>> pulling the plug. italy's populist leader drops plans to form a government. we are live in rome with the latest. tosident donald trump seems confirm that his summit with north korea will go ahead. th north korea will go ahead. oil heads to its biggest losing streak in four months. opec does not want top prices. no one is interested in seeing an overheated market. andre serving that now

pushing the oil prices. ♪ francine: good morning, everyone, and welcome. i am francine lacqua in london. we have very thin volumes on the market because we have a big memorial day celebration in the u.s. and u.k. stocks are also closed. what i'm looking at is little bit of flavor on the markets. it's a risk on move. trading floors are expecting a little bit more buoyancy. this is what i'm looking at. we make it fresh elections which is why we're seeing a little bit of response in europe.

yield,lian 10 year definitely one of our biggest stories of the day. story that opec and russia have already cleared the markets area we will talk about oil slump -- markets. we will talk about wheels slump. wheels -- oil"'s slump. we also have an interview with james noris at 10:30 a.m. london time. here is the first world news. has hadit's a lee populist leaders pull the plug on attempts to form a government. anti-establishment five-star movement said it was considering proposing impeachment of the

president. solving he invented at a conspiracy and made a thinly veiled call for new elections. the euro has rallied against of the dollar. donald trump has appeared to confirm that his summit with kim jong-un is back on. he said his team had arrived to make reparations for the summit. he said he truly believes north korea will be a truly great nation one day. and the summit would happen. after south korean president moon jae-in had a surprise to our meeting with kim in a bid to keep the summit on track. -- u.s. oil has u.s. traded oil has extended losses. it's the biggest price crash in

a generation. futures in new york fell as much as 3.1%. i believe nobody is interested in seeing an overheated market. they are correcting that now and pushing your prices up, including production lines and geopolitical the structures. powered by more than 2700 journalists and analysts in more than 100 and countries. this is bloomberg. francine: it's a lee has hit another roadblock. populist leaders have abandoned their attempt to form a government after the president rejected their choice of finance minister. the leader made a finland -- made a thinly veiled call for fresh elections. struggling but they're

no confidence vote will be put before the cross party board today. here is rome's bureau chief. thank you both for joining us today. first, to you. it is a -- is a constitutional crisis in italy? >> definitely some kind of crisis. the situation now is that the president has called upon the former imf director general and we will be seeing the president today at 11:30. likely the president will give a mandate to try to form a government. we are not sure what happens after that. it's likely at this point that the populist will reject that government so the likely scenario is that we will go pretty quickly towards new elections, possibly in september. francine: is there any chance that mr. cook to rally -- mr.

gets the numbers to form a government beyond september or will we have to have fresh elections? what we arefrom hearing from the five-star, it's a -- it's unlikely they will li even though at one point they are posted for some posts. the situation has become dire. you mentioned it before. asking for the impeachment of the president so they will likely refuse this government and a confidence vote next week. then the president will have to dissolve parliament and move towards new elections. it will take some we're thinking september or october. what are the chances of the president being impeached? this is over the finance minister. concern of a present had there

was that he was making secret plans immediately out of the euro. set right? right.dra: that's it's hard for them to make a real case for impeachment. they are already in campaign mode. they switched very quickly to that. you saw savini in the square and making ingressive -- progressive statement. getting people to rally around him. i don't think they have a case to impeach him. the president can in -- can refuse and that's what is therefore. i find it very unlikely and very difficult that that is treason. the president accepted their prime minister proposal, a manhood no political experience. he said not this finance minister and they wouldn't propose someone. i think they have no case for impeachment. will get back to you. talk us through what is happening in spain. we know the spanish primus are

was fighting to save his government from collapse. was happening today? the ibex has rebounded today because we are seeing the opposition party agreeing but they are struggling to come together with a joint plan. partye the socialist saying they're going to go ahead with a vote of no-confidence. the plan is to form an alternative government and the call for elections. the problem is the liberals are saying not so fast. what we need to do is get rid of coffers -- and then call for elections. this goes back on the back of jail sentences handed down in the bridge -- madrid exposing his party scandals.

he is a seasoned politician. it's his popularity waning by the minute? maria: it is. we haven't heard from him at all. he says it's a complete overreaction. convicted are no longer serving and rajoy has always denied any wrongdoing. the problem is he doesn't want to go. officials still think he is the best person to lead the party. we got a hold yesterday. it says they would lose more than half of their seats in parliament. spain is not so sure about it. francine: what are the chances of him resigning in appointing another official to -- to appease everyone? that would be something

to appease everyone. basically just saying, eases way out. the problem is, he just doesn't want to go. he's made it clear he wants to stay in 2020 and thinks there's no legal case against them. he says, again, there's no wrongdoing and he's done nothing wrong. he says the people that have been convicted are no longer working for the party. he does not seem to be willing to go. it seems the vote of will go ahead but he was stay in power at least a year. francine: one final thought. when do we know if they can actually form of government? what do we find out after that?

alessandra: this whole process keep starting all over again. the president can approve list and once he does that, he goes for a confidence vote. the populist parties are likely to not give him that confidence for. then, what can happen, is the president can either dissolve with catoight away otarelli as a caretaker government. francine: thanks so much. covered.ll angles join us from copenhagen is john hardy. good morning to you. we saw euro with a little bit of a sigh of relief.

could it all unravel? i haven't seen the market for the last couple of minutes but it was sort of already in the process of unraveling as far as i could tell. our headline for the morning was being careful of believing in the relief rally. i don't see how the situation leads to any immediate relief. if it means new elections, this could be a situation where the populist party actually increases the popularity of the result. if that's the case, it could continue to weigh on the euro. i think it's good to continue to do that. make sure all of our viewers and listeners are clear, did you find it odd that euro had a sigh of relief when you found out we could go fresh elections?

you are suggesting that we don't actually know which way goes. .ohn: that's right it makes some sense to see some relief. here's the president stepping into his role in circumventing an appointment. , after the ugly friday close, a knee-jerk reaction in the opposite way but i think any sustained relief rally is not something we will see. unfortunately for markets, i think we'll see loss -- see a long time of uncertainty. francine: does spain add to your uncertainty? john: not having much. italy is multiples of anything happening in spain right now and is dominating the market focus. spreads: looking at between spanish and italian 10 year yields, to look at the its lease pain spread or the italy

german spread? john: we track everything versus germany and the italian situation has dragged spreads wider. even into things like hungarian spreads. we track that, of course. i haven't started tracking very much the spanish versus italian but that could be interesting if the spanish situation turned to the something that creates a bit more of a widening their than has been the case. francine: i'm looking at trade weight of euro. overall, do you the situation could delay ecb's normalization plan? i think even before the situation we had the market question whether ecb normalization is something that can ever happen. have we turned into a japan scenario? the conclusion seems to be more or less yes.

this is adding to the sense that ecb was asian is off the radar. these for now. now?ine: what you mean for do you see a scaling back on bond purchases in september or november? that seems to be priced in. john: scaling back on purchases is one thing but the whole idea prior to that was the convergence idea that ecb is behind the curve and we get towards rate normalization. a lot of that has been taken out . i think there's a much lower probability on the degree to which the ecb will be up to wind down there to be purchases. -- wind down of qb purchases. wqe purchases. the markets will be careful to sort through the data points.

the vatican direction in the euro that will feed into inflation for a few months ahead. we have the oil price. weakening in the oil price and i don't the conflation will be a big one on the agenda. -- i don't think inflation will be a big one on the agenda. francine: if we get any calls saying that the italians are turning eurosceptic, what happens as soon as there's fear of italian exit? john: the existential fears feed a weaker euro but if you could somehow imagine a europe without italy, you have a situation where the euro should be far stronger but that's not how the market. -- the market thinks here. it will continue to affect europe and if you have the

entire italian yield curve, two years at -25 basis points two years ago and i are finding a huge swing. it's a credit situation in the situation that is untenable with the ecb why the down its qe purchases. winding down its qe purchases. francine: thank you so much. straight to the bloomberg business flash. marcus: softbank has ended its eursuit of a stake in swiss r though the two companies may still agree to collaborate. they purchase of the stake in the world's second-biggest reinsurer would give the japanese company access to steady cash flow and diversified sources of income. said theth knowledge two sides have disagreed over the price.

china energy reserve and chemicals group has confirmed it has not paid a ball and that matured earlier this month. that trigger defaults on other notes and as to concerns about credit facing some chinese insurers. it is considering asset sales. china energy spiked in heightening credit conditions. the ceo of the world's largest publicly traded hedge fund term has said recent bond defaults in are part of regulars attempts to normalize the markets. made the comments and exclusive interview with bloomberg. government is clearly trying to get the bond market in china to be a more

normal market. on the corporate side, we have seen a few defaults. to last year and for this year. it's a process to get to a place where there is sensible risk in bonds. that's the bloomberg business flash and i marcus. francine: president trump has appeared to confirm a meeting with kim jong-un is back on track days after abruptly calling it off. he said u.s. officials had arrived in north korea to make arrangements for a summit between the two leaders and said he saw a bright future for north rio grande. they echoed recent remarks by mark pompeo. join us now from seoul is our reporter. what is the latest on this meeting with kim jong-un?

to repairow the talks for the summit appeared to be back on track. we have north korean diplomats meeting with u.s. diplomat singapore to prepare for meeting even as we speak. it's quite a turnaround after trump's that he was calling off the summit with kim jong-un. apparently, it seems to be in their best interests to get these things going again. if it works out, trump could -- legacyacy that new that no other president is able to achieve. while north korea could open up and prosper economically. what happened? why the turnaround. do we know what president trump actually took issue with? the biggest issue here is basically can north korea

guarantee that it's going to dismantle its nuclear program as quickly as the u.s. wanted to. , they want toa make sure the u.s. really genuine in his willingness to guarantee the survival of the regime. , is a the heart of this sense of mistrust between the two sides. they hate each other for decades. since the korean war. that's why south korea has an stepping in the middle to be a mediator. south korea's president is trying to run by both trump and kim jong-un that it is in their best interest to talk. we are seeing reports right now that he may actually go to singapore to be part of the summit on june 12 area there's a lot to watch right now. thank you so much.

still with us, john hardy. how is this playing out on the currency markets? mood, ourn, risk off people feeling a little bit better about life? he's happy, we're happy. trump is happy, so effects traders are happy? i miss the question, sorry. francine: i was talking about president trump and the markets seem to be encouraged that the summit and singapore's going ahead. what does that mean for dollar? john: on the positive side, this whole issue doesn't have much of a sustainable impact. we're talking about nuclear confrontations, this was a risk

off type of issue. on the positive side, is there any pent-up market anticipation? it's just something we watch. i don't think it will have tremendous follow through on the positive side. it's a nice headline over the weekend and gives a little bit of a boost into the opening but i think the impact rapidly fades. so no long-lasting impact. some sort ofhows diplomatic alignment or easing of trade tensions with china, if that is the result of the narrative, second could have more sustained impact for the situation and help out the dollar. otherwise, that's a much. where do you see dollar heading from here.

john: the interesting thing was the u.s. yields going lower after the big benchmark of the 3%. we've come back below. the cycle,cap for that has interesting applications for dollar-yen. if it's because of economic growth see some risk aversion coming in, and the dollar does reasonable ex-lover -- reasonably elsewhere. that's if the long end of the curve has been cap for now. be willing to tolerate some higher inflation that's a interesting signal. when you look at the emerging-market economies, given the dollar build up, how vulnerable are these governments to a stronger dollar? the dollar is the market

metric number one with looking at emerging markets. it's a huge problem the government side more than the private sector. it has an amplifying effect with the currencies go lower in the dollar goes higher. we are looking for weak links in the situation like turkey which is easily the most vulnerable of the more the with emerging-market countries. we are watching it closely. it does ease the pressure if the dollars coming back lower. other risk metrics we are tracking do not look very positive. if you're looking at emerging-market assets and equities, the not doing very good dollar terms. thank you so much. gone,t, with the oil glut the russian minister tells us what he wants to open the taps again.

we are seeing a little bit of movement when it comes to oil today. one the most read stories is that opec and some of its oil producers concluded that the aprilmarket rebounds in was about eliminating the global surplus. it was interesting hearing a little bit earlier on next week. it means that some of the demand coming to the emerging markets will also go high. european stocks following asian but we have a big bank holiday in the u.k. and the u.s. so volume is subdued. this is bloomberg. ♪

francine: economics, finance, and politics. this is "bloomberg surveillance ." we are following the italian situation and we are just

getting some breaking news from the head of league, mr. salvini, saying he aims to govern with vetoed ministers. if we remind our viewers what is happening, the big news was that the president of the republic, mattarella, decided to veto a finance minister that he considered did not come forward with open plans to get out of the euro. he says he shouldn't be able to be finance minister. the populists asked for the president's impeachment, then saying they will govern with vetoed ministers anyway. let's check what is trending. on tictoc, we will find out why japan's tech giant softbank has ended its pursuit of a stake in swiss re. findto bloomberg.com to out why critics think donald trump is boiling the frog with his attacks on the doj.

stories, in read third place, president trump seems to confirm his summit with kim is back on track. second place, loyal extending it betweenter an agreement russia and saudi arabia. in top place, italy falls into further political chaos. let's get straight to the bloomberg first word news. here's markus karlsson. >> italy has sunk deeper into political uncertainty as populist leaders pull the plug. the president rejected their choice of a eurosceptic germany bashing candidate as finance minister. the antiestablishment five-star movement said it was considering proposing impeachment of president sergio mattarella and salvini hinted at a conspiracy. the euro has rallied against the dollar. u.s. president donald trump has appeared to confirm that his

summit with kim jong-un is back on. he tweeted, our team has arrived in north korea to make arrangements for the summit. i truly believe north korea has brilliant potential and will be a great economic and financial nation one-day. kim jong-un agrees with me on this. this came after south korean president moon jae-in held a surprise meeting on saturday with kim in a bid to get the summit back on track. the u.k.'s foreign secretary has repeated his call for britain to make a clean break from the european union. boris johnson warned the prime minister that the country won't be able to take full advantage of the split unless it does. theresa may must resist growing calls for the u.k. to remain in the regime. 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 markus karlsson. this is bloomberg. francine: thank you so much. just getting some news out of turkey. we knew this would happen. the rate will be at 16.5%. this is on the back of strong lira depreciation. effect fromll be in june 1. this is the new framework that the bank had outlined, but we did not have a start date. opec and allied producers including russia have concluded the crude market rebalanced last month when their output cuts achieved a key goal. russia and the saudi's are proposing raising production to make up for losses. the russian energy minister said no one in opec is interested in seeing an overheated market. east look -- he spoke with

bloomberg. all, when we discuss the corporation initially, we have always assumed the possibility would exist based on market conditions. we reached preliminary agreements on that. i would like to stress that no decisions were made. we just discussed the possibilities which were always on the table. members likesome iran and venezuela who won't see any benefit from others increasing production. how will you persuade them to support this proposal that you spoke about in st. petersburg? >> first of all, before we make a final decision in june, we want to look into the numbers and study them in detail before

the discussion. i believe that nobody is interested in seeing an overheated market. there are many factors affecting that now and pushing the oil prices up. that these factors significantly affect the price. consumers could be penalized. that could impact demand. that is why we are aiming to restore supply and demand balance. the mechanism could be eased or strengthened depending on what the market needs. francine: that was the russian energy minister speaking to bloomberg in st. petersburg. joining us for the half hour is the founder and chief investment officer at a bp invest.

let me bring you over to our wti brent chart. it kind of goes through these oil prices together with the number of rigs going back online. how difficult is it to have a look at what the oil price does next? >> this is very much politically motivated. i believe the stronger relationship between the u.s. and saudi has played a key role. i think also misses trump's comments over the last few weeks, that the price of oil has been escalating, and clearly it would help the u.s. and broader economy if those were contained. shale producers are now the swing producers. they are what opec did 10 years ago. >> correct. we've got issues. we've got potentially mexico, iran, but that is where the corporation between saudi and russia -- they met last october and they are looking to meet

later in june to discuss that. i believe they will find a way to keep prices contained. we have the midterms in november coming through. does the price in oil filter through inflation? do central banks look through it? thanos: it does have an impact in terms of the consumer cost. central banks will try to see through it if there are significant developments and changes. so far it has not been able to derail inflation. rising,re to continue clearly it would have a direct impact. francine: apart from the fed, can anyone else normalize? normalizinglose to

as markets believe they are? i think the ecb will be keeping a dovish stance. clearly the latest developments with italy, the discussions taking place politically, will keep the ecb a little bit on the back foot in terms of normalizing and reducing the policy. francine: what is your take on italy? i'm getting quite a lot of notes coming on, saying that because of mattarella getting involved, this is not positive. it gives more of a chance for the populists to govern down the road. thanos: i'm quite worried. the reason i'm worried about italy is because both parties came in through the backdoor, if you like. what they saw is le pen's

approach of anti-euro in the french election did not work. le pen had a clear view in terms of the impacts of austerity, the immigrant issues, but she went down the anti-euro sentiment rule. the french voted against that. i believe the italians saw that anti-euro policy would not necessarily help them win. having been through the elections, i believe they are looking to implement that through a roundabout way. expressing anti-euro sentiment view now rather than pre-election. francine: would that get them elected? thanos: there will be most likely a second election coming through. i think they will not get elected. they will probably avoid being clear on that and maintain the broader policies on the economic potential. francine: let me bring you to my chart.

is there any thing in italy that you like at the moment? thanos: the only thing i like about italy is that italy has been used to change of government. that broader instability does provide the market with some sentiment that change is something which italy is used to , and that uncertainty will be managed. francine: does that mean the ecb policies need to take a step back? what does this mean for the franco german lions? will put ahink that back foot on president macron's views on closer euro integration. we need to take a little step , and with merkel looking to retire and put in place the next levels of government, that will be more on the defensive. francine: what are you buying

right now? is there anything in europe that looks attractive? i prefer spain to italy. although we are seeing some political instability there -- francine: equity? thanos: it has converted itself into an exporting powerhouse. the structural changes will help the economy grow positively. there have been signs of recovery taking place. even early signs of structural changes, strong tourism. francine: thank you so much. thanos from a bp invest stays with us. plenty coming up, including china, a sign that regulators are cracking down. we will hear from our exclusive interview. and, swiss re is looking for a

new anchor investor after talks with softbank's failed. this is bloomberg. ♪

francine: you are watching "bloomberg surveillance." the chief executive of the world's largest publicly traded hedge fund firm has said that recent defaults in china are signs of regulators' attempts to normalize the markets. luke ellis made the comments in an exclusive interview with bloomberg. >> clients are looking for performance. they are looking for returns.

the thing is that if you have all your money in the chinese stock market, the only source of return is growth in china. if you've got bonds -- a lot of the alternative to equity in china has been to have some of these bond products which have , andproxy guarantees there's a lot of pressure to take those products out of the market. people are looking for some diversifying investment. >> after the bear market in bonds, many banks had to cash out their money just to kind of mediate what is going on with the pboc. funding. key source of is that a long-term trend? >> i think that the chinese government as part of that process of liberalizing and normalizing markets is clearly

trying to get the bond markets in china to be a more moral -- normal market. we've seen the first few defaults. whereld get to a place there is sensible default risk in bonds. that becomes interesting because you can start to make judgments between different things. there's a clear process to try to drive them to being market-driven products rather than based around guarantees. i think that is all healthy. i spent a bunch of time with the regulators last week and they are trying to move things forward in sensible steps. they've come a long way. there's a long way further to go. it takes a lot of steps to make sure nothing breaks along the way. was man group

chief executive luke ellis speaking to bloomberg. for more, we are joined from hong kong by our chief asia economics correspondent, enda curran. what does this suggest about funding conditions in china? >> good morning, francine. themes thatig global have been looking at is china's deleveraging campaign. it is a sign of that broader curb the level of credit creation in the economy. we probably will see some more signs of stress going forward. we've had an uptick in defaults compared to a year ago. china wants side, for the market to be in what to

put a price on risk in its market. there's a view that this is an important development. it is all part of getting the market to stand on its own two feet and become less dependent. there's a mixture of near-term volatility and there may be some stress borrowers, but the bigger picture is all about getting china's credit market to a more mature stage. are we likely to see more defaults? i think it is going to be a recurring theme. liquidity seems to have tightened up somewhat. i think the message especially towards shadow banking is that want to be all't things to every man. they want to send a message that discipline is needed.

himself hasing likened financial instability to that of national security. we take it that there will be some of that. think the stress, i don't the expectations are that this d risking campaign is going to be on such a scale that it would tip the economy over to a hard landing or a sudden stop. this is going to be a piecemeal, steady as she goes approach. they've got to handle credit creation. that is how they want it to play out. bloomberg's chief asia economics correspondent joining us. nos is still with us. do you worry about defaults in china being symptomatic of

something that will unravel? thanos: i think there will be the sporadic default as part of the normalization. but i do not expect that to destabilize the national economy. is in verywhen china delicate discussions with the u.s. and the e.u. francine: will they try and challenge the dollar, and can they change something in 20 years? thanos: i don't believe the chinese would want to have the stronger currency. there's negative impacts. at the same time, i don't believe the u.s. would be willing to give up on its reserve currency status. the renminbi is becoming much more liquid. bilateral trades have been increasing. i would expect that to continue.

but i would not see the u.s. dollar being derailed. francine: talk to me about lira. we have this headline about the repo rate. this is lira depreciation. happen forto investors to get that confidence? thanos: i'm worried about the lira. the recent developments in the worsened the economic situation. the second worry is the macro prudential issues which president erdogan mentioned in terms of the concerns of the central bank. whetherd is intervention will work by the central bank of turkey.

so i continue to be worried about the turkish lira. erdogane that president will most likely win the election, but there's still the local elections. i would be very surprised if he came on the first day and decided to pursue proper macroeconomic policies. francine: what i'm struggling to understand, and we have a piece on the bloomberg terminal, the economic numbers aren't bad at all. if you look at lira depreciation, it makes you think the economy is about to crash. is there anything at the margins that could create value? thanos: i would totally agree with you if the central bank has the independence to raise interest rates. viewer, given that in my the central bank will not have that independence to pursue the necessary measures, that inflation could spiral out of

control. thank you so much. thanos, founder and chief investment officer at abp invest. swiss re has said it is open to approaches from an anchor investor. the two businesses have announced an end to negotiations. they are said to have disagreed over the price and size of the stake. shares in the swiss company are a little higher this morning, leaving it little changed for the year. let's get more on the story with our editor, ross larson. first of all, good morning. what would's wrist three -- what would swiss re have gotten out of a deal with softbank? >> both sides have been quiet about their motives, but we can infer that they would hope to get a lot more access to asian markets, which are very popular

with the insurance industry, and some help in improving their technology. re bene: would swiss willing to give up some control to attract a large investor? >> that is kind of what has been spoken about a lot. was that swiss re didn't want to create new shares. that may have been the whole reason this deal fell apart. they didn't want to have an investor that was too involved. both of them -- softbank haven't acknowledged they've had these talks. we are limited to what we hear from inside. francine: where does this leave softbank in its pursuit of a steady flow of cash? >> softbank is kind of the

definition of a company with a lot of irons in the fire. they are involved in the t-mobile-sprint merger. they've got a huge investment fund. they are invested in the temporary office company. they have a lot of other fish to fry. that has led to speculation that may set aside this deal because they have too many things going on. they've got a lot of different avenues to pursue. francine: thank you so much for joining us. that is bloomberg's european investment team leader joining us from rome. let's check in on the lira. the turkish lira actually appreciating to a session high versus the dollar. term, look at it longer bringing it back to 2012, it is very simple. the central bank said that it had decided to complete the

simplification process regarding the operational framework of the monetary policy from june 1. this is the one week repo rate. it will be equal to the current funding rate. i guess this gives investors a little more framework. interesting that the timing is 24 days before the election. "bloomberg surveillance" continues in the next hour. we will bring you an exclusive interview with jim morris. we will ask about some of the demand for etf's. i want to ask him where are the markets positioned. thatll have plenty more on through left today. this is bloomberg. ♪

francine: pulling the plug.

italy's populist leaders drop plans to form a government after the president rejects their choice of finance minister. the euro gains on hopes of fresh elections. president donald trump appears to confirm that his summit with kim will go ahead just days after calling off the meeting. and, drilling down, oil had for its longest losing streak in months as saudi and russia say they are discussing in output boost. good morning. this is "bloomberg surveillance ." equity markets in the u.k., in the u.s., are closed for the bank holiday and memorial day. we have quite a lot of news. we're looking at italy. we are also looking at turkey. the central bank has simplified its monetary policy. the one-week repo rate is now the policy rate. it will be 16.5%. we did see a little bit of lira strength.

i think it has gained some 2%. we are looking at italian bond yields. president mattarella has invited the technocratic prime minister to take over after the previous populist one decided he could not put a coalition together. let's get to the bloomberg first word news. here is sebastian salek. sebastian: president trump has appeared to confirm that his summit with kim jong-un is back on. he tweeted that the u.s. has arrived in north korea to make arrangements. last week the president called off the meeting. south korea's president held a surprise meeting with kim on saturday. senator marco rubio says his proposal to block zte and other chinese telecom companies from operating in the u.s. would have supermajority support in congress. wants to let zte stay in business by paying a fine. rubio says chinese telecom equipment could be used to help

china spy on the u.s. the political turmoil has gotten worse in italy. president mattarella rejected the populist choice of a eurosceptic for finance minister. that led populist leaders to end their attempts to form a government. asked to form be an interim government. u.s., southeastern tropical storm alberto could cause more than $1 billion in economic losses. the storm is expected to come ashore today. winds have hit 65 miles per hour. parts of florida, georgia, and alabama could get up to a foot of rain. 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 sebastian salek. francine: this is bloomberg. francine: thank you so much. this is what i'm looking at when it comes to your markets.

first of all, just a warning for everyone out there that we are thin on trading volume. this is a holiday in the u.s. and the u.k. there is a sentiment that this week will be risk on. this seems to be the lead by indications that a u.s.-north korea summit is back on track. italian shares also up a touch after the president rejected a eurosceptic finance minister. when you look at the ftse mib, it is retracing some gains right now. that is what i'm looking at. this is definitely the chart that i'm looking at the most. it was a close call between lira and the spread between italian and spanish yields. this is because the spanish prime minister is fighting to save his government from collapse after a slew of harsh

jail sentences handed down by judges in madrid exploded his party. whate trying to figure out happens in italy next. for the latest on these developing sagas, we are joined by our reporters on the ground. in italy, alexander. madrid, maria. thank you both for joining us. let me kick off with you. what we know is that we had mr. conte step aside, saying as a populist he cannot form a government because the president blocked his choice of finance minister a eurosceptic . what happens next? point, he will very , thesee cottarelli president's choice.

cottarelli is likely going to try to form a government. he has to hold consultations. he's going to come up with a list of ministers. we go through this process over and over again. presumably the president will accept it. then they need to go to parliament for a confidence vote. given what has happened, the populists are not likely to vote for the cottarelli government. we will have to go to early elections. itfar as we can calculate, will take at least until september before elections can be called. francine: are we in a constitutional crisis? can the president be impeached over this? >> it is certainly a crisis. i think everyone understood that we will go to elections quickly. as far as impeachment is concerned, i find it difficult.

this is how the italian presidency works. mattarella accepted the populist choice for prime minister. he held consultations. they could have proposed other people for the post of finance minister. he's within his rights to say he didn't want this one person as finance minister. i think it is unlikely that he will be impeached, but the fact that they are proposing it is part of the electoral campaign. we are in for a lot of mudslinging. francine: alessandra, italian bonds reversing some of the opening gains. you can see the 10 year yield. one final question to you. sensel, will there be a that the system is rigged, that because the president intervened

and blocked a eurosceptic finance minister, that if we go to french elections -- fresh elections, the populists will gain more? >> there a risk of backlash. there's a feeling that the thatdent blocked a choice they voted for the populists and the populists were unable to form a government. the populists saying is because of germany. the president did say it is in part because of the markets. this is what it is going to look like in the next few months. it is a political campaign. it is going to be anti-euro against pro-euro. francine: how ugly will it be in spain? the spanish prime minister is losing popularity, but he doesn't seem to want to go. >> that is right.

he is saying this is a complete overreaction. the vote of no-confidence was triggered last week on a corruption case related to his party. roy saying this is a complete overreaction, saying the people who were sentenced to prison are not part of the government. we understand that he is willing to stay until 2020, or at least another year in power. oil really wants to stay. he thinks he can make it even if there is vote of no-confidence. francine: maria, what are the chances of the prime minister surviving, and if he goes, how will the markets take it? the markets appear to be a little bit confused. the either is losing a little bit of steam. it has become harder to interpret what is going on in spain.

everyone in parliament wants rajoy to leave office. the problem is his rivals cannot agree on the way to do it. we have two options on the table. if there is a vote of no-confidence, the socialists are likely going to lose that. flipside, we have the liberals holding a press conference. they don't want to have a government with the socialists. they want an election. it is this tension between up rajoy.t could prop francine: maria, thank you so much. our reporters on the ground in rome and madrid. we are joined by the chief economist at g plus. thank you so much for joining us. what does this mean for ecb policy? does it mean the ecb is less likely to normalize this year? >> i wouldn't necessarily think

so. the way that italian spreads flew out last week should probably quell some of the populist voices on the other side of the fence. if anything, the ecb is going to look through that political noise and remove itself from it. the ecb sets policy to its policy mandate. there is a clear path of expectation that the markets expect the ecb to follow. that, the ecb is not ignorant of financial conditions. the strength of mario draghi's ecb has been taking a strong rate of financial conditions. the irony in this case is that italian authorities calling for a break away from the euro have resulted in losing control of financial conditions in italy.

that is something the ecb will be concerned about. ?ill it result in a change i think it is unlikely. francine: how much will it impact euro strength or weakness? let's say we have fresh elections. it is unclear whether this move means that the populists are more likely to get a stronger mandate or not. if they were to have a stronger mandate, what does that mean for euro? >> there's a case to argue that the euro should be weaker. some of the compression we saw in risk premium over 2017 clearly had been against the real convergence. italy is a very particular case. italy runs a primary fiscal surplus and a current account surplus. in other words, italy runs a domestic demand deficit against the rest of the world.

in other words, italian electorate has not seen a normalization as other economies have. clearly italy needs a weaker moreexchange rate and expansionary fiscal and monetary conditions. clearry short-term, it is that the markets have been underpricing euro political risk. francine: i guess the italians don't feel part of the recovery. we will get back to that. li na, liver stays with me. coming up next, we speak with jim norris. we will talk to him about the markets, the demand for etf's. this is bloomberg. ♪

francine: this is "bloomberg surveillance." the turkish lira has advanced the most among its peers today as the central bank announced it will simplify its policy framework and set its one-week repo rate at 16.5%. with more on that, we are joined by a man at the top of the world's largest mutual fund, jim norris, managing director of international operations. always a pleasure to speak to you. i'm looking at lira strengthening amongst the major currencies following a report that the central bank is planning to change its system. does it change vanguard's view on turkey? the mostve to say

important message we reinforce with our investors is to invest for the long-term, not to pay attention to short-term volatility, the noise in the marketplace. i would describe a lot of what is happening now as noise if you are a long-term investor. the same way we treat our clients, we treat our businesses that way. we're going to ignore the short-term volatility in these markets because we think these are going to be fantastic markets to be in, particularly for someone like vanguard. francine: are you investing longer-term in turkey specifically or are you talking about emerging markets overall? jim: emerging markets more broadly. little bitive me a of your take on these emerging economies. one of the concerns that we've been picking up is, since the financial crisis a lot of emerging economies have built up

dollar debt. rises, how vulnerable does it make these economies? about think if you think the currency changes over long , these currency fluctuations tend to balance out. perspective, if you look at the long-term trends, look at gdp growth, look at the emerging middle class in these markets, and you think about a place like china where you have 80 million people in the middle class today, if you are an asset manager, you really do need to be in these key emerging markets. you need to be investing now and you need to be investing despite the considerable volatility that you are describing. francine: do you worry about fed increases, rate rises, and do

you expect volatility in emerging markets in the short term? jim: yes. i think that is probably inevitable. we are seeing some of that now. if you are an investor, what should you do about that? should you be making changes in your asset allocation? we would generally say that is not a good idea, partly because you have to be right on the way out. you have to be ready when you get back in. our advice would be that you have to accept that volatility is likely to be there in the time frame you are talking about. hold steady and understand that in the longer run, you are going to be fine as an investor. francine: jim, what is vanguard's take on the chinese market? what kind of growth potential do you have in that market? jim: i think the biggest thing

you have to look at is, you already have 80 million investors in that environment. lots of challenges. i think those challenges are becoming less so in the years ahead. for all of the talk about the u.s. and china from a trade perspective, as it relates to financial services, the market is opening up more and more by the year. to being aa path fund manager in mainland china. if you are going to serve retail investors in china, you need to be a local provider. you need to be competing on the ground as a local provider. there is of ways you can do that. in a market like china, you probably need to work with local partners. they could be distributors. they could be other asset managers.

if you really think about all the markets outside the largest asset management market, china really does have to be at the top of your list. where is your main competition coming from? is it local players or international players? if you are trying to serve institutions in mainland china, you can do that offshore. that is a whole different set of competitors than we would generally think about. i think china is going to be the same. you want to serve people who are in the local market. you really have to have an approach of a local company. if you are going to win over time, you are not going to win at the expense of other global offshore firms.

you have to compete against local companies who have local capabilities. behink it is more likely to competition with local people in the marketplace versus being a foreign asset manager trying to go it alone. francine: what kind of products to investors want in asia? etf's, orx funds, more active products? is, whatchallenge investors want and what they should want is often quite different. i would argue that vanguard's history has been a history of not necessarily providing investors with what they want, but what they should want. today investors in china are not looking to invest in index funds. it is very much an active management market. it is very much a high trading

type environment. i would say if you went back to when vanguard started, very similar environment to what we saw in the u.s. it took us a very long time for indexing to become 3% of the asset management market. today it is over 30%. if you look at the china market today, it is probably about 3%. isexperience with china cycles tend to happen much faster. today there's very little demand. we feel optimistic that that demand is going to increase over time as people move away from really being short-term speculators and being more long-term investors. first of all, will we have a trade agreement between the u.s. and china, and will opening up financial services in china be part of that agreement, and how much of a boost will

that give to vanguard? jim: the opening up on the financial services side, that is already happening and has been happening with a lot of momentum in recent years. we were feeling great about that regardless of the broader trade discussions. our team would say that there's probably little likely of this escalating into a broader trade war. these are skirmishes that are happening at the margin. we think there's a pretty good likelihood that we will get to a long-term trade deal. there may be more noise in the months ahead, but we would feel more optimistic that we will get to a long-term trade deal. that is better for the global economy. thank you so much, jim norris, managing director of vanguard's international operations.

i look forward to having you here in our london studio. still with us, lena, when you look at china and you look at some of our most read stories on bloomberg, there's one about an energy company missing a payment. are we going to see more of those stories, defaults on bonds, and will that be ugly, or can it be maintained to leave a little pressure? the broader context behind your question is that there has been this shift in investor interest away from the extraordinary global liquidity for asset valuations at the high-end in the shape of strong earnings expectations and strong top-down support from central bank liquidity.

if anything, developments in turkey and italy have highlighted the reality that we are ending this financial cycle ,uch the same way we started potentially having systemic implications. the energy market is in a balance,rly -- a power which means that fluctuations in energy prices will impact emerging markets. most emerging markets are net importers. francine: on trade, how do you see that planning out? is it going to get ugly? if anything, i would link the trade dialogue between the u.s. and china with the trade dialogue between the u.s. and the e.u., and also north korea negotiations. what has been clear is the question is not will the summit happen, but who has got the

lever, the leverage, in that power balance? it is a multilateral negotiation . the fact that it has happened already has had many turning points. to give a great deal of concessions to the u.s. what i'm worried about is that this trade dialogue is not happening. that has to happen. francine: thank you so much. lena stays with us. this is what lira is doing. turkey's central bank has decided to more than double its one-week repo rate. ♪ what's a gig of data?

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pay for data one gig at a time. and with millions of wifi hotspots included, you'll pay less for data. it's a new kind of network designed to save you money. click, call or visit a store today. francine: good morning, this is "bloomberg surveillance." why japan's bank has

ended the pursuit of a stake in -- and had to bloomberg.com to find out why critics say that trump is boiling the frog with his attack on the doj. and for most read story in third place, trump seems to confirm his summit with kim jong-un is in second place. second place, oil extending its slide but what is the wider opec view? and cap place, italy. falling further into political populists slams the protests. let's get to the bloomberg first word news. sebastian: president trump decision last week to cancel the summit with kim jong-un is ancient history. he said a delegation is in north korea to make plans for the meeting. there are talks that the south

korean president may be part of the summit. giuliani,wyer, rudy is questioning the special counsel's investigation. robert mueller probe is rigged. he questioned the origins of the fbi investigation into russian meddling. and opec and his allies have announced that the surplus is up. less than the five-year average in april. it will be the focus of a tense meeting. saudi arabia and russia want to boost output. and boris johnson is again putting pressure on theresa may over brexit. in the telegraph, he repeated his calls for the u.k. to make a clean break. he asked theresa may to dismiss

remainor theresa may to in the trade unit. global news, 24 hours a day. powered by our more than 2700 journalists and analysts, in more than 120 countries. this is bloomberg. francine: and other potential block from chinese telecom companies in the u.s. would get back to congress according to marco rubio. >> i believe it will have block. i believe there is a growing belief in congress to do something about what china is doing in the united states and this is a good place to start. -- ing us francine: joining us now is enda .urran zte hasnow that the

become part of the trade mix. even about the issue, it trump himself put it on the table amid trade negotiations and china had significant concerns abound that -- concerns around that. so the intervention of trump and the concessions made by china in terms of being willing to pay the fine and shape of management seems to be a step forward in the broader trade but it would suggest that the trade tensions are continuing to progress. what exactly the outcome of the negotiation will be is unclear. some people are surprised that zte went into the story. it seems that both sides are willing to do a deal, but the shape of the final deal will remain unclear at the moment. francine: do we have any

timeline? shares were all over the place this morning to figure out if they would be banned or not. could this last three or six months? 12 months or more? enda: we are lacking specific detail on money. this is one of the issues. we do know that wilbur ross is june in beijing to continue perhaps theand latest round of negotiations, we will get more of a quid pro quo detail. and when it will be implemented. money measuresc promised by china will be critical for how the trade talks play out. both sides say they don't want a trade war, per se, and both sides are willing to come to the table but it is the details and

specifics of what agreements would be implemented and how. it will be critical to the near term trajectory of the trade tensions between the world's two biggest economies. francine: do we know how many jobs would be at risk in china? billion set to face $3 of losses due to the u.s. band but there was the crew took out sayingtrump put we had to preserve chinese jobs. but how many are at risk? enda: 75,000 employees at zte and under the original punishment originally envisioned, it would put them out of business. 75,000 workers going out. but they have pulled back from the brink. we had the intervention by trump in his tweet and trump argues it --'t just chinese jobs and jobs but it is american jobs. given the technology, crucial to

their business. so it could potentially have a chinese -- an american impact as well. this is china's biggest telecom maker and to have it chips down as originally planned by the u.s. would have had negative conquest leonsis -- would have had negative consequences. francine: thank you very much, enda curran. let me pull up my chart of the hour. we are looking at the 10 year treasury yields. this signaled that they are set to raise interest rates in june but a lot of the officials we spoke to didn't really send a clear message on whether they would hike one or two times this year. where do you stand on how many times the fed will hike? done aink the fed has great job. something you have covered

tremendously on the show. the original message from the last meeting was that the fed andbecoming more confident the u.s. economy was now converging more towards the 2% inflation and full employment which gives us little reason for interest rates to stay as low as they are for much longer. on the other hand, it is a balancing act. while they are more confident and comfortable with the prospect of overshooting with times ofrget given the undershooting which we have had in recent years. that has been the gift that emerging markets need because it 3%.ed to bring yields below it angered them around the 3% handle. and what that tells us is that the fed is preparing now that once we get the estimate rate rate, maybe after

one or 1.5 more rate hikes, they will possibly be willing to sit back and wait signals from the economy he for responding to stronger impulses. that suggests a steeper yield curve, growth and inflation slower tightening of financial conditions. francine: we don't like jargon on the show but if you look at the equilibrium real rate of interest, is that something we should look at more in the future? so.: i think i think the fed is hinting that as we get closer to that, we are not going to know. which is why the fed will attach more significance to the ratioal informational which comes from the data. it would tell us whether the

economy is slowing down as a result. and it is clear that the fed is happy to let the economy rest for a little bit. which is good news for emerging markets and engineering a soft financialr the engineering. lena komileva, thank you so much. staying with us. coming up, we hear more from our interview at the st. petersburg international forum. we will also be joined by john sfakianakis. that 6:30 a.m. in new york and 11:30 a.m. in london. this is bloomberg. ♪ s is bloomberg. ♪

francine: this is "bloomberg is a lotnce" and there going on in italy and spain given the motion of confidence launched by some of the opposition parties against the prime minister. this is what i look at in italy. the story of the day is what is happening on the be wrought in the 10 yearetween bonds. as the populist leaders have pulled the plug on their attempt to form a government and we understand that the resident will meet with -- the president will meet with somebody he may appoint as the mere technocrat. oil is heading for the longest run of losses in four months. saudi arabia and russia suggest reviving output. jumped to levels not seen

or last seen since 2014. lena komileva is still with us. and emily, welcome to the program. you had a fantastic interview with the russian oil minister. basically suggested they cleared the markets? so they are ready to put reduction back for production losses? they're now saying that in june they can have a discussion about revamping output. but the biggest thing missing from the meeting was the rest of opec. this is the question i was asking, how are you and to get members on board who have nothing to gain? nobody in the of the group is interested in seeing an overheated market.

upare pushing the oil prices -- production decline or from geopolitical factors. i guess the question is, there are only two swing ofducers and saudi is one them. so there are shale producers in the u.s.? alone, they could be the ones to fill the glut. even if they do when hundred thousand barrels a day, they are still at a level where the market is tight. and it is amazing. last week we talked about oil going to put hundred dollars a barrel now we are seeing the wti with brent at eight dollars a barrel and losses coming off. oil for russia is a big deal. $60 a barrel is what they can do with. but the finance minister went even lower.

listen to what he had to say. >> as for the russian budget and fiscal policy, we want that to be independent. vulnerable to external oil prices. that is why the budget is based on the consumption of a $40 per barrel. that was the minister they are saying they could do $40 a barrel. overall, a great report came out last week, the annual report. $70-$80, it hurts consumer demand. emerging markets by less oil. is there an optimum price? opec will never say they are targeting price. but possibly, that seems like that could be a useful range. we have seen consumers happy with around $70.

it was the trump tweet at the last meeting when he said opec was artificially moving prices and the u.s. came under pressure and called out opec. so they are feeling this anxiety. and that is what was said to be in the way into the panel. anxietyy are feeling from consumers and they want to keep that to a minimum. countne: this is the compared to brent and wti and if you look at that, it is clear that he shale producers are the swing producers, globally. know about where the price goes next? and how to factor that in? is a welloil market monitored market and there is expenses. in terms of as far as i understand, the decision to increase output was reduce output from iran and venezuela.

interested in marketa balance bond which means it should not deviate too much from where it is now. that is notwithstanding the fact a great dealll be of noise in the short term until we find that equilibrium level. but i would be surprised if we go strongly below where we are at the moment. francine: if it goes up five dollars-$10 a barrel, does that directly impact inflation expectations? a great question. there has been a strong link across oil and five-year markets. which is used as a proxy for inflation expectations. makes it policy sensitive in that respect. and the reason why this exists

is because much of the global economy is at full capacity. of a decade ago is now complete. the u.s. and the eurozone, it is at its peak. and that's a just that any pressure at this point is more likely to materialize. so that means that central banks have to pay attention. is a big opece meeting in vienna between opec in their allies or buddies june. how tense will that be? expected to be quite contentious to the fact and this reform happened you had the uae minister there as well. he made it clear to say that they will make a decision as a group. no two or three countries will decide on their own. members inside opec and outside

opec seem to be in disagreement as to whether they should revise out that. so it will be contentious for sure. a lot of people say it will be difficult to reach consensus. , thank you.dern lena komileva stays with us. log on to your terminal, it is a bank terminal -- it is a bank holiday so you don't know what to do so you can study charts all day to dazzle your colleagues when you are back at work. this is bloomberg. ♪ this is bloomberg. ♪

sebastian: this is "bloomberg surveillance." -- responding to the demand for large can of business jets. they will build to know -- they will build two new jets. the global 7000 goes into service the second half of this year. some of china's biggest internet countries -- companies are

betting on the largest ipo. becoming strategic investors in foxtrot. -- in foxconn. and a rare setback for disney. the company's latest offering had the star wars opening the lowest opening. $83 million in the first three days of memorial day weekend which was well below estimates. the worst start of the year for the fourth star wars movie that disney has released. lira has searched. after the bank announces implication of monetary policy. this rate will be equal to the current funding rate. joining us now to discuss this benjamin harvey. great to have you on the program. what does this mean for investors?

does this process but mean they are expecting more from central banks? benjamin: what is interesting today is that the central bank has raised all of its main rates significantly. from 8%.ent but they are not calling this a rate increase. a investorrom standpoint, they are being proactive and taking action against the lira weakness. and for the time being, they are talking about political pressure on the central bank cut rates. francine: what does that mean for the lira? i don't know if you look at technicals? but what needs to happen for the lira to strengthen further? benjamin: investors are taking this as positive news. the lira is up more than 3%. investors have been looking for is a vocation of policy.

-- for simplification of policy. the central bank is in acting this off schedule. they have another rate meeting coming up and investors will be looking to see what they do then. francine: benjamin harvey, thank you so much. .e are back with lena komileva when you look at the strength in the turkish lira, something we haven't seen for quite some time, what will investors look to go further? the actions suggest there is an alleviation of political interference which is good news but i don't think we can quite -- political risk with the lira. outcome of thehe june elections that turkey will hold. even so, after that, we are moving away from a parliamentary democracy towards a presidential

which will change the relationship between economic implications in terms of policy output. and in terms of geopolitical risk. the lesson for populists around the world from this financial turmoil over the last several weeks is that when populists try to take control for political gain, they will lose control of financial conditions which is are. lyrical cycles that is a good message to carry forward. it is a global phenomenon. francine: li na, leave so much. coming up, we speak with kit juckes. ♪

francine: pulling the plug.

italy's populist leaders drop plans to form a government after the president rejects their choice of finance minister. in room with the latest. back on track. trump appears to confirm that his summit with kim jong-un will go ahead. this is days after calling off the meeting. and drilling down. oil has the longest losing streak in four months. saudi it and russia say they are considering an output boost. welcome. this is "bloomberg survaillance." in the u k, holiday holiday. bank in the u.s., a memorial bank holiday. equity markets in the u k and the u.s. are closed and treasuries are not trading although equity futures in the u.s. are up a touch. the two main stories driving markets is the turkish lira

strengthening after we had a move from the central bank and we are looking at a european yields including the italian one after we understand that the aesident is meeting with premier who could be technocratic so we go to fresh elections in italy in september or october. let's get straight to the first word news with sebastian. trump appears to confirm that his summit with kim jong-un is on. a u.s. team arrived in north korea to make arrangements. last week, he abruptly called off the meeting. south korea's president met with kim jong-un on saturday and could end up taking part in the summit. the eu is trying to figure out the last minute trade deal with the u.s. trump wants to impose tariffs on steel and aluminium imports this week. they threatened to retaliate with tariffs on american products.

the eu was already to agree with the u.s. on points that are necessary. turmoil has gotten worse in italy. the president rejected the populace choice of a euros cap take germany bashing leader. summoned ant has he mayimf director and be asked to form an interim government before the elections. and a sub tropical storm alberto could cause more than one than $1 billion in damages. winds have hit 65 miles per hour in florida, georgia, and alabama. global news, 24 hours a day. powered by our more than 2700 journalists and analysts, in more than 120 countries. this is bloomberg. francine: this is what he or markets are doing now.

traders are kicking off the week with a risk on mood. trading value is really thin because of the holidays. but equity futures are following asian markets a little bit anher on the signs that america-north korea summit is back on track. italy's president rejected the finance minister and the euro weakened a touch on the back of analysts saying that this may furthery into populists. the other market story of the day is the turkish lira. turkey central banks has more than doubled the one-week rate to 60.5% from june 1. this sets a new benchmark and it means that simplified -- investors are buying the lira on the back of this. so for the latest on these developing political sagas, we are joined by reporters on the ground. in italy, and joining us from

.eadquarters in madrid maria, let me kick it off with you. we understand the spanish parliament is starting the process for a no-confidence vote? what does this mean for the prime minister? right. that is breaking news we are getting. i want to say that this is the parliament say -- the parliament saying the confidence vote can go ahead. it doesn't mean much. the parliament could say it is valid and it goes to a vote but it doesn't mean we get the vote and socialists will win it. it just means that the parliament says this is a valid motion and we can proceed and go ahead with it. but it doesn't mean anything in terms for the applications yet.

we will probably find out when this takes place so we are now getting clarity on dates. if there is a vote of no-confidence, the next step is getting a concrete date for it. francine: do we have any indication that the prime minister will step down? or will he cling on for dear life? maria: right. himhis point, it seems that leaving government would put a break to the political crisis but what we understand is that he thinks it is a complete overreaction and there is no reason for him to leave government. this all goes to the corruption scandal. a verdict we got last week -- sentenced to more than 300 years in prison for corruption but he says he has done nothing wrong and there's no wrongdoing and he is leaving. from, what we're hearing sources and officials is that he has no intention of leaving and what the prime minister is noterned about -- he is

concerned about a vote of no-confidence because he thinks socialists will lose it if they don't get enough support. in rome, is it happening now with the president meeting with -- who would start a technocratic government? >> he is in there right now and we're waiting for them to come out of the doors of the palace. presumably, he will get a mandate to try to form a government which means he will come up with a team of ministers. he will put that before the government. they will be sworn in. and then they go to a confidence vote. because after everything that has happened, the populist party will not vote for this government. they will not give the vote of confidence vote and that means they will go to election fairly quickly and the president will have to solve parliament and new

elections are likely in september or october. so there will be months of electoral campaigning which will be rough. francine: analysts are split on what happens next. let's say we have elections. half of the notes i get this morning say that the euro rose on the back of it because it could mean that the populist parties would have to say whether they are for the euro or anti--euro. but others say that this is raked because the president would likely gain more ground. is it 50-50? alessandra: yes. and that is how the country .eems to be divided we don't have polls on this yet. but it is turning into a referendum on europe, pro or against. it could go either way. people perceive this as

unfair for what they have done, they could go back to the populists and we could be back to square one. on the other hand, will italy vote against europe? the question is different now. it is the same question that was put to voters in march. will they go against europe? we don't know. but it looks like that is what the next vote will be about. much,ne: thank you so alessandra migliaccio there and maria tadeo. -- isg us now is juckes kit juckes. what fun to have you for an hour. a this the money chart for monday bank holiday? : i think everyone will be

wondering what is happening next in that one and it is hard to see anything other than a reason for covering in the short term but i suppose it does bring the whole issue to a head in that point. francine: you mean italy with the euro? or populist? kit: presumably, although the next election will be a referendum on europe, it does mean that we take off the table europea of a spain in with a government that wants fiscal policy that guarantees a fight with the european core. but if we have fresh elections in italy and the populist and people are angry, it isn't a referendum on the with thethey vote populists, what does that mean for the markets? then we come right back to

the center of what it means for its hellion debt. predict, 1000 articles -- over the next six weeks, articles. we focus on the size of the event. talk to me about targets? does the bank limit it? i'm not sure what they could do to limit it now. it is a system from italy to frankfurt. you can't unwind that at this point. i don't see how you can. or easily offset the risk right now at this stage if they were to leave. does the ecb become more cautious? mario draghi cannot be seen as cooling off normalization but would it be a risk at this point in time to scale back asset purchases? don't hear anything about

asset purchases in june. of there has to be a risk what we see. we will see how the world feels in july. you would expect the ecb to hold even. the ecb has no qualms about that. i made a trade weighted euro for kit. this is trade weighted. i don't know if you would rather look at that? kit: that chart is less awful looking for the euro than the euro-dollar chart. the euro has gone down less than the dollar has gone up in the last few weeks. look at thise i and say, this isn't such a big i think, ok.

we could get a bigger correction in the euro if we really thought there was a big risk of this falling apart. you tie that right now to the position that the market hasn't gotten rid of the long market position yet. will probably see that with percentage points lower. almost a come what may when the dust settles, particularly if we get into a discussion about a discussion in september or october. thank you so much, kit juckes stays with us. talk is back the on. we are in washington for all of the latest developments up next. this is bloomberg. ♪ ext. this is bloomberg. ♪

thestian: let's get bloomberg business flash. softbank has dropped the quest people-- according to familiar with the matter. they disagreed on the price. they couldn't agree over how much management control would be given to the softbank manager. and softbank say they may collaborate on some businesses. -- $4ing a pursuit on billion on investor funds which owns dozens of office buildings. that would present a 30% premium on the closing price. and the owner of -- hotels may chairmanst from -- the

would fund acquisitions, which own hochstein hotels. hochstein hotels is expanding into the u.s. and europe. that is the bloomberg's/. business flash. francine: we are keeping an eye on what is happening in rome. the president's meeting with someone who could possibly .eplace as a technocrat we may see early elections and there is quite a lot of movement .n the italian 10 year yield i am also looking at the spread and that is widening significantly. or 48l take 24 hours hours if -- gave us his last --erview eight days ago forming a government. and then we will see if he gets the numbers which seems unlikely

at the moment to not go to elections in october. trump appears to have confirmed a meeting with kim jong-un. he says it is back on track. days after abruptly calling that off. officials from the u.s. have arrived in north korea. the comments come after recent a statement by mike pompeo who related that -- who alluded that major investments from the united states if north korea gives up nuclear weapons. we go now to our senior white house correspondent. margaret, we are grateful got you out of bed in time to bring us up-to-date over whether this is on or off or on again. margaret: yes. it is memorial day in the states north the border between

korea and south korea, it is all business in preparation for the summit. onmp always wanted to do it june 12. the team that has arrived there is beginning the first full day of work. and those discussions with the north koreans are going to dictate whether or not this is actually going to go forward .ith the summit on june 12 and what the structure or framework of the discussions are going to be. and while we are still waiting for any type of full manifest from the administration about who is participating in the talks, we believe that they the korea expert on the national security council and the ambassador to the philippines, who previously was the ambassador to south korea

and is south korean, originally and speaks the language. all of those are important elements as well as the background in the bush administration. dud?ine: will this be a between the u.s. and north he should orst could give up his nuclear weapons and what he gets in return, what does that have to be locked down before the summit? or can they meet for the world cameras? margaret: traditionally -- and that is the caveat -- both sides, if they do something like this where the object is so important, would agree to something that they are both willing to say they are working on or talking about. i think it is a more fundamental question, which is whether kim jong-un is willing to denuclearize at all.

but how they frame it or what they say, what they talk about -- that will dictate whether or not they can go forth on june 12. you see the south korean leader still incredibly interested in the idea of trump and kim jong-un being able to meet anti-may be wanting to be a part of the action as well. but as far as how the discussions go forward, there will be benchmarks and timetables that have to be set forth. for the meetings to continue after the initial meeting. the president pulls this off, this will be one of the biggest wins in international history. does this play into midterm elections? margaret: the political calculation is driving some of his domestic calculations. describe even being

able to put something together as major and historical with this compliment that what happens next is incredibly important and there are many national security analyst and korea analysts who have been tracking discussions and fixed party talks for decades. for the four successive administrations and have cautioned that even though a high-level meeting like this certainly would create a major , it onlynd opportunity really matters if things go smoothly after that. so this is a big opening with big stakes. but it is just the beginning. francine: thank you so much for joining us. margaret talev there. president of the white house correspondent association. this is bloomberg. ♪ is bloomberg. ♪

francine: this is the chart for the turkish lira. gaining two point 5% after turkish central bank has decided to more than double the one week rate to 16.5% from june 1. kit juckes demanded we talk turkish lira. does it go up from here? kit: it will strengthen further from here. have to wait our way carefully through this. but shorter in this short --

there is a possibility that we get further tightening in the next week or so. that is good in the short run. will be getuestion, politics out of monetary policy? because that is the concern. francine: can you get the politics out in 15 seconds? the centralt tell bank to get on with inflation which is the central target. francine: quietly, to an international audience. you very much.nk sfakianakis.hn we talk oil and oil prices. this is bloomberg. ♪ ♪ retail.

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francine: mrs. breaking news, you are watching live pictures of the palace in rome, where we understand that the president just asked mr. cottarelli to form a government. the show a few days ago saying that he would not work with the populist coalition. he was head of the imf delegation for the italian government, then he was plan.ted is spending he is seen as a technocrat, it economist, so what he would likely do is put a coalition or cabinet in place, then go to election, because he just does not have the right amount of numbers in parliament to survive october.ember or if you look at kind of what this means, are we in a political turmoil? are we in a constitutional crisis, but we don't know

whether the president could get impeached or not? guest: i guess it would be a constitutional crisis if that were to happen. we are in constitutional new ground, but as put it that way. . we have not been here before in terms of the way this is playing out. , if we hadlections elections in september, we would have a two month period of uncertainty. francine: we are also getting breaking news out of el pais, the spanish newspaper saying that the spanish president, rajoy will be facing a new election as well, a no-confidence vote on friday. it feels like europe is going a bit haywire. guest: it feels like there is a bit too much news coming from so many angles, and i think you will probably find a consensus in screen, that economic

recovery going on, that these are domestic political problems with the rajoy government, there is no danger of a populist movement in spain big enough to leave the euro. or have irresponsible fiscal policies. none of that risk is there, it is more local. francine: ok, changing gears now. ztetential bill to block and other companies from operating in the u.s. could be back in congress according to republican senator marco rubio. supper rubio i think most rubio: i think there's a growing movement in congress to do something about what china is doing to the united states, and this is a good place to start. francine: joining us now, chief is your economics correspondent of bloomberg, enda curran.

how much are people talking about zte and what could happen to this company? it --francine, it is his it has been a huge factor, because it was originally about sanctions with iran, but it got mixed up with the rest of the trade discussions as well. himself intervening a few weeks ago, saying that he was at the point of making a zte qamar major telecommunications company which would have been put effectively out of business by the sanctions u.s..envisioned by the so this speaks to broader progress on the broader trade story, but as you heard from senator rubio, there are many complications and hurdles to get over, before we have some to tradeangible policy

tensions with china. francine: you have been following this very closely from the beginning. zte has to be seen as part of the trade negotiation deal, you can't really pull it apart, there are two sides to the trade argument. -- you can't really pull it apart, kenya? two: the there are different sets the argument, the structural argument is the u.s. saying, we don't want china to create a state sponsored and high-tech economy. cce are at -- the zte are a hard line for china. so that is where the impasse is there we had china has made it very clear that they zte't want to go and see

being put under pressure. onexposed china's reliance u.s. technology, and as a go forward, there is more official language coming from china on how to greet their own system of providing technology, their own ecosystem that companies can feed off. so it will certainly remain a source of tension between the .orld's two biggest economies francine: thank you very much, enda curran, joining us from hong kong. now, we go back to kit. zte story, ande how it relates to trade, and the other story is the defunct bond that we are seeing sporadically here and there. certain-- is bond defaulting good, our edit unravel? the we have known about

chinese bond bubble, but the scale of the domestic credit growth in china, for a very long time. i think that defaults of the dead, letting the air out of it, or a healthy thing at some point. and there are signs that the government is working pressure to bear. we worry because we don't want this to accelerate to something that they cannot control. but you do have to let air out of this particular balloon. speaking of letting air out of the balloon, this is a bit of pent up anxiousness in the markets, maybe. orelli, whodemic cott we spoke to a few days ago on this program, says he has accepted the nomination. he could feel the cabinet with people from the populace fories, to get more support

his governments come out for he says, i cannot do that, but i can put some kind of technocratic government together that would cobble italy through until they go to elections, which would be september or october. so we are just getting some headlines, you can see mr. speaking. . for those of you listing on bloomberg radio, he says that the elections could take place in early 2019. he says the italian president has asked him to present a program. this, he you look at is say that the elections could be in 2019, that the government would have to approve a budget. so. will do less elections just be on euro entry or staying within the euro, or not? kit: i guess the longer you can push them into the future, the more they are just about getting a viable government initially. there is a fair amount of

gameplay coming through. if you are the populist party, you want elections in september. angry,t to come back all and say "we were robbed of our chance to form a government, by these people who work what we came into existence to fight." so i think he has his job cut out. francine: whether you are a populist or not, or whether you agree with the economics, does it feel like the system is rigged? to thesident has said no eurosceptic -- it is not because he is a eurosceptic, but it is a secret plan to get out of the eurozone. and number two, by post earning the elections, the us the elections, he is keeping the votes safe for the populist parties? kit: i think the sooner you have the elections, the risk is greater.

the move by the president was to say, more or less, if we want to have an election to lead the euro, can we have it on those terms, please? not the back door? themore calm you can get, more the italian people can decide whether that is what they really want. francine: they will have to see you who mr. cottarelli surrounds himself with. we were just listening to him, the president has just asked him to become the premiere of the country and he says he has accepted the mandate, also saying that elections could take place in early 2019. so, a lot of news coming out of it is the. also a lot of news of spain. stay with us, this is bloomberg. ♪

♪ ♪ ♪ ♪ ♪ francine: this is "bloomberg surveillance, we are getting. breaking news out of it are the mr. cottarelli has been asked by the premier to form a government.

he has said he has accepted the mandate, also adding that elections could take place in 2019. he also went as far as talking about euro membership, saying that it is "continued euro membership remains essential for italy's economy." we will continue to keep an eye on that, there's a newsfeed coming out of the palace. oil is heading for its longest run of losses for about four months after saudi arabia and russia discuss reviving output. you are trying to ease. pricesr anxiety after jumped to levels last seen in 2014. tomorrow -- we now have our next got a from riyadh, john fanatic is. how difficult will the opec vietnam?n june be in there was a lot of tension with some of the other smaller opec countries, -- be in vienna?

john: well, unfortunately, they deal be set up, but the helped oil prices go all the way to $80, and we did have this effect where a lot of the surplus oil was taken out. the small countries need to allow for the bigger ones like saudi arabia, to take the lead. i think that they will have a contentious meeting in june, but i think there will be an agreement. i don't think anybody wants to see oil at $50 a barrel, they could say they wanted at $60 a barrel, which reflects on iran's position. i don't think the saudis. want oil at $60 a barrel, i ,hink they wanted at 70 -ish which is good for the saudi economy. i think there will be an agreement, all about containing

this jumping oil price, and having some more oil supplied into the global market. andcine: it seems like opec some of their oil producer allies have concluded that the crude market rebalanced in april, is that right? john: yes, definitely. a year if you look back ago, the story was about the surplus oil that was out there to react a million, million and a half barrels. then due to the agreement between saudi and russia, you had a lot of the oil taken out. so that is why the market reacts, and there was less supply. oil went from 70 something all the way to $80 a barrel. plus of course, the geopolitical premium. but overall, i think this is it. i think the mission has been accomplished come us another opec members have to see how this will be contained, so it is not bad on the global economy. francine: but what is the ideal? and oh that they will not speak

about prices, i know the saudi will not go about it, but what is the sweet spot for the price of oil? i have a chart which is very clear that as soon as the price of brent grows up, as long as wti goes up, so does the show producers. we do not have shale producers a few years ago. what is the ideal or octomom rice of barrel -- price? john: i think the ceiling is $80 and the floor is $70, i think that is good for everybody, including the u.s. shale producers. i think that now the global economy which is now in full swing mode, is going to be really bad, if we see oil at $90 plus per barrel. i don't think it'd but he was to see it at that level, that some analysts have been professing, and definitely not $100 a barrel.

ishink thi the sweet spot $70 a barrel, and it helps saudi arabia recover and get this economy back in full swing and diversifying its economy from oil dependency. francine: is there a lot of speculation about the health of the saudi crown prince? nothing has been verified? john: for sure, i have been asked, but i am to say that he is in a definite health, swing. hass into running what he to run, and there was a cabinet session a few days ago. he was there, and i can tell you that this is a lot of speculation coming out of qatar. i don't think it is very healthy, to be saying these things globally, but i would say very good health

and doing quite very good health and doing quite well. nothing to worry about, there. francine: all right, john, thank you very much. economics research director at the gulf research center. now, let us get back to it from generale. how do the central bank, how should they look at the price of oil? do they look at the moderate inflation increase or take it as a job done? enda: they are supposed to look through it? kit: we know that when oil prices go up, the push inflation up. and we know that the inflation comes down unless the price keeps going up forever. by you and i can see on our screens every day, that inflation has traded in the market moves with the oil price. we always struggle to completely look through it. thingsbeen one of the that has encouraged concerns about monetary policy. francine: over all, for your models, and this goes back to emerging markets, if the dollar rises, emerging markets borrowing in dollars, it makes the life difficult?

kit: yes, the world is a happier place when the world is not going up. we certainly don't want dollar accommodativet pricing of the dollar, it is they're happy space for emerging-market investors. francine: when you look at markets globally and fx, where do you see the main inflection point? is there something that looks uglier than others? kit: i think the starting point out the moment now, as we get to the backstage of the u.s. monetary policy cycle, we are all worried about -- not about whether we will be back about 3% , or whether we will go to 3.5%, i think we will go on worrying about whether inflation is going to get out of control. but really, what we are facing globally is a badge of geopolitical news that we are not good at. feel here and how do i

about venezuela coming back on the oil supply market? have never been to venezuela. francine: not yet? yet.not what do i feel about the political crisis in italy, it is difficult to get to. it is not new, but we are not it. to policy changes in turkey, is at the government pulling away from interference, or is it going to be a buying opportunity in the lira? i think there is way more politics than economics in markets now, and that is never easy. francine: kit, thank you so much. and in be back with you, the meantime, if you are a bloomberg customer, you can log on to g tv and see some of our really cool charts. especially, the one that i made especially for kit. it is a pretty important, when you look at all the volatility we see in italian and spanish politics. this is bloomberg. ♪

♪ is "bloomberg surveillance." i am francine lacqua here in london.

recent bond defaults in china are said to be a sign of regulators attempt to normalize the market. our next guest spoke to bloomberg about that. >> they are looking for performance, looking for returns because that is what they are after. the thing is, if you have all your money in the chinese stock market, the only source of return is growth in china. if you have bonds, there are a lot of the alternative to equities in china, that has been to have some of these bond products which have been sort of proxy guarantees from banks, and therefore the government. there was a lot of pressure to take those products from the market. people are looking for some diversifying investments. >> after the bear market bonds in china that we saw this year, many banks had to cash out there money parked in external funds, to kind of mediate what is going on with the pboc, as of raise the money market rates higher.

that is a pretty key source of funding for hedge funds. is that going to be a long-term trend? luke: i think the chinese government as part of their process of liberalizing markets, is trying to get the bond markets in china to be a more normal market. so on the corporate side, we have seen the first few defaults. two last year, for this year, we could see it as a step process to get to a place where there is sensible defaults risk in bonds. that becomes interesting as an investor because you can start to make judgments between different things. in the same way as with different products being sold by the banks there. there's a clear process to try to drive them to being market-driven products, rather than based around guarantees. i think that is all healthy. i spent a bunch of time with the regulators last week, and they

are trying to move things forward in sensible steps. they have come a long way, there was a long way further to go, but it takes a lot of steps to make sure that nothing breaks along the way. but they are trying to get to more normalized bond market. chiefne: and that was the executive of man group speaking to bloomberg. still with us is kit juckes from generale. when you look at the political periphery concerns with china, over all, where is the biggest quirk in the markets? kit: i think it is the desperate hunt for yields that comes from being in a world where all the safe asset yield very little. back under 3% in 10 year yields, i have got a world where if you want to get decent returns, you are already seeing up to a with chinaargument -- if you put sensible risk into the chinese markets, then i can get better yields, that are

differentiation, and i can go and make investments that yield returns. if you go to turkey and you say -- if you do politicized turkish monetary policy somewhat, these yields and rates, am definitely interested. we will invest, or say -- if you take out a little bit of the geopolitical risk with north korea, come the markets down, that is going on for everyone. francine: thank you very much for joining us, kit. coming up, ahead of currency research, joins "bloomberg markets". we were are looking at turkey, italy and other countries. happy memorial day to our u.s. viewers. this is bloomberg. ♪ this is bloomberg. ♪

♪ >> it is noon in london, 1 p.m. in frankfurt, 7 p.m. in hong kong. welcome to bloomberg markets." ♪

mark: here are the top stories recovering from bloomberg and around the world. political risk finds its way back into the minds of investors in italy. the president on the populists are crash in and he has not carlothe premier, mr. cottarelli to form a government. a global trade fight a key of a key deadline this week, we look at the implications of trade uncertainty on the markets. as crude oil climbs on again saudi arabia and russia send mixed messages on the direction of crude prices. we will hear from the energy minister from russia. ♪ on what is check happening to markets today. this is the gri function highlighting what is going