islamic state claims responsibility for the killing of a policeman in paris. marine le pen is due to speak this hour. does this strengthen her hand ahead of this election? heading for a stock shock, says the fed, and investors should be valuations.rrifying is a crash coming? and deutsche bank busted. thegerman lender becomes first to be fine for breaking the volcker rule. this is "surveillance." i am mark vernon -- mark barton.

later, we will speak to the former cbi director general, digby jones. if you have a question for our functiono to the ib and message show producers. european equities a day or two away from the french election, stocks little changed. the stoxx 600 on track for its second weekly drop, the worst since november. and melenchon pen one and two, that could spark a 5% or 10% drop in european equities. the euro is up against the dollar today, steady after the shooting on the shaanxi laissez elysee.e champs french presidential polls are tight. the euro could go to one dollar or below after the second round of the election.

the french 10 year yield is falling today, down by four basis points, the lowest level since february 27. it was at a 17 month high in february, in the levels of heightened concerns about a marine le pen victory. lower today, and on track for the first weekly drop in six. a five-week winning run was the best since july. let's get the bloomberg first word news with nejra cehic. u.s., deutsche bank has been hit with the federal reserve's first major to assureailing traders abide by the volcker rule behrmann risky market bets. the company will pay even more for letting currency debts -- traders chat online, revealing positions. almost $157 million in fines fault lax oversight last year. the trump administration is aiming to complete the u.s. tax code since the reagan era by the end of the year. treasury secretary steven

mnuchin says the reforms will go ahead even if a second attempt to repeal the informal health care act fails. he says the administration's priorities are to simplify personal taxes, create middle-class tax cuts, and make business taxes competitive. steve: a big priority for the president will be to get tax reform done. it will be sweeping. it will be significant. and it will create a lot of economic growth. japan'she bank of government has set the central bank will continue with very accommodative monetary policy, and maintain the current pace of asset purchases for some time. kuroda told bloomberg that while japan's economy is doing better than thought a few months ago, the inflation rate remains sluggish. kuroda: we think the current ase of purchase, as well monetary base increase, will continue for some time. nejra: german police have

arrested a 28-year-old suspected of carrying out a bomb attack close to the coach of the dortmund football team. prosecutors allege that the suspect, who has german-russian citizenship, bought 15,000 options on dortmund shares on the same day as the blast. global news powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. expecting a statement from the national front leader marine le pen imminently. meanwhile, the police -- the murder of a policeman last night is forcing leading candidates to cancel campaign events ahead of this weekend's french presidential election. theothers were injured in shooting, which the french government has said it is treating as a terrorist incident. let's get the latest on the situation, how it could affect this weekend spoke. caroline is in paris for us. what do we know about this incident? the attacks know

happened shortly before 9:00 p.m. last night, near the top of the champs elysee. at least one man pulled out of the car and started firing at some police officers who were patrolling in the area. they were actually in a van. he killed one of the police officers, injuring seriously the other one, but we heard from the prime minister that the life of the second police officer was not in danger anymore. then, the attacker went on off dead by but he was shot another policeman. the islamic state quickly claimed the attack. initially, it said this was the result of -- the attacker was a belgian citizen. however, prosecutors have identified the man as a 39-year-old who was born in an eastern suburb of paris. we just learned from afp that three people known to the shooter were arrested, and we actually also heard from the ap

earlier that francis also hunting a new attack suspect, based on this belgian alert. of course, the investigation is ongoing, and the prosecutors of paris should give a small details on exactly whether this attacker was just a lone attacker or whether he had any compasses. mark: just to reiterate, we are awaiting that statement from marine le pen. how have the candidates responded to the events of last night? technically, the campaign is over, mark. the campaign was supposed to be over tonight at midnight. this is the deadline for campaigning, rallies and interviews. today, the candidates have canceled all the rallies, after this attack last night. now, in the mind of the french people, this could create an emotional last-minute change of their vote. obviously, the newspapers in

paris ishis attack in on the front page. every newspaper has it on the front page. terrorism will be the focus in the next couple of days. pen already reacted last night on television and on twitter, saying that we should not live -- should not leave our country to our children, a country that cannot protect itself, and we should not be naive in the fight against terrorism. we remember, of course, that after the marseille arrest a couple of days ago, these attackers were suspected of potentially planning an attack against the campaign. marine le pen has already said this was the result of islamic fundamentalism. obviously, in this press conference that should start any moment now, she would probably and refocus her campaign on her base, on the far right wing fight, and her

rhetoric against immigration and against terrorism. ink: thank you for reporting from paris. bloomberg will bring you all the election action as it happens, and special programming sunday evening. tune in to bloomberg television and radio for "france decides," it :00 p.m. paris time, 7:00 p.m. in london. olini, aing in luca pa fixed-income strategist. the deadly paris attack adds another layer of uncertainty onto an already very uncertain election outcome. luca: obviously, there are four candidates, and just three go to the second round. any combination is possible. it would make all the difference for markets. in italy, we do not know. the polls are very tight and we can only wait. throughuld you run us some of the scenarios? i have read all sorts of scenarios in which ultimately

depend wins, we see a big selloff. this weekend, let's say we get a le pen, melenchon one, too. i have seen 10% declines in equities. what is your best case scenario for the various outcomes? luca: i think an outcome with 5% or 10% is possible. european equities, about 5% or 6% this year. i expect the euro to fall, potentially to parity. then, you have the second round. you have the reelections in june. everything could change very quickly. but the first reaction would be very bad. pen: if it is macron and le , with the margin tightening -- any could proceed to the final round. if micron has a sizable gap and le pen remains around 24%, do we see a rally on monday -- on monday? fia: as long as macron and

llon make it to the second round, this would be a good reaction for markets. but we do not expect a rally in case of a positive outcome. there is some momentum on the way down. mark: are you holding your core on european stocks ahead of the results? is there reason, putting the election aside, as you say, given the gains we have seen this year, to be fairly optimistic on the outlook for european stocks? luca: it is a very positive economic backdrop. recently to done is to look at european equities because of the elections, but we are not going to change completely because of that. entering a $12 european equity position in case there is stress on the markets in the next few weeks.

mark: back in a second. let's get the bloomberg business flash. here is there a change. nejra: a billionaire investor has a message for janet yellen and investors -- be very afraid. the macro trader says that years of low interest rates have bloated stock valuations to a level not seen since 2000, right before the.com bubble burst. bubble before the dotcom burst. at a press conference, jones said the stock market relative to the size of the economy should be "terrifying" to a central banker. first-quarter revenue growth below estimates as setbacks in visionnd its shoulder weight on results. the sales were flat. total revenue in the quarter nevertheless matched estimates at 2.60 4 billion pounds because of the currency benefit. reported prillaman are

operating profits in the fiscal year of $2.6 billion, well ahead of its earlier forecast, with strong performance across most businesses, including games, and cost savings and ships. it said net income would be more than twice the previous forecast. that is the bloomberg business flash. mark: a host of global leaders have been talking trade. yesterday, canadian prime ministers justin trudeau called for more of this. christine lagarde warned against anything that could jeopardize it. the u.s. national economic council director gary cohn said the trump administration is prepared to pay this play hardball to narrow america's trade deficit. gary: we are in favor of progressive trade deals. we will be looking at how we can participate in that, how we can continue to support the growth of trade, and how it can be done in the most efficient, fair, and global way as possible. gary: we would prefer that we have free and open trading

porters. but if you want to insist on having a tariff on a product, the president believes we should treat you in respectful fashion. christine: that implies a level playing field. .o use of assorted measures and no protectionist measures going forward. in: we are always looking for good trade deals for canada. i think as we move forward in what seems to be a post tpp world, we are interested in continuing to grow our relationships of asia, and look at how we can pull together. jerry: we have to export more to them, so that trade deficit narrows, and there was quite quickly. mark: still with us, the chief strategist at an asset management. clearly, the threat is still there. america could levy tariffs if necessary. but there is still a desire among global thinkers and leaders such as madame lagarde

and mr. trudeau to keep trade as open as possible. how confident are you, given this new administration, that free, open trade will continue? luca: first of all, let me say demonizationd of threatens us already in 2009. this is nothing really new. is, wey thing i can say have to see what the trump administration will do. this is exactly what we don't need at this stage. we have still low growth globally. i think if we start trade restrictions and everything, we will enter stagflation. it is too early to stay -- to say. if the u.s. economy weakens, the risks are much higher, because the trump administration will have to do something to improve the situation. it is too early to say, but i think the risks are probably five. i think it is probably already priced in. this ise you feeling

global, synchronized upswing in growth? that is encouraging, isn't it? luca: it is, but we are pretty much in the same range of the last five years. we see investment which is very positive. but we are still in the slow growth cycle. what has changed is that growth is now synchronized, and not just in the u.s. it is europe, japan, and emerging markets. mark: which gives central banks space to maybe put their foot on the gas, to use an analogy used by fed chair janet yellen. the fed clearly is already on that path. how soon before the ecb and other central banks like the boj -- we spoke to mr. karate yesterday -- follow suit? luca: i think for japan and europe, the output gap is much bigger. there is more time for the central banks to react. i think the ecb will not do anything until the end of this will and the bank of japan

probably continue to do what they have been doing. i think this kind of monetary tightening -- we see it in the u.s., but slowly. into next year, the ecb will take part. mark: our interview with corroded giving the japanese stock market a boost yesterday. he said they would remain accommodative. just getting some headlines from france. marine le pen his giving -- is getting a statement. you know, the campaigning has ended, and marine le pen is , inking right now in paris the wake of last night's deadly terror attack -- what is being called a terrorist attack on the chantilly-- the champs elysee. we will keep an eye on what marine le pen is saying that statement. back to emerging markets. it has been a fascinating to virgins in performance between em stocks and bonds and develop stocks and bonds this year.

can i continue? what is behind that outperformance by e.m. assets at the start of 2017? of investors lot were actually very bearish on yen, and we are seeing a very strong lead, especially from asia. --s was very reassurance very reassuring. for emerging markets, if the dollar gets weaker, it will run quite well. with this recovery, emerging markets will tend to do well. it is a combination of valuation and global growth. mark: marine le pen is speaking in the wake of yesterday's terror attack, what is being called a terror attack, on the champs elysee. a policeman died. two others have been injured. for complete coverage of the french presidential election first round, tune in to

bloomberg sunday night for a "france decides" special, beginning at 8:00 p.m. paris time, 7:00 p.m. in london. ♪

mark: national front leader marine le pen in paris, giving a statement in the wake of yesterday's terrorist shooting on the champs elysees. resting all on the security risk list. she is asking for french borders

to be restored now. this is among her campaign pledges. she said the paris shooting was a new act of barbarism. she treated her support last night of the french police. one policeman is dead. two others have been injured. we will continue to monitor marine le pen's news conference ahead of the french election first round on sunday. be very afraid. that is the message billionaire investor paul tudor jones has four fed chair janet yellen and investors. the legendary macro trader says that years of low interest rates bloated stock valuation to a level not seen since the year 2000, right before the.com bubble burst and the nasdaq tumbled by 75%. the s&p 500 now trading at about 22 times earnings. scott minogue said he expects a significant correction this summer or early all. philip yang, a macro manager who has run the willis bridge -- willowsbridge associates, sees

a stock fall. -- be afraid. are you afraid at some of those warnings? is true especially in the u.s. that equity valuations are pretty much at the same level as 1999. we can look at the gdp. bond yieldst forget are much lower than in 2000. i do not feel there is the same level of bullishness in the market among investors. , thatverybody is bullish is when you have to be really worried. and i do not think we have the same situation now. bond yields are remarkably know -- or markedly low, given the rising interest rate environment. is the bond market right? what is the stock market versus bond market face-off telling us? luca: i think what it is telling us is central banks will be behind the curve. they will not take the risk of hiking rates too early.

, withields in the u.s. inflation rates, yields are pretty much negative, which is very strange. but the fed told us they do not want to take risk. and it is the same, actually, in europe, japan, and the u.k. mark: are you going for two more this year, three with the. projection? luca: in the u.s., it is going to be weaker. we have seen it peak of momentum, inflation is speaking. to monitor the situation. in the last few weeks, it has been clearly weaker in the u.s. mark: steve mnuchin's timing of tax reform yesterday -- the trump reflation trade seems to be running out of momentum. is that encouraging, the prospect of tax reform in 2017? or do we now take everything that the administration says with a pinch of salt? yes, it might happen, but timing

seems to be beholden to many risks. luca: i think the failure will repeat of obamacare, of the trump administration wanting to look as though they are doing something. they will announce something particularly big without thinking of how long it takes with congress. i would expect a tax package. probably, it is not as big as the market expects. i think it will help the u.s. economy more next year than this year, but will be a positive for markets. mark: but you say the dollar has peaked? too: we think the dollar is expensive. at the end of the day, the u.s. economy is not outperforming even european economies. everyone seems to be bullish on the dollar. we feel the evaluation is too high. momentum in europe is stronger than in the u.s.. from that point of view, we feel the dollar may decline over the next few months and the next few years. mark: look to buy the euro, sterling, and swiss franc? luca: yes, we are still

overweight the euro. the pound has had a big rally. if we go about 1.30, we are probably going to sell. but the dollar has weakness which is not tactical. it will be protracted for the next two to five years. mark: good to see you. luca paolini, a chief strategist. camera republican francois theon make the top two in nailbiting first round of the french presidential election? we speak to a business leader who is backing him. ♪

mark: you are watching "bloomberg surveillance" in london. here is nejra cehic. nejra: and france, the murder of a policeman on the champs elysees has forced leading

candidates to cancel campaign events. islamic state has claimed responsibility for the attack, which left two others injured. the assailant was shot dead during the incident last night. the shooting came three days before the first round of voting in one of the most tightly contested presidential elections the country has seen. in the u.s., deutsche bank has been hit with the federal reserve's first major line for failing to assure traders abide by the volcker rule am on risky market that's. the company will pay even more for letting currency desks chat online with competitors, allegedly revealing positions. the simultaneous sanctions total almost $157 million, the fault of lax oversight that persisted into last year. the trump administration is aiming to complete the biggest overhaul of u.s. tax code since the reagan era by the end of the year. treasury secretary steven gochin says the reforms will ahead even if a second attempt to repeal be a portal health care act fails. he says administration priorities are to simplify personal taxes, create

middle-class tax cuts, and make business taxes competitive. german police have arrested a 28-year-old suspected of carrying out a bomb attack close to the coach of the dortmund football team. prosecutors allege that the suspect, who has german-russian citizenship, bought 15,000 put options in dortmund shares on the same day as the blast. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. mark: retail sales data crossing the bloomberg. the largest decline in seven years, and the first quarter. consumers very much feeling the pinch of accelerating inflation. the volume of goods sold fell 1.4% from the previous three months, the most since early 2010. in march alone, sales dropped , seizing the -- exceeding

the 1.5% forecast by economists. the economy relies heavily on consumer spending. growth almost certainly cooling in the first quarter. it is expected to slow further this year, putting pressure on the bank of england's key rate. duringsales last decline a quarter in 2013. the sales weakness seems to be a consequence of price increases across a range of sectors. consumers also face a period of heightened political uncertainty after prime minister theresa may called a surprise general election. it is a bid to strengthen her hand in the coming brexit talks. the pound coming down against the dollar. u.k. retail sales, the biggest quarterly drop since early 2010. the bank of japan governor says he will continue with accommodative monetary policy, and the current pace of asset purchases, for some time to

come. lacqua, to francine kuroda said even though the japanese economy is growing, geopolitical risk could affect the yen and inflation. kuroda: this is a political issue. certainly, in the past, whenever we had some geopolitical risks ,ising, the yen appreciated making our policy more difficult than otherwise. at this stage, i don't know. it can move depending on various factors. geopolitical risks, but other kinds of developments. so i cannot say anything about , if generates movement geopolitical risks escalate. help melp -- francine:

understand -- if you goes higher from here, does it hurt your inflation forecast? know, our you may inflation forecast is based on exchangeption that rates would not move much upwards or downwards. if the yen depreciates, then of risee inflation rate could . and if the yen depreciates, the inflation rate could -- could decline. that's true. say our inflation forecast. it is based on continuous improvement in the labor market, continuous improvement in the output gap -- which is quite certain, because the 1.5% growth is our economy is doing

potential growth rate. the labor market will continue to tighten, and prices would rise in wages would rise. it could affect the inflation rate in the short-term, but basically, we see that inflation rates would gradually go up, reflecting an improved output gap. mark: the murder of a policeman on the council is a -- on the champs elysees last night has first candidates to cancel events ahead of this weekend's french presidential election. let's get more from caroline connan, in paris with a guest for us. caroline: of course, the big question today has been how this attack will impact the presidential elections in france on sunday. to discuss this, i am joined by

a fillon supporter. good morning. he is also an entrepreneur. attack impacting this campaign? how can it change the game? >> who knows? this is it is true that back in the field, the activity, and the french people are reminded that france is at war -- out oregon's the islamic at war against the islamic state, even within our own borders. francois fillon was one of the first to write about that, his famous book "how to fight islamic totalitarianism" has been a best-seller. it is a way to fight this, outside and inside, and maybe help, a little bit, on sunday.

christine: -- caroline: you believe this could help francois fillon? >> it is a bit difficult to say that. it is clear that this subject has been well tackled by francois fillon, when compared to the other candidates. caroline: arguably, we could say this would also help format candidate marine le pen. she is just giving a press conference. she said that french prisons have become jihadist trading camps. she is also calling for the immediate deportation of all french people on the security lists, and wants to restore the french borders. do you think this is going to benefit marine le pen? >> possibly, also. again, there are the economic subject. france.e subjects in these attacks we are getting for

now a month -- remember, we had 240 people killed in paris 18 months ago. it is a real subject. marine le pen has extreme measures. francois fillon is a more realistic vision. he wants control of the national borders, of course. heads ofto convince states and governments in the european union to have real frontier is at the frontiers of europe and the union. and he wants, also, more flexibility to build an international coalition and links with russia, in syria, and iran, to fight this islamic state. caroline: however, don't you think this goes to creating , this possible terrorist? we know in marseille, their

newspapers showing francois fillon on the front page. >> they hate him because he has the most realistic plan to get rid of this islamic terrorism. it is not a surprise that it is a target for them. caroline: does that mean we aren't going away from an idea melenchon in the first round? is that killing his chances? >> i think so. this would be understandable, excuse me. this is stuff about melenchon. france and french citizens are very concerned about the security. we have to restore economic order in france. of course, i am a supporter of

francois fillon. if he is ready, he has the only plan for these major issues. the first round on sunday. thank you very much for being with us today. the republicans candidate, francois fillon, could come back after this attack, in his campaign, and how a new opportunity to get voter support in the first round. mark: thank you, caroline connan in paris. for coverage of the first round, do tune into bloomberg on sunday night. atance decides" beginning 8:00 p.m. paris time, 7:00 p.m. in london. next, the weeks big brexit news dominated by theresa may calling a snap general election. we get the thoughts of a former cbi chief and trade minister. ♪

mark: welcome to our weekly brexit show, live from european headquarters in london. i am mark barton. frexit news this week dominated by one story, prime minister theresa may and the surprise general election three years before it was due. pma: i have just chaired a meeting of the cabinet, where we agreed the government should call a general election, to be held on june 8. for welcome the opportunity us to put the case before the people of britain to stand up against this government and its failed economic agenda, which has left our nhs in problems, left our schools underfunded, left so many people aside.

we will put a case to the people of britain on a society that cares for all, an economy that works for all, and embrace bracelet that works for all. >> this is the biggest political u-turn in recent history, but it is a decision the prime minister has made in the interests of her own party, not in the interest of the country. theresa may clearly sees the opportunity, given labor's total crush theto opposition, get rid of anybody that disagrees with her, and give herself a pretend to move the country in an ever-rightward direction. >> this is an election that gives britain the chance to change direction, an opportunity to vote against a hard brexit, and i believe a majority of the people join with me and hoping to keep us in the single market and to make sure that britain has a strong and deep opposition , which labour currently do not have, and you will only have with the liberal democrats. >> our guest campaigned on

behalf of u.k. businesses. after leaving the cbi, he was made it here and served as trade and investment minister in the u.k. government. he is a strong supporter of britain leaving the e.u. lord digby jones, are you surprised as we are by the snap election? >> britain likes courageous leaders, and i think if i could use the word cajones, she has some courage. mark: what brown could have done. digby: she wants to be elected by the country to be prime minister, as opposed to nominated. i think she sees in 2019 -- the election would have happened in 2020. she has to come back to parliament. just watching your clips, the andcrisy of nicola sturgeon

the liberal democrats saying, she is playing party politics. what they would have done to her in 2019, with the election a few months away, would have been pure party politics. so the hypocrisy of that. she wants to avoid that. i think for the country, to give -- the french negotiator for the e.u., where he cannot say to her afterward, you have not got the backing of your country. in negotiation, it makes it easier for her. the bankingthat commission would have changed thanks, and it would have made it easier for the conservatives. in 2020.d have done she is behind because of that. placesy, in a lot of where there remain constituencies where there was a remain majority in the referendum for brexit, they will have to think, do we vote as we would have done, tori? or do we vote liberal, not labor?

it would be a great night for the liberals. -- that wasrals hugely brexit because of the fisheries policy. -- : and scotland digby: i do not think they will be 56 out of 59, i will say. but the -- she will campaign as a unionist. will drop down to about 48. what happened i mentioned in all of that? labour. i am the only minister in the that has never belonged to a political party. what i'm saying is not politically biased. they have a real problem. mark: is this 1983 or not? digby: at the end of the day, can an ordinary, conventional labour voter see jeremy corbyn leading the nation, having to press the nuclear button, having to commit -- mark: leadership, leadership?

digby: i think he is a very genuine, very straight leader of a movement. partyed against his own more times than david cameron. at the end of the day, the guy is legit. he is straight. but he is no leader. i think she is not going to get the landslide. i think she will get about 58-60. i think it is enough for a mandate. but if it was not brexit, if it was on conventional everything else issues, she would be into about 120, 130 seat majority. brexit will bring it down, not up, because of this remain issue , where people want to go liberal. where ukip would eat into the north with brexit, against labour, they will not do that anymore, and they could just vote tory. be deaf.s could just down in other places, the

liberals will be labour in a remain constituencies. i think we are facing enormous issues. a lot of this will please theresa may, a lot of this will please liberals, and maybe it pleases greens. mark: this week, there has been great debate about what a large majority means with regards to brexit. some have suggested it means we are stuck with the hard version. some say maybe with her own mandate, she can compromise more . maybe it is a less hard brexit. i am not going to be soft. less hard. -- a newactually mandate from the country, and -- she 60 a good mandate will be able to put the real hard brexiteers back in the box. i think business -- we are talking business, here. i think business would like that. issue, and that is a lot of

sloganeering here -- you hear the liberals go on about, we want a soft brexit. we must stay in the single market, they say. well, the single market -- the word single market, i don't know anybody in britain who would not like to stay in the single market. i do not know any business that would like to stay in the single market. with the european court of justice, you do not control your borders. brexit meant those things. people who say single market never say the price it will be, which is to control the borders. i think you should do this in a general election campaign, actually. i am not a hard brexit here. i would like to stay and reform the e.u. i do not believe that level of reform is possible, but i do not want to see immigration in britain coming down in terms of sheer numbers. i want to see the quality of

immigration go up. i do not care if they come from europe or india or australia or america, as long as they are skilled and live in peace. ,here you have got a situation where you have people coming in regardless of skill base, from europe -- business does not want that. business wants to fish in a reservoir of 100% of the world to increase the wealth of britain through immigration. i think it is the lack of control. it is the feeling you cannot stop it, that the people you elect cannot stop it. that was the feeling behind. when people stay -- say single market, they never go on to say, that means we have no control. mark: what have businesses been saying to you in light of the snap election? sterling is up. the thought ofus a stronger government is encouraging? is there a possibility of a transitional deal? if theresa may gets a majority -- digby: i think if jeremy corbyn

became prime minister, i think you would be talking about the rise and british airways shares, because there would be writes to get out of the country. have as of, does she governing chance of being in charge after the election -- this is interesting. i have had meetings this week, and more board meetings next week. saying, did not see that coming. she has got courage. see it as a stamp of her leadership. it will give more consistency, more stability. what we have got to get used to -- i think we will come together on this. i do not want to see this remain-brexit argument business. i do not want to see the propaganda sheet in the mental times every day, -- in the "financial times" every day, we are going to hell in a handbasket.

that should have gone the way with the telegraph or something else. it is the time we came together and said, we have got to make the most of this. now, let's fashion something where we get the best we can in the market. yes, we have to pay a price for that, it'd financial or in policy. and now, move that together. but in saying, this will be armageddon, that long. -- that won't. mark: but there are two sides to the equation. the e.u. -- is it softening its stance? there does not seem to be evidence of that. digby: i agree. i think it is neutral to them. i think i would put up a good show. i would say it does matter. the "you cannot et it to parliament."

he knows in his sole it makes his negotiation more difficult, but he is never going to go public with that. i think if i was in france or germany -- god bless them, in france today. if they have a german election coming up -- the british general election, i do not think they care. year, 2018, is going to mark the big negotiating stuff. , ori want british business an international business based in britain, to really work on the government -- not with it. just say, how do we fashion this in a way that delivers control of borders, with as much internationalization as you can? the other thing we have not talked about is, what does it do for the rest of the world? mark: the prospects for deals. digby: one of my companies is based in singapore in its asian operations.

the other one, it's american operations, next to boston. to get them cannot wait free trade deals done. they are being lobbied a lot by trade representatives from government, saying, when can we start to do this? you have got to go along way to say what you might lose in europe, but especially with america and asia, there is a real feeling that there is something here britain can do. when i was trading minister, especially with cpi, people know britain as an open trading, not protectionist country. in asia and america, they are saying, actually, we are not going to persuade you this is a thing to do. the britons do it. you start ahead of the game. how to put the ball in the net is something we must get on with. mark: 30 seconds on the economy. retail sales, is the penny dropping? digby: i don't think so. i think that is a temporary

function. do i think there is going to be uncertainty? we do not know what is going to happen in the general election. i think april figures will be good. many will not. by june, it will be back. mark: 2% this year in your forecast? digby: i am beginning to worry after getting it right all this time. at what point do you believe in this stuff any more? 2%. the imf trend is i have always said 2% this year. mark: digby jones, great to talk to you. thanks for joining us for the last 20 or so minutes. "surveillance and continues in the next hours with francine and tom in washington. ♪

two days till the french vote.

pen suspend their campaigns. deutsche bank becomes the first bank fined for breaking the volcker rule. after sends the yen lower telling us they will continue with a very accommodative policy. good morning, everyone. this is bloomberg "surveillance ," with francine lacqua and tom keene i in d.c. we have some great gusts. -- gue sts. tom: the shock with the shooting in paris. it was amazing to be up on the stage of my panel, and a phone was handled to me with the news of the shooting. things can change in a moment. francine: i do not think it had an impact on polls, but something we need to watch out for.

marine le pen was addressing a rally. emma: thank you. more on that attack in paris. islamic state is claiming responsibility for the attack on the champs elysees three days before the presidential election. a man killed one police officer and two others were wounded. the gunman was killed as he tried to escape on foot. there's speculation that the attack could affect the vote. bizarre story involving last week's bomb attack. police have arrested a suspect that he hoped to profit from a slump in the publicly traded team share price. on the day of the attack, the suspect bought 15,000 shares. --iran, mock mood and a

eichmann didn't shut has been disqualification from running for election. is expected to win the moderate vote while other candidates but the conservative vote. order at trump will review of any significant tax regulations imposed last year. the white house is the president wants to reduce tax burdens that and undue complexity and exceed statutory authority. nder president obama, government tried tot rain and u.s. companies shifting their profits off shore. this is bloomberg. much.hanks so the imf meeting, very quiet markets.

futures are flat. and oil a few days ago down at the 50 level. on to the next screen. the vix, 14.06. i do want to note the german yields have been soggy all week. that should be red on the scre en. points lower.is sterling has some stability. francine: we look at euros. france is leading the game in government bonds. it is two days before the important vote. something that happen on the champs elysees, that deadly attack, could change, it could not change. stock volatility scaling is highest level in nine month .european equities erasing a bit. need to look at the yield market. we'll get out onto that.

we have quite a lot of terminals to show you throughout the two hours. the bank of japan governor told us japan's economy is doing better than thought a few months ago. though the inflation rate is quite sluggish. speaking to us exclusively in new york, the central bank willnor said the boj continue with its very accommodative monetary policy. >> we think the current pace of the purchase as well as monetary -- increase would continue for some time. we have acquired 40% -- which means 80% of gdp equivalent. we have acquired. but this is the result of quantitative easing, and monetary easing. set, at: joining us on imposin -- adam posen.

tom, it was interesting to see governor kuroda on our flight on the way here to d.c. he sounded quite cautious. tom: absolutely. that is the tone of this is that things are better. nobody buys it for a minute. every single, and was on the tumult of the politics wrapped around this meeting. i thought that the poor a lot more optimistic than they were six mexico but worried about geopolitics. six monthsy were ago. a quick comment on boj, they see more confident. >> they are more confident because they have shifted from worrying about having to reflate the whole economy to just worried about inflation expectations. they have a more limited job now. i think governor kuroda feel that's he they are onto something they can handle. the number one

central banker in terms of doing things outside the realm of what the text but said -- textbook said? one standing, total commitment to conventional policies. you can see how it is softening , which was another of those less men standing. should, my senses you not get too excited about those super quick exit strategies. verynk draghi is still concerned, still looking at the glass half empty. a very slow pace for the ecb. >> it is not a question of commitment to q.e. they feel that situation is better. kuroda isllen, walking away from q.e. tom: i am stunned at this imf meeting.

i got in every newspaper the present of the united states talking about steel tariffs. i feel like i am in the 1930's, i have got the wide lapels. let me start with dr. posen. i have never seen a dialogue of free trade wrapped around a zero sum president. dr. posen: this is unprecedented. there is a reason why for 80 years almost no american president of any party has engaged in this. eel tariffs that were counterproductive in the 1980's but not in the face of the world where the u.s. is trying to say that trade is trade, open this is good. tom: help me with this. because i am looking at an absolutely original imf meeting. i did a panel with the ministers of columbia, indonesia, turkey and ukraine. you could've heard a pin drop about the tumult but yet all the

play is in the media like, it is business as usual here. is it business as usual at these meetings? like businessok as usual but i think what is players inr non-u.s. those meetings is to get some sort of understanding of exactly . administration is. if you are european or south american economic authority, you do not really know. you do not know where the fiscal policy is going to go, which has a tremendous impact on your own economic outlook. you do not know where trade is going. you do not know, in a way as well, with what kind of monetary policy in the u.s. we could be dealing with next year. francine: i'm going to push back. first and foremost, if you are a the markets or if you are a banker or finance minister, all you can do is actually look at data. you can't go and transfigure -- try and figure out what

politically can happen in for policy. dr. posen: yes and no. what gio said is slightly misleading. we saw this with brexit. everybody kept saying the problem is we do not know what the policy is. here it is not that we do not know what the trade policy is going to be. the problem is a policy is wrong. francine: tell me what they are. i don't know. largesen: i'm for the corporate tax cut. you're going to get a disappointing go on infrastructure. you're going to get a rising dollar but not as sharply rising -- you are going to get a monetary policy that is going to said,own out of, you central bankers cannot preempt politically. finance ministers have to try to preempt politically. theonly one in the u.s. is finance ministers. tom: that is exactly what i felt

in the panel at the world bank. we was this idea we have got to ask now. we've got a great set of guests. we'll continue with them as well. coming up, conversations with jason furman. we will speak with jacob frankel on dollar dynamics. join us.rivlin will from our studios in washington, stay with us. this is bloomberg. ♪

francine: these are live pictures of a rally or at least a conference we are expecting from francois fillon, one of the

candidates. we are two days away from the vote. the murder of a police men yesterday on the champs elysees has forced an early end to campaigning for the leading candidates. as they now head into sunday's first-round voting with the race wide open. that debbie attack has been -- that deadly attack has been halting campaigning. the front runners fillon, marine le pen and macron have canceled their campaign events. we are speaking with the project coordinator for le pen's presidential campaign. thank you for joining bloomberg "surveillance." do you believe the polls will change because of marine le pen 's stance on immigration? will she make a strong link between that and what happened yesterday on the champs elysees? >> first of all, we are mourning

our policeman yesterday and the streets of paris, victim of terrorism. of course, this is a tragic fulfillment of what marine le pen has been warning about for years now about this islamist threat. she was the only candidate who spoke about the risk of attack, the problem of insecurity in paris. francine: is that not divisive? is that what france needs? this could make matters worse if you blame certain people that may not have anything to do with it. >> no. we are not blaming all the people. we are blaming for now the policy that was followed by people who were in power for the past years and they did nothing to try to prevent this attacks

to happen. we have a bunch of measures, which are exposed in our program, starting by the closing mosques in which you have hatred speeches every friday. you have all of these blacklisted people who are known by the police and who must be arrested and deported. this and stand by like say that every action will amalgam or mixing all the people. the politics must stand with what happens and be strong to tackle this problem. pen'shat does madame le single message need to be and the next 48 hours to get the marginal voters?

what did she need to say to france to pick up additional votes? allell, i think, as i said, the candidates have analyze this about current situation of france. and what is happening in the security field, but we can also talk about what is happening on the economic field. is a true fulfillment of the rightness of marine le pen analysis. therefore, people are more and more convinced about the strength of our measures and the reality and the credibility of our measures to tackle all these problems. and i think this is a tragic event that happened yesterday in paris. it is not the last one, of course. francine: of course, a lot of people still find your party and

palatable because they find you too extreme and bordering on xenophobe. i want to focus on the economy. has le pen convinced investors that her project would work for france? >> we must make a difference between ideology and investors and financial actors. i, myself, make a a lot of conferences throghout -- throughout financial market actors in the past weeks and months. and i think that investors are very pragmatic, as they have managed to what happened in the united states with the election of donald trump. they so far manus what happened with brexit. and are very pragmatic. financial actors are saying no matter if you are "frexiting,"

we want to have a specific for us to continue to make money. they are very pragmatic. they are not ideologues. francine: thank you very much. the project coordinator for 's presidential campaign. there is a press conference llon.way with francois fi a lot of the rallies, that the three main candidates were suspending but we are still hearing from fillon. with this is adam posen from the peterson institute. you're french, do you worry about what is happening on sunday? gilles: look at the polls a lot of very weird configurations can come out. i remain never send tens before the vote. you have got four candidates who could make it to the second

round. so, that makes it six potential combinations. all of those six, you have only one which would probably be quite -- marketwise, which is when there is no euro skeptic making into the second round. the five others are, shades of sterss and-- stress and in some cases a lot of stress. if you taken on what we have 's in now, one green light there and five with various shades of tension, we should be nervous. we've got loss of talk about. coming up, we have too much speak about in here in washington, and we will continue our coverage towards the french elections. looking for our special programming on sunday. this is bloomberg. ♪

francine: it is the spring meetings of the imf and world bank. that is why tom and francine are in d.c. and we will have coverage of the french elections. fillon just finished speaking in paris.

the other main candidates have canceled events today. the only one it seems to be theng ahead is melenchon, common is backed candidate, saying he did not want to be seen to panic after a murder of a policeman on the champs elysees yesterday. he continues with his plans for today. let's talk a little bit more about france. adam, how do you view france? it is a very immediate political risk. what happens to france and the markets if we have le pen, me lenchon second round? dr. posen: that is the disaster scenario. and you end up hoping for m elenchon. suburban xina u.s -- suburbans in the u.s. that went anti-clinton, do not go melenchon. on the le pen story, none of the u.s or u.k. markets every

denomination risk. as long as she keeps talking he's talkingthen s about risk of nominal assets in france. you should start to see capital flight to germany and switzerland. francine: i want to show you my terminal, the euro-dollar one month volatility. this is the chart. there you go. it brings us back to brexit. what will markers do on monday depending on who wins? gilles: obviously , if it is the configuration thatadam was mentioning, i think the market reaction can be very adverse. as i n many previous episodes, a lot of investors will try to reassure themselves by saying it's more complicated than that. will they be able to implement the policies. au could end up with manageable situation. the problem is that with euro

skeptics in this race it is not so much what they would do, it is also what they could block. and that is the biggest issue. no matter what, we know that the european union as it works today is not complete. you cannot really have this if you have some sort of institutional paralysis in paris. just that would be an adverse factor. a reminder. stay with bloomberg for the latest on the french elections. we're live in paris this sunday for a special coverage. tha starts at 2 p.m. in new york and 7 p.m. in londont. coming up, we look at the market moves. this is bloomberg. ♪

♪ francine: "bloomberg surveillance" from washington dc. we are here for the imf world bank meeting. tom: it is a different meeting

this time around. here is first word news. >> leading candidates and sundays french presidential have stopped their campaigns a day early because of the terror attack. one police officer was killed, two wounded along with the by standard. please shout the attacker as he tried to escape. islamic state is claiming responsibility. analysts say the attack it could election,pact on the marine le pen asked for border controls to be installed. the white house budget director says president trump has proposed spending $200 billion of taxpayer money on an in for structure would leverage private financing, taking the program to $1 trillion and would be ready this fall. republicansuse and

in congress are at odds over whether to try another vote to repeal obamacare. administration expects the house to vote soon, but a senior house republican aide said there is not a bill for lawmakers to look at. , another day of protests against the president as hundreds of thousands turned out to protest against his policies that have consolidated his power and shattered the economy. at least three people were killed. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. tom: thanks so much. wonderful to see you today from london. coming up, good conversations with some special guests. we will speak on the domestic issues of america, particularly fiscal policy.

adam, let me begin with you. i am thunderstruck by these meetings and the tension within the trump administration. not fred burks tends imf meetings. this is the founding of the peterson institute. would bergsten recognize the tensions? that gets losses president trump said some nasty things about the world bank yesterday. in europe, under president george w. bush, republicans were embracing the world bank, so yet another reversal, another attack of multilateralism, and basically the trump program so far is about taking down the financial institutions the u.s. built. , marine le pen

was speaking about joe stiglitz, one of those economists who talks about the growth rate. is in search of economic growth. is it finally here for these leaders? init is clear to say we are in an upswing, but what is still missing is a great sense of a proper in krugman and structural growth. we are missing that in the u.s. it was at the heart of the and political and economic debate, and now we are something that does not address those issues. in europe, we have made our policies a bit less adverse to the economies. a proper inspurring proof meant and potential growth, i think we are still far away. tom: this is critical.

one of the critical points this week was taylor riggs talking about great european auto sales. francine: we interviewed just a glitz when his book came out. he is critical of the euro. does the euro survive in its current state? >> short-term yes, long-term no. move towards neutralization of death come integrated financial markets, and some said a fiscal transfers. the commissioner for european economic spoke about the fact that the euro airy divergences are reemerging. that fundamentally has to be addressed. if wene: is it clear that that have emmanuel macron could rejoin the franco-german axis that the euro will be solved? >> i will not pen my hope someone candidate. before theeed to do

middle of next year is the ecb will have removed more of of -- to come up with a plan that adam was describing. for this, you need not just a pro-european president, you need one who is credible enough in .he eyes of the germany it is a complicated thing to achieve. it is not just shorting out a few issues in europe. >> if we get through the french election, then all the talk will be about italy. tom: i went through my panel yesterday waiting for someone to bring up the president of the united states. i had a trump-free panel. no one mentioned the president given theted states latest new flows, that is refreshing. adam, help me with the impact of, trump on these imf and world

bank meetings. is he even being discussed? >> he is certainly being discussed, but like carrier, ford, boeing, you don't want to mention him and get attacked in a tweet. if you are a european finance minister, there is no reason to discuss center correctl directl. i'm hoping the world bank stands up to defend itself about the attack trump unfairly put on yesterday. the backrtantly, in rooms, what can these countries do on their own. what can we do together without the u.s.? the question is can china and the eu build something that makes the usa we are being left out? tom: help me with what you learned yesterday. was a lengthy interview and we talked about targeting the yields, about asset purchases. he reassure the markets a little

bit. that heheard it before, will stay firm and continue with his policy. what i thought was interesting with the linkage between yen and everything else and whether given the strength will derail his policy. let's have a listen to the bank of japan governor kuroda. >> this is a fiscal issue. certainly in the past whenever ,e had political risks rising then yen appreciated, making policy even more difficult, but this day, i don't know, because candidates can move the pending on where factors come not just geopolitical risks come about so i can'topments, say anything about exchange rate

geopolitical risks escalate. francine: if yen goes higher from here, does it hurt your inflation forecast? know, ourmay inflation forecast is based on the assumption that exchange much upwardnot move or downward, so if the yen depreciates, then of course inflation rate could rise, and if yen appreciates, the inflation rate could decline. that was governor kuroda. let's get back to our guests. adam, i want to look at yen as a haven, which is basically what it is. once we get france out of the way, and let's say it's not a

terrifying outcome, what happens in italy? , they ares, politics more europe-skeptic, or do we talk about a bailout? >> i don't think we talk about a bailout. i think the major banks are fine, but in the political way, the inability of the italian government to deal with small bank bailouts is terrible and attach point going into the .erman elections meanwhile, the politics dominates in italy, but you have no strong party there and no reasonable alternative, and in makes a huge come back. going back to what he was saying anut emmanuel macron being engine for your, they have to organize around problems. tom: why are these guests on?

maybe it is because they did landmark work. at imposing in 1998 wrote a classic treaties on japanese economic growth, and restoring japan's economic growth. those of the chronic natures of these challenges. in the u.s., a four-year cycle, and may be a five-year cycle in france or do we are talking about the same issues in europe sner was talking about 19 years ago. >> we don't have the time and we don't have the same level -- tom: because of the debt level? >> notches because of debt. japanese debt is higher, but the political arrangement. governor kuroda defines monetary policy for a homogenous country. he is not trying to cut deals from people from the north and south. this is what the ecb has been doing from the start, and quite

well. youproblem for italy is first need to turn the narrative around on europe. if you are in southern european countries, 5-10 years, europe has been seen as a force for constant cuts in public spending , constantly unpopular structural reforms. if you cannot turn this around and tell people it is also positive, something that can help you along, then we will get more moments like this when we are waiting for the possibility -skeptic moment. turning your karen in terms of its narrative, talking about growth in japan, i think the oecd has potential growth in italy. have debt at 150% of gdp and estimate growth to be at zero, you definitely have a problem, so too can manage and

we have evidence of countries that manage the situation, but you need to know there is something in europe that is ready to help and ready to intervene fairly easily. it is the ecb that has been doing that job for several years. we need to be able to create something that provides some visibility, and that would turn the narrative on europe again. francine: we will talk a little bit about the jean-claude juncker plan. both stay with us. coming up right here a little later on, the eu commissioner for economic and financial affairs. we will talk about france, the elections, but also italy. look for that at 9:00 a.m. in new york. this is bloomberg. ♪

>> this is "bloomberg surveillance." when of the largest mortgage processors has been rocked by allegations. regulatorsederal have blocked them from acquiring new business. ocwen says the complaints are unfounded. a billionaire investor joins janet yellen, saying she should be terrified by u.s. stocks. he says interest rates have bloated stock by rations not at a level since 2000. ahn's made the comments at closed-door goldman sachs conference. deutsche bank has busted the

volcker rule. andne has been imposed deutsche bank would pay a total of almost $157 million, and that is the bloomberg business flash. francine: thank you so much. our guest for more on deutsche bank. of a of all, how much surprise was it, and how significant is it that deutsche bank is getting to quite a lot of issues is the first bank busted on breaking the volcker rule? >> today's news is a mixed picture. that number you highlighted, $157 million, that is to separate enforcement cases. one is the first significant fine for the volcker rule breaches, and secondly this does bring to an end and enforcement

process with the fed over alleged fx rigging, so if we focus on the volcker rule breaches, this is the most significant, but is somewhat relative to fines we have seen far other wrongdoing, but what it points to is continued concern that the bank may not have the right processes in terms of compliance and monitoring what a staff is up to. francine: does this look bad for the chief executive? he took over two years ago and has been trying to refocus on growth after probes in litigation. >> yes, that is where the pivot will come to. people will focus on first-quarter numbers next week, and he has clearly made dealing with and advancing from the legacy issues a priority, and the focus will be on can the bank maintained its market share if not grow it. francine: are we expecting more

banks to follow suit? -- the focus as far as deutsche bank is compliance, not trading per se, but the monitoring of that training. are potential opportunities to review the rule, so there may not a many to compare it with. francine: thank you so much. we are still with our guests. away from the banks, i don't know if we need over all, do we need stronger banks to fulfill that crucial role that banks need to do, which is transmitting monetary policies? >> at least in europe, it is clear. there was clear hesitation a few years ago in some circles around the idea that what your needs to do is get closer to the

anglo-saxon model. the truth is banks remain at the center of funding in europe. there is no way around this we have not been able to create a in enough market to suck more medium-size companies into so it has to be the banking sector. one thing that continues to make me nervous is the lack of cross-border activity in europe. what you had in the 1980's and big drive,s was a especially northern banks, into southern europe. they stopped with a re-nationalization of lending it we are talking all the time about the banking union. we have done this on the supervisory side of things, but in terms of actual banking and business activity, it has free nationalize. from twotwo of you are

wonderfully different worlds could let me ask the same question to both of you. can we move forward given the great distortion we are in if we have worse negative rates in germany, if we have low nominal rates, absurd real rates? europe,n we adjust in japan, and the united states? >> we can adjust in the u.s. if we keep shooting ourselves in the head with anti-trade and anti-competition stuff. we can't adjust in europe without some real redistribution between the north and south. that complements my point. the renationalization of this on theou have this focus fact the north's lending tons of money to the south. it also reflects instead of having private entities in the north lending to peripheral entities, it is now intermediate central banks.

it is about actual lending activity. you on with to get your work day. thank you very much. we will continue with dr. po sner. the meeting of the imf and world bank. coming up, our guests. this is bloomberg. ♪

tom: good morning. "bloomberg surveillance." a quick moment with kevin cirilli. america, andsum steel tariffs are front and center. tarifftime a steel discussion for metal lagarde's big party? clearly this is a signal to the international community that it will be a continuation of the political strategy. they will investigate and try to bring people to the table from there. tom: link in his defense strategy with his trade

strategy. is there a link? kevin: they will make the case if you're not going to play ball with us on the economy, then we will not play ball with you on international agreements on security and northee korea. tom: do share his angst over international affairs? >> absolutely. this is reverse linkage. like you said, about steel, 40 jobs for everyone steelworker, it is crazy. tom: how do we work this out? how do you clear a foreign policy dysfunction? it is youn way to do try to have something that smacks the trump administration in the face and forces them to recognize their error, like the taiwan step after the election, but is not bad enough to reverse the world. tom: thank you so much.

congratulations on your work. it is really something. the heaters and institute. we have a great our coming up. francine: we will talk more about donald trump you kevin, thank you we go on to france and speak about the french elections, but also yields. tom: there we go. coming up, another hour. jason furman will join us, very important conversation linking international economics with that of america. stay with us from washington. this is bloomberg. ♪

tom: this morning, world leaders in washington in the better but fragile global economy.

and the assembled demand american leadership on free trade. this hour, jason furman, jacob frankel, and alice rivlin. president trump demands steel tariffs to make america great again. aess what question mark it is zero-sum world, a death on this morning,t is a -- good everyone. this is "bloomberg surveillance." ofs to me is an original set imf and world bank meetings. francine: it feels like every six months we say that because of the last duty years we say something new. it that a lot of people are concerned about what is happening in france after what happened yesterday. 2448 hrs for that first

round of the election. would i would suggest is extraordinary to see the cover of the washington post talking about imf meetings and steel tariffs all in one moment. right now to london, here's emma chandra. >> in france, presidential candidates are sounding tough on terror the day after a gunman on thea police officer champs-élysees. far right candidate marine le pen ask for border controls to be restored and for islamic radicals to be expelled or detained. islamic state has claimed responsibility. elise kilby attacker as he was trying to escape. two other officers of the bystanders were wounded. a bizarre story involving an attack. to profit fromd

a slump in share price. the suspect put 15,000 put options at one player was wounded in the attack. iran, the former hard-line president has been disqualified from running. the supreme leader had urged him not to run to avoid polarizing the country. seen asualification is a boost for the current president. he is expected to win the moderate vote. in washington, president trump today will order a review of any significant tax regulations imposed last year. the white house says the president wants to reduce the regulatory tax burden that exceed statutory authority. under president obama, the government tried to rein in u.s. topany and their attempts send profits offshore.

thanks so much. let me get to the data. not much going on on friday, a little curve steepening, oil at $50 after a difficult week. yield.two-year, a lower that should be on the screen down one basis point, but very little discussion of the negative yield space. francine: very little discussion on that because they are less negative than they were three months ago, but i want to focus on france. not much movement when you look at the euro, but the regions appeared this is before the nation ghost to the first round of voting on sunday. we are also awaiting emmanuel macron to have a news conference. a lot of the main candidates

after the attack yesterday changed their plans, so we are waiting for that. the poll is important, but there is one third of the french undecided, so they could change quickly, but it does seem that support is aon's little bit. i have not seen a report that says marine le pen can become president of france in the second round. acclaimedsilver, the statistics a guru in america, made clear the margin of error in france is a complete history. francine: 30% of people are undecided. population decides to vote 24 hours before. tom: we are decidedly decided on wonderful guest to bring you this hour. jason furman of the peterson totitute, we are thrilled bring you our guest, a global

macro strategist from black rock to provide common sense. is your head spinning? it is an original super calculus right now, isn't it? >> are senior portfolio manager is trying to keep cool. tom: can we make some news here? >> that's not the idea. the idea is to focus on fundamentals and keep cautious. will we adjusted to this talk of free trade? to skipvice would be the oval office signing when gary cohn did. be givingcertainly advice and private that this would be bad for our economy. if you want to help

manufacturing, you don't want to raise the price of steel in the united states relative to what japanese and german companies are paying for steel. a newre these meetings zero some regime we are in? >> i think there is a real nervousness. it is still too early to see if what we are seeing is noise and threats and they will not follow through. on tariffs on china him mexico, labeling a currency manipulator, none of that has happened, and that is good news, but this national security review of steel is the first action that has gotten me real nervous because there are issues around steel, but we need to cooperate with other countries to collectively solve them. we don't want american manufacturers paying more for their steel then makers of cars in japan in cars in germany. that is the way to destroy our manufacturing, not build it. francine: is there a pressure from within the administration

or will there be pressure on the trump administration to get something done that is visible, loud before the 100 days? is that important politically and something you worry about at black rock? >> that is one of the key issues , there is this popular anger, not just the u.s., but other countries, and we understand the elected leaders will have to deliver something in response that could be growth -- good for growth and markets, or bad. there could be some wins dressed up -- not dressed up, there could be win-win that is good for growth and part of the electorate that has been angry and we could see that in the trade area. one example mentioned yesterday makes everyone happy. if that works, there is no need to go into actively harmful measures. >> i worry the most important

things we need to do our legislative, invest more in infrastructure, reform our business tax code, have trade agreements, invest more in education, and science. getting all that done through congress is hard in the best of not adept if you are at working with congress as this administration so far has not proven itself to be, it becomes impossible, and that my lead them into these other directions where you flail around through different actions. francine: because it is an easy win? if you can't be seen as getting something done in congress and go for protectionist measures, it is an easy win so you show your base your getting stuff done? >> the president has a lot of authority under the law. on trade and do protectionist things, congress gave him those tools already, so he does not need to go back to them. that is the easier thing to do,

the more dramatic thing to do. i'm not sure it will happen. so far, he has done less than promised, and that is a good thing, but he will remain a danger for an easy outlet for action. tom: we are talking international relations economics. me to stay in stocks, given all this turmoil all the bluster. how do i stay in equities with confidence? simple. unless you have a 48 hour time horizon and watch her money back , it used to be a u.s. driven story. we are now taking this -- seeing this take hold in europe, , china takingts this back from the u.s. in terms of leading global reflation. sure there is volatility every so often, but if you have a reasonably medium-term perspective, you should look through that and invest

particularly the u.s. is more advanced in that cycle, but invest in emerging markets in europe once we are past the french elections and invest in japan and you have a lot of growth potential there. tom: we will continue this discussion. coming up on bloomberg ,elevision and bloomberg radio the former chief economist at the international monetary fund now with the peterson institute has is dr. fuhrman. we will look for that in the 9:00 hour. from washington and the meeting of the imf and world bank, this is bloomberg. ♪

>> this is "bloomberg

surveillance." the bloomberg business flash. sony has raised its profit forecast by 19% of the fiscal year. the company says most businesses have to boost earnings. sony says costs were lower in its semiconductor unit. it is the biggest retrenchment ever for subway restaurants, e close hundreds of locations last year, the first time subway has had a net reduction. 27,000 instill the u.s. and continue to drop in 2017. that is your bloomberg business flash. francine: thank you so much. this is what we need to talk about, the french election, and when you go through the imf and world bank, it is what people are worried about. we are expecting emmanuel macron to give a news conference, or at

least speaking to the press. we have heard from francois fillon after the attack on the champs-elysees that left one police officer debt, the main three candidates apart from jean-luc melenchon decided to cancel it offense or change their events out of respect. we are joined by a emmanuel macron who served for over 15 years in various roles in the french government and was also the french minister of commerce during the administration of jacque chirac. he joins us here now. thank you so much for joining us. i have never seen an election like this. you have four candidates, and actually any of them could come to the second round. why this french election is so open? why do the french not want to vote and are so undecided? >> well, you have in fact five candidates are at two of them are representing the old governing parties, the socialist

party and the unp, and they are far back. i think people are rejecting those parties who have been failing in fixing the main issues of the country. then you have two other candidates who are extreme right and extreme left candidates, pressing a global refusal of the system and frustration of voters about unemployment, globalization, everything which and negative rather than a positive change in today's environment. eventually you have emmanuel macron as the only candidate europenting openness to to globalization. francine: we have talked a lot about the candidates. , but talk to me i'll

about what france and the french voters will vote on sunday, security, economy, and how much change to they want? >> it is mainly a question of like with the brexit, trump's election, whether the country -- on innovation come on today's world. put up barriers and walls to protect itself. so it is a choice between protection and trust in the future, and of course most of the candidates are playing on the fears and proposing to be that protection. some could be real threats, like leaving the euro zone, but others are building on security

and terrorist fear, so it is a question of whether the country is confident in itself, whether the country is able to surmount those obstacles, and whether the country is hit by a fear of the led by people while promising issues. tom: within the founding of the unp, which seems like a lifetime ago 15 years ago now, help me with the basic idea that socialism and the socialist concept in france has changed. socialist or left view different now than it was when you made original law in france? over 40 years, the political

choice was between a socialist solution and a free market solution, and it was very clear for most of the electorate. now most of the people think that what is good for the country is a mix of social fairness and economic efficiency, so they don't want to have this primitive choice between socialism and and free market policies. they want a mix of it here they want to keep their high level of public service and at the same time to have competitive companies being able to compete with challenges all over the world. aey are trying to find balanced solution, not a radical solution. that is the big change for this election, so the socialist party and the unp, which are lagging in terms of understanding the change in the political opinion, key proposing radical choice,

but it is not what the people are looking for. they are looking for something much more balanced and bringing based table the solutions on lower taxes, more economic efficiency, and on the other risks kind of coverage of based on public services, and that is exactly what people are expecting. francine: thank you so much. the former french minister and we are back with our guests. on will the markets wake up monday? i don't know if we have a jean-luc melenchon or emmanuel collapse ort euros yields go up significantly on monday? ofthere are a number combinations could we try to

bucket them into risk on and risk off scenarios. any scenario where you have one mainstream candidate doing well or better than expected in the paul's, or to mainstream -- poles, or to mainstream candidates is obvious he risk on. you have a variety of risk off scenarios, the worst being jean-luc melenchon against of the pen, because then you would have the certainty of a nonmainstream candidate being elected, and the clearest in bond would be seen markets with the french spread over germany going up significantly, exactly how much is hard to tell, but considerably up to 200 basis points. we would likely see some very negative reaction as well on ,isk assets across the board and that would be a global reaction from what we have seen at times in the campaign when there was tension or polls showing marine le pen: ford, so it would not be limited to european markets. francine: thank you so much.

coming up this sunday on bloomberg tv and radio, special coverage of the first round of the french presidential election live from paris, france, london, new york for campaign events and rallies across france, as well as the latest market reaction from london and new york. this is "bloomberg surveillance." a beautiful picture of the eiffel tower. ♪

tom: good morning. on international economics, from worldwide. i want to digress domestically. we are thrilled by your careful research with president obama about the state of the american unemployed and our lack of labor participation. why are we so unemployed? would is the character of our unemployment right now? >> we have been talking a lot about france this morning. a lower fraction of men between 20 5-54 are working in the united states right now than in france right now. we do everything right in our labor market when it comes to flexibility, easy to hire, fire, low minimum wage, all those classic recommendations that

make labor markets work. it turns out some of those may be good ideas, some bad ideas, but none of them are sufficient to keep and get people into the workforce. institutions, of training, job search assistance, maybe even subsidize jobs to make that work. tom: we will have to continue this discussion in greater detail. i haven't even coin this phrase yet. i would do it right now, american sclerosis. he's heard it before. i'm trying to do something to impress francine. thank you so much. we will continue this conversation another time. coming up -- this is bloomberg. ♪ .

tom: "bloomberg surveillance" we have coverage of the french elections beginning sunday afternoon in the united states.

ght now, general electric, a change over the last three or four years, out with earnings on first glance look better than good. their organic revenue growth is the key industrial number and really sort of like fedex shipping, people care what fedex does, they care about the internal growth at general electric. francine: earnings seem to be beating estimates. however, we're looking through the report to make sure they're comparable. first quarter orders seem to be holding up, $25.7 billion and they're reaffirming their operating framework for 2017. tom: the single headline that goes to the tone of these meetings in washington is the idea of cost cutting. g.e. with a single headline out on further cost cutting which maybe is a theme we can do here with jacob frankel and alice. right now to london with our news. >> in france, that shooting on

the streets of paris is having an impact on sunday's presidential election. some of the candidates have ended their campaigns a day early. far right marine la pen wants radicals detained or expelled. another contender said he'd ask for 10,000 more police. it occurred on the champs-elysees where a gunman killed one police officer and two others wounded and the attacker killed by police. islamic state claimed responsibility. in washington, the white house budget director says president trump plans to propose pending $200 billion in taxpayer money on an infrastructure building program. nick mulvaney said it would leverage private funding taking the program to a trillion dollars. the plan won't be ready until this fall. the white house and republicans in congress will try another vote to repeal obamacare. a white house aide says the administration expects the house to vote soon but a senior house republican aide says there is more bill for

lawmakers to look at. in car agoous, another day of -- in cacaus, protests against nicholas maduro's policies that consolidated his power and shattered the economy. three people were killed. global needs 24 hours a day, powered by more than 2,600 journalists and analysts in more than 120 countries. this is bloomberg, francine and tom? tom: thanks so much it. this is a highlight of our visit, we saw john lipsky of johns hopkins but now jon frankel is with us to say the chairman barely does service to economics and foreign exchange markets at the university of chicago. that was a few years ago and also joining us is jacob frankel and alice rivlin, vice chair of the federal reserve and invented essentially our budget responsibility of the modern age and is from a small

school, radcliffe college of harvard university from a few years ago. there was an american exceptionalism when you were at radcliffe long ago and far away. do we still have an american exceptionalism? alice: we have a strong economy nd the potential to be world leaders. we are world leaders but i'm not one who is discouraged or thinks america is in klein or any of those things. i think we have the potential right now to move the economy to a new level if we invest wisely and rev up our skills and fix our infrastructure, there's a lot of things we need to do. the big problem is we're sort of gridlocked politically so we're not doing them. tom: the gridlock we see on the cover of "the washington post," these i.m.f. meetings and talk of free trade and we have a president of the united states wanting to put in steel tariffs. i feel like i'm back when you

were doing your research at chicago. john: well, we need to see how it's coming out. there are two approaches. one is the very concerning approach which is that we are on the way for increased protectionism, isolationism, fragmentation, something which would be very bad for the united states and very bad for the world. another way to interpret it in some of the people i met yesterday told me well, just wait and see, this is a negotiating stage in a long term new trade arrangement and the president is a negotiator. i do not know the president but those are the two approaches i think we should, however, be careful. wealth credits and rhetoric can become permanent though it's just a stage of negotiation. tom: you carry forward the theory of george stigler and particularly jabe ok -- jacob

viner of a century ago it seems now of a zero sum state. do we risk here a zero sum america and a zero sum world? jacob: we risk and why we should put all the efforts to avoid it. i agree with alice rivlin we now have a special opportunity. this is the first year after a long time that the i.m.f. has revised upwards all of its forecasts about performance. there's no single reason in the world today that is in the decline. this is the opportunity to say ok, we are not in crisis management mode, we need to have a medium term mode, a mode that looks at growth, sustainable growth and inclusive growth. the world growth appears in all of those three statements. in order to grow, you need to innovate and you need to have markets open that you can sell what you produce to the world. this is the idea of free trade. it's not just slogans, it's

fundamentals. francine: this is the thing, i.m.f. are saying forecasts are better but we're worried about popularism and protectionism. you're optimistic about the u.s. economy. what happens if we do have real protectionist measures put in place? alice: nothing good. we get in a trade war, everybody loses and i think we just can't do that. there are certainly things that can be renegotiated in trade agreements to be more favorable but basically if we start raising tariffs and other countries start raising tariffs, everybody is worse off. jacob: we should change the narrative and instead of talking about protectionism, we should recognize nobody in the world says i do not want to benefit from the gains on trade. what people are saying is i want to protect those who may be harmed. but then there's a fiscal issue. francine: the white house changes rhetoric, i'm not changing my rhetoric, i'm repeating what's being said.

jacob: this is a comment. we are talking to the white house and to everyone. we are really talking about an issue that can be solved in the conventional policy measures, the fiscal policy, education, innovation, mobility, compensation, trade adjustment assistance, those are all budgetary issues and let's not put trade as the -- let's not kidnap trade. trade is something good. francine: alice rivlin, do you believe the president will be more measured given the fact he's already more measured talking about the fed and janet yellen. alice: he's learning, as he says himself, the world is complicated and he learned health care is complicated. he had some simple prescriptions and the american president is not all powerful. he has to negotiate with the rest of the world and with the congress. and i'm hopeful that more

moderate and sensible views will prevail in the end. but i do think we need some drastic action. we have allowed the march of technological change and trade to leave a lot of people behind. we need to do something about that. we need especially to improve our skills and education. tom: you invented fiscal analysis and fiscal policy in modern age in america. are the republicans the majority party in this city? are they really a majority or is that a fiction and we're going to have a process over one or two trump terms where they're a minority-majority party and need the democrats to get anything done to make jacob frenkel happy, which is it? alice: the majority question is are the republican as party or a couple of parties. they have some very right-wing folks who are very dug in and

they have some more moderate people who could negotiate with the sensible middle and with the democrats and get some things done. tom: i got a huge response out of twitter six weeks ago and put out a photograph of president reagan, speaker o'neill and bob michel has been on the show recently, an esteemed legislative gentleman from the upper midwest. can we get back to the romance of reagan and o'neill from another time and place? alice: i hope so, i'm a dedicated bipartisanship and the only way we move the country forward is for moderate, sensible people in both parties to be talking about policy. francine: how important is it, jacob frenkel, that we do see a president to get support for tax reform or the health care so he doesn't turn to protectionist measures or trade measures like you're saying? jacob: yesterday i was in several meetings and two issues i took away from it. number one, we talk a lot about

trump. do you know trump, don't you know trump? nd everyone told me you know what is the team and does he listen to the team, team, team? and they always said, you know, when you have a bunch of c.e.o.'s who are not yes men, you ask yourself, what is their positions and you get a little bit better way to go about it. i don't think it is right. i got another insight that says there are always six p's we need to look at it we want to forecast what's going to happen, what are the policies, what are the priorities, what are the processes, what is the politics, what is the personalities, and are they professional? all of them are important and the last one, professional, is a very important word. we are in a complex world and you really need professionalism. francine: who do you think the president listens to? i was told he listens less to the team around him and more to

c.e.o.'s that he respects. alice: well, i hope that's true. i don't know. none of us know. i'm not in the white house and i'm not close. i think that certainly he listens very closely to his daughter and son-in-law. they seem to be very important. and he's got some people with experience in the cabinet, the defense secretary and the head of the national economic council, people who are sensible and experienced. and i think he's listening to some of them. tom: what does mr. mulvaney need to do at o.m.b.? what's your prescription for a good fiscal process, one of the p's, a good fiscal process for this administration snl alice: first thing to do is keep the government running and i think they will do that next week. no one wants to close down the government. and they essentially willig theory the president's budget proposals which were very

drastic cuts in domestic spending. that's not going to happen. that can't pass the congress. so they will pass a omnibus appropriation that sort of is a continuing resolution that keeps everything going at approximate the current level. on the domestic side, they will add to the defense budget and they'll probably do that by putting it in a special account. tom: thank you so much for starting your day with us. alice rivlin, former vice chairman of the federal reserve system and we'll speak with her on the radio as well. we'll continue with jp morgan, the former bank of israel from the oecd. and most interesting gentleman with always insight and opinion on the state of international economics and from our studios in washington, this is bloomberg. ♪

francine: two days until the french election. of course it's only the first round. we have four main candidates. 1/3 of the french say they won't go and vote. the other 1/3 say they won't vote because they're undecided and if you look at these four candidates, they're really neck and neck. this is the latest from a reporter who gave a news conference. we know the candidates have changed their plans for today after that deadly attack at the champs-elysees. one candidate says he'd expand the military as president and still talking about policies and saying tariffs want to shake the french policy says

macron. is trying to attack his opposition. it was a failure of france to lock down the borders that made the attacks possible. let's keep the focus on france. the o.c.d. is headquartered in france. and jacob frenkel is in the studio. great to speak to you on the phone. what is your number one concern? is it politics with the french election or geopolitics with korea or is it that the world economy is getting better but we're not at escape velocity yet? >> in terms of the french election and events in france, those of us who work in paris and live in paris and who are out of paris and who receive 130,000 people who come to work at the oecd in different committees, etc., from all over

the world all year long, of course they will not bend us, they will not break us and we will continue on. but of course condolences and sympathy both to the families of those affected and also to the french people. in terms of the concerns, i think there are many. there are a lot of downside. there is a recovery in some of the numbers but there's a lot of elements that are concerning, and we have not shaken off what i call the low growth drop. and that means a low growth of investment and certainly low growth if not flat growth of product. and fills the need to go structural. because we ran out of room in terms of the monetary policy. we certainly have modest room on the fiscal policy, therefore

the solution is to continue to press on, but the problem is we just diagnosed and we just delivered a diagnostic yesterday to the g-20 that the reform process is slowing down, that there seems to be some reform fatigue at the time we need it more. that's what concerns me more. francine: do you believe the attack which you were talking about there in paris will change the need when it comes to the first round of voting this sunday in france? angel: no, i don't think so. i think people of -- if anything, the french are very admirable. the french are very strong around their institutions and this will unify the french even more against terrorism and against any danger to their democracies. francine: what do you make of the concern that the trump administration may put steel tariffs, that we may have protectionist measures that trade is going up a touch now

but could reverse back down very quickly? angel: listen, we have been for 55 years, you know, we've been omoting open trade and any measures that are protectionist in nature, clearly are of concern. now, we have been documented year in, year out since 2008 at the request of the g-20 protectionist measures taken by the g-20 which every year put out a release, you know, even the leaders and ministers, etc., saying we will fight protectionism and at the same time to say we have a stance still and maybe even a rollback in terms of protectionist measures and notwithstanding those commitments, they have occurred in 1,400 independent measures which can be absolutely described as protectionist. then the question of coherence and the question of consistency between what you say and what you do is not recent, is not

new, is not from this administration, it's now been -- you know, we've documented that in the books for a long time and we are, of course, against protectionism of any kind. we believe this doesn't help, that open markets are the solution. francine: thank you so much for joining us, on his way to meetings this morning here in washington. with us as well, jacob frenke lnchings, jp morgan chairman and former governor of the bank of israel, among other esteemed duties. i've been dying for three days to ask you this question, can any of this get solved within the great distortion with the oddity of continued negative and substantially dampen negative rates in germany when we see the swiss 20-year back down towards zero and again when we see so many of the turmoils as identified in the fixed income market. do we have both hands behind our economic back? jacob: i think we should look at it with some perspective.

this is the first year that there is no economic crisis mode. tom: agreed. jacob: the world economy is collapsing and now the dangers is geopolitical and there's a stronger economy but let me connect it, you know. everybody is talking about north korea. there is a scenario in which the resolution of north korea will end up capitalizing very construcve relations, geopolitical and geoeconomic between the united states and china. united states and china are the two most important two countries in the world. and if they join a approach to the north korea will bring about, this can really change from protectionism to corporation. tom: you're a central banker. you're one of the few guys here

that's a legitimate academic theorist with jamie diamond's ear and major central bank cred. the do you need from officials, what do they need to do to move on from the distortion to that people like madam legard can get things done? jacob: all the -- one of the negative consequences of the past seven years has been the istortion that central banks became the only game in town and central banks exhausted what they can do and now it goes to government. francine: with normal rates? jacob: absolutely. the united states is normalizing the cost and we should not only focus about how many times, how many times this

year we now have to talk about 2017, 2018. it is a journey. we are far away from normal, real rates of interest. francine: when do the politicians get it, how many times have we heard mario draghi say it's not up to me with, we need to spend and have infrastructure and can only be from the politicians? jacob: in most parts of the world they've had elections recently and as a result, i would say there is a ray of hope. the current administration did not establish economic policies, the united kingdom has not established its economic policies. with europe and draghi. there is an opening. if on top of it. tom: i do understand you work or american banks.

is there an adult in the room that will clear their balance sheets or do they dilute what happens. jacob: we have an adult in the room, in the city, in the country and in the world. tom: is mr. draghi the adult for the banks now in europe? jacob: he is a very significant and distinguished adult. tom: i agree. francine: thank you so much. jacob frenkel. jp morgan chase international chairman. i think we're getting the french prime minister talking at the moment. we in fact have a live shot from paris. he's talking about the deadly attack yesterday on the champs-elysees. let's get to our reporter who is on the ground in paris. will any of this shift how

people will vote on sunday? we're talking to angel gurria, and he says it won't have that much of an effect on how the french choose who they want to go to in the second round. reporter: it will be hard to tell because there's only a few hours left before the end of this campaign because from midnight to tonight french time, the no opinion polls are allowed and no interviews and no campaigning anymore. the opinion poll we had today from opinion way showed the republican candidate was gaining one point and the far left wing candidate was losing of this 18% but 85% poll was conducted before the attack. we should have another poll later today. of course the danger is that the french people who are still undecided which represents

about 30% of the registered voters change their mind at the last minute and obviously use his in the vote on sunday. tom: thank so you much. we have more to look forward to in the coming hours and more from the meetings of the international monetary fund and the world bank and francine travels to paris. she and david will have our coverage sunday afternoon in new york. and we'll look at turkish lira, stable. this is bloomberg. ♪

jon: the eu braces again.

the bond market finds some stability. the treasury secretary said the tongue for a risk rally. deutsche bank takes first position in the race no one wants to win. the bank hit with the fed's first major fine for failing to comply with the volcker rule. the markets, let's get you up to speed. political risk in europe colliding. the euro a little softer. the treasury market is stable. futures a little firm. continues,ed speech 9:30. neel kashkari and a q&a session. killer pmi's in europe. will the u.s. follow suit? 10:00, existing home sales for marc