francine: fighting the fed. china may press the u.s. on the timing of a rate hike. no holiday for greek debt. payout as thets a imf concedes. it drops to 7% for the first time since november. and unicredit is replacing the ceo. that paves the way for a review of capital strategy. this is "bloomberg surveillance," we have a busy

day. this is about central banks. we are learning about china and we're talking about the pound. tom: it is an interesting economic day. great series of smart guests to give us depth. i would notice are the headlines just out of microsoft. you have the hewlett-packard headlines yesterday of the split up of the split up if you will on hp q and now you have microsoft out with a 1% severance or layoff or job cuts. i like job cuts on the bloomberg banner. 1850 out the door. shows the door of the real economy around the economic data. let me guess, we will also talk

about brexit? francine: surprise. [laughter] francine: it is a month away. we may talk about it for the next three years. the imf has backed off and greece will get its next round of financial aid. it will allow the relief of more than $11 billion and they will take steps to ease the burden of the countries $58 billion in debt. they stood down after originally insisting that the program did not offer a path to fiscal sustainability. that leavingsays the european union could force austerity measures into the next decade. it says that russian may face a budget deficit if the country leaves the eu. that could lead to more spending

cuts or higher borrowing. electricity prices in the u.k. may rise this winter when the el niño goes away. that will drive up energy demands. it will end the wind needed to power wind farms. it usually follows the el niño pattern. , the taliban has killed that a leader was killed in a drone strike. a u.s. attack along the border -- he will be replaced along -- will be replaced by one of his deputies. global news, 24 hours a day. powered by our 2400 journalists in 150 news bureaus around the world. tom: your bloomberg data check off the bloomberg terminal. it is up nicely in real term. will call this week or over the

last few days with dollar strength but a lot of it is yen based. there is a modest lift in oil. how about that? to two year yield migrates 0.93%. there is gold, sitting on support. francine: european stocks gained 1% i want to show you the emerging-market currencies. the south african currency has gained. i want to show you the greek senior government bond deal. the didn't get debt relief but we did have it at 7.06 pounds. tom: let me go to the bloomberg.

the u.s. to mistake bloomberg , a median price. i have adjusted for inflation. it is a very different chart. the median price of a new home. the shock of a much higher median price in two days. in 2008.cores we have cheaper prices off the trend, touching off where we were in the 1980's. just for a moment, housing was cheaper. in america, it is a have story. it is about the bigger homes and the fancier homes. to thee: it goes back

inequality story. this is one of the top stories of the day. in lieu, you have the china remained the price. i circled what happened in january and what happened a couple of days ago. what this shows us is that china's currency fixing is weaker. , burnt orangeange circle, the fixing was stronger during the january turmoil. now at the lowest since march 2011. for more on china and possible kamalation, let's get to sharma. what do you think of this chart? we keep talking about china devaluation. this makes life so much more difficult. kamal: what we are looking at here is that the move by the chinese authorities shows a

following. we are looking at a new regime. when the basket was introduced, the chinese hoped that the overall trend was moving, i .hink that is conceptualized francine: we understand that china wants to ask the u.s. about the timing of a rate hike. that would be very normal. kamal: there have been various commentaries about potential hikes. i think what concerns the chinese was that a fed rate hike has the potential to stop capital outflows from china. so what they are worried about is if that happens again. they are trying to get clarity. tom: your research is hugely detailed. it is institutional, pro-research.

is it a liquid market out there? in a a market acting normal manner? really, regulation and other developments have had an impact on the liquidity issue behind markets. we are seeing moves, the dollar yen move pulling the decision by the bank of japan to keep rates on hold. that was a prime example with a new environment that we do have to deal with. tom: within the new environment, what does that do to the idea of unilateral, coordinated intervention? we are getting the japanese gaming, where they will intervene, i don't eat the drama, will they or won't they? how will they do that in the new, manage flow environment?

kamal: you had the g-7 meeting and there was a polite agree to disagree during the u.s. treasury secretary and japan. aremately, i think markets working for their own reason. that is a byproduct of domestic there is a need to cut -- there is a need to get inflation on a higher level. whether that weakens the currency, it is a natural divergence. francine: if we take a step back, is dollar rallying a given? kamal: i don't think if -- i don't think it is a given. a long dollar against the aussie, short-term against the kiwi.

it is somewhat diluted. we only have one rate hike this year. we have the ecb potentially pollute more stimulus after the recess. we have seen the incremental impact of these policy measures by the bank of japan and the ecb, they are not having the impact on their currency. tom: we will continue with kamal sharma, particularly the yield curve. the yield curve is flattening. francine, i want to drive that microsoft story forward. this is a bomber disaster. no other way to push it. look at the phone transaction of microsoft, and this is one step in the debacle. a near $1 billion impairment. francine: the other news we have speak of is apple. we understand that a court

ruling in the last 15 minutes says that apple cannot open standalone stores in india. francine: -- tom: i missed that completely. up,ng up, he cannot -- economic finance. fromtien galy will join us deutsche bank. good morning. ♪

francine: welcome back. inm francie blackwell london. we need to talk about greece and the corporate stories. let's get to the bloomberg business flash. >> as we reported, job cuts are

on the way in microsoft. the company will cut up to 1850 jobs and take a 900 $50 million charge. most of the job cuts will come in finland. the base of the phone business they acquired from nokia. they have already -- written off the nokia deal. boost salesplan to in india. the indiana finance minister has ratified a decision that apple must meet local sourcing rules to open its own retail stores. apple would have to by 30% of the components in india to meet the standards. -- says it is confident it can meet monsanto's demands. have rejected the $62 billion offer, calling it too low. they are also concerned about regulatory and finance risks.

that is the bloomberg business flash. tom: thank you. greatly appreciated. we have a new word in the english language. it has to do with greece. that is where you invent new financial and diplomatic words. the word is smooth anening. i don't know what that is. ofncine: it is the opposite rocking us. they are a little bit closer than they are apart. tom: absolutely. it is lost in translation. --spoke yesterday with professor, help me here with smoothening. do i understand that the can was

kicked down the road? >> the can was kicked down the otheningt the smo was welcome. we have needs for the next 15 years up to 2030. we assume this includes treasury bills. despite that, they do not have concrete steps beyond that. the debt relief would be discussed around mid 2018. it is clearly a compromise. it is a welcome break after 1.5 years of constant instability and negotiations. they need stability in order to start operating under normality. was,my immediate reaction within the imf rumors and speculation of getting to 2014,

if you do this in 2016 and you job loan it out past 2018, those pretty four months don't make a difference if everybody agrees the goal is to get to 2040. "if" and ithe big will be defined not before the conclusion of the greek program. the question is, whether at that time, the eurozone will be ready for the situation as it is. the imf analysis shows it cannot take anymore access primary surplus targets. it needs the relief indicated by the imf report. francine: there is a 1.5% that .ould be much more manageable

they don't want to give debt relief straight away because they want to denglish in front of the greek authorities and say, debt relief >> if you stick to the program. >>that's right. no one was willing to give unwilling -- give debt relief. last year, the government squandered a great deal of confidence. it komen eggs a referendum? -- they want to make sure they have the greek government from now until the following years bound under specific conditionality's. in order to give the debt relief. i would say that the surplus target remains ambitious. it, it is welcome that they do not mention it for after 2018.

this indicates that they are open to revising the target downwards, closer to the imf projections. the imf has pointed to 1.5 target as reasonable. francine: what do you say to the ones who say, six years on, we haven't dealt with the crisis? through no-fault of the greek citizens or politicians, they are not seeing growth. it makes the debt so unsustainable. >> that is the problem in greece. it is not that greece hasn't done enough austerity measures. what has happened in greece is unprecedented for on -- for any developed economy. the problem is that a combination of factors have led to a stagnant or shrinking economy. as long as the economy is shrinking, the debt will continue. so adding more austerity measures won't do the job. it would be much smarter to allow a smaller primary surplus

target this year to allow the economy to recover. and growth would develop the surpluses in order to meet more ambitious targets than the 1.5. francine: thank you so much. greece's 10s out, year yield is dropping 27%. 7%, what weto haven't seen in a while. -- what doeshave he think about the bailout deal that is coming up next? ♪

tom: good morning. we are nearing june 23, which means francine is all fired up as the world turns with today's brexit twist. the military gets into the battle. francine: this is my morning must read. we have clusters of people coming out for or against breaks it. today, it is the general. general julian thompson wrote in either greatthat britain will remain in the eu, dominated by people we do not elect and to dictate the laws

which govern us, or we will take back control ever turn to an independent country in which our parliament is elected by us. so basically, i woke up this morning and there were 10-20 former generals of the british air forces and the raf, and they say that because of rules done in brussels, it puts the u.k. soldiers at risk. quote, we have a general do we have a churchillian angle like this? it's as if churchill wrote", seriously. francine: right. a lot of people who are against brexit say this is old school. they imagine the commonwealth ruled britannia but others say it has an impact. let's talk currencies.

when you look at the currency debate, will it be crazy volatile? >> we have seen an easing of volatility given the rally in the pound over the last week or so. but certainly, this is an event which we think is too close to call. therefore, we think volatility will remain in the sterling. francine: tom keene is so excited. s&p is saying that the brexit will risk sterling reserve aces. coming back, we will talk italian banks. ♪ okay, ready?

whoa! [ explosion ] nothing should get in the way of the things you love. ♪ get america's fastest internet. only from xfinity. tom: thrilled you are with us this morning. francine lacqua in london, tom keene in new york. down nineold,

dollars. that is almost interesting support level on gold. to the first word news. president took a shot at the european union when an: all was least expecting it. he has threatened to tear up the central bank of turkey's agreement with the eu on refugees a day after he and merkel met. he will not take refugees back from greece. mexico, arque, new protest outside a donald trump rally turns violent. protesters threw burning t-shirts and plastic toddles at police, who responded with pepper spray. paul ryan has told confidants he is ready to end the feud with trump. aboutsaid to be concerned

the split that has developed in the republican party. the u.s. justice department will seek the death penalty against a man accused of killing nine people in a church in charleston, south carolina. he is facing murder charges in a local court and the prosecution is asking for the death penalty. president obama has wrapped up a three-day visit to vietnam. he held a town hall meeting and ho chi minh city today, renewing his push or the transportation just transpacific partnership. dayal news 24 hours a powered by our 2400 journalists in more than 150 news bureaus you.d the world, thank francine: unicredit ceo federico ghizzoni will step down after leaving the company -- leaving the company for six years.

tice.g us is jonathan this is not really him stepping down. this is him and pushed down because he lost the investor confidence and he is not growing the bank. jonathan: ultimately this comes down to capital and the lack of execution of strategy. , they areency ratio the key solvency ratio, -- the fact that they have things that strategically do not look as attractive as they did years ago, put that together and i think the straw to break the camels back was very much when the board looked tohe underwrite the popularity. francine: this goes back to

government pressure, which he has bowed down to. they have been pressuring a lot of the ceos. if you look at number two, in yellow isnicredit, in the bank of sao paulo -- sanpaolo. unicredit is the only italian systemic bank. jonathan: unicredit has a lot more interest. intesa is also very important. they had a better capital position and that is one of the reasons they performed, and a better insurance asset management business. it's capital to its loans is considerably lower. tom: i greatly appreciate that perspective. of a jesled by moments staley interview yesterday at barclays.

there was a big uproar about fortress and citadel playing off jpmorgan and james dimon. if we had citadels of banking in europe, why can't these guys do a cash call and issue debt? what are they waiting for? jonathan: i think with unicredit, there is no credibility at the moment and they have asked that -- assets they can dispose of. if they begin to restructure, and the november results were reporting. place some into proper restructuring, even though it will be diluted, i think you will have a lot more happier shares that are prepared to underwrite a significant amount. if you work on the assumption that you want this bank to have 12% or 13%, those are the right numbers. tom: i know you have a cup of

coffee with mario draghi each week. what is your prescription to get credibility back into european banking? is it that they have to merge into fewer banks? jonathan: i think you have to take it on a country by country basis. still hasike spain considerable restructured loans and bad debt. what we need is some banks to take their medicine. you need to report a few losses, get some credibility back, clean up the balance sheet, and sell the assets at prices people are prepared to pay. tom: that is the single most intelligent thing i have heard about the ecb, they need to take their medicine. francine: the problem is, how do you take the medicine?

do you cut too much in investment banking or not enough? it is more of an execution all, operational problem. once again, deutsche bank is exposed for weakness. when are we going to put a stop to all the bad news coming out of deutsche? ,onathan: if you have a look and barclays has fallen at least as much. we are expecting this. the american banks have won that battle. when does the restructuring and? i think it is harder to say in europe. you have the ubs saying we have to cut but not too far because we will look silly. deutsche and barclays are still on the wrong side of the cost base. francine: it seems that we do not really know at all who is going to take over as the but ubs has a

cloud of great managers. the names i have heard , there are a tenet of names that are not from ubs and they are not just investment bankers. what we saw with standard charts with crime moving, with staley, just bringing a banker with good investment experience to something like unicredit, the problem is bad debt. we need somebody who has proper experience of the italian retail and corporate sector. tom: john, you are a noble guy. we had a noble experiment yesterday and it went worldwide. fold in on negative interest rates and how it affects your

analysis at bloomberg intelligence. jonathan: i think one of the problems with negative interest rates is the trading book. the ecb is about to give the banks another few hundred billion paid in 40 basis points to lend. banksve banks and swedish saying, we do not want to pass this on to retail customers, but they are being bailed out so the expense is being born by the german pensioner. the banks have done a great job of repricing. from here i believe it gets harder and now i am more worried about revenue momentum. thank you so much. bloomberg intelligence, if you have a terminal, cannot say enough about his financial analysis of the train wreck known as european banking. in bloomberg , an update on technology.

the apple news out of it really -- at india, microsoft, almost 2000 jobs out the door. michael chambers -- john chambers. ♪

tom: good morning, everyone. francine lacqua, tom keene. all you need to know is the fed meeting as before brexit, june 15. interesting gyrations in the market including a flatter yield curve. the difference between the two-year and 10 year has flattened. the two-year is up while the 10 year has stayed flat. it is how the yield is constructed.

>> if you buy a bond you are consenting to an investment -- committing to an investment for a period of time. they call that the term premium. the term premium today is the lowest since 1962. john f. kennedy was president and you were dancing to the locomotion. you can see how risky investors thought the bonds were in the 1980's. tom: this is fabulous. what is the red line? michael: the red line is the kennedy years, and you can see where it is today. there is almost no comparison to get. europeans want treasuries, asians one africans, even the penguins want treasuries. to why we get into

crisis, which is cheap money and cheap credit. are we redux thing that again? michael: look at where the term premium is today, -33 basis points. ordinarily your investment is overvalued but because everyone wants in, you cannot get it higher. it keeps going lower even though the fed is talking about raising rates. in 2006, alan greenspan's conundrum, the fed loses control of the yield curve. know, there is a horse and a cart. is the yield curve telling the fed cart what to do, or is the fed telling the market what to do and the yield curve is the response to fed rhetoric michael:? michael:the yield curve is operating independent of the fed

. the fed wants to move rates higher and they are going to, and you see that two-year responding that you do not see the long and responding. there is inflation or risk and they would rather get the yield. francine: this is a problem that we are doing the bubble because of what is happening in treasuries. kamal: the policy mistake trade is resurfacing again, that we are seeing a rise in the front end of the u.s. yield curve promoting a stronger dollar, but at the same time a demand at the back of the curve due to the lack of availability of positive yielding assets or government bonds around the world. we have taken off some of our yield curve trades. francine: so you think the fed has lost control or it is choosing to call? kamal: we have a broad consensus among non-yellen members.

we will see what the others have to say on friday. yellen seems to be pushing against the notion that the fed needs to hike anytime soon. tom: i want to bring up the jfk chart again. this is the most interesting chart we have had for ages. i love this idea of where we are, and the fear is you go back to an eisenhower term premium to the disinflation we saw in 1953 and 1954, that is the real fear. was the legacy of world war ii were they did not raise interest rates and in those years they started to move. at this point, people do not see any risk so we are back to that level. tom: do we have theory here or are we unhinged from any kind of fixed income theory? kamal: that is an interesting question. the markets are trying to push back on the notion that the

central bank is moving in to have an impact on the currencies , they are trying to trade the central bank in terms of currencies has proved futile what the bank of japan and the yen in particular. many think the market is at an inflection point, a tug-of-war between what the market thinks should be happening and what is actually happening. francine: is it right for the central banks to follow the markets or should they put an end to it? historically, central banks do not like to surprise markets. it wants to signal to the market what its intentions are. fed that is the trying to push the market in another direction. tom: we are going to continue with come all sharma. kamalme all sharma --

sharma. michael: the market is coming toward the fed, that not fast enough. .93%.he yield that was brilliant. michael mckee, we will continue the discussion on bloomberg radio. gross on whatliam did you miss this afternoon. this is bloomberg " surveillance." ♪

francine: welcome back. this is "surveillance." i am francine lacqua in london, tom keene in new york. nejra: hewlett-packard enterprise will get even smaller. it is selling its business services building to a competitor. both companies say the dealer -- the deal is worth about eight and a half billion dollars. the company was formed last year when hewlett-packard split in two. climate activists targeting exxon and chevron are seeking investors' help. shareholders will help -- will

vote today on the proposals. exxon and chevron are opposed. another auto company is choosing a side and the ridesharing. toyota is making a deal with uber. lyft. a tie up with that is the bloomberg business flash. francine: thank you so much. let's get back to bank of directorerrill lynch's kamal sharma. when you look at the emerging markets index and you say, they may see outflows, or there is a u.s. consumer which means that exporters will do well. what happened to these bridge market currencies? kamal: we recently conducted a

global investor sentiment survey and the key finding from that is that most investors believe the stability in china we are seeing is probably going to last no more than three to six months. francine: this is huge. what you're saying is basically the relative stability that we saw with the stock market or in terms of gdp? the pboc authorities have done everything they can to stabilize the economy. you think it is not working? kamal: we think there's further public volatility ahead. with the fed potentially hiking race in september, the asian currencies are still vulnerable to further downside. we have seen that taiwan remains under pressure, malay, and korea as well. it is part of a global risk on complex where we saw asia fall under that down -- under the

backup of the following s&p. tom: as we were discussing before, further curve flattening, bring up the chart. the idea of the belly of the the tenst the twos and but the threes and the fives, and your call is for this to flatten. advisorscumberland strongly agrees with you. what will that signal? what does that do to limit the options of central bankers? they run out of tools if we have a flatter curve, right? kamal: it just reinforces the view that that is part of their overall strategy. that keeps emerging-market currencies under broader pressure. tom: within this, it comes down to degrees of freedom.

how does it full over with limitations within finance and economics over to real economic growth? is your house calling for global stagnation or global recession? kamal: no, we are not. u.s.ail risk of the recession story has certainly , particularly in the mind of our investors according to recent reports. global growth will be subdued but in no way do we think there is going to be a global recession. francine: what is your favorite currency price? still need toy balance their non-commodity trading sectors. there is, we think going to be further easing by the rba. we do like a higher swedish krona. at mario when you look draghi, he does not have an easy job. kamal: when you look at the

euro, qe has diminished and we do not expect any said that the can -- significant move in euro-dollar. that will be premised on if the fed steps up to the plate instead of if the ecb issues more quantitative easing. tom: if the swiss franc's litmus paper for the system, explain that. kamal: we have been challenged slightly in our view that the swiss franc would make some strong gains headed into the eu referendum, particularly as the risks around the referendum are localized but what we are seeing according to the data that swiss equity funds are showing outflows. we think that could be driven by the forthcoming ecb corporate sector program where according to our credit strategists, we

are seeing significant inflows into the investment grade world. against a backdrop of a swiss economy is still in the throes of deflation, where growth is still very mediocre, and of course where we have negative rates. that is the opportunity to invest in investment grade in europe is quite unappealing prospect. tom: very helpful. we are going to continue this discussion. this is a really nuanced discussion linking economics and the fixed income and what it means for all of us. sebastien galy joining us, and chris perrone -- chris perrone on stocks priced to perfection. ♪

this morning, yields are higher. oil advances, gold settles.

it is june or july for the fed, i guess. extend to 2018 and pretend you are the debtors who kick the greek crisis can. sure on a little less consumer chip stocks this may. this is "bloomberg surveillance ," live from our world headquarters in new york. i'm tom keene. in london, francine look law. francine, i love your brexit work earlier. these research papers keep on piling up -- brexit will do this, if we do not leave it will do this. there is a little bit of uneasiness in the markets as the polls are now swayed that the u.k. stay in the eu. if we get a surprise, it may turn into a shock. tom: your "morning must-read"

earlier, one of the generals coming out in support of independent britain. we are in support of our first word news in london with nejra cehic. off,: the imf has backed and greece will get its next round of financial aid. creditors averaged agreement that will allow the release of more than $11 billion. greece has taken steps to ease the burden of the country's $358 billion in debt. the imf stood down after insisting that greece's program to fiscalfer a path sustainability. a new report says leaving the european union could force the u.k. to extend austerity measures into the next decade. the study comes from the institute for fiscal studies. it says britain may save a budget deficit of $44 billion if the country leaves eu. could lead to more spending cuts or higher borrowing and debt. electricity prices in the u.k. may rise when the el niño

weather system goes away. that will drive up energy demand while ending the breezes that wind farms need to generate renewable part -- to generate renewable power. france, police have moved to end the blockade of an oil storage facility, according to asp. a labor dispute has already caused fuel shortages that have gotten worse. every one of france's oil refineries has experienced disruptions or shutdowns. workers are protesting homeland's -- are protesting president hall on's plan. the u.s. failed to make any progress in peace talks with the taliban since mansoor took over last year. global news 24 hours a day, powered by our 2400 journalists

in more than 150 news bureaus around the world, i am nejra cehic. tom? tom: thank you so much. i want to get through this quickly, but let's do it carefully because there is a lot of nuance in the markets. the two-europe is higher today. -- the two-yield is higher today. oil is a major story with a lift. $50 a barrel, 49.11 on west texas intermediate. the good news in the market of 14.11. vix that is a stunning statistic. there is the two-year, elevated in gold, weaker. francine: this is my board. in terms of what i am seeing with european stocks, gaining 1%, i wanted to show you some of the emerging-market currencies so you can see the south korean won against the u.s. dollar, and then that government bond yield

after we had the accord with eu it is now a little bit backup. tom: the korean won showing some real weakness over the week -- over the recent weeks and months . some of the dysfunction between europe and major currency dynamics and what we see in aem. let me go to the bloomberg economic data. this is housing median home sales adjusted for inflation. 321,000 is the price of new home sales in two -- in today's dollars. remarkable linear, cyclical, a beautiful chart. it is amazing the one chance you had in 2008 to get the three-bedroom, six-bath condo in new york, where we were back to 1985 prices. there was that moment, and up we go with new-home price strengths. francine: maybe it will come back, tom. there is so much talk about china and devaluing the yuan.

basically what it shows us is back here in january, this is the orange circle, fixing is lower than in march of 2011. what you can infer is that it is still weaker. tom: joining us, working with alan ruskin of deutsche bank, is sebastien galy. you have way to bank many inclusions in your research note. the variances, the covariance analysis and that. all of this is weighted by inflation expectations. arehe 2016 story that we migrating into a permanent of low inflation? sebastien: inflation remains quite low. even though we are seeing oil prices recovering, that will create a path through epi come and through cpi, it is quite a

temporary effect. global growth is said to be relatively moderate all over the world and better in the united states, so the modern potential means that -- the moderate potential reflects the yield curves. tom: the dampening is maybe signified best through the swiss franc. explain to our audience why pros like you watch the swiss franc. sebastien: and the old days the swiss franc used to be the safe haven. i would talk to u.s. pension fund and they would try to find a way to diversify in the eurozone, the obvious choice was the swiss. it had better fiscal position. tom: what happened after the massive disjoint move? sebastien: this was eventually came in with negative interest rates, and that did the trick. negative interest rates have kept the swiss franc in a range from appreciating significantly.

they are suffering somewhat of a deflationary sock -- somewhat of a deflationary shock. i mean, they are very good at adapting, but there is a lot of headwind on the way. what is the one thing that could go wrong this year? we talk about risk, china, negative rates. what is underpricing the markets? isastien: the political risk what has not been priced correctly, and there are some examples of that in the u.k. with the brexit, where the currency moves significantly on the back of what is considered a potential risk. that risk is perceived to be risky. there will be other risks. u.s. elections. there are risks that we may not be aware of, and the global political risk, i suspect they are receding generally. whereeless, in the market people start to believe that everything is calm and bank --

, acalled ming -- is calming lot of shocks are receding through the market. francine: the fx market seems to be where all the volatility or all the risks are being played out. do you expect it to be so in the next six months? it seems they are taking the brunt. sebastien: i think so. you are seeing from the ecb data , the eurozone is benefiting from an equity perspective. the u.s. is doing far better, so the dollar is strengthening. the potential rise of the dollar, there is a lot of moderation. but if you look at emerging markets, we are seeing significant terms. tom: reporting on the canadian dollar, coming up, chris varona will join us from strategic us

research. -- from strategas research. our chart is on to being priced to perfection. next, charts. "bloomberg surveillance," london, the dark and gloomy clouds of brexit over london. ♪

francine: welcome back. this is "bloomberg surveillance." london.ncine lacqua in tom keene is in new york. let's go to the "bloomberg business flash" with nejra cehic. nejra: job cuts are on the way with microsoft. the company will cut up to 1850 jobs and take a $950 million charge. most of the job cuts will come in finland, the base of the

phone business microsoft acquired from nokia in 2014. hewlett-packard enterprise will get even smaller. it is selling its is the services division to a competitor, computer sciences corporation. both companies say the deal is worth $8.5 billion to shareholders of hp enterprise. the companies was formed last year when hewlett-packard split in two. apple has an they hurdle if it wants to boost sales in india. the finance minister has put through a decision that apple must read -- must meet sourcing rules per that is according to people familiar with the matter. apple would have two buy 30% of components in india to meet the standard. now it gets most of its products in china. that is the "bloomberg business flash." tom: sebastien galy is with us from deutsche bank. i asked a couple of days ago, would you drag chris verrone

onto the set. he is with strategas partners. he is very good, at trend analysis with charts. chris, go right to wear i wanted to go, which is blue-chip consumer stocks, truly priced to 1950's nifty 50 projection. this is a gorgeous chart of the , why up we go, we peeked -- we peak. chris: when we look up the constituents that make up the group, with they are weakening from the inside. disney and nike have not made any money in a year. we have seen netflix rollover, under armour rollover. all the leaders we have counted on for the past six to eight years have been --

tom: do you see this with the staples? chris: not to the same extent. tom: you have to admit your eyes glaze over, comparing consumers to staples. chris: not to the same extent. when we look at staples, we still see better charts. pepsi, coke, food, it is a better yield. tom: folded into sebastien galy's world, folding economics and finance into what i do with my 201 k. chris: we have seen industrials lead, interview lead, staples and utilities lead. all of that speaks to later cycle leadership as we had last -- and we has -- as we have lost auto stocks. tom: should you be in a quiz, given what you have seen between your two world? chris: yes, but you need to pick

your spots. the correlation among s&p 500 stocks has been the lowest in two years. while the index has been flat, the range of outcomes is wider, dispersion is growing. that calls for a market where we need to pick our spots. we have to be particular of what groups and stocks we are in and those we are not. francine: how do you choose them? i guess you have to make that management knows what they are doing, that they are in the right markets, that they are pricing their things right. you do not want to be anywhere close to a bubble. chris: i think when we look within the groups that we like, perhaps the most interesting cyclical group is industrials. this was a sector that has not worked for two or three years, and we care a lot about them. they have the highest r squared with the s&p. we have certainly welcomed the reemergence of industrials at the leadership group. we have seen it with aerospace and defense, which is a distilled bull market.

building products i think has led the improvement. francine: we saw a temper tantrum. we were looking at the fed start normalizing again, and if the emerging markets get hit, it will hit industrials. chris: i'm reluctant to make that conclusion at the moment. given where rates are globally, a lot of the linkages that we rely on to make the calls are broken. we see that with the yield curve. the curve has flattened, yet industrials have still works, which is an unusual circumstance when you look historically. i am reluctant, given how unique howmac human -- given unique the macro environment is, to be too somatic or elegant. we like industrials, and we should own them. discretionary, conversely, is getting worse. francine: what is your take on emerging markets, sebastien galy? sebastien: they may be going in the right direction. in the short-term there may be

in ups broke -- in the short term there may be an upswing, but long-term they may be alive and kicking back hard. we can think for example like in mexico, these hits will happen. tom: it goes back to the game of what is the fed going to do as the central banker to the world. this is not a chris verrone chart. it is inflation-adjusted gold. up we go again. verrone, we are at some short-term support. what do you glean from the charts on gold? chris: i want to buy it. or 1200we will see 1190 hold. when i think about gold -- tom: is it seasonably not good? -- is it seasonally not good? i

have two earing orders in. gold anden we look at commodity bear markets, we need to look at the mid-80's. fromwas in a bear market 1981 to 2001, but it went up 75% from 1985 to 1987. you could have been dead right .n gold for 20 years tom: inflation-adjusted quickly. quickly, your view on gold? an old gentleman said years ago that i am a buyer of gold. it hit 100. tom: sebastien galy and chris verrone with us as we look across economics, finance, and investment. i believe that is where they will go this afternoon. what did you miss? a conversation with william gross of janus capital. look at that at 4:30 p.m. this

afternoon. this is "bloomberg surveillance." ♪

francine: this is "bloomberg surveillance." i am francine lacqua in london. tom keene is in new york. buyers are saying it is confident that it can be -- bear is saying that it can -- bayer is saying that it can meet

monsanto. aaron kirchfeld covers deals for bloomberg news. i like the way you put it earlier, which was that they said no thank you but in the nicest possible way. are they looking for a higher price? i think it is evident that they are. they said we respect they are as a brand -- we respect bayer as a brand. we think it is inadequate what they offered, and we want guarantees on the risks with regard to regulatory questions and financing. francine: we spoke to the ceo with tom keene a couple of days ago, and he would not budge. we tried to press him on whether he would pay a higher price. and he do it? i think he can. he could raise more financing or sell more shares. their last six unit he still has some tools in the shed box. tom: i am fascinated -- and i

love what you are saying -- why it is not trading closer to 122. jeffries is shifting from hold to buy overnight. the idea of a 30% move or any present move off 122, i believe they have a 132 target. what are a kind of numbers you are seeing? : a report came out today that said they need to offer at least 135 per share. we have seen from $120 to $150 in the last week or so. analysts are all over the place. tom: i would be, too. how do you do this with negative rates? frankly, they could do this deal all stock, take out the debt with a three year or five year yield. it is a massive free lunch, isn't it? 's view ishink bayer that if they are offering more cash than stock it is more

predictable. some people are talking about that if they want to sweeten their offer, they could throw in a stock component because that would give them more firepower without having to throw in more cash. there are some areas they can tweak, but at the end of the day , cash is king. francine: what surprised me -- and we had him on in earlier shows, and there was a chief investment officer next to us, and he said it is all about gm. if you get a buyer -- if you get reallyriced, they never believed in the deal. it seems like a great fit for germans that have been anti-gm in the past. aaron: it is a combination of the above. we all know monsanto is considered the most evil company in the world, and regulatory risks, we have seen two other major deals announced in this space in the last year or it we have seen dow dupont, so obviously regulators will have

to take a look at the third deal. people are asking themselves, what is bayer known for? they are known for pharma. they bought america otc last year. all of a sudden they shift away from that and expand across science, that has a couple of investors scratching their heads. tom: i want to talk with chris about making 14% per year on boring agriculture. aaron kirchfeld, thank you so much. we are going to continue this discussion later today on bloomberg radio. to come upyers, have with wilbur ross. we will do that on television and radio today. good morning. ♪

tom: good morning, everyone. from london, from new york, "bloomberg surveillance." here is nejra cehic. nejra: turkey's president

erdogan took a shot at the european union when angela merkel was least expecting it. he had threatened to tear up the central plank of turkey's agreement on refugees. it came a day after he and merkel met. he said if the eu will not keep its word on financial aid to turkey, he will not take refugees back from greece. in other kirkby, new mexico, a protest outside a donald trump rally turned violent. demonstrators threw burning t-shirts and plastic bottles at police. please responded with pepper spray and smoke grenades. house speaker paul ryan has told confidants he is ready to end the standoff with trump, according to people close to ryan. he may endorse trupp this week. he is said to be concerned about the split developed in the republican party. the u.s. justice department will seek the death penalty against the man accused of killing nine people at a church in charleston, s.c.. dylan group is white, the

victims are black. the prosecutor in that case is also asking for the death penalty. racked up aama has three-day visit to vietnam. he held a town hall 80 for young adults in ho chi minh city today. the president renewed his push for the trans-pacific partnership trade deal, arguing it would help prevent human trafficking. next stop for mr. obama is japan. global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus i am nejraworld, cehic. tom? tom: very quickly, i want to finish up with the thought on monsanto. fits verrone, what we do is the chart back to the investment banking story. here is monsanto -- up we go, the challenge they have after the global crisis. what a recovery. 135 is right about there. that is the premium we heard in the last interview that we are

gaining, and that is only about 14% per year for the last 10 years. that is not good enough for the board to save face. chris: i think it is too low. it is noteworthy that when the rest of the market was making a new low in early 2016, this one had already bottomed. it was telling us something was changing. the whole space, whether it is dupont and dow, both stocks want to go up. tom: i did that just to see how you could dovetail technical analysis in and plugging in returns with all the investment banking mumbo-jumbo as well. i like that. i am sure that is the regulations that bayer is doing. credit suisse ceo has agreed to step down after pressure. thank you for joining us.

unicredit, the ceo no longer had the support of investors. unicredit was not a bank that was doing well on share performance or capital. what can you expect going forward? >> they have to find the right person not just to create a new strategy but to raise capital. it could be quite a lot. 5 billion euros, 6 billion euros, 7 billion euros. it is a tall order, but that is what we need to expect next. francine: i like your gadfly piece on this. it is a systemic bank, the only systemic bank that italy has. lionel: it is a big global bank. it has operations in europe, germany, austria. they do not want to destroy the franchise.

it should not sell the crown jewel and go too far, so it has to strike that -- , i know itien galy is inappropriate to talk with you about deutsche bank and other european banks, but you can comment on negative rates. do you just assume more negative rates by the people doing negative rates now? sebastien: no. one is because they are effective. germany's going in the right direction may not be exciting, but it is going in the right direction. chief economists have been pointing out that negative in just rates, people begin to , it influencess their behavior, and it comes self-destructive. cost cutting, people get depressed, wages get depressed. tom: that goes over to the world you're covering with bloomberg gadfly, which is the effect of negative rates across the

banking economy. give us an example of where you see that right now? it is all over the eurozone, tom third we have seen banks in scandinavia handle negative rates quite well. , andhave a semi-oligopoly they are able to lend more. in the eurozone it is tough to get loans out. either banks will have to take more pain to lend more, or they will have to find ways to offset it. we are hoping that the fed will lift us out of this. francine: the problem that european banks have made be exacerbated or be put for the long because of negative rates, but there are structurally fundamental problems that you say need to be tackled head on quickly. lionel: absolutely, but all of the measures that could be taken , such as taking capacity out -- big mergers, consolidations -- that is stuff that is tough to

do now because right now there is not the kind of regulating support for that. that may come later. right now banks are in a tough space. you try to generate demand in this environment, and it is tough but potentially painful for profits. francine: what is your take on deutsche bank? today we had another piece of bad news, which is to be expected. given all the troubles they had, i do not know if it is a surprise to anyone. but when will we start seeing positive news from deutsche bank? lionel: deutsche bank's ceo has been quite honest when he says that we should not's -- we should not expect to see any improvement this year. ceo's are being paid to restructure and pare back their ambitions. think we should be unhappy to see banks staying away from that mentality. you do not want to lose your core franchise, but we can take

the bad news with a pinch of salt. francine: european banks are becoming so much smaller. they are retrenching, looking much more inward. is there real risk that means a free lunch in the u.s. and that will not lead to a brexit? lionel: u.s. banks are taking up market share at the expense of the europeans. it is easier for u.s. banks, given the efforts they have made in the past, to adapt to challenges that all banks are facing. this is a global issue. a lot of markets are becoming more electronic, more automated, with big balance sheets being a thing of the past. who has the advantage right now in the tricky market? it looks like the u.s. has it. tom: thank you so much. we will move the banking discussion forward to the american banks. michael mayo of clsa will join us later this morning. really looking for that in the 8:00 hour. with chris verrone of

strategas and sebastien galy of deutsche bank, "bloomberg surveillance." ♪

francine: welcome back. this is when european stocks are doing. currencies, commodities, also a little bit of sport. before we do that, this is what the european stoxx 600 -- gaining 1%. global equities are rising to a two-week high. there is optimism out there. withstands. economy higher interest rates? that means global stocks are not sold off as much. a psychological level after we had that bailout and more money

being reimbursed from the eu to greece. let's get to the "bloomberg is this flash." isra: bayer says it confident he can be monsanto's demand and get a proposed takeover back on track. montaigne thomas board has rejected -- montaigne -- ansanto's board has rejected bid. the deal would create the largest -- exxon and chevron are seeking investors' help. for higherore cash dividends and buybacks. exxon and chevron -- another big automaker is choosing sides between the apps.ing toyota is taking a small tape of ash a small take of uber.

withal motors would tie up lyft. tiffany's is out. offany's on the luxury side things, and also with the real japan and asia component in there as well. a large signal digit decline, even fx adjusted. tiffany's is out as well. what we know for certain, bring up the banner. the rangers are playing golf. that is what we know. all of this was discussed last night as the pic was -- as the pittsburgh thing winds took it to game seven. glorious in pittsburgh. game seven here in pittsburgh. i believe it is melt into crosby. tampa bay looking silly. castle bats it in like a single to left field. all of this enthusiasm lost on one scarlet fu. she and christopher verrone of strategic us research -- of

-- tegas you spoke to gary bettman, the commissioner of hockey, at their prime moment? canadians are not too happy, either, because no canadian teammates in the playoffs for the first time in two decades. under gary bettman is watch, he has made the game more competitive, more exciting. there is salary cap, revenue sharing. revenues are at a record, almost $4 billion last year. i asked him if he would get to $4 billion -- $4.5 billion this year. gary: we have slowed up a tab because of the decline in the canadian dollar. if the canadian dollar were still on par, we would be $100 million, $200 million higher

than where we find ourselves. but i believe there will be a and we increase, continue to grow year after year and set new records. scarlet: after a $200 million hit on the canadian dollar, he also says they are projecting based on the people they speak with for the loonie to level off. if lundquist has a tantrum and leaves the rangers, he gets than god from the toronto maple leafs. the canadian dollar plays into it. scarlet: the way the collective bargaining agreement works is that canadian teams get subsidized a little bit and the players have to contribute. tom: or if lundquist went to an expansion team. scarlet: do not go there. he is on a contract until 2021.

gary: we have been engaged in a quebec of evaluating city and las vegas. it is a process we are still engaged in. the executive committee board of governors is not yet quite ready to make a recommendation, so everybody is going to have to wait and see. carl: will we see this as early asscarlet: will we see this early as the 2017-2018 season? gary: we said the earliest we would expand is at the 2018 season. if we met that timetable, we would probably have to make an announcement in the next couple of months. notlet: he says he is worried about the open raiders making it to vegas first. tom: can use plain white to -- can are going you explain why ex-rangers are going to --

francine, i have to ask this question of scarlet fu. it gives me so much joy. pittsburgh or tampa bay? game seven? scarlet: i have to go with pittsburgh. francine: i would love to go back to speaking english. most people do not even know -- they do not know the rules, they do not know it is called a puck. scarlet, are they going to be able to play at the olympics? this is what people care about, right? scarlet: certainly the ones in your care about that. that is a good question. they have not decided yet. they will make -- they will wait for the world cup before making that decision. the nhl does not make money from letting its players play in the olympics or there's actually financial cost because they have to sort out insurance. they have to stop the season for two weeks. no other sport has to do that. francine: i have been googling

frantically. how much money is there in hockey compared to football and other sports that are more well-known? tom: you asked the absolute perfect question, and the answer is it is a much smaller sport. i have seen one to four, one to five compared to football, baseball, or basketball. it is an upscale sport. the great thing for gary bettman is that the canada television contract jumpstarted all of this. the quiet little secret is hockey is upscale like golf, and that is why people -- francine: and like rugby. need an expansion team emotionally in canada, in quebec. sebastien: it is a small market, limited by -- they love it. tom: what else did you learn from gary bettman?

scarlet: what i thought was interesting was a question about jersey advertising because the nba has already done that. i asked him if that was going to happen, and he said they would have to drag me kicking and screaming. if enough people stay in the marketplace, indicating that is what they want to do, he would -- the europeans would love that, right? i am not sure they are ready for that yet. fu on the beat with the national hockey league. michael mckee and i disagree on this. we are not on speaking terms because of it. scarlet: we are rooting for the peg maines -- we are rooting for the penguins, full disclosure. tom: go penguins. the defense of the penguins looks wonderful. the offense, they have a spirit. very, very good. scarlet, thank you so much per you should do this early in the

morning more often. i like this. futures up seven. stay with us with chris verrone, sebastien galy, the hockey network. ♪

tom: on his historic trip from

vietnam to japan, the president will visit hiroshima on friday. and of course the evening in tokyo, air force one landing new tokyo. and withouttant question historic visit come arguably the most historic for a president -- for the president interest terms -- for the president in his terms. dollar-yen, 110.24. we are watching renminbi as well. francine? francine: coming up shortly, it with davidrg ," westin, jonathan ferro, and vonnie quinn. what do you have on the show today? vonnie: wilbur ross. he has already invested in european banks more broadly. we will ask about his potential business.e u.k. steel

an interesting answer there, and also an indian company, apple having difficulties breaking into india. we will speak with john chambers, chairman of cisco. they have been trying to digitize the whole country, in fact. we will speak with former u.s. trade ambassador ron kirk. that is all coming up on "bloomberg ." francine: i am really looking forward to the apple conversation. the finance minister pushing apple before the standalone shocks, to have 30% of their components made in india. let's get to a bit of a brexit conversation let's focus on pound. we heard in the last 55 minutes that the s&p global ratings is saying that a brexit would not just weaken the pound, it would jeopardize its status as a world currency used in trade. let's go to sebastien galy. chris verrone is from strata strategas.om

we were debating this in the break. it is not even a reserve currency anymore, is it? sebastien: not at all. what happened in the 1950's is we had a sterling system that was changed to a dollar system. in the 1970's they liberalized the system. sterling is the reserve currency only in the sense that people have some money and a few it is a place where people invest and put money in the foreign reserves. it is not a core for an reserve, it is just part of the places where you put money. we wouldncept that lose that reserve status is slightly unusual. tom: interesting. you have a research report on hydrocarbonthe

currency. i love your trade of canada versus norway. what an interesting trade. explain why you believe norway can be stronger against the loonie? benefits farnada more you have the choice between putting your money in fixed income in the united states are putting it in canada. canada has been a great place for fixed income. they depend significantly on the flows. tom: so the money comes out of canada to the u.s., and you express it in terms of norwegian krone? sebastien: that is one element of that. in terms of fiscal policy, the norwegians would be more effectively -- would be more effective. tom: the president is landing in japan and being greeted at the airport, air force one touching down. francine, this is a most

historic trip. i really must say america will be riveted friday on the president's visit to hiroshima. francine: you're absolutely right. this is for political context, ,ut there is also business probably with the g7 over the weekend. we g7 finance leaders missed know they will talk about china and brexit, and it will be interesting to see president obama weighing in on those themes. tom: the president being fetid there by and that -- the president being greeted there by caroline kennedy, the ambassador. this is "bloomberg surveillance." ♪

mark: china is pressing the united states on the timing of the federal reserve's next rate hike. agreedgreases creditors to reach 10 billion euros of

aid. vonnie: a big offer is poised to get even bigger. confident in its deal with monsanto despite its bid being rejected. ♪ .welcome to bloomberg i'm jonathan ferro alongside david westin and vonnie quinn. have a very important guest, wilbur ross. we want to talk to him about his investments all around the world. havee: and we will chairman john chamber each in new york for the breakaway conference. jonathan: let's check out what's happening around the world.