leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. tarde war. message rate war. -- a trade war. the nation is looking to form the 65th government since world war ii. how concerned should markets be about the outcome. we are live in rome. the prime minister's speech. can her speech ring rebellious mp's back to her side?

good morning, everyone. rome.s francine lacqua in business, finance and politics ahead of the vote. the head of the biggest business lobby joins me shortly. gdp figures,an which came out at 1.6% for the fourth quarter, the same as the preliminary reading. for the market check, let's get back to london and mark barton. mark: a good day to you. day downwn for the for the week, down for four consecutive days. the stoxx 600, 1% lower. investors just mulling over the big market news over the last 24 hours. the big announcement, the tari ffs hitting steel. donald trump said he would

impose tariffs of 25% on imported steel and 10% on aluminum. that's feeding through the markets on a global basis. the concern is we will see a tit-for-tat spat from the likes of china and other nations. comeiatory notions could to the forefront. the dollar is down for a second day after rising earlier in the week on the back of jay powell's first testimony to congress. the dollar coming back. the reason why is because of the potential for trade. friction on the back of these measures. the u.s. 10 year yield is up by one basis point today after falling yesterday. 1.8% is the field today. -- is the yield today. gold is up marginally today, but the prospect of more interest rate hikes from the fed

is putting a damper on gold prospects. francine: the bank of japan's governor says policymakers will start thinking about how to exit the rapid stimulus program in fiscal year 2018. has not provided any clear guidance for the timing of normalizing policy. the yen surged, while yields on japanese sovereign debt climbed. the u.k. prime minister will tie herself to a promise that leaving the european union will not destroy jobs. theresa may makes a major brexit speech. she's under pressure to meld together competing visions of brexit and in a telling detail that highlights are political weakness, may after ministers to allow her to make last-minute changes to the text. you can get the latest by going to tliv . jerome powell says he sees no

signs of heating in the u.s. economy, even if the growth outlook strengthens and the labor market tightens. he reiterated that the central bank will continue to raise rates only gradually to keep unemployment and inflation in balance. >> we see wages trending up a little bit, most growing at 2.5%. nothing in that suggests that wage inflation is at a point of acceleration. i would expect continued strengthening in the labor can take place without causing inflation. francine: global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. and this ishic bloomberg. francine: thank you. now, let's kick it off with the top story. markets are down across the globe after donald trump said the u.s. will impose steep tariffs on steel and aluminum imports. the official announcement is

expected next week. china said it will act to protect its interests and the european union said it will respond as necessary. reign minister has urged donald trump to reconsider. we will hear some of the reactions to the announcement. >> believe me, protectionism is a dead-end. trade restrictions address the symptoms and not the underlying problems. as chair for 90 said, the tariff approach is not the best approach. the best approach is to deal with people directly rather than falling back on tarrifs. >> we had a great steel industry at one time. we had a tremendous aluminum industry at one time. china has just run us out of business. they have basically stole the business. >> the steel industry has been in decline for about 30 years at

this point and it is imperative to take action now because the cheating continues and it continues on unabated. address theeed to unfair chinese practices, but we need to make sure we do not jeopardize the game we have seen here in america. -- jeopardize the gains we have seen here in america. francine: this comes ahead of the national people's congress in china. for more, let's get straight to hong kong with our chief agent economics correspondent, enda curran. what has been the reaction in asia? are they outraged, or taking it in stride? enda: no, there is quite a strong reaction here. with the markets, we saw a big tumble in share prices for aluminum and steel makers, especially in japan and south korea. we have australia, a key u.s. ally, saying this is

disappointing and south korea saying they want clarification. in japan, reminding that they are an ally. th ebig one is china. muted, oruit subdued, but they called on the u.s. to play by the rules. i think that is a holding technique. don't forget. we have heard from washington. let's hear what he has to say. actually, what can retaliation look like? do you think they will retaliate? and depending on the discussions in washington, which industry would be hurt? ugly ofey could get china wanted to. there is a feeling that perhaps at the moment they are happy to play for time.

something will come out of those meetings. they have had a few tensions and we do not quite know yet what they have put on the table in terms of concessionary offers. but if the u.s. rejects or except that, the ball will go back to the chinese court to see if they could respond. they could go down the route of targeting u.s. imports and do not forget, they are already looking at agricultural imports in the u.s. the u.s. soy bean, that is a product they could hit in a hurry. if it escalates beyond that, china could target u.s. goods, the iphone, as well as targeting chinese investment in the u.s. so, the feeling we had a big step forward in the trade rhetoric and an aggressive step up in trade regressions in the u.s. and china. -- up in trade aggressions in the u.s. and china. will see what they do

when they finish in washington today. francine: enda curran, thank you. mark, you can see stocks drop across the world. mark: let's talk about the impact on fx markets. thanks for joining us today, fx strategist from ing. ak the simplest of terms, week dollar --, or trade tensions equal the weak dollar? >> you have got the rest of the world growing, the structural deficits, the twin deficit, and expensive u.s. assets. you have heightened u.s. trade policy and geopolitical risks to contend with. that is a toxic concoction for any currency, let alone the dollar. mark: and those factors outweigh a possible more hawkish fed if we listen to the comments this

week by new fed chair powell. viraj: exactly. technical policy changes from the fed will not do anything for the dollar right now. if you believe the interest rate in the u.s. is between 2.5% and 3%, markets are pricing that in. so, anything that takes away from that, it is unlikely. we do not think there will be a massive regime change in the fed. focus on the long run structural multitier factors with the dollar. mark: what about the other countries who are in the firing line of the u.s. through these potential tariffs? i am talking about canada, who exports steel, metals. i am talking about the mining related countries, how would their currencies fair in the wake of these measures?

viraj: we would have expected the dollar to weaken against the , but there has been broad-based weakness against the canadian dollar and aussi, which you would not have expected. i think for now it will be contained to a repricing of u.s. political and economic risks. if this starts to get a bit more contentious and antagonistic, you will see a bit more divergence. mark: so much going on today, this week, this weekend. kuroda has taken center stage today, the boj governor. he says the boj will start thinking about how to exit this massive monetary stimulus program. it's pushed the yen up to its highest level in 15 to 16 months. it is still a long way away, isn't it? inflation is still half below the boj's target.

is this as big a deal as the market is making of it? viraj: i think currency markets, they like a bit of that, to see where currency is going. just the fact we are talking ,bout a potential mobilization that is going to start to get priced into the currency quite quickly. for dollar-yen, we have the risk that we get a throw back to the 1990's. 1990's have style anti-trade policy. mark: we will save italy and germany for our next guest, but let's check in with the ecb. we have done the economist poll. the suggestion is that maybe the early indications were that the ecb would say something in march, or tweak something. that has been pushed back now. is that the case? viraj: i think so. it does not help that eurozone data has lost a bit of steam. the story for the euro-dollar,

it is a move to 1.30. for the ecb, it is the path of least resistance. we have gradual strength for the euro. they do not want to let anything untoward any country. mark: up next, we focus on the italian election ahead of the big vote on sunday. we will look at what business wants, speaking to the director general, italy's biggest business lobby. day, governor mark carney, 11:00 a.m. do not miss that interview. ♪

francine: economics, finance and politics. this is bloomberg surveillance and ims francine lacqua -- and i am francine lacqua in rome. sunday's election -- the nation will be looking to form the 65th government since forward to. weeks of political uncertainty recbe burdened by the overy. joining us now to look at finance and trade is the director general. overobby represents 165,000 companies. thank you for joining us and braving the wind and rain. what do you want from the election on sunday? want from the

atection is a government th dismantles the reforms we have seen put in place. e expect we will have a government and this government will implement the reform process. experiencedness with the italian economy is having a good time. the economy is recovering. .e had a huge increase italian companies are changing and becoming more competitive. they are investing in innovation and skills, and looking for markets abroad. this is the cause of international demand within the economy, which is growing. also, this is the effect of the transformation process that italy has undergone in the last year. francine: but, it does not improve. why are they not part of this

recovery. >> [indiscernible] yesterday, we showed that we grew in 2017 1.5%. francine: what kind of reforms, do you remember? if you are in the italian business, and you are a big business, do you need more employment labor reforms, or do you need a flat tax? marcella: well, we both need some fiscal measures and structural reforms. if it is in porton, the reform must not be dismantled and must

be implemented. we have had reforms to the judicial system, which has been slowly improving. we need a government that covers. hand, we need a fiscal policy that took part in teh investment. we have looked through some fiscal measures. both have italian companies innovating and changing the race .nd becoming more competitive

francine: what are the skills required question mark is it for linkages -- what are the skills required? is it foreign languages? marcella: of course you need foreign languages. the company is not looking at the local level. but we need scientific and technical skills as well. skills,managerial too. we are watching a lot of schools and universities. we help them choose what is helpful for the labor market. francine: what would it take for a light of these companies to orest in abroad, invest at home. recovery isis

spread away from the demand. the domestic demand is slowing. grow,r a program to emplyment. european employment is decreasing. as far as young people are concerned, some measures have been put in place ab with fiscal measures. they have got to pay less contributions on that young w ork. then, we expect these measures will continue in the short-term. francine: how much damage would a hung parliament -- no government for a couple of weeks and months. i don't think we will

have that situation. we are looking at a developing trend through europe. germany still does not have a government. or, a new government. as well as belgium. but also in the u.k., when they have a government, they have a majority. it really is something that is a credit to the social stance. i do not think we will not have a government. economy will go on. , thank you.rcella with that, mark, back to you in london. mark: let's get more analysis ahead of sunday's vote. joining us now, the analyst from the eurasia group. your thought about the

likelihood of these sunday votes. >> i think the best we can hope for is the more incremental the fiscal consolidation, the little the reform, i'm afraid. does this mean the results have a potential to fundamentally undermine the economy that has taken hold in italy. probably not. does this mean italy will remain ia liability. are investors complacent about the outcome of the election on sunday. look at theare italian tenure spread versus germany. we are seeing some in-flight volatility pick up for the one week variety. are investors too calm about the outcome? >> there is a bit of nervousness, and their are two factors we have to

consider. will this load on the pace of economic growth? no. so, that is what the-year-old focus is on. -- that is what we euro focus is on. the passing of these events could be my sign of helief. mark: you are suggesting whatever the outcome the economy has brought forth. what is the most relaistic worst case though, for the e the likelyth forarios, which would make no measure of disruption, the biggest risk is the possibility of a eurosceptic, a populist government taking hold. a new -- i knew this was not

going to be likely. iraj, the other big political event takes place in germany. risksay that is a bigger than the italian election. would you concur? ? reomists ar working through this here. but they are not necessarily taking the euro low. tom: federico this vote, does it hold big risks. >> i would say so. there is a lot at stake here, not just having a government in germany, which is close, but also, eurozone reform. if there is no government in germany, that process will most likely stall. and i think there is a chance the vote could go the other way. francine: and if that happens during one of merkel's days?

>> i think that becomes an uphill struggle for her, to say the least. tom: and do we get used to the idea that most customers are loose formations. >> the political certainty does lose some steam. santi,ocico thank you. thank you. ♪

francine: economics, finance, and politics. this is "bloomberg surveillance."

i'm francine here in rome. markets are on the move. let's get to mark barton in london. mark: so much to chat about. what a wurl function to take us through the equity markets. germany's dax down 1.9% and you have the delegate vote over the weekend. will they rubber stamp the coalition pack seal between the two parties? italy down by 1.8%. the election taking place. france is 1.5% lower. down for the fourth day and first week in three. biggest since february 9. the euro is up a fraction ahead of the a, italian risk and b, german risk. and sterling ahead of teresa may's big speech. 20% higher against the dollar. we're seeing bond yields fall today and commodities decline as well and c.d.s., bond insurance, the final column. the t word, the trade word,

steel, the stocks remain in focus of after president trump said he would impose tariffs on imported steal and aluminum. for a long period of time expected to sign this formal order next week. the companies to watch are the ones declining the most. this is our functions for the stock 600. autos, are they going to be hit by the rising cost of steel and aluminum? ou have the likes of matel and others. only one industry group is rising, the food and beverage group and all down to the fierce of a trade war. will china retaliate? will the e.u. retaliate? will japan retaliate? will we see tit for tat measures because of the trump announcement yesterday. just to give us a sense of

where we are when it comes to risk, pricing and risk. this is the difference in yield between the italian and german tenure. close to you can see 1.3% right now. the low was 1.20 on february 7. that was the narrowest since september of 2016. last year ahead of the french lection, the spread widened to 2.8%. the sovereign debt crisis saw a spread of 5.25% between italy and germany and that puts it in perspective as does this, investors in the currency markets aren't losing sleep over the election. the premium or put options, this is a game of how much they hedge against the political outcomes, slower than it was headed to the french election n april and may last year.

risk reversals telling us the investors aren't as concerned about the italian election as they were about the french election the start of last year. francine? francine: so diplomatic. they're completely ignoring the italian risk. italy headed to the polls sunday with voters divided on policy and taxes and the relationship with the e.u. investors will be focused whether the winners will be able to navigate political deadlock and continue italian financial reform. joining me in rome is the assistant professor of economics at the school where he focuses on risk in the banking sector and debt. thanks for joining us. the financial markets are completely ignoring any kind of ugly or disruptive outcome. are they right to do so? guest: i think so in the sense the most likely outcome in this uncertain election is

ultimately the grand coalition and that's something that markets are positive in the sense of status quo. ven in the likely outcome of a larger win by the movement, in the last couple weeks they've changed their economic policies and become less extreme, more standard. that's also good for markets. francine: what does it mean for the banks, if you have a grand coalition with parties that may not see where the reforms are needed, what does it mean for structural reform the company needs? nicola: the italian bank depends on the european central banks. as long as the european central banks continue to buy bonds the banks will be if ok. francine: that could change quickly. nicola: the risk is when mario

draghi will be replaced and the chairman of the e.c.b. will take place. of course the only way to reduce them substantially is for the political economy to recover strongly and will depend on the policies that will be enacted. uncertainty about that but there was uncertainty even before the election and why the markets aren't reacting. francine: what is the flat line of 23% and what does it mean for the deficit and g.d.p. and how do you fund it? nicola: the proposal of a flat tax is unfunded. actually, the way i see it, the italian party know they will not be able alone to form a government. they will need a coalition. so in the last week they are promised everything and they even promise discounts for people who have animals, a flat

tax, income for everybody. so we saw a large area of promises that most likely will never be fulfilled. francine: talking about animals, for our global audience, it's a proposal of having free vets for your dog or pet every two weeks. nicola: exactly. n the last couple of years they've become a big animal lover. francine: when you see who will replace mario dawgy if a german is in charge of central bank and italy can't finish the reforms, what does it mean for the debt, talking 18 months from now? nicola: that's the scenario now, the head of the central bank, we have a country, italy, that the economy is increasing saw, bt and the prices we the scenario we should avoid as

a country. francine: if the economy doesn't keep growing, because it is growing a bit in 2017 was 1.5% higher and the numbers are getting better but not a lot of people see the benefits straight away. but if it doesn't get better very quickly will the country get it? nicola: the problem is twofold. on one end the economy is growing but sluggish and way behind the european partners. for example, it's a global downturn. the second is being distributed from 20 did 06 to today, italy is a country where poverty has increased the most. so sluggish growth is unevenly distributed, especially for young people or women. so that's a problem. francine: if there's a trade war and this is one of our big themes today after what we heard from president trump on steel and aluminum, what does it mean for italy, they're a

rich export economy, could they be the biggest loser in europe? nicola: definitely a threat to italy. most of the trade or italian companies is within europe. so in the sense i don't think it will be a disaster. those kind of policies will be very negative globally for the global economy in general. francine: do you see the emergence of a trade war globally? nicola: i think so. i think trump policies go in the direction and on the other end of the world in china we have policies that seem not very friendly towards trade, i'm thinking for example, the shares by chinese companies subsidized by the chinese government. . we could have much more tension. francine: thank you, nicola. stay with "surveillance."

plenty coming up including trump gets a negative reaction to introduce tariffs on steel and aluminum. we'll talk to an expert from the steel association. this is bloomberg. ♪

mark: let's get to our top story. the u.s. will slap steep tariffs on steel and aluminum imports in an attempt to protect national security. markets are lower across the globe. here in europe, jean claun junker said the e.u. will react firmly to protect its interests. the director general of the european steel soths joins us

from brussels. thank you for joining us today. what was your reaction to the rump announcement? guest: our action was very clear. we fully support the european commission in taking all the options at its disposal legally to counter the announcement of president trump. we still hope that the president will come to reason and rethink his decision of yesterday. mark: what options are at the european union's disposal within the confines of the w.t.o.? what options are at their disposal given trump's actions which he is going to take next week? axel: yes, there are a set of options possible. of course retaliation is an option. safe cut measures is an option as well as going to the w.t.o. for a ruling, and it could well

be a combination of the three of them. mark: when it comes to retaliation, what might retaliatory moves look like? is there a risk a tit for tat chain of events's takes place? axel: yes, indeed, the risk is of course there but this is of course a political decision, it's not upon the open steel industry to reply on what kind of retaliation measures could be applied. it is very important for us as an industry that we get the safe cut measures being in place in order to mitigate any potential impact, and all that goes beyond that in retaliation, the commission told us they will now look into this very carefully within the next few days in order to come to a decision. mark: mr. eggert, the devil, as

always the case, the detail, we don't know which sectors or countries might be exempted. what is your view on this? will the e.u. maybe be able to egotiate an exemption? axel: yeah, actually, we don't know whether we have the time to negotiate. our understanding is that the president has taken a decision for the moment to address all ports, meaning all countries but of course the option that was being discussed the last week to exempt certain countries such as the e.u. member states, even that option would mean that we would have huge trade deflection from steel exports to the u.s. from

other countries, which now would then be diverted to the e.u. market and to be a bit more concrete, when we are talking about steel trade flows, we're talking about last year almost five million tons of e.u. steel products being imported into the u.s. with a total of around 40 million tons. and of course, if the measure would address also the e.u. countries, we would not only have the deflection of our own product but we could risk deflection of 13 million, 15 million tons of steel from other countries into other open markets, and the nature of the open market globally is the european union and it's obvious we may come quick into a situation where we had been two years ago when steel prices were falling sharply and we had

closures and we lost millions of thousands of jobs in the steel sector. so here for our industry, either we address directly or indirectly and would have a huge impact on the european steel industry. mark: mr. eggert, what are the parts of trump's logic for this, is national security. he says it's justified on the basis to cut price metal imports, both american producers and national security . we've heard out of japan that they're going to challenge this. to what extent does e.u. steel challenge national security in the u.s.? axel: yes, of course. when you're talking about u.s. steel imports from the e.u., we're basically not talking about products that are a

concern of national security. maybe 3% or so of the european steel imports -- exports to the u.s. concern sectors of national security. but then in addition, the e.u. and the e.u. member states are the closest allies of the u.s., so why should national security measures address the european union? that is not understandable. but of course we have to go back to the root problem, and there we completely agree with the u.s. president. the root problem is the method overcapacity in china. china has built up steel capacities from the year 2000 of around about 50% of global production to today's 50% of global production and in just 17, 18 years. and millions of tons are put on the global markets by the

chinese and the conditions which are unfair and that of course is putting a lot of pressure on manufacturers around the globe, both the u.s. as well as europe has taken measures to dumping anti-subsidy measures against chinese imports. however, the problem now is that while stopping significantly imports from china, china is exporting to other destinations and the pressure is then intriguing to other countries which then are forced to take a similar policy to dump and to put volumes on the market which are not sustainable. and that is really the root problem, the overcapacity in china. and we need to address this together with the u.s. there has to be a global volume on the capacity with direction taken on principles and this of

course is to be enforced now. it's a voluntary agreement but however, we believe that together with the u.s., we can have a good option to enforce measures iples, the taken or announced now by mr. trump is not the right way and not in conformity with w.t.o. rules. mark: mr. eggert, thanks for oining us on "surveillance." axel eggert from the steal association, live from brussels. teresa may set to deliver a breakfast speech and will leaving the e.u. destroy jobs? will it be enough to address the critics? mark carney joins us exclusive, 11:00 a.m. u.k. time. don't miss that. this is bloomberg. ♪

mark: economic finance politics, this is "bloomberg surveillance." i'm mark barton in london. >> 3.8 billion franks has been taken and will sell assets in a

attempt to boost the biggest cement company and boost former swiss rivals. a group led by make rea ntreras agreed on an asset and will keep the company out of bankruptcy and the sale is at $500 million including the assumption of $225 million in debt. brexit would lead to an unprecedented food shortage if the u.k. leaves the union without a deal according to the c.e.o. mike coop said, quote, the impact of closing the borders for a few days to the free movement of food would result in a food crisis, the likes of which we haven't seen and is inconceivable there won't be a solution found. that's the bloomberg business flash. mark? mark: in the u.k., prime minister teresa may will promise leaving the e.u. will not destroy jobs and is a major speech and later in which the

cabinet was haggling until late last night and is expected to stick to plans for a tailor made deal despite resistance from the e.u. the focus on jobs is interesting because it's a slight evolution from an earlier position. guest: that's right. and if it sounds familiar it's because what the labor party have been calling for a long time and been calling that strategy a jobs first brexit is what they're aiming for. and this week it's fascinating to see what was left out of the comments. there is of course plenty of time for dissent when she speaks but no mention of trade in there and specifically the big argument of the week which has been customs union. maybe jobs include that and you might interpret it in reading between the lines that focusing on jobs gives to the possibility to come to a sort of customs arrangement and might not call it a union because we know there's a vote looming on this in the parliament and others think she may lose it.

we'll see how she tackles that question speaking later. mark: what's the risk by appeasing both side of the divide, you don't give clarity to the e.u. when they desperately are calling for it? david: she can only fudge the issues so long or kick the can down the road as has been said of her. the e.u. wants to know what britain wants. they'll look at the detail. we're told there's a lot of detail in the speech and she'll be talking 45 minutes or so. what was released to us last night was only about 600 words or thereabouts. there should be a lot more detail in there. the e.u. is craving it and businesses craving it. it's important for company to plan and invest and you heard the comments from the chief executive talking about the chaos that would ensue without a deal. hopefully this is her moment to give us that clarity. we'll have to wait and see. mark: tailor made deal, the excerpts suggest the tailor made deal. david: already rubbish. one said it was fantasy, having

lunch with her yesterday, jeanne-claude junker said cherry picking is not an option. so we'll have to see what the e.u. reaction is quickly from that speech and i'm sure will be coming in quickly. mark: david, we'll be there with you later. big day for us. david will be at the terminal looking at teresa may's speech as well as the reaction. we'll talk to the bank of england, governor mark carney and at 11:00, francine has the latest from rome as investors react to the news that trump will be basically leveing tariffs on steel and aluminum tariffs next week. this is bloomberg. ♪ francine: harsh tariffs on

aluminum and steel. italy votes. the nation goes to the polls on sunday hoping to form the 65th government since world war ii. we are live in rome. theresa may is due to promise that leaving the eu will not destroy jobs. ahead of that, we hear from mark carney on the future of money. this is bloomberg surveillance and i am francine lacqua in rome. tom, we are spending a lot of time looking at the tariffs and what that means for global investors. there is a little bit of anxiousness. we are looking at italian elections and though the stakes are high, markets are not feeling it at the moment. tom: you wonder what the impact of the president's tariff announcements will be, obviously on china, but also other

nations, including a recovering italy. that will be quite remarkable. francine? tom, what is very clear being on the ground here is the normal italian citizen does not feel the recovery. we'll also be talking about the boe. that's a great conversation and we are looking forward to hearing from the bank of england governor mark carney joining us for an interview on the future of money. i imagine he will talk about a cashless society or not. that interview coming up in one hour. let's get straight to the bloomberg first word news. promised --as donald trump has promised to increase tariffs on steel and aluminum. he says american steel and aluminum producers need protection from cheap imports. h.r. mcmaster might be on his

way back to the army. according to a white house official, john kelly has asked the pentagon about a possible military position for the three-star general. mcmaster has clashed with president trump a number of times over the last year. berdych prime minister theresa may delivers a landmark speech on brexit today, one that are cabinet was haggling over for hours. may will tie result to a promise that leaving the european union will not destroy jobs and she will say she wants a deal that covers more sectors than any free trade agreement in the world. the bank of japan will start thinking about exiting the giant monetary stimulus program around the fiscal year that starts in a pril 2019. the comments from governor kuroda mark the first time he has provided any guidance about an exit. he things inflation will reach 2% next year. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. i'm taylor riggs. this is bloomberg.

tom: thank you. let's look at the data right now. the stock market is down three days in a row. 1.7% over 1.5% and the last three days. the futures, -10 and the dow futures, -25. i would watches carefully through all of surveillance this morning. we will do extra data checks. the dollar churning as well. with a weight to oil, interesting curve flattening. vix, not at a level of angst yet. but getting there. yields get there down to 3.09. i used that as a benchmark. here's the major story. every pro i walked to y -- every pro i talked with yesterday said, watch yen.

a stronger.69, japanese yen. let me show you the one chart i am looking at among 15 charts that are out there. i've seen this everywhere, thanks to gina martin adams of bloomberg. what's going on with trade right now away from the president's historic statement yesterday. this is the nation's exports, and take out oil. it's not a pretty picture with a massive second derivative down here of lesser and lesser exports. this is again, the trade balance on petroleum. it's the ugly chart on trade right now. you wonder where that goes. francine, in rome. francine: yeah, so tom, on president trump, he said the

u.s. will impose steep tariffs on steel and aluminum. trump said it would mean long-awaited protection for the industry and here is a sample of the mixed reaction. >> are many approaches to dealing with the cost of globalization, but protectionism is a dead-end. trade restrictions address the symptoms and not the underlying problems. >> as the chairman said, the tariff approach is not the best approach. the best approach is to deal directly with the people affected, rather than falling again,,tariffs which these are not measures that are consigned to us. >> we had a great steel industry at one time. we had a tremendous aluminum industry at one time. china has run us out of business. they have stolen the business. >> the steel industry has been in decline for over 30 years at this point.

it is imperative to take action now because the cheating continues and it continues on unabated. >> yes, we need to address the unfair chinese trade practices, but we need to do it in a way that does not jeopardize the gain we have seen here in america. francine: joining us now is rupert harrison from blackrock. rupoeert, great to have you on this important day when it comes to a possible protectionism. do you see a trade war brewing between china and the u.s.? rupert: yeah, i think this will be a big story for 2018. if 2017 was about the debate on tax, 2018 is about trade. this is one of the big promises from donald trump's election campaign. i think this announcement over the last 24 hours is really just the opening shot. i think the big deal is still coming down the track, which is the section 301 investigation and the potential remedies that

the president might propose about chinese intellectual property restrictions on investors into china. and i think that could see a far broader range of actions being taken. s are tariff significant, but they only apply to a small number of imports. rupert, let's also bring in our chief agent economics -- our chief agent economics correspondent, enda curran. how will china retaliate? do they have any choice but to retaliate? enda: that is the big question. the top chinese economic advisor to president xi jinping is in washington at the moment, specifically to defuse

tensions. there is the feeling that the ball is back in china's court now. though they will not be specifically hurt by these tariffs, they do not export that much steel to the u.s., but nonetheless, they could respond to the u.s. they could tackle u.s. agricultural imports, u.s. planes, and of course, they could tackle chinese investment in the u.s. we are not there yet, but the big fear is that china does have to retaliate and then we go down a much more difficult route for the global economy. tom: and does china feel ingaled out. the real focus here among a lot of different analysis, i saw a great barclays study last night. it is really not about china. discuss that. do they feel singled out? enda: i think china would be happy with tariffs on steel and

aluminum because the big losers in asia have been u.s. allies. south korea sought clarity. japan said they are not a threat to u.s. national security. they urged the president to play by global trade rules. to really hurt the chinese, you have got to go beyond the steel and aluminum and into the textiles, electronic goods, toys. ip investigation. we are not there yet, but that is where tensions will grow. tom: we have been here before, we can look at 1971, and a number of other tariff moments in the u.s., but i know your great great great great grandfather was involved in the trade war of robert peel in 1840. that did not work out either, did it? history is not

encouraging. r donaldticking a box fo trump. he needed to deliver on this idea of protectionism. i think it will be interesting to see how far he will go. for now, he has chosen a maximalist approach on this deal and aluminum issue. i think it is no coincidence that he is doing it while the chinese diplomat is in the u.s. and clearly, the range of actions he could take in future as a result of this 301 investigation are extensive. the interesting thing is, there is still a battle going on within the administration. you still have more dovish voices arguing for caution and of course, the stock market. donald trump is very sensitive to the stock market. he likes to trumpet the stock market is one of the major measures of his success. i think it will be interesting to see what the feedback loop is between the response in

financial markets and economic sentiment and some of these measures. his donald trump going to be a president who learns that actually, if he pushes this too far, they could undermine some of the things he is proudest of? francine: rupert, what does that mean for fed policy? if there is a trade war in the u.s., will be fed have to factor in another hike? rupert: i think the fed will be very cautious before responding to specific trade policy measures. they will want to see if there is a knock on impact, either upside on inflation. i think that will be very moderate from these measures that we have had today. on the downside from sentiment and activity, i think it is much more important for the fed, this big picture context we heard from the new chair, which is very much confidence in what i think will be four hikes this year. they need to keep on a steady course. and also, the data.

trends. is bucking the globally for a little bit softer data, maybe a rolling over momentum around the world. we do not see that in the u.s., particularly in the serving data, the ism that around 60. record high consumer sentiment. the us is different because of these tax cuts. muchd --he fe will be i think the fed will be much more focused on that. and if we look at possible retaliatory measures from china, what u.s. industry groups could be hit? tech, because they are so reliant on some of the components made in china? rupert: i think the broader retaliation -- sorry, go ahead.

enda: my apologies. francine, just to say, i think there are certain sectors that could be hurt for sure. in washington today we assume they will be some concessions on the table. they are unlikely to backtrack on finance. they have taken more imports on u.s. beef and other meat goods. if they do want to go hard on u.s. goods, i think it would be in the area of agriculture. that is where they could strike back at the moment. tom: enda curran and rupert harrison, thank you. the bank of england governor mark carney is speaking. he's really focusing on cryptocurrency. the major headline that i see right now is he makes very clear that whatever it is, cryptocurrency or bitcoin, it's not money. that, according to the governor of the bank of england. much more on this, including our

stephanie flanders discussion with the governor in the 6:00 hour. stay with us. this is bloomberg. ♪

taylor: this is bloomberg surveillance and i am taylor riggs. a $401 billion write-down after reevaluating assets. they also said they will sell some businesses. simplifiedpromising operations and has come out with a new five-year strategy. the struggling film and television studio weinstein company will avoid bankruptcy court after all. harvey weinstein has agreed to sell the assets. the buyer is a group headed by

the former small business administration chief. the deal is valued at $500 million. and chevron says the impact of climate change on the oil and gas business will be minimal for decades to come. the company says multiple scenarios end up with the same result, demand for oil and gas will remain strong. shareholders have asked for reports, like chevron. the concern is as demand for oil flows, energy projects will lose money. that's your bloomberg business flash. tom and francine? francine: the prime minister of the u.k. will today promised that leaving the european union will not destroy jobs. in a speech expected today at 1:30 p.m. in london, she is expected to stick to her demand for a tailor-made deal, despite strong resistance from the eu. the with us is rupert harrison from blackrock. rupert, for many years was the chief of staff for george

osborne, so he has a unique knowledge of u.k. politics. what's goignng on? this week was difficult, she has rebellions on both sides. what speech does she need to deliver to appease both sides of her party and bring them together? rupert: "what is going on," is a pretty good question. from what has been briefed already, there's very little new in this speech.. she is setting out five tasks to flesh out what the cabinet is supposed to have agreed. but in reality, the issue that she is setting out is quite a long way from the crunch issues that need to be resolved if we are going to have successful progress at the march summit in three weeks time, and even further away from the issues that will come towards the autumn, when we have to neal dunn the future relationship. the cabinet has coalesced.

she's been able to unite her party around a position that is a very long way from what is offered by the european union. that is this sort of three basket approach, which is a very customized answer for the u.k. this breaches a lot of red liens for the european union. those in the government will say, if you speak to national capitals behind the same, they are willing to cut us some deals and the position is not as hard as michelle barnier set out. that might be true up to a point, but i think we are a long way away from what is realistic. the key issues to watch out for our first of all, transition. i think that is looking a little more optimistic. the u.k. has made some serious concessions in recent days, making a u-turn on eu citizens rights. the u.k. is understanding they really need the transition deal. i am relatively optimistic that that could be nailed down in march.

the much bigger issue is the irish border and how that works with any future relationship. we're still a long way away from resolving that and i do not think this speech today will get us any closer. francine: rupert, what did you make of the jeremy corbyn speech on monday? do we suddenly need to pay more attention about labor opposition? rupert: i think we do. the labour party have finally gotten themselves into a position where they can hammer away at the most divided point. it opens up the possibility that the government could lose votes in the house of commons on the customs union. there are a couple that have been pushed back, but they will have to come in april or may on bills in the house of commons. the interesting thing is, what is the consequence if the government lost those votes? if the house of commons says the customsnt should seek a union, it is not clear that a government engaging in a

negotiation can bound be by that kind of instruction. and secondly, the questions about the future of theresa may. there has been chatter about her turning those votes into confidence votes. you have got to understand, that is no longer possible in the u.k. ive vote on a bill can no longer be a confidence vote. the rebels in her party fear one thing more than a hard brexit, and that is jimmy corbyn. -- rupert harrison, is she enjoying a better economy question what is the vector on the united kingdom's economy right now. rupert: i think the vector is pretty flat. the economy is growing. the bank of england has grown, there is a convention that they need to carry on with the gentle path of rate hikes. the labor market is holding up. the housing market, while soft, is not getting any worse.

the best thing you can say about the u.k. is the economy is not rolling over. i do not think that is the main delta for theresa may's position. it is a bit of a shame, really. she came out of december and that agreement in a strong position and she sort of wonder that a little bit. she has not really taken the initiative, particularly around the irish border. i think she will have to confront the brexiteers in her party at some point and say, we have got to get real about the irish barty, we have got to give concessions around probably some sort of customs arrangement for goods to make the irish border work. she has not used that political capital yet really. she is still trying this model through approach from day to day -- he is still trying this muddle through approach from day to day. tom: i am looking now at the headlines out of russia, and this goes back again to the tariffs. we will have much more on that in a moment. rupert, let me give you the is foration, whether it

prime minister may or governor carney. and stephanie flanders speaking in 45 minutes. bring up the chart, if you would. this is the dots chart, something we show every fed day. rupert knows this. rupert, you have got to believe that if we have these tariffs, the center tendency of 2019 and 2020 dots, that has got to come down, doesn't it? and what does that do to the degrees of freedom of all major central bankers? rupert: it has got to come down if these tariffs really do have a persistent impact on sentiment and activity. but i think we should not rush to that conclusion. what has been announced today markets,itely rattled but it is not hugely economically significant itself. it could become self-fulfilling if we get a big downturn in

sentiment. but at the moment, there are more important things happening in the u.s. economy, the tightening labor market and inflation firming up and these tax cuts. i would not jump to that conclusion just yet. francine: rupert, are you getting worried about the u.s. overheating. rupert: well, overheating, i do think it is not a good time to have this overwhelming fiscal stimulus, but that is the reality we face, what the fed is having to deal with. that is why i am giving them the extra confidence to -- unless we get an extra downturn, i think four hikes will be the case this year. overheating, we are a long way to go from that. we still have modest wage growth and inflation is contained. i would not use that word yet and i agree with the chair. he said yesterday he does not see signs of overheating, but it is pretty solid and i think the

u.s. will remain pretty sell it because you have this extra almost 1% coming from fiscal policy and that is very different from the rest of the world. i think we might see this narrative around the u.s. outperformance reemerging and i think that could be positive for the dollar and i think that changes some of the dynamics from what we have seen during the last year, which is this uniform and global growth dynamic. francine: rupert, if we can infer, actually, if we see more tariffs for steel and aluminum, can we infer from that a weak dollar policy from the u.s.? there were contradictory notes on that in davos? rupert: clearly, there are seeds of doubt in the market on what the dollar policy is. i do not think that has been the main driver of the weak dollar, which we have seen until a week or two ago. i think that has been more about capital coming out of the u.s. into the rest of the world, strong growth in the rest of the world and unwinding that we saw

in the u.s. over preceding years. that is why this relative growth differential is the key dollar question do we see growth rolling over in china. is this slight rollover movement the beginning of something to come, or is it just a blip. and if the rest of the world does rollover while the u.s. remain strong, i think we get a different dynamic. francine: rupert harrison stays with us. coming up next, we speak with the latvian finance minister. we speak about the european central bank. this is bloomberg. ♪

tom: good morning, everyone. i'm tom keene here france and claw in rome. an extraordinary news flow on

this friday. we will be joined in the next hour on trump entry fear it right now, your news briefing. here is taylor riggs. taylor: in china, warning of retaliation. australia, tariffs on trade, and canada is vowing to hit back. told producers they will have protection for the first time in a long time. the administration has accused imports of hurting the u.s., and steel industries. a day after saying he wasn't afraid of the national rifle association, president trump tweeted that he had a great meeting in the office what -- oval office with the lobbying group. kim out in favor of several gun control provisions. is internal revenue service closing a tax loophole involving so-called carried interest.

money managers will be involved using -- an extension of new rules for carried interest. there could be an unprecedented food shortage if -- leaves the eu without a deal. closing for even a few days would lead to a feat -- a food crisis. it is feasible there won't be a deal. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. tom, francine? francine: italians head to the polls for another unpredictable election. it will be the 65th it is very windy.

thank you so much for joining us right here in the makeshift studio. why has it been so slow? why is the election so uncertain? >> it is difficult to answer shortly but i will try. been atian economy has least 30 or 40 years, barack unnecessaryd tape, complications. that is the greatest burden the company has. any attempt to simplify and streamline the administration would help, but it is difficult. they crash against invested interest.

francine: this is about the common man on the street. ederigo: the benefits of it are for the most part absorbed by this elephant sized bureaucracy. francine: how difficult would it be for the economy to grow more and continue with the hung parliament? federigo: discussions at the most is easily on progress. here, discussions don't happen for the most part but on the armchairs. francine: translate for our audience. federigo: you give me that and we will see what we can do. francine: what are the forms you pushed through if you were in

charge? federigo: i was in favor of the referendum a year-and-a-half ago to simplify this political system to constitutional change, which was rejected by 6%. i am afraid we have to wait a little longer. a political clasping of italy itself, there are way too many politicians. there is one party that will probably be successful to some extent. francine: there is no one on

sunday.tform for >> it would be very costly. it also comes with great difficulty. abandon after.ly francine: could that come back if it is too slow? think italian voters are going to the polls to decide on? is it the economy? >> i think there will be a

referendum in the past five years. this will be -- francine: will the turnout be ?rucial federigo: a traditionally very not expect iti do percent, nobody does here between 65 and 70 something. it is low for italy. will happen, i have no idea. theontinue with administration in one way or another.

i appreciate a candidate -- he doesn't have the possibility to participate except behind the person sort of. francine: talk to be a map -- talk to me about the markets. why are they staying so cool about what will happen on sunday? federigo: i don't know. italy is part to double. under the cover, or, perhaps, the times would make in their changes. francine: thank you very much. get straight to the bloomberg business flash. taylor: pressure is mounting for the scandal. for

prominent critics want them to force-out everyone on the panel at the time that it took place. salesggest threat to gun may be president trump. demand is falling to lower levels. a surprise on barack obama was president. crackdowns and rushed out to buy more weapons. the blackstone cofounder steve schwarzman enjoy 2017, total compensation came to 87 million dollars, their biggest take-home ever, up from $425 million a year earlier. that is your bloomberg's news flash. tom, francine?

you.ine: thank -- returned to work at a central bank. though only dealing with his position on the ecb council, we to beeased to join -- joined on the phone. us.k you for joining what do we know about the ecb? as they receive information about the details of the case of your central bank governor? >> the ecb anticorruption office is getting all of the so they canprovided take their decision on whether or not the principles of the ecb has been infringed. practice with a

strong rule of law that any allegations are parting -- regarding conduct's, are taken very seriously by law enforcement institutions. parliament ofe ministers dof the trust our law enforcement security measures imposed on the governor central bank. >> you have any concerns about >> isvernor attending .till varies for the governor as you probably know, security -- they are put .n hold

tom: wonderful to speak to you. a should point out you are chess player of world-class renowned. close is latvia to the endgame of this chess match? what is the urgency to get this fixed this weekend? dana: all is well that ends well. it is important we come out of the situation stronger, more sustainable, and this is the most important thing. tom: i must ask you this morning about the stunning news of washington. the president of the united states wants to take a different tact on trade and that would be tariffs. i assume latvia would be minimally affected, but you must comment on what it means for the

greater europe. dana: we are a small and open markets. coming from trading partners and immediately having an effect on growth. so they would be beneficial for the both sides. francine: as we are going back, you have seen an impact. have you seen outflows? we have a challenging situation with one of the biggest banks. it was not of the bank system.

generally, the finances to -- finance and the economy have not the notably affected by the bank stopping its operations. this is one thing for several years, making sure these banks are dealing with the business, having the adequate capital and liquidity ratios so to be on the safe side, happening to the banks themselves. >> do you think that will drink -- that will dwindle because of what happened in february? dana: i think trying to take the opportunity and trying to revise that borders of responsibility

as you probably know, they are currently left as a national prerogative. a common business model including the biggest banks. case, if we are thinking of the banking sector, it still should be reconsidered whether they should not be included as part of the responsibility for the ecb monitoring process as well. to too many of our viewers latvia,e, lithuania, what is the left field distinction now and what will either distinction for five ?ears

that wesides the fact are strong democratic countries with a strong rule of law, it is the ability to reflect will and economiesd change our . following the needs of the big economy. , will look at the banking it have the perfect image for latvia and this is an event where you clear it and move on >> we should clean the sector,

do it at a much faster pace. the announcement of u.s. treasury regarding the consequences, the bank itself faced, it has clearly showed to the rest of the business sector that this is a no go, no way. sector would get back. .his is a strong dedication following two years to notably , thease the business finance sector, for the criminal activities would be possible.

francine: when will this be over ? when will we have a decision about what happens next? we are waiting for the ecb decision and how they regarded situation. the bank has taken the decision for liquidation's. they have to work out the issues painted by the u.s. treasury and latvia.ic safety in working at different changes and stronger inion even

a while. tom: a finance minister of latvia or that i thought that was absolutely fabulous. in our london studios, really, the trading world waits for the treasury tweets. let's review this. it possibly speaks not to the chaos but the cacophony of the white house. let's bring it up if you could right now. familiar with baldwin.

alec baldwwin, who's dying mediocre career was saved by his impersonation of me on saturday night live, now says playing dj t was agony for him. it was also agony for those who were forced to watch. you were terrible. we have a major set of issues going on in washington. a major set of issues and, to be blunt, we have a distracted ?resident, don't we >> we got used to this over the last year. we realize we have to look behind the tweet and dig into one of the dynamics.

we have a certain amount of chaos. this was a risk on the horizon for 2018. we do not know whether this will be a diplomatic spat with small economic consequences or will turn to something bigger. focused, ande're we learned a lot in that debate of 1835 and 1840 about what tariffs do and cannot do. if there are a set of free trade adults in any government, in dos case, the united states,

they need to act boldly and exit the white house, or would you suggest they need to stay around as primary or sub primary government officials to fight the battle against ross? raging against nafta, wanting a very dramatic manned made, particularly mexico. and i think some of the lobbying and information presented to the , anddent about the impact the few marshals the evidence and presented it to the person and say it will raise prices and cost jobs, you know, that has an impact. the interesting thing is china

and you would like to talk about it in your campaign rallies. president, me, mr. the president tweeting out a second, not on alec baldwwin, but much on trade. when a country is losing many billions of dollars on trade, it does business with trade war's good and easy to win. when we are down 100 alien with a certain country and make it cute, don't trade anymore, we win big, it is easy. and now, with his fancy education, wheat -- we cite david ricardo.

we have to go back to the intellectual courage of david ricardo, stock rocher, about 1812, who took it further. the trump theory has been proven wrong since the war of 1812, hasn't it? >> the tweet is astonishing and the market will focus on that phrase, trade war's are good. that is clearly a classic expression that you can inically measure the success your yield bilateral relationship. all that matters is it is trading in one direction or another. the u.s. is going further particularly with china and taking further actions, one investigation into intellectual property, one thing they can do in retaliation, it is interesting it can go beyond agriculture and into technology. capacityhina has the

to hit and hurt high profile and i think it will be interesting to see how that affects bait -- debate, from people have benefited some of the cheap goods and improvements to lifestyle's when it comes to trade and china. this.et's jump to let's go back to richard nixon, 1971. remember this important speech by the president. i am proposing an additional tax of 10% on goods in america. when the unfair treatment is ended, the import tax as well. as the result, the labor will be more competitive, unfair edge of our foreign competition has will be removed. there is no longer any need for the united states to compete with one hand tied behind its back to rebecca could be

released by the president of the united states right now. the thing that gets in the way do all ofy to you and blackrock just assume a weak dollar policy off of this scene we are seeing from the president? >> the assumption is the president doesn't mind and it actually takes action to correct the record. you probably can be's -- can be persuaded to open current seat. that probably can be contained. growthlarly the relative and the rest of the world. are, this isssues the beginning of a potentially troubling eruption in trade disputes. but i don't think that will be a principal driver of the dollar.

tom: thank you. a terrific reefing and great sense of history this morning. service to the government of the united kingdom, at black rock as well. we will drive for the conversation today on momentous news by the president. edward heiman will join us and ted will join us from peterson institute as well. coming up, stephanie flanders, a tiny -- timely and important conversation with the governor of the bank of england. stay with us, the president tweets on trade, a zero-sum america. this is number. -- this is bloomberg. ♪

see a lote going to of good things happen. the president of the united states attempts to reinvigorate the clear and present economy reacts. futures lower as we speak. free republicans and trading partners simply adjust. in this hour, ed lee -- edward heiman. he loses his degrees of freedom as the president acts. they raise rates amid a trade war, diminish exports, and a weak dollar reality, and all of italy north and south, old and the young, deeply divided. good morning, everyone. we are live from our headquarters in new york. i am tom keene. news flow.ry francine, how is rome after the

snow? >> one thing that i have been quite fascinated is the markets are largely ignoring the on sunday. we do not know what hung parliament we will get. they -- put through the reforms or we can get it, some kind of skepticism, which for the moment, the various parties are running on it. >> to me, it is extremely important. it weekend of sunday elections and they will be with us monday in rome as well. what an evening last night, so much to speak of. the president just tweeted, it is an extraordinary tweet about zero some american trade policy.

much more on it through the hour. right now, stephanie flanders leading all of bloomberg economics in a conversation with governor bank of england. cryptocurrency amid trade chaos. stephanie? stephanie: we have been pleased to have the bank of england here at bloomberg headquarters in london talking about the future of money, the biggest subject there is. particularly when the cryptocurrencies have coin saless, the bit at currency. what the mean by that? >> there are three ways to measure currency. anyone who looks on your bloomberg screen, the volatility is 10 times more volatile. londoni think the most importang can you use it to

buy goods? it is not that efficient. 1.5 two views cash, to use a debit card, swipe card for your iphone, it costs about two pounds to use bitcoin on a transaction basis here are the environmental costs and other factors, it is not that good at doing what it is supposed to do. but it points the way in many respects to the future of money. we are not worried about it displays and sterling or the u.s. dollar or a conventional currency, but it does through a challenge, the cryptocurrencies throw a challenge to the central bank and the markets on how to reorganize and better serve the customers. >> this is a vision of us sitting in the park simultaneously clearing the

price of the drinks using the technology. >> part of the genius of they cutrencies is, out the central banks, the banks, and peer-to-peer between you and i. the challenge for payment systems is to move in that to instantaneously move money from my account to your account, the guy runs it directly to her what we're doing in the bank of england is reorganizing the core of the system in a way that allows new payment providers to plug in. they can be using other technologies, we are in a position where the so-called ps to provide able those types of services. we have seen similar innovation amongst banks and other innovations. this is coming and that is the challenge we have to meet.

what the cryptocurrencies are trying to do here they are not doing it well but they do point the way. , the thinged about you are most positive about with cryptocurrencies is getting rid of the high costs for day-to-day transactions. if you are jpmorgan, you're saying saying you can get rid of all of the profit -- is that basically where you're going? think the financial institutions can see where >> i.cial institutions will go making a lot less money for payment systems, more money understanding customers, more money providing other core banking services. payment costs will keep going down.

the service to customers will improve. it is a good thing. . making a lot less money for payment systems, moreit has alwn financial services at the banks and nonbanks will innovate. this cryptocurrency innovation is pushing out, certainly this cryptocurrency. >> the time has come to hold the ecosystem to the same as the rest of the financial system. what will that mean? are, thef the issues exchange is the crypto assets, the exchange in which we trade, those in general are not regulated activities and they are certainly not regulated to the same's andrew. it is not my direct responsibility but given the fact there is evidence of an a lot of temptation for market

manipulation and misconduct in some of theges, operational and technical standards are not the same in terms of the cyber heist and cyberattack. want the best of the cryptocurrencies to gravitate and others will fall by the wayside. quite darkly about crypto. down andea is tracking china is cracking down. that is the thing. bringing cryptocurrencies into in the end,d tent,

anchorot just

post -- both friend and foe. on example and ahead of the promises. mcmaster may be on his way back to the army. a military position for the three-star general. a number of times over the past year. the european union will not destroy jobs and she will say she wants a deal that covers more than any free trade agreement -- agreement in the

world. around -- the fiscal year, april 2019. the governor, who marks the first time he will provide any guidance about an exit. he thinks inflation will reach 2% next year. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you so much. ed hyman as we talk about momentous trade news. talk aboutave got to the people right now in the white house. we saw last night from you, what we saw from john and, what we saw from maggie, what we saw from any other reporters down there, is total chaos.

who are the trade proponents in the white house this morning? who is with the president and who is leading the free trade charge against the president's policies? >> good morning. it is not gossip when it influences policy. stories influence the policies and personalities inside the white house, case in point, no better example than on trade. yesterday, it was remarkable to see president trump set higher on metal up to 25%. inside of the white house, the globalist versus national protection policy, that is between the likes of peter navarro, as someone who wants to see in china going head to head, he has in pushing behind the scenes advocating for that versus the length. wilbur ross also urging the president to take a second look.

the pressure to come from capitol hill is very strong. jeff quietly telling the white house this is not what we want. tom: we have got to get to sunday talk shows. what will you look for today in the white house? >> president trump will attend the funeral of the late reverend billy graham. mar-a-lago, he has got meetings as well in florida. he will be meeting with republican donors and discussing midterm elections as well as potentially 2020. in terms of what i'm watching for today, out of the fallout from the week, it has been a rocky road that i have not seen since the early days of the administration. francine: do you think the trump administration has modeled how they could retaliate?

>> the pressure is loud and clear. late last night, the in ministration who is familiar with the meeting between chinese officials who met with other economic providers saying they had a productive meeting, they did not go into details about whether this stuff came up. unionstion the european saying they would have filed complaints against the world trade organization and south korea saying they would shifted to southeast asia, that message was heard inside of the white house. tom: thank you so much. we got lucky today. iconic with his isi, his daily economic reports. mr. hyman knows the mechanics

and wanderedering by the massachusetts institution of technology and joins us this morning. i should member -- mention as a board member of the china institute -- let me show you the president's suite of 10 years ago. this is extraordinary, when a country is using many billions -- losing many billions of dollars on trade, which rate wars are good and easy to win, it is easy. this is not easy, is it? this.idn't expect i find it really scary. see how it plays out but the problem is not what we do, it is what they do.

it will retaliation comes back with. it gets problematic because you can go for -- tit-for-tat. sort of go through the next days and see what tit-for-tat is, but it is pretty bad. news, maybederful of columbia university, all of intel --ree that is an an appointment. how does the fed respond if we tariffst the trade against these nations? against these nations? >> that was my forming views on the topic. i have always assumed trade wars are really bad.

we were talking a minute ago. tom cong we were talking about the speech in 1971. >> when you were in 1929, the equivalent of the fed funds rate was 6%, which is pretty high. then you had a depression. so i would think if we start to get the trade war, it will put pressure on the fed to be more cautious on raising rates. you could get inflation for higher prices. tom: there is any a number of ways to go. you assume strong dollar for bid. growthng lower economic for the economic policy the president doesn't see. >> it is too early to tell.

know if it is posturing on the administration's part. i didn't expect this. it is unsettling. >> i want to go out with the morning must-read with so much going on today. this is paul krugman. people see percent it by future same president would drive the dollar early but the prospect of future depreciation would inhibit. this is so important to professor krugman says it is a one-off and if the president goes through, later presidents the tariffs

proposed p do you have faith in that? >> no. first, i'm living in the present. market investors, maybe the next president will do it but i have that to get through this year and next year. it is a difficult situation. is doingeconomy exceedingly well and i saw your charts this morning and it looks exceedingly bad. >> but you mentioned disposable income doing quite well. claimsthe unemployment this week. >> extraordinary let's go back. just as i said, a massive shout out to the team. it has blown everything up to get you to the point -- to this point. this is bloomberg. ♪

taylor: let's get to the bloomberg business flash. weinstein company will avoid bankruptcy court after all of the company cofounded by the hollywood mogul harvey weinstein to sell its assets. a group headed by administration chief maria. the deal is to be valued at $500 million. the maker of angry birds falling. -- shares are falling. the company reported first-quarter earnings that

disappointed. the ceo says the management is not satisfied with the current performance of the company. much are theo headline is extraordinary this mine. the prime minister let me bring up the set of headlines. multilateral. the prime minister goes on to say she will be engaging with united states. the backdrop as kevin mentioned is the secretary of commerce mr. ross. navarro, just before the election. allowing america trading partners to -- the trump administration, tariffs will be .sed as a negotiating tool

the fact that we are already engaged in a trade war. are we in a trade war right now? think like we could get into this. understand what he is talking this is a new x -- a new escalation of it. it could get pretty ugly. typically from china. tom: we were weaned on a multilateral time. then it became bilateral by both candidates. are we into a unilateral area or back torag ourselves constructive negotiations? >> i think we will drive ourselves back.

a lot of economic uncertainty. tom cole and explain the probably. this is a delicate issue. the idea is the market always looks forward. does it look forward to the harmful effects or can it look forward to beyond trump? >> i do not think it could look forward to beyond trump. i think it will be looking in the next few days and few weeks as to whether or not this is are for -- referring to, the negotiating approach, or whether it would spiral out of control with retaliation by other people. the economic act drop is exceedingly good.

monetary policy is still very accommodative in my opinion. but this is a new wrinkle and it depends on how quickly we could get some resolution. the uncertainty in the white house is troubling. tom: dow futures -200. people think ed hyman's leading the good life on 5th avenue. he spent most of his times and airplanes flying around the country and talking to people here it you mentioned twice now how good the american economy is. on aluminumose people do? what will they do if they are away from the on nostalgia the president has? >> there in a different world. i was in atlanta yesterday and it is booming, absolutely booming. what is driving those economies are anything but steele.

there is education, health care. will be to rails by the suggestion by the president? think so. there is something more, but i don't think so. that edare thrilled hyman is with us this morning. and historic statement by the president. that tweet this morning which in itself is shocking, we will show that through the day. maybe the president will want further conversation today. francine lacqua in rome. don't forget. this conversation with mark carney, governor of the tank of england. worldwide.s this is bloomberg. ♪

♪ taylor: good morning. "bloomberg surveillance" -- futures deteriorate this morning. -230.

adding up with yesterday's carnage. it is a 600 point move. we are also checking in on italy. what do the italian papers say this friday morning? papers arehe italian looking at the various scenarios and what it means for your household income and the undecided voter. we cannot talk about polls anymore. they are also looking at immigration. there are a lot of issues that the italian voter will have to decide on. and you look at immigration, tax reform -- maybe the immigration issues poses the biggest issue for italy. taylor: the german election as well. we will go back to francine with important interviews. right now in new york, with your first word news coming here is taylor riggs. taylor: metals maker in china

warned of retaliation. australia says this will destroy trade in canada is vowing to hit back if president trump makes good on his pledge to impose the duties. americandent said metal producers will have production for the first time. the administration has accused cut-rate imports. commencing he was not afraid of the national rifle association, president trump tweeted he had a great meeting in the oval office with the lobbying group. he surprised the on ra by coming out with -- in support of regulations. promising american business leaders that she will take steps to reform the economy. she told executives in washington that china's economic success is because of its embrace of market forces but he did say what form the president

is considering. and the irs is seeking to close a tax loophole. it involves so-called carried interest. money managers will be barred from using s corporations to take example -- to take advantage of new roles of carried interest. global news 24 hours a day powered by our 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. at an advantage with ed hyman with us. back to cj lawrence. truly, our most respected market economist. we are in shock and perspective. the good news of a proposed vice-chairman of the federal reserve system. monetary slide. and that would be richard from columbia university and pimco. i went back to--

1999 and the science of monetary policy. what is the science of this kind of economics? studied thes modeling of the economy in great depth. dynamics, the general equilibrium model that you love so much. looking at what makes the economy tick. he will help the fed a lot in terms of what it does going forward. when they decide a 2% target is not useful anymore, he is a good he is a good person to talk to about what not to do. smart economist with a lot of background in markets and in academia. taylor: after the end -- after crisis, we looked

at the new models required in the game. richard has shown real humility. idacribe the clarer humility. a quiet and soft-spoken guy and willing to listen to anyone. he listens to you and me and that tells us a lot. he is not a guy that is doctrinaire. that is an advantage for the fed if he is elected. leans theblican and direction that the administration wants but he is not doctrinaire but pragmatic. he will listen to arguments on both sides. that would take the temperature down at the fed. taylor: worrying about slack in the economy. about inhat you talked your reports on disposable income. do we have low rate donald?

and will this team had to deal with low rate donald? ed: they have to deal with a lot on that front. clinton, president clinton and president bush job owned alan alanspan -- jaw boned greenspan to not tighten so much in the 1990's. we are watching the stock market unravel in the last few days. the stockmp has used market as a report card. in terms of this trade breakout, the stock market will put pressure on donald trump to not let this get too much out of hand and it will put pressure on the fed possibly to watch the stock market as well. far,e thing about trump so for all of the really strange and disturbing things he said about the economy, he has been

very mainstream in who he has chosen for the fed. he has not on overboard in picking anyone outside of the mainstream even though some names have been floated. awboned themo to this point. ed: good morning, francine. francine: hello and good morning. talk to me about inflation. households are in a sweet spot with inflation as well because we feel richer. if inflation is out of control, or at 2.5% or 2.6%, would president trump and the administration not want the fed to act? think thatclined to inflation is picking up. the economy is strong and money is easy. at the moment, it really is not picking up. tore are so many headwinds

inflation like globalization and technology and intense competition, it seems to be holding it back. for cpit of february number for the eurozone, a big economy and it was still very tame. i think inflation will pick up. it is picking up some but it is not taking off as i expected. , we heard from the tweets from president trump saying that trade wars are good. can you infer from this that they also want a weak dollar policy? ed: not necessarily. trump is a hard one to figure out. you saw on the stands with the nra that he is one way and then another way. i could see that what he is going through now is part of a negotiating stance to deal with the other teams. taylor: i want to go to michael

mckee. with great respect to ed hyman. here is the dow right now. 24,000. the correction. we rolled back up and we come down. mike, we have a stew. here is where we are on futures. 24,000. 23,000 is a 200 day moving average. alan greenspan said follow the stock market. should the president follow the stock market? in the broadest sense. unless there is a real collapse, it will not risk -- it will not affect the average person. only about 40% of americans own stocks and most of them are people that own them through their pension funds. it on anot follow day-to-day basis. we have seen research that suggests the stock market reacts to headlights but it does not

really reflect the overall economy the way the bond market does. taylor: i hope the present -- tom: i hope the president is watching this right now. louis rukeyser. does the president look at the stock market as a rich man's casino? is it different now? it does have an element of casino to it. mostly because business news is so relevant right now. in the model we used to forecast the economy, we have consumer net worth. a key driver. and consumer net worth got week in 2015. kind of week -- and consumer net worth got weak in 2015. it has an impact on the world economy.

the confidence of psychology. people watch the stock market. the stocks driving market influences the economy. as a historian, i noticed that in 1950 nine, alan greenspan gave a speech where he said the stock market is not a discounter , it is a driving force. has a bithe president of that tone i would suggest. ed: i would think so. i think he is watching your show and the stock market and he is going to be thinking what his next step will be. michael: you go to those dst models. models. the market is a feedback loop. tom: they are not doing dgse models on fox and friends. we will continue with ed hyman.

withe do a data check markets on the move off of what we saw yesterday and the shock of the white house announcement. futures, -16. -213. the curve is stable. next board. the idea is a big stick. yields we will watch as well. 105.44. yen -- stay with us from rome and a stormy east coast. this is bloomberg. ♪

♪ --

pressure is mounting for new oversight at wells fargo in the wake of the bank account scandal. watch her members of the board will leave next month but prominent critics want wells fargo to force out all of the directors on the panel the time does the amp took place. the biggest threat to gun sales in the us may be president trump. the gun industry thrived when barack obama was present. done enthusiasts -- gun enthusiasts rushed out to purchase weapons. enjoyedkstone cofounder 2017. his total compensation came to $787 million. the biggest take-home ever. investors seeking assets other than stocks and bonds fueled blackstone and its peers.

that is your bloomberg business flash. we are here in rome covering the elections. this weekend, italians are going to the polls for what looks to be another unpredictable election. when the eventual shape of the government emerges, it will be the country's 65th government since world war ii. we had the founder and head of research with us. great to speak with you today. we cannot talk polls. we can talk about is whether you are we can talk abos whether you are worried about whether the market is worried. why is the market so cool about this? >> good morning. i think the market is so cool about it because there is a cyclical recovery at the eurozone level and that is particularly strong. i think it is a combination of the fact that market is a lot

more confident on italian fundamentals and as you said some the election is very uncertain so the market is betting that whoever will come well more or less deliver growth. what is the biggest danger right now for the italian economy? is there concern that the people in the streets do not feel that their situation is improving, will they turn eurosceptic? >> i do not think that is the biggest issue. it is true that love towards the eu has decreased. theillusion meant on significance of the eu has increased. but desiring to leave the euro area as priority number one is a .iny minority i suspect this is likely to be the case for many more years. the italian electorate is simply saying that the structural changes that have been done, the

policies, the way they have been done in the type of policies are not optimal for the state of the economy today. the economy is still facing a shrinking industrial base and a shrinking population. an aging and drinking population, all at the same time. they're demanding bolder measures in my view. francine: what kind of bolder measures? there does seem to be a consensus among economists that with a situation improving and you talk to taxi drivers in rome and they say they have not felt any improvement at all. competitiveness at the industrial level has improved but it is flat like a pancake. in terms of what they can do for bolder measures. there is a consensus across that the taxation system

should be streamlined. corporate taxes should come down. element ofd be an fiscal stimulus for households. those are good starting points. whoever is next in power will whicho prioritize elements to start with. i would say most of the electorate would like the tax system to be simplified come especially at the corporate sector. --t in itself low be a major that in itself will be a major step forward. and they need to make sure that fertility rates go up and you stop the brain drain and reverse it. in the long run, the country depends on how many people want to stay and prosper in the country. risk thatis there a we go back to the 2011 sovereign type crisis? >> not really. not in this type of global condition with ultralow interest

rates and a fairly buoyant economy. we can discuss how strong it is. the attack -- the appetite for is incredibly strong and we may have some volatility next week and some bond yield rising but nowhere close to 2011. in our model projections, it would be fair for the 10-year to eventually trade to around 3% by next year's time on the basis of fundamentals and inflation cycles. 100 basis point of yield move is a freely big move that nowhere close to what we saw in 2011. francine: you are starting to see a possible normalization of the ecb policy. we are also on the brink of a war -- global word trade. -- trade war. depends on your horizon. in the next 12 months, the balance sheet support from the

ecb is significant. anyway anchor on yields and i think the market knows that. in terms of trade war, structurally it would favor euro strength. it would favor euro strength. for italy, given the competitiveness gains it has geteved all the way up more fiscal stimulus and no real improvement in global trade, or a minor deterioration, you should consider much higher numbers. anywhere between 1.5% and 3% in the next 15 months are on the table as probable or potential scenarios. francine: one of the parties was proposing a 23% flat tax.

can they go through with it if they win or if they are part of a coalition? >> a flat tax for the corporate sector would be viable in my view. it would still need to be heavily negotiated with the european commission but in itself it is not a particularly expensive measure that has been discussed in the campaign. a flat tax for households at this stage would be prohibitive and is not likely. but also, bear in mind, that any bold tax change tends to be implemented a lot slower than people with think. you have to wait for the new budget. you need to negotiate with commission. you need to be certain about what you are implementing and phase it in. if you were to be serious about a flat tax system for the household sector, minimum, this would be a three p 5 -- re-five year journey. -- 3-5 year journey.

tom: francine, thank you so much. looking forward to the coverage on into monday after the election. it is the single best chart. we do this this morning. , ed hymanest research leads with the american animal spirit and that being nominal gdp. this is a chart you know so well. our net worth compared to the money coming in. household net worth. disposable income. the malaise of the 1960's and the 1970's. cj lawrence -- up we go in the ramp up here. are these constructive ramp ups? factionalue and increase in our net worth? or is it the leverage of the fed? ed: some of both.

tom, you are really talented. this is a nobel prize charge. tom: for your consideration. i you kidding? -- are you kidding? thank you. ed: the first bubble in the 1990's. the one you circled in red was the tech apple. and there is the housing bubble. and we are at it again. the dynamic is that starting in the 1990's, we had low inflation and the fed kept pushing and they created an asset bubble. prices and consumer net worth went up faster than the economy and we are doing it again. i spoke with senator dortmund from ohio. he was adamant about two ohio's. one ohio is struggling and the other is really engaged. how do we bring those people back into the american economic experiment that leads to good

net worth as opposed to disposable income? ed: wage increases. tom: where are they? ed: they are coming but they are modest. they need to be 4% for people to better.r -- to feel in my view, asset prices continue to increase faster than income so it is a bubblelike environment. the third time i have seen it. extensiontcoin is an of this. and the da vinci ours sale for $450 million. tom: and we heard governor carney speaking to stephanie flanders about bitcoin and cryptocurrency. he was not too enthused. francine: that was a great conversation that i very much look forward to hearing. going back to wage growth. where does it come from?

if we see this looming trade protectionism across the world, will that hurt companies' ability to raise wages? ed: it will create uncertainty that will hold them back in the short term. the u.s. economy is really doing well and unemployment will go below 4% fairly soon. unemployment claims came out this week. the lowest since 1969. we have a tight labor market. there are forces holding back wages like technology, intense -- addition, globalization putting downward pressure on wages. i am confident they will continue to edge up over the next few years, up to about 4%. they are currently at about 3%. tom: i look at all we have covered today and i want to go back to your shock about what we saw from the president last

night. if you were sitting with president trump right now, what would you tell the president? ed: i would say that this trade thing is really a dangerous path to go down and i would point them to the stock market as the transmission mechanism that could undermine the economy and his presidency. tom: thank you so much. ed hyman at this historic moment. it will be an eventful day and we will continue our work on bloomberg surveillance with jon ferro -- and it unfold weekend in italy. rinsing the pause there is with our team. -- francine lacqua there is with the team. this is bloomberg. ♪ mom, dad, can we talk?

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>> trade wars are good. president donald trump tweeds trade wars are good and easy to win. world waits for retaliation. president trump's bold move sends stocks into a tailspin. brace for impact. lyrically charged weekend with prime minister theresa may laying out her brexit plan, it italy is facing elections. david: a big storm outside in new york. >> we have a nor'easter, a harrisst storm -- eight alex: storm. the s&p had its worst first day of the month since february 2016 yesterday. the dollar, the weaker currency climbing0 euro-dollar higher. there was a reversal in the currency market after that tweet.