♪ francine: trade headway, global stocks rise after washington and beijing hail progress. investors awaited jobs data from the u.s.. theresa may asks for a delay until june 30. donald tusk is reportedly proposing a sliding 12 month delay. and we are live, where i will be speaking to business leaders on italian growth and the world economy. good morning, everyone, good afternoon if you're watching from asia. forum,e at the spring

not a bad day, not an ugly place to be. coming up, we speak to the former italian prime minister, don't miss that interview at 9:30 a.m. london time. first, let's quickly check on your markets. a lot of the focus will be on what president trump and the vice premier of china can actually get done when it comes to trade. when you look at some of the stocks, you will see they are pretty much laying flat. a couple of days ago is where the main brunt of the positive news was taken at today, we're looking at eu data out there. then we are looking at pound is little bit of going forward. let's get straight to bloomberg first word news. breaking news, the u.k. has asked the eu to delay brexit until june 30. comes after reports that donald tusk is reporting eight --

proposing a 12 month in section. they hope to have a deal before elections but is prepared to take part in them in case the deal fails to get approval. ray dalio says that flaws in american capitalism have created instructive social gaps. he says they reinforce differences in education mobility, assets and income this is according to a new essay by the billionaire founder of the world's biggest hedge fund, saying the bottom 60% keep falling behind top 40%. this former pizza executive might fill one of two open positions on the fed board. inwas previously a director kansas in the 1990's and came to prominence after running for the 2012 nomination. some in britain are becoming victims of stealth tax increases about saying this is due to

thresholds being frozen rather than lying in line. it means an increasing number of people are being drawn into higher taxes. and investors can relax over who controls amazon once the world's richest person gets divorced. jeff bezos will retain 75% of given, plus, his wife has him voting control of his 4%. he will remain number one on the bloomberg billionaires list. global news, 24 hours a day on air and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: china and the u.s. say they have made headway on trade talks. president she says progress has been substantial and is pushing for a rapid conclusion. president trump says a deal could be quote very monumental, but says they still have some ways to go. intellectualking

property protection, we are talking about certain tariffs. very important for certain elements of the tariffs that are in discussion. butave a number of things, we have also agreed to far more than we have left to agree to. francine: as it is jobs day in the u.s. with expectations, joining us for the hour is the director of g10 fx strategist at bank of america merrill lynch. we'll talk about jobs data in , china'sd, but first is something that a consensus. what are you expecting to be in this deal? we have always been on the more optimistic side of the market, in terms of expecting a china-u.s. trade deal. the thing markets will be looking for most is what is conspicuous by absence, which

will probably be any detail on ip. secularprobably be a issue that holds back trade negotiations. other than the fact, the markets are just looking for clarity over the near-term out, that, combined with the brexit news, have been two major drivers about the outlook for risk assets in the near-term. this agreement would force china to buy commodities until 2025 >> on the flipside, it would also give chinese authority the potential, or force them, to open up companies for foreigners. do we need a signing doing president trump and president xi jinping? is that the only way to know that we will have a deal? kamal: i think so. we have just been discussing confirmation bias. for a lot of things, we have been john down a path where we expected quite a lot.

i think that once we do get that clarity, once we get that agnature, markets can breathe sigh of relief and put it to the back of their concerns. the other thing on the statement, we have discussed in our research and whether they will be some kind of currency clause similar to what we see with the u.s.-korea trade talks. that can be an interesting development if the chinese agreed to a trade deal. , in return, asks for stability on the renminbi. question weis is a are asking today on u.s. jobs, our mliv question. i urge everyone to go on to our markets blog, it is especially strong today, and this is the question we are asking everyone. a deteriorating u.s. labor market a prerequisite for a fed cut? the conjecture as to what

the curve inversion for the treasury market means. at a more interesting dynamic would be to look at the trend. reactt think the fed will to one or two nonfarm payrolls. a number below 100, you will see a lot of bells, but i think the fed will be looking at a traditional metric, the six month moving average. if that starts to come under pressure, i think you can make the justification that the fed it needs to start altering its language. talkine: there was so much about pressure president trump is putting on jay powell. even talking about removing him. does that change anything in your dollar forecast? kamal: we have not factor that in. that the fed will not be politicized. this is all part of trump's dna, in terms of his outlook.

remember, we are not that far away from the next presidential nomination race. that trump needs two or three things, he needs the straight deal to be successful enemies the economy to remain strong. his key metric is always going to be what happens to the equity market. francine: thanks so much. sharma from bank of america merrill lynch. coming up, plenty from the spread for -- spring afford. you also don't want to miss our interview with the former --ance into -- ministry former finance minister of italy. this is bloomberg. ♪

francine: economics, finance, politics, this is "bloomberg surveillance." we are in italy for the spring workshop. we are getting headlines at a brexit. the headlines coming in a little faster than usual. earlier on, we understood from donald tusk that he wanted a 12 month delay, longer than we were expecting and what we call a sliding. -- slidingg the lead delay. theresa may is saying that she will write to parliament and

donald tusk to ask for a delay until june 30. this actually involves a lot of questions about whether the eu will force the u.k. to go through the european parliamentary elections, which should be in a couple of weeks. it has huge implications for some of the conditions attached. we will have plenty more on brexit. -- sebastian: samsung has reported the worst profit drop slowing, caused by profits and smart phone sales. rare wanteded a last month that this result would be short of estimates. elon musk and the securities and exchange commission have two weeks to work out their differences this is over how the chief executive posts on social media. any claimed he has violated october settlement and want some bound.

exhibit two sides and should we work the deal to avoid any ambiguity on what is and is not allowed. and swedbank's chairman has stepped down, deciding to leave the bank at the height of a money-laundering scandal. this follows the ceo who was forced out last week. they are being investigated for having potentially committed fraud on top of multiple other rooms -- probes. that is your bloomberg business flash. francine: thanks so much. welcome back to italy at the & springmbrosetti workshop. is also celebrating its 30th meeting. and in europe, it will give speakers and attendees idea food for thought. of course, it is not glamorous at all, is it come on the riverbank. i think the house of george

clooney is right behind me. right behind me is one man who puts this all together, managing partner and chief executive officer of the european house. great to speak to as always. we talked about italian growth, yesterday, we had a bloomberg scoop saying growth will only be 0.1% instead of the 1% that was expected. what does that mean about the cap relations for the coalition? >> that is a good point. sorry i am not george clooney, i know you would have preferred that. francine: close enough. >> close enough. well, the forecasts for italy are much gloomier than they were one year ago. and as a matter fact, italy is the only country with turkey amongst the 36 oecd countries with a negative growth for crest -- forecast.

, particularlyad considering the fact that this has a debt to gdp ratio above 130%. i do not know how many economists have outlined that, but we are 18% below the historical record that we had touched in the post-vatican period in 1920. francine: what does this economy need? we are here, beautiful houses, family money. what you need in italy to kickstart the economy and to give you a little more prosperity -- youth a little more prosperity? valerio: we need to have an urgent priority of attracting investment and mobilizing entrepreneurs. we have a number of them, but they are scared.

they do not trust the future, they do not have enough positive sentiment to be confident to make investment, and therefore, activated jobs. and our narrative is no growth, no future, so that is the key priority. francine: this is what, incentives? growth prospects through incentives to businesses, tax cuts, political stability, which at the moment is unclear if we have? valerio: we do not have a real vision for the future. all political decisions have been anchored to the past, to cancel what others have done, likely wrongly. there is no dream for the future, there is no project for the country. and then with a number of political mistakes taken at the diplomatic level, you should not

meet with the sheila jean -- with france, for example. they wanted a unified position with china, but italy was the first to sign the belt and road initiative. second, france was the they sold billions in airbus contracts and we only did 7 billion. i don't think that was a mistake, frankly. italy did what it was supposed to do, having the infrastructure that we have. that is the least of the problems that we have outlined in the past month. started: the workshops here half an hour ago. do you expect more optimism or pessimism compared to last september? unfortunately, the optimism is shading away.

because, mainly, a feeling that is shared among entrepreneurial and leaders class that we are lacking this vision, lacking programs and priorities and are doing the day by day stuff. do you worry that central banks do not have the tools to deal with the next downturn? abouto: i am not worried central banks, i am worried about the political leadership. but it takestaly, france, germany, what is happening in england is astonishing. the worst mess ever seen in any european government. the brexit chaos is unbelievable. it is a number of factors. the eastern european countries in certain cases as well. that is more worrying than anything else.

francine: thank you so much for joining us, managing partner and chief executive of the european house ambrosetti. was february's week -- february's week payroll number just a fluke? we hear from larry kudlow. this is bloomberg. ♪

♪ economics, finance,

politics, this is "bloomberg surveillance." tiam in italy for the ambroset spring workshop. germany suffered a double blow yesterday, a factory slump followed by a new forecast predicting the weakest growth in six years. meanwhile, italy is reportedly set to cut economic wrote forecast. now the government's previous forecasts was for a 1% expansion. london is kamal from bank of america. how concerned are you about european central bank policy? we're not surprised that the ecb has had to downshift its view on the process. we are concerned about the backdrop of european macro growth, but we have been and that situation.

we are starting to see some green shoots of recovery. a lot of it is heavily contingent, but what is very interesting is that despite we of a horrific set of ordered numbers, the market did not react significantly. the euro took it very well. it is telling you that the market has priced in a lot of the bad date on real activity. what is more significant is the fact that the euro made a significant move following the service sector pmi numbers. so the market is really focused on forward-looking indicators. the news on a weaker european economy is not new news. what will the new is if we start to see an inflection point. for now, we're still defensive on the euro. francine: ok. what will it take for euro-cable to move? kamal: i think it would be

sustained signs that the pmi numbers in china are starting to prove out. i think we will wait for the next number to get more confirmation. i don't think the market can wait until it feeds into european data. it will start to trade positive china numbers by a higher euro. we are really waiting for the china data, and we are again starting to see some tentative signs of that improving. plus, if we do get some resolution this weekend or in the next couple of days on the u.s.-china trade talks, i think that also leads to the concept that data will start to improve as this geopolitical headwind is ruined. francine: what about euro-sterling? doesn't move on the back of a brexit delay or just on european central bank policy? kamal: it is a bit of a

tug-of-war. i think you are right to highlight these two conflicting pieces of momentum working here. that is why i have a relatively stable euro-sterling profile. the bigger move would be a conclusion to brexit, possibly by a longer extension. the outlook for european growth has been priced in, but it has been a geopolitical story that has been driving the eurosterling, rather than data. francine: thank you. sharma from bank of america merrill lynch stays with us. coming up, we speak to the former italian prime minister about italy and brexit. this is bloomberg. ♪

francine: this is bloomberg surveillance. i'm francine lacqua where we are talking about global growth, italy, and brexit. let's get straight to bloomberg

first word news. hi, sebastian. sebastian: the u.k. has asked the eu to delay brexit until june 30. donald tusk is proposing a 12 month extension. theresa may says she hopes to have it ratified before may 23 but is prepared in case the deal fails to win the approval of parliament. china's vice premier is holding a new consensus when it comes to trade. it came after a meeting of the white house in a trip to washington. president trump talked up the prospects of a monumental agreement. there was an idea for trump to finalize a deal. leaks, theo wiki nation has a plan in place for the u.k. for his arrest. bail when he refused

to be extradited to sweden. he said he feared facing trial in the u.s. for facing -- leaking government documents. relation -- revolution, according to the billionaire founder of the world's biggest hedge fund who says more than 60% of income earners keep falling for the top 40%. amazon is reportedly ready to take on apple's airpark. pods.mpany is -- air the company will let people use their voice to order goods and access music. tictoc -- powered by with a 2700 journalists in more than 120 countries. >> welcome back to the spring

workshop. the slowdown in global growth is very much on the agenda for the political and business leaders gathering for this year's event. and perhaps not for the first ise, italy and its economy planning to slash this year's forecast just 0.1%. approved a package of measures to move the economy. i am pleased to be joined by italy's prime minister from 2013 of2014 and is now dean international affairs. thank you, professor, for joining us. what does italy need now? last year it grew, this unit will grow less. >> the need is to have a where the hard change

message is anti-growth. point is tocrucial have a great change in the messages. i don't know if this change can happen. message to investors or to the european new -- european union. there is the fight with france and the fight with brussels. >> there is a lot of mistrust, a lack of confidence. they are blocking investments, and that is not the right way to boost growth in italy. the government was completely focused on resolution, not on growth. it is a huge problem because tobe we have to redistribute

help and rebalance, but we have to have growth. you have a government that is basically to parties and cannot be further apart. doing need early elections? >> at think so. i think we will have early elections. francine: will it change anything? >> it will change very much because the agreement between the two parties is over. they are fighting each moment for each topic. many things will change. i don't think this government can continue for years because the agreement is no more there. but i strongly believe that the , in terms of economics, the next budget low would be impossible to be managed with the same tools of the previous one. but a resulting huge

unemployment, especially what they use faces. >> you can have employment if you have growth. >> is possible to redistribute if you have growth. you need investment, you need to attract investment, and you need lower taxes with interest. you need to change the economic policies. needs a strong and big change and economic policy. francine: do you think brexit will happen? [laughter] that is a good question. i think it is a disaster and a nightmare. i hope the leaders will find an agreement.

in the general sense of the really very bad news for all of us. francine: people are fed up with the elite or london, like they are part of something. how do politicians regain that trust? think brexit was a problem of too many lies. europe is not the scapegoat of everything. and now maybe people are starting to think that it was not the image that they had. with their politicians gave to them. behink confidence needs to very accountable in implementing what we decide to do.

for instance, migrations. it was the key issue and european countries didn't deliver on migration. the problem is, i hope, will bring a new generation of leaders able to deliver. but this is a concern, right? if you were to explain what europe does for them, what would you say? it feels very far. it feels like strasburg and brussels, they tell you how big your banana should be. united so that we can stop trumps protectionism. fors a disaster manufacturing. it is easier to impose tariffs. >> a clear example is data

protection. our data and our second identity, i don't see the american way of life or the chinese way of dealing with the system in the same way. a strong european union means protection for data. and the environment. our strong idea for the environment against climate change is a good one. i don't think trump or the chinese have good ideas. examples, the european union is better than the u.s. and china. francine: how does that improve the life of the common person? >> the common person can be completely destroyed by a protectionist approach in the

u.s.. factories,ing at our all of this with the fantastic positive. think they know very well that the european union is doing well. francine: thank you for joining us, the former italian prime minister. we will have more on the river banks and in the meantime, we are getting some headlines out of france, saying it is premature to talk about a brexit deadline extension. she wanted an extension to june 30 and others wanted longer. they say the extension requires credible long-term plans. this is bloomberg.

♪

francine: economics, finance, politics. i'm francine lacqua in italy for the amber spring workshop on the lake como. the bloomberg business flash and london. hi, sebastian. sebastian: swedbank chair step down with immediate effect.

this is at the height of the money laundering scandal. swedbank is being investigated for potentially having committed fraud on top of multiple other probes into the laundering case. retain 75% of his amazon stock following his divorce. this eliminates investor concern that it would influence control over company. bezos maintains 4% of amazon, making her the world's fourth richest woman. it also helps the ridesharing company have different perspectives for the offering. as $120 be as much billion in the ipo, the biggest listing this year and could be one of the 10 biggest listings of all time. and that is the bloomberg business flash. let's bring you this

morning's breaking news on brexit. theresa may has written to request delay to the uk's departure until june 30. may sites talks with opposition leader jeremy corbyn aimed at breaking the brexit impasse. she also says the u.k. is continuing to prepare for european elections should she fail to get her deal passed in the next few weeks. what does this mean for the pound and u.k. assets? all, what exactly is priced in on the pound right now? >> the no deal risk is being taken out of the market and it looks very clear from development in the house of parliament and theresa may zone political stance that i no deal has become politically unviable.

for us, the pound is probably found a base above 130 versus the dollar. >> little changed if we do have postponement? is the market going to assume that it will be a much softer brexit? that has been argued for a while, that an extension effectively reveals the preference of the u.k. government to avoid a no deal. and the compromises that continue to be made by the u.k. government will eventually lead to a softer brexit. we have already seen a shift from a meaningful vote to a more permanent customs union. that is one particular shift. we have seen the government ask for an extension to june 30 and this will end up more along whether the european union wants it rather than for theresa may. disappointment in

wems of the price action, waiting for a bit of confirmation bias. we have been here before. and we have a negative headline in the market goes back to trading. once we get this long extension participation in european parliamentary elections, the view is that the market can put brexit to one side for a while which would be pretty -- pleasing to most of us. sterling would gravitate above 135 to a measure of 140. francine: where do you see yields? if you look at the yield curve, it has been continuing to flatten? the issue is that whatever we think about the currency market, it is undeniable that the macroeconomic impact of brexit is being felt.

it you look at the stock ratios. this is showing that brexit is having an impact on the market. the question is whether the bank of england places more emphasis on the tightening of supply conditions within the u.k. economy, i.e. the labor market as a reason why it wants to hike rates. it is a message that if we get this protracted extension, that the bank of england which remains the base case could be a bit of a -- see a bit of a push-up. from bank of america merrill lynch, stay with us. u.k. companies are having to plan for an eventual -- all eventual outcomes. executive.the chief preparing for a no deal brexit for the last six months. that is the worst case that we can see.

francine: through stockpiling? >> there are some things that we have stockpiled like final supplies they need to be in the airport. rubber gloves that people use the swabs that we use for trade protection. withve also been working government in the eu and the u.k. said that they understand that we do something about it. and to give them credit. they have done a good job with aviation, the enabler for any other trade to happen. and the biggest port in the u.k., it is important to european nations as well. there is an agreement in place between the u.k. and the eu that plans will keep on flying, even in a dough deal brexit. -- in a no deal brexit. passengers that

arrive u.k., if they are european or the other way? changes are no major planned. francine: even in the case of a no deal? a noen in the case of deal. people are being pragmatic about how we make this work. i think that we will see very little change to your journey. you can keep on working with confidence, you can expect to travel with ease. there may be additional passport checks but it's more likely to be on the european and then the british and. the government is keen to make sure that they remain open for business as we leave the eu. insurance tax-free? or is that secondary? >> it is a secondary deal. we're focusing on making sure that passengers and planes can keep on flying as they do today and that will be the case.

francine: that is the heathrow airport ceo talking with me. the major economy cuts rates as it faces headwinds at home and abroad. we will focus on india and emerging markets next. this is bloomberg. ♪

francine: this is bloomberg surveillance. finance, politics, and more. i'm in italy for the spring workshop. let's talk emerging markets and focus on the world's fastest-growing major economy. the moston pace for aggressive monetary easing in more than three years. the 25 basis point cut comes as india seeks to support growth in the face of rising risk both at home and abroad. still with us from bank of america merrill lynch. when you look at emerging-market currencies overall, put that into perspective for what we're

seeing in terms of world growth. >> we're seeing now is the china and itside of think it has to be positive for the global growth backdrop. the currencies have come under some significant pressure since until last moved year. the value still seems to be in emerging markets and the pace remains quite strong. when we thought to remain steadfastly bullish, and if you're looking for the big bang , must notably u.s. , it will betalks the flavor. stories, idiosyncratic

but the broader base in the backdrop in asia particularly looks to be improving somewhat. picky so much, director of strategy at bank of america merrill lynch. let's get a check on what is moving today. here is bloomberg's emery. up higher today after a successful satellite launch for the company. ems the biggest gainer this morning, a swiss-based company. first order net sales came in 1.5% higher than the previous year. sapem higher this morning after winning $200 million for offshore drilling. your stockhose are movers. overall, the stoxx 600 pretty much flat with u.s. futures on the front foot. a touch of response coming into the market with the 10-year bund yield into positive territory. oil on the back foot headed for

a fifth weekly gain. bloomberg surveillance continues the next hour with tom keene joining francine lacqua and italy. talk to the former finance minister of italy. don't miss that interview from the spring workshop after 11 a.m. london time. and of course, more markets. that touch of response coming through after gets onto progress on the trade talks between the u.s. and china. you can see on the board that the european equities are not reacting much. but the 10 year yield is up a basis point on a 252 handle. the euro is steady at 112.31. this is bloomberg. ♪

francine: trade headwinds with global stocks rising after washington and beijing hold

progressive talks. investors weigh job data from the u.s.. theresa may asks for another delay until june 30 but donald tusk is proposing a 12 month brexit delay. we are lies on the shores of lake como. businesse talking to leaders and world leaders on the economy. and we are waiting for a siding of george clooney. at theancine lacqua spring workshop. tom and i talking about the history of this place. it is party, party, party. tom: i took italian lessons on flight. it is cold here. we will give you a touch of history to the day but the seriousness of the discussion here linking together economics with the new politics. brexit is not a sideshow it is a

number of things here worldwide. back in: we will get just a second but let's get to bloomberg first word news in london. prime minister theresa may has asked to delay brexit until june 30. may made a request in a letter to european council president donald tusk. she cited ongoing talks with jeremy corbyn as the reason. brexittrying to get a agreement in time for elections next month. china is seeing progressive talks to end the trade war. president xi jinping is pushing for a rapid conclusion. president trump is talking about what he calls a monumental agreement that could be weeks away. china's vice premier met with the president yesterday. they said that the two sides have reached consensus on the text of an agreement.

trump was to add a second person to the federal reserve board. he wants to nominate herman cain to fill one of the two open seats. last month, the president selected conservative economist stephen moore for the spot. president trump has criticized the fed for raising rates. local news 24 hours a day on the air and onto talk on twitter powered by more than 2700 journalists and analysts in more than 120 countries. francine and tom? anna edwards just emailed me and said we don't need george clooney. our next guest is far better looking. let's get a check real quick. day indo that on a jobs america. a better market in the u.s. on thursday. risk there. francine: i would point to the

pound to look at what is going on with brexit. money markets really respond to this low yield brexit risk. any pricing for a rate increase is actually much longer. now they are asking for an extension. i would say that if you look at european stocks, it is moving sideways. this is on the china u.s. trade deal and if we will actually get something in writing. asked the eu to delay brexit until june 30. theresa may wants to have the divorce deal before elections on may 23. but she's for parents to take part in them in case a deal failed to win the approval of parliament. chair of the house

and services commercial secretary to the treasury. we have a million things to talk about, but we need to stop with brexit. -- start with brexit. what do you do with brexit? do you extend? with juneyou get one 30? .> you kept me out of the blue i can't imagine why the eu would agree to that unless there is a wrinkle that means we can pretend it is the 23rd of may. it seems to me that where we are, the likelihood of a longer extension has risen quite a lot in the last week. tom: why is theresa may doing all this? does she want to blame the eu for crashing out?

or jeremy corbyn for not passing the deal? giveawaywas a bit of a earlier this week when he said s&s the failed attempt of hers to call a general election in 2017 results in a coalition, it go obvious that she had to off the brexit. what she has done in the past few days is everything she should've done then. thought she could scare her really crazy brexiteers. but now she has to get down to reality. >> a spoke to roger and they seem in retreat. say that they to have left.

>> i suspect that they are plotting and deliver really keeping quiet to see how far she goes. there is talk this morning of the second referendum. you will see these guys making a big last attempt. tom: what does it do to manchester? one of the basic voices, what does the tomfoolery in london mean for the people of manchester, birmingham, and on and on? been on -- bang on. big-time bang on. get us out of this damn thing.

even though they now know that it will be a lot of cost. it isn't the most important thing facing our economic future. i talked to you guys about this before. poor skills, huge and no wage growth. people for a very long time, facing enormous inequality. people.what matters to what about a general election? will they get one? >> i don't think british people want a general election. they want some kind of representation in westminster to do something that relates to their normal lives. this is just some weird world that doesn't relate to us still. the reason why theresa may hadn't talked is that she was trying to keep the conservative

party together. is that fair? >> i think it is fair. theite what happened at last election, a lot of it has been driven about how to build a conservative party. it still goes on. one of the consequences might be that the conservative party splits. tom: making a sterling call at one point. [laughter] i'm not going to ask you a sterling call, but i will ask you about capital flows. the dynamics of wanting in and out of the united kingdom. is that are normal flow of capital to london and the united kingdom? is that a substantial risk?

>> i read a very interesting with mark mobius associated with emerging markets who apparently described the u.k. as an emerging market. i thought that was a bit odd. he is a guy that is the champion of emerging markets. does that mean he is bullish about the u.k. because he's normally bullish about emerging markets? a little bit deeper. is the u.k. on the verge of some kind of emerging markets i crisis? and what is so intriguing is , absolutely not. the pound goes up and down. equity markets and everything is behaving pretty normally. those momentsof where everyone has woken up.

it might be that the markets themselves push two years before the british prime minister that we may never have the lead or it may be the softest brexit i have. that phrase pre-lehman gets everybody's attention. thank you so much, jim o'neil here as we begin the hour. we have many more good conversations coming up. just speaking to the gathered us. to join look for that coming up. and tom keene. a stay with us. this is bloomberg. ♪

tom: good morning, everyone. tom keene at francine lacqua. these are important meetings at the workshop. everything is a secret. you can't identify who said what. is the chairman. >> the funniest thing i heard since it became chairman's i met chinese guy that i've known for i was already fascinated by the chopping house rule but i never thought i would meet the ruler. tom: if you look at the basic

economic equation that you live by and we all live by, there is domestic work and there is the external work identified by net exports and imports. worry about a global slowdown? are we over focusing on trade dynamics versus the underlying strength of various domestic economies? >> you are on form tonight, tom. francine: he had an italian espresso. of the biggest issue that has been bothering me in the last six months is a slowdown of chinese consumption. sadlyat indirectly is resolving why europe is so weak. so looking at it slightly more positively, what we got out of china in the past week might be the beginnings of evidence that china is starting to respond to the policy stimulus.

if not, we have further tough times ahead. francine: no recession in the next 18 months? does the central banks preempt the good news? >> at on think i would go that far. -- i don't think i would go that far. some that i have learned to trust are all in the same negative direction. the fed shifted in january because of this use financialuge rise in conditions, after a few months, that would start to pick up and pmi and it looks like we are seeing it. is, it is before we got into this. the central banks are saying that maybe we can stop -- start hiking again and we have that fear and risk of what happened in the fourth quarter.

with the underlying message of the past year is, surprise surprise, the world economy is dependent on the friendliness of central bankers. what are the indicators? is it market? is it yield? is it the economy? >> the multi-pmi's that we get over the world. the new order part. it is south korean trade. they are still declining, but the rate of decline is slowing which might be a sign of the same. and there is the chinese consumer. tom: i need an update on the bricks. you changed international economics with this idea for russia as well. they have been proponents and critics. give us an update on the new bricks if they do exist? >> i get this question all the time, of course.

it is pretty hard to find all the countries that can be there when they shouldn't. and actually translated into i visited the house this week. let's call it the tropics. brazil. i think brazil is arguably the most visible for market participation -- a newhe new bricks is populism. that is a big difference. >> is it new? i will make this comment when a go on stage. there is this unusual uncertainty, but the bricks now is 17 years old. and the interaction between the economy at politicians, that is how it is. and maybe what is new is that some of our own western provisions are going a bit wider. think this idea that

populism in these places is that new. it has been around for ages. it is new for people in the west observing it because it is more important. tom: did you get the manager of manchester united signed? >> i don't think you get better players. francine: we will see about that transfer. the chairman of neil will stay with us. coming up next, we will speak with luigi, professor at the university of chicago new school of business. we will talk italy and banks. this is bloomberg. ♪

everyone.morning, bloomberg surveillance. francine lacqua and tom keene talking about the divorce, brexit, and all that. divorces centered on a long ago and far away. george the fifth could not get along with caroline and this is where caroline hit out for four or five years. francine: we are talking about marriages and divorce. rriedar wars, padme ma anakin just next door. tom: continue. francine: let's talk more about emerging markets. the most aggressive monetary easing, this is the nation seeking to support growth of the

face of rising risks posed at home and in brazil. and we talked about brazil although most people don't want to talk about star wars, wedding, and divorces. but on a serious matter, would you do with india right now? >> i'm not sure. not sure. it keeps on creeping away. this happens in contrast to some of the other bricks. relativelyishingly lowball equity market rally. ,nd as long as whatever goes on we have a big election coming up. francine: but some of it did not get pushed through, right? >> no, no. people complain about a lack of reform in china. india, india if you did a quarter of what china is doing, it has this incredibly strong labor dynamic.

at a minimum, i would say for the next decade, india should easily grow by 6% to 6.5%. the next government somehow discover genuine reform, that could quite easily get there. quite easily. tom: i think we learned in the last five to 10 years, it is really separated away. how do the leads of india connect with the many people of india? it has to be a revelation. >> they don't. how do they connect with them to make for a better capitalism? way that the mode got around it comes disappointingly is he plays the nationalist card so powerfully. this for skewness between india and pakistan was extremely

convenient for him. and he plays that card so powerfully. it brings a lot of people together including most of the really poor hindu people. they're still probably 300 million people that can't really read or write in india. for the people to get the stories they should, they need to do lots of really basic reforms and a lot of really big reforms. francine: talking about populism. >> it kind of frustrates me at a moment -- at the moment. superficially, us people jokingly call it the tropics. in particular with this finance minister, he has a pretty heavyweight intellectual economic supply-side brain. no disrespect to anybody in the other economic machine, but not

the same kind of person. problemsse of brazil's , there is al reform that he might get this to move. and if they did, i think that maybe that is where the brazilian markets have been so -- given the small probability of it. but if it happened, people would not be saying to me, maybe the bricks should've just been next -- nixed. tom: we have to get jim o'neil off to a panel here. but stay with us. ♪

♪ francine: this is bloomberg "surveillance," tom and francine from italy. tom: this is a river?

it is not a river. francine: it is a river bank. tom: that is snow. francine: there is also george clooney's house in the background. protracted slowdowns in europe are being fueled by economic data. germany has been one source of concern. despite rising industrial output, the the forecast is for the weakest growth in six years. in italy, there is concerns about economic expansion as the nation will cut its growth forecast 0.1%. we will talk german a and italy with luigi zingales. i want to talk to you about banks. does it make sense for deutsche bank to merge with commerzbank or unicredit? sense fors much more unicredit to buy it for two reasons. we want transnational banks in

europe so and in country merger would be a terrible idea. i think unicredit has done a lot to improve and is much more efficient. anding deutsche bank commerzbank is like merging two men into one. rates andnegative negative yields in europe, it will grow and it is because of negative growth in germany and evelyn. is that true -- italy. is that true? luigi: if we had healthier growth and italy, it would do much better. germany has been growing relatively well until now. i think the problem is not the lack of growth in germany. the problem is the business model of deutsche and commerzbank is not working.

deutsche is quite an embarrassment over the last 10 years. all the scandals since 2000, it amounts to more than the value of equity today. -- tom: you are expert on cross-border combinations of banking in europe. one of the key things for unicredit as they have to have the italian government behind them and the italian people behind them. is there italian capitalism that can support unicredit and other italian banks? luigi: i think unicredit should be able to merge without the support of the italian government or german government. if we go down that path, we will not have a european capital market. this reminds me of italy until a few years ago where you had to have permission to merge two banks.

we are competing with china and we cannot be discussing the little details in the corner. francine: how many banks would you close down, how many retail stops? does it all have to do with the new fintech? luigi: i would not close down any banks. i would let the market decide. certainly, fintech is coming and is changing. whether fintech would be an app or you still need some branches, let the market decide. we are not here to decide. an elderly, people are -- in italy, people are fairly conservative and they need to see a person. thing is to have a fairly efficient cost combination -- cost income ratio. european banks in general,

deutsche and commerzbank in particular have a terrible cost income ratio. in sweden, they have negative interest rates but healthy banks. in europe, they don't. it is not a question of just the monetary policy. tom: i have eight more questions in time for one. we are celebrating professor rajan' s new book. or is ite community permanently fractured? economists tend to ignore the social aspects at a cost to society. it is important to emphasize. what kind of community we will be able to build in the future, whether it is local or social in the cyberspace, we will see. the questions that are not

completely clear are what can we do and what should we do to foster the sense of community? our economic system indicates that whenever there is a shortage of jobs here, you have to move there. loseyou move there, you many connections and community, so i would put it to really put -- and the mechanisms of capitalism. tom: he sounds like an american. francine: i know you have to go to a panel, luigi zingales joining us today. let's get straight to the bloomberg first word news. sebastian: president trump says any trade deal with china is probably still weeks away, but both sides are making progress on other agreements that could be monumental. hemet with vice premier lou

liu he. they are searching for a rapid conclusion. canada is putting pressure on the u.s. to end tariffs on steel and aluminum. the u.s., canada, and mexico sign a new trade deal but all three need to ratify it in time is running out in canada. u.s. regulators ordered boeing to fix a second problem with the 737 max 8. software that affects flaps and flight control hardware is linkede from the problem to the crashes. carlos ghosn will remain in a japanese jail until at least april 14. prosecutor's request to keep him for longer and they want to question him on allegations he funneled millions of dollars from the automaker. he had been free for almost a

month. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. salek and this is bloomberg. thank you so much. ,rancine lacqua and tom keene we are reporting on economics and politics from the meetings on the shore of lake como. what we know is there is a pin drop when mohammed l area and speaks. -- mohamed el-erian speaks. were up at 5:00 a.m. having espressos over the eight things we would talk about. i want to go to davos. why do you never go to davos? mohamed: i prefer the small gathering. tom: the theme at davos was the european banking system has to clear themselves but can't because of negative interest rates.

while there be a point where negative interest rates are not advantageous? mohamed: ben bernanke warned that when it comes to losing unconventional policies for macro economic objectives, it is about benefits, costs, and risks . the longer you persist, the lower the benefit and the higher the cost and risk. tom: i want to go to your wheelhouse, negative interest rates, you have clear outcomes early on and then they become diffused. has the value of negative fromest rates diffused years ago? mohamed: yes, the transmission mechanism is stretched if not exhausted, and the second reason is we are realizing that negative interest rates for a long time undercut the ability of the financial sector to provide credit and long-term financial protection, which

means risk aversion among households goes up. francine: are central banks realizing? mohamed: yes, mario draghi actually mentioned this. coming from the ecb is quite a change in terms of recognizing it is about cost and risks, not just benefits. thecine: has the ecb locked window to normalize and is this a policy mistake? mohamed: i think the window has closed tremendously, but what is key -- and the ecb and mario draghi have been very good to stress -- it is not about central banks, it is about the response of other policymakers with better tools. a quarter of his conference was spent saying it is not about us. francine: and no one was listening. mohamed: now it has become more urgent. what you start to see is central banks get pushed too hard and

start risking their political independence. francine: there is a growth problem in germany and edley. does the ease -- italy. does the ecb have the tools to deal with that? mohamed: no. the most ecb can do is by sometime. time. some think about a patient who is hooked on painkillers and does not deal with structure impediments. you become addicted and the side effects become worse and worse. youthat medication buy relief? yes, but at a cost. tom: what should be the approach to defend chairman powell? we had lbj going after mcchesney martin over the need to inflation after the death of jfk , and now we have a new bout of this. radar.arsh is on the

how do you protect jerome powell? mohamed: we explain that central banks have gone out of their way to carry a policy burden that is way beyond the tools, and this is not about central banks. tom: how do you respond to the fact that marvin goodfriend got buried in the process and now mr. cain is a fed officer, how do we explain that? mohamed: it is part of a bigger phenomenon where people have lost trust with expert opinion, lost trust with the profession of economics. therefore, it is ok in the view of these people, to appoint non-economists to economic positions. there is a significant trust deficit that has developed, particularly with respect to economics. in: there is a plane coming that looks like it is out of the

1930's. i think that is nouriel. onncine: we will continue mohamed el-erian. he stays with us. tom keene called it, we worry over beanie -- nouriel roubini will be with us in about 10 minutes. this is bloomberg. ♪

♪ francine: is as bloomberg "surveillance." it is a jobs day in the u.s. last month, jay powell touted a

strong market but nonfarm -- for agrowth showed gain of 177,000. bring us in. tom: this is important, and there is always a surprise within the data, but that is one month's data. have we finally broken this wonderful growth of jobs we have seen for seven years? mohamed: i look at three and six month averages, not monthly data , and what is striking is so late in the cycle we are still having job creation well above what you would expect at this level. you would expect 120,000 and we have three and six months averages way above that. jobgoing to focus on less creation and more wage growth and labor participation. these numbers impact the demand

and supply side. it is the handoff that has to happen going forward. tom: you have been a technologist and you are expanding on instagram. that is not calculated within our economics and society as a new technology. technology over to our analysis of the american labor economy? technologythink of and being powerful as reducing the barriers to entry on the demand-side and supply-side, and by bringing in existing assets that otherwise would be underused. you have a transformation in not what we do but how we do it. on theuses two things labor side, displacement and insecurity. despite an amazing labor market, people are still insecure. the second part is it opens up new opportunities.

keep technology on the focus, but it will not be picked up by the things we look at normally. francine: breaking news out of norway's sovereign wealth fund. we understand they just got the go-ahead to cut emerging markets from their fixed income holding as part of an overhaul of their $310 billion bond portfolio. ofs this make sense in terms , what would be your ideal portfolio when looking at emerging market bonds? mohamed: certain risk assets have come too far and it is a time to tactically monitor your rate exposure. i am not sure what is driving their decision or the details, but the key issue if you are investing in emerging markets is balance sheet matters more than income sensitivity. focus on balance sheet resilience.

build the portfolio from the -- andup nv very careful be very careful about passive products. tom: a lot of consolidation and scale is felt. mohamed: absolutely, and you will see that in terms of what is offered and on the asset management side. francine: they say government bonds across the world have become much more correlated. when does that bifurcate again? mohamed: when central banks become less influential in setting asset prices. that is a critical element, the injection of central banks. tom: mohamed al arian, thank you so much. stay with mp l us, this is bloomberg. ♪

♪ tom: good morning, everyone, francine lacqua and tom keene on the shores of lake como. it is froid.

oecd,rength of the catherine mann is our chief economist. how have the first weeks been in the first quarter's been at the oecd? changene: it is a big both for may and the global economic outlook. i hope it is not correlated but it has been deteriorating. tom: we had a conversation about the oecd being able to look back. intotried to look forward what happens. in your perspective, what do you see for global economic growth? lawrence: a big change in the major driver of global economic , a which has really

and a thirdconomy of the planet out of poverty. that will change drastically because of all the challenges from politics and from the rising inequality which has taking place -- taken place over the past two decades. another element, digitalization, combined with an open economy is revolutionizing the labor market. years,ook at the next 10 14% of the jobs will disappear. 30% will change significantly. that is a revolution for everybody working today. francine: it seems there was a lot of pessimism on the world economy and the markets are optimistic. does it have to do with the consumption in china? lawrence: i think china has been

growth.ting to global when we look at the short-term to, otherre leading emerging markets like turkey have been driving the change and the decline in european growth to a significant extent, more than china. francine: what would be your prescription to fix european growth? stronghold and italy is much worse. lawrence: germany is only forecast to rise .8%. in europe, we have a single market and a common currency that is protecting europe from all of the fluctuation that may happen. first, coordinating fiscal

policy, half of europe can do have economic investment. if we want to compete in the digital world, we need digital infrastructure. that is the first thing. the second is reform. , that isess grow important. tom: where are we in this gilded age? the oecd has been out front on inequality, the gdp coefficient. how gilded is the gilded age? lawrence: related to your first question, which shows how prescient you are, is this hauling out of the middle skilled worker. that is to a large extent the brexitof the sentiment, to the populace votes everywhere

on the planet. do notll worsen if we address it now through redistribution and to be able to redistribute, we need common facts that the oecd is working. looking forward, we need to give access to more people, to health care, and they are looking at this. francine: what i wonderful way to end the interview, lawrence boone has hope. in the next hour, an exclusive conversation with nouriel roubini and jacob frenkel. this is bloomberg. ♪

♪ tom: this morning, politics in truth.

the united kingdom staggers to the weekend with ever deeper divisions. president trump outraged over the southern border and its affect over china. it is jobs day in america. economists are deeply divided over a "fully employed america." the elites of economics within italy to consider the inequalities and divisions of a gilded age. this is bloomberg "surveillance," tom keene and francine lacqua in italy on the border with switzerland, lake como, the beautiful weather. fredo. word is francine: it is cold, and the coldness in terms of international relations and politics, if you look at the u.s.-china trade, europe is

caught in the middle. tom: strongly agree. francine: they are fighting for a relationship reset with china and president trump, if he has something to do with china, attacks germany. here reallytory going back to the 1400s. this is where a lot of celebrities go to get away. francine: everyone was here in the world of politics and celebrities in the last 60 -- 60 or 70 years. this was built for the local cardinal. tom: jobs day in america, we cannot forget that. here is sebastian salek. sebastian: theresa may has asked to delay brexit until june 30, making the crest -- request and a letter to donald tusk, citing ongoing negotiations with jeremy

corbyn. their position is if there is a delay, it should be longer. theresa may is trying to get her deal approved before european elections. the u.s. and china says -- say there have been touch has been progress in their talks. president trump is talking about a monumental agreement that could be weeks away. with's vice premier met the president yesterday. ecuador plans to expel julian -- and there is an agreement for his arrest. he feared extradition to the u.s. since wikileaks published thousands of classified american documents. ecuador says there is no decision to expand him -- expel him.

global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am sebastian salek and this is bloomberg. tom: thank you so much. how about a friday data check? risk on has been the theme to the week and even with a good close yesterday for the dow, one screen is the simple screen with a still elevated futures market. the risk on feel is the story. francine: a lot of investors and markets are trying to figure out what this u.s.-china trade relationship will look like in some of the fallout. i am also looking at european stocks, trading sideways. pound, 1.3084. anresa may asked for extension until june 30 and that could be problematic for the e.u. who wanted a longer extension. ,om: politics in the morning let's do two things.

we can do that always with michael mckee michael mckee in washington for jobs day. in the truly experienced trade dynamics of the trump administration. what kind of trade weekend will president trump have? michael: he may be trading his golf balls in, because that is generally what he does on the weekend. there seems to be a problem, a hold up the administration did not anticipate. everyone who is an expert on trade said this would take a while, but the white house has been leaking but they are close to a deal. the president said it could be several weeks before they get there. it looks like the chinese are not giving incompletely to the administration, particularly on the idea of leaving sanctions on until the trump administration has decided china complied. until they can figure out a way

to satisfy both sides, it will not get done. let's go to the jobs day, labor participation. ont does michael mckee see the american labor economy? anhael: the last time we saw unemployment rate like this was the 1990's and the question is, where did we get the workers from? what is happening is the same thing as than, we are drawing in older workers who are retired or had never worked and see an opportunity to make extra money. labor force for to patient is rising particularly in the older cohorts. the younger people who disappeared from the labor force are coming back, but not at the same rate. can we keep this up? are there enough old people that want to keep working so we can

push unemployment down? when the fed came up with their new economic forecast they decided that probably would not be the case and thought we would get down to 3.5% unemployment. now we are there, as far as we can go. francine: how does the fed look at this? is there danger that after all the gloom reports we have had, the fed looks at the jobs data and says we are on track, hike, hike too soon, and the economy goes bad again? michael: the fed sees what everybody else sees, an economy that is slowing down. they forecast it would slow down and it has. they also forecast it would pick up in the second half and until they see signs of that, they will not move. wages, theyhourly

will be looking at, and whether that feeds into inflation. we are seeing signs the phillips curve may still work. movement and average hourly wage men as inflation goes down, but that is not -- labor markets will not be driving the fed to move. tom: michael mckee, thank you so much. 8:30 inforward to washington for the jobs report. inriel roubini knows that every basic economics book, you pick your textbook, there is one little chapter two thirds of the way through where they discussed finance. everybody forgets about finance for the rest of the textbook. i will of course ask the acclaimed economist about finance. davosmber one theme at was the banks have to clear, particularly in europe, they have got to get it done. how can they do it given the

jumble of international economics? nouriel: there are serious downside risks to the global economy. we are in the middle of a global slowdown that is more severe in europe in the euro zone. tom: today expect mergers? ideally, you need massive consolidation in the banking system in europe but mergers are difficult for political reasons. on the optimistic side, this cloud on europe and the rest of the world, a few things are going well. done in china they have gooder round of -- this is . we might get a trade deal between the u.s. and china. ofeurope, there was the risk a tariff coming from the u.s. i think trump will decide against them. i feel that brexit inside of the

noise will be soft rather than hard -- francine: i want to go back to the tariffs. there is a school of thought that says by beating up on china, president trump does good with his base. if he has a deal with china, he will start with germany. lawrence: if he has a deal -- nouriel: if he has a deal with china, he will start with europe. whether he will start negotiation like he did with china, or whether he has the option of waiting. i think he will go for the latter option because the first option would be a market shock in the last thing it can afford is another risk. politically, the way to move forward is negotiation over the next six months from may until november and see if you can get a deal. francine: if you were a european

regulator or politician, would you push for the commerzbank-deutsche bank merger or cross-border? nouriel: the optimal point of view, cross-border merger makes more success -- more sense than domestic merger. oneideal situation would be with cross-border marriages and would consolidate the european banking system. from a political economy point of view, there is some resistance from the national governments. the desirable option will not curb deutsche bank-commerzbank. tom: nouriel roubini, thrilled he is with us on the shores of lake como. kudlow,o with lawrence national economic director, after the jobs report. stay with us. bloomberg.this is

♪

♪ francine: bloomberg "surveillance," tom and francine in italy at the spring workshop. let's talk about brexit. the u.k. asked the e.u. to delay brexit until june 30. theresa may aims to have the divorce deal before european elections, but is prepared to take part in them in case a deal fails to win the approval of parliament. dwindling, shes is desperately trying to get a divorce agreement over the line. let's talk brexit with nouriel roubini. , theyou look at brexit

longer you delay it, does it mean that brexit could not happen or you will get such a soft brexit -- which the markets have been pricing in -- that it will not have much of an impact? nouriel: one thing i know for sure, we will not have a hard brexit because it is a disaster for the u.k. and europe. the last thing they need is hard brexit so whether they like it or not, europeans will have to delay the brexit decision. the longer you delay, if it is beyond june 30, the u.k. will have to participate in elections and that means commissioner and the chancellor and a changing government. to get brexit at all becomes more likely. some agreement might happen by june rather than a reversal of

brexit, but we will not get a hard brexit. francine: your scenario is for a general election? you could see a scenario where boris johnson wins the election. brexit,s that mean for and what is the raft -- if the 44?erendum is 56- nouriel: i do not know if we will get a soft brexit or a reversal of brexit. avoiding a hard brexit is the most important thing, that is the first observation. if and when wars johnson becomes --me minister, at that point boris johnson becomes prime minister, at that point he will have brexit. if there is an election in the u.k., the chances are a general

election or a referendum. tom: is it constructive to have the debate between governor carney and former governor mervyn king? they seem to be going back and forth on what no deal means. is that constructive? nouriel: not in the sense that there is an ongoing debate of what will be the consequences of brexit. most people believe hard brexit will be terrible for the united kingdom. noise amongtical former and current policymakers that is not very constructive. francine: nouriel roubini stays with us. coming up shortly, we zoom in on italy. we just got the economic with pierof italy carlo padoan, the former italian to dutch foreign -- finance

minister. ♪

♪ francine: bloomberg "surveillance," tom is learning italian and we focus on the economy. we talk about growth, politics, and foreign policy. we are in italy. concerns over a protected slowdown in europe are fueled by the economic data in germany and italy. the nation will purportedly cut 0.1%.owth forecast .01 --

joining us now is pier carlo padoan. thank you for joining us. if you look at the growth prospects in italy and the reforms that have or have not been put in place, and the coalition government. mr. padoan: the situation has been deteriorating steadily over the past few weeks. the government is forced to tonge its growth forecasts now barely positive growth. it has an impact on public finance is becoming unsustainable, so there is a againhat begins to rise that would impact negatively on confidence. spreads will go up and there will be a new recession situation because of this inability to manage the economy. francine: is it government for the budget that europe was

against, prices went up and they backed down. what to they have to do next, readjust the budget to make sure they do not pick a fight with europe? mr. padoan: what europe and markets are looking for is a commitment to have a steady convergence toward structural balance. this is what european rules are about. this government has continued saying they would not respect european rules. they are waiting for european elections to change the guard in the commission and hopefully from their point of view, change the rules and not be necessarily tied to fiscal constraint. tom: you would be expert across the 17 newspapers of london and that you are expert on the multiple party system of italy. is there a risk with brexit and this uproar that they will go from two parties into being more italian like with multiple parties? mr. padoan: of course, it is not

so much that you have multiple parties but where those parties are going. we managed the political miracle of bringing together two parties. tom: it is working out well. mr. padoan: it is working out exactly in the wrong way. does a hardat brexit, no deal brexit mean for italy? what does the european union need to do to soften the blow? mr. padoan: hard brexit would have especially medium to long-term consequences on europe. i am not one that believes this is just a u.k. problem. this is an e.u. problem. many mistakes have been made and has inflicted pain because the lack of politics being managed correctly. hard brexited if a

or no deal brexit emerges so i hope some sort of a negotiation as possible. tom: marco polo came out of harry's bar and wandered off to china. now the chinese are coming to italy. signal the symbolism and that we see china courting it away? mr. padoan: china was the great empire before venice was built, so it is history coming back to some extent. we have to separate two things, the economic incentives for italian and european firms to strike agreements and contracts with chinese counterparts and the other thing is the political leaning of a memorandum of understanding that has been signed in italy by the italian government what the chinese authorities, felt looking for what needs to be done, a european agreement. behindis still lagging

in defining a global strategy and this is showing a lot of the weakness that europe is going through. francine: we have not even talked about the banks. should unicredit by deutsche bank? bank take that much risk on? mr. padoan: unicredit has been with some scrutiny, pursued the policy of diversification and become more european and less nation based. this is good for the italian economy also. in terms of unicredit looking at german banks, i am not familiar with details but i read the news. this is part of the story. of course, it must be remembered that german banks still have a very large presence of public participation that would of course give a different twist to the deal. you think the mood

of the music, we need a national champion as opposed to cross-border? mr. padoan: concentrating on mergers and acquisitions, i have no religion. there is a tendency that needs to be picked up of banks getting larger and because of the technology pushing banks to be larger and multifunctional. i hope this is part of that strategy. tom: thank you so much for joining us, pier carlo padoan. clooney is in paris to -- ms. clooney is in paris today. this is bloomberg. ♪ want more from your entertainment experience?

just say teach me more. into your xfinity voice remote to discover all sorts of tips and tricks in x1. can i find my wifi password? just ask. [ ding ] show me my wifi password. hey now! [ ding ] you can even troubleshoot, learn new voice commands and much more. clean my daughter's room. [ ding ] oh, it won't do that. welp, someone should. just say "teach me more" into your voice remote and see how you can have an even better x1 experience. simple. easy. awesome. ♪ good morning, everyone, tom keene and francine lacqua in italy. meetings, this is

truly were some of the great minds of economics and politics meet to chew over the underlying series of the economy. the hallmark here, in speaking to the leadership in 30 years, this may be the coldest year ever. francine: a lot of people are used to this. i am sure george and amal clooney had to go to paris because they are not used to being here with such cold weather. issues discussing real and this gives it a little more time, in-depth, things that matter with papers. tom: what is wonderful about it -- less brexit. less brexit is good. president trump says in a trade deal with china is

probably still weeks away, but both sides are making progress on an agreement that could be monumental. he met with china's chief negotiator who says the consensus on the text of a new trade agreement and xi jinping is pushing for a rapid conclusion. canada putting pressure on the u.s. to end tariffs on steel and aluminum. the u.s., canada, and mexico but leadersde deal need to ratify it in time is running out in canada before the next election. u.s. regulators ordered boeing to fix a second problem related to the 737 max 8 regarding software that affects flaps and other flight control hardware. it is separate to the other issue. carlos ghosn will remain in japanese jail until at least april 14.

prosecutor's request to keep him longer to question him on allegations that he funneled aliens of dollars from the automaker for his -- billions of dollars from the automaker for his own purposes. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am sebastian salek and this is bloomberg. thank you so much. of j.p.cob frenkel morgan chase international, their chairman, that barely describes his accomplishments. ago, the a few years first david rockefeller professor at chicago was one jacob frenkel. he joins us today not on foreign exchange dynamics, but the grace on hell central banks should act. we speak to you as a former -- on how central banks should act.

we speak to you as a former governor of the bank of israel. dayb: i am sure every everywhere, political leaderships want -- central banks' credibility is so high the best has been protection of central bank policies. witheveryone is engaged distinguishing the files of the crisis today, central banks are trying not only dealing with the files of yesterday but securing the stability that is so important for growth and development. londone common theme of baines johnson and mcchesney martin, i need growth and inflation, i need the economy to pop. that is exactly what we would hear from president trump. why do politicians want that when there are so many smart guys like you saying, no, you cannot have the punch bowl 24/7

10 years in a row? jacob: the test of a good central banker is he can take the punch bowl away before the party gets going. politicians have a short run benefit but that comes at a high cost in the long run. the best way central banks can contribute to growth is by lengthening the horizon, by securing the financial system and the price. francine: when can they take the price ball away? it seems like this is the caret that is never coming -- carrot that is never coming. jacob: one of the key points we learned as being the only game in town is a mixed blessing and has become a curse. since the crisis, the only game in town has been the central banks. they have been overburdened and

looked around and said, where are my troops? they are gone. it is time for not only fiscal policy but also what we call structural policy, which means making the economy more flexible and contributing to productivity and growth. it is not an issue of lowering interest rates. they are as low as they could be. francine: this will not get easier because politicians who have wanted to be reelected realize they have a populace to contend with. the more they are tough on reforms, the more they lose their job quickly. jacob: this may be the case, but if i look for example, look at did veryof germany who tough measures, he paid the political price, and germany was booming thereafter. even in israel when prime minister netanyahu was minister

of finance, he did the tough policies, was very unpopular, paid the political christ -- price, and the economy was booming. you need to be a statesman and butnot how am i reelected, how can we improve the state of the economy? francine: israeli elections are a couple of days away. you cannot mention polls. thatare the nuances markets do not understand? jacob: the short answer is very technical one. there are many, many small parties that may not cross the threshold that is needed in order to enter. if they don't cross the threshold, the votes that went to them are gone. therefore, when you do public opinion polls which are not allowed anymore, you have to

take into account that many of the votes may be gone. policiesally, those that may not be elected into parliament may be those that decide on the balance between the center-right in the centerleft governments. tom: we will be going to the imf meetings and they put up a green book on financial stability. what is the tail risk right now? synthesizes all of that risk on the left tail, how malleable is that? jacob: financial stability is key and that is the main lesson from the crisis which we now commemorate, i will not say celebrate, the 10th anniversary. traditionally it was said that central banks need to focus on price stability. financial stability is just as important.

the more you push interest rates down, you have the illusion that you stimulate the economy but you make the financial system more vulnerable. we have printed and printed and do not see it in the consumer price index, but you see it in the financial market. if you financial markets are growing on soft land, they will be more fragile. that is why it is important to strengthen the financial system. the most important key test for a strong economy is the strength of its financial system because that is the element that can derail prosperity. francine: jacob frenkel, thank you so much. he will be staying with us. we are getting some headlines from the spokesperson of theresa may. we try to get a little bit more of an idea of what theresa may's

aim for the delay in brexit means. he has just told reporters on the ground outside number 10 downing street that the e.u. will look for clarity in the way forward. mayrtantly, he says theresa has not set a deadline for labour talks. this is in the context of pointing out that she wanted an extension only to june 30 and we are waiting for the european response to see if they will grant her a short expansion -- extension. tom: we are also waiting for the labour response. jon ferro with lawrence kudlow later after the jobs report, and a conversation with rick reiter of blackrock. please stay with us. this is bloomberg. ♪

♪ this isfrancine: bloomberg "surveillance," tom and francine from italy at the spring workshop. china's vice premier has hailed a new consensus when it comes to trade after a meeting at the trip house during liu he's to washington. the deal may be some weeks away, according to president trump. he is talking up the prospects of a monti mental a great -- monumental agreement although we do not know what that means. tom: go to the university of chicago and talk monumental. francine: it is a little bit different in french.

still with us is jacob frenkel. when you look at the actual trade deal, what would you put inside? what would be a good deal for the u.s. which would be a lasting deal does not unravel in a few months? the nature of trade negotiations is such that it is not a process that ends with a deal and we go home and live happily ever after. it is a lifestyle of communication and the key message is the two trading partners, the most important in the world, the u.s. and china, are committing to continue communication. ,t is not going to be the deal and like all deals, the u.s. will go home and say, we got the most important parts that we wanted but not everything, and the same with the chinese. intellectual property rights is the key.

the question is not only what is stated but is there a mechanism for monetary? china has their things. i think that is where we are supposed to end up if there is any rationality. tom: the rationality of it at what is. in new york, the outcome if we do not get any kind of an agreement? jacob: there is a quantum difference between the importance of those types of negotiations with china and the u.s. there has been machinery in place which connects previous administrations and will go to future administrations. with korea, north korea, it is completely an aberration in a way, the style of negotiations and the existence of negotiations. this is probably a lesson one needed to go through.

china will be amazing. anything that comes through the positively, the market will rally. the markets are telling all of those guys, we want a deal, we need a deal, and you better lead us to that deal. tom: thank you so much for joining us, dr. jacob frenkel. we have much more to talk about here on all of these events of economics, finance, and investment. off to theto dash radio. jobs day with jon ferro, it will be a big deal. francine: coming up on bloomberg markets:loomberg balance of power" we will look at sale versus opec, that interview coming up at 5:30 p.m. .n london, 12:30 p.m. new york

this is bloomberg. ♪

♪ sebastian: this is bloomberg "surveillance." the worst decline in profit at samsung and more than four years, falling 60%. they were hurt by falling memory chip prices and slowing smartphone sales. a federal judge has given elon musk and the sec two weeks to work out their differences over social media. the sec claims musk violated a settlement and won him found in contempt of court. the judge wants the settlement reworked so there will be not desh will not be any questions. -- will not be any questions. in the firstrned

few hours of trading, morgan stanley's role as stabilization agent comes with the potential for more collision. that is the bloomberg business flash. francine: thank you so much. we are here in italy at the spring workshop to talk about banks. with us is the alger breece chief investment -- algebris chief executive dutch investment officer. -- investment officer. there are rumors about unicredit buying commerce bank if deutsche bank does not get to it. what would be the ideal consolidation match? neededt of all, what is in germany is less banking because it is an over banked market. is happy torket make an extremely low cost of equity and returns.

what that does is prevent any private sector players from making any profit global margins -- profitable margins. there is a problem with digitalization. we need a cost-cutting story. we have the deutsche bank commerce bank which probably has more overlap, more cost savings, but more layoffs. francine: why did deutsche bank not do enough cost savings by itself? davide: it is a legal issue. in germany as in most of europe, fire.nnot hire or the unions, that is the law. you cannot wake up and say, i want to fire 10,000 people. you have to be in a position where you are about to go bankrupt and need to reduce cost . deutsche bank is highly

profitable but still making 3% or 4% on equities so they legally cannot fire anyone. any activity at that point, you are restructuring and legally you can have redundancy. anyone who wants to cut costs, they actually need m&a. solutions, more global, deutsche bank and , orerzbank, more overlap more synergies in terms of business which could be hpv commerzbank. it make sense for unicredit to go in and try? you have a more reasonable diversification that means you have a stronger bank. davide: there are two solutions. unicredit will be a key shareholder and the bank will be owned by commerzbank and

hbb. alternatively, if you are thesche bank-commerzbank, bank has a big outsize investment banks which may not be profitable and an important german bank. the complexity is higher. easier to execute would be commerzbank and hpb. the state might be more happy with a commerzbank-deutsche's. francine: what happens to mergers if they are done for political interest and not financial interest? davide: the reality is you need regulatory approval, which is not political. i expect given that we are talking about 20,000 to 40,000 layoffs, you will see some form of government intervention. case thatink it is a

is happening as the commission is changing. the commission will not be ultra focused on the potential state aid. francine: how much cross-border consolidation do you see in the next five years? if you have a national champion emerging in germany, is that a catalyst for french? what does that mean for investment? davide: i do not think we will see many cross-border as long as we do not have a single banking market. a mortgage in france is completely different from a mortgage in germany or italy so having a cross-border bank does not help. as long as we do not have a single banking product market, we will not see cross-border banking because each country runs its own banking. francine: i hear from chief executives that they are worried about negative rates and it is a problem with the economy. is that right? davide: europe and the u.s. have

about the same equity in banking. it is about a trillion and a half of equity. reserves cost the the banking system and it is the 50 billion profit in states. u.s. banks are valued half a trillion more because they have excess reserves of 2.5%, while in europe they are valued at -80 billion. the gap explains it. if you take the market cap, a good portion is explained by the difference in short and rate. in europe, central banks keep talking about the long end, but 90% of the profitability of banks is zero to three years. what matters to the smaller banks as short-term rates, ecb rates, not what happens 10 years

down the curve. francine: coming up a little bit later today, we will be here in day., como throughout the after the jobs report in the u.s., larry kudlow, national economic council director joins bloomberg tv and radio. we will ask about how he sees the trend going forward. atnot miss that interview 9:30 a.m. in new york. this is bloomberg. ♪ so with xfinity mobile

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rapid conclusion -- china's xi jinping pushes for a rapid conclusion. disappointment. prime minister theresa may asks the eu for another extension to june 30. offer 12 moreuld months. david: welcome to "bloomberg daybreak" on this jobs day. we had ray dalio out with an essay about the problems with capitalism yesterday. alix: sort of mocked in the wrong withwhat is the economy and lower income workers, but when you look at it, there are charts and statistics, he ran research and it reports on the overall impact. david: the same