says talk ofump impeachment is totally ridiculous and strikes out at what he calls a witchhunt. he prepares to head to the middle east for his first middle east tour. as thes crash in brazil embattled president says he will not step down. may'sleaders say theresa brexit plans are extreme. this is bloomberg "surveillance ." about and what we

need to look out for is volatility in the market. your markets and this is what we are seeing overall. global stocks seem to be more study certainly than they were yesterday. rising.x stocks and europe edging higher. that means they're having their worst week since november. the brazilian real we'll talk about all day, 3.37. the vix down. a little bit of a swing upwards yesterday. let's get to first word news. sebastian: the u.s. treasury secretary says breaking up the banks would be "a huge mistake." steven mnuchin says the u.s. administration does not support splitting commercial and investment banking. elizabeth warren accused him of

a bizarre policy shift. temer has defined calls to step down, saying an investigation will clear him of a cover-up. media claimed that he approved hush money for the former house speaker. realurmoil has seen the tumble. u.k. political parties have criticized theresa may's approach to brexit ahead of next month's election. jeremy corbyn refused to take her brexity slammed plans as extreme. >> theresa may backed by nigel is calling- firage for an extreme brexit that will damage our futures for generation. lostritain i love is not yet.

from brexit to this extreme form of brexit where we are running the risk of jettisoning many of the benefits we get from participating in the european union on an equal basis with all the partners. votingan: iranian are today in a presidential election aat will either hand rouhani second term or have it lurched back to conservatives. a win for rouhani would give him a mandate but the remaining sanctions -- an untitled portrait has sold ar $110 million at sotheby's, record for an american artist and the sixth most expensive work ever sold at auction. the bidding blessed for 10 minutes sparking gasps as th ree parties chased after the work.

the buyer was a japanese online retail magnet. this is bloomberg. fran? francine: now, president trump has denied trying to quash an fbi investigation of his former national security adviser and has insisted there is no collusion between his election campaign and the russians. entirent trump: the thing has been a witchhunt and there is no collusion between certainly myself and my campaign, but i can always speak for myself and the russians -- zero. th president said i -- erik says he schatzker asked three guess what their thoughts on the controversy surrounding the administration during the conference in las vegas yesterday. >> i don't see a train wreck.

and i don't see donald trump anything different from other politicians, except in his language, ok? and for perhaps in the way he does things in an accelerated way. >> i think the administration could be doing a better job of softening the antagonism with the press, but i think that the president has made a reasonably fair assessment that most of the press is biased. >> i think there is a lot of press that's been very negative for him. he has not done a great job of getting around that. was he does, i think things will get back on track. it is getting thing back on track that will create that uplift. francine: all of this comes as trump appears to head to the middle east and europe on his first overseas tour. let's get more with bloomberg's stephanie baker. and we are joined by the

globally head of strategy at bnp paribas. give us the lowdown on what you are expecting, if anything, from the president today? stephanie: some people are expecting him, he may or may not nominate his successor to james comey as rector of the fbi before he leaves on his trip, his -- as director of the fbi. it is unclear whether he will do that. the formerion democratic senator joe lieberman as one of the finalists. and that has cost some degree of consternation, critically among democrats who view him as not necessarily the best candidate for the job. they would like to see, traditionally presidents have nominated a political directors to the fbi post. judges, former prosecutors. and lieberman does not fit that bill. he's also 75. that raises questions about the notion of appointing an fbi

director for a 10 year term. he may decided to waive and focus on his foreign trip as a way to reset the tone of his presidency. he is expected to get a warm welcome when he goes to saudi arabia and israel. this is an opportunity for him to change the narrative. francine: we will try to have full coverage. i am also traveling to saudi arabia this afternoon or use meeting a lot of ceo's. we are expecting memoranda of understanding and things like that. talk about robert mueller. how much do we know about what his investigation will look like? stephanie: we know now that it is a criminal investigation. he has the power to prosecute. and i think what people are worried about now is how his investigation could collide with the multiple congressional investigations that are ongoing. a criminalse it is investigation, he may want to prevent certain people from congress. in

because that could interfere p sohis own investigation i think th upshot is the american public may not get as much information on this as we previously thought. now, that is a good thing potentially for trump. it takes this whole story slightly out of the public eye. but i think the ball's in trump 's court to stop talking about it. many people are surprised that he does not say this is the hand of the special prosecutor. i'm completely innocent, let's move on and talk about my legislative agenda. let's talk about the other things i want to get done in my presidency. francine: what is your take on this, is he going to stop talking about it? the markets are pretty sanguine. they seem to have focused more on brazil. will it come back? how do you price it in? >> one thing we should just remember is that ultimately, republicans have control of both sides of congress. so, they are still the dominant

party and it is still a very long road towards impeachment. there are a lot of hurdles that need to be jumped. if we look in the past, there have been investigations of previous presidents. how many impeachments have we actually had? he will calm down and move the agenda on and he needs to do tax reform. that is crucial. francine: even if we live in pitchman to one side, the president usually benefits from goodwill in his first couple of months -- even if we leave impeachment aside. if he loses a lot more of that goodwill, what does that mean for tax reform, for infrastructure spending and some of the things he wants to deliver to get the economy stronger? theon't forget, francine, republican party will face midterm elections. they have a year to go. we are already on the path. a lot of people will be seeking reelection within congress on the republican side. so they do want to see the president deliver. if it is in their interests to

see the president deliver, so they have a much stronger run in, a much stronger campaign, i manifesto to deliver to their voters. from their point of view, they will have to be on the same page because any further disruption, particular in terms of delivering the tax cuts, could be fatal. resetne: it is almost a for the president. he is they're looking for investment. is it a distraction for the president or something that he can show back home that he can do business? stephanie: it is an opportunity for him to reset his agenda. as we had reported last week, saudi arabia is going to be investing $40 billion in u.s. infrastructure. if that gets announcement he is there, that is a nice win for him and helped change the story. but it really is up to him to stick to the script and start talking about other things, other than the special prosecutor. it's completely in his court. francine: stephanie baker, thank

you so much. ."w, stay with "surveillance chaos takes hold in brazil with markets sinking as president temer says he will not step down at a corruption scandal. we will have the latest on that, and football's secret trade as the u.k.'s premier league season comes to a close. this is bloomberg. ♪

>> i have never said we are in favor of breaking up the banks and separating. if we had -- >> let me try one more time.

i have to try this one more time. what does it mean to be in favor of 21st century glass-steagall? if it does not mean breaking apart these two functions in banking? >> i'd be more than happy to come see you and follow-up. >> tell me what it means. >> we never came out -- to separate banks. 21st centuryat glass-steagall means if it does not mean breaking apart the two functions. it is an easy question or an impossible question. >> it's a complicated question. there are many aspects of it. the simple answer, which we do not support, is breaking up banks from investment banks. we think that would be a huge mistake. francine: that was u.s. treasury secretary steve mnuchin and elizabeth warren going to head-to-head on the trump administration's plans for wall street. exchange operator euronext is reporting a 9%

decline and first quarter net income. company, which operates markets in countries including the netherlands and france, also said revenue was little changed. onext plans require a clearing house from london stock exchange next year. aston martin is considering a london ipo next year. the british maker of james bond's cars is seeking to capitalize on the success of ferrari. martin would be valued at $3 billion. takata search the most in four months on news that bmw and two other automakers have reached a multimillion dollar settlement. 'll reimburse out-of-pocket expenses, provide loners and help to raise participation in the recall. the airbags have been linked to 17 deaths worldwide and prompted the biggest product recall in history. and that is the bloomberg

business flash. francine: now let's talk about the situation and brazil were president michel temer has defied calls for him to step down amid allegations he approved hush money for the former house speaker who drove last year's impeachment of roussef. $150 billion was wiped off the country's stock market yesterday. the real plunged by the most since january 1999. >> i will not reside. i repeat. i will not resign. were correct.cts i demand a full and quick investigation to clarify for the missing people. francine: our guest is with us. ed, let me bring you to my chart. this is a great chart. basically shows you the break or futures.azilian the markets are nervous.

with a right to be so nervous? it's hardly surprising when you take the market by the brazilian the vespa because it has been one of the best performing equity markets in the world since the removal of power of dilma rousseff. it's fantastic. it is hardly surprising that when you get first sign of any bad news, people want to take their money out. it is as simple as that. within the emerging markets what i would say is that actually brazil is less important these days than it used to be. emerging indexci is in asia. you should worry about china. brazil is less of an issue. francine: what happens if he stays on. the problem is that, is this a revisit of what we saw in the last 12 months? if it is, what happens to the brazilian economy and the person next to charge? >> i think it is not that obvious we will get a repeat of the dilma rousseff issue.

that rumbled on for a long time before she was removed from power. the second point, in any case, the brazilian economy is not growing quickly. so i think there are issues for the brazilian economy in any case. it is not a classic emerging market economy. it is driven by consumption and consumption has slowed. 1% gdp growth. it is not exciting. from that point if you come i'm not surprised to see that the equity markets and the currency have suffered some profit taking. but i do not think we are at the point where we can see it fall off the cliff further. francine: what we need for that to happen in order for that to get worse? if the impeachment process, if chose, the path they takes a long time. what are the reasons for staying in the markets? >> i don't think they do. from investors point of view, it makes sense to look elsewhere to a lot of investors are invested emerging markets.

they are invested in emerging markets as a whole rather than brazil specifically. if you are invested in brazil specifically, it makes sense to move on. if you are in e.m. as a whole, it comes back to asia. asia pacific fund represent 70% of the weight of e.m. much more important than brazil. francine: talking about indonesia. s&p just upgraded it to investment grade. something like indonesia as a standalone or do you put it in emerging markets portfolio? emerging markets. indonesia, although it is the largest muslim country in the world, in terms of stock market terms, it is not so big and it is quite concentrated. a very big explosion to the various commodities, soft commodities and oil. it is quite an unbalanced economy. as such, i would put it within an emerging market portfolio rather than chase after it as a single country.

in any case, if you were to look at from that point of view, more to the bond market than the equity market given the fact that an upgrade - tends to be more point for bonds. francine: thank you so much. paribas.at bnp iranians vote in the future of their country. will they choose isolation over inclusion? this is bloomberg. ♪

francine: bloomberg "surveillance." iranians are casting a type race between rouhani and conservative raisi. the election comes a day before donald trump is due to arrive in major regional rival saudi arabia. let's go live to tehran where our markets editor is at one of the biggest polling stations. what's the state of play at this hour? yousef: the crowds are not letting up. polling stations open and it's 55 million eligible voters. reference points last time round was 77%. big showdown at a big and

critical moment for the discussion. one of the most important election since the founding of the republic in 1979. we do expect the polling to continue to around 11 p.m. if there is no major winner out of all of this, in this first round, it would go to a second round. and that would happen on may 26. very different platforms. ultimately, as well the whispers of the populist seas we've seen around the world. and that is what raisi is trying to jump on, jump on the opportunity. you are looking at the average iranian here sometimes does not feel -- in terms of the nuclear deals have brought them any improvement in quality of life. but this is also a much bigger story. this is about setting the tone for the iranian political scene for the next three years. this is about the succession from an aging supreme ruler, the ayatollah khamenei. a slight edge for rouhani, but all's in play.

francine: thank you so much for the great reporting on the ground. our middle east anchor live in t ehran. football secret trade as the u.k.'s primarily season comes to a close with this weekend. we take a look inside the murky world of the player transfer fees market. coming up next with one of our sports reporter who also just released a book on exactly this topic. this is bloomberg. ♪

francine: good morning, everyone to you are watching bloomberg "surveillance." let's get straight trip first word news. sebastian: president trump has fbiied trying to quash an

investigation of his former national security adviser and says there was no collusion with the russians. at a white house news conference, trump says it was "totally ludicrous" to thank you has done anything that would amount to an impeachable offense. president trump: there is no collusion between certainly myself and my campaign, but i can always speak for myself and the russians -- zero. treasury: the u.s. secretary says breaking up the big banks would be a huge mistake. testifying before a senate banking committee hearing, steve mnuchin said the u.s. administration does not support splitting commercial and investment banking. democrat senator elizabeth warren accused him of the bizarre policy shift. brazilian president michel temer has to five calls for him to step down saying a supreme court investigation will clear him of an alleged cover-up. media claims he approved hush money for the former house speaker who drove last year's

impeachment of dilma rousseff. realurmoil has seen the tumble with trading briefly coming to a halt. uk'srs of four of the political parties have criticized theresa may's approach to brexit ahead of the next election. in a debate, jeremy corbyn refuse to take part in, rv ivals slammed may as extreme. >> theresa may, backed by nigel firage and jeremy corbyn is going for an extreme brexit that will damage our futures for generation. don't give up. the briton i love is not lost yet. >> going from brexit to this extreme form of brexit where we are running a real risk of jettisoning many of the benefits we get from participating in the european union on an equal basis with other partners. sebastian: an untitled portrait

by -- has sold for $110 million at sotheby's, a record for an american artist. at $57ding started million and lasted for more than 10 minutes sparking gasps as thee parties chased after work for the buyer was a japanese online retail magnet. global news 24 hours a day powered by 2600 journalists and analysts and 120 countries. this is bloomberg. francine: now britain's premier league football season ends this weekend. of 3revenues in excess billion pounds, it is the richest football league in the world but with big money there can be also big problems. bloomberg sports writer has written a book about the murky world of the player transfer market. barred exposé and the financial transaction of the world's favorite sport. i'm looking forward to reading more about it. i don't know much.

i know our viewers are interested in football but this is something that happens in the back channels that you would never hear about if you are sports fan. >> that is exactly right. reaching for are the back of their newspaper to see what player their team will be signing next. multimillion pounds. it is $4 billion a year goes around the world in buying and selling footballers. what we are looking at other kind of secret investors who are profiting from investing in normally young talent or buying small stakes in the hope of selling players on. fifa world's governing body has stopped this or tried to stop this but, you know, they are quite a find another way. they are buying small clubs now sell players in this comey market which is completely unregulated. francine: does it mean that the more you pay for, are the fees going up because a lot of these

players are earning so much more? where's the end? will it be regulated? i spoke to a senior at fifa. we're not a financial standards agency. we do not have the wherewithal to do this. these are hedge funds, clever investors who are running rings around the regulators, if there are any. you were talking about is this going to end any point in terms of price increases. it only ends with the scale of a tv income. risenome has accidentally year after year and deal after deal. the premier league and the next three-year is in a contract of one billion pounds for three years for these 20 clubs. that money trickles around the world into brazil and spain and elsewhere in when you are buying and selling football plays. francine: i want to talk to ed. i know that he is a chelsea fan. the european transfer season, when do the deals get need?

is at last minute or do i call up my favorite player months in advance. >> a lot of this has been in place from february, march, april may, june. if you are a big club, and you are poor. for a good season, you want to get this stuff done early. those who want to strike a good deal wait until the very last minute and try to play on desperation. we are going to have a massive deal next week. it is a 16-year-old boy in brazil who has played for half a now at flamingo in brazil. it created an auction between real madrid and barcelona. real have won the race for this guy the on tuesday or wednesday next week, 45 million euros for from brazild boy who is only played half an hour football. his salary, they will work on the salary for him. he will be ok. let's put it that way.

francine: ed's ok, because his club chelsea won. are you going to the parade? ed: i got work to do. francine: your boss is watching. because you are in the business of finance, how many parallels are there? sad, because quite i think it detracts from sports. i look football for the sport. i do not like it for the financial side of it. actually, what other sports have done, like rugby and even american football -- the american teams have got round this by imposing salary caps. we're not going to keep on competing to pay higher levels of wage inflation. we stop it now. you have a budget and stick to the budget. ultimately, that is where football will have to end up, because this cannot carry on. francine: thank you for joining us. football's secret

trade, how the player transfer market was infiltrated. our thanks to ed shing who spoke anythingthing -- about from donald trump to brazil and indonesia. up next, as opposition leaders accuse theresa may of are suing an extreme form of brexit, we will focus on the election and the e.u. negotiations in our special brexit show. we will be joined by a member of the u.k. brexit committee, domenic raab. this is bloomberg. ♪

francine: welcome to our weekly brexit show live in london. let's talk about the markets. seeing a little bit of pound volatility. we saw a little bit of movement.

onto that. with less than two weeks until the general election, leaders of politicale u.k. parties have criticized theresa may's approach to brexit. they made their case in a tv debate. >> we have gone from brexit to this extreme form of brexit are running the real risk of jettisoning many of the benefits we get from participating in the european union on an equal basis with other partners. you may be too scared to come here tonight. for your policies to be exposed. you want this election to only be about brexit. >> we can transform our energy system to make it the cleanest and greenest and we can forge a relationship with europe which is open and says no to racism. >> brexit would never have happened if it were not for u.k. ukipp mp's.

theresa may backed by nigel firge and jeremy corbyn is going for an extreme brexit that will damage our futures for generations. therene: my guest says are plenty of reasons to be optimistic about the uk's e.u. negotiations. before the election campaign, we saw parliament -- he was a prominent member of the u.k.'s brexit committee. welcome to the program. what are the british people going to vote for on june 8? >> we certainly hope on the conservative side that they are going to be voting for the strong and stable leadership which is important for making a success of the brexit negotiations. think the country is where it is on this now, whether they voted leave or remain, that is a 68% of the majority wants us to make it.ns success of

there is a clear choice in terms of strength and leadership and only theresa may and the conservatives provide that, we would argue. and leadership on the economy and the social issues that are important across the country, particularly social care which has been one of the hot topics. francine: if you look at the polls, a lot more people are for the torys. that means that there are more people now that one brexit than even that june 23rd referendum last year. be a bit careful about the polls. they're almost as unreliable as economic forecasts. in terms of the clear trend in the most recent poll which found that 68% of the public now would like to see brexit go forward rather than take us back, have another referendum. as the liberal them are cuts are suggesting i think that is important because first of all it shows the public are getting behind theresa may in the conservatives. but also we do not want to do ivide. francine: what do negotiators

need to do? is it antagonistic, do you try to create allies and see angela merkel before you see jean-claude juncker? >> there are a few things we need to do from june the 20 thirds, one is keep the economy strong. growth picked up. didn't know stock is some suggested. employment and records high. second thing is set a plan. yes, we are leaving the e.u., but the prime minister gave the lancaster house speech setting out a positive vision of post-brexit britain, self-confident democracy but a strong trading and security partner with the e.u. and a global leader in free trade. we know the public are behind this plan. we need to look for the win-win. all the tittle tattle in the media. if you take the u.k.'s negotiating plans that is set out in our letter to donald tusk e.u.'s negotiation

guidelines, we agree on 2/3. the negotiations are about bridging that final third. the ftse rally, of course, and it tester record high but if you converted into u.s. dollars, the rally is disappearing. how much of this economic strength are we seeing or also the rally in the ftse is just a down to pound weakness? that will hurt us in the end/ . >> no. you are quite right to say to her has been a correction around plus or -20% but that was long overdue. the pound was overvalued. mervyn king, a former governor of the bank of england said, since the referendum, brexit creates an opportunity with a corrected values sterling and with all of the excellent opportunities to shift from a consumer spending paradigm of growth in this country to an export-driven paradigm of growth. and that is a huge opportunity for british business.

better productivity. that is what we have got to realize. francine: what does it mean for the single markets? of theis getting out single market. you not feel like it is putting the conservative party too much into a corner? if, for example, jean-claude juncker with emmanuel macron, turned around and said, you know what? we want you in. if you cannot cherry pick, we will give you something. >> it was during the referendum a consensus point amongst leavers, remainders and the e.u. that if you leave you cannot stay a member of the single market. if you look at the guidelines, aey wouldn't allow us to say former member of the single market. this pulls the rug away from the smp and the liberal democrats. what we want is a classic free trade agreement with -- as few mary's to trade as possible. one of the important things, you mentioned who'd we talked to? we know the view of jean-claude

juncker that is different from some of the e.u. leaders. perhaps german business. we were told that they would say quiet. we have heard from the german chamber of commerce in the aftermath of jean-claude juncker 's disparaging comments that maintain no, we must barrier free trade and that will put pressure because there are a lot of european businesses union to do not want to see trade profits jobs go. francine: would you have to pay for that access? lled free trade for the region. i do not know any other region that does trade with a e.u. that pace to engage in free trade. francine: switzerland has an agreement where they pay part of it. you could argue that you pay a bit to have access to free trade which is what happened in the german commerce ministry. >> it is no longer free trade. and that would defy the global norms. and it would be a rather aggressive step. but i what i would say -- what,

the germans are worried about the black hole in the e.u. budget. and also worried with a trade surplus with the u.k. of 25 billion losing the u.k. market share. we do think we need to look at it from their point of view. if there are projects that are of mutual self interests, whether it is investing in the balkans are helping italians dealing with the migrant crisis off the murder trading -- off the mediterranean, we should do that. we are not paid to engage in trade. that would be a curious development. we want to be a liberalizing force for free trade in the whole world with the rising economies of north america -- south america and asia. francine: what happens if there is no agreement? what happens if you have no agreement in two years? >> we need to be responsible. if the e.u. was to cut its nose to spite his face. i think there are three things -- francine: you would be heard as well. >> if you have got a 60 billion trade deficit with the e.u.,

they would be disproportionately hit in trade terms. what would we mitigate? the correction of sterling helps mitigate that. the fact that we will be opening up free trade deals from china to latin america with india would help. also, let's remember, we get back not just our contribution to the e.u. witches net 10 billion, but if they refer to which ison e.u. -- but if the net 10 billion. they're all sorts of leavers we have to smooth the transition. we will make a success of brexit come what may. francine: u.k. wage growth. this is in blue. you can see the blitz that was announced a couple days ago. i guess people are hiring but they are concerned about the future. and this is cpi. again, pound devaluation in part. they could be tariffs or something else. what does the u.k. consumer do with this? >> since 2014, real wages have

been rising. a positive message. inflation and the uptick to 2.7% cpi is scheduled to go back down as of next year. there is a squeeze on low and middle income's right now and that is having an effect of the bank of england, all the institutions reckon it is going back down. and what we are doing with the extension of the personal -- cutting income tax on lower middle income families, is making sure we can ease the pressure of the cost of living on some of those household. francine: how? >> they have got more money put for example, we cut the base rate of tax. by on average 1000 pounds, the basic and high rate. that is 1000 pounds they have got more in their pocket to spend. but this is temporary. the real story there is how real rages have been rising -- real wages have been rising. this is the journalists versus the politician. there is always a positive spin. >> i leaf the negative things to you guys.

francine: let's check in on markets with mark barton. mark: the week has been dominated by political events in washington. we saw 2% -- a 1.2% decline for the msci. yesterday it fell by 0.3%. today we are up but we are headed for the worst week in the global benchmark in a month. after the gauge rose to a record on tuesday. seems like a long time ago. best yearis up 8%, since 2013. wanted to show you this chart. brexit may hav ushered in a newe era of independence for european equities. the one-year correlation between the stoxx 600 and the s&p 500 come a s&p is the white line. the lowest level in 20 years. according to bi equity strategy. the magnitude of this move more the breakdown

following black wednesday in the early 1990's. is up by 6% inp the stoxx 600 has gained 8%. this is the chart of the week. for brazil, it could be the chart of the biggest one-day drop for the real yesterday since 1999, falling by 7% to the lowest since december. hold in brazil yesterday. markets slumping off that the newspaper report that president temer endorse the payment of hush money to the imprisoned former speaker of the lower house of congress. before thursday, the real was the second-best performing emerging market currency, rising 11%. rand top. ruble second. this is the reaper zillion stock market percentage price change. 2008st drop -- since yesterday, sinking by 8.8% for imposters who bought into temer's austerity measures during the worst recession on record. delivered what was an absolutely crushing blow, including a 15%

slump in shares of -- in which is at the center of the car wash corruption investigation. the star market losses yesterday totaling $150 billion -- the stock market losses. francine: let's get more with our guest, domenic raab. talk to me a little bit about, we mentioned the polls briefly. you should take the polls with a pinch of salt. however, the conservatives seem so far ahead. are you concerned about places he? - about complacency? absolutely. we need to avoid any complacency. and i think that is the clear message coming from the prime minister and the whole conservative team. this is a critically important election. not just on brexit but also on the economy and some of the social challenges like social

care which have been swept under the carpet for too long. we are arguing we have the leadership to deliver on this but you have got to vote for it on the eighth of june. francine: what is the one thing that you think once the vote and the conservatives get in these to be done? when will the nationals be given a little bit of -- a glimpse of the future? in thee.u. guidelines u.k. position is we ought to do with this as quickly as possible. i would love to get it done in june but certainly this year. it is inconceivable that we will not eventually safeguard the position of the e.u. nationals. francine: six months? >> by the time negotiations are over. my message to e.u. nationals here across the country is we want you to stay. we value you. and i think it is inconceivable that we will not get there. i know until you have got the concrete guarantees, you cannot take it to the bank but we are going to get there.

this is one of the issues that e.u. and u.k. agree about. and the british ex-pats on the continent as well. francine: -- he's provided that stability the markets have wanted, since the brexit vote? is mylip hammond neighbor. i will never say anything disparaging. he has had an important stabilizing effect given the impact of brexit but decisions on cabinet are above my pay grade. francine: that's fair. i don't want to get you in trouble. give me a sense of how that you think the negotiations in terms of the e.u. with jean-claude juncker have clearly said they want to inform the public every step of the way. this is something theresa may does not want. >> they can do what they do and we will do what we do. i thought it was very interesting, jean-claude juncker made those does obliging comments about the u.k. and donald tusk came back and called for moderating -- we nkow angela merkel is very cross about this and its parts

commentary from the german business groups and the german chamber of commerce. we need to calm down and tradeate the win-win free trio. i would not overreact to every bump along the way and every histrionic that makes it into the media pet as i said before, look at the u.k. position position.e e.u. that is what i did when i was a foreign office negotiator. we agree on 2/3 let's buckle down and find the win-win on the final third. francine: if you speak to brussels, they do not think we agree on 2/3. >> henry kissinger used to say this, the great american secretary state, do not judge them on what they say. judge on what they do. look at the e.u. guidelines. compare them with the u.k. letter from donald tusk. they say they welcome and share our in missions for it trading relationship and strong security cooperation. there will be difficult issues

around liabilities. we will need to approach that pragmatically. let's not lose sight of the opportunity. formalually, what the positions are, which show, yes, there are gaps that needs to be bridged but huge opportunities for agreement. francine: thank you for joining us today. domenic raab, former member of the brexit committee. bloomberg "surveillance" continues. tom keene will join me out of new york as donald trump appears to head to saudi arabia. as do i. we will bring you live updates from riyad. we are expecting a lot of the eo's. we will talking about oil and what is happening in brazil. this is bloomberg. ♪

♪ it is a witch hunt. back att trump

accusations that his campaign included the kremlin. .haos returns brazilian assets to a nosedive on the corruption allegation. the president says he is staying put. iranians choose between a moderate incumbent president and his conservative challenger. good morning. it is "bloomberg surveillance." francine lacqua in london. keene in new york. geopolitics and president trump heads to saudi later and will be joined by american ceos. tom: like every president when they go abroad, they have to come home. you wonder what president trump will come home to. the blog on mr. comey is stunning. when hebe fascinating

gets off the plane, what creates him in the united states. some are focusing when he arrives. i think we will be able to a lot of the american ceos, but also the saudis. are welcoming him with open arms. they wonder if this is a distraction for president trump, or the strength he needs to bring back home to the united states. let's get to the bloomberg first word news. it iran,tarting in voting and the presidential election. iranians will decide whether to give president rouhani a second term, or hand the office back to conservatives. ' antagonism to the west left iran isolated from the

rest of the world. early polls show rouhani in the lead. president trump denied trying to stop an fbi investigation of the former national security adviser. president trump: i think it is ridiculous. we have to get back to working our country properly to take care of the problems. we have plenty of problems. taylor: the president saying he will name a new fbi director soon. he called former senator joseph toperman one of the contenders. a proposal to balance the budget in 10 years. the trump plan calls for deep cuts to discretionary spending, with social security and medicare not being cut. isna's president ping willing to improve strained relations with south korea. he met with a south korean

diplomat who carried a note from the new president. moon has said he is aware of china's concerns. 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: a more quiet data check after two days of of, down. -- of up, down. curve over the last three or four days. 95.01 is a big number. presidencythe trump statistic of 100 basis points. we can get through this quickly. got nothing to say, francine. i'm sorry. francine: you said everything

important. i would touch on crude. stocks are setting up for a volatile week. the brazilian real, will get to more on that. a shift of 7.5%. tom: we never talk about the charts we do. i had this chart worked up yesterday. it today.it -- re-did this is the chart of the week. united kingdom real wages. this is the of motion from our viewers, that they are detached from the central bank. he will have negative or flat wage growth. to me, the headline is we have been here from 2010-2013 when we had inflation above wage growth. this is an important chart. think this will

not happen the united states. i don't believe it. it.cine: i really like i will give you credit. i'm being nice day. , it is alian futures breakaway gap. it is pulled off so fast that the price doesn't overlap in the previous movement and begins a new trend. the volatility and violence on the markets yesterday in brazilian futures. tom: the atlantic magazine talked about the history of the witches in salem massachusetts. that was in the early "surveillance" years. you can go back to bernstein and nixon.

the president yesterday in his press conference with the colombian leader on witchhunts. president trump: the entire thing has been a witch hunt. there has been no collusion between myself and the campaign. i can only speak for myself and the russians, zero. tom: rupert harrison of tleykrock and james hur as well. what is the distinction with mr. trump versus other joys we have had with our presidents. fermi, one of the biggest changes compared the watergate's you have the president's party in control of congress. more to shake lot

his base. thisght be living through kind of noise until the midterm until democrats retake congress. otherwise it will be a noisy ride. you will see these headlines from long time. a lot ofhave experience on what politicians do and don't do. how do you respond that this president wants to see different .ations, not the allies he is not in london, paris, or tokyo. is that something that bothers you? rupert: it is in line with what we have come to expect from donald trump. investors don't see this as the beginning of a major correction. special appointing of a prosecutor back home put russia

and a box and allow congress to return to what will happen on reform?are and tax if we see that starting to happen, people will look through the political noise. francine: what would be your advice as a former political spin your? -- spin doctor? i have limited experience being under investigation. i'm not sure i have that much advice. he has to get some wins and get back on his agenda. back on to, jobs, tax reform. the sooner he can do that, the sooner he can move on. in way, he probably didn't greet the news as good news when he heard about the special prosecutor, but it is good news, lifese it is sapping the out of his agenda. focus will be shifting in

congress to the big decisions where we end up on health care and tax reform. the white house may be a combination of distraction and authority might be more of a player than a leader. francine: it is what the president needs to show he is back in business and focusing on business and bringing investment back home? james: he needs to accomplish something. after saudi he will be .eturning via europe his european counterparts are more likely to create negative headlines for him. when he returns home he might be coming off conceptual meetings with european and nato allies rather than stories of "gee, signed a big deal with saudi." tom: help us with blackrock's

thoughts on alma distraction. what it means for u.s. gdp and markets. you have to stay focused on the fundamentals. , itof the political noise has paid to stay focused on the fundamentals. u.s. momentum and growth is pretty solid, maybe the second derivative has come off a little , as you powered the rally valuations. the u.s., in particular, looking more stretched, but there is no sign of anything serious. the opportunities are probably a little more exciting elsewhere. europe a little bit, japan a little bit of a catch up trade. you have to stay focused on the fundamentals. tom: we will continue our discussion with rupert harrison

through the next hour. get ready for your weekend reading. this is a perfect friday desk. -- friday guest. the challengesn secretary tillerson has with the distractions in washington. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." bloombergto the

contenders. broadcom is said to have our of $20 billion. rose the mostta in four months. have billion dollars was settled to resolve lost claims for faulty products. that is your bloomberg business flash. francine: thank you. the brazilian president has defied calls to step down, saying the supreme court investigation will clearheaded. >> i will not resign. i will not resign. i know what i did and that my acts were correct. to need a full and quick investigation for the brazilian people. francine: they say that he drove

the impeachment of president rousseff. thank you so much for joining us. of whateeing a repeat happened 12 months ago? our shareholders or investors going to flee, or will we learn to stabilize? isbrazilian politics extremely unpredictable. there are key differences between today and 12 months ago in terms of brazilian assets. indicators,nomic this is an economy with 1% current-account deficits. all of the current account deficit is covered. the central bank is credible with ample reserves.

we would be surprised to see a repeat of what we had in the second half of 2016. francine: what happens next? stays.ay michel temer the president will struggle to revive an economy that has not only on down, but sharply down in the last 18 months. abbas: there is various scenarios that play. one would be michel temer's resignation, less likely after yesterday's announcement. for one reason or another the prosecutor saying the evidence we have against michel temer is insufficient in prosecuting. that would be a positive response from the markets. we could see the pressure on temer increase so much he is

forced to resign. under that scenario, by default the presidency would fall to the speaker of the lower house, who is very market friendly. we would have an indirect election via congress. we would expect under this scenario, him to maintain michel temer's economy team that has on spending. that would be an amicable scenario. it will still be messy and we will see volatility on brazilian assets. tom: bring up the chart. you saw this across credit default. this is the 10-year yield in brazil. 11.8%, high yield, lower bond prices.

full faith anda credit in brazilian paper this morning? abbas: this would have been a difficult question for a lot of investors. we don't think brazil will have the credit issue. the central bank in brazil has $360 billion in asset reserves. this compares with ou asset denominated debt. even when you add petro bras it is significantly higher. at these levels, we see scenarios in the political environment in which brazilian assets gradually recover. tom: maybe 3.8 standard deviation. .hat is a big move do you overweight emerging markets, and can you overweight

international compared to a fully priced united states and united kingdom? rupert: the problem with the emerging markets is shown by brazil. volatility, and compared to the middle of last year, even with the moves in the last 48-hours, the valuations are not as attractive. the wayot being paid you were. also cautious on chinese momentum. people are still catching up to the extent to which they tightening trade conditions that will feed through the commodities channel. we are cautious on emerging markets and prefer europe and japan to a big bet on the em. tom: thank you so much. thank you so much for being with us today. later today on bloomberg

television radio, david gura sits down for a timely conversation with mr. stoltenberg of nato. this is bloomberg. ♪

francine: "bloomberg with francine and tom from london and new york. this is what i've picked out as

the morning must-read from "the times." president trump goes to the middle east where his team is spite. for res beginning and saudi arabia, then israel, then the vatican, then finishing in brussels. explaining what saudi arabia needs to hear from trump, acknowledgment that the saudis have made progress is important. changes must be carefully inquireed to not backlash -- insight backlash from the kingdom's religious conservatives who are at odds with saudi rulers would soothe saudi feelings of being chronically misunderstood. rupert: from the political point of view, president trump needs to not screw up.

he needs to look presidential. i think the people are eyeing the oil price nervously. we have to try to understand the limits of saudi tolerance. i they willing to do what ever it takes to defend the $40 floor. my bet would be they are, but they are running to stand still against the supply response from the u.s. that is the one most successful trend we have had is the oil range between $40 and $60, being tolerance of opec $40 is the floor and $60 is the ceiling. that has been tested a little we still have conviction, but that is where we will be looking. francine: is there a danger if demand picks up significantly they will have to extend

production cuts quarter after quarter? rupert: the whole reform program is so dependent on defending the oil price. in the short term, they are probably willing to take the pain. francine: coming up on "bloomberg surveillance" a , talking aboutor politics in europe and reforms italy needs. very sanguine on the future of italian politics. this is bloomberg. ♪

i need your love, babe. i guess that's what i'll do.

president trump will be on an eight-day trip. francine lacqua on her way to the airport. is in washington. this is an age old tradition of all presidents. isout of dodge flint it difficult. what does the president leave behind? marty: he leaves a mess. there is a special counsel who will start investigating. the power has shifted in washington towards the establishment. people on the hill are ignoring him and his agenda. his policy prescriptions are stalled. affairs is his strong

suit, he thinks. he has to still run the domestic ship while he is away. with him to give him counsel? tillerson, mcmaster, general mattis will all belong to make sure president trump stays on script. given the amount of press coverage, he will have to do that. tom: what has the vice president been doing? keep: basically trying to people in the house and senate calm and on point.

before the special counsel was appointed, there was concern the gop leadership would abandon this president, but he helped keep them in line. he has been a liaison between trump and members of congress. tom: thank you for the briefing asked the president exits. here is taylor riggs. seven-yearpping a rape investigation against julian assange. he had and living in the ecuadorian embassy in london for five years. he feared that if you left he would the arrested and extradited to the u.s. agreed to buy for a generation combat ships from lockheed martin.

the deal is valued at $6 billion. it may he announced tomorrow and in saudi trump arrives arabia on the first leg of an eight-date trip. embattled president michel temer is vowing to stay in office. temer says a full investigation by the supreme court will prove he is innocent. a billionaire hedge fund manager agreed to a lighter penalty in the case brought by the fcc and will pay $4.9 million and there will be no impact on his ability to run his hedge fund. he refused other settlement offers because he said he did nothing wrong. 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. .rancine: thank you prime minister theresa may

called on voters to give her the freedom to walk away from brexit negotiations without a deal as she reinforced her hard-line approach, conservative her party's conservative manifesto on thursday. backing plans with a clean break with eu we are with rupert harrison of blackrock and former chief of staff to george osborne. concern some people in the market have is that conservatives may win by a landslide. if they do, whatever is in the manifesto, which seems like a hard brexit, is the way theresa may will go. rupert: people need to ease off the patriotic language around the election. we saw staged complex with jean-claude juncker around the election. the electoral strategy.

i don't think that will affect the way brexit pans out. what is important is what is in the manifesto. it recommenced to the things she said before, not being in the single market in the customs union. it means that parliament cannot fight back, particularly the house of lords. the unelected house of lords cannot vote against those things . it removes any suggestion there will be any parliamentary fight back against the exit. the caveat on the opposite side majority gives theresa may more flexibility to move things around transition and allowing the u.k. court of justice to keep jurisdiction during the transition. the other thing in the manifesto is it keeps maneuvering on

budget payments. there will be no vast payments to the eu. that gives a lot of wiggle room to buy off with cash some of the market issues. we are not headed for soft brexit, but the risk of no deal is less than months ago. francine: are people more behind brexit now than they were in june 24 given the support of theresa may's party, or is it muddled up that they cannot find another leader? has been noe groundswell to reverse the decision. the liberal democrats have failed to pick up in this election campaign. the phenomenon of the relievers, the people who voted remain, have resigned themselves that britain will leave is the big

development. the prospect of this being reversed is virtually zero. i have asked in every brexit interview about the calendar. i believe next month is june, it it what doesn your the calendar mean to rupert harrison one year, two year, three years out? rupert: we have to count back article 50. date in we should see the first stage of negotiations that will be noisy. they have to agree on the principles. u.k. and eud the citizenship are tricky because it affects and a visual voters are you will hear a lot of noise about that in the autumn. able to agree in principle on an approach to those issues that allows discussions around trade and

what the future relationship might look like. year goingd of the into 2018 we have no visibility of what that relationship will look like, that is probably a negative, but i think we will. tom: that is the smartest answer i have heard. how do you fold economic growth and what you discussed. are the separate ideas of politics and timeline as compared to slower economic growth? are separate apart from the exchange rate. we are seeing the effect of higher inflation on incomes. tom: i am scrupulous. i stole that from francine.

rupert: it is leading to some softness, but we had labor market data that is strong. employment is a growing at one of the early negatives out of the brexit vote was the negative impact on -- the negative impact on investment intentions is coming back. the bank of england will be fairly satisfied that things are slowing down, that it is justifying the dovish stance, but not catastrophic. francine: what happens to the pound? through 130 onak retail sales, then it has come back below. we are marginally long on theling, because we thought election was a positive and u.k. data was not as bad as people to see, but it is hard how sterling can get above 130 with all this uncertainty. francine: next, david gura in a timely conversation with stoltenberg.

look for that at 8:30 in new york. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." let's get to the bloomberg business flash. threatened to fire the engineer at the center of the lawsuit withr waymo. he told the court he is being forced to choose between his job or a constitutional rights against self-incrimination. s&p updated indonesia's credit rating to investment grade. goldman sachs said the indonesia upgrade may attract $5 billion in funds.

a record night as sotheby's in new york. an untitled portrait by jean michel paschi at sold for $10.5 million, the most ever -- jean m highest evert, the for an american artist. all markets are bouncing back as donald trump travels to riyadh. crude prices down by half, but crude production is of dramatically. we are talking with rupert about the range he had for oil which has proven fruitful between $40 and $60. talk to me about where you see oil.

the fact it has risen a little in the last week is on hopes that saudi and russia will continue production cuts. >> you'll probably get it agreed by the rest of opec. he still have decent compliance, 97%. there is a sense it is the right thing to do. even iran. this is a chart i show frequently, but one of my favorites. if you look at what rupert is looking at come it is between $40 and $60, but the economy in a country like saudi cannot go much below $49 or $50? kona: going for market share strategy, the u.s. oil shale producers are the winners. of $55 ise target

there, ideally $60. that would help the economy. that is something they will push for aggressively. .om: this is a chart of oil i used saudi oil because it goes back forever. i adjusted for inflation and rising income. in the trump saudi room has to be 1986. is saudi anywhere near the , thetion of 1986 when oil economy, and their society collapsed? kona: i don't think so. i think saudi cuts to production are one of the lowest in the betweenome people say 50 and 35. what the saudi are targeting is the government budget which was set a couple of years ago. lowest.l be the

they will be the ones that can cut and produce. -- i don't think we are at the turning point, but this is clearly a target for them. tom: what is the status of the house of saudi? who greets the president today? has been ahink there change. the crown prince has this agenda, which is widely seen as the only option for saudi to pursue. it is dependent on the oil price dynamics. the problem for the saudis and opec is the extension of the in. is priced they're running out of room to surprise. that is why they are running to stand still, where they have to keep pushing out the deadline and ramping up the rhetoric.

they are racing against u.s. shale production which continues to surprise. the animation and cost dynamics keep surpassing what the saudis think will happen. francine: we talk about oversupply, but demand is strong and from china will clear out markets. strongsia is extremely right now. it is ultimately that low prices have seen demand rise. increasesurther price push that back a little? we don't think so. into summit season, you will see demand driving coming in and you will see a boost. barrel, when0 per demand continues to remain strong. francine: thank you for joining us. back with rupert

harrison talking about other commodities. iranians choose between a moderate incumbent president and his conservative challenger. we will be live in tehran. this is bloomberg. ♪

francine: this is "bloomberg surveillance." francine lacqua with tom keene. iranians casting their vote in the presidential elections. opinion polls show a tight race. the vote comes a day after iran to fresh sanctions from the trump administration. yousef, how close is it? can you tell us the latest? to close to call. i'm outside one of the key religious sites. mines back as far as the eye can

see and they just beefed-up security. of fivelooking at 72% million eligible iranian voters to decide between the two key contenders. candidatesfferent offering different platforms for the electoral campaign. even more fascinating to see if we will see a decision and the first round or the runoff on may 26. francine: the election is fundamental between choices about priorities. how divisive has the campaigning been? yousef: it has been a heated electoral campaign. sharp rhetoric and criticized by the supreme leader ayatollah. encouraging more subsidies and wanting to make use of a stronger iran in terms of

domestic policy and foreign policy, which is why the key people we have been speaking to say that if he wins it could strain relations with key allies and key adversaries from iran. rouhani is more mainstream. whether or not he will continue on that platform remains to be seen. suggest rouhani is slightly ahead, but we will have to see. tom: is the united states of america part of this election? are the policies of president obama and potential policies of president trump part of the discourse? it is a fundamental integral part. when was the united states not part of an act world campaign? the deal they struck is part of the issue.

is the deal delivering tangible ?enefits and quality of life in terms of price gains and being able to lead a halfway decent life? what you are seeing in terms of the sanctions back and forth between the two countries shows that nothing is sick here. we're seeing that -- nothing is secure. we're seeing that with businesses as well. that needse results, to be established for foreign business. francine: how you read the iranian story? it shows one country divided with two fundamental choices which we had with trump and the election of macron. is the market ignoring these political risks? rupert: iran is not very high on

the radar. the political risks, you have to keep holding risks through the events and pick up the premiere. the question is, what are we missing? we have spent a lot of time thinking, what it break as out of the regime? mobile growth, tame inflation, yields out of control. it could be an unknown unknown if we have a big change in dynamics and a middle east that either lead to a breakdown in opec cooperation between iran and the saudis or supply disruptions. north korea is another. everyone knows north korea is an uncertainty, but no one is prepared for what a significant escalation would mean for markets. we have to ask ourselves, it pays to own political risk, but where is the regime change going

to come from? it is a difficult call. tom: coming up, we drive for the conversation as the president moves to his first trip abroad. professor hormats. good morning from london and new york. stay with us. ♪

tom: my bags are packed and i'm ready to go. exits washington

on air force one leaving behind an exhausting week, and exhausted staff, and a newly minted special counsel. tillerson's forming constraints. the u.s. yield continues to flatten. the trump trade is toast. america's capitalism, luigi zingales joins us. live from world headquarters in new york, i am tom keene. francine lacqua leaving for riyadh. guy johnson joins us. how is the president's trip perceived in london and europe? is turning tobia american business or investment opportunities. that is why there are a big hitters going with the

president. .om: and eight a trip to get you briefed with our first word news, here is taylor riggs. insistspresident trump he has done nothing wrong and there was no collusion between his campaign and the russians. he denied trying to stop an fbi investigation of his former national security advisor. : it is totally ridiculous. again, we have to get back to working our country properly so we can take care of the problems . we have plenty of problems. a new fbi will name director soon and named joseph lieberman one top contender. sending congress a proposal to balance the budget in 10 years. it calls for deep cuts to discretionary and safety net

spending cut social security and medicare won't be touched. lawmakers in both parties are in certainbject cuts programs. iranians will decide whether to give rouhani a second term to pursue engagement with the rest of the world, or hand the office back to conservatives, whose antagonism to the west left iran isolated. most opinion polls show rouhani in the lead. president ping met with a south korean diplomat who carried a letter from the new president moon. china has objected to the anti-missile system. moon says he is aware of china's concerns. investigationape against julian assange. he has been living in the fordorian embassy in london five years, fearing that if he

left he would be extradited to the u.s. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. tom: thanks so much. equities, bonds, currencies, commodities. quieter after the festivities of the week. curve, 95 basis points. the morning before the election, a much flatter yield. the trump trade is toast. euro swissie, overall a stronger swiss franc. interesting safe haven moves. at what islook happening in europe. session highs when it comes to the stoxx 600.

after difficult sessions, we are back on trend. we are going to be watching what is happening in brazil. the denial by mr. tem is iscinatinger -- by mr. temer fascinating. tom: we have an eclectic our. -- eclectic hour. he is a soccer team of people on air force one. what we listen for from the president in the first days of his trip? ty: ms. president's staff has had a hard time getting attacked together logistically, even in terms of normal press conferences. prep of this size and scope is hard to orchestrate.

it will be a test of this administration's ability to operate that it goes smoothly. the key thing is for him to look presidential and stay on script. tom: it almost sounds like a comedy act. want to look presidential. he wanted to land a helicopter at a heritage site in israel. israel said, "you aren't going to do that, mr. trump." what is his goal on this trip? .arty: no screw ups look presidential. he has been in good encounters with world leaders. if he can stay on message and he has a strong group of national security people around him, he will be fine. the question is, what is happening back home.

guy: the most difficult elements of the trip will be the meeting with the pope. do you concur? marty: i don't know that it will be that difficult. my understanding is the meeting with the pope will be behind closed doors. it probably won't get a readout of what happened. there is reporting that the pope does not plan to lecture the president. i think it has the potential to blow up if it is contentious, but i don't think it will be that difficult. tom: a viewer in austria just tweeted we should be in government. we will end the interview here so we do no harm. marty: 2 new yorkers i don't think could make it. tom: no one from fifth avenue could be elected. we have esteemed guests.

an expert on the dynamics of hedge funds. we will get to him in a moment. first, professor hormats. theuld have killed to be at hormats' breakfast table this week. your response? robert: mueller who will be very tough of the -- on the investigation. he will get to the bottom of this if anyone can. on the heels of this, a nine-day trip to one of the more complicated countries. arabia to a saudi culture he doesn't know or understand. tom: hormats has done this -- he can't count the times.

does he have a staff from foggy bottom to assist? there are very competent people in the white house, but these trips take a lot of planning here and you need the state department to do this because the white house doesn't have people in all these countries. there are good people on the ground. you have to listen to them. the culture of saudi arabia is something he hasn't seen. leaders in saudi arabia take your hand and walk down an auto with you. culturally it is different for americans to have that. he has to learn to understand the saudi culture. you drink your drink, shake your it tthey stopped giving o you.

tom: how will he be received at the g7 meeting. greet with what we have seen? robert: the g7 is the last stop. your head gets muddled on these trips because it is so different. doesn't knownt who much about international issues, then he has heads of state, some of which are very competent with a lot of experience. emmanuel macron a good buddy of mine, will be there. l be there. he cannot be dominating the conversation. his objective is to listen to these people and understand the issues they are putting forward, their strategies, and figure out how the united states works for them. tom: let's bring in guy johnson

in london. guy: let's talk about what is happening. to saudi business trip arabia. saudi arabia needs u.s. investment. that is why jamie dimon and other ceos are going. announced andrs deals coming through the aramco be a cash fors the market side? rk: it will take time for this to roll out. looking at markets near date, the leaning strategy is up 7%. other strategies in developed .arkets of 2% to 3% flat yield curve, with that did for funds is forced people to sell u.s. thanks.

relate talk about saudi arabia, that is an opportunity, but how big is it? how much money can go in? probably not a lot. ?uy: as brazil were you we saw some ripple effect. is largely passive money. it tends to be a bucket, you tend to see a ripple effect elsewhere. is that something you would watch out for? is that a crowded trade? mark: possibly, and e.m. is always the canary in the coal mine. when we look at august 2015 or october 2014, we saw selloffs in high-yield before they hit the broader equity markets. we are keeping an eye on brazil for sure. will continue our discussion and have data checks. the events of washington this week.

later today, david gura of bloomberg surveillance has a conversation with the secretary general of nato. look for this is bloomberg. ♪ that in the 8:00 hour. -- look for that the 8:00 hour. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." let's get to the bloomberg business flash. ers.ading bidd emerged as one of the top contenders. broadcom has so to have offered $20 billion. shares of takata rose the most in four months.

that will help takata's potential buyer assess possible liability before deciding to go ahead with the deal. tom: thank you. with us thismats morning. first, we need to digress to the real world of bloomberg, economics, finance, and investment. what is great about mark connors is does not only he work in -- e brokerage and risk, we speak to mark connors on the great billion know it as hedge funds. all these guys eight billions of dollars, 10 or 20. thatpaulson did not to well, no one cares. the answer is the categories

performance has been lousy. why? the past five years you have had a market driven by one thing, central banks. looking at equity markets broadly, three things drive performance. earnings, dividends, and key multiple. -- p multiple. all that means is financial repression causes multiples to go higher. tom: what is the state at a hedge fund business now. spending all the time in the meeting on 10 or 15 people, and everyone else cannot make two and 20 etc.. what is the actual state of the business? mark: it is morphing into a more mature business for sure. the growth of hedge funds has been organic. they have grown only by their return. turning into are other products. they know they are in a tough

market, so they are evolving and getting into different products. our fees coming down? yes. tom: give me a number. 1.5 and 15 is a number. the guys ands if gals are doing well, they can still charge to an 20. if the markets are moving, if we had the regime shift in rates go higher, you might want someone who has what we call a left hand and a right hand, they can buy and sell. guy: when you thing about what is happening and look at what the story is as hedge funds evolve and look for different strategy, the problem is passive money has taken the dumb money out of the market. it's what you are seeing in the hedge fund community a reaction to the huge amounts of money that continue to flow into the hedge fund community.

then guide in the u.k. having a massive ripple effect into the rest of the market. more money is being sucked in. it is passive money. a much smaller bucket to play in in the hedge fund community. mark: there has been a rotation into passive from active. you mentioned vanguard. someone had a stat that every dollar that goes from every into vanguard reduces the money in financials because their fees are so low. when we hit a regime shift, we hit 9.7 this month. the last time we saw this was before being moves -- the big moves. you.thank on the carry conversation.

we will talk about what is happening in iran and we will later on the program from chicago. looking forward to that conversation. this is bloomberg. ♪

>> i will not resign. i repeat, i will not resign. i know what i did and that my were correct.

i demand a quick investigation to clarify for the brazilian people. was the brazilian president defying calls for him to step down saying that the supreme court investigation will clear him of a cover-up, approving hush money for a former house speaker. today will be another interesting day in brazil. the sao paulo bureau chief joins us now. let's talk about the firm denial . is there a danger in this been priced into the market? that this becomes a long, drawnout affair. express in london that is the worst case scenario. >> you saw him deny that he did anything wrong and said he would tapes.t and wait for the

he is sure that his conduct is beyond reproach in this matter. we still don't know what will happen. , weredio did leak released, late yesterday. the debate has been did he or didn't he. morewe still need details. newspapers tend to have a habit of holding things back. what will the weekend deliver? news. likely a lot of getaudio of temer did released. the plea bargain is supposed to be quite long and it is still yet to hit. we have seen it sent pieces, but not the whole thing. greatly appreciate it from sao paulo. we continue with dark conner and mats.ssor hor

what is the creativity of hedge funds? long short, is everyone gravitating toward the black box t? more focus in the quantitative space with a finer calibration of data. tom: we talking about this on the break. the suspected yield has come down on every investment. it goes back to your work on the linkage of the economy into debt and investment. the days of 9% are over? robert: unless you can point to higher rates of inflation. tom: do you see that coming? this point,not at not at all. you get low inflation and a lot of money going -- sneak this in a what was your reaction to see

secretary kissinger in the office with the president? robert: i'm glad. he is a person that understands the importance of strategy and the-term planning, importance of understanding the cultures with whom you are dealing. i think he could impart a calmness on the trump organizational management of the white house. of our themes.e mark connors, thank you with credit suisse this morning. at will be the results from tehran, the results from their historic election. this is bloomberg. ♪

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private wifi for your business. strong and secure. good for a door. and a network. comcast business. built for security. built for business. the shlike a bald penguin. how do i look? [ laughing ] show me the billboard music awards. show me top artist. show me the top hot 100 artist. they give awards for being hot and 100 years old? we'll take 2! [ laughing ] xfinity x1 gives you exclusive access to the best of the billboard music awards just by using your voice. the billboard music awards. sunday, may 21st eight seven central only on abc. bloomberg surveillance from london and new york. president trump is leaving for nine days.

he migrates from saudi arabia through rome and onto the g-7 meetings in sicily, which seems 11 -- forever away. it's most extraordinary. with your briefing, our first learn -- word news. taylor: president trump denies trying to stop an fbi investigation of his former national security adviser. he said it's ridiculous to think that he would have done an impeachable offense. he spoke after meeting with the president of columbia. he said joseph lieberman is where of the top contenders to become the direct your of the fbi. buyi arabia has agreed to combat ship from lockheed martin. at $6al is valued billion. it may be announced tomorrow when president trump arrives in saudi arabia on his eight a trip. leon cooperman has agreed it to a lighter penalty in that

insider trading case. he will pay $4.9 million and there will be no impact on his ability to run his hedge fund. he had refused tougher settlement offers because he said he did nothing wrong. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. 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 very much indeed. iranians are casting votes in the presidential election happening today. there is a tight race between the encumber moderates and the conservative cleric. the vote comes a day after iran struck back against french -- fresh sanctions. give us a flavor of what is happening. are they turning out to vote? me, thean see behind

crowd is as far back as the eye can see. there are 55 million eligible voters. you can see behind me on the right, that is some riot police. in terms of how this is going to play out in terms of the result, they can vote until 11:00 this evening. there are big campaigns and they are different from each other. remain,ontenders that to are the ones seen as possible winning. if no decision comes today or tomorrow, there will be a runoff may 26. guy: if the president's trip to saudi arabia today having any influence? is it being talked about in the country? states ise united always an integral part of any conversation when it comes to

election platforms and the fact that they have this nuclear deal. there is the imposition of new sanctions that leads people to asking questions about is this of any benefit to us? they may be taking a firmer stance. that's what they had been campaigning about. this comes at a sensitive time. could you have imagine it -- managed to coordinate it any better with the presidential election? a lot of experts expect more rhetoric on iran during that trip. tom: thank you so much. remember 1979. things changed in that moment in 1979. does the supreme leader and the follow-on's and the supreme leaders of the future, do they have the power we witness for decades? >> they are really the main decision it makers.

he is very active. his health has declined. he still plays a very active role. he works very closely with him. a lot of things he has done would not happen without the acquiescence of the supreme leader, including the nuclear deal. tom: i want to get that in a moment. this talents of an islamic theocracy with democracy is original. give us your perspective on the optimism if that experiment can workout. it has worked with an uneasy balance. you have a regular government superimposed on religious authority led by the supreme leader. you have other groups like the guardian council, which decides who can run for president or the assembly of experts who picks the next president. you have a normal government and then you have these religious authorities and then on top of that a very strong literary

group and a lot of very able technocrats. it's a modern economy in one sense with a theocracy played a very powerful role above the whole fray. you were in the economic sector of the state department. one of the hallmarks was the agreements with iran. how should the trump administration adapt and adjust within their politics to carry tillerson? robert: they have to understand that iran is here to stay. rolegoing to play a major in the region for a long time. what they are going to be doing in saudi is try to boost the alliance with the sunnis. that is designed to in a way reduce iran's role. obama played a strong role in strengthening ties with iran, even though they did not materialize in the way he

wanted. they are more normal than they were, though there are many revolutionary activities in the region by the iranians. now they are going to go to work with the sunnis. there is going to be a sunni summit that happens when the president is there. toaddition, they are going be bigs -- big arms deals. there are going to be more of those. that is going to be used by some of his opponents to say the americans with whom he made this deal are selling more arms to saudi. perhaps other countries in the region. what happens if he wins and the clerics retake control? what does that due to the investment case in places like saudi? we have the deal coming up.

jamie dimon is going to be on the ground. there is big stuff coming up. of wonder how that change tone in teheran it could change that investment case. robert: it could create a greater sense of uncertainty in the region. i do think the saudi's, particularly the deputy count prince, will push hard on continued die certification -- diverse location and foreign investment. i think some of that investment will take place. i think on the iranian side, if the u.s. starts giving a lot of money to or selling a lot of arms to saudi arabia, it does tend to cause apprehension in iran about what the americans are doing. calling into question this administration and others have deal has put aar

chill to a degree on some of the foreign investment that rwanda a expressed did -- expected it. it would've asked back -- strengthened his position. u.s.ou -- the role the plays does affect both sides. guy: what they tell you is they can get ready much every second line. the critical one is the banking. it's the financing surrounding all of this. opec goinge to be forward? will the banks sit back and wait? getting stuff done in iran is pretty much impossible. robert: that is very accurate. it's not only the trump administration, they have created a lot of ambiguity and it's very opec what banking rules are going to be. i will say this. at the end of the obama

administration, the banks were very cautious, perhaps less cautious than today. a lot of the treasury rules were opaque, not simply with respect to american banks, but with respect to foreign banks that felt they would have more opportunity to do financing and iran. it turned out the guidance provided came relatively late and was unclear. a lot of foreign banks are saying you'd better be cautious because the rules are opaque and in part because a new administration decides to snap back those sanctions or take a tougher line on american banks working with foreign banks to enable them to use dollars and transactions. that could slow investment as well. , evennking element through primary and secondary sanctions, could be adverse to investment iran. tom: i believe we could go for

hours this morning. david will sit down in conversation with the secretary general of nato. that will be across all of our platforms. that is in the 8:00 hour. from london and new york, this is bloomberg. ♪

taylor: let's get to the business flash. s&p has upgraded indonesia's credit rating. it brings it up with the two main grading ratings. the upgrade may help attract as much as $5 billion in funds.

one of the pioneers of remote work is telling workers to come back to the office. ibm is giving thousands of remote employees a choice, abandon your homework space or leave the company. moving them into regional offices will improve collaboration and speed up work. that is your bloomberg business flash. tom: this is a huge deal. marissa mayer was talking about this and now it's at ibm. we've got to start working from home. that would work out better. guy: you live so close to the office you are practically working from home. tom: that's what misses keen thinks. thank you for joining us today. robert is with us. this is what surveillance is all about. he is on set. his book is on american capitalism and its definitive on

the free spirit needed for the people. i've been dying to ask you this question. how do we jumpstart investment in america. i hear all of the different views. luigi: we need more political tranquility. it seems uncertainty is a big issue. i think the idea of decreasing corporate tax rate is a good idea as long as it's done in a sustainable way and is not crazy. of more calmdea lower rates will work. tom: if you were sitting in the oval office with mr. trump. what would be your advice to jumpstart a better gdp? what do you do to jumpstart that?

aigi: i think if you have credible fiscal path where you can reduce the corporate tax physicallyay that is sustainable, that's a great idea. it will help the economy grow. good morning. i don't know if you sell it happened in the u.k. yesterday. the conservative party unveiled its manifesto. it was not exactly friendly to business. i wonder if the political momentum is very antibusiness. it was talking about putting workers on boards and taxing companies that bring my grandson. when you talk about capitalism for the people, is this what you were talking about? a more closed off system? anti-thatcher? luigi: a lot of people are being

left out from the growth in the last year. both in the united states and in the united kingdom. i think my understanding of what theresa may is doing is trying to find a path in which you lead to growth, but especially appease the people that are resentful. i think brexit was a big sign of this resentful this. i think she is trying to find a path forward. i'm not sure that bringing workers on board is what it's going to make a difference. we need to experiment with alternatives. my favorite thing would be to try to push more competition in the system. what we know is companies are sitting on a large amount of cash. they are not investing. part of the reason is because if you have a lot of market power, you don't want to invest fully.

that is part of your market power. we need more competition with investments and more growth. guy: that money when it gets put into investment, is it going to get put into people? will it go into intellectual property and staff? will it get put into other areas like robotics? this is always been the conundrum surrounding what donald trump was talking about. he was talking about the immigrant story and investment, yet people said when companies invest it's not going to be in people. that would be in robotics. i don't think it's necessarily bad. the increase.p up that's what gives the nation more to enjoy. productivity,sh

we cannot make everybody better off. roboticss to invest in and other equipment. i see that is complementary. tom: i want to talk to both of you about a concept. you helped invent g-20. you studied it. trumpre going to be ag world in sicily? how do people in europe react to this guy? luigi: if you think the reaction in the night states has been visceral, europe is much more anti-trump than the u.s. establishment. it is not particularly friendly to trump. tom: he's going to be coached and all of that. the president is the president. what do you presume we will observe in sicily? robert: they are looking traditionally to the united

states for steady, predictable leadership, for support for the liberal global order. from first world war ii. because it'srating very doubtful trump really understands it fully or believes in it or is implementing it. he is very critical of nato and a lot of institutions. the world needs strong u.s. leadership and they need it of the liberal global order. it can change a little bit. at its center, that is critical. they are going to be asking and watching to see if he understands it and if he's going to take constructive leadership. europeans are going to be taking a much more proactive role with europe and those two countries will be in the lead. you will see a lot of them kind

figure out what they are going to do and this is going to give you a venue for that. tom: we are going to have to leave it there. luigi is with the chicago booth school. we will be back here in a moment. appropriate, two weekends before the cfa exam. it's a tradition. they are out with earnings. they are doing what everyone else is. revenues are ok i guess. they give a good view forward, which may boost the stock. john deere is up 3.8%. it this is bloomberg. ♪

tom: single best chart, this is something he is lived. this is the price of oil back to the 1950's to the expansion of opec in the 70's. this is the collapse in 86. this is adjusted for price and rising wealth. we are not going to saudi arabia like we did 30 years ago.

robert: it's not all oil related. we are not there urging to pump more oil and keep prices down. we are talking about strategy and purchases of american equipment and other products. they are trying to get more investment to diversify their economy. tom: there was the movie lawrence of arabia. anthony quinn gets up on the table and wheat do the first arab council. it was total chaos. there is going to be an arab council to greet esther trump. what will this meeting be like of very prosperous arab nations with a newly minted a president of the united states. robert: i hope he listens to them. there are some very thoughtful people in the region. in addition to the economics which we have discussed, they want to get more investment and they want greater american

security guarantees. a number of them still have their big issues with iran. the president is going to have to understand this. he wants these deals because they boost growth and jobs in the united states. there is a lot of conversation. they want to reduce the role of russia and iran in the region. that's going to be the behind the scenes back story to a lot of the conversation going on. do you think they understand the reaction function of the trump administration? we saw the cruise missile happen quickly. do you think they understand how the administration thinks? robert: no. i think they will have to listen carefully to what he says and hope that what he says today is what he will be saying tomorrow.

the problem is they want to know what he has on his mind and they want to know that once they get it and hope he understands their position that he won't change his mind on a whim. they need an american narrative for what the united states wants to do in the region. i do think he does understand it's important to mobilize these companies. he wants a solution in syria. he has to be consistent and have a strategy. muchthank you so ambassador for your perspective today. we will continue on the radio. let me do a foreign exchange view. the canadian dollar is stronger. ♪

jonathan: hopefully the chaos

behind, president trump heads to the middle east. if you thought the impeachment chaotic, thereas is to a row. it's the calm after the storm. a warm welcome. it good morning. this is the calm after the storm in the equity market. .2%.es are firmer, up there is some euro strength in the mix. pointries are up a basis to 224 and a tenure. alix: it is flat flat flat. that bear flat there continues. the dollar-yen is a touch lower. there is a huge move up 2%. the vix is a little softer and gold has its best week in more than a month.