♪ >> the top tech firms cut off suppliers, critical software components amid crackdowns, since companies tumbling. oil jumps. opec signals they will keep supplies constrained as u.s. tensions with iran ramp-up. and a polarized europe. bracing for a snap election of a scandal. meanwhile, angela merkel says voters have a stark choice to make as europe heads to the polls. ♪ >> welcome to "bloomberg surveillance." good morning in the states, good afternoon in asia.

i am francine lacqua in london. let's check in on your markets. a little bit of volatility and questions about what happens next in the trade war. a lot of crucial elections that markets are trying to get their head around. test when it comes to risk out there is the yen, 110.11, and because we spend a lot of time talking about the trade war, you can see the you uan at 6.9120. coming up, we will speak to the vice chairman of blackrock.don't miss that exclusive conversation about the world growth, central banks, china, and banks. first let's get straight to the first word news in london with sebastian salek. >> transactions involving entities controlled by president trump arouse suspicion of anti-money laundering specialists at deutsche bank, according to "the new york times." it occurred in 2016 in 2017 and

involved jared kushner. the paper reports that it was recommended to be referred to the treasury department. austria has called a snap country after the dumped the populace coalition partner when they were offering government contract in exchange for campaign funds. he has a tight rope to walk, declaring the party unfit to govern, this despite praising the policies that helped. scott morrison says the government will command a parliamentary majority after a surprise when on saturday, according to the australian broadcasting corporation. the pitch was at the heart of the coalition in office, and he may be the first prime minister in more than a decade -- european voters face a choice between liberal values and destructive nationalism, according to german chancellor angela merkel as she set out the stakes for this week's european

parliament election. they are campaigning against anti-e.u. parties and says they won't win enough seats to disrupt the bloc's policymaking. narendra modi's ruling coalition's post for victory according to exit polls. this will give it another five years of running the world's fastest-growing major economy. polls have been inaccurate in the past, wrongly estimating that he would win reelection back in 2004. the fight for the iron throne has come to an end, but. the finale of "game of thrones" leaves hbo with avoid. it has a number of high-profile shows in the pipeline, including a "deadwood" movie. 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 sebastian salek, this is bloomberg. >> thank you. let's turn to trade.

president trump says he is very happy with the trade war, and that china won't become the world's top superpower on his watch. these comments signal he is in no rush to get back to the negotiating table as top u.s. have reportedly frozen the supply of hardware to china's huawei. let's talk a little bit more about china and trade. joining us for the hour in an exclusive conversation, the vice chair at blackrock. thank you so much for coming in. you make a lot of our viewers smarter. how do you look at the trade war? three weeks ago we thought that president trump wanted a deal, and now it has complete leaflet. >> trade is the pinnacle of something much bigger. essentially what looks increasingly like a strategic confrontation between china and the u.s., and really the underlying prize in a way, the is the indicated,

digital technology space. trade is very important, it's the main risk of the short-term to the global economy. we have seen some de-escalation with canada and mexico. on the chinese front, things are getting more heated up, and it is getting more difficult to pull out. i think it's a very significant risk but underneath it is a bigger story. >> could the trade war escalate, even if it stays? you were for many years a central banker. should they worry about deflationary environments or the consequences of little depression? >> i would say the baseline scenario is not bad for global growth. we are still slowing, growing a bit, although there are recent signs in europe in china that there could be an upside surprise potential. it's really a risk story. so far we don't see much of it being assessed in the hard data. we see some softness in asia

trade, but basically the channel will be through sentiment and business investment. at the moment, these are primarily risks, but significant risks. it's really the reordering of the global trading system that is at stake. >> if you look at the downturn or slow down, will it come from consumers spending less or from chief executives not investing? >> the letter would be the most likely direct, a confidence shock that would manifest itself in terms of business spending and investment, and that could undermine an economy which is growing but not great. we are growing at roughly potential so it wouldn't take very much to throw it off course although at the moment the baseline scenario is recently constructive. >> should we worry about the u.s. economy or the chinese economy? >> i think it's the global economy. the chinese economy is getting very big. in the next five to 10 years, with the contribution of u.s.

growth, it will go to about 110. china matters more and more every year, but what really matters is the interaction between these biggest economies in the world and what it would do to the global economic system. >> there are particular links between the bank and china. is pboc a force that will do whatever they can, to make sure the economy doesn't drop off a cliff? what do we understand about how they operate? >> my experience that not just been with the central bank about the chinese have always had first-rate policymakers in place, certainly the ones i've interacted with. we have seen this pattern that they have, a wide range of instruments, arguably a wider range of instruments that many countries in the west would have, in order to stabilize and respond to weakness, which is exactly what we've seen every step along the way, and one of the reasons i see some short-term upside is, in fact,

once again we have seen this easing effort to counteract the risks. >> final question on china and then i know we need to take a break. when you look at the renminbi -- what does it lead to? it is seen as the ultimate test, but what actually happens? >> i think we should think of the currency in the traditional monetary conflict as part of what makes up the overall monetary conditions. i'm sure it's an important factor in how the authorities central bank and fiscal authorities determine how much stimulus to put in the system, but it's really no different than another countries where it's an important piece in the makeup of chinese monetary conditions. >> thank you so much. philip stays with us. saudi arabia and other key producers are trying to keep oil supplies constrained for the rest of the year. oil is rising. we have all the news from the opec plus meeting, coming up.

this is bloomberg. ♪

♪ >> economics, finance, politics. this is "bloomberg surveillance." i'm francine lacqua. key opec producers have signaled intent to keep oversize constrained. they have pledged to prevent any genuine supply shortages. suggested that russia is potentially going for a wait-and-see approach. go into arabia will not deviate from our targets for july in anticipation of either a decrease or increase for our target. we are going to commit and take an extra month on our own, and i

hope my other colleagues will do the same, will not jump the gun. >> joining us now from jenna's manus cranny. what caught your eye? it seems like the russians are playing a more pivotal role, and saying there's a number of ways we could continue. does this mean they are cooling-off, sticking together with saudi arabia, or is there more nuance? look, i think the russians are still very much part of this. they will not go gung ho, as the nigerian oil minister said last night. the message you want to take away from that is don't be fooled by the price -- stay the course is the byline for this meeting of the gmc. do not be fooled by higher prices. and also he reflected back, francine, to the scenario in 2018, which is where our collective answer -- the waivers were coming to bear, our collective action was

undermined. that's the broadside of the united states. i would say there's an uneasy wem, an uneasy peace, and are all staying the course and the road for now. >> manus, how much does the conversation focus on iran? interesting, they all batted away a little bit. media,d that you, the are talking too much about it. before the press conference he said our assets here in the region are protected. we spend a lot on protecting your assets to back that issue. then overnight you have lgb or, the foreign minister, saying we will not stand idly by. what does that mean? i caught up with the uae foreign minister. he wanted to de-escalate. there is a number of different vantage points on the position

of iran. i leave you with this thought -- donald trump has his most recent tweet, if you want conflict from iran, it could mean something quite substantial. there's a desire to de-escalate to talk about protection, but then you look at the tweets and it gives you a whole other canopy to work with. >> thank you so much. great reporting on the ground in jeddah, saudi arabia. also -- if you look at that, it basically shows brent crude is getting more than wti, you can see the widening spread pushing between the two for brent's july contract to about nine dollars more than wti. let's keep the conversation on oil and geopolitics. still with us, philip hillebrand from blackrock.

if you look at the price of oil as geopolitics, markets are taking it in stride. maybe they are worried about demand, and that gives us a little bit of something to worry about in the world economy, or goes back to inflation on how central banks should look at it. >> i think the oil story at the moment in terms of inflation policy isn't a big story, in that the inflation outlook remains very benign. the world needs that. right now i would say we are on a very narrow path for higher risk assets, and the economy has to remain strong enough to not worry about renewed, strong slowdown, and at the same time, we don't want to see overheating and have central banks be back with the risk of rising rates. at the moment, that balance is maintained, but of course the risks are that this could somehow derail. i think that downside risks are certainly greater than the upside. >> the central banks have the

tools to deal with the next downturn? >> that is the big question. i would say the answer is not clear. certainly in the countries or regions were rates are zero, where the balance are already extended, there is a legitimate question -- what would come next in terms of fiscal and monetary response if we hit a really bad price? i think that would be a big theme that will be pervasive in market talk and analysis as we move forward. mmt, people talk about monetary theory -- should people be looking at that? >> mmt itself i would dismiss, frankly. but there is a question -- if we forward, wouldng you create strong disinflation? with the existing toolkit post crisis be sufficient, or would we have to go to something much bigger?

be anould not just extension or renewal of qe again, even buying equities would be a duration of that, but still in the same category. the question will be, are we moving in that scenario to something much bigger along the the famousme form of helicopter money speech that ben bernanke gave many years ago. >> do you think we should be going there? >> it would be incredibly complicated, and i suspect the marginal adjustments of the current framework that are being discussed in various central banks will not be enough to deal with a really significant downturn. discussionhave a big on what would one do, and if you went into that kind of space, you are very quickly in the fiscal space, and that creates its own set of problems in terms of central bank independence. >> thank you so much. philip stays with us. coming up on "surveillance," we will speak exclusively to the

uk's city minister of economic secretary to the treasury. we will talk about brexit. don't miss our interview coming up next. this is bloomberg. ♪

♪ >> this is "bloomberg surveillance." let's take a look at what you should be watching this week. tomorrow, mark carney testifies to parliament. watch for any comments on his inflation report. on wednesday, the ecb holds an event in honor of peter freight, who will be replaced by the irish central banker philip lane

on june 1. speakers included president mario draghi. commerzbank holds its agm that day, followed by deutsche bank on thursday. watch for any comments on the merger talks in banking consolidation in europe more generally. then later this week, voting gets underway for the european parliament, the u.k. and netherlands go to the polls on thursday with the majority of countries voting on sunday. ahead of those bank earnings, let's talk a little bit more about consolidation in the sector. our guest is still with us. philipp, we were expecting commerzbank and deutsche bank to be the catalyst for some wider, cross-border bank. that's not happening. does it put the consolidation in place or does it do something else? >> we have to see it over time. if europe is to function properly, if it is to be real, this is perhaps the most important part of completing, to have a proper banking union. >> you want to proper banking union. will we get it in time? >> that's the question.

being a bank in europe at the moment is tough. scale is one of the answers, but it is not the only answer. you have to have the appropriate business model. but i do think all countries should recognize that, for their own respective banks to be able to offer at scale cost, the entire european market would be a tremendous advantage, and it would allow shifting the focus away from being too exposed in the u.s. and having more of a scaled up, huge market that you could tap into at the european level. >> this has to be cross-border, right? do you have to do domestic champions first? >> no, i don't think the journey has to go by domestic champions. you first have to have an integrated european market or it doesn't work. then you have to have players that have this starting position to move into the market, and they will tend to be the biggest domestic players. but i don't think we need to think of it in terms of being a

domestic champion, it's really just about being well-positioned and having a market, but it is open and integrated so you can operate and make investments that will be necessary. think retail banking, i.t.. these will be large investments and you need a market of scale to make that profitable. >> it seems like a lot of banks want to be asset managers, but asset managers will also have to merge. >> you would expect. i work for the world's largest asset manager, but in some ways it is surprising that we have competitorgenuine in europe that has the scale to compete with the global asset managers. i think that will be part of the story, and if banking bjork it's in capital unions -- you would certainly expect that over time you would see some consolidation. >> can a bank even compete with the u.s.?

who can compete with the big u.s. funds, is it regulation or negative rates? is it a confluence? >> the yield curve is a particular challenge globally, but it is even more so a challenge in europe. but i think the whole answer here for european banks should be over time to have a large european market that they can tap into so they become less dependent on competing, particularly investment banking are now so far ahead of the european banks. >> we were looking at commerzbank agm, deutsche bank, how do these banks get away from all the speculation, not merging on connect to shareholders? >> these meetings are not going to be fun for the boards or the management, undoubtedly. second, i think the answer has to lie in finding an answer to the business model problem, which has been at the core of european banking, rather than

just saying we need to get bigger. you need to have a view of what you will do with size. again, in my mind, the answer can only be they need to push for the completion of banking so europe can operate as an integrated financial market. >> all right. thanks so much. we will talk about the tearing system. he stays with us. coming up, the u.k. international trade sentry speaks at london. we will bring you our interview with him later, and ask about boris johnson, the fight in the conservative party to be next prime minister. we will also talk about brexit. this is bloomberg. ♪

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every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. take your business beyond. francine: frozen out. top tech firms cut off critical

components to huawei. oil jumps as members say they will keep supplies constrained as tensions with iran wrap up. polarized europe. austria braces for a snap election after a scandal brings down the government. voters have a stark choice to make as europe heads to the polls. morning, everyone. good afternoon if you are watching from asia. i'm francine lacqua in london. let's get to bloomberg first word news with sebastian. producers are keeping oil supplies constrained for the rest of the year. to prevent any genuine supply shortages. it is unclear fresher shared that view, suggested potentially relaxing the curve. saudi arabia urged staying the course. >> in saudi arabia, we are not going to deviate from our target which was in anticipation of the decrease for the target.

month onake an extra our own and i hope that the other colleagues will do the same. president trump has warned iran not to threaten the u.s. or face consequences. he says if iran wants to fight, it will be the official end of iran. gdp rising 2.1% and economists can -- predicted a contraction. prime minister shantou abe will delay a sales tax hike. president trump arouses suspicions of an time on -- anti-money laundering investigators.

becialists recommend it referred to the treasury department but banking executives rejected their advice. stunning turn of events at a graduation ceremony, robert smith went off script during his commencement address and promised 396 graduates that he allhis family would pay off of their student debt. $380will be 300 80's -- million. -- about $38 million. hbo is looking for another hit in the order of game of thrones, but it won't be easy. global news 24 hours a day on-air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. francine? francine: everyone is so stressed that we will give away anything on the finale of game of thrones. not on bloomberg surveillance.

knows what was. following the collapse of cross party talks, theresa may will make a bold new offer to improve the brexit deal. the prime minister prepares a fourth attempt to get a new parliament. of the uk's opposition party is closer to backing a second referendum. shouldcorbyn says there be a vote on any deal to leave the eu including one proposed by his own party. >> we fought the general election to respect the result of the referendum. that we have done to try to get a deal that guarantees trade and relations with europe in the future. and if we can get that through parliament, then i think it will be reasonable to have a public vote on this side of it. >> joining us to talk a little bit about brexit is city minister john glenn. i was just looking at your tweet saying that this morning, you opened the annual conference of

city week and you say london isn't only a european hub, a global one. but how much has london already lost? >> sca modest contingency there has beent stability and a recognition that there are opportunities beyond brexit. that is what i was talking about this morning. francine: should theresa may leave in june? does that make your job easier or more difficult? at that 80% of the conversation is on who is the next prime inister? >> the topic does come up. we will enter into an implementation period. and then how to relate to the eu regulatory framework. we do need certainty and we

do need to resolve this matter. green think about finance, thin tech, the u.k. city of london as a world , indonesia,al hub china, and beyond. it is important we are ready for those as well. >> i am a june minister in the treasury. there are many aspiring candidates but this is not my time. francine: would you serve the government under boris johnson? happy to serve my nation under any prime minister if they wanted to have me. recognize what is important here, and orderly and stable government led by people who understand the need to have a flourishing economy.

that gives growth, tax revenues, and allows us to invest in public services. we need to recognize that we need a broad agenda. when you speak to international investors, is there an assumption in the market that the longer you do brexit, the more watered down it ill be? or is that far-fetched? >> when i talk to investors across the city, they want clarity. the city is very pragmatic. they look at all different circumstances, but they get on with it. their life a lot easier by giving them some uncertainty so that we can give them assurances over the investments they are making. they have made modest contingency arrangements.

what is striking is that they continue to believe that the is a world hub that will endure. and it will grasp the opportunities of a growing global economy and will grow significantly faster than the eu itself. i will get to our guest host and a second. a but what do the big banks and asset managers ask of you? of me to ensure that we get a deal as quickly as possible. i am a junior member of the government but i have lots of conversations with the chancellor. and the chancellor has been clear that we honor the referendum result in a way that minimizes disruption to the economy. the prime minister will bring a new version of that deal back and i very much hope the house

of commons will support it. this uncertainty is obviously damaging. >> what do institutions such as blackrock one from the government? he's absolutely right. you want certainty. closer to really understanding what the new regime is going to be. markets are very good at adapting and discounting. they do so quickly and efficiently. to they need some clarity as what the future regime will be. unfortunately, so far, we don't really have much clarity. ae worst outcome would be sudden, inadvertent scenario where we end up in a hard brexit because no other deal comes through. the thing i worry about is that

the european colleagues are running out of patience with this and could start to shift the position to be less accommodating. francine: were you disappointed that it did not seem to be one of the top priorities for the government? services were a crucial part of the economy. it is always understood that they will need to be carefully looked after during this negotiation. we will clarify the matter for i accept this prolonged uncertainty and an agreement can't come to an for most of us in government. thank you so much. think of for joining us from city week.

plenty coming up and back to the .olls this is bloomberg. ♪

francine: i'm francine lacqua in london. courts have announced a snap election after the government was thrown into crisis following the release of a video showing the deputy leader promising government contracts in return for campaign funding. in september and a bid to govern that.

>> michael goal is a very simple one. i would like to work for our beautiful country. we will move on without incident or scandal. francine: to put into the oftext, philip hildebrand blackrock. and welcome to the program.

>> a think the remain camp could of been more affecting. francine: and by european, roth? think everybody recognizes that just breaking that way is not a good idea. you know, populism might be good at responding to emotions. many of them we need to take seriously. it has no answer about how to generate sustained prosperity and growth. it does not fundamentally address what is important for people's livelihood. francine: if you were to go back, right? whether you are a remainder or which have done anything differently? i'm not talking about campaigns. but it seems that citizens are not connected to their politicians.

>> there has always been a democratic deficit in europe. it is one of the fundamental problems. it is a problem for a very large union that has only gotten larger. british foreign policy drove the european union. the british foreign policy deeper.was not we only have ourselves to blame. you lost the veto, you had more qualified majority voting. that is when things began to crack. it became the reality of politics and much more difficult. we haven't had that conversation with them in public. francine: is the public view changing? a second referendum right now, would people vote differently? >> the polls have switched a little bit. the polls suggest that if you have the referendum today, it would depend on the question. if it is revoked no deal, you might get a small majority for

of folk. -- for revoke. around, the polls were predicting exactly that. it would depend on turnout and what people feel. francine: what do people want from an election nowadays? we talk about populism. at how do populations reconnect -- but how do politicians reconnect or how do citizens reconnect with policies? stilla sense, we are suffering from the fallout of the crisis. and that is what is driving populism, in my mind. even that is related in many ways to the financial crisis. but unfortunately, the established political parties in the mainstream has not really been able to re-create a sense of sustained prosperity. and that opens up the path for the populists. my guess is because they don't

actually give you answers to this problem, we will see them peaking in germany right now. they are signs that unable so far to actually come up with economic answers to economic problems. francine: speaking of economic problems and economic answers, you have written a book called "extra times." have we taken care of this earlier, -- had we taken care of this earlier, would it have an impact on populism? >> in terms of aging? francine: dealing with the agent population. x that is one of the strands. demographic shift will change the balance of power -- the demographic shift will change the balance of power. there are a lot of things we have not wanted to think about partly because none of us wanted to think about old age at all. brexit point. the economic realities are only just now beginning to sink in.

if you like, has done a pretty poor job of educating people about how the global economy works. a lot of people have gotten very rich off the back of it. they are not necessarily aware about the global supply chain. it is only just beginning to percolate now. francine: we will talk about the book and the lessons for an aging world. camilla and philip, both stay with us. stay with us -- coming up next, 2020 vision. people aged over 65 outnumber children under five. we will discuss lessons for an aging world next. this is bloomberg. ♪

economics, finance, and politics. i'm francine lacqua. my guest calls it one of the biggest challenges facing the human population today. the number of people aged over 65 will outnumber children aged under five. how do we face the challenge in

the new subject of a book called "extra time: 10 lessons for an aging world. today -- camilla, the author, is with me today. >> the fear the future, all of this fuels the population we had. the market is scary because of technology and we have insufficient savings. francine: you could've written a book on 157 -- 150 subjects. why this one? >> i was very conscious.

people are living a lot longer and another group is getting chronic disease, diabetes, dementia, and it is really going to cost us a lot of money and being miserable. i'm just taking about age and us? does age mean to it is extra time because a think we have an extended middle that we haven't really acknowledged. is 65.et of old age that is how we define the working age population. that is no longer true. i wanted to write what turned out to be a much more optimistic book about what we should do with that time. francine: the link to economics is quite stark. is there a country that gets it right or that this gets better for? >> japan is very interesting because there are the world's oldest society. they started to focus on healthy

life expectancy. they're trying to make sure their population becomes more healthy and more or less. the twilight of time. japan has produced one year of extra healthy life for every man between 2030 and 2060. no other government has done that. the government should look at the project they have undertaken. francine: should central banks look at this more? how much does it change the gdp and how you measure things? are a bigerest rates complexity and of a challenge regards to eight -- in regard aging. -- in regard to aging. central banks -- rates are not low because of central banks. rates are low because we have a structural growth problem in the world. i don't think central banking can be the answer here. that would is clear here is that it would be very beneficial to

this challenge if we could interestnormalize rates. and don't get in a scenario where we have to go to more extreme monetary measures in the event of a downturn. do?cine: how does the u.k. i don't think there is a ranking. >> there is not a proper ranking because all the data is different. but in the u.k., you're likely to have 80 years of healthy life more likely in the southeast then in the northeast. what we really need to do is to take health much more seriously and be much more optimistic about what old people can achieve. the threshold, if you like, and some people -- stop that threshold people crossing that threshold. there are things we can do to keep people on the right side of that line. a nursing, there is model where they send qualified nurses into people's homes and doing amazing work. it ins up costing a lot less

because people trust the system. francine: maybe that is the next frontier to be disrupted. , do for joining us, camilla author of "extra time." and philipp hildebrand from blackrock. surveillance continues in the next hour. tom keene joints me. we have an exclusive conversation with our guest a little bit later this afternoon. in the meantime, stocks of turning higher and bonds with traders trying to put their eyes on developments in the trade war and a series of major elections. oil is up. this is bloomberg. ♪

top tech firms cut off

the supply of critical software and components to huawei. companiesown sends across the supply chain tumbling. and polarized europe. austria braces for a snap election after scandal brings down the government. angela merkel says voters have a stark choice to make as europe heads to the polls. good morning, everyone. if you areoon watching from asia. tom, we have a lot to look at including oil markets. we look at the race to become the next prime minister and leader of the conservatives. it is very important. brexit is important. what is it about american media with all of these spoilers? .ere is the new york post francine: i can't bear to watch.

tom: we are covering up the spoilers of american media. we are spoiler free. they're a good. the european elections on thursday are a huge deal. i have a great morning must-read from the new york times that explains everything as the far right or the populist having a united front. we are seeing a little bit of market jitter because of it. tom: it is it -- it is an interesting market. oil lifts are not dramatic. they had a number of conversations last week led by edward morrissette citigroup -- morris at citigroup.

onto the next screen if it can. the vix showing the bull market. 16.31. and renminbi gives three to 6.91. and sterling, i guess it has a bit, but it is a fragile bid, francine. what i am looking at overall is a little bit of uneasiness. we look at supplies and the supply chain. we are also looking at some of the things that we're watching for an oil. -- in oil. the index is at 16.33. up to speedare not out of the new york times with the definitive article over the weekend, the florida shop of deutsche bank. you see it down here well under seven. this is a long-term chart back in the glory days of 2006 and

2007. what is very important, francine, we never got the two standard deviations. there yet. but we are really elevated. rather, depressed. deutsche bank rolling over again. i'm looking at brent crude gaining more than the vti. you can see the widening spread between the two. that is pushing the premium from over wti.ontract that is the biggest this november. let's get back to trade. president trump says he's very happy with the trade war. rush to get back to the negotiating table. this comes as tech companies have reportedly frozen the supply of hardware to china's

huawei. guests forhank my joining us. start? this about to is it about trade war tech supremacy? or tech supremacy? >> it is about making to the china is not going to overtake the technological superiority of the u.s. it is about the trade deficit. multiple goals. and making this tension for the for seeable future. future.eablef tu francine: what is it mean for the markets? >> it creates volatility in the tech sector.

i think that some of the other areas of tech are probably a little bit more protected from software and areas that have structural growth behind him. it adds uncertainty to markets which are generally ok. tom: what is the investment in confidence and business confidence right now? >> generally, people are feeling more optimistic than they were last year. the first -- fourth quarter was tough and the first quarter was much better. few donors and investors with relatively high levels of cash. we are not fully totally confident when we look at what the investors are saying. to: are investors linked what is going on in international relations? or is it just a convenient

distraction? is there a linkage in carolines world with your world? or are they discrete? >> in the way that they are investing, promoting global portfolios, they will have exposure to the global markets. and then from the business owners side, it depends on what businesses they are an end if they are global or not. they may be facing slightly different pressures. look at somen you of the tools that china could actually use in relation to the u.s., would it be a full financial arsenal? a think it would be part of that. if look at the picture and take , itre forward-looking take is a question of power.

chinesedeploy the state. play, this is the thing that trump can do. tom: we have lots to talk about banking international issues. london, here is first word news. tweeted that if iran wants war, it will be the official end of iran. he doesn't want the iranians to have nuclear weapons and is not looking for a military confrontation. head of the opposition labor party is closer to backing a second referendum on brexit. jeremy corbyn said the public should get a choice on any deal to leave the european union. generalught the

election to respect the results of the referendum. we are trying to get a deal which guarantees trade and relations with europe in the future. and if we can get that through parliament proposals, i think it will be reasonable to vote on this side. but not yet. >> after the surprising come , thatehind election win is the heart of the coalition. gross domestic product rose at an annual rate of 2.1%. somewhat misleading, it means net exports grow growth. day,l news, 24 hours a powered by more than 2700 journalists. this is bloomberg.

tom: a lot to talk about. and also interesting market activity as well. .une 19, the fed meeting the 9:00 hour. this is bloomberg. good morning. ♪

>> despite my sympathy of the technical issues in the pipelines, i would like for them to stick with their current production.

>> there is a deficit that we need to cover. >> we can talk about both the supply side and the demand side in terms of the balance of the market when it comes to june. colleaguesy other would do the same and not jump the gun. francine: that was ministers of key opec oil producers. russia's position was less than clear. relaxing the curves and favoring a wait-and-see approach. annmarie, what is russia playing at? they seem to be wanting to just

have more options. is it because they are uneasy about their relationship with saudi arabia or they are just keeping options open? good morning, francine. they certainly want to keep their options open. i have asked alexander novak a number of times what were the proposals? he wants to see black swans in the market right now. they want to see what happened the next few weeks to decide whether or not there is this need to pump more oil. the oil companies are eager to pump up the task. of course, saudi arabia representing opec and the plus side. saudi arabia made it very clear yesterday that they need to stay the course. they need to do more than ease the inventories in the market. what does it tell us

about how opec is seeing iran gekko how did they see the market developing in the next couple of months? annmarie: iran was probably the biggest topic here. the one member not at the meeting was the most talked about. many are saying that they are waiting to see how much export is lost in the market. i asked last night in the news conference where he sees iranian exports falling. he says he sees the analyst notes but disagrees with many of more saying that a lot iranian crude is leaving the shores of iran, the borders of iran, but not accounted for as a rainy and's. -- iranians. he's not talking about smuggling , so he says that means there is

less demand the says there is still a lot of iranian crude in the market. tom: what is the conversation of texas and oklahoma, the permian basin? vienna,e in jeddah or do they talk about supposedly american independence. annmarie: did you speak about that, 100%. the u.s. has spoken at every single meeting. it is something that opec cannot escape. many see the market right now. we need to decide what you are doing based on u.s. inventories. mentioning this swelling of .tocks he also mention the fact that they are sending less to the u.s. tom: thank you so much, and report and -- annmarie horton.

opec, i guess, is a diminishing power. power ofu measure the the cartel. >> the power of the cartel also depends on the global empowerment here. so whenever a moment like this one where there is more questions in terms of iran, .enezuela, the supply the power of opec goes up. this goes through when the supply is steady. that is how i would look at it. this is a group that is not perfectly functional, but still they have an impressive leverage. it is something that is not easily discounted. francine: this seems to be a natural hedge with the of levels dropping

because of the trade war. >> yeah. the majority of the story around oil has to do with supply. demand has held up and there are where demand has been ok. i think the supply side is the driving factor. exemption, the rollback of the exemptions on iran are really important to the supply side. now.e not that far off it francine: thank you both, guests will our stay with us. we will be joined to talk a little bit more about opec, coming up. this is bloomberg. ♪

>> let's get the bloomberg business flash. top companies are complying with a trump administration crackdown wei.quipment maker hua qualcomm will not sell until further notice. someincludes hardware and software. t-mobile and sprint are offering more concessions to get the u.s. government ok there twice $6.5 billion merger. they promise to sell one of their prepaid brands and will

pledge not to raise prices while the five g network is being built. thomas cook plunges to record lows and shares are plummeting, too. sky news reports the payment theany is working with operator. the company is struggling with debt and mounting losses. it is the bluebird business flash. tom: greatly appreciated. on the markets, carolyn simmonds with this -- caroline simmons with us. weekenddebate over the i saw was once again timeless, yield versus dividend growth. which is it? do i want to capture yield or is dividend growth the new yield? >> i think both is the answer for now. tom: come on, you sound like an economist. [laughter] >> strategy is diversified.

the reason is because yields are still quite low's a you want to capture the high-yield. but given the global growth that imprison the second half -- that improves in the second half, it will continue on a relative basis. you should have some growth and capture the global recovery. theink the combination at moment, particularly in the u k were you have dynamics of brexit. how great is the separation of full faith and credit bonds and everything else? to me, like i have never seen it before, the full faith and credit to offer the debt discussion and everything else is over here. am i right? >> the market is telling us slightly different things at the moment. it is more optimistic than the fixed income market. where we are in the cycle is quite important to remember that we do both. equities have done well and we think they will continue to do well. oneome point, whether it is

or two years out, we will get a slowdown in the economic growth picture. so we need to be more in the fixed income space. in the moment, they are telling you different things. francine: the main concern is recession. what is the likelihood of recession 2020? >> we remain relatively low. be good inbably 2020. some of the dovishness from the fed and the other central banks have looked to prolong the cycle, actually. early 2019 and 2020. >> if you look at the trade war, does it escalate from here? they want both sides to take it down. war escalatesade or continues in the next 12 to 18 months and it could point to a recession.

at ae one side, we look six-month reprieve in terms of the car issue there. so i think it is difficult. i don't think there is a linear trend here. there will be some ups and downs. the closer we get to the u.s. electoral cycle, it will get connected to that. most likely, volatility i will say. it is a softening of the trade story. caroline simmons, is it a good time to be diversified or do i want to focus my bets? >> diversification is really important at this point in the cycle where there is a split in the markets about whether growth will improve are not. -- or not. the we you do with that is diversification across asset classes. the way you deal with -- the way you deal with that is

diversification across asset classes. invest in equities and it was fine. now you need to be a bit more nuanced in your investments. tom: and we will be more nuanced in our discussion of brexit as well. guestne simmons and our on monday morning to get you started. coming up on the future of investment management, mr. gilbert of aberdeen standard. their chairman at the 1:00 hour. please stay with us. worldwide from london and new york, what are we watching? we are watching brent. 72.51 on brent. this is bloomberg. that is london. ♪

>> we should think of the currency much as in the traditional monetary contacts as part of what makes up the

overall monetary conditions. i am sure there is an important factor in how the fiscal authorities determine how much stimulus to put in the system. but it is really no different than in other countries, where it is an important piece in the make up of chinese monetary conditions. being a bank in europe is tough. scale is one of the answers. you need the appropriate business model. but all companies should recognize, for their own respective banks, to operate at scale across the entire european market would be a tremendous advantage. it would allow shifting the focus away from being too exposed in the u.s. and having more of a scaled up huge market you could tap into at the european level. francine: that was philip hildebrand. thelet's get straight to first word news. sebastian: president trump is

signaling he is in no rush to get back to talks with china on trade, saying he is happy with her current trade war, saying we are taking in billions of dollars. china's obvious and not doing well like us. the president also said that the chinese economy will not surpass america's what he is in office. which a bank's laundering unit reportedly saw suspicious activity in a counseling to donald trump and jared kushner to a16 and 2017, according "new york times" report. show primexit polls minister narendra modi will sweep victory in general elections. votes will be counted later this week. modi ran on a platform which included a boost in infrastructure spending and support for farmers. a stunning turn of events in a graduation ceremony in atlanta.

theorehouse college, speaker promised the graduates that he and his family would pay off student debts. global news 24 hours a day on air, and on @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am sebastian salek. this is bloomberg. tom: thank you. what a joy to see this from mr. smith. we meet with them every year at davos. a chemical engineer out of cornell. he started basic as an intern. to land the calling job at bell labs, which began his career. he is an extraordinary individual, completely away from his charity and good feeling. i cannot say enough about his integrity, job to job, project to project. francine: it was amazing. he did it live, and he is a

prominent philanthropist, and he made the announcement while speaking to 400 graduates. well done. the students must have been extremely happy, if you are one of those students in the crowd. let's get more on brexit. theresa may says she will make a bold new offer to improve the brexit deal. that is as the prime minister prepares for a fourth attempt to get it to parliament. meanwhile, the leader of the opposition labour party has moved closer to backing a second referendum. jeremy corbyn says there should be a vote on any deal to leave the e.u., including one proposed by his own party. >> what we fought the general election on was to respect the results of the referendum, to try to get a deal, which guarantees trade and relations with europe in the future. if we can get that through parliament, then it would be reasonable to have a public vote to decide on that. francine: still with us, kellen simmons of ebs and wolfango

piccoli of -- caroline simmons of ubs and finger piccoli of 10-year intelligence. does this mean labour has no incentive to deal with theresa may right now? is she a lame-duck? wolfango: she is and will be for some time. she will continue to be as long as she is an interim leader. so, yes, it will be mainly about the leadership context, and it will be long drawn, because we are not likely to see a new tory leader -- and the question is why would anybody want to be prime minister of the u.k. in late august or early september, we are likely to see a new leader. francine: last time we checked, there were 17 or 18 candidates. wolfango: i think it is more

than 20 at this point. francine: there you go. i did not look at it for at least an hour. what does it mean for the policies? is there now a bigger chance of a general election, of a second referendum? wolfango: there is a bigger chance of another extension, first of all. a general election, it will depend. the risk is on the rise, but the main risk areas policy paralysis. it is not just about brexit. this parliament has not legislated on lots of other things, so there is complete policy paralysis going on. this is likely to prevail until the end of the year. tom: i've been dying to ask you this question all weekend -- is the united kingdom becoming like italy? is a becoming like spain, with a four party system? this is what is new -- it is not two parties anymore. we have to guess four, and is

there permanence to that? wolfango: you are right, but there is one more thing. the explosion of political u.k., -- in italy and spain, you will not see it in the u.k. because of the electoral system. i'm not talking the european elections. what you have is a complete division between -- within the labour party and the conservatives about issues. brexit is the most well-known one. so it is manifesting itself and a different way because of the electoral system. dcaawithin brexit, permanence to the different parties, the assent of liberal democrats and others moving from a left labour to the middle? is there a permanence or does this end when brexit gets fixed

magically? wolfango: it is a bit of a temporary phase because of the european elections, where we're using a different electoral system that allows more parties to acquire seats. when we go back to domestic politics, we will go back to the old format. there is a chance for the lib-dem to come back. farage brexit party of or the change party will do. francine: what does it mean for you? caroline: i think it means in theinty around risk u.k. we are neutral on diversity. on sterling, it will remain volatile, along with brexit discussions. it is more of the same until we get some sort of progress. francine: thank you.

caroline simmons of ubs and will finger piccoli of teneo intelligence -- of 10-yearccoli intelligence. will be talking about brexit at 1:00 in london and 8:00 in new york. ♪

francine: this is "bloomberg surveillance." let's take a look at what you should be watching this week. tomorrow, mark carney testifies to parliament. watch for any comments about inflation. byer pitt will be replaced

the anger central banker -- we should have a mega wall to show you everything happening this week. commerzbank holding its agm followed by deutsche bank. watch for talks about they failed major -- merger p later on in the week, voting gets underway in the elections for the european parliament. the u.k. and the netherlands go to the polls thursday. i like a mega wall. it means it is really important and you should not miss it. tom: and no "game of thrones" spoilers either. and i want to bring this up as one of the great tensions -- this is deutsche bank, down 1.37% over the last five days. that is an ugly chart. and wolfangoons piccoli, as we stagger towards

thursday and the european elections -- i guess it is that american phrase, "lame-duck," the idea of british situations or party members to brussels, to the european parliament. how lame-duck are the british when they go to brussels? wolfango: they are and have been for some time. one of the first turning points was david cameron taking his ., stillt of the a.p.p the most influential powerhouse in brussels. so certainly lame-duck now and more in the future. regardless if these elected mp.p's will manage to take the oath. out the "telegraph" dashing andions between mr. farage the conservatives. type go tofarage

brussels? do they just show up & a piece of paper and leave or do they actually try to have a conversation? new too: he is not brussels. he has been there for a long time as a euro mp.p, and he has been good at making noise. they will dream the possibility of making even more noise at the crucial time in september, october, november, when we have next -- the it is perfect for someone like farage to take cheap shots at the european union. francine: i will get that caroline and a second about assets, but i have to get my morning must-read from the "new york times." european elections will gauge the power of populism is what this is entitled. thet, stephen erlanger,

writer, says that if populist vowed to shatter the european union, they have softened their matchde -- softened to public attitudes. is that right? -exit.d to talk about ital has the narrative changed? wolfango: the narrative has changed. it is still a nonsensical narrative, if you ask me, but the narrative has softened. the moment you talk about bringing down the castles, you make voters nervous. that did not work so now it is let's get more votes. even if we do well -- and we put it all under the same umbrella, geth is wrong -- and they 30% of the votes, they will not go far. it is a signal, but the way we election is athis

midterm in key countries. in terms of the brussels story, the trajectory is unlikely to change, even if the party gets 30% of the votes. the vote but 30% of for extreme populist, what does that mean for assets? caroline: it creates more volatility, particularly around currency. it is currency that tends to react to politics. but the longer the political concern is with us, the less currency tends to react over time. it gets a bit complacent. so we may see some of that around the political side in europe. in terms of equities, we are underweight on european equities from a valuation perspective. we think the european market has fully priced a full recovery, but the earnings expectations is still too high, so earnings are coming down, so it will probably underperform on the cyclical market. francine: caroline simmons of

ubs and wolfango piccoli of 10 year intelligence. coming up, the spanish italian minister will be on at 10:30 a.m. in new york. they came back victorious after the spanish elections. now we will ask about european elections. ♪

tom: this is "bloomberg surveillance." elections in india. the prime minister's coalition is poised for victory in general elections, according to exit polls. the win would give narendra modi another five years running the world's fastest-growing major economy despite a struggling rural sector. joining us is bloomberg's we editor in mumbai. do we trust polls? and how will that change the dynamics in the economy? are right, the polls b.j.p. is set to make a

comprehensive victory this time here this will only strengthen .odi's hand as prime minister having said that, it quickly got the numbers. around 267 toe 350, and all you need is about 272. this looks like a credible victory. there is one caveat -- exit polls in the country have a notorious reputation. they got it wrong in 2009 and in 2014, they underestimated the victory. francine: when you look at the agenda modi has put in ways, includes -- it includes a boost

in infrastructure spending, but what does it mean for the economy? he seems to have been slower than investors were expecting him to be in the economy? modi came 2014, when into office, there was a lot of expectation that he would shake up the economy and offer a new deal. the has not happen. what intern you got was a bunch of incremental measures that weaken the economy at the edges. or goods and services pacts the bankruptcy call, which the modi administration claims as the prime minister's cap. but what the economy now needs is a creation of a large number of jobs to get the investment cycle kickstarter, fixed the problem of agriculture. this requires significant out-of-the-box thinking backed by a significant amount of capital. modi, if he comes back to

office, will have a new set of priorities. tom: let me get to indian civics 101. of modi has a new vote confidence, but who does he politically speak to? explain the legislative branch process of india. the prime minister is accountable to parliament. if his party wins more than 272 seats in parliament, they will have a majority, a two thirds majority in parliament. they will also control the upper house of parliament if they make these kind of numbers. but here is the story -- the audience that prime minister modi has been able to appeal to by, in essence, been fueled this brand of religious nationalism that has become the mainstay of the b.j.p.

the fear that many liberals will have is the soft, inclusive yearsfor the lasso many will be replaced with an aggressive brand of nationalism, which the present government is also encouraging. that, in a sense, is a concern. francine: thank you. harsha subramaniam there. still with us, caroline simmons and wolfango piccoli. what does this tell us? i do not know whether this is an india story or whether we can ascribe late -- extrapolate and say as long as the economy is ok, the incumbent has a stronger impetus of staying? wolfango: if you want to look outside india, the payload can isto other emerging markets a strawman story. the blend of religious leaders and -- look at turkey, duterte.

there are some parallels. if you are into political science and want to look at the story, europe is the story of the alignment, the party system being forced to change. in emerging markets, it is a story of a strong man, usually running on some sort of nationalist, populist campaign. francine: i do not know whether there is a really craft in emerging markets? caroline: emerging markets are trading in double digits, so there is a lot of potential for them, but they will be busted by certain aspects, whether it be political or the trade war and also the dollar, so we were underweight on emerging markets, and lastly, we brought that up to neutral. tom: what do you think of america? what is the weighting of america

for cap stocks? caroline: we are neutral. it is the only market trading above its long-run average, only slightly, whereas all the rest are slightly below average. tom: neutral on the u.s. where can you overweight now? caroline: we are overweight global equities, which has a large element of the u.s. and it. we are overweight japanese equities. and overate emerging-market sovereign bonds in u.s. dollars. tom: caroline simmons with ubs, thank you so much. wolfango piccoli, thank you for the walk-through of about eight international themes today, and he is with teneo intelligence. it is the beginning of an exciting week. i would center back to the thursday e.u. elections. and we do not see results right away. it takes a couple of days to get all the country's devout, is that right? francine: right. it starts thursday. a lot will be thursday.

it will be -- a lot will be sunday. it is up in the air whether they really have an impact on policies outside brussels. of course, it could have an impact on brexit if nigel frost does really well -- if nigel farage does really well. next hour, we consider the equity markets, the courage to be in the markets given all of the news flow. john gallo joins, with credit suisse. futures a little red right now. this is bloomberg. ♪

tom: oil elevates as opec manages the macroeconomics of

supply and demand. the president, by tweet, manages , badran story -- good cop cop, rinse and repeat. little news on the trade war front -- one thing is that investment and business confidence are stalled. and deutsche bank has many questions to answer. good morning. this is "bloomberg surveillance ," live from our world headquarters in new york. i am tom keene. with me, francine lacqua. i am covering up the "new york post" -- i do not know if you can see it. there it is, and it is painful. it has a massive spoiler alert, and i am covering it up yet i do not know why media is doing this. francine: the tension is rising. i do not know why we are doing it it it is like i have a secret and and not showing anyone. tom: total denial over the

moderate conception of drama and theater. we are not doing this at "surveillance." downine: put the "post" and let's talk the markets or european elections. tom: european elections are front and center for me. for our american audience comics plain why i care about thursday in the united states of america? francine: first of all, people have not cared about european elections for the last decade. suddenly, it is an indication of populism in europe and some of the policies that could be put in place. even in the u.k., despite theresa may saying we will not has to voteections, for parliamentarians in brussels despite being a withdrawing country. this is kind of the world we live in. tom: many stories this week as well paid right now in new york city, with your first word news, here is kailey leinz. president warns that iran faces ruin if it wants to

face the u.s. he later told fox news that he does not want the iranians to have nuclear weapons. british prime minister theresa may is promising what she calls a bold new offer to include the brexit deal she wants parliament to approve, but many members of her conservative party have moved on, focus on the bigger race to succeed her. many are trying to stop boris johnson. australia's prime minister, scott morrison, his back to work after his surprising come-from-behind election win. passing -- isis promising to pass tax cuts. japan, the economy grew faster than expected in the first quarter. gross domestic product rose at an annual rate of 2.1 percent, but that figure is somewhat

misleading. japan's imports fell faster than exports, which mean that net exports drove growth, a sign of weakness in demand. and a stunning turn of events in a graduation sermon in atlanta. billionaire investor robert atth went off script morehouse college and promised the almost 400 graduates that he and his family would they off all the student that's, costing around $40 million -- they would pay off all the student debts, costing around $40 billion. global news 24 hours a day on air, and on @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. tom: thanks so much. i am glad you put in the morehouse story. mr. smith visits as every devils -- every davos. he decidedly did not start out at third base. what do you do with next year's grads? who shows up to speak at

morehouse next year? francine: find another billionaire. up rightgates, line now, or someone like that. maybe mr. musk right now. for our global audience, that really captured the imagination of america. let's get the data check. features negative two. oil with a little bit of an elevation. i will look at renminbi and deutsche bank. onto the next screen. renminbi 6.92. brexit -- i do not know. francine: i know about brexit -- i do not really, but we are looking at how it unfolds, which we are unclear about whether the labour party wants a second referendum, but it is having a little impact on pound. i am looking at and may be -- renminbi. i am looking at yen, because it is a good litmus test on risk on sentiment.

and european stocks mainly down. tom: very good. tim copeland joining us on one story and the radar -- huawei. i think we have to go back to basis. who is huawei? >> they are one of the world's largest technology companies. they make smart phones, one of the largest smartphone makers. but what has everyone noticing them is they have risen up to the one of the major suppliers of telecom equipment. that is the stuff that sends you the signals that streams "game of thrones" to your smartphones, and they are really freighting around the world -- not much in the u.s., but many other countries around the world by a lot of huawei gear. the u.s. is worried about that, because they feel that huawei is aiding and abetting chinese espionage because they think they have too close of a link to

the beijing government. tom: nice summary. to get to the point, is there demonstrable evidence of said espionage? tim: publicly, from the u.s., no. they have been some cases of concern. bloomberg wrote a story two weeks ago where some things have popped up in europe about 10 years ago that were of quiet concern where backdoors were found by telcos there, but as of yet, the u.s. has not put forward of desperate forward evidence of huawei being engaged in espionage. there may be a feeling, but no evidence has been furnished publicly. francine: the u.s. are going quite hard on huawei. the europeans are not. can the europeans build 5g without the help of huawei? tim: they could.

samsung in south korea, -- there are very capable companies. there is a belief that huawei is ahead in 5g, but i do not think by much. viablend ericsson are competitors and can do it without huawei. tom: tim culpan on asia and technology, really one of the joys of bloomberg opinion. thank you. right now, joining us to get your briefing going on the equity markets, jonathan gallup of credit suisse. be a bullonfidence to in a mall-up market. are we still melty-uppy? >> it is a 3% contraction on trade concerns, but i do not think the likelihood of recession is there. tom: this is so important -- i

am looking at the news flow coming by -- iron ore is at a record price because of demand for china, and we are worried about the overlay of global demand with all of the stories we are covering, yet you can still stay bullish and participate in the market. notthan: the key is you do need a roaring economy to have a perfectly fine stock market. is the economy great? no. you have the surveys done of executives on their spending extra stations showing that they are decelerating. global economics are weak. but there is a difference between modest growth and a contraction, and that is where we are. francine: the more this trade war continues, even if it does not escalate, how much does it shave off world gdp? of,than: it is a question

first of all, the tone as well as the duration on this. if we are really attacking supplying chained -- supply chains and undermining what business needs to do, then this could be big. but the way it looks now, you're going to get 10 to 20 basis this isax, if contained. it will be a blip, nothing more than you would see in a set of incoming data. francine: but is it contained? are we excepting some kind of deal that we never got? jonathan: it is difficult, but i do not see anything that is indicating they're looking to escalate this to an all out trade war where they are actually attacking supply chains and holding back strategic capabilities and things of that nature. the key here is we have to step back. what the administration is trying to do is level of the playing field, because china does not allow access of foreign

companies into their market. they are subsidizing industries. the goal is create something that is positive for trade over the long run, not simply to get a better deal. it is to get a fair deal. in that context, we will be fine. tom: we just had tim culpan with bullydo you still have a -- these faang stocks. let's go broader -- 20 or 30 stocks. do you still have confidence in that move, given the various ratios we see right now? jonathan: i will say yes, but. the reason is, especially these faang stocks, they have gotten so large it is difficult for them to maintain the growth rates they have had. these internet related companies, like facebook or google or others, the are

really large, to continue to grow revenue at 20% forever is hard. it is clear that they are spending more on their businesses for things like security, and that does hit margins a bit. from creditn golub suisse with us. reacted -- this is expected. blackrock will not directly vote on the deutsche bank asset management business at this annual meeting, and that rings true to me. they will hire out an independent fiduciary to do that voting for them. that maybe does not move the needle, but i bring it up because it has clearly moved the stock, now down to 6.67 euros per share. francine: and you wonder where we will end up with. we were talking to philipp

hildebrand of blackrock earlier on, and they are one of the biggest investors in deutsche bank. the heart of the matter is we do not know what deutsche bank will look like. a lot of people will say it is about cost, but it is actually fundamentally what does this bank want to be in the next three years to four years? a lot of people are saying we still do not know. tom: right now, coming about the 9:00 hour, a very important fed president. these are the regional president s, hear from atlanta, raphael bostic with our michael mckee. this is bloomberg. ♪

think that all country should recognize that, for their own respective banks, to be able to operate at scale across the entire european market would be a tremendous advantage. it would also allow shifting the focus away from being too exposed in the u.s. and having more of a scaled up, huge market that you could tap into at the european level. francine: that was part of our conversation with philipp hildebrand, the vice chair at blackrock. it was an interesting conversation, because we spent a lot of time talking about mmt, and the fact that he was at some point, central banks will come to the limit of what they can do if there is a downturn in the next 24 months. tom: a very important conversation. i do want to point out we have had a real deterioration on the tape. green an hour and a half ago,

futures now -11, dow futures -89. jonathan golub with us and marty schenker joins. screen -- deutsche bank has fallen out of bed. there is no other way to put it. the fed, as a regulator, would handle this family in new york than our experience of how -- theors will handle fed, as a regular, would handle this differently in new york than ours variance of how regulators would handle this in germany. martin: to the extent that they violated any rules, the new york fed will be right on it. tom: and of course we had the "new york times" article this weekend on the florida operation and such. but when you talk to our all in banking team, has the distance and never been greater between

american and european bank operations? martin: no, the difference is stark. especially when you look at performance. the u.s. banks -- tom: stark? [laughter] don't you give away any spoilers. it could be start, but maybe not "stark." francine: no spoilers for "game of thrones." if you are listening, we will not have any spoilers, at least on "surveillance." when you look at the difference, it is also because of the financial crisis, the u.s. reacted quickly. i do not know whether we want to talk about the banking union, but what does europe need from america when looking at the bank s? marty: i think it needs the a regulatory structure that allows them to

operate in the u.s. i would say it has less to do with u.s. regulation that it is with actual performance and management of the banks in europe. they are definitely weaker in a whole range of measures than their u.s. counterparts, and that will not change anytime soon. francine: away from deutsche bank, talk to me about the trade war. between the u.s. and china, is this more about technological supremacy? is this what the president means by saying this will not happen on my watch? marty: clearly, the u.s. has ,aken, after the ban on huawei a clear marker in the sand that they will not allow china to take u.s. technology and gain ground with it, which it has done over the past many years. and it has taken donald trump's administration to say starkly that they will not sit still for it. it is rather fascinating.

you really have to separate it from the trade issue. they are different issues, although they get to the same place, which is china's ambition to be dominant and challenge the u.s. force of promising -- before supremacy -- for su premacy. francine: thank you, marty schenker. jonathan golub stays with us. coming up, david westin interviews mario no wilson. this is bloomberg. ♪

tom: good morning. "bloomberg surveillance," francine lacqua in queen victoria street in london, tom keene here in new york. deutsche bank at an all-time low -- says it all, doesn't it? francine: yes. and there is downward movement to a lot of these european banks. they kind of move in tandem. deutsche bank has extra issues, because investors are trying to figure out what they stand for and what their market is. we also have the agm a little later on this week. us fromathan golub with credit suisse -- of course he will not speak about a competitor, but he will talk about use of cash. share buybacks are enormous.

do they slow down at the margin or do share buybacks continue? jonathan: they do continue, but i think we are misreading this. share buybacks are being driven by the fact that these companies are generating massive free cash flow from their businesses. the fiction that companies are borrowing cheap cap it and jamin up stock prices are false. will that continue? jonathan: it will continue. this past quarter, in earnings season, it was over 2% of eps came from buybacks, which i do not know is a record that is a really high number. francine: where do you see value in equities? jonathan: i would almost asked the question differently. is that going to be the key driver, cheapness? i think that screening stocks on

what is undervalued is probably not the right way to look at it. the u.s. is extensive compared to virtually everything else in the planet, and it will continue to be an outperformer. technology shares, you could almost argue, putting aside some issues like tom and i were talking about the megacap tech, they look as reasonable as any, given their growth prospects. francine: i like that. it is like a fancy way not to give us some of your calls. orchids -- emerging do you like emerging markets? jonathan: i like the u.s. better. if you saw we were going to have a huge back half rally in the local economy because china did big stimulus, yes, i would want to be an emerging markets. but that is not what we are seeing. right now we are seeing a sloppy

economic backdrop with a bit of deceleration. in that market environment, it is not great for e.m. that is probably a better environment for the u.s. francine: thank you. jonathan golub of credit suisse stays with us. coming up, the bnp paribas chairman. he will have a thing or two to say about rose and whether european banks can fight the u.s. for some market share. that interview at 10:00 a.m. in new york, 3:00 p.m. in london. this is bloomberg. ♪

tom: i will not mince words -- fed presidents speak differently in asia then they do in the united states. mr. bullard out of asia will be more than interesting. francine lacqua in london, tom keene in new york. with our first word news, here is kailey leinz. kailey: the president is signaling he is in no rush to get back to trade talks with china. the president told fox news he is very happy with the trade war. "we are taking and billions of dollars. china is obviously not doing well like us." the president also says that chinese economy will not surpass the u.s.'s while he is in office. deutsche bank's anti-laundering unit reportedly sought suspicious activity in a counseling to to donald trump and jared kushner. 2017,appened in 2016 and according to the "new york

times," and the staffers wanted to refer the matter to a federal watchdog, but an exec have overruled them. and the indian prime minister will sweep to victory in the general election. that has stocks rising to the highest in three years. modi ran on a platform that included a boost in for shorter spending and support for farmers. hbo is plotting a post "game of thrones" future. there will be a "game of thrones" prequel, and programming will be ramped up by 50%. 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. leinz.ley this is bloomberg. tom: thank you so much. no spoilers here. the "surveillance" team that's up wicked early, and most of us

have not seen it. and we will keep it that way. francine: no spoilers here. speaking of spoilers, key opec producers have signaled their intentions to keep supplies constrained for the year. it was less than clear if view.'s shared that saudi arabia urged staying the course. >> saudi arabia, we are not going to deviate from our target for july in anticipation of either a decrease or increase for our target. we will commit and take an extra month, and i hope my other colleagues will do the same. we will not jump the gun. difficulty with the technical issues they are facing with the pipelines, i would like them to stick with their current production voluntarily and make up for that torproduction that they had

do in the first three months. but overall, i think everybody is satisfied with the contributions of opec plus globally. francine: joining us now is annmarie hordern -- is amrita sen. first of all, do we know where russia stands? it is unclear whether they were keeping their options open or whether they are shying away agreement?s amrita: i do not think they are shying away from the opec+ agreement. this is the first time russia has been in a bind because of what is going on in the pipeline. from what we know, it is far from resolved, and the northern and southern leg right now are still shot. on reducingerall over compliance as a group,

particularly saudi arabia. byy have been over complying 500,000 barrels a day. but even russia, the proposal is millione the 1.2 barrels a day. it is nothing major. it is partly driven by the fact that they will struggle themselves because the pipeline will take months to clean up you otherwise, i believe they would have pushed for a bigger number. opec+ worried are about? orl recession cutting demand cutting supplies because of iran? amrita: i think this is a big issue for them now. it is a great question. on the one hand, they acknowledge the trade war will be regimental for demand. on the other hand, they can see all of their customers asking for more crude because of the losses from iran.

at the same time, oil prices have not really gone up. they are very stable at $70. these price levels, there is not really an incentive for them to bring a lot of oil to the market, whereas the physical market -- grant is almost -- brent is almost one dollar back. has notncial community bought into the narrative yet, and that is the dilemma for opec. tom: i think you are exactly where the discussion was friday, the distance from the financial community to what oil experts are seeing. how does not close this week -- how does that close this week? amrita: i do not think it closes this week. i think it will take time. because financial guys were badly burned last year. they want to make 1000% sure increasingis not

production before they step in. at the same time, geopolitical risks are ratcheting higher. so flat price has to go up. amrita sen, thank you, of energy aspects. jonathan golub with us from credit suisse. on economics, oil does not play much in the fact oculus anymore -- until it dies. are we close to the "until it does" licks in? -- clicks in? jonathan: i do not think so. but first of all, it is a big input cost for the economy and the impact on the whole economy part of the market, but also, it is a huge impact on the energy sector, which is something close to 10% or, in aggregate on the market. tom: where are you on the animal spirit of hydrocarbons after anadarko and the occidental play. play? jonathan: it is interesting.

when i go to canada, all they talk about is the price of oil and energy. in the u.s., i am hearing a lot less conversation on energy and other areas. francine: but how does it play to inflation? should central banks around the world still be targeting 2%? jonathan: on that issue -- no. first of all, the 2% number is probably way too high. if you look at the fed's preferred measure of inflation, to 1.7%.t is closer it seems as if 2% is too far away from reality. here's what we will see -- we will see inflation will be in the high 1's. long-term gdp will be 2% or underneath. that is a benign growth backdrop with benign inflation, which means interest rates are likely to stay between 2% and 3% for a long time. francine: what does the oil price actually mean, then?

if you look at the trade concerns and the impact it could have on investment, coming from chief exec at is an consumer demand, what -- is there a role that the oil price plays in all of this? jonathan: it plays a role when it spikes out of range and starts to mess with the consumer. but one of the issues, when i am talking to people about inflation, number one is you are looking at wages and a really tight labor market, which has the potential to push wages up, even though it has not in a huge way. then, you're looking at housing inflation, which has eased off a little bit. and also issues around health care. oil matters, but i would say it is secondary in people's minds. francine: thank you. jonathan golub stays with us. in the meantime, we are getting breaking news out of the chancellor of austria, the youngest head of state in europe.

hours after his nationalist deputy resigned after a video of him promising government contracts for campaign funds, kurz dumped his far right partner and began campaigning for general elections, a sebastian kurz now warning it copperheads of investigation and saying the leaked video destroy the coalition. tom: coming up, martin gilbert on investment management. this is bloomberg. ♪

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

here we are off the price-to-book on the bloomberg. deutsche bank, 0.2 two p commerzbank, 0.33. unicredit, 0.41. 0.6 one. j.p. morgan, 1.54. steven arons joins us on deutsche bank trading at seven times less than jpmorgan's value. when does this stop? when do the regular to see in europe catch up with america? >> yeah, it is crazy. the price-to-book value is amazing. it is the lowest by far in europe and the u.s. as well. it will be a big topic at the agm thursday. deutsche bank is having their annual general meeting thursday. it is also a problem for regular's. financial regulators in germany say they are worried about the profitability of german banks in

general. by deutsche bank being the biggest german bank, i am sure they are thinking of them as well. profitability is not there. tom: how do the regulators in germany it fit into society? how do the regulators fit into the government or into the industry or into the minds of the people? important role, obviously p they are the regulators in an important industrial, commercial sector. they report to the finance ministry, to the german our, indirectly, accountable to german voters. but it is an indirect accountability. but they have a strong say. everyone listens to them, especially in the banks. when they say something against the banks, the german population will listen as well. francine: with a merge with anyone else? they merge with anyone else?

steven: deutsche bank? i do not think so. it is a very remote possibility. look at the balance sheet of deutsche bank. still hasmous and legacy issues. some of the derivatives on the balance sheets to have maturities of decades, and winding them down is costly and difficult. and that is a real -- legal risk. i do not see it. it would be a long shot. tom: steven arons, thank you. jonathan golub with us from credit suisse. he will not talk about deutsche bank or any other bank individual stocks. let's take a look at the single best chart, which shows bank stocks, so jonathan golub storm's office at. how about normalized in 2007, the 2009 ugliness, the trajectory of fortress dimon,

down 10% of its value in 2007. stock selection matters, doesn't it? jonathan: so on the top is jpmorgan? tom: jpmorgan. jonathan: the u.s. got ahead of this issue. and look at the success we have had in the entire economy compared to europe. tom: are you buying etf's in mutual funds, or do you think there is value in individual stock selection, so you get in the line and all the white line? jonathan: -- so you get in the blue line and not the white light? jonathan: the u.s. still does better. i think the u.s. will dominate this trade. if you look at global equities, the u.s. is tech heavy. europe is bank heavy. if you think non-us and european banks will struggle, that means the also be an outperforming market and there is no other way to look at it. francine: when you look at the

longer-term trends, whether it be driverless cars or other things left to be disrupted, is now a good time to get in on that trend? or do you need more uncertainty? jonathan: which trends are you talking about? francine: driverless cars, some of these big ideas that we talk about. the future of space, the way our world will look like in five years, 10 years, 15 years? jonathan: i live in the world of large-cap u.s. stocks, seven -- and some of these are ideas that could or will be changed. the auto sector trading at a multiple of something like six times p.e. in the market is saying because of the impact of driverless cars , the car is dead, and i think it may be too soon to make that call. tom: where are you on consumer

discretionaries? jonathan: there are two discretionary sectors. you have amazon and the rest of consumer discretionary. you are talking about the use of technology. these traditional consumer companies, many are just not taking advantage of the new economy themes, and i think they will struggle as opposed to those playing the new economy, that revenue growth is amazing, the margins are amazing, so it is really two separate sectors. we are overweight in total, but we like the new economy. francine: we will come back to that. now coming up on "bloomberg chiefak," reimer's executive at 8:00 a.m. in new york, 1:00 p.m. in london. this is bloomberg. ♪

francine: this is "bloomberg surveillance." let's talk about brexit. following the collapse of prosperity talks, theresa may says she will make a bold new offer to improve -- approve the brexit deal, this as the prime

minister prepares for a fourth attempt to get her through parliament. meanwhile, the leader of the opposition party has moved closer to backing a second referendum. jeremy corbyn says there should be a vote on any deal to leave the e.u. joining us now is our bloomberg political editor. it seems like theresa may has been a lame-duck for such a long time. is she really a lame-duck? >> i think she will make this last-ditch effort to try to get her withdrawal agreement billed through. will do is the tories so poorly at the european elections that conservatives and labour iwl llive in -- will live and they will put brexit behind them. it is a slim chance of happening.

she is proposing a bold deal that will try -- all attention has moved to the tory leadership race. the better the brexit party does, the better the chances a hard-line brexiteer, someone advocating a no deal brexit, will have in that race. francine: but the parliament earth magic does not change. so does that mean we go to fresh elections or second referendum if there is a hard-line brexiteer? a: you cantheres replace the prime minister, and we get catharsis of where you get a prime minister who can try to appeal to different factions, but the parliament is divided on these very big questions -- -- custom unions, and i do not see that changing to the question is which side gives

first? the main takeaway for markets and businesses is that this no deal exit that we had, with a great sigh of relief, that was off the table is now back on the table. tom: are going to a four party united kingdom? is there real story out of the e.u. vote is you have not two parties but four parties? therese: if it were not for the fact that the british electoral system heavily favors the major parties, we would absolutely be seeing that peer that is clearly not a two-party system. but the electoral system forces the logic. i was recently watching nigel farage's brexit party -- there is an incredible groundswell from tory and working-class labour supporters. his gamble is he can break that

mold. tom: is it a farage of 2019, is that the same farage i first knew a number of years ago? therese: no, i think it is farage 2.0. he has learned from donald trump's campaign but has also learned from five-star in italy. he has laid off the beer. it is a focused, professionalized campaign that ,oes not talk about immigration principally. it is about channeling the anger against the establishment on brexit. it is about talking trust in competencyonfidence, , all of these issues that resonate with both sides of the political spectrum. it is a crafty, much more professional campaign that we have seen in the past. inncine: if farage does well

european elections, does he come politics?mestic therese: he will absolutely come back to you he has made no bones about the fact that he does not see this just about your peer and parliamentary elections. european palmut entry elections. ofyou look at his roster candidates, he is pulling from names in the conservative party, inroadsels he can make into both parties. francine: thank you. teresa rafael -- therese raphael. we will have plenty more from brexit. we will look at boris johnson and what that will mean for policies. "teresa"gly american -- "therese."

sorry. let's look at deutsche bank. here is a 10 day chart. what is important is there is a convexity and acceleration to the downside, right now trying to hold it at 6.61. that is a euro-chart based as well. much more to talk about on "bloomberg surveillance" through the day and through the week. europeang towards elections thursday. much more going on in washington. and futures, -18. stay with us. this is bloomberg. ♪

♪ president trump threatens

iran. saudis say they don't want a war. a tech cold war. companies stop selling software to huawei as president trump says he's "very happy" with the trade war. and elections from india to australia have one thing in common. prime minister narendra modhi could retain power. david: welcome to "bloomberg after the lastay episode of "game of thrones," which we are not telling you about. alix: no spoilers. it's going to be ok because i've not seen it. david doesn't care, but i didn't see it. no spoilers. can i make it 24 hours without knowing anything? i think it's possible. david: the question is what does hbo do next