francine: turning positive. stocks go green as oil moves higher. the yen retreats. the market sinks. china's credit squeeze. , asorate borrowing jumps the boom starts to unravel. banking on the debt trade. goldman slashes costs as it deals at the fixed income slump. this is bloomberg "surveillance." i'm francine lacqua in london; tom keene is in new york. breaking news -- it's important

because the ecb is trying to put a spin on things, saying that we see a recovery, and germany is feeling it. were expecting a figure -- this is a big surprise on the outside. tom: absolutely, no question about it. there's a real desire not only their but in the united dates to get better economic data into the end of april. certainly, interview after interview is a tone of better economic growth; we did not hear that yesterday. francine: yes. at the moment, there is no interest rate hike christ in, and i wonder -- right type priced in, and i wonder if that will change. let's get straight to the first word news. here's nejra cehic. nejra: thanks. the taliban has launched an attack on a government security agency. authorities say it was a suicide car bombing in kabul. there are a number of fatalities and more than 200 wounded.

the taliban says it is responsible. the militant group announced the start of its spring offensive. dilma rousseff vows to keep fighting and impeachment process she considers an affront to democracy. she says the fight is only just beginning. the lower house of congress is voting to put her on trial, this could senate temporarily remove her from power. are running out of time as a search for people trapped in the devastating earthquakes. more than 400 people were killed and 2500 injured. magnitude quake flattened scores of buildings on ecuador's pacific coast. meanwhile in japan, it is estimated that about 100,000 people were sleeping on the streets after a series of earthquakes. aftershocks continue to rock the island; more than 40 people were killed and 1000 injured. and hillary clinton and donald trump are hoping to quiet the critics today in the new york

press official primary. the front runners have lost recent contests, but both are favored in new york. 'clintons campaign manager says it is close to impossible for bernie sanders to win the nomination. global news, 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. i'm nejra cehic. tom: thanks. let's get right to the data yesterday. exactly 10:00 a.m. yesterday, 22 wonderful minutes. what a reversal after caution we observed yesterday morning. the s&p near 2100, the 10 year yield at 1.79%, the euro m nymex crude showing continued tone. down futures up 46. the vix, 13.14. you have to believe we will handle, the way we look now. francine, "the wall street journal" says the dow clambered over 18,000.

i looks up clambered -- i had never seen that used before. it goes back to 1340 and i can't pronounce the old english. i don't think we clambered. that's anxiety or frustrated or grudging. i won't editorialize that. we boomed. francine: i love that word. that's what i do every morning, clamber out of bed. it's an awkward and laborious way to get somewhere. this is my data board. this is the picture for overall european stocks, and i wanted to nymex.u nine nex this is what happening to the golde dollar, 0.776, and -- it's an interesting move given that we are in a risk off mood. tom: loonie down to 1.27, with a higher oil price. i want to go into bloomberg;

this needs a little explanation. this is something you can do on the bloomberg compare and contrast,. ratios. this is housing starts as compared to total sales. housing sales, new sales existing sales,. here's the fond memory of the 1970's, nixon. tons and tons of new housing starts, and the structural decline through the crisis, begrudgingly making our way back with housing starts as compared to total sales. it is sort of a pulse, if you would, of the american housing market. what do you have? francine: that's a good chart. clambering. [laughter] francine: this is what i picked out. i didn't know whether i would show you the south african rand or the spread of government bonds in china -- i went for china. we had a great story that talks

about the $3 trillion bond market. this is the spread between the seven-year aaa chinese notes versus the china government bonds. you can see that it has been widening. it's starting to unravel. we talked about it a lot, tom, so are you worried about the debt much -- so we are worried about the debt market. you can see the spread has gone higher; local issuers have already canceled bond sales. we shouldn't be alarmed, but we need to look at this chart on a weekly basis to be sure that it doesn't get much worse. let's talk about the markets. with us for the hour is j.p. morgan asset management global strategist, david stubbs. great to have you. theyou look at the market, didn't move on doha. that was a little bit of a surprise. they had an initial big fall because of a lack of agreement, but the market seems to be pegging to something else. >> for the oil market in

particular, there is a supply disruption in the middle east. you could argue that maybe the fundamental is not guaranteed to outstrip demand. absolutely, oil has been the dollar than factory markets for the last few months, because the crash went from a place where it takes a dollar from the producer and gives it to the consumer, and they crashed into the financial viability of companies, credit quality, and the development strategy of entire countries. that is why the market is focusing on that. also, if you look at what central banks have done in the last couple months, they have and we have reinforced they are behind the recovery. you see the bank of england on holiday. i think central banks are right there. tom: help me with the vigilantes right now. we have boston talking down the market with yesterday; all my

radar goes up when i hear that, when a well-meaning economist tells me the markets don't know what they are talking about. how vigilant are the market vigilantes right now? what is the urgency of the markets by their actions to reset or readjust central-bank thinking? isi think what rosengern saying is right; if we look at the current pricing for u.s. interest rates, it doesn't take into account the possibility of doing anything this year. i think that is an overly dovish start. if it turns out to be ok, june is still on the table, and we could get two rate hikes. the markets are not price for that. but i think that is different from saying he is a vigilante, or the whole concept of their bond vigilantes that we discuss so much is present right now. it seems that they have been flayed by central banks, most obviously here in europe, where

they play such a role in spain and portugal and other peripheral yields that have been beaten down by ecb action. it shows no signs of coming back. tom: can you and your team at jpmorgan -- do you link equity market performance point for point into central-bank -- bring up the chart. this is fully shown in the previous hour. there's the inflation adjusted dow, nowhere near the one standard deviation move, that blue circle, which is down 19,600 on a real basis. david, what do the equity markets a signal -- the punch bowl to the brim? >> to a certain extent, yes. if you see a risk appetite now, and the central banks are fully eehind the economy, i think th central banks and especially the fed do have an asymmetric reaction. markets fall quicker than their

rise; volatility spikes quicker that it receives. central banks are worried that any kind of market fallout can damage the recovery of the real economy, which is ongoing. they do believe the economy is fairly resilient, as long as markets don't fall off course. that is why we have seen them be quick rhetorically to react to think the equity market shows that, and shows that the message has a well-received. tom: david stubbs with us for the hour, a lot of good discussions. with the gloom yesterday, boy, was that reversed, with the dow closing 18,400. is of the great bulls adjusted, and changed his tone. what a perfect time to speak with anthony weier. stay with us. ♪

francine: this is "surveillance." i'm francine lacqua in london; tom keene is in new york. let's get to the bloomberg business flash with nejra cehic. nejra: volkswagen investigators are looking into the investigation scandal but are being tripped up by dozens of code words. they describe illicit technology they used to turn off pollution controls when cars were on the road. as a result, vw probably won't have a complete report by the the month. and first-quarter sales rose thanks to demand for three breast cancer drugs. it posted revenue that beat estimates but did not report earnings. they hope growth will be driven by a new long medicine -- a new lung medicine for multiple

sclerosis. verizon is in the bidding for yahoo!. according to people familiar a digital advertising business of what yesterday called yellow pages. and that is your bloomberg business flash. tom: thanks so much. francine, this is interesting -- idea of yellow pages in america is something you don't want to talk about. of stodgy.odgy askeiest likeey changed it to yp, they are embarrassed by their history and technology -- call it ancient technology. francine: i look like the yellow pages. i didn't even know they existed in europe. we had them, i remember, went big phonebooks passed through the letterbox. i don't know if we even use that anymore. tom: i remember party lines

where your mother had to wait for the people in the neighborhood to hang up so she can make a phone call. we did everything but the can and wire. that was just before was born. francine: [laughter] that was probably a longer time -- tom: keep it up. francine: this is a good discussion point. the unprecedented boom in china's $3 billion corporate bond market is starting to unravel. this was one of my charts of the day. sam dower, global credit strategist fo. simon, we had a chart saying that this $3 trillion debt market is unraveling. is it unraveling quicker than we thought, or is it just a bigger part that is unraveling? simon: i don't believe it is unraveling quicker, i just think it's a natural attrition after the level that has driven the chinese economy. it's natural to assume that we

will get some slowing, as we have seen the economic numbers come down to mid single digits. the market is repositioning itself for that. there are still some positive signs coming out of china in terms of stabilization numbers. while we gain a little bit of weakness coming into junk-bond, it's perhaps nothing -- it's just a repositioning of risk within the em chinese portfolios. francine: the authorities can also push the can down the road, right? as long as they keep a close eye on it, it'll be fine. simon: the amount of stimulus being put into the chinese economy, and every level for municipality to state to state, it's been exceptional. yes, he will get a soft edge, but it is a small correction rather than -- tom: simon, to pick up on a theme we had yesterday with richard haass, the idea of exogenous shocks, little tea

leaves that can become bigger issues, i'm struck by malaysia, related within the economic growth to china, but malaysian abu dhabi having a massive tiff over a debt deal -- it harkens back to the gloom of 1998, but to 1994 and the crisis. what do you make of a serious argument between two emerging-market nations in oil power and abu dhabi? what does that signal to you? simon: it signals that the market is very fragile in terms of risk appetite, and the level of stimulus has come to need in order to maintain valuations. the fact that we are getting tiffs between malaysia and apple dobby, weakness coming into the peripheral numbers within china, all just goes to show that we've perhaps over aligned on stimulus in monetary policy, and we now need to reposition ourselves for

the new paradigm. tom: coming out of the imf, on an economic basis, this is much more about a lack of nominal gdp, a lack of animal spirit, and it devolves from economics to finance. you see that in these little events. >> absolutely. to the last two stories and what you mentioned, both china and malaysia see very large credit bothh; banking systems -- countries have not really had a true default cycle. they tend to come when you get weaker nominal gdp, and certainly when expectations of gdp growth are not met. so i would not be surprised if we see defaults rise over the next couple years; spreads should widen in response. this is going to be a challenge to financial stability in malaysia and the wider

countries; it doesn't have to be a crisis, but it is something that will be the focus of policymakers and markets. tom: it's great to have both of you here. let me look at the data. the idea of another day -- member, 24 hours ago, we were on the edge of gloom. there was a way to the market, and at 9:38 yesterday, the stock market moonshot over the next 22 minutes straight up. nymex crude $40.16, oil prices over. stay with us. ♪

tom: the entire view is democrats, except state senator in the distance -- a small island, the island of staten. n island'stidam republican. francine,ies today, were totally wound up in the empire state, from niagara falls to the hamptons. there's a republic in the bronx that "the new york times" wrote about. francine: i think something out for you. it basically talks about ted the "financial times,"

talking about how it has been difficult for anybody to get delegates. he says -- tom: after the third-ranked of your choice -- last time i was in london, you were talking to me about my new york values. francine: [laughter] i was, exactly. this is one of the things that new yorkers do differently. you also like it london style. tom: david, help us here. i'm being beaten to death. i look at this, and we are winding our way to the convention. it is going to be a gap. is a lot bigger deal globally than what happens in new york or north carolina. the waiting of those two big political issues is interesting. >> sure. absolutely. it's only a couple months away, it could be a seismic change in

the economic strategy of the fifth-largest economy in the world. and of course, the primaries are fascinating to watch from abroad, sometimes alarming. the actual election is not going to be decided until november, and the new president is sworn in until january of next year. still quite a ways away, but today we have new york, and the big question is can trump you more than 50% in take the delegates? if he can, it is looking more likely that he will be the nominee. tom: francine on the other side, is bernie sanders standing behind the empire state building? secretary clinton, in a typical "new york post" momenta -- come on. mr. murdoch is having a field day with this. bernie is really putting it on, even though she is way out in front in all the national polls. early, but know it's i wonder when nothing is priced in. i don't know how you model a trump win or nomination.

it's almost like they have blinkers on. >> the first thing is that markets have to price in the most likely scenario, which is a clinton presidency with a republican house and the senate on either side -- that is where it has been the past, and how does this election start to hurt markets? trump-sanders election campaign will be fairly alarming for equity investors, because you have got someone on one side who wants to end trade relations, and the other side who is a declared socialist. tom: thank you so much. we will have much more on this in the next hour. good morning. ♪

tom: good morning, everyone. bloomberg "surveillance." we welcome all of you on this tuesday. goldman sachs out later.

first, first word news with nejra cehic. nejra: in china, the government is expanding in anticorruption drive, restricting the business activity of relative senior officials in beijing and three other places. earlier this month, the data leak disclosed offshore holdings of relative of eight current or retired chinese leaders. attacked byan, an the talib and has reportedly led to hundreds of casualties. authorities say a car bomb blew up outside a government security agency, and that was followed by a gunbattle. least 300.at the taliban has claimed responsibility. last week, the militant group announced the start of that spring offensive. u.s. troops may be getting closer to the front line in iraq. president obama is sending another 200 soldiers, allowed to be closer to the fighting than ever before. the pentagon is also sending

attack helicopters for the upcoming battle to retake basel from the islamic state. meanwhile, the president is at odds with senators in his own party over a bill that has angered saudi arabia. the measure would allow saudi arabia to be held responsible in u.s. court for any role in the 9/11 attacks. the government says it risks alienating a key ally in the fight against terrorism. president obama will talk to saudi arabia later this week. in the u.k., it is another sign of the split in the conservative party over the referendum on the european union. justice secretary michael gobe is attacking david cameron's case for staying in the eu. he used to be one of cameron's closest political allies before they split over the vote. global news, 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. cehic.ra tom: thanks so much. i want to bring up something i mentioned many times, and i want to do it now. miracle. gadfly is a

i urge you to go out and look at it. you will see short, sharp, chart driven articles on whatever is at the moment. michael regan yesterday had an absolutely spectacular short summary on the cost-cutting and morgan. let me go to the bloomberg terminal before the to chris wheeler in london. we saw jpmorgan at deutsche bank with some good bank/bad bank drama. here's goldman sachs, back on trend from the crisis, and the under performance from the same point. james gorman really working on cost cutting and the need to cut costs. christopher wheeler across the atlantic looking at u.s. banking and what it means for european banking. mr. wheeler, let's start with u.s. banking. can asset management save the day for most of these banks? it's certainly a

benefit to have an asset manager on-site, because these are capital likgight businesses. and they are requiring higher levels of capital. the answer is yes; unfortunately for morgan stanley, what they're doing at the moment with their troubled fixed-income business is hiding high quality wealth management. tom: michael regan in his fabulous peace talks about the word streamlined. i have no idea what that means. you are the grizzled veteran -- what does streamlined mean? >> streamlined is the cost-cutting program. guess what? like most banks on the street, given the only thing they can control at the moment is cost, that's the big focus for morgan stanley. francine: why were goldman sachs so late to the game? i know they have been cutting costs around the edges, but this

is the first time we are seeing them try to be more intent on cutting costs down to a big siz e. >> think i will disagree with you. i think they have been very active. 25% of their staff are based in what they call high-value locations, which to me is little value locations, because it is low-wage. salt lake city, bangalore. they haven't pushing a lot of frontline traders out and replacing them with engineers, preparing for the electronic fication of the equity markets. i think they have been very active in putting that what they call operation leverage, but they are pushing it even harder, because when the markets turn -- francine: will they do a lot more, or is this just a process of the trend continuing? >> i think it will be a continuing trend. they reached out to a number of partners, but that's normal. they like to sharpen the management pyramid so they have

young people coming through and they keep refreshing the business. i think they are doing a lot of good things, and they are ahead of the curve rather than behind it. francine: how much does goldman sachs have to outperform? they have done better than markets expected 11 quarters of the last 12. and markets always pile much more pressure on goldman. , but that article published this morning about how u.s. banks tend to push down expectation -- goldman pushed mine down further than the markets. i think march was a much better month. one of the big things they were hit on was -- they got $20 billion in private equities, and a lot of that was in asia. that was recovered in last -- tom: i want you to brief james gorman and lloyd blankfein, maybe even jamie dimon. here with the economic

growth we are going to see this year. without question, is first quarter was a one quarter bad american one-off. yesterday they really pushed against that. what does he say? do we get a pickup in animal spirit that helps the banks? >> we -- to a certain extent, we do. we have some of the drags fading 2 and q3, and this residual seasonality. the first quarter is inexplicably weak. one of the things we are quite core bank is the loans rising over 8% year on year. we look at the old-fashioned tradition of lending to consumers and businesses; that's the highest pace since the

crisis and is one of the reasons we are quite constructive on lending volumes. chris, give me an update on the european banks. do they having james gorman religion? >> yes, i think they do. unfortunately for the whole sector. cost is one of the few things you can deal with. is you canhing influence loan growth within your organization. the problem in europe is the low demand remains pretty anemic. it's good to say you can control much it is across the banking sector. francine: thank you so much, chris wheeler and david stubbs. we be talking more about european banks. if you look at the underperformers, the global banking index, clearly it's deutsche bank and credit suisse, two new ceos of the helm. ♪

francine: this is "surveillance." we're talking banks. this coming, european banks. we are expecting the goldman sachs earnings and about two and a half hours. chris wheeler and david stubbs are both still with us. chris, i made you a chart. i wanted to see what credit suisse's performance was like compared to deutsche. it kind of tracks them, because it also has deutsche and credit squeeze in it. deutsche bank and credit s uisse are the worst performers. is this because the ceos have come in at the wrong time?

if you look at global interest rate of the way the world is going? for is a problem with the strategy. >> there are two different stories here. one had to come in when there was a problem when they let the previous ceo go, and basically he has gone back to basics and saying i have to shake the business. improve profitability by taking out quite a bit of costs. he has made-- promises that are a long way out, and he is not under promising. the other came in with credit shape, and what was shocking about that white line is that credit suisse has the second-biggest wealth management in the world, jpmorgan would bite their arms off to get a hold of that, and yet look what's happening. that is because of confusion over strategy. francine: because people want more details or they don't understand what the ceo is trying to achieve? >> well, john has laid out a bleak picture, of laid out

clearly. the other knows what he wants. he was a strong switzerland, but the bits around that -- and still confused as to how the non-swiss wealth management and the non-swiss investment bank fits into that. it's very clear that the morale is troubled, because they have in making such substantial cuts. tom: i'm confused by one thing, and that is the over banking that has going on . chris wheeler is fed up with this chart. jpmorgan, right off the bottom. if you want to call that a difference between j.p. morgan and deutsche bank, showing that white line. mr. wheeler, are there too many bents? >> i don't think that's the case. if you look at those two charts, there is one very important factor to bear in mind. the great benefit that jpmgan showed is they have a very strong retail banking business, an outstanding asset management

business, an investment bank. obviously the weaker investment banking business was down 22% year on year, actual earnings down 7% because of the other businesses. deutsche doesn't have anything in the way of an investment bank in scaler profitability. tom: chris, you have been doing this for decades. why do we need so many banks? is it like pan american airlines -- just the national airline like lufthansa or british airways? why so many? >> >> we have had substantial consolidation. the u.k., partly down to the crisis. the u.s., and talking to bankers in the u.s., i think there is perhaps more scope, buffalo very big players. i think the answer is the regulators are very nervous about further consolidation, because they try to regulate the banks they now kind of understand rather than saying,

my goodness, we have jpmorgan and very a. different animal. francine: this is exactly what we are fearing. the facts that even if you needed consolidation, it probably wouldn't happen. how do you set some of the european banks? >> i think they are struggling from a pretty unique set of macro circumstances. negative interest rates. being the primary one. may have had week loan demand for a number of years. obviously it is improving, but it's incremental. you can't get too carried away. and it is much larger gdp in europe and the united states. -- weis just pointed out think there is a lot of scope for outflow in terms of why there will be winners and losers. there are many things you can go into.

a reluctant to overlook the whole sector. francine: that negative race -- i have been led to believe that if they were down, or if there was a tiered system, than the banks would be automatically hit. >> let me clarify -- i absolutely agree. i don't think it harms the banks with what they have put in. this is just a very low margin, a very flat yield curve, which is not good for traditional banks. caseould maybe make the that if commodities continue to bounce, the conversation late next year could be -- is the ecb going to remove these extraordinary actions? at that point, i imagine the banks.would react well furthermore -- the banks would react well. i think it is fair to say that the last set were somewhat looser than people might have hoped for. and therefore maybe we will get

a more stringent test going forward. tom: k chris, last question.this goes back to davos. it was a cold january morning. francine was at the pm for the p&l bar the night before. i was sitting on the deck with my coffee, whiling away the time, and we both realized that the theme of a five-year plan is now three years. is that what we are talking about with these corporate titans of banking? that they don't have any time and they have to get to it right now? >> look, that's absolutely right. how long is it since the crisis now? we are getting to eight years and we still haven't got banks normalized on a return on equity. we still have plenty of u.s. banks sitting below 10%; plenty of europeans below 10%. unfortunately you don't fix that overnight. james gorman suggested he wants to get to 9% by 2017.

it might be one of the better quarters of the year. i would suggest that he needs to push his targets a little further down the road as well. francine: chris, thank you so much. chris wheeler from atlantic equities. david stubbs stays with us. norish.up, kevin durant this is probably one of the most important interviews of the week. we understand that the saudi deputy crown prince is intensifying his feud with iraq. ♪

tom: good morning, everyone. francine lacqua in london; tom keene in new york. phone early, vote often. let's get you to our bloomberg business flash with nejra cehic. nejra: thanks, tom. shares of netflix are falling in premarket trading. the world's largest online pay-tv network forecast weakening subscriber growth in the second quarter, especially in markets outside the u.s. investors had anticipated that international markets would fuel netflix's future growth. closerv is one step toward winning approval of the big takeover of sab miller.

the company has accepted its ther to buy the beer brand, price for $2.9 billion. the deal is contingent on closing the sab miller deal. ab inbev is helping to ease concerns of antitrust issues in europe. and china wants to take control of the country's most popular fast food chain. the consortium is interested in taking a majority stake in yum brands china business, including more than 7000 kfc and pizza hut restaurants, all this according to people familiar with the matter. that is your bloomberg business flash. francine: this is what we are watching for the rest of the new york go to the polls today in the presidential primary seen as a crucial test for bernie sanders and the last chance for john trump to shore up the nomination. on wednesday, president obama will meet with the heads of state of the gulf countries, and

the ecb announces its interest draghi's press conference. for more on what mario draghi can do, let's get to the global market strategist david stubbs. you're mario draghi and you look at qe, he's trying to argue with what we heard. it's helping the economy because it is filtering through the economy. i'd argue that qe hasn't done much -- >> sure. and it else risk sentiment to a certain extent -- you see the rally investments and the announcement of the changes of composition. the problem is they were late to the game. workstative easing when equity valuations are low. none of it makes the case, and

it is not the case now that they are putting more into it. doesn't mean nation but it means they get less for their buck. i think bank lending is very important; the stress test an asset quality review, as far as them being lenient, were positive for confidence and that is crucial. say withhat draghi can a clear heart that the european economy has been one of the success stories of this year. francine: at the margins, we aren't doing so great. it's not a catastrophe, but given how much money is pumped out there, we aren't in that great of shape. >> true, and he is fighting against a lot of structural rigidity and fiscal consolidation. the issue is usually with european politics. look at retail sales and industrial production. credit conditions are loosening and gdp and economic sentiment look positive.

a million miles away from where was a couple years ago, and i think he's trying to keep the show on the road and allow the slack to be withdrawn; hopefully that will spark higher volatility, but for now it is the show on the road. update on, give us an what your shop thinks about financial repression. percolating across all the business media are stories and, indeed, at times, heartbreaking stories, of negative interest rate in europe and minimal positive interest rates in the united states. i'm sorry, there are a whole bunch of non-elites getting absolutely crushed by central-bank policy. >> sure. you're absolutely right. as the years go on, we're in this ultralow policy rate and bond yield environment. the claim that we are overly damaging and preventing retirement gets more

traction. ultimately, low interest rates work because they allow people to refinance debt and encourage levels of investment and speculation. after a while that tends to lessen, and you are left with a low income generation you get from those low interest rates, and of course when you push down bond yields you push up the price and exacerbate the wealth, and that is absolutely why we are dealing with a very combustible election season in the united states. francine: is it possible that brexit is positive for mario draghi because it weakens the euro? >> that's a bit of a stretch. no, i think it would be a shock to the established order and to business confidence. i don't think it would be seen as a positive. tom: david, thank you. david stubbs of j.p. morgan asset management. we will continue this discussion. is an interesting, new wants today.

-- nuanced day. and of course, the president traveling to saudi arabia. next, the dow was at 18,000. dwyer.k with anthony of his deal is he won't step on stage it was futures are up. they are. down futures are up 62, and oil $40.a humbling short, francine lacqua in new york. everything in that view -- that one loan island in the middle, staten island, is 100% trump. ♪

tom: the shorts hibernate as stock markets surge.

un-brexit. very doha and opec chaos. and from niagara falls to the hamptons, from staten island to brooklyn, the empire state votes. good morning, everyone. this is "bloomberg surveillance ," live from our world headquarters in new york. tuesday, primary day, april 19. i'm tom keene in london. -- i'm tom keene. francine lacqua is in london. anyone care over there what we see out of the secretary and mr. trump? francine: everyone cares. anything that would be seen as too extreme is what europeans would be afraid of. there is a lot of interest. tom: megan murphy will join us in the hour to give us important perspective. right now to our bloomberg

tuesday first word news with nejra cehic. nehra: an attack by the taliban has reportedly led to hundreds of casualties. a car bomb louisville outside a government security agency, followed by a gunbattle. 20 people were killed and there were reports of 300 wounded. the taliban has claimed responsibility. last week it announced its storm -- the start of its spring effective -- of its spring offensive. angered saudi arabia. it would allow saudi arabia to be held responsible in u.s. court for any role in the 9/11 attacks. supports the measure. president obama spoke with cbs news. president obama: if we open up the possibility that individuals in the united states can routinely start suing other are alsots, then we

opening up the united states to being continually sued by individuals in other countries. the president visits saudi arabia later this week. donald trump is counting on his home state to provide a big boost toward the republican presidential nomination. polls show him with a double-digit lead over ted cruz and john kasich in today's new york primary. a win would get momentum going into five key northeast contests next week. democratic front runner hillary clinton, who represented new york in the senate, is hoping to increase her lead over bernie sanders. sanders has won seven of the last eight primaries. global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus i am nejraworld, cehic. tom: we look at equities, bonds, currencies commodities. up, up.

moonshot right up until 10:00 a.m. oil, barrel, american brent crude. over, shortssis vanquished. francine: there you go. there is no oil crisis anymore, and the stocks have gains. we can go to bed, tom. see that. nice to there is three ways to quote gold. xau is one of them that we use. housing data this week -- you can make a ratio on the bloomberg, the cix function. this is housing starts, as compared to total sales. new home sales, existing home sales. this is what i remember, the massive new home sales boom in the late 1970's. down we go, structural decline,

housing starts to total sales -- here is the collapse -- and the crisis, we have come back somewhat towards normality. francine: i have an emerging market currency. for you, tom, this is the white line, this is the medi average. basically, trade is stronger than its 200 day loving average -- it's 200-day moving average. what it means is, it may be a signal to traders that further gains are in store. tom: there is strengthening for the commonwealth. i was watching a documentary of the queen, the week of her birthday, and how she was totally fixated on the commonwealth of when she was younger. the whole thing was to keep the commonwealth together. francine: it will also play in people's minds when they vote on the brexit referendum. tom: absolutely.

ok, i have to put this up because i do not agree with this. ," dowall street journal members back above 18,000. i bring this up because, frankly, the "surveillance" team, we clamber out of bed this morning. philosopher anthony dwyer -- you more than anybody i know -- maybe brian belski -- have talked about the wall of worry personified by mr. baker and his good people at "the journal." the wall is still there, isn't it? tony: think about this statistic. the percentage of newsletter writers, according to investors that were bullish worth 24.7%. the only two times that has happened in the last years were after the credit crisis in june of 1990 four, and the lehman crisis in 2008. you can have volatility, but

those were extraordinary times to be a buyer of equity. tom: you have kept people in play in the markets with your theme and your nuances over the many years. now,e wall of worry there because janet yellen has not kept people in the markets? we are not getting the verbal from her as she effects monetary policy? tony: i think the idea that you have such negative global economic perception -- that is really the inappropriate time -- i think it is more international. and, yes, there is this. but we make it like it is janet yellen, tom. it was a greenspan put. he double grades, corporate credit collapses. on thedy got bearish internal bear market. very similar to now, you go into june of 1994, you make the low, and then you are off to the races. if you could pull up -- if you

look at the s&p 500, from 1988 -- from 1984 to 1994, that 10-year period, there is no way that you are thinking that 1995 and 1998 is going to happen or it it was looking like the market was hyperextended, overvalued. the perception of the fundamental backdrop has been so negative, it creates opportunity. i did not want to compound the mistake. i wish i was more defensive in december. i do not want to make it like i am constantly right because i am not. but you do not want to compound things and get bearish at a low. that you i understand can be constructive and add to equities, but look at the world we live in. we have a great article saying that we are getting used to this upside down world economy, fueled by cheap money. this is probably what is

affecting a lot of these equities. it is fictitious. tony: it is not fictitious because it is going up. i am not buying the next tick. i think the market has run too far, too fast. think about this. any time we talk about the market going down, while the fundamentals are speaking to us am a telling us that the market is going down, the market is telling you something. when the market goes up, how come it is never telling you anything? it is always wrong. the fundamentals are always wrong. so when you have negative economic activity -- which we do not have -- the whole key is that as long as there is in -- as long as there is lending in the u.s., with a service-based economy, you will march forward. slowly at times, but you will march forward. you just need money availability. his inflation going to pick up at a level that the fed is actually content with? tony: ok. so my view is rippled waves tied

-- i think what is going to be stored in areas, your brand analysis is spot on. six to 18e next months are going to be terrific. but to answer your question, i think the fed is behind the curve. you already have accelerating recovering economic activity. i think you will have an inflation issue, maybe 12 to 18 months away. the fed will have to become more aggressive. the tide has started to go out. tom: financial stocks, give us your update. you see earnings, james gorman cutting costs, etc. jpmorgan, focus on deutsche bank struggling as well. can you buy the banks, and in particular, can you buy thank leader jpmorgan? tony: i think you have to. so many people want to go away from it because the yield curve is flattening.

and 1994, 1995. ,oth of those flattenings without recession, you had an extraordinary outperformance of the banks. tom: looking at challenges for one or two years, and it is suggested that the major banks will mint money 3, 4, and five years out as well. statement in the empire today. coming up, we look at the new york state primary. they can murphy will join us from our what -- our washington bureau chief. she is in new york, as are ms. clinton, sanders, trump, and ted cruz. ♪

francine: i am francine lacqua in london.

tom keene is in new york. let's get straight to the bloomberg business flash with nejra cehic. nehra: investigators are looking volkswagenvestors -- investigators are looking into -- codesions scandal work -- code words were used to turn off emissions controls when the cars were on the road. there will probably not be a complete report on the cheating by the end of the month. now says it is being investigated by the sec and federal prosecutors. sara-- sara know that have been reports that its technology may not work. a new study says that the outlook for women ceos got worse last year. women captured less than 3% of new chief executive positions, the lowest since 2011. the numbers were worse in the

u.s. and canada, less than 1% of new ceo's were female. that is the bloomberg is this flash. could spend easily an hour nonstop with megan murphy and get her brief on where we are, where we have, and where we are going -- to pennsylvania, new england. i would like to focus on megan murphy, our washington bureau chief. let's talk right now -- what is the appetite for this vote in new york? i have yet to see a sign of clinton, sanders, trump, cruz, and kasich. there is no excitement to me. -- is public in the aged the public engaged? bar -- f you were in a tom: what is that start every conversation? megan: i think you are feeling -- i think you are feeling the burn in parts of the city. the most enthusiasm has been

around him in the city. donald trump has drawn a lot of people to these raucous rallies as well. i think it is pockets of new york, rather than the state as a whole. tom: i have great respectfully polarities and uniqueness of this great city. staten island is 120% for trump. with itsew york times" fabulous article about the sole republican in the 15th congressional. the one republican in the bronx. the polarities are great. megan: it is going to be fascinating to see if he can turnout higher than the 50% threshold, which he needs to sweep the 95 delegates, which he hopes to do. on the democratic side, we will be looking for, is it going to be close tonight? tom: help me with the upstate/downstate dynamic. megan: he has to turn out those

numbers big-time. is -- whenthink he you look at ted cruz and john kasich's weakness, in particular, that is a dynamic not a lot of reporting is focused on. yes, ted cruz made those comments about new york values. but john kasich has run such a targeted campaign. tony: why is he doing so poorly in new york? megan: why is he doing so poorly in many places? i think the issue is -- there is a great quote today in the article -- that he would have done great in the republican party of 20 years ago. but in this dynamic we see with the surge of populist anger, such frustration with washington, insider politicians ,re being rejected en masse everywhere. tom: we need a london perspective. francine? francine: i want to talk about democrats.

the story there is one of consolidation. there is pressure for bernie sanders, if he loses new york, to give his votes to hillary clinton. megan: what we have seen all week and the past several weeks is real vocal resistance from his advisers, from himself, to say we are carrying on, we have the money, the message, the surge to carry on this campaign further than new york and take it all the way to the forum in philadelphia. the issue will be, when will they start to say, for the health of the party we are going to try to coalesce behind who seems like they will be the presumptive nominee. but that is very difficult when bernie sanders has come within two points in many polls nationally. we can see a point that when hillary clinton builds up her delegate lead, they actually flop in the national polls. tony: has there been a time when you have had a situation like this, where the second person is coming in so strongly but does

not have anywhere near the delegate count and ends up being the nominee? megan: we have not seen anything like this with this huge surge. there is usually a presumptive nominee locked in place, but this momentum is truly stunning. we will have -- it will have huge repercussions on the party for years to come. isy: i am blown away by, he a stated socialist. the momentum that he has is somewhat stunning in a capitalist system. socialist,s a valid i am a liberal, break up the banks, but his position on guns and his record on guns in particular, stands out for being on the left. i always wonder, younger voters in particular, we really do not look at it. tom: pennsylvania is always interesting as well. megan murphy, thank you so much. she is our washington bureau chief.

if you want more intelligent youtical coverage on this, will get that "with all due respect," 5:00 p.m. tonight. you will get a new wants -- a nuanced discussion. from new york and london, "bloomberg surveillance." ♪

tom: good morning, everyone. we attempt to give you value. francine lacqua and london. i am tom keene, in new york or it lets get you to the value of a just and fox "morning

must-read." housing. it is a fabulous essay. tom: mr. fox, with his humor as always. francine, this is a superb essay on the greater vision of the housing in america. you wonder where it goes from here, given so many people cannot afford to rent in cities? francine: it goes back to the inequality, which is fueling all this extremism, politics that we are seeing on the right and the left. problem in theng u.k., particularly in the southwest with london at the epicenter. problem is as you look at london, there is a lack of a 41

housing, but it is also a testament -- there is a lack of affordable housing, but it is also a testament to -- it is a double-edged sword. tom: tony dwyer, you have eight fireplaces in your house. what is the mood? francine and i are victims of the city. is,: what is interesting relative to what we are talking about, the millennial demographic. remember when everybody was talking about tattoos and piercings and eric. aeropthey had the -- and ostale? those young people are aging up. you have already started to see a pickup in homeownership and household formation. that is a holdover from the great recession, but this is an important point. the pig and the python -- the millennials are as big as the

baby boom generation. the peak birth year is 26 years old. 26, i was just meeting my wife. i did not want a car. i did not want more loans. i certainly was not thinking about a mortgage. when i met my wife, then i created a household. then we did have a family and we did move to the suburbs. that, i think, is what we have in front of us for the next seven to 10 years. the demographic ages up. they make more money. they have more availability and credit, and they need more space where it so you end up with the household formation picking up. the homeownership rate picking up. that helps move the economy. tom: francine, when i was 26 years old, i was sitting in a disco going, "i totally don't get this." disco you didn't get, or did you not get the house prices? if you look at house prices in metropolises such as london, it

is locking out buyers. there may be a trend where people do not buy houses, they rent. they give up because they will never be up to afford that first house or apartment. tom: i was the millennial demographic. i could not afford rent, i was the liquid on my student debt. at what happens to me, i had to move four people into a two-bedroom that was far more expensive to do that than to actually buy 84 -- a four-bedroom in the burbs. francine: coming up next, we talk commodities. we talk oil and iron ore. ♪

tom: from new york and london, good morning. "bloomberg surveillance." francine lacqua and tom keene. let's get right to our "first

word news," with nejra cehic. nehra: de la rue seth is vowing to keep fighting and impeachment -- de la rue seth -- dilma ro useff is vowing to keep fighting and impeachment hearing that would temporarily remove her from office with a simple majority vote. in houston, at least four people have died in a massive flooding. thunderstorms dropped more than 15 inches of rain across part of southwestern texas and more than hundred thousand people have lost power. houston airport canceled hundreds of flights. in ecuador, rescue crews are running out of time as they search for people trapped in a devastating earthquake. more than 400 people were killed and 2500 injured. the 7.8 magnitude quake flattened schools and buildings on ecuador's pacific coast. japan, it is estimated about 100,000 people are sleeping on

the streets after a series of earthquakes there. aftershocks continued to rock the island. more than 40 work killed and -- more than saudi -- more than 40 people were killed. 1000 per injured. ghosns secretary michael is attacking david cameron's case -- global news 24 hours a day, powered by our 2400 journalists in more than 100 50 news bureaus around the world, i am nejra cehic. francine: joining us to talk oil and commodities, the story of the week, we are joined by the barclays head of commodities research. great to have you on the program. the surprise no-production freeze, and this is basically political.

is this spat going to get much worse? certainly, it undermines opec cooperation and coordination, and that potentially holds out problems further down the line if we find that we do need some opec action, cut back, given current relationships would be difficult to engineer. having said that, and oil prices are holding up robustly, moving up again strongly this morning, i do not think many people expected very much to come out of this opec meeting. on top of that, the underlying market balances do seem to be improving. by a number of planned outages, the latest in kuwait. right now the market seems to be rebalancing pretty well without opec, and the problems between saudi arabia and iran do not yet

seem to be a major stumbling block to higher prices. francine: what is going on in the markets? it has not -- people have not moved from their position. where we expecting too little from doha, or where people -- or were people brushing it off? kevin: the big question for the market was, has a price recovery been spurred by the idea that opec is trying to do something major, or is it a function of changes to underlying supply and demand funmentals, particularly large production declines in the u.s. and reasonably healthy demand. in the wake of what has happened, we will have to say that the market is looking reasonably strong at the monitor there are risks, of course. we have a large speculative, long position. what could make a difference is we saw the dollar weakening over the course of q1, and that seems unlikely to continue. so there is a big price risk to

the downside. we have to say even without opec corporative -- cooperating, it is difficult to predict. tom: you allude to what the bet is, buy the market. nobody i talked to is looking for oil prices that are lower. kevin: most people believe that the bottom is in now. there is a large amount of speculative length hanging over the market that is not surprising. oil has been one of the best performing assets over the course of q1, so a lot has been leveraged to it. the big risk now is the demand side. the supply side seems to be behaving. and adjusting. but we have got big uncertainties about demand. china is still looking somewhat fragile. the diesel situation globally is very weak. gasoline demand does not look too bad. but diesel does look very weak indeed.

an awful lot is going to rest on what happens to demand, and probably key over the next few months will be anticipation over what the u.s. driving season is going to look like. is thatexperience russia is always a wild card. does russia have enough dynamics to move a market totally focused on iraq and iran? kevin: russia is doing pretty well. it is managing to increase production, but that is being absorbed fairly comfortably, i would say. i think more than any individual what isnow, perhaps most important in determining the supply outlook is what happens to prices. the prices have moved up a long way. if that continues, given the ist that a lot of supply very price sensitive, particularly in the u.s., this rally could become self-defeating. if prices move up to the mid-40's, low 50's, we might see

a reacts hillary's and in supply growth in other parts of the world. russia, probably not. the u.s., almost certainly. that puts a cap on the upside right now. francine: what does that mean, that we are trading in a range 55 -- 145 and 155, or 40 and 50? kevin: it would seem to be 45 from a fundamental point of view. we put together a sequence of events where the u.s. gasoline season is not as good as people hoped -- if china slows down -- then i could see us moving down to the mid-30's. but it will not go below the $30 a barrel region, given the underlying changes in the market. the difference between front --th contract futures tightening up is not so much a

problem anymore. francine: do we look to june 2 to see if they freeze or if saudi arabia stands, that opec is really no dead in the water? kevin: in many senses, it does not matter too much. the key will be saudi arabia. iran is coming back, but more slowly than people expected. meanwhile, number of other opec countries, iraq and nigeria, have seen production declines because of unexpected problems there. there is a lot going on within opec countries. most of the adjustments are taking place outside. as long as saudi arabia is not aggressively increase its production from where we are now, than the market is rebalancing gradually. h, thank youorris so much. coming up, we will look at another commodity that will be how you define luxury. is it louis vuitton, or maybe it is something sharply more accessible, and that would be

sandro. coming up, the state of luxury. ♪

francine: i am francine lacqua in london. tom keene is in new york. here is nejra cehic. --ra: shares of netflix in are following in premarket trading. forecast weakening subscriber growth in the second quarter, especially in markets outside the u.s. international markets were anticipated to fuel netflix future growth. china wants to take control of the country's most popular fast food chain. it is interested in taking a majority stake in yum! brands

china business. that includes more than 7000 kfc and pizza hut restaurants, according to people familiar with the matter. verizon will have competition in the bidding for yahoo!, according to people familiar with the matter. and y pequity firm tpg holdings have made offers. y p holdings is a traditional withtising business once the yellow pages. that is the bloomberg business flash. tom: we have been talking about the theme of ever higher for required things like band-aids and the rest. johnson & johnson at $110 a ,hare has defied the skeptics and their earnings are out with t.little bit of the bea he has defied the skeptics for years. this is a wonderful guest to have on the show. career in a storied

luxury. some people talk about it. other people do it. louis vuittonom -- this is one of the great from the- you get start of sandro henry kravis. how do you do that, in 15 seconds? daniel: it was a wonderful story, founded in paris. it was a dream. they worked together for many years, and then her sister went to create her own company. so very entrepreneurial people with a very strong creative drive, and through the years became a very strong success, but only in france and europe, but also in the world. thisand the new finance of nowr. kravis and kkr, and with the chinese. is this the future of your

industry, that china will owned a stub or a minority or a majority of the houses? daniel: i do not think it is. what is important is that the asian market is an important market, just like north america, for accessible luxury and luxury . i think it is normal that they exert influence in the market, but i do not think it is the standard model. francine: how many shops are you expected to open in china? you have that very sweet spot, markets,sible luxury it is priced well. but for the moment, the chinese and japanese are buying higher end. daniel: they are and they are not. we have opened up the chinese about 2.5 years ago, and we have been opening roughly 30 to 40 stores per year in the market. -- notccessfully, only only in hong kong and macao,

but also shanghai and beijing. the brands have been very desirable in this part of the world as well. tony: have you seen any kind of change in spending in the short period? daniel: in the accessories luxury segment, and the brands, , have a numerous validity in that part of the world. we have seen tremendous results. we are in the sweet spot of the market now, and we see luxury as having some challenges. tom: tony dwyer is with us. francine, jump in here with us. francine: i was reading a story were a lot of viewers will know and recognize your brands in london, that you cannot go without seeing all of the stores together. is it much cheaper because you have three brands and they are usually sitting next to each other? daniel: we do not necessarily bulk lease, but we try to be in

the same environment because all the brands are marketed to the same type of consumer, but we sandrovery different -- would be more chic and cool. they do appeal to different audiences, and -- tom: with baton -- let me bring this in here. we go to the rebecca dress. this looks like 1200 bucks or 2000. this says scarlet fu. fan of fu is a huge daniel lalonde's work. , it ison furstenberg beautifully accessible. how do you do it? gucci and the others -- do they

want to be more like you? daniel: you would have to ask them the question. thisny cases we have had developed since the very beginning, and a very tight network of suppliers throughout europe. most of our production is in europe. how do you get the stitching the way you do? the stitching is shocking. daniel: just been working with suppliers for a very long time, and trading know-how through all the years. stylists that of work with the same sourcing. that makes quite a difference. another big point of difference that we have that our brands ine, versus most companies luxury, we are retail players. we do not do any wholesale business. us, sotore is owned by we really control the customer

experience, the commercial policy, and deliver that experience to every customer directly. ipo?ine: what about this was the preferred scenario to a lot of people that wanted to come in. do you still think about ipo'ing , and was at the market condition that pull you off, or did you need an investment partner that enabled you to grow? daniel: we looked at an ipo route a month ago. we found a partner that was really believing totally in our company, saw the success of our brands in asia as well, and has been able to help us get to the next level. more importantly, they really believed in our business plan and our ambition. our ambition is very simple, to be the global leader in accessible luxury. so we have all these common beliefs. francine: no small feat. thank you very much. we wish you success.

to fx.m fashion of fx strategy joins us. that is at 5:00 a.m. in new york, 10:00 a.m. in london. ♪

tom: big up yesterday, big up today. francine and tom with you. good morning. the yen weaker, 109.34. sterling rallies, 143.67. shortly, tom coming up it is "bloomberg ." david: we will be talking about earnings. we will talk to the ceo of johnson & johnson about what those earnings mean for the health care. we will be joined by sheila bair about these living wills and why the u.s. banks have built them. that is all coming up on "bloomberg ." tom: let's go on to two charts.

the siegel best chart right now, the inflation-adjusted dow back. what is important about this is how extended are we. 30-year regression of americans' economic growth with excesses, with lehman collapses, and the blue circle is just before the crisis. we are one standard deviation exposed, the redline out to the green line. we are not back there yet, but we are getting there. how does a pro like you know when the market is extended? tony: i do not think valuation has been a good call. when valuations are on an uptrend, i think it is a super important point. and you look at the chart that you add up, what i was looking at, it first hit the standard deviation about 1996, 1997. can you imagine? that is a career-ender as a strategist. tom: so you do not want to sell

off this chart. let's look at another one the same way. this goes to the ftse in europe as well. tony, this is pepsico. frito-lay. a percent solid return, almost 9% -- 8% solid return, almost 9%. everybody has been against these blue chips forever. , all i am neutral weight sectors right now. the defensive sectors, such as pepsi, pepsi is in. consumer staples -- history shows they are fully valued. if you have this movement back into basic industry, energy, economically sensitive areas, which i think you will get over the next two to three years, it will come at the expense of something. i think it will be at the expense of the surrogate bond trade. we were talking off-camera about how there is nobody in the world

thinking that equities can really run higher. i think you need inflation for that. what if -- just what if the chinese year-over-year ramp that we are seeing, coupled with the corporate debt buying in the eurozone, coupled with the fed being in a box -- tom: milton friedman. tony: you could have topline surprise. francine: what if the fed decides to move in june? is not bad. they are not concerned about china so much. what happens to emerging-market stocks and the tao or the s&p? tony: you have been ahead of the curve in terms of the brexit we find ite -- difficult to believe. when janet yellen raised rates in december, everybody on the planet new she was raising rates, and you ended up with currency and market dislocation anyway. i do not think that they are going to be willing to risk that one week before the brexit vote. i do not see them raising rates

in june. francine: i tend to agree with you, but now you have eric hawkishn calling us a dove, whatever that means. tony: again, you had last week, lacquer talking about how brexit is figuring into the policy decisions. that is an important point, too. i listen to what janet yellen is saying. tom: 10 seconds. tony: i do not think it will be in the next 15 minutes. i think we will really ramp over the next -- tom: are you going to be responsible for -- tony: i live in new jersey. tom: tony dwyer, thank you very much, only voting in three of the bureaus today. coming up, we will do goldman sachs earnings, provide full coverage across all bloomberg platforms. "bloomberg " is next.

," wemberg surveillance will continue on radio. it is a tony dwyer data check. risk-on, euro,r, there it is. crisis over. oil surging, on its way back to $100 a barrel. $30.34 on american. let's look at new york city. -- $40, $.34 -- $40.34 on american. "with all tonight at 5:00 p.m. we will give you better than good perspective on the new york primary. from new york, this is "bloomberg surveillance." good morning. ♪

david: stocks are rallying around the world as the dow closes about 18,000. -- above 18,000. thank earnings -- goldman sachs report -- bank earnings.

plungeetflix shares after forecasting weaker subscriber growth. here in new york, it is primary day. a big test of confidence as trumping clinton look to win in the state they both call home. david: welcome to "bloomberg ." i am david westin, with vonnie quinn in new york. jon ferro is in london for the week. vonnie: in the next three hours, we will be speaking with johnson & johnson cfo dominic caruso. sheila bair joins us. and bank of america/merrill lynch. let's get a check on the markets. jon? jon: the