francine: the global rally. china stocks dropped the most since february as the pboc signals a reduced appetite for monetary easing. european shares of the lower. donald trump and hillary clinton win clear victories in new york and tighten their grip on the party nomination. and obama rides to saudi arabia, where he will meet with the king. oil and security are top of the agenda. we will speak to a former advisor to the saudi government. this is "surveillance." tom, we have a lot of market movement. we have an commission scandal

brewing in japan. we have to talk about interest rates. tom: interest rates is what sets the table. i'm really interested in having mark halperin join us in the next hour. last night was the first moment i've seen secretary clinton relaxed. i mean that. it's the first actual moment she has finally looked like herself. i thought it was great. francine: and of course, that may be through her popularity. popular she how not is amongst many. let's get more on this with the bloomberg first word news. caroline: thank you. the front runners in both parties scored big victories in new york's president of primary; first for the republicans, donald trump rebounded from a few weeks of campaign upheaval. vote, beatingthe john kasich and ted cruz. >> we don't have much of a race

anymore, based on what i'm seeing on television. just aboutz bilis mathematically eliminated. we've won millions of more votes than senator cruz, millions and millions more than governor kasich. butline: trump won all handful of delegates, but the associated press says he cannot possible connect all he needs. meanwhile, clinton put an end to bernie sanders's winning streak. represent won the state represd with 58% of the vote. >> today, today, you proved once again, there is no place like home. [cheering] caroline: clinton's victory makes it almost impossible for sanders to win the nomination; eight states determine his path

forward up to the primary fight. now, the vice president of brazil plans to downsize the government if president still a is ousted,eff according to a person familiar with the matter. the senate may decide next month whether to open a teacher proceedings. she says she will fight against it. global news, 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. i'm caroline hyde. tom? tom: equities, bonds, currencies, commodities. great to have not much going on. futures take a pause; euro 1113. on to the next screen. confounding the doom and gloom. we're moving so quickly.

euro-yen is interesting, and sterling showing some strength. euro-yen showing euro stronger of the last few days. francine: i also had the yen. this is my data board, the global rally. down someuities -- 2.3%. they were earlier losing as much as 4%, because the pboc doesn't want to do too much. i also looked at yen and crude. tom: very good. a chart and never done before -- let's go to the terminal and look at real stock market and real inflation. adjusted real estate. thaback 20 years; here's inflatn with adjusted housing, the fall over, the recovery. inflation-adjusted. here's inflation-adjusted dow; dow boom, and then we come back to the housing peaks, the dow's

right there. here's the falloff in equities and that huge boom we saw, the central bank boom, the earnings boom, the cash flow boom. when the differential over 20 years between real dow and real existing homes. francine: yeah. and i love that you mentioned inflation, because we had some wage growth filtering through in the u.k.. this is my board. i did a very simple chart, but whaich quite importantis. -- but which is quite important. i want to show you that there is a trade -- we have been trading in that range over the past two months. we broke over the last week. you can see that at least we aren't in that lull. let's get more on the markets and more on central banks.

the global strategist, joining us, and guest host. great to have you. not much going on n. what will go wrong? anything and everything. every day there is something new, and the pboc is suggesting they won't ease more, putting markets and if lesser. >-- in a fluster. >> the most boring thing that could go wrong is fatigue, in the sense that it was working out yesterday, and we had 40 billion euros per month of european buying because of what the ecb is doing. it gives a high correlation between treasuries and bonds. all of this is part of the central bank. morningimmediately this -- if any central banker says, hey, you may not get your regular fix. way, but youlong

do sense diminishing returns, even in equities, even in risk appetites. this will play out slowly, because i could come in one morning and think, the world has ended but no new story. francine: i had an important conversation with mervyn king -- he is a formal central bank governor -- a former central bank governor. not only is policy diminishing, its actually creating an environment where governments don't do anything anymore. >> yeah. take the s&p are the shanghai composite on the back of easing money, the greater the risk if anything goes wrong. that seems clear -- or even something as mundane in this as this morning's u.k. data, just running out of momentum, employment growth slowing down, consumers still piling on consumer debt, now, here?

we are not being encouraged to do the most sane things. i'll give you one more from the imf. tom: let me jump in. francine, help me out. i just stumbled on this chart which is very -- it's euro-sterling, and i didn't realize it -- with a strong euro move we have had, confounding juckes and the rest of the thieves known as strategists, we are about to see it up on the resistance line a strong euro. would you suggest that euro can breakout through this amazing crisis resistance line, the strong euro, weaker sterling? think -- it's not surprising that we're backing off a little bit. we'd have to get more worried about the vote, more worried

about the economic uncertainty between now and june 23, and we might need a run-up. it might even go back down. but most likely, it is going to be quite hard to push higher unless things go wrong, or less we get really worried about the economy. tom: if it's vote-specific, how do you, as a pro, position for something as arbitrary as a vote? if no different than going to las vegas and placing a bet at caesar's palace. excuse me, you go to the bellagio. francine: [laughter] >> it's a straight bet. opinion polls related to close to call; there is probably more weakness on a no. we had a poll here at bloomberg two weeks ago; pretty much everybody thought the u.k. was bound to stay in. is guessing the market positioned to some degree for the u.k. staying in, because

that is what professionals in the industry expect. but it's a casino bet. it's not very interesting to me. the only thing i would say is that i can see sterling bouncing more than temporarily, covering between now and june, because we will go on being very nervous about the economic uncertainty. tom: this is fascinating. i can't say enough how technically correct this chart is. to see strong euro, weaker sterling, it really goes down to what mr. juckes said, it is nothing more than a bet on the vote to gain euro stronger. we will continue this discussion. coming up in our next hour, we are really looking forward to seth masters of bernstein, their cio. he joins us at the 6:00 a.m. hour. bloomberg "surveillance." ♪

francine: i'm francine lacqua in london; tom keene is in new york. let's go to china, where we saw some stock moves. they dropped as much as 4.5%. enda currant is our chief economic correspondent and joins us from hong kong. good morning. these share slides are on the back of the pboc suggesting that it may not move as witches markets are expecting. enda: good morning. shades of january again -- lots of jitters in the market with the selloff. it doesn't depend on anything in particular, but when it's pointing to is this commentary, which is china's official news service saying that the pboc can move away from easing bias

and guiding the market to expect less interest rate. that was followed up by a pboc official who came out last night and told local media in china a similar message. taking that on the back drop of what has stabilized an economy, it kind of ads to this year that perhaps there will be fewer rate cuts anticipated, and maybe that is what led to the selloff. francine: wrapup for us -- that's the state of play, and we have better than expected figures in terms of exports. we think the economy is doing a little bit better than we expected. but keep on talking about debt. and wethere is overhang, understand that there are a lot of chinese companies that had to wait longer to get it. enda: yeah. this is a divergence in the china story. the headline is that things are stabilizing; that's the narrative. we are seeing improvement, real

estate sector showing great strength, a little bit of pick up in exports, consumption holding up reasonably well. is it is still being driven by credit. there was a huge credit surge in the first quarter, leading people to believe that china has a problem with debt. -- peopleing things are worried that we might bring more stress from corporate borrowers. it: enda, on a day when seems like there isn't any news, it's a quieter day, let me ask you a dumb question. what is the relationship right now with your hong kong in be and beijing? if they are worried about real estate and leverage and debt, how does hong kong fold into the beijing debate? enda: hong kong is very exposed to the china story. it rode the wave of china's

supercharged growth over the last decade, and is now feeling the pinch of the slowdown. it is feeling it in the slower tours of arrival, slower spending in captured goods, and of course hong kong is a highly leverage city in terms of the -- the amount of borrowing that went on here, betting on it as a one-way train. a lot of borrowing in hong kong to go back to china. there is a view that hong kong is very vulnerable to a slow down, given what is happening in china. tom: enda curra thank youn, so much. love to have him on on the day where there is a churn to everything going on. one thing we know is that the yuan, the renminbi, will not stay stable. it was widely presumed that we would see managed, orchestrated renminbi depreciation.

is that assumption still true? they try torderly, managed orderly. tom: that worked out. >> i got volatility. done now is a deliberate attempt to get control back. we are seeing is the balancing act of maintaining control; if we start seeing the equity market lose its nerve because the pboc has stopped evening because we aren't going to pile on more debt, this thing is not stable and the currency in the equity market will be the outward sign of that, or perhaps renewed capital outflows measured in the reserve data each month will be what we see. i think it's coming; i think it's almost inevitable. francine: do you think this is the path they will definitely take? >> i think they want to maintain control for as long as possible, and the chinese authorities will choose capital control over disorderly markets any day. they will choose more debt, more

easy money, more fiscal expansion over and out of control economy. they still need to maintain the economic development of the people. they are not independent of people in china. but it's just so unstable. francine: thank you so much. coming up tomorrow on "surveillance," alberto gallo, who has switched votes. he set up a fund to deal with negative rates. it will be an important conversation; that's at 5:00 a.m. tomorrow. ♪

francine: welcome back. it's a sunny day. we wake up a little too early, tom. i don't know what the weather is like in new york. it's time now for our morning must read. earlier this morning, i spoke with mervyn king; he has a new book out called "the end of alchemy." i tried to get into talk about brexit. he says he doesn't want to weigh in out of respect for the current governor of the bank of england, but he says that we need to stop sensationalizing. here he is. >> british membership in the european union is not a nexus tension threat to the european union or europe as a whole. people have calmed down and reflected on that. francine: tom, that was an

interesting take. we have had both sides of the debate trying to throw figures out how much it would cost families, how much we have to lose and to gain. mervyn king being very levelheaded; but i wonder when you go to vote on the referendum , what do you think about? tom: it interesting -- did he talk about what chancellor osborne said yesterday? is he going to part of the debate, are is he in a position where he has to stay removed? francine: he has made a choice of staying removed because he doesn't want to influence it, especially because of the bank of england's position, mark carney coming out with a report saying we need to make people aware of the risks. -- we are is here little bit brexited out. tom: i'll say. francine: the never-ending referendum is how tom calls it, and yet it is very important. how risky is it?

>> it's the source of uncertainty through june 23, and as i said, the opinion polls are too close to call. i have some sympathy for mervyn king; the world will still go around one way or the other -- francine: but are we sure about that? if not lehman brothers? -- it's not lehman brothers? >> i think most of the stuff that i have seen from all the regular economists i can find insist that it's a drag, but the biggest drag is two years of uncertainty to negotiate a new position. aroundre bigger issues these king -- his book, chapters on what needs to be done to reform the european union. i think that's a bigger issue. immigration in the new world, globalization of and equality,

these are bigger issues than where the u.k. sets. but here for the next few weeks, for sure. tom: kit, i spoke yesterday at new york university, and they let british students at nyu, i don't know what that's about. brexit was a big topic. is there any conversation we can calculate, the so-called cost, plus or minus, of these brexit transfers? is it just a shell game of people talking their book? >> i think there are a lot of people who will talk their book. it will be hard for campaigners, and for those of us who are not campaigning and therefore trying i just don't see how you can easily come out with a set of data that could save the u.k. would economically when. it's not the end of the world, but it could give you two years of economic uncertainty; you take what the gdp forecasts were

and you have a lower one, and the debate for the average voter is in my happier because we left with gdp lower? after that, you do your best. but i think it is to some degree hard for people, and the numbers are less important. tom: thank you so much. we need a briefing on saudi arabia, the changes, the turmoil with the royal family. this is as the president visits saudi arabia. the gulf research center director for economic research, truly one of the great voices on the domestic dynamics of saudi arabia. next. really looking forward to it. ♪

tom: good morning. bloomberg "surveillance." markets churning, futures negative, right now on a

wednesday, first word news with caroline hyde. caroline: thank you. donald trump and hillary clinton have ended their losing streaks in a big way. . runners scored double-digit victories in the new york primary. trump took more than 60% of the republican primary, with a handful of delegates. john kasich came second. trump told supporters it's not much of a race now. the associated press says cruz cannot possibly collect the delegates he needs before the convention. meanwhile, clinton put an end to bernie sanders's winning streak with 86% of the vote. that makes her road to the nomination almost unstoppable. sanders will determine his path forward after the primaries next tuesday. criminal charges will be filed against three people in the flint, michigan water case, according to the associated press. they say that two state regulators and the employee will be charged almost a year and a half since they used improperly treated water containing lead.

the fbi wasn't able to open hundreds of mobile phones over a six-month period. the problem is they were encrypted using passwords that couldn't be broken. fbi officials testified before a committee discussing law enforcement and technology. global news, 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. i'm caroline hyde. francine? francine: thank you. we have breaking news out of the eu. the european commission accusing -- of losing its power over the world smartphones. this is something we have heard at th in the past, a concern because googles means of making money is now under threat. we'll have more news throughout the day, but the european commission, tom, the formal antitrust regulator, sent google a letter of complaint. it really does go at the root of

what google does. tom: or is this the root of brexit? americans look at these headlines -- i'm by no means an expert, on the dumbest guy on the block -- but americans look at these headlines like, are you kidding me? is this like the discussion of britain leaving the eu has occurred? francine: not really. brexit can be talked in many different things, but google has nothing to do with the u.k.; the u.s. is not part of the european union. the competition commission in brussels actually deliberates for worldwide companies. whether you are in the eu were not. tom: interesting. we will advance that story across all of bloomberg news. the president today touches down in riad the head of history to the united kingdom, i believe for a birthday celebration. in germany, he will be meeting with the king. of course, heads of state of the gulf cooperation council

countries. theing us now from riyadh, director of economics research. very important here, john. i will the president be greeted by the royal family in riyadh? >> > definitely he will be welcomed. it's important visit, the last visit during his administration. but it is a relationship that has been framed not just from saudis but the rest of the world. obama has to do a lot of explaining to a welcoming group that still needs to see what is the foreign policy of the u.s. in the region, and the gcc in particular? tom: years ago, i went to visit you, and i notice the machine gun turrets manned outside your office building. are there still machine gun turrets in riyadh pointed towards yemen? >> still, absolutely. it is a concern.

yemen has been a concern for some time. and you have to deal with the wider issue of iran. what is iran doing in yemen? this war of proxies of the wider region, there is concern that, geopolitically, the region hasn't improved and has in fact interior rated. the u.s. has to say, listen, this is what i want to contribute, this is what i want to do. i want to sell weapons to the region, and i am confirming this. there is a lot about how much does the u.s. want to deliver in terms of armaments to the wider region, and again, to saudi arabia in particular? francine: did we underestimate the animosity between saudi and iran? this is what we found out in doha. can president play a tiny role of reconciliation, because he is considered a lame-duck? >> absolutely. i think that everybody

underestimates the difference of opinion between saudi arabia, iran, and the rest of the gcc. there is an agreement; however, nobody knows if there is in a a violation. we recently saw iran firing missile tests, in violation of un security council resolutions, but that everybody is sitting back and saying, it's ok, they can do what they want. so definitely, the messages that when it comes to iran, two oil policy, saudi arabia will do whatever it needs to do to control market share, but also it will contain the aggressiveness of iran. francine: at the same time, the other big story that came out was the saudi aramco ipo. is there anything obama can do in attracting that ipo? aramco will be a success, and definitely there is a u.s. involvement in that;

jpmorgan and others. certainly, it is going to be on the appetite side for the market to determine. i think the market will determine that the aramco ipo will go ahead in the near future. discuss morewill the politics in the economics of their relationship with the region rather than getting into the particulars of aramco. tom: john, explain the relationship of saudi arabia with the other gulf nations. we saw that strike in kuwait; i guess i am mostly intrigued by the relationship of riyadh with the persian gulf, arabian gulf, and the united arab emirates. give us an update. >> i think the relationship is proximate, but it is a relationship that at times changes and evolves. clearly in doha everybody saw that once saudi arabia said, listen, there is no deal, all the other oil producing states

jumped in and said we go with the saudi position. i think it is clear. on the geopolitical military matter, the u.n. plays an important role when it comes to yemen and it plays an important role in a comes to the rain. -- comes to bahrain. it plays an important role with the alliance that has been there . however there are differences at times. tom: news over the weekend and over the last number of weeks are the challenges of abu dhabi with the debt deal in malaysia. it seems to be very problematic. we would be honored with your perspective of this idea of nations and sovereign wealth with obligations in a challenged emerging-market mill you right now. what do you make of abu dhabi's response to getting the check from malaysia?

think this is something that has to be dealt with over time and i think as we get more clarity we will get to know what is really happening. i think it would be premature at me to say this -- tom: i think that's very safe. narratives. -- there it is. malaysia has a lot of debt riyadh to, and it's the rescue. thank you so much. francine: tom, let's get more on the conversation, first on the middle east and the impact it has on oil. i'd love to get your thoughts on what we learned from doha. it was almost impossible, in hindsight, if you listen to the saudi arabia deputies, what iran was saying, that we would have gotten agreements. >> yeah. only are learning is that the story is one of slowly rising global demand, slowly falling global supply, and it will

praise that is not reflecting that and at some point the excess of supply is going to fall away and did inventory building will slow down and stop. i am inclined to think the oil price is going to be in a broad range for quite a long time. we won't go much higher because the oil producers can't cut out for it -- they can't put the rest of the world under pressure. but realistically, we have taken supply down in seen all these numbers and demand is picking up. i have feeling more comfortable -- i am feeling more comfortable. tom: an oil chart shows the range we are in, the fortyish level, and we are back to where we were in 2004. do you look for exogenous shocks, or can you take off the next six months? >> we will get shocks, but the

oil market -- professionals complain that amateurs like me get too involved, that they would like to go back to their fundamentals stop i think it is going to be much more a story about -- we won't go back to $100 a barrel unless something huge changes -- we are just going to mess around in a broad range and probably get overexcited. tom: ok. interesting. it's fabulous to see where we are after that mess. everybody wants to be in wealth management. we will get his perspective, legendary with an index fund. ♪

francine: live pictures of washington, d.c. what a beautiful, beautiful skyline. i'm francine lacqua in london; tom keene is in new york. d.c.,ng you pictures of because of the new york primaries. but first, let's get to the bloomberg business flash. caroline: thank you. mitsubishi motors has admitted to manipulating fuel economy testing, after 20 500,000 cars were affected. models include those supplied by nissan. shares of mitsubishi fell 15% in tokyo, the most in more than a decade. yahoo!'s ceo ursa minor is trying to reassure investors.

she says the company will be moving swiftly to consider the offers, according to people familiar bill, including verizon and yp holdings. yahoo! also reported first-quarter earnings that beat estimates. and intel will make its biggest job cuts in a decade because of the slump in personal computer sales. the world's's biggest computer chipmaker will eliminate 12,000 jobs, about 11% of its workforce. it is shifting its focus to data center machines. the company gave a second-quarter forecast that fell short of estimates. and that is your bloomberg business/. -- business flash. tom: greatly appreciated. this is a stunning announcement -- if you followed intel, they were the servitude of technology. kit, i look at the intel announcement and i focus on 11%

of their workforce. you and i know as a rule of thumb that managers cut 3%, they cut 4%. to me, these cuts are not just created destruction of technology in the new intel. it's much more about global nominal gdp. where's the growth going to come from, or are we going to see more intel-like announcements? >> i have come on both sides. the global nominal growth story ofains -- i have this sense central bankers around the world growth thanunt more is on offer. how it's different now, we are in the sluggish period, and companies have to resize for that reality. i'm not suicidally pessimistic with global growth, it's just that i watch central bankers trying to get more than they can. tom: that new book "the age of

growth than is on offer. oversupply," let's go over to the bloomberg. here's ibm and intel. in the bottom line, they both ended up at the same point, with managers that are not only -- it's not just underperforming and coming back, but this performance around creative destruction goes to the idea that there is too much stuff out there. are we in an age of oversupply? >> we are in an age of oversupply, and we are moving very fast. this is the pc market. know that i have more phones and tablets and internet connected devices on the go and sitting at a pc isn't the thing anymore. if you want to technological company, you have to keep on reinventing the standard product. there is an oversupply, in the

price comes down all the time. if you want to buy a computer that does 20 times more than what it did five years ago, it's almost free, and that's a problem. francine: right. and i understand that this is a barometer, but i would push back against what a lot of economists you look at intel and it tells you the state of the world. clearly intel has a personal computer problem. 50% of its sales come from pcs. i don't even own a pc anymore; i just have a tablet. now they are trying to refocus on making chips for data centers and interconnected devices. but this goes back to a company that missed the boat. are we missing the boat when we analyze productivity? because of this huge technological shift, do we also need to get models on how you measure the economy? >> willell, i think, to be fair, part of it is that technology was faster and

faster. the dis-inflationary forces as you get news -- pull things get cheaper all the time, and whole areas of personal computers are a huge part of our lives five years ago and that age of our supply is so real. around the rest of it, you see at a micro level and the top line level, but to keep ahead, you need to run faster and faster to keep up. tom: yeah. i can't convey how important this discussion is. -- this iscine idea all against the backdrop of not global recession, but where's the growth going to come from? willf the other teams is yahoo! be there at christmas time, at labor day, who knows? scott galloway -- maybe he has a clue. if the stern school of business,

galloway truly one of the nation's sharpest critics of yahoo!. we will do that in the next hour. ♪

francine: you are watching "surveillance," where the focus

is on finance. tom, this is what we are watching for the rest of the week -- later this morning we will get earnings from coca-cola. results are due in about an hour. later, president obama meets with the king of saudi arabia and the heads of gcc. tomorrow, the ecb announces its interest rate decision. tune in for live coverage and the decision with president mario draghi. we are back with kit. we talked a little bit about productivity and brexit and markets, what we didn't talk about was what power mario draghi has to change euro trends. is it on the matter what he does? or will change the dynamic? >> there is not much he can do at this point. i was so struck by the numbers released yesterday, that in the european investors

have flooded out of european bonds and foreign assets. investors are selling european bonds now. ago they achieved a year was exactly what they wanted to, but since then, currency wars -- everybody has fought back. now, really, if the fed were to raise rates, effect yields went above 2% -- francine: while the fed surprised markets? jude is off the table, but if gdp comes in better than expected, the risks in china peter foff, they could happen. >> they could happen. they probably aren't pricing in a rate hike, but my buyers tend to think, shirley, it could come sooner. we have to be a bit careful. but i think the u.s. economy is trundling along, for lock a

better term, in a not terribly spectacular way, but domestic inflation is more likely. i think that will in due course be what drives the euro lower. to be hopings got he gets some life in the economy. tom: what is he going to get from germany? i lost track of the dynamic between mr. draghi and the rest of the german political economic systems. what does germany want out of mr. draghi? >> hard money. germany is dragged into the idea of negative rates and the idea of exceptional accommodation, and let's be fair, if the german housing market is one of the big beneficiaries of quantitative easing, then that's booming. the bigger dynamic in germany pleas betterthe

coming from the imf and christine lagarde, please ease fiscal policy in germany. tom: how does that play out? i saw no cultural suggestion that germany would do what madame lagarde requests. >> exactly that, although certainly not without some quid pro quo. the imf meeting last me could be summed up as the world has borrowed too much, has too much debt, could those who have room please borrow. an odd message, but one which is sent toward germany and falling on deaf ears. francine: will he have a crisis this year? can central banks combated if we do? >> i don't think>> we will have a crisis. look, i have been amazed by the ability of central banks to come back with more and more. it feels as if they are running out of room. if you do come back with more, more importantly, can we have some structural reform rather than just more debt to keep it

going? the is someone goes down the road with helicopter money and central-bank finance fiscal accommodation, perhaps in japan. and that's quite a big line in the sand. tom: this has been fabulous. i love seeing you on days that i'm crazy. kit giving us perspective; we will drive forward the conversation. we are thrilled to bring you the follow on, seth masters of bernstein, really a most interesting synthesis year across economics, finance, and investment. for the entire hour, mark halperin with us. ♪

tom: this morning, markets churn, yields grind ever lower.

chinese equities, they retreat. mr. trump will not retreat. in this hour, mark halperin on a humbled republican establishment. the view forward. yahoo!, tech engineers toward their own creative disruption -- destruction. i am tom keene. with me, francine lacqua in london. one big churn to the market, in search of a trend. francine: yes, the market once again is being moved by central bank action, or lack of it i would point to chinese stocks, down 4%. masters, with us from bernstein, will advance the discussion on economics, finance, and investment. politically, i have to get to "first word news." there is caroline hyde. caroline: the front runners in both parties scored big in the

new york presidential primaries. donald trump rebounded from a few weeks of campaign upheaval and gas. -- and gaffes. donald trump: we do not have much of a race, based on what i am seeing on television. senator cruz is just about mathematically eliminated. we have one bank millions more votes than center -- we have won millions more votes than senator cruz, millions more than senator kasich. in new york.mp won puts any indeed to bernie sanders' winning streak. in the state she represented in the senate, she won with 50% of the vote -- with 58% of the vote. hillary clinton: today you

proved once again there is no place like home. victory exitnton's a impossible for sanders to win the nomination. the european union is opening a new front in its fight for google. regulators have sent google a formal antitrust complaint for its android phone system. poweraccused of using its to crush the competition's apps. global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus i am carolineld, hyde. tom? tom: let's get through data here. not much going on this morning. equities, bonds, currencies, commodities. i would look at crude, above 40 again. 40.23. second board, the vix showing the rising assets, the good feeling among elites. francine?

francine: this is what i wanted to show you, very quickly. .uropean stocks down then it went up a little bit, -2.3%. this is after the boj said it may not introduce further policy measures to support -- market,s is the equity inflation-adjusted, and real estate inflation-adjusted. this shows how good feeling the upper 1%, 7%. up goes the equity market, outperforming real estate. but this is national. it does not show the boom in washington, in france -- in san francisco, new york, but a real disparity between real stocks, real estate. but it does not take into account the boom of some of the elite climbs. francine: i wanted to show you

what stocks in europe have been doing. we were mentioning stocks down a touch, but over the last six to seven weeks, it has been pretty boring. we are stuck in this kind of range, and we broke off that range about five to six days ago. it is significant. it may make for a little bit of volatility. tom: it is wonderful to have with us mark halperin, "with all 28-hourect," working a day today. when did you go to bed? mark: i just stayed over. tom: great to have you here, mark halperin. in your book you have the chapter on the dating game. who does secretary clinton date last night? she looked like a real winner last night. what is the next dating challenge? mark: both trump and clinton had strong winds in their home states, now they have to wrap up the nomination and think about being president. we are not that far away from

one of these candidates becoming president of the united states. tom: i saw a more presidential trump last night. all of the interviews are that there are a new set of advisors. do you have confidence they will bring us a more managed message from mr. trump? always tomantra is let trump be trump, so they need to balance what makes his personality strong, what makes an vibrant and popular with people who support him, but he has to broaden his support. he will never be president without significantly broadening his support. that is the version we saw last night. francine: what does that mean, a more tempered donald trump? someone that is much more cautious? is he going to be less crazy in his thoughts? mark: i think some of it is stylistic, calling ted cruz senator cruz rather than "lyin'

ted." talking about issues that maybe divide the country more, and last night we heard about emphasis on revitalizing the american economy. that one issue has the potential for whoever the republican nominee is to be a real factor in the general election. 2% growth for a lot of americans just isn't enough. francine: will that i'm clinton be able to dish will madame -- will madame clinton be able to -- it seemed like a more confident hillary clinton. mark: this is a state where she is comfortable. i think if you are in the clinton campaign and you look at her unpopularity with voters at large, you have to worry, except when you look at ted cruz and donald trump, who are less popular. tom: i adore pennsylvania politics. right now in hockey, the flyers, the penguins -- they all hate

each other, going back-and-forth. attacks donald trump his distinction in pennsylvania? mark: a lot of rural parts of that state. donald trump, you are right, it is complicated. if he goes there with an economic message, it is a typical rust belt state, the central part of the state looking at a new path the good paying jobs. on theve us an update republican establishment. how do they adapt and adjust to what they saw? francine: at the -- they start to wrap with the rules of the convention and also the question of, can they accept donald trump as their nominee? if they cannot, is there anything they can do about it at this point. the voters have a lot more say than the insiders do.

tom: a swirl, all in all. i want to know where i go after the primaries. do in thisdidates strange gap to the convention? mark: trump may be looking for a majority of delegates. as big as his win was last night, he will have to perform by well to get a majority of the pledged delegates in that first ballot. he may be will have to pick a vice president, maybe get to -- tom: who would you expect him to pick? mark: i think right now, chris christie, who endorsed him early. francine: you are one of the very few people in the world who have interviewed all of the candidates for the presidential election. what was surprising? is it different one-on-one -- is there anyone who is different

one-on-one in person than on stage? mark: both hillary clinton and donald trump have that kind of from what you see in public. they are a little bit more relatable and human. that is not uncommon for presidential candidates. tom: the grizzled pros will -- what do they say to mr. trump, with his unique and successful processes over 30 years? is,: what they are saying you have to worry about delegates. there is an outside game of winning primaries. there is an inside game of how do you get delegates and make sure they vote for you on that first ballot, make sure you are accumulating delegates who have to vote under the rules. that is a process that could make the difference between a donald trump nomination and a huge surprise in cleveland. mark, thank you so much. "with all due respect," tonight.

dateds book, which is not . "double down." up next, we go to economics, finance, and investment. seth masters joins us from bernstein. from new york and from london, this is "bloomberg surveillance." ♪

i am francie likewise london. tom keene is in new york. it is time to get to the bloomberg business flash, with caroline hyde. caroline: the sign that the

labor market in the uk's cooling-off. unemployment rose for the first time in seven months. the number of people looking for increased by 21,000 between january and february. saudi arabia has agreed on terms of a $10 billion loan to fund its budget deficit. its first sovereign loan in 15 years. , european,up of u.s. japanese, and chinese banks are lending the money. there is another bullish signal for iron ore prices. bhp billiton has cut production because of bad weather. -- iron oreere up prices were up 34% on the year. tom: caroline hyde, thank you so much. this is a great pleasure, seth masters with us from bernstein, their chief investment officer. he is truly definitive on the retirement crisis of america.

we are going to delay that today. right now, though, on the markets, wonderful to have you here. the basic idea you have and that i observe is that we have a quiet vix market, but you have a " around that. seth: there is lots of structural risk around the world, and that means that even though things are quiet right at the moment, that could change at any time. that is the question -- how do you take advantage of that, avoid the pitfalls of the spikes and risks when it happened, but -- note, love your research the idea of, ok, we are here, but as we react, we have to have a this custody to it, react slower. why -- we have to have a this osity to it.isc

seth: in the heat of the moment, economicals drive success. in a risk-on, risk-off market, moment and be helpful for a little while, and incredibly damaging right afterwards. so you have to have a very carefully calibrated strategy that does not get caught by these swings that we will continue to see in the market for some time to come. francine: what is a strategy? unless you buy volatility at vix , you do not really know how the markets will react. it is emotional. so you either take a view that in two years markets go off and you take that position when they tank, or how do you go about it in a sophisticated way? seth: the first thing, you need to understand your long-term strategic risk capacity and target, and you are absolutely right. you have to have that vision of how much risk you should be taking.

that is going to be a more difficult challenge in the years ahead because returns, especially from bonds, are going to be so low for the next five or 10 years, given the current interest rate environment, we do not think returns on stocks will be that high either. so you need to make sure you have enough exposure, but then you have to calibrate carefully as the markets are changing literally day today, where the risk in the market is evolving. there are parts of the world that are becoming riskier and where you are not compensated enough to take on risk, we need to urge stepping back. we are underweight in europe right now for that reason. the problem is that as and takese fed hikes the markets by surprise, everything tanks. i do not want to be madame doom and gloom, but nothing is really looking good out there. earnings are being supported by cost cuts. central banks are going further

into negative territory, and nothing good will come out of it. seth: i would qualify what you're saying. if you look overall at the macroeconomic environment, things do not look are able. we have moderate economic growth in most of the world and a lot of uncertainty around that, so you are going to see basically spikes up and down, around the low average attorney general. that makes people nervous. however, that nervousness is creating opportunities all over the place because people also overshoot. people tarp broad sectors with a brush, but they may be well-positioned. tom: if i look at a global system and you have to invest in it, we have to participate in it with risk, with lower dan and growth and lower nominal gdp, -- with lower dampened growth and lower nominal gdp, we have fewer places to move.

"we," if youu say are a central bank, i agree. if you are an investor, it is not necessarily true. let's take the financial sector. banks are having a lousy earnings season, and the financials sector has performed accordingly. if you think about it, the factors that are bad for the big banks with low interest rates and concerns about perhaps credit quality diminishing are very legitimate concerns. they are very focused on things that are driving the big banks. if you look at consumer finance mostly apart from student loans, it is healthy. right now, those companies sold off, too. that kind of thing creates opportunities for investors, but you have to understand the fundamentals. tom: i like the idea about the partition between certain big events as well. we will continue this discussion, looking particularly towards emerging markets. francine: talking about big events, tomorrow on "bloomberg

surveillance," we will talk to alberto gallo, the head of macro about theand we talk subzero club. at 5:00 a.m. in new york tomorrow. ♪

tom: good morning, everyone. on economics, finance, and investment, francine lacqua and tom keene.

wonderfulasters' note, i did not understand the to virgins in emerging markets versus u.s. stocks. it is an elegant chart. you go back to the beginning of the crisis and everything is pretty much in lockstep. seth masters, let's first do the why. seth: what happened? as central banks -- what happened? seth: as central banks were trying to bring things back under control in the financial crisis, they created massive amounts of liquidity that was designed to stabilize the markets here. a lot of it sloshed over into other parts of the world, particularly into emerging markets, creating a week -- creating a big investment cycle. you bought the big phone company of a given emerging market. what kind of emerging market do you buy. is a geographic specific? is it industry specific or company

specific? seth: i think it is company specific. there are lots of companies that you would never want to own, either because their business model is not that great, or because they are state owned and not really to the shareholders' benefit. it is critical everywhere to be selected when you buy stocks. that is especially true in emerging markets, especially in the frontier markets. you see: seth, where do these companies? emerging markets have gone through a tough time, but nothing good will come out of it. i had a conversation with the former bank of england governor, and he was saying clearly, if ,ou look at bricks countries the other three are underneath. seth: what i would say is, first of all, a lot of that is in the price in many cases, so people were excessively optimistic about the bricks a few years ago , and that was one reason why we were under waiting most of them.

at this point, the price of many companies in emerging markets in general corrected quite dramatically, and now you have more opportunities to buy, especially with companies that are dealing with the parts of the economy that are growing sovereigns. a lot of people are particularly worried about the old chinese economy, which has been growing very slowly. if at all. but the consumer economy is growing and almost 10% per year. that there is good opportunity if you know where to find it. francine: so you would stay away from commodities stocks or commodities companies. debtways talk about this burden, not only in china but in emerging economies. as soon as yellen normalizes, it would make their lives different. you have to not throw out

babies with the bathwater because very low oil prices which exist today can actually create opportunities, too. a company that uses oil as an input or natural gas as an input to make another commodity like fertilizer or some kind of chemicals might actually have a wider margin today than it normally does, and it might have gone down a lot because everybody was so worried about commodities. so you really have to take care of the stock level to make the right decisions. the days of just blindly buying up an etf are over. up, on yahoo!, scott galloway of nyu. this is "bloomberg surveillance." ♪ you shouldn't have to go far

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we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. great time for a shiny floor wax, no? not if you just put the finishing touches on your latest masterpiece. timing's important. comcast business knows that. that's why you can schedule an installation at a time that works for you. even late at night, or on the weekend, if that's what you need. because you have enough to worry about. i did not see that coming. don't deal with disruptions. get better internet installed on your schedule. comcast business. built for business. francine: we continue the conversation on finance and the economy on "bloomberg surveillance." i am francine lacqua in london. tom keene is in new york.

here is caroline hyde. caroline: donald trump and hillary clinton have ended their losing streaks in a big way. both front runners scored double-digit victories in the new york primary. trump won all but a handful of delegates per john kasich was second, and ted cruz came third. trump told supporters it is not much of a race now. possiblyed cruz cannot collected delegatee needs before the convention. hillary clinton beat bernie sanders with 58% of the vote, making her nomination almost unstoppable. the vice president of brazil plans to downsize the government if president dilma rousseff is ousted. mikel tamura -- will rue seth says she

fight against her ouste -- her ouster. -- they are encrypted using passwords. ,n fbi official testified studying the conflict between law enforcement and technology companies. numeral charges will be filed against three people in a flint, chicken, tainted water -- flint, michigan, tainted water case. three state regulators and a flint employee will be charged, using water that contained lead from pipes. global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world, i am caroline hyde. tom? tom: this is a real treat. seth masters is with us from bernstein. dive in and will look at the challenges of his banking, our banking, your banking. thatled that you were

thrilled that you are with us. there is a group of stocks breaking record highs, leading the way -- old, stodgy, dividend growers. bring it up, the pepsi chart. there are a zillion of these companies. can you own those stocks? can you add shares to those stocks? seth: price, if it goes too high when we build portfolios, we try to cover many different active scenarios, including building as an overall strategy. there are some stocks that have stable growth that are attractive. you want to be careful when you look at that kind of stock that, is the price getting ahead of itself? in some cases, some of these companies have gotten too expensive for our taste. it is an overall good idea as part of an overall strategy. tom: way out front in any number of metrics, and yet the plan is

there. if we get economic growth, do they underperform because everybody migrates to the companies that do better with economic growth? seth: there are two scenarios where they might underperform, or you might expect them to. one is if they are in a stained rally in general. -- one is if they are in a sustained rally in general. also, you are right. if there is a big bursting growth, the premium for the stability might in fact give way as companies that are more cyclically sensitive to benefit. francine: i want to talk about price to perfection. the flip side of it is something you do not want to be investing in. with aa conversation venture capitalist, and he was saying that everything is overvalued. do you push against that, seth? seth: i am not sure that everything is overvalued today. if you look at the stock market in general, when you consider

the quality of earnings in general -- and there are some parts of the market where this is not true -- but overall, we think the quality of earnings and the interest rate basically mean that stocks are not terribly overvalued at today's prices. the cost of capital is low. company balance sheets are strong in general, and company earnings, although we are seeing earnings drop for many companies in this earnings season, they are still at extraordinarily high levels. it looks like for the next 12 months the s&p 500 could have earnings of $1 trillion. that has never happened before. when you put it all together, it is not an ideal situation in some parts of the stock market, but in general things are pretty good. francine: i am looking at banks. let's take goldman sachs as an example. yesterday, this is a company that was the most profitable securities firm ever back in the day. it brought in

first-quarter revenue that was the worst ever in about 12 years, and the share price hardly moves because they are cutting costs. does that make sense? seth: it is interesting. it suggests the people who own the stocks were expecting some of this to happen. indeed, you can see that many banks have had to change their business model. they went from basically relying on high leverage when they were allowed to do that, and taking a lot of risk, to pulling back. one of the reasons why goldman has an issue now is some of the areas where we are still taking risk in trading have turned out not to be very successful. blankfein and other managers who have to make three and five year decisions, is it a structural decision that is , or do they get saved by a cyclical recovery in the economy? seth: the history of many of the investment banks is that they have been extremely good over time at reallocating capital.

whenever they have an issue like they have today, they have moved aggressively to move out of the areas which are troubled and into new areas. we will have to see if they manage to do that again. tom: it will be most interesting. i thought yesterday was really sobering, francine. francine: it was. thank you so much, seth. the global stocks rally that we saw over the last couple of days, taking a step back here in you can see the stoxx 600 down 2%. look at yen -- it was rising. it is now lower. 40.17.s at ♪

lacquae: i am francine in london. tom keene is in new york. the conversation is focusing on global wall street and

economics. now let's get to the bloomberg business flash with caroline hyde. caroline: the european union is opening a new front in its fight with google. googleors have sent a formal complaint over its android phone system. google has responded, saying it will show that the android business model is good for competition. its biggest job cuts in a decade because of the slump in personal computer sales. the world's biggest computer chipmaker will eliminate 12,000 jobs, 11% of its workforce. intel is focusing its business on internet connective devices. yahoo! ceo marissa mayer is trying to reassure investors hoping for a quick sale of the -- of thesset or it internet asset. include verizon,

tbg, nyt holdings. that is the "bloomberg business flash." tom: let's take a shot at yahoo! right now. the success of marissa mayer. up we go. there is where she took over. it was the honeymoon. it was fabulous, then the big rollover. scott galloway of the stern school of business joins us on the set right now. wonderful to have you here. you have been way out front on this debate. what is the new new for professor galloway, as tim armstrong possibly takes over the headache known as yahoo? scott: i would argue that marissa mayer has been your disappointment. favorite is verizon, because verizon can afford to

overpay. 105 million handsets, plus the assets of aol and yahoo!, you are looking at the largest mobile network in the world. the fastest growth around the epicenter of media is global advertising. so verizon can afford to spend the money for this thing. tom: that is the key word, isn't that? they can overpay. scott: they can overpay. the odds-on favorite -- i cannot imagine one of these trust merger things over time. can you imagine if yahoo! ends up going to the yellow pages? it does not make any sense. it will be exciting to see. this is a lesson why active investing works. i think these guys would have played slow ball and kill the deal if not for this guy. francine: scott, you think verizon buying this core business in what is essentially

a failed internet portal makes sense because of advertising that they will have to overpay for? scott: there are some assets here. it is a company that has the third most-- the traffic in the world. they have incredible assets that people do not talk about. $90 million of free cash flow growth is from yahoo! japan. even one million square feet of unused real estate in the valley, which they think they can monetize at 60 million. they do not talk about the incredible ip. they could get a couple billion dollars from that. there are some real assets here. again, 100 million mobile devices with a billion people coming into those, that is fantastic data and you can sell a lot of advertisers. verizon, with a 100 billion dollars plus market cap, can .ome in

i think these guys are better armed to come in and take this thing than anybody else. telling mehat you're is that the only way to make money from digital advertising on mobile devices is to have scale and lots of scale. scott: this is a winner-take-all economy. you have a company like facebook 65% on.5 billion users, it every day. yahoo! users, only 10% of them are on it everyday. 51% global mobile advertising goes to two players, facebook and google. every day, it increases. the world belongs to two players right now. this is happening across every industry. tom: this is two days in a row that i am doing justin fox as the morning must-read. mr. fox is brilliant on ibm.

tom: it is a great essay on the reality. give us an update on how intel, ibm, and the rest adapt to facebook/google. it is real and present right now, isn't that? oftt: look at the heroes yesterday. talk about the ramifications of a winner-take-all economy. yesteryear,eroes of 125,000 employees, $150 billion market cap. facebook, 12,000 employees. is that good for society? tom: that is the question i was

going to. michael but lucien wrote an essay years ago, where it is winner take all. we do that and also to regulated business. we do that in industry. we did that with the chinese trying to buy a hotel company recently. are we at the point where we will begin to regulate your tech world? scott: i personally think it is going to go the other way. it is hard to regulate these things. by the way, the most rheumatic example, $60 million -- the most , $60 millionple for uber? 4000 people, investors? we are headed to a recognition that we cannot re-create jobs as fast as we are storing them, and we will end up with a negative income tax. francine: we do have regulators. we have antitrust regulators.

they have been active and aggressive here in europe. even google today, once again being accused of wielding too much power over its smartphone. this goes to the core of their business model. it is that business model that is under threat. scott: aggressive? google has 80% market share. aggressive is it when one player gets nine out of $10, 90% share at 120% of the profits? apple gets 92% of global profits from the product that defines our age, smartphones. apple, facebook, amazon, and google have waived their perspective middle fingers at regulators and they have won. so regulators can stamp their feet and get angry, but when you look at market share and profit, these firms have done a smack down on regulators if you want to talk about share. and you are asking

whether this is good for the world economy? scott: i am not asking, i am saying it is awful. company like a google doing $10 million per employee and then other firms doing a million, i have panels pf people from google and wp wpp shouldme, and have 10 people on the panel. tom: 15 seconds -- seth masters, can you buy this crazy world? can you be long, scott galloway? there are some companies that are interesting investors for some reason -- for that reason. even though it is true that there is a lot of concentration of wealth because of this, we are still at record low unemployment levels in the united states because a lot of jobs are being created around

other sections of the economy that are not winner take all. tom: that was brilliant. thank you so much for the quick update. he will continue with us on "bloomberg radio," on "surveillance" in a little bit. than upntrill is more to date on mr. trump, on the secretary. both looking happy last night. it was a presumed victory for both. they move on to pennsylvania and to further primaries and then to the convention. libby cantrill on the washington convention. we will do that next. good morning. ♪

tom: a more relaxed "bloomberg surveillance" today. euro-yen, i am watching as a litmus paper. a stronger euro this morning, 124.12 on euro-yen. francine: we are watching "bloomberg ." jonathan ferro is with me in london. jon: i think this is probably the most important thing happening in global financial market right now, what is

happening to the bond market. the conventional theory is being put completely on its head. i had a discussion about what we are looking at. 0.4%, right away along the curve, all the way over from 40 years. we are looking at next week to see if we are going to get into more stimulus. tom: we also heard from governor kuroda today. he was quite adamant that he would do more, and today he was a little more hesitant. jon: i think when you already dts a third of the japanese market, there is more that you can do. right now, the fx market -- francine: jonathan ferro. tom, we are talking about politics now. 's with pimcontrill and joins us. she looks at washington and the

dynamics of our political process. what are you -- and what is washington adapting to this morning after what we saw last night? let's take a step back. there was no surprise that trumpet and hillary clinton did well. it was by how much they did well. for trump, he exceeded the critical 50% threshold, and in doing so he won all the statewide delegates. hillary clinton did very well as well. for needed these victories the momentum. tom: mark halperin suggested they are focused on the delegates and the process. how does the establishment that is anti-trumpet and anti-cruz -- how do they adapt and adjust? libby: trump did very well, taking 89 of the 95 delegates home last night. but it is still going to be a tough road for trump.

he needs 53% of the remaining delegates, and right now mathematically it is very difficult for ted cruz to get there, but he is staying in the race to try to thwart trump at the convention. road to themp's nomination got easier last night, it is by no means a slamdunk. we will not know until june 7 at this point. francine: what happens to bernie sanders after that? libby: it remains to be seen whether he will be in the race by then. primariesouple of key and hillary clinton is expected to do very well in those primaries. at this point the math is getting increasingly harder for bernie sanders, and in addition to the superdelegate dynamic, it looks like the hillary clinton is going to be the nominee, especially if she does as well next week as she did last night.

tom: what will you look for in the coming days? i am befuddled by what the candidates actually do when they wake up in the morning. libby: the narrative going into yesterday was a brokered and now there is no discussion of a brokered convention. i do not think that the math has changed that much. certainly trump did well, certainly the eyes are on a brokered convention, maybe decreasing a little bit, but that is still very much in play from a market perspective. tom: we are short on time here. seth masters, do the markets want gridlock is gridlock good, the potential new gridlock? seth: i do not know if it is good for the economy, but the markets will be reassured by gridlock, rightly or wrongly. that is what we will get. tom: coming, senate and house dynamics. coca-cola out with a little bit of the beat.

much more on this throughout the morning. $.45, a tick up as well. we will cover coca-cola throughout the morning. one of those stocks is like this as well. "bloomberg ," next on television, and "bloomberg surveillance with --"bloomberg surveillance" will continue on television. let's put up a panel of a market turning this morning. chinese stocks are getting weaker. crude oil elevated, above $40 a barrel. stay with us. ♪

jon: google accused of antitrust behavior. intel slashes 12,000 jobs this week.

shares are sliding. clinton versus trump? soth winning their party' race in new york. set?e election a very warm welcome to "bloomberg ." , vonnieme in new york quinn and david westin. david: wish you were here with us. we have some great guests lined up for today. --exclusive interview with marko kolanovic from j.p. morgan and