francine: merger talks and reports of barclays and consolidation in the sector. italy's populist leaders reaffirmed their pick for premier and the government takes another cap turn, and the euro sinks to its weakest level against the dollar. get a boost in trading after congress approves a sweeping overhaul of the dodd frank act. ♪

welcome to bloomberg surveillance, i'm francine luck was in london. let's take a look at shares. to spend some time talking about eurodollar treasuries, investing with the dollar oil dropping. commodities are down and you have a bid on the yen when it comes in haven against the u.s. dollar. we also getting some euro services pretty much in line just a touch below at 53.9 instead of the 54 17 we were expecting. morning to the news of a possible tie up with barclays. they are currently saying they are focused on executing their strategy and that they will not comment on speculation. you can see standard charts currently gaining 2.3%. we talked banking, regulation, and opportunities in the markets. we have exclusive interviews with the chairman of renaud, and

we will be talking about the switch to renewables for cars, we will also talk about chinese tax. tim adams, we will also ask him onut. frank and axel weber the world economy banks and treasury volatility. let's get straight to the first work news in new york. starting in italy, the search for the country's next prime minister has been thrown into disarray after doubts were cast the law suitability for professor, the candidate chosen by populist allies. according to a five-star official, he is no longer by ain of endorsement five-star movement and anti-immigrant lake. they say to himself me back in the running for the premiership.

the u.k. has received a list of break the demand sanction must get on with it as fast as possible. and whento bloomberg osiris, boris johnson says theresa may is responsible or ensuring they take back their regime. couldrongest comment that keep britain tried to eu trade rules for years. minister is the comein of the plants to out of the single market and get on with that project with all convenient speed. that is what we are going to do. president donald trump has expressed pessimism about the summit with north korea's leader. the comments came as the south korean president fleto washington yesterday, amidst growing uncertainty about kim jong-un goals. after the pyongyang regime has made critical remarks of trump's vision.

marks and sensors turnaround plan is taking another chunk out of their profit. fell and theits retailer recorded one-time charges of millions of pounds primarily related to store closing and sales of clothing and food fell short. the store failed in their clothing and home division and fell 3.4% in their first quarter. news 24 hours a day, powered by more than 127 journalist in more than 120 countries, i'm taylor raikes. gs.race -- rig francine: some breaking news out of the turkish lira, one of our top stories. that abouthe back of the independence as the the bank.said of

the turkish lira dropping past 4.91 or dollar. let's talk banking. there has been speculation that barclays has been exploring a potential merger with rival banks, including standard chartered. there are getting a boost this morning on that speculation, however those familiar with the company said barclays is not actively pursuing a deal. meanwhile, in the united states, in the united states, the house of representatives has approved a sweeping overhaul of bank regulations, sending trump a do agiving him a chance to big number on the god frank act -- dodd frank act. now is a jonathan tice, senior banking analyst for bloomberg intelligence, and jason bevan.

thank you for joining us. first of all, speculation about a tie up with barclays. some are saying we are focusing on our strategy. does it make sense? >> not really. i struggle with this. barclays, whose biggest focus is improving returns on capital investment. they allocated 50 billion in risk assets. , they look at the u.k. have $.25 credit card share, the mortgage market is a bloodbath. that is the problem with barclays, he doesn't think they will turn around the underperforming units and he wants some of that capital to be returned to shareholders, which is why they started talking about buybacks in february. strategically, it makes little sense to me. lot ofe: you see a banks, especially swiss banks, wanting to go after the asian market.

standard charter is basically an asian market play, so could you infer that barclays wants to be bigger in asia, or again, that something don't be against what they need to focus on. >> you wouldn't take it on with all the loans. one of the reasons standard charter can give reasonable guide is we don't know how they just an asiann't franchise, you have india etc.. prices,ook at the share they're both trading intangible for good reasons. gettingt see them there, certainly not standard charter for 3-4 years. >> what is your take? >> i think barclays has a significant challenge associated with the uk's domestic business. i am not a bowl of the u.k. economy, and i anticipate that far too much of the growth we

to takeerved has been equities out of the housing markets or other means of plundering savings. therefore, we have an economy that is highly leveraged. i certainly think they will be exploring other ways in which they can address the challenges. francine: talking a bit about god frank, is this the right time to be rolling back? liquidity wise, for the banks that have escaped the market, it is good news. if you look at the leverage ratios of the large banks, that's a we are expecting to see more relief. cycle, i thinkhe it makes sense. francine: does it put pressure on european banks? they are disadvantaged. johnathan: our leverage rates

are much lower, so it's not a level playing field anyway. and europe is already struggling, so i don't think this makes much difference. it frees up liquidity for the u.s. banks and probably puts pressure on the deutsche banks of this world. francine: is that how you see it? i very happy with the u.s. banks and i think the u.s. economy is ace -- is in a stronger position. this is a mechanism that will support the economy and would allow more liquidity in industrial activities. francine: let's just check on the lira. we have of emerging market news we need to get to, but the plunge is at a new record. another shot exacerbates market conditions and we did see a selloff by japanese investors. at 4.8862. leader is is this a crisis?

seeing athink we are resurgence on the dollar on one hand, and a loss of confidence in emerging economies. -- rand is another you currency that will come under pressure. thanks for joining us. we'll keep an eye on the lira and the banks we were just talking about. us, plenty coming up. including hanging in the balance, and nominations of italian prime minister's. the concerns over their suitability, we'll talk crisis next. and nissan plays hard to get, the chief executive says he wants to maintain some autonomy. -- merger with retinol off the table. this is bloomberg.

♪ francine: this is bloomberg surveillance. let's get back to the lira, tumbling to a record. been a lack of central bank action following the president coming on this very set and telling us that after the election, he once to have a bigger handle on the economy and a bigger handle on the central bank. what happened this morning was there was a selloff by japanese investors and a bigger move in the last couple of minutes, the biggest move since that attempted coup 18 months ago. let's get back to what this means for the charts.

james, is there a momentum? you don't want to catch a falling knife? you don't. it's hard to see where this will finish. but the break from this trendline is highly significant. it implies the market is refocusing. francine: we will get back to james and the lira throughout the show. let's get straight to the bloomberg business flash. held discussions with standard chartered and is not actively pursuing a deal, according to a person familiar with the company. timesr, the financial said they have been exploring a merger with rival banks. same time, standard chartered said it is focused on its strategy and is not responding to regulation. eu lawmakersleft fuming over unanswered questions at the end of a hearing.

at a meeting with the eu parliaments, zuckerberg repeated what he has been telling every audience recently, that his company did not take a broad enough view of their news, andlity, fake that he is sorry. has also become clear that we haven't done enough to prevent these tools from being used for car -- harm. that goes for fake news, for interference, and misuse of information. a broad enough view of our responsibility, and that was a mistake, and i'm sorry. >> and cte is estimating losses of billions of dollars. this is despite a lot of deals, thever those familiar said smartphone maker is hopeful of striking a deal soon.

they say they already have a plan in place. washington agrees to lift its seven-year moratorium on personages of american chips. that's your bloomberg business flash. francine: thanks. the search for italy's next prime minister has been thrown ofo disarray after doubts his suitability for the role. of reports prompted the five-star movement and lead to reevaluate their take. the latest turn and a chaotic government building process on 10 year bond yields rose for the fourth time in three days. what does the chaotic situation mean for investments? james, the question is will we be seeing a repeat of the greek crisis? this is a bigger economy.

challenge comes in terms of targets of borrowing. the ifa institute in germany has said they don't believe that credit should be extended under the system to italy that already has a gross of borrowing. so around $500 billion. if they were successful in saying no more credit, there would be widespread repudiation of all of the low of the target to system. so this is very serious, the scale of the italian connie is enormous. -- the economy is enormous. one of the mechanisms for the federal reserve board, all of the balances are zeros. there is no such mechanism in the target to sue system, and it would be quite easy for them to

say, fine, lots of lending and borrowing goes on. that these ideas are squared off and that there is an unlimited pot. this system have to stop. in sixe: this will be months. we still don't have a government, so is the only begun -- jumping the gun? james: no. in the scale of these bills that have to be ignored or repaid. up with a will end much softer currency that might have been a expected. i think we are seeing a long. of your weakness. francine: as we talk further about possible european integration, next. in the meantime, french carmaker criminal is seeking to build -- renault is seeking to build on their relationship with nissan.

but nissan's chief executive says a merger may be a step too far. earlier this month, he downplayed the process saying the current arrangement is working. let's get over to caroline high at bloomberg technology. she is joined by the chairman. >> thank you very much. chairman ofby the's the amount nissan. about frenchk business, because today we know that map from his meeting with tech leaders. is that good? >> without any doubt. the french market is doing much better, trust is back, and people have a lot of hope that it will be a good year for the french economy. >> what about 2018?

you are in automation, you're also in electric vehicles. >> all of them. this will not be an increase in revenue, our investments are going to be there. the growth of the company and beyond. cycle is very long, so what you are doing today is going to be visible in three or four years down the road. setting of today is the fruit of what we have done three or four years. >> the fruits of electric vehicles are already selling, but you sell millions of cars per year. how many do you eventually want to sell? i think the sale of electric cars are ramping up in many countries.

you know, this is mainly driven by regulators. and consumer demand. my opinion is that i have seen the statistics say that by 2030, about 30% of the car sales in mature markets will be electric. ass number can be as high 20% in emerging markets. there gearing one third of sales of new cars being electric by then. it is a very reasonable statistic, but don't forget this is not going to be a market-driven demand, a regulation driven demand. when working with regulators, looking at the competition in electric vehicles and tesla, is that the key pinup? >> we aren't in the premium market.

it is obviously important, but this is eight or 9% of the total market. we are gearing towards the 91%, the core of the market. this is where we are going, and we are very optimistic on the fact that demand will be here. it's not just the consumer asking for electric car, he will say it is the best option for me. the regulators in the country is deciding. you have the french and the regionally, is, the most exciting for developing technology? >> it depends on the technology. for example, i like the cars are hot in china. aud cars are everyere. connectivity is also everywhere. so we are prototyping and

testing in the major markets in we world because when develop technology, we also want to communicate with the regulator so they can get familiar with the technology. , they willomes already have a lot of data in mind. >> what else is driving growth? i think the trend is still on crossovers. a trend we are seeing in the united states, in europe, china. over.vers are taking >> what about your future when it comes to read now and nissan nissan.ult and >> you will see more convergence and integration. today we have already decided to have a common engineering and manufacturing.

this means more integration and more things in common. still, maintaining different brands and identities, you will continue to see. the main question today is about how sustainable is this model, particularly when the leaders of the day would retire and you have new leaders coming. question, thatir we need to answer. how to maintain the sustainability of the system. driving synergy between the company and at the same time, independently of who is leading what's. this should not only be limited. of solutions for this, a merger is one, there may be other options. we have to be patient. >> what is your perfect solution? the perfect solution

is the one that maintains this drive or synergy and at the same prize autonomy for different brands. this is important. you needd of the day, people who are proud of their brands fighting in all of the market. , we will haveme one technology, one platform. everything the consumer does not care for should be done in common in the sake of efficiency. >> will the government be happy? i think the governments will be happy about the line and want them to work and want them to be done, you know, benefiting each one of the components. there are many ways to do it. >> we will keep in touch with you to hear how that develops. ceo and chairman of the rent out nissan mitsubishi alliance. francine: thank you so much.

at bloomberg technology's sooner than you think event. to get more on the things he was getting on with u.k. foreign secretary boris johnson tells us the prime minister must take britain out of the eu as soon as possible. more on that exclusive interview and we are back with james t. tumbling in its biggest move since the two. not only are we looking at that, but a haven boom for the yet. we look at crude, commodities, emerging markets, a lot going on today. this is bloomberg.

♪ francine: this is bloomberg surveillance. let's check in on what's trending across the bloomberg universe, is there a new

headache growing for chancellor merkel? why china's trade deal could leave germany squeezed in the middle. this is on bloomberg.com, more downside for the turkish lira as a japanese investors are bailing out. in third, standard charters as they are focusing on strategy. number two is the lending housing boom over? this looks at the impact brexit is having on housing prices. of the pile, all about markets as president trump is casting doubt on north korean talks. some breaking news out of the u.k., a perfect excuse to go back to jane, to talk about brexit concerns. month on month, it's a little bit lower than expected. this is cpi for the month of april. also short of what economists were expecting, 2.4 instead of 2.5%.

that is the very latest on some of these cpi figures. ppi, that'sat the also be low estimate. ,et's get back to james overall, if you are the bank of england you look through the lack of inflation? james: i think we will probably see consumer price inflation by a few points by the end of the year. i do think we have a structurally weak economy. a thirdlast five years, of the increase in spending has come from more credit or reduced saving, about two thirds has come from those sources. that is not strong, and i think they will turn out to be less hawkish. i certainly think inflation is heading lower. francine: for the moment, you can see table expanding its decline below 13360.

foreign secretary boris johnson has sent prime minister theresa may a list of brexit demand, saying she has to take the u.k. out of the european union's trading rules as fast as possible. he spoke exclusively to our politics reporter at the g20 summit in when a site is -- in buenos aires. is to come out of because of union and to get on with that project with all convenient speed. that is what we are going to do. what people like argentina, peru, chile, what they want to hear from us is that we are getting on with it with , goingnce and dynamism to get on and take control about terror schedules. that's what they want to hear, and that's what they are here. >> that is going to be quick, right? you can be in that spot for very long. >> i think it is important for

people to have a sense of when it will happen, to do it as fast as reasonably possible. >> you set the brexit servers should trust the prime minister to deliver because they are worried there might be some betrayal. you don't think that's right. my question to you is can we trust the eu? what is your bottom line. -- u.k. ends up shackled in some sort of agreement, would you be prepared to walk away from the cabinet? >> t prime ministehas made absolutely clear that we are cong out of the union, ouof the single market. and what is entailed by those promises is very precise. it means we take back control of our tariff schedules, we set our own tariffs, run our own commercial policy. it means we are able to do things differently if we choose,

when it comes to our regulatory framework. otherwise, you not taking back control of your laws were borders. and the prime minister has been emphatic about that. so i think she's got a very clear perspective, a clear mandate, and it's all very excellent speeches. francine: that was the foreign secretary boris johnson. for theis the outlook pound and u.k. assets as uncertainty swirls? the concern i have is that if you speak to any pro-brexit person, they say the position of the u.k. is clear, yet that is not what you hear from the prime minister or the eu. what you think brexit will look like? think there will be a fun because it is not possible to reconcile the challenges.

let alone the hard challenges in terms of long-term trade relations. we do want to export to europe, so we have to recognize compliance with eu regulation. , but boris ises warning theresa may to get on with it. can you see a snap election, that certain factions would go as far as overthrowing her if they don't get the brexit they want? don't think she will face a challenge from within the party before the end of the brexit negotiation. it would be a poisoned chalice. boris johnson, a consummate politician once himself up to have a tilt at leadership. we all know it will be extremely hard to impose terms on our eu counterparts. francine: so they will live with fudge? james: i think they will have to. the real pressure points is are

the democratic union party's continuing to support the makeup , and what will happen to the resolution of the irish challenge. secondly, as we get closer to the general election, it is apparent if may is able to achieve public support or not. of party has a long record dishing people when they think they are a liability. francine: let's look at the pound again, u.k. inflation unexpectedly slowed in april. traders, they the are taking it not in stride. england expects inflation to retreat towards the 2% target. you can see it is currently at 1.3 352. does it work on the back of the economy? i think brexit negotiations are far less important than the underlying strength of the economy, and the

implications for the bank of england policy agenda. i wholly anticipate that inflation come down and we will get 2% by the end of the calendar year. i think would have a relatively low trajectory of underlying growth that will encourage the bank of england to be less hawkish and hiking rates. not good news for the pound. francine: this is what we are seeing on the chart, and this is a very nice chart, basically, if you are looking what theresa may speech, she did that saying that she was very serious about brexit. if we see a hardline, what happens to the pound? relative to the euro, there is the challenge of how strong do people feel the euro arrangement looks.

do think the italian election challenge has raised the risk for the euro project quite some. this singular balance between italy which once an expansionist policy to achieve growth that haven't had for an extended. . , theill know better than i gdp is still below where it was decades ago, and that is frightening and will tell you why the people in italy voted for change. that's expansionary policy which requires an inflationary bias, is head-to-head with the german continuation of the compacts of discipline. thank you james from ccl a investment management. remember, viewers can interact with our charts featured on bloomberg tv to catch up on key analysis. this is bloomberg.

♪ talkine: we don't often about this on surveillance, but this was a pretty big deal. the official website of united emirates has carried an image saying proud to be part of the arsenal family. the arsenal has come out saying they had a new manager and he is

called tonight emery -- unai emery. i'm not sure exactly how soon we will find out if there are any changes to the team, but he left the french side i believe this month after a two-year spell after he won a league title and for domestic competitions. we'll keep an eye on anything to do with arsenal and their manager. let's get straight to the bloomberg review, here is taylor. italy, the search for the next prime minister has been thrown into disarray after doubts were cast over the suitability for the post of law professor just second --. no longer certain of andrsements by luigi demaio the anti-immigrant league.

they say luigi demaio himself made back in the running. barclays has not held discussions with standard chartered and is not pursuing a deal, according to a person familiar with the company. earlier, the financial times reported barclays has been exploring a potential merger with rival banks. at the same time, standard are focusedys they on their strategy and is not responding to speculation. the u.s. has approved a sweeping overhaul of bank regulations, sending the president a bill that will give him a chance to make good on his bow to do a big number on the. frank act. they voted to advance a measure that is the product of years of financial industry lobbying. attract bipartisan

support to get through the divided senate. an iconic american novelist philip ross has died. he burst into the international consciousness with a satiric psychoanalyst couch modeling set in new jersey. awardlitzer national book and prize-winning author's work drew inspiration from jewish family life and american ideals. in more than 120 countries, this is bloomberg. francine: thank you so much. let's get the latest from the u.s.. ofongtime business partner donald trump's personal lawyer entered into a plea deal. they may be cooperating with the government as they turn up the

heat on one of the president's closest associates. elsewhere, president trump has poured cold water on trade optimism, saying he is not pleased on the ways talks are going to china. according to people briefed on the deliberation, his administration has decided to hold off on imposing tariffs because the white house discord over trade strategy and concern about harming negotiations with north korea. we can also throw in some doubts. joining us now for analysis is us is aand still with james from ccla. they for joining us, congratulations on your new job. what do you focus on? the u.s. and americas program is concerned with understanding

the politics of many things we are looking at the causes of these trade negotiations in china, iran, north korea. but we are very concerned with the position congress is taking and what constraints are there on the power of the president. we are seeing that congress is taking a hard line on national security concerns with respect to china and that there is a real concern in terms of what is going to happen with that summit coming up. it is not entirely clear that there is a very good strategy in terms of what has been worked out. what role does china have to play? leslie: i think the concern now is that china might be easing back sanctions on that maximum pressure campaign, and there are a lot of moving parts. china is concerned about what , andthey will get on trade

so i think there is a concern if china is playing ball and if that strategy will be clearly mapped out. this is a clear goal, both for kim and the president. they want the summit to go forward, but it is looking shaky. francine: domestically, robert mueller is staying silent and giuliani going on attack. are we expecting significant movement on the investigation? they were saying that the investigation might be wrapped up by september. possible, but i think there will thatncern new the midterms nothing comes out that seems to be interfering in the integrity of the electoral process. there is still question marks about whether this whole investigation of michael cohen and his associates will go. is unclear if this will tie

back to the bigger question of collusion between trump and russia, not obvious, but we have to wait and see. francine: does president trump have to recalibrate as we get closer to the midterms? are we going to see a white boisterous or belligerent president trump? to see that his basics with him. leslie: i think we are seeing that. what we have seen in the most recent. as he has taken on new members of his cabinet, he is moving much closer to those campaign pledges he discussed, moving the embassy to jerusalem, pulling out of the iran deal, taking a tough stand. there is a question mark about this broader relationship and his concern with china. but yes, we are seeing playing to that case. hewe approach the elections, will reach deeper back into trying to hold onto his face.

of course, his position is at risk. holding onto congress and the house will be difficult. francine: these court cases and investigations. have had amarkets remarkably relaxed stance, on the basis that political issues come and go, but the underlying realities are twofold. one is corporate earnings, and the results of mr. trump's ,nterventions in tax and growth does mean that we are going to hundred 55 earnings in the calendar year, perhaps more next year. that to reasonable economic growth, we will get three more fed hikes this year. but we wait to see inflation rise dramatically, and i think we can see points in the s&p 500s simply on fundamentals. that will be the main focus, not

these short-term challenges. leslie, you are also speaking to stephen bannon, the architect of trump's election victory. if you look at how the president speaks to his base, what we know about who still support him? leslie: that base has stayed very strongly with the president. him,38-40% has stayed with regardless of movements on any individual policy. they are with him for a clear set of reasons. there are things that will help that, but it is not clear that some of your broader packages like tax cuts help the base. nonetheless, they have been resilient. what we continue to miss is that it is a style of engagement and representation of who he is and what america means to him, that is what keeps his base very clearly with him. that june 12 summit

doesn't happen, who has more to lose. the president and his credibility, or is it better to wait so that everyone is better briefed? leslie: in a broader strategic concern, i don't think anybody looking at the issue has ever been under the illusion that we would see north korea actually get rid of north -- nuclear weapons. that won'tly, change. but in of managing an unstable situation, a lost is lost. it will go forward because both parties want it so much, and perhaps the united states has wanted it too much. that explains partly why he is moving forward with those commemorative coins without having a more detailed plan about what we are willing to compromise on and what we are not willing to compromise on. stake in some at senses, but in others, less so. francine: what can they

compromise on, trade? five --ing to be a five. there is potential for a win-win, they want fair trade not free trade. they agree it is more sustainable where both parties believe they have a reasonable deal. it's fundamentally unstable. i think we can get the agenda to a better place. francine: do you understand the linkage with the zte? from the political side, the linkage is it's pushing congress to take a much harder line on the u.s. position with deal,t to any trade because it is clear they are holding tight, you cannot violate the sanctions against iran and north korea, bottom line. sense,s linked in that

and they cannot see trump making any concessions that don't require. what is being asked for now is compliance for one year from said t -- zte, that's what congress wants. francine: thank you to our guests. as theo back to turkey turkish lira has plunged to a new record low versus the dollar, euro, and the yet in the biggest move since the attempted coup back in 2060. best as a lack of action by the central bank sparked concerns that prompted a selloff by japanese investors. -- pull down cover other emerging currencies. justin, first of all, thanks for joining. this is on the back of that

extraordinary interview guy johnson did with president are to one who said he was taking more control. do they need to scale back that rhetoric? there is a realization in a turkish political circles. probably, is the answer. erdoganas president sticks to this view that raising interest rates would be harmful and ultimately wouldn't stem of the losses in the lira, then the lira will continue to decline. we will ultimately see the traders continue to take the lira on this rather worrying nosedive. francine: justin, is this a currency crisis? >> that's what it looks like, quite clearly. externalok at the

factors working against turkey, you have rising oil prices, skittishness around the world. but when you throw into the mix turkey's persistence in account deficits and this extraordinary unwillingness to do anything to shore up the lira, that has to be the conclusion one reaches, that we are in a crisis. bank, i: candy central mean, what can the central bank do? the argument is having waited for so long, what is needed is something really extraordinary like 400 basis points. we saw the kind of action and the argentine central bank did a theweeks ago to save decline in the argentine peso. that is what traders might be looking forward to.

but there is no sign of that. what they could do is impose capital control, but turkey has been historically unwilling to take measures of that nature. his radio silence, and the market is just waiting. francine: thank you so much. bloomberg surveillance continues in the next hour, tom kean joins the out of new york. we have an exclusive interview with alex weber. 1130 u.k. time, we will be asking him about dodd frank and the banks. this is bloomberg.

♪ francine: merger talks.

will we see more consolidation? contact -- then euro sinks to its weakest level against the dollar this year. get a boosts. banks in extended trading after congress approves a sweeping overhaul of dodd-frank. we will speak to the ubs chairman on the new regulatory landscape. good morning, everyone. this is "bloomberg surveillance ." guy johnson joins us for the rest of the week. all is still moving on the back of your fantastic if the new -- fantastic interview with turkish president erdogan. we also have a great volatility chart for the day. it is the biggest move since the --ended to back in 2016 intended coup back in 2016.

: i wonder whether that will be enough to satisfy the markets. you wonder whether or not they're going to have to go inside. francine: this is a story of momentum. also looking at banks after the speculation of a possible merger. we understand that barclays hasn't really had proper discussions, but we've also heard that they've not actively been pursuing a deal, according to a person familiar with the story. i think emerging markets, we are looking at political situations, and banks as well. let's get to the bloomberg first word news with taylor riggs. taylor: president trump will have a chance to make good on .is promise

wall street didn't get as much as it wanted. british foreign secretary boris johnson has said british prime minister theresa may is responsible for making sure the country takes back control of its trading role. >> the prime minister is the custodian of the plan, which is to come out of the customs union and get on with that project. that is what we are going to do. teamr: last week may's tomed to a controversial price that could leave them in a trade union for a year. is trying tomp save the u.s. steel industry by imposing duties on imported steel and aluminum. discussions with u.s. authorities are continuing, but

we are also emphasizing that currently we have temporary extensions of those additional tariffs, but we need a permanent solution to this problem with the eu being permanently exempted. then we can discuss trade measures, and we are open to discuss trade measures, including reciprocal improvement of market access from both sides. taylor: the eu has threatened to retaliate if the u.s. doesn't lift tse tiffs. the federal reserve released its minutes from his latest policymaker meeting today. to show expected divisions among fed officials over the yield curve and inflation. the information could help analysts forecast how many more interest rate hikes there will be this year. arsenal has named a new head coach, who spent the last two seasons as coach of paris

saint-germain. he is replacing the most successful coach in arsenal's history. global news 24 hours a day, on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. riggs.lor this is bloomberg. francine: thank you so much. this is what we are looking at in terms of what stocks are doing. lira one of our top stories. banks our other top story. overall, stocks are sliding. they opened europe a little bit mixed. now they are definitely following. i guess there are concerns about turkey, about north korea. it is unclear whether the president will meet the north korean leader june 12 in singapore. there are also doubts about the economic growth prospects for the eurozone after some pretty

chaotic wheeling and dealing in italy over the new government. treasury is advancing, dollar up, oil dropping, and a little bit of a haven bid with yen. guy: let's take a look at lira trade. , 4.8331.ollar-lira . one point we were 5% up their, astp yield in well as what is happening with italian politics. date out from both france and germany. services down in france, manufacturing a little better than anticipated. futures, you are seeing a selloff over the past hour and a half, down by about 7/10 of 1%. francine: let's talk banking. there's been speculation this

morning that barclays has been exploring a potential merger with rival banks, including standard chartered. they are now up some 1.7%. however, a person familiar with the company's thinking has said barclays isn't actively pursuing a deal. ,e are joined by johnson tice and dan morris. thank you both foroing. you just don't believe this makes sense, even if it were true. >> no. it in if you look at barclays, they are certainly going to put an extra $50 billion of risk for the next few years. standard chartered, their problem is capital generation.

this strategically doesn't make much of a fit. there's nothing you need in a bank deal, and i just don't really buy it. francine: is it normal for a chief executive chairman to look at all options? >> the chair has been there a long time. he was an executive member at standard chartered. he sounded very disgruntled when they sold barclays africa. caohave the long-standing -- i don't put much credence by this. guy: they both spent time at jpmorgan, an interesting sidebar. is there a need for european banking, are there needs for changes? do we need to have mergers?

regulators have been nervous. they've seen what happens with big banks. >> there is a contrast between the other issues you pointed out in the issues you have in america. generally more supportive of deregulation certainly with its latest acid of legislation on congress, is likely to encourage bigger banks. what is good or bad from an investor's point of view, you could argue that it is better to have this lighter touch and the .otential for growth cib.you have a ibthe c more important than in europe? >> the volatility gets attached to that potential, but that esn't often eugh. ancine: when you look at

dodd-frank and they are now rolling it back, what -- where does it leave european banks? >> if you get the leverage relief for those large u.s. banks, they are going to have more capital to take more share in europe. i think from an investment banking perspective, not ideal for deutsche. i think for funding growth in one .s. and asia, it is knell to the american banking as well. guy: one of the things that may come out of the barclays conversation is the idea that we could see assets being downgraded, and i would really's capital. -- would release capital. with the rollback, how significant could that be if that were to be pursued? how much capital could be released? >> the problem is there is no

growth anywhere else in barclays. let's shrink the cib, but at least you have momentum there at the moment. frankly, i can't really see them being in a position to do anything material. you look at citigroup, you look at europe, you've got some banks at 75.80. it is just not the same thing. going back to capital, don't forget standard chartered is a global cp. but what -- look at what the bank of england thinks about asia. for some reasons, i just opened this make any sense. francine: thank you so much -- i just don't think this makes any sense. francine: thank you so much. chairman hase ubs a thing or two to say about the banking consolidation, also

asking about treasuries and world was. that is a test world growth -- world growth. that is at 6:30 a.m. in new york. this is bloomberg.

♪ taylor: this is "bloomberg surveillance." let's get the bloomberg business flash. it will be the largest mainland chinese ipo since the 2015 stockmarket crash. apple's most important assembly partner foxconn plans to raise $4.3 billion. foxconn is trying to lessen its dependence on apple, which provides more than half of its revenue. is ready to accept a $3.5 billion deal in indonesia

for its share in a giant copper and gold mine. mine mayent on the still not be reached. ,ne t stiing points state has to be transferred to a local firm. that is your bloomberg business flash. let's talk a little bit about what is going on with the china story. the u.s. could be reconsidering penalties against zte. and it looks like the historic meeting between president trump and his north korean counterpart might not happen after all. joining us to discuss all of this, miranda carr, senior macro strategist for python international -- for haitong international. there's this wrecking ball going on around the world at the

moment hitting emerging-market after emerging-market. we are definitely watching turkey this morning. how did the chinese view it? they have protections in place. if we were to see this escalating into something more significant for emerging markets , how will the chinese authorities play it? >> china is in an interesting position of the moment where it has insulated itself fairly well. basically onned how much money it has to offset inflows are outflows. it is zero at the moment. this is a really rare event. the inflow into china has been restricted -- has been offset by a very restricted outflow. in previous time when you had the spread between the two markets, currently about 63 basis points, you have seen

currency come under a lot of pressure back in 2015. guy: any other steps they might take if this were to escalate further? thes long as they keep capital controls in place, so the big thing is the switch in the bond market. $7 billion from $8 billion every month going into china's bond markets because they opened them up two years ago. the trade surplus is averaging about $30 billion. so in addition the $70 billion goes into china. that protects the currency, so not only is money going into china, but also it is not going out, the china is not buying assets. you have a double insulation. it is not based on interest rates or market prices. it is based on a structural

shift out of global markets by the chinese, and foreigners going into the chinese market. this is a massive change, and that means china doesn't it the effect so badly as other foreign markets. francine: the chinese, for a long time, have been wanted to have a new reserve currency. that is near impossible. 10 or 15 years down the road, can that change? >> that is quite far to be predicting. a lot of it will depend upon the capital controls. to get that what you need to have an economy that is much more integrated. i think the lesson perhaps china has drawn over the last 10 or 15 years was much more around the advantages of having control over capital flows, as opposed to what happened in asia when the dollar swung around and what that did the domestic sectors in these countries. we like controls for now. we would like to get to an international reserve currency,

but it is not exactly clear how you balance the risk. zte?ine: what happens to we have the latest stories saying it is facing at least $3 billion in losses from the technology ban in the u.s.. moment,osition in the in the short-term term, and maybe up to get back on its feet. obviously suffering quite significant losses in the short term. is then longer-term, this china, it becomes a protected company in the chinese system. obviously china is going to push forward its own domestic technology as a result of this threat. therefore, things like comments from lenovo about wanting to use westell technologies -- used the mystic technologies rather than you -- use domestic technologies as opposed to u.s.

technologies. guy: thank you for joining us this morning. coming up this friday, the riksbank marks its 350 year anniversary. fed chair jay powell will speak alongside his bank of england counterpart. the conversation will be moderated by bloomberg's head of economics. this is bloomberg.

♪ francine: this is "bloomberg

surveillance." the search for italy's next prime minister has been thrown into disarray. the latest turn in a chaotic government building process, italian 10 year bond yields resume their ascent. we are back with daniel morris of bnp paribas asset management. is this a real problem for the italian government or the european central bank? guest: certainly both. the ecb can't ignore what is going on. if we think about how this might evolve over the next weeks or months, that is certainly one of the comments that is going to be very important. not only is there all the machinations around building the government itself, it is part of the eu and when he the reaction

from those agencies as well to interpret what the dynamic is going to be in the markets. francine: is there a signal that italy can send said that international investors are a little less freaked out? guest: i think certain things people would like to hear is even if we do propose cutting taxes and increasing payouts for guaranteed minimum income, that is going to be offset by cuts somewhere else. that is that the message we've got so far. the plan is to issue more debt, and that is what is spooking markets so far. that may be a little difficult to foresee. guy: this is just one of the issues europe faces right now. the other is the expectation story. expectations got very high regarding the euro zone economy. those seem to be rolling back very fast. a survey this morning showing more weakness. we were arguing about this in the break. this may sound like semantics, but if you talk about flatlining, people assume that is negative. if you talk about stabilization,

that seems more positive. if you talk about stabilization above potential, that sounds quite good. we may argue about this, but where is europe right now in reality?the language is important for people at the wrong end at the stick. guest: take italy. in italy earlier this year was 60, which seemed quite extreme. you had a very natural rebasing of expectations. it is still very positive, even if the pmi has disappointed. as always, we were perhaps carried a while me up -- carried away on the upside in the first part of the year. you're still going to have well above trend growth in the eurozone this year that is going to be supportive for inflation and all the other things we want to see. we don't want to get too pessimistic and assume that there is contraction in any sense in the eurozone is that is absolutely not the case. francine: do you worry about italian banks?

guest: if you think about who is most at risk if you have a continued selloff in italian it isment bond yields, primarily domestic investors. compared to the last eurozone crisis come you don't have anywhere near the foreign exposure you had before. it is going to be much more limited if things get worse. francine: daniel, think is a much. coming up, tim adams, president and chief executive officer of the institute of international finance. that is coming up in about four minutes. we will be talking to him about mergers and acquisitions, dodd-frank and banking regulations. this is bloomberg.

♪ francine: this is "bloomberg surveillance." let's check in on what is trending across the bloomberg

universe this morning and on tictoc. is there a new headache brewing for chancellor merkel? a will find out why chinese trade deal with the u.s. could leave germany in the middle. this is our most read story in the last couple of hours come in third place on the terminal, standard chartered says it is focusing on strategy despite merger speculation. and looking at the impact that brexit is having. all about the market, the turkish lira moves and president on europeang doubts investors. guy: the long time business partner of michael: best of michael cohen -- of michael

cohen has entered a plea deal. cohen has not been charged with wrongdoing, but better on investigators are probing him for bank fraud another possible crimes. our financial investigations reporter joins us from paris. this looks like it is a story that is going to evolve fairly quickly. where does this potential change leave the investigation? reporter: this is essentially part of the continued back-and-forth between trump associates -- not donald trump himself as much as people around him -- and the investigation led by special counsel robert allegations ofe russian interference and collusion in the 2016 election. what this does is put more pressure on trump's personal lawyer michael cohen and his business dealings.

the person charged with a longtime friend and business partner of cohen. the logical reason for this plea deal is that he is cooperating with the government, both with the new york state attorney general, which is the one who actually charged him, as well as robert mueller for his investigation into trump. the reason it appears to be that friedman would be cooperating with the government is that he was charged with multiple counts of tax evasion for about $5 million. what he actually agreed to plead guilty to was one account for $50,000. his sentencing was delayed by a year and he will not serve any jail time if he fills the commitment he makes in this guilty plea. all of that tends to suggest he is cooperating with the government. francine: the pattern that seems to be emerging is robert mueller staying silent, rudy giuliani on the attack. are we going to have any progress on the investigation?

are going to hear anything publicly on the investigation? or is it going to be after the midterm elections because the worst thing the investigation would do would be to publicly influence the election? alan: the trend you just cited is probably the pattern you are going to see for the foreseeable future. whether or not this investigation ends or something comes out more publicly before the november election, who knows. the way robert mueller works is he engages in subpoenas, people.nts, he charges he never speaks publicly. i don't think that is going to change, and no one around and seems to think that is going to change. trump's policy, particularly is to attack and be on tv all the time, speak to the media as much as he can,

continue tweeting, to attack the fbi and justice department, and that is likely to continue all the way through the elections as well. guy: great stuff. thank you very much. let's get a bloomberg first word news update with taylor riggs. taylor: officials are still moving ahead with plans for president trump's historic meeting with north korn leader kim jonextonth. still, he is expressing as an is and that the meeting wiltake plac the sticking point is the issue of whether north korea will give up its nuclear weapons. union lawmakers are unhappy that facebook ceo mark zuckerberg left member of austin's unanswered. soderbergh -- a number of questions unanswered. european parliament president called it "only a start." >> we want the respect by the

different companies of the rules of the european union. this is our engagement. we will work in defense of our .itizens taylor: one of the questions breast a side was whether he thought facebook should be broken up. american author philip roth has died. roth looked at post-world war ii .merica philip roth was 85. 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. francine: thank you so much, taylor. a decade on from the financial crisis, the u.s. house is approved sweeping overhaul of

bank regulations, bringing president trump one step closer to make good on his vow to dismantle dodd-frank. joining us to discuss financial services a man who has served as chief of staff to two treasury secretaries and is now president of the institute of international finance. tim adams joins us from brussels. always great to speak to you. you make us smarter on banks and banking regulation. what does the rollback of dodd-frank mean for european banks? first of all, it is good to see you again, francine. always a pleasure to be on your show. it is not a rollback. really it is a bit of modulation , finding better balance in regulation, with special attention to small and medium-sized banks. they were unfortunately caught up in a broader regulatory agenda. isncine: the using there

anything the european regulators are looking at to make life a little bit easier, at least to compete with their u.s. co unterparts? guest: we are at different points in the regulatory cycle in europe. i think there is still a lot to be done with this current parliament, which is finishing capital markets union, finishing banking union, and having a true european wide banking industry, which i think is now lacking. the u.s. has just been a single integrated industry. guy: good morning. you say this latest rollback of regulation or re-modulation of regulation affects the smaller medium-sized institutions. do you think the next step will be to allow some of the larger institutions maybe to return even more money shareholders -- even more money to shareholders?

guest: we have seen record its out of the u.s. financial services industry. i think this was really just trying to provide some relief to smaller institutions. this is really focused on the smaller banks. we always look for opportunities to return capital to shareholders. that is what all industry should be looking to doing. there is much talk this morning about consolidation and the european banking space. it may come to nothing. we simply don't know. do you think that banks with cib's attached to them or owners of cib's should be looking to merge in europe? is that a solution to the problem? are bigger or more systemically important banks, is that an idea that won't fly? guest: one of the principal

isics here at our conference the threats and risk posed by big internet platform companies that had huge scale, huge resources. i think what you will see from the banking sector, not only , is the application of data, digitization, artificial intelligence. the banking industry is transforming itself to compete with internet platform companies. consolidation is a part of that strategy, and i think it probably makes sense. francine: what part of the world is over banked? is that part where we are going to see more consolidation? guest: i think in the u.s. we have already seen just this week some mergers announced in the midwest. i think you will see more of that. i think globally we will see consolidation. you are competing with the larger internet platform companies to bring a whole new suite of mobility and services

and products. in many ways the banking industry is going to transform to compete with them and look a lot like them. francine: are we going to see a banking union in our lifetime? does it mean that the germans are now less likely to sign up to it? lifetime.ope so in my certainly it means greater economic growth, greater capital formation, and more jobs. i think it would certainly benefit europe generally. i don't think it is going to happen in the near term. i do agree the italian circumstances makes it more difficult to achieve the risk reduction that has to occur before we see risk unification, so yes, i think it does come looking things. -- i think it does come looking things -- i think it does complicate things. debt and abreast of the

european capital market has gone backwards since the financial crisis, the same time the u.s. has gone forward. -- does thent banks investment banking model even work in europe women have this kind of situation -- europe when we have this kind of situation? guest: i think so. capital markets are not as important in europe, but they are still an important part of financial intermediation. banking obviously be dominant form, but there is an important role for investment banking. unfortunately i think brexit probably sidelined the capital markets union discussion, which is unfortunate. but what we need to see is more champions for capital markets union. we probably have to get through the next european parliamentary elections and a new commission before receiving at stage of capital markets union. do you worry that chaotic activity may lead to

italian banks not hitting targets by the ecb? guest: i am not really worried about the european banks. they are in very good shape. they have balance sheets in good shape. they have a lot of capital and liquidity. they have great leadership. i would separate the banking italianhip from politics, which as long as i can number has been case -- can remember has been chaotic. i am not worried about the italian banking system. francine: just a quick final question. i think we caught up with you for the imf world bank meetings. we talked about the turkish lira. what is your biggest risk out there? is it the currency crisis in turkey because that has a more systemic effect for emerging markets? guest: you know, emerging markets has taken on a lot of debt, including foreign-currency debt.

they need to do more with respect to good policy to prepare for higher rates, higher oil prices, and eventually a stronger dollar. this is an unrestrained set of for -- and unforeseen set of circumstances. i hope turkey and other countries will take steps to prepare for what will be even more stressful times ahead. francine: all right, great to speak to you, as always. iif,is tim adams from the joining us from brussels. coming up later today on bloomberg tv, we talk to lucky barton -- to lockheed martin's , speaking onve "the david rubenstein show" at 9 p.m. tonight in new york and at 2:00 a.m. in london. this is bloomberg.

♪ 45 minutes, newly 46 past the hour. i'm guy johnson, in for tom keene. francine lacqua. trouble continues as the turkish lira has hit fresh all-time lows against the dollar, euro, and yen. the human heart rejoices from a stumble -- benjamin harvey joins from theis temple -- stumble -- from istanbul. we seem to be in the midst of a currency crisis right now. the lira dropped more than 5%. that is the biggest decline in more than a decade, bigger even the in the aftermath of

2016 coup attempt. guy: the market is pushing for rate rises. what would satisfy the market at this point? you were here last week will we talked to the president. he seems to be indicating the rate would go lower. a 400, 500 point te hike taken off the table. guest: the central bank has always been under immense political pressure, but when the market forces eventually come in some of a have done 500 point hikes in the past. the central bank has essentially taking itself out of the game, especially after president erdogan's comments in london that he would like to take more control over monetary policy, and he is a well-known advocate for lower interest rates.

francine: this is a great volatility chart. you can see the swing lower this morning. we brought it back to 2013. is this a full-blown currency crisis? why now? does it mean that it automatically falls? does it spiral? reporter: a lot of it will depend on the rhetoric you get from the government, as well as any actions or nonaction from the central bank. if we think about what has gone , iover the last year or so head of an election you have a , it hasredit growth just arguably spun a bit out of control at this point. is the currency continues to fall and inflation begins to spiral, it could become an economic situation. francine: we have another chart.

the lira lost 21% this year, the second worst in emerging markets. what can policymakers do now, if anything? how much do they have to hike to make a difference on the markets? ben? reporter: people are now talking about rate increase in multiple hundredths of basis points. that is similar because the central bank is so far behind. it is possible if they had done this earlier they could have managed, but now the market is looking for a big move. guy: can we talk about the election now? we talked about in a moment ago, but we had a situation where we could find ourselves with an outcome in the election that freaks the market out even more. what would happen, for instance, if president erdogan were to win

the presidential vote but lose the parliamentary vote? the system is set up to only really work when both of those two systems fit together. how big a threat could that election be as we build up to it with such currency tension? reporter: i think the problem is it is totally unclear how that will work. after this election, turkey will transfer from a parliamentary system into an executive presidency, where the president will have a lot more power. it is not totally clear how will separate bodies interact with each other after the election, especially if the opposition takes one of them and erdogan remains in the presidency. therey you would think would be some sort of consensus to overcome the divisiveness that have been distracted -- has been destructive to turkey and its markets over the past few years. francine: thank you so much. benjamin harvey there, are

turkey bureau chief. coming up this friday, the st. petersburg international economics for him -- economics forum. andjapanese prime minister the imf managing director there. this is bloomberg.

♪ the prime minister is the custodian of the plan, which is to come out of the customs union and market and get out of that project with all convenient speed. that is what we are going to do. that was the uk's foreign secretary boris johnson saying prime minister theresa may needs to get on with it and deliver brexit. let's get a final comment with daniel morris of bnp paribas investment. that, coupled with programs it cabinet members that continue rexit cabinet-b

members saying theresa may will definitely be outside of the customs union, public it's her job even further. movingyou have the pound on inflation and politics, so that does make you cautious. the markets will want to see either and in prose on growth -- to see an improvement either on growth and inflation or brexit. at this point, where he little bit more doubtful. francine: thank you so much for joining us today. hour, thein the next ubs chairman will talk -- the ubf chairman will talk a little bit about markets and what we are expecting in treasuries. we will talk about the possible

merger and consolidation after that rumor about barclays and standard charger -- standard chartered, and then dodd-frank. guy: quite an interesting subject for him to riff on. francine: we will also ask if it is time for a german to be ubf president. quite an interesting topic. that is coming up in half an hour. this is bloomberg. on the get lira, new low back of your talks with the president. guy: let's not extrapolate too far. this is bloomberg. retail.

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

every corporate office, warehouse and store near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. >> you might see some a variation in the numbers overtime. that does not mean we are in a shooting off period, where inflation will take off. i do not see that happening. ♪ francine:

guy: what are the options for turkey now? how much will it take to re-stabilize the market? what does he mean when he talks about the fact that institutions have the power to remove it bounces? -- imbalances? >> i guess that is a question you have to ask him himself. one point is very clear.

the turkish lira is under selling pressure. the rate level is inappropriate to their economic imbalance. it is an appropriate concerning the external funding need. it should take -- rates. you can argue that something like 400 basis points will be enough to stabilize exchange rates. handlennot expect a five if that does not happen? hans-guenter: we are in the middle of an election campaign. that means that if you are increasing rates during an election, it will be highly unpopular. i think the government is going to watch this. guy: that was a very political answer. five handle? hans-guenter: maybe. is: ok, hans-guenter redeker going to stick around. next, joining us is the chairman caixbank.

this is bloomberg. ♪

♪ francine: this is -- taylor: this is "bloomberg surveillance." look at the bloomberg business flash. there is a deal to merge nissan and renault. does not think he will see an agreement this year or next. they have been discussing ways to strengthen their alliance, including a possible merger. he was asked about the sales of electric cars and what is behind

increase. >> the sales of a electric cars are going to many countries. china, for example. is thisinly driven by the regutors, the consumer demand for electric cars. be the largest mainland chinese ipo since the 2015 stock market crash. apple's most important assembly partner plans to raise $4.3 billion in its public offering. that would value the company at $43 billion. trying to lessen its dependence on apple, which provides more than have of its revenue. finish a is ready to deal with indonesia. an agreement on the mine may not still be reached. one of the sticking points is that estate in the mind has to

be transferred to a local firm. that is your bloomberg business flash. francine: becky so much. we are getting some news from lowe's. yesterday they posted -- the chief executive of using many. lowe's reported some of earnings for shares in the first quarter. they missed analyst estimates. what i find quite interesting is that they had poached the new chief executive and the main challenge would be to find a way to revive the number two in home improvement to get to number one. home depot without a doubt as done a lot better when it comes to share price. guy: i've got a little bit of home improvement. big fan come diy. let's talk about what is happening with home improvement in italy. francine: they don't touch th stuff and really. -- in italy. [laughter] guy: i was going to joke about

what they are doing for the foundations. that moment may have passed now. [laughter] let's talk about the euro. weaker data today and the pmi's. we have got this italy story that we have to factor in. the italy story is being price into btp's. how much of it is it price into the euro? hans-guenter: real money has to make a decision. we have seen it the same way last year and reverse. at that time the euro was flying high. we were movingly from yield and rate differentials and now the opposite may have to take place. you have to think about if your euro exposure is too high, if you have to reduce it, should

you do it by currency hedge? i think you are paying for a currency hedge. you look at short-term interest rates in germany, they are at -0.6. you can take risk out of your folio by having a currency hedge -- portfolio by having a currency hedge. i think when people are struggling to find an answer about why we are moving away from yield and rate differentials, that has a lot to do with the gross position that people have invested in your country, in your environment. that is to be currency hedged. that means -- that needs to be currency hedged. it is a management of the stock of assets that you have. a stock of assets in the eurozone are quite significant. if investors come to the conclusion that some of this eurozone reduced then --. decision,ey make that

does that symbolize that they are losing faith in mario draghi? hans-guenter: not necessarily. you increase your return by imposing those currency hedges, because the hedge does pay you. secondly, it is not about mario draghi. it is much more about how we build that european house. that means you need to provide european institutions. it means that you may have to centralize fiscal powers. we are increasing the reform process, but goes hand-in-hand with that in the long term is that mutual position. the market -- mutual ization. the market now has the added that europe is going ahead with its own fiscal policy. you are not reforming as quickly as people were hoping last year. it is the second round affect of

this italian situation, which were the concerns me. francine: people call it revisiting the euro debt crisis. whatever they call it, who can fix it? does it need to be the ecb or a political solution from within? hans-guenter: i think it requires a framework. the first framework was a contract, unfortunately in 2003 we got rid of this framework with the destabilizing implications from there onwards, but we have to return to a framework. you cannot have this framework on a contractual basis. to.have build firm institutions for credibility reasons that means that the political unification process should be a result of this renewed turbulence within the market. francine: thank you so much. .hat was hans-guenter redeker yields in the eurozone's heaven

pushed up and the peripheral economies. how will this play on the wider banking sector? jordi gual.ow is thank you so much for joining us. do you worry about a contagion effect starting with italian banks? jordi: good morning. it is a pleasure to be with you. i do not worry. theink that the crisis in new political situation in italy will be managed, and the system is robust. weertheless, i think that need to caution european authorities. we cannot afford complacency in the building of a complaint monetary union.

at some point with -- complete monetary union. at some point we have to go forward with the union so that as sufficient backstops, and sufficient leverage to deal with financial turmoil. it is important that we go on building a full and complete nking union. frcine: how much of a setback would this be for the european banking union? jordi: sorry? i cannot hear you well. francine: i will say it again. how much of a setback, how much of a difficulty with this be for the banking union? that to fully complete the banking union, we need to make sure that national domesticintroduced by inequalities are removed. but of course, we face significant political difficulties. these can be achieved -- this

can be achieved, but it will be important that at the same time the eurozone provide with instruments of risksharing to all the members of the zone. , what we will achieve will be a reduction of the level of risk for the entire system. that is no contradiction between risksharing and risk reduction. the two of them go together. i think that is one of the fundamental lessons i would say of basic economics. it has to be put into policymaking. guy: this is guy johnson. good morning. do you think that the link between sovereign bond markets and european banks has been broken? because if it has not been broken, then i can draw a line the spanish bond

markets, and the spanish banking sector. that linknt has been broken? jordi: d't think that we have. the way that the banking union has evolved as helped -- has diminishing the link between the bank and the sovereignties. we also have a link between the sovereigns and the bank. --t requires a fundamental not only of the way that sovereign bonds are issued and traded by the different member states of the union, but also a ing of the -- ripp fiscal framework. when one count to joins the single currency area, it is doing something fundamental, which is relinquishing the --.ity to issue a risk

and must be the case that the members of this single currency zone should be able to issue yet -- a share risk for risk fiat. anything that brings the link that breaks the link between sovereigns and banks should be related to the overall framework of how we deal with the budget deficits of the member states, one of the fiscal rules, what are the rules regarding debt restructuring, and so on, and so forth. francine: understood. that you so much for joining us. that was the pressure been chairman. this is bloomberg. ♪

♪ francine: this is "bloomberg surveillance." guy and francine from london. tom keene has the morning of. we will get back to banks.

will get straight to new york with the bloomberg first word news. this is taylor riggs. taylor: president trump will not have a chance to make good on his campaign promise to do a big number on the dodd frank act. the house has now passed and sent to the president a sweeping overhaul of bank regulations. reliefs smaller banks from postcrisis rules, but wall street did not get as much as it wanted. u.s. officials are still moving ahead with plans for president trump's historic summit with kim jong-un next month. the president is expressing -- that the meeting will take place. he says there is a very substantial chance it will not work out. the sticking point is the issue of whether north korea will give up its nuclear weapons. some european lawmakers are unhappy that facebook ceo mark zuckerberg left a number of questions unanswered. he did apologize for recent privacy woes.

the european parliament president called on the is start. by theant the respect different companies of the rules of the european union. this is our engagement. with more work -- we will work hard in defense of our citizens, first of all for that election of 2019. taylor: one of the questions that zuckerberg brushed aside is whether you that facebook should be broken up. american author philip roth has died. he looked at post-world war ii america in novels that discussed sex, politics, and secular judaism. " was turnedumbus into a movie. phillip brock was 85 -- philip roth was 85. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. guy? friends in? -- francine?

francine: -- prime minister has been drawn into disarray. the latest turn in a chaotic a government building process saw italian 10 year bond yields resume their a sent, rising for the fourth time in three days. what this political risk in an for the ecb as it works to normalize policy? we are joined by the current chairman of ubs. he is an expert on global growth and global recessions. he is axel weber, and he is also chairman of the imf. axel weber, always good to speak to you. thank you so much for joining us. axel: good morning. francine: good morning to you. how much do you worry about the chaos that we see in trying to italya government in and that infecting the eurozone? avos, i remember in ds

everybody was optimistic about this year. italy was one of the risks that we mentioned. the endgame is not clear at this point in time. i think the underlying concerns eurocentric government has always been there. but we have seen is some debate that for europe is not good. at think europe needs to commit to take europe to the next level in any discussion about moving back or changing the underlying agreements is really not productive. we see that they are immediately penalized in the market. if these talks and rumors continue, we will see that pattern continued. and is in nobody's interest to really question the fundamentals of the agreement that has brought europe together. francine: all we back at the european debt crisis? could we go back to the european debt crisis? axel: this is more isolated. i think you see strong momentum out of germany and france to

take europe forward. we always knew that in that debate, italy is an important partner, and they are not yet on board for this debate. i think we are watching this play out. caretaker government that has been in place, the -- inment italy has been italy has been stabilizing the situation quite well. i think an anti-european movement in any country, be it france, we had this in discussion about them, is really causing europe to go back, and be in the focus of markets. with brexit happening, there is already a lot of problems in europe. what you see is the europe -- unique winner out of this is the u.s. the u.s. is back in business and moving forward, and europe really has to watch it to not be left behind. guy: axel weber, good morning. this is guy johnson.

there is talk of an alternative currency new delhi. how would that the -- currency in italy. how that be taken the ecb? axel: i don't think it would be taken positively and i don't take it seriously. any doubts about the euro being the common currency of the member states is producing new tensions in the market. you see that if you look at sovereign spreads. they are reemerging. the ecb has some years ago stabilized the situation. it has not solved the underlying problems. there is a debt problem, a debt overhang in many countries. banks still need to be put in order in europe, more than in the u.s. and other countries. europe still has homework to do. on discussion about reneging the current system are questioning its liability is really going to be negative, not just for italy, it is not to be

negative for everybody else. is going to impact negatively on the euro. this is something europe cannot afford. guy: it talk about the u.s. economy motoring on. is that because we have had extra fuel put in the tank and the form of this fiscal push the has been formulated by the trump administration? and how long does the last four, do you think? axel: we reckon that for the next two years, both of the tax reform, which is a structural change in the u.s. tax system, and also the late cycle stimulus that has been coming into the u.s. will drive the economy forward. s more than ha upset the very slow tightening of the federal reserve and the reduction of the balance sheet of the fed. this will carry the economy for another two years probably. i see some clouds coming up in

mid-2019 on the horizon, but this is still going to be an economy with a record low unemployment rate, where banking a stronger. i think the u.s. economy will have a good one or two years. at that point in time, as a fiscal stimulus fades out, and monetary policy normalizes, you will see some headwinds, but they are building slowly. guy: can i just talked to about those headwinds, and what that looks like from a european perspective? a was exactly the point at which the ecb could be at the point in which it is looking to raise rates. could the ecb raise rates at that point if the u.s. was beginning to roll over? that would send the euro through the roof, and we end up with a very difficult situation here in europe. can i ask you about how the sequencing is going to work here? ecb has twowhat the sets of homework to do. they still have an easing bias

the communication. they have to remove that. the ecb will revisit some of that language. they wld give us some clues about the task at handand that is to wind down the purchases of assets. as that happens, it will take the ecb some time to take out the economy response to that. into 2019, as we are heading toward the and mario draghi a mario draghind sturm, i'm sure the ecb will --. i'm not sure it will take them all year, but it is a good assumption that as the u.s. economy cools, the european economy will feel some headwinds from that. we might have seen most of the tightening in the u.s. by 2019, and the long end of the european growth very much moves with the u.s. long end. i think the ecb is that this going to phase out the unorthodox policy and move

interest rates slightly positive territory. the journey from there is pretty unclear at this point in time. francine: akzo weber, is there a danger that the market interprets as underlying of the -- axel weber, it is there a danger that the market interprets as underlying of the --? look, i am not going to get into the weeds, the appointment of the next ecb president. that is up to the european politicians to do. i think, as you rightly pointed out, the ecb has two tasks. of thexpectation, most unwinding of the unorthodox policy, which is very much sort of characterizing mario draghi's term, will actually happen towards the end of the term. when ben bernanke left, he started unwinding some of these

purchases, and he was pretty much of to his -- it was pretty much up to his successor to either continue those winding down operations forward come particular look. there was some nervousness at the changeover to jerome powell. lag for rate hikes this year. they will concentrate on the purchases this year and phase them out. that is my long-term expectation, that they are no longer needed at this stage. whatever weakness we see in q1 data is temporary. you will probably see quite a strong rebound in q2 figures. i'm not worried about this patch and the european economy. pmi though we did see some data from the eurozone in france and germany, we see is a bit of weakness. ubs weber, the chairman of is go to stay with us. we look forward to talking with

him about turkey. riksbank marks 350 years in business next week. there.powell will be be conversation will moderated by bloomberg's head of economics. that is on bloomberg tv, bloomberg radio, and on live go. ♪

♪ francine: this is "bloomberg surveillance." guy and francine from london. tom keene is off this week. we have breaking news out of tiffany. we had some comparable sales. if easter about the foreign movement, it is gaining 7%, a little better than expected.

they are boosting their forecast for the future. they are saying that basically ey a authorizi a $1 billion share buyback program. that is tiffany trying to i guess get more of a loyal investor base. i don't know what is doing to earningst given the are better than expected come i would imagine that the share price pretrade is a little but up. we will keep an eye on anything to do with tiffany and any jewelry related revenue. guy: let's return and talk a little bit about turkey. the turkish lira at a new record low. it is a big move this morning. the central bank may step in to prop the currency up. loss this year alone is the second worst in emerging markets. the ubs chairman axel weber is still with us. axel weber, you are famous for

understanding orthodox economics and monetary policy. can i ask you about what your thoughts are on the experiment that seems to be taking place in turkey at the moment? some may talk about president erdogan, they talk by his views and have a different to the rest of the world, in terms of how monetary policy interacts with inflation. the turkish lira is falling aggressively. ultimately, do you think that president erdogan is wrong, and you think that the central bank will have to raise rates? turkey, asu look at one example, but argentina has pretty much experienced the same just two weeks ago. the central bank monetary policy lose at the moment. and argentina we saw that with a reactive 40% -- rate hike of

40%. turkey is in the same situation. monetary policy is to lose. there is a repeated overshoot of inflation over the target. the central bank should raise rates to reestablish more credibility in the market. at that point in time, if the government questions the independence of the central bank, or their ability to act, and actually puts on the table in move that goes in the opposite direction, namely characterizing rates as already too high, that is an insufficiency -- inconsistency in macro markets. i would think that in those cases, it was an inconsistency of domestic policies that caused the markets reaction. the only way to do with the bet to correct the inconsistency. what turkey clearly needs, i would not call it orthodox monetary policy.

it would need appropriate monetary policy. that has been a late cycle credit boom. it is not a general emerging-market weakness we see here. is look at the south african currency, the russian ruble, and a general dollar strengthening environment they have not had the same experience. these are idiosyncratic, homemade policy issues that lead to a market repricing. unless you change the course of policy, the market will continue to do that. guy: it will continue to do that. how far could ago? president erdogan -- how far could go -- far could it go? president erdogan was at bloomberg last week. he says he will be further involved in monetary policy. how far will the market push the story? how aggressive do you think it can get here? axel: i'm not going to speculate on any numbers. it is very clear that this is

exactly the inconsistency we're talking about. lose the central bank independence, monetary policy becomes -- to general fiscal policy. in my general -- in mike view, -- in my view, that is not a good move. i think the sooner that the turkish government goes back to a mainstream division of labor, what the central bank is in charge of monetary policy and supported by the government in what is needed to stabilize the currency and get inflation under control, that is going to be the key issue. this is not something new. i think governments sometimes learn these lessons the hard way. it is clearly going to be that the market will continue to focus on this. drive there is a new new -- new drive to make policy more

consistent, the market will continue to price down the literate. francine: i want to talk to you a little bad about ubs. as interest rates start to normalize in the fed, what kind of impact does that have on your operations? what does it mean for ubs? axel: we, like every other bacon, have been suffering in an environment where your usual utter business has been undermined by zero or negative interest rates, as in the case of switzerland. far wealth management business, whiskey is that economies continue to mobilize, and we help our clients. we have a very strong focus on wealth management in our bank. normalizing, led by the u.s., it will offer as much gger opportunities in the future to lead clients into balance portfolios were fixed income returns are normalizing. that is a big part of our picture.

a lot of our clients have overly invested in equity portfolios. we still recommend equity as a good investment class, but they will want to add exposure to fixed income. you see that at the current juncture, markets at that point in time -- where basically the repricing of it interest rates is leading to conditions that produce headwinds for the markets. we have to be close to our clients in navigating these difficult adjustment periods. policy starts normalizing, that is when clients need a lot of advice. we are very happy to work with our clients on that. francine: on regulation, how will affect -- it affect your rates, your operations, trading income? very clearly we have a dedication of capital into the investment bank that fits our needs. operation, it is

a common theme at the imf meeting, scale as become unimportant factor. as we scale up our operation, we will scale up i will to management, and we will scale up our investment banking. will not change the composition of the things that we do. we are trying to gain traction. with our time to grow our business. --h our headline operations we are trying to grow our business, we are trying to grow our headline operations. francine: axel weber, thank you so much. as always, a very interesting interview. i know you have to get back to your iif duties. axel weber from brussels. let's get straight to the bloomberg business flash. . taylor riggs. taylor: target posted first-quarter sales growth that beat estimates.

the midpoint of targets second-quarter profit forecast was better than expected. tiffany posted first-quarter earnings that beat estimates. the luxury jewelry chain also reported comparable sales that were higher than expected. tiffany also boosted its full-year forecast. that is your retail bloomberg business flash. guy and francine? guy: thank you very much indeed. francine: i have. guy: francine is going to rescue me. she is writing to my rescue -- riding to my rescue. francine: this is the single best chart. guy johnson spoke to the present of turkey two weeks ago and what we were talking about was the turkish lira. this is what we read has been doing since. it is no doubt -- lira has been doing since. it is no doubt the best chart, but also your chart. about japanese

investors saying to get out of lira. the consensus seems to be that it would be an aggressive move for the central bank to get involved. guy: i don't know what aggressive means anymore. he solid happen in argentina, really big -- you saw what happened in argentina, really big basis point moves. i don't know what it would take at this point to stabilize the turkish lira. 500, 600? i don't know. francine: you see the inflation data that we had in the u.k. and what that means for mark carney. let's get to our bloomberg opinions columnist. he writes about bonds, treasuries. recently he has been writing about the cpi and what it means for mark carney. >> yes, i have are in a little

bit about mark carney. i think the bank of england has had troubles with their forecast, and inflation is one in particular. they expect it to be stickier than has been. i think at 2.4 it should be easier to get to the 2% target. guy: rate hikes this year? >> i think possibly not. august 2 is the day. i think the chances of that can only be related to whether growth bounces back properly and quarter one -- in quarter one. i don't see much of that -- evidence of that happening. that is their window. the economy is weakening. on must there is a substantial bounce back, and i hope there is. it is 50-50. francine: one thing we're trying to figure out is whether the market is actually -- guy: right now there are plenty

of things to figure out. right -- francine: right. we are talking about the turkish lira, regulation. >> i think this italian stuff is quite serious. i'm surprised the ecb has not come in and be more demonstrative, and defended a 4.5 trillion euro balance sheet. they are letting them come although it back up again. i think that is very strange. they have put this big bear trap potentially. i think it is a waste, it is a shame. what are they doing? francine: that is his next opinion piece. we have a pretty opinion --pre--- pre-opinion. he is from bloomberg opinion.

turn into jonathan ferro on bloomberg surveillance radio. we will see what they have to say about markets, italy, the regulating. i like that donald trump said that we would do a number on dodd-frank. that has up for interpretation. we have a little bit of a direction in rling it bk quite significantly. this is what we are looking at in your markets. we talked quite a bit about the banks. i would watch for more sentiment about possible consolidation in europe. there seems to be more caution on the markets about korea and turkey. on economicubt prospects also in europe. this is bloomberg. ♪

lira hit a record low again.

more pain to come and of the central bank goes missing. u.k. inflation disappoints and turkey jitters spread, the trade is risk off. and the battle over barclays, barclays directors considering hypothetical combinations pitting the chairman against the ceo. david: welcome to "bloomberg daybreak" i am david westin with alix steel. president trump trying to roll back the dodd frank, but i think it is time to go to turkey. alix: apparently really cheap. record low again. but with that finally seeing contagion and the risk off field we are seeing. take a look, futures down by about 17 points, triple digits for the dow, 200 down in the future markets. dollar-yen