francine: deutsche is downsizing. the bank abandons ambitions, cuts jobs in a sweeping overhaul of the investment bank. we will be speaking to the chief financial officer. the ecb announces a policy decision later. just how confident is the central bank's president in the euro area economy? facebook shares rally. is it too early to see the true impact of the data privacy scandal? of course, it is thursday, our brexit show, will we will talk the customs union, the irish border, and a possible second referendum. ♪

welcome to "bloomberg surveillance." i am francine lacqua here in london. these are your markets. you can see european stocks gained, and the banks are fluctuating. the stoxx 600 bank in europe is pretty much flat. 1.2164.lar is oil is gaining. we hear from the barclays chief executive in an exclusive interview. we will be talking to the riksbank governor after the central bank pushed back its tightening cycle. guy johnson will be speaking to the new deutsche bank cfo after the bank announced its downsizing program. we will get to that and a second, but first let's get straight to the bloomberg first word news. >> deutsche bank plans to cut back its investment bank to save costs and focus on european clients.

germany's largest lender said it would scale back rates and trading, reduce its corporate finance business in america and asia. that came as it reported first-quarter net revenue of 6.9 8 billion euros, missing the lower analyst estimate. we will be bringing you an interview with the deutsche bank cfo later this morning. emmanuel says he thinks his u.s. counterpart will withdraw from says hemmanuel macron thinks his u.s. counterpart will withdraw from the iran nuclear accord. he said he had no insider information on donald trump's decision. french]ing there is --. what president trump said on a number of occasions and his willingness not to support this agreement. i do not know what president trump will decide on the 12th of may.

u.s. supreme court looks poised to uphold donald trump, as to keep justices used --. the court took its first director look at a policy that indefinitely bars people from syria, lebanon, and other countries from entering the u.s. opponents say this was motivated by anti-muslim feelings. china is considering cheaper rates of import duty on passenger cars. according to people with direct knowledge of the matter, the country's cabinet is weighing proposals to reduce the levy on imported cars to 10% or 15%. the current rate is 25 present -- 25%. china's ministry did not immediately respond. tomorrow there will be a historic summit between kim jong-un and moon jae-in.

kim jong-un will walk across the border to be welcomed by an honor guard. the meeting is scheduled to take place one hour later. expectations are high for the summit, the first meeting between the leaders in -- between the two korean leaders and 11 years -- in 11 years. has been minister demanded to stick to hurt guns. she has reassured that she would deliver the kind of brexit -- -- brexit that they want. tory rebels are threatening to defeat the government and forcing it to state and the eu's trade regime. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine? francine: thank you so much. let's kick it off with the central banks, and the ecb, keeping policy unchanged in its decision today.

mario draghi is likely to face questions about euro area growth, to falling industrial output. the region seems to be losing economic momentum after the best performance in a decade last year. what does the market actually want from mario draghi? joining us is that chief investment officer for europe, australia, and africa for credit suisse. i guess the ecb has to be careful if they start giving us a date on when they are thinking about pulling back from this quantitative easing, that the market does not interpret it as a interest rate rise as well. how do they communicate that? >> i think there is a task of communication around what they are going to do, in terms of the reinvestment of the large book that they have. that will continue to feed into european bond markets for some time. i don't think that mario draghi

will regard today's meeting as too onerous, in the sense that the dip in the data is actually welcome, perhaps will take the edge off of inflation. the euro has dropped off momentarily. we don't think that rally in the dollar will continue. we are structurally negative relative to the dollar and the euro market currencies. we're having somewhat of a despite for investors in europe. i think the underlying fundamentals and the european economy are solid. we have come off at a very high point in january. --ncine: jubilee that is it do you believe that is it, max? max: i'm not quite sure. what we have seen is these economic surprises that were negative over the last couple of weeks. i think that will have to be mentioned today. that will probably catch some investors on the wrong foot. positions haveg

just reached another record high. yes, it has come off of a little bit -- off a little bit, euro-dollar, but i would say the new range in euro-dollar is rather 115-120. probably over the summer we will have those positive base affects in energy prices that will push inflation higher. that is more of a global factor rather than a eurozone specific factor. francine: how should mario draghi navigate trade tensions? max: he does not have to navigate them, because he and many european leaders can't stand back and let the u.s. and china lock horns. ,here is collateral damage specifically for germany, because of the extent of car exports, etc., to china. entree tension it is a sensitive political it -- entree tension,, -- on trade

it is a sensitive political issue. think that is probably an issue that he does not want to get into into great detail. francine: let me bring you over to our chart, max. this is a chart looking at the ecb's role in the overall stimulus. you see ucb -- ecb assets as a total percentage of the boj. what does that tell you about the role of easing of the ecb compared it to the rest of the world? max: obviously the ecb has taken over. i think what we have seen since 2013 with the tapering of qe, that obviously -- the first taper tantrum was taken as something extremely negative. the ecb taking over, the boj taking over, that was probably one of the main reasons from 2015-2017 while we had the -- why we had the equity rally, and

significantly subdued volatility levels. mainnk that is one of the reasons why we have this differing kind of risk perception now relative to 2017. in 2017 we still have the expectation of ultra-loose monetary policy. uptick in inflation was temporary. the uptick that we saw was fairly idiosyncratic. you, the of told expectation of policy normalization was stretched, and stretched. 12 months ago -- the super clever people, probably not me, but we're talking about the spread between economic policy and volatility. they did not comfortable months -- it did not come for 12

months, because we have normalization, the ecb inevitably having to end qe purchases. all of a sudden trade -- market participants as a whole have to realize that they have to look at the kind of different risks does that mean we go back to a pre-2007 world? how do you play that on the markets? max: i would love to return it to a world where we do not have -- return it to a world -- return to a world where we do not have qe. the states supply of government issuance is going to increase. the fed is at the margin, more out of the market now.

the government is issuing more debt. that is why you have had this higher acceleration in u.s. yields. i think supply at the moment, and the role of the ecb in europe are much less of an issue. i think the presence at the margin of the ecb in european markets will be felt for the next year or so. i think that means investors will probably focus more on volatility coming off of the u.s. 10 year, the rise in real yields in the u.s. is going to be very important for equities. francine: max kettner and michael o'sullivan from what it's reese stay with us -- credit suisse stay with us. can watch the video stream, follow all of our charts and functions. click on ask the guest a question at the bottom of the video screen. up next, we breakdown deutsche bank's earnings and cost-cutting

plan after it announced it is abandoning wall street ambitions. we will bring you an interview with the deutsche bank chief investment officer later. this is bloomberg. ♪

♪ francine: economics, finance, politics, this is "bloomberg surveillance." iif francine lacqua here in london. let's focus a little bit on financials. deutsche bank plans to cut back its investment bank to save costs and focus on it european clients. they said they will scale back u.s. rates, sales, and trading, reduce its corporate finance business in america and asia, and review its global equities business, with a view towards cutting it back. comes after it reports first-quarter net revenue that missed even the lowest analyst

estimates. barclays has reported a first-quarter loss, while the bank be trading expectations for second straight quarter, and is showing momentum. we have an exclusive interview. all of ourgage with major shareholders, and we look forward to engaging with --. we appreciate the interest and investment in barclays. we have a strategy for the bank that we outlined, we think we are executing it well, and we think the profitability outlines that. all of our businesses, they all generated double-digit returns in the first quarter. forink the numbers speak themselves, but we will always engage with our major shareholders, and look for a robust conversation. >> tell me if you have got any dates in mind for that conversation?

you can also answer a question about returning increasing amounts of capital. has your thinking evolved since last quarter, or is it much the same? >> it is much the same. what we said last quarter is that we want double dividends, but -- which we will do in 2018. we have to get the major conduct and litigation issues behind us. the main issue that we had was the department of justice against mortgage backed securities sold in 2005 and 2007 . that was settled. to do that, sod now the department of justice issues behind us -- we were seeking to do that, so now the department of justice issue is behind us. we can be focused on generating double-digit returns. for the first time in 20 years we can begin to consider to return capital to shareholders to things like stock buybacks.

>> stock buybacks are certainly going to tempt investor -- the investor. do you think there could be a stock buyback before the end of the year? >> we're not going to give it a day to that -- a date to that. there are things that we want to do with our balance sheet, like deal with some of the legacy issues that were issued during the height of the financial crisis. there is some balance sheet issues that we want to do, but at the right time we will look returning -- beginning to return excess capital to our shareholders to buy back. we're not going to put any kind of timeframe on that just yet. francine: trade in both barclays and deutsche bank have been mixed, as investors digest the results of deutsche's new plan. how should investors be placed

in the sector? joining me is -- with me still is max kettner and michael o'sullivan. if you look at the bondholder return, it is different to the shareholder return, and it is -- it seems pretty clear that actually bondholders are having a better time than shareholders. max, if you extrapolate this, is it true for european financials in general that actually bondholders seem to be winning at this? max: certainly in the past, yes. certainly in the past. i think it is a different story, because what we have seen is a story of investors basically being pushed towards triple b minus, or even doing a crossover. is stille saying this where i am relatively safe, or the triple b minus. are they just want to stay extra

safe and add --. i would say that it is probably something -- what mike was referring to afterwards, we prefer a world without qe. that is not something that is reflective of fundamentals. it is more reflective of the berism factor of investors ing pushed out of the curve. the rates space is very different from the equity space. in the financial space you say look, if i don't expect the ecb to go anywhere and we expect a rate hike from the ecb only late in 2019, and basically there is no way that tenure bonds should hire to above 1%. in the equity space, probably not the best idea. francine: do you agree with that, michael? michael: we were for much of

wastingr, -- over financial debt and we have cut back to neutral. we are actually making the switch, and i think our view broadly is that in the business cycle you want to be taking a risk in the equity space, and less so in the credit space. i think the bond yield is very important. relative to the u.s. banks on a regulatory outlook, the u.s. banks have a less stringent kind of environment, so they have been outperforming some of the eurozone banks. we think bond yields will slowly rise. you are getting some kind of an end to this curve flattening now , which tends to be good for banks. francine: when you say that you would rather kind of it back to normal environment for markets, how do we know that they function correctly with all this

extra stimulus? it has been such a long time since we have had it, with is like-- what if it is just haywire? michael: it depends. there are a lot of things to be normalized and to be wrung out of markets. there is a lot of positioning, a lot of mindsets that need to be changed. if you look at the people that populate central banks, their mindset is that qe is an everyday tool to be used. they talk about expanding the toolbox, etc. if would put that also in a broader context, also let's say that g4 central banks, and if we look at the majority of investor outlooks for 2018 were like, i'm not sure whether mike would agree, but i'm sure that the majority of it investment

outlooks for 2018 was that the first half of 2018 will be all right and that sometime in the second half of the year it would because thetricky, fed would speed up balance sheet normalization. basically people have gotten so much used to qe that it will become tricky. i think that is one of the main reasons why it became different this time. we are already in the stage where we see a lesser degree of additions to central bank balance sheets. people are already not used to that. michael: one of the qe driven trades come on investment trade investment trade that may begin to unwind is -- that begin to buy back shares. that is a story that i think we will see play out to the rest of this year. us,cine: both stay with

michael o'sullivan from credit suisse, and max kettner from commerzbank. shares are advancing for facebook after reported earnings. it was a big quarter for the social network. will facebook -- facebook's revenue soared almost 50%, beating estimates. this of course as the company was embroiled in one controversy after another. did the facebook scandal have an impact on business? joining us is our european tech columnist at bloomberg. commerzbank,rom michael o'sullivan from credit suisse are still with us. talk to me about facebook. this is better than expected, but it is not necessarily the time where there was the privacy and the data was leaked. >> exactly. it is very close to the end of the quarter, two weeks. movemente facebook

really only got rolling in the last several days. they kept the momentum going, they were still growing in the quarter, they beat on almost every measure. one measure they did not reveal, interestingly, was how much time people were spending on facebook. that was a number that declined in the december quarter, and they did not release it at all this time. it is too early to make a definitive call. francine: it seems that analyst were quite relieved. with a happy that it was not a bloodbath? >> yes, absolutely. it is not a bloodbath, they still made out with a healthy forecast. mark zuckerberg has said that we have not seen substantial declines in users. he said that a few weeks ago after the news broke, and that seems to substantiate that. i think the big question for facebook is that we have seen in the past that they have had issues and they have hunkered

down and hope the storm blows over, but the risk of that is that the culture of the company is not changed. that they are still oblivious to external concerns. francine: they are changing their ways. i keep on getting text messages. that theyybody saying need to reapproved it privacy policies >> facebook is still slightly disingenuous. they said they were going to roll it out globally, that is not exactly the case there is a huge amount of confusion between

what is content and what is data. you don't necessarily know what kind of metadata they have money. >> i have a question on facebook, if i may? do you think they are weighing with a company that is very profitable on one hand with a company that has become very controversial? they are making lots of money out of this month and there are growing calls in the u.s. for different aspects of tech to be regulated. >> this gets right to the heart of the issue. i think one person in the middle of this that is crucial is sheryl sandberg. she was brought into the company to create a business model for it, and she did. but she is also supposed to be the adult in the room, the conscious for these bros at the top of facebook. that conflict has not been resolved yet. i think on the whole people tend to be fairly oblivious. the extent to which they are able to maintain that balance was determined the success in the years to come. francine: do you like bro stocks, max? max: yes. it is a fundamental reason, more of a market structure kind of

reason. i think when you look from the fundamental side, yes, of course when we were heading into the q1 earnings season what you have seen is that we had a record number of positive pre-announcements. it was not like the usual way slashpeople/the forecasts lash thecasts -- sals forecast. that record high number in positive the announcements was particularly driven by tech. german by the expectations, but also the realized earnings and revenues -- driven by the expectations, but also the realized earnings and revenues. towards the big of the global cycle it is momentum stocks and quality stocks that seem to do quite well. what is quality and momentum? it is tech.

from a cyclical and structural perspective, because if you think about the sheer amount of --,and that is invested in then these people will inevitably probably rotate in these kind of factors. francine: thank you for the wonderful chat. mike skinner from commerzbank, michael o'sullivan from credit suisse stay with us. commerzbank,r from and michael sullivan from credit suisse stay with us. we have the norwegian air shuttle chief executive with us. thank you so much for joining us. you say you have other suitors beyond iag. who exactly?

--it someone like sponsor lufthansa? >> good morning. actually i cannot tell who they are, but the only thing that i can say is that they are seen as people -- is that they are very serious people in very serious in that part of the industry. they are keeping a lot of interest. francine: i understand. i understand for reasons that you cannot tell us. would there be investors outside of europe? would there be an -- investors interested in your company that are not airlines? >> so far it is airline groups. i cannot tell. [indiscernible]

i say that we have been [indiscernible] see a totally different norwegian air. francine: i understand you are very limited when you can tell us. can you tell us if you would hope for white night to step up? or would you be interested in pursuing some kind of selloff? >> no. if the price is right, everything is for sale. that the board will [indiscernible] francine: ok. the 140me a sense about aircraft that norwegian is in the process of selling. what exactly are they? what will you sell?

>> we are sent to the market that we are in the process of to theg with -- saying market that we are in the process of engaging with -- for a large part of fleet. [indiscernible] we do not anticipate that we will fly in the future. it is actually nothing new. the only thing new is that we are told what is the maximum [indiscernible] you have to remember that we have more than 200 aircraft. iagcine: have you spoken to about the potential offer for the company? i know we were talking just a couple of seconds ago you said it all depends on the price. have you spoken to them and you have a ballpark figure that you would be willing to sell for? >> no.

this is the board the has to handle these types of questions. there is not any single shareholder, particularly not me as a ceo,eo, -- that should answer this question. they are certainly a reputable company, and i know personally best iny are one of the the industry. we are pleased to have them on board as shareholders. no other comments. francine: all right. so you won't confirm or deny whether you have met with him about the offer and recent weeks -- in recent weeks? >> no. it is the board the has to decide on this. francine: i understand. thank you so much for your time. he is the norwegian air shuttle chief executive. now it is time for our weekly brexit show, so let's recap the

week. >> the uk's prime minister started the week battling to avert a cabinet revolt. the fears is that she will -- to take europe out of the trade regime. be forced she could to accept a stand in the customs union, because parliament will reject her plan to withdraw from it when the issue comes to a vote. such an issue could present a challenge to her leadership and the brexit campaign in the conservative party. the uk's upper house voted against theresa may on a key piece of brexit legislation. it backed an amendment for the government -- so-called european union withdrawal bill. the result further complicates the prime minister's plan for british -- britain's departure from the eu. the european union would be prepared to offer and a better trade deal than the one it gave turkey, if it decides to stay in

the customs union after brexit, and listen to u.k. views on trade policy. the officials said that britain would have to give up its economy, and would not get a seat at the negotiating table when the eu makes deals with other countries, but it would be possible to establish a dialogue on trade. -- a cfo said that despite questions remaining over brexit, he remains positive about the u.k. economy. he made the comments in an interview with bloomberg. >> there is uncertainty about the process, cost the economy is performing relatively well. obviously we and the rest of the u.k. banks are probably a bit more conservative in terms of our marginal risk to our balance sheet, particularly in the consumer lending area. in general terms, banking activity has are made very active. > global news 24 hours a

day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine? francine: thank you so much. let's talk about the bank of england and governor mark carney. he surprised investors last week when he hinted that interest rates might not go up until may. markets and are looking forward to tomorrow's a gdp data. bloomberg economics expects the figures to be strong enough to convince the monetary policy committee that may is the right time to raise interest rates. what does the market what from mark carney? still with us is max kettner from commerzbank and michael o'sullivan from credit suisse. thank you both for sticking around. max, every time you come on we talk about banks, and mike every time you come on we talk about -- boe.elite -- the oe mark carney said that it may hike is not a done deal.

is there going to be a communication problem between the government and the markets? >> yes. the problem is that we already have that communications problem since last week. the bank of england risks playing with its ability. so far the main hike was almost completely priced in, when you look at --. if it does not do that, that basically -- it's sort of his maneuvering and their difficult waters right now -- in their he ver veryt waters -- difficult waters right now. they are really risking to face the credibility challenge -- a credibility challenge the coming months. of --o risks this sort what is the value of forward guidance, for example, if i cannot trust you anymore than what you are saying? francine: i have a bloomberg

headline. this is a press briefing by the angela merkel spokesperson, who is due to fly to washington. they are saying that germany sees steel and aluminum tariff going to affect -- into effect. should we take this as a sign that things are not going well, or is this just in case, we are expecting tariffs, but still hoping for an exemption? >> the talks taking place between the u.s. and china -- i think germany specifically is in a difficult position. the political capital of angela merkel in washington is pretty low. she does not have the -- germany does not have the national ties to congress and the senate that maybe other countries do. france does. emmanuel macron has figured out how to work the u.s. president. if you look at the speech that he gave to progress -- congress,

it is -- was much more true to the french and macron's values. i think diplomatically, angela merkel is far behind him in that respect. francine: what do you make of this? is now suddenly for europe, kind and trade, ones, of the worries? >> it could be a first sign of germany and france really working together. if we look at the france, macron's visit in washington, on the surface it looked really nice, we look at the speech that he delivered. it has been as far away as possible from trump's agenda. it could be a sign that the european union stands united and says we are not going to back down on this issue. this is why we therefore expect tariffs to come into effect for

the european union as well. is tradedan issue -- on issue -- trade an issue? yes, definitely. if you look at economic data from the emergency -- emerging actually they have surprised month over month's, they have surprised positively. since then we have had this streak of negative surprises. it is not only the excavation of trade tech -- escalations of trade tensions, it has a ready happened. francine: we have another proposal to renegotiate tariff. s. do you worry about that german economy -- the german economy? now there is such -- they are such a big exporter that it

could be a big downturn for them. >> i am worried that the potential of the german economy has not been realized in so many respects. in terms of fiscal spending, etc. the german government has so far been very conservative on that basis. i think trade is a key issue. it is a much bigger issue for germany then perhaps some of the other eurozone countries, because of the car sector, and some of the other export sectors. francine: we have jumped all over the place because of the breaking news coming from angela merkel's spokesperson. we were talking about the boe and mark carney.

it has kind of been moving sideways from september of last year. >> we are long sterling. we think sterling is going to rally. we are going down the road towards a soft brexit is part of that story. we think the bank of england should raise rates. there is a good chance they will still do it in may. i don't think that carney is losing credibility. he has done admirably and lots of various test in lots of areas -- in lots of areas. there are so many other factors to worry about like lack of investment, brexit, lower housing market. he is reflecting that structural uncertainty. francine: if you have the markets pricing in a 90% chance of a rate hike, and you talked that down to about 50%, then you hike, what does that tell the markets? i think it tells markets that the future path for rate hikes is going to be a very slow and unsteady one. for the next hike you will probably want to see a couple of months of strong wage growth, and continued steady high levels

of inflation, and also strong growth. actually short sterling, but particularly on cables. that is partly a dollar story. i would agree with mike on the structural dollar issue, but that is probably more of a negative story. over the next six months, i would say that probably with more of a divergence with global growth. late cycle, not overheating, but getting a bit of a boost. the negative surprises on the export side and the emerging economies that i just mentioned, if that feeds through, and we get negative surprises probably -- possibly on the core inflation site in the eurozone, and probably the eurodollar long positions do not make sense, but also the longer cable positions that we see at the moment. i do see more upside for the dollar side, and more downside for the sterling, particularly

that i agree with mike that the al decision is going to be a shallow rate hike by the ecb. at the same time, the bank of england is signaling that they are hiking in may, but they are --. francine: thank you so much for joining us today. michael o'sullivan, chief investment officer at credit suisse, and max kettner, cross asset strategist at commerzbank. stay with us. theresa may may -- is said to have held secret talks with eurosceptic tories. back to the ballot box? i am joined by a head of one

group calling for a public vote on the final brexit deal. that would be a second referendum. will we get it? will we not? this is bloomberg. ♪

♪ francine: welcome back to our weekly brexit show, live from our london headquarters. brexit conservatives have held secret talks with theresa may to demand that she stick to her plan for a clean exit from the european union. that is according to people

familiar with the conversation. there are reports that the u.k. prime minister may be ready to buckle on her red line to leave the customsthat is according toe familiar with union. she has reassured euro skeptics that she will deliver the kind of brexit that they want. joining us now is brute -- bloomberg's brexit director. we talked about the customs union, but first of all, where we -- are we on the irish border? >> i think yesterday we saw a hardening of the position from ireland and the irish prime minister. david davis had comments on the customs union, and the prime minister said that david davis says a lot of different things on different days. frustration is creeping into the irish position. what we see now is that ireland at once something concrete in june. they are not happy to let things drift down until that withdrawal agreements in october. just want a deal, or

significant progress on the brexit border issue by june. we are racing towards a high-stakes game. francine: what is more of a headache from the government right just want now? the irish border of the customs union? >> headaches are the nature of these negotiations. i think they are intrinsically linked, these two issues. the customs union is supposedly one of the issues that could really unlock that problem. this customs union problem has been really building up over the last couple of months. whenw this picking up stance.- their this is going to be a big fight over the early part of the summer. the secret talks last night are a sign of how worried the very wing of her brexit party is getting.

coming from all sides, not only the irish side, but the europeans as well. europe would very much like to see a customs union. it is better for companies. can theresa may hold her red line on this? we do not know. we are to have another cabinet meeting next week. apparently this is on the agenda , solutia continue to hold the line when it is increasingly becoming clear that the numbers in parliament do not support a strategy. francine: going back to ireland, is there a chance of a unity referendum in ireland anytime soon? >> no. i don't think so. there is no prospect anytime soon of a referendum on reunification. most people in north ireland do not want unity with the republic of ireland. if you ask them if staying with

the republic of ireland, would you be prepared to go into the united ireland? people are much more open to reunification. what we might see is a very hard brexit. you may see a shift in economics, but no time soon. i think if you were to go for a referendum anytime soon, you risk hardening tory intentions. who knows? francine: thank you so much, our dublin bureau chief. there are suggestions that brexit risk premium are alive and well. it would probably take a second referendum for that to change. that is exactly what my next guest is campaigning for. the group open britain is backing the people's vote. the grassroots movement launched this week. np and these --

bee persuaded -- np's persuaded to get on board? joining us is francis grove-white, deputy director of open britain. can i begin by calling up on the term, second referendum. we see this as something completely different to the vote that took place in 2016. this of the for the first time the terms ofeing brexit as negotiated by the government. they would be presented with a choice of being allowed to make a decision. francine: but that is semantics. >> when in reality it would be a third referendum. francine: what additional demise

-- what it did digit demise -- delegitimize negotiating power? francis: i think the opposite. they have failed to come up with any solution to this album. potentially ainto crisis, not only for the negotiations, but for the conservative party. i think that is why we see a grown appetite in the public. we see an increasing level of support for a vote on the deal. i think that this is something that is going to build over the next six months. inn the deal comes back october, november, december, whenever we see get, parliament is going to be faced with a choice. do they except a deal or rejected? at the moment i cannot see -- reject it? at the moment i cannot see --. putting it in front of the people i think is going to become quite an attractive

option. francine: if we look -- if we kind of take apart theresa may's options. on the customs union she has it euro skeptics that one a cleanup -- wants a clean out. they want -- they have parliament, who want them to stay in. what they are proposing at the moment is a customs partnership. their language in this has always been important. whether it is the customs union, or a customs union. the government has said that they want a customs partnership. it is a complicated and technical thing that they have proposed. it involves collecting tariffs on behalf of the eu. a lot of people are saying that this is magical thinking, it is impossible, it is far too complex. that is a situation that they have at the moment in their minds. it is kind of a fudge, but relying on technology to make it

work. they need to come up with something else. the system -- a system like this , there is not one anywhere else in the world. is there anyway to bring these two sites together to keep everybody happy with the wording? or does this problem continue to fester until we get some sort of felt, or something else happens -- some sort of vote, or something else happens? we have to factor that in. she is leading a minority government. francine: francis grove-white, do believe if there is a referendum on the final deal and theresa may does not get the support, do we need to go to elections? francis: if there is a referendum and? francine: they say we do not like your do with the eu. does it automatically mean that she is out of power? francis: there are all kind of

circumstances that we can envision. i don't think anybody knows how this is going to play out. if parliament rejects the deal, does that force the prime minister out? if it goes to a referendum, what is the question of ballot paper? we are not advocating a particular question. we are just signed that at this stage the negotiations are going badly, people are increasingly alert to the fact that the brexit being delivered is not the one that was promised. we know that trade agreements with the likes of donald trump are going to take years, and potentially involve huge trade-offs. as we get to the point at which the government is going to bring back the deal, should it be parliament and politicians? or should it be the public that get to choose the terms of whether we accept the deal? francine: is there a relies nation that they are not getting -- is that true? that they are not getting -- that they are

francis: around two thirds of the population say that they think the negotiations are going badly. they say they think we are likely to get a bad deal. i don't think there is a huge level of detailed forensic analysis of what is going on in the investigation. the brexit that is going to arrive on the table later this year is not going to be the one that was promised during the referendum. francine: thank you for joining us, francis grove-white, deputy britain.of open bloomberg surveillance continues in the next hour, and we will be talking about deutsche bank. ♪ talking about deutsche bank. ♪

francine: deutsche's is

downsizing. theeeping overhaul of investment bank. we will speak to the chief financial officer shortly. draghi's test of faith. how confident is the central bank's president in the euro economy? investors like facebook again. is it too early to see the true impact of the data privacy scandal? good morning. this is "bloomberg surveillance." i am francine lacqua in london. tom keene is in new york. and a lot of the show will be , especially banks european ones and if they can compete with the wall street giants. a little bit of momentum is being gained by deutsche bank. a big overhaul as the new chief executive wants to make a play that there is a new man in

charge and he is accelerating some of the retrenching from u.s. markets. the bloomberg news article on deutsche bank is stunning. i will say now that it is the end of an era. francine: it is. 11:30 a.m. london time we will bring you our interview with the deutsche bank chief financial officer. france's president believes that president trump will pull out of the iran nuclear agreement. in washington he told reporters that he thinks president trump will withdraw for domestic reasons. there is a deadline for president trump to waive u.s. sanctions that were lifted as part of the deal. the ahead of the veterans affairs apartment nominee has been rocked by

allegations that he dispensed prescription drugs. white house aides are preparing for him to withdraw. cut the duty on imported passenger cars by half. is considering a plan that would reduce import taxes from 25% to as little as 10%. that would give a lift to luxury carmakers such as bmw. in sweden, the central bank can't get enough of inflation. the pushed back against plan to raise interest rates for the first time in seven years. swedish policymakers don't see a tightening until the end of the year. since 2015 they have been on a mission to restore inflation and have cut rates to below zero. in the next hour we will hear from the bank's governor. global news, 24 hours a day,

powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. tom: thank you. .uiet markets dollar strength is one of the stories. future and curve and euro and oil are flat. surveillance, not flat. raising inocks are the earlier drop. i'm looking at bank stocks. the dollar is steady. oil is gaining. tom: to me, this is the back story of what we are seeing from deutsche bank. we are always doing the transatlantic comparison. about the transatlantic comparison, let's look at the euro comparison. the total return in jpmorgan, big deal. normalized paribas,

back to 2007. it is an abject failure against major european banks. francine: i also have a deutsche bank chart which shows the different returns for credit. some of the bonds and deutsche bank and shares. european central banks, if you look at my chart, this is a percentage of overall stimulus. we will push it out on social media. the ecb has started to unwind its balance sheet, it is only 35.7%. let's get back to the european central bank. for more on the news conference, cluse joined by reinhard and john bilton. if you are mario draghi do you worry about recent data not

being as high as expected, or du think at least i don't have to explain when i'm going to cut my asset purchases yet? you are happy for breathing space. if we look at the pace the wasstrial sector accelerating, there was a risk that the ecb would be caught napping. the economy was clearly picking up aggressively. we are seeing employment continue -- unemployment continuing to come down. if anything, they will look through this soft data, see it as a natural deceleration in a short-term cyclical trend, and they will look further out and say there are one-off factors in the couple of months and the general outlook around the globe, global pmi's, it is still point 5%or a 3% three

gdp. this is in a bad place to be and we will set policy appropriately. , the ecb needsed to navigate setting a date for getting away from the qe. the markets the idea that they are raising interest rates. is that the biggest challenge? reinhard: it is to get out of the super easy and super unorthodox monetary policy without rocking the boat. medium-term view, 12-18 months. despite the short-term weakness in the heart data, which is slightly unsettling so to speak, dust in the hard data, we are the hard data, which is slightly unsettling, so to speak, we think interest rates will be there by 2019.

and itu learn chemistry is about controlling reactions. can mr. draghi return the reaction functions over the next two years? john: i think he can. to be fair to mario draghi, with they have learned over the crisis, i would argue that other have learned it is important to have guidance within the toolkit and to allow that to work appropriately. it is important to give credibility. the ecb has done what they said they would do in terms of the rate guidance and pushing on with quantitative easing. i don't see why they would deviate from that and create market uncertainty. the biggest thing that markets want, and if we look at the gyrations in q1, they were

uncertainty. to worryne less thing about. i would argue it would be front and center of mario draghi stocks today. tom: let's have a moment of silence for ubs. i will not explain it because i other thanstand it, this is the complexity of the european banking system. europeanifully capture banking. where will the ecb be in five years ? we used this chart to explain the massive challenges developuro reform to the banking union. over the medium-term, the intention is to make the eurozone more stable. two essentially take pressure off of the ecb. the institutional framework of the eurozone needs to become

more solid, stable, and we need to improve the buffers for recessions, deeper sessions. that would also be -- deep recessions. that would also be a really for the ecb. we have an important summit at the end of june when some banking-related issues will have to be tackled and important decisions made. mario draghi and his colleagues will follow closely and hope eurozone politicians hesitationme their and make real progress. was a headline from angela merkel's spokespeople about trade and they are expecting tariffs to come on may 1. how many questions will mario draghi field on this? up,: people will bring it

but trade negotiations take a long time. we can look at prior bouts of trade tension in the bush era or similar. the thing to remember is there is a distinct last move right spats. in trade under the rules, if you find yourself in a situation where the initial onslaught is unreasonable, you have time to target responses. i think we are to be in a situation where there is discussion, questions over trade for some time. we are seeing mood music from both sides of the atlantic that neither side wants it to descend into a trade war. it is something the markets will live with for a period of time. francine: if you look at german growth and expectations, they are worried about trade because they are a big exporting economy. has german growth peaked?

reinhard: the first quarter data that we have seen over sketched the weakness. we are convinced the flu wave, which has been severe this winter, and the harsh winter weather -- average temperatures were lower than usual in january and february -- that is part of a

taylor: this is "bloomberg surveillance." i am taylor riggs. volkswagen's first-quarter profits missed estimates. the new ceo says the overhaul will strengthen their ability to adapt to changes in the auto industry. royal dutch shell hasn't seen profits like this since the days of $100 oil. they have an adjusted net income that was the highest since 2014. investors are worried about shell's cash flow, if the

company will be able to afford share buyback. ford is getting ready to cut $11 billion from spending plans to reach an elusive profit target more quickly. they will get rid of most of their north american car lineup and focus on lucrative suv's and pickups and expect an 8% profit margin bye -- profit 2020, 2 years ahead of schedule. the barclay's chief executive says the chief results underline the current strategy and a promise to return an increasing amount of cash to shareholders through dividends and buybacks. >> i have not heard yet what mr. wants.

we have a meeting shortly. i think that shareholders like that we have completed the restructuring of the bank. we are strategically where we want to be with the sale of the control of our position in africa being strategic. on a pathway to returning excess capital to our shareholders and producing one of the most profitable quarters in the history of the bank in the first quarter, generating a double-digit on return for the group above the cost of capital. that is a sign that we are past the restructuring and back to a more normalized business operating environment for barclays. wait tohole world will see what comes out of those conversations and what news we can break around it. in my experience, it is good to listen to activists because they sometimes have a point. got is your red line as you

into the meeting with this activist investor? prepared a high thing off of the investment bank, is your red line defending the i.b.? oure do engage with all of major shareholders and we look forward to engaging with cherbourg and we appreciate the investment in barclays. profitability this quarter underlines that. all of our major businesses, consumer, credit cards, private bank, corporate bank, they generated double-digit returns in the first quarter. the numbers speak for themselves. we look forward to a robust conversation with him. any datae if you have in mind for that conversation. answer around

returning increasing amounts of capital. has your thinking evolved to since the last quarter or is it the same? very much the same. get thesaid we have to main conduct and litigation issues behind us. everyone knew that the main litigation issue was the department of justice around mortgage-backed securities sold in 2005-2000 settled. was will -- that settled with roughly how the u.s. banks were settled. now the department of justice issue is behind us. we took a reserve for ppi. much behind us dow and we can focus on generating double-digit returns. for the first time in 20 years, consider returning capital to shareholders through things like stock buybacks. >> that will tempt the investor.

do you think there will be a stock buyback before the end of the year? >> we're not going to give a date. we have the stress test with the bank of england to go through and there are things we want to do with our balance sheet such as deal with some of the legacy preferred issues that were issues during the height of the financial crisis that carry high interest rates that we were able to call. there are balance sheet issues we want to do. at the right time we will look at returning excess capital to our shareholders through buybacks. we are not going to put a time frame on that yet. francine: that was the barclays chief executive. tice,g us is jonathan john bilton, and reinhard cluse.

is the momentum turning? jonathan: you have a ceo that is behind growing the investment bank. because riskess is has grown. equities are over 40%. 40 inn was less than dollar terms. it is a great quarter for trading. they did good on costs. francine: deutsche bank, a new person in charge, and they are cutting wall street ambitions and focusing on europe. the share price has gone down. jonathan: it will be all about costs from here. he has made a hard target of 23 billion that they stepped away from. it will cost more on restructuring. it will be painful. i think it will take a while,

but markets are trying to figure out how much capital have we got? jonathan tyce i want to bring up bar and revenue charts. i think they are ugly and don't tell a story, but this one really does. this is deutsche bank with a move from the 80's to $35 billion year revenue, then they roll over. my experience in every major --tructuring is the manag the management has no clue what the blind path is. do they know where revenue will 1, 2, 3,r to quarter, 4, 5 years out? jonathan: no. the revenue flight path will to 15% from here. we know that they will care

about the u.s. frenche the big investment banks rolling out. barclays is back on its front foot again. even the refocused to europe will not be straightforward. moving in europe and it is painful to be a resale and corporate bank as well. but this comes down to is the fact that this morning, and theiring to john tyce, new competition is bnp paribas? bnp is growing. i would not say that they are new competition. that they are building quite successfully. me bring you to my

chart. at deutsche bank bondholders, they are doing better than shareholders? 81.than: you have the the mda disclosures. is comfortableio above 13%. there are still question marks about how much capital it needs, but if it wants to shrink risks it has plenty of capital, it is generating returns on that capital. francine: let me go back to my chart. are you hoping european financials will pick up a little bit when the qe is taken away? from a macro investor's of view, that shows when the sector in 2016 and the first half of 2017, that was

indicating that concern over the balance sheet strength was in the past. the notion that we would revert to the eurozone prices again was put into the rearview mere. people are wondering how the go from securing their balance sheet to growing earnings. is there the environment and appetite to allow banks to grow their earnings in europe? it is a crucial question for any macro investor. europe versus the u.s., if you trade europe against the u.s. you are taking a tacit consumert to do industrials and an underweight on tech. someone buying commerzbank, consolidation, is it domestic and one country? we don't expect big deals.

ill take putting the commerzbank together and deutsche bank together does not solve the problem. there are too many branches. provisions cannot fall much, if any further at all. all the banks are embarking on multibillion pound investments in digital for the future so turning growth is difficult to find. u.s. corporate lending and trading in europe is reasonably hamstrung, unfortunately. tom: will there be mergers? jonathan: you may see domestic consolidation. in germany, there are hundreds of banks you have never heard of. you will see a lot of consolidation in italy. will you see bnp merging with parkways -- with barclays?

there's not a chance of huge megamergers. francine: thank you, jonathan and, jonathan bilton, reinhardt clues. portfolio management, we will ask about the european central bank. with the press conference, what it will entail. theou look at german bunds, reprice, what does it mean for the market? that is coming up in 4 minutes. this is bloomberg. ♪

tom: "bloomberg surveillance." news flow of this morning, including the restructuring of deutsche bank.

an important interview with the deutsche bank senior management coming up. city, here is taylor riggs. taylor: the fbi has joined the u.s. investigation into if a chinese telecom company has violated sanctions selling to iran. the probe grew out of an earlier sanctions case that led to penalties against another chinese tech company. citigroup says that by next year they may be in the next oil exporter. opec continues to curb output. couldnd its partners always taper cutbacks earlier if they think that the u.s. is cutting into their market share too much. expectations are high for the first on the between the leaders of north and south korea in 11 years.

they meet tomorrow at the military demarcation line that divides the korean peninsula. there is speculation it could eacewith a p declaration. the british prime minister had a secret showdown with members of her conservative party who want a clean break with the eu according to people familiar with the conversation, she assured the euro skeptics she will deliver the brexit they want. there have been reports that she would buckle on her pledge to quit the customs union. global news, 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. i am taylor riggs. the ecb is likely to keep the policy unchanged. mario draghi is likely to face questions about euro-area

growth. it is on uncertain footing after sacking confidence. -- sagging confidence. here with us, john bilton and reinhardt clue -- reinhardt. zonern around the euro economy, what does that mean for how mario draghi will position himself today? >> good morning. that means they will have to kick the tires and take a look under the bonnet of their forecast. the due diligence of their forecast will show that while soft has been a patch of data recently, the momentum a strong. they will reaffirm their forecast that they published last month and reaffirm that the balance of risks to growth are

broadly balanced and they are on track. despite the soft data i would an unchanged outlook in terms of growth and inflation. francine: i'm looking at, a couple of hours ago, we saw the swedish central bank delaying a plan to raise interest rates inflation.weak does that indicate what mario draghi should be looking at? andrew: i think that when we look at the ecb in the next 12 months, it is reasonably uncontroversial. when you look beyond 2019 it gets murky and more interesting. the environment may look more familiar to what we are seeing with the brick bank. like it is a problem that the ecb would love to have, but it is so far away from it. dispersionok at the of inflation around the zone, it

looks like the growth momentum will continue, but all of the indicators in the forecast on inflation, it seems difficult to get up to the 2% range even over 2-5 year time horizon. it becomes difficult to forecast. coupled with the delay of normalization, i expect that is what we will see in the eurozone as well. tom: our viewers and listeners want to know what the pimco experience is living day to day with negative interest rates. has your work changed, the quarter to quarter of movement changed given chronic negative rates? i think when they first started appearing in the eurozone the initial reaction was, let's sell everything that

is yielding negative to avoid it. the reality is we are approaching 2 trillion in excess liquidity in the euro money markets and the policy rate is -.4. there is demand for liquid assets that have pushed so much of the front end even below the that became a standing feature of the environment. we try to minimize the exposure to it, but you cannot avoid it. you can minimize the impact. in terms of strategy and product, you remain true to the design of your product and strategy, but you have to take what the market offers. has a negative rates a distorted or changed the job for mario draghi? should he ignore them or are

they front and center in his various calculus? it was a conscious decision by the ecb to put rates into negative territory. the idea of being turbocharged the impact of asset purchases. turbocharged in the sense that you increase the velocity and .urnover of assets it pushes the whole impact of the policy rates through the capital markets to the end borrowers. it is somewhat controversial, i think. other countries have managed to get out of their post-lehman's shockst-lehman without going into negative tarik -- native territories. keepingral bank itself companies a life that are having

a deflationary impact from that they would not under a positive yielding environment. are we increasing the likelihood of housing price bubbles? maybe it is a legitimate pushback from the central bank communities that look to macro prudential policies of the countries that have put them in. it seems to be and that that they do work. maybe this is the new normal for monetary policy going forward. an environment where policy rates are very low and you have other authorities preventing housing bubbles. francine: foot is pimco buying at the moment? is there anything in europe that looks particularly attractive? there are a few areas, traditional areas, that we have favored for a long time. mortgages from some of the surrounding countries, denmark and sweden, some of the new

issuers in the corporate are looking attractive. even corporate bond have been less over participation where you are getting yields. in the international comparison looking across the whole currency environment, euro yields look not that. -- not bad. eaan obligations are an ar that attract us and look good on a risk return perspective. that is one area we are focusing on. francine: let me bring in our guests in london. repricing a violent -- let's not call it a violent, fast repricing of german bunds? we forecast 100 basis points by the end of this year.

that is up a lot, but if you look at the historical perspective, it isn't outrageous. it makes sense that if growth continues and the ecb monetary policy normalization precedes, there is justification for bond yields to go gradually up. also the gap to u.s., but we whip anticipate nasty pricing. a 15 trillion balance sheet across the central banks. the reinvestment even after the goes to zero, the reinvestment will suck up a huge amount of german bund issues. andave an aging demographic the pension industry suffers from negative cash flow. we will see increased demand over time as we get older for

high-grade riskless paper to provide income. the idea that we will suddenly face a cliff where there is no bond buyers left is not the case. mr. we will continue with in london.mr. cluse the headlines will come out as 7:45 new york time and then we move on to the press conference. through that carefully on bloomberg radio as we do "bloomberg surveillance." the press conference at 8:30 this morning. this is bloomberg. ♪

tom: tom keene in new york, francine lacqua and london. we go to our senior executive officer for body language out of berlin, a student a political body language. he will need it. macron, touchy-feely, merkel a chill in the room. what a shift this will be for europe. when francine and i are together, it is like this every morning. for those on radio, be glad you are on radio. likeill the german people the chancellor to be greeted by the president of the united states? visit,ink after the last a handshake would suffice. he refused to shake merkel's

hand in public. what a remarkable state visit it was from macron there were two distinct faces. you saw that he was extremely touchy-feely and he got along well with the president. freely spoke his mind. they diverged on just about every policy available. 2 distinct faces in the state visit. varian usual. -- very unusual. tom: what does chancellor merkel want to accomplish? to get the same message as mr. acron, or will there be uniquely german nuance to the delicate discussions on iran? merkel and macron are remarkably on the same page on the big issues on iran.

merkel, the big one is trade. we didn't hear very much about trade from macron and that is merkel's focus. we have the may 1 deadline for the u.s. tariffs on metals, which is looming. desperate to get these out-of-the-way. that is her focus, certainly. francine: we were at the world bank meetings in d.c.. did hear murmurs that the u.s. administration and the new economic advisers didn't want to focus on europe. otheranted to focus on things. how much truth is there in that and what does it mean for trade and tariffs? trump prefers dealing bilaterally with germany and france. this issue of trade is one area

where the eu punches its way globally. there is no way around when you are talking trade talking to the eu. i think that merkel will try to thatadvantage of the fact of course there are areas of conflict between the u.s. and germany, but trump appreciates that germany is a big economic power that makes things that are desirable, such as bmw and mercedes. the new globalization, may be the new transatlantic foreign policy. let me go to you on this new globalization. the transatlantic dynamic. i know that ubs lives that every day. what can the politicians do to boost gdp and trade? mean, keep trade

open. that is a constant challenge that you need to fight for every day. we know in the current context that open global trade is challenged, under attack. therefore, we need to maintain the dialogue. now that we have seen the report on macron meeting with trump, it is good that channels of communication remain open. even from chancellor merkel's point of view, it is good that macron gets along well with trump, because that will be needed over the coming years to discuss these important areas. not just iran and global trade, but many global policy initiatives where europe and the u.s. will have to work together. francine: the problem is that they are exempt from tariffs and trade until may 1, europe is.

what happens after that? macron was there to talk more than iran then trade -- trade. john: it reinforces that a trade negotiation is not one and done. you have political rhetoric around the globe having to talk to a somewhat disenfranchised domestic audience who have been left behind by globalization. that is the case in the states, in europe, and around the globe. some of that is a political reality that domestic leaders account.ake into global supply chains are so incredibly integrated today that is is difficult to put a tariff or trade restriction in place without somehow hurting your own domestic industry down the stream. this calculus takes time to work through. implemented,been it is impossible to know what the reflects are.

it is another point that underscores volatility is a little bit higher than last year, uncertainty is a little bit greater. as a result we have to rethink the level of risk we want to take in these markets. francine: there is a deadline on ord, and iran acc we heard from the french president that they expect the u.s. to pull out. reinhard: the price of oil has gone up recently. in terms of growth for europe, it is not welcome. since we do not produce much oil ourselves, we want to lower our prices globally. in terms of inflation, the short-term impact is somewhat higher, but within the grand scheme of things, what matters to the ecb's growth and not fluctuations in oil. situation,oeconomic

from the demand side we want higher oil prices because of ofh demand, not because supply constraints. that would be very damaging. tom: thank you for this conversation. coverage twice this morning, the release and the press conference. your morning brief, coast-to-coast and worldwide. bloomberg daybreak on bloomberg radio. stay with us. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." let's get to the bloomberg business flash. resilient in the face of the data protection scandal. beatly user growth estimates and facebook's ceo is promising to invest in building new products. hyundai motor posted quarterly missed that estimates. incentives to lure american

buyers eroded their profitability. we do not want to overplay this, there are no injuries in zurich. some of these select offices in zurich. bloomberg is summarizing it. the fire is being put out with no injuries. francine: we understand by speaking to the fire brigade that they are putting out the blaze. we are keeping an eye on the building which is part of the ubs group headquarters complex in central zurich. prime minister theresa may started the week battling to avert a cabinet revolt. there are reports she will break her promise to take the u.k. out unit. eu customs have anynow if you

visibility on what happens next. most of it is political. i want to come back to the boe, but on the political front, we don't know how theresa may will navigate because she has so many stakeholders to keep happy. john: there is clearly tension the purer euro skeptic elements within the government and what the business community is pushing for. one thing that we can say with certainty is that it will be several rounds of negotiation from here in. what we are seeing a sterling against the dollar seems to indicate that markets are leaning more towards there being some deal done. we should recognize that the level of sterling against the euro, which has flatlined, suggests there is bilateral uncertainty. u.k. assets, what we have to recognize in the way that mark

carney is doing is that there is uncertainty. mario draghi seems to be set on issuing durant guidance, but mark has become more open-minded in that the data outlook for the u.k. is uncertain. thank you so much. more to talk about with an important new book out, one of the important books of the spring season. ian bremmer will join us with a wonderful new interpretation of globalization and a lot on president trump. this is bloomberg. ♪ retail.

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

near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. path to amorning, the

regional and german bank. deutsche bank gives up on being . global bank, restructuring where will revenue be in 2-5 years? there is no mystery to iran, russia, and china. "an bremmer, "us vs. them globalism has failed. good morning. this is "bloomberg surveillance." world headquarters in new york, tom keene london. francine, i looked at the house of lords and i think that they voted down may again. would you explain what the people with red leather are doing? saying tothey are theresa may that she needs to stay in the customs union, but this is a lot of

pageantry. like president macron showing up in d.c. i would look at that in how he could bring president trump closer to the iran deal. banks, deutsche bank cutting wall street focusing on europe. right now, to our first word news. france's president believes president trump will pull out of the iran nuclear agreement. he told a reporter that he thinks president trump will withdraw for domestic reasons. there is a may 12 deadline for president trump to waive u.s. sanctions lifted as part of the deal. headdent trump's choice to the veterans affairs department met with white house aides last

night. ronnie jackson's nomination has been rocked by allegations that dispensedo excess and prescription drugs. jackson has denied the claims, but white house aides are preparing for him to withdraw. on importede duty passenger cars by half. china's cabinet is considering a plan to reduce import taxes from 25% to 10%. that would give a lift to luxury carmakers such as bmw. in sweden, the central bank cannot get enough inflation. backunexpectedly pushed against a plan to raise interest rates for the first time in seven years. swedish policymakers don't see a tightening until the end of the year. since 2015 they have been on a mission to restore inflation and have cut rates to below zero.

global news, 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. tom: futures elevated slightly, everything else is flat. francine? francine: stocks in europe are stabilizing a touch. they erased an earlier dropping are on the upside. be postingeem to company earnings. i'm looking at banks which is why i put sx 7p. tom: let's go to kevin cirilli .efore we go to dr. bremmer it is pageantry. mr. macron and mrs. merkel, what

happens after the chancellor leaves? domestically, what will the president focus on? today it is nominations. scott pruitt testifying on the house energy panel later today. he is in battled. the president's energy policy is at stake if he would withdraw support from him. nominationis that va also facing intense scrutiny. for the global audience, the broader takeaway is that this is the day in the middle. yesterday you had president macron and tomorrow you have chancellor merkel. president macron saying publicly that he believes president trump will ultimately decide to withdraw from the deal on may 12. tom: life goes on. amazing granularity about one of the virginias. they have been watching the may 8 primary race. they believe either of

blankenship's mainstream rivals would stand a better chance of delivering the republican senate seat this fall. blankenship might actually become a republican standardbearer, in which case trumpier than trump would work as a slogan. by fascinated by winning going more trump than trump. steve bannon would agree. many republicans would argue that alabama was an anomaly. geographics are so diverse, especially in 2018. a republican running in west virginia is different than a republican in pennsylvania, parts of pennsylvania, which is different than parts of florida. i would caution folks from

looking to try, to paint all republicans or democrats especially in 2018, with one brush. senator heitkamp from north dakota running for reelection in 2018 is running as far away from the democratic establishment as she can. she is running far away from senator warren. when it gets to turnout, that is -- it will be interesting if that calculation helps her. tom: a domestic dose of politics after state dinner pageantry. thank you. in the hour. we will dive into dr. bremmer's new book in a moment. first, we need to talk with ian group abouturasia america and the idea of us versus them. what a great -- you designed this with your dog? ian: yeah.

actual pawprints, i wish i were lying. tom: the president would love the idea of us versus them. is it an act or is there a ance.n is the most effective us versus them that we have had. he is a great vessel if you want to show that america first, everyone else is not really a person. we don't accept syrian refugees and we can build a wall on the border. that has been working for his base. the failure about of globalism, about an ideology driven by the west for free markets, open borders. the united states defending people around the world. the average american and average

european saying this ideology isn't working for us. if you get rid of trump, it doesn't fix this. if you reverse brexit, it doesn't fix this. is aact that brexit problem for the market doesn't make europeans feel like they want to start voting for the establishment. you saw in germany, italy, and hungary at this is so much broader than let's be upset about trump's latest tweet. that is the problem. francine: it is a good book, it is an easy read. in the book you make predictions. the one that should concern governments and investors is that the battle between liberalism and nationalism -- between globalism and , which you feel will spread to china, russia, india, and other markets? ian: it is spreading.

the most recent piece, the technology piece. i was in brazil and in the last one wasn elections no getting their news from social media. now, over 50% of brazilians are telling us that their primary information source is that. thes driving them away from establishment the same way that it has in the united states and europe. in thebs regained emerging markets, they were the beneficiaries. they liked globalism as a consequence. now with automation, ai, and labor rates being more expensive in emerging markets, they will face the same backlash we did in 20-30 years ago in the united states and europe. the only country that is set up to respond strongly as china. in china, social media is controlled by the state. it builds authoritarian sponsored nationalism.

you don't fragment, you bring people together. notou don't, you end up being heard from anymore. the chinese government is set up to ensure greater employment, even if it is inefficient. that is why they are doubling down on state-owned enterprises. problem. serious it means that the liberal democratic model is not seen as an example by people around the world and inside of our own countries it is becoming delegitimized. young people are saying we don't want a democracy anymore. lifting: what about people out of poverty at the highest rate we ever have? ian: the fact that populism is as great today as it is, despite the fact that we in the united states have the best economy since before 2008, the global economy looks so good for

2018-2019,, that should tell you when we have a recession we are in serious trouble. a lot of people have been raised out of poverty. in the west come you see social and economic inequality growing. the fabric of their society is unraveling. like thet feel community they had. there is an identity and military peace. enlisted military men and their families voted for trump. they do not like forever wars. it is interesting. the message is consistent, even if the vessel is broken. tom: i want to go back to the president of the united states.

you, more than anyone, has to the studyture of international relations. do you see any end to the great american culture war? ian: i think it is just picking up. tom: just beginning? ian: i posted a stat that showed under obama's last year we accepted 13,000 refugees, this year so far 11. you can name them, you can put their pictures up. half of the americans responding to me on the feed say that 11 is too many. that tells you a lot. i think that the willingness to build walls, the willingness of those walls to work, is something we are seeing just the beginning now. tom: why does the right like your book and the left has not given it a lot of love? ian: the right is latching onto the idea that globalism is dead.

the left has picked it up, but so far the marco rubio's and fox and friends -- tom: are you on fox and friends? he doesn'tesident, read but he likes the cover. the left in the united states is focused on how trump is such a disaster. my message is, yes, but that is not how you will

people are still angry. i think that the establishment is more complicit with the fact that they have allowed people to get so mad that they would vote for trump over the last 20-30 years in the trump -- tham the trump voters are. the left is not ready to accept that. francine: deutsche bank embarks on a sweeping overhaul of its investment bank. we will speak to the chief investment officer. that interview is coming up. that is in 15 minutes. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." let's get to the bloomberg business flash. first quarter profits missed estimates. the new ceo stresses that the overhaul will strengthen vw's ability to adapt to change in the auto industry. $11 is getting ready to cut

billion run spending plans to reach an elusive profit target more quickly. of most of the north american car lineup and focus on suvs and pickups. the profitto reach margin two years ahead of schedule. barclays is finally showing momentum. beat tradingank expectations for a second straight quarter. the results might strengthen the of the biggeste shareholders, activist edward bramson. from thee a strategy bank that we outlined in march 2016 that we think is executing well. we think that the profitability that.ines all of our businesses, consumers, credit cards, investment bank, consumer

banker, they all generated double-digit returns in the first quarter. we will always engage with our major shareholders and we look forward to a robust conversation. that is your bloomberg business flash. tom: a lot of the banks, particularly deutsche bank, in a bit. we continue with ian bremmer of eurasia group in celebration of "us vs. them." question, a quick summary on globalism and much more on president trump than i expected. i want to talk about ian bremmer boston inyscrapers of the distance from chelsea. you were a junior achiever, and it was really about the idea of teach ian bremmer how america works. does donald trump, born on third

base, does he understand how america works? ian: he did not build a business. i would have loved if someone gave me $10 million. tom: you have ended up on second base. ian: the ability to get out was and it isn i grew up getting harder. for all of my support for free trade and globalization and the money that it makes for the world, if we in the united states are not spending -- trump did one week of infrastructure and it went nowhere. he is building walls every week, he is talking us versus them every day. that hurts the kids from chelsea. tom: the most important quote from the book. geology the morning after the earthquake. wants to watching this

be ian bremmer. they are all taking the courses, but it is one big look back. in 2009 we had the occupy wall street movement where we talked about it for six months and ignored it. the assumption was, i guess that wasn't such a big problem. it didn't go away. the trump election has focused people's mind, but only on trump . the earthquake has not hit. tom: complain your discontent with globalism versus discontent with globalization. ian: when you have globalization, you will create thers even though efficiencies at scale matter and goods are cheaper. it is only a small piece that is about trade. a big piece is why did merkel get hit so badly, why did the northern league to so well in

the wealthy north of italy? they saw that the countries were becoming more differentiated and were not integrating the most recent arrivals. they say we will get rid of 600,000 migrants from libya if you elect us. that is a big piece of what has driven trump in office. francine: when you look at president trump, he surrounds himself with billionaires and dealmakers. is it because he is changing the way that we talk about diplomacy and is effective in his tweets? ian: the regulatory rollback is not draining the swamp, it is strengthening the swamp. so much of what trump has talked about and some of what he has done is attractive to his base. hereafter recognized that when people are saying that the system is rigged -- you have to realize that when people say that the system is rigged, part of voting for trump is to shake

things up and break things. the fact that the mainstream media has their heads explode every day with every tweet is something that these people voted for. maybe he will break some things. i think that the fact that trump goes after black athletes in the united states that are making millions of dollars, how dare they kneel for our national anthem was an issue that was directed at the base and was very effective. those of us making a lot of money to travel around the world in new york think that is horrible and anti-american. the average american feels like the elites have been anti-american for longer. america first resonates with these people. they like trump pulling out of paris, fighting wars. we'll get back to ian

bremmer. turning to europe, ecb, a completely different story, likely to keep policy unchanged. mario draghi is likely to face questions about euro-area growth. the region is on uncertain footing. joining us is paul gordon. talk to me about what mario to communicateo with the markets. without to stop qe suggesting he is increasing interest rates? paul: that's right. he doesn't want to shake things up. he has done enough of that through the 6.5 years of his term so far. a key is slow and steady. everyone wants to hear when the ecb will wind down the asset purchase program and put it on the path to higher interest rates. think you will hear much

from draghi except for patience, persistence, and prudence. tom: thank you so much. we will look for mr. draghi in a bit. we want to look at international relations on the equity markets. a wonderful voice of the midwest , david -- david: the flyover zone. tom: i won't talk about the flyover zone, but the elites on the east and west coast ignoring the flyover zone. are you advantage being in the midwest when you look at equity markets? david: every day, all day. i get all of the excess that i want to good management teams that want to talk to us as a potential buyer of their stocks. being further from new york, , isgh i love coming here

probably an advantage. i will take issue that what is good for the equity markets and isd for corporate profits more sensibility on the regulatory environment. talk to the midwest banker that is not been pulled over for one mile over this be limited that has greater latitude to create capital, growth, construction workers, and on the energy side. that has been a positive factor and is good for markets. tom: do you look at u.s. multinationals as companies that can compete in dr. bremmer's globalization, or are you forced to go abroad and invest? david: abroad you have a name , a well-run company that can play a role in a portfolio. for u.s. company abroad, i will talk about small caps, but a large cap name like cisco plays

to the international side but is selling at the right price. -caps.our expertise is mid david: i say if i want my kids to go to a better college, it will be small and mid-caps. tom: i love your optimism. we will continue with david sowerby. ian bremmer is with us from eurasia group. is a wonderful book. , theirup, deutsche bank chief financial officer in conversation with guy johnson. this is bloomberg. ♪ welcome to the xfinity store.

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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. francine: this is bloomberg surveillance. itssche bank abandoned

ambitions to be a top global securities firm. it announced sweeping overhauls of its investment bank. with theon is talking chief financial officer. not significant a shift in terms of strategy for the company. we aim to be a corporate led global investment bank based in europe with global reach. there is a rescaling of our ambitions particularly internationally. if you like a discipline in terms of focus making sure activity in the u.s. and asia align with that european court. -- core. guy: what does the u.s. business look like after the restructuring? >> obviously smaller. we have an inefficient use of so startingsheet point is to reduce the leverage exposure.

the other strategic discipline is making sure that when we are present in activity in the u.s. it has to have some connection selling real unique proposition of this company which is that we are the leading european investment bank with global reach. to the extent that there are u.s. activities that fall outside the perimeter that's where we would take some action. guy: you wouldn't care to mention those? >> we don't want to be too precise about what that means. and can'tig knowledge compete against our u.s. brethren in terms of scale in every business market client segment in the u.s.. guy: we reported that it was cash equity was the main area you are going to be withdrawing from. >> that was speculation. we said we were putting the equity business under review. to measurebe careful

twice and cut once. the three elements of the business do have interconnections so we want to make sure we are very deliberate about the actions that we ultimately take and it's about ensuring that we can defend our european core. staffow do you keep good during this process? you just hired a new head of equity. his entire business is now under review. is he going to be around? how do you keep these people? >> he is a full participant in the work we are doing to the ground reshaping our equities franchise. we have also hired recently in europe at a senior level. he is completely committed towards a sustainable equities business with global reach that leverages our core strength in europe. guy: don't you worry that by not delivering specifics -- if i'm

sitting within one of those businesses that potential he could be at risk i'm on the phone. >> you want to move quickly. to give as much certainty as you can to our people and clients. but at the same time measure twice cut once. the premium is on quick and acknowledgingn there will be some friction costs as we go through it whether that's uncertainty among employees, among clients and potentially loss of revenues. guy: do you have the numbers upstairs that you could give us? when do you think the specifics are going to emerge? >> we have analyzed the decisions in great detail. some of that is estimation of what we think the future could look like.

our hope is those assumptions are conservative and we can outperform our expectations that we have measured the affected businesses and the impact of the actions and now the focus is on execution. guy: have you learned a lesson from the past which is don't give the market numbers? and tend to shoot at them if you don't deliver that's a problem. >> we would much rather underpromise and overdeliver. to be out with proof points over time so that we can tell the market what we've done and what the impact of the actions is rather than in spreadsheets. are you willing to accept that you're allowing the market to work with assumptions at the moment? >> we are. as we have more detailed to share we will engage with the market because we recognize

people want to get the details. analysts want to build those into their models. staff will be communicated with and we do every day. the driving assumption is to build a more sustainable , more-margin business profitable in terms of its return on balance sheet uses. the decisions we've made are aimed at doing that and our analysis suggests we are on the right path. francine: that was guy johnson speaking with the cfo of deutsche bank. this get back to our guest in new york. ian bremmer and david sowerby. aboutis a concern european financials for very domestic bank specific reasons. the other thing they need to deal with is volatility and normalization of monetary policy will make their job a lot easier. do you think volatility will be back this year? >> yes.

much like we are seeing in the united states. when we hear from draghi today i weld like to hear him say are going to continue to embark on more of a tightening mode. rates arelation pushing on 2%. the yields are 0.6%. that's clearly negative. negative real interest rates might be good for the party in the near term but the rise in volatility later am a hangover later is what no investor wants to have. i know this is a question for longer-term but if you look at all the qe we have take that away will markets function like precrisis or will they be fundamentally different? >> markets can still function. in a perfect world draghi would say i need to make sure that a 2% event. it rarely stops at 2%.

it usually goes higher and it was even better he would say i have done my heavy lifting. now it's time for european governments to show more sensibility on their fiscal andronments, tax policy regulatory environment. tom: ian bremmer, is europe becoming more anglo-american? i thought that interview was lousy. guy johnson did a great job and the cfo told me nothing. we are not playing a transparent game of capitalism and corporately structuring. are they getting more anglo american or is there still going to be a capitalistic distinction to continental business? >> there is a big difference in the most important new sector which is technology. in the united states it is sort of wild west. over there it is actually privacy really matters and people are in charge of their data. tom: are they getting more anglo american? >> i think the answer is no.

tom: mr. macron is not getting more anglo american. >> he has failed. tom: come here. you've got dandruff on your coat. the size differentiation is about the same between the two of us. macron came to office saying i want more europe. it's dead. he came to the united states, it is dead. no one has failed like macron. normal --u have the royal baby name yet? francine: no i don't. changing -- tom: i ask jamie dimon. this issue of bounce a capitalism -- that's your next book. >> the united states for all of mr. trump has not changed the way of stunt business -- the way

it does business one iota. washington is washington. >> it was the same when mitterrand would look at reagan with disdain. book.here's this it's good. bonus round, there's another book out of eurasia group that you can read with it. we're going to do that later with dr. bremmer on china as well. coming up -- actually this is the interview of the day. it's on dunkin' donuts. nigel, change the name back. it's dunkin' donuts. 3:00 p.m. this afternoon. -- the little -- with the sauce as well. boston cream. 3:00. ♪

>> this is bloomberg surveillance. i'm taylor riggs. breaking, fiat chrysler out with earnings slightly missed estimates. first quarter adjusted ebay to came at 1.6 billion euros. the company confirmed shares are trading lower in the premarket. facebook is proving to be resilient in the wake of the data protection scandal. first-quarter revenue rose to that are than expected. monthly user growth also beat estimates and mark zuckerberg is promising to invest in building new products. south korea's hyundai motor produced quarterly earnings that missed estimates. to learn american

buyers eroded hyundai's profitability. interesting threesome on the desk right now. ian bremmer, david sowerby. quickly, brian wieser this morning with pivotal research on facebook. to go back to david kirkpatrick's wonderful book, the facebook effect. is it now the instagram affect or is it still facebook dominant? >> instagram is too small to matter for these purposes. about 1/10 of the size of facebook when it comes to total time spent. tom: what did you learn yesterday? >> business was still good. none of the issues hitting them with regard to data privacy mattered in the first quarter. thiser thought it would at point and time. the issue is what does it say about the future.

the data privacy issue is a symptom of broader mismanagement of the company that has been going on. we will see it play out over time. francine: if it mismatch? the figures we had yesterday weren't actually when the scandal happened. >> correct. i don't think that many people will delete their accounts. the bigger issue is that people will continue to spend less time on the platform. there was no discussion from the company of how much less time is being spent on the platform. the data that i have from nielsen suggests that's around 10% annual decline right now. per person. there is an increasing number of users and that is helping of it. inically there is a decline use of the platform. is that remotely credible given that that's their entire

business model? >> they were experiencing a decline before. the decline looks like it probably has accelerated. through we have goes february. tom: let me bring in francine. francine: i want to go back to the story we were covering yesterday. facebook andast, figures from twitter. which is more significant for the whole of media landscape? verythink the comcast is expected relative to what they have said in the past. for all we know that could just withgotiating position respect to other commercial relationships they have with fox and disney. it's really hard to read between the lines of what's going to happen. tom: i want to go over to david sowerby. we are talking about a company. you're a conservative belt and suspenders guy.

do you look at them as a real company? an industry that you can actually follow? >> too hard and probably too big to it doesn't fit in my space. i certainly respect the business model. tom: help brian wright his note this morning. the founder still proved to be ultimately the good ceo with apple and i think time will tell. has build outt eurasia group, ian bremmer has done a great job of bringing in talent with his executives to build out a small business like eurasia group into a big business. do they need an adult that facebook to help mr. zuckerberg? >> it's hard to say specifically where the problem lies. we can point to data privacy mismanagement and failure to adhere to certain laws. that is symptomatic of a broader

set of problems. advertising metrics consistent persistent problems. inability to take down content when they say they well. there's a ton of these other issues. e?ere does the fault li i don't know. that is the problem from the outsiders perspective. >> big companies lose their entrepreneurial edge when they don't let the ceo run it the way he did as an entrepreneur. the longer you can hold onto that the better you are for the culture. the linkage between the comcast deal, the twitter and facebook numbers is a big ad agency like wp p is it better to break it up? the sheer size of it is not the problem. it seems fanciful on the part of

investors to think there might be more value to be realized by breaking it up. there are certain parts of the business that can be consolidated a little bit. they are starting to work on that. i think it will be a big risk for the company if they look for an outsider. there are plenty of internal candidates who could run the company fine. tom: we are going to look at china with ian bremmer. let me tell you about a new function that people are raving about. grab tv . francine's brilliance, my brilliance, guy johnson's brilliance. deutsche bank versus bnp paribas normalized back to the crisis. that's an example of what you get at tv . coming up, ian bremmer on the new china. ♪

tom: bloomberg surveillance. francine lacqua in london. i'm tom keene in new york. we're celebrating dr. bremmer's "us versus them."

single best chart on china right now. this is the heart of the matter in terms of gradient and slope. the united states at 52,000 per capita. india coming on as well. what is the length of this for when they preferably catch up? take the orange line and realize they are still about 20 years behind the chinese, india. you like what modi is doing economically, not politically. a are so far behind in terms of infrastructure, bureaucracy. so much so that you see a lot of indians in government saying maybe the authoritarian model is a more attractive way for us to build. tom: one of the great things about ian bremmer is you surround yourself with people that play better than you. here's the joint read.

read bremmer and then go read his colleague, robert kaplan's "the return of mark: polo." -- "the return of marco polo." understands the gravity of the world both politically and asia.ically is in he sees the road of china building out pakistan and building ports that will go to iran. , it's this is natural where the goods and services and people are going to flow and the chinese are playing the long game. started to endy when after the soviet union collapsed the states said we are not going to rebuild them. we're not going to bring them

back. that was the end. but wed expand nato couldn't think they could or long about how we are going to maintain u.s. led globalism for the markets. the onesse are building out a global model and it is not globalist. all roads go to beijing. francine: who has the strongest road? the american relationship with china is vastly more important. the chinese are going to invest a lot more in europe has the americans will stop the chinese on technology. i'm not worried on trade. the u.s. china trade relationship is going to stay strong. there will be some tariffs that get implemented over the next couple of months. seriousaid to escalation. on technology we are heading towards a cold war with the chinese. they are building an ai system and it is not win-win. it is zero-sum. francine: if what you say is

true we want a better deal or at least a better working relationship. how do you talk to chinese? >> the fact that the trump administration has a lot of time and respect for how much the chinese have accomplished is important. when we hit the south koreans to get a new deal we basically just strong-armed them into saying you're going to make some changes or we are going to hit you really hard. within the chinese we don't actually do that. trump says things and we quickly say we have to negotiate out. mnuchin isreasury heading over there. tom: we've got samuel huntington. we had for reads a car you talking about a post-american world. president obama talked about a pivot. how does president trump to the given what you have observed? where's the trump pivot?

>> there is no trump pivot. the fact that he is fundamentally a unilateralist, that is why macron failed when he came to washington. trump is not going to get back into the paris accord. he is america first which is all of our allies in asia -- abe came to mar-a-lago, he left with a t-shirt. that's all he got. tom: a t-shirt. that's the trump gave it -- pivot. read "us versus them." it gets the brain going on where we are right now. >> comes with a t-shirt. tom: this is bloomberg. ♪

alix: mark zuckerberg says he is proud of the company is still of active users -- daily active users continue to grow. deutsche bank abandons wall street. the new ceo says he is trying to sell job cuts, efficiency and decisiveness. draghi's tightrope walk. ending bond purchases this year. david: i'm david westin with alix steel. we have a busy morning. alix: 69 companies on the s&p reporting. we get half of the s&p by the end of the day. really good read on where earnings are. david: general motors is .eporting $1.43 a share they also are reported $36.1 billion in revenue compared to an estimate of $34.7 billion for the quarter.