francine: u.s. stocks have the worst day in 2019 on the threat of an all-out trade war. jamie dimon season 80% chance of a deal with china. the chief executive also talked about the fed brexit, and his bank. and the new york times says president trump used tax breaks to avoid paying taxes in the 80's and 90's. ♪ francine: welcome to "bloomberg: surveillance." these are what the markets -- this is what the markets are doing. we are seeing a little bit of

we will focus a lot on why the u.s. stocks had their worst day in 2019. for the moment, futures actually gain a touch we will also get euro on the back of some german data. plenty more on that, plenty more on the banks, plenty more on some of the main stories out there as well. we will look in-depth depth at what we heard from treasuries and what we are expecting the fed to do. coming up, we speak to stefan engles, the commerzbank cfo. and we will have a lot more on the banking sector and why the merger with deutsche bank will not happen. let's get straight to first word news in london. will no longer comply with some parts of its nuclear deal. it is given the other signatories 60 days to fulfill their commitments, the republic is not withdrawing entire.

-- entirely. >> we did not initiate the violation of commitments and we will not initiate any wars. ne have never given into -- i to bullying and we will respond to any aggressor. the federal reserve vice chairman has pushed back against speculation they will cut interest rates, saying the bank is in a good place in the current policy will bring inflation back to target. they echo those of chairman jay powell. inflation is on the soft side recently and we think there are some temporary factors are baseline view is that inflation will begin to move up towards 2%, but we are surely looking at the data closely. >> south africa heads to the

polls, signaling increasing investor anxiety. they're looking for a strong mandate to push through policy reforms, but faces opposition from factions within his own party. marks the 25th anniversary of the first democratic postapartheid election in 1994. global news, 24 hours a day on air and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine. francine: thanks so much. global markets are under pressure on the backs of this selloff. they had the broadest day of decline since christmas eve and chinese exports unexpectedly fell in april. we spoke with jamie dimon in beijing and asked him for his take on the trade war and where the markets were headed. >> i don't think they get the deal done by friday and i'm hoping they don't put tariffs in place whatever the odds were before, i think it is still 80% they get it done. the odds of something bad

happening has doubled. that is why the markets are reacting. they are not just afraid of the direct effect, they are afraid of a reverse of global trade. it could slow down global growth and hurt economies around the world. >> it could. global is protecting growth to be at its lowest even with a deal. could it be even worse than that? >> the world economy is doing ok. china is growing at 6.5%, $1 trillion in growth. america at almost 3%, half $1 trillion. the fly in the ointment would be this, if this goes south, that could change global growth. >> do you feel talks are be getting -- are getting a louder voice? also here, as there is a bit of

a push back to the comments from donald trump. do you hang tough or haggle for a less than ideal deal? >> both sides should do what is in their best interest. there are serious issues that need to be seriously resolved. they have made a lot of progress and i think it is good for both the chinese and americans. neither side has to do something. it is a terrible error to say it is because we are doing better, just get the deal done. it will take time. i would rather not do a deal van do a bad deal -- than do a bad deal. and remember, japan and europe also have an interest. we will not coordinate with them, but they would certainly like to see a proper trade deal and they can't support it. -- can support it. do you think they can

overcome the big differences? timetable,erifiable the ending of force technology transfers, issues on the internet -- issues on intellectual property rights? >> yes, they have already been doing that anyway. they need reform in their own markets. for bonds, equities, for transparency and the rule of law, they need that. they want to anything in our interest, they will do it because it is in their own self-interest. americans should not blow it out of proportion. want unfair not competition, let's not blow it out of proportion. a country like china is allowed to have industrial policy, i wish america had better industrial policy. >> what are your concerns about the markets? perhaps the rally and the recovery is over? that, maybe,rned

donald trump likes to see the stock market performance as a referendum on his success as president. is he willing to put that aside? >> it would be a huge mistake for american policy to be set based on the stock market. i never worry that much about it. the market is always going to react in different -- two different things. china is growing, america is howing, we look at that, can we serve clients over time? the market will fluctuate, economies fluctuate. people get scared and overreact, that is not how we run the company. i don't spend that much time worrying about that. francine: that was jamie dimon speaking with stephen engle at the jpmorgan summit. keeping it on trade, joining us this morning is a senior economist at ehrenberg and a

senior strategist. how much could it shave off gdp if we have a fallout trade war and what is the likelihood? >> the likelihood seems to be slow, although that has been the biggest risk since early last year. in the context of soft data out of trade oriented europe in , news from mr.s trump's twitter account is not good for sentiment. that said, this is what we have seen before. mr. trump, good stock markets, good data in the phase of negotiations, let's ratchet up tension. i think this is a negotiating tactic. if it goes wrong, it would be bad to have to shave a few percentage points from global worth. -- glow growth -- global growth. kallum, i think

there will be a positive resolution to this. president trump campaigned for this, he needs to deliver for his electoral base. they want to see a deal being resolved. hopefully, this is just a negotiating tactic and we will see a more positive compromise. i am reticent to pile into risk or trade. i think you need to study yourself for more positive news -- steady yourself for more positive news. francine: iron ridge everyone to go on our markets live blog if you are a bloomberg terminal user. : ourwe are asking is markets to complacent around prospects for trade peace? the other flip of the coin. should they be optimistic? kallum: they seem to be

optimistic enough. we have had a bit of a bumpy ride over the last few days, but equity markets, unlike the bond markets, have been pricing in a strong rebound in the second half. eimear: will probably get some kind of kickback. clearly, we have seen the chinese equities come off. it is bond markets that are probably underpricing. francine: this is a very nice bloomberg risk index, our on-off indicator which amalgamate's indicators and tracks equities, bonds, commodities, and liquidity. what are the markets tracking right now? kallum: there are lots of risks out there, even though fundamentals are good. but they are linked to politics, whether it is brexit, trade wars

, potentially between the u.s. and eu. i think the markets will be looking closely at the negotiation and take their cue on the negotiations get to come. that is a good chart of global risk sentiment, it's just dollar sentiment. what we've seen is the dollar tends to weaken when we become risk on. we move out of perceived safe u.s. assets into europe. become -- strengthens because we have become more risk on -- risk off. it is unrelated to fed policy, to inflation expectations. measurehat is a good and i imagine shows a similar trend. francine: both stay with us. coming up, we hear from the chief executive of imperial grand -- brand.

don't miss that interview, this is bloomberg. ♪

francine: economics, finance, politics, this is "bloomberg: surveillance." imperial brands has reported earnings that beat estimates. revenue growth was driven by cigarette alternatives. the chief executive spoke exclusively to bloomberg. first quarter is where we saw most of the slowdown in the category. i still see this as an important opportunity for us. that is combined with the cigarette business.

mass-market cigars as well. the whole portfolio is working in that market. but yes, there continues to be huge opportunity. annmarie: phillip morris just got the green light to sell certain products. what are you doing to face that competition? alison: it is good to see them approving, it gives us a clear reason in terms of getting vape policy approved. annmarie: so you welcome it? alison: i do. we can see some opportunity for products in the market. in the u.s., it is very much a vaping market and that is our focus . launched it has just for the first time in japan. alison: test launch in japan. it has not been our priority,

but i think we have got a great product. annmarie: what is next for this type of product? i know these heated tobacco products are big in asia, while vaping is big everywhere else. definitelyre are other prospects for growth in eastern or central europe. we are just focus on the japan launch and vaping in the priority markets. annmarie: i like to think of the next generation products. they sometimes don't have to go through the same advertising restrictions in some countries. do you see this as a way you can leverage how you market or educate people about these new products? products,lot of especially those that do not contain tobacco, do have less restriction in terms of advertising.

you have got more opportunities to communicate about the product and get them to think about transitioning to a vape product. so yes, there are more freedoms and some market. we have also leverage our strong retail relationship. now, we have got a number one position in retail in most markets. annmarie: i want to ask you about cannabis. last year, you invested in cannabinoid technologies in a venture firm backed by snoop dogg. now, this firm is targeting a pharma for funding -- big pharma for funding. do you see potential in offering these devices as medical devices? alison: we have not landed on an opportunity in the space but we are exploring. it -- no doubt, this has been great for learning about the science.

but also just interacting with the leaders in the space has been good for our understanding and evaluation. if i look at the technologies and capabilities we have, there is something there to explore. annmarie: you once described it you can see yourself between this recreational use and medical use. something like wellness. is that the case where you can make your mark? i was in los angeles two weekends ago and some of these dispensaries remind me of apple stores. if you want to feel less anxious, want to go to sleep, this is the kind of pen for you. is that where you can make your mark? alison: you are right, there is a whole spectrum of use of cannabis where it is being developed in different markets ranging from pharmaceuticals through recreational. no doubt, when you look at the demographics and developments of

the whole wellness interest, i'm not just talking cannabis, but generally. it is growing in the population. lifestyle policy is where we are focused and any decision we made in the space would be very much around those lifestyle type brands and disappearances. annmarie: it was for an undisclosed amount of money, but the see yourself investing more money into either oxford cannabinoid or another type of medical cannabis company? alison: just exploring for now, but clearly we will keep now, but clearly we will keep evaluating. annmarie: want to ask you about the cigar. you said you're going to sell

this premium cigar business. alison: it in -- it is in terms of how long they take. but we are going to recognize up to 2 billion across the program and that is still very much on track. annmarie: who do you think is interested in it? luxury, private equity? we do see a lot of of companies invest in these next generation products. where do you think this could go? alison: it is a very interesting asset. it has got some great, iconic brands. there will be brought interest. francine: that was alison cooper , chief executive of imperial grants speaking exclusively to annmarie hordern. the fed says they are in a good place and do not see a need to change rates. our exclusive interview with the vice chair next, this is bloomberg.

♪

>> we think the u.s. economy, and monetary policy, is in a good place. right now, our focus is in sustaining maximum employment and price ability -- stability. we'll see a strong case to move in either direction, but as data comes in, we will always be looking for indication. francine: that was the fed advice chair giving his take on the economy. still with us are our guests. let me bring you over to my

chart. we're talking about dollar dynamics and if there is one thing we are trying to understand, it is whether the inverted yield curve means something ugly for the economy or not. what is your take on it? kallum: it is something markets should not ignore. i don't predict the recession quite as often or as accurately as the yield curve. that said, my hunch is that the yield curve is expressing potential political risk. brexit, u.s.-eu negotiations. if any of those go wrong, it could tip the u.s. into a projected slowdown. but as i look at economic fundamentals, what we don't have are genuine, underlying excesses. wage or price

inflation, issues with credit or debt, a big inventory buildup. excesses, it is hard to see why we would just organically go into a downturn. for me, they express risk. if they go the right way, it means the inversion takes a step back. francine: quickly, what is your dollar call? i think we are still seeing a reaction post fomc. but we do think growth will pick up elsewhere in the fed is on a stable path. francine: both stay with us, we will have plenty more on the day. we also talked u.s. politics. president trump has big losses in his tax return. we talk about that next, 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. francine: trade troubles. a markets sank. the threat of an all-out --

ink on the threat of an all-out trade. j.p. morgan chief executive talking brexit and his bank. and the new york times says president trump used tax breaks to avoid paying taxes in the 80's and 90's. this is bloomberg surveillance. it is 9:30 a.m. in london and 4:30 p.m. in hong kong. let's check on what is moving in the equity markets. vesta.'s start with the company says that they are a victim of the trade war. -- they rcn costs rising costs and raw materials -- they are seeing rising costs in raw materials. and pandora also to the upside

of more than 4% for the first time in history. they are looking to contemplate with they are doing and potentially issuing bonds. those are your market movers. a report says president trump's businesses lost more than $1 billion between 1985 and 1994. the newspaper sites printouts of of federal tax forms. he lost so much money that he was avoiding paying income taxes. we also spoke to general john kelly, the former chief of staff . here is what he had to say about the influence of the president's family. >> they are an influence that has to be dealt with. and by no means, misses trump.

the first lady is a wonderful person. guests are still with us. first of all, when you look at what the new york times published in relation to president trump's taxes, do we know if there is any wrongdoing here? >> it is hard to say. these tax details are from an earlier period. they raise doubts about the president's claim to be the best salesman and businessman of all time given the extent of the losses being reported. but the more recent returns are the ones the democrats are trying to get released. those are the ones the treasury secretary says he will not release. and those are the ones that matter the most. the question is how much the public really cares. 50% believe they would like to see the returns.

how many of those are in his base is another question. not onlydent himself says the returns are not understandable, but people wouldn't care. we're certainly in full campaign for the presidential election. does it hurt one party over the other? >> it is something the democrats are using to try to get leverage. but trying to get the robert mueller report released on redacted and subpoenas to the attorney general, these are -- gs time congress and not in knots. if the democrats do hold william barr in contempt, does it play into the republican sands? -- republican's hands? possibility, a

sympathy vote for the u.s. president may increase. as far as we're concerned, it's all done. but the democrats won't let us move on in a way that is important for the economy. all of this, u.s. politics, actually noise? there was a relief rally when the mueller report came out because we took away the risk of impeachment. >> it may affect short-term trends in markets. it is hard to see how much politics in the u.s. will have a big impact come the next election when we know what that means for economic policy. the two key issues like trade wars and the u.s. economy still going above trend. so it doesn't really

have an impact on the dollar? the dollar isnk the strongest play. and the equity spaces where you see a reaction to it. it will be complicated by the fact that there is a reserve currency that you will go to in times of safe haven. you want to go to the election and see what the policy manufacturers are. francine: executive editor for international government, please stay with us. exports -- [indiscernible] re-escalation in a dispute with the u.s.. these latest developments raise the prospect that talks between the two world's biggest economies will collapse entirely. jamie dimon will prepare investors for treasury yields.

they are climbing with that they had 4%, 5%, or higher. >> i think the 10 year at 2.4 or 2.5 is extraordinarily low. boughte government has $12 trillion of sovereign debt, it can have an effect on the 10 year. i think 4% when you are really good growth is not a bad number. >> at clients but not making much money. this was after the breakdown of talks with deutsche bank. the company profit declined by more than half. it remains a real challenge for the chief executive. and uber has enough investment the ipo to the top of the range. there are orders for three times

the amount of stock on offer. they could raise as much as $9 billion. 10 -- it is the top likely to be one of the top 10 u.s. listings ever. 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. francine: stay with bloomberg surveillance. plenty coming up including south africa's election day. the anc is the clear front to revive theg country's economy. we will also talk iran next. this is bloomberg. ♪

francine: this is bloomberg surveillance. complyll know longer

with the nuclear deal and it has given other signatories to the agreement 60 days to fulfill their commitments in response to the u.s. increasing economic pressure. earlier this month, it led to oil waivers expiring. riad hamad.s resume -- iran resume uranium enrichment. >> it will not. there is a gradual policy. they are stopping a couple of things they had committed to as part of this agreement. what they want is for the -- the americans have already left the agreement. in the next 60 days, we want to see something from the europeans that shows us it is worth staying in.

after those 60 days, they will remove the limits on enrichment. and it would be the beginning of the end of the disagreement. francine: how dangerous is this situation? if there is any indication that iran is backsliding, is there anything the trump administration would do? from the iranian perspective, for them, this agreement was kind of a keep of their policy. they want it to survive. if the europeans come up with a way to make this agreement work for iran as well, to stick to the agreements, they are willing to return to the letter of the agreement. rouhani's perspective, he does not want the agreement to fail. but they are under pressure from hardliners saying, what is the

point of it? we are not seeing any benefit. the u.s. will argue that we knew it all along. iran does not want to it here to this agreement. anyway, we have other issues with iran and we have reports of an aircraft carrier sent to the gulf. there is kind of an accumulation of factors that could increase the risk level. francine: do we have any indication of what europe will do? you see, the europeans haven't really found a proper answer for the last year to what president trump has been doing. themputs the spotlight on to see if they can come up with something that would allow iran or the iranian banking system to continue to have access to international financial systems.

it is doubtful the europeans can come up with something that would work because even if the europeans say they have a system, the private companies may be hesitant because they don't want to get into the crosshairs of american sanctions. or the europeans could except that and say if iran is not going to follow the rules of the agreement, we have to agree with the americans that the agreement is dead. seen.ains to be riad hamade.much, gears and talk south africa. voting is underway for the national election. volatility measures show no doubt that the election is immediate risk. first of all, what is at stake here?

if you wednesday, mr. ram posa might be a bit slower than investors were hoping for? >> there is reform and progress. it was slower than expected but the market has given him the benefit of the doubt backed by moody's credit rating agency that he has a plan in place. once the election is over, people expect he will come through with his economic foreign package. it depends on the margin of victory he can secure. if you look at the opinion polls , support is very fractured. and you still have former allies that if he wins below 55%, he yous a lot of mandate and

could see the deputy president coming to power. this as jacob zuma coming back to office. francine: i have a nice little chart that i have taken back to 2018. how do you trade the rand right now? >> i'm quite positive on the rand going into this right now. it is a proportion that each political party is gaining. there are also key states, a deputy record case that is traditionally a stronghold for the opposition da. it is really about that margin of victory. francine: market assets were not moving on the back of dollar weakness, but it is about trade.

provide opportunity and risk. many are commodity oriented so they are i play on the global cycle. we have launch of risks that are depressing momentum in the global economies linked to the trade cycle. we see most of them in europe. my bet is that over the course of this year, because underlying global fundamentals are in if tradeod shape, negotiations go the right way, as long as the u.k. avoids a hard brexit, the u.k. economy will gain a little momentum. we will see the play strengthen. we will talk a lot more about european economy, output unexpectedly getting in the eurozone. in the eurozone. next, a german surprise.

what does it mean for euro strength? this is bloomberg. ♪

president trump appears to be crazy. rationally crazy. and wants toqueeze appear to be tough. it at the end of the day, he wants a deal. formere: that was the pboc advisor speaking to bloomberg about trade and president trump today. let's get straight to the bloomberg business flash. >> facebook is accelerating efforts to make money for the popular whatsapp messaging service. facebook has been testing payments in india since last year. workers,f 4000 stopping deliveries a frozen pizza and ice cream directly to stores. it is becoming an industry standard for big food. changes to the company mean the elimination of over 1000 tracks and 2000 front roots.

-- different routes. in the first financial report since going public, the ride-hailing company succeeded expectations. it had a second-quarter revenue of $800 million. sales grew 95% in the first quarter. toyota is buying back ¥300 billion of its own stock as it sees a profit forecast falling below projections. n threat to raise tariffs have had an effect. and that is the bloomberg business flash. francine: now let's focus on european economic picture. production increased 0.5%, estimates predicted 0.5% drop. at -- as officials in

brussels for the downside risk remains quite prominent. a lot ofed upwards your economic forecast. why? >> a little. the picture since the start of hasyear, the gdp retail been better than expected and better than the soft data suggested. still sluggish in europe. probably 1.4% for the eurozone over the course of the year. what is most interesting, in q4, the soft data did not quite pick up on the extent of the slow down. especially on the industrial sectors in europe. and in q1, they continue to deteriorate. the hard data is coming better than expected. it is difficult at the moment to take a handle on the hard data and where it is headed based on surveys. economy,t the european

the news has been better than expected. francine: what is your take on the euro? .> we are quite positive there are signs of stabilization, but the rebound hope is europe. but we are seeing tentative signs of recovery. it is interesting this time that it is coming from spain and places you would not necessarily expect. the trade concerns between the u.s. and china, europe has been a byproduct. investments. more u.s. not go after germany in particular? and gou.s. may follow up after germany or the eu more

broadly. but my bet is that if the u.s.-china talks go well, markets will take their cue that u.s.-eu talks will go well. there is no geopolitical rivalry. there is much less appetite for . trade war with the eu the eu can match the u.s. for size and even though germany runs a surplus with the u.s., the eu overall is in trade balance. mr. trump may threaten car tariffs, but the eu will respond in kind by looking for very isolated targeted sectors in the u.s. which will be key for the primaries heading into the next election. trump doesn't use autos as a tactic to get the europeans to open up agricultural products, which is completely off the table, the and the u.s., look at nafta and tell us what you don't like.

forget agriculture. we will alter the deal. i see no reason why the eu would not agree to that. francine: what is the biggest risk to your forecast? to sit how we deal with brexit -- is it how we deal with brexit? >> the euro doesn't really trade on brexit. i think the biggest risk is the negative deposit rates and the market really pricing in further interest rate cuts from the ecb. francine: are you surprised we haven't seen much movement or much market chatter gekko -- chatter? >> we have mario draghi today. measures?preliminary we need to justify it so it is

walking that data. how much is expected in q1? francine: thank you for joining us this morning. bloomberg surveillance continues in the next hour. we will be talking to the commerzbank chief financial officer. frankfurt. a conversation you don't want to miss about banking consolidation or not. it is at 10:30 a.m. london time. this is bloomberg. ♪

.rancine: trade troubles markets sink.

u.s. stocks have there were stay in 2019 on the threat of an all-out trade war. the dow drops. deal withnce of a china in an exclusive interview with bloomberg. the executive says it is important to do the right deal. >> it may take more time but we should do a proper trade deal. i would rather not do a deal to get a better deal. francine: and president trump avoided paying taxes. tom keene in new york. we have a little bit of data out of europe. that are than expected. it is interesting to see the soft indicators. we look at the euro and we look at the implications for the german economy. i like how your framing equity markets at the top. you would think that the world

came to an end. users up a little bit. we are down less than 3% from a recent high. crisis avoided. crisis, for now, avoided. iran will no longer comply with elements of the 2015 nuclear deal. days tot rouhani is 60 andill their commitments oil sectors. this is in response to new u.s. sanctions. >> we did not initiate the violation of commitment and we will not initiate any wars. given intoer bullying and we will never succumb to bullying. we will respond to any aggressor. >> in the trump administration has refused to extend waivers allowing a countries -- allowing

eight countries to import iranian oil. and before the abrupt turn in lead to themay increase in tariffs. negotiations resume this week in washington. donald trump lost more than $1 billion from the mid-80's to the mid-90's. that is according to the new york times. the president appears to have lost more money than any other individual american taxpayer. he was able to avoid paying taxes eight of the 10 years. a lawyer called the tax information demonstrably false. initial public offering at the top end of the price range. uber is likely to be the biggest ipo this year. global news 24 hours a day on

,ir and at tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. equities, bonds, currencies, commodities. over the last three tumultuous days. and the 12 and 13 level. the 30 year bond and three basis points. and francine, at home yesterday after the surveillance nap, i watched yen correlation click in with a vengeance. i'm guessing 11 a.m. and 1 p.m. yesterday.

finally the yen catching up out there. francine: was that on netflix? i love that. .his is the data check european stocks are shrugging higher. at the euro climbing for factory data. .'m also looking at crude oil tom: and there is an appointment miller interview with commerzbank coming up. you have shown this chart a million times, but i've done. back a year and five months ago, the regression of the dow actually slopes upward, francine. rising markets for 18 months. francine, is crushed,

crushed. francine: crushed, i say. this basically combines 18 indicators for equities, bonds, currencies. thank you to hillary clark for making me this sideways chart. it has taken hits over december and is going down a touch but is still quite high compared to 2014. this is despite recent increase in tensions about global markets. he spoke exclusively to bloomberg. >> we are doing better than the economy. just get the proper trade deal done. it may take a little bit more time. i would rather not do a deal then do a bad deal. >> they are not just afraid of , it can slowfect

down global growth. >> i think it is still 80% that they will get it done. the odds of something bad happening is now doubled. and that is why the markets are reacting to it. that was jpmorgan chief executive jamie dimon speaking exclusively to bloomberg. joining us now is chief market .trategist and peter chapman it you both for joining us. are we too optimistic or two -- too pessiekko mistic? >> there has probably been a little bit to much optimism on the fact that we were going to get a grand all-encompassing trade deal to put u.s. trade hostilities behind us.

were going time, we to get a federal reserve cutting rates? that seemed a little too good to be true. what the market is digesting is not only whether the trade deal will be all-encompassing, but whether the federal reserve will the preemptive and aggressive fueling the u.s. economy. i think it is a combination of the two. peter, let me ask you a question. if i asked karen, she will walk off the set. are we doing a redux of december? to that.milar we have a much more dovish fed. ,f we do have another meltdown it is dramatically reduced. that is why we think the market is priced very complacently because we think that there is limited room for the fed to come in and catch the market.

also, we see little incentive for both of the political letters here -- actors here to make much of a concession. we think a stalemate is apparent and something the market is underpricing. francine: we see a pboc that is highly stimulative of the chinese economy. if there is a stalemate, we go back to the of the numbers in a couple of months. peter: and we get to the realm of manufacturing easing. that will be a global currency war. francine: who wants this? no one really wants this. peter: it is just political posturing to reach the final or it could be the trade talks breaking down. it is clear that the administration faces a difficult balancing act of wanting to appear tough, to break the

ground with china. and at the same time, not being so tough that it challenges its own recovery ahead of the presidential election. slightly more optimistic that there is some shape of a deal that they are leaning toward a conclusion and we are not in a meltdown scenario. the devil will be in the details. it will be highly conditional. it will likely summer but not boil over. using the phrase, "shares are on sale." pointhas got to be a within the asset allocation where you say enough. let us acquire with more enthusiasm. are we anywhere near that point? karen: i don't think we are at that point. the rally happened alongside

earnings from expectations coming down. so multiples in the u.s., i think, are far from screamingly cheap. i don't think there is a reason to be super pessimistic about a significant downturn unless this get to a highly aggressive scenario which i don't think it's likely. from that point that we were in january where it was -- the valuations had become so cheap that it was by and close your eyes. us: you both for being with today. trying to give you perspective on the market as it links in these great trade events. it is without question the great banking interview of the day. it may be mr. dimon gets that trophy. i will give it to stephen engle's from commerzbank. negative interest rates in the future of his bank.

this is bloomberg. ♪

>> let's get the bloomberg business flash. toyota has come out with a for your forecast of how short of analyst projections. the japanese automaker is spending more on incentives to make up for demands in the u.s.. lyft reported better-than-expected sales since going public. they assured the big losses would decrease next year. they posted a first quarter loss of more than $1.1 billion, larger than the company's loss for all of last year. tot of the costs were due

the ipo and stock-based compensation. facebook is accelerating efforts to make money from the popular whatsapp messaging service. it plans to drive mobile payments. they have been testing mobile payments in india since last year. tom, francine? u.k. prime minister theresa may will face lawmakers in parliament after another day of inconclusive talks with the opposition labor party. this has further dented her hopes of reaching a brexit deal. our guests.ow is david, are we ever going to have a breakthrough with labor in the coming weeks? unlikely,does look francine. like ays looked longshot, frankly. that these sides that have no real interest in helping each other out getting a brexit deal

over the line. those talks don't seem to be going very well. haven't had a final canceling of them yet. it may come in the next few days. the attention will turn to what happens next. we will have another set of what they are calling indicative votes. giving parliament a range of options. union,choose a customs we can go with the second referendum. maybe the chances of another boat, and other choice on this have come a little bit closer. than the government has said that they are going to go for it. francine: theresa may says that a deall step down once is agreed on. what is the likelihood of her stepping down before that? david: she wants to get this over the line and she think this is her legacy. many are clamoring for her to set a deadline. brady, he is telling her

very bluntly that she needs to step down. timetable is when brexit is delivered. when will that be? we don't know. she will be standing up in about two hours time to take questions. her own mps might stand up for her -- stand up today and call for her to step down. she is very unlikely to heed those calls. liberal democrats walked differently in the house of commons on this wednesday? they were annihilated almost at the last election. while we have seen their support swelling in the country, they don't have a huge voice in the commons. or not one of the big enough parties. -- they are not one of the big enough parties. they are campaigning hard for the european elections in two weeks time. support replicate the

in the local elections? and they will be up against the other new arrival, the change u.k. party. that remains to be seen. tom: do you have a guesstimate where we are the morning of may 24? david: it will be quite a circus . it the election has all different ranges of outcomes. will eat theresa may's lunch. that is certain. we will see a triumphant mr. farage say that he won that election. sending a very clear signal to brussels and to the mainstream politicians in britain that things will have to change course. you imagine that after that point, the calls for theresa may to step aside will become louder. francine: thank you so much. we will get back to our guests on market commentary. stay with us.

coming up on bloomberg, brexit with theean elections european commission vice president. don't miss our exclusive at 11:30 a.m. in london, 7:30 a.m. in new york. this is bloomberg. ♪

tom: the gloom of london. it is the confusion of london may be more than the gloom.

a lot going on with questions coming up here in about an hour and a half. will be language watched more than you would expect. karen ward with us, peter chadwell. it peter, let me go to you. what is different with the decline of negative rates in germany? what is the difference? it is the same old -- is it the same old reaction to gloom? peter: despite what the ecb says, expectations are floating away from the target. the market is thinking very much that the ecb probably won't be able to hike rates. so the next move could well be to restart the quantitative easing program. that is why the long-term german yields are able to sustain very low yield levels. around 60 orading

55 basis points. that offers value in the context of what is a very steep yield curve. you have to take into account with a deposit rate is and in the context where you can monetize these very low rates. it is by monetizing kerry and role. and roll. tom: but is it due to market allocation, karen? do that in the bond market. we do that in banking. what do the negative interest rates mean for the stock market? karen: in terms of market asset allocation, the challenges how to diversify from the portfolio. to what degree do i want to start scaling back active it leads you to moving allocation away from stocks and towards bonds.

the potential upside from bonds, there may be a little bit in the extreme risk off environment. broad government core bonds can do in your portfolio is very limited. it does mean that you have to keep looking for opportunities elsewhere. it may be staying exposed to more defensive stocks. , largercused on value cap value rather than small-cap. about how weking can use, for example, the alternative. trade or how do you not trade u.k. assets given the linda we are in with brexit -- the limbo we are in with brexit? the only thing we have

learned is that the u.k. parliament will not approve no deal and has a legislative power to prevent no deal. and the eu has similar appetite for no deal. i think the no deal risk has been taken off the table. and i think outstanding assets will be moving higher. although no deal risk has been removed and replaced with general election change in forrnment risk, international investors, that is a concern. i think we were talking just now about theresa may, jeremy corbyn discussions. both parties are equally divided, producing a brexit manifesto for a general election will be is problematic for theresa may as it is for jeremy corbyn. i think u.k. assets are looking cheap. we will think -- see sterling move higher and domestic stocks

reprice higher. you can see international investors are not willing to take that risk right now. francine: thank you both. , more on later today the german economy and the growth forecast with german financial supervisory authority -- that will be an interesting conversation. and we will talk about football. tom is getting up-to-date with what happened in liverpool. even i watched. tom: you watched football? francine: and i couldn't have a conversation with my husband, so i watched football. tom: it is an exclusive. francine: we talk football, next. this is bloomberg. ♪

♪ it appears to be crazy, but i call him rationally crazy. he wants to squeeze a better deal for the u.s. and appear to

americanin front of political stakeholders, but at the end of the day he wants a deal. fromextraordinary comments a former advisor to the people's bank of china, off the usual from james dimon and a shout out to meredith sumter who was wonderful yesterday capturing how the chinese look at president trump. ,e have a vignette right there very valuable as we attend the jp morgan meetings in asia. matheson. rosalind we try to keep up with the events in government and the date calendar is full. attentionour greatest in u.s. politics right now? rosalind: the interesting question obviously is on the new

york times report on the u.s. president's tax statements from 1985 to 1994, which showed he suffered very big losses during that period from his businesses. the question is what if any ammunition that gives the democrats because they are focusing on his more recent returns, the ones the government is not releasing and the treasury secretary will not release, the ones the democrats want to get their hands on. do they use this latest report as leverage to try to get those other returns released? the other question is truly how much does the u.s. public care about donald trump's tax statements? about 50% of the public are interested. wered trump said not only they not understand his tax returns but they would not care. tom: the report from the times

is extraordinary in its detail. with all that said -- and id for two timothy o'brien with toomberg opinion -- i defer timothy o'brien with bloomberg opinion -- does your washington team assume a separation of powers, that the president will be as litigious as possible to run out the strain on his first term? and itd: very much so, is clear that congress is pushing on a number of investigations for donald trump and pushing the attorney general on the mueller report, but the republicans are digging in and plan to drag this out as long as they can. the more they can show the democrats have focused on pushing this into the election campaign, the more republicans can use their strategy, we are focused on jobs and health care

and we cannot get on and do this because the democrats will not let it go. francine: how much are the american people fed up of the fight between the republicans and democrats? it is the mueller report and various other things. both parties or does one become triumphant? rosalind: it can weaken both of those parties. it is a big field of democrats, some on the left, joe biden more to the center. we will see some really strong campaigning within that field and against each other. that, how much to those candidates focus on what is going on in washington and donald trump, and how do they use that as a platform to put policies forward? francine: if there is one thing, the iran thing tom was asking

about, they were expecting europeans to apply, but is it -- but does it almost give victory prove -- to president trump? notlind: rouhani says he is walking into a trap. the u.s. provoked him into a response. does that give him the opportunity to escalate their actions? it puts europe in a difficult spot, rouhani saying unless you make it possible for me to sell my oil i will act in 60 days. what is the patient's on that and does that put rouhani further in a corner? francine: let's get straight to the bloomberg first word news. kailey: u.s. attorney general william barr is raising the stakes in his battle with congressional democrats, threatening to ask president trump to invoke executive

privilege. the house chair committee is expected to vote whether to hold him in contempt. president trump's former chief of staff john kelly had an additional issue to deal with trying to bring order to the west wing, talking about the president's family. >> they are an influence that has to be dealt with. -- by no means do i mean missus trump. ump.rs. tr kailey: he was reportedly frustrated with ivanka trump and jared kushner. ages, a comeback for the liverpool shut off -- shut out barcelona. -- theyhe first match lost the first match and had to

outscore the champions to go forward. 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: thank you. i spoke with "surveillance" football punditry jonathan ferro, he said shut up and watch it so i guess i will watch it. that i would like to point out, something really unique, trent alexander arnold, arguably the greatest corner kick in the history, started out working with the liverpool youth league when he was 14 years old. there is something different about this than american sports. this kid's homegrown from day one out of liverpool, and as the coach said, it is the greatest corner kick since time began. francine: whether you are a

sports fan or not, this was against all odds. the odds of liverpool piercing through the barcelona defense four times without their best strike, i don't know if there were odds but it probably would have been 1000-1. maybe it follows to other businesses as well. tom: they go in this weekend with really important games and that battle against manchester city. i have no idea what i'm talking about. francine: sounds good. tom: we will think michael mckee for a great conversation with richard clarida. >> inflation has been running on the soft side and we think there are temporary factors so inflation will move up towards our 2% objective, but we are looking at the data closely. the u.s. economy and monetary policy is in a good place.

our focus is on sustaining maximum employment and price stability. we do not see a strong case to move rates in either direction but as data comes in we will look for indications. francine: that was the federal reserve vice chair to richard clarida. ands get back to karen ward peter chatwell. we are looking at risk appetite and the start of the yield curve being inverted again. does that mean something ugly is coming? karen: i think the yield curve signaling power is dented by the quantitative easing world we are in. if you think about why the yield curve is supposed to have signaling power, it is supposed to tell us about the start of monetary policy versus neutral, so it is telling us today's policy is tight, above long-term

neutral rates. long-term rates are no longer neutral for the u.s. economy. not many people believe long-term nominal growth in the u.s. is less than 2% and for that reason has lost its power. i am more focused on the current economic indicators and ultimately, this big question of whether this low unemployment rate will deliver higher wages and higher core pce. francine: this is my yield chart. curvecked the u.s. yield trending towards inversion. what are you tracking? beer: i think the fed will better to talk a lot less. that would give them more credibility. talking about having a symmetric inflation target on the one hand and clarida comes online and says if inflation were to get

close to 2% it would be sufficient and that is not symmetric. 1.5% to 1.6% for the last few years. the curve is a really interesting base. we calculated a new level of neutral interest rates for the fed nominal rate, 2.10. that is taking into account all the fed's nonstandard measures, the balance sheet and so on. when we get a curve re-flattening, it does not concern us. the nonstandard measures have weighed on the term premium intuit negative area. francine: we are seeing the south african president voting right now. tom: voting right now, 25 years on, and this is another form of global populism we have been seeing.

it is a guy who is more popular than his beleaguered party. , have theymystery simply run out of patience with the anc? i would emphasize, this is not a normal election and there is more going on than the typical anc soiree. francine: we have been speaking to economists who follow this , wholy and the president we are seeing on camera, it posa is voting in a crowded voting station. he needs a decisive victory. what markets are worried about is if he does not win with pain large majority -- with a large majority, it would go back to somebody who would cut the reforms he put into place. tom: being a yield hawk where

you go to em to pick up marge basis points, do you want to be -- more basis points, do you want to be more aggressive with troubled economies like turkey and south africa? rosalind: we are always reluctant to talk about e.m. as a basket because there is so many different cases within e.m. broadly, the question of where do you go for yield really hinges on whether you are happy with a dollar view and if you are happy we are going to see the u.s. slow, but nothing too material. you are comfortable with a view that the dollar will trend down in a stable fashion and then picking up yield toward emerging markets is sensible. if you have less conviction that is where the dollar is going,

looking for yields in emerging-market is not so. tom: futures at negative seven right now. there is a trend in german banking. matthew miller in conversation with a gentleman, he is amazing &a's, stefan q angles from commerzbank. ♪

♪ bloomberg "surveillance," francine lacqua in london, tom keene in new york. we are watching many parts of this equity market, the correlation into the other markets.

dollar-yen, we are ready to get a 109. a real indication of some of the risk off feel. ,utures have rolled over negative nine on s&p futures. has been someone of relative sanity and looking at e.u. banking where he writes blistering notes. what is the sweat level for commerzbank now? announce when will you the next round of job cuts would be the question. ed continues to flatline, rates are not going up, and as credit nots begin to rise, that offset the savings they deliver next year. what is your next trick? has to be costs. everybody else is doing costs as well, but there is the

relationship with government. what is the tangible difference between commerzbank's discussions with german regulators versus deutsche bank's? jonathan: deutsche bank is three times as high. it has pretty underlined lossmaking. they are a proper restructuring story, they need to shrink the u.s., shrink spain, shrink germany. francine: thank you so much, jonathan tyce stays with us. let's head to frankfurt to talk about german banking. live with the chief executive officer of commerzbank. i am here with the finance chief of commerzbank. he had better than anticipated earnings. revenue was in line with what

the street anticipated, but you still have an issue with declining topline numbers. how will you boost that? stephan: what we saw in principle in q1 is strong customer growth, loan and asset growth, and on the back of development, the strategy pays off that we have been doing for quite a while. you can see the cost reactions are paying off in terms of net profit especially in our corporate client segment. the environment is difficult and the effort has been for the last few years, and looking forward we do not necessarily expected to get easier. and growings customer base by revenue is what is the answer to this difficult market. matt: we just heard from jonathan tyce talking about that. you have not been able to cut

costs as quickly as costs are declining. you do not have a positive jaws ratio. will you have to reduce headcount drastically? stephan: if you look over the previous years, we have cut costs pretty nicely and we are on our way to get to 6.5 billion in 2020 and below 6.8 billion this year. quite a bit of cost coming -- cost-cutting coming over the years, and we are running a cost reduction and fte reduction. there is more to come over the next few years. shouldow many employees commerzbank have to be competitive? stephan: that depends on what you believe is possible in terms of product, customers, and revenue growth. if you want to serve your customers properly, we are a client centric model, you have

to make sure you have a proper presence and the ground to go for the resident -- revenues. matt: your outlook and terms of interest rates, you have negative interest rates to contend with, a banker's nightmare. is this a permanent situation? matt: it has turned from a nightmare to reality. -- stephan: it has turned from a nightmare to reality. if we examine what the ecb says about rates going up and down, there is little to no belief we will see the rates rising in the next two years. everyone can have a personal view after that, but i do not believe that. you have to set up your business model in a fashion that compensates for pressure on revenues, which typically is gross, grabbing market share, and cutting costs to get to the

positive draw. -- jaw. if you look at the last few quarters, you can see quite a bit of that. matt: how much more? you mentioned 100 23,000 private customers you added, 800 institutional clients. is that where you need to be or doesn't need to be double or triple that to scale up to the right size? stephan: if you look at the german market in general, a lot of competitors are closing down branches. -- branch closer rate closure rate has almost tripled. you need to adjust your net new customer approach to what is available in a certain sense, in the market. just doubling it is not necessarily the best thing to do. you need a good feeling of what is going on in the market can grab your share.

yesterday saidor his concern is you have a massive and expensive infrastructure, this back office that you do not really need. he would rather see you move your clients to com direct and deal with them that way. have you heard that suggestion? stephan: not really. two things you need to keep in for, com direct is efficiency reasons, and that is with howere nor there we deal with the customers. customer types are different. com direct is geared towards on learn -- online brokerage clients. the second part, i think if you look at what we have had in the

pipeline, this is addressing the efficiency of running the i.t. platform, and a closer connection between the business people and the i.t. people to make sure we have a better grip and better efficiency on investments going forward. matt: the bottom line what investors want to know -- will you go with a strategy where you stand alone or do you need to have a merger? like ing orsomeone unicredit to take over? stephan: what has been said about consolidation in europe where we have more than 5000 banks still holds true. environment is as it is, and we need to deal with it. first answer to that is as long as you have a proper strategy which addresses the concerns we all have, this is one of the key

ingredients to go forward on a standalone basis. we had been on a standalone basis before the merger talks, and are now. of a merger attempt -- questioning the strategy. as the discussion about consolidation in europe? the general believe is that in the market, mergers will be much easier than cross-border markets because there are more regulators involved. matt: you spent months looking at the possibility of mergers. i am sure you have considered the possibility of a prospered germ order -- cross-border merger. is it too difficult to execute in europe? stephan: whether it is too difficult or not is something you will need to find out with any specific project if you want to. we have not spent months on merger talks.

it was more weeks, and these weeks showed us the in market piece is not as easy, or not as convincing from a point of view and a given time period that it would make sense. by aer so, more case-by-case study. that is the solution for everything. matt: looking forward to hearing more strategy updates from you for the summer, stephan engels, chief executive of commerzbank. onncine: what is your take consolidation? he was saying that consolidation holds but you have to have a rate strategy for your bank. who has the right strategy? jonathan: you cannot legislate the banks where they are and germany is unprofitable.

saying what the rates expectations, rates are not going anywhere. exacerbating the profitability problems of the banks, so will they agitate themselves for stripping out costs? yes, i think they will. commerzbank is a candidate for that. tom: jonathan tyce, we are out of time. thank you for perspective out on matt miller's interview. we will look at the markets, priya misra and david rosenberg with us. futures at -11. this is bloomberg. ♪

♪ tom: this morning, a market swoon of all of 3%.

china,frontation of american trade, all the negotiations. note -- japanese yen strengthens. a great interview by matthew miller, european banking and crisis with negative rates. deutsche bank enjoys a six handle. commerzbank goes in search of a future. young trump enjoyed the advantages of depreciation. good morning, everyone. this is bloomberg "surveillance." i am tom keene, with me francine the call. i thought matt miller's interview was spot on. engels,mon, stephan they are boxed in by what the central banks are doing. francine: he talked about negative rates and it is important to assume that rates are staying like this.

nuclear a 60 day countdown unless europe delivers on trade, and data out of germany and what that means for the euro zone. tom: we need a first word news breaking. president iss giving european countries that signed the agreement to fulfill their -- 60 days to fulfill their it -- commitment. we did not initiate the violation of commitment and will not initiate any wars. we have never, ever given in to bullying and will never succumb to bullying and will respond to any aggressor. kailey: the trump administration refused to issue waivers to allow countries to import iranian oil.

japan fellipments in abrupt turn and trade talks. negotiations resume later in washington. donald trump reportedly lost more than $1 billion from the 1980's to the 1990's. the president appears to have lost more money than nearly any other individual taxpayer. he avoid paying taxes eight of the 10 years. demands enough investor to price its initial public offering at the top of its price range, putting in an order for three times the amount of stock on offer. it is likely the biggest ipo this year. 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.

much.hanks so markets are moving. stepsy gina martin adams onset and futures go down. withy down substantially dow futures down. yen on the move. over 20, 20 .75, that is a big figure. theear bond comes in, but number one thing i am watching starting about 12:00 noon wall street time yesterday, the second derivative of yen shifted , stronger yen to weigh 109 handle. francine: what you are seeing with yen is extremely significant because it has an impact on the fact that that trump tweaked keeps rippling -- tweet keeps rippling.

u.s. equity futures are on the rise. europe, there is a little bit of volatility. i am looking at euro on the back of better than good german data and gold rising, oil giving up gains. tom: we will show this chart this hourour times for the swoon of last year, and up we go off the december low. a rising general -- market in plunge. and here is a gina martin adams writes yesterday, we were crushed. francine: this is the bloomberg risk on, risk of indicator -- off indicator. it is not cratering but it is lower. tom: we have a good lineup, priya misra and gina martin adams.

the market strategist richard clarida and jamie dimon. >> that is why the markets are reacting. they are not just afraid of the direct effect. if it is a reverse of global trade, it can slow down global growth and hurt a lot of economies in the world. of: we have richard clarida the fed. >> the trade measures had a modest effect on the economy last year and obviously, we are hopeful there is an agreement. that is up to the president and the negotiations that are ongoing, but if that is not the outcome, we will take that into account in future policy. tom: the vice chairman of the fed, i thought that interview was just wonderful. what a set of interviews we have had with fed officials.

must watch, must listen, david rosenberg will join us. priya misra is from td securities, and we are coordinating with gina martin adams as well. what does your bond market tell you about the equity market? priya: there is a disconnect. theas been correcting so market has been pricing in fed rate cuts this year and next year. there is a long way between now and next year, so i do not find that odd, but the bond market pricing and rate cuts this year tell you the rates market is concerned about the economy, and yet equities were surging higher. ishink the equity market seeing that this trade deal is not done, so we are seeing some correction. tom: i am going to go mental. cratered, crushed.

you have got to be kidding me. we are hysterical over a 3% pullback. how did we get here? david: it is fascinating -- gina: it is fascinating. historically on every -- on average every 10 months, you get a correction. we have had consistent positive gains and all of a sudden you get a crash, so the market is conditioned when you see turnover as you will get a crash. overall, very bearish sentiment. valuations are within the range of normal considering the signals within the bond market and got to where they should be. the problem is, there is no further upside so when the fed signaled, we are not as dovish as the bond market was expecting

, that created volatility in the equity market. down afters calmed liverpool-barcelona. let's bring in francine. what exactly is priced in this morning when it comes to trade talks? what we see a big list if trade talks go better or will it be the other way around? gina: what we had done so far this year is priced out any further tariffs. that was clear. even the stocks that are most exposed to china and the s&p 500 doubled the return, so we priced out any further tariffs with respect to equity prices. now we are trying to figure out if we will get an acceleration of tariffs, if geopolitical relations are deteriorating. it is wishy-washy in the short run and what is happening in the equity market as about more than

trade. two weeks ago, we started noting things like exhaustion in leading indicators was semiconductors. the market was wobbly with respect to the fed, so this is more than just trade, this is a natural correction of sentiment that built up. careful to draw conclusive evidence out of trade. watch the trends, watch the market for signs of stabilization in general because the trade rhetoric could remain in place for longer than this week. francine: i feel like chief executives -- when you talk to chief executives that just reported earnings, costs about the future and very low visibility, why is that? are we at a certain time in the of tradeis it because concerns and geopolitics? gina: at is a combination of

things. generally, executives are giving very little guidance. last year, we saw guidance to the positive, overwhelmed guidance to the negative. it is very modest but we are starting to see positive guidance show up. it is just tenuous. the global economy took a dip last year and we are seeing evidence we will see a massive recovery in the second half of the year. there is still major comparisons to last year's tax reform as well. global conditions are not as strong as they were and you have trade uncertainty holding back risk tolerance in general. there is a lot of uncertainty. at the same time, you got a shift in signals from the fed and they are on hold. that leaves us in an air pocket of, what next? orl we get an acceleration

will we not get an acceleration in growth? that is a difficult premise for equities that are trading that we will see growth. francine: coming up this hour, brexit, european elections, and much more with valdis dombrovskis, the european commission vice president. this is bloomberg. ♪

♪ they are an influence that has to be dealt with. i don't mean -- by no means do i mean mrs. trump.

the first lady a wonderful person. tom: at one point there were three generals in the white house, now zero. david kelly, much more with that interview, general kelly, begins to explain. there needs to be no explanation of the bombshell the new york times dropped. i do morning must reads on opinion, but the story was so important, here is a little bit story, manyous pages on the details of mr. trump's taxes. fevered acquisition and spectacular collapse, $1.2 billion in losses for the decade. for decades and the president refusing to release his tax returns while the president reported hundreds of millions of dollars in losses for a long time ago, his father's income

only onepositive, with major lost, $15 million invested in his son's latest apartment project. thisdy shanker has seen before. who cares? marty: it is an extraordinary piece of investigative journalism, but what do you come away with? donald trump inflated his business acumen and wealth. people have known that for decades. surprises andets all of that, -- pullets are -- r prizes and all of that. is there more validity? marty: i do think the narrative

is we cannot normalize the kind of behavior where donald trump criticism m is -- criticizes amazon for taking advantage of the tax laws when he took full advantage for long time. it undercuts those arguments from him. i applaud the new york times for spending as much time and effort digging into this and they did a great job. but do voters care and do the public care? francine: to phrase that differently, and we need to talk about iran, do americans want to see the president's tax returns? marty: donald trump says he did not release them before the election, he got elected, so that is the verdict. oversightnction of that congress should be able to see his tax returns, but it is a slippery slope because the policyn is -- is it for

reasons or political reasons? the democrats have not done a good job explaining there are policy reasons to see those returns rather than just political. francine: a run has set the sick dayran has set the 60 nuclear countdown unless europe delivers on trade. does that ratchet up tensions? marty: that clearly raises tensions further. -- u.s. center for -- task sent a task force to the persian gulf and are planning to send b-52s. it will not sit well with the administration, and they have taken an extremely tough stand on iran. taking notessra is going, why did i get up this early? i want you to fold in your full faith and credit world with our

trust and confidence in government. can you take basis points off the yield market because of the blather mr. shanker has given us? priya: risk is historically hard to price in. chinaou can bring in flows, 25, 50, 75 basis points, but can you calculate his world into your world? priya: ed is hard to price that in because there is a knee-jerk reaction. if we see a tweet, we could see a five or 10 point move. that is far more demand for lower rate reduction. interest -- protection. interest rates are low and there is a desire for protection. you have seem some parts of the market -- seen some parts of the market starting to price it in,

but i think it is much harder. tom: a little bit of correlation, futures at -12. marty schenker, thank you so much. much more to look at from our washington team today, exceptionally busy in the next three days. a conversation with carla hills, always straight talking, the u.s. trade representative in the 8:00 hour. this is bloomberg. ♪

♪ there is nothing wrong with wait and see. growth has been good and they have got to react. they should stop forecasting. forould be a huge mistake american policy to be set by the stock market. i never worry that much about it. francine: that was the j.p. morgan chase chief executive on the fed and u.s. policy. still with us as priya misra. when you look at the fed, they could move down or up in interest rates, what concerns you most? is it mispricing rates or yield curves that could be back to inversion? priya: the market is pricing in too much risk of near-term rate cuts. what we heard from the fed, and

continue to hear the same message, the economy is ok. growth is certainly slowing. we were growing around 3% last year and now it is 2% but that is still trend growth. if inflation gets closer to 2%, the fed can scale back. we are close to neutral and the fed does not need to do a lot. they have told us they are ending balance sheet runoff. i was nervous the equilibrium level of reserves is higher. at some point, the fed will start buying treasuries in the open market. based on our analysis, there could be as much as $300 billion of issuance a year and one third of that could be taken by the fed. they are trying to keep policy as neutral on the balance sheet and the rates front. the markets are worried.

there are worries on the trade front, global growth, why is europe not picking up growth? that is where the market is pricing the near term rate cuts. francine: the yield curve is edging back towards inversion. priya: that is a function of the global rate environment. to zero itr is close is hard for the u.s. 10 year two selloff. u.s. 10 year rates are lower. any historical episode, term premium will be much lower because global rates are lower. using the yield curve as a signal is not that strong, given the global rate environment. tom: we care about low german rates, more negative rates. should we care? priya: you should care because

that will keep u.s. interest rates lower. tom: price up, yield down. priya: yes. tom: i got that right? priya: you did. jgb and germany at zero, the u.s. is at 50. tom: we have to do a data check. handle.with a 110 .02 lots of stories, gina martin adams helping, priya misra, and david rosenberg will darken the door. rosenberg on the boston brewers -- bruins, 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. ♪ >> it may take a little bit more time, but we should do the proper trade deal. i would rather not do a deal done a bad deal. >> president trump to be crazy,

but i call him rationally crazy. he wants to squeeze a better deal for the u.s. and wants to appear tough. >> between the united states and china, i think they will arrive at some sort of deal. >> i am positive that we might have a positive outcome, but clearly it is becoming more binary. >> even after we have an agreement, there will be ups and downs so people should not read into this like, there is an agreement, it is all over. tom: i am not a big fan of these conferences. this one was different, the j.p. morgan conference. look at their equity outperformance. will no longer comply with elements of the 2015 nuclear deal and the president 60giving european countries

days to fulfill their agreements. >> we did not initiate the violation of commitment and will not initiate any wars. in toe never, ever given bullying and will never succumb to bullying, and we will respond to any aggressor. kailey: the trump administration refused to extend waivers to eight countries to import iranian oil. william barr is raising the stakes in his battle with congressional democrats, threatening to ask president trump to invoke executive privilege to keep democrats from getting the full unredacted mueller report. they will vote today on whether contempt.rr in

two suspects arrested and a shooting -- in a school shooting. it took place in highlands ranch, colorado, just miles away from where 30 people were killed in columbine years ago. 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. francine: greatly appreciate -- tom: greatly appreciate that. our michael mckee with a great conversation with the vice chair of the fed. inflation has been running on the soft side and there are some temporary factors , so our view is inflation will move towards the 2% objective, but we are looking at the data closely. we think the u.s. economy and monetary policy are in a good place. sustaining maximum

employment and price stability, and do not see a case to move rates in either direction, but we will always be looking for indications. us from tdmisra with securities and another canadian, david rosenberg with us. absolutely thrilled to have both of you. i have eight things i can go with, but i want to go with what i see on the bloomberg. this is the probability of a rate cut out to january and it is at a rosenberg level. why will we see a rate cut? david: the economy will slow precipitously and recession risks are elevated. the barometer is at an 11 year high and has riven -- risen every month this year. the recession barometer has gone up six straight months so the

risk will increase. that cornflakes moving back to 2% is as prescient as jan and yelling's view -- janet yellen's view two years ago. year, somen the 10 are talking up sub 2%. can we get there? priya: if the fed is easing, you can because the rate goes down to zero, they will use qe and forward guidance. tom: if he is right -- which is rare -- if rosenberg is right, are you suggesting a linear move from two to 120? priya: rates could call because i do not by these insurance cuts. if they are starting a full on easing cycle and taking rates down to zero, we are talking

about average inflation targeting. i think they will pull all the stops and that will take rates lower. i disagree with david. financial conditions are very easy. the stock market has fallen recently, but we are significantly higher than the end of last year with growth much better than expected. china has put a lot of stimulus measures out there. we are seeing early signs of improvement in china. it is still slowly filtering through into europe, but the u.s. is going ok. i am worried the markets will say, what does the fed know that we do not know? i think if growth is at zero, they are starting to ease. francine: to the point on the market, let's forget the real economy. does the fed talk too much?

is there a problem with the fed delivering their message given what we have seen? david: the fed's message is just a mark to market message. sayard clarida will , justent things next year like ben bernanke when he said subprime would stay contained. we have to stay ahead of the curve. i disagree that the u.s. economy is in great shape. it is incredible how lucrative the market is and not digging in. real gdp growth in the first quarter, but when you add up consumer spending, construction, business spending, the domestic guts of the economy was barely 1%. it was stall speed. , that is theayroll

only number out there. a survey which nobody talks about does a much better job then payrolls do, that household employment was down to 103,000 last month. the u.s. economy is weakening more than people think. the stock market, it is almost impossible to know what is driving the stock market. the bond market historically gets the story right before the stock market. the fact that we have the 10-year note yield trading below target is a clear signal the bond market is telling you things will be cooling off substantially in a time where core inflation is below target. that will be the rationale from the fed. francine: does it mean you

basically ignore any communication from the fed? they say we could cut or hike. what does it tell us about what they are looking at? you are saying a weaker economy than expected. greenspan 2001, alan was telling us we had an inventory david: correction. as a private sector economist, if i paid attention to what the fed is telling me, no, i have made a career doing that. here would be asking me into thousand six about ben bernanke 2006 about ben bernanke that the prices will stay contained. when i am predicting is this -- the fed's message will be different three to six months from now than today because they tell you about what is happening right now. we are in a good place, we are

told, but will we be in three to six months? tom: we have got to go, because you are driving german rates lower. francine: david rosenberg and priya misra stay with us. for the kicklive off the salt conference. we will speak to anthony scaramucci and the gallantry chief executive. this is bloomberg. ♪

♪ neither side has to do something to not make a mistake. because we are doing in the

economy -- better in the economy, just get the trade deal done. get the proper trade deal done. i would rather not do a deal them get a bad deal. the 10 year at four or five is extremely low. $4n the government bought trillion of sovereign debt that had an effect. 4%, when you are having trillions of growth, is not a bad number. tom: james dimon talking in asia. angst to our group and stephen thanks to our group and stephen engle, a great interview. a single best chart in honor of david rosenberg. series.the age 15 back to eisenhower, up to volcker, double-digit highs. moving down to the blue

regression would be rosenberg levels. you are not suggesting we get there, are you? seea: i do not think we rates go a lot lower because we do not see the fed easing but i do not think we see the 4% either. cycle fed ends the hiking at 2.5, how do you get the u.s. ten-year much higher? that would mean investors want compensation for duration risk, which they do not seem to want here because global rates are low. keep thistrade will premium -- the curve will dimon, 5%.

you are adamant the specter sustains. david: take a look at that chart and you will see a secular downtrend which is on track, punctuated by cyclical upturns.

brexit, we got to 3.3% last fall, and now we are back to 2.5%. we are past peak inflation. core cpi inflation peaked in july and it is down to around 2% . we have never seen core inflation peak at such a low level. inflation will be rolling over, we are past the peak level of growth. the impact of what the fed has done, the lack of monetary policy in the real economy is six to eight quarters. we have to see the impact of what the fed has done hitting the economy when sub 2% inflation will be a dominant feature over the next year. you what 10-year gilts be down to 10%, people would not say that. looking at it in the context of

where are yields and the rest of the world, and the reason the u.s. yields are higher is because of the cost to carry. if u.k. gilts are down to 1%, that is a great leading indicator for the treasury market. that is where we are heading. tom: we will come back and do priya misra and david rosenberg on radio. they are clearly on a different page, and we love that. francine: coming up -- brexit, european elections, and we will talk about the tariffs and iran and how europe will react. valdis dombrovskis is coming up next. this is bloomberg. ♪

♪ this is bloomberg "surveillance," tom and francine from london and new york. the european commission has lowered its -- the downside risks remain prominent with the escalation of trade wars, and a no deal brexit is among the greatest threats.

joining us is the european commission vice president. thank you for speaking to us. commissioned is the and you specifically about the impact of the u.s.-china trade war escalation? mr. dombrovskis: if you look at our latest economic forecast, we expect some slowdown of e.u. euro economy this year and expecting some rebound next year. for the euro area economy, we expect one point 2% growth this year and 1.5% next year. we see risks to this economic outlook and ongoing trade tensions including between the u.s. and china is one of the factors we see is a risk. francine: do you have numbers? if we have a complete rake down which we heard about yesterday

-- breakdown, which we heard about yesterday, how much will that shave off european gdp? mr. dombrovskis: we are not currently having a newer forecast than the one presented yesterday, so those are our latest figures. we indicated this u.s.-china trade conflict is a risk factor. we will see in which form it will shape up. analysis. update our in any case, we see that economies which are strong export economies, first and foremost germany, are seeing a significant slowdown because of trade tensions. tom: you were the prime minister of latvia and you enjoyed getting through physics at the masters level.

congratulations. you understand the mathematics of negative interest rates. , when thee when negative interest rate game falls apart? regard tovskis: as interest rates policies and negative interest rates, we see it more as a situation which should be more like exceptional but not the norm. normally, the economy should function with positive interest rates. it is linked with monetary policy. the euro zone is linked with monetary policy, the european central bank, and they are gradually moving toward normalization. tom: minister, this is so

critical right now. there is no gradual about it. deutsche bank printed a six handle today. commerce bank just told our matt -- commerzbank told our matthew miller of a desire to find revenue. is it an immediate moment that europe needs to confront negative interest rates? mr. dombrovskis: first and foremost, i must respond institutionally because as the european commission, we expect -- respect the european central bank to set the base rates. the current policy of the ecb which is gradual normalization of monetary policy, but i cannot go much beyond that. francine: we have a lot of questions and we want to come to brexit and a second, but let me dayabout iran, the 60

nuclear countdown unless europe delivers trade. how will europe react? mr. dombrovskis: indeed, we have a concern about this solicitation first and foremost. we are opposing the u.s. unilateral move out of the nuclear deal with iran. they are going for further escalation of sanctions and they announced withdrawal with the nuclear deal. this is a cause of concern for europe. closely andwing it we are in touch with stakeholders. it has been confirmed a number of times by international institutions, monetary and the implementation of the deal that iran was following their part. francine: if iran were to

withdraw, will we see european sanctions restored? mr. dombrovskis: this is something which we cannot exclude, but currently we are working closely with stakeholders. whichret the scenario in this escalation is taking place. francine: a number of reports that have not been confirmed by bloomberg that the talks between labour and the conservatives are breaking down. what does that mean for the brexit process and the commission? mr. dombrovskis: from the e.u. side, as the process is quite clear, we reached an agreement with the u.k. government on the withdrawal agreement, and now it is for the u.k. to decide which direction they want to go. there is an extension to the 31st of october to give the u.k.

more time to decide what brexit scenario, if any, they prefer. clear inhas been very granting this extension that it does not mean reopening withdrawal negotiations. thank you so, much, the former price -- prime minister of latvia, valdis dombrovskis. move, a loton the of important conversations across bloomberg. thrilled that david rosenberg and priya misra drive forward with me. we will talk liverpool. farrow make me do it. ♪

♪ alix: equity punish with their

worst loss since january. china warns of retaliatory tariffs as trade delegations land in d.c. exports fall, corporate fault surge, putting more pressure on the pboc. new zealand becomes the first developed central bank to cut rates. jamie dimon says 4% yields are not so bad. if growth holds up, the fed has to react as key yield curves continue to flatten. welcome to "bloomberg daybreak" on this wednesday, may 8. david westin is in washington dc with extraordinarily busy news flow out of the capital. david: i came here because of the trade delegation out of china. in the meantime, we have mike pompeo going to iraq because we have problems with iran because iran says we are going to start up our nuclear program in 60 days if you don't do som