francine: credit suisse post is as -- posts a second-quarter losses. it is a green day for european chinese inflation firm of the pboc gains reasons not to ease. this is bloomberg surveillance. lacqua, tom keene in new york. you have got it within

european banking and their struggles but a lot going on across the commodity space as well. i am stunned by the gloom among the pundits in the last few days. i honestly can say i have never seen it. each of them has an interesting shade and color. we will have some optimistic push -- optimism to push against the gloom. francine: when you talk about gloom, i know in davos, any ceos were optimistic and there is a re-shift. let's get straight to the bloomberg first word news with vonnie quinn. consumer prices in china keep rising although they are still below the government's target price. it is the third straight monthly increase. food prices with a big reason. investors want to know exactly what the and come and president

does incoming president of the philippines will do. he was elected with 39% of the vote and campaigned on a platform of fighting crime. he has sustained investor confidence on an economy that grew an average of 6% a year in the last decade. north korea staged a massive parade. kim jong-un looked on at thousands of people marched across the main square in pyongyang. the number of officials linked to his father's rule were hurt. ministers wille come up with their greatest plan yet for greek debt relief. the plan calls for extra austerity measures for greece. productions,budget they have said it is not

possible. in the united kingdom, the trade will haves employees excessive working hours if they leave the union. global news 24 hour's a day powered by our 2400 journalists in more than 150 news bureaus around the world. tom: i do not want to get into brexit. i am seeing an inflammatory stuff from both sides. vonnie: just a few weeks left and have a campaigning. france in the to work 80 hours a week if brexit. she already work 80 hours a week. currencies, commodities. upures up 14, dow futures 115.

there is a lot of interesting things going on in the foreign exchange commodities space. 43.81, the dollar stronger. on to the next screen. the vix showing a priced to perfection market, 13.94 and the yen or than anything pulling back. right now up to weigh 109. francine, a data board from zurich. zuriche: data board from . it is a lot of the banking stocks with credit suisse leaving the game. the yen is weakening, banks are gaining on the back of better than expected credit suisse figures. they still posted a loss but it was better than analysts had expected, a little bit of welcome news after the hard time they have had the last four months. panic,is is sort of the

not the panic but the worry that is out there for commodities. let's go to iron ore in china. here is this massive rebound. there is a little bit of a commodity top but you wonder in the last few days if it is over. francine: definitely contributing to a little really for. tom: iron or is the asian indicator of commodities. i have never seen so many intelligent reason notes that the world is coming to an end, from major activists like carl icahn, things are terrible. doug cask was on yesterday and he is extremely net short. neil dutta is net ohlone. .e has been -- met baloney he is a begin of optimism.

take me all of the ledge right now, why are things not that bad? you have two very unusual futures right now at least in terms of business cycle dynamics. we are at full employment and typically when that happens the housing market is rolling over and fiscal policy is getting more tight. contrast, this time around we are at full employment but the housing market is accelerating and residential investing has grown 10 to 15% for the last four five quarters. fiscal policy is getting more accommodative so i find it interesting that you've had a lot of calls for more accommodative fiscal policy. you have had presidential candidates talking about significant infrastructure rebuilding. ways.ed in interesting i guess the real question is, do we need stronger fiscal policy

to get u.s. core inflation up to target? probably not. tam: let's bring up the dut optimism index. this is the wage index that the pros use, and i'm sorry that redline is a massive improvement back to the nirvana of a previous generation. vonnie, you are toooung to remember the glory in the early 2000's. ises and adjusted inflation not too bad but the gloom grows says too many americans are not participating. neil: don't they always say that? strongwth is not the enough, then the wages are not strong enough, and then they talk about income inequality. the fed is doing the best job it possibly can to combat income inequality. tom: should they lift in june? neil: no, but full employment is

the most powerful tool to fight income inequality. tom: how can you say that with mr. trump and mr. sanders? neil: i think this is classic of the electorate, they top tech gloom and do. tom: let's bring in fancy makua. -- francine lacqua. let's get our umbrella out. francine: when you look at switzerland -- you like the umbrella? it is a credit suisse umbrella. theyu look at switzerland, a strong frank, negative rates, and hearing you speak to neil, i am not sure what we are waiting for. you believe data is quite strong but the fed should not move in june. what is it waiting for, this global uncertainty or do you really want a significant wage inflation for them to actually increase rates? neil: i think the fed has

begrudge them a moved into this role as being the backstop for the economy. you have to let the inflation in the u.s. surge. i think the fed wants to let it run so strong that the yield curve ultimately stevens as they go into a move so inflation has to run higher to offset the .nflation everywhere else i think that is what the global economy needs. it should not be a surprise to anyone. in have seen a relief rally emerging-market currencies and equities and that is really what the fed is doing. i think this inflation target is symmetric and i think the fed is going to prove that as we go forward. i think inflation expectations go higher as the fed continues to pursue this policy of benign neglect. tom: neil dutta is far too optimistic for this show. we will continue this.

gold a little soggy and the last number of days. we will ask him about commodities and gold and his wonderful work on fundamentals. jeffrey rosenberg from black rock join us, another perfect guests amid the punditry gloom. stay with us. ♪

tom: good morning, everyone. from london,, francine lacqua in zurich, switzerland. easyjet,umpy skies for posting a first half loss. attacks of terrorist

and a uruguay capacity glut. revenue receipts could drop 8% in the current quarter. the largest steel maker in germany is make -- is cutting its forecasts. the company posted first-quarter earnings down 20% from a year ago. nokia came up short and its price quarterly report after combining with alcatel lucent. heard by phone carrier spending less on wireless networks. that is our latest bloomberg business flash. much.ne: thank you so we are not here for negative rates. we could be in zurich talking about that but we are here for credit suisse. the second biggest bank in switzerland did a little bit better than expected although it did have a loss. topoke for about 15 minutes

the ceo and we talked about the fed and volatility and brexit. concerned.lways of course we spend a lot of time worrying about brexit and we have a brexit working group, and we will be ready whatever the outcome is. we have to prepare for it. there is still growth in our economy. i think europe is better than it was. i think the u.s. is still growing. i think that the macro is ok. -- of course a geopolitical risk a run oil, risk around oil, saudi arabia.

francine: what is your plan b for brexit if it happens? >> we are not ready to discuss that publicly but we will cope. francine: after that warning in march, credit suisse was the worst-performing stock in europe but today scanning some 6%. let's get straight to michael moore. great to have you on the program. when i spoke to tidjane thiam he sounded very confident. he could not quite call the end of the sanguine market but he does feel a lot more comfortable. is there anything that analysts should worry about in what we found out today? michael: i think the worry is that is going to be more of a slog. --hink they were protecting predicting confidence in their plan because they had to change the plan in march so i think they wanted to project that they

are back on track, that it is just going to be more of the cutting story. surprise better than a is what you got a couple of months ago. they arederstand spinning the span and they are doing a great job in zurich. who will they end up merging with? thatere a list of banks you guys talk about in london? thiam said they will not be merging with deutsche bank when asked about that. the problem is, they are shrinking the investment bank. they are trying to build up and wealth management and they are having enough trouble getting their own ship in order. do have a merger on top of that would certainly complicate things. they are more focused on

showing some progress after a couple of missteps with their turnaround. tom: how are they linked to global and eu nominal gdp? are they driven by the economy? when you look at the idea of 150,000,. banks with 200,000 employees, we forget these are smaller and tutees -- smaller entities. how are they linked to the economy? michael: i think they are trying asiave to link more with and some of the emerging markets. they are trying to chase growth around the world. asia is the business that is getting a lot of the capital coming out of these other trading businesses. they are obviously still tied to switzerland. i think they are trying to shift the geographic mix and capture some of that growth because europe, not much of a growth

story at this point. tom: michael moore, thank you so much in london. , andon bloomberg the most interesting time in the markets, the gloom that is out there, the banking uncertainty to the june 15 meeting, deutsche bank on your need to participate in the equity markets. from zurich, london, and new york, bloomberg surveillance. ♪

tom: good morning, everyone. bloomberg surveillance from new york.

francine lacqua in zurich, switzerland. sweetie's,of credit go -- credit suisse, go right, go left, and there is a wonderful bistro. why is she in zurich? i do not get it. what is the mood? francine: what do you mean you do not get it? we came to speak to the ceo to see whether he is on track and for the first time, there is nothing to write home about that it is not as bad as it could've been. tom: let's go to the morning wall street. commodities the spike in early years -- microbubbles, the new word -- not a new trend toward dollar weakness or commodity strength, andr current credit

monetary policies, the impact is contradictory and dis-inflationary, creating the risk that commodity price the kleins will impact asset prices commodity price declines what impact asset prices. neil: the commodity markets have repriced because global inflation has been priced out. tom: is it now stability within commodity prices for can foil drive lower? if you have real concerns about the global economy it will. tom: does it get us to a gdp run handle the u.s. of a 2% or can we even be as optimistic 3%?.8% or three point -- neil: i think generally speaking

u.s. growth is around 2% to two and a half percent. francine: the impact of china on the u.s. is not as drastic as other forecasters are saying? neil: i do not think so. if you think about the dollar, that was a hot topic for the past year and a half. despite the strength in the dollar, u.s. core inflation accelerated last year so as the dollar -- core inflation in the u.s. has room to move higher. francine: when will the fed hike? neil: above their target for a period of time. to the extent they will come back to target, they will let the next recession take care of that. i think september is a reasonable baseline. one of the things we are

seeing is the idea of theory and hand. his orthodox phillips curve theory working? or is it every economist for themselves? neil: the unemployment rate is down and rates are picking up. it seems the phillips curve is working. i agree it is flat but once you are at these low levels of unemployment, then the curve -- tom: you are not concerned about a bimodal to america's? matt king at citigroup has that ,reat chart showing the poor the waiters, the busboys are doing great and people like vonnie quinn are doing great. it is everybody else in the middle. neil: this has been a theme for quite some time. there was an article recently in

the wall street journal talking about the significant increase in knowledge workers, for example. i think a lot of the, we are going to lose our jobs to robots and automation, this is the so-called lump of labor fallacy. you have productivity which increases labor to do other things. you i happen to agree with on the road barth frenzy. -- robot frenzy. neil: labor power is picking up. tom: from mail data of macro economic research. in our next hour, ricky leavy. ♪ [ soft music ]

e.t. phone home. when you find something you love, you can never get enough of it. change the way you experience tv with xfinity x1. .rancine: this is surveillance european stocks rising, oil climbing to around $44 a barrel.

base metals clawing back some of the losses we saw yesterday. the yen sinking as we expect the boj to do more. i am in zurich as we spoke to credit suisse, a little bit better than expected. driving credit suisse higher and pulling up some of the banking stocks. i am francine lacqua in zurich, tom keene in new york. vonnie: police say a knife attack at a german train station was probably politically motivated. the attacker killed one person and wounded three others. police arrested a 27 euro german. witness reports that attacker yelled god is great in arabic. ofcanada, 90% of the city fort mcmurray survived the wildfire at about 2400 structures were destroyed. fled and will not

be allowed back until police two weeks. lawmakers and brazil trying to impeach dilma rousseff are trying to get the process back on track. chief of the brazilian senate says he will go ahead with hearings. recess is charged with illegally using state ranks to plug a hole in the budget. the u.s. could bail out puerto rico by july 1, according to the national resource committee chairman. debt.ill restructure its island's development bank default did on $370 billion -- million dollars last week. a rainy and snowy winter has eased the states' five-year drought. global news 24 hours a day

powered by 2400 journalists and more than 150 news bureaus around the world. tom: adam kohl's joins us live from london. there is no other phrase, where is the dollar. strong dollar or weak dollar in the coming quarters. i think range bound dollar. i would probably be a buyer around these levels but with no greater ambition than to playing it toward the top of the range. i think long-term trends are hard to find at the moment. one of the trends that has been established as if you take the bundled courtesy group of asia and japan, the adx why that at some point we will see within the currency war a depreciation of aged currencies, and within that -- asian currencies and within that a stronger dollar.

i think it needs some dollar direction behind that to get it moving and in particular, i think it needs some direction from dollar-yen. it may have made a short-term bottom but to get some real momentum to drag the rest of asia along, it needs a broadly stronger dollar and i think that is becoming increasingly the story for next year. chart,ere is the kuroda inc. of a pan -- bank of japan first option in january. what they got was a stronger yen. it is hard to have a strong dollar with yen strength like that as well. adam, the other idea is going back to europe, the battle for parity. what a consensus that is a weaker euro they have been confounded? is this because of a real interest rate game or because of capital flows? i think capital flows and

broad dollar ratios are the big story. there really is not a strong ration -- reason to be out wide -- outright negative on the euro. a gain, the bigger picture to get euro-dollar lower it needs a broadly stronger dollar and the market pricing in a much more proactive fed. the hurdle for that seems to be high so i think we play euro-dollar at a broad range. sellers probably averted again with not much more ambition toward a move toward the bottom of the range. francine: given what you have just said, what happens to yen? the finance minister is saying, we cannot intervene. governor kuroda has disappointed the markets and likes the surprise. adam: i do not think we are as

close to intervention as the authorities would like to have us believe. the problem is, i think selling an intervention when the yen still on most measures undervalued will be very difficult unless they can make a case that the markets have become outright disorderly and need management from that perspective. i do not see an awful lot standing in the way of dollar-yen possibly taking a stand to 100 or briefly through that level unless we can see the broad dollar digging it back up from here. not i do not think is a long-term trend i'm ready to back at the moment. francine: you are saying they will not intervene? we spoke to a strategist this morning who was saying the problem with the japanese authorities is that they might look like the boy who always cried wolf without ever doing anything. risk andhink that is a

i think if anything, that is the way we see things playing out as selling yen intervention to the international community be very difficult at the moment. the yen is still cheap and the japanese market is still competitive. it is really hard to make a case for yen intervention. tom: adam cole with rbc in london, thank you so much. neil dutta with us. do you remember long ago and far away the fed never spoke about the dollar? only the treasury. that has all been shattered. is janet yellen the keeper of the dollar now? neil: she is not the keeper of the dollar. tom: there has been a big change. the fed as markov's end of the impact of the dollar on inflation.

that put significant downward pressure on core inflation and the fed obviously has to lean against that to some degree. i do think a lot of this is overdone and the fact that the dollar has now come down a little bit is going to put some upper pressure on poor import prices. plaza did not work so they did move -- louvre. as you say we have really had quite a move. neil: we have, no question, and i think the fed -- people are talking about the second plaza. i do not think of it that way. i think it was more sort of a mutual coming of the mines with respect to the inflow of china on the global economy. tom: we could not have a plaza

accord. francine: i think it is a mona lisa economy. tom: how can you have a martini if the oak bar is closed? on foreign exchange in the plaza, neil dutta, in our next hour jeffrey rosenberg will join us. chief investment strategist for blackrock. we will talk particularly about your financial repression. we look out upon a beautiful food court that is not that bustling right now. over to the left is where the cheese it's are kept. bloomberg surveillance. ♪

francine: welcome back, you are watching surveillance.

i am francine lacqua in zurich, tom keene in new york. we have a little bit of banking stocks on the move and basic resources. tom: we are watching commodities with dollar strength this morning. theael mckee is focused on 47 fed speeches this week. they mentioning the toolbox? : the toolbox is starting to lose its ability to affect things and that is one of the reasons you can expect the fed to move sooner rather than later. qe isre saying they think beginning to lose its effectiveness and you can see it in this chart. it was supposed to raisesset prices and push down on interest rates. as long as the fed was increasing its balance sheet those things happened ever since the fed tapered and began to maintain a flat balance sheet,

now we are seeing stocks and interest rates are not going down. tom: the yellow line was yield and that was taken and price and the three lines dovetail perfectly. the fed is doing is just maintaining and is that good for the economy, is it adding anything to the economy? one of the arguments some of the fed officials are receptive to push downou do this, on interest rates so much and increase the wealth effect, you pull back spending. now you are not getting any bang for the buck. toolbox, i associate the term with an acclaimed said researcher in cyprus during their moment of crisis. define the toolbox. neil: i think the fed has a number of tools left to combat the next recession.

the first thing they can do is what they are doing right now, just take the threats of hikes off the table. tom: is that because mr. trump says we can print money? michael: it is in terms of helicopter money. it is one of the tools out there that you might eventually get to if necessary. a long way from their. francine: the fact that interest rates are not declining, that is fine by the fed but they are at the front end. michael: what they would like to see is the front and rise and slow the economy but they push -- put so much emphasis on the long and it is going to take a while to get higher. tom: francine lacqua is visiting the united states of exogenous shots, in zurich, switzerland. -- they hadcurrency a few currency. francine: if you look at the

u.k. point of view, a lot of the campaigners for brexit look at switzerland and say they are not doing too badly. we want to renegotiate some of the same deals that switzerland would be, question when you look at global concerns, is there a sense that it officials talk too much? is difficult trying to go for transparency when you are so data dependent. that is one of the concerns and you hear it expressed especially from people overseas where central banks do not talk as much, or talk with more of a centralized voice. when you talk to the fed bank presidents they say, we are just bringing the debate forward and expanding the debate and that is a good thing. tom: where is the level of optimism? i am thunderstruck in the last three days the number of researchers and pundits who are -- gloomy right

now. that is why neil dutta is on this morning for some optimism. michael: the rebound is underway in the second quarter, jobs are being created, inflation is rising. the markets are trading very strangely these days. volume on the s&p 500 is down 23% this year to date. it is kind of strange. the dangerous volatility. that is because matt miller stopped his daytrading. talk about inflation, isn't there still some uncertainty that we will keep running at the pace we are at and get hotter? inflation ford no so long that people are starting to question inflation dynamics but just because oil prices are up will help.

if we are getting wage increases now, which we are, that will put pressure on it as well. neil dutta is looking at this conversation and saying, why did i get up? did i get up for this? he will talk to us about the level of inflation that will cause angst. michael mckee and tom keene. he has written an important research note on the state of his chicago economy. from new york and zurich, bloomberg surveillance. ♪

francine: i am francine lacqua in zurich, tom keene is in new york. global stocks rising as oil prices climbed to $44 a barrel, base metals klein back some of monday's losses. the end declining. i want to show you some of the banking stocks. credit suisse is driving a lot of european banks higher. 13, futures advancing up down futures up 104. i want to call it a measured balance. i would note dollar strength,

94.15 on the dx why expressed by a flat euro and a much cheaper -- cheaper japanese yen. 50% of the world's largest international airline, that is emirates, expanded its fleet to take passengers through dubai. sign that german industrial production fell more in march, the second monthly decline. many facture and and construction declined. car sales rose in china for the eighth time and nine months. sales of cars, suvs, and multipurpose vehicles were up 6.4%. among the big sellers were general -- general motors and toyota.

that is our latest bloomberg business flash. some twitter feedback and i'm going to get that by saying that neil dutta is optimistic on the american labor economy. so many of our viewers and listeners flat out do not agree with that. explain renaissance macro research. power.xplain to me labor that is from our youth. nobody remembers labor power. neil: that is when the unemployment rate converges close to full employment, pushing wages higher. unambiguously that is happening. average hourly earnings are up three point 2% from the beginning of the year and that is pretty good evidence that the margin understates. tom: which way is slack in the economy going? neil: it is declining.

we see that in the u six labor rate. the most important thing is the composition of unemployment. you have more people voluntarily choosing to leave their jobs. that is -- that happens when they are confident about their prospects. tom: this is eci wages which includes benefits. the migration backup in the sweet spot. francine: when did expect the productivity gap to close them? neil: i think there is some evidence for this idea that we have a productivity boost at full employment so when you are at full employment labor costs are rising. you have some productivity growth. you could also make an argument that some of the productivity numbers are depressed because we have had this detonation in the mining and manufacturing sectors largely related to the commodity rout.

mining and manufacturing are two of the most productive sectors in the u.s. economy. francine: you do not sound too worried. you make it sound like it will solve itself at some point. is that the case? neil: i guess i am more optimistic than most. productivity worries me at the downside as we have had very weak investment growth unit there's more of an upside risk of inflation meant because compensation eight inflation plus productivity over time. risk is more of an upside to inflation in a low productivity environment. francine: is there something that could make productivity even worse? we talk about deflationary pressures, all this new technology. what if we were looking at the wrong numbers? a lot of economists have looked into the idea that there is a mesh measurement issue in productivity -- a miss

measurement issue in productivity. i think productivity is weak because the capital stock has not been growing in the united states and that is a big driver of productivity. over time we should get capital capitalg as the formation remains constant in aggregate hours flow so i think we are at that point and that should have a positive effect on productivity. the equitypan linked markets, do you assume and earnings rebound as real gdc's -- gdp sustains? neil: i think going into the second half of the year we are going to see these earnings revision ratios pick up. tom: is that what the graph says? neil: the graph is looking more at the technicals of the market but what i would say, the reason the market has been sort of soggy lately is basically

because the dollar has strengthened and oil prices have collapsed. that story is fading. plus, you have a pickup in real growth. look at the isn. it is a proximate for corporate profits so i am somewhat upbeat on the second half. is the gloom of the bear market and we are all going to die. this is 3m. minnesota manufacturing and mining. it is terrible, the world is coming to an end. francine: when our corporations going to put some of this capital to work? neil: when i get more optimistic on the output. the has not been a global as investors and corporations get more confident in the outlook, we should see a pickup. tom: this is the acclaimed bloomberg des screen.

that is five years dividend growth. that is done little -- double nominal jeep dp -- gdp, triple. power out of labor 40,000 people generating this kind of retirement? neil: you are getting it, tom. to me, there is just no doubt about it. there is still a business cycle. one thing i would say from an investment point of view, i like the industrials for a trade. the global economy is stabilizing. tom: neil, thank you so much. coming up, jeffrey rosenberg will put us in our place with mickey leavy and james steel. ♪

this morning is the commodity rally over? jeffrey rosenberg of blackrock on a strong dollar, perhaps weak

oil, and continued financial repression. hsbc on gold. and mickey leading on the draghi, cast of yellen, karen he, and kuroda. francine, i know you are there with credit squeeze. what is the backstory in ceric yak -- in zurich? francine: there are a number of different angles. this is one of the countries that economists say have put in negative rates. there is the negative angle. they have had to fight with extremely strong -- with an extremely strong swiss franc. then of course this is a country that is not within the eu, that had to renegotiate treaties, that is an extremely prosperous country, and the backbone as a

whole, the banking system, services, and that is the model that the programs it campaign in the year pay -- are looking at. tom: francine lacqua in zurich today. now to bloomberg first word news. here's vonnie quinn. vonnie: consumer prices in china keep rising, although they are still below the government target prices. the were up 3% in april, third straight monthly increase. stronger inflation may get china's central-bank reason to hold off on another reduction's main interest rate. the new leader of philippines was elected with 39% of the vote. presiding over an economy that grew 6% per year

over the last decade. canada -- 90% of fort mcmurray survived the fire. people fled, and they will not be allowed back for those two weeks. euro area finance ministers have come out with detailed plans. they are trying to get the international monetary fund to take part in a rescue. in the past, greece has said that it is possible. to the united kingdom, the trade employees willt face excessive working hours if the country leaves the european union. brexit supporters want to be timeto cap working projections. global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world, i am vonnie quinn. tom: a quick data check. equities, bonds, currencies, commodities.

up, up we go. futures up 11, dow futures up 96. yields churn. the euro fractionally weaker, the yen much weaker. 109.17. the 109.18 with dollar strength. francine? i am looking at some of the european banks, and of course i am here in ceric -- in zurich. i'm here in prices are climbing toward $44 a barrel of oil. metals clawing back some of the losses from yesterday. and the finance minister says they are -- tom: let's look at one of the

great indicators, the canary in the iron ore mine. this is the vaunted commodity rally. looking back a good seven years, eight years back. here is that decline, china on its back. there is the rally. we have not rolled over yet. he does there is so much gloom out there within punditry, one of our themes this morning, our guest host this hour to synthesize all this, as he does so well from blackrock, the chief investment strategist for headaches, jeffrey rosenberg. what is your biggest headache now? jeffrey go did you invite me on because of the gloom? tom: we had neil dutta on optimism. i think you can synthesize what is going on, given all the gloom research notes. the world is coming to an end, did you not know that?

jeff: perhaps people are getting a little bit gloomy, but what is really going on is you are starting to see a bit of a shift from the mid-february recovery, and a lot of that was fueled by a weakening of the dollar, pulling back from bad expectations. and we are getting to shift that. a lot of people are dismissing the economy getting week because of the headlines. the problem is that people get more optimistic on the u.s. economy, that means that you have to bring the fed back in play. the financial markets do not like the idea of the fed raising interest rates because of the impact. tom: it field is price and inflation is directly linked to yield, are you concerned about high-yield? it is not there. inflation is not there, is it? jeffrey: inflation is not the worry. the worry is deflation. deflation is a much worse outcome for financial markets than inflation. we should hope that we create

some inflation from a global perspective, it is that will keep us out of the next credit cycle and keep us out of financial market conditions tightening. it is not the inflationary side, it is the deflationary side. that is what worries markets. that is what you're collapsing commodity price chart is about. tom: the important idea of an now theresta -- maybe are deflationistas? jeffrey: there are. the market is concerned about falling prices or the inability to raise prices. that is what japan is all about. that is why we are having conversations about negative interest rates and helicopter money. that is what you have to resort to you when you cannot create inflation. francine: are the central banks powerless when it comes to fighting deflation? they have thrown a lot at it, and it is not really going anywhere.

the specter of deflation is there. jeffrey: they are not powerless, but you have heard janet talk about the asymmetry. they feel they have more tools to do with inflation than they have to deal with deflation, and the tools we have to do with deflation our new tools, and we do not know how well they work. they had confidence channel impact that can undermine their efficacy. tom: within the efficacy of every retiree out there starving, bring out the five-year chart. i was not aware of this. forget about 10-year. go to the five-year. this is back not to world war ii but really back well into the 1950's. this is the average five-year inflation adjusted to yield back when we were happy. the red line is the average year of that dutiful period, and down we go into financial repression. jeff rosenberg, when we -- when do we get back to the redline?

jeff: it is not clear we will ever get back to the redline. that is the cover station of growth terms are lower, savings are higher, the demographic shift, and maybe the redline is no longer the normal level or the equilibrium or the neutral level. maybe zero is that right level. that is a consequence of this low growth environment. until we see some fundamental changes with respect to where we can get to growth, you will not have interest rates at a real basis before inflation getting back to that 2% level. francine: where -- vonnie: where are we seeing the major capital flows? jeff: the issue is in this low interest rate environment, where can you find yield? we have been in this environment of reaching for yield, and as long as central banks are backstopping the risk in terms of accommodated monetary policy, seeing this movement out the

risk curve. tom: the ultimate gloom is that the party is going to stop. the central banks will stop, as you beautifully put it, back stopping. do you see any indication they will stop doing what they are doing? jeff: i do not see any indication they will stop doing what they are doing. everything has been the ops this -- everything has been the opposite. we saw from the pboc yesterday -- not from the pboc, but from the authoritative persons speak for policy change in china, perhaps they are not going to go forward on credit growth as fast as they have been, and maybe we will see a pullback from there. otherwise, the rest of the world, the sign is they are going to continue to press forward with unconventional monetary policy. tom: we could do this for six hours this morning. i have never seen such a jumble of nuance, tactical, strategic,

and theoretical jumble, a mess of it, if you will. with jeff rosenberg of blackrock. we are thrilled to bring you later this hour, mickey leavy of berenberg capital markets. we are going to talk on central-bank theory. it does not get better than that. "bloomberg surveillance." ♪

tom: good morning, everyone. from zurich and new york, this is "bloomberg surveillance." right now to our bloomberg

business flash in new york, here is vonnie quinn. vonnie: the retailer's springtime comeback has not materialized. gap fell 7% in april. old navy did poorly too. pandora is rising the most in 15 months after boosting his forecast. first quarter earnings beat expectations. pandora sales were up 35%. nokia came up short in its first combiningreport after without the television. the company missed estimates her by phone carrier spending, less on wireless networks. -- by phone carrier spending less on wireless networks. that is the bloomberg business flash. francine: thank you so much. i am here in zurich, where i spoke earlier today with the credit suisse ceo. credit suisse reports

first-quarter earnings today. we have a loss on the quarter, but it was a lot smaller than we had expected. currently they are focusing on cost cuts. he unveiled the strategy in november, then had to tweak it and come up with a much stronger strategy in march, especially to unwind or at least to cut down on the investment bank a little bit more than expected. today i asked him about volatility, about liquidity in the markets, and whether he thought the worst was over. have a listen. >> altogether, they generated one billion swiss franc of profit this quarter. that is a big number. i do not think we will get worse conditions than in q1. we are on a 4 billion trajectory. we had a 6.5 billion 2018 target. that does not seem so crazy anymore. francine: the strategy is very clear. he wants to focus on wealth management in asia. a lot of analysts are asking

because --is lagging whatever happens, it is clear credit suisse wants to be present in the emerging markets. they want to be one of the go-two things in that region, in asia but also china. i asked him about whether he was still optimistic about the prospects for china. idjane: people going to the hospital and getting good quality health care, going to cinemas, those sectors are really growing. ore, we know traditionally -- what people do not see enough serviceow dynamic the sector is. francine: given all of this, the share price of credit suisse getting some 6%. these are not seller results, better thane

economists and analysts were expecting, and it seems everything is on track. now it is about executing that new strategy. tom: thank you so much. jeffrey rosenberg with us from black rock. it is the singular theme of 2015 and continues this year, the idea of u.s. banks clearing and moving on the european banks that just cannot clear their problems. why is that, and what will they do in the next three quarters to fix it? jeff: there has been a long overhang from the global financial crisis. you go back to 2009, and the interventions we had in the united states, it was to fix the capital problem and the bad asset problem. we did it very aggressively. in europe they were never as aggressive about it, and that legacy is still with us. we still have those bad banking problems in terms of legacy assets and lack of capital. the improvement in capital in european banks did not take the same form as we saw in the u.s., and that has been holding back their bank. call for the major

banks, that is not your job at blackrock. where do we see a cash call for the european banks' share dilution for their shareholders. that will be one of their themes into the second quarter, particularly if they do not the cup. -- if they do not pick up. 17,705. from zurich, london, new york, "bloomberg surveillance." ♪

tom: it is a good and beautiful

"bloomberg surveillance." jeffrey rosenberg is with us from black rock, and mickey levy from berenberg capital markets joins me now. he is making a storm of news in london. in the telegraph, come on over here. peter spence and mickey levy on clinton and trump. , is donald trump to the left of hillary clinton on a lot of economic policy? is donald trump keynesian in disguise? mickey: we do not know. tom: that is a good answer. expand on that. mickey: so donald trump actually has a platform, if you ignore everything he says and just go to his website, he has a platform of lower taxes and broader base for both corporate and individual income tax, and

he has some announced spending cuts, but there are so many blanks to his platform you cannot make sense of it. when he talks, it is hard to make sense of it. once again, clinton, her whole platform, i can tell, was written by the washington establishment. to washington standards, even though it is way out there. tom: do you suggest within your reading of right-left history, that she will move to the middle toward a convention and give us an economic platform more centrists come september or october? on several issues or she will move toward the center. but on basic issues she will not move toward the center. example, when corporate taxes, on some of her large spending initiatives, on her tax policy for capital gains, i do not think she will.

on the other hand, donald trump, i do not expect to hear any more details in the next four months as they bash each other, but should he become elected president, he would have to fill in all the blanks in his platform because there are just a lot of blanks. francine: most of the commentary -- vonnie: most of the commentary you have heard so far is from the premise that debt will skyrocket if donald trump becomes president. do we know that? mickey: know, we don't. in his official platform, he proposed several big spending increases, particularly for veterans and their access to health care. but then on spending, on spending he has a lot of bookmarks for spending savings, there aren taxes --

just too many blanks in his official platform to make it all add up. lot: you have talked a about what we do not know. do you see any impact of this election already in what is happening in the u.s. economy? mickey: great question. the answer, i feel -- impact in having an the economy, and yes, it is already having an impact on capital markets. for the economy, over the last six years, the weak link in the economy has been business investment. if a business is on the fence about whether to expand or not, everything going on is making this shy away, so -- tom: let's tie together our 5:00 hour in new york without 6:00 hour. neil dutta talks about a return

to labor power. do you see within the jobs report, within the larger at -- within the larger macro economics of the nation that labor can catch it did? -- can catch a bid? mickey: not really. i would like to see it. the reason why wages are low is productivity is low. and a lot these new government mandated expenses on businesses -- tom: we are starting to see that with the affordable care act with pricing. mickey: are being passed on. wage index,the eci wages and benefits, is that mostly benefit centric right now, the lift that we are seeing? mickey: no, you are seeing higher wages if you disaggregate them. but given the unemployment rate being all the way down to 5%, everybody, including our friends at the federal reserve, would have expected more of an

increase in wages at this point. , and jeffevy rosenberg with us this morning, asking better questions than me. we continue this discussion, an important thought from mickey levy on the nation's economy. on bloomberg radio this morning, he has had back-to-back days of scathing notes about washington's establishment, particularly the challenges of the grand old party. greg valliere. the clouds are finally removed. after 32 days of clouds, sunshine in new york. "bloomberg surveillance." ♪

francine: this is "bloomberg surveillance." zurich,ncine lacqua in tom keene is in new york. if you look at the msci world

index, it is actually climbing, on the back of oil prices. base metals are also climbing back from the losses we saw yesterday. the end declining after the finance minister says they have scope to intervene. banks are pushing the european stocks higher. tom: six days of the in reversal, stronger yen to a finally weaker yen. still a long way to go to abenomics. , 1.03.ures a stronger dollar this morning. we need to get to our bloomberg first word news with vonnie quinn. vonnie: a reversal in the middle brazilnight with possible impeachment process, putting it back on track. -- with brazil's impeachment process, putting it back on track. dilma rousseff is accused of illegally using safe banks to

plug the hole in the budget. the u.s. conga's capacity bill to help puerto rico with a $70 billion of debt by july 1. create a control board to improve puerto rico's spending and to restructure its debt. bank defaulted on a $370 million payment. california may lift a mandatory conservation -- speaking of the golden state, nba star seth curry -- steph curry is back. from a strained knee, with a record 17 point in overtime. his team takes a three games to one lead in the semifinals.

golden state could win the series tomorrow night. global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world, i am vonnie quinn. there is your productivity right there. good, he guy is so will single-handedly change the lines, where they have to move the three-point line. he is doing better than good. basketball having a golden year, to say the least. jeffrey rosenberg with us from blackrock. and from berenberg capital markets, mickey levy, who has contributed so much. here is a levy quote. bring up the quote, if you would right now. tom: the backdrop of this is 1973, carl bruner and alan meltzer got so fed up. they set up a shadow open market

convict the -- shadow open market committee. what is the critique right now of traditional, orthodox economy at the fed? mickey: the set is still using the same model. that is, as long as inflation is low or inflationary expectations are well anchored, more and more stimulus and lower bond yields stimulate. in reality, it has not worked in the last six years, but they keep on -- tom: they keep on doing it. i do not want to get into a big debate about helicopter money. i know you are against helicopter money. what is the likelihood, dr. levy, of helicopter money? mickey: i do not think it is in the cards. the fed has done as much as they can do. there are a lot of nonmonetary factors that are constraining both aggregate demand and productive capacity.

the fed has begun to allude to that, and they have set the marginal benefit of tom: more and more stimulus is -- .e have eight charts to show here is five-your forwards. then you look at the dots chart, market from the fed -- then you look at the dots chart, miles from the. vigilantes or the fed. jeff: the market has been right. has been overly optimistic about the impact of its policies to generate the kind of growth the fed has been forecasting. the underlying forecasts have been wrong, which is why you have had this gap that you were showing on the bloomberg terminal. tom: if you have a bloomberg in on ther, keep your hands wheel. this is the comedy dot.

here is the euro, march. june, watch the red line. it jumps around. december. and then in march, the marches of the little angie's -- the march of the vigilantes is in charge. gap between the market and the green line -- the fed has been having to push back on its forecast for growth because they have not delivered. tom: let's go to zurich, switzerland, where there are no dots. francine: on the dot plot, one of the things that you hear over and over again is that we should ditch the dot plot. we spoke to charlie evans yesterday of the fed, and he was saying look at the dots. mickey, do we just need to get -- do we just need to look at janet yellen's dots? mickey: you just hit it on the

head. one of the markets -- one of the reasons the markets will raise more gradually than it is projected, is that janet yellen emphasizes time and again her reticence to raise rates. everybody reads what she says, how she says it, and the markets made the better forecast. what is interesting is, the economy, history shows that if they actually raised rates gradually, even if they raised rates this year three or four times, you would still have negative real interest rates. history shows that will not have any impact on the economy. uncomfortable, unhealthy relationship between the fed and the markets. tom: dr. levy, thank you so much. coming up on bloomberg radio, continuing discussion about the american economy. it is nice to get out of new york. carl tannenbaum is from chicago. northern trust corp. chief .conomist

coming up, gold. ♪

francine: welcome back. you are watching "bloomberg surveillance." we're watching banking stocks, global currencies. tom keene is in new york. i cannot get away from you. i am trying to get away, but even here we have to talk about ice hockey because switzerland is playing in the next couple of hours in the ice hockey world championship in russia. i have to say, the feeling in zurich is one of excitement. tom: nobody cares for the nhl going on right now. the blues watching

and the dallas stars last night. let's go back to jeffrey rosenberg of blackrock. our theory here is the theory behind negative rates. is there a theory behind negative rates, or is it made up of the non-theory -- jeff: earlier in the show we looked at negative real rates. had negative rates in the theory for a long time. negative real rates helped to stimulate the economy because it makes borrowing attractive. what is happening in the zero interest rate environment is that you cannot get those rates anymore negative, so now to push it more negative, you have to get the nominal rate negative. that we have not seen before. in switzerland we saw that experiment and it has spread through the rest of the world. up 47his has been brought times in the last 46 days. the german yield staying lower, and this morning even lower as well.

work in ave rates more diverse, open economy, versus a switzerland or denmark? jeff: one of the issues with negative rates that we are particularly when we focus on germany, and we have the ecb with negative rates, the japan market with increasing negative interest rates, and those capital flows do not stay in those economies. they go to the rest of the world, and a lot of that impact is how the transmission, how the benefit to the real economy is expected to happen, which is through the currency. tom: here is the disinflation chart, the deflationistas. jeff likes a five-year space. this is five years, down we go, and the crack disinflation we have seen in the last three years. vonnie: and jeff would say there is a big oil impact. jeff: there is, particularly more recently.

deflationaryer theme that that chart is highlighting is really one of the reasons why we are talking about negative interest rates. policy -- your earlier question, tom, about what is the theory -- we are trying to generate economic growth and inflation. if lower interest rates hit the limit as zero, now we are discovering zero is not necessarily the floor. it isve some room, but not necessarily that effective. tom: let's go to zero, switzerland, where the bowtie on zurich,et's go to switzerland, where the bowtie -- francine: it is difficult to export a lot of the stuff here. jeffrey, when you look at sweden, we are talking about the ecb, a little bit about switzerland, sweden also has negative rates. so does denmark, trying to protect its currency's.

is there a way you can structure tierive rates, may be a system that japan tried out but the markets did not believe in. is there a way to structure it so it does not hurt the banks? jeff: that is exactly the right question, and that is why we have seen the impact from financial markets, whether or not negative interest rates are beneficial. your banking system is critical to getting credit going into your economy, so there has been a lot of unintended consequences . the tearing system that you talked about is about applying negative interest rates on differential levels, not necessarily having an impact on the banking system so negatively. it becomes clear that the direction to which negative interest rates is focused on is currency. there are limits to how well you can make the currency stimulate your economy because it gets into bigger by neighbor kinds of

policies. -- you arelly looking for domestic demand stimulus. you are not getting that out of the negative interest rate policies. francine: you're talking about the side effects, but is there an even bigger concern that even if we do not go further into negative territory, the fact that it is prolonged negate territory, the side effects of that are even worse than if you cut deeper? jeff: that's right, and particularly in europe what you saw last month from the ecb was pushing away from the focus on expanding into more negative interest rate policy. that, you saw expansion back into qe, so there is a debate as to what we will see coming out of the boj, whether they go more down the path of negative interest rates or more towards a path of traditional, nontraditional, or conventional, unconventional

policy in expanding the balance. tom: we are doing five hours of "bloomberg surveillance" on television and radio. there is a little bit of a dose of optimism as welker all of that devolves into what has been on fire. gold. absolutely of hsbc nailed the gold bull market call. there is a lot of "now what" in gold. ♪

tom: your yen report this morning, the forest report, the 109.678. the euro-swissie there, because francine is in europe. a stronger euro, weaker swissie as well. davidoomberg ," westin leads the charge. david: we will have more of withine lacqua went -- to jane 3m -- with

-- to 2200 printer will ask them how that squares with earnings we are seeing this quarter. we will also be talking about yield with private equity. ofhave the founding partner searchlight capital. we will ask him where he is putting his money. that is coming up on "bloomberg ." maybe there is a theory to gold. james steel's with hsbc, and he has been brilliant on that little blip over to the right. james steel has the tattoo somewhere on his body. it is inflation-adjusted gold back to eisenhower. bring up the chart again, please, the single best chart. there is next in -- there is nixon. up we go. and then the gold boom of the ,0's and the long deflation bear stearns nailing that

deflation. and then up we go. james steel, give us an update on gold. are we going to be peaky again, or will we turn higher? james: i think it will likely churn higher. we got up to $1300 level. there is quite a bit of resistance, not in the technical sense, but we have had big gains in etf's this year. they have leveled off. negativead high interest, so it will be difficult power much beyond that. tom: what is your message to gold bugs? james: the best thing for gold, rather than to look for depreciation on any one day or one month or year is that it is portfolio diversification value. it is not correlated to other assets. that is where its strength lies. as far as whether it goes up or

down soon, we are moderately bullish, but in the long-term it is the diversification argument that is the most powerful. it is an insurance policy. vonnie: what is the driver of gold prices at the moment? currencies, emerging-market weakness? james: it is a combination of dollar weakness up two very recently. the dollar bounce act, and -- the dollar bounced back, and negative interest rates. and the shift, the perceived shift in fed policy. the declines we had last year were predicated on maybe two rate rises last year. for this year, we got one last year, and we need to get two this year. having clawed back from 225 basis point rate rises this year. one we think will happen in september. that means the gold market will have to recalibrate because it has already declined on a series of rate rises that do not look as if they will materialize.

so a combination of perceived shift in fed policy, a recently weaker dollar this year, and some weakness in emerging markets. james, isn't this going to be the over -- the most ?vercrowded asset class everyone says buy gold and everyone will pile in. james: i would not personally complain about that, but it is something like 6% or thereabouts of the total financial markets, so it is relatively small. it can be historically volatile, but it is a barometer of not only the economic and financial markets but also the wider political and geopolitical financial markets. tom: let's bring in jeffrey rosenberg. jeff: one of the most important bests, back to the single chart, if you talk about the

real interest rate impact, that chart almost looks the same as the golden pack. tom: bring up that chart again, please. we pulled back a lot of expectations for the fed. let's just say that is wrong and we get some strengthening in terms of payroll, inflation, inflation expectations. what happens to gold of the market expectations for the fed are wrong and the fed does deliver more than what we are expecting this year? james: then i think the market will be under pressure. only and will be under pressure. below 1200, and say in extreme cases we get three or four rate rises this year and we go back to the recent weakness we saw last year. when we penetrate around 1100, that is when the physical market tends to respond. so we usually get a good bounce in chinese and indian demand, which between the two of them, occupy around 60%, 65% of the

gold demand around the world. tom: if you get that instability, but what is fascinating here, we remember the size back -- the seismic -- mr. steel's colleague -- if you get to steve major's world, what does gold do? james: it may be volatile, but on rallies above 1300, again, the physical market is going to come into play. we have seen very poor demand. tom: huge elasticity. these exactly, because relatively poor income economies, even the top 20%, which buy the bulk of gold in those countries, have fairly limited incomes. when you get particularly with the weakness in the rupee that you have seen, you get it out priced. tom: jeffrey rosenberg, let's rip up the script.

why are central banks buying gold in 2016? do you have any wisdom on this? jeff: i do not. part of the story has been this long path of diversification of bank holdings. so in terms of adding to that exposure -- have you met a gnome from zurich? james: as the private eye cover, "the gnomes of zurich." as far as central banks go, the reserve bank of india published a compelling paper on why emerging-market central banks in particular would buy gold. older gold purchases have come from emerging markets. my: let's go to france in quad. did you see any gnomes on the street this morning? plott's go to francine dot -- let's go to francine lacqua.

did you see any gnomes on the street this morning? francine: what did it take for gold to go lower? james: it is a fed shift policy to get more rather than fewer rate rises. rather than a stronger dollar. they would be key. that combination would press gold lower, particularly if we get a reduction in geopolitical tensions as well. and lower oil. bringingk you for sanity to our discussion with the theory of gold. james steel with hsbc. jeffrey rosenberg with blackrock. thank you to francine lacqua. we look forward to the interview in its entirety with the ceo. we -- to radio. good morning. ♪

david: cutting deep. credit suisse posted a second quarter loss but those to keep cutting loss. crisiss of stability in

-- in china continue to rise. nathan: walt disney and allergan report today. ♪ david: welcome to bloomberg go. i'm here with david -- i'm david westin. i'm here with jonathan ferro and amanda lang. manda: we had deutsche bank's .hief u.s. strategist plus searchlight capital will be with us on ways his private equity firm is finding opportunity in a low growth in the late environment. and we have a look at the markets. jonathan: