francine: all about the job is markets 08. friday's payrolls report. the u.s. crackdown on a visa program. meanwhile, could slumps on vehicle sales put the brakes on trump's plans for american car factories? cut to junk. south africa loses its credit rating for the first time in 17 years. measurements on president zuma. and trade on tour. theresa may leads a global brexit roadshow. slams her mp's

assertion that no deal is better than a bad deal. i am nejra cehic in london. good morning. let's get your markets first. we are looking at the stoxx 600. we saw a close lower after initial games, fairly steady now. see the carmakers really underperforming, down 1.3%. the asiant happen in session. it is feeding through from the u.s. car data we got from the u.s. yesterday. the car sales coming in, disappointing that data. we are seeing it read through to the european equity session. in terms of dollar and yen, we are seeing a weaker dollar. ae yen strengthening for third day. i wanted to show you the 10 year yield on the german bund. went down one basis point, 0.26%. we saw a lot of demand go into u.k. and german debt yesterday. the 10 year treasury yield is fairly steady. we saw it hit its lowest since february yesterday.

the 10-year gilts yield reached its lowest since october. a lot of demand for the safest assets among safe havens that are bonds. if get to the bloomberg first word news. here sebastian salek. russian investigators suspect an islamist immigrant from kurdistan detonated the bomb in st. petersburg yesterday. that is according to the interfax news agency. the explosion in the russian metro killed at least 11 people and isn't -- injured dozens more. it happened during a visit by president putin. authorities found and discharged a larger bomb at another statement -- station. the rain has weakened again after s&p downgraded the country to junk for the first time in 17 years. it cut the rating, with a negative outlook, following president jacob zuma's cabinet purge. continuity is at risk after president zuma sacked finance himster gordhan, replacing

with someone with no financial or business experience. senate democrats have set the stage for confrontation, assembly enough votes to block president trump's supreme court nominee. republicans advanced george gorsuch in the judiciary committee, clearing his weight on the senate floor. mitch mcconnell has said gorsuch will be confirmed one way or another this week. australia has kept its cash rates at a record low, 1.5%. policyision continues paralysis as the housing market is too hot to allow for easing, and the economy lacks the strength to endure tightening. the u.k. trade secretary said asia-pacific has become the most important region, in terms of the global economy. the comment was on the visit to the philippines to talk trade and investment. he is looking for opportunities for british businesses outside

of the european union as the country prepares to leave the bloc. center -- where the center of the gravity of the global economy has moved to. there are opportunities here in terms of exports, but also of investment moving in both directions. we are looking to see how we can expand u.k. exports, which are, at the moment, too low. we have to get those exports going up. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i've sebastian salek. nejra: u.s. jobs are the center of attention again today, as we await nonfarm payrolls data on friday. the immigration services department has announced a crackdown on companies bringing foreign technology workers to america, using the h-1b visa process. the new measures are aimed at combating fraud and abuse in the

program. boostent trump's plan to jobs in the united states might have hit a snag after auto sales came up short last month. heavy incentives failed to stem plunging demand for sedans and compact. were cast out on expectations sales would bounceback following declines. in the head of equity strategist at j.p. morgan, and richard jeffrey, chief economist at cazenove capital management. is, wet big question have heard a lot from donald trump about the importance of jobs in the u.s., and the importance of trade and rebalancing the trade deficit to bring more jobs back to the u.s. is there any sort of sign there might be cracked in that logic? >> it is an interesting picture. you have the cyclical recovery in employment and secular

issues. so far as the cyclical issues are concerned, this cycle has seen massive job creation and much better job creation than anybody expected at the start of the cycle. the jobs data now is going to get more difficult to interpret. let's see what happens on friday. but if we have a disappointing set of jobs data on friday, you will immediately jump on those numbers and say, disappointing numbers. that means the economy is slow. what it might not. it might mean as the economy gets toward full employment, it is harder to get people out of unemployment into jobs. there is the difficulty in interpretation. i think president trump is looking at the longer-term and is saying we want a greater proportion of our population in employment in the longer-term, and we have to focus on that. those are cyclic or issues, not cyclical issues. nejra: one more thing, richard.

there is a big discussion whether we should look at the u.s., soft data in the and what each side of that coin is telling us. is it that we have to look somewhere in between? what are you focusing on most, apart from jobs data? think you have to look at all the data and tried to synthesize that and come up with an overall view. we see so much noise in economic and financial data. we tend to over interpret individual data readings, and that is a dangerous thing to do. the markets are responsible to that sort of information. what i think you have to take a step back and say, does it look to us as if the economy is gaining momentum, losing momentum? at the moment, i think most of the data is suggesting the economy is genuinely gaining momentum. this is not as exciting a cycle as prior to the stock market prices and recessions. it is not that type of cycle, that it is gradually gaining momentum. nejra: i have a chart here i pulled, and what it is showing

is that the correlation with the s&p 500 over the last time in clear, andeen very auto sales have seemed to lead equities. but now we are seeing that correlation breaking down somewhat, with car sales slumping to the lowest level in two years, the s&p 500 still holding just below its record high. is this any kind of signal to you? >> i am delighted richard has just made the point about single data points, because i think this is a good example. if we look at the broader picture for the u.s. consumer, as richard says, the unemployment picture is looking healthy, getting close to full employment. consumer confidence is holding up well. at the moment, within most other economies, you have a negative real rates and the cost of borrowing is extremely low. those are not circumstances in which you would expect a major downturn to develop. nejra: looking into european equities as well, if we were to see any kind of pullback in u.s.

equities, for whatever reason, how would that translate into what is happening in european equities? would it mean more flows into europe, as we saw last week? or would it mean the general risk off would have a downward impact? stephen: it would depend entirely on the catalyst in european equities. the issue in europe is that the economy is generally recovering. profits are starting to recover. that there is still political risk around. there is every reason people are circumspect in asset allocations toward europe. if you look at a price to book basis, you look for european profits to recover. a better long-term story in europe. nejra: i want to ask you about productivity. we had comments from christine lagarde, the head of the imf, overnight, saying governments need to set their signals an economic policy and it is about productivity. you have been playing the strong for a while. richard: productivity is crucial

to profits growth. it is crucial to the amount people are paid, whether they see real pay increases. the conundrum central banks are faced with is, why, when we have excessively easy monetary policy, aren't companies taking advantage of that and embarking on long-term productivity and capital investment programs? there is an answer to that. that is that they do not have to. with very low interest rates, central banks have taken the challenge out of the system and companies have become more with theirdividends surplus cash, rather than using that for capital investment. that is why we have interest rates and bond yields that are too low. were they hire, companies would have to think about how they grow profits in real times. it is a policy issue, but it is not one the central banks think. interesting. stephen and richard stay with us. for now, let's get to the bloomberg business flash. here is sebastian salek.

seb: shares lower after asos said discounting and a week pound are weighing on profitability. its reseller margins contracted by 40 basis points, to 47%. the u.k. company said price cuts overseas remain the reason for the decline. tesla is now a more valuable company known for. share soared yesterday after worldwidereported shipments of 20,000 vehicles in the first quarter, exceeding analyst estimates. musk poked fun at those hitting against his company, tweeting "stormy weather in shortville." in china, capitalizing on a famous investor. warren buffett will appear on cherry coke following the launch in china last month. berkshire hathaway company owns 9.3% of coca-cola, worth about $17 billion. buffett is a heavy user. he says he drinks five cans day. that is the bloomberg business

flash. nejra: thanks so much. south africa has lost its investment grade rating from s&p for the first time in 17 years. the agency cut the country to junk following a cabinet purge by president jacob zuma that sparked increasing calls for him to resign. let's speak to peter, head of emerging economics at numerous international. to speak -- great just the two you for the second time this week. i am sure you are not surprised by the latest development, but is there anything catch you off guard at all? peter: interesting was the rating remained on negative watch. the downgrade came because of the treasury, as much because of the removal of the previous minister as the new minister. the negative rating reflects concerns that further policy change will dramatically shift the path or damage the growth outlook. he may see them move again, particularly on the local rating, in june.

news from moody's, then putting the rating on review for a downgrade. that could come as early as friday, depending how much time they need. , isissue for the market is really focusing on if zuma is removed or not. i think the market is too optimistic. nejra: how likely do you think that zuma will be removed? and how will the market react to that is to mark with a see it positively, because he has been removed and they did not have as much faith in him, especially around what happened with gordhan, or will they see it negatively because there will be so much uncertainty and so many changes? peter: the market would see a positive if he is removed. that misreads what zuma is responsible for in the economy. , labor laws were put in place. ,hat was 15 years or so damaging the structural capacity of the economy.

delay is responsible for regulatory uncertainty at the moment. but there are bigger issues going on that are not particularly zuma's fault. who pessimistic on anybody comes after him being able to turn it around. when moving is incredibly difficult. he has a majority in the anc, and ultimately this comes down to a call. do you believe zuma is a master political tactician who can play the anc at its own game? i think the answer is yes. nejra: this interested me. the national treasury responded said, cuts to junk and reducing reliance on foreign savings to fund investment, and relying less on debt to finance public expenditure, will secure south africa's sovereignty and economic independence. what is your response? iser: the press release slightly odd, to be honest. if we look at the projections, we were on an upward path in the amount of debt issuance going forward. they have been continually

revising up the amount of long-term debt. the statement did not chime even an puthe budget that gordh out in february. there is going to be a revenue shock as a result of low growth and sentiment from this reshuffle, which will ultimately mean that more debt will be required. i think raising further revenue is going to be quite hard. nejra: we have not yet heard from fitch, as far as i'm aware. you are expecting multiple downgrades. do you think all of them will downgrade to junk? peter: i think fitch will go to junk this week. nejra: it is a little above the others. peter: they are a notch above. but they will react around these institute -- these issues of quality. governance and management. that is what it is about. it makes it hard for the new minister. do not judge the new minister to much yet, but it is hard to do anything here. it is down to trust. and is the reason we implied for the removal of the previous minister. nejra: i have a chart going back

one year, the dollar bond. the s&p downgrade affects foreign-currency debt for local currency bonds, still one level above junk. last week, we saw net inflows into south african from particularly foreigners, despite everything going on. does this all come back to that you think investors are slightly under assessing, not reassessing properly? peter: exactly. i think it probably was some that buying going on, quite concentrated. i think people sort of saw this ps" opportunity, not a need for structural reassessment. the interesting thing about this graft and about the dollar-rand, further, 22015,

when a scandal happened, you do not see a meaningful shock, if you look at that as a politician. you are not around the levels we were at the scandal. that is the markets not understanding it. politicians look at markets. the signal the market is sending his, we are worried, but we are not freaking out about a reshuffle. i think that is part of zuma's playbook. how concerned are you about south african brakes and the feedthrough to the rest of the economy and the general political crisis? the political crisis is not going to be a financial stability crisis. banks remain well-capitalized. their funding costs will go up. into the economy is going to be lower growth sentiment, weaker consumer. we are not talking about based on -- a sudden stop balance of payments. south africa still has heavy capital controls on locals,

which prevents mass outflows from occurring. it means investors who have too much offshore already have to bring it back on shore. protection.grees of we are talking about a level repricing in risk. nejra: the head of emerging economics at nomura international. falling, the land falling-- rand falling. trade on to her. theresa may leads a global brexit roadshow. mp's slam her assertion that no deal is better than a bad deal. ♪

u.k. trade secretary says asia-pacific has become the most important region in terms of the level economy. made the comments on a visit to the philippines to talk trade and investments. liam: asia-pacific is where the center of gravity of the global economy has moved to. there are enormous opportunities here, in terms of exports but also of investment moving in both directions. we are looking to see how we can expand u.k. exports, which are, at the moment, too low. we have to get those exports going up in both goods and services. nejra: elsewhere, u.k. chancellor philip hammond and bank of england governor mark

carney are visiting india as part of a push to build trading relationships in preparation for brexit. theresa may is in the middle east. she will be in saudi arabia later, extolling the importance of trade and security ties with the kingdom, britain's biggest trading partner in the region. her trip has been strongly criticized by the opposition leader, jeremy corbyn, on account of saudi's human rights record. under pressure to publish a thorough assessment of the consequences of britain walking away from the european union without a deal. house of commons brexit committee says her assertion that no deal is better than a bad deal is unsubstantiated, and failure to reach an agreement would damage both the u k and e u. still with us are the head of european equity strategy at j.p. morgan asset management, and the chief economist at capital capital management. nove capital management.

how likely is no deal? richard: i do not think we know the answer to either of those questions, and that is a problem with a lot of the comment coming at the moment. we are in the area of the unknown. i think what is vital in this , whenar interim period people say it is uncertainty, businesses start planning for the future. we know at some stage we will not have easy access to european markets, as we have had in the past. when we joined the european union, way back in the early 1970's, it accounted for about a third of the world economy. it is now about 15% of the world economy. the challenge to businesses is to focus on the 85% of the world that is not the e.u. that is where new markets will lie. i think these initiatives are a good thing. they will come through positively. the question is, with what speed? it is unknown. nejra: indeed.

and when you are dealing with an unknown situation like this, what have you been assessing in terms of flows and equity markets? have you seen any sort of versussment of the u.k. europe? a weaker sterling is good for the ftse 100. we all know that. anything below the surface we should pay attention to? stephen: it is adjusted for currency. you can make out the struggle relative to the rest of the world. that is an entirely rational reaction by the market. we have not seen the kind of take the house. the selloff in the aftermath of the referendum, stock prices have recovered. valuations look fairly attractive. balance sheets are robust. if you look slightly further out, it is obvious that the exchange rate is going to be the pressure valve of the whole situation. negotiations are perceived to be going badly.

but a lot of that, to my mind, has already been priced. moment, we have something of a trading bounce in sterling, without things going badly wrong. there is a chance in the short term for sterling to improve. nejra: very quickly, what about gilt yields? we have seen yields fall quite a bit, down one basis point. or down? stephen: i think gilt yields ought to go up. they are not safe, because they are losing money in real terms. nejra: our guests stay with us. up next, we talked france. ♪ .

♪ nejra: you are watching bloomberg "surveillance.". london.ra cehic in >> the death toll from

yesterday's bombing estate petersburg has risen to 14. dozens more injured in the attack on the metro system. amid reports investors suspect a radical islamist detonated the bomb which happened during a visit from president putin. a larger bomb was found. as in the global ratings downgraded the country as junk for the first time in seven years with cap before currency rate with a negative out the following president zuma's cabinet purge after he sacked the finance minister. in the u.s., new immigration rules making it harder for companies to take foreign tech workers using a visa process. and memo, the citizenship immigration services agency said the new majors are aimed at combating fraud and abuse.

senate democrats have set the stage for confrontation, simin enough votes to block president trump's supreme court nominee as republicans advance the judges nomination in the judiciary committee. the majority leader has said neil gorsuch will be confirmed one way or another this week. the u.k. tray secretary says asia-pacific has been the most important region in terms of the global economy. he made the comments on a visit to the philippines to talk trade and investment, looking for opportunities for british businesses outside the european union as the country prepares to leave the block. >> asia-pacific is square the center of gravity where the global economy has moved to. there are enormous opportunities in both exports, and also an investment moving in both directions. we are looking to see how we can expand u.k. exports, which are at the moment to low.

we have to get to the exports going out in goods and services. >> global news 24 hours a day, powered by more than 2600 journalist and analysts in more than 120 countries. this is bloomberg. nejra: thank you. we got some u.k. construction data. the pmi reading falling to 52.2 from 52.5 which is a miss on the estimate, expecting a number of 52.5 for the construction pmi. this comes after the manufacturing pmi yesterday also falling short of estimates. sterling down for tense of 1%. 124.39. the first round of the french presidential election less than three weeks away, all 11 candidates will take part in a second televised debate this weekend and investors hedging political risk, sending the yield difference between french and german two-year bonds to its

widest level since 2012. still with us are stephen macklow smith from j.p. morgan asset management, and richard jefferies. , this start with you debate tonight, 11 candidates, another debate on april 20. we already know some candidates will not participate in that. is this a key thing to watch tonight? stephen: yes, most folks know when that make up their mind television -- televised debates, these are highly choreographed, they talk about prepared position as opposed to being forced to think. look at the general direction of opinion polls and the most important thing by far as to what's the number of undecideds. pole, get closer to the you have a much better feel on exactly the way in which they are heading. have the spread

widening in the past couple of days or so. what has brought this on? -- what has sparked is increased? richard: as we get closer to any event, the anxiety levels tend to rise, slightly. you take a step back. political noise is just as damaging to the methodology of interpreting events in markets, as economic noise, you have to be very careful not to pay too much attention to it. the other message from the political events last year, be careful to disassociate the political event from what goes on an underlying economies and financial markets. both of the political events have consequences for markets

and economies that were not foreseen at the time. in terms of u.k. referendum, exactly the opposite. you have to be careful about allowing your political views to dominate your good sense, in terms of markets and economics. nejra: what opportunities might there be in equity markets off the back of this election? this is all based on whether you think le pen will win and how you are pricing that. nejra: -- stephen: we should not underestimate a marine le pen questionsclose -- all within the about the integrity of eurozone and you could see a rerun of 2011 and 2012. the french debt over german debt . if you look at italian debt over the last week or so, that is expanded. by about 20 basis points. warrior the political

are influencing death worry is influencing-- it, youoes not make will see money sitting on the sidelines coming back in and that will coincide with these -- first-quarter earnings which it looked pretty good for europe. the second quarter could be a spicy quarter. tom: a great -- nejra: a great story on the bloomberg, if we do get a marine le pen win and a euro exit, the ecb will be powerless to do anything about it. what happens, if we get that scenario? >> that is a massive if which looks highly unlikely. and thelism antiestablishment voting that comes through in the united states and united kingdom, does not look like it is for them to europe. there are economic reasons for that. we have seen marine le pen and

the situations mounting a challenge but falling a short -- short in the final vote. that is likely to be the case this time around. tos she have enough support -- persuade investors to try to mitigate that anyway that holds their assets and i think the answer is probably not. you can speculate what if, it would throw the eu into confusion or marine le pen to win but that is unlikely. nejra: thank you. stay with us. qenty coming up, including down but not out, ecb board member says reducing quantity easing does not mean it is the end of the stimulus program. later, the future of global tech , we talked to the ceo of a company with more than 200 million customers, listing in at them today. this is bloomberg -- listing in amsterdam today.

this is bloomberg. ♪

♪ nejra: you are watching bloomberg "surveillance." i am nejra cehic in london. let's check in on the markets. >> let me take you into the heart of europe where political risk is on the rise. here is the spread between the two-year french, german yield, the highest level since 2012. the candidates for the french election me tonight for the second debate. vote in the first round is three weeks away but people still saying le pen will not make it in the second round. our markets correcting their mistakes after brexit, after trump, not following the polls? i will take you to africa after that were more turmoil for the

rand and president zuma. the longest fall since august. against the dollar. -- s&pings agency cutting south africa credit rating to junk, the first time we have seen that since 2000. movies says it may do the same -- moody's says it may do the same. look at this blue line, the 200 day moving average, the rand has crushed that, significance or level. if we spend too much time below that level, we could see further falls in the rand. treasuries, the 10 year yield, it rebounds after three days of falling. his testing the two per three -- 2.3% level. amid weakness in equities. the question is from the live

blog is, can extend -- can't extend that level -- can it stand that level? there is the picture, old treasures rebounding for the first time in three days. nejra: ecb executive board member says the reduction in the monthly volume of asset purchases is not the beginning of the end for tv. -- qe. down debt to 60 billion euros on the previous pace of 80 billion euros. still with us are stephen macklow smith at jp morgan asset management and richard jeffrey, chief economist at cap no caps on management. eno asset management. when mario draghi acknowledged ecb rate guidance and

expectation rather than a commitment, investors prepared for higher rates, pricing in as much as 13 basis points with a deposit base increase. a 20 basis points spike in september. since then, with a devilish tone struck by policymakers, these money markets back in line with levels seen before the meeting. what is going on? say,rd: the first thing to you started with comments about quantitative easing. it has become increasingly clear that the longer-term program, monetary policy, which includes quantitative easing, has failed. central banks said this would stimulate economic activity and get to stronger growth but it has not done that. they have to step back and become more introspective and try to understand the dynamics of economies and why monetary policy is not having the impact they anticipated.

not so much what is going on in europe is the interesting thing, yes, they are off the face of quantitative easing that interest rates remain low for a long time. it is how the american economy performs. while interest rates are rising. that may be the mobile that comes through for other people. if american growth starts to gain momentum, as interest rates are rising, this may cause questions in other central banks as the weather maintaining interest rate at exceptionally low levels is really valid. as far as the ecb is concerned, two in quantitative easing now. nejra: do you agree? nejra: i think that -- stephen: i think there is another agenda with quantitative easing. they achieve the recapitalization of the banking systems. the purpose is -- extended mending of balance sheets. capitals.ks, raising

making sure you did not get to accelerated nonperforming loan cycle. in that case, it succeeded. growth is not picking up to the extent people want. .e will see how the ecb reacts from our point of view, if you look at what is happening in the .tate, -- fundamental let's see how that changes corporate behavior. will it unleash more investment which will contribute to productivity gains? one of the things we think about is the point at which growth become self-sustaining. the test of whether growth is self-sustaining, is to get the real rate above zero, which they still are in the state, and trigger a normal upturn in cycle and confidence. we are not there in europe but we need to get there. nejra: the difference between europe and the u.s., this caught my attention yesterday, the steepening german yield curve. we saw a pickup as we saw these

monthly bond purchases reduced at the start of this week. the u.s. curve flattening. what does that tell us? u.s., telling us markets expect short-term rates to continue to rise. i think, in the long-term, that is the great assumption. whether it is to further steepening remains to be seen. it could at some stage. nejra: start to reduce the balance sheet? possibly, which may start as soon as later this year or early next year. in europe, i think we are seeing a lot of disturbance coming through from political events. i would not read too much into the fundamental into the exchanges. nejra: richard jeffrey and stephen macklow smith, thank you for joining us. , the future of global

tech, we talked to the ceo of a company with more than 200 million customers, listing in amsterdam today. you do not want to miss that. this is bloomberg. ♪

♪ nejra: you are watching "surveillance." i am nejra cehic in london. >> shares lower after the online fashion retailer says discounting and a week pound waiting on profitability. the u.k. company set price cuts overseas were the main reason for the decline. ford is more valuable than , shares soared yesterday after elon musk reported worldwide shipments of 25,000 vehicles in the first quarter, exceeding estimates. against theg company said it is stormy weather. coca-cola is trying to add fizz to china by capitalizing on its most famous investor, born about it appealing on check -- cans of cherry coke -- warren offett appearing on cans

jericho. he drinks about -- cherry coke, he drinks about five drinks per day. nejra: telecom and digital services firm listing on the amsterdam today. customers,35 million with russia and italy its biggest markets. let's speak to their ceo, who joins us from amsterdam. congratulations on the listing. why amsterdam? >> good morning. great to be here with you at the amsterdam stock extent. amsterdam is an important milestone for us. this listing is to broaden our appeal to european shareholders and, over time, to be included in the euronext index.

amsterdam is also very important to veon as this is our headquarters. we employ over 500 employees in amsterdam, of 30 nationalities. nejra: you are listed on the nasdaq in the u.s.. what proportion of trading volume may move to europe on the u.s. as a result of this? >> that will be determined by the markets. we are not introducing new shares. over time, our expectation is there will be healthy trading on both sides of the electric, in .he nasdaq and and euronext our objective is not only to appeal to traditional anglo-saxon investors but to broaden this appeal to european investors. nejra: the decision not to list in london, that was not because of concerns about brexit?

in the u.k.as low in the first quarter and some are attributing that to brexit concerns. >> no, obviously this listing and amsterdam is natural for veon which is our headquarters. we employ a large number of staff in amsterdam. of ouram is also the hub digital initiative and we are recruiting in amsterdam, one of europe's largest and most prominent digital capitals. recruiting software developers and recruiting data scientists. amsterdam is a natural location for veon for the long-term. nejra: this is part of a strategy overhaul you have been undergoing, very much repositioning as a technology, rather than a telecom company. according to my colleagues in bloomberg intelligence, there is little evidence telecom companies succeed as technology companies.

why is veon different, if at all? >> ultimately, we are reinventing veon to be very solid telecom providers to the 235 million consumers we serve in markets around the world. also, our goal is to bring these customers a completely different customer journey. we want the custom-made -- customer journey of the future to be -- not the brick-and-mortar customer journey and we believe this is appealing to consumers in emerging markets. that are at the beginning of their digital lifestyles. at the same time, we want to bring ultimately, new services to these consumers that represent our markets, 1/10 of the world population. we want to bring services from entertainment to financial services. this is a strategy that is not a bolt on strategy, this is a

strategy to transform profoundly a very solid telecom business that we operate in these emerging markets. nejra: when will that strategy -- that transformation will start to affect the bottom line? >> the strategy of transforming veon has already impacted the bottom line. we have seen very solid financial performance for 2016. we have transformed our balance sheet. that is very conservative today. we have resumed a meaningful dividend policy recently for our investors. we have increased six fold. the business is on a very solid financial footing. improve the financial performance in 2017 versus 2016. beyond that, over the medium and long-term, we expect this

digital strategy to help change our business model on a brick-and-mortar model to a digital model. while finding new relays of growth for our business. that will be over the long term. thank the ceo of veon, you so much for joining us, great to have you on the program as veon lists in amsterdam. bloomberg "surveillance." continues, guy johnson will be joined by tom keene and we will talk to eric nielsen from unicredit. this is bloomberg. ♪

♪ tom: and this -- it is risk off, european markets reacted. the trump trade, a continues to

fade. standard & poor's downgrades president zuma's to junk and he ran -- rand's brutal move continues. debate from paris -- a candidates debate from paris. this is bloomberg "surveillance." i am tom keene. that she is lucky not here. tom: guy johnson, the french debate, looking a lot american, isn't it? guy: it will be much more confusing, must more difficult to do damage to macron. with 11 on stage, it will be much more choreographed. tom: with ever bloomberg first word news.

there is taylor riggs. taylor: and st. petersburg, russia, radical islamist suspected in the subway bombing that killed 14 people according to the government appear to stand with says the suspect was born there but became a russian citizen. investigators suspect it was a suicide attack and the bomber carried the device in a backpack. rights of dropping u.k. to boost trade efforts outside europe, the trade minister tells bloomberg that 90% of global warming is generated outside the continent. he says the u.k. must direct in economic activity to a specific. in the u.s. -- asia-pacific. senate democrats have enough votes to block neil gorsuch with made -- maybe republicans to use the nuclear option. they hold an advantage in the city and rules require 60 votes to move a supreme court nomination to a final vote.

republicans could make the controversial move to require only a simple majority. the trump administration is trying to persuade house republicans to sign into a new version of the health care bill. lawmakers abandon one version of the bill last month and in investing setback to their pledge to repeal obamacare with one member of congress saying the new proposal could allow states to charge six people -- sick people higher rates. global news 24 hours a day, powered by more than 2600 journalist and analysts in more than 120 countries. this is bloomberg. tom: data check, equities, bonds, currencies, commodities. the markets on a move which have been for the last two days with future deteriorated, negative seven, europe eight to 10 spread, a huge deal. 108. 108 percentage point difference between the 10 year and two year , a flatter yield curve back to november. the color is wrong, the german two-year yield -0.83 has

deteriorated in the last hour which it be a red color, down to full basis point, a big move on the german negative two year yield. --: the bond market -- the stoxx 600 going nowhere. u.k. market outperforming a little bit on a weaker pound. we will talk about the rant, approaching 14. there is the german 10 year yield. a .4 handle a couple of days ago. i want to mention the french, the 2012 high on the two-year. -- in risk and risk about the debate. tom: mark barton had a great chart about one hour ago from london. let's go to the bloomberg. not just auto sales. that was a shock. here is the five year moving

average of used car price change. and price inflation. here is back in the 1970's and 1980's with big price inflation. the restarting year, 2000, persistent deflation. the rollover in used car prices which was out front of what we saw yesterday within car prices and great incentives on the bigger cars, what we call suv's. guy: this is dan is toast in the united states. -- the sedan is toast in the united states. look at the correlation between car sales and what has been happening in the -- as in the markets, -- s&p markets, look at the breakdown. we see this continuing. this would be a downdraft for the s&p of around 10%.

maybe this is the canary in the coal mine. slowdown in auto sales mean for presidents plan to bring jobs back to the united states and manufacturing jobs back to the united states. we have erik nielsen, the unicredit she cannot -- chief economist. is this worth thing attention to -- paying attention to? erik: i think so, the recovery in america's very long and the question was whether trump could stimulate for another year. more and more indicators are saying he cannot. --: is four-person possible 4% possible? erik: growth, no, 2.5%. maybe the 4% is the correction and the s&p. tom: let's bring up the 10 year

and two year yield. the white line is what he just had any data check which is a positive 10 year yield. the two-year just rolls over and rolls over. overnight, the telegraph walk through european deflation fears and the parsing of italy, the parsing of the peripheral countries towards very weak economies. where are we? can you say all clear with better unemployment and with some of the economic data? which way does this go in europe right now? erik: the telegraph article is, the usual beating up on europe, pmi thatwe have suggest growth in the eurozone is up 2%, even in italy 1.5%, 1.6% on pmi numbers. as kevin davis said, every indication the soft numbers are

more correct than the hard numbers. showed isnumbers you very much a technical issue, because of the ecb. qe, arehin the ecb's you saying mr. drawdy controls the destiny of the fixed income market and he controls the marginal change of economic growth? erik: there was an interesting article in paris yesterday. he discussed this. he was saying that we do not, other fx in the market. he is somewhat wrong. the change in the ecb policies last year can be seen. they are buying the short. they are very influential on shaving the curve right now. guy: how do they carry on? the data in europe, the cap is

closing.-- gap is what is next? erik: the gap is closing, not closed. guy: still open. erik: that is right, a long way back for inflation to get back to 2%. you can argue that the eurozone u.s.18, months behind the and the central bank reaction appeared a little bit different. the ecb stays with a qe through this year i am sure. through the german elections. we think they will taper next year. that will be difficult to justify on the inflation forecast because the output gap is sizable. tom: different ways to cut this. erik nielsen is with us and we will continue from london and new york. in our next hour, a timely

moment to speak with robert horovitz with a visit from the president of china to the white house. much to talk about on trump foreign policy. this is bloomberg. ♪

♪ taylor: this is bloomberg "surveillance." boeing has agreed to sell 30 -- planes to an array the and and line, the list price is $3 billion, although airlines get a discount generally on big orders. in december, boeing and iran air agreed on an 80 airplane deal with a list price of more than $16 billion. the latest investigation into credit suisse is a blow for the swiss attorney general who did not know that some of the bank's office would be rated last week and attacks that's a tax evasion

probe. the swiss attorney general says rules of international cooperation have not been followed. two major advertisers have pulled their commercials from the show up on news channels top-rated host bill o'reilly, the move by mercedes-benz and hyundai claim that come after the new york times said five women made accusations of inappropriate behavior by o'reilly. that is your bloomberg business flash. tom: thank you. we had to go into bloomberg news and find somebody who watched mr. smith goes to washington in be9, 14 times, that would james, managing editor at bloomberg news who served to doors of duty in new york. a difficult were of duty in paris and now in london. we will have a filibuster. you know a little bit about the law. what this is about, making the

senate more like the house of representatives. isn't it? >> that is right. it is about demonstrations of raw political power. the democrats -- it depends where you start. there has been a tit-for-tat, the latest iteration is the democrats feel like they are responding to the republicans shutting merrick garland, the obama appointee, nominee, out of even a chance at a hearing last year. after the election of donald trump, the democratic base has no patience, would have no patience for democrats looking for common ground on the trump appointee, a from nominee. it is an unfortunate turn of events for extended institutionalist like john mccain and lindsey graham. tom: articles will show that this goes way back for decades and involves both sides of the

aisle. what should we expect in the coming days? will it be like jimmy stewart in the 1939 movie? senator standing up, ready to keel over, talking forever? -- thefilibusters modern-day filibuster is not like the old days in the movies. getting theer of votes needed. to shut it down. you will not be standing up there talking nonstop. lue the values deva of the american institution? we see the fighting, the downgrading, can i feed that back into something more wide? >> i think it does but nothing new. we have seen this going on for many years. it seems to beginning worse. >> it is new. -- there always been

has always been common ground, especially after the election of obama, republicans, from the minute he was elected, they put up a brick wall of no! they were not punished by voters and democrats learned that lesson. erik: the freedom caucus versus the entire republican party? >> the reporting we know now, in operation, mitch mcconnell and the republican leadership decided that any -- there would be no compromise. guy: this is an asset of the united states, the ability to deliver policy and for to new directions. -- forge new directions. frozen, doon, it is

i need to apply a discount to the united states as a result of this? >> on the other hand, the economy -- growing nicely. treasuries are the currency of international financial markets. if you apply a discount to that, what is 100 cents on the dollar? tom: i have to take time to ask you about french politics and the second debate today. is this a change and paris? we will always have paris. will this be a different. from what you knew 10 years ago? , you know,d france it has been around for centuries . whether kings and queens and know,ents, and, you unless marine le pen wins in the second round, my senses, as far as paris goes, not all that different. tom: do you see the jobs in

london moving to paris? i haven't seen an article from anybody that suggests paris could pick up in the debate over capitalism in europe. >> the banks and the institutions that have moved jobs that we have seen, there not been too many to paris, we has in brussels in dublin and talker frank for. particularly,on, i do not think they are thrilled with the possibility of moving jobs to paris. tom: thank you so much. on a number of topics. particularly with judge gorsuch today in washington. coming up on bloomberg television and radio, conversation with alan ruskin of deutsche bank, the outlier call from deutsche bank, weak sterling. a wonderful time to get to with him. -- to catch up with him. we continue with erik nielsen. this is bloomberg.

♪

♪ guy: guy johnson in london and tom keene in new york. yesterday, the brexit committee in westminster to theresa may that she must define what no deal would look like surrounding the brexit negotiations. writing in the financial times, addressing some of the issues surrounding this, he says there is a logic to her no deal is better than a bad deal. to make the threat critical -- credible is the next threat.

let's talk to erik nielsen about this, unicredit chief economist. line isdeal is ok baloney. rubbish. think about in the context of negotiations, theresa may has no other option but to say i can walk away from this. there has to be that option, otherwise the europeans have all the cards. erik: yes, they have all the cards in a sense. means -- she is probably correct to say a bad deal is worse than no deal because no and you can imagine some deal that is very distorted. that is where she has gone. she has gone to companies, worse than no deal. she is the one in my opinion who

has stepped off the normal path. guy: the last 48 hours has revealed a number of things, one of which is the issue that should not be on the table which will be on the table and will cause confusions, gibraltar, we talked about this yesterday, no idea have we are in this position with gibraltar. it highlights the fact that the black swan, grey swan events surrounding brexit are not fully understood in any shape or form. erik: a shocking development. not that howard said that he is irrelevant, but he should be expelled from the party, if you say, even le pen suspended her father for saying stupid things. the defense minister said something like that but eventually put it to rest. this should not be mentioned. that is not where you are going. it did not start well but shows the british government is not coordinated. tom: is london threatened by

this talk? erik: the financial sector? so.i do not think let me put it this way, if we sit here in five or 10 years, sure, the london is the biggest financial city in europe, not with the same distance to frankfurt or dublin. you mentioned paris. the supremacy of london is less , but iced, i am sure cannot imagine a scenario for any other european city would be bigger financially than london. tom: a discussion point for both of you -- does the financial sector in london and edinburgh, do they hold sway in parliament? erik: i think this is the number one question. think about it, among the brexit people, the globalists, the boris johnson and the spectator guy on the magazine, and little

england who are very protectionist. the former group, they will say we will hold sway, but it depends on parliament. legislationart of that makes britain the singapore of europe? present parliament, not so in the future. parliament is confused and disconnected now. labor being nowhere. , will wesition time get one and what does it look like and how does it affect the financial sector? erik: for me, i do not understand why theresa may will not mention the word. there has to be a transition period. that younce in hell can get a trade agreement in this two-year period. tomorrow if they settle the divorce bill and start trading, two years is impossible. it took seven years with candidate, and there were no financial services. tom: go ahead, finish the

thought. 800 tradeda employed specialist for seven years and britain has at last doubt, 20 of them. it will not happen in two years. tom: brilliant. erik nielsen, thank you, we will continue on london and the united kingdom. coming up on bloomberg television and radio, barry eccleston on the airline worst, not american airlines versus americas andairbus boeing. from london and new york worldwide, this is bloomberg. ♪

tom: good morning, everyone. tom keene in new york and guy johnson in london. let's get our first word news. here's taylor.

taylor: in st. petersburg, investigators say a radical islamic terrorist detonated a bomb that killed people. the suspect was born there but citizen.russian says thi it was believed to be a suicide attack, but that's not known for certain. british prime minister theresa tiess seeking to increase with saudi arabia. she is on the three trip to jordan and then the saudi capital. suspendssh lawmakers armed sales to the saudi's due to the strikes in yemen. president trump is beginning to toiver on a program deliver work visas to silicon valley could it will be harder to bring overseas workers to silken valley with hb one visas. being encouraged not to discriminate against american

workers. a major victory for broadband. internet service providers are -- that means there's no privacy rules on the web. for hours a day provided by 2600 journalists and analysts in more than 120 countries, this is bloomberg. candidates will assemble for another tv debate later tonight. and letill show macron pen taking the top 10 spots -- two spots. federico since he joins us now alongside eric nielsen of unicredit. 11 on stage tonight and too many to really make a difference. hat does the outcome of

tonight look like? he is unlikely to be challenged seriously. federico: he was seen lacking in spark somewhat which is needed to galvanize his candidacy. this is something of a metaphor of the time campaign that he was doing so well in the polls that it was part of that he was able to energize a base of support with problems with candidates to his right and left. guy: 11 candidates, you're never really want to get into the debate and never seriously get into the policies and never really pin him down on anything. tonight is again love largely not going to change trajectories. it's really the last time for candidates to dig into the policies. this could work in favor of toron if he is able

articulate a clear thought on economics. tom: the eurasia group has been really straightforward about the advantages le pen has the election. he thinks she is underrated. tell me where the marginal vote for madame le pen will come from so mr. brenner is a right on the call for her victory. think markets are right in the expecting that le pen will not win but they may also be underestimating that risk. it also has to do with this fact that all of her opponents are distributed as radical or untested, which is really the case for macron, of course, the favorite. that is the risk you. tom: outside of paris, it's a mystery. do i have that right? outside of paris, it's a mystery? federico: like a mentioned, the fact that macron does it really have a party behind him is also

associated with the fact that he was working in the financial sector and mostly associated with the previous government could . a growing number of endorsements from the left could worry him. i think the first round will be the real challenge for him. guy: let's talk about where the markets are positioned in advance of what is going to happen next. since 2012.s higher is that the wrong price? eric: it doesn't look like she is going to win and that means this is going to have a rally. it depends. in the short-term, that's the interesting thing. i don't know if you share my view, but if le pen does very well in the first round, this thing is going to look even uglier. i think this is a buying opportunity. would notther people

have otherwise voted macron in the second round. i think macron's final chance is improved if she does quite well the first round. i think the market will read it the other way. with italy, that's where your expertise lies. it's a little bit off the radar. eric nielsen is telling me we do have economic recovery in europe. do you buy it for italy? is there going to be that little economic growth that helps out in their political economics? federico: markets are focused on france at the moment, but i would argue that italy does post as large a risk for the eurozone in the medium-term as france perhaps. this has really to do with the combination of very weak economic fundamentals but also increasingly unstable political outlook. the recovery is there, but it's still very weak. successive governments have

succeeded in putting the deficits under control but have failed to put the debt from the banking sector, which is somewhat fragile of course. italy is most exposed under eurozone countries because of the rise of interest rates eventually. the political situation is looking increasingly problematic. it is very well-placed to win the next election, which is scheduled by may 2018. tom: you are constructed to answer this question. is the conservative vote in italy similar to the french conservative vote? it's really not. what you are seeing in italy is sort of the opposite dynamic in france, where in france have historically mainstream parties coming together against eurosceptic candidates. in italy, you have the opposite dynamic at play. if the election will be held with a proportional

system, which is essentially opposed to what you have in france. fact thatthe five-star could form a government. the prospect of them winning the election and the largest number of seats is equally problematic for markets. guy: let's talk a little about what you think. the italian election is going to be a next year phenomenon. is there a reaction to the french election with these two things isolated? eric: i think there will be. attention in the market will enter onto italy and rightly so. it's not too early in my opinion to draw any conclusion on italy because we are waiting for the outcome of the democratic party's leadership challenge at the end of this month. i think there's a fair argument to be made that the five-star movement lead right now could shrink a little bit once you get renzi formally appointed. pollmost any opinion

today, there has to be a big shift for the five-star movement not to be the biggest party but not big enough. then the problem is, rest actually come together? that remains to be seen. that is where my uncertainty and concern lies. guy: what does the credit impulse look like in italy right now? when you think about the confusion that surrounds that anythingtaly doing that it needs from the rest of europe? is it going to turn around a time soon as my question? federico: i would say growth prospects are very lukewarm in the short-term and long-term. out of some good news the banking system, but at the same time, we are looking at increasing euro era interest rates. it will find italy a much unprepared. tom: federico, thank you so much.

and the french elections, look for the paris bureau to give you updates through the day and into the evening on what we see from the second debate. no debate about it. with deltekpeak international with the markets on the move. the curve flattening and equities a little bit troubled and with some challenges and currencies. we will do that soon. this is bloomberg. ♪

as: 5:41 a.m. in new york i'm in london and tom keene is in new york. let's turn our attention to the southern hemisphere. south africa has lost its investment grade rating. the agency cut the country to junk following a cabinet spurs

led by the president. sparking increasing calls for him to resign. africa'sng in one of financial institutions. michael brown was on the task force. withked very closely the former finance minister. mike, thanks for taking the time to join us. what does this mean for your bank -- >? it's not good for south africa or anyone in the banking sector. we managed to get through the global financial crisis in really good shape, but it's not good news, but it's certainly not a major problem for banks. guy: presumably you have been preparing for that. this is been a story waiting in the wings for south africa for quite some time. fighting so hard to make sure didn't happen. it now has happened with his

departure, but you must've seen the writing on the wall to some extent. there's so many scenarios to understand the impact of this so, as you rightly say, we are working really hard to make sure this didn't happen and it really should not have happened. ofwas primarily as a result the executive changes initiated by the president that this had taken place. it looks at the economic fundamentals of south africa are still relatively weak from a growth point of view. have you been talking to the star and have they been talking to you? are they checking up on you and making sure you are right? mike: absolutely. they would be doing the job the any central bank would be doing.

right now the system is stable and operating 100%. tom: might, wonderful to have you today. you had a long tenure at the bank. it goes back 100 years is a dutch bank. hbc went after you a number years ago. what do you need for the new government? ori assume mr. zuma survives doesn't survive, what do you in the banking community of south africa need right now from the politicians? think we need policy certainty and we need consistency because any business banks included need both ingredients as it can create confidence. confidence creates investment and investment creates jobs. it's that simple. tom: help me with the idea of assistance from global banks. there was a real interest a while back when the governor block that. assistance from

a global platform to expand your domestic business or can you go it alone in the next number of years? mike: you can certainly go it alone. actually if you look at unification of regulation with the transition, it's incredibly difficult for any global bank to own cross-border. regulation plays into the hands of a strong regional banks, which is exactly what the bank is. guy: thank you so much for taking your time to talk to us this morning. mike brown, the net bank ceo, joining us. of's bring back eric nielsen unicredit. is this an isolated incident? is this something we should take heart from? when you look at what is happening right now, those with big current account have sits not having something to focus on, but south africa closed it.

our others going to be refocused on? erik: i think there are a couple of similarities. a lot of places you see an emerging markets were growth has been not so good. you see the political system rearrange itself and not in a good way. the biggest economic weakness was the so-called franchise five, but that is not so pronounced anymore. a place like turkey i would ask you certainly has a much bigger financial need and a much more volatile picture. politics are not very pretty either. guy: cannot talk about the conversation we had rather the beginning of the program, where we talked about the value of institutions? we talked about it with brexit but quite a lot and how much institutional strength there is an yard states. south africa is devon shooting and has a constitution and that constitution is actually delivering.

whereas in turkey, we now have a strong man that is in place and is going to change the constitution and a similar story in russia. that is something that has to have a value, isn't it? erik: i agree. you can just take your previous guests here. you have a fine financial system but independent of the government. one of the beauties of south an emerging market with first world institutions in many ways is that the constitution is stronger. that you don't find in many other emerging markets. guy: think you very much. you can join the conversation. tv is the function you want to use. you can access the video feed and use the radio feed as well. you can access the charts in the functionality on bloomberg was morning . are we doing a good job? let us know. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." let's get to the bloomberg business flash. ordered government has wells fargo to reinstate a former banking manager that was fired after reporting suspected illegal behavior.

the bank was also ordered to pay him $5.4 million in back pay and legal fees. that won't delay the government's order. berkshire has eliminated 289 jobs at its newspaper group. more than a third of the jobs were vacant positions. buffett's are suffering the same problems as the rest of the industry following readership and a decline in ad revenue. sellers are agreeing to lower prices in order to get deals signed before inventory and mortgage rates rise more. purchases of previously owned homes in manhattan rose 7.7% in the first quarter from your go -- a year ago. that is your bloomberg business flash. tom: we are thrilled to have erik nielsen with his optimistic view of europe in the european economy. let's talk the u.s. right now. help me here with an assumed

jump to a better gdp in the second, third, and fourth quarter. is that your call? that isah, but part of the fact that q1 is probably sort of a technical weakness in the u.s. we think that q2 will pick up for technical reasons. in our view, the u.s. cruises .long at 2.25% or thereabout the whole issue would be whether trump will immolate or help the recovery, which is more crushable today. tom: bring it up, folks. it's a tremendous chart. here we are. the rollover of the trump trade, 1, 2, 3. i'm sorry. this trend is in the wrong direction and the direction is back to november 8, isn't it? erik: it's heading that way and the really interesting thing of course is what his approval ratings will do and what he will do when he sees this because he

has been justifying what he has done or taking credit so what for exactly that picture. if that does not fade away, which is increasingly likely, it will be very interesting to see the reaction. guy: the u.s. five euros 2.39 right now. doesn't exactly scream inflation to me at the moment. erik: there are two sides of it. the short-term upward trend is there because the upward gap is closed. even if he does nothing, inflation is going to move higher for a while. there's also these elements going on that we do not fully understand but certainly puts a damper on how far inflation goes. guy: it's not scary place in. erik: not scary at all. with that said, the fed things or said that he really approved -- the fed thinks or says equilibrium is 3% and that's not sure.

i would bet my money happily that during this year that the fed is going to revise its forecast up from 3% to something higher. tom: i'm going to outdo guy here. he talked the five-year european. this is the interest rate five years out and then looking at the inflation expectations five years from there. it's sort of the opposite of the trump trade chart we just put up your we have the idea of an plac inflation at 2%. this is nielsen screaming. nielsen screaming all the way along. nielsen was a genius. up we go with the trump reflation, but again to guys point, what does it signal? it is indeterminate, isn't it? erik: i think it is. it is normalizing. that would be the way i think about it. the five-year has been really confused by itself. tom: thank you. erik: if you saw how it reacted to oil prices, which they got

completely on the wrong correlations in place and some of that is being corrected now, i think, so most of this is normalization in my opinion. fed confused with the five-year and market compariso participants confusing janet yellen? is doubly confused? erik: i would not say those three are confused. they know a lot about it more than i do. most of what they are confused about were unclear is of where the u.s. government is going. also on protectionism and on the fiscal side, nobody seems to know. they are very nervous about what's coming and they are holding back a little bit. ik nielsen, greatly appreciate it this morning . let's do a data check here if we could.

maybe we can squeeze in both screens. we will do this at the top of the hour, public markets on the move weaker with the data and auto sales really a struggle, we have futures negative seven in the morning. here we are with the second screen, which is fine. the curve flattening out as well. that is the three-month five-year spread getting back to where we were november 9. the german two-year plunges down. that should be a red color on that .01. the dollar stronger as well. horvathhour with robert of kissinger associates. this is bloomberg. ♪

♪ this morning, markets continue their april swoon,

. american auto sales tepid and the german two-year year lows. thank you, cole porter. susan rice what it redacted names. a bloomberg view bombshell, he joins us later. there is a canary in the goldmine. to junk stateoves as president zuma faces true national crisis. good morning, everyone. this is "bloomberg surveillance." we live from our bloomberg world headquarters in new york. i'm tom keene in new york. guy johnson in london. 11 candidates on stage, the second debate. are they all going to pile up against metal 10? madame le pen? guy: i think it will try and they will be shooting at macron as well, who is leading the polls. with some of you people on stage , whether or not there is actually the possibility that we we actually find out very

little result because as will be a very confusing picture. they're somewhat structure that must be put in with 11 candidates. tom: you wonder who will drop the surprises at the second debate here three weeks or so from that first round of elections. our first word news this morning, here's taylor riggs. taylor: in st. petersburg, russia, a radical islamist is suspected in the subway bombing that killed 14 people. that is according to the government, which says the suspect was born there but became a russian citizen. it was ators suspect suicide attack in that the bomber carried the device in a backpack. brexit is prompting the u.k. to boost its trade efforts outside europe. 90% of global growth is being generated outside of the continent. he says the asia-pacific is the center of gravity of the global economy so the u.k. must direct it's s investment and economic activity there.

senate democrats have enough votes to block neil gorsuch's nomination to this up in court which may lead republicans to use the so-called nuclear option. inublicans hold an advantage the senate and rules require 60 votes to move a supreme court nomination to a final vote. they could make a controversial move to only require a simple majority. administration's transit persuade house republicans to sign onto a new version of the health care bill. lawmakers abandon one version of the bill last month in the embarrassing step back on their pledge to repeal obamacare. one member of congress says the new proposal could allowed states to charge six people -- six people high rates. for hours apoint power by toys and senator listen more than 120 countries, this is bloomberg. move thists on the morning with futures negative seven and the euro-dollar weaker. we are really getting back to levels. november 8

the trump trade continues this morning with a vengeance. oil coming back down your 50 . showing 12.88. the german yield really spiked down. that green 0.01 should be read. that is a lower negative yield back under .80. that is a real signal of negative rates attention. strong yen and weak euro. guy: let's continue have a similar theme to what is going on. equities are not really the focus of attention. we've talked about that throughout the program, approaching 14. there is the german 10 year to compare with your two-year, which is interesting as well. we've gone from a 0.420.2 quick look. to of 0.2 quickly. i wonder if that's at the front

end of the german curve and the repo squeeze with concern surrounding france in the upcoming debate tonight. tom: very good. guy johnson, thank you so much. we want to go to kevin cirilli and do a public service. drop aght, eli lake bombshell on bloomberg view about kevin rice. would spring up the morning must-read. i have gone in and sliced and diced el. mrs. rice requested the identities of persons an and raw intelligence reports. those names are redacted and blacked out and they reviewed more of rice's request and instructed him to go away in requesting the identities of trump transition officials. rice's request were likely within the law. help me here, kevin, with the conservative-liberal battle on cable tv.

did she do anything wrong? i can't figure it out. kevin: defense of the u.s.. conservatives would say she is partly response will further leaks as well as their surveillance over the administration. democrats say she was acting within her capacity. from a broader standpoint, if you take a step back, what essentially is going on here is that this is continuing to dominate much of the administration's attention. that, they're not able to get to the policy items that they want to turn the page to/ . tom: one more question on this before we go to washington matters. the article makes clear that she requested. did she receive any of those names? kevin: that's what we don't know and it's great reporting by our colleague, eli lake. that is where they are turning to. the initiation has said that the correctping tweet was and that she was being proven

more and more correct. they would point to an article like that as evidence of them being proven sure. tom: eli lake to join us here in 25 minutes. we are thrilled he can join us on a day off. you look filibuster black today. you are wearing your filibuster look today. it's not like jimmy stewart in 1939. come on, they are not going to stand up and yap. what is going to happen if they filibuster? kevin: if they filibuster, nothing will happen because republicans will deploy the so-called nuclear option. this will allow them to go to a majority vote if you will. in which case, doesn't really matter if they have because they have the majority of the 52 votes they need to pass. guy: has u.s. politics ever been more divided? kevin: well, i think that it's very divided right now, but i would also note that it was

divided during the bush administration come in during the obama administration. what is interesting now is that issues russia continues to shadow over the political process in a way that republicans are also asking questions about what happened with the russian meddling. that is a bit unique, but as president trump is a very different president than we have ever seen. tom: greatly appreciate this this morning. for more perspective, robert horvath joins us. in service to the obama administration an important advisor to secretary clinton as well. you walked down the corridors and have seen the full and empty offices. was the day-to-day impact and particularly of treasury of empty offices in the secretary building? robert: this is not the way to run a government effectively. you need to have all your people on board, particular your top

people. many have not been nominated much less confirmed by the senate and he really cannot run these big agencies any more than you can run a big corporation without your senior report team, your senior people under the secretary. they're critically important. virtually none of them are there. tom: if we begin the competency or the idea that mr. mnuchin is confident, did you work with them at goldman sachs? robert: he is confident. the he has got to go president and say i can't do tax reform without bodies. is that what's going to happen? robert: yes. there are some very able people at the treasury. there are other people at the state and others. the people who work at top levels particular with the congress tend to be critical appointees.

you have to have those senior post. tom: i want to make clear, guy johnson, that we are talking one guy who links treasury to stay in the moderate age. he brought economics from the foggy bottom. no one else did that but horm ats. guy: let's take it a little bit wider. does the u.s. economy do better when governments in washington is in the deep freeze for its ability to not policy i limited? i we focused on the granularity or what is going on on capitol hill? robert: it's a fair point. there are two parts to your question. the economy will continue to people are not confirmed or appointed to their jobs. is thatlem, however, the kinds of reforms that have been talked about will be very

slow in coming if at all. that leaves a lot of uncertainty as to when they will come and what they are going to look like when they do come. you can get a sort of stasis continuing for the time being and the economy will work. the private sector is working. it will do what it wants to. if you're looking at government policy and you want to have thoughtful people of various points of view putting that policy together, then you don't have that. you don't have that combination. the state department is the same thing coul, tillerson goes of and does his thing. he doesn't have the full support he needs to run an agency in the treasury doesn't have the full support it needs to run a big agency other. either. guy: let's peg it from a different angle. is the judiciary the most important element of the government and that it's

effectively refereeing the contest between the democrats and republicans at almost every turn? robert: on some things, of course, it is. ,n issues we are talking about foreign policy and financial policy, the judiciary does not play a major role t. the state department and the treasury did. that's why the emphasis on top people getting in so that there are different people working together to support their secretaries and to support the president. it's like a company. a company might run with only a ceo and not the top five or six senior people, but companies only have them reporting to the ceo. you don't have that with the government. it's very hard to take new initiatives and very hard to respond to a crisis if you only have very few people doing it. then the white house has its loan seen together. the agencies simply don't have full strength to participate in the process. tom: i've got a very important

chart of what really spans a mats.r of ambassador hor on south africa, the turmoil there. lele will join us. from new york to worldwide, this is bloomberg. ♪

taylor: this is "bloomberg surveillance." let's get to the bloomberg business flash. the latest since investigation into credit suisse is also a blow for the general. he didn't know the offices would be rated last week. investigations are underway in five countries. this as the attorney general's office ruled that national

cooperation has not been followed. two major advertisers have pulled their commercials from the show of fox news channel's top-rated host bill already. -- bill o'reilly. this comes after the new york times reported that five women made allegations of inappropriate behavior against o'reilly. say they received 13 lead dollars in settlement. tom: the trump trade continues. mats.us is robert hor he is one of our experts on international relations. here was his must-read from a good number of years ago. this was on the fiscal policy of the nation, the price of liberty. this was i walk through of how we get in and out of debt. i will name this officially the hormats chart. here's megan down here.

here's the tax reform act of 1986. here we go to bush junior and president obama and the surge up .n debt to president trump to your point in the price of liberty, the constraints that president trump has are enormous. they are equivalent to the worst of your book, aren't they? robert: the numbers are large and many of the things that he wants to do, which i and some cases support infrastructure spending, i certainly support with tax cuts as well. the fact is that he has got the constraint of a rising deficit and projections that the deficit will get much bigger. the conservatives, particularly the freedom caucus, are very concerned about that, but many people the financial world are concerned. tom: you work for both sides of the aisle. how do you respond to the new ethos that we can have both

things? we can raise the debt up and get some fiscal stimulus at the same time. do we have to be deficit neutral? robert: we don't have to be deficit neutral. we can afford to have the deficit go up over time if you need it. the fact however is that the economy is growing. it's not growing as rapidly as we would like, but it certainly growing. -- do you need to have a big fiscal stimulus and an economy that is growing and creating jobs? the second is the short versus long-term consideration. moreight be able to get stimulus in the short-term and that could be beneficial if it's relatively modest. but over the long-term term, if you keep doing this year after year, particularly when the economy is growing, then you're going to give a big deficits in the out years. that's going to be very difficult to deal with and coming generations. spending on

infrastructure could be helpful because if you don't do that, then you don't have less of a fiscal deficit, but you have a huge if a structure deficit down the road. yep to pick your spots and address and the right way and make sure it's within the realm of reason when it comes to longer-term deficit projections. thing fora smart mature mnuchin -- mr. mnuchin others to do now. together into wrap the same bill infrastructure and tax reform? that may be something to appeal to enough on either side to deliver that. is that what we should now be looking at -- some sort of combined policy which allows those that want tax reform to sign-up and those who want infrastructure spending to sign up and therefore we get everything and deliver it in a single bill? robert: politically that would be a very, very good idea because you correctly point out that it would appeal to various groups.

the technical issues in the hill are very difficult because you can do some of the tech stuff under reconciliation bill. it's very hard to do infrastructure spending under reconciliation bill because reconciliation bills typically are not designed to allow large spending increases. but you can do them in parallel. i think if they were to send the infrastructure built up and it was a bill not with these tax credits but a bill that has government leverage utilized to enable borrowing to take place by state and local governments who are the main components of infrastructure. they are the main developers of infrastructure and parts the country. that would be helpful and also some tax cuts, but doing them together as part of a growth sound bill. tom: good luck with that. we will continue with ambassador hormats. look for that and the 8:00 hour.

bloomberg radio worldwide, this is bloomberg. ♪

tom: let's look at a chart. this is the south african rand. tom:right here is where francine lacqua was screaming at me to pay attention to south africa. francine was right. atul lele with us as well. does this affect emerging

markets or is it a south africa story? inl: the significant move the rain comes against the backdrop of incredibly strong emerging market inflows over the last four or five months. as well, emerging markets have been benefiting from the global tailwind taking a. this is very idiosyncratic. this is also quite surprising against that backdrop because it's been such a sudden move. south africa, like a lot of emerging markets, has a great .ailwind at the moment to see them go and disrupt policy in this way is doing the economy no favors. guy: president zuma saying south africa policy orientation remains the same. how long can south africa continue to deliver with this president? you expect this president to be here the end of the year, the end of the week? atul: the situation is

incredibly fluid right now. we talk about policy uncertainty around the world. this is the center of where we are seeing policy uncertainty right now. emerging markets have been experiencing more stable conditions. this type of move could see the president easily go over the next few weeks animal certainly by the other year. tom: you have dealt personally with each and every one of these people. is there a replacement for their financial minister out the door? robert: i think it was a huge mistake to fire gordon. i worked with a lot of the g 20 finance ministers. he was one of the very best. he knew his stuff. he was very forthright. he was very constructive in dealing with south africa's domestic issues and very credible on the world scene. it does not surprise me at all that this would have a negative impact on the rant when you get your all-star finance minister,

who has been doing so well, and overnight remove him. tom: very quickly here, can you by the rand at 14? is there a point where you step in and say there's the gift that keeps on giving? atul: they're better opportunities elsewhere. there's a commodity reality that has had a very long run. tom: we've got to run to washington. we will continue with this on bloomberg radio. coming up, it was a bombshell last night for all of washington. we speak with bloomberg view columnist eli lake. we request a conversation with eli lake next. this is bloomberg. ♪

london. in tom keene is in new york. let's get a first word update with taylor riggs. taylor: in russia, investigators

expect it was a radical islamist --t killed 40 people you killed 14 people. the bombing is believed to have been a suicide attack although it is not known for certain. a second device was found in another subway station and is armed. seeking to is increase trade and security ties with saudi arabia. she is on a three-day trip to jordan and then to the saudi capital. -- the kingdom's airstrikes in yemen. trump is beginning to deliver on a promise to crack down on a work visa program. for'll make it harder companies to bring overseas tech workers to the u.s. using h-1b's is. and it is a victory for broadband providers and it may

turn out to be a campaign issue for democrats. trump has rescinded a rule that requires internet service providers to ask their subscribers permission before using the web browsing history for marketing. democrats say that means there will be no privacy rules protecting consumers on the web. in sports, north carolina won the six ncaa championship. lastar heels scored the eight points of the game to beat gonzaga. last year, they lost the game on a last-second shot by villanova. 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: it has come down to he said, she said. that is the blomberg last night with the bombshell from eli

lake. i read your essay three times. "request" 11words times in the essay. did susan lake receive any of the names that were redacted or did your request to go unfounded? the she did receive requests. it was described to me that she would often put in their quest after seeing an intelligence report and she would get it within that day so yes. tom: yes, she did. that is an important statement. eli: i want to add -- there were dozens of requests. as far as i know, there were not .ozens of individuals someone's name can come up more than once in these reports and we are waiting to get the full tally on that. tom: i understand this will go back-and-forth. pick your tv network and pick

your political debate. i will use the phrase "general counsel" tells the young trump-ite to stop doing this. expand on this. what did you learn on that? to dohat is not the way that. i would stress on the show that the staffer who did that has an important job and it was in his remit to do this kind of review. it is the national security council director on intelligence and in some ways, you could say the classified secretariat. my understanding is that the staffer did comply with the request, as well, and i think it has to do with the fact that they believe that this is of aning that was worthy investigation by congress and they did not want to have that

chain of evidence tainted. that was meant to not be a warning shot or anything like that. and it was authorized for him to do that review. that is important to get out there. tom: what would you like to see from senate intelligence, house intelligence or the federal bureau of investigation? eli: at this point, i think that would we really have here, because i think that it is a low bar to get the unmasking of u.s. needss -- i think there to be more reforms for the law and the process to make it harder to get this kind of information. connected to things like a pending cyber terror relates to

intelligence. in this face, they are impeding issues because we know that the fbi had an ongoing intelligence probe and it would be absolutely important for the security adviser and the white house to know about and have information about it. but if the standard is -- i need to know this u.s. persons identity because it helps them better understand the intelligence, that is such a low bar that i think it is prone to abuse, even if it is not illegal. lead thee does this tweets of march 4 that came from donald trump? review beganthis -- it really did begin before that tweet. i have been asking my sources and other people around as much as i can about whether there was some sort of clever strategy behind this tweet from trump. it is you could argue that he has suffered a lot of political tax for it but when he made that he stirred uply,

james clyburn to go on television to say he sees no evidence which was helpful to him on the russia story. and in some ways it did bring political attention and spurred to focus onairman this issue of unmasking which is now front and center. there areink means two investigations and politically that is good for the white house. , if i keep coming back that this was a trump reading breitbart and getting a notion in his head -- it was not accurate in the sense there was trumplegal wiretap of tower, it is more an issue of unmasking. it isn't more congregated than that. a isn't to say it wasn't to play at being

possum. it made up being that all of the furious denials about that were true, literally, but may look at the question of unmasking, there was a sensitive issue that was behind what trump was getting at but i don't think it was deliberate. do the tweets represent a risk to the president? are many people who are serious in government right thethat are happy about tweets from trump. there was fascinating testimony last week on the senate intelligence committee for the former fbi official who said bots onre were kremlin social media which targeted the president social media account when they knew he was online. pretty scary, especially considering that we know that trump in the past has basically signed off on or

tweeted on fake news. whether it was about ted cruz's father being involved in the jfk assassination. obviously, totally fake news. so yes, it is of concern. tom: this morning, susan rice looks lonely. how should president obama react? how should the president and the obama administration reacts to your essay and your request made by susan rice? eli: at this point, i reach out to her and i know other tornalists have reached out her. we need to hear from her. she should talk about this activity, even though it is getting into a classified realm. shestos she can, to say why was asking for the names and identities of the u.s. persons in report said would have related to the trump transition. herself?lain

i haven't yet heard that she is going to be called before any committees although one can probably expect that, knowing how these investigations go. so maybe at the advice of counsel, she needs to keep her remarks brief. but it is always worth -- we haven't heard from her and she has a right to explain her side of it and defend herself. now, let's hear her explanation why she did it and does she think she did anything wrong? just explain it and then we can scrutinize those answers just like we do with all else. tom: thank you so much. eli lake, i can't say enough about the careful read of a essay. robert hormats, you have worked with susan rice. tell us who she is? president'swas the national security adviser in the second term and has been very

close to president obama for a long time before this. i find it difficult to sort this out and now this news is just breaking so it is an interesting story but i do think that allowing time for all of the players to its plain what they were doing does make sense. theses obvious is investigative committees are working on a whole range of things. you know that we have -- with china? a little bit of news on china is coming up. president trump will visit the white house here in a few days. on the airline bores on airbus in boeing, very interested airbus. look for that at the 7:00 hour. this is bloomberg. ♪

guy: this is "bloomberg surveillance." you are looking at the data surrounding the positioning on sterling. we have come down a long way. are we set to see a bounce on the pound? maintain their to position? let's talk to emmanuel has a few views on this. tom: peterkin cello is here with us. on sterling, this is simple. about capital flows or is it interest rate dynamics because sterling is so weak? peter: i think it is about capital flow and the interest rate side of things.

you have noticed that markets have been getting excited about the boe and whether they will hike this year or next. personally speaking, i don't think they will. what is the question about kind of deal to the brits get. continue toes invest in the u.k.? i'm natural that they will to the same extent that they did in the past so we could see a roller coaster. tom: the dollar has been stable. is a two-part analysis that is about week's sterling and it is about strong dollar. what we are likely to see at the beginning of the brexit negotiation is that you have headline risk going into the negotiations. i expect that sterling will be a bit more volatile over the coming weeks. fordollar, we are waiting the capital flow story from the trump administration in may.

that is the next dollar driver. so this is really more a sterling story. and obviously, we have to see how the negotiations develop over the coming months and years. we have for risk is in european politics, rather than u.k. domestic politics. if you look at it from a european perspective, it will be quite hard to got consensus about a deal because there are competing interests. on the u.k. side of things, theresa may's government has a slim majority. so you are lucky to have someone who has idiosyncratic domestic issues. getting an agreement around the deal is going to prove very difficult in my view. the eu doesn't have a great importantcoming to agreements in short spaces of time. guy: the flow data across every desk that i talked to tells me that everybody is already short the pound.

the data tells me that pretty much everyone is short on the pound. tell me how this goes even further south if this is the case? really would be more of the dollar story at this stage. rather than just a sterling story. i think really, what we are going to see in the next couple of weeks, once we see trump's tax plan, if we do see the tax bill on the corporate side of things, then we are likely to see dollar appreciation and sterling will trade lower. that might be the next driver to go lower in the coming months. we had to see how the brexit negotiations develop. as i said, i think we have high headline risk over the coming months. as these negotiations take place. consequently, that will lead to further down mike's in cable. guy: let's say that doesn't happen and sterling has been bouncing around for a while. how much longer do the shorts hold on if we don't see a break out of the range?

question is, if we break to the upside in cable, then obviously investors reduce their risk. it develops.ow we could see some dollar weakness and it inevitably will lead to some sort of positioning by investors. kinsella, always good to see you. in a moment we will be back with robert hormats. in the meantime, looking talk to you about this great function on tv . you can listen to the radio and you can increase the functionality that we use on the show. it looks like this. it is a great function. tv . this is bloomberg. ♪

movemarkets are on the today. the yen is stronger. no question about it. it gets your attention.

ise out the dollar and 80 stronger yen, weaker euro. that is it a deal. let us showing a modest dollar strength as well. i johnson? guy: coming up in nine minutes, "bloomberg daybreak." we willel is here and be talking about defense? alix: trump is looking for an additional $30 billion in funding for this year as well as his proposed 2018 fiscal budget. we talk to someone who is a big proponent of that. carlton everhart. the reason it is important is because he wants more defense spending but they don't want to raise the budget to visit so how will that play out? we are front and center with that. tom: you wonder where we go given the depth and constraints that are out there with the president. alix: and what deals you will have to make with democrats to

get it done. but then how does that end up democratic caucus? tom: very good. we are looking forward to that in a bit. is here with us this morning. is this the fifth or sixth round ? there has been a cycle of presidents that we have worked with. who is this president most like? he is different from any other president, really. power veryralized much under his control. of course, president now did the is to say heich wants to control as much can of the apparatus of china. he had enormous power. tom: people look at the gdp

numbers which nobody really believes. our single best chart today -- this is almost something that jonathan spence would have. here are the real rates on china. we don't normally show this. but they were sustained at a 4% real rate. they came down a little bit. relative to the rest of the world, china appears to have high real rates. does that signal a great economy or a troubled economy? robert: i think that china is in the middle. it isn't as great as it was but it isn't as troubled as some of the pessimists would have one believe. china is now in the middle of a restructuring. from an economy dominated by industrial production and heavily dominated by exports to an economy which now services are over 50% of gdp.

and that is a big change. they are trying to rein in, difficult as it is, a lot of excess capacity. they have a lot of excess capacity in and you factoring and they are trying to pull that back. that also makes for some very difficult adjustment and a lot of people have lost their jobs. because of the cutbacks. becausel be interesting the chinese economy will be focused on restructuring but now they are in the middle of an economic issue -- the one vote issue. expensiveealing with and pushing for globalization and greater effort to strengthen regional ties that will help the chinese. guy: given what is going on in

washington and what we have been speaking about, do you think this will impact the way that the chinese position themselves as they fly to florida? chineseyes, i think the going to emphasize that is playing more of an assertive and broad and extensive international leadership role. and i think that will be one of the things that the president will position himself to do. he will also want to demonstrate that he can work with the united states. he doesn't want a big confrontation. the united states will push him on certain issues and he will push back. tom: i have to get this in. we have to get it in. tell me about bluster. we saw the north korea bluster with the tweets. as bluster work? robert: north korea's want to call attention to themselves

when they think they are not receiving sufficient attention but they are dangerous. an increasing capacity to deliver it. we don't know what they will do but they do have to work out ways to work together. the chinese don't have as much influence over north korea as we think they do. tom: interesting. have some. they do tom: this has been fabulous. robert hormats, thank you, we continue on bloomberg radio. this is bloomberg. ♪

jonathan: a fragile consensus

with auto sales, not enough to shake the optimistic growth. for the riskwait to fade. french presidential candidates take aim at macron in the debates and shaking off political uncertainty. political uncertainty hangs by a thread. the threat remains strong. good morning. a warm welcome to "bloomberg daybreak." up. is how we are set futures here are down five points on the s&p 500. the euro is weaker. but a big target is coming up .rom geoffrey yu alix: he also wants to buy sterling. i have your check for you. you are having a safety bid against the german bund curve. down by three basis points. goa