francine: ecb policies. and economists strike a more hawkish tone. >> it is clear the next governing council will have to make an assessment of whether progress so far has been gradualnt to warrant a unwinding of our asset purchases. toncine: beijing is set consider buying an extra $25 billion of goods this year, will it be enough to avoid a trade war? tesla shareholder side with the chief executive as his board

rejects a proposal that the chairman can be an independent director. ♪ francine: welcome to bloomberg surveillance, i am francine lacqua in london. flatlining. we did see a gain in asia, off ,he back of a bump in markets that the u.s. and china are backing off from the brink of a trade war, so there is a bit more reconciliation. we understand there is a proposal or offer to buy more u.s. goods. i'm also looking at the euro-dollar. a lot of other chatter in market-rate, and i suggest everybody go on to our live blog on ecb and whether they were .ore hawkish than expected >>

and keeping an eye on crude. the story today is the swearing in of the italian prime minister to set a content. he got approved by the senate, and these are italian bonds. yesterday, we had some concern about some of the things he would put in place and you start to see the economic side of the populist governments taking hold. you can see the 10 year italian guilt. coming up, we're joined by chief , and att to talk ecb 9:30 a.m., wilkie -- we will speak to vice-chairman of rothschild. and then, we're joined by the chief executive all -- of alliance. in the meantime, let's get

straight to bloomberg first word news. the white house once kim jong-un to commit to a timetable to surrender his nuclear arsenal. has said theal president has been advised not to offer kim any concession, as the administration seeks to put onus on north korea. the officials say trump is also determined to walk out if the meeting does not go well. alternatively, he is toying with the alternative of offering him a follow-up summits if they hit it off. hasy's new prime minister pledged new winds of change, based on a program of fiscal expansion drawn up by the five-star movement and lead that risk breaching european union budget rules. the prime minister also use his speech to reassure investors that the eurosceptic administration has no plans you. -- the eu.

up foring the eu is not discussion. this is not an objective we are trying to follow. -- >> the uk's is keeping closer to the block after brexit. the labour party leader jeremy corbyn put forward an amendment to theresa may's flagship brexit legislation to be voted on. towould make a formal goal maintain access to the single market. theresa may is determined to leave the single market. and the chairman of saudi arabia's force authority says the nation is now allowing women to attend all sporting event. the chairman says it is just another step towards modernization. >> all of the events that kingdom carries out encourage women to enter.

women are also driving, and women are getting a lot of rights in this rate era. we just don't want to give an excuse to those who want to take us backwards, and we are protecting our customs and religion before everything. global news, 24 hours a day, in more than 120 countries. i am taylor riggs, this is bloomberg. francine: thank you so much. ecb policymakers hope to have a discussion about the future of qe next week. the government ning council is likely to treat this meeting in latvia as an opportunity to debate winding down on buying. meanwhile, italian 10 year yields are extending after the prime minister alarmed markets with a series of populist messages. so should investors have cause for concern?

are two guests. thank you for joining us. when you look at the ecb, does it actually delayed their monetary policy normalization? >> certainly not. i think they are going to make that decision and some sort of announcement probably starting september. if things were to blow up in italy, that might change again. government, a government pursuing policies the market is not too thrilled with. but i don't think that is a game changer for the ecb at this point. probably, all systems go for the meeting, and an announcement of the taper to start in september. francine: why is there a need to start the taper?

is there a fear that a recession comes, they need tools? marie: i feel they have enough tools. i think this is a market propaganda view. [laughter] that central banks have somehow run out of tools. it is our view that purchases might go on until the end of the year, we are not really expecting that to end abruptly in september, in any case. i think it is a tool kit that will remain and will be brought back if needed, or one down if permitted. francine: what is the biggest concern you have on ecb's? side, isrt that to one there a danger that by starting to talk about a normalizing date, one could see it as an interest rate hike? ian: at some level, it is a

tightening. right, there are is no god-given role that it is a catastrophe for markets. after as a change, long. when they have done the opposite. markets,ays a risk for but this one has been well flat. nobody will fall out of their share in surprise if they announced they will start tapering in september. they are doing this against a background of political ,ncertainty in a big economy and nobody made money on betting on it italian government lasting very long. so by the time it begins, we could have a whole new array of issues. is, you cannot delay necessary monetary policy action. what you can do, as marie says, is to respond to it. if things change, you can stop your taper or do whatever you like.

central banks, in thisontext, are tonstrained. francine: but there is a credibility problem. you have seen it before. yes, and it ended very badly with crazy hiking, at a time when they should have been doing the opposite. ecb has a track record of not doing the right thing, but under draghi, it has done the right thing most of the time. and i think they understand that he understands the fundamental problems. there is trust their that there was not previously. francine: if you look at the german economy, has growth peaked? because of trade wars or tensions. is there something more serious for carmakers? is in our forecast, that 2017 was the year of the peak in everything, that the world economy accelerated by half a percentage point, which

doesn't sound like much, but is a lot. so we don't look for further acceleration this year in mature economies, and perhaps less growth going forward. the only way countries can address that issue, of declining growth rates, is strewn -- through structural reform and not central banks. provide she fuels. if we want the engine to grow, we need the government. clearly a global issue where governments today are not stepping up to the plate. it is difficult, politically, to undertake reform, but they are not doing enough on the global scale. not only gmany, ily. aroundre so be countries the world where structural reform is not stepping up to the plate. if we take a look at what economists saying, what are they getting wrong? well, the big story over the past six months has been the

lack of a further acceleration in europe. about,ople were excited when europe outperformed last year. learned i think we have this year is that that was probably and it mistake. i agree we have seen a peaking in most of the developed economies. ,he u.s. might be an exception but in europe, forecasters have to get their head around the idea that this is as good as it gets. francine: but why? the forecast is wrong because the models are wrong, because inflation is wrong? ian: liquidity growth has slowed. it has slowed quite sharply in the eurozone, and that has been a strong leading indicator. it is so fundamentally a bank driven economy. the bank of italy's liquidity growth is slow, market sent to slow. and everybody likes to ride a wave, note he wants to see it

break, so there is a great deal of wishful thinking going on. especially in europe, after so many years of growth, you get an upside surprise and everybody wants to extrapolate. but that was always asking a lot. francine: do you agree? come back toand i the idea that most people have exaggerated ideas of what monetary policy can achieve. , 25 basis points doesn't make much of a difference. but small decisions by governments can make overnight huge differences. we need to shift our focus from central banks to governments. that is perhaps a depressing shift. what we need them to do today is difficult. because polarization is great everywhere.

thank you so much. stay with surveillance, plenty coming up, including china's concession. beijing is said to consider buying an extra $25 billion of u.s. goods, but is it enough? and italy's prime minister passes his first parliamentary test. we speak to the former any chief executive. this is bloomberg.

♪ francine: this is bloomberg surveillance.

let's have a look at the turkish 10 year bond yield. this is the very latest we've heard. the market is telling us they are at a record high. now remember, it seems when we look at a lot of the big banks, they are saying it is the moment of truth for turkish markets and analysts seem to be divided. example,ok at ing, for they were saying the currency will outperform on a credibility reassuring hike. if you look at our bloomberg survey, eight out of 14 analysts expect no change. keep an eye on that. isther story making its way that a hedge fund managed by alan howard is set to gain 36%. we will check out the details,

but there are quite a few stories about these fund managers. i guess the market wants to know how they were positioned. so we will keep an eye on that. managementrd asset definitely staged a comeback after years of mediocre performance. a lot of traders at that fund exploiting sharp moves. i think there is a lot of interest in these kind of stories to see how they were placed on italy. read more about that on the bloomberg terminal. let's get straight to your bloomberg business flash. standard chartered sets to create two new hubs for their asian operations in singapore and hong kong to simplify its extensive network. bankberg understands the has drawn up plans to consolidate as many as 10 southeast asian countries under a new singapore subsidiary. standard chartered said they continue to look at ways of optimizing capital and liquidity structured.

investors have enacted a approved -- a war and the reelection of three directors. the board advice keeping elon musk and retaining the three directors. advisors had wanted an independent chairman after complaints that he missed model three targets showed the lord had failed. at the same time, must has expressed confidence in meeting their goals. deutsche bank investors are leaving the german lender. many, including the two heads of their finance business, are leaving. the investment union has seen a number of departures as the new sewing, scales

back parts of the business in america and asia to combat low profitability. that's your bloomberg business flash. francine. francine: thanks so much. china has offered to boost purchases of american goods by $25 billion. bloomberg understands that xi -- put the on this offer out as they finalize the deal with the u.s. equipment maker -- chinese smartphone maker zte. guests.th us are our there are about a million angles i could ask you about, but i know you like to keep it short. first of all, what are you most worried about? is it the fed reaction in hiking rates to the dollar, or is it is possible trade war sparking up and plunging the world into recession? trade wars have the

potential, and i stress potential, to cause chaos. but we are not at that point yet. we have right now our tears on metals, uncertainty in that debt, and some squabbling around the edges. that is how far it has gone, so to compare it to the 1930's. makes no sense. but the potential is there. i think there is a potential that things get out of hand, but a small probability of a terrible event. guess is that outside trump's office, i don't think anybody wants a trade war. i don't think larry kudlow or steve mnuchin want a trade war, and certainly nobody in europe, canada, or south america. but trump is the wildcard. he has been opposed to the global trading system since the 1980's, the one constant in his life. outfallaking

advertisements in the 1980's complaining about japan, remember that? this is one of the only things he has been talking about, so you have to believe this. means the views of all these rational people won't necessarily prevail. i think they will, but it is potentially an awful mess. francine: and this goes back to what you were saying, marie, that people need to focus on what central banks and politics can do. than structural reform, how should impact economic models? marie: speaking to the trade policiesmetimes the don't even have to be at enacted they already have an effect. we have seen data for the first quarter of this year showing that growth was flat in air freight for the first time in two years. and growth in container shipments is half as strong in the first quarter compared to

the end of last year. so trade volumes you appear to be shrinking already. to give some perspective, trade volumes fell by 10% in the 2008 crisis. . we saw how bad that felt for all of us. trade volumes fell by 60% in the great depression. so clearly, we do not want trade volumes to fall. policies should be trying to counteract that, and that is obviously quite difficult with the current u.s. administration. francine: how do you resolve this? if the u.s. does not want a part of its. is it china putting pressure on the u.s.? there are so many different components. how should a chief economist look at the? do you analyze it, even political scientists don't know what happens next. that is the name of our

game, to make conclusions from insufficient data. [laughter] and the way we look at this from what i have just said regarding falling trade volumes is that it is going to be extremely difficult for the world economy to accelerate in this context. whether trade hostilities escalate or not, we see it is already having an impact. stable growth is already perturbing markets compared to last year when growth accelerated. that was an inoculation against political risk. with stable growth rates this year, possibly falling next year, political turmoil is probably going to have a greater impact on markets, and we expect greater volatility. globally, perhaps half of their returns this year. francine: thank you both.

tech and the two big stories of the day, first of all, tesla investors have backed its besieged aboard. were calls for an independent chairman after showing the board had failed to oversee the chief executive and chairman elon. facebook also confirms it had partnerships with chinese firms. flagged by u.s. intelligence, but that information from the integration was not stored on their servers. joining us now is bloomberg opinion columnist, alex went. -- webb. >> the tesla story is more interesting. facebook has been a constant drip. yesterday, we had that story from new york times about sharing data, it seems like many of those would be possibly not american. just because they have the data

doesn't mean they used it. in tesla, elon has had a vote of confidence from investors. it is rare that someone gets turned out from the chairmanship. it will be interesting to see what the voting numbers were, that will come out in the next few days. francine: what does facebook get raw? -- wrong? >> i think they need to get ahead of the story. when you look at over, they had a terrible last year and replaced the ceo. when he came in, there was a controlled release of their misdemeanors have perpetrated. goingacebook, if we are to believe that they have good intentions, their constant defense over the past few months, they have got to say here is everything we did. we are sorry and we are moving on. francine: hasn't had an impact on user growth? >> not yet.

don't forget, there were only two weeks before the end of the quarter they reported with became a catalytic story. we'll have to look at the . -- . thanks to our guests who stay with us. we will be talking italy. the italian prime minister wins an important senate vote in support of his government, but markets are spooked by his populist program. tax.lked last task -- this is bloomberg. ♪

francine: economics, finance, and politics, this is bloomberg surveillance. let's check in on what's

trending across the bloomberg universe. tesla, butunting for the group overcomes critics as shareholders that elon musk. california's gubernatorial primary provides a key litmus test ahead of the midterms. this and politics in the next hour and are most read stories on the bloomberg terminal. you guessed it, in third place, the trade war. investors drop worries about low backs of protectionism. and senior bankers leaving deutsche bank, and at the top, the italian prime minister passing his first term. -- hurdle. francine, the white house once kim jong-un to commit to a timetable to surrender his nuclear arsenal when he meets donald trump in singapore. a u.s. official says the president has been advised not

to offer can any concessions as the administration to put the onus on north korea. officials also said trump is determined to walk out of the meeting if it does not go well. is toying withhe the idea of offering him a follow-up summit at mar-a-lago if they hit it off. european central economist has confirmed that next week's policy meeting will be pivotal for reaching a decision of when to end the institutions bond buying program. his comments reinforce the view that the governing council is closed to settling the question of how long it will continue to buy debt. bloomberg has learned that members anticipate a fully fledged discussion that could conclude with a public announcement on wednesday intend to cease purchases. is clear next week the governing council will have to make an assessment of whether progress has been sufficient to warrant a gradual unwinding of

our next asset purchases. and the chairman of the saudi sports authority says they are allowing women to attend sporting events. they say it is just another step towards modernization. >> all of the events the kingdom carries out now allow women to enter. approaching women driving and they have gotten a lot of their rights in this era. we just don't want to give an excuse to those who don't want to move forward, and we are protecting our customs and religion before everything. tictoc on twitter, powered by 2700 journalists in more than 120 countries. i am taylor riggs, this is bloomberg. francine: thanks so much. italy's prime minister past his first parliamentary hurdle when the support of the senate. the italian 10 year yield is

rising for a second day after populist pledges including sweeping tax cuts and spending on the poor cause concern in the market. his next test comes this afternoon when he faces a second vote in the lower house. should markets be worried about his populist agenda? the formernow is chief executive officer of the andan energy company eni, still with us our our guests. thank you for sticking around. welcome to the program. i think last time we spoke, about three or four weeks ago, it was just at the beginning of the formation of this coalition. will the current government hold? paulo: yes, i think it will because power itself is a glue. if they are in power, they will stay as long as they can. the next test will be the european elections.

this might cause a difference within the government. last tuesday, there was so much anxiousness in the market. is it because people thought they could not get out of the euro, and if it is, will it be and battles on immigration? for me, the real reason the market is so nervous is because people at that time would have gone towards new elections. a new election is the worst scenario, because it would probably give the same results. secondly, because it would be lengthening this kind of uncertainty that we have been seeing in the last few months. now, we have a government. we hope this government will perform well. we will see what happens. if they can find the

initiatives they have promised, what would be a good outcome? paolo: for me, the key issue is that italy stays in the euro. if italy stays, and i believe this is a given, the markets will determine the moves of the government. with the level of debt we had in italy, we cannot go beyond a certain level of interest rates. i have seen the two-year bond today grew a lot. so the markets will be the monitor of every move in the government. that is why i am not particularly worried. francine: and this is a spread between italian and spanish yields. is it a given that italy stays in the euro, and can the markets keep a check on this? it is very easy for a populist leader to say look at the markets, they are holding us hostage, look at brussels. ian: that is a cheap line and i

expect to hear a lot of it. but i agree they are staying in the euro. there is no majority in the italian population to leave the euro. small supportwn and a small majority who think it would be crazy, and they are right. italy has nothing to gain from leaving the euro, so it won't happen. can't imagine any political gains to be made at this point by pushing for the exit. , and i thinksay the market cycle is a substantial check on what the government can do. we have seen, over and over again, that fiscal profligacy does get punished. looking at italian bonds, it happens there as well. there are constraints. and i can fully understand the italian population the frustrated with the strictures imposed, but it is just a

fantasy to think they would be better off outside the zone. absolute fantasy. is alwayswhat surprising when you look at the elections is you have 1.5 gdp growth, the strongest it has had seven years, yes people did not feel they were part of that recovery. -- can the government do something to make people feel more inclusive? marie: this is what we all hope and know precious little about, they are an unknown entity. discovered, to be and the positive note is that there is hope for change in a strange way. countries,n, in many is that the established parties and political order being challenged. now, the rosy view is that that can actually produce something positive and lead to change. anhaps france is illustration of this, which is incredible what happened in

france. is people whoent were never in parliament before. so an incredible renewal took place in france and needs to take place in brazil, for instance. now we are all keen to see what happens in italy. this,is hope in all of ,ut there is also concern because some of the rhetoric has asn against what we think of the established economic and political norms. we just have to see how that evolves. have ae: paolo, i question for you from a viewer. by the way, if you are a viewer, you can always send questions to our guests. its is from a viewer, and says how much probability do you put on a government breaking up given the policy difference between the league and others? said before, for a

few months, not high. be that they are new and are in power. then maybe something will happen, because we should not forget that the constituencies of the two parties are the opposite. i believe that the league, is alsoother things, going to be making sure there will be nothing against business in italy. francine: and that is what you told me last time, but did you listen to the prime minister's speech? will the government as a whole be pro-business? paolo: as a whole, they will be. the new finance minister is. he will be the most important reference for the league and is

very pro-business. i would consider it almost impossible that the italian government would be against business. thank you to our guests. they all stay with us. plenty coming up, including oil. our exclusive interview with the royal court advisor of the saudi general sports authority, and oil on the rise, even as the u.s. lobbies opec. the marketook at move and any impact it has on inflation. this is bloomberg. ♪

francine: i am francine lacqua

in london. saudi arabia has issued driving licenses to women for the first time in decades. it is part of a huge modernization drive that spans reducing the country's reliance on oil to empowering women. the royal court advisor and chairman of the saudi general sports authority spoke to exclusively to bloomberg's manus cranny about the country's whatude, while manus asked guidance he took from the crown prince on the subject. as time permits, yes, i talked about the angle a lot and i take guidance from him. >> do you give him guidance? >> he is my school. every time, i learned from him a lot. every day there. >> let's talk about women in sport.

you have opened gins and done things to bring women into sport. but there has been controversy. you have close jim's and asked instructors to leave the country. you,is the red line for your excellency, or women in sports? as it relates to women in the current. , the season that passed, they were permitted to enter three stadiums. the coming season, they will enter all of the stadiums. all of the events they carry out womenlow women to enter have gotten a lot of rights in this. . we just don't what to give an excuse to those who want to go backwards and delay us in the issue. tradition and norms, absolutely.

but investors have told us that what you do with women and women driving and in sport is incredibly important and powerful. -- hown is your body soon is it to have women in all sports? >> the freedom of women is very large in our society. i see it's very important for men in our society. if you wonder what women are lacking now in the kingdom of saudi arabia. francine: that was the royal saudi court advisor and chairman of the general sports authority. we have some breaking news out of malaysia, this is out of the main telecom in malaysia, their national provider, saying the chief executive is set to resign. is a bloomberg scoop, according to people with knowledge of the matter.

course, could the coal alone core base carrier announced the resignation in the next few days. the regionalusly chief executive for southeast asian operations. we could not get a comment from the company, but this could be quite significant. i don't know if it has to do with the elections in the country, but it could be something we need to keep an eye on. that is the latest from malaysia. in new york is expanding following an industry report that shows a drop in american crude stockpiles. the data was held to quell concerns after the u.s. lobbied opec to boost output. that comes after oil is said to be trading in a sweet spot for both consumers and producers. filling in for us, is policy is our guests. thank you all for joining us.

into, without getting comment on what your successor says or not, is there an ideal rights for all of -- oil? you have so many factors. paolo: i would agree that we are ace -- in a sweet spot. 70-75 is very good. russia is doing well. their economy is doing well. saudi arabia continues to do well. for them, it is good. for the consuming countries, 70 is very bearable. it makes renewables still kind of competitive, because with a $30 oil price, they know there is a debt. total, they would suggest that this price is a good price, and i believe it should remain at this level for a relatively long time. francine: talk to us about the

connection in oil price and inflation. does a higher oil price help inflation? ian: it raises retail gas prices which annoys everyone, but it does not fundamentally change the picture. you are right, it is about wages. the will drive the fed is timing of the u.s. labor market, and the gas price is a sideline. political football, absolutely, especially if the average retail price goes over three dollars a gallon. but that is not actually a macro game changer. in fact, for the u.s., to put on the u.s. should want the oil price to go higher because it is now an enormous producer. francine: and you have the summer driving season. a time when what the

u.s. has become is very responsive to short-term movements which now boost growth. higher oil prices boost economic growth because capital spending in the shale business is bigger than the squeeze on consumers. that is the first time in history that has ever happened and we saw it very clearly in 1450. in the olden days, it would have accelerated, but actually crushed the shale business. to the u.s. now response more like saudi arabia, what a big change your --. well, i have to say that inflation is never a good thing. and i do not think that is what central banks should be targeting when actual inflation is lower than the target. i think that is a very bad for the growth outlook. because wage inflation is moderates, because we have moderate and nominal wage inflation increases.

it eats into real purchasing power, and the consumer cannot continue to increase consumption as they have until this point, where the result is obviously less gdp growth. where there is not enough mobilization on other levels to get the economic engine growing, then i think higher inflation is a real problem. what stands out to you when we think of opec. are you surprised the saudi russia alliance is actually holding? both when you talk about production costs, but also putting more barrels on the market. it is already almost two years. thes a common interest of two countries to keep oil prices at this level. we were so scared two years ago what is happening in oil prices

that we could probably stick together for as long as they can. now, i believe their production is going to grow, so they will probably produce one million more. remember, they got 2 million barrels only 18 months ago. so just to keep the prices at this level and not to have shale oil to continue to grow at the pace has been growing. francine: thank you to our guests. bring you the latest episode of leaders with lacqua, which airs tonight. an italian oil flavor to all of this. i spoke to the chief executive , ande italian energy giant we discussed the future of green energy. we started trying to develop projects in areas that have no subsidy, no incentive asian. -- incentivize asian. -- incentizes.

we got a lot of criticism, and we said it is because we think subsidies will end, and we need to prepare for when they will we have prepared for competition. we have prepared for the moment when renewables will be open, global, and a fierce battleground. today, we have a huge advantage. ok, you go to comments, you tell them you have a problem. do you buy them, do you invest in them? >> we do not buy or invest. we have partnerships with investor funds which do that and we do not get into that. francine: why not? >> it is very simple, because we cannot make a mistake. things can never go wrong.

i am joking, but it is the mentality we have. if you cannot make wrong investments, you better not invest in stuff. we are saying we are not allowed to do that, let others do it. what we do is we take the startups and taken to the market quickly, employ them on the large-scale we had, and do not pretend to have exclusive rights. cleant them to become accessible ways of generating energy. we see competition between energy sources, not players. that is the competitive fight we are in. itncine: how realistic is that collected vehicles become a meaningful source of revenue? >> they will become, obviously. francine: in 10 years? >> maybe less. we are at the beginning of a huge curve, next year, maybe we will all left saying how stupid

we all were trying to predict the growth. but if you see the billions car manufacturers are throwing into investing into electric vehicle development, there is no doubt this will become a huge business. francine: that was part of our interview with the enel chief executive. ont episode airs tonight bloomberg. paolo, aside from that, we don't talk about the end of oil usage, or closing to the end because of driverless car's. paolo: peak oil is behind us. ,he amount of oil in america

shale oil makes this idea of big oil a thing of the past. on top of that, you have renewables growing every day. oflways say that the era stones did not disappear for lack of stones, but we discovered something else. this will be the same case. oil will continue to be underground, and we won't use it anymore. time, howat the same do we know with the economies of tomorrow look like? ian: i completely agree. he oil was yesterday's idea, the idea that we will run out of oil before we run out of demand. technology is moving at a speed that is astonishing. switch to renewables, driverless car's, ultimately this will cost millions their jobs. ago, whends of years

the course of economy disappeared, that caused millions of their job, but i think we are better off than we were. there are losers, obviously. but from a macro perspective, the progress was enormous. this transition, this displacement, the juncture, it is progress. there is no reason to think this will be different. that's all we have time for, to short of time. thank you so much for joining us. bloomberg surveillance continues in the next hour. tom keene joins me in new york and we will talk investment, italy. this is bloomberg. ♪.

corner, ecbrning a

policymakers are said to expect a debate on qe at the next meeting. this morning, the bank's chief economist strikes a more hawkish turn. beijing is said to offer an increase in u.s. imports -- will it be enough to avoid a trade war? tesla shareholders side with the chief executive, rejecting a proposal the chairman be an independent director. this is "bloomberg surveillance." tom keene is always in new york. we are just getting some breaking news. i will get the currency up in just a second to see if it was expected or not. we look at central bank policy and the limits of the central bank. francine: some of that -- tom: some of that tension, we will to that in the data check.

brazilian riau and there not spending -- not working out as well as it is in india. francine: in the meantime, let's get straight to the bloomberg. here is taylor riggs. taylor: next week's summit between president trump and kim jong-un could lost -- could last two days or two minutes. the white house once came to get rido a timetable to of his nuclear arsenal. if it does go well, the president could invite him john on to florida. bloomberg has learned that china has agreed to by $25 billion more of u.s. goods this year, among them, oil, coal, and farm products. meanwhile the chump administration -- meanwhile the --mp administration -- z de

zte was cut off for violating a finance agreement. leaving -- thes head of deutsche bank is leaving and the new ceo is scaling back in the advisory and underwriting business. he has also promised to cut the number of senior executives. itsi arabia is underscoring eagerness to strengthen its ties with the trump white house. jointudis will support a bid to host the world cup in 20 to 26 -- in 2026. morocco is the only other contender. isunited states of america one of the oldest and strongest allies of the kingdom of saudi arabia. they knocked at our door in 2017 and presented us with a request to help and we responded and reviewed their file. our brothers in rocco do not ask

for help until one month ago and we had given our word to the americans that we are with united states of america. taylor: we will have more with the head of the saudi sports authority in the hour. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am taylor riggs. this is bloomberg. repeatu are seeing india common stronger. -- come in stronger. we say good morning to all in india watching. american equities, bonds, futures, we do some tesla on the hour. up 72. up, dow futures the euro not really part of the story.

12.11 is just extraordinary, showing that complacency. we are back to january complacency. yen goes to 110. the brazilian real is just a mess. francine: there is an emerging market flavor. the chart that matters is turkish bond yields. if you look at u.s. stock futures, they are rising. when it comes to european equities, they are stalling. the euro is strengthening, government bonds declining amid the hawkish messages we heard from the ecb. i'm looking at commodities with crude on track to rise for a second day but italian bonds are slipping again even after the prime minister said a euro exit by the country had not been discussed. tom: let's look at a chart. moves are discrete until they are not.

brazil and suddenly we have a run on the brazilian real . a curve is acceleration. the central bank coming in yesterday to staunch this depreciation in the currency. it is not working. francine: what i am looking at is turkish bond yields. we have been doing a lot of work on the turkish lira. economists at what are expecting, thursday is a big day for turkey. this is the chart that matters because it is a moment of truth for turkish markets. that is according to morgan stanley. analysts are divided on how the central bank will set policy in response to deteriorating inflation. eight of 15 analysts surveyed expected no change.

ing is saying the currency will have to form on credibility reassuring. if you have credibility reassuring, it will also affect bond yields. on to europe and the european central bank. the chief economist and board member has confirmed that the ecb will debate an exit from qe at its meeting. >> next week the governing council will have to make the assessment of whether progress has been sufficient to war and a gradual -- to warrant a gradual and widening -- in making this assessment, i think it is important to consider the underlying growth of the economy and what extent this growth , that we makehave , is passing through to wages and price were made in. -- and price formation.

the gathering could end with announcement to end asset purchases. joining us, we are delighted to welcome the alley and's global -- thank you so much for coming on. a quick comment on volatility and how markets and investors are reacting. do people want to be back in the markets because of the volatility we saw last week? >> active investors love volatility. frankly, i think volatility is still blow to spook investors but people are more concerned than they were. they major fright may be around the corner. francine: would be a political fright? is there anything that could move the markets?

i do not know if they have been complacent or cool. >> we have a major conflagration in the middle east, we have emerging market turmoil, we have the start of a trade war which everyone thought was going to be a trigger for a market correction. it is respond is in the markets have not responded more than they have and the one major explanation is there is still a lot of liquidity from qe. we are talking about slowing it down in the ecb and the pace of the fed hikes have been a long market expectations. that is the reason the market is sanguine. tom: you are not a public officials so we may get an honest answer. when you go down to the allianz phd's, do you have the ability

to believe we will see a controlled unwind of the central bank balance sheets? do you buy the statement that it will be an easy task? andreas: i cannot speak for pimco because i'm the ceo of allianz global investors. our economists believe it is possible to unwind in an orderly fashion. clearly there are political events and other events that can cause enormous problems. the other thing i have to say, this is an experiment that has never been seen before or attempted before. i studied monetary economics, i did not think qe would be possible the way that we did it. it is anybody's guess if it can be unwound in an orderly fashion. the fed is showing the way. it looks to be working to a reasonable degree, but if you look to japan, they're the

situation is different because the government debt is so high. it is difficult to see how that can happen. tom: when you look at negative interest rates, how they affect and how theyday affect deutsche bank day-to-day? -- andreas: is interest rates that are the real problem. you can imagine negative interest rates and positive real rates. this is the core of financial repression, it is causing the wage compression and causing some of the populism. it is affecting us politically but also affecting all of our investors who are struggling to find yield and that has shifted too much liquidity into spread past, too much liquidity into emerging markets which is starting to unwind and too much liquidity into liquid assets where the returns have

been compressed. when you look at economic forecasts, what are they getting wrong? there is something that may have an impact on your investments. if you see that, that is how you make money. andreas: i say we get most things wrong all the time. the questions are what are the likely things to get more wrong than other things for the next five to 10 years. i think the key is going to be inflation expectations. what we have seen in the great unwind of inflation interest was that markets consistently overestimated inflation and underestimated the pace of disinflation. i would guess that markets and economists would underestimate the pace of rising inflation over the next five to 10 years. that has implications for markets. undress, thank you so

much. -- andreas, thank you so much. coming up, our interview with the saudi royal advisor and the chairman of the saudi sports authority. on the back of that, we will talk oil. this is bloomberg. ♪

taylor: this is bloomberg surveillance. let's get your bloomberg business flash. receivedny has first-round bids for its u.s. shale portfolio. u.s. has learned -- bloomberg has learned that bp and chevron are among the bidders. serviceat united parcel

have authorized their unions to call with we the first strike since 1997. that gives negotiators more leverage in talks to replace the contract that expires at the end of july. ups says it is confident it can reach an agreement with the union. galaxy partners chairman michael novogratz says and lester's were caught flat -- investors were caught flat-footed by bitcoin last year. regulators are getting involved in doing what they are supposed to be doing. the first thing is to go after fraud and market manipulation. the first things are going for fraud and market manipulation. taylor: that is your bloomberg business flash. chinane: the u.s. and continued to haggle on the terms of the deal to fed often impending trade war. bloomberg understands beijing

offered to boost purchases of u.s. goods by $25 billion. this, let'sall of get to our chief asia economics correspondent in hong kong. thank you for joining us as always. what we know about the 25 billion and the million-dollar question is will it be enough to get the trump administration onside? >> it does seem like negotiations are going forward on a piecemeal basis. the latest we have is china making this offer to buy more goods in the energy and agricultural sector of u.s. exports. said theyconsistently are willing to put an offer on the table to buy more u.s. goods to close the trade gap with the u.s.. is not surprising but

it does sound like it is a long way short of doing the total brat -- the total gap in the trade deficit. economists say goes to show how far the talks still have to run before a resolution that the u.s. trade office will be satisfied with. tom: they won a by john deere, they want to buy caterpillar, are they going to buy that stuff anyway? >> this is exactly the point of the debate that economists bring up. commitments to buy produce and products they need for their own economic expansion and growth. china frequently has made promises in the past to fall short on details and executions. there is a degree of skepticism around all of this. it remains to be seen what the

details are of any final agreement. thank you soine: much. bloomberg's chief asian economics correspondents. of's get back to andreas allianz investment. you mentioned inflation and deflation expectations. what a trade war be eat inflationary or deflationary? andreas: inflationary. assuming only a portion of that can be offloaded to customers, even that means inflationary pressures rising. francine: you say does the central bank's expectation for inflation and market expectations that could be the most off indicator. andreas: i think the next five to 10 years will see continued financial repression in the sense we will have low or even

negative interest rates and that will be caused by central banks hiking behind the curve and the market consistently getting inflation expectations wrong in the sense that realized inflation will be slightly higher than expected inflation on a going forward basis. we are already seeing that play out. whyral banks are explaining inflation rates are higher. they will blame oil prices, they will blame seasonal factors, but if one analyzes it, one sees they consistently underestimate inflation and that is probably intended. francine: thank you so much. we are getting live pictures out of the reserve bank of india. governors of india's central bank raised its interest rates for the first time since 2014 about 15 minutes ago. this is in order to curb rising price pressures.

this is on the back of prospects for further tightening from the u.s. federal reserve and how that is rattling emergence -- emerging markets. we will have plenty more. this is bloomberg. ♪

surveillance." it is about wall street. andreas, i need desperately a

mifid update. how big of a headache is it for allianz? andreas: i cannot go to sleep at night. that is how worried i am about mifid. it is analysts favorite topic. it is not keeping me awake at night but it is an issue. the reporting requirements across the board have gone up. that is all a good thing. what is not clear is what the impact is going to be on the thely on the street and other thing that concerns me that we still have not found in the marketplace a new pricing arrangement that everybody can live with and agree with. there is a huge gap between the gulf of expectations on the buy side and the sell side. as the year progresses that will have to be resolved. tom: i am sure you are slaving

away at allianz with kids taking the exam in 19 days -- to they have a future in securities research? his securities research going to be done because of method? -- because of mifid? .ndreas: it might be repriced when i started in the industry in the mid-1980's, you are not expecting to make much of a living. train drivers were making more of an income than those in the financial services industry. there might be a repricing going on. by and sell jobs will be put under significant pressure. at allianz global investors we -- ourmally -- we are graduates are required to take the cfa exams. francine: are you still interested in hiring hedge fund teams? andreas: we are.

there are plenty out there and i think one of the consequences of mifid is it is getting too expensive for many of the small to medium-sized boutiques to operate in very difficult for them to get shelf space so they're looking to hook up with larger players and we are one of them. tom: very good. a very important update. i should point out that we mentioned the cfa, i'm a member of the cfa institute. i want to make sure that bias is public. daybreak on "bloomberg ," a timely discussion. what do you do with your money at the 8:00 hour. this is bloomberg. ♪

tom: good morning. surveillance."

thrilled you're with us this morning. francine, i believe we are trending this morning. francine: this is what is trending across the bloomberg universe. the problem has been mounting for tesla but the board backs elon musk. we will get into that story. california's gubernatorial primary provides a key litmus test ahead of the midterms. we will discuss this and all of the d.c. politics in our next hour. warhird place, trade investors dialed down worries about protectionism. more moves at deutsche bank as senior bankers leave the firm. the italian prime minister passing his first parliamentary hurdle. we are back with andrea silverman -- we're back with andrea silverman -- we are back with andreas utermann.

andreas: it is definitely the italian story i would read first. bloomberg started to restrict the number of articles you can read online site to get around that. i think that is a critical issue the european good be tested -- the european could be tested by italians allying with .he eastern europeans i will be worried about that following the italian story. after that i would go to trade. the deutsche bank story might be interesting but i like the human interest so i would leave that aside. -- one of them have been flagged by u.s. intelligence as a potential national security threat but the social media giant says information was not stored on the servers. joining us now is bloomberg

is this a data breach? facebook looks bad. does it impact user growth? >> it is an extension of the story we saw where facebook was sharing information with data providers. they would let other companies create their own facebook app. a hundred companies are apparently getting this. it is not a data breach. facebook was giving them the data in good faith that these are good actors. it speaks to that trend of facebook being openhanded with giving data. francine: yesterday we were talking about apple during the contrary thing, trying to preserve the data as much as possible. you are suggested it could be a play against facebook. do shareholders care, do users care?

>> i personally care. think people on the street necessarily do. people on the street do not know facebook owns instagram. what will be interesting is what regulators make of this. they will see this pattern of facebook and they will see a trend that they need to be more active in regulating facebook. the they are arguing about size of facebook versus what app. this is a huge deal. they are giving data out to chinese operations and do not give me this baloney that they are private companies in china. went to the regulators blank? >> i think the regulators are. we have seen whatas said in europe. we saw in congress that there seems to be a growing consensus

that this needs to happen. , apple give one caveat is the company that moved all its icloud servers that served they are thea and company with fake investors. they are doing things which are in some way more questionable. tom: i have to interrupt. we have a surveillance connection. i said what app instead of what's app. francine: correction of the correction. in expert onnot facebook. whether this is not a sideshow for facebook. there is a hilarious youtube clip with an interview with a millennial job interview and when it comes to facebook she response and says facebook? that is for old people.

-- i canperate that corroborate that. they asked me about instagram, they want to be on what's app, they have never talked about race book. -- about facebook. >> anytime a story comes out saying facebook affected the election, that is an endorsement of facebook as an ad platform. bloombergs alex, thank you so much for updating us on all things tech. trump has beennt advised not offer kim jong-un any concessions. the white house once came to commit to a timetable to get rid of his nuclear weapons. u.s. officials say president trump will walk out of the meeting if it is not going well. if it does go well he may invite

came to a meeting at his florida resort. problem main opposition is proposing a plan that would keep the country closer to the eu after brexit. the labour party leader wants the eu to effectively stay in that eu market. parliament will vote on the labor proposal next week. as we were just mentioning, there are more concerns facebook has not told users how it's personal data has been shared. the social media giant says it has partnership with chinese companies. one has been named as a potential security threat. says the integrations with chinese companies were controlled from the start. a surprise move by india's central bank. the reserve bank raised its interest rates for the first time since 2014. it was increased by 25 basis .oints to 6.25%

emerging markets have been rattled by the prospect of further tightening by the federal reserve. new central bank is moving quickly to raise interest rates and stabilize the country's currency. he told bloomberg that may not be finished. >> [indiscernible] met -- do not miss our exclusive interview with bank indonesia's governor. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm taylor riggs. this is bloomberg. francine: thank you so much. italian bonds have dropped for the day. this is just a simple chart of the spread between italian 10 year yields and spanish 10 year yields.

it follows that the italian prime minister's populist budget in his latest speech. he promised increased spending for the poor. let's get back to andreas u termann. investors were spooked. i do not know whether that is justified. the spending that the new prime minister is putting in place will be very difficult to balance out. whether they would flaunt eu rules or whether the markets are worried about integration. andreas: it is the euro, it is immigration. that thet is obvious first big battle at the european level is going to occur around immigration and the dublin treaty. revisedbly needs to be because the italians will bear the brunt of that if that gets passed and they will probably align with the eastern europeans . you can understand where they're coming from.

issue. a major that is going to be a big test. beyond that, you mentioned the euro. if you talk to italians, a lot of them are convinced -- i'm not saying the majority -- but a lot are convinced it is some kind of german conspiracy to make italy poorer. we know that is not the case, but that is partly what this is playing on. their memory -- there are members of this coalition that are anti-euro type players. the concern is they will make demands on the europeans that the europeans cannot meet and they will turn around and say it is not us taking italy out of europe, it is the europeans pushing us out. that would be grave, and that could have a domino effect on other countries in the eu and see what we are already seeing with brexit.

forces in golfing the euro zone and that is what last tuesday was all about. tom: we will continue. your morning briefing on radio coast-to-coast, radio worldwide including radio london. look for bloomberg daybreak. they do a great job of what happened while you were asleep. "bloomberg daybreak" on the radio worldwide. ♪

francine: tom and francine from london and new york. to the movies now. with the world cup teeing off, football is proving to be more than just game for saudi arabia. the kingdoms sports minister

said he is backing a bit by the u.s. and canada and mexico to host the 2026 world cup, underlying the middle eastern nations goal to strengthen ties with the trump administration. we spoke to him exclusively. the united states of america is one of the oldest and strongest allies of the kingdom of saudi arabia. door fromed on our 2017 and presented us with a request for help and we responded and reviewed their file. our brothers in more october -- untilocco did not comment months ago and we gave our word that we are with america. i will say it and i will say it again. one of the best world cup sites on my life was the 1994 world cup which achieve the best results for the saudi team and the attendance was until now a record number.

are there days of doing deals just because it is an arab initiative -- are those days over? >> there is no doubt in the arab relationship that the interests of the kingdom of saudi arabia are above any consideration. we go with the interests of the kingdom of saudi arabia. >> is the interest of the kingdom of saudi arabia america first? >> they knocked on our door before everyone and we do not close the door to allies. >> you have courted controversy -- 10 qatar pull it off in 2020? >> i am focusing now on the team in 2018. let's delay our discussion on this issue until september. there will be more expanded discussion on this topic. >> you will wait until september to talk about this but if it was

betweenel of confidence the kingdom and qatar in 2022 would you say sport wins, we should go to the world cup? >> of course. we will go to qatar and we will play matches. we went now and had matches there. how is your relationship with bin salman. tell me about this meeting of minds. >> it is the relationship of an employee and a leader and he is also a role model and an inspiration. just forhammed is not me but for all the youths of the kingdom and inspiration. i have been honored to work with him for more than 10 years and prince mohammed, what he is doing now was not born just now. it was planned for years.

a lot of people considered in dreams but he proved to all he can make dreams a reality. of the worldsion cup and saudi arabia as well. to get a larger view on the region, we are thrilled to bring arabian monitor chief economist and chief executive officer. conversation with you and it ramps around the new saudi arabia, whether it is moving soccer balls or moving politics of your region and it focuses on the protests in jordan. they seem to be the real deal. how has the king and the leadership of jordan reacted to those protests? >> very well. statementa proactive made by the king with great and i think that is

the way arab leaders need to react. they need to move fast and listen to what is going on on the ground. tom: the need to move fast seems to be the new phrase. is saudi arabia moving fast enough? the new politics of the royal family -- they have always been the great support of jordan. will that continue and can they move fast enough for jordan? >> i grew up in saudi arabia, i spent 16 years there, and i think they are moving at supersonic speed. some are moving at about this -- some are worried about the speed at which saudi arabia is moving. i'm impressed by that speed. all arab governments are reacting much more rapidly to what is happening on the ground. vision of 2030 is so ambitious with so many goals. what would be a success, 20%, 30%?

be honest, they cannot afford to only implement 20%. what is important is the direction of traffic and the direction is the right one. there will be have cups along the way. reform initiatives are ever -- there is always trial and error. the general direction of travel is quite impressive. i am ambitious and happy with what i am seeing. i hope it does succeed to the tune of more than 20%. francine: thank you so much for joining us. arabia monitor chief economist and chief executives. if you want to use some of tom's charts to dazzle anyone on your team, you go on to gtb go and you take that -- gtv go.

you can send the charts back to tom and i and we will show them shortly. this is bloomberg. ♪

taylor: let's get your bloomberg business flash. google is being pushed to tie executive pay to progress on diversity. an employee will present a proposal at alphabets annual meeting. the company opposes the plan. google cofounders have more than half of the voting power. head of the the company's largest telecommunications company is out. bloomberg has learned that telecom malaysia's ceo had to resign. he joined the company last year. the latest episodes of leaders airs tonight. francine spoke with the chief executive of italian utility giant and discuss the future of green energy and the companies bet on electric vehicles. >> today we are at the beginning

of this huge curve and in the next years we will say how stupid we were when we try to limit the growth of electric vehicles. i have no doubt this will become a huge business and we like the word electric. question whether the word car or the electric will prevail. the two words are more important. taylor: that is your bloomberg business flash. francine: you can watch that interview tonight at 9:30 p.m. in new york. we are just getting breaking news out of the european commission endorsing the imposition of additional duties. what we know is that this retaliatory oh tariffs from --

takefs on u.s. goods will effect in july. is there a concern -- we seem every week to go this is in a hand, we will find a solution but then it spirals. when do we know when this is a trade war? andreas: when it happens. it has not happened yet. at the moment like a phony war, like the north korean situation, on, off. this is not going to have much of an impact on the markets today. as this ramps up, if it does in july than we will see it become a bigger concern. francine: are you expecting more m&a in the insurance sector? andreas: i do not know about the insurance sector. i think valuations are high across the board, particularly

in the financial sector. there is a lot of pressure on margins everywhere and it is my expectation that across the financial services sector there needs to be more consolidation. francine: how much more consolidation? are we going to be left with three or four big players in 10 years? andreas: there is no doubt the european market is over bank. that is why we are seeing all these combinations being spoken about. it is all up for grabs. if the european monetary union is going to be more stable, and i think the summit in the summer is going to get us one step further in the right direction, the banking market and the insurance market need to be more consolidated. tom: thank you so much. andreas utermann is with allianz global investors. we have so much to talk about.

moving, a muchis weaker real. the india bank reporting. weaker japanese yen. coming up, and especially timely discussion. a couple of years ago, my book of the summer. it is a wonderful time to talk to john taft about the future of global wall street and the state of american political economics. looking at that as well. it is a beautiful day in new york. we have had unseasonably cold weather. it has been absolutely lovely. stay with us. this is bloomberg. ♪

tom: this morning, january

complacency. don't tell brazil. their currency collapses and their central bank fails to defend the currency. pay attention. the yen weakens through 110. the future of securities research. it is not badyet for the gop. good morning. this is "bloomberg surveillance." i am tom keene. francine lacqua in london. can we say things are better in italy? there is tension in the 10 year yield. francine: there was. we heard from the prime minister. they are trying to deliver on what both populist party said they would do. what does that mean for the economy?

as he was delivering his speech yesterday, markets got edgy. nothing huge. tom: the u.s. 10 year yield higher by two basis points. right now let's get a morning briefing. union: the european preparing to strike back. the tariffs will take effect next month in response to president trump's decision to put tariffs on imported steel and aluminum. avert a tradeg to war. $25a has agreed to buy billion more of goods this year. the trump administration is finalizing a deal to allow zte to resume purchases from american suppliers. zte was cut off because of sanctions. summit with north's

korea could last two days or two minutes. the u.s. wants a timetable for north korea to surrender its nuclear arsenal. president trump will walk out if it does not go well. if it does go well, he may invite kim to his florida result. deutsche bank departures. back inceo is scaling the advisory and underwriting businesses and has promised to cut the number senior executives. saudi arabia is trying to strengthen its ties with the trump white house. the saudi's will support a joint bid to host the world cup. morocco is the only other contender. u.s.s., u.s.,

the nine at states of america is one of the oldest and strong of saudi arabia. they presented a request for health. we responded. our brothers in morocco did not ask for help on this issue until a month ago. to the given our word americans that we are with the united states of america. taylor: global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you so much. their, we would mention as well to our good colleague, i doubt the attains thisbe making a bid year. let's go to the data check.

i have been feeding them to death. francine: with your world cup knowledge? even i read up on the world cup. if i know that, you should know that. tom: data check. francine: ok. tom: how about equities up six points? dow futures up 84. is extraordinary. we will talk to mr. taft about this. green?get to the next the present riel is a serious run on did i wish in of the currency. francine: this is what i am looking at. stocks extending gains. about itsuncertain

future. we had hawkish comments from the european central bank. also looking at a tie in bonds. .terling strengthened there is a lot of play here. thanks. they called it super tuesday, kevin. what really happened? am i right? kevin: it was a jumble. california,n having who won the democrat bid for governor. in comments to supporters said the future of california is the future of america. pay attention to him. he is a former san francisco politician.

i have my eye on iowa. i think the republican who won there and how they will advocate .or trade policies tom: let's move on. ish feldman from harvard expert on the supreme court. it was an importing must read. the president is different here at his favorite method is to talk him and not do. a lot of presidents doing the same thing again and again with congresses implicit acquiescence , counts as part of the structure of government. trump is clever enough to know that repeating words is a way to make them true. ande can do that without out falsehoods, he can certainly do so with matters of opinion. this is a brilliant essay. i can't say enough about noah

feldman scholarship of our supreme court. there it is, kevin, from professor feldman. tore are the republicans discuss with the president his language and tone of separation of powers? by chuckwas struck grassley who said the other day it would be stupid for the president to pardon himself. i think that what we are seeing is that the supreme court and lawyers and bob mueller don't care about president trump's tweets. they care about the facts. that is where all of this is headed. if itare about the tweets is an obstruction of justice, but the truth will matter more than the political theater. francine: are people talking about zte?

also the implications about what it means? kevin: absolutely. with regard to zte, yesterday at the white house, republican from visiting with other republicans talk directly with president trump about a deal that advanced out of the senate banking committee. on the 22-3 vote, advancing out of committee to .he senate floor it was passed because republicans had concerns about the president proposing to lift restrictions on zte. they don't feel the president should have the authority to do that. and folkse sources affiliated with's et feel that the commerce department has the authority to continue to enact what the president has proposed. the pushback from republicans on

capitol hill with regard to zte has led to president trump and senior economic officials from to larry ross kudlow to say we are just considering these restrictions. sign is they have heard the republican concerns on this. tom: thank you. with us is john taft. his wonderful book stewardship on global wall street. he has been a student of wall street for decades. we touch on the magical name of taft going back to the election of 1908. john taft is not active in politics. , whichs a certain path is every single person, where is

the discourse of the republican party? is the republican party of your family going back beyond your great-grandfather, is it gone? , which is oned it of the reasons i have not gotten involved in politics. wingoderate conservative of the republican party does not seem to have a home in u.s. politics today. there has been a lot written recently about my great-grandfather and his views on the presidency, specifically a new biography, a recent column the washingtonin post, pointing out his constitutional modesty, the idea that he was quoted as saying that the constitution restricts more than it empowers the presidency. that was his view of the role of the presidency, a limited one. of modesty and a

mixing it up with hubris -- is the idea of modesty and mixing it with hubris, are you looking at when jennings bryant, or is there a real sea change within our culture wars? >> i think there is a sea change. who was the first trump of the modern era, it was probably teddy roosevelt, with whom my grandfather had a complicated relationship. since then, we have had this model of the imperial presidency where presidents seem to want to expand their powers instead of living inside some constitutional line. tom: we will go back to the senator from cincinnati where the top family came out of, and that would be rob portman. >> exactly. tom: how does your party do that ? how do moderate democrats find the next jackson? >> i have no idea.

it is a frustration to many like me who are asking where is the party of our ancestors. tom: we will continue. john taft with us. we want to look at his wonderful book. we can do that was somebody in the trenches of global wall chief equityroup strategist. john taft. test what here it that is what "surveillance" is all about. this is bloomberg. ♪ ♪

bhp billiton has received first-round bids for its shale portfolio. themberg has learned

bidders. another is royal dutch shell, which teamed up with blackstone. workers at ups have authorized their unions to call the first givee since 1997 to negotiators more leverage to replace a contract that expires in july. ups is confident it can reach an agreement with the union. chairman says's regulators were caught flat-footed by bitcoin and other cryptocurrencies last year. he spoke at the bloomberg interest summit. >> the regulators had to get involved, so they are getting involved in doing what they are supposed to be doing. fraud, market manipulation. so the first two things are fraud and manipulation, and it is a good thing. >> that is your bloomberg business flash. francine: thank you.

economistentral bank and board member has confirmed fromcb will debate an exit qe. the gathering could end with a public announcement on win they intend to end asset purchases intended to run until september. still with us is john taft. great to speak to you. thank you for giving us an hour of your time. , central-bank policy, our market still expecting too much of it? what is priced in? >> the markets are pricing in a return to normalization. i think the fed in particular, the ecb has a different challenge, but t fed in particular is doing a good job of signaling what they intend to do, whiclowlh is s carefully

into the teeth of a steadily expanding economy continued to bring interest rates back to something normal, which is to say real positive interest rates. they are doing it in a measured way. volatility is indicating that it likes it. francine: where are the fault lines? we had economist saying the ecb .as done the right thing , whatdo have a trade war are the impact on central-bank policy, inflation a record deflationary? >> our market strategists have written a lot about the fact that when you compare the worst-case economic impact of tariffs, you are talking about a drop in the bucket compared to the recent economic fiscal

stimulus coming from the tax cut , additional spending in washington, and the repatriation of profits, so trade war tariffs while headline news really is not going to have an impact on the markets if people interpret it correctly. the other fault lines are is the economy overheating, and there you can look at wage growth. once you trip 4% annualized wage growth, you are in the danger zone. we are well below that. once the yield curve inverts, that is a danger signal. pointsstill 50 basis between the two-year and 10 year. the economy iss humming along and the bull market still has legs. having said all of that, you talked about the vix. when we had more normalized level of volatility, investors

got spooked. to me that is an indication that 10 years after the financial crisis investors are still traumatized by what we experienced in 2008-2009, 50% decline in the value of their savings. stat that is one of the most extraordinary statistics i have seen to explain the market. since 2007 there has been a net equity from u.s. holdings on the part of investors, money has poured out of active managers and poured into passive managers, but they don't know the net has been a negative net outflow since the financial crisis, notwithstanding the bull market we have been in. tom: and now we have the share buybacks coming off the tax policies. we will continue with mr. taft. coming up on the political front

, a democrat from maryland, timely conversation. look for that in the 12:00 hour day. stay with us. worldwide, this is bloomberg. ♪

francine: this is "bloomberg surveillance." let's talk about tech. backed thetors have board and elon musk and voted down a measure that would require an independent director musk asg elon

chairman of the carmaker. david, we talk about this on a daily basis, tesla shareholders sided with the board. what does that mean for tesla for the future? clearly an endorsement for elon musk. controversy over governance at tesla for several years. it got worse recently as they kept missing production targets and shareholders were calling for more oversight. if you look at the shareholder base, it is a lot of big investment firms, fidelity being one. they double down after the silver city deal and bought more shares. these are the true believers already. they are saying stay the course. we will stay with the plan and

we think he will make us a lot of money. is the mainat concern for tesla that shareholders could have? is it that they are still burning through cash? >> they have a number of concerns. as smart as elon musk is, he has manyx, the boring company, pursuits, hobbies, companies, and tesla is at a pivotal point. if they don't get the model 32 full production, they will not cash the second half flows and profit. if he is distracted or they need somebody who is a better operator to work alongside him, or somebody who is a voice to steer the ship, then they will not get it. shareholders who wanted that will not see it now. tom: is tesla a car company?

i have 14 different opinions. it is tesla on automobile manufacturer? at the moment a struggling automobile manufacturer. they are a struggling company trying to be an automobile manufacturer. for thenk you so much briefing from detroit this morning. bloomberg radio and a briefing of the morning there. that coast to coast, including minneapolis, st. paul. this is bloomberg. ♪ this is bloomberg. ♪ retail.

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

every corporate office, warehouse and store near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. francine: this is "bloomberg surveillance." we are looking at market moves.

a spike when it comes to italian bond yields, may be concerned about the populist moves. let's get to first word news. taylor: president trump advised not to offer north korea any concessions at next weeks's's summit in singapore. to white house wants kim commit to a timetable to get rid of his nuclear weapons. if it does go well, he may invite kim to his florida resort. the u.k. main opposition party has proposed a plan to keep the country closer to the eu after brexit. the u.k. ton once effectively stay in the eu single market, a defeat for prime minister may. parliament will vote on the proposal next week. has notcerns facebook told users have their personal data is being shared. dataocial network had a sharing partnership with four

chinese device makers, including huawei and lenovo. while way has been named as a potential security threat. facebook said the relationships were controlled from the start. bank, by india's central raising its benchmark interest rate for the first time since 2014. the repurchase rate was increased by 25 basis points to 6.25%. emerging markets have been rattled by the prospect of further tightening by the federal reserve. indonesia's new central bank governor says moving quickly to raise interest rates has helped to stabilize the country's currency. he told bloomberg that he may not be finished. possibility. is a the magnitude and timing will be mentione the calibration of new information coming. don't miss the exclusive

interview with the indonesian bank governor. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you so much. we like to go around the world. with the death of allen being, one of the gentlemen who landed on the moon, a few years ago, astronauts from different nations are being launched into orbit. this will occur today in about an hour and a half. the u.s., german, russian, and canadian astronauts. this is a dream 30-40 years ago. is north of uzbekistan in kazakh a stand kazakh stand sciencereally shows how

is grinding forward come even if it is not the drama of going to mars. it is something that touches everyone. the others are going up for the first time. we understand the german astronauts first flight was in 2014 has part of the expedition increment. tom: very good. we will look for that launch in about an hour, hour and a half. this is a real treat. us, his-chairman with lifelong commitment to stewardship on wall street. someone living it in real time is the chief u.s. equity strategist for citigroup. i want to talk about the equity markets and where you are in --ch on how wall street

this morning? >> a moderate bowl. note will be upside, but that fabulous. we have to high rates, inflation along with some of the uncertainties out there. there are a number of forces restraining great into zs and. tom: what are you hearing from companies? the synnex aren't surprised by that. is there an investment spirit among large multinationals? >> there is. companies, these are come a capitall

expenditures were up 8% for 2018 when we did the study. when we read in the study, up 11.2%, so they accelerated, particularly in the technology area. something is driving this increased activity. francine: are you expecting more volatility in the markets? last tuesday was triggered, then affected world markets. >> we think there will be some increased volatility. king is our global credit strategist and is a fair amount of work looking at central bank purchasing activity and fixed income issuance. there is $1 trillion less of fixed income issuance this year versus last.

trillion more $1 issuance than last year. technically less demand, more supply. you will probably see credit spreads widening. there arester, but different ways you want to play that. one could be buying stocks without the same sensitivity. francine: what are the stocks or industry groups you would leave to one side? >> the areas i am not interested defenses,e to be staples. they have not performed well. there's no great reason why they will perform well, especially if wage inflation accelerates and you get some push higher. excuse me.

tom: john taft, you worked for years with rbc at capital markets running their wealth management. looking from the spirit of mid-cap america. what do you see. what is the pulsed of midwestern industrial america? >> it is extremely healthy. the focus has always been the mid-cap industrial sector. i am an old machinery analyst. tom: what do we see in the machinery of the midwest? look athing you could is the level of merger and acquisition activity setting records. thatis an indication companies are looking at financial performance and it is

better than it has been in many years and looking to monetize those two levels. what are the sick codes of manhattan that get -- of the zip codes of manhattan that get it wrong? >> it is lack of familiarity with the sector. one of the things that is going on in that small cap sector, those companies had historically higher effective tax rates. since the tax bill was passed, rates have dropped dramically. cash on cash through earnings? >> yeah. if you asked me what people get wrong, it is just not sexy.

they are like the hot growth story of the day. tom: we don't talk individual stocks. let's go there right now. are you telling me there is uncommon value in the market? >> we have been telling investors to be cautious on the , traditional cyclicals versus defenses as those changes occur. i get why people like the so-called fang stocks. it's not like the growth story in tech is undiscovered. i think people know that. they may not be as familiar as what is going on in midwestern industrials. tobias,: john taft and you are staying with us. merkel answering questions from mp's of the

bundestag, the first time she faces direct questions from lawmakers, a new procedure that enabled angela merkel to form her latest government. from thisderstand parliamentary session is that it will last 30 minutes. onstarts with a short speech the upcoming g-7 summit. now she is taking questions on that summit. we will be following that closely. this is bloomberg. ♪ this is bloomberg. ♪

"bloomberg surveillance." an employee at google will present a proposal today.

the company proposes a plan saying it won't enhance alphabets commitment to sustainable ability. the owners have more than half of voting power. the world's largest personal computer maker will cut more jobs than estimated. increased job cuts to as many as 5000 by the end of fiscal 2019, 1000 more than discussed in a reorganization plan. hp has produced consistent growth despite falling demand for pcs. a breakthrough and saudi arabia. women are allowed to attend sporting events. bloomberg spoke with the saudi sports authority. >> all the events the kingdom carried out now allow women to inter-. women are driving. women have gotten a lot of their rights in this era. we don't want to give an excuse to those who want to take us

backward and delays in the achievement. customs,otecting tradition, and religion before everything. >> that is your bloomberg business flash. tom: thank you. as we mentioned earlier, some things percolating out there. we want to take a little bit of colleagueeak to a from citigroup, head of emerging-market foreign rates strategy on the brazilian real. i assume the move is discrete from brazil. let me begin with efforts from their central bank. why is it failing to support the brazilian real? >> i think we have quite a few factors adding to the noise. the background environment for emerging markets in general is just not good enough. u.s., nominalthe

, the now higher once again epicenter is in the states. sometimes the epicenter turns to europe. this would be the case over the last 48 hours with a more hawkish ecb. background fore emerging-market assets a little in trouble. the exogenous factor i do believe the markets are entering a stage where they are acknowledging nominal rates in brazil are too low. for the fiscal risk and the currency risk -- tom: looking away from brazil to all of emerging-market, is president trump an exogenous

factor right now for emerging markets? does he filter into these instabilities? >> absolutely. absolutely. the abrasive policy coming out of the west, at least for now, this is adding to the market perception that trade costs will increase, and that can only be detrimental, trade costs and volumes as a matter of fact, that can only be detrimental to anrging markets in environment where emerging-market growth is stalling once again. africa, wezil, north are not seeing a push. think that the trade policy ways into the price action now. francine: i wanted to get your take on india.

is raising key interest rates. will we see more emerging markets follow suit? because itteresting has been a synchronized effect here. we are seeing more hawkish reactions and more hawkish differenting out of emerging-market economies. are still suffering from imbalances. i believe the major concern recently his the fiscal side continues to impact the appetite for indian bonds and will impact the currency. tom: thank you so much.

back with john taft and tobias to talk stewardship. we want to note an interesting space launch out of kazakhstan run by the russians, but an international crew, including americans as well. that, aet there behind live feed from nasa one hour away from this launch. this is east of the caspian sea. stay with us. this is bloomberg. ♪ this is bloomberg. ♪

tom: good morning. thrilled that you are with us. our guests are with us. it leads to a generalit leads tn centered on the cfa exams, the future of global wall street, something john taft has been looking at for decades. let's bring up or single best chart. this is the dow jones industrial average law.

what is it called? >> yield. e. yal tom: tobias, let's start. all you have to do is buy and hold, right? >> long-term, you have made a lot of money in stocks. there's only been one decade where you did not make money from stocks. john taft, within your work and stewardship, can global wall street continue to make money? and how do they do it in the new generation? >> they certainly can make money come and you see them doing that today differently and more constructively than they did leading up to the financial crisis. you do it by focusing on clients. you do it by asking clients what they need and providing services

that make their lives better. leading up to the crisis, it was trading, proprietary balance sheet capital, and making money. theually the traders became power system inside these firms and make money the wrong way. now wall street is making money the right way by focusing on clients. tom: francine? francine: tobias, i want to talk about u.s. banks. a headline from the chief executive deutsche bank sank the bank has a strong foundation and he plans to build on it. he also says the credit rating cut was not about financial strength. if you look at the difference how credit is performing and the equity, it is different. overall the business case is european banks versus u.s. banks . are you a liker her of financials in the u.s.? ande like banks

insurance in the u.s. about u.s.things are banks is they have gone through and did a lotain of dilution of shareholders through equity issuance associated with paying back tarp and those things, so they are very well structured for shocks in the system. the is why they were given right to return capital to shareholders. is if you lookry at the survey on commercial and industrial loans, that has further east, even in an environment where were worried about fed rate hikes. the ability to lend is there and the desire to lend is there.

i think that is the surprise, people will see growth and banks. tom: your classic book stewardship, you discuss synergy and financial engineering. be one bankoing to that tobias works for? will we merge ourselves into the merger of mergers? >> there has always been this consolidation and this leavingation, people big organizations because they c't do what ey want to do inside the organization, so there is more activity and dynamism in the financial sector than there has been in a long time. page letterthe 56 from a guy named jamie dimon at some bank on park avenue. he talked about hard work. that is what this is about.

in thes almost a grind new global wall street. defined grind paying attention to clients and giving them what they need. it is a grind, and that is a good thing. tom: this is been wonderful. wonderful to have you with us today. mentioning the world cup is upon us thursday. we will look forward to that. global analysis of the world cup . i have to get briefed fast. to get briefed on the world cup. stay with us. this is bloomberg. ♪ h us. this is bloomberg. ♪

>> it is alive.

the chief economist for the ecb confirms the next meeting is live. european yields job. let's buy some beans. china could by $25 billion more in goods a year. nafta crumbles. the u.s. could seek separate deals with each country. the peso tries to recover. david: welcome to "bloomberg daybreak." it is all about trade. alix: very specific movement with trade. i was struck by how much more the peso moved to the downside. part of that was mnuchin talking about steel tariffs, but shows the vulnerability of mexico. david: industry after industry figuring out what does it mean for them. it is not in the abstract anymore. alix: china is like, yeah, we will buy some