>> jay powell says the fomc has no bias towards a hike or a cut at the fed leaves rates unchanged. carney hits pause, the bank of england expected to keep rates unchanged amongst ongoing uncertainty. but theresa and jeremy corbyn are hinting they may be close to a deal. bnp bounces back, emerging from the doldrums after a tricky fourth-quarter. >> we are bearing the fruit of the changes we have made. we have digitalized and changed the joint venture capital markets to help people. and investors that we them together.

we have borne the fruit of that. ♪ welcome to "bloomberg: surveillance." you arening, if watching from europe, good afternoon, if you are watching from asia. we are getting a little bit of news, european april manufacturing pmi a touch above estimates at 47.9 and set of 47.8, still below 50, meaning it is not in contraction. are doing,t markets european stocks down 0.4%. i'm looking at the u.s. 10 year yield at 2.53 and euro-dollar 1.12. look out for any moves in the yen. of course, monetary policy earnings are coming in from the oil sector and the fed. onot of focus will also be

trade talks to the u.s. and china coming up. we speak to a managing partner at lombard about what his clients are looking for and whether they are plowing into the market, an exclusive conversation. exclusiveve an conversation with this executive that has decided it is time to ipo. first, let's get straight to the first word news. to a deal,loser these signals coming from theresa may and jeremy corbyn the leaders talking about the prospects of a compromise plan. editor --started in in an attempt to reach a negotiation. a cautious approach to interest rates will likely be the bank of england message.

they say continued up brexit uncertainty outweighs resilience in the commodity -- in the community. off with the rate decision followed by governor mark carney's news conference. attorney general william barr says he will not show up for a scheduled hearing about the mueller or after the justice department objected to the format of the testimony. the chairman of the house committee now says he may issue a subpoena to the attorney general. the standoff follows yesterday's contentious hearing in the u.s. senate. and central banking is on the way out, according to billionaire investor ray dalio. he says it is quote inevitable that something like monetary monarch -- modern monetary theory will replace it. widelycept is criticized, but he says policymakers will have to embrace it. in protests and street clashes continue in venezuela after opposition juan guaido failed an

attempt to oust nicolas maduro. opted not to arrest his rival and continues for now. he has the backing of the u.s. and other major international allies and says more protests are to come. 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: let's kick it off with the fed. jay powell downplayed recent weakness as transitory. he gave no indication the fomc is weighing a rate cut, despite from thefrom -- washington and wall street. do not think the first quarter was related to anything we did in terms of raising rates. we do not know this, but you never know only with hindsight

-- you never know, you only know what hand -- with hindsight. francine: let's talk about the fed now with our bloomberg mliv editor. mark, always a pleasure to speak to you. given this patient's, what does it mean for treasuries? i think one of the controversial things is you might see the curve of flats in a bit. the fed is sticking to the patient policy. it is the markets that has overreacted and interpreted the word patient as looking to rapidly change policy. they have reiterated patience. that is why it is unlikely front end rates will move. they were discounted because of the pressure from trump and markets. so the chance for the front end, a bit means that treasury yield actually comes down a bit.

that is because we are clearly seeing the data in the u.s. is emphasizing the economy is not doing great. not collapsing. season,ness earnings citing strong earnings, seems quite negative. not collapsing, but not doing great. is eveng we might see the three-month tenure curve flattening a little bit more. if it inverts, how would take the? -- take that? when itstorically, solidly inverts, that is a large indicator there might be a recession on the way. signals,e been false but what is more relevant is wedded reis deepens after the inversion. is when it read stephen's -- resteepens.

this is not necessarily a reason to panic about not a reason to be bearish on equities. i am bearish on equities, but that is a separate issue. we can still make highs in the cycle later on in the year. mark, you have basically argued, in a great peace iron everyone to read, urgeu.s. equity -- piece i everyone to read, that us equity will pick up. mark: yes, my argument was that they are looking at negative at the margin. the u.s. economy is not collapsing, but we have gotten to a world we have placed and access pessimism to excess optimism. meanwhile, we have priced in a fed it to be way more dovish than they were signaling

suddenly, we have a world pricing in all of the good things and none of the negatives . this goes back to the earnings. u.s. equities seem very and p/e ratios are around 17 versus a 10 year average of 50. so sudden -- 15. so suddenly, i think we are in line for a correction in may. but this is not a seven long-term turn for bearishness, it just means we might see 5% or more correction. francine: mark, thank you so much. exclusive now for an conversation is the senior managing partner at lombard, looking at over $245 billion of total client assets. patrick, last time we saw each other was at dennis. i don't know if the mood has changed, but what are the clients tell you -- telling you?

patrick: we actually advise our clients say in the market, it also, they're are asking for more precise advice. the volatility and uncertainty call for more advice. francine: more advice because it is difficult to read? has beent earnings, it a good quarter, but visibility seems sketchy. patrick: exactly. the major fundamentals are still there, and in general, is still reasonably positive. at the same time, you have bad news succeeding good news, good news succeeding bad news for the same companies in the same sectors, so it is difficult to read. the name of the game is to be agile and look professionally, advertising clients in a bespoke matter. francine: how our clients reacting? are they prudent, sitting on cash? say, theif i may

clients listen carefully to what we have to say. they stay invested, of course, they are now inclined to look at the longer-term safe investment philosophies. we may have a correction in the , but basically, if we have a corrections not to get out of the runtime. time. out at the wrong francine: what is they are horizon? five or 10 years? long.pretty low -- patrick: it is. years andking at 3-5 the fantastic opportunities arising today due to what we call the revolution in the sustainability space. this offers new opportunity for investments and we are want to take a lead.

it offers new opportunities. francine: do get questions on certain sectors like driverless cars relative to trade or geopolitics? when we look at the world in general, even if we have a bias towards sustainability, which we think is the biggest driver of future portfolio returns, we have to look at the overall situation. that has to do with monetary policy, etc. etc.. to look at thee companies with respect to their practices, and finally, the business models. clients: you say the have always invested, but swiss bank said there were some ugly figures for the first quarter. you see a pickup even if you stay in the markets?

clients willing to transact more? patrick: not necessarily. they are willing to have the better, longer-term portfolio holdings so that the strategy can work positively. francine: interesting, patrick, thank you very much. coming up, could there be a hawkish hold? it is the first decision since the six-month delay. we look ahead to super thursday at the bank of england. this is bloomberg. ♪

francine: economics, finance, politics, this is "bloomberg: surveillance." let's get straight to your

bloomberg business flash. posting aibas surprise jump in its fixed income of business. this is a relief for the chief executive who has been trying to improve performance. it has helped the french lenders to global market unit post a profit of over 250 million euros. we spoke to the cfo. >> fixed income is bearing the fruit of the changes we have applied. createddigitalized and joint venture capital markets to help people. investors have been brought together and we have borne the fruit of that. >> more time, that is what deutsche bank has to provide the u.s. house of representatives with donald trump's financial details. the deadline has been pushed back as the federal judge rules on the president's request to block the order. the house plans to file a formal request. will -- itrguing it

should not have to defend itself in a courtroom a short walk away from its headquarters. opponents of the move say it could be to lessen the company's financial liability. francine: thank you very much. is an independent lyon the bank dedicated to managing wealth and's one of the largest private banks in europe, looking after over $245 billion in assets. so what to clients want from the bank? still with us is it a managing partner at lombard. thank you for sticking around. we were talking about what your clients and the fact they stayed invested. first of all, and wealth management, what areas in europe do you see having more appetite? where can you grow your business? patrick: in europe, the business

has been growing for us. the spoke aspect of the investment management advisory services is becoming very important, and clients need that active advice and discretionary management is growing as a consequence. we see europe as a growth area, along with asia and the middle east. francine: in asia, do have a specific expansion plan? we have been very successful, being a firm that is focusing solely on wealth management. not on buying infrastructure, but are growing organically. what we have done is created partnerships in asia with precise, local banks that have dominant market shares. and generally family rooted, experience with tradition. we bring our expertise so they can cater with their own clients. they have been very successful, particularly in southeast asia.

this is a model we would like to pursue in other parts of the world as well. francine: how much bigger can you become in asia? how do you view success? patrick: that is a very good question. but actually, the success comes from the quality we get from our clients. successfully devoted to portfolio management there, which they bit of a difference from the industry, which is very active, or an advisory only. we see the growth they're looking very, very strong. talk to me about some of the progress made about sharing the spec office. -- sharing this back office. if this happens, there could be huge costs. patrick: it is the strategy of using our own technology platform recognized by the industry. we will have partners bank to come on our platform and say things like 25% of the cost.

it will bring us revenues that will allow us to invest and get the best input from those other banks. francine: how will that of all? that all -- how will evolve/ ? patrick: we see the strategic importance of getting those banks together. we get revenue and input. consolidation on the technology side of the banking industry has to continue. francine: do you see the need for more consolidation? and what part will you play in that? can help with anything with regard to administrative or joint processes. there is no reasons -- no reason those processes will be performed individually.

this is a difficult step, because many banks see it as an it -- as a competitive advantage. we want to see ourselves as a consolidator, but this is not our main business. our main business is wealth management, which attracts other and sillier businesses -- other auxiliary businesses. francine: thank you very much. up next, we talk central banking and whether it is out of fashion. that is according to billionaire investor ray dalio, who thinks modern monetary policy will take its place. that's next, this is bloomberg. ♪

francine: central banking, as we know it, is on the way out, according to ray dalio. he says it is inevitable that something like monte -- modern monetary theory will replace it, saying governments should manage through spending and taxes, not interest rates. he says policymakers will have to embrace it. still with us is patrick from lombard. when you look at what ray dalio is saying, our world would be disrupted. in thebeen disrupted past 5-10 years and will be disrupted even more. what kind of disruption are you helping clients face? patrick: first, this notion of a low interest rate which creates a disruption in the overall market trend. we have to be creative in

offering alternative market solutions that usually involved in fixed income strategies? but it is true the world will be disrupted due to the sustainability revolution. that means that there will have to be very careful about our idea of managing assets. we have to make sure we understand the trends and make sure sustainability is fully embedded. francine: and gives the same returns. and some of your clients want it, they ask for it specifically. patrick: it is a precondition. we have a fiduciary duty to serve our clients. the good news is that this is simply positive egoism. portfolio from a point of view will do well for society tomorrow. and if you look through the right lenses, you'll see much more opportunities today than you have ever seen in the past. that is where we have fantastic opportunities. francine: and 10 seconds, is

there a generational shift? patrick: the younger ones, but also the entrepreneurs. this lens right well as well as families want to spend well for the long-term. francine: thank you very much. up next, time to go public? retail watches as switzerland launches a potential -- as this company launches a ipo plan. andalk about swiss watches brexit in general and the market environment for ipo. this is bloomberg. ♪ alright boys, time for bed.

listen to your mom, knuckleheads. hand em over. hand what over? video games, whatever you got. let's go. you can watch videos of people playing video games in the morning. is that everything? i can see who's online. i'm gonna sweep the sofa fort. well, look what i found. take control of your wifi with xfinity xfi.

let's roll! now that's simple, easy, awesome. xfinity xfi gives you the speed, coverage and control you need. manage your wifi network from anywhere when you download the xfi app today. francine: economics, finance, politics. i'm francine lacqua in london. don't forget one of the big

things we're watching out for, boe day. i will be heading out to do equation reports. and we will see mark carney and how he dances around brexit. we will get an update on what brexit means for interest rates since it has been delayed. at the same time, we do have news, we think, from labor and theresa may that they could be nearing an agreement. we need to keep an eye on what happens with the boe. i have a great chart that we will show you in a second. data out of the u.k. has been better than expected. aprilmi for the month of also beating expectations. 50.5 is better than the 50.34 forecast. interesting stories with the chief executive. let's get to bloomberg first word news in new york city with viviana hurtado. viviana: jay powell is pushing

back on president trump's call for interest rate cuts. he says inflation will rebound and the economy will stay healthy without fresh out from the central bank. he added that the economy and financial markets don't appear to be boiling over. >> we think our policy stances appropriate right now. we don't have a need to move in any other direction. revealing secret discussions about huawei's role in britain, but the issue of the chinese supplier is dividing the u.k. and its allies. the u.s. is warning countries that it is vulnerable to espionage. upliam barr will not show for a scheduled hearing about the mueller report. he objected to the format of the testimony. the chairman says he may issue a

subpoena to the attorney general. the standoff following a contentious hearing. clashes and street continuing today after failureon juan guaido's to oust nicolas maduro from power. change them to opposition for now. he vows more protests are to come. onbal news 24 hours a day air and on tictoc on twitter, powered by 2700 journalists and analysts in more than 120 countries. francine: we're looking for the boe. we are looking to digest what the fed said. and we're looking for data. hong kong better than expected, 1.2%.

better than the 1.7% we were expecting. it is only 0.5%. more on what that , it is the ipo on the london stock exchange. we tend to have a free float of at least 25% of the shared capital. global management appears to keep control of the company. brian duffy is the chief executive. thank you for sticking around. welcome to the program. this is an exciting time. how do you dance around brexit? do you make a decision once you know what brexit looks like? or do you do it regardless? >> things are less affected by brexit.

arrangements have been put in place. maintain that. thee should be no impact on impact or logistics. they are physically small. an supple, we're less affected by brexit. behind the decision of the ipo, what was it? the swiss watch accelerated quite significantly. the watch market in the u.k. has been consistently strong. watches.ur it is one of the best markets.

we are delighted to lead it. francine: are you worried about gekko -- disruption? >> we have never shown inclination to retail. we're working closely with partners like us. they control retail and the environment. totally in control of the experience of them actually wanting it. we find that very much complements success. francine: what would you do with the proceeds of the ipo? expansion or shots? >> we are paying down debt so

moving ourselves to a leveraged position. we will pay down some debt and we will sell part of the holding. ,s you have said in your piece it has been a great order for us. francine: this goes back to what we were saying. at the market seem ok. as long as you don't see a massive downturn, do they come to you and ask for advice on ipo's and what the best timing is. do you just go when it feels right? >> i want to say how proud i am to see that the swiss watch is pushing our image in a positive way in general. your question, an ipo is a

very specific question to each company. it can be a good idea, the wrong idea, and the timing is there. of more in the sense transmission of a company, or the transaction. to buy and ipo from time to time. pressure and the company becomes very much different. francine: would you consider ipoing? >> we are never obliged to go to the market because we believe in our business. we believe the independence of

structure and the independence of markets. give us a sense of the ideal customer actually is. an age or she have bracket? is it part of the region that travels to the u.k.? >> we have a very broad appeal in our products. people start getting interested in watches from the age of 25. the concentration is 35 to 54 when economically you are in a .ituation where you can afford it tends to be more men than women but a huge trend in women buying watches is coming around.

they are interested in watches. watches --ecause of apple watches or iphones, people tend to buy these pieces less. >> our experience is that it has not been impacted at all. the research says only 1% of people that owned luxury watches own a smart watch. one is not a replacement of another. one is functionally different. one is beautiful to look at and another is to tell you how you slept last night. so the technology has no impact at all. francine: it must impact your bottom line. >> it does. andonsider who the control

they don't like there to be a disparity in pricing. so what happened following brexit, swiss put the prices up. we buy in sterling and we sell in sterling. so they fail to quickly put the prices up. that change and exchange will generally be addressed over a short time. there are major catastrophic events. sense and worrying about them, because what can you do? but we have a really great mix in terms of consumer profile. this is the complement to what we do. we dealt with a lot of ups and downs. demands a really healthy . brian duffy, thank you

both so much for joining us today. for an exclusive conversation on bloomberg surveillance. coming up, it is super thursday. we will get the first information us as we can. this is bloomberg. ♪

francine: this is bloomberg surveillance. i'm francine lacqua in london. prime minister theresa may and her political rival are edging closer. wrapping up talks next week. it is super thursday for the bank of england.

take a look at what to expect. >> today's meeting is the first chance to gauge how the boe will approach the new brexit deadline between now and the end of october. preparingimed at markets for the possibility of a 2019 hike. jpmorgan, citigroup, and td bank are facing the possibility of this hawkish o.a.t.. gdp isuarter gatt -- forecasting 10% growth. but the rate path is really brexit dependent. this is the outcome of brexit impasse at westminster. our guess is the boe will pull the trigger for a hike this year. take a look at the numbers. a boe spectrometer. the doves versus the hawks.

splitting eight to one in favor of holding rates and unanimously to keep the stocks active purchase unchanged. at the end, one could possibly vote for a hike. if anyone would join him, it would be andy haldane. all this is coming up later, francine. a close: we will keep eye on the boe and be following the news conference live and in full right here on bloomberg. here is viviana hurtado with the bloomberg business flash in new york city. viviana: third-quarter sales, the company will calm citing weaker demand for smartphones in china. this overshadow the benefits of settling a prolonged legal dispute with apple. the stock is falling in extended trading, but surged more than 50% since the resolution with the iphone maker was announced. volkswagen is gaining after a rise in first-quarter profits. the german carmaker says it will

need the annual earning gold despite a global market slowdown. contracting car market sales in china have hit the company. -- last year,rs vw sold over 40% of its vehicles. >> china has recorded the second market. the markets are down substantially beginning in the middle of last year. it is what we saw in 2018. >> performing better than the first quarter, this is a strong and mixed earnings season for oil. but the dutch giantess more focused on natural gas than his peers and that division outperformed more than any of the units.

2020 target. francine: the u.k. prime minister has fired her defense secretary for revealing secret discussions about huawei's role in britain. the issue of the chinese supplier has divided the u.k. and its allies. the u.s. is warning that the equipment is honorable to espionage. keep everything in the telecom space. a national service provider with a focus on the cloud has seen a huge 2019 with shares up more than 70%. the business connects multinational corporations. it dealing with cyber security threats and a changing environment? great to have you on the program. thank you for coming in. we will talk about security threats and a second. but first of all, how do you deal with the consolidation around you? are you concerned that you will be swept up in the change in

consolidation? we doubled in size since i was here about a year ago on bloomberg. over the last two years, we'll most could drupal to -- we almost quadrupled the size of the business. we have a long run ahead of us before that happens. do you francine: think that you have the appetite to go for a bigger company -- francine: do you think that you have the appetite to go for a bigger company? >> absolutely. there is inquisitive growth there. we have the next financial objective of growing our business over the next three years. we think that we can get significantly large. pay almost $200 billion in revenue.

we have a 1% market share today. francine: if you are targeting companies, does this look more like in europe? or are they cheaper? gone back and forth. we view each market as very attractive. it is a function of that. how many questions do you get about security a day? >> it is the number-one thing on the cio and on the stock exchange. and it is the number one thing that people think about. and we tell them it is right in the midst of being able to provide diverse solutions to clients anywhere in the globe. francine: are they worried about china spying on them more cyberattacks?

>> they are worried about both. they're worried about breaches to be able to expose their proprietary data. all of those are types of security solutions that we combine with networking to provide more secure networks. francine: we are worried because you don't realize that there could be potential spying. >> china is one area that could potentially disrupt business communications. i think there is a plethora of attacks that come through the internet and i think corporations need to think about all of the threats and not just china's is typically. and the potential union of t-mobile and sprint, what does that mean? >> we serve nine of the 10

largest telecoms. -- much of business our business is carrier in nature. we think the business would not be different. we do not plan the consumer mobile market. we focus on the large enterprise space. we are somewhat indifferent as to which way that would go. francine: the targets are impressive. will you exceed them? >> we expect to achieve our synergy plan. it has been a fantastic year for us. 3000 people across the organization. we absolutely are right on track with what we announced when we were here he year ago. we are very comfortable with our business plan at this stage. francine: what a treat to finally meet you. rick is the chief communications executive officer. but next, we take a look at what is moving in the markets

including vw, the automaker. this is bloomberg. ♪

francine: economics, finance, politics. let's see what moving in the markets. amory is here. -- annmarie is here. ams applee the supplier, volkswagen also to the upside up more than 5% this morning. they beat on their earnings and saying that they will meet their yearly earnings. the company is tremendously undervalued. the downside plunging today, down more than 13%. there are two months of deposit outflows. it meant a subsequent regulatory probe francine. francine: let's get to the other things we're watching. bloomberg surveillance continues in the next hour and we will focus quite a lot on boe.

we will also focus a lot on what we heard from the chair -- the fed chair, jay powell. tom keene will be joining me out of new york and we will talk to chief executives. don't miss the conversation all about beer and some of the other things they have been offering. and having to do it in key, emerging markets. it is a look at what the markets are doing. stocks are mixed today. on companyocusing earnings and back to trade talks. the dollar edging higher for a second day. more coming up next. this is bloomberg. ♪

♪ tom: the balancing act, stocks

light in the dollar advances while jay powell says there is no reason for a hike or a cut, leaving rates unchanged. expecting to keep rates unchanged in the ongoing brexit theresa may and jeremy corbyn are hinting they are closer to a deal. after a trickyk fourth quarter, emerging from the doldrums. >> there are changes. we have digitalized. francine: good afternoon if you are watching from asia. tom keene in new york. a great fed show yesterday and we will spend a lot of time seeing markets react to a jay powell was saying. we will look at the boe and brexit maneuvering. tom: i'm glad you mentioned the

boe. i like the report out of caracas today about the waiting game --ween maduro and quite know juan guaido. believe, francine, we will see a waiting game from governor carney today. aancine: we will call it balancing act,. fine. let's get straight to the bloomberg first word news in new york city with viviana hurtado. fed chair jerome powell says the economy will stay healthy without fresh help from the central bank. he's pushing back against pressure from president trump to cut interest rates. policy makers are leaving the main rate unchanged. theoesn't see a risk of economy or financial markets overheating. the bank of england likely to take the cautious approach to interest rates. every economists surveyed by

bloomberg expected officials to hold the rate at point 75%. the uncertainty is expected to outweigh evidence of resilience for the british economy. british prime minister theresa may and opposition leader jeremy corbyn are hinting a brexit deal could be insight. on signaling she could move her red line. and there could be customs unions with the eu. she invited corbyn to work on across party deal after parliament rejected her brexit blueprint a third time. as tomnt nicolas maduro and francine discussed, he is playing a waiting game, deciding not to arrest juan guaido who called for an uprising earlier this week. still has support of the military. it juan guaido has the backing of more than 50 nations. sayingl street journal the opposition held secret talks with maduro's inner circle.

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 viviana hurtado. this is bloomberg. equities, currencies, commodities. we saw higher yields and again, and equity lift and we get a return this morning. flattening, i should point out. , ira jerseynference saying that it is not all that good news for the big banks. 2.92% at the higher yield, it should be green on the screen. put in sterling there, francine. at a why. brexit, local elections, whatever. well done, tom.

a beautiful thing to look at. the pound moves when the boe is about to eat -- to meet. just keep that rate hike alive. i am looking at overall european stocks. and the focus will be on monetary policy for the trade talks between the u.s. and china. the vix is down significantly. michael killing it in the press conference was these matthews. and to one measure of inflation. the dallas trimmed. i like the cpi. francine likes sioux falls. , theou have to know about vector is steady and higher. that was chairman powell's message.

this is the flavor that you pick, a grinding higher inflation that pushes against the rate cut crew. francine: and that is an interesting chart. the trend is there, but it is so slow, tom. we kind of try to make a decision day guide. and clark brought me this chart. which i love. the boe will push back expectations for an orderly departure. and with that is economic data that has largely surprised to the upside. it is basically economic data for the u.s.. and the u.k. may be starting from a low base, exceeding expectations. with the fed off chairman jay powell downplaying recent weakness as transitory. indication the fomc

is going to have a rate cut despite pressure from the white house and wall street. performance i don't think is related to anything we did in terms of raising rates. but you know this, until perfect hindsight but some of it does appear to be transient torque idiosyncratic. francine: joining us is jpmorgan asset management. i will jump in with a question and then i want tom to take it. what does fed patients mean for treasury markets? in a range, 242 to 80. 240 to 280. i'm not quite convinced it will be priced in later this year. we are stuck until we get a

capitalist pushing in one direction. tom: another chart here, working with bob. expectations of a rate cut into next year. what shifted yesterday is the september certitude that became the december certitude. and there is this belief in a rate cut, the majority believe it in the next year. to the economists take it is less than likely? >> i think so. the market can't sit there with no expectations. tom: fair. >> i think it is fair that the price cut was priced in. the reality is we get to the backend of this year and we finally get a little bit better around the rest of the world. yesterday -- tom: what is important here is,

a rate cutt mean environment? what is a due to the price and what does it do to the stock market? >> i think it does a lot to the treasury market. it will be fairly range bound. what it will do to the stock market will be dependent on whether we continue to get a bit of a pickup in economic activity. you do get some of that china stimulus coming through. you do get an agreement between the u.s. and china on trade. even if you get easing out of the fed pushback. i don't know what the probability of any ms curve would be in your eyes, but should we take that as a probability? say never.

historically, it has always been an indicator for recession. it does not mean that recession is happening imminently. it could be one year or a couple of years. i think there are a lot of other factors at the moment. low yields around the world, having influences about long and yields. expectationsto see -- inflation expectations pick up a little bit. francine: do you think inflation expectations pick up a bit? >> they should towards the back end of the year. we have rebounded a decent amount. we've got wage growth coming through around a majority of the world at the moment. ,hat will be interesting to see the u.s. looks fine. europe didn't look so bad yesterday. that and it seeing should lead to inflation picking up. thank you very much.

from jpmorgan asset management, stay with us. coming up, we will ask about strength and weakness in the emerging markets, asking about his business, and currencies. this is bloomberg. ♪

viviana: this is bloomberg surveillance. first quarter profit falling at volkswagen. a sales the kind of vw, porsche, dropped forsales

vw, porsche, and audi brands. car sales fell for a 10th month in a row. why that matters last year. cars are there. they posted first-quarter earnings that missed estimates. ofy blamed the loss customers that were wrongly sold payment protection insurance. the bank was hit by the cost of lending. today, regulators are reaffirming their view of the .ompanies roundup a roundup is the focus of thousands of lawsuits in the u.s.. bayer inherited the we killer -- weed killer after buying monsanto. francine: carlsberg joined the competitor heineken reporting a strong start to the year.

revenue surged. after having spent several years cutting costs, they are focused on how to boost sales growth. we are delighted to be speaking to the chief executive from copenhagen. this to heart, thank you for joining us. are you expecting to do more? are you going out and buying more local producers? >> good morning. indeed we had a good start to the year. we do look forward to increasing our share of the companies that we have across the globe. of m&a arehat kind you looking at? you have acquired a couple of crafter brands, but have you looked at much larger partnerships?

as the market knows, we are interested in the privatization process. currently with the local government,and the that the company will come through. and we will have an opportunity to buy that. years, the last few there has been an interesting rollup strategically in the beer business. -- beerll the business business be in five years or 10 years? does it all merge into a duopoly? >> we will see. there are four or five very big players. and you have a few midsized players, a few very local ones. will depend, of course, on the appetite for further acquisitions of the

larger companies. movee anticipating a small further. as you know, there are not that many things for sale anymore. it is already a fairly consolidated market. tom: what is fascinating, with -- withapse of craft your decades of experience, how will you manage low single-digit revenue growth? i will put you 100 basis points above anheuser-busch. maybe i'm wrong in that. but you don't have a revenue pop. what you do when the management and the income statement is done if you are only developing maybe 4% revenue growth? >> in the coming years, our promise to the market is seen so far is very attractive. we promise revenue growth in the mid-single digits for profit.

and we give share buybacks at the tune of 4.2 billion. -- we have tripled our have tripled the contribution to shareholders over the last three years. it is appreciated. me about iflk to you're planning to take control of your listed businesses, the subsidiaries, more. do you plan to take control like you've done in cambodia? it in greece and in cambodia. we will do that more, but we are -- keen to look at the possibility of the majority. but it depends on the willingness of the partners to engage in these kind of

improvisations. the company has been monitoring cannabis for several months now. what have you been finding? >> it a very interesting market. we will see that there is a lot of appreciation for our brands. we have been a minority partner for years. it is a business that we know, it is a country that we know. the difference is that we will make our own decisions. improvement of our route to market. it is a three-year plan. we're early in the first phase and we see some good momentum coming through after the first four or five months. we are positive about the outlook but it will take another couple of quarters to really

improve this business in a sustainable way. francine: thank you so much for joining us. coming up, we look ahead to the barclays egm. we will look at if the activist investor edward bramson will be given a seat on the board. the share price puts barclays up 2%. this is bloomberg. ♪

bloomberg surveillance,

francine lacqua in london and i'm tom keene in new york. william barr not testifying to the house today. that is the washington news of the moment. the economic news is the fed meeting yesterday. governor carney joins us. we have really been focusing on the equity markets, the earnings season, revenue dynamics kerry and i want to focus on the bond market. mi and for total return -- mi in bonds -- am i in bonds for total returns or to clip a coupon? you just heard was an honest gentleman. that is white we log -- that is why we like bob. he tells us the truth. it continue. >> from a fixed income standpoint, the numbers have been a lot better than what most people expected at the beginning of the year.

had phenomenal performers across high-yield and corporate bonds. that those spreads have come a long way. it's not to say you can't still clip the coupon. it is still pretty attractive, relative to the government bonds. >> joining us in the next hour, we have bond issuance. are the different countries that will arbitrage the currency move? >> we are seeing that to an extent at the moment. and that is the most beneficial place to borrow from. we will continue to see that as we have this big disparity between europe and the u.s. francine: where do you overall see the best value in fixed income. >> we do believe that the credit

cycle has been extended by the central banks. , north ofield market % in the u.s. the place that has been the most disappointing has been the emerging-market space. you could see a catalyst. it will be a lot more volatile and exciting part of the fixed income space. do you like emerging markets? what is your dollar call? >> the dollar is challenging. when you look at the dollar relative to other developed markets, the u.s. looks a bit exceptional at the moment. and you start to maybe get some of those cuts moved out. it should be dollar supportive. the some of those emerging markets, they should do well. china does well.

and they will significantly be valued about where they were. the currency call is challenging at the moment. this is how strange his world is, francine. their five-year peace has a 2.5% coupon. rich, itg is priced so is yielding .30%. weigh less than 1%. that is owning a carlsberg five-year peace, making it more than sporting for in ceiling -- four -- sporting for ian. the former governor of the commonwealth of massachusetts, william well, he takes on president trump with david westin later. this is bloomberg. ♪

♪ has the president or anyone at the white house ever asked or suggested you open an investigation of anyone? >> i wouldn't --

>> yes or no? >> could you repeat that question? >> has the president or anyone at the white house ever asked or suggested you open an investigation of anyone, yes or no, sir? >> the president or anybody else. >> seems like you would be able to remember. >> i am trying to grapple with the word "suggest." they have not asked me to open an investigation. >> perhaps they suggested? >> i would not say suggested. >> hinted? >> i don't know. >> inferred? in reaching your conclusion, did you personally review all the underlying evidence? >> no. >> mr. rosenstein?

in theccepted the facts report is accurate. tom: i did not watch this yesterday, getting ready for the fed meeting, lucky me. a team shout out to sarah rappaport, our most cynical employee, putting together our cynical washington pieces each and every day. now we go to someone always cheerful and lovely, stephanie baker. get the unreal, and i idea it is republican/democrat, but there is more going on here than trump against the democrats. what is the backstory you observed? stephanie: for me, it was clear he was parsing his words. democrats said it was hairsplitting, accused him of

lying. the takeaway quote was one barr said, this was my baby. he viewed his interpretation of special counsel law that he has the right to determine whether ,r not trump obstructed justice what to release to the public and when. democrats accused him of anleading congress in earlier april testimony when he was asked whether or not he was aware of news reports that said mueller was unhappy with his four-page summary of the mueller report, and he said no, i wasn't. there was a letter released by mueller to barr saying he was unhappy, saying it did not fully capture his conclusions. tom: let's do history for our global audience. general, withney

reagan, he is the one everyone use to beat on. barrttorney general's was the younger and bar being the 18th attorney general now. it is almost like the exhaustion of this attorney general. job to guy up to the represent his president? stephanie: they would hope his deep experience, he might be an impartial arbiter in the smaller investigation, and that has shown to be false. he did appear to be -- he sounded more like trump's personal attorney, more like rudy giuliani many dead like an impartial attorney general. like an impartial attorney general. some people say it ruined his

reputation. francine: what is the likelihood the mr. barr has to resign? well we see a subpoena from the seerney general -- will we a subpoena for the attorney general? stephanie: tomorrow, he was supposed to appear at the house and he has backtracked on that. orwill likely get a subpoena be found in contempt of congress if he does not appear. i do not think they can remove him with republicans showing themselves backing trump and barr in their handling of the mueller report, so i do not expect him to go anywhere even if democrats call on him to resign. stephanie baker, and shout out to our sarah rappaport who went through hours of footage to get that. british defense

secretary gavin williamson denying he released secret talks about huawei, but theresa may says there is compelling evidence so she fired him. willtary penny moore. replace him. japan's prime minister shinzo abe is willing to meet with kim jong-un without preconditions. he told the japanese newspaper he wants a candid discussion and hopes kim is willing to be flexible. mediator inrve as a a summit with trump. bnp paribas is bucking the slump in trading. fixed income business hosting a surprise jump in the first quarter, revenue rising 23%. total revenue was better than expected but income came up short.

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. francine: thank you so much. u.k., theresahe may and her political rival jeremy corbyn are signaling they may be closer to a deal on brexit. theresa may is going to wrap up talks next week with or without an agreement. the bank of england minutes and economic forecast are due later on. kennedy ands simon iain stealey still with us. it is the first time we heard from governor carney about the delay in brexit and what that means for interest rate hikes or cuts. are we expecting him to keep that possibility alive? simon: they continue to be cautious and have moved it out

to october on brexit. they will have to adjust their forecast for that. backdrop, and the talk that we might see policymakers start pushing for a hike, michael saunders the one everyone is watching. mark carney must navigate the crosscurrents. we are seeing better economic data but the general consensus is you would not want to hike into brexit. francine: all these economic surprises, let me bring you to my chart, my favorite chart of the day. if you look at economic surprises, if you chart globally surprises compared to the you because -- u.s. and u.k., the u.k. has outperformed. simon: unemployment is now higher since queen victoria was

on the throne, which is a pretty good record. at the same time, inflation remains soft. it was below target. that conundrum for central banks also applies across the world. inflation is a little bit soft so carney and his colleagues have some room for maneuver. tom: i was just channeling judi dench, as you were giving me the queen victoria treatment. it is a prosperous united kingdom, but with your experience in government and economics, is it like the united states where there is a partition between the domestic inventory dynamic separate from it? simon: yes, to some extent, and exports is important to be watching, fits into the brexit debate.

certainly, that will be a measure to monitor going forward. if exports start to be imperiled, that will have an effect on the economy and it partially is related to the structure of the pound. tom: the u.k. has also challenges going forward. , theyou talk to your team sprawl of simon kennedy's world on united kingdom economics, what are you focused on through the summer and into the autumn? simon: there is only one theme in the british economy, brexit, what it looks like, how it influences the economy. going back to the inventories, that is a good example of something will be watching, a lot of countries bringing up their inventories of late. that will happen by virtue of a demand issue. brexit, what it looks like is the number one question. francine: we are not expecting

any material shift into what the boe will say, but if we do what will it have -- effect will it have on the pound? iain: if you get one, i do not think it will have much effect. bank of england, can they really go against every central bank in the world? francine: is there an urgency? does mark carney want to keep a hike alive? was: they are where the fed a couple of weeks back where they perceive the current rate to be lower than neutral. they would like to get a couple of hikes in so later down the line they can reduce the rates again, but they are and likely in front of -- unlikely in front of brexit. tom: simon kennedy, great to catch up with you. there will be a news conference.

they are all different. draghi's is different. a carney conference, the governor's careful comments on leave and remain. this is bloomberg. ♪

♪ francine: these are live pictures of the italian president with the french ,resident in france participating in a ceremony honoring leonardo da vinci. it has been 500 years since he

died. we think of what da vinci has presidentsnd the two taking solace and what it means for trade, a wider issue of political things. not sure what they will talk about. they do have a pressing problem, euro. tom: there are moments when your day stops. a royal collection identifying a second image or portrait from da vinci in his lifetime. it is absolutely extraordinary. i am sure that will be big news in the coming days. francine: richard branson is hoping to land a board seat at agm. he opposes jes staley's plans for barclays. jonathan, we keep talking about consolidation.

your thoughts on french banks? it is not as ugly as they could have been, but it comes from a low base. jonathan: absolutely, the european banks are compounding what we expect from the u.s. generale and bmp -- bnp paribas were both down 30% last year. , little bit of short covering a little bit of relief that there is not more bad news. tomorrow will be interesting, because they have been a big underperforming. francine: they have been cutting a lot of investment banks. 1600.an: 1200 of they have a decent quarter so they have a bit of breathing space. if you look at the guidance from citigroup, q2 will not be as weak as it normally is in so far

it is looking reasonable. tom: translate the culture involved with barclays right now for our global audience and particularly our american audience. jes staley is out of philadelphia, a loyal member of bowdoin college. his a lot of this simply tension that an american is running barclays? jonathan: not really. jenkins,r anthony barclays was always good to be two thirds retail, one third investment bank. the debate has been going on a long time about what kind of makes they should have. the issue we have had is the return on capital is poor relative to a credit card. when credit costs are at multiyear lows, so i think the debate is one that has continued to go on, not because he is an american.

barclays is holding its own against the u.s. better than the european banks are. banksere is the european down here, the train wreck known as deutsche bank, barclays in the middle, and jp morgan up where everyone wants to be. is it delusional that they can get to american bank total return? is it a management to merge approach? "delusional" is a good word. i do not think they will get there. staley is pinning his colors to the fact that he can do 9% this so he is next year, committed to the annual cost target below $4.6 billion, but will we get a jp in morgan number like -- jp morgan number like that? not while i have got hair. in any ways europe

helping regulation? jonathan: it is not hindering. your, -- europe where you still have underperforming investment banks and retail that is inefficient, like hsbc -- because of all the liquidity, got its focus. europe is still all things to all people and they need to be to beyond need waiting for interest rates to change, it is a cost game. mr. branson speaking outside the annual meeting. he predicts a defeat in the barclays load, not sure what that means. mr. branson says barclays acknowledges things are not

working. is, to to become -- this be kind, developing story. tyce, thanke -- you. the eleven o'clock our, ever more important -- 11:00 hour bang, ever more important. this is bloomberg. ♪

♪ it is gorgeous, building 1788. 1788. think -- built in do you think that was built with negative interest rates? for jp assetke mark -- jp morgan asset management with all that negative paper? it is not every single bond is negative, so there are things we can do. german bunds, there are negative

across the periphery, portugal, spain continue offer to -- continue to offer positive yields. of news story in those parts the world are looking pretty good, helped by the ecb. tom: we just mentioned moments ago, mr. branson predicting defeat in his battle for a barclays board seat. i guess that is constructive news. stealey of jpin morgan asset management. if there is a permanence to negative interest rates, how do you manage the x axis? is there a chronic nature within your european management? iain: i think we just have to live with it. the environment on the ecb first announced it, it was supposed to be a short time and that is five

years ago. they are here to stay, but what is good in europe is the yield steep.p -- curve is very we might have low yields but there is a lot of role and carry down the curve. in germany, maybe the yields have not moved since the bunds tantrum, but you have had 13% returns so there is still opportunity across europe, given the role down you can pick up. have ae: when will we significantly pricing for german boones -- bunds? iain: it will be a while. you have to have a view that the ecb is going on a hiking cycle, and not just move from -42 -20, they need to move in positive territory. you have given that

the european elections, do you worry about the spread widening in italian btp's because of underlying populism? away,interesting about it we think to last year, the problems arose when we discussed the deficit. for 2020, that is likely to be in the third quarter. we have a period where the data is better, coming out of the recession, went through the rating announcement. it is an environment where you could see the periphery do well. spain is up five basis points on the 10 year spread last year. tom: well done with that chart year.don, 2.6% on the 10 meeting, and onto the bank of england here in a bit. what we want to do in the next

hour is coordinate into the asset classes with steven englander. rate, andy cross jerome schneider with us also. this is bloomberg. we say good morning. ♪

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chairman powell crushes hopes of a rate cut and michael mckee focuses on dallas, the trimmed measure of inflation. inflation is trending ever higher. steven englander says no. in this hour together, jerome schneider and steven englander. mr. barr regrets he is unable to testify today. this is bloomberg "surveillance," from our world headquarters in new york, i am tom keene, francine lacqua in london. it will be interesting to hear governor carney's language regarding brexit. the first time we hear from the boe and governor after the delay. the elephant in the room is brexit and until you know what shape it will take, it is difficult for the boe to give

any take on monetary policy. tom: that will be our theme today. now for a briefing. viviana: federal reserve chairman jerome powell says the economy will stay healthy without fresh help from the central bank, pushing back against pressure from the president to cut interest rates. policymakers leaving their main rate unchanged. inflation will rebound and not see a risk of the markets overheating. policy stance is strong and we don't see a strong case for moving in any direction. viviana: the bank of england is likely to take a cautious approach to interest rates went every economist expecting it to hold the benchmark rate at three quarters of a percent. british prime minister theresa

may and opposition leader jeremy corbyn are hinting a brexit deal could be insight, may signaling she could move on one of her red lines and let the u.k. sign up with a customs union with the e.u. that was after parliament rejected her brexit blueprint a third time. in venezuela, president nicolas maduro is playing a waiting game , deciding not to arrest his political rival who called for an uprising earlier this week. maduro still has the support of the military but juan guaido has the backing of more than 60 nations, seeing him as the legitimate leader. they held secret talks among maduro's circle about getting rid of 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 viviana hurtado. this is bloomberg. equities, bonds,

currencies, commodities, the day after the fed and the bank of england, equity left up and down, curve flattening. a stunning flattening yesterday. thank you to ira jersey for bloomberg fixed income wisdom. at 15.93. francine: i am looking at equities in europe, a little bit mixed. they have been focusing extensively on earnings and are focusing on monetary policy on the back of the fed and trade. treasuries retreating, the pound inching higher. the vix down quite significantly. tom: you have a bloomberg for us today? francine: this is what i am looking at. this is on the back of the boe, economic reports that have been

better than expected the site -- despite brexit turmoil. this is one of the reasons we understand that the bank of england will not be changing their stance on the economy but may have a hawkish flaunt. the global economic surprise index, the united states and the it. beating estimates when comes to data over the last few quarters. tom: we could spend literally two hours speaking to steven englander and jerome schneider but bloomberg stopped me dead in my tracks yesterday, michael itee mailing it -- nailing during the fed meeting. trimmeds on the dallas fed adjustment which is up nearly lofty 2% and others are saying there is no inflation. pcece how the scoop down in

becomes less scoopy. expert for ther, expert pimco organization, and holding court at the standard englanderbank, steven , global head of fx and arguably the best cross rate guy i know. aeven englander, is this structural dollar adjustment we saw yesterday by the fed? do you change the view on dollar? steven: i would not, but the view was not interesting in the short term. the g10 seems to be going sideways. there is no catalyst for dollar weakness. the market seems to be so loaded with dollars they are reluctant to buy dollars. it is muted movements. we expect the dollar to weaken.

tom: it is your job to make money and not lose money, mr. powell gave you an opportunity yesterday. fore is your opportunity june, september, and december? maintained powell his posture of optionality. investors should do the same. he pointed to several factors, inflation being one, focusing on the fact that inflation will be transient. really focusing on the difference between pce and the dallas trim mean is important. the reaction function for the .ed is probably more prolonged the patient's virtue will remain intact for most of this year and maybe next. focuses on financial conditions longer-term. they will only move a financial conditions change materially.

francine: are you expecting inflation to be higher like the fed, or are they wrong? jerome: they have highlighted a few things. laborforce force gains have been moderating inflation. productivity gains moderating inflation. this is a transitory environment for lower inflation so we estimate inflation creeps up, pce vignette to 1.8 later this year. up to 1.8 later this year. it will take a lot to create a reaction function where they will have to be more defensive, create easier monetary policy in the short order, and if he was inclined to do that he would have indicated he was. i would say he was pretty adamant he was not on the table aray midterm rate -- for

midterm rate cut discussion. ncencine: what does fed patie mean for the treasury markets? steven: we think inflation is on the downtrend globally and possibly in the states. if you look at the chart of the , throughoutrim mean the period it is almost always below core inflation so if you are targeting core inflation, it does not tell you much because downward surprises are dominating. the fed will have a problem if 1.6%,ion stays at 1.7%, possibly at 1.8% over six months if there is no inflation and they are shifting. why shouldn't they cut? decemberember became

and maybe even late january 2020. how does this play to standard chartered's core markets? is chairman powell the central bank of the world and what will this mean for em? steven: i think hawkish and us on the fed is not great for em, but yesterday was sort of a -- tom: did you see hawkish miss yesterday? steven: i think the market took it that way. believe not actually powell's forecast on inflation. ultimately i think it means the fed thanks he will have to change -- public thanks the fed will have to change. tom: did you get whiplash yesterday? jerome: i just her cough touch took off my neck brace. it hawkish is probably a

bold statement. however, i think it is worthy that you have to recognize market orientation is still toward rate cuts. for this purpose, powell was pretty clear. he made one statement that stood out, he would give considerable advance notice to the marketplace to ensure there would be a smooth process. if there was a need to create benside rate cuts, he may poised to communicate that ahead of time. it seems like the market got ahead of itself in the minutes following the statement, and the clarification we get, which is the purpose of the meetings, was recalibrate and create a smoother trajectory going forward. , steven: thank you both englander and jerome schneider stay with us. zentner willlen

talk about treasuries and what we heard form -- from jay powell. this is bloomberg. ♪

♪ the president or anyone at the white house asked or suggested that you open an investigation of anyone? >> i wouldn't -- >> yes or no? >> could you repeat that question? >> has the president or anyone at the white house asked or suggested that you open an investigation of anyone, yes or no, sir? >> the president or anybody else. >> seems you would remember something like that, he able to tell us.

>> i'm trying to grapple with the word "suggest." there have been discussions of matters. they have not asked me to open an investigation. >> perhaps they suggested? >> i would not say that. >> hinted? >> i don't know. >> inferred? in reaching your conclusion, did you personally view all the evidence? >> no, we took -- >> mr. rosenstein? >> we excepted the facts in the report as factual record. we did not go underneath it to see if they were accurate. tom: whatever your political beliefs, it makes john mitchell in 1974 look like the attorney general. our kevin cirilli is relieved he will not have to go through this again today, our washington

correspondent. it is hugely polarizing. his mr. barr here for the rest of the trump administration? trump -- mr. trump's lawyer, that is clear. kevin: everyone i have talked with on either side of the aisle surrounding that hearing yesterday, which dominated the discourse, agrees. if you are attorney general william barr, the fact that he is not testifying suggests the white house made the calculation they did not feel they would be politically attacked much by him not showing up. at theearly anti-barr washington post. before he was known as the attorney general to george h w bush.

now he is known for betraying a andnd, lying to congress, misrepresenting the molar report in a way that excuse the president's misbehavior and let pressure off the hook. kevin: they feel if you look at the four page summary, memo that the attorney every -- attorney general released, there is no discrepancy in terms of the findings from the molar report. -- mueller report. if you hear what lindsey graham said yesterday in his opening remarks, republicans who are in lockstep with the white house feel it is time to move on. now the debate from the white house's perspective, from kellyanne conway's perspective has shifted from the findings of the molar report to the rollout -- molar report to the rollout

-- mueller report to the rollout. francine: well william barr -- will william barr be subpoenaed? kevin: that is a possibility. the house of representatives is androlled by the democrats jerry nadler, democrat from new york, suggested subpoenas may be utilized. it is a procedural back-and-forth. the house judiciary wanted to nonmembers allow for to question the attorney general and the department of justice does not feel it is necessary and he will not testify. it has been a back-and-forth of political ping-pong and he will not testify. tom: kevin cirilli in washington. steven englander and jerome

schneider with us. short, viceark president pence's chief of staff. bank of england in a bit. this is bloomberg. ♪

♪ is bloomberg "surveillance." --st quarter proppants profits falling at volkswagen.

swamp in china affected -- in chinachina -- slump affected vw. they sold 42% of their cars there. >> china is, i would call it our second home market. slowed down substantially in the middle of last year and the first quarter 2019 has pretty much been a copy of 2018. everybody is more optimistic for the second half. viviana: lloyds banking group posted first-quarter earnings that missed estimates. they blamed cost compensating customers who were wrongly sold payment detection insurance. they were affected by the cost of letting two businesses manage

managers reaffirmed their view, roundup does not pose health issues when used properly. bayerbang inherited -- inherited weedkiller when they bought monsanto and have come under fire because of it. , widely anticipated as they do a debt called except within the document, you do not see the debt specifics. this is a formal offering, the stock a little south, sitting on $231, $232. francine: keeping a close eye on tesla. let's get back to our guests, steven englander and jerome schneider. when you look at the fixed income moves in general, what seems to be out of whack?

andeep talking about bund the negativity in europe. jerome: yesterday's policy changes are something to keep mind of. the poly's estate and was largely -- or lessee statement was largely unchanged -- policy statement was largely unchanged. for a technical perspective those investors focused on capital preservation and de-risking, at will put more of a burden on them to achieve a yield. that move, although very small in terms of a five basis point change, put a ceiling on what it takes to be safe so being in money market funds came less of a compelling option. while the front end of the yield curve is very flat, which is why we tend to favor the front end of it, the reality is being in

t-bills and money market has gotten less interesting for investors over the short term. francine: if the yield curve inverts, how would you interpret that? steven: historically, the yield curve inverting has been a recession indicator. you cannot escape that conclusion. that is not assaying a flat yield curve is a recession sayingor -- that is not a flat yield curve is a recession indicator. the flattening or steepening based on economic indicators, what the market will look for is the fed to cut sooner and the yield curve to steepen. that is what i would be looking for with respect to the yield curve. in opportunities are emerging markets fixed income.

with low-inflation and u.s. treasury yields as low as they are, there is room for em fixed income particularly in asia to catch up. "avengers:ou seen end game? jerome: no. steven: no. tom: nerd patrol, the three of us have not seen "end game." this is not statistically possible. scarlet fu, entertainment lodestone will speak with one anthony and joe russo of cleveland, directors of "end game." look for that. ♪

♪ envisage over time that industry consolidation will take ways in europe and deutsche bank wants to be part of that.

the timing on specific form remains to be seen. >> we don't have any comments on market rumors. it is a question of sticking with our organic strategy. we will look at transactions as they are presented. >> consolidation as part of any business growth and therefore, we cannot rule out per se. something we find attractive at this point in time , and we have high hurdles. in most situations, the risks and returns are not appropriate. focused onbas is changing the bank. that means we are not interested in any acquisitions. francine: there are some executives from europe's top lenders talking about banking consolidation.

staley talking at the annual meeting saying meeting return on equity products is there priority. mr. branson was projecting defeat for the board of barclays. tom: let's get to the first word news. viviana: we begin with one day on capitol hill enough for attorney general capitol hill -- attorney general william barr. he said he will not show up to today's hearing, following yesterday's contentious hearing before a u.s. senate panel. the u.s. department of justice was to face questions from lawyers. denies -- gavin

williamson denies revealing information about huawei but theresa may fired him. penny more. will replace williamson, the first female defense secretary. shinzo abe is willing to meet with kim jong-un without preconditions. he told a japanese newspaper he wants a candid discussion and flexible.will be he could serve as a mediator in talks with president trump. ray dalio says something like modern monetary theory is coming, whether we like it or not. the debate over the doctrine has exploded recently, saying government should manage their economies through spending and taxes rather than relying on central banks. policy makers will whento embrace mmt

policymaking does not work. 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. this is bloomberg. non-news,is non-event, except it is. everything with minnesota mining and manufacturing is news. 3m had an ugly 10 days. of $7 billion. no one cares, except you really do when you are in the bear market 3m is in, setting conveniently on support. streetg debate on wall with what to do with this venerable blue-chip. francine: let's focus on the u.k., the prime minister and her opposition leader. they may be inching closer to an agreement.

may expects to wrap up talks next week with or without an agreement. headlines from her spokesperson saying he is not aware of any brexit talks with labour today. joining us as our head honcho when it comes to brexit, have a ross thomas. it is relentless. what do we know about going on -- what is going on in the background? does theresa may want a deal with labour and will jeremy corbyn give her that? emma: she was grilled by skeptical lawmakers and spent the session dodging questions about the customs union and dancing around the semantics of what a customs union means. what it means to most people as you accept tariff free trade within the bloc, and probably precludes trade deals with other

countries. that is one of the main aims of brexit. theresa may was dropping increasingly obvious hints she is prepared to move toward something that might not be called a customs union. it could be called some new and imaginative terminology, basically, remember that even in the withdrawal agreement, the overall deal she signed in november there is a customs union hiding. the e.u. always thought the u.k. would end up in the customs union. the mood music is louder that there could be an agreement between labour and the conservatives, important to see how the local elections go. francine: the prime minister wants to do everything she can to avoid the european elections? emma: she definitely wants to avoid that because nigel farage

is back with his own brexit party, talking to the tories and labour voters and could possibly change their mind. she does not want to fight those does not want a general election before brexit has been delivered. for what will you listen from governor carney today? front, ithe brexit -- i guess the initial dealof fear and the no catastrophe scenarios we have heard about, that has not dissipated. i would interesting to know anything about the economic impact of an extension. what does that mean for the real economy, prolonging that? businesses are not terribly

thrilled about this extension and yesterday may raised the prospect of another extension. thomas fromss bloomberg, thank you. with us, jerome schneider and steven englander. on sterling, it is amazing how much we have changed that morning after brexit. do you have a sterling call? is it possible to make one? steven: it is difficult. the market has backed off the sterling longs and is flat or slightly short sterling. any agreement that looks like it will last a year or two come we think sterling will rally. what the market is trading is this sense of angst that will will be in groundhog day with three to six month extensions. tom: that is your opportunity,

price up, yield down. how do you play that in the craziness? jerome: you have to have a deal and resolution on brexit. -- theyended runways have extended runways. ultimately what they have to do theirure out where will growth expectation go? slightly higher than the 1.2 percent they forecast? do they anticipate a smooth brexit? there is a lot of what if's at this point, but the runway has been paved longer for u.k. policy. francine: given that the brexit calendar -- and we have a story that will shortly be on the website -- given the brexit calendar, if the u.k. in bank of england governor wants to keep the possibility of a rate hike alive, this is the only window

of opportunity, is that right? steven: we think he will be cautious as long as we are in this uncertain stage where there is no clear roadmap for where they will go. if anything, u.k. inflation has come off. two years ago, core inflation was 3% and now it is 2% or slightly lower. sounding conditionally hawkish is less there and we think he will kick the ball out of bounds , saying lots of uncertainty. if there is resolution, the u.k. economy is tight, but we have to wait for resolution before any move on rates. yearine: we had that last around the imf time, almost exactly a year ago, where the market was so sure the boe would do something and governor carney

said they are data dependent. does he need to keep the hope of a rate hike alive? -- as ayou want to keep wise central banker, he will keep options open. there are political ramifications and it would be fullest for him to be backed into a corner. tom: jerome schneider and steven englander, much more as well. the countdown clock going. --k carney with a decision rate decision and the 7:00 hour in new york. this is bloomberg. ♪

♪ this is bloomberg "surveillance." royal dutch shell's first-quarter earnings beating the highest analyst estimates. the natural gas business leading a strong performance. they are more focused on gas for their peers, accounting almost 25% of the lng trading. weaker demand for smartphones in china, that outlook overshadowed the benefits of settling a prolonged legal dispute with apple. thanomm shares rising more 50% since the deal was announced. watsons of switzerland is considering an ipo. they handle about half of rolexes sales.

they would use the money to expand into the u.s. market. apollo globalet management reduce its stake. part ofo will sell their holding. exactly what they will sell, i don't know. there, but apollo have been a great open dutch holder for us. everyone enjoys watches so i expect they will stick around for some time. viviana: that is the bloomberg business flash. jerome,gle best chart, i want to go to you with the great arbitrage, the two year yield, the gap between the german two-year and u.s. 10 year. how do you play this grand canyon wide gap between the

negative rate and chairman powell rate? jerome: you have to think about where the policy will be most able. we have been of the point of view that the front end of the yield curve has been attractive for the past six to 12 months. it is less immune to the volatility in the market place and with repo rates being where 2.5%, two point 6%, the front end is attractive. ratestely, when you think will go, if you think is the bias is towards continued growth, that is for 10 year rates to steepen in the u.s. tom: you make a growth calculation to make an interest rate determination and urodynamics and dollar dynamics get in the way. --we see that opportunity

how will that play through currency? how will that be expressed in currency dynamics? steven: i think markets are trooper pessimistic on growth and what the ecb will do -- uber pessimistic on growth and what the ecb will do. draghi is leading the dovish faction in the ecb and there is some pushback from the governing council. ben this 10-year looks to over, we may see some firming in the sense that -40 is not doing the banking system or the economy or transition mechanism any good. let's go to zero. francine: are you surprised we are not taking into account that mario draghi's 10 year is finishing just around the corner and we could

have someone significantly more hawkish in place? that is correct and that is why it is not a q2 story. story.e q3 nobody is an old-style bun displaying hawk, but some of -- sna --s bank hawk -- bundesbn even some on the governing council think that is working. tom: what happens -- francine: what happens if weidmann is back in the game? steven: i do not think he will be the attrition of -- guy, butal bundesbank are negative rates helping or hurting the banking system? messes up a view

on the two-year space? if you get a hero surge, the map falls apart -- euro surge, the map falls apart. jerome: you have to put together a trajectory of where inflation's growth will go in europe. you probably stay in this range ,ound effectively where we are so the reaction function is much more what will happen on the u.s. side. europe has to prove itself in terms of the ingredients to move itself out. tom: what are some of the most standard cross hairs right now? what is your standard chartered cross rate? steven: we are looking at relative volume -- value trades.

korea. long yen, short we think the korean economy is soft. we think the china impact on korea is still there, so we like that trade. we also like long euro, short h and that the eastern european economies are dependent on chinese growth. we do not have -- see enough for them to rebound. tom: everyone is taking notes. jerome: volatility is very low right now and one of the key factors whether you are a monetary policy implicate or or investor, you want to buy options when volatility is low. simply means having optionality to react to the policy of upside or downside

growth on a secular horizon, and that is the most valuable thing in the next few quarters. tom: great to have you here. coming up, this will be most interesting, janice henderson, is, what you do after powell. this is bloomberg. ♪

♪ we think our policy stance is appropriate now. we don't see a strong case for moving in either direction. >> the weak first quarter expect -- was not expected and i do not think it is related to anything we did in terms of raising rates. the financial system is quite resilient to shock the various kinds. as needed, we will use our tools to keep the federal funds rate somewhere in the target range. don't expect me to do it again, but we don't know. our monetary policy stance is in

a good place and we will be patient. the data is not pushing us in either direction and we will not hesitate if we feel the data justifying moving in either direction. tom: i thought it would be a boring meeting and it was decidedly not. jerome schneider with us. axis.e extended out our x how do you respond to the large crew that say 2020 recession because powell took his bet and analysis well into 2020? jerome: it comes down to a growth story and he did a good job of emphasizing that trajectory in terms of growth projection and inflationary expectations. pushing out the growth trajectory is what the fed will want to continue to do. ultimately, they will do anything to ease and stabilize financial conditions.

when you think about it, ultimately the fed -- jerome powell gave us all a gift card. you give gift cards because you do not know what to give people, so a gift card gives you an opportunity in the future to buy something you want. we created a smooth, low volatility environment but we have to be aware of the risks percolating, credit, pricing of equities. we cannot be remiss to recognize this is a point in the economic cycle where it is more prudent to have -- towards fixed income. francine: i wish we had more time to discuss gift card. from the shareholder activist of barclays that he expected -- addicted defeat on the board -- predicted defeat on the board.

jes staley saying capital is in is 70 --- line and he seeing profit stability. barclays pulled back there share buyback program and the stock has fell fractionally through recent support. a beleaguered 3m as well. we will see if there will be a buyback with the bank of england, and a very important brexit presser of governor carney. this is bloomberg. ♪

♪ it's all transitory. fed chair jay powell surprises

dovish traders by saying the recent fall in inflation could be transitory. ray dalio forecasts third-generation monetary policy coordination. 29% in theibas jumps first quarter, crushing competition. david: i'm david westin, here was alix steel. we have bank of england out, and surprise surprise, they didn't change. alix: signaling more than one hike would be needed to keep inflation in check. the rate decision at 75 basis points was 9-0. there wasn't conversation. toks like it was unanimous not raise any interest rates. david: it is fascinating actually, the inflation story, given what we had at the fed yesterday.