regulations and rollback dodd-frank. he spoke moments before the signing of the treasury department. takenent trump: we have unprecedented action to return power to our citizens. we have lifted one terrible at a record clip from the energy sector to the auto sector. we have many more to go in that is going to be happening over the next four to five weeks. mark: the president said businesses and individuals would cut" that"massive tax he plans to reveal next week. mobilizing troops to the korean peninsula after footage published on social media appear to show russian military vehicles and helicopters near the border. russia says the military hardware and artillery were heading back from drills elsewhere and denied any connection to the tensions around north korea.

in a campaign event today, discussing brexit and calling it a chance for the country. ,> it is not just a process it's an opportunity. an opportunity to change this country for the better for the future. may: prime minister theresa should strengthen her mandate ahead of the negotiations. todayof the 91st birthday as the monarch celebrated quietly at home. past buckingham palace, staging a 41 gun salute in hyde park. they played happy birthday during the changing of the guard ceremony. the queen is britain's longest reigning monarch. global news 24 hours a day. this is bloomberg.

scarlet: live from bloomberg headquarters in new york. it joe: 30 minutes from the close of trading in the u.s.. scarlet: u.s. stocks falling this afternoon with oil sliding below $50 a barrel. joe: the question is, what'd you miss? scarlet: a race for the french presidential election. says to be investor very afraid. she says should terrify. and president trump signing an executive order. we will your from the white house budget director nick mulvaney. the let's look at where

averages stand. abigail: very small declines for the major averages heading into the close. all down slightly. this is basically on a quiet day. and been down about .5%. try ton we saw stocks climb higher after president trump said he would be revealing a tax plan next week some consolidation. it we are at gains for the major averages. interesting in contradiction. move before the 10 year yield. row,ll six weeks in a telling as bonds were rallying with price in verse. and we have yield, the 10 year yield down six weeks in a row.

ahead, of course, of the french presidential election in. pretty interesting to take a look at that. this is g #btv 7985. the 50 day moving average. in yellow, the 200 day moving average. time of theound the brexit, the s&p 500 slices the 50 day moving average. something similar happened around the time of the u.s. election. have it recently, we back below the 50 day moving average suggesting a move down to the 50 day moving average. concerned bynalyst the positioning of the s&p 500. we could see the s&p 500

drop-down. it would be a 7% pullback. let's round this out suggesting the pullback could come g #btv 4350. in white, the s&p 500. ad around those big events, big pullback around the time of the u.s. election. but the point i really want to make here is that the vix has moved above the trendline suggesting we could see a measured move higher up toward 20. could, in fact, see the s&p 500 pullback. things could happen. see a bit of could a pullback based from technicals as well. thanks, abigail. what did you miss?

the annual imf meeting in washington will continue through the weekend with a focus on the state of the global economy and international development. while the u.s. economy is poised to gain steam, that rosy forecast could change if president trump promises tax and fails to materialize. steven mnuchin talked about the timetable for reform. have a treasury staff working hard on this day and night. and we're pretty close to being able to bring forward what going to be major tax reform. president said the tax plan will be released on wednesday. coming to us from washington, the director of the imf fiscal affairs department. thank you very much for joining us. several years, people said that the u.s. needed fiscal stimulus in some way whether it was infrastructure or lower taxes.

some sort of positive fiscal impulse. with this be helpful in the united states? >> we have been advocating for many years that there is a very good opportunity associated with u.s.rate tax reform in the if you compare the u.s. with other countries, you see the corporate tax rate is very high. the federal tax rate is 35%. it can go higher than that if you add state taxes. at the same time, this tax rate , the taxthe highest revenue is 2.2% of gdp compares with 2.9% for the oh ecb average.

clearly, there is a very high low tax revenue, a narrow tax base. the first advice that we give is to lower the tax rate and widen the tax base. scarlet: have you spoken to anyone in the white house? how they responded to that kind of recommendation? >> we have engaged with the u.s. administration and we have had a dialogue in the past. at this particular point in time, we are eager to learn about the forthcoming proposals for reform from the new administration. just now, weid expect news in the coming weeks. a good argument that the u.s. tax system is in need of some sort of fundamental structural reform. given the fact that the corporate tax rate is very high,

but that collections are little, it seems like there's an opportunity to fix that. but what about from a cyclical perspective? is there an argument to be made that fiscal stimulus on the tax i door spending side would need help in ?he united states thehe fiscal stance in united states should be neutral in the current year. and going forward, a gradual process of consolidation can take lace to put the public debt to gdp ratio in a firmly downward path. advocating for years that the u.s. would benefit from a medium-term fiscal framework. we have been waiting for this white house to come out with the tax form announcement.

that meanness the same theme across the rest of the world? are they held hostage to what the trump white house does the? -- does? >> one thing we emphasize in the fiscal monitor is that fiscal policy is now, all around the world, being asked to do more. given in many countries, high levels of public debt, contingent on risks that have to do with some financial sectors. long-run trancelike demographics. -- trends like demographics. there are restraints on what fiscal policy can actually do. the fiscal monitor achieving more with less. i wonder to what extent

the is discussion about how much influence the imfnd other multilateral organizations have in an environment where populism is risi. we heard populist politicians voice skepticism about the imf. had you respond to concerns that the imf is less relevant now? it,r: so the way we see there is an important case to be openness for trade. if you look at the trends in the world in the last 30 years, we have seen that trade has helped with literally hundreds of millions of people out of poverty. onhave seen convergence

economic levels of development, it is the same time the imf very much emphasizes the need for thatries to adopt policies guarantee the benefits of growth are shared widely. the fiscal policy, fiscal transfers, and taxation have a very important role to play. are you worried your influence is waning and less relevant now given skepticism towardsd by politicians the imf and towards international organizations. important case indeed,de that, national economies adopt policies for inclusive sustainable growth.

g-20follow what the communicates and recommending to for the various national economies. it then that debate is a debate that can be one. scarlet: director of the imf fiscal affairs department, joining us from washington, d.c. we will be hearing from mick mulvaney, he will tell us what is driving the discussion on tax reform and where the white house stands on the border adjusted tax. from new york, this is bloomberg. ♪

scarlet: whadid you miss? the man that oversees the country's budget plans to give the president $1 trillion worth

of work on the ground. in an interview with david westin, mick mulvaney says president trump's infrastructure plan would be ready in the fall. one way to fund it is the border adjusted tax. david asked if the white house has taken a position on that tax. >> not yet. it is at the center of our discussions for the past several weeks. over ary mnuchin treasury, gary cohn has been leading the team on tax reform and the border adjustment tax. forms of the tax proposal have been part of our discussion. it is fair to say we have not settled yet but my guess is you will know by next week. david: that would be great, to get the plan. can, a real supporter of president trump. he was on yesterday and thought that the border adjustment tax would be a great thing for america. it would be part of a plan to get growth going again in this

country and it would help, including his own home depot. -- why not have border adjusted tax? mick: he is right and consistent with what we are coming from at the white house. everything is key to growth. we're not starting with a tax plan, we are starting with a goal of economic growth at 3% into the future. we are trying to back fill from there. what tax policies give us the best chance of getting that long-term economic growth. you get some aspects of that. it also creates difficulty. not just in terms of political difficulties, but in terms of market segments that don't benefit from it. itnderstand his views on how would not be harmful and possibly helpful to home depot. others think it is hurtful to them. reasons it has been 30 years plus since we've had a massive tax bill. they are difficult to do.

a lot of people with skin in the game. we understand he's been a good supporter and we understand his position and we are that into consideration. david: one of the issues is how to pay for the massive tax cuts. if you can't go that way, do you have alternatives to come up with $1.1 trillion? mick: there are a couple options open to us. it has to be revenue neutral. it technically has to reduce the deficit outside the 10 year budget window. i know i just put half of your office -- audience to sleep. if we decide that instead it is thatimportant to give deficits are not driving the discussion but it is part of the discussion. how do we get economic growth?

it would have to be less than 10 years. the balancing act we are to go through right now. we haven't settled. david: and you couldn't have it by friday before the government gets shut down, you in the president say it will not happen. i know you are preparing for the worst at the same time. there has to be negotiation with the democrats and certain things on the table. wall?the me look at why this is a critical juncture for this administration and washington, d.c. the next four days will tell you a t about the next four years. we boiled it down to something we want very badly that the democrats don't like. the border wall.

something they want very badly that we don't like very much is the cost-sharing reductions, the obamacare payments. ordinarily, this would be the basis upon which a negotiated resolution could be achieved. the question is how much of our stuff do we have to get and how much of their stuff for they willing to take? that's the way we hope that it works. csrffer them one dollar of payments for one dollar of wall payments. that should form the fundamental understanding that gets us to a bipartisan agreement. if the democrats say we can do that, we can do this. it's a good sign in the short-term and long-term. if they walk away and choose to not participate, it's a bad sign in the short-term and for the next several years. scarlet: budget director mick mulvaney speaking with david westin. time for the bloomberg

business flash and a look at some of the biggest stories in the news right now. general electric reported a sharp drop in cash flow, putting a dent in the industrial giants results to start the year. operating cash flow dropped to -$1.6 billion in the first quarter. $1 billion worse than expected. ge is looking to regain momentum after the oil price slump impacted growth last year and wait on the stock price. wall street has capitalized on an accounting rule that creates tax gains and losses tied to stock-based compensation. rising share prices for the six biggest banks boosted first-quarter net income by $1.4 billion. the change comes in the difference between health regulators and the irs. the difference was reflected on the balance sheet and not the income statement. apollo global has joined the list five it equity firms finding creative ways to deploy record amounts of cash. it is raising the amount that

can invest in public stocks from the new buyout fund. a technique utilized by kkr. apollo plans to raise $20 billion and can use 10% of the money to buy shares on the open market. it doubles the amount it could allocate in the previous pool. that is your bloomberg business flash. scarlet: a new iphone isn't due out for months but investors are smelling success. how the numbers are adjusted higher. this is bloomberg. ♪

scarlet: i'm scarlet fu. what did you miss? analysts are growing optimistic on apple. they have been ratcheting the price target for apple. that is the blue line. it has been taking place in february and the average price target is about $154. about 9% higher than the current price. see appleh analysts climbing to $185.

apple's share price is in white. a for this would be the newest iphone, the 10th anniversary edition. morgan stanley was the latest price target -- morgan stanley says supply chain and data demand show a clear path to a super cycle for the next iphone model. joe, you check your iphone all the time and you're due for an update. joe: i just got a new one. check out on the bloomberg from a few days ago, mark berman -- scarlet: the iphone x? joe: a pretty dramatic term. french elections this weekend. i want to look at one of the really cool functions on the bloomberg which is the volatility surface. euro, usd, the euro. this is a 3-d look at volatility. , we see one week to 10 years out. we go from puts to calls.

and up here, we look at the premium. at the front of this volatility surface, we see massive premium for puts in the short term. there is a lot of anxiety and protection against downside risk . it the election is in three days. if you go out on the longer term not much anxiety about the euro. it is very much concentrated on thetely, acutely negative downside. a very good way to get the holistic perspective on how currency options traders are seeing the currency at any given time. joe: i love that. i lovelet: -- scarlet: that. it was the greatest expedition i've ever gotten on that. the market close is next. take a look at the major indexes. we have less than four minutes to go to the close. we are looking at modest losses for the dow, s&p, and nasdaq. all three indexes look to be

closing higher. from new york, this is bloomberg. ♪

♪ we are moments away

from the closing bell. "what'd you miss?" the s&p 500 had its best week in two months. i am scarlet fu. joe: and i am joe weisenthal. if you are tuning in live from twitter, we want to welcome you. scarlet: u.s. stocks drifting lower to the close on friday. for the week they are higher. a bit of a come down at the end of the week before we had to the first round of the presidential -- french presidential elections. is the calm before the storm or more storms. scarlet: s&p 500, not a lot of change among the sectors. telecoms down 1.5%, utilities up 0.5%. one group is rising, the other declining. from the to glean

sector breakdown. but individual movers driven by results. general election having its worst today since late january after putting a shardrop in cash flow. -$6.1 billion. leader collins was the in the s&p 500, best days since s&p 500. mattel, the lowest since november 2015. first-quarter results missed anasts' estimates. a lot of questions whether a come back is feasible. analysts were looking for $.17 in terms of the loss. joe: let's look at the government bond market. on u.s. two-year yields, but it does not tell the story. are lower in the day than we were higher. those trump comments about

unveiling tax reform picked up yields and stimulus. on the surface, a very quiet day, like equities. a quick mention of france. we have to talk about france because they have the election coming up. a modest increase in yields. macronenign outcome with getting through, but no one too eager to rely on the polls. anything could happen. are bettingestors up safe haven currencies like the yen, like the swiss franc. you see it whether it is the dollar-yen or euro-yen. 1% --eek it has climbed less than 1% this week. the shooting in paris yesterday did not have much effect on the

down other than weighing already thin liquidities and options. joe: on commodities, i want to talk about oil and gold. decline in oil, west texas intermediate dropping below $50 a barrel. more concern about rising u.s. supplied. no clear answer what will happen with the future of those production cuts out of opec. oil ending the week below $50. here is the intraday chart tung around 10:00. scarlet: those are day's market minutes. we want to take a deep dive into the bloomberg. you can find our chart using the function at the bottom of the screen. i want to start with our earnings analysis screen. it is early in the day, let's see where things stand. in the s&p 500 have been reported, that is about 1/4 of the index.

earnings have topped estimates by more than 5%. in terms of growth, let's click over here so we can take a look at how much earnings have arisen or fallen versus last year. we are looking at almost 5% sales growth and 30% profit growth. keep in mind, analysts are looking for 6.7% sales growth for the full quarter. this is just what has been reported so far. on earnings, they are looking for a 10% profit increase. financials are the companies we are paying most attention to. 66 companies have reported so far. i terms of where i see red, want to highlight industrials, down 10% since last year. energy profits down 20%.

it is hard to draw too much of a bankssion, given only two have reported. it is a great function to keep track of where things are now. joe: and we can continue to keep track as it progresses. i want to look at data from the last two days, the survey data. the yellow line is the business outlook, the white line is today's market flash pmi. you see it surge after the election. both of them are starting to cool off a little bit. the market number that came out commentary at warned that q2 is off to a mediocre start. the philly fed number showing good growth. that initial euphoria in terms of how businesses saw their outlook, fizzling a little bit. we have to keep an eye on the surveys in the coming weeks. isrlet: i wonder how much

linked to first-quarter softness in the past couple years. data ande is actual how the expectations on policy have changed. "what'd you miss?" major money managers warning stocks aren't unsustainably high levels. billionaire investor said, years of low interest rates uploaded stock valuations and should be terrifying to a central banker. he is joined by others were warning of possible corrections ahead. with us now is a bloomberg macro strategist. cameron, thank you for joining us. can people call doubles? can they say this is looking bad, it will explode? >> it does not mean you will be right. the late 1990's was a period when smart and successful investors thought it was a bubble, which it was.

but one or two years premature. at the end of a bubble period, the price action goes parabolic. if you go short you risk losses, but if you get out there is an opportunity cost. you saw it with a lot of money guysers in the mid-1990's, who were conservative and ultimately writes, -- right, they were not using conventional valuation measures. the people who allocate did not want to believe it at the time. scarlet: forget bubbles, maybe you could call it a correction. take a listen. >> i am thinking we will have a significant correction this summer, or early in the fall. but i do not think this will be a bear market.

is still bull market intact and ultimately, valuations for stocks will be higher than where we are today. scarlet: my apologies, that was last week. consider the bear market, what concerns you now? cameron: valuations in terms of ratios higher than you would like it to be. ago i talkedhs about my favorite indicator, the real earnings yield. flashing at red levels, i would say amber flashing levels. not as compelling as it was for the last seven years. positioning is always an issue. you can perhaps be a little more , a fund manager survey showed people were taking money out of the u.s. and allocating it into europe.

you could argue there was a tacit underway. a lot of the rally of the past few months has been feeling a narrative of hope that the new administration would work friendly policies through. it has been stagnation so far on that front. joe: when you look at the various indicators you like to see, to whatever extent you can time the market, you see yellow flags, but no massive signs of -- if that is a word. cameron: it is a very nice word. it can be triggered by idiosyncratic events, the unknown unknowns. the bear market, a 29% down move. since the 1960's there have only 500 seven downdraft in s&p in a three-year window.

every single one of them but one, you saw inflation accelerating during the down move. we had an uptick in inflation over the past few months. but because of the base effect, we are at or close to the peak. from that perspective, inflation is a fairly benign factor. financial conditions are absolutely critical. you can still have a negative real fed funds rate. historically, the market does not peak until that goes above 2%. we are close to -2% now. joe: the big event this sunday, the french election. how are macro hedge funds thinking and positioning for any risk that may emerge? cameron: broadly speaking, not. it is so close. the edge anyone would have on

this is relatively scanty. would have on this is relatively scanty. particularly if it comes out over the weekend. your first call will be the foreign exchange market. i worked without a number of years and i can tell you, the price action in new zealand time on a monday morning is less than you would like if you have a good position. what people are generally going to try to do, play their car relatively close to their chest. if there is an outside move, they could say that. scarlet: you talked about positioning. they made clear one area of concern is a risk party funds. by some measures, half $1 trillion put into these targets. are they invested in the same place, do they end up putting their money in the same products? cameron: there is probably some dispersion in terms of strategy. commentalso say i saw a that the poll was grossly exaggerating the size of the

risk inherent and shock. risk parity not that risky. i also saw the net flows in the risk parity strategy, the outflows for the past several quarters. can sayery least you the risk is not as big as it was a couple years ago. scarlet: cameron crise, bloomberg's strategist. we saw a less talked about housing sector improving. the home-improvement market. this is bloomberg. ♪

mark: france's anti-terrorism prosecutor has confirmed the assailant who shot at police officers in paris thursday was born in a small sore burp -- suburb of the capital city. 39-year-old,was a used weapons including a shotgun and large kitchen knives. pieces of paper found next to the suspects body and in his car had messages which suggested support for islamic state, which claimed responsibility for the attack. the paris mayor was among those saying -- paying her respects at a makeshift memorial for the -- for the was officer. president trump says young dreamers and rest easy on his immigration policies.

in an interview with the associated press the president said he is "not after the dreamers, we are after the criminals." former president obama changed enforcement priorities to protect many young people brought to the country illegally as children. in other news, house speaker paul ryan is leading bipartisan congressional delegation to warsaw to meet with poland's president and prime minister following the recent deployment of thousands of u.s. troops there. talkseaker says today's are focusing on economic and security issues. the congressional delegations trip to europe is scheduled to include stops in britain, norway, and estonia. more than two months after president trump got into a dispute with the leader of australia, vice president pence will be working to smooth over any lingering hard feelings. the vice president will meet with malcolm turnbull tomorrow as part of his 10 day, four country trip to asia.

he will reassure the prime minister of the state of the unusually strained u.s.-australia alliance, laying out the new administration's priorities for the pacific rim. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am mark crumpton, this is bloomberg. scarlet: "what'd you miss?" the housing market has seen good data. posting numbers not seen since 2007. for-improvement activity, more on that, let's bring in brad hunter, a chief advisor for homefinder.com. i want to go inside the bloomberg and look at home depot's shares. they have been on a steady climb up this year, $150, trading at a record high. if you go to the five-year chart, it is a straight line.

does this mean the latest survey indicates there is more good news ahead for home depot and lowe's? they have beeny, killing it at twice the speed of other retail. one thing we are seeing with home depot, selling a lot of appliances and getting very strong numbers in what they call the large ticket sales. $900 and above kind of purchases. something like 12% annually in that category. that dovetails with our research. we are seeing that consumers are opening their pocketbooks whiter -- wider when it comes to spending on their homes. whole room, whole bathrooms. at 1700 businesses in the home-improvement space and the majority said their average job is bigger in terms of dollars than it was a year ago. and only 7% their average job got smaller.

so people are spending on bigger things. we did a survey of homeowners and found the average homeowner is spending 57% more over the last 12 months than they did at the prior 12 months. joe: what accounts for the difference? is it just the cyclical state of the economy? thatare the key variables affect how much a homeowner is inclined to spend on renovations? to be there able crossroads between homeowners and the pros doing the work, able to look at millions of data points. what we see drives us to the conclusion it is all about homeowner equity, that is the number one thing driving the bus. it has doubled in the past five years. at the same time, home prices have gone up. most people are in a positive equity position. number one, people feel reacher

towealthier, more confident upgrade the countertop, whatever it might be. secondly, they have the means to do the project because they can get loans more easily if they need to. thirdly, mobility. lockedwho were formally into their homes because they were under water in their mortgage, if they sold her house they cannot pay off their mortgage, they can now move. and when people move, that triggers two more home-improvement. one when they sell the house, and once when they move in. they put in the flooring, the subway tiles, the backsplash. scarlet: compare and contrast the optimism we see now versus the last housing boom, 2005 to 2007. brad: home-improvement was going through the roof, just like housing was.

but we are seeing numbers that are headed higher and higher now. with the generational things changing, millennial's now getting into home ownership, boomer is still spending a lot upgrading their homes, we see continuing growth. we just have the easter holiday, now we are in the spring. homeadvisor, we see a big spike in the number of service requests after easter. he goes through the spring and we think it will be a very strong spring for home improvement. joe: we have a chart about different generations. sometimes i watch those home they walkv like hgtv, into the home and the guy says look at that crown molding. ido not know what that is and do not care, but the millennial's are spending a lot these days and i wonder what their tastes are, relative to the older generations. what do they want to see in a

home versus baby boomers and genxers? brad: they have modern taste, but they cannot afford a new home. they are priced completely out of the new home market unless they have generous in-laws. but they can buy fixer uppers. on average, the millennial homebuyer buys a home that was made in 1984. 33-year-old home, as old as they are, needs some work, generally. but they do not put all the money in in month one, they can't. over a period of a few years, they put it in for the things they have to do. termites, ands, over time they put in the tile they like, the hot tub, entertainment system, all that. joe: brad hunter, home advisor chief economist. scarlet: breaking news, morgan stanley saying -- has resigned

from the board of morgan stanley. he is the former chairman ceo, resigning from morgan stanley's board. we do not have any more details on how the replacement will be found. earlier it was revealed the contents of the letter he had ,ent to an activist investor that was interesting and have interesting details. scarlet: there is the context. joe: we are nearing zero hour in france. they had to the polls sunday to vote in the first round of the presidential election. what does that tell us? this is bloomberg. ♪

♪

scarlet: i am scarlet fu, "what'd you miss?" one theme we are tracking is the switch of u.s. markets to emerging market stocks. a blue line attracts emerging markets relative to the s&p 500. it is a ratio, when the line goes down emerging markets are underperforming u.s. stocks. they failed to sustain this year's rebound. i will zoom into you can see how the blue line has moved higher. the reason why is to look at the white line. that tracks this overall trend carefully. it is a ratio of industrial metal prices climb -- prices like copper. it is now at an 11 year low. lumber is a proxy for the u.s.. to lumber ratio.

the last time to look at it before the two rounds of the french election. let's check in on the top right, you get the latest chart. this first chart, the probabilities emmanuel macron still far and away the betting market favorite to win the whole thing. marine le pen is next and in yellow we see fillon. one chart over, the current polling. inron in the lead, melenchon the red. he has leveled out, not gained in about a week. maybe some relief there. candidate,ialist really been fading. scarlet: 7.5%, not high. is tax informed dead in the

water? what it is suggesting. this is bloomberg. ♪ hey you've gotta see this. c'mon.

no. alright, see you down there. mmm, fine. okay, what do we got? okay, watch this. do the thing we talked about. what do we say? it's going to be great. watch. remember what we were just saying? go irish! see that? yes! i'm gonna just go back to doing what i was doing. find your awesome with the xfinity x1 voice remote. ♪

mark: i am mark crumpton, it is time for first word news. president trump signed executive orders to review u.s. tax regulations and rollback dodd-frank. he spoke just before the signing at the treasury department. president trump: we have taken unprecedented action to bring back our jobs and return power to our citizens that had been taken away. we have lifted one terrible regulation after another at a record clip. from the energy sector to the auto sector, we have many more to go. that will happen over the next four to five weeks. says the president

businesses and individuals will "a massive tax cut," in a package he intends to unveil next week. "ahe is the benchmark to measue new administrations achievements is in his words, a ridiculous standard. he tweeted that sentiment this morning. he will hit the 100 day mark in office on april 29. he declared no administration has accomplished more in the first 90 days. new supreme court justice neil gorsuch cast his first deciding vote, allowing arkansas to begin executing several death row inmates by legal -- lethal injection. he voted in line with his four fellow republican attorneys to execute ledell lee. he is one of eight arkansas has been trying to execute before the lethal drug expires at the end of the month. first execution

since 2005. venezuelan officials say another person wasn't killed today in a wave of antigovernment protests in the capital city, caracas. it brings the death toll to at least nine. demonstrators have been marching against what they call a slide into authoritarianism and economic collapse. they also plan to block the nation's main roads on monday. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am mark crumpton, this is bloomberg. scarlet: let's get a recap of today's market action. a slow drift lower for u.s. stocks on this friday, the friday before the first round of the french presidential election. the dow moving 31 points. but for the week, all three indexes closed higher. joe: "what'd you miss?" president donald trump says he will have a tax announcement

wednesday before his 100 day mark in office. but merrill lynch indicates tax reform from a market perspective looks like all that a dead issue. we have more on that call with the head of u.s. short-term rates at the bank. a lot of enthusiasm about tax reform, people realizing it might be difficult. before we get into what the market is saying and how traders are seeing this, is there a difference between tax reform and tax cuts? do across-the-board tax cuts, or a complicated deficit-neutral kind of thing, from an economic perspective they are not equivalent, right? >> i think what the market wants to see our policies and tax reform helps with that. a lot of folks in the administration have talked about simplification, progrowth policies, providing incentives to bring business back to the u.s. instead of keeping businesses or cash offshore.

that is the reform the market would like to see. tax cuts are a good thing and i would be stimulative in the near-term term, but a broader reassessment of how the tax code is structured is what the markets would ideally like. scarlet: how did you come about your conclusion that the short rates market sees tax reform as dead as opposed to just struggling through growing pains? mark: the analysis our team did looked at near-term market indications about what is likely for increases in rates over the next few years. we looked at a probability distribution of rates. let'spulled -- scarlet: pull that up. mark: it shows the mid-curve options in 2018. that has shifted far to the left. joe: we have the orange versus the yellow. the oranges right now, the yellow is mid-march. mark: the probability has

shifted lower. roughlyysis indicates 35% chance for the market that increases are no greater than 50 basis points over the course of between now and 2018. our baseline is still two additional rate hikes this year, they will look to raise it three more times next year. we think what the market is pricing is a little too low. joe: i am looking at another chart here. it is the treasury curve, where it stands today, that is the white line. and, where it was in mid-march. peaked. the day it we are flatter now, what is that telling us? mark: it is telling us there are increased risks the markets are assigning to, reaching the end

of the cycle by 2018. we do not think that is realistic. especially if any stimulus is provided from tax cuts, reform, infrastructure. all of these things the administration has strongly touted. market is overly pessimistic on the prospects for near-term growth. we expect to see that reverse. there is debate on how quickly the white house can act on tax reform. we surprised by any of your findings? mark: our surveys have shown a broad consensus, 59% of respondents think tax or formal be done by the end of the year or we will see something completed on that by the end of the year. we have seen the expectation for that decline, which is no supplies. we are still talking roughly 60% orthe market that think tax former will indeed take place

and that we should begin to see stimulative benefits of that in 2018. it suggestshe case, it is too low and too much pessimism in the market. if the survey participants are right that tax or form is still on the table, then the market is too pessimistic. on the flipside, it could be the market is right and the survey respondents are not paying close enough attention. mark: sure. there is clearly a divergence there. not every survey participant will have the same market impact as other market players will have. the market is indicating a lot of pessimism. but we can to align with our survey respondents on the view something could get done. there are a lot of incentives to make sure it happens. president trump plans to unveil something wednesday with regards to the white house's version of what tax reform will look like.

we believe there incentives are aligned to get something done. it will be much more challenging for them to face a midterm election cycle without domestic legislative wins. and will to avoid that take necessary steps to ensure something gets done. wurlet: i want to give david a shout out. he was telling us they have to get tax reform done before august, which means you have to have it by july, passed by june, planned by may. if not, more than a tactical retreat on trump trade. what would that look like in the rates market and other asset classes? mark: it is probably already beginning to price asked some of that trump trade. rally,int basis points the clear indication of that. it is possible that could extend if there is negative income --

outcome associated with the french election. we do not think that is the most likely outcome but we could expect pessimism through markets with lower rates, lower breakevens, a reduction in toets that can be assigned go with the unwinding of trump trade's. scarlet: we have some breaking news, united airlines says oscar munoz, the current ceo, will not be chairman of the company. leavingir says there is his termination to the board. the second amendment thaties good reason, indicates why someone would not be chairman when they are already ceo. oscar munoz will not be the chairman next year. bloomberg, at the you can see oscar munoz is the ceo of the airline company.

over, the shift current chairman of the board, roger melton, has been there since june of 2016, not yet one full year. oscar munoz will not get that chairman role. this is bloomberg. ♪

scarlet: "what'd you miss?" in france, they pick their head of state every five years. every vote has equal weight. in theory they can win on a first ballot if they garner 50% or more of the vote. they generally go to two rounds. the candidate who garners the most votes in round two is named president.

this year it will be held april 23 and may 2. round,e on sundays first let's bring in our guest. great to speak with you. the conventional wisdom is that marine le pen will prevail in round one but be were -- be defeated in the second round. in 2000 to her father did well in round one, but lost in round two. a lot has changed in the last 15 years. what is your confidence that the and center can come together again? >> we should start with what happened yesterday, the attack in paris, it may affect the result. to answer your question, she will most probably be one of the

final candidates in the runoff, but she will be facing either ma fillon, antrist, or conservative former prime minister. i guess she will lose to both of them. she is in favor of believing the european union, which the majority of french people do not want. to will not have a majority govern because a few weeks later in june there will be parliamentary elections and there is no way the national front can win that election. joe: you said she will most milly be facing macron or -- fillon. is the melenchon momentum losing? has done a very good campaign but he has plateaued the past few days.

stakes as isecurity was referring to earlier, i do not think people are ready to vote for a candidate with such ideas. the president should be seen as a strong man they can deal with terrorist attacks as well as putting france back on track economically. how much faith do have in the polling given what we saw in the u.s. election and brexit before that? it shows that marine le pen will be one of the top two, that it will definitely moved to a second round. philippe: it will move to a second round, and never before happened that one got elected in the first round. the problem is, they are all very close. and le pen. macron could makeble fillon

it to the second round. steady.been studying -- per electorate is stable, she has managed to capture 25% of the electorate in the polls. i do not think she will get many more, despite what happened yesterday. i do not think she can get more than 25%, which would already be a great success. the question is, who would she be facing? the we are talking about technical stuff and the prospects for sunday but i want to talk big picture. that said,n op-ed the prospect of a marine le pen presidency upsets a political positivism, the view democracy can only go from good to better, for being a necessity to a right. marine le pen's election would go counter to history and therefore, it cannot be.

this is a big theme of politics we have seen around the world in the past year. is there something bigger happening or have we extrapolated a couple close votes from the u.s. and brexit and overdetermined a story about what is happening in the world? philippe: it is easy to draw parallels, but i do not think the french situation is exactly the same as the ones you described. the national front has been around for 40 years. on one hand, a claims not to be part of the establishment. on the other, it has been around daughter of the founder of the party. they have a traditional, right wing, almost neofascist electorate. at least half of what they have now. half, the people she has managed to gather, the because they do

not see traditional politicians as succeeding. neither central left or central right. that is what she is saying, you have tried them all, why don't you try me? experience in government and nobody knows how she will govern because it she will not have a majority in parliament. joe: thank you very much. this is bloomberg. ♪

joe: "what'd you miss?" have markets become too pessimistic on the u.s.? why some are making the case for

optimism again. >> i think first of all, you have to look at where we were a couple months ago. structurally and globally the economy was doing well. we saw an uptick in growth across the world since the end of last summer. it was not specifically since the election, which was the mistake everyone focused on. then we got a massive trump premium in the market, a big belief that there would be a fiscal stimulus in the u.s. u.s. asset started getting mispriced and looking less attractive. early march i turned more worried as the price turned more negative. now we see a flip of those situations. we have had this pullback but there is been no panic, no sign of a stretched leverage position. positive again despite the fact we have seen lower prices.

we have seen globally very good data. in the u.s. the data has not been good. in china, asia, europe, it continues to pick up and look positive. most importantly, the tail risk we have worried about we have worried beyond. we were worried about trade wars, countries being called currency manipulators. but we have moved beyond that. it is not like trump will start a trade war with president xi in china. it looks like they are getting along well and trump has made an about-face from his more dangerous policies. think about one potential risk is still out there, the possibility of a le second round in the french election where someone pick someone backed by the communist, eurosceptic nationalists. how do you feel about the risks there? >> the risk has risen quite

suddenly in the last week. i have been ignoring it until yesterday. the reason i was ignoring it, basically no chance le pen wins. the polls have been consistent but she will find it hard to win the second round. what took us by surprise is the sudden rise of melenchon. he is behind in the polls but he has momentum. if he gets through he is expected to beat le pen and fillon, and he is quite close with macron. secondot through the round it would likely be against le pen. melenchon is just as bad for markets if not more so than le pen would be. knew 2017 would be heavy on the political calendar. we are also getting a u.k. election, a huge rally in the pound.

is there more to go on that front? mark: i think there is definitely more to go. the next couple weeks it will remain difficult in the short-term. we cleaned out a large chunk, but there is still a large short position. with of the u.k. leaving it does not change the short-term. it changes the long-term brexit picture. but it will not change in the next six months or year. that outlook is one of improving fundamentals. the current account balance is it -- is better than it was expected, trade, industrial production, u.k. economy is doing better than expected. it is not doing brilliantly, but the market has a doomsday scenario. -- the despite the fact election was a catalyst to look at economic fundamentals.

the u.k. economy is not doing brilliantly, but not doing too bad, so why are we so concerned? the postelection environment, incredible enthusiasm about fiscal stimulus and economic growth. and overshot on the upside. now you see a skepticism perhaps unwarranted. through it all there is a solid global picture and nothing has changed. now there is an opportunity for markets to catch back up and continue with good things all around. mark: exactly right. think the global economic picture is very strong and uptickout of asia, a big in chinese growth from where we were looking at a year ago. globally it is very good. the u.s. have this premium that was unjustified. the u.s. is not the big driver of the global reflation story. it is the u.s. reflation story

you should doubt, not the global reflation story. it will not drive it on its own. i do not think the u.s. equities will roar ahead. aboutre no longer worried the downside because they will move up in line with everything else. the best opportunities in the world are still outside the u.s.. joe: that was my interview, former fx trader who writes for bloomberg. this is bloomberg. ♪

scarlet: "what'd you miss?" modest losses for u.s. stocks friday. the french had to the polls sunday to vote in the first round of the presidential election. tune in to bloomberg 2:00 p.m. eastern. joe: and i will be watching the gdp data. thelet: we could see government shut down by next saturday. that is all for "what'd you miss?" joe: have a great weekend, this is bloomberg.

alisa: alisa parenti in your watching "bloomberg technology." president trump has signed executive orders today to review u.s. tax regulations and

rollback dodd-frank. the president also says businesses and individuals will receive a massive tax cut under a package he plans to unveil next week. president trump says young immigrants shielded from deportation should rest easy. he tells the a.p. he is not after the dreamers, just criminals. supreme court justice neil gorsuch cast his first deciding vote along arkansas to begin executing death row inmates by lethal injection. he voted in line with fellow republican appointees. the house intelligence committee is launching its probe into russia's interference with last year's u.s. election. five key witnesses have been asked to testify including f.b.i. director james comey and national security agency director mike rogers, who will testify on may 2. former president barack obama will return to chicago on monday for his