francine: showdown over syria. u.s. secretary of state rex tillerson prepares for a rumble in russia, with moscow trying to cover up for a son's -- assad's gas attacks. the and at its strongest level since november. japanese shares tumble. a governments lend support to tough breaks it, figures on households starting to feel the pinch. lineups ofe great

interviews. i am very excited about today. we are here at a google institute event. i will be talking to the former ecb president couple of minutes. minutes later, we will talk to the imf managing director, christine lagarde, 11:30 a.m. u.k. time. we will talk about you strength, the economy, and pitfalls due to the political situation of certain countries. first, you have the data. shrugging off the geopolitical concerns. the stoxx 600 rising to the highest level since december 2015, a 16 month high. the euro is -- rising today. it is significant, because it is gaining for the first time in a while against the japanese currency. after a record losing streak -- the yen has benefited from the haven demand because of geopolitical concerns you have mentioned, like syria, north

korea, and upcoming french elections. the u.s. 10 year is up a pick -- pip. little changed, the 10 year yield, since falling to the lowest in november. since the fed raise rates, the red -- the rate has fallen. today, gaining for the seventh day. best run this year, on optimism saudi arabia will support an extension to the opec-lit output cut, just as u.s. stockpiles show signs of shrinking. francine? francine: let's get straight to the bloomberg first word news. here is sebastian salek. formerl has jumped after iranian leader mahmoud ahmadinejad registered his candidacy in presidential elections. he previously held the position consecutive four-year turns until he was succeeded by

rouhani in 2014. will iran remain committed to rouhani's policies, including the nuclear deal? in the u.s., white house press secretary sean spicer has apologized for saying adolf hitler did not use chemical weapons. it came after he was asked whether they might persuade russia to stop bashar al-assad. spicer said someone as despicable as hitler's did not sink to using chemical weapons. the killing of millions of jews and others using zyklon b gas. one of trump's outside advisers said the u.s. is unlikely to brand china a currency manipulator. the treasury will publish a report this month. the blackstone ceo tells bloomberg's he doubts there will be criticism for actions over the yuan. that would break a key trump campaign promise and be another sign that the administration is backing away from cap rhetoric over trade. >> i do not know, but i would doubt that that would happen.

i think the meetings in florida at mar-a-lago were good meetings. i was there for some of it. and presidentxi trump seems to establish a pretty good relationship. chi's producer prices surged again, rising 7.6% from a year earlier, beating estimates. but that is a slight pullback from february, suggesting the reflationary boom to industrial product -- profits is set to moderate. in germany, police are investigating three explosions that went off near a football team. a defender fractured his list in in incident, -- his wrist the incident, which led to a quarterfinal match been postponed until today. authorities are examining the authenticity of the letter claiming responsibility, found near the blast site. tesco has vowed to keep prices

low, ratcheting up the pressure on an industry set by -- facet by shanking profitability. the company revealed that annual profit cap beat estimates. it is a boost for ceo dave lewis as he seeks support for a plan takeover. >> we are the leading retailer in the u.k., the leading food wholesaler in the u.k., and we believe there is a great opportunity to get real growth into the delivered food service market, which is where we are underrepresented today. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am sebastian salek. mark: the u.s. and russia are readying for a clash over syria. secretary of state rex tillerson is in moscow to tell the kremlin it must abandon support of president assad if it wants an important role in discussions about the country. the trump administration says

evidence clearly shows syria was behind the chemical attack on civilians last week. this is a live picture of where the tillerson meeting will take place. for more, bloomberg's government reporter joins us now with what to expect. tillerson clearly comes with a message. will russia listen? well, expectation for today's meeting is that the confrontation rhetoric. in at least a little bit. shots have been fired. positions have been shown. the u.s. is blaming russia for what they call a poor choice of allying with a sound -- with assad. putin blamed the u.s. and the west for labeling russia as a common enemy. it would be hard to imagine even more attention for the first tillerson visit to moscow.

notabout syria, we should forget there is north korea, which is important for trump's administration, and the topic of ukraine, which is important for the kremlin. mark: is there any evidence that putin is willing to loosen his relationship with assad in syria? olga: well, we know that putin has made a lot of investment in supporting the assad regime in syria, and there were no signs so far that he plans to step back on that. mark: and very quickly, is putin even going to meet tillerson? olga: that is the main intrigue of the day, because so far the kremlin has not officially confirmed any possibility of such ameeting, and meeting is not currently scheduled in putin's agenda. but if putin will not meet tillerson this day, that can be

a major snub by a russian leader, because putin met previous u.s. secretary of state john kerry on all of his four recent visits. all we know -- that tillerson has time today. he plans to leave tomorrow. tillerson will meet his russian counterpart, lavrov, in the morning. there will be a press conference in the evening. we also know that vladimir putin is currently in moscow. not on a trip. all we have to do is just a way. mark: thanks a lot. olga is in moscow. you have a distinguished former central bank governor president with you, francine. francine: i certainly do have a very distinguished guests, the former ecb president, now part of the group of 30 wisemen, jean-claude trichet. thank you for joining us. >> it is a pleasure to be with you. francine: we are seeing live

tillerson'sscow, meeting with the foreign minister. markets are nervous about political concern, north korea, the french elections, russia and the u.s. can it impact the world economy? jean-claude: i think if this couple of uncertainty would be too long, it would certainly impact the world economy. but i expect that there would be some kind of stabilization, and we will see. i mean, it depends very much on the relationship between the u.s. and russia, at the present moment. isis should be the first enemy of both countries, and i have to say of the europeans also, is something which seems to be very much in the cards. so we will see. but in any case, it is very important that we have some kind of thoseement tensions, because otherwise, of

course, you know, markets and the economy, the economic agents, are very much fearing uncertainty. francine: do you think populism is a little less scary than we thought three or four months ago? if you look at trump policies so far, he may have realigned a little bit with the western view. we have not heard about trade yet. jean-claude: we could see the interruption of the transpacific agreement, which was, in my opinion, a very big mistake. and we are waiting to see, exactly what would be the crystallization of t new 's strategy.on i continue to fear, of course, kind of erratic behavior as it comes to global trade. we know that global prosperity is based on global trade. of course with the possibility of, i would say, solving difficulties here and there, all of this exists already.

it could be improved, certainly. but rocking the boat would be really a catastrophe. so, again, we will see. we are waiting to see exactly how the new administration will crystallize its new position. there is some hope that it would be reasonable, but we don't know yet. francine: mr. tree shea, do you worry we are expecting too much about central banks across the world because of geopolitical tensions? the markets need political support still, because the world is still uncertain. needclaude: the markets the central banks to be an anchor of stability, and also to always decide, independently -- independently of the government of the executive branches, but also independent of the short-term reaction of the markets. their goal, their obligation, is to produce this medium-term anchor of stability, and i expect that it will be done by

the fed and by the ecb. i have confidence in these institutions. thank you so much. we will come back to you in a couple of minutes and talk more about the fed, and how they should view growth, and also the european central bank dealing with politics. that was mr. jean-claude trichet, former ecb president. first, sebastian salek. seb: the ceo of united airlines has offered a second apology after a passenger was dragged off a plane in chicago. oscar munoz describe what happened as truly horrific, following backlash and the slump in the company share price. there is a review into the incident. daimler almost doubled with surging demand for mercedes cars. earnings before interest and tax climbed to 4 billion euros. daimler has been reaping the benefits of a rebound of its product line after supporting an expansion of its suv's.

i morning that the u.s. auto market has peaked and will shrink this year, despite unprecedented interest from outside. ,ark carter said industrywide it may fall from a record last year. he said toyota's incomes were the highest ever after auto sales in the u.s. declined in the first three months of this year. that is the business flash. francine: that january, ecb president mario draghi said that a marker of healthy inflation would be broad-based price gains across the euro area. bloomberg calculations show there are large discrepancies from country to country, in the impact of the 2.8 trillion euro program. there is still decline in parts of the region, with high unemployment and structural reforms outstanding. still with us is the former ecb president, john tree shea.

how difficult -- john country --uld -- sean country should jean-claude trichet. how difficult is it to set monetary policy for the countries? designed forit is 19 countries as a whole, and it is up to each country to take that into account, and knowing that the currency would be stable, that inflation would be medium-term, with the definition of price stability, it is up to them to have the national policies that would be appropriate. but let me say that thinking of the 19 countries as a whole, we see that growth is there. we see a lot of derivatives are moving in the right direction, including unemployment, which is going down regularly. encouraging -- encouraging for the policies which are pursued, and

encouraging, of course, for the ecb policies. of course, a lot of hard work remains to be done, and i would say the ball is clearly in the camp of the structural reforms up to the governments. the central bank cannot be the only game in town. and this has to be very clear -- very clear. francine: this is something mario draghi has been saying for six years, that you have been saying before him. jean-claude: we continue to say that. and he should continue, which he does, because it is true. it is as simple as that. the job is not done now. -- if the job is not done now, we will have a lot of difficulty tomorrow. interest rates will go up again, and policies will not be as accommodative as they are the world over, not only in europe, and we know that it is in the cards. so what happens with the absence of structural reforms? what happens with the debt outstanding, which is too high, and so forth? we have to be very clear on the

message. it is the case, certainly, in europe, in japan, and in the u.s. francine: when is the optimum time, given the elections coming up, and uncertainties in europe, to talk about the issues for the ecb? jean-claude: everybody knows that since the beginning of this month they have slowed down the pace of purchases. up to the end of the year, it would be the same level. and i expect the ecb to be clearer, these of even markets, in the last month of this year, to say what are the likely decisions for e xt year. we will see, in any case, everybody knows that this extraordinary accommodative policy cannot be pursued internally. it is clear. all the economic engines have that in mind. francine: what is the one thing

you worry, when you look at the fed? when we look at numbers, is gdp noisy like chair yellen inks? -- thinks? jean-claude: the fed has an isnomy in front of it that very much in the business cycle on the upward episode of the cycle. that is clear. unemployment is extremely low. necessaryabsolutely for the fed to take that into account. i think they are very clear, the ecb, that there is no rush on rates.e of the interest and less accommodative policies -- i think that everything is clear, and there is no ambiguity in the position of the fed. it seems that is exactly in line with what the u.s. needs. francine: how should it deal with trump policy? if certain cases are slow to materialize are hard to

understand exactly what he wants? jean-claude: they have to take into account facts and figures, whatever is the administration, whatever are the policies, in the u.s.,the case of to call for price stability on the one hand and maximum employment on the other hand. and they are, i would say, as regards these criteria, extremely close, if not over what is required by the legislation. so i take it that, again, whatever the administration, whether it is republican or democrat, they have to take realities as they are and stick to their legislative mandate, which they are doing very well, obviously, in very difficult circumstances. now, much is your circumstances. but we will see. if new decisions are taken by the administration that would rock the boat in whatever way, they will have to take the measure that would be

appropriate in the new circumstances. but from now on, i do not see major difficulty for the fed. francine: jean-claude trichet stays with us and we talk about france policy. we will talk to the imf managing director, christine lagarde, and 11:30 a.m. u.k. time. ♪

francine: welcome back to "surveillance." i am in brussels. mark martin is in london. with us is jean-claude trichet, former ecb president. we have been talking about the fed and the eurozone. mr. trichet, thank you for joining us this morning. underpinning all of this is politics in france. when you read the polls, how surprised are you that in 2017 front runners with two dangerous candidates for the markets. jean-claude: i must confess it shows to an extent that our democracies are hurt. we are very fluid. polly was expecting this that we have now, very close to the election. are twoaid, there candidates that have extreme positions, extreme right and extreme left, and i would say

from the economic standpoint, decisions that are in their programs are very, very bad, to whaty, in comparison is necessary in the country -- namely, structural reforms in the medium-term perspective. monitoring that would permit us to go back to full employment, which is the main goal that france has. clearly, that is not the case of two of the four candidates. [dele -- there seems to me a direction that could be ,nappropriate and circumstances if we want era a level of employme that is unacceptable. it is very, very serious. francine: do you think anything could happen and any of those candidates could become president? jean-claude: i expect it will not be the case.

i do not think the extremes would be president, because it does not correspond to the position of the overall french people. the problem that we have is a two round election, which is very special. but my own understanding is that this will not be the decision of the french people. that being said, it calls for the appropriate lucidity of all are thers, which sovereign in any democracy. so we have to be fully conscious that it is the sovereign which could decide, and the stakes are enormous. francine: do you worry more about italy? once the french presidential elections are over, and let's say we do not have an ugly surprise, what does it look like five years from now in italy? jean-claude: i expect the result in france would be more or less in line with what has happened in the netherlands, and i would expect the same in italy. when you are not the french -- i

know it is also a majority in italy -- the majority do not want to quit europe. there is a very strong majority to remain in the euro. francine: mr. trichet, thanks for your time this morning. that was jean-claude trichet, former ecb president. leader, we have u.k. on employment and wage growth data, important in light of the inflation report. we will have to see whether british households are starting to feel the pinch because of brexit. this is mainly due to inflation because of the pound being so low. we will have those numbers. we will hear from tesco, the ceo. that is seen lagarde interview in exactly two hours. ♪

mark: i am mark barton in london. the meeting between rex tillerson and sergey lavrov is due to take place, the meeting meeting iswhere the

gathering. tillerson, of course, heading to moscow after the g7 foreign ministers meeting that took place in italy in the last two days. lavrov, and potentially putin. we are not sure of the meeting between tillerson and prudent, whether it will materialize, but intentions are clear from both sides. tillerson wants russia to loosen its ties with the syrian president assad. we are eagerly awaiting russia's response. there are obviously question relationshipssia's not only with syria, but other geopolitical flashpoints will be on the agenda as well. we will continue to monitor that meeting. elsewhere, we are just getting some data crossing the bloomberg terminal. the data is on employment, is on wages. the early takeaway is, the unemployment rate has stayed at and at least 10 year low of 4.7%. that was forecast.

what is as important is basic wage. basic wage growth has slowed to 2.2% in the three months through february. .ut there is an estimated 2.1% this is a big theme with this employment report. weak sterling boosting inflation, hurting the consumer, which has been the backstop of the economy since the brexit vote in june. if real wages are squeezed, is that going to hurt the consumer , orher and push the economy dense the economy's some would say stronger than expected performance since the brexit vote? this is the big data point that has crossed the bloomberg terminal in the last few seconds. tesco shares are lower today after the uk's biggest supermarket vowed to keep prices low, ratcheting up pressure on an industry beset by shrinking profitability. at the same time, the company posting adjusted operating profit, which rose.

it plans to resume dividend payments in the 2017-2018 fiscal year. t cfo spoke to nejra cehic about the results, and how the company has been trying to remain competitive with low prices amidst rising inflation. >> that is what we are setting out to do. we think that by maintaining a competitive position, customers will shop more with us. that gives us more volume, and we have more to talk about with our suppliers. it becomes a virtuous circle we can work with. we set up our plans. we have beaten expectations slightly, which is good and pleasing. we are onfident that track for the 3.5%-4% operating margin by 2020. nejra: how quickly do you expect to meet that 2020 operating margin you set up? alan: we will see as it evolves over the next three years. we have been underpinned by the

1.5 billion of cost savings we set out. today, we announce we have already achieved 226 million pounds of that, so we are on track and slightly ahead of where we want to be. the key part of maintaining a competitive position is the ability to reduce our -- keep our prices low. we are building our overall margin toward that 3.5%-4% target. beat today has been down to revenue, but also down to you managing the costs. but of course, as we approach the brexit process, none of us know how fast inflation could accelerate. if you do see a faster acceleration, more than you expect, how will you be able to fully mitigate those costs? alan: we will have to look again at how we operate the business. we have highlighted clearly the three areas we are looking at, which is the store operations. we have noticed some changes to know what to expect during the course of this year. logistics and distribution is an

area. we cap announced that two of our distribution centers, in january, and goods not for isale, but for consumption, otr key ar of focus. all of those, we look at. if the environment changes, this is part of business, and we have to look harder and more quickly at what we can do. but we are confident about where we are and about the pound. mark: joining us now is an economist at ubs wealth management, to discuss the jobs or wages takeaway. let's start with this wonderful blue line, wages. three months through february, 2.2%. yesterday,lation 2.3%. adjusted for inflation, the labor report showed regular pay rose just 0.1% in the three months through february, the weakest figure since the third quarter of 2014. this is the big takeaway, the squeeze on real pay. >> this is the real theme that

is going to be driving the u.k. economy as we go through this year. given the following sterling, we are still seeing the effects of that. than the cpiing numbers were the ppi numbers. very strong numbers in there. that does point to higher inflation down the line. typically growth continues at this level, which i think is a reasonable assumption, just range, real5% incomes will be under pressure this year. mark: what is the impact on gdp, on actual growth going forward? it held up remarkably well, hasn't it, since the brexit vote, someone say. dean: absolutely. i will be the first to admit the strength of the economy surprise us all. taking into account what we are expecting to see in terms of real income growth, consumption numbers that have been supporting the economy thus far -- we can never say never, of course, but it gets very difficult to imagine how that consumption number is going to

hold up. we actually expect consumption will slow to around 1% this year , which will drag the economy lower. i would emphasize we are not overly pessimistic on the outlook for the u.k., not forecasting recession,ut growth of 1.4% or 1.5% for this year seems reasonable, which will be quite a big slowdown compared to last year. mark: it all comes as the true brexit discussions get underway. we are in the two-year process. interesting story which caught my earlier theme -- brexit negotiations may have to wait for a new german government, and it is centered on comments made brady's --ector -- by the director of brexit studies at birmingham university. he is citing something we knew about the german elections in september, but he is also saying that coalitions in germany take traditionally quite a long time to form, which means we could be pushed into november before the , or important leg of

the negotiations, take place. time is running out, isn't it? dean: time is running out, with that two-year window, and it has to be voted on by the european parliament. that said, there is a lot of groundwork that can be done between now and november. the meeting on the 29th, when we get the formal positions from the european government hands, will lay the foundations for that. in thet a lot will go on background. but as always in these talks, i think the expectation has been that it will for the end of the period.of the it is a fair point, that i do not think it is something you need to be overly concerned about for the time being. mark: thank you, dean. for the moment, oil is moving up today. it is on its best winning streak of the year. former iranian leader mahmoud ahmadinejad registering his candidacy in the country's

presidential election. he previously held position for two consecutive four-year terms, until he was succeeded by hassan rouhani in 2013. let's get more with the middle east anchor, yousef gamal el-din . is this a surprise? were we expecting mr. ahmadinejad to throw his hat into the ring? yousef: not really, mark. nobody was really expecting it. a couple of months ago, he made --ar he had no attention intention of signing up, so this is a change of course. anyone is free to sign up in iran for the presidential election. what happens now is a vetting process, and ultimately, they cut these down. or 200 candidates cut down to a selection of five or six, depending how the guardian council moves on this. this is critical because ahmadinejad is a populist has been, and rouhani

on the other side of that during his administration. he has been emblematic of normalizing relations with the west. trade and investment have figured highly here. he has worked closely in terms of getting opec together on that front. that is at risk. that is why this comes as such a surprise. we have to wait and see. there is a lot of oil here at stake. remember, talking about iran, we are talking 11.8% of opec output. the fact that you could have a populist candidate here would split the conservative vote or maybe go all the way and be able -- some on some of the of the dissatisfaction among iranians. let's face it -- trade and investment, not every iranian has benefited. mark: and that is the big question, isn't it? what, instead, have the poorer parts of society not benefited from, under the rouhani presidency? well, that is -- we have

heard as well from the supreme leader, ayatollah khamenei, and he has voiced some of those criticisms. as normalization policies have not really been able to lift up the quality of life for a lot of -- they, this is a very are going to jump on that and try to gain votes on the back of that. if you look at where inflation is, at where economic is, there is an argument to be made that it has not fully lived up to expectations. ultimately, since relations are strained as well -- bear in mind, we heard very sharp breath -- rhetoric from president donald trump. there are questions about, to what extent is the iranian state president syrian bashar al-assad? a lot of moving parts to this. we will have to see whether ahmadinejad passes the vetting process and can ultimately build on his base and some of the old themes of controversy and

confrontation that we remember very well. mark: thanks for joining us. our bloomberg markets middle east anchor. try tos hollande may knock leading contenders out of the presidential race, causing an upset. "le monde" is reporting he worries le pen and melanchon could make it to the second round. about one in five people could consider leaving the country, depending on who wins the election. .et us bring back dean turner it is an astonishing race, isn't it? every week throwing up a new surprise, with less than two weeks to go. dean: who would have thought, two weeks ago, that melenchon would be ahead of mr. fillon? certainly a surprise. the most likely outcome is that the main candidates, the leading candidates, le pen and macron,

are mostly we to make it through, though i would not write off fillon yet. francine: you've -- mark: you have to think about the core base, the undecided voters. dean: that is one worry around mr. macron. still willing to change theirare mind. i think even on the question of le pen, with so much support still undecided, we still are not sure whether she makes it to the second round, although that looks like it is going to be the case right now. mark: let's bring up one of my favorite charts, which is the spread, the difference in yield between the french and german ten-year. it has moved up in recent days, coming down a fraction today, but about 70 basis points. 79 was the february high. it shows the heightened uncertainty as we move toward next weekend.

would you expect that spread to widen further? and if we get a shot in the first round, or a couple of sharks, it is game on, isn't it, for the bond markets in europe? dean: absolutely. i think we have to watch the polls very closely. 's momentumnchon continues, and it could be le i thinkus melenchon, bond markets will become very nervous about that prospect, because we are facing a run off the record have antiestablishment candidates with economic programs that are questionable. mark: and one in five thinking of leaving the country. this is early days. but economically, that is hugely damaging. mr. trichet said earlier, france need structural reform. that is the message here. dean: that is really the choice we are facing in this election. we would like to have the antiestablishment candidate, which wants to continue as things are and introduce more

protectionism, which would be a negative outcome for the french economy at a time when things seem to be going reasonably well. if we do get a fillon lori macron-- or a presidency, growth should improve. the bond market could rebound swiftly. mark: a busy half hour. dean turner from ubs wealth management. i want to bring you live pictures from pretoria. thousands of protesters have joined opposition-let demonstrations calling on president jacob zuma to stand down. excuse me, this is rex tillerson , the u.s. secretary of state, shaking the hand of sergey lavrov. that meeting taking place in moscow, of course. it takes place in a tense time for the relationship between the u.s. and russia. some of the headlines from lavrov -- russia has a number of questions on a number of u.s. news. saying the u.s.-syria attack was quite alarming.

said, weria attack, he need to avoid such actions in future. russia is ready, he says, for a u.s. dialogue on equal footing. to the u.s. he says, you are with us or against us. a few comments from tillerson. states. secretary of russia talks come at an important part of our , an important moment in the relationship. he says he is looking forward to a frank and candid exchange with russia, coming into this meeting with lavrov with the intention of trying to persuade the russians to loosen their support of the syrian president, bashar al-assad. will a meeting with president clinton take place? that is another -- with president putin take place? that is another question. it could be a snob if the russian president does not meet the new secretary of state. back to those live pictures from pretoria, when thousands of protesters have joined opposition demonstrations calling on president jacob zuma

to stand down. the protest coincides with the embattled leader's 75th birthday. it has been a torrid week or so for the south african markets, for the rand, which a week or so ago was the best performing major currency against the dollar. you had the then finance minister called back from his travels and stripped of his job. then we had the rating downgrade. it has ba turbulent week for south african markets. all of those gains have been completely erased because of the moves taken by the president, which of course are not exactly popular around the country, as evidenced by these live pictures from pretoria. coming up, big business meets trump. blackstone chief executive stephen schwarzman telling bloomberg what he got out of the talks. more from that interview, plus 11:30 u.k., we speak to the imf managing director, christine lagarde. ♪

mark: i am mark barton in london. here is sebastian salek. seb: the ceo of united airlines

with a second apology after a passenger was dragged off a plane in chicago. oscar munoz described what happened as truly horrific, following a huge social media backlash and they slumped to the company share price. the u.s. department of transport says it has begun an initial review into the incident. first-quarter profit at daimler almost doubled, did by surging demand former cities cars. earnings before interest and taxes climbed to 4 billion euros. timeline has been reaping the benefit of a revamp to its product lineup, with an expansion of its suv's. autoa is warning the u.s. market has peaked and will shrink this year, despite unprecedented incentives to attract buyers. it says industrywide delivery 17.5all from a record million. total u.s. auto sales declined in each of the first three months of this year. that is the bloomberg business flash. mark: donald trump has once

again talked to chief executives . job creation is the top of his agenda. he said cutting taxes and regulations such as dodd-frank were his priorities. president trump: we are to reduce taxes, eliminate wasteful regulations, which we have already done, probably 25%, if you take a look at dodd-frank, for the bankers in the room, they will be really happy, because we are doing a major streamlining and perhaps elimination, and replacing it with something else. mark: blackstone chief executive stephen schwarzman things plans to overhaul the tax code will be more thought through then the speedy attack on obamacare. stephen: i expect a much more approache, logical than trying to pass health care in 17 days. withis not going to happen the tax area, which is good for

everyone. i also think there will be a circle back on health care. mark: still with us, dean turner, economist at ubs private banking. generally, investors are giving donald trump the benefit of the doubt, aren't they, when it comes to infrastructure, tax cuts, so on, and so forth. but you wonder how long that patients will last. dean: well, i think that is a little unfair. does notnk tha of appreciate the cyclical forces underway in the u.s. supporting the economy now. most economies are not baking in 2018,ump effect until because these things come with a lag. there clearly is a concern that the way obamacare was handled, that it could present problems in the future for the agenda. but i think it is still a bit too early on that. mark: the underlying economy is doing well on its own. dean: exactly. mark: you should separate the

two. dean: there is an argument it side,upport the fiscal which could be a benefit for the economy, which would build in less of a fear of boom and bust. mark: that raise up the fed. bond investors are convinced we will see two more hikes this year, one at best. what are your thoughts? are you in the medium dots or dovish? dean: we are in the do more camp. a more interesting debate than the hike is, what happens to balance sheet? that is going to be the real debate come the end of this year, especially because ms. yellen's term is coming to an end. mark: the view is that normalization will begin this year. do you need rate hikes? bill dudley referred to that. how long is the cause? dean: i think to answer that

question, we need a better handle on how the u.s. economy is doing. other things being equal, if the economy was performing as well as it is today -- inflation picking up, wage growth where it is, i think we could see both types in conjunction. face a bit were to of a slowdown, they would think again. mark: are investors calm? a lot of that maybe geopolitically linked, the 10 year dropping yesterday. since the fed rate hike in march, it has gone from 2.6 to 2.3. are you surprised by how the bond markets reacted? different fects. dean: exactly. a little surprised, but geopolitics is driving this. i think on the other side of the economy, you have the equity markets. clearly, with the s&p making , i think ther story is quite interesting. what you are seeing is probably

a fair reflection of what is going on in the underlying economy, and that probably does support a risk on view. mark: what is your biggest worry right now? what is dean turner's number one fear? worldit has to be politics. it is not just france. we have a number of events in europe this year. i would argue less germany, but we have to think about italy either this year or early next year. mark: does the ecb begin tapering this year, or put it off to next year? does it mention it is going to taper and implemented next year? dean: i suspect once you get french elections out of the way, assuming one of the centrist candidates does win, the rhetoric of the ecb will change quickly. our expectation is,, a september meeting, tapering will begin early next year. that date will be six to nine months for the taper. we certainly expect that markets will get a positive surprise, in terms of the timing of that

announcement. mark: great to see you. dean turner, economist at ubs wealth management. i want to recap the headlines from the meeting between sergey lavrov and rex tillerson, taking place in russia. tillerson looking forward to a frank encounter, and says we need to clarify differences with russia. i said, you are with us or against us. u.s.a is ready for dialogue on an equal footing. he said, we need to avoid such actions in the future, referring to these area attack. stay with "surveillance." francine has a big interview, speaking to the imf reor, christine lagarde. this is bloomberg. ♪

francine: showdown over syria.

rex tillerson is preparing for a rumble in russia. feeling the pinch. lends eu government support to the tough stance, the biggest earnings leap since 2014. and one of the adults in the room. in the next hour, we speak to christine lagarde. bloombergng, this is surveillance. here in brussels. david, an interesting day. i would say this but between the u.s. and russia, it does take stock. david: absolutely. the is a few weeks ahead of spring meeting and we look forward to that for sure.

francine: we look at the yen as the biggest proxy and you have to play geopolitical concern. as you were mentioning, we do start in moscow where the u.s. and russia go face to face over syria. rex tillerson will meet with his russian counterpart. the trump administration shows --t russia was behind the that's syria was behind the gas attack last week. the kremlin rejects the new u.s. narrative. korea's nuclear weapons program should be resolved through peaceful means. the u.s. has sent an aircraft carrier to the region. and that brings fears that conflict cou breakout. germany, -- they will say

what is in the letter. a player from the team was injured. a quarterfinal match was delayed. saudi arabia probably support suspending opec oil production costs which is according to someone familiar with the matter. hoping thessia were cuts would lead to higher oil prices. it has been between $50-$60 a barrel since last june. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. i am taylor riggs. this is bloomberg. david: data check this morning. i am looking here at s&p futures up slightly. is 10622.ollar 53.66.rude is

let's switch up the board. let's look at the dollar-yen. swissie right now is 1.0686. the 10 year yield is 2.29. the -- let meg in ask you, what accounts for the reversal we see here in terms of the geopolitical risk we are seeing? it is still out there in the market? >> definitely. the risk is a cost. else this morning and yesterday but people remembering the fundamentals. it is why the s&p 500 is still doing all right. with equityets for

fundamentals doing quite all right. david: when you look at the asia orical risk in russia, what is the greatest concern for you? >> remembered to think about what exposure you have with the markets, whether that is in southeast asia or russia. this -- in-depth portfolio for the region. for us, it is looking at the positive side and the bright side of the political risk. in europe, there is actually something we are coming to terms with. it could provide upside potential if results do turn out to be more positive for the markets through the course of this year. francine: what our markets

worried about? the french election? potentially dangerous markets -- europe and the markets are they worried more about the russia-u.s. tensions? nandidi: the french election will be the biggest move in terms of the sovereign response. the candidates are much less far apart for the first round. to theess distinct due following data. so now we have marine le pen versus another candidate which wasn't macron which is less cyclical. so i do think that is the largest risk in terms of exposure. because almost every global investor has a stoxx 600 in their portfolio and it could have a widespread effect versus the russian or korean geopolitical risk that we are seeing today. francine: if there is more risk

on the rkets,t would you be buying? the yen? goals? the answer to a to do to solve a risk problem or a the yen doesion -- look expensive at the moment. .old could be a possibility maybe even u.s. treasuries or some of the government bonds that could potentially see spread tightening across the world. ,rancine: nandini ramakrishnan thank you so much. joining us now for the hour here brussels is carsten nickel. great to have you here. what a day to talk about foreign policy. we talked a little bit about the nervousness we saw in the market. do you expect that geopolitical

concerns will increase? yes, i think that is safe to say. -- the unifying sector, that is what it boils down to. uncertainty over where the trump administration is positioning itself. if you look at france or brings it -- i think that is the unifying sector. francine: it feels to me like three or four months ago, we didn't know what we're looking at. there were less concerns about a possible trade were between the u.s. and china and we had no idea what would happen with mexico or brexit. on aow we seem to be better path. populism looks a little bit less ugly. carsten: in a way. yes. but take a look at the

guidelines from the brexit negotiations. we have signals coming from one or two years down the line, are we sure we will g the sign off given the domestic probls? risk remained elevated. david: rex tillerson travels to condors ofwe see the this beginning to shape up. are we getting anything cohesive? do we have anything cohesive on u.s. foreign-policy right now? carsten: not really. i depends on the g7 and the russia side. what we can signal was uncertainty is that the russians are not going to go back. this is the strategic interest here. how far the americans are willing to push -- let's say in exchange for russia, it is

unclear for now. david: what are the economic ramifications for that? with sergey lavrov and the russian president as well? carsten: uncertainty, that is the only thing we can point to. at this point. it gives us an indication of what is ahead on the global scale if you look at trade relations. global trade talks. the role of the wto. it gives your idea of the fact that it is difficult to say where the u.s. is heading. and without that, there is obviously uncertainty. francine: thank you so much. be stayingkel will with us and we will talk more about french politics. coming up on "bloomberg surveillance," a conversation with christine lagarde.

we are live from brussels. it will be after a speech where she will layout the priority for the imf on how to make the world more inclusive. look for that at 6:30 a.m. in new york this is bloomberg. ♪

taylor: this is "bloomberg surveillance." let's get the bloomberg business flash. more problems for jes staley. hasu.s. justice department joined british regulators in investigating him for repeatedly trying to root out it was a blow or. the barclays board has reprimanded staley and have taken back the $1.6 million bonus.

mercedes earnings dropped 60% from a year ago. part of that is june for the rising demand. up at three times the growth rate of the rival in the market, bmw. and the ceo of united airlines is pledging to review company policies after a passenger was dragged off a flight. the federal department of transportation has begun its own review. and the senate commerce committee told united that the explanation has been unsatisfactory. that is your bloomberg business flash. francine: thank you. as you can government lent ,upport to trump's tough stance it is a mix of the inflation because the pound is so much weaker than it was before the brexit. joining us now is carsten

nickel. a lot of the negotiations will be here in brussels. will he be? will he soften? would you go if you were thesa may to bker a better deal? carsten: she might. is pretty, everybody much on the same page. everyone is seeing more than just a market. everybody is concerned about maintaining this right now. yes, the u.k. is an important areing project but there vacations are much larger for individual countries. francine: do you think they will punish the u.k.? not go: know, they will that far. nobody wants to punish.

everybody wants a pragmatic deal today. offyou cannot be as well when you decide to leave the eu. david: what do you say to those who say it will be another big hurdle? how big of a hurdle is this, do you think? carsten: towards the end of the year and until the end of the there is the brexit peel and we need to talk about the and theelationship german elections play a role here. there is a coalition in place. is that you have 10-11 months to negotiate the future relationship. the david: when you look at

trade, do have idea of what the negotiations might look like? carsten: i think it will happen in two parts. areas ofee in which the single market they u.k. would like to retain eu they'reip and wher willing to give up on market access in order to retain or regain control. and the second half of next year looking towards a deal. francine: will they get it done in two years? carsten: the question is, what are you looking for? a transition deal? yes. but it will take years to negotiate.

francine: do we know if that is a priority? carsten: that is for sure. from the u.k. government perspective, they want to retain the ties because they are very close. the risk, as i said earlier, are you able to push this through, domestically in the u.k.. can we retain the benefits of the close economic benefits in the eu -- what is the moment when the eu and u.k. domestic conversation wakes up? david: we talked about a unified front and europe. but if you look at the u.k., it is different. how much is the x factor of scotland? scotland, i think it has been put a little bit to the side because theresa may has been very clear saying that we will not talk about that until

the issue with the eu has been wrapped up. the whole idea of sovereignty versus parliamentary sovereignty , when it comes to relationships between the government and parliament and the u.k. and the eu. so these are all issues that are unresolved. and that will be with us for years to come. francine: carsten nickel, thank you so much. he stays with us and we will talk more about frolicies. , we sit down with a conversation with the eu commissioner for economic and financial affairs. we want to ask him about the french election. that is 7:20 a.m. in new york. this is bloomberg. ♪

francine: "bloomberg surveillance" is live from new york and brussels today. we are here to talk to christine lagarde, the managing director of the imf. we talked before about the strength of politics with jean-claude trict but we are also looking at foreign policy and the mishaps that could happen. that is now with carsten nickel. let's focus on little bit more on france. rise in thenia john

polls are continuing. and we did hear that francois hollande is concerned that out of the four main candidates, we could see something surprising. i put the question to the former ecb president. the two't think that extreme would be president because it does not correspond at all to the overall french people. the problem is that we have a two round election. it does call for the appropriate the voters, they are the sovereign in any democracy. so we do not be fully conscious

that it is the sovereign that could decide and the stakes are enormous. formere: that was the ecb president. if you are nervous about this in the markets, you either sell the euro, you buy japanese, the safe haven or you look at yields. theact, the spread between french 10-year and the german tenure has been increasing. that is probably one of the favorite ways that investors will try to protect themselves. let's get back to french politics with carsten nickel. how surprised were you? the polls now show a far left , possiblyelenchon making it to the second round? carsten: it is significant. but what it shows us is the weakness of the political center and that is something we have

seen playing out over the weeks and months now. the only one who really occupies the political center is macron. if it goes well for him in the betting on the center-right moving to the right moving to the left. the big anticipation is that now, this movement isn't an established political party. david: help you understand what will happen to the party after the election. how will they pick up the pieces? carsten: it is imploding. i would say. they are experiencing the fate inthe wind and centerleft democracy. if you look at melenchon -- the less of the socialist party. so there is a very good chance that macron will win the election.

david: carsten nickel stays with us and he is with francine in brussels. coming up later today on bloomberg television, a conversation with larry summers. look for that at 8:00 a.m. in new york. this is bloomberg. ♪

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we need to look at the market and look at the updates but first, the first word news. moscow times is challenging the u.s. to clarify its position of foreign policy. withillerson is meeting whenounterpart at a time tensions have increased. he faces questions over the contradictory ideas from the u.s.. the u.s. says evidence shows that syria was behind the gas attack last week. and this appears to be the beginning of trump's campaign promise to drain the swamp. he will lay the groundwork for widespread government reorganization that could eventually lead to the downsizing of the workforce. thessued a memo called rethinking of the government structure and it is almost certain to draw widespread opposition from congress. seanpicer has apologized for

claiming that even adolf hler didn'use chemical weapons. he was ridiculed for drawing a comparison between the nazi leader and president assad. he failed to acknowledge that the germans killed jewish people with gas. filed to runly after being told by the supreme leader to stay out of the race. the matter of president had been as a favorite who negotiated the lifting of sanctions against iran. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. imt taylor riggs. this is bloomberg. tillerson has demanded that russia abandon its support of syria, setting the two countries up for a clash. tillerson meets his counterpart today. carsten nickel joins us now.

and let me start by looking at the history. theclose relationship between john kerry and sergey lavrov. you look at the commons out of g7 yesterday. rex tillerson adamant that things will be different this time. john kerry tried so doggedly to -- how willack things be different this time around? to see moreping pragmatism and left a motion in the relationship between the u.s. and russia. john kerry and sergey lavrov did have a good relationship. rex tillerson does have a good relationship with president putin. he has known him for the last 16 on the one hand, we could say that the relationship

between john kerry and sergey lavrov is missing but rex tillerson does underand russia. he knows russia quite well. what we have heard so far from both sides, stating their positions, it is no surprise. we are looking out for compromises. for some way they can work together on a pragmatic basis. david: you mentioned the relationship between vladimir putin and rex putin -- rex tillerson. he wasn't expected to meet with putin, even before the chemical attack. when the trip was first announced, there was no mention of a meeting between president putin and the secretary of state so nothing has changed. although, given their close relationship, previously we might have expected there would be some informal meeting. and we are not aware of that at this time.

there is a lot that we are watching in this meeting. we will pay attention to what is said formally and we will also pay more attention to what is said privately from the u.s. side and the russian side in the days ahead, as to what transpired at this meeting behind closed doors. francine: we had a rather -- i don't know if you want to call it bizarre -- but rex tillerson yesterday threw a comment to the reporter saying the u.s. taxpayer should not care about ukraine. is that foreign policy from the u.s.? is there some kind of thinking that the u.s. doesn't get involved in ukraine? let putin do whatever he wants in ukraine in exchange for a peace agreement with syria? it would go against what we have heard from trump. president trump has been equally

clear. but russia should get back. coulderson's commts go against that. the way we interpret this is not that the u.s. is looking to back away from any support of ukraine, it is simply that they do not want to physically get involved and that is continuation of the policy we saw from the obama administration. there has been very little financial support given to the ukraine from the u.s.. very little in military report or technical report. and that is a continuing position in regards to ukraine. russian is toe on resolve the situation but we won't get further than that. what we continue to see in the it is primarily the european union's problem and i think that remains as before.

francine: carsten nickel, how describe the friendship or not between the u.s. and russia? carsten: we should look at the whole question of russian perspective. it is important for the europeans and the west to take russia seriously as a geo statistic -- with a geopolitical interest. will be impossible for vladimir putin to let go of crimea or eastern ukraine. and things have been slow with the relationship in syria. about a strong dollar policy here in the u.s., do they have a strong ruble policy? where do they want to see that right now? been clear ons when he wants to see the ruble. he wants to see it be weaker

against the dollar. because it has become clear that russia needs a fundamental overhaul of the economy. relr too long on the consumer economy to draw growth. and that needs to change before the oil price. so russia needs a new economic industrial policy. and that must be based on attracting higher levels into manufacturing. and that can only happen if the economy remains competitive. and a key part to the competitiveness is the weak currency. putin has been public about that. even in february, his finance thester says he believes fair trade is 63 but recently it has been trading at 55. so there is clear support in the weaker for longer ruble in order to attempt investors.

aboutid: let me ask you the opec production deal. have been reports -- sapa reports that russia is continuing interest in that. how important is that? that is a very important -- sorry, go ahead. david: respond. i think the oil price is still important. russia plays down the importance but in terms of the budget, oil revenues are very important. a surprise with the follow-through in commitment of production. that i guess that what we missed was that there was a strong buildup of production in september, october and november exceptionalthat

buildup has now been cut back to normal levels as part of this deal. so oil price is important. i would expect that the kremlin will give continued political s far as the extension of the opec deal. in terms of oil companies getting fatigued with it. and in terms of actions. there is a question about that but strong political support, for sure. francine: thank you so much. chris weafer will stay with us and so will carsten nickel. coming up on "bloomberg surveillance," a conversation imf managing director from brussels. that is 6:30 a.m. in new york. she is doing a speech a couple of meters from where we are and talks about a three-pronged attacked from the imf on world

grows. this is bloomberg. ♪

david: i'm in new york and francine lacqua is in brussels. trump is issuing a warning from north korea, tweaking yesterday "north korea is looking for trouble and if china decides to help that will be great but if not, we will solve the problem without them." and carsten nickel, both are still with us. go to youckel, let me first. how fearful is china a that the u.s. will go it alone when it comes to north korea?

carsten: know, there is whereion around the world the administration is standing on all sorts of situations. so i would assume that it does involve chinese leadership. that alistically, a fear solution to this problem, it can only be found if china is involv. so there is a huge element here this situation for domestic consumption. it also accounts for the whole north korea question of whatever is going on there also on the u.s. side with a show of strength for domestic consumption. david: the phone call did follow that treat last night. look at this after the meeting at the mar-a-lago last week. do you foresee a formal continuation of talks like this?

as you say, formally, i would expect to hear frequent contact. what we would be more interested in is the informal relationship between the two. the last time i was in beijing recently, you got a strong sense that the chinese are also trying to assess what to expect from the trump administration. they certainly were as surprised as everybody else. trump gave approval for the strike against syria. -- on thek they are one hand concerned, and on the other hand, curious to see the way trump will run his administration and what that might mean for them. so i think it is fair to say that the quick initial strike in syria has taken everyone by surprise a little bit and it did change the equation. we now know that the trump white house can act in a much the obamaway than

administration. so too early to say at this stage. the next few months will tell how this dispute will play out. back to: i want to get brussels here. carsten nickel, when you look at this the right -- when you look , the person who took everyone by surprise was vladimir putin. -- that he did last week me that he is almost an expert in this? carsten: to me, this looks like a trial and ever approach. with a strong view as to what is actually going to go on with the voters at home. so i think it is too early to say that.

francine: chris, what is your take? chris: it is absolutely clear. putin's lot of this in early days as president as well. there was a lot of figuring out as you go along and now, we can talk about russia having a a bit more. but a relationship to the trump presidency, it is very early days. the strategy or been is evolving. we are seeing knee-jerk reactions and we can expect more which makes the situation dangerous or unpredictable. and the administration will find its feet later in the year, then we can talk about what is the plan. but we certainly can't talk about that today. that was chris weafer, great to talk to you. carsten nickel will stay with us in brussels. take a look here at your tv

. you can look at our program live. we have headlines and charts and the likes. you look back on what is happening this morning. check that out on tv on the bloomberg. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." tesco are falling in london. they are promising to keep prices low and it is turning up the heat on an industry that has been hurt by shrinking profits. imported products have been more expensive. walmart is taking another step to challenge amazon. they will offer discounts on more than a million online only items that customers can pick up at stores. walmart says it is costing them less to ship to stores so the customer should share in the savings. francine: thank you, so much. janet yellenweek, said the federal bank is trying to give the economy some gas but not too much. earlier today, i spoke with

jean-claude trichet on his outlook for the u.s. economy. >> the fed has an economy in front of it that is very much in the upwards cycle on episode of the cycle. that is clear. unemployment is extremely low. and so it is absolutely necessary for the fed toake that into account. i think they are very clear, obviously. there is no doubt on the pace of the increase of rates. everything isat clear. and there is no ambiguity in the position of the fed. ofhas kept exactly in line what is needed. francine: how do they deal with trump policies? they may be slow to materialize or hard to determine exactly what they want?

>> they have to take into account facts and figures. are the policies. in order to provide the outlook for price stability and maximum employment. say,hey are, i would they're watching these two criteria extremely close if not over what is required by the legislation. again,ke it that whatever the administration, republican or democrat, they have to take reality as they are and stick to the legislative mandate, which they are doing very well in difficult circumstances. now, much easier circumstances but we will see. if new decisions are taken by the administration that would rock the vote, they would have to take the measures that would be appropriate. on, i don'trom now

see a major difficulty for the fed. that was the former president talking to me earlier on. we are back with carsten nickel. when you look at the u.s., and i know there are still concerns amongst leaders about possible trade sanctions and border taxes, what is the likelihood, at this point, of the trump administtion imping something like that? carsten: difficult to say. you look at the potential impact that such a move would have, not the least on the u.s. economy itself, and you would say it is unlikely but let's not make at -- let's not make the mistake we made in the past. if we are learned -- if we have learned anything, we have to ofe into account the fact populism and political fragmentation. francine: is or something that leaders can do to try to protect themselves to make sure that

doesn't happen? is theresa may the key? carsten: we are still focusing on the latter part of that equation. trying to prevent this from happening. so traveling to washington to try to convince them of the benefits of the benefited world trading system. so i think we are still in that space. thatnk it is pretty clear on the european side, we have to think about retaliation. david: we have wilbur ross coming up in the next 90 days looking at trade relations around the world. what do you expect to see in that report? we have peter navarro doing the the u.s.g and then -- trade representative, you have a three headed beast on trade policy. apparent and we see it in many areas. it is important to look inside the administration to try to

figure out who actually has the upper hand. in we're still very much that process. and i think for the partners of the u.s. around the world, it is very much a wait and see approach until we have it figured out. that the it your sense administration is re-examining proposal spoken in the campaign? david westin says he does not think this administration is going to label china as a currency manipulator. csten: definitely. only givenoposals him a campaign, that is not something we are used to in politics. but policy proposals from a couple of weeks ago -- they are being reevaluated on a daily basis. and that is the main source of uncertainty. francine: is it a foreign-policy crisis if they do call them and manipulator?

carsten: when it comes to china and the rise of china over the last 30 years, it is intertwined and it is an economic story with huge invocations which would go together. francine: carsten nickel, thank you so much for joining me. coming up, we have another great hour together. we will talk to christine lagarde, the managing director of the imf who has just given her speech eight days before the imf world bank meets in washington. she has laid out a three pronged proposal to get the economy back on track and make sure it doesn't detract as that we don't fall into a recession. this is bloomberg. ♪

syria.e: showdown over

rex tillerson prepares for a rumble in russia as washington accuses moscow of trying to cover up for the gas attack. feeling the pinch as the eu -- tough economic stance. the biggest earning squeeze since 2014. in the of the adults room -- in this hour we speak to christine lagarde. morning, this is "bloomberg surveillance" on the road -- i am in brussels. york.gura is in new we had geopolitics. it is a great day to speak to christine lagarde because she is here trying to lay out the priorities for the imf and she is really good at looking at the crossroads between politics and the economy. a greatt will be conversation. let's get to the first word

news. taylor: starting in moscow. russia is challenging the u.s. to clarify its foreign-policy. rex tillerson is meeting with sergey lavrov at a time when tensions have increased. he has questions about what the u.s. needs. the u.s. says evidence shows syria was behind the gas attack on civilians last week. and they accused russia of trying to cover-up for their ally. trumpinese president told the issue of north korea's nucleaapons progm should be resolved through peaceful means. thpresident spoke with trump tweeted that china was "looking for trouble." germany, authorities have found a letter claiming response ability three explosions that a explosion in a

top soccer stadium. quarterfinal match was delayed until tonight. and in the mideast, saudi arabia will probably support extending oil cuts. they were hoping the cuts would lead to higher oil prices. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. i am taylor riggs. this is bloomberg. david: let's take a quick check on the data. futures are pretty much flat this morning. the euro-dollar is unchanged. -- the dollar-yen,

see that at 110. the u.s. secretary of state has demanded that russia abandoned its support of syria. setting up the two countries for a clash when he meets his counterpart in russia today. joining me now for more is kevin cirilli. .nd marc chandler kevin, good to have you with us. what is the white house telegraphing year about this meeting between tillerson and sergey lavrov? turntionis is a direct you of barack obama. they're arguing that for al of the criticism they have received for not being tough enough on russia, that they will get down to business. they will face head on the criticism that they haven't been tough enough.

said, we have seen this in the past where on one hand, they seemingly think they are headed in one direction and then do a fake. so what happens today with rex tillerson and his interactions, it might surprise some people. david: helping what we saw yesterday during the press briefing. that one of the reporters would rest the shovel out of sean spicer's hand as he dug himself deeper. kevin: it is challenging because if you think back to canada is something that was consistent on the campaign trail, saying that various countries were not paying their fair share. notably, angela merkel -- to see in the past week, the germans and the u.s. coming together after tense

--ationships and rhetoric and they will see it play out. it is now a big turnaround from what we have seen in the past. how watching this play out? this is what we have seen in the markets. straight we have seen. i wonder if it was naive to think that the u.s. could convince russia not to support syria. the russians have supported president assad's father. it is the middle east. and even though i agree that it they do say what and thetaxpayers

transactional orientation -- you look at what the strategic interests really are. francine: that is interesting. kevin, do you see that? whether rex tillerson spoke out of hand or if it was an off, it, i think he said that u.s. taxpayers shouldn't worry about ukraine or whether this is a deal? kevin: this was rector towards the base of the party. they were quite frankly stretching -- they were for scratching their heads last week take action when they saw him take action against the president assad regime. still, it was a show to them on theok, they ran

message of not getting too involved. and the second point i make here is that secretary tillerson is having to walk the political tightrope. to a political advisor outside of the administration yesterday who told me this is " deja vu" because it is the administration trying to have it both ways. but as they try to do that, they have to send a message, not just to congress, where they are receiving bipartisan praise for the action in syria, but also what all of this projecting is all about. francine: as the world and investors try to figure out the political implications on foreign policy, what would you be buying to protect yourself from any eventuality? go yen-euro? yen-dollar? marc: today is the first full day -- the last full day of the

easter holidaye plays out. i think we will see the markets consolidate. hesitant to reverse the big moves we have had. i see the korean stock market and currency. i think the u.s. 10-year needs to stabilize. one thing we have been watching is that the euro has been weakening against the yen it is the longest losing streak the euro has had. hereder if the geopolitics is a bit exaggerated. in the past, geopolitical issues flare up and then relax.

coming early next week, there will be a lot of these easing back off. david: we will get a joint news conference today mentioning the comments that rex tillerson made about the u.k.. -- other countries are contributing to nato? will this be the big elephant in the room? kevin: funding and syria. h.r. mcmaster has met with trump in the past 24 hours. , how will you be able to negotiate? you need leverage in terms of the bilateral agreement. seend that, we haven't much detail.

we haven't seen any deal be made. it is a different thing to get results. francine: that was kevin cirilli washingtonchief correspondent. we will be back with marc chandler. 15 minutes from now, we speak to christine lagarde. that is an exclusive on bloomberg tv and radio and we -- wealk about erected will talk about brexit. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." is asget the bloomberg

flash. .ore problems for jes staley the u.s. justice department has joined british regulators investigating him for repeatedly trying to root out a whistleblower. the board has reprimanded him and made him get back be $1.6 million bonus. first quarter profit doubled at the parent owner of mercedes-benz. part of this is due to rising demand for the cars like the new sedan. sales were up 16%, three times bmw. and the ceo of united airlines is pledging to review customer policies after a passenger was andged off a flight chicago. the federal department of transportation has begun its own review and a senate congress committee told united that the excavation has been unsatisfactory. that is the bloomberg business

flash. david: the vix index posed its biggest jump since november. they're concerned about the outlook for the fed hike. much complacency for so long. what was the catalyst to finally move? a high level of uncertainty. we are getting into the earnings season. i think that a lot of people value investors but there might not be a lot of value left. so momentum traders, they are paring back a little bit. i'm not so concerned about this. i don't anticipate this to really be taking off at the long end of the curve. we expect a good 30 year today. i think this is a typical modest pullback when everything is said and done. david: let me pull up a chart here on the bloomberg. this is the two day moving average. this is along the trendline that we saw a recently. why is this such a proxy for the

anxiety over geopolitical tensions? of one hand you have the uncertainty about the french election. and now it looks like a four-way race. you have the focus on the european election. and when you see heightened tension in the world and trades rally, it tends to strengthen the end. so i think that will give the korea story and the french story together. i think that is the way a lot of people are expecting that view. francine: are you not surprised that the markets didn't correct a little bit further? because there is so much concern out there? between the spreads

french, 10-year and german bund widen a little bit but it is nothing huge. marc: in the big picture, most people do not expect marine le pen to win. but because of the surprises we ,ave had in a year and a half people have been hesitant to take bigger bites. a lot of the uncertainties will the short run. , i thinkhe true signal they will do fed policy. i think that is what people are focusing on. the underlying trend. francine: what could be a catalyst for the bigger correction? is this a general mood on the markets? is this the china manipulator? marc: we still have some time to

worry about china as a manipulator. that this will be based on the strength of the u.s. economy. can the fed raise rates in june more than 50% and markets seem to be thinking of right now. that is the next big focus. but we have to get to the ecb meeting. especially in nations like germany, they were talking about maybe raising interest rates before the asset purchases. and we saw a low core inflation. 0.7. ecb has expanded the balance sheet. so the next hurdle or catalyst is the ecb meeting with u.s. economic data. david: we got data from the u.k. this morning on employment. wage growth was disappointing. does the market care about that stuff right now? i think most people i think moe

2010 average growth of q1 was 1.1% and the rest were 2.5%. so a lot of people see the week first quarter -- yes, and then there is a reseller ration of the u.s. economy. francine: thank you so much for that insight. was marc chandler. he does stay with us. we are getting headlines from imf.irector of the

christine lagarde is finishing the q&a and then she is coming to us. she is saying that the risks to the global economy include political uncertainty and ejection is him. she wants more cooperation and she is also talking about the greek debt and that restructuring is needed. this is bloomberg. ♪

francine: this is "bloomberg surveillance."

we are from brussels and new york. this is where christine lagarde at this conference. she is talking about the greek debt restructuring. of theseven days ahead world bank imf meeting. she also is laying out what needs to be done. talking about the main risks to the economy. this includes political .ncertainty and protectionism a clear warning to theresa may. be a: no doubt there will lot to talk about after the spring meeting in a few days. themorning must-read -- washington post. in the column it is written that and as akes to win result, the siri operation,

praise at home and abroad, has consolidated the power of trumps core foreign-policy team in ways that may alter the political balance of this white house. it has been difficult to figure out who speaks for whom in the white house. taking a lead on the attack in syria last week. who are you looking tadd listening to in the administration no when it comes to foreign-policy? do we have a clearer sense of who is talking? marc: that is part of the issue. i think there is a global-liberal wing of the trump administration that is not that the of a difference between comets that jack lew made. even in the g-20 statement, they say that not many play the currency markets. but when it comes to trade, it is a different story.

theen mnuchin talks to treasury department. so i think the division of labor within the administration is something we have to be more sensitive to. it i'm not so sure a general in the global is liberal hand. i think there is a new rule and the rules are not defending u.s. interests or they are not being enforced. david: let's use the syria attack as an example -- the white house is adamant here that there isn't a change in policy toward syria. have to look and wonder what this leads to next. you satisfied that we have gotten any indication of what the policy is? part of thes problem. the uncertainty sends misleading signals to officials. it isn't like he is building a casino are getting a trademark or buying a used car.

uggla watching what he says. and what he says is very important and people take that. so when the sense that ukraine is not in the u.s. taxpayer interest. or that nato is obsolete. he is sending powerful signals and it isn't surprising that other countries act up. you so much.nk that was marc chandler. coming up in the next couple of minutes, we talked to christine lagarde, the managing director. we talk about brexit and the trump administration and china. what are her main risks out there? this is bloomberg. ♪ so you're having a party?

how nice. i'll be right there. and the butchery begins. what am i gonna wear? this party is super fancy. let's go. i'm ready. are you my uber? [ horn honks ] hold on. don't wait for watchathon week to return. [ doorbell rings ] who's that? show me netflix. sign up for netflix on x1 today and keep watching all year long. >> bloomberg surveillance. i'm in new york today. let's get the first word news. >> u.s. secretary of state rex

to tryon goes to moscow to convince russia to end its support for serious president assad. tillerson met with the russian foreign minister sergey lavrov. they said russia has questions about what he calls ambiguous and contradictory ideas from the u.s.. the kremlin says distancing itself from assad is shortsighted. this could be the beginning of president trump's campaign promise to "drain the swamp." he will lead the groundwork for reorganization that could lead to a downsizing of the workforce. a rethinking of the federal government structure is almost certain to draw opposition from congress. white house press secretary sean spicer has apologized for claiming that even hitler's did not use chemical weapons. he was ridiculed for drawing the comparison between the not see leader and syria policy bashar al-assad.

he failed to his knowledge the killing of jews with poison gas. in the middle east, a surprise entry into iran's president election. former president atman in a job expected to run despite being told to stay out of the race. moderate president has been considering an overwhelming favorite. he is the one who negotiated lifting the sanctions against iran. 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. becky so much. theier on, we spoke with former ecb president. we talked about the fed and the european federal bank. get,hat i really wanted to the thinker's imagination to talk about was about political risk. this is what he answered. >> i think if this period of

uncertainty would be too long, it would certainly impact the global economy but i expect that there will be some kind of stabilization. it depends very much on the relationship between the u.s. and+++ first enemy of both countries and the europeans also is something which seems to me very much in the cards. we will see. in any case it is important that we have some kind of appeasement

of those tensions because otherwise, markets and the economy, the economic agents are very much fearing uncertainty. francine: do you think populism is a little bit less scary than we thought three or four months ago? if you look at from policy so far he may have realigned a little bit with the western view. we haven't heard about trade yet. >> we could see the interruption of the transpacific agreement, which was, in my opinion it very big mistake obviously. and we are waiting to see exactly what would be the position of the new administration strategy. course,ue to fear, of erratic behavior when it comes to global trade. we know that prosperity is based on global trade. of course with rules and possibility of solving difficulties here and there. all of this could be improved suddenly, but rocking the boat would be a catastrophe. see., we will we are waiting to see exactly how the administration will -- francine: that is the former ecb

president. we are also talking about tensions between the u.s. and moscow. let's get back to marc chandler. ideat to go back to the that the markets have started to actually,olitics but are they still dependent on central-bank action? >> i would prefer central-bank action as a driver as opposed to geopolitics , korean peninsula, sya and the french ections. but i do think this is the challenge that we have. political uncertainty, the geopolitical risk, might have peaked already with the 10 year yield falling. the korean stock market has gone for six days in a row, closing higher today and creating a little bit of pressure closing higher today. the panic has abated a little bit. perhaps over the next couple of

days, i think the former ecb president was right. geopolitics can dominate these events but hopefully they won't. and hopefully a week from now we will see calm her things, tensions in the korean peninsula easing a little bit as well as what to do with syria. i am not convinced that a one-off military strike on an airfield is a game changer on the ground in syria. i am not sure the challenge here of a persons evil as a sod might be, many of the rebels are even more backwards thinking, less modernizing. the shah of iran is a cruel dictator but also modernizer in the country. francine: we also talked about balance sheet from the fed in the central bank. do you worry that the central bank, because of their mandates have to look at data and figures so that they hike rates too soon?

that we have either a trade war or tensions rumbling back on the agenda and that it will be too late for central banks to not hike? >> the federal reserve is already hiking rates. many people are looking for a june hike and even after that. i think on bloomberg's got about a one in three chance of a second rate hike to come this year. that the first hike behind us and another one possibly in june. a third of a chance of another hike being priced in. it is premature to talk about the ecb shrinking the balance sheet. i think it is early to think about a rate hike. -40 basis points is the deposit rate. david: let me ask you about the personnel on the federal reserve. also the unwinding of the balance sheet. do you sense we've got a fed chair who recognizes that she wants to get this started soon? how does that influence the way the committee approaches the balance sheet.

>> no more than one bernanke he was leaving, he set up a process for tapering that yellen executed her first year. at the end of the day i think that the federal reserve has decisions and anyone a -- anybody presented with the measures, full employment with the twon approaching present level, no matter what their political ideology or passion, they will have to respond to that. people have to deal with the facts on the ground. i am not so sure it would change. trump has the opportunity to .3 people to seven next year. it is five out of 10 people who say they will do it the old-fashioned way. david: two-part question here. what kind of communication do you think we are going to get from the fed about the balance sheet? and what kind of communication

would you like to see? >> the fed cannot overcommit. the federal reserve is still finding its way around. they ruled how to do this. i think the fed has to explore. we will look for some based decisions to try to take it out with passions. i think the new york fed talking about maybe a small pause between the decision to the last rate hike -- maybe in september -- and maybe a pause will return to its balance sheet. we have a lot of treasuries maturing next year. all of this rolled off without reinvesting some of them, so i think we have to see this gradual pace. francine: thank you so much. coming up in the next couple of christinee talked to lagarde about greece, the trump administration and brexit. we will ask about whether she is

concerned we are going to see a revival of protectionist measures. this is bloomberg. ♪

>> this is bloomberg surveillance. i am taylor riggs. let's get the business flash. shares of britain's largest supermarket chain have followed -- fallen in london to keep prices low. that is turning of heat on an industry that has been hurt by striking profits. the drop in the pound has made products more expensive. of thosesing less increases to customers than any of its main competitors. walmart is taking another step to challenge amazon. the world's largest retailer will offer discounts on more than a million online only items that cost -- that customers take off at stores. walmart says it costs less to

strip doors so customers should share in those savings. pushing tesla to add two directors that don't have ties to elon musk. it is a sign the questions remain about electric carmaker's corporate governance even as the shares soar. five fellow board members have personal or professional links to him. that is bloomberg business flash. isid: coming up shortly bloomberg daybreak: americas with david westin, jonathan ferro and alix steel. jon: i am in shock. that is what is coming up. tom is on vacation and you are stepping up. this is bloomberg surveillance. coming up a little bit later, larry summers, the former treasury secretary looking forward to that conversation. back in january, he came on bloomberg daybreak and said markets are on a sugar high. i would be interested to see if he still thinks that. the market is still moving away quite nicely.

the price action pretty muted over the past few days. david: i can tell you, tom keene will be back on monday. thank you very much. time now for a single desk with mark taman handed with me -- .ark chandler with me laying the groundwork for the conversation christine lagarde is going to have with francine lacqua, looking here, i see advanced stations at the blue line at the top. these are narrowing not in the way that you might want. what is your sense? >> i think we will see a little bit more optimism. people are so pessimistic getting over the financial crisis, the headwind, but we are seeing all the major centers now, the major part of the economy, doing a little bit better. weak q1 gdp we talked about, the eurozone has a strong robustdata suggesting first-quarter growth. china's economy stabilized, the

japanese economy stabilized, india is doing the monetary experiment. things look better than they do a few months ago. david: we will come back in just a moment here with christine lagarde speaking to francine lacqua from brussels. check out tv on the bloomberg. you can watch live programming and go back and look at previous interviews from the morning in days past and see added content on the right-hand side. this is bloomberg. ♪

francine: we are in brussels with the imf managing director christine lagarde. speaking just moments ago about how we can face actually the risks of the world economy. always a pleasure to speak to you. thank you so much for agreeing to speak to bloomberg. what is the one thing we should worry about? prectiist measures, are they as bad as we thought couple of months ago? -- if it wasism is to be realized, it would really be a break on growth, a break on

productivity, a break on investment. innovationng both and trade are conducive to productivity. activity is the engine for growth and better allocation of resources. seeart of the risks that we , clearly, protectionism is one. political uncertainty around the world, particularly in the european region, is also high on our agenda. flowstential for capital moving from emerging market economies as a result of the reinforcement of the dollar and the rise of interest rates is a third one. that applyhe risks to a situation which is quite positive at the moment. francine: do you believe the

trump administration could be less protectionist than we feared just at the beginning of january? think thats, i don't any economy would actually prescribe limited growth, limited productivity, limited investment, limited innovation. policy makers including the u.s. policymakers, want better growth, more investment, more innovation and productivity, trade is part of the solution. then you go into the question of what kind of trade? is it trade with restriction? is it trade with assorted measures? i think everybodyi hope, would agree that we do not want restrictions. open, thatde that is is fair and inclusive in order

to facilitate opportunities. francine: what happens to the world economy if the u.s. decides to, for example, label china a currency manipulator? >> i would first observe what has been decided on day one has not been decided. the best, we believe, is an assessment of the currency cost value on the broad basis. on the global basis. you cannot just identify one particular country because the whole system works together. when the currency goes up somewhere it goes down somewhere else. it has to be a zero-sum game. estimates should be conducted in a very cohesive manner. we tried to help with that. we will be releasing a report in july. francine: what are your concerns apart from these eager zeitgeist concerns? do you worry about french policy? >> i worry about the outcome of

any election. the economies do not like and what the investors do not like is uncertainty. the track record in the last few months has been the realization of unpredictable results. that leads to a period of uncertainty now. everybody wonders who is going to be the next french president? who is the next politician in germany? what other terms and conditions of brexit in the rest of the european union? the sooner those are known the better people can actually plan their investments, their location of business, their jobs going forward and so forth. francine: ithe euroze, if a far right or far left candidate will be president of france? >> i certainly hope not because the eurozone with its benefits and costs, with its pitfalls and

its unfinished business is just that'llng construction together countries that were at each other's throats for many years before. it is not perfect, clearly. it needs to be improved, clearly. it needs to benefit all countries. yes. it needs to be differential and respectful of the cultures of the societies. as a construction, certainly, it contribute to a lot contributef additional welfare. i have said all along that any recovery to which we would contribute by way of lending would be predicated on significant reforms that would help the economy go forward and stand on its own and on debt

that was sustainable for the longer turn -- longer-term. we have made real progress because the authorities understand that it is not the question of more austerity but a question of better reforms that would actually sustain the economy going forward. the imf is not asking for more austerity. what we are asking for is sensible, alan's pension reform that would simply informed the decisions made in 2016 by the greek authorities themselves. we are asking for tax reform that will enlarge the base and make the system much more efficient as well. reforms need to be implement to unleash the potential of that economy. understand how the that be sustainable in long run -- in the long run and

we understand that some degree of debt restructuring will be needed. that will be between the various partners and institutions. we are talking with christine lagarde of the imf, talking about greece. will the imf set the target of what needs to be done to then decide? >> to determine the sustainability, we need to understand what the fiscal -- what the reasonable fiscal targets would be in the short and in the medium term for greece. that has to be predicated on the capacity of the economy, on the potential for growth, and we will do that with integrity and with what we have. it is on those basis that we will identify the modalities of debt restructuring. francine: can the government actually reached a deal with the eu? ball.on't have a crystal

i wish i did. i read everything that prime minister may says, and i understand that probably the parties will be headed towards the transition period. which to me is a sensible approach given the complexity of the talks and the many issues that need to be addressed, tackled, resolved. .here are multiple issues trade, financial sector, migrant workers situation, the border between island and island, and so on and so forth. francine: on rex tillerson, who is in moscow, witnessing -- visiting the foreign minister of russia today. yesterday he was saying that it is not the business of the taxpayer what happens in ukraine. what does that mean? is this some kind of agreement with russia that actually they will leave the ukraine alone and

in exchange they will have some kind of peace in syria? >> my understanding is that he raised the questions. he did not answer the questions. what is the point? it is a legitimate question. not for me. imf, when ahe country asks for help and support we have to assist them and do it under strict commission allergies. that is what we are doing. clearly, we do have a large economy because ukraine is a large economy. it is where investment is protectable. it is in the interest of not only its neighbors but all economies in the world. to fully for that reason, it is worth having a stable zone at the borders of europe and the border of russia. francine: do any of these concerns actually affect your

ormitment or the bailout -- your support of ukraine? programs, thell program with ukraine needs to be owned by the authorities. presidentsubstitute a , a government or a central bank. we have to be convinced of the value of change and reform that they are going to help them and that we have negotiated with them. it is their country, their economy, their reform. that thosehope is reforms are actually owned by the president. i am convinced he cares for his country and he cares for his economy and he wants progress. responses, it is a question of resilience, keeping at this and you eradicated in what has plagued that economy for a long time.

corruption in particular. francine: what grade would you give the world economy right now? , b plus, c? >> we see a spring in the air of the global economy. we are certainly seeing a pickup and an economic cycle of recovery at the moment where growth is picking up. we have the prospect of more jobs. better incomes. where we should not spoil it and we should not waste it. we cannot self-inflicted wounds that would put a brake on that. that pickup in the economy is pretty well spread around the world. in the economies where we see a pickup in the manufacturing in particular, also in the emerging market and developing country's that are also growing at a reasonable height and providing

about three courses of the best three quarters of the global economic growth. francine: thank you so much for the time today. that was the managing director of the imf talking a little bit about the hotspots, what investors are worried about, french politics, greece and brexit, and the transitional agreements that we hear the markets hopefully will reach. otherwise it may be difficult to reach a full on trade agreement or a full on new relationship with the eu in two years. that would -- that was managing director christine lagarde. we talked about ukraine and rex tillerson in russia today. this is bloomberg. ♪ jon: president xi tells

president ump north korea must be solved by dialogue and not military confrontation. a showdown over syria. amid increasing tension, rex tillerson begins talks with his russian counterpart sergey lavrov. and investors want to wait for the french election. why a candidate is reaching the market. from new york city, good morning to our viewers worldwide. this is bloomberg daybreak. i am jonathan ferro alongside david westin and alix steel. as we counted on to a three-day weekend, we continue to do that. in the markets this morning, futures in the united states largely stable. down two points on the fed. muted price action friday, monday, tuesday, likewise today. looking at the fx market, stable on the euro-dollar. risen by that yen stretch and that bid we have seen the last