♪ >> touchdown in london. president trump in the u.k. next, the big protest expected. china says the trade war hasn't make america great again, and is investigating fedex. coalitiony's grand has chancellor merkel quitting throwing the chancellorship deeper into turmoil. good morning, good afternoon if you are in asia. "bloomberg surveillance." we will look at your markets in the second. but first, president trump is

u.k.,rriving in the air force one and all of its glory landing just a couple minutes ago. president trump will meet members of the royal family and will be expected to discuss climate change and chinese technology during talks with the outgoing prime minister, theresa may. protests have been planned and althoughk., president trump has spoken of his admiration of the prime minister, he is also expected to have differences of opinion in the talks, which begin tomorrow. we are waiting for the doors of air force one to open. i'm sure we will get a glimpse of the first family. we understand on the u.k. side that the prime minister will raise the issue of climate change with the government spokesman, saying on monday that the u.k. was disappointed by the decision to withdraw from the paris climate agreement.

we will have plenty more on that throughout the day but before that visit we will hear from president trump, telling newspapers he's backing conservative party leadership boris johnson to be the next prime minister. let's have a look at what your markets are doing. overall, it's a lot to do with the trade concerns. withs in europe declining, trade war jitters against mexico and a lot of stocks are down. 10 years treasuries gained. and minors pulling down the stoxx 600 index after things treated lower in asia. at, oilwhat i'm looking extending its route as the wti tumbled. we are waiting for the president to get down from air force one. we have live pictures from the

airport and then we will go to the ambassador's residence at regents park. we have been following this story. we are expecting the president at the palace later. he must have tweeted from the presidential plane. he attacked the london mayor, sadiq khan. >> that's right, attacking him in a series of tweets, saying that he is "nasty" to a sitting president, and compared him to the likes of bill de blasio, the new york city mayor, and said he should have his -- he's talking to a lot of locals about how trump is the most egregious threat to the global order. many here in london on the political side don't agree with the pomp and circumstance that's being rolled out for the u.s. president, unlike barack obama, who was the last u.s. president to have a state visit. he addressed parliament and

president trump will not due to the opposition. >> how many protesters are we expecting? >> well, in the thousands, francine. security is the highest at these types of visits, and very high for this visit, given that there is so much backlash. he doesn't pull well in the and of course, there was that famous donald trump baby blimp -- we can expect the same here but if you walk around buckingham palace, you get two lines of american and u.k. flags. there were not protesters insight because security is very high. expectinge we president trump to focus on in his visit? will he be trying to lobby the government to be tougher on the chinese technology companies,

and will it matter since the prime minister will be here shortly? >> i think that's a great question. whoever steps into theresa may's role, it will be something that i think trump is critical on. on, my. papers leading way or huawei. we saw something similar with the telegraph as trump lands in the u.k. of course, the u.s. has been talking to allies to ban huawei as they have blacklisted them and we have already seen two senior members of the conservative party and come out and signal that they may actually agree with the u.s. president on huawei and the controversy connecting to the chinese government/ ? >> all right >>, thanks so much. emory horton. we understand that ivanka arrived before her father and posted a picture of herself in west london.

our guest is also with us, thank you for joining us. let me kick with you. we see the door open of air force one, the president set to arrive, step down and make his way toward the ambassador's residence. what is his main message for the u.k.? does he want to weigh in on huawei? >> i think he wants to weigh in on brexit for sure, on the future leader of the u.k., on -- but setting aside those critical policy issues, the american president is coming to london because he wants that state visit, the optics of it play very well globally despite the controversy. this is a president who loves these visits. >> is it because he has the media on him? -- if theuse he has

president says i want boris johnson as prime minister, does that change anything? >> it doesn't change anything, very difficult calculation to make. for those who are inclined in that direction, it takes them further down the path, and signals that with boris johnson as prime minister that the relationship between the u.s. and u.k. will go to the next level. but i don't think that's necessarily why he is here. and ifs the symbolism, he thinks that it will further his agenda in pushing britain and a particular way, all the better. >> we start to see the first quinces of the pageantry. we understand -- we have been told by officials that president trump will be greeted at the airport by the u.k. it will be greeted by the u.s. ambassador and palace officials. how unusual is it for a city president -- for a sitting president to bring his whole family? >> there haven't been that many

state visits -- plenty by u.s. presidents, but not many official visits, so this is unusual without much to compare it to. this is a president whose family and loyalty are very important himim, and the display of meeting the queen in the royal family, the cabinet, -- remember, it's a president who sees himself as a form of royalty. does this state visit move the market? >> i would be surprised if it moves the market -- i think he's here more for the ceremony than anything else but a few tweets along the way won't be a missed opportunity. in terms of what the markets are thinking, i don't think they expect anything particularly new. you can tweet by policy but

could tariffs on mexico add to the markets -- when he talks about the relationship of the u.k. could he not make policy by attacking germany? >> he could do. i think he's particularly interested in u.k. politics, and obviously he gets regular briefings from nigel farage. i think you could see him more likely to intervene there and i'm sure he will have spotted that the situation in germany is looking less stable than it was a month ago and he may well weigh in with a comment about a future election in germany and what that outcome may be. >> is there anyone who briefs the president on u.k. matters? >> nigel farage, by all accounts, seems to have the president's here, but people are watching carefully. one of the most significant things, with the interview yesterday by the u.s./u.k. ambassador woody johnson, creating the beginning of what

we are likely to see, the american president saying if you want that free-trade deal, get out of the customs agreement and remember your entire economy is up for grabs. i think we will see a lot of hard conversation about that. >> there's the president of the united states of america getting out of air force one with the first lady, melania trump, coming down the steps, he will be greeted by jeremy hunt, the former secretary and contender headcome a leader -- the of the next conservative party. you have a sitting prime --ister leaves on friday what is the president really hoping to achieve? before wee was chosen knew friday would be theresa may's last day in office, but it did raise a very important question as to whether it would be rescheduled. not easy to schedule a state

visit, especially not with the president were security is such a great concern. toseems most impossible strike any important policy deal, but it wasn't going to be easy anyway, with the u.k. still uncertain about brexit. this makes it much more problematic and potentially the visit more controversial because he's likely to continue to weigh into the domestic politics of the united kingdom, something presidents aren't meant to do, shouldn't do, and haven't done in the past. >> we see pictures of the president with the first lady, jeremy hunt, and the ambassador. you can also spot steven mnuchin at the back. he is here to talk trade. >> i would hope that he has come and will have something instructive to say to the conservative politicians on trade, but whether that will get much airtime -- obviously there's going to be quite a lot

of other things on the agenda that donald trump will be pursuing, more the ceremonial ones. >> the president tweeted -- i think he was on air force one, saying that sadiq khan was nasty that they would allowed to have the baby blimp of trump at the capital -- does he go after his enemies and what does that mean when it comes to brexit? we have seen that for well over two years. it plays to a certain audience -- not everybody is following those tweets, he is speaking as a president who is masterful at speaking to multiple audiences over the course of hours. he will continue to do that, but this is a president who is about business, coming here to meet with 10 of the most important business leaders from the u.k. he will be looking to strike

deals and will be looking to further his views on what the u.s.-u.k. trade deal will be like, and which way britain should go if it wants to achieve something with the u.s. >> the president and the first lady getting onto marine one. the cost of the state visit, some of the equipment, that the president is bringing with him. hostrow morning, they will a business breakfast at st. james's palace. there will be the barclays chief executive and the chief of glaxosmithkline. we will keep a night on what the president does next. we understand he will go to the u.s. ambassador's residence in central london. as the president takes often marine one, we will be back with our guests, both stay with us. coming up, more on our top stories. anda police are on patrol,

the giant inflatable trump baby is being prepared as britain welcomes president trump. stay with us for full coverage. this is bloomberg. ♪

♪ i would say that brexit is brexit, it's not like -- we will use the term hard brexit and i assume that's what you mean. think the brexit movement and everything is going well, nigel farage is a brand of mine, boris is a friend of mine. they are fantastic people. nigel has had a big victory, 32% of the vote, starting from nothing, and i think there are big powers and have done a good job. moreat was some of the

recent comments from president trump about brexit. more about his visit throughout the show. let's get straight to the bloomberg business flash in new york city. cyprusneon is buying semiconductors, valuing the chipmaker at about $9 billion. the company expects cost synergies of about 180 million euros per year by 2022. blackstone doubling down on the future of online shopping, agreeing to buy nearly $19 billion of u.s. logistics asset the singapore, saying it's world's biggest private equity real estate deal that will greatly expand the industrial footprint of the company. as online shopping grows in popularity the need for warehouse space and cut delivery

times has ballooned. plunging after cutting its full-year profit outlook, saying costs will rise more than expected. this is the chief executive accelerates an overhaul of the british home building property maintenance company. he's racing to show her up finances to avoid mirroring last year's collapse of their arrival. struggleces an uphill to reassure airlines over jet safety after fatal crashes in five months. the international air transport there is a say speedy resolution that can be reached. the president predicts the 737 max 8 won't fly again until after christmas. >> i would have said december would be the time -- i don't believe it is going to happen before that simply because global regulators have a difference of opinion as to how they are going to get them to

fly anytime soon. >> and that's the bloomberg business flash. >> thank you so much. china says it is willing to work with the u.s. to end the escalating trade war but won't be pressured into concessions. an official report blames president trump for the collapse and talks and says the fight with china will only make it worse. the report also takes a swipe at the 2016 campaign slogan, saying the dispute has not make america great again. chief asian correspondent joins us. >> on the one hand, this was a trump,swipe at president blaming the u.s. squarely for collapsing the trade talks, and of course it said that the trade negotiations and tactics being deployed are hurting the u.s. economy and hurting growth and consumers and pushing up

inflation. they tried to put the ball back in his court. but for all of that they said china remains willing to talk and willing to come to the negotiating table and that was the takeaway for many people, this is still something of -- for all the rhetoric we are getting in the state media, this harsh nationalist tone, this shows that they are still willing to talk and even if it is getting tied around g20 later this month, it suggests that china is still willing to come to the table and perhaps there will be some prospect for a deal this year. >> how are you economists responding? had this view among my investors and economists following all of this protest that this central scenario they described was still that u.s. in china would come to the table, but those

expectations are diminishing, certainly most economists are downplaying the profits in osaka. investors are probably underestimating the damage that can be done by tariffs, and there is a risk of tipping the world economy into a recession. goldman sachs is saying something similar, expecting president trump to go ahead with to stay in remaining china. the broader picture is economists are saying the trade war is going to deepen before it gets better, but still there is some hope for a deal. >> thank you so much. enda curran, our chief asia economics correspondent. our guests are still with us. thank you both for sticking around. when you look at trade, if trump goes after mexico and says he will worsen the tariffs and

nothing changes, does this automatically suspend the truce with china? he's clearly putting himself in a situation where there is a lot of pressure to do complicated things. we have mexico, china, talks with iran. these are three major sets of talks to be pursued by an administration that isn't particularly good, all rhetoric to the contrary. china has weighed in and said that this is not a great situation, and the mexican government has chosen not to retaliate. it sent its foreign minister to the u.s. to have talks, this strategy of slapping tariffs on mexico -- if he pursued it, and that's a big if, many people expect you might walk this back because there's so much pushback domestically. but yes, it divergence his attention from china. it is less likely we will see

any kind of deal in the short term with china, even that the president is fighting a tariff on two or three fronts. >> what does that mean for the markets? >> probably less than two weeks ago the markets were hopeful that we would deal at g20 and now markets are pricing in a hold pattern. >> for how long? five years of trade war? >> absolutely, and they are pricing in will hold at the g20 so no further tariff increases, and an outside possibility of a deal around hallway. but in reality, i think the markets are coming to terms with the trade war's that are ongoing and long-term on stock markets, and when i say long-term, two to five years or longer still. >> is there a danger this becomes an fx for? >> it could. it will be fought on the number of fronts. the other thing the markets are worrying about is -- they always

knew trump was unpredictable but i think this underlines the fact that they cannot really guess where he may turn his lens and point at retaliation over trade or other hard-hitting influences on how their economies perform. uncertainty is what they worry about. >> do you think this could be escalated? >> one thing to note here is that i think we will begin to see more pushback against the becauset domestically domestic interests in the united states are being hit by china. theyusly agriculture -- are very concerned about the implications for consumers and manufacturers of the mexican tariffs if they go forward. i think hit germany -- this president is going to begin himuffer and we might see

take a slightly different stance, because the elections move -- calculation he's making with mexico is if he hits migration and trade really hard, that it will embolden his base and do him well through the primaries but it's not clear that's the case. are right --u migration and trade are the two things he is promising. will he go to any lengths to make sure that he delivers? >> i don't think he will, especially on mexico. those economies are very integrated, not only the level of supply chains but the people who depend on someone on that border. and it's not likely to have that effect. wethe caravans come through will see more migration through the summer months and tariffs aren't going to solve the migration problem -- put that together with the economic costs and i think it becomes a harder sell. >> where does this leave the

dollar? short-term, the dollar will remain particularly robust particularly against developing currencies. in the medium-term we have the possibility of rate cuts later this year and i suspect people will worry about the effect on trade in the economy. >> all right, thank you both. you both stay with us. coming up, as the spd leader steps down, we will be live in berlin next, and will talk a lot about the german yields. this is bloomberg. ♪

♪ >> touchdown in london. president trump backs boris as he arrives in the u.k.

next, meeting the queen is protests are expected. china says that trade war hasn't make america great again, and is investigating fedex. in germany's grand coalition on he brink, angela merkel quits. good morning, this is "bloomberg surveillance." let's look at your stock movers with dani burger. >> we have gotten confirmation of the latest megadeal in the chip sector, buying cyprus, which will put a valuation on the company for $10 billion. analysts are saying there is something in this deal for everybody but the synergies aren't as easy as they appear on paper and shares are declining more than 6%. they are moving down on some sell side ratings, this one from jeffries, who cut the price target on a 50% reduction from

where shares currently are, saying that the valuations are very high and there's too much optimism priced in and they would need perfect sales and customer acquisition for this price to make sense. have cut their full year outlook, saying it would cost the company construction business. costs are going to be higher, the company saying that because of that therefore your outlook will take a hit. >> thank you so much, dani burger. getting some data out of the u.k., mainly in manufacturing pmi fell 49.4, anything below 50 is a contraction. pmi, we have all been expecting this. we will get back to all things brexit and u.k. related as president donald trump has just touchdown, on his way to the

residence of the u.s. ambassador but before that let's get straight to the first word news here in new york city with viviana hurtado. blamingovernment is president donald trump's administration for the collapse in talks, even though it says it is willing to work with the u.s. to end the escalating trade war. they also said they won't be pressured into concessions. fedex, givingting a hint to the companies it made y label as unreliable as retaliation. president donald trump's chief economic advisor is the latest to leave the administration. he's the chairman of the white house council of economic advisors, a vigorous backer of the president's signature tax cut, but his influence in the white house was seen as limited. his post was downgraded from a cabinet level position. the trump administration is ready to negotiate with iran without preconditions, according

to the u.s. secretary of state, in response to iran indicating it would be willing to renegotiate if it wasn't bullied into doing so. despite this cooling of tensions, u.s. forces are practicing operations in the arabian sea. france is looking for an overhaul of the european union's antitrust rule. they leaveire says companies vulnerable to u.s. and chinese rivals. to end thets the eu killer acquisitions, when large tech companies by startups to stifle competition and innovation. becoming antt is increasingly expensive lunch date. the oracle of omaha being his record with the winning offer of over $4.5 million. many as seven as friends to dine with the billionaire investor. they will be eating at this smith and wilensky statehouse in new york.

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. >> thank you. trump just landed in london and is on his way to the ambassador's residence, he says there's an opportunity for a very big trade deal at some point in the near future between the u.s. and u.k. on the agenda, meeting the queen, sitting down with theresa may, and commemorating d-day. on wednesdaymouth before heading to normandy on thursday. he will also be meeting emmanuel macron. he is also meeting with the irish prime minister. let's focus on europe's biggest economies, the main governing parties are trying to pick up the pieces of their coalition after the unexpected resignation of the leader.

she says she has lost the support of her party, and her departure could prompt the spd exit from the government coalition which could force merkel to make a minority government, or call another election. us.guest is still with what does this departure mean for the coalition? >> hi, francine. she was one of the people who really pushed the spd to join the coalition and if you look back you will remember that they were very much reelecting partners. this has people in berlin asking questions about how long this coalition will go on. there's another school of thought that says spd won't pull the plug on the coalition yet because they are pulling very poorly in germany -- they dropped another 5% over the weekend, now just ahead of the far rate afd. but of course with no leader in the party, this leaves a lot of

questions as to where they are headed. they are meeting and we will know more this afternoon. they are likely to name an interim leader and not a permanent leader. >> who might replace her? well, that is the real question. the one person that a lot of people were thinking might be the likely candidate would be the finance minister. he ruled himself out as a candidate late last night and a lot of the names we are hearing are people who would serve on an interim basis -- local leaders within the party and who emerges on top is something that isn't likely to be known for weeks or even months. there is discussion of a special party congress for the spd in september. quickly, we are also hearing about tensions between the possible successor to angela merkel and angela merkel.

any insight on what that means? it seems like it could create a big headache for the chancellor. >> the issue for the chancellor is she doesn't want to pull the plug on this coalition because when she does her time as chancellor is up, because you have a new leader of the party and there are tensions. we will be hearing from her afternoonlater this on the path forward for the city, it's quite interesting for them in the poll over the weekend to see they have fallen for the first time behind the greens is the biggest party in germany. >> thank you so much. our germany bureau chief. guests whonow, our are still with us. a lot to talk about and president trump may also weigh

in on the german political situation but first of all how weak is germany? economically, it hasn't had a great ride -- does it the economic concern? no doubt. was as is something that risk, and it materialized that one of the key party leaderships are falling apart. germany will probably want to deploy -- the economy is slowing down and we have already seen that. some industrial production data that will assess how well we are doing in the second quarter but all indications show it is decelerating. what's happening within china and the u.s., in the u.s. and mexico, is not helping. that probably means a slowdown you cap a strong government. the second is the political.

wantrms of what many will -- of the jobs coming out germany should play an important role and maybe merkel herself has to play that role, who knows? >> is merkel the lame-duck? the next theresa may? >> i think there's a chance that -- government pulls her back it doesn't look immediately look doesn't but if it merkel herself may be more interested in one of the jobs. at -- it's look crazy to think that you have to pay the government to hold your money. is that ever going to change? >> i'm sure it will change >> let me rephrase -- >> in the near term, the

politics hardly help and i take your point that i think angela merkel is coming into the same position as theresa may, that the pressure is growing and i'm not sure she will be around that much longer in the market knows it. the other pressure from german banks who are not particularly keen on growth and that doesn't help their own profitability. there's quite a lot of crosswinds but in the short term things are negative in politics as they are i think it will stay there. >> who does that hurt? >> it hurts the banks because they can't make as much profit. if you are a pension fund, your maturities are coming through, you can't replace those bonds at the same level and you can't match liabilities. it's not good news for german pension funds or the german banks. >> do we understand the fallout

from the european election? candidates are very must have anit impact on policy longer-term. >> sure. most people are looking at the european elections as a signal of what's already going on, but you are right. one key point about angela merkel, it's interesting that she has given the commencement address at harvard, that wonderful interview to cnn, she's taking a position, not a somebody who is going to retire into private life, but as someone who might go on to have a leadership role in europe. at a time with what's happening with germany and the u.k. -- there's a vacuum of leadership and i think looking for that next leader is absolutely critical. >> do you think she will be commission president? there were all sorts of rumors about what she could do next but what does she want? >> it depends. it's a very involved job.

i was thinking more along the , and maybee council she can enhance that position. but i think both are possibilities. >> all right. you allstate with us. stay with "surveillance," plenty coming up, including a trade reduced recession. morgan stanley says that's the danger if trump raises tariffs again. that's coming up next. and how look at they go? jp morgan's is u.s. 10 year yields could be at 1.75% by year-end. we discussed that in a couple minutes. this is bloomberg. ♪

♪ this is "bloomberg surveillance." investors may still be underestimating the full risk of the trade war on the global economy. the recession could begin in as little as nine months, if president trump imposes 25% tariffs in retaliation. this was the warning by goldman sachs, that lowered it second-half forecast by half a percentage point. our guests are still with us. all, i feel like we need to start with how president trump sees it. we always thought the way president trump measures success is a soft market, job creation. if that's true, he will not put us on the brink, is he? >> he has a couple calculations.

president trump at some level believes in himself and that his policies will win. but remember, he has a short-term calculation driven by domestic political consideration as we move into the primaries, as he's trying to mobilize throughn his side nancy the democratic candidate.that is separate from what he does, which is the stock market, the economy, he cares that unemployment is low but he is going to get a lot of pushback and that is where we have to wait and see how he responds, especially on mexico where there will be a lot of pushback not to put those tariffs down, even the 5% on june 10 and certainly not the toy 5% by october -- and how that will affect what he does with respect to europe. he's also taking on a number of geopolitical challenges, talking

with iran, and there is any number of dimensions that for this particular president will affect his calculations -- not because it's rational but because this is the way he thinks -- politics shaping political reactions. he is unpredictable in that sense but if the economy starts to tank i think you will readjust. >> what is worst case scenario? calculations would be shaving off $600 billion. do we underestimate the impact could do want technology? the question is full trade war or not. if it escalates -- i share those least,heoretically at you don't want to push the economy into a recession when you are preparing for elections. miscalculate,ou you go full-blown trade war with china, and let's not forget

europe. europe will be around .6 of gdp lower. if all of this happens together -- that's a big if -- you will get that recession in several countries. we are already seeing u.s. 3.2 in q1eping from to close to 1% by q4 because of financial stability should -- financial stabilization, financial concerns as well, equity markets, all of that to increase risk premium and a slowdown in domestic demand. situation far from a in which the red alarms are going off. >> do you have red alarms going off? >> orange, amber. >> not bad.

>> what i would say is that i think the last few weeks has definitely unsettled investor confidence, and that's the thing that i suspect donald trump will find hard to manage. the uncertainty that has crept in with investor thinking has curbed because of the unpredictability and they thought the deal was on the aback and they were taken -- very unsettling for markets generally and the yield curve is further inverted and markets are suggesting a slowdown in 2020. >> an economic slowdown that could lead to a recession in the u.s. or elsewhere? >> i think in the u.s. because that is what the bond market is saying -- you can see through causes of negative growth and i is thatso the reality at the moment employment is the one thing holding up well. if that cracks i think markets

will get very worried. >> all right. thank you all. our guests stay with us. coming up, more on our top stories. roads in central london are being closed, and a giant, inflatable trump baby is being prepared as president trump tramples to london. this is bloomberg. ♪

♪ president trump on marine one, we understand he's on his way to the u.s. ambassador's residence in central london's regents park. i think that is part of the gated community where they fence. this temporary we understand there's a lot of security on the ground. with us, our guests. what will you be looking out for? we understand that the queen and the president will give a speech.

obviously it is what he says this -- is it the language or the tone or as president trump consistent? >> we are looking to see whether he will intervene yet again or in a different way and the u.k. leadership challenge, what he will say about the u.s.-u.k. free-trade deal. at this point, these are predictable things that we expect him to weigh in on despite the fact that american presidents coming to britain have never weighed in on the u.k. leadership challenge. now i think we are looking to see that we don't already expect. we have come to think of him as an unpredictable president but he has become phenomenally predictable in certain ways -- will he use the moment to leverage?ny kind of the other thing he is doing is he is pushing the debate amongst those individuals who are setting themselves up to be the next leader of the conservative party -- she's moving the dial

on how hard a line they should take on hallway and views on trade because they are positioning themselves not only domestically but also with respect to what relationship they can build with the president of the united states. he is moving the leadership challenge and a very important and nuanced way. >> what's the president want presiden theresa may to do with huawei? friday is the day we start the leadership contest -- does he want europe blocking huawei? >> he certainly wants the u.k. behind him and i think he wants to see any person who hopes to be the next leader of the united kingdom take a strong line and say that this argument that has emerged, that you can differentiate between huawei and the core and their engagement more generally -- i think he

wants to push that argument and see the u.k. take a harder line, because it gives him leverage, i think, and support for his broader position on china. >> all right. thank you all for joining us. "surveillance" continues in the next hour. tom keene joining me here in london. he will give us a little bit of trump perspective. stay with us for continued coverage of the state visit to the u.k. we will be talking about trade, quite a lot about what will happen at buckingham palace later today, where the president and the queen are expected to make a speech. ♪ speech. ♪

♪ >> touchdown in london. president trump arrives in the

u.k., and the big protests are expected. china says the trade war hasn't saved america, and is investigating fedex. stocks fall further. in germany's grand coalition is on the brink. a key ally of angela merkel quits, throwing her chancellorship deeper into turmoil. good morning, everyone. this is "bloomberg surveillance." i'm francine lacqua in london. tom keene is here to give us insight into the presidential pageantry. >> we already saw some of the pageantry, the president and the first lady beginning the first day. --will be interesting to see it's fascinating for an outsider to see how the british papers are attacking. >> he gave two interviews to the "son" and "the times," laying out the name of the game.

andill weigh in on brexit is trying to shred the london mayor to pieces. >> the stories coming up right now -- we will put the tweets on the mayor right now, the first gucci oning the plane and coming off an burberry. >> this is a lengthy tweet. we are following the presidential tweets. hasays the mayor of london, "been doing a terrible job as -- he says hen," is a stone cold loser who should focus in crime. blimp couldble baby fly over london.

but first let's get straight to the first word news in new york city with viviana hurtado. >> china is tweaking president donald trump's campaign slogan, saying the trade war hasn't made america great again. beijing says it is willing to work with the u.s. to end the dispute but blames the trump administration for the collapse in talks. china says it won't be pressured into making concessions. morgan stanley is warning a recession could begin in nine months if the trade war escalates. the firm says it depends on whether president trump carries out his threat to impose tariffs on more chinese goods and china retaliates. goldman sachs has cut their forecast for second-half growth in the u.s. to do percent. it's also raising probabilities for rate cuts by the federal reserve. germany, where an unexpected resignation is rocking chancellor angela merkel's coalition. the social democrats are looking for an interim chief after the party leader quit.

some party leaders want to ditch the coalition in hopes of rebuilding voter trust. our call could be forced to find a new partner, head of minority government, or face an early election. 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. >> thank you so much. we need to remember with all the festivities in london, markets are on the move. futures are really quite ugly, -15 from what we saw last week. euro-dollar was the strength off friday and oil may be the theme to speak to. our esteemed guest will be here in a bit to do it. two year yield absolutely already 1.99.

there is an adjustment to the world markets. ,> stocks declining in europe the yen holding most of the gains we saw on friday, looking at treasuries go up, havens are still in demand as we figure out what happens next in this u.s.-china trade war. trump has landed in london, speaking before his -- he says there's an opportunity for a big trade deal at some point between the u.s. and u.k. he also added that we will see how things will work out/ trump is on a european trip which includes meeting the queen today, sitting down with theresa may on tuesday, and commemorating d-day. he will be heading to normandy on thursday, where he is due to meet president emmanuel macron and the prime minister of ireland. joining us from buckingham palace, annmarie hordern. what do we know so far? he's not going to shy away from talking about brexit and giving his views on who should be the next prime minister.

>> certainly not. before he even came to the u.k. he gave two interviews -- kind of like deja vu when we covered ,im, his last visit last year he didn't endorse anyone but obviously he is showing preferential treatment toward him and nigel for raj -- nigel farage. thewhen he stepped off airplane he was calling sadiq khan nasty. this weekend he was saying the u.k. shouldn't be rolling out or all thepet pageantry. getting involved in u.k. politics even before the trip has begun. >> as you look to three days of coverage, what is the single thing you will be watching? >> i'm going to be watching how

president donald trump's interacts with his u.k. counterpart -- this is different from a working visit. job on may is out of the friday, so what can be done? it will be interesting to see how he reacts with the queen when he is set to arrive in a few hours for a working lunch, and then he will visit works of art in the picture gallery. last time there was embarrassment because he seemed to walk ahead of her. i think how he handles himself, the world will be watching. >> emory, thank you, outside buckingham palace. this is a name you should know in america and worldwide, a senior washington white house reporter. that fairly describes her decades of experience watching presidents abroad, and she joins us this morning, traveling with the president. what was the mood on air force one? we were told recently that this is a president who is

exceptionally rested on his travels. was it the same this time across the atlantic? see, he wasyou can very much chomping at the bit, he wanted to leave his mark on the visit before he had even touched down. but today's visit is supposed to be about the royals has both his staff and the press have looked ahead they will be all anticipation that tomorrow will be the day when he might mix it up, the day when he is at 10 downing street and will meet with boris johnson and nigel farage. no official word on the schedule. but before he even touched down, taking london's mayor to task and making sure to insert himself. >> margaret, what can the president achieve? will he talk about european tariffs, or is he here to muster support for hallway? since the prime minister is

effectively leaving on friday, who will he try and lobby? >> great question, because he is not supposed to be here for any of those things. it is supposed to be the d-day anniversary. it debate since to put the visit now and when all of that was scheduled we did not know -- she did not know -- nobody knew about theresa may's expiration date. but now what you have is a president with an opportunity to try to put his thumb on the scale, to get who he wants for the brexit candidate. margaret, away from this trip -- the pomp, the circumstance -- kevin hassett, the president economic council and advisor has left. how is the white house cohesive message on trade? what's the level of chaos, of trade messaging?

has been a calming force, i don't know if trump whispered is the right word, but someone able to explain to the american public into wall street what he's doing. there are a couple still around, and that's the holy trinity for explaining trump, but this departure will leave a mark. you can see him right now departing on good terms but i think this has been someone who is part of his trusted circle and able to help explain when the president speaks and acts. >> thank you very much. to 10,000ow that up police officers have been drafted in london, 20 5 million pound security operations during the state visit. the l1 energyset,

holdings chairman in the house of lords. thank you for giving us your time, especially on this momentous occasion. if the president asked to meet him, would you accept? >> of course, he's the president of the united states of america. i spend my life meeting heads of state and other people, and heads of state represent countries. i have a great fondness for the united states apart from the fact that it is important. >> how do you think this state visit will be defined? >> i think we will remember it for the photographs of the president and the queen. this is her 113th state visit. i expect there will be a lot of parallel activity, which will be comments on brexit, comments on trade, comments on hallway. a lot of things, all of which have yet to be settled. there's a big agenda of unsettled business here. >> you are a great internationalist. this president is not in internationalist.

he comes buttressed up against markets on the move, and it is not pretty. how important is the market structure in correlation to the politics we are seeing? >> i still think it is very important, because in the end, domestic politics do have a big component of economics and them, and voters generally feel better about voting when they feel better off and they feel things are going well. but i really do believe -- i'm a great globalist, and i believe globalization has brought good things to the world. i agree there have been some bad components -- it would be a pity to see it disappear. >> are the next prime minister's, plural, globalist? his prime minister johnson, prime minister corbyn -- could they be globalists? >> there are 13 -- >> would you like to make some

guesses? >> absolutely not. there are 13 candidates into opposition leader's. i think everyone has a different view and i think that view is being shaped by what they see today. it's all about trade balances and the meaning, whether or not people are taking advantage. i see mexico came in the other day, a lot of problems. >> an interesting day, and we are honored to have lord brown here with us to give us perspective on some technology and oil conversation. an extraordinary day in london, and protest is expected, a quarter million or more, tomorrow. right now, the view from. the city of st. paul's this is bloomberg. ♪

♪ bloomberg "surveillance" from our studios in london. a most important day, the president has landed in london, ready to meet her majesty the queen at buckingham palace. brown of with us, lord l1 energy holdings, and john norman joins jp morgan -- any number of things to talk about, we need a framing from john norman, who no doubt will have a memo and will write a different memo today. what has changed from friday to monday in the markets? >> i think the biggest changes with the collapse in bond yields , which way the dollar should go, which is giving stability to a handful of markets but doesn't

change the underlying dynamic that the global economy is slowing. it doesn't matter to me whether the fed cuts rates once or twice, you are still going down over the short term. update on the percentage or amount of this market upset that comes from the great trade war. i think the move down is all about the trade war but i don't think this is fully apprised. we have yet to see the economic tosequences of trade and yet see the full market consequences. >> you are the u.k. chairman of huawei -- what do you make of everything that's happened between the u.s. and china? if you were to speak to the president now, what would you tell him? >> it's a balance. it started as a big issue of security. what risk is the right risk to take? some would say zero, other would

say contained and managed. against a technology trade war. those two things have yet to be resolved. that ifis very simple, people believe they can manage risks, they should, but otherwise we have a difficult situation where potentially we are seeing in the technology area to different systems around the world -- and that would be a great shame. safe, orwei equipment is it that we can't build 5g without it? >> it's a question which has yet to be resolved. the government says it is safe and certain parts, but remember -- i think the u.s. were the great leaders in this area -- the pieces were sold, and the u.s. was left without technology. >> you went right where i wanted

it could be the shops out of boston and this is one example of the western world giving up its technological authority. is that what we are doing? op? do we st >> what's left of bell labs is in the hands of ericsson and nokia. there are three firms in the world that have that 5g technology but none of them -- the rare earth we are talking about, we are all reacquainting ourselves with our childhoods. labor andven up the labor method it takes to mind rare earth. it seems like we are giving up hundreds of years of technical incident to the chinese. >> it's a balance. with everything you do, there's no unintended consequence.

rare earths are not rare, incidentally, they are difficult to mine and environmentally damaging -- so why not outsource it to somebody else? if you want to bring it home you have to pay for the consequences. >> thank you so much. john browne stays with us. we will get back to oil in the commodities that we are watching for. this is what we are seeing right now -- live pictures of the president of the u.s. at winfield house, in central london's regent park. no, this is buckingham palace. what am i saying? we will be live shortly. this is bloomberg. ♪

♪ morning, everyone. bloomberg "surveillance," all this week from london. the president has landed, and you need to know that markets are on the move right now. futures at -11. with us this morning, john browne of british petroleum and l1 energy, one of the great internationalists of global wall street. we are looking at the synthesis of the markets right now and how it. in two that rate call. >> we had a viewer that wrote in

-- if you are a bloomberg user, head to tv and right underneath the video screen and this viewer rode in and said jp morgan was calling for four hikes in 2019, now it sees 10 year yields to 1.75. what is it you missed and have learned from the experience? >> we deserve that one. >> so does everyone else, i should point out. >> we didn't think the fed would be shifting toward higher inflation targeting, and we didn't think trump would reignite the trade war going into the 2020 election campaign. shift and thear other has to do with the whims of the president. >> the president making the adjustment is great but you mentioned inflation -- the -- aity this morning central banker who believes in a

blended, service sector number and vector and everyone else looking at no inflation. where do you fit in on that continuum between higher inflation and not much going on? >> headline inflation will be down for the rest of the year because the trade war has been pushed down. core numbers will probably be firmer because of the impact on tariffs on a whole bunch of line items and it probably will not net too much or what drives the fed policy decision. that will be driven by what happens to the economy. it is going to open up this interesting question six months from now -- let's say there's an eventual deal between the u.s. and china. tariffs are on schedule to be revised back -- i don't think so because it looks like the fed might have to ease again next year. there are a couple narratives -- one is risk management and another is the achievement of a higher inflation target. >> how dangerous are trade

war's? >> very dangerous. we haven't seen massive trade war's for a while but they are they willeduce and make markets smaller by allowing people to do bilateral deals and get out of markets. lots of volatility expected. >> all right, thank you so much. our guests are staying with us. we will talk a lot more about what lord browne is working on, and what the trade war means for china, and whether it hurts demand for oil. >> please stay with us. from london, this is bloomberg. ♪

francine: this is "bloomberg surveillance." more about the

president visit to the queen. he will be with prince charles, camilla, and the queen. it still with us, lord john browne. -- also with us, john of jp morgan. i want to talk to you a little bit about the energy market and whether it is something you want to ipo and if it is, you need the trade war to be over to have perfect market conditions? lord browne: you need lots of things to be perfect to get a good market for an ipo. i think now post anadarko being bought, it is the world's biggest independent oil and gas company. it is privately held by bsf and some russian investors and we wanted to float it. it is a big company and it will be a jumbo ipo if we proceed

with it. we won't be happy -- ready until the first quarter of black -- year. francine: is it the trade war with china or the sanctions with iran and venezuela? lord browne: all of the above. people were focused on supply and that is the big thing because you can keep managing it. now suddenly, the focus is on demand and the resort -- result of all trade war's is weakening demand globally. the markets were pretty tight. there is one data point which is not good, u.s. inventories. the rude american and ask you a question that is ill-timed, but it certainly everyone in oil is looking at it, carl icahn is an accidental shareholder and the most upset about this transaction in particular that it was not placed to a shareholder vote.

how can you have ox he chevron -- and the great anadarko and this transaction is affected without shareholder vote? lord browne: it would not normally happen in many parts of the world. in the u.k., they would be outraged. the rules are the rules and the rules say you can do it in a certain way. then i guess you can do it in a certain way and not get shareholder vote. this is an interesting transaction and not without risk because it does require good prices and leverage coming down and the leverage they have got is reasonably expensive. let's see how it works out. as i strategic move -- a strategic move, develop -- strengthening the developers as a good move because it takes guts to get things done. tom: i have 24 more questions. we will not be able to do that.

how do you link dollar dynamics with oil dynamics right now? john: the common thread is what is happening to global growth expectations. thend down, oil down, but dollar up. tom: thank you so much for joining us today. francine: i might jump in with a crazy question on oil. lord browne is one of the people who understands the dynamics. could oil demand be one of the ways we look at a recession? is it one of the front running canary in the coal mine? lord browne: to an extent although demand does pick up as the price goes down provided it is put through to the consumer. generally oil is an indication of economic growth, less than it used to be. oil and gas, a bit more. staying with us is jp

morgan -- john normand of jp morgan. let's get to bloomberg first word news. >> china offer to work with the u.s. in ending an escalating trade war, but it is blaming the trump administration for the collapse in talks. beijing vowing it will not be pressured into making concessions. china says the trade war has not made america great again. mike pompeo says the u.s. is ready to negotiate with iran without preconditions. pompeo was responding to iran's president. he was saying iran was willing to talk as long as it was not bullied into doing so. aren warning those forces within range of its missiles. president donald trump's chief economic advisor is the latest administration official to leave . the chairman of the white house counsel of economic advisors has

been a vigorous backer of the president costs signature tax cut, but his influence was seen as limited. his post was downgraded from a cabinet level position. 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 countires. thisto be our taco, this is bloomberg. francine: donald trump landed in the u.k. for a state visit at a sensitive time for the ruling conservative party. rival candidates are jostling to replace prime minister may and the president has weighed in saying boris johnson would make an excellent prime minister. -- and johns normand is with us. the president said bojo would make an excellent prime minister

and he said he would send nigel to negotiate with the e.u. -- does that give them more or less of a chance to be credible? rob: i think it almost makes no difference. faraj poses an existential threat to the conservative party and there is no way no conservative plea that will do anything that gives nigel faraj more credibility than he has. this isn't the first job trump aje.tried to get for far i think any british prime minister might feel tempted to say to the president if you like him so much, maybe you should hire him. around the tory mps making at the moment around

who should be there prime minister, so complicated that it is unlikely there is a tory mp -- saying i don't know who i will vote for, but saw the front page of the sun and says if trump says it, maybe i should back johnson. tory mps worried that johnson is now a divisive figure who sort of -- the kind of liberal voters they need to pick up if they are going to win a majority again who would be alienated now by johnson might look at that endorsement and it might stir those concerns. tom: i want to stir the concerns of what we are going to see tomorrow with 250,000 protesters. how about the guardian from december 27 of 1918? this is actually -- after world war i. all the gaiety pent up through

the cruel 4.5 years seem to be released in the great noise of cheering. the londoners flocked into the narrow two miles of the street. stood tall, imposing, bear headed, queen mary handed him a union jack. woodrow wilson from another time and place. this time is totally different than the celebration of 1918. what will these protesters actually do? >> largely, i think they will assemble in the square and shout and try to make a lot of noise. everyone's favorite part of the protest is the trump inflatable baby, which is adding greatly. tom: we have seen that before. >> we had seen that last year. in the flesh, as it were, in the

rubber, it is less impressive. you watch it rise and eight sort of gets up to about fifth story level and floats around and goes down again and you go, i was hoping for something more. is not large, actually. erected at foxhall bridge. how big are the protests? does that make a difference? this is why he did not speak to the house of commons because he did not want to be booed. is affecting a lot of protests and they are changing roads in central london. it is not a good time to take taxis. francine: what will tom do? rob: speak to the chief, tom. walk. i wonder if they will be as big as last year because somehow last year felt like a bigger moment. he is not going to

kensington palace -- buckingham palace, but there are state lunch rob: rob: -- vince cable is not going. .t is government ministers only that means boris johnson is not going because he is no longer a government minister. he is not invited. whether he will find time for a meeting, we don't know. i don't know whether -- i have been speaking to boris johnson's people over the weekend, it is not clear whether they want photographs with him shaking hands with the president. it will be interesting to see what decision they make. given that trump is up for it, i think if they wanted them, they could get them. tom: thank you so much for an update on what we will see in the coming days. $250,000 -- 250,000 is the estimate for protesters. we have more of our coverage all this week from london. please stay with us.

this is bloomberg. ♪

president trump: i would say brexit is brexit. when you use the term hard brexit, i assume that is what you mean. i hope the brexit movement and everything happening there goes well. nigel faraj is a friend of mine, boris is a friend of mine. they are interesting people. nigel had a big victory, picked up 42% of the votes starting from nothing and i think they are big powers and they have done a good job. francine: that was president over talking about brexit

the last 12 months and we are looking at live pictures of buckingham palace. the president will go to buckingham palace later on. i think we are waiting for marine one to arrive at winfield house. police and security have been preparing for trump's visit for some time. there are some 10,000 police officers and the better part of 25 million pounds the security operation cost during the state visit. tom: they will not meet in buckingham palace, they will meet behind the gardens, huge open field space hind. -- behind. he will not be sleeping at buckingham palace, which is what more recent visitors have done. atncine: he will be sleeping winfield house.

the two main governing parties in germany are trying to pick up the pieces of their coalition after the unexpected resignation of the sbd's leader. departure could prompt her exit from the governing coalition and this merkelirst -- force -- thank you for sticking around. stephanie, what can you tell us about germany? how concerned are we about germany especially if it was to be fraught with extra u.s. tariffs? >> i think the trade story is problematic and one we need to keep an eye on. we have had this stay of execution as trump considered -- extended the period for tariffs. we will see exactly what we have seen with china, mexico, at least you get that temporarily

-- temporary hike in stress in markets and you almost need that to reach a compromised solution. that is the factor that changes the way he works. in terms of what is going on with the government, from a european risk perspective, germany is not one that would be on my radar in terms of critical with genuine selloffs in market. beyond that, i think they will try at least to form a new supporting coalition and if not, we go to elections. i am more concerned with somewhere like italy holding elections than germany. francine: tom every day references the german bund really at a record level. view it as part of a growing leadership vacuum on the planet where angela merkel has been a lame-duck chancellor. she is undermining her own chosen successor by saying she is not up for the job and the sbd is declining in terms of popular support.

the only good news is the populist party is nowhere near majority. you have to wonder who is going to demonstrate a leadership role if and when europe is in a crisis in a couple years. tom: this question is a little bit mathematical and goes back to your colleague, michael for rowley. we are really getting there rather quickly. explain to us the outcome of the chronic nature of negative interest rates. not so much of the amplitude of negative interest rate down, but week after week, quarter after quarter, all banks in the negative interest rate space have to deal with negative interest rates. it is unproven, isn't it? john: it is a constraint on bank profitability. u.s. banks are profitable even with low interest rates. european banks are not profitable, but it is not so much about the interest rates, it is about their lack of scale and efficiency. the rate environment does not ,elp a lot of sectoral views

but i don't think it is the make or break issue right now. tom: you mentioned the importance of italy. the urgency of why italy is different now versus the over a or 6 italy's couple years? stephanie: when you compare against the renzi era, we saw an italy reforming and an economic upswing they were benefiting from and now we have an italy circling structural reforms, cyclically speaking, weak. the afd in germany is not anywhere close to majority. in italy, populist party's make up the majority of support. going forward, the reason why ambassadors worry about italy is because it is a trifecta of risk. it's hard to tell a cyclical

story or structural story that is costs -- positive. then you have politics creating all this noise. francine: are we going to see anticipated elections in italy and is that something the market will welcome or not? stephanie: i think we will get an election and the best time would be spring 2020. september, october, we will see this fiscal stuff taking off and that is the obvious time you would see elections triggered because the coalitions are struggling and a fiscal deal will create more pressure. in that kind of context in italy, investors probably would struggle with the fact there is more uncertainty and we don't know what is going to happen. if you ended up with the state and government -- they were successful, but ended up with more of a center-right party. that is less extreme than what we currently have which is one party that wants to cut taxes and one that wants to increase

spending. it may not be the worst case outcome to extend the election. francine: john normand of jp morgan, stephanie kelley of aberdeen standard investments stay with us. the former italian treasury chief economist will be -- will join "bloomberg surveillance." this is bloomberg. ♪

francine: this is "bloomberg surveillance." tom and francine from london this week. we are back with our guests, stephanie kelly and john normand. we are talking about italy and my question is does market volatility or the spread between italian bund and italian btp's keep the crazier policies that the italian government could put in place at bay? john: i hope so. i think it is a question of time and what happens in the interim. whether it is tariffs or excessive physical easing, they are counterproductive. eventually there is a rethink about the wisdom of implement in these policies, but if it takes

three months, 6 months, you can end up with arrest session. that is my working assumption that the spread makes leaders rational, but does not give me confidence the rationality will become quickly enough to prevent bad outcomes. francine: last wednesday we had the u.s.-china trade war and then we had mexico and now india could be next. where does it leave europe? john: europe is not a direct .asualty my confidence that the u.s. is going to respect the self-imposed 6 month deadline for negotiating is low. the president could change his mind and tariffs could end up imposed on the auto sector in general. it is not a reason to think europe is at all out of the woods because they have not been directly hit by tariffs. bothi have a question for of you, but i only have time to go to stephanie. how do you find austerity and

germanic austerity? italy is buttressed up against the current and present and cultural austerity of germany. stephanie: that is actually exactly the issue you have with -- broadly. they would like more flexibly and the kind of germanic sense that what is responsible for government is as you would with your own bank account balance, it needs to be balanced if not having a surplus. you think of it in terms of some governments say we can borrow more, that is the nature of it and others and truly in germany, it is like political ideology on both sides and the tendency to think maybe with a different leader, maybe if it is not .erkel, that is not the case we continue to think at least a balanced budget is a positive thing. i think there is more leniency today than there was when we -- austerity during the crisis and that was a truly sense that in

crisis, you have to hold on carefully to your fiscal balance. in the next crisis, it will be more of a conversation about the role of fiscal versus monetary policy. tom: stephanie kelly with us of aberdeen standard and john of jp morgan. markets approving here a little bit away from the festivities. francine: we will have a full round up of president trump arriving in london about an hour and a half ago. making his way to winfield house, the u.s. ambassador's residence and he will meet the queen later. tom: this is bloomberg. good morning. ♪ od morning. ♪

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distance between the markets and central bankers. a two year yield plunges again, further strengthens. global wall street radically resets for a fed rate cuts and possible recession. it is a special relationship, this perfect spring day. her majesty will greet the president of the united states. not invited, the half his height mayor of london, also not invited tomorrow, 250,000 protesters. all of europe looks to italy and german austerity in this hour. lorenzo kurt o'neill. with francine lacqua from our studios near mansion house in the city and and theown, the garden buckingham palace that the president will not enter. it is under renovation, or so they say. francine: he is meeting the queen later on and the queen will be joined by the duke and duchess of cambridge.

the duchess of sussex will not be attending, following the birth of her son, archie. president staying at winfield house, which is a residency of the u.s. ambassador in london in regents park. with all that history of world war ii and again, moving from stands dead three days onto fort smith, the president with a busy schedule. really a schedule that is pom-pom circumstance in minimal interaction -- pomp and circumstance in minimal interaction. francine: the reason he is not addressing the house of commons is he is concerned about booing and interruption. the president will be given a tour of westminster abbey. the state banquet today is as much known for who will not attend.

andhead of liberal dems jeremy corbyn will not attend and that leaves them in a tricky situation. he already weighed in on brexit and the leadership of the tory party. francine: weighed in on the mayor of london. francine and i spoke to a true londoner many times before there was a presidential tweet literally on the plane, i believe, before he and misses mp landed.rs. tru by far the most important ally of the united kingdom on the mayor, he is a stone cold loser who should focus on crime in london and not me. he goes on further to say the mayor reminds me very much of our dom and incompetent mayor of new york city, president of la -- deblasio.done

i look forward to being a great friend to the united kingdom and looking forward to my visit, landing now. this goes to a word used by critics of the president, petulant. you thought you could find a way to criticize mayor khan without the viciousness of half height, but that is not his style. francine: we certainly have seen in the past. i will point to the body language between him and the queen. we understand the president likes the queen very much. last time he was here, there was a little bit of missed protocol which brits did not take well. it is amazing how much of the u.k. media were against his visit asking why the president is here? tom: we will provide color on this over the coming days as well as the president is in london today and protests tomorrow. we need to go to new york city,

your market briefing, your news briefing. viviana: china is tweaking president donald trump's trade slogan -- campaign slogan saying the trade war is not making america great again. it blames the trump administration for the collapse in talks and china says it will not be pressured into making concessions. morgan stanley is warning a recession could begin in nine months if the trade war escalates. it depends on whether president donald trump carries out his threat to impose tariffs on chinese goods. goldman sachs cut its forecast for second-half growth in the u.s. to 2% and it is raising the probability for rate cuts by the u.s. federal reserve. it to germany, that is where an unexpected resignation is rocking angela merkel's -- some party members want to ditch

merkel coalition in terms of rebuilding voter trust. merkel could be forced to find new partners, head a minority government, or face an early election. 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 countires. -- countries. this is bloomberg. tom: what you need to know, i a better day to check then an hour and 30 minutes ago. we are down, but nothing like we were earlier. s&p futures at negative nine. yield short-term coming in with a vengeance. euro strength, oil was weaker earlier. this is against the backdrop of an ugly may. the vix was 19 level, now 18.84. the global risk litmus paper japanese yen, 108.38. year treasury

yields advancing, gold up, swiss bank up, it feels like havens are in demand. i am looking at pound after we had figures for the month of may that showed a contraction, so those are much worse than expected. u.s. president donald trump has just landed in -- landed in london. he landed about two hours ago. he said there is an opportunity for a very big trade deal in the future between the u.s. and the u.k., but added, we will see how that works out. a trump is on a european tour which includes meeting the queen, sitting with theresa may on tuesday, commemorating d-day, and he will head to normandy where he is due to meet emmanuel macron. it joining us from buckingham palace is sebastian salek. what exactly is president trump hoping to achieve on this visit? sebastian: this is about the ceremony, this is a treat for him coming to a country with

which he has deep ties. his mother was born here and he spoke in the past about how much he respects the queen and the united kingdom as a country. it is not what he got last time, this time there will be a grand banquet at buckingham palace and the gun salute and all these opportunities to try once-in-a-lifetime opportunities and he will be banging the drum tohuawei and urging the u.k. ban the telecoms provider from being part of the infrastructure. that is iffy in terms of where politicians stand because it is an incredibly delicate time for the conservative party. theresa may will be out the door and the people need to replace her. standing short of calling for a ban. biting the cards a little closer to their chest. tom: you are a great student of

the british press and they have been in a froth about this for weeks and weeks, some would even say months and months. what is the character of how they feel the united kingdom is being used here? define that for us. beastian: this seems to indication that came about very quickly. why is it even happening and especially at this time politically? theresa may, this will be one of her last occasions. on friday, she stands down as prime minister of the united kingdom, so they will play things very carefully. for many people, it is about getting through it, avoiding any gaffes. the pretty chef the -- etiquette system is amazed. it donald trump has his work cut out for him. everybody wants to get through this without any major upsets, without any bad press. tom: thank you so much. in front of the timeless view of buckingham palace.

i would like to look at any number of morning must reads. we showed one from 1918 earlier. balm andto 2019 apple the washington post on fire writing on the president's visit and why this is occurring. at the president is not coming to town to conduct any important business, there is not anybody to negotiate with. he will achieve something for him that is more important, he will be photographed with some uniquely recognizable world-class celebrities and she goes on to describe japan and the recent visit where the president spent the entire trip tweeting about political enemies back home. joining us in washington, someone with decades of synthesis of presidential visits and that would be martin shanker . he was tweeting on the mayor of london getting off the plane or maybe taxiing in. who will the president tweet about back home while he visits london? gas.: it is anybody's

he also took a shot at mayor bill de blasio, one of his favorite tweet targets. this is the typical way donald trump makes an entrance. untraditional, unrestrained, and we have been seeing more of that kind of donald trump in the last few months as we have since his presidency began. tom: i would like to go to something that is maybe tangential on monday, but wednesday will be front and center and that is the visit of world leaders to fort smith and normandy as well. not that it will be clumsy for this president, but he struggled when he is in front of military pomp and circumstance and particularly veterans. what will we look for from president trump as he meets those over 90 years old from portsmouth? marty: i don't think even donald trump can overcome the solemnity of that kind of presentation. there has been a lot of talk in the u.s. political scene about donald trump's failure to serve

in the vietnam war. he has a troubled past when it comes to his eligibility for serving in the military, so he needs to keep himself pretty restrained and solemn and i think that is what you will see on wednesday. francine: why does the president like to weigh in on brexit so much? tom: good he question -- good question. francine: does he feel it is some vindication of what he has done in the united states? marty: absolutely. this harkens back to steve bannon and one of his primary goals he thinks donald trump must fulfill is disrupting the postwar globalism and the institutions that were created in the wake of world war ii. this is part of it. an acronymhe e.u. is --ck anachronistic he would like to see it torn

apart and that is what he is trying to do. tom: thank you so much. marty schenker looking from new york at all that is going on in london. we have much more to come through the day. please stay with us from our studios on queen victoria street and across town, sebastian salek in front of buckingham palace. this is bloomberg. good morning. ♪

francine: this is "bloomberg surveillance." ase from london all week donald trump touchdown with air force one about two hours ago on his way to winfield house, the u.s. ambassador's residence in regents park on marine one. the president tweeting about

sadiq khan saying he has done a terrible job and in the last five minutes, the president also tweeting although that tweet seems to have been deleted. i don't know if we have that or if it has been deleted. he tweeted china is subsidizing prizes in order that it can continue to be sold in the usa. many firms are leaving china to avoid paying the tariffs. the u.s. is taking billions. that was a tweet tweeted out at 11:07 local time, seven minutes ago, but has since been deleted. to talk about the president's tweets and his policies, we are joined by marvin and william porter. both of you, thank you so much for joining us.

potd of the u.s. president tweet, i don't have it anymore, but are we expecting him to make policy by tweets? >>'s tweets are a message in hech he can take -- his -- conveys intent. one of the challenges william and i face is sorting out the noise from what is actually there. we know trade is something that is important to him, that he feels committed and strongly about these issues. i think we should take him seriously on the china stuff. one thing you have seen in the market reaction is the broadening of the front. markets have been surprised by that. mexico, europe, india. whether he will go down that road i think is a much bigger difference. deletee: i sometimes tweets. what does this mean for treasuries? william: i think it is going to continue to bull run for the

time being, but we have generated a lot of negative and falls -- negative enthusiasm. his strategy is to set the agenda and he sets all sorts of hairs running and has done a good job in the past of owning the agenda by provoking his political opponents. the real question we have to address is very simple, is there going to be a u.s. recession or not? tariffs.er one through there are historical precedents, but that is the question. the two 10 year yield, year yield, whatever, if you get to four standard deviations, that signals instability. how close are we to that? how close are we to the instabilities that come from simply movement in the markets? marvin: one of the things happening here is --william: one of the things happening here is the yield curve is converting

between threes and tans, but not twos and tens. i would say they are the indicator of real trouble. the reason why i think they are more important is because if tos not moving, they -twos are not moving, it looks like the market will make a policy mistake. it often requires some sort of mistake to trigger a recession. the question is if you rule out the possibility of a mistake from the fed, are you going to get a big enough mistake on the tariff side? francine: mistakes. we will see what will lead 1.75%.ies to 2% or even marvin barth and william porter stay with us. we are looking at live pictures of buckingham palace and winfield house, the u.s. ambassador's residence where we

continue live coverage of president trump. on monday, the president will be given a tour of westminster abbey and he will meet prince charles and the duchess of cornwall for tea and then onto a state banquet at buckingham palace. this is bloomberg. ♪

francine: -- tom: "bloomberg surveillance." we welcome all of you to our studios, queen victoria street -- by mansion house in the heart of the city.

knowing the president touched down his helicopter at an fieldhouse, this is the ambassador's residence. mr. johnson of the new york jets joining us, does not know the new york jets and john micklethwait, our editor in chief to give his perspective. built by misses cary grant, barbara hutton in the 1930's. what does it feel like for london and all of great britain to feel the americans evade once again? >> your peasant -- your presence here is the start. i think three. an fieldhouse is amazing, by far the nicest house in london. it has an amazing garden. even trump will look at it as being a satisfactory piece of real estate. he has made comments about how

unsatisfactory the american embassy is. francine: does president trump have an agenda? he wants to talk about huawei and he has weighed in on brexit numeral times. >> i think he has multiple agendas. if he can wean britain off huawei, that will be a victory and i think there is a broader version of what he wants to do, somehow bring europe more into line with america. i think that is what he is trying to do. his problem is he cannot exist intervening in things like brexit. tom: what is so important is -- is we have a president who some would say is elizabethan in his policy, not elizabeth the second, elizabeth the first. how art of touch is the president with all the heritage and the united kingdom in terms of bilateral and multilateral development over the centuries? >> i think it is a mixture. on the one hand, his method of negotiation is not dissimilar to francis drake and he tends to

send in ships and see what happens. i think he is that way. elizabeth the first was a shrewd negotiator and balancer of power , which he perhaps is not quite so much. i think he has some idea. if you talk to people around trump and even trump himself, you get a feeling he thinks there is something a little bit different about britain compared with the other allies in some ways and a more reactive way than obama. obama was much keener on the idea of thinking of europe like a german lead construction. trump has not gotten on particularly well with the chancellor of germany. he feels more at home in britain, i think. francine: the president is weighing in on boris johnson and nigel farage. does it sway the minds of the brits or does it make them choose? >> if you are boris johnson, you were -- you are probably saying

it was funny to do this to begin with, but please stop. which is interesting because there is a strong element of hypocrisy. the more johnson is seen as trump's candidate, there are few people within the orthodox conservative party who would rally to that. in the pure brexit party bit, there is a link between farage and trump. they talk about each other in fairly warm terms and the people around trump will talk heavily about lessons they learned from brexit when they ran the last campaign. francine: john micklethwait, thank you so much, our editor in chief to talk about trump and brexit. marvin barth and william porter both stay with us. this is bloomberg. ♪

news.ood morning breaking

humana confirms it will not combine with centene. humana put out an unusual disclosure and simply said it is not going to happen. you wonder if it has to do with the market gyrations. us.iam porter is out there marvin barth.th what is the overarching fable of our market interpretation right now. markets areging aware of where the growth is going to come from. the globalization that was

enabled by progress that allowed extended supply change is undermining that. why would you excess cheaper labor somewhere around the world when it is cheaper than robots? to nextave to get friday after i get back from london. does it signal a gross instability or is it something we can frame for an opportunity later? marvin: the current environment is another negative for emerging markets. they are harbor dependent on china and the u.s. for trade. trade tensionsf is one that is putting them front and center at a time when they don't have domestic demand. this is a negative for emerging markets. francine: how low can treasuries go? marvin: you would have made a

youof money -- william: have made a lot of money over the years of taking that answer and having it. if there is a u.s. recession, they can go lower. our call is there will not be a u.s. recession but the market wants to think that. francine: is that because of the trade war? william: and the historical memories of and the what happened then. a lot of people who have been bullish on economies think something has turned. but thebelieve them market wants to go in that direction. i put this more in simple theory . we got this right on brexit and i slightly missed the train on the u.s.. the rational thing is to reach

an early agreement but that is not what happens because you are driven by domestic political incentives. the political incentives are not there. the market is getting ahead of itself and is too negative but you can go lower in that environment. francine: thank you both. let's get first word news. >> china offered to work with the u.s. to end trade war. it is blaming the trump administration for the collapse and talks. beijing vows it will not be pressured into making concessions. china says the trade war has not made america great again. secretary of state mike pompeo says the u.s. is ready to negotiate with iran without preconditions. pompeo was responding to iran's president who said it was

willing to talk it -- as long as it wasn't bullied. american forces were practicing strike operations in the arabian sea when that was made. president donald trump's chief economic advisor is the latest administration official to leave the chairman of the white house council of economic advisers has been a vigorous backer of the signature tax cuts that the influence of the white house was seen as limited as opposed to being downgraded from a cabinet level position. boris johnson and the u.k. is launching a campaign to secede theresa manning. he says the country must leave the european union with or without a deal in october. johnson talked about cutting taxes and boosting spending on police and schools. global news 24 hours a day, online and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries.

i'm vivian horton auto. ortado. chancellor merkel election. -- may have to call another election. work effectively together or he will quit. we are going to have more on this. as the chief economist to the italian treasury. still with us is martin barth and william porter. thank you for sticking around or joining us. will this correlation with italy there be aer or will

call for elections after good numbers in the elections? has gone through european elections these two parties -- elections. these two parties have run against each other. we are in a campaign mood in italy. it is not clear whether it will but io early elections think it will survive. compromised another and continue to go on. talk on europe has changed. now he says we have to try to reform it. theyields going to keep policies of this government in check? lorenzo: it is essential to

shape -- change the attitude. welcome onmuch cutting taxes and trying to streamline requirements for paying taxes. at the same time, fiscal discipline needs to be maintained. will is a clear risk italy enter etp or the attitude of the keyian government will be for financial markets. and i speak about it quite often does italy not need to be given a little room to maneuver? lorenzo: yes, but for doing what? if there are good reasons to spend money for investment and

reforms, certainly the eu is .illing to give leeway for this tom: as you synthesize italy and economics and culture paired is italy new debate between and austerity or is there something different this time? lorenzo: it is something different because the government is different. the previous government was gradual fiscalne consolidation with reforms, knowing that the effect of such reforms take time this government is clearly going against all of the rules and trying to throw back. it comes back to the bet that italy can change the small

g in the equation. it was written that italy needs to shift the growth metric to a smaller rate of growth. can they do it? are you optimistic italy can escape the low growth period? lorenzo: it is correct that italy is suffering. it would be desirable for italy to have new monetary policy. the measure problems that italy do withg has nothing to stimulating. fiscal spending is not addressing the issue. francine: how much pressure are banks under? lorenzo: the banks are adjusting the balance sheet. they are doing that by improving the quality of the balance sheet at the expense of the economy to some extent. they are lending lust to the

economy -- lending less to the economy than in the past. the economy suffers from lack of credit. banks isbetween the pretty much there. tom: let's talk about the loop to brussels. where would the relationship be in five years? or do we go back to a kissinger like nation? arenzo: there needs to be complete rethinking of the relationship. tom: who will lead that? lorenzo: it needs to be led by european leaders. we had a report that stretched the future of europe going forward. let'sstart from there and see what is needed to bring the

euro zone to the next step. francine: thank you so much. that is lorenzo codogno the visiting professor and micro fund manager. we will have plenty more on the markets and treasury yields. president trump in london for a three-day state. -- stay. this is bloomberg. ♪

tom: the president of the united states, and the ambassador at is here.

i have been told it is gorgeous. francine: i have been there many times. i am not sure if they put extra swans for the president. the kingdom palace and part of it is being redone. tom: or so they say. we have a number of side stories to look at as the president begins an important three days here in the united kingdom. we will stay on the markets. it was ugly a few hours ago. we can do this the sculpture at westminster abbey. budget atchart of my harrods over the last 24 hours.

there is. wherewith william porter and martin barth. the rhythmic showing a massive rate of change. what are the instabilities its tingles -- signals to wall street? they are a real problem in negative rates. mathematics as well as economics going on there. curvee look at the yield nots telling you the fed is making any rate cuts. we are predicting a rate cut in

july. tom: but not a recession? william: not a recession. play foreignou change? marvin: foreign exchange is a relative price. while people are getting more bearish on the u.s., who is worse off than the rest of the world? europe looks to be incredibly weak and not sustaining strong domestic demand. emerging markets also week. we see those as the key losers around this, even with falling yields. and a country that seems to be doing relatively well as well as a strong safe haven japan, should do better. francine: what do you do with the yen? nothing is going the president's way.

marvin: the economy has been doing what -- very well throughout this. one of the lost facts of the decade is that japan has had the growthr capita income this decade. japan is doing incredibly well. francine: where do you see value? you look at global yields and are there some things that are misplaced and will change pricing in the next six months? bigiam: i think there is a point in the discussion and going back to japan, i lived there at the time. all of this talk about lost decades, it is now a lost generation. rise has been a tremendous in real incomes. , they had this unsustainable profit share in the economy and part of what is going on in the whole of the

western economies you have a very high profit share. you are seeing the world politically pushing back against oft and saying we want more this income. japan has been politically stable and people's lives have been getting better. it is the same way in the u.s. and europe. the ballotsaying to box and protests that they want to lower profit share. japan, just don't think we are having the conversation about profits. both, and wenk you are getting breaking news from the spokes person of theresa may theresa may and president trump will host a roundtable but there will not be a one-on-one between the two

leaders. not are saying they are expecting brexit. tom: we have 47 people running for president so there has to be talk of brexit. francine: i interpreted that someone goes to brussels but until you have a name, i am not sure how brexit can move forward. tom: this is the one debate buried in the headlines, the prime minister agrees the health system of the united kingdom should be off-limits in trade talks. america could say, how is a health system part of trade talks? francine: we will have a lot more on that later on. thank you for joining us. we will be back with a look of the markets and a full round up of president here in london for a state visit.

this is bloomberg. ♪

francine: this is bloomberg.

i'm francine lacqua. u.s. president donald trump landed in europe and speaking on the journey he said there is an opportunity for a very big trade deal in the near future between the u.s. and the u.k. but also added we will see how that works out. he is on a european trip with -- which means meeting the queen and then sitting down with theresa may. ofare following helicopters the president arriving at winfield house. there are two helicopters circling above the ambassador residence. have ourlighted to bloomberg senior reporter who has been traveling with the group -- the president. you know what the state visits mean for him what are you watching out for?

margaret: how strongly does he try to put his thumb on the scale for this contest to replace theresa may and what will he say and how will he maxes -- address exit. we don't know if you will see boris johnson or others. he has said consistently he may. as of the last time and we are constantly checking meetings were not scheduled. we thought some of the drama would wait until tomorrow. but it has not. and the white house has put out a statement in which the president says the president supports brags that being accomplished anyway that will not affect economic and financial stability while also securing independence to the u.k.. what does that mean? ofsounds like he is in favor theresa may's plan but her not being the person that carries it

out. francine: he sees brexit as playing out what he did in his own campaign. he sees this populist upheaval in the u.k. as a stamp of approval for his policies. itgaret: he sees strengthening the united state'' position and other countries can leverage their power to have huge power as weakening the united states. not everyone sees it the same way and inside britain it is fair to say there are divided opinions about whether they would have emerged stronger for my bilateral trade deal or having the leverage of the eu. from the president's perspective, he does not like to much power concentrated in the eu and wants the united states to guide these discussions. he said pretty clearly he likes boris johnson. we will see how directly he inserts himself. over the last day or two as he

was getting ready to depart the u.s., someone asked him if he thought it was appropriate to insert himself in u.k. politics. if you do not think it is appropriate, stop asking me is what he said. he wants to push that hard to get the u.s. -- the u.k. on the u.s. side. margaret: it sounds like they are waiting until the next prime minister is in place before they make initial decisions. heardidance that i have from both sides is that britain is not opening the door and rolling out the red carpet to bring huawei into the british government. we are not going to get an answer immediately. francine: margaret talev, thank you very much. the latest innovation from xfinity

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the government releases and white paper on the trade war,: u.s. greedy, and warning students of the risk of studying abroad. and tariffs are a beautiful word. president trump doubling down on tariffs, leaving investors trying to figure out the next move, all this while he lands in the u.k. for his official state visit. and, 10-year yields. calls for 1.75%. bonds continued their rally. we will talk to that chief economist over at barclays on best for hisls calls for a three rate cut this year. >> and the real story is china. . you mentioned fedex, but also, there's only 200,000 chinese students here. >> yes, i did not know this, they are the largest total of foreign students in the u.s.. it is almost like in any oakley thing, if you can do this, i will one up you.