♪ francine: china's credit growth to the u.s.. before the financial crisis of 2008. druggie.or investors expect the ecb president to say that his program is working. we talked with algebras. as president obama leave saudi celebrations of the u.k., we talk oil and production freeze. this is bloomberg "surveillance." am francine lacqua in london. tom keene is in new york. we are looking at markets and the queen.

that is probably a sideshow to what we're really looking at, yields on fixed income. tom: jim polson will join us. .o one ever says melt up it is always melt down. what a melt up we are seeing across asset classes. francine: or a belt sideways -- a melt sideways. before we go to the u.k., president obama wraps up his visit to saudi arabia. he is meeting with leaders from arab countries on the persian gulf. he reassured the saudi king that the u.s. is his countries allied. a u.s. official said that obama did not unleash -- back off of unleashing criticism. european central bank president may use a press conference of my designs that the ecb stimulus is working.

inflation is weak, but the euro-area jobless rates fell to its lowest level in four years. coming down faster than .conomists but exit a warning from billionaire investor george thoreau who says that china's debt-fueled growth reminds him of what happened to the u.s. nine years ago before credit markets seized in the global recession began. most of the money the chinese market is supplying is needed to keep businesses are alive. russia has defended syria's defensive near the city of aleppo. the russians called it a response to provocation i a wing of al qaeda. they say that opposition groups must and ties with the militants. they blamed the russian-backed government for the near collapse of a cease-fire. queen elizabeth ii turns 90, the longest-serving on eric and british history has rained for 64 years. fire at a mid day and the parliament will be lit

in red white blue. global news, 24-hours a day, powered by our 2400 journalists, in 150 news bureaus around the world. cehic.jra when you have lunch with the queen and the president, what will you be thinking about? francine: "surveillance" obviously. i'm sure they watch it every morning. the queen turns 90 today. think about what she has achieved. a video message from david cameron, calling her the rock of strength for our nation. 90 years. 70 in charge, i believe. .he is almost faultless most people have great respect and admiration for her. at the life ofk the queen. say thank you to daniel your again. i urge everyone to read his command of the queen. this is a logged chart which really accentuates the slope

than 90 years of the queen. we have a most difficult 1930's. up we go. like at the buildup in equities during the thatcher years, the blue circles. up to the canary wharf high before the uneducated said the recovery of the dow and much of the united kingdom as well. we will show that chart a number of times through the morning. let's go to our data check. higher across all metrics. equities, currencies, , the dollar is stronger. nymex crude, that is american oil, $44 20 five cents. on to the next screen, the vix a massively bull market. jim polson has been a vigilant all through thick and thin. was 105. that is an indicator of less

stress within the system. we will show that chart in a bit. francine? i wanted to go through european stocks. they're not doing much, but they're holding to a three-month high. everything is on hold as we wait . mario draghi, what will he say? we are hoping to have vindication of the rate pass. i want to show you crude oil and copper. george there off keep saying market resembles the premarket crash of 2007 2008. tom: alberto gallo is with us in a bit. over to the bloomberg, this is a great optimism chart. we have shown this before the recession. here they show very clearly, the numberpared to of employees. this is absolutely extraordinary.

i would suggest, francine, america that is employed, prosperous, doing well. with great respect it leaves out a lot of americans that are struggling. something that janet yellen is worried about. of course mario draghi is concerned with in europe, as well. francine: they really important chart. what i picked out is something in japan. these.t impacts a lot of the blue lines, the 30-year japanese government bonds. the white line, 40-year. the circle in red is when governor kuroda decided to go into negative rates. we touched below 0.4% for the 30 and 40. this means the search for europe and the bond market is proving more than ever before. let's walk central-bank spear that's go to frankfurt where we are joined by bloomberg news's central-bank editor paul gordon p are two interesting things happening. we heard from the swedish

central-bank. they put more qe. it is not having the red effect ont the governor wants currency. mario draghi is probably saying that qe is working. charts are very interesting. they portray but -- labor betray the they concerns of the euro area. the assets are rising, not so great if you are a saver or looking for returns, on your pension fund for example. or if you're planning for your retirement. that is causing anger in germany. there are plenty of people out of work, notably in spain, portugal, and greece. they would like to see more government measures coming through. what is a central banker to do? mario draghi is likely to point to the drop in the unemployment rate. the drop of the unemployment rate in the euro-area, while still saying that it is too high, it has been quite impressive. the majors that are in place are

working. they will continue to work. they will take time and governments need to do more. francine: this is a problem. governments need to do more. they are not. he goes back to what we are seeing in sweden. the swedish central-bank fighting the currency with more monetary stimulus. this morning, it is not working. paul: that's right. these claims come through from barriers present the world. the former bank of england governor speaking on bloomberg television yesterday saying that central banks might be near their limits. that echoed comments by the australian central bank, the canadian central bank, and germany. there is a concern that central banks may have gone as far as they can go. there are seeing diminishing returns. they cut rates far enough below zero, they are pumped up qe as far as they can realistically go. not everyone is convinced. tom: what is the surprise that we will hear the press

conference today. he comes out, there are three or four questions. we note that lines will be in advance. there is a change, a shift in 8:50 a.m. and we will see real headlines. what will they be? paul: one of the things that we are looking for is what draghi has to say about interest rates. it is a -0.4 percent. many people are looking for him to say that they could go lower. even if they may not go much lower. will he reach rates? he confused somewhat of the last press conference. that is one that people want to look out for. any signs of more stimulus qe. any signs that more stuff could be bought under qe. -- could be bought under qe. tom: the relationship between mr. draghi and the germans, where is that as we go into the press conference? paul: as you are aware, the finance minister will function

nobler -- finance minister wolfgang schaeuble are called mario draghi's rent. maybe that will go as we have stimulus into the summer. this is partly political. the government has elections next year. when populist parties are on the rise. it infringes on central bank independence. draghi may feel that he has the push back. the bundesbank is on his side on that matter. francine: thank you. stay with bloomberg for our coverage of the ecb news conference. will bring you the right decisions at 7:45 a.m. in new york, 12:45 in london. we will bring you mario draghi's news conference starting at 8:30 a.m. in new york, one: 30 in london. is the glass half full? ♪

♪ francine: welcome back. i am francine lacqua in london. tom keene is in new york. let's get to the bloomberg business flash. volkswagen will pay $2 million to settle claims over rigged emissions test. the u.s.0,000 cars in would be covered. it is unclear how much individual car owners would get. it is the deadline today said by a federal judge for vw to say how they would fix the cars. the first quarter profit that beat estimates that sales were down 3% after the swiss company's best-selling cancer drug lost protection. they're sticking to their forecast that sales and income will be largely unchanged from last year. four-yearthat operating income came in 9% below the forecast. the company booked 500 $43

million impairment for the unit that makes sensors and lenses using cameras and smartphones. sony is affecting what impact last week's earthquake in japan will have on earnings. that francine: is the bloomberg business flash. francine:oil trading at a five month high. five month after u.s. output dropped to the lowest since october 2014. we are joined by how the year -- by javiar. withs more to do technicals than fundamentals. you said there is a great bloomberg function. ,f you go on to brent and do hs this shows backwardation. structural,een, the between immediate delivery and the second contract. it has moved into positive. it has been the last 14 months to 18 months in negative. it is now positive.

that means that you i positive investor and you buy brand. this is month after month. every month, you get a positive return to the precision in the past. you can stay there, and it was costing you money. that is now triggering a lot of inflows. we are seeing the opening interest in brand, skyrocketing to a record high. morningreally the flows, what is really explaining what is happening on the market. fundamentals are also improving. this is very much of a money flow. of theat is the why singular moment? why is it happening down and not three months ago or three months from now? you think that the wires if look at the second half of the year, we are approaching, the fundamentals look stronger than we were thinking six month's ago. also, the demand for gasoline around the world, particularly in the united states, but also in places like india, it is very

strong and that is filtering into the data. investors are more confident that there will not be an increase in production. we say production of most opec members are struggling. investors arely, saying u.s. production declining and the climbing fast. shell companies are in trouble. tom: i get that. you don't think that it has anything to do with these two guys getting together in riyadh? , is this a pro confluence of this moment with the green on this bloomberg screen, that cannot be ignored, can it? javier: you are right. the sentiment is changing. -- and obama and king sol king of saudi arabia together. we had money flows.

the international agency has been quite bearish about oil prices, highlighting the downside. this is highlighting the positive. i think that that is in general the oil market has changed over the last weeks or months. this week has been different. wencine: how long are expecting backwardation? is it technical? will it spike higher because it has been in the range for a long time? javier: it is confluence. the confluence is happening as we go into the mine agencies into the northeast. remember that this is brent crude. it is produced out of the north sea. whether during the summer it is positive, as you know, francine, the only time of the year that we get a bit of sunshine. not so much rain in england. oil companies take those three months of summer.

they do production, then it comes down. that also helps us, and other fundamental that is helping the market. essentially, it seems a bit of a technical issue, moving into backwardation. the market, in general, they're expecting it to remain. the markets move very quickly to backwardation. that is to cover. that is exacerbating the move. tom: thank you. the only backwardation in new york is that the yankees are in last place. javier blas with bloomberg news in london. we will speak with james of fletcher's school. on the president's travels. -- the new- the nei era. ♪

francine: i am francine lacqua in london. tom keene is in new york. i'm pleased to welcome the head of global macro at algebris investments for his first tv interview since he left rbs to join algebris investments. it is great to speak to you. you are also launching something that a lot of investors have probably advertised, which is basically splitting my chart of the day, how do you make money in a negative interest rate environment. this is japan in the 30 year touching lows yesterday. the assetoday,

management world is made of funds that buy bonds. they are not yielding much. you need to have a strategy that is more flexible. the person you don't want to do is to buy benchmarks were you have a lot of negative yield bonds, like bunds or core european debt. you want something without a benchmark that does not follow the crowd. that is more free to go into high-yield if you want to go into emerging markets. something flexible or do want something that can go short. sometimes there are central banks distorting markets that have a lot of risk. this risk will appear. we saw it with portugal and greece. 4, want a car that is a 4 x that is designed to go for a rocky road. you also want one that is more cost effective and many others around. tom: congratulations on your move. i read your research and did not understand a word. let's bring up a quote from gallo, which gets the tone of where we are. this prolonged qe

aesthetic, the paradigms of investment no longer apply. bond markets show a drought in yield, yet opportunities in the niche is the edge of central-bank policy, credit is at a multi-decade turning point care and why are we at the turning point, and where are we turning to? alberto: the first thing i think is that we will be in a prolonged low interest rate environment for a long time, especially in europe. qe is not working in the economy. it is working in the bond market, it is not really working because there is no fiscal policy. the central bank is pushing market, but there is no drop encryption or inflation. we will have low interest rates for a long time. effectively, the central bank will announce more details about the corporate bond purchase program. all of the investors are now being bought by the central bank , there is less return. you have to be on the edge.

with the central bank does not buy, and also without taking excessive risk pretty want to be diversified. you have to take more risk if you want positive returns and you want to go into high-yield, banks, coordinated debt. you need more hedging. tom: straight talk on banks which you cannot get when you are at a major house. every conversation ends with italian banks in the real economy of it early. what is the state of the italian banks when they look at the dealt int draghi has the credit markets that you have written about? what do they do? alberto: we have rescue funds which is a good thing. the government created this to stop the spreading of systemic risk. -- there has to be an acceleration in the forms. like the bank regime. consolidation of banks to make sure the

problem does not come back in a year or two. there's a problem of tactical outlook. the key acceleration in the forms has been announced by the government, but the implementation remains slow. francine: thank you for that. a bird of gallo. since :00 a.m. in new york, 11:00 a.m. in london. if you're the central bank governor you announce more qe. your currency goes the other way that you want it to your it what is the problem? it is a market a problem? do central banks need to do more? are they doing too much? that is what will be asking governor ingress -- governor ingves. ♪

tom: good morning. bloomberg "surveillance" on economics finance investment on international relations. we welcome all of you to our show. right now, first word news.

here is nejra cehic. nejra: doma rousseff is coming to new york for united nations climate event. a concern international stage where she can't denounce the impeachment process. it a q and blames the vice president, michelle timmer. pain for a devastating earthquake. degree powers to boost the sales tax by two percentage points for single year. millionaires and businesses will pay more. anyone making more than $1000 a month will lose one day if they. the earthquakes that struck the other japan last week may cost insurance $3 billion according worldwide. air it caused widespread damage. tenant republicans will kick in on part of president obama's emergency request or spending on

the zika virus at according to a republican familiar with the matter. they're drafting their own plan to spend more than $1 billion. the president asked for twice as much to keep the zika virus from spreading. theman who shook up presidential campaign with his unorthodox style is going more traditional. donald trump lands to hire a speechwriter, use a teleprompter, and give a policy speech on foreign affairs. he tells the wall street journal that he plans to be more effective and disciplined. global news, 24 hours a day, powered by our 2400 journalists in 150 news bureaus around the world. francine: a teleprompter for donald trump? .ow it billionaire investor yesterday said that is what is happening in china. he says that it resembles what happened during the financial crisis in the u.s. in 2007-2008, which was field by credit growth. most of the money that banks are

suppling is needed to keep enterprises alive. economic correspondent for bloomberg news us from hong kong. davose to george soros in . he said that this is after some pretty optimistic data out of china in the last three weeks. good morning. indeed, as he warned you in january, it is more the same. it is a view even a shine's economy stabilizes on a headline basis, you have to look at what is driving the stabilization. it is a surge in credit. it is a gush in lending. at backdrop is that bad debt the nationsbank is at the nationsbank is that a 10 year high. may go that the loans higher. there is a concern that china is achieving near-term stability, but at a longer-term cost.

that is allowing where people george soros to come in. china italy has plenty of assets to offset, enough to make it quite different than what happened to the u.s. in 2007 2008. tom: they also have flows. what is not missing for mr. ' announcement is capital flows. where are they in china? the capital outflow story is relatively calmer than where it has been. has stabilized. china is doing more to attract inflows. investors have argued there is potential for the inflows to grow exponentially over coming years as china opens its bond and equity markets. the big story on the outflows remains the yuan. as long as the yuan is relatively stable, that is ok for china. it takes pressure off the people

looking to get money out. if it changes, it puts pressure on the outflows and puts it front and center of the china story. with a hedgepoke fund manager that made money during the financial crisis yesterday. he is quite bullish on china. >> china does not concern me. i think that china, has the anyr to move on without catastrophic consequences in terms of having to revalue its currency. i think we're safe. i think china is now beginning to the statistics which demonstrate that. truth is probably somewhere in the middle, right? are we going to have signs in the next couple of months on whether the world is about to end on the back of chinese evaluation enda: or not? the issue with the china story isn't quite an extreme view. it is either the full on bearish

camp where those who think that china can navigate their way out effortlessly. key going forward is to watch the yuan does travel. the federal reserve is a big park at the base. if we see fresh strength in the u.s. dollar that would put forcing on the yuan, chinese authorities to perhaps intervene. if you look at the triggers on the horizon, there is worry about the housing market, rising debt, worries about capital outflows and the like. the real trigger could be the yuan, and that is the key to the stability in the china story over the coming months. tom: when in doubt, look at the upside. we appreciate that. alberto gallo with us from as we look at the litmus paper of the cds market. you have some of the algebris investments portfolios. is it a better pricing today than the fears of days ago. what do you glean from asia's cds?

the emerging markets have rallied in q1. this rallyt in part was overdue. fundamentals are still weak in un. parts of the they can do a soft landing in the coming months. it is not an end of the world story. then you have brazil, where the president is about -- the impeachment failed, but there is still a week situation. we're not sure who comes after rousseff. there is still a lot of overcapacity in emerging markets. markets and oil. there has been a cut in production, but it is temporary. u.n. isure for the still weak. we are cautious. you need to be selective about the countries that you are long and the countries where you are

short and we were long in argentina, that was a strong story with little change in political landscape. you have to cherry pick the countries which are turning around and are improving. francine: are we trying to figure out where the world is coming to an end or not? it seems like half of the people that come on the program are concerned that we are missed priced -- we're mispriced and the mishap will put us into a recession. thatto: look, i think there is an interesting concept. are goodest rates today. if that is the only policy that you're implementing, low interest rates can cause low interest rates in the future. that is something in the past, the bank for international settlement has been writing. ang interest rates create financing in sectors where people should be more prudent. that we have seen in energy or mining or real estate. for create incentives

having bubbles in the future. i think that we need to see a on toppolicy action here of reforms which take a long time from governments, especially in europe. the long-term danger is to go into a japanese scenario in europe. politically, europe is more fragile than japan was in the 1980's. tom: let's swing over to equities. the idea of emerging market equities into verging from the s&p 500 index as well. what does it signal to you, alberto, in the equity markets to see such a great divergence back three years? -- generally, the u.s. has outperformed everything else since the crisis. there was one reason in my view. the u.s. is the only country that has been able to deal with its balance sheets. we talk about this as a balance sheet recession. consumers, governments, having

too much debt. the u.s. is the only one where households, corporate scum have been able to restructure the debt. in bondes restructured markets. households restructured their mortgages. this system has reset itself to some extent. on andnot able to move restart with some credit growth. in other countries like the euro zone and other areas, we have one trillion euros of nonperforming loans. in china, nonperforming loans are officially 3%. in reality, we estimate them to be between 8% and 10%. you have economic loss in the system. people know that it is there, but it is not quantified. it blocks the economic system from working. it stops banks from lending. it stops corporate borrowing and hiring. that is why the u.s. is outperforming. they have been dealing with the balance sheet. francine: alberto gallo. coming up next we'll hear from

the ceo of ericsson. ofy missed their estimates this morning. shares are falling for the most in a year. they are down 10%. companies do?sh they have been trying to shrink the wireless networks. will he change? we are talking to him next. ♪

♪ it is a full moon with bonfires across the united kingdom. i believe that is here. a gorgeous moon. it is a scorpio moon? i am doing my astrology.

francine: i want to make sure that no one turns into a werewolf. let's keep an eye on the moon. tom: that is a moon and the constellation trump. the donald has his own constellation. francine: but now he is using a prompter, so maybe he will get back from looking like a werewolf. ericsson, we have to focus on corporate stories. falling theickson most in one year. we're joined by hans vestberg from sweden. thank you for joining us. your share price is down 10%. you're falling behind in sales. a lot of your competitors are doing better than you. how do you stop from here? looking at the first quarter we have a flat sales compared to first-quarter loss. we have a clear improvement on the bottom line. betweenally went out

all of the swedish krona in competitive 2.1 loss. we have some weaknesses in this report as well a along the service station get a traffic worker. that is where we see emerging markets. that is for seven quarters. it is getting an impact on their investment level in countries like brazil, countries like russia, portugal, the middle east. there are weaknesses in north america. that is where we have seen a couple of quarters. tom: transfixed by intel's restructuring, 11 percent of employees leaving as they are restructuring. will you need to do the same? your employment account is remarkably like intel's. will you have over 10,000 people go out the door? we have two programs right now. we have one being cost-efficient where we take out 9 billion swedish krona in fixed cost.

that is ongoing. we made really big headcount reductions last year. we have some steps left. there is a right side in the market where they have lower activity right now. as we go to reduce headcount. we have not a total number. we talked to individuals. we talked about the number. we are in a moment where we are actually adjusting our capacity in service delivery as well as our fixed cost reduction program. needs new technology. they are reinventing international business machines again. what is the pressure on you and find new to architecture, new technology, as erickson? -- at erickson? hans: very high. we see that happening all around. we are spending a lot of time and technology. we think we are on the forefront. that is a totally different technology than any other mobile

technology. is coming toation telecom. we are going into media. everything from all of the softwares needed to reduce content around the world. innovation is on the forefront for us to continue to we were a leader. francine: hans vestberg, i'm looking at your share price, it is down 10%. i know that you had positives, but the market is focusing on the negatives. one analyst told us the shortfall makes them worried about your ability to run a tight company and improve profitability. what is your message to the markets right now? do you have to accelerate your transformation? definitely. we are accelerating our transformation. we also announced a new structure of the company that will be enforced two months from now. units will be a tighter end to end. we definitely are catering to

different types of businesses. customers are changing, we have changed a lot. we have our net business, our cloud business, our media business. we are structuring the company to execute on that. that is an exploration of our strategy where we were the world theater. we're taking everything that we can control in this environment to continue to improve our profitability and come back to growth. francine: with all due respect, if it doesn't work in six months, do you feel that your job will be on the line? working to see that there is a long-term execution. that also means taking care of the short-term. i'm not thinking about myself, i'm thinking about erickson continuing to be a world leader. i think that is the most important. so much. thank you no coverage of the european central bank. will bring you that rate decision; 40 5 a.m. in new york. on all the bloomberg platforms,

television and radio. we will bring your mario draghi's news conference which starts at 1:30 p.m. in london. ♪

francine: welcome back.

you're watching "surveillance." i am francine lacqua in london. in new york. sony says full-year operating income came in 9% below its forecast. they booked a $543 million impairment for the unit that makes sensors and lenses using cameras and smart phones. sony is assessing what impact last week's earthquake in japan will have on earnings. it is game over for microsoft's xbox 360 p they plan to stop making the game console and it will not be available after stores sell out their stock. microsoft sold 80 million from 2005 to 2014. many of the games designed for the 360 can be used on a newer turbulentarry the first quarter on wall street has taken its toll on the real estate market. home sales in the hamptons they'll to the lowest level in

three-years. would be buyers of beachside mansions stayed on the sidelines, sending purchases down 19% with the average price falling to $895,000. that is the bloomberg business flash. tom: we are showing this chart through the day. the queen's birthday. it is wonderful to have alberto gallo with us. this is 90 years of the dow. chart,ression, the long slope matters. the thatcher years in blue. the green is the peak of the market before the financial crisis. has a read on the queen's middle years. he talks about the struggle. bring up the book cover. i cannot say enough about how your again -- how daniel your again shows the england of the 1930's and the desperation that led the thatcher years pure the queen across all of that span. it is amazing when you

look at a time line. i was looking through some of the u.k. papers. it is amazing what she has seen. throughout it, there is a sense that she has risen above all of these problems and led the nation without having effective power. let's get to alberto gallo yard when you look at the clean, and it is an interesting segue, she has been through a lot of referendum. she has guided his country which will not talk about the brexit, but it is probably the biggest for this country and the eurozone as a whole. i agree. i think in the financial industry, a lot of people have underestimated the risk of brexit, especially in the beginning. now the odds are closer. we know that under a lot of is setc terms, the u.k. to lose if there is an exit. even know that there is an idea of higher sovereignty, sovereignty is always traded and

compromised to get to an agreement. the problem is that not everyone recognizes this on an everyday basis. francine: how many questions will mark you drag have to field on brexit? we are not expecting anything in terms of two-year interest rates, but hopefully we will understand better what he is ranking about what the main risks will be. alberto: central banks have an emergency plan. the bank of england and the ecb wouldms of rice that they employ more stimulus. in the end, the major issue is companies,ctories, banks having employees here. on day one, if there is a leave vote, nothing would change. it is not legally binding. there is a two-year time when the eu could get more federal in response to a potential leave

vote, which would take jobs out of london and the financial industry out of the u.k. goes to francine's interview with the swedish governor and our next hour. here is swedish gdp. done we go, the crisis, up we go -- manipulated. this really gets my attention. let's call it a miracle. what can the united kingdom learn from sweden as they consider brexit? alberto: sweden was never into it. there is less risk. we do not have similar issues with the u.k.. we both have a bubble in housing market. we have capital rates that went into negative. u.k. have aand the household debt problem, which puts central banks in a trump. the bank of england. haven, itike a safe

looks like things are going really well, but actually, there are underlying issues in sweden and the u.k., which, on top of the high debt, also has a current account deficit, which is very high. it is a block here. the u.k. government has spent money to stimulate the economy in the last 10 years. it has increased debt. households have borrowed another few bullets left to use. tom: alberto gallo thank you. the portfolio manager with algebris investments in london. we continue the conversation on economics, finance, investment on this day of these he be meetings. this is bloomberg "surveillance."

♪ tom: draghi and the ecb will have a global punch bowl.

equities and oil search this morning. the president meets with arab leaders from the six nation g ulf to operation council. and isn't the first day in london, the president will fly in from riyadh. bonfires across the kingdom. good morning. bloomberg "surveillance" live from our world headquarters in new york on thursday, april 21. i am tom keene. with me is francine lacqua. do you stand outside buckingham palace? what do men are mortals like you and me do? littlee: i am a disappointed. when you were in london we got to a bow tie with the union jack. i am disappointed that you are not wearing it. let's talk markets. tom: go get the bow tie. it is in the house somewhere. for francine, i will put the bow tie on. let's go to our first word news, on a serious note.

here is nejra cehic. nejra: president obama is rubbing of his trip to saudi arabia by meeting with leaders from six arab nations on the persian gulf talking about regional security issues, including the fight against the islamic state. another topic is iran, which the saudi's and other states see is a destabilizing force. mario draghi may argue today that the glass is half full. draghi may use a press conference to point designs that the ecb stimulus program is working. -- point two signs that the ecb stimulus program is working. the jobless rate fell to its lowest level in four years and is coming down faster than economists predicted. u.s. senator public and will give an on part of president obama's request for emergency spending on the zika virus according to a republican familiar with the matter. they're dropping their plan to spend more than $1 billion. the president asked for twice as much to keep the zika virus from spreading. defending syria's

defensive near the rebel held city of aleppo. the russians call it a response to provocations by weighing of al qaeda and they that opposition groups must end ties with militant spirit opposition groups blamed the russian-backed government for a near collapse of a cease-fire. queen elizabeth ii turns 90. servingest monarch has rained for 64 years. cannons will fire a salute at midday and the houses of parliament will be lit in red, white, and blue. global news, 24-hours a day, powered by our 2400 journalists, in 150 news bureaus around the world. i am nejra cehic. equities, bonds, currencies, commodities, the list all across. futures updated, the dow 18,096 on the close. weaker, the dollar stronger. i stand corrected. does go to the next board with brent crude leading the way. can you think of a $50 barrow?

that will change. emerging markets. i want to point out the curve is deepening from 100 to 105, move a decimal point over two places, 1.05 percentage points. that is a big deal. is a big deal. have european stocks. they are a little bit more negative territory than they were 10 minutes ago. holding to a three-month high, but it is about what my go draghi -- what mario draghi says. point 06.r 113 the crude is about backwardation looking at brent peter there a lot of discussion about china, up 0.7% in copper. this chartwed earlier. let's see if i can do this. this is claims. it looks good. what do you think? it looks good. claims, recessions. news forood

america. this is a part of america that has jobs, even a shortage of jobs. i think jpmorgan, the idea here of two americas, or three, or where there is a struggle is the fed debate for chair yellen. francine: this is our bloomberg surveillance present to the queen. a gorgeous bowtie on tom keene. her own son recorded and broadcast where he reads passages from shakespeare. i prefer the bow tie. i will tie this during the break. i'm wired up in the back, so i cannot do it like i normally do. at emerging markets, anastasia amoroso with us. the global market strategist. on a serious note, we are hearing more people say deploying assets. where in em is the best em?

anastasia: i think the oil trade may be coming back. we talked about brent crude living up to $50. if you look at another i merging market companies, their ties to the oil trade. one interesting thing to add is while the u.s. oil producers are cash strapped and cannot meet their debt obligations, a lot of the international oil producers, russian ones, are not. that is one area that i would first of all look to deploy capital in the e.m.. equityt's look at the markets to show this in the last hour with alberto gallo. the basic idea for three years has been that this is your wheelhouse anastasia. is it load the boat or deploy assets in a measured way? russia, saudi arabia, non-opec indonesia, the philippines, etc.? the vote. not load

imply capital selectively overtime. value, 1.3ooks times, the same as it was in the financial crisis. going back to the 1990's -- that would argue for loading vote on e.m.. one thing that i'm worried about that matters is china. we are temporarily in a better string of data for china, but the issue remains of overleveraged, dependent on the banking sector, the chinese government, to deliver growth. that has not gone away. that is why i say that we have to see how that plays out before we do load the boat on e.m. francine: how much more do you do on negative rates? this is my bloomberg chart. i picked japan, but this could be true for sweden, and it could be true for some of the other central banks around the world. the search for yield is more elusive than ever. the white line, the 40 year jgb.

the 30-year is also at a record low of 0.4. the red circle, is when japan went into negative rates. what does that do for pricing the markets? anastasia: i think that negative rates are hated why the financial assets with a few exceptions that is true across the board in any country that is implemented negative rates. i do not think that negative rates can do the trick by themselves. i think that what mario draghi of the ecb has done in the last meeting is more helpful to financials than negative interest rates alone. i'm talking about doubling down on a targeted long-term financing operation. i expect to hear more about that today. i expect to hear about how does the ecb mitigate the adverse impact on margins of financials from these negative rates? the way to do that, of course, is to provide them with exceptionally cheap capital from the ecb that they can lend to the economy. francine: are we nearing the end of this great financial

experiment overall? we heard from the swedish central bank governor. they're speaking from him -- speaking to him shortly. he said his bank may be nearing the end of this unprecedented stimulus. it is not having the effect that he wanted to. anastasia: i do not think that we are nearing the end. what we found out over the last year, just when we think we are nearing the end, there are more tools in the ecb tools in this case. even though that statement last goth that maybe they do not deeper into negative territory, i do not fully buy it. those predicated on a set of current conditions. if current conditions deteriorate, of course, you could potentially see a further move in negative territory or something else. tom: investing 101. of firemen emerging markets, to you presume i have to hedge the currency? solution domestically for these nations is a weaker currency pair that kills me as a

developed nation investor. anastasia: it does. tom: do you had? anastasia: you can more effectively hedge that in the developing markets. the interest rate differential is not as wide, but it is expensive to do that in emerging markets. it is expensive to hedge. tom: anastasia: the great distortion? if you look at the interest rate in russia, it is 12% purely talked about negative interest rates here. i would not say long-term you necessarily need to hedge emerging market currency. if you look at this weed spot for emerging markets, the growth from 2000 to 2011, emerging market currencies did very well. francine: do you see how anastasia says "russia is 12%" like it is no big deal. that is what you do when you are in e.m. it is fine. francine: that is probably one of the main concerns, right? inflation picking up a few

goods, then you look at oil. the countries in the financial. knowmadame lagarde, i you're watching. i'm sorry. 12%, it is no big deal. francine: brazil is in that camp. theyin good company, -- are in good company, maybe. we'll look at negative rates for the countries. swedishspeak to the governor stephan invests. -- the swedish governor stefan ingves. ♪

♪ francine: i am francine lacqua in london. tom keene is in new york

currently have been talking about negative rates, the implication for banks on currencies. the swedish bank has kept its rate at -0.5%. it plans to buy additional 54 billion swedish krona of government bonds. we are pleased to welcome the risk bank governor, stefan ingves. s thank you for joining us. we understand you might be nearing the end of this unprecedented bout of stimulus. are you not disappointed that it has not helped your currency more? it is too early to tell. basically, we are on a path to reaching our inflation targets in the course of 2016 here that is so far, so good. we have stated that most likely over time the exchange rate is likely to appreciate. it is to make sure that it

happens slowly. if it were to happen too fast that would cause a problem for us on the inflation side. so far, so good. francine: you're telling me are willing to live with a stronger krone as long as it is not too quickly -- give me a sense of why you chose cutie over negative rates, more negative rates. well, the last time that we chose to lower the policy rates to -0.5. this time, we felt there was a need to bring clarity when it comes to doing qe so people would know and fully understand our intentions in terms of what to do during the second half of this year. for that reason, it was suitable ons time to bring clarity that side. that is why we felt that this was the proper accommodation now. getting: so, you're not more uncomfortable with the idea of cutting more negative rates?

or are you? there is a raging debate around the world about the real effect of negative rates. certainly not in the terms of technicalities of actually lowering the rates, going to low when a 0.5 -- technically speaking, it is fully possible for us to do that. as far as we can judge, and there has not been any really serious negative consequences in function, banks' profits, things like that. we can do more if we feel that we have to. tom: seven years ago, you wrote a wonderful paper on the lessons learned from the banking crisis. i would like for you to address right now, obviously delicately, what the united kingdom can learn from sweden. i think it is extraordinary the gdp growth of sweden versus everybody else. as the united kingdom goes to their important brexit vote, what is the lesson learned from your sweden?

i really don't want compare. on the issue of banking, generally speaking, first rule, domestically as possible, that is in any country, the longer you wait the harder it gets. what happened to the u.k. was that when the crisis struck, eventually people fairly quickly got around to dealing with the problems. then the issue of brexit is a different set of issues. those are very, kind of, local and national. that is really, really difficult to compare. tom: what did you learn about your economics about being independent? the u.s. says that it is independent, but the swedish bank has a unique independence. how does that help you? there is constantly a debate over what we're supposed to do and how this is supposed to happen.

at the end of the day, it is the six of us who have the right to decide. that is in this country very carefully handled and managed. we are truly, truly independent. i think that this has served the country well for quite a number of years. francine: do you feel that it is more difficult to be a central bank are nowadays? there is a race to the bottom. it seems like a lot of the everett that central banks do around the world ends up in limbo. i would not say limbo, but we are in a territory that is far from where i ever expected to be, and where the economy expected to be when i went to school studying economics or was in the central banking business in the middle 1990's when the inflation target was first established. combination of, i

call it, numbers that are best to deal with. on the other hand, i've been around a long time, and you never know what will happen next . you have to do your best and try to look and have a forward looking for you. in -- forward-looking view. turn outse, if things the way that we expect them to turn out, we'll get our inflation target next year. in addition to that, the swedish economy has had, by then, uniquely good growth numbers for a number of years. francine: thank you for joining us pure the swedish central bank governor stefan ingves. the most interesting perspective on the impact of negative rates around the world. stay with bloomberg for the coverage of the european central bank did we will bring at the rate decisions at 7:45 in new york. all the platforms will bring you the mario draghi news conference, that starts 45-minutes after. ♪

♪ tom: we welcome all of you, worldwide, from the united kingdom france in the quality or the president will fly from riyadh to london for celebrations. worldwide. from the united kingdom, francine lacqua. the president will fly from radio to london for celebrations. this is fabulous. kennedy, one gets

crafty after a while and learns to save oneself. the queen told mrs. kennedy y'sing the first lad visit to the palace in 1965. where is prince charles and all of this? 306 engagements in home, 35 abroad. that is almost an engagement a day. to me, that is not being a slacker. prince charles gave a wonderful tribute to his mother by reading shakespeare. this is what we do in the u.k. tom: i like the idea. francine: on radio. tom: the basic idea to me is away from all of the celebrity stuff there is an institutional linkage to the capital and capitalism of the nation. you wonder where that goes with french -- with prince charles and on from there. francine: you wonder at 90 if she might step down.

there is no rumor about that, but you don't know. she is 98 she is in great health. maybe, at some point, she will want to pass it on. tom: a great moment with "surveillance" was with you discussing rush of the way that mr. putin went to the island off of ukraine. your perspective was great. there is a linkage of western institutions wrapped around all of this. at hiss mr. putin look london? there's always been a linkage. it is still there, brexit or no brexit. anastasia: it seems like russia has more of a connection with western europe than eastern europe. you talk about the rhetoric out of london or out of frankfurt, those policymakers are more sympathetic to rush's interests. russia's interest --

interests. we are getting live pictures out of the u.k. parliament where prime minister david cameron is taking questions from members of parliament and paying tribute to the queen. saidas said that -- he has that she has been a rock of strength for our nation. that beautiful picture of the queen and her grandchildren and great-grandchildren. tom: very cool. very cool. rime minister cameron. anastasia, when you look at this backdrop, we talked about that, when you look at all of jpmorgan, is there a lift to global gdp? can we say all clear from secular stagnation? anastasia: no. quite the opposite. it does not matter which country you look at, west, europe, russia, the u.k., everyone is suffering from the same problem, a slowdown in working

populations, and a slowdown in productivity. we have hit a major roadblock on both of those things. that is why, you were pointing out the 10-year before, that is why it is difficult for the 10-year to measurably move higher. tom: i want to talk about productivity. i'm glad that you mentioned that you and we were on the show based on what our guests say, they are smarter than we are purely turn to the market, more of a lift this morning. no oil. $44.30 in america. brent crude on a path to $50.45. from london, bloomberg "surveillance." ♪

francine: tom keene is in new york. i am francine. brazil's leader is

leaving the country under the control of the man she accuses of trying to dispose her. coming to new york for a climate event. she can to the impeachment process against her. ecuador will raise taxes to pay for a devastating earthquake. the president will use emergency decree power to boost the sales tax by two percentage points for a single year. billionaires and businesses will also pay more. anyone making more than $1000 a month will lose one days pay. thathile, the earthquakes struck japan last week may cost insurance $3 billion according to the catastrophe model. it killed more than 50 people and caused widespread damage. the money political donors are no match for donald trump. super pacs and other groups have spent $40 million on ads to stop

trump from winning the nomination. he is still the front runner. some of the biggest donors are behind the dump trump effort, among them, joe cricket. global news 24 hours a day powered by our 2400 journalists and news bureaus around the world. tom: thank you. the great pleasure, he visits we still have him and anastasia with us from jpmorgan. let's bring up a chart from yesterday. this is the jim paulsen chart. a not to go to cash by and here is 30 years of the dow jones inflation-adjusted and what is critical is that blue circle at the beginning of an extended market. we are not there yet, that is 19,600. you have been in the market through the and thin -- through thick and thin.

why should they be inequities right now? jim: right now, i think we are going to break ties. we have a few things coming together that are good for stocks. we are sort of damping down the deflation fears, commodity prices are coming back and inflation prices are rising. i think we have got the sense that the earnings story, learning the worst quarter and earnings will get better in the second half of the year, i personally think we are more and and eminence broadening out the economies are picking up around the globe, including china, europe, so we could maybe have one of the rare sort of synchronized bounces globally. tom: within a synchronized and we goou, and i back and forth with francine on the equity market, and you need

to have to go higher, right? jim: i think the fourth thing is good, it is fear. the hallmark of this bull market compared to past, for me, is climbing a potential wall of worry. the only time it left was a may 2014. people got a little complacent after the market went up and that is when it started to struggle. this january, you did not really see fear return, but we did in january. he started to fear. out, you talked about the global financial contagion, bond spreads were blown out, people were running to say paving treasuries, gold, and i think that is what the market is doing well again because we had that wall of worry down. anastasia: yesterday, there was an important interview in the u.k., a hedge fund that made 30% in the debt of the financial

crisis, and he said you can only buy volatility or you buy spreads between government bonds. for example, italy versus germany or some currency options. jim: i am more risk on at the moment. i would look at doing that first and foremost with international marks as opposed to the united states. i would also tilt more toward smaller than large and i would also tilt more industrial ,apital goods, materials producer sectors and consumer sectors right now. i think stocks are going to dominate here for the next several months. if we do rally to new highs, there may be an opportunity to move away from that risk on trade, -- tom: anastasia, jump in here. she we get the confluence of good news that the e.m. behind keeps the dow jones and s&p 500 and ftse 100 going?

anastasia: i think the idea of a global balance is what is driving the markets right now, but when we talk about the fear trade, i agree, jim, that we did hear a peak on that fear trade on february 11, but a lot of it has unwound since then, so i would argue that we have swung the other way and we might be complacent now. remember, it is one thing that causes turn around, not jamie dimon buying chairs, but the u.s. dollar tree turning around, right? the dollar was starting to weekend, commodity was at a , and the dollar up so we production helped as well. one of my near-term concerns is that now that there is no longer the trade, that if the dollar start to strengthen, what happens? im: -- i totally agree with that, people look at that dollar trade as being tied to policy differentials between the united states and the world. i think it is due to the growth cap and not policy

differentials. how do explain the fact that over the last year, japan is at negative fields, and the dollar has gone down against the currencies? i think it is because the growth gap is closed. 2014, the u.s. stay the same, the world hurt, the dollar soared. and now the u.s. dollar is staying down and the rest of the world is picking up, which is driving commodities and driving risk on. again,e: if we step back if you say syria is good for the markets because you can find value as long as there is not a huge crash, if fear is in the markets, it is because, it -- participants are seeing a recession are central banks [indiscernible] this is not the right time to be buying anything at all. like to find the midst of fear. it has been a great trade throughout this entire bull market. have gone from one armageddon to another armageddon and typically

the market climbs right through that. when you have intense fears, a noted there are a lot of people on the sideline waiting for the worst to happen. if it does not, there was fresh capital that comes in to push prices higher. doesn't happen, that is the point. anastasia, do you believe there could be something more sinister that we think and we see it in the behavior? if you look at onions, they are holding on to cash and cutting costs. anastasia: i think the reality is that we are moving further and further along in the business cycle. one of the things that we are paying careful attention to right now is cash flow operations from this company is relative to the uses of cash. one of the things we start to see, if you add up the buyback, dividends, they are not fully been covered by cashel operation. on a variety of measures.

that is fine if you can access capital through the credit markets to find one or two or three of those things, but of credit spreads do rise, then that becomes prohibited, so that is what we are on the watch for. i will say that everything has changed since february 11 and as credit start to decline, that did start everything for equities in the short term. days, the dowfew jones, 18,096 volumes. he will speak volumes in his press conference, mario draghi always important. the last couple of meetings have been on the edge of fouled. ecb coverage across all of bloomberg today. look for that at 8:30 this morning. ♪

this is:

"surveillance," where the conversation is focusing on economics. i am francine lacqua. tom keene is in new york. toat least $10 billion paid settle u.s. claims over it or break pollution tests. almost 600,000 cars in the u.s. would be covered. it is unclear how much individual cars they would cap. toay is the deadline for vw say how they would fix the cost. retail sales in the u.k. fell by the most in more than two years. sales other than gasoline went down 1.6%. britain lot -- but less of everything. levelg to the lowest since two thousand nine, shipments were down almost 9% in the first quarter. foras returned to bust watchmakers, such as rolex and omega. exports went down 38%, they were

down 33% in the u.s. very good. thank you. southwest out with earnings. the stock up a good 3%. one thing i noticed is the headline of bloomberg, southwest plastic" to retire " aircraft in 2017. i'm not sure i know what that is. anyway, southwest air with good news. let's go to the single best chart right now. we have had a lot of fun with this. this is the spreading the difference of yield, the 10 year yield minus the two year yield basis you have a 200 point number. down, down we go over the last three years. to paulsen, we do not want go lower. begot to 100 basis points, up 105 this morning -- we got to 100 basis points come up with hundred five this morning. jim: it is going down, and that

may be a good sign to fund the curve, but if you look at policy variables, whether it is 6% there areth, and still steep deals, note rising yields to look at yet at all, you still have positive fiscal stimulus out there. policy variables do not suggest recession is close. there is no excessive behaviors for the most part. the one area we had it wasn't energy and that has been liquidated. tom: anastasia, if i look at the emerging markets, it is not the single best chart the most of your world, right? anastasia: yes, and with some help from inflation, those rates may actually move higher as well. i wanted to bring up the point that you were just talking about on the recession point, i don't have the yield since we seen since 2013 is an indication of procession. i think it is an indication of

the distortion happening in the long end of the curve. tom: is that janet yellen's two cents? anastasia: the reason that spread is declining is because mario draghi is doing what he is doing in europe on kuroda is doing what he does in japan. theof that money from european investors has to go somewhere, and it is absolutely coming into the u.s. along end of the yield curve, so we have these significant buying pickups there. that is what the fall in the 10 year is about, but having said that, you could see some prospect here. ifgrowth does pick up, inflation expectations pick up, so should the 10 year yield. jim: i could jump into that point about the distortion curve, which is interesting. i take for europe, i find it very interesting -- i would argue that if you go out, you see the european economies getting better in the last year. it has gone from 1% to 1.6

percent, retail sales have gone did they% and why decide to go to negative fields? -- yields? the u.s. has done the same thing. it has stayed at zero. tom: what is interesting about that is stocks of done terrible in europe. francine: i am looking at some of the country's because you make a good point that overall, the economy is not doing too badly. a lot of the peripheral countries are actually going nowhere. we have reforms being put in place, 25% unemployment and that is not something you write home and say, the economy is much better. i want to ask about china. george soros morning we are at the brink of the financial crisis in china because of this huge debt and this is despite the numbers we have had from china in the last three weeks. what do you make of that? jim: i like china.

i think china is getting better along with emerging markets. if you look at some of the economic surprise indices, the a -- theyrthward in china are going northward in china. the story with china is that for three of the last four years, you are trying to moderate recovery and they did so successfully. it has only really been the last year or little more than that that they have tried hard to push more in their economy, and rather than trying and failing for years, i think they just begun to ease and it is starting to work. i think we will be surprised that china does bottom out. francine: anastasia, what is your take on china? but torturous argues, that most of -- what george soros argues, that most of the money they are supplying is making lost enterprises live. anastasia: it is right, if you look at the nonperforming loans

in china, the reported numbers 2%, but if he believed that number, windows loans when into commodity intensive industries, and we know what commodity prices have done, so i think they could pick up from here, but the issue is, yes, there is this big structural cloud that overhang gain -- that is overhanging, but projects are getting better. tom: but how is george soros' thinking flawed? he is one of the great investors of all time with sound economic there he how do push against his gloomer fear of financial instability? we have been worried ever since the 2008 crisis, so there has been a perpetual fear out there. tom: a legitimate fear. jim: it is, but it has not happened. [laughter] in china, unlike the united

states, they still have with the united states was 34 years ago where the credit is truly just in the banks and not really a bond, and that makes it a different risk. we think it is a contagion risk because once it spreads throughout the credit -- tom: you think it will continue? can go in as much as they can policy was. tom: jim paulsen with us and anastasia with us from jpmorgan. francine? european stocks overall at a three-month high, so they have not been doing so great. basic resources are not doing too badly. copper them, such as gaining 6%, it has to do with the european central bank. it all has to do i with what for theaghi tells us outlook in the economy. ♪

tom: very good. this is bloomberg's "surveillance." francine the clock in london,

tom keene in report -- in new york. yearuld have been cable, a of sterling, sterling singapore dollar, singapore australia and i did not do that tomorrow. hero-yen 124, -- euro-yen, 124. francine: coming up shortly, "bloomberg ." coming up, it is about mario draghi. vonnie: exactly, we are leading up to that seven: 45 announcement and the 8:30 news conference. president obama in saudi arabia today and tom keene will be joining us. our guest will be talking about what extra details we might get out of mario draghi in terms of the technical aspect of stimulus and if there will be more. we are also speaking [indiscernible] francine: thank you so much.

vonnie quinn there. i am looking forward to what mario draghi has the same. tom: tomorrow is earth day and we have two guests. an op-ed from michael bloomberg and jeff sachs from columbia university tomorrow, and we are thrilled to have the professor on emerging markets. he is so into to the environmental debate and we will bring it the secretary of energy, ernest moniz. i attended the paris meetings and this is the theme in paris. it was something to see, cities, communitysinesses and leaders collectively play a larger role in the future emissions than any federal government. that is what michael bloomberg, and certainly that as we saw from the mayor of paris as well.

francine: yes, it is one of the things that we were covering in december, and it is amazing the power of these big cities and these metrolises in tackling climate change. if you start there, everything else should follow. tom: final thoughts with jim paulsen and anastasia m barroso -- ambaroso. are we going to see a list to global gdp? anastasia: i think cyclically we will. even though we are toward the end of the cycle, we are not there yet. yes, we could see a list of global gdp as the u.s. consumer is still there and global growth seems to be forming upward as well. tom: you link it to develop gdp as well. jim: i do. i think we getting the first synchronize global bounce. tom: since a few years. jim: i don't think it will be we getrowth, but w if

everything going north at the same time, ceos or look at this recovery differently and it could bring out capital spending that has been missing. francine: when will that be? three months, six months, a year? of: i think the second half the year, we will notice that global growth is doing better across the global a bit, and i don't know if we will have strong cap spending, but that might bring us into next year. say,e seeing, as i economic surprise indices that have turned up and reports are improving and we are stabilizing, manufacturing, commodity prices, we will see a synchronized lift. francine: anastasia, the biggest from onethere, is it of the world's biggest central banks? anastasia: i think it is one of them. of course, it is the federal reserve raising the rates and that could cause the dollar traded to unwind, but i think the biggest risk longer-term is that capex spending does not

pick up. if you look at the spending in the world, and has been driven almost entirely by china in the last five years from 2008 to 2013. in has not been the u.s. except for a small the cyclical rebound, so i could see the downside not picking up but i could see the upside risk of europe gets it together. tom: thank you to both of you. greatly appreciated. it was her worst year in her 90 years. lead by the fire at windsor castle, today, there is a celebration for the queen at windsor castle. at the great symbols of the united kingdom. good morning. ♪

countdown underway. mario draghi announces in 45 minutes whether the ecb will add stimulus for the euro area. plus, volkswagen shares drive

higher. the pay at least $10 billion to settle the omission cheating scandals. general motor's reporting earnings in the next 30 minutes. the automaker cfo joins us. welcome to "bloomberg ." i am vonnie quinn, david westin and jonathan ferro joins us from london. day, all eyesbig on mario draghi. in less than 45 minutes time, an important policy decision from the ecb. that is when the real action happens with the news conference on bloomberg television. david: we have a stacked deck to cover. deutsche bank's