francine: china tops the agenda and board leaders gather for the g-7 summit. life above 50. brent hits 50 in the past few months but is it really the end of the oil glut? of privatenton's use e-mail did violate state department rules. we will break down what it means for the democratic front runner. this is bloomberg surveillance. i am francine lacqua in london,

tom keene in new york. at g-7 will focus be china. tom: the president with those comments. what i find remarkable is how all of these leaders seem to be speaking to their homes, but it is not a g-7 meeting but it is people talking to america, to canada, etc. francine: especially japan where you see shinzo abe trying to get out of the increase. let's get straight to the bloomberg first word news. nejra: starting with the g-7, angola merkel does not have much support when it comes to austerity. the debate over stimulus versus belt-tightening has shifted. canada's new prime minister had shifted his country's focus to infrastructure spending and cash.

david cameron joins markel as a champion of fiscal restraint. just a few minutes from now, president obama holds a news conference at the summit. in france, strikes at oil refineries may spread today. workers at six of eight refineries have walked out. the strike is protesting the president's proposed labor reforms that makes it easier to fire employees. the european union is escalating a spat with turkey. its say turkey must toughen anti-terror law. turkish president air to one said he would scrap iran mark -- egyptent are to one -- crash is calling for change on how flights get airplane data.

experts say the technology should allow the plane to strain the information in real-time via satellite. a warning for hedge funds from tony james, billionaire president of blackstone group. he says the hedge fund industry may learn a court -- lose a quarter of its assets in the next year. he told bloomberg tv canada, it is kind of a day of reckoning. there will be shrinkage of industry and it will be painful. hedge funds are having their worst start since the financial crisis. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. tom: francine, that is really interesting. you wonder where hedge fund pricing will be, 2% and 20% of the gain over hurdle. you wonder where that will be in five years. what is the mood on hedge funds in the city?

francine: it is our most read story on the bloomberg terminal and that gives a good indication of what people are worried about. i listened to what tony james said and he talks about the day of reckoning, saying it will be painful and that the shrinkage in the industry will be real. there is a lot of appetite to find out more about this. tom: paul tudor jones struggling with that as well. equities, bonds, currencies, commodities. story, $50 on brent. west texas intermediate, 49.86. the vix, 14 exactly. there is the $50 oil. i am really looking at euro-sterling throughout the morning. 0.7607. that is more of a brexit indicator to me. francine: it is, 100%.

what the g-7 needs, i thought it was spot on when you say a lot of people are looking inwards. talking to japan and european leaders talking about the dangers of brexit. this is my board and when i really wanted to hire dutch highlight was crude oil. tom: that is american crude. the benchmark over $50 a barrel. let's take a look at euro-sterling. 2008, weaker sterling, stronger euro. the regression and the average before the crisis, remarkably lines up. this is a welcomed series and we are getting back there. nou are wondering with bremai will you get strong euro. i hope that was not too much this early in the morning.

francine: it is not too much, and this is what people want when they watch "surveillance." bear with me, because this is energy junk bonds. it goes through the spread of a lot of these energy companies with treasuries. everything below the letter -- redline is anything below 10, which means distress. this is oil at $29 and this is oil and $49 so you can see their life is getting a little bit easier when you are looking at distressed companies. above $50 atraded barrel for the first time since november. that's get more on this with virginie maisonneuve. great to have you on the program. when you look at that -- when you look at rent above $50, it was a psychological level. what does it tell us that the markets are clearing a lot sooner than we thought and we are not in the oversupply

hanger? virginie: the short-term and the medium-term, the short-term, clearly you have the supply disruption that is helping but clearly medium-term, when you see how poor growth globally is and when you see this competition for cash that is going on, so if you look at some of the oil-producing countries' repayment of debt and barrels when they barred at hundred $20 a barrel and are paying back at $40 or $50, they are going to have to pay back to 23 more times oil than originally thought. in the short-term there's clearly some support. we know in the first and second quarter 2017 the inventory picture is not going to be great. all said, it is a slow adjustment so i am still quite cautious.

clearly you want to have oil in your portfolio that i'm still cautious. francine: i know this was untenable levels, but do we need some of these oil smaller companies to fold? virginie: i think so. i think it will happen. it is just taking time because you have a lot of free money now. you have unconventional policy and tolerance and a certain level of complacency. out will probably happen between now and second quarter 2017. tom: one of our themes this hour will be the president's trip to japan and hiroshima. what is your asia waiting right ing right now? how much are you in asia? what is the percentage investment, are you overweight, are you equal weight? virginie: if i was managing a portfolio which i'm not i would be underweight with some

exposure to china in areas that i think are quite cheap. i'm quite cautious about financials in general however technology, sector, and health care in asia offers some attractive opportunities. tom: i do not believe there is negative interest rate in asia. maybe speaking out of turn. how do the distortions of the western monetary system affect asian nation? virginie: quite dramatically. in japan we have negative rights but if you look at global gdp, asia is generally very dependent on global gdp. etc., think of exports, over a quarter of local gdp is coming from countries with negative rates so clearly it has an impact. the question is, where is the next source of growth for those countries if global growth continues to be anemic? when i find quite interesting as

three-point innovation strategy around green, space, science, and trying to become a powerhouse of innovation by 2050, these are the kind of things we must look at for patient investors but the short term might be tricky. tom: what i find remarkable is screen for asian equities. the rest have really had a difficult 12 months. monthne: i wonder if that or if that one or two weeks in january where we saw solid growth in china. it seems to be a little bit more stable. i want to bring in what bill gross told us about the fed

because whether you look at currencies, whether it is commodities, whether it is oil, it goes back to the fed and when janet yellen will start normalizing. >> i think the move in june, and i think that because the second quarter is looking decent, it is a 2% to 3% kind of quarter, a comeback from the first quarter. jobs will probably be adequate in terms of growth, and the dollar has gone down instead of up. the stock market is close to its peak, so for all those reasons financial conditions and economic statistics, this is their time if ever to move. i think janet yellen is more dovish than some of the governors and presidents. francine: june seems pretty punchy. it is six days or seven days before the referendum on brexit. virginie: to me, there are reasons clearly that we will have another hike this year but the timing in june, if you want

to be conservative with referendum vote, also new surveys. there was a survey conducted by the fed showing a large portion of u.s. households would find it quite difficult to make an emergency expense of $400. you have mixed data. investment has been quite weak. target so is below although asset prices as we have seen are quite good, the rest of the picture, although better than much of the world is still quite moderate. my bet would be for later than june. tom: virginia madsen of with us --virginie mizzen of virginie maisonneuve with us. at the g7 meeting, the president to make comments, and this comes warned of aent abe

laymen styled economic -- lehman styled economic crisis. this is bloomberg "surveillance." ♪

francine: welcome back. i'm francine lacqua in london, tom keene in new york. let's get straight to the bloomberg business flash. maker the japanese airbag facing billions in costs is and talk with potential buyers. according to a person familiar with the matter, to caught i has had discussions with kkr and other can a mets -- candidates. shares have fallen 65% in the last year.

has cleared an important hurdle in getting its new diabetes drug approved in the u.s. it's once a day shot that combines two jobs should be okayed for sale. another drug similar appeal -- received backing. valued asy may be high as $16 billion when it goes public the second week of june. they will sell 17% of its existing shares. francine: thank you so much. above $50e breaking per barrel for the first time in six months. having a blast joins us now -- javier blas joins us. life gets easier if oil is at $50 instead of $20. javier: i think life is getting

easier for all oil companies, particularly small oil companies, and also for the banks who are financing these companies. let's not just call mission accomplished for the oil sector. at $50 oil the level we were back in mid-november, and that is when ceos of exxon mobil and bp were saying, we are going to do a lot of cost-cutting because at $50 we really need to do things. it provides breathing space that we are not out of the what's. -- out of the woods. $50 is the sweet spot and they are expecting it to rebalance in the third or fourth quarter. are you surprised we are rebalancing quicker? javier: we have had massive disruptions in nigeria where production is the lowest in 20 years.

delta, andthe niger the same thing with the wildfire in canada. they are more or less under control but that has disrupted oil flows, and they have a very close proximity to consuming centers. in two days they are in the united states, and with africa oil, it is felt very closely into europe. that has been the impact. it is still a bit of oversupply so the market is getting a bit ahead of itself. i have been talking this morning and yesterday with physical oil --ders and they said there we are probably five dollars above what we are -- what we should be. tom: congratulations on your coverage. i think you were out front pushing against the gloom of $30 a barrel. the chart of brent crude puts this in go.

$100 a barrel, down we go. down?e rationalization people sat at the surveillance desk and said, i would be stepping in on oil. and then here at $60, i would be stepping in at oil desk in on oil. -- in on oil. does everybody have an angle and an opinion? javier: absolutely. those that were betting we were going to get at $50 could not have anticipated the disruptions. you might haven't dissipated the situation in nigeria get worse, but you have no way to anticipate fires in canada. tom: what is the geopolitical delta and $50 oil? to $30, $20, how much is

geopolitical risk? javier: i think a significant amount of what we have a market is geopolitical risk. inc. about nigeria, the country -- what -- think about nigeria. obviously we are also having some pricing because of the .ituation venezuela is facing in general, the market is a bit nervous because it's his --blems and libya, ig area it sees problems in libya, nigeria. tom: absolutely fascinating. we will see you at $52 a barrel when we will be in total panic. he is with bloomberg reporting on this each and every day. we await the president's conference at the g7 meeting. on bloomberg radio we get an update on technology. looking forward to all of this,

all the doom and gloom on apple will get some clarity. ♪

francine: this is "surveillance." francine lacqua in london, tom keene in new york . we are waiting for president obama to talk at the g7. they always do the summit in the most remote places of the host country. i know for a lot of the leaders was a hassle to get there. tom: maybe the remoteness is a

little bit about security. i think about brett no one's north of new hampshire -- witain the woods -- bretna oods. this is a beautiful shot of the summit. it is a typical website at any given resort. the president will be in a smaller room, not a big ballroom , nothing like the east room of the white house. this is a makeshift press conference with some real weight. i would underscore guard or harris'overview -- gardiner harris' overview of his visit to hiroshima tomorrow. i think you did a good job of summing up the moment the president traveled to hiroshima. president obama: in the interest of getting you all home at a reasonable hour, we are not

going to be doing a press conference after so i thought i would give you guys a chance to fire off some questions now. a quick comment on the g7 meeting so far. it has been extremely productive. i think one of the benefits of the g7 is you have like-minded tontries, who are committed , andracy, free markets international law. norms, so fornal us to be able to get together and focus on critical issues that not only affect individual countries but affect the international award or just order i think is vitally important. -- order i think is vitally important. so far we have discussed issues of the global economy and the

need to continue to accelerate growth, to use all of the tools at our disposal to make sure we are not only putting people back to work but also helping to lift wages and helping to make sure that we can sustain the momentum of the recovery that is taking place in the united states, most prominently, but we are starting to see some progress in europe. the fact that the greek debt for a has been resolved reasonable length of time, i think should help, but we all have got a lot of work to do. we agree to continue to focus on making sure that each country based on its particular needs and capacities, are taking steps to accelerate growth. we had a chance to talk about tpp and ournly

involvement in that, but to tip -tip, and emphasize the importance of pushing back against either protectionism or competitive current cd --uations or the kinds of currency devaluations. some of thetouch on key security issues that are important to all of us. south china sea and maritime security, touched on issues surrounding the ukraine where we have started to see some progress in negotiations but we are still to seeing -- still seeing too much violence. we are going to spend some time this evening tackling some of

the other major international hotspots. that gives you an update of where we are at so far and with that, you guys can ask some questions. mr. president, 11 of your predecessors decided against going to euro shema. what do you know -- euro shema -- hiroshima? what were they worried about that you are not? doh nonproliferation, how you communicate risks in a way that it will get resolved? it seems to get worse. americans are worried about terrorists with suicide vests. do they worry enough about nuclear mishaps which are unlikely events that could millions? are we paying enough attention to kim jong-un and things that are going on? all, ibama: first of

will not characterize how other presidents were thinking about these issues. i can tell you how i'm thinking thet it, and that is that dropping of the atomic bomb, the ,shering in of nuclear weapons it was an inflection point in modern history. it is something that all of us with in one way or another. obviously, it is not as prominent in people's thinking as it was during the cold where -- the cold war, at a time our parents and grandparents were huddling under desks in frequent of as, but the backdrop nuclear event remains something that i think presses on the back

of our imaginations. i do think that part of the reason i'm going is because i want to once again underscore the very real risks that are out there. and the sense of urgency that we it is not have, so only a reminder of the terrible toll of world war ii and the death of innocents across continents, but also to remind ourselves that the job is not conflict,ducing building institutions of peace, of reducing the prospect nuclear war in the future. , we have seen real progress over the last several

years. the iran nuclear deal is a big piece of business because without us having to fire a shot , we were able to persuade a big, sophisticated country that had a well-developed nuclear program not to develop nuclear weapons. negotiated myt i first couple of years in office with the russians has reduced our respective stockpiles. the nuclear security summit and all the work we have done on that score has made it less likely that nuclear materials fall into the hands of terrorists or nonstate actors. and although we have not seen the kind of progress that i would've liked to have seen with respect to north korea, what we have been able to do is mobilize the international community so that their proliferation

activities are scrutinized much , and they have far fewer countries that are actions by potential north korea outside of their own program. korea isid that, north a big worry for all of us. they are not at the point right now where they can effectively but each timets, that they test, even if those tests fail, they learn something . it is clear that ideologically ,hey are still convinced that and kim jong-un in particular that hisbe commenced

own legitimacy is tied up with developing nuclear weapons. you pointed out the continuing tension that exists in south asia. that is still a concern, and we know that terrorist organizations would have no compunction about using a weapon of mass distraction if they can get their hands on it. we have a lot of work to do. i think we have built up an architecture during the course of my presidency that has made a difference, focused attention on key points of donor ability, but we are not where we -- points of vulnerability, but we are not where we need to be and we have not achieved all of the goals that i spoke of in prod about my about myy -- in prague presidency. i knew that i would not be able to achieve all of those goals, and this is going to be an ongoing task, but it is one that i think we have to be paying a lot of attention to. north korea nuclear program

was called the biggest threat in the world right now, the gravest threat. you agree with that? are you see this nuclear program as the worst thing going on? is not the thing necessarily that poses the most immediate risk. rifles andisil using crude bombs can kill a lot of people in paris or brussels. people are rightly insistent stamphe world community out i saw. so that is whyil we are focused on that. this is not a situation where we

can just afford to focus on the short-term. in the long term when you have a regime that is so isolated that generally flouts international norms and roles more than perhaps any other nation on devotingat is also , hrmous national resources ell-bent on getting nuclear weapons that they can fire long distances. that poses the kind of medium-term threat that we have to pay a lot of attention to, and i assure you, it is something that my administration has paid a lot of attention to. it is something i think has been at the center of the trilateral will work we have done with our close allies in the region. it is something that we have put the center of our discussions

and negotiations with china. before, what we have seen is actually improved responses from countries like china. countries in the region like vietnam and burma taking these issues much more seriously because of our engagement. risks that may reduce the weapons korea selling othersile material to countries, or putting it out on the black market. it does not solve the core problem of north korea continuing to develop its , and we are going to have to continue to work in a concerted way. in the meantime, i have been working with the pentagon for several years on making sure we can develop the kinds of defense architecture that can protect

the united states and our allies exculpationpected -- exculpation -- escalation. >> you said before when you talk about where leaders they often ask you about the presidential election. can you give us a sense of conversations you have had so far, ridiculously now that donald trump is the nominee and he has said that japan should presence.e u.s. troop also on the democratic side what they are saying, and what you think of that as they are continuing to be divisive with bernie sanders saying he will take it to the convention, and he has endorsed your democratic primary chair. haved he change course? you decided you are not going to get involved until one of them concedes to the other? pres. obama: the world pays

attention to u.s. elections. our pay more attention to elections sometimes than we pay to there's because the united before,s, as i've said at the heart of the international order. are those countries that critical of us, even those countries that complain or question particular policies or thations we make, know ultimately things do not hold together so well if the united states is not making good decisions. provide aon us to certain level of stability and direction in meeting global challenges. so they are paying very close

attention to this election. thatnk it is fair to say they are surprised by the republican nominee. they are not sure how seriously to take some of his pronouncements. but they are rattled by it, and for good reason. i think a lot of the proposals that he has made display either ignorance of world affairs or a interestattitude or an headlines tweets and instead of thinking what is required to keep america safe and secure and prosperous, and what is required to keep the world on an even keel. with respect to the democratic primary process, as i have said before, it has been my view to

let this play out, let voters make up their minds. during primaries, people get a little grumpy with each other. it is just the nature of the process. you start off and everybody is thinking, this is fine, this is going to be a friendly competition, we are going to share ideas and then one person says one thing and another person says another thing, and that felt a little sharper than i expected. somebody's supporter pops off and there's a certain buildup of aggravation. we saw that in my lengthy primary in 2008. this is no different, but what i think is really important to remember is that unlike what you have seen in the republican

therey, for the most part is not that big a difference in ideologically -- ideologically in terms of the issues. both hillary and bernie believe that every american should have health care. both of them think we have got to make college more affordable. both of them believe that it is important for us to have a tax , and that wes fair should be closing corporate loopholes to pay for things like investment -- infrastructure investment and early childhood education. if you put their proposals side by side, they are all pointing in the same direction and the differences are primarily tactical. they had to do with, how do you get some of this stuff done? does not mean that those are not serious questions to ask and debate.

it does mean, though, that once the primary process is resolved the ability for us to pull themeer around a common that is in sharp contrast to the division being offered on the other side, i think is one that will get done by the time of the convention. urgedd urge, and have both sides to try to stick to the issues because a lot of that grumpiness arises where folks feel that we are not talking about an issue but we are talking about personalities and character. and they are both good people. i know them both well. important fort is this in a waynd both sides feeling proud of what they have done. and both sides have run serious,

competitive races and debated issues in a serious way, so i am proud of democrats for doing that. know, i sure now because i have been through this a bunch of times, there is just the natural impulse when you are having to report every day on campaigns, that every little conflict, trash talking that takes place is elevated, not to mention polls. learnedone thing i have after being around for a while is that day-to-day choppiness is not and did give of longer-term trends. i felt of the democratic vision

notthe country and ability just to win elections but to deliver on behalf of the american people. the convention going until the end of july going to make it harder to defeat mr. trump? pres. obama: no. what better if everyone was unified and whoever the nominee was could take a nice, two week vacation to recharge? absolutely. i guarantee the eventual nominee wishes it was over now, because this is a grind. ,t is hard, and in some ways one of the things i have voice found is that it is a lot more draining arguing against your friend then it is arguing against your political opponent. more.t weighs on you

being criticized by folks who are in your own party always hurts just a little bit more. takes a little energy folks you, but these are who are serious about trying to solve the country's problems. they're both veterans of the and so they are going to hold up and by the time we get to the convention i'm confident we will be in good shape. as a special bonus, i'm going to take one more question. mentioned some tactical differences between the two democratic candidates but when you hear bernie sanders speak, it seems like he is talking more about the issue of trust ability

and the need for political revolution. just yesterday we saw the state inspector general put out a report about secretary clinton's e-mails and it basically undermines some of what she said about her e-mail practices. i wonder if you think that undermines her trustworthiness with the american people, and if you agree with bernie sanders that she should release the transcripts of her highly paid speeches to wall street? pres. obama: i take it back. i am not taking any more questions. don't we have something in asia to talk about? i have already said a lot about those issues. i think those are better directed to the campaign. as i said before, during the course of the primary, people say what they think might help them get some votes. over, thenmpaign is they move on and they make an

assessment in terms of how they can make sure that the vision that they care most deeply about has the best chance of passing congress in getting signed by , and that supreme court nominees are confirmed, and all of the things that make for a functioning, effective government. that isthat the noise going on back-and-forth between point, if youthis want insights into how they are thinking about it, though should be directed to them. you have already had a question so if i'm going to answer another one i think it is fair. >> can i ask you what you think of your desk of the new talib and later and what you think of

leaderhe new talib and -- taliban leader? pres. obama: this continues to be an organization that sees violence as a strategy for movingng its goals and in afghanistan. we have a democratically elected government in afghanistan that we are supporting. our goal right now is to make constitution and that democratic process is not to mention that we are able to maintain the counterterrorism platforms that we need in that region so al are not able to take root and use that as a basis to attack us in the united states. myhope, although not

expectation, is that there comes a point at which the taliban recognizes that they are not going to simply be able to overrun the country, and what they need to be doing is to enter into serious reconciliation talks led by afghanistan. happens, that is something the united states and others in the world community with support. that that willul be happening anytime soon. we will have to wait and see how those things develop. anticipatet-term, we that he will continue to pursue andgenda of violence blowing up innocent people, the kinds of actions that have approachized their

over the last 15, 20 years. but i do think that there will not thisint, perhaps year or next year, but eventually, where there are community thate surrounds the taliban and at their that recognize goals are best achieved by negotiations. ok. >> is that embarrassing? pres. obama: to me? why is that embarrassing? i was not the one that rolled them up. i was very blunt with the vietnamese government.

there is so much good going on in their country. when i indicated to them is that these kinds of heavy ended -- end up being entirely counterproductive. and the folks we invited our people that are prepared to have a constructive conversation with the government about how to prosperity andnd economic development and environmental security in that country. heard,ral message as you harness that talent. let them loose to create problemsand to solve

and engage them. it is the same message i had with cuba. it is the same message i had in a wide range of countries where you still are seeing serious problems with human rights. the one thing i am absolutely convinced of is that by us engaging, by s meeting with civil society activists -- by us meeting with civil society activists it moves the ball. it does not solve these problems immediately. isht now, burma myanmar undergoing a democratic transformation in part because of the process that we helped spearhead. they are going through revolutionary changes of the last several years, but i

guarantee you there is still human rights activists inside of burma and myanmar who are being harassed, are not able thepeak freely or assemble way we would expect them to be able to do in our own country. when i went to cuba and that with those dissidents, one of the individuals who was there still had cuts on his wrist from handcuffs because he had been detained just the day before. i did not come out of that meeting thinking the problems of human rights in cuba are solved, but what i am pretty darn sure of is that by us meeting with them, by s shining a spotlight on their stories -- by us shining a spotlight on their stories, by us indicating not that we were going to dictate how these societies develop,

that we do think there are certain universal values that we care deeply about and that we are going to stand with, that that helps. is thet, i think, biggest lesson over the course of the seven years as we have been in gauging some of these countries with -- in gauging -- engaging some of these countries with serious human rights problems. --hink if we just and back stand back in school, but somehow that is going to change these internal dynamics, has proven -- proven to be less effective than us engaging, indicating to governments that we are prepared to work with them, but that they need to make

progress. continually try to lift up the actions of these civil society leaders in a way that provides them a little bit more space, and that space slowly grows. up being a process, and it is not always a process that travels in a straight line. sometimes you take two steps forward and a step back. sometimes you start to see openings in these societies and governments get nervous and they climb back down, but that steady with an combined appreciation of the history of these countries, combined with a , combineds to listen

with an ability to mobilize the international community so that we are not thinking that we are doing this all by ourselves, over time we have seen results. more modest than i would have hoped, but that is true of everything about foreign policy and domestic policy and the human condition. i gave you a couple. i already gave you your bonuses. japanresident obama and at the g7 meeting, a wide-ranging press conference. delicate questions on his visit to hiroshima. the former secretary of state's

e-mail flow is much in the news in the united states. i was really struck by an almost philosophical president, really has the feeling of final press conferences as a president, and his family migrate towards november. francine: i think you are right, tom. it was a very wide ranging press conference. beforeinteresting that he is actually meeting with world leaders. he did talk about competitive effects devaluation. i know about 80% of the news conference was on the geopolitics, role of china, foreign policy, but about fx devaluation, the g7 needs to push back against that. he also mentioned wage inflation and economy growth around the world. tom: the sigh of relief i heard was from the british contingency. i believe private -- prime

minister cameron was pearl diving. southwestvate oysters of tokyo, but there was no maxon -- mention of brexit or bremain. francine: that was the only thing he did not talk about in that 40 minute press conference. the south china sea, he did mention trump briefly saying world rat -- world leaders seem to be -- seem to be rattled. to: that was a scheduled question -- schedule two press conference. i thought the discussion of a new asian order that he spoke of with the backdrop of the adjacent nations, and vietnam as well with something. but as you say, a minimal amount on economics. francine: minimal.

tom: right now as we begin our -- a bloomberg surveillance, let's go to a news briefing. nejra: thank you, tom. the european union is escalating a spat with turkey. mustresident says turkey toughen its anti-terror law if it wants visa free travel in europe for turks. the president signals he would scrap a landmark ref unique dutch refugee deal if they do not loosen travel requirements. in france, strikes at oil refineries might spread today. the union has called for electrical workers to go on strike. they are protesting the president's label reforms -- labor reforms. the egyptair crash is spurring calls for changes in how it relates get flight data. sophisticated submarines may be

the only hope of finding the data and voice recorder in the mediterranean. technology should allow the planes to strain the information real-time by satellite. ,he hedge funds from tony james he says the hedge fund industry might learn a quarter of its assets in the next year. he told bloomberg tv canada "it is kind of a day of reckoning. there will be shrinkage in the industry and it will be painful." hedge funds are having the worst start to the year since the financial crisis. global news 24 hours a day powered by our hundred 50 let's look at our equity bonds currencies and commodities. oil front and center, $50 a barrel. west texas 49:83. we've got a wonderful guest on china coming up twofold in the president's recent comments.

sterling,iced euro .7604. it is all linked to brexit and we do see a little bit of that concern moving on. this is european stocks, they are pretty much unchanged. the big point we want to show wti first of all, the wp -- .85, a lot of people are calling it a sweet spot. tom: to the bloomberg quickly, here is euro sterling again. the regression and average downe 2008, strong euro, we go with a recent bout of strong sterling, a weaker euro. we didn't get to parity on euro-dollar. fading, werexit

power run through back to an average. this is what i picked out for this hour. i moved away from the distress in a lot of energy companies and i picked the spread between u.s. two year and 10 year yield. the spread is flattening. this is something that we talk about because it relates back to what china can do. it all relates back to the fed. let's welcome, from hightop .ecurities, she is miranda carr you listened to the news conference with us. it went on longer than expected. he talked about china from a poor and policy point of view. -- from a foreign policy point of view. should he have talked about the economy? at thes quite difficult

g7 to bring in china and criticizing china has a lot of issues but if you have all the g7 countries getting together in japan, it doesn't look good. a lot of these things will come off in a couple of weeks time. we have the strategic and economic dialogue between the u.s. and china. a lot of the tensions, whether it is over the gop fight or the currency or the economy all comes head-to-head. francine: we also spoke to wilbur ross yesterday. he said he would be interested in distressed debt in china. can someone like him get into that market? >> it is pretty risky. debt, there ised no experience on how to deal with it.

you've got the legal system which has not had to deal with those issues before. you are going into an untested probablyne which i am going to leave to the asset management companies in china. tom: in your notes on china, you talk about the squeeze beginning for china. that was a few weeks ago. give us an update in a timeline of how the financial squeeze will unfold. >> what we had in march was this big credit boom. financing, andee also bank loans. every single measure of credit in china went off the scale. whatthey haven't done -- they have done is tighten regulations. ec regulations in the bond market. this has dragged a lot of the excess down. now, may, we are

going to get much lower financing numbers. wheresue comes in june lots of these issues, if they combine with things like the credit default or continued problemsutflows or any in the banking sector, if that creates -- that could create a bid -- a bit more of a squeeze. a lot of these factors coincide. tom: how much of that will be spearheaded, planned, or cajoled by beijing. understand is a freestanding financial system versus our understanding of beijing running everything. which is it? >> it is a mixture of the two. government wants stability but it is also trying to move to a market-based system. comments on the currency, they are ditching the market based system but the trouble is the

market comes in and intervenes. people take money out of the .ountry, people start paying so there are market pressures on the currency. they become much greater and they are forced into devaluation even if they don't want themselves to keep it stable. tom: we would love to have you back again. terrific perspective on china and asia. coming up on bloomberg surveillance, a conversation with diane swank economics. we will talk about the resiliency of the american economy. bloomberg surveillance.

♪ >> when in doubt go to asia. this is not in st. louis. but in singapore, talking on u.s. to mastech policy, it is a powerpoint show with president bullard. in all talk to diane swonk moment. here a business flash. >> the japanese airbag maker facing billions in costs is in talks with potential buyers. takata has had discussions. they rose by the maximum amount allowed in tokyo. those shares have fallen 65% in the last year. a french drugmaker has cleared a hurdle in getting its drug approved in the u.s.. the one today shot that combines

two drugs should be ok for sale. a similar drug also received the backing of the panel. denmark's largest ipo in decades may be valued as high as $16 billion. when it goes public, it will sell up to 17% of its existing share. tom: thank you so much. for way too long, since we have spoken since diane swonk. she said "i will not appear unless the white sox and cubs are in first place." here she is. nirvana in chicago with their baseball teams including the presidents doing very well in the early days of the baseball campaign. wonderful to have you here. james bullard, no normalization policy. would you please translate? don't haveying they

the policy because it is not just glacial. it is beyond glacial. this is something we have been hearing. the fed has been telegraphing consistently. the distance is gone and the fed is singing in unison. they are saying "you have to get used to the idea that we are going to raise rates slowly." you're based in chicago was away away from the microeconomics of chicago and the theoretical in a mix -- theoretical economics in the east coast. are we going to move out of all of this with each -- with a smooth wide path where we have abrupt brutal moves in market? >> the fed is attempting to make this smooth, but the fed moved in december. we are dealing with this

geopolitical and economic environment that is fragile. we didn't hear a lot of economics from president obama this morning. the issue is geopolitics and policy are now economics. those can affect the economy quite a bit. the fed and the u.s. live with a stronger dollar? >> they are going to have to. the issue is how long can they take a stronger dollar? a little bit of appreciation is not a major change from what they have seen. the problem is if we had a sharp appreciation in the dollar from here, so it is really a matter of magnitude. the fedother reason why wants to move very slowly and have this be a nonissue. you were talking about your guests from china. the chinese economy is what happens if china meltdown again. francine: is that risk now

removed? where we were- was unintended consequences. it could be huge outflows from emerging markets. it could be devaluing or something uglier. >> that is exactly one of the issues the fed has been thinking about and we can't integrate that into your models. the fed doesn't take that into their models. to mention michael mckee providing the distinctions that mr. bullard is not suggesting a normalization policy. he is observing one. in the what we see markets, this idea with no normalization with that market line being so far from the regression of the dot plots. it has been a cacophony this morning with the president speaking. the long-term mission -- i had to do a mission chart.

the university of michigan -- wonk -- here is the swonk critique. disinflation is out there. is the public out in front of the fed? >> the public is seeing guest prices -- seeing gas prices. we did see chalked -- c talked by terry yellen. >> able look at the prices of the gas pump and when they have been slower longer, they reduce their expectations. when they are higher longer, they raise their expectations. tom: the real economy follows on with a parlor discussion of june, july. >> i'm going to drop it at june.

i feel like i am back of the crowd again. tom: we got that out of the way, but the basic idea of, is the real economy getting up to steam , we have a wide set of opinions. >> we will get gdp tomorrow, so maybe we doubled our chapel -- doubled or tripled gdp. it does look like we are gaining traction but there is some seasonal adjustment problem between the first and second senser so it is a false of security that we keep re-accelerating. when you're doing it off of a low threshold, it makes a bigger difference. overall, retail sales aren't great but things are encouraging. construction, better housing, better employment figures, so from a purely domestic point of view, what would you be happy in seeing? >> i am in favor of the fed

normalizing in june. the fed is lifting its foot off the pedal. they are just watering down the drinks of it. they want the party going and i want to engage people and i do agree that the economy -- the false sense that we were flirting with ice and thin ice in the first quarter, the mistake was that the economy is gaining some traction. yellen has made it very clear the re-engagement of those disengaged workers. one of the most unnoticed and underrepresented generations since generation x. they were hit the hardest, they lost participation in the labor force. francine: will inflation overshoot? >> i hope inflation will overshoot but the question is, by how much.

anything from to a half to 3% would be fine. of the day,he end this is not a fed that is going to let inflation happen. francine: what is good about evans is he is intellectually consistent. tom: let's bring up this banner. this is possibly the best and are we have ever done in the history of bloomberg on the economy. bowl toves from punch cash bar. >> it's still a party. tom: this so beautifully discusses vice-chairman fishers idea of altra accommodative. where is normal? >> who knows? that keeps lowering the target. what is the tipping point? it is 3%, edging towards 4%. that will change over time.

we are not going to get there for a long time. tom: beautifully explained. with us.nk bloomberg this morning linking in economics. jeffrey rosenberg of black rock, always interesting. i'm sure with an update on the impact of negative rates. bloomberg surveillance. ♪

james bullard of the

st. louis fed, they are speaking in singapore. we are -- he is repeating what he said in beijing on monday. stronger labor markets favors slow normalization from the fed. tom, you have the morning must read. tom: project syndicate, lords get lcd writing -- lord skid sure, the only way to make more money is put into circulation is to have the government spend it. the government would borrow the money from a central bank and would say negative interest rates are a distraction from a d give -- a deeper analysis of what continues to go wrong. negative interest rates, that wasn't in the textbooks yet.

>> it doesn't seem to have worked very well. tom: we are learning every day. the japanese have try to neutralize it and it didn't have an impact. it is hard on balance sheet in europe and hurting the bank balance sheets. this is not something that should be in the options. helicopter money, if the federal reserve were to resort to helicopter money -- tom: do they have a mandate to do that? >> they would have to have congress go with them. tom: some of the debussy talks about -- some of the taboos he talks about, francine? francine: he said people would be concerned, but is it not the only way of getting inflation back up across the world? everything else is just not working to fight inflation or disinflation or he pressures. talked about it

after quoting milton friedman. it is not the concept is wrong. it,issue is once they did in terms of inflationary forces going forward, they lose their independence. they are under attack from central banks from the right and the left on their independence. that is a real issue. that this would be their last independent fact. tom: this is a german two-year chart. we can show denmark or japan as well. part of your charm is you are from chicago. from theip codes away fear and gloom of big city crisis. what do you see in chicago? >> we are not doing terrific. we are trying to catch up.

deal with a lot of ceos now and one of the things we are seeing instead of realization that it is not just what they are doing -- you would have thought the crisis would set it into them. they are worried about geopolitical. what does this presidential election mean for them? those policyen, issues matter to them. thesehe idea of mixing themes in with economics, finance, and international top of thatnd on quiet nominal gdp as well. we will continue with diane swonk. is -- of wells fargo. ♪

tom: it is a rare occurrence. gorgeous city in london. that is a cheese grater front and center.

ofn we go over to the beauty primo oriole day new york city. down in the right corners, the rattus -- the radish slicer. anyway, one of the new constructions. the beautiful empire state building in the background. right now, on bloomberg first world news, >> the g-7 summit has wrapped up in japan. president obama met with the leaders of six other nations. they discussed ways to get the global economy moving. >> we discussed issues of the global economy and the need to ,ontinue to accelerate growth to use all the tools at our disposal to make sure we are not only putting people back to work

but also helping to lift wages. tomorrow, president obama becomes the first sitting president to visit hiroshima where the u.s. dropped an atomic bomb to end world war ii. an endorsement by house speaker paul ryan is imminent. ryan spoke with the likely presidential nominee by phone last night. ryan said he wants to end the impasse. democratic presidential candidate bernie sanders has turned to marijuana to boost his chances in the california primary. he backed a proposal on the california ballot that would legalize the drug. the marijuana issue placed sanders's support among the .outh vote airlines and airports in the u.s. are taking matters into their own hands and spending millions on more workers to shorten long lines at security checkpoints.

the tsa has come under fire for the problems it is -- problems. it is expected to be a record summer in travel. global news, 24 hours a day, powered by 2,400 journalists in 150 news bureaus around the world. tom: thanks so much. west texas intermediate making a -- for 50 right now. what are the lines like at heathrow? americaa huge uproar in . francine: they are better than jfk. is that fair? that is between 45 minutes and an hour. tom: this is a problem that won't go away. joining us is surveillance transportation expert diane swonk. going to o'hare in chicago is like going to narita in tokyo. >> once you get on your flight, you are ok.

they are getting better. that is the good news. they are letting everybody through. i walk through. tom: i can see the e-mails coming in from tsa right now. >> it was crazy. three hours nine -- three hour lines? tom: george bory with us from wells fargo. we spent 90% of our time on equities priced to perfection because of all the economics of ---- corporate runs corporate bonds are just like stocks. >> corporate credit in general has had a tremendous run over the last couple of months. the policies you were talking about earlier, easy military policy,- easy monetary

the corporate sector has been a huge beneficiary. the chart here, moody's double, i will take aa. that is lower yield and higher bond prices. nice channel there, a great moderation channel of lower yields. you figure this ends with the bond i have priced at 98 on my statements. >> bond prices are driven by two things. interest rates and corporate credit quality. interest rates have been on a secular decline lower and the fed is trying to creep that higher. we saw a meaningful backup in yields given what we saw. you've seen bond prices roll over. the credit cycle is advanced. fault rates -- default rates running at 6%.

it is going to continue to rise as we go through this year. that is the real concern. credit investors have had a tailwinds hail wing -- for seven years. this isn't a sell everything, get out of dodge type of environment. a credit investor has to talk -- has to walk carefully through the credit fields. >> beyond oil, which sectors are you the most worried about? i've heard a lot of people talk about commercial real estate. where are you most worried about? >> in terms of sectors, you are seeing leverage go up the most in sectors like high-quality sectors, telecom -- technology, health care, retail is under a

lot of secular pressure because of the shift in dynamics. absolutely. the industrial complex is a mixed bag but you have seen a lot of incentive for companies ,o push their balance sheet borrow as much money as possible . the highest quality possible has the access to the most amount of money at the cheapest cost. tom: let's tie this into brexit. francine: i'm not always talking about brexit. tom: i am. at thee: when we look oil industry, 50 for the first time since november. this means less distressed companies. this is oil at 29 and this is the distressed level of companies. are we going to see this backup? oil majors, are they in more of a concern with some of the commodity producers? pricesbig step up in oil over the last couple of months is driving a consolidation

across the industry. the weaker energy companies are still in the shakeout phase. you are seeing defaults rise. you are going to see more as we go through the rest of the year. it is really the midsized companies and the bigger companies which are now starting to consolidate the industry. that is a good thing. that should help the strong get stronger. at the weekend of the spectrum, even $50 oil is still going to result in a meaningful amount of shakeout. that is what we are working our way through right now. francine: talk to me about the companies that are able to combat a negative yields in terms of corporate bonds. how crazy is this world? a very good point, in

europe in particular. selling it back to the central bank is going to ramp up its purchase programs for corporate bonds next month. that is an exciting development in the corporate bond market. negative yields in corporate is a curious scenario. a company doesn't have its own printing press, doesn't have its own ability to tax. it is dependent on its earnings stream. if you are willing to lend to them at a price higher than what you are going to get back, you have to have ambitious assumptions about lower interest rates or the willingness of another buyer, perhaps the government. tom: that fades in nicely to the present tense on bayer and monsanto as well. is told 401k, on some stocks, on some bonds. i am not confident in owning bonds based on what i am hearing. why would i own bonds if we assume price to client? resultink it is a direct

of what you were talking about earlier. rose is low and it is a flight to security. to quality. george we have just what said, that is a perfect redux of low rates credit boom that we all enjoyed eight or nine years ago. >> it is a little different but it is there. one of the things i worry about is commercial real estate and where the leverage is. even a small change could change our valuation. that is where you look for those points. we have had commercial real estate bust that have not been fun. but it is not the same as the housing market bubble. whatever environment we are in, the bubbles that we see look more manageable. tom: seven of the 14 buildings right behind you in our shot went under in the last commercial bust. kidding.idding -- i'm

our beautiful new york bank. you be nice. i heard that. our audience didn't hear that. she's casting dispersions at mr. trump. >> when you talk protectionism -- sorry. tom: with oil near $50 a barrel, it is a perfect time to speak of oppenheimer and company. 49 87 a barrel. bloomberg surveillance. ♪

francine: welcome back. this is what markets in europe are doing at the moment. futures are pretty much unchanged.

european stocks are also unchanged. i want to show you banks because they are some of the biggest losers. a spanish bank, called banco falling some banks are today after capping some of the biggest back-to-back games in six weeks. let's get to the business flash. >> mcdonald has made investors happy with sales growth. now we have to deal with workers wanting higher pay. many demonstrated outside mcdonald's corporate headquarters. advocacy groups want the world's largest restaurant chain to pay aim minimum of $15 an hour. billions in costs for the biggest auto retail ever in talks for financial buyers. 's shares rosekata

21%, though shares have fallen 65% in the last year. lockheed martin is looking to reward the indian company charter group to help a big warplane deal from india. be in an f-16 fighter jet. that is the bloomberg business flash. you did so well is you look east from america. i usually fail at that and you noticed the wonderful story this morning on a stunning announcement. this is the biggest thing and finance today. qatar with a $9 billion bond operating -- bond offering. francine: it is double the amount that was expected, meaning there was quite a lot of appetite and the issue helps push offerings overall for this year from the interim -- from the middle east and africa.

we are seeing a record for a lot of these. tom: it speaks to the desperation of the oil community, which means it is the --fect time to speak to bory .o fadel gheit are you surprised at $50 a barrel oil? >> not at all. oil prices over the last year or so were so low to unsustainable levels. the margin cost of production will have to be in the 55-60 five dollar range. when oil companies are spending more than 50%, it is only a matter of time before supply and demand would balance and we are seeing this taking place. the combination has pushed oil prices from a 12 year low, where

it was $26. oil prices will be between 25 and $40 for the first -- for the for seeable future. and another weeks, four weeks, oil prices are over $50. a $50 rate is unsustainable because it is not sufficient enough to attract sufficient capital to meet global demand. tom: to the point of the qatar paper and what we hear from barrelrabia, is $50 a enough to calm their fiscal urgency? or do they need a higher price? >> definitely much higher oil prices. all these countries have been living beyond their means. they exaggerated their sustainability over $100. a lot of them said oil prices would go higher. the fact that it would not have

100 dollars to begin with and should not have touched $26 -- it is exaggerated movements in the outside and the downside and that is distilled by speculation. with not a conflict, investment banks in the u.s.. francine: i have heard this it isnt for decades that the speculators, but we hear these stories about these tankers sitting with oil in the middle of oceans. enough,hink 50 is not or if we do get stuck in a range of 45 or 55, that we have an oil shot because there is too much investment being taken out. and byquestion is when how much. oil prices will have to go higher but not to $100. speaking, even

with the speculation that you have a way up and away down, oil prices should move higher. to what level is the question. shall producers come back online at $50. >> only the best will come back to the pre-collapse two years ago. you have to remember a couple of things going forward, that the low hanging fruit has already been packed. cost more. will tom: thank you so much. thrilled to have you on. swonk is way out front on the ramifications of cheap oil to the consumer. you mentioned earlier our emotions on inflation.

what happens when the gallon of gas goes up? to some extent, it is stabilizing because we don't take -- we actually produce and invest in the oil industry so it helps to stabilize that. it is a three-month play once we cross 50. i would expect to see some recounts come back as the stronger industry consolidates. i think people really underestimated where it occurred. there are going to be record travel seasons. wasof the things that i saw when oil prices were $100 a barrel, people in low-wage jobs could not accept low-wage jobs. the commute costs were too high. some of the pickups in employment were related to people finally able to accept jobs they couldn't afford with the commute costs at higher rates. a lot of good work on

labor mobility as well. drivee are going to forward the conversation of wine it another apple product in my house. my last count was 43. we need a marginal improvement. gene munster and piper jaffray on apple. ♪

tom: global surveillance from london to new york, from many other geographies as well as well, how about a foreign exchange report. sterling stronger, fractionally, but nevertheless on the move. i am watching sterling very much. migration moves forward to june 23 and a brexit vote. francine: we will talk technology in just a second. we have james bullard saying some may lead to productivity gains. this is what we will be discussing next. bloomberg is next with david westin, vonnie quinn, and jonathan ferro. >> two numbers in focus. it is $50 credit. high-yield energy no longer looking distressed.

we are looking at that $9 billion bond offering as well. once again, calling the end of the hedge fund industry. will always be doing that. tom: thank you so much. greatly appreciate that. james bullard speaking in singapore. two major themes. productivity and what doesn't go into john taylor's global headwinds. with us as well. productivity is a mystery. >> we have seen it in profits. what is interesting there is there is so many factors helping -- factors holding back investment but it is not being turned back into investment. instead of going to corporate buybacks to dividends, those are the things we worry about going

forward. interestingly, productivity growth picked up when wages picked up in the 1990's and you saw innovation as firms tried to deal with that. there is some uncertainty, regulatory uncertainty. >> you throw everything in there and you'll get it. >> but should we be worried because we don't have a handle on it? should we ignore it? >> we should because we can't find it right now. we need to find their productivity and it is worrisome because the fed wants to overshoot and allow little inflation. if you believe the productivity numbers, you have little wage gains. george, i don't want to get you in trouble, but is it feasible that the monsanto bayerctions, buyer --

could borrow money at a negative interest rate? >> the total financing cost would be hard-pressed. some short dated paper that actually came in -- >> how far out? >> 2-5 years. in euros. tom: this has been -- >> the currency they use. tom: we picked them out of a tsa line at o'hare this morning. they were in line for three hours or something like that. will continue on radio, we will continue to grill her on the cubs and the white-hot -- the white sox. tomorrow we are filled -- we are thrilled to bring you james major and sweeney. ♪

oil's revival back to $50 a barrel. a day ofcing reckoning.

blackstone says the hedge fund industry may lose 25% in the next year as performance slumps. vonnie: global leaders convene in japan for the g-7 summit. jon: to our viewers worldwide, a very warm welcome to "bloomberg ." a big three hours ahead of us with stocks inches away from record highs in the u.s. david: we have great guests this morning. capital,s from janus he thinks the fed will be hiking. vonnie: an interview you will only see right here on bloomberg. looking at brit