♪ >> president trump threatens to raise tariffs on china. beijing says negotiations are still on, but declines to say if the vice premier will be a part of them. markets.cross asian and european stocks tumble wall street called lower, and oil slides as wti heads toward $60. occidental loosely stepped closer to sealing it's a deal for anadarko after a sweetened bid. ♪ >> welcome to "surveillance," i'm nejra cehic in london. let's get a check on the markets.

carnage in these markets, you were seeing risk off across asset. let's start with the asset markets, euro stoxx dropping for the first time since january 2 by 1.9%. u.k. equity markets closed for the bank holiday, and we are seeing a lot of red elsewhere in asia. the chinese equity benchmarks are dropping as 6%, the most since 2016, futures pointing lower. gains in u.s. equities on friday following the jobs report, signaling to markets that the economy is strong but inflation is low risk. we could see a down day today. meanwhile, treasuries not trading right now with the holiday and the u.k., but when the treasury markets open in the u.s. session, are we going to see the 10 year yield drop? that is what futures have been indicating. the you boo weakening the most in three years. we have seen some moves in terms of the authorities in china, a cut, and some

reports that state funds may be looking to stabilize what's been happening in the equity markets, perhaps trying to give a signal that things are under control. well markets by it? dollar-yen at 1.1074. weaker dollar, stronger yen, hitting a five-year high. meanwhile, hitting a five week low for oil, down more than 2% on wti. let's get the first word news with olivia hows. >> thanks. the u.s. says it is sending an unmistakable message to iran. it is deporting a bomber force to the middle east. john bolton says the u.s. isn't looking for war, but will respond to any attack. it is not immediately clear what prompted the move, or whether the deployment is new. north korea's we some weapons test may have included a ballistic missile. am jong-un was overseeing military threat potentially involving the sanctioned weapons, but experts say it appeared to be short range so it wouldn't necessarily break his te pledged.

they may fall short of a majority in the national elections for the indian elections, far below what other party leaders are claiming. time ahe first coalition prospect has been raised. confident ofy securing an absolute majority. >> and aeroflot plane made a fiery emergency landing in moscow, killing 41 people. the flight suffered an engine fire after technical problems caused it to return. the plane spent on the runway with his tail on fire, engulfing the rear as it came to a stop. global news, 24 hours a day, on air and at @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm olivia hows. this is bloomberg. >> olivia, thank you.

trade tensions back in full force. president trump threatened to increase tariffs on chinese imports amid frustration over negotiations. beijing says negotiators are still prepared to travel to the u.s. for talks, but declined to say whether the vice premier will be going. markets around the globe are sinking on the back of this news. joining us now is enda curran, our chief asia economics correspondent.great . heard from the foreign minister just a little while ago. catch us up with what we know so far in terms of china's response to the tweet. indeed, that was the first official response. it wasn't especially definitive, where you might read it as something is an effort to defuse the situation. the spokesman said the delegation is still preparing to go, and said there's a need for the u.s. and china to continue talking, but he stopped short of any details.

-- whether or not these talks to go out this week. >> and meanwhile, we have seen some moves from authorities, a targeted rrr cut. we have also been hearing about a chinese state fund looking to stabilize the selloff we have seen in equities. is this a sign that chinese authorities are genuinely concerned that president trump's tweet may be more than just part of the deal? hasell, certainly there is been a big impact, the chinese market sunk by the most since 2013, so no doubt it is unnerving sentiment. the move from the central bank to cut rrr, it is hard to explicitly link it to what happened on the trade story, but

at the same time it is hard to rule out there is no connection. a lot of economists say they are trying to shore up. we knew authorities were willing to shore up the stock market. by all accounts there is a feeling that the authorities are watching this, watching the risk, and watching to step into shore up sentiment if needed. so much rides on how the next few days ago, whether or not the trade talks can get back on track, or whether we get back to whereby china is forced into retaliation. >> absolutely, and that begs the question whether this move from the u.s. could potentially backfire back on america. enda curran, our chief economics correspondent, thank you for joining us. joining us for the hour, john hardy, head of fx strategy at saxo bank. great to have you in london. thanks for joining us on this bank holiday. let's pick up with what i was talking about in terms of the stimulus, that targeted rrr cut today.

do you expect more broad stimulus to come from china now for the rest of the year, particularly if these trade talks actually escalate in a negative way? >> the trade talks escalate, that's the shock. we have to take time to look at that one. the reason political signals ist word that the stimulus already in the pipeline sufficient to lift the chinese economy. it will be along the lines of supply side economics, tax cuts, maybe rrr, but i'm not looking at a major stimulus wave like 2016 or 2009. china can't afford it, keeping capital controls as it is doing with the current account. i think the stimulus will be quite modest. >> ok. uanthat case, the you bo move, is that a bit overdone? >> it's the biggest move in three years, but it is within the range. to me, the signal value is

seven. as long as we are orderly here and keep away from seven or 6.9, keeping away from some dramatic exhalation and these trade negotiations, i think it's not much of a news item. >> and you have definitely seen one or two houses come out and call for a move toward seven. would you be anticipating that anytime soon? >> i think that's up to the chinese authorities. i think the marketplace is entirely different but china wanted to keep the line, as long as trade negotiations are ongoing it is a sign of good noth to the u.s. side by allowing the currency to devalue. >> so i'm hearing from you that you really are at least today feeling quite sanguine about the move, despite the fact that it is a relatively big move compared to the stability we have seen since the beginning of december. does it in any way cause you concern about the rest of the asia fx space? >> you could say i'm sanguine about the yuan, but not about

what happened here. i think it is a sign of some wider dysfunction. the market is way over emphasizing the impact of the trade deal. when you can't transmit the shock or transmit the worry into the chinese currency, because there's a lot of concern, it raises around em currencies. but they have been pretty quiet, outside of aussie. singapore dollar, these exporters into china are pretty quiet. one exception was the korean won, where we saw a big jump with that major resistance line. that is where i think we would see the market react and position itself or what's going on. >> just briefly on dollar-yen, you have seen a selloff in many currencies, you mentioned the aussie. dollar-yen broke through the hundred day moving average.

where is the direction of travel and the ultimate destination for you in the short term? >> that depends on where we are going. if we are talking about something bigger afoot, than these negotiations will end up in some sort of impasse, we have to price in more uncertainty and lower u.s. rates that feed into a stronger japanese yen. we saw an anonymous bid for emerging-market assets. i would say the yen is reasonably stronger across the board, more so than versus the dollar. that, we have seen quite a bit of dollar strength. we will talk about that more with john hardy from saxo bank. he stays with us. we focus in on the fed in on the fed and the dollar after another big jobs figure on friday. that's next. this is bloomberg. ♪

♪ economics, finance, politics. this is "bloomberg surveillance." i'm nejra cehic in london. 30 minutes into the equity trading sessions in europe. the euro stoxx 50 has dropped for the first time since january 2, a lot of red in european markets. ignore the u.k., because it is a bank holiday, not trading today in u.k. markets. but in asia, absolute carnage overnight. chinese equity markets dropped by as much as 6%. japan is closed, but a lot of red on the screen. risk off across these markets

after threats from president trump on more tariffs on china. we will discuss more throughout the show. let's get the bloomberg businessweek with olivia hows. >> thanks. anadarko says it will carefully review occidental's revised takeover proposal as it sweetens its offer. it increased the cash portion of its bid to 78% and says it will cover the $1 billion breakup fee anadarko wooden incur for banning its deal with chevron. warren buffett has up his criticism of private equity, saying sometimes returns aren't calculated in ways he would describe as honest. he says frenc pension funds shod be careful. they also said they use their cash pile to buy back $1.7 billion of its own stock. executives at softbank are reportedly weighing the idea of taking its vision fund public. that's a 100 billion dollar behemoth that invest in technology companies, reaching from cooper to we work. bloomberg has learned it is in the early stages but could consider a direct listing rather than traditional ipo.

and that's your bloomberg business flash. >> olivia, thank you. u.s. payrolls blew past estimates for job growth in april, with the jobless rate falling to 3.6%. muted,owth remains keeping a lot of speculation that the fed will still be forced to ease policy. last week's fed decision, jay powell pushed back on expectations that the next move would be a rate cut. still with us is john hardy from saxo bank. in your note at the end of last week, you were saying you were waiting about what chairman powell said. what do you read from it in relation to what he said? they impression is that longer term policy review -- this carries far more weight than what the next move is going to be on these month-to-month jobs report. it was mixed at best and we did see the nonfarm payrolls growth flattering the situation. the average weekly hours dropped

by 0.1. it wasn't actually a jobs report, suggesting that it was almost like a trend that was developing, where it increasingly looked like the labor force -- people were interested in the workforce, fully reversed. a bit of concern, but i think overall the overriding concern is that the fed is in a policy review. it is looking to establish a more dovish policy mix. i think the market has thoroughly priced that in. >> there are some parts of market pricing, though, that have actually increased, even what happened overnight with the trait headlines, the probability of a fed rate cut by the end of the year, i think around 60% at the moment. trumping powell in terms of the pricing a fed rate cuts, the headlines we've had on trade so far? >> certainly. it's an exogenous situation versus the fed doing its own review. if the fed was doing its own

review in deciding to get ahead of the curve and cut rates aggressively to get the inflation target on track why ile the economy is doing well -- but the fed will be forced to cut because the economy is weakening, that's a different angle and a different foundation. >> and we have seen some curve flattening in the past few weeks in reaction to what we heard from powell last week. in terms of where we go from here, is the market priced about right now in terms of the expectation for where the fed goes, or are you bracing for more moves and positioning? >> it's about the pricing but it's also about is the fed behind or ahead of the curve. if we see the weakening the fed will be behind the curve, whereas if we see stabilizing economic data and the fed continues to switch to this dovish mode, it concludes in its policy review that they need to cut rates more and they had already over tightened, and then we have the melt on scenario.

between horses i think what we see is a risk appetite maxing out, especially as the trade negotiations are on the rocks, and we see more fed rate cuts by the end of the year. >> we are looking ahead to cpi data at the end of this week. i guess we will find out how much weight to the transitory, and from chairman powell had. dollar weakness on friday following the jobs report, and then we get strength today and a safe haven bid because of the trait headlines. the opposing force is on the dollar. what's your outlook? >> i had a hard time selling the dollar, until i know that we are post whatever recession or financial mishap we are facing, which is the standard machine when you are seeing a u.s. recession. on that perspective, i think the dollar has a rocky path, especially versus the riskier currencies and commodities dollars. that process could take longer than i originally anticipated. >> on the 10 year yield as well,

not trading right now. u.k. markets closed, futures indicating we could get around the q 45 handle. do you see the direction of travel is lower for yield, given all the risks and the expectations around the fed and the curve flattening? >> the long end of the curve, to me, is a safe haven indicator. if yields are going well, it's all about trade negotiations, equity markets selling off, et cetera , more profound lowering of the rates, even if we are not seeing that news, would suggest the market is very pessimistic. tactically, we have seen a grenade thrown into the room on the trade front, and further out it is about these other issues. >> john hardy from saxo bank stays with us. up next, the outlook for the euro after a spat of week data. that's next. this is bloomberg. ♪

♪ economics, finance, politics. this is "bloomberg surveillance." i'm there a change in london. economic activity in the euro area shows signs of stabilization, with signs that the slowdown may be bottoming out. a compass at pmi index came in at 1.45. little changed from march is 51.6. the gauge for the service sector

declined, with slightly higher than initial estimates in order growth improving at the best rate since november. still with us, john hardy from saxo bank. we have pmi coming through france and germany, better-than-expected specifically for those countries. does that show positive signs to the euro, now that we are trading around 1.11? >> there were minor signs of stabilization. we've done a pretty good job of turning that ugly momentum we saw into the beginning of the year. that's a reasonable accomplishment. we are talking about the economic bloc with the largest existential surplus in the world. we need a sense of demand for that current accounts to continue to feed off global demand. and if we are worried suddenly about u.s.-china trade negotiations, we still have the cyclical concerns that we have. i think the potential for balance is rather limited for growth and therefore for the euro. >> is the path clear to go

through 1.10 or 1.15? >> valuation-wise, you are getting a lot of carry versus the dollar. even if you only go to 1.10 or -- i think the path is still lower before we get 1.25 to 1.30, much longer term. >> how vulnerable is the euro as well to further escalation in the trade threat? i know that is dominating everything we are talking about today, but there's a link to be made. >> a bit what i was discussing previously. the economic bloc with the largest current account surplus, a sponge of global demand, and if you are not seeing that global demand and if stimulus is underwhelming or if economies are not seeing the demand because they are engaged in trade spats, the euro zone is caught in the middle and does exceptionally worse. surplus countries do worse economically in a growth

slowdown. >> what is the best euro trade here? is it against the dollar, the yen? >> i don't think it's terribly interesting, but maybe euro versus carrier currencies, the funding for carry trades has been there and if we are going into a phase where we are worried about global growth, these traits are unwound. >> john hardy from saxo bank stays with us. we have seen quite a bit of carnage and markets today, cross asset equities taking a real hit globally. the euro stoxx 50 dropping by 2% for the first time since january 2. this is bloomberg. ♪

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♪ ♪ every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. take your business beyond. economics, finance, politics. this is bloomberg surveillance. in london.ehic let's take a look at stock

markets. we have the movers. it has a lot to do with sentiment today. what are the stocks you are looking at? stocks andhecked the for companies are trending higher. volkswagen is down more than 3.5%. arcerlormittal is down almost 5%. tweets sent by the president of the united states threatening to increase trade tariffs is why we have these three companies on the downside this morning. nejra: thank you so much. let's get to bloomberg first word news. >> china is preparing to travel to the u.s. for trade talks. trumpomes after president threatened the country with steeper tariffs over the pace of trade talks. he said there will be increased duties of a deal is not reached

by friday. chineseld up a level on cuts from 10% to 25%. and who log guarantees there is no cross-border checks on goods. guarantees there is no cross-border checks on goods. this is an attempt to and support from opposition leader jeremy corbyn by theresa may. mueller should not testify, oakwood into president trump. this comes ahead of a hearing -- according to president trump. this comes ahead of the hearing. democrats have been eager for mueller to testify since the report came public last month. begins aohen three-year prison sentence today. president trump's former fixer is charged with campaign violations. the term was delayed to allow cohen to record from surgery and get his affairs in order.

made a fieryne landing at a moscow airport. the flight suffered an engine fire after technical problems forced it to return. flames engulfed the rear as it came to a stop on the tarmac. 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. india finishesk, its democratic election with results due on may 23. party may fall short of a clean majority. it is the first time the prospect of a coalition has been raised. bjp spoke to- john micklethwait. [indiscernible]

confident in the majority. >> you are well known in taking a big interest in china. why won't india join that? reason for a good that. number one would be sovereignty. it passes through an area that belongs to india today. theaid we cannot support bra initiative. projectupposed to be a that was supposed to have been a multilateral project with a number of countries. but there was never any multilateral discussion over the project. decided -- [indiscernible]

john: can i push another issue? -- can i push you on another issue? in a report from human rights watch says 44 people including ow muslims were killed by c vigilantes, people objecting to eating the meat. will you condemn those killings? >> absolutely. any type of vigilantism has no place in our system. [indiscernible] we have asked the local state governments to take strict action when it comes to that kind of violent. but i must tell you, india has seemed five years of absolute social harmony. five years of absolute social harmony.

[indiscernible] but i will say that we never support any vigilantism. nejra: that was india's ram madhav speaking exclusively with john micklethwait. let's focus on south africa which will be ceiling the general election on wednesday. ramiposaamapo' -- looks to secure a new mandate but the country is better by and flagging growth. john hardy is still with us. john, we heard about india and given you an update on south africa. we have seen bellerophon with .he extent -- the lira fall talking about -- we were talking

about the carry trade. do you favor certain emerging currencies over others? a question ofe which ones we are favoring less. it is a bit interesting because we see credit spreads, for example, continuing to tighten. it suggests quite a strong bid into emerging-market assets. a bit unusual and maybe suggests there is a bit of hedging behavior of their. i think emerging-market currencies have been pretty done big for the cycle. with is a bit of risk off the china trade deal. it could be a test of her emerging markets stand. nejra: we were talking about asia and a potential through -- u.n.through and volatility. john: the russian ruble is

pretty interesting. versus the dollar, it is pretty well-established. there is a lot of asymmetry versus risk and reward there. you could hope the dollar rate goes much higher. but can it go much lower when russia is happy to give in and accumulate foreign currencies as it gets around the 64 level in dollar-mobile -- dollar-ruble. have seen a tremendous tightening in the credit spreads, knowing the risk reward asymmetry there. disrupting our markets as well as hopes around the global growth outlook. this could be an interesting trade. more risk on the downside. and the dollar, still the best of a bad bunch to paraphrase quite a few people that came to me and said that you should still be dying -- buying the dollar. the speculative market is

quite long with dollars. i generally agree but i argue that all three currencies do reasonably well if we have some kind of mishap. thinke japanese yen i there is potential for the yen to match dollar strength. nejra: john hardy stays with us. to discuss. stay with surveillance. arnold tumbling to 40. -- 10 tumbling -- oil tumbling to $40 a barrel after president trump threatens to increase trade tariffs. this is bloomberg. ♪

nejra: economics, finance, politics. i'm nejra cehic in london. let's get the bloomberg business flash. before ag new months deadly crash that a cockpit alert was not working as advertised. but the playmaker did not share this would airlines or the faa. the alert was standard on the models but only available for a fee on the new aircraft. this raises questions about the lack of transparency. antitrust met with an complaint. the tech giants 30% cut in revenue is effectively a report. a resolution could take years.

the $100 billion behemoth that invests in technology companies ranging from bloomberg to we work. it is considered a direct listing rather than a traditional ipo. andrew ladd that guarantees no cross-border checks on goods is what theresa may's team is working on. the move is an attempt to win support from opposition leader jeremy corbyn but may push the prime minister even further away from some in her own party. fans can't get enough of the avengers. game" is now the second highest grossing film of all time. that is your bloomberg business flash. nejra: anadarko says it will review the revised takeover proposal as the $38 billion offer was sweetened. the cash portion of the bit is increased to 78% and it will

cover the $1 billion makeup free -- breakup fee. great to have you here. how and why did they sweeten the deal? to get the bid in for anadarko. the ceo has been trying for 15 months. toy did it by boosting cash 70% from 50-50. if they come out of the deal with chevron, they will back the fee. i thought this was interesting. they got warren buffett to put some money into occidental. if the deal goes through, they will buy $8.8 billion of african assets that anadarko had. this is in south africa and mozambique. have lng, soesn't it makes sense. total and puts

chevron, these big oil players head-to-head. nejra: how high are the stakes getting? we do get earnings from but how tense is this getting? letter,u look at the the ceo says that we remain perplexed that european at resistance for attaining far more value for anadarko shareholders that has been expressed clearly over the last week. ready strong words. pretty -- pretty strong words and pretty tense. nejra: great to have you with us, annmarie. and john hardy is still with us from saxo bank. let's start with commodity currencies. what are you favoring and not favoring in the commodity currencies space? john: we mentioned the ruble.

also the canadian dollar. gettingegian krone toward the last bits of its range versus the upside. i think we will see the noise lesspointing a little bit towards forecast rate hikes. it has been in oil sensitive currency and it could add to the potential downside here. it could see a former -- another squeeze. nejra: what is your outlook for oil? we are seeing quite a correction in today's session. towards $62 a barrel. do we see a bounce back? gekko --our outlook outlook? we have seenhs

recently is rather expensive crude. or $65, maybe a bit higher on brent is the forecast. nejra: let's broaden the commodity chat. think about the commodity spectrum and the outlook for the central bank. we have the aussie central bank and also new zealand this week. are you bearish on the aussie? john: i am, but it comes with reservations. china beingd on rather stable and the degree of stimulus already in the pipeline. it is difficult. i am bearish. we will get the rba tonight. 50-50 inwas a sort of terms of cutting rates. to 100%.ing closer not 100%, but close to it because of what went on over the week. cut twice, possibly

more. it is partially priced in. but we will see markets swinging toward a more negative global growth outlook and see in concert and chinese markets before the aussie can develop a bigger downside. nejra: if we were to get a rate cut from the rba, would you want to see more downside from global growth before you got really bearish on the aussie? if we get something extremely positive out of the u.s.-china trade negotiations and china insists on pushing currency back to the downside, i andk it derails the aussie keeps it flat versus the dollar. that is the difficult part about looking at it. i think it would be broken down if not for the chinese maintaining currency where it is. and waiting for something to happen on the trade negotiation front. nejra: you are bearish on the

aussie and also on the pound. it is a holiday in the u k but we have seen positivity come to sterling given the local election. are you with consensus on this? that i see the argument elections will hasten the process to some kind of deal. for the parties to come to an agreement. but i have a hard time seeing .his be in past a brexit in name only and we get along with life. a deal like this to the table without actually bringing it to the population for a referendum? out ofefinitely consensus there. i don't see how this friendly dealng of a customs union is possible without being subject to a second referendum. which is negative because of

increased uncertainty of a proffer -- proper hard no deal brexit. increase theit probability of a rate hike by the bank of england? , that is naturally the sterling-positive outcome here. the bank of england is very happy to hike rates with the assumption that we will see all this investment, the cloud over uncertainty in investment lifted. forould have to compensate what already in the pipeline risk for the next three quarters of u.k. growth being put into doubt. nejra: can i ask what your preferred haven is? budgeting in the fx space and volatility remains suppress. implied volatility on yen has moved up a little bit. but in the grand scheme of things, we're looking low.

thet yen, the swissie, dollar, gold? worthgold is one mentioning. but among the currencies and non-gold currencies, the dollar and yen. maybe in equal measure. and yen in equal measure the safe haven for john hardy at this point. think you for joining us from saxo bank, particularly on this u.k. bank holiday. up next, warren buffett confronts tech driven change and investors question his move. we will talk about berkshire hathaway meeting, next. this is bloomberg. ♪

nejra: economics, finance, politics. in london.ehic warren buffett has been put in a rip position following berkshire hathaway's and he will meeting over the weekend. the investor fielded questions on new technology and if his approach needed to change. pathetic knowledged the trends -- buffett acknowledged the trends. buffett is really well known

for being a value investor. he likes cheaper stocks but he has largely missed out on this epic rally in expensive tech shares. he even ignore that -- acknowledged that. look how it has changed for berkshire in the past 54 years. he says some of the changes have hurt them. some of the investments they have made and missed have hurt them. here's the investment team made in kraft heinz. it lost dramatic amount. -- it lost a dramatic amount. it was $20 billion when they entered and $27 billion at the peak. it is now $10.6 billion. they lost a lot of value here. ,uffett acknowledged this saying they overpaid. back in february, they said they would abandon or at a more to

this vision. it was not just -- to this position. it was not just kraft heinz. he recently talked about his position on amazon and it is not surprising. the 2016ne up since bottom. you need some of these stocks and buffett acknowledged that. he said it was the younger people that led him to see that. certainly interesting when you look at the tech stocks. if we are in a bubble, we are in the sort of expansionary phase of that tech bubble. , thank youni burger with a look at some of the takeaways from warren buffett over the weekend. it's have a look at the take away from the markets today. it is a clear takeaway, which is risk-off. s&p futures lower by 1.9%. this is following the jobs

report on friday, with a stronger economy and not much inflation. we see red across the board in europe. the euro stoxx 50 dropping by more than 2% at the moment. a strong selloff in asia with stocks in china dropping by as much as 6%. switch up the board and you see some weakness in oil. wti heading toward $60 a barrel. the dollar-in pushing through the 100 day moving average. you can see a bid for the safe haven assets, treasury futures looking ahead to the market opened in the u.s. bloomberg surveillance takes over with guy johnson in new with guy johnson and tom keene in new york. this is bloomberg. ♪

♪ tom: this morning, call it presidential math.

with $22.5rica hit billion in tariffs and a economic results. no word on if farmers agree with the president's elizabethan calculus. prime minister may will adjust various shades of tories. it is ban holiday in britain. everybody except for guy johnson it is a bank holiday in britain. everybody except for guy johnson day off. this is bloomberg surveillance, live from new york. i'm tom keene. guy johnson in for francine today for a bank holiday in london. no holiday for the brexit group. there is a new debate between may and corbin j-- corbyn? guy: it is make or break and i think will theresa may saying, let's get this done. we need to get this done now.

that is what we were told in local elections. there is drafting of legislation taking place. we will see with the timing of this looks like. itay and tomorrow, i think is really important for the brexit process. let's get a bloomberg first word news update. president trump has unexpectedly set a new deadline in the trade war with china. he warns that tariffs on $200 billion of chinese goods will rise from 10% to 25%. tariffs will be imposed on billions more. the president is unhappy with the pace of trade talks. china said a trade delegation is still coming this week but it's not certain if the top negotiators will attend. is sending an aircraft carrier strike group to the middle east for a warning to iran. ann bolton wants to send "unmistakable message."

the trump administration plans to target a new sector of iran's economy with sanctions this week . in moscow, investigators want to find out more about a fiery emergency landing of a jet that killed at least 41 people. officials say the plane made a hard landing and a hard landing and the fire broke out. the jet returned to the airport after the crew reported a midair malfunction. the man once known as donald trump's fixer goes to prison today. timeel cohen will serve for finance violations linked to hush money payments on the president's behalf. he tried to get his sentence reduced after testifying on capitol hill. occidental has escalated the bidding war for anadarko's petroleum. they increased the cash portion of the bid to 78%. and france's total has agreed to buy anadarko's operations in african nations if they agree to

the takeover. anadarko had accepted a rival offer from chevron. 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. -- six through the data right now. through the data right now. about midnight last night new york time, guy johnson, we really grind down to the new low. that -55 on s&p futures. this is really getting down to the new lows coming off of about 7 p.m. last night. the euro weaker. yen stronger. churning as well. 18.72 is off the 13 level. of a move.

i don't like the 45% move, but it does show the abruptness of the move. the dow closing up 200. and we get right back to the -.60 level. and i through this in just to impress you. , tom. am impressed as you say, london is down. feeling a bit squeezed in volatility this morning. csi 300, take a look at that. was down 7%.it it might be on the back end of the section -- session. copper is down. kiwi down. the australia really hammered

in this great debate that we will see also the bake -- the week -- that we will see all through the week. i will not go into a dissertation of the microeconomics of tariffs, but this is customs data over 30 years. there is a very nice trend and we break out. out for standard deviations -- four standard deviations. the president suggesting that china is paying the tariffs. no one in economics agrees with this. guy: democrats are avoiding this issue right now. a quick look at what the chinese equity markets did. this was on the back end of the session, but this is the shanghai comp. we get through the 3000 level

overnight during the asian session. that is a key level that will be held through february and march. a key technical area. this will be very hard, tom, for the markets to bounce back through this one. technicians are paying attention. up toarter ramping monday, looking at what happened over the weekend. bloomberg working 24/7 off of as well.a earnings let's listen right now to the china trade minister. >> as to the u.s. threat of terrorist -- terra increases -- , china'screases position is always clear-cut. the u.s. knows that. of responseicacies after the president's tweet.

let's go to our economics correspondent. i will give you an open question. however the tweets -- how were the tweets received in beijing? the point that the delegation is still going to washington but stopped short of the details of who will be in that delegation. perhaps it is an effort by china to downplay the latest tensions. the same time, when you consider what happened in markets today, commentary and a lack of clarity around it, they seem pretty confused as to where it's going. all jonathan spence on me, but there are stereotypes of asian and chinese saving face. these tweets are uniquely uniquely american. how do the chinese culturally and socially adapt as they react to these tweets?

from their own self-interest, of course. they don't want to be seen as humiliated by president trump and having to bow down to his demands. say face.to they will argue they made concessions on the goods side. xi making--president concessions recently. in their own self-interest. nonetheless, there is a case for china to make concessions in the broader trade negotiations. i think that there is a group probably pushing inside and outside of china for them to come to the party and head off these complaints. a cuthe pboc delivering this morning to try to stabilize the situation. what does that tell us about the policy response were these talks

to go south? >> again, it wasn't exquisitely linked to trade developments. -- explicitly linked to trade developments. authorities will be there to back the economy if the trade had ado fall through and rocky patch. china's economy has been stabilizing but it needs support . the measure today show that they are willing to ensure that they are there to back up the economy if need be. that is why so much depends on how these trade talks go and if go totrade talks washington. it will be very important for sentiment on the china story. guy: the stock markets and the to the u.s.mportant president. how important is it in china?

we did see a significant drop. it had been pushed up recently by margin traders. , psychologically, are key metrics like that? enda: it doesn't have the same play on the real economy and doesn't of -- reflect the economy the way the u.s. stock market does. but it does play to the sentiment story. the bigger story is what happened to the yuan. a much bigger source of concern. as you know, it may trigger capital outflows. it draws foreign market pressure to push down even further. policymakers spend their own reserves to prop it up. onp an eye on what is going with the exchange rate. it is a particularly sensitive one. that goinge to see

further over the coming days, you will see talk about chinese intervention to support it. guy: thank you very much, indeed. thank you for joining us and giving us the chinese side of the story. if you believe a trade deal still gets done, is today an opportunity? of this week days is. you have to understand the art of the deal, donald trump style, in terms of where he's trying to get. hard to navigate this because the u.s. president is quite hard to forecast with these kind of outbursts. the chinese response is hard to forecast. even if you think that surely everybody stands -- understands that at the end of the day, you have to have a deal. and that the chinese needs will avoid this falling apart. i look at currencies like the levelsian dollar above

where it is definitely cheap. if we get a deal, it will look pretty attractive. --would i buy? i think that is the trouble. guy: talk to me about how this will affect volatility. volatility has been lower. they will get squeezed higher. walk us through the positioning around this and where it all goes. kit: the market is short volatility in general. it is short volatility and long dollars. it is not long emerging-market currencies because it has been a bumpy ride all year. it is somewhere in the middle. not turn up in the foreign exchange market so much. it might tur up in emerging markets. it might turn up in equities. turn up in emerging

markets. it might turn up in equities. but volatility will come back. there is so much uncertainty and so much at stake. euro-dollar, we look at dollar-yen. pros like you take out the dollar, combine them, and look at euro and yen. strong in a -- strong yen and weaker euro. comment on that. kit: it is not what i want to see. but it is still the first reaction. , president all year trump doesn't do anything to make you want to buy the dollar. the market is long in the news is not that great. the news is not that great. we don't get anything to suggest that this kind of monetary policy season and to

quantitative easing. end to quantitative easing. the yen is the winner. we need a sustained move to force the palanks. tom: we have not had a sustained move in yen strength yet. is with us this morning. we will speak with kevin's really in washington and go further with conversation with john from the brookings institution. stay with us. and most interesting monday. down futures, -520. this is bloomberg. ♪

tom: bloomberg surveillance.

guy johnson on duty in london. i'm tom keene in new york. at bonds linked to all that we see. what we see is turmoil out of china-u.s. do you assume lower yields? kit: yes, i think we get lower yields this week. we started off with nothing very threatening on the wayside in the u.s. labor costs are very low. we have the reserve bank of and inflation so low. we have low inflation and uncertainty and high volatility. x-axis.l me about the not only do we have low yields, but through the year, persistently low yields. what is the effect of chronic low yields on your foreign exchange market?

killer is a volatility and forces investors to buy things in the environment. they seek yield. they seek yield, but because we have slower growth, they don't want the dangerous stuff. people are trying to find safe risk or safe high-yield. or emerging markets that are posh. it is kind of a fine-tuned thing. that is why in the foreign exchange market, the chinese yuan becomes important. have been as currency play, a small yield play, but incredibly popular this year. if we shake that up, one of the few strong performing trades of 2019 is going to start falling apart. guy: a quick question on the fed. if the trade deal does go south, would the fed cut? kit: only if they see economic

data following it in pretty smart order. s biases to be patient. guy: they tell us that time and time again. kit: it is another reason to be patient. but if the economic data go , then we will all kind of start looking at it pretty fast. the lack of inflation and the fed's puzzlement about the lack them a policyives by to say, all right -- if we are not going to hike and inflation overshoots, if we have a reason to cut, we should get on with it. remember, the numbers were only -- [indiscernible] futures, -54. we will get bond quotes in a bit. coming up, this is an important conversation. well-timed, as always, for

today. morgan stanley with a very different house call on equities and bonds. 9:00 hour. the stay with us. this is bloomberg. ♪

>> this is bloomberg surveillance. let's get the bloomberg business flash. japan's softbank is considering an ipo for the $100 billion vision fund. they invested in tech companies ranging from -- [indiscernible]

the ipo would give investors a way to cash out all or part of their stake. theng left regulators in dark with problems like to the 737 max 8 is. the airplane maker acknowledges it knew the sensor wasn't working months before the disasters. it did not tell the faa about the problem until after the crash. it is the bloomberg business flash. guy: let's talk about what is happening in europe. in data this morning, we get more meaningful pmi data. the services number was a bit better than anticipated. looking at could mentally better in europe. we sort of whispered that. i want to come back and talk about what is happening with the chinese story. europe is just beginning to gain traction to the point that we could see a re-escalation of the trade tariff story with the u.s.

that is not a great combination for europe. not help the geopolitics at all. first quarter was better than expected because expectations were so poor. the benchmark against the mood, .he mood is dire german manufacturing has been a mess. german manufacturing is a shrinking part of the european story. it is correlating less. or two weeks now, we have gradually better gdp numbers. the detail of the pmi data is better. and it is looking better going forward. you get your hopes up. if global trade takes another whack -- >> currencies take another whack. most import and currency in the world, no matter what else it is. it is not the most traded, but the biggest part of the ecb basket.

a 23 point 6% share compared to 17.6% for the dollar. deal, the euro-u.n. move. dollar-u.n. is important. -- the dollar-yuan is important. negativeres are down five, 24 off the bloomberg terminal. coming up, i mentioned the other look for david-- mcintosh at noon. this is bloomberg. ♪

tom: what you need to know. "bloomberg surveillance." guy johnson on duty in london. a bank holiday. futures are a large at -55, dow

futures at -521. here is kailey leinz. kailey: the next move is up to china. beijing may delay a trip by top negotiators to washington after the president -- president trump announced friday he would increase tariffs on chinese goods to 25%. the president unhappy with the pace of trade talks. the chinese had the delegation is supposed to head to the u.s. north korean leader kim jong-un may be challenging president trump's bottom line. launchrsaw a missile which may have included a ballistic missile. says specialmp counsel robert mueller should not testify before a house

hearing. he is expected next week. on twitter, the president wondered if democrats were looking for a "redo." and fans cannot get enough of "the avengers." endgame" is not the second highest grossing film of all time, passing $2 billion. global news 24 hours a day on air, and on @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is bloomberg. guy: thanks. theresa may's officials are reportedly drafting a new law to avoid customs checks after brexit. this is part of an attempt to reach an agreement with the opposition labor party to break a political deadlock in westminster. treasuryabour commissioner poured cold water. >> no.

not after this weekend, when she has blown confidentiality. i think she jeopardized negotiations for her own, personal protection. merritt.s now is david still with us is kit juckes. tomorrow is a self-imposed deadline when it comes to negotiating with the labor party. is it going to deliver results? david: that is right. and you heard him say that he lost trust in the prime minister. there is not much trust between these parties anyway. but we have been talking up the chance of a deal. gher ong took a nose hi the possibility -- it is falling again today after listening to those words. there seems to be a gulf there. the labor party and the conservatives are really -- if they strike a deal, they will

alienate significant parts of their own parties. the --t's stick with what could a deal look like? what do we know about how far they have got? david: reports are that, as you just said, ms. may is readying a customs union -- they will not call it that, because it is a toxic phrase among the grassroots, but some sort of pledge to stay within customs arrangements with the european union. that is not popular with the tories and brexiteers, because it means no new trade deal. to e.u. committing standards on things like employment rights and trade of goods, so those details willemerge. but the customs union is the fight. tom: what i read in the papers

was basically brexit exhaustion. people are worn out by the debate. iain duncan smith, arch brexiteer, said get it over now. why can't that happen? what is holding the prime minister back from moving the dialogue forward by stepping aside? david: she really feels that her legacy, if it is going to be anything, has to be delivering on this promise. this is what brought her to power after the referendum in 2016. time and again, she said she would deliver. brexit is brexit -- remember that phrase? to step down without having delivered brexit seems like an enormous failure to her. tom: and i really try to --erstand a liberal democrat where are the liberal democrats, in the middle of all of this,

and also that new party? david: the liberal democrats have not had a pretty good week. they have been arguing for a long time -- they are the party of remain. 48% of the british public wanted to stay in the european union. they had not really been getting much traction. but this week, we have the elections for the local councils, and they had their best result in a generation. they picked up all of those voters deserting the conservatives and the labour party. from the government's perspective, it complicates the issue. people are not voting -- are people not voting for the tories because they are or are not committed to brexit? forward to the european elections in two weeks, that is where we will see where the support lies. guy: do you expect a deal

between corbin and may? kit: i hope for one at this point, but i doubt it. at this point, it would be good for the british economy, good for sterling, it will probably be welcomed by business, just to close the deal. but there is too much to lose, both within her party, the parliamentary party for the prime minister, and there is way too much for the labor party -- the labour party to lose. but it looks like losing remain voters if they get a deal done. and the conservatives get the benefits of any economic uptake. they would like to find a way to blame may. guy: logo elections provided bad news, very bad, -- local elections provided bad news, very bad news, for the conservative party and bad news for the labour party.

elections crystallize the situation? do they help us take steps forward in terms of the process? kit: not really. european elections will just split the country is. the anti-europe party -- the man in the street thinks they will murder all the other parties. it will give lift to "brexit means brexit." it would be terrible for tuesday submit in that sense. there is huge incentive for theresa may to get a deal done. but labour have to think they are not losing from that deal politically. in the middle of all of this, the british people do not know how that works. the poker is terrible. tom: we are three and a half

weeks to four weeks away from a presidential visit to london. is david merritt ready for that? david: we have no time to mentally prepare for that. we saw the last time that the president came here there was a bit of a furor. there was a giant baby balloon l aunched. we have seen demonstrations in the streets, chaotic ones, around the issue of climate. we will see more of the same. it will be summer time and the weather will hopefully be better. that will encourage a bit of opposition to the president's visit. and he could be coming right in the middle of an increasingly critical storm. we could be having a tory leadership contest when he is coming. maybe he will have to take refuge with the queen at windsor castle from all the noise. but it is bound to be a lively visit. senioroomberg's executive editor david merritt.

let's take you out of this world -- spacex, the dragon congo craft arriving at the international space station. this is the significance of this process. this is the second flight of , dragonticular cargo cargo craft. the fact that they can be reused is a massive change in the economics of this process. we are anticipating that the docking will take place shortly. live pictures coming from nasa. this is bloomberg. ♪ >> a crew on board has the ability to send an abort command dragon if things were to go wrong. but things are moving smoothly as we continue to progress. ♪

china.e president tweets

let's run you through a data check. we need to take a little more time on this. features at -55. dow futures negative 502. the curve flattening. the euro comes in yen stronger. the vix 13-ish. 12 in the bull market. 18.64. there is the close friday. bond markets in the united states, we get quotes about 7:00 on a mac and bonds. the german two-year unch'd, but right at the negative zero point right now. the renminbi weaker, past two standard deviations. guy: the car sector is the worst performing sector in europe right now. oil is down. european equities are down around 2% at this point. there is a little variance in

that, but not by much. in terms of what else we are watching, we are keeping a firm i on the aussie dollar -- a firm eye on the aussie dollar. also a story of china and mr. low and a meeting coming in. fromuckes joining us socgen. what is your take? it is a story on a knife edge. kit: our economics team tell me they think it is too soon. we have had quite a few central banks that have eased in the not too different -- in the not-too-distant past when it was too soon. it is the lack of inflation that gives them the ability to say rates ton't we cut preempt the economic downturn or buy some insurance, because there is no danger in cutting rates with persistently low

inflation. guy: ok. we believe it there. let's turn our attention to the oil sector. occidental has escalated the bidding war for anadarko, increasing the cash portion of its bid to 70%. it will also bear the burden of a $1 billion breakup for abandoning the deal with chevron. this proposal comes hours after occidental struck a deal to offload nearly $9 billion of anadarko's african assets to totale. the critical thing here is, at this stage anadarko is still not saying "we are in on this." how much further does occidental have to go? >> occidental went pretty far. it was 50-50. now it is 78% cash. it gives them the right to bypass stockholder approval. at the same time, they are bringing in totality -- totale.

no plane lngd market. totale is a big player in that, so it makes sense. the ceo of occidental has been going after this for some 50 months. things are getting intense. guy: i think she is surprised that they are still not willing to say we will back your deal at that point, the talk is -- at the clock is ticking on chevron. annmarie: they will have four days if they decide to go with occidental. guy: so they are playing for time at this point he or the next question has to be why is everyone so worried about occidental shareholders? they are against this deal, which is amazing when you consider how far the ceo has taken it. annmarie: and look at occidental shares and chevron shares. people are worried about we are throwing all this money. she had $10 million from warren buffett. she now has totale on her side

pichai can get this through without shareholder approval. tothis point, she is able secure it and maintain occidental as prime in permian, shareholders will support her. veryyou noted these signs -- the size variance. chevron, $160 billion revenue. total, $198 billion. 1/10 of these players. how will their shareholders respond? we have any knowledge of what occidental's major institutional shareholders are actually doing? annmarie: it is interesting, because before this, they did not want this to go through. but now she has more money coming into this deal. she has brought on total. she does not even need shareholder approval at this point, to get it through. i think the fact that she has

brought in a lot more money and, if occidental is able to get anadarko's play in the permian, i think she will be able to stay in her position, and she will get a bit more shareholder approval. but the fact that they are so tiny and are up against this major oil giant -- many people thought they were crazy. also interesting, now total is an online -- an ally of occidental, it puts head-to-head occidental versus chevron. been greatweeney has about this on radio. where is chevron in all of this? it is great for debate and great for annmarie hordern's cocktail connotation. where is chevron in this deal? annmarie: they have been laying low. is i think they

thought they would be such a shareholder rebuke in occidental that they would not have to do anything. possibly this morning, they will be looking around and saying what do we need to do to make sure we maintain this deal? it would be a huge blow for chevron if they were going to be outsmarted by occidental. guy: let's talk about carl icahn, taking a stake. bloomberg intelligence believes this may be a little too late to block this deal. carl icahn, a well-known name, is basically saying oxley should not do this -- oxy should not do this. annmarie: shares actually rose when he did that because it meant the deal would not go through. he is getting in maybe a little too late here that is what is so fascinating about this deal. warren buffett, carl icahn, now total, and three oil companies. it is pretty incredible. tom: absolutely incredible.

annmarie: they have overtaken the saudi field. this is now the future of oil, the permian. tom: we will see. it harkens back to what will be the chevron response. annmarie hordern, thanks for that brief. kit juckes of socgen with us through the hour as we see the markets through the move. -505 on the dow futures. coming up on "bloomberg daybreak," driving forward the conversation in petroleum. can we drive higher? stay with us. worldwide, this is bloomberg. ♪

>> i want higher interest rates. i think these are unrealistically low p of the problem we got a supply and demand. unfortunately, there's more supply than demand. i look at 3.6% unemployment. it does not get any better than that. do not remember when it was ever

there before pay the biggest challenge we have and the biggest risk we have is dealing with entitlements in america and dealing with the debt. this debt is not limitless. when you have a $500 billion trade deficit with china, that is not good. the foreignut when governments do not want anymore of our -- any more of our debt. these institutions need to put these in norma's sums of money to work. tom: kenneth langone, we spoke with him at length friday. everything said and done, the major theme was his belief in the market and his belief in the systems. right now, kit juckes of socgen sitting with guy johnson on a bank holiday in london. thanks for coming in on an odd day in the united kingdom. theyquity markets, are

correlated to the kit juckes world? kit: most of the time. they are caught between a slowing global economy and, still, exceptionally low interest rates. that continued to keep earnings high paid for some reason, there is this decoupling bit where a handful of tech revolution stocks are driving the whole story. at this point in time, there is not much inflation, there is some growth, and there is this superlow interest rates, and you watch it and think i do not know where valuations mean this must run out of steam. it cannot be far. but there's less of an anchor on valuations and equities then currencies. guy: where you sit on oil? we have the americans putting a carrier group into the gulf because they are worried about the iranians. the irradiance talking about a response because -- the iranians talking about a response because

of the u.s. wasave a deal that annmarie talking about. the saudi's certainly seemed to take a view on that. where do we see the correlations on oil and the global economy and what it tells us? kit: i do not think the people in the oil industry think oil prices have that much more upside. it seems to me this oil price let's m&a happen in the - lets the oilm&a happen in business, and they're happy about that. we spike higher on venezuela, but we do not maintain it. certainly aircraft carriers in the gulf do not have significant impact, and we did not see much of a spike on sanctions. so there's not much belief in that. we have the static high. in the foreign exchange market,

it is a fight between the growth story and the oil price. as oil prices rose, most of the world's best currencies were oil exporters for the ruble is the best this year, but the mexican peso is doing well. but you have some -- for example, the canadian dollar has decoupled because of its growth story. tom: kit juckes, thank you. you single-handedly lifted dow -496.s from -520 to we will come back. tony dwyer will join us on the equity markets and we will have a lot of other good conversation. ♪

china hasmorning,

paid to america $250 billion, making for "great economic results." no word if american farmers agree with the president's elizabethan calculus. will adjuster may to various shades of tories. it is a bank holiday in london. everyone is off except for guy johnson, helping us on "surveillance." good morning, everyone. this is "bloomberg surveillance ." we are live from our world headquarters. in new york, i am tom keene here in london, guy johnson. -- spacex debuting has a rendezvous with the iss. and -- big as you can see, it is a one.

we are almost half are through the process. they are certainly doing this in style in thailand as we watch the coronation process unfold. ceremonies in a modern thailand. right now with first word news, here is kailey leinz. kailey: u.s.-china trade talks appear to be on life support today. that after president trump on excitedly set a new deadline, warning friday that tariffs on $200 billion of chinese goods would rise to 25%. tariffs may also be imposed on billions more of chinese products. china says a delegation is still coming to the u.s. for negotiation, but there is no word when that will happen. the u.s. is sending an aircraft carrier strike group to the middle east in a warning to iran. national security advisor john bolton says he wants to send an message."able plansump administration

to target a new sector of iran's economy in new sanctions this week. in russia, investigations are jet thatn an aeroflot landed on fire, killing 41. the man once known as donald trump's fixer goes to jail today. will serve time for a number of crimes, including campaign violations. the president tried to get his sentence reduced. its $30sweetened billion offer to anadarko by increasing the cash bid portion 270%. plus, france's total agreed to by its assets in four african nations if the deal happens. already agreed to

a deal with chevron. global news 24 hours a day on air, and on @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is bloomberg. tom: thanks. the shanghai, -5.6%. equities, bonds, currencies, commodities. ago, an hour and a half s&p futures at -52. dow futures at -493. they were at -520 an hour ago. the end stronger. oil cells. up to going up 18.5 3 -- 18.53. the germany two-year comes down. we do not have the u.s. yet. and the swedish krona really legging out versus the euro. guy: this is the worst performing g10 currencies so far this year. it is having a tough time. the bank is backing off in terms

of a rate hike, but sweden is very exposed to the industrial stories and the trade narrative is front and center. talking germany, back down. most european markets down. copper is under pressure. and keep an eye on the rba as we watch for the possibility that governor lome cut rates. tom: and rounding it up, turkish lira. mr.motional benchmark for erdogan. let me go to the bloomberg. this is tariffs customs in the united states. i use a 30 year trend. we are out 1, 2, 3, 4 standard deviations right now. let us go to china for an update. enda curran, bloomberg chief

economics correspondent. was beijing cup i surprised by the presidential tweets -- caught by surprise by the presidential tweets? enda: i think they were. a spokesperson made it clear that the delegation is still preparing to make a trip to the u.s. for trade talks, but he stopped short of specific details. he did not say who would be going, when they would be going, and did not give a cast-iron guarantee that the talks would happening either. much will depend on back channeling overnight between washington and beijing as to whether or not these trade talks go ahead and push forward a deal or whether we push for it friday and mr. trump hikes tariffs. guy: does star trump, the president, have a point? have a chinese been dragging their feet? we know that china has

come to the table and made it clear they are willing to buy more goods. on some of the issues around access to the economy and allowing or companies a more level playing field, they made a concession on that as well. we heard a speech from president xi jinping at a belt and road forum on those. but how it would enforce a deal to begin with, when it comes to physique with china and trade agreements, i do not think anyone specs those big issues to be resolved in a short timeframe. it is those issues that are now tripping of these talks, perhaps, and whether or not they can get those results on time. it will become the critical issue on where to treat pimm: next. tom: greatly appreciate it. we have international segment. kevin cirilli will join us in a moment on washington. scheduled, 100 people

to come to the u.s. right now, anthony dwyer joins us. let me go to the chart right away to frame this. this is the october swoon, the december swoon as well. here is the bull market. everything is great. right now, we are coming down to this horrific pullback. tony dwyer, d go to cash this morning? [laughter] tony: no. i needed a good laugh in the morning to you are great for that every morning. get awayve it up and "game of thrones" boilers. [laughter] fed ticketedhe they were going to do four interest rate hikes in february, similar to 1994. you have this 10% pullback quickly on fear of fed. and then you go back to when they inappropriate height two times in the fourth quarter. tom: amazon -- tony dwyer was

buying a million years ago. you do not comment on individual stocks. before theved it presidential tweets, don't i love it after? tony: the market had just gone straight up you the vix went back to 12. you had newsletter writers up to 56% bullish, which is generally an overly optimistic level be -- market here is what is different. rather than year you will get those two kind of declines you highlighted, you do not have the same kind of interest rate backdrop. you have a dovish fed pivot. you have green shoots coming out , on the global indicator. economic activity will be ok. the fed policy will be very different from where it was prior to the to the two major declines. guy: are u.s. stocks expensive? tony: if you go by the median

over the history of time, yes. but you have to change it -- this is very important for viewers. you have to adjust it for inflation expectations. when core inflation is between 1% and 3%, the market historically trades at 19 times earnings. so we do not have to guess where it will be. it was there from the fourth quarter of 2016 to the fourth quarter of 2018. for 2 years, it matched the average multiple you get in low inflation. so i do not think the market is extensive. it is slightly in extensive, as long as you're able to avoid a recession. tom: day ago, tony dwyer saying load the boat -- i am kidding. and :00 this morning, matthew hornbach -- at 9:00 this morning, matthew hornbach. jon ferro will beat him to death

on these low rates. and we will get some quotes for you at 7:00. this is bloomberg. ♪

tom: "bloomberg surveillance." when the news happens, it happens. two headlines coming out. i suggest this is unexcited. kraft heinz will not be able to file a quarterly report on time. kraft heinz restating disclosures for years ending 2016, 2017. those are wow headlines from new management. guy: the stock is dropping. looks like it is down 2.4%

through the market will be down as well. stocks moving down on the news. now with us, kevin cirilli, as we look at china. i will lose the morning must-read so we get enough time with you today. will the white house back away from the president's tweets of this weekend? kevin: it does not look like it. i think the president, in terms of the u.s.-china relationship, has taken a much more aggressive rhetorical approach then we have seen in recent weeks. but at the end of the day, i think secretary mnuchin and trade senators are signaling the are nearing the end of trade talks. that would be a long-term positive game in terms of a short-term agreement. but a short-term agreement, does that get to thursday or friday?

we have 100 chinese coming to washington or is that in the air? kevin: it is up in the air right now. that, in terms of her publicans on capitol hill, they are increasingly hammering this president on the issue of tariffs, where the on u.s. mga or on u.s.-china trade talks. these tariffs are something they want to see removed. the chinese like to hear that coming from the republican party. guy: good morning, it's guy. can i put together what is happening with the mueller testimony possibly happening and these tweets on china? is one related to the other? kevin: to be honest, they are not related at all. in fact, we have seen in the past two weeks is that it is increasingly democrats -- democratic leadership, with

speaker pelosi and center minority leader chuck schumer, and president trump, they have shown they can accomplish and work on policy while these investigations continue the president has said he does not want -- that democrats would not be able to investigate and legislate, but it seems that in that regard they have separated the issues. tom: kevin cirilli, too short. thanks. it will be an eventful week in washington. coming up, tony dwyer of canaccord genuity. futures -52. dow futures at -500. stay with us. from london, from new york, this is bloomberg. ♪

tom: "bloomberg surveillance." guy johnson in london -- bank holiday there. yet. not have bond quotes we get them at 7:00. dow futures -503. we have tony dwyer of canaccord genuity on the markets. right now, john hudak of brookings. on eros engine -- on a washington response to

china. the focus on china at the andings institution, particularly eight china challenging essay from two months ago was brilliant -- and particularly a china challenging essay from two months ago was brilliant. how will china respond to the president's tweets? john: china has a number of options. the reality is president xi does not have to face voters in 18 months like president trump does. i think the chinese understand they hold economic and political power in the united states based on their responses to presidential tweets, like we saw this week, and their own choices over the policies and behaviors they will put forward. tom: how will the response be in washington? we are framing it today and racing into it tomorrow as well. the culture and pace of washington -- will we see fireworks today? john: i think we will.

you will see some bipartisan unity on a response to president trump saying that these tweets are irresponsible, that policymaking by tantrum is not something the united states stands for, and it is certainly something that can be destabilizing, at least in the short term, as we are seeing with futures this morning. guy: good morning. we issue i have with what are watching here is i am paying attention to this in light of what happened with north korea. in north korea, the president walked away. are the two situations compatible or comparable? john: i do not think they are quite comparable. we are seeing a simulated -- a situation in which they may look similar, where the president is keeping his distance, at least temporarily, from china and it feels like the walk away from north korea. but in reality, the president and his advisers know that the way in which you deal with an

isolated, small country like north korea has to be different than the way you deal with an economic and political superpower. guy: sitting here in europe, we are trying to figure out what the implications of this are for u.s.-you trade talks. .s.-e.u. trade u talks. john: whether you are in china, whether you are in the e.u., whether you are part of the new north megan pact, you have to be concerned about the president's stability in these talks, the ability of him and his administration to keep the eye on the ball and game out what an effective strategy is. tom: tony dwyer with us as well. how does this affect strategy? guy johnson noticing that chinese stocks have really collapsed at 5%, -6%. is there an opportunity for you? tony: i think you have to

backtrack -- i do not know how irresponsible the tweet was or not because i am not in the negotiations. we have to be careful to assume exactly what was said in a room between negotiators. i am hesitant to say it will end up a certain way or not based on the tweet. so what we fall back on? tom: revenues and earnings. tony: interest rates which drive revenues and earnings. the ramp up we have had from the christmas low is riven by a fed dovish privet. it is extraordinary no one focuses on the fact that you have had a huge drop in market-driven interest rates and come at the same time, have not inverted the curve. you are actually steepening a little bit. you have money availability that is becoming cheaper. tom: you nailed your non-recession call as well. a 201 k over at

brookings. why can't we extrapolate that up, like we do once every 12 years in the market? tony: let me give you the playbook. in 1994, you had a february 10% decline -- tom: john hudak is taking notes in washington. [laughter] tony: basically what happened is, going into 1995, the fed was tight. they raised interest rates february 1. the end it up cutting interest rates because of economic activity slowing by july of 1995. the market was up 25% at that point. it went up another 50% into intoend -- another 15% year-end. the ended up cutting again. the story, in my opinion, is inflation expectations have come down. the five-year inflation breakevens are down, not up from the 2018 level.

the has to scare the heck out of them. they cannot even get it to 2%. so similar to the 1995, even with seemingly better economic data, the fed is watching inflation. you have a chance of an actual rate cut later this year, which would surprise the market, and that is the bull story. guy: i want to fold in the oil story. we have the u.s. putting the abraham lincoln carrier group to the gulf. can you talk to me about how the uranian situation -- iranian situation is likely to escalate? john: i think it is largely avoidable. my colleague has written extensively on the iran nuclear deal and what president has done by stepping away from it. it speaks more broadly to the risks this president provides to a foreign global policy. he threatened to tear up

and was toals replace them with better deals. he has not done that and will not do that with iran. when we see escalations like this, we can draw a direct line over the president's choices over rhetoric around certain agreements and the outcomes we have today. it is troubling, both at home and abroad. guy: we will leave it there. thank you, john hudak. tony dwyer will stay with us from canada or genuity -- from canaccord genuity. willg up, john delaney join us at 12:30 p.m. new york time. ♪

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♪ ♪ every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. take your business beyond. tom: "bloomberg surveillance." we do more data. guy johnson in london. i am tom keene. equities, bonds, currencies, commodities.

futures at -54 earlier, now -52. now at 5-03. the year comes in yen stronger. the vix with a five figure with the 18.47. morning,unmanaged this a weaker chinese yuan. guy: one thing that will affect u.s. markets as we work to the start of trading will be apple on a down by 3.2% overnight. move for aizable mega stock like apple. the reason it is trading down, apparently, as the european union will start a formal probe of the company within the next few weeks, this following spotify's antitrust complaint, this reported by the "financial times." just to annoy jon ferro, this is the third most heavily rated stock in the doubt. --: he is just focused on

what is the name? ester-manchester football game here that is all jon ferro cares about. right now, here is kailey leinz. kailey: the next move is up to china. negotiators made delay it shipped to washington after president trump announced friday he will increase tariffs to 25%. the president is unhappy with the pace of trade talks. tona's delegation is set come to washington, but it is not clear if vice premier liu he will come or not. kim jong-un oversaw a live military fire which we have included north korea's first ballistic missile launch since 2017. earlier, president trump had said kim would not break his testing promise.

and bloomberg has learned that theresa may's officials are drafting a new customs law that would guarantee no checks on goods crossing the border. may is trying to get the opposition labour party to sign onto the plan. specialt trump says counsel robert mueller should not testify in front of a house hearing. it is set for next week. it would be the most anticipated on years. on twitter, the president wondered if democrats were looking for a "redo" because of mueller's findings of no collusion with russia. global news 24 hours a day on air, and on @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. kailey leinz. this is bloomberg. guy: thank you. arren buffett was in preposition -- he was justifying his approach, but he admits there were things that went wrong.

he overstayed for the stake in kraft heinz. he is probably feeling that little this morning. realize theed to full potential of amazon. berkshire only started buying the stock this year. investors are now wondering if they need a change in strategy. we do have that news on kraft heinz having to look to maybe restate numbers and finding that difficult. our bloomberg finance reported joins us now. more oil on the fire of the kraft heinz story. walk me through how buffett is playing that, the mea culpa surrounding the stock. it has not been a great value play. >> it has not. obviously, this morning was not good news. they will have to restate earnings. buffett noted that he heard about it from deputies. berkshire was not able to include those results in their

first order -- first-quarter earnings. it is a misstep that they admitted. they overpaid for kraft. he does not seem completely upset by it, though. he still has confidence in kraft and is still supporting the company. but he said in february he will not buy or sell more of the stock. that is a key indicator that he realizes it has not panned out exactly how he had planned. guy: he said as well that the kraft heinz stake "could have been better deployed." that is probably a fair, and at this stage. in terms of the criticism surrounding his investment approach, in some ways, these two stories, amazon and kraft heinz, put it in stark relief. yet the performance of investments made are indisputable, and they are substantial.

how seriously should we take any of the investment approach? katherine: every time people start criticizing, is buffett behind the times, is he not reacting well to change, it is the.com bubble burst, and he sort of comes back instead. there is that question right now -- valuations are high. mindviously had a shift in andechnology, although the was on investment was by a deputy. is the time coming so that buffett will swoop in again, find more occidental-like deals and find a way to deploy cash to generate higher returns in a way that made him famous? dwyer with us now from

canaccord genuity. i want to go back to what we did when we were kids. we got the buffet annual reports, actually griffin -- we got the buffett annual report, actually written on paper. is the buffett omaha now the same as 20 is ago? tony: it can't be because of the rogatory environment. he buys companies he can hold forever. the bull story works because most of the time the market goes up, no matter how ugly they can be. tom: critical question -- he is up to his eyeballs in money, as are 47 other ginormously successful companies. does that raise the gloom? tony: it has to be let's talk about what creates a recession. what creates a recession is companies need to raise money and do not have access to it when they have to. when they do that, they have to cut production, cut employment,

cut all the things echoed into production. we are not in that. tom: hello does he respond to that? andett is per american pro-capitalism, and he has always been like that. but there are people going the end is near? tony: it is smart. why would you listen to me if i say do not worry about anything, we go up 300 points on the s&p, or i look at the camera and say god, you say oh my will lose all your money? there in lies the problem. there's only one thing that shuts down a bull market, that is after you invert the yield curve, companies and households need money and do not have any access to it, because it is this

incentivized -- dis incentivized to lend money when you're going to lose money. much dry powder out at the moment. warren buffett has a stock of it, but there are plenty of other funds that do, too. is that money going to be invested wisely? tony: that depends on your individual manager -- guy: but basically you have got -- as you say, there is so much money out there, you have to wonder whether or not there are enough decent deals. this is buffett's problem as well, the moment to return decent deals. -- as well, to return decent deals. tony: we are not early.

things happen at the end of a cycle. if you talk to a private equity player, they will tell you valuations have become so stretched it is almost scary. it is sort of like about when you are blowing up a balloon. when a vase in front of your face, it feels like it will pop, and then you can put another 10 breaths in it before it dies. we are still in the phase where there is enough money not just on the sidelines, there is enough money available via bank lending or, more importantly, shadow bank lending, which is nontraditional bank lending. i am not saying this will be great, do not worry about it forever. i am saying you are still in the expansion of the credit phase of this. what will ultimately be a bubble, like the last three cycles. tom: kat, one final question to you. what was the energy about the buffett is getting

on in years? give us the pixie dust on that. katherine: the fact that they go for six hours is impressive, but you can definitely tell that -- how oldre quips about they are. keepof the reason they coming as they want to make sure for see buffett and munger as long as i can. and it is critical we have seen two of the most likely potential successors speak up a little more during the meeting. they would be handed questions that sit in their wheelhouse. that was kind of important. it was subtle, but hearing from ofm more may alleviate some the concerns about the succession issue.

guy: we will leave it there. nsky, giving ali city just on what came out of the weekend meeting. coming up, a conversation on what is happening in the oil market. francisco launched -- francisco team, will be joining the coming out. this is bloomberg. ♪

>> i loved what i owned, and i felt, over a period of time, if i held onto them, i would be fine and i did not have a bank

as a partner. what you worry about is if you live on borrowed money and the bank says we want our money back, those are the people get crushed. tom: how do we go back to the enthusiasm on wall street, standard and poor's book -- don't we want to get back to a joy of individual stocks? how do we get back to that? ken: i do not think you do, because the market has become so institutionalized. -- blackrock, over $6 trillion in assets, started in 1998 with nothing. how do we do it? these institutions need to put these enormous sums of money to work. pension funds. foundations. endowments. we need to figure a way out.

how do we invest it wisely with a sufficient rate of return? tom: i love busting mr. lan gone's chops. his book is wonderful. and he has done something original in philanthropy, paying for all tuitions at new york university's medical school as well. there is the book, "i love capitalism." a violent look about his childhood out and all the success ken langone has had. it is.at stock -- there tony dwyer, you and i know it. mr. langone mentioned that home depot has out-appled apple. we did not get much romance in 2x4 plywoods. tony: it is probably the only place every person goes to other than apple. tom: howdy have the courage to stay on board home depot in the 2000s? tony: do they have access to

money? do people and businesses have access to money? family does a home project, we had to get materials for that project it if i do not have increased income or increase access to capital or lending, how will i buy stuff there? that is the difference that i think i need to really convey in the marketplace. it is always about availability of money. to be bought until i do not have availability of money. we used to talk about how there is no trickle-down effect in taxes or lending or anywhere else. we did a show years ago where i was doing a house project, if you remember -- if i do not have access to that money to do the reconstruction project, the driveway guy does not get paid, the roofer does not get paid, i do not go to home depot for the lumber. tom: he built a 5000 seat hockey

rink in his backyard. [laughter] guy: why not? you build it, they will come. tony: you should have said a, soccer stadium because guy is on. guy: i'm a rugby guy, but jon will be on, he is the football guy. with whatepot kept up is happening in the home retail space? shares have gone up. you take a look at amazon -- ultimately, will amazon eat home depot's lunch? i look at the fact all of these companies, one by one, are being consumed this machine that is amazon. tony: let's look at the charts. home depot -- i am not an analyst on home depot or amazon, so i cannot comment on individual stocks. what i would say is home depot is up and to the right, just

like amazon is up and to the right. itit is eating its lunch, has not shown up in earnings. but the story is both are working well because incomes are up and lending is up. those are the things that drive spending. it is simple. tom: we hear that from mr. langone as well. tony dwyer, thank you. we got a lot of talk about difficult markets year. the u.s. broncos at 7:00. u.s. bond quotes at 7:00. this is bloomberg. ♪

kailey: this is "bloomberg surveillance." i'm kailey leinz p let's get the bloomberg business flash. occidental sweetened its $38 billion bid for anadarko. the amount is not changing, but occidental changed the cash portion of the bid to 70%. plus, if it does by anadarko, it will sell off a stock of its

assets in africa to total. already's board had accepted a takeover offer from chevron but will look at occidental's bid. aere will reportedly be formal investigation into spotify's antitrust acquisitions against apple. apple takes a 30% cut of revenue from spotify for distributing the music streaming service on its platform. spotify calls that a tax on competitors. that is the bloomberg business flash. guy: thank you. this week, india enters the for phase of the world's largest democratic elections. results are due may 23. the leading is party may file just short of a majority. 's national secretary spoke exclusively with john micklethwait in new delhi. >> we have a country security

and absolute majority. bjp ought to make an alliance with partners. >> can i ask about china? you're known for taking an interest in that. you have the belt and road initiative coming out. why won't india joined that? >> there are two certificate reasons, the number one being the sovereignty question. there is activity that peons -- belongs to india today. the brat support initiative. bra -- the b.r.a. initiative. help.r.a is supposed to countries, but there was never any multilevel discussion on

that project. we should be that able to speak. elected,r. modi was many outsiders brought up the issue of the religions between majority hindus and the minority muslim relation. the result from human rights watch -- people were killed by so-called vigilantes between may 2015 and december 2018. will you condemn those killings? >> absolutely. india -- however these incidents have happened, we asked local governments to take strict action to handle that kind of violence. years of has seen five social harmony.

-- in the past, we have had some incidents in the country, but we have managed peace in the country. but i will say we shall never support any vigilantism. tom: our john micklethwait with ram amadhav in india. it really data check shows the dynamics this morning. let's show that now. these are dow futures. a set higher -- this is a classic synovial dampening function out of 26,000, just below a two standard deviation move. it is normal. guy: it probably is reasonably normal, and it is not a major overreaction. a tasteless, it may be

of what is to come. apple i would keep and i on, "ft" reporting on spotify is worth paying attention to. pay attention to the swedish krona as well. it has been weakening. an overnight, the aussie dollar at the bottom, pay attention to that. the rba could be a story overnight. first dm central bank -- tom: guy johnson, you are a trooper, coming out of bank holiday in london. guy johnson with a smart comment from david merritt about the exit. we are focusing on washington. the response of the chinese to the president's tweets. this is bloomberg. ♪

♪ alix: president trump threatens

increased tariffs on chinese goods in two tweets. beijing still reportedly sending a delegation this week the -- the's country struggles to respond. occidental increasing its cash ,ortion for its bid on anadarko all or nothing for the ceo. david: welcome to "bloomberg daybreak." i'm david westin, here with alix steel. this was supposed to be a victory lap on u.s./china trade. i'm not so sure. is good for the markets, then not so much. it appears it is not going to be wednesday he will show up. maybe thursday. alix: no doubt, mr. trump posturing over the last 24 hours. the question is, posturing for