francine: the market season no fomc responded softening economic data without reducing expectations? iphone sales slump as consumers wait for the next big update. can apple deliver the blockbuster new features it needs to fend off rivals? brexit gets bloody. theresa may says that jean-claude juncker is finding out what a tough opponent she can be. o the gloves appear to be off.

i'm francine lacqua in london. quickly, a check on data. this is where a lot of the story is. i think is probably one of the most significant trades entity's session -- in today's session. euro-pound. #to touch yesterday. -- the pound strengthening a touch yesterday. notable for the fed. we get onto the french presidential election this sunday. let's get to first word news. u.s.nordisk in the president trump has tweeted "the government needs a good shot down" in september after congress agrees a budget deal that denies him his wish list. it includes no money for his although iter wall, is full funding for planned parenthood. democrats call his threat to shut down the government after a successful bipartisan deal sour and shameful. fell after reporting

slumping iphone sales. 50.8 milliont sold phones in the first quarter. it highlights the need for apple to deliver blockbuster new features in the next addition of this device defend off samsung. >> we're seeing what we believe to be a pause in purchases on iphones, which we believe are due to the earlier and much more frequent reports about future iphones. u.k.'s prime minister has vowed she will not be pushed around as her war of words escalates before negotiations began. theresa may said it jean-claude juncker is learning she can be "bloody difficult" after leaked details of a dinner meeting was shocked by

your approach negotiating brexit . >> she said today she that she will be a really bloody woman in negotiating with the european union. and i must say i fear for this. nejra: jpmorgan plans to move hundreds of london-based ireland and luxembourg. as a prepares for the u.k. to lose access to the single market. eofore the referendum, the c warned u.k. employees that as many as 4000 could be relocated in the event of brexit. global news 20 browser day powered by 2600 journalists in 120 countries. -- global news 24 hours a day. francine: we get the fed's latest rate decision at 7 p.m. u.k. time. investors will be watching the wording of the statement for any

clues as to the rate pop ahead. let's bring in jeremy stretch at canadian imperial bank of commerce. thank you so much for coming in. do they need to keep the possibility of a rate hike alive? ndeed., i i would argue that today's meeting is a little bit of an inconvenience for the fed, because they do not want to rock the boat. they want to leave markets where they are without destabilizing and that is a difficult balancing act. underline theo fact that perhaps there is a degree of moderation in terms of household spending. that is the way they were trying to characterize that. they'll also talk about inflation expectations. so, leaving open the possibility, the probability, that june is still a live meeting, and we could see a risk of a rate hike.

qualify? how do they that is like lost progress. if you look at the data, will they need to say that this is a blip? they are talking about moderation rather than saying it is a reversal from trend. of course, we are in the light of a disappointing payroll. we get another one on friday. that is the subtext. be interesting to see whether the fed are mindful of the impact of the labor market. i think we need to underline the fact that average earnings are showing some signs of grinding high, however slowly. that is very important for the fed. they will try to make some reference to not only the absolute level of labor market growth but also in terms of the underlying action in terms of earnings. francine: is there something in the data to -- for example, consumer prices, that would make you guess that they would not hike in june? jeremy: we still think they will hike in june. so, we have been in the camp of

three hikes but looking at the fed getting ahead of the curve and not replacing the mistakes of 2015 and leaving policy unchanged for too long and having to scramble through the back end of the year to try to get through some tightening. there is a degree of catch up. i think it is going to be a progressively more difficult process as rates move higher in terms of risking destabilization of the consumer and mortgage markets. at this point, it is going to be the case the federal reserve will utilize a little bit of a window, because the trump administration are arguing or trying to underline what their fiscal measures are going to be. this gives an opportunity for the fed to get ahead of that. we're still of the view that june is a realistic possibility. speakne: tom keene will to ben bernanke in. what would you ask him? do you ask him how he would have dealt with the fiscal uncertainty, given the trump

administration and we are awaiting details for how they are going to do everything they promised? or ask him about redressing the balance sheet? jeremy: when you are asking the first part of the question, that was what i was thinking about -- it is more about the balance sheet. helicopter ben. ede person charged in the f during this period. we are in this experience. a number of central banks are in a similar center. we'll get onto talking about ecb. it will be fascinating to see how the federal reserve will deal with on wanting the process. francine: what they talk the markets to taking it slow? jeremy: i'm not convinced we will see a massive divorcement of fed holdings from their balance sheet because that would be destabilizing. i suspect it is going to be a long and drawn out a protracted process, ultimately allowing a large proportion of the balance sheet expansion to roll off

naturally as the debt matures. i think it is going to be a slow procress. we only have to go back to the taper tantrum to know how markets can become dislocated quickly. francine: but communication has changed. my: because we are moving away from this expansive monetary policy. the federal reserve has to accept that and understand that, and markets are looking for signals in that regard. the fed have to continue to cajole the market into assuming that we'll be this moderate pace of monetary timing. the balance sheet will be allowed to gradually moderate but not reverse quickly. i think that is the process. because, of course, if, for example, u.s. 10-year yeields would suddenly spike, that would destabilize the mortgage market. a reallyed have

difficult balancing act. and that is why, going back to the original point, today's meeting is like an inconvenience because it does threaten that relative stability. francine: but also very important for the markets to pinpoint the fed. market has been surprisingly reticent to get excited about today's fed position. francine: maybe they need to look into more detail. thank you for now. let's get to the bloomberg business flash. nejra: higher revenue from trading bonds and stocks has seen a surprising profit at bnp paribas in the first quarter. with revenue climbing 33%, outpacing european rivals. ibas is one of few european banks targeting growth from its -- >> so, bottom line, up 4.4%. even of 13%.

this is a tribute to our business performance of revenues were up seve7%. if you look at ratios, and continues to improve. so, basically, that is. least, we've just neutral.s a bank to be nejra: china has raised its stake in deutsche bank to almost 10%. compiledg to data by bloomberg, it surpasses blackrock's stake. volkswagen first quarter probability has surged as turnaround efforts gained traction. 7.8%. widened to at the same time, the vw brand asted 89 million euros

revenue totaled 19 billion euro s. francine: we are getting live pictures from brussels where the chief brexit negotiator is talking. this is not him. this is someone asking him questions. we'll get on to that. you can follow that on live go. this is extremely important, as we are seeing both sides trying to put their argument through. we saw the spat after the leak in one of the german neighborhoowspapers of the dinner. theresa may responding saying she would be very difficult. we also heard from peter mandelson who said it could antagonize the person you are going to do with before starting negotiations. something we are keeping a close eye on. verhofstadt starts

talking, we will bring you any updates. an independent emmanuel macron will face marine le pen for their first and only head-to-head debate. with four days to go, polls suggest macron will take 60% of the vote. but a quarter of the electors plans to abstain. first of all, how are the candidates? good morning. how are they getting prepared for this important tv debate tonight? >> there will be a clash between two opposite visions of france. pro business, pro european, emmanuel macron and the nationalist and protectionist marine le pen. to win this debate, emmanuel macron will have to be more combative to show he is not too hesitant or too soft, and to

show he can dominate marine le pen. he can sometimes be very aggressive in that kind of exercise. to expand her base, marine le pen will have to do the exact opposite. she will have to reassure, to soften her views, especially on the euro, which is something she has already tried to do of the past two days. this is the battlefield we have seen in the interviews since the first rent. -- first round. >> if you consider that what you have lived through five years is hell,tax hell, economic hell of massive immigration, hell of the rise of islamic fundamentalism,then you have to vote for me. program of the national front and its practices weaken the democratic content of our country. we are at a tipping point. i'm telling you at the same

time, i'm fighting marine le pen with all my strength of her practices and her obscenity. for marine lege pen will also have to be to not sound too hysterical when she attacks emmanuel macron. and, of course, both of them will have to come up with something very strong, something that people will remember, or who may abstain in the runoff. francine: is that surprising looking at the poll that 25% said they will not vote? betweenhe french vote 70% and 80%, one of the highest participation in elections across europe. >> it is surprising. in fact, usually in a presidential election coming have around 80% of participation. with one exception -- 2002 when jean marie le pen managed to

pass the first round and be in the runoff. of course the uncertainty is wing voters,r left who did 19% of the vote. nearly 2/3 of the electorate of melenchon would abstain. of course, if the tension is higher, -- abstention is higher, this could benefit marine le pen . francine: thank you. so much joining us with live coverage from the french presidential election. we will have live coverage through to sunday. we have a special show for you when the polls, the exit pulse start coming in. -- polls start coming in. when you look at the french elections, are we over the risk breakup or is there a danger that two days before, tomorrow actually, markets wake

up and say, let me price in the 30% chance that len pens? jeremy: markets are certain much more relaxed. that is where there was really excitement in the first round. on that sunday night, lots of people were here in london looking and identify and trying to understand the ramifications of what could've happened. so, now looking at the way the opinion polls are formulated, it seems relatively low probability that le pen can win. of course, there is still the risk of a last-minute interjection or some of been happening which could destabilize markets. i think the perception is the risk has moderated. in a sense, if we go back to the dutch election, the rise of populism in europe seems to have reached the high water market. francine: are you working this sunday? this sunday there is a far lower level of interest.

we will see very few people in the markets trading and the way we were a couple of weeks ago getting ready for that open, when we did see the euro gap hi gher and ultimately seen -- com ing in to medically once european markets opened monday. francine: to believe the markets are discounting the fact that mr. macron, energetic and young, still needs to govern? he does not have a party behind him. is a good point because we fixated on the presidential election and failed to recognize there are parliamentary elections. we could end up with macron winning and ending up with a parliament which are less keen on his policies. that coho protection -- that cohabitation will continue to be an ongoing problem for france. that has been one of the structural issues which has left france behind germany in terms of economic performance.

i think there still is the reduction or removal of the breakup risk of europe on the basis of french presidential politics, but ultimately, there is his ongoing issue of the french economy being the laggard compared to germany. i think that is a scenario which markets have not discounted. francine: up next, waiting for the next big thing. iphone sales slump as consumers hold out for what they hope will be a blockbuster up grade. this is bloomberg. ♪

francine: this is bloomberg "surveillance." apple fell after reporting sales that missed forecast. they sold 50.8 million phones in the second quarter against 51 million and the same period a year earlier. >> we are seeing what we believe o be a pause in, in purchases iphonens, which we believea are due to the earlier and much more frequent reports about future iphones. francine: let's get more analysis with the founder of radio free mobile, specializing in digital and mobile. great to speak to you on skype. apple reported reasonable results but a lot of people are waiting for the upgrade. what can apple delivered to

make people buy more iphones? richard: i think slumping is a little unfair, seeing they did generate $33 billion of revenue from one device. i think what people are looking for something to go up against the samsung galaxy x8. the screen on that device is quite sensational, to be honest. 8e stories of the iphone about much larger screens. i think that is what people are really looking forward apple to come september. francine: is there any doubt in their mind it will not be able to deliver something? goingd: i think they are to deliver. there is speculation that they are having technical problems with putting theh ome button underneath the screen which would make it more difficult to make a much larger screen. but i think they are going to

deliver something but the real issue here is, if you look where is apple is today? wills like the iphone 8 generator product cycle, which means people will upgrade more quickly. and it will go back to baseline once again. what we are looking at is apple in the long term being a company that trades on product cycles. francine: you make the argument that apple looks like an industrial company. talking about margins, they were better than expected. industrialmean, from the point of view of growth. the margins are excellent. while a google ecosystem continues to struggle to make a credible threat against ios, the margins are going to remain very healthy. iphone 7 plus slightly sold

more than expected. other than that, we are looking at stable gross margins around 40% for the perceivable future. francine: does it look expensive, copy, or cheap, -- te company? richard: not too demanding. i have looked at it like this. a year ago, you could company say that apple was ridiculously cheap. if you take the cash out, you would see the company was on an 8 times pe. now the stock is more expensive. that upside on the valuation argument is no longer there, but the company is increasing the return to shareholders through the dividend and the buyback program. as one to hold as a long-term investor, it looks ok. francine: very quickly, and you disappointed with the wearables because they have not done better? richard: my position is overall

it has been a mess of disappointed. a sum it up, wearables are solution looking for a problem, which means people do not ask how much is it? i want it. it? ask why should i buy that will keep a lid on them for time until someone comes up with a compelling use case for these devices. francine: upnext, as theresa may describes himself as "bloody difficult," we focus on the war of words underway before negotiations have started. watch out japan. the 129.32. this is bloomberg. ♪

francine: this is bloomberg "surveillance." let's get to the first word news. nejra:in the u.s. president trump has tweeted the government "needs a good shut down in

september" after congress agreed on a budget deal that denies him much of his wish list. the deal includes no money for his mexican border wall and full funding for planned parenthood. democrats called his threat to shut down the government after a successful bipartisan deal sour and shameful. apple fell in extended trading after reporting slumping iphone sales that missed forecasts. it sold 50.8 million phones in the second quarter against 51.2 million a year earlier. it highlights the need for apple to deliver blockbuster new features in the next edition of the device to fend off rivals like samsung. australia's trade minister has insisted that the transpacific partnership is still possible, even without u.s. involvement. speaking at the milken institute, he told bloomberg that the apec meeting and hanoi this months will be the next

focus for progress on the deal. it's absolutely possible and it is good if it happens. fundamentally, what we need to do is cap the benefits. we were disappointed but it was not unexpected when the u.s. withdrew. there have been questions about what countries might do but we met recently in chile. we had a conversation, the 11 of us decided to keep the options alive. nejra: independent emmanuel macron will face marine le pen of the national front tonight for their first and only head-to-head debate of the election. with four days to go, plls suggests macron would take 60% of the vote but more than 1/4 of electors plan to abstain. global news 24 hours a day powered by 2600 journalists in 120 countries. this is bloomberg. getcine: we're just breaking data out of the u.k. this is for april.

it's construction at it is a beat. 53.1 instead of the 52 we were expecting. i'm surprised we are not seeing much reaction on the pound. 129.29. yesterday, we did have some pretty encouraging data. then actually gave the pound a reason to be higher. let's talk about the pound and also talk about these brexit negotiations. theresa may says she will not be pushed around in brexit talks. of words with brussels escalates before negotiations begin. senior line from a former minister, she is saying that the e.u. is learning that she can be " bloody difficult." >> actually she said today that she will be a really "bloody woman" in negotiating with the european union. and i must say i fear for this.

francine: let's get more with canadianretch from imperial bank of commerce. talking about the pound, this is what we have been seeing. we touched 129.30. we're retreating back to the sort of levels we were seeing back in the late september, early october. and that is the time when theresa actually signaled the u.k. was going towards a hard brexit severe. we're reversing back to that sort of level. the manufactured pmi was encouraging. construction is firmer this morning. i think the real kicker will be how resilient will the services sector proved to be? manufacturing, we would like to see a rebalancing of 10% of the economy. services is what really matters,

and here i think we are going to see the impact of the compression on real earnings starting to impact it. that could be the reason why we do not necessarily see a significant exposure above the 1 30 threshold. francine: what exactly is priced in? does the pound go lower? jeremy: i think we have moved away from the worst-case scenario. i wouldn't be surprised if we see a move back towards the lower 120, if we were to see a scenario of a hard brexit scenario with reversal back to wto terms. so, i think that is the sort of scenario. these sort of levels, to me, sterling feels overvalued. there is a case we may that if you look at the way the forecasts have been upgraded from the imf and bank of england, we are talking about 2% and will growth. i think that is going to be a bit ambitious. the bank of england reversed

and became too optimistic this year. francine: are we going to see a lot of volatility in the meantime? i do not know whether traders, on the floor, you're looking anything that comes out of primels for what our minister will say or whether you look through it and look at the fundamentals of the economy, or when we have an actual do. foremost wet and will find that megaphone diplomacy will continue. it's going to be messy. for those of us who are close enough to it in the u.k. are europe, we can understand the dynamics in play. for those investors further geographically away from the process, then they will take those headlines more to heart. when you get the ft talking about a 100 billion euro divorce bill. that is the story that will create uncertainty. we could see sterling suffering

in the asian session. that is not going to suggest that the u.k. will face to pay that bill. that headline will create greater instability. francine: how do you see it playing out? it's impossible to tell. jeremy: it is. we have to remember that the u.k. is in pre-election mode. germany is moving towards its own election. what we have to remember is that we as market participants take every, from politicians as a reference point to markets when that is aimed at their domestic election. in the context, we need to look beyond the headlines. if we are pragmatic, you can argue there would be benefits for the u.k. and the european some kind of to resolution, including a transitional deal overtime so we avoid that clip edged scenario. i think that is where we will end up. we will see the u.k. having a slower exit. but not the doomsday scenario.

francine: do you worry about the two years/ ? do you worry about the timeline or the negotiations? worry abouthave to both because clearly the negotiation process will be bumpy. the legacy of the eurozone crisis tells us it's only when you get to the edge do you get any positive negotiations. that has to be a problem, that things will get worse in terms a the noise prior to getting degree of resolution or pragmatism coming out. francine: stay with "surveillance." plenty coming up, including sanctions showdown. this is bloomberg. ♪

francine: we're just getting breaking news out of ericsson. it has been downgraded to junk by moody's. it david esteban look but this is one of the most in a "comes from -- it is one of the most significant outcomes from ericsson. this was one of the main worries a lot of the debt holders had. being downgraded to junk, and th e outlook stable. so, this is what we know so far. we will keep an eye on it. this is the share price, down from 1.7%. if you look at the share price over the longer term, i have it on my terminal, taking it back f ive or 10 years, it has fallen from quite a peak.

57 at the moment. it was at 170. that's pound. i'll put it up for you. ther eyou go. this is ericsson longer-term, at 120 mid 2-105. -- 2015. let's check in on the rest of your markets. mark: i thought we would look at seag. a season aality chart. this is euro-dollar going back 10 years. up yellow color. the average over the last 10 years as a drop of 1.9%. jeremy stretch is a currency man. maybe he can explain it. that is the worst month over the 10 year average. wonderful function. you can use this function for

all sorts of things. fed meeting. we look at the latest announcement later. economists expect the fomc to after thecy unchanged two-day meeting while making minor tweaks to their policy statement. possibly to embellish that weaker than expected first-quarter growth. this is what fun futures are telling us right now. the june rate, the purple line, tells us there will be a hike. the yellow line is the december 2017 level which is just below what the fed is telling us will be three this year. the white line is january 2018. that is when there will be the second of the two hikes the fed has told us there will be. wonderful chart. this is a wonderful chart. u.s. listed etf's.

$562 million last month. in theacron's victory first rows. the expectations he will go on to win. few investors think that france will be the e.u. this is the breakup index. probability of any country leaving the e.u. in the next 12 months as 13%. francine: they do so much. we are produced on whether marine le pen is for the euro or against it. we'll figure it out but we have to see the french elections on sunday and see whether emmanuel macron does become president. under foreign policy. sages must remain on russia. that was angela merkel's message as she met the russian president in sochi. the two leaders clashed over several issues, in particular the conflict in ukraine. >> what is missing is implementation, not more agreements. that is a challenge for all sides.

the key is, and this is also my urgent plea for the russian president, to do everything possible to achieve a cease-fire. in my opinion, this is the only way that we could create a climate and ukrainian society were they able to make compromises regarding the state of territory. francine: putin had what the white has had a very good call with donald trump in which they agree to step up in efforts in syria and the fight against terrorism. they appear to be overcoming heightened sanctions. syria is also expected to ldsture heavily when putin ho talks with the turkish president erdogan later today. andrew barton joins us from dubai. andrew, first of all, what should the key takeaway be from that phone call between vladimir putin and donald trump?

andrew: well, it was the first phone call since the u.s. carried out the cruise missile strikes in syria, after the gas attacks. after hose attacks, everyone was wondering where u.s-russian relations were going. that set them back. this was a big phone call, but it was also the latest in what has been a string of high level depomed activity. we had angela merkel and putin -- high level diplomatic activity. we had the phone call with trump and putin. and today we have erdogan. merkel was in the uae. everybody seems to be talking about syria and some sort of agreement. russia had a cease-fire that keeps being violated. the death toll keeps coming up and it looks like putin is trying to push this plan.

if the news that phone call to bring him aboard, might be a small win for putin but it might bring u.s.-russian relations back on the front burner. francine: there has been talk at in the focusing to be on syria. there are a lot of bilateral talks going on but the talk of a so-called safe zone in syria, how crucial is that and what is his likelihood? andrew: well, you know, reaching something on syria is very crucial after half a million dead and millions displaced. more importantly, in addition to all of these high-level talks, we also have some more technocratic talks taking place. the u.s.he first time, has sent a high-level representative with the under secretary of state fo near east affairs. while you have discussions going up with the heads of state. there islooks like

some sort of a deal that might be in the works, but the big hurdle, of course, is iran. trump has been very critical of iran. it might be difficult to see how he would come on board for an agreement. saudi arabia last night, the deputy conferenc -- the deputy crown prince was on tv saying how iran was trying to dominate. we may see something over the next 48 hours or so. francine: very quickly, save sound is a glimmer of hope if that is decided on, or does it mean that there are steps towards ending the war in syria? andrew: well, they would not be ending the war, but whether a proposal on the table, it would call for saison. in areas of syria wthat are highly contested where you get repeated violations of the cease-fire have some sort of up hundreds of meters between the two sides to keep them apart.

and perhaps even have troops t u.n. peacekeepers to keep the sides apart. it would be a very challenging environment but that is the concrete step that russia is trying to push forward as part of its cease-fire plan it tabled last year. francine: thanks so much. thisy, i don't know how plays out in your world. whether we also look at north korea and geopolitics is front and center about humanitarian crises. does it translate into how markets also perceive risk? jeremy: indeed, it does. we are talking about bilateral discussions and that has to be welcomed. of course, there may be ongoing disagreements but i think the fact the leaders are discussing issues and trying to come to a solution is encouraging.

that is probably one of the reasons why geopolitics, which were front and center and heightened over the course of the last few years, have mitigated. looking at the representation and the vix. we have seen some risk appetite improving. and that has applications in terms of fx based. the yen, clearly geopolitics matter. north korea was always a wild card which is more difficult to model. usic has improved a little bit from where we were a couple of weeks ago. so, we are seeing rick's trading on a better basis. -- risk trading on a better basis. francine: up next. the south african president continues to be dogged by scandal. we will speak to the ceo -- this is bloomberg. ♪

francine: bloomberg "surveillance." south africa could be headed for another year of economic growth. the economy is likely to remain sluggish as exports falter amid political risk. joining us from the world economic forum is the ceo of

rothschild and sons south africa. thank you, mr. kingston, for joining us. give me a sense of whether rothschild is committed to south africa as it used to be, after the deposing of the finance minister. kingston: i think we are facing challenging circumstances in south africa. the world is itself a very different place than the last time the world economic forum was held. we're seeing significant investment interest in certain sectors. i think we need to explore what we need to do to stimulate greater long-term investment flows against what i said is a pretty uncertain back to both -- backdrop both in south africa and further field. francine: what your clients asking you? are they concerned about the future of south africa? what is the question you get the most? martin: the question we get the

most at the moment is with the reshuffle that to place a few weeks ago, with the downgrade we received from two of the rating agencies, pending review by moody's in terms of the long-term and short-term debt, there is a question mark about not only the regulatory on policy framework and i have to say the government has confirmed and recommitted itself to the position in a has taken over the last several years in terms of policy. but whether or not we are going to see a decent rate growth as a consequence of the downgrade and further downgrades. whether or not people are going to be prepared to make long-term commitments in terms of capital investment. the acquisition of existing businesses investing into new businesses, when we have high unemployment, when we have a volatile exchange rate. the potential of consistently high inflation and potentially higher interest rates. so, that makes for a very ofplicated concoction

circumstances against which people need to take long-term positions. as i mentioned before, we have seen in certain sectors, the oil industry, we are advising chevron, where the chinese are requiring their stay, a large investment of $900 million. in the downstream bottling area, coca-cola is buying back an operation controlled by sab miller. we are seeing genuine interest. if people are prepared to weather the storm, and the longer-term there will be real material scope, not only for growthrm investment but in selected sectors of the economy and south africa, and also with a view, obviously on the continent, more broadly. again, there we have seen pockets of real opportunity, but substantial concerns about the short-term direction and the

ability for policymakers to actually give -- affect to the policies by implementing them in a resolute manner. francine: thanks so much. now, bloomberg "surveillance" continues. tom keene will join me. and we will talk to the allianz ceo. we are following all of these brexit negotiates and getting some live pages of the chancellor philip hammond. he's joined by david davis, the brexit secretary. they are talking in central london. this is bloomberg. ♪

alix: --

francine: the future of the balance sheet is in focus. jpmorgan shifting hundreds of london-based jobs. billion brexit bill is not happening. and chinese conglomerates become the largest shareholders and , surpassing their european peers. good morning, this is "bloomberg surveillance." d.c. to talkin balance sheet. tom: we will talk with ben and with a paperback version of his book. he has some real analysis over monetary policy and theory of the trump administration. he really goes after the mystery of trump economics. well asmckee is here as

we have said day. it will be an eventful day in washington. francine: let's get to the bloomberg first word news with taylor riggs. taylor: trump and putin are trying to mend fences, started with cooperation on syria. the two leaders spoke by telephone and appear to be overcoming tensions caused by the u.s. strike on syria and allegations that russia interfered in the election. cast a newn plans to missile defense system by the end of the month. the goal is to be able to intercept a ballistic missile like the one north korea is trying to create. bigger oil production cuts last month, crude outlets fell to 32 million barrels a day. iraq and venezuela came closer

to their targets. this is part of the historic agreement to stabilize pretty -- stabilize prices. theresa may is warning the european union to vote be pushed around in brexit negotiations. she said the commission president that she can be "luddy difficult." global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. i am taylor riggs. this is bloomberg. let's look at equities, bonds, currencies, commodities. it is a quiet market. the euro is unchanged over the last, what, year? i am making a joke. the curve is flattening. a flatter yield curve.

and oil, oil, oil with the collapse yesterday down to $47 on texas intermediate. a little bit of a left with brent. canada is weaker off the weaker oil. francine: we have a new function that tracks the one-month percentage change for currencies. i am only sticking up for the european. one dollar .2 nine cents -- the pound is $1.29. they, that is what the need to look at. fromook at tech companies -- companies after apple yesterday. this is a great chart. what this is, basically, the fear on the markets specifically

for the region on the euro breaking apart. what is interesting is that the in april.alling we are around here and you can see it was quite high, much higher when the european debt crisis was happening. that is on the bottom. 73% for theord split in 2012. so we can focus on that, on the fed, on the $4.5 trillion balance sheet. janet yellen says she wants to shrink it in an orderly and editable way. joining us now is andreas utermann. and also with us from d.c., michael mckee. all, do you worry that

the market is to a huge correction if the fed miss communicates? the fed is pretty clear about what they expect. itthere is a correction, will be triggered by other events, geopolitical consecration or what is going on in the world but not fed action. mike mckee in d.c. following the fed for us. the fed needs to navigate and this discouraging or not as good data by keeping june or july? the seasonality problem that the united states is had for the last couple of first quarters, they could blame it on -- they could blame it on that. when you talk about gdp and gross, you could say, we will

wait and see. acknowledging it was weak it we will wait and see because we don't have to do anything until june. no new economic forecast so no reason to do anything. tom: some excitement here. we had excitement with the war andt and the civil andrew jackson. yesterday he went after the government shutdown. as janet yellen distracted by the power game in washington? well, it is clear that andrew jackson would not have raised rates in march. but other than that, no. [laughter] michael: she has always been able to shut out politics. intoannot incorporate this your forecast. so you go with what you can and tells us that they could stick with the forecast for two more this year. tom: i want to go back to on the talksann

that michael has been following in washington. is there something wrong about a 15 year bond? you have to live with long-term european paper. is there something immoral about -- 50 yearinch bond french bond? andreas: i don't know if it is immoral. it represents in action. i think the monetary policy of the past 10 years could be framed as questionable. you are basically redistributing wealth from those who have taken on a look at that and who are long financial assets, taking it away from the sabres who are not taking risks. and you are getting monetary risk on their savings. so i think that is the monetary issue. the fact that they are as long as they are as a consequence of the framework. francine: what's that tell us if you do about growth prospects?

is there a danger that investors would say, if the u.s. does issue 50 year bonds, they are joint parallels with japan? andreas: i think that is all very true but fundamentally, what that tells us, is that those who have invested in long data assets are either compelled or not happy to take the risk aymore to be short or to see riskier asset. and for them, whether bond yields are higher than they are -- it relates to the vulnerabilities. -- reticence about long bonds. who is driving that we have to , are theyar-50 year talking about 100 year? michael: most of the chapter is

about a 50 year bond. it seems to be only the trump administration officials. it has come up, the idea of locking in low rates for a long time. but it would bring up the regular and predictable policy of the fed. because there will be enough demand for that paper to continue to issue it in large enough amounts that it would be liquid interest. francine: -- tom: you and i have a great respect for bond. is there anyone in this debate to has read the big michael: bond book that we struggle through? there is not a lot of people in the domestic finance office who they have not felt the roles at the treasury. thef: 30 eastern time, announcement on ultra long bonds but there is a bet they don't because have not been able to work through the political and financial consequences because

there is nobody home yet. tom: we have so much to talk about. michael mckee with the fed coverage and you will be at the building for the fed announcement here this afternoon. we continue with andreas utermann in london. new york.eene in we will be in paris on monday but before that, a conversation with an bernanke. this afternoon. ♪

taylor: this is "bloomberg surveillance." i am taylor riggs. isle has reported that it selling fewer iphones because consumers are waiting for the next big cup trade. there have been multiple reports that the upcoming iphone eight will have a number of new

features. there is speculation that consumers may be waiting for that to come out. the biggest investor in deutsche bank is a chinese conglomerate. --hna has overtaken blackrock is the largest shareholder. additional they sold shares to increase capital. and sainsbury's says it is able to cope with the brexit induced squeeze on profits. at theof profits estimates. grocers are trying to pass on higher imports. sainsbury's cfo says there is still uncertainty. >> clearly, it is helpful to us to have a stable government. it is helpful to have some clarity on where we go forward but we understand it is a complex situation and the government is managing that the best they can and our job is to focus on the business and what we can do day to day. taylor: earnings were held by

those that were a discount retailer. that is your bloomberg business flash. francine: breaking news out of brussels, we see the chief exit negotiator for the european commission. from brussels, 30 minutes ago. mr. barnier saying that the hard work has paid off. he says he has worked a lot with president juncker. he wants a safe approach. i don't need to put this in context for the international audience but it is clear that there are lines that are being drawn. and the lakemay

from the german newspaper showed is that these are real negotiations. and different sides have different expectations. and what you can negotiate at the same time as the biggest wake-up calls for the u.k. and we heard yesterday that theresa may says she is a difficult woman to deal with. this is because we had, during the referendum campaign, one person from the conservative party told her that she was being a "bloody difficult woman." tom: do we have a length of time of this initial infantry skirmish? do we have a length of time that this will go on? francine: the skirmish could go on for two years. for two years, the negotiations need to end or the u.k. will have to be extracted from the eu. we could have this gossip for another two years, or to be

exact, one year and 10 months. jpmorgan says it plans to move hundreds of london-based bank or its two dublin, frankfurt and luxembourg. andy --t back to andy let's get back to andreas utermann. gameis like a full-blown theory retrieved the u.k. and the eu? andreas: koran look at brexit is with great sadness. for the u.k. and the european union. the skirmish is entirely self-inflicted. if you go and try to negotiate on the basis that he will have your cake and eat it and show a ransomed theolding european debt, aggregate tickets starting point of good faith in a chemical divorce. so i am sad and very worried

that the collateral damage to the u.k. in particular and also, to a degree, to the european union will be significant. francine: will there be a correction with the pound and other asset classes? andreas: i'm not sure it is priced into the markets. the euro to prices of time and on the upside for the euro -- in that sense, i think it is perversely priced in. game and a relative ultimately, a lot of european corporations are global and therefore, they will not be impacted in the short and medium term which is what markets have to focus on most. tradehould we assume that is damaged with these negotiations? a look at exports and imports between the continent of europe and the united kingdom and the commonwealth -- if i want to be old about it.

do you assume trade continues through all of this? andreas: not on the same terms, obviously. the best result will be less than the current situation. and equity markets have not factor that in. it is only relative game. maybe equities would be higher still today if it wasn't for that? we don't know. but what is sure if that you go from a situation where you had free trade in goods and services to a situation where there will be some form of tariff, the question is how big is it going to be and how much does that impose on importers and exporters in the u.k. and the eu when they import each other's goods, you will be less well-off. but not: it is obvious too many fought against it. we will get back to that point. thank you, andreas utermann. coming up in the next hour, we speak with the chief economist of the national federation of independent business.

for that as 6:30 a.m. in new york. we'll talk about tax reform and what smaller businesses in the u.s. need to kickstart animal spirits. this is bloomberg. ♪

francine: "bloomberg surveillance," from london and washington before tom and i are live there in paris.

and investors are piling in are tracking french equities as investors price of populism ahead of the presidential vote. the french etf has seen an in flow of over $560 million in the past week. penght, macron will face le on the national front for the first and only face-to-face debate on the french election. let's get now from -- let's get more now from andreas utermann. i don't know how closely you look at this. our markets worried that even if theyn becomes president, won't be able to govern or are they just trying to get through sunday? andreas: if it is and macron and le pen, all hell will break loose. currencies and equities. that poses a threat to the euro and the eurozone and the european union. it isn't a given. we were talking here year ago taking that brexit was going to

happen and we thought donald trump would have a difficult road to the white house so, you know. , theine: the polls, for me polls were right. they were writing on right. andreas: for once. it could be luck. macron isn't an experienced debater. le pen is eloquent. ofouldn't exclude the type damage that has been done to the presidency and if we have to get through that then we will get to the vote then maybe the polls will be proven correct but we are not there yet. tom: a wonderful article out on the bloomberg which tells us what the guardian is telling us. the left and the far left will not vote for a banker from rothschild. aey are looking for "gesture." that a a gesture

rothschild banker could give to socialists on the left of france? andreas: i think his already started by, a couple of days go, modifying his tone and discourse on the european union. he said look, the european union needs to be reformed fundamentally if it is going to survive. so think he has started doing that. i think he has going to -- i think he is going to stick with his script. i don't think he is going to offer that much to the left and the far left because they will not be deciding the election. francine: what do you worry about next? after sunday? it could spread wider after the european german bund. andreas: if we get through france, the assumption is that the german election will deliver it pro-euro and pro-european result and probably the italian

political establishment, whatever the election throws up, will fall in line with the franco-german action. tom: andreas utermann is with us. ben bernanke is with us this afternoon. before that, an expert on china and international economics. we will speak with the professor hear his new thinking on china. let me look at the data on a fed a. oil, $48.14 a barrel. a 47 print yesterday. this is bloomberg. ♪

night, washington last rumor has it they were up all night rewriting trump-care

getting moderate republican votes. that will be a seam in the next hour. it is not going well for the president and speaker ryan. they have to exit now to get to thursday and friday. right now, in new york city with the first word news, here is taylor riggs. has a: david davis warning for the european union. he is willing to walk away without a deal if provoked. pays says he will not brexit del of 110 billion dollars. he was reacting to a financial times report that the eu negotiators had revised the first calculations upwards. he says he has never seen a number from the eu. jpmorgan is preparing for the u.k. to lose access to the market after brexit. they plan to move hundreds of bankers from london to dublin, frankfurt and luxembourg. deutsche bank says they may move

4000 workers and goldman sachs say it probably will begin relocations next year. trump'ste has confirmed choice to run the securities and exchange commission. clinton will be the first major wall street regulator to take office. --awyer whose fiber clients former clients include goldman sachs. and in saudi arabia, the government plans to spend at least half of the money it raises on domestic investment. the saudi deputy crown prince says they will use some of the ipo proceeds to develop arms manufacturing, mining and the entertainment sector. the saudi economy is in the worst slowdown since 2009. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you so much. he is in new york city but his

key expertise is on china. -- i'm going to talk this afternoon to an bernanke about the mystery of investment in the united states. on the sizepdate and quality of investment in china? to invest atinues great deal. the interesting thing is that it could invest a lot. if you look at the capital labor ratio in china, it is 1/5 that of the u.s.. so a lot of the investment in intermediated by a banking system that is not handling capital very well. there are investing very poorly. and that continues to be the case. however, investment has become less important in driving growth. production growth has become

more important so at least it is going in the right direction. tom: i remember 10 years ago when one day china bought all the cobalt in the world. i don't rumor the exact time. how is this an international investment and they, and are they advancing if trump wants to be isolationists? ther: it helps china if u.s. starts with drawing from the bilateral engagement. china is positioning itself to fill the void that the u.s. leaves behind, in asia in particular but more broadly as well. because of the capital outflows that china has been experiencing, they have made it hot -- they have made it harder for households to invest abroad. so the draft the china has brought to bear in terms of international experience has slowed down a little bit. but china think that is very well positioned given the treasure chest of

foreign-exchange investments and other resources it has. once it feels more couple with the capital account, we will see chinese money coming out and once again, china is expanding the financials as well as geopolitical clout. francine: and it is also about regulation? regulations -- they are trying to walk the tight work -- trying to walk the tightrope of tightening what they have on the user there is enough cash in the system so investors don't get scared off? eswar: it has been a difficult to hold that they have managed to pull off, more or less. if they tighten up on credit -- an age-old problem in china -- squeeze willrowth not have a big effect on the large enterprises but the small and medium enterprises. which they're counted on for better quality growth and employment growth. so i think it will be very difficult for china to do what he really wants to do.

tighten up on credit growth. chances: what are the of a deleveraging process? i know it is difficult -- is it a 50-50? they are leveraging up even more. the bigger issue right now is whether they can stop the rate of the increase in leverage and make sure that the slowdown and the rate of increase, the source of economic growth and employment growth -- once the deleveraging process starts, the big question is whether they will have the financial system, allocating capital to the parts of the economy that can maintain growth without destroying growth. if they cannot pull off that balancing act, any deleveraging could be painful in terms of economic growth. tom: professor, i want to get an update from you on where we stand on the zero-sum society. we spoke to douglas kerwin from

dartmouth yesterday. we celebrate the 200th are we becoming a zero-sum america? a newhina look at us as society? -- in manya has been ways. it has kept its markets restricted. but china has been taking on the mantle of great globalists. and this is an issue of the u.s. pulling back. one of the most open markets in the world. labor andbetter reduction rights and so on. the difficulty is that if the u.s. steps back from the notion moreshing forward globalization, it means that china gets to be more

influential in the roots of the game. and china wants different routes. -- it wants more. we could be ending up in a system where world trade starts contracting because we started viewing it as a zero-sum game. inncine: let me bring andreas utermann. distilling the fear of globalization, being spearheaded i china and the u.s. retracting -- being on the international space when it comes to geopolitics? andreas: i agree with eswar prasad. if trade is seen as a zero-sum gain, which a lot of politicians seem to think then everyone is a loser. for the united states, it is

actually a loser's game. you have more to lose than others will gain. and one of the regions that is set to gain is the rest of europe and asia. i think the other aspect to consider is that the chinese have a number of levers that they are considering to deal with the conundrum that we talk about. and the overemphasis on credit. and also, the misallocation of capital. they can reinforce their policy focus on the sector, and we are seeing evidence of inviting and for structure investment which would allow chinese capital to flow out of china. , the oddestrasad thing yesterday, the president of the united states advocate basically for a government shutdown later this fall. in the boldest of that

statement, can you say that the wto is dead? what is the state of the wto given an america that is walking away from a basic civic duty? the wto is alive but not kicking. and the u.s. this regarding the wto -- it is going to be very difficult for a to become and remain a viable institution that promotes world trade and fairness. the u.s. manned up shooting itself in the foot if it tries to walk away from the wto, because the wto has served u.s. marketss in opening up around the world. it will be a bad day for world trade if trump followthrough in this promise on any form. prasad, thank you so much. from cornell university. as afternoon to -- this afternoon, my conversation with

an bernanke. we look at his book and also, and bernanke on the future for his federal reserve. we are really looking forward to that. this is bloomberg. ♪

tom: a busy 10 days for "bloomberg surveillance." francine lacqua will travel to paris for the final battle and i will join her on sunday in paris. in washington today, the fed meeting. my conversation with ben bernanke, as well. none of that matters to the buy side. if you don't what the buy side is, let's call it asset management. it is the people who manage your your retirement.

one of them is andreas utermann. i know you saw the analogy -- i know you saw the announcement of bernstein. there are a lot of stories of, not turmoil, but the battling of outflows from active managers buying thesions to index. what should be the response house and the response of the industry? andreas: the industry needs to get its act together. the last 40 years have one where making money for clients and asset management companies was easy because data returns were significant. we have seen a fast liberation of an offer -- we have seen a vast proliferation of an offer coming in and much easier investment strategies at a lower

price so the value proposition and the asset management industry needs to be rethought. the marketurning to strategies and products that are more relevant to the individual and investor. if it is an insurance company, longmight be interested in data assets. they couldn't deliver on that in the past. or all sorts of alternative assets. the other end of the spectrum, we are talking outcomes. were they interested in the index return? maybe they should be interested in what sort of income they can generate? management asset business a victim, particularly on the bond side, on the great distortion? did central banks acted in such a disordered manager -- in such that itered manner

affected any of your competitors? andreas: i'm not sure i would argue it that way. policies were helpful in terms of inflating asset prices and that has been a good thing for asset management companies at large. it has prevented greater carnage. but it has made life difficult for active asset managers because as a result of low interest rates, correlation has increased significantly which has made it much more difficult to keep the index which has reinforced the pressure on the industry. francine: will be pressure become greater and greater? andreas: i think it will become greater and greater and there will be greater consolidation happening. it is frankly, it is an industry ex-growth. francine: is there an asset

class that looks to be a better value? andreas: that is really tricky. the key focus has to be on great franchises, the sustainability wendy business model -- it's be very diversified. bondsporations looking at and equities -- having a sustainable business model. focusing on a lot of factors that future regulators and consumers will pay attention to. these are often the ft factors. in addition to that, we have talked about this before -- increasing dividends, the capacity to increase dividends will play a major role in total shareholder return when one looks at investments. francine: we will be back with andreas utermann. if you're a bloomberg customer, you can ask us or ask a question directly to andreas utermann. go to tv and you can look

at our charts and data checks. ask the guest a question. that is where you tell us what you want us to ask andreas utermann. this is bloomberg. ♪

taylor: this is a "bloomberg surveillance." i am taylor riggs. in france, the -- reported a surprise increase in profits. they posted higher revenue from trading stocks and bonds. i am one of the few european banks providing growth from the trading business. they want to grow global market revenue 5% a year through 2020. several private equity firms are cloud serviceshe company according to people familiar with the matter. carlyle group and others submitted bids last week. customer been working with goldman sachs to find a buyer. and the u.s. justice department -- as-- as an investment

an investigation into drug prices. are known to be part of an investigation into the collusion into the generic drug business. that is your bloomberg business flash. tom: thank you so much. we spoke to eswar prasad about investment in china but we should move to africa. the world economic forum meeting is in south africa and joining us now is our africa chief executive officer, j ireland. wonderful to speed to you. with the investment in africa, what needs to be the capitalist -- what needs to be the catalyst? i think to your point, the investment is viewed from a different perspective of risk. and i think that is a key thing from the standpoint of being able to be able to understand

what you are investing in. and you have the right rate of execution and the ability for the investor to get its return with the safety aspect of that is important. so i think there are a number of potential ideas out there right now which will really drive some hopeful potential investment. we are working with the world bank. and what wedfi's can do to spur on credit enhancement. that will be key. tom: what is needed from the government? a battle over the import-export bank in the united states, how can governments assist private enterprise towards midsize or larger investment? oh, i think we have run into a capital -- we have run into a technical difficult he. that sometimes happens. we thank jay ireland.

frontne, you were way out on determine oil -- you are way out front of the turmoil in africa six weeks ago. stability there yet. francine: we did speak to the new finance minister of south africa, which is significant, to see whether they are committed to south africa or not. we need to get back to jay ireland on that and the world economic forum there. but let's get back here to london with andreas utermann. financial repression, something you have talked about for years. we have talked about central banks. what is the one thing that markets should prepare for? the biggest risks or the tapering or the big risk -- markets are not pricing

in a marine le pen victory. number one and i'm not sure they are pricing in a tapering. we talk about tapering but i think finally, over the next 12-8 months, we may be talking about coming out of the policy framework in europe because it seems to be working. they're well below the national rates arehe periphery coming down. and fiscal policy is relatively accommodative. data that came out yesterday was encouraging so it sets the scene for a stronger euro and potentially, for the ecb to inounce tapering to start

2018. francine: isn't that risky at a -- in andreas: it hurts the lower end middle income parties through the reducer properties as we talked about before. tom: within the battle of europe, and we stagger from politics to politics -- did you know there is an election in the united kingdom in four weeks? it is amazing how this stuff comes up. give us an update on negative rates in germany? i refuse to believe there is any advantage to the german people. andreas: and right you are. they are not. especially given the fact that german savings are part of low yield or zero yield savings accounts. that is what we have been

talking to german consumers about for the last 10 years. it has redistribute it wealth away from savers and are politically very unpopular. it is compounded by the fact that germany has an aging --ulation like germany and like japan and italy. , that is harmful for them. politically toxic they are becoming. utermann, thank you so much. in the next hour, we turn to the goings-on in washington. we look at the growing debt and deficit. this is bloomberg. ♪

tom: this wednesday, republican leadership needs and obamacare

repeal vote. legislation. the vice president twists arms and the president threatens a government shutdown. it is a gradualist committee. janet yellen will gradually increase her goldilocks outlook. good morning. this is "bloomberg surveillance." we are live from washington, d.c. with the news bureau here. francine lacqua is in london. there is enough going on with the battleelection, for brexit -- but there is a fed meeting today and a conversation before with ben bernanke. what would you ask ben bernanke it? francine: i would ask him about rebalancing or the balance sheet. ask him about communication and timing. i don't know whether he would answer any.

that will be my interview of the day. tom: that is great. i don't know what to say here. a helicopter question is great speech in to the 2003 tokyo. we need to go to new york city with taylor riggs. areor: trump and putin trying to mend fences starting with cooperation on syria. the leaders spoke by telephone and they appear to be overcoming tension caused by the u.s. missile strike on syria and accusations that russia interfered with the u.s. election. trump told putin the u.s. will to talkepresentative about syria this week. the pentagon plans on testing a new missile defense system by the end of the month. the goal is to intercept a ballistic missile like the one that north korea is trying to develop. it will be the first interception attempt since the successful test three years ago. opec made bigger oil production

cuts. crude output fell 32 million barrels a day. i rock and venezuela came closer to their targets. it is part of the historic agreement to hold down production in an attempt to stabilize oil prices. todayope, tough talks from both sides of brexit negotiations. david davis has a warning for the european union -- he is willing to walk away without a deal if provoked. davis says he will not pay brexit deal of $110 billion. nashhile, michelle barty a said that thenier clock is ticking and time is short. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. i am taylor riggs. this is bloomberg. ♪ tom: lets you a data check here on the fed day. it is always quiet. and that will keep the entertainment going.

oil, $47 handling yesterday. right now, $48.03. on to the next screen. thank you apple for the drama yesterday. $1.37.lar canada, that is because they beat the rangers last night. up 1.29 and we had better than expected construction on to european stocks. , they looking at apple were amongst the biggest losers. and the vix, look at that. 11.09. we go to my bloomberg terminal which is has -- which has a new function. do you like that? it is a heat map, looking at the seasonality of the euro over the

last 10 years. this counters in the fact that the euro hasn't changed -- but it does have the biggest gain for the month of may in at least 10 years. so there you go. proving the right. tom: dazzled. absolutely dazzled. thank you for that moment. we begin our conversation in washington on this fed day with stan collender who has given us so much value on the debt and deficit. he served public duty on capitol hill for way too long. how are the bond vigilantes doing? when you look at the dots and you pull them into the rate vigilante-ish?ey

have been exist, they hiding under a rock somewhere. we saw pretty good data out of europe and in the u.s. over the last couple of months. marketsfact that the are pricing in a lot of risks out there. the geopolitical risks out of canada and the government shutdown, that is something that somearket has been pricing risk in of. tom: is volatility in the fixed income space, it is damaged? at the you look one-year-10 year break volatility, it is near the lows. and i think that is important because they are saying that it isn't a lot of risk that we will get a massive selloff in risk. that is not what is priced. for people that think hey, rates are going to go up and this is a great time to buy some hedges but at the same time, the market

isn't giving you any indication that you will see a significant bounce back in treasury yields towards 3% anytime soon in the 10 year. francine: will come to the program. give me a way you would describe u.s. data so far? progress, disappointing, risk? stan: i'm naturally there were too many people who expected that economic growth would shoot up because donald trump was elected and the republicans took over and had control of house and congress. we haven't seen anything on the policy side that would change that. so i don't think the data is telling us much of anything. it is a really concerning to anybody in washington. francine: ira jersey, do you agree with that? that the fed is acting cautiously and saying, let's forget the data while keeping the june hike alive?

ira: the fed will talk about the fact that you have had continued growth. keep june on the table. that is an option the fed will want to keep. right now, the fed is only -- he market is only pricing one more full fed hike this year and i think that is something that may be concerning to them because they have been talking about two more hikes for the better part of the year. they have one behind their belts and they want to do two more. but they have to wait for the data. when you have a government shutdown, that is something that could push them out. , theg the taper tantrum markets priced out taper just because there was going to be this debt ceiling and a government shutdown in 2013. fed nowis something the has to consider as well. tom: the backdrop to this is the

artist washington i have ever seen. i'm sure there have been other times where it has been as odd yesterdayesident basically said he wanted a shutdown in september as a tool in negotiating with congress. how did you respond to the president of the united states using government shutdown as a weapon? stan: first of all, you are exactly right. this is the time when washington entered the twilight zone. and for those of you who are too young to remember that joke, google it. isn't it ironic or strange that the president said he want to shut down in september when he could have shut the government down this week? he could veto the bill where he could get anything he wanted. as bluster, it more a negotiating tactic. have director mulvaney who has been against the increase in the deficit now saying that

deficits are ok as long as they are caused by tax cuts. tom: stan collender is here with fornd ira jersey is here the bond and fixed income market. we continue with the two of them and we have a wonderful hour on the bloomberg radio and "bloomberg surveillance." before the fed meeting this afternoon in the 12:00 hour, i will have an extended conversation with chairman ben ben mackie. -- with chairman ben bernanke. i am really looking forward to that. from washington and london, this is bloomberg. ♪

taylor: this is "bloomberg surveillance." i am taylor riggs. apple has reported that it is selling fewer iphones and the

company believes it is because consumers are waiting for the next big upgrade. havepcoming iphone 8 will a number of new features. tim cook speculates that potential buyers may be for it to come out. the biggest investor in deutsche bank is a chinese conglomerate. its stake toased almost 10%, overtaking blackrock as the largest shareholder. last month, deutsche bank -- deutsche bank sold additional shares of capital. that is your bloomberg business flash. tom: thank you. in washington and london, "bloomberg surveillance." joining us now is kevin cirilli. with us in new york is ira .ersey and stan collender what i want to know right now is the immediate news -- not even the fed meeting this afternoon

-- is open on the care repeal and the idea -- is open obama care repeal and trump-care -- you talked about an amendment overnight? decided asas been late breaking news. but i can tell you that these discussions are ongoing. the dynamic that has emerged is that the white house is pushing for artificial deadlines. they have to get a bill passed by wednesday, by thursday. and it started again last week. get it passed by saturday. and their house members in the moderate and the freedom caucus who say, what is the rush? don't have the votes yet. tom: they are feeling the pressure from trump who came out yesterday and said he wants to shut down in september. i have never seen that in my life. ais guy is a deal maker or pseudo-dealmaker. he wants to apply his template

to washington. our the next three days where he learns he can't do that? you would have thought it would have been during the first go-round around when he tried to force their hand with policy reform. until he gets a win, we are always going to be talking about this. every source i have spoken with from members is saying that they votes right now. francine: i know you are not a psychologist. but if he doesn't get a win soon, is it more likely that the president becomes protectionist? kevin: that is a great point. from the perspective of how he can accomplish other items on his to do list with the , it makes itform more difficult. and until they have the momentum -- and that is what this is all about -- should he secure the

win on health care reform, he has the momentum to accomplish policies. francine: what does this mean for the government shutdown? stan: there won't be a government shutdown. the president -- he is and even mentioning it. and that has them one of the more interesting parts of it. of what kevin was just talking about. what kind of momentum will be get wendy president will sign a bill on friday when it will be an absolute loss for him? the president will have a huge loss and congress goes away for 11 days. one of my questions is, isn't it foreign policy and about doing things without congress? kevin: particularly north korea. some type could see of message and i did think we saw that with syria. we are staggering from

event to event. it was shut down on tuesday. what does the chairman of the committee of the house and the senate -- how do they act and respond? congress seems to be telling the white house to butt out. kevin: i totally agree. mike pence understand that versus reince priebus. ira: and also mulvaney. government open this week and congress is saying that we could do a better job if you let us -- if you stay out of our hair. tom: you remember 2011 or 2012 shutdown-o-rama.

the rate market is pricing in some of that. that is why we had a little bit of a rally in the treasury market. going back to the congress discussion, there is a realization in the senate where everybody knows the deficit is going to go up anyway. there will be higher deficit based on the graphic. that is something everyone want to take into account when they think about tax cuts. as opposed to this natural increase in the deficit from demographics. markets are not pricing that. you have folks in the treasury department trying to figure out how they will fund this thing. you are talking probably by the

end of the year, especially with the fed potentially starting to let the balance sheet run off and not reinvesting. tom: ira jersey with us in new york. he will continue with us. at the desk and dash offevin cirilli -- of to capitol hill. at noon today, before the fed meeting, somewhere around the 12:00 hour, 12:20, a conversation with ben bernanke. to seems to talk about -- i try to get a six hour conversation but that didn't work out. this is bloomberg. ♪

francine: from d.c. and london, a pitstop in d.c. before we make our travels to france and paris french ongoing presidential coverage. we start with the morning must-read and then we go on. what we've picked up today is from project syndicate -- from a belgian politician and a chief exit negotiator who weighed in on the brexit negotiation -- who weighed in on the french

election. saying it was one of the great congregant powers before it became a funding -- before it became a founding member of the eu. different as-- as these legacies of imperialism and multilateralism appear, both have embodied france's commitment to globalization. macron will face marine le pen for the first and only head to head bait. -- head to head debate. on many people will not vote sunday and will the debate see her them into action? the amount of undecided is unclear because it depends on ont melenchon voters will do sunday. it could be up to one third of his electorate who will of sane -- who will abstain. , we knowcois fillon

that one third of his electorate could vote for marine le pen. tonight, this debate will be very decisive in order for the two candidates to convince the undecided. francine: how much do we know about how they are preparing for thatebate and it is clear le pen -- she has been doing this for longer than macron has. >> she is a professional in this kind of debate. macron started participating in those kinds of debates a couple of months ago. so of course, she will be aggressive with him. but the danger formerly known pen -- but the danger for marine le pen is that she needs to show she could govern and be elected president and she cannot sound hysterical or too emotional. giveor macron, he has to

punchlines. he needs to reconnect with ordinary people, ordinary voters. amount of is a small for others.voted are either of these candidates will be able to speak tonight to the disconnected left? >> i know you like history. one debate actually changed the outcome of the presidential election in the past. it was 1974, the first time two candidates face each other in a debate. and -- came out with the punchline, saying "you maybe from the left wing but you don't have the monopoly of their heart." later, he said that made him

win the election. so it will be interesting to see if macron can also come with that kind of punchline in order wingnvince those left voters who are unsure about his liberal pundit. tom: thank you so much. today.curred it was in all of bloomberg media. a conversation with denver naki -- with ben bernanke. how that a conversation with bill gross on your federal reserve system? this is bloomberg. ♪

♪ francine: this is the city of london, tom's favorite landscape.

we have a way of naming our landscape in the u.k. the brexit secretary has flatly rejected a reported no of his much -- bill of as much as 100 billion euros. he said he will walk away from the bloc if provoked. the game at its best, people threatening to walk away. tom: it is off our radar. i am good -- glad we continue to push the brexit dori. -- story. after the election on sunday, on we go to the united kingdom. taylor: we are sticking with grexit, -- brexit, tough talk on both sides. david davis has a warning for the european union, he is willing to walk away without a pay, and the u.k. will not

$110 billion. the brexit negotiators says the e.u. wants to reach a deal but warned the clock is ticking. jpmorgan is preparing for the u.k. to lose access the single market and they plan to move hundreds of tankers from london -- bankers from london to frankfurt and other places. begin will probably relocation next year. jay clayton will be the president's wall street regulator, a lawyer whose firm are clients include goldman sachs. he wants to determine whether roles linked to dodd-frank are working. in saudi arabia they plan to sell shares on domestic investment. the deputy crown prince said the government will use some of the forco proceeds

manufacturing and entertainment. the economy is in its worst slowdown since 2009. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you. from london and washington, this is bloomberg surveillance. dan colander with us. we will talk about the debt and deficit. joining us as well is william dunkel bury. he has annexed desk esteemed career, and is truly the voice of small business. blue 24/7. wonderful to have you here. william: thank you, tom. tom: it is an absolutely bizarre time and one has been the trump

fade. tohas come essentially back november 8. a small business beginning to fade? william: i do not think so. our most recent survey, and we surveyed 320,000 members randomly each month, we have seen reports of actual sales quarter on quarter going up, not skyrocketing, but moving in the right way, good levels of capital spending. they are not fading, and the optimism index award the day after the election -- sword -- soared the day after the election. tom: the most important meeting is not at the eccles building but the dirksen senate office building where you and among others will brief congress. what is the common ground between the leftist from columbia and one representing

business? >> we are both nice guys. tom: there has got to be a common ground. both interested in job creation and the best thing we can do for people in general is provide them an opportunity to work and pursue their own dream. we do not think the government should be spending a lot of time giving you new resources -- resources. we do not have the same view of what the tax system should be doing, the regulatory structure in particular. francine: talking about the great american dream, how does president trump revive animal spirits to make sure it goes down with hard cash in new investments? ira: something that tax policy could do if the president could get congress to go along, could help investment for small

business. how do you finance them? whether it is through debt or otherwise. the others -- one thing we have seen recently is a significant change in the amount of issuance of corporate bonds. with the talk of the potential for the tax-deductible really of interest payments by companies potentially changing, that has to change your funding mix if you are an investor. animal spirits of larger companies might change because of that, but for smaller businesses there is not -- there is effects for them too. if you cannot deduct bank loan interest that changes the investment landscape for small business. francine: do they come up overall we saw a massive -- do they, overall we saw a massive upswing when president trump came in. where are we in terms of where

they want the president to go? ira: business in general probably wants changes to the tax code. will they go too far or not far enough? the rates market in general is pricing for not a lot happening in terms of tax cuts and stimulative policies. tom mentioned, we came down from having a very steep yield curve to back to where we were right before the election. one of the things that is telling you, you are not expecting a huge uptick in growth whereas after the election or was a lot of optimism. tom: the president of the united states one partly because of people who run small businesses. after the first 103 days, do you see a president who represents dealmaking, the gilded age in new york city, or does he actually represent small business? is a deal maker and he has

worked with a lot of small businesses, some not so happily. i think he has got the right ideas. we have to depend more on the private sector and limit the amount of government interference on capital and pricing labor. ,om: you wonder how i do this this early in the morning. i knew what his answer was going to be so why set you up. have you ever seen government gets smaller? dan: no, and it is absolutely not going to. at least on the fiscal side. we know that medicare, medicaid, social security going up and they will need regulators to handle those. maybe on the regulation side there will be some deduction but the government is not going to get smaller. we are talking about a variety of decreases -- increases for

nih and elsewhere. one question for iran and bill. -- ira and bill. what happens if it starts to be disappointed, what happens? william: if we don't get the kinds of things we were hoping for, obviously our optimism will fade about where the future can go for the economy and our particular economic circumstances in business. we will invest less, hire less. you do not bet on a future you are not hopeful about. stan: is it the failure of the tax bill that will trigger that? william: i do not think so. number one on our list, getting health care straightened out. tom: that is working out well. william: number two is the complexity of compliance cost, then taxes. tom: these guys walk into the studio in washington and take

over the show. i read jersey, bail us out -- ira jersey, bail us out. will it continue? ira: i think we will end up with 10 year treasury yields potentially lower. we are targeting about 2% 10 year yields which is not something i know you want to hear, but certainly in the cards if you do not get any stimulative policies we have been talking about. tom: thank you so much. dunkelberg, go away. has providedg really a national service with his work. later today, speaking of national service, i conversation with the former chairman of the federal reserve system. i have had so much help on this from brendan murray, michael

mckee. this is going to be a great conversation in the 12:00 hour. ♪

♪ this is bloomberg surveillance. bmp.ance, by surprise increase in first-quarter profits, posting higher revenue by stocks and bonds. they are targeting growth from its trading business and want to grow global market revenue 5% a year through 2020. justice department agents were part of an investigation into drug prices. perrigo has not commented. their drugs are known to be as

part of an investigation into collusion in the generic rug business. -- drug business. tom: this is great right now. this is the washington post this morning, and you are not supposed to see it but you see the blue dots. these are all the tweets from the president of the united states in his first 100 days, front and back as well. with us in washington, jump in here. they are not tweeting like this in the united kingdom. francine: we are seeing a little bit of tweets from the european union so we could collate what jean claude juncker and the maybe negotiators and indices will trade on the back of how many words were used in the space of 24 hours.

the chief brexit negotiator unveiled his first detail vision of how talks with the u.k. -- u.k. will take place. hundredsplans to move of staff to other e.u.-based offices because of brexit. yorkersey is onset in new and stan collendar is also with us in d.c. a bloody difficult woman, is how theresa may wants to be seen by the e.u.. at the milken we spoke to mr. mandelson who said maybe this is not the best way to go into a negotiation relationship. simon: we are in an election campaign. jean claude juncker makes an demand. all the paint him as things the brexit vote did not like so it plays into theresa may's hands that jean claude

juncker appears, or his office appears to have leaked details from the dinner last week. she can use that to say she will be a tough negotiator, a bloody difficult argument. to some us spent the british can say, -- extent, the british can say, we are not leaking the documents. they can take the higher road and say we were not turning the talks toxic. francine: what do markets take of this? do they look at every twist and turn and toxic element or ignore? simon: yesterday the pound was pretty steady after the weekend newspaper reports. they see it going up again to the dollar. ing sees sterling's decline into the euro leveling out sometime this summer.

sterling is not bullet proof and investors will be watching those negotiations. tom: i still remember when you took me to the tower of london and gave me the tour. help me with where the treasure of the united kingdom will calm from to pay 40 billion or 60 billion or 100 billion. where does the money actually come from to pay off europe? simon: first things first, david davis saying the u.k. is not going to pay 100 billion euros and this actual bill is a matter for negotiations which will kick off in june. michelle barney eight fleshing niera few details -- bar fleshing out a few details. the issue is one of politics and a kind of, a bumper sticker number that would risk irritating those who want to break a may -- break away from

the european union. been great about your leadership of the brexit coverage has been the bretz. which part of the debate is the key part for the election in early june? simon: i think what we will see is a lot more talking about jean claude juncker, more about how this proves to conservative voters and people who might want to vote conservative that only theresa may in her view can provide this strong leadership going into the talks. david davis and the chancellor philip hammond talked about how she is much better equipped than jeremy corbyn to deliver brexit. tom: simon kennedy, thank you so much, and congratulations on your continued brexit coverage. what an interesting conversation this will be. jim jordan's front and center with the congressional debate .ith the house freedom caucus

on radio today from our studios in washington, jim jordan. from washington and london, this is bloomberg. ♪

♪ boring, it is

never boring in foreign-exchange. the first three lines are boring but the bottom is not. 1.3729.anada we are watching canada migrate towards a 1.40. francine: coming up shortly, bloomberg daybreak: americas. welcome. what do you have? fomc: as we wait for the we will bring in marty feldstein. he is a professor at harvard and we will talk about growth, where the economy as, and whether the couldproposed tax cuts get growth coming in, and how would you pay for them. francine: thank you so much. we are going to the single best

chart, we did something related to defend but i did treasuries, the 10 year treasury for the u.s.. depend, theill trajectory that tenure takes will depend on what the fed says. it will be a surprise if the fed raises rates. twicere expected to hike more this year so how do they do it? .t is a balancing act we are back with ira jersey and stan collendar. you have put this very clearly. the concern is that policymakers need to try and talk the markets through how they will reduce the size of the fed balance sheet. when did they start talking about it? stan: they already started. in the march meeting a were clear they wanted to use rate hikes as well as run out of the

balance sheet as monetary policy tools. frankly this was a little bit of a surprise, they are interested in letting both the mortgages on their portfolio and the treasuries run off. realistically, what does that mean for treasuries? probably not as much as some people think, primarily because the treasury department will t-bills,e notes like two years, three years, but if they decide to go with a large amount of 30 or 50 year bonds, which they can do at this point, that can have a significant effect on the bond market. tom: let's turn to the fed meeting. ira, let we start with you. as for word guidance worked out -- has forward guidance worked out? worked duringt the crisis because everyone

wanted to know, how long is the fed going to wait before it hikes? at this point it has backfired because people say, the fed says they will hike twice. the market never priced for two more hikes after march so the believability of some of this guidance has waned in the markets eyes over time, so maybe they need to pull that off dutch pull that back and give a range pull that back and give a range of potential guidelines. us forwardu give guidance on the deficit to gdp ratio? back to 6%te from 3% gdp? stan: over a 10 year. , that will certainly -- 10 year period, that will certainly be the case. it will be costing more rather

than less, and with congress and the president likely to agree on more spending for defense and cuts in domestic spending, i do not think there is any doubt we are going back in that direction. tom: you are talking about my age? stan: absolutely. tom: i want to be clear. francine: talk to me about how the fed should view outside risks? ira: they will at least look at and discuss, some of those risks have diminished. you still have places like north , exogenous factors that have to go into the fed's thinking but i think they go into more as a market confidence perspective rather than how will that affect u.s. growth drones -- trends. agoar or a year and a half

you were worried about a real slowdown in china and that seems to have stabilized. for bloomberg intelligence rates, look for that worldwide on your bloomberg. stan collendar, i think we will see a lot of you over the next six months. stan: that is encouraging. tom: a fed special this afternoon, scarlet fu leading our coverage at 2:00 p.m. michael mckee is rumored to be in washington. my conversation on someone who had the courage to ask, ben bernanke at 12:20 this afternoon . from london and washington, this is bloomberg. ♪

♪ jonathan: after auto sales

rollover and gdp growth softens, the federal reserve is expected to keep the rate hike in june on the table. billion, theow 100 e.u. wants the u.k. to pay up. apple reports following iphone sales as consumers wait for a major revamp. from new york city, good morning, this is bloomberg daybreak. i am jonathan ferro alongside alix steel and david westin. futures a touch softer, down 1/10 of 1%. the euro still north of $1.09. way, david davis says no we are not paying 100 billion euros, and sterling down versus the dollar 1/10 of 1%. the vix modestly higher, some commodities rolling over, copper off 2.5%. crude getting mm