talks of as the fed june rate hike, stocks rally and the dollar retreats. blackrock says arise will not happen until july. g-7 leaders meet in japan. yen strength sharpens the debate about stimulus versus alterity and japan faces off against germany. the search for the egypt airplane enters a second day. records maysays the have been found. this is bloomberg "surveillance , of course we have to look

at central bank's. there is that all-important g-7 meeting where we talk about currency wars. we just found out in the last couple minutes that according to egypt state tv the egyptian military saying it has found part of the wreckage. tom: these two headlines are coming up across the bloomberg. what i find fascinating is the different treatment in waiting thehis plane crash and speculation about terrorism within the london newspapers and the new york papers. it is amazing how this tragic event translates differently across the atlantic. francine: that is something we will have to explore further. in the meantime, let's get straight to bloomberg first word news. vonnie: breaking news on the missing egyptian airliner. according to reports from egypt's broadcaster, the military has found wreckage from the plane off the coastal city of alexandria. 66 people carrying

vanished while flying from paris to cairo. thereiation minister says is a chance that terrorism knocked the plane out of the sky. lasteading suspects in november terrorist attacks in paris will be questioned today. authorities hope he will give them information about islamic state's strategy. he was arrested and belgium after four months on the run. he was extradited to france westmont. avoidcameron trying to what he is calling a psychodrama within his conservative party. radion spoke to lbc rejected a suggestion that he would hold a debate with boorse johnson. in austria, the freedom party hopes to leverage unhappiness in an election victory sunday. will break with decades of

presidents who agreed to play a ceremonial role. in washington, house republicans and democrats have reached a deal on puerto rico. it called for a control board to manage the u.s. financial obligations. the board would oversee some debt restructuring. lawmakers are trying to pass the bill before puerto rico defaults on a $2 billion debt payment due july 1. thank you. now, for the latest on that possible down to egypt airliner, let's bring in our north africa bureau chief. we just heard news in the last couple minutes. they were citing the state owned egypt tv, but actually know it is the egypt civil aviation saying that they found some of the wreckage. >> that is right. there is actually, there are two statements. one from the civil aviation ministry and one from the military. the statement from civil

aviation says -- they are the variations in the detail. one includes that they found the longings from the passengers, but essentially, what they have announced as they found some debris 290 kilometers off the coast of alexandria. francine: does that make sense when you look at the flight path? i'm not that familiar with egypt. but it seems to be where they were. it seems quite far from where they were initially looking. just kind of looking very broadly at a map, it seems -- it is not that far off. i don't know the exact location, the accordance of where the wreckage was discovered, but it is somewhat in line. the flight path would have probably taken it over alexandria anyway. us about the direct and domestic reaction to this tragedy in egypt?

is it to the goal, or is there something unusual to how cairo and the egyptian people are handling this crisis -- or is it typical? tarek: aside from the obvious sadness or sense of remorse, i think there is also a concrete sense of frustration. that kind of feeling of why us? why does this keep happening every few months we try to put our feedback on the ground and get moving. there is that sense of frustration about the lack of progress or the fact they keep getting knocked back a few paces. tom: is there a special relationship between the french transportation authorities and the egyptians? is there something unique there over the years, or is it from a distance? tarek: i don't think there is anything that sets it apart. they have good relations and coordinate on as needed. the same iway they would with

ntsb. tom: thank you very out of our cairo news bureau. francine, i want to point out the distance in kilometers is for those ines america, the distance from new york to baltimore roughly. north off the coast. i say that broadly. we do not know the exact location. off the northern shoreline of egypt, alexandria at the end of the nile river. equities, bonds, currencies, commodities. we set up a quiet friday. we are thrilled to bring you -- to synthesize your work into the 16,kend had euro 112. indicates a stronger and resilient dollar. -- 1.1216. second board quickly. this is the yield elevated 0.89%. there is brent crude. 49.15.

francine: i picked out wti. we are switching things out. overall, there seems to be a little bit of signs of stabilizing after what we heard from the fed. we saw markets a zigzag quite a lot. now they are searching on expectations of a u.s. interest rate increase and a lot of emerging markets are putting -- the stocks and your 600 gaining 1%. yuan.ted to show you the global strategist great to have you on the program. on a week that has been quite busy. is this fed really getting ready to raise rate? or trying to make sure the markets are pricing a possible rate rise? >> they want to put their throw in the water and see how we react. the fed felt the market is underpriced.

they would be alarmed if they needed to raise rates and we were not ready for it. i do not think they will go in june. i do not know many people who think they will go in june. francine: july? >> i would not be surprised if the fed would like us to think about july. if not july, then maybe december in the sense of you run into a difficult period in the calendar. for december as being the most likely month. they've acted at the end of the year with tapering. i feel they want to do something that they are put off in washington. tom: it is fascinating. put it off pass the summer. certainly very different than what we heard from mr. dudley. at the landscape. and synthesize this into equity and foreign exchange markets. yield.year here are the different fed meetings. the trend of a higher yield. once, twice, three times brought the yield down to that

low standard deviation trend line. we bounce right back up again. why are we seeing the cyclicality? kit: at the moment, because in a sense we have tied everything to the fed having these absurdly low levels in order to help confidence in asset markets before they raise rates. high enough tot scare emerging markets to roll the equity market over again, the fed backs off. so, we bounce around in this just where i think we're dangerously addicted to the drug of easy money, zero rates or quantitative easing at this point in time. and that is keeping us -- you can overlay the chart of the s&p on top of that. not quite making new heights. tom: i have two morning must reads. papery fischer's yesterday in support of michael at columbiaareer

university was my reading for the weekend. it was extraordinary. it showed the vice-chairman and all his intellectual glory. within that said, are we working within the theory of professor woodford of columbia, or for that matter, professor good hardening went? goodhart.essor policythink there is a that we have at the moment to buy time to see if we get something to boost productivity in the united states, to get this growth out of this slow piece, whatever we call it, new normal. to break the problems with debt. what i worry about is we are not using the time very well. tom: that is exactly what tim geithner told me eight years ago. juckes just said is brilliant about by time on the x axis of every chart. that is all they have done for eight years.

francine: they have bought time but no one used it. tim geithner tells you they are buying time. you expect someone to take that time and do something useful. we'll talk about currency wars, and what it means for yen strength. live from the g7 meeting we will be joined by a finance minister for the netherlands. and we will talk to the e.u. commissioner. all of that and much more coming up on bloomberg "surveillance." ♪

tom keene is in new york. we have quite a lot of news to get to it let's get started with a bloomberg business flash. creators of angry birds are hoping the movie will revive interest in the franchise. the movie opens today in the

u.s. i'm not kidding you, tom. they created more than a dozen games. interest has been waiting. hsbc will rely more on digital banking in india. the british bank will shut 50 branches in the country. it's targeting affluent indians. and deutsche bank is investigating whether a group of employees made millions by improperly trading with the firm. for now, they have halted their bonus payments. six employees are involved. the trades involved credit indices and the underlying debt. that's our latest bloomberg business flash. more on banks now. francine: goldman sachs holding its annual shareholder meeting today. this comes back on deutsche bank's agm yesterday where

investors signal confidence in john cryan and rejected the board's new compensation scheme. michael moore is the head of the u.k. finance team for bloomberg news. still with us is kit juckes. michael, when you look at goldman sachs, this was kind of the linchpin of what wall street was getting right. the burning showed us a couple of weeks ago that goldman sachs has cost discipline, and that made it get through a very tough quarter. what will we hear today? will hear some discussion about cost-cutting and their commitment to the trading business. what hashat is kind of set them apart in the last few years as they have been the most vocal about we are staying in the trading business. we are not getting out of significant chunks of it the way you have seen at some of the europeans. and i think they will continue to try to lay out their reasoning and what has been a tough trading environment. francine: i guess shareholders will be quite -- i do not know if it is angry but will ask tough questions. michael: we will see.

the last couple years, goldman's annual meeting has been relatively lackluster. there have not been a lot of shareholders that have shown up. they've held it in different places. closer to newg york this year, i will be interested to see if we have more shareholders. tom: i will give you agitating. what i don't get is kit j 143,000cgen is employees. when i'm in paris, i can see they are bank. his goldman sachs a bank? some ways.ey are in they are trying to be a digital bank. they are launching this online landing platform. -- lending platform. they have up their deposit funding. and now they are looking to do something with that. you are starting to see them act more like a bank. they are not going to be the 150,000 employees and we see a lot of commercial lender's.

but around the margins, in their asset management business, in these new ventures, you are starting to see them act more like a bank. tom: so, they are going to be given out credit card applications at yankee stadium? that is where we are heading. i do not buy it for a minute. michael: we are little ways away from that one. tom: you and christine harper are pros. what we listen for at this annual meeting? michael: i would like to hear what lloyd blankfein vision of what the fixed income rebound looks like for the trading business. whether it is going to be five competitors fighting over a pool of $80 billion or whether it is going to go back to nine competitors fighting over $150 billion. we have seen so much shrinkage in that business. the question is whether it's

structurally changed and secularly down from where it was five years ago, or whether he is holding onto the believe that a lot of this is cyclical. francine, operating income was $17 billion and they made it back to $10 billion. francine: yeah, we were talking about market cuts. and about cutting some of the -- banks. yesterday, it was an advocate it seems that after some months -- about thencern viability of deutsche bank john cryan was able to garner a little bit of shareholder confidence. michael: he seemed to generate a lot of support at the meeting. both in the voting and the commentary from shareholders. people seem to get behind him and his strategy for turning around the bank. the chairman got a lot more criticism than cryan. cyran has been there less than he year. i think people want to give him some time to try to turn this around -- he has been there less

than a year. francine: we will get back to the banks of the volatility. quick update on what we have heard in the last 15 minutes. the egyptian presidency has commented in an e-mail statement about the egyptair plane that went missing 48 hours go. egypt has offered its condolences to families of people, passengers on the egyptair flight. we still don't know what has happened to those 66 passengers on board of the flight from paris to cairo. we will have plenty more. in the last 10 minutes we understand from the military they may have found part of the wreckage. we will update you as soon as we have more breaking news. ♪

francine: welcome back. it is "surveillance." tom, this is what i pigged out for my morning must-read. my morningut for must-read. the financial times is talking about the ongoing powers mr. erd ogan is taking. face of uncontrolled trafficking, angela merkel e.u. institutions to craft a deal to which turkey would receive significant benefits in exchange for holding migrants. with three official visits, ms. merkel is widely perceived in turkey is having "voted er dogan." we are expecting a decree to be passed from mr. erdogan today. kit, i know you follow turkey.

when you look at erdogan, it is a tricky situation. e's becoming much more like vladimir putin by the day. kit: hyes. can win as many elections as you want. but he is certainly not into freedom of the press. he's certainly not into free exercise of your views of your kurdish. so, he's a difficult man for westernize investors to love. in terms of the way the country is run. incrediblytically important. i still think of it as an investor. the achilles heel of turkey is the dependence on foreign capital. if we ever get back into a period where emerging markets are selling off, i am not sure that all of the love he's

getting from europe alters the reality of the currency taking a hit. francine: the problem is there is also pressure being exerted by the president on central banks. at the same time coming after look at foreign investors and say they want currency stability. basically pressure from the president directly demanding lower interest rates. kit: correct. on mr. putin at the same time, ces, iook at the two pla am much more bullets over the ruble than the lira as a place to park my money because of exactly that. inrussia i get more yield current account surplus and political stability. in turkey, i get political stability but concern about what that means in terms of its monetary policy. a sense they do not mind a weaker currency. tom: i want to come back to the ruble in our next half hour. for now, i believe we are seeing brutal moves in foreign exchange. the other day we saw euro-dollar

out to 2.8 standard deviation. is that our future this year? it ishe danger is extremely brutal and volatile and choppy without huge directions. that's brutal.s, but it is brutal if the fed talks about talking about moving. then they don't move. it is brutal back the other way. we are not in a stabilized equipment -- equilibrium. shepardson.up, ian he has said in writing that mr. is elected. sanders president, he is moving to america. next on american economics. ♪

tom: good morning. yes, we're watching the news flow from the tragedy of the egyptair crash. right now are bloomberg first word news.

breaking news on the disappearance of that in egyptian airliner. egypt's government says wreckage has been found 180 miles off the coast of alexander. that discovery was made by the military. no other details are available. 66 people vanished over the mediterranean. egypt's aviation ministry also there is a better chance that terrorism knocked the plane out of the sky rather than mechanical failure. the new president of taiwan is resisting pressure from china to a knowledge their part of a single nation co. she was sworn in as the first female leader. she says she seeks peaceful ties with china. finance ministers from the g7 countries are meeting in japan where they are sending mixed signals about how to increase economic growth.

the agenda includes more fiscal stimulus. but germany is pushing back against calls for more spending. a new study says more than half a british university students don't know the date of the referendum. plus, many of them run the risk of not being able to vote because they are on the electoral register in the wrong location. poll show greater support for staying in the e.u. among younger voters. hillary clinton says donald trump is not qualified. clinton told cnn the republican nominee is out of step with what a president would need to combat terrorism. forp says the front runner the democrats is unfit. whatever anybody political persuasion, it is beginning to heat up. this went viral on twitter. is associatedhe with brookings. in "the washington post." on fascism.

we talked to ian bremmer and about this. these are two thoughts. successful fascism was not about policies but about the strong man, the leader in whom could be entrusted the fate of a nation. whatever the problem, that leader could fix it. dr. kagan moves on to what these people will not see is being republican supporters of mr. trump, is that once in power, mr. trump will old them and their party nothing. this is your first read into the weekend. you may agree or disagree but there is a hilarity as we go into our political summer. iaian shepherdson with us. this is anckdrop for economy. it is the economy election. it's not, is it? tan: it is and it isn' because it is the economy that has driven the rise of trump. tom: and sanders. issues that the

mainstream have not addressed -- which is the hollowing out of mostly blue-collar jobs over the last 20 or 30 years. a flattening of living standards. which the traditional parties have had very little to say about. and sanders have trumped -- and trump have picked up on this and have pushed it in. tom: going into this weekend, the stanley fischer paper with columbia university in woodford. the assumption of your academics is it is all in together, america. a one mode america. john edwards is right. it is a to america. a bimodal analysis. do you use that within your economic study? ian: this is where economist go wrong because we tend to look at the overall picture and we say a trade deal, nafta, has generated a net gain. what we cannot have much to say about is the distribution. there are winners and losers. the losers have lost a lot and there are a lot of them.

the traditional parties have not spoken to those -- verlinger was courageous in his comments on nafta and the effect of that upon two america's as mr. trump and mr. sanders speak up. francine: the problem on the side of the atlantic is you're waiting for -- away from the part of politics to simple he understand from an economic point of view whether donald trump presidency would look like. what is it meet for trade? what does it mean for bondholders? ian, what would it look like? is it too soon to know because he changes. ian: it is another day, another proposal. the thing to bear in mind about trump if elected he goes to the hill with very few allies. it makes it difficult for him to get anything done. he would be there in charge of one branch of the government but not in control of congress. we've seen over the last couple

years of the obama administration, if you do not have a lot of friends on the hill, it is hard to get anything done. why he is -- while he has said some very alarming things, his ability to do any of it is going to be constrained. he would be in office but not really empower, thankfully. francine: i guess if you were elected, he would give the sense to a lot of the world superpowers becoming more inward looking. what does that do for world growth? is awhat you end up with declining spiral and world trade which we saw in the 1930's. it did not end very well. trade vinesf world has lifted hundreds of millions of people out of poverty over the last three decades. -- the growth of world trade has lifted her the last thing we want is an unwinding of those gains. what trump has been pointing out is those claims have hi impose losses in the u.s. what he's speaking to is the people have been dispossessed by trade. the problem is that the net from

a global perspective, trade makes everybody better off. what politicians have not found is the answer to how to do with the people who lose out. just denying people have been lost out, does not cut it anymore because they have lost out. vonnie: this is all applicable in the brexit debate. this is why the exit his campaign and nationalism is on the rise in britain. in a different way than it used to be. kit: i agree with everything ian said. if we see a downward spiral and world trade as we become more insular, what will move will be the people from the poor countries that were surviving by exporting were going to come, whether we put walls or leave the e.u., whatever we do, those people now will get in boats and cars. so, this issue of inequality is not going away. economice issue of the and political mainstream's

inability to listen to these forces. allre going to hear this over europe, in italy and france and germany. we will hear it from spain. we are going to shout about it for the next six weeks. tom: we are at the end of may. let's do something i do every four years. week before is the the election in america. we have a gdp report october 28, the friday before the first tuesday of november. ian shepherdson, you say to yourself, essentially the october 28 election. that will be the mood going into the ballot boxes. ian: that will be ok. we had a terrible first quarter. the fed does not believe it. they said so in the minutes early this week. absolutely. i do not believe those numbers. what is going to happen in the second and third quarter will be a rebound. see probably. accelerating wage gains and probably a lower on a planet if -- lower unemployment rate.

if we were fighting the selection on the headline economic embers, clinton would be issuea shoe-in. but we're not. we have not had an election fought on that basis in the u.s. as far as i can remember. it has always about the unemployment. it is not anymore. you can have millions of people feel dispossessed. those people have been energized by sanders and trump. francine: i guess it goes back to the fact it was so difficult to predict the rise of donald trump, because on the face of it, economically, the u.s. is not doing badly at all. wages are picking up. that is the inequality problem. kit: it has been bubbling under the surface for a number of years. the only way you have been able to see it, is the books we are reading w have changed to reflect this. now it is having its day. tom: kit juckes with us in

london. and ian shepherdson of pantheon economics. in our next hour, this is a really good time to catch up with our global m&a coed at citigroup. speak to him about the distortions of our economics and what it means for a burgeoning m&a. this is bloomberg "surveillance ." ♪

"om: it is a "surveillance difference. where else can you get dollar-yen. francine lacqua demanded i go to this this morning. for the first time in the history of bloomberg "surveillance," we look at the currency pair. are you kidding me? it is friday. let's consider rand-ruble. so, you believe the russian ruble will advance versus the

south african rand? down to the blue circle? why is that? firstly, there is a big jump we saw when sanctions imposed. that can be reversed as we rehabilitate the russian administration, if that's the term, and as oil prices stabilize rather than recover. by contrast, the problems of the politics, those problems are going to continue in south africa. and they are going to continue to the devil the economy. bles another country vulnera to weakness in china. and a current account deficit. it is emerging-market waiting to continue. tom: what about ruble versus euro or ruble versus dollar. i love your idea. bring up the chart.

this is brilliant reversion to the mean. this is what he does in his day job. what about putin vs. the president? kit: i was looking at this chart this week and the sense of whether i wanted to be in terms of the overall view of risk aversion that we have in markets at this point in time. u.s. bondre now is if yields start moving higher and we start getting more nervous about the fed and that tips emerging markets down, the ruble and the rand and the turkish lira is going to weaken. if we go back to naw, they are not going to raise rates. everything is all right. investors will still need the yield. a, i want to buy time as trader or an investor, i can't just take a view of going bearish of things and waiting for it to blow up. if i'm long the ruble and short the rand, i can earn some carry.

so i can position myself by investing in one or the other. i think timing the next significant emerging-market risk aversion is pretty difficult right now in terms of just this week -- francine: is it not linked to the dollar rally? or possible dollar rally if we had divergence? which would push the chinese to do more. and it may push the chinese to devalue the renminbi. sense to me that if we get into position were tighter u.s. policy gets the dollar up. that puts more pressure on the renminbi. that threatens to spiral financial markets. who loses most? south africa is a loser. russia is a relatively -- winner. francine: kit juckes there. coming up live from the g-7 in japan we speak to jeroen dijsselbloem. the finance minister for the

netherlands. we will ask him what he told the u.s. treasury secretary. we'll talk currency wars. ♪

tom: good morning. bloomberg "surveillance".

an important interview coming up with an eu leader coming up. right now our bloomberg business flash. vonnie: yahoo! is down 3% in the fremon -- in the premarket. bidders are'sher expected to offer 2 billion to $3 billion. bids due thed of first week of june. stores in japan will close this year struggling to compete with japanese fashion brands. gap says it's refocusing on north america and china. that is the latest bloomberg business flash. g-7cine: all eyes on the meeting in japan as finance ministers discuss monetary policy. joining us from the meeting in japan is dutch finance minister. jeroen dijsselbloem. for joining much

us. i know you met earlier on with treasury secretary jack lew. you discussed greece. did you discuss anything else, currency wars and possible fx components? mr. dijsselbloem: no, we did not. the secretary was to be informed of the progress we are making on greece. i could give him a positive message. a lot of work has been done since we reach the political agreement on the third program. the greeks have worked very hard pushing through structural reforms on all different fronts. not we are entering into a debate about their debt sustainability. francine: jack lew has been urging europe to provide debt relief to greece. are you concerned that if we do not get the relief and if we do not have a solution for greece in the next couple of weeks or months, we may look at another some of on uncertainty on greece, on brexit and the eu

like we did last year? notdijsselbloem: no, i'm worried about that. we are at a completely different situation than we were a year ago. ek government is very constructively working with the european partners to improve the state of the economy, to improve public services and administration in greece. they are fully committed to the program, which is a completely different situation from where we were a year ago. on that basis of that confidence, we are now entering into a discussion about debt relief. if you look at debt sustainability, greece has a h igh sovereign debt. we have given them a long time to do with that. on average, 32 years. interest is very low. we stand ready and are now discussing to do more. francine: are you worried or is their key concern for a lot of g-7 finance chiefs, currency wars?

you had brought them up in shanghai. you said what japan was doing was a topic of concern. do you have the same concerns this time? well, i thinkem: there is general agreement that adjusting your currency rates just for the purpose of improving your competitiveness is not going to work. it only has a short-term effect. it will probably provoke the same kind of reaction from other currency erareas, and effect will be short-lived. to thing to do if you want improve competitiveness is to deal with the structural business environment in your countries, make sure that investment go up. make sure productivity improves. that is the kind of thing you need to do if you have a competitiveness problem. and not try and adjust your currency rate. tom: tom keene in new york. good morning. if i look at the dance over the

imf'seece workout, in the ability to project their plan upon the german people. beg, begeen several for a restructuring exactly as the imf proposes. what is taking so long? aat do you need to a get proper debt workout for the people of greece? mr. dijsselbloem: first of all, you have to realize at the end of 2012 we already, the major debt operation, reducing the debt burden by 40%. now we are looking ahead. what more needs to be done? we can take different measures, some in the short-term, some of the end of the program. we are designing and discussing those now. hopefully next tuesday, and the next euro group meeting, we will

get that deal that i think greece needs. tom: can you structure that deal and the interest rate delayed out to 2030, 2040, given the negative interest rate environment of europe? mr. dijsselbloem: as you know the largest part of the greek debt is in the hands of the european emergency funds. esm. already they are providing a very low interest rate. and we are considering what more needs to be done on that front, also. there are other levers you can use, like maturity periods, grac e periods, swaps of a more expensive loans or cheaper loans. all of these instruments we are considering. to put a package together, which as i said, something is going to be done up front. and some things will be put ready for a later date.

for example, at the end of the program. francine: is donald trump youidency as worrying to because it would be inward looking at a possible brexit? mr. dijsselbloem: um, i think there is a trend everywhere, certainly europe and the u.s. where people think that we are better off without the outside world. i don't think that is possible. and i do not think it is true. think, for example, in europe, our cooperation has brought massive improvement of wealth as well as stability. and international trade has always contributed to the wealth of our nation's. and that's true for the u.s., which has always been at the forefront of fight for liberal markets and liberal market economies. but certainly also true for europe. i would assume that any new president -- you so much.

we greatly appreciate it from japan. jeroen dijsselbloem. ian shepherdson, you have been listening to this. it is surreal, given the financial structures of europe. it's the oddest conversation. ian: the two things i take away from that conversation is that the greece deal will be done. grexit is not a threat. greece is effectively a ward of the european structures now. it is not economically sovereign. it is not going to be allowed to leave the euro. and they are going to throw them enough bones to stay in. the second thing is that no mention whatsoever of the impact individualseurope, who have lost out from trade. sful unawareness from the policymaking establishment that we have in u.s. tom: that is the same phrase francine uses about me. "tom, you are blissfully unaware." francine: u.s. politics seems

pretty odd for my side of the atlantic. let's not only beat up on europe . tom: next we will talk french productivity. ian shepherdson, thank you so much. it's a cat fight between me and francine lacqua. referrieeing for us. a good time to catch up. an important conversation with citigroup. we will look at m&a and the time a single digits. of oddest of internal rate environments. futures green on the screen, up four. dow futures up 42. a chill in new york city. good morning. ♪

♪ to the have just spoken

finance minister. gives a stanley fischer lesson on interest prices and the crying need for economic growth. government says debris from the plane has been found 180 miles off the coast of alexandria. good morning, everyone. it this is "brilliant surveillance." i'm tom keene. francine maclachlan london. francine, i thought the minister from the netherlands was blunt about greece after this conversation with the secretary. francine: he was. it goes back to the tension with the germans and other european countries. we go back to this austere yes debate. tom: an important conversation for the week. now, the difficult news

from egypt. here is vonnie quinn. vonnie: investigators have the first clues of the missing egypt jetliner. some of the wreckage has been found. fromiscovery of the debris the plane and passenger's belongings have been found 180 miles off the coast of alexandria. last month -- suspects in last month's terrorist attacks will be questioned. he was arrested in belgium. british prime minister david cameron is trying to avoid a drama within the conservative party over referendum. cameron spoke to radio and suggested he might hold a debate with conservatives who want to leave the eu. and austria, the populist

freedom party helps to leverage unhappiness over -- they have promised to way into austria's politics. in washington, democrats and republicans have reached a deal for puerto rico's debt. the board will oversee debt restructuring. lawmakers are trying to pass a bill before puerto rico default on its payment due july 1. i'm vonnie quinn. tom: thanks so much. commodities, bonds, dollar stronger, oil with a dash. crude 48.80.

modestnding a modest, bid. francine, tell me about your psychodrama. francine: financial markets are saying less psychodrama and seeing signs of stabilization by a certain expectation. stocks up. dollar strengthening. important youy did that and rounded up. let's go to the bloomberg. where are we as we go into friday? meetings, bounce, bounce, bounce. that regression. we have regressed to the mean. there it is. we have shown that too many times. francine: because there is the g-7 meeting in japan. out something for yen.

blue is the six months. where your -- it -- s us traders if you look at the chart, it suggests traders see declines a short-lived. tom: very good. let's get to an update on the equity markets. gnosisthan gollum psychodrama knows as reporting. it gives us a market backdrop. yields up, equities down. that still true? short run,n the very the market may not like it, but the reality is the market wants

higher interest rates because it means conditions around the world are not sickened anymore. tom: i have to make money on monday to make up for the bets i lost this week. would you go long on retail? jonathan: i think traditional retailers will continue to struggle. investors continually underestimate the damage from amazon. everyone in their wake is carnage. tom: granting, it is amazing in the report said nobody mentions the letter a word. it is stunning. francine: jonathan, when you look at the luxury players, is the u.s. consumer back? benchmark forot a consumption strong enough to get to the u.s. growing at a sustainable level. jonathan: if you look at the

consumer discretionary space, it is by far the best sector in terms of earnings this past couple of quarters. there is a really big difference between the consumer as you would measure it when you are looking at macy's or nordstrom's or walmart and then the broader space. if you look at even the retailers, the auto retailers, the home-improvement retailers are all doing terrific and the tom's point,n to they are not in the sights of amazon and holding a much better. vonnie: when you look at active management. active management is great. it has been difficult to do. andas been quite binary link to monetary policy. jonathan: when you look at active management, it is the important thing -- the important

thing is that it has its own rhythm and tends to go in and out of favor. for example, between 2001 and 2012 four 2013, active managers massively outperformed for a period of a dozen years or so, and recently, it has been more difficult. the reason is, when the market gets concentrated in a small number stock, that is what happened in 2016, that is a difficult environment. the 10 to be pleading. i don't think the reason environment is an indictment. tom: we address stan fisher's fabulous speech yesterday at columbia. ofse are functions in honor -- jonathan golub, you have these memorized. what this means is low yields

forever. right? jonathan: those of the first time i have seen those in a while. here is the question for stocks, not whether they are earning more money, but in an environment with low inflation and low growth, are stocks worth more? i think the answer is, yes. tom: the idea of earnings divided by the yield flipped by we need to getdo used to a 50/50 environment? are you kidding me? do you -- do we need to get used to a nifty 50? jonathan: the fairmont on the market is probably in the low 20's given where interest rates are. tom: this is going to come back to haunt you. [laughter] from your perspective, if you add dividends and buybacks, which is what

companies are paying out to shareholders, stocks are yielding 5%. that is an unbelievable number right now. tom: that is unreal. we are going to do these equations with peter tague, with citigroup, he took these in a agose on thursday 42 years in college. there it is. we are going to link stanley fischer into the world of m&a. peter tague will join us from citigroup and we will look at the new internal rate of return. right now, we look at markets dollar, stronger looking forward to jonathan golub and peter tague on "brilliant surveillance." ♪

♪ this is "brilliant

surveillance." straight to the bloomberg business flash with vonnie. benie: digital banking will relied morning via. shut itssh bank will 50 branches in india. bank is investigating whether employees made millions on properly trading. according to a person familiar with the matter, six employees are involved and involve credit indexes. shares of you who are down 3% in the premarket. yahoo!'s core business might not bring in as much from the option as expected. verizon and other bidders are expected to offer $2 billion to $3 billion. the next round of bids are due

the first week of june. that is the latest bloomberg business flash. shelling andeen fisher's equation with jonathan showing we have been stanley fisher's equation with jonathan golub. there are the wonderful stan fisher's equations. peter now joined by tague. you represent one of the 42 buyers of yahoo! right now. there seems to be a mystery about where the biggest. are you surprised? peter: there are no surprises that the buyers are prepared to pay less than the sellers want. the fact that this is leaking into the press is an enormous surprise -- isn't and what a normal surprise either. tom: i understand this is a delicate point for you.

the adjustment on the income is it an urgency if you look at the accounting side of yahoo!? ther: i can't comment on pricing side of yahoo!. have a role in the process. i do think the totality of the process -- it is not a specific thing that is going to be a 50%.yst, a drop of roughly buyers versus sellers expectations. i don't think you can connect down to an accounting issue. tom: is it a different m&a withook when you deal technology people in silicon valley? do you do with them differently if you dealt with an industrial company in iowa? peter: you would probably have to say yes. tom: i am giving -- getting you in big trouble.

[laughter] do they understand internal rate of return? peter: the absolutely do. francine: let me get you out of trouble. what is the most depressing thing you have seen in m&a so far? expecting more m&a news, but it is contained in certain industries. peter: we have seen to industries so far this year that have increased in terms of the level of activity in 2015. the broader industrial space and technology -- everything else is down relative to 2015. we have seen a relatively more contained m&a market. that said, volumes year to date, which suggest we are going to come in in the 3.5 toy and trillion. $3.5 we would not characterize this as a down market.

given the qe and where interest rates are around the world right now, would you have expected more qe? is it ceos holding back for fear of megamerger's? ofer: there are plenty things for ceos to worry about. the m&a market is driven by confidence. that confidence has been shaken and you canear point at a number of things, whether it is concerns about brexit, fed tightening, or tensions in the south china sea. causing -- is it causing ceos speeding up mergers? peter: i don't think that a small change in the fed rate is going to make a difference in the way ceos think about funding a transactions for the cost of

capital. it is too small a move. what we are focused on is the longer term trend and if there is a series of near-term moves, what does that say about the longer-term is marked -- the longer-term? tom: is m&a busy because of the search to substitute phenomenal gdp? maybe a little bit. but the cost of capital right now is so cheap and growth is so low that yes, you would think so. between now and the end of the year, i am going to be more optimistic than you on m&a with volatility much lower than it was eight weeks ago, and what the cost of capital still low, like you said, 25 basis points on short-term interest rates means nothing. i think as a prize between now and the end of the year, we will see much more m&a. peter: from your lips to god's years. [laughter] tom: there is a new frenzy

urgency. our sane decisions being made -- are seen decisions being made? peter: i don't think there is any systemic sloppiness around the m&a business. the m&a market today is being driven by a surge for growth and is being driven a questionably a relatively low cost of capital. we are seeing year to date record levels of all cash transactions relative to the last couple of years, and that is powerful stuff. jonathan: we are seeing unbelievable capital discipline on the part of companies. you are not that title using capital within your company and then sloppy on m&a. -- it seemspace like it is in total cash digital disruption. peter: the media space has turned into a small space on how

you defined it -- depending on how you define it. if you want to define it as including yahoo! and google, it could be a more interesting space. tom: this is fabulous. peter tague and jonathan golub. coming up, francine's important -- with the of the economic affairs commission. this is "brilliant surveillance."

♪ francine: this is "brilliant

surveillance." tom, i need to give you an update from the egyptian authorities. wreckage they found and belongings from the missing egyptair plane that went -- that advanced 48 hours ago. -- that vanished 48 hours ago. itemsships found personal and parts of the plane. north of kilometers alexandria. we are hoping to hear more news shortly. of course, the search has been ongoing since the disappearance and are looking for the black boxes. tom: thank you so much. let's move on to the morning's must-read. stanley fischer is always interesting. he did a tour de force in honor of michael woodford. this is on money that does not exist within the woodford model. woodford provided

justification for the behavior talkanks that sink -- that about monetary policy in terms of the interest rate. faster trend growth would increase a longer running: beer -- would increase a longer equilibrium rate. golub, this is the arch question. everybody needs growth. where is it jonathan golub? get used to should something like gdp in the low t wo's. we are going to make mistakes and start to see policy officials pushing too hard that will not return. ,om: this idea of nostalgia

peter, you lived this. world, itingle digit made a lower rate of return in your world? peter: it does apply a lower rate of return in our world. it is defined by the overarching environment for returns. that said, i think m&a is one of the ways companies are delivering growth to their investors. peter, i have always been told that the problem with m&a is that it works for a culturally fits. if you have these megamergers where they don't fit, it can get very, very ugly. we have moved -- have we moved on from mistakes in the past? it would be wonderful if we could say the m&a business got to a point where we did not make mistakes. that is not reality. i think companies are conscious of the social issues you discussed and are building them and to their planning. jonathan, does m&a market

create a bid on the market? jonathan: how much growth is there -- no, it is at -- sign of confidence, but short of that, i don't think so. citigroup.tague with in japan, pierre moscovici, the conversation with francine lacqua. this is important on greece, and the imf. this is "brilliant surveillance." ♪

♪ it is "brilliant surveillance." an update onto get egyptair. here is on a claim. found: officials have

traces of the egypt jetliner. wreckage and belongings from passengers have been recovered. it was discovered 180 miles off the coast of alexandria. over the mediterranean on a flight from paris to cairo when it vanished off the radar screen. 66 people were on board. egypt is not ruling out anything, but officials say it was more likely a terrorist attack than mechanical failure. is new president of taiwan getting pressure from china to acknowledge it is a part of a single nation. taiwan'sorn in as first female leader. she thinks -- finance ministers from the g7 countries are meeting in japan about how to increase economic growth. back againstshing

calls for more spending. a new study says half of british universities still know the date of the referendum on the european union. some of them are not -- are running the risk of not being able to vote. hillary clinton says donald trump is not qualified to be president. clinton told cnn that he is dangerously out of step. response, he says she is unfit to serve and out of touch. i'm vonnie quinn. tom: thank you so much. secretary is speaking on china right now on balance growth and the obvious idea of a global economy. the backdrop, the markdowns we have seen from the imf.

lew must address puerto rico. time now for a single best chart. golub andwed -- jon peter tague with us. peter, it goes back to the beginning of citigroup and the idea of you guys funding the panama canal at the request of teddy roosevelt. it just shows what we have seen out of the depression in terms of a persistent growth. a the middle of that is carter malaise, which is unfair. the sentiment of investors, both public and professional investors, instrument is when you consider we are in one of the greatest

bull runs ever. it is a shock. there is ashocking disconnect between -- look at the numbers of jobs be created. this believe that there is no job creation. peter, this goes over into your world that all the good is being allocated to the golden age, corporate guys you talk to every day, where you said, when does america start to benefit, or do they stay in a malaise part of our political discussion? i know big you can separate the benefit to the overall economy from the benefit to any given individual. it is a part of a strong economy and strong confidence that will lift all votes. the connection between my business and the m&a business is a long one. tom: john, quickly. jonathan: if you are running

under 2% inflation in the stock market is up, there is no malaise. i just don't understand and i appreciate the position, but now. peter: isn't that a feature of the difference between a backward looking and what do people expect the future will hold? in the uncertainty associated with it? stalks --u see long stocks until the end of the year? look for this single best chart. clock in, francine the conversation with pierre moscovici at the g7 meetings with secretary lew. this is an important conversation, front and center on greece. this is "brilliant surveillance." .

♪ london --i'm francine i'm francine lacqua in london. we go now to japan to the g7 meetings. joining us now from the meeting in japan is european commissioner for economic and financial affairs, pierre moscovici. thank you for joining us. there are a lot of risks out there. we spoke about greece and negotiations for debt relief. there is a u.k. referendum on the u.s. presidential election. what were you the most? pierre: about the u.s., it is up to the voters to decide.

hopefully they will be wise and choose an open attitude on greece. i am optimistic and willing to find a solution by the 24th of may and i would be a great signal that we are solving this issue and we are maintaining the integrity. for the brexit, i hope the british voters will choose to remain because that is the only win/win solution for the u.k. and eu. comesne: the u.k. always up as the problem child because of the political concerns and referendum. change?l it i am not a on that. eu isthe economy -- the in solid recovery. it could be even stronger.

it could be faster. it could be even superior. but we are at a level nearby 2% and for next year. and it is solid. we need to pursue reforms. we need to keep a strong pace of fiscal consolidation. we are leading the investment plan. the eurozone is on the right track. there is a need for more political leadership. crisis needs to be addressed in a stronger way. francine: monetary policy helps, but everyone is doing it. i'll be in currency wars? -- are we in currency wars? there: we are supportive of

ucb. bcb. to goped the eurozone through the crisis and maintain its integrity. it also acts in the right way of fixing the currency rates, which is obviously rather an asset for the eu. francine: commissioner, how would the eu deal with the president -- with a president tromp if you look at some of his -- how would the eu deal with a president trump? what would that do for trade? pierre: i cannot intervene in u.s. politics.

i have my own feelings and convictions. i hope there will be a choice the keeps the u.s. in international approach as a global leader. we need that. we also need that if we want to move on trade issues. a good negotiation leading to a good agreement. is up to the american people to choose their president. personally, i would not be reassured with a donald trump. francine: could it hurt world growth? give ayou don't want to political message, but if the u.s. president is the most important figure on earth and goes to stability and growth we are seeing worldwide? friendly speaking, i am not the "what if" guy, and i

know how unpopular and inefficient to listen to messages that come from outside. trumpof people fear what could be. u.s. is a huge democracy. they are great people -- americans are great people. obviously, whatever it is, it may be preferable to some and not others. francine: i respect her statement on that. moving onto foreign exchange and yen and the fact that we have heard a lot of japanese officials that they may intervene in the currencies. where it is point acceptable for a country to directly intervene on their fx market? we did not discuss at

g7 finance meetings about currencies. i am confident that there won't be any kind of currency war. this is a point that is discussed at the level of people who decide on monetary policy, but i think we should be on that field, really reasonable. as far as the euro is concerned, we know it will last for a wild. mario draghi said as long as needed. currencies,vel of towards the dollars we think is an asset for growth. francine: commissioner muska vinci -- commissioner pierre moscovici, thank you. financial market stabilizing

after quite a difficult week. it is a week with the federal reserve said they were moving closer to raising interest rates. it ♪

tom: good morning. bonnie, what do you see -- vonnie, what do you see? vonnie: the company down 10%. outcome is worse. third quarter of equipment sales down 4%. once again, 156 close to the estimate and revenue. chart.is is the dear -- deerehow has been. weaker yen through the week is clearly been the headline. -- mber the day after day

rimimbe declining. david, you have a lot going on. david: i want to bring you optimism after a long week. markets are way too bearish. advisor and heal is david that invests over $400 billion. he relies principally on nobel prize laureates. he has a business school in chicago named after him. he thinks stocks are way overrated. that is coming up on "bloomberg ." tom: we are going to talk about

a part of america that i am guilty of this and that is industrial and manufacturing. showed last week, there is the boom in new orders. what a comeback by american manufacturing. from citigroup is sitting with us and jonathan golub as well. jonathan, let me start with you. can you belong american manufacturing? jonathan: analysts revision, expectations are up much more in the industrial sector than anything else. a big chunk of that is the move in the dollar. a weaker dollar is the benefit. tom: peter, the romance of the m&a business is taking lunches with anchor types. what youotatoes -- hear from chief executive officers?

there is a high level of conversation around m&a and the broader industrial base. -- theial sector industrial sector is year in and year out. tom: a synergy different? transaction, do you assume you can take on even more? peter: the cost savings and benefits from combining two companies is entirely transaction specific. going forward, do we wait for the next round of refinancing? peter: we have seen the technique transaction range. we are expecting their is going to be a higher level of talk for stock -- stock for stock where one company is trading its currency, which they may believe

is undervalued, but trading it for another undervalued currency. the economic still make sense and returns are still there. vonnie: is that because of necessity? there is no questioned that the capital markets are much tighter for the oil and gas space today than they were a year ago. said, the necessity for a specific company to use m&a as a tactic to help themselves depends on the sector and even down to where the specific assets lie. francine: peter, were you expecting more consolidation -- where are you expecting more consolidation to come from? is it the same industries that will keep on being consolidated, because there are still very few players left? peter: you raise a good point. they are already very consolidated.

we are not predicating m&a activity off of beer consolidation. that said, there are industries like technology and health care, which by virtue of a need for growth, they are going to see a lot of activity out of that for this year and in years to come. it will be a regular part. francine: activity coming from where? is it the chinese trying to get a hold of everything they can? peter: the greater globalization of the world economies been reflected in m&a volumes. we are looking across border activity around 35% of overall m&a holding. that is close to a record. there is no question that cross-border activity will be -- tom: i don't think bristol-myers has ever been -- jon golub is from the midwest. they get out a trophy, they have to be the ugliest of ugly.

way down from all the glory people we follow. you got to help me here. you can't make money on stocks. this is the industrial america. are the dirt cheap and a time of a higher pe multiple? jonathan: you can pull up a lot industrials. they are showing up something -- they are showing something different. 20 becauseoser to there is expectations of an earnings recovery. when earnings are depressed on a lot -- earnings are depressed on machinery. they are trading expensive with a plague him on the resurgence of earnings. tom: peter, let's translate this. you have a 20 multiple on a fallen hurts stock. in 20 multiple is a tough sell. peter: it depends on what you're currently looks like. cash today is very cheap.

depending on the company we are talking about, in some cases, their equity can be a very highly valued currency. so, what we end up talking about on a specific basis is what is the value you are delivering versus the value you are getting? vonnie, just to put things he is on thee, phone with john bezos today -- vonnie: the decisions that have come out from regulators on -- amazon aers, silly the winner. peter: there have been a couple of key decisions. halliburton, baker hughes, time warner transaction -- we are not quite ready to draw lines in the sand. there is no question that this administration has taken a hawkish view on regulation.

vonnie: overall, are we seeing less volatility? if there is volatility, you shy away from it? jonathan: we talk about volatility, but if you measure about 16. it has gotten as low as 14. it feels uncomfortable, but the volatility is not that difficult. --ill tell you that for risk people who are investing, it feels to them that the world is a much riskier place. tom: will there be multiple bidders for twitter as for ?ahoo! smar peter: i couldn't tell you. tom: thank you so much.

golub.ague and jonathan francine, have a great weekend. thank you so much. i thought the p.m. cvg interview was interesting. update onmonday, an your economy. the get a huge response -- we get a huge response. futures up five. the yen is being watched wanted anything today. have a wonderful friday. ♪

epic -- finance gather in japan and the u.s. is warning that conservation will not have

global growth. officials say they discovered debris from egyptair flight. we have the latest developments. ♪ >> welcome to "bloomberg ." we have a big three hours ahead of us. we had the big g-7 meeting and for the developments in the egyptair crash. we keep talking about the fed and what they might do in june. jon: but the market, no real drama. week pricing in the bond market. equities at least, no significant move. >> but drama and a psyche of some traders wondering if they got it wrong? jon: that is a conversation what we will have. futures in the