--said they were really temporary relief. hard times ahead. uber chief executive warns of a rough ride as it keeps sinking on day two of trading. will the third day provide any respite? we speak with new york's fed john williams today. ♪ >> welcome to bloomberg surveillance. these are your markets.

havens taking a little bit of a dinnep. a little bit of arrest by after a tough week that was after the concerns that escalations of the trade war. hi, the vienna. down.ding buyer shares the company losing to trial in iner to pay $2 billion damages to a couple who used a product for 30 years. the largest jury award in the u.s. bayer is challenging this one. it they are excessive and unjustifiable. escalation in the trade war making an extended economic

downturn more likely according to mike wilson, morgan stanley's chief equity strategist, one of the biggest equity bears on wall street. and who must accurately predicted 2018's stock dropped. downturnhere is more and expectations are to live. little progress in persuading america's european allies to take a harder line towards iran. that is what mike pompeo faced during his quick visit to brussels. the eu is standing behind in nuclear record abandoned by washington. there is reportedly frustrated and european capital that trump's hardline and perceived as a lack of strategy. turkey is reportedly considering a u.s. request that delays the purchase of a russian missile defense system. this could ease tensions between the nato allies. it plans to receive the advanced in july but now my push it back into 2020.

at the u.s. defense secretary patrick senat shanahan saying it is incompatible. president donald trump praising on gary and prime minister viktor ooprrban despite objections that the national leader has taken steps to limit freedom in his country. he has become the poster child for right wing groups in europe. global news 24 hours a day on air and on twitter, powered by more than 2700 journalists and analysts. this is bloomberg. francine: thank you. the u.s. is readying new tariffs against china even though president trump says he will meet president xi jinping at the g20. $200 billion in products to be taxed. china hit back with its own duties.

trump responded by warning beijing to not go too far and he says he is still optimistic. president trump: we just got back from china. we will let you know whether or not we are successful. i have a feeling it is going to be very. francine: let's get to tom mackenzie joining us from beijing. what do we know about china's retaliatory response? tom: it was interesting. beijing outlined it response after the start of trade in the u.s. markets time yesterday. what we know they are going to do, which will kick in june 1, they will raise the levees they already had on place on $60 billion of u.s. imports in the chinese market. that was part of the previous response from china. they set these levees ranging from 5% to 25%.

these are goods that range from everything including agricultural products like weeds and corn, but also energy products like lng. that is the plan for china june 1 windows increased tariffs will kick in. what they didn't do was reimpose tariffs on u.s. made autos, something they suspended back in december. they also have not canceled, of yet, buying 7 billion tons of u.s. soybeans. francine: what do we expect them to do? tom: that is the key question. the offensive is the countermeasures and the defensive is what they will do to shore up the market in light of what many people assume will be additional pressure on the economy. we expect the pboc to continue with this targeted approach, but also cutting reserve ratios for the banks, particularly to aid them in pumping liquidity to

smaller and medium-sized enterprises. we have a package of measures including tax cuts valued at $300 -- $300 billion. continue, but we are looking at the central bank. it was interesting according to some who intervened in the offshore market around the yuan, sucking up some liquidity in hong kong around the yuan to support the currency. you saw more strength there. in the state newspapers saying we should not expect the yuan to be devalued. there is a lot of focus on additional steps the pboc makes. we have something of a window. june 1 is when the chinese tariffs kick in and then we have one or two more weeks. around retail sales and industrial production, it may give the central bank more of a steer. francine: tom mackenzie joining us from beijing. joining us for the hour, the

managing director, head of asset allocation at pimco. thank you both for coming. let me kick off with you. we have a great piece that says china may have missed a good trump's weak spot because by raising tariffs, the pboc does better which means stocks go up. is that fair? >> i think we don't know who missed tech related -- who missed calculated who. it looks like a deal will be in the making but the question is how long it will take. both economies are due to suffer from this. the counterbalance to all of this when you have two major powers in such a race for economic -- economic and technological supremacy, whatever it takes. if this trade war were to take place, more help from the chinese authorities. on the other hand, the u.s.

maybe not too much. the hurdle for the fed to do anything up or down is high, but maybe now the chances of a cut is probably a little higher than it should be. francine: andrew, what have we learned in the last six days? it is three angles.even if the fed cuts , a global trade war will be hurtful for the common man and woman, and the fact the market was position for a deal. why? andrew: a couple of challenges. the first, even though you had reassuring comments out of the administration in the past 24 hours, i don't think they have done a great job of managing the markets expectations of the last four months. two sides were getting close, great progress. that makes it harder to put into a box. i think when we look back at the last year, the one thing that has seen to move the sides together and to drive compromise has been market pressure. i'm not sure we have seen enough market pressure to again move that towards a

resolution. the third issue is i think the fed has rightfully identified if tariffs do create a risk to growth, and they will consider that an might consider rate cuts, but if we look at scenarios where the fed is cutting rates were growth has been poor, that is not been great environment for stocks. francine: what does it mean for that policy now? andrew: the fed will remain on hold. i think they are pretty content with rates where they are assuming growth remains constant. we would not expect the fed on the current headlines or current market weakness to think financial conditions have moved enough or growth has moved enough to warrant a change in their stance. francine: this is a question we are asking all guests and i urge everyone who is a bloomberg user to go on mliv, the markets blog. are markets too big to bet on rate cuts amid the trade war? geraldine: we would sure that.

the hurdle is up or down. the fed is pretty high. we need to see somewhat of a deterioration. several weeks of an impasse of the trade talks either affect financial markets or confidence, and we see a slowdown in the economy. both china and the u.s. a probably ready to act which itself contains market price reaction. it is like a chicken and egg situation at the moment. i would say reaction on either side is relatively contained so far. francine: given the fact markets were expecting a deal. given at last-minute, we were not even given a deal but retaliation, how could we be sure that the chinese will not weaponize yuan, treasuries? andrew: we don't think either of those scenarios happen. we forecast a stronger yuan. in some ways, we think they would be self-defeating.if you

are talking about 25% tariffs, you cannot begin the you want enough to offset those. the disadvantages of a weaker yuan in terms of instability and other concerns about confidence would vastly outweigh the benefit. we don't think that will happen. i think on the treasury side, again, you have a situation where given that china is a large holder of treasuries, it could be somewhat self-defeating if we were to see some of that selling. i don't think you see china following that path, but what i think you see is two sides that remains far apart on key issues. focusing back on the u.s. side, you probably need to see more market pressure to get the u.s. side back to the table. francine: a great chart that hillary clark is showing us, odding at the fed cut s, gaining momentum. what does it mean with how you position yourself in the

portfolio? geraldine: two things we need to put into perspective. one hand, more certainty from the tray part. was somewhat in the price. i think for us, reducing risk, more crucial given the uncertainty makes sense. or profits of companies by those tariffs, they have been it. taking a step back when the s&p trade for this year does not look like a bad level to take some money off the table. francine: thank you both. andrew sheets, geraldine stays with us. as 1 wall st analyst warns, we're fast approaching white nec novel territory. this is bloomberg. ♪

♪ finance, economics, politics. this is bloomberg surveillance. let's get to the bloomberg business flash. hi. viviana: t-mobile and sprint considering concessions to salvage their older $26 billion merger. among the options being discussed, the potential sale of their so-called prepaid business. the carriers facing concerns of how their type will hurt u.s.

while his conditions. they have argued they could challenge verizon and at&t. in the investment business has seen assets grow. client adding 18 billion euros. this reverse of outflows seen at the end of the year. it now manages more than 1.5 trillion euros for outside clients. the chief finance officer giving us his view on the current market conditions. >> this kind of volatility, if you ask me, is kind of normal. because of the trade discussion around china, eventually this discussion might go in the right direction and we might see again instability because the economy is doing fine. we are not getting nervous because of the volatility we might see on a quarterly basis. viviana: that is the bloomberg business flash. francine: thank you.

let's focus on europe and investors will get an update on the region's biggest economy. the german survey has been heading south since its high reading of 95, which it reached in 2018. economists expect a small tick up today. still with us geraldine and andrew sheets. when you look at europe, not exactly sure if you find value because valuations are cheap or whether you worry about economic indicators. the soft indicators that were so bad creeping up a this was before trade concerns. andrew: i think the story in europe is better than people fear. valuations is part of that but buried in the headlines -- last week, we had a better eurozone pmi number. data picking up off the lows. the other issue that i don't think is talked about enough is that a predominant concern in europe and the idea that tread

tensions will turn to europe, that europe will be the next source of trade tariffs. the longer u.s. and china trade tensions go on, that could delay the implication of tariffs in europe which would be a positive thing. i think on the whole, the markets are too cautious. francine: do you agree? the market is cautious about europe? geraldine: i don't share that as much. i can see the point of the trade war, but ultimately, europe is very open as an economy. a model of europe could be at risk by a trade war, much more than china for the u.s. which is economy.re closed europe does not have. the other thing is that europe might look a little cheaper on valuation, but when you adjust for cash on balance sheet and when you adjust for the sectors, europe as a sector mix that is not too sexy.

i think the valuation are starting to look a little rich on our model. francine: is there anything that looks cheap at the moment? andrew: she makes a great point. the problem in europe is that you have quality in growth stocks, very expensive. the things that are cheap are cheap for a reason. they are deep cyclicals with a lot of sensitivities. we like autos which is why we dislike on the tariff figure but price for a bad trait outcome. in the trade tensions go on for longer and china stimulates domestic policy more aggressively, maybe that could help provide a lift to that kind of china focused sector. i think it is a challenge but the way we think about the equity allocation, europe is more attractive than u.s. equities, and more attractive than japanese equities. francine: we will talk about japan later. andrew and geraldine stay with

us. where weive in europe will talk to john williams. we will ask him about trade concerns and potential rate cuts this year. this is bloomberg. ♪

♪ francine: this is bloomberg surveillance. whatsapp former ability

allowed attackers to attack spyware, according to the financial times. whatsapp discovered attackers were able to install surveillance software on iphones by calling targets using the app's phone call function. for more is matthew from bloomberg intelligence. tell us more about the company which is an israeli software company and its elected spy breach. matthew: it is in the business of creating technology and software that government agencies can use to prevent and identify crime and terrorists. this company has this software called pegasus that has been around for some time that is the center of the issue that found a way using the whatsapp calling feature to downward -- download the spyware onto smartphones which could be used to get into

all of your dark secrets you are holding on your phone. francine: this is not without controversy he does they are implicated possibly with saudi arabia and even possibly the murder of khashoggi. there isthe view is legitimate government, they do that with the vetting of the israeli government as well. they are not directly involved in anything themselves. government. francine: how threatening is this for whatsapp and facebook? matthew: about 1.5 billion users for whatsapp. today for facebook, it is on a huge revenue generator but it is part of the growth opportunity that facebook has in mind. if they don't close it out quickly, there is a threat that other people will move away from whatsapp to other platforms and the damages potentially the future revenue opportunity. francine: who are the other

platforms? matthew: like facebook messenger, keeping it in the family. but signal is a relatively small, but highly secure messaging platform that people have started to use increasingly. line, wechat, other messaging platforms. francine: thank you so much. matthew blockxham. coming up, uber investors hit the brakes as shares tumble. tech anddiscuss uber, valuations. that is coming up next. this is bloomberg.

♪ francine: temporary relief.

stocks take a breather in the trade war as president trump says he will meet xi jinping at the g20 summit. uber's chief executive warns of a tough ride of the company's stocks as it keeps sinking. will the third day provide any respite? one rate cut this year. we speak to the new york fed president john williams today. this is bloomberg surveillance. good morning. good afternoon if you are watching in asia. we are getting some u.k. and employment figures. basic wage growth slowed to 3.2% but that is as forecast. i don't think there is much movement looking at my screen, but good to look at all of our viewers as well. you can see the pound at 1.2941. let's check in with the markets with a look at european stocks. here's dani burger. dani: crawling back from some of its losses.

when it first are open, shares lost as much as 3% but up 2.5%. it cut its dividends which is usually a bad sign, but goldman analysts say it helps reduce the debt and earnings did not look back at. some gains from volkswagen. down a little bit from earlier gains. a surprise it will spin off. it had canvassed ipo two months ago. they are also looking to sell some nonessential parts volkswagen as well. that has the markets tentatively excited. this all has to do with the sausage begin. we had some excitement but sales are ahead of estimates. they will be better for this year because of the publicity pumped up around the food. it also has more foot traffic into the store. it ought to do with the sausage vegan roll. francine: much more popular. i knew it was sold out everywhere. getting some breaking news out

of nissan. fourth quarter operating income at ¥4.5 billion. we are hoping to have some insight on the possible merger and possible news of a merger. renaulthi, nissan and thrust into the limelight after the arrest last year and that puts the alliance in question. plenty more from nissan. let's get to the first word news. viviana: the u.s. is preparing to make china with a new raft of tariffs. a list of $300 billion worth of chinese goods the white house is threatening with a 25% levy. president donald trump says he will still meet his chinese counterpart at next month's g20 summit. that could prove pivotal in the ongoing clash over trade. escalation in the trade war making in next than it economic downturn more likely according

to morgan stanley sheet equity strategist. he's one of the biggest equity bears on wall street, but also the strategist who most accurately predicted 2018 stocks drop. he says there is more downside in the market due to earnings equitation too high. william barr plans to investigate the russian investigation. barr reportedly appointed the u.s. attorney in the state of connecticut to investigate the oranges of the special counsel probe. according to many reports, the goal is to see if government intelligence operations related to the trump campaign were legal. slumpingres after it loses a third trial after the roundup weedkiller casas cancer. it has been ordered to pay $2 billion in damages. this is the largest jury award in the u.s. so far this year. bayer is appealing the previous verdict and challenging this one

too. it says they are excessive and unjust. consumers can press ahead for a lawsuit accusing apple of artificially inflating prices. that is the ruling of the u.s. supreme court. the split decision could add pressure to the company to cut the 30% committed it puts on ad sales. joined by president donald trump brent kavanaugh, apple says it will prevail. 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. this is bloomberg. francine: thank you. we are getting some breaking news from nissan. we had that net income, the l-yearquarter -- ful dividend back in the year of 2019. we are hearing the chief executive briefing reporters as we speak on the financial

results. live go follow that on on the bloomberg terminal. investigation regarding the scandal concluded. now, let's get back to uber suffering a second disappointing day with shares closing more than 17% below the ipo price. the chief executive since in email to staff during the session, technology and other tough day and warning of a difficult few months anhead. he also said facebook and amazon faced a rocky road, but shares hav recoverede. joining us is geraldine and andrew. side ande uber to one see if this was part of the trade concerns or more technology space. overall, when you look at technology, is it valued correctly? overvalued?

are we seeing it valued? even if they don't make money? geraldine: we view the tech sector as two kinds. there is a tech that is well-established that has more attributes according to stocks rather than growth and we like those kinds. these are companies that are very robust and they are cheap relative to the growth market. and then there is a new kind. more less established, more up-and-coming with the future cash flow is less and valuations and multiples are more inflated and is part of the market was more kosher. it is a story of two worlds and people group it but there is a whole part of tech that we find relatively cheaper. francine: it is basically where it is in the value chain but is

it also regional? geraldine: we find in the u.s., some of the 10 so this would also be in china. this would be the three areas where we would find those that are cheaper and the ones we like to be exposed. francine: she makes it very important point. andrew: this is a very diverse sector with different companies lumped in with thin tech. we are cautious and underweight in the sector in the u.s. and asia. it has not been a popular position but one based on valuations but also concerns of the earnings are more exposed to margin pressure, deceleration. i think the tech sector in the u.s. is one of the sectors showing the sharpest deceleration and earnings in 2019 which is a little bit below the markets radar whereas in asia, the reason underway taiwan, the equity market has concerns about the asia tech hardware sector.

there is investor optimism overall. the valuations are expensive relative to the earning trends, but a good point. but alld never blanket, of this sector under the same blanket and are some good things. francine: are we in bubble territory? is this the early 2000's? it feels different. francine: i think we are in a different place. andrew: if we look at the leading, dominant tech companies. pe's start with a 2 rather than a 5 like they did in 2000. we are a long ways away from that and that valuation issue. i think some of our concern is that it is really about the earnings. that is what mike wilson is those concerned with. he thinks those 2019 earnings estimates are too high. if you look at the cap axa spendings, it has been coming down in that can help some tech companies. you can save money by spending less but also have more detrimental effects on the supply chain. francine: thank you both.

andrew and geraldine stay with us. coming up, we speak to the new york fed john williams at 10:30 a.m. london time. this is bloomberg. ♪

♪

bloombergthis is surveillance. let's get to the bloomberg business flash new york city. viviana: t-mobile and sprint considering concessions to salvage the over $26 billion merger. among the options reportedly being discussed is the potential sale of their so-called presale business. the tieup could hurt u.s. wireless of addition. they have said they get challenge the likes of verizon and at&t. strain ofnder the falling revenue and rising costs. euros biggest telecom carrier slashing the quarterly payout by 40%. sales in the fourth quarter falling slightly from a year ago. the company has to deal with buying new spectrum and paying for the $21 billion birgit assets.rges of liberty

this is just two months after xiaomi's push by the poor market conditions. it may sell two non-core businesses. the german carmaker hopes to live the unit by the time of its summer break in august. >> i think it is a perfect combination. on securities in the market but they will always be there so we are very happy that we got the decision. bloomberghat is the business flash. francine: thank you. let's get the latest on brexit. theresa may will meet with her cabinet today as she comes under pressure to a lot of the withdrawal talks with the opposition. bloomberg has learned a cross party meeting last night broke up with progress. conservative lawmakers are pushing for may to set a date for her departure with many angry with the ongoing talks labour.

,ndrew, it is anyone's guess but what does it mean for the market? i do think that the european elections which are coming up next week are an important marker for an issue that it has been hard to figure out where public opinion is. i think this will give the main parties and the country a better idea, maybe where public opinion lies. i think for the markets, i think the thing that we think about that morgan stanley for yuki assets, you are dealing with a parliament that does not have a majority for a no deal exit. if that is lacking, the pound is too cheap for the other scenarios and u.k. yields are too low and need to move higher. francine: what does it mean for the assets you invest in right now? is it too early to tell? andrew: i don't think it is.

we like earning the pound now. we like being underweight or versus.k. real yields u.s. real yields. that is an attractive entry position. i don't think you need to wait.running the risk reward is attractive for both. francine: overall, what do you do with u.k. assets? i don't think if you can put brexit to one side, depending on the economy, but what would you do with yields and other assets? geraldine: we have long held a view that ultimately there will be no hard cliff, therefore we tendencyat there is a to the overweight on the assets underweight on the duration

in the u.k. it prices a cataclysmic issue to brexit. the path has been incredibly difficult to forecast, but where more markets got it right is a cliff no deal brexit is very low. this is the focus we have because the path between here and there is anyone's guest. francine: we went around the world in 40 minutes. the u.s., europe, britain and technology. what is the question you get from your investors? what does it have to do with, the kind of politics, how they infiltrate the markets or pure monetary policy? geraldine: exactly, it is the recession. recession is a big worry, especially in an asset allocation world is late cycle, the dream portfolio you want to have which is going to be overweight equities and a little underweight on fixed income, is the opposite of what you want if there is a recession. complex.g that is that is the focus of everybody. when is midnight going to

strike? we don't think a recession is on the very near horizon. certainly in the two were three here basis. here, it would say remain invested. theme is to go up the quality ladder in your portfolio. fixed incomes or equities. because waters are rough and we saw it in the past few days with all these tweets in the uncertainty around the geopolitics. francine: can fear start a recession? we saw it with earnings, sony chief executives saying i have poor visibility. it is difficult for me to tell you what happens in 12 or 18 months. does that lead to a slow down because of lack of investments and people are uneasy about something? andrew: happen because a lot of people do the same thing at the same time for the same concerned recent. businesses pullback and

consumers spent a little bit less and everybody is spending a little bit less of the same time is what causes growth to go from trend to below trend and get that recessionary outcome. there is this idea that you cannot get a recession as long as the consumer is strong, for example. yet, if you think back to 2000, 2001, amild recession in the u.s. and the consumer was fine, the housing market kept going up. i do think that confidence is important, thus things like trade are an ongoing issue. to me, i think a really important question is where is the output gap? right. for a lot of last year, because a dominant narrative was around -- it seems like growth would be good, we get more inflation, the fed would need to tighten more. implying that the spare capacity of the economy was love. i think this year, that has done a 180.

people seem quite confident we can get a lot of growth without inflation. that seems like the dominant theme. is there enough spare capacity for goldilocks to continue or do we get back to a 2018 dynamic where there are more trade-offs? francine: thank you both for joining us. geraldine and andrew. the untimely death leaves a massive void in the leadership of fiat-chrysler. we will talk about what it means to lose an indispensable leader and ask about what is next for the italian carmaker. this is bloomberg. ♪

francine: this is bloomberg surveillance. a quick check of your markets. uber and lyft both gaining. uber beginning 1.4%. two trading sessions, they were actually down. uber in premarket currently at one point percent higher. the untimely death of marchionne left a massive void in the leadership of fiat chrysler. the chairman said the chief executive marchionne was critical to the execution of the company's strategy. he joined fiat in 2004.

the global expansion of the bankrupt u.s. rival chrysler. his sudden death from complications arising from shoulder surgery leads the company with uncertainty. his time has been told in a new book by our bloomberg milan bureau chief who has been chasing him around for a decade and joins me now. congratulations on a book that covers him. this is what you tried, through your eyes, through his experiences. event: it is about him and a little bit about a -- my story pestering him for over a decade. session story of my of covering fiat chrysler and his obsession for fixing. francine: what is his legacy? he had enormous charisma.

tommaso: i have the chance to discuss it with his successor and his cfo and one sentence richard told me when we met, he the lastpend most of 10 years since i've is building incident being outside with my family but i don't regret it because this meant would not just obsessed about his job but yet so many interests. he graduated in philosophy. he was giving his present to his people about german philosopher of the 20th century. movies. he was telling them and showing them how to make a difference. leaderships is his and all the managers around, that you can make a difference every single day. francine: how aggressive was he in his vision of execution? you tell about a deal he wanted to do that almost when hostile.

tommaso: he was really aggressive. he had the idea of making the world's biggest carmaker by combining with gm since 2009. in 2015, you wanted to do it. he sent a letter, never answered his letter. at a certain point, he had a bank ready to finance him with a $60 billion hostile bid for gm. he was somehow blocked, blocked by the u.s. establishment. lot by the fact that warren buffett said i don't think you have to do it because many borrow needs to have her chances. francine: he was pretty formidable in every sense of the way -- is a difficult for his successor to fill those shoes? tommaso: absolutely. if you ask mike manley, he says no one can fill issues. i'm a different leader in a different environment. as you know, it is facing a revolution. who knows how many carmakers will survive 10 years from now?

marchionne showed before others that the only way to do it is through mergers and creating global companies. francine: thank you so much and congratulations on a fabulous book which i think is sold out. you can wait for a second copy. it will be released soon. it shows the tenacity of our bloomberg reporters. that was tommaso joining me to talk about marchionne. bloomberg surveillance continues in the next hour. we will be keeping the conversation on trade and monetary policy. we will also talk to the new york fed president john williams. our interview that kathleen hays will conduct. we will talk yield inversions and trade. this is bloomberg. ♪

francine: temporary relief.

a stop in the trade for as president trump will meet xi jinping at the g20 summit next month. uber's chief executive warns of stocks.des for the will the third day provide any rest bite? fed president john williams, that interview shortly. good afternoon if you're watching from asia. this is bloomberg surveillance. we have a little bit of breaking news out of brexit, but a lot of the focus will be on uber. a lot of the focus will be on a report that some of the software could be used to spy on you. we will look at trade. tom: what we are looking at covering markets off of the next day of this china trade war, a huge amount of news in america on this. john williams' discussion, he

zurich,n a speech in and he makes clear that he is modeling for lower economic growth. softine: we are looking at wereators that economists pointing to dechellis that soft indicators were going up. these are for may -- to show us that soft indicators were going up. these are for may.a little better than before, but great. we will have more on the impact it could have on europe. let's get to the bloomberg first word news. u.s. is on the verge of escalating the trade war with china. the trump administration preparing to impose new tariffs on $300 billion of chinese goods. at the same time president trump bull made with xi jinping at the g20 summit, a meeting that could be pivotal in resolving the dispute.

the market is pricing in an federal rate cut i the reserve. the rate on the futures contract implies that the benchmark will fall more than 25 basis points. that shows that traders are pricing in a quarter-point reduction. at 5:30 new york time we have an exclusive interview with the president of the fed bank of new york, john williams. a jury in oakland, california ordering buyer to pay more than $2 billion to a couple that claims they got cancer as a result of using roundup for 30 years. they will appeal, calling the excessive and unjustifiable. theresa may coming under more pressure to pull out of opposition talks with the labour party. critics in her own party are

pressing her to set a date for her own departure. bloomberg learning cross party a deadlock at ending in congress ended without progress. global news, 24 hours a day on-air and on tictoc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. equities, bonds, currencies, commodities. futures up 14, dow futures come back 100 points, the curve steepening. the euro is a big story and what done. not the vix, 19.31. the two-year yield stays where it is. weaker yen, weaker renminbi. francine: this is what i've looking at. u.s. secretary futures rising on european stocks. i think there are haven aspects. feel, a goodtter

factor. not sure why. maybe we have seen a sharp selloff so we don't see brutal selloffs anymore. washington and beijing are keeping the markets on edge. looking at the pound on the back 145 .29tle brexit news, at the moment. tom: i'm not going to go into all of the math of this. here is the stronger chinese renminbi, a very well contained chart. then, it is not. this is to standards deviations. that is two days in a row. weaker renminbis perhaps on its way, finally, to 7 yuan per dollar. francine: the u.s. preparing to china with new tariffs.

billion of chinese goods it has threatened with a 25% levy. president trump said he will meet his counterpart at the g20 summit and is optimistic. trump: steve just got back from china. we will let you know in four or five weeks if it is successful. i have a feeling it will be very successful. thank you, both for joining us. the you listen to help market is expecting a trade deal, is it a miscommunication from the trump administration, and how can economists and markets make sure this doesn't happen again? .> oh, boy it is impossible to trade on the back of what trump says. raisingtalk show host tensions and taking them down along a path you don't really

know. as an economist, the path is not a good one. it is about trade frictions. where we end up, i don't know. the notion that every time he starts a mini trade war, thinking maybe he is successful, maybe he is not. not for a moment do i believe that trump will succeed if he believes it to bring us to a place where there is more free trade then today. francine: this did not hurt the u.s. as much. the pboc will add stimulus and american stocks rise. percentthree and a bit while the chinese market is down 9%. that is a ratio that counts. will levy, 60a

billion dollars, versus the u.s. on china, $300 billion. trump will keep throwing rocks. francine: what if china starts weaponizing yuan or treasuries? >> treasuries are a false thing altogether. own 1.1 trillion, it is self harm if they do this. u.s. treasuries will do better if china stops selling because everyone will panic and go to safe haven assets. reality, they want to sell in the u.s. in dollars, u.s. treasury's are the best option. if it goes over seven and they lose control of the currency, china loses even more. tom: can we extrapolate revenue and earnings growth reductions? can we go back to

traditional security analysis after what we have seen in the past 48-hours? us: trends on earnings are not good. gain of two the 2020 election. when you look at what we have seen in china, what are the ramifications to your european optimism if we get the same tariff treatment for europe? it is bad. that is why you are seeing the effect on the european markets. trump is a bull in a china shop, and it is difficult for any country or economy highly dependent on foreign trade, europe and particularly germany. they will be hit more than the

others. china is very important. they are being hit on the external side. it will have a negative impact on part of the european companies. the question of whether they can shift the domestic demand. you have seen a drop in demand or cars in china, for reasons, i'm not sure i understand all of them, but that affects part of the european industry. francine: the longer the trade whatever he wantedy wan call -- whatever you want to call it, -- to predict what trump is up to you. if there is any logic you don't many fronts war on at the same time. i would think the odds are less as long as his engagement is in china, we live more peacefully here. way, but i'm very

reluctant to -- francine: that is fair. a first move for trump. there are signs it is happening already. articles are pointing to that, letters being sent. clearly that is where the donald trumpt for will start. he will go to trade if he does not get the right response. like three days ago, three weeks ago, we were talking to marcus, what about a melt up? does it have the ability to come right back? market.it is a chop it is a trading market. it doesn't look great on the chart, but we have seen friday's recovery in the selloff yesterday. we are bouncing back. this morning seeing good on those trump comments. he is dangling the carrot at the

end of the trade talks. at the end of three weeks we will see. we look forward to the next bloomberg opinion perspective on the markets. erik will continue with us through the hour. it will be an important conversation. from san francisco, still unpacking in new york, president of the new york fed. trade with john williams in the next half-hour. this is bloomberg. ♪

francine: we just had breaking news. investor confidence in germany's growth outlook unexpectedly in may for the first time since october, seemingly underlying the fragility of europe's largest economy as -- as globalns work tensions worsen. economists had expected an increase to five. k, i keep being told that usually soft indicators and fundamentals track each other. they have not tracked each other

so far. soft indicators were down, creeping up. what does that tell us? between the soft and hard data are very clearly, in my assessment from meetings clientsporate around europe, people are worried about trump, trade -- and not just for the last couple of weeks. generally and fundamentally. good hard data and softer week data. we number today, i think have to be careful. we don't know what share before and after trump's latest trade frictions. it was assumed the majority came in after. if that is true, that is probably why you suddenly see this drop in expectations. if it comes before, i would look differently.

francine: are you worried about germany? it is the most important economy and we are hearing that there is a change at the top. is there something that should make us feel uneasy? erik: not fundamentally, but you are right. i came back from berlin, and it is clear it is a political battle at the top with long transition with very little activity. this i worry about a lot. we have seen the misery on the financial sector and the banking side and all of the rest of it that was a display -- we have known for a long time that the national champions and german banks, but the industry is doing fine. met with a number of corporate's over the last month or so. fundamentally, things are in good shape. there are no big imbalances and

demand is still ok. fantastic. tom: i don't want you to get in trouble with the general counsel you about thesk chronic nature of negative interest rates. it has been quarters and quarters and quarters. there is a point where it doesn't work, isn't there? erik: that's right. about thisn writing in my team. here is the fundamental issue. negative interest rates are fundamentally damaging for the transmission mechanism because you are taxing the banks, which should transmit monetary policy to the corporate's. the small smes and households and the rest of it. i think this is what draghi has referred to, what they are about.

they have been talking about how you get out of it. i'm sure they would love to get out of it if they could. the problem is they have persuaded themselves in the the zero bound is nonzero. it is somewhat deeper down. therefore a move back to zero rate would look like a hike. the economy gives the narrative easily that there is an easing if it is back to zero. i think they are caught, to be honest. francine: thank you. coming up later on bloomberg natots, we speak with the secretary general. look for that at 10:30 a.m. in new york and 3:30 p.m. in london. is the budget and the u.s. contributions to the nato budget. this is bloomberg. ♪ s bloomberg. ♪

>> this is "bloomberg surveillance." nissan has for cap profits that are less than expected. they're trying to recover from slumping u.s. sales, aging models, and an out of sync product cycle. the dividend cracked under the strain of falling revenue and

rising cost. europe's biggest telecom carrier is slashing its quarterly payout by 40%. sales falling slightly from year ago. the company has to deal with buying new spectrum and paying for the 21 billion dollar purchase of liberty global assets. second guessing beginning of the uber ipo. in the first two trading days shares have fallen 18%. the focus is on morgan stanley, critics asking if the syndicate led by the firm set the ipo price to aggressively. they want to know if morgan stanley sold to many stocks to large investors that made hollow promises to hold it long-term. this is bloomberg. tom: i am tom keene in new york. she is out of the london school

of economics, phd is stanford. a stanford phd in economics is a certain kind of economist. john williams, president of the and newlysco fed minted as the federal reserve bank president for new york. a different kind of presidency there. rik, the gentleman from san anncisco codified the phrase equilibrium concept of random plug-ins like jobs, inflation, and the rest that comes up with where the real short-term rate should be. does this still work? does that john williams theory still have importance? erik: yes and no. i think it is a great concept as an economist. we love to think about equilibrium and where things should be. we are i think it has gone wrong for the fed is it moved too much. i come around suddenly and you

say they have moved a little bit in there for monetary policy is a little more accommodative than we thought before or the other way around. that is not good central bank communication in my opinion. if anybody on my team told me every three months that they have free estimated equilibrium for your dollar or interest rates, i would say this is not going to help us. when you do equilibrium like that, you have to have some permanence. you cannot mess around with it on an almost weekly basis. francine: if there was one question you could ask john williams about interest rates or anything else in the economy, is it possible to have a recession or recessionary environment with at the same time strong consumers? that is a good question and is something to ask about how he feels about this. my question would probably be, how much does he worry that this

recovery is so long and there's so much risk around the world, and is there not a risk when you hear what they say, that they will not come out and forecast a of the policyse mistakes like the trade policy? really, butwer that i think this is the question we in the market wonder about a lot. whether they are totally honest in their predictions. thank you. coming up next, we will be speaking to john williams, the new york fed president. this is bloomberg. ♪

tom: good morning. "bloomberg surveillance." and tom keene.

a conversation with john williams of the new york fed. a data check. euro stronger as well. the big lift in equities. to the next screen. the idea of the vix coming in nicely, 19.19. i want to focus what i am watching each day, is yen. forave a very friendly yen the equity markets. 109.71. yesterday the yen was not correlated and came back nicely this morning a weaker yen. our kathleen hays is in conversation with john williams. kathleen? kathleen: thank you. i want to welcome to our tv audience, our radio audience

around the world for an important discussion with john williams, president of the federal reserve bank of new york. is almost ayself it year, not san francisco but new york now. what a year it has been. and this is hit hard by the escalation of the trade war. when you look at the economy, what do you see? a potential economic shock or a manageable bump in the road? john: the economy is in a good place. we have seen solid economic growth, good job gains, low aemployment, and inflation little below our target and a good place. we are starting the big macro picture in a good place. what we need to do in the fed and looking ahead to whatever happens, whether it is trade issues or others, is keep our

focus on achieving our goals, maximum employment and price ability. now.e close to those goals and adjusting our policy stance so we can best achieve those goals. at quarteret's look growth. when you look at the 3.2% headline print on gdp, it looks great. when you look inside the report you see that a lot of that was inventory building. business investment flattens out. slowed pretty sharply so final sales were just up 1%. you get a different picture, it seems a picture where i have to ask is this economy vulnerable to a trade war's impact? don't want to overreact to one or two data points up or down. when i look at the first quarter data there are mixed messages. what we have seen since the first quarter gdp in terms of

consumer spending, and employment growth is that the economy has rebounded .olidly after a soft patch reading through that data i saw definitely a weakness in the economy last year and early this year, but a nice rebound. i think the economy is well-positioned to deal with whatever events can happen in the future. kathleen: where do you look for signs of weakness? you have to be watching this closely. everyone at the fed has to be waiting to see what happens in willolitics and where you look to see worrisome fines in the economy that the trade war is taking a bite. john: business confidence and consumer confidence are areas that we saw turned down late last year and have rebounded. anding at confidence consumer spending, if consumers lack confidence we are worried.

if consumers are worried about what is happening in our country or around the world they're more likely to pull back on plans.ent and the data is for solid growth, but those are areas where we will be watching for signs of weakness. kathleen: but happened a couple of months ago is not where we are now and we're trying to figure out where we go. in this sense, it may not be slice and dice the numbers, what is the economic impact, the bite taken from the trade war? trade market, the uncertainty. john: in terms of for the effects of the tariffs are in terms of growth and inflation we have seen some affects, a little boost to inflation, some subtractions in growth, but they are relatively small so far. as the tariffs get larger, i think the fx will be bigger,

boosting inflation in the next year and having some negative effects on growth. the real issue is about confidence and uncertainty. when i talk to business leaders around the country what i hear is that when you are uncertain about what is going to happen with the policy or the economy you pull back. see what will happen. i am more focused on confidence. kathleen: we had a good drop on the stock market. that hurts confidence and tightens financial conditions. when we saw the transition on fed policy from december into january into march, we see that that seems to be one of the things clearly on the radar pullback for stocks and what that could do for financial conditions and the economy. i would separate is volatility and markets. markets move up and down, that is what happens.

more on the broader more persistent movement in financial conditions. if financial conditions tighten, that affects households. that is one of the factors we take into our account taking about where the economy is likely to go. of big that sure is a lot things affect u.s. growth and the fundamentals are solid. a lot of the underlying momentum in the economy is solid. watch financial conditions, it is important to thinking about growth, but not the determining factor. kathleen: thank you for joining me in zurich, we have never met in zurich before. thank you to our radio audience that have joined us. when we look at the landscape, the fed has not then including a balance of risk statements so far. where does this leave us in terms of the balance of risk? the trade war has started.

we don't know the impact. we know there were some vulnerable parts, weaker consumption and not good in the first quarter. john: let me step back to december thinking about the balance and risk. what we were thinking about was slowing global growth and financial conditions tightening. those are the two areas of risk i would focus on. on the international side, china's data and growth is becoming better in part because of policy actions taken there. mixed picture. on the global growth side there are downside risks, financial conditions have overall improved quite a bit in the last few months. overall the balance of risks is roughly where it has been. it changed a little bit, but been.roughly where it has

flipping we don't want to lose track of it is the u.s. economy is ahead through this. the u.s. data has been better through this. everyone talks about the downside risks, but we have seen pretty strong numbers in employment, unemployment, that tells me that the economy still has good momentum. kathleen: yields continue to fall on the benchmark 10 year. the yield curves from three to 10, briefly inverted, still very flat. is once againrket pricing in at at least one race hike in 2019. are the markets reading the fed's reaction function accurately? john: it is hard to know what market participants are thinking about. the risk of downside risk is in investors minds, which is understandable given some of what we talked about. in the medium-term, where is the

economy going in terms of employment and inflation, and try to keep monetary policy in a nice balance with our goals. i will not opine if the markets are right or wrong. we will have to wait to see how the data comes through and if the risks materialize or don't. , that meansncy continually reassess. what is the data telling us about the economy, the outlook for the economy, and focus on the medium term of how we reach our goals. kathleen: the next move could be in either direction. you will do what is appropriate. what is the damage from the trade war if it continues? the tariffs may stay in place even if the deal is made. when would it become severe enough? what are the cues that it is time to look at a possible rate cut? john: i do think of the tariffs , a supply shock.

as various effects and the economy. it will probably boost inflation by a few tenths over the next year. it affects demand and growth in the short run and has negative effects on the value chain and how our economic system works. we have to keep assessing, evaluating what are we learning from the data in terms of those effects, and the broader set of developments we are seeing. i don't think there's any specific point. it is just assessing where we are in terms of our goals if we need to get inflation back to 2% at the same time making sure we can sustain the economic expansion as long as possible. we have to assess and evaluate. the economyst year, was somewhat shielded by the tariffs because they were not so much on consumer goods, because china's currency declined,

helping to offset the impact on u.s. importers. how big of a boost in inflation -- the back of the envelope we can't be sure -- how much will this boost u.s. inflation? john: it is hard to know. i will start and end with that. studies have been detailed looking at this. we could probably get a couple tenths on the inflation rate raised on what has already been announced. if there is further escalations in tariffs those effects would get larger. you are making the right point, this affects consumer prices more proudly and the consumer start seeing it in terms of prices they are paying it stores. this is a significant effect. it will obviously be a part of our analysis in watching how the economy is doing. the kind of it thing that could start inclining the fed on the other side of that rate path towards a rate

hike this year, because some people are starting to say it did not boost inflation enough that may be the fed would feel it is more appropriate to think about taking that step? on all of theds factors assessing the outlook for the economy. in the past i would say that a change in the value of the dollar, or i think of the tariffs in a similar way, fx inflation only for a year or so i don't see it as affecting overall inflation and over a longer period, inflation expectation. you don't want to overreact. at the same time, a big move in inflation would be something we would be studying carefully and trying to make sure we understand how do we keep inflation right around the 2% metric. kathleen: the international monetary fund swiss bank conference panel was broadcast live on the website.

in your prepared remarks you emphasize that in a world of lower growth does a lot for world fore factors, a your so close to the zero lower bound. it is important for central banks to reassess their toolkits, etc. does that show how important it is which way the fed errs. on may be therr inflation is heating up we should be looking at rate hikes, or we cannot afford another move towards zero lower bound. if anything vigilance has to be in avoiding any downturn in the economy, particularly when a trade war may hit it some and make it more vulnerable? john: the risk management are highlighting are important at all times for monetary policy, but especially the lower bound you're talking about. that was a concern and

consideration as we kept interest rates low for seven years and took our time bringing interest rates back to more normal levels. the idea is you have to manage those risks and what happens if something pulls the economy back down. now that we are in a more normal economy, those concerns are still in the back of my mind, but in the current situation the focus has to be on keeping expansion going and keeping inflation on our 2% goal. the lower bound issues are inortant and are definitely my mind thinking about risk management, but i think we are in a good place away from the lower bound, and i think our policy choices, we are in a good balance for them. economic in your research you focused a lot on the role of inflation expectations and how important it is not to let them get anchored at too low. role infed had some

depressing inflation expectations? the fed started raising rates long before inflation was anywhere near the 2% target. rate hikes as inflation was still far from the target. think theight, do you fed could have handled that differently. is that part of the reason why it nation, far from being at or above target, is below and falling? john: the experience over the last couple of years has caused many of us to reassess the inflation process. one thing we have done at the new york fed and the federal reserve system is re-examined how low we can get unemployment without creating inflation. others have it lower, how low unemployment can go before it ignites inflation. think it isus to much lower than we think was

sustainable in the long run. reassessing your models is an important part. i think there is a broader issue. we can do our very best to get inflation around 2% .nd keep it around 2% i think these challenges of a very low mutual rate of interest, the lower bound, tells us a central bankers, including the fed, need to think hard about how we best frame our policy strategy, communicate that strategy, and execute that strategy given that lower bound will be a recurring aspect of our policy reality in the future. this is something we are doing at the fed. something i think is important for us over the next year to think about. make sure we have our strategy right, that we communicate that effectively so that we can do the very best we can in the future.

kathleen: when you look at what is happening with inflation recently, looking at the fact there is a trade war on the table, have you seen anything -- and i want to put those two big reasons, because maybe people think the next move is a ca -- wouldt move is a cut, that change your dot? i know the economy is in a good place, but is there anything at all shifting you towards that direction? i wassome of the risks worried about about may be the economy slowing faster than we were expecting has diminished because the economy seems to have momentum. the events in china has given me a little comfort that they are not going for a hard landing. the lower inflation is on the other side of that with concerns other factors.d there are a lot of risks. fundamentally, the policy is in the right place and i don't see

any reason to have a biased upward or downward in the current circumstances, but we will evaluate, reassess, and see what is the best decision to get us to our goals. kathleen: thank you. john williams, president of the federal reserve tank in new york. hopefully i we will be able to soon give you a one-year anniversary party. thank you very much with the president of the new york fed. we have been talking to erik nielsen. it is the consent but all central bankers to get back to 2% inflation. they have not succeeded, have they? we will talk more about the decline that mr. john williams was talking about, the tariffs' effect on inflation could be significant. we look at the policy so far and what could happen in the next six months time. tom: we will continue worldwide.

this is bloomberg. ♪ . ♪

francine: this is "bloomberg surveillance." tom and francine from london and new york. interview,eat

kathleen hays speaking with john williams of the federal reserve of new york. he was talking about the trade concerns and the tariff effect, and what that could mean for inflation. which we know, to get to 2%. to keep it there he says for the moment monetary policy is in a good place and he would not be was orn to where his dot where he saw the next move for the federal reserve. tom: i think the fundamental thing that i saw was the headline on 2% inflation. i know you want to go to erik nielsen. abject failure of central bankers over the last x number of years. not just the fed, but all central bankers. would you explain the efficacy of a 2% target for inflation?

erik: i wish i could. you are right. it is -- we don't really understand why global inflation has been so low for so long. there are theories about different rates of distribution effects in america. purchases, retail, and the rest of it. one thing is clea they needrcent -- 2% to be more accommodative. i think that the key takeaway of all of that discussion is that central banks have been put in an impossible spot, almost. tom: equally important was a conversation with eric rosengren of the boston fed. he put tariffs, import taxes, on

x-axis. can we say long-term that the trump tariffs will boost inflation? erik: no, not long-term. williams said, there is a short-term one-year effect. i think it was generous towards trump on his assessment on these negative effects on inflation. he mentioned a couple of tenths of percentage points. at the fed in san francisco in february, they made a detailed that said exactly what would happen to inflation if they do what trump is about to do now. the overall cpi 0.3. on investment goods, one percentage point, which is huge at a time when investment has not been high in america because

companies have borrowed, buy back shares instead of investing . i was surprised how late that key was on the inflation affect. francine: but john williams was saying is that there is a negative supply shock if tariffs increase or stay as is. in that scenario, what with the fed to? -- fed do? erik: strictly speaking, fed to look through the one-year effect and tighten because tariffs will lower the potential growth rate. economy byshockingly making trade less free, our potential growth rate goes down. that calls for somewhat tighter monetary policy if you are a strict inflation targeter. tom: this is very simple. it is the abrupt move in a rate cut that we have seen over the

last couple of days out to january of next year. d almost to the peak that we saw in march. you are an optimist. can you model a rate cut? -- i don't share the optimism that williams said. your colleague pointed out that the first quarter was not as robust as it looks. i think there is a case for a cut. tom: that is amazing to hear. for eric nielsen to say "there is place for a cut." thank you. this is bloomberg. ♪

tom: this morning, it is the

morning after. 600 plus points down. the yen weaker. after.he morning now what? farmers voted for the president. in this hour, a congressman whose constituents are flat on their agricultural backs. .nd it is the morning after are any democratic presidential candidates, anybody out there free trade? world live from headquarters in new york. i'm tom keene. francine, it is a bounce in the markets. the path forward will be most interesting for the week. it will be most interesting to see how china weaponize is, if they do weaponize some financial market instruments. we will talk at length about renminbi. check,look at the market

havens are not as much of a thing to be as they were yesterday. tom: let us get to it. but first word news, here is viviana hurtado. is on thehe u.s. verge of escalating the trade war with china. is trump administration preparing to impose new tariffs on $300 billion of chinese goods. including laptops and children's clothing. president trump says he will at next month's g20 summit. it could be pivotal in river resolving the dispute -- in resolving the dispute. the rate after the january fed fund implies the benchmark will fall more than 25 basis points. it shows traders are fully pricing in a quarter-point reduction. moments ago, we spoke with john williams, new york fed president.

do at the we need to fed, whatever happens, whether it is the effective trade issues or others, keep the focus on achieving goals. again, i think we are close to those goals. and adjusting the policy stance for whatever happens. bayer has lost three trials over the roundup weed killer. to pay $2ering bayer billion to a couple. they claimed they got cancer as a result of using roundup for about 30 years. bayer appeals, saying it is excessive and unjustifiable. 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. better markets and less correlated markets.

a bounce in equities, 600 points down. back 130 threee and the s&p bounces up 18 points. the curve steepening. the euro does nothing. on to the next screen. the vix come in at a solid 1.46. there is the headline. bond yields have not moved. that is most interesting. it the weaker yen correlating with equities. have had because we losses on monday and losses in asia, it is interesting to see investors assessing the prospects for a global trade war. less brutal than the start of the week. a little bit of a lift off. a little bit of a bounce back. pound for good measure because there is a little bit of easing on the pound. a lot of people from theresa

may's camp telling her to stop negotiating with labour. tom: all fed president are not the same. boston is different from st. louis, on and on. and there is the separateness of the new york fed president. here is john williams. john: the real issue is about confidence and uncertainty. when i talk to business leaders around the country, what i hear is that when you are uncertain about what will happen with the policy or the economy, you pull back and hunker down, week to see what happens before you make the investments or hiring decisions. >> we had a big drop in the stock market. hurts confidence but titans financial conditions, something the fed is watching closely. when we saw the transition of fed policy into march, one of

the things clearly on the radar what financial conditions could do to the economy. it has not been pretty the last few days. john: one thing i would separate is volatility in markets. markets move up and down. look at the broader movements. tightening, it affects households willing to spend or businesses willing to invest. that is one of the things we take into account. , there is apicture lot of things that affect u.s. growth. fundamentals are solid, real wages have been growing. isot of underlying momentum still positive. it is input thinking about growth but not the determining factor. tom: john williams of the new york fed. we will get to our guest in a moment.

but right now, we have to look at the political ramifications of all that we have observed in the last 24 hours. kevin cirilli is our chief washington correspondent. what will the president do today on trade and terrace? this is where the divide is within the republican party. the countdown is on from the june 28 to june 29 summit where president xi jinping and president will come face-to-face. president trump telling reporters he fully intends to meet with president xi at that particular meeting. a deadline is looming on the threat to increase tariffs in the coming weeks. tom: let us go to catherine from the washington post today who i think really lined up the fact that president trump and secretary clinton were both against pacific trade. democrats have been muted or mealymouthed in their criticism.

perhaps because when it comes to trade policy, most of them don't have a leg to stand on. democrats have become fiercely free trade. 67% of democrats believe that free trade has been good for the u.s. everyone is lining up with trump or even more strident on a protectionist america. what is the mood? that is a fascinating point that catherine points out andt the democratic party where they stand on the issue of free trade. it is the base of the republican party and the trump political movement, the base of the democratic wing of the party that are so aggressively out there against this. when you look at the democratic primary, we talk about the republicans. think back to 2016 when bernie

sanders ran to the left of hillary clinton on the issue of nafta. what does it mean for pulling? lling?ling -- for po itin: in terms of polling, will come out full force at the democratic debate summer. former vice president joe biden is, without question, making the same pitch to union workers. thinking goes, it is against some of the trade agreements of the past. they switched and voted for trump in the last cycle. it will be an interesting tension as sanders makes the point against the trade agreements. biden will probably do so from a more centrist approach. tom: kevin, thank you so much.

our chief washington correspondent. we have two wonderful guests the morning to digest market moves that we observed yesterday. securities's at jmp and barely describes his understanding of west coast technology. he is definitive on equity markets. we are thrilled on short notice that ian's harvick -- jens here. -- nordvig is how does the chinese protect yuan per dollar? how do they achieve that given the global forces at bay? >> we have seen that the way they fix the currency every day when their trade starts, it is lower than it otherwise would have been.

last 2,currency in the 3, 4 sessions, they are spending their own currency to avoid a rapid move. it currency manipulation or stabilization depending on the perspective you have. those are things that they do on the short term. jens: -- francine: who wants a deal more? does this get ratcheted up? it still doesn't feel very rapid in terms of the conclusion. to decide who has more to lose, i think china probably has more to lose in terms of economics. our president has probably more to lose in terms of politics. it is an interesting juxtaposition. it does not feel like the things

we have seen from the president. this is not going to correct itself anytime soon. when i hear the next meeting is in june, it feels like a long time away when it is 45 degrees and doesn't feel like spring. summertime feels a long time away. you so much,nk mark, jmp securities president. jens, both stay with us. markets stay on edge. it let's go to the data board and see what the markets are doing right now. , driving new penalties down soybeans and cotton prices. haven assets slipping. this is bloomberg. ♪

>> there are a lot of things that affect u.s. growth. the fundamentals are still pretty solid. real wages have been growing. i think a lot of the underlying momentum in the economy is volatile. it is an important input into thinking about growth, but not the determining factor. ago.john williams moments on currencies and renminbi dynamics, we are thrilled that mark lehmann is with us out of san francisco with a legacy that a zillion years. he was there when they invented the semiconductor. me cut tokets, let what everybody wants to know this morning. is it october of last year?

>> i don't know. we will find out in the next few weeks. think the problem with people that want a quick and -- end to this, there probably won't be one. and we have the ipo market that perked up a little bit with important data points. suspicionat adds more to the overall strength of the market. grizzled in silicon valley ipo. lift --take uber and and lyft as data points. is up over 50%. and uber are their own data points. companies like we work and airbnb accessing the capital markets.

we have to take a lesson from this as underwriters are doing as well. that is the largest thing going on. we are flying around the country and assessing where are the buyers? and what is it mean for the overall strength of the company? look at theen you ipo's, what do you make of it? i heard everything from what mark is saying to you have to look at the underwriters. or that they have a tricky business model. not a lucky day that they did this ipo on. has had an market incredible rally for three or four months. we are topping out at the same time and we are having this very .ricky macro news i think that is a big part of the narrative. valuation issue.

is it the right valuation? and in a tricky market environment, that comes to the fore. francine: how difficult is it to evaluate these companies that do not make money? and if there is no barrier to entry and you can see a disruptor in two or three years, what does it mean for how the market should be looking at it? mark: we have seen companies that are profitable at ipo or years beyond. amazon front with peril because there is just one amazon. i would argue that there are large barriers to entry between uber and lyft, and whoever the third participant is in the states. there are large barriers to entry. cooper having $8 billion is a toge war chest for them affect what they want to. when do they get profitable?

when will they make it a better business model? two months ago, people were willing to say that uber had a $100 million -- $100 billion market cap. you can tell people all day long what you are worth but the public at 9:30 a.m. every money -- morning will tell you what your company is worth. that's what we learn for every public company. on: i have a few questions uber and lyft. jens nordvig.and officer the chief interview in the 8:00 hour. this is bloomberg. ♪

tom: we talk trade war and renminbi in a bit. right now, we look at ipo. let's look at a chart i constructed this morning. pink is for lyft.

$98 a share, then down we go. then we have uber at $45 a share. i, we really don't care. we will take either one. what a set of arrogant transactions. let me cut to the chase. how did this happen? you have two really impressive companies that have built huge businesses in a relative short time. they disrupted the market and a great way. clearly a ceo with great fanfare and has done some unbelievable things to transform the company. deep down, these are businesses that have long pass to profitability. some people question their business model. i don't. how soon can they turn a profit? if we get into a car to go to the airport, in a couple of

years ago, it was a $60 taxi and today is a $40 uber. is it me, you, the driver? wage in seattle and san francisco. , they can getne dollars an now away with it and subsidize the drivers to where they need to be. what is the difference between that and profitability? investors are telling you what that is worth in the public market. in the private market, they were willing to pay upwards of -- much more of a premium. we haven't even talked about where they traded privately. francine: mark, is there a secret sauce for uber or lyft to come out and prove that their valuation was correct? is there something they can do

to be the next amazon? mark: the most important thing they can do right now is run their businesses. i don't think that they will look at their stock rices. they have much more to worry about on the day-to-day business model. and i think that they are hyper focused on that, the people that work with him have done a great job. stockk looking at the price and trying to make a quick recovery is not going to happen. amazon also had this problem. a $500went public at million market cap and raise $50 million. that is almost impossible to believe that is true. these companies were upwards of tens of billions of dollars and got private money. francine: let me cut you off. is there a place in the world that has not been disrupted yet that you look for the next amazon or the next facebook? asking for the next

trillion dollar company, if i largest iss one, the home. how to unlock the embedded profit in your home? my mom has been in her house for 40 years. if she wanted to pay for something with that. lots of people have embedded profit in their home and that will be a thing for the next 20 years. francine: thank you so much, mark lehmann there. coming up, we speak with representative roger marshall of kansas. we will talk tariffs. this is bloomberg. ♪

asi do think of the tariffs

a negative supply shock. it has various effects of the economy. it probably won't to boost inflation over the next year. it affects demand and growth in the short run, and it also has negative effects on the value --nge in our economic system how our economic system works. we do skew evaluating what we are learning from the data and the broader set of developments we are seeing. i don't think there is any threshold or a specific point. it is assessing where we are with inflation, do we need to get it back to 2%? or keeping it there at a sustained basis, keeping the economic expansion as long as possible. the studies have been very detailed looking at this. we could probably get .2% on the inflation rate based on what has already been announced. and there were further escalation -- was further escalation on tariffs, it could change.

could startumer seeing it in terms of the prices they pay at the store. it is definitely a significant effect. that was our exclusive conversation with the new york fed president john williams with kathleen hays. they talked about inflation and tariffs. it let's continue the conversation on tariffs. still with us is jens. let me ask about the market reactions and the functions we have seen so far. the markets need to be taking it in stride. why are they less panicky today? in some respects, the stark reaction was just that it was panicky and overdone. this is like an earnings call that we had less than a week to price in. that is why you saw the mad rush to vol.

volatility is more in line with implied. what i find most interesting about what has happened recently in vol is the backend of the vix curve. eight months or nine mustang the road, they have picked up substantially. that suggests that traders are now pricing this as less of an event for trade and more of an endearing pain in the but. -- the butt. tom: i follow yen, and sometimes it is in lockstep with the markets and other times it is not. how does dollar-yen move? over thethis episode last week or two, we see a strong correlation with the u.s. equity markets. it has been a good risk barometer. i think it really started to happen again this year after q4. we had a big drop in the u.s. equity market.

that has to do with the flows coming out of japan. investorsave japanese , it can put a damper of that risk off affect. probably because the japanese investors are not that aggressive at the moment. tom: what are you going to look howon the bloomberg? luke: much is the market trading this like a macro? his point. the yen has been reacting but if you look at the classic macro vol look, it hasn't been barking that much. by thehave it widening most this year, the most in over a year. i will be looking to see how much is a growth worry and how much is a financial market equity worry. jens, thank you.

marshall isll, dr. a congressman of the first congressional district of kansaskansas. it is the most interesting trump territory and farmer agricultural territory as well. roger marshall, what do you need from the president after the last 48 hours? approved.need usmca that would help my farmers a lot and give us certainty. we probably need to move on to japan. china does not want to negotiate with us and we are stuck in the middle of this river. if china doesn't want to deal with us, let's move on. soybeans, who knows what the product is. but do you see anyone advising the president in the white house towards free trade, the less tariffs trade that kansas needs? roger: i don't hear that voice right now.

i hear the president doubling down on where he's at. the farmers are still supporting. bankruptciesup and are up but we have hope in the president that we can be taken to victory. say your farmers still have faith in donald trump. but as the war in china escalates, will they still be behind the president? >> i have never heard one farmer badmouth the president. but we need some relief and help. i don't see farmers flinching. they are the truest patriots i've ever seen. someone will lose $200,000 that i talked to this year. francine: are they bad mouthing the tariffs? roger: they are bad nothing the price of wheat and corn. but we all know how bad china has treated us in the past.

we are glad the president has taken on china. but we need relief from usmca. kansas stateout of . it you had a horrific primary process where kansas went from arch idiot conservative to the more measured path of dr. marshall. how do they get to a democrat in kansas? only democratse in the first congressional district, but how can your farmers support a president from fifth avenue in new york city? how does that happen? >> he has really connected with their heart and soul. i have never seen anything like this from day one. even my wife -- not mean to interrupt but you just stated that suicides and bankruptcies are up?

from fifth gentleman avenue in new york city connected to someone in el dorado, kansas? roger: i don't know if it is an emotional or spiritual level. i can't explain it very well. but they support his policies. i feel like we are in the middle of a very fast river and donald trump is driving the boat. we have faith in him and we have hope and president trump that he can deliver for us. tom: tell us about the meatpacking district, the immigrants coming in. de-peopling.sive district? be a new kansas will be solid republican. we have 50,000 open jobs in kansas right now. a lot of those are agriculture related.

of price of wheat, the cost health care, and a lack of labor is where the jobs are. i don't see kansas changing much. you are pretty much spot on. francine: can i go back to the relationship that the farmers have with the president? do they believe his tactics are right? do they believe the president will get there in the end and this is just a negotiating tactic? that at the end of the day, the farmers will have a better deal with china. roger: today's farmers are not the same as my grandfathers. are well-educated people, following the news and the markets. end have faith in the product. three years ago, we would not have started down this path. at we are in the middle of very fast river and we have faith and hope in the president. bargaining is gambling in many cents and it is darkesre the sun comes up.

i think the sun is about to come up here. thecine: river transforms into a waterfall? roger: we will have to paddle faster, i guess. we are making do. we will do what we do. we have the pioneers are it. -- pioneer spirit. tom: i say this with great respect to the farmers in kansas. inflation-adjusted soybeans. we are about ready to break down to historic weakness in soybean prices adjusted for inflation. when do you and the farm constituency in congress march down to 1600 pennsylvania avenue and start lecturing your president? roger: we should start lecturing congress. would give us more relief than the chinese deal. more to canada and

mexico, so there are things we can do besides china. tom: this has been wonderful. thanks for having me. much more coming up this morning, including on energy. u.s. secretary of energy, listen to that with david westin in the 12:00 hour. futures up 20 points. this is bloomberg. ♪

>> the economy is in a very good place. we have seen solid economic growth. inflation a little bit below target. but i think it's been a pretty good place. we start in a good place and i think we have monetary policy in a good place. when we need to do is look ahead to whatever happens. it is really just to keep our focus on achieving our goals, maximum employment and price ability. and adjusting our policy stance for whatever happens so that we can best achieve those goals. when i look at first quarter data, you are right. there are mixed messages there. since first seen

quarter gdp in terms of retail sales and consumer spending, , it isconomic indicators that the economy has rebounded pretty strongly. tom: john williams of the new york fed. this is the conversation of the day for global wall street on renminbi. this is a pro chart with moving averages and regressions. all you need to know is the fear of depreciation, not evaluation. -- not devaluation. how are we getting weaker renminbi? how is this offside two standard deviations. >> we have something that looks like a full-blown trade war. tom: is the market moving this were the government in beijing? >> the market is moving currency and people are concerned about what will happen to chinese exports.

hascapital flows that china in need. tom: that is the big change here, the capital flow metric. and the piggy bank of reserves. renminbi dp she asian. -- depreciation. have this is the year we in a cap deficit in china so they need capital inflows and investors to buy at these. they also need foreign investors to buy their bonds. excited that chinese bonds are getting into global indices. aprile last data point in shows foreign investors not buying the bonds yet. so there is some kind of vulnerability in the bounce in payments. , and the models show this, in the last three days,

they will spend some of those currencies and the reserves they had to support the currency. that is why we have moved more than the chart is showing. francine: what is the biggest concern for the chinese economy right now? it has done a pretty good job. what do you worry about now? capital outflows? do they need to put capital ?ontrols on their -- on there jens: china has had capital controls since the end of 2016. so the currencies through 2017 and 2018, in a way, it's already happened. even last year when we started to approach seven for the second time, i guess. they added to the capital controls. they have done a lot of that already. they don't have much up their sleeve. we had a low one last night.

i think in the short-term, they will spend more because they will keep this negotiation going for the next couple of weeks. francine: what kind of consumer does china need right now? just by seeing the headline of trade war with the u.s., does the chinese consumer stop spending? we have seen significant weakness in terms of consumer sentiment. car sales have been week over the last six months or so. there are real concerns there. that is something they have to deal with in addition to the trade tensions. there is underlying weakness and that is the reason why that have been driven by tactical considerations. book,ith your wonderful you are having a cup of coffee today with the president and lawrence kudlow is agreeing with

yen's -- jens nordvig. what is it given your study of international trade history? jens: you have to be careful what you wish for in the sense that you are pushing these protectionist measures. at the same time, that is driving the dollar stronger, right? is it really benefiting the export sector in the united states? that is really the dilemma. tom: well said. nordvig joining us today. guest is at a conference in germany to talk about activist investors. we will talk about that next. this is bloomberg. ♪

>> china's data and growth is becoming better in part because of the policy actions authorities have taken there. europe is still a mixed picture. on the global growth side, i think there are some downside risk there. financials have improved quite a bit over the last few months. i would say overall that the balance of risk is roughly where it has been. francine: that was our exclusive sit down with the new york fed president john williams with bloombergs kathleen hays. as the u.s. china trade rift deepens, let's also take a look at the impact on cross-border investment flows and dealmaking. from globals hernan head of m&a at jpmorgan. we speak to him on the phone from the inaugural shareholder activism event in frankfurt. to catch up, especially on a week like today where we have ipos that came and

some of them flopped. what is the global sentiment for m&a and ipos right now? >> good morning. like to talk -- nice to talk to you both. i think that everyone has been focusing that q1 this year was weaker. but also what i tracked down is the fact that 2018 was a great year. it was a year that was decelerating. the second half of the year was much weaker than the first half of the year. one of the great points was that q1 was up on q4 last year. driven by ally number of large, transforming deals. i don't think that transforming cross-border deals was easy.

but a large transforming event has been driving a good q1. very positive that it was up on q4. francine: how have the role of activists changed in germany? >> i am here in frankfurt today. i think this is the new frontier of activism. i think that we are with a bunch of tax clients. and really trying to share with them our experiences in the u.s. and other markets. avoiding the negative vortex of activism. i think of activism almost as a hostile takeover of governance. there are no rules of engagement. there is no closure. so we want to work with clients to identify what actions need to be taken consistent with any investor concerns, and for clients to execute a plan on their terms. vortex buta delicate

i will ask the delegate question anyway. your perspective on the ability of eu banking to merge? >> i do not understand the question. the your perspective on ability of european banks to combine and merge. >> i think a lot has been written about that. i think it is a three-dimensional game that involves operating issues, regulatory issues, social issues. discussionsrecent have indicated it is a puzzle that is not easy to solve. tom: i like that analogy. francine, we are looking at a tape that is remarkably better today. i will go back to jens.

we really see that with the weaker yen. francine: i am seeing a lot of the havens relaxing a bit. we need to look at market psychology and ask ourselves if they see a deal. expected. than tom: the president tweeting on china. that dialogue will continue in washington. kevin cirilli looking at trade and the knock on effect. -- effects. dow futures up 147. please stay with us. ♪

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president trump: we are in a very good position and i think it's only going to get better. >> trump columns the market. -- calms the market. market's take a break from a brutal selloff. and warning of the tariff affects on inflation. the market ramps up the chance of a fed cut this year. and does china have pocket aces? both countries are betting on the river. or will they full fast? >> welcome to bloomberg daybreak. i'm david westin here with alix steel. the president saying it is good that we didn't do a deal. any deal would not be as good as we would have now because we are getting billions in tariffs. he says he is happy where he is. alix: he is going all in on the river. david: i love the whole thing. alix: