♪ francine: peace on the peninsula? what the leaders -- the leaders of north korea hold a historic cross-border summit. what they strike a deal to halt kim jong-un's nuclear program? has governor kuroda just delayed --. amazon delivers. impreza investors with a more profitable quarter than anticipated. the stock is primed to open at an all-time high on wall street. ♪ francine: good morning, everyone and welcome to "bloomberg surveillance." i am francine lacqua here in london.

these are your market checks. we are getting some breaking news. we understand that because of a volatility, it has lost $21 billion in the first quarter -- the norway wealth fund has lost $21 billion in the first quarter. fund gives us an indication of how some of the banking units will do. you can see equities gaining. i would point to the buoyancy that we saw with tech stocks. we had intel reporting, amazon beating estimates. we had the bank of japan from go dirt -- governor kuroda look -- live. they are getting rid of the language of 2%. we have nothing that much of an impact on yen, currently up. below the 3%s are target that we hit earlier in the week.

i guess if you look at the markets overall, they are really looking at this historic summit between north and south korea. the leaders of the country or speaking. i don't know if we could get some live pictures. it is quite something. you see the leaders over a glass of water chatting. to theup, we speak electrolux chief executive after the company posted earnings. later we talk tech and outlook for u.s. stocks. a little bit later this afternoon we also hear from the chief financial officer of intel. first, let's get straight to the bloomberg first word news with nejra cehic. nejra: the bank of japan has left its monetary stimulus program unchanged, as governor kuroda started his sixth year at the helm. the central bank also removed previous wording on reaching 2% inflation around fiscal 2019,

while leaving its inflation forecast largely unchanged. the u.s. senate has confirmed that cia director mike pompeo to be the secretary of state. the vote came after weeks of heated debate that was much about the discord of the trump administration's handling of the policy as it was about the nominate itself. u.s. president donald trump has made it one of his strongest hints yet that he may intervene in the justice department's rush investigation. discussing the probe he said that he has taken a position, and he might change has position. that comes as a senate panel advances a measure to protect robert mueller from being fired without cause. senate has confirmed that donald trump will make a trip to the u.k. britain's prime minister was a first for a leader to be hosted by the president at the white house.

lester theresa may proclaimed the strength of the -- last year theresa may proclaimed the strength of the relationship between the countries. the european union's chief brexit negotiator has said that u.k. banks will face similar restrictions as u.s. institutions. he said markets should therefore a messy breakup. this deals a fresh blow to the british government. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am nejra cehic. this is bloomberg. francine? francine: there has been a historic day, as kim jong-un became the first north korean leader to enter south korea. he was greeted by moon jae-in at the border ahead of the nuclear summit. this is underway in the demilitarized zone. they called for a new era of

peace and prosperity. it is quite amazing when you look at the body language. they are talking with glasses of water beside them. our north asia correspondent has been watching this unfold. great to have you on the program. talk to us about the symbolism and significance of this meeting. there is so much a symbolism. of course just a few minutes ago we saw kim jong-un and moon jae-in plant a pine tree showing shared prosperity and peace. they used dirt coming from the northernmost part of the korean peninsula to the southernmost island in south korea. they sprinkled it with water, talking about peace and prosperity. this is something that would be unthinkable just a few months 2017, when end of there was so much rhetoric about fire and fury and threats to guam, and icbm missile tests.

a life is changed, and kim jong-un has promised to hold his missile tests, he has promised to stop the testing center of the the northeast part of the country. at the same time he has not said he was going to get rid of his nuclear arsenal that he now proclaims to his people in the north the north korea is a nuclear state. today is it about peace. it is about the optics, and it is working. it is shared propaganda. keep in mind, this was also the stated goal of moon jae-in. number one killer of his three-pronged approach to reconciliation with the north was he's first, then cooperation -- peace first, then cooperation. francine: as you say, a lot of it is about symbolism. when will they formally result the 68 year conflict? is it for real that it is the end?

what does kim want in return for his peaceful gestures? >> i think there is a mutual interest in having a shared eventual reunification, ok? that is still a long ways to go. the united states and the under interested parties -- other interested parties would like to see denuclearization as a key to any reconciliation. they could strike an agreement today to begin the process to have a peace treaty. that would be internationally recognized. that would replace the military document that was signed in 1953 in the dmz. that was an armistice. symbolism would be very strong with a peace deal. then it gets to the hard part. is north korea really going to denuclearize? that will be at the crux of donald trump does indeed meet kim jong-un.

that will be a very interesting dialogue for sure. francine: we're still looking at these live pictures. really quite amazing. let's take a moment to think about it. it is basically the leader of north korea and south korea coming together, talking about the future with this bright blue fence around them. if you look as you are saying, it a it a long way -- is long way in determining if kim was strike a long-term deal with donald trump? what are the chances? do not have any clue right now -- do we not have any clue right now? >> i think that the stated goal -- not the stated goal, but the goal behind the scenes was to make the optics of this summit to date positive. smiling, they were arm in arm, they worked together -- walked together. they were arm in arm and saying

all the right things. kim jong-un said he was flooded with emotion as the walked the 200 meters to the demarcation line and shook hands with them and that is supposed to be his adversary, moon jae-in. they are sending the message to the world that they are willing to work together. that cannot do anything but help set the mood for donald trump. however, we know the unpredictability of the u.s. president, so we're not sure. perhaps the white house will say that they want a deal on denuclearization, and if not, no meeting. we don't know, but at least this is a positive first step. kim's regime is on the cusp of a developing a missile capable of striking any u.s. city. was it really president trump that brought the north and south together? i kind of missed the

question, but i know it is about the missile testing. of the biggest problems that north korea faces with its missile program right now is that the testing site in the northeast part of the country, a lot of people have said there has not been any activity there since september. perhaps it actually imploded and has been rendered useless. that is one theory as to why he has come to this conciliatory tone starting in january. the other reason is perhaps they are running out of hard currency. they have probably gone through a lot of their already meager foreign-exchange reserves in the face of these international sanctions. that is one take away. kim jong-un is showing good faith and in return he would like to see good faith come from the international community, and relax is very hurting sanctions. francine: thank you very much.

we are lucky to have our chief north asian correspondent there. you can keep up with all the latest of elements on the historic summit on our lifeblood -- live blog. what does this historic summit mean for risk and for the markets? amoa, ore is diana folio manager at j.p. morgan chase bank, and ralf preusser, global head of rates and strategy at merrill lynch international bank. it is amazing to look at these leaders. it seems like the markets have a sigh of relief. how much is -- how quickly can the market react to a geopolitical event? so far it seems like it is pretty much ignoring it. diana: i would not say that the market is ignoring this. are a lot of things going on right now. the north korea issue was one of the geopolitical risks that the

market was focusing on recently. there also -- are also talks with it still --. the reaction is likely to be muted. where we could see more reaction is perhaps in some of the asian currencies. the korean yen is one that might react much more. francine: if you look at the risk, and i have a chart looking at korean yen. the market is looking at this and i don't think they have priced in anything. i don't know whether they could president or whether they just used -- price it in our whether they just choose to ignore it? come, i guess the implications of a meaningful nuclear escalation pretty , i guess therea

implications of a meaningful nuclear escalation pretty obvious -- are pretty obvious. what is signal and what is noise? the markets for the most part has decided to try and focus on the underlying story, which is that we are in a seemingly intact recovery where the fed will continue to normalize rates. that is been a much more dominant driver of markets than some of these geopolitical events. e.m. is a different story. yuan -- the yuan rose for the first time in two years. we know that they will be joined by their wives for a state banquet. when you look at the risks out there, we mentioned monetary policy and treasuries.

does an inverted yield curve in the u.s. suggest that there is an upcoming economic slump like in the past? or is it different this time? diana: i think it is different this time. there are a lot of distortions in the u.s. curve at the moment. you had distortions at the front end from. u.s. treasury's. . you had the impact of qe still weighing on the back end of the curve. ecb reiterating their commitment to keeping monetary conditions very loose in europe. you have the boj earlier today, their commitment is intact. it is hard to see this dynamic reversing very quickly. francine: do you agree with that? ralf: i would. the more important question is that, is it really a meaningful

statement to say that the recession is coming? the world will end at some point. francine: you are right, but the curve keeps on flattening. if you look at -- you can see an inversion pretty quickly. ralf: it is not enough forecast, but it is eminently possible. what do you do with that information? if you look at the average length of time between a yield curve conversion -- inversion at the -- and the beginning of a recession, it is 27 months. what is the market meant to do with the information? it doesn't really help us all that much. i don't think it necessarily serves as a signal for when you start fading the selloff in rates. francine: we will come back to that. maybe it means something that -- maybe this is the fed dilemma that the new people in charge me to look at.

ralf preusser from bank of america merrill lynch and diana amoa from jpmorgan asset management stay with us. we have plenty coming up. the bank of japan it reviewed language about the timing of the 2% inflation goal. we will talk monetary policy in the world third-biggest economy. an electrolux -- and electrolux. we speak to the chief executive, yoenis samuelsson -- jonas samuelsson, next. this is bloomberg. ♪

♪ francine: this is "bloomberg surveillance." im looking at life features of the leaders of the koreas walking together. these are really historic talks. the summit should theoretically conclude today, with kim going home after the evening's banquet. this is according to unofficial schedule, but we have not seen this for 11 years, the two leaders coming together and meeting. there are no plans to extend the event until tomorrow. this is a historic event. stephen engle is on the ground for us. we will be keeping a close eye on this. the leaders of the koreas bank joined by their wives for a state banquet later on. the bank of japan gave its latest policy decision today, keeping stimulus unchanged.

absent from its statement was any language about reaching its 2% inflation goal around fiscal 2019. what does this mean for kuroda and the bank of japan? how are the markets taking it? still with us is diana amoa from jpmorgan asset management and ralf preusser from bank of america merrill lynch. thank you for being with us. if you look at boj, what does it mean? yen did not really move on the back of it. governor kubota said they did not check -- kuroda said they just removed the language of the 2% target. ralf: i think it is similar to the message of [indiscernible] we did not actually discuss monetary policy. that is quite an extraordinary statement from the monetary policy meeting. the boj is trying to signal that they are faced with some volatility in the data. we do not really know how much

of this is noise, or how much we should take seriously. why focus the markets mind on an arbitrary calendar date that then crystallizes expectation auction that you might not actually want to take? francine: that is a central banks do, they got the markets -- guide the markets. don't they? diana: i think as a carry-on in this stage of the economic cycle, we might start to see discussions of if the forward guidance is doing more harm than good. the statement that came out from the march meeting was quite interesting for me. you have draghi's comments, that the euro strength was reflective of underlying fundamental strength. there was also some discourse about how much forward guidance was contributing to this. central banks are trying not to be too precommitment toy path. have seen inhat we

q1 with some weakness in data out of europe and japan, i think that having monetary policy on autopilot is not the way that they want to be at this point. francine: thank you so much diana amoa and ralf preusser. votes stay with us. electrolux shares are sharply lower this morning. fourth-quarter operating profit -- first-quarter operating profit beat estimates. we are joined on the phone by the electrolux chief executive, jonas samuelson, and he is in stockholm. thank you so much for joining us. how do you explain the share price down almost 10% today? jonas: i think we are quite at peace with our first quarter performance. latin america% in and the asian pacific. there is also good underlying performance in north america. the challenge that we are facing is that input cost are

accelerating, both in terms of raw materials like steel and plastic, as was logistics costs. guiding for higher costs in that area, but we were also guiding that we should be able to offset those i price increases and further thinks. francine: how worried are you about -- concerned argue about a potential trade war? jonas: there is concern. that creates sometimes a skewed impact of cost, depending on where you happen to manufacture the source. that is something we are concerned about. francine: what is the worst-case scenario for electrolux? is or anything you can do to prepare for that worst-case scenario? jonas: for us the real concern is that this could result in an unlevel playing field. depending on where in the world you manufacture and sell.

we're a global company that manufactures around the world, and sources around the world. the risk with escalating trade barriers is that that could have unintended consequences that could skew competitiveness among competitors. that is our main concern. francine: going back to the risk of raw materials, is there risk that you might have to raise your forecast? jonas: we're quite aligned with the market. right now. 2018. a limited risk for francine: you also say that price increases in north america will start showing affects this quarter. to what extent would that make up from the -- for the increasing role material costs? the combination of price and cost efficiency to offset the price increases for raw materials. there is a time lag in terms of cop -- impact on revenue.

francine: how much do you travel to brussels to try to put pressure on the brussels authorities, the european authorities to avert a crisis in trade with the u.s.? jonas: we try to really make our perspective heard along the political spectrum. -- toy point here is that explain to policymakers the unintended consequences of some of the policies, and to make sure that of course moderation -- preferably there will be no tcreases or to rifts -- ariffs, but to understand that the changes made will have consequences. francine: have you heard from them, that they think that the exemption to be extended -- could be extended? jonas: we certainly hope so, but

it is impossible for me to speculate on that. francine: thank you so much for your time today. that is the electrolux chief executive. he is a jonas samuelson. we get a rating of u.k. gdp very shortly. what will it tell us about the bank hike next month? about the speech that carney gave. he reprised the markets so they are not 100% sure about a raisin hikes. what happens if they do hike? we'll discuss that next. this is bloomberg. ♪

francine: economics, finance and politics, this is the burke surveillance. let's get to the bloomberg first word news with nejra cehic. nejra: north korea's kim jong-un called for more meetings with

his south korean counterpart after becoming his country's first leader to cross the border to hold talks over his nuclear weapons program. the pair met on the militarized boundary. basked in the symbolism of the moment. kim declared a new history and an era of peace while moon said the weight on our shoulders is heavy. .ompeo to be secretary state the vote came after weeks of heated debate that was a much -- that was about the trump administration's handling of diplomacy. the white house marked the confirmation with a tweet. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. i am nejra cehic. this is bloomberg. francine: thank you so much. we are getting gdp figures out of the u.k. for the first quarter. much worse than expected.

that number is coming in at 0.1%. this is what i am looking at for british pound, 138.29. the gdp number gives some insight into mark carney's thinking on whether or not he will hike next month. let's get back to our guest from jpmorgan asset management. economy inok at this the u.k. growth, 0.1% in the first quarter. i need to dig down because this is the worst quarter since 2012. a lot of it has to do with the snow. it is all of these seasonal affects. worried thatyou mark carney guided the market toward no hike? it means tot hike,

boe has committee case of problems? >> mark carney is stuck between a rock and a hard place. they have been operating on the basis that they need to be hiking. what we have seen in inflation is some of the fx pass through impasse. inflation is moderating. we are going through this soft patch with the data which is weather-related but we need today through the numbers to see. i suspect in the next policy meeting they will spend as much time as the ecb trying to figure out whether this is something more meaningful that they need to be concerned about. perhaps, less time discussing whether they should be hiking. i think it is still up in the air for them. i'm not sure they will hike. francine: digging deeper into this gdp that we saw. the worst performance since 2012.

as snow hit retail sales. we seem to understand the statisticians that the effect of the weather was limited. we saw a lot of disruption and brought travel chaos of the country for the end of february. is a hike this- year a done deal? ralf: we never thought they should be hiking. francine: at all this year? ralf: at all, because it is hard for us to understand why you wouldn't expect the fx pass through on the way out to be similar to the way in. that is what the bank of england had in its forecast. impact on inflation from a temporary move in sterling. we only factor in their rate hike because the bank of england told us there were intent on hiking rates. our gdp tracking was at .2.

caven -- he came in even worse than that. you have to ask yourself over inflation center central-bank. the economic side is also developing quite meaningfully below would you had expected. why hike? francine: the counterargument is you give yourself some room in case something happens. you want to stave off any inflation. right diane a? that when itear comes to europe and negative inches rates in the u.k., we are not there yet. for me, right now given the uncertainty we are going into with brexit negotiation, it aels as if they are expecting single patient taking medication before they know they are sick. it makes more sense to buy

themselves time and try and figure out whether this weakness is something persistent or if it is weather-related. they can always come back and hike later. francine: we are seeing gilts off on the back of this. the u.k. money market pricing for a deal he rate hike fell to 36%. a little more market reaction. the 10 year yield could be five basis points to 1.45%. ralf: gilts are really tough play. you are caught between a inflation market that is present -- youation that doesn't have the real rate market trying to factor in real rate. nominal duration for me remains a tough play. i would much rather be sure -- be short real rate and u.k.

i don't see any argument for a hike this year and we know that shock.is a supply it will come with lower productivity, lower integration, lower competitive influence and higher average rates of inflation. in that context, it seems difficult to believe that the bank of england will remain the most accommodative central-bank of the planet. being short real rates on a cross market basis. it seems the best way to try and play at the moment. francine: the money market -- i hope we have a heart -- we have a chart up. diana, you can seized the first rate hike for 2018 in december. what does that do to gilts? remain risk bound for now. if that is what the market expectations are, then gilts come a little bit more driven by

what u.s. rates are doing. you will have this disconnect of monetary policy getting priced out, but we expect u.s. rates to trend higher as the year progresses. that tension leaves gilts stuck in the moment. francine: thank you both for joining us. there was diana amoa and ralf preusser. remember, bloomberg users can interact with the charts showing up on keycatch analysis and saves charts for future reference. we will have ongoing up on gilts shortly. this is bloomberg. that's have one going up on gilts shortly. -- have one going up on gilts shortly. this is bloomberg. ♪

>> welcome back to "bloomberg surveillance." i am francine lacqua. we have the looking at live pictures all day from the koreas. incredible to see the two leaders of the north and south coming together, talking and walking together. then they will be joined by their wives where they will extend -- they will attend the state bank went. -- state and quit. customer, a bloomberg and we hope you are, just log on to mliv , top live go. it goes through the history of it. what we can expect so for some of our people on the ground, including stephen engle who has the looking at this for 21 years, this is made some of them didn't think they would see this. yet look at the details about peacer this is lasting

and whether north korea will decide to be able to .enuclearize the promise -- analyst forecasts swelling ranks of subscribers in the cloud computing division that is way more corporate customers. shares surged in after-hours trade. joining us now, alex webb. alex, always great to see you. what is going on? amazon has been great. alex: thanks to prime customers but thanks to the cloud. its biggest revenue piece is clearly the delivery service. and intel which reported earnings as they. they provided ships for the clouds.

they do after can this? how big will amazon be? alex: if you look at the valuation -- francine: this is a problem. president trump has been going after jeff bezos tweets. does he have it in for them? alex: it is hard to regulate because if you regulate am a tough -- amazon is trying to diversify. the money that they make, they

are piling into other things which tracks more people at the prime. becomes beneficial. the regulation piece when it comes to data is what is going to be interesting. may 25 is the day when it to the pr drops. you are seeing all these terms and conditions. that is to do with the data protection regulation. amazon uses user data to sell you more products. the ability to do that will be very important. francine: what is the future looking like amazon? they bought whole foods. is amazon going to take over my life? alex: jeff bezos said that the most important part of visit -- blue origin. amazon they want to sell you stuff. that is their business. , could besell you pharmaceuticals. that is a huge, potential business for them. the brilliant piece, she did a very data centric analysis of amazon's business and she picked on this data point. amazon was getting to health care in a joint venture come all the health care stocks have underperformed since that date. a lot of industries are petrified about amazon big footing into the space.

they are now moving into fresh foods. francine: you cover all tech. it is missing how we were looking at the testimony of the facebook founder said, tech stocks, a lot of people we interviewed together said they wanted to get away from it. they all had microsoft figures, intel. it is -- is tech back? alex: there is a lot of volatility. if you look at the data piece, and story broke just two weeks before the end of the quarter. was hard to see any impact yet. this current quarter is when we will be able to tell. the other part you have separate out is the hardware piece. amazon, microsoft, they are software services company it apple, they still hardware. it is not looking so rosy. smartphone sales are flattening.

ont is a question we answer tuesday. francine: is amazon buying anything else? what are they doing with whole foods? alex: we have seen them try to find more joint ventures in europe. they can come with their own offering in see things into what they sell on amazon.com. there are a number of investors and retail companies that would love amazon to drop a few dollars. amazon is not as profitable as apple. isy do -- their guidance $1.9 billion in operating income. they have money. they got ability to raise debt but they do not have an endless pit of cash as others do. tech,ne: keeping it on

bob swan joins us at 4:30 p.m. u.k. time. in the meantime we are looking at leaders of the two koreas meeting of the demilitarized zone. kim jong-un calls for more meetings with his south korean counterpart. we will get back to that. this is bloomberg. ♪

francine: economics, finance and politics, this is "bloomberg surveillance." let's get to the bloomberg business flash with nejra cehic. nejra: always want to you in dollar will fund has reported its first loss in two years. it lost $21 billion at 1.5% in the first quarter. lost 2.2% on stocks and 0.4% on bonds while ballistic provided a 2.5% gain. growth at its mercedes-benz cars offset spending to develop electric vehicles. the previous forecast was for no

growth. amazon jump in exhibit trade after delivering bigger than expected profits in the first quarter. amazon showed growth. it added $12 billion to the founder jeff bezos microsoft has been expectations for third-quarter sales and profit lifted by strong corporate command -- demand for cloud computing. .ales rose by 16% the software maker is riding a let of demand which left -- customers store in the data center. francine: let's get back to our top story, korea. stephen engle has been watching history unfold. house with blue

borders what do we know? stephen: i have the headlines emblazoned in my head right now i cannot say what he said. it is significant. i am watching the live feed, the two gentlemen, they have gone into the piece house and they are about to start this joint declaration. they did talk prickly about denuclearization -- frankly about denuclearization. this'll be a precursor to what will be the next summit on the horizon between donald trump and kim jong-un, potentially. right now, it is been in a store day. early this morning, we have been

here all day. thering this and camaraderie that the two gentlemen showed -- there was a lot of optics involved. they wanted to show the world, the south koreans cousin moon jae-in is an engagement president. he wants to have a sunshine policy. tim john kuhn wants to show he is -- kim jong-un want to show he is acting in good faith. these biting sanctions have crippled the economy. we are waiting for these statements. you are going to have to keep tuned to bloomberg television. francine: that is one way of keeping viewers hooked. i am hooked. back to stephen engle. if you want to be up-to-date with all of the latest developments, just type tliv on your boomer terminal. european stocks poised for a fifth week of gains.

a lot of them came in better than expected. one of the biggest challenges for equities in 2018. the best can be still to come with the numbers expected to improve substantially into next year. how healthy are they looking at the moment? joining us now is tim cragin. tim, thank you for coming on. if you look at equities, i don't know how much you focused on the earnings reported or forward guidance. tim: it is one of those things where it is a little bit of both, and the good news with the ink, expectations coming were relatively muted. a lot of that is because of currency. clearly the underlying macro picture is quite strong. what we have seen thus far has been a modest beat on the top

line. a modest miss on the earnings number, depending on how you want to cut them. currency is definitely one of the issues. we have seen stocks responding favorably over the course of this week and the last two. basically because expectations were pretty muted going into the numbers. the market had reset nicely from you violation perspective. this is a sigh of relief that it is not worse in this micro. -- micro period. francine: technology has a pretty good bid. tim: this is one of those days where you wish europe had more of a technology sector than it does. amazon is setting the stage by doing as well as from an asian perspective. we have seen energy do well and retail ok. banks have been fine.

it is a notable in big piece of europe. on the flipside, some of the staples that have been holding the fort over the course of the past two months, have actually given up the ghost a bit. it is interesting. auto, daimler up front. there is a substantial headwind ahead because of all of the spending which was mentioned. it is holding things up. francine: a lot of reporting from the asian markets. how much are these earnings here in europe dependent on currencies? tim: it is a huge issue. by our calculation, it is at least a couple of points on revenue this quarter. it is more than that from the standpoint of an earnings bite. if currencies stay at current levels, that will continue into the second quarter but it is a

little bit of the reference you had up front. as we get into the second half and things normalize, we start to see the underlying fundamentals come through. that should create quite a nice earnings tailwind for europe. having faced this headwind so far this quarter. that is a flip with the u.s. which can be quite good. francine: tim craighead, now we will have plenty more from korea. steve engle is on the ground. we will be talking treasuries. this is bloomberg. ♪

complete aim for denuclearization and aiming to declare an end to war this year. tom: for those sleeping in america and waking up this morning, an extraordinary day

65-years on from the three-year korea war. the essence is that war never ended. that is what the key headline is at this moment. thecine: this is declaration. according to the declaration, there will be no more war on the peninsula and a new age of peace. let's get to our correspondent who has been covering the summit on location. you are one of the experts. you have been following the two koreas for 28 years. is this for real? will peace stay? you cannot blame me for being a skeptic for being here for 28 years. i have followed every gyration up and down, every saber rattling for three decades. back onh koreans come their promises or the united states makes a miscalculation. there have always been hiccups

and the relationship. i'm seeing the live feed on the outskirts of the dmz. the 2 men are hugging. the two held hands as they walked on both sides of the demarcation line. they have just signed the papers. have agreed to into the war this year, basically replacing the armistice, a military document signed in 1953, and work to sign a peace treaty and into the war officially this year. they will also seek denuclearization. that is a key component to and a trump's strategy precursor to engagement with the north koreans. the south and north have a goal of a nuclear-free korea. the keyword is complete

denuclearization. on disarmamentd as trust between the military have built over time. they have set up liaison offices in the industrial complex area to my right. the rail line was shuttered two years ago because the relationship between these adversaries, now former adversaries, was so bad that they shut down this joint complex. perhaps that will also be restarted. moonadversaries, now former will visit pyongyang in the autumn. 3nuclearization was mentioned times. it looks like we will have been making comments right now. it was spectacular to watch. they are about to address the people gathered. the press of the world. details we have on how they won to improve relations, they are

agreeing to a number of summits, they are having general level military talks in may. i -- why now? >> because there was pressure from the and united states. there was a president in south korea who put a sunshine policy in place. he spent a lot of political moon, and campaigned on engagement with the north. his number one priority was peace first. achieving.thee is sanctions against north korea probably forced kim jong-un much closer to this moment now, because they have been really fighting the economy of south korea. how compare and contrast these two leaders feel about donald trump. if he has been approximate

catalyst to this historic moment, they each must look differently upon the president of the united states. what is that distinction? >> before any summit between the kim jong-un and donald trump what we are seeing now had to happen. the koreans had to come together and, not unify, but unify their message. this is what we want, this is the ultimate goal. donald trump is a polarizing character. has hadn jae-in differences with donald trump, who is seen to be more hawkish, hard-line. including the japanese prime minister, shinzo abe, has been hard-line. we must exert pressure on north korea. moon jae-in believes in engagement. we have seen in the twitter sphere the differences that moon

jae-in and donald trump have had. there has been so much rhetoric leading up to the peace overture in january. we have come a long way in four months. tom: you have covered this for bloomberg news for decades. i want to go back to 1992-2000, and 11 years ago the eight-point peace declaration that collapsed. flies the confident that this time is different? is their confidence that this time is different? >> north korea claims that they are a nuclear state. by all indications they are. to message that he has given media in the north is that north korea is a nuclear state and we are equal with the united states and other nuclear powers. he can come tols

the table and say we are a nuclear power but we want peace. he wants to be treated reciprocally. north korea was in a different situation back in the day. the past president of south korea also had a sunshine policy. he won the nobel prize for his sunshine policy. -il passed away, his son his over and had to assert credentials in north korea. he has done that. he has made north korea, by claim, a nuclear state and can now stand side-by-side, equal, with moon jae-in. francine: what is the north korean leader want in exchange for peace? sure.wants legitimacy for he wants to stay in power.

most likely he wants an easing of the international sanctions, which have probably dwindled what little foreign-exchange reserves that they had. the international sanctions with china, a key ally of north korea, has blocked oil imports to north korea. keyas blocked coal exports, drivers of economic revenue, into north korea. good faith with the international community, can the international community show good faith and ease the sanctions? tom: we welcome your bloomberg radio and television worldwide. this is an historic moment for the korean peninsula, the nations around korea, and nations worldwide. no doubt being watched at the white house by president trump. steve is at the dmz for the

pageantry sense 9:00 last night. here is the leader of north korea. can you bring us the audio? korean]g tom: for the first time we are hearing this leader so clearly. it is remarkable. how much of a shock is it for hearon the korean watch to the leadership of north korea speak? very interesting that you picked up on that. we see a lot of footage of kim jong-un, but we do not hear his voice often. colleaguesnotes our that are following this closely, a key take away from the morning session was kim jong-un does not speak with a northerner accident.

-- accent. different accents on the korean peninsula. you'd think being born in the north and educated in europe that he would have a northern accent. his accent could be mistaken for someone living in the center of seoul. voice ort heard his seen his signature. he signed the guestbook in the peace house. francine: stay with us. when you look at this historic we have never heard from the north korean leader before, will this bring long-lasting peace or could it all go wrong? it is aut a doubt, historic day. we can all agree. it is a historic day for the two andas, the entire region,

the entire world. this is an unprecedented event. president moon was striving for a lot of the effort that went into organizing something like this. there was active participation by north korea over the last few months. this is thethat, start of a very long process. there is a call for very cautious optimism. ultimateization is the goal of the day based on the declaration that everyone is expecting to happen. we should be more pessimistic than optimistic on that front. up-to-date, it doesn't change anything. francine: the north korean leader, and we are seeing translatoren, three

it says it took a long time for such a meeting between the two koreas. a month ago we were talking iii. a possible world war what happened that suddenly the two leaders are hugging and signing that the rations? -- signing declarations? wine element is the impact of economic sanctions. it has had an effect on the north korean economy and served .s a motivator the trump administration might be another one. and we feel that the ultimate goal of north korea in these talks, future talks, and the trump meeting that will follow, ease as many sanctions as possible without giving too much in return. almostnuclearization certainly off the table, regime survival and the amount of

resources building of this arsenal to where we are today, they are on tv right now, they're not going to give that up. i would put the ball into the court of president trump whether the international communities will accept that. saying we cannot reach this new objective, it is unlikely we will reach it, what else can we discuss? thate willing to accept and welcome north korea as a de facto unofficial nuclear weapons state or not? that is the question everyone will have over the next few months. francine: i am looking at treasuries, extending gains, traders are looking at these stories agreement between north korea and south korea. this is what i am looking at. the one thing that i would like to focus on, i know that part of

the screen is cut off, but let , bear with me,a you can see korea is tightening, and that means that risk is dropping. theylet's go to the dmz, stored moment for the two nations, north and south korea. bring up the image that gave us pause over a decade ago. is an extraordinary image. the first time i saw it was an globe."ton bring up the image. the pageantry between the koreas. this is the photo between a dark and black north korea, the border with china in yellow, and l, career planoeu to just below. how desperate is the leadership with north korea? the totalitarian regime?

how desperate are they to jumpstart their economy versus 2007? >> this might be the moment that kim jong-un says it is time to change. we have seen the incredible economic development over the last three decades in china. it is no surprise that kim jong-un recently visited beijing. he's on the gleaming skyscrapers, the economic alin-istfor a st state, a communist country. why can't north korea do the same thing? south korea was under martial law in the 1980's. now the growth cap at a is $29,000. in north korea it is $1200. they have a long way to go to

catch up. if there's going to be a peace dividend, north korea will benefit immensely and a lot quicker. your decades of experience, and our colleague michael mckee with gorbachev and reagan, how does the family of north korea did inwhat mr. gorbachev russia, lose control of the process? how did they maintain control given these historic events? they have amazing control over the message in north korea. it is not like the fall of the soviet union in the late 1980's where there was so much information coming into the soviet union. they had the rising, sweeping oc and in the eastern bl walls were coming down. there is no such thing in north

korea. the regime has a tight grip on the message and the people through intimidation and fear. different. if this is going to happen, it will come from the leadership. at least he is saying that he wants to have this kind of openness. the proof will have to be in the pudding in the road ahead. let me give you some translation of what kim jong-un said. he and moon jae-in will put in efforts of the agreement will not collapse as some agreements have done in the past. he is referring to the past. promises broken. he says that they will work to maintain and fulfill those promises. if you believe, and like many that we have spoke with today, that north korea's goals of wanting peace are not far apart from the obvious sanctions, what does president trump want?

he was maybe the catalyst. the economic sanctions, house and you expect a summit between president trump and the leader of north korea, and could that unravel? >> it looks like we are looking at may or june for the summit with various locations being floated, with singapore becoming the most likely venue. would expect that summit to be very carefully stage-managed, just like the one today with a a lot of handshakes and positive, optimistic rhetoric. looking at this time last year, it is a massive improvement. obviously, we need to know that s, inhree sides, 4 side this case, will be going into future negotiations with different expectations. on the side of the white house will be north korea is disarmed and they do so very quickly. i think that there will be a

point where they will be very disappointed. likewise for north korea. what they want is obviously not disarmament. looking at the recent gestures, they are not necessarily all a ploy. i think they are less than ideal for the optimal rules of negotiation they might agree to. weapons, an indefinite freeze on testing, etc.. these represent a realistic goal. this would mean quietly

accepting north korea into the nuclear club. we remain skeptical because of the implications in the u.s. and on international norms. we are skeptical that this is something that the international community will tolerate. the likelihood of that happening is building up higher than it was a few months ago. francine: thank you for joining us. let's look at the markets. first of all, let's remind you what we have heard in the last 10 minutes or so. have been talking about the headlines and looking at amazing pictures of the leaders of the two koreas signing an agreement to clearing that the war is over. that they will work towards denuclearizing. then we have a hug between the two leaders in a press conference where they were addressing and one of the first time to have heard the leader of north korea. they're heading back into the peace house. quite symbolic. a lot of people on the ground seem emotional.

in terms of market reaction, it has been muted. let's get to our guest this hour. m pickering and themos fiotakis. a muted reaction first of all from the korean won. does that mean the some of the anxiousness was not priced in or that people are pessimistic if we will give peace and reunification? it is interesting to look at the september highs. we were in turkey when getting mixed messages about nuclear weapons flying over japan. , we have received signs from many different sides that the tensions were coming to decline. beenrocess of pricing has

long. now i think some of that is in the price. .s you have discussed we need more evidence, but i think we are in the process of reducing the risk for months and we are within that process. wonop of that, the korean has cyclical forces globally that are strong and supporting the won. francine: the two leaders are often joined by their wives. mos, we are seeing statement theng through from kcnn, north korean state-run news outlet. they are saying according to in the united states is perched to respond with sincerity. is the u.s. and president trump the wildcard? they are a key player always. the main difference is this time

relative to any past location is that the demonstration from korea that they have nuclear capabilities pushes the dialogue earlier. also the discussion between china and the u.s.. there's a lot more in the background. , there that to go here has been a lot of warning signs that we are getting closer to an anti-climax. of tensions. and south korea have meaning for the first time and greetings from the family. on bloomberg radio, these are remarkable images which i'm sure you will see in the coming days. stephen engle, how bad do people from north korea want to run to south korea? are we going to see thousands of tople move across the river

china in the north or the dmz in the south? how does that calculus play into the coming weeks and months? stephen: that is going to be a key question. everyone.o benefit it has to benefit the north koreans as well. we have to wonder what the messaging is coming from the domestic newsagency. spun as aing potential age of prosperity for the north koreans? they might be hailing this as kim jong-un is now on par with the global leaders like donald trump and moon jae-in and shinzo abe. it is interesting watching the footage. people all around, and a lot of local south koreans, they are watching on a giant screen off of the balcony. they are trying -- they are crying seeing the leaders arm in

arm and hugging. the two wives of the leaders arm in arm and showing such good faith. literally crying. me this istold beyond their expectations for the summit. here kim jong-un, i'm sorry if i'm getting excited, this is beyond my expectations and i am a pessimist, to hear kim jong-un speak and glowing and kind words, no rhetoric about war or the past other than saying that we need to move beyond the past, it did not serve us too well, the 2 koreas. francine: those the first time that can publicly address the global press. that is what moon said at the podium. what happens next, we understand that moon will host kim at a banquet at the peace hourse.

their wives are in attendance. is wearing blue , the korean reunification color of the flag for the olympics. live blog going. just log onto tlive. this is unexpected. there is a little bit of pessimism on if this will to denuclearization 100%. how should the markets proceed? it is likely that we will only see economic effects from higher confidence. if you think about the pressure points, the korean peninsula is the big one. it involves so many key players, china, the u.s., japan, all of

the potential stories. the imf and the world bank have to put in a tag line when they give the 305 outlook. i don't think we will see anything in the short term the economic data, but it means that at the margins the geopolitical environment has diminished and is less risky than before. francine: thank you so much. themospicering and fiotakis are staying with us. let's look at the patterns. if this goes back to something uglier, we will discuss that next. this is bloomberg. ♪ mberg. ♪ retail.

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near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. ♪ tom: good morning, everyone, to this special edition of "bloomberg surveillance." we welcome all of you on bloomberg radio and television worldwide. without question a historic day.

three-year korean war, with many killed on all one steps from the north to the south, and the other from the south to the that, in immense symbolism has continued into our early london and new york mornings. just extraordinary. we can barely keep up with the headlines as well. really come within all the years you and i have been doing this, absolutely an extraordinary moment. francine: it is unprecedented, tom. i am reading our live blog, which is very good as always come up -- always, but particularly good this morning. one of our editors saying it can also be seen as a fitting pattern of north korea's outside engagement. really the key question is whether today has been enough to break the usual pattern, which

is what comes next. , i notice a lot of people especially in the koreas being relieved, but let's take it and see actually historically what this means, and whether this really will be a sign of complete denuclearization. let's get straight to the bloomberg first reviews. here's -- first word news. here's taylor riggs. taylor: the new u.s. secretary of state already on the road. mike pompeo flew to brussels for a nato meeting after being confirmed by the senate. president trump has signaled he will not undercut mike pompeo on foreign policy. has beener bill cosby released on bail after being found guilty of sexual assault. a jury near philadelphia convicted him on three counts of driving and assaulting a woman. cosby's 80 and could get 10 years in prison for each count. over the years, dozens of women

have accused cosby of similar attacks. the european union has issued a stark warning to market. prepare for a messy, no deal brexit. u.k. banks will face similar banks to u.s. institutions after the divorce. that is a new blow to the british government, which was its banks to have far better access to the european single market. president trump is warning other that the u.s., canada, and mexico have put together a strong proposal for the 2026 world cup, and it would be a shame if other countries the u.s. supports would compete against the bid. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: thank you so much. on to central banks.

afterund has rallied economic growth in the u.k. slumped. about this gbp figure. expectations below . does it really delay a rate hike, or does the governor at the imf delay the rate hike? the uncertainty about the early steps that central banks will be taking. we had a similar story with the fed a couple of years ago. figure quarter by quarter. a couple of reasons to think

, as you mentioned, but if you take the averages for each quarter, q1 has been the worst quarter for three years in a row, followed by acceleration over the us of the year -- over the course of the year. i think if you really wanted to force it come you can go for a hike in may. it is still early days. i don't think it changes the direction, which is a gradual tightening. francine: i guess the concern is governor carney was talking down the interest rate hike in may. the market pricing went from 90% to almost 60%, now to 35%. if he does hike, does he become the unreliable boyfriend? >> it could go both ways. you could say why did mark carney let market prices slide so far or you could say if they hadn't spent almost four months preparing for the hike, the market went through a period of unnecessary volatility. i would stress that a 25 basis point hike really doesn't matter.

the general view for the u.k. is growth at around trend, moderately tightening labor markets. i wouldn't be concerned until you got to say, 1.5%, 2%. ofn central banks come out bloated balance sheets, the day-to-day data matters a lot. we have the same story with the fed a couple of years ago. tom: a really interesting thing, i think, is the strength of down sterling -- pound sterling. this is trade weighted pound sterling. i will throw it out on social for bloomberg radio. everyone looking for the decline of sterling back to where we were in 1992. instead, we've had this really wonderful pound sterling trade weighted strength over the last brexit year-and-a-half. is the united kingdom wealthier than it was june 22 of 2016?

>> if you look at the actual numbers and income, the matter of fact is they are, but i think your question is a little bit more complicated. i think the market was projecting a lot more economic damage but did not get the depth of the damage the market is projecting, which caused some relief rally. the headlines about a potential transitory agreement almost took sterling to 86 and below. i think the bigger question, both for the bank of england and the markets, is the economic trends are not as strong as they were before. we still have that pending growth risk in the years ahead. you can see that in the imf projections for the economy as well. at the same time, you have the bank of england facing an environment where they may need to remove some accommodation, but they are not sure exactly how much. at the same time, inflation which was pound driven is now

dropping and will probably continue to drop, so we don't have a huge, urging pressing reason to do so. tom: where is the nominal gdp of the united kingdom? i get the idea that there is greater inflation relative to other countries, some of that sterling derived. where is the nominal gdp of the island? >> i would probably say around 4% at the moment. i think if you take the view that brexit will reduce u.k. potential growth maybe from around 2.1% inside the eu to ,bout 1.7% in a semisoft brexit if you take the european average potential growth rate, it is around 1.5%. the u.k. is still one of the faster growing major economies in europe. the problem is when the marketplace is some probability on a hard brexit, which could

take trend growth below 1.5%, it is very strong to justify -- hard to justify a strong sterling. the market can really discount the probability of a hard brexit, it will shift its estimates up for potential growth and the probabilities it associates with it. what has been remarkable is the bank of england has tightened. the economy has been better than the market is expected. inrt from a little jump sterling, sterling has remained pretty weak for the last 18 months. thisine: you talked about moving sideways since september of last year. >> it is very tough to see where eurosterling is for two reasons. there's uncertainty about where u.k. potential growth is because of brexit, and is -- and there is about european potential growth. you might think unemployment to

be a little heightened before the crisis. you could also say that the supply-side reform across the eurozone has had the opposite effect. if you have eurozone employment just above the u.k., u.s., could average, potential be close to 2% for the coming years, in which case it is hard to see were sterling and euro goes over a five-year basis. >> i somewhat disagree. first of all, if we do get the soft brexit, trend growth could be softer because trend growth in the past is driven by labor mobility in the u.k., which probably will reverse. the downside risk from brexit from growth are bigger. the uk's current account is very sensitive to global earnings. it is very sensitive to earnings of mining companies, banks.

in any kind of downturn, particularly around the time brexit would peak, the pound would have a lot more downside than upside. you put that altogether, the pound is on the expensive side here. obviously there are upside and downside risks, depending on whether brexit is happening or not. tom: wonderful to have both of you with us on our london desk. again on this historic morning in london and in the united states, we have history made in korea. twoleadership of the nations of the korean peninsula meeting. if there is one headline that sticks out to me, it is the leader of south korea, mr. moon, saying kim's bold decision

brings "good gift to the world." please stay with us for our coverage, including stephen engle. this is bloomberg. ♪

♪ francine: "bloomberg surveillance those quote on this historic day. we look at -- surveillance" on this historic day. we look at the two korea's. move on -- two koreas. we look at business headlines as well. amazon shares surged in

after-hours trading. they may be posed to open at a new record today. joining us for more on amazon and all things tech is alex webb , our european tech columnist. when you look at what we heard from amazon, it just seems they are getting bigger, better, stronger, mainly thanks to the customers paying for premium service. >> that is one of the reasons they are getting bigger. one of the reasons they are getting better is because of aws , their web services. it operates at something like an 80% gross margin. they have a huge amount of capital that they can pump into other areas of the business. francine: where does amazon go now? is bought whole foods. president trump is after them in tweets. can he regulate amazon?

>> i've yet to see anything substantive trump is able to do. i think the things other industries are concerned about is amazon's desires to expand into new spaces. the top of that list seems to be health care and pharmaceuticals. the way stocks have performed since news broke about pharmaceuticals and amazon's interest in that space. they have largely underperformed the market because of those fears. francine: we're just getting some comments from the prime minister of japan, mr. shinzo abe, talking about the historic summit and that declaration of the koreas. the koreas. he says he appreciates the efforts of south korea's government on talks.

we are also talking about the implications of a trade war possibly escalating more de-escalating between china and the u.s.. the geopolitics in this is huge. it is not only about the two koreas. this could be a big jigsaw puzzles for the rest of the world, and especially world leaders. tom: the effervescence of this historic leader cannot be enough said. we are getting comments from around the world. want to make clear to our global audience, this story continues in the koreas, and we will continue to look at it across "bloomberg surveillance" this morning. to get back to amazon and their effect on society, part of it is their financial performance. was this the same old, same old financial statement of growth, growth, growth? or was there any indication or indications that they will start to deploy money to the bottom line, and heaven for bid even back to shareholders? >> this was actually one of the big differences, it seems. it has been a developing trend that amazon has been able to be

--fitable, but the analysts amazon released their outlook even more optimistic than the market is. operating income is very different from net income. they are still investing in growth. given at the cloud business does $5 billion in business now, the operating income still remains quite low as a. proportion of that it speaks -- as a proportion of that. francine: alex, thank you so much. coming up to more on the korea summit and this declaration of peace. tom and i have been trying to understand what this historic summit means for the future. i think one of the most germanic moments that's one of the most dramatic moments is when -- one

of the most dramatic moment is when the leaders met for the first time. today was very symbolic because they actually crossed the military demarcation line on foot and traveled north in a car. it is something we really need .o get back on we will be right back. this is bloomberg. >>[speaking in korean] [applause] ♪

♪ francine: --taylor: this is "bloomberg surveillance." postedank of scotland higher earnings in the first quarter. is yet to settle a u.s. justice department mortgage securities investigation. there are estimates the deal could cost the bank about $9 billion. microsoft riding the wave of demand for its azure cloud computing services. the company posted better-than-expected quarterly profits.

microsoft is trying to move services to its internet-based platform. --sbc trader mark johnson tom: they do so much. stephen engle -- thank you so much. stephen engle coming to us from korea. linking this all is globalism and globalization. pickering, let me go to you on the idea of the size of world trade. is it on the upswing right now? >> both global trade volumes and

the market moved together. a four point 5%, 5% increase year-over-year in global trade volumes of the second half of 2017. that's all in line with the improvements in the market. for the beginning of this year that has slowed to around 4%. is theeat of trade wars single biggest risk factor from a policy point of view to sustain both trend growth in the global economy for the next few years. we have angela merkel meeting with mr. trump today. the market should be looking for any signs the u.s. could further exempt it you -- exempt the eu from the steel and aluminum tariffs. the macro error -- the macroeconomic effect of the current tariffs is actually pretty small. what we have to worry about is the confidence effect.

you get a little less of it in the u.s.. the fiscal stimulus is upset. given the improving sentiment around the korean peninsula, when china and the u.s. sit down to discuss trade, do they try to unwind some of this progress or actually bend to the pressure? my guess is that china may simply bring forward some of its already planned policies to open up its capital market. there may be a little token gesture in there when it comes to intellectual property. that should probably be enough for trump to say he has a win, in this thing should blow over. i'm a little more optimistic than i was before given the news this morning. this is really good progress. at a the market looks proxy issue for china and the u.s. when they look at the korean peninsula, for them to go backwards now would be seen very badly.

whoever would move backwards would be penalized by markets. francine: it was amazing seeing the body language, the hugs, the sinking of the hands, the two best the shaking of the hands -- the shaking of the hands, the two agreeing to finally denuclearize. >> the question is whether this is something separate happening or whether this is part of a broader dialogue of the u.s. and china are having about a number of issues. let's not forget that the last 20 years have seen the enormous rise of china. a lot of things haven't adjusted. there's a lot of open questions about trade, about the south china sea, but the rolet of inan -- the role of japan the military of japan a lot of koreas nuclear power have forced a number of this to speed up. when it comes to trade, the main

question is basically what we are seeing here is a separate ether itent or wh is a signpost in the broader dialogue between the u.s. and china. tom: thank you so much. kallumfiotaki and pickering giving us wonderful perspective on these historic moments in korea. ian bremmer with us yesterday. he just tweets out, "trump deserves full credit." we will have much more credit, including stephen engle at the dnc. we will do that at the top of the hour. this is bloomberg. ♪

♪ tom: it was a war of another time and place, the korean war,

that has led to 65 years of troops and this -- of truce and distressed. this morning, a historic declaration of no more war on the korean peninsula. the leader of the south steps .nto the north go in search of wealth inflation in a fully employed america. that said meeting next week. -- that fed meeting next week. and the amazon effect. how the company has grown and the world.anging absolutely extraordinary. for americans, this is hugely emotional. francine: for everyone. i think it is even more

emotional if you are a korean today. tom: absolutely. francine: what a day to work in the news business. finally an agreement to end this seven decade war this year, andy t -- and the two leaders of agreeing to complete denuclearization of the korean peninsula. what we are trying to figure out on tradessible effect tensions, escalations, and the escalations. tom: with has yet to hear from president trump. we have headlines from germany, russia, and japan. mr. abe speaking moments ago. we will go to stephen engle in a moment in korea. right now a quick data check. with dollars stronger, there's a sent in the dollar -- there's been ascent in the dollar. , europeanvery quickly stocks holding on to gains.

we do need to focus at some point on technology, treasuries also extending gains. let's get to the news of the day, the month, possibly of the year. our north korea correspondent stephen engle has been covering the summit on location. he has been covering this story for about 28 years. the question i will keep on asking is why now? a month ago we were on the brink of something ugly, possibly talking about a world war iii, and now a hugging and the signing of this agreement. stephen: that is a very good question. really the person who knows is kim jong-un. he is the one that made that overture in january in his new year's address, saying he would like to seek more peaceful relations with the south. perhaps the saber rattling we got from donald trump, dare i say, maybe that worked.

maybe they painted the united states as the bad guy to put the koreaseas gather -- together. i have been saying that any peace on the korean peninsula will have to start between the two koreas. it will not be enforced by china, the u.s., or japan. that is what has been the main , theorm that moon jae-in south korean president, has spent a lot of political capital saying peace first. that is the the number one killer, and he is achieve that pillar, and he has achieved that today and at least in optics. the image of them walking across the demarcation line arm in arm. francine: in the past it has

gone back to kind of animosity between the two leaders. is it different because of the symbolism? is that bearhug actually quite significant because it is difficult to walk back from that kind of emotion that we saw? stephen: it is interesting. maybe we need to dig into our archives at bloomberg and show the two photos side-by-side, today's photo of kim jong-un and moon jae-in raising their hands together. it is a very similar photo of back and 2007 when the then president of south korea did the exact same pose with kim jong-il. of course, things turn sour after those similar statements of rapprochement and peace. the difference now is, at least in flame, north korea is a -- in

claim, north korea is a nuclear state. they have halted all of the testing. they are a nuclear power now, so it is very different. and kim jong-un on perhaps a much different style leader. we are still trying to figure out what kind of man he might be on the international stage. the first time we have really seen him address the international press. tom: we've yet to hear from president trump, and i believe we've yet to hear from china as well. behind you this morning as part of the hon river estuary. seaoes out to the west over to china. china is not very far away. how will they react to these events? stephen: i think it would be very welcoming of these events. china once a peaceful coexistence. they don't want an overthrow of the north korean government.

. they don't want more u.s. troops here and then flooding into the north. they don't want regime change in the north. they don't necessarily want to see south korea take the lead here. they want to see a peaceful status quo. that is what, at least with the optics, we are getting today. you are absolutely right, we are seeing is the bridge that goes into the dmz. this bridge actually leads into the industrial complex that was shuttered years ago because their relationship had fallen apart so badly. now they are both saying they will open up liaison offices in the industrial complex just down this railroad tracks here. that could be another step towards economic reunification. tom: stephen engle please stay with us this morning in korea. we are now going to bring you wright, with his years of teaching at the

university of cambridge. question, your response, your emotion to this historic day. it has been extraordinary, really. i've been astonished by the level of the optics of this meeting, the confidence of kim jong-un, the significance of seeing a north korean leader in the way in which both men seem to have a genuine rapport. with have seen that famous hug at the end of the presentation of the joint document. i think it can't really be underestimated. this is really extramural meeting. of course -- really extraordinary meeting. of course, the devil really is in the details, but with the publication of the so-called panmunjom declaration, and

declaration to end the state of hostility and hose a very substantial set of practical innovations, setting up a zone of peace in the west sea on that northern minute line, reconnecting railroads and ordinary roads between the two koreas, open up the possibility -- opening up the possibility of economic ties between the two koreas. we should not underestimate, and all of this, the role of the united states, but there does seem to be a genuine commitment to finally end the state of war between the two koreas. tom: this is the third-generation generation of what is supposedly a royal family or contrived royal family out of 1948 and the korean war in the north. i go back to the desperations

that gorbachev had in russia. layout the desperations, i mean that collegial he, that kim has this morning. what are the things driving him towards this stored meeting. -- this historic meeting. inphen: in terms of -- >> terms of what matters to kim jong-un and why he is making this commitment, i think it is partly informed by economics. kim jong-un has had a strategy since taking over as leader, keep the country safe by developing their own ability, but once that is secured, and he has been arguing that north korea is now secured, turn the attention to economic development. i think this is probably the best explanation for why he is doing what he is doing at this stage. francine: john, what is complete denuclearization? is it ambiguous?

you can say this is north korea getting rid of all of its warheads. you could say also it is north korea asking for the u.s. military out of south korea. yes, and that has been the traditional korean position. not just out of south korea, of course, but the entire northeast asian theater. removing american forces from the region clearly a nonstarter. in place of that i suppose would mine eyes in some sort of security guarantee to the north koreans. it is hard to imagine how kim jong-un could at this stage commit himself to rio, the killer -- two real denuclearization. thatrt of the constitution it is part of the state. he will of course have to demonstrate to the americans, to willing,ump that he's

and that most important observers have been highly skeptical that the north would commit to. getting the most we can expect is in the first instance and maybe some sequence, grants or reciprocal process in which the north agrees to give up some of its assets in return for some of these incentives. of course, president moon has been saying those very important words of the press conference that progress can be achieved provided there is movement on part of these agreements, and even kim himself has said this .ill be a step-by-step process despite recognizing the very best be very ambitious undertaking of today's event, there are a lot of things that will need to be satisfied to improve relationships in

pyongyang. francine: in the past we've had previous agreements that collapsed over inspections, over weapons tests, and disputes over economic aid. are you expecting something concrete within six months? when did we know whether this commitment will lead to lasting change? guest: i think some of the things that are being laid out in this joint declaration are immediate. we're going to have the beginning of an establishment of a case. there will be an agreement on reaching some sort of deep zone in the west sea. on the bigger issue of denuclearization, we will have to wait and see. tom: please stay with us. we want to go again to the southwest corner of the demilitarized zone.

stephen engle, it is a hundred miles from tokyo to the capital of -- it is a hundred miles from capital of north korea. is there such epic distrust between japan and the koreans that it will never be capital c? stephen: yeah, today the talk of peace was between the two koreas. japan still a very sensitive subject on japan and the korean peninsula. there's still lots of lingering distrust of the japanese. has in mind shinzo abe taken a very hard line against north korea in this process. is the river here, the

specific area. tom.w you love geography, we are looking towards the south end of the demilitarized zone. tom: where we are in these, what do we expect for your evening? will there be events tomorrow? what is the plan forward in the next two or three days to continue with this diplomacy? now they aret having a banquet, they two leaders and their wives having korean delicacies. then they will go their separate ways. kim jong-un and his wife will walk back across the gorder to pyongyang -- the border to pyongyang. then all the ministerial get their marching orders.

moon and can have agreed to hold military talks as early as next month, seeking a phased disarmament taylor: -- disarmament. the north korean state broadcaster, while kim jong-un was very grand in his speech today and very kind to the north terse inkcna was very their warnings to the united states and donald trump, urging the u.s. to respond with todayty to the comments made by the two leaders of the koreas. they said the u.s. needs to learn good manners and stops with the arrogance. very interesting to hear these atd of comments aimed the united states. francine: alone to go back to dr. john nilsson wright. we understand they are having a three and a half hour banquet. you found it quite significant not there are

officials from the opposition, which takes a much harder stance against north korea. what these think will be the message from the opposition? >> i think the opposition wanted to emphasize the importance that we need to trust and verify. eagerouldn't be overly that the north koreans will deliver on their promise taylor: -- their promise. but this is further confirmation of the extreme their efforts we saw at the 2016 piece olympics 2018 olympics. this neweresting that

declaration involves a .ommitment to massively expand all of this i think is designed to enhance bilateral dialogue. francine: stephen engle, some of the other things. if we just recap what we have heard from this panmunjom declaration is that they agreed to the reunion for separate families and seek to connect railroads and roads. how much work will that be? anphen: it is going to be extremely difficult challenge going forward. even kim jong on today commented -- kim jong-un today commented

about the structure in the north compared to the south, but it is a stepping stone to get economic integration between the two countries. capitaional income per for the countries is vastly different. there is a long way to go economically for the north. that is perhaps why many economists are saying if there is going to be a peace dividend mimic late. done going to have to be in the north as they go ahead .ith this initial peacefulness tom: stephen, thank you so much for long hours over the last day. -wright, thank you for joining us from paris this morning.

back withng to come john dollop about the equity markets, about amazon making a window of things to come in the equity market. this is bloomberg. ♪

♪ tom: good morning, everyone. "bloomberg surveillance." really an extraordinary day. history made in korea. we will continue our coverage

here in a moment. right now we turn to the equities space. we do that with someone who's had the courage to be in markets fromgh thick and thin credit suisse come our -- credit suisse, our chief equity strategist. know oforld you and i conventional securities analysis , conventional stock market analysis, are we fossils? does the amazon crew know something that we don't? guest: if you look at this quarter, these are companies that are growing at the next ordinary rate and are massive, and their margins are just levitating. there is general belief that as you get larger, your margins have to slow down, and they are doing the opposite.

they areet bigger getting more pricing power and becoming a bigger part of our lives. one of the great zeitgeist of the week in equities is this is as good as it gets. olub going to guess jon g doesn't believe in that. first this is not the quarter out of a recession. tom: do we go down to a single digit earnings dynamic or a good old double-digit growth that develops double-digit returns? guest: let's look at this year 2019. we are looking at earnings that are about 6%, 7%, and that is fine. right now with the benefit of taxes, for energy companies and oil, banks of higher, -- banks

deliveringtech massive results, it is just good news everywhere. this is where investors are going to struggle. in 2019, but it cannot possibly be what we are seeing right now. do we look atmuch earnings, and how much is it about forward guidance? we are dealing with possible trade wars, a lot of uncertainties in monetary policy, which is normalizing. in all honesty, the guidance is equally surprising. you are seeing that out of the big tech companies that have been providing a forward look. they are telling you that they are seeing bigger volumes, the they are raising their pricing and things of that nature. at are also seeing this number of industrial companies, even the ones that are warning that it can't get better than this at this moment. they are raising their guidance anyway.

still aard look is pretty positive one. tom: jon golub with us. want to note that we have a weaker pound sterling this morning here against strong dollar across the board. a number of program notes with us. we are thrilled to bring you rhodes,ning william board member of the korean bank and allutsche of these events we have seen and finance in europe in the recent days. please stay with us worldwide. this is "bloomberg surveillance ." ♪

♪ >> mrs. bloomberg surveillance, tom and francine from london and -- this is bloomberg

surveillance, tom and francine from london and new york. this is fueling speculation that the bank of england may refrain from increasing interest rate hikes in may. this is significant because we had a re-pricing in markets. at what we found out today, a lot of the negative performance, the economy was in expectedhape than , but the pound falling as on ators paring back bets hike. , but aave a lot of news little bit of trivia -- we have a name for the new royal baby in new k and he will be called prince louis charles. to korean leaders are at a

banquet and they agreed it to denuclearization and we will have a set of summits until now until the end of the year to make sure that happens. the president tweeting on james comey and not yet on korea. ian bremmer calling president trump's efforts historic. and we will have bill rhodes with us. francine? francine: let's get straight to the bloomberg first word news. the new u.s. secretary of state is already on the road. mike pompeo flew off to brussels after being confirmed. president trump says he will not undercut pompeo on foreign policy. bill cosby has been released on bail after being found guilty on

sexual assault. . jury convicted him for eachget 10 years counts, and over the years dozens of women have accused cosby of similar attacks. i start warning to markets, prepare for a messy brexit. stark warning to markets, prepare for a messy brexit. president trump is warning other nations not to undermine a joint north american bid to host soccer's world cup. he said it would be a shame if countries the u.s. always a support were to lobby against the bid. global news, 24 hours a day powered by more than 2,700 journalists and analysts in more than 120 countries.

i am taylor riggs, this is bloomberg bu -- bloomberg. tom: thank you. theout any question, president trumbull do a victory lap on these historic e -- president trump will do a victory lap on these historic events. president trump anticipated around 1:50 this afternoon to do a joint press conference with angela merkel. i've covered president trump since back when he was a candidate on the campaign trail, but when you look at his foreign policy in the last 24 hours, this is without question the , on the same page that they have been. case in point with the secretary

of state, mike pompeo's confirmation yesterday, sarah huckabee sanders releases a photograph of secretary of state meeting with north korean dictator kim jong-un several weeks ago. off, lands in brussels, tells reporters that this was the first stop you wanted to make. he is then going to head to jordan, saudi arabia, and israel. was a lot of differences between rex tillerson, and u.s. ambassador nikki haley. she sat in on the new

this is a big weekend in washington, the white house correspondents dinner, a law of the blue checkmarks will be gathered here. president trump will break with tradition again and not attend, but it really does -- he is mb,her very sick or very du that is the president on james lot thatthere are a

would agree with him and many democrats that are rolling their eyes about comey, they are not saying it publicly. tom: kevin, appreciate it. withnt press conference the german chancellor this afternoon. we would have on our desk of the gentlemen in business who is without question in america most attached to korea, he has been a member of the korea society, he has family that goes back to all 20the events of the middle century of korea, bill rhodes joins us. what does this morning means for you? bill: i think it could be momentous, but one has to understand when we are facing someone like kim jong-un, you are facing someone different than what we have seen in korea before.

he is more like his father, grandfather than his father. he is a very shrewd operator. it sounds good. the question is how do you verify any denuclearization. relationship a with mr. moon, the leader of south korea, but you have also seen the disappointment of 2007. there is a part of south korea that desperately wants a rapprochement with north korea. where do they push back with caution? groups, the oldest that remembers the korean war, and the youngest who not want to see the very good economy of south korea having to support north korea. it is very interesting. it is the middle group, which the president of korea, represents.

i got to know him well and he has very much a spent his life talking about the sunshine policy which was the policy to reconcile the south to the north. he is very much in that mode. he ran his campaign for president see when park was out on the basis of reconciliation. >> what is the incentive for the north to give up their nuclear arms? obviously, great expense. why not hold on to the promise -- a kinder tone or something that would be more palatable? are not sure what they mean by denuclearization. in there, you get verification. you are dealing with a shrewd operator. he is very good at playing people off. played peopler

during the korean war. americans, ande perhaps the russians later on. francine: let's bring in francine lacqua in london. good morning. , bill.rning does this feel like a 2007? different because you had a new young? north korean leader bill -- bill: the difference here, you have who was a shrewd operator. frankly, the chinese have had a hand in this, because when they agreed to go along with the sanctions, particularly on oil and gas, it made a big

difference. i was saying that a long in op-eds. that has brought him to the table. we have to see now how the rest of it goes. in any future peace talks, they need to include china, japan, and the u.s.? you: the chinese are talking about reviving the six party talks and that includes all the ones you mentioned including russia. the question is how is this all going to inst -- unfold. stake hereot at including all of the japanese that are kidnapped over the years. you have a lot of interested , not to speak of our own president to you have to give credit for in the sense of taking a tough line, pushing on sanctions with the chinese.

where do we go from here? i would like to be with my friend steve, who you have sitting there talking to him about what the chinese of -- view might be. francine: we are just getting a afterdent tweet saying, " nuclear testing, a historic meeting between north and south korea is now taking place. good things are happening but only time will tell." this goes back to the commitment to complete denuclearization from both parties. how ambiguous is this. gettingther north korea rid of the warheads or north korea demanding that the u.s. gets out of the region. bill: all of the above. insistedun has not

that american troops lee south korea, but we are at the first -- leave south korea, we are at the first chapter of what is going to happen. we will have to see if we have this meeting between president trump and kim jong-un and what will come out of that. haspresident of south korea spent his whole life talking about trying to reconcile with north korea. he has a big stake in this personally. tom: we are going to go to another analyst later in this half hour to wrap up equities coverage. i want to get this out of the qualified tocohen be the chairman of citigroup? can you take a goldman sachs east coast -- goldman sachs ethos and bring it over to jonathan reed? bill: that is a big question.

you are talking about is the chairman, and i am no longer -- i am retired out and no longer advising them. chairman, michael neal, who has done a great job and is probably going to retire. we think william rhodes for that nonanswer. but here is a german bank and retreat, how do you retreat selected parts of a new york desk and maintain an american relationship? >> that is going to be very difficult because they built up the investment bank tremendously. tom: were they successful? i think their problem was overcapitalize and they extended themselves. the american banks in 2009

decided to write off the bumb debts. this is why the major american banks are in much better shape. we have the royal bank of scotland in the hands of the government after all of these years. francine: on deutsche bank, is it right that deutsche bank almost forgets the u.s. to refocus on europe -- is that the right strategy? we have to remember that deutsche bank is the bank in germany. historically and that is their major franchise. timespend a lot of building up their american business. too not think they are going abandon that anytime soon, but they are in mode. there is a big challenge for the

i think that, but under most circumstances, you would say they would be able to bring it off, but it is going to take time. francine: should they buy commerzbank? bill: that is a rumor that has been around for 10 years, and it is always a possibility. they have to clean up their own act. bill rhodes, if i look at deutsche bank and i look at how they will compete, it does speak about the dominance of america banking. what does america banking need from washington right now? bill: i hate to say, they are basically getting what they want. you are already seeing deregulation from regulators. all of the major regulators, their changes are being made. things are going in the way of the banks.

interest rates are going to go up with the inflationary push. at this time, we are in the suite -- sweet spot for the american banking system. us, jonl rhodes with from credit suisse. and the president just waiting this afternoon -- tweeting this afternoon. taylor: the royal bank of scotland is positioned to restore dividends. bf is yet to settle a u.s. justice department investigation. the deal could cost the bank about $9 billion. riding a wave of demand for its cloud services. cloud revenue almost doubled.

microsoft is trying to move customers software. the first person convicted in now inobal crackdown is prison. traderas sentenced -- a was sentenced to two years. largest banks have paid more than $10 billion in penalties. that is your bloomberg business flash. thank you. citigroups, former vice-chairman. and jon, you have been more than patient. i want to bring up your favorite chart which is monies free. that is where we are right now. the inflation-adjusted fed f

unds target rate. we sort of like got back to a zero real fed funds target rate. what equities do to get to normal? jonathan: they go up. is tellingthe fed you that we need life-support, we need support. we do not. the economy is stronger than that and it will be recognized. the fed will tighten up eventually, but the next two or three rate hikes will not do it. the history?

you have lived this for 50 years. the markets are expecting greats to rise and it is long overdue. the quantitative easing is being ratcheted back with the balance sheet the fed has. the markets of an artificial now for 10 years. been artificial now for 10 years. you start to get cracks in the system. raising interest rates and continuing on reducing the quantitative easing is exactly the right way to go. jon, i like tom's use of omg. fx section.in the francine: omg, the yield may

invert. >> it is an interesting thread. we saw weaker data out of the if you look at the longer curve, it is being held down by really low rates in europe and japan. on the short end, you have the tightening policy because the u.s. economy is substantially healthier. i do not know about inversion, but if we get to a flat curve, this might be a very long time that it doesi do not mean anythg for the u.s. economy and investors are going to struggle with the idea that the economy can continue moving to inflationary risk that is very low. tom: william rhodes is with us and jon golub. bill, there is a new accounting.

i saw a company that has a new definition and i almost wanted to throw my beverage at the wall. we are always trying to find a new accounting. is there value to the new accounting that jon golub deals with are doing it to go back -- do we need to go back? bill: i am always for going back but i think the basics are there. we might even get the phillips curve working. wework was is a leasing data offices is come up with a new definition which allowed jon golub to have further gray hair. jonathan: on this account in

question is the goal to provide clarity? if the goal is to spin a number that is positive, that is very different. tom: he is saying this with a straight face. jonathan: i am. a company looking at to look at operating earnings, it provides a clearer view. in: we are putting sga which is sacrilege. francine: let me go to bill rhodes. where do you see the next crisis coming from? bill: it is going to come from a search and reach for yields. the can always come back in real estate business, a good, and a lot of different ways. people become accustomed to low interest rates, liquidity sloshing around, you could have

a problem in the emerging markets. as you get the markets tightening up, you could have a problem in a lot of different countries. look at turkey. so it does not necessarily have to start in the so-called "advanced economies" -- a good start in the emerging markets. tom: we are going to go back to the some asian of korea here. you and i have -- we are going to go back to the summation of korea here. you have lived the development of asia at citigroup. then we assist asia, china, assistnd korea -- can we or does the president have to consider a bilateral or multilateral approach? bill: the latter. you're going to see him doing

more of that going forward. we havetalk about asia, not mentioned that we have a mission led by secretary treas -- secretary of treasury mnuchin, but the korea thing is going to,. if it were not for the chinese sanctions, i do not know we would have the present situation. all of these things linking together. our relationship with china, japan, korea, it is going to come together. rhodes, thank you. jon golub, thank you so much. let us go through some of the headlines. tweets hisnt comments, and francine and we have seen from russia, japan, i am sure webut will hear from much more.

what headlines caught your attention? francine: i would focus on four things. the two leaders signing this declaration agreeing on a seven war.e -- to end this oreas pursuing denuclearization of the pen insula. tom: we just have the president tweeting. amazing. the president of the united thees, korean war to end united states and all of its great people should be proud, taking their place in korea.

♪ >> on cloud nine, amazon revenues soar.

now it is up to big oil to keep pace. taking economy's temperature. numbers will give investors a first read and whether we need to be concerned about employment costs. the leaders of north and south korea have a historic meeting after 64 years of unresolved conflict. and angela merkel visits washington to seek her own form a piece of president trump. i am david westin here with julia chatterley. >> always a pleasure to be here. thank you david, and thank you amazon. take a look. intel, microsoft, and facebook end session lifting. be interesting to