francine: china's vice premier plans to visit the u.s. as the trump administration says tariffs on chinese goods will be raised on friday. says transitory pressures keep inflation low. profits slumps. antitrust provisions. francine: good morning. good afternoon from asia.

welcome to "bloomberg surveillance," this is francine lacqua in london. headlines,trade stoxx 600 unchanged. mixed bag, u.s. 10 year yield at 2.48. crude oil, a little news. the trump administration dispatched warships in the middle east in a warning to iran but it hasn't had that much impact on the price of oil. coming up, jamie dimon, from the global summit in beijing. don't miss that interview on bloomberg tv. the $38 billion takeover plan is superior, giving chevron four days to boost the offer or walk away.

executive saidef he is willing to end if the price gets too high. profiles aredit taking on more and more debt. , didatest ability record not indicate any course of action to rein in markets. refused tohin has release president trump's tax returns. this rejection opens the door for democrats to pursue more forceful means including issuing a subpoena or filing a lawsuit. turkey has ordered a rerun of elections in his temple. allegedng ak party widespread irregularities in the original election.

erdogan has been criticized for undermining democracy. extinctions face according to a new report that calls for global action. climate change is cited as the third biggest cause along with pollution and changes in the way the land and sea are used. 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. francine: the u.s. will raise tariffs on chinese goods on friday, accusing beijing a backpedaling. the vice premier will visit washington on may 9 and 10th. joining us for more, our chief asian correspondent, edna. -- enda.

enda: china is trying to de-escalate tensions and perhaps they think there is still a window to get a deal done but it appears there will need to be offers. our colleagues were reported accusedy u.s. officials the chinese a backsliding around technology transfer and how an agreement would be enforced. whatever they bring to the table will need to be convincing, at this stage, to head off increase in tariffs. francine: what are the unresolved issues. the main stumbling blocks remain the main issues. there has been progress on the deficit. china has made some commitments for opening up parts of its economy to foreign competition. agreement, of any

there is concern, around force technology, transfers, ip protections, structural issues, that i do not think anyone expects to be resolved in a short timeframe. the question is, are we looking at last minute squeezing?

>> maybe we should be more mindful, unless it is signed, nothing has been decided yet. it is interesting. let's see what the talks will bring. it is probably a lot more unknown territory for markets overall because when is the last time we had a trade war potentially looming over markets? francine: will it be a real trade war? to my mind the question is, will it stay within the china-u.s.? or will it broaden? there is more a potential global

situation and only until we know how this is going to unfold, we can start having a look at the implications. what it will do automatically is bring more uncertainty. if you think about, if you are a corporate treasurer, would you start investment projects now? this is what we have seen. sentiment,ompany this is potentially weighing on the outlook going forward. francine: what does it mean for your investments? if you don't invest in infrastructure, commodities -- the price, longer-term, goes up. sonja: you're right. it is about understanding where the profits of the economy that will be hit the hardest. there has been focus on individual sectors and segments. view on how corporate sentiment will hit the economy is much more difficult. it is not all negative.

we have seen some commodities rising on the back of the strength of the chinese economy. it is more nuanced. you have to trade more carefully. francine: what does it mean for renminbi? for policy? sonja: they have been more focused on their stimulus measures in the domestic economy. we have seen much more in line in terms of revitalizing chinese economy. a wait and see mode. francine: thank you. you are staying with us. coming up, robert kaplan says rates are in the right place but it warrants watching. that is coming up next. later on, we speak to richard clarida, of the fed. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance," and i'm francine lacqua in london. the world's largest beer public stance.a the company is looking for new

ways to pay down the debt. airlinesggest budget is keeping up the pace of expansion. the indian airline has been adding an aircraft every week. ony are now discussing whether to buy a longer-range version of a plane. german automaker hit by slowing sales in key markets, plus potential legal charges up to one billion euros. that is your bloomberg business flash. rates don't need to be lowered but weak inflation needs to be monitored, according to robert kaplan. bias towardave a the next move being up or down for the moment. i think we are in the right place, in the neighborhood of neutral. i will keep an open mind,

watching how the economy unfolds before making a judgment either way. francine: sonja, it is clear the problem, iy has a don't know whether it is how you read inflation, or getting inflation up. if there is one thing you need to get right, if inflation is here or not -- so far it is mixed. sonja: it is clear the tail risk for markets lie within getting this wrong. it is nice he says he doesn't mind whether the next move is up or down. if it is down because it would imply growth trajectory is weaker than expected. historically, the honeymoon. hike inetween the last the first cut which is good for equities. if the next move was to be a

cut, this would imply growth trajectory is weaker and that is not good for risk assets. francine: do you worry about asset bubbles? monetary policy is the biggest concern in fueling them. sonja: there was interesting reports on the importance of fiscal policy. expansionary fiscal policy comes with larger deficits and they are mostly supported by low interest rates and made sustainable by them. it is an interesting analysis on how this will work out. in other areas, we have seen explosion in bbb corporate bonds. interest rates have fueled companies using that window of opportunity. francine: do you have to take a bet on whether it is a cut or a hike? sonja: both are risks to market. the way it is priced, there is a higher chance the market is

looking for cut. data, look at economic the latest labor market data, we are still working in expansionary and economic environment. q1 has been better than expected in the u.s. and other markets. there is this question on how this will work out. the idea markets have been looking at, growth is stable, no inflationary pressure and central banks in supportive mode for the foreseeable future -- if you change any of this, risk assets have to reconsider whether valuation levels or spread levels for bonds. francine: you first see a movement in treasuries. does it impact bunds? it is difficult to tell. the butterfly effect. more: rates, short see bearish than equities. interesting diversions. you wonder who is right at the end of the day?

it is always interesting if you see one asset class pointing in a different direction. it remains to be seen for the time being -- equities have the upper hand because of economic strength. francine: we have had a good earnings season. visibility is low. do you like europe more than the u.s. because it is cheaper or are there more risks? sonja: two points. one, expectations have been lower so dramatically, first quarter. we might come in flat or negative. that is interesting. that tells you, multiple expansions did the heavy lifting in q1. it has nothing to do with the strength of underlying earnings. the market is trading on the hawk. that is in slight contrast to the potential cut priced in by rates markets. there is a conundrum that needs

to be solved. only one can be right at the end of the day. from that angle, there were interesting snippets. margin pressure and low visibility in terms of outlook, -- tech sector has been the standout in earnings weakness in the margin and disappointments we have seen. such a greathad run for equities. if we finally see input costs going up, inevitably something has to give. this is why we finally see the impact of negative operating leverage. and you as robust, don't see translation to earnings level. tech,ne: tech or parts of are you wary of? sonja: software and services. it is interesting, i looked at a chart earlier. for software, expectations have stayed stable. semiconductors are the most sensitive and cyclically

exposed. they have come under more pressure. who is more realistic in terms of assumptions? software sector has been the one with the highest disappointment on the margin front. francine: you are staying with us. still to come, exclusive interview with richard clarida at 3 p.m. london time. this is bloomberg. ♪

francine: this is "bloomberg surveillance," and i'm francine lacqua in london. the hotly contested mayoral collection is getting a rerun. a new vote must be held on june 3. the original ballot was the worst setback for president erdogan in his 16 years of power. editor,le east managing good morning. why is this such a big deal for turkey? supposedly oneis city. for the ruling party, it is more than that. the reaction from investors really underlines how they see

democracy ine turkey has been undermined. the president would not take a defeat. result,d not like the he would go for a rerun. the risk is there is an extended period of political turmoil. francine: what does it mean for investors? two they worry about political risk? do we have any polls? -- do they worry about political risk? reporter: before the rerun, investors were promised this is the last vote and we will have four years without an election in turkey. there was more clarity. now you have the risk of more political turmoil. who knows what the result of the june revote would be? that is why they have been selling lira.

the economy has been struggling. inflation is over 20%. where do we go from here? that adds to the risk facing companies trying to service debts in dollars. francine: thank you so much. laud.with us, sonja given all of this, what is your exposure to turkish assets? sonja: i cannot generalize. it depends on the mandates. he summarized it neatly. marksve real question about democratic strength in turkey. although it is one city, it is the most important in turkey. it pays to stay on the sidelines until you have greater clarity. halt turkeys would in em context?

is it worth the risk for waiting? i would opt for the latter. francine: let me bring you over to a chart. -- the, emerging stocks flareups make emerging stocks the cheapest. sonja: i do not like them in general, but in particular. i like pockets of em . complex, part of the argentina. we should not forget, on the back of the strength for the renewed strength of the chinese economy, the real beneficiaries are across the emerging market complex. francine: you look at china strength rather than dollar weakness? sonja: dollar weakness is always a positive agreement -- a

positive ingredient in the e.m. season. it is now finding pockets of strength and the global earnings picture. china has produced the backdrop that should be beneficial for companies around em. francine: thank you so much. you stay with us. dimon from jpe morgan's global china summit in beijing. do not miss that interview. this is bloomberg. ♪

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iliad. 70% of the portfolio in france. it is a transformative deal that doesn't break the bank. both companies to the upside. movers on the stoxx 600 this morning, so they -- solvay has a bit of pressure on it this morning. francine: let's get straight to the bloomberg first word news. china's top trade to go shooter will still visit the u.s. this week following the white house hoping pressure to raise tariffs on chinese goods this friday. it accuses beijing the backpedaling on commitments it made during the negotiations. significant points remain unresolved including of tariffs will remain in place. is the first of many all over

the world. so we should do everything that's possible to avoid a trade war. is always afs deadlock. and to get to a decision for everybody in the u.s., and for growth all around the world. >> rates don't need to be lowered. that is according to fed president robert kaplan. tweaking the monetary policy won't impact that. for the't have a bias next move being up or down at the moment. i think we are in the right place. we are the neighborhood of neutral. we have been watching how the company unfolds. >> the president gave tiger woods the presidential medal of freedom.

the first major title in more than a decade. 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. francine: getting breaking news out of china. ,his is the effects reserve especially when you look at the global dominance of china. at the end of april, $29 trillion. a little bit of movement on the yuan. 6.77 is the dollar offshore. we will turn to oil now. services chief executive

-- >> about growth, we have identified a clear strategic , it is at the end of the strategic. >> but you have already been up the dividend. that audience is going to be part of the message. towards dividend play. >> the dividend play is a strong message.

we can deliver strong, sustainable payouts to investors and shareholders. they have plenty of headroom and capacity. it is a strong figure. but this company is about growth and the outlining of those objectives today and tomorrow are very much focused on outgrowth agenda management. and i have spoken on a number of occasions. you want to expand into saudi arabia. why do you want to go towards uae? arabia and the your core market gekko what do you have to say -- market? what do you have to say to that? growing in the uae,

choices between growing in the uae and internationally. we will grow in the uae. we have grown significantly over the last 18 months. and we will talk today about opening an excess of 10 sites in dubai this year. we have also grown very significant in the first quarter. therefore within the uae, we have a strong performance and growth trajectory within that. what the international peace gives us -- yes? sorry, go ahead. >> with the international peace gives us is the ability to go longer. we know saudi arabia has a quasi-districts fuel market today.

have seen positive results from that. but we will continue to learn from that. our business as a very international business. >> that was john kerry to bloomberg in london. that to a developing m&a story. the company favors occidental's bit giving them four days to boost their offer. thank you for sticking around, james. this is a really old-style bidding more. why do they prefer occidental's bid?

>> for starters, occidental has come up with a lot of methods of addressing some of the concerns had.rko shareholders they have done a deal with french oil company total. so this is addressing the questions about investor protests and the high level of debt. francine: will they come back ?nd offer more >> the big test is if the chevron ceo made that a big part of his pitch to investors. they still say they will get value from the transaction. francine: a final question on

doesn't getit anadarko, what does it do? >> it will have huge tracts of land. it will do lots of drilling. the shale oil assets would be a good addition to chevron's portfolio. what does it mean for investors that may want to find value gekko is it too risky to say that -- to find value? is a too risky to say that valuations will go up? >> we have not seen bp in the while. gas arena in a much more has been happening in the health care space. m&athe end of the cycle, activity is picking up because companies try to buy growth. it depends really on how this is going to turn out. i think at the end of hopefully we are going to see is the .etter combination

chevron could come back with a higher bid, but at the end of the day, what the signature potential is, this is what it will look like. i don't have any knowledge at this point. francine: do you expect the flurry of consolidation? >> it is possible. bp did a big deal. portfolios, seen as being a bit light. both country's sticking to this mantra of cost discipline and value. now that may be just part of the play as they negotiate with targets. certainly details on the podium.

francine: thank you both. next, press slumps at bmw. falling 58% after setting money aside. he will bring the details next. this is bloomberg. -- we will bring you details next. this is bloomberg. ♪

>> [speaking foreign language]

francine: president erdogan speaking at the parliamentary .roup meeting in ankara over the weekend, turkey ordered new elections overturning a near defeat for president into one. .- president erdogan we will have more from turkey throughout the day. the new mayoral elections istanbul will be held on june 23 after the board decided voting 7-4 to another one. we will keep an eye on turkey and we will keep an eye on what mr. erdogan says. let's get to bmw for squibber profit slumps. is it setting aside more money gekko -- many? -- is it setting aside more money?

delayed the rollout of cleaner omission cars. but in an interview with bloomberg last month, they denied the charges. those allegations have no foundations. the discussions we had with other manufacturers were not held in a secret way. we have communicated in a very regular way. counteract everything we need to. francine: joining us from the neck is oliver sack out -- is .liver oliver: the numbers if you look at it, it was their first automotive profit law since 2009. since 2009.ss

but that legal provision you mentioned, profits are still lower by about 42%. it brings the profit down about 27%. there are a lot of factors in .lay bmw is also in the middle of a model refresh. profithat happens, the isn't hitting the levels that they hoped it would. francine: when does bmw expects things to pick up? they have set the second half of the year. they have repeated that since the beginning of the year. saying,ything bmw is once the model refresh is or the new three series hits the road ,r the x seven hits the road they are looking at the third and fourth quarter of this year. francine: thanks so much, oliver.

our reporter from munich. when you look at carmakers, there is a lot of game changers. when is tariffs, one is the alliance in place. do you see value? or are they too many carmakers around the world? don't just look at bmw in in terms of their profit outlook. there are various moving parts of play and clearly we have seen the overall car production cycle and we should brace for a slowdown. there are factors in terms of bmw. but we have seen struggling car manufacturers for a while. we're probably in the middle of the transformation because of the change towards electric cars. manufacturersr

have started to embrace this topic. we rely quite heavily on the old combustion model engine. the car: had you choose of the future? electric cars is one thing. .riverless car's is another >> i don't know that we have the visibility yet. focusinghy we see them on the electric side of the equation. area -- a transition transitionary period to cover. obviously, the breakthrough in terms of the electric models they bring to the market. francine: i know this is a difficult question because we

don't always understand the psyche of the trump administration. if there is an agreement with china, will they be more likely to be aggressive with carmakers, tariffs in europe, or -- i don't know what the dynamic is, but it feels interlinked. complacent be too because he hasn't ruled it out. inyou were successful getting concessions from china, why would he not try to reach them on the other side of the atlantic? it seems a reasonably straightforward target. it obviously is a double-edged sword. do we think president trump has a problem germany in particular? knows it would hurt the most given the size of the car manufacturers in the german economy and the changes attached.

francine: what is your take on europe as a whole? where do you put europe in all of this uncertainty? >> europe remains reasonably unloved. we have seen quite a few numbers economically. it seems like a different chart going on from the investors angle. we have seen improvement from the consumer side. labor markets are steady as she goes. europe is much to birth -- cheaper in terms of equity markets. again, you have to be mindful that there is quite a heavy cyclical exposure. this is what you see at the bottom of the chart. stabilizing.

francine: chief investment officer at legal investment management. returns,g trumps tax setting up a potential legal showdown. we will have the details next. this is bloomberg. ♪

language]ng foreign francine: that is president erdogan in istanbul -- actually, in ankara right now. we are the istanbul mayoral elections will be rerun. 15,000 akp voters were stolen in istanbul. it is quite close.

theuse they are rerunning mayoral vote, it is just amended -- another manifestation of his power over institutions. lira atsee the turkish 1678. treasury secretary steven mnuchin has refused to reach -- submit president trump's tax returns. democrats pursuing more forceful means including issuing a subpoena or filing a lawsuit. president trump's personal isyers saying joe biden entering politics again. have dismissed the request for tax returns. will they ever get them?

weeks.inted for it makes it inevitable that the house will file a lawsuit demanding that he release them and having a federal judge ruled on the matter. but that the law is very clear that the house has the right to request to see the president's returns. i think it is a delaying tactic more than anything else. it will go for potentially months. you put together a timeline in this ukrainian probe. lawyer hasersonal saying that biden should be investigated for his call in early 2016 for the ukraine general prosecutor to

resign. he says it was done to benefit his son. board of an on the company that the general prosecutor was investigating. we have spoken to former and we have seen documents that showed even though there was open investigations, multiple ,nvestigations into the company they were not going anywhere. they were effectively buried. and that the u.s. had never requested that that investigation stop. francine: everyone should see stephanie baker's story on the website area this is bloomberg. -- on the website. this is bloomberg. ♪

francine: in washington, china's vice premier will visit the u.s.

president trump says tariffs on chinese goods will be raised on friday. robert kaplan tells bloomberg that transitory pressures are keeping inflation low. and we speak exclusively with the fed vice chair. slumps, falling by 78%, hit by an antitrust provision. good morning, everyone. this is bloomberg surveillance. tom, we look at brexit and there is a lot of news simmering in the background. the istanbul election, addressing parliament right now and we look at the european union. it's really front and center in america and it has pushed mr. mueller a little bit off to the side.

trade really front and center in washington. we will talk about trade and the implications for the dollar. trade, it willh be a crucial week between the u.s. and china. beijing says the top negotiator will head to washington this week for talks. this was after the trump administration ratcheted up the pressure. the u.s. plans to raise tariffs on $200 billion of chinese products on friday. the next move is up to chevron. they have declared the occidental takeover bid superior. they can boost the offer or walk away. the federal reserve has ramped up earnings on the corporate debt market. the companies with the worst

credit profiles are the ones doing more and more borrowing. are they going to do anything about it? and in turkey, the election board has overturned a rare defeat for president erdogan. it has ordered a rerun. they allege widespread a vote won by in the main opposition party. it could hurt democracy and the economy. 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. equities, bonds, currencies, commodities. predicting that we would come back. we did. down we go again. the curve a little bit steeper. next screen please, if we could.

vix 16.20. and i'm looking at the german two-year. it has gone nowhere. -0.60. a lot is going on with mr. erdogan. francine: we are struggling to find a long direction because of the street concerns. there is concern about nationalization when it comes to the labour party. tom: that is a really difficult chart. if i was teaching a course, this is textbook. it is really well contained.

all i have to say is that it isn't pretty. is extremely well behaved against the moving averages. i will not go into the details other than to say if i was teaching a course on drift, this would be it. deutsche bank is really an ugly chart. i chose to talk a little bit more about trade. the implied volatility has surged and this was one of the biggest one-day jumps. china unexpectedly devalued its currency. chance it could pass, and we took it back to september of 2015. on friday,se tariffs

accusing beijing a backpedaling on commitment it may during trade negotiations. trade talks will continue as the vice. if to visit washington on may 9 and 10. is set toe premier visit washington on may 9 and 10. give us a sense of of this -- of if thisng changes anything. does it make the u.s. less likely to impose tariffs? >> it may well. he is still getting on the plane despite the significant threat over the weekend. the chinese said they will not negotiate with a gun to their head. that is what they are doing at the moment. it is a matter of the technology transfer that led to this

frustration in the first place. he may have something new in his back. may have a lot of sticking points. can they overcome them? it is brinkmanship at this point. we could get a deal that actually overcomes them. it is a difficult question. it is unlikely the issues will be resolved in time for friday. is there something, some form of words or a concession to kick the can down the road a little bit and give the global economy a bit of breathing space? tom: i want to bring up something in the new york times

that i will run this hour and the next hour. this is from the editor of the hong kong economic journal. leader since the founding of the communist state in 1949 can recognize the paramount importance of american ties and work hard to improve them. under president xi, anti-american rhetoric has been seen. he may have challenged the global leadership of the u.s. too hard and too soon. does he have the support of the arty? been know there have ingher times for xi jinping

the course of this trade war. notcommunist party is monolithic. but the country as has been pushed by trump has rallied behind the leadership to a certain extent. the wheels have not come off yet.political wagon just clicheis is a story, the developing. the china story in washington is developing. we'll develop a conversation with the vice chairman of the fed, exceptionally important in framing economic policy for chairman powell. look for that in the 10:00 hour. this is bloomberg. stay with us. ♪

>> this is bloomberg surveillance. let's get the bloomberg business flash. first-quarter earnings slumped at bmw. the german automaker was hit with slowing sales. the eu is investigating bmw for alleged collusion. upliftingignaling pace and expansion. on average, the indian airline has been adding aircraft to its

fleet. discuss it a longer-range version. and the world's largest beer maker may take it public. anheuser-busch considering the ,ale of a minority stake showing how the company looks at new ways to pay down the debt. as the bloomberg business flash. francine: there is an important event, the paris forum, where we have a number of leaders attending. and of course, we just getting news from the imf talking about the trade war saying that everyone loses in the trade war. trimming some losses this morning on news that chinese vice premier will be coming to the u.s. for trade talks. let's have a listen.

>> nobody wins a trade war. in a tradeas to lose war. takenscussions that have place will resume which is what i understand will be successful at the end of the day. francine: joining us are our guests. first of all, when you look at showing up in d.c., does that mean they are willing to give something? that trade wars are easy to win. and to have less leverage. -- bere not going to see seen as the one still railing this round. -- as the ones derailing this

round. francine: this time we have terms of 25%. are we back on track? >> the downside is that the risk has bigger market moves. it is definitely not the-based -- not the base case. even though i like to say it would be fine, we have to assume the worst. can make 2% or maybe 3% on the good news that the trade talks are ongoing. the downside is much bigger. trade tariffs across the board on all imports, the u.s. can issue the pace, not the chinese. it does not impact gdp or inflation that much.

it is whether financial conditions tightening. tom: it is a managed currency until it is not. it is the definition of an unmanaged move. >> the fact that talks are ongoing. i think the chinese are a little bit more on top of this.

we're not there yet when it comes to the next forum. do forat is this economic growth? madame lagarde is concerned about economic growth. >> we will have to see what kind of tariffs get the slumped this week. it is one point or two percentage points in the next few months. the chinese leadership is stepping in with support. it is still targeted support. there are still small and medium banks.

the chinese were not confident that the deal would happen. they have been lining up a series of fiscal and monetary policy. the credit binge could be upon them. far, the stimulus put in place has taken hold. -- >>1 data was positive q1 data was positive. there is always a credit surge at the end of the year. we also have to bear in mind that we have 30 years of the .iananmen square protests china needs a good story for the domestic audience. the fact it is helping the financial audience -- the international audience is good, but it is still about the domestic audience. francine: thank you both, stay with us. coming up on bloomberg letterforms, we are joined by the chairman and chief executive jamie dimon from jpmorgan's global china summit in beijing.

such that interview starting at 10:30 p.m. in new york. this is bloomberg. ♪

>> i don't have a bias for the next move being up or down. i think we are in the neighborhood of neutral. i will keep an open mind. it is not having a substantial material impact, but i can tell

you it is having a chilling effect on the ability to manage the cost and the way to do business. tradeay be showing some tensions. dallas federal reserve bank president robert kaplan. remaining calm with that message is well. the linkage here on trade is tangible. thepresident talks about simplicity of his view of a trade deficit. and it has to have diminished xports, right?

>> trump is emboldened by the sense that his trade war has worked. it remains to be seen how long the u.s. can contain on the stimulus. it can have an effect on china and the u.s. we look at the american media, the guys are flying in from china. there will be a meeting and they will shake hands and all of that. what is the effect on the culture of politics in beijing? this week is extremely testing because the u.s. has thrown down the call it. and an official diplomatic speak, china would have to retaliate. they are still going to beijing because they have to push through. the chinese can't be seen as

being bullied by the u.s. which is essentially what is going on. if this is a last-ditch effort to reach an agreement at the end of the week, that is great. it saves face for everyone. but that is where the deal is stuck because chinese need to show the u.s. is making concessions. that means lifting some of the tariffs. the u.s. wants to leave the tariffs in place to measure compliance. that has been a massive sticking point. francine: we have been looking at the measure of volatility and if it reaches seven. what prices in the dollar? >> in these other currencies need to weaken. the euro-dollar would head lower. really one that stands out is dollar-yen. dollar-yen has fallen and hasn't recovered or shown any signs of recovering since. but broadly speaking, risk goes off.

that is something that people are not pricing in. and therefore, we have that sort of core asia and everywhere else essentially repricing anxiety about the trade talks falling apart. the irony of the situation is that the u.s. economics question has not hurt as much as china. the leverage when it comes to tariffs is in the u.s. favor. theal markets start us on back of it and it changes the dynamics for trump. markets are quite long the s&p right now and you can see that happening if those talks fall apart. and you see a deal get done, ironically. you just have to go through some pain, first. francine: how much pain? >> you have to go back to december to see. donald trump at the phone call with xi. you see politicians do react to the markets. tom: thank you so much, mr.

rochester with numeral. -- with nomura. the dialogue from tweet a actual discussion is so interesting. we will be joined in the next hour to talk about any host of topics. it's trade 101. stay with us worldwide. this is bloomberg. ♪

♪ bloomberg "surveillance," from london and new york, lots going on. baker is, stephanie bloomberg for multiple paragraph stories of investigation and she does that with former vice president biden on ukraine. moreatulations on your than essay, a long read on a sorted thing called ukraine which we are not going to do today, but it sets up mr. moeller come -- mr. mueller coming to washington. bring forward the greeting that mr. mueller will get based on all the stephanie bakers that have written over the last five years.

what kind of greeting well he received from democrats and republicans? stephanie: that is a good question. it is a question whether or not he will appear. there is a tentative date set and we know trump is pushing against testifying. i would expect the democrats to be grilling him on the details they do not currently have on the mueller report. subpoena forued a the redacted versions of the mueller report. they still do not have those in our meeting with justice department officials to hammer out an agreement so they can see some of those reject the d portions. redacte they want more details, especially about the obstruction allegations in the report. tom: this goes back to your

reporting, the linchpin for all of this, reporters who are actually reporting on the details of them a new show -- of the minutia going forward. some sort ofe bombshell -- will he drop some sort of bombshell? stephanie: that is a good question. i would be doubtful that he -- i go any further than think he is such a careful prosecutor, he will be very tods to violate -- loathe violate any rules around materials that were redacted because that was part of a grand jury investigation. he will not want to get close to any violations of that. i think he will be extraordinarily careful and frank about his displeasure with attempted to

summarize his report. that is where you will get more of a push back on why his summaries were not released and why barr was able to control the narrative. francine: tom gave you a victory lap on a story, which i just urge everyone to see. it talks about president trump's personal lawyer and joe biden intervening in the ukraine to help his business. stephanie: this is a narrative that i think will continue through the 2020 campaign, accusations that biden as vice president called for the removal of the ukrainian prosecutor general who had an open investigation into a company where biden's son was on the board. talking to former officials that worked in the general

prosecutor's office, more or less they were ignoring this investigation, not actively pursuing it. aggressive attempts to undermine a u.k. case into money laundering and the u.s. complained about lack of support from the prosecutor's office. on the contrary, the u.s. was pushing the prosecutor to pursue this company. tom: stephanie baker with bloomberg in london. let's go to the first word news. china is sending its top trade negotiator to the u.s. for talks after an escalation and the tariff war. there were speculations he would cancel his trip on the threat to raise duties. the u.s. accused china of reneging on previous commitments.

wantsis saying the u.s. to reopen areas that were negotiated. minister isrime urging the u.s. and china to avoid a trade war. isthe idea of a trade war the first threat on all of the world. we should do everything that is possible to avoid a trade war. raising tariffs is always a deadlock and a negative decision for everybody, for the u.s., for china, for the euro zone, for europe, and for growth all over the world. kailey: iran may respond to tightening u.s. sanctions by backing away from part of the nuclear deal which could raise tensions. one iranian official says they do not plan to follow the u.s. in abandoning the agreement, but they want to make some -- to its commitments.

what could become the biggest showdown in congress with president trump. steve mnuchin refused to release the tax returns, prompting democrats to take steps. it's starbucks coffee thrones" was a mistake. such a thinged how could happen on such a costly production. 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: the government and the opposition labour party -- the government and the opposition labour party are set for a meeting today. the chances of another referendum or general election will rise if they do not come to

a decision. thank you for staying with us. when you look at the chances of a general election, if theresa may finds a brexit deal with labour, is she out? will we see mps try to push her out and succeed? guntram: i certainly think that the first priority now for the comehas to be to finally to an internal decision and some sort of deal, or leave the european union. have been hanging around with a strange situation, the u.k. half in and half out, that will have massive implications in the european level if they stayed on and what a lack the european parliament. there would be all kinds of parliamentarians from the u.k. with their own agenda and from

different parties. the tories might lose a lot. the big priority seems to be between theresa may and jeremy corbyn, to sort out differences and try to get a majority for the deal. once the deal is passed, everything is open in terms of domestic politics. a new election then is quite likely. francine: give me a sense of actually the chances of an orderly divorced from the european union. what are the chances of that? if we don't get it, what will the european elections bring? guntram: i think in the end, it depends on the british domestic politics whether we will have an orderly deal. i still think the chances are not so low. and -- theresay

may for sure and i would say jeremy corbyn have an interest in avoiding a chaotic no deal brexit. theresa may simply does not want to leave her position as prime minister without having delivered brexit. she would be in the history books for not delivering brexit. it seems the chances are low that they will agree on some sort of deal. agree and they at some stage decide to leave the deal, theut signing a economic disruption will be quite substantial. it is also possible they will just linger on for another couple of months and then we will have a european election. the european election will put labour into the european parliament with the tories, and put the new brexit party into the european parliament.

from a european point of view, this is undesirable because we will have this very strange situation having parliamentarians from a country that is leaving. they will all want to have a say on the new european leadership, so even if the prime minister says, i do not to decide on the next president of the european commission, the parliamentarians are there and will say something. francine: let me bring in jordan rochester. what does it mean for pound traders? do they avoid the noise until news happens? jordan: no, trade is off the back of it. on friday, we had hopes of a deal being made. sterling traded higher as a result. over the weekend, the hopes of a deal have been dimmed. the risks to sterling trading

are of course if theresa may resigns, the uncertainty for the new leader of the conservative party would send sterling lower. it would force a general election. my old colleague converts the polling numbers and finds out what the majority will be. it is six seats short for labour having the majority. the market at 50/50. francine: coming up, the euro group president and portugal minister of finance at 8:00 in new york, 1:00 p.m. london. this is bloomberg. ♪

♪ kailey: this is bloomberg "surveillance." let's get the bloomberg business flash. elon musk followed through on his promise to take part in tesla's capital increase, buying $25 million shares -- $25 million of shares. last week, tesla said it was raising $2.3 billion to increase liquidity. in germany, factory orders rose for the first time in three months but the increase was smaller than forecast. thedeclines have concerns german manufacturing slump will continue. profit at aig's property and casualty insurance helped the company's overall earnings beat estimates. that has not happened in a year and a half.

tom: greatly appreciated. a terrific report by annmarie hordern as anadarko turns, that was the soap opera we looked at yesterday. foran murray, the most important isrocarbon expert -- export the cfo of chevron. explain why he is the most important oil guy. annmarie: the clock really starts for chevron to make this bid. he has said in the past that anadarko wanted to 75% stock, 25% cash despite the fact that chevron was willing to boost the cash. we could see them boost the cash betweeng -- offering $70 and $72 a share to stay in the game. tom: here is your "surveillance"

map, and you can do this through the bloomberg, exxon mobil is 14%,11%, short -- chevron , tote how, 22%, and anadarko at 43%. if they went to being a low debt company, and they can lineup a debt in what, six phone calls? annmarie: they can completely. they have deep pockets. last year, their cash flow was the most on record. this is always an opportunistic deal for them and rbc suggested a deal is needed. there ceo has made a reputation in the past 15 months as being financially disciplined when it comes to this.

it is really how far he wants to take it. chevron has the firepower to increase its offer but do they have the appetite? tom: bring up this chart again. thatou need to know is downline ain't pretty, 11%, 12%. that is the tension in this deal. oxy shareholders are crushing it. francine: is there a concern chevron cannot bid because they have been so cost disciplined? anadarko, not buy could they buy something else? annmarie: they have the cash to do the deal and they have a presence in the permian, but this deal has put the spotlight on the permian basin where everyone wants a piece. the permian basin would be the third-biggest opec producer

after saudi and iraq. a good point when it comes to occidental, there investors do not want this deal. friday, they have an annual shareholder meeting and t. rowe price saying they will vote against the board. deal,y they did the should be able to make the deal structured but they do not need shareholder approval. many shareholders and investors feel snubbed. francine: will we see more consolidation in the oil space? annmarie: this is the biggest in years. bp recently did a deal in the permian. i think we could potentially see a lot more deals. this is certainly a public bidding war and spiking a lot of interest. tom: annmarie hordern on the soap opera in the oil patch. coming up on bloomberg

"markets," an important goldman sachs,th credit and finance. everybody is doing transactions. stay with us from london and new york, this is bloomberg. ♪

♪ bloomberg "surveillance," francine lacqua in london, tom keene in new york. we should be in istanbul with jordan rochester. let me go to a chart. this is turkish lira back two years, beyond ugly. it is way elegant. aboutt up with francine what turkish lira is telling us nicely below six. francine: it is a great chart,

and the question is what happens to lira? we have been used to volatility, but the rerun of an election means quite a lot for market makers. jordan: there is so much going on in turkey. that line you showed, that is you have to pay 23%, 24% short kerry so it is very expensive. politics helps you. i cannot imagine the politics changing until the market forces it to change. the value means we are not there yet. dollar-turkey at seven, may that is when we need to rollback extreme measures. francine: is there a psychological level where something changes? jordan: like i said, seven.

our turkey specialist covered this in detail, and there is so much going on, nato versus turkey, the russia missile order , local elections, the central bank turning more dovish, and processar-ization continuously. it is only a few months at the current rate for they are depleted -- before they are depleted. you need something to change and i cannot see it from the politics or what the locals are doing. it has to be a market reaction. tom: let me ask the official question for all of nomura -- it appears the idiosyncratic nature of this has increased over the last six weeks. turkey is more removed from the rest of your world, is that right? jordan: it is.

when the turkish devaluation happened last year, we saw euro-yen go lower because japanese investors have been highly involved in turkey when it comes to buying turkey, a high returnand a given the risks. the correlation is a lot lower. folks have de-risked and taken into account the risk around turkey. it is no surprise turkey is falling in value. it is the idiosyncratic story and it is not moving on the markets like last year. francine.ead, francine: what is your take on emerging markets? jordan: the dollar outperformance has been one of the things that has gotten most analysts off guard. i have seen a few throwing away their dollar weakness story.

we still have that in the second half of this year. european data comes back on a bounce thanks to what is happening in china. we need to see more stimulus from china and more fiscal spending. bank, othertral easing measures will feed through and emerging markets should be better. tom: jordan rochester, he writes for nomura. call it a solid economy in our conversation, he absolutely nailed that. richard declared a, every word larida, every word matters. ♪

♪ tom: this morning, confusion reigns as mr. lighthizer and

vance's the president's tweet -- advances the president's tweet. china arrives tomorrow. chevron hass, yes, a response and more cash with occidental. brexit. maybe they will name the baby ian or jeremy. who knows what they will name the baby. it is all about brexit. we are live from our world headquarters in new york. francine lacqua, what will they named the baby? we should actually make a bet on it, we do offline, and then you buy me dinner. it was quite exciting yesterday. everybody loves the royal baby and it is the root of the nation.

not translating into brexit talks. break from thece idiocy. we go into the week, it is a side story but it is not. it is a boy. we cannot name the baby emma. francine: no, we can't. tom: let's go to first word news. kailey: shaping up to be a crucial week in the trade war between u.s. and china. beijing's top negotiator will head to washington. it was announced after the trump administration ratcheted up pressure, accusing the chinese of back telling -- backpedaling. the u.s. plans to raise tariffs on 200 billion dollars of products on friday. anadarko has declared occidental's takeover offer

better. the federal reserve has ramped up its warnings on the dangers of high risk corporate debt, saying that countries -- companies with the more -- worse -- will they do anything about it? in turkey, the election board overturned a rare defeat. it ordered a rerun of the mayoral election in istanbul. critics say the decision could hurt turkeys democracy and economy. 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 kailey leinz. this is bloomberg. tom: thanks so much. --ndon emails in from excess texas.

he said, you can name a baby anything today so i am going with emma for the royal baby boy. yesterday, nice recovery, lighthizer speaks and futures down. we are still below the levels we were at before the panic crash. the vix, 16.32. i guess i have got to go off of kaylee's news, turkish lira sharply weaker. assetse: weaker lira, sinking as the istanbul vote rerun raises political risks. stocks are declining as trade concern lingers, oil dipping, euro rising in advance of

factory orders rebounding. storyline,t off the it is so darn elegant. this chart is a gorgeous and elegant mathematical exercise. this is a log chart of deutsche .ank, and it screams lower if i was teaching a course at school, i would use this chart to show trend. it is beyond ugly. francine: i like your chart. i am looking at some of the trait anxiety on renminbi, another way of telling the trade story. you can see the one-month implied volatility for the offshore one -- yuan has soared. good chat ons a politics, finance, and economics in china, what is the outcome for beijing for what francine

showed, this jump position over four standard deviations of a weaker yuan. what does it mean for politicians? yuan is a sensitive issue when it comes to stability and sentiment for china's market . it has been very stable in recent months. outflows have been nonexistent. reserves have been steady. it is probably one of the two they have up their sleeve if the trade tensions become worse. if we have the resumption of a trade war, we might see downward pressure on the yuan. all these metrics looking in, the exchange rate is the most politically sensitive. tom: there is also a political debate as well. bring up my morning must read. timess from the new york

-- the former editor of the hong kong economic journal, and this was a stunning essay on the history of china. every chinese leader since the founding of the communist state recognized the paramount importance of american ties and worked hard to improve them and reaped huge benefits. under the president, anti-american rhetoric has spread in official media. soviets,with the president xi may have challenged the globe world leadership -- global leadership of the u.s. too hard and too soon. feeling among a china watchers that perhaps mr. ,i overstretched his hand pursuing grand -- the belt and

idea for ambitious made in china 2025 to be a world leading economy, and that makes it a competitor to the u.s. rather than a strategic ally by description. the dallas fed president mr. kaplan making the point that many of the grievances the u.s. has against china are limited and the u.s. is set to take on these issues. there is a feeling when it comes to trade and china, the growing economic weight, their relationship has to be readjusted to factor into its current state whereas -- versus where was 20, 30 years ago. that is a view that perhaps xi has been overstretching the little bit. francine: the japanese have always said -- chinese have always said they will not negotiate if they are put into a corner.

what can they do to negotiate without losing face? enda: they have their own self interests and rational viewpoint, but at the same time they are trying to negotiate a trade deal, so it suggests they want to de-escalate the trade tensions and head off washington at the pass before they increased tariffs. clearly, they want to come to the table with some kind of offer. presumably, if that offer is washington decides whatever the vice premier brings is not good enough, we are back in with the trade tariffs. a fairly critical few days ahead. tom: thank you so much. we appreciate your evening conversations from hong kong. the vice chairman of the federal reserve system, michael mckee

asks questions to the chairman of the press conference. michael mckee with richard cla rida in the 10:00 hour. this is bloomberg. ♪

♪ i think it was necessary for the u.s. to step up and address these issues, but this is a very complicated agreement and people in the united states should not think this is a simple thing. i do not have a bias toward the

next grouping up or down. i think we are in the neighborhood of neutral, so i will keep an open mind and watching how the economy unfolds before making a judgment. tom: the reach of bloomberg, mr. kaplan in beijing speaking to our team in asia, on u.s. policy. it is always a good time to speak to willem buiter of citigroup, special economic advisor. that barely conveys his holistic sense of economics, economic history, and the times we live in. we are thrilled to have you here. i have got to go right to the fed and michael mckee's conversation with richard clara data. -- richardara data clara.. clarida.

is am: richard clarida first rate global economy and macro economic -- economic -- economist. in the privatece sector and coffers. chops, as doajor you and stanley fischer. gertler-clarida, can those dynamics work for the vice chairman, the chairman, or is this so messed up the clarida papers do not work? academic discourse is different from central-bank discourse. i know that richard clarida is

very -- francine: how do you think they are interacting with the market? robert kaplan suggested it does not matter for the economy whether there is a cut or a hike. it does to the markets. our the markets mispricing what the fed is looking at? willem: he said the economy is roughly where it should be. rates are where they should be, near neutral. likely that the next move is up as down. there is no bias, in the fed's view, on which way the rates will go. given the strength of the underlying economy and the under shoot of the inflation target is modest, it seems an entirely appropriate stance. francine: do you feel inflation will pick up or continue to

under shoot? willem: inflation will pick up, not massively, but it will pick up first in the labor market where we are seeing 3.6% unemployment rate. is still higher, but the labor market is tight and getting tighter. there will be some passing on of higher wage inflation into price inflation. it will be modest, but i think it will be enough to keep the fed happy. tom: there has been two eras of trump appointees. the train wreck over mr. cain and mr. moore. we had an interview with him literally hours or minutes before he resigned or was thrown out. can trump get back to appointing

legitimate economists? can he get back to a more traditional appointee? willem: if you look at who has been appointed, he certainly knows how to appoint people that are eminently qualified. i have no reason to believe that will not be resumed for the next time. now i look at the fed right and the theory of rate cuts. have you ever seen this divided polarity? 1994, like another time you have studied? willem: because of the market's perception of what the fed is doing, these are rather unusual times. the fundamentals are quite simple. the economy is growing robustly. inflation is slightly below target. what you do is in your hands and you wait for the data to tell

you which way the economy and inflation will move. francine: thank you so much. interviewn exclusive with the j.p. morgan chase chief executive, jamie simon, at a global summit in beijing. that is on wednesday. this is bloomberg. ♪

♪ this is bloomberg

"surveillance," let's get the bloomberg business flash. first-quarter earnings slumped at bmw. they were hit by slowing sales in key markets and revised potential legal troubles upwards. bmw is being investigated for collusion. indigo is set for talks with airbus for another plain order. they have been adding an aircraft to its fleet every week and are looking to buy a --ger-term version of considering a sale of a minority stake of an ipo. ways to payking at down the debt of sabmiller. tom: thank you so much.

i talked about an economic base. in the 20th century, there has been a great linkage, not only willem buiter under james tobin at yale, but the whole dynamic --how we count the beans counting the beans, the input output analysis and every viewer in their own way is living this new technology. ,an we trust the economic data given all the new technology we are dealing with? that.: we always have --h artificial intelligence

is that correct? willem: we are undercounting potential output. one of the reasons for the miss measurement is that there would be not counting for the gig .conomy in output for the greater potential, there is more slack in the economy then we would believe on the base of past evidence. francine: what is your take in modern monetary theory? is it a low-dose path or

something that will happen? way ofn appropriate describing the economy when it is stuck in a liquidity trap. any deficit can be financed harmlessly through monetization. once you get away from the zero then the possible inflationary consequences and other consequences of debt financing become first-order economic issues and the simple version of modern monetary theory is no longer appropriate. francine: does it mean that --kets should be wary that well, earlier than we think, or do we keep it at bay? willem: markets might be worried that the wrong application of mmt might be implemented and

policies at some point after the next elections, but i would not hold my breath. remember, monetary policy in this country is made from the operation of an independent central bank. even if the political classes in power were to be true believers in monetary theory, there is still a long way for implementing it in practice in an economic system like the u.s. francine: thank you so much. we are getting breaking news out of ferrari, confirming its 2019 guidance. it its highest estimate. we did hear from ferrari that they are thinking about suv's.

getting some 3.6%, tom. tom: how charming. let's come back. we are looking at markets, futures at -15, dow futures at -24. the euro is still turning at a 112 love -- 1.12 level. this is bloomberg. ♪

tom: bloomberg "surveillance," worldwide from london and new york. here is kailey leinz. toley: iran may respond tightening u.s. sanctions by backing away from the 2015 nuclear deal and that could raise tensions after the u.s. deployed an aircraft carrier to the persian gulf. iran does not plan to follow the u.s. and abandoning the agreement but plans to make a minor reduction to its commitments. journalists freed from prison and myanmar. they were from reuters and were sentenced to seven years for breaking the official secrets act. hbo admits disposable coffee cups in "the game of thrones" is a mistake and joked it should

have been an herbal tea. some of them wondered if it was placed there on purpose and others wondered how it could happen on such a costly production. 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. leinz.iley this is bloomberg. francine: thank you so much. the u.s. says it will raise tariffs on chinese goods, accusing beijing of backpedaling. thee talks will continue as vice premier is still set to visit washington may 9 and may 10. we spoke to christine lagarde on the trade tensions. >> nobody wins a trade war. everyone has to lose. we hope the trade discussions that have taken place between china and the united states will resume, which is what i understand. we will be successful at the end of the day.

both parties are tackling difficult issues. those matters take time. francine: joining us as meredith sumpter, eurasia head of research strategy and beijing diplomat. willem buiter is still with us. and cans this deal more they resolve the differences? believe: both sides they have time on their side, and their respective economies can withstand additional pressure. the u.s. is coming off strong q1 growth and china has seen some success with its stimulus measures from early this year. essentially, a lot of the talk he when hen with liu agreed to the concessions in february, positive market talk, but in reality we are seeing that underlying negotiations have been much more contentious.

for that, you really have to look at what was negotiated. document,150 page seven chapters written in english, and some of the negotiators have described language as fairly broad brush strokes. this is a chance for beijing to take a look at the language, translated into chinese, and say, we need to re-clarify what we meant. that is essentially where we are now. francine: overall, how should president trump deal with the chinese? if he backs them in a corner, will it backfire? meredith: i think we should anticipate that the president will move forward with tariffs this friday. he has given the chinese a small window to come to the table with what beijing would consider large concessions. beortedly, liu he will

arriving in washington on friday with a smaller delegation than he planned, and that is bad news . the president is giving liu he 24 hours to come up with some major wins for the u.s. side and we do not see xi jinping authorizing that. tom: you set with two ambassadors at number 55. the pronunciation, help me here. room and you have to tell ambassadors or the president or mr. lighthizer how the chinese will react. your expertise is the chinese behavior. 24 hours and an aggressive bullying approach, it is unprecedented, am i right? meredith: unprecedented, and currently we are in the middle of politically sensitive days for the chinese.

we have the may 4 student movement and the june 4. capitulatee seen to during this difficult time. tom: the gentleman is coming from beijing with a reduced team. who has got whose back and beijing while they are getting tweets from the president? willem: who has got -- meredith: who has got whose back? tom: who has the president's back? i think the mystery on the chinese side is dramatic to me. francine: this is really chinese diplomacy. you think you are getting somewhere and not the lyness -- last-minute they will come back and say, what we agreed to, we need to take a look at that. the president's approach is unorthodox and beijing is dealing with that.

we have two strong personalities, president trump and xi jinping. both our confidence they will win out. it will come down to market pressure on one or the other economy that will force the hand. what we see likely now is a continued extension of trade negotiations, a delay of any deal perhaps even into 2020, depending on how this latest bout works out. francine: i was going to ask about market pressures. how will this play out on the chinese economy? meredith: the u.s. president is porting to the negative fallout for the chinese stock exchanges that this will put xi jinping in a difficult place. the stock exchanges do not have as much of a direct connection to the viability of the chinese economy. essentially, i think beijing will continue to take certain measures to continue to ease its

economy and manage these pressures over the medium-term. tom: the only reason meredith came today was because you were here, she wanted an explanation of elizabethan trade dynamics. how far back as the president, past david ricardo, william stanley jevon send? is he back with the mercantilists? willem: this is just a very aggressive way of trade negotiations. the president has certain objectives which are very clear. shorts. has gotten the and of this attic. -- the stick. tom: you have a piece of chalk in your hand and you are lecturing to meredith. willem: pay the tariffs in part and in part, the chinese will absorb the margins. tom: how much part is the u.s.

farmer absorbing those tariffs? willem: they are undoubtedly, if there is retaliation by the chinese, there will be further. tom: the farmer in iowa is getting killed. meredith: you have to watch the farmer and the american consumers. when tariff rates go from 10% to 25%, you will notice and it will take several months to bake out. this is a white house that believesf tariffs -- if tariffs stay in place, they can live with that. tom: is it a linear function from 10% to 25% or is it log? meredith: my sense is we will see a bit of a jump. tom: this is what "surveillance" is all about, meredith sumpter and willem buiter. what a privilege. we have willem buiter and a guy name clarida will show up later.

nyu stern,of professor of economics in the 8:00 hour. economics at bloomberg, it is wonderful. ♪

this is bloomberg "surveillance." the government and labour party are set for a crunch meeting that could define the course of brexit. if they fail to agree to a compromise, the chances of a referendum or general election will rise. joining us is tim ross.

what do we look for now? tim: how far it has been in time and how long we have to go before a resolution, you could end up with a conservative leader and no deal is back on the table. it is all up for grabs. francine: run through that with me. boris johnson has a chance of becoming the next prime minister because he has name recognition, but he has parliament to contend with. tim: the big issue for boris is can he get down to that final two in the next conservative leadership election for e.u. membership? thingp's care about one

and that is winning elections. boris cannot be ruled out. is maye date calendar 23. get us to may 23 for the tories. what do they need and what do they want. -- what do they want? that dealwant to get done potentially with the labour party. there are talks happening today and we will know by the end of the day whether there is a realistic prospect of a brexit. if that falls away, a whole lot of other things come into play. -- tim ross, tom: thank you so much. timothy would be another name -- another wonderful name for the baby. our single best chart is

sterling, pound sterling. we can plot all the royal babies as they come along. of poundepreciation sterling back five and six years. didn't i learn in my textbook, that is a wealth destruction for a nation when they see a persistent depreciation? whatm: it depends on happens to domestic price. it is the real exchange rate that matters and there has been some depreciation, but significantly less than the nominal market. i am worried about the five-year trend downward. ,om: what are you worried about about pound-sterling? concern coming out of this political disaster. it was a massive foreign portfolio.

there was a sharp depreciation. francine: if you are a market trader, do you trade weekly on the expectation of who replaces theresa may or not? beach. i would be on the francine: until when? willem: if we have a deal or the outline of a deal between labour and the tories, the currency will strengthen. if at the end of the day, there is no agreement and no prospect for an agreement. it was all very much up in the air and uncertainty dominated

the central tendency. francine: we were covering those last week.ions do we see the emergence of a real force? point from --y tim: the key point for the elections, i can see a repeat of that, but potentially even worse, when the european elections take place. 's new outfit. francine: are the chances of a general election increasing? i think more people will

vote. it could be an election or .eferendum the current account of the last 20 years, what is the current account -- persistency of the current account deficit? willem: external debtor. when that point will be, it is very much up in the air. this is something that is not sustainable. tom: one final question. labour andon from

tory and assume they are not coming to an agreement, you mentioned the mystery of it all. what is the single thing you followed when we get an announcement that labour and tories cannot get together? it is the future for the prime minister. tom: it is early morning in the united states. would you explain to americans who remember lbj and others who just resigned, it is ok? why can't that happen in your england? tim: theresa may is a determined person who has soaked up all kinds of political pain since she took over almost three years ago, including losing her majority on an election. one thing she is desperate to do is deliver brexit, some kind of ofxit, to get written out

the e.u. and deliver on that result. ross, our leader of u.k. government and willem buiter stays with us. across all bloomberg platforms, we will be joined by jamie dimon global chinan's summit in beijing. this is bloomberg. ♪

kailey: this is bloomberg "surveillance." elon musk followthrough and his promise to take part in tesla's capital increase, buying $25 million in shares. he is the biggest holder with about 19%. creaseock sales in the -- increase liquidity. steep declines in the past two concerns thetoked

german manufacturing -- will linger. losinga six quarter streak, aig's profit more than doubled in the first quarter, helping their overall earnings beat estimates which had not happened in a year and a half. tom: it has become an interesting soap opera, anadarko to be taken out by occidental. they will take over african on dollars.a gagilli what are you looking for today? at the ceo of chevron, but what are the next set of headlines? kelly: the thing we want to see now is how chevron will react to all ofth. anadarko has excepted occidental's bid and that gives chevron four days until the end

of the week to make a decision on whether it wants to sweeten the offer. tom: it has got to be all-cash, right? kelly: it doesn't have to be. if you think about what chevron has said so far, the cfo came out and said when we are dealing with anadarko, we want the 75% share in 25% cash offer, despite the fact that chevron offered more cash. chevron paper is valuable to it mayo and that means not have to go at a higher price than occidental is offering. it may have a more valuable bid. francine: what happens to chevron? kelly: they could try to take somebody else out in the permian. if they want to get more acreage, there is other options.

there is other opportunities. presented this as an opportunistic offer and now if it gets into this bidding war, it is looking like they need to do it. tom: did total steel the african assets? kelly: i don't know that it stole them, but it was a great acquisition for total. this company has done well with countercyclical acquisitions and this gives it an enormous presence in africa and that crown jewel, that mozambique lng. francine: do these big mergers work? kelly: the biggest merger in recent history was the shelby jean merger. shell-bg merger. .t has been going gangbusters

there integrated gas division has been getting more than its upstream division and they have an enormous share in lng trading which is expected to surpass the oil specter -- sector. tom: the conversation of the day, looking at a solid economy and maybe he will mention the word "patience." we will hang on every word from ida in aclar conversation with michael mckee. we are looking for anything forward on the china and u.s. for trade. futures that -18. this is bloomberg. ♪

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the chinese -- trade talks still on. willhinese vice premier still come to the u.s. and don't break up big tech. a progressive tax could be the answer for companies like google and facebook. we speak to a nobel laureate on his ideas. david: welcome to "bloomberg daybreak" on this tuesday, may 7. we have some earnings out already. alix: we are looking to see where it starts. it looks pretty ugly, though. losses of 41 since a share -- of share. they've been trying to sell themselves in a really tough milk market. david: but they kept positive cash flow. h