francine: disappointing data, china's economy loses steam in april for the latest tariff talks dark the outlook. to echo whathe fed the pboc is doing, claiming the u.s. would win if they did. the german economy returns to growth despite a slump in manufacturing. but italy says it may breach oosts to boost of jobs -- b jobs. ♪ welcome to "bloomberg: surveillance." i am francine lacqua in london.

good morning if you are watching from europe and the u.s., good afternoon if you are watching from asia. one of the interviews from the day, we will be speaking to the ia, cutting growth forecasts after a tough quarter. we are looking at brent and european stocks across the board. they are seeing a little bit of pressure, markets trying to figure out what happens in the trade war next. and the rebound we saw yesterday did just not have the impetus to continue. we are also looking at the renminbi. exclusivelye speak with the ai iv president -- aiib president. but first, let's get straight to first word news in new york city. >> weakness is showing up in the u.s. economy. that is according to jeffrey gundlach.

indicatorsasket of have fallen to its lowest level since the financial crisis. this is despite some lofty predictions of growth. he says the chance of a recession in the next two years is extremely high. the next 12 months is quote 50-50. president trump has warned he would send more than 120,000 men for a war with iran, though he denies it. the new york times has published a claim the president is blasting as fake news. tensions have been rising after the trump administration revoked waivers that allowed iran to continue selling crude. theresa may has set a date for her final brexit showdown, promising to bring the deal to parliament at the start of june. talks with the labour party have not yielded an agreement, but she is hoping members of parliament will back her to bring an end to the process.

the brexit secretary says it is time to make a decision. state legislature has set up a direct challenge to the u.s. supreme court case that recognizes a woman's right to an abortion. lawmakers have approved a measure that would outlaw allstate abortion, even in cases of rape or incest. the supreme court will use challenges to the law as an opportunity to overturn roe v. wade. , aecord in the art world sundrenched landscape by claude monet has garnered $110 million at an auction. 1890 and has ain presale estimate of half the final some. -- final sum. by the way, the identity of the winning bidder is unknown. global news, 24 hours a day on air and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg.

francine: thanks so much. it is and over -- eight roller coaster week for oil -- a roller coaster week for oil after a drone attack on to sign stations shut down its main link. meanwhile, the international energy agency has reviewed forecasts. joining us now from paris, we are delighted to welcome neil , head of oil at the international energy agency. always great to catch up, you make us smarter. it has been some major oil supply curtailment. yet prices have remained pretty stable. how do you explain that? neil: that is the main point. in the run-up to the interview, you cited the brent price being

below $71 a barrel. we have become used to the ongoing supply worries. venezuela and the iranian sanctions issue. it looks like markets will take that in its stride because of expected higher supplies. before yesterday's attacks, the market was feeling reasonably confident that supply would be maintained. of course, an element of doubt has entered into things because of yesterday. but i think the market has taken in the view that the attacks have not caused any sustained damage. they have not interrupted industry operations and so the market remains focused on the underlying fundamentals. francine: do you think that the oil price already factors in a possible demand shock? neil: i would be careful about the word demand shock.

yes, there are headwinds in the news headlines. you are referring to the trade talks and there are some other concerns about other economies. today, we have downgraded oil demand forecasts. it is the first downgraded we have made for several months. the downgrade is fairly modest in reaction to some slightly weaker-than-expected data. in terms of aking demand shock and we do not see that on the horizon. we remained relatively confident that demand growth for oil will remain relatively robust. francine: you were just talking about the markets taking these attacks in stride in the middle east, assuming nothing will get worse. what is your assessment? how will that play out? we can't know how the

situation will develop. there is plenty at play here and it is beyond my capabilities. is view we take at the iea that security is of paramount importance to the global economy. and as always, the main players in the markets will do everything they can to ensure stability. what happens in terms of any real major cutbacks in supply due to attacks will have to wait and see. -- i think we will we are a long way away from that. francine: how are you looking at oil demand in europe? i have a some weakness in diesel, how do you -- i know you youweakness in diesel, have explain that? neil: there was some weakness from the so-called "diesel-gate"

scandal. what we have seen is very poor performance of diesel vehicles in europe. that is one of the factors driving down demand. that is, of course, not such a bad thing. later this year, we have the introduction of the new international maritime organization rules on shipping fuels. that is going to have a major impact on the whole product market. some respects, lower demand for some of the on land diesel -- on-land diesel use might not be such a bad thing. francine: what the think opec and its allies need to do right now to keep the oil market balanced? interesting and dynamic situation.

opec's next meeting is still six weeks away, which in today's market, is a very long time. what is noteworthy is that the opec countries, supported by russia and others, are actually producing less than they are entitled to do under the supply agreement they made last year. so they do have some scope, if they choose to exercise it. they can do that without actually breaching the supply agreement. we will have to wait, six weeks is quite a long time. we will have to see what decision the ministers take at the end of june. francine: thanks so much, neil atkinson, head of oil industry and markets at the international energy agency. up next, an exclusive interview with the president of the aiib. that interview coming up next, this is bloomberg. ♪

francine: economics, finance, politics, this is "bloomberg: surveillance." let's get straight to the business flash in new york city. >> ing and unicredit are lining up advisors explore a takeover of commerzbank. this is after talks with deutsche bank broke down last month. the two lenders have had on and off talks with the german bank, but bloomberg has learned no formal negotiations are ongoing. ing and unicredit have german business, but a tie up with random broader access -- would bring them broader access. walmart says that preparations

for the ipo could take years. they say they are not rushing into anything. this comes after u.k. antitrust regulators lots a planned merger with sainsbury to create britain's largest supermarket. payingtagon could end up a contractor more than a 90,000% premium. they have a contract to pay over , but itr a driver should cost just $46. the inspector general is now weighing legislation that could expand transparency over the cost of spare parts. that is your business flash, francine. francine: thanks. called ontrump has the federal reserve to match china's efforts of offsetting the impact of the trade. besays the economy will pumping money into its system and the pboc will also reduce interest rates. joining us now is the president a development bank

based in beijing that supports the development of infrastructure and has just priced a $2.5 billion bond last week. thank you for coming on and giving us a little bit of your time. first of all, congratulations on that bond issuance. do you worry about market volatility increasing because of the trade war? we are thrilled to see that the first bond is a great success. this represents the international capital markets confidence in the asian infrastructure investment bank, which is devoted to promoting broad-based socioeconomic development through infrastructure and other sectors. of course, the trade issues between china and the united states are worrisome. but i do understand there are twists and turns on the road to reach a final agreement.

i certainly hope the trade dispute will be resolved, because it is in the best interest of both countries to have a very good resolution. as far as the banks of business is concerned, we believe our investment is for the long-term benefit of all countries. and indeed, a very strong investment in infrastructure can help the borrowing countries improve their resilience to deal with external shocks. know, the bank is very, very firm in maintaining high standards, transparency, a high level of governance, protecting the environment, and promoting social acceptance of high quality projects. does the trade war between the u.s. and china actually impact your work? --s it impact the aii the the aiib?

jin: we do not feel any impact so far because the investment programs prepared by declining -- are prepared for by the client countries. this kind of investment is not to be adversely affected by short-term turmoil in the capital market. we try our very best to work with the client countries. we think that we will be doing fine. francine: where do you plan to lend more in the coming months? are there specific regions, countries, projects? jin: we are working very closely with many clients and we are also working with those countries that have yet to

develop the lending programs for our bank to consider. everything is moving smoothly and we are doing our very best to recruit professionals from across the world with strong staffing in the investment operations department, with strong staffing in other departments. meet thee able to needs of these client countries. as you know, we are moving forward and developing very solidly. qualityttention to the of our assets. regardless of the current macroeconomic challenges him a we believe we can work closely to do a good job. francine: could you elaborate on the banks local currency bond issuance planned for this year? could you start with the renminbi?

i know you mentioned india and some southeast asian countries. but where do you stand on bond issuance? jin: it is certainly important for us to tap the international capital market. we will continue to do that. you took a and requests from the borrowers. -- we took requests from the borrowers. we believe we should issue currency bonds to meet their needs. as you know, quite a few sponsors in these countries may have difficulty hedging against currency risks. if we provide local currency financing and issue local bonds, that would help them a lot. so we are working on this for quite some time. ,nd before the end of this year we may be able to issue the

first local currency bond. if not, by 2020, we will be able to do that. n, is there more scope for cooperation with the world bank? how has the relationship been with the new president? jin: during a spring meeting in washington, i had a good meeting with the newly appointed president of the world bank. we had a very good exchange of ideas. i gave them background information about the cooperation between the world bank and aiib. our risk is satisfied by the excellent relationship. i have told him we are dedicated to work with the world bank and standards. with high over the last three years, we have worked with the world bank on financing a number of projects.

this is very good. and i think it is a very good beginning. ,rancine: one final question industrial output, retail sales investment also more than expected in china. do you worry about the strength of the chinese economy? , the chinese government is fully aware of the challenges, particularly against the current geopolitical situation. sure that the chinese government could handle all of the tough challenges. they are very experienced weathering the storm's of 1997 -- the storms of the financial crisis. as you look at the policy announcements of the government of a i think they are doing a deal with the challenges.

also, as president xi jinping announced in the recent belt and road summit, china will continue to push for reforms. the reforms would be important for china to be resilient and to maintain its growth. so i am confident. you can see the chinese government is undertaking a series of reforms, opening up the financial market, and i think they will be doing well. francine: thank you very much, jin liqun, president of aiib. up next, we focus back on the trade war as trump asks for the fed to get involved. this is bloomberg. ♪

francine: let's talk more about your markets and trade. joining us from zurich is the chief investment officer and head of what management and the global head of research at credit suisse -- wealth management, and the global head of research at credit suisse. what do you think is priced in when it comes to the trade war in the markets? >> i think that, at the moment, the markets have factored in heightened uncertainty. this is very visible in vix, for example. and how risk asset equities have been behaving in the last week. at the same time, the markets

are still pricing in some sense that this is a temporary phase, not the lead to an outright trade war. for example, if you look at typical safe haven assets like the swiss franc were japanese yen, even gold -- or japanese yen, even gold, we do not have prices reflective of such a scenario. this opens opportunities, but also risk. francine: thank you so much. nanette from credit suisse stays with us. we will ask for more about the opportunities out there in the market. -- markets. up next, we talk travel and holidays. ♪

tom: -- francine: disappointing

data in china's economy before president trump's latest terrorist talks dark in the latest -- terrace -- tariff talks dark in the outlook -- darken the outlook. returns toeconomy growth despite a slump in manufacturing. morning, everyone. a good afternoon if you are watching from asia. this is "bloomberg surveillance." let's check what is moving your markets. let's check the downside today, down nearly 3%. this is the first quarter net income falling 11%. the resiliency in trade revenue not helping stocks today. they plan to give a fresh set of financial targets. upside.the it was a clean beat across the top line.

performance for the lender. erragamo, upat f nearly 10%. the biggest surge we have seen in seven years. itot of analysts are saying may be a turning point for the italian shoemaker. they are also pointing to positive performance in china which is a luxury market. tom: let's get straight to the bloomberg first word news with viviana hurtado. viviana: president donald trump is calling on the u.s. federal reserve to match china's efforts to offset the impact of the trade war. the world's second-largest economy will be pumping money into its system. he says the pboc will probably reduce interest rates. he knows if the fed were to do the same, it would be "game over." as trade conflicts move from china to europe, traditional

allies of america are showing signs of strain. nato says these issues won't split the country's apart. issues on climate change, nato has been able to unite to keep each other safe and protect each other. is actually doing more now to protect each other than it has done for many decades. cutting interest rates could lead to asset price bubbles according to kansas city fed president esther george. she once the move could lead to an economic downturn. she praises the central bank's stance.stands -- and a record in the art world. a piece has fetched $110 million at a sotheby's auction. it sets a record price for the impressionist painter. haystacks was painted in 1890.

it had a chris sale estimate of half the final sum, $55 million. the identity of the winning bidder is not immediately clear. 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. francine? francine: double line capitals sees a gundlach says he -- thespite before test forecast of growth. he says the economy has been expanding largely because of debt as u.s. raises spending. he says the bond market is extremely exposed. still with us is our guest from credit suisse. we were talking about the biggest concerns. your biggest concerns in the market that we can see. what is your advice to clients

that want to position themselves with risk-taking but not too much? had you hedge? -- how do you hedge? way to be focused is to select regions very wisely. the u.s. tends to be defensive. and as a style, u.s. quality for is one of thent ways we advise clients to take exposure and sees the opportunity to enter markets. and the second way in our view is to participate in a long-term equities,esting in they have an absolute long-term implication on many sectors that are very dependent on the business cycles. we do a thematic approach to equity investments at this point

with a more long-term outlook. francine: this is the market slide question. we have a markets log and we're just want to check it out if you are a bloomberg user. our assets mispricing china's economic resilience to the trade war? how much do you worry about china? terms of the chinese growth outlook, china has been more toward a domestic lead and consumer letter economy. economy.er-led the volatility ahead is likely to result in a negotiated deal there. but it also says to us that with the help of the measures already in place since last year, there has been resilience in the global outlook for the chinese economy. what we think is going to give way and really adjust to the

trade scenarios as far as china is concerned is the currency. example, a risk case not resulting in a deal but rather a protracted trade dispute, we anticipate renminbi to trend towards the weaker side. don't know how you actually look at opportunities. is it region by region? is there anything that makes you uneasy? or is it just weaker than the others? i think a number of investors are looking at regions. it we have a clear focus with ae u.s., but also sectors are way for classic equity investors to take opportunities. this is a time when volatility is high, whether it is a large

at sector levels and company levels. it is a good stock environment. i mentioned before, i think the themes are very fresh way to also get into markets at this point. askcine: what do clients the most? is it if there will be a recession in 12 months? think as long as this trade escalation is not closurent but comes to in the next six to eight weeks, the impact on the global economy is going to be relatively limited. one region that is the most exposed to this whole trade escalation is probably going to

be europe. these are economies that are very export oriented. chinaise, the u.s. and have been focusing on the domestic economy. isthe u.s., 70% of growth contributed by the private customer. the recession risk still remains low for as long as we don't have a protracted trade dispute. francine: could you see a situation where you have significant slowdown but the consumer is quite strong? yes.ine: i think this is what has shown and all the economic data so far -- in all the economic data so far. the surveys have always been resilience. and even in europe, this has been the case. it is more the manufacturing and industrial side that has been suffering from the trade ups and downs here with the business cycle. tom: thank you so much from

credit suisse. it stay with us. bitcoino come including the longest,000, winning streak since 2013. and we will bring you the latest on europe's biggest economy as it returns to growth. this is bloomberg. ♪

francine: this is bloomberg surveillance. i'm francine lacqua in london. the markets rattled by the latest trade war. cryptocurrencies are staging a resurgence. bitcoin has jumped past 8000 dollars, clocking the longest winning streak since 2013. -- analysts have

credited everything from haven seeking to the attorney general. here is dani burger to explain. dani: that is one theory picking up steam. sold off or been jittery, bitcoin has been more or less a haven asset because it is uncorrelated with what we have seen traditionally. we have seen gold and big one move in the past few days. that analysts have thrown cold water on this -- but analysts have thrown cold water on this. the price and volume did start to happen well below this most recent traits that. -- trade spat. what could've caused this rise? the new york attorney general is investigating and it could have driven investors into bitcoin. i have a little bit of issue getting the next chart up but i

will show you that bitcoin gapped up. prices surged over the weekend. couldn't catch up with the price of bitcoin. and because a lot of shorts were on bitcoin, that means there could've been some short covering. had to cover their shorts. so we have fundamentals and you also have the short cover occurring. that is helping the price of bitcoin. lotcine: dani burger with a more news on bitcoin throughout the day. let's get straight to the bloomberg business flash with viviana hurtado. ing and unicredit are reportedly lining up advisors to explore a takeover of commerzbank after talks with deutsche bank broke down last month. the two lenders have had on and off again talks with the german bank.

bloomberg learning that no formal negotiations are ongoing. already haveedit german business, but this would bring them more to europe's economy. disney taking full control of hulu. it struck a deal with comcast to seize the streaming platforms value, soaring to more than $27 billion. but that would only be 1/5 of netflix current market cap. quarter,e in the first outpacing rivals. revenue rising 2% to 472 million euros. this bucks the trend of lower trading results at many peers. only bnp paribas turned and a a better turned in fixed income performance. francine: is the new fight between italy and eu in the

making? to prime minister is willing breach budget limits to boost jobs. his remarks have triggered market turmoil it's -- turbulence. meanwhile, good news for germany as the economy is bouncing back. it grew 0.4% in line with estimates. that is despite a manufacturing slump that continues to plague the nation. still with us is our guest from credit suisse. do you worry that the european central banks don't have the tools to deal with the next downturn? >> there are limitations on the number of central banks that are running with negative interest rate. the international bank is also to be mentioned as well. at the same time, the policy mix is not one made by monetary policy.

speaking about germany, there is a bit of firing power on the fiscal policy side. you see valuee do in europe? are they cheap compared to some of their asian counterparts? or is there still a lot of unknown? arcus were preparing between a possible fight between italy and brussels. >> we have been preparing for equity markets like spanish equities. they have been lagging with broader european equity prospects in the first quarter. and when we look at the economic indicators, these have been better in spain, for example, then in the eurozone overall. vathanin the eurozone -- in the eurozone overall. we caution equities here versus other regions.

when it comes to fixed income, i feel like this is an environment where we should still be anticipating low benchmark corporateeurope and credit, for example, will be a source of yield pickup. francine: overall, what do you make of some of the german exporters? there was so much talk about the fact that president trump would sign a deal with china and it would zero in on the deficit in germany and go after german carmakers. as long as the u.s.-china trade continues, does it make europe more immune? thecine: i think that eurozone generally and germany more specifically is really exposed to the global cycle. therefore the china-u.s. dispute would impact germany via the broader economic outlook.

and there's the added twist that even if we have a resolution at the u.s.-china level, president trump might actually focus on and the european and german auto sector specifically in terms of tariffs. there is uncertainty around this particular area. francine: thank you so much. chief investment officer, international wealth management, and head of economics and research at credit suisse. it is market growth by 25% a year. e-commerce is taking off in the middle east and north africa. more on that next. this is bloomberg. ♪

economics, finance, and politics. this is bloomberg surveillance. let's get to bloomberg first word news in new york city. viviana: weakness in the u.s. .conomy is shoving off he says a basket of different indicators have fallen to the lowest level since the global financial crisis.

this is despite lofty predictions of growth. he says the chance of a recession in the next few years is extremely high. in the next 12 months, he says it is 50-50. willdent trump says he send more to be reported 120,000 men for a possible war with iran even though he denies it. is blasting it as fake news. tensions in the gulf have been rising after the trump administration provoked waivers that allowed iran to continue selling crude to some customers. set a date may has for her final brexit showdown. she is promising to bring her deal back to parliament at the start of june. talks with the opposition labor party have not yielded an agreement but she is hoping members of parliament will back her in order to bring an end to the process. steve barkley says it is time to make it a decision. the state of element.

the legislature has set up a direct challenge to the u.s. supreme court case that recognizes a woman's right to an abortion. a measureapproving that would outlaw almost all abortions in the state, even in cases of rape or in test. or incest.-- 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. as more consumers shop online, e-commerce is finally becoming a reality in the middle east and north africa. an annual growth rate of nearly 25% means the market reaches $8.3 billion in 2017. that is according to a study that says the shift is creating new opportunities. joining us is cochair of fashion

trust, a nonprofit initiative launched to provide funding to the upcoming arab fashion designers to be able to benefit from the e-commerce boom. >> thank you for having me. you saw an opportunity because he said the middle east has access to so much luxury. but they don't grow talent from within. how will that change? is ashion trust arabia mission that we launched in 2019 to help young designers in the region to grow internationally. there is a lot of talent in the arab world from all the regions. is growing. we have a lot of designers applying to the fashion trust. we have 275 applications of young designers. francine: when you are a young

designer, when do you need the gekko is it -- the most support? think two or three years in the business is when you need the most support. it is the process where you want internationally and to the e-commerce. francine: how do you get your brand? is it possible to have a famous brand and not make any money out of it? how do you help them out? is it designing differently? partnered so that they will have mentors. , on the retail strategy, on the merchandising strategy, on the business strategy.

that is what we are trying to do. not just to give them financial support, but to give them mentors, which is a key factor for designers. thank you so much and congratulations on the initiative. cochair of fashion trust arabia. bloomberg surveillance continues in the next hour. tom keene joins me from new york. in 19 minutes, we will be speaking to one of the presidential candidates from the democratic side. we will talk about that. we will talk about china. president trump putting pressure on the fed. this is bloomberg. ♪

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there is human ingenuity. ♪ ♪ every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. take your business beyond. francine: disappointing data.

it china's economy moves before president trump's latest terror talks. -- terrace talks -- latest tariff talks. and focus on europe, the german economy returns to growth. italy says they will use growth to boost jobs. morning, everyone and good afternoon if you are watching from asia. tom and francine from london and new york. we look at brexit and the talks or the non-talks. chinese economy with worse than expected data, and we are trying to figure out what that economy will look like if the pboc would do a policy mistake. fromstill waiting to hear the leadership in beijing for what they will actually do on tariffs. german interest rates are absolutely extraordinary.

truly touching historic levels. get straight to the bloomberg first word news in new york city. here is viviana hurtado. china's economy losing momentum before donald trump imposes the news terror -- the new tariffs. it all slowed more than economists forecast. the chinese government will need to boost stimulus to cushion the blow. sign of escalating tensions between the u.s. and iran. the state department ordering nonessential and nonemergency staff to leave the country immediately. last week, washington said it to tech to new threats from iran and proxies targeting american interests in the region. agencyernational energy cut its forecast for global oil demand. consumptiong fuel

in china, japan, and brazil. warns that supplies may tighten because of u.s. sanctions on iran. the data set for theresa may's final showdown over brexit. the prime minister promises to bring her deal back to parliament at the start of june. may has not been able to reach a deal with the opposition labor party yet, but she is hoping tomakers will support her end the fighting hearing both parties apart. apart.ing both parties 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. tom: equities, bonds, currencies, commodities. a lot of fireworks after the bounce yesterday. i will be watching the euro carefully over the next couple of days after what we saw out of

germany. down.x showing the big and the yield of structure, three yields in a row that are extraordin should be read on the screen, the green is not correct. 2.18% lower yield in the united states. the headline is the german two-year not near record lows but getting there. and the germany 10 year yield, that is an extraordinary statistic nearing record lows back to reunification. i was digging around to try to explain the kind of markets we are seeing today and one market participant said the rebound and global shares are struggling to stay as it was. a are struggling to keep momentum. treasuries are up with german bonds. i'm looking at china.

they reported industrial output and retail sales slowing last month. -- thisrscores the underscores the fragility of this economy. these markets are trading sideways, but tilting downwards. tom: it is a chart on reunification on the german ten-year, just long-term disinflation. bringing east and west germany together. americancial crisis in and we touched a negative yield with the recent rollover. you have to wonder what mario draghi thinks of this germany 10 year. you're looking at the european point because we have at 0.4%.t quarter gdp at 0.3%.ent increasing

we are reversing roles today. weakness showing up in the u.s. economy despite predictions of growth. , wehanks to hillary clark look at the new york fed to generate a probability of recession 12 months from now. the odds are rising. we will have plenty more on the possible u.s. recession. we will look at the german ten-year. beijing will boost stimulus. looking at retail sales, investment came in lower than expected, underscoring fragility ahead of the intensified face-off with the u.s. over trade. joining us from hong kong is the bloomberg chief asia economics correspondent. thank you for joining us. figures, butpected these are figures before the trade war intensified.

there is some distortion because the numbers are so strong on the back of stimulus getting off the ground. so economists expect some kind of slow down but it is steeper than anticipated. we see state spending or government six ending -- government spending expanding in the private sector. dragged by carn sales -- auto sales, i should say. that theis evidence broader weakness initially anticipated, this was altering the trade truce and ahead of last week's resumption of the trade war. is that the challenges will only get greater from here. francine: thank you for the great briefing that you helped me with. we heard from the president of china in his first address since

the trade tariff war ratcheted up. he says it is fully for foreign efforts to reshape other nations. does it mean that we will see the status quo for a long time? and it will be difficult to sign a trade deal? that the s no doubt comments from china have been ratcheted up from the hawkish side of things. china is making it clear that they are willing to come to the table. they are not willing to roll over on it. that is why it is so critical to both sides will come together to either agree on a deal in and around the g20 deadline that everybody is talking about, or at least agree on some kind of resumption of the trade truce. that deadline is one that

everybody is watching. me: and what you do best for is you translate chinese culture and chinese thought into all we do yesterday. folks, this is one single sentence from the global times which is the newspaper of the chinese government. leads toof thinking estrangement and conflict between civilizations turning dialogue into an increasingly global concern. can you translate what we will see next from the chinese communist party? will they set up a polarity with the president of the united states? with america? or with western civilization? which is it? it reflects what we have seen as a pretty hawkish turnaround coming out of china in recent weeks. the reference of the trade war headed and and by state media, but it is back in full volume. press acting as attack dogs

for the chinese government. is that if president trump will use his rhetoric, china can retaliate in kind. the court takeaway -- the core takeaway is language. now, we need to get somebody on the desk with francine in london who can fears of theur market and this world that is going on. we now begin a four hour conversation with james bevan and hope that i don't go to cash by the end of the show. what extraordinary times we live in. let me give you an open question to begin today. i mentioned the new rhetoric by beijing. there will be tweets from america. how should viewers synthesize this new heated rhetoric? james: it reflects the underlying tension which is

forwarded by hegemony rather than china turning to trade. we have two leviathans in global political terms buying to be the top dog. neither wants to give an inch. this is usually more important than just tariffs and trade prices. we have seen this before when empires give way to new players on the block. china has made it clear that it intends to catch up. but there will never be easy growth and it will go on for an extended period. tom: we have tencent earnings coming down and we will digest that. importantly,very how do you take a grander geopolitical conversation and folded into your belief of corporate earnings and corporate revenues? james: i look at the capacity for very high quality companies continuing to participate in the long-term secular growth.

i will say that the amazons, unilevers, from my perspective, they look cheap. too much time talking about price and earnings ratios. we should be thinking about price cash flow. we should be talking about the return of capital. companies with expensive price-earnings. to me, it looks to cheap. -- too cheap. francine: we are getting tencent figures. revenue from advertising. facebook, whatsapp, and google do not exist in china. you see tencent and alibaba really seeing their shares decline because of a slow down in the chinese economy. does the trade war hurt some of these companies because people are less likely to be shocked?

james: i think that we will probably downgrade the expectations. not majorly. certainly a bigger impact than the trade war. safe to say that china has had a relatively prolonged slowdown. the trade war is icing on the cake in what has been a difficult last six months. the war on trade, does it actually catapult the world economy onto a significant slowdown yeah code -- slowdown? james: it has been a significant slowdown for a period. the only to wake up and look at the trade data to see the economy is moving a lot slower than the imf data. on published numbers, china has been overstating growth for a considerable

period. francine: we will get back to that. james bevan stays with us. we did get those figures from tencent overall. perhaps better than expected net income beating estimates i about 40%. it looks to be a decade. that is according to our bloomberg opinion columnist. i urge everyone to check out the live blog that is really strong. online gaming revenue seems to be the strongest part. advertising revenue is also pretty good. this is bloomberg. ♪

>> you are watching bloomberg surveillance.

i am viviana hurtado with your business flash. aston martin reported lower first-quarter earnings at a time and sales in the u k mainland europe declined. the british luxury automaker boosted spending on new models. aston martin is trying to replicate ferraris success with higher volume car making. prosecutors conducted nationwide raids in germany related to deutsche bank. they were investigating wealthy individuals with offshore accounts. 11 banks were targeted along with eight people. that is your bloomberg business flash. without question this morning, early morning america on your screen. there is a stunning reality of german interest rates. in 2016. once again, it is steering germany in the continent -- staring germany in the face. need to understand about the chronic nature and

deeper amplitude of negative interest rates? james: i would argue the negative interest rates essentially reflective a really significant deterioration in the demographic profile of germany. very much following in the footsteps for what we have seen from japan. the german be demographic developments that we have to anticipate, we are in for a couple of decades of german economic growth. people say, wait a minute, germany is a powerhouse. people, it is economic activity. you have a real challenge to get global growth growing up -- going up. negative interest rates are pushing up german savings rates. tom: well said on the dynamic over to savings as well. would you explain to me the strategic view of commercial

banking in europe given the interest rate structure? of deutsche bank, he is viscerally heated on how this experiment won't work. do you agree? james: i absolutely agree. let's run through why the system doesn't work. states, thed federal reserve board requires the regional central banks to clear balances of interbank lending and borrowing. deutsche bank has no such arrangement. so you can run significant between or deficits constituent members of the european banking community. we have italy and spain borrowing roughly 450 billion apiece. we have france borrowing 100 million euros. billion euros, sorry. borrowing agermany

trillion euros in the system. two quart money from commercial banks. because of negative interest rates, by the way, gentlemen, there is an ongoing check. this is a nightmare. and looks continue on at the swiss 20 year yield breaking down a new positive yield this morning. we will continue with james .evan of ccla in london an important conversation. morgan stanley chief economist and global head of economics joins us in the 6:00 hour. this is bloomberg. good morning. ♪ ♪

francine: this is bloomberg surveillance. we had earnings from tencent. revenue up 25% year on year. the net income was pretty good. the concern that some analysts have is revenue growth. 16%,nt's revenue growth is something a lot of companies would be happy with. but it is the slowest on record. it is still a 16% increase in the first quarter of 2015. let's get back to james bevan of ccla investment management. full disclosure, ccla owns part of tencent. shares for our clients. this is a long-term growth

story. i don't worry about incentive movement. when you have a fast growing company, the earnings can rise but the percentage can shrink because the scale is moving at such a fast pace. francine: what will tencent become in five or 10 years? james: it will be an immensely powerful company in advertising and i think much more in gaming. gaming is a big growth industry. that opportunity will capitalize and monetizeilbe huge. tom: compare and contrast tencent and amazon. james: if you were to say to me, who is most capable of unseating amazon in the global capacity, it is much more likely to be alibaba. amazon has demonstrated through its web services devotion that it is more than just retailing. as long as amazon can use cash

flow to drive the long-term retail strategy, it will continue to prosper. and amazon should be a long-term portfolios. i think i know the answer but we needed on record for the archives of the bloomberg fault. james bevan on upstart ipo companies saying they want to be the best -- next amazon. there are many companies that want to be the next amazon. unseating the big giant is really difficult to do given the footprint that the big players have. it is a different story than 30 years ago we were looking at these companies as genuine startups. they will invest until there is none left. francine: what do you make of uber? did you buy shares? absolutely not. i did not see uber having a free cash flow model to generate the

returns that investors need. james, thank you so much. we will be joining daybreak america to discuss china trade talks. a.m. in newew is 8 york. markets and at trade issues. it is interesting when you are looking at what is going on in the european markets. let's bring the board up again to look at some of the asset classes you should be watching out for. european stocks facing a little bit of a return. lower bond yields as thomas saying, taking a lot of focus today. european elections are looming. this is bloomberg. ♪

♪ "surveillance," francine lacqua in london, tom keene in new york. .ower yields across the board

stunning yields in germany and the u.s. to year yield with stock market stability -- two year yield what stock market stability -- you wonder where the rate cut numbers will be when my bloomberg finally warms up. here is viviana hurtado. toiana: donald trump plans impose a major restriction on foreign telecom companies. american firms would be banned using gear from overseas companies that pose a security threat. the administration has singled out huawei, saying their equipment could be used for spying. stateo alabama, where the legislature has set up a direct challenge to the u.s. supreme court case that recognizes a woman's right to abortion.

a measure toroved outlaw almost all abortions, even in cases of incessant and rape. incestnsed and rape -- and rape. the former vice chair of the fed died yesterday in washington. she was head of the congressional budget office when she attacked ronald reagan's projections. she was bill clinton's budget chief and was appointed to the fed in 1998. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. tom: thank you so much. i first met alice rivlin and she was a dynamo. she was at the end of her career , except the end of her career

happened four times, maybe five times. she invented cbo. she single-handedly invented fiscal sponsor ability and analysis in the united states, and her leadership as vice chair of the fed, she was extraordinary. francine: i remember the last interview we had with her about 18 months ago. she was a deficit hawk and at the age of 86, she could explain what was going on like no one else. it was compelling for someone with a huge history. tom: i thought of this last night when rachel told me the news. she was sharp as a tack at 86. francine: and could explain things like no one else could. let's get on to brexit. theresa may has set a date for her final brexit showdown, promising to bring her deal to parliament at the start of june.

talks with the opposition have not yielded any agreement but she hopes they will back her to bring an end to the process. david merritt and still with us, james bevan. i don't know what to make of this. this is early june. does she bring back kind of the same deal or a different one with a customs union? we have the european parliamentary elections where they could be decimated. david: at will be a disastrous salt for the conservatives. they are not -- disastrous result for the conservatives. if the results are so bad for her and labour, number 10 is betting that maybe that would be enough to bring mp's around to the fact they have to get a brexit deal. we are not hearing any signs of holdouts against this deal

changing their minds. european does the election change policy in the u.k.? is it seen as a referendum or something else? ared: the remain camp billing it that way, saying this is your chance to express a desire for another referendum to possibly stay. for labour and the conservatives, this issue is toxic. it shows a failure to get anything done, so they are trying to steer it on to other things. nigel farah's looks like he is going to win the biggest share of the votes and his base is what we are seeing plastered across the media and reminding the parties how fall -- how far they have fallen. francine: he has made quite a comeback. is it because his message is simple -- we will deliver a brexit?

does that change the outcome? james: if you looked at the performance of british assets since the referendum, global class companies have done well and domestic companies have focused -- have done much less well. the return on equity of british companies is that of global tears. -- peers. there is a challenge whether next year the u.k. economy will grow faster for the euro zone economy, and that would be sporting for british assets. tom: what do we get from the president's visit? we have manchester tottenham liverpool. can you imagine how we get out in exactly 17 days? david: the president's visit is interesting timing. that week is when mrs. may well

hold the last throw of the dice vote. you will have all the demonstrations presumably against mr. trump's visit and pally withs rather the president. well he stage an event or have a dinner? we cannot rule that out. and a sense of proper planning around this processnigel -- around this process seems to have long evaporated and it will turn into a headache. tom: i think we have 22 democratic candidates in washington. how many people do we have running to be the next pm? david: it is approaching that number, i think, more and more people throwing their hat into the ring. there is a jockeying for

position. she is seen as a lame-duck prime labour ared the saying it is not worth getting a deal done because we will be negotiating with someone else possibly in a matter of weeks. they are all joshing for position and she is less likely to get anything approaching her deal through. francine: does the outcome of brexit change if you have a pro theit prime minister, or is arithmetic of parliament the same and no deal off the table because parliament does not want a no deal brexit? james: it is critical and hard to see a deal getting through, given the opposition at the moment. we believe if mr. johnson were to become p.m., he would call an election to see if there was a mandate to pursue a different strategy. general election time

or second referendum time? are they becoming more realistic? david: i think certainly what james said is right. the numbers for the second referendum, it is very interesting. rob hutton ran the analysis earlier this week and it is becoming increasingly likely that the way out of this could be changing policy on the government side and having another vote. labour and the remain side say, we will vote your deal if they will add a confirmatory vote or second referendum. that will take a long time and there will be huge fights, but it is more likely, and the glimmer of hope for the remain side is that the decision could be reversed. the country and talk to people and they tell me

they will vote even more emphatically for brexit. i do not think the people who want a second referendum do not believe that is the attitude. ,avid: this is mr. farage getting big crowds and saying leave would get a bigger mandate. we do not know. francine: we will have a discussion again tomorrow about this. david merritt and james bevan of ccla management stays with us. , at 10:00 a.m. in new york, 3:00 p.m. in london, we will talk about dollar dynamics and trade. this is bloomberg. ♪

♪ downgrade --first it is the first downgrade we have made for several months and that is modest in reaction to slightly weaker than expected data in q1. at does not demand shock and we do not see that on the horizon. we remained confident that demand grows for oil in 2019 will remain relatively robust. francine: that was the iea head of industry markets, neil atkinson. they cut their oil demand forecast but see a market tightening. editorrg's executive jared wallace joins us. still with us is james bevan. given the possible shocks to the system, the saudi tankers and

things like that, the market has not moved. what is priced in? >> the market definitely has moved. it looks relatively calm. you need to look at year to date thee we are up 30% and second is to look at the time spread, look at the curve. if you look at the difference between the first and second contract, that is blown out. the curve is pricing in deep concern about short supply. francine: the concern now is there is not enough supply or not enough demand? stuart: you have got the trade war bubbling away on this and that is offsetting it. far itor concern is how could escalate in the persian gulf. the attacks you saw on sunday and the attack on the pipeline,

again, that sends a strong signal that is saudi arabia will be the producer that supplies canextra barrels so u.s. pursue its policy against iran and venezuela, you are sending a signal that we can attack the exit points for barrels for this country. francine: let me bring up my terminal because i'm trying to impress stuart wallace. look at wti, brent, and the rig count in the u.s., and you can see that fluctuating depending on the price of oil. if there is less demand because of a trade war, is this a good first indicator of a protracted slowdown? james: i am taking a view against consensus. when oil stocks move up, it is an opportunity to sell. i worry about the demand for hydrocarbons for automobiles and plastics, both of which i

suspect have been in long-term decline. returnedat capital from new production and it is very poor, reflecting the fact that so many oil companies are run by people who are engineers and material scientists rather than financials players. the safer way to play this is through sustainable energy. it is deeply cost competitive, cheaper than hydrocarbons. i see immense opportunities to make an enormous amount of money over the next decade. tom: i want to go broader. this is one of the most fascinating charts, candidate for chart of the year. this is the bloomberg commodity index and it is priced for inflation, the real commodity index valued in today's 2018 index value. come at withc two

mass inflation, a china boom, and we have rolled over as well. what does the trade war due to this series? do we assume we drive to further deflation? stuart: no, and the short-term you have inflation because what you do with a trade war is the same amount of stuff will go to the same people, it is just where it will come from so you are reshaping global trade. that is a wildly inefficient process. people will have to pay premiums because they will need stuff on short notice. you are seeing it with the tariff hikes in china. 40 ships are tearing across the world trying to get to china before the tariffs kick in and if they cannot make that, they will have to reroute and take a discount. short-term prices potentially go up for the buyers that in the long term, we are still on the downward trajectory. tom: mr. wallace gave you a

beautiful vignette into the granularity of his policy dash as we count ships on oceans. what is the commodity that is most linked to china? australia? stuart: in terms of percentage , and the u.s.lia is pretty spectacularly dependent if you look at the agriculture sector. the prices in the u.s. have collapsed to the point where farmers are losing money on every bushel they harvest, and their biggest market has been cut off more or less. where else do they sell to? that is a hard question to answer. dependency depending on the sector, but i think australia is a fair bet. tom: we will have that chart on soybeans in our next our with marty schenker. stuart wallace, bloomberg

executive patriot commodity and energy worker. thank you so much. james bevan will migrate forward with us. coming up later, a most interesting gentleman. he is the governor of puerto rico, always an interesting conversation, in the 3:00 hour. this is bloomberg. yields are lower. ♪

♪ viviana: this is bloomberg "surveillance." we have gotten the first meeting of how much is being bet against uber's stock. reaching 760 $8 million on the third day of about 11representing and a half percent of the float. of lyft isfloat currently shorted, lyft down 30% since its debut. crown strike joining the crowd of u.s. tech companies that want to go public. the company filed for an ipo. raised $200y had

million in a funding round that valued the business at more than $3 billion. president xi jinping says foreign efforts to reshape other nations are foolish, the first time he has spoken in public since donald trump boosted tariffs. he spoke about the dispute with the president of the angel dutch asia infrastructure bank. >> the issues between the united states and china are worrisome, but there are twists and turns and the road to reach final agreement. i hope the trade dispute will be resolved because it is in the interest of both countries to have a good relation. viviana: not as the bloomberg business flash. mostit has been a enjoyable hour with james bevan of ccla. heree got to synthesize in

the three themes of investment and economics -- dividend growth , which is what we are hanging our hats on, the lack of yield so we are forced to find dividend growth, and chairman powell who is trying to manage about three chefs in the kitchen. will we continue to enjoy dividend growth based off fed policy? james: i think we should look at returns and therefore i would be looking at dividends and dividend growth, but also share buybacks. what has become apparent as the return of capital in recent years has been substantially with buybacks, and i would expect that to continue. i believe the fed will commence easing again this year if the economy weakens and the amount that the consensus is gradually beginning to anticipate. there will be a long-term support for equities against that backdrop. tom: what is the financial meter

now? or isese legit buybacks there something going on besides the best interest of shareholders? year sayingnt last this is all jaggery, poker re-, and bad news. i am convinced companies are acting in the best interest of shareholders and that is due to the remuneration of stock, rather than through the post tax reserves. seeing is what we are no significant reduction in the overall shares, at a rerouting of employment expenses -- but a rerouting of employment expenses. francine: i have enjoyed this conversation. you want to push back against the recession. james: it is conventional wisdom to believe it is an indicator of

forward recession. in the current environment, this is misleading because global yields are so low. investors are looking at u.s. treasury yields as hugely attractive and are buying yields to augment returns. i do not think the bond market is pricing recession. francine: should we price in a recession because of the trade concerns? james: i do not anticipate we will have a u.s. recession for at least 24 months. world,look foolish in a but no lead indicators tell me i should expect a u.s. recession anytime soon. francine: is that the question clients ask you the most, what chief executives and money managers are worried about? james: the next bear market will come when we have a recession. we are living through ray correction. -- through a correction. tom: thank you so much.

james: thank you. tom: moving from the news flow of the day to the market realities and looking at the terminal, extraordinary to see where yields are. this swiss 20 year yield has just plunged on a percentage basis just over the last hour, not at a negative yield but i would look for a vector to be negative within two or three hours. coming up, an important conversation linking all of international relations to the equity markets, christopher verrone joining us. this is bloomberg. ♪

♪ tom: the trade war comes to

europe as the german 10 year yield finds a more negative yield. how will vietnam and finland adapt? trumka not win without the farm belt. win without the farm belt. buying people chinese goods to help our great patriot farmers. cash in may, is the melt up done? good morning. this is bloomberg "surveillance," live from our world headquarters in new york. i am tom keene with francine lacqua. david merritt gave us a brexit briefing. is it the same old brexit or is it different? francine: the same old with a different twist, like we have had over the last couple of months. deal intoy put this

parliament in june. there is always hope. approaches, the minds of parliamentarians will be focused so they will vote the deal through. they say if the labour party the bad, that will focus parliament. tom: european elections, the president visits, and then there is the fourth of the sixth vote by the time the president visits london. here is viviana hurtado. viviana: china's economy losing momentum even before donald trump imposed tariffs. industrial production -- all rose more than forecast. chinese will need to boost stimulus to cushion the blow. another sign of escalating tension between the u.s. and

departmenttate ordering nonessential nonemergency staff in iraq to leave the country immediately. they have detected new threats from iran targeting american interests in the region. the day is set for theresa may's final showdown over brexit. she promises to bring her deal to parliament at the start of june. she has not been able to reach a deal with the opposition party yet but hopes lawmakers will support her to end the fighting tearing both parties apart. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. tom: a data check, equities, bonds, futures at negative seven, deteriorated in the last hour.

all i know is they are coming down. we will have a truly wonderful trend expert with us and a moment. i am watching the euro, weaker off of what we are seeing on interest rates. the vix showing the balance yesterday, 18.30. the two year yield was 2.19. those should be all red, yields are all lower. at german 10 year yield -0.11, we really get scope and scale back to 2016. the reporting by our bond team is a set of factors. francine: looking at european stocks, they are struggling but fluctuating a touch. they were down than up and now they are back down. the rebound instocks, they globs struggling to maintain momentum. treasuries slipping with german bonds.

the slight pickup is that stocks -- hiccup is that stocks are thoughts that beijing may boost stimulus. a little more time looking at the weakness in the chinese economy before this trade started. tom: reunification, east germany, west germany, here is the financial crisis in america, august 2007. in 2016, this rollover has got to have the full attention of mr. draghi. francine: i am looking at what jeffrey gundlach was saying. let me bring you over to my chart. he was saying there was weakness in the u.s. economy despite his lofty predictions of growth. this is the new york fed indicator using the spread between the 10 year and three

toths u.s. treasuries indicate a recession. that indicator has been increasing. tom: let's go to a discussion on the farmland of america with a gentleman from the first district in kansas. this is westra -- western kansas. supporting.re still it is dire times back home. bankruptcies and suicides are up, but we have hope this president can take us to victory. tom: right after dr. marshall, thrilled to be with us. we heard from the gentleman farmer of fifth avenue, the president of the united states. let's gaze on a tweet of agricultural economics. i feel like we are in college .tation, texas doing economics

our great patriot farmers will be one of the biggest beneficiaries of what is happening now. the honorchina do us of continuing to buy our great farm product, the best, but if not your country will be making up the difference based on a very high china buy. this money will result from the massive tariffs paid to the united states for allowing china and others to do business with us. the farmers have been "forgotten" for many years. christopher verrone is speechless. with us today. i thought the gentleman from kansas was riveting. this is serious stuff. he said it, suicides and bankruptcies are up. marty: bloomberg news among

others have been chronicling the distress in the nation's farmers , from an economic and psychological standpoint. the u.s.ump may say will buy any surplus grain and soybeans from farmers, but there is a question on how. tom: i had a brain freeze. --hought christopher verrone so great to have you with us. can i bring up a chart to save myself? this is inflation-adjusted soybeans. now.n ahya with us this is the reality of farmers in america. is it a tariff discussion or is there a greater complexity than what we are seeing from the president? chetan: global growth has slowed

significantly and that is weighing on all commodities. the fact that china reduced its purchases is weighing on the prices in the u.s., so trade tensions and the fact that global growth has slowed significantly. francine: great to have you on the program. as it almost a two way bed? the trade war escalates and you need to take a bet on whether this will slow down growth to where it could be a recessionary environment. is it or not? chetan: we are assuming there is a possibility that both the countries come together and there is a deal in three to four weeks. if that does not happen and trade tensions escalate to a stage of an additional 25% china on all imports from , you are taking a huge risk. will see a recession in the

u.s. and the global economy. the global economy will reach below 2.5% growth year on year by 2020. francine: that is a bold call by morgan stanley. what do i look at to see whether this gets de-escalated? jinping oneech by xi foolish nations trying to reshape others. marty: neither side is backing down. you need to look for whether some level of discussions get opened. steven mnuchin flying to beijing. right now, there are no talks scheduled and if the pain gets great enough you might see impetus to start the discussions again, culminating with a trump visit. tom: i was taken with the dialogue of republican senators and the president basically baloney. there are some fractures among

midwest senators. what will you watch for from the farm belt? marty: they are trying to be constructive. tom: and the verbiage i have seen, no. marty: chuck grassley has been very clear he does not believe tariffs are the answer to solve the agricultural problem, and he and other farm state republicans are making that case to the white house. tom: ellen zentner has been beautiful -- brilliant on a slowdown we have been talking about. with the caution of your equity team, i want to you to reaffirm holistic economics from morgan stanley. can you say you are the most conservative on the street and you are looking for a set of lower yields, dampens gdp, and what will be the impact across the equity markets?

chetan: the big picture is that there are two key forces at play. we have the policy easing from the fed in the last year. the financial conditions easier china basis points, and at a stimulus of $250 billion. that is one side. on the others we have trade tensions. if you see all the analysis, it is what is the impact on growth on a direct basis because of tariffs? do not miss the point that trade tensions are having a serious impact on corporate confidence and capex. that part is underestimated. massive classch a in capital indicators, it was growing at 21% first quarter last year nominal dollar basis and now it is contracting 3%.

if you get the trade tensions escalating more than three to four weeks, that will tip global growth towards a slowdown. francine: chetan ahya of morgan stanley and marty schenker. , formerp, mark mobius templeton asset management chairman with a thing or two to say about china and the relationship with other southeastern asian countries, 8:30 a.m. new york. this is bloomberg. ♪

♪ viviana: this is bloomberg "surveillance." walmart may take its unit in the u.k. public. they are telling employees they

are seriously considering an ipo. the process could take years. british antitrust regulators blocked their merger. aston martin reported lower first-quarter earnings at a time when sales in the u.k. and mainland europe declined. they boosted spending on new models. they are trying to replicate ferrari's success in moving toward a more high-volume car making. tom: we are thrilled to have with a chetan ahya unique call at morgan stanley, caution on the markets. to dovetail with us is truly one of the best on trend in wall street, christopher verrone. it is absolutely wonderful on trend. where are we now on trend? did it get blown up? christopher: i don't think so.

we had a 25% rally in four months. i am not sure i would go to the melt up language. in the context of the 25% rally, we have had a two week pause what the market down 4.5%. it is early to say we are through this, but as far as disrupting the trend, this is a normal corrective phase in the beginning of a new bull market. tom: this is so important what we are discussing. let's bring up the chart. this could be chart of the year. correction in february, we got there. bear market, no. here is the great melt up and we have barely rolled over. how do you take your economics and synthesize it back to mike wilson's calls in the equity

market? chetan: mike wilson's point is based on the fact that the u.s. is in late cycle and trade tensions do not help. that is forming his view that he is not confident earnings will be good going forward. from a global perspective, the story was really in the rest of the world. you had support from china coming in. we were expecting europe and japan to do better, but the trade tension story is taking the sting out of the flow-through -- growth recovery story we had. francine: if there is a recession in the u.s. looming, where do you see it first? the inverted yield curve, the oil price? chetan: in the financial prices broadly -- conditions broadly. one way would be looking at the chicago fed financial conditions index.

based on the tightening and the number of basis points. by 100 basis points from december to now, and when the fed made the pivot, and the preceding three months at had tightened by 75 basis points. if you see anything of this set -- of the nature of 75% to 100 basis points, you will see spreads coming to rescue us. the first cut about 50 basis 2019s by the first quarter -- fourth-quarter 2019. francine: you said you were expecting more volatility. what is priced in? christopher: we have seen this far percent drawdown, worse and worseally -- 4% drawdown, in cyclically segmented groups.

when we look at corrections, you typically want to buy them, with more of this cyclically oriented groups. highs for the first time -- semis just made the new all-time high for the first time in 10 years. autos have gotten better here. homebuilding and housing has improved. that is not the late cycle signal we are getting from the market just yet. tom: christopher verrone and chetan ahya with us. breaking news from turkey is straightforward, their finance ministers speaking about financial actions. a weakest -- weaker turkish lira. there is no let up in lower yields. if you are part of global wall two-year,e u.s. 2.168, that is a wow number.

the swiss 20 year yield near a zero level. this is bloomberg. ♪

♪ this is bloomberg "surveillance," tom and francine from london and new york. theresa may set a date for her final brexit showdown at the start of june. talks with the opposition party have not yielded an agreement but she hopes members of parliament will back her to

bring an end to the process. emma ross thomas. the timing is awkward because she says she will bring this back to parliament in june. meanwhile we have elections. how will they do? emma: the timing is in her favor. one of the good things about the european elections is the tories will almost certainly get wiped out by the brexit party. aboutfarage is pulling at 40%. jeremy hunt said yesterday if they get a drubbing, that will send a message to his colleagues to jolly well deliver brexit. hope,eems to be the main the message from the elections, you have got to get on with it, deliver brexit, and talk about something else.

inside the tory party there is a view that the brexit party is an existential threat if there is a brexit. francine: the brexit party, it is clear what you are voting for, if they win big, does it not give impetus to a conservative party possible sayer that is pro brexit to , theresa may, move out of the way, we want something stronger? emma: it is likely, the next step is a leadership race. it is not very likely that theresa may's deal goes through. people have become increasingly entrenched in their positions. when i say that about the european elections, the hope is that she will offer the labour party what they want, a customs union and complementary vote. she would end up being killed by her party.

probably a brexiteer will win the race. with the sametuck parliament that has voted repeatedly against no deal. it is not too hard to imagine beyond the leadership race you are looking at the general election to renegotiate that deal. ross thomas, thank you for being with us. coming up, a gentleman from youngstown, a really interested and committed congressman from ohio. he is a democrat and a presidential candidate, ryan of youngstown. this is bloomberg. ♪

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francine: we are listening to parliamentary discussion over barclays, and mr. barnier talking about what happened and some of the banks in the u.k.. we will have more not, and we are looking at germany and the strength of the economy. we had a couple of week numbers from germany, the economy returning to growth despite a slump in manufacturing that could worsen because of the trade tensions. aroundring in chris of ahya.rone and chetan talk to me about europe. is it the most unknown region or the riskiest region because it will be difficult for the central bank to come up with new tools for the next downturn? chetan: europe and japan are

stuck in a low growth, lowflation trap. we should not be too bullish or bearish. they will be going through this model through environment because the central bank does not have tools to stimulate. with the political constant in europe, we will not see a big fiscal stimulus. we will see ups and downs that will be somewhat small, driven by the rest of the world, particularly the u.s. and china. francine: how vulnerable is europe to escalating trade tensions? chetan: it is vulnerable because there is no domestic demand outside. we have some support from fiscal policy but that is relatively small so if you get a global recession or a downturn on trade, europe is exposed to that environment. it is stuck in the low growth

lowflation environment. we get this new lower interest rate, and we are seeing at this morning. two-year.the u.s. over to thet fold technical structure of the stock market? christopher: european yields in particular, german yields trade through japanese tents. it is only the third time in history this has happened, the prior instances being summer of 2016 and years before that and the crisis. it is a degree of what is priced in. cyclicals are down 30% to 50% last year. to what extent has that slot -- priced in the slow down and the trade war? when we look at autos, luxury names, and retail, they will

tell the tale of how europe will perform. tom: is it a japanification of europe? christopher verrone mentioned the analysis of european yields coming through. it is evolving similar to japan. it has better demographics and the starting point in the economy is better than it was in japan. the dynamics and europe are similar to japan. low growth, lowflation trap. traplow growth, lowflation . let's have one final call. could you adjust a recession call today? you are seeing less oil demand and lower yields. does morgan stanley need to would tapped? 20%an: we are assigning probability to global and u.s.

recession. the base case as we still muddle through and do not go through that scenario. francine: when will we see a repricing of german bunds? chetan: when you see the real yields rising back again? we will have to see that recovery in our base case, you will see a recovery led by china and u.s. financial conditions. if you get this deal done or agreed in some form in three to four weeks, the base case scenario is in play where china stimulus as significant, $250 billion. that will drive the recovery in the rest of the world. in the u.s., we had some one-off issues and financial conditions were tight. that should help second-quarter recovery.

we are hoping that recovery in the world drives the 10 year bond yield up in germany and europe. ahya and christopher verrone with us. as we spoke to the gentleman from western kansas yesterday, we migrate to youngstown ohio. he is a presidential candidate for the democratic party, but congressman in a the crucible of the trade war. tim ryan joins us. yourot elected because democratic opponent in the primary was essentially nafta free trade. ,f you go free trade in america doesn't mean political death? rep. ryan: it is not popular because no one dealt with the underbelly of free trade. that is causing a great deal of

stress and anxiety and economic anxiety in america. community is like youngstown, , the, gary, indiana southern textile towns, no one cared. no one had an agenda for them. we knew globalization had to happen and free trade creates wealth in the aggregate, but these communities were left behind and no one cared. progressives and liberals of the democratic party only get there agriculture shrink-wrapped at whole foods. you are living the reality of farmers. when you hear the president talk about patriot farmers, how do you react? rep. ryan: it is a joke. the president has no agenda for rural america. farmers have not made a profit in five years. the industrial agriculture approach we have taken is

destroying our soil and environment, killing 220 metric tons of fish at the mouth of the mississippi river, algae blooms all over from florida to the great lakes in ohio. this is not working and the president is making matters worse, making the stress levels worth for farmers not making monday -- money. and there is 22 candidates at some point there will be 45 democratic candidates and tim pelosill sneak in with support. president, how do you deal with chuck grassley and the farmer from iowa? a center get to tendency where the president from youngstown can get business done with a gentleman farmer from iowa? chetan: you sit down and talk --

rep. ryan: you sit down and talk , open a line of communication, and do not bully people. you have an agenda that is sustainable over the long term. there is a move in the u.s. around regional and local agriculture. paying farmers to sequester carbon, there are opportunities to reduce the stress level of farmers if we come up with an agenda. the only way we have ever gotten anything done in the united states, and so many people are sick of being divided they want a president who will unite the country. president trump did well -- won my home county so there is an opportunity to do well if tim ryan becomes president. francine: would you agree with the fact that democrats have been pushing president trump for months to take a tougher stance

towards china on trade? if that is true, is that not what he is doing? rep. ryan: and is one thing to take a tougher stand, to be firm . i come from a district where china has been dumping steel tubing into my district for a long time, manipulating their currency, stealing intellectual property. tariffs are a tactical move that really are part of the old economy. we have to level the playing field in certain areas. what is the bigger strategy? plan.has a 100 year they have a long-term plan and our president is operating in a 24 hour news cycle. francine: answer me this -- would you have taken a bad deal with china rather than no deal? rep. ryan: you have to look at the entirety of the situation. it is hard to judge what the president is thinking because

one day he is taking a firm position, the next day he is backing off. strategy?e larger under the tim ryan administration, let's dominate the new technologies, infuse them into our industries, ramp up productivity, and cut the worker in on a vehicle -- deal. we should be dominating solar, wind, agriculture. right now, china is. we are getting our clock cleaned, and those could be manufacturing jobs in places like youngstown, but we have no agenda. tom: you almost sounded like a liberal. wasreality is ronald reagan elected running right then went to the middle. you have a set of opponents who do not know where the middle is. do you just assume the liberals and progressives of your party

are unable to come over to tim ryan, or will they migrate towards tim ryan as we get to the convention? rep. ryan: my agenda is practical. how do we deal with the stress and anxiety crippling our society? whether it is economic stress, the ill health of our country, concerned about our kids. i just read an article about , 75 percent of them are anxious and stressful. that is their top concern. tom: this is really important and speaks of the bipartisanship . rep. ryan: you have got about six different names for me. tom: you have to be careful because there is republicans in southern ohio. as you get on the same page portman of cincinnati on opioids? andare living heroin

opioids in ohio. how do we get back to bipartisan solutions like the portman-ryan act? rep. ryan: through presidential leadership. we go back to ronald reagan and tip o'neill. this happens. ,ill clinton and newt gingrich there are opportunities to work together if both sides want to. i want to be the president that brings people together, that builds these relationships. i have good ones with republicans in the house and senate. you have to sit down and listen and respect each other. everybody has something to contribute and america is falling behind. if our president would stop sugarcoating everything, meanwhile people are losing their jobs and cannot make ends ift or are barely surviving, you have that honest conversation you can come with a new agenda.

it has got to be around, how do we provide health care and reduce prescription drug costs and get hunt treat -- healthy as a country? how do we put vocational training back into our schools? these should be things that everyone agrees on and they are. wants to reduce health care costs. why can't we move to a system that incentivizes health and not just disease management? this is doable with a president who is smart -- strong enough to leave -- lead. tom: representative tim ryan of youngstown. this is bloomberg. ♪

♪ bloomberg "surveillance," francine lacqua in london, tom keene in new york. we are watching yields lower, stabilized a little bit, but lower yields all across the world. single best chart right now, i am going to bring it up. this is how we do the secret sauce, this is the bits and study. -- ibbotson study. what is wrong with buy-and-hold? christopher: not much. in 2013, at the market made new all-time highs for the first time in a decade and a half. last 17 orts tend to 18 years. we had a cyclical bear market in

2018, 70% of stocks down 20% or more. the global markets peaked in january. you have seen this cyclical bear market of this recent phase, and it is hard for us to get too negative. tom: the basic idea is we all by. -- buy. some hold, if you hold. the long-term trend, that is a good line. the fear is we are here or we overshoot to some gloom. what gives you your optimism to stay in the market? christopher: it is difficult to find signs of euphoria. the dominant leader the cycle has been technology and even intech, valuations are not remotely at the excesses we saw last cycle. i have never seen able market die without that and it is to --

a bowl market die without that -- bull market die without that. francine: not investing enough? christopher: clearly weighing on short-term uncertainty, but this word "uncertainty," it is bullish. , when they indices spike it has been consistent with good returns in the future for stocks. a look at uncertainty as positive, reflects anxiety and fear, and good bull markets have a lot of that. francine: is there anything that looks in a bubble? if it does, when does that burst? christopher: the trick is part of that question is the bubble or euphoria is not in the public markets. we have seen it in the private market and that is perhaps why

some of the new ipo's have not traded well. when you look at the public equity market, it is difficult to find evidence of bubble like price market. on: let's go mathy wednesday. washed out, which means catharsis. how do you measure washed out? christopher: we look under the hood. we want the majority of stocks to reflect that washed out condition. we are not quite there. the other thing we look for is big's bikes -- big spikes in fear. the vix has become an unreliable indicator. maybe that is the bubble we see, this short vol trade. put calls are a timely indicator. tom: i have about 14 more

questions, christopher verrone with us. we have so much more coming up. this is bloomberg. ♪

♪ this is bloomberg

"surveillance," tom and francine from london and new york. prosecutors in germany led a nationwide raid of deutsche bank, investigating wealthy individuals with offshore accounts. deutsche bank has said no search of their premises has taken place and the raid is not aimed at the bank. what exactly does this tell us? how problematic is it for deutsche bank? of oneit is a reminder of a number of challenges the company still faces. in november, it was the target of prominent and visible raids. for the case at thought it settled, they looked at the revelations in the panama papers and had not found anything concerning and they moved on.

almost a reminder that these things are never quite done potentially. francine: where are we on deutsche bank? deutsche bank and commerzbank did not happen but you have speculation about other banks including unicredit. they had to issue a statement yesterday. elisa: as deutsche bank and commerzbank decided to go their separate ways, there has been long-term interest in commerzbank. -- banks outside germany are looking at the numbers to see if it makes sense. you have banks hiring their own advisors as they look for those numbers, although from what the reports say, there have not been formal talks. tom: why does unicredit shareholders not want them to buy commerzbank? why are the shares down of unicredit? elisa: it reflects partly the

execution risk that remains quite substantial for a banking deal. also a lot of opposition in germany, not just to deals but to foreign deals as well. the labor union said there would be blood before they would sell to an italian bank. another thing unicredit could be doing for itself is engaging in potentially a risky combination. tom: do you see any indication of a desire or appetite of cross-border mergers? i do not see it. elisa: on the one hand, the european regulators particularly the ecb would like consolidation to take place. on the other hand, it does not see from a regulatory standpoint that that is possible because

without a deeper banking union cana deposit scheme, you move liquidity around freely and it makes deals more attractive. tom: elisa martinuzzi with us today, writing important pieces for bloomberg. what has your important attention of the 14 stories in europe? francine: tencent, i know who broke it at the beginning of the hour, tencent topping estimates but investors are wary about the pace of growth, and that goes back to the china and trade conversation. tom: yields are lower. this is bloomberg. ♪

♪ alix: china news is good news?

the market expects more stimulus out of china in the middle of a trade war. italy strikes again. deputy premier matteo salvini goes on the offense. german tenure bund yields hits a 10 year low. [no audio] alix: -- in the middle east and persian gulf. we don't really know what the stance is with that. i don't know if the market knows how to price that in yet. david: i'm not sure anybody knows. the president was saying if we have to send troops, it's a lot

of troops.