francine: leaves or remain, that is the question. we will recap the arguments on both sides. yen on the rise, japan's currency surges against the dollar. and rbs' loss. the bank says it will take longer to resume dividends. this is bloomberg "surveillance ." vonnie quinn is in new york. currencies, a at lot of the market action, but also getting april consumer .rices for the euro era

we had estimated a decline of 0.1%. when you look at central banks, it is the specter of disinflation and it looks like mario draghi may have to address this. euro area economy, we also get gdp figures. it was a little better than estimated. gdp better than expected in the first quarter. vonnie: we are not getting much of a market reaction yet. stocks were lower in the first few hours of trading. the cac 40 down about 1.4%. the euro also not seeing a huge reaction. people haveguess been led to believe that mario draghi will address this, so this would explain the circumstances in the markets. let's get to the bloomberg first word news. here's nejra cehic. and opponentsers of british membership in the european union squared off here

in london today. they gathered for the bloomberg brexit eight posted by francine lacqua. >> the value is not just in the eu, but around the world through trade deals. it is valuable for jobs, for investment, for the future roster of our country. what they tell us is they don't see any way of getting that same market access from outside the european union. >> the present situation in the eu was not satisfactory and it needed radical change. i'm sorry to say i don't think that radical change was met. it was disappointing. i think we ought to leave. nejra: the british referendum on the eu is june 23. voters in iran are deciding whether moderates or hardliners will control the parliament. polls have opened for elections determine the last 68 seats in

the legislature. supporters of president rouhani won a majority. it was a setback for those opposed to last year's nuclear deal with the u.s. the united nations warns that fighting in syria has taken a catastrophic turn and a crisis could get worse. airstrikes on rebel held areas of aleppo killed at least 60 people this week. u.s. secretary of state john kerry says that russia has a theonsibility to prevent syrian regime from attacking civilians. global news 24 hours a day. i'm nejra cehic. vonnie: thank you so much. i do want to mention that wonderful panel that you just came from, fran. thank you for running from your panel. speaking to a couple chancellor of the exchequer's.

francine: it was very emotional. ebategoes back to the d within the government. david cameron's ministers are fighting against him. i thought there was quite a lot of emotion. it goes back to the fabric of being british and what the brits want for the future. i managed to grab one of the panelists, maurice levy, and brought him on set. vonnie: wonderful. let's get to some data now. we do have currency markets trading in futures here in the u.s. not showing much movement yet. no move from yesterday. the euro is trading a little strong versus the dollar. crude oil futures are getting a little bolstered. wti at 46.40. the dollar index weaker once more. 15.fix is above

it was below 15 yesterday. quick look at the german yield, coming right back down. it has moved around a little bit. since the double central-bank meeting, we are seeing 24 basis points. francine: this is what european stocks are doing, they are sliding. investors are trying to figure out if this is a cell opportunity. we also had losses in u.s. equities yesterday. overall, i think the main question of the day is mario draghi's real challenge from now on is that inflation figure, what it is highlighting is that we're seeing faster economic growth overshadowed by a drop in consumer prices. i don't know if banks can do anything to spare. joining me now, one of the panelists on my brexit debate, maurice levy, and george

magness. thank you both for coming on. maurice levy, let me start with you. few that seef the the real economy. does it feel better out there? gdp in the euro area, a little better, but inflation, worse than expected. maurice: yes. we just got the numbers of growth in france for the first quarter. ,e had a very good surprise with a nice improvement. the situation is not yet clear. there are still a lot of issues. backnnot say that we are on a cross trend and that we should be sure of what will happen in the future. i think we are still in a wave of uncertainty and we won't see things improving, in my view,

before the end of the year. francine: george, when you listen to maurice levy, we cast ourselves back to what mario draghi has done so far. then he counter the risk of disinflation? do central banks have the power to do that? >> i don't think they do. about, the whole debate how far can monetary policy go, how far can the european central the european central bank, cutting interest rates, negative rates, qe, asset purchase, this has all become a bit of nonsense. i think it underscores the weakness of not just the debates in europe, but also in the u k, u.s., and japan, as to how we deal with the enduring aftermath of a financial crisis. monetary policy has basically shut its bolt in my view. vonnie: what central bank are we dependent on, george?

is the federal reserve receding in importance? is the ecb or bank of japan becoming more important? >> i think quite the contrary. the european central bank and pushedk of japan have the boat out in terms of monetary initiatives to the point where they are trying desperately to try to do things just to stir inflation and star economic growth. i don't think they are being successful at all. if anything, the federal reserve has a little bit of ammunition left in the sense that it can still influence expectations about interest rates over the short to medium term. thinky point of view, i the central banks are all compromised a little bit because of the willful absence of government from the whole process of decision-making about the macro economy.

i think the fed as a little bit left in the tank. vonnie: as you mentioned that, george, i want to point out that there was a tiny reaction in inflation expectations. the 10-year yield coming down, but the five-year moving up. interesting development. george, will the fed be able to lift the rest of the world towards 2% inflation, whether it is japan or europe? >> i don't think so. for reasons that include the federal reserve, but not only the federal reserve, the core measures of inflation the at,ral reserve is looking also, the broader and more widely known consumer price index, they are kind of inching up toward the federal reserve's ,arget, but to keep that going i think the economy has to be growing at a decent clip. it clearly wasn't in the fourth

quarter of last year in the forest quarter of this year. i think it will pick up a little bit of momentum in the spring and fall. but you need to have that. the federal reserve alone can't do that. francine: maurice levy, you had one of the biggest companies in france. how much do you focus on central banks? what you need are structural reforms. you need economies that grow some people spend. maurice: we need economic growth if we want to grow ourselves, to have a healthy country. when you look at the consumers today, their appetite for consumption is very low in most european countries. it is very low for a lot of reasons. they have fear about the future, about employment. they fear that the economy is not picking up. on top of this, there is something else which is

likening that is a little a submarine. it is all the way from digitization, where there is a sharing economy getting the price down. they think this is something which should not be underestimated. it has a huge impact on prices. monetarylonger only policy which can solve that aspect. it is simply the fact that we have to create growth in order that people have the taste to spend. as long as we don't see this operators who the are bringing the price down will be the beneficiaries, and we will be in the low inflation, if not deflation. francine: it is a very clever point that we've tried to discuss, that social media, the

sharing economy, is bringing deflationary pressures. you've told me in the past that twitter is what, the third-largest economy in the world? how do central banks need to look at this? issuee: that is the big for which i have not the answer. i think that all these europe operators together are changing the paradigm of our economies and they don't believe that economies have taken this into account. phenomenont this which is surprising everyone -- when you see airbnb -- and help to capture the revenues, the taxes, help to make sure that this is going through the normal flow of the economy, it is a new world which is today escaping from the hands of the politicians, the hands of the

regulators, and it is a very good thing on the one hand because it is a vibrant economy, and it is something which has to be more regulated if we want to have this contributing to the growth of the world. francine: we have just the guest to talk about this. coming up, we speak with robert kaplan, maurice levy, and george gnus stays with us. this is what we need here in europe. we will also talk about the advertising industry. that is next on bloomberg "surveillance." ♪

francine: i'm francine lacqua; vonnie quinn is in new york. this is "surveillance."

let's get straight to more on brexit. this is one of the big debates we had; i chose a debate with six panelists. ande joined by marcel levy, also with us is george magnus. are you surprised? the debate was acrimonious and high-end motion. >> yes. it's normal, by the way, because it is something which is extremely -- it's about the future, it's about what will happen to the eu and also to the u.k. it was normal. i was a bit surprised by how nar row were they thinking of the people in favor of brexit. i don't want to be disrespectful, but they had the feeling that it was much more victorynostalgia of the

that doesn't exist anymore, rather than by the future of the new world. it's not something which is so british. in fact, when you look at the british people, what the u.k. has been able to do, it's just fantastic. andng from the war rebuilding the country, and becoming a very open part of the eu and of the world. some surprised to see that formerful mps and chancellor' could defend the idea of leaving europe. francine: george, when you look at the figures -- what's

difficult is that we don't know with certainty what the u.k. would look like. is there nothing good that could come out of it? >> [laughter] there is a charged question. there has been a lot of sophisticated economic analysis by the u.k. treasury, the oecd, f, about the relative economic advantages and disadvantages. most economists we were discussing before, most are certainly -- they lean to the view that the economic argument favors remaining. it is quite appropriate to have a certain skepticism about economic predictions made it 10, 20 years and the future, it is not the similar from the kind of argument that most individuals would have with their doctors about diet, exercise.

the doctor can't tell you exactly what will happen to you if you carry on with your bad habits, but the chances are high that you will do your self harm if you carry on with those kinds of things. the's in my view is economic view, pretty much settled. we know the risks of exit will exacerbate the costs, and i think it is wrong for the campaign to deny. francine: gentlemen, thank you so much. theng up, t we speak to unicredit chief economist about the boj, yen strength, and what janet yellen's next move could be. we talk advertising. ♪

vonnie: you are watching bloomberg "surveillance." francine: thank you. we are joined by maurice levy. we will not talk about brexit, because we had a whole hour of it. what i will ask you is your archrival, coming out with his succession plan today. do you have a succession plan in place? >> we have a succession plan in place, which has been built since a few years already, and which we have come to fruition, i believe, at the end of the year.

decision, the the beginning of next year. is deeplyisory board involved, and clearly it's a process which is extremely thorough. i'm confident that we will find the right solution. vonnie: maurice, you were on a couple weeks ago, on a new advertising campaign. talk to us about the u.s. election and what you see in terms of advertising and picking up advertising around. election is something which is creating a little bit of issues for the european to understand exactly what is happening. market, i think u. s. will benefit from the

spending, but this will benefit the media and will not benefit the other side. most of the other agencies are not taking part in the election campaigns. francine: what is your biggest concern for the next couple months? lou have great accounts, it'l be fun to watch -- >> it's not something which will help us grow. doubts regarding what will happen with the olympic games, because brazil is not in very good shape. all in all, i believe that this year will be better than the former one. we think -- francine: thanks so much. >> it's the u.s. which is still strong. eu is picking up progressively.

number, but a great it is picking up. the situation in india is improving; the situation in china is also improving. russia is doing better. i believe that all until we will have a stronger 2016. francine: maurice levy, thank you so much for coming to bloomberg. coming up later today, we talk boj, fed. rob kaplan at 10:30 a.m. in new york. ♪ [ cheering ]

thank you! thank you! what a week! we sat down, we kicked back, and we watched tv! [ cheering ] this win is just the beginning! it doesn't end here. because your laundry can wait! keep those sweatpants on! order another pizza! and watch on! [ cheering ] don't wait a whole year for xfinity watchathon week to return. upgrade now to add the premium channel of your choice so you can keep watching. call or go online today. vonnie: you are watching "bloomberg surveillance." having a quick look at some data. u.s. index futures pretty much unchanged. i wanted to take a look at

europe's stoxx. not much of an improvement; mixed data today, gdp coming in better than forecast quarter over quarter, half a percent. retail sales were down 1.1% month over month,not much of anp 1.7% year-over-year. we're seeing the euro stronger. crude oil futures holding their gains. now let's get our first word news with nejra cehic. nejra: thanks. a u.s. citizen has been sentenced to 10 years in prison. the country's supreme court found him guilty after a brief trial. no other details were available. year, north korea sentenced in american college student to 15 years in prison for antigovernment activity. on the verge of giving israel its biggest military aid package ever, but

the animosity between president obama and benjamin netanyahu has slowed matters down. at the same time, israeli officials are insisting on more generous terms that could total more than $40 billion. state of colorado is considering a radical change in health care. in november, voters will decide whether to abandon president obama's health care act and create a taxpayer financed system that provides coverage for everyone. most would save money. business groups say the cost is too much and the details are too vague. in southern california, a demonstration against donald trump turned violent. nearby,ump was speaking hundreds of protesters throw rocks and stopped on cars, demonstrating against his comments on immigration. 17 people were arrested. the national football league draft -- the newly relocated north angeles rams have the first pick. they picked a new quarterback,

and haven't had a winning season since 2003. day,l news, 24 hours a powered by 2400 journalists in more than 150 news bureaus around the world. francine: thank you. china's central bank strengthened its currency by the most since it was dismantled in july, 2015. magnus, a senior independent economic -- i'm watching what we have learned in the last six months. at the moment they can't stomach it? or will we see more intervention? >> what we have learned is that itshina wants to fix exchange rates for the time being, i'm not taking a four-year view. if they want to six their exchange rate, it can do so. the reason it has been able to do so is partly because since the turbulence that afflicted the market in january, capital

controls have been tightened up. and also because the economy has stabilized. the latest numbers we have out of china about investment, including in the property sector, property prices in big cities like change showing it in shanghai, these numbers in terms of official data certainly suggest that the economy is not in a nosedive, which is what everyone was afraid of. the reasons there has been an almost unprecedented surge in credit creation that has been going on since spring of 2015. for the time being, we can call the bears off. things look like they have settles down. but it's no cause for complacency. the problems we all worried about in china haven't gone away. francine: i just need to bring

all of our viewers up-to-date; a south african court has just ruled that dropping the graft charges against the president, jacob zuma, was wrongfully made. it has started the legal process, which has had an impact on the south african rand, one of the currencies we have been talking about on the program. china, if we go back to given what you have said, that they can still fix it for the moment, you don't believe that there is a kind of secret shanghai accord between janet yellen and the pboc, that janet normalize.waiting to >> i think there was a fortuitous weighting of minds. certainly there was no formal agreement, but it suited china then and still does sue china to keep the exchange rate stable. of course, at the time, the federal reserve was having a

it was -- should i say, going through its shortest flirtation with normalization of interest rates anyone can remember. the federal reserve was very happy to pull back from encouraging expectations about high interest rates, and they were worried about a strong economy. there was a fortuitous meeting of minds. whether that endures throughout the year is a moot point. reserveow, the federal check out the references to that kind of external environment. if the economy does pick up, things could change. francine: china has staved off immediate trouble and is keeping a very close eye on its fixing with the u.s. dollar. but will there be a price to pay for all of this, and what will that be? >> i'm not sure whether there is a price to pay for -- well,

there was a price last year. there was a huge credibility edoblem following the botch devaluation of the currency in august. year, we have some turbulence which brought out the governor of the pboc, and the council clearly became concerned about the turbulence. i think they have put that to bed for the time being. the price that china will pay if its passivetop with attention to probably more robust credit creation and they had an even 2000 802,009, that price could well be a period of pronounced financial instability, and than a hiatus of growth which could go on for a very long time. i'm not saying that investors should panic now. i don't expect the current

condition to change for the next three to six months. eggs, this are credit problem will become more serious if it is not intended to soon. vonnie: you are saying that could be sometime after six months? that's not that far away. >> it's not that far. remember, the big political event on china's calendar is the party congress next year, when vacancies crop up on the committee because of retirement. president xi jingping would clearly like to have his supporters still those vacancies. i think it will go to the ends of the world to make sure there is no economic problem between now and the congress. but these things are sometimes beyond the wits of even politicians. and i think people should be aware that china is flirting

with a potential credit crisis. francine: i want to hit you with a chart on the yen. this is the big conundrum. i look at it every day, because it's so incredible what we have seen in japan. the boj disappointing markets. this is governor kuroda saying i will not be dictated to? or is it him capitulating? >> yeah. well, i think there is a domestic angle to this, the effect that -- the incremental effect that japan's qe, negative interest rate policy, has on the currency and on inflation, which is that incremental effects that becomes almost zero after the initial announcement impact. then there is this external environment, which is the reason it is risk on for currencies and emerging markets funds, and

european spread products and the yen in particular, because of the way in which the fed has backed away from its previous policy. we should watch this space carefully, because that could change again. francine: thank you so much. george magnus. coming up next, we talk more about negative rates and the impact it has on the financial companies and insurance companies. the world's second-largest insurer posted a second-quarter decline. he's up next. ♪

francine: this is "surveillance." ie, let's get to some of the earnings that came out today. a lower first-quarter profit for the company that boxed up its reserves and pricing as the

industry remained under pressure. for more, we're joined by the chief financial officer, david cole, on the phone from zurich. great to speak to you. we have been talking a lot about negative rates. this is a huge problem for you. do you see the side effects of negative rates, and how long do you think negative rates are here to stay for? >> absolutely. overall rates, there is a long-term investor -- that applies not just to the swiss insurance industry, but also individual investors. the consequences of low interest rates are a very significant reduction in the ability to earn on accumulated wealth. of course, that is the intent of the central banks. but the fact the matter is, as a investor, it does have

a negative impact. vonnie: does this like warren buffett pulled out? >> well, you'd have to ask him what his reasons were for his investment. it they will be he had other things he was looking to. with the insurance business, it remains an attractive sector. weyou look at our results, have a 14.6% roe. in today's environment that's an attractive return. vonnie: david, what i do things that you are waiting on? the catastrophes and the things that keep you up at night? >> i appreciate the question. if not that i'm waiting, it's just that i expect certain things to occur. it's hard to say when earthquakes will occur or when stones may occur. at the same time, we know they happen. sometimes it happens against our expectations. we don't have a reason to

believe that earthquakes will no longer occur. we have to prepare; we have to make sure that financially we are very strong, and have the ability to absorb these types of losses. but we are also there for our clients -- vonnie: talk some specifics when th it comes to that. >> there is always the threat of large windstorms in north america, or hurricanes. there is always the possibility of earthquakes; there was one in the door and another in japan. flooding is something that can occur around the world. these are the things that are the highest on our list of potential large losses. francine: is there anything you can do to offset pricing pressure in your space? >> absolutely. the most important thing to do is differentiate ourselves with our clients. offer additional services, we offer know how, we offer claims paying security. we have been very successful not just in q1 but in many years.

times,e: but a lot of clients or customers want a cheaper factor. i wonder how you achieve that balance. >> there is pressure if you have a level of lawsuits and reported profits. our clients are intelligent, and they aren't short-term. they know it's not just someone who is willing to check their premium, but someone will be here in 10 years to pay your claim. when they see protection, they want low income security. vonnie: could we get your take on the reinsurers in the news? existence toe in protect the operation of banks, or even hedge funds? decades, youer the have seen different periods where various forms of insurance and reinsurance have emerged. some of them have proven to be successful, but a number of them have not.

i think more recently there has been a lot of discussion about alternative forms of insurance; time will tell whether these new approaches will prove to be resilient. vonnie: resilient, but are they reinsurers, or are they just there to protect the entities that created them? >> it would be difficult for me to make a broadbrush comment about all sorts of different players. i think our model is one of tradition. we provide protection, support our clients. our clients know we will be there. francine: are you looking at m&a? would you bue interested? >> i won't talk about any specific opportunity, but as we discussed, we look for opportunities to accelerate. we certainly have indicated we would remain interested in further building out our franchise. that lies with our corporate

solutions business, where we may be open to intelligent opportunities to accelerate. francine: so you would favor m&a over by back? >> no, i wouldn't say i would favor one over the other. what i would say is i would favor intelligent investment per think that is something our shareholders of be very much on board with, if we have more capital than the opportunities that are available. vonnie: david, this competition for the best emerging markets are the ones that you are staying away from. grabbing market share would probably be a little bit too much for us, that playing a meaningful role in the emerging markets is something that is quite attractive over a longer period of time. that is over decades. it's quite clear that for insurance and reinsurance to develop, there are a couple of prerequisites you need to have -- a stable government, a legal

system that supports multiple contracts -- vonnie: anything you are staying away from, then? >> i'd rather focus on the countries who would like us. china, india, brazil, mexico, indonesia, colombia, the middle east, a number of countries in the southeast asia area. vonnie: thank you so much. that's david cole joining us. coming up in the next hour, the unicredit chief economist, and the former inspector general for tars. remember that? this is bloomberg tv. ♪

vonnie: good morning. i'm vonnie quinn in new york with francine lacqua in london. let's get to the bloomberg business flash. nejra: thanks. amazon is showing that it can make money, even while it invests heavily in technology and entertainment. the world's largest online retailer posted quarterly sales and profit that beat estimates. growth is being fueled by quick turnaround delivery of products, cloud services, and devices like the kindle.

won itsk's spacex has most important contract yet, bidding less than what it would cost to launch the satellite. it plans to cut costs by reusing the first stage of its falcon nine rocket. the largest search engine company in china will now spend more on track for cars and on-demand services. baidu reported better-than-expected quarterly profits after a rise in mobile searches. the chairman plans to spend billions in the next three years on robot parts and on demand services like their delivery. francine: thank you. we talk oil, set forth the biggest monthly gain in the year. earnings are out today. produceran oil posing a larger than expected loss. let's get straight to stuart wallace, the executive editor for energy and commodities at

bloomberg news. also with us is george magnus. stewart, when you look at the that it oil, it seems is all of the fate of the companies who either manage orts and deal with signing post bigger than expected losses. >> that's right. this earnings season has been a huge surprise. one is the companies are cutting costs faster than expected. the second side of it is the ones that have done the best -- i think that speaks to a lot of the problems we have had in terms of tracking the performance of the corporate. it's very hard to dig into the trade and figure out if it will be profitable or lossmaking. i think you are seeing similar problems in the mining sector for glencore. a huge trading business, a lot of people struggling to understand. george, we have been disappointed in the last day or

two with gdp out of zurich in the united states. held what point does this turn up in oil hit the gdp? >> well, if this continues, a couple stories we had out of the euro area today in france and spain, they were quite upbeat. the out turn for q1 beat expectations. i'm not going to project economic nirvana in the euro area for the rest of the year, but i don't think that global economy is as beaten up as we think it is. clearly, things will begin. the u.s. in the first quarter, it looks as though april -- we can't really, we can't cast the second quarter, but it looks like things are picking up. i don't think things are awful in the euro area. there are political issues, and with the chinese economy, china is a systemically important place, the chinese economy has

clearly stabilized. china, as far as i know, chinese companies have been stockpiling crude oil as well. so yeah. i'm not saying we can't go back barrel,ays of $30 per but it doesn't look like it will happen anytime soon, from the point of view of global economic watching. francine: the other thing is that there used to be saudi arabia; now it's the shale producers u.s. are we going to see stocks correlate? how much can we infer about strengthen the world economy, and how much is this a supply and demand problem? >> well, shale is important, but what we are focusing on is libya and nigeria and iran . how fast can iran bring it back on? with libya, it's difficult to tell what's going on. the bigger conversation is it's

more complicated. every time you will look you will find another factor; net result is that oil is piling up at the ports. that will have this knock on effect back up the line. complicated,mewhat but you have seen the drop off in supplies. they are bouncing each other out in the focus. francine: stewart wallace from bloomberg news. and george magnus. coming up in the next hour, we will be joined by unicredit's chief u.s. economist. we be asking him about inflation of the sector and what it means for janet yellen. ♪

leave or remain. we will recap the question on

both sides of the brexit debate. currency surges against the dollar after the boj holds off on further stimulus. saying misses estimates it will take longer to resume dividends. this is "bloomberg surveillance ," francine lacqua in london, vonnie quinn in new york. vonnie: some currency movements and all the deals yesterday impacting things. we got a lot of economic data out of europe, including gdp figures on top of u.s. gdp figures. francine: gdp better than expected. thatnflation with concern mario draghi has over the lack of inflation. here is nejra cehic. a square off at the european headquarters in london.

to market access not just in the e.u. but around , it isld for trade deals value for jobs, for investment, for the future prosperity of our country. what they tell us is that they do not see any way of getting the same market access from outside the european union. >> the present situation in the e.u. is not satisfactory, and it needed radical change. i am sorry to say i don't think that radical change was met. he was disappointed. balance, we ought to leave. the british referendum on e.u. membership is scheduled for june 23. voters in iran are deciding whether moderates or hardliners will control the parliament. determine the to last 68 seats in the legislature. in february, reformists and moderate supporters of president

rouhani form the majority. the u.n. warns that fighting in syria has taken a catastrophic turn, and a humanitarian crisis could get worse. aleppo,ld areas in raids killed 60 people this week. john kerry says that russia has a responsibility to prevent the syrian regime from attacking civilians. global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus i am nejraworld, cehic. thank you so much. let's get to some data now. we are seeing a little bit of deterioration in europe. 1%.dax is down in terms of the s&p futures, we are not seeing any change. the euro is solid. we were just speaking about crude oil, up another 1%, above $46. the dollar is holding on to the

weakness, post fed, 93.5, and the vix is elevated above 15. francine: nothing to write home about. this is the problem with some of these european stocks. the banks are under pressure because of rbs. i want to show you -- we have the brexit debate. the dollar overall sinking to an 11th month -- an 11 month low. vonnie: something interesting that can post federal reserve as well, we saw the 10-year yields move lower once again. we had been inching higher, and then moved lower. . little bit of hope there perhaps there is the inkling of some inflation expectations coming back into the market, francine. francine: very interesting. it is all about inflation. i was meant to show you the ruble chart, but i decided to do

oil. this is ahead of exxon and chevron. it shows you the correlation, between wti and global stocks. you can see where we are. the correlation is still strong. we think because oil is back it 45 and 47 and nothing has happened in terms of rally with the stocks being less correlated. vonnie: fascinating. let's turn to our guest host for the hour here. harm bandholz is unicredit bank's chief economist or let's begin with the federal reserve and the tweaks in the statement the other day, which did not make much difference to the market but perhaps has given global markets breathing room. harm: there were only a few changes, but given the shift on chair yellen from a few weeks earlier -- i was surprised the fed was that honest to acknowledge the financial have nots globally

improved very much. getting rid of the warning that global development poses a risk, the fed left the door open for a june rate hike. vonnie: it is only a year since we had the german bond market tantrum, and we are not getting those tantrums this week, so perhaps the fed is doing the right thing. the market is slowly adjusting to the communication of the fed. execsere are still some that catch us by surprise. they could do a better job given that they have been working on to mitigation for years now, and they wanted to -- they have been working on communication for years now and they wanted to improve it. francine: how can they communicate? if you are data dependent and looking on a daily basis at forecasts for the economy, how can you guide forward? that is almost what you are

asking for with better communication. harm: the fed is completely backward looking, and that is a problem. if policymakers tell us that you just look at what happened last week or react to the latest volatility in financial markets or some monthly indicators, you follow the right policy course. you have to have some confidence in your forecast and have an idea where you're going medium-term. we have seen the said blinking twice, first last year in august and september when we had the stock market selloff. they did it again now. a few weeks later they say it is not as bad as we said. it is important to have more confidence in your medium-term outlook instead of reacting to what we saw over the past few weeks. saying youre you think janet is being dictated to by the markets, and given with the doj did not do, is it an affront from governor kuroda

against the markets? fed is payingthe close attention to the financial markets, but what i said is not only referring to financial markets but to economic data. the fed is paying close attention to financial markets. what the doj did, i think the boj might have reacted to the fed leaving the door open to the june rate hike. i remember being here after the fed turned more dovish in march, and that is because the fed pays more attention to the global economy. my thought was, how does it help in the oj, the ecb -- the boj, the ecb, interning more dovish? years and years of zero interest rates, and suddenly now we are expected to

know what the future is from one jobs report? isn't it the jobs report that janet yellen is looking at for the main? we are seeing no disappointment in that, but we are still not seeing wages rise. harm: the jobs report is important. i would not agree with the notion that we are in a hurry. we are behind the curve. the fed should have raised rates earlier and said we wanted to be more patient. if you are patient for another three months, or six months, it is fine. -- if you keep doing it even the doves now say two or three rate hikes is a very gradual pace. vonnie: it seems like we are in a hurry for the bank of japan to do more as well. why can we not just wait and let monetary policy do its thing? harm: i 100% agree. whatever big central banks do something, you add another layer . i agree with you.

francine: when are you expecting the fed to start normalizing this year? revised -- wenot are one of the few banks that has not revised the fed call. we are still seeing three rate hikes, which is still an upward battle. the first quarter number is not reflecting the underlying momentum of the u.s. economy. the numbers are getting better soon, and if that materializes in time, the june rate hike is still in play. of course, the risk right now is to the downside. risk-free rate hikes are reasonable. fomc member complains that the fed is -- francine: i only see -- i not only see risks out there, i see

china debt, u.s. elections not -- wherethe direction do you see bright spots? harm: the legacy of this great recession, what do we try to do right, implicitly? we try to extrapolate all the weak factors without allowing them to fade. one of the concerning developments in yesterday's gdp report was business investment. of energy investment is now lower than anything we have seen, far lower than anything we have seen since the late 1990's when the statistics began. my view is that this drag is fading. the inventory draghi is close to fade. is closeventory drag to fade. we are still suffering from 2015.

there are a couple of drags that are expiring. and consumers are doing very well. the labor market is doing more than ok and allows consumers to accelerate from here. with all of this together, we had up with more than 2% growth in the next quarters. francine: i want to get a couple of headlines on delta. -- vonnie: i want to get a couple of headlines on delta. it is no ordering -- it is now ordering another 37 airbus jets. we will be right back here on "bloomberg surveillance." ♪

francine: i am francine lacqua

in london, with vonnie quinn in new york. let's get to the bloomberg business flash with nejra cehic. nejra: new economic figures highlight the problem the euro area has with inflation. april after.2% in the european central bank cut interest rates and ramped up other stimulus last month to get inflation going. the region's economy grew .6% in the first quarter, the fastest growth in a year. the royal bank posted a bigger loss than expected in the first quarter. the bank postural -- the bank's trouble is linked to a payout to the british government as well as a charge related to a portfolio of shipping loans it is trying to exit. largest advertising company, wpp, says it is looking for candidates to replace

founder and ceo martin sorrell. he is 71 and has not and out to retire or step down. strongs it has a number of candidates. that is the bloomberg business flash. francine: thank you so much. here in the u k, there is such acrimony when it comes to ceo pays, and i have to say one of the most acrimonious relationships is between archrivals martin sorrell of wpp and his main competitor. it was fascinating, when we talked about succession, having him react to that -- his competitor is saying he will also step down. vonnie: it is intense, and martin sorrell just getting paid 70 million british pounds, equivalent to $102 million u.s.,

you can see why there might be onalso on the brexit score, the european side of things, he would rather that britain does not take extra advantages from being partnered th the european union than it should. yeah.ne: one of the things that has come out is that there is a lot of u.k. politicians and businessmen that want their country to stay within the e.u., and there are a lot of politicians within the would like you to leave. we have a slew of bank earnings barclays, and now we have rbs. michael, you have been across all of these earnings. of is significant because

u.k. government owns a big chunk of that. it means they will have to hold on to that child for much longer. muchel: it depends on how of a loss they are willing to take on the sale. it is down from the bailout price. but you had rbs kind of taking the beginning steps, paying the dividend access share to start to start that process of the government getting out. that was known, and that drove a lot of the loss. but even underneath that core revenue, down from last year, and you had some more costs from the businesses they are trying to get out of, including the portfolio of shipping loans, nonperforming loans there doubled from the end of the year. so there are a lot of things going on, a lot of problems that the ceo has to get his arms around. francine: everybody wants dividends. one of these banks had to postpone it.

this was something we touched on with bill winters. rbs is saying it will take longer than expected. michael: they have a number of obstacles that they have said we have to knock these out before we can pay a dividend. one is the mortgage settlement in the u.s., whenever that comes . a big one is williams and glenn, which is the consumer bank that they have to spend out or sell. to get rid of the benefits package. yesterday they said we may not hit our 2017 target for that. having that the delay could also delay the dividends. vonnie: what is the thinking in general? are banks targeting the right places to shrink? that investment banking grabs the attention at least for barclays, and one could spin off and senior executives are bringing back the

old partnership idea. michael: there are a lot of questions on barclays and the decision to get out of africa rather than out of the investment bank. jes staley has made spirited defenses of that decision, including yesterday at the annual meeting with shareholders , saying that he thinks the bank needs to have this diversity revenue that having an investment bank with the consumer bank is still the right way to go. but you also have the issue of, if you did try to spend it out, what would the funding base look like, and could you have enough stable funding in an investment bank that it would not run into a crisis if things turn south. having a lot of those retail deposits helps your funding base. but now with the u.k. ring -- now withe them the u.k. ring fencing system, you do not get as much of the benefit of that.

vonnie: thank you to michael moore. ,oming up monday, carl weinberg chief economist at high frequency economics, will join us. it is 6:00 a.m. in new york, 11:00 a.m. in london. ♪

vonnie: good morning. you are watching "bloomberg surveillance." it is time for my morning must-read.

i wanted to bring something in about brexit. there was a huge penalty on the implications of brexit, including several former -- including several high profile european guests. the polls i chose it from our bloombergberg -- a columnist. he says -- vonnie: he is not mincing any words, but some of the pro-europe dissidents -- the areeurope participants saying what he is saying. francine: i had not thought about what mario monti was saying, but he was saying the

problem is an internal belief from the campaign that they would be able to negotiate a trade deal, both with the u.s. and european partners. he was talking about donald trump and saying there is such a wave of isolationism not only for the u.k. because they want to have a referendum, but from everywhere around the world, that it would be highly unlikely that they would indeed get a better trade deal with anyone in the world. vonnie: again, to make the analogy to the u.s. elections in general, there was this sort of thatoung divide, that idea older people would turn up to the polls, whereas younger people might feel the impact of all this down the road, the millennials. francine: i do not often talk about the weather, but it is clear when you speak to pollsters here, the older generation tends to go out and exercise their voting rights whatever the weather. for the youth, there has to be better weather.

of thed see the future u.k. decided on whether we have sunshine on june 23 or not. the implications for the united states and trade if there should be any. harm: well cross our fingers that it does not happen. the first impact we would see is huge volatility in financial markets. the direct trade link may not be that big. but we do not know. vonnie: coming up, we will speak with neil borofsky. once again, you can see the column on "bloomberg view." ♪

francine: this is "bloomberg surveillance." i am francine lacqua in london. vonnie quinn is in new york. data coming out has not really played out on the currency market. japanese yen, 107.10.

fromnor kuroda held off adding any stimulus. crude oil, 46 yesterday, touching 47. euro-dollar is interesting because we had the consumer price following, and then banks with rbs posting a larger net loss than expected because of dividend payments to the government. let's get straight to the bloomberg first word news with nejra cehic. nejra: in north korea, a u.s. citizen has been sentenced to 10 years in prison on spying charges. the country's supreme court found him guilty after a brief trial. no other details were available. an american college student was sentenced to 15 years for so-called antigovernment activities. puerto rico may find itself in technical default unless the u.s. commonwealth can strike a million bondr $422 payment. a planned rescue plan likely

will not be ready until congress returns from recess may tend. california, we are up for the -- we are actually a for the softball league draft. -- the football league draft. global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus i am nejraworld, cehic. francine? francine: talk about the nfl. nejra cehic with some of your top stories there. bank -- if central you look at ruvell -- at the ruble, it was the best start to the year, suggesting russia would be back in business. however, inflation is still

quite rampant, and the bank of russia is saying they will resume gradual key rate cuts if not go down.ks do we have a disinflation problem, russia does not have that. vonnie: analysts are saying the ruble is close to a tipping point right now if this continues. it will not be pretty. turning it to our next guest, neil borofsky is the partner at jenner and lock. you remember him as part of ta rp -- of tarp. almost impossible to believe that chart is 7.5, eight years old. before you move on to the new initiative with treasury and what you're standing for, take us back to the days of tarp. regret?anything you neil: my role is an oversight role. you look at the historical -- for a program of that size, how

little fraud was associated with it, i think we did a pretty good job. i would look back on it as one of the high point of my career. vonnie: are used on that given the amount of work that had to go into it from the administration, from the government level at that time, that suddenly eight years later it is being left up to the federal reserve and politics, and that layer seems to have just washed its hands of the economy? is not surprising. one of the unfortunate aftermaths of dodd-frank is that by taking an approach that really -- congress and the president made a decision that they were just going to outsource this entirely to regulators and trust them with the future of our financial system, and basically rolled the dice that the regulators who did -- get it so right or the did not get it so right the first or the third or the 10th time, things are pretty smooth and we are probably safer than we were in 2008.

but it is a pretty heavy reliance on a group of regulators who never met that task before. francine: you wrote a great piece on "bloomberg view," arguing that the aftermath of , that treasuryrs .ould bring up a draft rule i remember being at a g-20 in london chaired by gordon brown, where he had the same intentions. it never came to fruition. why will this work? neil: this really is the rule in most developed countries, most developed financial markets. it is not terribly complicated. the proposed rule says when a -- a account is opened u.s. bank opens an account with a shell corporation, it has to find out who the beneficial owner is so the bank can do the necessary due diligence and make sure it is not dealing with a drug dealer or a terrorist or

someone trying to hide their money from their home taxing authority. this is a rule that is already in place in most of the world, particularly in countries that we think of as used to being synonymous with tax havens, like switzerland, luxembourg, the cayman islands. it is all there. the trend is right. the limitations by not having this rule, whether it is law enforcement, the reputation of the united states as being hypocritical when it comes to international tax evasion, is so powerful. i think this time has come. the panama papers was a big breakup call -- was a big wake-up call. the treasury has been kicked into action to get this done, and we will be safer as a result. francine: you also argue in your piece -- and i urge everyone to check it out on bloomberg.com -- that the proposed reform was far from perfect because it does not apply to accounts already open.

if we mean business in tackling this, we should look at all accounts. absolutely, and there are aspects of the united states that make it today is one of the biggest potential tax havens in the world for foreigners trying to hide their money from their home governments, and this rule alone will not get that done. we do not sign on -- there are 100 countries that sign on to tax initiatives. the state laws have the ability to set up these shell corporations with such little information that it is very dangerous. there are more steps to go, but this is a good first step. it is encouraging the treasure is moving on it. vonnie: where should the burden of transparency be? is it the individual /corporations? is at the bank, the state, island havens? neil: if you look at the united states and its recent effort to

track down tax shelters, everybody pays the price. they have had some remarkable actions against foreign banks who have been harboring u.s. tax sheets. that is why this is a good rule for the banks themselves. if a bank is found out to be have been -- to have been bank is founda out to have been harboring a tax to trulyrcing a bank know who their customer is behind these shell companies, it is a good thing that will protect the industry as well as making it really important for law enforcement to be able to find out the activity. vonnie: is transparency always a good thing, and the lack of it, does it should be -- does it contribute to the lack of equality? harm: one reason is that they

they are left behind, there is rising inequality. the panama papers being published strengthens the feeling of some people that they are being left behind and the feeling that some others who have more power and wealth get away with different rules and the government does not have to stick to the same rules. from that perspective, in the short term maybe transparency is dangerous, but overall it is healthy to change that. francine: how do you look at inequality? k look at it here in the u with brexit. is that filtering through voter reaction against moderate politicians? it should also get the central banks thinking about how they can reduce this gap, shouldn't it? agree with the first statement. it is trickier because central banks do not have the tools to deal with inequality. ,hat we have seen in the u.s. the fed was very accommodative,

and it happened to benefit people who hold assets more than the others. but that is no reason, in my view, not to add policy stimulus. that is what chair yellen has been saying repeatedly. some may benefit more than others, but we think the whole economy is better off if we stimulate the economy. i do not think it is up to the fed to do anything about inequality. it is an unfortunate side effect that policy stimulus has further increased inequality, but it is more to fiscal policies and the fed -- then the fed to change that. francine: we will talk a little bit more about central-bank action him and our thanks to bloomberg news' neil borofsky on his paper with the panama papers. coming up, an exclusive interview later on with mr. kaplan of the federal reserve of dallas. he is giving a speech today.

we have a look at the prepared remarks, and he is saying that he thinks the growth outlook for 2016 should be around 2%. he is talking about inflation, also about the risks coming from china, that the spillovers there are likely to spill over into emerging markets in the u.s. he is not a voting member, but he is an influential member of the federal reserve. robert kaplan, that interview later today, 10:30 a.m. in new york, 3:30 p.m. in london. ♪

francine: you are watching "bloomberg surveillance." i am francie likewise in london. vonnie quinn is in new york. to work out the bugs in a new chip-based card.

have been complaints from retailers about slow checkout times, so there is new software to make the process faster. the new cards increase checkout times by 10 times per customer, an eternity in fast food. elon musk will launch a satellite, under bidding an estimate by 40%. eacex plans to cut costs by reusing the first stage of its rocket. the world have largest online retailer posted quarterly sales and profit that beat estimates. amazon pottsgrove is being fueled by quick turnaround delivery of products, cloud growth is-- amazon's being field by quick turnaround delivery of products, and cloud services. vonnie: amazon is up 12% premarket. it was a stunning quarter for

amazon, taking people by surprise because not only did it pick up a little bit of market share and profit, but also expanding into other areas, such as home food delivery, and other little projects. amazon web services are continuing to power away. talking tech for the single best chart, it is apple or it wanted to show the apple chart. it is a very typical stock chart , and you would not think that apple is having such a time of it recently, but with carl icahn pulling out his stake in saying for alooking to china real area of competition for apple in terms of what china can produce, you can see there why the stock is trading lower. it is still trailing 12 months earnings. francine: amazon was a clear surprise to the upside because a lot of analysts on wall street were expecting them to do less well because they spent so much

money on infrastructure. amazon clearly made a point that despite all of their investments and hardware, software, and entertainment, they can still make money. with apple, there was so much expectation that they would still continue beating, people were disappointed when iphone sales in china were 25% down. it is interesting to see the psychology of analysts when you get into earnings. vonnie: it is a little bit about perception. when it comes to amazon, people are thinking it -- thinking about it in terms of a long-term structural trend. apple should have become almost a utility or a consumer staples like stock now, but it really is not. they are buying more into services and have plenty of options. it does not need to come up with another iphone. technology in of

the u.s. economy, will it contribute or detract from productivity when it comes to the average worker? harm: technology is always contribute in, so the question is -- there was probably a bit of a lack of investment spending during the crisis and we may see the fallout and there are these longer-term trends. then there is the issue of this measurement. ist adds together and that why we have slow productivity gains. i think the amazon number is a good reminder that the u.s. economy is changing, and we have been hearing so much negative over the past several quarters about all of these retailers, mostly brick-and-mortar retailers missing expectations, retail sales being disappointing. that is because people are thinking in old patterns, that if these retail sales are doing poorly, the consumers are not doing well. the expectation is that they are now spending money online, and that is not reflected in much data. the consumer data is strong, but they are not spending in brick-and-mortar stores anymore,

they are spending online. francine: i remember when people questioned amazon spending so much money, and was losing money for their prime membership. now there seems to be a clear shift, that even in e-commerce, if you put the customer first -- amazon,ow how i use which is a lot -- if you put the customer first at the end of the day it works out. i cannot -- it is a shift toward e-commerce, and then amazon of course right now, is a big player in the room. it will be tough for them to come up. but it helps if amazon keeps its customers happy for them to retain their position. harm bandholz stays with us. later on "bloomberg ," a.m. inweiner at 9:30 new york.

we will talk about technology stocks, cash they are saving on, and the new model on the sharing economy. ♪

vonnie: you are watching "bloomberg surveillance."

time for a forex report. see -- the end dropped below 107 today. it is trading just above 107 .10. this is impacting currencies all around the region as well. the korean won is heading for its fifth weekly gain thanks to the fed and the boj. one more for you, the philippines. i want to show you the peso because it is probably one of the only asian currencies that is we can sing -- that is weakening because of the election coming. francine: coming up shortly, it is "bloomberg " with david westin and jonathan ferro. jon, you have a lot going on. you're talking about banks and currencies. to 107llar yen dropped

for the first time in 18 months. we will talk about yen strength and dollar weakness. crude is popping. the bti, $46 a barrel. -- wti, $46 a barrel. we will look at linkedin, up over 8% premarket. we will wrap all of that together. francine, the s&p 500, second-longest ever bull market. we will debate that and some of the nuances around it as well. high can ago? when it stops going higher, what happens? mario draghi's challenge was all about consumer prices. in the last hour, we learned that inflation is falling. is still here. when you look at the conundrum that is the european union or the eurozone, gdp a little bit better than expected, inflation is stubborn. it is not doing anything. it is stuck and fell more than

we expected. what is a central banker to do? harm: inflation is weaker than we wanted to be. we have been talking about perception that the markets are reporting on. when i read the headline it was all about negative inflation surprise, and then, by the way, gdp numbers are pretty good. it should be the other way around. we should highlight the more than decent gdp figure for europe, and if that causes a conundrum, i think mario draghi is happy to have it and not to solve that. from is usually, apart doing helicopter money, which is not in the cards in europe, the real channel through which inflation goes higher is stronger growth. it is closing the output gap on all that stuff, and usually inflation will react. the correlation is strong in the u.s., maybe less strong in europe, but overall the correlation holds. if the economy keeps doing what

it has been doing in the first quarter, growing at a decent pace, it is a question of time before inflation rates pick up as well. it is a question of sequencing between better gdp numbers and for inflation to pick up as well. francine: how should mario draghi greek brexit? is there more of the safety mike it on the economy ahead of the june 23 referendum vote? harm: he of course is in close contact to mark carney and other officials to get a better sentiment. what they should have in the draw is some emergency plan. , that will extend liquidity to the financial system and cushion volatility. theie: when it comes to federal reserve, will we look to the fed for the next move? you want to come back to

this and talk about the fed and market expectations. when human -- harm: the way the fed was talking about market-based inflation, break evens, even in janet yellen's testimony, she was kind of dismissing the message from these breakeven rates because they said it is impacting that is impacted by liquidity and the oil price. they started to highlight low market-based inflation expectations as a reason for concern. that is not helpful in terms of clear communication. since the risk appetite can back to the market, oil prices went up. surprise, market-based inflation expectations are coming back as well. what is the expectation of the things? they do not tell us anything

about where inflation rates are going the next five or 10 years. vonnie: thanks, harm. we wanted to know. francine: harm bandholz from unicredit. "bloomberg " is up next on bloomberg tv. coming up on monday, we have a great lineup. carl weinberg, chief economist at high frequency economics, will join us. tom keene will be back. he was on holiday. thank you so much. we had a great couple of shows. for the rest of our viewers, tune into "bloomberg " or bloomberg radio. ♪

jon: the japanese yen -- "bloombergome to ." jeff one or joins us. the stock moving on that report. speaking of earnings, exxon and chevron reporting in just about an hour from now. bank of america's global head of commodities, francis: blotch, weighing in on the -- francisco blanch, weighing in. jon: we get you up to