francine: the slowdown cycle, chinese data misses estimates. the ecb will continue to support the economy. ratio flirts with its highest rate. still far from its highs. certain uncertainty, carney defenses worrying about a brexit. this is "bloomberg surveillance." -- awe start a new word new week about china.

there is news out there. every nuance is interesting. we move on to the challenges of venezuela over the weekend. i would suggest you have in your lead, brexit, front and center. we will talk about the brexit dynamic over the weekend. francine: we have more research and survey saying we should do this or that. let's get to the first word news. in iraq, a series of attacks have killed at least 29 people. 14 died in the attack. a series of bombings killed 15 others. dozens more were wounded. it is the fifth straight day of attacks in or around baghdad. in saudi arabia, john kerry met with -- about conflicts. he is trying to shore up a

fragile truce in syria. there have been violations on both sides. discuss syrial again tomorrow with the russian foreign minister. the first time, joint military exercises will be cooperative into -- missile launches from north korea. six weeks to go before the votes. the campaign over whether the u.k. should leave the european union is growing more caustic. invokes hitler's name, supporters arehe losing their compass. president obama took another shot at donald trump. he told graduating students ignorance is not a virtue in politics. trump not mention donald

by name, but criticize the campaign for anti-laden tech -- anti-intellectualism. tom says it is going to heat up. we go right on. they blend in with mr. trump making comments over the weekend. let's do a data check. it is quiet out there. euro weaker. the two sentence spread, i will get to it in a moment. 95 basis points. we begin to get near 50. the brazilian riau, weakness. it is important because we will talk about the finance minister in charge. story saying we should

remember the bond bust under his watch. this is the picture for what i am looking at. asia-pacific index rose from a one-month low. yen falling a touch. tom: the difference between the 10 year. we are getting back here. , going not seen this back to the slowdown. this is the recession. it gets your attention. francine: it is not sustainable. go for 10oom to years. -- you canp it takes

hope it expects to widen. this is my char, looking at s&p 500 index valuation, this is the fed model. you have earnings yields, the 10 year and white. is the spread between the s&p 500 and the u.s. 10 year yield. technique referred to as a fed model. let's get to our guest host. when you look at my chart, i am not sure what this tells us. central bank action is dampening how we look at risk or when you look at earnings, it has a leg up? what it was trying to

achieve, it is trying to take interest rates at the floor level and hoping that some of this will translate into a transfer. this will filter back to the real economy. francine: it is not being translated into anything concrete. >> i would argue you have tons and tons through holdings of equity. it might be why, when it comes to qe, the ecb tried different things.

the kind of wealth effects on which we can count in the u.s. is probably less powerful in europe. our german exports goods because they are good or are germany exports good because demand is bad? >> it is not bad at all. the problem germany has at the moment is how they will react to fact that the demand for

german goods is not great at the moment. corporatereaction of germany to this is to cut costs further. this may reflect slow wage growth. it is modest related to what we had last year. it means we are not going to get any kind of inflation acceleration, even coming from germany. tom: within all of this germany being a

good citizen or are they worried about the euro and do seeing exports? slowdowny is trying to . it is clear they don't want things to go to fast. , probablya warning any ideasrther away of debt neutralization. theyare clearly feeling a limiteddragged into transfer unit and they are not comfortable with that. francine: they said we just need to give them a little bit of time. how do you look at italian banks resurfacing?

>> it we were not comfortable with that. it was coming back very badly. when it reflects is we do not have enough neutralization on the banking issue. italians are dealing with their banks as a mutual is asian. they are trying to get the strong banks. for now, there is no banking unit working through. it is not about trying to revive lending. it is trying to protect the weaker link. tom: we will continue. an important interview with tim o'brien on mr. from. coming up, one of our scenes of

we.ck and all -- shock and a robert mellman with an exceptional note. ♪

francine: tom keene in new york. let's get to the bloomberg business flash. a recordoogle facing antitrust fine. is european commission planning to find google $3.4 billion. google will be banned from manipulating search results to

favor itself. norway's sovereign wealth fund wants to join a class action suit against volkswagen involving the fake emissions test. tosays it is acting safeguard its --. initialnsidering an public offering. the timing will depend on how its battle with uber plays out. that is our latest in business flash. isncine: the brexit debate long ranging. sam is our london business chief. great to have you on the program. we had an eventful weekend.

thate two months away from referendum. mark carney came out with comments saying be careful because brexit has an impact. pro-brexitersd by . this is a quote saying look, if we are going to answer the other policy,nts of monetary we have a duty to explain that tothe british people and parliament. he is getting flack because he seems to be weighing in politically. click that would be his argument. that is what you saw a reiterated yesterday.

they are saying you should reside. >> i am amazed at how little airtime the pro-brexit people get. what is going on? are they not getting their message out? them? media blocking what is the back story on the lack of the messaging by the pro-brexit people? >> you have two separate arguments. are going to keep pounding on what it means to your pocketbook, your chance for employment. on the other side, you're looking at political leadership.

francine: the rules mean they need to get 50% of their time. if we did leave the eu, it cuts red tape and makes the u.k. more .ompetitive >> those critical of the eu, brussels has tied them up in rules and regulations. particularly those who do not enjoy the trade benefits. tom: a couple of articles in the telegraph. where will this debate go over the next two weeks?

it is not about math, who is going to win or lose this. where does it go? >> we have seen the hitler button pressed over the weekend. you are going to continue to see the camps pursue what they think is the best argument. david cameron decided it is about the economy and you will see that. he is accused of running a project fear. he used it as the best argument. people are worried about income and job prospects. that is the one card he is going to play. six weeks out, on the day, it will be a gut choice for a lot of british people. how you can shape that is anyone's question. tom: we will bring you back. simon kennedy getting us started on a week of brexit with

bloomberg news in london. coming up, a conversation for the under secretary for international chain -- international trade. we will talk about the spirit of trade and possibly the death of tpp. ♪

francine: we talk about the fed and currencies. tom keene is in new york.

gilles, when you look at the dollar, some better than expected consumer spending. investors can shift their view on what the fed does next. things i don't think will shift quickly. the last two or three months, it is consistent with a prudent fed. i do not think things will change. they were counting on a much more hawkish fed. want -- from weaker currency. they have been trying to move away from this focus on the currency, which was apparent last year. has different

thresholds. as long as we are there, the ecb can feel fairly comfortable. it is something that is not playing in their camp. tom: let me introduce a chart we are going to use. the wake-up call last week. the white line as amazon, redline is macy's. they are in sync and something changes two years ago. having a little to do that. i am sure you are seeing that in europe, the new consumer, the new consumption, the new retail. will there be a consumer spirit in europe? there already is. it is one of the things that has changed. in most countries, it is a contribution to growth.

contribution from trade is neutral the negative. investment is not ready to take the lead. in many cases, it is happening. the key is when you look at the --son why we have domestic doing ok, most cases you would find it is a reflection of a fiscal push. spending is doing well because there is a better sentiment in europe. in most cases, the driving forces because we moved to a fiscal --. the thing that we will monitor for the remainder of the year is whether or not we have the means fiscalinue this relaxation. there is no other driving force for us. tom: thank you. a great briefing for the morning. friday was as, change in retail in america. how lousy retail

sales appear to be when you look at department stores and how sales are when you look at the data. francine: it is intuitive. if you look at the way we shop, it makes sense, but you overlay the with the risk of economy and it is a challenge for janet yellen. coming up, the current cfo for the world bank. catch that interview at 4:00 p.m. in new york, 9:00 p.m. in london. ♪

tom: oil at $50 per barrel. jorgen writing up this

morning on $50 per barrel. we're not like there yet, but we are watching. francine: all about nigeria. tom: maybe it is all about nigeria, you know more than i do, but $50 is not between dollars. first word news. vonnie: hillary clinton will have a job for her husband. in charge of revitalizing the economy. donald trump says if he is elected president, he will likely have a very good all not likely- have a very good relationship with david cameron. he called his plan to ban the visit. trying,ts have been

it wasing to evidence -- revealed scores of attempted attacks on bus lines, airlines in the u.s. and europe. greater manchester called an incident at a game of fiasco. suspiciouson -- a package was found. .t turns out it was not a bomb speaking of soccer, no one will be cheering harder against ludlow.then the ceo tells bloomberg that they lose $1.4 million for every game that england wins. vonnie quinn.

tom: francine is betting on whether or not i will screw up bloomberg every morning. thatine: we are betting on shirt. tom: this is lost in translation for our international audience. the president is appealing to rural america. they will split firewood in kentucky if the vote does not go well. the president and secretary clinton are going to split firewood in appellation. look at that shirt. francine: you know what, it is a very powerful message. i was looking at the papers over the weekend. bernie sanders came out with a new campaign and basically if accusing, like any art, that hillary clinton is out of touch. it --s those doing kissed

his bit to show he is in touch with the american public. tom: he looks like kenny logins. francine: he looks american. tom: he looks like he is going to launch into johnny cash, or something. francine: fresh data out of china. the april readings on retail. bloomberg'shis bit to show he ih with the american public. tom: he looks like kenny logins. monthly gdp tracker shows that china's growth has slowed. let's get to the head of asia research. great to have you on the program. and you look at china, it is not really playing out on the markets. a worse than expected trio of data. >> i think this has to be taken into the context of one month ago. the ppi trends have been the

best we have seen since 2008. industrial profits are showing the best trends in two years. there is conflicting data. the picture is opaque. we try to look through the boom and look at things like apparent consumption of commodities. they seem to be robust. francine: your big take away is there will be tom's along the road, volatility, but actually, in china we trust. >> there is a time when significant change is required. we're still looking for reforms to come through. the main question is whether they can deal with the slowdown that will inevitably come in china. the northern trust securities, we believe they can. the most liquid central-bank in the world. they have significant firepower behind them to deal with the bumps on the road. tom: you do with they do in chicago -- you really deal with

the minutia. that's take up one of your -- of your charts. this is china's ppi. i always look at food inflation in china. tell us about the business space and china. >> this is usually important because the diversions we have seen over the last five plus years has held up capacity in china. it is the industrial sector versus the demand environment. the strength we have seen has been a supply-side strength. as you rightly noted, it was on food inflation, pork, and vegetables. on the other hand, ppi, the industrial sector, the trend we are seeing is showing the industrial sector is becoming

slightly more profitable on the margins. at the margin, the outlook looks to be improving. part of it has to do with oil prices. tom: let's summarize that with the understanding that they will completely clear the old industry space and bring a new one in. how did they migrate from a debt induced space now over whatever the new is? >> that is difficult. i think the market is struggling -- for the last 10 years, we have been looking at china as a cyclical story. in the think is we are midst of a secular long-term change program. they may not be able to do it. at the margin, we're seeing tertiary gdp taking up a greater portion of gdp and primary sectors combined. that is not yet coming down into consumption. there are mechanisms in place to

cause this rebounding to happen. we also have to remember, this is the largest most liquid central-bank in the world. coveragerop the ratios, they have enough cash right now to cover five times mpl's than peels -- being reported. francine: this is a huge transition. it comes down to whether the authorities can manage it .ithout they crises or risks should we be confident that china can get through this ok? >> from a very selfish point of view, look at china, what matters to us is what kind of traitor do with them. the improvements we had the beginning of the year was a

reflection of a push. they probably can keep things together. the problem is we have gdp growth at 6.5%, but chinese imports are falling. problem for us. we have a disconnect between gdp data and imports falling. already, in the world economy, we have negative traction from china. that is the reality. francine: thank you so much for being on with us today. douglas stays with us and we will be talking about oil next. this is the data we are looking at. we have a lot of european markets closed. overall stocks, downside. crude oil and nigeria, goldman sachs admitting the market is

rebounding quicker than they thought. ♪

of: it will darken the door our world headquarters. we are thrilled, in the next hour, to bring you the smartest guy on the block on oil with a major public policy resume. eger will be here in the next hour. we need a briefing to get up to speed. we do that with michael mckee. what you have on oil? michael: you remember the man camps of north dakota? people flocking to these states

for jobs. good pay. all of that is over. oil prices plunged, people got laid off, and the legacy is left. on auto loans.7% produceginia does not oil, but the fracking boom lowered the price of natural gas so much. you see results in west virginia as well. the national rate is only under 7% since last year. remember home foreclosures? take a look at this other chart. after plunging for years, home foreclosures starting to rise again in north dakota. a real problem. tom: you know this utter than i do -- better than i do. has to analysis.

one is a better american economy when you ask out -- x out west virginia, north dakota, and texas. michael: texas at least has some offsets. north dakota, a real problem right now. for chile, for the national economy, a very small part. francine: how does this for in -- i love hearing about north dakota. goldman sachs basically admitting today that the oil market is rebounding a lot quicker than they thought. how much does this have to do with the flaring up in nigeria? does it mean we are still fixed in the $40-$50? michael: that is the interesting question that no one seems to know the answer to. i have talked to some analysts who say we are producing more oil than we need, but it is a bet that that could slow down

very quickly. the question is how quickly chuckled to be open new wells or drill the ones that are open and then cap chacko it seems to be a question that no one knows the answer to. francine: thank you so much. douglas, when you look at the oil price -- i am reading from the terminal. they cheering volumes cut by 30%. also significant in china. what does this tell us about the supply and demand balance and oil? ituglas: the first point -- is either a supply and demand issue or a u.s. dollar and market forces kind of issue. over the last six months, oil has been property for global risk. having said that, when talking about supply and demand, the supply side has been driving the price over the long-term rather

than demand. demand has held relatively stable when we look at volumes. i think one of the trends happening is in the short and medium term, they are trying to build up stockpiles. the utilize twice the amount of oil per gdp. francine: there should not be such a strong correlation with the markets, right? is that fair? i think that is unfair. at any point in history -- this is a commodity that has something like five times the amount of open interest rather than the real demand. francine: what is different? ,ouglas: in different periods different things drive the oil prices. i think we are now approaching a period when oil related supply and demand will drive the forces. partly because of supply

factors. the implications for china, for the ppi, are very positive. tom: if i do my math right, 5% growth in china's 20% of over -- seven years. that is way more than developed economies. you just assumed that china keeps gaining? douglas: not at all. there are arguments each way of what the true growth rate is. we are interested in the trend. is it getting worse or not. tha thewe look at, be it commodity demand that talked about earlier, or gdp downgrades that we see from the imf and at least have have come from emerging markets. people expect that to come from china. china has had no gdp downgrades.

in fact, they have had upgrades. we are relatively sanguine about the short-term trends in gdp right now. as you mentioned, in a world that is short growth, china is looking ok. the government bond deals are the highest of any g 10 pat nations. tom: we will have to leave it there. thank you so much from london. coming up in the next hour, this is must watch. philip verleger. ♪

tom: good morning, everyone. bloomberg surveillance from london. let's get to the bloomberg business flash. home prices in the united kingdom rebounding this month. $442,000 improvement. the prices jumped by 6%.

shareholders will not like corporate america's latest attempt to offset the slump in profits. months,ast four announced fallbacks have fallen by 38%. that is the biggest decline since 2009. france once to reclassify uber drivers as employees. to legal cases have been filed. if they are classified as employees, that would force the employee pay -- employer to pay millions into the french welfare system. tom: thank you so much. of bloomberg

gadfly is a huge success for bloomberg. mr. o'brien, out of georgetown. he is the actual only person that knows donald trump. he has written a book on truck nation, "the art of being donald." he has raised a firestorm over the last week with two essays on mr. trump. congratulations on the impact. did you expect it? you never know. i have written about four collins, and that one blowout. tom: did he respond to your? timothy: he didn't. he has responded in the past, but not anymore. tom: where is our discourse going to be like the second week of october, after the conventions? will we continue down this path of tragedy in our discourse?

timothy: i think this will be a very brutal campaign. we know the clintons know how to play hardball. they have for over 30 years in politics. they are smart about what you need to do in elections. i think trump is walking into that. we have already see how he plays the game. i think it will be of little campaign. tom: do you see, within your expertise, and effect by his new cameras on the messaging? is that the donald as usual chuckl? timothy: he has no handlers. he does not listen to other people. he will bounce ideas off other people, but at the end of the day, the only person he listens to it himself. francine: how much of an advantage does he have over democrats? timothy: i think being anointed before your competition gives you a chance to organize and get moving sooner.

i think hillary clinton is also recognized already as the presumptive democratic nominee. i think both of them are sharpening their swords with each other in mind already. francine: how much does the vice president for donald trump -- how much can it help him win this? timothy: it will be interesting who he picks. he is certainly week with certain demographics. he will be week with certain voters of color, with women. those may be things he takes into mind when he anoints the vice president. i think he will have a pretty small list of people who want to occupy that office. tom: over the weekend, it sounds like he was week with the republican establishment. let's go to a quote here, where you aggregate people. it was said that he apparently

boosted his income by conflating business revenue with personal income. he does not respond to the assessment, but he could clear all of this up by releasing his tax return. francine: as you know, i have -- as you know, i have seen the tax return, but i cannot get into the specifics. i think there are a lot of things we can learn here. obviously, his income. we can get a sense of how much money he brings home. ly filed all of his private held businesses in a way that it is easy for him to confuse the

income. tom: basically taking losses and diminishes from business to adjust his income. you are not willing to say that? i am just trying to get you in trouble. we also think that the charitable giving -- he has made support for war veterans core part of his campaigning. there is not a lot of evidence of charitable giving. .om: thank you tim o'brien of bloomberg gadfly. watch for that this week. coming up in the next hour, eger on oil. ♪

tom: another monday, another boom day for internet retailing.

in this hour, on the american consumer. markets turn this morning. .50 oil beckons speaker ryan and mr. trump, and the rest of the gop, they must life after james madison. this is bloomberg surveillance. headquarters. in london.eene what an odd set of politics between brexit and the american president shall campaign. francine: odd politics, but look at oil. a lot of commodity rich currency. tom: i find what is interesting there is no one gaming $55 or $60 per oil. no one talking about higher and higher. right now on a monday, let's get to first word news. vonnie: thanks.

iraq, a series of attacks by the islamic state has killed at least 49. a series of bombings killed 15 more. dozens were wounded. it is the fifth day of attacks in or around baghdad. in saudi arabia, secretary of state john kerry about conflicts in syria, lebanon. syria againuss with russians for an minister. south korea, russia, and japan trainings next month. with six weeks to go before the vote, the campaign over whether the u.k. should leave the european union -- opponents say

that statement show anti-eu supporters are losing their moral compass. president obama took another shot at donald trump, this time, in a commencement address. he said that ignorance is not a virtue in politics. .e did not name trump by name global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. i am vonnie quinn. you have breaking news. tom: range resources. about 1200 employees. an oil deal. you will see a lot more of these. memorialources to buy resources. let me get through a smaller data check. very quiet markets. news driven. the euro, weaker over the last few days. on to the next screen.

brazilian real, ever stronger off the news of last week. crude raising to a six-month high. this is a supply disruption story in nigeria. tom: we will get to our guest here in a moment. under 100 asus points here. we are going down here. a lot of people say no. people nervous. we should see it widened out. tom: what you have quickly? vonnie: this is the s&p 500 violation told. what it shows us, in blue, the

index earning. stagnation has let price ratios -- if you look at it and judge it against bonds, stocks still seem cheap. tom: or some would say. one of the great notes of friday afternoon is issued by robert melvin. we will discuss the american consumer later in the hour. right now, we will discuss the state of janet yellen. it is wonderful to have you here. janet yellen's head has to be spe spinning. : i think we have to realize that june 15 is close. we only have one more employment report. we also have the brexit vote right after it. i think given the uncertainties about where the u.s. economy is

in questions about the global economy, and disappointment on wee april payroll report -- brexitking for july, if is a book that destabilizes markets. i think, in terms of what the fed needs now, it needs to things. it needs a sense that the economy continues to find its footing. is it really an other year before we are down and up? secondly, there's nothing going wrong in financial markets. is there slack in the is that a fiction of a new american economy? hard to know whether there is some slack or no slack. i think we could agree that there is quickly diminishing slack.

we are getting close to a labor market is tight. i think that is the point here. not whether or not the fed needs to be normal, but whether we continue to eat up slack, whether we see inflation continue at 2%, and whether the fed could therefore stay at .5. if we get those signals, i think the market will be wrong in pricing out the fed for the rest of this year. francine: what u.s. adjusting is basically the fed and janet yellen are being dictated to by financial markets. is that right tackle is she right to look have financial markets as a third market? bruce: i would not say she is being dictated. i think she's following the economy. we have had some financial volatility. if we are right that we end up

with a broadly stable financial environment and economy does return to a more normal growth rate, i think that will bring the fed back in, but not by june. you are expecting by july. how many rises can be economy handle this year? bruce: we think we will get to. if we are right about the economy and also the global economy, i think that is an important part of the story. i think the economy can handle two. tom: this is the love note from friday. i will not send it out, folks. we protect the copyright of our guest. note onthe anti-gloom wall street right now. jamie dimon calls you up and says, "we on the economy -- i'm kidding, we know he is not.

what to say to an anti-gloom person? bruce: he is in fact more optimistic than i think we are. ok forly, the economy is now. what we saw at the beginning of the year was misleading terms of where the trends are. the economy is still moving. the problems we have is with the underlying markets, profitability. there is medium-term concerned for that. for now, i do not think we should be worried about 2016. tom: what is so cool here is with rate rises, no one is talking about the economy. out thatt is pointed the difference between the slowness this year and last year is the q1 slowness was balanced with two other slow quarters. what would make you think that

the fed is able to move twice this year? even retail sales, some of that was healthier spending? bruce: one of the differences between this year and last year, we believe that inflation is rising. we also think the dollar has stopped rising. a global environment that is feeling less scary. if you get those three things together, this is the fed that doesn't feel it should move aggressively, but it feels they should start to come back to track to a one move per quarter pace. vonnie: apart from brexit, it feels a lot more stable out there. we had some pretty dire economic indicators from china, and yet, the market is stable this

morning. bruce: the market is stable at this point. i think the message outside of the u.s. is people got really scared. nothing went wrong in the first quarter. we do think the second quarter needs to see some wings go right. march was strong. is the message here, stabilization, maybe slight improvement. we need to watch what happens next. tom: friday was a shock on retail as well. we will touch on that coming up. this is what it is about. verleger onhilip oil. on national oil policy. a little bit of monday sarcasm. bloomberg surveillance. ♪

this is surveillance. we talk about oil, currencies. im in london. in new york. first, the bloomberg business flash. vonnie: talks will resume between unions representing thousands of workers. workers walked off the job one month ago. they say that verizon wants to freeze pensions and take layoffs -- make layouts easier. google is facing a record antitrust fine in europe. frome would be banned search results favoring itself. the company has not commented on the report. the oil glut has turned to a

deficit faster than goldman sachs anticipated. goldman has raised the crude forecast from $45 per barrel to $50 per barrel. tom has more on oil now. tom: this is a real treat. we are honored to bring you phillip verleger. this nationthat screwed up nafta. that shows the reach and scale ger inlip verle washington. let's bring up a chart on oil now. we have shown this many times. an approximation of real oil and inflation adjusted oil. just an approximation. this gets back to oil being cheap. where is the terminal value for oil?

philip: probably a round $30-$50 per barrel. as such the, what is happening is oil is the new corn. it is following the same pattern as corn has for years. it has become in the agricultural -- and agricultural product. the technology is bringing more and more oil out of the ground. technology week did not think about 30-40 years ago. tom: do we have an american energy policy? philip: i don't think we have one and we have never had one. i have been in washington working on this. policy sinceral the 1990's -- it is an economic policy. we do have them by mental policy to bring down omissions of methane, and so on.

the energy policy, we don't have it. tom: where is jp morgan on the price of oil? is there a disparity here? to say lower for longer? board i think we are on for that. there are a lot of temporary supply factors there. we think that oil will settle in the $40-$50 per barrel range. this is boring. francine? francine: when you look at the price of oil, inching towards $50, is this a significant level? we have seen a lot of disruptions in nigeria. goldman sachs said they did not expected to balance out so quickly. philip: i was watching the hour before when you are talking about the price being influenced by nigeria. there is also venezuela. no one talks about venezuela. in this way the has been the thece on the supply --

hidden force on the supply. cropder nigeria, a there'll. we will probably lose another 200,000-300,000 barrels per day. we get the numbers because the major companies are producing there. on themuela, we relied to tell us what production is. they don't. oil you work on how much they are processing at refineries and how much they are exporting, the numbers do not add to what they claim they are producing. their supply is going down as well. goldman sachs has come out with a higher price number. francine: it goes back to the main question. we have been trying to figure it out since the start of the year, whether it was a supply and demand disruption which meant as

a sagging of the oil price or something more fundamentally wrong with the economy. it means we should actually not look at the oil markets as a proxy of growth anymore. philip: that is correct. i don't think we should have ever looked at oil as a proxy for global economic growth. we are not able to get good natures being consumed or produced contemporaneously. tom: what is the lifting cost for oil? i talk with bloomberg intelligence about this all the time. what is the basic cost to get this stuff out of the ground? philip: probably $50-$20 per barrel. tom: that low? philip: what has happened is the technology of fracking is rising

costs down. ise you have drilled, it $50-$20 per barrel. companies will keep producing as they have financial problems. tom: we have much more to talk about. we will talk about the american consumer, the massive shift in retail dynamics. on bloomberg radio, the undersecretary for trade. futures, let's call it flat. good morning. ♪

tom: good morning, everyone. bloomberg surveillance. i am tom keene. we are pleased to bring you verlegerman and philip . investment has not been there in america. when does it light up? i don't think anytime soon. the big drag is profitability. in makes of concerned that we a new phase. it is hard to see investment picking up. if we are to get better growth, it is the consumer, production, some drag. tom: i am aware that exxon is .he size of an island nation they are down to 20 billion.

that is a huge issue of the challenges that exxon is having. somewhat of a leveling out. investment in oil is not coming back. it is not. for years, the oil majors were here in new york. mobile and exxon. they have moved and essentially become much smaller. they are looking at these projects, and the duration is too long. if prices go up, they know that smaller oil companies will consume fracking. it will probably never be able to recover funds in these huge projects. theou look at australia, or kazakhstan, those are projects that we will never see again. industry cannot afford to take

those sorts of risks. francine: doesn't mean we are seeing the next oil price hike or spike now because there has been so much cutting back on the upstream investments globally? philip: yes. we're seeing some thing of a spike because supply has been cut. prices will go up. then, supply will increase again. again, this is almost the agricultural model. .eople can pursue this it makes it very risky to go after these huge projects that the industry wants followed. can you bring his world over to your general world? like fracking, things move and click quicker than they used to? bruce: i think that is something

we have seen. people changing where they are producing. from the macro economy point of view, about energy investment, it has gone down so far. shares of overall the foot have gone down so far. anything that looks like price stabilization here probably means that drag will stay. i think the outlook is weak, but we will lose the drag that has been placed on the economy in the last few years. us.cine: stay with this is the picture of oil as we head to break. a six-month high. boosting some of the mining companies. the euro is down. ♪

francine: this is surveillance. it is a live pictures of capitol hill. fed,ed to talk about the

that's one of the main conversations we've been having and if they will be able to raise interest rates. let's get to the first word news. vonnie: speculation is ramping up about donald trump's running mate. gingrich said he would be interested. ben carson tells the washington post that sarah palin it, ted cruz, marco rubio are all on the list. ben carson is involved in the vice presidential search. hillary clinton will have a job for her husband. she says the former president will be in charge of revitalizing the economy. -- cited the economic success of his presidency. there was a security blunder at a manchester united game. ae stadium was evacuated as

suspicious package was postponed. it was a training device left inside the stadium after a security exercise. -- cruise shipp has left on its maiden voyage. daxony of the seas has 16 and 23 symington -- swimming pools. tom: i can't see kate winslet i can't see leonardo dicaprio. how many swimming pools does it have? vonnie: 23. tom: full disclosure. i don't get it. good jobs are created in france. on friday.appened thee used to walk down street to the bagel shop.

something happened. we're looking at the shift in the american consumer. this is amazing. amazon ands with macy's rolling over. i thought friday was a real seachange. brick-and-mortar retail is gloomy. buoyant? tom: we've had a week run. bruce: i think that was indicative where the consumer stance. i think we got a real message on friday that the consumer is ok. it was broad-based as you say. it wasn't just the internet retailers. it was looking reasonably good across the board. tom: do you have a good accountability of digital retail? bruce: you probably don't. we are getting better on that. the accounting does start to

look more normal as you go over time. i think the problem with the consumer is not the measurement overtime. it's been the measurement around the turn of the year. we've had these patterns were we've turned into the year and it's looked very weak. it's a bit frustrating as you are going through that. think we got that sense of release on friday when we start to see that pattern emerge again. vonnie: let's bring out the chart again. at the end of the day, e-commerce will win the day. we are looking at amazon and others going back to bricks and mortars. it's not one or the other. bruce: i agree. what's happened and what continues to happen is internet sales are becoming a more significant part of the wallet of the u.s. household. where that stabilizes, i am not

an expert on that or don't claim to be. we are having an important bricks and mortar part and it -- and increasingly important internet part. it's not as weak as the earlier data suggested. the consumer is doing ok, we got that on a friday. we see a 3% gain on real consumption. is that thanks to fed policy or that they have been holding off normalizing? bruce: i don't think the consumer everyone away. growth.umer average 30% it's about the swings. it ends up being a somewhat seasonal and it's been frustrating to track. i think we got to down beat on the consumer. oil is behaving like a true commodity. our oil consumers behaving like a true commodity? philip: yes.

the price elasticity is low for gasoline. consumers are buying more. i think the data overstate how much they are purchasing. there is a large 4% increase in gasoline consumption. sales look at the retail that came out friday and you can gasoline stations, sales were down 14%. that includes inside and outside of sales. sales areproduction -- consumption is up 2.5% right now. it's picking up. the economy is picking up in the weather is warming up. tom: this is way too much optimism on monday. how much was the consumer forced to spend? bruce: retail sales or were we don't get any information on health care. there has been a pattern over

the last year and a half for we have seen health care spending go up. adjust for that, health care spending has been going up on a volume basis. it's become more generally a bit more. keep in mind, what's happened over the last year or two is the consumer got a huge benefit from falling inflation. the prod picture on pricing has been to help consumer spending. we are starting to see the numbers pick up. that's going to be out this week. tom: go ahead. turnine: i was going to around and talk about one of the most important consumers, the ceos. what are they going to start spending their cash? bruce: we think that is warranted. we don't think profits are growing. the dollar matters for the u.s..

i think there is some opportunity if the economy picks up in the middle of the year to get better. what's interesting is to try to get the mix of spending versus hiring. we felt that hiring is going to hold up. the mix is that the corporate sector stays very weak. tom: have we lost our love affair with the auto? most kids in the urban space or not wanting cars and -- cars. philip: i think the answer is yes. we are seeing much less of it. deals,u look at the line they are moving into the city. they are looking to make the most of their lives rather than spending time stuck in traffic jams. we are still selling cars. the numbers are running at record levels. the hail economy is going down a little bit. it's nothing like when we were

young. the kids look at me and i have my porsche and they say why do you have that? what you have something more sufficient? rambler, i just took the chains off. up, we will ask about the ofhtness, the adjacency europe. from new york, bloomberg surveillance. ♪

francine: tom keene is in new york. currencies andat countries specifically. let's get to the bloomberg business flash. pilots and southwest airlines are unhappy with contract talks. the plane is scheduled to enter service next year. southwest maintains the plane does not have to be specifically named in any deal. chinese rival is looking into a public offering. invested $1 billion in it. the highest-paid female executive in the u.s. according to the bloomberg pay and dekes is the co-ceo of oracle. a $57 milliond

pay package. third was mary morrow with $36 million. that is the bloomberg is the/ area hopefully there is more to come. francine: the year before that there are more and more fight back against pig fat cat payouts. if you do a good job you're seen as one of the underdogs, people seem to leave you alone in the u.k. let's get on to china. we had a trio of data to disappointed a lot of economists today. industrials and production was weaker than expected. chief executive, i am

going to send you the question first. this could either take along nicely with a little volatility. they will manage this huge transition. volatility much along the way. are you confident they will manage this in an ok manner over the next five or 10 years? bruce: i don't have any confidence. i have confidence that they will get growth stabilized in 2016. april was a disappointing month in terms of the reports that you mentioned. they came after a march that was surprisingly strong. you see an economy that is stable to slightly firmer as we go through the second quarter of the year. we are disappointed in april was not stronger. we wanted to see more left. .t does raise questions the success in the policies you see in the new pipeline

investment project and the housing data, i think that's still tracking. francine: we should be confident in the shorter term because these packages and these policies will be kept in place? bruce: i think we have a commitment to get growth. i think they have signs and starting to work through the system. credit numbers are continuing to look good. we don't know how long they will deal with the tensions of overhangs and the real economy, the read -- need for reform. there is a lot of uncertainty and that's why am not trying to sit here and say i have a good sense of where china will be. tom: this is the chart we sure earlier. they are finally getting a leg up with some stability. you are a claim for your work aboutafta and your doubts trade agreements. what do we need with china?

what we basically need is an agreement that drops the tariffs, they are essentially gone now. agreement and participation of all the countries not to push one country the way china has done and limit the investment activity into china. china has grown. we allow them to increase exports and the key percent. we need better enforcement mechanisms and quicker enforcement mechanisms. we have not had that. if i were advising the next administration, i would be .ushing to speed the claim if you look at steel right now, which is front and center, the chinese have been pushing and

getting away with exporting much too heavily. tom: do you just assume it tpp is dead? bruce: pretty much. philip: it's dead. tom: one of these to have to win colorado. philip: it's not going to pass. in the u.k. and in europe, there has been some traction. even the french president was against it because it brings tainting to some of the local products. in japan, this is probably the most experimental, the most outside the box thinker. at the end of the day, can it work? bruce: i think the question is yes. i think it's going to be hard to get the company -- economy out of deflation.

think the real question is whether they've been working together. we had the rise in the tax that hurt us. we've had limited structural reform. i think corona has been to conscious. it looks like it's going to have inflation come back down in the underlying sense to zero. tom: thank you so much. wonderful to see you in new york. another company, pfizer is picking up. it's called anna corp.. it's based in blowout so, california -- palo alto, california. for $99 abuying them share in cash. the deal is valued at 5.2 billion dollars.

tom: there you go. fungus among us. something like that. we're going to come back with an important discussion on inflation in this nation. this is the focal point as chair yellen has much to balance. futures are a little bit rattled. there's a little to roll off on monday. stay with us. bloomberg surveillance. ♪

tom: it's never quite of a foreign exchange market. even on a quiet monday. it was showing the yen strength. that has turned back recently. a weaker riel. prancing? francine: coming up shortly, it's boomer go. what do you have going on? jonathan: credit growth slumps. the data follows. weak retail sales.

that's the macro story. we will talk about crude getting back to that six-month high. we will talk about that treasury curve. since 2007.rowest we mix in that hunger for yield. we will talk to pimco's head of credit. tom: thank you so much. it is not cost push. it's the single best chart. we showed this last week. when they really put this in the friday report they did not get this for me. they are smarter than i am. michigan expectations of inflation. it's not walter heller inflation. we've been very low. we're not looking for a serious

problem with the fed hit its target. we are looking at the fed seen numbers they feel more comfortable with. tom: is overshoot part of the policy? does she say we are going to overshoot? forget about the data and the actual progress. bruce: everything she talks about in terms of how she balances risk and how she thinks about the economy says they are willing to expect an overshoot. tom: i'm going to have a moment of silence. he nailed this years ago. francine: when you look at inflation, the u.s. may overshoot. what's going on elsewhere that the u.s. is doing right? i know it's wage growth. what can we look at the u.s. and replicate? bruce: the basic story is europe and japan have had it two or three recessions since the financial crisis.

the u.s. is had a steady stream of growth. theon't want to worry about growth. what's happened is we've been growing a little over two. that's been decent growth relative to the weak productivity performance. that onet's important of the real problems in the world we are going to have is the u.s. expansion which is getting tight and mature. that's a very different stage in their economic cycles. if it overshoots, does that mean we are looking at a policy mistake from the fed if they don't start normalizing? bruce: it's hard to know right now. i think it's reasonable after having had inflation so low for so long to let the labor market run and let inflation get a little bit higher. whether you couldn't control that are not as the key question. taking that risk, following that

path and recognizing the limits on how far it will let it run, it's not unreasonable. we will find out whether we can achieve that end how much risk we are taking in terms of following that path. francine: other officials have said it explicitly. how hot with a let inflation run and for how long? what impact would they need to see? bruce: i think the fed will probably tolerate underlying inflation until it gets to 2.5. i think you will see a difference in the reaction function. what's going to cause a more serious set of issues here, we have to wonder what the -- with the economy can get up that high. i think the fed has to do that. it's labor markets and the imbalances in the real economy. it's all the things we think about that signal the economy has problems. to say that willing

the first quarter slack is over? are we starting to see real growth? real growth of 2.5%. tom: thank you so much. way out front with the new terminal value for the american economy. tomorrow on the program, we are thrilled to bring you deutsche bank. what a great time to catch up. he is linking advertisers with facebook and google like nobody else. we're really looking forward to that. see you tomorrow and bloomberg television. ♪

mark: commodities grind higher. goldman sachs is the economy is coming back more quickly than they thought.

jonathan: data disappoints. billionaire investor is backing a group. welcome toid: bloomberg . we are going to have three full hours of you. it's great to have you here. we have some great guests with us today. to michael joins us on set discuss the hunt for yields.