Transcripts For BLOOMBERG Bloomberg Surveillance 20170512

Emails for a break for a prankster pretending to be the chairman. Im guy johnson alongside tom king. Been quite a week. Quite a week. Had im not sure there is a correlation between your being here. Tom it has been an exhausting week. I cannot remember a week like that. We have got more reporting on that to all of surveillance. There is still a lot of other news out there including the german election. To the big one. Lets take a look at what is happening with the data. These are the numbers you need to know. The stoxx 600 barely budging. Tom, do you know what . We have had the biggest info into european equities on record this week. An in some ways, it has been incredible week but the equity markets have not reflected it. The german 10year is not moving very much. Tom maybe an oil lift. Guy up by. 2 . Tom i decided to do a data check. There is not much going on. That in itself is news. Let me get to my chart. A bloomberg chart on the atlanta gdp. For those of you not familiar, vyedifferent fed regionals for research ability. Down below is that First Quarter guesstimate. They were dead on. Up we go with the Second Quarter expansion that we are in right now. Green line. Maybe we get one quarter in the trumpian year. Gdp, may be. That is a maybe number. Guy im going to show you treasury yields. Story to me this week has actually been what has been happening with the fed. Harker speaks this week. Evan speaks to manus cranny. The fed is trying to tell the market is behind the curve. Dollar is not listening. The treasury market starting to respond. Tom there is the market look. Well do it all across the show this morning. In new york city with a friday, the first word news. U. S. , they have reached an agreement for china to provide greater access to American Natural Gas exporters as part of a broader effort to begin reshaping the trade relationship between the worlds two largest economies. The agreement covers 10 areas were trade negotiators have reached consensus, including agricultural, trade and Market Access for financial services. Well be speaking to the u. S. Commerce secretary about that deal at 1 30 u. K. Time. Bank of England Governor Mark carney says that the central bank may have to raise rates sooner than markets are expecting based on a forecast that presumes a smooth brexit. But traders are questioning the likelihood of such an outlook sending the pound down. The u. K. General Election Campaign takes shape, the opposing parties are taking increasingly barbed swiped at one another. The conservatives will warn workingclass voters that the labour party has deserted them. Jeremy corbyn will launch an attack on theresa mays foreignpolicy. The liberal democrat leader has called for a change. Have determined the tone of this election must change. It is time we gave the people of wales, the whole of United Kingdom some hope. That britain must now struggle under the yoke of a oneparty state led by theresa may . Just staley has responded to emails from an imposter pretending to be the chairman. According to the Financial Times, it criticize the barclays shareholder who had had saw to oust staley. The ceo responded with praise for macfarland comparing his fearlessness on the guitar to that of eric clapton. Global news 24 hours a day powered by 2600 journalists in 120 countries. This is bloomberg. Tom the badge of email shame. Do you like the cream allusion. Guy he is having a tough week. Tom this happens. This is our worst nightmare. Speaking of nightmares, has been the week of american politics. Each of the days of that russia thing have been different. Whether it is the president speaking to the economist. Or then there was that thing that nbc news interview with lester holt. President trump what i did is i was going to fire comey. Ester you had made the decision before they came in the room . President trump hes a showboat, he is a grandstand or. The fbi has been in turmoil. Everybody knows that. You take a look at the fbi a year ago. , less in virtual turmoil than the year ago. It has not recovered from the. Tom the Washington Post with a beautiful tic tock or the four or five flavors we had from russia from the white house. She is our showboat and grandstand there, we welcome stephanie baker. It is amazing how they are trying to massage the message they . There a is this president controllable . Stephanie the message is a mess. He gave a completely different account than all of his press spokesman and advisers who had been trotted out in the aftermath of the firing saying that he alone took the decision, contradicting what had been the story line in the days preceding that actually it had been triggered by the memo, by rod rosenstein. So, you know, i think there is concern, concern about the credibility of what is coming out of the white house. Do we believe what they say . Of thee interim director fbi also indicating that morality fbi was not a problem. Stephanie no, fine. Enjoyed widey support and contrary to what the white house has said the russia investigation was very small in the grand scheme of things. He said it was a significant investigation. They would be proceeding. Ahead. Tom what we think about into the weekend as you prepare for a battle on this . Backanie they need to get on message. I think the main challenge ahead is to appoint a replacement for comey. Tom topic number one. Stephanie the names in the mix are not household names. They are not the ones that had been floated previously. We thought maybe it would be Rudy Giuliani or chris christie. They are very divisive figures. Traditionally, fbi directors have received bipartisan support when they are appointed. This is going to be an unusual case. Tom this is a critical distinction, much like judges. When a president appointed to bring court judge, they do not know that is for life. Within this, for example, mr. Mueller who is the most esteemed of our directors in the modern age. Does the president in any way control and a fee i director . I believe they dont control the fbi director . May have trump misunderstood the relationship between the president and the fbi director. From the 1970s they were given a 10 year term as a measure to give them independence. If you look at the new york umpes story today about tr demanding loyalty toversus honesty. Ofch gets at the whole issue maybe he misunderstood the very nature of the relationship constitutionally and legally. Guy he is learning on a job. This is a president who is absolutely learning on the job. Hes figuring stuff up and what does that tell us about the rest of the term . Do you think he will have it figured out by the end of it . Stephanie lets hope he learns faster than he has learned so far. He is obviously learning on the job about these crucial, constitutional relationships that are new. Tom twoyear good question and my conversation yesterday with the former nato commander is he learning on the job about north korea . The fbi this is all fun and games and giggles. North korea is not fun and games and giggles. Stephanie if you asked john mccain that question, there are certain republicans who think that actually trump has appointed some really serious, wellrespected National Security experts. These people are well trusted on both sides of the aisle. That should bring people some measure of reassurance. Tom he needs a mathis at fbi. This is extraordinaire. I am exhausted. Guy i wonder we will look back on this week as being pivotal or just part of the noise. Tom thank you so much for your perspective this week. It isa it is a blur. Carry on the conversation what is happening with the u. S. Administration. Wilbur ross will join bloomberg. Coming up on the show, including growthanys economic increases. And we will speak with the oecd secretarygeneral live in ita ly. This is bloomberg. Tom bloomberg surveillance. Were thrilled to are with us. Lots of talk about. The politics of the nation. Guy tells me thin mins. Italy . Ns in i do not even know where that is on the map. Were going to do some fashion to figure how to spend my remaining funds in london through the week. Now in new york city, our business flash. It boosted its fiscal year profit forecast ll aafter it agreed to seel brazilian steel plant. Provided United Internet has agreed to take control of german wireless operator. The deal comes as it seeks to compete with telecom and vod afone. The combination will unite vivendis media empire with havass marketing and advertising assets. That is your Bloomberg Business flash. Tom i just figure out where bari, italy, is. It is just above the silver on the heel. Guy we are going to have fun today, arent we . Tom its on the heel of Rupert Sanderson boot. There are members of the keene family that do not care about mr. Trump. They just want to talk to mr. Sanderson. Cant get to heathrow festina. Fast enough. Guy exports benefiting from recovery and global demand. Ahead of Regional Elections in the countrys most populous state. Meanwhile, the European Economic and Monetary Affairs commissioner says that germanys europe. Ader will be pro i think the germans are lucky. Because whoever is the next german chancellor will be a strong leader dedicated for europe. Guy as to what is happening are the german data, they pretty solid right now. More evidence of that today. Nevertheless, these are the kinds of cues that draghi needs to turn policy neutral and point is to a change further down the road. Andrew absolutely. German data, but European Data as a whole has been very strong. Ecb have had to navigate the political events. Junenk the next meeting in should be set up perfectly for draghi to move to the neutral setting. Tom i saw it on twitter, a great chart of the forex market, what the Interest Rates are going to be. There is a hope and a prayer of higher Interest Rates. Why is now different . Andy one, we do have to be cautious. Things in terms of how are different, the obvious thing for me, if you look at the last six years, we have had times when european economies have done on the u. S. Economy has done well, china but never at the same time. What we are right now is much more synchronized. It is much less stealing growth from other countries based on exchange rates. It is about the Global Economy moving together. And that makes it feel more stable. What hard to be sure positioning is. Buying heavily. There are these collateral needs that are structural and not cyclical. Bunds. Overall, think the market is probably talking about investors being short bunds. But i do not think that trade is on yet. I think they want to see the signs from the ecb. They want to make sure the ecb is moving to stop q. E. Otherwise, if you are seelinllig bunds thats uncomfortable. Tom when i look at the rate market and i look at the curves. We talk generalities with extremely confident people. Buried in the Research Notes is some real detail. You have a brilliant paragraph on the far end of the yield curve. What is tensthirties. What does the distant part of the yield curve tell you . Andy initially that was a big focus to be buying in germany. They were forced out to the long end. Tom forceout. Andy now they have been able to buy. Nearer on the front end. Tom critical question. What do you see about the debate in the United States about 50 year paper or 100 your paper . Year paper . Andy the debate is on the table. It does not feel like it is a done deal. The market is pretty interested. If you do see that, we are going to see some weakness at the back end of the u. S. If you look to what happened when that story first came out a few weeks ago, it was global back ends that she bent s cheapened up. Fun we can have a conversation about convexity. Well leave that for another time. We may talk about delta later in. On. G7 meetingat the in italy. Matt miller has been speaking to finance ministers. What can be accomplished . Were going to find out. This is bloomberg. In new york city. 10 23 a. M. In italy. Matt miller is there. Over to you. Matt thanks. Im here with oecd secretarygeneral angel gurria. Thanks for joining us this morning. What do you expect to be accomplished at this meeting . Sec. General gurria this is a process. Nothing ever gets finished at any one of these meetings. You build up and build up. What comes out. These are seven of the largest economies in the world. Theyre crucial to making things happen, whether on finance, whether on the economy, whether on trade or environment or government issues, etc. So, when you focus, when you converge in a meeting like this one, people go out with a stronger will, with conviction. Nothing gets decided in the sense of it being a decisionmaking body. Then you go to the different organizations. The go to the world bank or the the the ecb, the wto or world health organization. You make things happen. Today we were talking about inclusive growth, about the question of inequalities and how do you deal with it . And how inequality, actually if they can be in certain extremes, affect growth. A moral question. Even a political question, it is a very important economic issue that we have to address. Matt when you talk about inclusive growth and inequality, i think about globalization and trade. Most of the people in this meeting are very much protrade. They want to keep it status quo with the exception of maybe the u. S. Delegation. Has this globalization that we have experienced in the last few years pushed the inequality that seems to be growing worldwide . Sec. General gurria it is not globalization. Lets not blame globalization because there are individual policies in each of the countries that put together may be responsible for some of the undesirable results. Say globalization and trade. The problem with globalization. It does not have a body, face or a neck where you can hang it from. Then you take a proxy. People used trade as a proxy. Trade was not meant to address all of the problems of the world and the question of inequality and the questions of level Playing Field. It was meant to be one of the cylinders of the growth engine, together with investment, together with skills, with more competition. And you have to make everything happen rather than focus on one particular sector or one cylinder of the growth engine, because then your diagnosis would be wrong and you would basically be typically, you know, barking up the wrong tree. Matt you mentioned level Playing Field. Donald trump has been calling for that. Steve mnuchin seems to think theres isnt a level Playing Field but it is getting leveled. Do you think with the agreement with china, now President Trump is no longer manipulating currency. Are they coming on board the free trade boat . Sec. General gurria there is today a big discussion. Freeether the word is trade or fair trade or fair and balanced trade. I think we should focus a lot the on the policies and actual decisionmaking and the agreements rather than necessarily on the wording. But i think if you focus onf free. Rulesbased is another part of the equation. What are the rules about and what is fair about . If you are saying no subsidies, i would say yes. This is fine. Then you would say no protectionism. I would say yes, this is perfectly fine. Currency no currency manipulation. Matt those are three phrases not likely to be in the communique. Sec. General gurria let me put it this way. These are the things that one should be practicing every day because that is what will make for what is called balanced trade, which means a trade that will result in the actual competitive advantages that are legitimate, given the endowment of the countries, both of Natural Resources as well as Human Resources, and of the skills they may have developed over time. Because many countries with very scarce Natural Resources will develop their Human Resources to a great extent and then they will become a powerhouse. They will become leaders in technology. Become leaders in high value added activities, etc. And this is where we have to get our lessons. And go for the best practices. Big, proper countries are represented. The poor countries less so. Greece will be in focus. We have heard optimistic statements about the fact you could actually get a conclusion to the greek debt problem by the Euro Group Meeting on may 22. Sec. General gurria greece is thea member of the oecd. We are working on competition and education issues. Were working on what i would call the future, the tomorrow of greece deion the shorterterm beyond the shorterterm agreement. The question is, they need space in order to be able to grow again, because the burden of the debt is too heavy. The problem today is that most a the debt it nf not all is public debt. It comes from the imf or european taxpayers. And, therefore, that is more rigid in terms of giving, you know, net Debt Reduction than it was when it was private bonded debt when you couldve had a marketbased, very more traditional type of negotiation and reduce it at least by half. We lost that opportunity. We are now left with the consequences of having lent to greece oto pay at 100 cents on the dollor, oar or the euro. The question is time, windows of opportunities, the cost thereof, so that the medium and longterm real cost of the debt is reduced by virtue of having lower Interest Rates. But the question is not about whether you invite, you know, developing countries to participate. Just imagine the fact that the g7, ministers of finance and governors of Central Banks, came her to listen to three or four of the most important experts on inclusive growth issues. To re being exposed mr. Bertoli. Matt we are going to hear from them. It was a pleasure talking to. Thank you so much. Back to you. Guy i hope you are sticking around for the weekend. Right. Lets talk about what is happening in the u. K. Welcome to the weekly brexit show live from london. Im guy johnson. Tom tkkeene is shopping for high heels. T. Tom did you see the hong kong breaking news . That is a big number. Guy the hong kong numbers always strike me i take it with a pinch of salt. Absolutely. You think about how currency controls have been imposed. You need to Pay Attention. Tom what we know is he both cannot afford it, the real estate. Whos our guest . Guy andys still here. We need a quick round up and talk about the big brexit news. Taylor theresa mays government accused some European Union countries of wanting britain to fail in the most outspoken comments so far, the home secretary claims European Commission president Jeanclaude Juncker held very hostile briefings against the Prime Minister. He deliberately influenced voters. Report by the recruitment and deployment federation claims British Companies are finding it harder to hire. The availability of workers from both permanent and temporary positions fell at the fastest pace in 16 months in april. The Organization Says there is a acrosse of applicants a wide range of industries and that brexit may exacerbate the problem. General Election Campaign take shape, the opposing parties are taking barbed swipes at one another. The conservatives will warn workingclass voters that the labour party has deserted them. Jeremy corbyn will launch an attack on theresa mays foreign policy. The liberal democrat leader has called for a change. The tone of this election must change. It is time that we gave the people of wales, the people of the whole of the United Kingdom, some hope. Who say that britain must struggle under a oneparty state led by theresa may . News 24 hours a day powered by 2600 journalists in 120 countries. This is bloomberg. Guy thank you. The bank of England Governor Mark carney says the u. K. S Central Bank may have to raise rates sooner than expected based on new forecasts that presume a smooth brexit. Traders are questioning the likelihood of such an outlook, sending the pound down. Thee have assumed that process of leaving the European Union would be a smooth one. Twhat does that mean . That means there will be in agreement about the future trading arrangements. That there will be a transition or an implication period from the negotiation to that new agreement. Guy andy chase is the head of european rate strategy at nomura. Carney to markets, you are mispricing it. Markets to carney, we aint. Andy that line that was in there about having surprising was at odds with Everything Else in the report. I think the market look at the report and saw where the inflation forecast were lower than they were before. And just thought, there is no pressing need for us to get hikes. I wonder if they are trying to nudge the market around, rather than actually say that we are going to be hiking soon. Tom you talked about Economic Growth and convergence. Are the central bank is converging . Is there a convergence of theory by Central Banks . The extent the economies are synchronizing, it allowS Central Banks to talk in similar ways. I think there are some big global themes. The end of the q. E. Era. The ecb and the fed talking about Balance Sheet reduction. But the bank of england is maybe the odd one out here, because of this brexit thing. Tom is Governor Carney a Forward Guidance . Andy he has done a variety of Forward Guidance. Here and there. They have not necessarily panned out that well in terms of the underlying forecast. Tom he has got some other distractions like brexit. Guy i have got a chart. Tom hes like trump. Its a distraction. Guy brexit is high in the agenda. Are gilts expensive . The white line is the breakevens. We have got massively, massively negative real rates. Which one of those lines has to change . Andy hopefully both is what i am thinking. Nominate yield, 10years should head higher. 140. But i also think the breakevens have been supporting the currency collapse. Youve always got the ldi issues in the background of the u. K. A perfect storm, pushing breakevens higher. Five and 10year breakevens should come down. Tom there is always the obligatory question on tokyo and japan. I just spoke to chairman bernanke he and we compared his speech in 2005 with where japan is right now. Call on themura next phase of abenomics. Andy it has taken longer to implement the people were thinking. There was a lot of euphoria straightaway. Tom it stopped the deflation vector. Andy yeah. And this is a bit of a misnomer. People talk about japan has been in inflation for 20 is. It has been in zero inflation. In terms of getting inflation back up, it will take hard work to do so. But what will help dependence of the rest of the Global Economy is kicking on bit, which has not been the case. If you have not had the Global Economy, it is hard to get your own economy going. Both japaning that and u. K. Have experienced is very poor wage growth. Yesterday, dr. Carney talked about had a reasonably high degree of certainty that he things wages is going to bounce back. All evidence of just that aint gonna happen. Why do think the bank is so convinced that finally we are going to see the oldschool theories we all thought were gospel starting to work . Andy the phillips curve is coming back from the dead. His view, and most peoples view, there has to be some level of unemployment where you finally get a kicking and of wage inflation. What weve got wrong in the u. K. s we thought that level of unemployment was higher than last years. They have been lower. That was just on the basis of wages. At some point, wages seem likely to have to kick in. Basic economic theory tells you. Tom this has been great. Particularly the long curve analysis. Guy thank you very much, indeed. Up next, Angela Merkel faces a final test of Public Opinion ahead of septembers election. We will talk about Political Risk and brexit and europe next. This is bloomberg. Tom good morning. Our brexit show continues. Ourks to Simon Kennedy and Bloomberg News team. 24 7 on brexit. A great value to us in new york and in london as well. Much to talk about. Another good guest not only to synthesize brexit into what you and i were doing a week ago. Guy germans in the state of west failure. Westphalia. Tom we should go. I have never been to north rhine. The vote this weekend. The final vote before the country goes to the federal vote in september. The e. U. s commissioner for Economic Affairs is that whoever wins germany will not threaten the european project. Think the germans are lucky. This is not a source of concern. Whoever is the next german chancellor will be a strong leader, dedicated for europe. Guy interesting viewpoint. Lets talk about mr. Macron. And how each will playing to the brexit discussion. Joining us is charles lichfield. How does the French Election affect the Brexit Debate . Charles for the moment london is worried. Hes said he will be strict with london. I do not think he will be unreasonable. Hes even brought in the whole agreement to the discussion in the first week, an agreement that was 15 years old whereby london can conduct border controls on french soil. Quarter controls are conducted in britain, it if border controls are conducted in britain, it can make the situation much more competent. The starting point is not good. Guy do germany and france see eye to eye on this issue . Charles i do not think germany has a position. I think they are much closer than they have been depicted. France is depicted with this sort of hawk with germany with a more reasonable position. Merkel has said the same thing of the Outgoing French president the Single Market must a intact. Even when she said this to german industrial leaders, they have applauded because they see an interest in keeping the e. U. Quite close it, including parts of the e. U. That might want to consider another relationship in the east. Tom when i was on the plane coming here, what i wanted to know is where mr. Juncker fits in . Charles he is the president of the commission, the bureaucracy of the European Union. Often when you think about bureaucracy, you do not want to listen to it but you have to. Tom chancellor merkel has to listen to this guy jawbone about the United Kingdom . Es absolutely. He has experts who know exactly how the new relationship can be negotiated. People who know all the Technical Details of the Common Agricultural policy he actually is their boss. So, they have to listen to him. Guy is that the weapon the commissioner is going to use . A point made by a former commissioner, they have not paid attention to any of this stuff. The u. K. Has not done detail in brussels for a long time. Detail is part of this process and it can be a very effective agendas, timelines this stuff is exactly what juncker knows about. Charles it is very much what i think the commissions main advantageis, because they have the letter of the law on their side. They may interpret it in their own interest, which is why i think the figure, the exit fees the u. K. Might have to pay, the settlement is so high. The u. K. May be able to negotiate it down. L but the letter of the law is on the european side. Tom one of our guests earlier this week, the guy who runs youre a star. Eurostar. How will my trip be different . Do i get in a different line . Is that the only difference . Aarles that would be decision for the u. K. , how they operate their own immigration policy. The u. K. Already has its own independent european policy. I do not think your trip would be that different. Unless mr. Macron brings in all of these u. K. French agreements on border controls. I think that is quite unlikely. Guy it is a nice path to northern france. Charles it is where macron is from. Tom amiens, is that how you pronounce it . Guy that is where the factory is. Tom i dont nkoknow. Charles it is where macron met his future wife. Guy up next week focus on the sector of the u. K. Economy heavily exposed to the e. U. We will speak with Rupert Sanderson. Tom keene has spent a great deal of this morning looking at high heels. Were going to get into the reason why. This is bloomberg. Guy this is our weekly brexit show live from bloombergs European Headquarters in london. Im not sure how this is going to go but lets crack on. Lets focus on the u. K. Economy heavily integrated with your opinion. The fashion industry is and provides work for 900,000 people. Joining us is the celebrated shoe designer Rupert Sanderson. I havent been interrupted by tom yet. Good morning. Rupert, brexit, big deal . Imrt big deal because, my owto speak to businessn but we employ a lot of italians and a lot of french people in this country and the way we conduct our business is a very pan european. Betweenfrictionlessly we are going to fight very hard to prevent it from changing because i do not see it can work in any other way. Guy would the business work under, if you increase the friction, does the Business Model back up . Rupert i think it would be damaging. Paris moving the people would slow everything down. In an industry that is getting quicker and quicker. The season, the demand, the assumer needs things now, quickly as they see on social media. You cant have things going the opposite direction. Thatcaroline, do you hear from everybody . Caroline there is real concern that the u. K. Wont compete in the way that our european counterparts do. If you think of goods, the Raw Materials come from one place, made in another and come back to the u. K. And they are shipped out, particularly with ecommerce, expected with very expedient delivery across borders. And the business and the industry are very concerned about that. So, priorities in terms of free moment Free Movement of goods, frictionless borders, tariffs are high and the agenda. talent is led by the huge revolution in gucci. Have you been affected by gucci . Have you had to adapt and adjust to the gucci affect. Really. Not it has been fantastic for business. They have taken massive risks. It is what fashion loves come up offense that reframe how people think. Its great fun. Tom bring up the off the ne il young song four dead in ohio. This is the most dangerous shoe on the planet. How did you come up with that design with one in the office that is bored stiff with what they are wearing . I hate you. 755, are you kidding me . Rupert that is reflective of all of the work that goes into to get that shoe ont o that screen. I come up with blossom lots of concepts and some are more withssful than come up lots and lots of concepts and some are more successful than others. Guys lets price this in dollar. Starts off being priced in pounds. Rupert we start in europe. The wholesale market will buy in euros. We ship into the u. K. And convert two pounds and that is hurting us. Tom when you began this years ago and the United Kingdom, it is about the soul of italy. Is italy craftsmanship changing . Interesting. They are so proud of that brand, made in italy, and rightly so. It is a culturalt hing. It is not just fashion. It is food, wine. Tom you go to the ferragamo store in new york and there is this room that might as well be the british library, all the original ferragamo fashions. Is that soul going to be there or is it going to be that. Sole, pun . Caroline industry is built on heritage. In the u. K. , we have a Rich Heritage from the monarchy, from savile row, all the way through to our young doe designers. We see incredible inspiration that will continue for generations to come. Guy if im coming out of the fashion schools in london, all m i staying or leaving . Caroline we hope that you will be staying. If you look at London Fashion week, many businesses are employing people. They are not necessarily british citizens. Ill continue. W we hope the International Talent will come to the u. K. For incredible colleges. And supporting that talent from college through to ceos and l s xury brands. Tom they are teasing me in the control room. Are you kidding me . Go away. There are no small sizes within the confines of the United Kingdom. Spokestom. Tom wonderful to see both of you. Guy thank you very much. As tom keene says, dangerous. Bloomberg surveillance continues in the next hour. Tom between loyalty and honesty, in what has been one of the wildest weeks in american president ial history. Finally it is friday. For the president , quote, this russia thing will not go away. This weekend, maybe we can all play some golf. Germany plain and simple killing it. Firstquarter gdp accelerates. This sunday, guy johnson said north rhine is a big deal. They vote. And youve got mail. Incoming email is always a threat to your career. Regretsey at barclays hitting reply to the chairman. Good morning. This is bloomberg surveillance. Francine lacqua is off. Guy johnson with me this morning. The votes just keep coming in america. They are voting over there. It is a constant thing in europe. Guy there are a lot of countries here. There are a lot of election timetables. This is not a federal vote, so it is in some ways a warmup, a dry run for what is happening in germany. Interesting choice of words on the german data. Tom we are going to do a data check in a bit. Right now in new york city, heres taylor riggs. Taylor the Trump Administration is starting a process that could ease the bite of the volcker rule on wall street banks. Mnuchin secretary steve has ordered five agencies to review what is allowed under the rule which bars banks from lending on markets with their own capital. Critics say the volcker rule made banks too conservative and has dried up liquidity. President trump calls former fbi director james comey a grand stander and a showboat lee planned to fire all along. That is in contrast to Previous White House statements. President trump spoke to nbc news. What i did is i was going to fire comey, my decision. You made the decision. I was going to fire comey. Theres no good time to do it by the way. Taylor President Trump is considering a number of candidates to run the fbi. Among them, mike rogers and former new York City Police commissioner ray kelly. Saudi arabia is preparing to cement ties with President Trump i making investments in the u. S. According to people familiar with the matter, the Saudi Sovereign Wealth Fund will invest aslans to much as 40 million in u. S. Infrastructure. That may happen next week. Theres been a breakthrough in trade talks between the u. S. And china. An agreement will allow more exports of u. S. Natural gas, plus american exporters will have greater access to Chinese Markets. The u. S. Will allow the import of cooked chinese poultry. It is the first negotiated trade deal for President Trump. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. Find taylor riggs. This is bloomberg. Tom thanks so much. Weve only got one data screen this morning. Safe haven study again. Right now, futures negative. Curve has done nothing since time began. Nymex crude, 47. 76. I saw brent by over 50. Guy it is turning out to be a more positive week. Brent trading 50. 70 at the moment. Tom spot. Guy spot. The stoxx 600 is doing nothing right now. German 10year data out of germany solid. That reinforcing the idea the ecb is going to go soon. Tom gdp great in germany. Weve seen some other good reports as well. Lets go over to atlanta now. This is the u. S. Indication. Michael mckee loves this. Down below is the ugly First Quarter. Almost down to zero. The recent number for the quarter were in now is that spring up to 3. 6 . Way out over the trumpian greenline of 3 . Two years ago, that read regression, it really didnt happen. Guy you said no greeks today. Im going to use one. Lets talk about delta. This is commercial lending in the United States which caused for a while. Tom very good. Guy this is something you want to Pay Attention to. Harder to see down here but that is the pickup. Tom put that banner right across your chart, see how he did that . Just like a friday joke. Guy we will blame somebody for that. Our next guest is well known for developing complex system models. Tom has a book hes going to wait in my face soon. 2006, it led him to expect a serious economic crisis would occur. Book, canshed a new we avoid another financial crisis . We are joined by steven kean. Good morning. We saw Victor Constantia talking about the fact that he wants the ecb to have more regulation over the Banking Sector. Is he looking in the right direction . Steven the whole problem is they are not looking private at all. They are fiddling about the actual structure of the Banking Sector but they dont worry about the levels of debt you are looking at there. The onlyhat so far institution internationally that understands credit is the bank of international settlements. Got import in breaking for the United States. The mating within a troubled Wireless Phone business. This is sprint and softbank the attachment there with japan, and tmobile. At t, allto verizon, struggling with that more maturing business. Within the triathlete, if you players in the United States, what will we see . All sorts of government ramifications. We will have much more on this. Guy going to be interesting to see. Sprint softbank said to have reached out to Deutsche Telekom as well. It has been one of the more profitable elements of that. Consolidation is a fascinating story. Tom this goes to steven kean and you can give us some perspective. This is about the courage of doing something outside the box. Legere of tmobile United States said, im going to create some rules. He destroyed the pricing system. Can we in the capitalism we have today you have been one of the major critics of the modern capitalistic gilded age. We need more legeres of tmobile to break up the pricing system. Steven the dominance of the finance sector as well. Im happy to talk about telecommunications companies. That is where you get innovation. Tom why cant we do it in the Banking System . Steven i think it is the sheer power of the financial sector. Their conversation is about restoring them. Guy if you break up the banks, would that change it . Steven breaking up is one part of it. We had regional and diversified banks. That was criticized as being inefficient. If you think about an agricultural or biological field, you want to diversify. You cant have two or three particular banks. They fall over collectively. Weve had an irish potato famine for the financial sector. We need diversified financial structures. Guy do we do that by allowing new banks to be created . Do we do it by breaking up banks . Steven we have to segmentize the financial sector. The old glasssteagall type rules, that Community Banks were used to before ragan got rid of them, all those various things gave you a diversified financial base. People would specialize in those areas. Now you can click on line and 15 seconds later youve got a mortgage. Tom the charm of steven keen. A million years ago, i spelled my name like steven keen. You and james from texas are liberal economists, controversial economists, with Great Respect for traditional systems. What does ross get wrong about trade . You dont believe in the zerosum society. You dont believe in a mercantilist society. What is the most optimal freetrade system . Steven what gives us growth is not trade. It is investment. What gives you investment is not free trade. It is a diversified industrial structure. Freetrade gives you specialization. Japan specializes in silk and england in cloth and stuff like that. The real world, you find strong economies. The Strong Industrial sectors have diversified industries. And it is diversification that gives you the strength. America has lost that diversification. Keen, is, Steven Donald trump the naked emperor . Steven i hate the thought. Tom ugly sight, but that would be true of me too. Steven i see somebody with a serious narcissistic personality disorder. There were people on the right trying to get me to advise him. No way. Hes a dangerous individual. At least emperors are maintaining the empire. I think hes destroying it. Tom you have to read steven keen, always a controversial. Ook, but a great essay here can we avoid another financial crisis . Staywill mix i with us. How do you go from steven keen to roger bootle . Steven keen wakes up every morning and reads the telegraph cover to cover. Guy johnson and tom keene in london. This is bloomberg surveillance. This is bloomberg. Im taylor riggs. France has started preliminary talks to merge with tmobile u. S. Executives from softbank and sprint have had informal contact tmobile owner Deutsche Telekom. Softbank and Deutsche Telekom told investors they would be open to discussions about consolidation. Lands to takeendi over and advertising giant in a 4. 2 billion deal. The takeover would unite vivendis media empire with havass marketing assets. Barclays ceo jeff daly has responded to emails from an imposter attending to be chairman john mcfarlane. According to the Financial Times he criticized the investor who tried to oust staley. Staley responded with praise for mcfarlane, comparing his fearlessness on the guitar to that of eric clapton. That is your Bloomberg Business flash. Guy thank you very much indeed. G7 finance chiefs are gathering in italy. Officials dont see eye to eye on trade. They are talking about other issues in europe. One of which is greece. Heres imf chief Christine Lagarde weighing in on that issue. We will carry on working on this debt relief package. There is not enough clarity yet but i hope the European Partners will continue to progress in that direction. We havent changed our position. Guy lets go to southern italy. Matt miller is there. What are they talking about . Are they seeing eye to eye . What areas of commonality do exist . Matt one of the discussions has been about using esm debt, european debt, which costs less, lower Interest Rates, and swapping that out for imf debt, which is already outstanding. That could be one of the ways they get Christine Lagarde and the imf to go along with this. I spoke with Pierre Moscovici last night. He said hes optimistic they will have an agreement by may 22 in brussels. Tom when you look at financial minister meetings, i would assume it is a photo op and maybe an effort to get on from here. What is the backstory they are talking about . Is it about Southern Tier finance, greece, portugal, italian challenges . Matt actually its interesting, tom. I heard your discussion about trades and investment and globalization. Even though that is not the track of the finance ministers meetings, it seems like thats what everybody really is discussing, this issue of globalization and inequality and how it relates to trade. Even though they need to stay away from words like protectionism and rulesbased. Matt miller, thank you very much indeed. Steve keen still with us. Any chance these guys are talking about the right thing . Steven no. The problem was caused by private debt exploding. They took their eyes off private debt and obsessed about government debt. They are still doing it. Until they see the trap they are in, nothing they talk about is going to reserve resolve the situation. Guy what are the longterm implications for productivity . Steven no investment. A large part of Corporate Investment is financed by borrowing money. If you have corporations carrying a load that is pushing the envelope, you wont get growth. Tom the heart of your new book is a complexity analysis. Theres been a discussion 40 years now that the e. U. Model is too complex. We saw matt miller with a complexity of flags the hind him. Will it kill the European Union . Steven that is part of the issue. The fact that you are trying to push together 18 nations which should never have been put into one Political Union imagine having an asian union. It is a nonsense idea. Tom Henry Kissinger is in the oval office with the president of the United States. Are we going back to every nation for itself . Steven the trouble is with trump at the top of it, that is a possibility. This is the breakdown of globalization. Globalization has to fail. Lead with a recasting of marxist theology. What is our very antimarxist audience, what do they need to know about the benefits of the modern theory of karl marx . Marx got the labor theory completely wrong. Forget about that side. X got a complexity of capitalism right. Complex,ok at that unstable, creative vision, that is tom this totally dovetails with my book of the year a year ago, hubris. Guy lets think about the sustainability of the current model. When are you going to be right about this stuff . Steven i was in 2008. Guy when is the next steven there are countries which went through a debt crisis in 2008 like america. They are now stuck where they are never going to reduce the debt. They are stuck on the japanese track. There are another nine to 16 countries including china which got through the 2000 a crisis by accelerating private borrowing. They managed to avoid 2008. They are coming out of a crisis. We are talking economies roughly the size of the american economy. China, katonah, australia, south korea, belgium, norway, sweden, maybe some of the old ones. Guy steve keen, sticking around a little longer. Coming up later on, what do we need to talk about . Were going to have a conversation with Charles Evans of the chicago fed. Hes one of two speakers from the fed today. Harper also speaks today. A. M. Inversation, 10 30 new york. Guy executives from softbank and sprint had informal contact with tmobile owner budget telecom. Lets bring in bloombergs matt campbell. Still with us, steve keen. The regulators going to be cool with this . That is the question. If you look at the international context, most large economies are going from four wireless carriers to three. The u. S. Is a bit of an outlier. This is a sensitive subject. Everyone knows what they pay for their phone bill. No politician wants to tell consumers theyre going to have to pay more. I think this is still a very tricky situation. What is the model . Is there something we can look at and say, it worked here, not here . How do i think about this if im a regulator . Is instead ofha having two very large operators and you would effectively have three big ones that can compete with each other. Be,counterargument would the Current Situation has worked in many ways. Tmobile has made a lot of noise about being more consumerfriendly. If you are an opponent, why change it . Tom the guy with the purple tshirt changed the business. This guy was a joke when he came out. I laughed at him. Mr. Legere revolutionized that business. Every kid i provide ownership two, all the stupid phone bills i write, or because of this guy. Is he going to run this dog . I dont believe softbank would let him do that. One thing we dont know is who ends up with the combined asset. It would have been perhaps softbank a few years ago. Priceless,that theyve got to keep them there to compete with verizon, with at t . That is a very good question. Im sure tmobile has to be very happy with the job john legere has done given how much more visible they are. But this is being decided at levels way above him, in tokyo and in germany. Whether he stays on will remain to be seen. Talk to mr. Trump about it as well. It is that sprinttmobile thing , maybe that is what the president would call it. Matt campbell, thank you for driving this conversation forward. We have much more to talk about. Nicholas stern of the London School of economics, all of his work there, his work on Climate Change, it is a changed dialogue. Stern about to nick the financial crisis. From london, this is bloomberg. Tom i miss home. There it is, guy johnson, beautiful new york city, the east river. Good morning to all of you. Early morning in new york city and worldwide as well. Bloomberg surveillance from paris, now from london for the week. Guy johnson in for francine lacqua. Tom keene as well. Let us go to new york city. Heres taylor riggs. Taylor theres a report that former fbi director james comey declined to pledge loyalty to President Trump in january. The New York Times sites comey associates. Tommy replied he will only give the president his honesty. Comey was fired this week. The pentagon is reassuring turkey of american support after agreeing to arm kurdish fighters. Defense secretary james mattis met with turkeys Prime Minister. He was the first facetoface contact since the u. S. Said it would supply weapons to cards fighting Islamic State in syria. Theres been a turn in the legal battle involving driverless cars. A judge in San Francisco asked prosecutors to look into claims against uber. Hes not saying whether a criminal case is warranted. Waymo claims engineers have trade secrets. In china, president xi jinping will host 30 World Leaders as the centerpiece of the soft tower push. The forum is designed to solidify xis image as one of the leading advocates of globalization. Bys prepared to back it up spending hundreds of millions on infrastructure around the world. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. Im taylor riggs. This is bloomberg. Guy thank you very much indeed. President trump skeptical about Climate Change but his administration appears to be taking a more cautious approach. Rex tillerson signed a document Climate Change is serious threat to the arctic. We joined on the phone by nicholas stern. Steve keen is still with us. Lord stern, good morning. The Trump Administration seems bogged down. Is that a good thing or a bad thing . Nicholas it is a good thing that theres been no decision to leave paris. I think the Paris Agreement on Climate Change which took place at the end of 2015, where 196 countries including the United States were involved, and there was a decision to try to halt increasing Global Temperatures to well below two degrees relative to the end of the 19th century, and the United States was the key mover in bringing that about, and it is a good thing that there has been no decision to leave that. Arelieve the arguments increasing in strength in washington in the direction of staying in, although there is clearly a lot of pressure from some quarters to quit. I am hopeful that United States will stay in. It is very important that they do. They havent left yet. Guy who should i be listening to on that matter . Who do you listen to in washington to get a sense of what the administration is going to do, since of direction it is going to take . I dont have an inside track into the white house, but the discussions have been quite well reported. It seems to me to be pretty clear that a lot of the big figures such as Rex Tillerson in treasury mnuchin in and the defense, National Security chiefs, that they are pretty clearly in favor of staying. They understand the risks from Climate Change. They understand the risks to the u. S. Replication reputation, and they understand that theres a real growth story year. States to be the united leading the charge on new technologies, new ways of doing things. I think theres a big group that understands both the terrible risks of Climate Change, including to the United States, and at the same time, the real opportunities in the growth story, the threat to the u. S. Reputation, business, if it does leave. Theres a small group which from all accounts includes the head of the epa which is in favor of leaving. Im hoping that rationality analysis, the selfinterest of the United States and the world, will prevail. Tom that explains the white house. Lord stern, you created International Headlines and uproar with your original work on Climate Change. Were you wrong . Has it all happened faster than your reports thought . Nicholas at the time some people said i was exaggerating the risks and i think that was 10 years ago now. I think all the evidence that has built up is that i probably underplayed the risks. Things have been happening faster than we thought. It looks still more dangerous. Something else has happened. The technologies have moved much faster than we thought. Is stills that action more attractive now because we can see how to make our cities cleaner, less congested, more efficient, and at the same time we can save money by organizing our energy more cheaply. Tom the dynamics of this is, if we look at the Paris Agreement, the idea of going small, going local, going city, is the technology up to scale where we can do that . Nicholas it is moving very quickly. Recent bids in india on new power generation, solar was down to about 3. 5 cents per kilowatt hour. You are seeing the renewables now competing with traditional fossil fuels without much support. And of course without proper pricing of the fossil fuels for the damage they do. Even without the corrections to the markets that we need to take into account the terrible damage that burning fossil fuels causes, even so, renewables are pretty competitive now. And of course the whole Energy Efficiency story has gotten stronger. We are managing demand much better. We saved money that way. The tremendous revolution in materials, we can insulate far better than before. It is not just renewable energy. It is managing demand, materials , across the whole frontier. Guy can i ask you a question just to wrap this up should london band diesel cars . Nicholas yes, it should. Guy how does that work . That is an existential threat to the entire infrastructure that weve built up. How does it happen . How in reality does this take place . You say yes they should. Now nicholas people dying from air pollution in the u. K. Than traffic accidents. If it was traffic accidents killing 40,000 a year, you would get pretty fast action. E need that fast action i think we can do it. We could do it at some time between five and 10 years. In the meantime, you make it much more expensive to bring diesel in. Say 2005 2025, from that date on, no more diesel in london. Tom im too attached to it. Nicholas stern, thank you so much for being with us today. Steve keen has been squirming over here listening to this discussion, holding macroeconomics to the theory of Climate Change. Where are we going to be in 10 years . Steven i think were going to have a serious climate wakeup call that makes people realize not only are they wrong to deny they are worse, and going to throw monumental amounts of investment at this to stop destroying the ecosphere. Tom weve got to make the intellectual debt before we know the result. Steven we have to. The barrier reef in australia. We need something on that scale which shocks the world and says it is worse than we were told. That combination could get us out of the debt trap as well. Guy you could draw the line back to the debt trap and Everything Else. Steven a global Climate Change effort could be our second world wo. Mark t guy were going to carry on the conversation. We are talking to bernard byrne. Were going to take you to ireland. We saw a big focus yesterday on brexit and what that means for ireland. We will carry on that conversation as well. This is bloomberg. Londonm guy johnson in with tom keene. Lets turn our attention to dublin. Since the u. K. Voted to leave the e. U. , britains Financial Firms have explored setting up subsidiaries or moving headquarters. Will brexit give dublin a rise in the rankings . Im joined now by the allied irish bank ceo, bernard byrne. Good morning to you. The man effectively in charge of the Commission Strategy on brexit in dublin yesterday speaking. Do you have any belief that were going to be seeing ireland coming out of the brexit negotiations in good shape . He assured everybody they would. Bernard i think theres opportunities and threats that come out of brexit. In the short term, we are more focused on understanding the threats and trying to make sure we can understand the businesses we support. Those are things to come from currency movements, and as brexit moves forward, what sort of trade deal will exist. Opportunities are clear in terms of encouraging more Foreign Direct Investment has ireland remains the last englishspeaking restriction in the e. U. Ireland is an attractive location. It doesnt take a significant amount of movement from a u. K. Base into a dublin base to have a meaningful impact. Barnettier is mr. Is going to barnier listen . Do you think that softens the talks . A hard border between north and south would not be good news. Do you get a sense they are listening . I think that if you listen to all of the commentary about the border, i think it is clear that both the u. K. Government and Irish Government have done a good job making sure everyone understands how important it is that this is dealt with very sensitively and is to the four of the negotiations. I think any statements that have come out have supported that. I think the e. U. Is behind the idea that it needs a special solution to address that. Great success from the Irish Government and u. K. Government. I do think the statements from the commission generally recognize that. The answers are going to be difficult because it is a unique problem. How those solutions emerge will be important. People are definitely going in with the right mindset. Guy is your ipo on track . Bernard the markets are very attractive at this point in time. The Irish Economy is doing well. People are upgrading forecasts for growth in the Irish Economy. Youve got a political will to do it and our business is performing well. All those things are the key factors you need in place. Weve had some good conversations with potential investors. I think were on track at this stage. Ultimately it comes down to the minister deciding that now is the time. His commentary has been positive around his focus for a shorter term issue. Ultimately it is his decision. Tom i want to congratulate you and your bank. You are coming up on the 10th anniversary, maybe the ninth anniversary, of the coverage of the irish to do something about the financial crisis. How lonely was ireland when they confronted their irish banking crisis . Bernard obviously if you go back, i joined the bank in 2010, so my memory starts being very focused on then. Around that time, the crisis emerged and even more deeply 2011, then it started to be solved. Everyone was looking at ireland as if it is unique. Many other jurisdictions had those problems. I kind of took a longerterm solution to them. I think the strength of the irish recovery and our bank has been because because we did manage to take the action and get on. You think that would work for another six countries to clear the market. Help me with this ipo that guy johnson mentioned. Everybody else can ipo. You would think you would be first in line. How is your ipo going to differ from the dilutions we see in italy and germany . Bernard i think the bank is a completely different stage. Measures. Through the close to a couple hundred basis points of capital every year. The business is kind of fixed. We are in the stage of the government recovering its investment and seeking to maximize its return rather than putting capital in to rescue a bank. It is at the opposite end of the risk spectrum. Tom mr. Moynahan at bank of america has frequent flyer miles on aer lingus. Do you need to have a discussion . Are you such a National Identity that it is unthinkable you could be merged with someone like bank of america . Bernard that is obviously an issue for somebody else to decide. Tom were asking you. Its friday. Bernard sure. We have a franchise that makes a lot of sense in the irish context. Weve gone about focusing on delivering for the core Customer Base here. If somebody sees that as attractive, that is an issue for the shareholders to decide. In the shortterm, it is more likely the state would see its value being realized from an ipo. As time goes on, if a large player figures out their interests are best served by having a larger presence in the european markets, that is clearly a value decision for a shareholder. Wonderful to speak to you. Congratulations on the recovery. Bernard byrne with aib. Amazing what they did. Remember the carnage . Guy i was there. I remember walking out of the press conference and it was snowing. Slipping up and falling over on my posterior. Tom your posterior . That is what we say on television. Radio, we Say Something different. Were going to come back with steven keen. Were going to go to steven keen right now. Excuse me. Can we avoid another financial crisis . You just heard there the clearing of markets. Highistance from economics, i would suggest, is about courage. It is about capitalists being afraid to act and theyve got to find the courage to clear markets. Steven it is also a challenge for the governments to realize they can do something. Like the irish, theyve got through the process to some extent, but theyve got a larger private debt load now. They havent got the same bubble on the housing sector. They havent actually understood the problem. Quickan i just ask you a question on Debt Reduction . The fed is about to start reducing its Balance Sheet. Talk about Balance Sheets. Steven centralbank Balance Sheets are infinite. People think, how can we fund the education policies . Nobody asks where did the central bank find the money to do qe. In one year, they did 200 billion pounds worth. Far greater. They simply do double entry bookkeeping. Nobody turns down central bank money. Guy Marine Le Pen suggested in france that she would use the bank of france to fund infrastructure. Steven theres no such thing as a shortage of money. It is a shortage of knowing how to create money. Tom thank you so much. Congratulations. Conservatives, shut up and read this. Good idea. Bloomberg, it seems like hes being interviewed every day. It is not an exclusive. Wilbur ross. We would do that in the 8 00 hour. This is bloomberg. ,m bloomberg surveillance guy johnson and tom keene in london. Guy in for francine. Rumor has it she will return. Right now, you went to new york, so worn out with washington, defense are really joins us from new york. Theres all the talk. Lets can it. What is the president going to do this weekend . Buthings are still in flux he will continue on preparing for his First International trip. We are anticipating more comments from that nbc news interview that mr. Holt did with President Trump about the fallout over his decision to fire former fbi director james comey. Discrepancies emerging yesterday in the hearing in which king acting fbi director Andrew Mccain identified discrepancies. Guy kevin, does the Upcoming Trip start to divert attention . Do we Start Talking about Something Else next week . I think just how quickly the news flow has moved since President Trump has taken office, it could. The russia story is not going anywhere. Next week on capitol hill, former fbi director james comey will be meeting with the u. S. Intelligence Senate Committee the hunt closed doors. Theres a push to make that public. Yesterday, the acting director said that unlike what the west wing was saying, the fbi rankandfile members did not ase confidence in mr. Comey the west wing has been offering. Tom maybe you should clay golf this weekend instead of the president. On behalf of all of our surveillance team, thank you for your team and all of you in washington for your work this week. Just extraordinary. Coming up in our next hour, this is a great voice. Very different from steve keen. Roger bootle will join us. You know him from the telegraph. He is a force at Capital Economics. We will get an update on brexit. We will also talk to roger bootle about the strength of the economy. This is bloomberg. Distinctionhe between loyalty and honesty in what has been one of the wildest weeks in americas president ial history. It is friday for the president. This russia thing will not go away. This weekend can we all just play some golf . Germany is plain and simple killing a q1 gdp. Theyine west malia, vote and she meets with mr. Macron in france. Incoming emails always a threat to guy johnsons career. Regretsey at barclays hitting reply. I am tom keene in london in four francine with guy johnson in for francine lacqua. Guy he gets inaugurated on sunday and macron will go straight to berlin. Its about integrating europe and pushing the european agenda. I wonder if the germans are really on board with this. Tom i am surprised they do the inauguration a week after. Guy well they have got to have a party. Or they are soirees Something Like that. Here is taylor riggs. Taylor the Trump Administration is starting a process that could ease on wall street banks. Treasury secretary Steve Mnuchin ordered five agencies to review what is allowed under the rule which bars banks from betting on markets with their own capital. Critics say it has made banks to conservative and driedup liquidity. President trump calls james comey a grand stander and showboat who he planned to fire all along in contrast to previous president s statements. The president spoke to nbc news. President trump i was going to fire comey. You made the decision before they came out . President trump i was going to fire comey. There is no good time to do it. Is considering candidates, among them, mike rogers and former new York City Police commissioner ray kelly. Saudi arabia is compared preparing to cement ties in the u. S. Will planwealth fund to announce more than 40 billion in u. S. Infrastructure. Inre has been a breakthrough trade talks between u. S. And china. Beef exporters will have greater access to Chinese Markets and the u. S. Will allow import of cooked chinese poultry. Global news global news 24 hours a day, powered by more 2600 journalists and analysts in more than 120 countries. Riggs. Ylor this is bloomberg. Tom thanks so much. A data check, just one more today. Quiet markets out there. Futures negative six, dow futures 35. Oil was a little bit of a list this week lift this week. Guy stoxx 600, it is going nowhere today. Absolutely unchanged this morning. No real sense of direction. I am told this week saw record inflows into european equities. The german twoyear, i think it will get interesting as we see the data come through strongly. 63 on the gdp the kearney effect on cable tom turning quickly to the bloomberg terminals before we get to roger bootle. Bounce, uglyith a firstquarter and the forecast is the big bounce up. I would Pay Attention to the red line two years ago where it just didnt happen. A lot of this is a real guesstimate across our interviews. Guy absolutely. Lets talk about what is happening with the twoyear to fed, fed, ap fed. What is interesting is the bloomberg dollar index is not following suit. Dollaryen is a little bit more correlated. It will be interesting to see how this manifests itself. Tom we are going to rip up the script here. We love it when we get two guests from different parts of the world. And john with norman. He and i are following each other around. You were in new york a week or so ago and we joined john london in his london this morning with guy johnson. The u. S. Is not the only economy with rates going up. There are obviously rate increases in a number of emerging markets. Guy is the fed being underestimated at the moment . Every fed speaker i hear at the moment says the fed is on rails. I think it will be underestimated by the time we get to the end of the year, toning the fed is likely deliver two more hikes. I think difficulty for the bond market is ever pricing in more than a hike and a half more than the current number. That, it is difficult to get a sustained selloff in bonds and a rally in the dollar. Tom we will get to brexit and all of that in a bit. Help us with the Capital Economics view of where gdp will be particularly in the United States. There seems to be a distribution to a economists of 3 plus certain level of doom and gloom. Roger we are pretty confident about the u. S. Economy. The key thing is what that will mean for Inflationary Pressure. We think Inflationary Pressure will be building. Tom help john normand with an economic briefing this morning. Does that assume stronger dollar . Roger i dont think the stronger dollar will have quite of an impact. How is reflation responding in todays world to a tightening economy and a tightening labor market . We dont know the answer. I think the early signs are there that Inflationary Pressure is building. Guy the bank of england is trying to figure out exactly when this stuff starts to pop and saying they believe wages will start rising. Is that going to happen at some point in the nottoodistant future . I think in the states the answer is yes. I think you can see the early signs of it happening now. It is very difficult territory because we dont know how far the new economy has actually changed from the old relationships and it could be wrong. E fed gets this we had very low rates for a long time and i think the danger of carrying on that building has got to be in the back of the feds mind. I dont think they will want to give too much leeway. Guy you talked about the other elements to these pairs and the euro is a big factor when it comes to the dollar index. The output gap is in or miss enormous ins certain parts of europe. John they have lots of time if you think they are guided by only inflation. It is essentially the only needle in the compass, but i think they look at a greater range of indicators. I think as long as the economy is delivering up trend growth and there is political pushback against the idea that the ecb you can haveaged, changes in the policy setting even without inflation being an issue. Tom i cannot get home. I cannot afford to make home. I have to make money and you are telling me i will make money on sweeney Swedish Krona or japanese yen . Audience y global to my for young for those of you on radio, it is generally for 20 years. E how do i make money on krone yen . The only things we are recommending. The dollar is going to go up versus places that are not moving. That is a Dollar Strength versus canada, southeast asia, where whenee currencies rise they are biased to the upside because it is too loose. Is an assortment of currency. A window into the minutia in john normand and others work within the foreignexchange space. What you all want to know is roger bootles thoughts on the United Kingdom and e. U. Politics. Up, a required conversation and listen with eli lake of bloomberg view. He has been hugely controversial on the russia thing. From london, this is bloomberg. Bloomberg surveillance. Lets get to Bloomberg Business flash. Sprint started talks to merge with tmobile u. S. Executives from sprints largest shareholder softbank and sprint itself had informal contact with the tmobile owner. Investorslecom told they would be open to questions about consolidation. Vivendi plans to take over in a vote . 2 million deal. The teak over would unite vivendis media empire. Ceo jeff staley responded to emails from an imposter pretending to be the chairman. According to the financial staley responded from praise from mcfarland citing his grit and comparing his fairness fearlessness. That is your Bloomberg Business flash. Tom thanks so much. Just everybodys nightmare. Guy opening it up and responding to it is a bit dramatic. It has been a tough week. It was a tough session for him to get through. Tom i was on an airplane and there was a senior partner of a Washington Law Firm and he had literally stopped using email completely. He uses secretaries and assistance to help him. That is how much he was afraid of what email could do to his career. Thet now, we need to move to the drama in washington. We have had terrific respect. Rom eli lake he has written very terse, direct comments on all the Trump Administration. He joins us by telephone this morning. What will you be thinking about into the weekend . How do you digest this historic week . Eli that is a great question. I think you have to go back and look at Andrew Mccabe testimony yesterday before the senate because we did learn some of the initial stories were not quite correct if he is to be believed and he is a comey loyalist and his wife is a democrat. I do not think he would be. Overing for President Trump he said a couple of things that were important. He said there were enough resources to continue with the investigation and he said the firing of comey did not deter the investigation. Some of the early arguments that President Trump obstructed justice. I think that is going to die down at this point. Trump himself has been erratic in some ways and the White House Communications on this has been all over the map. They have contradicted themselves saying it was about this letter. In the saw last night interview was extraordinary. He said let them think what you that id comey told me was not under the investigation at this point. Tom within this was what your good reporting was a few days separating legal issues from political dialogue. Where is that separation this morning . Point, i think democrats may have overplayed their hand. They are comparing it to watergate. I dont think there will be momentum for a special and ittor at this point is extraordinary what happened because i did not think he would be able to fire comey with an Ongoing Investigation into a trump campaign, but he did and so at this point, it looks like there is still going to be an investigation and it is still going to be overseen by the Deputy Attorney general is respected by both parties and seen as someone who is not really political and whoever they bring in their into the fbi to lead the fbi, we will see how it plays out, but it looks like the independence of the investigation continues. I think it feels a little bit less like a crisis than it did tuesday night. Guy does this week embolden the president . Eli i think in some ways it can embolden the president , but it is not quite like when reagan fired the air Traffic Controllers which sent an Important Message all over the world because at this point, i think he heard himself and the white house hurt himself because androllout was so erratic when you are president of the United States, you need to ss. Ject calm this calmne at the same time i think it was him saying this is my presidency and i think he made a speculation. This is just speculation. I think the name made a speculation that under comey this investigation was would greg on. Drag on. In that respect, he asserted control over it. What he does need is kind of closure to that investigation and this does add more questions about that. , once you really look at it, comey was not a great fbi director. He made a lot of mistakes. Tom thank you so much for your repeated attendance with us over the week. Myself and all will be staggering to monday with the sunday talk shows. Coming up, the former secretary of commerce, Penny Pritzker on the state of american business. Look for that in the new york afternoon hours. From london, stay with us, this is bloomberg. We will carry on working on this debt relief package. There is not enough currency yet, but i hope the European Partners will continue to progress in that direction. We havent changed up, officially. This is the same, we have two issues, policies, which are being voted by the greek authorities come much progress has been made and we hope that europeans will be more specific in terms of debt relief. Guy that was the imf managing director speaking to us at the g7. We are back with John Normand Jpmorgan head of fx Commodities International rates research. Roger bootle is here, too. Lets get a sense of where we are right now in terms of in terms of the story. The g7. They dont want to talk about the big things, this is greece and they talk about a lot of things that honestly i dont think what is trying the Global Economy right now. We still dont understand what is happening with globalization under the Trump Presidency and we dont understand what trade is going to look like you are we just waiting . Standing here trying to get an understanding of once the policies in washington come down what the policies will look like . John there is a waiting game because there is a divergence and opinions between trump and the cabinet and trump and republicans in congress. Until that consensus emerges, it may never emerge in his first term. Guy are we just waiting . Is that your sense as well . Do you have any idea what the landscape will look like . Roger i think the important thing is politics is being eclipsed by economics. For all the lack of clarity we have about trump and his plans, the World Economy is actually doing quite well. All the gloom and doom around the euro so has proved to be diminished. China slowdown did not happen. This is the really big story, i think. Tom i want to lean forward to the brexit discussion to come. There has been a percolation of a no deal for brexit. Can the United Kingdom recapitulate a unique, alone British Empire or is that just a pipe dream . Roger it is a nightmare rather than a dream. It is ridiculous. No empire, but i think britain can be an economic we have always been outward facing. Weve got trade relationships all around the world. I am quite sure we could leave the e. U. Without a trade deal in do extremely well. Tom this, guy, to me is fascinating. Guy the bank of england thinks the entire premise is that we will get a smooth brexit and hasnt generated a plan b. Are you surprised the bank of england has an modeled a plan b . A plan b would sound alarmist. I think it is better to feel this is a moderately low risk scenario. Guy sounds a bit like mario. Raghi in 2012 we will be back with john normand and roger bootle coming up. We will be talking about what is happening in the fed. This is one of the big conversations. Charles evans will talk to this is bloomberg. Tom it is friday. Francine lacqua is rumored to return monday. Guy johnson holding down the fort here. In new york city with terrific news flow this week is taylor riggs. Taylor there is a report that james comey failed to pledge loyalty to President Trump at a dinner in january. Comey replied that he would only give the president his honesty. This was fired earlier week. The pentagon is reassuring turkey of american support after armed kurdish fighters james mattis met with turkeys Prime Minister. There has been a dramatic turn in the legal battle surrounding driverless cars. A judge in San Francisco asked federal prosecutors to look into uber. Ymo lawsuit against waymo, owned by alphabet, claims an engineer took with him when he joined uber. President xi jinping will host 30 World Leaders. The road for him is meant to of one of themage leading leaders of globalization. Quote global news 24 hours a day, powered by more 2600 journalists and analysts in more than 120 countries. Guy thank you very much. Manuelmerkel will host day afterl macron, it the plant inauguration as french president. Planned inauguration as french president. It is a big deal. This is kind of really important in terms of the regional votes. Lets get back with john normand joining us from j. P. Morgan and roger bootle from Capital Economics. The you think that merkel and macron can see eye to eye on the direction of europe. Cron my story at the moment is they are not really up for a transfer union. John true and that is an issue they will always agree. I am not your negro is a key issue on which the i am not sure it is a key issue there is a variety of things that will always be discussed and i think the emphasis on the euro bond is excessive. Guy what happens to mr. Schultz . I think you have a faster move to federalism, but i think it is still a move that proceeds at a very german pace, meaning it will be glacial. There may be a common bind, but not total socialization in europe, that is not something that passes through the electorate. , if where is the zeitgeist you will, of francogerman relations . Where is that relationship right now . Roger i think we probably dont know because we are in this manscal no manned no land. I really think what we will see cracks. Ing over the i dont think there is real, genuine agreement between germany and france on the way forward. Tom two both of your optimisms on Economic Growth, if you get Economic Growth you dont have to make tough decisions. Roger so this could end up being a negative thing. There is some definite Economic Growth, but it is across the continent. Is onke deficits and he unemployment. Tom he said he gdp today was very china induced. And there are some weather factors in there as well. Lets talk about the periphery of europe. They are watching this discussion take place between Angela Merkel and missed year mr. Macron. How does europe come together and is a good news for places like portugal and greece . Do you think the ecb will carry on the qe to keep the train on the tracks . John i think the only country watching this closely is the race. They think this kind of team is greece. That is the one place that owns germany and france is critical. For the rest of the periphery, there is nothing really to be debated. I think the more immediate issue is how bond markets will perform when the ecb is properly tapering by the end of the year . Tom what is your euro call this year . Adjusted itent because we always assumed a centrist candidate would win. The market was going to trade off the likelihood the ecb tapers and bond yields raise more than u. S. Yields. Tom 115, but can they get back to the glory days of a strong euro . 1. 15 is kind of where they initiated. John that is an average level for currency. You always have leaders that claim the euro is strong, but it is really set by the ecb versus fed policy. Macron do what he needs to do in france . Youve got a new, young leader coming in with a Strong Program he believes he can annexed, but t, but he can enac france is a difficult reform. I think the likelihood that he is able to push through some reforms is reasonably high because even though his party year, itexisted for a may take half the seats in the assembly. Maybe he ends up putting together a coalition. Tom roger bootle, will the frenchness adapt . Roger i do not think he will achieve very much in terms of reform. It is on the streets in the history of this. Tom you are looking about the labor protest to be real . Roger several president s have tried to reform france and demonstrators come out in the streets and there are barricades and violence and in the end, the state backs down. Tom why is this time different if you have a more constructive view on france and what they will get done . Is labor and impediment to that . John i think, unfortunately, his administration will overlap with a complicated period for Monetary Policy in europe which can cause the spread between bond to widen. Tom we will come back and talk about brexit with roger bootle and some of the tone he has Prime Minister may goes into this summer as well. We are going to come back with john normand and roger bootle and coming up later, a conversation with angus deighton, the reese recently laureate. Nobel professor deighton has not done that. Hes got some Controversial Research about the death of the middle class in america. This is bloomberg. Taylor this is bloomberg surveillance. It is the biggest ipo in south korea in seven years. Gains climbed almost 4 in the first day of trading. The mobile game developer has a. Et value of 12. 4 million the Public Offering was priced at more than 70 times last years earnings. Wells fargo will probably shrink earnings of auto loans as used car prices are falling. Wells fargo will take a closer look at risky borrowers. The head of Consumer Lending says he is willing to reduce market share to avoid potential losses. Add nordstrom to a list of department change with decreasing First Quarters. Macys and kohls also reported sales that fell more than forecast. That is your Bloomberg Business flash. Tom with all you have been waiting for worldwide, mr. Ootle on brexit this is some of the tension into the weekend on brexit. The Prime Minister stalling instead of getting on with the job of negotiating the exit. The Prime Minister may believe tonight that more votes will turn into more concessions. No one cares about the election whether mrs. May is strong or weak is irrelevant to the positions of the 27 countries she faces in the brexit talks. Bootle. Mand in mr. The trouble with europe is your wonderful book. Er you have to recognize she is a running for election so it is daft to imagine her laying out the brexit plan. She has got to win the election first. I did not agree with this correspondence view that the outcome does not really matter. In brussels they may not be sitting there with bated rest, bigif she wins by a majority, this will be extremely important because it gives her control of the whole process. She doesnt have to worry about her own party. Tom why do you write about plan a, plan b, plan c, plan d. Is doesnt she just say this what we want and this is our negotiating point . Roger i think she will win the election is out of the way and once they have done the work to prepare. ,he doesnt need plan c or d but she does need a plan b. If you put everything on plan a, you are handing your opponents against because they know you have nowhere else to go. I think its important they know we do have somewhere else to go. Guy lets think a little bit about where this will leave us. Lets assume, and we are in a general election. Her and there are plenty of other parties contesting the shetion, but lets assume ends up with the majority and she goes into this debate with a plan b, with a plan a and a plan b. How does the other side respond to those two plans . She needs to put plan b on the table. They go, she well you are going to be fine without us. To start, we talk about the other side, but it is really a strange animal. The European Commission and there are 27 countries and those countries have got very different interests. Guy at the moment, they are speaking with one voice. Roger behind the scenes they certainly arent. I think the political process within europe is going to be extremely interesting once we get down to brass tacks. Who is going to be pushing for what . Comei know guy wants to back to this. John normand, what are the market events that will overcome the debate, the plan of the mayte where Prime Minister is going question right is it sterling, capital flows . What is the thing that will get on in the way . John i think it is the performance of the macroeconomy. It is firm on the manufacturing side and weakening on the consumer side. If that picked up, it would matter how the negotiations are proceedings. It could be bearish for rates and bullish for the currency. I would rather say where it is, which is up trend. Tom youve got a more optimistic view, but what is that due to the debate question mark roger as long as the economy is growing reasonably, i dont think it will make that much of an impact. I am much more optimistic and i think what we will see are the gdp q1 figures that fall away and we will get decent growth for the rest of the year. Tom Everybody Knows in a divorce that nobody fights about the kid, they fight about the dog. What is the item that will be that sensitive and emotional 20ate team month from now months from now . Roger i think it will have to do with the European Court of justice. Tom European Court of justice . Roger at the moment, the European Court of justice has jurisdiction over the u. K. And many of the judgments the british people strongly object to, they hate it. There is this awkward transitional period and all sorts of questions about the relationship of britains Financial Companies with europe which may yet still be subject to the ecj after we leave the e. U. The people in europe want that and that will go down extremely badly. Guy you want to have common analogy of rights for people in the European Union that commonality of rights for people in the European Union that live in the u k and you need something that will back that up. How do you write a Legal Framework and a guarantee how do you write a legal guarantee for those people . Roger i thought magna charta was signed in england. I am not sure why it has to be on the continent, what is wrong with good old english law . This is difficult. If she makes a concessional which corresponds to toms dog in the divorce settlement, this will be far more the root of argument in dispute. Guy this is exactly how the European Union will argue it. They will use detail and the legality of all of it in this is ultimately what the u. K. Will have to confront. They have to figure out a way to provide the Legal Framework outside the ecj to provide some sort of backbone for this agreement. I dont know how that happens part ofthe ecj being it. Roger i am not saying it will not be part of it, but i am telling you the people will not like it. This is going to be very is the David Cameron dead . Is coming back. It has been dead for quite a while and i think theresa may is here for a long time. Tom we will come back with a special chart from john normand. We are doing this for taylor riggs in the cfa. Guy we look forward for that. Jeremy korman Jeremy Corbyn is contesting the upcoming vote and speaking at Chatham House about foreign policy. Ou can follow that on live i would also like to welcome my colleagues from the shallow cabinet. Thank you very much for coming today. Guy 52 minutes past the hour. This is bloomberg surveillance. Coming up shortly is bloomberg daybreak americas. You are talking trade . We will be talking to wilbur ross on radio and television. First is the 10 point joint statement between the u. S. And china about overt trade. Next, the trade deficit is us selling more beef to china really end up moving the needle and what is it mean for trade deals from the u. S. . Will it be selective or broad sweeping . This is what we will dig into with secretary ross. Tom bloomberg surveillance on radio will have that as well. Right now is the single best chart and i will tear up because john normand came in with a home run chart from jpmorgan. Taylor riggs gets ready for the cfa panic. John normand, here is the swedish banking crisis and here is the swedish japanese yen. Cyclical. How do you play a cyclical currency pair to make money . John you buy the currency when you think rates are going up first. Tom so it is a rate analysis . Obscureen if it is an pair like swedish and yen, you can do that with all sorts of pairs. It is kind of a metaphor for lots of things going on. Tom what is your call to be clear . You are looking for strong sweden . John strong sweden, strong europe. Tom the great analysis whether a is level 2 or 3, this is backbreaking example that will survive although taylor riggs is going to challenge it in new york. Fx dynamics is about Rate Movement or Capital Movement . John they are two sides of the same coin. Capital is going to capture yield. It is not the only capital flow in the market. In theat this means answer on a cfa exam is 1, 2, 3, know. And 4 is i dont guy what we are seeing at the moment is money flowing into europe seems to be on the front foot. People are talking about it and john is making positive noises about europe. This week has seen positive inflows. People love europe. If europe is feeling better about itself and it is on the front foot, how does this change the u. K. Point of view . Roger i dont think it has any fundamental effect on how they view the future, but the eurozone has a little bit of a reprieve at the moment. Economically things are looking better and politically things are looking better. I think mr. Macron will have a little bit of a honeymoon period and it will look better and then we cap crunch time after findber because then we out how long germany and france are apart and how they can do a deal. Underneath all of this lies italy and that has been the country i have been the most worried about. They have been recovering, but not by very much. The politics are extremely interesting and you have the election next year. I think the next nine months will be pretty good. Tom we will continue this interview. Let me do a Foreign Exchange report. Oday was a vanilla report sort of a basic report, yen stronger, there is euro, sterling next time i will be able to speak in french. Guy when are we going to do this . Tom francine is back on monday. Guy she can definitely speak french. Breaking down trade barriers one sector and country at a time. The u. S. And try not a great to promote shipments of American Natural Gas. Finance ministers do not see eye to eye on trade. Investors are focusing on the data, looking for evidence that consumers bounce back after a week First Quarter. This is bloomberg daybreak. U. S. Retail sales coming up shortly. Grind lower continues, futures a little bit softer, down 2 10 of 1 . Euro strength, not the story, the dollar on par 4 to best week of the year. All eyes on the u. S. Economy. U. S. Retail sales and vpi cpi for april. Discussing Monetary Policy in dublinan