francine: stocks rise and donald agrees to a summit with kim jong un. steel,laps tariffs on excluding mexico and canada. and the amazon factory. toys "r" us u.s. might be repaired to liquidate the u.s. operations. good morning. welcome to bloomberg surveillance. i am francine lacqua in london.

this is what the markets are doing and i am looking at european stocks, pretty much flat. we seem to be in a risk on the. if you look at the yen, it's something after the news of the unprecedented agreement talks between the u.s. president and mr. kim jong un of north korea. you can see gold is usually a haven, down to $1318. coming up on bloomberg surveillance, larry hathaway gabs ahead of multi-asset solutions. he joins us. he will go through the payrolls and the jobs data. and then, still to come a little bit later on, we talk with mark short. now, let's get straight to the bloomberg first word news. nejra: donald trump set off a race among nations and companies to win relief of his deal on aluminum tariff.

have been and canada excluded as nafta talks continue, while trump also through the door open to further exclusions for countries and niche products. donald trump: we have to protect and build our steel and aluminum industries. while at the same time showing great flexibility and cooperation toward those that are really friends of ours both on a trade basis and military bases. jra: 11 members of the transpacific trade pact have signed the agreement in chil e. some say the accord could be implemented by year end. donald trump pulled the u.s. out of the deal last year and the signing came on the same day that he slept fresh tariffs. final policyda's meeting before his new term begins next month. as forecast by all economists surveyed by bloomberg, they kept

the of control settings and asset purchases unchanged. a stronger yen threatens progress on inflation. so, economists have pushed back the forecast date for changes to the stimulus program. the governor of the people's bank of china have said market access reform should be accelerated and the country can be marbled when opening the economy. policymakers are now more focused on achieving quality growth, rather than the pace of expansion. this came with china's factory inflation easing amidst the week long lunar new year holiday. u.k. officials do not expect to clinch a break the deal by the end of the year. january could be the real deadline. that is according to people familiar with the negotiations. the european union chief negotiator michel barnier has long said he wants the agreement done by october of this year, so there is time for it to go to the european and u.k.

parliaments for approval. david davis has indicated a public that the timetable could slip. john mcdonald has told bloomberg he thinks the british government needs to face up to the reality of the thorny irish border issue. >> i think it is almost inevitable. i would rather the government face up to the inevitability now. i do not see another way of that being secured. the axes that we want and the position with northern ireland on the border. it is externally complex issue, but this could help us greatly. nejra: global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. i am nejra cehic. this is bloomberg. francine: as donald trump has hailed great progress with talks with north korea after agreeing un, sarahm jong huckabee sanders says the meeting would occur at a place and time to be determined. of the countrye

bidders had to say about the potentially historic talks. >> along with president trump, we are optimistic about continuing a diplomatic process to test the possibility of a peaceful resolution. >> trump is going to stake more or less the failure of his presidency on this deal. >> they have had to give nothing. >> i think it would be great if they meet at mar-a-lago. i don't know if that is possible. i think it would be important to get kim jong un out of north korea, so he cannot present this as another homage to north korea. >> nobody wants to be shot at and north korea is not an exception. this time, they are more afraid of the american carriers than economic sanctions. francine: joining us now from hong kong is david tweed. the u.s. president has hailed

this as a great progress in talks. frame ofe a time one is that happen? david: we know they will happen before may. that is as much as we know there. i think they definitely will happen. the station out of at this stage. where they are going to happen, we don't quite know, francine. francine: is this a big win for donald trump? is this how it is being portrayed in hong kong as well? ifid: i really do think that you look at what has happened, yes, this is an exceptional win for donald trump. when you consider his tweeting, his feats of military action, all options are on the table, he was castigated for his behavior towards north korea, but he seems to have gotten results and he got everything he asked for. kim has agreed to go into those talks and discuss denuclear rise asian, something -- and discuss

earization, something he said he would never do. he also agreed to suspend his missile testing. that is another thing he said he would never do. and at the same time, the north korea regime said it would turn a blind eye to continued exercises between the militaries of south korea and the u.s. absolutelyas got everything he asked for and still he is maintaining sanctions. so yes, it looks like he is going into these talks with the upper hand. francine: what does it mean for russia and china, two very historical allies to korea? id: i think at the very end you are going to -- if we do get to the end game, francine, north korea is going to want security guarantees that it will not be attacked by the united states. and so, the question of renew

vacation of the north -- and so the question of reunification of the north korean peninsula will have to be taken into account. maybe they will decide to maintain north korea and south korea. this is where russia and china, north korea's neighbors, come in. will they be able to provide some kind of security guaranteed to north korea? in the past i've seen six party been, which have often held in beijing that beijing was certainly pushing them. beijing has got a lot of skin in this game, rush as well. francine: thank you, david tweed, our senior government reporter joining us from hong kong. so, what does this mean in terms of risk and investment? the yen is lower and asian equities are higher. joining us this morning's larry hathaway, ahead of investment solutions at the john taylor six income manager at john bernstein. good morning. let me kick off with you.

what does this mean for the markets? turning point, or will the market be skeptical until they see the men shake hands? larry: any decline in put it will risk, particularly in the korean peninsula will be seen as positive. the yen is typically a risk off trade. we see it as an indication, as are higher equity markets. people are pleased to see this. and that decline in risk warranted. this is covering up other areas which are a greater concern these days. obviously, the prospects are trade wars, going back to that topic. let's say the departure is chaos in the white house and the unpredictable the a policy in the u.s. and against the backdrop where monetary policy is being challenged by signs of inflation creeping back into the system. to some extent, i would look at this as a short-term recovery of markets. francine: do you agree with that, john? john: yes, i would echo those

comments. one of the downside risks is geopolitical uncertainty. i do not think it is a home run. francine: if you look -- -- i mean, what was actually priced in? largely the markets ignored any political risk so far. this would point to the fact that maybe they were correct to, but why aren't they pricing in geopolitical risk? john: i think there is a little bit of fatigue around it. we have gone through a heap of geopolitical risk, be it the italian election, brexit, the french election and the market initially in the early years price for a negative outcome, and then they rallied away again. people have decided not to worry too much about the downside until it actually heads. that is the sense in the market. francine: do you agree with that, larry, or is it algorithms, or is it because you do not know how to price the threat of nuclear war? it thatou should add to the backdrop is very positive,

improving global growth, strong profitability and that allowed investors to essentially bank on the fundamentals, even if they had some concerns about political backdrop. as those fundamentals begin to shift, not so much growth or earnings per say, but we have much higher hurtles to overcome here, multiples with higher markets of advances. y of the positive markets is not as strong. so we have the arrival of new challenges. francine: and we will talk about ariffs and protections and second. yesterday i had a great conversation with daniel pinto. he said the markets could correct 40% in the next two to three years. is that a view you share? larry: i would say that is in the tail risk scenario for me, not a central scenario. it is possible. what you would have to see in that environment is a genuine

threat to global growth. hence, the global earnings, which would lead to multiple compression. that is how you could add up to that type of a correction. those things are not actually that apparent at the moment. francine: john? john: amongst our client base, the amount of cash people are holding is high. i think people are waiting for a pullback, not 40%. one of the risks that could lead to problems in the market is if the inflation does start running materially hotter. if we see yields move up materially and we are talking 10 year yields above four, then we see risk assets in general struggling. but even then, it is difficult to get down to 40%, but a setback is possible. francine: john taylor and larry hathaway both stay with us. saudi arabia's energy minister hinted that aramco's ipo could be delayed until 2019 and discussed the latest on bloomberg. >> as far as the aramco listing,

which is what you were alluding to be inn continues contention. the only certain thing about the saudi aramco ipo is that it will happen and b, it will happen. the anchor market will be the dow by exchange in saudi arabia, -- itis being prepared will bring in a lot more foreign investment. importance that london plays and will continue to play, we believe post-brexit, we think the relationship between these two centers of capital is very important. as far as the second venue of the listing for saudi aramco, if any, it will be announced in due course, but the decision has not been announced yet. reporter: so, is the

international listing 100% confirmed for this year? -falih: the international listing will be ready to be made this year. he said that repeatedly. the company has prepared and the government has prepared. we have created a framework. erwise, regulatory for them to be listed this year. we will announce when we feel the conditions for the success are in listing is -- place. some of those conditions are not in our control. we have two sure the global capital markets are ready. and that we have made good decisions about the listing venues as well. reporter: so, is there a chance we could see a delay into 2019? al-falih: i cannot comment on that. i would say the objective of the ipo has always been to optimize value for aramco and the investors. that is the guiding principle

that we will loose. on timingi am pushing because many bankers say you only have a short amount of time left for the ipo train. when is the last possible moment you can decide to hit 2018? al-falih: i do not believe that we are hitting any deadlines. concerned, am between december 31 and january 1, there is no value lost for the kingdom. deadline --see this this artificial deadline that you referred to as being significant in our decision-making process. francine: that was bloomberg speaking with the saudi arabia energy minister. now, let's get straight to the bloomberg business flash. nejra: ubs has boosted sergio ermotti's pay by about 6% after profit before a charge related to u.s. tax changes increases.

the bank boosted the bonus for 4017 two 3.1 billion swiss francs and ermotti remains the highest-paid executive with a total compensation of 14.2 million francs, including 11.4 million francs in composition. making rest is preparations for liquidation of the bankrupt u.s. operation and say that although the situation is still fluid, a shutdown of the u.s. division has become increasingly likely in recent days after so far failing to find a buyer or reach a debt restructuring deal with lenders. representative ford was a rest declined comment. lehman brothers bankruptcy estate and dissipate $2.4 billion compensation for the role in the u.s. mortgage crisis. that sum is far less than the $11.4 billion some hedge funds were seeking. the manhattan bank of the court put a final tally on what they can recover from the banks. lehman brothers collapsed and went bankrupt in 2008. that is the bloomberg business flash. francine: thank you.

president trump has taken another step towards the trade war, signing in order to on steel andffs aluminum. he excluded canada and if the government the levy and it struck an optimistic tone on the possibility of procuring a nafta deal. under the new rules, which take affect in two weeks, people can apply for a waiver. people are now practically building cases for invention. let's bring in john taylor and larry hathaway. larry, what are the biggest concerns the you have that could trigger a market selloff? protectionism? with this the it, or are there so many exemptions that this is, president talking from his face, but it will not damage the u.s. economy that much. larry: this flexibility that is excluding mexico and canada opens up the possibility for greater flexibility for other countries that might otherwise retaliate.

the european union is probably the first amongst those that we have heard from overnight. south korea and china are also taking the situation very seriously. i think the flexibility will have to be broad enough that it actually waters down the tariff s, to avoid a trade war. i do not think countries will withouthe tariffs retaliatory measures. from my point of view, it remains a risky situation and let's not forget, this is the second round of tariffs the trump administration has introduced this year, following those on solar panels and washing machines. francine: are you worried about this hitting road growth, or is it more of, we don't know what trump does next? know what he does next, but it is part of this populism same. the outcome of that is likely to be higher inflation, at least in the near term. but i think as i point to growth in the medium-term, it gets damaged globally as protectionism builds up.

but the market can focus on the high inflation pressures during the near term that this protectionism brings. francine: john, what does it mean -- could you assume that protectionism also leads to a weak dollar policy? we had different remarks in davos, which meant we were not sure there was -- i had never heard it before coming from the treasury secretary steve mnuchin, but him up from said, we do not have that policy in place. john: for us, we do not have a strong call on the dollar versus the euro or anything from here. i think there will be a lot of noise and a lot of movements we see on a day by day basis. they will be driven by these political events and fundamentals. i think theually, dollar policy is a bit confused, but we had a departure from what was a 25 your policy supporting dollar strength, at least verbally. what the dollar did was left up to markets. dollar weakness reflects shifting capital flows with more

investors linking opportunity outside of the u.s. i think the dollar is settling into a lower trading range. albeit, with the relation to these issues. francine: would you expect protectionism, if we have different measures i guess, hurting growth at the margins, do you expect it to impact monetary policy from the fed? effects. it has two john mentioned one, the potential it lives inflation, which is beginning to move higher and the second is that a damages growth. i think direct affects of both a relatively small. but if you think about the growth effects, those are more thend sentiment, around willingness and ability of firms to move forward in a predictable way on investment, on hiring. that is where i think the affects of protectionism are most pernicious. right now we are at a low level of these kinds of things against the backdrop of things that are boosting capital expenditures. but i would say that is the swing factor for monetary policy. it is more a threat to growth and inflation.

toncine: is it a threat growth in emerging markets, or is there going to be more trade between china and the neighboring countries? smallerthink the players are more likely to be impacted. the negotiations between the u.s. and china are likely to be fairly even, but when you talk about the smaller countries, they get hit more. trade is more important to their economy than the u.s. we need to be very watchful about the emerging-market countries that could suffer in this environment. does it actually represent an opportunity for europe if with the chinese money that could have gone to the u.s. , but because there is a trade war it goes into europe? overtime it can definitely affect capital flows, especially for direct foreign investment. those are shifting anyway as more companies look at europe, that is mainland europe, as the place to invest. that is driven by brexit and the uncertainties of what kind of access the u.k. will have to the common market. but if you throw another form of protectionism -- and brexit is

to some extent a protectionist measure -- then you begin to exacerbate those impacts. could europe benefit? yes, in a narrow sense, they get some investment, but nobody wins. francine: let's talk about europe, the ecb, and there has been a change of language at the ecb. president mario draghi has dropped a pledge to ramp up on buying. the central bank is expected to continue the asset purchase program into the fourth quarter of this year. in a sign that it is looking to end qe in the not so distant future, asset purchases are expected to total 30 billion euros over the last three years. draghi also waded into the trade tariffs conversation. draghi: they should be discussed in a multilateral framework. unilateral decisions are dangerous. i wouldere is a certain

say, worry or concern about the state of international relations. because if you put tariffs allies,what are your one wonders who the enemies are. francine: ok, what did you make of mario draghi? he seems to be wanting to talk the euro without doing much. lawrence: i think he was focusing on an absolutely essential, let's a concept of economics, especially trade. especially that multilateral solutions are preferable to bilateral lung. bilateral ones tend to divert trade rather than created and tend not to enhance global welfare. these sets of measures by donald trump are clearly bilateral. you exempt canada and mexico, but you impose the tariffs on the rest. that is breaking with the tradition that has been in place ever since the get was founded sincte world war ii.

it is principled of economics and for the global trade. i think he is making a really important statement. outside the balance let's say of monetary policy, but a very important statement about how we arrange our affairs globally. francine: going back to what the ecb said, how much does that move for example, the german bund? i guess that is the one that could reprice itself quite quickly. what does that mean for the rest of asset classes, if indeed ecb policy changes. is doinghink the ecb everything they can to stop the bund repricing quickly. we are seeing a european temper tantrum that we saw in the u.s. if you go back to last year, the reason they were not aggressive in tapering was because they were worried about a negative market reaction and thus far, we are getting closer and closer to that qe exit date. we have seen some movement in the currency, which is natural. i do wonder if we do see that

sharp correction and ecb to try to smooth that correction. francine: do you think they are on top of that, and you see a smooth repricing of german bunds? what does that mean for the rest of the asset classes? john: there is no doubt that european bonds are very expensive, given the trajectory of the u.s., it does not justify a 10-year differential. at some point, that has to correct and it is all a matter of how the market reacts to that. but we could see, if it does happen in a short fashion, that would be a negative for risk assets. we have seen that early in the year when the u.s. saw risk assets. it is in europe's best interest if this move that now. they only have a matter of months to do that, so they should allow the market to loosen the reins a bit. i think the next meeting will be important, giving it a clear direction. francine: do you worry about

that, larry? larry: i do worry that if they act abruptly, you could see a global selloff and bond yields, particularly because there are questions being raised about the bank of japan within the same context. most people think it will be another year before they make adjustments to the yield curve management. that might change. if those central banks are called into question about how quickly they will remove a combination, that is when i think this coil spring, which represents all long-term bond yields around the world, could really be unleashed. francine: larry hathaway and john taylor stay with us. coming up, the brexit deadline. u.k. officials are looking at january as a target date for the deal. this is bloomberg. ♪ mom you called?

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word news. nejra: donald trump has hailed great progress after agreeing to meet with kim jong-un. sarah huckabee sanders said the meeting would occur at a place and time to be determined. the announcement was made by south korea's national security council chief, who told reporters in washington that tim was eager to me trump and the meeting would take place by may. set off a races among nations and companies for release from his aluminum and steel tariffs. mexico and canada have been excluded, and nafta talks and -- talks continue. we have to protect and build our steel and aluminum industries, while at the same time showing great fixed ability and cooperation -- great for and corporation towards those that are friends of ours on a trade basis and military bases. the 11 members of the

transpacific trade pact have officially find the agreement. ministers pledged to send the pact of their parliaments in the next few weeks. some say it could be implemented by year end. the u.s. was pulled out of the deal last year. the bank of japan has stayed the course with monetary stimulus. forecasts by all economists surveyed, the central bank kept its yield curve settings. threateningger yen progress on inflation, economists have pushed back of their forecasted days for changes. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm nejra cehic. this is bloomberg. much.ne: thank you so we are getting u.k. data. this is manufacturing for january. it is manufacturing output rising to .1%.

wereis not as high as we expecting it to be. industrial production is below if you look at the month-to-month figure for favorite -- for january. construction output for january, significantly below estimates. we will get pound for you in a second. we need to talk about brexit. british officials don't expect to secure a brexit deal by the end of this year and privately say january is the real deadline to ensure everything is in place. trade is one of the sticking points. john mcdonnell spoke to bloomberg about these prospect -- about the prospect. >> i think it is almost inevitable. i would rather the government faced up to it now. i don't see any other way about securing the access we want and securing the position with

regard to northern ireland border, which is complex, but this could help us greatly. francine: with all of this, brexit uncertainty. the pound, you can see, a little bit range bound. john taylor and lawrence are still with us. let me kick off with you, john. overall, the economy is slowing somewhat. how bad will it get if we don't have a clear picture of what brexit will look like? economy has held up well since brexit. we had the investment side fallaway a bit, which is to be expected. up.consumer side has held

we have gone into a little bit of softness there, because you are infected -- you are impacted. as we try and get more certainty about the future, we could see some recovery in the investment side. we are starting to see the first signs of wage growth. this year will be negative real wage growth, but next year we might see a push up again. we might see reaction has changed somewhat. previously, we were happy to keep policy loose. moving, other banks unless the economy slows to medically, we will gradually continue to move right set. slowsess the economy dramatically, we will continue to move rates up. francine: larry? lawrence: i think the fundamentals are reasonably supportive for the currency, that is for sterling in particular and the idea we may

have to see more movement from the bank of england. overhanging the long end of the curve any markets to some extent is this issue of how brexit is going to be sorted, and the timeline is not that long down. the problem is a potential split in the tory party. if that happens, then you throw political uncertainty into this fundamental mix. side,abor sitting on the advocating a customs union, they may be slightly more credible on that basis. for the pound, that is the biggest downside risk. francine: are you telling me that if we see more of a split in the conservative party, which we hear about almost every day, but they kind of have a united front, that we would go to early elections in that jeremy corbyn has a chance to become prime minister? lawrence: that is what the market would have to think about.

while labor is advocating one of the more reasonable outcomes via a customs union with that you on many other fronts is probably a list business from the agenda -- a last business from the agenda. business from the agenda. look at this chart. this is euro pound. is this the one to look at? you have seenhn: brexit sentiment play out considerably well. more softer brexit came through. big eurosterling is more tricky to look at, because you have a positive momentum in the euro economy. starting toing is

move back of it. we should expect the pound to be weaker going forward, and maybe watching the pound versus the dollar will give the brexit sentiment coming to her. francine: barry, do you have any positioning on assets and the do you have any positioning on assets in the u.k.? these are all equal probability sorts of outcomes. it doesn't lend itself to taking active risk. you take a view on brexit and how it will unfold, it is probably best manifest through sterling, because there are factors driving the euro and the dollar. it may be a blend in trade you put on, but we tend to watch eurosterling a bit more as a barometer for brexit risk. francine: what does it tell us? we were talking about parity and some of these stocks. it is range bound. lawrence: it is. what you are not seeing and that

relationship is optimism about the outcome. i think that is correct that negotiations are extraordinarily difficult. whether the irish question, access to the common market question, and what has to be foregone for the u.k. in that kind of world in terms of immigration in the european court of justice. the complexity of issues has kept sterling relatively weak against the euro, which is appropriate. the complexity has yet to be sorted out, both in his negotiating sense with europe and also in terms of political implications. i think that is going to weigh on sterling. francine: thank you so much. john taylor, think you for joining us, and lawrence hatheway stays with us. is said to bes rs preparing to shut down. is there any hope for rescue efforts? this is bloomberg. ♪

♪ francine: good morning. you are watching "bloomberg surveillance." toys 'r' us is preparing to a good bankrupt u.s. operations. that is according to people familiar with the matter. charles allen joins us, and lawrence hatheway is with us. thesezon putting a lot of traditional maybe old-school retailers out of business? this is i don't think only amazon. this is a classic case of a assumer where the owners they would be able to generate cash for a long time, and then

they allowed the company to become less competitive. things,ook at various like the capital expenditure, which has been well below depreciation the last eight years. the store became progressively less attractive. in the almighty world, you have to have stores people want to go to. there are plenty of other reasons. francine: do they have a lot of retail space? charles: they do, about 900 stores in total. off,ine: if they sell that is that any help? charles: selling stores or borrowing money against stores was another thing that was extracted cash from the company, but raised the cost structure. one of the difficulties for a highlyinesses is seasonal category, like toys. essentially, you have to make all of your money and one quarter and you are competing against people who can rotate

their seasonal categories and can sell with a much lower gross margin in the key quarter. they become progressively less competitive. , is this toys "r" us an amazon story that the bigger you get, the cheaper you offer prices, the more market share you get and companies like this can't survive? company that didn't go with the times. an idiosyncratic story here about their strategy and how it appears now to have failed them. i would pick a few threads out to think about as far as the sector is concerned. the first is an indebted to company is able to survive in a world in which it can generate cash flows and borrowing costs are low. that is as good it has been recently. we want to be much more careful about indebtedness going forward

and where the cash flows are picking. the second thing is what was mentioned before, which is that to be a brick-and-mortar retailer, you need to offer an attractive reason to get up from behind your computer screen and go there. if you are not spending the money wisely to make your morerance, your offering compelling, then you are probably going to be on the slippery edge of something, which we could associate with the ability of people to purchase by amazon. those two effects could be thought of as messages for the consumer sector. is the charles allen chart. we made this for you. this is the company in the u.s. and white. in blue you have acquisition. it is showing the capital expenditure was well

below depreciation, so it is not even expanding. you are not even spending enough to keep your stores and acceptable conditions. they have become crisp -- progressively less attractive. support asback into well from vendors. they are willing to spend with retailers with attractive stores. best buy has done their best to keep many of their stores in place, because people like samsung and apple are prepared to put money into the stores for shopsng to make attractive. if you progressively run down stores, vendors are going to say i am not going to support this. it is not worth it. i will put my money somewhere else. francine: are we going to see more cases like this? amazon is challenging the industry. lawrence: i think there are two

things i would say. the first is the pressures are acute, and we are beginning to see some issues arising. always are us is one. target mission -- target missions on margins is another thing. enjoyed people have strong growth, strong earnings, low interest rates, and it is allowing firms to probably look better than they are. as the tides go out, interest rates go up. growth slows, profitability becomes pressured by rising wages. we will find out who has a sound business model that survives both sets of tides. in that sense, what target recently reported and what toys 'r' us is going through now are probably hints of what is to come, which is going to be a more difficult time for the retail sector as a whole.

it isn't about amazon, but amazon will make it challenging. francine: thank you both for joining us. charles allen and lawrence hatheway stays with us. up next, china's gold ambitions. the outgoing central bank chief pushes equality growth rather than the pace of expansion. this is bloomberg. ♪

♪ economic, finance, and politics. this is "bloomberg surveillance ." let's get straight to the bloomberg business flash. boosted the ceos pay an increased the banks bonus pool by 6%. was boosted to 1.3 billion swiss francs. saudi arabia's energy minister has hinted that the initial public offering of aramco could be delayed until 2019. amidove was pushed back

plans to modernize the economy. the comments were made in an interview with bloomberg. believe that we are hitting any deadlines, and as far as i am concerned, between december 31 and january 1, there is no value loss for the kingdom. an artificial deadline that you refer to as being significant in our decision-making progress. decision-making process. the embattled chinese conglomerate accelerates its selling speed to repay debt. isuying offer for a site likely to be completed by may 16. the bid is 15% higher than what hna paid for the site last year.

that is the bloomberg business flash. the pboc governor says market access reforms should be accelerated in the world's second-largest economy can be bolder in opening a. the lastd be some of public comments from the man that has led china's central bank for 15 years, the longest tenure in history. on march 19, delegates will vote to appoint a new governor. let's bring back lawrence hatheway. on, you areu were saying that china was not positive but neutral for 2018. does that still stand or do you worry about the concentration of power, which could lead to some mishap of debt? lawrence: at this point, no. --n the road, we we have to down the road, we way have to -- we may have to look at the sign.

it is apparent they are beginning to restrain credit growth. the beauty of it is that they can pull it off right now, because consumer spending services and net exports are picking up the slack, meaning that whatever slowdown happens is gradual, predictable, and nonthreatening to markets. story, nowhe china the terrorists story. how will they respond? lawrence: it is tied up with that. if we end up in -- end up with a rise in trade frictions, we will have to worry. it is tied up with the affairs in north korea and the korean peninsula until we get through this next situation. with respect to tariffs, the concern is that u.s. trade representative it appear -- is apparently working on a paper about the activities in china regarding property protection, intellectual property protection. if that turns into a trade dispute, that would actually be a very big concern for markets.

there is a lot of play in china. they will probably see it through domestically. it is the international side that is more word the concerns would reside. francine: would it be financials that would be hurt the most, u.s. financials, if there was retaliation because china could potentially block that sector off to foreigners? already fromhave the playbook of the europeans around steel, which is selective comfortability measures that try to address the political sensitivities of trade. if china were to do the same, you could think about financials, but you would be looking more at aircraft. boeing is an example. perhaps technology and technology transfer would be another area. it would probably be more targeted to try to put pressure politically on the united states to revisit issues of protectionism. francine: what does this mean for nimby? will the chinese try to continue to intervene with the new pboc

governor or be more relaxed? lawrence: i think they will be more careful. they have memories of a couple years ago when it didn't work out so well and contributed to volatility we saw. a new central bank head is going to proceed carefully. aina is trying to manage trade weighted exchange rate. if the dollar is weakening, then the remember evil strengthened against the dollar. china,e: if you look at the next crisis comes from china, is there a canary in the coal mine? lawrence: i think we have memories of a few years ago when hard landing riskless the problem for capital market. chinese economy is in balance. the company ships trying to restrain credit growth, if that tended to coincide with a global slowdown, we would be concerned. china is more vulnerable in that world.

at the moment, those concerns are probably more in the distant future then short-term. francine: thank you so much for joining us today. that is lawrence hatheway. , we will be talking to the head of energy industry research at goldman sachs. we will talk oil and a little bit more about china. leg up we saw for stocks in europe is struggling a little bit. it is job stay in the u.s. we will have a fired up tom keene. this is bloomberg. ♪ mom, dad, can we talk?

sure. what's up, son? i can't be your it guy anymore. what? you guys have xfinity. you can do this. what's a good wifi password, mom? you still have to visit us. i will. no. make that the password: "you_stillóhave_toóvisit_us."

that's a good one. seems a bit long, but okay... set a memorable wifi password with xfinity my account. one more way comcast is working to fit into your life, not the other way around. francine: asian stocks rise and donald trump agrees to a summit

with north korea's kim jong un, the first time a sitting president has held talks with pyongyang. steel and tariffs on aluminum, but excludes canada and mexico. and the outgoing pboc chief says china needs to see open access reforms and open of the world's second largest economy. this is bloomberg surveillance and i am francine lacqua in london. tom keene is in new york. it is a busy day, jump stay. we look at market movement and anything in between. tom: it is extraordinary what we have got to do over the next couple hours on television and radio. i like that we are focusing on asia, it is the focal point of a number of stories. francine: you are right because the outgoing pboc, who can really say now what he wants has everything to do with the korean peninsula. let's get straight to the bloomberg first word news with

taylor riggs. taylor: president trump set off a global race to win exemptions from the tariffs. he impose a 25% duty on steel and 10% on aluminum. canada and mexico will be exempt. the president invited u.s. security allies to apply for their own exemptions. the bank of japan is staying the course. the central bank has the monetary stimulus unchanged at the policy meeting today. inflation is far from the boj's 2% target. kuroda,'s governor said monetary easing is here for a while. he begins his second term next month. and in the u.k., chancellor of the exchequer philip hammond look get a much-needed boost on tuesday. his cisco much stock is expected to predict faster growth and lower borrowing costs than it did in november. the budget deficit is expected to come in as much as $15 billion lower than expected.

that would make it the smallest in a decade. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. ik'm taylor riggs. this is bloomberg. equities, bonds, currencies and commodities. just one screen today. the vix, 16.40, amid a better stock market. francine: this is what i am looking at. if you look at the market ve nottalked about this is between three and five weeks. bitcoin, four days in a row off a cliff. it really has come down abruptly. of, through the key support 7000. nevertheless, something to watch for through next week. francine? francine: let's get back to the top story, donald trump has agreed to meet with north korea's kim jong un in an unprecedented summit. the president tweeted, great progress being made, but sanctions will remain until the agreement is reached, meeting

being planned! sarah huckabee sanders says the meeting would occur at a place and a time to be determined. joining us now from hong kong is our chief asian economics correspondent, enda curran. if this goes ahead, this would be a major breakthrough. will donald trump take credit for it, which he has, but will he do it rightly so? enda: well, francine, the pace of it is quite breathtaking. it is a very significant development. this is one of the big worry spots regarding jupiter risk and the economy. on the surface, it seems like progress, as this is an unprecedented meeting of these two leaders. in terms of how we know how it will end up, it is a high risk, high stake strategy.

sure, you can map out a deal. economistsestors and are saying, there is a lot that could go wrong. there is a lot of anticipation as to where it all goes. francine: when you say "high risk," once the leaders meet could be worse off if it does not go to plan, then it could of been two months ago? enda: listening to the analysts -- investors were speaking about this today. a signal that significant progress was made, significant concessions presumably enough by north korea return, they would get something on their side, presumably a guarantee that the u.s. would not try to topple the regime and a guarantee of their own securities. sks on bothll big aask sides.

this news was met with a degree of caution that while it is a dramatic headline development, it is not quite there yet. we will have to see how it pans out and if indeed, the meetings do go ahead. tom: and welcome to the insanity of washington. it was remarkable yesterday, the lack of consultation by the president and even parts of the white house with the rest of the white house and with his administration. how was this taken in south korea? to me, that's the linchpin. what do the people of south korea want? enda: i think consistently, tom, the message out of south korea is they did not want this elevated to a crisis level. they thought they could manage it how they have in the past. that is why they pursued the strategy of engagement, and they took a step forward with the winter olympics. we know they had a plan enables, which is quite something. i think today was quite an element of surprise and even shock out of south korea that

they got this far so quickly. but just like all the actors in this, china, russia, both koreas and washington, a lot still has to be said. there is no guarantee how it plays out. tom: do we have any understanding if the south koreans want this to be a long walnut table at the dmz, or are the going to meet in mandarin hotel in hong kong, or at some golf course? do we have any idea of the structure of this thing? enda: well, the details on that were coming from the white house and as best we could tell this morning, they said, there's no confirmation regarding the venue. as you can imagine, that will be one of the critical sticking point. remember back to the vietnam talks in paris, they were held up over objections regarding the shape of the table. the furnishings might have a significant role to play. tom: god, i feel old. 1968 inetnam talks in

paris. for some strange reason i was actually in paris when they started that. they were arguing about the ship of the table, you were absolutely right. enda curran with us, always valuable from china. right now from beijing the senior asia analyst to do is perspective, joining us from skype. a very clear skype, i might add. these are stunnign, stunning announcement as well. president xi will be busy. does china want to be part of these greetings by the president and leader of north korea. we just heard the official chinese reaction of not too long ago. they have welcomed the move. it was to be expected. let'sy because --

put it this way, as you mentioned, there are a lot of unknowns going into this. obviously, this is a guess, but if i was a decision-maker in beijing, i would feel that the likelihood of an outcome here, certainly one that would cause north korea to denuclearize is so small that i would prefer the talks to go ahead and any mistakes that were to go ahead would be trump's and south korean president moon's to be made. envision aboutu the handshake and the photo opportunity? miha: well, there are many unknowns going into this. the first test will be seeing if the summit takes place. one thing i might want to highlight would be the upcoming trip of shinzo abe next month. and though he has welcomed the summit, he has over the last month been very hawkish on north korea.

he has not really supported dialogue. and it is quite likely that trump might go out of that meeting having much firmer views about the summit than he does at the moment. that is one obstacle. in terms of results, we are looking if the summit does take place, at the start of potentially a very long process that can take years. keep in mind of for example, son south korea's sunshine policy which ushered in years and years of negotiations. we are looking at a very long process with a very dubious outcome. francine: miha, what does this mean for strategic, historic allies to north korea, china and russia? miha: mhmm. well, i just mentioned for china, obviously, their reaction today was, in a way, on the one hand they said they paved the

way for this to happen and they also conceded that really, their hands are tied. they tried with they could and they could not get the north to talk. if i had to have a guess, i would say beijing is taking a wait and see approach. it were to appear that there might actually be some kind of an agreement coming out of this, that would prompt probably major strategic questions for china. earlier todayng with a colleague, we were trying to gauge what the likelihood of this being trump's moment is. we think it is exceedingly well, but if it works, this is a monumental, seismic impact on the level of the meeting between 1972.and moa in this would reshuffle the deck where we see north korea and of become closer.

but this is such an unlikely outcome that it is not keeping xi jinping of the night, or anybody else. tom: thank you for joining us, miha hribernik, on the stunning announcement of the president of the united states and kim jong un. within all of this news flow, it is jobs day. we will do our traditional news coverage. we are thrilled to bring you bill gross on television and radio worldwide after the report to see what wage growth does. this is bloomberg. ♪

francine: i am francine lacqua in london. and thee is in new york

countdown to march 21 has begun to that day. 25% tariff on steel and 10% tariff aluminum has begun. according to the president, the country could be spared. international response is not positive. china pushed back, vowing to take strong measures in german chancellor angela merkel has called for a twist. ofling us now, daniel morris b.n.p. paribas. thank you both for joining us. dan, what does the trump tariffs mean for will growth? at what point does this start biting, if it does? expected is one we from november of 2016, the applications of any kind of trade escalation restriction. given how much trump talked about this during the campaign, we expected some kind of restriction and we expected to be negative. we are beginning to see an out

and it was always a question of how far it would go, especially with the exemptions we have for canada and mexico, we are exciting that is the trend we see with the other trading that will hopefully avoid an escalation, but with trump, it is quite risky to predict what he is going to do. francine: michael, your take? ee, this is ar starting position. and sometimes there is more pragmatism towards the end. what potentially could make , to see gerry connolly. even internally, that is not a great strategy, which was to pull out at the beginning, come to a not so harsh compromise at the end. i think there is some nervousness. we will see how the market takes it because donald trump obviously likes to look at the equity market. but the trend is not so rosy anymore, as it was a few weeks ago. tom: michael, let's look at the bond market where you are focused at blackrock.

there is ambiguity here. rates could cut higher or lower , thef the idea of tariffs idea of a war. what is a dampening there. is it towards a lower interest rate, more tepid economic growth? or does it cut the other way. ? michael: i would argue that if we really go into the more negative scenario, that we see basically, countermeasures from china, maybe countermeasures from other countries. i would say probably, it tilts economic growth has begun. thes will be lower in near-term term and longer-term, we can make arguments that it shows less import. inflation, bute i think timewise, that is the secondary effect. daniel, what will you write on terror of weekend. this is extraordinary, the number of people waiting in on

terrorists. -- number of people weighing in on tariffs. is this overanalysis? daniel: if you look at the producers of aluminum abroad, they lost far more in market cap and the supposed beneficiaries of the proposals in the u.s., the steel and aluminum producers. it did look what the markets overreacted and that has corrected already a bit. but then again, we do not think this will be the last we will hear from drop around trade. it couldpoint of view, set up volatility. we see some volatility in the market and that gives us the chance to reallocate our portfolios. tom: what is global trade doing? is it point right now, daniel? i do not have a answer like that from anyone. is global trade doing well right now. >> i think so. one of the concerns you had after the global financial crisis -- we saw the slowdown in trade and it seems to remain

quite low for quite some time. we worried about the end of globalization, or at least a retrenchment from it. it doesn't seem to be accelerating. i think we saw numbers on china. the down side of that is the u.s. current account deficit is growing because the u.s. is importing more from china. which if trump wants to could use as further measures against china. we should be focusing less on the aluminum and steel tariffs, which will hopefully turn out to be relatively small. there is the potential for relationships to sour against china if the administration proposes something else and if anyone how the market reacts. francine: coming up on bloomberg markets, the conversation with charles evans, federal reserve bank of chicago president. that is that 10:30 a.m. in new york and 3:30 p.m. in london. this is bloomberg. ♪

francine: good morning, everyone. i am francine and i am in london. tom is in new york. it is time for a morning must-read and we picked something out for you tom out of the ecb. it is ambrose evans pritchard, one of tom's favorite. hasrites, the eascb dropped the long-standing pledge to boost stimulus. the tribe of german lead hawks, marking a major turning point in the eurozone's regime.

attacked the trumpet ministration -- attacked the trump administration's tariffs. michael, not a lot of people will agree with what mr. ambrose pritchard wrote. is this him talking down the euro, forgiving into the german hawks? thehael: actually, i see change is relatively small. draghi got a question basically saying, six weeks ago the data was marginally weaker, so why change it now? i think the truth is, obviously the ecb is looking a bit more ahead than the next meeting or the meeting after. they have a course and they know they will decide during summer weather to taper after september obut if you make that decision in june, we do not need the wording that you potentially increase it. for that reason, i actually

think that the second market reaction was correct. actually, bonds ended up stronger. that gave into the technical detail. it is just part of this medium-term cost. francine: is this the top-tier down, -- is this the top euro down, or something else? >> i am sure he would like that, but he could lower interest rates further or startup qe again. they could have an impact, but we actually think the euro will continue to strengthen and that will be a challenge for draghi regarding their inflation objective. they are betting that growth is strong enough. if you look at objections, inflation is slowly rising towards the 2% target they have and of course, we do have the political considerations if you will, that knowing that qe is popular with parts of the ecb,

and that is probably why they are slow. tom: i was stunned at the turn of the headline yesterday. extending out his strategy and also, you could hear a pin drop as mr. draghi went after mr. trump on tariffs as well. i know he is not replaced well out over a year. but in the past of his release replacement start yesterday? >> we have been thinking about it for a while. you have seen articles of the newspaper on his replacement and his perspective on qe and the differences from draghi. what you are right, it is a ways out. i do pick it will impact monetary policy between now and the end of the year. that is more or less fairly set there have been many discussions and newspaper articles that are not of a lot of import this year. tom: of course, inflation falls

right into the u.s. jobs day. and to wage growth. as always, we are honored to have bill gross with us. what a joy to have alan krueger of princeton university with us. alan krueger, on the minimum wage. stay with us. this is bloomberg. ♪ retail.

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tom: good morning. "bloomberg surveillance." francine lacqua in london and i'm tom keene in new york. .ith us is michael kreps there seems to be something that is not going away and that is the effort great angst of substantially higher yields along with lower fixed income prices. every interview we do pushes against that idea. why will yields stay contained? it's a good question

and probably a question fixed income managers like me are confronted with every year in the last 10 years. on the other side, i think we have an interesting point in time for several reasons. we nowlook at the u.s., have for the first time in a while what i would call a meaningful hiking cycle. that we are iny an interesting point in the hiking cycle because the hiking cycle so far was very interesting for fixed income managers when you ask yourself when they hike once or twice or three times a year, but others are relaxed because the u.s. long and was sustained. i think the curve is now so flat that you can really ask the continues orhe fed is the time over about that the long and will be so anchored because we have reached a limit of how flat the u.s. curve can be near-term. can obviously have strong implication on other asset

classes i that have benefited from the long end. tom: i have been wrong on this and guilty of this as well is our complete fixation in america on washington and to the extent of the macon financial economy. twoeems in the last week or that as a general statement that europe has rolled over. the gdp numbers may be are not going to be there as well. is this as good as it gets for yields in europe? i would agree to the first part of your statement. pmi andook at the economic growth in the fourth quarter, i would say economic growth is probably as good as it will get in europe anytime soon. on the other side, i would probably not say that yields cannot rise at all from here because yes, it's relative that

the economic news is weaker. it makes the tapering in q4 a bit more likely, but as long as the slowdown is relatively muted and that is what we so far so, the ecb will pretty much stay on the preset course and stop the qe at the end of the year and at the end of 2019, we can be back to zero interest rate, which is a big change after years of negative interest rates . tom: quite an interesting timeline. michael, thank you so much. right now, your first word news. here's taylor riggs. taylor: the have insulted, threatened, and mol mocked each other and out trump and kim .ong-un have agreed to meet south korea says it will take place by matthemay. says they have

halted testing for now, but economic sanctions will remain in place. leaders of the u.s. and north korea have never met. canada and mexico will be exempt from the new tariffs on steel and aluminum as long as they agree to rewritten trade deals. allies are lining up to go for their own exemption. trump left a lot of leeway and left a lot of allies to discuss discuss ande no -- negotiate their own solutions. expect officials do not to reach the brexit deal by the end of the. those officials think january is the real deadline. the u.k. is set to leave the eu by march of next year whether there is an agreement or not. the eu says they want a deal by october. dayal news 24 hours a powered by 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. francine: the people's bank of

china governor says market action reform should be accelerated and the world's second-largest economy can be bolder and opening up. or swan the his first song, he was speaking at the national people's congress and so the focus was on achieving quality growth rather than the pace of expansion, which is something that we need to keep a very close eye on. that's the very latest from this part of the world. for more on this, let's get straight to our guest this hour, michael. is china a positive, neutral, or negative? dan: the quote could've come from trump himself to one of his objections and his negotiations with the chinese is to increase taxes. that's part of the reform that people in the u.s. and europe would like to see. statespositive and some

would like to believe that you like to see more reform in china that matches the rhetoric that frankly you got last year. hopefully now and that he is leaving, i will have to see what is replacement thinks of this. attitude, you of will see a more constructive relationship between the u.s. and china to opening up the chinese market. francine: what does the concentration of power of the president actually mean for the authority to deal with deleveraging and the like? michael: to some degree, obviously now we have learned that he will be one of the longest-serving religion china, but that was prepared over many months. to some degree it's not that surprising. there is no question about his authority to reach his aims of higher quality growth, reaching the deleveraging in the cycle.

from that perspective, i would say our scenario has not changed in a major way. it will be a fine balance. this process will continue as long as economic growth holds up reasonably well. i think we will slightly compromise on the targets one economic -- one economic growth goes more to 6% or lower. tom: daniel, in the textbooks there's talk about a trilemma. mmas on tuesday. how's this express through renminbi? daniel: and matters quite a bit for the chinese economy and for the u.s.-china relationship in terms of trade and for the other countries in asia that try to export to the u.s.. it's absolutely crucial in terms of how things will develop early

from here. bengs around the yuan will important in terms of not upsetting the relationships we currently see. if the dollars continue to appreciate, which we expect it to thanks to stronger pressure, oft could be a source tension, but for the most part we do not believe there will be a dramatic change in the value of the currency. tom: michael, i look at your markets. chinay gilt market out of and for that matter out of asia fluidl something that is and has a greater death than a decade ago? michael: definitely have. we have not heard about them opening up the bond market specifically, but we have heard about the opening up of china in general. they're also trying hard to open up the bond market to get the bond market included in more of

the standard indices. that is definitely playing a bigger role than it was 10 years ago. i do not think we are even half that way. we will continue that way and evening out. , and asia years ago position was kind of an outside position and now it's quite more standard to really have trade in that region as well. francine: does it hold even if we have a trade war? michael: i think it still holds tot we will try th position the funds, but it could be quite different positions that they are now. tom: michael, thank you so much. daniel morris with us this morning with bmp. we have a lot to talk about in the united states with a terrific news flow out of washington. and part ofjobs day

that is talking to michelle meyer of bank of america merrill lynch. we will do that and 8:00 hour to hour. please stay with us. this is bloomberg. ♪

francine: this is "bloomberg surveillance." i'm francine lacqua in london and tom keene in new york. oil set for its second weekly decline after concerns over the global glut way on prices. american production hit a fresh record. meanwhile, the saudi arabia oil minister accompanied the crown prince to london this week, speaking exclusively to bloomberg. he hinted that opec could

continue cutting their output the on 2018. -- beyond 2018. >> oil markets change on a dime as they say so it's premature for me to say exactly what will happen in 2019. >> would you be open for it? >> i will say with certainty that we will continue almost a certainty. things can change unexpectedly, but it looks like we are set to continue with this framework for all 2018. then we will determine what we need to do in 2019. allone thing i know is that the participants have worked hard. what we have achieved this partial -- is partial. our job is not done yet, but it has been quite a turn from the list that we have seen of 2015 and 2016. the countries, the companies, the service industry, our -- so what we want to

do is preserve what we have achieved. what we have achieved as a framework has been a savior for an industry that is too valuable to leave to the volatility that we can be subject to. i think everybody wants to work hard to preserve it. i'm sure in 2019 there will be an evolution. we will see what it brings, but we're not just going to part a way. market called for it, you and the members would likely be open? >> we will do what is necessary to preserve the market stability that we have got. >> any discussions of phasing out the curbs? we see oil trading between $60 and $70 and many say the market has rebalance. >> i don't think the market has rebalance. certainly in the first quarter builds seen as expected

in both crude and inventory. i take that quality globally shaky so we have to see and wait for what the market does for the remainder of the year. francine: that was the saudi oil minister. let us bring in that head of energy goldman sachs. thank you for coming on "bloomberg surveillance." what is your near-term forecast for the price of oil? i think you had $82 and six months. are you still holding that if you? view? >> absolutely and the main reason is demand. everyone talks about u.s. supply growing, but the key surprise is demand. in the current strong global economic environment, we think demand can grow at 1.8 million barrels a day. francine: coming from where? >> most of the demand growth

comes from emerging markets which are doing well at this time, but also a lot of the producing countries themselves where the higher oil price incentivizes higher activity and consumption. also in the countries, we see a good output for demand. although efficiency gains continue, and a strong economic environment, people tend to upgrade their cars. you end up consuming more gasoline. francine: could that change if we see a trade war? how much will it shave off growth and hurt demand for oil? michele: we continue to see a strong gdp environment. we do not think it will be hurt by trade, but if we were to see the material slowdown in the global economy a recession, yes, that would change and have an impact on our oil price view,

but that is not what we forecast for the next couple of years. know you don't talk about individual securities, but there robust dividend payment by european big oil. can they sustain that given lower nominal gdp and lower potential gdp growth? isa 5% dividend an artifact of another time? michele: that's a very important question. i think the sector is completely changing. what is happening today is that even with an oil price of $60 to $70 a barrel, these companies make higher returns and hire free cash and higher earnings than what they did when the oil price was about $100. the key reason is that we're back. period,014 to 2015 oil you had 50 companies.

now you are back to the seven sisters, the only companies that can fund and take the technical and political race to develop megaprojects. tom: the seven sisters are companies like exxon mobil, bryn mawr, and smith college as well. that was a new england show. when you look at the big oil's and the seven sisters if you that the big distrust is they will gallivant off to the arctic ocean and spend way to much money. is that a worry that goldman sachs has of going off in doing megaprojects always returns? michele: no, we don't think that is going to happen. fights reason is big oil with megaprojects, mega cap x, mega inflation when they feel threatened. it's financed by banks and bonds the way we saw it for the last 15 years. rulebook is the

one of the 1990's where effectively only the seven sisters can finance and take on megaprojects. between themselves, they tend to be quite disciplined. if we look back to the 1990's, oilas period where big outpaced consistently year after year and that was a golden perio d for them. that is what we are coming back to 10 years. francine: let me bring it over to my chart. this is my favorite oil chart and we will push it out to social media. good morning to our radio listeners. you can see brent wti and you can see every time the principle goes up, the u.s. rig count also goes up. if you look at these dynamics, what does it mean for capex? are they not spending enough? big mover thate

oil goes up to $100 in two years because they're not spent. daniel: if you look at business investment in the u.s. over the last year and one of the things that had driven u.s. growth was an increase in business. that was extremely concentrated in the energy sector. whether that was for big oil or shale, that was more toward shale. you have seen a successful amount of investment there, but we don't see a deficit of investment in the sector in the u.s. and that makes us more cautious about the outlook for oil. we do anticipate further increases in production in the u.s. if oil prices stay at this level. that will act as a natural cap on how far oil prices will go. francine: any comment on the chart? michele: what we are seeing is typical of this phase in the cycle where the show cycle investment like u.s. shale is fully funded. long cycle investment doesn't get funded anymore.

what we are seeing is an air up term -- near-term uptick in production. no investment in low term long decline rate production. period ofliving in a oil production abundant, but that will stop as we move at the end of the decade. sustainede can create tight oil markets for many years to come. francine: will opec and russia have to extend their production cuts if they're going to stabilize the price of oil? michele: that partially depends on the strength of global demand growth. they may start already to unwind some of the cuts in the second half of the year if demand would be as strong as we expect it to be. francine: so that's a yes? if demand stays as it is and we don't have a big shock to world growth, you are expecting mainly saudi arabia and russia to the working together? michele: yes. i think the partnership has been a store nearly successful. they managed to stabilize the

oil market and reverse the austerity policies that there had to impose on their countries and people and bring back some level of mild inflation and the global economy, which is actually quite healthy and this phase of the cycle. i think the all alliance is very successful. tom: maybe it's a research note from monday and we would love to get out in front of that and get an advance look at goldman sachs. what do aluminum and steel tariffs do in the united states to the metal of hydrocarbons, the pipelines, the rigs? what does it do in europe? it's got to have a knock on effect. michele: that's a very interesting point and it shows a clear divide in the industry. on one side, big importer arernational developments

deflationary and moving lower on the cost curve and becoming more profitable. on the other side, shale is already suffering from inflation because of labor and bottlenecks. will further compound the inflation, which means shale is becoming more expensive, less competitive. i think it continues this upward pressure on the cost curve of oil and the long-term oil price. tom: thank you so much. greatly appreciate you with goldman sachs and a briefing there on the linkage of the economics of oil into the reality of european hydrocarbons. michael mckee now with us in washington. he's in charge of international economics o and policies. does anybody in washington care about the jobs report today? there's so much other entertainment happening. michael: i will let you know at 8:31 a.m. on one the report average hourly earnings.

that is what wall street is looking at and maybe the unemployment rate. go below that and you will see the market selloff. to have an impact on the markets of the short run, but there is a lot of news out there. tom: there's a lot of news out there and we will get wage inflation as well. how does it dovetail at to we saw from mr. mario draghi yesterday, extending out and waiting for inflation to come? how will jerome powell interpret this lack of inflation and extending out within the united states? michael: they put it in terms of their model and slack in the phillips curve. to absorb more workers and the unemployment rate goes down, it should get harder and harder for people to find the employees they need. we saw that in a report yesterday from the national federation of independent business. of small businesses looking for additional hires cannot find anybody. we are getting tight labor markets and that should push up wages. we saw that with the overall

wage number last month. the question is what happens to just the production worker an average guy. if you take supervisors out of it, the wage gains were not as strong. we also have a technical reason to think smoothing reasons may go down a little bit. maybe not this month, but inflation is definitely coming. francine: what are you expecting from the jobs data? daniel: consensus is 2.8 versus 2.9 last month. there is a slight concern for another unpleasant surprise from the markets. one because they have taken up with the vol and all the things we have talked about. inflation expectations have been coming back down. if we did get a surprise on the upside with higher wage growth given what has been happening with the inflation expectations, i think you have a chance for another bump in equity prices. tom: i've got a chart, but it's

not nominal wages. it's inflation-adjusted wages. you know this chart better than me. this is the atlanta fed wage chart, adjusted for inflation. as you know, the headline year is it ain't happening. we have that from all our viewers and listeners. where's the wage growth? i don't see it out there. where is it? michael: go back a little bit in your graph to just after the financial crisis when wages went way down. they went way back up again. there is a feeling among economists that perhaps what happened is companies held on their workers and did not cut their pay, which is what you expect under a normal economic model to clear the system. wages have remained sticky and higher than they otherwise would have been. you tell that to the guy who looks of his paycheck and he doesn't think so because he wasn't expecting it to be cut in the first place, but that may be one reason companies get used to

keeping costs down on the employee side. have tor later, they raise wages that they cannot find workers. tom: thank you so much and we greatly appreciate your your travels to mexico earlier this week. greatly appreciate your attendance particular on china. coming up next, harm bottles of unicredit. ♪

♪ tom: this morning, it is jobs day. usual jobs report, but also the jobs at harley davidson in your, pennsylvania that may be lost to save it steel jobs 212 miles away. nixon goes to china and trump goes to maybe north korea. there is no henry kissinger. it is a well expert free trump foreign policy.

draghi, powell, connie, and kuroda -- will they go in search of inflation? we consider the gradual growth of inflation across north america. this is "bloomberg surveillance." we are live from our global headquarters in new york. i'm tom keene and francine lacqua in london. the news flow is extraordinary. we got to the last hour brexit free i can't believe we did that. north korea has really subsumed all, hasn't it? francine: we did have a good chart, but it is never really brexit free. how do you read this reprimand between north korea and the u.s.? this could be very high-stakes. if they meet and get along and something happens, we got what more peace, but if the two leaders to meet and they do not get along, we could see a selloff. tom: for art global audience, thezeitgeist is how alone

president was as he generated this historic announcement. with your friday briefing, our first word news on korea, pierced taylor riggs. taylor: they have insulted, threatens, and mocked each other, now president trump and north korea's kim jong-un have agreed to meet. a time and location for the summit have not been set yet. south korea says it will take place by may. president trump says north korea has agreed to halt missile testing for now, but he says economic sections will remain in place. leaders of the u.s. and north korea have never met. president trump has set up a global race to win exemptions from the steel and aluminum tariffs. the president signed an order imposing a $.25 duty on imported steel and 10% on aluminum. canada and mexico will be exempt as long as they agree to a rewritten trade deal. the present invited u.s. security allies to apply for their own inception. the bank of japan is staying the course. the central bank cut the monetary stimulus unchanged.

inflation is still far from the boj's 2% target. the banks governor told parliament this week that powerful monetary easing is here for a while. corona begins his second term . next month. the chancellor of the exchequer will get a much-needed boost on tuesday. they are predicted for faster growth and lower borrowing been november. the specter budget is to come in as $15 billion lower than predicted. that would make it the smallest in a decade. global news 20 for hours a day apart by.700 was and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: let's get to the data right now with a quiet market with the news flow frank wly. the vix is 16.32 and it shows the calmness to the marke ts.

francine? francine: the dollar is steady and treasuries edging a little bit lower. asian stocks were rising on the agreement for this unprecedented summit between u.s. north korea. it seems that markets tempered a little bit of their enthusiasm. i guess waiting for the u.s. jobs report. tom: let us begin our coverage on the historic events in washington. kevin cirilli always in washington. i want to get to you in a moment with the tensions, the political tensions in washington, but first, tom mackenzie joins us from beijing. i'm thrilled you could be with us so late. i don't know where these two are going to meet. maybe they meet at the dmz, but just as easily they could eat at the -- meet at the friendship bridge. explain the tension between china and north korea at that historic river that divides them. tom m.: the tension between

china and north korea has been exacerbated in the last for years. president xi and kim jong-un have never had an official meeting. the relations of china and north korea have been the lowest in decades. some of the experts here beijing ath chinese experts looking this said that one view is that china has been sidelined from these talks. china host of the six party talks that ended in 2009, but they are not party to these talks . it seems unlikely there will be hosted in china, but we will have to wait to see. china has welcomed the dialogue. it is something they called from. talks fromlled for pyeongchang in washington. there is concern that they will not be involved in this conversation. tom: do you conflate tariffs into this announcement on foreign policy or are they too distinctive ideas to mr. xi and

the chinese leadership? tom m.: i think they have to be taken together because that is positionshas hi the trade action has taken on china in many ways. he has conflated the two so i do not think you can unpick them easily. he is concerned about them being brought in the out to a wider range of sectors. he's concerned about it being retooled. china signed off on these sanctions, the most recent round of sanctions on north korea. part of that has played to this breakdown of relations between north korea and china. china in some ways has been like a rock -- been between a rock and a hard place. they are facing pushback from north korea. when i was a north korea back in 2016, they are very interested

in striking up a dialogue with the u.s.. they were back then and clearly they are now. they raise their eyebrows when you try to link the north koreans in china. they do not like to be seen as china's little brother. francine: kevin, how much does this embolden president trump? this is an unprecedented summit. a lot of times he was alone and asking for this and playing tough. does this mean the president will be emboldened even more to go at it his own way for domestic policies? seniorpresident trump's administration officials saying they feel this is all happening because of economic pressure they place on north korea by isolating them. they feel if that continue pressure is going to continue to bring north korea to the negotiating table, but they're also doing this with extreme skepticism. i can tell you that that is really next on the priority list for republican leadership in the senate to get that through.

it is also what the treasury department is pushing for in terms of the next priority. that's after the dodd frank bill makes its way through. in terms of these economic sanctions, a really is still going to continue despite the presence agreements -- president's agreement to meet with a dictated by may. look it north you korea, they were historically very close to russia. does the positioning of the u.s. talking unprecedentedly with north korea actually weaken the russian position in the world? tom m.: it's an interesting question. certainly we have seen overtures from russia in the last few years to try to improve their ties with pyongyang. putin and his colleagues are pretty adept at using leverage to cause instability geopolitically. certainly there have been trying to boost those ties.

there's a bit of trade between russia and north korea though it's fairly minimal. china is still the main trading partner, providing 90% of the trade and energy. this seems to put russia back on the back foot in terms of their involvement with north korea. tom: kevin, let me go to you with a little bit of reaction. no surprise from "the washington post" as he has been strident on the tone of the american military. he nails it on the alone this year. the president has agreed to meet mr. kim, giving the worst human rights abuser on the planet what he must wants -- international legitimacy. if you bother to talk to north korean experts, he would learn that kim's regime is pursuing its age-old aim of pushing u.s. military forces off the korean peninsula. kevin cirilli, how will the secretary of defense react to this announcement?

what will he do with our military expansion in the north pacific? doesn'took, i mean it matter what my opinion is, but i can tell you that i speak with several national security intelligence community sources, both who have worked with the obama administration and the trump administration. across the board consensus is that talk with north korea is a positive thing provided that it's done with substance skepti. i don't think anyone and be a ministration or the previous administration would argue that they are trusting of this dictator, but the question becomes well that communication lead to some type of sanctions or some type of framework that would allow them to denuclearize? right now the overwhelming consensus from the administration standpoint is that there's a commitment from talks to do that. tom: way too short today. tom mackenzie, greatly

appreciate the effort from beijing in your friday evening. coming up, it's jobs day. even kevin cirilli riveted with what will happen with wage growth. we will speak on the leverage is to the market with bill gross . stay with us. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." i'm taylor riggs. let's get the bloomberg business flash. it's been a decade since lehman brothers declared vacancy arekruptcy and now they being paid to recoup their role in the financial crisis.

that is more than some expected for the mortgage backed securities yo. ubs has boosted its bonus pool and given the ceo arrays. about 6%onus pool rose to $3.3 billion. his pay went up a little bit less than 4% to almost $15 million. so-called pharma bro martin shkreli could get 15 years in prison or more when he is sentenced today. portray him as a manipulator who stole investors funds to start a drug company. his lawyer's say investors and his two failed hedge funds got all their money back and more. that is the bloomberg business flash. tom: thank you so much. on this job day, we are benefited by harm bundles. he has a huge charm of being from another land so he looks twisted at the american economy

and looks twisted at our greater economics. you said we have to talk about the 31st president of united states and a great joke was it was herbert hoover. herbert hoover was hugely misunderstood as a brilliant engineer and businessman who really had a checkered and challenged presidency. granted into a really difficult economic time. "the wall street journal" equates mr. hoover to mr. trump. do you buy it? harm: no, i don't. i think mr. hoover really misunderstood what he was doing. he was pushed into these tariffs. he signed the smith holly act back then being convinced by gentlemen it was a great idea and i don't think he had a strong view about it and he regretted it. this time the push really comes from the president or maybe one or two trusted advisors. tom: you have done an eclectic

set of research on saudi arabia and your work with europe as well. respond as part of europe or is germany going to micro-adjust their trade given the trade war? harm: it is tough. we have seen over the last several months the debate that trump has been accusing germany because germany has this huge current account. germany said we don't do european trade politics. that is done on the european level. we have seen a response by the european union as they came out with a list of potential retaliation targets. at the same time, what you're hearing from germany and berlin is that the approach in germany is a little more muted and cautious. is weetoric right now would not like to retaliate that much and that hard. maybe because germany has more to lose, but maybe it's been the german approach since world war ii or whatever being a bit more moderate on a global seen.

i think germany tries to save the day by not being aggressive, but when you are getting pushed and germany is being part of the european response. this point, what is the percentage of this possibly escalating? harm: [laughter] that is an easy question. francine: in 20 seconds please. [laughter] harm: we certainly have entered the slippery slope down towards more protectionism and actually towards a global trade war. there is still hope that we can somehow solve the situation. obviously by itself it's not changing a lot and i think mr. trump wants to use it as a bargaining stick. tos a big bargaining stick push other countries to a dread that's -- address the trade imbalances, but it's the u.s.

who should address the steps. tom: let's repartition on this before we move on to jobs. you have written extensively about we are bring in a lot of imports and the president is hysterical about that and you are saying export. is it any sense of export growth in the president's discourse so far? harm: no, that's really the missing piece of the whole debate. onas in washington last week a panel of making u.s. manufacturing strong again. i was stunned to see the make and exports talking only about taxes and regulation. there was one of three panelists who mentioned education way down the list. if you have the same debate in germany, it would be all about labor shortage. the companies have issues finding good labor. i think this is what the u.s. should be working on. do your own homework first and

then talk to others what they are doing wrong. not everybody is playing by the rules we agree. there is plenty that the u.s. could and should do by itself to solve the problem. francine: thank you so much. harm stays with us. coming up with us on "bloomberg markets," a conversation with charles evans. we will talk dollar and jobs and inflation. this is bloomberg. ♪

francine: "bloomberg surveillance." tom and francine from london and new york. let's talk about brexit. we understand that u.k. officials don't expect to reach a brexit deal by the end of the year and privately think that january is the real deadline to get in talks for exit tha day. he wants the withdrawal agreement done by october of this year. the uk's shadow chancellor talk to bloomberg about the prospects of staying in a customs union with that you. >> i think it's almost inevitable. i would rather the government face up now and i don't see any other way about securing the access that we want and also securing the position with northern island border, which is

extremely complex, but help is greatly. francine: with us is harm. when you look at questions but the markets are asking themselves, whether it's a third party can stay together or is it the labor government next shortly or do they still worry about what brexit will look like? if you hear the different views within the u.k., my impression is that the market has taken a step back a little bit and just waiting for the u.k. to come up with a view. we've heard the speeches from may, but our view is that her speech was lacking all the details. this northern ireland question is a tricky one. it is certainly not what the market, the global market is painting much attention to these days. francine: will it continue playing out on pound? do you look at cable or euro

pound? harm: that is more of a question that you have for effects guys from time to time. we think that the dollar pound will go up over the next several quarters. the same time, we think the euro-dollar goes up a little bit. on clarity of the position that london has right now is the main topic. i think the rest of the european union is just watching and waiting for some clarity. francine: i know tom has a couple of questions on possible your levels, but if you look at the political situation in italy where we are nowhere near a government and we do not know what we will get. is europe in a better position than it was three months ago or in a worse position? harm: i think it's in a very similar position. the economic indicators fluctuate on monthly basis.

the political situation has not really changed. germanys believe that will get its act together and come up with a grand coalition. merkel will stay on as chancellor. in italy, we expected something like a hung government and that is basically what the election results provided. as i said, europe is enjoying one of the strongest growths in several years. tom: we will go to jobs day in a moment. a great lineup of bill gross among others. in your introduction, you really caught me by surprise. did you mean october of this year is one we really start getting brexit decisions and brexit deadlines? francine: if you look at the final deadline, it is march 2019. we definitely have to be in october because that would give the parliament enough time to vote on it. tom: to me, that's fascinating. i was not aware of the

immediacy of this. and suddenlyober is what i would put it from across be a limit. francine: two years goes fast. harm stays with us. coming up on "bloomberg daybreak," a conversation with tom when berger. ♪

tom: it is new york city. it is the advent of the spring season. seasonable weather here and nothing really to talk about, but nevertheless the days getting longer. days or longer for those long on bitcoin as well. we've got talked about it and 10 or 11 days. just a quick touch on that point. drag up the chart if you would. actually a big drop with some 20% as well. with bitcoin down, it's a rollover chart.

i don't know what to make of it other than to make you aware that suddenly again bitcoin is down, down, down. with your friday briefing, and incredibly busy first word news, here's taylor riggs p taylor. taylor: they have insulted, threatened, and mocked each other, but president trump and kim jong-un have agreed to meet. a time and location has not been set yet. south korea says it will take place by may. president trump says north korea has agreed to halt missile testing for now, but he says economic sanctions will remain in place. leaders of the u.s. and north korea have never met. canada and mexico will be exempt from those new u.s. tariffs on steel and aluminum as long as they agree to a rewritten trade deal. u.s. allies are lining up to apply for the on exemptions. president trump formally imposed the tariffs in the signing ceremony, but he has left a lot of leeway. he invited u.s. security allies to negotiate their own exclusions.

the trump administration wants cut $100 billion off its trade surplus with the u.s.. that would be a cut of more than 25%. shortfall that china rose 8% to a record high last year. president trump has threatened to take a number of actions. british officials do not expect to reach a brexit deal with the european union by the end of the year. according to people familiar with the negotiations, those officials privately think january is the real deadline. the u.k. is set to leave the eu by march of next year whether there's an agreement or not. the eu has said it wants a deal by october. global news 24 hours a day powered by 27 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. tom: the joy of jobs day. america flat on its labor back.

those times of changed and we have moved on to a better and fully employed part of america. harm is with us from unicredit and carl riccadonna wanders by of bloomberg economics could i show this chart earlier. this is inflation adjusted wages. it's a bunch of fancy math that i don't get. there is no way growth out there when you look at inflation, right? carl: it's true if you look at the chart that you have there. we see just a very mild uptrend. that means that market participants overreacted to that surprise in average hourly earnings that we saw following the january report, meaning to step back and reassess. when we do that, the bigger picture is a slow burn on the wage front. tom: you sound like you work at the fed. they are devising chairman powell. what will they tell him to look

for in the morning report? carl: it's pretty consensus feel at this point that the unemployment rate falls to 4.0%. that's the lowest since december of 2000. in addition to moving to full employment mode, you have to watch for the delayed reaction from inflation, which is the wage pressure number. the payroll number will get little traction assuming it's within a standard deviation of plus or -100,000 from the consensus. how do tariffs actually impact wage growth? does it mean that chief executives hold back from paying their employees more? carl: it is not a totally straightforward answer to that question. it depends on the uncertainty and the expectations of whether the trade tariffs will be put in place permanently or over a short time. if it is sickly disrupting corporate confidence and will not pass through to higher wages for workers. carl, how difficult is

it to explain why we have not seen wage growth we were expecting last year? if you are able to explain that come it means that you are a more accurate forecaster for this year. carl: that has been the challenge of the cycle. economic cycles don't repeat. they rise. that means economists and forecasters have to look at what is working in the current cycle. the current cycle, the level of the unemployment rate has not been that useful as a predictive tool. when looking other indicators that have worked, view six has been better than the unemployment rate, but better than the you six rate is the unemployment ratio. when we look at that metric, it is a story of a slow burn and gradual pickup of wage pressures. they are moving in the right direction and not about to surge. tom: part of this is a fully employed america. our listeners say that's

a bunch of hot air because they do not see fully employed america. janet yellen had slack. his jerome powell going to have a slack equivalent? will he search for a word that will describe the political labor economy versus the numbers that carl is talking about? harm: i think it worked after we got adjusted toward what yellen was talking about. the slack that carl referred to is more than just b the unemployment rate. one tricky thing that the fed tries to tell us and some people still have not understood is that a stable participation rate that we have seen now for five years means a decline in slack because the participation rate includes everybody, including the retiring baby boomers. the demographic trend would tell us the participation rate goes down and the fact that we are moving sideways means less slack. tom: you got the red tie memo today.

within the fancy red tie crew, it doesn't matter. our viewers and listeners in their communities c2 labor two labor americas. will that change with the employment rate that call talks about? employment is more than whic wage gains. globalization is something that increases the pay gap. technology and progress is something that increases the pay ge gap. we have to improve the skills and education of the workers to make them more productive to justify higher wages. carl: the janet yellen legacy at the fed is alive and well at the start of jay powell term. chairt mean, i mean that yellen raced significant questions about the real level of full employment and the economy. jay powell and his congressional testimony mentioned that it

could be anywhere -- i will paraphrase -- between 3.5% and 4.5% so he's not totally convinced we are there yet. there is some slack heading into his tenure as the chair, but that will be the key change relative to janet yellen. francine: you were talking about skills. why have we not seen more people asking for a wage increase? doesn't go back to the fact that we are in full employment but people do not feel confident enough about their future to ask for a wage increase? harm: there are a couple of reasons. it is changing right now and people are starting to get a little more aggressive asking for pay raises. over the last several years, many people still have the great recession in mind so they were a bit more cautious. you are a little more careful asking for higher wages and you're just lucky to be employed. plus, we had disinflation on the headline level, which means you big increasesny

on the nominal pay to offset the loss of purchasing power. that has all been changing right now. therefore, i agree with carl that there is an upward trend in wages, but i also think what we have seen over the last two months is exaggerated the inflationary pressure. tom: we will have a jobs report and it's not like it was 10% unemployment, but it's a stunning thing frankly if we will come up with a 3.5% number. his 3.6% unemployment a sign of healthy america? carl: that certainly is a sign of a healthy america and it's not unprecedented. we have been at lower levels for much of the 1960's and also in the early 1950's. we have been at these low levels. tom: i have to go back and look at that. carl: what's interesting is that he talks about participation and a lot of economists say that we cannot really model or differentiate between the cyclical and structural trends in labor force participation,

but a key variable is wage pressures in the economy. these fence sitters that are marginally attached or not participating in the labor force will be drawn back in when we finally look at the wage pressures and we have not crossed that threshold yet. tom: this is the only reason that they show up. we can bring up this chart right away. bring up the carl riccadonna unemployment chart. way under 4%to lbj and here's the joy of eisenhower and substantially subdued even under 3% unemployment. i haven't looked at that in ages. carl riccadonna killing us this morning. [laughter] francine: as always. when you look at wage growth, does it move if we have dollar strength or weakness or is it largely uncorrelated? carl: the dollar has become far more important as a driver of economic conditions as trade has become more important for a once fairly isolated u.s. economy.

we learn that coming out of the great recession. weakness helped the export sector, which got us to where we are today. that is a big risk as we watch economic conditions in 2018. what happens to the dollar from here? if the fed is truly the only game in town in terms of tightening policy, tax reform meeting a lot of for-profits being on short to the u.s., all these factors should augur for dollar strength. that will do some of the heavy lifting for the fed. the icing on the cake may be the ramp-up on the fed balance sheet unwind that will hit its full velocity in q4 this year. someone has to buy those assets from the fed. it will not just be domestic purchases. that means foreign purchasers are going to have to purchase dollars before they can purchase treasuries and mor mortgage securities.

tom: we will see you in about 12 minutes with harm and carl riccadonna. i think we have to call it the carl riccadonna chart. we will come back and harm can comment on it as well. he knows the chart. he does not need to be like me and reminded of it. alan krueger is with princeton university and the former chairman of the president's council of economic advisers. alan krueger on 3% to 4% unemployment. stay with us. it's jobs that coul day. it's bloomberg. ♪

taylor: this is "bloomberg surveillance." i'm taylor riggs. let's get the bloomberg business flash. lenders appear ready to give jcpenney more breathing room

again according to people familiar with the matter. the struggling retailer sold $400 million of bonds. jc penney will buy back some debt that mature next year. it will try to survive a retail apocalypse. toys "r" us is getting ready to liquidate its bankrupt u.s. operation, according to people familiar with the matter. a shutdown of the u.s. division is more likely in recent days. toys "r" us has not been able to find a buyer or reach a debt or restructuring deal with lenders. cigna has proposed a $54 billion takeover of express skips and it faces a drawn out review. it will see of customers actually benefit from the consolidation. the coming says the deal will help lower health care costs. regulators are reviewing cvs agreement to buy health insurer aetna. that is the bloomberg business flash. francine: there's been a change

of linkage at the ecb. mario draghi has dropped the pledge to wrap up on buying up the economy deteriorates and that is as the central bank continues its asset purchase program into the fourth quarter of this year. qe in's sign of ending the not so distant year, asset purchases are expected to total 30 billion euros in contrast to the current total of 30 billion per month. harm and carl are still with us. when you look at the ecb's message yesterday, was it a clear sign that mario draghi turned hawkish or is it that mario draghi is worried about the strength in euro but not saying what's next? harm: i do not think they are too worried about the currency. i think it was a pretty logical step on the way toward the tapering. if you're going to and asset purchases at some point and we

agreed happens during the fourth quarter, then the next one is we're not going to add more stimulus. you add more liquid changes in the coming month in june or july. i think it was just a step in the sequencing and the ecb is getting towards the exit. francine: mario draghi got a lot of questions on tariffs and a lot of them he actually answered. should he worry more about them where little bit less? harm: i think we all have to worry about tariffs to the extent that they will leave to a more pronounced trade war. mario draghi is right to worry about it. i think it's good that he mentions it. the one problem that europe still has is that there is no foreign minister or something like that. mario draghi is the head of one of the future of european -- few true european heads.

tom: a year ago we were waiting for inflation. it's march and we are waiting for inflation. where is the confidence to believe with his comments yesterday that we will be in labor day waiting for inflation? carl: i think in the u.s. economy we are seeing some green shoots if i can borrow the expression. tom: i less gray hair then . [laughter] carl: when we start drilling down into the inflation details, it's a very mild pickup. part of what forecasters got wrong is that they dismissed the inflation due to transitory and idiosyncratic factors. when you strip that out of the story, you still had a very benign inflation environment. they were dismissive for one months in two months and a pretty soon, we are at the end of the year where we have week

inflation. forecasters are again over predicting the degree to which inflation accelerates. that is true for the u.s. respect watching with to europe is the appreciation of the euro. a stronger currency is the de facto interest rate hike. the strength of the euro will hurt the competitiveness of the european exports and maybe not just yet, but take some of the as theut of the momentum ecb moves toward less accommodation. tom: carl riccadonna with us and we will come back with a killer chart showing the scope and scale of america's labor economy. right now, tv . this is how you get briefed. one of 19,000 employees with bloomberg and you have got a meeting with carl riccadonna this morning and you need to look smart. you can watch me be boring and dumb in real-time. better yet, go over here and pick up a chart and look at bitcoin rolling over. you can steal that chart to

dazzle carl riccadonna this morning. tv . this is bloomberg. stay with us. ♪

>> we have our experts here who will be able to answer the question. francine: this is "bloomberg surveillance." live pictures from the european commission. you see two gentlemen at the podium taking questions. they're speaking to reporters on tariffs and trade, saying the eu is prepared to use rebalancing measures if needed. the lines, between that is retaliation, but at the same time, they are saying they take that the bt over metal tariffs. it's kind of like a cop, good cop situation. we heard from the trade chief saying that the steel tariffs are wrong and that the you should be excluded from them. that is the good cop. you also see the european commission saying that they will raise imports on u.s. goods like cranberries and orange juice if needed. tom: there's the back-and-forth and it begins maybe yesterday

and today. unicreditth us from and carl riccadonna from bloomberg economics this morning. i want to bring up the carl riccadonna chart. we are at 4%. it is a really cool chart. thank you so much for letting me steal this from you. here and the world is coming to an end and we forget our collective memory of 3% unemployment. most americans would say that's a broken economy. what do we need -- more immigration? harm: that always helps, particularly if you have a demographic problem like the u.s. and many advanced economies have with the baby boomers aging. immigration is a good thing these days. tom: this is about labor supply. you were mentioning the backward ending labor supply curve. that's about our work preference versus my leisure preference. i have a massive leisure preference.

help us with the backward bending labor supply. carl: don't we all have that leisure preference? when you look at the front window of your house and see your neighbor bought a new car or took a nice vacation coming might be coaxed back into the labor market. prosperity and mid-to-late cycle developments tend to cause is cyclical change in labor force participation. i don't think that is fully understood yet at this point in the cycle. while we are still nine years notin the expansion, i do think that necessarily means more late cycle. as the wage pressures come in, we will see some impressive changes to participation. tom: isn't it great we do microeconomics here on job s day? francine: we always do microeconomics. what does it mean for the fed? is this the most important number? we tend to do it every month

saying it's the single most important number, but this time is it really? harm: i don't think so. chair powell did a really good job of highlighting the positive outlook for the economy at least in the short to medium term because the stimulus. he did not emphasize the latest uptick in the core cpi an average hourly earnings number. we are of hitting our 2% inflation target but did not get excited about the latest number. i think that is a very good call because it seems like many of these economists around here have the view that the strength in inflation wage data in december engine anyway overstated the underlying trend. seeould not be surprised to some retracement and the fed is prepared as well and it does not change the underlying outlook. tom: thank you so much. carl riccadonna as always very valuable. we have a whole line up in front of us for "bloomberg surveillance." alan krueger will join us from princeton university.

harm will continue with us and bill gross will join us from .anus henderson could yo you have the countdown clock until i have my first bag achieves its today. oh that's the jobs report. one hour 33 minutes to the jobs report. ♪ mom you called?

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♪ alix: president trump will meet with kim jong-un. wages are in the spotlight. a big selloff in the bond market. offers exemptions on double-digit tariffs are aluminum and steel. -- for aluminum and steel.

alix steel finally back from houston. alix: that's no, i just could not get -- that snow, i just could not get out of houston. it is operation wait for the jobs number. futures totally flat. euro-dollar moderately weaker. it is a risk on feel. weaker on the day. in the bond market, you are seeing a little selling on the margin. yields