to the state department and new resources to fund the fed. the fed anticipates a rate hike. chair yellen says her trigger finger might be getting a little itchy and a setback for populism in the netherlands. the euro slides and the france bond gains. good morning to our viewers worldwide. welcome on this thursday, march 16. i am jonathan ferro alongside alix steel and david westin. walk us through what a skinny budget is. david: we got a look at it. a huge shift for things like epa and state department. these are more radical. it seems like a political document fundamentally. a of republicans say it is that on arrival. .lix: you were there but a lot of what they are cutting is what the rust belt council on. the rust belt voted for president trump and now they are

losing a lot of their budget. david: agriculture is going to be very interesting because that is the farm belt and that is where iowa is where the primaries are. historically, you don't want to cut subsidies to farmers. we will be joined by richard haass, council on foreign relations, and he worked for a long time at the state department that they are talking about cutting by as much as a third. jon: looking forward to that. still in the markets this morning, a global bid in equities. a comparatively dovish barrel reserve. at least compared to excitations in the markets. equities up 6/10 of 1% on the stocks. by 1/10e euro is softer of 1%. the treasuries on offer after yesterday's big rally, your yield on the 10 year. alix: yields in the five-year up by four basis points. the dollar index goes nowhere

with softer ends to the fed. we are nearing a cross. longer-term averages are rising. that is going to be interesting to watch. gold, a little bit of a bit of four dollars and oil getting another big day today after a rally of 2%. david: let's turn to the so-called skinny budget. kevin cirilli is our chief washington correspondent. how dramatic a shift is this proposal from the white house? >> it is night and day from the last administration. i was speaking with several prominent conservatives yesterday who were quick to usher the lack of communication from the communication -- from the administration in terms of theiewing the budget but second i would make is this is largely just politics. he is calling for a $54 million increase to defense spending while trying to cut five key department agencies, the department of agriculture

receiving cuts as well as the environment protection agency now. for broader context, i would note that a lot of these cuts to the agencies, the business community is interpreting as part of a trend of rolling back regulation. they like that aspects, rolling back some of these regulations and they are viewing this as a signal that that is what they in policybut perspective, i spoke with several a's last night on capitol hill. david: moving away from that, there was this hawaiian court joining the immigration ban. how much is that consuming white house attention? >> they are definitely going to fight it and push back against it. they don't view this as as much of a concern of the previous iteration of the first front of executive orders. they feel they corrected the mistakes and that this will be upheld in court.

alix: all the action was happening in washington yesterday. the ellen push still holds. the fed chair delivered a dovish hike yesterday. >> today's decision is in line with that view and does not represent a reassessment to the economic outlook or the appropriate course for monetary policy. to maintain some kind of flex ability and option alley, check out dots go. this is a historical timeline of the median projection, the green line and the red line which is the market. both of them moved higher after that hike in december. but the median goes nowhere. so does market dictation, slightly below the fed. jiming us now for more is caron, senior fixed income portfolio manager at morgan stanley investment management. what is the real trick here? >> i think what is important is the fed was extremely careful not to signal an accelerated

hike. what they are telling us is they are on a predictable and chart a course to 3%. that is the good news. what we are seeing because of that, because we have that predict ability for the path of rates, that is a positive risk. at least do better, even the dollar. we talked about the dollar but if we look at the dollar versus some of the majors, it is weakened what look at the dollar versus the peso. currencies,riskier it is actually doing a lot better. the peso is somewhere around 19.2 right now. it has been strengthening based on this. this is more of a risk on town so why by yesterday? maybe it was a dovish surprise. why sell today? ina riskier asset market signaling better economic asset prices which is going to make treasury yields rise. alix: we saw the junk bond rally, the high-yield wind up, but is there a hidden risk?

the market still does not believe we are going to get to 3% by 2019. >> you are right about that. or a long time, the market has been right. maybe we are switching course and the fed is going to be right and the market is wrong. if we continue to get data that is strong, the soft data coming into the markets today, it turns to the industrial data, the manufacturing data, which starts to get stronger. i think we could have an upside surprise and growth. i think 3% is a strong possibility. jon: what did we actually learn yesterday? >> the fed wants to move very slowly. they are taking on board some of the survey data has gotten better but they still want to wait. they want to wait and see. i don't think they are taking on board any fiscal or tax stimulus in the immediate future. i think there is a lot of uncertainty around that and i think janet yellen is doing the right ring by being cautious and

slow. there is no need to go a lot faster now or signal that they are going to go faster. jon: but they are going faster because they have gone to a high 12 months to a high quarter. the markets change between september and march. >> you could also make the case -- i understand there was some dissent -- that the fed should have gone below core 80's. why are they moving? they are only meeting 50% of their dual mandates. you could make that argument but i also think we have to understand the fed does want to increase interest rates. if they didn't go in march it would be a lot harder for them to skip june. think about what is going to happen between march and june. we've got european elections, so far we've gotten one out of the way in the netherlands, probably a good story for the markets but there could be a lot more uncertainty and a big delay in march if they do that they are in a tough position in june so why not get much out of the way? it didn't create any problems.

it was the right decision for now. david: the fed is taking a look at it and right now they don't believe that donald trump will get us to 3% growth because if you had that you would not be looking at this kind of protection. -- projection. looke way that you could at that is you could say, ok, if the growth iso -- about 2%. that is basically what they are telling us. but you can also look at it through the taylor rule construct. equilibrium is about 1%. janet yellen is basically saying that we could maybe get to a 3% nominal fed funds rate and if you take away 2% inflation, that is your 1% mutual real policy rate. you can only believe that 1% is your neutral policy rate if you believe we are going to get some 3% gdp growth. what iseffectively underlying their summary of economic projections. you are right.

janet yellen is skeptical that donald trump will get us to 3% growth. alix: how do you factor that in? do you use a high-yield investment grade? you have high yields 400 basis points. where do you go that seats into that risk? >> we have a couple of criteria we need to meet with. fixed rates are rising but we have winning characteristics we need to follow. you want assets improving fundamentals, you want a decent carry. you need idiosyncratic factors for supply and demand technicals and you want to way more towards credit sensitivity than rate sensitivity. the assets that characterize that best are on the credit side of the housing market. the housing market is very strong. think --markets, i look today. emerging markets carry -- if rates are going to be printable -- emerging markets commodity exports do very well. also, high-yield.

high-yield has worked very well but it is still yields. you can get coupons on some really nice stuff -- food, beverage, materials, basic industry. things like that give you the yield you need. jon: jim karen of morgan stanley investment management. budgetup, the proposed cuts to the state department. we talked with the council of foreign relations president. later, a man who knows about the labor market. jason berman, senior fellow and former white house chief economist. from new york city, with a decent bid for global equities, this is bloomberg. ♪

jon: from new york city to our viewers worldwide this is jonathan ferro and bloomberg daybreak. housingpean parties and the prime minister. them --g is an answer in amsterdam with more on the election. well, in many ways, it is liberalism trumped white ring -- right wing populism. he will be given the opportunity to run around the hollowed halls here to curry a new coalition. on the extreme right, they did better than that in the last in just but coming under that level, these are the parties that have done

quite well. christian democrats, 19 d 66, labor -- smack. the performance -- worse performance on record. labor takes nine seats. the freedom party with 20, liberals on 33, christian democrats 19, what it means to an american audience, the won.ists how dor markets broadly, you extrapolate from this into the other elections coming up? into france, specifically. can you do that? is the netherlands an example of what could happen elsewhere? >> the netherlands is an example of what populism does to create fragmented politics. 13 parties will sit in the houses of parliament behind us and they will form a coalition.

i think it is difficult to extrapolate the firewall that has been built into the french market. you saw the euro go bid overnight, you saw stocks with a nicer rally overnight and there is a relief, a palpable sense of relief in markets that this dike like moment is building in the netherlands, and one or two told that, from marine le pen will shift the dial. so a little bit of a relief rally but overall there is still that geopolitical risk hanging over europe. is weighing in this morning. >> europe is going to be plagued by political uncertainty the entire year and even greece, looking for another mission, might come back as a problem over the summer. plenty of political risk that might materialize in europe. the market will react with volatility and caution.

alix: joining us for more is jim , morgan stanley investment portfolio manager. now we are back to where we were before those that before the fed. what do you do? a sigh of relief on the political front. one of the great uncertainties we have, looking towards europe with the big election cycles, is we are trying to access -- assess the risk premium in the market. one topic is the election through europe. what we have seen today is the first starting point that a more moderate party, not an anti-euro party has been elected. -- toes us more confident invest. there are a lot of cheap assets in the financial sector within europe. you could stand to make some big gains. at the end of the day, this just

reduces risk premiums in the market. the german two-year could hit -100 basis points. do you think that is not true? rates can go lower but i think we are getting towards the end of that. as long as we have good growth in europe we are going to start talking about an exit strategy. it is premature to do that today but six months from now, not so much. i don't know if i would want to be buying two-year rates at 100 basis points. that seems like a money-losing proposition. jon: i see french bonds on offer. the euro is softer and there is a net we market rally. anything that has happened this morning, the netherlands are being viewed as pretty much nothing. >> when we look upon deals and french yields, these are the higher quality assets across europe. that selling off is basically telling you that there is some risk coming out. maybe that goes into the equity markets, maybe it is an

allocation away from the sabr europe. in two other asset classes. we do see higher rates across europe, which means growth has been decent. inflation data has been good, spain is going around, you could get some better news equity markets across europe, seeming relatively undervalued and cheap. you're going to have good opportunities to invest and we have to get through the political dynamic first. jon: do you see the politics changing radically? the opposition is clearly the eurosceptic party. the fact that marine le pen is in the running tells you about the situation. that is not going to reverse it self because the election might go and manual microns way. >> the long time is certainly correct. populism rising has certainly been a risk but it is also a question of time. , he buys more

time for an investor and time is something we have to factory. if we get a two or three year reprieve of maybe extreme populism rising, there is plenty of money to be made. david: there is one potential lesson we could take away -- there is no europe when it comes to markets. there are individual countries. it happens in the netherlands doesn't necessarily affect france. what does it tell us as investors? do we need to look at those individual situations? >> you are making a good point. we are seeing a d correlation. we look at europe as correlated risk. but now, spreads are moving in sync. now spreads are moving more individually as opposed to in sync. the uncorrelated market can be confusing and the reduction correlation could be confusing but it could allow you to build a portfolio and reduce correlation risk.

therefore, you could trade companies -- trey countries based on the round dynamics based on what is germany doing, france doing, and of story. it creates more opportunities for their own merits. when things like that happen, what i find is there are more investment opportunities arising. david: really good point. is going to stay with us. richard haass is going to come on and we will be talking with jason furman, and the former white house chief economist. this is bloomberg. ♪

jon: from new york city to our viewers worldwide, this is bloomberg. the u.k. has faster inflation making a case for a rate hike in the bank of england. the recent signs of a weakening economy and the looming brexit negotiations me officials are ready to go anywhere yet. here with us is jim karen.

fixed income portfolio manager. for you, the brexit discussion hasn't really started yet because the official initiations have not yet begun. what does it mean in the moment? >> i gauge what is happening with the sterling. we do expect the sterling to get weaker, down towards possibly 110. we don't see brexit as necessarily a good long-term thing for the u.k. but in the near term, you could see some positive impacts. the driver of those impacts really comes from positioning, not necessarily fundamentals. i don't think the bank of england is going to hike rates and even if inflation is looking like it is looming higher, you could get some short-term. of economic growth. the longer dynamics of trade policies, what are those going to look at? what is the capital accounts going to look like? how does britain look in the long-term? that is uncertain.

what it does for us is it creates an increase in risk premiums around british assets. longer term, we are little bit wary. what it does for us is it makes us stay away from the markets. jon: when you see that premium more pronounced, and with the pound i get that, but with guilt around 1.22 and inflation where it is now, isn't that surprising? >> it definitely is surprising and the thing is there is this big divergence going on between central banks around the world. more that the fed increases interest rates, the more likely it is to increase treasury rates as well. the yield could rise at the same time but ultimately, rates are rising across the u.k. and you could expect there to be a stronger sterling. none of this is holding water as we look at this event as a volatile market. but the immediate expression in the markets is going to be through the sterling. that is the fastest and easiest way to do that.

the bond market has different technical dynamics. pension players who need to buy long data assets by into that. there is a factor to that. i think it is going to be primarily based on occurrences best a currency. jon: what takes us to 1.10 on the pound? >> around brexit, if we don't see a clear plan. we have to gauge the europeans reaction. when brexit gets announced, what are the details that come with that? what is the european response? it looks like there is a very rigid relationship between the two when nobody is willing to negotiate. then we have a very difficult situation and i think britain loses in that sense and sterling could get significant we weaker. jon: for the rest of this year, do you want to buy euros denominated assets or sterling denominated assets? >> i would rather buy euro because it will do better as the

european economies are holding stronger. you will probably get a little bit of strength of euro versus dollar. i think equity markets are attractive as well. jon: thank you very much. coming up, we discussed at the top of the hour big proposed cuts to the state department from the trump administration. coming up, a conversation on power with richard haass. later, jason furman, former white house chief economist. from new york city, this is bloomberg. ♪

♪ jonathan: from new york, this is bloomberg. i am jonathan ferro. bid, upwith a decent one third of 1% on the dow,

positive five points on the s&p 500. the ftse at an all-time high. reserve the federal than the politics which is called a dovish hike by many people, if that does exist. retraces a move, margins a little bit softer. market, 2.53 on the u.s. 10 year. let's get you an update on the headlines. the way has been clear for british prime minister theresa may to start the process of leaving the european union. the queen has given her royal assent to the brexit bill and the prime minister can choose when she wants to invoke article 50 which will begin the two-year process. presidentocked trump's travel plan before it an acted.

a judge in hawaii cited the president's words on the campaign trail as an indication he wanted to keep muslims out of the country. the president has vowed to fight all the way to the supreme court. he said he based claims that obama wiretapped trump tower were based on the media. mr. trump: nobody ever talks about the fact that -- but wiretapped covers a lot of different things. i think you can find some interesting items coming to the forefront over the next two weeks. emma: the republican chairman of the house intelligence committee says the house is not found any evidence to back up president trump's claims. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. chandra. this is bloomberg. david: the president of course proposes the budget but it is up to congress and the house of representatives to decide how

the country will be spending its money. joining us is one of the principal house leaders, todd rokita of indiana. thank you for joining us. you. great to be with for a moment i thought you were introducing my father. david: this is hot off the presses. how much of this did you know about in advance? todd: i have been having a few conversations and others have two with our friend mick mulvaney who used to be a representative. those discussions were going on at a higher level and we have been able to talk about some of these issues. last week i had a lunch with president trump so none of this is a surprise and we are ready to get to work. david: i think some of the country may find it a bit surprising because it is being perceived as a fundamental re-shifting of priorities toward defense spending and national security and away from a lot of other programs.

is that something you believe congress can get behind? todd: i think so. it is nothing more than your traditional guns and butter argument. the president certainly has the leadership ability and discretion to suggest that we be spending more on military right now. it is one of the few jobs that the federal government as well and one of the few jobs outlined in the constitution for the federal government. some of these other things you can make a constitutional argument against. it is a matter of where you want to focus your priorities and we will move away from domestic priorities and moved to protecting us. our president said this from day one on the campaign and i'm not surprised. it is congress under title i of the constitution that really has finals a -- final say over the purse strings. alix: part of that is a cut to the agricultural department by 29% and indiana as part of the

corn belt. how do you sell that? todd: we have to look at the details. 80% of the agricultural budget is not spent on agriculture, it is spent on food stamps. you are really going to have to go back and look at it, but i suspect it is going to be some reform to these welfare programs , especially when it comes to able-bodied workers, people who could be working and are still receiving subsidies. cut, what would you support, 29% or lower? todd: you have to look at the details of it all and certainly we will. the agriculture bill, 80% of the authorization generally is not about agriculture, it is about welfare programs. the way we measure success is to get people off these programs, not how big they can be an key people on the. david: this is going to be a process and what it ends up

being will be different than what is proposed, but we are have some republicans on the hill saying this will not happen. it is easier to add things then take them away. how close to you think the ultimate budget will look to what we are looking at today? todd: i think it will look very close in terms of the overall discretionary number. there is a slight decrease in overall discretionary spending, about 1% or so, and that is what he is talking about. he is shifting funds around like you said, but overall the discretionary budget that we vote on every year will go down slightly and that is a good thing. to is whate to get is driving over 70% of our budget that is not addressed. let's not get wound around the axle about how much percentage one agency is going up or down. when the titanic is out there getting ready to sink, that is

the social entitlement programs of medicare, medicaid, and social security. that basically makes over two thirds of our budget and that is not addressed. david: that is such an important point because we talked to senator purdue about that yesterday. 70% of the budget is servicing the debt plus medicare and social security so we will ask you to come back and have a conversation about that. let's continue this conversation . we have with us ambassador richard haass, who has served in many administrations, most recently under george w. bush. his latest book is "a world in disarray," published earlier this year. you served in the state department that they are talking about cutting by one third and you see this reallocation from soft power to hard power. what do you think? richard: not much.

it is the wrong place to find cuts. so many of the programs at the national security. virtually every former secretary of defense says he would rather have state department funding. this is preventive funding that can deal with mass emergencies, refugee flows, it infectious disease -- infectious disease, so this is the wrong way to do it. to have an entire budget recitation out of a larger context of entitlements does not make sense. at the end of the day that is where the cuts have to come. we are eating our seed corn. this is a fair case to make for increasing defense spending, but the way to fund that is not by taking, basically gutting domestic programs. jonathan: let's talk about the ideological shift from soft to hard power. what are the consequences?

richard: it weakens the united states. incremental dollars on hard power do not by a lot but small cut in the state department budget have disproportionate impact, given what it means for refugees, for combating disease and promoting stability. a small investment in the stability of the country pales in comparison to what it would cost to pay for an american military intervention. jonathan: this is not a conversation just happening in the united states but in the united kingdom as well, cutting foreign aid. what is the blowback from the united states but pulls back on foreign aid? richard: it is very hard to persuade others if you do not walk the walk so we can go to others and say, spend more on this while we are not? you have zero credibility if you are not willing to put yourself on the line. david: what does this do to

secretary of state rex tillerson on his first trip in asia as he has just taken this job? richard: it further weakens him. he has no personal relationship with the president in the way of background, no staff, not one political appointee. you have competing centers of power at the white house, and his budget while not quite as bad as the original is still getting a 30% cut. symbolically and it further weakens the hand of the secretary of state. david: where are his friends? where's the support on capitol hill for foreign aid? richard: foreign aid does not have a big public constituency. the answer is people like john mccain, lindsey graham, the national security establishment. people on the armed services

committee, senate foreign relations committee, senator corker, that is where you have to go and i think they will. this budget we are talking about i think will not there a lot of correlation to reality. jonathan: who is setting foreign policy right now? richard: there is no administration yet. you do not have anyone at feds or state, other than secretaries. you have a second national security adviser, president, vice president. jared kushner has a special role, steve bannon has a role but you cannot speak about an administration and interagency process. we have been lucky that so far we have not had a real crisis, but we do not have a team in place to deal with this. jonathan: let's say secretary tillerson gets his team in place. what he be the person who runs foreign policy or will it be diluted across the agency -- administration? richard: i think it will be

diluted. anytime you have multiple channels for which policy is set , it almost guarantees you will have a consistency, implementation issues. foreigners will shop around for what they think is the most favorable entry points and access. this is asking for trouble. you can only have one foreign policy at a time so only one foreign policy process. david: is there hope for rex tillerson in the hope of general mattis and general kelly? sorry,f the nsa -- nsc, if they agree with you, the defense policy, the security of the united states requires more soft power could they rally with him? richard: yes, and they could work closely with congress because congress will decide the budget. they have got to work together and push back against the white house which is never easy to do but that is what they have to

do. wrote,the last book you foreign policy begins at home, you are concerned about the economic strength in the united states. what does this budget as outlined do on that subject? richard: i think it works against the strength. my argument is that you need the foundation of a strong economy and we need to go faster than we are. we need to deal with entitlements. we cannot allow the debt to mushroom. you are eating your seed corn for not investing in the future so i think this basically gets the balance wrong. my argument is that foreign policy has to begin at home and cannot and at home, the national security is a balance. the end of the day, american security would suffer from this budget. david: richard haass will be staying with us. alix: budget, jobs, said, we will be discussing -- said, we

, we will be -- fed discussing all of that.

♪ emma: this is bloomberg daybreak. coming up, jason furman, former council of economic advisers chairman. this is bloomberg. this is bloomberg daybreak. time for other stories making headlines at this hour. i am emma chandra. a second round of job cuts at gopro. they are eliminating about 270 full-time and open positions after a workforce of 1600. they fired 15% of their

employees and have gone from being a highflying gadget maker to accompany being undercut by cheaper asian rivals. love tom's earnings are set to fall, hurt by a combination of shrinking -- and increasing fuel costs. that is your bloomberg business flash. i am emma chandra. alix: president donald trump and german chancellor angela merkel will meet for the first time in washington, free trade front and center. germany surplus comes under fire by the administration and the american first foreign policy promotes tough and fair agreements, emphasizing that trade policies will be for and by the people and will put america first. merkel says it is important for the european union to take a united stand against protectionist practices wherever possible.

richard haass, council on foreign relations president is still with us. it happens in that conversation tomorrow? be the: it will probably most interesting foreign policy conversation of this presidency so far. angela merkel has spent more time with vladimir putin than any other leader in the world over the last 10 years and she estimate the case for the european project, why brexit is not a good thing and why the e.u. is still a vital and essential organization. she will talk about trade and i think she realizes it is under -- unrealistic to generate some kind of gush but wants to make sure germany is not under the target. alix: how does she negotiate out of the target? richard: the real challenge is not trade imbalances, but the fact that automation and innovation is eliminating jobs.

we in germany have tried all sorts of programs. we want to work with you in helping our two economies get ready for the future so we can deal with driverless vehicles and robotics. i think she has to has a positive conversation about trade. alix: so they do that, they have a nice handshake and have pictures taken and that as well and good. then peter navarro comes out and says the euro is still undervalued and germany is again in the spotlight. what does that do to the relationship of merkel with the rest of europe? what is the result? richard: she is going to anticipate that and i think she will make the case where the euro makes sense. despite the german trade surplus it is not exploiting anybody. there will be people in this administration pushing back against mr. navarro. one of the clearest things to emerge is a fault line with people like navarro on one side, and i think he is clearly wrong.

then you have people like gary cohn, the white house economic chief corner who says you do not want to pick a trade war. if you have a goal of increasing u.s. economic growth to 2.5% and 3% you cannot have trade wars. jonathan: you put america first, global conflict next. the form to play out, is it going to be global trade? richard: i hope not because i think the global trading system has been a strategic and economic benefit to the united states. if we go to war with china or mexico, germany is the third potential. as they say about most wars there are no winners, only losers. we will not be better off as a result so i am hoping that cooler heads prevail, and the president understands that statesbecause the united is running bilateral trade deficits with some countries

that does not mean we are being exploited, there is something bad or wrong with it. on balance the system works and imbalances reflect other forces. it is a hard argument to make. jonathan: what do you think will happen? who wins out, peter navarro or gary cohn? richard: i think gary cohn because if you really want to have the kind of growth we want cannot afford to have massive trade wars. .t is inconsistent i think that president will look for areas to claim victory on trade. i just do not think he can go to matt with china or mexico or germany and have a successful market. he loves to point out how the market has gone out and we will recent -- we will see it go down fast. david: he was speaking about bringing manufacturing jobs to the united states. is there anything that he can

come out of this meeting with merkel and go back to michigan and say we will get more jobs because of this? richard: i expect chancellor merkel will have a few specific cases. it is important to give this president. on a line. the idea that we would have a joint effort to deal with travel in the nation. what i would worry about in detroit, i would worry about robotics. it is not that these jobs will go to mexico, they will just flat out disappear. how do we train workers are the future? germany is as successful or more successful with any other society in dealing with that issue. i like the idea of a german-american initiative. alix: great to see you, richard haass, council on foreign relations. if you have bloomberg terminal checkout tv . interact with us daily. this is bloomberg. ♪

♪ jonathan: it has been a big week of central-bank action and we cap it off with a bank of england decision. here to preview that decision is bloomberg intelligence economist dan hansen. dan: we are expecting the bank of england to remain on hold today, we emphasizing the visual bias that has been the case since november. balancing two opposing forces, you have a big surge in inflation coming from the drop in sterling and at the same time growth is likely to slow from 2018 and beyond. this idea that policy can respond in either direction, the idea that inflation goes above target of the bank of england may hike, does that have any credibility with financial market participants? dan: possibly. personally i do not buy it.

inflation is going higher because of the drop in sterling. if you look at the labor market report yesterday, wage growth slipped back and that is where the bank is focusing their attention, really concerned about domestic cost pressures. when we see those picking up that is when we may see a case of higher rate. jonathan: the bank of england has come under a lot of criticism for their forecast. vote, the data did not drop off a cliff and maybe the bank of england moved to early. recently the way the data has evolved, is it beginning to a value doesn't validate the bank of england's stance? dan: to a certain extent. you do not get that immediate shock that economists were expecting but the pmi's, wage growth data, things this year look like they will get a little bit tougher.

the fact of the matter is that the stimulus is there and in place to support the economy through this transition, and carney came out and said we acted, and arguably that limited the effect on the u.k. economy, and i do not buy that. i think policy will remain unchanged because they are still really emphasizing the growth story and having a loose monetary policy stance to support the economy through this transition. jonathan: dan hansen of bloomberg intelligence, a decision coming up in just under four minutes time. later on, an important conversation with jason furman, former white house chief economist. his news on the labor market and american economy. ♪

jon: the trump administration lays out a skinny budget with fat cuts of the state department and new resources to fund. the fed delivers a much anticipated rate hike. her policy trigger finger might be getting itchy. pound record highs as the to clients with just months away from the tank of england's monetary policy decision. for new york city, good morning to our viewers worldwide. the decision leaves rates unchanged at 0.25%. -- purchasese it's program at 10 billion. kristin forbes votes for a 25 basis point interest rate hike. the bank of england has rates unchanged. guy johnson is standing by. , gettingeard this for close to where they might pull the trigger the other way. is this a surprise? >> it is a little bit of a surprise. nobody expected her to make this decision this time around. there was an expectation that

this would be unanimous. but it is not. therly, she has decided inflation push we have been getting at the moment will likely take us above the bank of england's target. it is something that needs to be dealt with now. there are plenty of others that argue that with an essence of wage growth. you should look through these numbers. she clearly disagrees. we have one. the question is, for that the road will there be others? jon: more fascinating is the justification. not just upside inflation but the slowdown has not materialized. many people in the last couple of months are saying we're beginning to see that data soften up. how widely held is that view that we have it wrong? slowdown has materialized? there is a lot of disagreement. the survey data reports to a slowdown in the united kingdom.

you are starting to see the squeeze taking place. that is as a result of the inflation push and the results of which, the big driver of the british economy is likely to fall off. you are not seeing the lower sterling. as a result, there is this expectation. you can see it in a lot of the projections for the british economy of 2017. maybe we are not slowing down for four to believe that what we need is the emergency policy rate of .25 we now have. jon: the bank of england keeping its key interest rates at .25%. for presenting and voting for a 25 basis point hike. on my bloomberg right now, up almost 2/10 of 1%. i look at this. with the bank of england many times in this direction, pushing rate hikes, it didn't

materialize in the rest of the governing council. the sec can make the voting for interest rate hikes. is this a sole dissent or are there others at the bank of england that could get to come with her. >> the panel is reasonably balanced. it is serving the nine members of the bank of england. there are plenty of doves. she sits at the more hawkish end of the spectrum. you mentioned other names. they are going to wait and watch. datau don't get the wage and you don't see this speeding through that is going to translate into a's -- a squeeze consumer which will act as a drag going forward. that is going to be pivotal if she is convincing anyone to go along with her. jon: some surprise dissent over the bank of england and the fx market, a firmer pound.

,otes for an interest rate hike jpmorgan joins us from london. a little bit of surprise dissent over the bank of england. what do you make of it? ratethink the balance of hikes, it is a lone voice. the reason behind that, there is there may be a squeeze on real income as a result. is aat rising inflation product of sterling weakness i am not sure the bank would want to have that off. -- head that off. jon: maybe we shouldn't make too much, but for the sole forbes, it kristin is not just the upside risks to inflation, it is that the slowdown has not materialized. it hasn't materialized in the way consensus expected it to play out.

negotiation officially begins by the end of this month. >> if you think about the building blocks in the u.k. economy, what didn't happen was the consumption held up. they didn't follow the cliff as a reaction to the vote. but if we look at what we are seeing, it was on consumer credit. necessarily something durable. i think that may have been a reaction to people anticipating it isrices and i think important to wait for that to materialize. alix: we are just as confused as the boe. there is different confidence on the strength of gdp in the u.k. as an investor, how does that allocate on the investor level? >> at the moment it is clear. we listen to what companies are telling us and companies are benefiting from the weakness of sterling.

that is getting into hard corporate earnings. in the u.k. there has been a fear that domestic demand might fall short. a lot of those stocks are trading on the u.k. health building sector, but that is very hard off the boat. usually, u.k. house bills are supposed to be robust. that is what we specialize in. jon: rbc capital senior currency strategist. surprise dissent but the sole individual is kristin forbes. little upside news. you could see momentum on the sec gravitating towards tightness. >> it is interesting that despite that dissent and such, sterling has moved a bit but not as much as you might think. in part, that is because the

underlying fundamentals of the u.k. economy are softening. you're seeing our supply indicator turning more negative and that together some momentum and we are actually looking at some more selling down. the survey measures of overall to >> -- overall activity show slowdowns in the worth of kristin forbes. that has not materialized. it could materialize in a delayed faction -- delayed fashion. >> the more important thing is how the data is evolving relative to expectations. having been through a period where we saw growth costs ratchet down substantially we have not seen the reverse happening. going into 2017, the risk is actually that people are being too optimistic about the strength of the recovery and how long that might last. jon: what interests me about this set of minutes in from kristin forbes -- kristin

forbes, she says it has to be nimble. we have been used to one direction monetary policy. could move both ways through a period of years? see itre beginning to more generally. if you look at the least that came out after the cp -- bce be meeting last week even as the ecb continues to buy assets. they're getting more sensitive to how they calculate. i don't see any reason why you couldn't see smaller adjustments. we have seen that with the fed. rather than the regular in 2015ng cycle we saw and 2016 and 2017, i think you'll rules of consistent upward cycles or downward cycles have broken. jon: how does that feel on the endless -- s&p market? >> i think those comments are

right. we have extraordinary monetary policy and we should be entering a. period of ordinary policy. it wouldn't be surprising over the next three years to see other central banks changing the policy. your speaker has mentioned a potential rise in the deposit rate. it won't have any impact on the cost of lending. it is really just design to stop penalizing banks. , monetary policy in the u.k. and the eurozone remained extremely easy at the moment. the banks are still conducting asset purchases. the monetary background is conducive. policyeping monetary loose and accommodative, that is what is driving markets this morning. thank you for joining us. both of them staying.

firmer pounds, a story. up one third of 1%. coming up, we take you to the american economy with jason furman. former white house chief economist. this is bloomberg. ♪

>> the fed engineering what some are calling a dovish hike yesterday. but look what happens to financial conditions. the u.s. financial conditions index from bloomberg, actually looser after the hike. traditionally, you want financial conditions to tighten. running us now is jason furman, senior fellow at the peterson institute for international economics and former chairman of the council of economic advisers . jason, how do you interpret

financial conditions getting looser as the fed is trying to engineer rate hike cycles? >> this is because the fed is doing exactly what it said it was going to do. in the manner it was going to do. their outlook barely changed yesterday from what they said before so all of this had been priced in already. look at the 10 year yield. it is basically unchanged since december. that is because we are on the cycle that everyone had priced in. alix: there is an argument to be made that if financial conditions continue to get looser the fed has to hike faster and harder than the market is anticipating. do you agree? >> i think different things are moving in different directions. at the end of last year you saw a big increase in yields at the long end of the curve and it stayed there. going in the other direction,

the strong equity markets are providing purchasing power to consumers. the fed's move yesterday was a good one. i don't see the need to do a whole lot more this year but it all depends on what the data shows for the rest of the year. alix: it raises the question, is the fed tightening now or are they removing excess accommodation. there is a good distinction within the markets and the economy. >> we all love to talk about what the fed is doing to the economy. isot of what the fed does accept and lock in what has already happened. interest rates have been really low around the world -- that is an economic phenomenon. the fed has accepted that with its low rates. what the fed did yesterday was just a recognition of pricing in at the short end at what had already been fully anticipated at the longer end of the curve >>. is jason saying that you can't

look at every word they are looking at? the same question to you, elsa. with yields falling, what is the catalyst for the dollar if real yields continue to compress? >> part of the problem for the fed is what is going on in the rest of the world. when you've got policies so extraordinarily easy everywhere apart from the u.s. where they are starting to tighten policy, it is very difficult to get that tightening of financial conditions. going forward, it will depend on whether the fed delivers on what they have promised. if they do deliver the two remaining hikes this year, we will have three hikes next year and that will be the emphasis for the dollar to outperform. david: i wonder, if donald trump had never been elected president -- cap actual -- -- counterfactual -- would it have changed? they think donald trump is made a difference. >> they would probably be doing

the same thing. the economy is just a mastiff -- and whatnertial thing is going on right now has relatively little to do with changes in expected policies. probably his election has boosted the equity market with confidence, but whether that proves justified is another question. been the caseas so that is probably stressed in the case for tightening a little bit but only a little bit. david: if it starts to prove that he is having an effect on gdp growth we are going to look at a different set of assumptions from the fed. >> i think it is very unlikely that he is going to have anything resembling the magnitude of an assessed on gdp growth that some of the market think. that is going to be a combination of things he promised not happening, some of the more problematic things like immigration restrictions hurting our economy and certain things not making as much of a difference of people think.

i am worried we are out ahead of our skis in terms of increasing cost incentives. thathat is justified -- will lead to an increase in inflation and put the fed on a path to more. jon: unless this is delicately as i possibly can. the survey of ceo's is quite clear. they are more optimistic now than they were when you're at ministration was in the white house. what you make of that? >> i think ceos often do a great job running their businesses but when you look at their measure of confidence in the economy, it is never particularly freshened. you look at it on the eve of the financial crisis, in 2007 2008 and 2009, ceo confidence was quite strong. i don't place a whole lot of weight in that. but there is a little bit of animal spirits. i am as happy as the next person. i just want to make sure that we are not disappointed.

jon: but you acknowledge to some extent that it was your administration, the message that came out of it, that you didn't build it. that was the message to offer newer's. now they see this administration is more business friendly and better for the economy than your administration. >> you saw business confidence rise a lot over the course of the obama administration. you inherited a massive crisis, you inherited losing nearly a youion jobs a month, and turned that around and had a record streak of private sector job creation, so i don't fully accept that. alix: we will be digging more into that. the last word for you, what did you do with the dollar? >> i'm going to duck out of this one. in this kind of environment where the dollar is just going sideways, it is actually a good

time to look at carry trade. we should see g10 carry trade outperform as well. you are better off looking at those than trying to punt on the dollar. alix: i appreciate that. thanks for joining us. jason furman, you are sticking with us. coming up, we are joined by the ceo of benevolence biggest bank. this is bloomberg. ♪

jon: from new york, this is bloomberg. that's turn to matt miller following the dutch election. thanks very much. i am here with the ceo of img. thanks for taking the time with us today. what you think about today? the results for the netherlands? are you pleased? clearhink the results are

in the way that the populist party was gaining over the last year but did not win this election. that is a fact. that is helpful going forward. take a lead are to now in forming a coalition. it will be a lengthy discussion. there are so many parties you need to form a coalition so both in parliament and the senate, the coalition will take a long time. >> does that make your job more difficult? talks go on?e what kind would you like to see? >> i don't have a preference. this is a democracy. whatever coalition comes out, we will work. from an economic perspective, the delay will not fatally hamper the economic growth we are already growing in holland.

needing toe reforms be pushed through have been pushed through. there is a budget surplus already. parties have some kind of expansionary program. honestly, the longer the coalition discussion takes, the better it will be for the government. -- from anrnment economic perspective it is not if itto change radically takes a long time for the coalition to be formed. >> what do you think about the possibility that this stops the dominoes falling in europe? that the core of europe one go pen won'tand that le win a victory in france? ,> if you look at the outcome the pro-europe parties have gained 20 seats in holland.

the skeptical parties have gained five seats. there is more polarization around europe, but you see the pro-european parties have actually gained more. which is a good sign for europe. >> how do you guard against -- and how do you buy other bankers as well? the asymmetric risk of a le pen victory -- unlikely to happen but if it does it could be almost catastrophic for a bank like img. >> clearly, banks are in the world of taking risks. but you have risk management as well. you look at some of these scenarios and what they could basically cost. a further populist movement in europe, and what that could mean to the euro. before, you have to make

assethat you balance liabilities for companies. >> let me ask you about regulation. after the g-20 this weekend, people will move on to basel to talk about that package of regulations and in the u.s. the trump administration is talking about rolling back bank regulations. does that possibility of rolling back in the u.s. tilt the playing field? give the u.s. banks and advantage? look at what you banks do in the u.s. and what banks do in europe, it is already difficult to create a level playing field like trying to play american football and soccer with the same rules. we just have a different role to play. from that perspective, forcing to come to some kind of an outcome is already something that is difficult.

that is why it has taken such a long time. now, if basel is for the delayed, it is not good for anyone. clarity truly helps. at this moment lots of banks are stalling decisions as to how to support infrastructure works in things that are fundamental to economic growth. basel could have a big impact on those. that is why you hesitate. that should go. >> thanks for joining us. ralph palmer, ceo of ing. jon: thank you, from new york, you're watching bloomberg. ♪

jon: from new york city to our viewers worldwide this is bloomberg daybreak. we are 25 seconds away from hearing -- futures firm, the ftse at an all-time high.

a dovish hike from the fed followed by the boe switching up the board. 6/10 of 1% as forbes dissents and votes for a rate hike with the bank of england monetary policy remaining on home. -- on hold. startsiller housing month on month for february, up 3%. you have january revised slightly higher. part of that is we have warmer weather and a lot of construction jobs but does that continue? sheess claims, steady as goes, coming in at 241,000. we are now below 300,000 four 106 weeks in a row. we have not seen that in four decades. a really interesting read. i have building permits as well coming in lower than estimated, down 6.2%. jon: the business outlook coming

in, the lows in the previous month at a slight upside. we are looking for 30 on that index. march, 241 onof the jobless claims. the tight labor market is the story for a while. discussing the american economy, i am bringing in jason furman and also joining us is terry simpson, blackrock investment institute classic investment strategist. -- asset investment strategist. the headlines have been strong for a long time throughout. through your administration, look at the payroll numbers and the unemployment rates but the question still remains and i am intrigued to get your response. why has wage growth lagged so much at a time when the labor market looks so tight? >> you are right. these are just unbelievably low claims numbers. they stay well below what i

could have possibly imagined by this stage. you have seen some translation of that into wage growth. you have seen wage growth of over 8% a year since the end of 2012. what wemuch faster than saw in the decade leading up to 2007. the biggest obstacles a stronger wage growth is the lack of productivity growth. until we have faster productivity growth in our economy we are not going to be able to have a type of sustained wage gains we would like to see. david: as you look at the new budget coming out, could that affect it? try to put aside your partisan hat because one of the messages is there is less regulation. could that lead american industry into making more investments that could lead to productivity gains? >> i don't think you will get productivity gains from a budget that has an 18% cut to medical research, which is one of the really big strengths of the u.s.

to just that has cuts about every infrastructure program as opposed to some other proposal coming later, but we have seen it cut job training and job search. this is not a progrowth budget. this is a budget that is anywise , -- penny-wise. david: you are a senior advisor the president obama but putting that aside a lot of the job creation comes from small and medium sized companies, not the big ones. regulation has been perceived as being a real burden on those. do you reject the possibility that by cutting back on the regulation we could get more investment and more job growth and better jobs, higher-paying jobs? >> i think there is room for regulatory reform, i think there is room for streamlining and simplifying regulation, i think

there are places where we have worked hard to get the balance right. we were focused on cost-benefit but there were places where we got it wrong, like places our predecessors did. but when you look at eliminating funding for climate research at the stated at department, that has nothing to do with regulation. that has nothing to do with growth. that is about shortchanging our future. alix: you actually put money into work. yesterday the fed changed how it categorizes inflation. it points out that wages haven't moved the needle and the fed is basically saying, let's look through the headline numbers. how do you play a reflation seem that has yet to read thierry allies -- to read materialized? we have to recognize that we are basically closing some measures of slack in the economy

and that we ultimately believe we are going to get to that 2% inflation. we think there are plans to overshoot that this year. we want to still hold these reflation trades because we are optimistic on the economy and if we get anything done in washington that will be additive for our position but we don't want to get up on a reflation just buy one fed conference. >> on the fifth -- on the flipside you had a lot that hasn't been able to materialize like infrastructure and tax reform which would really believe the markets. the markets.y it is a great question. >> one of the things we talked about after the election and everybody got excited about, fiscal policy, we welcome that we at the same time it -- had a nice cyclical improvement in the economy and a lot of investors are starting to lose that foresight and say, ok it is

only about fiscal policy. but if you are not going to get the fiscal policy we still think that by the latter months of this year you could have a very much improving economy and the conditions -- you want improving right now could be -- david: president trump is trying to target that, creating higher-paying manufacturing jobs back to the court. yesterday he had these remarks to talk about what he wants to do as a deal with americans. we should be playing it but we are not but i will tell you what he said because i was there -- >> we will reduce burdens on our companies and on our businesses. but in exchange, companies must higher and grow in america. they have to hire and grow in our country. david: that was well received from the auto industry workers in that plant.

they said, great, bring those back. is that possibility? can you give tax relief if you keep jobs here? >> first of all, one of the reasons those autoworkers were there in the first place was that the auto industry was rescued and you see really strong manufacturing job growth in michigan over the last eight years. i think we can do more to make america more attractive to set up jobs in. we could reform our business taxes and maybe have some room on regulation and then open up export markets. our markets are already very open to other countries. we can open their markets more. i think if you are putting up trade barriers, yelling at companies, telling them, you have to do this, you can do that, they are not going to want to set up jobs here. i don't love it when i see a company leave our country but if

you make it harder for them to leave they are not going to want to set up here in the first lace. to make business decisions for business reasons and we have to give them the best economic environment to make those business decisions in. david: if you are looking at it from an investor point of view, are you more inclined to invest in a company heavily involved in manufacturing today than you work six months ago? >> part of the reflation trade is that economic growth is picking up so we do favor industrials at this point. in tax policybe, and trying to bring jobs back to the united states, we are not basing all of our decisions off of that. it would be nice if the economy had improved manufacturing but if you look at the broader story, the broader story is economic growth improving and which sectors benefit from that. the broader story is do we get

to 4% growth. jim caron on earlier and he suggested that the middle class can actually spend that. that used consumption and you can get something more than where we are right now. more, but you can see that is a possibility? >> i wish we could have much faster growth. with the right policies we could have growth that is a little bit faster. but i don't think it is an accident that something like 17 different dots in those plots for the future -- 17 different projections for growth that the fomc members had and none of them are above 2.2. the reason is they have looked hard at our demographic situation. we have an aging population, the baby boomers retiring. in that world, if we could reproduce the same productivity growth we had in the 1980's when we had tax cuts and he

regulation, our growth rate going forward will be 1.8%. need to do better than that. getting to the threes or the force, i think that is highly unrealistic. we should just get used to and accept the demography we have and then try to add a couple of policies. i would be happy if we could do that. can't to get back to those fan charts. terry simpson of blackrock and jason furman, former economic adviser chairman. thank you for being with us. let's get an update on headlines from outside of the business world. in the u.s. two federal judges have blocked president trump's advised travel ban before it could be enforced. judges in hawaii and maryland slammed the ban. the judge in hawaii side of the president's words as a campaign trail as an indication he wanted to keep muslims out of the country. president trump vowed to fight it all the way to the frame court.

in europe, an explosion at the international monetary fund offices in paris. one person was slightly injured by a letter bomb. there were reports of a package containing explosives in emails to the german finance minister. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. david: coming up, more on the trump administration's skinny but it. -- budget. congressmancratic john yarmouth who will be joining us here. this is bloomberg. ♪

>> this is bloomberg daybreak. this is the hewlett-packard enterprise greenroom. in the next hour, an investment group founder and ceo.

this is bloomberg daybreak. time for other stories making headlines at this hour. i am emma chandra with your bloomberg business flash. there is a report goldman sachs has gone on a buying binge for homeowners from fannie mae. goldman has bought almost two thirds of $9.6 billion in loans. the journal says buying the mortgages will help goldman for phil terms of its $5 billion settlement with the government over the sale of mortgage bonds. the british government has intervened in 21st century fox's $14 billion bid to take over sky. they report in the 40 days on how the deal would affect of the interest issues. it is the most important hurdle for the company to clear. it would expand the transit lending rate of murdochs interests. president trump put out a quid pro quo for automakers, backing

down on my rental -- on environmental standards in extent for hiring more. the president met with auto executives who said those rules would have destroyed the industry. that is your bloomberg business flash. i am emma chandra. david: congress has a lot on its play already an overnight, the president's budget outline was added to that. here with us now is one of the congressman who will first turn to the many issues it raises. john yarmouth, democratic member of the house budget committee. he issued a statement calling it "shortsighted and irresponsible." welcome back to the program. >> good do with you. david: so why is it shortsighted? are proposingthey cuts $6 billion, 20% out of national institutes of health. this is the body that funds

critically important medical research throughout the country. this will actually halt in their tracks hundreds and hundreds of very promising research projects throughout the country. my district and elsewhere. this is the type of thing that has incredible long-term benefits, not just in holding down health care costs but creating real positive health care accomplishments for the american people. public education, cutting back funding for many critical programs that will actually help stimulate economic growth in the future. this, to me, is a very .hortsighted budget i heard my friend mick mulvaney talking this morning about how this was actually taken from president trump's campaign speeches. if that is what he got out of trump's campaign speeches he ought to be a translator at the united nations because i don't think anybody could get this out of what trump campaigned on.

david: why don't you take it as a given that there is a reason why these programs exist and there are good things being done by these programs, but we can't pay for everything? there is a limit to how much we can pay for. do you disagree with the idea that we need to pay more for defense and we have to find that money from somewhere? >> i am not intimately familiar with every expenditure that is done in the pentagon. i know that $54 billion on a one-time bump is a pretty significant increase. i think it would be hard for the pentagon to justify all of that when we know that there are tons and tons of waste in the pentagon as there is in a lot of places. balance, question of and if you are taking money away from the kinds of investments that this country has always made and the kinds of investments that have stimulated growth, then, again, you've got priorities backwards. defense is critically important

but then, you take virtually everybody in the military and certainly in the diplomatic corps saying "cut the 28% out of the state department budget." it means you have to buy more bullets and that, again, is something that to me reflects a real unfamiliarity with the dynamics of the world right now. david: part of the problem is we are talking about the discretionary part of the budget which is only 30%. 70% goes for entitlements. we had a colleague of yours earlier this morning who made this point. listen to what he had to say. --let's not get round around wound around how much one agency is going up or down. when the titanic is out there, getting ready to sink, that is the social entitlement programs of medicare and medicaid and social security, that is the interest we all ourselves and other countries, we make up over two thirds of our budget. that is not addressed and we have to get to that.

david: congressman, can you and your colleagues on the democratic side agree that we have got to get a handle on entitlements to get our arms around this? act didffordable care deal with entitlements through the medicare program and has sustained a lifespan of that program that has resulted in significant reductions in the growth of medicare spending. that is the biggest driver of our health care, our entitlement costs going forward. social security is probably more manageable. health care is really critical. it is not just getting a handle what we spend. it is getting a handle on the actual drivers of the cost. one of the things being the cost of pharmaceuticals. as you know, we are prevented as a nation from negotiating with drug companies on drug prices and medicare.

that is a statute the republicans passed in 2004. there are things we can do that actually don't result in cutting benefits for individuals, that would actually have a significant impact on our long-term prospect. i talked about it a couple of weeks ago with doug elmendorf. he was beheaded of the congressional budget office for about seven years and what he said was we are going to have to deal with that but it is not as urgent as many people want to make it out. right now, the biggest urgent need in this country according to him is that we make the kind of investment that will guarantee we have a thriving future economically. david: we will have him on the program tomorrow, as it turns out. thank you john yarmouth. jon: politics in the u.k., another twist throughout this week. the brexit negotiations are set to begin. from the north, scotland pushes for another referendum.

mediang with the british this morning, prime minister may saying now is not the time for another scottish referendum. the cable rate from an up by over half of 1%. that follows a dissent covering the bank of england for a 25 basis point interest rate hike. we continue the conversation in europe, one election down in several to go. from new york, you are watching bloomberg. ♪

jon: from new york city, this is bloomberg daybreak. that's it over to frankfurt with matt miller at the institute of international finance with a special guest. matt? >> thank very much. i am sitting by the secretary-general. thanks so much for your time, mr. secretary-general. let me ask first off, your response to the dutch elections. it seems this is the end of the dominoes falling for populism, or at least at the core of

europe, it is not going to tolerate that. >> i am not sure this is systemic enough that it is representative, but it is good news. everybody isthink but the and reassured problem doesn't go away, the challenge doesn't go away. if you weeks from now we have the french election. later on, we have the german election. there are certain common features and that is the fragmentation, the polarization is making it more difficult to produce stable, strong coalitions or governments with a strong enough mandate. the problem with that is because of the fragmentation on the economic side and the social side spills over to the political side. happens, you create

these fragile coalitions with very thin majorities. that constrains the leaders in taking the necessary decisions to break out of the rather mediocre outlook. >> does that make it harder to fight protectionism? the g-20 under the german leadership this weekend is sort of the crux, saying we need to fight protectionism and nationalism and work together to grow the pie for us all. last year at the g-20, you and others were arguing, warning of protectionism. has it gotten worse since last september? reported that 1400 protectionist measures have been g-20 by the g-20 since the was organized. here aboutking

countries that every communique are saying are going to keep the markets open. that a going to keep the free trade and this is good for everybody, etc. it shows a contradiction. in terms of the collective wanting to move in that direction and having these individual pressures, having to do with lower growth, high unemployment, growing inequality, etc. and trying to do extra on their own to get an ad, which of course is what creates a lot of noise. >> although in the u.s. we have incredibly low unemployment, growth is decent, inflation is present enough for the fed to hike rates, and yet they seem to be one of the problems as far as the protectionism is concerned,

at least as far as the rhetoric. what kind of response to you expect from steve mnuchin at the g-20? >> the u.s. is close to full employment and has been for quite some time. it has become a fantastic machine of creating jobs. they created maybe 16 and a half million jobs in the last five or six years. takes you see different because if you talk about trade, if you talk about taxes, they are very closely related. some of those involved a simple reduction in taxes, more investment in infrastructure, but of course that leads to growth. >> what about talk of the border tax question mark -- what about a talk of the border tax? >> if you complicate things with

this discussion -- and i say discussion, no problem, no bill, no wall, nothing, -- that the discussion and as far as we know thee read the headlines, debate inside the administration and the debate with the congress and with the private sector in the u.s. and of course the verymics etc. there is a active and vibrant debate going on about this issue. basically, that would have enormous complications. itself, we believe it is inconsistent with the wto. the problem is nobody is going to just stand by and put a flat tax on exports while they liberalize their imports. you do exactly the same, mirror image and then we get into a very destructive scenario.

>> i appreciate your time today. secretary-general of the oecd. i will throw it back to you in new york. jon: bloomberg matt miller. hear from new york city, you are watching bloomberg. ♪ jon: the trumpet ministration lays out a skinny budget with some fat cuts to the state department and new resources to fund defense. the fed delivers a much anticipated rate hike. chair yellen's trigger finger might be getting itchy and tech support. the nasdaq posts record highs. why they might not mean lower returns in tech stocks. good morning to our viewers worldwide. i am jonathan ferro alongside david westin and alix steel. the markets on wall street, a rate hike. the hawkish expectations were not delivered yesterday by chair yellen. up one third of

in europe, all-time highs on the ftse 100. the dax is high, as well. morning,e higher this by four basis points, 2.50%. dissent at the bank of england pushes sterling higher. check tohe cross asset let's get to movers now. alix: oracle up 7% in the premarket. earnings were better by seven cents. it raised its dividend by 27%. it is getting upgrades this morning, jpmorgan the latest. 2018arnings guidance for is being raised. gopro is interesting, up 10%, but it is cutting 270 jobs, second round of layoffs, 17% of

its workforce, and it already cut about 15% of its workforce. the new budget will be under estimates. it expects double-digit revenue growth in 2017, but they have had weak holiday sales. it has been a rough road for gopro. tesla up 3%, issuing 1.50 one million in stock and convertible debt. some analysts wanted to million dollars. the stock is up on issuance. it was not as bad. a massive cash burn for tesla, about $970 million in the fourth quarter. now back to the macro. jonathan: the federal reserve giving a dovish message yesterday after raising rates for the third time since the financial crisis. the federal open market committee decided to raise the target range for the federal one-quartery

percentage point, bringing it to 1%. the decision also reflects our view that waiting too long to accommodations could potentially require us to raise rates rapidly sometime down the road, which in turn could risk disrupting financial markets and pushing the economy into recession. the basis for today's decision is simply our assessment of the progress of the economy against our long-established goals of maximum employment and price stability. there is noise always in the data, but we have not changed our view of the outlook. we think we are on the same path. we have not boosted the outlook, projected faster growth. we think we are moving along in the same course we have been on. we are getting closer to reaching our objectives. the policy is accommodative.

the level ofo at the neutral federal funds rate. it is probably quite low. nevertheless, we have an accommodative stance or policy, and it will be appropriate to gradually move toward a neutral stance. firmness continues this morning with futures up across the board. -- weg us is a member have plop guests joining us. the headline -- we have two guests joining us. dovish compared to what the markets seem to be set up for ahead of the federal reserve. accountnk we take into the perception of the market leading up to this meeting was so drastic, the fed cannot hawkish again after the meeting, that would have freaked out the market here.

you had to take a dovish stance to keep people relaxed. it is a game of red light, green light. the markets gave the opportunity for the fed to hike rates, so they did. when i sit around a table with fixed-income investors and say, where would we be at the end of the year, flatter or steeper curve? the consensus is flatter curve. in thisoost the fed got last hike was that there were a bunch of expectations of fiscal stimulus coming down the pike, be it tax reform or infrastructure spending. if it looks like it is getting mired in a congressional logjam or will not show up until late 2018, i think the risk of much higher inflation and the future gets tamped down, as well. >> that is where the boost is for the all that the long end of the curve. it says something after all that has happened, after two fed hikes, we're still only at 2.5% in 10-year yields.

the market is not that optimistic looking that far ahead. david: if we are going to have 2% growth in the fed is right, what if the administration is wrong, and we are at 2.5% or 2.7% growth? steepen,eld will especially on the first bit of information that we are headed down that path. we need to see some evidence, and the markets have spent so long with low inflation, so it is difficult to make the case that you will get a big boost from infrastructure or other spending. up,ould take years to show so we need the evidence first. david: we are only 60 days into the administration so far, and fairness. in fairness. what about the equity markets? fed said they are not pricing and infrastructure reform. everyone thinks the market is pricing in all of this big stuff

right now, but i think it is a lack of -- lower regulation that the market is optimistic about. we have seen sentiment shift link never before. confidence, the views towards economic policies is parabolic lehigh -- parabolicly high. if we see signs of tax reform or infrastructure, then we will see a steeper yield curve. i do not think markets are pricing that in yet. spiked afterk etf the fed meeting. real rates are falling. money coming into high yield again. where do you take on the risk? >> we focus from an equity perspective, focusing on cyclical sectors, materials, industrials,egree, and technology. alix: we will be talking technology later on in the program. to the rate perspective, this is a great chart here.

it says, basically, every time you have a cycle with fed hikes, you get a top in yield. not even a cycle, i would say. is it fair to say that this is it, the 2.5% top in yields? >> i think the difference between this cycle and the past ones, something that was said a few moments ago, the fed has not forecasted much more aggressive conditions. so they have not really forced the markets to tighten the way they have been. alix: but it is. >> but they have not upgraded projections at altuve moved the 2018 gdp estimate up by .1%. in the past, when they have 2019, itfor 2018 or has led the market to over tighten. jonathan: people asked what changed between december and march. >> they saw the window.

financial conditions were good. they had the opportunity to push up nominal rates. it does not move the real rate that much. that gives them the perfect window. hearing: we keep goldilocks, goldilocks, goldilocks. inflation pressure remains quite subdued. normal yields are pretty low. if we have a situation where maybe we do not need the fiscal stimulus, growth solid in the u.s., inflation pressures look low, global economy is improving, you kind of have this pickup in europe and across asia to do you need the fiscal stimulus from d.c.? >> i do not think the markets are pricing that in right now. in order for the market to stay where it is right now, i do not think you necessarily have to see that fiscal stimulus, to play. i think it is more less regulation and increased optimism on the part of consumer and businesses. yesterday, goldman sachs

rated the global equity outlook to neutral over the past three months here at the longer the reflation trade stays, the bigger the risk to the downside. you have investors coming in, commodity investors coming in, and if you do not get that, there could be a very big washout. do you see that scenario laying out? >> i think right now, there is a lot of "what ifs." it.: that you need to hedge is there a way to address that? >> from our perspective, we are staying the trend that has gotten us here right now. until that shifts, there is no reason to alter the course. you can take a lot of scenarios, but let's wait until this happens. jonathan: great to have you with us. coming up later today, the ftse vice-chairman will be joining

bloomberg television. and a new program each friday at noon focusing on global issues and events that darkly affect debt markets. 30 minutes. that happens tomorrow at 11:30 eastern, new york. you are watching bloomberg. ♪

been a topasdaq has performer this year. a lot of help from tech names like alphabet -- apple, facebook , all sitting at record highs. amazon close to that record high. paul hickey is sitting with us. this chart shows stocks that benefit most from a rate hike, the white line. purple line is tech. blue line, stocks that suffer

most from a rate hike. if the fedenefit undergoes a rate hike cycle? that line looks similar to me. >> tech has historically -- purple lined is the and stocks that benefit from a rate hike is the white line. >> right, it has done relatively well. now you're looking at large cap technology stocks. growth stocks tend to take a hit in a higher rate environment, because future earnings are discounted at a higher rate large-cap technology stocks right now are stocks with below-market multiples and very little debt. i think you have some more insulation from a higher rate environment when you look at companies like google and facebook. facebook has an above market valuation, but it is growing fast. google and facebook have a duopoly on the online advertising market. in this environment, tech stocks that are reasonably valued and

have attractive growth forecasts and little debt, i think that is a good that going forward. alix: what about tax reform and repatriation? >> with a lot of these companies, like microsoft, they have a lot of cash overseas and are already paying a lot to shareholders. decent amountg a to shareholders, a lot of cash overseas. if you saw repatriation, there would be some benefit. i am sure they would release cash to shareholders. how is legislation going to play out? there are all sorts of scenarios. i think the companies themselves are attractively valued, and it is an area we like to stick with and operate here, but we're not going to jump the gun on what the legislation is going to be. i do not think the evaluations

and where they are trading right now are anticipating those programs coming through. david: your analysis on s andest-rate hike growth stocks raises a question. are a lot of these large-cap stocks growth stocks or value stocks? >> apple is a perfect example. you could consider that almost a consumer staples stock. people willany -- continue to have an iphone or mobile phone as a necessity, and people are locked into that iphone environment. it trades at a valuation that is cheaper than a consumer stable stock. david: what about google and facebook? >> google and facebook, different valuations. facebook is a little more higher valued. again, they have all of the incremental ad balance coming in

from the online ad space, not all of them but basically 80% coming into those two companies. the growth is really strong there, so we're still seeing those stocks looking like growth stocks. jonathan: we have a lot of data that looks solid, and then we had the fed rate this morning. the question is whether the enthusiasm and confidence amongst businesses translates into boosts into capex spending. which company is in the best position to capture that story, maybe going into 2018 as well? >> first, when you do see soft data historically, anytime it pulls ahead of hard data, hard data tends to follow through over the next three to six months, and that tends to go with a positive environment as a whole. i think the reflation sectors, industrials, materials, a lesser degree energy.

jonathan: and technology, more specifically? >> it is not necessarily a cyclical play. it is a play on the growth characteristics of these companies, and they are attractively valued and for the metals remain solid. jonathan: paul hickey, thank you very much. futures firmer. european stocks pushing higher. we're looking at a canadian company opening at about $25 affair. -- a share. it ipo'ed at $14 a share. there are conservative growth estimates. canada goose getting up pop. we will see how it goes. it feels like the ipo market is open in the beginning of this year. jonathan: it is easy to build up a bearish scenario with some of the ipo's and valuations. do you look at those kind of

things? >> when you follow the trends, you tend to see an initial spike. there is great growth among teens in our surveys. it is beating facebook and instant from among teens, really strong growth. but they do not necessarily have the treasure trove of user data that facebook has. companies,e of these they are taking the opportunity to cash out, and who can blame them? david: the data may well be coming. >> it could bp rebut a jacket company? i don't know. it could be. but a jacket company? i don't know. david: coming up, the general motors chairman will be talking to us about the border adjustment tax and job growth in the united states. ♪

david: this is bloomberg. president trump went to michigan, just outside of detroit, yesterday to talk to autoworkers about his plan to make america the global leader in automobile production again. a good part of that plan turns on his trade policy. the gmhere to talk with ceo to get her view on the border adjustment tax congress is talking about and how it might affect her company. >> it depends on what exactly it is, and we don't know. we are at high capital investment business, so we need to understand what the requirements and the rules are going to be so we can make smart investments. sometimes the investments we put in place are in 10, 15, 20 years in position, so we need to make sure we understand it. we voiced our concerns to make sure can support our company and in this new tax environment. i think there is a lot to be learned yet, and we are waiting to understand it. david: the president was

outspoken with the fact that a lot of other countries are not terribly fair in importing our vehicles, our cars. eu agree with him on that? is that something you're pressing forward, trade reform? -- do you agree with him on that? >> we want an equal playing field. i am confident that if we have an equal playing field, our cars will do well. i think it is something he is addressing, and we look forward to seeing the changes. on an equal footing basis, i am confident that, whether it is a chevrolet, cadillac, buick, across the globe, it will succeed. david: it is interesting that the president hit hard on restoring america as a leader in automobile manufacturing and the world. if it really were the capital, as he called it, of automobile production in the world, would that help general motors? or has general motors be set -- become so global that it would

not matter? >> it matters. we are a global company and our strong across many regions of the globe, but this is our home. this is where we started, and we had leading market share in the country. we want to continue to strengthen it. headquarters is still motor city, and we want to see that rebirth said he is talking about. david: that was general motors ceo mary barra in detroit. us. is still with being in the audience, it was a flashback to the 1950's. people were loving it, as he said we would dominate the world and automobiles. but it seems to be against the tread when they say we are global, and now he says we are going to be america first. the ceo is trying to come to terms with that. is she global or is she u.s.? isathan: is the low margin still going to exist, what will they do on the cost side of the equation when they have to bring

everything back home? yes, they might have a robust investment market, but if they could investment into high-volume, low margin projects, who picks up the slack? david: and the question is if they come to exist. whereave gone to mexico, it is much more inexpensive, and they have produced a really high .argin of expensive cars here maybe that is why the president said we will look at the epa requirements. jonathan: and some of these u.s. companies looking to pull out of europe, as well. david: as mary barra is selling opal. jonathan: precisely. alix: what do you think? >> we do not have exposure to that. manufacturing has become increasingly automated, as well. the auto industry is changing completely. just look at tesla. whether or not tesla becomes a

company for electric vehicles, we do think tesla will be the leader, but other come petition will come in and electric is becoming more widespread. rather than focus on each individual player, it is like cisco in the 1990's focusing on providing materials. if you are going to make electric vehicles, you need a lot of lithium and exposure to the lithium market. ticker, a leading producer of lithium and south america, i think that is a stock you have been focused on. and if you're nervous about tesla needing to raise more money, focus on a company that will apply to these producers. alix: and the lithium is really hard to get. it comes from brine. it takes like a year and a half to get it out of the brine, a very complex process.

david: look at you, the expert. some breaking news? alix: i want to make a correction, canada goose has not yet opened on the canadian exchange. the ipo has not yet opened it but we will be watching that is the we head to the open and canada. jonathan: thank you very much. futures are up .3% on the dow. in europe, the ftse at all-time highs. treasuries had a big bid yesterday. yields higher by three basis points this morning, two .52% on the u.s. 10-year. the dollar is stable. this is bloomberg. ♪

jonathan: from new york city, this is bloomberg daybreak. i had of the opening bell, features with a decent bid up. we had to grind out a week of

gains this thursday going into friday. treasuries really well bid following the fed decision yesterday. off by three basis points this morning, 2.52%. the bank of england story here. dissent. by one policyike maker 94 to five basis points. atx: here we go, not yet record highs, but we are inching close. a dow rally, a by 37 points. nasdaq up by two. it does not have the same feel as europe and asia, when you had european markets the highest and 21,115 onto watch, the dow. helping to read -- lead the rally is about base metals and underlying stocks, like

freeport-mcmoran and u.s. steel. there are higher gold prices. real rates falling with the fed and a dovish hike or goldman sachs saying they are still bullish and copper. the short-term effect, they see a shifting. we will see tighter markets later down the road or that is helping freeport, up by 2%. u.s. still still getting a popping. analysts saying steel production will not hold up. but u.s. steel is higher. we are almost to the end of the first quarter. i cannot believe that. this is where the target sits for the spicy bank -- for the s&p. the yellow line is the average. the high line is the highest year-end target. think it is 2600 at deutsche bank. we have surpassed of the average, but we have not been able to extend to the highs we saw earlier. financials, tech probably helped was today by oracle, but it

small caps that led the first leg of the reflation rally at the end of 2016. i you have the russell up only 1%. is that for shattering that we will not get the growth from president trump's agenda or is it a little bit of selling -- is that foreshadowing? jonathan: interesting that big cap said taken a lead in 2017. paul hickey from the spoke -- bespoke investment group is here. .he russell today up 2.18% a couple months ago, i think people would have said a lot more than that about that. what is happening? flow into small stocks after the election was just enormous. just went in. i think when people think about small and large cap stocks, they think it is interchangeable. but the russell 2000 is one-10th

the size of the s&p 500. when you move capital from a large cap into a small cap, it is like putting a hose through a straw. it will cause explosive force. consolidation in the small caps. and large cap, breadth has outperformed small-cap here at people think small caps are a precursor of what the broader market is going to be. it is only one-tenth the size of large caps. history bears that out. when large cap outperforms and small-cap trails, small caps eventually catch up. i think you also have to look at what kind of companies are being captured by the small-cap index, companies that will benefit from trump's progrowth announcement after the election, which is why you saw them rise so much at the end of 2016. and we talked about the lack of follow-through, maybe a little

bit of a lack of progress, people kicking the can down the road a little bit on expectations. it is important to note that since november 8, small caps are still about four percentage points more than the s&p. but the consolidation has kind of reared its angry had. it is not mean it is a place to get out of, but it means people'might be looking more closely at what trumps policies are doing -- at what trump's policies are doing. jonathan: and they are looking at a hike from the federal reserve and marge. what would you say about that? >> i would have said it was crazy, but it is a new era right now were good news is good news. it is pretty interesting because stocks may be up, but there was maybe some slight disappointment of the market yesterday. if we go into my terminal here, i have a chart that shows that

more rate sensitive stocks were outperforming yesterday, utilities, phone companies, and the like. this is a jpmorgan index that consolidates all of those that seem to be the most sensitive, negatively sensitive, to a rate hike. they actually outperformed going to the end of the day yesterday. i think there is maybe a little bit of a thought that that was priced in, that financials were already bidding up. we do not get the guidance, and people might have been disappointed. jonathan: and treasuries down, as well. of relief,s a sigh basically. there is worry about more rate hikes, but it is about when they are coming. >> they telegraphed it very well. market expectations went up. if you cannot hawkish after that, you may have seen a little bit of a freak out by the market. thingscame out and eased

over. they are beholden to the market, and if the market start selling off, they will get nervous. companies areual much more leveraged than they were before, and they can afford it. they will have to play -- pay the principle back at some point. >> anytime the market moves up now, you are borrowing from the future. valuations are not cheap at this stage. that will come into play at some point. not think youdo have ever seen a market peaked just because a valuations. something else drives it. you see the yield curve flattened out more, and that may raise some worry for equity investors. alix: help us understand what sectors or stocks you still like. i was talking about, i would focus on the russell.

joe said it is a matter of what stocks make of the index. i think the russell 2000 has a lot more energy exposure to it. that will weigh on the overall performance of the index. overall, we like to focus on small caps or large caps, we focus on sectors. overweight tech. we like materials are to a lesser degree, energy. even consumer staples. alix: in the s&p, tech is up 12% and health care up 10%, consumer discretionary 7%. >> health care is a tough sector. it has been weak. sentiment has gotten negative in the post-election period. but washington is looking to cut . one bipartisan issue is that health care companies are getting away with murder. you do not want to focus on washington's enemies when looking to make long

investments. jonathan: sentiment, some people call it euphoric. you do not buy it? >> sentiment has certainly improved. there is one survey which is very high. individual records record long streak of below 50% bullish sentiment. it is atbt, people say record highs. but twice 5% of all margin reading throughout history have been at record highs. alix: the nasdaq hit another record close, on pace for its biggest weekly gain since december. is there a kind of yield we're looking at where we suddenly have to reconsider where we are in the stocks? >> really good question. not yet. i think investors are still bullish into year-end. there will be a certain point some rateeffect of hikes will be more negatively perceived by the market, when we don't have the economic data to backstop us and when there is

not so much of the stuff going. for right now, no one is particularly worried about that to her jonathan: gents, thank you for being with us. coming up, managing partner of hippo ventures. , nine minutescity into the session. it is a global equity bid taking equities and europe to all-time highs on the ftse 100, the highest since december 2016 on the stoxx 600. but about a single point on the s&p 500. this is bloomberg. ♪

emma: this is bloomberg daybreak. coming up later on bloomberg markets, the and eac -- the fdic vice chairman joins us. david: this is bloomberg. the trump administration tried to take a second shot at its immigration ban, and another federal court, this time in hawaii, issued a stay. top tech companies, including airbnb, lyft, and square are formally opposing that ban. the managing partner of hippo ventures joins us now. have beenompanies pretty steadfast in resisting any curtailment of emigration. why is it so important to take? at least oneies,

founder of each company is and n immigrant. we depend on immigration to fill our jobs. silicon valley is full of immigrants. if we curtail immigration, it would have a huge impact on technology. talking about this particular ban and countries like libya, somalia, and yemen. are there that many tech people coming from those countries or is a more about what it leads to next? >> it is the tip of the iceberg for these technology companies. which let's turn to snap, has been the subject of the day with the ipo coming up. what is your analysis of snap and its future? can it be a rival to google and facebook? >> absolutely, particularly of facebook. young people are not using

facebook at older people are getting tired of facebook because it is not personal anymore. imagination of young people. it is incredibly creative, very imaginative you at a huge amount of time spent on snap. did you jump on snap when it was private? >> no, i wish. alix: it is hard pressed to find any kind of buy rating out there for it. what do you think of that? revenues,he amount of which are relatively small compared to facebook, it is right to have concerns. i am looking at it over a longer amount of time. it is important to our industry to her jonathan: it is a business model that is important. but we're talking about it relative to the price in public markets. many people think the price being paid for snap in public markets is too much. >> and the time of facebook's

ipo, who would have thought the company would be worth almost 200 billion dollars? very few people. we will see if it will grow into its valuation. i believe it is a service that will grow tremendously. young people will grow with it. jonathan: what kind of growth would be needed to develop eight -- to validate the price already? to $2 billionget or $3 billion next year. it is a very possible. alix: you have facebook and twitter but totally different trajectories. what gives you confidence that snap goes the way of facebook and not twitter? they lost their way, twitter, losing their story. they're not very focused. snap is an incredibly focused company. what,but there ceo is, 26? i think i was still a waitress

or something at 26. the idea is that they do not know how to run a startup company. >> we do not know that he appeared i think they have done a tremendous job so far. the valuation that they have today is a great positive for them. do have someone who has been around and knows his way. but they are not growing their users nearly as fast. it is different from where facebook was at this stage. is that a concern? >> it is definitely some things to watch. we do not know what is going to happen this year and in the years to come. david: their methodology is not to become a broadcast entity, not to go to the whole world, but have deep engagement of a limited number of people. we do not have to grow to the sky, but we have to get deeper in engagement with our existing base. >> twitter has about 200 million monthly average users, and a lot

of them are very active. it is a lot of people. alix: what about the broader ipo market? snap has no buy ratings. what does it tell other smaller tech companies that want to go public this year? >> i think people are encouraged. few companies have just filed, including a big company here in new york. i think people are encouraged to go public. david: you deal with a lot of ventures in the early stage. to get aa danger little bit loose with the spending, so they make foolish decisions in the startup phase or midterm phase? >> not if we have anything to say about it. company, igreat tech think most founders understand that. david: thanks so much. jonathan: coming up is bloomberg

markets. >> u.s. financial firms should position their investment banks in activity. the fdic vice chairman has chatted with us. the former fed president. a good day to chat to him after the big move from the fed yesterday. the chief economist from the u.k. is here. we are talking about forbes out today voting -- we thought today was going to be boring. leaving. she is you wonder whether this is a view that spreads across the mpc.

what is the view in london? mark: that is the big point. some others could be tipped over the edge. it suggests that even if she leaves, are you coming into a space where by the bank will be split? some will likely vote for rates to be kept a toy five basis points. 25 basispt at points. but things are shifting. jonathan: looking forward to the program. to watchckout tv us online and interact with us directly. you can send as messages in the show. this is bloomberg. ♪

jonathan: from new york city,

this is bloomberg daybreak. the headline risk to the rest of 2017 is a series of elections in europe. it began with dutch elections. what can upset the risk rally? a blowerals defeated in to populism in holland, the netherlands, overnight. this is what was said from the oecd on the decks elections -- dutch elections. news.is good everyone is think relieved and reassured. jonathan: good news for the establishment. of theare the chief oecd, you are certainly establishment. what does this mean for france, and what does it mean for europe? sweep this under the rug, immigration under the rug, that will bite you in the next

election. so even if you did not win, you cannot ignore that there are fundamental issues that have to be addressed. david: you would go along the eurozone today based on this, because 85% of the people voted for candidates that want to stay in the euro. are euro there skeptics, but for the population, when you do the votes, there is broad support for the euro. has not done well over the last seven years, the general economy. that needs to change and change fast. so sureut we are not about washington. alix: we want growth. we put that question to jason furman about the budget from president trump and growth. >> this is not a progrowth budget. this is a budget that is penny

wise and would leave our country poorer. alix: ok, no surprise. theif you are able to get middle class actually spending and moving, that does move the needle when it winds up coming for growth, and that could change the environment. david: and the proponents say that the way they are cutting it, they will cut people who would be regulating. they will get rid of those people, a lot of government jobs, regulators. i do not know if it is right or not, but that is the argument. histhan: when administration exited the white house and a new one was coming in, business surveys skyrocketed. president obama, he gave a message to businesses. business leaders are more confident now than they were four months ago. alix: look at the bloomberg here. thes&p monthly capex,

purple burros, but the forecast is the white line, and that is moving up. capex has moved higher as the economy has recovered somewhat. to put serious money to work, you want to make sure you will not have to pay fines. david: i spoke to one business leader who is more confident the cousin of the fuel efficiency being looked at. mary barra, ceo of gm. >> i heard he is reinstating the midterm review, and i think that is so important, to look at the progress made in the last five years in technology and how consumer trends have changed, really looking at the whole environment. he can as we can do things that will improve the environment, not threatening jobs. i think we can do things that will create jobs and strengthen the economy but do the right things for the economy -- the environment. that is about suv and

trucks in the united states, which are higher-margin. the direction of travel was maybe in that direction. we are about 26 minutes into the session. were welded going into the cache open. equities with a decent bid. 26 minutes into the session here in the u.s. up about .1% on the dow. flat on the s&p 500. the ftse hit an all-time high in europe earlier in the session. from new york, thank you very much. you are watching bloomberg. ♪

york,: 10:00 a.m. in new 2:00 p.m. in london, 10:00 p.m. in hong kong. i am vonnie quinn. mark: i am mark barton. welcome to bloomberg markets.

vonnie: we take you from new york to london and cover stories out of chicago, amsterdam and china. here are the top stories. in markets, global stocks are taking up the feds hike rate but is the central bank long behind the curve? mark: in the u.k., the bank of rate -- the bank of england keeps rates steady. there is a hawkish tone. for a ratebes votes hike. vonnie: president trump releases his budgets. to boosto cut the cost defense spending. ?ill it satisfy