>> talking tough in tokyo. u.s. vice president mike pence says he is deeply committed to security. the fight for france. 1/3 of voters are still undecided. asders are taking no chances they wait for the answers in the election. plus, as donald trump congratulates erdogan on his victory, the turkish leader insists the vote was democratic. and regulators pushing banks for their brexit contingency. on track ins

london? this is "bloomberg surveillance." i'm francine lacqua in london. it will be a very pack today with news and great analysis. your, let's check in on markets. it is the tuesday after the bank holiday monday in the u.k. shares in australia and london are retreating a touch. if you look at one of the main embassies around the world, it is gaining a little bit. but not huge. the dollar gaining. for theling a touch third day, now practically unchanged. iron ore is the story of the day, down from 3.7% after better-than-expected data out of china. yet, iron ore is telling us a different story. we will have plenty more, but now let's get to the bloomberg first word news. nejra: donald trump has called tokey's president erdogan

congratulate him on his referendum victory. this is after erdogan insisted the vote was democratic, despite the monetary group insisting a took place on an unlevel playing field. he said turkey did not care about the opinions of hans or george. the deputy prime minister has talked down the prospect of an early election. >> it has been made very clear the next elections will be held in november 2019 and there will be a period of adjustment. so, i think it has been very clear that it are not on the agenda. reporter: france's presidential race has entered the final stretch with 1/3 of the voters undecided. the race is the most unpredictable the country has seen in recent history. speaking at a rally yesterday,

marine le pen spoke out against about controlling france's borders. >> i will restore our national borders. no other candidate is proposing this, none of them. we opened the door of the france to mafias, to terrorists, who understood the bandages they could get from our incredible powers listen this and send their soldiers of hate among the flow of migrants to hit our country in the heart. nejra: in china, new home prices rose in 62 out of 70 cities last month. this is suggesting buyers rushed to meet tightening measures. home prices are up 18% compared to last year. policymakers are hoping to clear a glut of on sold homes in smaller cities, while enforcing curbs in major cities to prevent a housing bubble. regulators risk inadvertently

-- making detailed plans for the worst-case brexit scenario. they say senior finance industry executives are concerned the bank of england and european central banks' demands for full could s o contingency plans spur the movement to the continent. global news 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries around the world. this is bloomberg. francine: thank you. the u.s. vice president mike america is deeply committed to the country's security. their heightened tensions with regards to the north korean nuclear program. abe have just begun a news conference in tokyo. aso talking at the moment, and then we get onto the vice president very shortly. let's bring in the chief currency strategist.

thank you both for joining us. tim, let me start off with you. are the markets right to be less nervous than they were one week ago? it seems tensions are not going anywhere? >> there is a geopolitical concern. yet, the markets sail merrily higher. interestingly, the bond market continues to move ahead, driven by momentum and now by commodities being softer. the stock market is amazingly robust. francine: is that central banks? >> i think so. that is what we think. >> absolutely. we live in a world where that search for yield becomes so extreme that unless you are under a major risk, people are forced to continue to push the money out into whatever investment they could find. i do think it is central banks. are ane: currencies

different market. we see little volatility playing out, especially the south korean yuan. >> what historically do you see when geopolitical tensions start to rise? obviously, the position. what are some of the biggest positions with regards to currencies? trend of the last five years. the yen has been one of the classic funding currencies. no big surprise, ironically, the yen has been one of the strongest currencies over the last week and a half. the anomaly is the euro. typically what you seen over the last five years is in times of stress, you see a traditional unwinding of short yield. the euro has been the funding currency of choice. the fact the euro has not moved against the dollar i think is equally telling. it tells you there is a different force there. francine: talk to me about what it would take for the markets to take a little more stock with the geopolitical concerns.

does it have to be something uglier? or, as long as the central banks are there we don't care? >> for the stock markets, it does have to be uglier. we are not seeing that. we have a big reporting week coming up. there is nothing obvious on the stock side that is causing great concerns. valuations are lofty. on the bond side, we are seeing this combination of momentum and a push from slightly weaker commodity prices, inflation data over the weekend was pretty benign in the u.s. the competitors were looking for quite big inflation. it is just not occurring. the bond does seem pretty robust. it will take either more than three hikes from the fed, a change from the ecb for the bank of england for it to be derailed. francine: there must be somewhere where this is playing out. is it the volatility index? we will talk about the french

politics. have you protect yourself from the rising tensions between the u.s. and north korea? >> to buy the yen, and possibly the euro, the bond market. and to sell equities, which has not marked out for those people who have taken that protection. industries have picked up, but they have often fallen back quite quickly. i suspect it is going to be one of those. there will be a brief pulse of volatility, rather than a sustained momentum. anything in there the emerging markets that could take the brunt of his geopolitical rise? [laughter] francine: on the flip side. >> let's take the natural -- the yen should be the currency. itioncally, given its pos geographically. let's say it is a currency to strengthen.

you have got to believe in a currency environment. the precious metals would probably do well. that is not automatically the case that that happens. you see other geopolitical tensions. but that's typically after you have been in a big rally. i bought anything that is goldbacked, anything commodity-backed. out of the yen space, maybe something like the ruble might not be the best. francine: we have good data from china and iron-ore is down 4%. so, are one of those figures wrong? >> i suspect the numbers are right. but we are talking about what happens when geopolitical tensions rise. typically what you get is an unwinding of positions. francine: look at the euro risk reversal. this is going to be playing out with french politics. do you expect a lot more graphics like this? >> it feels like the graphics we

were showing 12 months ago, going into brexit, when we were showing what happened with sterling. a very similar time. volatilitieszon over the course of this -- i expect a rise in volatilities over the course of this rate. francine: thank you so much. both will stay with us. nelligan straight to the bloomberg business flash. nejra: china's bright food has agreed to sell wheatabix at 1.4 billion pounds. the acquisition was one of several deals they made with foreign food companies of china's second-largest food maker. netflix has reported first-quarter user gains that fell short of estimates because of a lack of hit shows to draw new viewers and retain others. the lack of big-budget

production boosted net income. the streaming video giant said next quarter with a return of "house of cards" and three major movies on the release schedule, profit will miss estimates, but customer gains will increase. the ceo of united airlines has assured wall street the carrier will rebound from the p.r. storm that all of the forcible ejection of a passenger. the issue will be a watershed moment for the carrier and they are determined to put customers first, said munoz. the third quarter financial performance beat expectations. that is the bloomberg business flash. francine: thank you. donald trump has called turkey's president erdogan to congratulate him on his referendum victory. this is after erdogan insisted the vote was democratic, despite a group claiming it took place on an unlevel playing field. coming up, we have the european critic. he also said turkey did not care

about the opinions. now we are joined from his istanbul. president erdogan and pretty harsh words about international critics last night. what exactly did he say? theef: well, he brushed off criticism and says he does not care, with reference to the european union. he said, they made us wait over 50 years. it is not like it matters now. ultimately, they should know their place. harsh words from president erdogan. criticism from the european union, skepticism from there as well. the question remains, to what extent will this harm eu-turkey ties. there is so much at stake in terms of trade, political ties, -20 member.to, a g both have an interest in that. let me get you up to speed with two other important developments domestically. the deputy chairman of the opposition will formally go to

the election board and contest the results today at 12:30 p.m. local time. it is unclear what kind of results will come from that, but that is important to watch. the other is the extension of the state of emergency, which was set to expire on april 19. it was high on the agenda of investors watching the story. this country has been under a state of emergency since last year. that has been submitted to parliament and it looks likely to be extended. francine: yeah, give me a sense of what the economy is doing. we had some job numbers and budget data. yousef: yeah, you know what, the budget data was disappointing for those who are looking for a recovery. deterioration, if you follow the data, very interesting numbers here. the budget deficit coming in in march at the lowest numbers,

three times the shortfall of just one year ago. general unemployment, rising to 13%, the highest since february of 2010, just one day after the referendum. this underscores what a lot of the analysts i have been speaking to have set as well. there is an incentive for president erdogan to prioritize economic reform, to get some momentum into this economic story, which has been of course, doubled down by the very fact they were coming from a failed coup attempt nine months ago. whether or not he is going to leave some of that combative rhetoric aside and start actually working on those reforms, we will have to and see how that plays out. francine: thank you, yousef gamal el-din, joining us from turkey. he will be live throughout the day with more updates and great analysis. haywood.ve tim

let me bring you to my bloomberg terminal. this shows the gdp in turkey in blue. what happens to the economy? did we leave the politics aside and say as an investor, there is potential because of the demographics? trainam concerned about a s coming from a strong dollar. ago, and12 to 18 months the level of dollar-denominated debt became an increasingly difficult issue for the turkish economy. and this is before the coup. ins story does not go away environment where the dollar remains strong. from a currency perspective, it is a struggle, frankly, for them to then fight against the weakness of the lira. ok, we have stabilized to a degree. but if you look over the last decade, the dollar-turkey has gone up something like 9.5% every year.

the yield differential in turkey's paper is -- turkey's favor is 9.5%. even with that, how do you protect over the medium-term? further dollar strength is kicking in. francine: tim, do you not like emerging-market bonds, in general? it seems like emerging markets overall are a little bit stronger now than they were 18 months ago. >> indeed. and as far as turkey is concerned, this has been greeted by emerging-market specialists. they want some stability. they dislike huge disruptions and have had enough of that elsewhere. that is why this positive result good, but just over 51% is hardly a ringing endorsement. many of the measures brought in by this referendum show skepticism by dedicated managers.

so far, it has been a measured response in the markets. francine: tim and simon, thank you for staying with us. simon derrick and tim haywood. up next, we speak exclusively to the novartis ceo. we talk about tropical diseases and why they have been neglected so far. we speak to joe jimenez. this is bloomberg. ♪

francine: these are live

pictures out of tokyo with the economy mrminister aso and the u.s. vice president mike pence. the u.s. trade relationship is extremely important. yesterday mike pence was traveling in south korea. he was saying that trade relationship was falling shortly. of strategic importance and is extremely significant. the only rex tillerson went to asia, but now the vice president is going to asia, given all the uncertainties surrounding north korea and also china. we will keep a close eye on that. mr. pence saying that trade is needed. trade that is free and fair. on to other news and it has been five years since 13 of the world's biggest drug companies joined with others to commit to tackling some of the world's worst tropical diseases. joining us now to discuss progress since then and the

future of the pharmaceutical sector, the ceo of novartis joe jimenez joins us. this is the anniversary of the declaration. first of all, give me a sense of why you are in geneva and why you and other industry leaders have achieved at this event. five yearsnovartis ago, together with the gates foundation and the world health organization made a declaration in london to go after some of the most neglected diseases in the world. for example, there are still hundreds of millions of people in less developed markets that don't have access to medicines for some diseases that don't really have profit pools that will create incentive for companies to go after, from a cure standpoint. so, what we have done over the last five years, novartis and a number of other companies, have made that commitment.

we have made some great progress over the last five years in reducing prevalence of some of these portable, neglected diseases. francine: what are the biggest challenges to combat these diseases? joe: one of the things we have learned, for example novartis made the commitment to offer free multi drug therapy to any patient that has leprosy. disease,s an patient but is still prevalent. there are still 200,000 cases a year of leprosy around the world. so, we have been able to reduce the prevalence of the disease by 95%, but it is going to require additional steps to go that last mile. the last mile to eradicate the disease is always the most difficult. so, we are employing new tools, even beyond just the drug to help reduce the incidence of these diseases. in leprosy, we are implying something called contact

tracing. any new patient that contract leprosy, we are having the community health workers identify those people that might have been in contact with that new patient and we can prophylactically treat them. so, this is a way we can really knocked down the number of new cases. francine: talk to me a little bit about the current administration. they said they will cut funding in certain cases. they will actually cut research talkingcular areas, about some of those diseases. what would that do to your work there? joe: every company around the world, private industry is going to have to work with governments around the world. these are difficult times for many governments. we will have to step up our efforts and our investments novartis and a -- our investmens and at novartis, we stand for underserved markets. we will have to step up with

some additional research. to step up with additional ways to make sure the drugs we have make it to the patients that need them in these countries. francine: speaking of the present, you and other pharmaceutical executives met with the president recently. what was the outcome of these talks? joe: well, we had many topics to discuss with the president. one of them was the importance of the industry in the u.s. i think the industry recognizes the pharmaceutical industry is important to the u.s. we spend a $70 billion a year in research and development we employ 4.5 million people, either directly or indirectly. this is an industry that the u.s. wants to continue to build. it's a very science-based industry. we also talked about the sustainability of the health care system and the importance of ensuring that we have -- that

we shift from what is currently a transactional approach to pricing to one that is a value based pricing, or an outcomes based approach. this is where we quantify the impact of our drugs -- let's say the medical value, the value to the health care system, the value to society -- and show how we select our pricing in a way that gives back some of that value and takes some of that value so we are encouraged to continue to invest in rnd. those were some of the topics we talked about with the president. francine: but how was the dialogue? did it go well? was it an open exchange? joe: it was a very open exchange. what we found was there was a lot of good, open conversation. the president's views are well-known. there was nothing new in the meeting that was communicated. so, value for the industry, but also a place where we must ensure sustainability through

pricing mechanisms taht ensure -- that ensure access to all americans. francine: what kind of pricing mechanisms? i know the president has been vocal about reducing drug prices. talkede also about introducing a new proposal. was the president on board? >> the administration listened to the way we describe these outcomes based contracts. it is very interesting. the example i give is our new drug for heart failure. this is a drug that has an clinical trials, proven to .educe hospitalization by 20% you can imagine the savings to the health care system by reducing hospitalization by 20% for these patients that have chronic heart failure. novartis has been able to enter into some contracts where we get compensated based on delivery of that promise of reduced

hospitalization. compensation -- not 100% compensation, but there are ways you can get paid based on the way your drug delivers. i think we will get paid on the outcome 20 years from now. we talked to the administration about ways we could improve the shift towards outcomes based pricing. there is a lot of regulation that would have to be reduced to enable us to enter into some of these contracts. and there was openness by the administration, in terms of who to enable usg to, to be able to move more quickly towards a value-based pricing. if you do that, you eliminate a lot of waste. we think you can illuminate 25% of spending in the health care system by shifting to this outcomes based spending. again, 20but, sir, years is a long time away.

could you not do anything before? if youbelieve the u.s., make a success of performance-based pricing, could you this in four to fiv eye years? >> yes, we are entering into performance-based contracts as we speak, not just for entresto, but for a multiple sclerosis drug. so, while i talked about the 20 year view as being the primary way we get reimbursed, we are already started down that path today by entering into these contracts. we have a number of contracts with payers in the u.s. and europe. i think this will only continue to build. francine: thank you so much, joe jimenez, the ceo of novartis, joining us for an exclusive interview after the imported meeting in geneva to talk about

nejra: mike pence has told japan's leadership that the country is deeply committed to their security amid heightened tensions amid north korea's weapons program. he repeated the era of strategic patients with north korea is over and all options are on the table. has called turkey's president to congratulate him on his victory, after he insisted his vote was completely democratic despite a group saying it took place on an unlabeled -- unlevel playing field. their deputy prime minister has talked down the proper -- proposition of an early election. --president oregon made it erdogan made it clear that the elections would be held in 2019.

i think it has been very clear that elections are not on the agenda. nejra: in china, new home prices rose in the extent to out of 70 cities last month, up from 56 last month. when compared with march last year, home prices are up 18%. policy are hoping to clear a glut of homes in major sit -- in smaller cities to avoid a housing bubble. according to people familiar with the matter, they say senior concerned for contingency plans may spur the relocation of activity from london to other continents. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am nejra cehic. this is bloomberg.

francine: france's presidential race has entered its final stretch and with no clear winner , everyone is petrified according to the political department and a polling firm. with the first round almost days away, voters are still undecided , picking this the most unpredictable race the country has been in history. we heard from some of the front runners. gain and end shang restore our national borders. no other candidate is proposing this. we opened the door to france to mafias who understood the advantage they can get from our incredible powerlessness, and send their soldiers of hate. 10 wantf 11 candidate, to bring us back to a fantasy of the past. them, with one

candidate it would be cuba without the sun, venezuela without the oil. withine: let's get more carolyn and paris. it is crunch time with candidates trying to gain support. what's the latest? caroline: it is always harder for the front runner so marine le pen and emmanuel macron have a lot on their plate. marine le pen has been struggling to expand the on her base, expand beyond the 22% to 25% she had in the latest polls. over the weekend she did not have a very good easter monday. some protests broke outside a rally she held last night in paris. the venue had to be circled by the police and at some point, a woman went on stage to try to interrupt her during her speech.

despite all this, she tried to stick to her approach of -- immigration, say she would see a moratorium on immigration for two weeks before she comes up with a plan to leave shengen. emmanuel macron held another rally in paris in front of 20,000 people and he compared melenchon , saying he would make friends be cuba -- france be cuba without the sun. went on a canal and paris and mocked those who consider him a risk of the financial market, and joked in english saying "i am dangerous." francine: what is the feeling amongst the voters? is it all to do with turnout? why are so many people still

undecided? caroline: the turnout of course will be crucial. the attention is expected to be high but we are seeing in the latest polls, the attention expected to be slightly lower than we saw just a few days ago. expected to be at 68% participation rate. we are also seeing the amount of people who are not sure of their choice increase, 73%. number was much lower just days ago, perhaps the first peg of a runoff between emanuel marchant and marine le pen is having just helping them make up their mind. what could be a useful vote for the french in the first round. francine: caroline connan and

paris. thank you. when you look at the market, and we have seen this a little bit because of brexit and donald trump, maybe people are jumping at shadows and trying to protect himself against that first round on sunday. is the french election a serious risk? tim: it is a very serious risk but i think the second round does see much clearer. -- seem much clearer. the euro has not collapsed. the movement has been relatively modest. we think that the euro will begin to move ahead toward the back end of this year. the economic surprises basically being to the upside, and like the dutch election, this is just one we have to get through. it is an incredibly tight race for four people and the margin

of error covers all for. -- all four and i believe we will be back when it's over. things overe last the last five or six years as people following the variety -- the euro for a variety of reasons. the market is stretched currently short euro, and it have to be cautious going into this weekend because much the same way with sterling going into the e.u. referendum last year, the market was short of sterling at the time relatively speaking. it did not stop afresh selloff from emerging, so i think you have to be extremely cautious about what happens is weekend. once we get beyond that, once we start to get some clarity, could we start to see a euro that's yards to come back? -- starts to come back?

yes, we can. i believe it is the second half of the year thing, and expensive positioning as we talk about a clear political story, and the already started talking policy by bringing down the asset purchases. the direction is clear, it is just how long it takes. this is the first round of a two-stage election whereas brexit was just one. i think the difference is the first round may be incredibly tight but the second round should be much clearer, and then the ability to promulgate some but i think this is generally different. i think the euro will find its poise. francine: and thus you have jean-luc melenchon and marine le pen first round. paris is controlled by

someone who is quite -- but will they be able to promulgate their policies? our argument for le pen is no, she won't. i think that is also true for melenchon. francine: you are talking about pound-euro. where do you see this going? traders,cally means there is a small chance that le pen will be president and i'm not going to take that risk. simon: that will remain in place for quite a while. or at least for the next few days. i think the thing that surprised me this year has been relatively speaking, how well sterling has performed despite article 50 and everything else. all the other uncertainties you have had around the u.k. my guess is that sterling, relatively speaking is reasonably well valued against the dollar, but if you are talking about extensive

positioning, i would short the euro position. i think it is probably going to go back to nine or quite a bit higher. francine: thank you. both stay with us. up next, power boost, we are live in turkey as the president wins another election. this is bloomberg. ♪

♪ francine: this is bloomberg surveillance, i am francine lacqua in london. let's check in with mark barton. mark: most european help -- markets were shut today because of the easter holiday, most industry groups are lower today

led by miners. we are down for the fourth day in five, the lowest level since march 29. the bloomberg dollar spot index, little changed following higher gains earlier. u.s. treasury secretaries mnuchin saying a strong currency is good overtime, going against donald trump who said he thought the dollar was getting too strong. which ofhe blue line, course is the 200 day moving average. forming from those mnuchin comments, the 10 year changed, 2.23%. falling to 2.19%, the lowest since november. advance ton of the yield support to 1.77%, the 50% retracement of the post election day selloff. this is the bank of america

merrill lynch global financial stress index which at the end of last week climbed 2.24, meeting the peak reached in february, rebounding from the low reached in march. you can see the fall last week, nowhere near the levels we were at the time of the u.s. election in november. brexit, allation, the 2012 sovereign debt crisis. do keep an eye on this geopolitical concerns as they heighten. francine: let's get more on turkey, president carter ones referendum saw the lira rise as much as two point -- president erdogan's -- referendum saw the lira rise is point -- rise as much as two points. >> we have been getting more and more perspective throughout our coverage live and we have gotten

more from the chief investment --icer at the as bundle istanbul base. the first day after the referendum evil, ultimately you are looking at a nation that is divided. you are hearing sharp rhetoric out of europe. that all -- does that add to the political risk rather than take away from it? >> the hope is that the questions regarding the referendum will be addressed as quickly and as transparent a manner as possible. noisy, butis always turkey has never had elections with a shadow of a doubt cast on them before and i hope this will be addressed fairly's. >> what does this mean in terms of the economy? the state of emergency has been extended and that is likely to continue weighing on sentiment. short-term, how positive

are you that this government can put aside the political conversation and focus on the economic priorities? >> when you look at the past 15 years, you can divide it into fairly contrasting episodes. there was a period until roughly 2010 and then since 2010. there is very strong institutional memory of what works and what doesn't. i'm hoping that as the noise dies down, turkey's institutional framework will take cold and reverse economic policy -- take hold and reverse economic policy to what it was. >> inflation could hit as high as 10%. policy,ntral-bank trying to improve investments from abroad? what is the first thing he should do? >> one of the upside to what has now been a rather long period

the stagnation, is that there is quite a bit of pent-up upside. in some sense, some of the problems we are thinking are a case of back to basics. the inflation genie is coming out of the bottle and that has to be addressed. we have done it before. back to basics policy, policy is the first step. then there is the whole second round of reforms. we know what they are and aside from them being easy, quick fixes, we know what they are. we know how to do that. it is not an unknown quantity. think about education and training. the extent of the politics allows us to get back to work really quickly. point,his inflection what happens at your asset allocation? >> hour with the -- our view is that it were me does it will

remain high for some time -- it will remain high for some time. we think the situation will resemble the late 1990's and early 2000's, high inflation, relatively highly, and low-quality growth. income.ore toward fixed but we are a very close eye on real estate. perhaps for the first time in a generation it is trading at rock-bottom prices in istanbul. perhaps the one shining opportunity. >> in terms of the direction of the turkish lira we have seen a giveback of the initial gains. what do you think? ratethink the closing allowed for a gradual devaluation over the past three and a half years so it is reasonably cheap and with the

central bank aware of what it faces, the currency is on the relatively safe side of the scale in terms of what can go wrong. rates will stay high and i think that will support the currency. >> thank you very much for coming despite the cold weather. with the latest view on how this post referendum world in turkey looks. francine: yousef gamma eldin joining us. what can we expect from the feds latest economic update tomorrow? this is bloomberg. ♪

♪ francine: this is bloomberg surveillance, i am francine lacqua in london. we get the u.s. federal 7:00 p.m. u.k. time tomorrow. derrick and tim haywood. thank you both for sticking around. simon, what is your take on

treasuries? simon: i suspect the search for yield will continue to drive treasury yields lower. do i think we are going to have an incredible story of, that the fed needing to hike three times further this year? no. i think two is probably the most , and and i would -- likely i would point out this has been a cautious fed. i think people will be disappointed how low yield are. francine: why? simon: i just don't see the incredible inflation people are talking about and the incredible growth. francine: do you worry the fed might do three hikes, because of a little test a lot of fiscal policies may not be put in place in time? tim: i think the policies are heading the buffers. his first 100 days has not heaged to progresses much as

is wanted and we has gone abroad to promote other policies, so yes, the inflation is quite quiet sent. the wage growth is not as much as people have wanted. it is not obvious that inflation excuse will be there for the fed to go three times. on thees, plus some work balance sheet toward the back ent of the year. that will pull this -- back ent of the year -- end of the year. francine: this is a nice treasury chart so you can see it raking out of the possible range for the 10 year yield. where do you see dollar going? simon: there has been three great dollar rallies. the previous two just under five years and here we are once again five years into this rally.

we already have an incredibly mature rally in place. it is being driven by yield and is a rally that one would suggest you are looking around for who will is out there to buy dollars at this late stage. we are talking about a fading impact of yield, which is absolutely the case this year, and lower yields potentially further out. i think we are looking at a dollar that tops out this summer. francine: your favorite play? simon: once we look beyond the election and political risk in europe, i think the positioning is short on europe and long on dollars so a high euro. francine: tim? tim: sell in may. by bonds is the rest of the sentence. i think we are coming into a bond positive phase. francine: tim haywood and simon derrick.

with miss our interview esther george at 3:00 p.m. u.k. time. tom keene joins the out of new york and we will be talking to unicredit bank on their level on dollar calls. what i really want to look at is, you have this dichotomy in terms of data strength and with the price of iron ore is doing so we will delve a little deeper as tom and i are reunited. this is bloomberg. ♪

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minister amid rising tensions with korea. steven mnuchin says dollar strength is a good thing. n new poll give centrist macro finance over marine le pen as the front runner takes aim at communist backed insurgents. trams some ofra its post-referendum gains as the french government urges the turkish president to not bring back capital punishment. good morning. this is bloomberg "surveillance." i am francine lacqua in london and tom keene is in new york. he is back. tom: i am not back, you have a four-day vacation, you are back. francine: the markets are on a roll, looking at treasury and currency movements. ddb rupp and istanbul. got to the imf and washington and you go to paris for the election on sunday, a

busy 10 days for us. francine: first of all, let's get to the bloomberg first word news. mike pence is in japan where he is talking trait and north korea. he told the prime minister that the u.s. is deeply committed to japan security and that the era of strategic patients with north korea is over. mike pence told japan's deputy prime minister that the u.s. wants trade that is free and fair. the transpacific trade deal is a thing of the past he said. taking aim atp companies that bring in foreign workers, reviewing the visa program. --inistration officials would likely have fewer these is approved. the visa program has been criticized for allowing american workers to be replaced by lower paid foreigners.

a disruptive brexit, the head of the european chemicals trade group says companies will bring many alarm bells during the negotiations and warns there are risks for the industry because chemicals are frequently shipped back and forth between the u.k. and the continent during the manufacturing process. in china, housing pricing rose since -- the most since october, suggesting buyers are trying to get in before more restrictions are placed on property purchases. authorities have imposed homebuying restrictions and a number of cities to prevent a real estate bubble. global news 24 hours a day, powered by more than 2600 journalist and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. francine: equities, bonds -- tom: equities mons, currencies, commodities. a big day yesterday when francine was off.

oil turns. -- churns. the german two-year is extraordinary. -0.86. the switzerland 20 years is migrating again, somewhat in the vicinity of a negative yield, disinflation and political tone, turmoil in europe. month,low is the three five your spread, major shout out to tony dwyer, this rate is dropping like a rock. it shows that the trump bump is done. francine: for now. i was off yesterday because the markets were closed in europe. tom: oh, they were? francine: today is the first day back after the easter holidays.

markets, theyobal are rising pretty much unchanged, gold unchanged. for pointingalix this out, strong chinese data and iron ore falling quite significantly. pound dollar. tom: sterling stronger. this is the economic data today on industrial production, i call this the jason chart. the 20's and 30's -- the 1920's and 1930's, the depression, this is unbelievable. to see the 15 year moving average in industrial production going right below that. in this flatness is the malaise in america. as you know, that is nothing like the malaise they see in france. francine: nothing like basie and

france but exactly what i was trying to show you. this is what we picked out this morning, this is the -3.9. this shows us that markets are nervous. rightly or wrongly, nervous about the french election, the first round being the big one this sunday. i lot of people trying to figure out what they can do. they do not like -- want to be burnt like they were with brexit. according to steven mnuchin, the u.s. treasury secretary for now, more on the trump administration and how it influences investors. our best host for the hour -- our guest post for the hour. us.k you for joining do expected volatility in currency markets? >> over the next few weeks, we will have an increase in volatility. largely because we have a number

of events come with each other, the french election, geopolitical risk emanating from syria, korea, and we have the market reassessing what the trump policies are all about. in terms of direction and absent risk on an risk off, i remain in the dollar bearish ca,p. -- camp. asia,ne: mike pence in following rex tillerson in asia, if there was something to be concerning to market, how would it play out? something concerning north korea? >> the most obvious one would be dollar korea. andely because it is liquid its geographic location. we have empirical evidence that this is the more sensitive to geopolitical risks across asia.

on the whole, i think dollar-yen downside is one investors should be looking at. tom: your world of foreign exchange to the rate reality, help me with the linkage. we will talk about this and the 6:00 hour. i am seeing new low yields in the german two-year and the swiss yields common, yields lower, how does that link in the foreign exchange? bring up the dollar chart, the dollar weakness, without question, the surprise of the early 2017. link the rate world into your role of foreign exchange. >> let me start from the outset and say that what i see in the short-term drives affects markets, nominal rate differentials, from a long-term perspective, correlations are much more robust when you look at real rate differentials.

these movements of that we are seeing in yields right now, they are quite interesting. the drop recently, talking about a drop across the board, in the u.s. and in eurozone. i think, the pricing out of the trunk euphoria does not mean we will see a reversal of the longer term trend. yields bottomed out in the summer of 2016 and started rising. then they got a shot in the arm by the donald trump election. the ap and are declining now. -- they keep and are declining now -- peaked and are declining now. yields are higher compared to what they were before the election. ,o me, there is a bigger story apart from the trump politics and their effects on yields, which is global growth. to the extent global growth has been the primary driver of

higher yields, if that continues to be the case, i would expect yields to keep going higher. far more normal and gradual pace than the one we saw over the past two months or three. what this means for the fx market is as follows -- we haven't saying this for quite some times, the dollar has decoupled, he had has priced in far too much compared to the rates market. at some point, the divergence need to close. it started closing in 2016, for the most part, then we had the donald trump euphoria, the donald trump trade which is now fading and the dollar goes back into closing that divergence tom:. i need a conversation from 12 months ago do keep me happy over the history with the french election. bring up this chart, the only reason i did this was taylor riggs. the german two-year back to reunification.

this is a stunning chart of persistency. do you ever see the german two-year moving back to a positive level? >> eventually it will happen. what is happening now is that growth in the eurozone, no question, is rebounding. at some point, it will filter through to wage growth which is by far the most important thing. this is the type the ecb will become convinced about the sustainability and the peak of inflation and this is when it will step back and allow yields to start riding higher. you nailed it on your data check on sterling, it has reversed, isn't this the bbc talking about a prime minister may statement in the next hour where we had a big sterling? francine: we are monitoring anything that will come out of the prime minister's office, we do not have confirmation.

we will bring it to you. thank both of you. coming up later today on tv and radio, a conversation with the kansas city fed president live from the institute confident that conference at bard college. this is bloomberg. ♪

♪ taylor: this is bloomberg "surveillance." china's fruit group has a great .o sell for $1.8 million bid they get most of their sales in the u.k..

the u.s. insurer, fidelity guaranteed life has ended its $1.6 billion agreement to be bought by a chinese company. they say it is looking at other deals. the company agreed to the takeover in 2015 at they could not get regulatory approval and violations of u.s. life insurers have resonance incident. knowing plans to fire hundreds of engineers because of a slowdown in airplane sales and it may cut more jobs later this year. they will hand out pink slips on friday. they have trimmed their workforce in their seattle area center by 9% over the last year. that is your bloomberg business flash. francine: u.s. vice president mike pence is making the routes across asia after a stop in south korea on monday. he spoke to japanese officials, including the prime minister and did a joint conference with the economy minister. another warning to north korea, saying the u.s. and allies will confront the ominous

threat and the trip has focused on trade talks in we have our she joins us from the trade ministry in tokyo. great to have you joining us on the program. what was the relationship like? is japan tight with the u.s.? moment, they are feeling each other out with a new administration. japan is trying to figure out what to expect and what it can offer in order to not give up the things that does not want to give up. francine: does it bring comfort to japan that president trump at his illustration are talking tough on north korea? the prime had minister of japan saying he welcomes the actions taken by donald trump. although he emphasized he wants to see a peaceful resolution to

the north korean problem. he welcomes the further pressure that is being put on them at the moment. tom: away from the niceties of discussion and the diplomacy, there is the question of the defensive and offensive capability of a japanese military. ,ive us a quick update on that is there a new military thrust in rebuilding by japan? >> yes, the short answer is yes but on a very small scale. what we did see, in recent weeks , lawmakers coming forward with a proposal for japan to have its own long-range strike capability. they have a pacifist constitution, not something they consider their area. opinion polls have shown it is swinging in public opinion to agreeing with that and thinking it should be considered. francine: thank you isabel reynolds from tokyo.

for more on the u.s. president's global strategy, let's bring in jim hertling. thank you for joining us. what is the one thing we are waiting to hear? there may or may not be an executive order. an appetite to learn more about that from a business point of view and dollar straight-dollar weakness that we heard the president being contradicted by the secretary of state. >> not the first time the president has been at odds with his cabinet or top officials. i daresay, it will not be the last. obviously, the market will probably pay attention to fundamentals. we were talking about asian markets and the noise around korea. the markets are not reacting to the saber rattling. francine: is that surprising, president trump says he wants to

focus on america and we have at a swift reversal and him suddenly becoming very present in international affairs. yes, it speaks to how little foreign-policy experience he has before he gets to office, because, in several cases, he has been public about, now that i know something about these issues, they are more complicated than i thought. his positions are evolving. that is having the -- some political knock on effects. tom: help me with your years of duties in paris. as francine mentioned earlier, massive tightening in the polling. are you surprised by that? jim: i am, particularly surprised by the rise of ml elenchon. 20%.by 11% to jim: it shows how fickle the french electorate is and what

tough conditions there are. they have not made up their minds. clearly, it is white knuckle time for the pollsters who make their living making accurate predictions. back to: i want to go the visa issues and link all this together. what we are expecting from the president. can you link these things around the world, political risk, the markets seem to be ignoring it unless there is something three days away, a presidential election. >> i will say yes and no in the following sense, i do not think the market is entirely ignoring that. if you look at the moving dollar-yen, quite substantial, over one week or two weeks, move from 112 to 108. a substantial move that corroborates that the market is anticipating some risk premium for the down the road. if you look at other currency

pairs, there are a number of factors that are offsetting each other potentially. euro-dollar, for example, it is undervalued. there is definitely a tendency for it to rise in tandem with eurozone growth. the dollar aspect is likely to push it higher but it is being offset by the risk premiums that are being priced in because of the french elections. after that, we will see much clearer picture. tom: thank you for stopping by. coming up, our next hour, a very strong opinion on yield curve dynamics and what it means for chair yellen appeared from london and new york, stay with us, this is bloomberg. ♪

♪ is bloombergs "surveillance." a beautiful day in london, a little bit colder than easter weekend but bright skies, everyone waiting for theresa may to speak in an hour. u.k. growth extending their drops, sterling weakening, we do not know what is going on. we do not have information on what theresa may will announce the market movements, the appetite from the markets. a clear market movement.

the 10-year gilts, the yields going down. this, it isk at hard to put you on the spot because she is making a statement out of the blue and we have no idea as we look at banks, energies, is unlikely to be brexit related -- is it likely to be brexit related? >> directly or indirectly but i am inclined to believe there may be some links because we are seeing a one-way move in sterling and in guilds. the market seems to be bracing for some sort of uncertainty shock. francine: is it a psychological level? the u.k. 10 year yield, if we break below 1%, is there technical support or does it mean a freefall? >> if we broke below that, it

will depend, obviously on the announcement, what that will be. if we break below that in a sustainable way, there is a case to be made that we may start gravitating lower from their. thank you, you will be here to try to figure out what is going on with the pound, continuing to sink. if you are a bloomberg customer, watch us on tv and follow us on the market live blog. , a conversation with the finance minister of ireland at 11:00 -- 11:40 a.m. in new york. this is bloomberg. ♪

♪ "om: bloomberg "surveillance. from london and new york. francine lacqua and tom keene. we will be at the imf meeting later this week and francine is

off to paris. let's get to the first word news. >> mike pence delivered another warning to north korea, he is in tokyo where he met with the japanese prime minister. >> the era a strategic patience is over. while all options are on the table, the president is determined to work closely with japan and south korea, with all of the allies in the region. and with china to achieve 80's -- to achieve a peaceful resolution. >> the chinese foreign minister says u.s. officials have made it clear that the military strike on north korea is still possible but washington would rather have negotiations. unlikely lobbying force hoping to got the president of withdrawing from the paris climate accord. block inside the administration has recorded oil

and coal producers to lend their support. exxon and shell are among those on board and there will be a high-level white house meeting on the paris accord, soon, possibly today the lead in home values grew in february after the slowest annual rate in five years. was $760,000,ice up just 1.5% from a year ago. london's most expensive areas saw prices drop while the lowest priced areas posted increases. global news 24 hours a day, powered by more than 2600 journalist and analysts in more than 120 countries. this is bloomberg. tom: thank you. look at the united kingdom 10 year yield. it is something and moving lower right now. francine: significant for two reasons, the move was quite brutal. tom: i agree. fromine: an announcement

theresa may and 45 minutes with came out of the blue. for the 10 year yield, significant because it could cross the threshold of below 1%, significant for a load of technicals. we are watching the u.k. and france, the presidential race entering its final stretch and with no clear winner, everyone petrified, that is a quote according to the head of the political department of a polling firm. with the first round days away, a third of voters are undecided, making this the most unpredictable race the country has seen in recent history. let's get more from the head of european research at the --opean group who is going to win? possible for a

>> we do not think is melenchon is competitive for a second round. he appeals to a specific demographic on the left and disenfranchised voters on the right. his ability to broaden his appeal is something we are questioning. and is ultimately macron lepan. fillon is the dark horse. francine: if you look at margin of error, or percent, you have -- 4%, you have three main candidates who could show up, apart from melenchon. a third are undecided. >> the data says fillon s ability to meet marine le pen is more robust than melenchon. macron is so despised by the right. around one third will go to

macron, . not separatingis from macron. fillon, appealing to his base and taking on more moderate left-wing voters is greater than macron. tom: you are on front with ian bremmer. on marine le pen, let's listen. >> we no longer live in a world with a curve, probabilities of unlikely tapering off. pen, verye marine le possibly, as the french president. tom: this is the second time i have heard this, a member of the house of lords talking about marine le pen, ian bremmer was in front with this. what are you telling dr.

bremmer? him that weying to believe marine le pen has a 40% probability of taking the election because of the unprecedented nature of the race . if you look at the candidates against her, the left are on the extreme, melenchon. the right is corrupt and macron has no resonance in terms of his economic platform or himself as an individual. his desire to present himself as the candidate of change is absurd, he is the establishment on steroids. the best educated at public schools in france and has private sector banking experience, was a junior administrator. he is a manifestation of the establishment. his ability against marine le pen to present himself as that candidate of change is preposterous and we do not think it will work. help francine as she goes

to washington and paris, what will marine le pen do in the next five days to get this done? she is trying to broaden her message, brought in her economic platform wide diluting the most contentious part. no longer talking about a referendum on euro equities, talking about a parallel currency, that narrative has been co-opted. you are seeing a number of the populist parties across europe diluted you most contentious elements of their economic platform to more moderate voters. francine: it would not be that much of a surprise, correct me if i'm wrong, if marine le pen made it to the second round. that is her versus anyone else and the big unknown, versus melenchon, if it is against a the more macron, centrist candidate that would win, and my right? >> i think so, but i think it would be a very competitive

race. macron and le pen is a 55-45 race for fillon. it is a competitive race. that states to the context tom was alluding to at the beginning of the excitement, voter out of the in france, economic and security, the government has been unable to get in front of the marine le pen, somewhat refreshing, new, with innovative ideas about how to address the situation. whether we believe they would work on academic. francine: how do you play the markets? between now and the second round, by far the most important , i think we will have increased volatility in euro-dollar. -- the short end of the curve in euro-dollar and eurosterling rising. assuming that we get macron for fillon when, we will be -- or

fillon win, we will be off to the races with the euro-dollar. tom: the distance between paris and the rest of the nation, if the margin, does the rest of the country matter, or in the next five days and on to the second round, is at paris, paris, paris? >> that is a great question, the rest of the country matters far more than paris. in paris, what is happening is applied to the rest of the country. itis important to see where is most entrenched, the north-northeast, its ability to expand the popularity. to understand that we should not look at what is happening in paris and should look at what is happening in the rest of the country, they're the sentiment and dynamic is different. tom: let's continue this discussion. make it clear that the 10 year british yield, the gilt

yield are lower and note prices are higher with the pound retreating. prime minister may to speak, a major mystery but the topic will be. we will look for that in the next hour. coming up on bloomberg television and radio, michael mckee and a conversation with esther george of the kansas city fed. worldwide, stay with us, this is bloomberg. ♪

♪ francine: this is bloomberg "surveillance." i am francine lacqua in london and tom keene in new york -- is in new york. the turkish president one for a package1.4% of constitutional changes.

the kurdish hdv party says the election board violated the law. there has been a lot of international outcry about what this means and what this does not mean for violations. ultimately, it is adding its voice to what the cht has said, the meeting underway, kicked off at 12:30 local time, they will file a formal request to contest the election results later today at 2:30 p.m. local time. ultimately, domestic story is one where it is divided turkey, thatng forward, a picture the elections or the referendum needs to be looked at again. internationally, you spoke about the reaction in europe. a lot of criticism, austria saying that turkey buried its eu membership. all of that, the turkish

little.nt seems to care that is the fiery rhetoric we got from the president. he says, you cap is waiting for 50 years, why should it matter now? the next thing to watch is the extension of the state of emergency, that bill in parliament right now, the national security council recommended the extension that was set to expire on april 19. the ongoing meetings are the next thing to watch with the higher electoral board, to see if they are willing to look at the allegations. francine: he was pretty combative, belligerent with europe, saying something like, i do not care about what they think. >> yes, he basically shrugged it off. a combative rhetoric that is part and parcel with the president. the rhetoric is there. the question that needs to be

asked him a make clear to me by the influential guests we have had on the program throughout the day, whether he will keep this up. in terms ofstake economic relations between the eu and turkey and political rights and's and nato. he will not be willing to put that at stake, unlikely. he has an incentive to deliver, in terms of economic policy to his people. with the political noise, he will hope being out of the way and the economy should be the priority. tom: you may have missed this being istanbul but last night there was a modest uproar in washington. it was about president trump's support of the turkish president, sending him congratulations on his elections . a huge deal within the washington beltway. how did that point in turkey -- how did that play in turkey? >> ultimately, this is the

congratulations being sent. they will jump on this. they will use this to underscore the fact that this is a victory from the side of the government. , he can really sugarcoat the other criticism from europe, saying that the u.s. president has congratulated ,e and this is the legitimacy the foreign-international legitimacy that says what i am doing is correct and the right to. -- path. an upside reaction from the government. francine: thank you for your report in istanbul. talk in a second about lira but what does this mean for turkey-euro relationship, we need turkey because of the refugee crisis. is this because of europe's criticism of the referendum, does it mean that the ties will

be more strengthened -- strained? >> ties are on a negative trajectory but berlin had a critical elections in september. absolutely needs the integrity of the eu-turkey deal to hold. they can't tolerate delays there need in a competitive election cycle, is to see that, apart. criticism from capitals will be muted, from the important capitals, will be muted and the european union will move to a rethink of its relationship with turkey once german elections are over because some of the constitutional changes that the turkish president is implementing which will come into effect after the next round of elections. clearly putting it at odds with its move westward. francine: what should investors do with turkey? a little bit of a concern in terms of the brain drain. >> i think, taking at face

value, the result, a narrow yes for the turkish presidents constitutional change, in the short-term, a rebound in the lira which will largely be driven by the fact that we will have some continuity and not political disturbance by snap elections. necessary buts a not a sufficient condition for the lira to sustain and gain. for the lira to be able to make a robust rebound going forward, you would need the turkish president to stop softening its language against europeans. you would need to see them maintain or tighten liquidity further because it would cut down to those people saying that is independent and being compromised. if we do not see that, i think the lira will plunge because

everyone will question the independence under the assumption that now, the turkish presidents our has increased. francine: in the last couple of minutes, a significant market move, talking about the u.k. 10 year yield which has just crossed below 1%. this is the yield as it stands, exactly at 1%. it briefly touched below 1% and now at 1% exactly, a nice number. we are expecting theresa may to talk at downing street and 35 minutes. we have no idea what she will say, jokes on twitter, it could be on article 50 or troop deployments. the markets moving without any solid base to move on. tom: the operative word is rumor and speculation, the financial times is linking the speculation to a presumed snap election. even they call it speculation.

we do not have that bloomberg news, do we? francine: no. 10 things she could be talking about. it will be very unusual for the prime minister to call a statement or saying she will deliver a statement at the last minute which is coming in 20 minutes. take market moves. -- big market moves. this is bloomberg. ♪

♪ taylor: this is bloomberg "surveillance." walmart is making another attempt to build up its online reputation. they are in talks to buy a clothing startup for about $300 million. according to a person familiar with the situation, discussions are in the final stages, last year they brought b --bought jet.com in a deal that transformed its online operation. cabela's is trying to salvage the buyout by bass pro shops, greinke will lower the takeover price and will sell it credit card portfolio to a financial deal that may help win regulatory approval. amazon's deal to stream national football league games on thursday night bigger than originally reported.

aszon will include as much $30 million worth of marketing and promotion for the league which pushes the total value of the contract to $80 million. amazon is using the games to boost the value of its video subscription service. that is your bloomberg business flash. francine: we are back. we are taking time to look at pound. it has weakened significantly. 10-year gilts, now that yields fell below 1% for the first time since october of last year and is now at 1%. theresa may, the trimester, a half hour ago, said she would make a statement in 25 minutes from now, the markets went into a frenzy. there seems to be speculation that it could be a snap election. also speculation that it could be true deployment. roop deployment.

the pound fall is due to uncertainty. the market jumping at shadows or a snap election would mean further pound weakness? >> we have to be careful because we do not have a clue. francine: we are not in the business of speculation. >> of what she will announce in 25 minutes. we are seeing a pressure across the board on u.k. asset prices. and yields. the pound is falling and yields are calling and pressure on the ftse there -- everything will depend on what it is that she says. i would caution, we have to be careful because we have no clue what she will announce. francine: i am getting isategist, one saying there heightened speculation there could be a snap election in the u.k. but we cannot speculate because we do not know what is going on.

let's assume we do not know but a snap election could be one of the five things she will announce. if it were and we do not know, if there is a snap election, does this weaken her position on negotiating brexit or not? >> if we get the announcement of a snap election which is purely speculative, i would look at what is the basis for her calling a snap election. i am saying this because by far the biggest decision for the future of britain has already been taken by triggering the article 50. i think there could be -- the market is perceiving this in some sort of a weakening in terms of the current pm. in terms of her own position, as well as in terms of her influence to the rest of the government. if that happens, i would think,

again, we are just regulating, it would be negative in sterling. tom: going back to the speculation, twitter is a joy this morning as we struggle towards this announcement. what does it mean when i say the see theion -- speculation that it break off is coming back to the bbc -- bake off is coming back to the bbc? francine: one of the most popular shows but taken away by arrival channel. -- by a rival channel. is working on a prime minister may store and in the next hour ♪.

♪ in this hour, the prime

minister of the united kingdom is expected to give a statement, sterling and guilt market on the move -- gilts markets on the move. germany signal tension in europe. how will chair yellen respond to events abroad? on the french election, it is sunday. we look in -- we look at melenchon -- good morning, this is "bloomberg surveillance." we are live from our new york headquarters. give us an update on what you observed off the bloomberg on this speculation of a general or snap election. francine: i have never really seen anything like it. in the last half-hour we found out the prime minister is going to give a statement and the markets went into a frenzy. a couple of traders said theresa may could announce a general

election and bbc even put a date on it. we do not know, but hold the suspense. it will feel like a long time for traders, but we find out in 15 minutes. there has been speculation and quite a lot of jokes about possible troop deployment after what we saw in syria. and more snap election details on article 50. at this point, we don't know, but the direction seems to go to a possible snap election. tom: these are somewhat common within parliamentary history within the united kingdom. there have been eight snap elections whether churchill's retirement or something as serious as a minor strike. nejra cehic is that downing street and will look for that announcement in about 14 minutes . right now in new york with a busy tuesday news, here is taylor riggs. taylor: vice president mike pence is in japan where he is talking trade in north korea.

deeply committed to japan security and he also said the era of strategic patients with north korea is over. pence told the deputy prime minister that he wants trade that is free and fair and for the u.s., the transpacific trade deal is a thing of the past. president trump is taking aim at tech outsourcing companies that bring in thousands of foreign workers to the u.s. he is ordering a review of the h-1b visa program. an administration official says -- would likely have fewer visas approved. the program has been criticized for allowing american workers to be replaced by lower paid foreigners. in china, housing prices rose in the most cities since october. gained in 62 of 70 cities tracked by the government. authorities have imposed

resurgence in number of cities to prevent a real estate bubble. global news 24 hours a day, powered by more 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. thankse: thanks --tom: so much. united kingdom markets greatly influenced right now. ent spread.2 c next screen, there is the bbc banner. the german two-year lower this morning and the swiss 20-year begins to migrate toward the negative yield. that has been an abrupt move in switzerland. what do you see within the united kingdom markets? francine: i am only looking at pound and dilts -- gilds. the pound falling before theresa may is delivering her speech on downing street, 12 minutes from now and it is very clear there

was a market selloff. also looking at yields in the bloomberg terminal and we touched below 1% for the 10 year yield. markets are speculating about what she will announce. it could be health care, a snap election, or anything in between. tom: we have a wonderful set of guests to get us to janet yellen's statement. there are all sorts of ideas falling -- around. dominic konstam of deutsche bank is with us and we wanted to bring in jonathan ferro running all of our global coverage. you are an expert on this, how .nap is the mood right now a snap election usually means i am going to win, right? >> that is right. theresa may has been under a lot of pressure to call an early election. -- it mightn't know

not be a snap election so we need to treat all of this with caution. if you look about the -- at the opinion poll, a snap election would make sense. she is miles ahead of the opposition labor party who are still in disarray and into brexit, there must be a strong temptation for her to increase -- with her increased majority. may: cabinetr agreed that the government should call a general election to be held on the eighth of june . i want to explain the reason for that decision, what will happen next, and the choice facing the british people when you come to .ote in this election last summer, after the country voted to leave the european

union, britain needed certainty, stability, and strong leadership and since i became prime minister, the government has .elivered precisely that despite predictions of immediate financial and economic danger, since the referendum, we have seen consumer confidence remain high, record numbers of jobs, and economic growth that has exceeded all expectations. we have also delivered on the mandate we were handed by the referendum result. britain is leaving the european union and there can be no turning back. as we look to the future, the government has the right plan for negotiating our new relationship with europe. we want a deep and special partnership between a strong and --cessful european union and

free to chart its own way in the world. that means we were getting control -- we control -- we were grain control of our own -- we regain control. is the right approach and it is in the national -- interest. the other political parties oppose it. at this moment of a norma's national significance, there should be unity here in westminster, but instead, there is division. the country is coming together, but westminster is not. in recent weeks, labor threatened to vote against the reached withnt we the european union. a liberal democrats have said they want to grind the business of government to a standstill. the scottish national party said

it will vote against the legislation that formally membership ofn's the european union and unelected members of the house of laws have vowed to fight us every step of the way. our opponents believe because is -- government's majority so small, that result will weaken and they can force us to change course. they are wrong. they underestimate our determination to get the job done and i am not prepared to let them in danger the security of millions of working people around the country because what they are doing jeopardizes the work we must do to prepare for brexit at home and it weakens negotiatingnt's position in europe. if we do not hold a general election now, their political gameplaying will continue and the negotiations with the european union will reach their

most difficult stage in the run-up to the next scheduled election. division in westminster will risk of the ability to make and cause brexit damaging uncertainty and instability to the country. we need a general election and we need one now because we have, at this moment, a one-off chance to get this done while the european union agrees it's negotiating position and before the detailed talks begin. i have only recently and reluctantly come to this conclusion. since i became prime minister, i have said there should be no iection until 2020, but now have concluded that the only way to guarantee certainty and stability for the years ahead is to hold this election and seek your support for the decisions i must take. tomorrow, i will move a motion

in the house of commons calling for a general election to be held on the eighth of june. that motion as set out by the parliament act would require a two thirds majority of the house of commons, so i have a simple challenge to the opposition parties. you have criticized the government's vision for brexit and challenged our of the -- objective. this is your moment to show you mean it, to show you are not opposing the government for the sake of it to show that you do not treat politics as a game. let us, tomorrow, vote for an election. let us put forward our plans for brexit and our alternative programs for government and then let the people decide and the decision facing the country will .e all about leadership it will be a choice between strong and stable leadership and interest with me as

your prime minister or it weakened, unstable, coalition government led by jeremy corbyn, propped up by liberal democrats who want to reopen the divisions of the referendum and nicola .turgeon and the s&p every vote for conservatives will make it harder for opposition politicians who want to stop you from getting the job done. every vote for the conservative will make me stronger when i negotiate for britain with the , presidents, and chancellors of the european union. every vote for conservative will mean we can stick to our plan for a stronger britain and take the right, long-term decisions for more -- a more secure future . it was with reluctance that i decided the country needs this election, but it is with strong conviction that i say it is necessary to secure the strong and stable leadership the

country needs to see us through brexit and beyond. it tomorrow, but the house of commons vote for an election. let everybody put forward their proposals for brexit and their programs for government and let us remove the risk of uncertainty and instability and continue to give the country the strong and stable leadership demands.- it francine: that was prime minister theresa may giving that awaitedt, eagerly statement. we found out in the last 40 minutes she was giving it saying she will hold a general election on june the eighth. this has to be approved by the house of commons, which is why she continued saying the house of commons needs to be approved this general election. tom, i know you want to say a word, that it is interesting to see market reaction. belowon the 10-year was and now it is creeping back up.

not as ugly as the markets were first expecting. tom: why don't you start with coverage. you have some good guests. i've got dominic konstam, but you have qualified people in london. francine: the head of global fx jonnicredit is with us and ferro is with us as well. it was interesting to see the prime minister explained the reason why she is calling snap election and she believes this will reinforce her brexit position because she will have more legitimacy. what is goingarly on here and they have been telling her to do this for months looking at the polls. ifarly, her message is that you are not with me, you are against me. the entire opposition -- she is trying to frame them as being wobbly on brexit and if you really want to carry out the

will of the british people, i, theresa may, and the only person who can do that. even here on the sets of downing street, somewhat divisive rallying call where she is saying if you don't believe in brexit i believe in, you are an outsider. are -- in new york with me are dominic konstam. i want to go back to your academic work at cambridge and historynd on the older of foreign exchange. the last snap election in the united kingdom was roughly 1974 by my math. she mentioned -- prime minister mentioned the search for stability. are the markets conveying a stability right now? dominic: not at all, i think the markets are highly uncertain and

worried about various outcomes, this just adds another one. we can all see that. we've got the tax reform, the french election, other german elections later and you got this on top of everything else. of: it may be the idea politics overcome by events, but for me, it is politicians overcome by what i would call the great distortion that we of 2007. coming out bring up the chart as we so you -- we show you london and downing street. this is the 10-year yield in the united kingdom and the great distortion and moderation. that is a constant theme of politicians adapting to disinflation and adapting to disappointing growth. >> and for the u.k. in particular, they have the problem of exactly what this brexit will mean and although growth has held up reasonably well, we know that if brexit negotiations don't go well, it

could be a bad outcome for the u.k. economy. francine: this is high risk. this is the latest all we are pushing on social media. westminsterlatest voting intention from the 12th and 13th of april. conservative, 44%. >> it's an incredible gap if you look at it. labor pulling in close to a percent, these are historical lows. what is even more worrying is the complete absence of momentum. jeremy corbyn is a contested leader in does not have control of his own party. your starting to think what on earth kind of a platform will they put together that will become. against the prime minister that has all the momentum behind her? francine: if you look at this gilt and thank you for sticking they were flying a touch and are now at 1.01. what are going through trader's minds right now?

>> they are digesting what all of this means. i jotted down some notes for hearing the announcement. i think she confirmed what we that thereing before is division in westminster and they want to start to get rid of that. i think it is a smart move because of the polls and she is hiding behind the resilience of the numbers in the u.k. economy. one of the fact we need to put view, this is my most likely a global phenomenon as opposed to u.k. specific. it is good to have the election now that you have good u.k. numbers, which are mostly dependent on global growth because when you see the u.k. using credit factors filtering through, potentially popularity excited,m not getting i think volatility is what

matters. i am not a believer in bilateral trade agreements for a company .hat exports services i still think there are going to be troubles for sterling ahead. tom: this is where we want to go with you dominic konstam, the deutsche bank call on sterling is extraordinary and you said it was because of politics. does this general election get you even further to 1.10 or weaker sterling? assumingthe selection, it is improved, will have a risk of becoming another referendum on theresa may and the brexit strategy. secondly could lead to a lot of volatility in sterling. there will definitely be people out in opposition. we expect selling -- sterling to get weaker because they are leaving. tom: give me a number?

dominic: 1.15. francine: good pushing, thank you so much. we will be back with tom and a konstam -- with dominic . the u.k. prime minister said she will seek an early election on june the eighth. this is unexpected and the markets were not prepared for it. thinks this gamble will strengthen her hand going into talks on leaving the e.u. we will have all market analysis. this is bloomberg. ♪ ♪

tom: we welcome all of you this morning. francine lacqua in a changed london, a general election on june 8. the prime minister said we will quickly on u.s. markets, john stoltzfus seeing long-term -- short-term and he thinks long-term. here's the long-term chart of seeing money in the stock market. help me with how you link this glory with trump's 100 days. john: i think the trump bump was essentially a bit of wings under this bull market. how is that for a mixed metaphor? what we have really is i think the recovery globally was baked

in before the election, the economic expansion of the sustainable, yet modest rate was in before the election. the market looked at what trump was offering in the agenda that was pro-business and said this gives us confidence to move to the next level, we broke through $2300 and here we are. tom: i want you to pull in dom onstam's world of foreign exchange dynamics and the politics of central banks. is his world of great distortion lower rates, is a going to assist you in the equity market? >> we would think so. at that year-end he of the first quarter we were saying the dollar was way overbought and the bonds were way oversold. the rally right now in bonds stateside in terms of trevor's was very much what we would have weected and the dollar is -- think that helps u.s. companies become more confederate of --

the come more competitive. tom: what should people be doing within their portfolios? is there a confidence about used of cash or do we go to the fragility and uncertainty we heard in prime minister theresa may's voice this morning? >> i think we look through fragility and uncertainty with expectation and as well as -- as long as we are aware of it, and take action, it is a positive process. tom: is the equity market linked to your world? >> it is a little bit. at the moment we are going through concerned about a risk off trade partially because the trump rally was overdone. supporting to help equities. tom: thank you so much for a brief visit today.

he will be on bloomberg radio with us later as well, john stoltzfus with oppenheimer and company. charles peabody will join us in a moment. the prime minister announces a general election in the united kingdom. i would like to announce that our michael mckee will be in conversation today with a kansas city federal reserve president, esther george. always interesting as she pushes .ack against the doves what a view it is in london. it is a changed london. a snap election not seen since the 1970's. this is bloomberg. ♪ ♪

"om: "bloomberg surveillance worldwide. we turn to new york city and mr. moynahan out with earnings in about 45 or maybe 46 minutes.

that could be a little early. stay with that and we will look at that. there was a modest announcement at 10 downing street. taylor: prime minister theresa may is making an unexpected gamble as she goes into brexit talks. she called for an early election. just minister may: i chaired a meeting at the cabinet where we agreed the government should call for a general election to be held on the eighth of june. taylor: an election is not due her may --y, but polls show the conservative party 20 points ahead in the the election. by mike pence delivered a warning to bash today. pence: while all

options are on the table, president trump is determined to work closely with japan, with south korea, with all of our allies in the region and with china to achieve a peaceable resolution and the denuclearization of the korean peninsula. taylor: the foreign minister says u.s. officials made it clear the military strike on north korea is possible, but says washington would rather have a multisided negotiation. an unlikely lobbying forces hoping to talk president trump out of withdrawing from the paris climate accord. according to people familiar with the matter, a pro-paris block inside the administration -- oil and coal producers to lend support. exxon and shell are those among board. there will be a high level meeting soon, possibly today. france election is up for grabs.

four candidates are hovering around 20% in the polls and perhaps a third of the electorate is undecided. emmanuel macron and marine le pen could be headed to the runoff, but the republican and the left this are within striking distance. global news 24 hours a day, powered by more 2600 journalists and analysts in more than 120 countries. this is bloomberg. francine: thank you so much. maye minister theresa announced an early general election on june the eighth. sterling ahead -- fell ahead of the announcement. it dipped below 1% for the first time in october. at the time, we were not really sure what the announcement was on and they have both recovered ground. we will talk to bloomberg's editor and dominic konstam. his argument is there is lot of division in westminster and the parties need to come together. morehe feels she will have

legitimacy negotiating with the e.u. if she wins on june the eighth. >> this is about strengthen her hand. she inherited a small majority from david cameron and that majority have art -- as you have far, --the process so -- probe exit -- pro brexit they have used their majority to push her around. she does not want to spend the next two years to have to come to westminster and face a conservative party in which whoever is up is happy and whoever is down is not. she looks the political environment. lyndon johnson, a favorite quote from george oswald "you got to know how to count." the counting theresa may can do is pretty good for her. haslabor party opposition had some leadership struggles under jeremy corbyn. the u.k. independence party whose rise as part of the reason

david cameron called the referendum, they've got their own leadership struggles. a look at the democrats, the coalition partner more apart than once -- what they once were. this is about a mandate for herself and to deliver. francine: who would be the strongest opposition from> ? >> perhaps within her own party. francine: but they will not stand against her. >> the more europe tries to negotiate a deal for the rest of europe, the harder it will be for theresa may to keep the conservative party together. this is what i love about " surveillance" simon kennedy in charge -- and with us this morning, dominic konstam. chart of the german 10-year and it is extraordinary to me the great

distortion we see in the drive to lower it. dominick, you predicted so much of this. all the gains of this distortion went to the hats, whether it is france or london or mr. trump or senator sanders from vermont, this is all about the gains to the hats. does she have a risk in a general election with the fury we see in france? can we see that same. june 8?- fury >> obviously it goes to risk the halfs in general, do well. is going on in the u.k. is they are trying to make sure that brexit does not turn out to him p -- economic disaster where you might end up with assets badly in addition to yields. help simon kennedy

reporting with his team, what is the exposure of the city? are people in this low volatility environment making plays and bets on united kingdom assets? >> basically people are assuming the u.k. will get a reasonable deal. you are hurting more -- hearing more and more the talk about operations being moved to dublin and also to continental europe. i think there is a lot of concern, but there is to hope that it cannot possibly be as bad as it could be. this is why it is important the u.k. can stand up and really demonstrate it can get a good deal with the rest of europe. the trouble is, europe needs to make a scapegoat of the u.k. because they cannot see a fracture he -- fracturing in their best interest. there are a lot of issues to deal with. does the real concerns. europeans are going to fight theresa may is

trying to make it clear that she wants the best hand to play and hopefully, for her, she can achieve that. i want to asknic, simon if we will see volatility on the markets or is the timing genius because you go through the french election and then you have a summer lull and they are enough, only a month after we have a new french president, so not much negotiating would've -- anyway.ywhere simon: then you have the german election later in the year. the germans were not really be at the table and then they have this period to really get an advantage in negotiations to settle it by june 8. help me with the history of the general election. is she holding this general election to get a mandate for europe or is it just about domestic politics? simon: everything in domestic

politics for the moment is about brexit. whatever you look at, whichever department or area of fiscal spending or decision-making, defense, security, everything is tied with brexit. theresa may is the brexit prime minister. how she will be written in the history books will be determined by how she delivers brexit. this is very much a mandate to deliver brexit. francine: tomorrow the house of commons is actually voting on whether they agree with+++

general election. we are hearing from bbc that the labor will hold from the government for a general election. is there any chance this doesn't get through? simon: it is very unlikely. which political party will vote against having a crack of power? certainly in the last year or so and this weekend, the french election is kind of a have a go spirit. it's another manifesto commitment david cameron made that has been unwound by theresa may. we will have another coalition and they said there would not be an election until 2020, kind of like u.s. style, you know when you will vote. she needs to unwind that and she will do so tomorrow. she needs a two third majority. tom: thank you so much. simon kennedy in charge of all of our brexit coverage. it has been 20 47 since june to me third. 347 -- 24/7inue -- ever since june 2 third. what a pleasure to speak to charles peabody, we will do that here in minutes. from london. from the york. this is bloomberg. ♪ ♪

francine: "bloomberg surveillance" from london and new york. we spent a lot of time looking at theresa may's announcement about a general election. and the 10-year yield. it seems to be stabilizing, but still quite a lot of movement. ftse down 1.4% and the yield fell briefly below 1%. it is psychological, but above 1%. at 136 see pound-dollar .37. let's get to taylor riggs. taylor: china's -- group agreed to sell to a u.s. cereal maker. they hope to grow the brand in china, but the sales never took off. they get most sales in the u.k..

guaranteed life has been bought by on bank insurance. they say they are looking at other deals. the company agreed to a takeover in 2015, but on bank could not get regulatory approval. boeing plans to fire hundreds of engineers this week because of a slowdown in airplane sales. they may cut shares. they hold out -- hand out pink slips on friday. that is your bloomberg business flash. tom: thanks so much. we are awaiting bank of america results. we saw jb pouring it -- jpmorgan a few years ago. his daughter ran the boston marathon yesterday, charles peabody joins us. you were way out front on a better use of cash by the banks. can you state that over the next 1, 2, 3 years the banks will

distribute dividends? charles: absolutely. they run with excess capital right now's other payouts will continue to rise over the next couple of years. tom: michael mayo was with us yesterday and he is focused on the governance of the banks. do you have the same concern about banks running their shops for a new, modern, post crisis banking? charles: i didn't hear his comments, but my belief is the banks have done a good job returning their balance streets, portfolios,he loan doubling capital and liquidity. i think whatever downturn we have in the next couple of years, they will come out of it in much better shape than they have in the last three recessions. i think banks will be in a good position to invest in their businesses day one out of a recession. tom: we have the earnings coming out right now. take a look at those in london. i will go to this statement.

we see bank of america results with $.41. francine: they seem to be pretty much in line with expectations. just a word of caution because they may not be comparable and as were just coming out are talking. bank of america, $.41 for the first quarter earnings pursuant -- earnings per share. what is important is to look at the divisions. we need to look at the division to see what the fixed income has been doing. we need to break it down with retailer expenses. maybe seasonably hired in the first quarter. earnings per share, $.41 for the first quarter. we also need to figure out that .hey divested some of the debt they sold about $6.7 billion in ac, eligible debt in january. i wonder if that has an impact on exactly what they are going through. for the moment, it is a big

result. i don't know if we want to go straight to charles. thes important to see various breakdown. for the moment, earnings per share, $.41 in line if not a bit better than expected. charles: $.41 is definitely better than the $.35 the street had been looking for and the $.37 i have been looking for an revenue came in at $22.2 billion, better than the $21.8 billion that people had been looking for. on the surface, a looks better than expected, which is what we saw at the j.p. morgan and citigroup. ideaselp me with three charles what we have you on the phone before you go to your clients. they took 70% of their money this year and distributed it in dividends and share repurchases. is that a large number? to me, that seems excessive. charles: the banks have been basically -- the big banks as opposed to the regionals or the trust banks have been delivering between 55% and 70% of earnings

back to shareholders. the move in future shares will likely go towards 100%. they do have access capital they can return. the return on equity? they are lagging jpmorgan as a general statement. what is the appropriate roe you would use for the bank and the too big to fail banks in general? charles: their cost to capital is somewhere around 10% and they are not earning their cost to capital. that is what they have to do a better job on to improve valuation in the market. i think bank of america in the returnuarter did a 10% on tangible equity, which is an improvement over last year, but not quite as good as the 13% to -- jpmorgan has been able to produce. i think they need to improve that. do youc synergy -- -- see synergy continuing to incur?

charles: their mandate is to grow revenue while keeping expenses in control. they have done a phenomenal job years inst five or six keeping expenses in control. in fact, dropping expenses. what they have not yet been shown is the ability to grow revenue. we did get 7% revenue growth this morning, so that is encouraging. tom: charles peabody, we greatly appreciate your perspective. . tell you about gb this is on the bloomberg terminal. you can come over here to the right side and look at a chart and get the wisdom of dominic konstam on the great distortion in the united kingdom. bonus round, you can take our charts directly to your terminal. you can take my cool log charts. there is dominic konstam, handsome devil he is. goldman sachs, 7:30 this morning.

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tom: what a morning. "bloomberg surveillance." sterling roars, 126.50 off the

speculation on her announcement we saw in this hour. prime minister may drove sterling lower and it came back with a vengeance. eurosterling, the barometer used much more than what we use in america, 84 pence. turkish lira has great stability given the uproar about mr. at a rdogan,e . showing, we usually don't this, but is a good idea on safe haven. it down we go with strong swiss-frank and persistently strong swiss franc. it's sterling on a perpetual devaluation>? we go back to other snap elections. it is the land of devaluation,

isn't it? dominic: i guess so, but that is also probably partly the way and the trading nature has lost a .ot exactly, you want it and you have hollowed out manufacturing and you go to services that you worry about that with exit. there is -- brexit. bank, you talked about a week sterling and all the ramifications of that. june 8, i doction not know what do ninth will bring whether it will be like june 24, which was stunning on the streets of london. will there be a brutal move? ofl we saw -- see a move abrupt sterling weakness off politics or for guys like you, is this a nonevent? dominic: the reason right now people are so concerned about sterling is the idea if there is this hardball with the europeans

and is a very hard brexit any to have a proper deal, you are going to have a super week currency and we can still carry on trading competitively. tom: to translate, francine lacqua. help me with this headline with the leadership of scotland, trying to move united kingdom to the right? is that news? francine: it is not news, but this goes back to the fight that nicola sturgeon has been having with theresa may really on the back of brexit. nicola sturgeon keeps saying scotland did not vote to leave the e.u. and therefore they should either breakaway or theresa may should listen to them more. her argument now to put in simple terms she says, the conservatives including theresa may who has been trying to -- who has been promising to take care of the disability is now trying actually to move a lot more right-wing. i guess she is trying again to start her campaign, nicola sturgeon is, for june the

eighth. i do not know whether because you are looking at the polls and i know you are a little bit further away, but the polls give conservatives 44% at the moment. a lot can happen from now to the eighth of june, we are fairly confident that actually theresa may will win this. >> i am not so sure. cameron obviously when he had -- he thought he wouldn't have any problems at all. that blew up in his face and obviously, totally makes sense that they should go for this election and solidify that support and everything she was saying. you know some people will view this as another chance on doing brexit. this is going to become. there is a favorite -- a very bifurcated outcome. on the one side she will get exactly what she wants which is why most people think sterling is doing well. on the other hand, the other extreme, you could get an upset

where mather -- maybe jeremy corbyn -- and you have a referendum again. people obviously talk about that. tom: thank you so much, dominic konstam with deutsche bank. talking about ripping up the script, we did that the entire hour with mr. konstam. it is going to be a most interesting morning. i want to appear from jon ferro about his united kingdom. we will do that on daybreak. michael mckee in conversation with the federal reserve bank of kansas city, the president, esther george. look for that in the 10:00 hour. from london and new york, this is bloomberg. ♪

♪ alix: u.k. prime minister theresa may call snap yields

below 1%. bond trading revenue up a whopping 29% for bank of america. goldman sachs is on deck. secretary mnuchin throws his support behind a stronger dollar, saying there is a big difference between president trump's talk and action. david: welcome to "bloomberg daybreak." i am david westin alongside alix steel. jonathan ferro is off today. the big story today will be about that snap election. coming up, we will talk about the first 100 days of the trump administration. are bouncingures off the lows. the ftse being hammered 1.6%. you did have yields falling below 1%. they are back up a little bit, now only down one basis point. the sterling is moving much we