francine: two for two, a fed rise in june is still possible. hike 2016.t to recession,ing a consumer spending leads to growth in japan. super forecasters say a 24% chance of brexit. not all banks in great -- agree. this is bloomberg surveillance. i am francine lacqua in london

with tom keene and new york. i know you are very focused on burberry and once again it is fed. tom: it is just interesting there is no news but the news there is is most fascinating. i know we are going to talk about japan and the oddity of their stagnation. it is exceptional to look at their data and the struggle they have for economic growth. francine: can consumer spending left gdp or is it just temporary because of that government release? let's get straight to the bloomberg first word news. >> call this one a split decision. bernie sanders one that democratic presidential primary in oregon and hillary clinton claims victory in kentucky, although hours after the polls call. it was too close to clinton is inching closer to the

number of delegates she needs and sanders is not giving up. mr. sanders: let me be as clear as i can be. we are in until the last ballot is cast. democratic primaries in california, new jersey, and four other states on june 7. a group of so-called super forecasters have jumped into the brexit debate, saying there is only a 24% chance the u.k. will choose to leave the european union. that suggests there is less uncertainty over the results then opinion polls are signaling. prime minister cameron outlines a program of social reforms. as centerpiece is to change the way prisons are run. he is trying to heal the split and his conservative party caused by the referendum. spain's caretaker government is .lmost burying the eu's budget

eu commissioners are discussing what to do after spain breached its budget limits for the fourth year in a row. that could lead to a fine. minister mayime not be penalized and the eu may decide not to do anything while it prepares for its second election in six months. the japanese economy has avoided a recession. gdp rose at a rate of 1.7% in the first quarter. business spending fell but increases in government and consumer spending. news 24 is a day powered by our 2400 journalists in more news bureaus around the world. a general churn with some interest in fx, crude oil with a little bit of a left overnight. we will get to that. the euro weakens with dollar

strength decisive. 15.5 zero among some of the angst yesterday. brent was $55 and change earlier. yuan and theaker allar index out at 95 shows beginning to get into the range of dollar strength we saw a number of weeks ago. francine: i picked out much the same assets. i want to show you japan and the japanese yen because there is a lot of concern that since they did not see a recession government kuroda will hold off from offering more stimulus. i want to show you the south african rand. , but alsoas expected south korea sinking to their lowest level in two months. there are allegations against the finance minister in south

africa. tom: some of the e.m. challenges we have seen and interviews in the last couple of days. looking at the emerging markets, china. over theuan strength last 11 or 12 years. if i bring it down, you can see this recent leg up and i'm not sure this is what the government wants in beijing. depreciation does a lot and we do not see the role over here. that pretty much gets out to a dollar-yuan of seven and we have not seen it yet. francine: i have picked up something that you have been weighing. yellow premiums of investors, 10 year u.s. treasuries and 2-year note is the least since 2007 and you can see that really going lower in the last couple of days . let's go to stephanie flanders,

market strategist for europe at jc -- jpmorgan asset-management. let's keep it off with japan, stephanie. when you look at the fact that japan avoided a recession, it is unclear how we should read it. it is all driven by consumer spending. is there a scope for governor kuroda to do more? stephanie: i think they have to focus not very much on the short-term dynamics but on this commitment to the inflation of 2% they have had that was part of the big challenge that was supposed be changing the conversation. it is really a question of how hard are they going to carry on trying to reach that goal or when are they going to accept defeat here it when they do, how public is that going to be? environment --nd at an environment where it is

close to full employment in japan. the fact that they are in positive territory they might see as a sign that this is a stable situation, there is a limit to how much we will get out of this, and they will be keeping an eye on the currency and whether the fed is going to bail them out. tom: i think you absolutely nailed the idea of reflation and the need to reflate. i thought the report last night was way off the mark. with that said, do you see any recent experience where a nation can reflate an economy? i am in search of it. stephanie: a nation with the underlying conditions they have in japan, have been the forerunners of this not very nice experiment. how do you grow in an economy that is very demographically challenged and has this enormous debt burden? they have achieved real growth of around 1% gdp per head over the last 20 years ago or so when

we think of them having their lost decade. the only problem is they have not been able to have the growth without having consistently higher public debt. we see that same dilemma now as we are thinking there might be more fiscal action and that will be the leave of this more likely to be pulled in the next month. tom: i think the mathematics are simple, and this is the key question. look at theto animal spirit of nominal gdp or do you fall back on inflation or deflation adjusted real gdp? i would respectfully suggest we are almost back to the early 1950's where it is a nominal analysis. and i wrong? isphanie: the global problem about cash gdp and growth.

for companies and governments that are challenged trying to get out underneath high debt burdens, and it in europe and japan. if you are japan and you're thinking a loan on this, what can i physically achieve in isolation? they have gone so far down this road and they have to fall back on real growth, but i agree with you. there's a big difference to the world whether we get 1% real or much more nominal. tom: stephanie nails the key economic dinner -- economic determinant which is nations "in isolation." they are in isolation. fed does if the something, gives a helping hand by raising rates it makes their life a lot easier which is what this chart that i made shows. hikehe odds of a 2016 rate and dollar-yen spot rate.

how do you work on inflation? if the yen goes up, earnings are hurt and the wage growth is stopped. stephanie: i think again that you are focusing on the inflation, that is what you are focusing on. the last time i was on the show we were talking about whether the central bank, whether boj still has a great deal of leverage over yen, particularly when you have a structural inflow coming back to japan. pay all the pensions of the gratefulthat are now for the money that has been saved for pensions. it is the structural obstacles but you are right, just in terms what they have in trying to adjust the inflation issue, trying to push up nominal gdp growth is focused on the currency but that shows the weakness of their options. tom: that gets us started strong

this morning. we will continue. in this hour, robert feldman will join us in tokyo with morgan stanley m uft securities. i am looking forward to talking to dr. feldman about japan and the lessons learned for the united states and europe. ♪

francine: i am francine lacqua in london, tom keene in new york . we are talking monetary policy and barbary. let's get straight to the bloomberg business flash. >> the president of mitsubishi motors is quitting in the wake

of the fuel mileage testing scandal. he will leave june 24. it's a be she is trying to regroup with the health of nissan motors. suzuki says it used improper fuel mileage testing methods on more than 2 million cars that it says their results were within an acceptable range of deviation. sab miller has posted full-year earnings that messed estimates. -- missed estimates. they are said to be taken over and theyev this year were hit with costs associated to the takeover. annual earnings dropped for a second year in a row at burberry. sales of the company's trenchcoats and products fell 20% in hong kong and tourists are spending less in europe. burberry has a plan to save more than $141 million a year. i am here in new york now.

in hong kong sales are going to go down. francine: they have a huge exposure to the u.s. was sayingrmann there is concern about the future of the ceo. tom, i know you have been looking at the savings plan and cutting costs, but they probably do not have the right product mix and they are exposed to the u.s.. tom: they are the adult in the round of luxury accounting and it is a bellwether of where luxury is going in the next 24 months. me isre importantly to this chinese idea that you get out of burberry that they have evaporated from the market. ifncine: the problem is that you do not have a product mix and geographical exposure you are going to be in trouble. tom: can i interrupt?

jamie murray ought to go out and buy a burberry trench coat. francine: how do you know he does not have one? you have just given him the right to wear burberry trenchcoats, and stephanie flanders is still here. when we talk about brexit, maybe a lot of the companies in the u.k. that export that will be hurt. how do you model the brexit? for the u.k.,k the sorts of investments people make year tend to be quite long-term. those sort of investments would be most affected by britain leaving the eu because we lose access to the single market so we model it by thinking about how that might affect the currency. -- avolves a see shock currency shock of about 10% and

a credit shock as well. you see how it transmits across the u.k. and across the globe. tom: what did you learn? thee: the implications for u.s. are probably pretty modest, maybe ever so slightly slower growth next year and the year after that reflecting weaker demand for u.s. exports and some spike in market sentiment. that could be enough to hit the balance away from a july rate hike, towards december meaning only one rate hike this year. tom: when i think is so important is your plug-ins on your model. i grant you the currency idea, i think it is common sense. what is your quality of your other plug-ins? mathematically do you have any confidence in your economy chicks? econometrics?

jamie: none. francine: we have never been in the situation before so is this a black swan event if it happens? jamie: there is no question. we do not know what the exact result is going to be and we can just hypothesize about what the shape of it would be like. we know that businesses would do last and -- less and the currency would weaken. stephanie: mark carney was addressing full on what he called the elephant in the room, the impact of a potential brexit vote. that one quite clear almost any forecast that you tend to make reasonable estimates, never your plug-ins are, you have material slower materiallyested and higher inflation particularly

from the exchange rate. we tended to assume that would mean lower for longer rates in the u.k. but actually he was quite clear and said it would not be automatic. that would pose a challenging trade-off. do they focus on inflation or growth? what they highlighted that goes back to some of these radium term forces is the potential supply side effect because it is not just a hit to demand. if you have under most scenarios openness to your main trading partners you are probably going to affect productivity and the potential growth rate and that could mean higher inflation or lower growth. they would have to face the choice. i am interested in the median supply demand affect. when it be enough to push the economy into recession? at the moment we say not but that is uncertain. francine: coming up in the next

hour we speak with ian bremmer from eurasia. speaka perfect person to not only about brexit but about trade negotiations. we will also ask him about donald trump. ♪

tom: good morning, i'm tom keene in new york, francine lacqua in london, stephanie flanders with us as well. this is from john nichols

weight, a very nuanced essay. rather than dominating europe, the chancellor has the same sort of negative cloud over the rest of the world. the chancellor can often stop things but rarely cause them to happen. an irony for the former mayor thehis fellow brexitiers, dominant germany they fear is more likely to come into being if britain votes to leave the voters -- to leave the union. francine: and it comes from a nuanced power play and the role that angela merkel has often in the u.k.. we know that she tries to find -- is a supporter of the liberal u.k. are you worried that her job is on the line further down? if the u.k. leaves it does give germany that much more prominence. stephanie: i basically agree.

john is a very bright man and he was very clever even before he came to work at bloomberg. i agree with him in the sense that chancellor merkel has demonstrated that we have to think about the politics of things and not just the economics. a lot of market people thought migrants were not such a bad opportunity for germany. at the same time, the immediate implications have been to challenge her and make her position much weaker going into the election next year. on this broader point of how it might relate to some of the brexit debate, i think some on the brexit side underestimate how important european integration as to germany. it is more important than the economic contact relationship with the u.k. i think germany would move very quickly to try and force more integration or achieve more notsion, and would

necessarily want to offer britain a fantastic deal. in terms of trade and other context. francine: we have heard that from their finance minister saying, if you leave you get to the back of the queue. is that fair? stephanie: we do not know. it is not clear that the brexit side is hoping to get a norway switzerland type deal with the eu. i think it is a real issue. stephanie flanders stays with us and we also speak with robert feldman from morgan stanley. we talk about japan, yen, and the jgb. ♪

show me top new artist. ah, ha ha. show me top male artist. my whole belieber fan group. it's not a competition, but if it was i won. xfinity x1 lets you access the greatest library of

billboard music awards moments, simply by using your voice. the billboard music awards, live sunday may 22nd, 8/5 pacific, only on abc. francine: i am francine lacqua in london, tom keene in new york. we are getting live pictures, we see the london eye as we await

the queen's speech. on is expected to deliver driverless vehicles and other bills that will be debated as she sets out the legislative agenda for the u.k. let's get to the bloomberg first word news. bernie sanders has won the democratic presidential primary in oregon and hillary clinton claiming victory in kentucky, a race still too close to call. clinton is getting closer to winning the nomination. on june 7ig tests are when four states hold primaries. wildfires and japan are threatening oil operations again. evacuatedrgy has three sites it was restarting in northern alberta. canada has lost about one million barrels of production a

day. opposition leaders have called on followers to pay for the swedes again today to force a recall election. then as well a is suffering from food andtages of inflation is in triple digits. there is likely to be a confrontation in the senate and house over the zika virus. the senate has voted to spend $1.1 billion. house republicans are willing to 622 million dollars but only if money is cut from other programs. the white house calls that woefully insufficient. hillary and bill clinton took a big hit financially last year. they took in $1.7 million in speaking fees, down 93% from the previous 16 months. likely republican presidential

nominee donald trump says he made $557 million last year. his campaign provided few details of how. global news 24 hours a day powered by 2400 journalists in more than 150 news bureaus around the world. tom: let's consider the japanese malaise. we heard about europe becoming japan or the united states becoming japan. .ere is japan nominal gdp we have blacked out the volatility and put in the four year moving average. there is what was and what is now with a little bit of recovery in the animal spirit of japan. that is a good lead-in to robert feldman of morgan stanley. wonderful to speak with you on this important day. end -- for abe, which is

more important? robert: i think the import of today's number is that we have had bumps up and down. down,we had up instead of but if you look at the longer-term chart on gdp that you just showed, basically it has been flat for the past year. i think the import of this for the prime minister is they have to get to work again on some of the fiscal issues and the growth strategy so they can get investment which was weak in today's numbers. tom: governor bernanke gave a important speech and tokyo years ago where he begged japan to reflate. m.i.t.,study back to have you ever seen a nation able to reflate an economy? robert: it has happened in certain times but after 20 years

of deflation, the mindset of the japanese people is still very deflationary. people are not going to think -- prices arelly really rising until they see it in front of their face. wages are doing ok, but what we are seeing his labor shortages that look like wages are not going up. there is still a deeply embedded deflationary psychology they have not managed to overcome. francine: what can governor kuroda do to fix this, if anything? does it have to come from fiscal or do we have to fully intervene in yen? i think governor kuroda has been very successful as first years in office in changing expectations. prices are doing better than they were before. this negative interest rate move has not been very well received in japan and my view is that monetary policy has become

something of a sideshow, or haps not just in japan. the key thing is to get fiscal policy going so we have a little bit of a philip for a while and then -- a fill up for a while. investment.me from you can raise productivity and offset the aging population. you can print money but you cannot print productivity. francine: does governor kuroda need to stop doing anything at all, and where's that third era we have been waiting for? robert: i think governor kuroda has taken bold moves. r was makingro progress in some areas but it has stopped in others. they have made some very good moves and carper it governance reform.

-- in corporate governance reform. they have not done too much in the labor reform area and there are a few other areas, particularly energy policy with a need to focus more on technology. after the election this summer, the upper house election, that is the time to get back and agenda. the feldman, when you speak to morgan stanley clients worldwide in london and europe, how do you respond to the idea is europe becoming japan? i am fascinated by the view from tokyo of the idea that everybody else is becoming like japan. mean whenat it would we say becoming like japan, do we mean a country that will have 20 years of deflation because of

troubles? i think there are some parallels but some differences. the government structure of japan is a single country so when a leader comes in and says we have to do something, it is easy to get behind him and do things. europe is very different, or of a collegial group of countries that has difficulty coming up with a single project. if europe wants to do fiscal policy, who do they call? japan. financiala united oversight structure. it is difficult and europe because they have second -- separate regulators. malaise,8 years of will there be a generational change in the coming years? robert: my belief is that the labor shortage into pan is driving test in japan is driving

wages up more than people see. in japan is driving wages up more than people see. if you draw a simplistic phillips curve what you see is if indeedext year, the unemployment rates go down below 3% you will have a sharp acceleration of wages. i think there will be an improvement that will change nominal gdp growth. stephanie: i was interested on your focus on zeroing in on the lack of investments in japan and the need to get that going, because there is savings by the corporate sector has been weighing on the economy, forcing them to do the fiscal action. there are some parallels with europe where you see still a reluctance to invest, even german company sitting on a lot of cash. where in japan do you see the

levers really affecting that? from the central government side, it does not feel like they have really address that, giving the companies incentive to invest that money. robert: i think that is a very deep and insightful question. my view is that investment is driven by the difference between the natural rate and the real interest rate. we have pushed the real interest rate as far as we can and we have to rage -- raise the marginal capital. japan needs a new energy structure but we are not moving fast enough for that to happen. we need a new structure for the labor market so we can move people out of jobs and into things were they could be much more productive. there are a lot of vested interests. when we get those changes, as we are seeing them now in agriculture, a little in labor markets, energy and other

markets, we could see some real incentive to invest here and i think that would push the economy. stephanie: a lot of them immediate impact of those changes could be deflationary because often you see those structural reforms will have a deflationary effect. what is the worry about how that might conflict with the broader macro objective? robert: i think the oecd does extremely good work. my old colleague, kathy man, has pointed out to me that they have some very deep studies of what kind of structural reforms you do when. i think the key thing for japan is we have a labor shortage so substituting in labor, saving investment is going to be a net benefit. if you go to some of these revolving sushi places, what you see is two lines, the old, slow line around the bottom and a bullet train line around the top

because they do not have the people to make sushi in front of folks anymore. in my view these are deregulation measures and will have a lot of impact on demand. both supply and demand are affected by deregulation and i think demand will be affected more so it is net positive. francine: robert feldman, thank you so much. is that bad if europe he comes japan? -- becomes japan? stephanie: what it would do -- francine: undermine draghi? stephanie: if you feel that investment will be stuck in a kind of rot that it has been in japan and the potential growth rate is as low as it is in japan, most people in europe do not feel that the projects -- problems are that great. they have made some progress on her debt issues in the banking sector.n the banking

compared to the extremely slow progress of japan in the first 10 years of their crisis, europe starts in a better place. the parallel, particularly when you look at germany is a lack of investment by german companies, and the german current accounts was nearly 9% of gdp last year. i worry there are some deep-seated, like japan. tom: i'm going to do a data check. equities, bonds, commodities. euro weaker, yen weaker as well. dx why stronger. oil with a bit of a bid earlier this morning. from london and new york worldwide on economics, bloomberg surveillance. ♪

morning, bloomberg surveillance from london with francine lacqua and tom keene in new york. summers has a prodigious economic ability, always controversial. i thought the cover was a little rude and i do not agree that the secretary is pushing the chair out. that is what we sat -- saw on the cover. stephanie flanders knows for certain that larry summers is rude. how do you write a speech for the smartest guy in the room? stephanie: with great fervor and trepidation. when i first joined, there had been stories about speeches being thrown out the window and

trampled on the floor, but that never happened to me. we had a beautiful working relationship. tom: i think it helps you in writing speeches for the queen. secular stagnation taken from 80 i spoke withagony, him at length in dubai and i would suggest he is taking a victory lap. are we and secular son -- stagnation? stephanie: i think those that he mentioned almost off-the-cuff when he first raise it a couple of years ago. i think it just captured the mood. there were some of the things that he was talking about that other people have talked about as well, but he found this historical example. he has added to that these is over the years and i think the progress of the global economy has fallen out to some agree. i am not sure at the heart of this debate whether it is really

about a shortage of demand or structural problems on the supply side, i'm not sure that is fully resolved. even he has changed his tune a little bit about whether this is entirely driven by a shortage of demand and whether you can fix it with an enormous amount of public investment. you will not find any economists who disagree that this is a good time for public investment, not least in the u.s. where you have so much infrastructure. if that is the solution to everything, i think larry would admit there are a few other things going on. monetary policy was always there to give fiscal spending a window and then we see the rise of donald trump, of isolationist measures that make it much more difficult to come stagnation,secular which also is postponing fiscal spending. as the former

governor of the bank of england said, tomorrow is here and we have to deal with it now that we are in the slower growth world and have not had some of the transportation we would like to see during this period of loose monetary policy. increasinglyes with more focus or attention put on fiscal policy, the potential for fiscal policy at least if we have another downturn in the near future there is building consensus that fiscal policy would have to play a role. incidentallyeeing the line between monetary policy and fiscal policy getting a little bit blurry. tom: what do markets tell you right now when you sum up the global markets? what do they say about the next six months or a year? stephanie: i think they are

signaling at the moment that we have seen a lot of improvement in sentiment overall in the first, in the last three or four months. that seems to me to be still related to actions by central banks and particularly the fed. havenease is that once you the fed get back on track in the next few months for at least two rate rises in the second half, you look at inflation in the u.s. and other factors that may drive that, the unease is that a lot of this good stuff that we see will unwind. we are seeing that a little bit on emerging-market assets and eat -- commodities. we are not getting a strong message from the market at the global economy, the rest of the world is strong enough to cope without the u.s. tom: stephanie flanders with us. onour next hour international relations and the

linkage into the economy, we will take a look at literally -- at italy. ian bremmer of eurasia group will join us. we will look at ag zero world. ♪

york,rom london and new francine lacqua and tom keene, we welcome you all. michael mckee is looking at everything but amazon. michael: it does come back to amazon. let's look at target and staples , both reporting today and both getting hammered. if you take a look at the stock chart, staples in white losing ground because particularly smaller businesses stopped buying stuff from them and buying stuff instead online. buy theirer was, biggest competitor office depot but they cannot do that. they have to go back to the drawing board.

target losing ground by the disposable fashion folks and online buying. do not look for a lot of information from them about their earnings, but look of wet the next strategy's will be -- of what their next strategies will be. they have done pretty well until recently and this moved to amazon. what they are trying to do is focus on the big companies selling to them, close stores, cut back on some of their merchandise, and try to refocus the business. target is now going to focus on their own line, stuff that you can get online from target but not amazon. francine: how difficult is it looking at a lot of these companies reporting, the strength of retail sales. do we need to look at it differently? stephanie: this is one of the agencies around the world and we have seen the u.k.

and u.s. asking are they capturing the change in consumer behavior? the implicit price fall in that behavior, sometimes you are treating things as different products when they are the same. it is a continuing challenge but i do not think there is anything unreal about the consumer spending we are seeing in the retail sales numbers last week. there is enough of an engine behind the economy from the can tumor side dish from the consumer side to a leave any side -- from the consumer to alleviate any fears that we may go into a recession. there is no reason consumers should not be out there spending . they're the only engine we have going at the moment. us when wereview for had good retail sales the other day but they are all struggling michael:? michael:the business model of who they sell to.

shopping,f online both of these places are trying to figure that out. tom: it is one big rollover away from amazon, isn't it? michael: exactly, it is the elephant in the room for all retailers now. tom: throughout the morning on bloomberg radio, stephanie flanders, thank you so much. we will continue with ian bremmer of eurasia group and look at international relations, and particularly a bit of the europe dynamic -- dynamic. also former senator of new hampshire, what a good time to speak with john sununu. ♪

forget g-8, g7 and g7 -- we

have ian bremmer with a g0 world. this morning, dollar strength. the chinese run be grinds weaker and donald trump with the first republican family, the john sununu's. i am tom keene. with me is francine lacqua. this will be a wonderful hour. sununu, the about younger. francine: we will be looking at trade. this is one of the most important things that faces every country that looks inwards rather than outwards. tom: what is it about the queen's speech? , how is thisthday speech different than the

others? francine: this is important because she lays out -- first of all, there are the carriages. who doesn't want to see a clean in a carriage? she lays out the logistics of the agenda. she opens parliament with the british pump. there are messages on extremism, driverless cars and unmanned drones. but i know you want to look at the pretty carriages. tom: that carriage looks like the carriage that ian bremmer pulled up in this morning. francine: maybe he's the one in the back. tom: first word news. sanders won the democratic primary in oregon and hillary claimed victory in kentucky. although hours after the polls closed, it was too close to call. it's didn't do anything to change the dynamic of the race.

bernie sanders is not giving up. me be asnders: let clear as i can be. i agree with you. the next big test for the democrats are the primaries in california, new jersey and four other states on june 7. a group of super forecasters has jumped into the brexit debate. they say there is only a 24% chance that the u.k. will choose to leave the european union. that suggests there is less thantainty over the result opinion polls are signaling. david cameron's centerpiece -- a project to change the way cousins are run. the conservative party caused by the referendum in the european union. global business news 24 hours a day, powered by our 2400 journalists in more than 150 bureaus around the world.

tom? lows is doing a home depot chase. michael mckee highlighting staples. he was dead on and they come in with a weaker estimate than expected. this is the filtering for the real economy. they will close stores in north america. they are way below nominal gdp. michael mckee was correct. amazon getting in the way of all of the challenges. bonds, currencies. currencies are weaker today. let me leave it at that. francine, you are bored. please? european stocks are flat. i want to show you south africa. politicalit of

shenanigans going on with the finance minister. tom: there he good. it is a wonderful time to speak to ian bremmer from the eurasia group. markets on exchanges in asia, what is callum anderson telling you about the linkage of your world in international relations and the huge world of what market say. something that he has wanted to do for 15 years. back then i had three people in my firm but clearly, the wallstanding of mainstream street that global politics are increasingly driving outcomes for is becoming more accepted. i think it is a significant manifestation. tom: larry summers talking about secular summation. a diverse of economic growth. ,ut your study of the politics

is very history of countries being able to reflate and jumpstart their economy? ian: it is hard to imagine that we will see significant success around the world on that front. year, a so far this have already downgraded their expectations for local growth. i would expect further moves in that direction over the course of the year. it is not that i am pessimistic but there are too many serious political headwinds. too many countries, too many shoes that can drop. as well as the possibilities of things that could go wrong. one or two of them is going to hit. whether you talk about brexit or there or the saudi's -- is a lot of children, geopolitically. it makes it more difficult. francine: what does that mean with monetary policy? it is not working to abandon it. and gived to press on

more time? fiscal policy is something that we will see much more of in the united states. are going to invest more seriously in the long-term in all sorts of infrastructure, including education infrastructure, he will not fix the growing problem that makes people concerned the country is heading in the wrong direction. europe has the same problem. , i'm quite optimistic in the near term because there are political reasons now that president rousseff is gone -- people will say, we have to get the house in order. it half that needs to be taken. but you are not seeing a lot of leadership around the world that is willing to deal with obstructive or as local and give them what

the country actually needs only the long-term. only in asia are you seeing that. francine: that goes back to the fact that the kind of politicians that are popular at the moment are the politicians that are inward looking. we look at donald trump and the concerns of exit. it is difficult to take pain to a population went they want people who may not conform to fiscal spending and the like. angela merkel. she is trying to spend much more that for those who would otherwise be supportive for the richland. the party is recognizing that as much as she has been the voice for austerity across europe with her own political fortune, it requires her to take a short-term perspective in the way that she governs. and if she can't do it in

europe, who can? in the time magazine, i argued that we needed to give it to angela merkel because it is the last year that she can possibly get it. fascism with the first citation. the ugly time for europe. we see austria and europe and american politics and on and on. how does a guy like you synthesize the tensions and shift? more inworries me countries where the political institutions are brittle. it is not a surprise that in , it is smaller than poland, austria. in germany, you couldn't get like that. you can't in the u.k., no matter what happens with breaks it. in europe, that implies that we will see a reversion to a core

europe. and ukraine, 20 five years ago when the soviet union collapsed, they had the same per capita income. they have split apart massively. that will start shrinking. tom: bring up the chart on italy. thanks to the economists for a nice set of articles on italy. this leads me to the ian bremmer world of crisis. is an optimism about this large nation and the spirit of their business in northern italy. at the chart is the chart. you worry about a polarization under a dangerous word like fascism. ian: i am delighted that there is real move on microeconomic reform. i am delighted that you are going to see a reform of the senate. i think the prime minister will get it through and that will make it easier for governments

to hear in italy. but the structural issues don't fly. to provide meaningful productivity and efficiency for , making themtalian feel like the future is in that country. that italians and americans have gotten everyone together to do something about libya. it might not be enough. but they don't want the next refugee crisis. francine: it takes time. i had an exclusive conversation with the finance minister. but itare put in place takes time for competitiveness and productivity to come back for a country that has a left in the dark ages in terms of reform for the last 24 years. that's going on, we don't know what will create jobs for these people. the middle class has been hollowed out substantially. in some cases, that is causing them to go off the rails in

terms of no more democracy. i think political institutions in the u.s. and core europe are strong enough to deal with this in the foreseeable future. emerging markets and the weaker states, these countries will fall off. tom: a lot to speak to ian bremmer. coming up, donald trump. can he engineer some kind of relationship with the establishment? we speak to the engineer from m.i.t., john new new -- john sununu. ♪

tom: messages will be sent. -- the pageantry

of the queen's speech. she is 90 years old. in among lords and commoners and give a speech, which for americans, will be a shock. it is remarkably detailed about the proposal for the majority government. they get down to the nitty-gritty. francine: they do. speech that lays out all of the bills that will then be talked about. it is written by the government. not the queen. but she reads it out. tom: i could make a joke. of the queen's speech. right now, let's catch up with the bloomberg business flash. shery: the british labor market shows signs of slowing down. they added just 44,000 jobs. one fourth of the gain from last year. the u.k. unemployment rate stays

percent.de slow they are waiting for the june 23 referendum on the european union. sotheby's has set a world record, taking in $175 million at a jewelry sale in geneva. the star of the sale was a 15 caret pink diamond. it went for $32 million and was bought i a phone bidder from asia who wants to remain anonymous. and annual earnings dropped for a second year in a row in burberry. sales of trenchcoats and products fell in hong kong. tourists are spending less in europe and demand in the u.s. is uneven. plans forannounced sales of one edge and $40 million a year. that is the bloomberg business flash. francine: let's get more on burberry. let's bring in andrew, who has

covered burberry for a long time. the problem is, this is the industry benchmark on whether created and ceo can be one job. what is the problem at her bury? andrea: it is unusual that you have the ceo and creative same at thebe the start. what we have seen at burberry is a creative side that it is the problem. that burberry needs a style update itself. tom: i 100% agree. i loved how you opened your burberry gadfly piece, going down to size zero. for starters, you cannot find a

size zero in the store. they have lost their traditional customer. what do they do to get it back? andrea: they have been focusing too much on the traveling luxury consumer. on: they have been focusing 24-year-old pretty faces. that is all there is to it. andrea: they haven't really because there isn't much a 24-year-old would want in a store. they have a lovely poncho which is a big seller. 1100 pounds.out quite a lot of money for a millennial to spend. they need stylists and cheaper products to connect with customers. follow them on instagram and social media. that is where they've gone wrong. there are concerns and questions about the ceo.

andrea hits the nail on the head. the problem is that it actually doesn't have the hype of gucci. they replaced the creative director and within six months, they turned around. nobody finds burberry exciting anymore. andrea: they need to bring in fresh, creative talent. has done good things to introduce the catwalk where you can buy products straight from the catwalk. he has unified the brand but we need excitement with burberry. he has done it before, about 20 years ago. he reinvented themselves and went from classic to cutting-edge and they need to do that again now. tom: andrea, thank you so much. she has a vicious short piece on burberry today. ofh us is ian bremmer eurasia group. it is clear that china has fallen off a cliff. worse is chinese luxury

goods in the world? it has vaporized. interesting that you know that they don't have a size zero on the shelves. [laughter] if you are not getting china right and you are a consumer goods company, you are in trouble. because see --ng because it is not that the chinese consumer isn't spending, overwhelmingly, the stimulus is moving towards pushing the consumer. i have to go with your columnist. isburberry isn't doing it it because the goods are not connecting with the consumer. there is also oversaturation in luxury markets, is there not? customers that loved burberry come from emerging markets and that is under pressure. ian: the middle east market for

luxury goods right now is not strike up completely but it is pressure.wful lot of a lot of money is flying out of the middle east to go to safer havens. and oil prices will stay low for longer. the pressure for countries across the board will be significant. china, the brand recognition changes. as you are seeing in second and wheregear cities in china people grow up in markets that are more mature themselves, it is changing. tom: i hate when you come on, i have 18 more questions. ian bremmer is with us. eurasia group. coming up on bloomberg radio, the link into optimists money. we will discuss the disappointment known as the minnesota twins. ♪

i am francine lacqua in london and tom keene is in new york. this is what i have picked out for my morning must read. there is an amazing piece by jamie murray and dan hansen. they link the fed and breaks it. it is impossible, they say, to know the magnitude of the potential shocks.

still, they say, the most likely characteristics of these shocks can be fed into a model to sketch out how the economy might be affected. , the problems that we don't know. a we need to view brexit as lacks one event? ian: no. we know there is a high likelihood that it will happen. evil have been spending a large amount of money with investment firms to get them ready to how they will react. corporations are prepared. is, the unwind of europe has been happening in front of our eyes for several years now. -- the inward looking whichever way they end up voting, it is a coin flip in my view, the fact that europe needs them to stay and they need british leadership is nowhere a part of the conversation in the u.k. and 10 years ago, that

wasn't even conceivable. ultimatelyt it is what the british stand for and their importance in and out of europe is predetermined. moveine: who has the most with whether brexit happens? ian: if they decide to vote to they, a most immediately will say they need another vote on the basis of a new engagement with the europeans. it will be kicked into the hands of the europeans. the level of uncertainty will be immense. francine: ian bremmer. this state of the parliament begins with the queens ♪'s speech in a few minutes.

show me top new artist. ah, ha ha. show me top male artist. my whole belieber fan group. it's not a competition, but if it was i won. xfinity x1 lets you access the greatest library of

billboard music awards moments, simply by using your voice. the billboard music awards, live sunday may 22nd, 8/5 pacific, only on abc. good morning. we welcome all of you worldwide in london and new york.

let's get to the bloomberg first word news with shery ahn. bernie sanders has won the democratic primary in oregon bankillary clinton has one kentucky. the big test for democrats is on june 7 when california, new jersey and four other states will vote. the wildfires in canada are oil producers. suncor energy has abandoned three sites. canada has lost one million barrels of production a day because of the fire. rescuers are searching for 200 families missing after torrential rain. at least 19 deaths are blamed on the weather so far, a mud is making it difficult to use heavy agreement in the search. leaders have called

on followers to take to the streets today, trying to force a recall election. their suffering from widespread shortages of food and plus inflation is in the triple digits. government with the budget police have forced sanctions. they're discussing what to do after spain reaches the budget limit for the fourth. in a row. that could lead to a fine. the acting minister's government may not be penalized. the eu may decide not to do anything. spain prepares for a second election in six months. global business news 24 hours a day, powered by our 2400 journalists in more than 150 bureaus around the world. francine? francine: thank you. we are looking at live pictures from the u.k. parliament where queen elizabeth is just starting to give her speech. it is called the queen's speech

and it opens parliament. she lays out all of the bills that will be discussed. we are expecting her to talk cars extremism, driverless , unmanned drones. this is a speech that is written by the government that she delivers it. she will not be talking about brexit. today, when we had the ruling, remember when the u.k. tabloid said the queen backed brexit? was ruled inaccurate. she will not give guidance on her thoughts or her family's thoughts. tom: the house of commons there. francine lacqua in london. it is a great unspoken on the left and right that trade is dead in america. august 14, 1941, the important atlantic charter moment. a shock. with us is ian bremmer.

is there a trump doctrine or trade policy? donald trump's foreign policy generally has been alliances, they are not win-win. tradetrue in terms of with mexicans, chinese and japanese taking advantage of us. he agrees with paul krugman. that is because he is playing to his base. i don't think trump is actually about policy and i think we should stop talking about him as if that is what he is doing. he is about identity politics and he caters to it. to thet we have moved general, it has nothing to do with what he might or might not do as president. should secretary clinton respond to this zero-sum tone in this

negotiation-non-negotiation? ian: you saw what happened in yesterday's primaries. bernie sanders is turning out tens of thousands of supporters and is winning states. i think what hillary clinton is going to need to do is reach out to bernie sanders in a significant way, in terms of the democratic platform that is more to the left and inclusive of the enthusiasm that he has been able to muster, so that she gets the turnout she needs in a member. i do think she is prepared to do that. i personally am a big supporter of the transpacific partnership. but when you talk to hillary clinton supporters, that is a fundamental unless things change. givesnly, that means it opportunity in the lame-duck session and it is becoming more challenging.

of japanese and vietnamese and others who will be profoundly concerned about america's commitment to them. on the flip side of the americans not caring about trade, they don't want to be the cheerleader of global values and have boots on the ground in countries across the middle east -- american allies everywhere look at the u.s. and say, are you committed to us? and long term, the more that answer is, we have no idea, the more you see hedging away from the american standard and american dollar. francine: when you look at trade, and i want to go back to the presidency, but when you look at trade, it seems there are countries around the world who are becoming much more isolationist. deals a lot of the trade we had similar standards from the french president, trying to protect the european identity and what they sell. ian: that's right.

right now, protection is mostly coming out of the halloween middle classes, which are quite wealthy in the global context from the developed world. united states, europe and japan. next fiveourse of the years, as we see automation, innovation, start to really a road and manufacturing sectors and service sectors in emerging sentiment expect that is going to shift into those countries as well. so this is an unwind. and the globalization that has been doing so much driving of lifting votes across the world, middle-class,uly that is now coming back and impacting politicians, saying, we don't want to push in global trade deals. we want barriers going up. we will focus on local populations. clearly your estimate for growth in that department will go down. francine: what just a donald

trump mean for u.s. trade and economy? ian: i don't think it means much for the u.s. economy in the need -- in the near term. ceos believe they would have more access to the white house in a trump presidency. they are probably correct. i don't think anyone believes that it would change how they would invest in the united states. see is the would risk acceptance of donald trump -- donaldsque on a berlusconi or putin -- that is really where the risks are. in this do we sell nation, the elite idea of trade now to someone in the boston housing projects? how do we sell this to the

common guy? you have to be kidding me. ian: i recently was giving the talk to the virginia military institute, a fine establishment. i had one of the cadets come over and tell me about his background where the family lost his job. and saying, why should i support this? and i told him, you shouldn't. there is no argument because the establishment parties have done nothing for you. they sold you a story. and you should not be supporting free trade until the american political elites change. tom: this is critical. if we go through george bush senior's lifetime, if we -- have we gotten to the point where we have marginally improved global trade so much that it isn't worth the marginal improvement right now? ian: no, i think it actually is. these are not trade deals, they

are standard deals. if americans don't line up other countries to coordinate under american rule then the chinese will be very happy to do so. there will be bilateral deals. is, advocating global trade leadership to china bilaterally does nothing to hurt or harm the trajectory of these people forgotten in the united states. until we create social contracts that work for them, they should not support trade deals. and donaldsanders trump have tapped into something. across things,g we will do that next. we will overlap across geography. what a wonderful time to speak the younger.u he is brilliant in politics. we will talk about he, his father, in the granite state

adopted. up next. ♪

francine: you are looking at live pictures of the queen. next to her is her husband at the state opening of parliament. this is a speech written by the government. she will lay out the bills that will be presented to the house of commons and parliament over the next 12 months. the queen celebrated her 90th birthday a of days ago. now more with the bloomberg business flash. of england, nike has just dropped the second largest apparel deal in and wish football with chelsea. they will pay up to 87 million

dollars per season to outfit the team next year. chelsea had to pay more than $70 million to break its contract with adidas. president of japan's mitsubishi motors is quitting in the wake of the mileage scandal. he believed june 24, mitsubishi is trying to regroup. suzuki is saying they used improper fuel mileage testing methods on more than 2 million cars. but that is within an acceptable range of deviation. main capital management isn't ruling out on ipo. erik schatzker at an event in boston. >> neither good nor bad. withay we look at it competitors is that if we felt being public would help our business, would help us do acquisitions and get us capitol that we needed, we would

definitely consider it. shery: he also said that when he goes overseas, the first thing he is asking -- the first thing he is asked is what is going on with the u.s. election. tom: and mechanical engineer from m.i.t.. middle the family of east origin, greek, lebanese origin. john sununu. the senator joins us now. good morning. primaries last night, how distracted is secretary clinton with bernie sanders? i think she has to be distracted, he is not going away. nominee, is made the perhaps not until the convention, she will have a hard time consolidating the democratic vote. it will drag her down a little bit. to me, ine explain

the coming weeks, what the to do for- what the to do list the gop as they address the new candidate? what is the john sununu prescription? john: first of all, my opinion doesn't matter to most republican voters. a fact.just most voters are looking at the candidate themselves. for myself? i want to hear the platform. i want to hear how donald trump will solve problems and not just identify problems and find someone to blame. what is your constructive solution for fixing it? fixing the tax code and dealing with the trade issues you have been talking about? that is where he is going to focus and it is not really about republicans at this point. it is about the independents. group ofou see a

people around donald trump to coach them on the day to day policy formation of a platform versus the one or two or three surprises we all get every morning with what he says the day before? john: sure. i would also say that the surprises sometimes are a little too surprising but you don't want to take away from the fact that the guy is totally honest. i think voters appreciate that. that there isn't too much of a filter. what you do need serious policy proposals and i don't know the people around him. but there are lots of people that could help him narrow down his priorities and policies in a way that connects with and communicates his seriousness with the american people. i think that can be done but he -- to make an effort area effort. how does donald trump

reach out to the establishment? , he is doing it. ,e had a meeting with paul ryan meetings with governors, he signed an agreement to work with fundraising on the republican national committee. i would come back to the point that the whole idea of division within the republican party or division in the democrat party is something that the media places much higher emphasis on than that it warrants. day, democratshe will vote for hillary clinton. republicans will vote for donald trump. it is a question of independent voters. ian bremmerbring in with a smarter question. you talk about needing more specifics. we are used to politicians flip-flopping. when you talk about things as specific as tax policy or iran,

you have him saying things that are 100 80 degrees in opposition to each other. i'm wondering if the strategy for the gop leadership is to pick and choose enough things that he says that makes it sound like it aligns with you and pretend that is the campaign? to say, look. the policies here aren't relevant because that is not with the donald trump campaign is actually about. and you will not have any idea, no matter how specific you get, of what he will do until the surprising candidate actually surprisingly becomes candidate? john: leadership is not going to make a decision there. you will see people with either of those. you will talk about leadership qualities, his ability to motivate people and the fact that he is not hillary clinton. for some republicans, that is enough. highlight, they will

think he where they will be the most practical and do the most good. whether it is tax policy or immigration policy if there views align with him. one more thing. he is totally unique in that those running for office, republicans running for office, they will have an easy time disassociating themselves from donald trump because he is a unique political personality. senator john sununu, thank you. for the latest on political , look for that at 5:00 p.m. tonight. it will be most interesting. they will pick up debris from kentucky and oregon. "bloomberg surveillance. ♪

tom: good morning everyone. the euro is weak or. the recent record dollar strength -- grinding ever

weaker. francine? francine: coming up shortly is bloomberg with david westin and jonathan ferro. what do you have coming up on the show? as allit will be packed eyes are only fed. we have the meeting of the fed coming up. coming upe amato talking about equity requirements and brian france who is the ceo of nascar will be joining us to talk about the nascar business. fact i didn't know. half of the fortune countries advertise on nascar every year. tom: very interesting. that is directly related to what they are doing. bloomberg is coming up. ian bremmer is with us.

we could talk saudi arabia or china. let's talk to messick politics. talk to messick politics. domestic politics. ian: i don't see why a donald trump residency destroys the gop. while everyone says they need to change their policies, i don't think that is actually true. areg people in america overwhelmingly more hispanic, asian, more secular, more socially liberal. but we will not see the effect on the house until after 2020. so i don't think the gop needs to do much in terms of the desires of congressmen to control their largely and overwhelmingly constituencies. are the chances

of a donald trump presidency? ian: quite low. at the fact that they will be the nominee means they are higher then you would like them to be. personally, i think five percent-10 present. i don't think in the general election he will be able to track the women and hispanics. be 70-year-olds -- at the end of the day, it is an anonymously taxing campaign. a health stumble for other ones would be significant. the vice presidential nominees matter so much more when you talk about someone, who after the second term is 78 years old. sandersthink bernie does with hillary clinton is that no one talks about her age. am: quickly, you talk about g0 america? not now?

10 years out? is that thee risk united states increasingly doesn't get stuff done in washington. done over have gotten the past few years like the obama health care and the energy revolution. marriage, drug revolution. these are fairly momentous as they are all happening at the state and municipal level. the reason the paris accords on climate got done is because of mayors and ceos. tom: ian bremmer, read his book. up, bloomberg go on television. surveillance" will continue on bloomberg radio. ♪

the apple ceo makes his first trip to india. the price, one billion sales in the next five years. ♪ a warm welcome to you. i am jonathan ferro here with lisa and david. an exclusive interview with erik schatzker about what we should doing with our money. we will preview the f1 see minutec minutes. >> and we have the earnings. jonathan: let's start with t