bank earnings bonanza. barclays slumps as trading results disappoint. for ubs. donald trump saber rattles over the nuclear program. rex tillerson talks tough at the u.s. security council. an expectation to show a slowdown in the u.k. economy. how will this alter the brexit debate and the general election? we speak with former conservative party leader iain duncan.

this is "bloomberg surveillance." final trading day of this week. next week is a shortened trading we cure him london because of the main bank holiday. -- may bank holiday. also on track for the third straight monthly advance, which is the best run since may 2016. investors buoyed by the first round of the french presidential election on sunday. the next one is next sunday. strolling up against the dollar. the best run since december. highest since september last year. the best run for a month, also gaining for a second month. gdp data at half past. that stopped sterling in its tracks as gdp comes in line with estimates, relative to the prior quarters.

today -- gdpr could see the economy expand at 1% annualized. historically, the first quarter has been week. will the rest of the year make up for it? will there be a shutdown, to name one issue? trump's tax plan renegotiating. geopolitical risks. crude today is up, below $50 after a rally in the first half of april. oil is set to end the month back below $50 a barrel. here is nejra cehic. nejra: u.s. secretary of state rex tillerson will use his first visit to the u.s. security council today to try to show north korea that the world is united against his nuclear weapons program. economic sanctions are expected to be considered at the meeting. president donald trump told

reuters that a major conflict with north korea is possible if diplomatic solutions fail. in japan, a flood of economic data indicates the modest recovery in the world's third-largest economy is recovering for a quarter, but inflation is largely refusing to budge, with the core measure rising just 0.2% in march from a year earlier. .he unemployment rate stood european leaders, excluding the u.k., gather in brussels tomorrow to finalize the blocked brexit negotiating guidelines. the e.u. warned that the remaining 27 countries are the main concern as it seeks to limit negative consequences for britain's departure. negotiations are set to begin shortly after the u.k. general election on june 8. with a little over a week until the runoff vote in the french presidential election, the rival candidates have stepped up their battle. there radically different views on france's place in the european union and the globalized world is putting

emmanuel macron and marine le pen at loggerheads. the one who today has to create unity within a fractured france, against mrs. le pen, who is the face of the national front, a party we have known for decades. aunfortunately grew up with french political landscape marked by this party. it is the one of hate, refusal of the other, and a shrunken rants. -- france. >> because yes, my friends, i am telling you, this presidential election is a referendum for or against france. , call on you to choose france not him. his platform is about the dilution of france. on his horizon is the deconstruction of france. united airlines has settled out of court for a passenger dragged off one of its planes earlier this month. forcible removal from a kentucky-bound flight sparked widespread condemnation, with footage of the end and incidentfootage of the

going viral. the amount of the settlement is confidential. i'm nejra cehic. this is bloomberg. has become the latest european bank to post disappointing first-quarter trading results. this failed to live up to the gains made up by its u.s. rivals. trading, fixed income along with the 24% jump achieved by the five largest american counterparts. income from equities, the other main trading business, also fell more than expected. >> we had a very strong first quarter of last year, and so on a quarter to quarter comparison, we did not have the uptick that a number of the u.s. banks did. in part, we had a strong first quarter of 2016. we always want to do better in the markets business. but we are comfortable with how we came out in the overall profitability of the corporate

and investment bank is making good improvements. i think we feel good about the quarter. picture fortive ubs. it's a clients return from the sidelines in the quarter. they added more than 20 billion swiss francs of money, boosting earnings in the wealth management business. that helped net income jumped by 80%, beating analyst estimates. >> the strength of this is what you have seen for the last several years, a superior return on allocated capital. we have a 24% return on capital. and without compromising on quality and excellence. ,e are a leader in many areas but they are the ones where we choose to compete. of scotlandyal bank reporting a quarterly profit for the first time in more than a year. upef executive mcewan steps cost-cutting and restructuring

operating profits in the three months through march, topping estimates. the company is on track to lower operating expenses by 750 million pounds this year. let's bring in our u.k. finance team. michael, let's start with you. not the first of the banks this week to report disappointing fixed income revenue. suisse barclays credit specific thing, or is it something else going on? michael: it is the americans versus the europeans on this, and it has been a continuing story of the american banks grabbing share. you have four major european banks report this week. all four have disappointed on the trading front, even u.p.s. -- ubs today. it had gains elsewhere, but posted a surprise drop in that. it has been a continuing story for the last couple of years,

but it is to be accelerating. mark: some of barclays european peers are scaling back from some markets retreating. is that an opportunity to win back the market share within europe? michael: i think that has been part of the plan. he has put his weight behind the investment bank. people were calling for him to scale it down or spin it out. but when he came in, he said, we need this business, and part of that is a bet on taking some share from european banks, but it did not come through this quarter. mark: the earnings have been overshadowed by attempts to unmask this anonymous whistleblower, in violation of the company's conduct policy, which has yet to properly play out. but it could result in him losing his job. is -- the extreme scenario is regulators say he is unfit for the job. most investors do not expect that to happen. sound pretty today

confident about his support from the board, from shareholders. he says he is still committed to the bank. but we are going to see over the next few months, the regulatory investigation play out. mark: persuade me that european banks are still a good buy. look at the screen to my right, the stoxx 600 bank index. since it fell to a five-year low in july last year, look at the ones on some -- the gains some of those banks, the gauge of i-55 percent. 55%. by >> the bottom was meteor last year, and it is the general bottom of the market. as a veryk at banks cyclical sector, where to play the recovery that is going on in europe, and the lowering of the risk -- that is what we are seeing behind the banking sector, but also behind the overall marker -- market.

beenuropean banks have lagging their u.s. peers, but they are catching up because the european economy is catching up. we have seen a lot of efforts in terms of cost-cutting at european banks that will bear fruit in the coming months. veryrospects are still fine for the european banks, so the steep rise after the bottom. there is still the momentum that is going on when it comes to the ratio of earnings. mark: more on that theme in just a few minutes. michael moore from our european finance team. re stays with us. career conflict. in morerump in gauging saber rattling as he heads to his 100th day in office. the latest as we check in on britain's economic health with gdp figures in 20 minutes. we talk brexit and the general election.

the former conservative party leader, iain duncan, with us. ♪

mark: here is nejra cehic. nejra: an unbroken twenty-year streak of revenue growth shows no signs of slowing. the company top profit and revenue estimates in the first quarter as sales may be projections in the current period, reinforcing its message to investors that big spending on warehouses and movies are part of a winning formula. google parent alphabet beat analysts sales projections in the first quarter, ending a four-year streak of missing wall street estimates after the holidays. revenue minus payouts to partners rose to $20.12 billion

as google benefited from a surge in >> on ads on smartphones. clicks on ads on smartphones. --rosoft plans in the cloud weaker demand for support services cap revenue growth in check. to 23.50 6 billion dollars, slightly short of analyst estimates. that is the bloomberg business flash. mark: thank you very much indeed. i will put in my number. all be clear in a minute. donald trump says a major conflict in north korea is possible if the climatic solutions failed, but senator john mccain says the president understands that military action is a last result. tron's comments come as he approaches his 100th day in office. chiefwith us the investment officer at abn amro. we will get the chart. don't worry. as trump approaches his 100 day

anniversary tomorrow, where are trump-flation trade, which is part of the reflation that began? didier: i think the trump reflation stimulus is still in store, because the u.s. economy , withown some good signs growth around one point 2%, essentially because of the very strong last quarter we had. not needeconomy does strong stimulus at the time. like dryomething powder, if you like. when we look at trump policies, we have seen over the 100 days a normalization of policies, with

possibly the exception of the north korean affair. so far, we are not seeing an escalation, so it is still under control. mark: further gains in equities, and risk assets, do they have to plans,led with firm tax firm infrastructure plans? there is a document which is sparse in detail. is that enough to give another leg up to risks -- risk assets? didier: there is still a hope to see a significant cut in tax rates. i think it is probably the point of the trump administration. ofare not talking anymore the whole of the tax system in the u.s., which is like going through the desert. but i think it will be rather precise. trump will be focused on precise items, such as the tax cuts, such as the way

to re-create the condition for the small and medium-sized companies. if you look, for instance, at the index of confidence of the small and medium-sized companies, it is very high. mark: look at this chart. this is a wonderful chart, g#bt v. the gap between hope and reality. the hard data is blue. the soft data, yellow. that is not a worry? didier: of course. let's say the soft data are more volatile than the hard data, because there is a big inertia in the economy. but i think it does not mean that all hope is gone. i think there is still a lot of things to be watched, in terms of exports, things that will benefit. there is something in store still on the hard data to

manifest. mark: and you are basically saying, don't worry about normalization of monetary policy, because it is a background of this economic recovery? didier: yes, i think the normalization of monetary policy is a result of the recovery, and it is not a threat to the economic recovery. we are seeing the central becominghat are simply smoothly separated after coming into the emergency room after the big crisis. really the action is not on what the central banker will do in the coming months. it is the real business cycle unfolding that will capture the attention. mark: back with you in a second. up next, speaking with stimulus. draghi shows enthusiasm about the euro area recovery. inflation means he will not be fighting just yet. the latest on the ecb policy decision, and the output for

europe and european equities. ♪

mark: the ecb maintaining its qe program. remainonary pressures too weak to contemplate paring back stimulus. draghi: the coming data since our meeting in early march confirm that a cyclical recovery of the euro area economy is

becoming increasingly solid, and that downside risk has further diminished. the risks surrounding the euro , whileowth outlook moving towards a more balanced configuration, has still tilted to the downside, and predominantly due to global factors. mark: we are with the chief .nvestment officer at abn amro monetary policy backdrop is still very supportive of the economy. and you think that european equities are still the ketchup story of the second quarter? didier: yes, i think we are still at an early stage, because a lot of people were interested in 2016. people are confused with turning points. we are at the moment unfazed for european equities. european equities have been flying high.

effects that spillover of capital in areas of the various regions, one that can be talked about is europe. europe is a developed market that is a huge ketchup story, but also emerging markets. the case for europe is a strong financial sector which would be boost to the european sector -- it is catching up. you are seeing decent energies backing the european markets. valuations, more than in the have things for next year which represent a risk premium for the medium term. for private banks, for private clients of institutional banks -- mark: this morning's recovery you keep telling me about, is this real? storms had many false over the years. didier: it is a deception

exercise, to go with the earnings forecast. from a verycome low, single-digit environment. thes easier to fly above double digits in europe. this is accelerated by the economic recovery. and on the cost-cutting side, more than in the banking sector -- we know in the overall, let's say, industry of consumer discretionary -- we have a lot of ketchup stories in europe. , which wassector heavily beaten by the emerging markets at the time, they are recovering nicely. that is an area where they have a competitive advantage in places like france. mark: yes, france, gosh. the first round of the election, are you confident macron will win? and will the elections in june allow him to push through his reform agenda? didier: i think there is a

strong chance that candidate macron will win. he has the advantage of adding a .ery broad policy agenda it is not all left or all right. it is both. we can attract a broad base of the electorate. it is concentrated on forward-looking. used toa look -- we look at leaders for the economic cycle. they tried to re-embark the people with what is happening. it is readying people for the momentum we are observing, and that is a big challenge for france. mark: we are talking brexit next. stay with us. ♪

mark: welcome to our weekly brexit show. i am mark barton. here is nejra cehic. u.k. prime minister

theresa may hosted jean-claude juncker for talks at number 10 on wednesday night. the european commission spokesman said they discussed the need for a swift resolution for the terms of the divorce agreement before talks can begin on the future. although brexit will not be final until march 2019, the process of ratifying any deals needs to be concluded by autumn 2019. german chancellor angela merkel laid down a tough line for brexit talks with the u.k.. addressing the german parliament yesterday, she reminded britain it can't expect preferential treatment, as she warned that some officials in london were harboring illusions. the comments came as the remaining 27 european union leaders prepared to meet tomorrow to discuss britain's exit. largest business lobby called on the u.k. and the rest of the e.u. to settle any exit bill quickly and get on quickly. a good arrangement is not about doing the u.k. a favor, but

based on solid economic reasoning for both sides. news powered by more than 2600 journalists and analysts in more than 120 countries. i am nejra cehic. this is bloomberg. mark: getting some breaking data from the u.k., and the economy grew slower than forecast in the first quarter, posting the worst performance in the services industry. growth slowing to 0.3% in the first quarter, down from 0.7% in the final three months of the year. that is weaker than the zero point 4% forecast by economists in a survey. services grew by just 0.3%, weakest since the start of 2015. having made britain the largest growing g7 economy, consumers responded to rising prices in the fourth quarter, by the depreciation of the pound since the june brexit vote. alsong and businesses facing heightened uncertainty as

britain prepares for the general election in june and the start of two years of negotiations to leave the e.u. -- that is the euro rising against the pound today. a downturn in services, which counts for 27% of the economy, driven by consumer focused industries such as retail, hotels, and restaurants. the economy growing slower than forecast in the first quarter. my guest this morning has been a prominent eurosceptic since entering the u.k. parliament in 1992. he was elected leader of the conservative party in 2001, during tony blair's second term as president. it is conservatives returned

i think this is pretty much par for most people would expect the economy to be. i suspect you would see some changes to those figures. as you know, the figures are on a very small data. there is quite a lot of data yet to come. periods in the past where they adjusted upward slightly. my general sense about this is, this needs to be seen completely out of anything to do with europe.

this wants us to get on with this and to get stability. that is what theresa may is saying she will do. that is the point about the election. evan you talk about the flow of the economic cycle, but when you dig deeper, the weak pound is boosting prices. when you look at attitudes toward spending, with a weak pound and higher inflation, clearly that is having an impact on consumer spending. we just sales fell last quarter, the weakest quarter since 2010. that was caused by brexit. how can you not link that performance in gdp, in part at least -- iain: i am not in the business of selecting individual items. any economist will tell you, you start to pick these things out, and you will go wrong. the truth is that the u.k. economy -- the consumer-led level of growth has been unprecedented for the length of time it is going. lots of people out there right now have a concern about the

level of debt they are in right now. there are a lot of longer-term issues in here. but what you can say about the pound is, it was certainly overvalued anyway before we voted to leave the euro. mark: where is the value now? iain: slightly under where it should be. there has been a massive boost to exports. exports will develop a sustainable economy, because most of those exports have been based on the strength of our economy, rather than just consumer spending. that is all slightly longer term. the key point to all of this period -- and you will see a certain amount of uncertainty in these negotiations -- you do need what theresa may says is a strong and stable leadership. mark: does today's gdp figure dan -- dent, maybe slightly, theresa may's case that she is selling to the country ahead of the snap election that the economy is flowing? you might not make the link between the economy and brexit, but many will. they will think, hang on. the economy is slowing.

what does it mean for us? what does it mean for brexit? should i vote for the conservative party? iain: listen, when we were running up to the election, we were told categorically, day one, there would be a massive crash of the economy. as a matter of fact, the economy has outperformed by way ahead. we expect it should remain stable. now, you have this position that says it is slightly down. the forecasts a year ago were telling us we will reach these levels much earlier in the normal cycle. my point is, there is an obsession with the idea that everything is due to the european union. it is not. there are some issues in the u.k. economy that theresa may and the government actually want to deal with, which is this overreliance on consumer spending and a structured area of export-based growth, which is where we are beginning to make that position. when you ask me what this theresa may say, the answer is, this economy is not in a position where you can simply go out and say we will lavish money

on everything, spend on everything we want, and tax people, which is what the labor department wants to do. you need a steady hand on this and a strong leadership. the number one thing for everybody in the u.k. day -- the u.k. -- they want to get negotiations down. mark: can we talk about the election on june 8? 20%e are huge risks in this holding lead that the conservative party has -- turnout apathy, maybe the company will go along brexit lines, how does theresa may and your party counter against those risks, when you have got such a large pulling lead, which could theoretically lead to a much bigger majority? -- the reality is that the public is already coming to i think the very clear conclusion that we have still some weeks to go about what the

alternatives are. this is what theresa may says constantly, and i agree with her. when we come to vote in june, we have a simple choice. you either have to vote for what you want, which is stability and strength, the leadership of theresa may, or you take a gamble, and you think, maybe we don't have to do that, and will vote for something else. the trouble is, you often get the thing you did not really want. that is the case of the labour party. they did not want jeremy corbyn, but let him onto the ballot. look at the disaster since then. the idea of him being prime minister is quite frightening. theresa may said everybody has to vote. it is your election. and you must vote for the thing you must want, which is stable government led by a strong leader. mark: our voters went to vote along brexit lines, do you think? iain: not at all. this is the trouble. i keep saying to everybody, there are some who are obsessed with the idea of what is happening in the european union.

my point is, this election is about government across the board. yes, we need strength in leadership and negotiations. but you also need strength in terms of industrial policy. there are large issues that need to be resolved. there are local areas where theresa may want a proper mandate to govern domestically and in international terms. that is the thing about the last referendum. we had a vote. i do not care what people voted in the referendum. remain or leave has no consequence. the truth is, we had the vote. the key thing we should all want is the sense of strong leadership to get the negotiation done. the strong leadership and stability is vital, and that is the point which is the single message to people. if you don't vote for that, you are voting for the alternative, which is chaos. terrible coalitions between the greens, the labour party, lets fly jeremy corbyn -- and i have to say, the prospect frightens me. mark: we will have to talk about the event date and what it means

for negotiations in the next two years. iain duncan smith stays with us. as than six weeks until the election, we will continue this brexit conversation with a former conservative party leader. ♪

>> we will add some employees within the european union. we have had to restructure the bank for new regulations in the european union and the u.s. we have to restructure for the u.k. we will have to deal with changes to the european union as a result of brexit. we are committed to our position and our role in the united kingdom. we believe that london will stay as a financial center for europe , and barclays is committed to do its part if that happens. staley weighing in on

the state of his business when he spoke to bloomberg earlier. we are live from european headquarters in london. let's check out the markets. nejra: we start with european stocks. they were ever so slightly weaker on the stoxx 600. at the end of the day, lower. a second day of losses for the equity benchmark. but thanks largely to monday's games, after the first round of the french election, the stoxx 600 heading for its biggest weekly gain since december 9. what got a boost from the first round of the french elections -- euro/dollar, we saw the euro hit a session low on the mario draghi decision. you see a little spike higher here. that is where it went higher on those comments to do with the downside risk. traders seemed to momentarily interpret that as a little bit hawkish. 108.95 --are at

1.0895. generally getting more bullish on the euro. you can see that if you look at risk reversal on euro/dollar, euro/yen. the bloomberg dollar index pretty flat to slightly week-- weak. if any of those risks come from u.s. political risks, that could give the euro a further boost. these are euro-sterling one-month risk reversals. we are now fairly neutral in terms of the positioning. it reflects the euro being favored versus the pound. -- alianz and j.p. morgan see if heading lower. cable is at its highest since october, headed for its biggest month again in a year, even after it gave up some of the gains after the gdp data came in. treasury yields has been testing ranges. the range in yellow. the support level in green.

,e look ahead to u.s. gdp data a possible u.s. government shutdown, and we take into account political risks, and trump's 100 days in office. the: six weeks to go until u.k. general election. the latest polls giving the conservatives will lead over the labour party, between 11 and 23 percentage points. my guest is former conservative party leader ian duncan smith. theere talking about mandate a big election win would give prime minister theresa may. what does that mean in the context of the two years of negotiations which we have just been marked on? i think first of all it puts us in a strong position in terms of her mandate. i think first of all it

puts us in a strong position in terms of her mandate. there is much greater flexibility during the course of that to your period to hone in to hone in onriod what she needs and to say, i do not need that. mark: what about the flip side of the equation? e.u. are showing strong resolve. angela merkel talking yesterday, batting back the "illusions" of some people in government. do you have illusions? iain: people go, they are showing resolve and strength. what do you expect? they are about to head into a negotiation. i have been in business. you always start in your firm position. you say, this is our resolve. the alternative is to say, it is ok, we will let the u.k. have everything they want. they are not going to do that. whatever she said yesterday is expected. i know what is going on behind closed doors, which is

a greater level of rational thinking. she had a meeting of blue-chip companies before christmas, and made it very clear -- one of them was in the meeting at the time and told me -- that germany themselves would drive this, and would drive it on the basis that they want a settlement with the u.k. that benefits the countries of europe, as well as benefits the u.k., because there is this mutual interest in having a settlement. mark: what might that look like? made aolfgang schaeuble very strong speech three months ago. he said, when it gets down to it, we need a proper arrangement with the u.k., because they are a very important market and a strong friend. the second thing he said, about the city -- he said all this other talk, absolutely not. we need the city to thrive, because they are the place that gives us cheap capital. so behind all the political rhetoric, which you would expect, the rationale of a

million and a half jobs in bavaria relying on exports to the u.k. alone of cars, that starts to matter to people. my sense is, when you go into this arrangement, the way we should do it is to work out what is good for the other side. figure out what they really need in this negotiation. the rest is basically accommodative. mark: this exit bill -- is that a stumbling block, or a not real hurdle? iain: it is what you would expect they will do. here is a figure we have been working out on the back of a couple of envelopes, and we will make it as big as we possibly can, because otherwise we are going to have to discuss what this is. the answer is, this is not about as having access to the market. this is about whether or not we have any kind of arrangements that are necessary for us to continue. bearing in mind that the u.k. has put over half a trillion pounds into the european union. about our asset base. what are our assets?

the constant value of our assets in the european union -- this is about how much we actually own. mark: what figured you think that is? say, it is impossible to because the european union has strangely not wanted to do this calculation. but we do a significant number of intellectual property rights of fixed assets. there is a discussion to be had. i am sure we will reach some kind of conclusion. mark: i am being shouted at. the a macron victory in french election have an impact on the brexit negotiations or not? iain: i don't think so. i think all that stuff about elections and the stock market trying to figure out whether macron will be victorious -- i am cynical about france generally. wiki -- we see people who are supposed to be on the left and right, but france's labor laws are shambolic. their pension system is still paying people to retire at 60, costing them huge amounts.

the levels of employment are very low by comparison to the united kingdom or even germany. there is a massive restructuring. peoplet say this -- should take a longer view of this. there is a massive need for restructuring and france. mark: that is a whole conversation we will have next time. in duncan smith, thanks for joining us. former u.k. secure -- conservative party leader. what about living opposite the queen? a development by property firm north acre. we talk about brexit m the london luxury market. ♪

mark: we are back to our weekly brexit show live from bloomberg european headquarters in london. house prices across the u.k. saw their biggest drop last month since when he 12. let's talk about brexit and the london property market. we are joined by a developer. propertyard the luxury market is beset by tax hikes, oversupply fears, and political uncertainty. are you faced by those issues? >> i think a certain number of those come into play at the

onent, but that really comes the fact that life was so good for such a long time -- 20 years of an unstoppable boom market, with one negative quarter over those years. industries are also quick, and there are challenges at the moment. mark: is there too much supply coming off the market in the next decade? niccolo: if you look at what people are developing, yes. if you look at how much will actually be developed, i think there will not be. who isho is buying, and staying away because of the aforementioned issue that the u.k. is experiencing? will geographical areas maybe reduce their spending in the last six months? niccolo: in the last six months, dollar-denominated buyers are back in full force. they are taking advantage of a slightly lower asking price, coupled with the fact that the dollar is substantially stronger against the pound.

and it makes a very attractive proposition to come here. mark: what about chinese buyers? they have capital control issues. does that have an impact? niccolo: chinese buyers have mostly been focused on the midmarket in central london, not substantial volumes of the high-end market. we are seeing it step up, buying higher-end homes with higher capital values. mark: increased appetite for middle eastern buyers as well? niccolo: i think the appetite from the middle east has been fairly constant the last 40 years, really. since brexit, they have been substantially stepping up their demand. mark: does the election and another layer of uncertainty? niccolo: i think this is a very different election than in the past. i think this is a snap election, where to the ballot is a seven-week period. if you look historically, there have been much lower volumes between thetimes calling and the ballot. it is usually six months.

this is seven weeks. i think it creates an opportunity for the long run, because we have a stronger government mandate, and the mandate that will not end when the brexit talks end. mark: with the government introduced new rules on stamp duty, maybe/stamp duty postelection, depending -- maybe slash stamp duty postelection? niccolo: they should cut stamp duty because the receipts are down by 40%. from that perception, i think they should. it is an unpopular thing to do at the moment, and i think it will take a while longer. but it will happen. mark: bloomberg surveillance continues. guy johnson joins here, with tom keene in new york. ♪

chieflay's

says he will not judge on ward quarter of performance. the american banks outperform. ms -- its wealth anagement. republicans do not have the votes for trump care. the president has a key decision. should he golf or not golf on day 100. into the weekend and onto the french, the german and the british election. macron and le pen. i'm tom keene. guy johnson in london holding for down for francine. what is the theme, and are you looking to paris and france? guy: the last half hour has been about the u.k. the credit impulse is fading. it's going to be something that

is going to be fascinating to see with the markets do and react how much is priced in. more data coming through. we'll deal with it when we go to the numbers in just a minute. tom: our crack team on a friday going to four digits on pound sterling. let's get to first word news. >> president trump once there could be a major conflict with north korea after policy fails. reuters thet told u.s. would love to solve the issue of the nuclear weapons program peacefully but says it is difficult. at the united nations, rex tillerson will try to show north korea the world is united against it. president trump plans to expand offshore drilling. today, he's expected to order the interior department to revise a five-year schedule. the goal is to open up more waters to offshore rigs. the president will order a

review of rules. e.u. leaders are ready to tell the u.k. they are united when it comes to brexit. there will be a summit tomorrow to discuss the u.k.'s departure. leaders will warn the u.k. against trying to create division and the hope of getting a better4 deal. in france, emmanuel macron and marine le pen are trying to expand beyond their own political bases. le pen appealed to conservative voters by saying that macron lac ked french values. global news 24 hours a day powered by 2600 journalists in 120 countries. this is bloomberg. tom: data check. guy johnson will step on thee, 108.95 on euro.

nicely above 109. a pop on inflation data. oil, we beat the banner. that's cool. 49.47 on oil. canada is the story. dollar canada. on the euro, what do you have? guy: what we have is a big spike in the cpi number. tom, your eco screen the last time round we were recovering to 0.7. it spiked up to 0.2. that is the highest level since 2013. the estimate was for shy of that. a. significant move draghi the incredibly cautious yesterday. do not expect that . they'll show this in the

bloomberg and a moment -- the difference between french and the u.k. consumer confidence. big gap. the ganbanks are former, but barclays absolutely not. tom: i was in conversation earlier. we will get to that in a bit. let me go to the bloomberg. maybe this is the backdrop for 100 days of a trump presidency. this is the atlanta fed gdp number back five years. here's the missableness -- whoa, how about that? i got to click. it is like nfl football. 0.17%, the previous winter, the previous winter. you see the pattern, and the average has been just above 2%. as trump mentioned the other day, 2% isn't good enough but we start 2017 with a moldy atlanta

gdp. guy: i'm going to show you two charts. this is the eurozone core cpi. that's 2015, 2014, 2013. you can see housing the weekend that is. what is happening with french consumer confidence. moving in different directions. there's french the blue line. dropping u.k. consumer confidence. the dissipating of the credit impulse is a significant factor for the u.k. the other thing we did talk about is what is happening on the geopolitical front. president trump says a major conflict with north korea is possible. although senator john mccain says that u.s. leader understands that this is the last resort. rex tillerson will use his first visit to the security council to increase pressure on the regime.

joining us on the phone is the head of the u.s. and americas program at chatham house. to what end are these kind of comments? >> this is a certain amount of saber readily. perhaps we should be un surprised by it. it seems to be a model of trump 's approach to a number of negotiations. the question that i think we are the north koreans and the chinese, in particular, will be asking is is there a military solution? this is the challenge that many american-made ministrations have fumbled over. the reality is that the americans don't know where all of the north korean missiles are. they don't think they can get them all out at any one time before north korea were to attack south korea. the military option is really very limited and what have significant consequences,

not just consequences, jus for the united states but north korea's neighbors. yes, there is a certain amount of saber rattling, a certain amount of language, of deterrence that is trying to take place, but the question is -- do the north koreans believe that america would follow through on this if they are not able to achieve in economic or diplomatic solution? guy: are the north koreans really the intended audience for these comments? is it actually beijing? the idea that you frighten beijing into making some positive move. is actually both. you're absolutely right to identify beijing as an audience putuse trump is trying to pressure on beijing to put pressure on north korea, but we have to remember, ask ourselves a question, how much influence does beijing have on north korea today since the arrival of kim jong-un, he has removed a number of people around him, including

his uncle, who were the principal interlocutors between the chinese and north korean's. there's a real question you hear not many chinese, they're clear how much control they have over kim jong-un. yes, it is putting pressure on china. absolutely. it's not clear that china has much more leverage. tom: you provided leadership for the queen's academy for leadership. what is your to do list in the next 100 days for secretary chosen? -- tillerson. how do they educate a new president? toia: the first thing he has do is putting people in place in the state department. we aw in the -- saw in the news of the last couple of days that tillerson has said, i've got to figure out how i want to change the structure of the state budgetent in light of

cuts but without senior leadership, you should not expect the state department to be a big player. outside of that, he is doing what he needs to do which is building a very strong relationship with dod, with m thes, with the cia, wihth national security adviser. what he needs more than anything else is people. till he has people he cannot give good advice to the president. tom: within this, is the idea of foreign policy, whether it's prime minister may or president outp, we're almost ad hoc of the white house. which is it? does the state department even exist? tillerson, secretary tillerson is doing what you would imagine somebody in his shoes would do. he's come into the job. he does not have anyone around him he trust. he does not know the job and he does not know his boss. he's learning about the job, he slowly bringing people in he can

trust, and he's building a relationship with his boss. events take place even while you are trying to get your feet underneath you. so, he really needs to start moving on some of these issues, including, in particular, building a team around him and order to be more effective. for taking the time to join us. out of chatham house. i'd like to carry on talking about what is happening with the trump presidency. the surprise at the top of it hour on the data out of the euro zone is worth turning our attention to. a portfolio manager joins us now. good morning. how significant is that number? of read on the core line inflation. if he keeps going at this kind of rate, which it won't, nevertheless a big spike higher. how long before draghi changes

the line which?-- the language? this is on the radar. there will be upon us in inflation during the next few months but there is relation in europe. this was completely off the radar at the beginning of the year. morer bund yields, upside for stocks, especially infrastructure, less for bonds. the same thing that the market price in the u.s. after trump's election is starting to be price in here. but we think it is more solid because it is not linked to one person, it's linked to organic growth in the eurozone. and we've not had fiscal stimulus. tom: bring up the chart, jason. this is the idea of a trade weighted euro. over we go. weaker euro. with a little bit of stability right now. alberto, with the better

economic data and the europe and the feeling of -- removed from the political ballet, can you say euro-sclerosis is an historical artifact? that it's something from another time? alberto: we need to get out of there. europe has been stuck overrelia nce on monetary policy. wasfamous juncker plan light on spending. the next three chance we have angelain france and merkel in germany with a higher influence from the opposition, more pro-europe. macron and merkel together can engineer something that is pro-spending, a solution for greece. tom: he'll continue with us

through the hour. that is a good thing. what a date calendar that we have on bloomberg television and radio today. what a high moment. the former chairman of the federal reserve system alan greenspan. he has been exceptionally cautious on american economic growth. alan greenspan and the 7:00 hour. from london and new york, this is bloomberg. ♪

>> this is bloomberg "surveillance." let's get to the business flash. barclays has become the latest european bank to report disappointing first-quarter results. it posted surprise dropa. the ceo spoke to bloomberg. >> we had a very strong first quarter last year. on a quarter to quarter comparison, we did not have the

uptick that a number of the u.s. banks did. in part, that was because we had a strong quarter in the first quarter of 2016. we want to do better in the markets but we are comfortable with how we came out and the profitability of the cib is making good improvements and i think we feel pretty good about the quarter. >> that's your bloomberg business flash. tom? guy? guy: thank you very much, indeed. barclays are comfortable -- less so the swing. another bank reporting. ubs posting better-than-expected first-quarter earnings. the ceo spoke to manus cranny on the outlook for wealth management in the americas. >> if you look at its contribution for the last four, five years as being very strong, the fact that we had a -- aarter in q1, 2017, it's demonstration.

i think the french is one of the best in the market. and we do still see growth in the foreseeable future. guy: manus cranny is still in zurich. manus, i haven't seen sergio ermotti look is pleased first quite some time. manus: he is happier. he doesn't have to raise capital. he's j happier than jes staley. he has got money coming into the wealth management business. relative to jes staley, he has ahead of the game. tom: i'm curious as to the unthinkable. it's a friday what we can do the unthinkable. it's available that francine is off today. why don't ubs and credit suisse merge and make a european-swiss german -- juggernaut?

explain to our global audience why that is unthinkable. manus: it's utterly unthinkable. a strategy2012 took where he said i'm going to apply capital in my investment bank where i make money. he's got a great business. lighter on credit. whereas, credit suisse is relatively speaking in a quagmire. they're four years behind. i don't think the regulators would even allow a sniff of it. guy: yeah. you think about what has been created and the fact that ubs is a creation, already started that merger back in the day. the regulators may have issues. great work this morning. manus cranny joining us from zurich. alberto, six months ago if you talked about european banks the

only thing you were obsessed with was the -- ratio. how strong was the capital? how do i judge european banks now? alberto: we are in a reflationary phase. you have to look at those banks where the net interest margin is more linnked to higher interest rates. we are shifting the focus from capital or nonperforming loans to revenues. can earn their way out. there are business models that are more profitable than others. we're commercial banks and banks in ireland, spain and italy that have more link to this normalization interest rate. we are putting aside the investment banks, because they to need many more years to repair their business models. the commercial banks are healthy and are still very cheap. tom: we heard that earlier this week. on bloomberg radio.

we'll continue with mr. gallo. coming up, this is important. the conversation. we bring regulation and are breaking structure to life. we are honored to bring a professor scott from harvard law school. look for that in our next hour. with guy johnson in london. i'm tom keene. this is bloomberg. ♪

guy: guy johnson in london.

i'm sitting in for francine lacqua. this morning. if you break it down, you can see clearly that is the consumer component really failing. it's really clear in the retail sector. is the u.k. heading for stagflation? the credit impulse is beginning to fade. alberto: the growth story that wasaw in q4 last year, based on that. they felt happier about brexit. but wages have not grown. productivity is among the lowest in europe. the u.k. economy has structural problems. an excuse tocome talk about anything but how to solve these problems. the government has a narrative that is only focused on brexit. we don't hear any economic plan for a post-brexit economy.

guy: is europe going to rescue us? their data is very strong. how much of a gravitational force is that going to exert? alberto: it could, but then you have a relative depreciation the pound versus the euro, which means you are going to pay more to import something and you will have inflation. remember, the u.k. imports half of its goods. food is imported. it is hard to get out of that from the higher cost of imports. so, we think the good case is a slow brexit with stagflation and loss of consumer income, a squeeze on consumption. there is a worst case where europe puts a hammer on theresa may because now you have macron and merkel together. tom: alberto gallo, we'll continue with alberto. we're going to show you a chart of u.k. gdp in a bit.

with the president looking at the classic 100 days, what are wonderful time to speak to the author of the world in disarray. richard haass of the council on foreign relations. we're going to spend some time, thoughtful conversation on where is the united states of america this 100th day of the trump presidency? control room, they are sharp on a friday. euro, guy johnson killing it. a look at the euro this morning. . oil still under $50 a barrel. a dark and gloomy new york. rangers lost. ♪

good morning. from london and new york. i'm tom keene. in a week will be on our wave to paris for the final round of the

paris elections. looking forward to that with francine lacqua. look for our coverage to make you better prepared for the election in france. right onto the united kingdom election june 8. on this friday, let's get to our 100th time of the first word news. >> in asia, china has told north korea to conduct no no more nuclear tests. tillerson.o rex china told the u.s. it would impose sanctions if north korea continues to impose testing. cut 2300 plans to diplomats at the state department, about 9% of the agency's workforce. most of the cuts will come through attrition. critics say the plan will hollow out the diplomatic corps. house leaders have put off a vote on repealing and replacing

obamacare. maccarthy says when there is pass, of vote for thit to they will have a vote. a number of moderate republicans are still opposed. in the u.k. businesses are becoming more confident about their prospects, possibly because of less uncertainty about brexit. business confidence rose to a 17 month high. meanwhile, consumer confidence has fallen. but surprisingly stable given high inflation and stagnating wages. global news 24 hours a day powered by 2600 journalists and 120 countries. this is over. guy: tecb president mario draghi acknowledged the risk to the euro area's recovery was still to the downside. moving towards " a more balance configuration." he did emphasize the negative.

alberto --ore from albertopasqual and gallo is still with us. when do we get the dropping of the downside element of that sentence? antonio: i think it will make sense in june. the economy is rebalancing probably by the time of the june meeting. they will have a majority agreeing on a rebalance profile of risks. and that gives them the cue for a more cemented for guidance. and on q.e. guy: how does mario draghi taylor the language so we do not end up with a taper tantrum euro style? how do we avoid the market extrapolating too far and pointing towards the exit? antonio: i guess it will not be a radical change. so, i think the key is to make

it more -- because deflationary risks are away. managing the monetary expectations, you're right, but they will be through the forecast. forecasts they gradually moves up inflation, i think we made the case for a gradual slowdown. tom: one of the great events this week was the stockholm announcement of delay in further accommodations, some of the tone we saw from mr. draghi. explain to our audience, why this reticence to even begin to frame a more restrictive policy? where does the reticence come from? is it gdp, fear about unwinding? it is something -- is it somethingo odd we don't see? the main headache for the ecb is the slow recovery

in inflation. they do not know why this is the case, ok? as you look at germany, with the lowest on a planet rate in history, wages are maintained. that is the critical issue. nobody seems very confident to forecast a strong core inflation into 2018. without a recovery in the labor market, you cannot remove completely q.e. or negative -- even next year. tom: help all of us with a euro call. antonio, let me start with you, what is the barclays call on euro one year from now? antonio: we are expecting some appreciation for the euro -dollar. that has a lot to do with what the fed will do. i guess now we have more clarity on the ecb, but the fed remains unclear for next week. tom: do you agreed that the fed

is the linchpin as we heard with the canadian dollar yesterday? the euro has to wait to see what chair yellen does. alberto: i think it is both europe getting stronger and perhaps some weakness in the implementation or delay in up limitation of the corporate tax reform and other u.s. policies. we see the euro-dollar strengthening to 1.15. it has lagged so far. the gap between the treasury 10-year and the bund 10-year should come down. treasury going towards two. the bund going towards 0.5% towards the end of the year. guy: you're saying we come down to 150. can i rephrase a question that was put in the press conference yesterday? in 2011, john kline trichet made a mistake because he was over focused on the wrong metrics.

over focused on inflation. are we in the exact opposite phase of that? i.e. the ecb's too focused on inflation. areall the o ther data pointing us towards a very decent eurozone recovery. alberto: there are two tools the ecb can use. the one is the q.e. purchases and the other -- the depot which affects the short end. the problem with a long end, if you increase the yield on btp 's, you start affecting spending. ecb should not withdraw q.e. what it should do is to normalize the deposit rate from -40 to something more towards zero. why? because in that way coming home banks to lend and help the real economy. that would help in the periphery. what is the problem?

the problem they have as they do not want to do this deposit rate hike. they are too worried about doing another trichet and making the euro appreciate too much. the right sequencing would be the opposite. move interest rates first. we don't think they will do it. they will be very gradual. but this would be the best solution. guy: antonio, how would you sequence the exit? the first up is announcing the for guidance that opens the door for this interest rate change next year. we think that 60 billion is not necessary to continue in 2018, but you still need some. our gradual -- our calibration is 50 billion. at the same time, start to normalize the rate from -40 to -30 in q3, -20 by the end of the

are. you end the year with q.e. at 20 billion per month and negative depot at -20. greece. me begin on we have not talked about the peripheral economies in ages. gdp.is greece real here is the massive greek success to 2007. antonio, let me start with you. it is thunderous the malaise of greece. are they going to break this of year, or does it wait for down the road? when do we get greece growth jumpstart and go? onio: i think from the growth perspective, if you have ine positive news because part because of the geopolitics of what is happening in other countries which have competitors

to grab some of the tours end. tourism will do well. growth in greece will benefit. from that to the resolution of the public debt dynamics, there is a bit of a stretch there. and the politics have played a role. it's difficult to see a resolution before the german elections. that's a politically sensitive issue. the resolution is delayed by that. guy: thank you very much for that. with us.allo still in some ways the stars are aligning politically in europe. merkel, we are going to end up with one of those two. macron.nd up with mr. they're going to find a solution to greece. alberto: it is about time.

but now we have a maturity and a couple of months and that will be paid with a temporary deal. you kick the can for another six months. then you have to think about how to structure a deal to reshape greek debt. after the german elections, likely, you will have a debt extension and an interest cut. we think it should be substantial. we would like to see a 10-year extension. it is more likely to be done little by little, five-year every time with checks and balances. but the economy is on track with all of the targets. we have seen a budget surplus recently. what needs to be done now is a progrowth plant. the first step would be to get greece a breath on the debt side. but then you need a growth plan. in the large scheme of the european union, greece debt is 170 billion. the esm is 500 billion. it's a solvable problem.

in ast don't want to do it bad way that creates a president -- precedent. with brexit pushing europe apart, there is more incentive to keep europe together and to find a solution for greece. guy: more to come from you. thankyou very much, indeed. fantastic function on your bloomberg. realpretty good but that highlight is this right hand panel. you get all the functions, the breaking news. tom had a good chart. i want to highlight this one. it works like this. it will take you straight to the chart. if you want to use the charts on "surveillance," that is how you do it. tv go. this is bloomberg. ♪

tom: there it is. the first 100 days. here on theaze next 100 days. alberto gallo giving us great perspective from the london desk. stephanie baker, a bloomberg global business correspondent. we make a joke about it. the sentence had a cartoon on -- the same since -- the simpsons had a joke. the president, does he golf or not golf. not much has gotten done. what is the biggest disappointment away from the supreme court appointment? >> the repeal and replace obamacare that went nowhere. you basically seen a flurry of activity this week as trump

tries to get things done and his campaign promises. you saw this attempt to get another vote on the repeal and replace obamacare which failed. he seems to have gotten some of the far right of the republican party on board but lost a few others. that's key for him passing any tax reforms. of: in the tweetathon yesterday, i kept seeing the word "deal." is goinge white house to give the president a lesson in civics 101 where deal guy discovers that there is a thing called the u.s. senate just for starters? stephanie: there's been talk of reince previous perhaps being on the out, being out of favor, so to speak, because he was the one that was tasked with getting the repeal of obamacare through. but i think he is the person

that trump needs the most if he is going to get any legislation through congress. the reflation trade has gone up. inflated and deflated. do we have too much expectations for the first 100 days? he talked about the fact he could be more efficient than the beltway had ever been. it was always going to be a difficult task. were expectations too high? alberto: we worried about the state of the u.s. economy. we see signs of stress. companies are levered. we are starting to see defaults and the subprime space in the high yield market. lending volumes are declining. fedou look at the atlanta growth forecast, it has come down a lot. the 3% growth narrative that mnuchin is talking about is hard to get to. it's hard to get to sustainable

growth and less you do strong unfunded tax cut. the good news is the corporate tax plan, the one pager, is maybe less ambitious than we thought but a bit easier to implement. eventually we may see something done, but what about infrastructure? what about the other things? that is going to take a long time. we have infrastructure, corporate tax reform and deregulation. we should get two out of three. probably will get one out of three this year. tougherephanie --it's to get stuff done on capitol hill than the administration anticipated. are the republicans getting nervous about the midterms? stephanie: they were already nervous. and this is why obamacare has been such a difficult issue, because what trump is proposing, this revised bill is very unpopular, you know, in the country. you had nancy pelosi giving the quote of the week.

she said if the republicans pass this this would be dodo on their shoes. this is going to be dragged down their support, looking into the 2018 midterms. tom: one question on 100 days. this is an open question on a friday. we've already had our bloody marys. how would mr. trump be greeted in london? stephanie: they're worried about that. he's not a popular figure here. yet, at the same time, she needs his support to do a trade deal, a bilateral trade deal, post brexit. this is a very delicate balancing act she needs to carry off. keeping him sweet, while at the same time not undermining her support domestically because he is a deeply unpopular figure here. tom: thank you so much for your perspective. we continue with mr. gallo. can't say enough about what came

out a few days ago -- the idea jr., obama- bush and trump. it's amazing how trump has stayed in america. scathing about the president's one pager on tax reform. he called it a fairytale. we will talk of fairies in the 8:00 hour. this is bloomberg. ♪

>> this is bloomberg mr. holtz-eakin:." this is bloomberg " surveillance." shares of barclays are dropping. fixed income came up short offsetting the surge in investment banking. meanwhile berkeley -- barclays ceo jes staley says he has support as he faces investigations were trying to unmask a whistleblower. its review bank did and voted unanimously to support me as ceo of barclays. all thi'm getting from shareholders is quite positive.

i work at the pleasure of the shareholders and the board and the board has been very supportive. >> staley said he never offered to resign. deutsche bank is close to naming citigroup treasure as its cfo. bank plans to make the announcement before a shareholder meeting on may 18. an investment banker at j.p. morgan and morgan stanley. that's your bloomberg business flash. tom: thank s so mcuh.uch. how about a morning must read. this is beneath the radar. france, then on to a lonely england. some argue that france will soften its line under macron. the anglophile. od ina hardening modd germany that is ominous. he goes on to the nuclear option

for united kingdom -- a unilateral free trade. back to the british empire. obdenit manifesto, turbocharged version of the repeal of the corn laws. alberto, can britain go it alone, can the united kingdom go it alone? alberto: absolutely not, because the u.k. is an importer of goods and human capital and exporter of services. it's very far from being a self-sufficient economy and without the transition yields, the cost on people, middle-class, low-income people will be extremely high. it is easy to recommend a high brexit from the comfort of your armchair in a newspaper office like "the telegraph." then when you start seeing inflation and% real wages have been declining for the last 10 years, you start learning that people on the her poverty, lower

incomes, it is difficult to do a hard brexit. tom: i wanted to get you going on a friday. where would sterling head if we had a hard breakfast -- brexit. if we had a hard brexit, where would sterling be? alberto: we are looking at parity with the euro gradually and something close to 1.15 against the. dollar of people have been short sterling. we need to see how the elections go. a lot of governments that have done election during the government time before the term have lost seats. it is not really a no-brainer. theresa may is coming under a lot of pressure that she has gotten economic plan. she's only talking about a strong and stable government. brexit and trying to undermine

the opposition, jeremy corbyn. there's no plan. people are starting to realize this. tom: thank you so much for your perspective. i love getting him going on the hard brexit thing. on at alberto going friday. we are going to jumpstart your reading. we will bring you the entire hour the perspective of ambassador haass. a world in disarray, american foreign-policy and the crisis of the old order," on day 100, perspective on the old order. this is bloomberg. stay with us. ♪

♪ barclays,che bank, trading revenue.

barclays when not judge on one quarter performance. take a memo. missed wealth management profits. perhaps no government shutdown in america. decisiondent has a key to golf or not cough on day 100. the french, british, german elections. good morning, everyone. this is "bloomberg surveillance." live in new york. guy johnson on the watch. love how you did the eu jump in inflation. what does that signal for mario draghi? we heard the early indications yesterday, that rise in the core number four inflation is significant for euro.

i would expect mario draghi to drop the negative trail of the euro economy and talk it neutral. tom: here is taylor riggs. president trump warns major conflicts with north korea if diplomacy fails, telling reporters the u.s. would love to solve the issue of the nuclear weapons program peacefully, but said it is very difficult. at the united nations security council today, rex tillerson will try to show north korea that the world is united against it. meanwhile, president trump plans to expand offshore drilling, ordering the interior department to revise a five-year schedule for auctioning rights to open up more waters. the president will order a review of the rules designed to prevent a disaster in the gulf

of mexico. eu leaders ready to tell the u.k. they are united. there will be a summit to discuss the u.k. departure. wornwill talk unity and against creating division in the hopes of getting a better deal. in france, the presidential election is a week from sunday and emmanuel macron marine le pen are trying to expand beyond the political basis. did not talk about exiting the euro. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. tom: thank you so much. a data check, quick, quick, quick. days, futures on the screen. yield curves have done nothing,

oil under $50, great chat with the secretary-general of opec yesterday. vix driving lower. amazon crushed, canadian dollar 136.37. guy: let's talk about some numbers, european equities not going anywhere. 5.45 off theottom, pace, the trading story. are higher, barclays lower, the cable rate firmer despite the disappointing data this morning from the u.k. a dollar story than a pound story i would argue. tom: very good. this is the atlanta gdp number. this goes back five years. here is the first quarter , the last first

quarter, the last first quarter, the last first quarter below that, before that, and the average is 2.1%, so we do have a cyclical recovery, and the optimists have the high ground for migration back to normal. a little fragile. guy: i want to show you something else, u.k. consumer confidence to french consumer confidence and u.k. consumer elections, the two all about the economy. confidence across france firms, .he u.k. fading that is important. you saw it in the gdp data, credit in the u.k. that has driven areas like the retail space starting to fade. tom: we have a great set of guests to give you 100 day perspective, and no one better

is kevin cirilli our chief washington correspondent. what did the president accomplish yesterday in his tweetathon? what did he succeed? >> he views twitter as a form of modern communication. i can remember the night he won we wisconsin primary when were in trump tower during his press conference. are on a president as we the eve of 100 days in office will play by his own rules regardless of what the washingtonian crowd once to make of him. him the will teach basic civics lessons? does he understand that u.s.

senate exists? to mark this question meadows yesterday in my interview with the chairman of the house freedom caucus and asked him what he thought the biggest misstep for president trump was, and he backed off and would not use the word misstep because he is a politician, but said he thinks this administration has had to deal with the new realities of working with congress and this idea he can jam things through congress like you can when you manage a business was perhaps wishful thinking. guy: a year ago, the president , the worldt war would have paid attention. why is the world not paying attention and what is the view in washington? >> that is a great question. i think a lot about what candidate trump said versus how he is governing, especially foreign policy and bilateral trade agreements. north korea and combating

terrorism, this is a president who i think markets and global leaders and people have adapted and recalibrated to his frederick, but on north korea come on bombing the heck out of isis coming you have seen clear action in which he has followed through on that. perhaps not in the way people thought, but in a way that would align with his rhetoric. tom: kevin cirilli, thank you so much. to give you perspective, no one richard haass of the council on point relations. i can't say enough about the ambassadors timely book, a world in disarray, more timely now on theen the ink dried cover. it is a primer on the mess we are in. i have to rip up the script and

go to north korea. tell me about that asia five. who is talking to who a north korea right now? >> the most important cour conversation is between donald trump and president xi jinping. it can't be business as usual. they have to use the leverage they say they don't have come up but we know they do come on north korea. point basic,ension old world, tactical politics? >> the united states wants china to put pressure on korea. will they put enough pressure on north korea to get north korea to move? the problem is that china does not want to bring north korea down. they want to keep the peninsula divided. we andstion is whether

the chinese can navigate that. step fromis the next a tactical point of view? we see the thaad activated. do we see greater ships moved into the theater? have a regular drum beat of military action of one sort or another, the air defense systems, more ships in the area, but the space i would watch is where the uc movement towards direct talks between the u.s. and north korea. china does not want to be at the table, but behind the table. the u.s. at some point will agree to direct talks that as a first goal are prepared for a freeze not to solve the problem or de-nuclear rise north korea, but except something that can be verified. the question is can you get talks like that launched and can

they make progress soon enough so north korea does not use the process of talking as a cover to continue to turn up nuclear warheads in advance their missile programs. guy: why now? is it a new president? the fact north koreans are making advances in rocketry? is it the fact the president is paying attention, or is there something more fundamental? >> fundamental. i feel it would have been similar in substance if hillary clinton had been president. they are finally up against north korean activity where they might be a year or two away from having missiles with the range and accuracy to reach the united foreheadnd the pace of production has gotten people's attention. it is the combination of the two. even trump style, talking about it, tweeting about it is different than hillary clinton

would have done, but the substance not that different. tom: you talk about regional realities. help me with mr. trump's american realities. what is the to do list to get this thing going? get something done domestically? health care has again hit a wall , tax reform will take a long time, infrastructure is not near-term, so domestically mr. trump has hit problems, and problems with the courts, that he will probably take the lesson a lot of presidents take. he will probably become a foreign-policy president. tom: the minority, majority party, that is what it feels like. are the republicans a majority party as we get towards a day 200? a the republicans have numerical majority, but not a governing majority. the white house has to keep fighting that reality or take on

a bipartisan approach where you forget the freedom caucus and work with 80% of the republicans and 25% of the democrats. they had yet to make that pivot. tom: foreign policy on president trump and their latest issue. it makes me smarter each and every day. coming up, a conversation with alan greenspan. look for that in the 7:00 hour. alan greenspan much to talk about on the american economy. this is bloomberg. ♪

>> this is "bloomberg surveillance." i am taylor riggs. deutsche bank close to naming

citigroup treasure as its cfo. plans to make the announcement before its meeting on may 18. he has been at citibank since 2009, an investment banker at j.p. morgan and morgan stanley. ubs posts better-than-expected earnings. if you look at its contribution for the last 4-5 years as being very strong, the fact we had a record quarter in , i think the franchise is one of the best in the market and we still see growth in the foreseeable future. >> that is your bloomberg business flash. guy: thank you. let's stick with the banking

theme, barclays the latest with q1 disappointing trading results , i dropped an fixed income trading revenue. the ceo spoke to bloomberg. >> the corporate and investment bank generated a little north of 8%, 100 basis points better than last year. in terms of banking fees, mergers and acquisitions, debt markets, equity markets, we had a great first quarter. that revenue number in the history of the bank is the best. in terms of revenue, rates and currency, one of the things you have to look at its we had a strong first quarter last year, so on a quarter to quarter comparison, we did not have the u.s. banks did, but in part because we had a strong quarter in the first quarter of 2016, but we always want to do

better in the markets business, but we are comfortable with how we came out and the overall profitability of the investment bank is making good improvements and we feel good about the quarter. >> are you happy in relation to how your peers performed? that itioned last year was exceptional. the increase with at deutsche bank, the top five in the u.s., where you sit in that bracket? >> i am comfortable where barclays is as a competitive matter. of investmentr banks had down quarters last year in q1 and have recovered. we had a good quarter in the first quarter of last year. we could have done better on the u.s. rates side, but we will not make any judgment based on one quarter's performance. >> could have done better in the

rates market. he is trying to say it is a comparison story, which may or may not have some validity. we are talking about too big to fail or too small to succeed, hsbc headlines coming out now. i have them off the bloomberg terminal, and mr. flynt goes to the idea of returning cash, conscious of the importance of dividends to shareholders, and then the news about the migration of warm bodies around europe, don't you? guy: you do. maybe, maybe needing to move 1000 to paris. we will see. the banks in london are trying to get really, really creative with how they work around all of ,his, particularly any interim where there is talk of pop up

subsidiaries, all kinds of and thebeing explored, banks are creative in every aspect and i suspect this will be no exception. tom: we continue with richard haass from the council on foreign relations, monetary policy, the regulation, and a government shutdown. this is bloomberg. ♪

tom: this is "bloomberg

surveillance." good morning. .e want to digress we are focused on president trump's 100 days. richard haass in a moment and where we are in america in disarray, but right now on regulation and the confidence needed in the linkage of government to wall street and the people of america, hal scott is professor at harvard law school and a giant on perspective on regulation. street? a trust of wall where we are in 2017, is there a rekindling of trusted wall street? peopleink the american because of all that has happened are somewhat distrustful of wall but i think president trump has begun to communicate the idea that we need a strong

financial system for a strong makesy, and the more he that statement and gets that message across, i think people will turn to wall street for help with the economy rather than demonizing them for the financial crisis. tom: help with regulation and the fed, how many empty seats are there in washington to assist with the new regulation? >> there are a lot of empty seats, too many. the treasury, the secretary of the treasury has recruited some that do not have to be confirmed, but undersecretary, deputy secretary are still empty, and those are important seats. we need to get those people named and confirmed as soon as possible. , therehe federal reserve

are currently three vacancies that need to be filled, and those are important for the supervision and regulation of our system. dodd-frank,ulation, is this a moment like the securities acts of 1933 and 1934? are we at a critical moment where we need to make new law to protect the process as we did long ago and far away? i mean we need to have a better regulatory framework for our financial system. there is no question about that. what has happened since the financial crisis is that we responded correctly to the losses we experienced and imposed regulation on the system. i think what we will see now is an adjustment back to favor more growth at the expense of overregulation. tom: thank you so much for

starting your morning with us. is at harvard university. and go too hal scott richard haass, then move right on to bloomberg radio. it is an interesting friday. let's take a glance at the data, green on the screen, oil under $50 a barrel. from london, new york, this is bloomberg. ♪

guy: red sky in the morning, shepherds warning. i'm just saying. it looks beautiful, doesn't it?

let's figure out what is going on. guy johnson in london, taylor riggs, over to you. >> china has told north korea to conduct no more nuclear tests. that is according to secretary of state rex tillerson. itsaid china told the u.s. would impose sanctions if the north koreans do continue testing. president trump says there could be a major conflict if diplomacy does not work. secretary tillerson will cut 2300 diplomats at state department. most of the cuts will come through attrition. critics say the plan to hollow out the diplomatic corps. house leaders have put off a vote on repealing and replacing obamacare. kevin mccarthy says when there are enough votes to pass the measure, a vote will be scheduled. they had hoped to vote this

week, but moderate republicans are still opposed. k, businesses more confident about prospects because of less uncertainty about brexit. business confidence rose to a 17 month high, consumer confidence has fallen. stable givensingly higher inflation and stagnating wages. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. guy: thank you. the bank of russia says inflation is moving towards target. it has lowered the key lending .ate to 9.25% the russian ruble has firmed a little bit. not by much though, i would argue.

let's talk about what is happening in france where it marine le pen's troubled background intruded as one of parties officials was asked to step aside after questioning the holocaust. cannot afford a misstep. how do she move into the next week and make it work for her as we work towards the final round of the french elections? >> her strategy seems to be succeeding. first, a lavish celebration for emmanuel macron after winning the first round, which is the message of privilege you did not want to send in france. then she upstages him at a rally in a part of the country where unemployment is high, so her on sevcon up -- her odds have gone

up. emmanuel macron is most likely the winner, but it is no longer over. she needs to not emphasize the stuff that animates her base, but make herself the person of the people so she can cut across party lines and appealed to the base of support for the far left candidate. guy: what advice would you give to mr. macron? >> first of all, no more keep ite, or at least in private, but showed he is not that he is more than someone with big ideas about europe. he has to show he is comfortable with the part of france that is not doing well. it's good to have people who correct me all the time. rothchild, mr. macr

on is involved as well. how will a banker play as a next six dayshe and as president of the republic of france? >> it's not a bank thing. it is a sense of privilege, the elite. he is not an experienced retail politician. he was an outsider. if he were to win governing, it will be a grand challenge. he does not have a party base to work with. tom: he does not have the structure. the definition of outsider is changing. outsider,le pen is an flaunting the establishment her

whole life. her messages i am in sync with you. to show he is more than a person of big ideas. he has a visceral connection. you have the trump and sanders equivalent versus hillary clinton going on in france. guy: what does it say about the future of your? we have a divided france. it is deeply divided on the issue of where it goes next. >> what it tells you is that votes in favor of an eu referendum would go down in france, italy, you name it, so he has to meet with angela merkel and develop the agenda for the next year. have hadof europe we with increasing control out of brussels needs to be rethought towardshift the balance

national governments are away from the eu and come up with an economic reform agenda. europe as a collective has lost their imagination and the hold on the european people, so the challenge for angela merkel and macron if he were to win is to revive europe. , the monetaryenda policy and so forth, it is so out of touch with reality. this is a warning shot. if the european project will survive, it has to it evolve. guy: can france be fixed in five years to put it into a position where it is hal happy with itself and its place in europe? >> it will be happy with europe if it is happy with itself, so can macron get to political and economic reform.

tom: what is the council on on the relations saying governing of france on the monday after the sunday? >> it comes down to nicolas sarkozy and whether he is prepared to work with or against a president macron, but what is interesting about macron, again, there are parallels. tom: i love your trump standard equivalency. >> trump is having trouble working with the congress because he does not match up with the party structure. with macron, he would not match up with the party structure, the french parliament heard tom: -- the french parliament. increasingly, and we saw it with the failure of the french republicans and the socialists formalrecent vote, the

party structure of france no longer reflects the political reality of france. again, some parallels here, formal party structures no longer represent the dynamics. tom: we will come back and bring it to america, a world in disarray. when this book came out, this is great, robert gates, walter it.cson and others loved we will look at a world in disarray. coming up, a conversation -- i love when the sky appears in the oaktree capital and howard's marks on the value in the market and the value for the future of america. this is bloomberg. ♪

>> this is "bloomberg surveillance." i am taylor riggs. and shares falling after a surprise drop in trading revenue. fixed income and equities came up short. haslays ceo says he still support from investors and directors as he faces investigation for trying to unmask a whistleblower. >> the full board of the bank did its few and voted to support me as ceo of barclays. committed today as the day i joined. i work at the pleasure of the shareholders and board. he has never offered to resign. amazon sending a message to investors, they expanding as part of a winning formula.

it posted a 23% gain in sales in the first quarter, continuing an streak ofwenty-year strik revenue growth. canada's accusing bombardier of selling its aircraft at absurdly low prices. trade tensions have been growing between the u.s. and canada. the u.s. impose duties on canadian lumber and president trump claimed about canadian protection for dairy farmers. that is your bloomberg business flash. tom: we get back to the economics in the united states with ambassador haas, but right now, this is the emerging-market interview of the week. he is exceptionally qualified to speak on the realities of mexico

and straight talk on nafta. he served as undersecretary of finance and worked on debt management. i am thrilled you are here. what is the biggest misconception the president of the united states has about mexico? any don't think there is relevant political constituency in the u.s. that thinks of mexico as some political or an economic threat. mexico has been a strong ally of the u.s.. the only thing that president trump is achieving by this aggressive frederick is depreciating the currency and making mexican products cheaper moreg into the u.s., and importantly, influencing electoral dynamics in mexico for

the presidential election next year. tom: i will go to the council of foreign relations site and look at a backgrounder from richard haass and his team, and i don't see a dynamic. does america want a zero-sum world or do they benefit from a multilateral world? >> one interesting thing about the aggressive campaign rhetoric around nafta is that it has triggered a consensus on the benefits of nafta in terms of the assembly of complex supply chains across canada, mexico, and the u.s. that is something people understand much better, so doing await with nafta would imply calling against the interests of several u.s. based, canada base, and mexico-based companies. guy: can i get a sense of how mexico now sees negotiating going? you're sitting down at a table

and you have had the process we effectivelyugh, and the bluff and called. how strong of a hand does mexico have? >> nafta is a strong institution in mexico. it established a base not only for improved trade dynamics between mexico and the rest of north america, but it was able to build an umbrella where investment and trust were able to develop, and the fight letter relationship between the u.s. and mexico in for significantly after nafta, so the fact that we are -- we have shifted the narrative towards improving nafta, i think that is creating a space to use the tpp blueprint , bringing some of the elements forward and come out with an

improved and strengthen relationship in north america for trade. the table is set for that, and that is why it is somewhat surprising the recent news we have seen coming from the u.s. administration. guy: do you think mexico could end up with a better deal? >> absolutely. modern deal back in the day, but it has been a long time already and people have learned of certain areas, rules of origin, intellectual property, conflict resolution -- there are different areas where learned and could be introduced to nafta to end up with a better treaty. tom: ambassador, a question for mr. rodriguez? summer 2018.are my friends in mexico family that the former mayor of mexico city would win. do you agree with that, and what

would it mean for u.s.-mexico relations? >> it is a question what type of president we would get if he were to win. you were talking before about the similarities in france and trump. i think you could argue the same in mexico. it is a bit unclear whether you want to taken seriously or literally, but we will know. what has happened is this aggressive rhetoric in the u.s. is contributing to lower the popularity of the existing president. there are some corruption scandals, and the one that has -- the left-wing candidate. it will be a contested election, a question of thirds, but he is clearly the candidates to beat right now. .om: a world in disarray let's call it a nafta in disarray could what is your prescription to make a better nafta? >> it is a 23-year-old

agreement, so negotiate with, not against, canada and mexico and make it a positive thing, and deal with issues like digital commerce. modernized.ds to be the question is whether we go into it to improve it, to break it. in the last 24 hours, things have moved in the right direction. tom: thank you for the briefing this morning. with the, much more former u.s. deputy treasury secretary on shutdown and on finance hyundai 100. we come back with richard haass. this is bloomberg. ♪

tom: foreign-exchange right now, stronger,, euro higher inflation. there is the surprise of the week. 1.36.,

guy johnson buying drinks next time he is in -- guy johnson buying drinks next over the last 15 years, not a good trend, ambassador. we are not moving in the right direction. do we have any hope president trump with a republican congress right thethe ship -- ship? >> how much worse will it get with tax cuts that won't be paid for, increased spending, and refusal to tackle entitlements? it is an unhealthy trinity. what can me a sense of

be done to right the ship. we are trying to figure out what is bluster and what is real. what needs to happen in the next 100 days? >> you want more modest tax cuts and couple them with corresponding spending cuts. what that means is putting entitlements on the board, as difficult as that is politically come maybe less of an increase in defense spending to get them a craddick support, so this is essentially an opening bid. to get democratic support, so this is essentially an opening bid. residence,ve a fancy revenant's corporate bigwigs, the corporate world, the gilded age, and everybody else. is this a tax reform that is corporate, corporate, corporate,

or will it benefit america to bring it out of disarray? >> it benefits at america if you pray at the altar of trickle-down. tom: do believe in it? >> i think it is dramatically exaggerated and does not reach large parts of the population. need is a much more aggressive, targeted public policy to get those americans left out of the modern economy. given robotics, driverless vehicles, ai, this is not a cycle. this is something that is secular and we need a national conversation about it. it's difficult to make the economy more efficient by tax. regulatoryr by

rollback and spending money on infrastructure. why start with tax? potentially you have a broad consensus. even democrats would agree corporate tax rates are too high, so tax has to be part of if equation, particularly you are a nominal republican. after health care, they will not succeed there, so everyone says taxes where you should have started, so the president has cycled back on taxes. tom: you have seen the 20 flavors of gop out there. which is the marginal republican you are focused on for sound legislative success, the freedom caucus, the middle people? which is the republican that matters to you? >> center right, but not the freedom caucus. have't think you can sustained governments with the freedom caucus. the question is whether it is too late to build a coalition that involves some serious democrats.

the president could have done it at the beginning from a position of strength. he chose not to. -- can heo govern pivot to a centrist strategy from a republican-only strategy? tom: thank you very much world in disarray, a fabulous book good -- fabulous book. don't forget, our conversation with the chairman alan greenspan come later this morning. from new york, from london, this is bloomberg. ♪

♪ >> from this day forward -- >> 100 day plan. >> i got it done in the first 100 days. >> this is a disappointing day

for us. >> i believe strongly in free trade, but it also has to be fair trade. the tpp is a horrible deal. my plan for the economy can be summed up in three beautiful words, jobs, jobs, jobs. north korea is a big, big problem, and we will deal with that very strongly. >> we will get tax reform done. >> my number one agenda item is taxes. >> how do we get economic growth? >> it is a hugely successful first 100 days. >> welcome to "bloomberg daybreak" on the evoke president trump's 100th the day in office. alix steel is off today. we have a great lineup to share thoughts on the first 100 days of the trump administration, including bob kimmitt and a rou