francine: the barclays board orders a significant pay cut for authoritiesr u.k. launched investigations. meet with ministers u.s. secretary of state rex tillerson as he prepares to visit russia on wednesday. and a four-way fight for france. polls,surge in the stoking more uncertainty about an already unpredictable election.

good morning. this is bloomberg surveillance. i am francine lacqua in london. show, we on today's speak to the head of g10 fx strategy at merrill lynch international, and the ceo and coast cio at shen of our financial group. -- at a financial group. function and a> message will come to me. it is monday morning, 9:00 in london. we are seeing a little bit of volatility, but nothing huge. oil gaining. one i would like to keep an eye kospifter the costly -- slid -- this has to do with geopolitical concern lingering in korea. weis extremely important keep an eye on what happens at the g7, where foreign ministers are showing up, and rex tillerson on wednesday heads to

russia. it seems the world may be a little more uncertain than it was seven days ago. let's get straight to the bloomberg first word news. nejra: barclays said its board will issue a formal written reprimand and make mythic and cuts to the ceo's pay after he tried to identify a whistleblower in 2016. they say he made an error in not applying appropriate governance and in taking actions to attempt to identify the person. meanwhile, the u.k. regulation authority has started investigation into his conduct. hasegyptian president declared a three-month state of emergency and created a powerful new antiterrorism body after church bombings claimed by the islamic state that left at least 43 dead. the attacks were the deadliest strike on the christian minorities since lcc == a --

al-sisi was elected. a french candidate is gaining. published late last my and puts the communist-backed contender up 18%, one point ahead of francois fillon. and marine len pen are tied on 24% each. president james bullard says the u.s. economy will grow around 2% this year. speaking earlier on "daybreak asia," he said a lower-than-expected jobs report and we growth in gdp suggests america remains in slow growth mode. nots: the economy is maybe as strong as we would like. 2% growth is not as fast as we would like it to be. has is consistent with what happened in the last 6, 7 years in the u.s., and there is no

indication of further weakness than that. therefore, i think we could allow the runoff to occur. nejra: the ukraine central-bank resigned over a lack of support for efforts to eradicate corruption. according to a person familiar with the matter, she tendered a letter of resignation. she has been a key figure in the country struggle to rebuild its economy. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am nejra cehic. this is bloomberg. francine: thank you so much. tensions with russia are overshadowing the u.s. secretary of state's visit to europe. rex tillerson his meeting g-7 members in lucca to day. russia has described a response to the chemical weapons in syria as a dangerous violation of international law. alex crawford joins us from paris. he is one of our major editors

when it comes to politics. today's meeting follows acrimonious nato talks with brussels. her me a sense of tillerson's g7 colleagues are likely to receive him. be fullthink they will of questions. they will want to know where the u.s. goes from here. given the strikes last week were broadly supported by the -- hollandeliament put out a statement saying it was understandable, given the fact that the sod alone was to was responsible for the strikes. they also need a little solution to this conflict, so they are pressing him for answers on that. to, thereou alluded is tension over u.s. demands that nato members step up their defense spending to this 2% of gdp threshold, particularly germany and italy.

they are unhappy about the way they are being harangued about this and being asked for specific outlines. they feel that other factors such as spending on refugees and monetary aid should be taken into account. so a bit of a mixed bag here. francine: what is the likelihood of more sanctions being imposed against russia? that it is hard to see it at the moment, given the fact that it is not really for individual g-7 members, as far as the g-7 members are concerned . it is an e.u. issue. aren the fact that they already struggling to hold together a united front in the e.u. for the existing sanctions on russia over ukraine, it is hard to see how they could -- how there could be appetite to implement more meaningful economic sanctions on russia.

sure,ne: how do you make or how can the g7 make sure, this does not escalate? we are seeing movement on the kospi in south korea. how do they get russia closer to make sure this does not become much worse? alex: it is a good question. it is hard to see what we would get beyond some kind of reassuring statements. a call for more dialogue with russia. as he said, tillerson is heading to moscow on wednesday. we do not even know before the press conference tomorrow, at aon -- we are unlikely to get sense of the town until then, i would suspect. francine: alan crawford there from paris, our european government team leader. let's bring in the head of g10 fx strategy at merrill lynch

international. always great to have you here. how do you view geopolitical tensions? we have seen the flight to safety in some of those havens, such as yen. >> so far, the market is assuming the situation in syria will remain under control. we have seen some market move, but nothing major. actually, the market positioning in assets, and equities, in low,ing-market assets is so this position could be vulnerable. but the assumption is this will lot -- not escalate further. francine: as a currency strategist, do you look at tweets, reports, follow every bit of news, or do you step back and take the position that if it does not escalate, everything will be fine for currency markets? thanos: even before this event, we were getting concerned about market positioning, particularly in the yen space. we started from the market being short early this year, the

position that is the longest it has been in recent years. looking forward, definitely the g-7 meeting this week will be important. they dialogue with russia to see how they would deal with that. always a concern. i would think that even if we do not get any geopolitical risks, looking forward, a market position is mixed. it is interesting, but the market is pricing a very slow pace of hikes by the fed. most likely, it will be faster than that, which could be challenging. francine: we will talk about the fed in a couple of minutes. has donald trump become more unpredictable? has his bet on predict ability when it comes to foreign policy changed in the last vendors? or is it better to forecast what he can do? thanos: i do not know that he has ever been protectable. something we know about president trump is, he is

unpredictable. the markets focused a lot on what he is going to do in tax reform and how far it will go. price for is already disappointment. that is why the dollar has been correcting lower this year. has beenarket performing well. francine: not a trade war? thanos: definitely not. it is a risk. we do not expect a prolonged trade war, but a move toward more protection. i think there is complaisance in the market. that is why emerging market have performed very well. but this is definitely a risk. there are checks and balances. you cannot -- he cannot increase trade protection substantially. but we expect a move in this direction, unfortunately. francine: does that mean the market is to binary? thanos: i think as it concerns policies and international trade

and policies on tax reform. i think the market might be wrong both ways. -- wehey see something want to see some progress in tax reform. francine: and the tax reform, we need to wait how long? there was a little bit of a selloff about two weeks ago on expectation of tax reform that was not coming. thanos: what is interesting about the failure to approve tax care reform in the u.s., the increased potential they will fail on tax reform -- we believe the opposite. the market has strong incentives to make sure that at least they do not fail on tax reform. the question is how far they will go. the border adjustment tax is not likely. politically, it is difficult. the most ugly scenario is that we would get a mini tax reform with the homeland investment act, but it will not be a game changer. os stays with us,

but let's get to the bloomberg business flash. elliottnvestor management has called on bhp billiton to unify its corporate structure, spin off assets, and improve capital returns. elliott said the world's biggest mining company, which has two separate legal entities in sydney and london, should become a single australian-headquartered company. the new york-based hedge fund has also urged bhp to seek a merger of the u.s. petroleum business. ceo has unveiled plans to introduce more electrified models in china. shanghai, mark fields held the meeting between donald trump and xi jinping as a constructive step toward stronger ties. have two leaders to meet face-to-face, they become people to each other. think, and basis, i reading reports from the meeting

-- that is a very firm foundation to go off and make concrete advances. largestivendi, the investor in telecom italia, has put its own ceo of top the list of proposed candidates for the phone carriers board. typically for italian companies, the first name is the chairman. the significance of listing him about the current chairman was not explained in a statement released yesterday. there is a suggestion of a planned replacement. that is the bloomberg business flash. francine: after friday's weak u.s. jobs report, the bond market remains unconcerned the fed will raise interest rates another two times in 2017. focus shifted last week after the central bank made a reference to explain to begin winding down its supersized balance sheet. the st. louis fed president, james bullard, spoke to bloomberg about this issue. james: one of the issues i have felt is important about the

balance sheet is that it is putting downward pressure on the of theand longer end yield curve, while the increases in the policy rate are putting upward pressure on the short end of the yield curve. it is a kind of a twist operation, and i am not quite sure that there is any theory that says that is the right thing to be doing in this situation. ist you would like to do allow the entire yield curve to adjust to the rate increases in a more natural way. and i think one way to do that begin allowing some of the balance sheet to run off. francine: i am very pleased to bring in the ceo and co-cio at an investment manager. still with us is the head of g10 fx strategy at merrill lynch international. welcome to the program. thank you for coming in. we do not want to talk about football. you had a great score

on saturday, so congratulations on that. talk about treasuries and what the fed can and cannot do. in terms of macro environment, this is what we expect from fed fund futures. it is a scaled-back jobs report on friday. what comes next for a hedge fund? where would you look for macro inspiration? loic: i think the u.s. will most themselves basically behind the curve. i think we run the risk of seeing faster hikes than what is anticipated by the markets. that trump didt not manage to pass the stimulus as he wanted -- he is not going to change the fact that job markets in the u.s. keep increasing and improving. we might be in the situation where there is also wage pressure that will justify the fed to move. francine: how many hikes are you expecting from the fed? thanos: at least two more,

likely three. behink the june meeting will like the march meeting. the fed will wait until the last moment, keeping their options open. but if there is no reason not to hike, they will hike. i think the market is likely to price quarterly hikes. what is interesting is toward the end of the year. we are going to have a number of new fed governors, including yellen's placement, and this creates a lot of questions about the fed, looking to next year. francine: just as a curve ball on a monday, this is the chart we did in terms of treasuries. this is the 10 year yield. these are some of the points we have touched. it is also the 100 day moving average. this is a key level below the fibonacci and below the 100 day moving average. what does this tell us about treasuries? thanos: i would be short here. the market is only pricing 1.5 hikes for the rest of the year. yesterday's number was not very

good. weather, thee unemployment number was actually very good. unemployment data, -- loic: the inflationary pressure is the lead indicator. i think others chose the pmi data and backlog off of monetary easing. all the data are pointing to stronger figures, and probably i

tonk there is a willingness hike from the fed. they might be moving faster than most people anticipate. francine: what does it mean for euro-dollar? loic: there is a downside positioning for the first time in the last five years. the euro-dollar is long. there are the french elections. runink the markets have ahead of themselves expecting hikes from the ecb. short-term, the risk for euro-dollar is to the downside. the euro will be better toward the end of the year against not just dollar currencies, but particularly yen, because the market will start pricing that in. is a charthere looking at french political risk, but this is the euro-u.s. dollar one-month risk reversal.

i know you follow ecb tapering. do we just assume at this point, because of political risk, that qe is here for infinity? isc: we do not assume qe here for infinity. i think for the sake of europe, it should not be there for infinity. we see increasing pressure from tothern european countries start the tapering of qe in europe. unemployment is north of 10% in most of european countries. that is basically what would advocate for qe to bring forward. however, at the same time, we see some data pointing to a sort of 2% growth across the e.u., which is -- why would you keep doing qe if the economy is growing as it is? that --initely think and of course, the few election

milestones and deadlines that we certainlygh 2017 will possibly bring the ecb to again intervened to stabilize markets when needed. however, i think that there will months, a sort8 of a move. i think the communication is what you are talking about, to go the direction of tapering in europe as well. francine: thank you so much. our guests post a with us. fed chair janet yellen speaks at 9:00 p.m. today. the berkeley's, getting a written reprimand and a pickup. -- pay cut. ♪

francine: this is "bloomberg surveillance" in london. barclays says it ordinal issue a formal written reprimand and make significant cuts to ceo jeff bailey's pay after he tried inidentify a whistleblower 2016. he has apologized to the board for the error in taking action to identify the person. let's get more with our finance managing editor. bloomberg found out about this first, but there are still some the questions about what exactly happened. what do we know? 2016, he tried to find out who the whistleblower

, and it seems to be a violation of laws for whistleblower protection that he should have the identity. today there were repeated attempts to find out the identity, and that has led to the action by the board, which will recommend him to the agm again for reelection. francine: has this ever happened before? elisa: the share reaction has been more muted this morning. it seems investors, for the time being, expect this to be a bunker along the way and that on board.uld stay as one analyst pointed out, if he should go, it would be a significant change, potentially, for the bank. francine: is it a credibility problem? is pay also got cut. concern abouts

his judgment in that circumstance, and how the board in general corporate governance unfolded in that case. francine: thank you so much. up next, the four-way fight for france. a late surge for the socialist candidate in the polls, stoking more uncertainty about an already unpredictable election. we are seeing a little bit of market movement. we were talking about it. you can see euro-dollar one-month risk reversals. will it really have an impact on yields? we are seeing a lot of japanese buyers coming out of that market. ♪

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will issue a formal written reprimand and make a very significant cut to the ceo's pay after he tried to identify a whistleblower in 2016. the bank says staley, who apologized to the board, did not take proper action. meanwhile, u.k. regulators have started investigations into his conduct. egyptian president abdul fattah al-sisi has declared a three-month state of emergency and created a powerful new antiterrorism body after palm sunday church bombings claimed by islamic state that left at least 43 dead. the attacks were the deadliest strike on the country's christian minority since al-sisi was elected in 2014. the st. louis fed president says the u.s. economy will probably grow around 2% this year, speaking earlier on bloomberg. he said a lower-than-expected jobs report and weak first-quarter gdp suggests america remains in slow growth mode.

is, you know,nomy maybe not as strong as we would like. 2% growth may is not as fast as we would like it to be. but it is very consistent with what has happened over the last 5, 6, 7 years in the u.s., and there is really no indication of any further weakness than that. so therefore, i think we could allow the runoff to occur. says the bank of england repeatedly pressured commercial banks to lower their settings for libor during the 2008 financial crisis. a report by the panorama program sites a secret recording in which a senior manager at a large u.k. bank instructed a libor submitter to lower his rate. the boe was quoted by the bbc as saying that libor and other global benchmarks were not regulated in the u.k. or elsewhere during that period. the central bank added it had been assisting the investigations into libor

manipulation. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. francine: the french presidential election is becoming a four-way contest, with a surge in the polls. the far left candidate has moved into third place less than two weeks before a vote. our reporter joins us from paris. could we actually see another serious upset? reporter: it is possible, francine. if you look at the margin of error, it is usually around 2%. if you take the best course over the past few days -- 19% in many of those polls. ,ou take the lowest poll macron run 23%, and you see the margin of error means everything could still change, less than two weeks before the elections. you have a lot of people who are still undecided.

french voters still undecided, and many could make the decisions at the last minute. francine: big rallies over the weekend. how did the candidates respond? melenchon knows he has momentum, so he held a massive sunnyir rally on a sunday, a gathering of 70,000 supporters. he claimed to be the candidate of peace. he criticized francois hollande and angela merkel's response to .he u.s. airstrikes in syria meanwhile, francois fillon held a big rally in paris. 25,000 people. directly.d macron he was joined by nearly 600 right-wing candidate in the legislative elections in june. he said that macron will have a very hard time to secure a majority. francine: caroline, thank you so much, in paris.

still with us are a hedge fund manager and co-cio at an investment manager, and the head of g10 fx strategy at merrill lynch international. you are french. you live in london. what are the odds? how do you look as a hedge fund manager at the first round? this presidential race was appended. we end up with a melanchon first round? loic: this is a possibility, although i do not believe in it. clearly, the trend on the red ise, the melanchon line, striking. the main danger on that line would be that the socialist candidate, at 9%, finally gives , and basically, obviously, the votes of that candidate would be probably split between macron, most likely. i still believe, as we speak after brexit and trump,

it is difficult to make predictions. i still believe we are heading for a second round macron-le pen. thanos: uncertainty has increased. if you pick melanchon against le pen in the second round, almost there is no positive outcome. definitely, a le pen win would be the worst possible outcome, because the markets would assume the eurozone breakup. what if melanchon wins? france will take a direction for the left, and this is not the direction the economy needs. it needs deeper forms. is an increases in risk and has made the first round more important than before. the momentum is moving toward melanchon, and the market is not prepared. francine: what are french voters voting for? is it security, the economy? why is there such momentum with melanchon?

i mean, he knows how to talk to a crowd. loic: i think you have two populists. if you set aside france and germany, all the traditional parties have broken up. you see the failure of the socialist party, which is the incumbent, the one that was leading the country, hollande. the socialist party and 9%. you see the traditional right ,mbodied by francois fillon which is dealing more with affairs of corruption than any other thing. as you said, france needs reform. and somewhat to implement reforms, you need exemplary behavior. i think that leaves us with the thepopulists candidates, extreme right le pen and on the left, probably, more of someone that is -- or commentary was candidate.the peace

i think his speech is particularly well-suited to the current environment. , who obviously embodies a young, modern vision e.u. ance, within the i think if we managed to avoid the second round without two populists candidates, i think that will bee one with the populist in the second round should prevail, and i believe it will be micron. croncine: cam -- can ma govern? there are legislative elections in july. loic: there will be a change. usually the parliamentary election follows the presidential election and gives the momentum to the president. particularly, you have seen the support for macron has been strong on the right side of the left and the left side of the right.

a well-knownly policy, positions that have rallied in support for macron. i believe he will be in position to secure a parliamentary majority, should he win the election. if not, we will go into a direction that will require a bit more attitude of maneuvering for parliament. that has been the case, as we know, in spain. spain has had very strong growth during that period. i think it is better to have a majority to implement reform. sense of give me a what happens to yields. this is the spread between france and germany. does this go higher as we near the election? thanos: despite the lack, markets rise about -- price about a 20% possibility for aim le pen win. that could increase in the next couple of weeks. it is more of hedging, rather than pricing it as serious.

it is more like a tail risk at this stage. u.s. elections, the brexit referendum, closer to the event, risks increased, and markets move. it is quite likely we will see the same thing here. francine: would you buy or sell at the moment? chart, japaner selling french bonds. you see this macro selloff the last couple of weeks. loic: i think the charts about the spread between germany and --nce, your previous charts it will not close the highs. at the same time, i believe that if le pen ends up in the second round, you might see the spread widening. francine: 100? there is still the ecb, right? loic: there is, obviously -- look at what happened in the days after brexit, and just before. currently,lity --

everyone is talking about it. i think if you look at what is aing priced, it is not climactic outcome. i think micron will prevail. -- macron will prevail. i think markets are certainly underpricing the possibility that we have a dramatic outcome. but i do believe that eventually macron will prevail. francine: thank you so much for joining us. we will talk about hedge funds and some of the opportunities out there. stay with "surveillance." under pressure. these are increasingly a focus as hedge fund outflows mount, but does performance remain key? plus, this wednesday, we want to speak to christine lagarde. ♪

francine: "bloomberg surveillance" here in london. let's get straight to your market updates. mark: good morning. shares are unchanged. we have been up and down. we are literally unchanged. the bestources, performance. food and beverage, the bottom of the pile. four days of gains proceeded today. the week, marginal gain was second weekly gain in succession, the largest winning streak since mid-february. the big corporate story today is barclays shares falling as much as 1.2% earlier. they have since recovered

losses. staley'swill cut jeff pay as investigators investigate how he tried to investigate a whistleblower last year. barclays total return over daily -- shares plus dividends, since december 1, 2015, 3 .2%. that is the decline under 2.5%y, versus a gain of for his peers. this is barclays versus stoxx 600. the yellow is the stoxx 600 ,anks index, during his tenure down by 7%. staleyor barclays under underperforming the -- outperforming the european benchmark. you are talking about the spread, the difference between the french and german ten-year, widening to the most since 2024.

it is a four-way race. look at what the polls are telling us. emmanuel macron, marine le pen, tied at first place, 24%. one point behind. it is tight with less than two weeks before the first round. march 7. since russia signaling it is weighing and extension two opec-led production cuts. we are about $52 a barrel today. francine: great charts there. mark barton with your market check. hedge funds are under pressure that exceed those around the financial crisis in length, but not in depth. fees are increasingly focused, but performance is still the key metric for investors. how do you maintain it? let's ask one key hedge fund manager. thank you so much for sticking around. we talked a little bit about the

markets, treasuries, the french election. how is your industry doing? loic: the industry is under pressure for two reasons. primarily, increased compliance and regulatory costs affecting asset managers. on the other hand, obviously, performance has been quite heavily commented. i would say it is always the case when you have an easy run on the equity markets -- we know that managers with or without leverage our going into the u.s. equity markets. they have not had a great run. as thatink that as soon trend normalized and that we see a bit more volatility, we will see what managers are therefore. preserving the downside and performing when the market is going down. i would say that the -- you -- that interaction

between investors and asset managers is good, but there is a -- of pressure coming from in particular, coming from regulation. francine: and fees, right? .t is the ultimate question if you believe this is a cycle, when does it come back for hedge fund managers? loic: i think opportunities come from either regulatory change -- and as we all know, a lot are affecting the european banking industry at the moment, the european bank landscape. but they also come from volatile and uncertain times. and each election, especially in europe, is creating those potential volatile moments. be able are supposed to to differentiate. francine: talk to me about financials. i know you have a financial fund. blue versusin european banks. are you buying anything that the banks are selling off? ,oic: we are definitely

believing -- this is just looking and valuation of banks. clearly, european banks are undervalued compared to their u.s. peers. that is primarily coming that we are still in the aftermath of the crisis. number two, i think european banks have applied a lot of energy to deliver. deleveraging is happening within european banks. that creates a lot of opportunities because of the regulatory changes, which creates opportunities for managers. i would say those opportunities are twofold. on the one hand, there is the asset disposals that are taking place. they started immediately in 2009, i merrily with selling books.nperforming recently, there has been a diametric servo -- surge of performing books disposal. 2016, or just over

$100 billion of sales from u.s. banks, just to be prepared with probably 10 times more than 10 years ago, just looking at the performing books. on the other hand, the new capital rules have pushed banks to make arbitrage and change where they want to arbitrate leaving markets withdrawing from activities in massivehat create this direct lending opportunity in the specialty finance market. francine: we will talk a little bit about that later. stays with us. christine lagarde will talk about the global outlook and positive priorities. that interview is on wednesday. do not miss it. ♪

francine: "bloomberg surveillance" here in london. let's bring back luic fery. we were talking a little bit before about the opportunities, and you said these are twofold. first of all coming in the

lending landscape, regulations make it more difficult for banks to lend in certain spaces, but you are also talking about nonperforming loans. greece, italy, is it time to buy, or is it still too risky? loic: there is always a period when price recovery is happening. spanish npl in particular, we bought very early in 2009, 2010. typically, i would say that italy has still a long way to go before we really have price recovery happening. the pace at which those sales are taking place in italy is slow. if you are talking about greece, in greece, there has been -- today, there is more the process about buying loans. fine, but how do you service those loans? the key challenge is setting up the operational set up that would allow you to service, properly, those npl's and provide solutions.

the opportunity in greece is more about undercapitalized companies that have private capital money. the opportunities in greece are a little bit different. in particular, the link between public sector debt and the private sector -- that is one area. we are also looking at very things in the health care industry. while you were talking, we got a greece nonperforming loan chart made. this is npl's in greece as a percent of total loans, around 37%. the is the opportunities even if there is no debt relief, or if talks with the imf turn ugly? loic: i think typically we are talking about a country that, over the past few years -- typically, this is an economy that is welcoming of foreign capital. securee, always, ways to

-- the private sector -- the private equity side, there are always ways to secure loans with assets, especially when you secure loans with set asset values, which reflect the current environment. there are opportunities. the either come from regulatory changes or a volatile moment. i think greece had its fair share of volatility in the past few years. francine: talk to me about the lending landscape. i guess you want to buy areas where creating is -- lending companies that loan privately, away from the banks. you say it would replicate the industry in the u.s. have roughly speaking, you 70% of the financing of the economy that is nonbank financing, where as in europe you have 80% on the bank balance sheet. the regulatory changes are pushing banks to make clear choices and the arbitrage, where

you want to focus. you want to focus on the larger market. in the easier, less costly type of loans -- we have looked at specialty finance, all the areas that are asset backed lending, leasing, financing. all those areas are coming in our opinion, very attractive to lend on. and obviously, there is a key challenge there. this will be the servicing and recapitalizing capabilities across the european jurisdiction, which we have rolled out over the last few years. francine: thank you for joining us, luic fery. soon, david joins me out of new york, and we talked to rupert harrison. ♪

moody another

tantrum. the treasury curve flattens after william dudley downplays the links of the normalization. barclays ceo gets a significant pay cut as regulators investigate allegations you try to identify whistleblowers last year. g7 foreign ministers meet today but tension has turned to rex tillerson and russia as he accuses the kremlin of incompetence. isd morning everyone, this "bloomberg surveillance." i'm here with david gura, welcome. to fill inleasure for tom keene who is on a well deserved vacation. francine: let's get to the bloomberg first word news. in egypt, the president has declared a state of emergency after church bombings killed at least 43 people. he also created a new agency to

fight terrorism. islamic state claimed responsibility for the explosion. the terror group targeted each option christians. mission toon's russia became more collocated. he said he will bring a tough message. likely to get a tongue lashing from the russian -- and minister and vlad vladimir putin could snub him by deciding to not meet with them. truck in the wake of a rampage that killed four people. the suspect is an asylum seeker who had acquired for residence permit and it was turned down. he went underground. has beenperson arrested. in the u.k., prominent supporting a are call to cap net migration.

that is for theresa may to satisfy the euro skeptic version of her party. it will be based on the number of working visas. 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. check let's get a quick of the data. futures right now on the heels of the unemployment report we got last week. 90,000 jobs added but many fewer than expected. the euro-dollar right now is basically flat. look at nymex crude. we did see the take up after the u.s. attack on a syrian airfield last week. francine: i like your market check. mine is similar. stocks are flat. i want to show you the south korean currency.

it is leading losses amongst major currencies. this is you with the geopolitical concerns lingering in south korea. today, g7 starts with the foreign ministers and wednesday, rex tillerson will show up in moscow. david: let's take a quick look at the bloomberg. a chart looking at the fed balance sheet. the foundation for a couple of conversations we will have this morning. look at the breakdown for that. a trillion dollars balance sheet. now, it is focused solely on what the fed will do when it comes to unwinding that balance sheet. a handsome chart. francine: is almost likely speak before the show. almost like i am more in sync that i am with tom keene. here's a look at the treasury yields. if you look at the technicals. the 10 year yield is below --

this is a great chart thanks to hillary clark. this shows us below the hundred day moving average. a little bit of even not to levels. on a monday morning. welcome to "bloomberg surveillance." downplaying the length of any positive short-term rate normalization. markets are focusing on the trajectory of the trillion dollars balance sheet. with us earlier, jim bullard give some clarity. >> we are not talking about asset sales. or at least, i'm not. this would create policy the future if we ever did get into another recession. and we are back at the zero bound. i think it is it prudent policy at this point. our guest host is

rupert harrison. he was the former chief of staff of george osborne. great to have you on the program. so much focus on the fed. futures are discounting an imminent rate hike because of the jobs data we had on friday. how do you view that compared to other negatives and yields around the world? are we going to see a shift in treasuries? rupert: i think it is underpricing the past a little bit. they're comfortable with the state of the economy. the jobs report and the headline number -- we know about the weather affect as the delegate will put them off their profitable. unless we get a geopolitical event to really upset things, i think we are set for june. the balance sheet is clearly a discussion they feel the need to be having. they feel the need to drawing up plans on the balance sheet. that is a political signals much

as anything else. they give the impression that they are in the early stages of that discussion. i wouldn't expect anything to happen yet. francine: will they have a more substantial discussion about the balance sheet? does the market take note of that? rupert: i think the market is sensitive to discussions on the balance sheet which is why they will play it carefully. very conscious of what happened after the taper tantrum. they feel they have things under control in a way at the moment. they like the way market pricing is moving. they are comfortable with the u.s. economy. they don't want to drop any bombshells. the messaging you are getting is steering you on a path for 3-4 hikes this year. david: there seems to be some discrepancy with the -- and unwinding the about sheep. how difficult will it be for the fed to do both things at once? rupert: i think they will do a lot of signaling in advance and

they will take it gradually. if you take a look at the minutes and conversations they are having and speak to people around the fed, it is an early conversation. there are no set views or timeline. they will take it slowly to see how the market reacts. david: how much does personal way on how much they might go? leave andhair may there will be vacancies on the fed. is that leading to an implicit timetable? a great issue. personnel is one of the biggest wildcards that we face. although we are seeing the impact of that already. on the balance sheet discussions, that is one of the reasons janet yellen wants to sit on the balance sheet because they are already addressing this issue.

i think that the chair is overwhelming important -- we are very unlikely to get anyone who will come in and cause any kind of market shock. we have the current fed turn to get ahead of the curve. and initially, they want to signal continuity. francine: i want to bring you to my chart so you can see the fed assets. we have a great bloomberg story ,hat says in overseas market they have turned positive in recent months and it makes it difficult for treasuries. true.: that is absolutely you have the overwhelming structural sources of demand for with pressures from

the weak productivity. so at this point in the cycle, you typically get a flattening curve. the fed is on a gradual hiking paths and the long and will be affected by these dynamics. going to seere we less subzero levels? you mentioned japan. rupert: japan is having the way policy is working. they were big beneficiaries of the early reflation move with the stronger dollar. the target on the 10-year is working. so until you get big moves, that is the key test there waiting for. in europe, we have had some noise but i think mario draghi is in control of the committee. i think they are more concerned inflation in europe is

still dead and until we see this exit.is a gradual francine: we also have to talk about politics in france and italy. coming up, a conversation with the imf managing director live from brussels. 6:30 a.m. in new york -- we will talk about populism, france and greece. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." wall street's top regulator is illuminating dozens of contractors hired to root out fraud. that is according to people familiar with the matter who say

that job cuts at the securities and exchange commission raised concerns at the pace of enforcement action will slow down. the agency is bracing for reductions but that didn't lead the job cut. eileen rosenfeld -- the wall street journal says the company has received -- struggles. activists are unhappy that the sales have fallen the last three years. they will determine the timing of the succession. barclays will reprimand the ceo and cut his compensation because he tried to identify an anonymous whistleblower last year. regulators in the u.s. and u.k. are also unhappy -- are also after he tried to unmask a tipster who alerted the bank. that is your bloomberg business flash. sticking with barclays? we are.:

the ceo has her it made a public apology saying he will accept whatever sanction is deemed appropriate. he said he will cooperate fully with the conduct authority. the board has accepted his apology. shares initially dropped by 1% but shares are now higher. moore, us now is michael part of the team that broke the story. and chris wheeler. congratulations. this was a story that bloomberg had first. rupert harrison is also on set with us. i have never seen anything like this. is this a new rule that comes into play? does this damages credibility? it certainly is a black guy because he has been so vocal about bankers needing to restore trust and told them selves to be certainlyquestion so

that does hurt that message. this is something that barclays banks, toand other establish a whistleblower program to speak up more if they see something amiss. and to have the ceo try to unmask it was a blower is not a great look for the programs. francine: is his job on the line? the board says they have accepted his apology and he is going to stay put but he has had a pay cut that is his credibility at stake? chris: my suspicion is that he is fine for the time being because i think the bank has taken advice from the pr advisers who are her profile. and i think they have been told to come down hard on this. giving a written warning to a ceo is unprecedented. the answer is to come down hard and we don't want this to come down again with bloomberg doing other five stories and having it become more painful. let's wait and see.

>> i'm curious about what that says about the bank culturally. can we read anything into the culture? chris: i have been thinking about this this morning. this is a bit like henry the second -- having thomas a becket murdered. he saw this letter about someone they'd hired. and he said, who wrote this? and you can see what the knee-jerk reaction was. howrtunately, that isn't you behave anymore. and the bank is making a clear message that the heat of the moment no longer counts and you have to be fully accountable for your behavior. david: help us understand what might happen next? herecase is under scrutiny in new york. what do we know that could color that investigation? michael: these investigations are in the early stages and you

are expected to take several months for this to play out. but i think the ultimate punishment will depend on not but the control that the bank had in place and whether they need to be strengthened. francine: what do we know about how much they need to be strengthened? is it harder in the u.k.? the rest u.k. showing of the world? michael: they are helping to lead the investigation so they are front and center on this. it is a little bit early to tell in terms of what they might find on the controls in place. this will be something that hangs over the bank for the next few months. francine: does this weekend -- does this weekend staley? chris: yes. this could be terminal. getting a written warning to the ceo is a big slap in the face.

but i think it is because the bank wants to say they have taken hard action. it will be a tough few weeks for them. david: thank you to michael moore and chris wheeler. coming up, we speak with carl weinberg at 6:00 a.m. in new york. this is bloomberg. ♪

>> i still believe as we speak trump,hat is brexit and it is difficult to make a prediction but i believe we are heading towards the second round with macron and marine le pen. francine: that was a famous hedgefund manager, french fund manager, indicating that a second round between macron and le pen is likely but he did tell me that he hasn't ruled out the possibility of -- with le pen. investors are dumping indigos -- for more on all of this, we have rupert harrison still with us. he also knows a thing or two about politics because he was the chief of staff for george

osborne for many years. let me look at the intention of voting. we can take this with a pinch of salt. but it does tell you a story -- in far left candidate red dust taking votes from everyone and going up in the polls. how does each candidate look at this position of themselves? could we see him versus marine le pen? rupert: that'll be the nuclear option. market would prefer -- but he is unlikely to be able to do much. you clearly have this and i think that people catch on to him because they like his style and his musings. he is puncturing holes in the other candidates. i think the caveat is that he has broken out from a narrow

bound. when you see a burst of popularity, he is now at the top of his range. i think this probably is the ceiling. gethim to carry on and another 5% support which is what he needs is very difficult. i agree that le pen and macron is central. francine: has the nature of politics changed? far less votes would go to a left candidate and what we see with bernie sanders is that they went to donald trump. is it populism versus the rest of the world? river: there has always been some kind of olap -- some kind of overlap. there has always been some kind of meeting around the back of the lyrical spectrum.

there is a new personality -- to make this the big issue. equally, you could be brought back down again quickly. so he has volatile. david: how are you regarding the polls at this point? you check what the speed with which social media can affect things. we are getting polls every day. rubric: i take the view that is a little bit unfashionable is that the polling did very well. with the trump and brexit, the polls are with one or two points. the difference here is that you take the second round between marine le pen and macron, a 20

point margin which is well outside the margin of air were french polls have been pretty good. think francois fillon was a big surprise but that is difficult to do. ago and paris a month they are aware of the risk of shy marine le pen voters. i would put quite a lot of weight in these polls. rupert harrison will stay with us. coming up this week, a conversation with christine lagarde. this is bloomberg. ♪

david: i am in new york with francine lacqua and london. the first word news now. taylor: in egypt, the president is ramping up the fight against

terrorism after deadly bombings at two christian churches. at least 43 people were killed. islamic state has claimed responsibility. a stateident to declare of emergency and created a new anti-terror unit. half of voters in the usa trump should be forced to release his tax returns. say trump's are relevant to his ability to do his job. in the gulf, sergio garcia has won the first major championship in a sudden-death playoff with justin road to take the masters tournament in georgia. he has been considered the best player to never win a big event. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. i'm taylor riggs. this is bloomberg. thank you. south korean equities traded

lower today after an american aircraft carrier bound for despitea was diverted tensions over rex tillerson saying that the u.s. is not interested in regime change in north korea. secretary tillerson heads to moscow on wednesday. joining us now is the xenia and also with us is rupert harrison. the implication of moving this into the region, what should we read into that? xenia: as rex tillerson has said, this isn't about regime change. it is about putting pressure on north korea and they could be putting pressure on china. when's no question that the chinese president met trump last week, they talked about north korea. we haven't heard much of what came out of that meeting. so if the americans send their ships and warships to the region, essentially that does send a message to china.

you do have to remember that this comes at the same time as american bombing in serious so this is an america that is .aying, we can be strong saying we don't necessarily want to but it isn't just north korea and china -- if you don't help us, there are other options. david: things were spilled over about a trump doctrine. secretary tillerson adamant he doesn't want to see regime change in north korea and the u.s. ambassador to the united nations said that it seems to be the course in syria. what is your sense of what the doctrine is shaping up to look like? i think it is far too premature to talk about what a trump doctrine looks like. what we know is that he has said -- in america in recent years, if it isn't in the direct

interest then america really shouldn't be using resources to address whatever challenge it is. i don't see any reason to change that assumption. america took action in syria last week. but it was a limited action and there is no reason to believe at the moment that there will be much more than that. able to think otherwise should be a little bit less sure about that. so to the sense that we have a doctrine, it is what we heard through the campaign. less intervention in america except when america believes it is in their interest. that?ne: do you believe was the syrian or strike a little more unpredictable and it could get ugly in terms of tensions between the u.s., russia and europe quickly? doctrinehe only trump so far is unpredictable and a. which is a long-held kissinger

principle where you don't know happen next. to with north korea, there isn't a u.s.trump doctrine but doctrine saying that it is unacceptable for the north korea to have intercontinental ballistic missiles armed with a warhead that could reach the united states. i think a message has been delivered to china saying that either you do something about this or we will. now the strong pressure on the u.s.. i think we have every reason to believe that donald trump means that. francine: what will china do about it? this is the problem. the regime can't collapse. then two things happen. refugees across the border and a u.s. ships sitting on the border. that is their priority.

and one of the topics at last week's meeting, trump is trying to tell the chinese that you have to do something or we will and the chinese are saying, ok. but we have different interests. we have given priorities. the reality is, what can trump do unilaterally? he can decide to fire missiles at north korea but the consequence of that is that north korea will be firing missiles that south korea and everywhere. so the same is true of syria. america can take action but the long-term consequences of that -- we don't actually know what the cause of lenses are and we can't affect change on the ground and america doesn't want troops on the ground. david: i was listening to interviews over the weekend have frequently embers of this administration commented on what happened in libya as a cautionary tale.

xenia: libya to syria? i think the thing that is worth remembering is that if you go back to the beginning of the situation in libya and the american involvement there, hillary clinton, then secretary of state, sent huge amounts of resources and time and energy holding a coalition on the ground in libya through which the americans could actually work with them. but she was unable to do that. the factions in libya was too great. but the message that america was understanding at that point was that you cannot affect change in another country unless you have actors in that country who are willing to move on the same agenda. you can support others but you can't promote an agenda that isn't held by those on the ground. applying that to syria, the same is true. you have incredible numbers of

factions in syria. you don't have a coalition with which the united states can work although it has been trying to for a long while. and you cannot force an agenda. you can only promote an agenda. so this is what the plan has been with syria for the last few years and chances are that this will continue. until there are factions on the run in syria with whom the international community can work and support, it is unlikely that we will see any real change in syria brought about by the international community except in a very temporary way. david: what is you observe from the meeting in mar-a-lago last week? our collie told us that we have warm words of middle substance. how successful was a summit in florida? your colleague was right. warm words but little else. that is the best we could hope for. this summit was vastly premature.

the u.s. government doesn't even have its personnel in place. so having a summit at this point two months into trump's administration was incredibly premature. we shouldn't of expected anything more coming out of the summit. in fact, it was the best we could have hoped for. go theirous partners separate directions saying ok, we understand one another better. that is a good outcome. francine: boris johnson has said he will meet with the russian but he isn'tt g7 showing up. does that put the u.k. in a vulnerable position? rupert: they are at a volatile position because they're trying to figure out what will come out of the u.s. administration. i think they would admit that they don't have a huge amount of insight. so players are dancing around the trump administration to figure out the next direction. and it is the actions of the u.s. that will determine the

next steps. aboute with north korea whether the u.s. -- whether it is a credible threat to the u.s. but the uncertainty of whether that is possible is a master of tribes approach. by being unpredictable and the mad dog where no one knows what you will do -- that is more likely to deliver results when it comes to that. there is a degree of uncertainty with china and the leaders about who they are dealing with and whether it is a credible threat. david: rupert harrison, xenia wickett, we will be back. in the next hour, we speak with thomas wright who is the author of an upcoming book. that is that 6:30 a.m. in new york this is bloomberg. ♪

francine: this is "bloomberg surveillance." u.k. foreign secretary pour johnson canceled a trip to moscow feeling the crisis between russia and the west. rather then traveling to russia, he will attend the g7 meeting and italy where he will call for the russian president to pull his troops from syria. for more, we are here with rupert harrison on and a xenia wickett. we did talk earlier about the u.k. response and how they are seen as negotiating with brexit. but what is to have a net g7 for this to deescalate? neither of you are expecting this to turn ugly or uglier but will they talk about sanctions on russia? rupert: it is such a fast-moving

situation. placegime was put in dependent on a coordinated line from the u.s. and u.k. and getting the rest of europe into position when sanctions were imposed. put into awere position over whether sanctions are tough enough. u.k. policy has been fluctuating a little bit. if you look at u.k. policy at in it hasn't has been had a consistent direction. shall we say. but that comes back to a u.s. lead. francine: where does europe fit into this? italy is on the brink of a possible election. a great question. let's go back a little bit. when sanctions were first imposed, it was driven by the

united states. whichs depending on country but europe was a little bit less certain but fast forward to today and europe is fairly strong on sanctions depending on the country and you have a united states with donald trump where the europeans go ok, are they going to back us? and then you have the events of last week which brought a stronger message and you have foreignwhere all of the ministers go there and say, what actually is america's policy toward syria and russia? is we have heard about a close relationship with russia and on the other hand, we have heard give half ofd to that -- so trying to understand will be exactly where america's bureaucratic policy is. where is america bureaucratic

policy? towards president assad remaining president in syria and russian support of president assad? over the weekend, i was reading that we could be putting back on the table russia coming back into what would be the g-8 if russia actually is going to be willing. --say that we give up on it on president assad. david: you have so many people have expressed adversity to that. is that still an issue? donald trump held the isition that multilateralism bad for america. but if he can use that to achieve his ends then he has a smart guy and he will use it. i think this is a great case in --nt where if the europeans and we can't forget canada and

japan -- if they come together to actually build a coherent is,y around where america and potential g-8 with russia back in? bringing russia on board with syria? then yes, absolutely, he will use that. but will he rely and be constrained by multilateralism? absolutely not. does this long learning exercise go on? it was brought up a few weeks ago where steve mnuchin -- it seems like all of his g7 counterparts were eager to hear what america was thinking of what the administration was thinking. is action inhibited by the fact that we are at a point where allies want to know what the u.s. is thinking? rupert: i think that goes on until we get clarity. you do start to fill in some of the blank spaces as you get the

first meetings between principals and you get more appointments. one of the issues is that in the u.s. state department, you have massive amounts of unfilled positions. nothing can get through. so it is going to take some time as we get more positions filled and blank spaces are filled in. i don't think we should expect rapid progress at any summit soon. franco you are one of the smartest people to talk about brexit. does this have a relationship with brexit? if they say they will stand behind you and go on russia -- they have so much they can do. can they play that card? of the this is one interesting things to come out of theresa may triggering article 50 with the juxtaposition of faler on trade and failure on security coalition. it is questionable how credible

that threat is. the second question is -- ok. can you identify any areas you will pull out of? and it is not credible. i think one of the potential u.k. deployment in the mediterranean and eastern europe. eastern europe is difficult for the u.k. action. the mediterranean, may be. it is less directly relevant. the u.k. is a contributor to the security of the mediterranean but in general, i think it is a credible threat. francine: rupert harrison, thank you so much. and xenia wickett. if you are a bloomberg customer, it go to tv so you can get this on the screen so you can see him talking earlier on and you can see some of the shows and the cool charts we put up for you. and you can ask guests a question. will do that for

you. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." drugmaker -- has agreed

to a $5.6 billion takeover offer . they're one of the last independent generic drug businesses in europe. the price represents a 49% premium to the countries -- to in december. price elliott management is targeting the world's largest mining company. unify corporate structure and improve capital returns. the firm sayss -- it is worth around $22 billion. chp is not commenting. that is your bloomberg business flash. sticking with commodities? franco chp shares are surging and went higher after news they are running it as it would boost shareholder value. now, let's get back to our guest rupert harrison from

blackrock. how do you view the commodity cycle? is demand still there? on the broader commodities, yes, it is all about china. a little bit overinflated by some of the liquidity dynamics in china and some of the policy dynamics. i spent both of those to come off a little bit in the months ahead. francine: how do you view oil? rupert: we actually have a oil range approval. between $40-$60 with a view being that there is a floor. and 40 is the pain threshold for opec and saudi and as you get above $50, the supply response in the u.s. is far greater than anyone anticipated. the degree of innovation happening in the u.s. sector is astonishing. so we are pretty comfortable.

david: what is your feeling that we will see a continuation of the opec deal? we saw some indications that russia may be interested in doing that? rupert: it is a little bit of theater. you have a concerted effort to try and keep the rice from getting too far below $50 and every time you get noise around the build in the u.s., you get more talk about another deal and continuing extensions. i think there is probably enough shared interest to kerley on delivering that. a painreally is management exercise, essentially. stopping the price from falling too far. francine: what is the one thing that you worry about that the markets haven't caught on yet? rupert: in the short term, the market is underpricing the risk of a government shutdown in the u.s. -- we need continuing resolutions to avoid government shutdown and that needs to get a vote in the senate and unless

there is anything but the most vanilla resolution, it is difficult to get a 60 vote. as a democrat, what impetus do you have to help republicans out? republicanunified government. if there is a shutdown, republicans get blame. if there's anything in there about a hot issue for democrats, i think we get into a difficult position and it will be read by the market as yet another doubt in the ability of congress to get things done. sense of thes your washington agenda at this moment? rupert: i was in washington last week speaking to a bunch of people and i and that thinking that it is even more complicated than i thought before. the sheer number of different things that could happen with the bridge is at the way they could go. are at such an early stage where tax reform means a very different thing in the house and senate and the white house and the white house view of what they

want. the one thing you do hear consistently in washington is that we need leadership from the white house and until they have that vacuum filled, it is difficult to know what the direction will be. that is something people say when they want to keep their heads down and they want someone else to go up over the front and into the bullets with leadership. so i think you are waiting for that. until we have that, it will be difficult. david: rupert harrison. thank you very much. in the next hour, and we speak to carl weinberg. that is coming up next. this is bloomberg. ♪

francine: avoiding another

tantrum. the treasury curve flattens after william dudley downplays pasty normalization. under investigation, the berkeley ceo gets a significant pay cut as regulators investigate allegations he tried to identify whistleblower last year. and missions to moscow. tension has already turned to rex tillerson's trip to russia as he accuses the kremlin of incompetence. this is "bloomberg surveillance." david, so nice to have a second hour with you. the wholeth us for week. we need to talk about geopolitics and tuscany. david: i am looking forward to a vacation -- no, there is no ration -- there is no vacation for me. no rest for the wicked. taylor: the egyptian president has to cleared a state of

emergency after church bombings killed at least 43 people. he also created a new agency to fight terrorism. the islamic state did claim response ability for the explosions. they targeted egyptian christians. and rex tillerson's mission to moscow became more complicated. the secretary of state will bring a tough message on wednesday following a cruise missiles attack on syria. president vladimir putin could decide to snub rex tillerson by refusing to meet with him. in sweden, people are questioning the countries opening immigration policy. following the truck attack that killed four people. suspect allegedly went underground and alluded authorities trying to deport him. , prominent conservatives are supporting the call to cap migration at 50,000 leaves theuntry

european union. that underscores the pressure on theresa may. this action has called for restrictions on the number of working visas and a five-year freeze on unskilled immigration. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. i'm taylor riggs. this is bloomberg. david: let's get a quick check on the data this morning starting with futures. s&p futures are down slightly. the euro-dollar is flat. the 10 year spread is up at .1% and we happen following oil since the strikes of syria last week. a higher wti, .7%. francine: this is what i am looking at. similar to yours. i'm trying to figure out whether the geopolitics of concern is playing out on the market. the only thing i can figure out is that the yen is moving a little bit on tension ahead of the foreign minister meeting.

-- the south korean currency that is the korean won versus the american dollar. david: rex tillerson is meeting leaders today before traveling to moscow. russia has described america strike on syria as a dangerous violation of international law. wiring -- now is carl -- joininginberg, no us now is kevin cirilli and carl weinberg. this is after a meeting with the president. this took up a lot of airtime. what is your take away from that summit? about which for most -- about which foreign policy seems to be changing. kevin: this is the first time

the trump administration has separated themselves on russia. maybe they were facing a lot of questions about where they would fall in line. but we have rex tillerson saying that russia is incompetent on how they were handling syria days before he is scheduled to go there. alsoust by himself but with his counterparts in the u.k. -- boris johnson will also be there. that is sending a clear message that they are looking for a change in policy. isid: andrew barden, how this playing out? we are following the u.s. security council meeting after an emergency meeting last week. help out in the middle east? how are the strikes playing out? andrew: in the middle east, most of the gcc countries have been backing the armed rebels fighting president assad so they welcome this. turkey welcomed this. turkey wanted to see more come from it. the russia with visit -- obviously, harsh words

but at least they have words, at least it is some clarity, we have seen that these strikes won't really change the balance of power in syria. but it did send a strong message. so rex tillerson will meet with vladimir putin to see what comes out of this. francine: what is your take on the strikes? is trump more predictable than we thought? or does the am predictability serve him well in dealing with china? is this something that rupert harrison firmly believes. if he is unpredictable and people are on the guessing game. kevin: i remember on the campaign trail went candidate trump would say his unpredictability would be an asset to him in the white house. i think this is the first example we are seeing where he would be a will to make that case. these strikeshat were going off while he was having dinner with the chinese president. literally, they were sitting

across the table at mar-a-lago. let's also not forget that he moved the ships off the coast of north korea, sending a message. so again, i think when you look at the broader politics of this after speaking with aids to the senior members of the republicans in washington over the weekend -- they are breathing a sigh of relief. because i think they had questions about where exactly the administration fell on russia. when you had senator john make -- senator john mccain and lindsey graham praising you, it sends a signal about a policy from the administration. do we know about how the u.s. will deal with north korea? does the u.s. have to do with it or china? think in parti what we heard from the strike is that it resonated around the world. north korea was suddenly looking at it.

it wasn't just the president assad that got the warning from that. the other message that came from going tohat it wasn't totally advocate from their role in global politics. there have been a lot of questions about how involved they would be. theylthough this may be went undone straight, it doesn't a message that they will stay involved. and in moscow they are actively engaging at the same time. will see the same with china and north korea. david: thank you so much. that was kevin cirilli and andrew barden. now, let's bring carl weinberg in. let me attempt an elegant segue. towards foreign policy. what does that mean for the agenda we are beginning to see laid out in washington, d.c.? we're looking at how this could affect it. we will see how they can

multitask between foreign agenda and domestic agenda. we have to get the budget in place. and that will be a challenge. challenge for the economic side of the trump administration . and moving forward with economic reforms and programs. david: are you placing less faith in washington in terms of getting that done? the agenda is? carl: we have seen the uncertainty in foreign policy. so we continue to see the approach to economic policy. we are watching this carefully. in terms of economic policy, i was impressed with what came out of the trump summit this weekend. it 100 a program to increase u.s. exports to china which is that is opposed to the uncertainty of said we were

trained to think about during the campaign, protectionism and shutting down world trade. air.erything is up in the we had to keep an eye on it. francine: did the markets take notice? do you buy volatility or yields or treasury? now, we are concerned about tightening up. is going full blast. so the bond market has to keep an eye on the fed. they have to rely on the economy not getting ahead of where the fed wants it to be in terms of unemployment which is the mandate -- not gdp growth but labor market conditions. is what the bond market is going to be focusing on right now. francine: where do you see more of the money going? does it take a trigger for the markets to try to understand geopolitics? just a move?

will the market turn to -- i don't know if it is a panic -- or just, i'm easy. carl: i am waiting to see how the markets open today. this is the first trading ability since the missile attack. on syria. they see see whether this as risk or stress from the trump administration? there are different overlays to it. i am an observer this morning and we will see where it goes from there. the core economic story is unchanged by this. whether you're an economic traitor or you look at stocks or bonds. the course for the u.s. is employment and employment and employment. somebody has to do something. david: how destructive it should we be by the headline numbers we got on the unemployment report? number isheadline much more than the unemployment rate.

98,000 jobs created -- that isn't as much as we were hoping for. but still more than high frequency economics. they duty to keep the unemployment rate coming down. as for long as it is going down -- then you are in the danger zone. francine: thank you so much. coming up this wednesday is a conversation with the imf francinedirector, lagarde. that is 6:30 a.m. in new york. we'll talk about global gross and populism. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." let's get the bloomberg business flash. wall street's top regulator out fraud.oot that is according to those familiar with the matter. they say that raised concerns that the paid enforcement actions will slow down. they are bracing for possible budget reductions but the sec say that should lead to the job cuts. there is a report that -- will look for a replacement for the ceo. the wall street journal says the company has contained a search unhappyer investors are that model lisa sales have fallen for the last three years. the journal says razan drilled well determine the timing of succession. francine: thank you so much. cutboard of investors will

the wages of saly. regulators will review whether the ceo tried to alert the person about a senior executive. joining us now is michael moore. this is quite an unusual case. it because-- is there is new regulation about how to deal with whistleblowers? michael: it is a little bit of both. you have programs that have been expanded in recent years to encourage whistleblowers and protect them if they want to remain anonymous. was mistakenstaley in the way you and about this. he has admitted that. tried twice to figure out who had written the anonymous letter. alerting people to the concerns over a senior higher. francine: what does this mean? does it mean that our quays

doesn't have the right culture? they want to reprimand him so he is seen as stronger from now on? what do they do from this? michael: they would like to move on but now you have regulators involved that will be looking at both of those questions. both his actions and whether the bank has the controls in place and the right culture in place around whistleblowing. barclays is talked a lot about encouraging that. they have a whole website devoted to their whistleblowing efforts. trying to get people to speak up. but this is not a great look for them. francine: let me bring you to my chart -- barclays is in purple versus the stocks as we normalize it to make it more readable. what does this tell us about the efforts that barclays needs to do to get the share price up and how significant is it that the share price hasn't moved on the back of it? michael: certainly, the markets seem sanguine about there not being a change at this point.

what if you go back to 2012, that is when barclays really started their overhaul. and you have been relatively flat since then. so certainly, there is a lot more work to be done. staley has laid out what his vision of barclays is. and this is supposed to be the year that this vision gets realized. they shut down non-core. they start getting out of africa. thethey really focus on investment bank and retail bank. so whether this will provide a distraction to that year of execution, we will see. david: give us a sense of what might be happening next year? the statement, the pay cut, the vision that staley has laid out for investors. what is likely to happen next? michael: right now, it is in the regulators hands which is likely to take several months as they do their investigation. thatank has kind of said

they are waiting to see what the regulators do before deciding exactly how much to cut his pay. he got a 1.3 million pound bonus last year so some portion of that or all of that may be taken away. so, you know, we are kind of at the mercy of the regulator's timeline. david: thank you to michael moore on that story that his team broke. later today, a conversation with wilbur james. look for that at 12:45 in london. this is bloomberg. ♪

>> we are not really talking about asset sales. at least, i'm not. and i don't mean other members of the committee are talking in those terms. it is about the reinvestment policy and it would allow a slow runoff of the balance sheet and it would create policy space for the future if we ever did get into another recession and we are back at the zero bound. it is a prudent policy at this point. david: that was james bullard speaking to us exclusively yesterday. we are back with carl weinberg in new york. we see the contours of the proxy debate shaping up here between james bullard and deadly.

it is clear that they don't what to do. if nothing else, their lack of action shows there is no true clarity or vision over what the right thing to do is. there is concern about growth, for sure. there the mandate about employment. and something has to be done. i think the only question recently is how we go about doing it. david: what is the market inking as all of this is being talked about? we were member the taper tantrum. what is the lesson to be learned from that? what did the fed learn from that? karl: you would like to think tot they have learned communicate more clearly but it doesn't seem to be the case. so right now, i think they're exploring what their options are. i think what is clear is that there has to be something at this point in time. even at the time of the taper tantrum, it wasn't clear whether they should or shouldn't, but now it is very clear with the unemployment rate at or .5

percent. francine: what will determine the price for the treasury yields? part of it is the fed hiking. the other thing is that there are not of -- there are a lot of negative yields in japan and europe, which means it could put pressure on money flowing into the mix? wrote about that in high frequency economics this morning. the yield field is alarmingly negative. the two biggest negative yields out there and my view is that it is unsustainable on things like that. the market won't except the oflds and that rate long-term interest rates is unhealthy for the economy. there are misallocation of investments with commodities which we have seen over the last several years which is why we are in such a problem space right now. i'm looking for the market to adjust. historically, yields are 2.75% above inflation which would put

them at 4%. we are 380 basis point below that. even if we just moved part of the way towards normal, the duration of the bonds are so high that it will be a portfolio hit. , that is one of the key risks out there. the ims talks about that in the financial stability report and everybody should be thinking how big it from low yields to higher yields without getting hurt. isterms of the shot that going to cause that to happen -- the long-term equilibrium bund yield is close to 4% and i think we have to think about heading in that direction. day, obviously. over the course of a few years. but we are at a point now where we can expect yields to go up. the ecb is running out of bonds to buy. isis have stabilized. i don't think we have an

inflation risk. i think we are done worrying about deflation. and historically, the correlation with bonds and 90%.uries is over so sooner rather than later. david: we will continue talking to carl weinberg. thomasing up we speak to wright, the author of a forthcoming book. joining us here on "bloomberg surveillance." this is bloomberg. ♪

francine: this is bloomberg "surveillance." it's not as sunny as it was yesterday, when we had 24 degrees celsius.

newser, there is a lot of not only on barclays. says, reliable producer 76 fahrenheit. we're looking at a report according to the bbc, saying the bank of england repeatedly pressured commercial banks to lower their libor during the 2008 financial crisis. i know a lot of people in the city will be looking at that and seeing if there is any implication of what happened eight years ago. david, let's go straight to the first word news with taylor riggs. the presidentpt, is ramping up the fight against terrorism after deadly bombings at two christian churches. at least 43 people were killed and the islamic state claims responsibility. al sisi declared a three-month state of emergency and created a new anti-terror unit. more than half of registered voters in the u.s. say

president trump should be forced to release his tax returns. only 45% say his returns are relevant to his ability to do his job. and sergio garcia won his first major championship, burning the first hole of a seven death -- of a sudden-death playoff to take the masters tournament. he has been considered the best player never to win the event. global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. francine, david? david: south korean equities traded lower today after an american aircraft carrier was denver to two waters south of pyongyang. this move comes as ministers meet in tuscany today. secretary tillerson will head to moscow on monday. joining us is thomas wright from the brookings institution,

author of the forthcoming book "all measures short." let me begin with a couple tweets of the president. "so sad to hear of the terrorist attack in egypt. u.s. strongly condemns. i have great confidence that al sisi will handle the situation properly." he called for a state of emergency -- how do you assess his response? sisi has a good relationship with president trump. they met not too long ago during the campaign. they see i tie on islam and counterterrorism. trump supports a tough line that sisi has in egypt, but that tough line has been part of the problem. ostracized the entire muslim brotherhood and gone after anyone associated with political islamic activity, and that has marginalized

legitimate political activity, and created fertile ground for extremism. it's a bit of a vicious spiral. the we are likely to see a continuation of that approach, and intensification in days and weeks. david: let me get your sense on the plasticity of donald trump's foreign-policy. our foreign correspondent wrote over the weekend, "as he confronted a series of international challenges from the middle east to asia, president trump made sure nothing was certain about his foreign-policy, to the extent that a trump doctrine is emerging it seems to be this -- don't get roped in by doctrine." do you have a sense of what his foreign-policy is? >> i think there are two conflicting forces within the administration, and his foreign-policy is the story of the tension between them. the first is his preconceived notions which he has developed over 30 years, a very nationalist, america first position, where he wants to

avoid entanglements and alliances, resisting free trade. the second are the mainstreamers, secretary matus, who have tel tillerson, a much more traditional the of american foreign-policy. i think what we are seeing is the fundamental clash between those two, and the foreign policy is a result of that clash. sometimes one force wins, sometimes the other does. in syria, the more nationalistic america first position won until assad launched a chemical weapons attack. faced with that, president trump felt he didn't want to give a green light for future attacks, and so he reversed himself and launched a small strike on the deter future chemical weapons attacks. i agree with peter baker -- it's a very mixed approach, but i

think it is the result of this structural incoherence between these two diametrically opposed forces. david: you look at that structural incoherence, and you wonder the degree to which the strike we saw in syria last week was reactionary or part of a broader plan for the region. what do you think about that? you have the secretary of state over the weekend saying he doesn't foresee there being a change to the policy. is that hard to do, hard to say, once you have made a strike like this? >> i think it was definitely a reactionary strike. it essentially ruled out doing anything against assad days before, and senator rubio said that that would encourage them to launch the attack, because he was told there would be no price to pay, that president trump doesn't care. i think it was the result of the president's repulsion at the disturbing images after the chemical weapons attack, and they really haven't thought through the next stages of the strategy. but i think we saw secretary tillerson site, well, that

strategy will not change. we will continue to focus on isis, to work and coordinate with assad's regime and probably with russia as well. whether or not that is sustainable is a big question. francine: but tom, was in his revulsion, or was it his daughter's revulsion? howto three generals -- much is it related to them and his family members? >> in this case, maybe they were aligned. it's hard to tell exactly who was influenced in any given day, but i thought his repulsion seemed genuine. certainly, the generals and secretary tillerson have been growing in influence as the more ideological elements like steve bannon, sebastian garg of have been marginalized. america's allies around the world i think will be reassured that secretary mathis and

particularly h.r. mcmaster have seemed to consolidate within the administration and are the most influential voices on a day-to-day basis. francine: quickly, is unpredictability a good strategy in politics or geopolitics? i have heard that three times in the last few hours. it may be good to be unpredictable in a business transaction, but in foreign-policy -- >> i think unpredictability is massively overrated as a geopolitical asset. of america'sngth foreign-policy over 70 years has been predictability, as a supporter of an open, global economy, as a reliable ally. if you look at north korea, for instance, it is america's credibility and predictability there that means the regime knows they can't do certain things. if you make that contingent in the go shovel, it really all --

negotiable, that opens up opportunities for adversaries and rivals to exploit the ambiguity. maybe there are rare occasions in geopolitics where it helps to be unpredictable, the for 95% of the time, i think predictability is far more important. david: what do you make of all this? >> i am wondering -- what is the message to china out of all of this about north korea? butsay unpredictability, certainly the president of china at the dinner table, that is a strong demonstration of power. art in terms any of trying to manipulate china to bring north korea to the table? >> i think actually the timing was quite unfortunate. be chinese will probably quite pleased that another u.s. president is getting dragged into conflict in the middle east while they are focused on east asia. the administration really needed to have the summit, to

demonstrate to america's allies in east asia that it was committed to that part of the world and to competing with thailand for influence, for a vision of regional order. the message coming out of this in part is that the u.s. always gets distracted by the middle east, understandable as that is. in terms of the summit itself, it seems to have gone relatively well. certainly the president avoided any of the language traps that the chinese government sometimes lay in terms of embracing their framework for how the region should the organized, and there seems to be some concessions. north korea, you really have to wait -- i wouldn't expect any fundamental change in the chinese position if only because they have real reasons why they and been fairly entrenched, they worry about destabilization of the regime, massive refugee i think they have

no real love for the regime. it's not like the regime of his father. they will be reluctant to push them further because of the unknowns that could follow. francine: tom, thank you so much. thomas right of the brookings institution. we will be back with carl weinberg. coming up, a conversation with the imf managing director, christine lagarde, live from brussels. look for that at 6:30 a.m., 11:30 a.m. in london. we will be talking about inclusive capitalism and greece. this is bloomberg. ♪

francinetaylor: this is bloombeg

surveillance. a $5.6as agreed to billion takeover from a private equity firm. stada is one of the last independent generic drug businesses in europe. it represents 49% in premium, when talks of a takeover surface. billionaire paul singer's elliott management is targeting the world's largest mining company. elliott wants bhp billiton to unify corporate structure and improve capital return. the hedge fund says bhp should whichte its oil business, the firm says is worth about $22 billion. php is not commenting. that's your bloomberg business flash. francine: thank you, taylor. the far left candidate for the france candidacy is gaining ground with two weeks of campaigning left. a new poll this morning shows a manual macron beating marine le pen in the second round.

joining us is caroline connan. our guest is still with us. caroline, talk me through what is happening in france. this is a very unpredictable, to say the least, election. we have a far left candidate -- i want to bring you to the terminal. [no audio] david: having some difficulty. let me bring you in, the riskiness of the french election in europe and more broadly. how big a way is the french election? >> it's a big way. with the potential eurosceptic party or presidents coming into power, the presidency isn't what it used to the, but it plays a critical role in setting the direction for french policy. the potential to call a referendum, or otherwise move toward separation, that would be a dagger in the heart of europe,

for france to try to leave. there's a lot at stake, and in terms of predicting how it will turn out, i don't know. this is all over the map. anything could happen on election day. pollsters have a bad track record, and this is certainly set up for them to do poorly. i will be counting the votes to see what happens. david: what is the connective tissue look like to you? you obviously have the brexit referendum, the vote in the u.s. -- is there connective tissue behind these events? >> i think so. two. one, there's a grassroots aationalist thing that has commonest point of view, which for politicians is really bad. it doesn't give jobs to people who vote, and that is a toxic combination. the second element is the economy. the economy is not doing that well. everyone talks about recovery in europe, but with 1% gdp growth 5 there are still fiv

million more people unemployed than they were at the start of the depression. the economies have fallen, the politicians are getting hit in the polls. francine: let me bring you to paris. connan, in the last couple days, the far left candidate really taking votes from the three main candidates, 18%. a reminder, this is the voting intention for the first round. how uncertain is this race? francois fillon was very popular in january, been plagued by scandals. do we even know who gets to the first round? caroline: it is very difficult at this stage, because for the first time, melechon came in third position. the race at the top is now becoming a four-way race. 2%, soof error is around

you could still see francois fillon or jean-luc melenchon passing the first round. 20% undecided, and remember also that the base of francois fillon and marine le pen are much stronger than the other candidates. francine: what are the chances? what are the chances, caroline, andt being marine le pen jean-luc melenchon? course whatis is of is carrying the markets at the moment, the reaction today on french bonds and the cac 40 equity market. of course this would be the scariest scenario for investors. it's still a remote scenario, according to political observers here in france, but it is not impossible. he's got the momentum. he gathered 70,000 people in a rally in marseille over the

weekend, and he is considered as the closest to the people in the last debate between the main candidates. francine: earlier i spoke to a french investment manager. this is what he said. >> i still believe that as we speak today, brexit and france, it is difficult to make predictions. but i believe we are heading toward the second round with macron and le pen. francine: do we trust the polls? one of the things he was saying, the french want to be so careful, but a lot of the polls assume that there are people that don't want to say they will vote for marine le pen. i think it is changing compared to the last election five years ago, where a lot of people were scared of saying they would vote for marine le pen. now she has become part of the political landscape. we can see that she passed the

first round, so people are less scared than before, and you can see that with the momentum. jean-luc melenchon, not afraid of saying they were both extreme, far left or far right. we shouldn't forget, as well, that a lot of these empty, establishment feelings you are seeing in france would possibly lead, for the first time in the past 50 years, since the beginning of the republic, where you could have an independent candidate like a manual macron and an extreme candidate, meaning both mainstream parties or be eliminated. david: thanks to caroline connan. go to tv where you can watch all our programs, with added value on the right-hand side. ask us questions as well. this is bloomberg.

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david: this is bloomberg "surveillance." news about toyota, investing

$1.33 billion in a factory in georgetown, kentucky, with the addition of 700 jobs. the president taking credit for that even though it was announced months ago, saying it is further evidence that the economic climate has greatly increased. the president -- time now for the report with taylor riggs. taylor: you are taking a look at a stronger dollar picture here, weaker euro against the stronger dollar. this is in reaction to comments that the president is saying the economy will grow 2% this year. the south african rand is weaker, down 1%, the most in emerging-market currencies against the dollar. that the report. francine? francine: thank you. coming up shortly with david west and jonathan ferro and alix steel, david joins us.

david: one of the top stories continues to be geopolitics in the wake of this syria attack. tillersonlk about rex and the aftermath of the xi visit. we'll have ian bremmer, the founder and president of eurasia group, with us here to sort through it. and what does it mean for the markets? the markets aren't reacting -- is it because they don't care or don't know what to make of it? we will talk to ian bremmer and many more. david: thank you. david west, looking forward to that. time now for the single best chart, back with carl weinberg. #btv6722. parlorhere is this car game with the conversation of rate hikes and unwinding the balance sheet. how tense is that argument right now? how easy for the fed is it to walk and chew gum, to scale back the balance sheet?

>> continue to normalize both by raising rates, showing the balance sheet. we look for two more hikes and deposit the end of the year. , in a coordinated program the last thing the fed wants to do was to cause financial market distress. it is clearly intending to baby feed the market with a little bit at a time. --ncine: sorry david: how much have you adjusted your forecast going forward, in light of the more robust conversations? >> i think the balance sheet is coming sooner than we had anticipated, but it is clear it had to happen. the fed has been telling us for a long time, it's going to be appropriate to shrink the balance sheet, and is just a question of deciding when it is coming. initially it was a little bit

later, but timing-wise, we haven't really had to adjust very much. we felt the fed was a little bit behind the curve, if i can be so bold as to say that. the unemployment rate where it is, the only way to keep the unemployment rate from going below the fed's target is for an abrupt stop in job creation, and there is no evidence of that insight. david: great to have you with us. carl weinberg, chief economist from economics. the conversation with the imf managing director, christine lagarde, will be live from brussels. you can look for it at 6:30 a.m. in new york, 11:30 a.m. in london. this is bloomberg. ♪

guy: investors struggled to read

the political tea leaves. the french election becomes a four-way race. fed officials talk about the sheet, and the exit plan is less clear. barclays ceo will be reprimanded, the bank will cut his pay. regulators begin to investigate how they try to unmask a whistleblower. from new york city, good morning, good morning. i'm jonathan ferro alongside david westin and alix steel. a short-term trading week. let's get you up to speed. futures on the s&p 500 in the united states, stable, unchanged. treasuries bid on the margin, 238 on the u.s. 10 year. alix: time for your morning brief. 10:30 a.m., rex tillerson will attend his first working session of the g7 were in ministers meeting in italy. this time, it might be different.