the brexit plans run into immediate operation. they cannot begin until britain has left the eu. say therward, the feds central bank should be prepared for the hike. >> for in one year would be much less than the last period of the recession. we were raising it every single meeting. twice as fast. relative to that this is much more gradual even if we did it every other meeting. >> into the finance minister

about the danger marine le pen poses. >> political risk. the victory of marina le pen in france would be impermanent political risk to europe. i will talk brexit, italy, donald trump and the reflationary trade in the united states but first things first. this is what we're looking at overall. want to spend time looking at the pound because yesterday article 50 was triggered. today we are expecting some sort of white paper ahead of the bill. global stocks retreating a touch. critics spending its rally. european stocks not changing much. we are not seeing a lot of movement and pound. yesterday we did see it drop lower. losses later in the day at 11.36.

two guilds in front of the treasury in the next couple of minutes. >> the chinese president will meet with donald in florida next week according to the news agency. the meeting will be the first between the leaders sense trump took office. regularlyresident has highlighted grievances with including the u.s. trade deficit with china and charges of currency minute relation. consideringcans are aching another run the next week at passing the health care bill they abruptly pulled up from the floor in an embarrassing setback to the efforts to appeal obamacare. two republican lawmakers say a vote,y are discussing even staying into the weekend if necessary. it is unclear what changes would be made to the deal the health bill. president trump will be briefed today on various ways to edelman conference of tax form changes. .>> the border adjusted tax.

marine le pen victory in france in the upcoming elections would add a permanent political risk to europe according to italy's finance chief who spoke to bloomberg earlier. >> markets are beginning to price aggressively, political risk. the victory of marine le pen in france could be a political risk to europe. i expect that will be reflected. wti crude has gone back of $49 per barrel after government data shows gasoline dropped more than expected. along with an unexpected disruption in the be a production, helping to drive prices 4% over the last week. samsung unveiling its new five should smartphone. the company's biggest prospects for a turnaround after the note 7 debacle last year which had a

tendency to catch fire and exploded. included facial recognition, the safety of the phone's battery. global news 24 hours a day powered by more than 2600 journalists and analysts in more , this iscountries bloomberg. thanks so much. theresa may has insisted britain is a part of europe and wants to maintain what she calls a deep into special partnership with the year. the historic step of triggering article 50 from two years of brexit negotiations. >> but i want is everybody to know what the withdrawal of mean it -- agreement is and what the future relationship is. special partnership with the eu because they are still part of europe area we want to work with them and cooperate with them. i think that's possible but it may be that there has to be in

limitation as people adjust, as governments adjust to whatever the new arrangements are. francine: -- >> we will never accept that startingec the u.k. is trade negotiations with other countries before the withdrawal. until the withdrawal, the u.k. is a full member of the european union with all the rights but also all of the obligations. unionhave the european making sure the following talks will be instructed and i hope the british government little work with the same spirit. the british prime minister assured me of this during a phone call.

today is therefore also a day for a new beginning. >> let's bring in our team of experts from the u.k. governments team. he also wrote the book why the tories one -- won. thank you so much all of you for joining us. start with you. seems quite smooth and then we had a number of opinion pieces from theresa may in european oblations -- publications. >> trying to win friends in europe before these negotiations go underway. she has a month until they have a summit for their approach to brexit. francine: what are expecting in terms of what is happening today. a white paper, then we get a great repeal phil. how to transpose it law into the u.k.. >> when you unravel a 44 year

relationship with the european union, 19,000 rules have come the way of the u.k.. matt: matt: francine: what was your take on yesterday? markets didn't do much. she seemed in control. >> there is extremely gotten, the sense that the plan is not very clear for what happens next to haven't gotten very far past and negotiations and we will talk about that. all of that looms ahead of us. the bottom line is almost that the brexit talk was the most important thing last summer in markets.

it was the biggest story it in the we've got right place i think. francine: with all the negative views, it's priced in? >> i think it's priced into the currency. companies.t we think there are methods to both of those. for guilt, you need a deflationary environment for the values their treatment. with brexit, you can have some growth of there is good news. there could be a terrible antitrade rhetoric coming off things. i think it's in the price of currencies, but not other assets. francine: did she strike the right tone? is it just too soon to tell? do we really have to wait until the first divorce is over?

>> she went through the divorce talks in the trade talks at the same time. i think she may have stumbled a little bit into her first hurdle. she said in her little that she wants a partnership the trades traded security. the feeling initiate the security note too hard. people see that as a threat u.k. to stop operating on security and that's not going well. francine: apart from the fact that they can sell into? >> she has triggered article 50, a lot of the power is would be european union's 27 countries. they can rent them :00 in the pressure will make any deal that she is offered grow. francine: how must we know about the timeline it? do we brace for things to trickle-down? >> what we know is the risk is

very slow. one side has no great reason to rush. the other side like to. there is so much politics. we are french and german elections and italian elections coming through. likenk that brussels would to devote most of which energy at this point in terms of the talk about the bill, the cost of leaving. they can agree on anything else. toncine: she seems willing pay for the bill. >> she would love to get struck of moving toward an agreement. they are going to drag it onto the last minute. maybe a deal will be struck. you have sides with differing agendas. francine: what does it mean the u.k. is transposed?

lamarcus be couple in the fact that the government could be a caretaker? >> that will provide some assurance. it is a move against free trade and that is the real agreement. it's not so much about the law and how that impacts companies. close trades and cap on migrant workers impact the economy. anything else will be in two years. francine: thank you so much. if you're a bloomberg customer, you can watch this using tv . you can follow the charts and functions. you can reach out to us directly. you know the drill. you know where to find this to message me. let's get back to the business flash. store openings the upset

highest purchasing cost. three gilad says it will introduce a new store brand with the first outlet opens this autumn. bill ackman says is sorry for his investment in valiant. he called a few -- huge mistake left part to have become the second richest person after he added $1.5 billion to his fortune yesterday as amazon shares jumped the day after they plan to buy the dubai-based retailer. worth $75.6 billion. francine: lloyds will opening european union hub following brexit. the insurance market expects the office to be operational at the

beginning of 2019. lloyds reports profits. he joins us now from the headquarters. thank you so much for joining us. >> good morning. francine: why'd you take rustles over other cities? reviewid a very thorough . we had a contingency plan for the referendum. to the flesh on to it read we concluded that the right solution was to form a subsidiary of the lloyds market on the shore of the eu. we came up the good structure, a very efficient structure which we think will be providing seamless access to our customers. we select at,

location for. we already have 10 offices around europe. we to select one location for our subsidiary. we did a thorough analysis of a number of countries. brussels came out on top. was weson that it did have many criteria. there were three things i would highlight rate of what is the the ttion approach belgian regulators have fits very much with what we required. they have a very strong reputation in insurance. global specialist in insurance. high-quality regulators and understand the market and who are flexible. the second factor i would highlight is obviously being the kind of specialist market we are

, we require access to a good talent will. there is no question that in brussels there is a good talent will bring they have a vibrant insurance sector anyway. the third thing which is more intangible is it's important for lloyds being the major insurance brandon the world if coming onshore to be in the heart of the eu, brussels is very much at the heart of the eu. francine: what else were you looking at? >> i'm not going to comment on individual countries and we had a list of five or six we were in detailed discussions with. many would have provided very good basis for us. in the end, we had to choose one. we had a very active look at a number of criteria, up to 30

criteria. francine: family jobs will be shifted from london to brussels? think the headcount for the corporation will be in the tens, not the hundreds. some of those will be recoded -- recruited locally. it will be a mixture. the subsidiaryh develops over the years will depend and how our business develops. it will emerge and evolve as time goes on. francine: what kind of impact going forward you see from brexit >> mark -- brexit? was it more smooth and you thought russian mark -- thought? think that for lloyds, speaking in a narrow sense of

our services generally, the solution we have come up with is an seamless and efficient as we can make it. we think that by going onshore with the eu, we can see some benefits in terms of improving our business penetration into the eu and creating an efficient platform which may attract more business into the lloyds market. process,of the brexit from a business point of view, we are very pleased we are not -- are getting on with it. we've been advocating that for a while. eliminateal that we as much uncertainty as soon as we reasonably can. if uncertainty persists, we will encourage business because of that uncertainty. i personally believe that london will remain the major financial

center in europe. it will remain that for lloyds. at other, if you look parts of the sector, they've got slightly different criteria and work. i think you will see some transfer. lender will -- london will remain a powerful financial center. thank you for joining us today. francine: we will discuss the boston fed resident -- present. we will get treasuries and the divergent. this is bloomberg. ♪

francine: the boston fed president said central-bank should be prepared to raise rates a total of war times in 2017 to guard against overheating the economy. they call for a height. >> for in one year would be less than what we did in the last time when we came out of recession. at that time, we were raising it every meeting. relative to that, this is much more gradual, even if we did every other meeting. , what is still with us your take on fed hikes? how many are we going to see?

patrick: i think the market is ready for two more. the fed has done a good job of getting the market to where it's going to get. they are talking about four. that was based on a strong continuation of the data. it's interesting that even more, the fed has two there is no change in real policy. inflation expectations of been the same amount. the policy is just as accommodative as it was. >> there are two things. first is the short time -- term. we were all beginning to wonder about the economy and what -- they are coming out with a clear message they are still on track. by difficulty with the message is i don't really care how fast

we go toward their destination. they haven't done anything to make the market to their getting to three. destination is very low anyway. it's all predicated that there is not much inflation. at the same time, they are screaming your estimates are too low. francine: gdp is not great. it's at 2%. it's not much. cycle, an economic there's not much inflation. there is cheap money fueling capital into the global economy every day. it wouldn't hurt to mobilize policy. francine: i can't take credit for this. i love it. this is the euro curve.

you can see it curve on the 30 year spread. the u.s. is here in blue. what does this tell us about divergence? patrick: it's interesting. that's why you're getting the flattening on the u.s. what changes is the markets are looking at the fed. when yellen talks about the unwinding of qe, that's when you see this again. for years, we have had the fed teens the biggest. people should not overlook cap talking about protectionist policies, japan and china have treasuries. if you do move away from that regime, you may have the fed having them be sellers of treasuries. francine: stay with us.

thank you for sticking around. tomorrow, we will bring you more exclusive interviews. up next, should markets declare victory in france? we will hear from the italian finance minister. he says things are worrisome. there is going to be more populism across europe. i spoke to him about banks and the --. this is bloomberg. ♪

francine: this is bloomberg surveillance area let's get to the news area -- news. nejra: the chinese president

will meet with donald trump next week. the meeting will be the first between them since cup took office. he has highlighted grievances with beijing, including the trade deficit with china and charges of mobility shouldn't granny -- the currency. to republican lawmakers say leaders are discussing holding a vote, even staying the weekend of necessary. it's a their what changes would be made to the health will. the president will be briefed today on various ways to implement tax code changes. according to people familiar with the matter, he will be given possible options. is thethe proposals porter adjusted tax. wti is trading above it. gasoline dropped more than

expected. along with a disruption in production is help drive prices more than 4% over the last week. samsung has unveiled its new smartphone. it represents the biggest prospect for a turnaround at the note 7 the bottle last year. it caught fire and exploded in caps on is counting the safety of the phone's battery. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. thanks so much. integration and cooperation within europe is necessary and will benefit italy. in an interview with me, he weighed in on the risk presented by a victory in the french presidential election. >> if there a stronger support any political level for it, we

will benefit again, it's not just about winning elections. it's about using the political mandate to change europe for better and to go on with integration. declarationed the of rome. 27 countries have agreed. this is putting things into policy, actions, and fax. generating negative political mood. not just of the league, but in other countries. let's not forget the temptation to leave europe is widely spread in a number of countries. francine: would that hurt yields for the spread between italian and german yields? markets are beginning to price. victory of rain le pen in

france would be a permanent political risk to europe. i think that will be baked in vaginal rockets. francine: we are getting some breaking news out of china. this is the biggest petroleum company in china. they are disappointing earnings. this is what we have heard. they are just coming in in terms of revenue. isis net income that disappointing, by a billion. , what we want to figure out is if domestic crude output would show a decline during last year. what we really want to know is because it's a great robert to understand how much demand there is in china, it has stayed in

profits. the first impression is a good mix. i will get you more as the numbers are coming. let's go back to some of the political turmoil we see in europe that we could further see. let's bring in patrick armstrong. we start with you. we were talking about the finance minister. banks haven central been here. this is why we haven't seen it spike up. what is the chance of marine le pen winning? kit: it hasn't changed that much. 20%, a low number. there is uncertainty about who will turn out to vote and the turnout on the vote is still there. the odds check function on the berg shows her it 30%.

she doesn't have much chance. it's an enormous jumper to get to the kind of voters she would need. it's way beyond anything that is easy to imagine. i talked to people every day say yes but, there is a lot of our supporters far away from paris. patrick: a lot of people are undecided. there is a risk there. i agree with your probabilities. it is unlikely. there are events that can change behavior the weekend before, the fbi investigation of clinton skewed things. chance, but a high it is chance, but it is chancellor should be some insurance against those small chances as we have learned over the last year. the swing youof

need, it's a vastly bigger swing than was needed for the u.k. to vote or for donald trump to win the presidency. it's a different order of magnitude. that's not to say there is not a tide of movement toward populism in the world. francine: what is your insurance policy? patrick: we are short the currency. we are not panicking that this is going to happen. we have a short tenure. we don't have any position right now. francine: what are the chances of this becoming uglier? we worry about france. what is italy go? kit: it's beyond two years. the movement of the discontented, low income areas in europe, that's not going to go away. the discontent on immigration and standard of living and the

perception of corruption by the elite, the that goes away. it depends on who wins the french election and commits to the euro. notitalian election might abandon the currency. it's a discussion about bringing more power back to italy and not about leaving the eurozone more likely. the political movement, the pressure against the center of europe, a not sure that's going away. francine: that is the center of europe not reform itself? kit: we could of had this conversation 10 years ago. francine: it takes time. kit: does it reform itself fast enough for italy, which needs economic growth that can be shared for the people. that's the achilles heel of europe in the long run, the lack of growth in the italian economy.

we need reforms it helps that fast. francine: i want to bring up the pounds and euro is in purple. in what currency do you want to be? patrick: dollars. francine: with any other currency? patrick: we are showing the euro versus the dollar. it's the dollar. andfed is clearly hiking it's going to be unwinding its balance sheet at some point. francine: thank you. stay with surveillance. the south african president faces a cabinet rebellion. he plans to fire his finance minister. we will go to johannesburg for the latest. newung unveils its smartphones. can they win back consumers? this is bloomberg. ♪

himhim francine: the south african

president faces a rebellion in his own party if he fires finance minister. ministers are considering resigning their positions. that is according to people familiar with the situation. reports of the plans are sharply lower this week to -- week. there is a rate decision this afternoon. we're back with patrick and kit. what is your take on south africa? i don't know how do you navigate this political risk, a president

wants to fire somebody who is credible in the market area -- market. kit: by far the most credible person in south africa. in the long run, it's scary that if you went back to under a year to the local elections last summer, they look like a move into a non-racially divisive structure, to a world of coalitions that would be incredibly positive for their politics. they're going backwards quickly. rating is worrying. i find that very disturbing. chart and thehe currency, it has come back up a teeny bit on a big political risk. hunting andf yield investment flows in the world is washing over this. i weigh those two against each other at the moment. francine: let's go to

johannesburg where we have our reporter. the confrontation we are talking about comes as we have a rate decision. what are we expecting from the central bank? expect23 economists interest rates to remain unchanged at 7% in it has remained that way since march. 2012ave to go back to july to have an interest rate drop in south africa. that was done half a percentage point, down to 5%. it has risen up to what is now at 7%. a lot has happened in the last week. i don't think a lot has changed enough to keep the monetary policy committee to change it. francine: how will the central bank react to this uncertainty politics? >> they are likely to put up how

stability may affect the currency and how it may be putting into inflation and hurting the inflation scenario in south africa. we saw it come back to 6.3%. the government is between three and 6% to it's not allowing for a cut in interest rates for now. there are rumors that were very evident toward the latter half of this year for expectations. for now, a lot of what is happening regarding food prices as well as the possible outlook is going to be very key for what they will say in today's message. francine: thank you so much for the update. he is joining us live from johannesburg. when you look at this volatility chart, do you just expected to

continue? struck by from the end of last year how the currency had rallied at high volatility levels. the money floated. now we have spiked it up. elevatedot an volatility environment. does the reality of something , ratings going well at some point, does that bring on a crisis? the market is not embracing crisis yet. it's saying there is bad news out there. francine: the market is rarely pricing in bad news. is there concern overall that we are in a fictitious world because we nor a lot of risk? even in western countries?

patrick: you are getting compensated to invest in emerging markets there is clearly risk. you have a selloff in commodities or a strong dollar. francine: do you like any of the emerging markets? itsad china boosting expiration. some indianhave insulated bonds. we have real yields of 4% there. that's an equity risk premium right now. that is a place with the spreads are wide. you get a kicker there as well. there is risk, but you are getting compensated for that. kit: the higher-yielding emerging markets have yields that are irresistible in this. the u.s. rates are not above three. in south africa, it is over 8%.

south africa i find politically scary. you almost try not to think about it. you the speed with which the mexican peso came back. maybe that will remain strong. india is the attractive and right now. francine: are we further away from a possible trade war? one of the things i keep. as if donald trump doesn't get what he wants, you may revert to doing what he knows best, which is protectionist measures. kit: the markets are pricing in the idea that donald trump is going to be slower moving overall than he was before he got elected. we are not out of the woods on a trade war. are trying to deal with the reality of growth that is not strong as we would like it to be. deliverrump wants to

prosperity, and a trade war fails on some accounts. patrick: just focusing on current accounts and deficits is a simplistic way to look at things. that seems to be the narrative. he believes it. that is worrying. the end result will be a trade war if he goes down this path. i don't know it will be a war. there are forces in place that go against globalization and it is negative for global growth. i think you will start to see that ending higher in pushing prices lower. francine: thank you so much for joining us today. up next, can they turn things around for samsung? we will bring you the latest battle on the goal market for smartphones. this is bloomberg. ♪

francine: bloomberg surveillance, francine lacqua in london. nejra: the largest lender by

assets, they haven't expected increase in four-year profits. costs decline. other chinese rivals posting better-than-expected results. the growth is poised to accelerate this year as low margins stabilize. h&m the analyst estimates. store openings helped offset purchasing costs. they will introduce a new store brand with the first outlet opening in london. jeff asus has jumped past warren buffett to become the second richest person. that's after he added $1.5 billion to his fortune yesterday as shares jump the day after they plan to buy the dubai-based online retailer. of $75.6net worth billion. francine: samsung has unveiled its new smart phone.

it is the galaxy s eight. caitlin reports on the campaign. samsung has unveiled its new android smartphone called the galaxy s numeral he. it's got to get this right. that's because the last major loss -- launch and disaster. videos like this were posted, showing it overheating and catching fire. issues with faulty batteries and after two rounds of recalls, the entire crisis is estimated to have cost them more than $6 billion. it may have cost samsung's lead in the market area -- market. apple edged asked -- past them. that, samsung has

beaten apple every quarter since 2014. that brings us to their comeback attempt. it comes in two sizes, both are latest best larger. the logo has been removed from the front of the phone. it comes with encrypted facial recognition and a virtual assistant to give users an equivalent to siri. there is still the question, is it safe? >> safety is already's the priority. lex they have a new battery safety check. investors appear confidence with stepson shares trading near a record high. samsung faces another test data this year. apple is expected to roll out the 10th anniversary version of the iphone. francine: to put things in perspective, this is my favorite chart.

it shows you the percentage of total south korean market cap. it goes up even as the valuation has gone down. we have a guest appearance. >> thanks for a much. on thefocusing in markets. we are focusing on the euro pound. we're not showing much brings fear. we see signs that it would favor the euro. we are seeing more demand. perhaps, things are moving in the direction the euro bears would want to see them. let's move on to what that means the stock pocket. we don't normally see a correlation between these two factors. areas, we're in one is correlations at the moment you it is driven by the

fundamentally strong data we see from the eurozone. aboutl price is just testing whether it keeps above those gains it made yesterday. it was up 2.4% yesterday. there was a drop in gasoline stock piles. that a man story in the conversation. francine: surveillance continues in the next two hours. tom keene joins me out of new york. also just getting breaking news from the french president saying he spoke with theresa may. we will have the latest. this is bloomberg. ♪

francine: pushback on day one.

the point person on brexit says theresa may shouldn't use security as a bargaining tool. risks to the union. italy's finance minister tells us exclusively that a le pen victory in france would cause contagion. and another health care bill possibly as early as next week? good morning. this is "bloomberg surveillance." look athat we need to the week that was. policy divergence. exit. .onald trump tom: plus the markets. it is an odd day when we can step back and figure out where we are going. friend and center was the historic moment yesterday in the house of commons. francine: yes, this is ahead of -- we were expecting a white paper. in a red box? francine: that is talking about

how it transforms. we will get onto that. let's get the bloomberg first word news. the state-runna, news agency says the president will meet with trump next week. a chinese spokesperson says the summit will take place at trumps florida resort. earlier this month, the white house said the purpose of the meeting would be too diffuse tension over north korea. another setback for trumps revise travel ban. a federal judge in hawaii has extended a temporary halt to restrictions on travel from six mostly muslim nations. the judge rules that weiss have -- that white house provisions failed. his ruling will stay in effect until a higher court overturns it. and -- says the fed needs to raise interest rates four times this year in order to avoid an over hot economy. >> 4 in one year would be much

less in the last time we came out of a recession. at that time we raised it every single meeting. relative to that, this is much ite gradual, even if we did every other meeting. taylor: he says the economy is likely to hit the fed goals by the end of the year. in europe, theresa may's opening offer for a exit agreement ran into immediate opposition. she tried to tie a free trade deal to a security cooperation but it ran into immediate opposition from the european parliament. a difficult conversations. let's not underestimate the different points of views and the fact that europe would stancey take not an easy with the negotiations. and also, sometime will have to be devoted to any transition measures needed to allow for the new arrangement to work. otherwise, there is a risk of the destruction to markets which

cannot be underestimated. taylor: the european commission president says the u.k. has made a choice they will regret one day. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you. help me hereview, with the dynamic of france right now. it is the time before the end of april. how is marine le pen doing? if she gaining momentum? francine: she is not getting momentum. that is ali spoke about this with the italian finance minister. plot telling at 40%. the problem with france is that you have a lot of people who are undecided. and the political spectrum, politics observers are worried that they will go a little bit the bernie, like sanders voters, may have gone to trump, you do politics

differently than 10 years ago. tom: that is what we will see in the complexity of the first-round vote at the end of april. let's do a data check. i only did one screen today because it is that quiet. oil up. the curve is flattening, continuing. down near 109 earlier this morning. the curve is not steeper. francine: i wanted to show you what european stocks are doing. the much flat. global stocks are retreating a touch. there approaching the end of the best quarter of global equities 2015. i want to show you the vix index. that is after the trigger of article 50. tom: let me go to bloomberg. this is a chart and have been meaning to get up but we have been so busy that i never got to it. this is a stunning chart.

boards the conference expectations chart. as featured on facebook a couple of times. here we are with two standard deletions. here is the regression. here is one standard to and here two. this is a very rare event to get up by this blue line and we are there. this increase in the expectation of enthusiasm and confidence for the american economy, francine, is remarkable. francine: this is what i did. i wanted to basically show you year spread in the u.s. is different than what the 30 year spread is doing in germany. in white is the bund spread. in blue is the treasury spread. it is clear that the year -- but is spreading. it gives us a sense of divergence. the reflation trade is showing

signs of resilience after a shaky start to the week. investors are approaching the best quarter for global equities since 2013. joining us now for the hour is larry hatheway. aeat to have you on on such busy day. let me bring you to my chart, straightaway. it is this divergence he that impetus tom stocks? larry: it will matter. ecb ise saying the overdue for getting the globalized policy. they do have to wait for the outcome of the french election. but the tendency is back towards neutral. the steps they adopted last year with the negative interest rates and a big interest rate in interest purchases are no longer warranted and that is what the market is telling us. but that u.s. is saying that we have made a big adjustment here.

an adjustment in growth expectations and the fed. it is a quiet looking diagram. francine: on monday, we had a market because people were concerned that trump couldn't get the economics plant and because he failed the health care bill. are they related? larry: they are. he pointed out before the enthusiasm there in terms of expectations that several standard deviations hides. if you look at euro and surprise , it is telling us something as well. take a look at the market that is performing with a retrospective look. they have traded higher on two things. improving growth relative to what was expected. enthusiasm on top of what the trump administration and republican congress would bring. theirf those are nearing conclusion. markets are settling down. those sources of support are gone. if the market is going to go higher, it will be on a

demonstrable improvement in earnings, likely in europe and a so in the united states. only do economics but also investment management, trying to figure out what to do with the money. helping right now with the u.s. and your call. do this with the u.s. or europe? larry: i think you can do bits in both. i think u.s. companies that have global exposure to both are going to be beneficiaries of improved revenues and earnings and that will support the share prices. i do think there is more operating leverage in europe in cyclicals and in some areas of the emerging complex. how about the operating leverage? that is a jargon phrase. explain that to us. see -- we are doing more of this. is studyingor riggs for level four of the cfa. taylor riggs.

operating leverage -- what is that? larry: that is what occurs typically because of the economic activity improving. we see stronger growth in revenues. in sales and volumes. specifically firms hold back in their costs space. asy are still very cautious far as capital expenditures. so what they tend to do is see their sales rise relative to expenses and then costs go up sharply at this point in the call and that is what we operating leverage. tom: very good. we will come back with larry hatheway. michael holland is back with us in the next hour on equities. on saidtill focused president speaking. friday, william dudley of the new york fed. the new york fed is a unique place among the regional feds.

it is like the head of foreign exchange. st. louis as well. look for those two important speakers on friday. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." this is the bloomberg business flash. bill ackman has apologized for losing $4 billion on his investment in valeant pharmaceuticals. in his annual letter to bet aors, he called the huge mistake. he says he misjudged the drugmakers management. fell 95% from the peak in 2015.

ubs asset management is boosting the president in china's bond market at a time when investors are pulling out. the spokesperson says the firm is doubling down and they are forng portfolio managers bonds and stocks. foreigners own 3% in china's local currency bond. that is your bloomberg business flash. francine: thank you. it is day one of the brexit negotiations and theresa may's attempt to try to tie the deals trade has already hit a wall. brexit negotiators say security is far too important to start darkening it with an economic agreement. for more on the tense road ahead , let's turn to simon kennedy. and still with us is larry hatheway. simon, great coverage yesterday. can getulletins, you

that into your and books by going into the website. clean you that this would be tens but now they are saying that they will not negotiate trade until they divorce. realization that europe hasn't been bluffing over the last nine months and they scope the infamous brexit bill and borders between the northern island -- it means the rights of european citizens in the u k and e u.k. citizens in europe. it is those things that will be tricky and problematic and perhaps not a particularly voter appealing background that theresa may has to get through before she discusses the goodies that she wants which is the unprecedented trade deal she is seeking encompassing financial services. she has to do the hard work first and then negotiate the

upside for the brexit. she is still pushing for those talks to be in tandem. francine: how did yesterday go? the tension out of that at some point, the smoothness will grow? a dose of realism has come back into the markets. selloff a little bit. a dose of realism -- this is going to be really difficult. there are no easy wins or solutions. and we will be faced with quite a bit of uncertainty. and it means that foreign investors will be cautious basing long-term investments into the u.k. before they know about their relationship to europe. brexitt's go to the barometer. this was invented by simon kennedy. we go back to 2000 and the idea of the average good of the united kingdom and a lot of challenges here in the crisis. up we go. simon, this doesn't look like a

nation beleaguered. it is britain negotiating from a strong economic stance? simon: certainly stronger than it was before the referendum. the treasury and the imf were implying that a recession would beckon if there was a vote for frexit. so they have done a lot better than expected. during the bloomberg today about sweetit is whether this spot has longer to last as companies have to buckle down for the negotiations. and headlines about what this means for the immigration and talent pool they rely on. so certainly, there may be bits of uncertainty today. based on some of the push back we saw yesterday from the european officials. going on about what they want. tom: an open question. give me an example of one negotiating point that shows how fraught this will be? landing rights at heathrow?

fish in the north sea? cricket bats? whatever. one example of how nasty this will be? simon: fish. and you can learn more, there will be a story on monday that will be on the terminal about and itssels bureau, outlines how complicated the discussion of fish and fishing rights is going to be. and it is a micro is him of how tough these talks are going to be. remember that when greenland old,the european union of it took three years and all they negotiated was fish. ofthat is simply one part the broader brexit negotiations. something like nearly 400 negotiating points. american security and science and patents and fish. a whole host of things that they will have to plod their way

through. with europe, it is all about fisheries. how would you play the markets? is the negative view priced into pound? everything got priced pretty well last year. the pound.ualty was the concerns worth the potential impacts but they were never going to be that great. having said that, the thing we are to think about is the u.k. inflation, courtesy of the weaker pound, is rising faster than wages. household spending will be cramped. this is something that will begin to bite further into this and that is the feel-good factor about how it didn't have negative applications, they are areably just would -- they probably just delayed. banks will remain on hold and will have a biased despite the chatter to the opposite and some

of the domestic retail will probably see pressures in terms revenue. tom: i just put out on twitter -- the simon kennedy story on fish. simon kennedy, thank you, as always. keep the stories coming. it is incredible, folks, the fabric of this brexit debate that has generated off. we will come back with larry hatheway and coming up next in the next hour, we continue the equity discussion with michael use of cash.e and also, the use of index funds. this is bloomberg. ♪

francine: this is "bloomberg surveillance." talk about political risk in the time for the morning must-read. minister fromance italy about political risk. >> if there is stronger support on the political level for the european projects then of course. not just italy, will benefit. it is about using the political mandate to change europe for the better and to go on with integration. .his has been the success story we have just signed a declaration of their own.

principleslate the into policies. francine: what happens if marine le pen wins in france? >> it will be generating italy butnot just in also in other countries. let's not forget that the temptation to leave europe is widely spread with a number of countries. francine: with that hurt yields or the spread? the spread of financial institutions? >> markets are beginning to price, aggressively, political risk. i expect that to be reflected in markets. francine: when i spoke to the italian finance minister, he says it goes back to brexit and yesterday, they are trying to get tankers to

come to their cities. we're just getting news and we understand that jpmorgan is in talks for a dublin office space that could hold 1000 staff. they are looking at a subsidiary. larry hatheway is here. all of these at comings and goings, will london survive? i think they will see some influence of importance in some areas of importance through settlements and fixed income markets. i think history tells us that locations that are important for certain businesses -- financial or other things -- are hard to dislodge. difficult to dislodge because there is a buildup of expertise and customs and understanding. there is also typically a law that follows that and all of

these things matter a great deal. when we look back on this 5-10 years from now, because we have a medium-term perspective on this, london will transform more and more. the bonds as one of those kinds of things. and perhaps slightly less of the european center. we will see the european expertise in that. francine: thank you very much, that is larry hatheway. stay with us. .oming up is leslie vinjamuri she has a focus on trump in the u.s. and google talk about reflation and economic policies and deregulation. this is bloomberg. ♪

tom: what do you need to know now. one of the back stories in washington. yesterday, the senate committees

on russia and the president spoke up. from the a light away house discussion and brought it to the senate. it will be interesting to follow through the week. head of theis the committee. a subtle discussion and we will go to kevin cirilli on this later here on "bloomberg surveillance." here is taylor riggs. taylor: trump's resort in florida will be decidedly first meeting with china's president. china's official news agency says the two leaders will meet next week. it will be the first meeting since trump took office. the president has been critical of china over trade and military expansion but the tensions that eased since trump agreed to honor the one china policy concerning taiwan. the trump administration is willing to sell f-15 fighters

without the human rights demanded by president obama. $2.7 million on the planes but congress has to approve. in south korea, the ousted president was questioned by a court that will decide if she should be arrested over corruption allegations. prosecutors accuse her of colluding with a friend who took a bribe and committed other crimes. the court is expected to decide by tomorrow whether they will approve her arrest. and the city of paris is boycotting the world's largest cement maker because they are willing to work on president trump's wall along the mexican border. they are stopping working with them as long as the companies won't respect the standards. the company says they have responded to a u.s. government website notice about the wall but it doesn't necessarily mean they will provide cement for it. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. i am taylor riggs. this is bloomberg.

francine: thank you so much. it is interesting with what taylor was talking about. part of that has to do with the fact that they may or may not play a part in building the wall . and i weather well it will actually hurt the french political class if they realize they aren't agonizing donald trump. tom: it is just part of the story today. vinjamuri is here with us now. it is an odd day. it is almost like a midday in the first hundred days of president. math changed in the white house? do you sense a change of subtlety year or is it business as normal? absolutely right.

friday seems like a very long time ago. that was a significant defeat on health care and there are even talks now that they may return , in part to pave the way for the beginning of the debate about tax reform. is there a recalibration or recalculation? there must be. there is a question about how shaky legislative agenda and how to see progress. we cannot underestimate what happened on friday but the last few days have been problematic. tom: i want to reintroduce a chart from eight years ago. i haven't done this chart in eight years. this is tax receipts as a of gdp. what is important here is with the obama tax legislation, we are up for the high on federal tax receipts going in history. the band here that we

had. it was basically low taxes, high taxes, the tax reform act of 1986 with the yellow circle and we are here right now but elevated. are they actually going to move total taxes? are trying to -- the big push is to cut taxes but what is interesting now is that the amount and the proposal it will bek like significant. it could be as high as 25% by the time we get any real agreement. is thatsetback here health care reform is a essential to keeping the budget balanced. this is no longer on the table. there are big debates about the question of a border tax. it isn't obvious that tax cuts will come down dramatically below what other presidents have wanted in the past.

francine: if they're not able to push to the economic policies to get the tax cuts, is there a danger that he reverts back to protectionism? larry: the danger is there. the markets will welcome the progrowth policies of a trump administration in which tax reform was one of them. was the third.es with all of those things , we could go back to forms of protectionism. it could be politics or it could beat at plan a was to reduce the amount of outlays around the health care and use those to fund tax reform -- we may have to go back to border taxes adjusted now at it would be bad for the markets. francine: you think we are going leslie: back towards the tax adjustments? leslie:there is a debate in the white house about this. supportive ofbeen

this. and they have to deliver on the commitment of more jobs. it is unclear now how that will happen. the president has faced a series of losses through the campaign. we are approaching the end of the first 100 days and he wants to be able to wave a flag and there wasn't a lot to point two right now. there is a bit of grabbing at straws. tom: no one on the london death remembers the tax reform of eons ago. leslie, help me here with the idea -- i have a clear understanding of what president reagan believed in on taxes. i don't have a clue what president trump's tax belief is eco-theology is.

do you? leslie: i don't look at trump as a theologian. he is pragmatic. he wants to succeed. he has proposed tax cuts but i don't think he is ideologically committed. he wants to deliver jobs and be able to claim that he has reformed an economy that frankly hasn't been in the bad state he has said it is. passldn't compare him to leaders who had a strong ideological base because that is not the kind of person he has been. francine: does he have the support of congress? saying he can't actually get health care is- different than anything else he is trying to do. larry: it is hard to tell. republicans have been out of .ower it has been difficult in the first days of the administration

and the new congress. but what you find on capitol hill is a divided republican party. conservatives,l who fiscal conservatives, prize fiscal consolidation and it can come at the extent of giving up tax cuts. so given that democrats are generally unwilling to support these initiatives for understandable reasons, it is proving to be difficult on the hill. francine: thank you. us. will stay with leslie vinjamuri and larry hatheway. coming up with us -- look for our interview at 6:30 a.m. in new york. this is bloomberg. ♪

tom: it will be a visit of subtlety and complexity. , rexecretary of state tillerson, is in turkey to put inland, 4e on that, million people vicious 13 million people to the west in his stumble. there is an entire politics here. a complexity within ankara. we will look for secretary show the flag in turkey here in a bit. good morning and welcome to "bloomberg surveillance." i am alone in new york but a busy morning on the desk in london with francine lacqua. and us is leslie vinjamuri

larry hatheway. let me go to you on your beliefs of a.m.. we will do e.m. investment in a bit. is turkey and emerging market? larry: it is. is facing enormous challenges. regional conflicts, not just to the south in syria and in neighboring environments. there is obviously been tensions with foes and friends in europe and russia. so lots of political complexities for turkey to deal with as a market participant. from that, when it gets back to the economy, the challenges that while it has grown rapidly over a decade, they have to balance a large external deficit with fundamental weakness in the currencies. they have to carry the moniker of in emerging markets but it is large and prosperous and growing

and it is an interesting opportunity. tom: i like the way you put it that. maybe it is an aristocracy. the meeting there with rex tillerson is in the presidential 1001 at 250 rooms is one count. help me here with the royalty of turkey? if the president royalty or becoming more aristocratic? leslie: he certainly isn't rolling as a democrat. this is a tricky visit for rex tillerson because we know one of donald trump's key pledges has been to take a hard line on radical islamic terrorism. the fight against isis is crucial and one of the ways to is by working with kurdish groups to fight the battle on the ground and turkey has been equally opposed so it will be the key issue for this visit. difficult toy

manage. it is a very tricky game. -- turkish leaders do not are not likely to be happy with the way things are going in america's campaign against isis. so it is a very important visit for rex tillerson. francine: what balance does he have to strike? leslie: he has to keep turkey on board as an important region. this campaign against isis is absolutely central. and it is intensifying now and to be successful on the ground -- and america doesn't want to commit its own people on the ground. they have to work with the local partners and that is the kurds. so it is an important balance between extending a hand to develop this partnership but also turkey on the outside. not an easy balance at all. francine: do markets trade on the back of things like this?

we don't have a support rex tillerson has from the president. my large come i would say as long as there is the sense of medium-term stability, the market will focus on underlying economics and fundamentals as they make their decision. the reverberations back to the u.s. matter to some extent but right now, those sorts of complexities which are undoubtedly there are second order for the markets when they think about politics with issues in europe around the upcoming french elections, that is one other thing that is higher on the priority list at the moment. tom: help me year with the communication strategy. you have a wonderful distance from washington and the beltway madness.ltway his rex tillerson taking us back to another time of relationships with the state?

roosevelt butdy you could go back to world war ii. is he taking it back to normal or is this a new and distorted media relationship with our secretary of state? he is certainly keeping with the media at arms length and is in traveling with them. we have to wait and see. we don't know if this is a new secretary of state. coming from a very different background, not the government sector who is used to working with the media and we don't know whether this will change and develop or whether this is just a new approach. it isn't one that is healthy. -- theit is important media becomes an important way of communicating things that are going on. if you don't use your own media then you are relying on the international media to communicate your message. so i suspect this will change slowly over time but it is a very new role.

aside, you saw exxon mobil was out in front for climate change, that was jarring, for the least. the western with till of turkey. when everything is said and done, just turkey still look to the west? is this silly kernel that could be modified, moving forward? leslie: turkey has been difficult since he attempted coup. beforeend was in process and it has taken a deep step back in terms of the secular power in the middle east. we look to the record on human rights and it is not good. is not aof course this concern of the current u.s. administration. nonetheless, the position geopolitically is important and it can't be underestimated so it will continue to be an important partner and player in the middle

east but it is a difficult time in regional politics. francine: leslie, thank you so much. we will be back with larry hatheway. talking about the political risk we may see in europe. don't forget that you can watch is using tv . we have breaking news, charts and you can question our guests. larry hatheway is staying with us. you can talk about markets or treasuries. we ask in the mac -- we ask him the questions. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." expand ins looking to dublin in the wake of the brexit vote according to people familiar with the matter. fair in talks to buying an office building that would have enough space for more than 1000 workers. jpmorgan says other options are on the table and no decision has remade. bank of america is shaking up leadership at the merrill lynch leadership.

they have cut a number of divisions from 10 to six. at least for deputies are leaving or they will take new positions. the shakeup is aimed at making it more efficient. that is your bloomberg business flash. francine: thank you. is lookinganagement at china. larry hatheway says growth fears have not been at the investors forefront for a year and they have been overlooked. let's get to back to larry hatheway. what should be really -- what should we be most worried about? they do about debt but seem to be on top of everything. larry: we are concerned about too much credit growth fueling too much fixed asset investments. an age-old story. over the next couple of months, the concern is that credit growth is beginning to decelerate.

turningnd derivative is down. statistically, that predates a slowdown in the economy and markets have reached these elevated levels over the last 6-9 months on the belief that global growth was improving. true in europe and the united states, but a big chunk of it was receiving fears about china which have been so prevalent this time. so if we get into the summer months and we begin to see that relationship reassert itself, i do think markets will struggle again. do you look for in terms of pressure points? your earnings -- earnings were well below expectations? larry: yes, and one would imagine that earnings themselves are more of a lagging indicator. they represent where we have been and not where we are headed. management guidance is a better indicator of where things are going. but i do think we need to turn

back to the idea of credit. credit is central to the idea of china. watching the credit numbers is important. there are certainly deceleration in the credit rose and that is the thing we are watching for. tom: help me year with the second derivative. oft is the second derivative the soft data versus hard data? do i really want to construct my belief on soft data? larry: i wouldn't necessarily say it is a soft data story. the link here is the real driver of chinese growth. the buildings and roads and infrastructure which is a big part of the chinese domestic growth story. that is funded by bank borrowing and by credit. so the rate of growth of credit itself is important. and what is really important is thinking about the inflection points. markets trade mostly off the

inflection points. whether that rate of growth of credit is accelerating or decelerating. we now seem to have reached a turning point where it is decelerating and that is the second derivative i am talking about. tom: larry hatheway, thank you so much. discussion.eresting again, rex tillerson will be in ankara and we are following that. and we are following in the united kingdom, mr. davis is speaking in the next hour so there is a lot going on in europe this morning. let me do a data check. pull it up there. equities, bonds, currencies churning the market that we see the curve flattening here. help me here was what you are trying to observe with brings it today? francine: we have the white paper. all of thes is things that can be translated. that really the lawyers

benefit from brexit so far. they're looking at the tone of the discussions. weterday, they said that don't start talking about trade before we actually divorce. theresa mayely puts in a position. tom: what an extraordinary day yesterday. coverage at the house of commons yesterday. atk for simon kennedy's work the bloomberg. stay with us. and other hour of "bloomberg surveillance." this is bloomberg. ♪

>> it's a great repeal after the prime minister's historic of a britishetails

exit. europe says thank you and good-bye. most unloved bull market. in this hour, michael holland on cash. use of index funds. and if you build it, they will bid. trump wall advances. i believe mexico is not picking up the tab. everyone, this is "bloomberg surveillance" live from new york. they may build the wall. >> so they had come under fire paris, tom, of because they said that it was willing to supply some of the build that wall. so very french, isn't it? > no, but come on, this is where you're going. you got to put concrete to and barbed wire and up you go. somebody's got to build this thing. this is going to be a huge deal at and symbolic

the minimum. let's get the news out of the way. talk about.to >> then let's go back to the wall. riggs.e's taylor politics, a ith chinese spokesman said a summit will take place at president trump's florida resort. earlier this month the white ouse said the purpose of the meeting would be to defuse tensions over north korea. u.s., another set back for president trump's revised travel ban. federal judge in hawaii has extended the stay. the white uled that house revision failed to make changes to violating the on religion s ban bias. his ruling could stay in effect overturns her court it. boston fed president eric the president needs to raise interest rates aur times in order to prevent

hot economy. >> four in one year would be much less than what we did at that we were d coming out of a recession. and at that time we were raising meeting, so it's twice as fast. so relative to that, this is more gradual. likely gren said it is to hit the fed's goals by the end of the year. prime pe, british minist theresa may -- that ran into opposition from the parliament. italy's finance minister tells bloomberg that brexit talks be easy. >> difficult conversations. let's not under estimate the views and oints of the fact that europe would easy stancee not an in negotiations. also sometime will have to be any transition measures which will be needed to toow for the new arraignment

work. otherwise there is destruction of markets which cannot be under estimated. >> the european commission president said the uk has made a regret one day. global news 24 hours a day 2600 journalists and analysts in 120 countries. riggs.lor this is bloomberg. >> thank you very much. here with elp me italy. we're france france france. give me an update on italy. it together?ing >> for the moment. there's quite a lot of concern markets.usness in the when you speak to market participants, once the french away, they are still worried about the banks. they're worried about the system.al when you look at pop hreufpl, euro tar movement, very skeptic. definitely leading in the polls. interesting to see. somehow i think we'll refocus on this after may 7th, to say the least.

let's refocus on the daily check. yield curve, the features negative 2. still 110, call it 111. really a lot of curve here last two days. >> so, i know what you mean. euro dropping a touch. there's a little bit of bond because of thepe established ecb. investors are trying to figure if the ecb means sticks to its looser monetary policy. gold falling. show a bloomberg chart. i want to get to yours. mine. is smarter than mine is conference expectation. all you need to know is i went cash down here and right here is where michael holland loaded equities.n up we go to two standard deviations.

here's the aggression. you can see the extraordinary lbj back to the late '60s of this optimism in america. francine.eries, >> yeah, tom. basically looking at the spread five and between the 30 year, that's the white line, he spread, then blue is the treasury five/30 year spread. divergence. the central bank policy. > one of the things we've seen in the last 24 hours is r. ackman apologizing for an investment that went bad. whatever you think of bill question of s a lack of diversification. preached worse diversification for years. michael holland joins us. in a bull market.

let me get right to it, have you sold anything or are you still belief of this market? >> i haven't been selling anything, tom. i have cash. always the diversification you just referred to for all of us survivors of all these markets over the years. a time to have cash at like this when things are bumping up against their highs once again around the world. had a great run in china. europe looks inexpensive to the u.s. lot of things are okay. it's time to have catch. ackman is a pro. it's been painful to see the onsequences of a lack of diversification. part of the calculus here is a digit world, single digit revenue. somehow it becomes high single double digit eb whatever.sh flow can it continue? can we still see great effect down the income statement?

well, i think without revenue growth which, by the way, i get ve we're starting to over the last quarter or two, and may be starting a trend, possible. i think it would be time to go we he cashier's window if don't get the revenue growth. i think we are getting it. five e first time in quarters, six quarters, we've begun to have earnings go up on s&p. we're about to get some numbers here over the next few days. maybe 10, sed to get 11% growth in earnings this 7% earnings. >> help the c class officers every morning for our morning brief. share buy backs. i doing a share buy back of dow 21,000? that doesn't sound like holland 101.ffet >> no. share buy backs, you like facts analysis.ke you know that the jury isn't out on share buy backs.

not very good. the problem for someone who is a ceo is otherwise mindful of analysis. he's buying stuff back because he doesn't have a lot more to do cash.is cash or her >> come on. raise the ld say dividend. >> that would be a wonderful saying i have re already done that. and my stock is cheap. paradigm. you don't like it? francine. >> i was going to talk about mine.es and coal because we missed '08 is people weren't looking for a specific the market. i don't know if it comes from stocks or elsewhere. that you data points would be watching out for to indicate a possible strong ownturn and huge correction in stocks? >> you know, i have never been canary with the respect to when it's time for

correction. it's something always out -- field would be the reason for the downturn. ometimes the downturn just starts because the downturn starts. that's why when you hear so often people have been in the for a long time, christine talked about no one can predict the downturn. true.really having said that, if you go into it and there's no particularly downturn, n for the if you just don't make a mistake 1987 was a great example.n 20, 25% scare. on your ok back at it charts, looks like nothing ever happened. but at the time, it felt like to an end.as coming it was a wonderful correction if you wanted to have cash and get invested. >> you're talking about the psychology of it all. >> absolutely. a lot in animal spirits. what does it take for a ceo to spirits but nimal

then to put cash in that investment you planned a few months ago? experiencing it right now. we're getting around the world. finished up our meetings with our chinese investors. u.k.,na and in europe and the numbers are getting better. orget about the sentiment surveys. people are doing things with their dollars and different currencies. things are getting better. the animal spirits are beginning to happen. acclaimed to the holland value track. if we look here at two stocks, i'm just picking it out, one is colgate, i need to brush my teeth. colgate has done pretty well up rather, apple is the moon shot. are you a growthy guy here? looking for value traps that aren't a value trap? > i think there are a lot of stocks that are inexpensive. ackman ked before about

and diversification. simply buy the best companies. viewers don't have to buy everything. of -- how about apple? >> apple. value with its chart? bring up the chart again. we have to do this. said this puppy's going to 200 out in a couple years. services, the i tune services cash flow alone is a small island nation. about apple talked years ago. i said it was stupid value. in terms of valuation. now it's okay valuation. inexpensive i think relative to a lot of other things that aren't quite so good. i think apple is a great example of the sort of things that are till available in this market reaching new highs. >> we're going to come back with michael holland. listen.must watch, must michael holland on the state of the buy side. chaos what 's total

we are seeing. francine mentioned -- taylor lynch there.rill right now let's look at a fed friday.ion on william dudley of the fed. two important interviews. that? you gonna get at bloomberg. stay with us.

>> this is bloomberg surveillance. bloomberg business splash. bill ackman apologized for losing $4 billion on his in valley pharmaceuticals. in his annual letter to ackman called the bet a huge mistake. e said he misjudged the drug maker's management and

aggressive strategy. fell.nt stocks it's hiring portfolio managers traders. foreigners own only 3% of bond.'s local currency that's your bloomberg business flash. francine, tom. thank you very much. we're a little more gossipy. interlude.pause and our chief washington correspondent, we're going to go gossip today.s of let's bring up the quote here tim o'brien g view who know morse about trump finances and the happy moment a decided nese investor not to pour billions into a by attan sky scraper owned the kushner clan. the timeline matters. is a distraction. what i want to know is where is

mr. bannon in the white house this morning? adviser.chief yesterday in the senate, the .s. senate intelligence committee led by richard burr as well as mark warner updated about their on going investigation into russia meddling into the u.s. election. said they will be interviewing jared kushner as well as others in the coming weeks. that means that this chatter and this gossip is going to continue for quite some time. obviously these are accusations. white house press secretary sean spicer has refuted. that said, they're facing on tions from republicans capitol hill. >> talk to me about the serious new health this care bill. are we really going to get a hel care bill next week? what will it look like? and will it be approved? >> i nut question to some senior ides just about whether or not we're going to get a vote next

week. they said there is no timeline this and no new update on this. that said, they also noted reportede scenes as we yesterday, that conversations continue. that they are continuing to republicans to talk about health care policies. look, i would be very surprised major piece of health care legislation that gets passed next week. >> thank you. i'm sure will be more festive on the washington front. michael holland with us, holland company. you've seen this so many times, the whole washington gossip and that. and all synthesize that? referred earlier to animal spirits. one of the things that has been into blowing up this recent market move is people and to potential changes in washington. ne of the reasons the health care thing didn't have an effect on the market lot of people

is because ould people feel that we're still moving in the right direction. you just spoke about the health care thing. visiting the tax reform thing. kind of tax abatement. people.ch of republican few democrats thrown in. they think that at the very east we'll get a corporate tax cut. if we get that, that's the low hanging fruit. we get personal, that's even better. >> i'm glad you bring this up. kudlow, great nce adviser years ago. here of where's tip o'neill? where's ronald reagan? photo i did, where's bob michael? i don't see those people that kudlow, young holland knew. >> exactly. jfk tax d about the cuts, which he had lots -- he democrats and republicans.

had all kinds of bipartisan civility.d this is a new world and let's adapt to it. e don't have any of those people you talked about so what can you get? low hanging fruit may simply be corporate tax cut that they can get that through. repatriation of the cash to appease the democrats. you chael, what happens if can't get that? is there a danger that the more stration turns protectionist or they think they can win it back? yeah, i think that's exactly the danger. f they don't get it, i think then the animal spirits are gonna start to get dampened a little bit. this, at the base of there are a number of articles on bloomberg talking about the for this stock market around the world, how the markets are reacting has a lot corporate profitability and the things getting a little bit better for companies around the world. so i think that overall, the

arkets will be once again they'll be helped by what's going on in the real world. would be harmed for sure by that. i think tax reform, even the algorithms, they would be unhappy with that. >> all right, thank you very holland of holland and company. asia's p on day break, president. 8:30 for that in new york, p.m. in hong kong. we'll talk brexit. this is bloomberg.

single best chart. gotta do it with michael. coupons.lipping clipping dividends. white wine of the s&p500 with reinvested. that amber line is the bloomberg barkley's lehman bond index. full faith in credit all in total return index. bonds.s stocks versus michael holland. it's an ageless discussion. stock stocks off the crisis, hasn't it? >> yes, as it should have been. you get people getting very epressed and a depressed securities price, you stand to make money. that's what's happened over the last ten years. is it like the '50s. is there an nifty50? mentioned apple with growth growing at 18%, 20%, 16%, whatever. an nifty fifty seal? >> not blue chips, but stocks.

there's no question we have some you fifty going on which always do in any market. you have a chance to lose a lot lot ney and you've made a of money if you've been in those. we don't have anything akin to that was the tpheufty fifty. there was a whole portion of the doing crummy, and a few companies doing well in the arket and extreme valuation, pedestrian companies selling at 50 times earning. >> pedestrian, that's a key word. companies out of the radar. the u believe your take on market that there will be more to help you launch pedestrian higher? >> definitely. the animal spirits francine referred to, there's no question it's beginning. ceo's will take advantage of that. look at all of the back and forth between bonds. what do you do with bonds? got institutional and family portfolios where they say coupon.hat steady

the solution of bringing in duration doesn't work. maturity, you don't get a coupon, right? >> yeah, but you don't have much coupon if you extend duration. >> how do you like bonds? >> i don't dislike them because any inflation right now. i don't like them. where i have to have bonds, i duration. i will continue to have short duration. the risk get paid for possibilities. if we do get inflation, you'll lose a ton of money. know if that's going to happen. duration, t in my too. his is great technology, michael holland. try it out.

>> bloomberg surveillance from london and new york. waiting the so brexit secretary here in the about this white

paper. now, the great repeal, i know it it's just y, but translating into uk laws and replacing the white paper. the first draft of that will be presented to the house of commons today. good.ry i don't know what a white paper is. nbc tv series in the '60s. what's a white paper? >> a draft. a draft of something. basically, if i had two papers, white paper is literally like a manuscript. >> i got my newspaper here. >> yeah. different than white paper. get to the bloomberg review. here's taylor riggs. trump's resort in florida will be the site of his china's ting with president. the two leaders will meet there next week. the first meeting since president trump took office. the president has been sharply

over trade andna military expansion. but tensions have eased since to honor trump agreed the one china policy concerning taiwan. is the trump administration willing to sell 16 fighters to bahrain. according to people familiar with the proposal. $2.7 billiond spend on the planes. congress still has to approve. south korea, ousted president was questioned by a decide ich should whether she should be arrested over corruption allegations. accuse her from cluing with big businesses, taking bribes and committing other crimes. expected to decide by tomorrow whether to approve her arrest. day l news 24 hours a powered by 2600 journalists and analysts, more than 120 countries. i'm taylor riggs. tom, francine? taylor.s so much, jp morgan is in talks to buy a as the ffice building

company considers expanding after the uk's vote to leave the european union. according toficial people with knowledge of the matter. of so spoke with lloyds london chairman, an insurance company, john nelson, who the insurance decision to develop a post brexit brussels.in > it is very important for lloyd being the main insurance company in the world. agree re you would brussels is very much at the heart of the eu. uk oining me is bloomberg's finance team leader. also still with us in new york, michael holland. michael moore, run us through exactly who we know where move each and the advantages of city. >> right. so the insurers have kind of moved first. lloyds, you have aig. their presence. the banks we reported on some of

favoring one city over another. we haven't had many official announcements from the banks at point. it seems to be that their plan s to move a small cohort of people at first and then see how the negotiations play out and more they have to move. you're starting to see the plans like jp morgan in this case in talks to perhaps buy an office building. when i spoke re, to the chairman of lloyds of ondon, it was very clear that away from the things that entice workers, such as good family buildings, good food, it's actually the regulations that make the deal for a lot of big banks. >> yeah. you certainly have a lot of factors going in. there's some that are very important to the employees and are more important to the companies themselves. whether it's regulation, labor those have come into play in addition to the quality of life metrics.

big one?the is there one big one that will actually change the name of the everyone else? do we know they're committed to oving ahead or is it just precautionary? >> i think jp morgan will be an interesting one to watch because vocal before most the vote about moving a large number of people. jamie diamond talked about as many as 4,000. so that's the significant presence. the biggest investment bank, the biggest bank, they may help set some of the tone. >> michael, help me here. about know it's regulation and it's about staff members and insurance. do?'s the buy side gonna asset management is totally beleaguered right now like i million seen in a years. what's the buy side gonna do? or they gonna stay in london are they gonna move where it's cheaper? they've got ainly few options. it also depends on whether, you

restricted they are in marketing to e.u. clients. and, you know, how much of a presence they have to have there. hat will come through in the negotiations. but certainly to your point, some companies perhaps see this as an pportunity not just to move some people because of the rules, but also to move them to cost locations. your experience on buy side and managing money. we put up the photo of james diamond. would put up the photo of mary ertos. your world is beleaguered. you and i remember the -- not comfort of ut the the industry of sir john templeton, with all the at fidelity or the late phillip coret, who we worship. that was another kind of place. where's your business gonna be in five years?

erdoes this morning. >> mary erdoes will be doing talked about yesterday. they're much more artificial intelligence. computer. large cap investing of the type that you just talked about years ago is migrating dramatically. there's a parallel move. it goes with lower fees and lower expenses as michael moore talking. >> it's about performance. can asset management finally get month?nth or 36 can they get something that gets the job done? overall, no. that's the history. so steeped in facts and analysis. at the facts you say over a long period of time managers -- jack fogel was right. index.on't outperform the but there are a few who do. when you get those and put them do very well.you for the rest of it, you don't do so well.

michael, how do you make the distinction between the ones and don't do well? there's no special sauce. some people are simply better at than others. i have been in the business a long time, francine. can't tell you other than listening to the person and looking at the person's numbers time when they go together. there's a good chance they continue. not an t performance harbinger of thins to come. that's not right. usually is. so i think the history, plus the way the person talks about what or she does. >> michael moore help me here aberdeen and er of standard life. go out the door? >> there's certainly going to be some. i think it's about creating scale and it's about cost efficiency. i don't know exactly how many. certainly cost cutting is part

deal.at >> i look at this. it's about scale. that's bloomberg news michael for cost cuts, right? is that what that is, mike? he said.y what some people are gonna lose their jobs. patch here. a tough >> this is sad. you.ael moore, thank david and i are going to get a decent breakfast at the pier. moore, whatever you do, don't look at rachel worthspan's bracket. okay? it's an act of god. just avoid what the woman from urdue has done with her bracket. i have never seen it in my life. well. gorgeous as that's basketball for this week. coming up next, this is an important conversation. i'll be blunt. he is mr. trump's harshest, most vicious critic.

>> this is bloomberg surveillance from london. to brian klaas. we get him on to talk about trump trump, the administration. there's quite a lot to talk about. you look at the trump travel ban blocked for as long as the court battle goes on. you have the wall with mexico. with the book n does the e written retrenching in foreign policy. is that really the case? what does it mean for who will the vacuum?

>> sure. at since k is looking 2006 the world has become less democratic. analogy i use is that the governments are like a referee. they're often bias. they don't penalize the right people. they sort of do the wrong thing sometimes. of accelerates the decline democracy. donald trump is either not watching the game at all, not attention, or he's actively praising and sort of on auding and cheering despots around the world. he has high praise for putin. things to say about the filipino despots. this is all a shift where china rising.ia are at the same time the west has of become a credible source criticizing the democratic regime. that's creating much more theterfeit democracy around world. >> are these friendships or alliances volatile? can a trump and -- can a trump and putin friendship turn very

quickly? >> it can, absolutely. this is the problem where you try to throw your lot in with a despot. you think we have the mirage of stability. that's the argument. i remember very clearly a map in 2010, political risk map of the middle east. libya, s in green were syria, jordan, tunisia and egypt. had an uprising months after that map was printed. you have this mirage of mirage that the u.s. often uses to guide its foreign policy. hen it breaks apart catastrophically not only are the political and moral all thences severe, but economic ones. >> brian, i want to congratulate you on your twitter feed. politics, youdy's have absolutely the smartest, twitter feed out there opposing the politics of washington. same nna ask you the question i asked kevin earlier. on what n update mr. trump needs to do about mr. bannon. there inou want to see

your criticism? >> well, i think they have a hands. call on their they hit 35% approval raeulting yesterday which is something presidents never hit. and the ones that have lasted about 900 days before they hit low. trump hit it in 68 days. should be a wakeup call that work. politics are not i think there's room for trump to become much more pallettable democrats. with the healthcare bill showed that he's going to have problems on far right. there are people that want to fix problems like the republican does. not the starting point in american democracy. it's not trump's fault. broken politics in washington for a long time. at some point you have to say even thinking about how to solve problems. we are thinking about how it on soerl media. trump could do himself a favor f he starts thinking about solving problems not politic. >> answer the question about the heology of tax reform and what

the president's belief is. take it broader, bigger like you do every day on twitter. help me here with the trump theology. is?you know what it >> well, i think there's gospel that tax reform sparks growth. been, for many studies, there's been a lot of questioning of that theology. tax cuts can spark growth if applied correctly. tax cutacross the board with gains to the wealthy has not proven to be that successful growth.king in the diagram of trumpism and republicanism orthodoxy, tax in the center ly of the diagram which is why there's a lot of energy in move toward that. it's one of the areas where an tax cut could d happen. harder.reform will be >> does he have the more or less together or not? with the healthcare bill, is come? sign of things to

>> i think it's a sign of things to come. the easy thing for republicans get behind is an across the board tax cut. thing to get behind is tax reform. that's going to be in for gridlock. the idea hel care was a difficult hurdle and tax reform is easy is a complete myth. totally wrong. it will be as contentious if not more contentious. >> what do you want to see from democrats? you mentioned maybe they ought to do some work with mr. trump. come on. pelosi and mr. schumer flat out don't agree with you. your prescription for the democrats to move forward, politics?mp >> well, as his approval ratings continue to fall, he will be pushed to search for compromise. he's already doing this. keep in mind he did burn the himself. he has treated some things. he called chuck shumer the head democratic party and then wants him to work with him. o i think he has some

apologizing to do. but once he does that and ealizes that his current approach is failing, he may be able to peel off some moderate democrats to work on things like infrastructure. they have different agreements on how it should be funded but be agree that it needs to rebuilt. that's where there's room for be broken andk to progress to be made. >> thank you, brian. a book aas just wrote that's coming out differently in the u.s. it's been out for a couple months in europe. coming up on friday, exclusive presidentfrom the fed of new york. this is bloomberg.

>> after if prime minister speech, little stronger dollar two day.last bonus round. report dxy twice in our this morning. yen is 111.13. that's my mistake there on the screen.

francine? tom, coming up bloomberg day break. a big guestyou have on. >> roger altman tpoupber an enior chairman of ever corp partners. two fold. on the one hand we want to know afbt the uk and olitical uncertainty under minds europe. the focus will turn to the u.s. you have a stalling trump agenda of the day. what does that do to ceo confidence? how positive will they be money back to work? to get that money coming in what is that doing? it will be a fast hitting conversation. help me here. would you please talk to r. altman about pirates, red sox opening day? >> tom, you're killing me. that's baseball, right? baseball, right. thank you. >> you got it. >> pirates/red sox.

altman about our beloved red sox. francine? we're talking about the white paper. brexit of the negotiations. saidhief brexit negotiator security is far too important to start to bargain it against an economic agreement. brian klaas, h uthor of the despots accomplice. you look at brexit. what was the tone like? theresa may struck the right tone in the sense that she was trying to create leverage. but also to be respectful going into negotiations. this will be a big challenge for negotiators. they need to realize they have very few cards in hair hands cards.e trump europe has a lot more. so i think it's going to be deal ult to hammer out a given that europe's politicians have staked their political europe.on the future of

they're not going to sacrifice that to give britain the better deal. take an economic hit if it comes to that. >> an economic hit that could country to recession or actually will we look through and say it wasrs just a blip? >> it will be a difficult thing, the thing politicians will exploit. it's going to be very hard in ten years time to say if brexit the world will look like this. the ripple effects will last a long time. time toalso take a long develop. politicians on both sides will cast blame. here will be people saying if we voted to remain, britain year.be growing 4%, 5% a there will be some people who say because we voted to leave, maybe a epid growth or recession. >> help me. congratulations on the book. bibliographyfor the alone. help me here with the swamp

known as europe. everybody's talking about the swamp in washington. swamp in out the europe from your view at lsc. >> lot of people view this deficit in brussels very negatively particularly in the uk. t's an argument that's been made about why you need to take back sovereignty from brussels. one of the problems with this is there's very few people who can pinpoint regulations that they specifically oppose in europe. as theresa may.ed out, to trade in the single market those e to abide by regulations. the absolutely true that brussels needs to do a better process by g the hich eu legislation is produced. to be a trade partner with europe you have to play by their rules. of thought is winning right now in europe? if you go to the french go back to the revolution of 1830, 1848. baggage all that forward to 2017. strain of dominant

thought of democracy right now in europe? a lot of people are coming back. they're questioning democracy. like brexit has caused people to question democracy. resolving em are around the idea that winston churchill said many years ago democracy is the worst form of government except for all the other forms that have been tried. system, but one that produces the best outcome. authoritarian rule is not better. >> does that change? we jumping at shadows, talking about this right to pop hreufpl. the donald trump presidency, people unhappy. you can say watch it. >> i think the problem is this idea of gaining currency. simply build walls and shut the world out and the problems go away.

engagement, the idea of putting your own country irst in global affairs is counter productive. s the also one that has a very strong vein in the democratic process. upset at the outcomes democracy has produced, particularly in terms of gains europeans and ss americans. so i think the real solution that needs to be talked about in united states, is how do you keep the democratic system? gains tually make sure accrue to people who are feeling left out and hurt by the sharp edges of globalization. brian, congratulations. despot accomplice. say enough about it. this is bloomberg.

>> world of finance prepares for

brexit london. talks.gan in president william suggests market of what's going to happen dc. and protectionist bids do not materialize. em outperforms. twice that of developing stocked. from new york city, good morning. welcome to bloomberg day break. up for the u set market day. here in the united states, just little bit softer. negative two points. the euro back for a third straight day. germany. in we retrace some of the moves we've seen over the last couple months. alex? >> you are seeing buying coming in as well. have a member saying euro monetary policy. dollar yen well off