francine: tech stocks suffer the worst day in three years and the effect spread to treasuries with the 10 year yield falling below 2.8%. a chinese diplomat is dispatched to souel.

good morning, everyone and welcome to bloomberg surveillance. i am francine lacqua in london. we see little bit of correction. it's really the technology stocks, after we had the drought in the u.s., and that is giving a little bit of investor worry, to assess the impact it means for of course, the earnings. or by far 600, the sect losing the most in europe. this is also the sector that drove the rally in 2016. we had a little bit of pressure on the 10 year yield in the u.s., below 2.8%. coming up, we talk global trade with paul donovan from ubs. and later, we speak with the former chief executive. partner,he industrial he joins us to talk italy and

the future of luxury and then, we talk with robert shiller. 11:00 11:00 a.m. london time. let's get straight to the bloomberg first word news. nejra: the announcement comes hours after beijing confirmed un made a surprise visit to china. he says he would be willing to give up his nuclear weapons and hold a summit with the u.s. it was his first known visit visit out of the country since taking power in 2011. according to people familiar with the matter, of which is a working to identify areas in which chinese companies would be banned from investing, such as semiconductors. it would be the latest step in donald trump's plan to punish

china for what he sees as violations of intellectual property rights. mark zuckerberg is expected to testify before a u.s. house energy and commerce committee. that is according to a congressional official familiar with the plan. he has this criticism by both republican and democratic members of congress. japanese prime minister shinzo donaldgoing to meet with

trump on april 18. according to the japanese newspaper nikkei, the two leaders will coordinate strategy. donald trump on april 18. according to the japanese theresa may has the backstop plan. the british pound rose on the news. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. am nejra cehic and this is bloomberg. francine: equities are back in the red and you can blame it on tech stocks again. facebook drank u.s. embassies done yesterday and european markets are following this morning. there's been a knock on effect for treasuries. at how long can this last? actually, richard, let me start off with you. what exactly are investors worried about? it started with facebook. richard: you look at the long

end of the bond market and is this an indication of greater risk? tech stocks are high valuation stocks. when is there a greater aversion to risk? cap ok, you also had uber -- on top of that, you had uber having problems with autonomous vehicles, the tesla fatal crash, and the internet syndrome. quite frankly, it seems to me that users are waking up to the fact that the internet has never been free, they had to pay for it with privacy. are there only questions on facebook, or the industry in general? richard: to be honest with you, i have been cautious on the growth coming through from the stocks for a considerable amount of time because there is a limit

to which you can grow 20% to 40% per year. this is what you see with china, if you look at what alibaba and particularly what tencent said last week. they have started to slow down. the stocks are so big and have become more mature, which means slower growth and lower valuations. francine: what is your broader perspective it of this? dave: we have had earnings growth etc. into positive decisions. with that, we have had the markets accelerate, busting into a value perspective. with this, you have had not only take growth, but it has been bolstered by global growth and by the trump tax cut. look of mutual repatriation, all of that is

tech oriented. the repatriation does not seem as big. you have got the facebook privacy concerns and the trade concerns, etc. that creates a reset and technologies is 25% of the u.s. market, so when it sneezes, there are big ramifications. francine: does the reset mean that the selloff will continue? tim: from a technical perspective, the quick answer is yes. if we look at the last couple of years, there have been a couple of notable tech selloffs and they have averaged about 5% or 6%. the tech sector versus the s&p. right now we are only at about 2 .8%. is stillstrength further declining. it has not bottomed over the last 20 years. the leading sector going into

the correction is a laggard coming out. francine: you are not a market guy. but you have been looking at the treasury on the back of this. will this change the economy -- not about the market selloff, but if people start to question these big tech companies? muchhing is tech is so more important to the market and the real world and economists live in the real world. [. -- [crosstalk] paul: it does not matter nearly as much to the economy as it does to the market, but the interesting question here is, if we go back between two and four years, the digital anarchists will say that tech is above government, governments do not matter. technology is all that matters. what they are discovering or

rediscovering is that governments do matter and technology companies are like every other company. they do not have a superpower. they will be regulated and are subject to government interference. that realization in the broader sense combined with the fact that in the u.s. we have a less protectable government perhaps. this is creating a shift in terms of risk. what withrichard, that regulation look like and if you regulate face of, does it mean that you regulate google? do you regulate all of the stocks? richard: i would level this criticism at these companies in particular and leave cap a lot of this. these companies have not been complete straight with the user when they have said, when it comes to the user agreements. they would like everybody to scroll to the bottom and press "agree." we should see some kind of

regulation to force these companies to be upfront and say, if you would like to use this service, you either pay with your privacy or personal data, or you pay for a subscription of x dollars per month, up to you. and something is clear and upfront as that a something needed to put this problem to bed. francine: richard, do we have any indication of how many less users are using facebook because of what has happened, or is it just the reputation that was tainted? richard: not yet. and if therea dent is an impact already, you will see it right away. my suspicion is, and i cannot guarantee i am right, my suspicion is people are unlikely to stop using facebook simply because they use it for so much and already has been ingrained into daily lives.

it might be a number that is so small that the company does not notice. francine: how would we know when everyone was born for birthday wishes if we did not have facebook? tim, it is a different kind of beast here, right? tim: it has been a real problem for europe over the last six to 12 months, not having a tech sector, when you have an issue like this, tech is about five of the stoxx 600 benchmark. it is 1% of the u.k. ftse 100 benchmark. there are other sectors that are much more important. and if you look at technology that europe has, it is oriented towards software, semiconductors, telecom equipment. it is not the internet. francine: are the areas of the tech market people could buy into right now. i know we are not stockpicking, but it seems the selloff is so wide that chipmakers would be affected if you look at a.i.

is there something you think was unduly sold off? tim: if you look at sap and infineon, they are all off recent highs. to the degree that technology continues to be embedded more and more inside our lives, those are companies that are at the heart and soul of what companies do to run their businesses, or devices we use on a constant basis. francine: richard windsor there, tim craighead, research director of bloomberg intelligence and paul donovan. plenty coming up, including a weaker u.s. growth forecast. this does not mean a deeper slowdown. he will discuss that next. china says the north korean leader would be willing to give up his nuclear weapons. we are live from beijing for the

latest on that. this is bloomberg. ♪

francine: economics, finance, politics. this is bloomberg surveillance and i am francine lacqua. u.s. fourth-quarter gdp could get revised up to 2.7% from 2.5% according to the bloomberg consensus. that data out at 1:30 london time and 8:30 new york time. this quarter in the u.s., the euro area says there is no reason to fret a deeper slowdown is coming. so, where is global growth headed. more, paulfor donovan from ubs.

thank you for sticking around. paul, when you look at global growth, it is fine, rosy, better than expected, according to the ima. that then you have these huge trade tensions. how much of a worry is there that we have this catalyst in the market? paul: we have got a couple of issues. the first point is a lot of the global growth is domestic lead. so, it is not really synchronized global growth. it is what i would call simultaneous global growth. the was consumer is alive and well, not in the shopping mall, but online spending money. the european economy is showing signs of arrival and in southeast asia, domestic demand is picking up. you have independence coming through. and the fact that so far, the trade tensions are basically --we are nowhere near a trade war. the tax on steel has

been reversed by trump for anybody that matters. we are getting away from the twitter spin. francine: do you agree with that? guy, you are pretty confident on the future? guy: my concern would be more on the profit side, in terms of the u.s., six to nine months out. we see the corporate cash generation, being nominal to net income for the last nine mo nths. companies are building up the receivables, so they are building up at her firms with clients to get sales done. technically they are moving inventories from their warehouses to the client warehouses. that to me is a sign that we see revenues begin to decline for these companies. i do have concern about the u.s.

profit cycle as we get into the second half of the year. francine: we were talking about inflation. if you look at inflated dynamics in the u.s. and we go back to which growth, is the fact that there are too many monopolies leading people to be concerned? or are they still not confident enough about the future pay rise? >> we are getting pay inc reases. francine: a little bit. decent index with 3% growth. but that is understanding what is going on because what we have also had is a rise in self-employment. self-employment's income growth does not show up as wage growth. you could be paying a dividend instead and this has been one of the big things in the u.k. when we do have data on this. have bettersumers

resources because of the self-employment issue. i do not think we see weakness in the labor market or the ability to get pay rises through, and when we look at the reporting, that keeps the companies are reporting sign on businesses that are doing more to attract people to come and work for them. this is indicative of a labor market which in certain set yours, has become quite tight end where we do see labor cost pressures creeping in. francine: we heard from jay powell, and he is less reliant models. does this not mean there is a danger that the fed could hike the curvd? >> this is the point, as paul is mentioning, we do see the beginning of signs of underlying inflation pressures. there needs to be a response from central bank globally.

the fed is definitely the lead in terms of global central banks and that means pressure on the front end of the curve definitely as people start to factor in the indus a patient's, or continuing to factor those anticipations. fact of the u.s. economy is growing. when you look beyond the five i thinka of the curve, people will start to be concerned about the medium-term growth story. that could be the case when we see the u.s. curve flattening from beyond the five year area. mobile, very focused on the 10 year area of the curve, but that can give you a different picture because the u.s. rate curves will be doing different things. francine: paul, this is my chart and it goes back to what guy was saying. where does this go next? >> this tells me is moving to five and 30 year treasury.

but it is collapsing. francine: but it is indicating. it is back in the 70's when inflation dominated the bond market and when inflation is closely correlated with the economic cycle that then, you would expect the strength of the youd curve to tell something. that is not what happens now. inflation is not the dominant part the bond deal. the real yield plays out a more significant role than it used to. point positively correlated with the economic cycle. so, we take those factors into account and you add in the fact that the bond markets are basically rigged. francine: by central banks. powell cannot wake up one morning and say, i will move out of treasuries and into equities. because the fed cannot buy equities. illegal.

most central things cannot buy equities, the swiss are an exception. they are creating a captive demand for the market, which is a distortion. fork about the gilt markets the last 30 years was generally a inverted curve because of pension regulations. i am not so sure that in the information one the bond yield curve is that but early in the 1970's or 1980's. yields were perhaps an indication of economic expectations. francine: thank you, but. i love the idea that this national bank is the hedge fund. will ofe the governor that. let's get back to one of the other top stories this morning. china and as a top senior official will make a two-day trip to south korea starting tomorrow. this comes just hours after beijing confirmed that kim jong un the chinese with

capital. a significant where donald reporter: we have the very first confirmation from can that he would be willing to meet with trump. this is weeks after trump and he's giving of nuclear these talks with trump whenever they occur and that is a very significant step for a country that six months ago said it tested a nuclear weapon. so, this perception about such a turn, at least rhetorically. the comments coming out of this meeting have been pretty significant.

it must be noted, though, taht dispatches, korean there was no mention of this denuclearization. as well as the comments, i think it is the optic they are taking out of this. this shows north korea has an ally, that china is in its corner. picturess theyou had the splasf out this morning. we wanted him to stand up to the trump administration. north korea does have diplomatic allies. it is not alone in this. so, it is somewhat strengthened going into these talks when they do happen. francine: thank you so much, our china market editor in beijing. to market care about geopolitical developments?

guy stear and paul donovan are still with us. paul, you are in the white house and president trump, or the administration -- the chinese leadership is leaning with north korea and you think, i need to keep china outside, so whether they go easier on the tariffs. unlikely att is this stage and i think there is a clear view with this administration that you are going aggressive and aggression gets results. would benot sure that seen as being part of this process. out whating to find good american consumers will be taxed on during the next week or so. and i think after that, then there could be a darling back. this is what we get all the time. reversei -- and

then you reverse what he saw previously. from society stear staysl and paul donovan with us. this is bloomberg. we will have plenty more in the markets and we look at geopolitics and of course, we keep a close eye on technology stocks. the industry losing the most is the technology industry, down 2.2% in europe. ♪ . . .

♪ francine: economic finance and politics, this is "bloomberg surveillance." i francine lacqua in london. let's get to nejra cehic.

nejra: china has announced that south korea will make a two day trip after tomorrow. that is hours after north korea confirmed that kim jong-un met president xi jinping. they also said kim would be real -- willing to give up his nuclear weapons. trip outside of his country since taking power in 2011. the u.s. is considering a .rackdown in chinese investors according to people familiar with the matter, officials working to identify areas in which chinese companies would be banned from investing, such as semiconductors. it would be the latest step in donald trump's plan to punish china for what he sees as violations of intellectual property rights. facebook ceo mark zuckerberg is planned to testify before the house commerce committee or he has been the subject of

criticism from both republican and democratic members of congress, as well as members of over signsrliament facebook failed to protect user privacy. japanese prime minister shinzo abe is likely to meet with donald trump. leaders are expected to coordinate strategy ahead of the u.s. president's anticipated meeting with north korean leader kim jong-il. trump has previously said he wants to meet kim by the end of may. irish officials have reportedly been told to expect new plans evidently from the u.k. on how it plans to avoid a post-brexit hard border. according to the "times" in london, they are working on alternative plans theresa may has. the british pound rose on the news spirit global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. i am nejra cehic. this is bloomberg. francine? francine: thank you so much.

the index compiler ftse russell thexpected to announce emerging-market category today. that comes amid signs that the crown prince is on a tour of the u.s., including chief sizes amazon and microsoft this week. ouring us is justin come global markets editor in dubai. charm offensive working, and is a charm, or is it that the economy has so much money, that the u.s. moves? justin: this is an important trip i mohammad bin salman to the u.s. , he is trying to rack up more interest in what is going on in saudi arabia, and he can impress on the all that this

is an economy in transition. where, if alle goes according to plan, you can pick up some pretty interesting returns on your investments going forward. francine: what does this all mean for the region? a stableregion need saudi aramco ipo to generate? justin: absolutely it does. see so many areas of tension and indeed problems that saudi arabia is currently grappling of geopolitics, because of the war going on in yemen. there was a rocket attack a couple of days ago on riyadh. the stability that iran is worrying about. obstacles, then

risks to investor sentiment. it portrays and conveys the idea that this is the pace that is changing, and it is moving in the right direction. francine: justin, thank you so much, justin carrigan, our emerging markets editor in dubai. how important is this to the markets? richard windsor and paul donovan are still with us. does this include -- does the ftse russell change anything at all? i think it is important, whether it's a big impact of money flows, we have to wait and see. i think the focus is a little more on the debt side. , what wee well aware have really been waiting for terms of emerging-market debt is more issues by the banks in

and in this case, the ftse could see more tolerance out of the dollar market. francine: ok. does it change? what needs to happen saudi arabia for investors to go back in? i heard a lot of chatter on the markets that they were willing to go back into saudi arabia, and then they had a crackdown. that kind of changed investors. paul: there is -- theythere is a risk, but need to balance them together. if you get at saudi arabia, the gulf in general, compared to other alternatives in emerging markets, it is high-quality with the high ratings, and so it is less risks them and might be in some other sectors, so in that sense, it is a draw.

i think you get a similar idea from the inclusion into the equity indices, that you really start to compare it with the other alternative, and some people can find it attractive. , what is your take on saudi arabia? , we: with oil where it is had it at the start of the year, the three days later, they are raising the stakes with the army. what matters to me as economist is saudi as a foreign entity in the repatriation flow that we have been seeing over the last 18 months. they sold about $100 billion last year in overseas assets. will they bring the money back? with that means to me is not only have we been lost -- then lost a key supporter of the dollar but a key supporter of the dollar that is turned into a seller. most of the saudi assets have turned it to dollar selloffs. flowis creating a negative

for the dollar at a time when the u.s. needs to be borrowing more from the rest of the world. francine: thank you so much, guy ubsr, paul donovan from wealth management phase. we will talk about luxury and italy next. brush offtors indecisive elections. we talk high-end's, luxury and trends, and will it pick up this year? we talk with a shoemaker about what is next for the sector. this is bloomberg. ♪

♪ francine: good morning,

everyone. this is "bloomberg surveillance ."i francine lacqua here in london . political risks do take a step higher. center-right league parties of the inner start coalition talks with the and establishment five movement, raising a debate over with the movement is, whether center or far right, but uncertainty is unclear. the bond investors are looking beyond politics. yields are only dollars sector, touching the lowest since december of last week. joining us now is the former chief executive and board member of luxury hotels. paul donovan from ubs is also still with us. for, thank you so much sticking with the program.

straight after the elections, what have we learned from the last month? is the economy strong enough to withhold it? onst: when i was in rome march 5, we just have the first results, and they were saying it was the worst possible situation. in fact, it is proving to be a situation where anyhow, the -- it is not ae big chance, but there are two important steps. in the lega,ge because they have been working on the program, they become ,vailable -- unable to elect and they seem to be much more

flexible than people is expected. this is not mean the alliance is going to be done. nobody wantsint is to vote again. mostly the members. 2/3 of the members are new. there will be possibly majority is, but based on 30, 40, 50 votes, we can move from one side to the other. francine: this is the point we were making the day after the election. to they need reforms? may be more labor, maybe the banks dealt with. recoveringere was a and to see. bane of risk is volatility, because we have no it is very difficult to

predict. i think there is a lack of withmies, a lack of people strong political histories. on the other side, you have the energy is moving faster, and it is also a changing factor. it has been a factor to the situation, maybe get some injection to outside of the high profile people, not for a technical government, but i think a government with some how and the know seniority. this is the italian

10-year. is this the right want to look at? with?s fair to compare it paul: i think given that we are also looking for the ecb to be ending if bond buying program at some point before the end of this year, it is probably better to be looking against france, because, obviously, the trouble the 10-yearng against germany is the 10-year germany is distorted very much by the ecb bond buying program, where is it tends to be shortened by the ecb. i think this is probably a better indication. basically, i think what that chart is saying, most italians italians, andby italians are relatively used to political uncertainty. they have quite a lot of experiences, a lot of government over the last 30 years. i do not think at sign investors are panicked about what is happening.

there is a reason for them to panic at this stage, and as a result, you've got coming yes, some reaction in the bond market, but it is hardly an abnormal reaction compared to recent history. francine: you sit on many boards, and a lot of them are hospitality or luxury, but these are companies that do very well. is the italian consumer consuming? michele: this is the point. i think the italian economy is growing because of exports, and because of tourism. tourism, there is not much it is potentially an area of development. luxury is not offering that much. you can compensate with other market doing better. the concern is, i think, with

the duties, it could take us through an increasing process, because of the and, everybody will increase. nobody will decrease. if you have to, say, you'll align the prizes, and they are going up, not going down. this is also a negative inflation, for example. the market, it is not a growth committed will be a more selective growth, but we will be at home for geographical room.ion, and there is is, for them to clearly separate winners and losers, it is not as it appears to be. look atotential, if you the single share, you will see how the two groups are moving. would you worry -- if you are a chief executive today from a luxury brand -- and we

will talk about luxury in a second -- do you worry about the supply chain because of tariffs on trade? no, i think the luxury supply changes quite unique. to say luxuries, france, italy, mostly france, you can do it. but you never go to a different -- the quality is of value. if you change the supply chain, then you lose your soul. francine: thank you so much, michele norsa there. paul donovan from ubs wealth management. both sa stay with us. up next, the lap of luxury. this is bloomberg. ♪

francine: economic fun if the baltic, this is "bloomberg surveillance." i am francine lacqua here in london.

one of the biggest drivers is asia's recovery with a stronger yuan raising the overseas spending potential of china shoppers. demandis also leaving for younger buyers. what is next for the sector and -- whatumer industrial is next for the sector? michele norsa and paul donovan of ubs are bolster with us. when you look at the luxury lines, what is more important for the sector to get right? the online or the shopping center? michele: they are both important. i think it is easier to grow the chinese consumption, because they are growing by numbers. they are growing by wealth. they are growing by traveling, so it is something which is

moving with an organic trend. online has always been surprising. good sense, but mostly negative. 10-year toxpects grow, but now there is the luxury both online. we can factor in the united intes, maybe it is closer the u.k., but globally, you're talking about mid-single digits. most companies are not even disclosing the number yet in the balance sheet. francine: is it because of touch and feel, or also when you spend 1000 pounds, 2000 pounds for a dress or a suit, you want to touch it? michele: this is the reason. in the united states, they are more used to receiving, sending back, which is not as easy and other counties, for example, in china. but i think one risk, which is an older technology, is really

the brand evolution. if you look at the online operators, 5, 6 companies, which have problems dealing with luxury goods, they always have a as discounting offers, plus, you have seen the problem of counterfeit, protection of other brands, mostly in china. companies are still there is cautious -- very cautious in moving massively toward online. a big company, like by 2025, online business would be 25%. i don't see this kind of growth, because the companies are just being more cautious, trying to

,et the online business inside reliable sometimes, totally unreliable like in asia. francine: this transit into the world, and how you look at economics. paul: one of the things that i think is coming out is probably industrial revolution. in many ways, we are reinventing the first industrial revolution, which brought in, for the very first time, shopping is a leisure activity. i think that is something which we are now seeing. with luxury, if you are shopping for luxury, for the most part, this is a leisure activity. this is a special occasion. you go toy a store, you have a , youattentive sales staff buy something special. if i'm doing a weekly shop, cleaning equipment for home, laundry detergent, this is not such a quite special experience

for me. i am far more likely to do that on my. i think this division is going to be quite important. the keysize one of things about the fourth industrial revolution in a sphere that they will all be replaced by robots and so on -- that is not necessarily the case, because you want the personal experience of being helped by a system in a store if you are buying luxury. you want the human interaction. you don't want the "please click here and enter your credit card number" if you are going for the luxury experience. in many ways, what is happening in the broader economy is we will see a gravitation toward online retail for the regular, monday and shopping, but then shopping as a leisure experience, perhaps reaching yet another level. michele: there is also another distinction -- the look of , like, more attractive the united states and china,

they buy online, because they cannot reach a store. but travelers, it is a pleasure to get there, and you see things you don't find online. so i think there will be a development of the online business. when they ask me -- amazon could be difficult to think. paul: i think also there are some consumers who will have a different experience as well. regard luxury almost as shopping for detergent. francine: guys, thank you so much. michele norsa and paul donovan. this is bloomberg. ♪ francine: tech stocks suffer the

worst day in three years. spreads ton effect treasuries. korean diplomacy after a top chinese diploma is dispatched to so uel. and the u.s. charm offensive. billions of dollars wroth of deals have been announced. right blankfein hails the crown prince's vision. i'm francine lacqua in london. tom keene is in new york. tom, let's focus on the technology stocks filtering through to europe and i think people are anxious about what it means for earnings and then you flip into the 10 year treasuries. i'm looking at the bond market. the bank stocks get depressed.

building debt in the united states. let's kiss her to the bloomberg first word news. here's taylor riggs. aancine: cap official make two-day trip to south korea. un then-president xi jing ping. kim be willing to give of his nuclear weapons. towas his first known visit another country after taking power in 2011. the u.s. has been considering a countdown to another country after taking power in 2011. the u.s. has been considering a countdown that america deemed suspect by invoking a lot reserved for other non-options. officials are working to identify to another country after taking would be banned from investing, such as semiconductors. it would be the latest gap in donald trump's plan to punish china for what he sees as

violations of intellectual property rights. facebook ceo mark zuckerberg is now expected to testify before the u.s. house energy and commerce committee. that is according to a congressional official familiar with the plan. he will meet with members of signs parliament over the of the company he cofounded and leads has failed to protect user privacy. reportedlyials have received plans on the post-brexit hard border. according to the "times" of london, it has details on what alternative plans theresa may's government has. globaglobal news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. i am taylor riggs. this is bloomberg. francine, tom. tom: taylor, thank you so much.

let's do a data check. equities, bonds, currencies, commodities. we would do a lot more data checks today. offres after the sale yesterday afternoon, futures -10, dow futures -84, and in may 2 10 spread, this would be great to talk with andrew balls about with pimco, 49-day spread, we are not at the intraday flattening that we saw back in january, but we are just within a little bit of a drought. will a good as well -- bit of a bit as well. on to the next screen. big figure since about 2:00 p.m. yesterday afternoon. the turkish lira gets my attention, francine, but the 30-year bond, 3.01%, is a huge move over the last three days. jerome powell is looking up at 30-year peace.

francine: he certainly is. i like the fact that you have a 30-year yield. i have the spread between the five-year and the 40-year. of course i'm looking at the 10-year. can see what i'm looking at, below 2.8%, tom, for that yield. not looking at stocks, definitely on the backcourt. europe and asia, it is all about technology. radio listeners, it stands for 2.64%. that is down the most, tom. tom: this chart matters. we showed this november 8 of last year and the circle over on the left is the trump election. up we go. every thing is amazing the trend we have seen since december of last year. down and are still within the range on so many other theories, but here we are,

and here we are again with a move in today's -- boom, boom, down we go. flattening.curve this is different curve flattening. curveve got the longer seen as stable. you get to a major curve flattening again this morning, on the 50 basis points, a print of 47 would be a huge deal, francine. francine: yes, a huge deal. this is what i'm looking at, tom, a simple chart looking at facebook. you see the market cap of facebook. we will push it out to social media, for our radio listeners, but this is why this chart matters -- you start with facebook, and now it is affecting the other stocks. it has fallen over $70 billion since the scandal came to light, the scandal with cambridge analytica. for more, we are joined by andrew ball of pimco and max

kettner of commerzbank. thank you both for joining us. we have so much talk about. maxima let me start with you. what are we worried about? -- max, let me start with you. what are we worried about? max: i don't think from a fundamental perspective there is much going on right now. when you look at forward earnings, realized earnings, things are pretty much in order. when you look at relative valuations versus the s&p, for example, it does not look like there is an awful lot going wrong. saying you're right in investors have a really tough time pricing, because they do theynow how to price, don't know how to price the idiosyncratic risks, which is now all come together. i think that is very difficult to price into earnings estimates. francine: so it could actually mean that the selloff is

completely overdone. max: it could mean that. when you look at some of the indices, like quality, for growth indices, or you have got something like momentum and disease, they'll have about 35% to 40% in tech funds. the market cap has 40%. if we do have momentum selling off further, cyclical selling further, the tech world will go further. bullve the faith of the market right now, heavily connected with tech right now. balls, i want to jump into hell of this into how all of this goes. your tie looks beautiful, andrew. let's go to jerome powell and the fed. i was away for the fed meeting.

thank you, mike mckee at all, for the coverage a few days ago. the market and the dots are right on top of each other for now, and then come andrew balls, it changes, and this cap to make a miami am sorry come out to years, a gap is still substantial. how far from this market is this that 18 months or two years out? andrew: the fed has told us last week that they expect to go restrictive overtime. when you look at their long dots and where they expect to be two years out, they are signaling that they expected to go restrictive. so it is the neutral rate that the markete to see, is clearly lower, there is a lot of uncertainty, and the outlook is always a particular concern about inflation. we think that there is plenty of room for the market to build in some more tightening by the fed,

but overall, to front end of the curve looks quite reasonable. tom: i have very weak on australian cricket. i also don't get what is going on with auction. is this about fiscal policy in the united states and the auction? is this where i have to become an expert on bond auction? max: when it comes to cricket, that makes us two. i don't have a clue, either. tom: good. max: with regards volatility, there may have to be more priced in over the next couple of months with regards to the way of issuance. the long end of the curve being the price slightly higher in terms of yields. however, where we are right now, and what we have seen over the last 18 months, is that there was an extremely strong correlation between inflation theyises in the u.s., when

price to the downside, the long end of the curve was rallying. months saw the last 2, 3 , we saw a steeper curve temporarily in the u.s., and we actually saw the longer end of the curve in terms of yields going higher. that is probably trump's -- the fiscal policy stance right now. we do see positive inflation surprises there. then we can see the long end of the curve actually recording you. francine: tom, you have to stop asking the germans and italians about cricket. there is only one person on this desk about cricket, and that is mr. balls. if you do want to talk cricket, which we will do probably in the break, afghans are. andrew -- ask andrew. andrew? inrew: we had a big move terms of equities. you had all the trade related concerns that you did not see too much in terms of the treasury market.

equity market, which looks pretty solid in terms of the evaluation. the technology stocks, which have done extremely well over the last year, couple of years. it seems perfectly normal that investors have been somewhat , theus to take a profit regulatory risk here, trade risk is clearly there. in that kind of environment, we think that just below 2.8% for a 10-year treasury does not look too bad. when you have such full valuations, you do not need a lot of news to get a pretty significant market reaction. francine: let's now but to eileen burbage. welcome to the program. and you look at technology what we saw yesterday, the people are worried about business models. question thet to business models, or is this

right now only a facebook problem? i do not think it is only a facebook problem. this is people letting the air out of the tires. there was a little bit to give you think it was the time to pick stocks in a bit of a warning call the you cannot just focus on top line growth, and these companies have to start thinking about long-term responsibility and modifications, whether it is in libya or tesla and effect they had a fatality, whether it is facebook and other plots like twitter that they have users' data and whether or not they will react responsibly with that. francine: will they self regulate, or will markets have to regular them? eileen: i think markets are worried that the government will step in and over regulate. i think that they will do both. tom: idol back to apple computer id what you have done in --

like to go back to apple computer and what you have done in the united kingdom. wonderful to have you with us today to let me cut to the chase. is silicon valley done? that is the gloom and doom in the united states. arrogance has finally caught up to them. is that what you observe? by the way come i would love to talk cricket with you. go away! [laughter] eileen: i think a lot of people would love to read about that. but it is the next as of technology and innovation. it is still a great hub of talent. maybe amazon, the microsofts, still, but it is not going to go on. that has not dampened it really that much. it also though probably has to thinking about longer-term

implications and responsibilities in a more civic way. i would suggest that in java blocks it was a heck of a deal because actually a normal valuation, a normal deal, i give great credit for it being almost like an industrial company in the midwest. the fact of the matter is the arrogance is still there, and you see it in the us drop elation of value. is that going to be one of the victims of all this tech foolishness? eileen: sure. i think that will come around and actually will bite the sector for sure. tom: thank you. i think the vast majority are not arrogant, and i think a lot of it is also the cult of personality and what the media -- obviously not bloomberg -- but what really drives people to want to read about and get to know these companies better? that has helped to feed a little bit of the frenzy, but yes, i think it is time to let a little bit of the air out of the tires and have a bit of a reality

check. francine: eileen, what will facebook become? we seeing less users because of cambridge analytica? is it a bunch of press that is not having an impact on the bottom line numbers? eileen: longer-term, it is coming back. what is interesting about people leaving facebook, they are going to instagram, and by the way, facebook owns instagram. as a company, facebook will not be too crippled by this. i think it is a temporary setback, tough for them to take stock and demonstrate greater leadership than what they have been doing in the past. francine: for the markets to love him is their part of the market that should not be selling off? makers, the chip robotics, ai, is there something that looks more attractive at the moment? think financial services will have a bit of a reality check as well, because when people start to think about everything we have been seeing over the last week and how that applies to more financial

information or financial services, it is probably more of a problem. i think this will affect the entire tech sector. i think it also ironically validates that it is not one that is going to dissipate or go away. it is permeating everywhere. it affects people and really in very real ways. we just have to be more responsible as a sector, and that is being reflected now. tom: eileen, should our kids have facebook accounts? should the queen have a facebook account? should francine lacqua have a facebook account? francine: a three-year-old or a 15-year-old? tom: do you have a facebook account, eileen? eileen: i do have a facebook account, tom, but i do not know that it is for everybody. i do not think it is essential for everybody, and i do not think it is inherently evil -- otherwise i would not invest in technology stocks -- but i do think people will make what they want to, and you can use it to connect to people and other friends come other contacts,

which is what it was intended for. there are unintended consequences, and everybody needs to be aware of those. that is what we are thinking about now in terms of how much of that responsibility and onus is on the company, how much is on consumers before they click and just say accept before they go on, and how much onus is on policy makers and regulators. tom: who will take twitter out? [laughter] eileen: i cannot even come to predict. twitter is interesting, because obviously when you have the president of the united states letting the world know that he has fired his secretary of state -- that have a couple of weeks ago -- on this platform, is clearly a cultural platform that is clearly valuable here unfortunately, its commercial value has not kept up. it is the new email. 20 think of people who make

money off of email, it is not be people who give us even now, it is the advertising on top of it. but email as a platform, nobody make money off of that commercially. i think we will see something like that with twitter. it is clearly not going away when you think of how much is happening on that platform right now. tom: thank you. eileen burbidge. it is an important time. we greatly appreciate your attendance. andrew balls will continue with us. let me look at my bloomberg terminal. futures -11 right now. in the next hour, on the equity markets, howard ward of gabelli funds. what a perfect day to speak with mr. ward on your amount of cash. stay with us worldwide. this is bloomberg. ♪

francine: this is "bloomberg surveillance." tom and francine from london and new york. a top official made a two day trip to south korea to malcolm hours after beijing confirms that north korea's kim jong-u metn with chinese president xi jinping. beijing also said kim will consider giving up weapons and hold a summit with u.s. joining us now, peter, there is issue between china and north korea.

what does it mean for north korea's relationship with the u.s. ? peter: that was a little more of a wrinkle in here. what happens is more important between relations with china and north korea, which is been on a -- for the last 6, 7 years -- on a chilly front, mainly because china has been worried about program,ea's nuclear has sided with the u.s. in attempting to curtail that, and they agreed to impose the , actually initiate them, execute them, and in many ways, because of china's maximum pressure, as the u.s. likes to call them, the sanctions, that maybe be one reason why north korea has come forward, willing to talk, making these pledges to denuclearize the south korean peninsula. this is an interesting

development. tom: peter, within the development is the movement of the people of south korea. how to the people of south korea perceive the president of the united states? peter: [laughs] well, i think it is no different from anywhere else in the world. they are anxious. they read the headlines. they see the tweets. they don't know what to make of trump, and as a result of that, they are really more afraid of what trump will do, now specifically what north korea or kim jong-un will do. that is sort of the feeling and the sentiment in south korea. francine: peter thank you so of bloombergae news. with us, andrew balls of pimco and max kettner of commerzbank. what is the move of treasuries from here, enter? does it -- andrew?

does it move on the back of geopolitics? is it more the trump administration than anything going on in korea? think you have a lot of presidential and white house-related uncertainty, volatility potential, the geopolitics that you have just been discussing, trade clearly, advisorsis some of the leaving, new advisors coming in, that uncertainty goes up. in terms of bond markets, for my prairie view, -- from my point of view, there is a lot of risk that these kinds of levels. we think the u.s. market looks pretty attractive. we talked about this earlier in terms of tech stocks with risk assets looking pretty full it should terms of their evaluations, we actually think bonds look pretty reasonable here. with a high-quality bond now, you might get a yield that is pretty reasonable.

francine: thank you both. a pimco, maxof kettner of commerzbank are both staying with us. hat'd yap on "wa miss?", they will be talking about geopolitics. p.m. in newew 3:30 york, 8:30 p.m. in london. busy move on the market. treasury yields some of the 10-year below two point percent, but i'm looking at the u.s. tech route and the impact it is having here in london. a little bit of pressure on european stocks. we will go through that and look at gold as well. this is bloomberg. ♪ retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store

near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. in the market right now, little bit of volatility. francine lacqua in london. i am tom keene in new york. futures are bouncing around with

a little more weight to it after what we saw yesterday afternoon. it's a good time to dive into the theory that matters. -- is out in san francisco and came up with an idea called r star -- i am going to call it low rates for longer, maybe it is part of pimco's new neutral. balls, who has been writing brilliance for pimco on the idea of a new neutral. what is a new neutral? andrew: we think policy rates are going to be lower and keep being lower in the cycle compared with history. we have been using this framework for the last four years or longer. not a new idea. thehink it is likely nominal neutral rate in the u.s. is 2% to 3%, whereas before the financial crisis, it was 4.5% to

5% and if that is right, we have to keep kicking the tires and make sure it continues to be right. that anchors ten-year valuations on global bond market valuations. if you think 2% to 3% is the neutral rate, the fed may overshoot. that is anchoring. if you thought we were going back to the old normal, you would have a very different current view. tom: do you get to the new neutral because of tepid economic growth or because of a demand for paper which moves the price of paper up and the yield down? which is a more important concept? andrew: personally, i think the macro is the most important. it is the growth and inflation outlook. it is the global balance of savings investment, it is high debt levels. it is demographics. that is how i think you get there with the macro in the model -- john williams' model,

it's the same idea and a different way to express it. we have seen the correction in six markets this past months now and you have seen higher expectations for the fed and significant pressure on equities this year. way to think- one about the neutral rate that equity markets are not going to in anue to do well significantly higher rate environment has borrowers are highoing to be -- given debt levels, sustain a big increase in terms of global yields. francine: looking at your cyclical outlook in a nutshell, you are focusing on duration, equities, commodities, and emerging markets? >> i think there is potentially -- potential cyclically for yields to go higher in the u.s. and globally. broadly, we think they look reasonably anchored. i think with equity valuations

and credit valuations, you price in good news and the macro outlook is pretty good for this year, but you don't have a lot of cushion for all the risks surrounding that baseline. the trade tensions, the technology tensions i think are just one example that when you have a lot of good news priced in, you can have this kind of volatility. we think overall it makes sense to be cautious in terms of overall asset allocation. francine: same question to you both, 3% for the yield, when will we get it? do we care? far off.e are not we think it would look a good value to their. if you look at the last couple of years, we haven't quite got there. the move since last september makes sense in the context of u.s. fiscal policy and increased supply. we have gone from close to 2% to levels that look for the attractive. we don't think there's a lot of numbers in this -- magic in

these numbers that could go above 3% depending on the data flow. pretty the u.s. looks attractive and definitely compared with other global bond markets. lot toe's probably not a add from what andrew said. i would add one thing, i think it really doesn't depend so much on the 3% level. i think it depends much more on how fast we get there. if we go there in like a week's time, probably when we get to the 3% level, it will make much more of a difference rather than if we go there in three months time at a gradual pace. the second thing i think is when we could get there and i think it would be possible somewhere around the summertime when commodity price -- the year in effect of commodity prices will become positive. that may be where economists have a rough time of actually estimating accurately those base fx and then you could -- effects

and then you could have positive theation surprises and see long end of the curve going slightly higher and that is maybe -- tom: this is constructive debate. bring up the chart, five-year, five-year, 4. the andrew balls new neutral chart. 4 is off a cliff hurried right here is where andrew balls published on the new neutral on the edge of kenya rossi -- to be clear, you feel we can move above this range to a greater inflation? max: probably not. i would broadly agree with what andrew has been saying. i think there has been extensive research done over the past couple of years. showing something like global value changes. if we look at u.s. inflation or eurozone or idiosyncratic

regional or country specific, but inflation on a global scale, you can actually see the significance of global value chains, the significance of global flak for inflation has become much more important in comparison with domestic slack. in previous times before the crisis, we have seen domestic slack has been driving domestic inflation. now it's happening with the global economy driving domestic inflation and i think that is what is utterly important if you look at the broader scheme. thelso means we look at idiosyncratic stories, for example on an allocation between u.s. bonds, treasuries, and bones or different outlooks of atbunds -- you have to look specific things. you have to look at country and regional specific things, willdity affects -- those probably more affect inflation

going forward. tom: we will continue this spirited discussion on your fixed income market with great curve flattening today. here is taylor riggs. taylor: china has announced a top official will make a two-day trip to south korea starting tomorrow. it comes hours after beijing confirmed north korea's kim jong-un met president xi jinping on a surprise visit to china. kim would be willing to give up nuclear weapons and hold up summit to the u.s. it was the first known visit outside his country since taking power in 2011. the u.s. is said to be considering a crackdown on chinese investments in technology that america deemed sensitive by revoking a law for national emergencies among other options. officials are working to identify areas in which chinese companies would be banned from investing such as semiconductors and 5g communication. it would be the latest step in donald trump's plan to punish

china for what he sees as a violation of intellectual property rights. tok zuckerberg is expected testify before the house energy and commerce committee according to congressional officials familiar with the plan. subject of criticism from republican and democratic members of congress as well as parliamentu.k.'s over signs the company he cofounded and leads has a failed to protect user privacy. japanese prime minister shinzo abe is likely to meet with donald trump april 18. leaders are expected to coordinate strategy ahead of the u.s. president's anticipated meeting with north korea's leader kim jong on. trump previously said he would like to meet kim by the end of may. global news 24 hours a day, powered by more 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. francine: thank you so much. italy's bond investors are

looking beyond political risks at chief valuations on the nation's debt make it attractive and the 10 year yield touched the lowest point since december last year thanks in part to the relative cheapness versus spanish bond. andrew, i have a chart and this is the 10 year yield versus spain. is this the right way at looking at european yields? andrew: yes. we are pretty neutral on italy. -- performed well this year and over the last couple of years. , it islook at the spread not very attractive. in the short term, there's a lot of political risk. who knows what will happen. it will probably work out ok, but a lot of uncertainty. i worry about europe in the next recession, the possibility of renewed sovereign tensions,

probability of renewed sovereign tensions in the next session. i don't think you really get paid very well for owning italy. i can find better things to do globally then owning at these levels. francine: what about you, max? if you look at the next downturn, are you more worried about that or more worried about a mess up on the ecb? --: we have been over rate overweight peripherals in particular for the past couple of three or four months. -- iusly that is the view would agree with what andrew says over a 2, 3, for the next three to 6 months, i don't think decisive risk is the point. it's much more the outlook for the ecb. if we imagine a scenario where inflation in the eurozone will surprise to the upside over the next three months and all of a sudden the market has to price next year and aggressive tapering of qe, then you do not

want to own peripherals at all. if we imagine a scenario where italian elections would have gone extremely right and extremely in the favor of markets, but the ecb would go out, that would be a toxic mix. for the next three months given that we expect inflation to trend lower in the eurozone because there's a couple of unfavorable -- we would rather earn peripherals on the taxing perspective given that that will probably drive the ecb outlook to be a little more came. -- tame. tom: i want to talk about jerome schneider. liber ois is in view in europe and the united states and a lot of people will bring it back to the short term papers and secure loans and such. is pimco concerned about the fragility's in the european short-term paper market? andrew: the european side, i

would say not particularly. i think the u.s. side is clearly very interested and that is something jerome and his team are watching carefully. we do not take a signal of financial fragility. we think it is technical impact, regulatory impact. i think the european side, nothing i see is up significant since -- is of significant concern in the short term. tom: thank you so much. we will drive it forward to a good chart at the end of the hour. i had a spirited conversation with him a few days ago, dr. navarro advising president trump on china and on the policy of china towards america. peter navarro, the 9:00 hour this morning. stay with us. this is bloomberg. ♪

♪ tom: very quickly. francine lacqua in london and tom keene in new york and i miss to this, deutsche bank having a little trouble getting a bit this morning. and we --e chart bring up the chart and we are back to where we were march 23 and you say this doesn't matter, but with the leadership challenge, down we go after the cryan news in the times of london. deutschegot to watch bank if it breaks under 11 euros per share. francine: yeah. it goes back to the times of london report, our own reporting on deutsche bank. i think there was a little bit of anxiousness on the market yesterday that was added to the not really hear

from the leadership either from the media team or the leadership at deutsche bank. i did have a good chart looking at equities versus bondholders for deutsche bank. i will have to get it out and we will spend a little more time on european financials. on to saudi arabia and softbank, they agree to build the biggest solar project in the kingdom. saudial comes during crown prince -- the saudi pronk -- crown prince's tour. for more on all of this, we are bloombergm dubai by a reporter. great to have you on the program. how significant is it the fact that the crown prince is in the u.s. and there's a huge charm offensive to build things in the kingdom? , that is exactly what mbs is trying to do in the

u.s. -- trying to get attention , through hism -- mpts to modernize the to attract foreign investors. it's good for him to have headlines including the number of $200 billion as we have seen this morning with his deal with softbank. happens at a crucial moment for the saudi's when trying to make clear that they have done everything they can, for example, in the stock market to achieve the benchmark, the tag of emerging markets that ftse could give to the country at that you and the of the day today. francine: ok. give me a sense of whether this is genuine interest and doing investment in the kingdom or is it all about saudi aramco? you have u.k. and you -- u.s. officials wanting saudi aramco to list so bad on their continent did that they are

willing to do anything to get that? those are two very good points. let's say they walk together. the decision by ftse and msgi in june is not completely tied to the ipo of aramco. ipo -- aramco could ipo even if saudi is not granted the emerging-market classification. that would make the whole operation a lot less appealing to many investors that have to track benchmarks that are compiled by both companies and would also not looked good for the saudis because they have done everything necessary as they have said before to actually achieve those tax -- techs and show the world of their market is lined up with the other emerging markets you have elsewhere. same would fall within the classification of china, india, russia, brazil, and they would

basically be put in the map of many investors that basically do not look at the country now. aramco is a huge name and a lot of people would maybe start looking at saudi because of it. this whole scenario would be better if they get this right now. francine: thank you so much, bloomberg's middle east equities dubai.r, filipe in i don't know whether this has an indication for saudi bonds or is it is an emerging market bond story. andrew: i think the saudis have a strong balance sheet and the move toward the ipo for aramco of theces the strength underlying -- underlines the strength of the balance sheet. we talked before about areas where you don't get paid as well for taking risk and i think the saudi andpaying for as a bond investor, the yields look attractive, the big up -- pickup versus investment-grade

credit. you are paid pretty well for the clear geopolitical risk, but you know the underlying saudi balance sheet is extremely strong and -- strong. francine: it seems they were ready for it and the crackdown of the rates kind of made investors cool off. max: with regard to the aramco ipo, i think it will be crucial whether they will be granted the emerging-market status because given what we have seen over the last 7, 8, 10 years, there's a move toward passive investments and etf's and toward the products index to msg i emerging markets, for example. there's a huge potential for inflows. i think that is probably from a perspective, what investors would like to see. i think the allocation in portfolios particularly if you

are multi-asset, the allocation towards something like saudi rabia if you are not -- i think that makes it tricky to justify allocating huge share in this. i think that will be crucial in terms of allocating assets over the next couple of years. francine: thank you both. aming up on bloomberg tv -- chief executive at 7:00 p.m. in new york and 12:00 in london. tom: very good. let's digress over as we talked earlier in this hour on u.s. credit to that odd thing, a brexit full facing credit. maxew balls with us and kettner. is there value in the united kingdom or it can i pick up yield by looking at gilt? andrew: i would not do that. we are underweight in our portfolios. too lowl of gilt looks

compared to the u.s. i think the market is not pricing in enough in terms of the u.k. -- the short end of the curve looks pretty unattractive versus the u.s. and clearly there is brexit uncertainty. unless this is a really very u.k., wete -- for the think there is not a lot of value. i would rather overweight in the tom: u.s. then underweight in the u.k. nds and theack e lovely days of june of a year or two ago, coming up on an anniversary and they have got to adjust in the fixed income market. what will we see in the united kingdom full facing credit market as we leap into july of this year? andrew: the economic performance i think has been surprisingly good. we had a relatively optimistic view of economic prospects and

it has been better than we expected. i think over time with each piece of incremental news that the market can price out some of this brexit risk, underweight the gilt market makes sense. andong the british pound u.s. dollar, and we have switched to that to be long british pound euro. that really hasn't moved and you have tail risk -- clearly downside risk could all come to the sudden stop in terms of the negotiations. ishink the risk of that incrementally lower. even if in the future u.k. potential growth is a bit lower than it would have been within the eurozone, i think the gilt market doesn't look quite right to us. francine: you always remember the anniversaries and there is one year since article 50, one year tomorrow since article 50 was triggered. what does that mean for u.k.

assets? max: when we look at the equity space and the bond space segregated, we are still overweight european equities. within that context, we like eurozone equities much more because that is what we agree with andrew, we have a bearish view on the euro. we have seen some economic surprises rolling over already. i think that has room to continue. some investors are a little bit too jubilant on the economic growth in the eurozone. not proposing a significant slowdown, not at all, but if you look at essential growth around are almostpectations one percentage point above that. i think there is room for softer relative to expectations. if you tie that with lower than expected expectation, i think that's the risk within euro. that would help eurozone equities. i don't think that would help u.k. equities and with a

relatively bearish view on oil we have come i think that has been translating to under waiting u.k. equities -- under weighting u.k. equities. when you look at euro-dollar versus eurosterling, you can see 2 different pictures. euro trade weighted makes much more sense to look at the actual underlying strength of the euro currency and particularly, with regard to how this will feed into higher inflation in the next two or three months when we have significant year-over-year basis asked -- positive base effects. euro-dollar, i think euro-dollar has probably run its course around 1.25 and i will probably see it and in more toward 1.20 with a mix of slightly lower than expected inflation and growth data probably in the next three to six months. tom: thank you so much, max kettner and andrew balls

starring in the new neutral with pimco. paul krugman will be on later today. we will get out in front in the gloria derby with robert shiller of you university. this is a perfect time to talk a shiller about the effect of trump society on america. robert shiller coming up here in moments. on the markets today giving you more data checks, futures do better than two hours ago, negative seven right now and dow futures negative 53. it's a dark and stormy night in new york. this is bloomberg. ♪ retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store

near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. tom: this morning, yields lower, slightly with curve flattening. is it the fed or simply the

dawning reality of trillion dollar deficits to come? in this hour, the laureate robert shiller of yale university. how much cash is too much cash? -- howard ward of kabbalah funds. the quiet in washington, we consider the president and his good society. are live from our world headquarters in new york. i am tom keene with francine lacqua in london. all eyes now on the president of the republic of france. francine: there is a pretty emotional national memorial service in paris to honor the police officer killed last week after he traded places with a hostage during a shooting in a supermarket. this is a daylong national homage led by emmanuel macron. , which ih newspapers read daily, have been dominated

by this. it's raising questions about possible failures in french thiserterrorism tracking -- bit earlier the coffin of the officer being carried in the procession. we will be following carefully the carefully chosen words of president macron. let's get to the bloomberg first word news. here is taylor riggs. announced aa has top official will make a two day trip to south korea starting tomorrow. the announcement comes hours after beijing confirmed kim during that president xi a surprise visit to china. kim top official said would be willing to hold a summit with the u.s. the u.s. is said to be considering a crackdown on

chinese investment in technology that america deems sensitive by invoking a long reserved for national emergencies. according to people risk that -- people familiar with the matter, u.s. officials are working to identify areas in which chinese companies would be and from fromting -- banned investing such as semiconductors and 5g. zuckerberg is now expected to testify before the u.s. house energy and commerce committee according to congressional officials familiar with the plan. he has been subject of criticism from both public and and democratic members of congress as well as members of the u.k. parliament over signs the company he cofounded and leads failed to protect user privacy. japanese prime minister shinzo abe is likely to meet with donald trump april 18 buried according to the japanese newspaper, the two leaders are

expected to coordinate strategy ahead of the u.s. president's anticipated meeting with kim jong-un. trump previously said he would like to meet kim by the end of may. global news 24 hours a day, powered by more 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. equities, bonds, currencies, commodities, get to our esteemed guest on the currency market. euro under 1.24. next screen with the vix backing up after challenges yesterday, 22.52. 30 year bond comes in 3.01%. turkish lira back over 4, showing em tension. francine: this is what i am looking at. you are right for looking at futures because we are seeing a little bit less of a selloff than this morning and that is translating to european stocks. stocks on the back foot once again across europe.

it's all about technology ap you, which is the fx are seeing on your screen. treasuries extending gains, but again flipping a touch. tom: let's look at the curve flattening. we will talk to howard ward and robert shiller about this. i am going to keep it short, the trump election on the left and down we go further flattening and a solid retest, 50 basis points. 47 basislike a 48 or points would be a huge deal. we are not there yet. again, under 50 basis points this morning. why my charts is matters, it's a simple look at the capital, how much value there is in facebook. over $70 billion in market value has been erased with the selloff we saw a couple weeks ago. good morning radio, we will put that chart on social media. tom: very good. we have wonderful guests this

morning given the market volatility. someone who invented our thought and discourse on this, the laureate of yale university, robert shiller. you know him for his idea of our measurement -- measurement of our exuberance. someone who has to live day to day with the exuberance is howard ward. are you under the desk? what are you doing at gabelli? what is the mood? business as usual. what we have seen has been an elevation in volatility, which we expected going into the year. bethought there would tension between stocks and bonds. we have seen that and we think that has more room to play out. tom: do you get value from that guy up in new haven when he is not in the pizza parlors of new haven, he is looking at the measurement of our valuation to

growth? howard: there is always value to anden to professor shiller i am looking forward to getting guidance from him today so i will know what to do. tom: what about the valuations to growth? is that a model that you and mario use? howard: not really. our focus as a firm is really on the private market value concept, which employs three multiples.sh flow on the growth side, it's really more of looking forward, discounting back earnings and cash flow. with all the errors that entails , we would maintain in essence that is what the market is doing. having said that, professor shiller's work has shown to have value particularly at market extremes worry -- where you can see the market has extended.

i think last year at some point you became more positive than you had been previously. i want to get an update. robert: not based on my tape ratio. howard: on something else than? robert: donald trump. tom: how does the president's roll into the new market volatility? robert: volatility is a mystery. in attention to the market in the past. it's not an exact theory. trump did not draw attention to the stock market, i suppose. now with the new trade war, it sounds like something he has done matters for the market. tom: something to dive into in the hour. let's go to london with francine lacqua. both of: good morning you. i wanted to ask you, howard, the market psychology in all of this. what is the market looking for? are they looking for treasuries to exacerbate a selloff?

there seems to be anxiousness on facebook. do you only look at monetary policy or do you look at underlying fundamentals? howard: you really have to absorb everything, as hard as that is an you bid on the biggest items right now. tariffs orituation, taxes. global trade is 60%. trade is 60% of global gdp so the tariffs will matter and we have a lot of runway to see how that will play out. this is the top of the first inning as far as that goes and i don't think that necessarily will be a good result. we have the fed tightening, that is a factor at play here. you have a new fed chairman. rates have risen. oil prices are up 55% in the last year. mortgage rates are up 50 basis points this year. you have this backdrop of monetary tightening taking

place, quantitative tightening instead of quantitative easing. that is important as well. facebook, that is an emotional trade. facebook was never -- a very expensive stock. rose 75%k's earnings last year. rose, it was just keeping pace with earnings and it's now selling at 17 times next year's expected earnings and that makes it a two multiple point discount. in line times forward with pepsi. pepsi is struggling to grow the top line with gdp. they spoke is growing at more than 20%. francine: is that wrong or is that -- we are talking about valuations? howard: this is an opportunity for people who can stomach volatility with facebook. being able to buy the stock down 20% on this emotional privacy issue, i think this is

equivalent of buying apple several years ago when people were calling for tim cook's head because apple had no creativity left. francine: it is a different business model. is could argue -- this trading data. where do government regulators get involved? we do not know. we do know this is an opportunity for people who believed in this brand a month ago and you are now buying the stock down 20%. will there be fines they have to pay? probably. is it going to be a complete change in their business model? i don't think so. tom: i want to get back to professor chiller -- shiller. 200 day moving average, here is the exuberance. i loaded the boat howard ward went to 20% cash in january. down we go correction stage, noodling around on the 200 day moving average and down here is

the gloomy moving market and the i will suggest--you will tell me the bear market is a normal part of our day-to-day lives. we are supposed to have their markets, right? robert: not exactly day to day. we have seen a couple of their markets this century. they matter a lot. i think they could have gone on longer. the endot down to 14 at of the financial crisis. it has gone up to the stratosphere again. -- pessimistict as my ratio would suggest. i think there is some element of confidence. none of it is measured by the confidence board, but in terms of -- i don't know, capitalist spirits. it's a term i just invented. it is something that is going

strong with the inspiration of donald j. trump. where that goes ultimately -- i kind of like in this to the 1920's under calvin coolidge, who is a very pro-business president. tom: that ended well. robert: that is when he left office, 1929. he had a few more months to go in 1929.e peak year is a midterm election year and historically, that is the weakest year in the four-year presidential cycle for the stock market. this year we have the potential , his donald trump republican party, potentially loses control of congress which means he may not get anything done for the rest of his term. how would that change your assessment? robert: i wasn't giving a big insert -- enthusiastic endorsement of the market, i was saying i can see it going on. if what you said takes place, if

we do have a power shift in the midterm, that will plausibly bring the market down. to breakave got to go so we can sell things so i can buy a new bow tie for the holiday coming up friday. i will not be here on friday. it will be good friday and we will be off then. we will continue our programming through a busy week this week and into next week. we are honored by our guests howard ward and robert shiller. coming up, another laureate of princeton university, paul krugman will join us as well. this is bloomberg. ♪

♪ taylor: this is "bloomberg surveillance." let's get the bloomberg business

flash. eda has confirmed it is considering a boost for shire. drugmaker said an acquisition would increase its capabilities in key areas and --vide it with treatment approaching the market. shire gained as much as 26%, giving the market value nearly 35 billion pounds. a shanghai court has accused -- a $10.4 billion fraud using unauthorized sales of investment type policies to prop up the company's capital. the charges in court statements offered an unprecedented look into bank -- anbang's innerworkings. he disputed the charges hang he didn't understand the loss and didn't know his behavior amounts to crime.

facebook has decided not to unveil new home products at the major developer conference in may. that is in part because the public is still outraged about the social network's data privacy practices. they say the new hardware products with connected speakers and digital assistants and video chat capabilities are undergoing ure they make the right trade-offs regarding user data. a facebook spokeswoman declined to comment. that is your bloomberg business flash. tom: thank you so much. we have just in the last you moments two tweets from the president of the united states on the koreas. we talked to peter paige and -- earlier. in seoul this is the first of the two tweets, see what you can do to get the second done as well. for years and through many administrations everyone said that peace and denuclearization

of the korean pencil or was not even a small possibility and now there is a good chance that kim jong-un will do what is right for his people. the president then goes on to say that he received a message last night with the leadership of china. look at that, there is the crack surveillance team keeping up with the president's tweet stream. this is the oddest way to do a foreign policy. kevin cirilli, translate this for us. i am going to assume the secretary of state designate right now did not really vet this. what is interesting is that it is a translation of sorts from the public statements that came out last evening from the white house from the press office about their response to kim jong-un's meeting with president xi jinping of china. when i -- when you look at this

more broadly, i think it shows the north korean dictator is really getting a boost in terms on thehe is meeting with world stage and it comes following the development of the administration's announcements regarding the trade policy with south korea. it is unclear of how specifically that might impact -- the specifics -- the policy itself is a bit ambiguous. a lot of moving developments in the last 24 hours out of the korean pencil of -- peninsula and the u.s. tom: when is the president scheduled to meet with whoever he is going to meet with in korea? kevin: they said they would do that before may. there has been no set schedule as to now and it is unfair -- unclear whether they will forecast when the arrangement is. it's also unclear where that location will be. francine: ok. kevin, if you look at the -- between china and korea, where

does this leave the trump administration? does donald trump think this is a good thing because he keeps china on side or does he feel threatened by this? kevin: i think the administration's thinking is that you really cannot do isthing with north korea part of it. we all know about the economic relationship between north korea and china, more than 90% of north korea's exports and imports directly related to china. of coarse, geographically, where they are located when you talk denuclearization and the issue of refugees along the border. all of that very much in the forefront. tom: thank you for the briefing. the president put out two tweets this morning on korea. kevin cirilli is our chief washington responded. we will continue with repressor shiller and howard ward as well

-- professor shiller and howard ward as well. balance of power today with kevin brady of house ways and means. worldwide, this is bloomberg. ♪

♪ tom: "bloomberg surveillance." wonderful day. francine lacqua in london. i am tom in new york. howard ward with us of gabelli funds.

and robert shiller. peter navarro will be with us today. i had a spirited conversation with him on trade yesterday. the basic idea if i say to you, professor, president trump in a good society, how do you frame that? he has a huge support across america. robert: it is a little difficult. good society, it was a term popular by robert litman about a century ago, strikes me as a more liberal -- it is not a business society, it is a society where there is more of a community -- i use the term in a book i wrote emphasizing i think finance is often misrepresented as selfish. i see it among my students. tom: is president trump selfish in part of the finance society or is he separate and removed from global wall street? robert: that is a complicated question. tom: you have 45 seconds.

robert: the question is whether trump will usher in a new era of capitalist success or whether it will be chaos. people really do not know which side it is. the chaos of the white house with all these firings has people wondering, is this his genius at work? that he is really fine tuning the administration or is it nonsense? tom: let's come back with robert shiller and howard ward. we will talk our fiscal state of affairs here in a bit. this is bloomberg. ♪ retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store

near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. ♪ good morning. this is "bloomberg surveillance." i know you're interested in talking about deutsche bank.

you for pointing out this trend. havehares of deutsche bank declined 29%. what the chart looks at is that it shows you the total return of deutsche bank stock versus bonds and it is clear the bank is run for bondholders, not shareholders. tom: yes. there?e: tom. you tom: i'm looking at the equity and it is above 11 euros be -- per share. francine: john cryan struggling

to maintain investor banking after failing to bring back co ntrolled growth. planned aas now two-day trip to north korea. this after it was confirmed that xi jinping met kim jong-un in china. it was his first then visit outside his country since taking power in 2011. the u.s. said to be considering a crackdown on chinese investments in technology, invoked inlaw to be emergencies. chinese companies would be banned from investing in semiconductors. chance for donald

trump to punish china for what calledr what he violations of intellectual property rights. to coordinate a nikkei strategy. italy, for sending is said to be open to his party joining a coalition -- be rlusconi is said to open his party to join a center-right coalition. dayal news 24 hours a powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg.

♪ tom: thank you so much. trying to get out front of a story on the nation's fiscal structure. in april, we had to see some cdo analysis. with robert and howard. the morning must-read, on the fi --this is fromme the conservative establishment. michael bosket leading the way. recently trump's released budget is a wake up call -- are thewhat

inkages to your work? >> this is a concern going forward. i point you to the end of this year when the federal reserve will be reducing its balance sheet at a pace of $50,000 a month when the borrowing needs are soaring. we cannot do this forever. there will be a day of reckoning if we do not come to grips with our entitlement. i do not think anything will happen in washington to change that anytime soon. it is not there. the public is not behind it and so the politicians are doing nothing. francine: i want to explain the thorsty of these many auhor

out of the hoover institute, at a stanford as well the left is with them. the economic community has a how group belief on difficult this fiscal situation is. >> the hope that is offered, the taxeshat cutting will be so stimulated to the economy that it will solve this dent --debt problem. francine: yesterday glenn hubbard, who do the one guy you think would support all this, he really distanced ballet from the fiscal of the trump administration.

tom: we heard from jay powell and he said instead of trying to predict what the economy is doing, he will be reacted to the economy. fed,that mean that the automatically has a bigger chance of being behind the cur ve? >> i think he is a very accomplished, intelligent man. he does not have to be an economist to be forward-looking. not forward-looking, you are behind the curve. this is important to monetary policy because of the leg built in to the economy. the tightening that is taken tak every last yeat year has

--has begun to take its hold on the economy now. i was hoping he would say he would make every attempt c to say ahead of theruve --stay ahead of the curve. tom: should the fed chair have gone to someone else? >> i was president of the american economic association last year. economists have a kind of expertise that i think is very and the question of allowing to get away with fancy stimulus having a extra normal affect. francine: mr. ward brought up the lag of fed policy.

mr. timberlake out of the georgia school, ben bernanke to look at the history of central banks and by definition they always lag. with all of our new press conferences at our disclosure, no one asked william mcchesney martin about this --are we asking too much of central banks to get out front. >> despite our expertise as economists, we cannot forecast a year out. n forecast aa couple of quarters and then they are lost. howard board, how is he supposed to invest with the fed going through this monthly ballet?

invest?: how do you >> you to look at the range of likely possibilities for the market. if you look at the range of earnings in 2019. if you want to know how stocks are doing this year, you have to fixate on 2019. 2019,0 earnings for somewhere between the $7,500 range. you develop a trading range for the stock market that is 24-75 on the low end and bright around 3000 on the high range. we are in an adjustment base. we had to adjust to tariffs and the fed tightening. it that adjustment period -- is that adjustment period

creating this turmoil. tom: what do you mean by the -- francine: what do you mean by the fed cannot forecast? you adjust your models, you may have the wrong model but it is your job as a fed economist to figure out what your policies do so you have to be for looking. >> i believe in the fed. i was basing my statement on research from the philadelphia trend where they have shown this. it is surprising. you think economists could do better than that. i think it is the nature of the problem of forecast that there are too many things that come in that are not economics, they are what would trump dp what is

going to be the --what would trump do. c word wrappedhe around, all of a sudden they are chronic deficits. what do you do with that f iscal overlay? >> wall street is going to largely ignore this until we have a crisis. we're going to kick the can down the road until we have a crisis and then maybe they will be concerned about it. the united states heading towards banana republic. just kidding. don't forget, your morning briefing coast-to-coast sirius xm channel 119 radio. here in moscow, bloomberg daybreak, good way to start the

day. this is bloomberg. ♪

taylor: this is bloomberg surveillance. taketao has confirmed -- has confirmed that it has created a big --did for shares in shire. gained, giving it a market value of 35 billion pounds.

accusedai court has former insurance company chairman of using a matter of upes of investments to prop liquidity capital. into anbang'sok wrongdoings, going back to 2007. wu said he did not know his behavior amounted to crime. apple has unveiled a low-cost students toad for compete with the crime book. pad includes the pen

stylus. to there has been a bid the stock exchange. thatu have to remember because we are running the process, we can either choose to sell the whole 72% to one controlling shareholder, we can do it through various body willons that everyv have minority interest. we can also think of other creative ways. taylor: that is your bloomberg flash.s fas -- tom: i have to ask you about apple. >> i think apple stock at 14

nings is a year's ear reasonably good value. higher,ocks will drift 195. deficits sle, twin trade. >> you want a number of correlation? tom: i do not want a number, this is television. are they close, type, linked? >> to me, they are linked with moral value. she federal deficit has alway aboutmoral tinge to it not being deceptive and not full

in people. do we have a moral tengion on our trade deficit it -- tinge on our trade deficit? >> it used to be that the trade deficit, to allow that would be unpatriotic. we learned the lesson it is not unpatriotic. a trade deficit reflects underlying factors like investment opportunities in the united states that affect the deficit so it should not be viewed that way. our views of the world are slipping. we are forgetting past wisdom -- more seat of the pants tom: you are describing the president. professor shiller just described the president of the united states. francine: if you look at lessons

of the past, what would be your number one lesson of the past? stocks, do not jump out and panic, especially after the market has lost 10%. live with the volatility and if you cannot handle it, maybe ocks.d not be in st invest in the stock market for the long-haul and stay in there and do not be affected by the state today noise. francine: what is the number one lesson that we learned from the financial crisis and is it right to focus on that or should we be more forward-looking? >> i never liked this lesson, stay in the stock market. financial theory does not tell you to focus on one investment.

the financial crisis taught us of the importance of diversification. tom: this debate between mr. ward and dr. schiller is important. if i diversify in the last great bull market, i would have diversified away all the excess output. i diversify, if i am a consultant to the pension plan, how can i diversify away his 32% return? >> that is one period in history. we reached a point where the stock market is very high by at least some sanders. --by at least some standards. we cannot overreact to success. >> we have to acknowledge that interest rates remain historically low.

the opportunity you had in bonds is no longer there. tom: who do we have in dubai this morning? francine: softbank having agreed to build the world's biggest --in the kingdom. the deal was announced and comes to during the saudi crown prince's u.s. tour. the saudi prince is expected to like jefftech giants bezos. pr push.his is a big the crown prince shows up in washington. he speaks to the trump ministration. he speaks to investors. what do investors want from saudi arabia? >> they want to understand the nature of the saudi stock market

and investment is a good place to put your money. we should have a decision by ftse russell about whether to include saudi arabia in the emerging markets index, which will give impetus to foreign investors in saudi arabia. all these incremental announcements, moments in the saudi arabian story are hopefu lly fueling investor optimism about the future. francine: what are they asking in return? it is all about saudi aramco at the end of the day and can all these countries afford to snub saudi arabia or should they play along to have a piece of the saudi aramco action? -- we havere looking been hearing about diversification earlier and the saudi arabia market is digitally

a lucrative --is potentially a lucrative one if you are an parttor wanting to be of the vision to turn this into a lessmodern economy, oil dependent economy and you mentioned the aramco ipo which is coming up, its inclusion in the ftse russell and the msci index decision in june. feeds into this moment for saudi arabia. francine: thank you. tom, today, a little bit later on bloomberg tv, khalid al hassan, interview at 7:00 p.m. in new york. tom: there we are from dubai.

york, we have a wonderful discussion on asset class diversification. i want to go back to your work in chicago on this efficient market and the information tha t we see and do not see. do we have too much information now? are we attending to be too efficient or should we just be bullheaded like this guy? >> i think the market is muslim efficient --is much less efficient tha commonly allowedn. inefficiencies do not allow you to make short run timing decisions. if you want to take advantage of the inefficiencies of the market, you have to go through years of being out of something

that is looking good, patiently waiting. tom: what are you waiting for, howard, to look good? what sector are you waiting for it to look good? >> um. industry sector? tom: which industry sector are you out of waiting for the robert shiller moment where it looks good? >> i do not know. we are much more stock specific than we are sector specific. i think that basic bias against industrials and materials is going to hold. growth?re is your >> revenue is a priority. everything after that can be

fixed. you have to focus on the top line growth. tom: can we do this again? the two of you were just great. >> i want to find out the tariff policy, are you for it or against it? >> i am against it. tom: robert shiley, and howard ward, with francine. will do it again on bloomberg radio. thank you for watching. this is bloomberg. ♪

♪ ♪ ♪ tom: tech stalls, bank stocks drop and investors left to wonder what is coming next.

the president said he will be happy with trade talks. empty, debtg on downgraded and a mysterious fatal crash in california that raises new safety concerns. .david with julia julia: welcome to the wall market west. techw the epicenter of the stocks, 3% decline for the nasdaq. a whole host of things to talk through. facebook, aa, broader crn