francine: thatcher janet yellen says the bank is shifting gears as the economy recovers. our two -- are two rate hikes still ahead? rex tillerson those two russia and the white house steps out warnings on syria. are there further sanctions? we get the latest u.k. inflation data this hour, ahead of wage figures tomorrow. how is brexit affecting spending? marine le pen brings multiculturalism a weapon for

extremists. kohl's kaepernick and that with -- polls have her neck and neck the first round. a big impact on the markets. let's get to your day to check. one thing we need to watch out for today. there is a very clear move to haven assets. you can see what we are seeing for young, for example, 110. i wanted to show gold in a couple of minutes. stocks slumping. yen gaming amid geopolitical concerns. stocks in europe for the unchanged. kreuz something we need to watch out for, just above $53. something we need to watch out for, just above $53. gold is gaining at the moment. nejra: the white house has warned syria to stop using barrel bombs against civilians. it suggests donald trump may expand the criteria for u.s.

action against assad. rex tillerson visits moscow a chance to persuade russia to cut support for the syrian regime. trench presidential candidate marine le pen has described multiculturalism as "a weapon for extremists." in paris, she said fighting terrorism must involve preventing muslim communities from imposing their way of life in france. societya multicultural is a multi-conflict society. the struggle against the constitutional community which exists in france, which must be a priority of the next president of the republic. asra: a camp housing as many 1500 migrants in northern france has been destroyed by fire. at least 10 people were injured when the blaze tore through closely-packed shelters near dunkirk. that was a fight between afghans and kurds. last month, officials said the camps have been dismantled .ecause of unrest's

a south korean presidential hopeful said he would confront north korea nuclear ambitions through direct talks with kim jong un. the candidate for the main nine election told the korean herald that the south is currently a spectator to the actions of china and the u.s. united airlines has come under fire after video of an incident on one of its planes went viral on social media. >> no! >> oh my god! called policerier after a passenger refused to leave a flight from chicago to louisville. he was violently pulled from his seat. the man was not being ejected for misbehavior or a security threat, but to make a united employee. a unitedpace for employee. tesla has cap general motors topped general

motors to be the largest u.s. carmaker. the company is within $1 billion of conduct, and cracking the top five automakers worldwide. honda,in $1 billion of and cracking the top five automakers worldwide. francine: the federal reserve chair, janet yellen, said the central bank's task has shifted from a post crisis exercise of healing the economy to one aimed at holding onto progress made. yellen and her colleagues are planning to ease back on the level of support the fed is providing the u.s. economy, as they close in on their goals of full employment and 2% inflation. yellen: with the economy operating close to our objectives, we want to make sure that we sustain the progress , and thatve achieved the appropriate stance of policy now is something closer to what we call neutral. we had a footore

pressed down on the gas pedal, trying to give the economy all could,oomph we possibly now allowing the economy to kind of coast and remain on an even keel, to give it some gas, but not so much that we are pressing down hard on the accelerator. that is a better stance of monetary policy. francine: that is chair janet yellen. julie chillingworth at rathbone joins us. and an economist at merrill lynch international. what did we learn from janet yellen yesterday? >> nothing really new, in the sense that it was probably one the fed was trying to steer the markets toward for quite a few months. what i think is interesting is that we have a fed that is telling us, we do not need to be

accommodative right now. we can be neutral. that is enough. at arowth is hovering mediocre 2%. that is telling you the fed has completely accepted the idea that the new normal for the u.s. economy is fairly mediocre, with growth potential he at one point 75 -- potentially at 1.75%. we agree that growth is mediocre. inflation is normalizing. in thosest, conditions, would want to normalize monetary policy at a quicker pace. it makes a lot of sense. relative to where we were a few years ago, it is still very early to say we can go to neutral. francine: at the same time, janet yellen believes gdp is a noisy indicator. >> yes, and i think that she, in the speech, made mention of

inflation targets, which are pretty well under control. what i would say is that i think come tovestors have to terms with the fact that, post-credit crunch, the new normal will be a much lower rate. i think is the developer of economies, we have to adjust to much lower growth spreads then we perhaps had experienced through the 1990's and 2000's. that message was reinforced. francine: it is the balance sheet that people want to know. that is talked about too soon, does that risk having a huge pressure on the markets and hurting gdp? gilles: yes, but the market took this news about the beginning of the conversation about -- you know, the fed balance sheet, fairly nicely. there was no massive overreaction. so at the moment, i guess there is a fairly benign view on the capacity of the bond markets to take this on board.

yellen still gives herself a lot of leeway to pedal down if she needs to. we are not faced with a fed that has decided to normalize , ignoringolicy whatever signals we get from the economy. they remain cautious. it is quite clear they have decided it is time to normalize, committed to aot faster pace. they can still modulate the policy quite nicely. the risk of policy error in this kind of situation, given the message we get from yellen -- i think this risk is lower. francine: we will come back to the economy and just a moment, but we are getting breaking news out of toshiba. toshiba is the japanese company that has been delaying submitting their third-quarter earnings. they just submitted them with an auditor disclaimer of opinion. this means they submitted them, but there is an independent review.

that is, i believe, what it means. we will get to the bottom of it. i know there is concern if they had delayed even more submitting these earnings that they would have been delisted. need to keep an i on toshiba. this is probably one of the companies that has suffered the most. if you look at the earnings release, it could not come any sooner. i know they are due to hold a press conference shortly. we will get to the bottom of that, and you will have the very , anotherom toshiba company that is really being beleaguered. back to the way the markets are reacting to the fed and central-bank policy, do you think the shift today is more on geopolitical concerns? julian: the fed has been posting pretty clear mileposts along the way, for us to know which direction they are going. and tensions are rising again. there has been quite a lot of rhetoric overnight from north korean leaders.

i think that the markets having ignored geopolitical concerns for some time are now focused back on that area, and we have obviously got problems in the middle east, issues in asia as well. consequently, i think it could be something that features strongly through the next couple of months. francine: do you agree to focus is on other things at the moment? spending time talking about politics, talking about macro policy. francine: we are looking at what the polls are thinking about the way we are reshaping this new world. obviously, there was a lot of, how do you say, expectation/questions about the new u.s. administration. the first tests, in a way, are coming in, and people want to know that. europe, because of the number of key elections -- it is not just the french election. we know that italy, possibly spain within the last 12 months,

to go into another electoral cycle. there is lots of interest in this. you still have the questions about the shape of the eurozone next year and a few years out. turkey and a number of things to think about. francine: we will talk a little bit more about geopolitics and the g7. gilles moec and julian chillingworth stay with us. i will be speaking tomorrow with christine lagarde at 11:30 a.m. u.k. time. here is nejra cehic. nejra: luxury goods lvmh reported first-quarter sales that exceeded estimates. the maker of hennessy cognac said sales rose 16%. l dmh joins rivals such as hermes in reporting a turnaround after several years of having demand in china and a slowdown in travel to europe. volcker has accused apple of to cover upulators

the use of inferior parts and some iphones. the world's largest maker of phone semiconductors responded to a lawsuit from apple with counterclaims for damages. it alleges the iphone maker breached contractual pledges, mischaracterized agreements, and misrepresented facts. that is the bloomberg business flash. francine: the white house has warned syria to stop using barrel bombs against civilians. later today, secretary of state rex tillerson will travel to moscow, hoping to persuade russia to cut support for the assad regime. the conflict dominated talks at the g7 summit in italy. >> the united states have already imposed some extra sanctions themselves, and we will be discussing the possibility of further sanctions , certainly, on some of the syrian military figures, and indeed on some of the russian military figures who have been involved in coordinating the syrian military efforts.

francine: that was boris johnson. for more, our international government executive editor is here. still with us, julian chillingworth and gilles moec, european economist at merrill lynch international. john, what did we learn about the g7 response? are they more united in trying to stand up to russia? john: certainly, yes. they are keen for tillerson to head to moscow with a clearer message of unity about how much they support the attacks we saw last week. a key question at the g7 is, how much damage can they do to the russian economy, or what kind of sanctions can they push through, and whether putin will take that seriously. francine: rex tillerson goes to moscow. hell frosty is that relationship? or they enemies, frenemies, friends? john: it looks frosty. we do not know whether tillerson will meet with putin.

it is the first time in decades a u.s. secretary of state, on his first trip, has gone to moscow and not met with the premiere of moscow. things are not looking very good at the moment. certainly going to be looking to have a show of strength. is not keen to show any sort of friendship toward the administration. a better do we have understanding of the trump intent in the middle east and with russia? john: no, we don't. if you listen to the statements coming out of the trump administration over the last three or four days, they are sort of all over the place. sometimes, they say the u.s. will prevent any more slaughter of the innocents. that could mean anything. on other occasions, you have trump administration officials saying the u.s. policy in syria has not changed, which means nonintervention or more non-intervention. obviously, a lot of drama over the last four or five days, but we do not know if there is a trump doctrine on the middle east, whether we will get one at

any point in the future. francine: has the world become a much worse place, in terms of security, and the last two weeks, also because of what is going on with north korea? john: if you add what we have learned over the last four days, the news contradicts the rhetoric of the trump administration. no one really thought he would come so quickly with the missile strikes. if you are looking at the korean arena, if you are looking at the middle east, there is an added note of uncertainty in terms of what the trump administration thanks. they certainly show they are prepared to act. isncine: 80% of your time trying to figure out politics. what is the question you need answered? i have been told maybe if you are not very political, that gives you the upper hand in negotiations. john: at the moment, there is focused on the french elections. mark your point, on the u.s. relationship with europe, there must be a certain level of

relief right now in european circles. because syria is actually central to europe. we had to deal with a major refugee crisis just two years ago. it seems far away, but in germany in particular, it was a massive problem. dealing with syria is central. the sense in a lot of european capitals is that the u.s. would not engage. as you say, there was a proper , but at leastine there is a sense of a modicum of engagement from the u.s. it is very -- i think it comes as a relief. the same thing in terms of this frosty relationship with russia. the one thing that europeans were expecting from washington, d.c. was some sort of continuation of the usual policy towards eastern europe. from that point of view, there is probably a little bit of hope. francine: if you look at it from a clear market perspective, just by volatility -- you read john's

articles, and then you buy viz. -- vix. that.: you could argue i think that for investors the unpredictability of the new trump regime is the worrying angle to this, obviously, even if you are buying. i am not sure that is always going to make you a huge amount of money. i do think you need to take the view that we are in an uncertain world in terms of geopolitics, but also and in certain -- uncertain world in where we are going to see growth and earnings. you need to probably take a fairly cautious attitude across the board, and that is what we have been saying for the last 12 months. francine: if you need to understand -- i know we are trying to understand the trump administration' x -- cap administration's next move. who does he listen to? visit his family? john: that is a question everyone is trying to figure

out. i think people like mcmaster are also very important. rex tillerson may not always be on the front line of decision-making, but trump is a businessman and he knows different parts of the world. trump is not that different from most presidents. you listen to views and you trust your gut. obama's got told him not to get involved in syria, and trump's told him the opposite. we do not quite know exactly who the four or five people are he listens to. francine: john heads up our international editor. gilles moec and julian chillingworth stay with us. we are still getting breaking news out of toshiba, trying to figure out exactly what these earnings mean. these are earnings they have been delaying putting out. now, they are earnings without auditor approval, to maintain need to take them with a little pinch of salt. the japanese company says it

sees doubts over growing concerns after the bankruptcy finding of its westinghouse electric nuclear power plant in it postedwhich means operating losses of ¥576 billion. i imagine what people are trying to figure out now, because they delayed reporting this for quite some time, is whether to trigger some concern that they will be delisted. without auditor approval. i imagine they did this to try not to get delisted. we will get a report online and bring you the latest. a nine-month operating loss, ¥576 billion. this is also what we are hearing on putin and tillerson. john was just talking about it, saying there was no confirmation. according to rbc, citing two unidentified people, putin will meet rex tillerson when he arrives in moscow a little later on. that if just telling us

he were not to meet the president, it was one of the first times ever a secretary of state of the u.s. would not meet the president on an official state visit to russia. up next, it is a celebration. openy leader lvmh crocs the champagne. it is all about asia and china. ♪

francine: this is "bloomberg surveillance." shares hits -- lvmh

a record high after sales that exceeded estimates. there was a strong performance in fashion and spirits brands, which mirrors a wider rebound for the luxury industry after several years of slowing demand. we will talk to andrew, who has been covering the regional section for several years. andrew, great to have you on the program. this is a wider luxury industry that is rebounding thanks to what, asian demand? >> china is certainly coming back, and not just the mainland. those have boosted demand across europe. francine: what is selling while at lvmh? it is known for its champagne. andrea: the fashion has done well. you have louis vuitton bags. they never stopped being popular, and the other fashion brands as well. francine: how does that compare to competitors? andrea: this far exceeded other

and industryowth growth. lvmh has products customers want to buy. you can have the best brand ambassadors and strategy, but if you do not have the hand that customers want to buy, there is no point. francine: but how do you sell that? is it marketing, celebrities, or the designer? andrea: it is designers that make the product that people want. one of the most popular bags -- they are big, unstructured, monogram bags. eternally popular. francine: do they benefit from currency swings? andrea: of course. the chinese are very sensitive. they will shop where they get the best deals. the u.k., at the moment, is very popular. that is spending in one place and not another place. it is really down to the product you have. francine: a great update from lvmh. we have been covering the luxury

sector quite a lot and have seen a little bit of a turnaround. andre back with gilles moec julian chillingworth. up next, we get u.k. inflation figures. our consumer starting to feel the squeeze? we talk about inflation. we have a great graphic that shows, if you want to protect yourself from inflation, buy marmite. but do not do the diy, because one thing that you need to improve your house has gone up. this is bloomberg, and these are your markets. we are seeing a little bit of a pullback. a lot of investors watching geopolitics. we will also talk about french politics in the presidential election just a couple weeks away, and shying away from risk assets. ♪

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barrel arms against civilians. it suggests president donald trump may expand the criteria for u.s. action against bashar al-assad's regime. rex tillerson visits moscow later today, a chance to persuade russia to cut support of the syrian regime. toshiba has reported earnings after twice failing to make deadlines, but third-quarter figures have not been approved by an auditor. it posted on operating loss of $5.2 billion for nine months to the end of 2016. the conglomerate said it sees doubts over its going concern after the bankruptcy filing of the westinghouse nuclear power unit in the u.s. toshiba is due to hold a news conference at 10:45 u.k. time. federal reserve chairman yellen says the central bank task has shifted from a post crisis exercise of healing the economy to one aimed at: on to progress made. she and her colleagues aim to ease back this year on the level of support the fed is providing

the u.s. economy. yellen says as things improve, the fed does not need to give it so much gas. a south korean presidential hopeful says he would confront north korea's nuclear ambitions through direct talks with kim jong-un. the left-leaning candidate for the may 9 election poll "the korean herald" the south is currently a spectator to the actions of china and the u.s. united airlines has come under fire after video of an incident on a plane went i wrote on social media. [screaming] >> no! > >> oh my god, no! the airline called police after a passenger refused to leave a flight. officers violently pulled him down the aisle. the condemnation has come because the man was not being ejected for misbehavior or a security threat, but to make space for a united employee.

thanl news powered by more 2600 journalists and analysts in more than 120 countries. i am nejra cehic. this is bloomberg. francine: that is certainly some upsetting doing. nejra cehic with the very latest. we are getting data out of the u.k. u.k. inflation is -- the pickup to inflation has taken on easter break. in lineare seeing is with expectations. the rate is unchanged compared with february, at 2.3%. if you think about when easter falls, this is for the month of march. the timing of easter, in april, means there was a drop in airfares in march. and also increases in the price of food and clothing. that seems to be consensus economists see inflation picking up. that we are seeing a little bit of a break because of when easter falls. in the month of march, prices rise 0.4%. if you try to break it down, airfares fell 4%, compared to a

23% jump by year earlier because of easter holidays. you can point to the weather and seasonality, but it does make a little bit of a difference. you can see the pound at 1.2417. still with us, julian chillingworth and gilles moec, european economist at merrill lynch international. as an economist, how do you worry about inflation? this chart is inflation in white with wages in the u.k. is inflation higher than wages? and is linked to brexit guess terrorists, and the pound falling. how much less will hassle be having? -- will households have? gilles: it is the main issue facing the british economy this year. brexit.still after what we have at the moment is exogenous supply-side shock on prices. this is the impact of the depreciation and sterling.

as a next large in a shock, it is not generating any effect of higher nominal wages growth, which means wages -- real wages, are going to start falling. given the fact that the savings ratio in the u.k. is already at zero, there is no way to maneuver to accommodate this, which means consumer spending will slow down. it is fairly straightforward. francine: what does that mean for how you play the markets? are you away from retail stocks because of this? julian: i agree. we are watching very closely. we get wage numbers tomorrow, don't we? francine: yes. julian: if we do not see a pickup in real wages in the next few months, i think people will become increasingly concerned about retailers and consumer spending generally. the ship we have already betweend by now is experience spending versus going out and buying goods. that is an ongoing trend that i think is actually affecting the retailers, more so than even the pressure on wages currently.

this is not good news for them. francine: what is your take on the pound? i heard it will kind of bottom out from now. i have heard it is priced in. i have heard it will go lower. julian: we believe, in keeping with a number of others, that on a longer-term basis, sterling looks quite attractive. that short-term, i think there is going to be a lot of volatility. we have two years of negotiations around brexit. i am sure there will be wild card events occurring. that will cause volatility around the currency, which will be the natural outlet. gilles: i agree. protracted to be a

negotiation with the europeans, -- therehat we heard would be a fairly easy discussion on trade and goods. but also a discussion about trade in services. that has been our view from the start. very complexas consequences for a number of ,ectors and carriers, aircraft financials. it is going to take a long time to get any clarity. francine: this is the spread between gilts and treasuries. do you buy gilt? julian: i personally would not at this level. i think the brexit concerns are going to be reflected in the gilt market as well. i think that ironically, because we are going to move on to this, because of the unease around the european political scene, a number of investors have been buying gilts as an insurance policy, and selling european bonds against that.

that, i suspect, will run through the next 3-6 months. francine: thank you. julian chillingworth and gilles moec stay with us. we talk about french elections next. --nty coming up, including as a migrant camp burns in northern france, marine le pen brands multiculturalism "a weapon for extremists." calls for a syria without a side, we look ahead to tillerson in moscow. ♪

francine: this is "bloomberg surveillance." let's get to your market check with mark barton. is ourolatility -- this fear index, the european

equivalent to the vix. it is up for the 10th consecutive day, the longest stretch since the backend of last year, since november 4. we are at the highest level since november 8. it shows you what movement we have seen in volatility since those record lows on march 17. you can see right there, concerns on geopolitics -- the french election, which i will come to, with less than two weeks for the first round. investors are preparing for a potential increase in stock swings. this is a gauge tracking the cost of hedging the cac 40 index . it has rallied for nine straight days, the longest streak since august 2011. it's 49% advance in the period compares with a 39% rise in the regional stocks which i was just talking about, and the u.s. vix index, which has climbed about half as much. lvmh, the world's largest luxury goods company, rising to a record today.

first quarter sales far exceeded analyst estimates, jumping by with both refreshing and drinks unit benefiting from a rebound in demand across the industry. lvmh joining other providers, such as hermes, in reporting a turnaround after several years of ebbing demand in china. and a slowdown in travel to europe. against thefalling yen, set to close below its 200 day moving average for a third day. significantly, francine, it is also nearing trendline support low.1697, which connects it since the brexit vote. a close below that could pave the way to erase all its games since falling to 1.0957 yen on june 24. keep an eye out for that chart today. that is very significant. francine: marine le pen says she immigrantsemble all

camps if she wins the french election. her comments come after a fire at the camp done dunkirk, which ceases was the result -- which she says was the result of a lax approach. the candidate has described multiculturalism as a weapon for extremists. in paris, she said fighting terrorism must involve preventing muslim communities from imposing their way of life in france. societya multicultural is a multi-conflict society. the struggle against the constitutional community which already exists in france, which must be a priority of the next president of the republic. francine: with less than two weeks before the first round of voting, pressure is building on the candidates. op poll puts le pen in line with macron. gilles, you are french, so i know you follow this even more closely than other economists. with the margin of error, it

seems there are now four candidates and roughly at 21% each. anything could happen in the first round. gilles: anything could happen. that is absolutely true. i think on the left side of the political offense, there was a blind spot for a lot of investors. there was some concern about the socialist policy and melanchon's candidacy. in spite of those candidates staying in the race, melanchon has made himself qualify will for the second round. it is coming late, and it is interesting, because melanchon is a very good tactician, and one thing he did was to torpedo llandelicy of another ho debate with all the other candidates just ahead of the first round. that means that now he is in this new group of potential qualified candidates, no one is going to have the chance to go dissecto distract --

the agenda on current tv. that is technically a good point for him. in 2012, he did very well in the polls and then came out quite significantly below where the polls have him. francine: i guess investors are worried because he is a eurosceptic. a lot of international investors will not know as much as the french public will. gilles: it is a different kind of euro skepticism as marine le pen. he is not as clear on his willingness to take the country out of the euro. he wants to renegotiate the treaty. he has given himself more leeway. , in the is interesting way he is promoting his candidacy -- he is not talking about his agenda right now. investors are worried about his agenda. but the way he is promoting his candidacy at the moment is by appealing to i would say fundamental issues for france --

what kind of country people want to be, what kind of society people want to build. he is very vague on his agenda. in the latest polls, what is interesting is people find him reassuring, which is quite surprising, when you read the agenda, which is very radical. francine: he seems very real, which is what we said about people pre-brexit and donald trump. let me bring you over to the chart. this is the volatility that is implied versus realized volatility. you have four candidates. none of them are really mainstream. how do you position yourself ahead of the first round? julian: i think the market's greatest fear would be the runoff between the far right and the far left. , ithat looks at all likely suspect we will see pressure on the bond market, the french bond market, further volatility picking up, and generally, i think that in terms of protection, i suspect people

will be reselling french bonds. they will be looking for security in bunds. francine: lesson currency and more in yields? julian: in reality, yes. francine: this is the german-french spread on yields. the ecb is standing firm. realistically, how high can this go? gilles: there is still some capacity for widening it, as you say. the most french scenarios could inge scenarios could play out. the ecb is seen on its way out. what was the ecb do it there was a president in france that would want to take the country out of the eurozone? you have this general concern over the fate of the eurozone in general, if you have one of those scenarios in france. and in those circumstances, the protection from the ecb is less efficient. francine: do you buy gold? julian: i would never buy gold. francine: what would you buy? julian: i was still hunker down

in good quality equities. i would steer well clear of europe on that basis, though. i have had a reasonable waiting -- weighting in u.s. markets with some debts to them, and even in the u.k. francine: julian and gilles, they can both for joining us. next, from popular text to populism. banks populism shaping bc startups? we speak to the ceo of a silicon valley bank. ♪

francine: this is "bloomberg surveillance" in london. let's get straight to the bloomberg business flash. nejra: toshiba has reported its earnings after twice failing to meet deadlines, but third-quarter figures have not been approved by its auditor. it posted an operating loss of $5.2 billion for the nine months to the end of 2016. the tech conglomerate said it sees doubts over its assumed going concern, after the bankruptcy filing of its westinghouse electric nuclear

power unit in the u.s. to sheila is due to hold a news conference at 10:45 u.k. time. qualcomm has accused apple of lying to regulators to spur investigations of the chipmaker, and threatening it to cover up the use of inferior parts in some iphones. the world's largest maker of phone semiconductors responded to a lawsuit from apple with counterclaims for damages. it says the phone maker breached contracts, mischaracterized their agreement, and the servers and effects. tesla has surpassed general motors to become america's most valuable carmaker a week after topping ford. tesla climbed 2.3%, lifting its about cap to $59 billion, 64 million dollars more than gm. it is within a billion dollars near cracking the top five automakers worldwide. francine: silicon valley has raised concerns about business conditions under donald trump

after he signaled a crackdown on immigration. fear it could affect skilled employees. brexit is putting pressure on the sector in europe. let's discuss how these factors are weighing in on tech investments. joining us now is a selection bank ceo and president, greg baker. techlk about valuations at on a daily basis. what is one thing investors get wrong about tech? is there too much hype, or not enough? greg: technology companies, what is great about them is, they are high growth. that is the biggest difference between traditional and technology industries. they are going so fast. you could look at multiples on a trailing basis, and that looks challenging. if you look on a forward basis, one or two years in the future, the growth can really -- you can grow into these valuations based on the growth rate. francine: as long as you execute. greg: that is one thing that does not always get factored in. sometimes that works. sometimes it does not. if you get it right, you see these valuations.

you could end up in a good position. francine: what concerns you about your company in particular? we mentioned attracting talent, visas. is this something on your priority list of worries? greg: when we think about portfolio clients, their biggest issue is always access to talent. when you think about immigration reform in the u.s., if individuals are not happy to come to the u.s. because they do not think it is a great place to be, or they are not welcomed, that is a challenge. it is already difficult to find high skilled employees. that is one of the things we expressed when we talked to the administration. we said, be careful not to alienate founders coming to the u.s., or even workers in general. that is a message we deliver. francine: and they are listening? greg: we will see. hopefully, it will play out. we are delivering that message. hopefully, they are listening. francine: what is it like doing business in china?

you have a joint venture. greg: we do, in shanghai. we set up a branch out of the joint venture. that is a great market. between shanghai and beijing, those two markets, it is a great opportunity for us to be in, and we are looking forward to it. are you lending to? i imagine it is a very different markets elsewhere. greg: high innovation, high-growth companies. francine: locally? both.it is companies that are performed and founded in china, as well as companies that have set up operations from the u.s. or from the u.k., setting up operations in beijing. we are working with those companies as well. it is local and foreign subsidiaries. francine: when you talk about high innovation, is it mainly manufacturing, jobs that are innovating and doing something more exciting?

or is it something i cannot even imagine yet but will want in five years? greg: it is all of the above. it is more traditional industries doing it in a better way -- software companies, hardware companies -- as well as life science companies as some -- an innovative machine learning companies that will play out over the next five years. it is both. it is the same thing in the u.s. and the u.k. if you were looking at sitting down with a company in beijing, it would be hard to distinguish whether that is a u.k. high-growth company or a u.s. high-growth company. francine: what are you the most excited about in the next five or 10 years? we talk a lot about driverless cars, about tesla. is it where rebels? is it something else? greg: it is everything. francine: give me one. ai,: it would be a are -- and machine when it in that as well. but that could be applied to almost any industry. it could also be an augmentation

to so many different industries. that is incredibly exciting. francine: great to have you on the program. thanks for coming in. , silicon valley bank ceo and president. "bloomberg surveillance" continues in the next hour. david joins me out of new york. we will be talking geopolitics. rex tillerson travel's to russia. we understand from a russian channel that he will indeed meet president vladimir putin, but we need confirmation on that. if he did not meet the president, it would be the first time in 30 years that a u.s. secretary of state would go on a racial state visit to russia -- an official state visit to russia and not meet the president. ♪

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♪ vonnie: extend the longest losing streak since june.

statement of intent, rex tillerson travels to moscow with a strong message as the white house informs. to stop using girl bombs against civilians. as janet rights dip yellen says it is time for the central bank to ease off the accelerator. this is bloomberg "surveillance." i am vonnie quinn. david gura is with me. deal politics in marcus today. russia,nd korea and interesting to see whether rex tillerson does meet with the president of russia later today. vonnie hoping to get confirmation shortly. let's get to the bloomberg first word news. -- presidentsan trump persuade russia to cut his support for serious leader. they are presenting a united front in front of a visit by the

u.s. secretary of state, rex tillerson here in the western powers are considering more sanction following the chemical attack last week. spoke withel president trump and said russia must be involved in a settlement out of the syrian crisis. rising inflation in the u.k. took a break in march, the rate unchanged in february. .p from 5/10 of 1% one year ago inflation over last year reflects higher fuel costs and a decline of the pound since the brexit vote last june and airfares fell in march offsetting higher prices for food and clothing. federal reserve chair janet yellen says the central bank wants to give the economy gas but not so much. the fed amy to ease back significantly on how much support it is giving the economy. policymakers have penciled in two interest rate hikes this year. soccer leaders from the u.s.,

mexico, canada, promising to put on the most lucrative world cup effort. they will try to expand which includes 48 teams and 60 world cup games in the u.s. and tent you in mexico and canada. 10 in mexico and canada in global news 24 hours a day, powered by more than 2600 journalist and analysts in more than 120 countries. this is bloomberg. david: let's get a check of the data on tuesday starting with features. s&p futures down. the two-year, tenure spread, down .14 with gold futures, risk on environment, up 4.3%. i have been keeping watch on the korean one. extending a six-day loss. francine: all about geopolitics. below $53.

tensions between syria and north korea, the uptrend for oil, breakouts higher but crucial data points from the u.s. report tomorrow. japanese yen a haven. gold, up a cut. -- up a touch. david: looking at the cyclical nature ahead of the french election. we see the french-german two-year spread the highest since the last election in france took place. looking at no -- at how it is rising. francine; it goes back to when it was really high, when mario draghi said he would do what it takes and now talks about a bring and how much you can do it the election somehow turns ugly in france. it goes back to my chart. slightly different angle. this is the volatility, one

volatilitys historic for the euro-dollar and a lot of market participants say, if i'm worried about the french election, i played through euro currency or yields. higher than it was before brexit. .e will talk more about that let's focus on the g7 and geopolitical concerns between the u.s. and russia. military flashpoint in syria and north korea and rising political tension with the west and russia has investors acting cautiously. global stocks slumped. the secretary of state's upcoming trip to moscow -- can they call him fears -- calm heightenike in them -- them? first of all, do we know whether mr. tillerson will meet with vladimir putin? we had conflicting reports.

>> the latest from russian state media is that they will meet at some point. we are hearing the u.s. secretary of state is changing his schedule and could stay later. in moscow. it looks like there will be a meeting. the kremlin spokesperson was unclear, saying no meeting was on the schedule. , youyou are vladimir putin can put a meeting on your schedule as quickly as you want to so looking like they will meet. likeine: what was the mood in g7? a little bit of a united front from g7 foreign ministers behind donald trump. >> that is right. if there is division, it is over the idea of how hard to push on new sanctions. the u.s. is saying it will add two sanctions, targeting syria

which would likely include russian military officials. there is unity, everybody wants rex tillerson to go to moscow and present a unified message, which is, you have a choice to continue to back syria at the expense of your standing in the world, or do you shift off that position and come join the full with the rest of the international community. boris johnson yesterday called the russian support for syria, talk to find, their image overseas. let me ask you about a couple of phone calls the white house flack yesterday, the president speaking with the german chancellor and the prime minister of u.k. on the subject of syria. what is the latest in terms of what the white house is trying to do ahead of the rex tillerson trip to moscow and in light of the gas attacks and airstrikes in syria. >> i think they are trying to

present this unified front and give him as much authority and power when he goes to moscow to show that he is not only speaking for the united states and donald trump, but for the entire international community. they held an emergency meeting this morning on the sidelines of the g7 and also turkey and gulf states, all to bring the unified message forward. when you see those conversations with angela merkel at theresa may, it is part of that effort to strengthen his hand as he goes into moscow for what is likely to be combative discussions with russian leaders. our foreignank you, policy reporter from the g7 meeting in italy. ,et's bring in our guest post the cio of state street global advisors where they met is more than true trillion dollars in .ssets -- $2 trillion in assets

will we see more volatility and a shift to havens? : what we findle is, when we look at risk measures put together, we look at a low level which sounds counterintuitive. is sayingd spreads the market is not quite euphoric but a low risk environment which seems like a contradiction. david: can they correct francine: -- francine: can they correct very quickly as markets pick up on possible exacerbated tension between the u.s. and russian, or the french elections? or will everything be placated by central banks? and the central banks big picture story, we have some degree of synchronization of growth, low level but sigrid eyes for the first time in a while. some of these issues are troubling, the french election within europe.

they may not be enough to derail the global growth story and are distracting us from what we should be focusing on, china-u.s. relationships. david: you talk about risk events. the riskiness of the risk event. we saw the bombing of the airfield in syria last week. are you concerned with that or the prospect of more attacks like these, more distractions in the future? richard: i will not downplay that. it is a terrible situation, syria, one that has geopolitical risk. if you think about its impact on global growth, compared to the relationship between china and the u.s. or tension rising in asia, not as significant. all prices telling you people are not quite as anxious as one might think from the amount of noise. and we price has gone up need to be content -- careful about contagion effects in the middle east but that is not the biggest risk investors are

facing. that is still china and china-u.s. relations. david: a word you used a moment ago, euphoria. state street measures that, what are you seeing in that read right now? richard: not complacency yet but a level of confidence that has not yet been shaken by the pushing back of some of the policy changes that we are expecting in the u.s. and the mixed signals in terms of the need for a balance sheet in fed to decrease. ultimately, that story has to play out in europe and elsewhere. that will be a constraining factor. are you- francine: worried about trade? top three best, we assume they are geopolitical, is it trading relations tween the u.s. and china or foreign policy between russia and the u.s.? turn and rightft turn in terms of u.s. policy may have been trimmed recently. we were worried about

deglobalization and anti-trade policies which is a slow burning issues with fairview road profits and drive global growth down. to have diminished a little bit alongside some of the other things on the right-hand side like policy changes and tax. we still remain concerned about any retraction from where we have in terms of globalization. francine: thank you so much. richard lacaille stays with us, more analysts -- analysis from richard lacaille. one of the first time, in the markets, in the markets from a little bit of the nervousness he was talking about at being priced in to the market. he was saying, it seems like a good for the moment. a conversation with christine lagarde live from brussels, talking trade and french politics. 6:30 a.m. in new york and 11:30

a.m. in london. she will be talking about inclusive capitalism. this is bloomberg. ♪

♪ >> this is bloomberg surveillance. toshiba is warning of its ability to continue. the japanese company finally reported third-quarter earnings after missing two deadlines that its auditor has not signed off on. they posted a $5.2 billion loss for the nine months that ended in december and has lost billions of dollars in its westinghouse nuclear power business in the u.s. shares of dialog semiconductor plunging, a firm downgraded them to a sell. strong evidence apple plans to partially replace their power

management chip and iphones currently supplied by dialogue. apple account for three fourths of their revenue. shares of gas rose to a record in paris, revenue much better than expected. he maker of louis vuitton handbags boosted by fashion and leather goods unit or quarterly sales rose 15%. their performance was the biggest rebound in demand for the luxury goods industry. that is your bloomberg business flash. francine: treasuries rallied and the breakeven rate dropped after janet yellen concerned the central bank has shifted to sustain economic gain and away from the post crisis healing. >> before we had our foot press down on the gas pedal, trying to give the economy all the oomph we possibly could. now, allowing the economy to remain on an even keel to give

but not so much we are pressing down hard on the accelerator. that is a better stance of monetary policy. francine: janet yellen speaking there. let's get back to richard lacaille, satan -- state street global advisors. gdp we are talking about, enough to keep the momentum, is this what we need to get used to come or 5, 10 years down the line, will we have growth pre-2008? unless productivity -- productivity growth in the u.s.. sure we heard pressing on the gas settle at the time but investors wanted that gas pedal pushed to the floor, both in the u.s. and in europe. we have pedestrian growth and a long time of growth in the u.s. but pedestrian.

we are not out of the woods yet but it is right we begin the process of normalization. francine: when you talk about the balance sheet, the chief investment officers freak out? richard: not freaking out, will it be held allstate forever? -- offstage forever?/ no. when you look at the people who want to buy u.s. treasuries, capital account in china which has a two flow between private and public sector, a lot of demand in those assets and for duration assets. i do not think we are faced about it. there needs to be a careful path that signals the market of how you get where you are now to the future. ecb is just as challenging. as a cio want you to see, looking for the fed to telegraph with as much advance notice as possible which securities they want to sell and how far ahead they do that?

theard: a vail cast over activity, if it becomes too precise come it is data driven you have a switchback that develops. that led to the taper tantrum where people place a lot of emphasis on whether the tapering what happened this month or next month. did it really matter whether it started in march or june or september? it did not but the veil is important when the balance sheet challenges, the action required is so long-term and so large. david: as we look forward to a reconfigured fed, janet yellen's tenure coming to an end. she used the tortured and tired car metaphor about the u.s. economy, how do you assess how the fed has to mitigated over her tenure -- communicated over her tenure? synchronize with market

participants although market participants have been skeptical over a long time about whether they increased rates. their adherence to a data-driven approach was in sync with what investors would expect. the data did not turn out as strong as expected and race were held lower for longer. was welcome --n synchronization was welcome because it led people to understand there was logic between developments in the economy at large and rate expectations. francine: this is back assets redthe blue is ecb and the is the boj, the ecb, the problem , how do they focus on the balance sheet without scaring investors, if something goes wrong politically in france? richard: another layer of challenge in europe from the political context. if you look at italy and the italian financial system, that needs to be healed. it is a long way from being healed, unlike spain. france may be a flash in the pan

in retrospect but italy is there to stay in terms of a challenge for the financial sector. that weighs heavily over any thinking the ecb might have about unwinding the balance sheet. caution has to be the watchword until it is in better shape from a financial perspective and maybe even politically. francine: thank you, richard lacaille. stay with us. with the, we speak global head of strategy for shorter's at 6:00 a.m. in new york and 11:00 a.m. in london. andill ask him about banks his concerns on markets. this is bloomberg. ♪

♪ francine: bloomberg "surveillance." we are back with our guest post, the state street global advisors cio. the effort project rate, airfares -- the upward project and with growth in u.k. in blue. this does not look great. richard: the feel that sector cpi taking off because of the exchange rate effect. francine: where do you want to be placed in the markets? retail stocks get a beating from here? richard: such systematic demands from pension funds not yet had,

the signal out of the gilt market, a little misleading. on the face of it, not a great investment. look at the spread against u.s. treasuries. yields are modest. the story is you are buying into a currency that is fundamentally undervalued. sterling on a fundamental perspective is very cheap. we are expecting the news flow to be aggressive in the following months. time you getvery news on brexit come it will unsettle sterling. francine: well it hit the floor at this point or can he get cheaper? richard: it could fall because there are things that could unfold from brexit negotiations. u.k. interest rates to be lower longer, even in the face of rising inflation. francine: what would it take for the floor? what kind of brexit negotiations would you look at for this to be the floor for pound?

richard: what is the worst case scenario, industry by industry and how are the industry's coping? some are taking advantage of the fact that sterling is cheap. some of the effects to some industries will be ok. where you have complex supply chains that go back-and-forth across europe and the continent. a different category. francine: we will be back with richard lacaille of state street global advisors. coming up, plenty more on geopolitics, whether rex tillerson will meet with vladimir putin. the kremlin has not confirmed or denied they will be meeting. this is bloomberg. ♪ [ engine revs ]

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crash in stockholm admits he committed the crime according to the associated press, which cited his lawyer. the suspect has been identified. korea, a presidential hopeful says he is open to direct talks with the north korean dictator. he is one of the top two candidates and the elections next month and says south korea must bigger sheet with the dictator to settle the dispute with north korea's nuclear program. the chinese government naming and shaming local officials and its biggest campaign yet against air pollution. almost 6000 inspectors examining pollution controls in the region around beijing. officials are called out for not doing enough and could get demoted or removed. in the u.s., a top federal regulator wants to put travelers at ease, the federal communications commission has proposed keeping the ban on mobile phones calls on airliners in flight.

a proposal to allow the calls drew complaints from pilots, flight attendants, and passengers who did not want to sit next to talkative people. global news 24 hours a day, powered by more than 2600 journalist and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. ♪ >> if you look at the countries that are with us, it speaks loudly, the number of countries that have good shoulder to shoulder with this president. russia stance with syria and north korea and iran. when you contrast the two groups -- countries -- it is clear we are on the right side of this issue. atid: that is sean spicer the press briefing yesterday talking about the differences in the difference in stance between u.s. and russia after the u.s. airstrikes in syria. rex tillerson visits moscow today with reports he is expected to meet with vladimir putin tomorrow. we are doing -- we are joined by

richard lacaille. rex tillerson planning to take a quick trip to moscow, will be there fewer than 24 hours. what is your expectations of what will come out of that meeting? >> the truth is that nobody really knows. we are in the middle of what could be a normalization of american policy towards russia. then again, this president has surprised in many unconventional ways, time after time. we do not know what may be going on behind closed doors in russia . mr. tillerson has a long-standing relationship with vladimir putin. what may be reported to the media -- it is clear that, perhaps russia overreached and donald trump is under significant domesticate pressure , including from his republican colleagues like john mccain, to

normalize the relationship with russia, which means historical confrontation. which means, being on different sides in terms of rule of law and human rights. this could really go anywhere. .avid: talk about surprised the expectation that by picking rex tillerson to be secretary of state, the president was speaking to somebody with experience you are talking about, including warm relations with russia. the best laid plans have gone wrong quickly. >> absolutely. it is because of the overreach. drip of new revolutions did russia -- every significant member of the trump transition team and the trump administration and the way in which the chair in the house investigations committee went to the white house and has had to recuse himself.

this is raising a stink. including, important among core donald trump supporters. national security is one issue on which donald trump was supposed to be strong, and it may be. a perception he is selling out american interests and making news with russia, which is not going well with supporters. i think we will see a normalization of policy and driven less by donald trump's instinct, but more because russia has overreached and there is a backlash. francine: when you look at every nishaf my new ship -- my -- if rex tillerson does not meet with vladimir putin, a good opportunity to buy or sell, do you look at it on an hour by hour basis? richard: rex tillerson knows

what the pain points are, sanctions could be nuanced. i do not think there is a point to sell out of russia. there is a risk premium. if you look in the context of local currency denominated em b onds, it is a diversified. francine: what is the one thing people should be wary of? the g7 is standing behind president trump. cannot turn quickly? this unpredictability good in foreign policy? >> i am not so sure. if you look at the middle east, perhaps even more important, right now, with the standoff in asia between two highly unpredictable gentlemen, the north korean dictator and president trump. and the scale and potential impact of any conflict that may arise, particularly on the

korean peninsula. perhaps, especially when nuclear weapons are involved, it is better to have a degree of certainty, rather than two unpredictable men trying to call each other's bluff. not obvious how that may be good for anybody. the stakes are too high. david: advice to the risk averse investor who sees what is happening all over the world and wonders how active he or she should be in the market right now? active: they should be in the fact that they should have risk on, we think the global growth story not a strong one but a synchronized one. it will not be derailed by some of these political events and geopolitical events in the short-term. longer-term risks are out there, deglobalization, trade falling back. those are things people should be focused on the people should be risk on with the global path. david: any currency pairs you

are looking at, today or this week? richard: the dollar is interesting because people have capitulated on the dollar trade, consensus trade. there is still a case to be made for the dollar in 2017. also emerging-market currencies. they took a beating but the fundamentals and many of those emerging economies, they have begun to improve. post-party congress in the fourth quarter, we will get more clarity on how rapid china may rip the band-aid off the challenges and credit. if that is the case, more support for emerging market currencies. francine: what -- where does china fit into the developments over the last seven days? fireina is holding its because it is waiting the big leadership transition. it was also clear during the 100

day trade plan agreed with president trump that the last thing the chinese president wants today is to have china dragged into any conflict, soft or hard. i think china will be on the issues of global security or global commerce, essentially hold its fire until after the leadership transition. francine: stay with us. bloomberg on surveillance, the conversation with the imf managing director, christine lagarde, live from brussels. 11:30 a.m. in london. we will talk about greece and the trump administration and french politics. this is bloomberg. ♪

francine: bloomberg "surveillance." from london and new york. let's focus on france, russia building as macron mocked fillon at having a problem with the truth. the impact on corporate france becomes a bigger talking point with the french state on state with more than a dozen publicly traded companies. this is much like italy, a little lit -- bit of unfamiliar territory. big ceos that investors would note risk their job, depending on who becomes president? 1990's, when0's or

a new president was elected in on the you have changes governments of dozens of companies in france. it is different, the french state owns a majority stake in only a few of these companies the nuclear manufacturer, 80%. and the majority stakes in the paris airport. this could have an impact, given candidateocialist would be elected. we could see some corporate changes. macron, when he was economy minister, played a role in the .omination of the current ceo we could see the influence of the french state and some of the companies where they do not own a majority but a big stake.

airbus, 10% owned by the french state and 10% owned by the german state. francine: talk about the polls. we have four candidates and all are around 20%, 21% chance of becoming president. is aroundgin of error 2% in the polls. .his has become a four-way race we had an interesting poll which was the first one to test melenchon in the second round. a scenario we are looking at. if melenchon was the face macron in the second round, the polls show macron would still win in the runoff. if melenchon was facing le pen,

at a runoff between the far left and far right, melenchon could possibly win against le pen. david: how does the tenor of this campaign change as we get closer to the first round? >> what we are seeing over the past couple of days is that the tone of the campaign is changing. because all of the candidates are taking seriously the melenchon risk and attacking melenchon directly. macron said that melenchon's economy program was impossible to deliver and what hurt french companies -- would hurt rinse companies and destroy jobs. -- thethe issue of the racist approach that the national front may have had in the past. that marine le pen has been trying to defend herself from,

and the approach from her father. over the weekend, she talked about the event in 1942 quite different police arrested 13,000 jews who were deported to concentration camps. this subject is coming back in the campaign. is showing their true face. francine: she wrote the fire that resulted in one of the camps was because of immigration. let's get back to richard lacaille of state street global advisors. i do not know how you play it on the markets, do you buy -- volatility, yields, how do you protect yourself against any rally?eality? -- even to

richard: we want to place bets on things we have a chance of diversifying the risk or avoiding it. we want to avoid it in the french election. francine: these are some of the polls we were watching yesterday. what can the ecb do to help with the rise in spreads? is there anything the ecb can do to placate political risk? >> the spreads are well within margins that are economically tolerable. not excessive by any means. .75%. francine: this is a spread with germany. >> recent historical spreads during the crisis, and on debt service and cost etc. not alarming. the ecb should not do anything unusual. if it does, it will be accused,

rightly so, a political intervention. i am sure there is a contingency plan in the event of an unexpected outcome, in particular of marine le pen or maybe melenchon. there is likely to be a selloff. ecb -- inse, the which case, the ecb come in the short-term would change the relative quotas of what advised and maybe buy more french treasuries in the short-term. willwise, it can expand at in order to placate any panic that may happen. before the election, the ecb tot stay out and not be seen be intervening in any possible way. there is no economic case for the intervention right now. david: and all of the data you look at, how important are these polls in light of what we saw in the u k and u.s.? how much credence do you give them?

richard: they are important because the markets are banking on a macron win. peoplenchon get support, are starting to rethink that. it is an important risk but not easily manage. i think -- we need to make sure we do not look at all of this through an anglo-saxon lens. things are different in france. the turnout among immigrant or second-generation immigrants may be low which may be a pot that macron can dive into. at the moment, things look less certain. as a result, that is driving the yield up and it could go higher than this. francine: thank you richard lacaille. user, you a bloomberg need to go onto tv and you can see richard lacaille,

answering questions on the polling situation in italy. you can directly ask us -- ask , click below the video link and you can sequel graphics on the right -- sequel graphics on the right.

♪ taylor: this is bloomberg "surveillance." wells fargo has rehired 1000 employees fire during the fake account scandal. a lost their jobs after struggling to beat sale targets. their board blamed former senior executives who failed to heed warnings. , one of the security officers who dragged a passenger off a united airlines like that was over book has been suspended . there will be an investigation. in an internal message sent to united employees, their ceo said the passenger was being disruptive and belligerent after being asked to leave the playing. airplane. leave the that is your bloomberg business flash. francine: back with richard

lacaille. we were talking about yields and treasury movement. what is your favorite play? geopolitical uncertainty not-because the central bank is staying. is there a canary in the coal mine to show there is a downturn in most asset classes? richard: still worry about china and how it turns out after the party congress in the fourth quarter. there are no safe havens right now. we are putting most of our equities.u.s. where we think there is a strong growth story, we understand the expensive nature of u.s. equities and feel comfortable that the growth will pull through. francine: talk about currencies. we are looking at euro-yen. this seems to be pulling on the exact opposite to central-bank policies. richard: sometimes yen looks like a safe haven. we think the euro will revert to a global level -- lower level.

not cheap, sterling is cheap. the yen had looked a little bit cheap. these metrics do not work very well in the short term but there tends to be a magnetic pole that gets you to fair value in the medium-term which we found important. for longer-term investors thinking about hedging. david: you mentioned u.s. equities, any sectors that are attractive to you at this point? richard: some trade like there is not much growth in prospect. even parts of the technology complex. if you set aside those that came out of venture capital,. some parts of technology that are pretty attractive. health care, you differentiate between different parts of the system. we think there are long-term secular growth stories that are undervalued. you have the cyclicals.

those that fall into the value category, where they are under earning. you can still find those. in the financial areas, you can part of the universe under earning. relative to the ford outlook. david: are you looking at high-yield place that p -- plays? richard: the dangers are clear. we have a large debt -- debt servicing gdp looks large in the u.s. and the default looks look like they have dissipated. the u.s. growth story looks reasonably robust. within credit, we are overweight in high yields. francine: thank you richard lacaille of state street global advisors. coming up, we talk about the markets and the crossover between market and your politics. markets.alk about the

if we look at your markets, this is what we see overall, gold gaining and treasuries gaining. yen gaining. mood. risk off you not know if it is very, very, but it seems to be a risk off move and a demand for havens, crude ended the year's best run. we heard from the white house press secretary and we will await for confirmation of whether rex tillerson will meet with vladimir putin when he is in russia tomorrow. i believe he lands tonight. look at the picture of london. we look at inflation figures. this is bloomberg. ♪

in full extends

the streak since june as geopolitical concerns rock sentiment. statements of intent, your secretary of state rex tillerson travels to moscow with a strong message as the white house or the syria to stop using barrel bombs against civilians. shifting gears, janet yellen says it is time for the central bank to ease off the accelerator. googlerning, this is bloomberg surveillance." lot whenere is quite a you look at the markets. incredible crossover as we have the meeting of foreign ministers wrapping up and secretary of state rex tillerson heading to moscow shows no sign of letting up anytime soon. up, gold treasuries up, and we need to look at yen. here is taylor riggs. taylor: president trump and british prime minister theresa may see a chance to persuade russia to cut it support for syria's leader bashar al-assad.

their presenting a united front ahead of a visit to moscow. western powers are considering more sanctions following the deadly chemical attack on syrian civilians last week. merkelchancellor angela spoke with president trump and said russia must be involved in a settlement of the syrian crisis. in the u.k., rising inflation took a break in march. the rate was unchanged from february at 2.3%. that is up from five tens of her percent a year ago. inflation over the last year reflects higher fuel costs and the decline of the pound since brexit last june. airfares fell. reserve.s., federal chair janet yellen says the central bank once -- wants to give the economy gas, but not so much it is pushing down on the accelerator. the fed is aiming to ease back significantly on how much support it is giving the economy. policy makers have penciled in two interest rate hikes this year. u.s., leaders from the

mexico, and canada are promising to put on the most lucrative world cup ever, making a joint bid for the 2026 tournament that will expand to include 48 teams. there would be 60 world cup games played in the u.s. and 10 each and mexico and canada. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. david: let's do a quick data check. starting with futures, pretty much flat this morning. the havenes, we see of playing out in the gold market. i have been watching the south korean yuan all week. david, this is what i'm looking at. price,, looking at spot a little bit higher than i think what you were looking at. overall, gold treasuries, japanese yen strengthening.

investors are cautious, worried about global security, worried about interest rates. i also wanted to quickly show crude. it was above $53 an hour ago. $52.94.s at keep an eye on those. geopolitical risk. let me pull up a chart. looking at the french-german two years red, reaching its highest since 2012. that is when the last french election took place. we see the dramatic five-year drop, ticking up as we get closer to two away from the first round of the french election. francine: another way of looking at that, similar shargh, year volatility -- similar chart, your volatility. investors are showing signs of increased concern before the french presidential election. market complacency. i imagine, given way to some

caution. you are seeing this is implied volatility versus the historic one. you can see that shooting up quite significantly. our guest host is huw van steenis. we are extremely pleased to welcome you because you are one of our favorite. david'sking at this -- chart shows the yield spreads. are we worried or it is still a fairly low basis, so the transfer market is still up in this is still a small correction? >> i would put the context of the geopolitical angst in the context of the central back exit. i think it is the two together. in europe, particularly the euro, as the market sees the intensifying, how are they going to exit? if they taper more and buy less government bonds, they don't keep a check on borrowing costs like you so between france and germany. abouts as much the debate

intervention as the underlying french election. francine: do investors worry about janet yellen and the fed? low.s still quite i know she finds it noisy, but it is low. >> i certainly expect we get rises, possibly three. you see with the fed and the ecb, they want to keep dovish but rain in the sheep. at the back of their mind, they have two historical parallels. there is a real nemesis, we want to avoid 1994, which had shockwaves across the system. the buy is dovish, but it is quite difficult to get inflation is picking up faster than they thought. up history sing investors in the west of long been able to ignore political risk and focus on the sectors or individual companies. you're drawing a parallel to

emerging markets. we're cigna transition in western or developed economies. talk about more about the parallel you are seeing. >> what you're trying to say, should you look at the western markets are the emerging market lens. history tells us follow to what he picks up. certainly, inflation not only .icks up it is a good thing, not a bad thing. populism is infectious. what we're seeing in france is as much a frustration with the system as we saw in the u.k. and the u.s. i think in the back of my mind, i'm hoping the reserve currency status of sterling, of the dollar, and of the euro may reduce the policy somewhat. should we get an anti-euro the secondr two in round in france, that could affect volatility. i think it is safe to learn from these historical parallels. david: you have the political

risk in the fundamentals. how much are you weighing each? are they balanced? >> i think it is difficult to completely turn off -- i think you need to be aware of what is going on in politics, but it is this intersection of banking and politics. the ecb and the fed and the bank of england have dramatically suppressed volatility in the last six years. it is that winding of the balance sheet that is creating uncertainty in markets. it is as much being a central bank watcher as it is about a political watcher. francine: is the trump administration coming in favor with foreign leaders and does that make it a little more comfortable about foreign policy? >> last time i was on, we agreed to checks and balances of the u.s. system were working reasonably well and the need to build a coalition around foreign intervention is also proving to be a cathartic process. at the moment, it is an unbalanced situation but i think one that is working out and

fingers crossed. francine: thank you so much, huw van steenis, for the hour, global head of strategy at schroders. coming up tomorrow on "bloomberg surveillance," christine lagarde will be live in brussels and we will be talking about greece, french politics, brexit, china, emerging markets, and the trump administration. look for that as 6:30 a.m. new york. this is bloomberg. ♪

francine: bloomberg.s is toshiba warning of its ability to continue as a growing concern. the japanese company finally reported third-quarter earnings after missing two deadlines.

the auditor still has not signed off on them. toshiba posted a $5.2 billion loss for the nine months it ended in december. it has lost lanes of dollars at its westinghouse nuclear business in the u.s. lv a major rose to a record in paris. revenue was much better than expected. the maker of louis vuitton index was boosted by a fashion and leather goods unit where quarterly sales rose 15%. their performance with the biggest sign yet of a rebound in demand for the luxury goods industry. that is your bloomberg business flash. david: new sanctions against russia and sanctions were discussed at the g-7. this comes after the white house warned syria's president to stop using perl bombs against silliness. -- barrel bombs against civilians. for more we are joined by our chief washington correspondent kevin cirilli and also with us, george goncalves and huw van

steenis. kevin, there was a piece this morning at "the washington post" and economic columnist who wrote about the domestic risks we are facing. she said on almost every major policy front, the administration continues to inject uncertainty into the economy. you got that risk, the domestic and foreign risk. how cognizant is this white house of that? walk atheir turn to tightrope. they're facing pressure domestically about not being tough enough on russia. we have seen some of that dissipate after the missile strike in syria. on the other hand, there are also trying to develop new alliances. couple seen in the past of days or so the most aggressive stance against russia from this administration that we

have seen at any time coming from president trump's political orbit both on the campaign trial, transition, as well as the first couple of weeks in the white house. david: let me pull up that morning must-read highlighting the risks. you know washington well. to see anyly movement here in the next few months on tax reform? plan laids ambitious out. safe to say there is been a revision to that plan going forward. kevin: i think there is pressure to get some type of legislative a congressman before april 29, the marker of the first 100 days. i do not see these will pass forward. we keep hearing, oh, there is a deal. isk, this republican caucus very much divided. you have different factions. the sources i was speaking with just yesterday within the house freedom caucus, they feel more embolden right now to not negotiate with this

administration because, quite frankly, they're looking at the win from their perspective of being able to block some of what they viewed as a more moderate health care proposal reform that was not conservative enough. on the issue of taxes, treasury secretary steve mnuchin saying he was to get it done by august. if you look at the calendar, it is going to be tough. david: george, there is legislative achievement. there is a simple ability to keep his government up and running. with those few days of legislative work ahead, how worried are you about the potential for a government shutdown? concerned, as are they should be. as we've seen before, a healthy level of rings mentioned. i think they will get a resolution. it is ironic. if you go back to where we were on the election, the days after the election and you have a simple majority of republicans everywhere, they were going to all come to agreement on things, and we're talking about potentially government shutdown.

that is the irony. markets are starting to realize this is going to be a much tougher sledding. kevin is right. we like to see legislation passed, but 19 or so days to go, it is going to be difficult. francine: kevin, for the first time since november, world leaders and the g-7 leaders are standing behind president trump. will that embolden him and change the way he looks at foreign policy? >> that is a great point. particularly when you look at european counterparts and how they have viewed this new white house, whether it is german chancellor angela merkel or the various other into gees within the eu, they're looking at the decisive action within the past couple of days this white house has taken against syria, not only as a signal against the charlotte sought, but signaling to russia -- bashar al-assad, but also signaling to russia and north korea. what everyone is watching for is whether the russians play ball with secretary tillerson.

do they try to have any last-minute hijinks? do they try to somehow mess with, so to speak, the photo ops? or do they come and are they accommodating to work with secretary tillerson to try to gauge something? if you look at the statements coming out of moscow, they have not been the most accommodating, to say the least. francine: how would this play on the markets? a kind of meeting of the minds against russia, does that calm the markets or more volatility over concern it will turn ugly? >> on the whole, i think it should be no positive. yet a luna lateral president breath nato and now the of the coalition forming, it looks like it is more of the same then the regime change. we have to be very open there are political fractures and fishers. fissures.

let me ask you what you're looking for on the heels of this g-7 seven. in terms of a statement at the end, what are you looking for and what do you want to see come out of this? >> one interesting aspect is around the uncertainty of regulation. i think would be interesting to see what the back chat is around regulation. i see there will be nothing. in many ways, that is positive. it is difficult to get major changes through in the senate and house. however, i think more technical changes which actually file a rough edges of regular and is a net positive. but a concern for many european leaders is the agreements are dead. i think one thing that will come out of this is how little impetus there is to work on global regulation around the

banking system. i think that is probably more broadly. i think there is less desire to cooperate on regulation. what i'm looking for is the absence of new news on the topics than a forthright statement. david: kevin, let me ask about what the white house is try to telegraph about the security team. haderday, the president conversations with angela merkel. trying to show a united front, different united front that perhaps we saw before? foremost, general h.r. mcmaster has been the more mainstream political presence missed. we have looked at the political tvs and the intrigue stories, general mcmaster has emerged as someone who is a force within is a administration and someone who is working in tension with secretary tillerson to craft a national security and foreign policy. the second point i would raise is that they're hammering the point home that this is a very

different foreign policy than the previous administration under president obama. david: kevin, great to see you. we will be back with george goncalves and huw van steenis a little bit later today. later today, the president trump meeting with ceos at the white house. we will have the conversation with former ge chairman and ceo jack welch. look for that at 12:00 noon in new york, 5:00 p.m. in london. this is bloomberg. ♪

"bloomberg surveillance." david, let's talk about japan and inflation expectations. height ofmbed to the more than three years. this was mainly on expectation of breakeven rate may be bottoming out. for more, we're with huw van .teenis and george goncalves george, i know you have just come back from japan. how difficult is it for a governor to be as imaginative as he was in 2016? will he manage to get inflation expeditions up? >> at the end of the day, it comes down to are similar to what we see here in the u.s., some version of animal spirits and people believing that the prices are going to go up in the future. central banks by a large, including the bank of japan, have thrown a lot of things at tackling the deflation risks out there. we do think with the passage of

time and the policies they have put in place, they are slowly working their way through. things withto tier the u.s. out the gates, europe is next, and japan is a distant third. francine: huw, what is your take on it? this goes back to negative bond yields, going back and positive territories, then he -- having a huge impact on treasuries. >> what was the in japan and europe is negative rates were field experiments in hindsight. it has created distortions, particularly at the front end of the curve. the central banks have to because it's about how they real that in. it is clear they're going to have to. are getting a, we synchronized global recovery. the u.s. may be ahead. i think the eurozone recovery is accelerating. -- one of the

challenges of last year, the fed now putting up rates, put pressure on the ecb and the bank of japan. if we do get these rate rises, that eases off a lot of the pressure. if anything, if japan does not will fallhe yen against the dollar and trump is going to start getting hot under the collar again about currency risk. i think it will be important bank of japan and eurozone reconsider their exit strategy. david: george, you mention the animal spirits. how does it look on the ground? how are you seeing that play out? >> if you ever visit japan, it is a well oiled machine. growthllenge is getting that is sustainable and inflation that is sustainable. we are at an interesting .osition in the world it does feel like we're getting more synchronized policy. easingfed came in with

eight or nine years ago, leading the charge, this rise in rates continues, it has a reinforcing mechanism. i think that takes pressure off other central banks to not be as aggressive. it is a building process. i do think one country alone cannot do it. i think japan would benefit from higher u.s. rates overall. francine: thank you so much. we will be back with huw van steenis and george goncalves. withrow, a conversation the imf managing director and will ask her about japan and volatility and whether you can move inflation by expecting it to go higher. this is bloomberg. ♪

francine: this is "bloomberg surveillance." let's get straight to the first world news. stockholm, the

suspect in the truck crash that killed four people admits he committed the crime. that is according to the associated press, which cited his lawyer. the suspect has been identified as a native of his pakistan whose application for asylum was rejected last year. in south korea, presidential hopeful says he is open to direct talks with north korean dictator kim jong-il and. he is one of the top two candidates and next month's election. he says south korea must thetiate with kim over nuclear weapons program. in china, the government is naming and shaming local officials in what is being called its biggest champion against air pollution. almost 6000 inspectors are examining pollution controls in the region around beijing. officials who get called out for not doing enough could end up getting demoted or removed. president trump and british prime minister theresa may may see a chance to persuade russia. their presenting a united front against the visit ahead of a

visit to moscow today by u.s. secretary of state rex tillerson. the western powers are considering more sanctions following the deadly chemical attack on syrian civilians last week. tillerson spoke at the foreign ministers meeting in italy. >> they have aligned themselves with an unreliable partner in a sharp al-assad. the chemical weapons according to themselves, the syrian government, the russian government had signed that accord. and now aside has made the is made to assad look not so good. visit willlerson's be the first by cabinet member since trump took office. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. fascinating year those comments from secretary of state rex tillerson, a few hours before he embarks on that trip calling bush are al-assad's administration unreliable.

-- bashar al-assad's administration unreliable. it is amazing how the conversation has shifted in the last seven days. still unclear to me, also talking to our executive editor, unclear to me what the trump administration wants to do whether they will go and do everything they can to depose bush are al-assad returned to strike a deal -- bashar al-assad or try to strike a deal. rex tillerson showing up in moscow. we had confirmation from rbc citing two unidentified people that putin will meet tillerson. the kremlin has said they cannot confirm that. if he does not meet the russian president, it will be the first time ever a secretary state of the u.s. shows up on an official visit and does not meet the president. david: john kerry met with him each of the three trips he had to moscow. janet yellen says the central bank wants to give the economy some gas, but not so much it is

pushing down hard on the accelerator. george goncalves and huw van steenis are still with us. let me pull up a chart. $4.5egant chart showing billion balance sheet the fed has. i want to go to a chart looking at the options the fed may have to wind down the balance sheet. four different scenarios. george goncalves, when you look at all of those options on the screen, what is most attractive to you and what you think is most likely be fed will resume? obviously, there are so many different ways you can slice and dice this thing. we do think -- look, at this point, accommodation of mortgages and treasuries, primarily more mortgages, but keeping it open ended in a way

where if they target the size of the balance sheet, just like the level of rates, i think it is a very elegant solution. at the end of the day, their china shrink the balance sheet will stop they should be impartial to which asset classes they're looking at. mortgages are the anomaly. i do think they will want to get to that point eventually. we do think this is more hearted approach -- mortgage is an interesting product. could extent if rates go higher. the duration will extend. it will be harder for them to get rid of these mortgages. we don't think they will sell assets anytime soon. this idea of targeting the balance sheet as some sort of predefined rate i think would make the most sense, but we will see. we will have a change of leadership potentially from most likely next year. i guess leaving some sort of orders that are open ended and not so rigid would probably serve the next fed the most justice. david: how do you position yourself ahead of this?

clarity from the minutes we saw of the march meeting. still, a lot of unanswered questions. how do you go about positioning yourself? >> i think the markets have been coming down the yield curve. ironically, he said the fed is raising rates on the front end. wantis the last place you to hide. it as you get rates higher and higher, if they start to tinker with the balance sheet, the one area we think that is completely mispriced is this concept of term premium. how much will be compensated for lending long in the market. more are embarking on a sustained recovery, than long-term rates should be higher as well. that is not just a component of fed policy, but global qe's of cap the long-term rates too low for too long. -- have capped the long-term rates too low for too long. they are very low. if that is an area that needs adjustment, then long-term rates

should go higher. the irony will be that this was a very unconventional using world we came out of, so why can't we have an unconventional tightening role with the balance sheet place a bigger role? it would be a different approach than we have seen in the past. francine: the problem for the fed, it does not want to be the divergence play. it is at risk of being that if they do three or four hikes. >> we all learning by doing here, aren't we? feeling our way through the fog. is should they fed move more to settle down mortgages first, and that slows down the rate rises, that will be a big problem for the banks trade. think about the regional banks in the states. there holding a huge amount of mortgages. if you deal with mortgages first, that might be the speed bumps are more painful. big implications of this across

a number of financial sectors. francine: let me bring you over to my chart. who is going to have the toughest time here? ecb, partlyhe because of the political backdrop you have been discussing this morning. but to use yellen's analogy, they have their foot on the brake and the gas at the same time. of alicehe kind looking through the glass. hang banks to lend. -- paying banks to lend. 35% ofust shot through gdp. the ecb is tortured. i think the other challenge is, should they not taper, they will start getting upper limits of owning one third of any security next year. i think the important thing is to address negative rates early.

just in the same way they came incutting rates when qe was place, they should raise rates. francine: how early? we will never the french president is by may 8, then you have uncertainty surrounding italy and the banks. but then you have the german elections. then you have brexit. is there an ideal moment where we can talk about tapering or hiking rates? >> there are two challenges. one, it is clearly a french election. the political cycle is always there. the second is, the biggest challenge to the ecb, they feel their waited for guidance. if they change communication, they need to do it softly. the intense debate in the last few shows how agonizing it is. at the next meeting, they could talk about opening options but they need to do it very gently. at best, the second half of this year you might see us what -- slight tweak. david: george, how about you?

huw mentioned, has to be careful. it felt good when inflation was going higher. depends onmes it where oil will be and things of that nature. to make any sudden movements -- what we learned throughout this, again, the fed has been the first mover. , you end uplculate staying longer in your qe programs or using programs. -- or using programs if you take it back to soon. the early part of next year makes more sense. david: george goncalves and huw van steenis. later today, president trump will be meeting with ceos at the white house. we will be having a conversation with stephen schwarzman. look for that at 12:00 noon in new york, 5:00 p.m. in london.

this is bloomberg. ♪

taylor: this is "bloomberg surveillance." of the security officers who dragged a passenger off a united airlines flight that was overbooked has been suspended. authorities say there will be an investigation. meanwhile, in an internal message sent to the united employs come the ceo said the passenger was being disruptive and belligerent after being asked to leave the plane. in hollywood, screenwriters are threatening to go on strike next month. back across the entertainment industry billions of dollars and take popular tv shows off the air. the writers guild says payments has not kept up with the digital revolution. hollywood producers say the

union is making too many demands. that is your bloomberg business flash. francine: thank you so much. wells fargo has rehired about 1000 employees fired during the fake account scandal. the workers lost their jobs after struggling to reach sales targets. wells fargo board blamed former senior executives. barclays ceo is on his final warning for trying to root out a was a blower. we are back with george goncalves. and huw van steenis. you are an expert in banking. the concerns surrounding italian banks that are affecting the yields, but also the greek ones, what we do with german banks. on all, our european banks level playing field with the u.s.? we'll see much more regulation of this point we don't know if the u.s. banks will comply with basel. >> we have a dt are to banking system -- a multitiered ranking system.

the challenge in the eurozone is with low rate as well as the bad debt. last year, eurozone banks made 5% r.o.e.. the banking supervisor mentioned concern 12 times in her press conference, which was more than twice last year. both the supervision profit and the bad stuff. in an ideal world, you would find a vehicle to drum up some of the bad debt because there simply dragging down the ability of the banks to support the economy. francine: i have two charts for you. is there any appetite to be buying this kind of stuck or is it too risky? >> where we see biggest interest , probably more in the corporate -- core countries, italy, spain, and i think greece does some investors some high risk reward trade. up the systemg

will be quite slow. we also know that things can take the losses they can afford can afford to take. that is also an impediment to the greek system at the moment. francine: regulation in europe, will it change to make it a little more fair for european banks or do you not see flexibility? >> i hope so. i think the reappraisal is a good thing. we think the system is safer, sounder. there are rough edges that need to be filed off. the u.s. looking at those again will be helpful. my concern is if the u.s. does not support the closing of the basil file, we have two options. one is the gay zombie, and never really finishes and you never get catharsis. -- one is like a zombie, and never really finishes and you never get catharsis. the other option is we get a deal, maybe a bad deal. it is likely bank supervisors, even if the rules get easier,

the bank supervisors remain cautious. i would not want to entertain two big of a relief for the banks. david: we were talking about the reconfiguration of the fed. do you see the regulatory burden placed on central banks changing as a result of that? as aere's a critical role regulator, and i think in general, the idea that regulators themselves will dialback even if there is a , not beingt in focus as onerous on the banking is right. -- huw u.s. regulators would still be cautious when they're looking at things, even if there were to be a scaling back of some of the regulations we put implies for the last -- in place for the last seven or eight years. they will be focused on that as well as the other agencies throughout the u.s. regulation, if it comes back, people are still going to be cautious in making sure things are stable and safe. david: thank you. take a look at tv on the

bloomberg. you can watch all of our programming there and ask us a question. anthe right-hand side, amazing array of data and charts free to peru's at your leisure. that is that tv on the bloomberg. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." you're looking at euro weakness against yen strength. lower byis driven rising uncertainty around the politicalction and uncertainty. it is translating into dollar weakness against the ruble ahead of rex tillerson's meeting with russian officials. moving to asia, the south korean recordcording of fungus -- longest record of losses. shortly, coming up "bloomberg daybreak." what do you have on the show today? alix: we're hunkering down

covering markets in new york. front and center will be ed morse, the commodities team at citigroup. you oil at $52 a barrel, gold barely getting a bit. what does that say about the geopolitical risks? does the commodity market tell you? what does that mean about the over supply inventory overhang we continue to see globally? nerd talk.netary the ceos meeting with trump. looking into all of the potential angles. particularly from steve schwarzman of blackstone. interesting to get his take over the next three hours. david: time for today's single best chart. we are back with george goncalves and huw van steenis. let me pull it up. imf growth data. looking at annual centage change. it looks 52020, dropping by 15%.

emerging market growth, the purple line, going to drop by 40%. huw van steenis, at the risk of using the trope of new normalcy, what is your take away from the growth figures we have seen? what do things look like to you as we look to 2020? >> i'm hoping for gradual improvement. i think this secret is global recovery is encouraging -- synchronous global recovery is encouraging. net positive for markets and economies, certainly in the u.s. at least. i am hopeful. the others will be challenging for emerging markets, the downdraft in prices. i'm hopeful it will be some improvement. the biggest risk is central bank tightening and making sure we don't unnecessarily create a harsher set of financial conditions. david: and for you? >> at the end of the day, we had

an environment where the global growth story pre-financial crisis, the emerging markets looking as if they are converging on developed markets from the bottom side up, but as your chart shows, there is the risk of developed markets as time continues, the developed markets converging with the emerging markets from the wrong direction. those speak to structural issues which regardless of what central banks do, they could try to ease off the hike not so quickly, which is a risk, but this idea that we are banking on fiscal policy and if you don't get it in the size and scope that many expect, especially in the markets, any sort of let down there you get a negative feedback loop in the risk markets which then could cause not just growth, but some sort of weakness may be of recession. francine: what do you see the biggest risk of tightening too much or too early? is it the credibility of the

central banks reversing or the fact it could push either the u.s. and no growth or even the world in recession? >> a variety of things. it is more about how do we tighten financial conditions but without the shock? take on a credit markets. we have gone back to the top high-yield bonds, corporate loans are once again without light. you of easy financial conditions. easier than 2007. how do we tighten those without crating a shock to the corporate system? francine: do we not a correction and a lot of asset classes? i know you say no -- >> the market is cyclical, so these things will happen. it is the volatility in currencies. a lot of growth has come from globalization. you want to avoid adverse and currency moves as well.

shakeout's, the central banks probably will have to reappraise this beat of their tightening. david: central banks, compared to political risk, are we getting to a point where political risk is influencing or out sizing that if central banks, or are central banks ruling the day? >> not quite yet. this comfort feeling the markets have that if anything does go wrong on the political side, they know the central banks will be even more cautious. they are still playing a huge role in i think they will be for a number of years. there are pockets of weakness out there, but nothing is really systemic. when it feels like you can isolate where the issues are, it does kind of create this complacency at the broader market levels saying, this is issue orkorean yuan something is happening and oil. we have gotten good at isolating where there are problems in market places, but if it ever got to a point where it is much more systemic, the central banks

cannot really move away, either. the politics have not created systemic risk yet, but if we got to escalation of intentions of war and things like that, it would trump things for sure. francine: george, thank you so much. george goncalves and huw van steenis. coming up tomorrow on "bloomberg surveillance," a conversation with christine lagarde. at 6:30 a.m. in new york, 11:30 in london. i also want to get her take on some of the reversals we are seeing on these are cuts, gold and treasury strengthening, japanese yen as well. this is bloomberg. ♪

♪ jonathan: the g7 resource 10 and

syria. rex tillerson prepares for a meeting with russian leaders. janet yellen says it is getting closer to the neutral. president trump leaning on ceos to get into that greer -- into fifth gear. morning,york city this good morning. a warm welcome to "bloomberg daybreak." i'm jonathan ferro alongside alix steel. flat through monday, flat this morning as well. futures are going nowhere. the euro inclined to 106. a little bit of dollar weakness for a second straight day. the yen strength driving that story. treasury of two basis points. rex: secretary of state tillerson will arrive in moscow. at 10:00 a.m., we will get some eco-data. we love looking at the quick rate for that. at 1:00 p.m., we will get