nejra: china these expectations, will the pboc hold off? netflix price hikes puts a dent in subscriber growth, but can they keep adding subscribers? and are lori l shares worth it -- l'oreal shares worth it? we speak exclusively to the chief executive. ♪ nejra: welcome to "surveillance." let's get a check on the

markets. we just got a headline crossing bloomberg. the cfi have quick count has announced a leader in indonesia. we will get back this talk more broadly about emerging markets, getting back to equity market talking about the china data. it is more in the equity markets you have seen that. stoxx 600 opening flat now to the dance over .2%. tear,ssie dollar on a went above the 200 day moving average. off that china data, we trade at 72 up two basis points meaning it has now reversed all the yields we are back above the level we started at.

a bit of a mixed picture is we're looking at risk or risk off, it dynamics to talk about. -- a lot of dynamics talk about. and our interview comes after 9 a.m. for something to look forward to. let's get to first word news. >> president macron has made it clear he wants quick action rebuilding notre dame. he wants it finished in five years and promises it will be more beautiful than ever before. french parties are suspending election campaigns, giving them a brief pause in the volatility and protests that have hit his government. in other news, price hikes netflix are clouding the giants outlook, predicting 5 million new customers. that would make it the worst three-month stretch in over two

years, partly due to subscription cost going down and keep markets like the u.s.. executors are dismissing it as a blip -- executives are dismissing it as a blip. apple and qualcomm have ended the legal battle over billion technology licenses. they'll make a one-time payment and the two sides have reached a multiyear agreement with the chipmaker will supply processors or light to its technology. saying that qualcomm has exerted too much power over the industry. the white house is talking to candidates to potentially replace donald trump's for the federal reserve. this is the former pizza executive herman cain should --ipher self to withdraw decide for himself if he wishes to withdraw. shares of football club juventus have dropped as much as before after the italian club was not

at of europe's elite competition . ajax now has a chance to boost its annual revenue after more than a third. 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. nejra: thank you. let's get to our top stories. consumer inflation jumps to 2.3% of its biggest increase in more than one year. chinese exports jumped 14.2%. imports saw the trade surplus balloon from the previous month and very strong credit growth numbers with aggregate financing exceeding estimates and a trio of strong data points today. factory output jumped from year earlier and retail sales expanded more than estimated

overall, gdp also be forecasts at 6.4%. here is what our guests have been saying. >> the performance was stable, .articularly in the third month >> where close to recovery, but it is also short. maybe it will be moderate. should look at the trend rather than the asked going forward. >> i would not be surprised. there is more fiscal status coming in in the coming month and they are likely to watch. >> domestic normalization really holds the key. where quite confident the domestic consumption further drive growth.

is thejoining us now head of the u.k. investment office at ubs management. , nowve heard all the usual will hear yours. -- we will hear yours. >> china will most likely not be a drag on expectation but can we actually turned that into major positives? it is something the markets badly need right now. i think the jury is out. nejra: the big question becomes what happens with stimulus? at the chart, what does that tell you about what we might see in terms of stimulus? jeff: is probably a reaction to the view that liquidity might be a shade tighter.

there is no need for the pboc to add significant amount of liquidity. so over the coming months or the engine starts to stutter a bit, that might come down is that is still the cost of liquidity for the financials is -- financial system. nejra: one thing that has been pointed out is that the private sector needs to get a bit more of a boost, how do you expect them to manage that? been one of the priorities if you look at pboc statement and the stimulus. it is that the private sector about private sector access to credit. that is one of the things driving shadow banking. they cannot neglect sector at the same time which really has been the driving force for china.

say, conserve the amounts of stimulus available, to help both sides that flooding the waters pboc likes to say, that is the challenge of ahead. nejra: if you take a look at how equities have come of global equities as well as chinese which are right out front versus the commodity index, which measures returns, there is quite a stark difference. what does that tell you? geoffrey: if china is rebalancing the right way, then we are going to re-rating in .hina that is something to look forward to and means that the correlation between em growths and what chinese growth is meant to be versus the commodity complex. look at chinese housing numbers, and that's it.

you are going to see changes in the correlation does not mean total the correlation but ultimately for em we need to look at the household and consumers driving things forward. dataste data -- today's was a surprise, but the core data is that week for some time. -- is weak for some time. that is one area of concern. nejra: when we were on the radio earlier, i asked how the markets might read the latest? you said it depends on the time horizon. this feeds nicely into our question of the day. which assets will love this data the most? news, for those who favor lower, sustainable chinese growth of private investors for example, they need rebalancing to work.

you think now is a good time to meet pboc is going to flood the waters. don't expect an additional sugar rush. you want china to do the right thing except weaker growth. nejra: the sugar rough we have seen may not last for too long, of course australia has its own internals. great to have you with us. l'oreal'some, as asian sales overtake europe for the first time we hear from the ceo. this is bloomberg. ♪

nejra: economics, finance, politics, this is "bloomberg: surveillance" let's get the business flash. >> intel is giving up on its failed request to break into the mobile market, even though apple customers, buts the ipo maker has announced it will return to using qualcomm chips. the company ceo is saying he's no clear path to profitability and adds the company will now assess whether they have a .uture a scandal has rocked investor confidence. investors are pulling about $4 billion in the first three months of this year. the billion loss in previous quarter. unders afforded assets management as just $140 billion.

saudi aramco is in talks to buy 25% of reliance orting to the times. -- according to the times in india. shares have risen more than 40% over the last 12. -- 12 months. they value the indian petroleum business at 25-60,000,000. nejra: thanks. netflix shares job -- dropped after underwhelming investors but have since regained some ground. they said they would add 5 million customers, short of the forecast. they said that price hikes will slow subscriber but won't -- subscriber growth but won't affect in the long run. the ceo is downplaying the threat on the earnings call. >> we mentioned we only have 2%

of downloading on mobile, 98% of the time, people are not doing it netflix. on u.s. television's, 90% are not watching netflix. there is a time of competition and disney and apple add a little bit more, but i doubt it will be material. geoffrey yu is still with us and matt from bloomberg: intelligence. is he right to downplay the competition? >> i think so. the great thing for netflix is the price point the has chosen. i think it means people don't have to make a choice between having netflix and disney. as we said there, only about 10% of u.s. viewing is netflix. they're still this massive pivots away from tv viewing and a huge opportunity for the u.s.

internationally and people do not have to make a voice -- a choice. nejra: in terms of the outlook disappointing investors, what was the big reason? price hikes? >> it was a substantial price i to dollars, up to 18%. there will inevitably be a bit of pushback. we see the seesaw with netflix, people get excited about the growth and then are a bit more cautious. q3 isnot surprising always the softest, but there still lighting to a record year -- gliding to a record year. nejra: you have really changed your view on u.s. tech, why? geoffrey: is basically is valuations are. -- argument. to highlight in software is we talk about the cycle cyclical slowdown and the

state of global industrials, but the tech cycles neither that can be a bit different and it will always be about the correlation. those are the two anchoring points. having said that, recalling being overweight u.s. tech at a price, that was the cracks of our theme. we started being overweight years ago. no matter what the outlook, we have to focus on the industry up. -- up ahead. nejra: briefly, the news we had from apple and qualcomm, are either winners or are both? >> i think both are, it could have been hugely damaging for qualcomm. and while -- and apple gets back to the original path for 5g launching sooner than they could under into. under intel. nejra: thank you very much.

next, the white house enters talks with more fed and at the pool for trumps top picks shrinks. this is bloomberg. ♪

nejra: this is "bloomberg: surveillance". the white house is interviewing candidates to potentially replace herman cain and stephen moore as president trump's picks

for the fed. this is after senators have signaled there is not enough support. larry kudlow says it is up to cain himself he wants to say part of the process. this is as support has dwindled in the recent days. just a quick comment on this aspect before we get into the outlook what the fed -- with the fed. geoffrey: it is interesting. the 10 year, when people think of the dollar be replaced as a well preserved currency, it's not about the deficit, it is about the underlying institution, the central bank independence, yada yada. but especially in light of recent developments, it is about the process of people being appointed to the fed. and it is not just the u.s., we're seeing it all over the world. this is a new input into the

dollar. still, but we do need to start thinking about the if central bank independence is becoming increasingly questioned. it is not going to be that much of an impact amongst financial as part of the long-term institution and will factor into their thinking. and by the way, they are very overweight dollar. nejra: that takes the right to my next chart, showing you risk reversals going negative the bloomberg dollar index has not move much in 2019 when they ask you this question about what you tell them about long-term prospects? geoffrey: the chart is saying no long-term changes, but what risk

ease is telling you is that i did not need to buy any insurance policies in the past but now on the margins, maybe i should. and reflecting valuations and a host of other thing. once these less positive factors starts to build up, you will see it in asset pricing. nejra: i mentioned at the top of the show, the 10 year yield back at that level, if not just about before the dovish shift. are we fair value or what is the outlook? geoffrey: 10 years and beyond i think that reflects trend growth there. but even in the short-term, there will be a sign that the fed shift has worked. to loosenant financial conditions and you should see the curve steepen a bit, especially backend. nejra: a few people saying to me the curve should be steepening,

it is an interesting theme. talking about volatility, the lowest of this century. a lot of people calling for a acrossn fall -- in vol assets. have you prepare for a spike, whenever that comes? geoffrey: they have the luxury of emphasizing the alternative space so the amount of interest we're seeing from our clients going to alternatives private equity, hedge funds which can the correlate your portfolio -- the correlate your portfolio and lots of liquidity. that is where the increasing focus is. it can go up to 60% in alternatives, 60.

they say diversification is the only free lunch, but in the future, you'll see more cross asset volatility in the same direction and you have to move. that is where our focus still is. nejra: we did see a lot of correlation in the first quarter particularly. geoff yu stry much, ays with us. ceo,ll hear from l'oreal's don't miss that exclusive interview. this is bloomberg. ♪

economics, finance, and politics. this is bloomberg surveillance.

let's get a quick check of the markets. the stoxx 600 on the back foot after opening flat following five days of gains. the s&p 500 closed flat yesterday. the nasdaq closed within .1% of a record. risk is rising along with the with theday along chinese data. the tenure yield is above the level we were at before the dovish tilt from the fomc on march 20. drop ofe was a surprise oil in the u.s. u.k. march inflation rate staying at 1.9%, the median estimate was at 4.2%. coming in softer on the u.k. inflation data. that is just breaking right now. let's get to bloomberg first word news in new york. president macron is making it clear that he wants to move fast with efforts to rebuild

france's iconic notre-dame cathedral following this week's devastating blaze. he is promising it can be done within five years and adds it will be more beautiful than ever before. the fallout over the fire has prompted political parties to suspend campaigns, giving macron a brief pause in the volatility in the government. disney is clouding netflix is million just 5000 -- 5 new customers in the current quarter. it is the worst in three years. executives are dismissing this news as a blip singing netflix is on course for the biggest year ever. qualcomm and their two-year legal battle over technology licenses. the iphone producer will make a one-time payment. they also reached a multiyear agreement with the chipmaker and supply processors

license its technology. apple had originally sued saying that qualcomm exerted too much power over the industry. in running for taiwan's presidency, one candidate the chinese see got encouraged him to come forward and pursue peace along the taiwan strait. shares drop as much as 24% after the italian club was knocked out of europe's elite competition by outsiders. ronaldo, thestiano dutch team availed. global news 24 hours a day on-air and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. back to you. indonesia's presidential

election -- one candidate is leading, the president. of the 2014 vote with job creation and the cost of living being key issues. gaining 55% ofs the vote. india, the polls opened a week ago. elections in the world's largest democracy will continue until may 19. yuning us is jeffrey you -- and andrew. thank you both for being here. looking at a gauge of emerging asian stocks, how are you choosing to sort of take your within emerging markets elections underway?

andrew: i think what they we have to do is get used to the political volatility. there are very high expectations going into the elections. but look at the longer view and assess how the candidate will perform if they come to power. we have seen different stories across the region. there are expectations around job creation and around reforms. it is a very islamic led agenda. incumbency, very few changes were actually made. is standinge bjp there again. their track record is significantly different. and whether that will be rewarded by voters is the big question today. of reward,in terms the risk reward you are looking for, are you preferring bonds? the fx market has been quieter. andrew: we are invested in the

long-term, private equity, infrastructure, that kind of thing. underlying investment philosophy is a secular trend. talking about this disconnection between gdp and secular growth. that is what we try to target to ensure that you don't have the reliance on general gdp growth. you are looking for something more. india. growingergy in india 12% to 15%. very healthy growth in the economy but accelerated in certain areas. nejra: very interesting. james bevan came up with that idea of solar energy. jeffrey, i know that you have been fairly bullish but are we at any sort of inflection point? basis, itn a relative

would be one of our current overweights in the context of a portfolio. but most clients are actually surprised not that we were holding em but that we were holding so little. i agree with the illiquid side of things. the client see things on the specific private equity side. it is something that we are increasingly focused on. cyclical trends matter but i am attached to demographics. matter but i am attached to demographics. less so in india, but china will grow rich. opportunities along those lines as well. nejra: if demographic concerns are a concern for you, jeffrey, what about for you, andrew? it's not that it's not a

concern, but it is a concern for different reasons. in africa islity between five and six across the continent. compare that to the rest of the emerging world where it has trended down towards to. -- towards two. and what africa requires is the enabling legislation to allow emerge activity to driving force. emerge a driving force. nejra: what do investors who don't focus only on emerging markets under appreciate the most in terms of opportunity and risk? jeffrey: the number one thing is the long-term secularity of growth. if you look at the u.s. or europe, we have populations going the wrong direction. productivity has declined in the productivity has declined in the u.k.

and we don't have the measures necessary to address that. if you look at china where the demographics are more challenging, the economy has grow at 6% or 7%.at 6% it is a reorientation of the economy. it is a sustainable driver on a generational basis. when you look at portfolios, you have to think about the broad-based diversification. you raise an interesting point interesting point on the impact. it is launched as a means or way to bring impact. they think about portfolios whatever suffocation, impact is becoming a key focus. sometimes you are questioning why you do not hold more em. stilly: equities are where there is not a lot about the inclusion but the bond coming.ves that are

we have more equities, more than marginally so. and you might see a marginalization of a stronger portion of em. but go back to indonesia. we recently met an indonesian delegation. sucho we under appreciate a population? there is no investment. it is a two-way issue. go to the world, explain yourself better, and explain the opportunities. i think a lot can work, but there is marketing then needs to be done as well. in the indonesian credit trade, for example. you agree with that that it has to do with the marketing as well? it is. headlines focus on disasters, political change, and they give an impression of volatility which is not entirely reflective of the true nature of what is evolving in these markets. part of that is education. part of that it's miliary ready.

and through bloomberg and other channels, you could now get and i -- an eye on the world. you can get a sense of what is really going on. when you look at equities, you see a high proportion of equities with commodity prices. only routehat the that investors have to access emerging-market risk, it is not a perfect mirror. nejra: is it oversimplifying when we refer to the fed in the dollar in relation to emerging markets? andrew: no. when the mentally remain the number one issue for anyone in emerging markets. what we see is a step up in political risk in the u.s. and europe. reductions a relative of political risk elsewhere in the world. absolutely.

a to have you with us. -- great to have you with us. -- great to have you with us. jeffrey yu will stay with us. sales overtake europe for the first time last quarter. we will hear from ceo jean-claude agon. that is next. .his is bloomberg ♪ . ♪

nejra: nejra: this is bloomberg surveillance. let's focus on the u.k. food and computer games keeping inflation unexpectedly below target last month with annual cpi growth remaining at 1.9%. joining us now is jeffrey yu.

some might say that this feeds the argument that the boe can stay on hold. jeffrey: yes and no. they mention that might be the plan anyway, but look at where be theowth plan anyway, but look at where wage growth is. look at where inflation is. you have a comfortable buffer. they are reeling from growth and that is welcome at any point in the cycle. it is translate into high consumption. and yes, the preferences have changed. is potential spending to be unleashed and we have to ask holdingtion, what is them back? the u.k. labor market, that is happening everywhere. it gives policymakers enough room to focus on other things.

nejra: and the question about pricing power comes to the fore in the u.k. with wage growth remaining robust. what does that mean in terms of your allocation in u.k. assets and through equities as well? jeffrey: given the uncertainty recommending are limiting the allocations. case.a stronger literally 100% of the conversations, is it time to get back in property, stocks, sterling, all of that? nejra: lots of questions. thank you, from the ubs wealth office.nt surging demand for luxury products from the world's largest cosmetics maker of theed the drag

economy. notre dame is one of the most iconic monuments in the world. it has a lot of value. it only historic value but emotional value. is great that people responded like that. >> is this an opportunity for france that has been divided with the yellow vests to unite? >> i hope so. everyone was really moved. they were really moved about what happened. it is a tragic event. i think people will unite. >> asia overtook western europe for the first time in sales. how is demand in china growing? >> very well. at least for our products, , it isbeauty products

very strong. the growth that we had in the with 32 or 33 -- with 32 or 33 --n we that is the reason we had it last year. we see no slow down. we see a strong appetite of chinese consumers, young chinese consumers. that is the secret, the reason .or the boom young consumers, women, millennials are really jumping on the products. >> you think it is sustainable. >> why not? the chinese economy is still growing. less fast than before, but still growing. today, it is broader than before. times forwere consumers of beauty products.

beauty helps for the quality of life. it is an easy way to improve your quality of life. >> they seem to be buying more lipstick in china but less automobiles. >> i'm fine with that. more reliantcoming on business in china and asia in general? >> for many years, l'oreal has benefited from many ways of consumption. first it was the u.s., then china, and it might be another part of asia. opportunity tour take the growth opportunities anywhere they are. >> do you think french companies more probably are reliant on asia at the moment? wrecks i don't think so. it china is 15% of the market worldwide.

we still have a very broad-based business. as you know, we are number one, but number one everywhere. in europe, america, asia. and let's not forget it's not and let's not forget it's not only china. we had a strong quarter in many countries in asia, indonesia, india, malaysia, everywhere. asia is definitely becoming the continent of the 21st century. m&a.want to ask you about the you have anything planned this year? last year you said that you were looking at tech with the acquisition of the augmented reality company. >> absolutely. we are interested in tech companies, and we bought another brand. also a german organic brand.

and a new license for luxury. we keep acquiring businesses that we think we can really grow very big worldwide. >> other sectors that you are interested in? i can't reveal anything but we are always scouting everywhere. but you have to be optimistic because you don't know what will be on the markets. >> i want to ask about cult brands. they have a big following. than $1 billion valuation. are there any cult brands you would be interested in snapping up or ones that you think are doing a really good job and are quite nervous about competition wise? >> i'm not nervous at all. we have had called brands in the

portfolio for many years. >> urban decay. cult brand. still a 55n we acquired kilt, it was million dollars in sales and now it is more than $1 billion. these brands to be really big. and i think some of the new brands we acquired may be staying under the current one brand,l become a cult too. >> when we last spoke, president trump was threatening tariffs on on the eu, and last i looked, it included makeup brushes. are you worried? >> not really. first, we will see what happens.

the worst is never assured. and we have the capacity to manufacture in every part of the world. for our consumer division, we manufacture in the u.s. for the u.s., in china for china. we are not too dependent on international transportation of products. >> isles also wanted to ask about the u.s. for demand. you said demand is lower. competitionng more competition from proctor or johnson & johnson -- procter & gamble or johnson & johnson? any newe not seeing competition arising. and fact, i think we are more manufacturing of that demand. it is pretty mysterious.

but the market in the u.s. for , it was prettyer similar. it is very soft. if we compare it to last year, it is softening the market. which is weird because the u.s. should be growing faster. >> i wanted to ask you about brexit. you were stockpiling for the deadline. now there is a new deadline. what kind of problems is brexit causing you? >> not much, in fact. we had a pretty good first quarter in the u.k. it was not bad considering the situation. we have been getting ready for the past two years. and now we will see what will happen.

>> are you going to stockpile for the new deadline? >> we don't need to stockpile >> we don't need to stockpile for october. >> any issues stockpiling for march? >> may be four weeks or six weeks, it is nothing. we see wait now until the deal in october. and i think maybe nothing will happen, but we will find a good solution for everyone. >> what is the ideal outcome for l'oreal for brexit? >> that there is no brexit. but if there is, we will adapt. we aren't in an industry that is pretty agile. we will always find solutions.

we will always find solutions. >> what is your favorite new product you have out now? >> we have many new products. we have a new lipstick which is a fantastic one. you should try it. we have new hair care. we'll so have a new skincare line. and it is very interesting because it is the organic trend. and if brand like kanye -- garnier can innovate. >> consumers seem to be more into natural or organic products. will you make more acquisitions? >> we will see. but even without acquisition, you can really enter into the organic category. >> enqueue for your time. -- thank you for your time. jean-paul a agon

speaking to bloomberg. it u.s. futures on a firmer footing after the nasdaq closed within .1% of a record. the aussie was pushed up higher by better-than-expected china data. look at the 10 year treasury yield. it is like the march 20 fomc never happened. oil gains heading to a five-month high after the api stockpile data. coming up on bloomberg tv, we will be speaking to vice president of lincoln motor company. that is ahead of the new york motor show at 5 p.m. london time. guy johnson and tom keene takeover bloomberg surveillance next. this is bloomberg.

risk on. morning it is

it is china risk on. and the art of the deal, is president trump's negotiating leverage slipping away? and we consider where to put your money in 2020. -- theorts are the woes rose windows and the organ are intact. we're live from bloomberg headquarters in new york. guy johnson in for francine lacqua in london. it is extraordinary how quiet the brexit story is. why is that? guy: everybody is on holiday. they return next week after easter recess. buts are ongoing, basically, that's why. tom: does the whole nation take off? the weather will be sensational this weekend so i think everybody will be staying at home and going to the beach. tom: there is a lot going on

here. we have european inflation coming up. thisan comment on headline, looking at germany. the export juggernaut of the european experiment. and it isn't happening. guy: and might happen soon judging by the china number. cpi data is crossing the screen and we will talk with our guests. 1.4 percent year on year is consistent with what we had previously. up month on month has picked to 1% versus .3%. and we have our bloomberg first word news. uma: it is what is going on in china. economic growth unexpectedly held up in the first quarter. risingomestic product 4.4%. it is beating estimates and matching the previous quarter.

beating estimates and matching the previous quarter. they helped stabilize sentiment with trade tensions with the u.s.. there are concerns president trump could end up giving china a new trade weapon. the president wants to make sure that china faces consequences if it does not live up to its promises. the u.s. is discussing a two way enforcement. it gives the unilateral ability to pressure american companies. this means the u.s. could not appeal by going to a wpo. congress is demanding he congress is demanding he withdraw support for the saudi led war in yemen. the president calls the measure a dangerous attempt to weaken his constitutional authority. neither house has the authority to override the president's veto -- has the votes to override the president's veto. apple and qualcomm are settling .atents apple needs the qualcomm chips that will connect the iphone to the new fifth generation

wireless network called 5g. until recently decided that the company was not up for the job. until recently decided that the company was not up for the job. global news 24 hours a day on-air and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm uma. arise you -- this is bloomberg. in the quieteties market with the curve steepening over the next few days. now back up and elevated over the last 12 hours or so. the 11 not showing handle, but 12.09 showing the great bull market. .300% -- at .30%. our we stronger? guy: i am curious why we haven't

had a bigger look at the chinese gdp number. pretty solid. there are areas of weakness but it is an encouraging number for the global economy. the stimulus seems to be having an effect. slipping.on ore is restarting and iron ore operation in brazil -- an iron -- it is restarting and iron ore -- an iron ore operation in brazil. comes to german growth, the economy is expected to grow at point five in 2019. and we have to have the inflation data coming through. kind ofline number just stuck at 1.4 as well. the market is suggesting the number could be a little higher. is 1.3.age

-- ifheless, a fairly no fairly low number during his tenure. a sovereign credit analyst is joining us on set. the german economy is being downgraded. to 2019.tation .5 i would've thought mario draghi woke up this morning and look at the chinese number saying, that will be a bit of a relief. the transmission mechanism out of the chinese economy is something i thought he would be spending a lot of time thinking about right now. >> for sure. at the credit numbers and export numbers, we're seeing a rebound. i would say that before, we see significant pass-through for the german economy.

if you look at the german export numbers, we should take some confidence. this will have to be very cautious. the differences between china and europe are pretty well documented right now. >> the news out of china is pretty good for germany. hopefully we can get a with thet in china u.s. and europe in terms of auto. tom: this is a chart you know

this is a chart you know very well. this is the benchmark over the 10 year. the great progression in yields. and a new level of disinflation now. is this intact? is this a structural disinflationary trend? >> i think so. it has to do with technology. it has been a secular decline in rates. i think a lot of that is just information. tom: the new neutral or the new normal, whatever you want to color it at pimco, there it is still intact. >> it is really inflation and

when it comes to terminal rates, we are 215 out from the fed and that is the midpoint of the so called neutral. and often the fed has gone beyond the neutral rate to kill and stopconomy inflationary pressures from rising. tom: we have the economic news of weakness and gdp growth as well. we will continue. is, withoutt question, the gray short book of the financial crisis. you remember simon johnson's "13 bankers." he's out with a new book on the american spirit. simon johnson.

thrilled to have him. this is bloomberg. ♪ erg. ♪

uma: welcome to bloomberg surveillance. netflix maybe paying a price for rate increases. it will add 5 million new customers in the current quarter. that is short of wall street forecast. netflix blaming rising prices in mexico, andazil, parts of europe. intel is giving up a failed quest to break into the global market. intel dominates the world of computing and apple says it will return to using qualcomm chips. the smartphone unit offers no path to profitability. the billionaire founder of the that -- plans to run for

the presidency of taiwan. seeking the nomination of the opposition party. he says a mythical chinese sea goddess encouraged him to come forward and support piece in china. that is a quick look of the bloomberg business flash. back to you. guy: let's get back to one of our top stories. a china and the breakdown of the data that we see this far this week. inflation jumping to 2.3% in march, the biggest increase in more than a year. were a long,alks exports jumped 4.2%. and strong data points today have factory output a year earlier and retail sales expanding more than estimated. coming in at 6.4%, tom.

let's think about what our guests have been saying about all of this. newburgh's chiefwburgh's asia correspondent and bloomberg sheaf commodity officer to get a sense of will take us. signs of investment. factory output is also accelerating. there are downsides to unemployment. we are facing a lot of investment that continues to be there. there is still a little bit to there is still a little bit to

go before we can truly say that china's economy has turned a corner. guy: one of the things the market is trying to grapple with this morning is to figure out if good news is bad news? is the chinese more likely to stimulate the economy? the data are starting to turn. as a result of which, the gains we've had thus far, that's it? >> yeah. say thateconomists did today. what it means is that policymakers will step back and they will inject the economy with the cheap kind of money that they have been over recent months. but we are still away from calling it a true corner just yet. private investment still remains weak. it is all-important. create a positive deal with washington, it would remove a major cloud. if those talks fall through, we're back to where we started. tom: that is really important.

you say policymakers plural. there's just one policymaker. xi.ident did the world changed today with his figure? >> things changed mystically. -- domestically. this was rather than the external story which was the trade war. ecb fixed asset investment picking up, you see consumption .oving up these are all domestically driven factors. the china story is somewhat better than it has been. side, aon the external trade agreement with the u.s. china's economy will be in a much better place than people expected to be three months ago. tom: joining us is marty .chenker

. marty, the donald trump's leverage just slip away with his economic report? marty: perhaps. but i think donald trump wants to cut a deal with china. he is moving into the campaign phase of 2020. it would not be a great look for him to say that talks broke down. there is incentives on both side to get a deal done. you haven't know if seen this in london, but it is front and center here. everybody is trotting out tax returns. returns. for the most part, i think it is being taken by the media well. here is karen from the washington post writing up mr. sanders, the gazillion air from vermont. from for mont. from vermont. this ambivalence about inherited wealth -- there it is.

this is one reason trump has perpetuated the myth that he became a billionaire on his own rather than starting on third base like martin schenker. -- trying to tying hide? the president is a real estate guy. he's using business deductions to hide income that he's got. everyone knows that. how does this end? marty: as donald trump said, he is a smart guy taking advantage of the rules. of ado this is a lot about nothing. we did a story that there were 17.4 million air's -- 17.4 million millionaires in the u.s. you are vilifying a significant portion of the united states and i don't think people really care. tom: and i think the gentlelady

from california paid her fair share of taxes. paid $700,000 of taxes. we will continue forward. rick rieder with blackrock, blackrock doing well. i will talk to rick about the future of thieves in his business. assets up, thieves down with a 900's -- 900 basis point spread. that is just or miss -- ginor mous. this is bloomberg. ♪ business.

bloomberg surveillance where we keep score. guy johnson and for france a look. -- for francine lacqua. bring it up right now. all you've got to know, year to date. 13% on the dow. 16% up on the s&p 500. 29% up on the fall nasdaq composite and other glorious worldwide results as well. , i missed the last 100 days. what do i do now? risk depends on your tolerance. it has been an absolutely terrific year. it is very possible that this will continue for a while. test 3000.l probably think it is possible the markets go up another 5%.

and we had a dislocation later in the year. tom: i have to make a coupon equities relative to the outperformance. is there a total return place in fixed income. coupons.ing >> i think, actually, yeah. as we discussed earlier, they are anchored here. i think taking the yields on the treasury and in europe, when you bunds, thenes -- curve is quite steep. the duration for the tenure part of the curve is quite decent. part of the curve

is quite decent. there is no real inflationary pressure. central banks are very patient. if more u.s. investors put more money to work in the german bond markets? you've got a currency story that works in your favor and you have a steep return. why isn't that money flowing across the atlantic? >> i don't think u.s. investors think currencies. if you grow up in europe, you think currencies. institutional investors don't understand currencies at a don't think currencies. -- and don't think currencies. they think the mathematics don't work. so u.s. investors are not currency players. guy: is the steepness of the german curve going to stay with us? is this something that you see carrying on for a long time? i see the german growth number being downgraded after this. you seeless, where do

the shape of that curve developing from here? and is that going to be a consistent story across europe as well? if anything, is likely to flatten. the european story is one of japanification. getting worsere and worse. inflation expectations are getting entrenched to the downside. if you look at the shape of the curve and the forward rates, forwardthe five-year forward relative to the short end and it is still quite high. tom: given american consumer product companies still have a multiple that is extraordinary, how do you rationalize a 25 p/e in this world? >> it is hard to do that. but you have a 6% earnings growth rate. but you put a dividend on top of that. it does not surprise me you aren't -- you are up 15%. but look, we are clearly at the

high-end of ranges. it gets to my point about last year. guy: we will leave it there and .ome back to both of you they will stay with us. coming up, gary shilling and company president at 11:30 a.m. , looking forward to that. european equities are pretty flat. you would've thought after chinese data, banks would be doing more this morning. that they are lower right now, a fascinating example of what be a fascinating scenario in these markets. this is bloomberg. ♪ his is bloomberg. ♪ so with xfinity mobile

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now that's simple, easy, awesome. customize each line by paying for data by the gig or get unlimited. and now get $100 back when you buy a new lg. click, call, or visit a store today. ♪ guy johnson in london, tom keene in new york. let's get a bloomberg first word news update. france, emmanuel macron

france, emmanuel macron is presiding over a rare moment of unity following the devastating fire at notre dame cathedral, telling that the cathedral will be rebuilt in five years. whopping $125 million has come in for the reconstruction. there are new reports the trump board board.

larry kudlow is saying the white house is interviewing candidates to potentially replace herman board. larry kudlow is saying the white house is interviewing candidates to potentially replace herman cain and stephen moore. republican support for the two has alsouncertainty over brexits uncertainty over brexit has given britain at least one thing -- their summer vacations. fairies across the -- ferry -- jumpingss overnight. there were concerns leaving the e.u. would make it more difficult for british businesses to travel. 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 uma pemmaraju. guy: netflix shares under pressure in extended trading after hours after they forecast second quarter's underwhelmed investors. would add 5said it

million customers. it said price hikes in key markets will slow subscriber boost briefly but will figures in the long run, but what about the competition it might see? , everybody getting into the story. alex webb is covering tech and joining us right now. let's talk about netflix. miss, i amce of a not going to get too bent out of shape. i think the longer-term story is it is heating up. is this business a zero-sum game? netflix has had a really good run, but now competition is increasing, therefore you have got to wonder how the pie gets sliced. in,: when new players come

disney plus, apple with their offering, there will be some people who will only go for one and a lot of people who will go people who will goent for multiple different offerings. netflix, someone new to the market who does not know what offering they will take, if netflix can get their prices higher now, people will enter under those prices. the price comparison will be harder to make. netflix has an edge over apple in that it has so much content , but disney is the one

they have to be scared about. disney, its whole business, it has hundreds of tv stations and perhaps consumers are more price savvy in the u.s. some impact is carrying over into brazil and elsewhere. i think the u.s. remains they havefor them and a high penetration rate already. it is hard to have stellar growth numbers. they have not had a massive drop off. where does amazon fit? where does amazon fit? alex: they are offering a lot more in their goal is not to make money from video subscriptions. andr goal is to on-ramp you

money on other things on amazon.com. guy: the question about the amazon-qualcomm story, they -- apple-qualcomm story, they settled. apple needs the 5g network needs to get the deal done and move on. my question is about how 5g will affect apple. you have a phone in your hand that is an incredibly powerful piece of equipment. 5g is a powerful technology for transferring data. data. why should i spend a lot of money on an apple phone when i will have 5g going forward? alex: good question. if you are selling phones to consumers and there is a 4g phone or a 5g phone, consumers will want the one that is newer and shinier. lower latency, faster gobs of

data coming into that phone, but in london it is very seldom the case that when you are using a video,ork to watch a that the speed -- that it is not the speed you need. on thing apple is useful video, that the for, if they can par more of the programming compute into the means they have to put less hardware into the meano put less hardware into the phone but can probably charge a premium price point. thethey are of 30% on the basisf they will compete against content.nd more

a lot of those companies are very rich. i would play the dividend yield and more the utility type telecoms. thank you so much -- tom: thank you so much for the netflix update, netflix down not all that much. and thesation on luxury future of no true tom: the -- notre dame cathedral, -- notre dame cathedral. this is bloomberg. ♪

♪ london, tomnson in

keene in new york. indonesians have cast their ballots in the world's biggest single day election. the president is leading in unofficial quick count's. race.a rerun of the 2014 key issues are jobs and poverty. bloomberg has been covering the issue. aslinda: it is not just jobs and poverty, it is also religion . islam played a huge role. the people in this country split right down the middle and the rift has not been this deep in a long time. thes get some perspective

numbers suggest he is in a double-digit lead. >> this is indeed a vote of confidence. he has been given a second mandate for his second term. polls pointing towards this in the past few weeks, it does come to an extent is a surprise, given that the him,d swell of support for and the fact that the campaign astounding.tum was haslinda: he will not accept defeat. what does that mean? will he get protesters to go to the street? amir: if this lead is maintained, more than 8%, we are

looking at a 10% lead that he is expected to win with, then i camp will have to accept the result. margin, itlow 5% would be likely there will be protests on the street, but this is a bigger margin than what some had been anticipating. haslinda: i want to touch on the issue of religion. he comes back to power, can joke away reunite the people? reconciliation is difficult to implement. to, and he hast been given a big mandate. win,nt projections, a 10% his calculations paid off. , as the leader,

he would have to make the right choices, difficult choices. he has got to stand up for what he believes. it is not going to be an easy journey. , both sides are to be blamed for the rights -- rise of identity politics, not just within the community but between the two largest organizations, lines.o along those he has got to show leadership in bringing the people, uniting everyone together, healing the divide. haslinda: indonesia is the largest economy and southeast asia and home to the largest muslim population. what is the priority? isr: making sure the economy on the right trajectory.

he promised in 2014 that he most grow it 7%, but in .arts it has been 5% 5%, indonesia can achieve on autopilot and there needs to be more creative ways to encourage .rowth addressing economic issues will help lower and drown out the voice of identity politics, and put it back in the box. it cannot be the top priority. .aslinda: it cannot be the top priority. haslinda: amir freyd ryman -- tom: what you can do with little

.ubes of paris rouge lipstick l'oreal, 18% a year for the last 10 years. goldman sachs, 6% a year for the last 10 years. there is a lot of money and luxury. you look at louis vuitton and the other companies, i think the growth has been amazing, especially in asia. europe is noy, longer the growing venture. asia is the growing venture? we are struggling to find a way forward in europe and the luxury sector is just one reflection of what is going on. does that german number we have seen this morning, is that consistent with what you guys have penciled in? nicola: it is broadly

consistent. i agree with you, i think europe is very much in the passenger seat when it comes to global growth. europe aree u.s. and trade dependent, and unless we have more significant domestic impetus coming from fiscal stimulus, which we are not seeing at the moment, it is unlikely to see europe driving the cycle. sectorench has a luxury that is a huge constituent part of the cac. dax is all about the auto center -- sector. reengineer itsy model to compete with the likes of the united states? how do they spend money happen?tly to make that the mood music out of berlin is that they do not have to. nicola: i agree. i think germany would do with some government spending, some

further infrastructure spending, more investment. you cannot force the private sector to do that, but the public sector could help with that. i think germany has the money. it is running a budget surplus and the debt to gdp is clearly falling back. it is designed by the government to boost investment, but we are not seeing that. tom: is the use of cash in a help or hindrance in the future of european equities? are they benefited by lessened dividend growth and maybe not the religion of share buyback like we see in america? kirk: and hearts the multiple. your -- it hurts the multiple. european companies do better to adopt the model.

money is awash in the world with the central banks, including europe. until the central bank conundrum resolves itself, it is going to be hard to change things. tom: what does wells fargo do on coupon given all the lower yields? 2.99%g at the bloomberg, on a 30 year bond. how do you acquire yield? where's the best place to find yield? have got to look at the short end of the curve and things like bank loans, which are doing well. as long as corporate credit holds in, there is opportunity there. you have to look at the good dividend yields. there are some good dividend yields in asia and emerging markets. you look at things like china and the emerging market equity income type products that you can get 4%. i think you have got to be opportunistic but there are certainly opportunities.

european fixed income going to outperform european equity? we had a cracking start but we came out on a low base. a lot of people are piling into fixed income which means they are behind their equity benchmarks. nicola: european equities are up .lmost 15% on the year if the situation continues, probably equities could end up with a higher return this year. look at it adjusted for volatility, it -- when you look at it adjusted for volatility, it may not be so different. guy: let's turn our attention to what is happening with the asset management business. outflows slowed and assigned the company will stabilize after the scandal that rocked investor confidence. gann reported outflows of $4 billion.

that is well below the last quarter. quarter. the stock is higher this morning and the reason for that seems to be the outflows are slowing, but the company indicates it will wind up the flows and get that done may be quicker than anticipated. tom: this is a good thing for gam. assets are leaving the company but

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beijing -- as beijing delivers solid growth. president is negotiating leverage. is it slipping way -- away? johnson ofr, simon m.i.t. on 13 bankers. now they are minting profit. reports that the rose windows and the organ are intact. "surveillance," -- this is bloomberg "surveillance." what captured your attention as we look to the remains of notre dame? guy: it is fascinating that we find ourselves in a situation -- and this is indicative of europe -- europe does not spend enough on stuff, infrastructure. why was notre dame in such a poor state? nobody knows what caused the

fire, but clearly, this is an iconic piece. since the heart of france and yet the french did not spend enough on it. it is a similar situation in plenty of other places as well. you have all of these rich guys coming out and saying they are going to spend money. it highlights the income inequality in france and elsewhere. we really appreciate the efforts being made by these people making massive donations, but if you are a person standing on a roundabout in southwest france, i am not sure how you feel about that. tom: the crane that we just saw in the video is the north window , and the reports are the stained glass is at least intact. no word whether it will survive or not. now, first word update. china, withws for economic growth unexpectedly holding up in the third quarter

-- first quarter and beating estimates, matching the previous quarter. ae chinese economy receiving boost from stimulus measures kicking in. presidentconcerns trump could end up giving china a new trade weapon. he wants to make sure china faces consequences if it does not live up to its promises and a trade deal. to do that, the u.s. is discussing a two way enforcement ability. u.s. peoplemeans could not be appealing to the wto. calling atrump measure a dangerous attempt to weaken his constitutional authority. neither house appears to have the two thirds majority to override his veto.

there has been a sudden end to apples bitter legal dispute -- disputebitter legal with qualcomm. the likely reason -- apple needs the qualcomm chips to connect the iphone to the fifth generation wireless network known as 5g. apple bet on intel, who recently decided the company was not up to the job. 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, come arise you. -- i am uma pemmaraju. tom: some real nuances to the markets. it is boring, that is what you do when you are risk on. really, i am going to call it not in the vicinity but getting to the 20,000. the vix, 12.06. in11 vicks we have seen it

the last few days -- vix we have seen it. back.income crawls guy johnson, with china better, renminbi strong. the i am slightly stunned european equity markets are not doing more today, but a flat session unfolding. you would have thought such strong chinese data, it would be doing better. 13, just north of 13. we had some pretty in-line inflation data. minus one drag on the european space, we have seen iron ore coming down. the volley is restarting an operation in brazil and we are seeing weakness in iron ore. indonesia, asking supporters

to wait for official results. let's talk about what is happening with china and get the details of the data. there has been a loss over the past few days and in the night, talkser -- while trade the down, chinese -- surplus balloon from its previous month. march saw strong credit growth numbers with aggregate financing exceeding estimates. that trio saw overnight, factory output jumping. retail sales expending more than estimated. overall gdp for the first quarter beating forecasts at 6.4%. malcolm scott is joining us from hong kong. the numbers look pretty good are they as good as they look or

when you get in the details, is there devil? malcolm: the numbers and china are never as bad as they look. right now, they are probably not as good as people are thinking. we have some front loading of fiscal stimulus that seems to be driving this and leading to a pickup in state investment but not private investment. we have a large part of this consolidation in headline gdp growth, accounted for by a smaller deflator. if you look at growth in nominal terms, unadjusted for inflation, that is what people are paid in and company profits are, growth will be decelerating. that said, the economy is looking far more steady than people had feared the start of the year, so for the global economy, that has got to be good news. guy: is good news bad news? is this enough to stop the

chinese from providing further stimulus? malcolm: it probably gives them room to dial back a little bit. we saw may be a sign of that today in some of their liquidity operations. they did not put back in as much as they had been. there was a rollover of money they had been putting into the banking system and they did not put the same amount in. at least on the monetary front, there will be less support coming through, although we should not think quite yet there will be a huge turn in direction. this is not a tightening move, maybe just less stimulus than some economists had based at the beginning of the year. there probably will be some of this -- ratcheting back of this frontloading and spending we have seen. china has been spending far quicker this year than in the past. it has gone into the red earlier in the year then it usually what

so there could be moderation in that fiscal support. tom: malcolm scott, thank you so much. we are thrilled to bring you in new york someone guy johnson usually sees in london. us in theer joins united kingdom as well. we get a huge response when you are on because you are incredibly scottish australian blunt. damn, whate market, do i do now? gerry: we have been expecting this growth slowdown. now we are at the point where the lower for longer yields are priced into equity markets. now we are transitioning to the growth environment.

tom: how do you get to improved earnings? gerry: with nominal gdp growth gets revenue growth and that is enough to produce earnings growth. we do not really see a significant amount of margin pressure yet. average hourly earnings and labor costs are improving but not at a point where they are exceeding nominee revenue growth -- nominal revenue growth. , is organicola revenue growth up 5.2%. that is really not a shabby number at all for somebody selling bottles of water and soda pop. this is not a shabby number by any means. it has maintained its guidance

going forward. i cannot remember how many years we have had up movement in the pepsi numbers. overnight,g at the pepsi is indicating at will open higher at this point in time. we will see how further traction that story gets. decent numbers coming through from pepsi. tom: is this where i do the frito-lay demonstration with a bag of potato chips, like the 10 bags i have every day at bloomberg? guy: that is a great idea. in a world that is migrating drinks, thesery are companies like coke having to go through massive changes, and evil lucian which dutch evolution -- evolution at which it is happening is amazing.

tom: quaker oats, oatmeal. guy: i am a massive fan of oatmeal. i have breakfast every morning. low g.i.. i am sure gerry fowler is a low g.i. kind of guy as well. the markets have been on a sugar high. equity markets, massive sugar highs since the start of the year. they got beaten up in december, but if i am a portfolio manager and i have made 17% thus far this year and 16% in the united states, what do i do now? managers aremost behind the index? what do i do for the rest of the year? gerry: a lot of funds are reaching their target for the year early on. you have to look at the transition of drivers of returns.

with equity returns, probably missing single digits over the next 12 months. the volatility does not warrant a significant allegation dutch allocation to equity. -- allocation to equity. we are starting to trim some positions in emerging markets and china, and putting more of that allocation into lower volatility instruments. debt is market currency one of our favorite trades because the dollar has not been as weak as it probably should be for this type of market cycle. conversationsund, to be had with gerry fowler. coming up, a price height -- hike for netflix could have contributed to the crowded outlook. i am sure i can hear chips being eaten in the background. it goes with the netflix story. outstanding.

♪

♪ tower,e freedom citigroup and the bottom, one of the new residential palaces on the right, the chrysler building so elegant. in the distance, the freedom tower, and a rainbow in new york on a day that is a new york yankees rainbow. let's get the bloomberg business flash. happening,s what is intel giving up a failed quest to break into the mobile market. intel dominates the world of computing but it's one significant mobile client will return to using qualcomm chips.

5g offers no path to profitability. the billionaire founder of the company that assembles iphones is planning to run for president of taiwan. he will be seeking the nomination of the opposition party. he said a physical chinese sea goddess told him to support peace in china. 24%, theng as much as team knocked out of the elite champions league competition by the dutch underdog. they are purchasing one of the game's best players, cristiano ronaldo. a-game is backed by a billionaire. that is the bloomberg business flash. guy: first time cristiano ronaldo will not be in the semi finals in the champions league

in eight years. i think. netflix shows dropping in extended trading after its forecast for the second quarter under well investors. -- underwhelmed investors. they said they would add 5 million customers, short of the 6 million forecast. price hikes in key markets will slow subscriber growth for a brief time but will not affect figures in the long run. what about the competition? competition in this space is definitely heating up with the likes of disney getting in and plenty of others. and sweeney is joining us gerry fowler is still with us. the outlook seems to be the thing that the investment community is focusing on. is that price hike responsible for that story, or is it something else? paul: it is primarily the price hike. it is a pretty big double digit

price hike increase for a lot of , somarkets in north america that impacts the subscriber numbers, particularly the churn as more people cancel because of the price hikes. we have seen that in the past, but longer-term, the subscriber growth story seems in good shape. 115 -- 150 to about million subscribers globally, but the big issue is competition. size,coming and coming in notably from walt disney. 49% per year for netflix. this is free cash flow and it is negative one billion, 2 billion, 3 billion, and i guess they are modeling 3 billion negative cash flow. this is predicated on their amazon that can grow in a retail

space forever. baloney. there is a limited streaming space. paul: we don't know. this is a global business and 80% of their growth came from outside the u.s. tom: is it amazon like growth? paul: it is. the story is still there, but you raised the big issue, the lack of free cash flow. they will not be cash flow positive until 2022 if you look at consensus numbers, so it is a big issue. they are spending $15 billion a year in programming. "surveillance," at 9:00 a.m., paul sweeney and tom keene complete team coverage on a gentleman from duke going to the nba. we have complete coverage for the entire 9:00 hour.

gerry fowler has no idea what we are talking about. this is bloomberg. ♪

♪ tom: good morning, bloomberg "surveillance," guy johnson in london, tom keene from new york. gerry fowler is in new york today. aberdeen standard investments, buy and hold, does it still work? gerry: assets have returned to

low levels so we have allocations and they have modest returns over the next 3, 5, and 10 years, but our tactical portfolios have more ability to move about between asset classes. and the best guess on buy hold has been predicated on corporate officers ignoring the blather and cutting costs and moving forward. why has that changed? can they still cut costs? can they still do efficiencies? gerry: it feels like you are getting a lot of cost-cutting. we have a model that says growth will be around 4%, which is not far off what we are expecting for revenue growth in the u.s. when you look at the bifurcation within the market, one of our key short positions is to be short the russell 2000 because

in a slowing growth environment, they are hit first, lower margin and more sensitivity to the cost pressure. the companies with the greatest level of debt, so the rising the russellels -- 2000 is in a difficult spot in the u.s. guy: do you think some of those smaller companies will have to pay their people more? this is the ongoing debate. when will u.s. companies pay their people more? the labor market looks incredibly tight. where does that show up, small caps or large caps? gerry: there is wage growth in the u.s. and the labor market is incredibly tight. our expectation is only in a creeping way, and the wage growth is not enough to exceed the revenue growth, partly because other costs have been softer in the last six months, namely commodities as one key component. these costs will grow,

particularly in the u.s., and that pressure will have a more significant impact on first of all, more domestically focused -- companies that seek more domestic labor, small caps versus large caps, and the companies where the margin is much lower and the pressure on margins is significant. fowler, aberdeen standard investments with us. we will take a look back 12 years with simon johnson and looked decidedly forward to an incendiary new book, "jumpstarting america." this is bloomberg. ♪

xfinity watchathon week has sadly come to an end. what, what, what! no! but don't let that stop you from watching the best shows and movies from showtime, hbo, epix... jesus, what happened? ...and more. it's just the tip of the iceberg. upgrade now to get more into what you're into.

thanks! just say "watchathon" into your x1 voice remote to upgrade and keep getting more of what you love. ♪ tom: it is a story that continues, the south facade of notre dame, today calculating what is out there.

mr. macron looking at a five-year plan to rebuild the dame,s and roofs of notre and assessing the architectural integrity. there has been all sorts written here in the last few days. , a student of paris at the new york times nailed something i have experienced. in the quiet of winter during the special moments in these walks, they would move along to those three portals of notre dame and listen to the organ rising behind the statues, the statues of states -- saints and kings, the flames spreading toward notre dame's massive towers, marching ever closer to the giant bells and the cathedral's musical heart, the organ had been saved. amazing what the firemen did late in this terrible disaster. guy: absolutely.

you would have thought the heat would have affected them organ -- the organ. time, some love, these things can be restored i would have thought. the fact that they are still there is an absolute testimony to the bravery of the firework -- firefighters. reports the trump white house appears to be backing off two candidates for the federal reserve board. the whiteow is saying house is interviewing candidates to potentially replace herman cain and stephen moore. republican support for them has dwindled. the trump administration is giving a green light to u.s. citizens to sue cuba over property confiscated during the 1959 castor revolution. two decadesverses of policy against it, creating new tensions with allies who do

business with cuba. uncertainty over brexit has given britain certainty over one .hing -- their summer vacations bookings across the english channel jumping 40% overnight after the e.u. and u.k. agreed to delay brexit. there were concerns that leaving the e.u. would make it more difficult for british citizens to travel abroad. 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 uma pemmaraju and this is bloomberg. tom: i have so been looking forward to this for our discussion with simon johnson, chief economist at the international monetary fund and an interesting academic from the massachusetts institute of technology. what we will do here is a massive victory lap and then we will introduce one of my books of the summer.

here is the victory lap, the single most important paragraph in the financial crisis. there is the new book. bring it up on the screen -- it is hard to read. the best deal ever, 13 bankers 12 years ago, and this is the single most important observation on how we got into this mess. it was simple, they leveraged up. one question on 13 bankers, are we doing it again? simon: i am worried about the dismantling of their financial oversight committee. there is danger is leverage in the shadows just like there was. tom: the shadows are different. simon: the shadows are different every time, but it is always the shadows where the problem starts and affects main street ranks. tom: we have to go to "jumpstarting america," jonathan

gruber has had the courage to say -- what are we going to do about the health care crisis? gruber and johnson together on a massive book with all kinds of a claim on using innovation. "science." word, simon: science has been out for 1940's, but in the 1950's, and 1960's it built middle-class america. we need to scale it up and spread the influence throughout the economy in a geographic sense and income sense. contrast whatnd america is doing right now and what europe is doing. trade talks have started between these nations and i am curious as to how they stack up. europe frankly needs some additional impetus.

i am skeptical of some of the views that they are close to full capacity. they had a really hard time in recovery. in the u.s., we have had a robust recovery over the last five or six years and the question is, what do we do to boost medium-term growth? i hope that europe can also get to the point where they are in a position to consider this kind of investment. guy: i just want to stay with that for moment. europe never fixed its banks. america did. did that jumpstart america? simon: that was an important part of what contributed to a more robust economy. europe had a sovereign debt crisis and we do not have anything like that here. they have a north-south crisis and we do not have anything like that. fundingved the equity in our banking financial system and that turns out to be a major

contribution to the robustness of our banking system and economy, relative to europe. tom: m.i.t., there are the remains of these gray lab buildings where they did the original skunk works, and out of lockheed as well. how do we build skunk works where we needed? simon: our point is there is a lot of talent, a lot of good universities to scattered across the country. what we have done in the past 10 years is concentrate tech businesses in the east and west coast. of thed argue, move some new investment away from the hyper congested, expensive places. tom: how do i do that? i want to live in 10029. how do i change that? simon: you need to make a big

investment. lamar alexander is saying we need to make investments in nuclear power. if you go down that route, that is a big investment. that is at ways which complementary to the private sector? there is no reason to put that on the east or west coast. you are more likely to go to the center. guy: ai looks like an area that will generate a lot of growth. when you get the biggest bang for your buck spending on infrastructure that will affect the entire economy, where does that need to be? are we back to the period after the second world war where we are building roads? what do we need to do to kickstart that? simon: it is scientific infrastructure. do you need to have a big, broad goal like go to the moon? there are some advantages but

once you reach the moon, now what? we need to focus on and decide on national technology priorities. lamar alexander says nuclear power, more say the green new biological --ike tom: to a great extent i live this, 1957 and the sweat of sputnik. president trump, and to be fair to the president, a huge body of america does not care about simon johnson and professor gruber and james killian and the technology to compete with sputnik. how do we reverse that? simon: everyone wants more good jobs. what ceos tell us is there is no different between red and blue, everyone wants good jobs. tom: what happened to amazon? simon: everyone wanted that

except for new york. there are concerns in hyper congested places about gentrification. to: i know i hate editorialize, but i am going to. how did that happen? queens-amazon happen? i flew over washington where they are going to create a pile of jobs. how do you reverse what happened in queens? simon: this is the problem tech has had. amazon dangled the idea that they would be transformative and more than 230 cities bid to get the jobs. theythey showed the plan, decided it was not transformative and secondly, the concerns were gentrification, houses becoming unaffordable. tech sector has to take this on and embrace it. there are legitimate genuine

concerns about overcrowding in megacities. the rest of the country is desperate for those jobs. tom: the answer is to do amazon and another location? simon: yes. tom: cannot say enough about rave reviews from the economic community of "jumpstarting usrica." gary shilling with with professor johnson, and rick rieder will join us in the 8:00 hour. what do you do now off -- after the big lift off 2019? this is bloomberg. ♪

♪ the french prime minister

addressing some of the issues surrounding the fire at notre dame and how the project is going to proceed. french prime minister indicating there will be tax breaks for those making donations to the rebuilding of the project. i come back to the comments tom and i were making, i just wonder how this will play with the protests. clearly, there is good well surrounding this project, but tax breaks for rich making donations, i wonder how that will go down. we will be -- we will wait and see how it goes down. tom: as we were talking earlier, you are talking about the state of ancient things in europe. i have the recollection of a wonderful article four or five years ago that said france is behind the united kingdom and the attempt to restore medieval and older buildings.

aght now, let's resurrect medieval chart with a medieval economist, gary shilling joining us, with the young simon johnson. your call on disinflation, 30 year bond back to volker, this is inflation-adjusted, the real 30 year bond. is that vectors still in place? are we looking at a greater disinflation to some terminal value? gary: if you look at what happened since the fed started raising rates in 2015, the spill over to the 10 year treasuries has been much less than in the average of the postwar period. a 100uld have expected basis point increase in the 10 year and you only got 25. the 30 year has basically been flat. deflationary forces are strong. tom: i am not going to give you

this book, it is my only copy. simon johnson talks about technology. greatlogy is part of your call of lower inflation? deflationary. is a lot of the new technologies of the day, they are only beginning to get big enough to move the productivity needle. you start from zero and you could grow at 100% a year but it takes a long time to get to a point where it moves things. the industrial revolution started in the 1700s but only after the civil war was it big enough to make a difference. guy: can i address this subject from a different angle? we are witnessing companies not investing in people. there is not a tight enough labor market to persuade firms they need to invest in human capital, and i wonder whether

this is part of the problem with the paradox of productivity, which is not picking up. how does the technology investment set alongside the investment in human capital? presumably we need to invest in both. simon: technology will drive productivity, but unless and until you have enough education you will not get the full benefit. you put your finger on the key issue, how much will the private sector take care of training everyone? the answer is, not that much. you train the people and they leave to work for your competitors. you need a bigger public commitment and pushing more effort around the country, getting more communities involved in believing there is a technology future and jobs for young people, that will spread the next wave. guy: when does the labor market become tight enough that

companies are forced to invest in their people? trucking is one area, but when does the labor market become tight enough that the phillips curve works again? gary: it has not worked despite the fed's belief that it would work. you have a lot of forces going on now. manufacturing jobs have been transferred out of the west to china and other areas. you have the uber affect, amazon, a lot of things going on . as far as education levels, it is a serious question. people have the ability to get educated. does everybody have the brains and ambition? todayare alternatives with various welfare payments, et cetera, a woman with two children has to be taking $30,000 to be worth working.

you have a lot of drags and it is not as simple as this thing, put everybody in school longer and it will work. it takes a lot of incentives as well as the ability, the facilities to do it. tom: goods inflation once again rolling over. do you assume service sector inflation rolls over or does it flatline? it isdeclining -- gary: declining. you look at medical services, they are declining. education, you see a rare decline in public education costs. i think it is finally affecting that. the idea that services are immune from disinflation is misplaced. productivity is very hard to measure. it is easy to measure what is happening when you have a punch

press, how many widgets can you stamp out per hour. measuring productivity in a service area is much more difficult, and you have the quality of improvements in goods and services. guy: we will leave that conversation there, gary shilling and simon johnson staying with us. we will bring you a bed of breaking news. it looks like reliance industries is potentially looking to offload its 25% stake in its refinery business. this is a developing story and it looks like they are going out of the gulf to get a buyer, potentially approaching aramco and going down to the uae to adnoc. we will see if we can get more on this story, but a big disposal potentially in the oil refinery space. ♪

♪ everyone,morning, bloomberg "surveillance." outan stanley, james gorman , we are awaiting those results. i think last time, morgan

stanley came a little early so i will cue that up on the terminal. one last thought with simon bankers you remember 13 , and the book is "jumpstarting america." this is my do book of the summer. it is exquisite. someone like the giant of microeconomics calls it a brilliant book. we need incentives to do this. where are the incentives to re- science america? you need more good jobs across america. people are looking for solutions. other measures have been tried and have not delivered. poweredis what really the economy in the 1950's and 1960's. romance, thea

russians and their space race as we are seeing in certain seminar -- sinema. .enneth leon joins us what do you expect out of morgan stanley? it is a different shot, isn't it? simon: they have addict -- kenneth: they have a different strategy in place which is going for revenue. what we will see from the first quarter is a rebound in the wealth management business as we saw for bank of america. capital markets are very tough across the board. , conservativenley about the outlook of the markets, but very firm in terms of their strategy ahead. suggest estimates trading will be one area morgan stanley can outperform. will that be the case?

market is on a declining with substantial declines in equity and fixed income trading. the good thing with morgan stanley is it right sized areas of fixed income where it does not want to put regulatory capital at risk. do not expect even positive growth in either equity or fixed income trading. guy: what does the rest of the year look like? ken: the rest of the year looks very different. the the last 10 plus years, first quarter is typically the strongest for the large banks, particularly investment banks. it may be the low base quarter where we see sequential quarterly improvement out for the rest of the year. that is the story for goldman sachs and could be for morgan stanley. tom: one final word from simon johnson of m.i.t.. they are minting money, as i said in my introduction.

what kind of money is it, financial engineering or a legit is this? -- business? simon: they have to treat their customers better. the retail business is strong. whether they can sustain this net interest margin, i am fairly skeptical. tom: i needed more time with simon johnson. we will continue this discussion with jon ferro on bloomberg "surveillance" on radio. simon johnson with "jumpstarting america." look for morgan stanley earnings in a moment. this is bloomberg. ♪

♪ china nails it.

the economy grows more than expected in the first quarter. germany slashes growth estimates. the economy minister sees the country growing at 0.5% this year. and if this he high watermark with bank on hold? david: welcome to "bloomberg daybreak." i'm david westin. we welcome back alix steel. stanley investment banking revenue was a little light. earnings-per-share was $1.39. i had them at $1.17. alix: we are waiting for that equity unit. here we go. a little bit lighter than estimates. i wonder if that is par for th