francine: trade truths. trump extends an exemption before the eu, mexico and canada. will u.s. allies really be able to have a permanent deal of? testing the accord while oil holds gains. has a day tomp make a decision on the deal. steve mnuchin tells bloomberg he isn't worried about the bond market ability to handle a reckitt government -- handle a record government following. ♪ francine: good morning and welcome to "bloomberg

surveillance." i am francine lacqua. here are the markets. a lot of them are closed across europe. mayday.because of the the ftse is open and gaining a little bit overall because of lack of trading. floors are closed in asia. euro-dollar, 1.2060. coming up on bloomberg surveillance we talk trade and economic growth with jim o'neill. he also focuses on viruses and superbugs. we talk fintech and the changing environment with antony jenkins. come we talk -- ericbank action with

nelson. let's get straight to the bloomberg first word news with nejra cehic. nejra: u.s. treasury secretary has said he is unconcerned about bond markets ability to absorb rising government debt. his department said it borrowed a record amount in the first quarter. cu let's just say it is a bit -- >> let's just say it is very large, robust market. there is a lot of supply. u.s. commerce secretary wilbur ross joins us after 6:30 p.m. u.k. time. donald trump has said he is considering holding a meeting with north korea's kim jong-un at the demilitarized zone or in other countries including singapore. speaking at a press conference with syrian president, trump

also expressed -- with nigerian president, chuck also expressed -- benjamin netanyahu said his country has half a ton of iranian documents that proved to build nuclear bombs. nothing gives donald trump ammunition to pull america out of the iran nuclear accord. --n's nuclear minister says by the international atomic agency. the u.k. is proposing a new plan to kickstart stalled brexit talks. negotiations resume in brussels this week. prime minister theresa may's team of negotiators have drafted a new way in which -- a new way in which they should work together to address broader questions. david davis said he wanted to move quickly when talks restart. u.k.'s house has sort to make it

harder for the prime minister -- by defeating her over the government's flagship brexit negotiation. they voted in favor of an amendment to the european union withdrawal bill to give parliament a vote before theresa may can walk away from negotiations without a deal. jeff bezos and blue origin have successfully tested its new separate booster. are --new shepherd mr. p shepherd booster. blue origin hopes to fly tourists as soon as next year. 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. the european union, mexico and canada have been given a reprieve with president trump

until june 1. the white house says the move allows for more time for negotiations. trade discussions with china are stepping up. steve mnuchin heading east to relieve tensions. >> i am looking forward to discussions on the trade issues. they continued discussions and see if we can reach a neutral solution. the good news is president trump mar-a-lago have been talking about the trade alliance. xiident xi -- president knowledge that -- acknowledged that they are looking for to a more balanced trade relationship. francine: there was the u.s. tragedy -- u.s. treasury secretary. joining us now, jim o'neill.

it does have an impact on spending. -- an arms race against bacteria. let's start with trade. how much focus d doing trade? -- focused do you do on trade? how many sessions will there be on u.s.-china relationships question mark jim: a lot. -- relationships? jim: a lot. judging about the news of me becoming chair. a lot of them have to do with issues about china. especially china's engagement with us. that is one of the reasons. hugely important. atncine: bras, when you look the equity markets desk virage, when you look at the markets, we

thought it was in america first policy and as time progresses, president trump is backtracking saying you are now live, you'll be fine. viraj: it is a thorn in the side of markets. you've got this perennial uncertainty. what it has done is ambiguous. it is not like the euro which is been benefiting. the idea is can we look through that. we will invest activity. second quarter activity and bounce back. back on track with the localization story. that is what we're looking forward. francine: heavy worried, jim, that global growth has peaked? jim: with the usual caveat, i don't look at the stuff is

closely. it is still in my veins. it looks that way. i think is i say, know exactly what is going on in the world. is surprising in europe. most of it. i don't know the standard. from the leading indicators i'm used to, it wasn't predictable that europe would suddenly slow. a lot of it is [indiscernible] i think today we get the pmi's, don't we? suspicious that the slowdown is temporary. slowed. the world has francine: barrage, we were

talking about the german economy overheating. you think that economy has peaked? viraj: we went into 2018 with expectations. the economy has underperformed than expected relative to expectations. what we now look at for the eurozone, that side is three or four year lows. the only way we can see that worsening is if this is a structural slowdown but if it is a cyclical with expectations lower, and in line with the data, that should keep the euro supported. the euro is running on hot air but looks at normal levels. nothing that should take the euro further. francine: what does that mean for central banks? we have been talking about normalizing for quite some time. do you think they need to be are some old? senaled?d be ar

jim: i think it is a tagteam. a couple of them have indicated recently they want to get rates up when they can. when the inevitable next problem them. they can cut the residue of what has happened across the decades, especially if it turns out to be more than a couple of months blip. the panic for some will set him pretty quickly. quickly -- pretty set in pretty quickly. some of these guys move. francine: what do you expect from the fed? when younish -- viraj: look at the short end of the curve, it is there. 25 basis points here whether

desk here or there unless you start to see -- here or there. the markets, the consensus shifts to the neutral pricing of the fed cycle. we don't think that is what happened. it is a story about the rest of the world. both.ne: thank you they both sick around. -- they both stick around. claims that iran had a nuclear weapons program. israel says it has proof. tehran says it is lies. what impact will that have on international agreements? kickstart to a brexit talks as another round of talks starts. is there a solution on the irish border? this is bloomberg. ♪

francine: economics, finance, politics, this is "bloomberg surveillance." let's get to the bloomberg business flash with nejra cehic. nejra: bp has -- falling into the sand trap as its peers posting weaker than expected cash flow despite the highest profit in years. cash flow in the first quarter excluding payments was 5.4 billion dollars, almost $1 billion below average excitations. -- coming it posted in at $2.59 billion.

>> cash will flow through this year, debt will drop down. around $4ly have billion to $5 billion of debt rolloff each year. we don't need to carry such a high cash buffer. we will let some of that debt 20 --f as we look up to 2020, 2021. nejra: rolling is acquiring aircraft supplier, k lx. thatll cash transaction includes $1 billion of net debt. the deal was conditional upon the successful divestment k 's -- other services to airlines. morgan stanley plans to raise

some salaries and offer quicker promotions as part of its push to improve conditions junior bankers. base salaries for most associates will rise by 20% to 25%. morgan stanley is among firms that are boosting pay to retain young talent. goldman sachs president david solomon says new technology has meant a number of people working on his tray desk has been -- trade desk has been slashed. he also cautioned that while the introduction of more technology into the trading business has made it more efficient for clients, it has introduced new risks. we will bring you a host of guests from the conference today including wilbur ross, tom barrick and steve ballmer. that is to bloomberg business

flash. francine: the israeli prime minister says his country has documents that prove iran had a secret program to build nuclear bombs. tehran strongly denies the allegations but bob corker says these allegations -- next line >> we knew the dimensions of their program until 2003. the obama administration when they were negotiating this, the jcpoa chose not to pursue that issue. we have all known. secret -- the no biggest known secret. francine: that is bob corker. still with us, ross patel and jim o'neill. patel and jim o'neill. jim, when you look at iran, is it a geopolitics story?

jim: don't know. a bit of both. it seems to me there is all -- tackleractical things going on as well as strategic things. is eagerne the u.s. for the israelis to say and in hindsight looks like the french and german visits to washington were heavily designed. how does macron position himself as his globally outward guy yet at the same time hezbollah should with donald trump is intriguing. the same time, his relationship with donald trump is intriguing. francine: when he saw the headline cross, who was the

israeli prime ministers speaking to? jim: he was speaking to the international media. media to get the u.s. more -- i would guess. beingying, i remember it some middle eastern -- because of the strength of the world economy, for some reason i was asked about oil. it is more likely to be 80 than 40 and that was without any of this. , notwithstanding what we said earlier, a bit of a slowing of the world. the world has picked up in so many places, the oil market is in the position that it is rice -- it is right to price in some kind of risk of a new disruption. it is that time. francine: we did see the oil price spike up. you saw the canadians

have a bit of a support. the followthrough is quite limited, especially for the fx markets. the oil market is second on third. how d.c. it panning out? it is so unpredictable. outow do you see it panning ? it is so unpredictable. how much is it difficult to price in these big geopolitical moves? is it a nightmare? in might have changed. -- it might have changed. ever-changing but there's the short-term risk. to how the idea now is much clinical uncertainty elevate to the levels. we're seeing a consolidation and

that it needs to move massive in one way. all these short-term stores take these directions. francine: now we have president trump we have to model. jim: we haven't had a president like this. this idea that we are in some new world of uncertainty. rubbish. that is what makes markets potentially interesting. anticipate and make some risk adjustment. days, arriving in q8, the morning after the u.s. bombed iraq. francine: then we saw the koreas on friday. then you see russia and the role they are try to play in the middle east. it just feels like we could be going through a massive shift. of mediae is lots

attention to unknown uncertainty. this big issue about known unknowns. it is a fact of life. you remind me of another book i reviewed recently. posthumous book. it is fantastic because it points out just how well the world has done less 20 or 30 years despite all these things we are worried about, including trump. there's a lot of good things, such as people living longer and people trying to giving attention to new antibiotics. arethe financial markets, going to deal with it. francine: let's see if they are making money in brexit. pk is proposing a new plan. -- the uk's proposing a new plan.

speaking at the conference in california, the former prime minister tony blair told bloomberg when it comes to the customs union, there is no easy solution. tony: what we have learned since the referendum in june 2016 is this negotiation is much harder than the people thought. there is a dilemma that the government has not resolved about our future relationship with europe. in which case a lot of people will say why are we leaving. we will have a clean break with europe, go our own way in which case the economic application given that half i trade with his -- trade is with europe will be significant. francine: is get back to you jim and viraj.

this is looking at fair value of sterling. we have an estimate in white. what do you look at? viraj: trade weighted in terms of sterling but when we look at fair value, fair value is a black box when brexit still highly unknown. for us, what we see is sterling is cheap. one of the reasons clients have seen it is a long run move higher. what you have seen is a structural repressing of till risk. -- repricing of tail risk. we are still caught between where it ends up. it just wants to clear currencies like the dollar. it wants to gradually move higher. the bank of england is a short-term story.

francine: governor carney and the label he has gotten about the unreliable boyfriend. we talked about brexit. colleagues -- me that there is a although theite, commissioner the brexiteers are going to fight it. there's an extension of the customs union going on. last night though, takes some of the attention away, in a way. it brings it more to the reality of what the tactics are. notwithstanding the disappearance that the cabinet balance have shifted a bit. i smell some kind of extension or underlying replication of the

customs union in the way that things are shifting. francine: it is 30 seconds, do you expect a hike from the boe officially.j: not it is not dead and buried. it is moving with data and data will move the pound. francine: thank you both for joining us. patel. jim o'neill. he stays with us. we will be talking fintech next. we will be joined by antony jenkins. this is bloomberg. ♪ mr. elliot, what's your wifi password?

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and it's "daditude". simple. easy. awesome. xfinity. the future of awesome. francine: economics, finance and politics, this is "bloomberg surveillance." i am francine lacqua it we are for breaking news out of the u.k. this is significant because we saw a slowdown in the economy

gdp last friday. worse than expected. that had an impact on pound. onained a little bit more what the bank of england governor was trying to can indicate. -- was trying to communicate. the hike was a done deal and in his mind, it wasn't. pmi crossing the bloomberg terminal. falling 53.9. let's have a look at where the pound was impacted. i did see it moving lower. you see money supply at 2.2. as we look at these numbers and we talk a little bit about brexit, it has an impact. should governor carney look through it? are we going to see slow down because of brexit? jim: it is like days gone by for me.

i am slightly surprised in my immediate reaction is slightly worrying. we should be getting some stabilization. that is -- if i were in mpc voting member, i would be thinking about a hike. i might be backing off a bit. francine: putting that in context come u.k. manufacturing slows more than forecast. it is now at it 17 month low. -- now at a 17 month low. week will be back with jim o'neill. we will have the former chief of barclays. nejra: donald trump will delay imposing tariffs on the european union, mexico and canada until june 1 as he finalizes deals with them. the white house says the administration has reached agreements with argentina,

australia and brazil. the administration continues talks to revise the north american free trade agreement. the trade secretary says he is unconcerned -- a record amount for the first quarter. steve mnuchin made the comment to bloomberg in beverly hills, california. >> it is a very large robust market. it is the most liquid market in the world. there is a lot of supply but i think the markets can handle it. nejra: wilbur ross joins us from the conference after 6:30 p.m. u.k. time. donald trump has said he is considering holding a potential meeting with kim jong-un at the demilitarized zone marking the north border with south korea. speaking at a joint white house press conference with the nigerian president, trump also expressed optimism that the

summit would take place and reiterated he would leave if it wasn't a success. jeff bezos and blue origin have tested its new shepherd booster. .t is the eighth test it is named for alan shepard, the first american in space. 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: now to -- it is said to revolutionize the financial services industry. john micklethwait caught up with manny roman at the conference to find out how ai and blockchain were going to change. one is how to make investment decisions better. the other one is how to service clients better. in terms of investment decision,

is the ability to collect, analyze, crunch a lot of data in different forms. numbers, there will be sometimes they will be words, sometimes pictures and be able to develop an algorithm to help decision-making. >> what is the particular thoughts of data that will be helpful? estates daily and real -- it is data in real estate. ofividual loans in terms being a to look at the whole though state market in america. that is a perfect example. credit card data. what does credit card data tell you about the economy? it tells you about customer behavior, sector, retail. it is the ability to look at derived be able to conditional information.

it gives you some type of venture. always in the context you have an investment process. you stick to it. it is one that can help you make good decisions. think this kind of robotic information -- there is much talk about people trading rapidly on computerized data. does this help in the long-term or short-term? >> etiquette helps long-term. we are in investment house, not a trading house. it also is make better decisions in terms of security we own and the risks we take. >> do you expect it to get rid of jobs? is it something that works with humans? >> as it relates to pimco, no.

as it relates to the whole change introduced by blockchain, it will revolutionize what they do. if you think a -- if you think of a world we have an absolute -- because of blockchain you'll be able to make sure that you go from executing a trade to everything being computed with the right information in one go. that will happen in the nuts addition -- in the not-too-distant future. >> why do you expect that to happen first? >> i think it will happen slowly over the next year. depending on how much people start to invest. we will be at the leading edge. >> i suspect the are, but are you less a believer in bitcoin them blockchain? >> yes, i'm less a believer in

bitcoin. one other thing about this business is sometimes you need to say when you are not quite sure when something is happening. we are staying clear of it. we let other people get excited or not by what is happening. francine: that was manny roman speaking with john micklethwait. a new technology team is set to alter the future of financial services. we are now joined by antony jenkins. still with us, jim o'neill. anthony, thank you for joining us. befuddlement unchanged

from last time you were on? anthony: it is really fascinating. 2.5 is ago, i came in -- i gave a speech -- 2.5 is ago, i gave a speech. i talked about financial services. since that speech, we have seen two of them. the first is in the growth in mobile banking which has caused a drop in branched traffic. that is a problem for the big banks because they have that space to sustain. secondarily we have seen a huge rise in crypto. desk itself is a huge crypto itself is a huge topic. third thing we are to see is about data. who controls data, how that is used, how that is monetized. in my own business, we rethought how deliver banking services around the customer and data.

where it made huge progress in improving the we can deliver the benefit. francine: what does that mean? fintech, will it change fundamentals? is it the old way but stuff i don't realize? anthony: consumers are going to embrace services that make their life that are. -- make their life better. you make it easier. secondarily, you make an instant. thirdly, you make it more cost-effective by better pricing decisions, eliminating things. what our platform does is delivered that. we can do it through banks, we're mostly talking about banks at the moment. francine: for me to get a mortgage easier, does it mean i

have to give up all my data so the bank can make an informed decision in 2.5 seconds. anthony: somebody has to take your data, curated and put it in a way that works for you. if you think about how it works today, your data is fragmented and spread across hundreds of different sources. employment, education, health care, financial, all of those things. those things are assembled painfully in slowly through thinks like credit bureaus. -- painfully and slowly through things like credit bureaus. at the moment, it is difficult to do that because the data is so fragmented. the new technology allows those things to be collected. francine: do you look at fintech, jim? jim: i think about it a lot. it is something i think we should -- with many other thinks

should be at the forefront of the right thing to do, whatever that is globally. the forehead my investment trust, i made some divestments and some of the emerging players. i presume i trust the so -- francine: i'm sure they're watching pr big banks thinking about this in the right way? anthony: i speak to banks all around the world. the big change between now and 2.5 years ago is the banks are now aware of this issue. they are worried about it. they are thinking about how can we transport. mobile banking is an example of innovative technology. you have to rebuild from scratch. many banks -- quickly,ift

[indiscernible] anthony: the only way you can do it is if you take resources and put them off to the side. it is very unusual for incumbents to be able to reinvent themselves. francine: joining the banks and u.k. and system. it is these banking services opening up. the various are forming. -- the barriers to entry are forming. you are doing the cloud now. it exposes the flanks of the banks to people who can create better, more effective customer expenses using technology. what is the response from banks? there are a few things that the bank can do. my recommendation would be take some resources, set them up and let them deal with future, unconstrained by the cultural

sections of the main organization. -- isne: is impossible to it possible to think about fintech? how do we train the workforce of today to have jobs and 10 to 15 years? jim: i have contradictory views in my own head. the biggest one is i don't think it is right to worry so much about what other jobs tomorrow. who would've dropped -- who would have dreamt that google would have been things are yet -- that they are today. the kind of employers that we have in areas that are employing a lot of people. the big surprise the past decade in this country, not with all the chaos that is going on is how strong employment is. you could've had some of these arguments about job displacement a decade ago. francine: some of these people

feel left out. a localn you've got community that has been dominated by big employer, that is being arbitrage away in some areas like this, the consequences are bit like what we lost all the pit villages and steel mills and dealing with that on a social perspective is tough. imaginative and more serious focus on steals -- on skills. francine: which is apprenticeship's. anthony: that is another thing i work on. the key thing is to not addictive future. -- is not to predict the future. they need to be of the reskill themselves many times. we know people need to be creative and be able to collaborate.

to create new things. these are areas where we need to build into our educational system. we need to get our systems aware of that. there is a huge demand in this country for engineering talent. i've got a software business. i need engineers. we need to develop centers of excellence for engineering and .laces -- in places people love living there. i am quite positive about this for the u.k. if we act now. francine: it is getting people interested in the subject matter. allony: people think it is bits and bytes. it is fascinating work. you can be on the forefront of changing huge aspects of our lives. jim: bring you back to

antibiotics. the couple of months ago i went ina research center manchester. it is on the old ashes and because site. -- the old astrazeneca site. there's lots of things going on the fourt relate to primary is, life sciences using modern technology. future employment of talent. francine: blockchain, what will it become? how many questions do you hear about cryptocurrencies? i think crypto is a fascinating case for what is going to be the most defining technology of the next couple of years. if you think about most of the

systems in our lives, they rely on centralization. if you want to make a payment in this country, you find many parties in the middle. it is faster, cheaper. crypto is the first incarnation of that. we can debate whether it is going to be a massive thing that is going to be in the future are not. i think there's a market for cryptocurrencies. i think the ability to trade in support international trade with crypto, take out the friction, is very important and could help goebel gdp. gdp --uld help global could help mobile gdp. they come together and stack on top of each other. like we have driverless cars now, it is not just because tech. it is the same here. internet allows you to track

physical items and finance them along the supply chain combined with the ledger creates huge economic opportunities. francine: can break leaders keep up? jim: can they ever. anthony: if you think about the internet, nobody really regulates the internet. there isn't a department for the internet locally. some of these financial mechanisms become global, regulation is going to become difficult. it will be a balance between the benefits that these systems bring in the loss of control. francine: who do you think should regulate cryptocurrencies? does it have to be domestic? say.ny: it is too soon to self-regulation is going to be important. particularly where regulators are increasingly racing to keep

up. self-regulation becomes important. is owed to have a regulatory body. jim: i don't have too strong a view about the way to do it. they kind of don't and they come like a battering ram and start over regulating yesterday's problems. you look at the facebook issue, clearly something has got to change. earlier added to one of my believes that have a suspicion that individuals might end up having to pay. facebook's future model may mean people pay to have access. it is hard to be overly prescriptive. they might pay but they

are going to get much more back in terms of value. francine: a lot of these technology companies, where d.c. them going to impact your world? do you see facebook becoming a bank? that is something that is more unlikely? anthony: it is quite unlikely. big tech companies would want to become banks because it is a highly regulated space. it is a low return space. when you're in a high return space, why would you? i do think what is interesting is if you accept that data is going to be driving the future, people that are good at data are going to be good. we go on shopping sites like amazon and our 10 recommendations. that is an early version of what can happen with your financial

life. if you can have an intelligent agent do that for you, when we love that? just wouldn't we love that? francine: it would save so much time. jim: it is not super returns but it is more stable and relatively easily -- easy to get returns. some of them might get into that part of finance. anthony: it is a separation of the customer relationship. that is the key. if he saw that in other areas like shopping and content. francine: antony jenkins, thank you so much. o'neill stays with us and we will be talking about microbiology. from fintech to geopolitics in north korea as the u.s. president explores a summit with egyptianun and an

billionaire sees economic opportunities as well. byi have been pressurized every single government in the world, by the americans, japanese, south koreans. what are you doing in north korea? i was saying i am doing good for the people of north korea. me being there is good news for you because i am a piece -oriented person. socialist/communist. being there makes me a goodwill ambassador. what was the mistake of the west? why do we have peace right now? when you bully someone and put him under pressure from everywhere and you say i'm going to destroy you, if his characters like my character, that willnd of guy

not been my arm. i am not going to go to the negotiating table. i will take the pain. approach,'ve been an maybe the south korean president. call in sit-down and talk before we start threatening. this is a childish game. this is people's lives. when you talk -- because there is a price. i know these north korean people. they're very proud. you just smile and talk in sit-down and they will come through. manus: could this be a turning point for you? >> i have been waiting for this moment for 10 years.

money and build a hotel there. whenaiting for this moment there's peace so i can reap some of my benefits. as one of those billionaire investors, would you look to do more? >> of course. i was waiting for that. alsothing gets -- they are , the currency issues are solved. we open up and life goes on. manus: advice for mr. trump? >> don't try to bully him. open.endly, be ask things he can do. promise prosperity in exchange for demolishing all the nukes. naguibe: that was

sawiris. let's talk about jim's book. something you have been working on for quite some time. we are overprescribing antibiotics. jim: there are 10 different areas. at the core of is we treat these things like sweets. we have to learn that they are a cure but only if these them if you have a bacterial infection. in the u.k., at least 30% over prescription. going back to what we chatted about before, we need mylan technology -- we need modern technology to forces to not have an antibiotic unless there's -- dramatically reduce the pressure on the health services. francine: how much do these technologies cost?

u.s. is and, the horrific offender. food is one of the areas where europe is better than the u.s.. anthony: i have a colleague that works for me. they came up with a program that can save 40,000 stroke deaths a year. think of the saving resources. if we can use technology to be more predictive, we don't need to go down. francine: we will have plenty more. this is bloomberg. ♪ we use our phones and computers

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but will allies really be able to have a permanent deal. -- deal? reports they had you run -- iranian documents -- and all record government are wing. this is "bloomberg surveillance ." lacqua.ncine tom keene is in new york. good morning. a lot of the trading is closed in europe. may day, which is european labor day. is front and center, but pushed aside on the "new york times" by may day. this from mr. mueller. a bombshell last night with the release of mr. mueller's questions to the president. kevin cirilli joining us in the

next hour. francine: we certainly will. and we will focus on all things brexit. in the meantime, let's get to the bloomberg first word news. taylor: the president came out with a late-night reprieve on aluminum and steel tariffs. he will hold off on imposing the duties on the e.u., mexico, and canada until june 1. the administration said it has reached agreements in principle with argentina and brazil. itn is rejecting claims that lied about its nuclear weapons program. netanyahu says material smuggled out of iran proved the country had a secret plan to build a nuclear bomb. trump says that he is 100% right in denouncing a nuclear deal with iran. approval rating is at the highest level in a most year. 42% of americans approve of the

job he is doing. that is up for percentage points from the previous week. the u.k. is proposing a new plan to get the stalled brexit talks going again. chiefime minister's negotiators have drafted a template on how the u.k. and the e.u. can work together to resolve questions over the irish border. the preferred option is to avoid the need for tariffs on goods check out the border between northern ireland and ireland. global news 24 hours a day on air, and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. tom: thanks. equities, bonds, currencies, commodities. futures, negative. dow futures -64. the euro weaker on a negative basis. the vix, 16 -- pretty much going

nowhere for the last number of days. gold migrating to 41299. that is interesting. i showed the dollar -- 92 handle on dxy. that is a big deal. francine: it is. we are very in on trading brawl -- volumes here in europe because there are a lot of bank holidays. it is basically labor day -- may day. that means there are strikes in france, a of people are off for the day. u.k. equities are open, climbing under lackluster sessions. not so great pmi figures out of the u.k. 76.nd -- or cable -- at 1.74 tom: let's look at the asian buck. yx japan.

a bundle of currencies without the japanese yen. strong asian dxy. a --is pretty elegant for maybe it is a weak asian policy. francine: this is what i am looking at. it is fair value for sterling. speaking with ross from ing. he says it is really difficult. we are trying to compare the bloomberg value with the imf exchange rates. difficult to get fair value at the moment. let's get back to our top story -- the european union, mexico, canada have been given a temporary reprieve with the

president on steel and aluminum tariffs until june 1. meanwhile, steven mnuchin is hoping to further ease tensions between the world's to be guests economies. frankm looking forward to discussions on the trade issues and see if we can reach a mutual solution. the good news is presidents trump and xi have been talking about the trade imbalance. resident xi acknowledged our objective is -- president xi of dollars our objective is to have a more balanced trade relationship. francine: that was the u.s. treasury secretary steve mnuchin. we are joined by erik nielsen and stephanie rickard. do you worry about these tariffs and trade?

it seems allies keep getting exemptions. book it be permanent? erik: i think there is a fair chance. i worry a lot about it. it provides uncertainty. you never know whether it is for 30 days how far it is. on steelou get tariffs and aluminum, that is not the end of the world, if that is all there is. life is never perfect. the issue is we will not negotiate on a threat. if there is this tit-for-tat risk, it could spin out of control. i do not inc. it will, but there is worry. francine: this is the problem -- there is no talk under threat. do you need to speak to the chinese differently? stephanie: absolutely. the u.s. has a strange strategy, because it could get the european union to help them with china. the european union is just as worried about how they deal with

intellectual properties, but now, the united states has alienated the european union with these tariffs. they are dividing and conquering when they need to work with the european union against china. francine: ok. tom: go ahead. francine: i was going to ask if whether the only way to get europe onside was to drop the tariffs and just focus on ip. goodanie: it would be a strategy but seems unlikely. trump has tied the steel and metal tariffs into things with -- into things like automobiles. it is a difficult position. permanentre will be a exception, but it is undermining the stability in the global trading environment. tom: how is global trade? we are 10, 11 years into a recovery. you and i know how mobile trade has rolled over in the last decade. growthe a pop to

exports? erik: as you said, global trade did not do well from resolve until about a year ago. growing less than global gdp growth did. then we had a nice pickup for five, nine months. it looks like, during the first quarter of this year, we have seen some slow down. -- globalg indicator trade is probably still running at plus 4% or so, which is not bad. tom: when we look at trade and mr. mnuchin talking the usual talk a secretary of the treasury talks, what do you want to see out of a trump administration that is basically bilateral, or maybe unilateral, or maybe my way or the highway? what would you like to see them amend as they confront discussions? stephanie: you put your finger

on the key challenge. the key challenges trump wants to go bilateral. by doing so, he is undermining the multilateral institutions, like the wto, that the u.s. was one of the key architects of. the wto has provided certainty for the past several decades. by undermining multilateral institutions, we are facing a trading world without certainty, without rules, without an international arbiter. i would like to see a move towards playing in the multilateral system, working through the wto, rather than picking out bilateral negotiations one by one. francine: do you worry the world economy has slowed or du think it will rebound? -- do you think it will rebound? littlet has slowed a bit, but it was growing rapidly. i think global trade and growth is probably going to hang in there quite nicely.

the biggest threat is when the u.s. slows down. it is kind of overdue. they doal expensing will give them a shot of steroid -- whatever the term is -- for a year, 18 months. but next year, i worry a lot. francine: you are always the optimist on europe, and you were proven right when we saw pmi picked up. do you think the european economy has peaked? erik: almost certainly. my colleague did a piece last week that showed the difference between the first releases of in the last two or three years -- the european numbers are always revised up, and american numbers always revised down. it shows pmi is a pretty good predictor of the final numbers. -- 2017, wef 2013 were probably growing in europe

around 2.5% to 3%, which is well above potential. it is naturally slowing somewhat , but i do not think it is anything more fundamental than that. tom: let me ask you the mac in question for the morning -- the president is upset about the german trade surplus. are we importing their stuff, ,ike cars, because we want to or are they exporting it because they are pushing it to us? which is it? buying germanare cars because we want them. inmany is not dumping cars the u.s., just as europe is not dumping steel into the u.s. market. so the idea we need steel tariffs to counteract european dumping lacks credibility. francine: great question, great answer. thank you, professor stephanie rickard. of unicredit stays

with us. we get to a little chinese economy as well. later today, wilbur ross, the u.s. commerce secretary -- that is after 1:30 p.m. in new york. that is 6:30 in london. this is bloomberg. ♪

♪ taylor: this is "bloomberg surveillance." the bloomberg business flash. boeing has taken another step towards expanding its service business. buy klx,aker agreed to which gets 20% of its sales in aircraft parts. sky bridge capital has big changes. the firm is dropping plans to be applied by china's hna group.

the company figured getting u.s. approval would take too long. meanwhile, anthony scaramucci is returning. he spent 10 days as white house communications director. bp capped earnings season in oil. it posted weaker than expect a cash flow, despite the highest profit in years. fully benefited from the rebound in oil prices, plus -- paymentsnding from a 2010 oil spill pushed higher, although bp says it will change. >> as that cash goes out, we have reached the peak of quarterly payments. rose.s why net debt that, plus the working capital bill. you will start to see that come down as the year progresses quarter on quarter, especially given where prices are today. taylor: that is your bloomberg

business flash. francine: thank you. prime minister benjamin netanyahu says his country has documents that prove iran had a secret program to build nuclear bombs. an strongly denied the allegations, while senator bob corker said these allegations were in nothing new. >> we knew about their possible nuclear weapons programs since 2013. the obama administration decided not to pursue the issue. it is the biggest secret known out there. francine: for the latest on what these claims me for geopolitics and the market, we are joined by andrew barden and stuart wallace . thank you for joining us. let me start with you, andrew. who was benjamin netanyahu's

audience? >> as we wrote overnight, he had an audience of one -- donald trump. there was some great theatrics and, to some people, it will resonate. obviously, people who follow this closely -- sources have told us it does not really move the needle. i think he was aiming at trying to convince donald trump to get out of the nuclear deal in the coming days. it was very choreographed -- or it appeared to be very choreographed. withad netanyahu come out a speech, then pull back the curtains, revealed the binders and cds. when it ended, five minute speaking,had trump and he said he had watched netanyahu and then took a couple of questions on the deal.

and do not forget that pompeo was there the day before. to your question, an audience of one. the ball is now in trump's court. francine: although, oil spiked on the back of it, right? >> marginal amounts. we are trading down today. that signals a market that looks at that speech, the evidence presented, and came to the conclusion that there is nothing really new here. it is pretty well known. tom: as you mentioned, mr. pompeo is now involved with this. what is the distinction between secretary tillerson and secretary pompeo as the u.s. begins to adapt and adjust not only to the ballet of israel but of iran as well? andrew: the key to the issue is spirit of is it the the jcpoa that is being

undermined? hardeople pushing for action on this -- and you can put pompeo on that camp -- say being supported by iran. aside and his forces -- assad and his forces are being supported by iran -- you may as well have a jcpoa that prevents them from getting the materials for a bomb, but the subtle stuff undermines this spirit. -- the spirit. pompeo says we need to look at the bigger picture. that is what israel is saying. tom: what happens the day or trump throws out the obama uranium plan -- what happens the day after trump throws out the obama iranian plan? andrew: i do not know what

happens -- tom: does stuart know? andrew: it could get messy. does iran try to solve this this -- salvage this and try to stay in, or do you embolden hard-liners in iran, or do you get saudi arabia looking for a ?ext use -- excuse a strong argument critics have is you are telling us to pull out, but not telling us what happens next. there are a lot of scenarios where you could see this quickly leading to some sort of confrontation -- either in syria or something more direct. but no one is telling us what step two is. tom is like black -- tom is like wall street. he likes black-and-white

answers. what do you think? stuart: there is a 180 day period where, theoretically, if you are a buyer of uranian oil, you start winding down that purchase. it is conceivable, given the chaos in sanctions and tariffs, that this time assurances of buying uranian oil outside the u.s. will not get second sanctions. so what will the trump administration do after pool at the video -- pull out of the deal? francine: erik nielsen, is this in oil story, or could it be bigger? erik: that is for a political scientist to say. as a market economist, you worry about it, because it gives uncertainty. it is almost like trump does not

like deals. he does not like anything that gives a degree of certainty. he would like to be able to threaten here and here -- francine: he does not like others' deals, he likes his own deals. erik: well, he has not struck anything, so i do not know. so far, he has taken us away from certainty to uncertainty. that is not good. the other side of this is we -- the fundamentals of oil, demand and supply, suggest oil prices should be lower. , a tax on price american and european payers, on uncertainty. tom: what is your take on the affinity of europe to iran? there is a french colonial past -- we saw that with mr. macron.

have the ought to frequent flyer miles of mr. macron, the way he has been piling them up. what is the european language -- iran?e between europe and erik: people in europe are generally as worried as many americans about iran. they are also worried about the very conflict in the middle east, iran, saudi arabia, issues. sudden reversal in american policy from trying to appease iran to go saber dancing in react -- riyadh. and the confusion about qatar, which apparently the president at that time did not even know that is where the base is paid a lot of confusion and uncertainty. that all said, these are countries -- iran and russia --

that are closer to europe than america. it is something people worry about. francine: erik nielsen of unicredit stays with us. later today, we are live from the milken institute global conference, speaking to top including tom barrett. we are getting breaking news out of barclays. i do not know if there is share price movement on the back of it, but when you have a chairman coming out, having to justify he will stay on, it is always a little bit of concern to the barclays chairman saying he has -- he has served three years. he will do a minimum of four. mcfarlane commenting in london. the piece of news that investors want to hear is the chairman saying is that is light at the end of the tunnel, and he believes that is getting brighter.

tom: the all time management cliche. "light at the end of the tunnel." light at the end of the tunnel in bloomberg as well, with kevin cirilli coming up. a lot more going on as well. and they get the fed day -- it is a dead meeting, did you know? francine: i do not know if it is live or dead, but i know erik nielsen is watching it closely. erik, when you look at the u.s. economy, six weeks ago, i was asking whether it was overheating. is it going to pick up again? erik: i think that is right and whether you like the fiscal expansion or not -- and i do not, because i think it is an inappropriate shape and time, it will stimulate the american economy for at least a year. i think the fed is seeing this and saying this is a fantastic time to normalize rates.

you have seen how the market has basically repriced with in four of not believing anything turnout repricing close to the dax. francine: do you worry about the dots? you follow them. erik: we do. the market does. but the fed says we should not, right? francine: all right, thank you. i am sure there is a standard deviation in the charts somewhere. we will look at the treasuries is pmi numbers that disappointing out of the u.k. this is bloomberg. ♪ retail.

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near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. ♪ francine: this is what we do on "surveillance" -- we look at treasuries but also the armenian

parliament, deciding whether to back the opposition leader as the new prime minister. tellis a lot of observers us what may be -- this is what a lot of observers tell us what may be a watershed moment in the -- watershed moment. the opposition leader says that the party may seek to halt its bid, because -- and this is significant because it is different. tom: these images from yerevan. it is a peaceful and beautiful morning in yerevan, armenia -- actually in the afternoon. the opposition is the exit party, i believe. as you mentioned, this is a huge deal, with the prime minister really pushing back against his opposition. and again, this is off the edge of europe, but it speaks to the

populist tendency we saw weeks ago in hungary. radio listeners, you basically see hundreds, what could even be thousands, in one of the main squares, a lot of them holding umbrellas to shield themselves from the sun. the protest leader asked people to meet at the republic square in the capital, which i think is what we are seeing at the moment. that is to celebrate what he calls the public victory over hopelessness and uncertainty. protest init is -- armenia this morning. we thank all of our global listeners for attending. here in new york city with first word news, here is taylor riggs. taylor: the president is making a temporary retreat from a his hard-line trade policy to the white house said the president will delay imposing steel and e.u.,um tariffs on the mexico, and canada until june 1. saysdministration agreement in principle have been reached with argentina and

brazil. there is a report that special counsel robert mueller has given a list of almost four dozen questions to the president's lawyers. they go from contacts the president had that his campaign russia -- manufacturing in the u.k. slowed more than expected to a 17 month low in april. that adds to signs that the poor first-quarter performance. continue. mant's second richest that on northrm korea years ago. need --to we naguib sawiris -- >> i did a lot of good stuff

there, waiting for the moment when there is his, so i can reap some of my investment. awiris, meanwhile, says he has put most of his fortune into gold. global news 24 hours a day on air, and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. francine: thank you. investment opportunities are growing in europe whilst trade uncertainties surround china. that is according to pimco chief executive manny roman. >> we think there is an opportunity in europe stemming from banks. anks, basically, have, in good way, cleaned up their balance sheet. opportunity in

real estate and nonperforming loans, sometimes consumer credits, to people like us, so by a long-term for poorly of at to people prices -- like us, in a long-term basis, at attractive prices. it has been italy and spain. some in ireland. there has not been much in germany. there has been some in europe. but someone needs to do something for a capital reason, and then it happens. in the u.k., it has been happening since the financial crisis. john: what do you see at the end of this? do you think your bulwark better -- do you think europe will work better? had tworance

presidents who did not really have a good score . macron is trying to do the right thing. there are strikes right now -- hopefully, he will go through this and will not make a concession, and get france to be a good partner to germany and the labor market. one thing, for europe, is that banks are now in good shape. they are probably capitalized. wave ofuld you expect a consolidation in european banking? manny: you may see some consolidation. these transactions are complicated. bank transactions are always obligated, but i am sure there will be some. john: on the issue of consolidation, you have been

part of various mergers in the past. do you see that happening on the fund management side? manny: yes. given the investment one needs to make in technology and given size of the capex we have to spend, it is more difficult to be smaller. john: your check the big to get a good? manny: i expect the big to get bigger and i expect people who are midsized to look at the bottom line and say maybe the capex investment i need to make will be too big. we will see. john: are you an interested in that?and -- enquirer in manny: no. we just have to keep doing what we have done for 46 years. francine: pimco chief executive manny roman there. still with us, eric nielsen of unicredit did our editor in

asking the chief executive of pimco about opportunities in europe. it is also labor day in europe. when we start talking about the franco german access, first of all, we have to make sure writesnt emmanuel macron economic reforms. erik: first of all, it is not strikes, but demonstrations. it is traditional. i think macron has done a number of things that shows he has taken on a vested interest in france. we have seen a couple of reforms already. more needs to be done. as your speaker was referring to, we have it now with the wage rates. upping and polls show that people in france support him in these efforts. francine: what worries you at the moment? the banking unions, that we do not have these transfers, ecb -- whatever takes over for mario

draghi? erik: short-term, i worry about italian politics and what looks like backpedaling in germany on the architecture. longer-term, i worry about exactly what he said, manny of theabout the cleaning balance, continuation, and move towards a more equity-based economy. that, is potential gdp and the believe it has been wrong for a dozen years and single digit equity return, do you assume regression as some given where mean, you put european and american potential gdp? let me say two things -- first is i think you need to worry, if you get equity returns

, in double-digit numbers. over a long period of time, single digits is probably a stable state of affairs. europe has not done poorly. terms, we have done basically the same as the united states. that is what drives equity returns. lately, it has fallen behind in europe, simply because, in america, corporates have taken a greater share of the revenues and given to their dividends or buybacks of various types. the earnings have been equivalent, but the payment in america to owners have been greater. that can be sustainable. francine: what do you think it is -- is it sustainable? short-term for the did itmerica, corporates

themselves. when you look at when interest rates go up, the first signal you need to worry about is if the u.s. corporate sector starts to see more defaults. they have indebted themselves too much to pay their shareholders. that is not sustainable long-term. tom: when you look at europe and the economics that we will see, it does link back to mr. draghi. as a general question, are we going to see inflation in the month of may? erik: no. not in europe. there are a couple of things that hold inflation down, and a lot of it we do not understand -- is at the shift to i.t. or digital -- tom: i agree. erik: but output caps still matter. samantha -- demand and supply still matter.

you see in america, they start picking up, because there is no the phillipsso curve seems to work. in europe, we are writing maybe 18 months behind the u.s. in this matter. tom: i am waiting for inflation. air using, thank you -- brief.rning bloomberg daybreak on bloomberg radio -- boston, new york, washington, san francisco, and sirius xm, channel 119. good morning, radio london. this is bloomberg. ♪

♪

taylor: this is "bloomberg surveillance." let's get your bloomberg is newsflash. barclays chairman john macfarlane says he will serve at least another year. he has been at his job three aars and he indicated that search for his successor is underway. he said "the light at the end of the tunnel gets brighter." a federal judge will announce whether he will approve at&t's it if i dollars takeover of time warner. billion takeover of time warner. an attorney for the two companies say the government failed to make its case. qatar haseign fund of been buying up hotels -- it now made by three european hotels operated by intercontinental.

-- eight may == it may buy three european hotels operated by intercontinental. for all of us, live, dead,, live, dead, but for erik, the fed is live. a year ago, we were talking balance sheet dynamics. we do that in europe a lot. why do we not do that so much in the united states? erik: the fed has been good at indicating what they wanted to do, which is bring down the balance sheet in a gradual way and a predictable way. in a sense, give back to the market, the long end of the curve, and then set in motion when they could see opportunity on the growth to some sort of normalized rate, as we talked about before.

part of the reason why we do not do this in europe to the same before,s, as we said because europe is about 18 months behind. tom: across kitchen tables in america, at the fed, there will be discussions of rates, and with it, inflation. describe how economists know that will turn out to do you know that if rates go up, inflation follows along in a certain way? or is it just a crapshoot? erik: i think this he glanced different. you would look at the output cap . look at the growth numbers, look and thattput cap, drives inflation. then, labor markets run 12 to 18 months behind

the real economy. when the labor market tightens, you get wage inflation. that is where the central bank needs to come in and take a little bit of the punch bowl away. that has been the guessing work pay because the inflation took a long time to start to pick up in the phillipshen curve, or the wage growth, did not really, long. in america, it looks like it has started to come. i suspect the fed sitting back and saying we are behind the curve. they would probably rather accelerate rate hikes now than the opposite. francine: how much of a dilemma for the fed is a flat yield curve? in the past, every time there was an inversion of the yield curve, there was an impending economic slowdown. is it different? erik: it probably is, but i am a little worried he'd i hear clever people say you should not worry, because of technical reasons, that i kind of always

worry a little bit when you see the signals. dismiss them.you but the point is they are giving the long impact of the market, but not entirely. so maybe they are fiddling with it a little bit. if i were them, instead of presetting the balance sheet reduction, maybe they should tell us what they would like the curve to be. and then adjust the balance sheet reduction to prevent that sort of flattening. that will be my part of suggestion to them. francine: do you worry about suggestion in the next 18 months? erik: it is very low probability. this is america. it is low to have recession within 18 months. economymber, the u.s. start slowing, and the fed starts tightening typically

about 12 months before the recession. looking at the curve, there is a more than 50% chance risk of recession, sometime in mid 2020. that means the whole thing starts to slow midsummer. tom: erik nielsen with us from unicredit for a generous our. this is the coolest thing if you have a bloomberg. we waited years to develop this. demand,emand -- by huge graph tv . an exquisite chart here on asia dxy. over here, you have the quality of the coffee in america versus francine's coffee in london, which is going up. v. this is bloomberg. ♪

♪ is "bloomberg surveillance." tom and francine, as always, from london and new york. figures in housing are set

to debit a little bit. this does not bode well for the u.k. as it faces brexit negotiations. erik nielsen of unicredit still with us. gdp figures, specially when it comes to construction, may be because of the snow factor p the pmi numbers today, does it change the storytelling? is there something more worrying in the trajectory of u.k. growth? erik: i think there is. we do not know what share of underperformance was part of the weather come up but it was part of it. it was an awful number. almost at a standstill whereas the rest of the world was doing well. -- a lotot the numbers of volatility in these type of numbers. it is impossible to escape the conclusion that something is not going well in the u.k. economy now. francine: what does it mean for

the boe? we were at the world bank imf meeting. it was clear that mark carney, after the market was 90% pricing in a right height, wanted to talk the market down. does he lose credibility if he hikes? erik: he cannot hike now. he would evidently lose credibility. his problem is whether he could come almost like a cliche, where you hike or you should not have hiked in the past. we work surprised, at unicredit, that the numbers were so sure, given the uncertainty in brexit. butcould put rates up, there are people most pushed aside. that could come back and bite them. francine: is that boe's problem, or is there just a difference in the way there are dissenting views? erik: it is one of these cases,

like powell and his first press conference, when he was asked about trade, and him saying we do not do trade policy. so, away from the political things. mpc is saying we do not brexit -- we do not do brexit. tom: you have been doing this for a wild -- while. can we see a slowdown coming? we have some data coming up that is a little nudgy. can you predict when a slowdown happens? erik: no. [laughter] certainly a lot of people, including ourselves, got overexcited about the brexit vote and the immediate slowdown. we thought it would take sentiment down faster. but there are fundamentals that work. which is uncertainty is not good for business. exit is such an uncertainty.

it is not an uncertainty that is symmetric am aware it could go well or it could go bad. at the best, it is a continuation where the customer union does not look like this. it is a question of how bad does it get? fundamentally, we could do it, more or less. tom: watch erik nielsen in may, then you can go away. [laughter] thank you, erik nielsen. we continue your may day briefing. an important hour -- kevin cirilli on the mueller bombshell. brian levitt will join us from oppenheimer. this is bloomberg. ♪

♪ tom: this morning with a fed meeting tomorrow, jobs day friday.

markets are still, the dollar advances. late-night bombshell in washington as over four dozen questions from mr. mueller to mr. trump await answers. mr. giuliani asks, is mr. mueller truly objective? perhaps the president asks, why did i tweaet that? ofconsider the path inflation and interest rates in this hour. good morning. from our world headquarters in new york, i am tom keene. from our world headquarters in -- la, francine the core cqua. to our conversation yesterday with robert kaplan, this is about moving french built submarines down to australia because of those dynamics of the south china sea. francine: this is significant because it goes to the soft

power that france and emmanuel macron feels he needs to rebuild. he went to see donald trump. we saw the friendship that certain press were talking about. we now see him going around the world to build alliances. a lot would argue that he needs to focus on geopolitics as he is but also on domestic affairs. as he is traveling so much, there are always critics saying he should be at home more to talk about labor reforms on mayday. tom: perhaps we will look for sanctions or any announcements from the president. here is taylor riggs. taylor: president trump came out with a late-night reprieve on steel and aluminum tariffs on the eu, mexico, and canada until june 1. the administration says it has already reached agreements in principle with argentina, australia, and brazil. iran is rejecting claims israel's prime minister that it

lied about its nuclear weapons program. netanyahu said material smuggled out of the country improves the country had secret plans to build a nuclear bomb. president trump will decide this month whether to stay in the iran nuclear deal. president trump's approval rating is at the highest level in almost a year. 42% of americans approve of the job he is doing, which is up 4% from the previous week. plan.k. is proposing a new to get stalled brexit talks going again. template onafted a how to resolve the questions over the irish border. the uk's preferred option is to avoid the need for tariffs and a goods check at the border. global news 24 hours a day on

air and at tic-toc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you so much. through the data quickly. gold in dollar moving today. not much going on in equities or the bond market. a little curve flattening. dollar stronger. 57% euro-weighted, stronger as gold dashes to 1299. francine: this is what i am looking at, the dollar rising on tuesday. i am looking at u.k. equities. they are climbing. it was a little bit of a lackluster session because most european stock indexes are closed for the holiday. tom: this is not the dollar, this is the asian dxy, the asian

currencies ex-japan. strong asia, stability. this rollover is rather elegant as the technicians would say. asianit is a weak currencies policy. francine: i am looking at sterling and fair value. this is the imf estimate versus the bloomberg estimates. this comes on the back of the u.k. proposing a new plan to kickstart stalled exit talks -- brexit talks. tom: thank you so much. stephanie flanders runs the economic ship at bloomberg across bloomberg intelligence and news. she had a spirited conversation with someone who really doesn't like to say the message. he is on script all the time. comments on a secretary of treasury heading to china.

>> i'm looking to very frank discussions on the trade issues and to continue those discussions and see if we can reach an mutual solution. the good news is president trump and president xi since mar-a-lago have been talking about the trade imbalance. acknowledged our goal to have a more balanced trade relationship. i'm going there with our large amount team to see what we can get. tom: a mutual agreement. michael mckee and i have a mutual agreement that usually the secretary says nothing. what is the backstory? i am not going to get it from secretary mnuchin. what is the backstory on this trip? the backstory is that the president has backed himself into a corner. he says we are going to put on sanctions. the chinese have threatened to

retaliate. you have to find some way out of it unless you really want a trade war. that is always a possibility with this administration. the chinese have suggested they are willing to negotiate, but only so far. what will satisfy the administration? the chinese, our reporting has shown, have suggested they would be willing to increase their purchases of a number of american products like airliners, but they will not abandon their plans to be strategic leaders in the industry's of tomorrow. navarromr. ross or mr. on this junket? michael: mr. ross is, mr. navarro has been sidelined. scene from star of who is on this trip. tom: this perfectly describes

this except the chinese don't play bar scenes from star wars. michael: they certainly don't all agree on what trade policy should be. do the tariffs and trade sanctions from the u.s. actually have any teeth if everyone is exempt apart from the chinese? the fact that we have seen huge leadership change in china with the president there for a longer time, does this mean he can deal with the u.s. in a cooler way? michael: he can certainly deal with the u.s. in a way he would like to. they have a plan through 2025 that he would like to stick to, but he can also make some concessions that in other countries might not be as easy to do. he has a bit more of a free hand than a normal politician would. the sanctions on the chinese are different from the steel and aluminum sanctions.

we have had sanctions on those products from china for a long time. the exemption must was granted to other countries. it will not affect china that much. it will perhaps affect the european union quite a bit if they can reach some agreement. tom: thank you. on a trippreciate it to china we may hear about in the coming days. later today, we will get briefed on these events. wilbur ross will join bloomberg in the 1:00 hour. the secretary of commerce, an important conversation. stay with us, kevin cirilli on mr. mueller. that is next. this is bloomberg. ♪ s is bloomberg. ♪

♪ taylor: this is "bloomberg surveillance."

let's get to the bloomberg business flash. we have taken another step to expanding its service business. the world's largest airplane maker has agreed to purchase klx for $4.25 billion. firmhanges at hedge fund skybridge capital. it is dropping plans to be acquired by china's hna gorroup. they figure it would take too long to get approval from china's government. scaramucci spent 10 days as white house communications director. bp has capped a shaky earnings season for big oil. they posted weaker than expected cash flows despite the highest profits in years. they still haven't fully rebounded from the decline in oil prices. higher, although

bp says that will change. >> we have reached the peak of quarterly payments in terms of the condo payments. it is that plus the working capital. you will start to see that coming down as the year progresses given where prices are today. taylor: that is your bloomberg business flash. you so much. there are exactly two international relations political stories from washington this morning. we will get to mr. mueller with kevin cirilli in a moment. right now on iran, here is the chairman on the senate foreign relations committee bob corker on iran. corcker: we knew of a possible military dimensions of their program back in 2003. the obama administration chose not to pursue that issue. we have all known. it is like the biggest known

secret out there relative to their previous activity. now, davidg us right wainer, kevin cirilli. how is this news, this dog and pony by mr. netanyahu, how was it received by the israeli people? kevin: i think there is a consensus here and there that this is not really a smoking gun. there isn't anything that makes it obvious to those who wanted to stay in this agreement such as the europeans that they have to reconsider. leaders who have wanted to back away from this now find it a convenient excuse to do so. those who do not say there is nothing new here. francine: is there anything new?

we wrote a brilliant bloomberg news story saying this was an audience of one, president trump. will that swing his thinking on the accords by may 12? david: i think what you have is netanyahu acting as a major cheerleader for what trump is promising to do. netanyahu is saying, here you go, setting up the way for him. on a deeper level, this is a huge intel achievement for israel to take out thousands of placents overnight from a , a very secure spot deep in tehran. this is a major achievement for the intelligence, but that is something we already knew that massage is very capable. many analysts are

saying there is nothing new or relevant here. will there be more verification on the ground in iran? david: i think it is all going to depend now on what the u.s. does. if the u.s. pulls out of this deal, there will be a chain reaction, which we cannot really predict at the moment. whether iran stays in the deal or the europeans stay in the deal. backs out of the deal, they clearly did not have to abide by the things they have agreed to, such as letting inspectors come into certain places. tom: thank you very much. i ran front and center in washington. that was blown asunder by michael schmitz story last night released late by the new york times. repaired for the president by mr. mueller. is the president seeing these

questions? was the white house given a heads-up on this? kevin: it is unclear whether president trump has seen the list of submitted questions. the questions focus on the relationship between paul manafort, the previous campaign chairman, and then candidate donald trump. this is the next evolution. the president has said consistently to reporters that he wants to testify under oath with regards about mr. mueller's investigation. that goes against the legal advice he is receiving. tom: let's look at the new york times piece. article. sidebar questions relate to mr. comey, what was the purpose of your may times17, tweet after the revealed the presence private

dinner with mr. cumming, mr. trump responded on twitter. said mr. comey better hope there are no tapes. presidente day that finally understands there are consequences to his tweets? kevin: it depends on who you ask. tom: i agree. kevin: this gets to the notion of obstruction of justice. that is what we are talking about. a lot of lawyers will pick through this. on the one hand, and obstruction of justice charge is incredibly difficult to prosecute, particularly in the political lens of washington dc. it could be a situation where president trump is not a target of any investigation with regards to collusion as my colleague has reported. a situation where

some report is issued and criticism is drawn on the principles of the investigation. to throw across a term such as obstruction of justice one quite frankly no journalist has all the facts bob mueller has. tom: this story will percolate today in kevin cirilli's world. thank you. let me tell you about what is going on on the west coast. erik schatzker, scarlet fu enjoying the beverly hills hilton. rosswill be there with mr. , arrieta huntington, and steve ballmer on basketball. mer on basketball.

♪ tom: "bloomberg surveillance." francine lacqua in london. i am talking in new york. made a today. like two thirds of the country shutdown today. francine: we have stripes, just , theng people celebrate only day we can sleep in by asking for more holidays and pay. tom: head of global rates strategy at oppenheimerfunds, brian levitt. there is this great summer mystery of technology in

america, the impact of technology on our economy and your world. is technology suppressing the real rate? the bottom line, technology feeds into wage growth and all that, is a keeping the real rate down? it feeds into inflation growth. it is freezing productivity breast-feeding productivity. -- it is feeding productivity. actually making a large part of the workforce useless. tom: it is a great earnings season once again. technology is the reason. brian: it is a very good earnings season, not just on the bottom line. not just the tax cut, sales look good. we don't see any cyclical inflation in the u.s. we have a tight labor market, so

we are seeing inflationary pressures rise. that is good news at this part of the cycle. it causes a little concerned in the equity market. we are in a healthy part of the economy now. if you look at earnings in the technology sector, it continues to be quite good. francine: is it the technology sector, or fin tech are there any unloved parts of the market that are going to the future of the internet of things or things like that? brian: certainly the financials have been a more reasonably priced part of the market. was the onerous regulation in the aftermath of the 2008 financial crisis. you see some reasonable valuations in the energy market. for the most part of u.s. equities don't look particularly overvalued. we had valuations a little higher. companies have seemed to grow

into those multiples. the equity markets are reasonably priced when compared to treasuries. it does not feel like the end of the market cycle. to your point about the internet of things, i think what investors are underestimating are a lot of these big growth themes that are likely to take place over the next five to 10 years. a lot of places are growing rapidly within economies even if the brown & brown numbers are not going to be -- even if the broad macro numbers are not going to be outsized. priya: so far the interest the fed's priced in path of a neutral rate. the fed is saying they want to go above neutral. we are talking about tightening. that is what concerns me about risky assets. when the fed is about neutral, they are actively trying to slow

things down. do you see risk assets reprice? are what does that mean, we 14 rate increases away? would offer that 2% is neutral and anything about 2% is starting to get restrictive. tom: we will dive into some of the equity market challenges. ofan levitt and priya misra td securities. great to have you with us. this is bloomberg. ♪ ♪

♪ tom: good morning, everyone. "bloomberg surveillance." francine lacqua in london. right now in new york, your

morning briefing. your first word news with taylor riggs. taylor: president is making a temporary reprieve from his talk trade policies. laying aluminum and steel tariffs with the eu, mexico, and canada until june. there has been a report that special counselor robert mueller has given a list of almost four dozen questions to president trump's lawyers. they range from contacts with russians to motivations for firing james comey. it is not certain whether the president will agree to be questioned. k slowedring in the u more than expected in april to a 17 month low. that the to signs british economies poor first-quarter performance could continue.

man madeecond richest a long-term that on north korea decades ago. the country's first telecom operator. >> i have been waiting for this moment for 10 years. i am in a currency that does not get exchanged very easily. i built a hotel there. i have been waiting for the moment when there is peace so i can reap some of my investment. taylor: he says he has put half of his fortune into gold. global news 24 hours a day on air and at tic-toc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. francine: thank you so much. the u.s. said late last night that it would delay import tariffs on steel and aluminum for the eu, mexico, and canada

until june 1. trade issues are far from over. john mickelthwait discussed this very discussion with the pimco chief executive manny roman. there was one issue with china and one issue of nafta, and we are hopeful they will both be resolved. >> which are you most optimistic about? manny: nafta. the travel with china will hopefully move in the right direction after the trip secretary mnuchin is taking. with priyae are back misra of td securities and brian levitt of oppenheimerfunds. hen you look at trade tariffs and the barriers going out, what does it mean for world trade and the market? is there a way to take advantage

of this? priya: the front end of the interest rate market is pricing in a perfect scenario. staying strong, interest rates moving higher. i would argue if you're seeing trade tariffs shop, that is negative for long-term growth. if the fed continues to hide above neutral, then it could slow down. end to say the front that markets are not pricing and a lot of headwinds on the girlfriend. growth has been -- on the growth front. growth has been great. does president trump want to deal for could we see barriers go up? brian: i suspect they want to deal. they will have to navigate between what has been promised

on the campaign trail and what will actually benefit americans between now and the 2018 elections and 2020 elections. riya is right if we go down a path of more nationalism and less globalization, that is not good for the economy. this is a globalized marketplace. the risks are there. i suspect from an equity perspective that if the trade rhetoric heats up and we will have inappropriate outcomes from a globalization standpoint and that creates volatility, there will be buying opportunities. i hear the belief that this is more political than macro. to haveis always a joy with us a man who brings in the american philosopher ron burgundy. brian levitt does that. when you look at the glass case

of emotions of ron burgundy in a phone booth. the present will be in that phone booth as he confronts trade policy, his glass case of a motion which is my way or the highway. ron burgundy also said, wow that escalated weekly. -- quickly. we hope that does not escalate quickly. with this administration, you put something out there. it is big and bold and the beginning of negotiations, and then you slowly walk it back. i suspect that is where we are headed. if you look at the numbers of what has been suspended with china, what has been proposed, it is not huge. it would be problematic from a sentiment standpoint. tom: we are always talking dollar dynamics as a litmus. the inflation-adjusted rate is one of those litmus papers.

compare real rates of our trading partners, germany and china with the real rate in america. priya: if you look at real rates in the u.s., we have risen significantly in the last few months. compared to the developed world, we are high. compared to the en world, we are extremely low. with japan, the u.s. versus germany, u.s. real race are high. can the economy handle this? we are hoping real inflation picks up. if it does not, can we base this on significant debt? tom: we saw this yesterday. thanks to ken hammond. i was covering my microphone. sorry. some people would like me to cover the microphone. when you look at the merger

mania it yesterday. francine, the nice. rates, get the deal done. brian: i think it is that a little bit. we have had market access for a long time. i suspect it is later in the cycle behavior. i don't think the cycle is ending. it is not be early rate hikes that matter, it is the late rate hikes that matter. we are still 50 points want, which probably means we have some time to go. are we there yet? no. my seven-year-old always says, are we getting closer? of course we are. if investors try to time this, they will miss out on good returns. francine: are we getting closer to an impending economic slowdown and is that the inverted yield curve? brian: we are in a little bit of

an economic slowdown right now. it was bound to happen. , 75% oft peak pmi countries around the world growing above potential. we were bound to see some slowdown in economic activity. you have seen a little bit of it in your with stronger currency, a little bit of it in em, and the united states. growth in the united states is actually likely to look better in the second half of the year because there is a lot of stimulus coming. i think this is a little bit of a pause. we accelerate in the second half of the year, and then how tight get on monetary policy? what does the yield curve look like at the end of the year? if you move flatter, you raise concerns about a recession in the next couple of years. if the federal reserve caps off in that environment, -- backs off in that environment, i suspect this cycle will

continue. i suspect this cycle will continue longer than people believe. francine: do you think the world economy has slowed, and what does that mean for the outlook on central banks? priya: outside the u.s., we are seeing a slowdown in europe, japan, and the u.k. we have pushed back our estimated first hike. as far as the u.s. is concerned, growth has been ok, inflation picking up. we have seen this divergence where the dollar has strengthened. over time, we don't see this slowdown in the rest of the world being sustained. tom: the great assumption of the auto market is smooth gradients, smooth reaction function, baloney. at some point you get junk conditions. do you see possible jump conditions? priya: i do. i think that is the possible

unwind of global qe. we have seen extremely low risk premiums. the duration risk is coming back, particularly in the u.s. tom: we are going to lead with that. priya misra of td securities. well ofvitt with us as oppenheimerfunds. don't forget your morning briefing on radio. radio, goodybreak morning, radio london. ♪

♪ taylor: this is "bloomberg

surveillance." i am taylor riggs. barclays chairman john macfarlane says he will serve at least another year. he has that in his job for three years. as he indicated at the barclays shareholder meeting, a search for his successor is underway. a federal judge will announce next month whether he will approve at&t's takeover of time warner. lawyers have made their final arguments in washington. a government lawyer said the deal will leave consumers picking up the bill. the sovereign wealth fund of qatar have been buying out luxury hotels for years. three-year he hotels operated by intercontinental. they have been drawing on the wealth fund the last 11 months to offset an impact of a point

out -- boycott led by saudi arabia. francine: thank you so much. last year, u.s. -- last month, u.s. treasury yields briefly broke 3%. onestors now say a full their market is all that -- beark market is all that inevitable. >> the u.s. treasury market is the most liquid and robust in the world. well i will not comment on interest rates, what i will say is the market expects interest rates to go up. the big event is always the flattening of the curve. we can argue the level it hits. we have been betting on a flat curve for the last year. we think that will continue. i think investors should position themselves for that. the question is do we get to one that is inverted?

>> it is just another benchmark. the issue is not simply in the threshold.the 3% the issue is what is the trajectory of rising rates? >> eventually it is going to go through that 3.03% level. it is important to watch when it does and that flattening. we could go inverted. that does not always automatically mean we will have a recession within 12 months. but it lends itself that way. francine: as we continue our coverage of the milken institute, we offer a special welcome across canada on bnn bloomberg. let's get back to our guests in new york, priya misra of td securities and brian levitt of oppenheimerfunds. when you look at treasuries, 3% west psychological. -- was psychological.

it kind of freaked out some investors. p percent, how much does it make a difference for investors? priya: it is a psychological level. everyone focused on it. we had been in this range for a while, and the fact we broke it doesn't create significant hedging needs. raten't see the neutral moving a lot higher. if the fed is ending the hiking hard to 2.75%, it is get significantly higher than that because it underpins the neutral rate where the 10-year .ill be treasuries look pretty attractive. that is why we are seeing significant demand in the treasury market. global growth picks up. bank is ableentral to normalize without markets

freaking out. in our view as growth is only slightly picking up in the rest of the world, we see global interest rates low enough that it anchors u.s. treasuries. we could get to 3.10%. i think the economy can probably handle this. when you get to 3.50%, significantly higher, i worry about the impact of higher real rates on the economy. francine: you make a very good point on german bonds. they were concerned about a violent repricing of bunds. what would that mean for the market? priya: i think the ecb is very concerned about that. basis this with the 100 point rise in rates that slowed things down. from ecbave seen

president draghi is a response to any unwarranted tightening in financial conditions that the ecb will push back. we see 80 basis points by year end, close to 1% next year. very gradual normalization of bunds. i think the ecb can continue to slowly toy -- hike prevent that dramatic repricing. tom: last night, the new york times released with michael ofmidt a bombshell story over 48 questions that mr. mueller will ask of the present. the president of united states has responded moments ago. this is the tweet. we wanted to get this to you as soon as we can. that is the idea so disgraceful

that the questions concerning the russian witchhunt were leaked to the media. no questions on collusion, oh, i see, you have a made up phony crime collusion that never existed and in investigation began with illegally leaked classified information. nice! somehow mr. giuliani will be part of this discussion today. stay with us. this is bloomberg. ♪

♪ tom: "bloomberg surveillance." francine lacqua in london. i am tom keene in new york. we need a chart to keep both of our guests happy. priya misra and brian levitt. let me go to the real fed funds chart it rate -- target rate. we have to get through a zero fed funds rate. are we going to go sideways like we are doing in this chart? and this vector up sideways action. priya: i think we will get that

sideways action through june. that you number getting closer to zero and then they will hike one more time by year end. m&a,what does it do to mergers like we saw yesterday? brian: i don't think we are at a level where it disrupts. there is a lot of fiscal stimulus in the latter part of the year. companies are keeping more of what they earn. i believe fiscal stimulus and monetary tightening leads to an expansion, slowdown environment in the u.s. a zero fed funds target rate is not going to kill the u.s. economy. brian, is there anything in the markets that feels like a bubble? brian: i don't think there's anything that feels like a significant bubble.

treasuries are moving back to a nominal growth rate for this country. equities are growing into their valuations. it doesn't seem like there is a significant bubble. the one thing you could point at its spreads on corporate bonds being at tight levels. spreads on corporate bonds are at a tight level 60% of the time. tom: what else are you looking at? priya: corporate spreads are a little concerning, but i would say the treasury announcement is probably a bigger mover. tom: explain. priya: treasury supply will pick up. you have very high deficits. trillion in4 deficit next year compared to $500 billion last year. where does the treasury fund it? the frontd that on end, you will get a flatter

yield curve and more talk on recession, if you find that on the backend, you will get 10 year rates higher. how much in bills and coupons? do we bring about higher interest rates? thatld keep an eye out for announcement on supply. that is a bigger deal for the macro markets now. francine: just make sure i get it right, is it just talk of a possible recession, or do you think an inverted yield curve spell something ugly? i think economists are split on this. priya: i would say an inverted yield curve at a higher fed funds rate is a recession. it is the single biggest indicator of a recession. the reason we don't see that now is the market is pricing in no significant overshooting on the fed. imagine if we do start pricing in 3% or 3.25% fed funds rate over the next year and a half, i

think it does he 2020 is the next recession. -- it tells you 2020 is the next recession. tom: thank you. priya misra td securities and brian levitt of oppenheimerfunds. we will drive forward the conversation on "bloomberg surveillance" on bloomberg radio. good morning across canada. we are thrilled you are with us. i have to have an all loonie forex report tomorrow. good morning, canada. this is bloomberg. ♪

♪ >> hold that thought.

president trump gives 30 more days on the tariffs on steel and aluminum. that house of health care. turning to medicine today as pfizer reported earnings higher than expected. the fed and the economy. days and inflation trending up. secretary treasury mnuchin says there is no reason to worry. ."lcome to "bloomberg daybreak it is labor day. i am at work hard glad to be here. ftse 100 up. nasdaq futures down. .hey have recovered a little the dollar continuing strengthening