♪ the world's second-biggest economy continues to expand. we are live in beijing. the new number two at the fed. richard clarida will be nominated. jay powell's inner circle starts to take shape. and netflix takes the crown. the streaming service closed -- posted blockbuster numbers. shares serve the master -- in after-hours trade. ♪ mark: let's check in on the

markets today. the stoxx 600 up and rising for the third day and four. it fell to a 13 month low on march the 26th. look at sterling. that's the best run since june the 30th 2017. strongest level for the pound since the day of the brexit vote on january the 23rd, 2016. number couldent determine the path of sterling. retail sales also important. the economic surprise and eczema votes lowest level since 2017. built up thes have biggest long position on the pound since august 2000 or team. last consider looking at sterling. 54 basis points is the highest levels in's march 23. germans data is due at the top

of the hour. concern rising in the euro's biggest economy. today,up on surveillance krishna on from jpmorgan talks the markets in the fed with us later. neil shearing gives us his emerging market calls and still to come we talk oil with the iaea. you.a day we have for let's get the first world news. donald separatists setback as hisderal judge denied request to keep prosecutors from reviewing evidence seized by the fbi last week. the district judge ordered prosecutors to make available to cohen's attorneys all the evidence seized. reviewsecutors cannot the information yet.

was revealedime that cohen also represented sean hannity. donald trump has reportedly put the brakes on a per limitary plan to impose additional economic sanctions on russia, according to the washington post. moscow's support of the syrian government. nikki haley announced on sunday and then the kremlin denounced it. the white house's has announced donald's intention to nominate richard clarida as the vice president of the federal reserve. downey fischer step october. this helps phillip leadership team of new chairman jerome powell. john williams maybe the next head of the banks are from new york branch.

china's treasuries rose in february the most in six months. even amid trade tensions between the world's two largest economies. bondss ownership of u.s. increased by $8.5 billion to $1.18 trillion. china remains the largest foreign creditor to america .ollowed by japan u.k. prime minister theresa may's facing a second debate and as many days in britain's role involving syria. she stayed up late last night listing to lawmakers views. there were six and a half hours of proceedings including more than three hours with direct questions from mps. this is in the face of allegations that she rushed forward without seeking proper approval. powered by more than 2700 journalists and analysts in more than 100 and 20 countries. i'm ed ludlow in this is bloomberg.

francine: -- mark: gdp grew by 6.8% in the first quarter let's get to our china correspondent. talk us to the data and what it means for the chinese economy. >> a couple of key takeaways. one is the chinese consumer remaining very bullish. this is despite the pressure on house prices. he saw online retail sales up 35%. up as well.il sales above expectations. you have that factor and the factor on the flipside as the old part of the economy are starting to slow. there is a tighter credit environment here.

industrial production numbers came in below expectations. fixed asset investment also came in below estimates. one key factor in that data point is private fixed asset statement above investment in the first time in three years. that underscores the rebalancing story. this 61 -- 6.8% and a wonderful opportunity. tapping down to dedicate relation here in china. mark: how to the trade tensions with the u.s. play into the current narrative? >> they are still unfolding. he probably didn't have much of an impact on the q1 gdp but we got. we heard last few hours, for example, that china's commerce department is putting duties, it

says, sorghum producers in the u.s. to ensure the deposits are put aside. that happened last few hours. and we have china outlining some of their moves to open up the office of her. relaxing the jv structure and outlining a timetable on new electric vehicles and the equity caps being removed for some of the foreign automakers. that is significant. we are still waiting on president trump to decide on those proposed tariffs. china has already put in place $3 billion worth of tariffs and that is pushed up prices but it's had a very marginal impact on the broader economy. headwinds, byl the real estate sector and the clamp down on pollution. the environment is a key focus for policymakers. mark: thanks for joining us.

during 10 things at once. market strategist from jpmorgan join us. what we takeaways. the china rebalancing story shifts -- ifs towards consumption and maybe develop market composition of gdp. it's happening. that's not to say that investment is dying. industrial production numbers are still quite healthy. overall, quite pleased with these numbers. like thea few things shift investment with private companies taking a bit more was step. nicely withps up our positivity on emerging market assets. did you worry about the trade rhetoric and the protectionist tone we are getting from the u.s. president and how that might feed through

to the chinese economy? it certainly a worry. trade wars are not a good thing from the economic restrictive. partly because of it oriented nature of many of the emerging world. plus inflationary measures that may affect the u.s.. the amount of assets or goods that are going to be taxed is actually quite small. compared to the broad spectrum of chinese gdp and even u.s. gdp. in terms of numbers, were not worried about the current proposed plan. if the signal the need the numbers that may be more of a concern at the moment we still maintain our view. compiler,star chart this is playing into a theme that china might buy fewer u.s. treasuries. ofshows the chinese holding treasury bonds increased slightly. china only in yellow.

fear, is it warranted? that china is going to buy fewer treasuries as a tool in this spot between the two countries? it's easy to get carried away with some of that rhetoric. they will dump treasuries and cause fluctuations but we are not worried about this. effects have a lot of on the currency as well as they started immediately liquidating the positions they have. something to watch the data tells us it shouldn't be too much of a concern yet. i think it's a broader issue of they start doing that. another interesting comment by trump yesterday accusing china and russia of devaluing the currency. another one by the queen of charts. the fed hiking rights. -- hiking rates.

google has depreciated. the one -- itar, was an interesting comment from trump given the treasury did label china a currency manipulator. -- didn't label china a currency manipulator. it's interesting. that's the key. the u.s. treasurer 2 -- treasury, a very authoritative body, has said there are not currency manipulators and has not escalated the language. investors should keep in mind separating some of the recent action and noise from what is actually being said by the real thinkers in charge. and currencylation wars are always a big topic because everybody wants to export their goods to get the best, attractive product of their economy, especially in a time when demand may be slightly

faltering in some of these economies across the world. in looking at what you can do to a great tradeet number every quarter or every month. it's a big issue and it's not ofething the current state plays they can is concerned about any broader currency wars going forward. thank you so much. she stays with us for the hour. plenty coming up today including powell's right-hand man. richard claret gets picked as the fed's second-in-command. how does this appointment to the balance of the central bank? netflix takes the crown. moreming service has customers than expected in the first quarter despite raising prices. this is bloomberg. ♪ ♪

♪ economics, politics, this is bloomberg surveillance. i'm mark barton. let's get the business flash. plans to remove foreign ownership limits for alto ventures in the next four years. ownership limits and utility and new energy vehicles will be removed by the end of the year. they removed the foreign capital commercial vehicles and 2020 and passenger vehicles and 2022. in 2022.es the paris-based drugmaker says a fully finance offer and companies are using an exclusive negotiation.

they're focusing resources on biotechnology and new medicine. gauging has been clients interest in the british bank is starting a cryptocurrency trading desk. the court into people with knowledge of the matter, it's so far done it limit very assessment of demand and feasibility. he could see the u.k. linda joining goldman sachs in founding a new business. barkley says it has no concrete plans. let's talk the fed. president trump has said he intends to net -- nominate richard clarida as the vice chairman. he has some insight into washington from his time in the treasury under george w. bush. our guest is still with us. good pick? have someone with financial market experience and

experience in government. more importantly, just getting those seats filled. it's a small board, isn't it. thoughts are not voting members. get thosetant to seats for voting members. and to get the broader construct of the current status. have power, clarida, williams, you have two top-flight economist. powell doesn't have the phd. is the balance good? >> economic expertise is there. the work in trade in markets is there. sprinting government is there. they all seem very qualified. i savor get into a very important time when markets are paying attention more to fed speak because the time were going to get three or four rate hikes this year. we think it could be actually four.

you know how medians work. his only one that needs to move up to get us to four. i could very well be a possibility if the data continues to show up. earlypimco was an generous -- generator the new neutral. what is the neutral rate? comes to the fed? >> what were looking at is at what point do we have to get to before companies in the u.s. start struggling to make their interest payments? 3% on theloser to base rate, we may start to see some companies expressed difficulty encumbering interest payments. to that point. on the current path come we're safe from that this year. towards the middle and end of 2019 we make it to the point

where we need to be a bit more cautious on all companies in the u.s. being able to be healthy. queen ofget in a charts chart in every single section. that's my aim. the 10 year premium over the average g7. it's the widest on record. yellow is the long-term average and ready zero. would you expect that to widen? less favored says jpmorgan asset management. as is going to widen? i think the key thing is that the fed is going to be raising interest rates and that affects the base of the short end but the long and so is global factors. the bank of japan is still in altra accommodative mode. while we think treasury yields in the 10 year should rise of the course of the year, they are not the rising at the same pace as the front-end. that means were not necessarily gain a steepening curve. that typically means we

should be worried, it's important to separate the current economic strength and how the yield curve may not be steepening with the fact that we still have the strong economic growth, yield curve threat -- flattening may not be a red flag. she stays with us. up next, netflix's blockbuster butlt in raising prices still grows its loyal customer base. we will discuss next. this is bloomberg. ♪

♪ mark: i'm mark barton in london. netflix having the strongest start of the year since its ipo in 2002. topiciber growth fixations. our reporter cover the earnings from san francisco. earning report was an absolute blockbuster. it posted its strongest start of years as the company went public 16 years ago. investors are pushing the shares up after it added more than 7.4 million subscribers this quarter. we also seeing revenue growth the fastest pace in history takes effect is able to continue raising prices doesn't lose customers showing netflix has pricing power. going tony is also continue to spend heavily on original content. the company said it already makes as many unscripted shows

as a cable network in order thanses more new -- movies any studio. it says it will release around 700 pieces of original content this year. it started been able to poach top talent from rivals like oxen disney. though netflix does report a profit, one concern investors may have is growing debt. it should be of a keep concerns and day as long as it is able to use that money to drive subscriber growth. this positive quarter is also lifting the entire tech sector which has been in difficult times because of data privacy issues. the scene shares of many top tech giants rise slightly afternoon fixes report. for bloomberg news, i'm selina wang in san francisco. mark: let's have a look at french president emmanuel macron. his addressing european parliament in strasbourg. is expected to set out his vision for the future of europe.

home in push back at the face of reforms that he's trying to push through. keep in on that and you can watch that if you have a bloomberg on life go. you can recognize that man there. the man in charge of the brexit negotiations. our guest is still with us. but still question on macron? it will cover all of basis. he's doing hard to push his reforms but he's facing pushback from unions. it's very important from economic standpoint that he is successful. >> it is because the potential for european countries, especially summerlike france, was to improve flex ability and labor market. to improve business practice.

because finally see a bit more improvement on margins or earnings the investors could receive of the end of they. it's not to say that the situations can we be gone. we still positive of the efforts of the ecb. still positive on consumers been confident in europe. a push from the government side, the policy side, as mark ron is trying to do my due welcome. he says think you faces challenges tied to division and doubt as well. year of the the chancellor, angela merkel? they're not exactly on the same path when it comes to how much integration they want to see within the eurozone, are they? >> they are a bit different and the giving the different types of economies in different types of labor markets.

on the whole, they are both in a sense pro europe. global investor good news in terms of maintaining stability and a bit of that more business friendly environment. particularly with micron in his recent engagements. the push is coming from to have a it is nice little bit less friction mother parts of the economic and governmental space. looking at my nyc fang index and as i did promise, we have another queen of charts chart. this is the fang index. versus the s&p 500. the fangs from their peak in mark -- in march, through the april, fellecond of roughly 14%. bounced little bit. netflix clearly delivered stellar results.

has the fangs story run its or is there further upside? >> with releases like we just seem from netflix it's hard to say the course has been completed run. there are still frontiers of internet entertainment in terms of social media, etc., that we don't even know now. the long-term story has not gone away. we do continue to remind investors that there are just a few stocks. when you have something that happens, one stock with such how violation falling down can really affect the portfolio. of the s&p and/5 in europe 5%. >> axes in the u.s. indexes a whole means maybe you have extra tech exposure that you may be not have wanted. an individual stock exposure may not have known.

basic math is a thing to consider. you can like tech but not like the fang stocks. interesting driverless cars, smart phones that can do beyond what we've imagine. you don't have to be invested in just those few companies. there are emerging marking companies it can give you that growth story. antidemocratic forces in commentsnteresting from the french as he continues to give his vision for the future of europe in strasburg. now, it never ends. let's get on to dana. u.k. wages rising at the fastest pace in three years, raising the prospect of then into the squeeze on living standards.

annual growth excluding bonuses went up 2.8%. consumer price inflation went up 2.9%. its forecast to fall 2%. slowly, wages are moving above inflation. the bank of england may raise rates despite the economy being disrupted by bad weather. employment rose after the economy added 55,000 jobs. the jobless rate is the lowest the doence 1979, below estimates. the prospect of a return to an forme growth is good news hard-pressed households after a year of wages lagging behind of prices. those are fascinating figures from the u.k. on employment. there is sterling. sterling on a daily basis

rising. tos is a perfect opportunity continue in this wonderful quests to show you another chart. ones sterling, but it's from earlier. this is a highlight, sterling strength. the red circle is the day of the 2016.- referendum in sterling is rising for an eighth consecutive day. that hasn't happened this year. what will it take for sterling to surpass the level it closed at, roughly $1.48. another wonderful chart. that is the highest level since the brexit vote in 2016. to the swissng

franc, it's within striking one dollar $.20 mark. that was the minimal exchange rate until 2015. it's all happening. u.k. data, wage growth is ticking up. inflation is just narrowly above it. will this be enough for the boe to push the button and raise rates? >> i think so. the key thing for the past year and a half as inflation rose above 3%, realt wages were being eroded. growth weight -- rate was behind. thisly, we are getting inching toward each other, the nominal wage growth numbers. we've got a stronger consumer now.

we are seeing low risk points and consumer confidence. some of those numbers of already been hit and are on a slight upward trend. we do think it's on the table for may. mark: what is priced and when it comes to sterling? i'm just typing into my bloomberg were closed on june 23. it was $1.48. today we are at $1.43. was it going to take to get above that psychological level? level beingmbolic hit. it might be interesting to watch here it that's not out of the question if we've got labor market strength. might have to rate hikes over this year. you could see a sterling that could hit some of those pre-brexit members. mark: it's priced in late in the year.

expectation in may, the second in november. that could come true. the central banks are independent. we will see. ,ark: we have had the good news now the hard work starts. we are starting the discussions on trade. already, the second referendum talk is out there. we will see until the next leader summit in june. these are the questions people are throwing around. brexit is massive when it comes to sterling's fortune. >> i think they were waiting for the brexit cloud to dissipate and the sun rays to come through. now we can have the clout completely gone. you've got a transition deal agreed. there are issues that need to be outlined by both sides. europegot a sense that

is dealing with the recovery that it needs to push forward as well. to threaten some of that growth, some of that export is an important consideration where you may not have voices another set of the table saying no, it saying let's work on something, a solution or workaround rather than destroying the green grass of recovery is it's coming through. mark: let's do another queen of charts. let's show off. franc,back to the swiss ins at 119 since the first january 2015. is it meant to be a haven in times of geopolitical stress? what's going on? look at the chart, the euro is coming up to that level. >> i think it's interesting.

you've got the idea of the safe haven. when you would expect market volatility, with a little bit more risk, the flight to safety helps push the swiss franc up. francwishing for a lower , which caused a lot of the economic slowdown in the last few years. it will be one to watch. have they lost their haven status? it seems to have lost that. in theses a haven environments when things are uncorrelated or things that acted in the way you think? you can take from any asset class for derivative, you want something that is long short. .hat's what we're talking about what can give you balance of the portfolio and everything gets thrown about. emmanuel's go back to

macron. he is addressing the european parliament. he said the u.s. is rejecting free trade. the eu has unique strength, national can lead europe into the abyss. we will continue to monitor that big speech from the french president his vision for the future of the european union. .e will monitor that speech you can monitor it on your bloomberg. this is bloomberg. ♪

mark: you are watching bloomberg surveillance. earnings season is well underway. one sector which comes to mind is thanks. we have questions about whether the banks are overpriced. this is the adjusted price-to-earnings made public by robert shiller. it's very stretched to downwards. it's the most stretched since the early 2000's. this is the long-term average. where are we as the u.s. sterling season gets underway? to be ank it's going

interesting earnings season to watch. expectations are high on the u.s. companies. that is double where you are looking at europe and japan. there are quite a lot of eyes on the u.s. market, it's where the fundamentals of the best and some sectors might get themselves off from the levels of the past two years. energy is one example, we see some oil price stability and people coming back online with profits. financials in general, there are a lot of different sectors with different stories. you've talked about tech already. on the whole, if you can get that 20% growth, it does look like an area we would like to have. mark: would you say equities relative to profits are stretched? they are if you look at this chart. measure, it'st one in the past 10 years and then up and down in terms of

prices during the crisis. pewe look at the general that is forward, the evaluations do look more attractive. we are just pennies the long-term average and some cases depending on where you take the long-term average from. we are lower than one year ago. that is helpful. it doesn't make the u.s. look expensive relative to the past two years. that is good news. the earnings story is good. mark: whatsit looking like in the european earnings season? >> there are a few more hiccups, that doesn't mean some companies of done well. there is a stronger euro. even just against the dollar, the dollar has been weaker than everything else, a stronger euro has been difficult for some exporters to manage.

that doesn't mean some companies in europe are not able to manage -- navigate that. maybe that 130 level might cause some pain for some companies. in general, there is still strength. unemployment is falling and retail sales are ok. mark: i know you wrote a piece and you are encouraging emerging markets. that's great timing. emerging markets of had a great run. things may get bumpier, some are using this as an opportunity to get more selective challenges. the winding down of central banks, your thoughts? >> we will talk about the fed is the main central bank. it's tricky. the fed is on a path to

normalization. that's not been great for emerging markets, especially those countries with that's. take a long-term view, it may not be in 30 years, you can see that consumption power, the rising middle class of china, india is still a little bit further behind, it is still on the uptrend. if you look at that change to now, we've got just so many more consumers online. in asia as well, they can access the growing consumption base. population growth is never looked better in emerging markets versus the issues we continued to see in japan and northern europe, which doesn't look great for the next generation of working age people. we are very strong on emerging markets. it'su take a 15 year view,

great long-term projections. emerging markets are something to continue. mark: you are staying with us. the users can interact with the charts using g tv. we have had a few of them today. you can use them for future reference. it's a good problem to have, the ecb debates whether to let the economy run hot. we weigh the pros and cons next. this is bloomberg. ♪

mark: this is bloomberg surveillance, i'm mark barton in london. ed: they want to remove foreign ownership limits. vehicles they will be

removed this year. china will remove the limits on commercial vehicles in 2020. to global boost companies seeking better access to the world's biggest vehicle market. they will sell off the generic drug units for 4.9 billion euros. offer withade an exclusive negotiations. they will focus resources on biotechnology and new medicine. netflix is posted strongest cyber growth since going public. the company added 7.4 one million users, topping analyst projections. they raised prices over the last few months. barclays is engaging interest in the cryptocurrency trading.

it has so far only done a preliminary assessment of feasibility. joinould see them use -- goldman sachs in pioneering a new business. construction conglomerate is -- it's how clever he talks that include them. the main business is the group. it's one of the essential assets. they were not immediately available for comment. the u.s. government had said they violated the terms of the imposed aand it has ban on purchases of crucial american technology needed to keep it competitive. the uk's private security center warned them and regulators that

there was a risk from using their equipment. that cannot be mitigated. that is your bloomberg business flash. mark: officials are starting to consider whether to let the economy run hot. the region is growing faster despite signs of a slowdown. that could be one way to repair the damage of a decade of financial crisis. it could put a charge of the economy, that's more relevant now as they discuss how to manage support. should policymakers keep growth under control? thee is a risk in allowing economy to run too hot and inflation gets out of control. when it comes to the ecb, is that the best strategy? >> i would not say inflation is

out of control. not see itntinue to above the 2% target. it is well below that 2% target. i think their question is how much more do they need to do in terms of the gdp growth and unemployment and other parts of the economic checklist that are doing well, holding inflation aside for a moment. when you look at the checklist, most things are being ticked off. consumerbetter confidence. germany is looking impressive. they have justification to wind down their program. they can get it down to zero. the key thing is separating the reduction and the tapering with the rays of interest rates. we think that will come beyond this year.

when inflation does get closer to 2%, they can separate tapering. mark: we can show the queen of charts in every section. my point.exactly mark: look at that range, it has barely budged. >> it has barely budged. it could get a bit higher if you think about the core goods affected by a stronger euro. it's not going to be near the 2% target anytime soon. macro picture is very good. you could start tapering this year. mark: next week, any tinkering it to the language? we had tinkering last time. >> may be. maybe not. the real benchmark is what's

going to happen in september. over the summer, maybe in the meetings that come after, they can tinker with the language. i'm not holding my breath on one specific meeting to be a game changer. mark: this is a chart i love. it shows the surprise index. economists, from that's the global gauge was it -- which is at the lowest level. how should we read that? >> when you split the different countries in this global index, europe is one of the worst. that may sound contradictory to the growth. pmi and allys have of these survey numbers hitting the top level for a sustained amount of time. they are turning down. that's ok. we can accept them.

they are serving numbers, they can't be at a high every time. they do need to come down the next three months. this part of the story different from the core, gdp growth is strong. we did it. queen of charts, every segment. bloomberg surveillance continues in the next hour. tom and francine are both in new york today. this is bloomberg. ♪ welcome to the xfinity store.

i can tell you about... streaming the most free tv shows and movies on the go. yeah, and... xfinity internet. it's so fast! and you can save by... by getting up to 5 mobile lines included. whoa, you're good. i'm just getting started. ♪ simple. easy. awesome. come see how you could save $400 or more a year

with xfinity mobile. plus ask how to keep your current phone. visit your local xfinity store today. continues to expand.

president trump says he will have a new nominee for vice-chairman. with the executive director on output costs. good morning. we are in the united states this week. we are in new york. we will be focusing on world growth and the risks and pitfalls. it's not just about sanctions. we will go to china with an interesting story. everything is linked. for is the number one topic madame lagarde. tom: if there is a trade war, it depends on how the economy is doing, whether they can fend it

off. tom: the economic outlook comes out today. francine: we have some investor expectations. now let's get straight to the first word news. taylor: it's a step back for donald trump over the fight for his lawyers records. request toed his review evidence. the judge indicated she may appoint an outside lawyer help in the process. tona is given a boost investors who want access to the vehiclethe apple -- market. overseas companies can own no with a chinese partner. the u.s. and the u.k. have an unprecedented warning about russian hacking. they say russia is using compromised computer networks to

attack agencies in the countries. individuals and companies should make sure their software is up to date and passwords are secure. areh and south korea calling an end to their military conflict. that could happen at a summit planned for next week. the paper reports one measure would be returning the demilitarized zone. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. francine: thank you so much. newspaper of the international system, risk is still on. dow futures are up 119. is 124. oil is part of the story. screen, that's an

extraordinary number. to theally getting back idea of a bull market, the idea of a new test of record highs. i will show that chart in a moment. that's a huge deal for smb. to 18.5.rengthens francine: u.s. futures are advancing. markets,t the european they were up. the dollar is flirted with the lowest level in two months in the wake of president trump's herbal for a into exchange rates. the british pound is positive after a recent winning streak. i've got 143 on brexit. we will show that chart later.

how about a bloomberg which goes back to us freezing in davos. chart of great synthetic euro and swiss franc with a long-term a strengthening of the swiss franc. up we go. the strengthening here of the swiss franc, it's stability. we get this huge move. they say enough. this is the come back very nice. you wonder if this is a precursor to the end of negative rates. francine: we are looking at the exchange rate. you were preparing to go to dow posts. os.dav this is my chart. we have talked about the pound hitting the post brexit vote. if you look at this chart, it's

very simple. tom: this is sterling. francine: it is. tom: i can do this. ok. there's one of sterling as well. can you bring up my chart anthony? as toerg surveillance logins to the bloomberg professional. walk through this. francine: we did have a little bit of wage growth that surprised the markets to the upside. if you look at that, the pound is climbing to the strongest level since brexit. we will see some dollar weakness. there is the boe rate hike. tom: this is where francine decided to bring the empty suitcases to america. let's get back to our top story and the risk of a

trade were between america and china. has a growing economy thanks to infrastructure spending. the expansion gdp show the economy staving off threats from protectionism. let's go to beijing where we are joined by our chinese correspondent. his the gap widening? >> the chinese would say they the desk theed on in terms of exports. what we are looking at, they came into the much of march strongly. sales,s of online retail it's up 35%. the chart is very bullish indeed. for the first

time in three years. that ties the rebalancing story. areas on the flip side of that? industrial production meets estimates. broadly, this is missing estimates as well. overall, you've got a window of opportunity for policymakers to continue to tackle some of those -- risks.risks and francine: when do those reducers, when will they allow foreign automakers to own more than 50% of local ventures? >> this is a significant deal. i think longer-term for the likes of vw ngm, these will be

put in place in five years. the chinese are saying they will allow full ownership for electric vehicles. they are starting with the shanghai local government. they wanted full ownership, now they will get it. it looks like the structure is being put in place. it significant and a takeaway for president trump. an: beneath the radar is story about how the u.s. will block a chinese telephone company from doing business with americans. this is the key phrase from around the world, as bloomberg says this morning, the real issue here is the linkage of this action by wilbur ross in the administration to the other sanctions that have already been put in the other tariffs that have already been put in. are they linked?

absolutely they are linked. this question about making it more difficult for chinese corporate's to access u.s. technology, that is the issue that makes policymakers hear sweat. they are less concerned about tariffs and what they see as this protectionist stance. they've been banned from buying chips and modems from intel and microsoft. tom: what you're looking for from the government? this is not the politics of emotion. direction against technology. .t's marketable how will china respond? >> i think you will see a doubling down of their program,

which gets them to this point where they have their own high-tech industries. they are putting in billions of dollars in r&d into semi-conductors to avoid this scenario. for many, they will be pushing for an acceleration to the program and more spending on those technologies. the question will have to be watched. the bloomberg was china correspondant. neil, it's great to have you on the program. the key takeaway, they are opening toward ownership. gdp was ok. out of those three stories out today, which is more significant? neil: it's the trade stuff. is this a real trade war hanging over the global economy for the

next five or 10 years. i think there are two ways of interpreting it. thatr they have abolished side because every gdp for the next three years has been around that number or the numbers aren't the real story. we have our own measuring that suggests growth is four point percent on the year. six.is down from there is some evidence the economy is slowing despite the official numbers. tom: we have the german numbers out earlier. let's show the german numbers. , there is an idea of a recession. is that even in the realm of possibility? neil: of course. tom: i am stunned by this. germany all of a sudden is nearing a recession.

neil: there is a possibility. we have cycles in economies. it's not out of the question that the labor market is the ecb wentd through extraordinary policies. that is investor sentiment. francine: that's on the worries that they have about trade risks intensifying. the only way they go into recession as if the u.s. does something to germany like they are doing to china. neil: they are a big service economy. they would lose if we would see a big shift toward protection. the more fundamental point for germany is we have three very strong years of growth. the labor market is starting to tighten. they may see supply constraints. might beal effects

starting to wane. the economy isn't going to collapse. francine: as long as economic growth is fine, germany will continue. neil: exactly. there is political uncertainty in all of this. the shape of the government, what policies. the france germany split, that .rohn's big reform program you francine: neil was staying with us. we speak with the executive director. we will talk about the fundamentals on the market. it's all about rebalancing. this is bloomberg. ♪

taylor: this is a bloomberg business flash. the prices $2.4 billion as part focus resources on biotech and new medicine. netflix is proving they can raise prices without losing customers. strongestd the subscriber growth. they raised prices for most customers. millionadded 7.4 subscribers in the first quarter. sales soared 40%. will meet with one of the eu's top regulators. he is scheduled to meet the vice president during a two-day trip to san francisco that starts

today. zuckerberg has been called to appear in the european parliament to explain how user data was passed along to cambridge analytica. that's your bloomberg business flash. francine: let's turn to oil, it is little changed. join us for an exclusive interview is the executive director. thank you so much for joining us. when does the market rebound? i think we are seeing oil stocks and oil markets are being eroded. we are seeing a market that is stronger than previous years. it's a reflection of that. francine: i know you hate talking about price. what needs to happen for oil to

reach $80? this to thed ask agreement parties. i would like to underline and increase ishe significantly higher, there are some consequences which will not be desired by the established oil producers. more oil production from shale we shouldted states, be careful. i'm going to be rude unlike francine and ask you about price. what is the calculation of the geopolitical risk in a barrel of oil right now? how many dollars per barrel is

it? you a number.ve anan tell you there is increase in the oil classes. eastenforced in the middle and also in venezuela. if i look in venezuela today, we see a major risk of prices. there has been a major oil exporter. that is becoming oil today. that is very bad news for the oil market, especially for venezuela. tom: what is the research on the responsiveness or elasticity of how russia produces oil? if he needs oil revenue badly because of sanctions everywhere,

can he turn on the spigot? does it work? all, you are perfectly right. muchussian economy is very tied to oil and gas revenues. the russian economy will get hit for sure. we see the russian oil production is resilient for now. if the sanctions continue, it will change the picture. in terms of gas, the shale gas coming to market is a major gaslenge for the russian revenues. oil prices are nearing $70. there will be explosive growth coming from the u.s. production

we were just talking about. is opec reducing their production? by continuing cuts, they are incentivizing shale to do more. seen a big wave of shale coming to market in 2014. the prices were flat. now, we see the second wave coming to market. if the prices stay at this level or higher, it may be even bigger than some of us think. there are much bigger implications on the process. u.s. shale shapes the market. this is a new determinant. president trump

threatening to reimpose sanctions on iran. how much does that add to the price of oil? think they had discussions about the sanctions. if the geopolitical tensions how muche oil market, will be depending on the sanctions and reactions. tom: one final question, this is a huge deal. when will the market reach the peak of oversupply? in terms of gas or oil? francine: in terms of gas. the globaleeing market very strong. 2017 was the golden year for natural gas, huge consumption growth.

this is a result of the lower levels. u.s. shale gas started to come to market in a strong interest to the global market. we did not see it peak. it was just the opposite of what we expected. entering the global gas market as a giant importer. china ase footsteps of a new player in the global gas market. as we have seen in the oil markets, china is moving very strongly as a consumer. these are the new dynamics of the global gas market today. tom: thank you so much. thank you for coming to us today from berlin. do you buy any of this?

do they have a handle on it? when you look at emerging markets, they have a handle on supply dynamics? neil: on the supply side, it's not with emerging markets. it's what happens here in the u.s. barrel, what a happens to the shale industry. that boosts gdp growth. what happens on the inflation side? tom: let's the rep this chart of brent crude. it's basically a moonshot. what does this do to the emerging market of petroleum? they've got to be loving this. neil: i think there is a production side and the interesting thing is what happens to inflation. do we start to see a pickup in fuel inflation.

we are starting to see core inflation creep up. hikes this year, two more next year maybe. this is good for the bond market. francine: do you expect this to go up significantly? do you expect the fed to let it run hot? neil: not just because of the story about oil, it's more about the labor market tightening. you've got unemployment close to record lows. francine: you have to feel confident to ask your boss for a raise. neil: they are talking about the legacy of the global financial crisis is at work. the survey, there is nothing over the next couple pickup.o see wage

tom: it's a different conversation. we will continue on this. we love doing this. they have a global report on democracy. we will speak to gideon rose in the 6:00 hour. there was an uproar in new york on mr. cohen. timothy o'brien will join us. that will be just wonderful as well. stay with us again. stay with us worldwide. this is bloomberg. ♪

♪ francine: there you go, the european parliament. for the last hour and a half,

they had been addressing the european -- very star wars. tom: star trekkian almost. it was in downtown brussels. francine: it was. francine:every six months, they change it. tom: i learned this yesterday. francine: which goes back to where the french central bank governor is, which is what our guest yesterday said he would make a good president of the ecb. they are talking very animated about trade, about integration, and about the strength of the euro. you can see they are patient afternow, mr. macron, having spoken quite some time. tom:? do these guys have to make an appearance here -- do these guys have to make an appearance here? francine: they don't come up but they do. it depends on how much animosity there is in the parliament. it is rare.

angela merkel came on about eight months ago. it depends on if you have a message. really wants to give a message of unity, integration, but we are hearing from insiders that that access on the german side is faltering. tom: this is important because away from finance, politics and foreign-exchange, this is the emotion of the politics of europe after this event in stratford between paris and berlin, right? yes, it is emotional because if you look at the various states that make up the eurozone, the eu, you have a lack of commonality. some people get elected on the basis of wanted a more united europe but they do not always get what they want and it becomes emotional. we will keep on bringing you in the headlines from that appearance with macron at the stratford european parliament.

let's get to bloomberg first word news. taylor: the supreme court hears arguments today in the high-stakes case over online sales. retailers want to overturn the 26th gold rolling that exempts internet merchants from collecting billions of dollars in sales taxes. it says retailers can be forced havellect the tax if they a physical presence in the state like a store or warehouse. wages in the u.k. are rising at their fastest pace in almost three years. the government says it sped up to 2.8% in three months. 4.2%, thent fell to lowest in the u.k. since 1975. theresa may faces a second day of debate over the accused role in bombing syria.she is defending herself over allegations she rushed to war without seeking proper approval. she says there weras no time to consult in taking action.

in china, the economic expansion is holding up things to a strong consumer spending. ago,ose 6.8% from a year in line with expectation. in march,es was 10.1% better than expected. production shows signs of cooling off. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. thank you. it was a dark and stormy day at the university of york a few years ago. meal sharing was going down in flames with dsge, dynamic so plastic general equilibrium, and clarida,earing at mr. our new vice chairman of the fed, assuming the process was for replacing stanley fischer.

and joining us -- remember the first time you read dsge and you said, what? >> many years ago, thanks. we don't have to get involved with it anymore. tom: does richard clarida have to bring the complexity of it and the dynamics of that theory to the fed or does he have to bring something else? inthis is the big question u.s. monetary policy at the moment. we have gone through heavy hitters in terms of fed chairs, lan,ing, bernanke -- yel bernanke, n.l. jay powell at the helm, less in terms of economic background so it is that intellectual have to come from? this is part of it. on athere is like a pilot big airplane and they. are only paid price a year when things go back professor -- when

things go bad. larida will be there when things get that. neil: and you think there is less risk in the financial system that the big thing will be when and if we see inflation return and how the fed response. that will be the next big challenge facing the u.s. fed. francine: how will they respond? raising interest rates, but there is quantitative easing and reducing their balance sheets and selling off the asset portfolio. there are big questions there. 20? -- is theet 2% target too low? francine: what does he bring to the table? he is more international. he understands d.c. politics and financial markets.

are you happy with the choice? neil: he is an academic economist, understands financial markets and has a background in d.c. politics. the three things you look for in terms of all the ticks on the box. tom: next week, we are going to talk a lot of smart people who are scheduled to join us. chairman greenspan, among others , all these people who have been humble. they have been humbled by the certitude of those old models. i get the sense from vice-chairman clarida that he is a new humility on what the models can do. if that is the case, what is the model at the fed right now? neil: this is a key question, what is the reaction, inflation in particular? grows,e demand, economy deflation picks up, and the fed

cuts interest rates. that was the old framework. it starts to break down because we had not seen the reaction in inflation in labor markets. is it just a lack or is it something fundamental that has changed with the economy and labor markets? does it dead? flatter? has richard clarida appeared here countless times with his work with pimco. is the advantage because he subareas bond guys go down in flames? there has to be an advantage that he was working at pimco, where he saw success and they look, gaining the bond market. neil: yes, when to have background in financial markets, you understand mechanisms in which economic decisions impact the financial economy. think unless you have a deep

rooting and grounding in that, i think it brings some vision to the party. friday, we had a number of emerging market leaders. how much is the carry trade alive and kicking because of what the fed will do this year? neil: carry trade is part of it. simply the fact that the cycling emerging markets seems to have turned and we seem to have dropped high in 2015 and are in the recovery phase. the key question, the one that stems from china's numbers, is how sustainable is it? i think that will determine what happens to the flows of emerging markets. about, ando talk we will do that here in that the. your morning briefing, on bloomberg daybreak, good morning to all of our digital products worldwide. we are thrilled you are with us. bloomberg daybreak, a morning

briefing. this is bloomberg. ♪

♪ francine: good morning. bloomberg surveillance from new york. tom and francine from new york, tuesday, wednesday, and then to d.c. russian stocks rallied the most in weeks after the ruble climbed on the course that president trump halted a new round of

sanctions against companies and individuals. gregory white is joining us, with us still, neil shearing. russia seems to be doing ok and they are not giving up the euro bond, despite the toughest u.s. sanctions debate. gregory: that is right. there is a strong current in the market looking for the worst to be over after battering the market took over last week and a lot of people in the government and market are looking for a bottom, hoping to see the worst and sanctions over. trump decided to hold off on further sanctions and that seemed to be what people are looking for. we have not gotten official confirmation and it isn't clear, but there is uncertainty in the market and it has not made up all of the losses. francine: we are not seeing panic selling debt. at the time, they had to cancel

a bond auction, right, and that is the first time it has happened since 2016? gregory: that is right, the markets are much more or delete and they are hoping -- much more portability and they are hoping -- much more orderly. they're hoping to continue the bond auction after the ruble bounced back. time, we are hearing our colleagues in the u.s. reporting overnight that blackrock, when of the biggest holders of russian debt, is uncertain about how strong with a sense of reputational risks and things that had not been an issue with russian investments in the past, now with investors asking, is this something we can hold long-term? washington chaos of -russia news, they were four or five stories. one of them was a president

pushing against his team on further russian sanctions. how is the president perceived by debt and beat and financial elite of moscow? as a friend of mr. putin? putinyou like to have perceived as his friend? gregory -- neil: i don't think friend is the right word. that ended fast after it became clear there would not be a quick friendship between the leaders. and now there is an amount of frustration but they are holding out hope that trump, while his heart is in the right place, but he cannot deliver because of competing interests around him and the political situation. so far, the russians have been unwilling to go after him in even ifersonally or they are very happy with u.s. policy.

francine: gregory writes, bloomberg's/--gregory white, thank you. russia,en you look at first, they have to diversify away from oil, how much will sanctions impact their steel exposure? neil: one thing to get straight is the economy is less vulnerable to sanctions than the case three years or four years ago. russian companies have paid their external debt, so the liability is lower. and the corporate sector, at the same time, the balance sheets are very strong with foreign exchange results. that gives it really. that makes the real economy less vulnerable. the main transmission mechanism is what happens to inflation and to ease policy. tom: are we in a tipping point on sanctions?

assuming the impact is not linear, are we had a point where does it feelmics, where more sanctions really matter or is it progressive paces? neil: i think it is the nature that is important. if it follows the previous path, perhaps it doesn't have much impact on the macroeconomy. it seems to be having much less impact, and things have been more stable this week. last week, i think what mattered was the change, not just sanctions on primary issuance, but affecting all transactions at the companies. the widening scope is what mattered. francine: but these are sanctions that actually worked. as to have an impact on the markets and companies targeted. where i think it is less clear-cut is whether it will have a tangible impact on russia's economy in the next

couple of months. probably not. will it affect individuals and companies targeted? yes. tom: with the china bombshell today, where we are going after chinese technology-aerospace-phone company worldwide for all americans that cannot do business with them, can we get that drama out of russia? neil: the short answer, i am skeptical, partly because china is so much bigger. depending on how you measure it. it is the first or second biggest economy in the world. i think the shockwaves in economic terms would be far greater than between the u.s. and russia. there is more geopolitical shockwaves. francine: neil shearing is staying with us. in the meantime, if you are a bloomberg customer, you logon to your bloomberg terminal, go to g #btv and you look at the charts. i have to brexit charts.

tom has the euro swissie synthetic chart. he is bringing it back to 1975. tom: this is not fair. the score is francine, five, tom, one. francine: we keep score. tom: why are we picturing that brexit chart? it isn't fair. francine: this is bloomberg. ♪

taylor: let's get to the bloomberg business flash. more problems for the tesla model 3. elon musk is temporarily suspending production of it for the second time in two months. they say the four day to five day hiatus will be used to improve automation and east bottleneck. walmart is sprucing up its website to capture business from amazon. a redesigned website will go live next month with a more personalized shopping experience. they lost momentum over the holiday timeframe. their online sales group at less than half the pace of the previous quarter. barclays is sounding out about possibly starting a

cryptocurrency trading desk. the british bank has only done a preliminary adjustment of feasibility and demand. all they will say is it has no concrete plans to trade the currency. that is your bloomberg business flash. tom: thank you. us, with ang is with huge look across a.m., the impact on developed nations, as well. -- e.m. and the impact on developed nations. we need to look at nafta. there are days. recently, we have seen a strong peso, what does that signal about it? neil: that the market is becoming less nervous about a disruptive nafta agreement. all of the folks have been on u.s.-china trade talk and we have had development on course. that has been done with no big shock waves. potentially something that we

could see next month. tom: bring up the charts, weak peso the last years, and very strengthening. last night, we had a 17 handle on mexico, extraordinary. it seems like a debate over nafta is impervious to presidential rhetoric. is that how you read it? neil: that is partly the case. the rhetoric has been fiery on china and there is always positive discussion on nafta to the sense there might be an agreement. back.so has come the issue for the markets is how does the central bank respond? if we get to elections in mexico july 1, we could see yields on the short end after the election. francine: we are getting breaking news deutsche. to have a new executive and looking at operations they can sell off and they are waiting

keeping the india retail and what operations. if you look at indian banking, isn't lucrative -- is it lucrative? neil: potentially, especially if you look at credit levels at the norman p.m. the issue -- at the norm in p.m. a lot of the local banks are because of assets that have soured and they have to work to all of that before you see some of the fruits spending and investment. tom: i am glad you caught this because you cannot do business unless you go there. that is the heart of the matter with this announcement. francine: deutsche bank is a case in particular, but i imagine a lot of costs up front and it depends on whether financial inclusion is one of the big concerns, is it more lucrative to have one in china

than india if you are a bank? neil: a foreign bank coming to china, it is equally tough in the environment. you will be dominated by the big four banks. is more difficult to get a foothold in the market. tom: what does capital economics idea of thethe indian ocean bounded and idea that india will prosper on a long-term basis at 7.5% gdp versus china at 6%? is it and it send it india? neil: in relative terms, yes.where are you going to get 6% growth? it is difficult to think of anywhere other than india. does that delivered the transformation we saw in korea, taiwan, and china? probably not. at this stage of development,

they will all grow in double digits. tom: neil shearing, thank you come up a great way to start coverage of document spring meeting, and of course, a little bit of developed nation discussion. ont, not only with a view the u.s. economy but on his germany, what an hour, gideon rose with us. tim o'brien will show up. and of course, we talked to kevin cirilli in washington. ony with us through the week international economics at the imf meeting in washington. this is bloomberg. ♪ s is bloomberg. ♪

♪ tom: this morning, risk on in the fx markets and sterling strengthens. we have a weaker swiss franc,

made continuing curve flattening. forget judge judy. judge whow federal demands order in the court and disorder ensues over calling mr. president. and days democracy dying and -- and is democracy dying? good morning. this is bloomberg surveillance, live in new york. i am tom keene and francine lacqua is with us to start a wonderful week. francine: we have great interviews coming up, focusing on global growth and also on macroeconomics and the biggest risks. we will focus on trade wars, tariffs, and a possible slowdown. tom: and the dynamic of china. gideon rose will be with us, and really looking forward to the meeting tuesday through thursday.

we have the real economic outlook later this morning. right now, here is taylor riggs. taylor: a setback for president trump in the fight over his lawyer's records. a federal judge rejected the president's initial request to keep prosecutors from immediately reviewing evidence seized from his lawyer michael:. the judge in the -- michael cohen. the judge have indicated he appointed an outside lawyer to help. consumer spending is stronger. gdp rose from a year ago, in line with expectations. retail sales rose to better than expected, 10.1 percent in march. industrial production shows signs of cooling off in china. friends's president -- the french president is warning about national -- to tell out this deadly illusion, which might

precipitate are consonant toward this, the illusion of sean power of nationalism, giving up freedom, and i reject this idea that european democracy is condemned to impotent. taylor: he is trying to gain support for his eu reform before brexit and 2019 election. there is a report that south and north korea are discussing plans to calling into the military conflict. a south korean newspaper says it could happen at the summit next week. the paper reports one measure for ending it would be to return the demilitarized zone along the border to the original state. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you. equity currencies come out and

really a touch of the risk on feel. points.ures up 126 on to the next screen with curve flattening, 45 basis points. a huge deal with the euro and pro-nafta, peso which is stronger over the last three days or four days. francine: we are looking at the futures expanding and i also looking at the dollar flirting with the lowest level in two months in the wake of president trump's biggest verbal foreign-exchange rates. i am looking at the british pound, pausing on their winning streak. treasury yields are rising and oil is fluctuating. tom: i have not shown this chart ages. is the euro and it swissie and the basic idea of it strengthening over a great amount of time.

and then we get down here to this too much strength and then we weekend and intervene -- weaken and then intervene, coming back to where we were in 2015, as well. there is look at the euro swissie this morning. francine: we will put it out on social media and our radio listeners, good morning to you, which is what i am listing the pound. this is what i am looking at and why this chart matters. the pound will climb to its strongest level since the day after the brexit vote. it has been boosted by dollar weakness and speculation of a bank of england interest rate hike next month because we have strong wage growth today. tom: you look at the speed of news that social media yesterday, and it was extraordinary to see the distribution of news yesterday. all that is going on with the president, kevin cirilli, the

esteemed constitutional lawyer at harvard was scathing today. the president cannot fire the career civil servant prosecutors who were now on the job. the southern district of new york team cannot bring the president to trial while he is president of a potential felony charge that would tangle for his presidency. evenuld face charges and prison on leaving office. that would create a huge incentive for president trump to resign and wait for president pence to pardon him. kevin, i do not think i have seen anything extraordinary in that paragraph from professor feldman. what is the immediacy of 1600 pennsylvania avenue this morning? had been: -- kevin: a source said the

pardoning was -- i want to be careful my language -- was essentially a dare sorts, to bob mueller's team in james comey, because of their relationship with the southern district of the new york court. there is a lot of back-and-forth with that part in, that to your points, speaks to the urgency of the president's legal team if it moves forward.the big takeaway is the investigation into president trumpadministration's and campaign have extended far beyond the scope of collusion at this point. that has frustrated some republicans but this stormy daniels issue, as we have reported on, has the potential to go beyond stormy daniels and into a subpoena fishing expedition. reacting withcans a backdrop of speaker ryan retiring?

kevin: speaker ryan has remained in lockstep in terms of supporting the administration with regards to the investigation. ongoing andhis is he does not have the political chains around him to feel that he would have to do that. there is speculation on how wrong -- how long he chooses to do that. right now, they are in lockstep with the station. francine: good morning and what will we find out? is about michael cohen and we can get out of him? kevin: correct. that investigation around him is a new dimension to this, but youide of washington and if are trying to plan for what uncertainty is bringing, right now, the administration is not as concerned with stormy daniels but much more concerned about the potential of an investigation going beyond the scope of stormy daniels and leading to a different avenue.that said

, there is so much geopolitical tension now with regards to trade and syria, and china, that that i think is the potential for more of a risk than the investigations are at this point. tom: we look forward to seeing you tonight in washington. kevin cirilli. this andholz is with we will look at the strength of the american economy. more importantly, gideon rose is with us, and i cannot say enough about the timeliness. this is extraordinary. very good planning by our team. and this is gideon rose with this is a screen of american democracy dying. tim o'brien will join us later. what did you learn about america's democracy? >> that we are a lot more like other countries than many of us actually thought.

there is a notion of american exceptionalism and we are different and it cannot happen here, and that is true and a lot of respects, but what we have seen in the last years looks extraordinary by american standards but common when democracy declines and progresses elsewhere. we have seen this movie before and never in english, as our latin americans friend put it. saw inlike what we hungary. francine: i am reading the big shift, which is the failing to mccarthy states, but aren't we just testing the u.s. institutions and are they looking at? gideon: great question. some of us in the old days might remember the samsonite commercials, where there was luggage g with aorilla -- luggage with a gorilla and he

tried to break it. in the kong movies, he always breaks the chains. in the samsonite commercial, the luggage holds up. right now, we do not know what the gorilla or cage will hold up. francine: is it on the investigations? on the travel bans? gideon: we have legal procedures occurring at their own rights and the question is, will all those go through unimpeded? tom: i was going to go to kung fu panda three on this. with gdp growth right now and the struggle all of a sudden we see in europe, the slower economic growth, their democracy needs -- does their democracy needed to succeed? harm: every economy needs some kind of economic growth. it doesn't matter if you are a democracy or another form of

government. you see more of a stimulus just to buy this support of the people amid the decline of democratic institutions. in the u.s., we see pretty decent goals because of the stimulus. in europe, several soft indicators and hard indicators have added to it. if you look at the pmi, it is almost 60, almost too strong and now we are back to the baseline scenario. tom: gideon rose, elizabeth the and economy -- the elizabeth economy and china. this china have any democratic tendencies? gideon: right now, they are cracking down on revival and it is performing well. chinese leadership looks well, which is why in places like saudi arabia and elsewhere, they are looking at the china model than the u.s. and liberal

democracy, which seems in trouble. is this just a lull in stocks every day? markets go up and down, but the question that we are trying to answer is there is no question that democracy is right now in decline and authoritarianism is doing well. will that last more than a quarter or two for a year or two or will it be a long-term trend? tom: gideon rose has a new issue of foreign affairs magazine. just keeping up with so many international land the must of affairs. harm handles is with us, as well. coming up, our coverage of the imf. my conversation with the international monetary fund chief economist as they release their world economic outlook. but for that at 10:00 with vonnie quinn -- look for that at 10:00 with vonnie quinn. this is bloomberg. ♪

♪ taylor: i am taylor riggs. let's get the bloomberg business flash. the biggest help ensure and u.s. had first-quarter earnings that beat the highest estimate and reported revenue higher than expected. united raised its full forecast for the full year. sanofi has agreed to sell its european drug business to be private equity firm. the price is 2.4 billion dollars, part of the ceos plan to focus their resources on biotech and you medicine. raisex is proving it can prices without losing customers. they posted their strongest subscriber growth since going

public 16 years ago, despite raising prices for most customers of their streaming service. they added 7.4 million subscribers in the first quarter and sales went up 40%. that is your bloomberg business flash. tom: right now, harm bandholz is with us and gideon rose with foreign affairs magazine. is someone wea have spoken to many times and he will become the new vice-chairman of the federal reserve, replacing stanley fischer. those are big shoes to fill. harm: it is almost impossible, but i think if richard clarida is concerned, he will be a good addition to the board. much has been said about economic straining of chair powell. if you get williams and clarida as the new inner circle of the fed, i think it is strong. is aine: but clarida

markets geithner used to be in politics. do we need an academic or someone more reactive on treasuries? harm: the good thing about him is he is both. he has written influential papers about tailored rules and all that. he is a strong academic and has this market experience at his current top. if you criticize anything, i would have said williams and clarida should have switched jobs, with clarida running wall street in new york and williams as the vice chair. but it doesn't matter, they are all in this together and i think it is a good group. francine: he has been on the show many times. this is when he was last on. richard: i have been calling markets for 30 plus years. one of the very few reliable rules of thumb is when the u.s. yield curve inverts, a recession

happens in the next 12 months. tom: he was talking about the markets. but gideon rose needs a briefing now want vice-chairman fisher. plus, go back 20 years or there is the equilibrium there he, that is a lot of fancy math and with it is the humility that it did not work in 2007-2008. harm: that is the beauty of every single one. you think you have the model to explain, but when you learn how they do not work, you understand limitations. tom: that is called war to gideon rose. gideon: i was about to say that the foreign policy side would be delighted to have officials to this degree of professional quality running things on our side of the show. tom: this is really important right now. the idea here that olivia bluhm chart, who we will speak to

later, they said, we got as hard as we can and we screwed up. they don't do that in your world. gideon: they do, but there are differences. the first, there is no recognition there is additional expertise in foreign policy that civilians might have. so that is what people do not policies.ivilian the other is you have a president who doesn't understand what has control of foreign policy, so he can play in this area what he cannot with the fed. tom: i had a nightmare, president trump working there. scary. harm bandholz there with gideon rose. today, what did you miss? atk about somebody he nailed texas a&m. he would like to do away with the model.

stay with this worldwide. this is bloomberg. ♪

♪ tom: bloomberg surveillance. foreign affairs magazine. i cannot say enough about this. we have gideon rose here. has 40 book reviews. read on anyrequired

airplane nationwide and coast-to-coast and worldwide. you want to talk about technology with mr. rose. francine: there is one article that caught my eye, called globalization is not in retreats, and. it goes through the future of trade this president trump have a chance at dean elected? and if he does, is it about globalization gaining retreat or will it be smoke and mirrors? gideon: there is a reality of the world economy moving forward that will affect markets and voters' perceptions, but with this president does will be most dependent in determining his own future and things like trade. the only recently are in a trade war by and large, except for chinese driving tensions is his desire to have one. it does not understand that trade wars are to trade like bumper cars are to driving, so we do not know how the underlying reality is going to mesh with the president's rhetoric. francine: unless he gets a deal

with china and this is something that imf is looking at seriously, like the pace of technology and how transforms. harm: i agree with gideon, there is a lack of trade knowledge. it ands been said about it is misplaced. i would say all countries waned with trade relationships. the most important is it drives productivity by increasing competition and allowing energy to spillover. there is a whole chapter about this and they concluded it is much better and to the benefit of all. tom: horse and cart, what you can title your next magazine. this growth brink letter productivity -- bring better productivity or does productivity bring better growth? harm: in the short-term, it depends on where the growth is coming from. if you have consumption driven growth, it doesn't help.

investment led growth does help productivity. it is a spiral, but short-term growth has to come from the right source. francine: we are keeping him for the next half an hour, harm andles and -- harm bandholz gideon rose are staying with us. users can interact with our charts using . my brexit chart is still here, but tom comes in close in second. tom: four to two. francine: then we had the mexican peso. check it out multiple times because the transcript updated. tom: my people -- we are just not getting this done. ♪ this wi-fi is fast.

i know! i know! i know! i know! when did brian move back in? brian's back? he doesn't get my room. he's only going to be here for like a week. like a month, tops. oh boy.

wi-fi fast enough for the whole family is simple, easy, awesome. in many cultures, young men would stay with their families until their 40's. francine: good morning, everyone, it is bloomberg "surveillance." tom migrates and i will be joining him on wednesday.

macro economics, politics, and geopolitics, but let's get to the bloomberg first word news. taylor: the supreme court hears arguments today over online sales. retailers want to turn over a 26-year-old ruling that prevents online retailers from collecting tax. the u.s. and u.k. have issued an unprecedented joint warning about russian hacking and say russia is using compromised computer network equipment to a tech companies and government agencies. officials say individuals and companies should make sure their router software is up-to-date and their password is secure. in london, theresa may faces a second day of debate over the u.k.'s role in syria. she is defending herself in parliament over allegations she rushed to war without seeking

proper approval. she said there was not time to consult lawmakers. china has increased its holdings of treasury by the most in six months. beijing owns $1.2 trillion of u.s. ones, bills, and notes. there is speculation that china could use their holdings as a bargaining chip in their trade war with the u.s. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. francine: thank you so much. we want to talk about deficits, but before that, breaking news out of china. it cut its rrr for qualified banks a percentage point. that is the reserve requirement ratio and it is basically actively changed its mandatory rrr since the 2000s. tom: gideon rose is with us.

in your new "foreign affairs" magazine, dr. economy is adamant this is wrong. president xi does not have a smooth road. there is pushback that could occur within their domestic politics and this news is about the agriculture sector and small business in america. gideon: one of the things we should be understanding is that xi is increasing power and has gained more dominance in order to be able to try to fix problems and control the development, as china races forward. the question is whether his increased control will make that succeed or not. tom: the morning must-read from dr. economy, and then francine wants to talk technology. this to me was a standout chapter in foreign affairs. the president is playing a long game, decisions that may appear

immediately irrational in the context of a liberal political system. have long-term strategic logic. there may be more pushback against xi dennis current -- than is currently thought. francine: we are hearing from the pboc that their targeted rrr has been cut. if this -- is this monetary easing? harm: we got gdp news from china this morning and that looked pretty good. china is on this long-term transition progress from an export oriented country to more relying on domestic growth. some details that we got from this morning's report suggests it is working. one big concern we have is too much debt in the system. if you see something like interest rate cuts in whatever where itt is something helps growth a little bit in the short-term.

it is certainly a type of easing, but what is the long-term or medium-term cost if you look at the overall credit outstanding in china, which is one of the worrisome developments? francine: is it an effective tool in china? harm: it has been one of the most used tools and it is hard to know how in this economy the tools work. it is not as clear-cut as it is --the u, europe, or the u.s. u.k., europe, or the u.s. , the consensuss. is 3, 4, 8 rate hikes. likelihood of mr. gross being right? if the time is long enough, he is 100% right. over this year, growth looks pretty good. we are adding the tax cut and the bipartisan budget act, which

is a huge spending program. we think the effect is going to be seen until the middle of next year, and then we have a slowdown. we are actually on the more cautious side, but not for 2018. tom: let's go over to technology. francine: we touched a little bit on the difference between technology and globalization, and whether its meaning is confused. are people still confused about the pace of technology? do they take it is globalization? gideon: that is absolutely true, but there are multiple different kinds of technology, and many of them do not get factored in until they become realities. one of my favorite packages in these issue -- this issue is a package on crisper and gene editing. will bes of things that happening because of technological advances in a few years, in the short run you

overestimate the impact and in the long run, you overestimated -- underestimate it. francine: do we underestimate the impact that large deficits around the world create on the global economy? harm: it is a good and fair question. the cbo just came out with a report and said deficits will be huge. the cbo says the impact on long-term yields is only 20 basis points. i think that will be one of the important channels, transition channels to which the higher debt negatively affects the global economy or each respective country's economy. been, before this financial crisis, been talking about debts. we had critical thresholds that once we go beyond, all hell breaks loose and it has not. the lines are certainly more

blurred than we thought ahead of the crisis. tom: we have richard haass talking about a world in disarray, which starts with our fiscal affairs, and stanley colander, a traditional -- , heific budget analyst wrote for "forbes" using. absorbed ourworld trillion dollar deficits? harm: the world sees the united states as being out to lunch -- gideon: the world sees the united states is being out to lunch. most of the broad lines of american policy, foreign policy, and others continue on inertial grounds, while at the top there is a crazy person running around screaming, and there is all sorts of corruption scandals and other things going on. everyone is basically watching and not counting on us to do anything for the next year or two, and see what happens afterwards. tom: gideon rose with us, we

will look at domestic politics. harm banholz also with us. in washington, 99.1 fm. sirius xm.new york, bob moon, bloomberg "daybreak." ♪

taylor: this is bloomberg "surveillance." i am taylor riggs. more problems for tesla model three. is temporarily suspending production for the second time in roughly two months. to five dayhe four hiatus will improve automation and ease bottleneck. walmart is sprucing up its website in a bid to capture business from amazon. it will go live next month with more personalized shopping experiences. they lost momentum over the holidays and online sales grew it less than half the pace of previous quarters. clients is sounding out on possibly starting a cryptocurrency trading desk. they have only done a preliminary assessment of demand

and feasibility. that itlays will say is has no concrete plan to trade cryptocurrency. goldman sachs is out with first-quarter earnings less than an hour from now and may give an idea of how wall street is dealing with a tough environment for commodities. last year, goldman suffered the worst performance since going public. that is your bloomberg business flash. with goldman, there is a few things i want to point out. a lot is present into the stocks. they had general numbers that beat, but stock rallies started to fade. you have tax reform and some of these lower tax rates priced into the numbers. tom: i would agree with that. what i find fascinating is they come late. we have already seen all the other companies. taylor: bank of america yesterday was a little bit better than when it came in. i think the second point we need

to talk about is volatility. volatility numbers have come and really strong in the first quarter and in some cases equity volatility makes up for more than the drop in fic trading. the quarter last year with fic was really strong, so the comps this quarter are hard to beat. does this more than compensate for the dish compensate for the drop in fic trading? look at the you return of volatility to equity markets, that boosted one of the units and if you look at rising interest rates. one thing i am not sure about goldman sachs is whether it can benefit from tax cuts as much as the other banks. tom: we have seen it this quarter. arecine: ecb officials considering whether to let the euro area economy run hot. supercharging the economy has

become more relevant now as officials discuss how to withdraw military support. us, harm banholz and gideon rose. i want to talk about your integration. if you are the ecb, there is a lot of trading about who is in place. do you let inflation ride up a bit? harm: there is a difference between running hot and allowing the economy to accelerate. i think there is nothing wrong at the economy ran hot a little bit. the development we are seeing over the last several weeks was that the indicators came in a little bit softer. it is all in line with the baseline scenario but has deteriorated a little bit, so that is the concern. against that backdrop, we have ecb minutes coming out that were basically saying, do not over interpret the drawdown. we still have plenty of time.

francine: if you are the ecb, do you worry about your strength, the economy, or what the fed does next? -- whole holm x, makes, part of the monetary policy we have seen the last few -- andas extraordinarily extraordinarily aggressive response to the crisis. the ecb is not immune to currency movement, but they are pretty well behaved. they want the output gap to be close, they want inflation to grind higher. they would like to see a little bit faster, i think. this qe and negative interest rates, that is a deep crisis response and i believe they agree they should not stay there forever. the holm x driving the ecb policy function now, they want to start normalizing. that works for the bank.

francine: do you care about european integration? it has an impact, but do we need a stronger german government to be able to go through this axis that french president macron wants? gideon: the short answer is yes, we care and we hope it moves forward. many of the american firm policy establishments do. what is fascinating is there a these global trends and tensions playing themselves out in different regions simultaneously. as we are seeing globalization versus anti-globalization tensions in the u.s., we are seeing it in europe. what is most interesting and europe is not just the institutional reform questions, but their relative fortunes of nationalist populates like viktor orban, or anti-populist like macron in france.

is the future of europe orban or macron? back to the big story that is playing out more than the individual deal dish details of reform. -- details of reform. tom: harm banholz, thank you so much for the briefing. we are going to continue. through tuesday, wednesday, thursday, and friday, we will be at the spring meetings of the international monetary fund with many important voices coming to you. worldwide, this is bloomberg. ♪

tom: bloomberg "surveillance," francine lacqua in this new york. we will be together through the week in washington and new york, at the imf meetings. right now, domestic politics, i want to bring up single best chart with a shout out to stand colander. there will be much more on this, the deficit to gdp. that is a set up as a fiscal backup -- backdrop for the

republicans, with gideon rose and now joining us, timothy o'brien tim o'brien flat out knows more about the affairs of citizen trump and president trump than anyone. there is a backdrop of fiscal irresponsibility. does that have legs to an election? campaigned,mp writing he was the king of debt, which was somewhat ironic. tom: he delivered the goods. timothy: he oversaw six corporate bankruptcies in his career and never did the math on his own debts. he is presiding over a government that enacted a massive tax cut and we will run up a huge deficit. to the newsto go yesterday, and something i have not seen in the media that i'm upset about -- who is kimbo would? kimba wood? wood was a big

name when clinton was picking a .ew ag, and she was in the race she is a very well regarded, rational judge and she is trying to figure out how to navigate around this moment when you have an executive branch that is trying to intrude into the southern district. tom: tim o'brien, writing up a storm. i think he had to do like eight rewrites. not then still is biggest catch. less threatening legally than domestic transactions. the investigation may require far more time to progress even if recent events make it feel like the end is near. timothy: there is a little bit of wish fulfillment in the media , in terms of every moment of the mueller investigation is

taken as the end game. i think there is still a lot more room to run on this. prosecution is significant. it moves the orbit into the hands of prosecutors in new york, that michael cohen was not the biggest fish. is frequently described as a lawyer who oversaw every deal in the trump organization, and he did not. that was jason greenblatt. francine: what does this mean for the gop? you could say this is testing the loyalty of donors. timothy: you have paul ryan who is gone now. i do not know that any of this stuff will resonate with trump's base. planning to campaign on a tax cut that is proving to be unpopular. i think the issue for the gop is what do they campaign on when midterms roll around? francine: do we care about the

midterms? had a must read yesterday that said the president could not focus on the midterms. do they go hand in hand? gideon: they are the most important thing that will happen in 2018, because the control of the government is at issue, and there is good reason to believe it may switch or partially the entirewhich case structure of the investigative apparatus of congress, the legal apparatus surrounding impeachment, the political apparatus will change entirely. the world will change one way or another, we just do not know which way. tom: tim o'brien, a chapter in your book that you suffered issuely on with a legal from the president. how does he spin what happened yesterday afternoon? timothy: he was quiet yesterday

afternoon on what happened. tom: exactly. timothy: he is not serving his own legal interest well if he tries to spin something like this. tom: can he get real legal counsel? timothy: no, there is a number of reasons he can't. he does not take advice from lawyers or anyone. lawyers coming into this do not want to deal with the client that will not listen. over the years, he has stiffed his lawyers. of five dollars of his contributions is going to law firms. was a guy like you surprised? timothy: he does not like to pay his own bills, so i do not think it is surprising that lawyers are hesitant to sign on with trump, because they do not know at the end of the day -- end of the day, like his contractors, whether they will get paid. gideon: donald trump has done things a certain way for a very long time. it has gotten him into all sorts it has workedt

successfully and managed to get him back from the brink. that is his strategy, he is going with it. over the last two years, we have seen that he does not care if anybody else thinks that is appropriate, so he will keep doing it. tothe past, he has managed bluster and bowl his way past everything and now he is in the spotlight. we do not know what will happen when he can't push it off. tom: we will continue this discussion, gideon rose and tim o'brien. francine, where are we tomorrow? francine: you are here and i am in d.c., and then i join you on thursday -- thursday. ♪ welcome to the xfinity store.

i can tell you about... streaming the most free tv shows and movies on the go. yeah, and... xfinity internet. it's so fast! and you can save by... by getting up to 5 mobile lines included. whoa, you're good. i'm just getting started. ♪ simple. easy. awesome.

come see how you could save $400 or more a year with xfinity mobile. plus ask how to keep your current phone. visit your local xfinity store today. ♪ alix: seven years of hell, the

u.s. imposes a seven-year ban on chinese telecom maker zte. slaps --laps -- china the inner circle, president trump fills out -- netflix nails it. goldman is next. netflix delivered the strongest subscriber growth since going public. banks not seeing big rewards since the financial crisis. david: a beautiful shot of the lower part of manhattan, welcome to "bloomberg daybreak." what a difference a day makes. driving rain. alix: it was terrible. the story is a firmer u.s. dollar and firmer equity market. s&p futures up by about 13 points. euro-dollar pretty much unchanged on the day.