♪ china rebuffse as the u.s. -- ♪ >> welcome to "bloomberg

surveillance." good morning from the europe and asia.good evening in i'm francine lacqua and these are your markets. countermeasures, china says they will put them in place against the stoxx 600, down 0.6%. there's a little bit of movement on the u.s. 10 year yield. overall, there is a bid to atens, also at renminbi 6.86. the yen is one of the biggest gains today. the u.s. treasury yields dropping to late march levels, a little bit of volatility on the markets as we are trying to figure out this tit-for-tat war with the u.s. coming up, we speak to the eu trade commissioner live from berlin from the global female leader summit. or will be having a thing two to say about trade in the u.s. let's get straight to the first word news in new york city. >> theresa may is trying to win

support of the opposition labour party by reopening brexit talks with brussels. number 10 is trying to rewrite the outline agreement on future custom times, but senior labor officials warned their party won't back a deal without a second referendum. the government is still hoping to take the u.k. out of the bloc by the summer. inequality is one more reason minneapolis fed president neel kashkari thinks the central banks should keep rates low. he says policymakers need to take income distribution into account. faster wage growth hasn't been putting much upward pressure on inflation, saying because in recent decades workers have lost a lot of their bargaining power. -- succeeding in guiding the amc to its sixth straight victory in south africa, but the party had its worst national results since the end of apartheid. now he faces the challenge of picking a cabinet.

the president aims to dismantle corruption in the state and revive a flagging economy. $7,000,oin rising above the highest since september. this is the cryptocurrency rally gathered pace since mid-december. the price has more than doubled, at its highest since last september. it is still a long way off its 2017 peak at tops $19,000. manchester city has one the english premier league. this victory came after a 4-1 brighton, clinching the title after a closely fought race with liverpool, which got the highest point tally for any team that finished second in premier league history. the two sides also have the highest combined points total ever. global news, 24 hours a day, on air and at @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine, back to you. >> thank you.

president trump is back at it on twitter, taking more shots at china over the trade war. he tweeted that america is right where we want to be, encouraging for breaking the deal. meanwhile, chinese state media is blaming the u.s. for the impasse, because it went back on its word and imposed more levees. the ongoing uncertainty means more trouble for financial markets. stocks in asia and europe have fallen along with u.s. equity futures. the white house chief economic advisor larry kudlow told fox he sees suffering on both sides. >> it's interesting, the expectant countermeasures have not yet to realize. we may know more today or more tomorrow. i reckon they will. we will see what we come up with. so far we haven't heard on that basis. >> joining us for the hour is 119 billionassets, pounds in assets. thanks so much for coming on. what does this trade war mean?

does it escalate? the market was so sure that something would get done. what happened? you put it down to discussions going off the rails. or you could put it down to the theatrics of trumps style. stockmarkets were covered and you get tweets about how great aerica is and then you get move back to refresh the base with an attack on china or whatever it might be and then the market falls and he will backtrack. there's a pattern forming here. say ittically you could will cover all bases in the campaign, but what does it actually mean for markets? >> for markets the tariff increases are obviously negative. it is hard to decide how the market responds because on the one hand they are a bit like another rate hike for the fed

and markets don't automatically collapse. and there are some silver linings. in particular the chinese fought where adil was being done. they were easing back on economic stimulus and felt they had done enough to keep the economy moving. creates and this buying opportunity with stronger growth. >> opportunity where? are there sectors which will be the first to benefit if there is a truce? >> one area we are starting to buy his european equities. europe has done quite well the last couple months. europe is obviously suffering from geopolitical spats -- one is the trade war, the other is brexit. but you could see a situation where the markets drop enough for trump to back away from tariffs. that is good news for europe,

who's in the firing line. >> what does that mean for emerging markets? i know you mentioned the pboc and the fact that we could see extra stimulus. do they have a good handle on the economy, or could they add stimulus but prevents capital outflows? >> well, i think emerging markets could also benefit. it's normal and a correction like this for markets to rally harder than other areas. i'm not utterly convinced that emerging markets have all of the attractions you want them to have. they tend to do well if you haven't easing fed or a weak dollar at least, and a strong china. we seem to get moving around between the two of them. sometimes the dollar is strong, sometimes it is weak. we don't have a clear picture. emerging markets isn't the obvious way to play on the recovery. i think european equities could be quite good. but it's a basket of general

global equities. >> your bases that we will find an agreement? >> five basis we will get through this current market correction. what may will happen is we have to go further down before we go up. the sentiment backdrop is always very important in these situations. last week, it was a little overbought. too optimistic. and now the market has dropped quite a bit. it may have further to go before it bounces, but when you are looking at red, europe is one area i will be looking to buy. >> how do you measure that sentiment? there was very little visibility from chief executives over the last 12 to eight months, which means they are uneasy about something. >> the earliest picture has been quite bad. if you look at the revisions from brokers, they are beginning to get less negative. if you look at the economic lead indicators from people like the oecd, they are starting to get less negative. you had the big industrial

production from china. you are beginning to see green shoots that suggest some kind of pickup. that's the economic backdrop. extra stimulus from china in the face of higher tariffs could add to that positive story. the short-term sentiment -- vix volatility, private investor --timent, company directors some of those things are looking better now than they were a week ago in terms of a contrarian opportunity. but company directors if anything have been selling shares recently rather than buying. that correction could run a little further before we get to the point where it's an obvious buying opportunity. >> what do you like and european equities? is it country specific, sector specific? >> it is not really sector specific. one we are talking about is countries or sectors exposed to global trade -- cyclicals

primarily, these are all areas that could do well. an environment where stockmarkets are recovering from a bit of bloodletting. >> thanks very much. he stays with us. coming up, hands on the wheel. a shaky day for global equities, which could be more trouble for over shares. we discuss that next. this is bloomberg. ♪

♪ >> economics, finance, politics. this is "bloomberg surveillance." we have quite a big market day so we will check the markets every 15 minutes. stocks are falling, the dollar is climbing, a lot of market

participants are worried about the trade talks and they are also trying to figure out the details of the countermeasures that china warned it would impose following the declaration of a trade war between the u.s. and china. more treasuries tumbling and u.s. futures down 1.4%. let's get straight to the bloomberg business flash in new york city. >> no wave emerges between european banks. that's the take of the unicredit chief executive. he cites hurdles to the deal, including the cost, dampening speculation that the lender may be interested in buying commerzbank, this is the italian lender is attempting to enter a growth phase at a tough time for the european economy. >> we need a stronger financial market and hopefully the capital market is on one side and banking on the other, bringing a deeper market. nissan is reportedly opposing

renewed merger efforts by written old. they reported that the french carmaker made a former tie up offer but bloomberg has learned no formal proposal has been made. a merger between the two would create the world's second biggest carmaker. that's the bloomberg business flash. >> thank you so much. uber shares will resume trading today more than 7% off their price of a disappointing first session on friday. shareholders think softbank was one of the biggest victims. emily chang spoke with the cooper chief executive after the shares opened. >> you can't pick when you go public. you can control how you execute as a company. are you building a great service, are you bringing in happy consumers all over the world? we are going to focus on what we can control. we raised a lot of capital to invest for many years. that is what we are focused on.

>> still with us is our guest from royal london asset management. when you look at technology, do you by any shares in uber? >> personally know. >> how do you explain the downfall? they are priced at the lower range. is it to just bad luck or is there something more underlying? >> it is something to do with the sentiment within the ipo market where you pitch the pricing and it is hard to get that right. sometimes it is broader market sentiment, and given what has happened in the broader market it could be they thought they were pricing at the low end. >> this is not a tech valuation concern, more market sentiment. >> i think so. there is so much volatility in the individual tech stocks, it's within the realm of possibility for the drop in the s&p.

i wouldn't read very much into that valuation generally. they are pricey. >> don't you like them? >> again, i would like to see the market drop further before buying. sector ischnology really the epicenter of what has been driving the last few days, cyclical tends to do well when inflation is quite low and at some point you want to move away from those areas. we think the markets were premature to worry about a recession in december. there is lots of things coming together. >> how much do you look at the sectors of tomorrow? you talk about the yourconnectedness -- do need to take a bet now on some of those longer-term trends or do you wait? >> i have not been around long enough -- the 1999 tech bull

market, at one point the argument for buying the likes of amazon was that everyone in the world would buy stocks through amazon. imagine that being so ubiquitous. still, the stock prices go down pretty sharply. you always have to be a little wary about the world economy and not get blinded by the micro details and individual tech stocks. >> thanks so much. we will come back to these valuations. our guest stays with us. still to come, more from our exclusive interview with the unicredit chief executive, talking about m&a. he does not see a way for european bank m&a, because of all the hurdles. we will come back to that interview shortly. this is bloomberg. ♪

♪ you are watching "bloomberg surveillance." -- saudi the latest arabia says two consulates were attacked well setting for tours in the persian gulf. andtankers were damaged, iran has called the incident regrettable but we are still lacking news as to who attacked it and how it happened. our guest is still with us. we know that there were two oil tankers attacked, as tensions

with iran are escalating. how does a portfolio manager handle this kind of news, that could be huge, could be nothing? one thing you have to bear in mind is that you to get these situations where commodity prices rise very sharply and one thing you can do is include commodities in your asset classes. obviously there are times when you want to tell your exposure but is commodities wouldn't read too much into what's happening at the moment, although i would say on the watchlist for the next year or so heading into the 2020 presidential elections is whether, having tried to get the fed to cut interest rates and congress to pass more tax cuts, trump will decide to ratchet up the tension with iran. moment. exactly a calm fed want to get back to the

and global trade because we had a gas that made a good point, will they cut rate soar hike rates -- if we are in a full on trade war, what does it mean? >> it is stagflation. , sometimesrices people suggest prices will come down but if tariffs are going up, prices are going up. american companies and consumers are paying this tariffs and so there is to a large extent the risk that the fed doesn't want to cut rates because inflation is rising but if you are trying to get people to buy phones made in nebraska, the capital spending isn't there yet. combination,a bad

it's bad for growth but it raises prices and therefore central banks are your friend so much. it's the same from the bank of england, saying a trade war increase is not the kind of things you can fix with interest rate cuts. >> what does it mean for the fed? will they stay on hold this year? >> it all depends on the china data. my base case is that we are starting to see growth firm up a little bit at the margins. if anything, the trade tensions may get the chinese to add more stimulus preemptively, because they are worried about the next tariff increase. you may end up with activity stronger-than-expected. i would also lean toward saying the fed changes rates against this year, but it is the hike. but that is quite a contrarian view. do they have a communication problem?

if they were pricing in a september cut, looking at the data they are probably pointing more to your sign. >> they have a bit of a problem here and if the data keeps improving they will have to change communication and the market pricing will move. toward thatto move without resuming rate hikes. in the end it will be the date of the drives the fed and they don't really know how these changes are going to impact the cpi data and inflation data or the growth data. they are watching everything like the rest of us. >> if the remember goes to seven, does that have an impact on the fed psychology are not? >> what's interesting about the chinese currency is it has been remarkably stable versus the dollar. it's a bit like the chinese saying, we aren't depreciating. they do have the ability to swing that around a little bit

but i think all this tit-for-tat does no one any good. we are now in a higher volatility regime, and that is something that requires you to be more tactical, and it requires you to develop processes where if equity volatility is too high you shrink your equity waiting. >> thank you so much. he stays with us. coming up, we are speaking with the e*trade commissioner, live in berlin from the global female leaders summit. we will ask her about trade, the u.s. and china, and the u.s. and europe especially with carmakers and tariffs. 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. trading blame. stocks slide as china blast the

u.s. after president trump's twitter tirade continues. he blames beijing for the deal. uber stalled in markets after an ipo saw shares growing nine .illion dollars in market value and a chief executive tells us in an exclusive interview that consolidation in the european banking's race will be challenging due to regulation and low interest rates. this is bloomberg surveillance. i'm francine lacqua in london. let's check markets. >> let's start with your next -- next on the upside. this is a major hurdle that is clearing the way. they are in the battle with nasdaq. euronext class to complete the transaction. aims to complete the

transaction by the end of june. luxottica is one of the biggest makers and sunglasses. nearlyenkrupp -- senkrupp down nearly 7% today. they are reporting their open to potential partnerships as well as asset deals. much.ne: thank you so let's get straight to the bloomberg first word news with viviana hurtado. viviana: arkin value sliding by $9 billion due in large part to the stake in uber and its ipo flop. the first day of trading open 7% below the ipo price before sliding even further. all eyes are on movers second day on the stock market today.

the 6 billion dollar bailout from pakistan from the international monetary fund. deficit triggers a balance of payments crisis for pakistan. and the white house considering judy shelton to fill one of the vacancies on the federal reserve ward. this is currently the u.s. executive director for the european bank. this follows the former picks falling by the wayside. osa getting toaph the sixth straight victory in south africa, but they had the worst national results since the end of apartheid. he faces a challenge of picking a cabinet. the president is set to dismantle corruption and revive a flagging economy.

manchester city winning the english premier league. they clinch the title after a closely fought race with liverpool. that club won the talley for any team that finished second in premier league history. the sites have the highest combined points total ever. howard by than 2700 journalists and analysts -- global news 24 hours a day on-air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. francine: let's bring you an exclusive interview. in the three years since he's taken over, he has cut costs to get back on a more solid footing. how should italy's biggest lender move on? earlier, i said down with unicredit chief executive and asked him about his plans for m&a. >> it is important for us to grow on it purely organic -- on a purely organic basis.

i said that mergers in europe would be very difficult to put together because there are a lot of things that need to be followed. risk will be proper. there will not be many measures. francine: this is domestically and cross-border? >> domestically and cross-border, yes. francine: but you don't have much m&a because of banks and because of rates. it will be tough to be a european bank. to be a interesting european bank and challenging. you mentioned negative interest ofes which are a consequence globals. is growing slightly at the

speed of european growth. and managing that risk properly. it is lower than what we've see in the u.s.. i know you don't speculate on m&a and on rumors in general, but how many banks will be left in europe because they have been taken over by m&a or because they haven't gone bust and 10 years? >> look at it in a different way. if you compare banks, they are to the 60 compared billion euro market cap. important is a bigger bank in europe. support european companies.

this is what is stated. we need a stronger financial market system in europe. and hopefully, the markets will go to one side. banking on the other side will bring a deeper market. a deeper market will come if we manage to attract investors from capital to european banks. as well as the european market. francine: that was the unicredit chief executive. still with us is trevor from asset management. do you hold them, sell them, or wait for them to merge? >> they plan to be a bellwether for the equity market. and we think that there are some signs that things are getting a little bit less bad at large in europe.

on the basis of global growth perking up a little bit, the ecb has stepped back and has dovish and loose policy. bit of an eye on next year. if we do get global growth that is a risk for next year to invert the yield curve in america and you could get a recession next year. francine: what is the chance of recession next year? >> i think it is rising. were onenumbers i saw third. one third probability. the u.s. housing market has been slowing for about a year. it seems to be a good 18 month lead indicator for the broader economy. unemployment will rise next year. that is the definition of a recession. francine: does it go back to the

inverted yield curve? i'm told look at a different this time. >> it is not quite inverted. it will stay at not quite inverted or slightly inverted levels since the 1990's. the yield curve looking like it is inverting particularly at the short-term is high. and housing markets saw weakening. that we areings concerned about. tariffs are part of that mix as well. materializeesn't and doesn't raise interest rates. interesting. let me bring you to the volatility chart. because of the trade concerns, where do you see volatility? >> we think it is a higher volatility regime. this is between the feds fund and volatility.

if you've been raising rates for two years, then rates will stay high. then volatility will stay high. we have one to two years of volatility. if you have stock returns in higher than average are lower ,han average volatility regimes you get a 6% annual return with a higher volatility. 55%, that will happen twice. in the lower volatility range, 13% to 12% volatility, it is better to own equities and volatilities there. about tactical chances to buy, but we are in a market where we are a bit more stable. francine: i will still your notes to impress -- i will steal your notes to impress tom keene in the next hour.

trade, trump, and the european union. it will speak to the trade commissioner next. put theresa may's conservatives in fourth place. latest oning you the the european elections almost no one wanted to hold. this is bloomberg. ♪

francine: this is bloomberg surveillance. i'm francine lacqua in london. let's bring in an exclusive interview on chinese tariffs. to the european union be the next target of president trump's trade war.

>> i'm joined by the eu trade commissioner cecelia strong. great to see you with us. president has increased tariffs on chinese goods. our european cars going to be next? report gave 90 days. the president can prolong this, of course. we hope for the best but prepare for the worst. >> in terms of the conversations withave had with the -- the administration, is that what you're waiting for? >> we do not know at the moment. betweenan agreement john kline juncker and president trump. during that time, we would not impose new tariffs on each

other. we hope the president will still stick to those words. >> and wind we see the retaliation from the eu. retaliate.have to we are preparing a list of possible items. i still hope it won't happen, but we will publish that list according to the rules and the final consultations. >> one of the things the u.s. administration always says as they want to focus on agriculture deal. your mandate made it clear that it should be just industrials. that they have only mandated very limited sectors. the easiest way to square that circle is limited but still meaningful trade agreement.

regulatorycuss cooperation and making it easier for companies to get their products qualified. and that can be done very quickly if we decide to do so. and that builds trust. and who knows what would happen in the future. but that is what we have a mandate to do for the future. not mean public procurement by america and the jones act that would be difficult for the u.s.. something quick, easy, and mutually beneficial. >> if it does mean that agriculture is something that you have to consider -- >> it is something that we will consider. we negotiate on the basis of the mandate. >> and that mandate is set up by eu leaders in a way that limits the way you can handle it. would they be open to provide a bigger mandate?

>> it is limited, but it is good for the u.s.. still lead to an increased trade between us. and who knows what we can do in the future. >> and what is the timeframe? can you get this done before november? >> we started to discuss regulatory cooperation we have not formally launched negotiations yet. u.s.ll be meeting with the agreement.s trade if we do set negotiations, they could be quite quick. >> another focus has been the wto complaint. do we have an update on where that stands? >> this is a very long case that

has an going on for 14 years. the wto has said that both of us have sinned. so why don't we sit down to try to find a solution to this instead of imposing tariffs. rules for rupees -- how to deal with this industry. that could be the norm for the rest of the world. there are other countries that should probably be a bit more disciplined. >> the trade tension between the u.s. and china is the big story right now. if you get a resolution to that trade tension, the u.s. what the eu would be discriminated against. would you have to tallied that in some kind of way? would that make you uncomfortable? >> we hope the u.s. and china can settle their conflict because the escalation of the trade conflict is that for the whole world. if they can find some sort of

limited agreement, that is a good thing. we watch a very closely, but we don't know the content of these talks so far. we hope for the best, but the european union is negotiating with a variety of countries across the world both bilaterally and strengthening to modernize the wto. we keep busy. >> you are in talks with other countries, but are we close to actually getting this done? >> it is a huge deal. -- people inuro the european union. we are quite advanced in our talks. i still think that we could close it this commission. we are talking regularly and it would be very important. in terms of the amounts or the trade?

>> we are looking at this to be a very competitive trade agreement including everything and we have long historical ties. ais would be reinforcing variety of areas and a very good trade agreement for us as well. >> thank you for your time with us. malmstrom onlia whether or not trouble increased tariffs on european carmakers. us, the eu commissioner of trade. in fourth place, we will bring you the very latest on brexit and the negotiations almost no one wanted to hold. this is bloomberg. ♪

economics, finance, politics. i'm francine lacqua in london. let's talk brexit. try minister theresa may is trying to reopen talks with

brussels. number 10 says the uk's hoping to explore changes on future customs ties. putomes as opinion polls theresa may's conservatives in fourth-place ahead of european elections due to be held in 10 days. joining us is trevor reza. home?t change policy back trevor: you're not changing the number of mps in each party which is where brexit will be decided. but what you are doing is potentially changing policy. conservatives are being very scared by the brexit party. in pressure on them to have a hard or no deal as to their brexit. the labour party is also seeing quite a collapse in the polls. it puts pressure on corbyn to back an unconditional referendum stance. also worth bearing in mind, this

is not a referendum on brexit. add up the hard remain party, they are at 31%. we see both lanes rising. labor had the highest combined vote sharing. could this be a mini referendum on brexit? >> it is being portrayed that way by people i think wanting us to leave the european union. together parties with leaving the eu and the manifesto, you have to include labor even though voters want to remain. if you want to ask people about whether they want to leave or pulling shows remain at about 54%. a very steady 54%. were askedyou specific questions like if you want to leave with may's deal, it drops away very suddenly.

the general public, if anything, is pro-remain but you may be able to interpret the elections as that message. francine: how do you get out of that impasse? the deadline has been postponed. >> sterling is still caught in this trading range. this was the top of that range at the moment. you just don't know which way the peg is going to break, up or down. you really can't rule out a no deal exit which would be chaotic and we would see the pound fall a lot further. so you are in the situation were the only way to resolve a blockage of parliament is a second referendum. the markets will be nervous going into that because it will become very unpredictable for the way the pound moves. trevor issa, head of royal

assetat london management. bloomberg surveillance continues in the next hour. tom keene joins me at of new york and we will have more conversations at of the global female leaders summit. we will speak to katerina and look at your markets. definitely a risk-on kind of falling andocks dollars climbing. and the stocks are worried about countermeasures by china after america escalates the trade war last week. treasuries are rising in oil is .limbing in saudi arabia saudi arabia does say that two of their tankers have been sabotaged. this is bloomberg. ♪

francine: trading blame.

us slide as china blasts the u.s. president trump's twitter tirade continues. after thes ride-hailing giant has a rocky ipo. there was about $9 billion in rocket -- market value. the chief executive tells us in an exclusive interview that it will be challenging due to regulation and low interest rates. good morning, everyone. and good afternoon. this is bloomberg surveillance. this is all about trade and a little bit of politics. right and center as markets are expecting countermeasures from china. norman joins us from jpmorgan. stephen roach joins in the next hour. an extra near a weakened on the trade dynamic. and lawrence kudlow pushing back against his president.

francine: we will keep an eye on that. to tankers were sabotaged. history to bloomberg first word news with viviana hurtado. viviana: we begin with an erosion of trust, making it unlikely that there will be a trade deal between the u.s. and china anytime soon. u.s. officials are increasingly convinced chinese hardliners have the upper hand in beijing. bloomberg has learned the stalemate growing out of an earlier deadlock over how and when to remove u.s. tariffs. chinese state run media blaming the u.s.. saudi arabia says two of the oil tankers were attacked as they were sailing to the persian gulf. and no one isged claiming responsibility. iran calls the incident regrettable and warns against plots to upset the region's stability.

british prime minister theresa may trying to revive brexit negotiations with the opposition labor party. she is promising to reopen talks with the european union. they will explore rewriting the agreement on customs ties, but the labour party warns that lawmakers still want to second referendum on brexit. and a $6 billion bailout for pakistan from the international monetary fund. pakistan facing a balance of with dwindling foreign exchange reserves. global news 24 hours a day on-air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is bloomberg. let me dotom? tom: the markets right now. we will get to bloomberg's equities, currencies, commodities. futures at -35 with significant

curve. there is the oil that francine was talking about. american oil. it 2018, .67acked .vaporated it should be read on the screen and five basis points with a substantially lower yield this morning. nextoach with us in the hour. equity futures slumping more than european stocks overall. these countermeasures promised by china, it is also about trade. treasuries and oil climbing. why or how.lly know we keep this risk mood out there.

and what it means for volatility longer-term. tom: this is two standard deviations off of long-term weakening -- strengthening, rather. we have room to move on a move down 2.5%. of trainr is 20% waited in china. when you look at the wand, if it touches seven, is it only a number? tom: exactly. francine: president trump is back on twitter taking more shots at china tweeting that america is right where we want to be and blaming beijing for

breaking the deal. china says it went back on its word -- the u.s. went back on its word. us stocks in asia have fallen along with u.s. equity futures. joining us is tom mackenzie, as hef bloomberg markets joins us from beijing. gekko --st escalating escalating and escalating? >> what we have seen over the weekend is tensions mounting. flaming the u.s. saying that they should take full responsibility for this impasse. and saying that these negotiations have been severely disrupted by the position to raise tariffs. hear about the irrational

stance and that china will not compromise on core principles. this is the sense that china is coming away with a stance that we will not strike a deal that is seen as one-sided. deal.d a two-sided and this push by the u.s. to enforce some of these actions while not agreeing. that tariffs have to be removed. francine: if they still trusted each other, they could find solutions. do these countries still trust each other? >> the evidence suggests that trust has fallen. antitrust the two sides has had is severely eroded over the last couple of weeks. our sources in washington say that the decision to send back

the draft deal with all of these amendments pushing back around dide requests, it really erode trust. on the chinese side, that trust erosion remains as well. kudlowhe comments from will have a return to beijing. meeting theents are g20 summit in japan. tom: a great briefing there on a very moving story, to say the least. on fox news, lawrence kudlow made headlines yesterday. the expected countermeasures have not yet materialized. may no more today or tomorrow.

so far, we haven't heard on that basis. larry kudlow moving away from her can tillerson yesterday. we were certain mr. norman would find time for us this morning. and truly expert on some of these dynamics of a trade war. professor, very importantly, how are the dynamics right now between the chinese trade representatives and their communist leadership in beijing? what is the relationship of a trade team coming back from washington to the leadership behind the red doors. >> you point at a very important question, that there is a potential diverging discrepancy between the chinese leadership at the political level in the chinese policymakers and what they think about opening up the chinese markets. reflectionpossible

that there can be pushback on what china is willing to do to open up markets. what are they willing to do to open up markets? do totheir number one to wait out mercantilism? >> china has been doing a lot more of this and developing countries are doing the same thing. changed ishat has the big china shock. there are a lot of problems with .he wto in terms of fairness it developing countries should not be overly restrained. china is just too big. that is the central problem. francine: i want to go back to what china can do or china can't do.

how difficult is it to trade on the back of the signals that we were sent? >> it is extremely difficult because the president is not consistent with his rhetoric or his actions. it is difficult to learn how to prices into markets. francine: when you look at the differences on how the u.s. and china are far apart, can they quickly come together to have some semblance of a deal? here betweenbe five months, six months, or a year? >> the hard part is finding middle ground because we're not really talking about specific trade practices. we're talking about the chinese development model. have the chinese want to pursue this, they want to do selective opening up. conflict with hyper globalization.

on those issues, it will be difficult for both sides. tom: let me ask you a question i'm sure you're going to get from clients worldwide. tail lookthe left like right now? what are the instabilities coming off of the trade? >> in terms of the macroeconomy, the left tail risk that we see on some of the big indicators, they are things like global manufacturing, pmi indices,, and corporate profits. the risk on markets is that equities are down another 10%. even though they are somewhat off their highs, it is from the starting point of markets that were slightly rich. it does seem to me that equities are pricing in risk premium for the macro data looking a lot worse. extreme in the other or put onthe tariffs all chinese goods. both of you, stay with

us. coming up next, we hear from the trade commissioner that the eu possibly retaliating if the u.s. put pressure on them. eue from that interview, the trade commissioner cecilia mal stromp. this is bloomberg. ♪

>> we would have to. we are already preparing a possible list of items that would be on that list. i still hope it won't, but according to the wto rules, you have the final consultation. will this be front and center in a week? cecelia malmstrom. john normand with us from

jpmorgan. triangulate the united states, china over the trade headaches of the eu? given the rising tensions between the u.s. and china, it will be more important for thise and china to promote open stance and turn away from protectionism. it will be in the interest of china to create more opportunities in the rest of europe. tom: i'm looking at a lower u.s. two-year. i don't need you to comment on deutsche bank. but it is paramount and it is tangible, isn't it? that one can say about the indicators affected by trade is that they are just

starting to stabilize in the spring. the hope is that they would lift in the second half of the year because the president suggested he could roll back tariffs on china. he's up to them and we have the unfinished business around europe. i think the indicators will move lower. it's not saying, we will see how negotiations go. but are they forcing china to retaliate? and how strongly will china retaliate? to retaliatehave in some form even if it is not perfectly symmetric. they have to resist this pressure. after the trade war results, what next? the next time that it comes around, we know it is not just about trade. it is about a rivalry between the two nations. francine: is china talking with one voice or does the chinese

president have to go back and get different factions together to make sure everyone is happy? >> there is a reformist group more about opening up. nationalists more more about staying strong. john, is there an opportunity with all of this fracturing of the washington consensus, is there a jpmorgan market opportunity to come out of this later this year? >> if you want to put an incredibly optimistic spin on it, you could argue that trumps techniques could resolve and lower trade barriers initially. lowerst of achieving trade barriers by initiating the negotiation process is that by the time you get the positive outcome, you will be at a much weaker level of the global economy.

i don't think this is the optimal strategy. i think it is too aggressive with the penalty. what does the trade war actually mean for the fed? chances ofrease the recession in 2020? the chances of recession because of tax hikes on the corporate sector that is weakened already because of. there will be inflation on imported goods. there will be some of the source of domestic demand and that is why i think the inflation story is interesting to me. already been mindful of what is going on, it does give you higher odds of cuts.

what does it mean for the pboc? are they there to make sure the economy doesn't suffer too much? uncertainty.eneral what is the future of the private sector? the transparent exchange-rate management, all of these things are under pboc consideration. tom: we will continue here, much to talk about regarding correlations and non-correlations in the market. getting us ready for our conversation in the next hour. stephen roach joins us on the next trade war. stephen roach in the next hour. stay with us worldwide. this is bloomberg. ♪

tom: bloomberg surveillance. across all surveillance this morning, the trade war and the effect on the market. steve roach is with us. , translate into .reater english translated to common english, please. >> markets have further to fall

not cheap.y are if you want a technical term for it, this is a layman's term. and to me, that is the standout issue going to the latest round. markets have not cheap and to a meaningful degree. what do you watch to judge the correlation of cheapness in he market? >> the contract the swings in global growth whether it is gdp or pmi. the markets fastly underperform what it is now. a lot of the cyclicals within a

developed market and equities were doing a lot better than global growth. it was an indication that they were slightly expensive. they have come back, but they are not cheap. francine: talk to me about volatility. we have a great chart that looks at stocks fluctuating compared to currencies. because of the trade, do you see a real resurgence in volatility and equities that we have not seen for some time? is volatility the new gain in the market? >> i think it is a little more nuanced than that. to me, the most bullish scenario is that there is a lot of downside to earnings expectations that are very elevated. long and theroadly equity market is slightly expensive. but we have on the backdrop is that equities are fair. there are certain types of clients that are long equities like asset managers. this is why it will go higher, but i don't think it will be revisiting the levels it was saw last year. when you look at

earnings, what did you make of earnings? >> you don't have a lot of visibility on the year if you don't have a lot of visibility on growth. we are somewhat depressed and the expectations will go up 3% or 4%. it is a very low rate. but the global growth will be down. and i think those expectations will go down. francine: john normand, thank you very much. john stays with us. coming up next, katerina will be at 5:30 a.m. in new york, 10:30 a.m. in london. she will be asked about european elections and trade. of course, this is bloomberg. ♪

francine: this is "bloomberg surveillance." tom and francine from london and new york. we will get back to the markets and alignment. first, let's get to the

bloomberg first word news. here is viviana hurtado. viviana: chinese state media are blaming the u.s. for a lack of progress in trade talks. newspaperip chinese of china's communist parties as the u.s. should take full responsibility because it raised tariffs. tojing has threatened retaliate but so far has not said what it would do. mike pompeo is making a surprise visit to brussels, where iran is being discussed. e.u. morant ministers are -- foreign ministers are considering ways to salvage the iran deal. back outhreatening to of some of the provisions if europe does not come through. and the white house is considering conservative judy shelton as the --

she is currently the u.s. executive director for the bank for reconstruction and development. swedish prosecutors will reopen a probe into rape allegations against julian assange. that is a move that may wreak havoc with u.s. attempts to extradite the wikileaks founder. authorities want to question the signs about a 9-year-old -- yearion assange about 89 old rape allegation. help --an will not talks have been ongoing since renault made an informal proposal tomorrow. nissan will report its lowest annual operating numbers in a decade.

global news 24 hours a day on air, and on @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. tom: thank you. we welcome you to "bloomberg surveillance" this morning. a lot going on on trade war, not just u.s.-china. what we are trying to do as a team is get out in front of the european discussion with washington as well. with us, john normand of j.p. morgan. you guys are really worried about the trade dynamics slipping into global slowdown. for example, it was mentioned that gm makes more cars for china than they do in the united states. cross-borderis is dynamics. tell us what your economists say about the intermediate good processes here. john: we tend to think about this is very disruptive to the supply chain.

is veryal economy integrated. it is impossible to have sanctions on one country or one sector without not having regional implications to it. that is why it is extremely narrow to think of a u.s.-china conflict as just a u.s.-china conflict. there will be spillovers. tom: what is your u.s. dollar call? higher think it will go versus asia, versus commodities, currencies, down versus the yen. the big issue here is you have downside on global growth. a lot of investor positioning in e.m. assets. it is classic deleveraging. tom: this is really important and goes into -- how how -- i will get it. it is monday. i had "game of thrones" and had

no sleep. argentinencratic is and the rest? john: turkey and argentina are idiosyncratic, meaning that even if president xi and president trump made up tomorrow, you would still see downside because of political uncertainty in turkey and argentina. francine: does all go back to the fed? or is there something more sophisticated? john: the fed is a much more neutral influence this time around. last year, it was an aggravating factor in context of trade tensions. now it is more neutral. if the fed were to cut interest rates preemptively, you might argue that the dollar would know down at least versus the euro, but i do not think the fed will act reactively. this sequence of events will be much more stressed, and at some

point, you may see a fed ease. francine: thank you. theresa may is promising to reopen brexit talks with the european union. this in an attempt to breathe life back into the negotiations with the opposition labour party. meanwhile, e.u. elections begin in two weeks. joining us now from berlin, the justice minister, katarina barley. thank you for giving us a little bit of your time. it is now clear that written will take part in e.u. -- it is now clear that written -- britain take part in you elections. what role are the expected to take after? and barley: i hope the u.k. members of parliament will play a constructive role. nobody knows for how long they

will be members of the parliament. i am optimistic about that, because we can see that, at the is, as long as. they are members of the european union, that they are taking responsibility. minister, can britain continue to be treated as a full member of the e.u.? or are you expecting them to be very disruptive? min. barley: well, they are a member of the european union, as long as brexit is not being operated. i am a minister of justice, so according to the rules, they are a member, a full member. as long as they have not managed to get out. treated they have to be similar to all the others. but of course, it is a political

question more than a legal question, how these members are going to behave. that is also a question of who will be elected to the european parliament. francine: how would you deal with the u.k.? there were concerns from the french side. they are a withdrawing country, which means they are fully in but are still withdrawing. min. barley: i do not think it will be a problem. on the counselor level. on the level of the european parliament, we will see the it a lot of members of parliament are the u.k., if they or, evenbrexiteers more so, completely against the european idea, i fear that they may act in a very disruptive manner, which could harm the european union, european parliament, as such. but i hope for the british

people that they also feel a sense of responsibility for the whole. aboutnot another election brexit, it is a whole european election. francine: with the german social -- to the e.u.rt president? min. barley: the germans support him, currently the president of the commission. he is an excellent candidate. we are the only party to be very ofar, to stick to the regime -- and to be clear about the person --

minister, tom keene in new york city thank you for being with us. i read an article in new york city and how berlin is half-asleep, even though it is the coolest city. how do you jumpstart the interior spirit of germany? lethargy,alk of a generational malaise in germany. how do you get out of that? min. barley: i am surprised seet this story, because we a young generation that is on the streets more than other generations have been. the yesterday, i attended positive europe movement, where he had a lot of young people. we have seen them demonstrating for their position on the copyright issues. this generation is actually much more active than we have seen in the last 10 years to 20 years. ey, thank you barl

so much. we have a lot to talk about. one of their boats went by me on the hudson river the this weekend. it was ginormous. of norwegiancutive cruise lines will join us at 2:00. this is bloomberg. ♪

francine: this is "bloomberg surveillance." let's bring you an exclusive interview. unicredit's chief executive has sold assets and costs in order

to get things moving. earlier, we sat down with jean pierre mustier, and i asked him about his plans for m&a. >> it is import for us to grow on a purely organic basis. we have a managing that very well. i said that mergers in europe will be very difficult to put together, because there is a lot of things which need to be followed. andtal needs to be matched, executive risk and governing -- in governance needs to be diminished. francine: this is domestically and cross-border? jean pierre: yes. francine: where does it leave the banking landscape, if you do not have much mna? -- m&a? because bankses,

do not know where they will be in 10 years, it will be tough. jean pierre: italy is interesting to the european bank. it is challenging. growth is not very high in europe. shat being said, european bank envision profitability by , transformingly activities and networks, and managing properly. thanll have growth lower the u.s., but the banking sector in europe is very interesting. francine: that was the unicredit chief executive, jean pierre mustier, speaking to us this morning. bloomberg'sus is reporter. >> this is the trouble and the challenge that most european lenders have.

the have gone as far as cleaning up balance sheets significantly more than they were a few years ago. they started to transform the business, but that bigger shift to more digital has yet to come, and the challenge is you will and to invest more money the cost savings, those take a while to come through, so you are asking investors to be a bit more patient with you. francine: i asked him many times by his plans for m&a, but he said it would be much more difficult to do m&a because of regulators and other hurdles. is he right? or markets anticipating it to be too quick? elisa: i think so. i was a little surprised. as far as cross-border consolidation is concerned, there are significant hurdles to european banks, even within the euro zone, getting together without a deeper banking union.

terry -- there are regulatory hurdles. ,om: i will show a chart unicredit, commerzbank, and deutsche bank. there is the boom in 2009. what is so important is this point in 2013 in commerzbank. it all comes down and then rose over again ever so slightly. how close are we to call options on the future? that there ceos are complete focused on equity price? elisa: the banks can carry on at these levels for quite some time. there is nothing triggering a restructuring, per se. it is clearly an indication of investor concern and the fact that there is no confidence these banks will be able to

restore stronger profitability soon. to be fair, there is some concern, still, that are banks really safer than they were before the financial crisis? as time goes by, you could also see a somewhat re-rating of the industry. tom: is there any desire to merge? elisa: on paper, doll looks potentially great. in reality, the execution risk that jean pierre mustier mentioned is particularly significant in financial services. to theulators are going scrutinies before the signs of approval. down,eutsche bank is sitting on support, to the light. thank you for writing for bloomberg opinion. we continue with john normand. let me do a data check.

it is weaker with some stability in their weakness. curves and the steepening. the year and the yen not doing much. the renminbi weaker. this is bloomberg. ♪

viviana: this is "bloomberg surveillance." let's get the bloomberg business flash. lloyd's of london commissioning an independent culture crackdown following a report of sexual misconduct. the bloomberg businessweek report found an atmosphere of near persistent harassment. -- they are already threatening lifetime brands for inappropriate behavior. monsanto is now owned by bayer. it cap secretays files on prosecutors and leaders. and bitcoin surging about $7,000, the highest price since september. the digital currency was up 11%

from friday's close. other cryptocurrencies also rallied. since mid-december, bitcoin has more than doubled. still, it is a long way off of its peak of more than $19,000. francine: thank you. hassouth african president led the south african national victory.to its six but it is seeking a cabinet that can impose economic reforms. what does this mean for president ramaphosa? can he doubled down on reforms he has promised? >> that would be this first big test for him, whether he can implement some of the policies he has been promising. and also whether he can pick the right people to implement those policies the he now faces a test

of appointing a cabinet. the people he appoints and the people he leaves out will be telling. francine: what does it mean for investors? time do they get him to see whether he really means business? talking to analysts, especially local analysts, the feeling seems to be that the window of opportunity is not very big. a is difficult to put specific timeframe on it, but the feeling is out the president would have to act sooner rather than wait until the start of next year, even. francine: thank you. with us, john normand of j.p. morgan p the next test is -- john normand of jpmorgan. t the next test is picking a cabinet. john: i do not think there is time. there are issues as to what the composition of the cabinet will

be. this what is the size of liability about the state owned sector and how much will that after the funded? the first start in the process is naming the cabinet. there is a serious implementation risk about the fiscal strategy. commodities,ioned currencies earlier. i believe that would be zar. do you just follow copper? is that the easiest way to see the trend? is anno, the copper price indication of chinese investment demand, where there are other issues at play in the commodity market p you could have a demand driven slowdown that pushes copper price lower, but you could also have supply stress and oil markets, which pushes the price up. it pays to be more choosy in terms of thinking about what the

drivers are. or onee should own oil should own gold, one should not own industrial metals. dollar, auss aussie what you learned from australian dollar versus australian yuan. theory, australian dollar should move in unison. for externalriver demand in australia's demand in china. that correlation is breaking down and will continue to break down going forward. you have something different going on now in australia that has not existed before. that is a borderline housing recension.

the aussieave continuing to go lower, because what is happening in the market could cause rba to ease. tom: thank you for getting my monday started. jpmorgan.d is with to go from john normand stephen roach is what this is all about. now at yale university, formally of morgan stanley. but what we saw with the kudlow interview and then the president and elizabethan trade policy, stephen roach served elizabeth i. stay with us. this is bloomberg. ♪

tom: this morning, it is a trade war with currency adjustment and

lower interest rates. renminbi weakens further. futures near half the distance to a correction. mr. kudlow agrees to disagree with his president. we consider elizabeth ii economics with the mercantilism of trump and elizabeth i in this hour with stephen roach. and uber, is there a cancel fee on canceling the ipo? good morning, everyone. this is "bloomberg surveillance, " live from our world headquarters in new york. i am tom keene paid with me, francine lacqua. i wanted to do a shout out to our ipo team for what i thought was measured are purged to the uber ipo. we need to stop what we are doing in economics monday morning -- the world is coming to an end. -- i know ithe ipo

was late in london. it just did not work. francine: yes. your excitement for the ipo is something to behold. this is big. we did speak to a couple of insiders, who said it is a little bit of being unlucky when it happens when a trade war escalates between the u.s. and china. so we need to look at whether it is a valuation with uber, a concern on uber, or general market sentiment. tom: we will get to the news, do a data check come and get right to our two important guests on this very important monday. here is viviana hurtado. viviana: an erosion of trust making it unlikely there will be a trade deal between the u.s. and china anytime soon. u.s. officials are convinced chinese hardliners have the upper hand in beijing. bloomberg learned the stalemate is growing over an earlier deadlock on how and when to remove existing u.s. tariffs. chinese state run media blames the u.s. saudi arabia says two of its oil

tankers were attacked as they were sailing to the persian gulf. the saudis say that ships were damaged in a sabotage attack off the united arab emirates. no one is claiming spots ability. iran called the incident regrettable and warned against "foreign seditious plots to up to the region's security and stability." the british time it -- british prime minister theresa may is promising to reopen talks with e.u. the government will explore it rewriting the agreement for future customs ties. but the labour party warns that lawmakers still want a second referendum on exit. and a $6 billion bailout for pakistan from the international monetary fund, hopping the country avert an economic crisis. facing dwindling foreign-exchange paid and manchester city won it second

straight inlet premier league over --th the 4-1 win toneeded every victory finish over liverpool. global news 24 hours a day on air, and on @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. tom: and for mother's day, all she wanted to do was watch all three games at the same time. i mean, how many -- francine: i do not believe that for a second. [laughter] tom: it was painful. it was all that mattered, man man united.a -- i get it all makes up. negative markets. entrance,urns, the

the renminbi weaker. the fix coming out at 18.46. the front or the dow set lower. and yields, yields, yields lower. what do you see? francine: investors are nervous about kind measures promised by china after the u.s. escalated the trade war. it kind of tell you all the story you need to know. 7, moving on the back of risk markets. try to capture friday to sunday. here are two vignettes. >> first, the issue of whether the tariffs should be lifted still under discussion. it is china's opinion that the tariffs are the starting point of the trade frictions and must be totally lifted if a deal is to be reached. >> it is interesting -- the expected countermeasures have not yet materialized. we may know more today or this evening or tomorrow.

we will see what they come up with. so far, we have not heard on that basis. tom: a wonderful hour we had last with john normand and the professor of the london school of economics. now stephen roach joins us of yale university. his new book is out now. and martin shanker with us. i want you to triangulate your china-u.s. with what is coming down the road in europe. martin: what is clearly happening here is donald trump decided he would hold the china agreement, thinking that they can wait this out. they were not calling it a deadlock, but it sure seemed like it. tom: dr. roach, you have been harshly critical of the

mercantilism of the president. you look at herbert hoover of 1930 -- what is the linkage? 1930, 1000 may of economists wrote an open letter to president hoover, urging him to veto what we now know is tariffs. the president then, what the president today, claimed he knew more than expert and ignored the overwhelming preponderance of advice he was given, assigned a lot into place, and made a garden-variety depression into a great depression. there is a lot to be learned from history, and we are in danger of repeating the same mistakes we made back then by a president who refuses to listen to any expert opinion. tom: do you see anything in your studies that the legislative branch can nudge a well-meaning

president away from elizabeth i economics? stephen: the congress right now is in a rare agreement bipartisan support to bash china. republicans and democrats alike are applauding the president. and they do not agree on almost any other issue that is on the legislative agenda right now. other than blame china for the problems that, in large part in the u.s., are of our own making. francine: and we heard from insiders on the chinese side ust china is trying to wait out. but if a democrat comes into power after the presidential elections, they may go even harder on china, so what does that mean for the future relationship? martin: i think it bodes not well for that relationship. i'veoach has said, and

have learned from that, the chinese do not think in the context of months or even years. they think of generational change. shows the chinese are going to prepare themselves for the long haul. whether it is a democrat or republican in the white house in 2020, this relationship is going to be very difficult to solve. stephen: there is a story that the chinese -- it was in the "wall street journal" late last week. that the chinese have decided to wait out until the next election or trump, because of his bashing -- i thinkr powell those stories are without merit. i go to china a lot. there is no discussion of the chinese wagering a bet on the

2020 election that will unseat donald trump, nor is there a view that the u.s. economy is terribly weak. the chinese have learned, like most of us, to take virtually everything that comes out of the white house with more than the proverbial grain of salt. i really draw on this presumption making its rounds that you just repeated into serious question. francine: marty, let me ask you little about what is coming out of the trump administration. again, we understand from the chinese side that they were far apart in negotiations a month ago, so why did the trump administration almost lead the markets to believe they were close to an agreement? martin: that is hard to say. with this president, his pronouncements of optimism may be more about him than the reality of the talks. i do think this whole notion of donald trump and xi meeting together to smooth a way towards

agreement is a false narrative. those two leaders -- the devil is in the details. those two leaders will not sort out the details. tom: what did you do, see my script or something? martin: sorry. tom: marty is on top of things. me onceroach, you told to read this giant book -- china in the western mind. president xi's continent -- it is a continent -- and china in trump's mind as well. what does the president need to understand culture you -- culturally about spence's china now? stephen: the main lesson from that book, written 20 years ago, is a we have repeatedly, for hundreds of years, made a mistake in looking at china the way we see ourselves. we look at china through the

western lands, because the u.s. had a debt crisis, china must have a debt crisis -- tom: what is the beijing lens you have observed in the last few weeks? stephen: they are focused on rebalancing the economy, from exports to consumption, from manufacturing to services, from imported to business innovation, from surplus saving to saving absorption. they are changing their model. for some reason, we are uncomfortable with that. because we like the old model better. it provided us with cheap goods and they bought a lot of treasuries, and that is what we want china to be. china is saying, look, what was then is not now. we are changing because it is in our best interest to change. the u.s., by the way, is not deficit its model in saving, budget deficits, large current accounts, and a multilateral trade deficit last

year that included china and 101 other countries. we are not changing. china is. that is what i wrote the book about, but the codependency of the u.s. and china. francine: we will come back to that. thank you, stephen roach. an hour marty schenker -- and our marty schenker. coming up, blackrock's global head of somatic investments. we will ask about oil and gold. this is bloomberg. ♪

viviana: this is "bloomberg surveillance." let's get the business flash. nissan opposing efforts by continue --

talks have been ongoing. report its lows annual operating profit in a decade tomorrow. softbank's vision find is investing $800 million in a british fintech firm. alternativevides supply chain funding to companies. it has delivered annual growth of more than 100% since 2015. bitcoin has surged above $7,000, -- highest price since the september. other codes or also rallying. since mid december, bitcoin has more than doubled. still, it is a long way from its than $19,000.ore tom: thank you. stephen roach with us.

his book on codependency. really arine mann, great level of success in this codependency theory. we have martin schenker with us as well. i want to talk to you right now about the codependency's of the fed that you see. ideat to go to you and the you had -- it is interest rates and unemployment, but when you were at morgan stanley, steve roach, usa look at the balance sheet and asset inflation. a way back to asset inflation with this fed? stephen: there is certainly a risk, if the fed is sending a signal that interest rates will stay low in perpetuity, that stocks -- i am sure several people on the show have said there are on the brink of a melt off. you get a big surge in equities, and we have the financial technologies to extract purchasing power on asset

bubbles, as we did a decade ago. we could be in trouble again. at this point in time, there are more important things on the agenda that we are talking about. tom: i want to bring in the start of the two year yield. rolling over again, five basis points at one point. this is yellen coming in with the move higher, calling it the rates.izing of interest powell comes in here. what does our washington team say about the tension of trade war, trade war, trade war -- maybe it is not. martin: i do think that what the fed and powell are trying to do is insulate themselves from both the influence of the white house , trying to make sure that interest rates do not go up, with the reality of the economy. in december, we were talking about a possible rate hike.

now, three months later, or six months later, the next move may be down. the fed is trying to balance reality with the perception of pressure from the white house. this is back drop of people on the same page about the global slowdown in overlay. francine: but i heard that if the trade war escalates or stays as it is, it is deflationary. what is it, actually? stephen: that is a good question. there trade war, to the extent that it threatens global supply beens, and it does, it has a major source of disinflation for the world. a study from economists at the b.i.s. a couple years ago estimated the impact of global supply chains on cpi inflation in countries like the united

states to be about one percentage point. so that is a risk. you add to that rising wage inflation in the u.s., and even though everybody's convinced everinflation will never, rise again, you have to look at a few factors that have been critical in really holding inflation down and wonder if they are about to go the other way. francine: what does that mean for the fed? martin: it means that the fed cannot be too complacent. they are telling you, by their pivot of last december, that they were too aggressive in sending a signal to for guidance framework, that they would be raising rates and reducing the balance sheet on a steady basis. this is -- they run the risk now

erring too much on the other side by see no reason to raise rates, and all of a sudden, the funds rate number which we did not think was neutral a few months ago, is now neutral. they have been quick to jump to the other side of the ship. tom: stephen roach with us and thank you for your generous amount of time. he is one of my favorites, the only one i know in maine who an oyster farm. angus king is the most interesting senator from maine, in the 10:00 hour this morning. stay with us. this is bloomberg. ♪

>> we are already preparing a ift of possible items -- this happeneds, he would publish the list and do the final consultations. francine: that was cecilia malmstrom, the e.u. trade commissioner, speaking to bloomberg a little early on. let's get back to stephen roach. when you look at the relationship between europe and the u.s., how does europe fit in? we heard from the trade commissioner saying that europe would also retaliate if the u.s. but tariffs on german cars, for example. but if they can get along with

china, does it make them less -- but if they cannot get along with china, does it make them less belligerent to europe? stephen: we do have this triangulation. -u.s., u.s.-china, and the problem i have with us upping the ante on the pressures we are putting on our trading partners we are a chronic trade deficit country, because of our saving problem. the idea that we can just eliminate all of our trade problems by using tariffs, without adjusting our saving balance, is ludicrous. save andtries do not they want to grow, they have to run balance of payments and trade deficits. there is no way around it. and yet, we have an administration in washington

that either refuses to accept one of the basic things we teach undergrad econ students in their 101, they either take the course, do not accept it, or they have a new theory they're trying to roll out to repudiate everything we have learned in simple economics for hundreds of years. tom: stephen roach with us. on the commodity market, certainly affected and buffeted by trade. hambro roach and evy together coming up. right now, futures to. . dow futures, -034. ♪

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♪ ♪ every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. take your business beyond. tom: "bloomberg surveillance." incredibly busy monday. trade war mop up and still waiting to hear a chinese response as well. also news in the arabian sea.

right now, here is viviana hurtado. viviana: chinese state media blaming the u.s. for a lack of progress in trade talks. the flagship newspaper of china's communist party says the u.s. should take full responsibility because it raised tariffs. beijing has threatened to retaliate for the extra duties. so far, it has not said what it will dupe you the white house is considering judy shelton for one of the two openings on the federal reserve board. she has served as an informal adviser to the president. she is currently the u.s. executive director of the european bank for reconstruction and development. u.s. senate opposition scuttled the president's last two sidekicks. swedish prosecutors will reopen rape allegations against julian assange, which may hamper u.s. efforts to extradite the wikileaks founder.

now to japan. the prime minister's support surging. a poll finding 55% of those cabinet,support abe's up seven percentage points since late march, the public unhappy with his economic policy, but it was likely he was helped by japan's first imperial abdication and ascension to the throne in two centuries, fanning national pride and boosting abe's standing. global news 24 hours a day on air, and on @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is bloomberg. francine: thank you so much.

off completely iran's oil sales. that is what is really interesting and is of main interest to them. they need the straight of hormuz -- the strait of hormuz, just like other countries do. if that gets cut off, that shipping labor comes less interesting. tom: i was shocked by how close it is -- it is a lot closer than we perceive. how united is the u.a.e. with riyadh, how tight is that relationship? anthony: it is a tight relationship and one is seeing evermore tight here they speak of brotherhood among the countries here. they are on the same page in foreign policy on issues like this. saudi arabia has a red sea coast that puts them a little less dependent on the straight of -- hormuz.it of the biggest commercial port is in dubai in the strait of hormuz.

any disruption to shipping would be a hit to their economy. there is an oil export port , which is that strait where the incident took place. so it is another export location for abu dhabi, but it is still quite close to the strait of hormuz. francine: thank you. bloomberg's anthony dipaola joining us. let's get to evy hambro, blackrock global head of thematic investing. stephen roach is also with us. let me get your thoughts on oil. on these geopolitical tensions come in general, it has actually moved -- is it because of trade? it is like a plus-minus and balances out? is a freshsly, this item. in general, for all the commodities space, with some exceptions, we have seen this pooling of interests and pooling of economic activity, taking the

shine of some of the performances we had earlier in the year, and oil is no exception. you should never underestimate the impacts of political risk in the energy markets. francine: what do trade tensions due to commodities? it creates uncertainty -- evy: it creates uncertainty. uncertainty makes people think do we need to buy supplies at this point? what are our customers going to want from us, few are -- if you are a producer. we have had specific supply disruptions. -- area most confusing to us most producers, year-to-date, have announced significantly lower production, so it is any lysing at 1.5 million tons of date,ptive supply year-to- if the couplers a market is lower, which is a conundrum.

tom: howling to our commodities? what are the correlations right now within the entire asset class? evy: the correlations are very tight, except where you have specific supply disruptions. you have mastered supply disruption early in the year out of unfortunate events in rna, but that has completely changed the dynamics of the markets. the oppositely than what analysts expected place. supply, youpecific have been seeing correlations take place. tom: where are we in the super cycle? are we seeing a turn? person,t is a dangerous but can you actually go long on commodities? give me a less dangerous answer. evy: we think about it from the

equity point of view. despite we had some softness recently, the companies are generating phenomenal levels of cash flow. pluswe think about that, the supply we have spoken about many times in the past, and the opportunities, it is pretty rich. tom: evy hambro said he would not come in today unless we got some wisdom from stephen roach on commodities. you have always been courageous, and i go back to your class, the next asia appeared what is your linkage to the commodity countries of china? simply stickdia, statements. give us some complexity. stephen: china is, for 35 years, a manufacturing and investment-led economy. now, the last five years, trying to shift to more services and consumption. but china still is the largest manufacturer in the world.

for have a natural demand resource intensive and, unfortunately for them, pollution intensive commodities. so they are the disproportionately largest piece of global commodity demand for most of the markets that evy follows. think, evens, i today, after five to 10 years of rebalancing, so goes the big macro economy cycle. tom: do you know what we're talking here? there are solving brexit. we are talking to hambro and roach, and they are solving brexit. [laughter] francine: we had from the spokesperson of prime minister theresa may, because she is trying to reopen talks with labour. i do not know if they are resolving brexit, but we know

there will be european elections, and we heard from her spokesperson that her opposition to a second brexit referendum is well-known, but cross party talks will resume in london. earlier, we had a great story that said she is trying to do everything she can to breathe life into negotiations with the opposition labour party. that could mean a customs union. this is bloomberg. ♪

viviana: this is "bloomberg surveillance." i'm viviana hurtado. lloyd's of london commissioning an independent culture crackdown following a bloomberg report of sexual misconduct. the report finding an atmosphere of near persistent harassment in the world's oldest insurance

market. threatened already to give potential lifetime fans for inappropriate behavior. hiring for an investigation into monsanto. french mediaset it kept secret files on politicians, journalists, and agricultural leaders. french prosecutors have opened an investigation. the ceo of italy's unicredit says relation and interest rates are barriers to mna in europe, jean pierre mustier speaking to bloomberg tv. >> mergers in europe will be very difficult to put together, because there is a lot of things which need to be followed. first, it needs to be controlled. capital needs to be matched. execution risk in governance appropriate. there will not be many mergers in europe in the future.

viviana: that's the bloomberg business flash. thank you. evy hambro of blackrock with us. three tweets just minutes ago -- the president upset steve roach is talking this morning. there is no reason for the u.s. consumer to pay tariffs, which take effect on china, today. this has been proven recently when over four points were paid by the u.s., 21 points by china, because china subsidizes product to such a large degree. i got to believe this was written for the president. the third tweet -- there will be nobody left in china to do business with. very bad for china. evy hambro and stephen roach on leakages. what we have here, in the maelstrom of a monday morning, is a president who is looking at almost unbipartisan,

iflow relationship where they are leakages to other nations, isn't there? stephen: that is what trade is about. what appalls me is that she read one of these tweets, but they all say the same thing. the president, the tweeter-in -chief, says china is paying us billions of dollars in tariffs. he does not get it. tariffs are paid by importers. china is not an importer. they are an exporter. we are the importers. all the evidence, and there are two first-rate studies that i am sure you have referred to, recently demonstrated, beyond a shadow of a doubt, the all of the costs of these tariffs are being paid by u.s. businesses and u.s. consumers. the president either does not read the studies or he is lying to the american people, which is something he is pretty good at. tom: evy hambro in london, i want to bring you in. here is the single best chart right now.

year,rt of the year last getting out front of 2019, the trade deficit and the vector of trade deficit and fiscal deficit is getting back to 1980's, reagan-like. what is the prism of you and commodities in blackrock on these two building deficits in the united states of america? evy: the main thing we have seen in the u.s. is strong economic recovery over the last few years. that strength has left us in the position we are in right now. but we are starting to see a shift in policy. last year was a classic example, with the change on interest rates in the fourth quarter. more importantly than that chart , the chinese economy. the chinese economy is absolutely the mainstay for commodities demand. when we think about commodities, it is essential to have that

understanding. their fiscal stimulus we saw coming through, with all the liquidity increases early on this year inside china, is a game changer for the short-term. chinane: if and when retaliates, if you think they will retaliate, will he be with a financial arsenal such as treasuries or currencies? stephen: no. that is their last resort. and of course, they are the largest foreign holder of u.s. treasuries, which is something they will always keep in the back of your mind, if we really up the ante. to look atwe have our vulnerability to china. china is the third largest and most rapidly growing export market or the united states of america. to think that we do not need chinese demand for our products is absolutely ludicrous. china has a lot of leverage to increase the tariffs and is already placed in a retaliatory

basis on u.s. products, and it will expand that further. tom: we will come back on that point with stephen roach of yale university and evy hambro of blackrock. the president puts out three substantial tweets on his view on trade. much more coming up. : balanceberg markets of power" today, this is a really interesting guy. haley barbour, former rnc chair. this is bloomberg. ♪

francine: this is "bloomberg surveillance." tony inferencing from london and new york. we are talking about strait of hormuz. we also talking about another tweet from president trump about china. first, uber shares are falling for a second day after its ipo. investors continue to shy away from its assets. seeing us now is my deep -- joining us now is mandeep singh. is it true that it is because of

these trade tensions giving a little pressure on these talks, or is there a concern with uber specifically? >> when i look at uber specifically, it is now trading as a comp. now trading at five times trailing, which tells me the market is concerned about how big the ridesharing opportunity is and how fast these companies can grow. tom: i want to congratulate you on your balanced reporting, voiding the height out there. have does it take for shares to -- to "flip>" mandeep: it will take time. especially after the roadshow, there is lack of clarity in terms of the topline growth for

this company. the topline growth in ridesharing will slow down to high single digits. that is not a good sign. they are trying to make it up with food delivery growth, but that is not an attractive business. tom: what is your percent change on uber? all the cheerleading we saw friday -- mandeep: we did some of the parts analysis, and we think there is a floor of a $65 million cap on it. tom: what is their share? mandeep: $42, $43 -- tom: now trading at $40.52. mandeep: it will be volatile. francine: how problematic is this for softbank? is there anything stopping can do to soften the blow -- is anything softbank can do to soften the blow? mandeep: saw think is a global investor in ridesharing, they have stakes in almost pretty

much every ridesharing company except lyft. it is problematic if the market cannot assess how big the opportunity is for ridesharing overall. tom: thank you. we have tweets. we have evy hambro and stephen roach. we have two more tweets. one is that fox and friends had a great show. in the other tweet, it is important on china the president outlined the idea that its production will move to other countries because "it is too expensive to buy in china" -- which, again, completely ignores cross border intermediary development. stephen: it takes a lot of time to relocate and reassemble a supply chain. you do not just put tariffs on the world's largest exporter and say come automatically, goods say,ship elsewhere -- and

automatically, goods will ship elsewhere. if it does occur, it will take years. but the importers and trade deficits will be paying the tariffs, not exporters, like china, as the president incorrectly insists on. francine: what does this mean for thematic investments? evy: that is interesting thing, because you have the ability to try to focus your exposure on companies that have terrell owens of growth. if you can pick up that disruption trend, hopefully through time, it will allow you to navigate through the volatility of the normal market. that is what we are trying to deliver for our clients. tom: stephen roach, you and i have known lawrence kudlow for years. mr. kudlowhe brave need to go -- need to do in the navarro white house? stephen: i do not envy his position. he needs to do more what he did

yesterday, which is the more evenhanded in addressing these trade issues. trader.ong been a free finds himself in an uncomfortable position. had to walk back his own ideological commitment for that, when he took this job. it has been a source of intellectual discomfort for larry. tom: we have to go. stephen roach, evy hambro, thank you. mandeep, let me know when uber gets to $20. mandeep containing himself today on post ipo. this is bloomberg. ♪

♪ alix: drop to china, you have

one month. no date set for further negotiations. four weeks to agree to a deal. investors flee to safe havens. markets price and a higher chance of a fed rate cut. the u.s. prepares new tariffs on over 300 billion dollars worth of chinese imports come but cell phones and laptops are at the top of the list. david: welcome to "bloomberg daybreak" on this monday, may 13. the president is very busy this morning. i think you should have bought that cell phone earlier. alix: you're right. i was waiting for 5g. david: this latest tweet really is about the supply chain, saying china is baking a big mistake because companies will be forced to leave china for other countries. i think he's talking about moving to southeast asia and things like that. alix: or back to the u.s. it seems l