francine: o the pressure mounts drawingith her handling criticism. the challenges facing the prime minister just days before the breadth and negotiations begin. recalibrating inflation expectations. some of the world's biggest central banks. the bailout deal reached for greece, but it is not enough to get the img lending to them for now. good morning, everyone. this is "bloomberg surveillance"

and i'm francine lacqua. let's quickly check on your markets. global stocks are definitely rising. shares in japan are probably advancing the most. the yen weakening after the bank of japan left monetary policy unchanged. treasuries holding onto losses. traders still, i think trying to digest the more hawkish tone struck by the federal reserve. i wanted to put gold in there as well, practically flat. let's get straight to the bloomberg first word news. reporter: russia has verified that the islamic state leader has been killed. isisuld be among about 30 commanders killed during a bombing raid last month. it is also said the attack killed another 300 islamic state fighters, but provided no explanation on the delay in reporting the airstrike. anger is growing over the deadly blow that struck the apartment

tower in london. the official death toll stands at 17, with the police morning fatalities could reach critical figures. prime minister theresa may has ordered an investigation into the tragedy, but she has come into criticism herself, being accused of offending locals when she visited the scene. philip hammond had been expected to give a keynote speech on the and made the case that brexit focuses on protecting jobs to an audience of bankers. he spoke after a meeting with the prime minister in downing street as may tries to prop up her government for the meeting with the d.u.p. >> she was in breach of the agreement.

she was in default. creditorsgreece's have agreed to release it .5 billion eu -- release 8.5 forion euros in lending athens. ends months of uncertainty whether it could make large bond payments due in july. president trump will announce the end to business between america and cuba's military. the president will announce the changes, which also block individuals from being able to plan their own educational trip to cuba outside of tour groups, and places restrictions on where they can spend their money. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world.

this is bloomberg. francine? francine: thank you. we were just looking at the pictures from luxembourg of philip hammond, who was meant to give a speech yesterday. that was scrapped, but he is now at luxembourg at the meeting of the euro finance ministers. u.k. will enter brexit talks to find a situation that works for both. he says he will not give blow-by-blow accounts of the talks. now, the mystery of inflation has been in sharp focus this week as the policy decisions have come to light from the world's most crucial central banks. you the united states -- the united states hiked rates for the second time this year. k., there are concerns about rising inflations widening among bank of england

policymakers. the biggest decision over rates among british policymakers in six years. finally, with inflation still distant from its target, the bank of japan left its monetary stimulus program. burgess.ng in mark mark, how much do you look at inflation, and how central banks tell you where to put your money? how much do you look at growth fundamentals? mark: i think the key issue facing investors is monetary outlook. this is an array of conflicting signals. core inflation looks to be nonexistent, but the fed is looking at the tightness in the labor market and says, surely, we must see inflation coming through and we have to tighten monetary policy. in the u.k., we have a tight labor market and inflation picking up largely as a result

of the fall in sterling. at the same time, we have weak economic signals coming out. i think finding a way through that is quite challenging. the important thing is what that means for bond markets and equity markets, in terms of where one should place one's monbeey in fixed income. we had a significant rally last year in the sectors of the economy that are exposed to global growth, but that has trailed off. francine: overall, the fed says, the strong employment numbers will be through inflation. what if it doesn't? the twowe can't square factors? mark: that is the key factors. i don't know if it is a function of debt deflation. there are productivity challenges within the western model.

these things appear to be keeping a lid on inflation. francine: what about the life of the portfolio manager? mark: that is always difficult. there is always something interesting to find somewhere. it is just whether one can find it. francine: where can you find value? mark: we think growth companies still a pretty interesting. they had a strong rally this year, but we think growth will still be difficult to find globally and for that reason, companies that can grow will deliver returns. francine: what kind of companies? let me bring you over to my bloomberg terminal. win." title this "locals arehis chart, it shows they outperforming peers that are most dependent on the u.s. mark: i think the u.s. will have decent growth this year, about 2%. europe is recovering. the leading indicators coming

out of europe look pretty robust. i think where we will continue to see economic profit surprises will be out of europe. the u.k. is where the challenges are. i think consumer confidence has taken a big knock. i don't think the general election will have done that any favors. we have already seen many of the leading indicators pointing to that. i think domestic u.k. will be challenging. francine: we will get back to the u.k., but in the u.s., if we have the actual infrastructure spending the president trump announced, would that change your mind about the u.s. outperforming longer-term europe? an economy, yes, but as a stock market, i'm not sure. the key is the structural reforms you just discussed. he has promised a lot. we have seen, nothing come through thus far. until the start to see the structural reforms come through, it is difficult to place a long-term bet on how that plays out. staysne: mark burgess

with us and we will be talking more about the u.k., and of course, brexit. stay with "surveillance." plenty coming up, including, the pressure mounts on theresa may. we look at the challenges facing the u.k. prime minister just days before brexit negotiations start. plus, as greece's creditors reach a bailout deal with greece, we speak about the finance minister. this is bloomberg. ♪ francine: this is "bloomberg

surveillance." let's get straight to the bloomberg business flash. european stocks

slumped the previous month, industrywide registrations grew 7.7%, at 1.4.3 million vehicles after plunging in april. this comes after we saw political stability in france helped the sector get back onto the path of recovery. tesco has posted strongest sales growth in years. be analyst estimates. is rising in the face of brexit fueled inflation. exposed sluggish demand for chocolate with a swift growing business such as coffee and health care. ofale of the unit with the $923 million will be the first major strategic decision by ceo mark scheider. that is the bloomberg business flash. francine: now, theresa may is

finding herself under mounting pressure this week. on the political front, gerry adams says his party is against any deal between the conservative and northern ireland's democratic in the nest party. -- democratic unionist party. fireandling of the london has been criticized with the premise are facing questions or not meeting locals when she visited the scene. the tragedy has highlighted divisions within british society, wealth and equality, and frustrations with the political establishment. all of this as brexit negotiations with the eu are due to begin on monday. still with us is mark burgess. we were talking a little bit, mark, about the underlying factors in the u.k. economy. the indicators fell short of expectations. given that and the political turmoil, would you stay away from the u.k.?

mark: one has to remember the u.k. stock market is not the u.k. economy. one of the reasons the u.k. stock market has done so well post-brexit has been because it is not the u.k. economy and the currency has fallen, which has given profits a big kick. but underlying that, given how consumption is so important, and how confidence appears to be falling away in light of summary things that have happened, domestic u.k. looks challenge. saying that, there are pockets of value within the u.k. stock market. i think the outlook for the u.k. economy, relative to the other parts of the world, looks interesting. it would be an area of the world we would be looking to underweight. francine: what are you looking at the most, politics? brexit? and therefore, the fundamentals of the economy, or is it just the economy? mark: it is a multidimensional question. but there is no question that

companies that have significant businesses in the u.k. will be impacted by the uncertainties surrounding what shape of economy we have, what shape of relationship we have with europe post-brexit and terms of whether you are thinking about long-term decisions, i think you are differing those decisions, or making those decisions to go somewhere else, and i think all of that will naturally slow the u.k. economy activity. francine: if you look at u.k. equity, a lot of them are commodity-based, or impacted by commodity prices, those are likely to go down, but then you have a possibly weaker pound lifting these equities up. again, what exactly would you be buying? mark: we think sterling will continue to trend lower. we think fundamentals around sterling will continue. many of the companies have done well, but we think companies that are exposed to global growth still, you can still find

pockets of value there. francine: and pockets of value being -- what do you look at to where you see pockets of value? do you go through the fundamentals? mark: yes, the long term valuation, all the traditional things asset managers do so well. francine: emerging markets, is there anything that you like? mark: we think the emerging markets look interesting. the valuations are lower. inflation is coming down. many of the central banks are cutting interest rates. they are not without the challenges, as we have seen over the last few weeks, but we think the emerging markets look interesting. francine: how much you put in cash, for example? mark: so, we describe ourselves dovish about the outlook for global growth in interest rates. we think interest rates are

going to stay lower for longer, supporting wrisrisk assets. we still like equities. we are not particularly interested in core fixex income, which looks expensive. but there are treasuries that we could become more interested in. francine: mark, thank you for joining us today, chief investment officer for emea. up next, we are live in luxembourg, where we will be speaking to the portuguese finance minister, and the challenges facing the eu. this is bloomberg. ♪ francine: you are watching

"bloomberg surveillance." i'm francine lacqua in london. greece's creditors have agreed to release 8.5 billion euros to athens amidst months of uncertainty. the deal was not announced to get the monetary national fund to agree. nejra is in luxembourg with an important interview. nejra: thank you, francine. i am joined by portugal's finance minister. greece does that have disbursement of 8.5 billion euros, but the deal was not enough for the imf to pay out straightaway. with that, i would like to start. mr. centeno, good morning. wasn't this just kicking the can down the road again? >> certainly, this was a great success in the sense there was

an advancement. we are still working on additions. ee knowledge that there ar conditions for sustainability. a little bit later in this year, when we have more information, to be completely warranting that the exercise is a safe exercise. there is a large consensus on this. even if we may look at it and say, ok, we did not complete the debt sustainability analysis, but we are confident that the end of the day, we will accomplish the goals by all institutions, by all member

states and this is a positive mood. nejra: there was a lot of positivity from a number of ministers after the meeting, even from greece to a certain extent, but greece did not get everything it was looking for. ultimately what it wants is to be recognized as having a sustainable debt load by the imf , so it can have easier access to the ecb's bond buying program. >> we know the conditions for sustainability are in contrast to the process itself. we recognize all the effort that the greek authorities in greek people are making. they are having great results. we think we just need to go along these lines, and we're pretty much confident that we will get to a very strong, robust debt sustainability analysis that will launch and p ave the way for greece to have success to all the programs and

all the markets. nejra: and a successful of the program in mid 2018? >> exactly, in the sense that the primary goal was that the greek economy was posting a good sign today. we are pretty confident that the greek government will confirm the commitment that it is pledging in the euro group level. it's going to be a long journey because this will take quite some time to suss out, but it will be a success. nejra: the proposal by france, which was added as a provision, regarding tying greece's that performance to the debt recalibration, what do you make of that? >> we think it is very important to reassure that there is some

consistency in the arguments used. of course, the economic success of the country is key for debt sustainability. if we tie that, in a way, we don't think it will come as a problem. that,e important thing is ideas are flowing. people really want to make a success out of this. and we are sure that will be the end of the story. nejra: on portugal's story, you are getting admission to continue with the early imf load. how much would you like to pay back early this year and next year? >> we are taking this very cautiously because we understand how important it is to restore confidence in the market, and to keep his confidence overtime. it's going to be a 30 month period process. it will be quite prolonged.

we are going to start very soon, as soon as we have the formal authorization from the european institutions, and until the end of the month, we will be able to repay one billion euros already. these will be maintaining the cash load with sustained profits. soon.'s going to be very portugal'so centeno, finance minister, thank you for joining me in luxembourg. francine: up next, the week after theresa may's lost her parliamentary majority, we focus on u.k.'s politics and the brexit negotiations. this is bloomberg. ♪

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which is why comcast business delivers consistent network performance and speed across all your locations. hello, mr. deets. every branch running like headquarters. that's how you outmaneuver. tthat's why at comcast,t to be connected 24/7. we're always working to make our services more reliable. with technology that can update itself. and advanced fiber network infrastructure. new, more reliable equipment for your home. and a new culture built around customer service. it all adds up to our most reliable network ever. one that keeps you connected to what matters most. francine: welcome to our weekly brexit show. i am francine lacqua. let's get a roundup of the week's big brexit stories. continued may

negotiations with the dup leader to shore up a broad agreement to secure their support for a confidence and supply deal in which the smaller party will prop up tories in key parliamentary votes. we told her very directly that she was in breach of the agreement and we itemized those matters in which she was dilatory or in default in relation to that agreement. >> three sets of u.k. economic data disappointed this week. consumer price inflation rose to 2.9% whereas weekly earnings came in at just 1.7%. the squeeze on real wages reflected in forecasts.

the mpc voted by five members to three to maintain the key interest rates in a record low 25 basis points. that was the biggest division among britain policy leaders in six years. promptedn tower fire the emergency to cancel -- philip hammond had been expected to give a speech on the economy. this morning, speaking at the euro area meeting and luxembourg hammond outlined his approach to leaving the e.u. a we are just about to start negotiation. we have set out very clearly our desired outcome and in the article 50 letter that we have sent but it is a negotiation. as we go into that negotiation my clearview and i believe them as the -- the view of the majority in britain is that we

should prioritize protecting jobs, economic growth, and prosperity. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. salek and this is bloomberg. francine: this time last week the u.k. was waking up to one of the biggest election upsets of recent times. theresa may's conservative party ahead by as much as 20% in the early polls, lost the majority in parliament. jeremy corbyn who had been subjected to a no-confidence vote by 80% of his mps gained both seats and votes. here to talk about u.k. politics we have former technology minister ed vaizey and angela smith. peggy for joining us. what was it like that friday morning after the election? disbelief?

angela: not really disbelief because we saw the attitude changing in the last week or 10 days. i was up at night and we saw results coming in gradually but i think we saw the switch that week earlier, and a very strange result as well. have -- thato overall, an amazing life, the labour party. francine: what do you think people voted on? ed: i think they voted against austerity, they felt there was light at the end of the tunnel. it was related to brexit which has added to the feeling that we are under economic pressure so they voted against a hard brexit. i think the british people kicked back. francine: do you agree? angela: i think theresa may came out to downing street for an election she did not need to

have. she had her mandate, her majority in parliament and her authority to invoke article 50 and then she said, i need a mandate, i have got to call an election. bennett said she was 20% ahead in the polls -- then it said she was 20% ahead in the polls. she was in a difficult position because she is a weekend and damaged prime minister -- we akened and damaged prime minister. francine: will she stay on as prime minister? and how does she fix the mess? ed: that was a speech she gave to tory mps earlier this week, a very good speech. there were flashes of the talent that theresa may clearly has in moments like that. i don't think people expect her to lead us into the next election. i think they expect her to stay for the moment to keep a stable

government, given the situation. we are going through so much at the moment that actually keeping our prime minister and at least putting forward a program for government. francine: how would it work for the dup? ed: we all become constitutional experts overnight when this happens. it basically allows the government to pass a budget and survive a no-confidence motion. it is important the government punish -- publishes the deal so there's no fear of coming back for maneuvering and unfair favors for the unionist side of the divide in ireland. francine: you know arlene foster? angela: yes, i do. francine: will it work? angela: i see it very difficult of how it will work. we do not know what the negotiations are. if they keep her as prime minister, whatever deal is done they are compromised by that and

that brings into question the agreements. they will want something in return. they will not say, yes, we will vote for you, fine. they will want something in return and we need to see with that is. francine: what do we think it is? i am assuming part of it will be investment into the region. is there anything else more problematic? angela: that has consequences. what do you do with scotland? that immediately looks at the budget and implications there. i do not want to speculate what they are asking for but i would treat anything like this with caution. the election decision did not give theresa may her mandate and the majority that she asked for. i think she ought to consider her position and clearly she has not been doing so. this is not sustainable. francine: is it sustainable, and

will we have early elections? ed: i do not think there is an appetite for early elections. there might be for the labour country wants -- so i think theresa may can be prime minister for the foreseeable future. francine: what is the stable future, by the end of the year? ed: you have spotted my attempt to avoid the question. when i was a minister are used always say i would publish an announcement in spring and spring in white bull runs from february to november. six months to two years. we are going to brexit negotiations and the prime minister is weakened. i'm worried about where we go from here. ed: at the moment, the prime

minister is in a secure position but we have not yet come up against reality. the negotiations start on monday. what tone will be set? the house of commons, we have a parliament that can assert itself in real things will happen in that parliament which will affect the future for the good or the bad. francine: we will talk more in depth about the brexit negotiation shortly, but what is it like being in the conservative party now? a party in real turmoil. ed: it sounds a bit selfish because people have lots of things going on in their lives. the tory party does feel pretty shellshocked. right up until that exit poll we were expecting to come back with a considerably increased majority. honestly, even talking to the labor opponents who expected us to double our majority, lots of people even on the ground were not expecting this. francine: boris johnson, michael

gove, david davis, do they feel empowered or faded away? ed: i cannot's week were all of them but i certain -- cannot speak or all of them but i get the impression from the more reasonable people that they would rather see a solution to brexit, even if that means compromising their firmly held opinions on what it should look like. i think there is room for maneuver on the soft brexit, because i think some of the hard brexiteers understand the electors do not want to go headlong into this. francine: do you agree? parliament will be the focus and the government has to change the whole tone of the debate. may to come out and say i am a bloody difficult woman may be amusing for the -- but if wemera, make the focus parliament rather

than the executive i would focus parliament more than i trust the government on this. not hard and soft brexit but extreme brexit which is hard brexit, or in more moderate, practical, sensible route. my sense is that is where the majority of parliament is and that has to bode well for negotiations. francine: thank you so much, leader of the labour party in the house of lords and former technology minister. we will be back in a couple of minutes. the luxembourg finance minister meeting is going on and philip said we should prioritize protecting jobs and it is good -- because it is a sign of engagement. this is bloomberg. ♪

francine: welcome to our weekly brexit show, live from bloomberg's european headquarters in london. i am francine lacqua. global stocksy in is pushing their market capitalization to the highest since 2008. this is the chart relative to the value of the world's goods and services. nominal gdp worldwide reaching 75 trillion, about today -- the same as today's equity market. as is forecast to grow to 78 trillion by december according to the imf. almost half of the investors of bank of america merrill lynch line is thee white market capitalization of global stock markets, the blue line is

global gdp. this is the big swings we have seen in the u.k. gilt market this week. written's hung parliament has left the market on sure which way to turn. we had a big up and gilt yields which followed a big move down and a big move up on tuesday. we have the strongest inflation in two years on wednesday, the weakest wage growth in two years and the icing on the cake thursday was the three members of the bank of england voting to hike interest rates. yields continue to rise, 0.7% is where we are. this is the intraday chart. strongest u.k. sales growth in seven years, the supermarket leader resisting raising prices as much as rivals in the face of brexit fueled food inflation. greece, and luxembourg creditors agreeing to release eight and a half billion euros, capping the

next chapter of the bailout. it means that greece can pay its debts this summer. the imf is not taking part. this is the chart. it wants its debt load to be sustainable and this is the debt load relative to gdp. francine: thank you so much, mark barton. must a year after the u.k. voted to leave the e.u. the brexit secretary and his e.u. counterpart will finally sit down on monday to begin negotiations. let's talk more about what we can expect from the discussions from my guests. baroness angela smith and ed vaizey. thank you both for staying with us. you,e start off with because we were expecting the chancellor of the exchequer yesterday to make the case where a new path for brexit. how do you see him laying out

his vision for the future? ed: it is incredibly complicated to know what the actual solution can be for brexit and people banded around all sorts of solutions, including becoming a member of the eea. overlaying the detail is a theme that will assert itself. .he chancellor is empowered before the election everyone told him he was -- and now he is not. i think he understands he wants and -- we want a brexit that does as little to our jobs and economy as possible. he will move the dial on the rhetoric from this hard brexit to jobs in the economy first rhetoric. being nice while in luxembourg is no bad thing either. francine: what is now the purpose of the labour party? apart from being elected, are they there for checks and balances? angela: checks and balances,

that i hope the conservative government will embrace parliament in the negotiations and take on board what has been said. the town has to change and i think philip hammond is clearly the man to lead that. this is a totally different approach. they should rule out that no deal is better than a bad deal. no deal is the worst possible outcome at all and i think that should be made clearly early on. u.k., itonals in the would certainly help our citizens living in europe, those things i hope would be developed really quickly. it is a different relationship that a good relationship. the rhetoric of some of the conservatives has been damaging to negotiations. francine: can we have a reset of the relationship or negotiations with the same prime minister? angela: she has got to learn a lesson but i'm not convinced she

can learn it. there's aliament majority for sensible brexit or soft brexit. i don't think the government can get all its legislation through if they cannot physically do it in time. kened government and prime minister. i think the queens speech will be much shorter than it might've been previously, but brexit low education -- legislation is not going to change. ,ngaging with the opposition not in the sense of a small committee, but in gauging as parliament as a whole -- engaging as parliament as a hold -- whole. this will join committees together of both houses and find the best way of doing this. francine: do you think she will change, the prime minister? ed: i think she will have to change and show that she has listened to the voice of the voter. for me, standing for parliament,

the clear message that i got from talking to those that did not want a headlong rush to brexit. we are going to leave the european union, as much as i find that a tragedy, but everyone is saying let's not run headlong into this. angela: she has to take a jobs first approach and focus in on immigration and the economy. francine: i have to ask you, because there is a lot of anger country aboutthe this terrible tragedy about the grenfell tower's disaster and there is more fears that the death toll could soar to 100. what would you do in this investigation? angela: i was fire minister back a number of years ago. you have to try and find out why, because the grief is quite likely turning into anger. i would be very skeptical of anyone speculating the causes. where the walls not tight

enough, was at the enforcement, or some procedures not working, equipment not working? i have no idea. this is so devastating and i don't know about you but i have been moved to tears several times watching this. the key is to find out what the cause was. there will be a longer investigation but there has to be an initial quick investigation because of anyone else can face such a disaster we have got to do something today. francine: we understand more than 70 people remain unaccounted for and the police fear it was so devastating that some victors might never be identified. they give for joining us today, aaron is angela smith and ed vaizey. focus on thell economic challenges of brexit and bring you our exclusive analysis of which countries and regions have the most -- from

the negotiations. this is bloomberg. ♪

francine: welcome to our weekly brexit show, live drum bloomberg's european headquarters in london. i am francine lacqua.

in bloomberg businessweek magazine, they have analyzed which countries and regions of the u.k. are most at stake from e.u. negotiations. the parts of the country most dependent on trade voted heavily to leave. simon kennedy, congratulations on great coverage all through the election and brexit negotiations that start on monday. talk to us about this map. we have broken down the various counties and regions that most have to lose from breakfast -- brexit. simon: on monday as they head into those talks, this is what is in play. she needs to keep these areas on her side for a central brexit. these are the areas that mainly voted for brexit and based on manufacturing and on big former -- worldwide employers like

coca-cola. if they feel brexit does not work for them they will look elsewhere. carmakers, drink makers moving elsewhere in the world. fore are the critical areas theresa may's brexit strategy and as talks develop, it will be well worth her looking to them and checking the pulse to see if they are happy the way the plan is unfurling. francine: lead indicators being much worse than expected, with that impact their psyche? about aheresa may talks global brexit and the promise of britain. philip hammond has found new powers and has talked in the past about people who did not vote for brexit to be worse off. whatever you voted for brexit, do not turn against that decision two years down the line because that would be increasingly hard for whichever leader is in charge at that time.

voters are pretty fickle. we have seen that a lot. something they voted for in 2016, they might have a reason 2019. in if they are an employee of or any of these foreign companies, the fallout from brexit, if it hits them it will hit those that voted for it. francine: simon kennedy, editor for bloomberg brexit. bloomberg surveillance continues in the next hour, tom keene joins me out of new york. we will be talking to pierre lagrange about hedge funds and inflation and central banks. this is bloomberg. ♪

♪ francine: the pressure mounts on

may with politics and her handling of the london block tower fire facing criticism. the challenges facing the prime minister. is it time to recalculate desk recalibrate? -- recalibrate? rate decisions from some of the world biggest central banks. good morning, everyone, this is bloomberg surveillance. i am francine lacqua in london, tom keene in new york. it has been quite an incredible 10 days when you look at u.k. politics, a big central-bank week, and u.s. politics. tom: a good friday wrap up after the london fire, the shooter -- shootings in washington. it is good to get to the weekend. a good, eclectic set of guests today. francine: i am looking forward to speaking to pierre lagrange but first, taylor riggs.

taylor: russia claims it may have killed the leader of islamic state. they are verifying intelligence that al-baghdadi was killed late last night in a russian airstrike. other senior commanders of the group are also said to have been died. if it is true, killing al-baghdadi be a major military success. the pentagon is taking steps to break the stalemate in the war in afghanistan. they are sending almost 4000 more american troops. the top commander in afghanistan says he does not have enough forces to help the afghan troops fight. the special counsel investigating russia meddling into the u.s. election has expanded his probe. robert mueller is examining the finances and business dealings of jerod kushner. the post reported that he was being probed over post election meetings with russia's

ambassador. the bank of japan cannot get inflation up to the 2% level so the central bank has decided to keep its monetary stimulus and place. the boj will maintain a negative interest rate and keep buying trillions of yen of bonds. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. riggs.ylor this is bloomberg. tom: thank you so much. one more data check, quieter data after the fed, the beer we, the bank of japan -- the boe, the bank of japan here at little bit of curve steepening, euro weaker, dollar stronger. we will touch on oil at this hour, 44.72. i do not think so much has been made of weaker oil prices through the week francine:. i think you are right and this is the big inflation story that we will get on to when it comes to central banks.

global stocks rising, there is not much going on in the markets . shares in japan advancing on the back of the yen weakening. the yen briefly extended declines after the governor said it was too soon to discuss an exit plan for stimulus. we have a snapshot of what the biggest central banks are doing. tom: a shout out to vince gault of bloomberg businessweek. on the chart of the week, this is cell phone bill deflation in america. for those of you on radio, it is real simple. your cell phone bill costs half as much as it did in 1997, and what is important is everywhere along the way companies make decisions because of competition . those little blue circles, and down we go, and a recent leg down in cell phone deflation which chair mentioned in the press conference last week, this is the noisy inflation.

this is the societal effects of something like cell phones on a central-bank. francine: i love the fact that you are looking at cell phone deflation. i want to see your cell phone bills. tom: it is the equivalent of a home mortgage. , let me: italian gdp look at european companies. this is how european shares actually did compared to u.s. ones but a little bit differently. when i tracked with the help of hillary clerk, the geordie of those countries that do business -- the of those countries that do business in that region are doing better than those who are dependent on the u.s.. a chart that shows that locals, if you do business in europe, you are moving at the moment. i do not know whether it goes back to growth or fundamentals but certainly something we need to talk on. to europeanon

companies, we have had serious policy decisions from some of the most crucial central banks. in the states, the fed hiked rates but in the u.k., concerns about rising inflation saw the split amongst bank of england policymakers widen. eight members voted for immediate tightening, the biggest division for rates and policies in six years. with inflation still distant from its target, the bank of japan left its monetary stimulus policy on cruise control. i am pleased to bring in pierre iconic --cofounder of and manages over $80 million in assets. they give for coming in. pierre: thank you. francine: central banks, what kind of model should they be looking at? is inflation noisy? does it indicate if you have a strong labor market it will beat

the re-inflation at some point? pierre: it will, and i think one of the consequences of brexit and the immigration policy in america is the scarcity of labor. we have a low unemployment rate and it is difficult to find skilled labor. you have a very different median issue, while the number of wage growth is quite low for a lot of people it is difficult because of wage inflation, but at the bottom end of the scale this massive deflationary drescher like you saw in the mobile phone -- pressure like you saw in the mobile phones, there is a lot of technology affect on the workforce. coming from scarcity of skilled labor and asset inflation coming as a direct result of the central bank activity. francine: this is something similar to what the ecb talked about that when do we start creating quality jobs? pierre: the quality jobs are created but we do not have

enough people to fill them. when you prevent your workforce then youe to come in, either need excess labor inside or you have to pay more. what is interesting is that the central banks are on a very different path, more than i would say a year ago. japan does not have an issue in continuing because they really want to see reflation. it is only starting a little bit and that is their main objective . you can see in the u.k. at this level, inflation would scare people away so that is why you see the activity which is also much more like guiding. almost trying to guide the long market where you want interest rates to be going forward so there is more risk of inflation here. tom: i want to talk about your background in engineering and i think of jean-claude trichet

when i think of this. the idea of plug and chug, all of this economic blather, do you trust it? are we working on newtonian matters from another time, that do not work in the modern world? pierre: i do not think you have a choice so i think it was a good development about providing the liquidity at the time when frankly there was so much risk. what i see, what was interesting, there was a study from the treasury a couple of days ago. it is an 11 page report on releasing capital of banks to the system. it is interesting to see that you only now are starting to see authorities saying, we need to let banks have less capital and therefore being able to leverage themselves. in the absence of the private sector being able from a regulatory standpoint or an

appetite standpoint, to be able to provide levers to the economy and funding the economy, think god the central bank was there to do it. the question is how long do you say? it is better to stay too long and to be leaving too early, in my eyes. tom: from where you are is a bond guy, are negative rates going to work for the central bank leaders? draghi,essage for mario janet yellen, and governor carney? no, they don't, but it is a side effect so the objective is to create loan growth. the interest rates, a penalty for holding cash is usually counterproductive. it is important that we let some inflation come into the system and see interest rates, especially at the short end of the curve, and that is probably what you will see in the u.k.

with the activity we have seen. my view is that it is not really working. well-intentioned for people to take risk but it is providing a large amount of a cold test liquidity to the system. -- liquidity to the system. tons going on in washington, including a stunning statement from the justice department made yesterday afternoon. it is the perfect time on all that is going on in washington, on our health care legislation. libby cantrill will join us from pimco. this is bloomberg. ♪

♪ this is bloomberg

surveillance, i am taylor riggs. andoup led by bank capital japanese investors has offered about $19 billion or toshiba's semiconductor unit. the bank group has the backing .f two state act funds that is essential in winning japanese government approval. a report the european union is planning to find google a record amount -- fine google a record amount. journal says the e.u. is also likely to force google to change its business practices. tesco posted the strongest u.k. sales growth in seven years. the grocery store's same-store ceo said the company resisted rising inflation in the u.k. to keep prices down. that is your bloomberg business flash. francine: thank you so much.

the london tower fire tragedy prompted the organizers of the mansion house dinner to cancel the event in the financial district last night. hammond hadhilip been expected to give a key speech on the economy and make a case for brexit that focuses on maintaining jobs. and luxembourg, hammond outlined his approach to leaving the e.u. >> we are just about to discuss weaving the e.u. and the article 50 letter that we have sent. but it is a negotiation and as we go into that negotiation, my clearview and i believe them at geordie of britain -- my clear view and i believe the majority of britain believes we should protect job growth and prosperity. in simon joining us kennedy and still with us, pierre lagrange.

simon, what did we learn about brexit? seven days since we had that cute upset in the election. is it soft, hard, or scrambled? pragmatic.keyword is elements of the conservative party are pushing behind that word and that agenda, are going to get stronger. whether they lost or not remains to be seen. hammond andm philip perhaps amber rudd, ruth days -- ruth davis of scotland on a brexit that focuses more on trade and economics and economic security whereas before the focus was on sovereignty and immigration. francine: how do you see this all going? i do not know if there is maybe wishful thinking and markets that we have a much softer brexit, it does not necessarily the case. pierre: i think the markets are

relieved that she did not go ahead with an agenda nobody had mandated her with. it was difficult to understand when the head of the cbi is telling you we cannot run the country with your immigration policy, and that you keep going ahead as a remainder campaigner. with a soft campaign taking the lead more than the hard brexit are from the beginning. i think there is a relief that we will not get that kind of -- that was happening in a vein of narrow leadership. that, what the chancellor said today is absolutely perfect. it is not a mandate that was given by the electorate a year ago so in order to be able to negotiate and got to parliament, and to get basically a consensus , i am not sure how that is going to work. the markets are probably not going to be happy for so long

because it will be very difficult to get anything done with no real majority and not a really clear mandate so it is very confused. tom: i guess from our interviews that mr. bernier's front and central in europe and i talked to matt miller as well. what is your response to all that has occurred in the united kingdom over the last 10 or so days? do we just let the united kingdom hang? see a fairink you amount of bafflement and that spills over into irritation. it is a year next friday since britain voted for exit and it has been britain that delayed the start of the talks. first they had to elect a new leader and then theresa may she needed time to form a plan, then the legal wrangling of whether she had the power to start brexit. then she has an election so we are 52 weeks away from the referendum and in that time, the europeans have gotten their act

together. they have been very methodical. that likes to fracture and there is a great deal of union of what they want to go into those stocks. they know there is hard deadlines, march 2019, but they want the deal struck before that. michelle barty a spoke earlier this week about not much -- mic hel barnier spoke earlier this week about not much time. how they change remains to be seen. they used the election. are to toughen up -- election period to toughen up there negotiation strategy. francine: what does it mean for hedge funds, and investors in london and the u.k.? soft, referendum, hard, or whatever brexit we get? pierre: i think we will see more

cracks in the domestic economy. a lot of people in britain were saying, it is not that bad. everyone who says brexit will be a disaster, look at the economy. you are starting to see the effect on housing and transactions and the real estate market is completely frozen. you will see domestic economy cracking so there is a lot of potential opportunities for us also to start seeing things falling off a little bit. i think what is interesting is that you have the barnier message and macron and merkel message. europeot forget that outside of the u.k. does not have that much interest in the u.k. doing well. it is not in europe's interest of a very weak and messy u.k.

i think they will be more conciliatory and of course behind closed doors from a negotiation point of view they can. i am not that worried about a european reaction. francine: thank you, simon kennedy and pierre lagrange stays with us. we will be asking him about the future of hedge funds. later today we hear from the london deputy mayor for business , 5:00 p.m. in new york and 10:00 p.m. in london. ♪

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tom: good morning, everyone. bloomberg surveillance, from london and new york. we are going to really look at washington in our next hour. right now we look at hedge funds and a good person to look at them with his pr lagrange with man group. -- pierre lagrange with man group. changed world, to say the least. our hedge funds going to be the same hedge funds five years from now that they were five years ago? pierre: absolutely not. ago tore not five years 10 years ago. that is the capacity of the industry to innovate and to basically move forward. i think what you see happening right now with the last 10 years is exactly going in that

direction. it is changing and morphing completely. tom: within the structure of how you make money in hedge fund, and i understand that 2% and 20% of the gain, can the math work and the investment strategies work given low yields? you could do it in a 12% or 15% return environment. and you do it in a single digit? pierre: you can. you have to be reasonable that some of the returns are not bayer, but they can't does are there, but-- are not they can come back. whether it is hedge fund or active strategies, we have been on a trend with central banks and interest rates and with the liquidity. hasine how all of that

caused the returns of asset classes. liquidity tends to overwhelm the returns. the european central probably come to september next year when they will start voluntary tapering. you can differentiate because there will be more room for returns outside of that. tom: we are going to run out of time here. thank you so much for being here today. francine and i would like you to wander back to surveillance as soon as you can. coming up, the conversation with the chairman robert eiger of his challenged disney. this is bloomberg. ♪

♪ tom: good morning, everyone. tom keene in new york, francine lacqua in london. let's begin with our first word news. taylor: president trump is

expected to start rolling back the obama administration plan to open relations with cuba and will announce the ban on american companies doing business with cuba's military. thosections will prevent planning education. bob iger wants the u.s. to face the first -- anniversary of the opening of disney's theme park. >> it is a priority for us as a company that pays a high corporate tax rate, that america get competitive with the rest of the world. taylor: he told bloomberg taxes are not the only issue, trade and regulatory matters are also issues. hopendon, police say they the death toll from the high-rise fire does not reach triple digits. 17 people are dead that many are missing.

as they have for more than a century, republican and democratic congressional teams played their baseball game last night 36 hours after a gunman opened fire on a republican practice, wounding five people. about 20,000 fans showed up. democrats won 11-2. 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: this is the new york times this morning, in this photo, it is a little hard to see but this is the heritage of the country. these are the politicians doing their prayer here in the center of the field. radio,f you on bloomberg you know the los angeles great steve garvey, he was a great player. all of these people are around

their hero. this is really cool. francine: it is a great picture. thank you for that. greece's creditors have agreed to release 8.5 billion for loans in athens. the deal was not enough to get the international monetary fund to agree to lend to greece. a senior scholar and former imf executive board member joins us from athens. we also have vasileios gkionakis. what do you see as the biggest risk to the greek economy? it seems that is getting a little better, we have an agreement, probably not the best but at least it is something. chose to ignore warnings that the europeans were not wishing to reopen the question of greek debt relief ahead of german elections, so

predictably he was forced to accept pretty much the same deal that he rejected last month including conclusion of the review. in the program in principle without financing, but no debt relief and no quantitative easing. the only difference is that some of the debt relief parameters have been fleshed out further, but not enough for the imf to declare the greek debt sustainable, or the ecb to include the bonds in the quantitative easing program. francine: how sustainable is it for the greek economy? miranda: greece does not have any -- and immediate need for that relief because we are still going through the 10 year grace period that was offered to greece in 2012, so it lasts

until 2022, during which interest the european creditors is capitalized. so this is what the germans keep repeating, that this is not a time we would prefer to wait until greece delivers on its commitments under the program before we decide on the exact debt relief parameters. tom: wonderful to have you with us today. i look back at your work with the administration 25 years ago, your work in pennsylvania, and i believe all the mathematics says there has to be a price to pay. do you see any indication the creditors want to cut their bond valuations to help greece? is anyone going to do a cram down in this process? miranda: europeans have said repeatedly that they do not accept a haircut on the debt. the only thing they will accept

is maturity extensions and possibly some interest rate reductions through swaps. the cost of which will be born by greece, not by the creditors. tom: is that feasible? mr. y plus inith geneva, that there has to be a haircut? miranda: that would be the best option available, but obviously this is not acceptable to creditors for obvious reasons. possible tot is make the debt sustainable just by pushing the repayments far into the future. yesterday zero group has agreed -- yesterday's euro group has agreed to extensions up to 15 years. they have also accepted to look at the profile, the repayment profile of the greek debt and

utilize program funds in order to smooth out the repayment schedule and make sure that debt payments do not exceed 15% of gdp over the medium-term. francine: miranda, thank you so much for joining us. let's get to our guest host, vasileios gkionakis. he is from unicredit. when you look at the greek situation, could they have reached a better deal? vasileios: at this stage, no. , ifas actually implemented the matter had not dragged for ages and ages i am pretty sure greece would be in a much better position than it is right now, but at this stage, no. the haircut is out of the question. there is no way the creditors, especially from the political side but on the economic side would be willing to accept an outright haircut.

expect now iscan extension of maturities and some reduction in interest rates but you have to bear in mind, they have to deliver. francine: should we worry about it until this is settled? vasileios: so far, the history that we have to judge this thing is definitely somewhat uncertain. it definitely raises concerns about the ability or even the willingness from the greek side to deliver all the things it has promised. i am optimistic by nature. i wish greece the best but i certainly have my concerns. tom: within those concerns, what is the timeline? does this just grind on for one year, five years, 10 years with greece gdp flatlining? is that the future? vasileios: that cannot be the case, largely because the way i see it, and when we go back to the issue of sustainability and

non-sustainability which has implications for years of hardship and the welfare, the important thing to remember is not really the extension of majority, -- maturity, not really been reduction in interest rates that greece is paying, which is helpful nonetheless. it is actually growth. the minimum that i could expect from greece is that over the next two to three to five years, we should see a return of growth in greece because that is pretty much the only way that the greek debt profile can become sustainable and that welfare can be improved. tom: i understand the growth has to be there. the seed of preconditions for real gdp growth in greece? i do not see them. vasileios: that is true, it is difficult. the targets for the primary surplus mean that it is going to be quite binding of the short to

medium term. i have to say, at least we have seen the trust and if you look at it from a mean reversion perspective you should expect some growth returning, but for that to happen to have to be a number of preconditions. there has to be political stability, much less uncertainty, and stability on the tax front. i am hopeful that we will see them but as i said, i still have my concerns. you so much,nk vasileios gkionakis of unicredit stays with us. coming up later today, bloomberg real yield is on the road, live from black rocks trading field -- blackrock's trading field. they give us their perspective in the fixed income market. that is at 5:00 p.m. in london, 12:00 p.m. in new york.

this is bloomberg. ♪

♪ taylor: this is bloomberg surveillance, i am taylor riggs. in europe, car sales rebounded back last month. dealer sold almost 8% cars in may after sales fell 7% the month before. fiat models such as the 500 and panda, and mercy 80's cars -- mercedes cars were the big winners. plans to file for bankruptcy as soon as next week. according to persons familiar with the matter, takata will seek local relief first and then the u.s.. disney's ceo bob iger calls it a

first for the largest economic -- entertainment company. he spoke about his company's performance in shanghai. ande wanted to break even today is the end of the first year of business. this will break even. that is an extraordinary achievement. i am not sure we have ever done that. meanwhile, he called on congress to reform corporate taxes and says america needs that to remain competitive. that is your bloomberg business flash. francine: in the u.s., special counsel robert mueller moved to investigate whether donald trump sought to get the fbi to back off on the probe of his national angered secretary has the president. tweeted -- and they talk

about obstruction. kathleen hunter covers u.s. politics along with vasileios gkionakis. kathleen, thank you so much for joining us. bring us up-to-date of what will happen next. are two nexis is of activity in the justice department, where robert mueller is in the midst of his probe of trump's conduct. there is also a number of congressional probes going on, and we had a story about the senate judiciary committee ramping up its investigation into trump and into the russian meddling allegations. so senate intel is also looking at that, house intel so there is a number of panels doing probes. tom: we are beginning to see

what we see in every administration, which is not one thing or even three things, but it seems this weekend we are going into 5, 6, 7, 8 things. what is the level of sweat in the white house into the weekend? kathleen: it is definitely ramped up and you can gauge the level of concern in the white house by the intensity of trump's tweets, and we saw him lash out yesterday at the latest allegations that were published about him being part of the investigation, calling it a phony story. i think that with these different investigations all happening at once, you will definitely see more concern in the white house. tom: is it the reality that the dictating what the justice department is to do? kathleen: that is definitely an interesting question. we saw the deputy attorney general cautioning, issuing a

memo cautioning people to -- anonymous allegations. i think that definitely goes to your point and seems to indicate that the white house is somewhat dictating what the justice department should be doing. tom: this statement we saw last night, i have never seen anything like this. exactly what iis want to ask kathleen. her people getting used to this end of the into this? kathleen: it is almost like a drip, drip every day. it is all unprecedented and unusual. we are getting used to the lack of normalcy. francine: at one point should markets actually take notice of this? we talk about geopolitics and politics in the next 12 months permeating in investors' minds. having to deal with all of these probes and leaks and memos?

vasileios: you are talking about uncertainty at the political level which is almost impossible to predict. i think the market should start getting worried when we see spillover effects into general global growth and global sentiment and global trade. i do not think we have started seeing that now. it has been leveling off of the past couple of months, so in general the markets have been relatively quiet. i think the fed is doing the right thing by keeping a steady attitude, a steady hand because if they had blinked i think they would have spooked the market and potentially a selloff. francine: give me a little bit of context into this. i want to go into our morning must-read, stephen dennis saying -- we are not the fbi, we are not the department of justice, we are the legislative branch. it is appropriate to do oversight to learn how to improve policy and terms of

whether any offense occurred. that is within director molars purview. in fact, we could end up harming the investigation. is it difficult to what it used to be in the past? kathleen: i think we are seeing a level of congress which is controlled by republicans trying to use its legislative oversight challenges and making it clear there will be a check on the administration because there are electoral complications -- considerations and they do not want to go easy on a president who might have done something wrong. francine: vasileios gkionakis, thank you. if you are a bloomberg user, go to tv and this is how you watch us because you have some cool graphics and analysis that tom keene brings us up for. you can see some of the headlines we have been talking about and the names of our guests.

you can also click here and ask guests a question directly. this is bloomberg. ♪

♪ francine: this is bloomberg surveillance with tom and

francine from london and new york. let's talk about oil, heading for his longest run of weekly losses since 2015. the global glut is putting price pressure, and climbing to the most in four years. bloomberg oila strategist as well as vasileios gkionakis. how much are you looking at shale producers in the u.s. to find out what the price well is doing? >> clearly shale producers in the u.s. are having a big impact. prices are rising much more than people thought. with the current wti forward curve averaging around $46 a barrel over the next 12 months, they see that is still being high enough to keep shale production growing, and this is one of the big problems that opec has not gotten to grips with. tom: this is oil, this is a

messy chart. for those of you on radio, you are lucky you are not seeing this. it is moving averages of oil and it tells me we are not there yet where oil has rolled over. is that the zeitgeist you see from the desk in london? julian: i think so. athink what we are seeing is great deal of nervousness at the moment. tom: agreed. julian: that there is no rebalancing insight. if you look ats, the total picture of crude plus products, those are still growing. the glut is shifting a bit from crude into products, but it is not going away. we are still way off to seeing a rebalancing. francine: julianne, thank you so much. let's get back to vasileios gkionakis. how does commodity prices impact

currency, apart from the ones that are clearly directly linked such as the russian ruble? is a very i think it interesting question because this year we have seen quite a significant rotation away from commodity effects in the first half of the year towards very much eurocentric currencies, and i'm not just referring to the euro. i think it is an interesting, all of this conversation about oil because we are not really seeing a rolling over of oil prices. we are not seeing a rolling over of commodity prices and as a result, traditional bellwethers seem to be holding up ok-ish against a relatively weak dollar. i think the reason for that is we still have a relatively healthy or solid local growth

demand. outlook from here, i still expect some rebounding commodity effects in currencies because i'm a believer in the global growth outlook and we will see prices gravitating higher. i also think that rotation toward eurocentric currencies will outperform because eurozone growth is here to stay. tom: let's rip up the script. taylor riggs in the news talked about better auto sales in europe. are they on the rebound? will they give us trump 3% gdp we cannot do? vasileios: the eurozone has a notof rigidities and it is the economy to expect it will gravitate from 2% to 3% within the space of two or three quarters. weekly eurozone is moving forward. i think growth is returning in a

sustained way. the dispersion of growth rates across the different countries within the eurozone is now very small, and that is something that draghi has alluded to. we are seeing a rebound in spain and italy. we see france and germany powering ahead, so i think a rebound is quite sustainable and it is coming to a certain extent by domestic demand. tom: thank you so much, vasileios gkionakis with unicredit. we have so much more coming up. a wide set of news out of washington, including something that has been buried, the debate on health care. libby cantrill joins us from pimco. this is bloomberg. ♪

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♪ tom: this morning, you are warned.

you should exercise caution. the department of justice warns "americans" about alleged sources bearing anonymous allegations, we can either confirm nor deny the statement, it is from the white house. kevin cirilli will translate. forget the trump soap opera. the senate is considering health care. ofspeak to libby cantrill pimco. and the lost decades of japan, japan is running out of economic time. good morning. this is "bloomberg surveillance" and we're live from new york. i am tom keene and in london is francine lacqua. francine, this story on the fire, you are involved with it. you have been near the tower. it has not stopped. it is so sad. francine: it is sad. anger is growing. know so far that 17 people

have been confirmed dead but it could rise to more than 100. we understand from firefighters and people on the ground that you could be able not to recognize some of the people who died in the blast. this morning, more more news of does green felt how were -- greenfell tower's materials were not allowed in the u.s. here is taylor riggs. taylor: starting with russia as they may have killed a leader of the islamic state. they said are verifying that al-baghdadi was killed late last month in an airstrike and the de facto capital of syria. other commanders are said to have died. if it is true, killing al-baghdadi would be a military success for russia. the pentagon is taking steps to break the stale cake --

stalemate in afghanistan. hastop american commander said he does not have enough forces to help afghan troops stop the taliban. the special counsel investigating russia meddling has expanded his probe, according to "the washington post," robert mueller is investigating the finances of jared kushner, president trump's son-in-law. at first he was being investigated for his meetings with russian ambassadors. the big bang of japan cannot get the inflation to 2% and they've decided to keep the monetary stimulus in a place. they will keep trillions of yen worth of bonds. 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. francine? tom?

tom: not much going on all the know but futures are up three. the curve is remarkable. a lot of stories and research on the flattening yield curve and maybe we will talk -- touch on that. oil cannot get out of its way. that is all i have got this morning. francine: i am looking at yen and a weekend -- and it weakened. traders are trying to digest a more hawkish tone struck by the federal reserve. tom: what i have is the new bloomberg "business week" african about tim cook's interview, we do not care. we care about this of our washington bureau has a chart of the week inside of this bloomberg "business week" that have to do with chair yellen. this is cell phone deflation

permit i did not know this chart existed. thank you. it is cell phone deflation, it has been cut in half from 20 years ago. what is cool is it is about the phone companies, the duopoly scum of the try all police and the blue circles are lower lis and-- of the duopo triopolies in the blue circles are lower prices. i have not seen the cell phone deflation that chair yellen next talked about. francine: here in europe, it is a different story. surges had a good handle on it. tom will put it on social media. let me talk you through it. a very simple chart but what it shows you is european companies that get a majority of their sales in their region are

outperforming peers most dependent in the u.s. and this is the first time it has happened in a year. visit the eurozone basket versus the morgan stanley u.s. basket. visit shows -- this shows that. tom: thank you. this is a joy. getting the ready for the weekend. we will get to kevin cirilli in a bit on the soap opera permit -- a soap opera. libby cantrill joins us from pimco, are you distracted by the soap opera? libby cantrill: every morning, you wake up to another news story. you are right. even washington policymakers are trying to focus on their agenda. they want to see some action on tax reform. there is a lot of distractions. tom: over to the so barbara of the house -- soap opera of the house bill and they were

appalled. what is the senate to doing? the senate and the house passed the health care bill in the senate is working on it. not many senators know what will be in the draft. and for good reason. mitch mcconnell, majority leader of the senate, he knows how to do this and he is trying to prevent annually so is trying -- prevent any leaks. tom: i remember when there were committee meetings as somebody brought in a gavel and bring it to order and let's talk about health care. libby cantrill: if you go back to the obamacare debate obamacare took about a year from when it was introduced and signed into law, 100 hearings in the senate. as very recently, we saw that process working. this is hard for the senate and mitch mcconnell realizes it. it is still unpopular. it is about 20% popularity

rating. they feel they have to deliver on something. they are stuck between a rock and a hard place. do they pass a pretty unpopular bill or do they not do anything or fail on a bit campaign promise? it will be quite difficult. question,just a broad do you believe there is more appetite in congress to push things like this through so that there is not so much press focus on testimonies and leaks in the likes? libby cantrill: for sure. members on both sides want to show they can govern and they are fulfilling their duties to the american public. it is difficult when they news , especiallytracting with the white house and the president coming out against some of the positions on

legislation. as tom alluded to be health care bill more recently he was very supportive of the health-care bill and then he said it was mean. members of congress are trying to stay focused and the pressure is on them to deliver. is a difficult policymaking -- it is a difficult policy making environment. francine: is there anybody the president trust? : i think hisl efforts on the democratic side has been less fruitful, unfortunately, a lot of americans like to see bipartisanship. that it doesn't really exist right now. he is, from all alleged reports, is talking to republican leaders. tom: do they have the votes? libby cantrill: i don't think they have the votes right now. tom: what does mitch mcconnell do in kentucky? they lost their obamacare.

what does the leading a guy in the senate do with that part of america is poor, devastated, what does he do? to mycantrill: it goes point, it is a very unpopular bill. i think people, at the end of the day, they kind of like obamacare. yes, they think it needs to between but they like -- tweaked but they like the fact they are getting coverage and relatively affordable prices. i think what mcconnell will do is call a vote regardless. dispose of health care before they can move on to tax reform. i think he wants closure. tom: the senator from kentucky withpaul broke our hearts a congressional shooting. he is in the health care bill. where does he stand on health care with his senators? libby cantrill: senator rand

paul and senator lee nobody has publicly said they have seen it and have a view. from all indications, it looks like senator rand paul is not supporting where the senate bill is leading to. get reminder, they need to 50 or 60 votes. -- 50 of 62 votes. that is very difficult. tom:. with -- libby cantrill with us for the hour. the president will give remarks about cuba and our policy there and kiss changes. -- his changes. look for that and our 1:00 hour. stay with us. this is bloomberg. ♪

taylor: i am taylor riggs. let's get to business flash. a group led by japanese investors have offered $19 billion for a unit, according to people familiar with the batter -- matter. they have the approval of two bank back to groups. it is reports of that a european bank will find google. the feynman -- the fine is expected to be larger than the one imposed on intel and that was $1.2 billion. wants theey's ceo u.s. to fix the corporate tax rate sprint he is marking the first anniversary of the disney

theme park there. >> a company that pays a high corporate tax that the united states against competitive with the rest of the world and we are not. taylor: eiger said that taxes are not the only matters and trade is important. that is your bloomberg business flash. tom: thank you. libby cantrill is with us from pimco and whipping talking about health care policy. now we talk about the history of the nation. night, an extraordinary statement from your department of justice, the deputy attorney general with a formal statement from the department of justice. here is part of it.

libby, this is not in my civics books of a long time ago, i would respectfully suggest is an original statement from our judicious body. libby cantrill: this is very unusual and we are all speculating about what it means. are they referring to a new story that will come out of a foreign body? we do not know. tom: what is the destruction of this policy? finance,e gdp markets i think pimco is involved in it as well, from it comes policy. what we put up on the screen, the shocker of last night, does it debit gdp and nominal -- dampen gdp and nominal gdp? have seen all: we

lot confidence after president trump was nominated. you are seeing expectations for what congress can do from a gdb perspective declining. i do not think anybody anticipated that trump's administration would be a headwind to growth. potentially, it could be if confidence falls and the stories plague the policymakers that are supposed to be doing some things progrowth. joins usn cirilli after the baseball game last night. on the story on the statement general, doattorney you expect fireworks from the white house or from any other body? kevin: yes, i do. the president has to miami what he will return at about 2:30 and he is not going to mar-a-lago this weekend as you would've assumed the proximity with him in miami.

this white house feels the pressure to have some type of strategy. the reports continue in the conversations i have with those in and around town connected with the white house with speculation there could be a shakeup that is imminent sometime within the next few weeks. tom: i will go with that. forget about the speculation, scandal and all of that, can you assume the statement that mr. rosenstein put out was dictated why somebody at 1600 pennsylvania avenue? can assume he is working in conjunction with the president's attorney. that, of course, could be interesting. simply put, there is some owitzption that mr. kas can have a more cohesive strategy than others are giving him credit for.

francine: what we know about the president's state of mind? if you feeling in high spirits -- is he feeling in high spirits or demoralized? steve scaliseted whose condition is improving in the hospital following the shooting and he released a video of the congressional baseball game. and, you know, he wants -- he is going to miami to rollback regulations on cuba that were eased under the obama administration. this week he signed directives regarding apprenticeships. they are trying to put out they are moving forward and there is no question of the reality of the russian probe. on mike pence hiring this veteran lawyer, what do you make of it? kevin: i saw it. i spoke with some political andit types about that this

i think their perception is everybody in washington has a lawyer. every body in does every politician has a lawyer and they would not -- every politician has a lawyer and they would not make too much of it. francine: thank you. for -- kevin -- kevin some really. we are back with libby cantrill. coming up, we speak with the john vail and and a lot of news when it comes to oil and boj looking at central banks and brexit. the negotiations with the eu doing to start on monday. this is bloomberg. ♪

francine: this is "bloomberg surveillance." we have to go back to brexit and theresa may's conservatives have reached an agreement. reports at the dtp is not calling for the u.k. to stay. let's focus on the economic challenges of all of this and the current condition of "bloomberg businessweek" has which businesses have the most at stake from the negotiations. they found many parts of the country most a dependent on trade is -- we will speak to sam kennedy who oversees -- simon kennedy who oversees brexit coverage for you congratulations .

if you are regular listener, click on her website and have the infographics in full exposure. and shows depending on, what does it show? you can be regretting in certain parts of the country for voting. >> it shows at stake. model, what it shows is the areas of the u.k. which voted for brexit and depend on manufacturing and foreing employers. two areas that could be hit if theresa may fails to get the trade deal that she talks about. if she does not that the deal or brexit talks end, big employers start to look elsewhere on do not invest in a more. -- any more. hammond said nobody

voted for brexit to be poor or less economic secure. reckis very much a ready oner for theresa may. is it going well? jobs are dependent on what she negotiates. tom: there are charts and i will go to it because you play cricket years ago. this is birmingham, jaguar, land rover, nestle, toyota, we get down to the granularity of the jobs at risk. how many jobs are at risk? simon: in theory, for finance to carmaking, look at the big employers that you mentioned all of them. all of them are in the u.k. k and deadlocked because they provide a great launchpad to trade in the eu and if that is

put in the jeopardy, certainly, they will have concerns that a ripple through into the economy. francine: simon kennedy who leads brexit coverage and he is trying to stay on top of what goes on with the implications. we are back with libby cantrill and she stays with us for later, we hear from london deputy mayor of business. we will be asking him about tech and inflation and we will be asking him about the horrible fire that we saw earlier this week. this is bloomberg. ♪

francine: this is "bloomberg surveillance" from london and new york. we have a time for brexit negotiations to start, next week in brussels and they will star

at 11:00 central european time, 10:00 london time. we understand that the commissioner and the brexit minister will brief the press around 5:00 p.m. london time on monday. we have a little bit of a timetable and we get briefed six hours later. tom: very good. it will be interesting. a little bithave of news from the russian central bank and we will get to it in a bit pretty straight to bloomberg first word news. here's taylor riggs. taylor: russia claims it may have killed the leader of the islamic state. they said are verifying that al-baghdadi was killed late last month in a russian airstrike near the as low make de facto capital of syria. other commanders are said to -- the islamic de facto capital of syria. other commanders are said to have died.

president is expected to start rolling back in the oh obama's administration to open relation cuba.ma's relation with those restrictions would also prevent individuals from planning their own educational trips to cuba outside of educational tours. meanwhile, officials in london said they hope they'll fire death toll does not hit the triple digits. as they had for more than a century, republican and democratic congressional teams slated their baseball game and this took place or to six hours after a gunman opened fire on republican practice. about 25,000 fans showed up. the democrats won, global news 11-2. 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? francine? francine: we are getting breaking news from russia and this is what we are seeing, the russian rate decision and they said there is space for cutting the queue eight. for the moment what they did was lower the curate, 9% interest rates. it is amazing how russia has such a different picture because of food prices to be rest of the world. russian bonds and the market reaction are steady after the russian rate decision because it is what we were expecting. tom: you wonder if it is a frontier economy? or what? we will wonder. we wonder where the real rate is. we will bring in john vail, chief strategist at nikko. he has spent decades not only on the economy of japan, where is

the yen but on the culture and the society on a japan. -- on japan. wonderful to have you. the massivepdate on divide between tokyo and urban japan and the rest of the japanese people. are they as polarized as americans? john vail: not quite. the urban population is quite usually from the rural population. it is not that huge of the divide. it is not a huge cultural divide about what is proper to be japanese as in america right now. tom: we treasure your perspective. bring up the chart of the drama of 40 years. it is japanese blue from 1980 up to 1995om from 1980 up and john, we give up the ghost.

back in 1994, animal spirit. why did it happen? why did we roll over five or six years ago? john vail: abenomics has improved dramatically. it has been a very long slug where people have been fighting against the pessimism and the strong yen. they are starting to pull out. tom: acan you saw the -- by policy or only by democratic revolution? john vail: that is a key point for it would help to have a bigger demographic profile going forward. it will be a big job to convince people to be more optimistic in because -- in japan because they have a natural since a conservatism. francine: talk to me a little bit about what the boj can do to

not talk about the markets? john vail: they don't really have a plan to exit. they do not want to talk about it because they do not know what they wanted to do yet. it is difficult, more difficult for them than even they ecb or the fed to talk about exiting the markets because they are so aep into market with owning large portion of their own government bonds and ejecting marty -- money. rateine: how would you governor kuroda, he is really pushed the boundaries. will he be able to find a way of getting us through this? pretty smart is a cookie and he is shown to be quite inventive as well and moving to the why cc where

basically they are fixing the long bond yield is quite a big invention in the world. lot up his sleeve and that seems to work in terms of tapering qe and they are not buying as many bonds as they used to be because people feel the long bond will be fixed. have were you get everybody together globally. where is pimco with a japan? -- with japan? libby cantrill: our review is the central bank, the boj has done everything they can, so creative. not into the time for the fiscal authorities to step up and we did i know if we will say the fiscal expansion. we seen for monetary policy perspective, they have done a thing they can do and every conventional -- unconventional monetary tool and it is time for the fiscal authorities to step up.

first event thank you, libby and john vail is -- francine: thank you, libby and john vail is with us. roadg up later, on the live from blackrock, jonathan ferro talked to a number of people. including a firm that has 5.8 trillion dollars in assets. this is bloomberg. ♪

taylor: i am taylor riggs. let's get to business flash. in europe, car sales bounced back. dealers sold almost 8% more 7%er sales fail 7% --fell

more. the big sellers are the mercedes revamped e class. the japanese air back matter behind the biggest -- airbag matter behind the biggest recall will file bankruptcy. they will file chapter 11. deflated have been blamed for 17 deaths. ceo disney bob iger called it a first and spoke to bloomberg about it being part in shanghai. -- theme park in shanghai. said we hoped to break even and i confirm we will. today is the end of the first full year of business and this would break even. it is an extraordinary achievement. i am not sure we have done that area we surely have not done in the last 30 years. called on america

to revise the corporate tax rate. that is the bloomberg business flash. tom: thank you. with maybe the exception of the massachusetts institute of technology, know whether the country that knows the math of our tax dynamics like donald marin out of harvard and his work with the council of economic advisers, donald joins us from the urban institute. you know the math like no one. what is the math you are focused on and tax reform? donald: the big story is everybody likes to talk about the ice cream. tax cuts and expanding deductions. we need some way to pay for it or the decision not to. you have seen a lot of action in congress to pay for real tax reform and the border at adjusted tax is the most prominent example.

what we are discovering is that is hard if you want to pay for a tax cut for people you are asking to contribute, they notice and complain more. tom: somewhere this weekend, there will be a barbecue and somebody will complain about the high obama taxes. we have to get taxes back to normal, is that a valid question, a valid statement? donald marron: normalcy is in the eye of the beholder and everybody is over where it should be. some people thing normal is in the 1950's and 1960's or maybe a decade or so ago. along withhat came president obama, many other tax increases was with the expansion of health care. we see that, the health a discussion and whether congress was to illuminate those taxes while dorothy -- once to eliminate those tax -- wants to eliminate those taxes while

doing health care and ways to pay for it. and perturbae you are the ones doing the math. earlier this week, bloomberg surveillance spoke to vinn we bber. she got together with the chip o'neill and ronald reagan and got something done in another time and place. will we have the photo opportunity again? donald marron: i don't think so. it was much easier to do and 1986al tax reform and if you're to accomplish which relatively and you could cut taxes on businesses and that was viable. today, and a lot of focus is reducing taxes on the businesses a you cannot increase taxes on people or cut spending and make that work politically. the interesting challenge is whether they decide they want to do it has cut their fundamental tax reform.

europe, -- here in francine: here in europe, we look to the u.s. to see what terms of equality and what tax reform is for repatriation. the u.s.o article save is where the rich is the richest, will it change? theld marron: if you take tax plan as laid out, a lot of the tax cuts go to people on the high end. for the tax reform debate -- health care debate, if somehow the undoing attacks -- health reform happens, it seems unlikely, a lot of the benefits would go to the high end. if you cut taxes on corporation, not all of it goes to the high end but some to workers. francine: and looking at it going to the top 1% has doubled. do you have figures on how much

it will look set -- accelerate? donald marron: obviously, if the tax idea -- the funny thing is there is no complete proposal that pays for all of the cuts they want to do. if all because with through, you would see is inevitable's and after -- you would see a post in after income tax. after would see a boos in income tax. want to deal with income taxi quality, unique sustained growth and achieve it on that side. tom: vasileios gkionakis -- libby cantrill, you are nodding away talking about 1986. john boehner essentially lost his job, the speaker the house, trying to get something done with the democrats. is that is where we were headed out?

paul ryan will have to knock on the doors of former speaker policy? -- pelosi? libby cantrill: he might want to. president trump has an approval rating of 70% among democrats. what political incentive? -- approval rating of 7% among democrats. their base would beat them up. l on the gallup pol president trump, every point down matters. pros like you is saying it is not like a parlor game, it is like hollande in france. he has had a big disapproval ratings among democrats and independents. the republicans are disapproving of him at a much faster rate than they were. going back to his base relying and is that supports starts breaking, he has fundamental

problems. tell a bank we have with the with us, mr. marron. have one of the greats with us, mr. marron. how do we get parents to get their kids involved in mathematics? we have to make a fun. make real world examples that your children can relate to. case, she was were the first women who worked on wall street, she was teasing me about pe ratios -- it was great. tom: that is sick. that is like forcing libby cantrill to read "the wall street journal" when she was six. love to have you on. we will continue on radio in a bit. tv on your trading desk. bonus round. donald marron and libby cantrill a you can watch us live.

bring on the chart. the john vail chart on nominal japan. you can steal that chart for me. stay with us. this is bloomberg. ♪

francine: coming up -- daybreak and they have plenty to talk about and it will be with david westin and jonathan ferro. what do you have for us today? david: one of the things we will talk about is the president reimpose to miami to sanctions on cuba. and well carlos gutierrez and he was secretary of commerce under president bush. he was born in cuba and fled when his pineapple farm was seized. tom: that is wonderful. his balance on the cupid issues. you do -- on the cupid issues. david: -- on the cuban issues. -- david: he is republican but a

moderate republican. we will talk trade under trump. tom: look for that on "daybreak." our single best chart. it is a great chart and a great history. back to the time of lbj and the nixon, down we go, 20 of six. the clinton surplus rolls over to a massive deficit area -- down we go to when deficits. twin deficits.o -- the clinton surplus rolls over to a massive deficit. is it 4% or do we sweat and 6%? libby cantrill: i don't think we have one single number. if we look at this administration, there was an expectation you might get fiscal expansion and we would be adding to them and you saw that right after the election. i think as flirtatious have come

down said -- i think expectations have come down significantly. it might stay where it is. one of the debates of 2017, the bashing of alice rivlin and the congressional budget office. i think everybody knows i believe in cbo work, do you? libby cantrill: absolutely. members of congress, political expediency and sometimes they do believe when it supports their thesis and sometimes they don't. the general view on the heel is sepia -- hill is cob is -- cbo is very talented people and an empire in terms of scoring. that is the general view on the hill despite political comments. the politicalng

things we have seen over the last week, what do people inc. about president trump's enforcing what he promised on the campaign trail? today he is in miami talking about cuba. what comes next? libby cantrill: people in the legislative side wants to see action on the health care side, either abandon or pass it. they want to see progress and potentially infrastructure. i think there is a lot of doubt it will come to fruition. and there's aont lot going on behind the scenes. treasury issued a report and we are expecting regulation. tom: francine, i want to go to you. we have done too much on america. what is going on in the united kingdom this weekend into next week? it has been extraordinary 10 to 20 days or the history of the nation. the motion of the fire. what will the nation be thinking about?

-- the emotion of the fire. francine: the speech that has been delayed. this lays out what the priority for the government will be, what the legislation will be for the next parliamentary session. what it means is we hope to find out more about the disagreement of the confidence between dental reit's and the du p -- between the tories and the du p and negotiations that start with the eu. we understand a team from london will travel to brussels and negotiations start at 10:00 a.m. london time. and we will be briefed at 5:00 p.m. london time. and send they will at least keep us up to date. me ask a dumb american question, does jeremy corbyn have increased power? francine: a very good question.

it is one of the controversial is becausen the u.k. he did a so much better than expected and the tories did worse than expected. shouldf people said he be consulted in negotiations. he has no legitimacy. that is what we need to watch out for over the weekend. tom: have a great weekend. francine lacqua. thank you so much. this is been really interesting. we will continue with libby cantrill on radio as well. , a quite it is sort of report, but the never quite pretty look at dollar pace. stronger mexican peso. this is bloomberg. ♪

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jonathan: president trump faces another headache and decency, another inquiry into the firing of director james comey. talks will begin on monday after the u.k. voted to leave the european union. rates onkuroda leaves cruise control. good morning. this is "bloomberg daybreak, " alongside david westin and alix steel is away. features are marginally firmer up 0.1%. sterling gets creeping higher. treasuries are big through the week. for 2017.ur low david: time for mourning a brief. at 8:30, we will find out how many housing starts there were. the confuses is it will go from a decline -- the consensus is it will go from a decline