>> coming up on bloomberg best, the stories that shaped the weekend business around the world. political tensions that the world on edge. implications for trade, currency and global stability. >> transatlantic relations are as poor as they have been in a long time. know who he isto talking to here. >> economic data sends ambiguous signals. leaders add insight to a complex picture. what's north korea's conduct is reckless, dangerous and becoming

more so. >> you believe this is a new cold war? >> absolutely. >> three top official share their outlook. >> we don't want to let this expansion run too hot for too long. >> everyone is watching the consumer. the consumer is the primary driver of growth. >> that is all ahead. welcome. i'm alix steel. this is bloomberg best, you review of the most important business news, analysis from bloomberg television around the world. last week included with the g-7 summit. ofs began with evidence strain in the g-7 alliance.

>> angela merkel has given her strongest indication yet europe and the united states are drifting apart. g-7, she said the reliable relations forged at the end of world war ii are coming to an end. >> there are times in which we can count on the u.s. are somewhat ordered. wet is why i can only say europeans must rely and take our destiny into her own hands. quite she's only stating the obvious. it has been visible for a time that the interests of the united states and europe are moving further apart than together. this may actually turn out to be a blessing in disguise. what usually happens when the world outside of europe looks more unpredictable, europeans may actually move closer

together and address what has been missing for so long, institutional reform and a way forward for the european union and the eurozone in particular. >> president donald trump is blasting germany over trade again, ratcheting up his dispute with angela merkel. he says we have a massive trade deficit. they pay less than they should. very bad for the u.s.. this will change. the tweet came after merkel met with prime minister modi & new agreements. quite she called india a reliable partner and address there areagain saying other relationships. >> a are as poor as they have been in a long time. it's not just things like free trade. she is heavily invested personally in the success of the paris climate accord.

it doesn't someone she got anything from donald trump that reassured her there. >> europe is our largest trade partner. it's our largest accumulation of allies in the world. i think president trump to understand who he is talking to. he needs to understand how to motivate them. he's right on some issues. he just hasn't figured out a way to deal with them effectively. >> with eight days to go until the u.k. election, the pound has dropped. theresa may's party could fail to secure a majority. the conservatives may lose 20 seats in next week's election. the labor party gaining 28 seats. the polling model allows for a large margin of error. >> it's a new way of projecting results. the government says it's a wide range.

in the number we have, 310 is the midpoint. they tested this model with brexit and got it right. >> how much weaker can it get? eight days to go until the election. >> not so much the polls. to the extent that we saw a surge in the pound before the election was announced. the pound went up. you could see the pound go down more than 26 or something against the dollar. when we get into the brexit negotiations, who knows where we go from there. day for theision paris climate accord. donald trump tweeted i will be announcing my decision thursday at 3:00 p.m.. make america great again. >> the united states will the paris climate

accord. >> the just of his message was that we are getting out of the paris accord but we will start to negotiate a deal that is fair. >> if you look at that speech, it was a dishonest statement. either we can have jobs or protect our environment and have a healthy future. that is a distinction that has been laid to rest long ago. >> we have to pick ourselves up on a global basis and get on and sort the problem out ourselves. >> elon musk tweeted i am departing presidential council. climate change is real. leaving paris is not good for the world. bob iger followed soon after. i have resigned from the president's council over the paris agreement with drawl. they had of goldman sachs decided to send his first wheat ever saying today's decision is

a setback for the environment and the leadership position in the world. >> leaders gathered in brussels to sign their first ever joint agreement on trade displaying a united front over the need to fight climate change. >> you say that we must do this for businesses and business is saying you mustn't do this. there seems to be a disconnect between leadership and business. numbers you need to look out for, the estimate, 182,000 on payroll. the payrolls report drops now. >> 138,000. much lower than estimates. unemployment, down to 4.3%. the lowest in 16 years. not for a good reason. .abor force participation down that is the lowest this year. >> does this inject some doubt?

if so, how? >> it does not take june off of the table. this is a weak report. relative to expectations in terms of job creation. but mixed in terms of where you would expect the labor market to be at this stage. we are still creating 130,000 jobs. which is above. wage growth is not great but it is ok. >> petition patient rate is lower -- the participation rate is lower. anyonet obsess on number. when you -- we revise them from month-to-month. the overall trend is good. , it'sinauguration day down 1%. we brought back close to 200,000 people that were dissatisfied or

underemployed in the u.s. workforce. that to us is an amazing trend. goes into jobs number the calculations as the june meeting approaches. bloomberg spoke with three fed presidents this week. the australian prime minister says he still trusts donald trump but up next, more political flashpoints including the first face-to-face meeting between the french president and vladimir putin. >> this is not the candidate that mosque out -- that moscow wanted.

>> this is bloomberg best. let's continue our roundup of stories that moved markets this week.

the north korean missile launch jolted the international community. >> north korea has fighter another missile. the ninth this year in response to beefing up forces in the region. we have seen the frequencies ramp up quite a bit. do you expect this to prompt any action from south korea, china or the u.s.? >> we have been seeing statements condemning the missile launch. these are pretty typical. they happen every time. this was a short range missile. what would really ramp up tensions is if he fired a missile on icbm. that would hit north america. that is what the u.s. is concerned about now. >> it comes as missile on icbm. a sensitive time for the new south korean president. >> yes. one of his campaign pledges was

to engage north korea, have a more conciliatory approach to north korea. these missile tests, well not as ,ignificant as a nuclear test it is still concerning. it is a challenge for the administration as to how to engage north korea. , it is still>> i want to move toh africa. jacob zuma is staying put for now. he served raved -- he survived by some in office. is he say for the moment? >> he is certainly. he is keeping control of the country. is vote of no-confidence something that he said he never wanted to hear of again. the constitutional court is debating whether or not to allow a secret ballot on a

no-confidence vote in parliament later this year. whether that will happen or not is to be seen but it does deal a blow to that move. nato and theof group of seven summit, emmanuel macron welcome vladimir putin to paris for their first one-on-one meeting. they found common ground over fighting terrorism but that is where the agreement may have ended. they traded barbs over sanctions. micron in accused -- emmanuel macron accused putin of invasion. what is their take? >> the interpretation is that put in an micron did not really managed to establish a rapport. you have to remember this is not a candidate moscow wanted. wall,favorite was france who was defeated in the first

round of the presidential election. this was an attempt to build fences. the reality is the differences remain so deep between france and russia on key issues that this was always going to be a difficult meeting. theario draghi has become next figure to tell the u.s. it might be headed down the wrong path on trade. the ecb president touted the four-year recovery and said the key risks are now from external factors, in particular the neo-protectionist stance. he repeated his view that the eurozone needs expensive monetary stimulus to restore stable inflation. >> it means interest rates have got to stay low. they also said at the end of the year qe is not just going to disappear. the market is

focusing on a lot, what does it mean for forward guidance. everything we've heard is that the key path of the forward guidance, the sequencing is mostly going to stay there. i think it is the right approach. minister is prime coming stateside. the first southeast asian leader to meet president trump. the main point of the discussion, trade. once we want to convince him that this is a mutually beneficial relationship for both sides and american consumers prefer the products that vietnam exports. >> we are already in discussions including trade. we have a major trade deficit which will hopefully balance out in a short time. president valve they

will get to the end of 2017 with their house in order. the finance minister back to mups saying he would conclude his term despite disturbances the economy is working normally and brazil is more resistant to shock. what do you make of his comments? >> the economy is more resilient than it was two years ago. it was aechnology strong political system and conditions may have been irreversible. the government is very engaged in spearing the reform agenda and committed to approve the social security reform and tax reform in the second half of the year. the question is about governor ability. possible to reveal the broad coalition or is that

coalition fractured because of recent developments? >> we have a look at what is happening geopolitically with the united states putting pressure on trade partners. they say choose between pyongyang or washington. if you are not with this green you are against us. that is the message. >> it takes on new relevance when you see rex tillerson going around speak into the united nations saying we want to see those countries that have diplomatic relations with north korea to downgrade those, and if they have commercial relations what to cut them off. they are worried north korea is using diplomatic means to get funds to fund its nuclear program. i tell you what me would be surprised how many countries have dramatic relations with north korea. 164 countries. a lot were picked up in the

1950's and 1960's. countries who recognized the north korean regime the cousin are part of the not intervention movement of the south east asia. the interesting thing is the early 2000's you so germany and the u.k. recognizing north korea. they haven't done anything to down scale those relations. the british have asked a got in an embassy and john yang. testify juney will 8 next thursday before the intelligence committee and it will be an open testimony. >> i expect there to be some fireworks. nothing has been dull. we learned this week that a letter had been sent to a lot of the key members of the trump campaign asking them for information. jared kushner has volunteered to testify.

it's unclear if you received one of these letters. he was very instrumental in the campaign. youhere is an investigation can assume that jared kushner will be involved or question to some extent. we are less than a week of way -- week away from the election. ministerw the prime will likely fall short of a parliamentary majority. >> investors are starting to deteriorate. taking the risk. torres --ld have the the tories just short of a majority. toy may convince lawmakers

lend them support they need to govern. together ancobble arrangement where they borrowed votes from the s&p, and the dems and greens, which is more likely than a formal coalition scenario. ♪

>> welcome back to bloomberg best. bloomberg sat down for a conversation with the australian prime minister. their discussion focused on international security and diplomacy starting with china's role raining in north korea. 's conduct isa reckless, dangerous and becoming more so. china has the greatest leverage over north korea.

with the greatest leverage comes the greatest responsibility. we will do our part. we look to beijing to bring pressure to bear on the regime and john yang, to bring it to ceases.es so that it said something7 of a seismic shift. suggesting germany cannot rely on the u.s. the u.k. but europeans must take charge of their own destiny. be lookingiance can so fractured, what does that mean for australia? the u.s. and australia have the shared values that do they really? >> of course we do. our reliance is stronger than

ever. it's more important than ever. as president trump and i demonstrated when we were together on the uss intrepid. our commitment, the commitment of our nations based on our history, our shared values, our mutual interests is stronger than ever. -- is there a concern that president trump has proved himself to be irrational, erotic when it comes to policy decisions? is that level of good faith something that can still be relied on? -- the relationship between the united states and australia is as strong as any relationship could be. it's based on history, common interests, the closest possible engagement at every level. defense, political, economic.

family. it is the closest possible relationship. they get stronger all the time. >> copy and lot -- scotland yard witho suspend information united states. soughttralia reassurances from the u.s. that intelligent shared would remain confidential? >> the intelligence relationship between australia and the united states is intensely close. confidence in the confidentiality of the intelligence we share, with our friends in the united states, as they do in the confidence we give to the intelligence they share with us. that intelligence is more important than ever.

in particular in the battle against terrorism. it is a global phenomenon, the global threat of islamist theorism extends from middle east to the americas, to australia. the sharing of intelligence not r's, it isn the five more than important than ever. >> still to come, more of the week's most compelling conversations. , and robert taplin. and stock split through a nervous week. james gorman sizes of the trading environment. >> there is enormous uncertainty which would breed volatility, and it is not. speaking their minds about u.s. policies.

>> it may be important for the u.s. but not for russia. >> this is bloomberg.

♪ do think the hedge fund industry is in a permanent decline? >> no, i don't. it is tougher for the smaller guys. the business has become much more institutionalized. i think the fee structure may have to change a bit, but there will always be the need for high-quality investors. >> when you say fee structures might have to change, what do you mean? and 24 a fund that is matching what is happening in the s&p -- be chargingy funds

two and 20? >> there are some out signing the rest of the group. there has to be some flexibility going forward in that fee structure, but it is very tough for investors to look at it and 20, butill pay two and you are barely beating the s&p. is that worth two and 20? lip falconewas phil in a rare and exclusive interview with betty liu. our colleague erik schatzker traveled to st. petersburg, where he set down with several of russia's leading business and political figures. here are the highlights of those conversations. >> mr. trump was promising a warmer relationship with russia. do you still think that is possible? >> it is not warmer. world will sleep

better if russia and america will have a better relationship, but his ability to conduct policy now -- >> the whole world would sleep better why? and americaussia are the largest nuclear powers, and not to have dialogue between them i think makes the world a much more dangerous place. >> because there is the risk of what? >> risk of any conflict which can happen. facts.ace the we have the situation before. >> you are referring to the cold war? >> we are in a cold war. >> you believe we are in a cold war? >> absolutely. >> president trump said he will consider major action, his words , if his administration decides that steel and aluminum imports threaten national security.

if he were to undertake major action, whatever that means, how would it affect the global market? the u.s. is a classical destination of many goods, including steel and aluminum. steelited states needs imports because of supply-demand balance, but any substantial --tortion, deterioration eventually we will all pay for it. , presidentlso said trump of course, that he wants american companies to buy american when it comes to ste el. aven your experience, will buy american policy help u.s. steel suppliers? to say.cult maybe short-term it could make some impact, but in the long run , it undermines free trade, a level playing field of competition, and less motivation

in the improvement of efficiency of american steelmakers, then there will be reciprocal trade actions that would lead to -- fors for inefficiency efficiency improvements. the widely spread conviction is that more protectionism at that time driven by short-term way of thinking, which is understandable, it nevertheless, a substantial deterioration in the economic and the u.s. and the world at that time -- they should avoid that mistake. >> president trump's top economic advisor gary cohn warned over the weekend it is possible the u.s. will toughen sanctions on russia. is that now the probable scenario? >> once again, it does not matter that much. we are concentrating on what is happening in our economy and the

structural changes in our economy, so what is happening inside russia is much more important. >> i can't imagine that sanctions don't matter. >> it may be important for the u.s., but not for russia. we are concerned with what is happening in our economy, the problems we have in the labor market in terms of financial investments. >> you are concentrating on this issues? >> we are not dependent on the capital flows here like other emerging markets. we have learned to live without huge flows from international markets. no follow-up for the sanctions, and no fallout from the investigations taking place in the u.s. congress? >> it doesn't matter much for us. fed: there was plenty of speak on wall street this week as the fomc is widely expected

to raise rates at its upcoming june meeting. with hard and soft data sending mixed signals and concerns about winding down the balance sheet, there is still room for surprise. this week, three pet presidency spoke at length with bloomberg television, starting with our exclusive interview with san francisco fed chief john williams. ,> you are still hawkish looking at three rate hikes, and you are not even writing off four. why the optimism still? >> the data is good. we are adding about 180,000 jobs in the u.s., twice what we need to be at a sustained level. unemployment is below 4.5%, and i see it going lower. the economy is doing well, momentum, a little ways to go on we needation goal, but to continue the process we started of getting interest rates back to normal levels. >> why aren't you that concerned about the weaker inflation data?

>> inflation is influenced by different factors. we have seen some transitory things push inflation down. when i look more broadly over the past couple of years, i see inflation measures moving towards our 2% goal. , bute still below that with a strong economy growing at a good pace and unemployment towards 4%, that will give us a draft to inflation and move us into i think 2% within a year or so. >> if you continue to see inflation below 2%, would you have to rethink the june rate hike? would that make sense? >> i'm not saying what we will or won't do in june. our strategy is a good one, a gradual movement of interest rates back to normal. even today, interest rates in the u.s. are low, a $4 trillion balance sheet, so we are still giving the economy a good push where we have monetary policy today, just a process of moving

back to normal over the next few years. i am eligible with where we are and where we are going. we don't want to let this expansion run too hot for too long. we are trying to get it just right and make sure we don't stall the economy, but make sure we don't let the economy get to an unsustainable point. >> i think a good thing about unwinding the balance sheet is that it will create policy the committee in the future if we on the rate itself, i think we are not very far from an appropriate rate for the u.s. economy that will keep inflation not too far from target and the labor market performing well. what i disagree with is the idea that we have to go to hundred basis points higher in order to get to some sort of neutral rate. i don't think that is the environment we are in. i think we can stay about where we are, possibly a little bit higher than where we are today. >> we have a hot jobs market,

but our inflation numbers appear ,, psi, weing, pce hear john williams echo to more hikes this year, so what do you see that they don't? >> i think those inflation numbers have been a little surprising. we have been arguing we are making progress towards our 2% inflation goal, but these have been going in the opposite direction in the early months of 2017. i also rank in the first quarter we have got a relatively weak .dp report it was revised up, but even with that revision, the first half of 2017 will be relatively ordinary gdp growth of around 2%, so the idea that the economy is growing a lot faster than trend and this will push up inflation, i don't think it is matching up with the

numbers that we are actually seeing. furthermore, inflation expectations actually started to decline after our march rate increase, and that is an important verbal to keep track of as well in this discussion. business confidence right now is high. there is a lot of business optimism. you see businesses stronger this year than in the last years. the issue is that is great, and he can help gdp growth, but 70% of the economy is the consumer, so at the end of the day, businesses are more optimistic for several reasons, but ultimately everyone is watching the consumer. the consumer is the primary driver of gdp growth. increased business investment helps, and businesses right now are optimistic. do they see it? the disconnect is while they are ask aptimistic, when you

business leader if they see an improvement in their business, often times the answer is, not yet, but we are expecting that. withes that have to do length or duration coming out of the financial crisis taking time to heal, or is there a new format of globalization where american businesses waiting to pull the trigger on the nostalgic investment we remember? >> for me, some business leaders fiscal and that other policies might help improve gdp growth. that is part of it. , in addition though, some of the things have been headwinds, which i don't think are going away. sluggish population growth, which has a big impact on consumer spending, and sluggish gdp growth, but also increasing disruption and new business models increasingly are displacing old ones, which are giving many business leaders pause, even though they want to

invest in the business, they are not sure the model they are investing in will be sustainable , so that is a countervailing headwind. ♪

♪ you are watching "bloomberg best." i'm alix steel. you areit may not have been a e dispute or a north korean missile launch, but the computer failure that stranded be a passengers qualified as a disaster. >> british airways is in recovery mode after the airline suffered a massive computer failure that left thousands stranded. nearly 600 flights had to be canceled. how much is the weekend breakdown going to cost?

>> there are several numbers floating around out there. one of them puts it at 100 million pounds or thereabouts, essentially the numbers that passengers can claim. you add to that three days of severe disruptions and lost business, some say that is 30 million pounds a day. as far as i can remember, it is one of the epic meltdowns we have seen from an airline. gain,n air reported a 6% europe's biggest discount airline also says it is in talks with boeing to add more jets to its fleet. >> people are moving around to get our cheap fares. what happened of the weekend can only be good for our business. our airline is four times larger than british airways and we don't anticipate a kind of i.t. issues they struggled with over the weekend. you have to wonder where the disaster program was. >> billionaire steven cohen is

planning his comeback. he was barred for five years after pleading guilty to securities fraud in 2013. that ban is him is over and he has plans to return to the industry. >> this is a man was something to prove. he only returned 1% last year. the year before that, 15%. if you go back, compounding on the order of 25%. that 1% does bother him. will he be held to raise money is one of the big questions. i think you will see a rotation in the kinds of people that invest. previously, his big investors were blackstone, citicorp, now it will be people much more comfortable with headline risks. he will be watched incredibly closely, but from where he sits and his ability to raise capital -- he has paid $1.8 billion or some similar number, and the thinking is he is done.

>> uber has fired the engineer hired to lead itself driving car effort. he is at the center of a legal dispute over the technology with his former employer google. why was he fired? judge inmay 11, the san francisco issued a partial preliminary injunction which required someone to turn over some paperwork on exactly the plans leading into the self driving tech at uber, either kluber had to turn it over or the engineer had to turn it over, and if nobody was going to do so, it required that the engineer's job would be threatened. no one turned over the paperwork. the company apparently made the decision today that it was going to part ways. of thelatest reading factory floor on china shows

manufacturing holding up in beating estimates. 51.2, matching april, showing the economy is maintaining some form of momentum. >> the main number is steady as she goes. you need to look at the sub readings. one is the pmi number is broken down into three categories, large, medium, and small enterprises. what led the recovery at the factory floor and china was the large manufacturers around the end of last year. they started looking better. the medium and small guys are still sub-50 readings and still struggling. that is turning around as they close the gap for small and medium enterprises, so that is a good thing, more number oh, innovative, smaller firms. pmifficial data showing the was maintaining economic momentum in april.

the private one, not so convincing. 50.1, 50e expecting for line between expansion and contraction. it has not been in negative territory since june 2016. this is the private survey of private smaller companies and so we are seeing increased the small to medium sized enterprises in this deleveraging campaign, even though the official sub index of small and medium enterprises in the pmi yesterday improved month over month. j.p. morgan and bank of america shares tumbling as executives from both company report trading revenue in the second quarter dropped significantly. what does significantly mean? >> it is a good question. the morgan told us in second quarter that trading revenue would be down 15% compared to last year. bank of america was not quite that bad. brian moynihan today said it would be down 11%, 12% or so.

>> they had a fantastic first quarter, a quarter we were not expecting in anyway way when it came to trading revenues, so is this a little give back? >> it is. last year's first quarter was terrible for the big banks. the second quarter was a huge quarter. reverse, the had a first quarter better than last year, and that is what you would expect, but now the second quarter because of the comp of last year is not as favorable and we are seeing it down a little bit. >> are you seeing the same impact? is that trading revenue starting to weaken as well? >> it is an interesting environment. readtainty would typically tremendous volatility, and it is not. there is this very passive perspective that investors have, risks isownside

outweighing the upside risks, of people are just not that active. >> auto sales and next bag. ford and the sound better than expected, nissan up 3%, ford up 2.3%. gm sales surprising to the downside, down 1.3%. what is your initial take so far on what we have seen out of the auto guys? >> it is starting as a soft month. -- a big done so with month with commercial fleet sales. you have general motors being down, and they were predicted to be up. is saying the seasonal annual adjusted selling rate is 16.6 million vehicles. last year it was 17.2 million vehicles. it is not greater income but softer and continues to be basically another month of down sales it looks like that we have seen every year -- every month this year, so not terrible, but continues to soften up here a.

♪

♪ news from e-commerce giant amazon, it's shares pushed asked that huge psychological $1000 tradingu.s. intraday tuesday, and analysts expect that to go even higher. bloomberg and check into the analyst recommendation function. sell,means by, read means and there is no read on this board. there are 39 vis, seven holds, and no sells. alix: there are about 30,000 functions on the bloomberg, and we always enjoy showing you are favored on bloomberg television. here is another function you quic .seful

this week's quick take brings us back to the subject of north korea. ♪ leader kim jong unlike's to brag about nuclear weapons. his country is thought to possess as many as 20 nuclear warheads. his military has tested a wide variety of missiles, and according to defense analysts, has moved closer to producing a missile capable of reaching north america and a nuclear warhead compact enough to ride on it. that is why neighboring countries and the u.s. are watching north korea and its unpredictable leader closely. >> you can bet on that. >> here is the situation. koreaber 9, 2016, north conducted at strongest nuclear weapons test in a decade and attend kiloton blast was almost as powerful as the bomb dropped on hiroshima.

in 2017, kim jong unwarned of more nuclear weapons test. he stepped up ballistic missile tests and promised to test long-range missiles that could reach north america. in response, president trump said he would consider all options. say over here. if he gets the long-range missiles, we are not safe either. china's meeting with president xi jinping, trump agreed to work with beijing to find diplomatic solutions. he later warned of a major, major complex of diplomacy fail. in april, the u.s. installed at missile defense system in south korea, and the chinese are not having the system surveillance capabilities in their backyard. china, north korea's only significant trade partner, has been pressuring the company and suspended coal purchases, but the chinese are reluctant to push a artist a risk the collapse of the north korean government. meanwhile, south and north korea have hundreds of thousands of troops deployed on either side of the border. here is the argument. north korea has a long history

of escalating and even escalating tensions to broker economic and diplomatic concessions, which leads the u.s. in the world in a tricky position. for a carrot and stick approach. unfortunate, neither that caret stick has work at what is left is on stronger sanctions awaiting the downfall of the dynasty or military confrontation that risks enormous casualties, but doing nothing is dangerous, especially considering kim jong unzip erratic behavior. a senior defector went so far as to say that as long as he is in power, the country would never give up its nuclear weapons "even if it is offered $1 trillion or $10 trillion in rewards." ♪ alix: that is one of the many quick takes you can find on the bloomberg you can also find it on bloomberg.com. that will be all for "bloomberg

best" this week. thank you for watching. i'm alix steel. this is bloomberg. ♪

>> brilliant ideas, powered by hyundai motor. ♪ >> ideas, ideas. ♪ narrator: raised in exile during the cultural revolution, ai weiwei is a man driven by his conscience. an artist as much as he is an activist. he uses sculpture, installation, film, and even social media to speak about issues surrounding truth, justice, and human rights. >> ai weiwei is very important in terms of what he represents