>> the 10 year treasury yield hits 3% for the first time. local stocks fall. as tidjanese booms trading.ots from we will speak to him in one hour's time. deal, french president macron wants to negotiate a fresh agreement with iran while about trump warns tehran restarting its nuclear program. ♪ mark: welcome to "

surveillance," stocks down. down by about 0.5%, investors cast their i over a mixed earnings season on both sides of the atlantic. the bloomberg index is rising to the highest level since january. it is moving in tandem with the withar yield which flirted 3% yesterday. it did not manage to finish above it. it finished just below it at the end of the trading day. the key level is 3.05. still at a january 2014 high today. 3.02%. we will talk the 10 year and markets. he will speak to the chief

executive after the company reported earnings. still to come, francine is in zurich where we -- where she will speak to the chief suisse,e of credit tidjane thiam. >> french president macron once a new deal to curb iran and halt its program. president trump warned iran not to risk heart its program. -- not to restart its program. >> i believe we can combine our views. we are not in a vacuum. we cannot tear apart the jcpoa. it would not be a good solution. nejra: at the same time, iran has warned it would abandon the nuclear deal if donald trump pulls the u.s. out. the foreign minister told the

associated press that america had not honored its earlier agreement. >> united states has not lived up to its side of the bargain. to its minute. to lift certain sanctions. thingsimpede economic between our partners. threatened,aded, companies from engaging with iran. nejra: donald trump has drip -- has shifted his stance towards kim jong-un. months after deriding the korean leader as rocket man, now he says he is very honorable, and hopes they meet very soon. trump still had a strong message for pyongyang. president trump: very simple, they get rid of their nukes. it would be easy for me to make a simple deal and claim victory. i don't want to do that. i wanted to get rid of their nukes. nejra: steve mnuchin will had to china for direct talks on trade.

president trump thinks there is a good chance of a deal being done, but if not, his imposed tariffs on billions of dollars of chinese goods will take effect as planned. the european union will be compared to offer britain a better trade deal in the one a gave turkey if it decides to stay in the customs union after brexit, and will listen to u.k. could use on trade policy. britain would have to give up its autonomy, and would not get a seat at that ago shooting table when the eu makes deals with other countries, but it would be possible to establish a u.k. dialogue on trade and would take a prophetic approach to such a setup. global news, 24 hours a day on air and at tic-toc on twitter, powered by 2700 journalists and analysts in more than 120 countries. . am nejra cehic mark: i want to tell you about president rouhani, he slammed the u.s. talks with europe over the iran nuclear accord.

macron meeting with trump in d.c. this week. macron proposing a fresh iran deal. trump is lukewarm to that nick -- to that notion. a lot seems to be going on the sidelines between the u.s. and europe on this nuclear deal which trump has to decide on within a week or two. when it comes to iran, rouhani slamming talks over the deal. the 10 year treasury yield piercing the 3% level for the first time in four years. it is a signal that high interest rates are ahead in the biggest bond market. schwab had charles to say. see a stampedell at a fixed income in schwab accounts or elsewhere? >> it depends on the pace of rates going up. they sort ofp as

our now, i don't know we will see it. if you see rates jumped 200 basis points in 90 days, you are going to have a bit of panic among investors. director ofs now, fx strategy at bank of america. hours, significant. where do we go from here? ,ome are saying the 3.05 level the intraday high is the next significant level. where do we go from here? >> i think we will be from five years down, we came into the year where the market was underestimating the fed. ,hey are not pricing inflation and the persistence of inflation. the consequences of the big deficits we are running on the

fiscal side of things. you have low unemployment. the biggest issue companies are facing is the quality of labor and the ability to attract labor. going to be surprised by inflation. myk: yesterday, i put it in file, the bloomberg dollar spot index. wonderful chart. this is the 10 year yield. we had a breakdown at the beginning of the year. yields rose and the dollar did not fall. they are moving in tandem once again. is this for long? will they continue moving in tandem? >> we share the view of the 10 year yields. i think what is important is the narrative on the synchronized growth has changed over the last

week. bank ofd back from that canada and from carney. we are waiting for the ecb and bank of japan. against this backdrop of a large dollar short, we are short euros at the moment. mark: we must make our viewers aware that your biggest position remains. troy percent of your portfolio? 20% of your portfolio? that has been our biggest bet ever on a single position. it has worked well this year. we think it has legs to get higher. we think will be close to 5% nominal gdp growth. if you have an economy growing, that is about where the u.s.

will come in. there is a big disconnect. the fed has made its path clear. the market is more hawkish than the fed this year slightly. what about thereafter? we will probably hike two more this year. they will do maybe three this year and then they will be done. we will not have an environment where it will be positive. the market is not pricing that in. up 35% over the last 12 months. the dollar is down 10% versus everything else over the last 12 months. those are ingredients that push prices higher. structural stagnation, that is all lose. we are in a more normal environment. >> inflation is moving out of

control? theo the oil point, that is one input into the central bank reaction that they may have underestimated. we will see what the ecb says and the bank of japan says. if you combine a weaker dollar with all higher oil price that poses challenges to the fed. one thing it would mention on the terminal rate is anchored around 3%. for u.s. treasury yields to be markedly higher, it needs to be u.s. equities -- mark: this is for consumer confidence expectations. capitulating on the bull market. the stock decreased.

you do not like u.s. equities. patrick: still very expensive. ecb was convinced they would stare more hawkish and interest rate cycles. you have the u.s. with higher interest rates. and loftier valuations. earnings, the market has never been more bullish over the last two years since 2000. long-term, nominal economic growth. short-term, companies will meet expectations. they meet five-year expectations. people are far be in optimistic. , cio,patrick armstrong

,lurimi wealth and kamal sharma director of g10 fx, bank of america merrill lynch. stay with surveillance. plenty coming up today. opening up the floodgates. credit suisse, is the hardest part over in the turnaround plan for tidjane thiam? revampwants to revamp -- the nuclear deal. convincedent trump be ? this is bloomberg. ♪

♪ mark: this is "bloomberg surveillance." suisse,lk credit beating analyst estimates. revenueming in at topping forecasts, getting a boost. managings is our editor for finance. patrick armstrong is here with kamal sharma. seems to be working for credit suisse? you areat is right, seeing momentum in gaining strength. assets are coming in at the fastest pace in seven years.

at the same time, costs are coming down. the ideal trajectory. is entering the final year of his three-year turnaround plan. what is the perception of how he is doing? a: it is gathering momentum. we saw on the market side, weaker numbers, but i think that had been somewhat expected. last month he pointed to volatility, not being there as they would have liked in march. particularly at the equities business, a little bit weaker. mark: something you mentioned in the break, about the disconnect between treasuries and the u.s.

stock market, what is your research -- what has your research uncovered? , the: you show the chart correlation is a positive correlation. we have done work around the diversification narrative that central banks are steadily moving away from the dollar as the world economy effectively dollarized world. we think that will be a trend over the medium term. the u.s. stock market can fall while yields rise? kamal: absolutely. mark: yesterday, you saw the move in stocks, you think that trend could remain? kamal: you will get these breakdowns and correlations if

you are of the view that you will see continued diversification. mark: banks, an interesting theme in the u.s. you have share prices falling. what is the take away from that? patrick: i think everyone was expecting great earnings. but when people are expecting back, it is usually when they don't deliver. in europe it is still in question. i think thatay, will be a theme for european banks. the french banks are in the sweet spot right now. dividend yield, 3.5. they have their fingers and all the pieces that are going in the wealth management, and investment banking. these will be tailwinds. , thatcompare and contrast is ubs's bread-and-butter. you have to look at the management between the two to see how big it it is for ubs.

elisa: you've got the behemon oth, ubs. the growth is not continuing at the same pace. side, investment banking it is a contrast this quarter. further thenhrunk credit suisse. mark: t has promisedhiam u isbs delivering on those. when will credit suisse follow suit? elisa: you rightly point out that credit suisse is delivering. they are expecting more from ubs as well. mark: thank you for joining us. , cio, plurimiong

wealth, and kamal sharma, director of g10 fx, bank of america merrill lynch stay with us. we will check back in markets and a second. this is bloomberg. ♪

♪ mark: this is "bloomberg surveillance." i am mark barton in london.

the brexit process is being discussed. this option takes you through every asset class and gives you a splattering of prices. this is the equity column. stocks are falling today. treasury yields rising. stocks inclining on both sides of the atlantic. the dollar is in ascendance. year yield rises the highest since january, 2010. we are seeing bond yields rise today. look at the commodities board. even gold is declining by 0.5%. what a busy day on the earnings front. this is the busiest week for european bank earnings. thiam, after the bank

attracted new assets at the fastest pace in seven years. key contributions from the asia-pacific. by -- profit and revenue did better than the bank expected. thiam entering the final phase of his three-year turnaround. , the owner of gucci, 6% higher. gucci keeping up its relentless growth pace at the start of the online sales doubling in the first quarter. the luxury groups comparable sales up right 37% beating estimates after more than eight 47% gain in kering shares. investors are watching how long the italian label can retain its rapid growth. the flip side of the coin, shares getting hammered, biggest

decline since 2015, down by 11%. it will begin talks with labor groups to implement cost-saving measures. cutting its forecast for last year. blaming a first-half slowdown and a weaker dollar that added to the strain in revenue. presidenthe u.s. unmoved by macron's pitch to stay with the iran nuclear deal. this is bloomberg. ♪

mark: mrs. "bloomberg surveillance." the brexit secretary is talking in parliament. .ollow that

he is saying a number of things. an agreement is not needed until october. he says october 2018 to march 2019 gives time for talks on trade. if parliament rejects the deal, negotiation will fail. all sorts of headlines. don't extend -- don't expect .rade talks to extend you continue to monitor and watch his headlines on the bloomberg. let's get first word news. donald trump has said he very says kim jong is

honorable. they get rid of their nukes. no one would say it would the easy to make a simple deal. i don't want to do that. i want them to get rid of their nukes. mnuchin will head to china to begin talks on trade. tariffsp: his proposed will take effect as planned. the european union will be prepared to offer a better trade deal than it gave turkey if it stays in the customs union and would listen to u.k. views on trade policy. britain would have to give up its autonomy and would not get a seat at the new go shading -- at the negotiating table. the block would take a pragmatic approach to such a setup.

maker of the engine them blew up on a southwest airlines jet was getting ready to recommend inspections that would have included that engine. csm recommended last year carriers inspect a limited population of older fan blades that did not include the one that failed last week. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. emmanuel macron has called for a revised iran nuclear deal to keep donald trump on board. the clock is ticking. trump plans to announce by may 12 whether the u.s. can stay in the agreement, which was reached in 2015.

joining us now, breanna marnie. convincea trump about anything? we have a full display of their relationship, but he did not manage to convince trump to change his mind on trade or iran. offered a newn deal, which would include containment of the iranian influence in the region. we do not know if trump will listen to that. in a press conference, nobody knows what i will do on may 12. on trade, he did not convince much, either.

we do not have insurances on whether trump will make the waiver on aluminum and steel. the cron said he would -- macron said he is confident it will be respected between allies. likely to sayiran about this? >> he slammed these talks, saying before there is any plan or discussion about a new deal, noon negotiation, -- new not stickinghe is to the spirit of the agreement. he criticized the talks, saying why are you talking to one european later? this is a multiparty agreement.

all of this pressure coming from the u.s. is not great for those who want to stick to the deal. they have not seen the benefits of the deal for the iranian economy. toy were expected growth pick up. that has not happened. mark: a lot has been talked about this bromance between trump and macron. how is it being received where you are? him to remain close with trump? aroline: people do not like donald trump that much, three quarters of the population of france do not like his protectionist vision.

macron is trying to make his .est to promote multilateralism he was not that successful during this visit. the french press is making fun special,gns of this donald trump taking dandruff off macron's shoulder, saying he wanted to make him perfect, and said emmanuelle will go down as anuel will go down as one of the greatest presidents in history. trump remembers this special relationship. here.patrick armstrong is

geopolitics is such an important thing right now. where are we and where will we continue to see the biggest rebel through the fx market. one question we are being asked is how is the dollar reacting to this pickup in geopolitical trade war tensions? to dollar has been the go currency. elected,e macron was political uncertainty in the euro area as declined. we have had a height in fiscal uncertainty in the u.s.

nowmarket is not as sure the dollar is the go-two currency -- go-to curency. theswiss franc is no longer safe haven currency. the current account surplus comes as the yen remain the favored safe haven currency choices. mark: have you altered your bets giving the -- given the backdrop? of it is noise, some has long-term implications. if we are moving away from , moving towards protectionism, that is a driver of growth in the economy and markets over the last 35 years.

the rhetoric has increased. last year, it was all rhetoric. there is some policy. it is right to question the dollar and treasuries has a safe haven. geopolitical risk puts itself at the center of it. i don't know if you want to put yourself in dollars. mark: where do you put yourself if there is a move from u.s. assets? we don't believe the trade wars will escalate. the performance and price action, the yen has been the favored currency. there is pressure on emergency room -- on emerging markets from a current account perspective.

current account surplus tends to perform better through geopolitical concerns. mark: how would you position yourself? short yen laste year. we think europe might be a beneficiary of trade wars. be a winner from things like that. part of our reason to stick with european cyclicals, that is a benefit for them. you will stick with us. stay with "bloomberg surveillance." over u.s. sanctions. -- we are going to look ahead to tomorrow posta decision from the central bank. this is bloomberg. ♪

mark: this is "bloomberg surveillance." aluminum supplier be estimates. turbulentlong a period. washington softened its position. it joining us now, the chief executive of north key drove -- -- can you tell us what

it is like in the wake of the easing of the rhetoric from the u.s. treasury earlier this week. situation for the aluminum industry is marked by great uncertainty. .everal factors surround us on --. the sanction it is a demanding situation. it is quite exciting times. crazy,he price has been down for a fifth day. concerns ease about these .isruptions it has wiped away half of its gains. a couple of days ago,

people were talking about $3000. is that once that too far? after the decision taken to postpone sanctions towards companies like --, it is now postponed. compensatere time to for what can happen. we expect they will find a market for the metal. it will be a displacement of the mental balance in the world. if they are not taking down changing theis not global balance. today, we are in a balance situation. there could be a deficit in

2018. mark: how many weeks of aluminum stock do you have? how soon might you have to shut if the brazilian issues are not resolved. there is not much aluminum available in the market. there have been a couple of cargo exported from china. if you look at the situation largest world's refinery, this has a big impact. possible the capacity has to be taken out. mark: you are also the biggest

buyer from the swedish smelter. are you talking with the swedish government to change ownership, and if saul, could hydro be involved? hydro be so, could involved? the situation in sweden, one of our plants that did not get sourcing, that is something we alternatives for. that was a tough situation. thank you for joining us today. the chief executive officer of norsk hydro. north china has raised the amount of domestic funds it can

raise overseas to $98.333 billion. evidence china is trying to open up its financial industry. patrick: slow and steady is how they will do things. they will not respond to threats. they have a vision. they will stick to it. slow and steady. mark: are you comfortable with /yuan?llar we have trump talking about russia and china manipulating currencies, but you have a treasury report saying everything is ok. how does that dynamic play out? kamal: you have to separate the rhetoric from the statements. theway trump sees

recalibration of the u.s. trade deficit is via currencies being -- not being in his words being manipulated by central banks. -- mark: lots more to chat about. both stay with us. the ecb, unfazed. it might besuggest ok to be relaxed about a slowdown. this is bloomberg. ♪

welcome back.

.his is bloomberg surveillance i am mark barton. its meetingts today. ahead of that, policy decision. euro area inflation remains me -- remains weak. they are optimistic about reaching their 2% goal and have their reasons for appearing relaxed. 2.4%cb's prediction for a economic expansion. still with us, patrick armstrong and kamal. plateauing this year for the euro dollar. we have been stuck. you are making a brave call. 115. kamal: we are starting to see

that unraveling of that tightening narrative. we do not expect that to be heard at the meeting, but it will be clear from the meetings intotapering will continue december and the ecb is in no hurry to hike rates into 2019. theave been focusing on potential for corporate america ofrepatriate millions dollars back into the economy held in non-dollar assets overseas. we think it will create a bid for the dollar heading into q2. on the focused unraveling of the rate pick up story and repatriation flows. feel aboutould you

euro-dollar at 115? patrick: that would be beneficial for our portfolio. mark: draghi would be pleased. weak euro, higher inflation. 115 is better than 125. kamal: we have not seen the line in the sand we saw from the move from one of five to 114 -- 105 to 114. intoould ultimately feed the numbers. there has been a little bit more concernsetoric towards the currency has been moving strongly towards 1.25 level. help with some of the concerns from the ecb. moved overstoxx have

the -- stocks. i have never seen it where the vstoxx futures are pricing lower than six futures. it is hard to put your finger on it. has driven the s&p. pluripatrick is here from mi. surveillance continues. ♪

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near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. francine: credit suisse shares wealth growth on the

management unit. a milestone for markets. the 10 year treasury old jumps to 3%. and a new deal. french president macron wants to negotiate a new deal with iran. good morning. i'm francine lacqua. new york.is in i'm excited about speaking with the chief executive of credit suisse. i want to ask in what comes after the two year plan. it ends in november. clearly have the update on where he wants to cut costs? of thee immediacy consolidation movement. i want to compare them with deutsche bank. it is an important conversation. francine: let's get straight to

the bloomberg first word news with taylor riggs. taylor: just breaking, china granted an additional fund. as leaching steps up the efforts to open up the $40 trillion financial sector and ease capital curbs. the investor quota was bumped to the firstlion, increase since march of 2015. macron says the effort to salvage the iranian nuclear deal might not have moved president trump. president trump called it a new deal with solid foundation. that did not appear to overcome to president's opposition the existing agreement. president trump's choice is not giving up the fight. according to people familiar with the matter, the white house

's selection will seek compensation. president trump suggested that jackson withdraw. fta talks trump's na are doing nicely. high-level discussions on revamping the north american trade deal are expected to resume today. there are still big differences on some of the toughest issues, such as rules on where cars and their components are made. the u.s. wants tougher rules on where america manufactures. in toronto, police are investigating whether women hating was a motive for that van attack. 14 were injured and 10 were killed. police are looking at a facebook post, suggesting that the suspect was motivated by misogyny. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world.

i am taylor riggs. this is bloomberg. much.hank you so a little bit of data and then to beijing for this interesting chinese announcement. 89. futures down euro 1.2203. oil with the continued lifted near $75. the vix, 1.72. yield consistently above 3% and the 30 year break out. let me go to the bloomberg, which shows the macron-trump transatlantic divergence. this is the german 10 year and u .s. 10 year. you can see the slope. up we go with the higher u.s. gradient and down we go with the germany gradient.

the gradients matter, especially to the british. they show the greater transatlantic divergence. this is one of the advantages of bloomberg, we can quickly go to beijing with this important chinese news. one of the more interesting jobs in all of the bloomberg world, john lewis, joins us today. thrilled to have you with us today. describe the domestic challenges the chinese government has with the financial and international challenges, where they are allowing more investment out from china from this announced. -- from the announcement. 15 minutes ago the government announced they will increase the amended money they can increase that they can invest locally and abroad. that is the first time they have increased that fund since 2015.

they have put in a bunch of controls to stop the stock market from plunging into stabilize the currency. with the economy stabilizing they have slowly started to take back some of those measures. tom: is there a huge desire to move money from out of the country. they went from 89 whatever to 90 whatever. if they improved that amount, with the money be there to exit china? reporter: there is an extremely large amount of money looking to diversify, to, leave the country, to invest in u.s. stocks, treasuries, whatever it might be. chinese investors are looking for something other than chinese stocks enand bonds. there's plenty of desire. francine: why are they doing this to liberalize the markets and open up the account?

are they no longer worried about the capital markets, as they were a few months ago? reporter: that is part of the story, the other part that is important, in terms of why it is happening now, they are bringing more capital into china. 1 they arey quadrupling the amount of money that could be invested into chinese stocks from hong kong. we'll have chinese stocks included within the msci later in may. we'll see chinese income included within the fixed income indexes. you will see a lot of money coming into the chinese market. as a result, they are opening up the channels that will allow chinese money to leave. there is a balancing act. francine: i imagine this was basically the pledge the pboc did for a lot of foreign firms, but does this play into the foreign tensions? does this appease the trump administration, in any way, shape, or form?

john: i do not think this step was taken specifically with trade or trump in mimnd. i'm not sure if this will help trump much with his base, in terms, if it be farmers or steel makers in the u.s. i think it reinforces the idea of china being more open. tom: thank you so much, john liu. jordan rochester from london, with the foreign-exchange strategy. i have got to go to the strong dollar, it is everywhere in the media. everybody is talking about the new, vibrant, strong dollar. is it really a strong dollar? reporter: it is for the moment because we have because i risk off move in the market and -- because we have the new quasi-ri sk off move in the market.

everybody was short on the u.s. dollar. euro,er versus the yen or everybody was short. we had a little mma news, pushing up the dollar-yen. everybody is trying to get on board with that. euro, we hadhe softer data and that is lazy thinking from the market, thinking this will continue and extrapolate. whereas, it is a good move to get shorter dollar again. it will materially break lower. all of the good news we have had over the last year or so, it is a good move they say. in reality, we have had a bit of a cleanout. tom: i think this is very important. scaleea of the scope and of this move offered. this is the bloomberg dollar index. i will put it out on twitter.

this idea is so important for radio. how do you know to reenter a trade? you enter a weak dollar with a goofy little spike like this. when does a pro pull the trigger? reporter: you need to look at where the data is going? we look at european data surprises. if data comes in better than expected, that is a positive and vice versa. what we have seen during q1 is record snowfalls in europe, ♪ strikes, labor, politics and trade wars. we have had softness within the european data and those surprises are near historical lows. now.re getting into q2 the strikes also subsiding somewhat. economistsrt to see lower their expectations, and when they do that, that is the moment you get long. when everyone says, they give up

and it is not going to happen, that is when you start going, it might get higher. francine: good morning, jordan. i want to ask you about treasuries and that 3% psychological level, but if we look at the as the leading trade tensions between the u.s. and china, if we enter a full on trade war, is it deflationary or inflationary for the world economy? jordan: for the u.s. consumer, it is inflationary. for the world, it does not mean we have an excess supply. you see that being diversed el sewhere. in terms of growth and trade in fact, you might start to see the dollar weakened. therefore, other currencies might strengthen. inflation might go down on the fx that is why we see the rise in the euro and yen. at the moment, the numbers are quite strong.

s -- are quite -- are quite small. the tariffs, some of their sizes , they were smaller than excited. steve mnuchin's visit might stop the flow of rhetoric and might slow down the escalation we have seen. so far, the u.s. is threatening another $100 billion, but we will not see anything until the 22nd of may, or later. on may 15, that is when you see the washington lobbyists move. at at the 22nd, that will be the end of the period. then the u.s. has to come up with something. it will probably be piecemeal. u.s. stock, the market has become intertwined with globalization and you will see earnings downgrade on companies if those tariffs ratchet up further. francine: jordan, on the 3%

treasury yield, how significant is that? should the fed worry more about an inverted yield curve? previously that would signify an impending economic slump. with that indicate the same now? jordan: we broke through that with the dollar strength. and the curve steepen up, too. the u.s. has underperformed on the treasury curve. that's what led to the short-term dollar strength. it matters about the speed of the steepening. we think ten-year treasuries have further to go than 3%. we have to remember that the supply side aspect of it all, you have got double the amount of treasury issuance this year versus last year. the reason it has not accelerated during q1 until this

week essentially, because a lot of this issuance was on the front-end. that surprised a lot of people. most of the issuance was on the front-end, so the back-end outperformed. youou start to see 3.25%, see people calling for the next bear market. the first is growth and so, it is high. we are in the top quarter. i do not think we are yet seeing 4% ten-year treasuries in the market. staysne: jordan rochester with us for the hour. coming up, the conversation with the leadership of the credit suisse, tidjane thiam. he estimates the share price will have the biggest gain in europe. i've just seen him walk in the door, so we'll be with him shortly. this is bloomberg. ♪

tom: good morning, bloomberg surveillance. thrilled you are with us. thank you for your important comments, usually with alexander campbell. by thehunderstruck response from steve keene, no relation. outally gave a shout during the interview, as we tried to go from the old school thoughts of marx. we will get that out on twitter today. right now from london, jordan rochester with us on the foreign exchange market. the litmus test for the global system. jordan, a little philosophical here. does the secretary of the treasury -- i believe he will chime in in a bit -- does he

want a strong or weak dollar? jordan: the official line is that a strong dollar is good for the u.s. he has got a trade deficit, current account deficit. the only way you fund that is with high yields. the u.s. is increasing its debt, and it will be expensive if yields start to go high, and then you start to talk about recession, if people start defaulting on their homes. but you can fund that with a lower dollar. a lower dollar fits in to that. tom: what we are dealing with here is this weird word, ambiguity. jordan it can cut both ways, strong dollar and weak dollar. let's focus on that 3% yield. do you have it in your head, a

3% 10 year yield where your world changes and the dollar dynamics and all the pairs change their behavior? jordan: i think we get to 3.25% on the 10 year, and that is when the dynamic changes. that's what's been flattening the curve, along with people saying long-term expectations are lower. if you get to 3.25%, that is when i think you start to get the proper curve flattening. the forecast we have is 2.10%. that is when the dollar needs to fall to attract investors. if you do not have yields going higher, what will attract you is the lower dollar. tom: jordan rochester with us this morning. one of the things we tried to do for you with bloomberg is give you smart conversation with bankers, faced with domestic

and international challenges. francine lacqua continues that in zurich. francine: yes, we are joined with the chief executive of credit suisse, tidjane thiam. i think it is one of the biggest gainers within the european markets, announcing 4% higher. thank you for allowing us to take up a little bit of your time. three of the last four quarters you delivered on your plan. you are always reluctant to tellme, this is good, this means i have achieved what i have wanted to achieve. is now the point where you tell me, yes, i've done it. >> never. if you remember an interview i have given you, i told you, we will never declare victory. we're always somewhere in the middle. granted, it is a good quota and we are pleased, but there is

growth to go for. we have the strategy of taking the buck, moving it away from markets and risk towards management. we have a 40% world margin. we want an 80% world margin. that's a major consideration. we have had fantastic success with mma's. francine: we were talking about the new assets. how much does it come from the investment bank? see, we created an investment in asia a few years ago. i think that is a great idea. we have a private bank. we did $6.2 billion in asia. fohave bankers working rus.

it works for the other way as well, we have private bankers creating ipos. if you take our bankers and our financing interests, we have had the six quarter in a relevant. francine: in terms of mma, is this the pace we should get quarter on quarter? tidjane: it is quite volatile. it is not something you can control, it depends on the economy. the pace -- we had a 13% increase in asia. with single digit rates, it's achievable. francine: talk to me about the asian markets. we were just talking about this. it is incredible when you look at the figures of last year how much it has grown. you are third there. how do you still grow? tidjane: the asian economy is not new.

we are embracing china. everything else is absolutely perfect for china. the chinese economy is being driven by how amazingly successful entrepreneurs our. and this ability we have to h, to helpir wealt them raise capital and grow their business, to help them invest abroad, in the u.s., etc. we are unique. organization to be moving on from the integrated model. we do not have a private banking currency. in asia, it's the same purse. we are working in a coordinated we. admitted, we have cases where mena monitor wealth for people. we came through the icbm.

we manage wealth for entrepreneurs. francine: but the cos competitin is thicker than that. tidjane: the competition is always out there and i keep people inside focused. we are moving forward. it's a tough world out there. we need to earn our income by serving the clients better. so, yeah, of course, people will try to imitate what we do, try to do better, but that is the nature of the business. francine: when we look at global markets and aipac, how has arisen during the second quarter as compared to last year? tidjane: within the dollars, it is up 2%. within the aipac market, it is up 15%. butall, it's a good -- very good, 80% of our profit is international.

we have turned our profit into a machine to support wealth management. venture take this with ips -- we launched three new products during the first quarter. over $2 growth of billion. we have turned wholesale capacity within the growing market to serve the kind of retail market. it's just very powerful. it used to be, if we sold $200 million worth of product, we would be happy, and we are now in the billions. that is just the beginning. there are good growth prospects for the market. francine: you are not changing global markets are cutting into global markets? tidjane: no, so we are very happy with it the way it is. we could not get the mma we get if we did not have the global market collaboration. sophisticatedre

investors. if we do not have the skills with credit. francine: what happens if there is a 20% correction on equities because of trade tensions or something escalating? tidjane: oh, that is quite disruptive. in wealthy is, management we have a long-term relationship with this. so, that will just keep us thinking about how to allocate assets. francine: when you look at your shareprice, on the tangible curve, it is 35% lower than one of your main competitors in switzerland. how can you narrow that gap? tidjane: um, we need to continue doing what we do. there are three stories, there is growth acceleration,

the long-term story. there is the operating leverage. we've really build t a good base there. there is a windown. and as that happens, and if i give you some numbers, we have a lot of upside in the stock today. we have extensive funding we will call on in october this year, we had $200 million this year. we will reinvest this. we raised $1 billion this year. ave a $1.6 billion uplift. thiss we are seeing materialize and as we continue to grow, right, and continue operating leverage, the rerating will continue. francine: you are nine quarters in of your 12 quarter plan, what

happens after that? tidjane: we cut it, we said, this is the path we love and want to grow. we said then, this is the path we do not want and we got rid of it. what is left is liquidity. we will continue to drive forward. francine: and what does that mean? you increase jobs? [crosstalk] tidjane: yes, the wealth has given us a lot of growth. you see more credit. our personal growth business, i really believe in the end, all the organizations need growth to like oxygen. over time i believe we can creat e drugs and be more successful than we can now and serve our

customers well. francine: in all your units? tidjane: they will grow. we have mearkets beating performance in switzerland. we beat everyone else in mma and customer relations. almost, the growth is infinite, very significant. the profit year on year is enormous compared to last year and then the i.bbcm and world markets are growing. they're connected to those businesses. they are growing are yield. francine: do you see banks consolidating within certain parts of the world where maybe there is overbanking? tidjane: that is always a tough question.. yes, during certain segments of the market, there is a cap.

it should be limited, but transparency within the market takes a long time and consolidation is hard to see. forall kinds of reasons, unilaterally, for all kinds of memories. the notion that people t hinhink it is bad. francine: even in europe? do you see that changing? tidjane: i still think it is changing, but the complacency is intertwined with the political and psychological with any transaction today. we are very happy as we are. we have plenty of organic growth. francine: is monetary policy a concern for markets? it's part of the 10 year yield, at 3% for the first time -- tidjane: it is always an issue. areonally, i think that we forming an economy.

we are striving for normalization -- long-term is a good thing for the economy. for long-term decision-making, we i think we are doing a very good job managing us out of the low interest rate area. for investors, it's delicate because of the ultra rates, stocks have become like bonds. behaving as they did with bonds and not the fundamentals. i personally believe that isn't good for the economy. that's a stocks are treated like bonds coul. normalization is good, but when bonds are starting

to longer and that may trigger some kind of correction. in the end, i think this is all part of making the system healthier. all the transitions need to happen and be able look for a more rational economy. francine: will it be a violet transition? or do youe swings think the fed has it in hand? tidjane: you are very talented journalist. i always try not to make forward-looking market predictions. i think i will stick to my tradition. what i can say is so far i agree with you that the fed is managing very well. francine: one last question on a press release that was landmark deals, which i believe was also in the equity derivatives business. clients?for specific tidjane: it was for specific clients and others are structures.

protection.for and also some hedging some upside. depending on their own position, you have to really design very customized products that they can then buy. we are really doing that because it allows us to use really smart market people. it seems obvious, but it is something we have not done in the past and we are now doing two great benefit to our clients. francine: thank you so much for joining us today. that was the chief executive of credit suisse. we will be in zurich throughout the day and look at some of the banking landscape and we talk said and treasuries. tom: thank you so much. in new york, i am tom keene and francine lacqua in zurich. in london, elisa martinuzzi is with us.

more than anyone, she has been on the eu banking watch. when you hear the chief executive officer of a dominant swiss bank talk, do link that with other banks in europe or are the swiss banks discrete and separate? elisa: i think they are to the extent that they have the profit engine coming from the wealth management business that puts them at a competitive advantage to some extent to some of the other european banks that don't have a profit machine behind them. , theu look at germany banking market is very competitive and that means the likes of deutsche bank are not as fortunate in having that proper generator. tom: we saw earlier the divergence of the 10 year yield between arising 10 year yield in the united states versus germany. there's the gradient of the u.s. up on the yellow gradient of the germany tenure down.

what are interest rates doing to these banks and come statements? if you would expand on what it means to have negative yields? we are not dealing with banking with negative yields. you are every day in europe, you?'t elisa: folks in the consumer banking market struggling there and trying to do more of the commissions type business that is less exposed to that phenomenon. go back to germany where that scenario is also coupled with the extremely competitive market , which makes it very difficult to time profit. -- to turn a profit. tom: it is the arch question. he always jumps around the question when francine asks it. when do we see the consolidation? what are we waiting for in europe? the noisesink from

we have been hearing that the regulators are more in favor of that type of activity now that the ecb has been in place for the supervisor of the eurozone banks for a few years now. more comfortable with that potential combination, but we are not seeing it yet and that reflects the fact that many of the large banks are still busy trying to find a successful model for them before they look outward. of course you are seeing more consolidation. you have seen somewhere in italy , but not necessarily the big deals that some point to a still being potentially necessary. ,om: thank you very much driving the ship on all of our banking. fascinating what's going on with the dynamics of the united kingdom and continental banking. we will drive forward that conversation with an important

discussion of mr. staley of barclays. it's different than credit suisse and it will be a timely discussion tomorrow. that's too early for me even 2:00 a.m. in new york. taylor riggs is bright and shiny at 2:00 a.m.. taylor: it's the showdown over the limits of the present power to control who can enter the u.s. the supreme court hears arguments on the presidents ban.lel critics say his policy is driven by anti-muslim bias. jeff sessions will not recuse himself from the investigation into trump's personal lawyer. people familiar with the matter may say sessions may step back to specific questions tied to the probe. session'sangered by decision to recuse himself from the special counsel's russia investigation. the u.s. congress has become a

investigation new into the emissions cheating by volkswagen. they want the vw chairman to testify. they are investigating that vw was trying to evade global emissions requirements. the committee seems to be seeking information outside its sure restriction. the european union is getting ready to offer the u.k. of staying in the customs union after brexit. according to one eu official, the agreement would be better than the one turkey got, but eu authorities would listen to u.k. views on trade policy. prime minister theresa may is under pressure to stay in the customs union. global news 24 hours a day on air and on tick-tock on twitter powered by journalists and analysts in over 120 countries, i'm taylor riggs. this is bloomberg. ♪

tom: "bloomberg surveillance." i am tom keene in new york and francine lacqua in zurich. an important interview so look for that on all of our digital products later. we go to international relations. forget about the lovefest that the state dinner last night in washington. we need substance and we get this from the middle east and africa executive editor and stephanie baker on the goings-on not so much about iran, but just about the administration and general. distill the delicate iran check that we hear from the president of france and the president of the united states? how does the prism of that play in dubai? the iranians have already

reacted. president ronnie has blasted the assaults and said they are talking amongst themselves. position has been clear and they said we have a deal. why should we change? why don't people focus on implementation, which they say they are implementing? why are people focusing on new deals and changing the deal that they say have no interest in that? tom: two-part question -- what's take the first part. are they dictated upon the religious leaders of iran? are they basically a mouthpiece for the narrow and very conservative religious leaders? no, i think it's a bit more complex than that. it is true that within the religious framework and the system of the islamic republic

that there are those limitations absolutely. within that framework, there are differences, large differences of opinion between the people in power. you have a group led by president rouhani who are committed to the deal and think it's the right thing for iran and the want to continue down that path. there are the hardliners from the beginning who are opposed to the deal and are pointing to the results of the deal, which isn't much. the iranian economy hasn't really benefited and you have not seen this money flowing into iran as a result of the deal. they are kind of telling the pro deal side and iran we told you so. it's not happening and there is no point in talking with americans because americans are basically preventing any sort of serious money flowing into iran. and thehin eurasia new indian ocean chemistry, there is the timeline. china waits and waits and they have a much longer timeline than the western world.

did the iranians say we are going to wait out president trump? is there basic mindset to wait two years or six years out until this problem goes away? now isheir mindset right very much on their own problems and own internal political problems because you have the currency the climbing. -- declining. you have inflation picking up. they are very worried about what's going on inside iran. i don't think they are in a mood of waiting for trump to go with, but the room to maneuver is limited by that. notso-called moderates may feel as free in terms of acting as they did before because of president trump. they are being limited by the hardline. tom: thank you so much. an important briefing from dubai.

we will begin with stephanie baker with the morning must-read. always good to see a morning must-read from somebody who has actually worked in whatever job is or whatever they are pontificating about. it's a guy down in the lower right corner. eric columbus served as a deputy attorney general senior counsel. "mr. rosenstein deserves praise because of -- not despite -- his occasional willingness to appease the president. without making compromises, he would've been long gone. for the past year, mr. rosenstein has supervised the molar investigation, served as a useful buffer for mr. mueller, and made clear that mr. mueller can be fired only for "good cause" and that no such cause exists." with that, we bring in stephanie baker who follows this and follows it from the idea of follow the money, which is really her major journalistic ability. it is all some duct and that and that therep

has not been a lot of news in this area. what are you waiting to hear as the molar campaign moves forward -- mueller campaign moves forward? stephanie: we are waiting for more indictments from robert mueller. there was the raid on michael a cohen's office and hotel room. rod rosenstein has dual challenges having to oversee that investigation as well as the robert mueller investigation. robert mueller has not made any indictments around the dnc hacking. that is one thing that i think we can expect in the coming months. mueller has run a very tight ship. there has not been a lot of leaks. it's very hard to predict what his next move will be. tom: for those of us who are not up to speed on this and i say this for folks coming off the columbus morning must-read and on the future of mr. rosenstein, is mr. comey with the book tour -- i know you bought five copies for your family -- but within

, is that helping or hurting mr. rosenstein and also the special counsel? stephanie: i think it's a little bit of both and it depends on what perspective you are coming at this from. obviously trump and his supporters have tweeted out that this only confirms what they had said, which is that they positioned james comey and the memos he gave to a friend as leaks. he leaped classified intelligence. says when he handed those memos to his friend that these were not classified. it depends on where you're coming at. the memos that were released and commies interview basically confirmed much of what we thought. it is consistent with what we , which mueller is doing is building an obstruction of justice case.

this all hinges on does trump sit down with mueller for an interview and what are the terms of that? tom: help our global audience with your core expertise, which is follow the money. when you hear people say right now follow the money within all these myriad investigations and the rest of it, what does follow the money mean to stephanie baker? stephanie: well, obviously they trump andg at whether the trump organization got additional financing from russia , whether or not there is any connection between paul manafort and his ties to pro-russian politicians in ukraine, whether or not his relationship with a russian oligarch and there was additional money. they are looking at those money trails to see if there are trails that lead them down the collusion path. they have got the subpoena

power. they are able to subpoena bank records with michael cohen. they will be able to follow the money and look at whether or not there is any suspicious transactions there that would lead them back to russia. roadmapt have a clear of where mueller is going with this. tom: that shows the mystery of it at this moment. from you so much as always our london news bureau. we are talking many things today and one of them has to be investment. the dow 600 points down. i believe it was yesterday. jack will join us from crescent wealth advisors. always with a different perspective. really looking forward to that discussion. alan is in the next hour. -- zurichin new york and new york, this is bloomberg. ♪

tom: "bloomberg surveillance." a beautiful shot out of our new world headquarters in london. cannot say enough about it. just wanted huge trophy for being environmentally way ahead of other office buildings. it is environmentally way ahead of st. paul's cathedral as well.

i believe that was 19th century coul. there we are with a beautiful shot of london, which means it's a perfect time to speak to our united kingdom government reporter. jordan rochester with us. are we going to get a baby name today? how does this work? why is there a delay in the baby name? >> you are asking me? you are asking the wrong person. i assume it's going to be arthur, right? tom: i think arthur is the best of the polls. we will go with that until otherwise. give me an update on prime minister mays fragility when the house of lords votes against her . what does that symbolize to the people of the united kingdom? flavia: she will remain fragile and the most interesting thing on the table is whether she will capitulate on the customs union

and that is where the debate is at she has crossed many redlines to preserve stability and keep things taking. the idea is there going to be some kind of fudge that she can make within brussels and her own party and parliament to essentially keep the u.k. and the customs union? tom: this story from tim ross -- i was under struck by this as the amateur in the house. this is the bloomberg story that you see in the terminal. 2021 -- is this what's really going on here? we are shifting the whole thing out from the brexit schedule that we all believe we have? flavia: i believe the americans collect kicking the can down the road and i think this is what we are seeing in practice, right? intriguinglyised is this irish question that seems so pressing can actually just be delayed during the period the u.k. has in the transition. if you are going to extend it to

years, what is stopping it from moving it further? it is going to be alarming to thelikes of jacob rees and ardent brexit supporters who are starting to wonder, are we actually leaving at all? tom: let's go to jordan rochester. sterling andall on does it adjust given the length of the debate within the united kingdom? jordan: our calls or 148 in cable -- r 1.48 in cable. that's a big dollar weakness story. against the euro, it's not really that strong. it will be a little bit down and sideways actually. it's mostly a dollar call when it comes to that cable call. also, real yield perspective as well. that's thanks to high inflation and low interest rates and very, very mild hiking programs so far from the bank of england in this cycle. when you start to see more

pricing and we had a bit of a take off with that pricing, the more pricing the banking hikes and once the deal is signed with the eu on a transitional deal, investment should start to pick up. if it's a customs union, it should really start to pick up. that will be positive for the pound. tom: very quickly, if we get the stagflation that jordan is talking about, what does that mean politically for the prime minister? if we get a higher inflation with a so-so economy, what does it really mean? flavia: you have to wonder whether she hasn't suffered enough. that is frankly the last thing she needs. tom: thank you so much with the bet on arthur today of our u.k. coverage in government. jordan rochester, thank you so much. i want to tell you what we are going to do on "surveillance" this morning. for those of you in the united states, morgan stanley has put out a spectacular study of where

the fiscal economy is going in the united states of america. we asked alan to come in and we will talk about the fed and this and that. i really want to talk to miss that there about the state of our trillion dollar deficits. really looking forward to doing that. a little bit of data right now with the vix after the difficult day yesterday, the vix up to an 18 handle. there is the yield story. you really wonder how inflation plays in. do we get stagflation like what we see from the united kingdom? francine lacqua in zurich and i'm tom keene in new york, this is bloomberg. ♪

♪ this morning, the 10 year yield grinds further higher. the dollar stronger and the

great transatlantic divergence widens. get used to trillion dollar deficits. in this hour, ellen of morgan stanley. limit chairman powell's degrees of freedom? what a dinner. mr. murdoch and selected select come to dinner. democrats need not attend. this is "bloomberg surveillance." live from our world headquarters in new york, i'm tom keene and francine lacqua in zurich. what did you learn this morning from credit suisse? francine: good morning from zurich. what i learned is that first quarter beat estimates. the chief executive who gave us a pretty long interview was pretty pleased with the results. he keeps on saying that they can still be better, but he is nine quarters into a 12 quarter restructuring plan and he is starting to say that the fruits of his hard work is starting to show. tom: we saw that with elevation the stock price as well.

right now, first word news with taylor riggs. taylor: china has granted additional quota for funds for investment securities overseas for the first time in three years. this as beijing steps up its efforts to open up its $40 trillion financial sector and ease capital curbs. the qualified domestic investor institutional quota was bumped billion, the first increase since march 2013. toanuel macron's efforts blast the iranian deal may not have budged president trump. president trump called it a new deal with solid foundations, but it did not appear to overcome the president opposition to the existing arrangement. 's choice to head the veterans affairs department is not giving up the fight. white house position ronnie jackson plans to seek

confirmation after allegations of improper behavior and management. president trump suggested to jackson that he withdraw. president trump says nafta talks are doing very nicely. high-level discussions on revamping the north american trade deal are expected to resume today. there still are big differences on some of the toughest issues, such as rules for where cars and their components are made. the u.s. wants tougher rules to help american manufacturers. in toronto, please are investigating whether woman hating may have mean been a mote for the deadly been attacked. police are looking at a facebook post that suggested the suspect in the case was motivated by misogyny. global news 20 for hours a day on air intake talk on twitter powered by 27 journalists and analysts in more than 120 countries, i'm taylor riggs. this is bloomberg. tom: breaking news and we have

been waiting for this. this is mr. roberts' font on sky. a lot of different transactions. bring up the chart right now. i have a double overlay here. this is what we do in real-time on "bloomberg surveillance." we do this in radio and tv. you can barely see it, but out here is the spike in the stock on the headline news that we are up 3% on the sky shares as well. what you do is you come over to our headline service, which i have right here. this is what we look at. you look at the sausage get made here right now as the team in new york and london sort out these different headlines. very importantly here, the one headline i would note is comcast superior cash offer for sky. that is a real negotiating point when you have all-cash. let's go to our data check as well on equities, bonds,

currencies, commodities. futures negative six off a tough day yesterday and earnings claim as well, -51. the curve is pretty stable with oil elevated a little bit. onto the next screen if we can. get over to 18 on the vix and the yield is elevated as well. we will full that into our conversation through the hour this morning. let me come back over to the terminal here. i've got the screen way over here. this chart matters. -- great diversion divergence in the attention of central banks. mr. mario draghi looks brightly. the german ten-year gradient down and the u.s. gradient up. the gamma happening with ever higher u.s. yield as well. we are looking at economics. we will do that with ellen in a moment. right now international relations, we are thrilled to go

to washington and kevin cirilli. tehran to get perspective. you have such a vision of the people of tehran given the bigger picture that we see. -- are people of iran they engaged in this debate between mr. trump and your government? i definitely think and feel that this is what people are talking about. this is definitely dinnertable conversation in iran for sure. people are talking about this and the state of the economy here and the two things are very much and a time to -- intertwined. you cannot separate them. i think people are concerned, but at the same time, from what i've heard so far and from the views i've listened to so far,

there tends to be quite a pragmatic approach from the people toward what's going on. i thought maybe people would be much more worried. it is sounding they are concerned over possible confrontation if donald trump does decide on may 12 two effectively withdraw from the deal. what's also been interesting is present macron's statements from last night have not seem to add to concerns substantially. i think people are still primarily worried more about iran's economy going forward in the future. that is always the biggest issue and the biggest concern for people here. i think that they believe that the europeans are trying to get in order donald trump to manage and maybe to an extent control what he is going to do

in terms of the nuclear agreement. sense thatn get a there is a huge amount of fear and concern. many people are worried and anxious. at the same time, i think they are being quite pragmatic about it. the have seen so much escalation and so much isolation and thingsns and also to throughout the past 10-15 years. i think they are resilient enough to deal with whatever comes their way. , the way thatkly a lot of the media are portraying this certainly in europe is that first of all, it's unclear whether president trump hinted at some kind of new deal. he says they may be doing a much bigger maybe deal. warned ofn the past severe consequences if the u.s. withdrew from the deal. what could those be? golnar: it's very difficult for

me to say for sure. like you said, we had the foreign minister say again that iran would retaliate if america withdraws completely from the deal and triggers its collapse. it is very hard to second guess what that would mean. my sense is personally i don't think it would lead to a confrontation. i think one of the reasons is with iran situation now, was different to what it was 10 or 15 years ago when the sections were heightened. you have a pragmatic moderate and government right now iran and russia are very strongly allied in the region . they could mean returning to a nuclear program that was more on the level of what is happening. what is so important as the

bathing of nostalgia that we saw at the state dinner when it was persia in 1960 and now we go to macron at the white house. forget about the nostalgia. what is the reality of iran that mr. macron, mr. trump, and the rest of the left need to know? what is the day-to-day reality that is lost in the media translation? golnar: that people here are just trying to live their lives. but there are moms, dads, kids, musicians,tists, every day trying to forge their path like anywhere else in the world. they are all united by this idea that they just want stability and they want the economy to grow. they want relations, i think, with the rest of the world. i don't think they want isolation. of thee very conscious

history. they are very conscious of the west in the past has engaged in iran. the colonial projects that they imposedst in the to that have n on iran in the past. they want relations with the west, but they don't want humiliation at the expense of that. i think you can say that for pretty much most people here. tom: thank you very much from tehran. we now turn to washington and it's a different washington with a whole different spin. kevin cirilli, very quickly here, let's get it out of the way. how did the state dinner go? mrs. trump got major accolade for doing every detail herself. within the body went which that beltway people look at, how did the state dinner unfold? kevin: it was a huge success from the first lady latest perspective as well as the administration's perspective. anyone watching yesterday the

relationship between president trump and mr. mccrone, they have got key differences on a host of issues, mainly whether united states ought to remain in or out of the iran level, but on a personal level, these two leaders get along. francine: that quote on the nuclear deal with iran -- president trump is skeptical of this accord. he said something like doing a much bigger may be deal. -- hintingting at some new deal we have not heard about? kevin: there was a moment yesterday during the press conference where president trump to mr. mccrone that there's no one better in the world than him who knows what decision he will make unmade 12 -- on may 12. these are the type of side deals that a lot of folks outside washington are looking at. what would it take for not only france it also the united

german and germany -- chancellor angela merkel coming to washington on friday -- for the united states to stay in the deal? if you look at the numbers 2017, about and exports into european nations coming from iran, it has increased especially. 375%. while there is a very much rigid financial services structure between the banking industry and tehran, when you look at trade in particular, it has dramatically increased and quite frankly there are folks in the united states who are saying, why is it that the unites states putting all this pressure to do -- denuclearize iran, but other countries are benefiting economically? through, if you run me why is president trump blocking this for the moment? is it because it was reached

under president obama or can he actually find something that would be suitable for the u.s.? kevin: i think the administration would hope the latter. i think there are many folks, democrats included. with many democrats to question how legitimate of a deal this is, particularly when you have very prominent world leaders including that of a netanyahu who are very much against the steel. when you look at the numbers and how the european nations have been able to penetrate into the iranian market at the expense of other world leaders such as the united states, i think that raises some concerns from a financial perspective as well. tom: kevin, thank you so much. kevin cirilli in washington, good morning and we will see you through the day. we are going to come back with ellen with an exceptionally important report on the new reality, which is $1 trillion

deficits. we come back on a fiscal affairs with ellen. i want to look at her great specialties of dynamics of the real yield and what chairman powell's choices are. stay with us. worldwide this is bloomberg. ♪

tom: good morning, everyone. amid all of her international relations and economics, mr. murdock attending the state there last night with his wife. they looked elegant. , over his early , maybe mr. murdock is looking at what mr. roberts is doing. comcast has come out with a new offer for sky and they are emphasizing the word cash.

moments ago, fox responded in this soap opera. fox remains committed to recommended cash offer for sky. somehow the story will change three times this morning. just so you know, comcast and fox are finally going at it about this really interesting calculus with sky. we have comcast earnings out as well and we will get that up here. we did -- be the j screen as well. right now, ellen is with us for morgan stanley coul. it's usually about the fed, but she has written a briefing about your trillion dollar debt. what was the number one take away? ellen: you can't just of this only on the near-term lifted growth when we put in fiscal stimulus. we are late cycle. i think many economists agree on that. for asset classes, we have

absorbed all the good news for fiscal policy and absorbed prices to the expected listed economy for fiscal policy. puthis collaborative note out with a lot of our global strategist, we looked at what happens on the other side when you pull demand forward and you're dealing with a whole on the other side and the fading fiscal impulse? you go to the next downturn when you have already used all of your fiscal muscle and you don't have anything but your usual automatic stabilizers. tom: a good run rate with the view model under 2% for the economy? potential gdp we do not believe was listed at all by this fiscal policy. economist look at is that you have lifted longer-term debt and the economy. when that happens, going back to the reinhardt work, it depresses longer run growth. it is something we can't ignore. tom: we talked to the husband

of carmen reinhart and here was the debate that we had. with a 30tes go up year at 3.19%. the deal with real yield is inflation. if we get british like inflation or we just move on from the low inflation 12 months or 14 months stagflation world where rates go up and nominal goes up and wages go up, but there comes inflation right there to crush people's returns? ellen: i think inflation is moving higher. we don't see the elements right now that would tell us we are just a gradual rise higher in inflation, but that is the risk. going to printre 2% year-over-year on core pce. that is coming up on monday. even if markets apparently could be prepared for that, i think we will see some reaction.

but i've talked to several fed policymakers that believe they have been doing a good job of getting out there ahead of this and saying at or even going through goal is perfectly desirable and we are not going to push harder against that. given such a persistent shortfall we have had, you do need to let it run above goal for a time. tom: you have best in class productivity analysis. is there any pay off for the nation if they are talking cyclical structural or back-and-forth? every pro tells me all it means is that we need increased productivity. do you see that within this new economy? ellen: the work that we did last year with our equity strategists where we dug and copy by company to build revenue and trends and we found that sectors of the economy are doing capital deepening. guess what they are buying? they are buying warehousing processes. they are buying automation.

it's not just amazon, but it's all in the service sector, which is important because productivity has picked up. we are not talking about 1.5%-2% certainwths because sectors do not produce. tom: this is incredibly important and we will come back and talk about this. if you get a productivity shortfall, it's really a problem . jack aplin is with us as well. so we will tie-in ellen with jack kristen what the visors. stay with us. this is bloomberg. ♪

francine: good morning, everyone. this is "bloomberg surveillance." tom and francine from new york and zurich today. let's talk a little about comcast. it has formalized its 22 billion pound bid for sky. --t is for 21st section of that is against play for century fox and disney. , saying it isded committed to a cash offer for sky and considering options. to discuss this from london is bloomberg intelligence's matthew blockson. this is an important day for comcast and sky. or is it about price also about regulations? matthew: a bit of both to be honest. 12.50 is a premium to the pounds offered. that fox offer is still waiting

to clear regulatory hurdles. that is expecting to get an update from the uk's competition and markets authority on the first of may where they will basically give their final recommendation to the government about whether to block the fox bid or to let it through. if they do let it through, it's most likely with conditions attached, particularly around sky news given the issues around media plurality. once that cma report goes to the make aent, they have to decision about whether to let the bid go ahead. that decision would be expected before june 30. matthew, what exactly would happen in this scenario to sky news? it doesn't close down. it just changes over top. matthew: that's right. i think fox and disney have anticipated this so they put in place an agreement where disney

would acquire sky news in an thempt to essentially bring acquisition of sky by fox from any media plurality issues. in either situation, i think the likely outcome is that sky news perhaps would be an independent company for a while. ultimately if disney were to acquire fox, it would get reintegrated into sky. sky news does not disappear. it may just be an independent copy for a while. tom: forget the scope and scale of this. the free cash flow comcast is 11th billion dollars a year or $12 billion a year. what is the size advantage that mr. roberts has over mr. murdoch? size or is it just a cleaner approach? d would the comcast bi

be very unlikely to hit regulatory snags. comcast and sky, it would be something like 53 million subscribers split across the u.s. and europe. there's a great natural leg which over that -- language overlap in terms of content development across those markets. it would be a real scale opportunity. given what we saw last week with netflix and 100.5 million customers and spending billions of dollars on content, these guys need scale. tom: you go right to the heart of the matter, which is scale, scale, scale. what is the major scale that you see in a comcast-sky merger when i have craig moffett and michael nathanson suggesting this is an act of desperation? where is the synergy? where is the scale? matthew: it's interesting to

see $500 million a year of synergy. they say this would typically discount, but you have two businesses now 23 million subscribers and one with 30. it's a doubling of the footprint so that does give them a bigger scale opportunity to invest in content that can be amortized across a much broader customer base, but clearly it is going to be some way behind netflix, which is really setting the agenda on original content certainly in europe and the u.s. right now. if you look at europe and the u.s., the sky brand is known. can they grow it by putting it elsewhere? is asia the next frontier? matthew: perhaps not asia initially, but certainly a european footprint. sky is most well-known and the u.k. and has substantial locations in italy and germany,

but has been expanding into new markets, including spain. it's repackaging its own content to get a local century in the new markets. we could see comcast encourage sky to extend into all european markets. beyond that, possibly asia. tom: thanks so much. we have ellen with us. she will stay as far away from this conversation as you can. we are thrilled to bring you the professed best the perfect guest talk to you -- the perfect guest to talk to you about media mergers. jack, this is not going to be on level 1, 2, or three. this has nothing to do with finance. ego and theabout desperation of a new media world, isn't it? >> i think it is. comcast has done a decent job of staying alive.

tom: i'll say. >> they shifted to content. they shifted to high-speed internet. hasaps this moved to sky certainly broadened the subscriber base. tom: within this is the regulation issue that matthew talked about. to me there is a huge distinction between the politics of the two companies and the british government. >> i think that is going to play an important role in this kind of deal. there's very little overlap between comcast and sky, so perhaps european regulators will look a little more kindly on that. tom: to both of you, this is so important. e tohere an emergency her because everyone

is headed to the theater exit before rates go up? is that really what this is about? >> deal volume is starting to drop as rates go up. i think this is a way to get in before the wire. >> i think certainly there is this sense out there that this is as good as it gets, and it doesn't that echo what caterpillar said yesterday, basically? they reported good results, but said essentially that this is as good as it gets. if you are in that environment, rates ishe path for only upward from here, so this really is as good as it gets. know if: jack, i don't you will get sky, but are going to see the media landscape change significantly with more other cross-border m&a? >> i think so. this is the first major deal what we have more -- deal where

we have more of an international focus. there has been a real move in that direction. perhaps we will see companies like netflix and others try to expand. theink now that we have internet as the distribution channel, it certainly broadens that international scope. francine: jack, how do you see it? is this just a fight for content? are you going to get premium price for the production houses that have that great content? >> it is all about content now. as a cord cutter myself, i can pretty much just go directly to content providers, even sports. i don't need the comcast cable box in my house or the at&t cable box in my house. that is a big reversal. tom: i think this is so important in any industry like you do is maybe bring your strategy into a

three-year plan instead of a five-year plan, but you do your deal analysis out much longer. ellen, this comes down to net present value studies. how does mr. roberts, how does mr. murdock do a study when i have negative rates in europe, london in an uproar, and the fed dealing with a zero real fed funds target rate? have you do that analysis? -- how do you do that analysis? >> it is difficult. there is evidence out there that is legitimate that when rates are the slow, your depressing risk-taking. the fed may be raising rates, and at least early in that process you do get people more warm and fuzzy about doing deals, but in the rest of the global economy, rates are negative. tom: jack, how was mr. powell's speech received in chicago? >> it's funny, i was in town but i couldn't make it.

tenure isat powell's going to be one that will be remembered as one of normalization. if you believe yellen was a combination and bernanke was just total dramatic experimentation, i think powell will be normalization, but he is constrained. there are a number of things constraining what he is able to do. tom: doing normal eyes the four -- do we normalize the four rate increases this year? why do they cause? that's why today -- why do they pause? >> there's this argument among members of the fomc. given that we think the yield curve will be even flatter, you've got full-year balance sheet runoff.

it's not just three rate hikes this year. it is three rate hikes plus a full year of balance sheet runoff, plus issuance and what that means for our now massive deficit. there are a lot of moving parts and pieces that we think are going to call for prudent policy when they are just pushing into positive real rates and engage how that is affecting the economy and how much further we want to push it. there are those who do not want to invert the yield curve. two other points on that that are geopolitical. one on may 12, president trump decides on the iran deal. in all likelihood he will walk away from it. odds are improving that we are going to end up in a trade war with china. tom: francine? allen, going back to the possibility of an inverted yield curve, in the past it showed an impending economic slowdown.

is it different this time, or should the fed take it as a real dilemma? >> the fed has had this , in 2006ion the past when they stopped raising rates. there was also talk of inverted yield curve which. certainly it may not be showing what it traditionally shows us, and yet it did. it always has. i think right now the consensus is balance sheets globally are large. so we should be operating in a flat curve yield. but when push comes to shove, and we think this will happen after that december timber -- after that september meeting, there is not going to be much appetite for going further because you're going to have indecision and skepticism on the s2 and see -- on the fomc of doing so. and maybe it is still a good

indicator telling us that a downturn is coming. i just don't think they will be able to muster the will to do that. francine: jack, what do you think? do you think it is still a good indicator? >> i think the 10 year for the most part is still tethered to the european central bank. bojou take the ecp and collectively, they still printed and added nearly $2 trillion of liquidity into the financial system. ecb is on record saying they are going to end their quantitative easing program in the fourth order of this year -- fourth quarter of this year. i think part of the reason we are seeing rates rise is that notion that the ecb is walking away. that said, if we do invert, particularly right away, i think ,t is more of an ominous signal more of a psychological signal than it is an actual signal of a

recession at hand. blin and ellen with us. coming up, an important conversation. stay with us from zurich, from new york. this is bloomberg. ♪

♪ francine: this is "bloomberg surveillance." tom and francine from zurich and new york. credit suissealk

after the bank attracted new assets at the fastest pace in seven years. i spoke with the chief executive in the past hour and asked about that performance. control.not absolute it depends on the economy. a 13%think the pace come increase in asia, which is extraordinary. mid single-digit rate is achievable. francine: talk to me about the asian market rate. it is incredible when you look at the figures from last year how much it has grown. your third there. how do you still grow? >> you know, that belief in the asian economy is not new. we are doing great in china. -- it isually absolutely perfect for china,

for entrepreneurs. ,e have to manage their wealth to help them raise capital, to help them grow their business, to help them invest abroad in tech in the u.s., or in any sector. as an organization we have to be based on client needs. we don't have a private banking client. in asia, it is the same person. the notion that we should in a courtth person needed way. francine: our conversation there with the credit suisse chief executive. the last time we spoke with him was in davos. it does feel like the strategy is paying off. we have to look at a quarter by quarter. there may be a downturn in the markets they are not prepared for. when i tried to get out him is

exactly what happens afterwards. he's at the end of the three-year plan. that will be in october-november. what is the story he will tell shareholders? he says we will be happy if everything goes to plan. they just want to garlic -- want to grow it. tom: francine, compare and contrast the challenges of deutsche bank and i guess the good news out of credit suisse. what do you see tomorrow? bloomberg is speaking with jes staley tomorrow. do you bundle barclays in with these other recovery stories? francine: they are very, very different. i would bundle barclays with credit suisse because they are really had to head in their own markets. -- ubs with credit suisse because they are really had to

head in their own markets. barclays is really another story. so far he seems to have the confidence of the board. deutsche bank, because it is the german market, that is a completely different story. if you were to look at credit , i think they are probably a step ahead at this point in time to both deutsche bank and barclays. we will see tomorrow. tom: very good. francine lacqua in zurich. right now in new york, here's taylor riggs. taylor: u.s. prosecutors are about to come out with the first charges in the investigation involving generic drugmakers. according to people familiar with the matter, at least two companies are on track to be indicted in the coming months. so are several executives.

apple ceo tim cook meet with president trump in the oval office today. cook has urged china and the u.s. to settle trade differences. the president's decision to impose tariffs on up $250 billion of chinese goods have led to tensions which could affect apple's business in asia. discounte largest brokerages in the u.s. is urging investors to be cautious of equities. charles schwab ceo charles bettinger spoke with bloomberg in san francisco. >> as we all recognize, you got to be diversify. if you are not diversified, you're basically playing the game. at this point where the stock market is, arguably you are picking up nichols in front of a steamroller -- eating up ni -- picking up nickels in front of a steamroller. you got to be diversified and balanced with your stock, your bond, your cash. you got to have the portfolio to it -- toh to withstand

withstand it. taylor: fox says it is committed to a cash offer for sky and is committed to options. comcast has declined to comment on whether it is still interested. that is your bloomberg business flash. tom: thank you so much. we are going to come back here and check with ellen that with us. ellen zentner andgo>, you look at it you've got our previous sections. stay with us. this is bloomberg. >> single best chart is brought to you by invesco, who asks,

what do people really invest in? find out at invesco.com/moreout oflife.

♪ tom: good morning everyone. "bloomberg surveillance." we are looking at london was further breaking news. the headlines just keep coming out. sky withdraws recommendation of fox offer.

we are watching this. bring up the charge, if you would, right now. we are doing single best chart. these are the famed bloomberg red stickies. that is what we call them internally. you bring them up, and there they are. there are the red stickies with the stories pegged at the top that our team think matter. those are the important headlines. in this case you can see 1, 2, 3, 4, maybe five on comcast and sky. we will see much more of this throughout the day. no doubt "bloomberg technology" will be all over this as well. well, bring this up as the single best chart on the deficit. ellen zentner is with us. how do you fold that into what it does to real yields?

jack: eventually real yields are going to have to rise. real yields are essentially the credit spread of a country. we are perhaps a poorer country than we are leading on as of these huge deficits we are running. that said, it is not a concern near-term. as long as we can can keep perpetuating these deficits and remove our debt to gdp is about 100%, legislators can look to japan and say, look, they are to 25 and every time the market gets upset everyone is running. tom: the basic book on japan, there has been a multi-decade malaise. is that the ultimate price of chronic trillion dollar deficits? ellen: i think that is what the literature definitely points to come about going back to what jack said, it is a longer-term issue. not only is it difficult to get many markets to focus on it, but difficult to get politicians to

focus on it. the politicians typically have a short lifespan, if you will, and office, so they focus on things that they can get past and be impactful and the time they are an office such as pushing through fiscal stimulus late cycle when it makes no sense. it is difficult for them to look beyond that in the longer run. directly, i them get answers like, we will fix it by then. especially when i am talking about all these cliffs we have now created of things that expire in very herky-jerky fashion from this stimulus. we will figure it out by then. they may not be in office. right now the water is heating up, but it is certainly not hot enough to worry about. ellen: this is why a love strategists. they always have a lot of great sayings. [laughter] tom: this is an exclusive,

economists occasionally speak to strategists. let's bring in francine lacqua in zurich. francine: ellen, when you look , can they afford it for four years, five years? ellen: i think we can afford it studies, andut the again, going back to this study that's going past a 90% debt to issue.does become a big if you believe the cbo estimates, which in the near-term tend to be accurate. in the long-term they tend to be lofty on. inflation and interest rates. according to them, you could be facing this by 2024. that is not that far away. years seem get, the

to be peeling away faster and faster, so that is right around the corner. it is something that the next congress is going to have to address. but how many times have we heard that before? jack: the math just doesn't simply add up. if you are at 100% of debt to gdp and your interest rate is higher than your nominal gdp, there is no way you are going to catch up with it unless you somehow pay it down. there's no way we can draw ourselves out of that kind of debt. tom: further breaking news on twitter. what a great joy to cover this yesterday with our team at theymberg intelligence." ,o a really nice revenue beat and the vector is up on monthly users. ibo tarp coming in a little light. active users are up 10% versus

12%. that gradient of active users on twitter a little different. we will get some stock pipe performance there, of 10% right now on the new dow jones component, twitter inc. and alan zentner -- and ellen zentner will stay with us. francine's interview on bloomberg digital with the executive of credit suisse. this is bloomberg. ♪ this wi-fi is fast.

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>> money pours into credit suisse. assets at a high, but the job is not over. from a stronger dollar to widening credit spread. and caterpillar's warning shakes equities. -- fangtocks lose stocks lose. david: welcome. i'm david westin. >> i will explain all of this for you. where's the equity rout? twitter comes in with some killer earnings, popping 13% in premarket. daily active users up to 10%, monthly active users up 3%, revenue and earnings in the estimate for their second quarter also raised above esti