francine: parliament votes later on whether to green light eestnet election as the u.k. prime minister goes all out for the power to push through brexit. we are live in westminster. as the odds of a fed rate hike in june received, world central banks prepare to tackle the $13 trillion quantitative tightening issue. in the world's richest man says he is counting on donald trump's pragmatism when it comes to policies on health spending and foreign aid. bill: you have seen has pragmatism on a number of things.

i am certainly hoping these receiveelated budgets some of that attention. francine: that was bill gates, talking to manus cranny. this is "bloomberg surveillance." we have some great guests who will talk about the markets, foreign policy, and the snap elections. first, to your markets. this is where we stand. european shares rising attach. -- a touch as commodity producers rebound. metal prices, chinese equities leading asian stocks higher. that index gaming 1.1%. i want to show you the pound. the vote in parliament a little bit later about snap elections on june 8. the vix index down quite significantly today, at 15.85. those are your markets. first, let's get straight to the

bloomberg first word news. u.s. vice president mike pence has called north korea the most dangerous and urgent threat to the peace and security of the asia-pacific region. addressing military personnel on the uss ronald reagan, hence also spoke of the overwhelming response available to protect japan against north korean aggression. pulling remains tight -- pence: u.s. military capability is dedicated to the protection of japan. japan, you are our friend. you are our ally. and on that foundation, we will face the future together. pulling remains tight in the final days before the first round of voting in the french presidential election. but one candidate has come up with a novel way to be in more than one place at once. last night, melenchon held a dijon whileh on --

a hologram was projected to six other locations, including reunion island in the indian iceland. traders are pulling back from that's the federal reserve will raise interest rates in june. the market sees a 43% chance of a hike, down from more than 60% early this month. it comes after a weaker than expected march jobs game -- gain and a drop in consumer prices. voicing disappointment that president trump's tax cuts and spending plans have yet to service. the yacht, and renault took advantage of a solid economy to buyers. lure industry right -- industrywide, vehicle registrations rose. the resilient car market in europe is a contrast to the u.s., where vehicle sales unexpectedly declined in march. the world's richest man, bill gates, says he is pleased the

u.k. has put science and job creation at the top of its post-brexit. speaking to bloomberg in london, the microsoft cofounder said britain and the world would be worse off without that focus. bill: i have been very pleased that both the chancellor and the prime minister have said scientific leadership, creating good jobs, having this strength that is really fantastic in the u.k. -- that they are going to work to maintain that, because it would be a huge loss to the world if that was not done. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. francine: the u.k. parliament will vote later on whether to give theresa may the green light for an early general election. yesterday, she called for a snap vote on june 8. the shock announcement makes a

sharp return for the prime minister who had previously ruled out early elections. the pound jumped 6% on the news. anna edwards is at westminster. why? anna: she has called a vote in parliament because she needs to in the housee mp's of commons to back her on her plan to bring a general election on june 8. the reason for that is we had a parliament act introduced after the 2010 general election which was to stop prime minister's from calling elections when they wanted to. but she sees this as a good opportunity, given her polling. that is what she has decided to do, and it looks like she will be successful in getting the labour party and others to back her in this motion. one of the parties that will back her, probably, is the liberal democrats. they have said they are up for the fight. we are joined by a liberal democrat mp right now, alyssa carmichael. -- alastair carmichael.

the liberal democrats saying they are excited by this fight. alastair: the had a difficult election in 2015, coming out of coalition. since the vote in june last year, you have seen our party sinceship has doubled, the last election. we are winning council by elections hanover fist. fist.d over you saw the fantastic victory in richmond park, in south london, winning back a seat we had previously held. i cannot remember a time when the party was as up for the election as this, because theresa may has chosen this election. anna: you were punished in 2015, losing 50 seats. seats. have just nine how remain is the liberal democrat party right now? it was said this morning, vote for the liberal democrats and you will get the softest brexit. is there still brexit?

alastair: we are talking about resisting and tackling theresa may's assertion that she wants the hardest possible brexit. we have had a referendum. that vote was to leave, was a departure, but there was no decision on what the destination was going to be, and that is what this general election is about. theresa may says she wants to take us out of the single market and the customs union. i think this could be catastrophic for much of our economy, not just for the farmers and fishermen in shetland, my constituency, but for people working in denver and london, in the financial services and banking. that is what is at stake here. the only people who are prepared to take on the argument about immigration, about the importance of the customs union, the importance of the single market and job security, are the liberal democrats. the liberalf democrats manifesto does not say we want to remain in the year, will it leave open away back

into the e.u.? stopping brexit -- will that be a plan in the future? 1950's,: in the liberals were arguing britain should be in what was then the european community. there has been a consistent part of our policy platform for decades now, and nothing has changed. we still believe that is our -- where our future lies. he have to deal with the realities that the present-day presents, though, and even if we are not to win membership in the say itn union, we would remains absolutely essential that we should be part of the single market, part of the customs union. anna: do you believe it is impossible at this point to stop brexit? have you had conversations with european partners about the possibility of stopping the brexit? alastair: the position this party has, as you know, is that the referendum has got to be acted on. must be aw negotiation.

theresa may, quite remarkably, once to go into that negotiation , coming out of it at the other end, with the position worse than the one she has at the moment -- a quite remarkable situation for us all to be in. but whatever deal the prime minister -- whoever the prime minister -- whoever that prime minister is going to be -- strikes, should be put to the people of the united kingdom in the referendum. that is the point at which that position has got to be made. anna: that will be in the manifesto of the liberal democrats, some kind of vote? alastair: you will be delighted to hear i am not writing the manifesto, and there will be size of relief throughout the party on that point. if you look at what the party has said for some time, that is a fairly reliable gauge. anna: what kind of appetite the you have for gaining back those seats? you lost 49 in the general election. alastair: we were down eight, and that was a very difficult line. it is seared in my memory.

we have opportunities not just in those areas that we held previously, where we still have a big campaign infrastructure -- you have got seats with people who were previously cabinet ministers, who will be standing again to come back and the parliament. but there are other areas. especially around the southeast of england, the local mp made be a hard-line brexiteer conservative, but 65%, 70% of his voters will have voted to remain. it is game on, all to play. you are seeing -- alastair: there is a little bit of nervousness in the building. --a: alastair call marco alistair carmichael joining us here on the green. they will be listening to the prime minister later, and there will be a vote leader in my house to see whether she gets through this plan for june 8.

if that will pass, there will be an election. francine: thank you, and edwards. let's bring in michael sullivan, chief investment officer for the u.k. nde mpa region for credit suisse, and gordon. thank you for joining us. i want to my pound chart. you can see this simple 200 day moving average. we could see a lot more volatility as we approach the snap election. or is it a done deal? will the markets assume -- michael: it is unlikely the opinion polls will change markedly, to the point where the market assumes a different result than the conservative majority. what you saw in terms of the more than 2% move higher yesterday was expectation that the u.k. would not fall out of the european union without a deal, because the small

parliamentary majority that theresa may currently enjoys, or does not enjoy that much -- she can expect, on current polling, to get a majority close to 100, maybe even higher than that, and that makes it much harder for the people who want a cleaner brexit in her party to force that position. michael: we have been overweight the pound. we have been adding the pound overweight in recent weeks, so we are happy with this move. it is under-owned. this move a trace. also, it is cheap. in the short-term, the only thing that will derail this in parliament would be a sharp decapitation of germany, and the more pro-european, centrist candidate takes over at the head of the labor party. that is probably unlikely, given everything the labour party has been through. i think it is a very bold move by theresa may. she will impose her own style on

the tory party and the government. it has risks. scotland itthat in is a de facto vote on scottish independence. i think that will contribute to a further splitting of the u.k., and the same with northern ireland. francine: if you are an international investor, do you see it as a chance to vote on a second referendum for brexit eston mark do you see the risk of having -- as michael puts it, the risk that if theresa may is further emboldened in the election, she has more mandate? >> it is clever. she has put nicola sturgeon in a position she does not want to be. it is difficult for nicola sturgeon, having won all but three parliamentary seats in the general election in scotland, to improve on that performance. anything less than that, which is almost certain to happen, will be taken by theresa may and her supporters as less of a mandate for a second independence referendum. i actually think it weakens

nicola sturgeon's hand. francine: interesting. michael, let me bring you over to the ftse volatility. you can see that spike if you look at the yellow line, the dotted line, just below 15. it is the one year average ftse volatility. what does that do? michael: the ftse has traded in line with sterling, which has boosted the ftse companies. i think more generally we are on the cusp of a little volatility spike, and one thing we have been telling clients in the last re-is that while politics is fascinating -- it is better than fiction. it dominates the news, be at the ft or bloomberg. what has been driving the market is the business cycle, and the business cycle is slowing a little bit. u.k. election on the political calendar does increase the burden on markets, and the

sense may be that political risk to aginning to rise slightly more unpredictable place. i think this will play slightly into markets in the coming weeks. francine: thank you so much. simonl o'sullivan and french. here is nejra cehic. nejra: a dual track process to sell or spin off a chemical unit as the company a chance to see off a 20 $4 billion approach from rival ppg industries. earlier, accel reported earnings -- akzo reported in earnings jump, beating analyst estimates. >> these dynamics at standalone companies can drive growth more efficiently, and therefore breaking these tw into , focused companies has a value-increasing effect, as you have already seen in the share price. nejra: luxury retailer

barberry's quarterly sales missed estimates as decline in the americas region countered gains in mainland china. fourth quarter retail revenue rose 2%. the u.k.-based company said it is maintaining its forecast for adjusted pretax profit. said it is disappointed it's u.k. workers are going on strike, but it is too late to assess the impact of the action. the british staff takes their first industrial action for more than two decades today, over a pension dispute. >> what is important here is that we need to have a pension scheme which is viable and robust in the future. i like some companies that wait for their situation to get into a more difficult spot, we are taking action to make it robust. our situation is also one which is determined across the whole industry. so discussions are still ongoing, and we will continue to do that. and i am sure, in the end, we will find the right solution. nejra: that is the bloomberg business flash.

francine: thank you. the imf has raised its forecast for global growth to 3.5% this year. a glimmer of optimism following a trend in recent years of lower growth forecasts. it also says the emergent protectionist forces could undermine the modest heightened outlook. >> it is hard not to be excited about finally being able to upgrade. 2016 to 2017 is pointicant, 3.1% to three 5%, as he said. whether that momentum will be maintained depends on a number of things. it depends on policies going forward. it depends on other risks, some political, some economic. heading into the uncharted territory of quantitative easing, the world's central banks are starting to plan their course through the uncharted waters of quantitative tightening. the fed, ecb, and boj will transition, the difference

of a tapererun tantrum or the undetectable market response to china's rundown of u.s. treasuries in recent years. the combined balance sheets of the three total about $13 trillion. still with us, michael o'sullivan from credit suisse and simon french. michael, let's start with you. how much of a shock will this be to the markets? it will be telegraphed. it is a little bit like the first rate hike for the fed. we talked about it for months. the market, when it does happen, should be prepared for it. we saw the japanese 10 year into negative territory, which was a glimmer of the pre-trump days, when central banks -- it was the only game in town. i do not think that markets have yet broached the issue of central banks reversing all the assets on the balance sheet. the bank of japan own a huge chunk of equity tf. japan is the worst-performing

equity problem -- equity market in the last couple of months. if they have to reverse that, they will have a significant impact. we are at the top of the market, at least in the evaluation terms. maybe not yet the business cycle. i think the big central banks ,ave, partly through groupthink really overextended themselves these wise, continuing waves and the slathering on of qe, which is appropriate maybe for emergency situations but not as something to build organic growth. francine: but they would argue that counterfactual's are easy, and if they had not done with the central banks did, maybe we would still be in even weaker growth. overall growth is not great at the moment. it is ok, but not wondrous. simon: quantitative easing has bought the global economy time

to make the necessary repair to balance sheets, and structural reforms. i think history will judge that time as being squandered. therefore, you find yourself in the position where there is an inability to roll off the balance sheet in almost all geographies, with the exception of the u.s., where there is increasing evidence that the fomc do want to stop reinvesting in maturing mortgage-backed securities. you can talk seriously about that happening in 2017. i think we are many years away from that happening in japan or the eurozone. francine: when will they start talking about it? does the countdown start when we actually hear a central bank uttering the word balance sheet? ,imon: we have already had that in march, banks talking openly about the idea of starting to reduce the balance sheet at the end of 2017. i think the difference between a very in vent-driven change in

monetary policy regarding interest rates and the way the balance sheet can be diminished -- it actually place to balance sheet reduction in the u.s. you simply do not reinvest the proceeds of maturing mortgage-backed securities. they can take us away from that enormous buildup toward a fed rate decision, a policy is driven down that road with enough forward guidance, not to rattle markets. francine: i am looking at a breakdown rate of the fed balance sheet, the trillions of dollars. we talked about it, but the market -- when did they start repricing? michael: i think if you look at dynamics of markets in the last three or four years, the bond markets and government debt markets, there have been quite big effects, depending on who is the marginal player. you see it for example in the equity market and various points , where it imparted a lot of

volatility into the market. we have seen governments and other countries stepping back from the treasury market, and that had a big liquidity effect. we have not seen the liquidity effect of central banks disengaging from markets and increasing supply in other markets. there is also a bigger danger for other central banks like the bank of japan, if they go down the route of monetizing debt. people talk about this as if it is a very clean accounting transaction, that it is costless. it is not. there would be a cost either in terms of the yen, the credibility of government debt, or both, perhaps. francine: michael and simon both stay with us. what does one of the business world's most famous names think about the world's most important political leader? microsoft cofounder bill gates spoke to manus cranny about president donald trump. bill: he is pragmatic on a lot of things.

it means talking to him and giving him background he might not have had through his past probably as important with him as with anyone. he wants to be a leader. that he to have things has actually accomplished. i have talked to him about hiv, and how the u.s. should be proud of our work there, and there is more we need to do. is important.ogue you have seen his pragmatism on a number of things, and i am certainly hoping that the -- these health-related budgets are -- receive some of that attention. francine: still with us, michael o'sullivan from credit suisse private banking, & french. simon, when do we get tax reform? of whatwe get an idea meet president trump will put on the bones? he keeps telling us a

matter of weeks, but congress seem to be holding the line both within the freedom caucus and the democrats of saying, there are other parts of the fiscal health reform, before we talk about maybe the corporate tax adjustments the president wants to make. my personal view is we do not see it until the second half of 2018. i do not believe the president he says we are a matter of weeks away from congress thing the first package. francine: michael, if you look world gdpu have incentage change, and purple, you have the development money. -- post crisiss recovery has been slow but steady. the u.s., how does it fit in? can trump go the other way if he puts protectionist pressures, or can it be the best performing

country out there? michael: i think maybe there are broad issues. trade wise, the world is sort of looking at a trade shock at the margins, and trade -- imports, exports over world gdp is plateauing at best. we just had australia and now new zealand introduce measures to curb immigration. we had trump last night talking u.s. overring canadian dairy farmers. this more protectionist atmosphere. in terms of the pack of u.s. gdp, you look at the business cycle data from the nbo and the u.s., we are into the second longest business cycle expansion in the last 150 years in the u.s. it has been a very slow, lazy recovery. but likely in the next two years, we would confront a recession, a normal recession in

the u.s., and i think it would be a good thing for the u.s., if the president delayed his infrastructure spending,'s fiscal stimulus, for maybe two years, and could lengthen and improve the quality of the business cycle. francine: michael and simon stay with us. thank you for now. we have plenty more big interviews throughout the day. we also spoke to blackrock ceo larry fink. that is two hours and 15 minutes from now. could rallies by hologram they can already close election a virtual tie? we bring you the latest from the french election. ♪

francine: this is "bloomberg surveillance." here is nejra cehic. nejra: the u.k. house of commons is set to vote this afternoon to

trigger a general election. in a surprise move yesterday, prime minister theresa may called for an early election on june 8, seeking a personal mandate and parliamentary backing to take her through brexit talks. may willan expectation be able to extend her majority and silence critics on both wings of her party, strengthening the pound. he was vice president mike pence has called north korea the most dangerous and urgent threat to the peace and security of the asia-pacific region. addressing military personnel on the uss ronald reagan, he spoke of the overwhelming response available to protect japan against north korean aggression. . pence: the v.p u.s. military capability is dedicated to protecting japan. japan, you are our friend. you are our ally. and on that foundation, we will face the future together. pulling backs are

from bets the federal reserve will raise interest rates in june. the market sees just a 43% chance of a hike, down from more than 60% earlier this month. weaker thaner a expected march jobs game and a surprise drop in consumer prices. that is disappointment proposed tax cuts and an infrastructure spending plan have yet to materialize. european car sales surged in march to their highest level on record as fiat, chrysler, and anault took advantage of solid economy to lure more buyers. industrywide registrations rose 11% as they benefited from a shift in easter to april. this is a contrast to the u.s., where vehicle sales unexpectedly declined in march. man, bills richest gates, says he is pleased the u.k. has put science and job creation at the top of its agenda, post-brexit.

speaking to bloomberg in london, the microsoft cofounder said britain and the world would be worse off without that focus. bill: i have been very pleased the both the chancellor and said minister have scientific leadership, creating good jobs, having the strength of that is really fantastic in the u.k. -- that they are going to work to maintain that, because it would be a huge loss to the world and the u.k. if that was not done. francine: global news -- nejra: global and us running for hours a day powered by analysts in more than 120 countries. i am nejra cehic. this is bloomberg. francine: just a few days until the first round of voting in france's presidential election, pull success the front runners to be -- the front runners, micron and le pen, have been slipping. melenchon moved

within striking distance. with many voters undecided, one candidate has come up with novel ways to spread his message. last night, melenchon held a hologramdijon, with a of him projected by satellite to six other locations, including the reunion island in the indian ocean. let's head to paris. caroline, people are talking about nothing else. the french election is front and center. how is the race looking in the final few days? caroline: with the hologram last night, melenchon is trying to appeal to young voters, to look modern, and it allows him to be in seven places at once. obviously quite useful when you only have four days before the first round. melenchon has been trying to appeal to young voters. also, he is very present on social media. he created this video game where an animated version of the

ofdidate shakes up the likes christine lagarde, sarkozy, and macron, to take their money. he is targeting young voters. with marine le pen, he has the most followers in twitter, more than a million each. francine: i definitely did not have that in my youth. on a serious topic, there were terrorist threats yesterday. how important is the fight against terrorism in this campaign? caroline: this might surprise you, but terrorism was the top priority of the french at the end of last year. now, it has been topped by the economy and unemployment, which have become the top priorities for french voters in this election. the arrests ofr two suspects in marseille

yesterday, terrorist threats might come back in the last few days of the campaign. we will hear from marine le pen, the national front candidate, who is holding her last rally in marseille tonight. she reacted yesterday after this arrest, saying this was the result of islamic fundamentalism. she said on the radio this morning she will restore french borders on the first day of her election. francine: thank you so much. non inne kamman-- can paris. still with us, michael o'sullivan and simon french. we also welcome the ,ice-chairman and former ceo and a newly minted director at ac milan. we are going to talk politics. we are going to talk football. , a mood,thearted note it seems french politics, sometimes in the u.k., feels like it is becoming more and

a ceo with are turmoil for a long time. where you have elections often, when you have candidates that are unusual? >> in france and everywhere, the economy looks a little bit immune from what happens in politics. normally, a strange thing happens in politics, and economies continue to go reasonably well. in france, it will depend, of aurse, because we will have fight now between melenchon and marine, where the economy would react. circumstance,er the economy is pretty immune from what happens in politics, even in france. michael, you have to decide where you invest in the markets. let me bring a chart up which basically shows the digital momentum for a lot of these candidates in france. it really shows that marine le

pen has an advantage. who do you trust? what pulse do you look at to decide how you invest on friday? personally, i find it extremely difficult to try to predict who is going to be standing next week, and there are so many imponderables that have been introduced, i think, by the rise in melenchon. he is an enticing speaker. he has the videogame, "fiscal combat." if you does not meet the second round, what he will do with all his political power and goodwill -- if we believe it he could take 20% of the vote, there is a vacuum opening up, where traditional socialist voters are going to melenchon. some going to macron, the anointed socialist candidate. others dispersed around the right. we have a debate on thursday. i think one of the things we need to watch for there is whether the other candidates are

really going to push and test macron on security. francine: politics -- we saw the bernie sanders vote go to donald trump. you could have melenchon voters go to marine le pen. two months ago, i said the markets were underestimating the likelihood of a le pen victory. the socialist bloc of voters potentially do not have -- a growing bloc of voters do not macroncandidate in a versus fillon final round. bernie sanders votes went to donald trump as a natural home, seeing it as an anti-establishment candidate. they can ally themselves even down clears not political lines. francine: there are still undecided voters. what is going on in your view, paolo? we could just as well be talking about italy. people are unhappy with their own situations. paolo: when people continue to

be relatively unhappy, even if european economy is performing much better than in the past -- if the time goes on and the economy continues to improve, we more german actions, or a reasonably good italian election at the beginning of next year, and, being optimistic, we could have a new european set up which would solve the problem around brexit. this is, of course, the optimistic scenario. then, you have a lot of potential drawbacks, and it is difficult to focus on the outcomes, including the french election, which is the first one. , whichction in holland performed reasonably well -- francine: i like that. we start with the optimistic and will go to the less optimistic after the short break. our guests all stay with us.

stay with "surveillance." coming up, more on political risk, as you can lawmakers prepare to vote on the snap election. we hear from the shadow chancellor. we check on oil ahead of inventory data to be released today. we will hear from the secretary of opec shortly. ♪

francine: this is "bloomberg surveillance." let's check your markets with mark barton. the pound ahead of the vote in the house of commons. the moving average breaking

about the 200 day average for the first time since the brexit referendum. we have been stuck in a range of 1.20 to 1.27 since october. we broke through yesterday. they 2.2 percent gain yesterday, the most since january. the highest since october. thestill lower against dollar since that brexit referendum. a big day today, that vote in the house of commons. chart, a wonderful taking the spread of the high price and the low price for the pound against the dollar on any other day, and on any given day, this goes back to before last year. last year, the only time there was a wider spread than october 7.as you know what happened on october 7, the flash crash which sent sterling 6% lower against the dollar. , this iser of minutes

interesting, the risk seems to be building. the treasury yields go even lower. yields reaching the lowest levels yesterday since november. in some cases reaching technical marks. traders abandoning bets on higher rates. in five-year note futures, 86,000 contracts in the week through april. the 11th rally occurred yesterday. we will keep an eye on it. ahead of the french election on sunday, risk reversal data against multiple currencies. the cost of one week options to buy the common currency against the dollar, the yen, the pound, and swiss franc have been falling, relative to contracts for selling. the risk reversal rate, a great gauge ahead of the big e on sunday. -- biggie on sunday. francine: we are talking about a risk story with michael at and -- simon

french, and paolo. the greenerestimating shoots? do we need to give a little more to make sure the policy is immune to this anger? paolo: the european economy has not been as good as it has in the last five years. unemployment is going down, slowly but down. the growth in the economy is almost everywhere, including italy, which has been lagging for many years. so there are reasons to be optimistic about the european economy. this, and a certain point, will which has populism been growing politically in europe, i believe. it only takes some time. francine: should we worry more about italy and france? if the french risk is out of the way, you could argue it is because of more structural problems. simon: i think we worry about it converging with anti-e.u.,

anti-eurozone sentiment. if the five-star movement corral support, and they could come together with either melenchon or le pen, looking to segment the euro into a more integrated core and a less integrated periphery that goes back to its own currencies -- that is a big fiscal risk. there is a transmission from growth through two reduction of populism. the critical metric is to look at who benefits from the gdp growth. is it capital or is it labor? labor. lowercase-l since the early 1980's, the share of gdp according to labor has been hauling, while the capital has been rising. that has to recalibrate to diminish populism. it is not solely gdp increases that will drive that. francine: to simon's point, the

populists that were voted to ther so far, including trump administration, are not necessarily the ones that want a fairer society. michael: i think this is all part of a really big tectonic shift. you get these so-called paradigm shifts. you get disruptive forces at the very start who are breaking away from the established system. sometime later, you get a new consensus and new ideas. i think we are on the cusp of that. when people talk about populism, you have to be careful to lessgregate maybe slightly genuine populist politicians, who will say things to please people, versus genuine concerns that people have. i think a lot of people in europe and the states have genuine concerns about genuine problems. i think it is a pity in europe that european politicians have not learned the legs and -- the lesson of brexit. you see the same forces at work in the u.k. as you do in france. let me show you the

one week volatility spreads for europe. this is euro-dollar, spiking higher. panic, if there is a shift you are talking about, why are the markets not correct? fx is when markets are playing political risk. look at the lira and the rand. a constituency of people who think that once we get beyond the french election, the euro could rally, because the ecb begins to disengage, and we have had two very firm communiques from draghi and the ecb that they want to keep the euro week. -- weak. euro, underweight the relative to the dollar. if you have a little rally after the french election, we will be selling them, because the view of the ecb is to keep the euro weak and try to keep the recovery going. francine: u.k. lawmakers will

vote today whether to give theresa may the green light for an early general election, after she called yesterday for a snap election. anna edwards has been speaking to the shadow chancellor. >> i think we will win the election. i really do. manus: -- anna: 21 percentage points difference then the polling? you think you will win? john: i do. the poles got it wrong in the last election, in the referendum, and even in america with the trump election. i quickly have to be somewhat skeptical of the polls. that wrong.re not john: we have to be skeptical of opinion polls. comingu will see in weeks is those opinion polls narrowing as well. people did not expect this general election. i do not think the average member of the public wants this general election. of trust this issue has already tarnished the prime minister within the first 24 hours. on the steps of downing street,

she said she would not play the party for political gains. she assured the party there would not be a snap election, she would go to 2020. i think there has been a breakdown in trust in the prime minister already. anna: you say you are skeptical about the polls, but you might hold more regard for a suggestion of your worst election defeat since 1935. that is not your analysis. john: i think they are completely wrong. that is not the reaction we are getting on the doorstep. we have been campaigning in local government elections for the last few weeks. that is not the reaction on the doorstep. we have been publishing various policies that have had overwhelming support, even in some of the opinion polls. i think they have got them wrong. i think the mood of the country is that the government -- the prime minister has broken her trust, her promise in terms of not having a general election. i also think people feel she has taken them for granted, with a

cynical manipulation of this election to her political advantage, and not the long-term interest of the country. anna: if you are not going to lose to the conservatives on the brexit subject and remain voters to the liberal democrats -- you are not providing a position to brexit. john: i think people want to see the country brought together. we will be the only party able to speak on behalf of all those who voted to remain and all those who voted to leave, because most of them now recognize that we have to construct a new collaborative relationship with europe, based upon mutual interest, not the basis of the liberals, who were trying to speak for a minority. the conservatives are happening for what seems to be a hard brexit, where britain becomes a tax haven on the edge of europe and our manufacturing base is undermined. we will be campaigning for a new relationship in europe, based on protecting jobs and the economy. u.k. shadowat was

chancellor john mcdonald. there is not going to be a massive 50 day resurgence? right john mcdonald is that the polls have not called many of the political events in the last 12 months. this is a 21 percentage point gap. this is not within the margin of error. this is anonymous. you talk about tectonic shifts -- i do not know what comes beyond tectonic. this would be huge. it is not going to happen. francine: i want to talk about oil, libya and russia. when you look at oil markets, there is one thing that traders are trying to figure out. if opec turns out not to be cheating, they are cutting the production level, and yet inventories are increasing, what, given your experience in the oil industry, you think opec will do next? will they keep cutting? paolo: crystal ball, inventories are slightly crazy. francine: you are right.

paolo: the kind of oil club we had only 12 months ago. i believe opec will continue its policy of restraining production . at the same time, shale oil will continue to go ahead, as it is growing particularly in the very promising basins, like the permian basin. the market is in a good equilibrium right now. and frankly, i do not think oil will be the front page of newspapers for a long time. $50 and $60etween most of the time, at that level. francine: you think the rebalancing is steady as it goes? is it taking longer than expected, but on track? paolo: it is on track. oil producing countries are pretty pleased with this level of prices. i was in russia last week. the russian economy is performing reasonably well right

now. growth in the economy. and since russia is so dependent from oil and gas, it means these oil and gas prices are fine for them. i'm expecting oil prices to stay where they are. francine: you have been on the show before, and we have talked about libya. italy is more sensitive, because they are very close. do you worry about u.s. intervention in the middle east, and that essentially hurting or exacerbating refugee policies in some way? paolo: the refugee crisis is already bad enough. every day, we have thousands of people crossing the mediterranean, trying to reach italy and spain and greece. i am not expecting u.s. intervention in libya. in libya, the situation is getting worse rather than better. , which is the government the western countries are supporting -- it does not control even tripling -- t

ripoli. the situation is getting worse every day, and i do not see any solution now for libya. francine: ironically, the markets are discounting foreign policy risks in the middle east or korea. simon: they are. i think some of the little pullback we had in the u.s. has been sparked by korea. speaking, we have a european political risk problem. oneexample -- on a scale of to 10, italy has a score of two. focused on not politics. they're focused on the business cycle. simon: in my view, it is about $10 per barrel of risk premium on geopolitical risk in the oil prices. if you look at the fundamentals of demand and supply, i think it is more consistent with $45, $50. but the rhetoric -- korea, the

is ae east, libya -- there series of events that could spike at any moment, and investors do not want to be on the wrong side of that trade. it is rational to have a risk premium within the price. francine: in the u.s., still a friend for russia? paolo: it has never been a friend, for many years. i frankly think that even if mr. tillerson got the order of does notp, like me, it mean he is not protecting the u.s. interests. yes, the u.s. probably is inclined to be more friendly than russia, but not much. ♪

francine: the perfect storm. week inflation expectations and

a rally. risks continue for the french presidential race as they enter the home stretch. -- ael: francois fillon says it should not distract for the election. good morning. this is "bloomberg surveillance." a new york. it is about european politics. the central banks are having an impact around the world. tom: bond movement and curve flattening today. i wonder what this means for chair yellen? when was the last time we mentioned her? that is forever. 20 three minutes and 52 seconds ago. let's get to the bloomberg first

word news. issued aike pence fresh warning to north korea. ussat on the deck of the reagan in japan. he reaffirmed u.s. support for japan. >> you can rest assured that the full range of the united states is dedicated to the protection of japan. japan, you are our friend and ally. , we will facetion the future together. a u.s. it turns out that aircraft carrier task force wasn't really sent to the waters off north korea after all. trump said the armada was being sent to the region but instead, they went south for the thecises with australia's view. john knows off won 48% of the

vote. he will face the republican june 20. previously held by republican tom price. in the u.k., a pull to get after to reason may's call for an election must be encouraging to her party. a 21 point lead over labor. the house of commons is expected today to approve the call for an election on june 8. bill gates says he is counting on trump to be reasonable when it comes to the health care budget. the richest person in the world spoke with bloomberg tv. >> we have seen his pragmatism on a number of things. and i'm certainly hoping that the calculated budget receive some of that attention. indicated hisates

confidence that the bill will make it through congress. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. i am taylor riggs. this is bloomberg. what a day, yesterday. let's look at the equities, bonds and currencies, currencies, currencies. futures are up six. the euro is at 1.06. a stronger euro. the curve is flattening on the 2-10 spread. a nice story about that on the bloomberg today. and there is oil which captures the heart of it. dropping gamead changing level for cable. i put the euro swissie in there which hasn't done anything and it is sort of a euro safe haven measure. it is about the election in france. it is definitely

political, left right and center. they rallied on tuesday but we are expected to have the vote today. shares are rising. this coupon the producer, this is what i want to show you. this is as they rebounded thanks to the actual metal prices and chinese equities are higher because of that. index, we are nearing a political elections are a good idea to look at the vix and it is down. the day.chart of alan ruskin provides this wisdom and it is set up the street bid on sterling. here is brexit and the white series is sterling. and the blue is the positioning on the street. down here is where the glue for sterling.ng up here is where people in

hindsight, wiser, like ubs and others with currency and stability and currency strength -- you have real stability are based on the stunning movie yesterday and it can migrate out or 1.3 5 -- that is a long way from where the crew was. smart research out of deutsche bank. francine: a really important dual axes. tom: seriously. this is a real change from what we do on "bloomberg surveillance." this is a pro charge. it shows the shift that it has had to make. no one predicted this. like it. i

this is my chart. that looking at something you charge it, the pound-dollar, we took the 200 day moving average. the pound rising above that for the first time since the referendum. anna edwards is at westminster following inflation expectations. and there has been a flattening of the yield curve. and there was a drop in the 30 year. our guest hosts for the hour is and kit juckes. he has abandoned me to be further field with tom keene. we have a great story on the bloomberg terminal saying the gorilla when it comes to the markets is the balance sheet. the fed will have to rein it

back in. and what point do they start talking about it with intent? kit: we are reaching the point where balance sheets are going but we arelling closer with the bank of japan in terms of where they are with this. when i look at all of this, the biggest shift for markets will be when we see genuine tapering from the european central bank. that is where the growth of the theral balance sheet has biggest impact on markets. not just driving down bond you didn't have that intervention, where with the german bund be? this is more meaningful and ongoing tapering and we can get a lot stronger euro temporarily. francine: let me for you over to my bloomberg terminal.

this is the imf growth projected. post crisis, we are steady. but it isn't great growth. the imf revising up? their forecast at this time? a part of that is japan and in u.k.. the entire genesis of the reflation trade globally has actually been china. because to some extent, the u.s. has healed and the labor market has heels. to some extent, housing has healed. but if we think about reflation that is helping growth globally, it has only been china. a 15% volume growth with u.s. him for growth has been around 3% and u.s. import growth has been close to zero. you guys are speaking about the entireearlier,

reflationary impulse has come from china and that is where the story is beginning to slow. iron ore and the yen is telling you that. that is what is being reflected. francine: we -- we go to anna edwards in a bit. you both nailed the foreign exchange call. you are looking for sterling stability and now we have blown through that to a stronger sterling. what do you do this morning? do you initiate a trade? do you take a victory lap? bhanu: i don't think anybody can take a victory lap -- kit: i don't think anybody can take a victory lap. the trade for me will be the euro against the pound at the best level possible as close to

the french election as a day or -- as id dare. i think that is the outstanding possibility. tom: what did ubs do yesterday morning when they saw that you people were brilliant on the strong sterling? how did ubs act? bhanu: we think there is upside in sterling. we think it could go slightly higher at the market is positioned that way. and there is a feeling in the market that it could lead to a could putt or that it up the question of a hung parliament. that would throw a spanner in the works. at 1.30, thatable would be a time to re-appreciate the position. we arethe things that

not discussing right now, one of the reasons why theresa may called this. the economy is beginning to slow. the imf said yesterday with the forecast, bumping them up to 2%. i would be close -- i would be surprised if we get close to 1%. is absolutely it critical to cbc changes. it is a wall street city lesson of what you do when you are right or wrong. yesterday was something that we rarely see with sterling. francine: this time, the volatility we saw on sterling was before we heard what theresa may was calling for. so people assumed the worst. you can see that markets are anxious to try to figure out what happens next. bhanu bawejaith and kit juckes. coming up, we speak with clouse wriggling. look for that.

we will talk about greece and other things. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." let's get the bloomberg business flash. in europe, car sales rose last month to the highest record. more than 1.9 million vehicles. fiat chrysler and renault were the big winners. the ceo of verizon is ready to make a deal. mergeronsidering possibilities to reset the course of the company. he would be open to talks with comcast, disney or cbs. they're looking for sources of .rowth

that is your bloomberg business flash. thank you. a strong hand. that is what opinion polls are just theresa may has if lawmakers agree to a summer snap election. 40% of voters intend to vote for her. can she secured she is looking for? or will this embolden nicola sturgeon? anna edwards is at westminster and joins us now. you have spoken to great guests over the last hours. i was struck by a labor and the shadow chancellor. heor is doing badly, but thinks he can win the election. i we going to see and of people in the polls or is it almost a done deal for the conservative party? anna: good morning. when you think about the reasons

the electoral calculus has gone through in deciding to do this, a couple of numbers matter. 17 and 21. 17 is the seat majority that the tories holes in the house comments. 21 is the percentage point lead they have in the polls. if they translate that into seats, could that mean they get 100-100 50 in terms of the seat majority? that is the reason they are going for this now. they thinkarty says they can win and they say the polls are wrong. they don't believe the polling. they say the polls have been wrong in the past. and that is why they will back theresa may and allow them to go for an election on june 8. francine: if we get the snap election, could it involve nicola sturgeon and what to give it renewed force to scottish independence? is one thing that is

being considered nicola sturgeon says this is a mount -- says this is a miscalculation by the prime minister. and they say they will reinforce their mandate. you can make an argument that why is it fair for the country to hold a general election when he has been told it isn't the right time to hold an independent one? but on the other hand, theresa may has been saying this is a chance to stop the independence tracks and bear in mind that the past mp had a record in scotland that they need to defend. to some extent, they are not the challenger. and they will be looking to not lose the seats they won in the landslide. tom: i want you to answer this for our american and global audience. why did she do this? i was asked this no less than three times yesterday. people abroad are baffled as to

why she did this. why did she do it? na: there are things she has said and things of the people are saying. the reason she gave was that she thinks people in other parties are standing in the way of the brexit she wants but others are saying it is divisions in the party. this is something we've talked about a number of times. i will show you one page of the newspapers this morning which sums up a few of the reasons. this newspaper saying that the snap whole will kill off labor. .hat is something she could see it also says that she will smash rebel tories. they call this "bloomberg or." "bluey call this" murder."

for details into what kind of brexit theresa may wants. tom: anna edwards, thank you so much for your wisdom. coming up on friday, francine is in washington before she goes to the elections in paris. joining us in washington was the former president council at jpmorgan. frenkel, allison rivlin will join us. join don't oppose and will us. i believe we will drag on a few of his fellow members with us. that is a great lineup on friday as we go through an exceptionally busy weekend. this is bloomberg. ♪

tom: on the market right now, this is alan ruskin writing on bloomberg. still favors cable upside tomorrow. and more important in the coming days, the early election call has played to a large squeeze. my colleagues have given me some flak for being conservative to a stronger 1.28, when the aero suggested more like 1.35. with us are too noted members. kit juckes and bhanu baweja. alanme understand what ruskin means by the squeeze?

kit: for a long time, there have really been two speculative positions in the financial markets. one was the short end of the u.s. treasuries which has been annihilated and the one that has an -- the one that has lasted until the week ago was the sterling which persisted. see now, with sterling against the dollar and stuck in a narrow range for the whole of this year, if you said 1.20, where we are been for a long time, as we break out, if everybody has to capitulate as -- saying they cannot carry even medium or risk.erm

tom: i hope you can see this. volatility of sterling. they still called for weeks sterling out 1-5 years. where will sterling be when we talk ubs into the holistic view that you have? where will sterling be three years out? bhanu: there is a decent chance that the u.k. sees significantly lower growth in the next two years. the boe orthan what the imf are saying. one of the reasons growth has basically, the u.s. household has been borrowing tremendously which has helped. telling me that a

u.s. sterling is likely to be around parity. in the near term you will get the squeeze but eventually the currency should be headed lower again towards 1.15 against the dollar and 95 to parity against the euro. francine: i do have a great chart looking at u.k. inflation and white and basic wage growth. in blue. i wanted to ask you whether it is important that theresa may asks for a snap election before this got worse for the u.k. households. it will be bad -- we will be back with kit juckes and bhanu baweja. coming up is a conversation with larry fink from blackrock. this is bloomberg. ♪

francine: this is "bloomberg surveillance." earlier before about the u.k. and you showed some great charts.

let me bring you back to what we are talking about with bhanu baweja and kit juckes. is probably the money chart away from the pound. it goes back to the politics. it is important that theresa may asap beforegitimacy the coming terms. crucial. anna edwards was speaking about why she has done that. she wants to consolidate the domestic political reason. there is an economic reason. and it is precisely this. the growth momentum in the u.k. has been helped by the most positive credit impulse globally the u.k..sident in and now it is turning down. nominal wages are coming down. down,en when they come inflation will be low. at that time, it will be much more difficult to ask for the mandate.

hindsight,nefit of this does seem to be good timing. the question is whether the polls are reliable. but the consistency has been so strong that you would imagine the tories make it safely. we need to see whether the methodology has changed. get to the bloomberg first word news. taylor: the u.s. says that terrorism -- rex tillerson certified that iran is complying with the deal to curb the nuclear program. but in a letter to congress, he said iran remains a leading sponsor of terrorism and a review will determine whether toctions on iran are vital the u.s. interest. two bombers have flown within miles of the alaskan coast. tookirst time since trump office that russia has come so close to the u.s..

the american planes flew alongside for several minutes and then the russian planes broke off and returned to their base. it has been almost two years since there was a similar incident. in venezuela, opposition for help --e asking they say the government will try --stave off bankruptcy why bankruptcy by turning the gold reserves into cash. lawmakers say that by supporting the goals as collateral, lenders regime as a dictator. and the kansas city fed president is urging the reserve to start shrinking the balance sheet this year. cracks all that happens in the context of how we see the economy unfolding. so if we haven't made a decision about when, but i think as we continue this discussion, you will see the minutes reflect where the committee is coming out. taylor: george says she would like to see the balance street -- the balance sheet shrinking

on autopilot. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. i am to the rakes. this is bloomberg. francine: france's for candidate election is becoming a head scratcher. in every poll, macron and marine le pen have led but that lead has been steadily decreasing the closer we get to sunday. any of the polls? we have four candidates. with the margins of error, anything could happen on sunday? >> absolutely. the margin of error is around 3%. that this is show a difficult race. difficult to predict exactly who

will come out of the first round on sunday. this is a situation we haven't seen in more than 20 years in france. this is the last time we has such a tight race. the last few elections were much easier for the pollsters to read. this is why some of the pollsters have said that they may not be able to -- at the very top of atm. francine: i know their word two the linked to terrorist threats. how will that play out in the election? immigration terrorism? >> she was the first to react. -- france andwere

she will store the borders on the first eight of her election but she also said that she wants all convicted foreigners to be sent back home. however, two suspects were arrested and they were french citizens. with francoisere fillon. he does well in the polls. thisis the momentum and guy is still in the race, isn't he? >> he is absolutely stone the race and it is not impossible that we would see francois fillon qualifying. has been trying to get his to we rivals on his site did have nicolas sarkozy asking people to unite behind francois fillon and as we are speaking,

francois fillon is visiting a factory with a mayor who was his main rival last november. tom: help me as a dumb american. is he the only real politician in the race? like the only sarkozy person? you may say that if you consider the mainstream republican candidates should be near the elections. if you look at macron as an independent at 39 years old, it is his first time doing a campaign. so for sure, francois fillon is the more established candidate. and it isn't impossible that some people who have voted republican or right-wing all , could change alone

in the polling booth. francine: thank you so much. let's get back to our guest hosts. bhanu baweja and kit juckes. how do you look at the election? we have different polls and different inattentive polling. i also saw one metric that basically looked at the social media and how the various candidates are going. who do you trust and believe? kit: it is too close to call. there are two things that are worth saying. coming back -- he has a party behind him so that if we have parliamentary elections in the next couple of months, he is the one who can put a government that can do things together. and a symbol foreign-exchange world that i live in, he is the guy that is best. euro if heh of the has a late charge.

i am nervous the more that melenchon looks like he could squeeze in. he is frightening to me as an economic outcome and it is looking less likely. and it is worth saying that marine le pen, to get to have a chance to win 50% in the second round, i think she needs to be near 30% in the first round. and she has been stuck in the 5%ls in this kind of 20%-20 level all the way through. she is missing votes unless people are just not talking to pollsters. francine: but the problem is wondering if people don't vote, it could give the upper hand. kit: if she has 10.5 million people who are going to vote for her at this point in time, you would have to have a voter forout that was under 60%

that to get us to where we need to be. she has a really good shot. them, the polls as we see when we talk about the legitimacy of the polls around the world, she is not getting there at this point in time. tom: help me with france. it isn't an emerging market. some would say that capitalism is a frontier economy. on what kit view jackson just said? what do you look for as we go to sunday? is the first round results. if you find that marine le pen does well in the first round and then it goes in with macron, it will be best case for the market. i think the euro would get a boost from that. i think that francois fillon

would be the preferred candidate because he has laid out his agenda.t clearly, this is closing out a lot. doesn't get a lot of votes, his votes could go to the centrists rather than the extreme right and i think that will help get the right result for the election. when you look at assets right now, there is not a lot of risk premium priced in. it looks pretty clear that macron is going to make it. i think the polls have gotten closer since then. tom: absolutely amazing. when weto watch this went back to november 8 and everyone got that wrong. heree going to continue with our two guests. a lot of international economics today. we will do that on friday when

francine joins me in washington. jacob frankel and alice rivlin. those are just some of our guests to give you the international tapestry of the world bank in international monetary fund meetings. this is bloomberg. ♪

tom: new york city, a little chilly today. it has been beautiful in new york, record warmth. i just saw a great chart on twitter on global warming. today is a little bit chilly midway through april. good morning. francine is in london and i'm in new york. thrilled you are with us as we pick up the pieces of the announcements yesterday.

to look at something that's got buried in the news yesterday, the international monetary fund. the chief economist was on bloomberg television. let me go to you, bhanu baweja, on your vision of emerging markets. -- is it clear for him merging markets that they can create growth irrespective of the french election or what trump does in america? bhanu: the simple answer to that is no. but i think there is a twist. not just because the french election and trump are important because the most important aspect -- last year everybody was focused on how the fed would deal with the terminal rate and how oil prices went up.

but had that not happened with china, emerging markets would not be where they are. so if you want to make the e.m. call, the first stop before paris and u.k. or new york has to be beijing. and that is where policy is slowly beginning to change. the wild consensus is that everything is ok until the bottom of this year because until then you will not see any disturbance in growth. but as iron or is telling you, you're beginning to see a slowdown in the housing market which has propelled commodity prices as high as they happen. of actual healing, we have seen current accounts get better but that is because growth has been weak. so the actual healing has not really come through. isn't because emerging markets has hit velocity. tom: you were on the singapore watch. an update on singapore?

we haven't talked about it in ages. how are they doing? done: recently, they have quite well because the tech cycle in asia has picked up and growth has been strong. demographics is a big issue for singapore. you're not likely to see the currency selloff in a material way because it is a large financial hub and they want to maintain the wealth management. growth in the medium-term will be barely above 1%. so the housing market and wealth management, these are the two pillars of growth in singapore. the one that is chugging along slow downthat, things once again. francine: do you expect a correction? we saw a note i wells fargo that ity rally in currencies --

may actually refers quickly and that is in the indian rupee. placesthat is one of the that has done extremely well. i think that will reverse. when the portfolio flows slowdown, the currency will weaken. but what i'm most worried about is the rand in turkey. this could reverse quickly. you folks of are even covering what is going on in turkey but outside the politics, there is a large deficit that is getting larger at a time when growth is slowing. this is not what you saw in brazil last year or mexico this year. there are places that have not healed at all. china has gone the other way. to tom's question earlier, i don't believe we have had velocity at all. i think we have to understand how special and exceptional the last 12 months were.

francine: do you agree with that assessment? what i like about this chart is that we charted the crisis in red. you can see us being steady but it isn't huge growth. it is trundled along. there's nothing exciting but it isn't bad. what bhanu baweja is talking about. i get a ton more yields in emerging markets if what i have is there it is -- 30 basis points. you do get paid so little in developed markets for investing that you would have to go searching. as long as that is true and as long as there isn't a car crash 100 yards down the road in front real then.l do get so the money keeps flowing back. and the best-performing market have been the ones with

the highest yields. it is as simple as that. for all of the political for russia, the ruble has been fine. the ruble is not cured. bouncing -- it is the lack of returns. and things are not getting dramatically worse. borrowing growth in china with credit. we have issues everywhere if the commodity markets start to soften. issues everywhere when the commodity market slows down but today, people cannot resist the zero yield. i know that bhanu baweja once a comment. you can ask bhanu baweja two, to

directly. or kit juckes. tv , you can ask us to ask questions to our guests. this is bloomberg. ♪

francine: "bloomberg surveillance." in the middle east we spoke to the opec secretary general. at the petroleum and media form. he told tracy alloway that the leading oil-producing nations are moving closer towards ending a global glut. >> numbers are looking more robust. much more encouraging. gradually, everyone has a higher level of compliance and conformity. and member countries over these challenges that america faced in the past few months. francine: let's get back to our guest hosts. bhanu baweja and kit juckes. when you look at oil, inventories are up and opec is

complying. today need to continue cutting the cost of oil? to make sure the rebalancing happens? bhanu: rakes are up as well. so i think yes, they do. maintain theto price here with the aggregate supply curve going up from one dimension, they need to bring it down in opec. so they will need to continue to to keep the oil price here. and let's spend a few seconds thinking about demand. the chinese and the lead for oil has been what of the biggest drivers. particularly in the consumer sector. and that is not slowing down. chinese retail sales are around 10% but that is coming down from 20%. truck and car sales slowing, you will see the aggregate demand saying yes, absolutely. francine: do you believe for the

market, but anything in yields, especially the german bund, links back to commodities? placee are in a happy where markets are with oil prices. they are moving slowly out. not fast enough to cause inflation or to get rates moving higher or fast enough to ruin the world but while we are here we have low yields driving asset prices and everyone is happy. it is fragile but that is what you can find. long-term chart. 60 years. this is the gold index. priced in for index. this is a great chart. this is persistent deflation with a one-off for china there. are we ever going to see a recovery back to the chinese buoyancy from years ago? kit: i doubt it. because the economy will not be

able to continue growing at that pace, i think we will settle into something that is probably much more range bound and difficult than the trends that we have had for so long. francine: -- tom: moved to new york. kit jack's. -- kit juckes. the bhanu baweja as well. brian belski will be with us. call, don'trful fear deflation. james sweeney will join us from credit suisse. this is bloomberg. ♪ .

tom: this morning, little to no in inflation.

hikes are pushed into deep summer, even toward september. after prime minister may's bombshell, this morning, sterling above 128 as the city scrambles to cover the sterling. president trump, what have you done? there are southern democrats in the state of georgia. good morning, this is "bloomberg surveillance" live from new york. i am tom keene. , everybody in the united kingdom feeling richer career francine, what was your reaction when you heard prime minister may's bombshell yesterday? francine: that she may be political savvy. she wants legitimacy. pressure within her own party and outside parties, she does gain fullegitimacy to

control and that is a fair perception and she thinks she can win it. tom: we will see. we will bring that to you. maybe she will have her cat with her. she feels so good for you first word news. vice president pence issued a warning to north korea and stood on the deck in japan and said all options are on the table. he also reaffirmed the u.s. support for japan. can rest assured the full range of the united states military capabilities is for the protection of japan. japan, you are our friend. you are our outline. on that foundation, we will face the future together. taylor: meanwhile, the u.s. aircraft carrier was not really sent to waters off of north korea. president trump said it was being sent to the region. instead, it it was south for

exercises. in georgia, a democrat narrowly missed winning a seat out right. won 48%.f he will face republican karen handel on june 20 doubt was princely held by tom price. may's call, theresa for early elections. the survey by icnde, gave conservatives a 20 point lead over labour. the house of commons is expected to approve the election. the richest person in the world spoke to bloombergtv in geneva. >> he is pragmatic on a lot of things. givingalking to him and him some background he may not

have had this past work, it is probably as important with him as anyone. he wants to be a leader. he wants to have things that he has accomplished. taylor: he indicated he is confident the president's proposed cuts will not completely make it through congress. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am taylor riggs. this is bloomberg. tom: let's get to the data. we will go to anna edwards and a. features are up seven. the curve flattening. -- we will go to anna edwards. the next screen. sterling, 128.35 is the lead story. a huge u.k. effect. francine? francine: i would point out to the huge you qe efax. european markets, trying to be

more cautious. -- i would point to the huge sterling effect. stocks are still rising. high loads declining. pound holding onto much of its games -- gains. tom: parliament will be interesting and historic. looknap elections, when i back to 1923, particularly rare. parliament, prime minister may on our way to parliament. we go to anna edwards. what will you listen for in the ceremony at the house of commons? what she hopes to achieve otherget a 2/3 obligor to mps to back her for a plan on election in june. it was quite easy for prime minister's to call elections at

the time of their choosing. but, it's got more difficult without fixed term parliaments brought in to give the coalition government and that seems to be thrown by the wayside. one of the clauses said you good to there's of the mps and you can go ahead -- two thirds of the mps a you could go ahead with an earlier election. the polls suggest they will go along with election. the dirty little secret, i would not know a liberal democrat if i saw one. are they part of the debate? anna: as are quite a where brief career there were more than 50 -- they are quite a rare sight. there were more than 50 of them. they were punished and lost so many seats and came down to 8 and now, nine. they are the closest thing and we do not know, the closest to a

vote you can get in this election of the three main departments. the three major parties. those are, of those three, the closest to a remains vote. we do not know yet. we spoke to a liberal democrat and they said they are still shaping a manifesto. out.were almost wiped could they be back as a bigger force? nobody is suggesting they will win. francine: you could argue the general election is a vote on brexit? you could argue this is another vote on brexit? faronin a sense, what tim is trying to turn it into. he is the leader of the liberal democrats. he said he wants something close to brexit.

it is not clear what they will say in the manifesto. when i spoke to a liberal democrat, it seemed they will be leaving to a softer brexit eddie -- and a leading to something more soft. tom: anna edwards. with me is brian bilski -- belski. mr. swinney, let me go to you. thisill the markets digest and what is this sense of their economic growth and also the inflation of the united kingdom? the immediate reaction to the brexit vote was expectations of a recession from short-term surveys. a sharp fall in the currency and you do not have such a bad growth. that growth has worsened so far,

you have moved toward hard brexit. it appears to be definitely happening. you can say this second vote is the brexit referendum 2, not really. it is theresa may looking for maximum negotiation leverage with the europe as she negotiates the brexit. i think the sterling depreciation is mostly about the u.k. getting a better deal for the u.k., a more prosperous u.k. tom: we saw the 10 downing street ballet, people pick up a phone and say i am watching "surveillance" and go to cash. yesterday was a perfect example of what you deal with with all of the news flow. .rian belski: good morning people may binary decisions, right? heading into this year, everybody was so convinced all of the policies that new administration were going to unfold and going to happen now

and everybody seems to think none of the policies will work. we are looking at the united states stock market that is up 4% in year to date. some of the comments and reactions, you wouldn't think the market is down 10%. we are looking and almost hoping for this massive correction in the market. earnings aret that pretty good and the company is pretty good, we do nothing we will see a big surprise. francine: james, going back to the u.k. and how you position yourself, is there a danger because the market was so positioned remains and they do not understand the rationale of brexit? they are hoping the market, this would somehow derail the brexit process. does it give hope that somebody could get in and will not have to go through with brexit at all? james sweeney: we have the french elections in between. that is a low probability

maybe this could derail the whole thing. it is a low probability. sense of what this vote is all about and it is about leverage for theresa may as she negotiates. i do not think the market is at risk of mistaking what is at stake here. low probability of disrupting the whole process. i think a higher chance of this impacts what kind of deal the u.k. gets and whether brexit will in fact be a bad thing for the country or not. francine: how do you differentiate? what will the markets listen to -- political risk mainly in europe or the $13 trillion gorilla in the room which is the balance sheets of the fed, boj and ecb? : people were looking for this reflation and it did not work out.

you are sent bond yields fall back down. we have seen a 35 year bull market in bonds and people are pointed to the bond market for signals. it ensure that things are slowing down. chasing the yield -- excuse me. the more defensive areas and we think it is shortsighted and reactionary. we think the economy looks darn good. yesterday, a decent day with worse that to earnings. again, you do the fundamental work. -- a decent day in respect to earnings. people were so bullish and got ahead of their skis and now things cool down. tom: participating in a bull market and james sweeney who has been brilliant about saying ignore the inflation fears. we will continue our discussion. we have not talked about the reset, i want to talk about

that. on friday, francine just off to washington and i will greek term with the meeting -- and i will greet her with a meeting of the world bank. we have a list of guests and these are 4 people who will join us on the president and world economy. this is bloomberg. ♪

foreign -- taylor: i am taylor riggs. business flash. toeurope, car sales rose their highest level on record. sales were up 11%. away marketers took share from the regional leader, volkswagen.

the ceo of verizon is ready to make a deal. he said is considering bring mergers to reset the course of the company. he would be open to talks with comcast, disney or cbs. it is the largest u.s. wireless growth and is looking for sources of growth. meeting atsters are the petroleum meeting for -- forum in abu dhabi. they said inventories needed to fall. >> [indiscernible] it took a long time and i think it is going to take a long time to -- [indiscernible] taylor: that is your bloomberg business flash. tom: thank you. brian belski with us.

and james sweeney with us. i want to do something i have not done in ages talk about the said. -- the fed. i never do this. i did not do this with ruskin's chart. this is the function and the bet for september. this gradual roll over and change is a big, big deal. game.rlor we are stretching things out, aren't we? >> yes. i think the fed surprised the market with the march hike, that was not expected until six before. there was upside noise in inflation earlier in the year. tom: right now, we are doing this. >> in the last few weeks, we got a significant downside and we'll of seeing global growth start to

slow a little bit. now, the mood is switching in the opposite direction. we think the fed will wait until september. june is a close call. a very close call. the fed seem so confident in their view, they are talking about three more actions for yellen leaves. tom: i do not see that on the bloomberg. >> bloomberg has not expected it. tom: was your head is spinning on the data? it sounds like bad balance sheet for how does an equity guy simplest size -- simplify the latest jargon? >> what happens in terms of the fed has to do with some of the rhetoric coming out of washington and not giving potentially the tax cuts even in august. the september, fed meeting.

that is why you have seen a slow down with what happened in bonds. this big move in premiums without really earnings growth. now, you are left holding the bag. when you think about it, if you are a company, you have an incentive to start growing and investing a you do not know what your tax rate will be? no. that is why everybody is freezing and relying on strong operations. francine: why hike? if you are the federal reserve, correct me if i am rogue, they are looking -- wrong, they are looking at data and they said labor, theya and seem to build up half unless something ugly happens, they --l hike and continue hiking they seem to be saying unless something ugly happens, they will hike and continue hiking. >> ceos have been squeezed and

only had cheap of to deal with and not this notion of the potential of fiscal responsibility whether new health care bill and or tax cuts . again, the fed will continue on , threeh, maybe three will need to see a lot stronger growth with percent -- with respect to gdp. talk to mr.nt to belski about the disappointment from goldman's taxi yesterday. correction, francine will be with me in new york tomorrow. i did not know that. everybody knew that but me. what is up with that? make sure to bring prime minister may with her. on friday, we will be in washington with arguably our the important conversation,

peterson institute. this is bloomberg. ♪

tom: "bloomberg surveillance," francine lacqua in europe. georgia in the united states of america, your president was tweeting out at midnight. camusso really was the first to repeat the tweet. here it is. -- kevin cirilli was the first to repeat of the 20.

the tweet.t joining us is kevin cirilli. help our global audience, why do i care about a runoff election in georgia? the seat, the former home of tom price, the health and human services secretary. it was a special election run in and a primary of sorts order for there to be the general election. democrats were hoping they could ride anti-trump sentiment and make the case it was part of a new trend in which they would be able to rally the troops heading into to 2018. however, you now the situation where the republican outcome was

better than they expected and they will be facing him in a general election. i spoke with the head of the ncts and she told me -- r and told me is not to be considered a bellwether. tom: you are no sound n -- sam nunn. help me with democrats in the southern u.s. there was a guy who was a personification of southern democrats. are there any democrats left in the south? kevin: i am old enough to remember former president president clinton. that kind of brand worthy were able to win over democrats in the south and reagan republicans , reagan democrats and some would call them trump them overrats, those who passed to vote for president trump, that's a type of brand they are hoping to win back in 2018 and

2020. ,rancine: if we brought in out does this election were republicans and impact trump? kevin: no, it is one a seat. come back next week. sources are telling me they have to get something done in the first 100 -- 100 day mark and he cannot keep doing executive orders like he did yesterday. francine: thank you. we will be back with brian belski and james sweeney. we will speak with a managing director. this is bloomberg. ♪

tom: "bloomberg surveillance," francine lacqua and london and she will be with me tomorrow. brian belski and james sweeney.

we were talking with kevin cirilli. tol sing those spread market where we were novick -- we have seen the spread market to where we were november 8. >> heading into the seasonal period where things slow down. mann,ot wait until sally -- ellie mae or whatever. -- sallie mae or whatever. a big move from the election, things will cool down. until we got more direction from washington and the fed am a it would not surprise me to see cooling down and we will need it. absolutely, why you should be a stock picker. quickly, i do not get gdp under 1%, macro economic advisers have a condition for the second quarter. how does a giant $17 trillion

3%?omy go from sub 1% to >> do you really want to know? inventories, trade, consumption is 70% of gdp. q2 is likely to bounce it back. i do not know about 3.6%. it is likely to be higher. the global data and focus on manufacturing and trade,ly and trade, -- the very end of last year and this year and that is rolling over. i radically, u.s. gdp has had the bad quarter but global industry production is at a peak in the first quarter and rolling over. i think that drives the markets. i think what will send the softness in commodities is more to deal with that. tom: i can make a chart of

tomorrow. we will give james sweeney credit. all of the credit goes to tailor riggs. -- taylor riggs. iran tiese u.s. said to terrorism could scuttle the deal. rex tillerson said they are agreeing but they are a leading sponsor of terrorism and a review will see if the sanctions are vital to u.s. interests. two russian bombers flew with in the u.s. alaskan coast. the air force scrambled intercepted the russians monday night after the american plains flew alongside for several minutes. the russians broke off and returned. there has been almost two years since a similar incident. global news 24 hours a day,

powered by more than 2600 journalists and analysts in more than 120 countries, i am taylor riggs. this is bloomberg. powered by more than 2600 [no audio] francine: the estimate was $4.89, it has missed for the revenue, net inflows. i am excited because i know we will speak later on to larry fink of black rock. i would ask about mergers and acquisitions. black rock was a star performer for a long time, a tough business. my number one question to him, do you need to get bigger? tom: and this raging battle particularly in london over how the buy side will move forward, and alsovogel debate security research will be compensated in the future. you are dead on about m&a.

francine: erik schatzker will interview larry fink in about 20 minutes. their revenue missing estimates in the first quarter. much of the debate in europe over greece's debt crisis is the involvement of the imf. there's another institution, the urine debt european stability -- europeantablish stability mechanism established in 2012 to help troubled countries and the bloc. 2015 to theout in tune of 86 billion euros. we are joined by a stability mechanism managing director, klaus regling. thank you for speaking to us. how do you see greece unfolding? when will it have a near final resolution on greece? klaus regling: good morning. greece is an ongoing story.

greece has received loans from european partners since 2010. we have always dispersed 190 billion euros to greece. in the third program which is 86 billion euros. we have dispersed and this program, 31 billion euros. we have another 15 months until august of next year. we are in the middle. we are talking about the next disbursement and the imf is looking at the situation and we are hoping there will be an imf program in parallel with the current program. francine: what is the biggest financial stability risk to the eurozone right now? we are looking at italian banks, greek banks, brexit. is there something you worry the most about? klaus regling: no, there are risks. brexit is not really a risk.

the u.k. is a member of the eu right now, but not member of euro area. for the euro area, it will have a minor impact. you mentioned italian banks and the greek banks. with are issues here handful of italian banks. it is not the italian banking system as such that is in trouble. that is very different from where we were 5, 6 years ago. europe has come a long way. their political risks which markets are nervous about. elections are always an important event in a democracy and they happen. some elections have gone well recently like netherlands despite the worries we had earlier. a presidential election a few months ago where pro-european candidate won. i am optimistic about the french

election next sunday and the second round. the markets have to price in the risks. francine: your fund, probably the most controversial thing in europe, will your font issue euro -- fund issue eurobonds? a lot of people want to see and a lot do not want to see it. well, that is several questions in one. on eurobonds, in a way, what the ecf has done is to issue eurobonds because we issue on behalf of all euro area countries. often, euro bonds are met on a different way. that is where the controversy starts and i do not expect that in the near future we will have a situation where one institution will issue bonds on behalf of the euro area countries. that is not in the cards. tom: klaus regling, focusing on

the little g in economic. economic growth rate. taylor riggs reported on terrific auto sales in europe. is it the big surprise here is a gift that will keep giving for you and the other elites in europe will be brand-new economic growth that will save the day? and save the day for the ecb? klaus regling:-europe has been on a better track then often recognized. in 2017, the 50 year of positive years,and the last three growth in the euro area has been above potential. if i take off the differences and demographic trends between europe and the u.s., gdp per capita growth in europe is again exactly at the same speed as gdp per capita in the u.s. , i have been looking at

it for quite a while and i am not surprised. we are happy the imf revised growth of. , that is good. there are other positives not rightly recognized. gdp per capita and we have the in the world. a lot of people benefit from growth then -- then china. all relate premarket is a lot better because of the employment rate is a lot higher than 10 years ago. news and a lot of good i think it is coming together. tom: it has been a real shift. klaus regling, thank you. ahead of the world bank and imf meetings. he is with the european stability mechanism. with us is brian belski and james sweeney. thepe simply, you look at

data and you think the world is coming to an end. the great auto sales. >> the unemployment rate falling 80 basis points a year. labor income strong. banks are lending. fiscal headwinds are going and the euro is lower. we have had problems and the u.s. with the dollar strength. tom: i know you are american centered, european -- canadian centered. help me with european stocks, you go by the greek mythology, they pay a high dividend. or are they? brian belski: that is the thing. do you believe that cash value or book flow and that denominator and that has been the big problem with european securities. you can say europe is cheaper in relation to the u.s. given the fact we have declining inet, just as an aggregate

terms of percentage in the world as sloan demographics is an issue. i think europe will have a problem with political volatility over the next few years. francine: thank you so much. coming up on friday on bloomberg tv, live from washington with the european commission and he is in charge of monetary affairs . look for that and 9:00 a.m. in new york. that is 2:00 in london. this is bloomberg. ♪

taylor: i am taylor riggs. bloomberg business flash. a long dispute between you as a canada over lumber is heating up

and home builders could be the losers. woodl expiring increasing prices. homebuilders may pay more for lumber. reports of that fox news has anchor bill o'reilly leaving the network over allegations of sexual harassment. o'reilly's lawyer said he is targeted by liberal groups who want to offer the air. that is your bloomberg flash. francine: thank you. let's get to klaus regling. ,e were talking about greece when you saw the deadline and when we will have a resolution. what the market wants to know, when will you reconcile with the imf and actually decide together on proper debt relief or not for greece?

will it happen in the next six month or will it take a lot longer? at theegling: we are phase when we have to decide on our next disbursement. the imf is looking at the possibility to have a program in parallel. on the debt side, the first thing to remember is a lot has been linked to greece. the previous debt relief has tremendous savings every year, almost 10 billion euros which is 6% of gdp. the europe group, the finance ministers of the euro area, decided in 2015 what to do over the next two years and they made it very clear that it would be short-term debt relief measures. we are implementing them right now. at the end of the program, which is the summer of 2018, there could be medium-term debt measures and a specified in a statement but not defined it. that can happen next year if

there is a need and reforms continue. and a third element, a long-term element, which i think for greece is important because we are looking at a very long time frame. ,he euro area said the long run additional debt relief is possible if needed. i think that is a useful commitment. uncertainty is very high. francine: do you think the french elections can hurt greece more if there was a candidate not as european as macron? germany is weekend and further bailouts would be more difficult to come? : there has been tremendous support and solidarity for five countries over the last few years as a result of the crisis. greece is the last of the five countries where money is still needed and maybe debt relief measures could become possible later next year.

i do not expect any problems in to euro area to live up those commitments. i look forward to the next french government and i am sure if they will cooperate well with the other euro area countries. -- we're ablectly to live up with what is needed. sometimes it takes longer. knowing that 19 democracies have signed it confuses that can take a bit up -- a consensus and -- we can do it. the problem for international investors, they think sometimes the eurozone is slow. you think the bella regime was is assessed. if something ugly were to happen, could you shorten the time to deal with the problem? klaus regling: a little bit, yes. my institution is up and running.

when the crisis started seven years ago, that had to be decided first and it took a while for a new institution. that will help speed up with the process. one has to be realistic. 19 democracies, when they have to deal with a big problem, they have to discuss it with their polymers and public opinion and find a way to compromise on many things. it takes a while and democracy. it is unavoidable. it's a little bit faster. -- it takes a while in a democracy. expect do, but do not democracy take some time. tom: dr. klaus regling, thank you so much for your -- so much for your time. if you have a bloomberg, you can watch us. it is in real time. you can go over here and dragged over our peace, as an example --

piece as an example -- well, it is not dragging. anyway, there it is. tv on bloomberg. ♪

tom: foreign-exchange will or it. the sterling report. -- foreign-exchange report. a lower number is a stronger sterling. .837. remarkable movements in sterling with the pageantry going on. with alixcoming up steel, david westin and jonathan ferro, you have a great interview coming up with a larry fink. alix: larry fink of blackrock after a really good earnings, beating, it was the record etf flows we want to highlight. fee-based is what investors are rotating towards. that is the blackrock story. what is the bottom four in u.s. 10 year yields? that is all i want to know.

tom: a really interesting diversions. james sweeney, what is your answer on it? james sweeney: i think there's a lot of geopolitical risk that consent is below 2%. i think in the absence of a shock, 10 or 15 points ally or. tom: we have a show this chart many times. because a longw series back to 1900 with the depression over here on the left side. we are not in a great bull market, brian belski. the great bull market. the most unloved bull market ever. brian belski: the most hated every. it is amazing. tom: what you hear to client? : retail has not played along. maverick is not engaged. institutional people only care about monthly and weekly returns . the majority of our meetings

talk about activism path. tom: how do you respond? : remember, interest rates are at a near record low. we need to start rolling our earnings again. tom: the underpinning, alan greenspan would say, a huge statement on the confidence of the u.s. economy, can you make the same linkage as chairman greenspan? yes, as a general point and i think earnings have taken a big hit from the capx and there is a rebound going on now. rally does recent reflect expectations of tax reform and these other things. and, it's a little difficult. above trend and i use real equity returns long-term is above trend but not far above

trend and not bubbly. that is where we are. we are in a bull market that can go further. tom: this is so important orause we have to be three four standard deviations above trend and the fact is, we are not. francine: you are right. a point our viewers, we are expecting morgan stanley earnings. it comes later and these numbers just coming in. billion for the first quarter. the estimate was 9.2 billion, a little better. little bit like goldman sachs, really needed to break it down. equities is morgan stanley's big business. we need to see what they unit is. yesterday, goldman said they could have done that are in fixed income and let's see if

morgan stanley says the same. tom: we have the press release and they say -- rather emphasizes may be goldman sachs and you wonder what happened to goldman sachs and maybe we will learn in the coming weeks. it is been wonderful two hours of "surveillance" as we go to radio. brian belski and james sweeney, way toou kit juckes, early to come on the plane. tomorrow in new york, our special guest will be francine lacqua of bloomberg surveillance. a few other guests on friday. this is bloomberg. ♪

jonathan: inflation trade

continues to bleed. suffering from election fatigue. if you are, look away. prime minister may looks for a snap election. morgan stanley wraps of earnings on wall street with a big beat. good morning. i am jonathan ferro alongside and alix steel. let's begin with morgan stanley. alix: it is hard to find a negative in earnings. $9.7 billion. trump to higher than last quarter and highlights goldman's miss. equities coming up big about $2 billion. 10.7%, high in target for the end of the year is 11%. jonathan: the stock is up. this