alix: coming up on bloomberg best, the stories that shaped the week in 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. >> trump needs to know who he is talking to here. >> economic data sends ambiguous signals. >> don't obsess on anyone number. >> leaders add insight to a complex picture. >> north korea's conduct is reckless, dangerous and becoming more so.

>> you believe this is a new cold war? >> absolutely. >> into the fed meeting coming up, 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. alix: 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 concluded with the g-7 summit. this began with evidence of strain in the g-7 alliance.

>> angela merkel has given her strongest indication yet europe and the united states are drifting apart. speaking after the g-7, she said 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 over. that is why i can only say we europeans must rely and take our destiny into our own hands. >> 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. saying 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. >> she called india a reliable partner and addressed this once again saying there are other relationships. transatlantic relationships 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 sound like she got anything from donald trump that reassured her there. >> europe is our largest trade partner. it is our largest investor. it's our largest accumulation of allies in the world. i think president trump to needs 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. after a poll showed theresa may's party could fail to secure a majority. the conservatives may lose 20 seats in next week's election. with the labor party gaining 28 seats. the polling model allows for a large margin of error. >> this is in a poll. it is a projection. 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 have spoken 7000 people and conducted interviews every day. they tested this model with brexit and got it right. >> how much weaker can it get? eight days to go until the election. houndt will drive the lower -- 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 to 126 or something against the dollar. when we get into the brexit negotiations, who knows where we go from there. >> it is decision day for the paris climate accord. donald trump tweeted i will be announcing my decision thursday at 3:00 p.m.. make america great again. president trump: the united states will withdraw from the

paris climate accord. >> the jist 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 contrast and 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 america or for the world. bob iger followed soon after. saying quote, i have resigned from the president's council over the paris agreement with drawl. the head of goldman sachs decided to send his first wheat ever saying today's decision is a setback for the environment

and the u.s. 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 es say you mustn't do this. there seems to be a disconnect between leadership and business. >> the 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%. that is the lowest in 16 years. not for a good reason. labor force participation down. that is the lowest this year. >> does this inject some doubt? if so, how?

>> yes it does, but it does not take june off of the table. let me explain why. this is a weak report. week 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. >> the participation rate is lower. is that a big disappointment? >> don't of says on anyone number. we revise them from month-to-month. the overall trend is good. since inauguration day, it's 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. >> the may jobs number goes into the calculations as the june meeting approaches. bloomberg spoke with three fed presidents this week. those conversations are coming up. plus, 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 moscow wanted. >> this is bloomberg. ♪

>> this is bloomberg best. let's continue our roundup of stories that moved markets this week. we return to the theme of geopolitics as a north korean

missile launch jolted the international community. >> north korea has fired another missile. the ninth this year in response to beefing up forces in the region. we have seen the frequency of these missiles ramp up quite a bit. do you expect this to prompt any action from south korea, china kind of or even 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. king has been doing this over and over again. what would really ramp up tensions is if he fired a intercontinental ballistic missile. that would hit north america. that is what the u.s. is concerned about now. >> this is a ratcheting up of tensions. it comes at 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, while not as significant as a nuclear test, it is still concerning. it is a challenge for the administration as to how to engage north korea. >> i want to move to south africa. the embattled president jacob zuma is staying put for now. he survived a bid by some to remove him from office. is he safe for the moment? >> he is certainly. he is keeping control of the country. the vote of no-confidence is something that he said he never wanted to hear of again. the constitutional court is currently 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. >> fresh off of nato and the group of seven summit, emmanuel macron welcomes vladimir putin to paris for their first one-on-one meeting. the two leaders found common ground over fighting terrorism but that is where the agreement may have ended. they traded barbs over sanctions. the ukraine, where macron accused putin of invasion. how is this being played out in russian media? 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 the candidate moscow wanted. their favorite was of course defeated in the first round of

the presidential election. nevertheless, 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. >> mario draghi has become the latest high-profile figure to tell the u.s. it might be headed down the wrong path on trade. the ecb president touted the 's four-year recovery and said the key risks are now from external factors, in particular the neo-protectionist stance. draghi repeated his view that the eurozone needs expensive monetary stimulus to restore stable inflation. what does that actually mean? >> 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. we'll probably get an extension later on.

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

results president -- valveows theyesident 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. given the level of reserves. we have to of knowledge it there was a shock to the political system. conditions may have been irreversible. the government is very engaged in spearing the reform agenda in the minister committed to approve the social security reform and tax reform in the second half of the year. the question is about governor ability. the political capital. is it still possible to rebuild 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 north korea's trade partners. they say choose between pyongyang or washington. if you are not with us, you are against us. that is the message. >> it takes on new relevance when you see rex tillerson going around speaking to 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 with north korea, to cut them off. they are worried north korea is using diplomatic means to get funds to fund its nuclear program. >> it is a no-brainer. >> you would be surprised how many countries have dramatic diplomatic 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 because they were part of the not intervention movement, certainly 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 in pyongyang. >> james comey will testify june 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. i don't expect this one to be either. 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 is unclear if he received one of these letters. he was very instrumental in the campaign. if there is an investigation you can assume that jared kushner who was instrumental in that campaigned will be involved or questioned to some extent. >> back to the u.k., we are less than a week away from the election. polls show the prime minister will likely fall short of a parliamentary majority. may's opponent attacking the prime minister for muted response to president trump pulling out of the paris climate deal. >> investors are starting to deteriorate. people are taking the risk. >> you could have the tories just fall short of a majority. they may convince lawmakers to lend them support they need to govern.

labor would cobble together an arrangement where they borrowed libdems andhe greens, which is more likely than a formal coalition scenario. ♪

alix: 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. >> north korea's conduct is reckless, dangerous and becoming more so. china has the greatest leverage over north korea. with the greatest leverage comes the greatest responsibility.

so we will do our part. sanctions, of course. we look to beijing to bring the pressure to bear on the regime in pyongyang. to bring it to its senses so that it ceases. >> the recent g7 said something of a seismic shift. when it comes to global alliances. -- angela merkel suggesting germany cannot rely on the u.s. the u.k. but europeans must take charge of their own destiny. if such alliance can be looking so fractured at the moment, what does that mean for australia? the u.s. and australia have the se shared values. do we 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. only little while ago. 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, the erratic when it comes to policy decisions? is that level of good faith something that can still be relied on? >> the relationship is in the best of health. 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.

business, people to people, family. it is the closest possible relationship. t gets stronger all the time. >> scotland yard was forced to temporarily suspend information sharing with united states. has australia sought reassurances from the u.s. that any intelligence shared would remain confidential? >> the intelligence relationship as you know between australia and the united states is also intensely close. we have every 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. i want to say to you that intelligence is more important than ever. in particular in the battle

against terrorism. it is a global phenomenon, the global threat of islamist terrorism extends from the middle east to the americas, to australia. so the sharing of intelligence not just between the five r's, but between all nations that are committed, it is more than important than ever. >> still to come, more of the week's most compelling conversations. we take the polls of the fomc. -- holes of the fomc. livmp through a nervous week. james gorman sizes of the trading environment. >> there is enormous uncertainty which would breed volatility, and it is not. >> and speaking their minds about u.s. policies. it may be important for the

u.s. but not for russia. >> this is bloomberg. ♪

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delivers consistent network performance and speed across all your locations. fast connections everywhere. that's how you outmaneuver. do you think the hedge fund industry is in a permanent decline? >> no, i don't. there is a tremendous amount of capital out there. 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 always is going to be the need for high-quality investors. >> when you say fee structures might have to change, what do you mean? 20 four apay two and fund that is matching what is happening in the s&p -- >> should any funds be charging two and 20? >> there are always guys that

will outshine 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 say, i will pay two and 20, but you are barely beating the s&p. is that worth two and 20? alix: that was phillip falcone gainin the financial following a five-year sec ban 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 some of 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. but more constructive. there is a good reason for this. the whole world will sleep better if russia and america

will have a better relationship, but his ability to conduct any policy now -- >> the whole world would sleep better why? >> because russia and america 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. let's face the facts. we have the situation before. >> you are referring to the cold war? >> we are now 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. the united states needs steel imports because of supply-demand balance, but any substantial distortion, deterioration -- eventually we will all pay for it. >> he has also said, president trump of course, that he wants the u.s. government and american companies to buy american when it comes to steel. given your experience, will a buy american policy help u.s. steel suppliers? >> difficult to say. 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 barriers for efficiency improvements. the widely spread conviction is that more protectionism at that time which was driven by short-term way of thinking, which is understandable, it nevertheless, a substantial deterioration of the economic situation in 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. in the past several years, we have learned to live without huge inflows from the global markets. our local problems mean much more for us. >> so no fallout for the sanctions, and no fallout from the investigations taking place in the u.s. congress? >> is your story. what is happening in the u.s. doesn't matter much for us. alix: there was plenty of fed 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 those mixed signals and concerns about winding down the balance sheet, there is still room for surprise. this week, three fed presidents 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 do to be at a sustainable level. unemployment is below 4.5%, and i see it going lower. the economy is doing well, we have good momentum. we still have a little ways to go on our inflation goal, but we i am still optimistic. we need 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 a lot of different factors. we have seen some transitory things push inflation down. when i look more broadly over the trends of the past couple of years, i see inflation measures moving towards our 2% goal. we are still below that, but with a strong economy growing at a good pace and unemployment getting 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. i think our strategy is a good one, a gradual movement of interest rates back to normal. let's not forget that 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 comfortable with where we are and where we are going. we don't want to let this expansion run too hot for too long. i think that creates risks on the other side. 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 space for the committee in the future if we need it, and 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. and so what i disagree with is the idea that we have to go to wo 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

to be cooling. whether you looking at pce, cpi, we 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 bit surprising. in 2017, 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 got a relatively weak gdp 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 is going to 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 variable to keep track of as well in this discussion. >> business confidence right now is high. there is a lot of business optimism. you see business investment is stronger this year than in the last years. the issue is that is great, and it can help gdp growth, but 70% approximately 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 right now is while they are more optimistic, when you ask a business leader if they see an improvement in their business, often times the

answer is, not yet, but we are expecting that. >> does that have to do with length or duration coming out of the financial crisis? it just takes time to heal, or is there a new format of globalization where american business is waiting to pull the trigger on the nostalgic investment we remember? >> for me, some business leaders are hopeful that fiscal and other policies might help improve gdp growth. that is part of it. and, 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. ♪

alix: you are watching "bloomberg best." i'm alix steel. let's get back to our review of the top dismissed stories. it may not have been a trade dispute or a north korean missile launch, but the computer failure that stranded ba passengers qualified as a disaster. >> british airways is in recovery mode after the airline suffered a massive computer failure that left thousands of passengers 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 number 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. >> ryan air reported a 6% gain, 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 over 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 almost 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 able 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 one of the positives 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 its self driving car effort. he is at the center of a legal dispute over the technology with his former employer google. why was he fired? >> so on may 11, the judge in 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 uber 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. there was a deadline till june 15. the company apparently made the decision today that it was going to part ways. >> the latest reading of the factory floor in china shows manufacturing holding up in

beating estimates. pmi at 51.2, matching april, showing the economy is maintaining some form of momentum. >> the main number is steady as she goes. to see what is going on, you need to look at the sub readings. two trends, one is the pmi number is broken down into three categories, large, medium, and small enterprises. what led the recovery at the factory floor in 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 innovative, smaller firms. >> official data showing the pmi was maintaining economic momentum in april. the private one, not so convincing.

>> we were expecting 50.1, 50 is the line between expansion and contraction. it has not been in negative territory since june 2016. this is the private survey of mostly private smaller companies and so we are seeing increased pessimism about lines of credit capital in this deleveraging campaign, even though the official saw the 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 ies report trading revenue in the second quarter dropped significantly. what does significantly mean? >> it is a good question. j.p. morgan told us in the 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 any 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. this year, we had a reverse, the first quarter was 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. there is enormous uncertainty which typically would breed tremendous volatility, and it is not. there is this very passive perspective that investors have, and i think the downside risk is outweighing the upside risks, of

so people just not that active. >> auto sales unmixed bag. ford 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. even though ford and nissan have done a lot of sales to commercial fleet sales. ford had a big month with commercial fleet sales. you have general motors being down, and they were predicted to be up. general motors is saying the seasonal annual adjusted selling rate is 16.6 million vehicles. last year it was 17.2 million vehicles. it is not an awful month but it continues to be basically another month of down sales it . not terrible but it continues to soften up.

♪

>> news from e-commerce giant amazon. its shares pushed asked that huge psychological $1000 mark in u.s. intraday trading tuesday, and analysts expect that to go even higher. i dive into my bloomberg and check out the analyst recommendation function. green means buy, red means sell, and there is no red on this board. there are 39 buys, seven holds, and no sells. alix: there are about 30,000 functions on the bloomberg, and we always enjoy showing you our favoites on bloomberg television. maybe they will become your favorites, too. here is another function you will find useful, quic . to quick takesu

where you can get important context and fast insight into timely topics. this week's quick take brings us back to the subject of north korea. >> north korean leader kim jong un likes to brag about nuclear weapons. his country is thought to possess as many as 20 nuclear warheads. kim's 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 all watching north korea and its unpredictable leader closely. it will be solved. you can bet on that. >> here is the situation. september 9, 2016, north korea conducted its strongest nuclear weapons test in a decade. the 10 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 testing with some lending in the sea of japan and promised to test long-range missiles that could reach north america. in response, president trump said he would consider all options. president trump: we are probably not safe over here. if he gets the long-range missiles, we are not safe either. >> after meeting with china's president xi jinping, trump agreed to work with beijing to find diplomatic solutions. he later warned of a major, major conflict if diplomacy fails. in april, the u.s. installed at missile defense system in south korea, and the chinese are not happy having the system surveillance capabilities in their backyard. china, north korea's only significant trade partner, has been pressuring the company and -- country and has suspended coal purchases, but the chinese are reluctant to push show hard as to 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

de-escalating tensions to broker economic and diplomatic concessions, which leaves the u.s. and the world in a tricky position. situations call for a carrot and stick approach. unfortunately, neither that carrot or stick has worked. what is left on the table is stronger sanctions, awaiting the downfall of the dynasty, or military confrontation that risks enormous casualties, but doing nothing is dangerous, especially considering kim jong un's erratic behavior. he has executed top advisers. 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. ♪

jonathan: this is "bloomberg real yield." ♪ jonathan: coming up, a downside surprise on payrolls. may job numbers disappoint. the 10 year yield plunges to a new low. spreads just keep grinding tighter. we start with the big issue, the payrolls report injecting uncertainty into the fed's next move.