♪ francine: erdogan exclusive. as lira hits a record low the president says he will tighten his grip on monetary policy and the central bank. we have to give off the image of a president who is influential in monetary policy. >> you will play a role in monetary policy going forward? is that the big change. >> yes. this may make some uncomfortable, but we have to do. francine: china's vice premier heads to washington, d.c. as president trump defends his decision to help zte. over and out. vodafone's chief executive is

leaving the company after a decade in charge. the cfo gets the call to replace him. ♪ good morning, everyone, and welcome to "bloomberg surveillance." i'm francine lacqua here in london. these are your markowitz -- are your markets. you can see the stoxx 600 is basically unchanged. we are expecting eurozone data about an hour from now. in terms of corporate news, i am really watching out for vodafone. vodafone we found out is what to see a change at the top. the chief executive, who was in charge for 10 years, will be replaced by the cfo come october. vodafone is also trying to buy the liberty global assets here in europe. you can see vodafone is currently don't 4.7% -- down 4.7%.

our exclusiveyou interview with the turkish president and then we will be theway.by larry ha we will be asking him about the emerging markets and turkish lira. let's get straight to the bloomberg first word news. u.s. commerce secretary wilbur ross has said that america is exploring alternatives to punish china's zte for breaking sanctions laws. donald trump called into question the two truck strategy -- to track strategy -- two truck strategy. this seemed to contradict wilbur ross' . statements at least 59 people have been killed in by one clashes on the gaza border. the protest came as the u.s.

moved its embassy from tel aviv to jerusalem. hamas led opposition to the move. msci has released the list of 234 chinese a-shares to be added to chinese equity benchmarks next month. inclusion is expected to channel around $17 billion in funds into the world's second-biggest equity market. the new additions begin with a very low weighting. botswana's new president wants to rewrite the terms of the african nations current 10 year deal with mining giant. he spoke exclusively to bloomberg. >> the preparations for the negotiations have begun. we expect to get a mutually beneficial agreement yielding positive results. and as a long-term agreement to add a wonderful relationship.

we expect the relationship to be even more tremendous. else, we anything expect consistency, reliability, dependability, and true allegiance. >> 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. the turkish president has said he will play a more active rol ,e influencing monetary policy following -- active role influencing monetary policy following elections next month. he spoke exclusively to guy johnson in london. all, you are the head of the state. when the people fall into difficulties because of monetary policy, who are they going to hold accountable? they will hold the president

accountable. we have to give off the image of a president whose influential -- who is influential on monetary policies. guy: you will play a role in monetary policy going forward. is that the change? >> yes. this may make some uncomfortable, but we have to do it, because it is those who ruled the state court accountable to the citizens -- who ruled state who are accountable to the citizens. guy: you have an unorthodox view of monetary policy. if you are to play that greater role, turkey will be run on a very different basis. to the rest of the world. is that something you're comfortable with? >> we're not doing this to disturb some circles on an international level. but we take these steps in order to protect my country's interests.

we will do whatever my country's interests are. how i am just curious as to your relationship with the government -- governor of the central bank will change. how will that relationship operate? >> however the central banks relations are continuing at the moment, they will continue in the same way. we're not new to running the country. we have not taken over the government recently. we have been running this country for 16 years without interruption. has anu said that turkey independent central bank, and he talked about the fact that things will carry on, and things will be the same now and afterwards. will turkey still have an independent central bank? above all else, and it is not just turkey, we will apply the

same governance in turkey in the same weight that it is up -- way that is applied globally. today whatever the governance approach in the u.s. or europe, we will apply the same in turkey as well. what is legitimate for them cannot be illegitimate for us. everyone should know this. we will take our steps accordingly, but we whatever -- but we will never let our country lose. the the comparison with united states. is your assessment that president trump and jerome powell, who is the chair of the federal reserve, as the president speak to jerome powell ? is that something that happened elsewhere -- happens elsewhere? you are implying you would take a much greater role. is there another country that stands out as a model that might

work for turkey? >> no. there is no need to argue. the u.s. interest-rate policy is known. we do not need to be invented, because we know that we have all the information -- invent -- t, because we know that we have all the information. we will take -- accordingly. will make our assessments according to this. we assess what it is in the u.s., what it is like an argentina, mexico, brazil, germany, in britain. we always make this assessment and we will continue to do so. will make our own decision accordingly -- we will make our own decision accordingly. guy: i would like to talk about politics and what is going to happen at the upcoming elections on the 24th. if you were to find yourself in a situation where you won the

presidential election but there was a more mixed picture in the parliamentary election, would you call another round of elections to make sure you secure the parliamentary mandate that the system is almost designed to be set up with? >> of course. now we have a saying, you do not but for --ems before seeing the string. let's see the results first. of course we will certainly have preparations for a result in the way you described. for the matters to develop exactly in the way that we clancy, plan a, plan b, -- plan c, of course all these will have been. it looks at the moment like we are doing well.

turkey will wake up to a much different era. francine: that was the turkish president speaking exclusively with our very own guy johnson. tomorrow we will bring you another big exclusive, an interview with the federalists -- st. louis fed president. going back to turkey and joining us is benjamin harvey and larry theway. thank you for joining us. i know this was a huge interview for bloomberg. the president saying he is going to take even more control over monetary policy. this is something that certainly speaks to investors. >> it does. that is one thing to go out and say it at a campaign rally in turkey that you want to lower interest rates. it is another thing to come to london at a financial center and

say to your investors -- say it to your investors. francine: let me bring you over to our chart, which is the lira depreciation chart. you can see it weakens further after we heard the interview. if you are an international investor -- so you knew already that there was maybe not as much independence as in other emerging markets in turkey. what does that mean for your appetite for turkish assets? >> it has been low to begin with. that stems from issues related to monetary policy, but also the imbalances that turkey evidences from a local currency perspective. there has been quite a bit of currency risk that you have not seen in other emerging markets. from our point of view, cautious going in, and equally as cautious going out. these remarks are not really

going to help international investors that might be looking for opportunity. there's too much volatility in the currency, and there's too much uncertainty about what that really means for monetary policy going forward. why is he doing this -- why is he doing this -- francine: what is he doing this -- why is he doing this? and why is he doing it now? >> i think the fact that he came here and said this to his investors, to bloomberg, said that not only does he believe this, but he wants to and acted itter the election -- enact after the election come i think that means he is serious about these ideas. francine: he said this may make some uncomfortable. i wonder if he is thinking about markets in specific. what would it take for markets and investors to go back into turkey. what would it take for the lira

to stop appreciating -- to stop depreciating? >> i think you would be well served to have a central bank that would try to bring inflation down to more acceptable levels. francine: when will that happen? >> not sooner, it would appear -- not soon, it would appear. there is an election coming up. there was surely a domestic component to would -- to it. there is a purpose behind it and it seems to work a little early orally.t currency -- turkey has to stabilize its relationship with major partners in order for investors to feel more secure. it is obviously in a deflected -- difficult part of the world that has caught the next this -- caught in the nexus of all of

its neighbors. francine: an election win on june 24 will consolidate even more power. power will he gain if he wins this? >> he will gain significantly more power. i don't think it is 99% certain that he wins. there are four opposition candidates. for the first time are not showing him with a clear first-round victory. francine: the opposition, what is there rhetoric -- their rhetoric? what are they campaigning on? most of it -- >> most of it is around -- arounde: most of it is erdogan.

>> exactly. he is still the most popular. and a one-on-one race against any candidate, he is the clear favorite. francine: thank you so much. benjamin harvey, bloomberg's turkey bureau chief. stay with us. we have much more coming up, including working overtime. government building talks drag on in italy as the country's two biggest parties struggled to reach a deal. the u.s. president defends his help of chinese company zte, as washington's top economic figure heads to china for trade talks. this is bloomberg. ♪

♪ francine: good morning, everyone. economics, finance, politics, this is "bloomberg surveillance." i am francine lacqua here in london. we are getting some breaking news from a holding company established through the merger of mitsubishi tokyo financial group and ufj holdings. it is a financial group based in tokyo -- are based in japan -- or based in japan. at income forecast came in ¥850 billion instead of the y977 billion that we were expecting. we will see exactly what happens to the share price tomorrow when it opens. let's get straight to the bloomberg business flash. >> vodafone has said that its

cfo will become the company's chief executive. cfouly the 27th, deputy will become the cfo and join the board, while read will be can the desk become the ceo -- will become the ceo. credit agricole trading revenue fell in the first quarter from a year earlier. in an exclusive interview with bloomberg, the deputy ceo says he is not concerned about the unit. vier: we know that our revenues of market activity went down quite markedly, but we are not worried. allianz -- >> allianz's first quarter profit rose. income from property and casualty premiums rose as customers opt for more coverage after last year's u.s.

hurricanes and wildfires contributed 28 record year in insurance losses -- to a record year in insurance losses. that is the bloomberg business flash. francine: tensions are mounting in italy, or the two biggest parties are struggling to nail down the final details of a plan to form a government. some analysts have criticized the populace duos spending plans, saying that they could be potentially destabilizing for italy's precarious public finances. joining us now is raffaella tenconi, chief economist and founder of ada economics. way.l with us is larry hathe thank you for joining us. they want to get rid of the increase of the retirement age.

it is a basic income and flat tax. is it just a bit to make prime minister -- bid to make prime minister. raffaella: i think to some extent, yes. when you look at the opinion polls, since the date of the election, both five-star and the other party have gained in the polls. another election would not necessarily give a clear-cut answer. i think it is more of a strategy. aside from the fact that there are not that many of those candidates that would suit those sides. francine: it is not clear if he will give his stamp of approval to the new government or not. raffaella: i think he will. he wants to secure the government at least for a year, make sure that the budget meets requirements, and prove that

italy can be a stable european partner. francine: larry, what is your take on italy? i will bring up the spread between german bonds against the spanish bonds. this is not great for public finances, the matter who is prime minister. larry: it is not great for public finances. the issues that we would be most concerned about are the long-term once. pension reform, and getting rid of the retirement age is something -- and that retirement age is something that italy has to address and stick to. it would be disheartening to see a pullback on those issues. i would also say that addressing italy's tax system. maybe a flat tax would be an interesting way to address that. it is also a way to restore longer-term, sounder revenue collection and italy -- in

italy. the spending plans, one quick quibble -- could quibble at the margins about. the real issue is going to be politics for the e.u. francine: how ugly would this if mario draghi were not in charge? larry: it would be worse. it is hard to justify a 10 year at 2.9%.te at -- btp that surely is not quite right. blonde yields -- bond yields are being held low but central banks everywhere in the world. if you look at the kind of -- the next step, what does it mean for gdp in italy? last year was 1.5% growth, the

highest in seven years, and yet the people in charge performed very badly in the election. raffaella: i think that italy has lagged everybody else in the business cycle. it is just beginning to recover. decentenefiting from a global recovery. the fact that we are not really in a serious recession at the eurozone bubble. i don't think -- eurozone level. i don't think your growth outlook is going to look so bad. francine: not even with the populace government? raffaella: no. i think consensus is too bearish, especially in 2019. if anything, it would be a small add-on to an investment recovery. francine: is there anything -- it feels like the market is

largely ignoring the fact that -- does italy really need a government? can i just go along as it is -- it just go along as it is? larry: every country it requires some degree of stability -- country requires some degree of stability. i would be fairly dismissive of the so-called first quarter soft patch in europe. that is going to improve its sovereign credit standing. i think italy has a little bit of room here and is what to begin some latitude. the big concerns that were out there about five start have been dissipated somewhat. an italian exit or something like that is not the cards. i think people are willing to give italy of a look here. francine: could an italian exit be in the cards? i know you need to have a referendum.

relationship has always been complicated. that is probably the understatement of the year. raffaella: i would say no, an exit is not in the cards. this politics matter at all -- does politics matter at all? it doesn't matter for the medium and long-term. the mediumter for and long-term. it is critical for the long-term potential of the economy. he said that growth last year was 1.5%, does not look like much. francine: the concern with about 1.5% is that if people did not vote for the government in charge, they are not feeling it. it is an export led growth. when can that change? raffaella: a long time away. in any case i don't think it was

just about the growth. i think it was about the dichotomy between the promises and the actual implementations. larry, i was in paris yesterday speaking to the french central bank governor. he would not be drawn into italian politics. do you think that eurozone growth has picked -- peaked. larry: i think it is probably peaked, meaning that the growth -- rate of acceleration his bind us -- is behind us. particularlying worrisome going on in european growth at the moment. francine: what does the ecb actually need to do to convince the markets that maybe they are , but are not -- qe ready to raise rates just yet? larry: i think their language is very much in the spirit of what

you just mentioned. the thing that would accelerate that pace would be inflation. i think the ecb is on course, as you just mentioned, to taper by the third or fourth quarter of this year. euroine: if you look at level, what is the optimum euro level for italy? is there one that they should be targeting? raffaella: surveys show that italian manufacturing has gained so much competitiveness in the last if you years -- last few years that the bottleneck on exports to the lowest since 1985 -- is the lowest since 1985. francine: thank you so much for joining us, raffaella tenconi and larryconomics hatheway stay with us. >> turkey's president says that

the u.s. needs to work together with its country rather than putting up trade barriers. the turkish president made the comments an exclusive interview with guy johnson from london. >> right now, whether the u.s. would enter into such sanctions or not, i do not know. there is only one thing that i know. we are buying the products that i consider to be strategic, such as natural gas and petroleum, from russia. we cannot cut off our ties with russia in that respect. if we are allies with the u.s., we need solidarity, not sentients. francine: wilbur ross -- >> wilbur ross has said that america is exploring alternatives to punish china's zte. donald trump called into question the strategy. that as the president appeared to contradict wilbur ross' statement.

on the israel-gaza border, at least 59 people have been killed in by the clashes. it was the deadliest day -- violent clashes. it was the deadliest day in gaza since 2014. hamas led the opposition in the move -- to the msci released a list of chinese a-shares to be added to equity benchmarks next month. they will be icbc, china construction bank, and petrochina. it is asked -- expected to fundsl $17 billion in into that equity market. undergoneump has successful surgery to treat a kidney condition and is expected

to remain in the hospital for the duration of the week. she had an "embolization" procedure to treat a benign kidney condition. no other details were given. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am kailey leinz. this is bloomberg. francine: we are just getting some employment figures out of the u.k. this is for january to march, so it is backward looking, but the unemployment rate stays at 4.2%, basic wage growth at 2.9%. little movement on pound currently. trump has defended hits move to help dte, drawing criticism from both sides of the house amid concerns it could jeopardize national security. he said the equipment maker buys

a big percentage of individual parts from u.s. companies and the decision is reflective of the larger trade deal he is negotiating with china. trade is on the agenda again in washington when the top economic envoy arrives for talks. let's get more with enda curran. thank you so much for coming on. what are we expecting from this round of talks? enda: i think we are heading into a critical few days now because there is a feeling that as the clock ticks down to the actual imposition of tariffs the u.s. promised, the mood is getting a bit better. the fact that they are going to washington as a sign of progress. the confusing signals we are it is a hugezte, tech company and china. it has been crippled for breaking sanctions, which is

separate from the trade story. it all seems to be part of the mix. it seems like there is a better tone and the fact that we have the chinese envoy heading to washington is positive, but it would be critical to see if that can be delivered upon and whether any tangible agreement can be reached over the coming days. francine: through your reporting and our reporting it bloomberg, have we understood better about why president trump decided to go back on this zte decision? he has defended his move. is it really part of wide trade negotiations or can there be another reason? enda: certainly from the chinese side, they have lumped it into basket.e you can argue it is a separate story about security and byctions, but the perception the chinese is that it is all part of the mix and that is why they are pushing back.

their suggestion that they want some concessions on this zte said if they are willing to make intentions on their own side -- concessions on their own side. tweet by president trump willsts perhaps the u.s. change up how they approach zte and in return, china will offer concessions. china has said they are willing to make concessions and we expect them to make more concessions in terms of buying more goods. the critical thing would be the details that come with those promises and whether or not they are acted upon, and whether it is enough to satisfy president trump. it all seems to be in the mix whether zte is or is not part of the trade circle. francine: thank you so much. we will have plenty more from enda throughout the day. larry hatheway is still with us.

trade, which seems to be easing and yet it may actually flare up again, what does it mean for your investment strategy? larry: as an investor and someone active in the markets, a phrase has come along that says we do not take trump literally but we taken seriously. there is an issue that we have seen in the negotiations on trade with other countries and we are seeing it with china and also around the iran deal, the rhetoric is worse than the policy. that is the way markets are responding. they are relatively relaxed about these sort of issues, taking the opening salvo of something that ends up being a trade war turns into an agreement. whether it changes much, only time will tell, but the outcomes are not as nefarious as the rhetoric seems. this is another example of that,

so to some extent, there is an understandable degree of acceptance that this may be a novel way of doing things but will not change things fundamentally. francine: is there a buying opportunity? larry: i am not sure, insofar as the market is not moved much. it is about seeing through some of this rhetoric and asking more serious, fundamental questions about what is happening here to growth, to earnings. on the growth front, the concern is not as much of the trade or trade spats may have material impacts. it is more on whether it affects sentiment, particularly business spending. francine: germany is blaming trade as the economy cools. gdp rose 0.3% in the first quarter. are there countries that will be impacted by trade concerns or tensions? larry: i think it is too early to say the first quarter data were that hit by these sorts of

uncertainties, after the weather affects and the flow effects. -- flu effects. there is also big problems in first-quarter data in terms of seasonable -- seasonal adjustments, but it is the thing to watch. capex is coming back globally. a lot of it is around tech. it is for understandable reasons in terms of innovation less capacity constraints, but capex is always driven by expectations for the future. it is about whether the future will be better than the present, and that is the issue about how trade can affect the economy. it is worth watching but it is too early to draw a conclusion. francine: i imagine it is also too early to draw a conclusion, if the china and u.s. find an agreement does it mean the china opens up its economy more to the

u.s. economies. , arehey brought quicker they brought at the forefront, for example u.s. financials being able to trade more independently in china? is that a way of getting into the u.s.-china play. larry: those areas that were deemed at risk to a trade war -- u.s. agriculture, u.s. aircraft manufacturing -- then become stories where people are a little less concerned about that , and there can be a rebound in some of the associated share prices. in terms of the big macro economic stories, i doubt they will be affected. the trade balances will not be reduced to the extent the u.s. is hoping for, and it is unlikely the u.s. will be able manufacturing.'s ofis not as though in areas

banking or insurance that there are big opportunities. probably more in areas of investment management opening up the capital account. francine: how are the markets pricing in renewed tensions in the middle east? we saw what happened yesterday. are they discounting any kind of geopolitical shift or is something priced in the market? larry: at the moment, the big issue around the middle east would be about oil and oil prices. sense thatinst some global growth is no longer accelerating, you come back to the level of oil prices that probably reflects a risk freemium, not so much -- premium , not so much around yesterday's events but in terms of what is happening with the potential for u.s. sanctions against iran and how they may or may not be able to respond. it is a potential supply story against resilient opec and russian supply string --

constraints. francine: larry hatheway stays with us. stay with "surveillance." downone ceo is stepping after 10 years in charge. can he round out his tenure with one lump deal? later, the scottish problem. u.k. prime minister theresa another political balance -- battle, this time with parliament in edinburgh. this is bloomberg. ♪

francine: this is bloomberg "surveillance." vodafone's chief executive will

depart in october after a decade at the helm. he will be succeeded by the chief financial officer. the announcement came during vodafone's first quarter's earnings, with shares slumping around 5% as trading began. they agreed to a $22 billion deal last week with liberty global overt euro cable assets. great to have you on the program, larry. thank you for sticking around. is the timing odds? ?- odd why is he leaving now. >> the deal is probably a swansong. they've been trying to get it done for years and they have just about done it. he has done this big deal, been in the job for 10 years.

now is a good time for him to leave. francine: how is the chief financial officer who is taking over being seen by investors? joe: he is seen as a safe pair of hands. he was successful as the ceo of the u.k. division. he managed the numbers well as cfo so people expect them to continue. down because the ceo is very highly rated by investors. francine: what does this mean for investors? is there something to be said, this media flash telephone network industry? larry: there is a couple of y, itself, but broadly it is more about companies navigating a fairly interesting change in their structural environment. francine: does it mean that the liberty global deal will be done by october 1?

joe: it likely will not have been. nikki reed has a big job -- nick read has a big job to finish it. francine: given the challenges it better tory, is be a european telecom operator or a u.s. one? larry: i am not sure there is a great deal to choose from between the two. willnk the european side generate a slightly more interesting valuation case, however markets are really not trading these days on relative value. you see that across the broader measures of the index itself. what will ultimately be the key is their ability overtime to address the cost side and generate the kind of sources of revenue investors are looking for. people are looking at telecoms as a mature industry, one that is perhaps able to do deals and shed assets and do deals. these deals are very important

for the way they are viewed by the market. this is no longer seen as it was 10 to 15 years ago. francine: are you surprised by the number of m&a deals we are seeing almost in all industries? does it have to do with the kind of, the point in the cycle and cheap interest rates or is it just weak industries that need to become stronger? larry: as a broad concept, the m&a cycle. it is typically because the sources of operating leverage have been fully exploited at this point in time. you probably accelerated your revenue growth as much as you can so you use finance in a particular leverage to generate a high roe's investors are demanding. share prices where they are, firms and entities have now some capital to deploy.

i think some are getting ahead of what they would be concerned about, which is rising interest rates. that finance m&a is being supported by a view that the window is closing on that. most of the boxes of what you would expect to see at this point in the cycle. francine: larry hatheway stays with us. up next, we talk brexit and the thorny issue of the irish border and we also talk scotland. could extending the transition period be a potential solution? ♪

>> right now, whether the u.s. would enter into such sanctions are not, i don't know, but there is only one thing i know. we are buying the products i consider to be strategic, such as natural gas and petroleum, from russia. we cannot cut off our ties from russia in that respect. if we are allies with the u.s., we need solidarity, not sanctions. francine: that was the turkish president speaking exclusively with bloomberg. let's check in on the country's

assets. let's look at lira, we have a regression chart that 12 months. on the back of that interview with guy johnson, the currency weekend to a record low against the dollar and the euro. bonds declined to a new record. we have been speaking to a lot of market participants saying that the markets will punish the lira. ergdoganrn is that mr. will stand in the way of rate hikes that are needed for the currency. we also have piston bowl, and this is -- istanbul, and this is where it is. larry hatheway cannot wait to talk about brexit. ,e also have the bonds basically declining a touch to a new record. the u.k. could have a short-term fix for one of brexit's biggest questions -- what to do about the irish border.

people familiar with the british position say one option is an extension of the uk's transitional customs arrangements with the edu -- e.u. the scottish parliament is expected to reject theresa may's flagship brexit legislation. how much of an upset could that be to her plan? larry hatheway is still with us. we cannot really figure out where to go. the ideal solution would be a transition period which gives enough time to find a solution, what it is difficult to see what kind of solution would keep the house of lords onside, pro-brexit onside, and keep everyone happy. you cannot please everyone. larry: you cannot. it is a thorny issue and there is no tenable solution. people are looking for ways to postpone things.

,he e.u. is not interested certainly not on any kind of a repeating basis. we are trying to buy time without necessarily having the ability to buy too much time. it seems that the prime minister is dealing with that quite well and juggling competing demands and pressures on her government fairly well, for the time being. there will not be that much longer until she will have to make a decision. francine: let a bring you to my euro-pound chart. beat in the uk's three on three-month employment change, but some of the other -- overall, a lot of the other figures were in line. the kind of job creation, positive, that a weaker headline wage growth in march versus february. larry: i think from a point of view of sterling, the macro backdrop and the backdrop for

the bank of england remains a short-term dynamic that is interesting to watch. the pound was getting support that the bank would move higher with rates. that is not in the cards. the non-acceleration of inflation speaks to that particular issue. speaks to the broader issue of what is going on with wage dynamics in many countries, but focusing on the u.k., the longer-term chart in terms of euro-sterling reflects this ambivalence of what we may see when we see a deal. i doubt that sterling would appreciate across an array of currencies. you have a serious challenge to britain's political future, which surely would have a tendency to weaken the pound. there is a split which reflects the same concerns we were talking about before, and the market cannot make up its mind about what this will look like. hence, the sideways movements in the currency.

francine: that was larry hatheway. bloomberg "surveillance" continues in the next hour. tom keene joins me and we will be talking treasuries, ecb, the italian election, what is going on with the bank of england, or what the brexit debate may entail. we will be speaking to alberto gallo. the other thing we will be watching for, our fantastic interview guy johnson did on turkey. the president of turkey who is facing elections has said he intends to tighten his grip on the turkish economy and the central bank. we heard from a number of currency analysts that this means turkish lira may go -- this is bloomberg. ♪

francine: erdogan exclusive.

as lira hits an all-time low the turkish president says he will tighten his grip on the economy and central-bank after the election. talks about his decision to help zte. could tensions be easing? ad we are live in tel aviv day after 59 palestinians were killed in applications with israeli -- confrontations with israeli troops. we are also looking vodafone. a huge company trying to buy the assets of liberty global in europe. the chief executive is leaving after 10 years. and vodafone trying to figure out what their future is -- francine: let's get straight to

the bloomberg first word news. taylor riggs with the latest on gaza. taylor: hamas vowed to keep protesters from storming the border. at least 59 palestinians were killed and 1200 more were wounded and -- in monday's confrontation. palestinians say putting the jerusalem undermines their own claim to east jerusalem. withteve mnuchin six china's vice premier liu he -- steve mnuchin sits with china's vice premier liu he. -- the president says he is working to get zte back in business. about to get a reprieve from the volcker rule.

u.s. agencies are preparing to presumptionrictive that most short-term trades violate the posts recession rule. italy, populists trying to form a new government are headed into overtime pay the leaders of the five-star movement are trying to nail down the final details of a coalition plan. the president agreed to give them more time. their plan is to cut taxes and rollback pensions, which could be destabilizing. global news 24 hours a day on air, and at 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 are negative. they are doing this through what is called a yield flip.

we have been having curve flattening with churning yields. this morning, decisively, curve steepening, up one point. 46.30 basis points. we are waiting for a stronger dollar. screen, the vix, 13.15. the 10 year yield, that should be green. a higher yield by two basis points come up to 3.02. this is a huge deal in the fixed income market, to see this finally flipped into a different dynamic in fixed income. it is expressed somewhat in oil. gaza in there as well. the turkish lira, after guy johnson's important video -- interview. francine: that is why that chart matters. this is what i am looking at. a risk off flavor in the markets today. forpean stocks struggling

traction following declines in asia. investors grappling with geopolitics. the dollar rising. oil pretty much study. the u.s. 10 year above 3%. tom: let me go to the bloomberg now -- thank you, david wilson. for those of you who do not listen to bloomberg radio, at 9:02 a.m. every morning, he powers into radio with equity observations. the white line, standard and poor's 500 dividend yield. call it 2%. the pink line is the 6-month thell going back to financial crisis. the flat line of the fed, the the central bank. we now have a six-month t-bill yield. higher than the equity market yield. francine: it is.

david wilson is great. you can only hear him on american radio. this is why the chart matters. a littlesh lira slid bit further since the interview -- since guy johnson's interview. the turkish president says he will tighten his grip on the economy. if he wins the election next month. he did caveat that with this may make some uncomfortable, but they have to do it. that is the latest from -- presidentwhon erdogan. you can clearly see the lira depreciation in this chart. his comments sent the lira to the weakest level ever. to our guyclusively johnson. here he is.

pres. erdogan: first of all, your that head of the state. when the people fall into difficulties because of monetary policies, who will they hold accountable? they will hold the president accountable. thee they will ask president about it, we have to give up the image of a president who is influential on monetary policies. guy: so you will play a role in monetary policy going forward. is that the big change? pres. erdogan: yes. this may make some comfortable, but we have to do it. state are ale the credible to the citizens. -- are accountable to the citizens. guy: you hold and unorthodox view of monetary policy. monetary policy will be run on a different basis to the rest of the world. is that something you are comfortable with?

pres. erdogan: while doing all of these, we are not doing them to disturb circles on an international level. steps in orderse to protect my country's interests, and we will do whatever my country's interests require. guy: i am curious as to how you think it will work, how your relationship with the governor of the central bank will change. how will that relationship operate? pres. erdogan: at the moment, however the central bank's relations are continuing at the moment, they will continue in the same way. we are not new to running the country. we have been running this country for 16 years, without interruption. guy: you said earlier in the interview that turkey has an independent central bank and same now andbe the afterwards.

it with your greater role in monetary policy, will turkey still have an independent central bank? above all else, and it is not just turkey, we will apply the same governance in turkey in the same way as it is applied globally. today, whatever the governance approach in the u.s. or europe, we will apply the same in turkey as well. what is legitimate for them cannot be illegitimate for us. everyone should know this. we will take off debt accordingly, but we will never let our country lose. francine: that was the turkish president, speaking exclusively to blaber. is alberto gallo. it was the clearest admission i

have ever heard that president toogan once to -- wants intervene in monetary policy, because he will be held accountable. was surprising for me is he did not say this anywhere else. what will it take for him to relinquish? >> it will take nothing short of a global rout in turkish financial assets. we have seen hugely controversial comments from president erdogan, targeted towards an international audience. a lot of us thought his rhetoric was targeted towards the local toestic audience tried espouse more populous kinds of sentiment -- populist kinds of sentiment. but this is a plus he ascribes to. francine: so what does it mean for the lira? will we see more depreciation, will we see investors shy away

from turkey? phoenix: i think both. there is a lack -- we have seen the confirmation about these controversial philosophies. going forward, the central bank is less likely to be able to take the aggressive actions they need to to tighten monetary policy aggressively enough to stem depreciation. that will lead to further selloff. at brown you are university, you learned foreign-exchange dynamic have a lot to do with international ramifications, but also the domestic economy. what does this evaluation of the turkish lira mean for the turkish people, whether in is istanbul or some village up north? phoenix: i think it exacerbates the kind of recurring nightmare the population finds itself in

time and time again the past several years. currency depreciation. lots of stress on corporate balance sheets. greater likelihood of default. financing pressures and greater financing needs. the rollover needs to become much more exacerbated. weakening currency results in higher inflation. i am as like we saw in argentina last week? stepsx: we are still some away from that pave there is still a lot of fiscal room they can access. to try to support the economy, if it ever came to a point where suchllapsed on the back of aggressive currency depreciation. that is still quite a few steps away from them. francine: the turkish lira, turkish bonds, declined to new records after he said to the president he will take responsibility for most monetary

policy and the economy. how much anxiousness is their own among international investors? alberto: we are still short. when you have this type of situation, you have to look at the willingness to defend the currency and the strength of the central bank. the willingness is not there, toause the president wants move it to get elected. a means pushing banks to lend to household and consumers. turkish banks have been lending a lot and nonperforming loans are growing. result, is, as a also limited. if the central bank starts hiking to defend the currency, there is a risk of domestic credit crunch. when you have a short-term , the environment of a stronger dollar, higher interest rates, in the domestic market, it will get weaker. the weakest asset -- the lira

has been selling off turkish local government debt. but if you look at heart currency debt, that is still in the range of 200 basis points, 250 basis points, which is among the tightest in the emerging markets he universe in europe. turkey was often regarded as a country that would join the e.u., go towards an investment grade developed market, and it is not. banks and corporate have a lot of heart currency debt -- hard currency debt. tom: alderton gallo and phoenix kalen, thank you. -- alberto gallo and phoenix kalen, thank you. looking at $80 oil -- what does it mean for america? will join us in our next hour. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." let's get the bloomberg business flash. the biggest energy company and portugal rejected a $10.9 billion takeover. the executive board said the bid does not adequately reflect the value of the company. aares of edp rose the most in decade -- that means investors expect the offer to be sweetened. and a german bank says business with key customers fell for at least the fifth straight quarter. backrzbank is paring

trading while focusing on retail lending. -- for the printer company as soon as possible. intel tells bloomberg he already has had private talks. xerox pulled out of a deal with fujifilm and replaced its ceo. that is your bloomberg business flash. francine: thank you. figures show it falling in line with expectations. joining us now is holger schmieding. and alberto gallo. for being here. has the german economy peaked? holger: in terms of year-over-year growth rate, it probably peaked last summer.

we are seeing a soft patch now in terms of overall, and we would like to see a return to growth rates noticeably above the 1.5 growth rate. the international environment is good, unless trump spoils it. there is a small fiscal stimulus. the euro is clearly to modestly undervalued. the german economic outlook looks good despite a dent now. francine: what is your take on the german economy? alberto: i think we are in a good place. we lost some of the momentum last year. you could say it was overdue because we had a strong acceleration. the question is how long will the expansion be? countries, you still have the permanent debt

overhang. you need three years of good or nominal growth above 2.5% for italy or greece or portugal to absorb some of the debt. a germany start sputtering little bit, you're not sure if you will get these three years of growth. and you have international risks . these are the things i am worried about. not so much the growth been positive or not. rose is positive, but it is the momentum -- growth is positive, but momentum is waning. francine: how important is that for the ecb? if growth falls well 2% plus.or stays at it likely will stay at 2% plus for the eurozone, so the ecb will proceed as it has outlined, which is the end of asset purchases. then, a couple of quarters later, we see the first hike. tom: holger schmieding and

alberto gallo, always a good thing. coming up, we continue. this is bloomberg. ♪ mberg. ♪

francine: this is "bloomberg surveillance." francine and tom from london and new york. ed a move trump defend to help zte. the apple chief executive spoke

with david rubenstein, where he discussed his meeting with trump. tim: i met with the president the next day. i would not want to say what he said, because that is not the way i look at it. what i talked about was trade and the importance of trade and that two countries trading together make the pie larger. true, undoubtedly, that not everyone has been advantaged from that, in either country. we got to work on that. noti felt that tariffs were the right approach. i showed him some more analytical kinds of things to demonstrate why. we also talked about

immigration. and the importance of fixing the dreamer issue now. we are only one court ruling away from a catastrophic pace there. francine: tim cook speaking with david rubenstein. interesting to have his take. when you look at silicon valley, some of the concerns we have out there is access to talent. a lot of the engineers, a lot of the people that work with software, are immigrants, so it is interesting to have tim cook speak on that after meeting with the president. between relationship silicon valley and the president are original. we have gone back and forth on this since before the campaign. it will be interesting to see if the midterms, how silicon valley frames opt a search for maybe a more comfortable democratic candidate and also keep up a

good relationship with the president. francine: we will have more on that threat the day, and holger schmieding and alberto gallo stay with us. you can watch the interview in the new season of the david rubenstein show, peer-to-peer conservations. coming up -- conversations. coming up, more market analysis. the turkish lira moving. tom: let me look at the data. interesting change in the fixed income market with the curve steepening and u.s. yields higher. the ramifications of that on strong dollar can be substantial. including the turkish lira after guy johnson's erdogan interview. this is bloomberg. ♪ mom you called?

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look at you. this tech stuff is easy. [ whirring sound ] you want a cookie? it's a drone! i know. find your phone easily with the xfinity voice remote. one more way comcast is working to fit into your life, not the other way around. tom: good morning. "bloomberg surveillance."

francine lacqua in london, off her successful trip to paris yesterday. i and tom keene in new york. yesterday, we were focused on israel. the move of the united states embassy firm -- to jerusalem. yesterday, i reality. with that, at least 58 dead in gaza. superb coverage yesterday. all of israel focused on gaza. michael arnold, what is going on, and what can we anticipate? >> so far, it is surprisingly quiet. this morning, they are holding funerals for many of the people killed in yesterday. it is possible once the funerals and mid day are finished, we will see things he'd up in the afternoon ashley to -- heat up in the afternoon.

egypt apparently told hamas to keep things quiet. toael apparently threatened start knocking off hamas leaders if riots get out of hand. tom: within this is the political divide, whether on american cable tv, a split protests or festivities, or the way each and every newspaper plays it. mediad the israeli report? michael: they did not have the split screen. the two events separately. they did not want to draw this connection between the embassy move and yesterday's protests. the protest movement has been building up for 6% in weeks already. it has as much to do with hama'' own internal distress. they are basically giving up on

governing gaza. it has as much to do with that as it does the actual embassy move. keeprael, they tried to the event separate. around the world, it was a split screen, and that was effective pr for hamas. unncine: i understand the security council is meeting to discuss the violence. is there anything that could actually come out of this session? would not expect so. the trump administration, aterally, protects israel the security council. it is possible that the arab state and some european companies will put forward a resolution criticizing israel's response, but i would be surprised if the u.s. allows that to go through. tom: i want to to redefine this word that -- the linkage to iran --redefine what "hamas" is.

michael: they began as a resistance movement against israel. as an arm of the muslim brotherhood, a fundamentalist muslim group that began in egypt. over time, they developed a strong military wing. u.s., considers them a terrorist group. since 2007, they have -- if they want: election and were supposed to share power with the palestinian authority. it did not work, so war broke out. last year, there was a reconciliation effort, where hamas volunteered to give up governing as long as they could keep their arms. i think they recognize that they are a militia, and that is their purpose, the governing is not something they do well. tom: michael, thank you.

right now, your morning news briefing. in new york city, here is taylor riggs. taylor: the president is defending his move to help telecom maker zte. tweetedident tweed -- buys a lot ofe parts from u.s. companies. zte had been cut off for violating a deal. innwhile, economic momentum china held off last month. industrial output be expectations. signals --estment retail sales came in slightly lower-than-expected. the turkish president plans to tighten his grip on the economy and monetary policy if he is reelected next month. the turkish lira hit a record low against the dollar.

spoke to guy johnson in an exclusive interview. pres. erdogan: we have to give off the image of a president who is influential on monetary policies. guy: so you will play a role in monitor policy going forward. is that the big change? pres. erdogan: yes. this may make some uncomfortable, but we have to do it. taylor: a victory next month would consolidate erdogan's one-man rule of the country he has governed since 2003. global news 24 hours a day on air, and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. thank you. the u.s. president has defended his move to help the chinese telecom company zte, drawing criticism from both sides of the house among concerns it could jeopardize national security.

the president tweeted that the company buys a lot of individual parts from american companies. trade is on the agenda again today in washington, with beijing's top economic envoy liu he. curran, talk to me about zte. what do we know about the president's reasons for reverting back to a decision to help zte out? >> zte is a huge company. it was in breach of u.s. sanctions for dealing with iran and north korea. that issue was bubbling. more recently, the u.s. has taken measures against zte that effectively shuts the company down. the view is it is a sanctions story, separate from the broader

trade story, but indications are the chip are on the bargaining table. so the feeling is we are heading into a critical few days between china and the u.s. china's top economic advisers heading to washington. it will be interesting to see what concessions china will put on the table. all the while, the clock is ticking towards the position of tariffs. francine: are we any wiser as to what the chinese will give in return for this favor? enda: we know from the outset that china does not want a trade war. they want to open up their

markets more, so there is a will put on china concessions. whether or not they will follow through on those promises is a critical question. they promise a lot, but it is often not delivered upon. so the cradle thing is what are the details put on the table, and will they be enough -- so the critical thing is what are the details put on the table, and will they be enough? francine: enda curran, thank you. we are back with holger schmieding and alberto gallo. when you look at the trade tensions, the trade-off, and when you read the president's tweets on zte, does it mean tensions will ease? holger: no. generally speaking, we're going towards a period of higher

protectionism. it can be opposed, but when it comes to choosing -- going back towards more globalization versus the situation in the middle of the u.s., it is always america first. iselieve that there something to make measures go through without a response, and there is potential help given countries. in argentina, for example. but the direction is clear. we are going towards a world with more geopolitical risk and more protectionism. that is bad for certain sectors and regions of the world. if i look atk -- turkey, the local 10-year turkey is going out 40 basis points, the 10 year yield, up to 14.93

-- 14.39%. if i look at argentina or china, the reality is, with the u.s. fed bank, we will have a higher u.s. regime in emerging markets. what will be the ramifications of that? alberto: the first shoe to drop is the emerging markets to have the highest dependency on foreign funding. argentina has been issuing a lot of dollar debt. a bond that went over 100, now back to $.87. some investors bought the 100 year in dollars. turkey, similarly, has a lot of hard debt. most vulnerable emerging markets. emerging markets as a whole remains positive. you can not make a bad bunch at of the whole group, but i would

say definitely there are some weaknesses. some companies issuing for the first time. these are vulnerable. tom: when we look at this arising real rates, the reality of what mr. powell or mr. draghi the battleey may do, in your world of economics, what will be the knock on effects of the largest developed nations to less developed nations? there has to be the effect of higher real rates, right? holger: this affect will actually be pretty small. tom: why? holger: because we have strong growth in u.s. domestic demand at the same time. that will get many companies to export more. trade tensions are dangerous. it is the uncertainty about the future trade regime that is weighing a lot on europe at the moment. incident around zte

means anything. it could mean that trump is ready or may be ready to conclude a deal that reduces trade tensions. if that is the case or we just get used to the elevated level of noise around trade, then we will have not just the u.s. growing nicely but europe rebounding from its dent. that is favorable. tom: within the mix of unilateral, bilateral, multilateral trade discussions, the fact is the president of the united states is doing this by twitter. i have never seen that. can that be a successful strategy? holger: no, i do not think it is a successful strategy. it is much worse than the multilateral strategies we had before trump. much worse than the attempts to have the transatlantic partnership to have a transpacific partnership. stuff that was happening before trump. relative to the heightened level

of fear, which we had in march and april, about global trade, i think there is a good chance that this will receive a bit. have ongoing growth in the u.s. european growth recovering from the short-term dent. that, all in all, is not a bad economic story. tom: holger schmieding, thrilled you are with us. and we have alberto gallo. real understanding of continental and global economics. speaking of economics, james bullard. always interesting. james bullard with our kathleen hays. look for that in the 1:00 hour. this is bloomberg. ♪

francine: this is "bloomberg surveillance." tom and francine from london and new york. tensions are mounting in italy. the two biggest parties are theggling to nail down details in forming a new government. five-star asked the president for more time. some analysts have criticized the populists' plan. what affect could a deal have on growth process -- prospects? holger schmieding and alberto gallo are still with us. first of all, what is in jeopardy now? populistve this government -- will the president say yes to it, and what are the main faults? is it terrible for public

finances? notrto: first of all, it is a done deal. it is possible that the agreement may fall apart. and you could have a different type of coalition if the two parties do not agree. if they do agree, there is a plan to introduce a flat tax, basic income, and increase spending. the president, however, has the ability to block laws that are not funded. he has said he would do so. i believe there is a strong difference between happenseering and what in practice. investors are starting to differentiate between the two. ising said that, there trading two times then spanish bonds.

let me bring into my morning must-reads. league-five-star coalition would represent what italians want. they won more than 200 seats. if they can shut a deal, so be it. if you are an investor, how would you take the news? holger: i would not take this news lightly. italy is going down a dangerous, slippery road in the sense that whatever happened short-term, the big news really is we are more likely to see reform reversals rather than progrowth reforms in italy. we are more likely to see fiscal fiscals then progrowth reform. for a country like italy, which is only half reformed, for such

a country, reform reversals could be fatal. not now, but in the next recession, if the next recession room -- lays bare the remaining problems. francine: we have a viewer question. this person asks the german economy may be at full employment, and how long can they expect gdp growth to be about potential growth? and what parallels can be drawn between the u.s. economic cycle and the german one? girls: there are clear into the u.s. and german cycle. the german cycle is stronger and more advanced than the eurozone's. it is more closely aligned with the u.s. than the cycle of other eurozone countries. we have a record shortage of --

the solution for germany is it qualified in immigrants from other european countries, helping the country maintain a growth rate that is beyond its domestic potential francine: holger schmieding, thank you. alberto gallo with us as well. oil breaking up to $78.90 on brent crude. a real run to $79. your morning briefing coast-to-coast, across america. robert moon, karen moskow, on bloomberg radio. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." bloomberg business flash. a surprise change at the top of the world's second largest mobile carrier. unexpectedlyo

announced he is leaving after a decade in charge. he will be replaced by the cfo. last week, vodafone agreed to buy cable assets from liberty global. the new ceo at easyjet put his a stamp on the airline. he moved to boost the company's holiday unit. he also attracted more business flyers. easyjet posted a small event expected first-half loss -- smaller than expected first-half loss. francine: - , today, ono gallo the litmus paper of the global financial system. on the bloomberg, this is really good math of what the dollar is doing. . contained weak dollar

with a basic observation. can this strong dollar trend continue? .lberto: i think so it is remarkable how the dollar has been weak so far. the fed has been really the only main central bank in the world raising rates. effectively, the u.s. is able to have its cake and eat it, too. by raising rates and keeping exports flowing through a weak dollar narrative. but markets, in the end, are realizing other central banks are not able to hike as quickly as the fed. that is resulting in a stronger dollar. carney dropping the ball on a hike. .he ecb more undecided the reserve bank of australia, bank of canada -- the fed is

leading and the dollar is getting stronger. i think it is overdue. it continues for a little longer. as long as global growth is not rebound come about global growth is hindered by the trade wars. tom: we have to get you back on to continue this discussion. mr. gallo is with algebris investments. thank you. the news flow extraordinary this morning. we are watching israel and gaza. coming up, we focus on the american economy with ian shepherdson. much more as well, including our concert -- conversation with mr. erdogan of turkey. stay with us. this is bloomberg. ♪

tom: this morning, u.s. yields break higher. will a continued strong dollar provide instability to the global financial system? and the u.s. embassy in jerusalem steel themselves for another day of possible violence. withohnson in conversation president erdogan. yorkis tom keene in new and francine lacqua in london. i have not heard a word in 5, 6, 10 days on brexit. is the u.k. just getting ready for the wedding? francine: indeed, the united kingdom is getting ready for the wedding. there is quite a lot going on in brexit. what is going on is theresa may

is getting a hard time from all sides. the scottish parliament is getting involved. there is still no solution to the irish border. we had a little data, and the underlying wage growth was not as strong as expected. tom: we have seen that elsewhere. retail sales in the u.s. later this morning. keepr: hamas has vowed to her testers storming the borders between israel and palestine. 59 palestinians were killed and hundreds more were wounded. theviolence occurred as u.s. was opening its new embassy in jerusalem. palestinians say putting the embassy there undermines their own claim to east jerusalem. setting down for trade talks with china. they may work out a deal on chinese telecom equipment maker

the te. -- zte. president trump says he is working to get zte back in business. his decision was criticized by democrats and republicans. wall street is about to get a big reprieve from the volcker rule. preparing to are that -- post term traits violate the rule. the time populist trying to form a government are heading to overtime. they are trying to now down the final details of a coalition plan. president sergio mattarella has agreed to give them more time. it could be destabilizing for italian public financing.

global news 24 hours a day on air and @tictoc 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. really interesting data check today. we need to get through it quickly. futures at negative three. curve steepening with yield higher in the u.s. a real reversal from what we have seen in the last two or three weeks. is higher at $71 a barrel. the vix is at 13.08. home depot is important as a bellwether for america. those comp sales are coming in a little light. oil is near $80 a barrel in turkish lira. impact there off of guy johnson's interview. francine: there is a risk off sentiment to the market.

we have seen declines across asia. i looking at bonds selloff deepening, the dollar edging higher, and oil advancing. tom: we need to return to israel and the protests seeing in gaza. so much of that has to do with history back to 1948. today is may 15, not what day for the palestinians, their moment of remembrance for many hundreds of thousands of palestinians come in their sense, pushed out of their homes. kevin cirilli is in washington. michael, what is the importance palestinians5 two -- to palestinians? will that change the character of protests? today is very important to palestinians.

they mark what they consider the tragedy of the creation of israel. this has been building up to today, these protests. they ended up knowing things forward yesterday so the major protests would coincide with the embassy move. today, thanks seven quiet. hamas has not been pushing people to go to the fence. the funerals for the 60 people killed yesterday have been taking place this morning. it is quite possible that once this funerals are finished, we will see masses heading to the fences again. tom: given your wonderful experience with israel, and i say it with great respect for the 58, 59 people that died yesterday, are these suicide debts? thethese people going to border know that they are going to die? what kind of deaths did we observe yesterday?

michael: that is a tough question to answer. theseents at protests, there are three rings. there is a distant ring up people that are families who are relaxing, hanging out, learning about palestinian culture. there is an intermediate ring of people who are burning tires, talking israeli soldiers, maybe throwing stones. then there is an immediate ring of people who try to rush the fence, try to move through it, try to plant bounce according to israel. expectingey go there to get killed were badly injured, i don't know, but that is certainly the likely outcome. francine: it is very clear that this was condemned by palestinians, the opening of the embassy. what does that mean for the prospects of what president

trump who once said he planned to negotiate the middle east deal of the century? michael: right now, the prospects do not look good. the palestinian authority cut off contact with the white house in november when the white house recognized jerusalem as the capital of israel. this is an area that is free of any conflicting claims and should not prejudge the status of east jerusalem, which is an area the palestinians claim for themselves. for a long time, they have been trying to internationalize the conflict because they feel the u.s. is too close to israel. move fitse embassy into that narrative, we need to take this out of u.s. hands. i will say there is no prospect of talks on the

horizon. francine: we're just getting pictures of protests on the west bank near rachel's tomb. the day after israel declared independence and marks the day when hundreds of thousands of palestinians were flat from their homes or --. fled. could the u.n. get involved? michael: get involved in managing the protests or how do you mean? francine: there is a security council. you tell me. what could happen? michael: i would suspect that probably nothing will happen. states areian

likely to introduce some resolutions. the u.s. usually blocks these resolutions. whether the gaza protests would spread to the west bank and ignite a wider confrontation. there are protests going on today, so far not wild. if the west bank catches fire as well, that would be a much more challenging situation for israel. tom: thank you very much, michael arnold. there has been some amazing and political and divided response across this nation to what we have seen in the last 30 or 40 hours. kevin cirilli is our chief washington correspondent. because one inflammatory op-ed in the washington post. what i was stunned by where the facts in this op-ed on the

attendance at the jerusalem opening. only 14 members of congress were on hand for the celebration, all republican, and only one jewish. speakers,t on to the went through their bios. this was less a diplomatic ceremony then a campaign event. a poll last year by the american jewish congress found that american jews, only 21% of the view trump favorably, were overwhelmingly, 68%, opposed to immediate move of the embassy. i was flabbergasted by the lack of attendance by congress at this event yesterday. was it a campaign event? kevin: it was not a campaign event. i was struck by what michael arnold said. when i traveled with the president last year from saudi air force one to

touching down in israel, that was the first connecting flight from saudi arabia to israel, showing this new working relationship between the saudi's and the israelis. wonder this morning is what the saudis are saying about the increased tension between the israelis and palestinians about this embassy move. think thekly, i attendance has a lot to do with the images we are seeing of the palestinian protests. ajc said, despite that poll, which some would be skeptical of, this move did receive praise from several democrats, including senate minority leader chuck schumer who released a statement yesterday praising this move. tom: there was one moment

yesterday where we realized -- tell us about john mccain's condition and how this will be affected in washington in the coming days. mccain isator john someone who has been a giant in the u.s. senate. he has so much respect from his colleagues on both sides of the aisle. in terms of policy, he has made his position of in recent months on everything from health care and most recently his opposition against the president's nominee haspel,the cia, gina for position on torture. becomes who will replace -- it is almost too early to discuss that.

himselfmccain has found unwillingly and not wanting to be in a political back-and-forth with this administration, and the focus now from folks in washington is wishing him well. thank you so much. kevin cirilli, our chief washington correspondent. coming up, our exclusive interview with the turkish erdogan., received this is bloomberg. ♪

taylor: this is "bloomberg surveillance."

mostn is taking its concerted step yet to digital advertising. it is testing a new display at -- ading that earnings offering that threatens google and other online advertising giants. the bank says that a key business that corporate customers spell for the fifth straight quarter. commerzbank is paring back corporate lending while it focuses on retail lending. thank you. a lot of impact today off of what we saw from guy johnson interview with president erdogan. we saw the lira drop. we saw mystic turkey drop as well. turkeystic bonds within

drop as well. >> first of all, you are the head of the state. when the people involved into difficulties because of monetary houses, who are they going to hold accountable? they will hold the president accountable. we have to give up the image of a president who is influential on monetary policies. guy: you will play a role in monetary policy going forward? is that the change? >> this may make some uncomfortable. we have to do it. those who rule the state are accountable to the citizens. guy: you hold very, let's call them unorthodox from an outsider to view, monetary policy. that is going to be run on a very different basis from the

rest of the world is that something you are both? while doing all of these, we're not doing them to disturb circles on international level. we take the steps in order to country's interest. we will do whatever my country's interests acquired. guy: i am curious how you think it will work, how your relationship with governor of the central bank will change, how will that operate? >> at the moment, however the central banks relations are at the moment, they will continue in the same way. we have not taken over the government recently. we have been running this country for 16 years without interruption. tom: you can see all of that interview ross number all caps through the day -- across

bloomberg products throughout the day. benjamin, let me cut to the chase. hasluation of the currency foreign and domestic effect. how will someone in a village 200 miles east of the simple, how will they fare with a weaker lira the collapse of the bond market? >> that is a good question. in turkey, the lira is considered the most closely watched barometer to the health of the economy. it is now making everything from iphones to gasoline more expensive. everybodyeffect, and is talking about. it also makes turkey less attractive for foreign investors, which turkey depends on to fund its current account

deficit and keep the economy running on. tom: tell us the nature of the central bank, their independence, do they fight back against mr. erdogan, or do they lose independence this time of crisis? >> it is the central bank that is under immense political pressure. his views are well known. he does not like interest rates. he wants the central bank to cut interest rates. he has unorthodox views about the relation between interest rates and inflation. it looks like this will only intensify going forward. francine: how big a deal is this for international investors? it is quite significant that the president shows up to bloomberg in the center of london to get this message. >> i think what he said yesterday was chopping not just hocking nots

just because of what he said but who he is and where he said it. you would expect it to say the central bank's and they will do anything they can to contain inflation, that he decided not to do that. visited inow the imf 2009 for their annual meeting in istanbul. will they visit to bailout mr. erdogan? >> no one is talking about that at the moment. one of his great points of pride is that he inherited an imf program, multibillion-dollar program, and paid it back. this is a feature of his campaign rallies and a great source of pride for him. tom: thank you for joining us this morning. sitting patiently, quietly, studying all of their academic

knowledge of butterflies flapping and canaries in goal mines, conrad dequadros and ian shepherdson. thank you for waiting. this has got to have a ramification. >> i think it does. two.rtainly has i think it is pretty clear that this is not turkey or just argentina. we are seeing this affecting markets broadly. we are now seeing much more concerted efforts on the part of the fed to return policy to a more neutral setting. i think that is having an impact. francine: we are also seeing ies sendendup -- mood

up their rating on a turkish shock. overall, this is a president that has been consolidating power, looks likely to win on june 24. what does it mean for international investment in turkish assets? ian: don't would be my advice. turkey has everything you want in an emerging market economy when the fed is raising rates. it now has the president announcing to the whole world that he will be taking over the control of monetary policy can removing the independence of the central bank, which is what markets want to see. everything that could be going wrong for an em when the fed is raising rates is happening in turkey. i think it could potentially go significantly further. as wevery tragic because heard he took turkey out of the imf program and paid all the

money back. it has been a huge source of pride. psyche is on the verge of throwing it all away -- it looks like he is on the verge of throwing it all away for reasons that are not clear. francine: could he do a reversal? he is saying that the president needs to take care of the economy, and the buck stops of them when it comes to -- with hi m when it comes to monetary policy. >> the problem in turkey is he cap do whatever he likes. we are trying to read the mind of one guy who is in complete control of the state. he could turn around and do the right thing, but it is difficult to say that is a reasonably likely outcome. i would definitely not say it is the most likely outcome. obviously, on the campaign trail have he will say whatever he needs to say to get the most votes possible.

andation is now rampant rising. i don't see any of this changing in the short term. tom: if we could link this back to the real world in "bloomberg surveillance" and less international relations, isn't it really about rising real yields and getting through the summer in a higher really rate regime.rate start, the fed has always forecasted that things will be better by tomorrow morning. tom: rising real rates is baloney. --it is tom: baloney is an american meat food. >> i always wondered. blink?en does the fed

>> not yet. if we look at what the fed is focused on, i think this is actually what we have seen so far, the fed is less likely to blank then the phone -- blink than the prior fed. tom: loving it. that is a good thing. sold ats were sotheby's. i did not bid. francine considered bidding. longe lampley will be a with what you should consider doing with $170 million. this is bloomberg. ♪ s bloomberg. ♪ mom, dad, can we talk?

sure. what's up, son? i can't be your it guy anymore. what? you guys have xfinity. you can do this. what's a good wifi password, mom? you still have to visit us.

i will. no. make that the password: "you_stillóhave_toóvisit_us." that's a good one. seems a bit long, but okay... set a memorable wifi password with xfinity my account. one more way comcast is working to fit into your life, not the other way around. francine: this is "bloomberg surveillance."

president donald trump has defended the move to have the aftere telecom maker zte he sparked bipartisan criticism. cook discussed his recent meeting with donald trump and his discussion on trade on the david rubenstein show. >> i met with the president the next day, and i would not want to say what he said because that is not the way i look at it. when i talk about is i talked about trade and the importance of trade and how i felt that two countries trading together making the pie larger. true,true, undoubtedly that not everyone has been advantaged from that in either

country, and we have got to work sn that, but i felt that tariff were not the right approach. i showed him some more analytical things to demonstrate why. we also talked about immigration of fixing theance dreamer issue now. we are only one court ruling away from a catastrophic case. tom: tim cook in conversation with david rubenstein. look for the entire conversation in june, a new season. this was hugely successful lester. i cannot say enough about the consistent week after week interviews, including with tim cook. that is coming in june. right now with first word news in new york, here is taylor riggs. china is calling on israel to exercise restraint along the border with gaza.

authorities in gaza say at least 59 palestinians were killed and at least 100 wounded in clashes with israeli troops. it was the worst day of violence in gaza since 2014. the palestinian group hamas says protests will not stop. the world's biggest producer of diamonds signed a new long-term deal with debeers. the preparations for negotiations have begun. get it mutually beneficial agreement yielding positive results for both. it is a long-term agreement. we expect the relationship to be even more cemented. more than anything else, we expect consistency, reliability, dependability, and true allegiance. diamonds account for

about 1/5 of botswana's gdp. the leader of the five-star movement and delete in italy are trying to help down the final details of a coalition plan. the italian president has agreed to give them more time. forident trump's pick chairman of the fed says he favors a balanced approach to policy. he says he supports both pillars of the feds dual mandate, achieving maximum employment and price stability. turkey's president has said the u.s. needs to work together with his country rather than putting up trade barriers. comments during an exclusive interview with guy johnson in london. >> right now, whether the u.s.

would enter into such sanctions or not, i do not know. there's only one thing i know. we are buying the products that i consider to be strategic such as natural gas and petroleum, from russia. we cannot cut off our ties from russia in that respect. if we are allies with the u.s., we need solidarity, not sanctions. moody's says macro trends --they are concerned about unorthodox monetary policy. global news 24 hours a day on air and @tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thanks so much. i guess we can call it breaking news after taylor riggs gives us a complete report. turkish lira, new record weakness right now.

bring it up if you would. bloomberg radio, it is simple. it is a persistent weakening of lira with a new acceleration out lira.0 it is an isolated condition with commenting, guy johnson's exclusive interview with president erdogan. ian, let me start with you. argentina is isolated. venezuela is isolated. we set turkey was isolated 20 years ago. it is stan fischer 101. we have seen this story so many times before. the u.s. starts to raise interest rates. that forces everyone who has been putting money into emerging markets to rethink, and

that means the weakest a.m.'s come forward first. that means turkey. tom: it is rationalized along the way. ian: you take the money out in proportion to the problems. conrad dequadros, from the economics, the argument is these events are all discrete and separate, and then they are not. what is the catalyst for things to become globally correlated? conrad: we should consider that although there is this instability coming from some of the fed, not just from all major central banks are ing that half. if we did not take that path, instability would be larger just further down the road. when it comes down to a central

banks like the fed have to conduct policy based on domestic considerations first. they're doing what they have to do with unemployment now below 4%. they will have to raise interest rates. that does not seem to be wearing the fed -- worrying the fed at this point. tom: years ago, you talked about the putting green, which was that illusion to real rates. the you just assume widening real rates in the u.s., or does inflation just keep coming right up as chairman powell raises that topline rate? that came about because of the top line rate. the fed is adjusting policy to a more neutral setting. back then the fed was going more slowly.

they were not worried about instability, but that did not mean instability would not form if they did not normal as quickl slowly enough. the fed needs to continue to push ahead to get policy to a more neutral setting. francine: should they push ahead and get a more neutral setting even if it means an inverted yield curve? ian: it probably will eventually. the next few hikes probably will not convert the yield curve. be rightl probably economicmproving indicators. the fed has a way to go to worry about loosening labor market pressure. that will be a story a year from now or even more than that.

the unemployment rate is very low. if we finally get the uptick in labor market anticipation we have been waiting for, maybe we can push the cycle even longer, and the fed can go even more slowly. we don't know at the moment what is going to happen. we could wake up at christmas and find unemployment is at 3.3%. in that circumstance, all bets are off. from the e.m. perspective, that will be disastrous. francine: do you agree that it could be that unpredictable? conrad: i think we have to see a significant move on the inflation side. 2.5%,see a move closer to we could see a pickup on the inflation side. i think we are likely to overshoot a little bit. i think the fed has said they are comfortable with that. markets might be underestimating just a little bit how likely the fed is to do this.

they will likely take a pass at a press conference meeting on a rate hike. i think we are more likely to see four hikes this year. inflation will have to go higher than a quarter percent. shepherdson on today's retailers. this is the actual screen we look at on bloomberg radio. jonathan ferro and i look at this in tandem on tv. this is all hinged on the american consumer. how are they doing? ian: ok. if you ask them about how happy they are, stratospheric. real income growth after-tax is not strong enough to generate retail sales better than that, which is ok. it is certainly the biggest single component to gdp. at want the economy to grow

3% rather than 2%, you will need to see figure investment. tom: we could talk about this for the next hour, but we don't have time. we will continue. you are captive in your car. sirius, washington, boston, new york, or the bay area. and karenob moon moskow. stay with us. ♪

taylor: this is "bloomberg surveillance."

the biggest energy company in portugal has rejected a takeover offer. they say the bid does not value ofy reflect the the company. shares rose the most in a decade yesterday, which reflects investors believing the offer will be sweetened. -- march the end of an era for the investment bank. she is the last of the generation of bankers do battle for supremacy in the golden era of commodity profits on wall street. carl icahn and darling decent want to start an option for the intercompany as soon as possible. they are already in talks with private equity firms about the possible deal. xerox pulled out of the deal with fujifilm and replace its

ceo. tom: thank you so much. it is an annual visit. we should talk to her monthly because the valuations are jaw-dropping. last night, it was one of those moments in the spring in new york city, the impressionist modern art auction. valuations across the board. these -- soey, so theby's vice-chairman of fine arts. had a work cell last night for $157 million. what is fascinating about it is usually when you are selling work at unprecedented price levels, they are exactly that,

unprecedented. there was already a medically on has nowsold, which crossed the $150 million mark twice. that is really unremarkable. that and this piece of work has sold at auction already. you can track this since 2003 when it sold for $123 million. saw a piece ofso work by leonardo da vinci. together,ut the two it looks different. brooke: da vinci was working 400 years earlier. his paintings are exceptionally rare to the world, only 16 of them. modigliani, there are 16 works

in this series along. the majority are in public institutions, and it is possible to acquire another one of these works. i think the availability to market of this work and the potential to repeat the price is what is really remarkable. met did the reading of washington crossing the delaware. it is great. it is a painting. buying the size, the horizontal of this miracle of 1917. series not only is this the venus of his work, but if you go to the tate modern retrospective that just closed about a month ago, they were

together in the last room as the hallmark and highlight and summit of his career. this work is the largest and most resplendent of all of them. you can see it standing out there. it is as far as we understand the largest work he ever painted. understand the previous owner purchased it back in 2003. you also have to pay the fees on top. is that the kind of increase we are seeing for painters of that era? brooke: there are two other fantastic examples from last. there was a beautiful casa painting from 1932 -- kosovo painting -- picasso painting 2000 that soldin

for $36.9 million. those are all great examples of blue-chip artists and their appreciation. tom: you are going to go into usual, and then you are going to go back to the office and have 400 voicemails from all these hitters who say let's go to auction next year. was it that kind of auction where everyone reassesses and sits down at the kitchen table and says we have to sell. brooke: yes and more to the point, think about the remarkable volume up artwork that has been on the market. in new york in just these two remarkable pieces. the market is absorbing it and pushing things to new price levels. if i am a seller, i should be thinking. tom: i want to show you a piece

of artwork. i want you to consider this. how about g tv . at your next set of these auction, you could purchase a grab of this. we are going to capture a grab of this. these are the charts that we do. turkish lira. is that too much for you? how about david wilson, this is a wilson we call this. s&p dividend yields of a six-month t-bill. graph tv. g tv . this is bloomberg. ♪ this is bloomberg. ♪

tom: turkish lira out to new weakness moments ago. tom keene in new york. francine lacqua in london. ofh us in shepherdson pantheon macroeconomics and conrad dequadros of rdq economics. what a move on a percentage basis. this is a log chart.

excuse me. i have the plague. before you die from the plague, let me go to you. risen quite a lot since last summer. it is enough to make a difference, but not enough to kill the cycle. if we were to move up over the course of this year to the 350 mark or 375, i would be thinking about a significant slowdown in growth. yield athe 10 year discrete points, or do you look at the curve dynamics around that pivot point? >> i think we need to look at conditions more broadly and not just the level of yields. my feeling is there is no tipping point on yields per se. i don't think it is necessarily

going to be a one-way move. there are going to be points at which people look at these yield levels and see some values. i think we will see another 25 basis points or so this year and move higher next year. francine: looking at the 10 year yield, why hasn't been struggling to go above 3%. >> there will be certain accounts that look at 10-year yield at these levels, the last bond auction we have where these were levels that have some value. in the near term, inflation breakevens will probably move higher because they are closely tied to actual inflation and oil prices. inflation moves sinochem that will probably move real yields higher also. tom: i look very quickly at the

yields. i guess we have to go back to chairman powell. his donald trump and to tell chairman powell what to do? >> no. >>this is a different world. he is totally independent. tom: bring this up on the screen. this is the story on bloomberg on our gorgeous new bloomberg.com website. devon pendleton. an irish horse breeder. maybe he was the owner of the modigliani has reported. thank you for our team worldwide today. this is bloomberg. ♪ g. ♪ mr. elliot, what's your wifi password?

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plan.is all part of the president trump helping a chinese company to get trained done as top level negotiations begin in washington. it depends on the definition of independence. the turkish resident says the turkish bank is independent but expects to have more influence in the future. fluke or trend? german investor outlook disappoints raising questions over global growth. welcome to "bloomberg daybreak." i'm david westin with julia chatterley. welcome back. julia: you had the courage to come back. julia: the president may or not have a plan. for the first time in five days, stocks set to open .2%. the look has a whole host of factors. modest gains for the u.s. market yesterday.

a break for the dow.