francine: keeping june live, four fed chiefs say a hike at next month's fomc meeting is an option, but markets aren't sure. that's ahead of u.s. jobs at that time atoday. the selloff in global equities gather pace, data highlights the franl i will state of the world economy. the r.b.a. follows trimming inflation projections. and the parting gathers in pyongyang, north korea's leader calls the first congress of the ruling party since the 19 0's, and we're live on the ground. "surveillance."

a most interesting day, because we talk about inflation in australia, talk about commodities. but it's really all about jobs. just a little bit of a haze into yen. tom: yeah, i also noticed german yields have again way this morning. one of my great focuses will be to revisit the two-year and 10-year german yield. what i want to ask you about, francine, are the elections in britain k. we talk about them yet? where are we in terms of results? francine: ok, so the results we find out a little bit later. we already have indications. yesterday we voted on three things. the mayor here in london, but also local elections. what we know so far is that it doesn't seem to have a huge revolution. i don't know the conflictions of brexit, but we'll try to analyze it. first off, let's get the news. >> thanks, francine. early results are in from the british regional and local elections. nationalists are on course for a third straight victory in

scotland. nicholas will extend her term as head of the scotland's semiautonomous government. the first real test, labour suffered losses in wales and has a mixed picture in england. the election comes just seven weeks before the u.k. vote on whether to stay in the european union. it was continue extraordinary result for the republican lowered of the house. house speaker paul ryan says he isn't ready to support donald trump yet. in roy an's words, i'm just not there right now. trump fired back saying he's not ready to support their agenda. ump and ryan may meet next week. wildfires spread to an area bigger than new york city. the numbers are staggering. more than 80,000 people have fled the city of fort mcmurray. 8,000 people had to be airlifted out. and the fire may turn out to be the costliest catastrophe in canada's history.

the losses may go over $7 billion. it forced oil producers to cut back their output by 40%. vladimir putin will have a rare one-on-one meet wag group of seven leaders. japan's prime minister is breaking the russian president's isolation today. he'll meet with putin in the black sea resort of sochi. western leaders, they argued, should engage with putin. it was reported that president obama asked abe not to make the rip. mine while, putin's orchestra just played a event in syria. last year islamic state used the site for mass executions. weeks ago, russian air power helped force the militants from the city. global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus

around the world. tom: thanks so much. let's look at commodities. what's fascinating on this jobs day, it was not moving and what is moving. it's really, really nuanced this morning. equities go nowhere. the dow, 17,660. the yield comes in over the last 24 hours from a 1 0 into a 175. that's a big deal. the call of a 150. crude churning on to the extreme. currency actually pretty quiet. the v.i.x. churning again. but the headline for me is yesterday german yields finally gave way and broke down. we'll be watching the two-year u.s., a litmus paper at 8:30 with bill gross joining us. i'm watching euro swiss and i'll get to that in a minute. francine: this is what i'm looking out for. i decided to look at stocks while you were looking at bonds.

stoxx down. on the week, they're actually down quite significantly, or at least most since february. i put the world index there for good measure. yen at 106.93. it's rising a bit. it's all about the american jobs data and whether it will shape the interest rate outlook. tom: let's find out where we are. this is international. we've got guests in the 6:00 hour. here's the great news off euro swiss franc. it was strong two years ago, and then the trend back, and we're just legging up again in strong euro weak swiss. it's something to note over the last couple of weeks, the odd actions, as euro swiss goes over 1.10. not profound, about the i just thought it was interesting. francine: i like it, because you see the move. this is what i think. it's a little bit off. this is about the biggest junk bond e.t.f.

it's what caught my eye this morning. i tried to chart it, and this is the largest exchange traded fund. it's actually blackrock's share. i brought it back to 2011. look at the drop. if you zoom in and see it's dropped quite significantly. it's basically flashing the potential warning that a three-month rally in this market is losing steam. so just something to keep your eye on as you look at all of your asset classes. we're joined by the head of markets research, francesco. great to have you on the program, as always. when you look at the markets, today is jobs day. i know it's important. how many interest rates are you expecting from janet yellen? they're data dependent, but also trying to guide. francesco: the forecast is for three hikes in the second half of the year, so june, september, december. francine: bold. francesco: it is bold. in honesty, the risk, as we

described to the down side given this new narrative by the fed, i think what they've -- two things strike me about the fed. they haven't revised their suck will i cal outlook. you have guests saying june is in play. it's the q-2 data that rebounds. i think that's sensible to say. and in their projections, they haven't really changed things that much between december and march. what they're emphasizing, however, both in their narrative and in the numbers is a revision in the structural way the economy performs. so the long-term growth, the neutral rate, and we see other central banks do this. so i think what is happening here is after quarter after quarter of never really getting to escape speed, all of us, including central banks, are learning that there are structural forces at play, which companies and consumers

are valuing. francine: if you're expecting a rate increase in june and the market is just pricing at 10% chance of that, are we going to see stocks and bonds go haywire? francesco: look, i think there's a lot of duration in the market clearly, but also in the stock market. if you look at the performance from january of all staple the or high interest rate-sensitive stocks, the ones that have very stable coupon like cash flows, that has been very strong. so if the fed were to prepare the data, were to be convincingly strong, and the fed were to prepare the market for a june hike, then i think he would see a rotation for sure. tom: good morning. i don't know anybody from a major house in the street that is so visible about what your recommended trades are and the visibility of whether you make a gain or a loss. you stand singular in that ability.

recently, it's been a little bit ugly for you and goldman sachs in taking measured, modest losses. how can you trade successfully in this environment? i don't get how pros can set up a hedge with all the cacophony of macro that we've got going on. francesco: look, we have tough trades. we recommend them every year in november. the irony here is that we've had a terrible first quarter in these trades, but we're back, or even above levels where we initiated them. is that y takeway here the staying power is really important in these markets, cause we do observe very brittle markets from time to time. things get overheated and then collapse under their own weight. but if your conviction is high enough and you manage to stay with the trade, then it's a

winning strategy. tom: everybody on the street should write research notes where you know what the hell is going on in their mind and they document their brain. help with us the two-year german yield. we break down again. you start talking about a revisit of tantrums. can the german two yee, can the german 10-year move through to new records negative and positive yields? francesco: i think we've seen two things happen here. one is the euro trade at the upper end of that range has been since the start of q.e., and that has made people think there's a greater chance that this c.b. may try to fend euro by cutting rates again. second thing is that we've seen an increase in the pace of purchases by the e.c.b. so the combined effect of these things has led to that price

action. i think the interesting thing here is the fact that the 10-year and the 30-year not rallying as much as they had in the beginning of 2015, so my sense is that particularly ahead of the corporate bond purchases by the e.c.b. and with oil continuing to gradually increase, people are a bit hesitant to think that we'll see flattening of the core european bond curves. tom: we'll continue through the hour with francesco from goldman sachs. we go on to our coverage of jobs day. bill gross and jim glassman later in the morning. but first, bill will join us from citigroup. we'll recalibrate his global recession probability. we're still going to bring you michelle meyer on the inequality of our labor america. this is "bloomberg surveillance." ♪

francine: we're looking at jobs. jobs in the u.s., we're also looking at currencies. i'm francine lacqua here in london. tom keene is in new york. let's get to the news. medivation has rejected sanofi's takeover offer again. they repeated the french drug maker's bid is too low, calling it highly opportunistic. sanofi has threatened to go directly to share holders if talks don't begin. first quarter profit dropped 33% atthe world's largest steel maker. the lucksenburg-based company was hit hard by slumping steel prices. china has been exporting record amounts of steel, undercutting prices in u.s. and the europe. and speaking of chain ark the country's largest ride service is taking another big step in its battle with uber. it's close to raising about $2

billion in its latest round of funding, according to people familiar with the matter. the company is seeking a valuation of $25 billion. that would make didi kuaidi the fourth most valuable start upin the world. francine: thank you so much. now let's stay in asia and actually talk about japan. this is a chart that we made for francesco of goldman sachs. it basically shows the 40-year yield. so the 40-year in blue. the red circle is when kuroda decides just a couple of days after deciding he's not contemplating to go into negative rates, and you can see not only are the spreads practically nonexistent between the 40 and 30-year, but a lot of the banks have also been hurt by it. francesco, do we need more easy money, is that the answer for japan? francesco: that's a central chart, the one you brought up. as you see, we stationed a long

period of time at 10, 140 basis points. talked, we n kuroda went all the way down to 25. it's possible we had expectations to justify that move, and i don't think anything beyond 10 years, or between 10 years and 30 years carries that much of a macro expectation content. so i think what's happening here is that they surprised on the rate cut, and they also do these operations, which they've extended to the long end of the curve. now, who owns these bonds? 75%, or the life insurance companies. life insurance companies, seeing what was going on, decided to receive a lot of these long and dated bonds, because they're mandated to do so. they need duration to fulfill their regulations. and so that has led to that spectacular price action. the 10-year plus maturity bonds

are up 15%, 17% year to date, which is staggering. francine: so it means you can't cut more into negative territory, right? francesco: this is the near term, creating negative wealth effect. so it's burning a hole into the life insurance companies. it's creating problems for the banks. and it's creating a lot of monetary discombobulation across the market. so i think the speed of that move, the surprise has actually backfired. tom: you talk about institutions affected by bond die natural sandicks by negative interest rates. do you and your team at goldman have any belief that the effect of negative interest rates will move over into the retail investor and the little guy at the local german bank or the denmark bank, wherever. are we going to transfer negative interest rates over to ere mortals from institutions? francesco: i think not fully,

because particularly banks have a preference to preserve the euro rates for small retailers, but surely i think the policy is designed to seep through, you know, the private sector more broadly, so that would be the intent of the central bank rules. if you manage to steepen the yield curve for a bank, the can emains profitable, carry trades and eventually lend more. tom: i'm going with that, francesco, but why are we seeing the market response in the last 10 days or so we're seeing? i get the idea we're "helping the banks," why don't i see it? francesco: well, because the banks -- there's a tension here. the consumers don't want the negative rates, and i think that's why we're talking about the effective lower bound. there is a limit, which banks can push these negative rates to their customers.

and then all of this stuff, i mean, it must be said, is untested. we've not seen in history negative rates, so we can't really say whether this will actually work and spur more lending and borrowing. francine: i'm told that dollar yen is going to go down to 95 this year. will it? francesco: who said this? francine: mr. yen. 95 seems pretty steep. francesco: it is. it will be a full reversal of the effect it had on dollar yen . i think that is -- that's not going to happen, unless there's an overshooting for positioning reasons. we still have the view that the fed is going to surprise to the up side, maybe not the full three, but surely more than the market discounts on sbrate policy. and that's largely on wages and inflation picking up from here. we're starting to see signs of

this. and on the other hand, the b.o.j. is very committed to containing full throttle q.e., and that is going to increase going forward. francine: thank you so much for joining us today. he's from goldman sachs. coming up later this morning on "bloomberg go," the chief investment officer for gangco investors. catch it at 7:00 a.m. in new york, noon in london. ♪

francine: this is "surveillance." i'm fran keen lacqua in london. tom keene is in new york.

north korea's first most political meeting in 36 years gets underway today, the first congress of the ruling party since the 19 0's. but it's also -- the 1980's. but it's also the first time that bloomberg is live from pyongyang. tom mckenzie, what does this tell us about market reforms? is the new north korean leader trying to open that door? it's always been an isolated economy. tom mckenzie: well, that's the really interesting question, and the question is whether or not the congress is basically going to give blessing to market reforms that we've seen happen over the last few years. we don't know whether that's an intentional move by the government to start the market reform or whether it is just a natural opening up of the market as people start to use money and spend chinese income. we've seen shops, seen things on sale, so will the congress give those kind of markets development? this is a very interesting question. we're going to look for answers. francine: this is the first

time in 36 years that we have a workers party holding a full congress. what are we expecting from that? i guess it's a way of the leader to purge his inner circles, but tell the community at large what he wants. tom mckenzie: absolutely. this is when he took over in 2011, so he's been in power five years, and he wants to cement his power. this is a coronation for kim jong un. and he wants to protect his image to his people and the rest of the world. this is one way, bringing in journalists, to try to get a message across. we're going to be watching for what that message is. but this is a very symbolic thing for kim jong un, and we hope to hear more about whether or not there are going to be market reforms. maybe we'll hear some kind of olive branch reach out to china, their closest ally, who they remain noticedy for for huge amounts of aid. francine: so, tom, very quickly, this is, of course, a

very and a leader that's been isolated dramatically. are we expecting it to get closer to china, as you're suggesting, and will we find out today? tom mackenzie: well, there are some who are optimistic. after this congress, after the securing of his grip on the country, he reached back to a country, china, that used to have a relationship it described with north korea as being like tea, that close. but that relationship has soured. now we'll be looking to see whether or not he reaches out to china, which is so important in north korea. francine: tom, thank you so much. tom mackenzie from pyongyang. ♪

tom: it is jobs day. headline data at 8:30. right now, global with francine in london. i'm tom keene in new york. much going on. lower yields today. a churn to the market away from

yields as we await that american labor number. right now, news in london. >> thanks, tom. the 48-hour cease-fire in syria appears to be holding. the truce was designed to halt the fighting in aleppo. hundreds of civilians have been killed in the northern syrian city in the last two weeks. the cease-fire is scheduled to end tonight. u.s. officials say they'd like to see it continue. if russia's forecast on oil prices is right, the country budget deficit will last until the end of the decade. that's according to a new bloomberg survey of economists. they use the russian forecast that oil will average $40 a barrel, and said the government books won't balance until 2020 or later. vladimir putin's government is seeking fiscal savings of one percentage point of g.d.p. to balance the budget within three years. a number of republicans have backed away from the party's likely presidential candidate, donald trump. but trump now has one of the

richest republicans in his corner. billionaire casino magnate sheldon ad ellison tells the "new york times" he'll be backing trump. he's donated millions to republican candidates. global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. tom: thank you so much. great scene there, lining up behind mr. trump. it's a sort of maybe. i don't know where we are sunday morning for the sunday talk shows. here's speaker ryan not ready to support mr. trump in a rare rebuke. this is in the "new york times." you see it across all. and what's really going on here to me is, again, the idea that mr. trump isn't an insider am he's a wheeler and dealer from new york, and he's picking up wheeler dealers. i get that. i don't know how he picks up the republicans, midwest establishment, as personified by the speaker from wisconsin. francine: yeah, i don't know

either. it's very interesting for me, because i also see donald trump finally weigh in on the brexit debate. a lot of people were hoping that he would join or maybe that he wouldn't join, but now it seems very clear after the interview that he's pro-brexit. i'm not sure that sways the poll, or maybe it does in different directions. let's ask a man who might know. voters heading to the polls in a series of elections across the u.k. yesterday. this offers a game of voter sentiment nationwide before the crucial referendum on june 23. meanwhile, the presumptive republican nominee, donald trump, has weighed in. let's get straight to john mills from j.m.l. john, always a great pleasure to speak to you, because you're one of the most pro brexit'ers on the program. the fact that donald trump comes and says i'm pro, does it help your cause or not? john: i must say i would like to think hard about that one. i think there's very mixed

perceptions about donald trump in the u.k., whether his endorsement would be a help overall, i'm not so sure. i think some people would be pleased to hear him say that, but i think others might be more skeptical. francine: do you think there's a real chance that brexit happens, given the polls we've seen in recent days and weeks? john: well, the poll that came out today showed the brexit 1% ahead, 43 to 42, something like that. i think it's very, very close. it's too close to call. and bookies show a majority in favor of the remain. they've been wrong in the past. they were certainly wrong about leicester city. i think they could be wrong this time, too. francine: when you look at the local elections that we saw yesterday, the mayoral elections that we'll have the results of later this afternoon, there's no revolution. there's no anti-government sense. does that not indicate that the polls may be a little bit off, that brexit a little bit urther away?

john: i think it may be. i think there's big brobts polls on brexit, because we're in uncharted territory. different polls produce different results. it all depends hugely on what the turnout is. i think that+++

francine: they're having their own referendum about whether they stay in the e.u. it would be embarrassing if there's another referendum. john: no, you've got to have a majority in the house of commons. i don't believe that majority exists. but even if it did, i don't think they're very keen on having a referendum on independence now, because the calculations they had before the last referendum were -- i

think of the $113 a barrel. it's now judge between 30 and 40. scotland will be lost with the referendum now. i think even if there was a referendum there, which i don't think there will be, they wouldn't win. tom: for those that support an independent england, an i understand incident united kingdom, what is the distinctive feature they have to do, the action that they have to do in the next five or six weeks to sway the vote over to their side? john: to sway votes towards coming out? tom: towards brexit, yes. john: i think what we'll have is a large amount of political activity, knocking on doors, a lot of leaders delivered, and what's called the ground war i think is going to warm up over the next period, and i think this will have a substantial effect. i think you will draw more and more people into the whole process of this referendum. i don't know what the final poll is going to be, and incidentally, if the poll is

relatively low, this favors brexit rather than remain, because on the whole, the brexit people are more infused, more determined, and more inclined to vote. francine: a disclaimer, he's pro brexit. tom: i noticed that. even i figured that out on a friday after cinco de mayo. one final question very quickly, did the president of the united states assist the prime minister, or did the president assist your brexit side? john: well, it's interesting to see what the polls tell us about this, which was that i think a lot of people on the brexit side feared that president obama weighing in the way he did was going to have quite a big now people's voting intentions, but it doesn't appear from the polls that wee seen that it really impacts much at all. ainge lot of people felt that we've been told from the outside what to do. as many as were swayed by what he said. tom: john mills, thank you so much. most illuminating. thank you, thank you, thank

you. john mills supporting a zphue different united kingdom. bill gross and jim glassman to join us in the 8:00 hour later. but first, bill will join from us citigroup, get an update on a most interesting international economics, including new lower german rates. and michelle meyer on the american economy this jobs day. ♪

tom: it is jobs day. francine lacqua in london. i'm in new york. we welcome all of you. we'll do economics, finance, international relations. but what we're really going to do is helicopters today. here's michael mckee. helicopter report. michael: it's bill gross' number one topic for his investor news letter this month. he's talking about the concept first put forth by milton

friedman that central banks could aid in the expansion of economy by absorbing the debt that a country puts forward. the united states could sell bonds, use the proceeds to increase employment, and then the fed would just buy those and hold them or write it off. tom: what's the price on the back end of that? michael: inflation. here's where gross says the great thing is -- we have no inflation. if you print a lot of money, you get inflation, and that's what central banks want right now. what's interesting is he's not basing this call for helicopter money on the idea that we should -- that we have a problem in the economy. what he's talking about is we're losing jobs. he sent along a graphic that shows the number of people who are working in the age between 25 and 54 continuing to go down from 82 to 78% over the last couple of years much that's because robots are taking their jobs. people won't have jobs in the future. you got to found a way to pay them.

tom: you know what we're really doing is advancing what olivia talked about four, five, six years ago when ben bernanke spoke to the japan in 2003 to 2005, which is this is nothing more than bold reflation. michael: it's basically monetizing your debt. he thinks the japanese are going to do it anyway because there's no way they can pay back the bonds that the bank of japan owns right now. he suggests maybe the united states, maybe the e.c.b. wants to look at something like this, because at some point you got to find a way to keep the people who lose their jobs to rebots, their heads above water. you got to come up with something, what he's calling the universal basic income, which he suggests is something that we are going to have to go to, not might want to, but have to go to, because too many people won't be able to find jobs. how do you pay for it? you use helicopter money. francine: i find that crazy. i'm trying to think of the thought process. if you do helicopter money, it could be quite badly taken by

central banks. he's talking about the millennials. you give them helicopter money so they spend, although they don't have a jobs because robots are taking their jobs? michael: exactly. that's his idea. francine: isn't that welfare? michael: it's not like the traditional labor force where people lose jobs and find jobs in other fields. they won't be able to find jobs because the robots took them. francine: but that's the welfare system n. europe, if you're unemployed, you go to the dole and get money for that. it's not different than helicopter money, and it doesn't freak out the markets. michael: the difference in this case is that the money is just printed. it doesn't have to be paid for. you can raise taxes and, of course, you look at the european countries, just like the united states, running deficits because they have these social programs. that doesn't look good to the markets. that doesn't look good to the politicians. but if the central banks monetize the money and it just goes away, the debt, then he says there's no problem. except inflation and, of course, we don't have to worry about that right now. tom: i look, michael, at what

we're going to see at 8:30 this morning. i believe there are selected jobs shortages in the country, and yet there's x number of million people, as mr. gross alludes to, that aren't employed. gauge for us the job inequality right now in america versus where we were five years ago. michael: the way you were holding your hands shows it perfectly. jobs are being created at the high end, the well trained. and you've got a lot of jobs at the low end, the mcdonald's jobs, hamburger flippers as they call them. it's the people in the middle that are not being hired, the former production workers who have lost jobs to greater efficiency. tom: we see trump, we see sanders, and yet we see an unemployment rate that any president would take a massive victory lap on. it's the oddest time. michael: it is. one of the reasons is because people drop out of the labor force. they can't find jobs, so they've gone on disability or they've just dropped out. the question is, would they come back if jobs are available? alan kruger was with us on radio today, and he said no,

they won't. tom: we have him today? michael: he says they won't come back. that's a big debate. francine: mike, when we look at the u.s. jobs data today, are robots already having an impact? we know all this technology is having an impact on productivity. michael: definitely they are. you look at the auto industry as an example number one. the number of cars being sold is at the highest level ever, and yet we're seeing declines in the number of autoworkers, because companies have gone to robots so much. gross' argument is this is what's going to happen in a lot of other industries. he even sees it happening in service industries, happening in medicine and law, lots of areas you don't think ordinary up would be affected. tom: you stayed up all night once, the predators win, and you're snapping this morning. michael: wait till we get to the kentucky derby, and hock any the same breath. tom: this is very cool. michael mckee with bill gross, we'll do that later at the 8:30

hour. we'll do that as we do it always on an 8:00 a.m. hour of jobs day. james glassman will join us to give us the market data, the market economics. and then a conversation on television and radio worldwide with bill gross on jobs day, "bloomberg surveillance." ♪

tom: good morning, everyone. jobs day, yields lower in germany. francine in london, i'm tom keene in new york. right now to our bloomberg business flash. >> thanks, tom. the german chemical maker is close to buying materials and additive units from air products and chemicals. according to people familiar with the matter, the deal would be valued at $3.5 billion. earlier this week, evonic's c.e.o. assured investors the company would not overpay for assets. more job cuts on the way at goldman sachs security unit. goldman will eliminate roughly 10% of the jobs in fixed income. the c.e.o. is undertaking the firm's biggest cost-cutting effort in years because of a slump in trading and deal making. and general motors is teaming up with lift to test a fleet of

electric, self-driving taxis, according to "the wall street journal." the move is seen as a challenge to both good and he will uber. the partnership will test public roads. a few months ago, g.m. invested $500 million in lyft. and that is the bloomberg business flash. tom? tom: very good. it is a wonderful time across all of america, particularly kentucky. this saturday marks the 142nd running of the kentucky derby, the longest running sport event in the united states dating back to 1875. with us this morning are the geniuses from last year. did you guys pick the triple crown? >> i don't think so. tom: ok. i did you not pick it either. peter is with us. peter and lee, who really had a lot of fun with this. 37-year drop, what does the dustry do after the magic of of american fare snow >> it's pretty tough. after 37 years of not having

the triple crown, and now -- tom: am i going to wait until 2052? >> well, i don't think it's going happen this year. tom: ok. >> i think it's a wide-open field. there's a big favorite. he's underseeded. he won five races as a 2-year-old, two times as a 3-year-old. and he's rode by a horse named uncle moe. he ran in the 2011 derby and finished out of the money, but he's been a great sire. but for the distance, we don't know. he's the first crop of 3-year-olds this year, so we don't know. both horses, nyquist and outwork, won at a mile and an eighth. but this is unknown territory. francine: you know there's a surveillance horse. it's called sudden breaking news. i know the odds are 20-1, but this is us. this is who we're talking about. lee, when you look at the total

numbers of people attending the kentucky derby, 150,000 last year, are we expecting even more people this year? >> i don't think there will be more than 150,000. last year, they were really, you know, it was great, because american pharoah was the big talk, and this year it's wide open. we don't know what's going to happen. but i think you'll still get a good crowd. francine: yeah, when you look at breeders around the world, i know this is probably the most watched 12-minute horserace. here in europe, we have the irish great breeders and also some of the middle eastern countries. who are the strongest horse breeders around the world? >> well, in the -- in the middle east, they have a lot of big breeders, shagwell stables, this have a breeding. i'm not surhoff the top of my head who's in the ranking of the breeders.

tom: help me with what we see. there's nothing like this, and then how many horses will line up at the gate? >> 20 horses. tom: 20 horses. who decides which jockey gets on which horse? >> well, the trainer usually corresponds -- he talks to the owners, and they decide on which jockey is going to ride. tom: so the jockeys know right now which horse they're going to get? >> oh, yes, yes. tom: within that, a wide-open field, the idea of the jockey making the difference this year must be front and center. >> well, they're all great jockeys. i mean, all 20 of them -- all the top-notch jockeys, and some of them have won the kentucky derby before, like gary stevens, who's the jockey on the horse that i like, number 17, more spirit, and, you know, they're all primed, great riders. tom: for the kentucky derby,

this is what the pros use. this is the daily racing forum. to me it's in greek. but lee davis -- look how it's marked up. i mean, there is a document worth millions, i say billions of dollars right now. francine, jump in here. francine: we talk about asset return, and what's amazing when you look at these horses, how much are these horses worth, and how much can they expect to win? i know in a year they can win up to $2 million, $3 million. how much does it take to buy one of these horses? >> sometimes as little as $10,000, $15,000 if you get lucky. in this race, there's a horse that they paid $2.2 million for. that doesn't give the horse an advantage when he's running. he's just bred well. you know, sometimes that will, you know, sometimes that will, people just give the that watch thinking that that's the best horse because they

paid the most money. tom: i got 100 bucks. what do die? >> ok, this is it. 20 on more spirit. bob baffert is going to try to make it two in a row. he won with american pharoah. he's going to come right back. did he that in 1997 and 199 with silver charm. he's going to try to do it again. i want to make a $1 trifecta box. these are the numbers, 3, 6, 10, 17, and 18. that's a $60 bet. tom: there it is. you heard it here. gentlemen, thank you so much. we have another hour coming up. willem will join us and michelle meyer will join us. stay with us. it's jobs day. ♪

tom: this morning yields drive ever lower. at new record lows.

it is jobs day. it is america. and speaker ryan considers mr. trump. we consider a fractured gop. good morning, everyone. this is "bloomberg surveillance." from our world headquarters in new york. i'm tom keene, with francine makua in london. we need to turn to jobs day. -- with francine lacqua in london. we need to turn to jobs day. say ite: most economists may persuade them to look at chairs a live meeting for yellen. let's look at wage growth and , and inn in australia that part of the region, and how they match up. tom: we will do this in the data check. , out lowerds driving in the last 18 hours. there is nejra cehic. early results are in from

the british regional and local election. nationalists are on course for a third straight victory in scotland. nicholas spurgeon will extend her term. jeremy corbyn's real test -- labor suffered losses and had a mixed picture in england. it was an extraordinary development involving the likely republican candidate for president and the republican leader of the house. paul ryan says he is not ready to support donald trump yet. and ryan's words, "i am just not there right now." trump fired back with an inability to follow ryan's agenda. they are scheduled to meet next week. more than 80,000 people have -- fort mcmurray mcmurray. the fire may turn out to be the

costliest catastrophe in canada's history. insurance losses may go over $7 billion. oilsands producers have been forced to cut their output by 14%. vladimir putin will have a rare meeting with shinzo abe, who is breaking the russian president's isolation today. he will meet with vladimir putin in the black sea of sochi. a japanese news service reported president obama asked abe not to make the trip. it is a trial made for hollywood. the issue, whether 92-year-old media mogul sumner redstone was mentally competent when he threw his next -- when he threw his ex-girlfriend out of his house. the verdict could end up deciding who controls his stakes in cbs and viacom. global news 24 hours a day, powered by 2400 journalists in

more than 150 news bureaus i am nejraworld, cehic. tom? tom: let's get through the data checks and get to professor buiter.- professor i would note nymex, churned. oil not affected, i would to just. to the next screen, quickly. german two-year yields. -0.51. that was a -0.4 924 hours ago. , stronger euro against the swiss franc. francine: i want to show you japan. 0690 seems one point to be a little bit off. they are set for the biggest weekly loss. tom: we begin jobs day coverage. bill gross and jim glassman will

join us later this morning. economics,on our willem buiter of citigroup. the most important thing to me, i guess it is like my sister leicester city. you were an outlier. all of a sudden everybody loves ester city.ic what did you see quarters ago on global slowdown that others were missing? the two main engines of the largest economies were in neutral gear, the u.s., and china. the u.s. is slightly slower than i expected at the time, and china, despite the artificial to putat they managed into activity in the first quarter, thanks to the credit bubble. and some old-fashioned stimulus.

nothing has changed. tom: what has changed in the last 18 hours is another dash to lower yields in germany. what is the instability that we will see in markets if the german two-year does break down to record low negative yields? willem: this is simply part of the new normal. markets should get particularly upset about it. tom: we should see banking instability with that we should see banking stability even with the lower negative rates? willem: it will still be a problem. it is only because there is this point you at some start squeezing the banks. but i do nothing we are there yet. francine: overall, you are more optimistic about world growth. you say that recent data suggesting that at least for now -- this comes at a

time when forecasters are downgrading their gdp forecasts. why so? willem: we actually have growth this year lower than last year in our forecast. we recognize correctly that the growth has bottomed out for the time being, but i expect that thischina gets out of artificial stimulus phase, the slowdown will go further. commodity prices have stabilized, so we are not looking at anything dramatic. i think we are going to look at an extended joe of growth, -- and expended period of growth. not much more than 2% at market exchange rates. francine: are you seeing more risk in the second half of the

year, or are you seeing global risks receiving a little bit? willem: oh, no, i think global risks are going to be with us in the first half of the year. in europe there is a material risk now of the deal between europe and turkey breaking down because of the situation in , abal leadership in the u.s. in two of the remaining three candidates for the presidency. i am protectionist. there is enough to be nervous about in the second half of the year. tom: i need to reframe the scale of your academics. through the doors, you wanted by the eight foot grizzly bear. you were livid over our international assumptions of economics. let's back up. 2005, benjamin bernanke

goes to tokyo and lectures the japanese on reflation. it did not happen. five or six years ago, olivier blanchard has the courage to talk about reflation, 3% or 4%. he got crucified for that. now we have bill gross writing about helicopter money. you are one of the world's authorities on this. are you kidding me? helicopter money is in the textbooks you studied as a kid? willem: oh, yes. a description for a combined market fiscal stimulus. it is a cute example of a particular kind of stimulus. tom: they take over fiscal policy. willem: that is why it is not going to happen that way. concept,for the mental fiscal stimulus to put

cash in people's pockets, or public spending on infrastructure instead of selling debt. tom: back to mcchesney martin. do we go to central bank independence by the boldness of this policy echo willem: not at all. the central banks should have the right to say no. independent central bank has the right to say no. they also have the right to say yes. whether they say yes or no should depend on how the economy is performing. in the case of the u.s., with inflation still below target and some slack left to the economy, there is a case for the combined march fiscal stimulus. a thunderinge is case. it is not difficult. francine: will we see more

negative rates before they try helicopter money? willem: probably, because the combined fiscal stimulus is politically difficult in most parts of the world. in the u.s. you cannot do it congressionalis gridlock. in europe you have to do it through the back door. in japan, there seems to be weird objections to it from the side of the ministry of finance. attitudespublic towards monetizing debt and deficit. possible,technically but the politics just do not line up. i think what we will see therefore is further rate cuts, ineffective in terms of stimulating the amount, but they will have their effect on asset pricing. francine: more negative rate cuts that will be taken by the markets as something terrible because of the side effect, or will they actually have some positive impact on these

economies? willem: rate cuts, whether they are more negative or positive to a less positive level, as in australia, have a very liberal impact on activity, even though they will impact asset markets still, including the exchange rate. but the exchange rate, which is the main mechanism of the moment for monetary policy, and stocks -- these things are zero sum globally. tom: the complexity of this is wonderful. i love what you say about china, a thundering case for reflation policies. we will come back with michelle meyer, bank of america merrill lynch. later, in the 8:00 hour, james glassman of j.p. morgan chase, and bill gross. we will talk to him about the fed, about sikorsky helicopters, and about a stamp collection. "bloomberg surveillance." ♪

francine: welcome back. i am francine lacqua in london. tom keene is in new york. it is a jobs day, but we also need to look at corporate. here is nejra cehic. nejra: first quarter profit at arsenal or mattel. -- at arcelormittal. geneva, prosecutors are widening their investigation into credit squeeze and one of its former wealth managers. that is according to people familiar with the matter. prosecutors have identified three more former employees as suspects in an unauthorized trading case.

involves the accounts of rich eastern european spear general electric is hunting for acquisitions in the struggling oil and gas industry. cfo jeff bernstein tells bloomberg radio that ge has been that twofor businesses companies were preparing to sell. tom: you have been having a -- we have been having a fabulous conversation with phil about citigroup on helicopter money, which is all -- with willem buiter of citigroup on helicopter money. immense caution on the optimism in america. michelle meyer joins us now. she has gone multifamily and has done a lot of study. here she is looking out of her new condo. she sent along a new photo. this is great, michelle.

you wrote a brilliant part of your research paper on the mass distortion, like jobs day, that we see in multifamily. multifamily is doing great, but it is not condos in nashville like 20 years ago. michelle: we can all look at the breakdown -- tom: it is not what we knew years ago. downlle: if you break it to state level or msa level, what you will see is a real concentration of the multifamily building in certain cities. 55% of multifamily construction we have seen has been in 20 msa's. that is at a historical high, significantly what we saw -- significantly above what we saw -- tom: it harkens back to the boom of acres of condos 30 and 40 years ago.

how will the inequality manifest itself in this morning's jobs report? michelle: this speaks to the type of building we have seen across top cities, more luxury buildings. the average size of the new single family home reached a new record after the great recession . so the type of construction we have seen has been targeted toward higher income individuals. have seen to a certain extent which growth increase more for those who are higher skilled, higher education , but generally speaking i think the job growth we have been experiencing has been pretty widespread. francine, the economic policy institute website has a phenomenal description of this in america. as michelle said, the polarity of 6%-plus wage growth for the great middle speaks

to trump and sanders and corbin, it is just not there. it is different for apartments because you share a basement or the like. michelle, you were talking about the great inequality and the fact that there are two bank many luxury apartments instead of multifamily. will that change? if so, what will be the catalyst? anhelle: there is still upside to multifamily building, but it will not be as fast as it was at the beginning part of the recovery. i will anticipate that this year 5%,ifamily will start down part of the reason being because of people rushing to get their projects done. but looking to next year, we resume a stronger trend. ultimately we still get to an equilibrium where multifamily construction is going to be

multiple -- is going to be notably higher than it was in the 2000's or even in the late 1990's. but it will take us longer to get there because the gains we have seen so far are so concentrated at the top market. francine: i imagine it is a lot like the u.k., where new york and washington, d.c., and the west coast, feels very different from the rest of the united states. michelle: very much so. that is where you see all the cranes,. it is for good reason. there has not been a shift toward more urban living. people want to be close to the city centers. tom: we are thrilled that both of you are on with two different bank shops. i want to know when the u.s. economy clicks after a dreadful first quarter. are we seeing better economic growth? willem: we will see. today's payroll is going to be important if we get something probably -- means

it is a lagging indicator, and the first quarter was terrible, and you cannot blame it on the , as if -- because historically mild winters affect gdp growth. policy uncertainty has been up so much. tom: we have to go to break here. it is a most interesting jobs day. michelle meyer is with us from bank of america merrill lynch, and professor buiter from citigroup. 's chairman of the president's council on economic advisers. will we see a lower unemployment rate, and 8:30? this is "bloomberg surveillance." ♪

francine: i am francine lacqua in london. tom keene is in new york. this is what i picked for our morning must-read. --s is david focus landau david full kurtz landau -- he says -- francine: willem buiter from citigroup is still with us. his main point is that basically so itb is doing too much,

structural reform or encourage fiscal spending, so it is the ecb's fall. is not the ecb's fall. they have to do what they can. it is the political classes in europe who are not providing the necessary fiscal stimulus and are not engaged instructional reform. the ecb makes it easier for politicians to sit on their haunches, but it is simply not the ecb's problem. they have a very clearly defined objectives, and they are trying to achieve it. francine: and also, when you listen to mario draghi, he says i am giving you a government when it will, so use it wisely. michelle: it is definitely -- willem: it is definitely not the

ecb's fall. it is the political classes that have continued to do so. no fiscal stimulus, minimal reform, and a lot of talk, and indeed verbal abuse at times of mr. draghi. it is very undeserving. francine: thank you so much, willem buiter. coming up on bloomberg markets, .t is mohamed el-erian that is at 11:00 a.m. in new york, 4:00 p.m. in london. it is jobs day. a lot of the markets around the world are taking it in their stride, selling off a little bit , futures at the negative. ♪

jobs day.it is francine lacqua with tom keene. let's get to bloomberg first word news with nejra cehic. nejra: in the u.k., voters in

global and regional elections gave no sign they are ready to defy their leaders and leave the european union. david cameron posco conservative party appears to be on the brink -- david cameron's conservative party appears to be on the brink of picking up seats. extend hergeon will term as they head of their semiautonomous government. and we will learn who will be the mayor of london later today. north korea's meeting gives kim jong-un a further chance to solidify his grip on the country. he came to power five years ago after the death of his father, kim jong-il he may focus on economic growth and military strength. cease-fire in syria seems to be holding.

it was designed to halt the fighting in aleppo. hundreds of civilians have been killed in the city in the last two weeks. the cease-fire is scheduled to end tonight. u.s. officials would like to see it continue. oilussia's forecast on prices is right, the budget deficits in the country will last to the end of the decade, according to a new bloomberg survey of economists. oil will average $40 a barrel theugh 2019 and said government's books will balance until 2020 or later. vladimir putin's government is seeking fiscal savings of one percentage point of gdp to balance the budget within three years. must has done it again. for the second time in eight months, spacex has landed a rocket on an ocean platform. the booster touchdown on a barge in the atlantic after launching a japanese communications satellite. global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world, i am nejra

cehic. tom? tom: the critics love to take .hots, mr. musk that is way cool, bringing a rocket down onto a platform. right now we have a way cool single best chart. let's look at gdp of michelle meyer -- with michelle meyer. this is clinton, trump, do something. this is a one year moving average of gdp. in the good old days it was 4%, 3.9%. right now, it is 2%. we are here. how do you jumpstart that back to where mr. trump and mrs. clinton want it? michelle: we may not be able to get back to 4% growth. in an economy where productivity growth is weak, potential growth is lower. we have to reset expectations, and i think that has happened over the years. our forecast, we will be running at 1% growth over the year. tom: not 2% growth.

willem: high runners, yes. tom: where to the optimist get it wrong? it is wage growth, isn't it? finding fewerare and fewer people who are strictly in the optimism crew, forecasting something in the high 2%, low 3%. recovery, there was demand that would start to show soon, and it has not manifested. tom: i want to get back to the conversation we had on ndau, paying attention to the moving of money around the world. in our new economy, do capital flows matter like they mattered in 1890 or the keynesian 1936? they move so fast. willem: they still matter, clearly.

countries who run clandestine to capital flows- matter, but they are part of the story. the fundamental story is about productivity gross -- productivity growth and demographics. francine: do we worry too much about productivity? we talk about it at least twice a week. here in the u.k. we talked about it, in the u.s. the world is changing. how we shop is changing. we need to acknowledge it and move on. it does not mean productivity cannot be rising. even in a world dominated by robots were nobody has a job, productivity can be rising very fast. new technology, new ideas, new products, new processes, and it is very surprising that in a world where there is so much innovation going on, so much new knowledge being created, the

, growth isage rising. it is simply low investment. and lack of education is frustrating. that is the fundamental problem. it is not being addressed. francine: what concerns you the that is it the fact central banks are not spurring monetary inflation? is at the low nominal gdp worldwide? andem: the lack of demand alaska of -- and the lack of fiscal stimulus. the is the demand side of story, and on the supply side, threat off the protectionism, lack of investment skills, that is the supply step. stimulus, intelligent

fiscal stimulus, supported by money creation. tom: michelle, bring this around. you mentioned productivity earlier. david stockman wrote a classic david stockman rambling note about reagan and trump and what trump gets right or wrong. but in the middle of it was a fabulous three paragraphs on the lack of quality of our american jobs. we are going to create 180, who knows, standard deviation, 220,000 jobs today? are they good, productive jobs for the nation and the individual who holds that job? michelle: this question always comes up and people look at the share or lower skills. it has been a case that in this environment, this recovery, hard time as a share of the total workforce -- part-time as a share of the total workforce has

been falling. we have been seeing a shift toward more full-time hiring, it is just taking longer in this cycle. in terms of overall productivity of those jobs, clearly we can see from the productivity numbers we are receiving, productivity is pretty weak right now. too not know if that speaks the quality of labor as it does to the inefficiency gains of the capital, the next stage, where you have the technological advances acting up the amount of production you can have per labor. francine: if you think it is abnormal in this current cycle, do you think it will go back to how it was, or will we go back to the kind of cycle, or is this once again the new normal because we count things differently? to acknowledgeve the structural changes of this new normal, but we have always managed to exceed expectations in terms of the new innovation and productivity. there is this idea of potential gdp is time varying.

you have short-term changes in gdp due to structural adjustments and things like regulatory changes, and as you look further when you start to see perhaps new technological advancements, you can realize a higher trajectory for production growth. francine: stay with us. if you look at some of these european stocks, they are seeing the worst weekly drop since the turmoil we saw in january. that is ahead of the all-important u.s. jobs data. ♪

tom: what a most interesting washington right now. what a most interesting america.

we have the jobs report and 8:30, but the backdrop is politics and a republican party in shock. good morning, francine lacqua in london. i am tom keene in new york. futures negative five, dow futures -37. my morning must-read is a little confusing. always hitting the ball out of the park writing for "the new york times," a fabulous article. quote is from senator reid of nevada. tom: this is a great article. the is great here is not

polarities that we are facing. it is the many polarities. james manley is a democratic ,trategist in washington obviously in support of secretary clinton. i am absolutely flabbergasted, of the lastrhetoric one he four hours. let's start with the basic. have you ever seen this before? jim: absolutely not. to be clear, i spent six years working for senator reid as a spokesman, so when i saw that line lest my, i said bravo, well done, senator. the answer to your question is no. an increasingly chaotic political situation, the rhetoric in this current day is way over the top. never seen anything like it. the over the top, what is the miss -- what is the to do list for mr. trump? what are the best political practices donald trump has to do right now? jim: "the new york times" had a

story yesterday about how his to do list begins with going to a couple of fabulous parties and finishing up by building a wall by the end of 100 days. he has absolutely no idea of the requirements that go into trying to get legislation done, not only short-term or long-term. he thinks he is going to call people down to the white house, a fabulous oval office, i believe he described it, and sit down and hash out a deal. that is not going to happen. not only is it not going to happen with republicans, but certainly not with the democrats as well. he has no idea what he is talking about, absolutely none. francine: could the democrats have put more policies in place to fight inequality? this is rife in america. it explains so much of what we are seeing in the political spectrum nowadays. jim: it really does, francine. they could have, but you have to remember, our policy -- people

hate when i say this sometimes -- but our policies are hamstrung by the total obstructionist actions of the republicans. in this day and age in the senate, you need 60 votes to get anything done, so you always want to hit the long ball. the most robust package as possible. but the political reality is, especially with e-house dominated by the tea party, you have to play small -- with the house dominated by the tea party, you have to play small ball. francine: i understand the difficulty in the political system in the last couple of years in the u.s., but is that something easy that the democrats could have done differently to reduce inequality? jim: i do not blame you for asking the question, but again, as an insider watching the senate closely, i do not believe so. a very modest proposal to take a minimum wage to the floor would have been filibustered quicker than you know what.

again, it is something we need to address. the need is obviously there, and probably more importantly, the american people are demanding action on it. but again, until the political dynamic changes, until the hyper partisanship that dominates washington goes away, it is going to be difficult to address this stuff. tom: political small ball. of 1972 at the auto the -- at the oddity of 1972. what the secretary kerry clinton -- what the secretary clinton need to do to get the delegate votes in ohio? jim: the traditional swing state , whose policies have been hammered in part by trade issues -- people are upset. they think they are being taken advantage of, and they want a government that is fighting for them. a different approach to trade

policy probably is a willingness to stand up to the chinese when a smart to steal is move. those are two that come to mind. so: jim manley, thank you much, working on the democratic side of the fence this morning. have not seen anything like what we have seen in the last 18 or 24 hours in the american political discourse. i think we could use the word "forever." they will continue to analyze forever, and they do it very well. john heilemann and mark halperin , "with all due respect." i had too much of a single demaio. it is "bloomberg surveillance." ♪

tom: good morning, everyone. jobs day. francine lacqua in london, tom keene in new york. right to the forex report. 1.07. euro-sterling, to help francine with her shopping this weekend,

-- francine: coming up shortly, "bloomberg " with david westin and jonathan ferro. david, it is jobs day so you look at markets. david: it is jobs, jobs, jobs. we will be joined by some pretty great people. we will have alan krueger, from princeton university. we will have howard ward, the ceo of gamco. we will be simulcasting with tom and "surveillance" on radio. then we will check in with jason parkman, chair of the white house council of -- tom: willem buiter is with us from citigroup. michelle meyer from bank of america merrill lynch. and carl riccadonna. what are you going to this morning? carl: normally i go beneath the surface.

this is not one of those reports. we see the economy in a three-quarter deceleration. things look not so good, and understatement for the first quarter. consumer spending was lousy, growth was lousy. all we need now is an all clear from the labor market that the pace of hiring is holding up. normally i am pushing an angle of look beneath the headline change. this time around, the check engine light is on and we need to know the labor engine is firing. tom: do we assume the unemployment rate comes down? path down, is it a good glide path down, or is it for bad reasons? --l: absolutely is a absolutely it is a good glide path down. if we move below 5%, that will be the economy moving below the neutral level of unemployment, and the stagnant wage story will finally come to an end as well as that happens. but at this point the on employment rate does not matter.

focus on the payroll gains. we need to know that the labor markets have not succumbed to the sluggishness we have seen elsewhere in the economy. francine: what is the magic number for the markets to shift their expectations of a fed rate hike in june? carl: i think june is really a big reach, so if june is realistically in play, not theoretically in play, as policy makers have been saying, i think 300,000 today for jen to be on the table. i do not see a scenario where that is possible. conversely, if we are below 250,000, there will be the -- a key point in the fed the statement, they said everything is weak in this sector and that sector, but household income growth is strong, and that means consumer spending will lift us out of this morass. we need to see job gains closer to 200,000 for validation of that view. tom: michelle meyer, here is the

chart where we migrate down here. a lot of americans feel miserable, but i am struck by, this ought to be the firm in victory lap, the obama victory lap. why are we so miserable with this absolute stunning success? michelle: you do need to decompose the jobs and the unemployment rate between the job creation and the labor force. part of the reason the unemployment rate has fallen so quickly is that the labor force has dropped. in the last six months, the labor force has increased again, which means it is actually -- it has prevented the bigger jobs and the unemployed and rate. tom: these are assumptions. labor situation we are in now? up to very recently, real wages are barely rising.

we are seeing a world where not just employment has been growing, but real wages are rising. this economy is still growing. i have doubts about the durability, given the performance of the last few quarters, but, yes, the u.s. is not the primary candidate for a helicopter money. or for monetized fiscal stimulus. but it certainly could use another kick on the demand side, yes. illem, when you talk about wage growth, it has kicked up a little bit. but what do we need to do to see real wage growth? willem: where are seeing will -- we are seeing real wage growth. nominal wage growth, headline inflation is more than 1%. real rates are rising. francine: not enough for janet yellen to want to raise rates.

real wages can rise without there being inflationary pressure. you have to differentiate. there is still slack in the economy. real wages are rising, and the has beenlabor increasing recently. not very much, and the trend can be reversed down again, no doubt. but this figure is looking better in the labor market. tom: michelle, i have one minute left. doubt believe in the robert gordon and northwestern has, that are better days are behind us? is quite an impact professor gordon has had. michelle: he has had a lot of attention over that, saying productivity growth is lower and we are on a slower growth trajectory. time will tell. in the near term we have to accept the low productivity environment. carl: that is an important point

we are still in the hangover of the recession. willem: you have not begun to see the impact of artificial intelligence, robotics, bioengineering, and all that. listeninghe person thinks that will take jobs from us. willem: they will. tom: carl riccadonna, thank you. michelle meyer, thank you. , thank you forr your comments on reflation. later today, bill gross and jim glassman will join us. stay with us worldwide, this american jobs day. ♪ âi

david: jobs friday. criticsts sai jobs rose. jonathan: a hike at next month's meeting.

global equities retreat. >> wi-fi finds goldman sachs cuts operations to 10% of its staff. ♪ david: welcome to "bloomberg ." here withwestin jonathan ferro and megan murphy. it is a treat to have you because all eyes are on washington. the big story is the jobs report out in 90 minutes. jonathan: it is the most important jobs day until the next one. guests a great list of including our kruger and bill gross coming up after the numbers break in 90in