Transcripts For BLOOMBERG Bloomberg Surveillance 20170526

Coming up later on the program, how would brexit be different if the u. K. s labour party won this election . We speak to the shadow home secretary, diane abbott, at 9 30 london time. Lets check on your markets. I want to start with crude. A slump weighing on Energy Shares as Global Equity markets seem to the heading for a lower finish. Crude below 50. It is a little bit higher than it was a couple minutes ago. However, theres a lot of speculation on whether opec stuck to the most predictable outcome in its plans, and what that means for the future. The onshore yuan heading for its strongest weekly gain against the dollar in four months and pound falling as polls show theresa may may be losing ground. Lets get straight to the bloomberg first word news. Heres nejra cehic. Nejra lets start with the u. S. The Justice Department has vowed to challenge a freeze of a travel ban against six muslim majority nations. The judge says the directive trips with intolerance and discrimination. Attorney general Jeff Sessions says the administration strongly disagrees with the decision, putting donald trump on track for his First Supreme Court showdown. China is considering changes to the way it calculates the yuans rates against the dollar. The plan could add a countercyclical adjustment factor that may blunt the impact of market swings. People familiar with the matter said banks are testing their models and will start to provide quotes soon. The pound has weakened after a poll showed the conservative party lead has narrowed after the Manchester Attack. The survey suggests the tories are ahead by just five Percentage Points. Investors also sold the currency after u. K. First quarter gdp missed estimates yesterday. Japans core consumer inflation gauge has risen for a fourth month, the longest run of gains since 2015. Consumer prices increased 0. 3 from a year earlier. That is still far below target and weak price pressures point to limited gains ahead. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. Im nejra cehic. This is bloomberg. Francine donald trump makes his g7 debut today as do theresa may, Emmanuel Macron, and paolo gentiloni. A tough debate is expected on trade and Climate Change but there should be agreement on the need to fight terrorism, an issue that has been given more urgency following the Manchester Bombing. Yesterday trump urged nato leaders to pay their fair share on defense to help counter the terrorist threat. Minimum for bare confronting todays very real and very vicious threats. If nato countries made their full and complete contributions, then nato would be Even Stronger than it is today. Francine our chief white house correspondent, Kevin Cirilli, is now at g7 in sicily. Kevin, good morning to you. Talk us through the last 24 hours. A lot of of focus on body language. Kevin absolutely. Yesterday, the handshake between President Trump and french president macron clearly dominating headlines and going viral on social media. Heres the policy behind the politics. This is the best illustration so far of the skepticism, and quite frankly the questioning going on in europe about President Trump, and you really see that illustrated by that handshake. Yesterday, President Trump speaking at a ceremonial event of sorts for 9 11 as well as the berlin wall, saying the nato allies must pay their fair share in order to counterterrorism, with the shadow of the horrific Manchester Attack clearly hanging over the president s First International trip, most notably with the backandforth between theresa may and President Trump. I spoke with a senior white house official who told me they believe the leaks coming from the u. S. Intelligence community to American Media outlets will embolden the president s cry for there to be some type of investigation to stop the leaks. Yesterday the president , in a statement, not an offthecuff remark, saying hes calling on attorney general Jeff Sessions to investigate the leaks and whoever is responsible should be prosecuted. This is the most scripted and on message donald trump ive ever covered. Francine what can we expect donald trump to take at the g7 . He is going to the meeting with japans shinzo abe. He is also going to be meeting with the head of the european union. He will attend an orchestra event with first lady amalia trump. Melania trump. Again, being greeted much differently than he was in the middle east. Saudi arabia and israel, two countries that have different policies, but are united against iran. Here in europe, that deep skepticism on the president s rhetoric and policies, several of the g7 nations here today actually do business with iran from a Foreign Policy standpoint. When you talk about counterterrorism, with the economic backdrop, theres also going to be a focus on currency and financing terrorism. Over the weekend, President Trump announcing a Counterterrorism Task force that unite nations to combat terrorism. Francine Kevin Cirilli in sicily. Joining us now, jon jonsson, senior Portfolio Manager for fixed income, and it stubs, double Market Strategist at jpmorgan. Jon, led me start with you. What does the g7 and the trip for President Trump, how does that translate into your world of fx . Your world of investment . Jon i wouldnt expect any market moving conclusion from this meeting. We are probably going to have them very split on trade, immigration is unlikely to achieve anything there, fight on terrorism is something we will probably have an agreement on something, whether they can but i wouldnt expect any market moving conclusion. Francine david, one line of thought is that if the president does a good job in his first foreign trip, he gains political capital, which means he can push onough the reform he wants health care and tax. Any truth in that . David i think a very small amount of truth in that, and wishful thinking. When he left, he was fighting this terrible press he was getting in the states. That remains the key issue, the investigations into the russian links, and the great difficulty of passing health care through the senate, which is dead on arrival there, and the budget, which projections are optimistic in the extreme. On the policy side, for this visit, the big thing already is Climate Change. Are they going to pull out of the Paris Climate Accord or not . I think it would be a hopeful sign if he doesnt. Of course i think you can read that onto relationships about trade. That is a big focus for the markets. Francine jon, i dont know whether david is right that this is completely wishful thinking, but he came into power by saying america first, make America Great again, and he seems a little more open than we could have guessed five months ago. Jon hes realized this is where he has the most flexibility, Foreign Policy, domestic policy. He has been unsuccessful in getting consensus, getting any policies through. This will be where he can save his mandate a little bit. Having a successful trip is going to give him some more confident at home. Francine this is a president that was also one script. David i think it is a good thing markets dont like the constant surprises from his twitter account. President this is a that is running into the reality of governing which is different from the reality of campaigning. He realizes the codefendants the United States has with its partners on key issues. Take china. Once you get in, you realize you need them to deal with north korea. You think about each of the g7 nations. You need them to play ball if the United States is going to have its International Goals met. Hes now understanding that. Francine you mentioned china. We see a Little Movement on onshore yuan, heading for its strongest weekly gain against the dollar on speculation that china has been intervening to support the currency. Do you think they are stabilizing it or do you feel downgraded, moodys but the regulators stand firmly. David for a while, weve seen china do a lot to hold its currency up. The great irony is mr. Trump saying it is a currency manipulator and accepting that now. There have been hopeful signs in the last couple of months about the chinese authorities getting on top of some of the biggest distortions that have been created by the growth targets and the development of complex liabilities. Groupre trying to get a of that. That is the strengthening in the currency. You see that cap opening up in interest rates. Francine what is your take on china and what is your favorite Investment Opportunity right now . Jon take on china, we are in the same camp. China is doing a lot to manage the slowdown. It is going to certainly how successful they are is going to have a huge impact on the developed market economies. Whether it is europe, u. S. , or japan, very important to the recovery weve seen. Toit hits anything close 6. 5 , i think that is very good for the markets. In terms of favorite market positions, we think inflation is still underpriced. That is certainly something that is attractive in u. S. Opportunities opening up in other markets. We think there are locations in currency markets to take advantage of. Priced, maybehave become a little complacent. Ive been reducing my credit positions in risky assets. Francine thank you so much, jon jonsson and david stubbs. Lets get to the Bloomberg Business flash. Nejra General Motors shares have fallen after it was sued for allegedly putting defeat devices in trucks. It is the fifth carmaker accused of diesel cheating since volkswagen admitted to flouting pollution rules. G. M. Says the claims are baseless. A second been hit with rating cut in 10 days. Fitch is flagging doubts over the companys ability to deal with debt. Singapore listed noble is in talks with thanks to renew a borrowing facility. Fitch expects the banks to demand less favorable terms and some may walk away. 247as been ordered to pay million to the state and city of new york after a judge said the company turned a blind eye to shipments of untaxed cigarettes from American Indian reservations. The decision comes two months after it was ruled that ups failed to comply with a 2005 deal by continuing to serve contraband cigarette enterprises throughout new york. That is the Bloomberg Business flash. Francine st. Louis fed says the James Bullard fomc is close to where it needs to be on the policy rates. Speaking to reporters in tokyo, he said the inflation path since is cause for concern. The price level has begun to diverge from this 2 path and we are almost 5 below the previously established path. This is not as bad as what has happened in japan. I will show you that picture. But it is worrisome nevertheless. Francine still with us, jon jonsson, senior Portfolio Manager at Neuberger Berman europe, and david stubbs, global Market Strategist at jpmorgan. David, what did you learn from the fomc this week . David the most interesting thing was the initial stab they took at outlining how they are going to draw down the Balance Sheet. They laid out a series all caps. This is a nice Halfway House between letting the Balance Sheet runoff passively, which would lead to rapid drawdowns visavis outlining a very rigid timetable, having it both ways there. I think this outlines the fact they are going to tread very carefully in drawing down this Balance Sheet. That underlines one of the key things to discuss about this issue. Im not sure it is going to have a huge effect on markets. Are everything goes so slowly, i doubt you can find a part of the markets francine people are concerned about some kind of temper tantrum. The communication has changed. David absolutely. That is an important thing to recognize. It is amazing how freely we are discussing this, with almost zero market movement. The fed has succeeded. There was a Shadow Communications policy about this which started at the jackson hole event last august. Janet yellens speech and then, not knowing how to talk about it, being worried about a taper tantrum, gradually got junior members talking openly about it, and now everyone is having this full discussion. By the time they get around to it, we will probably be sick of talking about it. Francine do you agree with that . The other school of thought is andmarket is shorttermism, anything six months away, they ignore. Jon markets seem to have the Attention Span of a mosquito at this point. Anything that shocks the markets tends to last less than 24 hours. We focus on nearterm events. I would expect them to be very cautious. They are fully aware of it. Theyve studied this for many years. It is going to be well thought out and cautiously communicated and they are going to go ahead with their rate hikes. What the fed faces is that the market is not buying into their forecast. The market has been ignoring it, has continued to ignore. Theyve communicated to us clearly the intent to hike. To market is pricing closer 1 francine because they are looking at the data. Jon data is still good. It depends on what you think about the economy. The economy is growing at 2 . It is above trend. The trend is quite below 2 . Youve seen that on the Unemployment Rate that has come down to 4. 4 . That was what the fed expected at yearend. If you look at the last tightening, the market is easier. Equity is higher. The data on the more dovish side that people are focusing on is a head fake. The slowdown in core inflation, the slowdown in year on year growth in bank lending, both of those things i think are affected by the slowdown in gdp growth, and the temporary tightening we had in Credit Conditions for to six quarters ago. I expect those things to gradually reaccelerate. The economy still is growing slightly above potential. Gradual rate hikes will keep coming into question. Will they pause for the tapering announcement . Theythey are not emphasized just how gradual they are going to the. I believe they will be so cautious, they would probably not hike then and announce their plans for reducing the Balance Sheet. Francine stay with us. David stubbs and jon jonsson. We also have a great chart, the differential between german and u. S. Yields. Coming up, oil slides as the opec cut leaves the market guessing about a longterm strategy. This is bloomberg. The president of the European Commission speaking in sicily. This is where the g7 over the weekend will take place. Tusk, hear mr. Donald president of the European Council, a funny moment yesterday when they were greeting donald trump. Here in europe, we have two president s, and that is one too many. Leaders will always have different positions, but the st keep unity. He also said this is the most challenging g7 summit in years. They will be talking about Climate Change, terrorism, and growth. Lets get on to another challenging meeting that happened yesterday among opec members. They may be celebrating a historic deal, but the organization is also facing unanswered questions. Will the relationship between saudi arabia and russia survive . Will u. S. Shale output prove too much of a temptation . And what does opec have planned longterm . The market seems concerned with oil holding its biggest loss in three weeks. Still with us, jon jonsson, Portfolio Manager at Neuberger Berman europe, and david stubbs, strategist at jpmorgan. David, when i caught up with the Saudi Oil Minister, i was asking, are you going to do whatever it takes . He was shying away from that. Should it have been a draghi moment, saying we will go as far as we need to . David i understand the reticence to do it. Industryrs in the oil have to get on board with the new reality, that it is very hard to push prices below 40 or above 60. Theres nothing any one organization can do about that. The initial plan for saudi arabia to take the price down and flush out u. S. Producers of shale has simply brought about a new reality of lowcost production in the United States. I think the hope is to get inventories down a little bit and therefore price will be somewhat more sensitive to reduced output. You are talking about keeping prices in the high 50s versus the high 40s. That is not the kind of control opec used to have. Francine that is because of the shale producers. Do you believe it is almost range bound now . Jon i believe it is truly range bound. Shale has been very disruptive. It is like uber was to the taxi industry. They have been able to move down there cost so quickly. That is very disruptive. The industry has lost control, or cannot manage prices as they used to be able. Francine thank you for joining us. Jon jonsson from Neuberger Berman europe and david stubbs from jpmorgan. Up next, we speak to the u. K. Shadow home secretary, diane abbott. This is what the pound is doing. This is on the back of a new poll. Pound falling on this tighter poll. The poll actually says the conservative partys lead over the labour party has narrowed to five Percentage Points with two weeks to go until the june 8 election. This is bloomberg. Francine welcome to our weekly brexit show live from london. Im Francine Lacqua. Lets get a roundup of the big brexit stories. Heres nejra cehic. Nejra u. K. General Election Campaigning was suspended in the wake of the manchester terror attack. 22 people were killed by a suicide bomber in the city. Police have made several arrests as the investigation spread to libya. The u. K. Independence party said Prime Minister theresa may should share part of the blame for the atrocity as it launched its election manifesto. Deputy leader Suzanne Evans said that may allowed high levels of immigration and failed to prevent the spread of fundamentalist ideology. The pound weekend after a poll showed the conservative party lead has narrowed after the Manchester Attack. The survey suggests the tories are ahead by just five Percentage Points. Investors also sold the currency after u. K. First quarter gdp missed estimates yesterday. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. Im nejra cehic. This is bloomberg. Francine thank you so much. Theresa may makes her g7 debut today as do a host of other world leaders. The socalled special relationship between britain and the u. S. Is facing its greatest testing years amid fury that americans passed intelligence details about the Manchester Bombing to the media. Matt miller joins us now. How much is this going to overshadow the talks about fighting terrorism . Matt everyone is talking about it. We just had theresa may get out of her first bilateral meeting with the new french president and her words immediately were talking about terror. When he spoke after her, he committed the french support to helping the english fight terror. He also brought up brexit. He talked about the businesses the countrys share. He talked about the hundreds of thousands of people that live in france and england and how they share their lives together. That is still a topic that will rear its head. People want to talk about Economic Development and trade. People want to talk about migration. People want to talk about Climate Change. Those are the three main issues that are going to be vying for attention. That is why theyve decided to release a separate communique on the fight against terror. Most leaders here are going to agree to some extent on that, whether there are quibbles about intelligence sharing or financial contributions. They are on the same boat when it comes to the fight against terror. Not the same when it comes to trade, not the same when it comes to migration, not the same when it comes to russia. Terror is the one issue on which they can all agree and that will probably get a clear communique and some progress. Francine we are also listening to the european president s, the president of the council and the president of the commission, junckerusk and mr. The u. K. Is baffled on how to engage with the Trump Administration on trade. What have you heard . Matt what weve heard is that trade will a must be left out of the communique. A g7 communique is typically delivered a week, week and a half before the meeting. At this meeting it is not done yet. The sherpas are going to gather tonight, the sherpas being the right hand on brazen women from these National Leaders who come together to construct the communique. The u. S. Doesnt have a designated sherpa. It is a question of how they will contribute to the communique and trade could be avoided just to avoid any awkward situations here. They are not going to have an agreement on Climate Change either and that is important to chancellor merkel, who just arrived here. I see her helicopter flying over us. It is also a very important point to Emmanuel Macron. Theres a possibility we are hearing from a canadian official that there could the an agreement on Climate Change among the six nations excluding the u. S. And that could go into the communique. They want to fight Climate Change. Francine matt miller there at the g7 in sicily. Guestrs ago, my next became the first black woman elected to britains parliament. Representing a district in north london next to Jeremy Corbyn, her politics were to the left of much of the labour party. In 2010, she was promoted to the shadow cabinet. Five years later, after carbons shock election as labour leader, she entered the top team, the coming shadow home secretary. Diane abbott, welcome to the program. We are expecting Jeremy Corbyn to give a speech saying the war on terror isnt working. He lays some of the blame on u. K. Foreign policy. Do you think that will resonate with the electorate . Ms. Abbott this speech is how we make the british people safer. Hes making the point that under theresa may we lost 20,000 Police Officers and a number of Border Guards but hes also saying, and i think particularly the war in iraq did not make the International Environment safer, and the intervention in libya has caused , withto be a failed state implications for the refugee crisis and terrorism. Francine hes also as far as i understand arguing that you need to fight terrorism but not fuel it. Is there anything else in the u. K. Foreign policy you can blame for the recent attacks . Ms. Abbott it is not about laying blame. It is about trying to understand. I was in parliament. People want that the destabilization would provide chaos and also could fuel terrorism, and very sadly the warnings have proved to be true. We are looking to see how we can make the british people safe. Francine how can you fight terrorism if you are not involved in the region . Ms. Abbott we do want to be involved in the region. We think, as well as international intervention, youve got to have negotiations. Syria,are talking about youve got to have real negotiations with the sponsors behind what is happening in syria. Via the u. N. , negotiations, in the end, a military solution cannot be the only weapon. Francine how many times do you remember that Jeremy Corbyn voted on antiterrorism legislation . Ms. Abbott many times he was going to lobby the tory mps. This legislation was not legislation which made britain safer. All the evidence from northern did notwas that this make the situations better. Mps toine for tory vote against this legislation. Jeremy corbyn was also listening to both conscience and pragmatism. Francine how was labour deal with this . How do you deal with homegrown terrorism . Ms. Abbott one of the things we want to do is enhance the governments prevent strategy. We think it should go a lot further. We think britain should be working more with women in the communities. Who is better placed to know that her son is turning into a potential jihadist than his mother . We need to work with them. We need to enhance prevent and work with communities. Prevention is something that is , something that communities are working with. Francine how do you find that spending and do you know how many people are at risk of being radicalized or are already radicalized . Ms. Abbott you cant estimate how many people are being radicalized. Often they are being radicalized in their own bedrooms. We think some of the funding we are about redeploying existing funding. The most important thing is to make this country safe. Francine it seems so difficult. Were talking about lone wolf attacks, networks that work in the shadows. It is not enough speaking to their mothers. Abbott it is not enough but we know from Northern Ireland that if you ultimately do not engage with the communities, you cannot succeed. In Northern Ireland and the we had to engage with communities. People had to talk. People had to engage. Thatern ireland shows us the way forward is not just about the military. It is about engaging communities. Allegedosing the manchester bomber, supposing his mother had felt confident to approach the authorities and say she was worried about her son, so many lives would have been saved. You have to engage communities. Francine i believe there were reports on this person 5, 6 years ago. How do you monitor . Lets say someone calls a hotline and says, i worry about my neighbor, my son. What are the steps you can take to make sure nothing happens down the line . Ms. Abbott part of the problem, i believe, are the cuts in policing, particularly community policing. It will fall to police in the community, on the ground, to engage. Problemtheres been a in terms of monitoring. Francine give me a sense what will happen on june 8. Do you believe this latest poll showing the lead by your biggest opponents is narrowing . Ms. Abbott we always believed the polls would narrow. The more the British Public looked at our leader, we believed the polls would start to narrow. We are in this election to win and we are confident. Francine whitey you believe the polls are narrowing . Ms. Abbott because people are our manifesto was very successful. It is the first manifesto in six general elections where people in the street say, i really like your manifesto. People have seen the real Jeremy Corbyn. Francine what do they like in the manifesto, brexit, security, spending . Ms. Abbott i think what they like in the manifesto is what were saying about the nhs, education, social care, and we are saying rather than make these big cuts in Corporation Tax and other taxes, were going to use that money to invest in things like the nhs and social care. Francine how do you worry about currencies . Does Jeremy Corbyn have a plan to stabilize pound for example . Ms. Abbott you have to worry about currency. Workingune 8 we will be with the bank of england in order to reassure International Investors. Francine how . Times, whenat things are changing, International Investors do look to the bank of england for reassurance. Even after the brexit vote, mark carney had plans in place to reassure investors and the financial community. We will work with him when we take power on june 8. Francine the bank of england is independent. There a master plan ms. Abbott it took it on itself when it wasnt clear what was going to happen with the brexit vote to draw up plans to try and stabilize the currency and reinsurer International Investors. Im confident that whoever wins on june 8, the bank of england will play that role again. Francine what is the biggest concern you have in trade relationships . Is it something you think about . How would you deal with the Trump Administration . Ms. Abbott the challenge with the Trump Administration is that donald trump has said that he wants trade agreements that are much more in favor of the United States. Ofit is a matter negotiations, how you get trade agreements which benefit everybody. Francine do you think there will be a second referendum if labour does win . Ms. Abbott no. Francine what happened afterwards . You still negotiate to get out. Ms. Abbott we voted to trigger article 50 because that was the democratic thing to do. We have commitments. We want to guarantee the situation of e. U. Nationals living in the u. K. Were not going to use them as bargaining chips. We will guarantee their situation. Our next priority is protecting jobs, living standards, things like financial services. We will not prioritize controlling immigration not to say we dont believe you shouldnt have fair rules. We will prioritize the economy. Francine so that means not having brexit. If you open up immigration ms. Abbott were talking about. Ecuring the situation were talking about protecting e. U. Nationals. Were talking about fair rules. Francine would you want freedom of movement for e. U. Nationals to continue coming to the u. K. . The french that want to come here and work for a bank or the nurse that comes from spain. Ms. Abbott once we leave the e. U. , freedom of movement will fall. What we are saying is, we accept the brexit vote because it was a democratic referendum. We have to accept it. Anything else would be wrong in democratic terms. But we are working for a type of brexit which will provide the maximum protection for our economy. Francine do you think there will be an agreement after two years between the u. K. And the e. U. As a whole . Is there enough time . Ms. Abbott we regret that theresa may chose to have an unnecessary election that took three months out of the negotiation time. There will be an agreement on the terms which we will exit the e. U. , but whether we can have an agreement about what is going to happen in terms of trade relations subsequently is not clear. I think theresa may has misled people as to what can be done. Francine a lot of people refute that. Give me a sense of what happens if theresa may has a resounding victory on june banks on june 8. Does it make it a harder brexit or a softer brexit . Ms. Abbott if theresa may gets a resounding victory, it will be a harder brexit and it will be to the detriment of e. U. Nationals living here and to the economy. Francine thank you so much, diane abbott, on the implications of brexit. Has britain lost control over its economy . That is the view of guy hand. We hear from him, next. This is bloomberg. Francine welcome to our weekly brexit show. Im Francine Lacqua. Lets check on the markets with mark barton. Mark stocks are down today but this is a chart that shows the correlation between the manufacturing pmi performance of europe versus the u. S. And the relative stocks. The white line is eurozone manufacturing pmi versus u. S. Pmi, the blue line. Stoxx 600 versus s p 500. The stoxx 600 has outperformed the s p 500. Lots of matters, sentiment improvement because of earnings, the french election, and better economic data. 7. 5 forhe stoxx 600, the s p 500. As we approach the fed meeting, financial conditions eventually ease, helping limit upward pressure on yields. Goldman sachs economists say the looser conditions are a reason for the fed to do more. They expect policymakers to boost rates through 2019. 8895. Growth in japan is one thing. Core inflation rising for a fourth consecutive months. Those are those blue bars. The 0. 3 is the gain, longest run of gains, well below target. Weak underlying price pressures pointing to limited gains. Prices were actually flat, zero percent. They remain distant from that 2 target. Price gains are lagging behind a modest growth in the economy. The breakeven talks about the outlook for inflation. As you can see, the trend isnt haruhikoone where mr. Would want it to be. Sterling dropping against all 32 of its major peers. That paul showing the gap between the tories and the labour party has dropped to five Percentage Points. In the last month or so it has been as wide as 24 Percentage Points. This clearly is to do with the welfare issue. It comes in the wake of the manchester terrorist attack as well. Confidence slipping to the lowest level since just after the brexit vote. Francine britain has lost control of its economy, that is the warning from Hedge Fund Billionaire guy hands. Political parties have resumed their campaigns. The chairman and cio of Terra Firma Capital Partners spoke to guy johnson. To a large extent, britain has lost control of its economy. The vote for brexit was a vote to get control. Yearse next at least two we arent in control of our own destiny at all. We are waiting to see how hard the europeans want to be on us and how hard our response is. At the moment theres lots of posturing by both sides which one hopes wont come to reality. It is going to be very destructive for the u. K. Economy and not very positive for the european economy. Theresa may is talking about putting representation from the workers, talking about scrutinizing m a. On those issues, what either of those factors make a difference to the way you think about investing . Putting workers on boards makes no difference at all. Ive operated in germany. Goodly, in some ways it is because you actually do have the unions and the workers having to take more responsibility for what they say and how they do things. We found it a positive experience. In some ways it is a nonexperience because you end board overinformal lunch and then the board gets back together and you invite the Union Members and youve made all the decisions anyway. It is either a positive or a waste of time. My guess is in the u. K. It will largely be a waste of time. M a, the rules will be what the rules are. If they make transactions more difficult, it just reduces the price. Theome ways, the worst Business Environment is in the u. K. , and some more politicians can mess it up, the more opportunity there is. When you sit there, has a investor, as opposed to somebody who is actually working in the system, you actually benefit from politicians messing things up. I think brexit was an absolute disastrous position. But for my business it is a great decision in terms of giving us opportunities. I would rather not be making that money from those opportunities. Francine guy hands speaking to guy johnson. Lets check on your markets. Onlump in crude is weighing Energy Stocks as Global Equity markets seem to be heading for a lower finish. This is crude, 48. 92. Oil is slightly on the higher side. Yesterday it was dropping the most in three weeks as opec stuck to the most predictable outcome in its plan. The markets may now test what their longterm plan is. It cut production for nine months but we also saw the Saudi Oil Minister being tentative on what happens next. Other things im watching out , 6. 8628. Onshore yuan it is headed for the strongest weekly gain against the dollar in four months. That has to do with a possible central bank intervention. Our team on the ground are trying to figure out if that is the case. The pound falling as the latest polls show the u. K. Prime minister is losing ground to her challenger. That is a nice, encapsulating data check that shows you everything going on in the markets today. By stoxx 600 down 0. 5 , led Energy Shares. Bloomberg surveillance continues in the next hour. Tom keene joins me and we will be talking to eurasia groups ian bremmer. This as mr. Donald trump is in g7 at sicily where he will be meeting with theresa may, chancellor Angela Merkel, and the new french president. This is bloomberg. Francine donald trump at the g7 in sicily, a day after he scolded eu leaders over defense spending at nato. The Election Campaign resumes in the aftermath of the Manchester Attack. Considers changing its a to curbrmul currency switch. A lot to get through. The pound dropping the most in seven weeks as traders try to curb out their exposure. Tom we have a lot to talk about. I would note china, which day after day has currency agitation. Yuan going to the best week since january. Taylor President Trump in sicily for what could be an awkward group of seven summit. They disagree on trade and Climate Change. It is believed the others will not gang up on President Trump, they will focus on terrorism and commony, where there is ground. According to the Washington Post investigators are looking into meetings Jerod Kushner had with the Russian Ambassador and a banker from moscow. One of his lawyers will share what he knows about the meeting. In the u. K. , Jeremy Corbyn says the war on terror is not working , and he plans to lay some of the blame on british policy. The Election Campaign resumes of four days after the suicide bombing in manchester. Has pulled within five points of the conservatives. An exit strategy after the cartel extended its price cuts. Theith this agreement, mandate has been expanded and takes a close look at the market and what is happening there. If any actions are needed, there can be an extraordinary meeting to adjust behavior and actions. Notor the market was impressed with opecs move. After the decision was announced although prices fell below 50 in new york. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. Tom equities, bonds, currencies, commodities. We will have the fx report at the end of the hour. The curve flattening. Not part of the fx story. Oil having a difficult 12 hours. 08 with a lot of territory. Stronger. Bi i would notice a stronger swiss franc. Francine i think where this story lies is in currency markets. We dont have to wait for your data checks, we have an expert shortly. Also crude weighing on Energy Shares. Own 0. 5 the british pound sliding. You briefly mentioned, and i want to show you, it has to do with a possible currency intervention in china. Tom forget about high Service Sector inflation, low goods inflation, this is the janet yellen inflation. Pc, back 20 years. Remarkable the ballot of higher inflation above 2 . Here is the average line over 20 years. Here over the last number of data points below the average line of 20 years. Where we are in the fed inflation derby. Rancine i like that chart what i did is a different diverging forecast on u. K. Gdp forecast. It goes back to the polls. ,fter the Manchester Attack campaigning has resumed. Where two weeks away from the election. This is actual gdp in purple. This is the forecast in february in white. Theyre being lowered it touch. Because of consumption, because of consuming and inflation. It is an interesting picture heading to the june 8 election. An interesting week for the markets, and with the dollar in positive territory after the st. Louis fed president s are the central bank is close to where it needs to be. In the u. K. , a bad day for the pound after polls show the conservative partys lead narrowing. Beijing, they consider changing their formula to curb currency swing. James foley from the trading desk. They manage 146 billion in assets. Thank you for being our guest host. Do you think is most significant and the pound . The pound is seeing a drought because of a change in polls. Do you believe the polls . The polls are difficult to believe. We learn that over the last several years, but there is evidence to suggest there could be loosening in the power over theresa may. A week ago,ack to the funding of care for the elderly. That was an unpopular motive. That doesntying bode well for her status when she goes into the negotiations for brexit. Francine 20 make of the league said negotiations we have had so far . Lets say the conservatives win and she has a Strong Majority . Does brexit become harder or softer . Jane there is a lot of talk in the market if she has a stronger her that will be good for brexit negotiating position, but i dont think that will be necessarily to supportive for the pound. A week or so ago we had the the eu unanimously agreed to have a hardline negotiating position for brexit. Whatever theresa mays position at home, her majority, it will be a tough position for the u. K. And could weigh heavily on sterling, too. Francine what is your take on the yuan . Theyre coming back in full force. Idea of trying to fix the renminbi to the dollar is in line with what you are seeing with the 19th Party Congress. What does the government want . The downgrade is a lagging indicator. A lot of it is in the price. The currency and growth, we know that growth is coming down. Ppi is a lead indicator. That is not bad, provided it is a measure deceleration of growth. Stabilizing currencies, what they are targeting to do, i think that is the right thing. Tom you have a chart that stopped me in my tracks. The savings rate and the United Kingdom. You go back to the beatles. Savings and the United Kingdom stand back to the beatles. Why is that . Jane Savings Rates at low levels. Thad matta that, barring rates at dodger borrowing rates at rates at borrowing record levels. The three month on year at 3. 1 . Inflation in 2. 7 . Our income has been eroded away by inflation and we are bar the hilt and we dont have any savings. That is up at sign. Tom that screams weaker sterling. What is the projection five years out . Jane if you are bearish on sterling, the cost rate to put that trade against is the euro. The eurodollar can carry stability. T gives the dollar will stabilize the cable. Sterling really has to fall against the euro. Tom spectacular chart on the savings rate of the United Kingdom. We will continue with ms. M aisonneuve. Twisted feduably president , caps on of dallas, when we continue. This is bloomberg. This is bloomberg surveillance. Another blow for the embattled hong kong group. It raise concern over the noble Group Ability to deal with 2 billion in debt after next year. Muddy water projects the company will have to undergo a restructuring. General motors denies they try to beat admissions tests. They claim the environmental damage caused by each truck suld surpass that of the vw business. A lot of interest in europe from International Investors. The u. K. Am particular suggests a buyin opportunity. When you sit there as an investor as opposed to someone who is working in the system, you actually benefit from politicians messing things up. Ive said this, i think brexit was a disastrous decision, but great in terms of opportunity. Taylor hands says the uncertain environment is driving british businesses to sell. Trump politics and observations by all of his trip. We go domestic. A morning must read. Who is an expert on trump finance. I mean that with sincerity. Over decades of journalism on trump. Mr. Kushner. The president can have a financial conflict, but no ethic laws apply to the president. The president is in a privileged illegal position when it comes to financial conflicts. Trumps advisers and relatives are not immune to those laws and others. Does mr. Come home to as the white house . Is he going to be holding mr. Kushners hand . Kevin a miss is was he a mess is what he is coming home to. The investigations are continuing well the president has been abroad on his First International trip. The u. S. Senate Intelligence Committee said in a statement with bipartisan leadership of senator burr and senator warner that they had the right to member that they deem necessary in order to carry out their investigation. This new report that Jared Kushner is at the center of a person of interest, so to speak, and we should know that term has no legal standing, this could get tricky for them. Chief of staff Reince Priebus and chief adviser steve bannon returned home earlier this week after their tour in saudi arabia. The body what was language like at the g7 . There was a bizarre handshake with the french president. Can we in for a that is translating into some kind of Foreign Policy . The body language and chemistry illustrates, i think, the awkwardness, skepticism, and frankly, the sense of bewilderment that many european leaders have with this new president. To is au are alluding situation yesterday with the president of brussels sidestep ed and moved to nato leader out of the way. Then you have the situation with the french president and the intense handshake. With eu leadership, including the eu president who said President Trump, he admired his toughness and the president s in their should be brutal in fight against terrorism. Back and forth already at the g7. Francine i cannot wait to see the communique. Bloombergs chief washington correspondent traveling with the president since last friday. Thank you both for sticking around. Of the g7 soake far . President trump has been on message and has made a success in certain countries. For mosten on script of the time, except when he is off script. We will see about the g7. At theeresting thing meetings in brussels, you saw this in some of the reports come he was very much on his own. Europeans are worried about russia, other things, they wanted a u. S. Commitment from trump. They didnt get that. What they got was a lecture about you are not paying enough. They wanted something positive. This coincides after macrons election when france and germany are seriously discussing if there should be a european relaunch. They are sizing up against trump, i think, in that. Francine how much influence will that have on President Trump when he comes home in how he deals with congress, and if europe would benefit from trade deals with the u. S. . Virginie you have to put that in context. There is a learning curve for President Trump in politics and diplomacy that is supposed to happen. The world is at a stage we dont really have too much time for him to learn how to do this. Call an environment that i back to the future. The new post postcold war environment. Trump is at the heart of that. It is shifting geopolitics around, and also a lot of fragmentation. Youlack of diplomacy if want movement is happening at a time where structurally around the world we have a new environment where we need more cohesion. What does that mean for europe . Number one, it will bring europe closer together. The second thing, it means m will increase around the world. The u. S. Media covering President Trumps for trip abroad foreign trip abroad, the body language, what it could mean for europe and the rest of the world, is the media focusing on what mr. Trump goes back home to . Tom they are completely focused on what he goes back to. Lit yesterday afternoon. Over the president s behavior at the nato meetings. Underk this stuff is way played in europe. Everyone is trying to do nicenice. Ofin cirilli is at the heart the matter. This is front and center in washington, and will be withssed when he gets home what we saw yesterday. We will continue with john fendi and his books on french and china. Virginie maisonneuve will be with us as well. Linkage of International Relations and economics. This is bloomberg. Stay with us. Francine bloomberg surveillance with Francine Lacqua from london and tom keene from new york. Lets talk about the Election Campaigning resuming today after pausing to respect the victims from the Manchester Bombing. A dramatic narrowing in the race with the conservatives on 43 of our on 33 . D lab what will move pound . I dont know if you believe the polls. It is a dramatic swing in a short time. What will drive pound volatility from now until june . Virginie it is sentiment driven. A surprise and inflation could sway, but it is sentiment driven around the election and what the eurodollar does. If you have a weakening of the dollar for various reasons, or a weakening of the euro, you could have a relative front. Otherwise, we have clarity around the election that the path will be volatile. Andou look at the vix falling in volatility, volatility has been expressed more in currencies. It is absorbing the uncertainties. Francine do you believe the polls or do you take it with a tinge of salt . This comes among the socalled dementia attacks that mays people think is mrs. As strong and stable as she is claiming to be . You have doubt in the middle from a very big tory lead. A dramatic fall indeed. This is a moment in the campaign which probably will not play itself out in the doubts about labour remain. It raises the question if mrs. May is a strong leader the strong leadership tells us she is. Francine we will talk more about g7 in sicily and have a currency conversation with the Credit Suisse global head of fx strategy. This is bloomberg. Tom bloomberg surveillance. Of new york city, memorial day weekend is upon us and it is, like, 12 degrees outside. Baseball can be played. Jonathan fenby coming up. Here is taylor riggs. Moving to sicily, leaders from the g7 nations are likely to do all they can to avoid a public confrontation with President Trump. The president is at odds with most of the other leaders on Climate Change and trade. On somethingak everyone can agree on, the need to fight terrorism. The next out for the president s travel ban will likely be the supreme court. Fromams the ban on travel six muslimmajority nations. In montana, the republican charged with assaulting a reporter has won the state election for the only seat in the house. He had 51 of the vote and 43 for the democrat. That is a setback for democrats who hoped to capitalize on President Trumps low approval ratings. The u. K. Registration numbers are seen as a boost to the u. K. Labour party. More millennials registered to vote than for the brexit vote. That is 22 more than before brexit. Polls show the labour party has a 20 point lead among millennials. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Tom this is a great friday treat right now. Maisonneuve and written fenby, who has 16 books about china, including the must read dealing with the dragon in hong kong. , how do you respond to the doom and gloom crew on china . Jonathan they have overdone it. But they overestimate is the remaining strength of the chinese economy and how it works. You have a communist party in power with a lot of assets and they will throw them at any problem which risks unsettling the regime. It may not be healthy shortterm or longterm, as we saw with the credit boom after 2008, but thats how it works. China will not go over a cliff anytime soon. The last decade, and down we go to a paltry 6 growth of china. The president seems to be worried about chinese supremacy. Help us with the myth of chinese strength. Jonathan chinese strength, you had a long period where Economic Growth is all that counted. Money, keep foreign markets open. That has changed. Xi jinping is a new emperor, to me, in china and is playing the imperial role on the world stage, moving into vacuums President Trump is leaving for him. China, undoubtably, is becoming a bigger global player, but they dont want the dominance you had from the u. S. In a benign way after 1945. Other people dont want that, too. The important thing is we are living in a fragmented world. If you look back to the end of the cold war, the world was ready to accept american leadership. Now, it isnt. There is the u. S. , europe or it about russia, but trying to get china. Together, and china is important, but it will not dominate. Francine a simple chart looking s role in financing. Here is when it was included in ket. Fdr bas in the white,gh blue going down just a touch. What we saw was the invisible hand in the china market. When do think the principle of private sector goes back fully . Five years . Six years . Candid come right after the end of the meeting this year . Virginie that is a tricky question. Back to interest rates, to currency except saying, and china has done a good job, in my view, of going very slowly and methodically towards that liberalization, knowing that we have a large debt that we are off over sort and wean time. The position in china is actually quite benign. Domestic debt is quite high. The path of the next 10 years will go towards liberalization. I would bet 10 years, not five years. Francine let me bring you to my morning mustread. He is from yale university. He believes as a producer, china has been the beneficiary of exportledon and growth and Poverty Reduction due to the absorption of surplus labor. That approach has now been stymied by mounting internal imbalances in a post crisis slowdown in global trade, and an increase in chinafocused protectionism. Aboutan we often forget politics in china. You have the 19th Party Congress towards the end of the year that will mark the beginning of xi jinpings second term. He has more power than any leader since mao. There are no factions. He hasnt even allowed a potential successor to emerge. Hes reaching the point where he has to start doing things, xi jinping. Involve a more serious approach to reform. It is now almost four years since the big reform document from the communist party. It has been slowly rolled out. You have to do more on the supply side, the excess capacity. Dont expect a lifting of capital controls, that would lead to a real estate grab. You will have a serious attempt at modernizing, rather than reforming, the chinese economy. The important thing is if we get a new Prime Minister in march. I want to her next book to be on newtonian physics on the vacuum out there is a vacuum in the politics in pacific. Jonathan some partners still want to revise the tpp. The one belt, one road is overblown. China comes into the vacuums, it will have a bit of a push back. Tom where do i go . Do i go to singapore . Where are you long in asian markets . Virginie if you believe the china factor will be a stabilizing factor overall in the back to the future geopolitical environment we have been discussing, i think that china is very cheap. You have to be opportunistic. Asia, particularly if you believe the dollar will not roar back up, is an attractive place to be. You have a foundation in korea, for example. You can playcome emerging markets, emerging markets are quite cheap versus civilized markets. Barring the tail risk events that could be coming, will do quite well. Tom interesting Financial Moves in china in the last couple of days. I believe it is a threeday weekend. Am i here on monday . Im not here on monday, ok. Tuesday, Robert Kaplan in conversation with the president of the Dallas Federal Reserve bank. Look for that. Francine this is Bloomberg Francine in with london and tom in new york. Into positive territory, though slightly below 50 dollars. Opec moved to prolong supply cuts for nine months. The Saudi Energy Minister has said this on the groups strategy. We have notthat elaborated on a specific strategy for the Second Quarter and second half of 2018 should not be interpreted that we will not have a strategy. We will develop it taste on the conditions that present themselves at that time. Francine manus cranny has been covering that story. I guess the concern is the markets were pricing so much in that what they really did was a mario draghi would do whatever it takes moment, which they didnt get. Manus it wasnt enough to put a floor in the market. The market desperation seems to have cleared out of the market. Or saysguage and ten we are credible threat. It is relevant and ready to do more. Uae is coming from the societies and russians, very much formalizing the dating relationship between russia, opec, and nonopec. With him, i caught up yesterday evening and he caught wind of the phrase about the ability to do more, whatever it takes. Gmcith this agreement the has expanded its levels and looked at the market and what is happening there. It continues necessary if any actions are needed, there can read an extraordinary meeting on the recommendation of the geo Ministerial Conference to adjust the heavier and actions. Saudis wrote the memo and passed it to the uae and translated it into russian. Novak got the message. There is an aspect that we will get a little variance in the market at the moment. You have to look through the eye of the storm. I had briefings from other ministers who did not manage to make it onto camera, they said it is about creating homoginaity. It is all about the exports of the usa. Francine the one thing people are concerned about is if you have saudi arabia and russia, how long will it hold . We dont know if they will be this friendly eight or nine months from now. Manus a symbiotic relationship that is mutually selfserving usually lasts a long time. 2004 whenime was there was a fracturing of that relationship. Agot a sense that this is mutual interest. They will formalize their relationship. This was the language that novak they will have a much more formal relationship. You have the issue of shale. Manus cranny, thank you so much, in vienna. Have three interviews telling me that vienna doesnt matter. When does oil matter for opec . When do we have to get to the point to figure out if opec is still a cartel . Verynie that is a interesting question. Youll back to geopolitics. I am not sure i can answer that, tom. It is important to realize if you did not have the last cuts the oil price in europe would be much lower. You have structural trends against the oil price. If you take solace of the next 25 years, the share they will take in terms of added capacity to electricity production in cities is absolutely massive. Forou look at ent environmental and social governance, which is gaining traction, 7. 5 trillion of assets managed around the world are asking for energy. I think you have structural are against Royal Securities that are important to take into account. Tom lets pause to look at the images. You do so much better at this than i do. I believe it is going to be a photo op. He was the president going to shove out of the way at the g7 . Francine lets hope not anyone. The g7 leaders might fight back. We will look out for handshakes. Little different. There is so much looking at the pageantry, but also the body language of the president , that the markets may interpret any animosity in the body language as some kind of trade repercussion. I dont know if that is true, but i know they have a lot to talk about at the g7, including Climate Change and growth. If you look at the lack of inflation, what they will argue president was talking about in regards to german cars, he said they were bad. You have six out of seven countries in pro open market and President Trump being protectionist, it will be a very awkward g7 communique. Jonathan as we have seen in previous meetings. 61 message. You will have other complications, north korea. The japanese will want to raise that and know what trump is wanting to do considering were stuck over north korea after the recent kerfuffle. Francine looking at where the g7 leaders stand on each issue. If you are a bloomberg customer you can ask questions directly. Y pulling up tv you can pull up data charts and ask questions directly to the guests or tom and i at the bottom of the screen. This is bloomberg. Francine this is bloomberg surveillance. I am Francine Lacqua in london, tom keene in new york. When french president emmanuel to berline his trip for talks with the german thecellor, merkel cited emergency act at a critical moment. Behind the scenes european capitals are adjusting to the Financial Sector postbrexit. We spoke with the german deputy asked aboutster and the postbrexit finance sector moves. With all due respect, i would within the a Second European union with the ecb and many big banks and financial institutions. If those who decide to leave to Continental Europe to be within the european union, that they go to frankfurt, weve would love to see that. Francine lets get back to jonathan and virginie. We were talking to the deputy of the finance minister in germany. Will he get under attack more and more from donald . Donald trump is on the attack were trade surpluses. It is possible, but what matters is to redirect the dialogue to working together and being constructive. I think there are points that need to be discussed if you think about global policy, security, and all of this. However, that doesnt mean it has to be done in a fragmented or divisive way. Europe is saying we have to be coherent and that time against all the pressure you are seeing. Will there be more pressure . Probably. What we have seen so far, he has not been very successful in his division campaign. It is about resilient. And the fact that macron is proeurope is adding to the potential for europe to get its act together and show a unified front. , when we shake cans were not quite knuckled whiteknuckled. We will leave that to President Trump and president macron. The election on june 11, will it be whiteknuckled . Jonathan it is a tworound election. I think macron has played a blinder. Extremely lucky in the president ial campaign and he won a resounding victory. Going to makeer it. He was walking into an easy election. He made the most of it and has hardly put a foot wrong since then. Rem,any seats his party, gets, and it has none at the moment. He will put together a governing coalition from liberal members of the Republican Party on the cooptedt has already the finance minister. Everyone moving towards him. The opposition is very weak. The republicans propose to something more drastic than his economic reforms. They will go along with him. You have the National Front with a dozen seats and the far left. He has it made, i think. Tom john fenby, thank you so much. Maisonneuve with eastspring, thank you as well. Ian bremmer kobe with us, a lot to talk about with dr. Bremmer. Ofwill devote a good amount time with speaking with dr. Bremmer. Give me a data check right now. I will whatever you are selling in the control room. Futures at negative four. The curve flattening. Oil, 49. 12. It was a 48 handle a moment ago. Stay with us. Bremmer as the g7 meets in sicily. This is bloomberg. Tom this morning, china considers adding countercyclical factors. It is the new solution to chinese volatility. Tightening the race as the Prime Minister stumbles. My bob uecker imitation. President trump delivers the trump charm and nato meetings. He walks outtings with the g7 leaders. A little bit of pageantry at the g7 this morning. In this hour, ian bremmer on agzero world. Gzero world. I am tom keene in london. , what is theua going to of g7 sicily . We know it from world war ii, but what is the modern sicily . Sicily isthe modern trying to attract tourists. I went seven years ago to a g7 in italy that was held in an earthquakestricken town. It is a very different g7. An older movie stars ago two. It is one of the worst performing regions in italy, tom. Tom lets go to Kevin Cirilli this morning. There is too much going on. Kevin, a week ago, the president left the white house via helicopter and god on air force one. Which donald trump walked out on the g7 platform . Much more scripted. More scripted than anything i have seen since covering him since the beginning of his campaign. He just gave brief remarks to Prime Minister shinzo abe. They will go into a bilateral meeting to discuss issues, most notably north korea. We come home to washington, what is the president focused on today as the first thing he must do when he gets back to washington . Is going to have to handle the firestorm of accusations that have engulfed this administration. There are reports that his soninlaw and top advisor Jerod Kushner is a person of interest. It will be investigated as part of the russian investigation. The u. S. Senate Intelligence Committee led by senator burr has also had the rights him according to yesterdays public statement, to have the subpoena of whoever they wish to continue their investigation. Francine what have you learned about body language . We talked about the handshake and the president shoving someone aside, but what about if you likes these other leaders and if we could see trade with them . Hisn it is night and day response in saudi arabia and israel versus his response in europe where he has been greeted with more skepticism. This is someone who is a billionaire businessman, but why the push asides and that handshake with president macron, they illustrate a deep sense of skepticism and the president s inexperience on the geopolitical scale. Six of therancine leaders have policies that come together on trade and climate russia immigration, and relations. What do they want to the president to be on board with . Do they really care about russia more than anything else . Kevin russia and counterterrorism. What is not likely to come up today is the paris accord agreement. They have been holding back on where they stand on this. There has been interesting backandforth in the last hour. A report from a german newspapers saying the president in a closeddoor meeting suggested the germans are that was some bad dealings in the automobile industry. Angela merkel will give remarks. It will be interesting if she addresses that headon. Tom since you have been gone on your threeweek vacation, jim likeon and the new yorker a zing how is secretary tillerson doing . Kevin he is in london. The backdrop to this being the Manchester Attack. The first time on the trip where geopolitical events has influenced the president s travel. I spoke with a senior white believeficial, and they the u. K. s decision not to share intelligence with u. S. Officials president sn the cry to stop Intelligence Leaks in the u. S. He put attorney general Jeff Sessions on it. He said that whoever is responsible for the leaks should be prosecuted. Tom thank you very much as we see the imagery of a g7 meeting, which seems from another time and place. Perfect time to speak with ian bremmer of the eurasia group. I will not give you the courtesy of an introduction. I want to ask you ugly questions. Is this president stable . If we run the meeting of the meeting, the outrage over the boorish behavior of the president of the United States, how does ian bremmer react . N the United States has a dramatically weakened relationship with our closest allies in europe. Some of that has been coming for there is a, but direct reaction to a president that has no interest in shared , and importantes institutions that americans have built over decades as a consequence. It is not for behavior, people can forgive a lot of behavior if they think you are a good person. What you see from the germans and french in particular, and is a sensenly grow, from americas closest allies that the american president is not a good person. They dont trust him, they dont want to work with him, and they are thinking of how they will deal with that for years on the world stage. Sit, all there you people that help you frame your vision, is donald trump a one detect permanent changes after President Trumps tenure . Is there permanent effects, or is it to screech to this businessman . Ian it is not discreet. Part of this is because this has been coming for quite some time. The most Important News has not trump. The Chinese Government had 29 heads of state for a one belt one road summit, the first ever which has real coordination strategy and money behind it. Tom and no one was shoved out of the way. Ian everyone coming there to say we want to be a part of this new thing, not g7 and nato and everyone looking how far apart they are. We are looking at the firstever in my meeting of the g0 view. The chinese are building architecture. A different dynamic of the global order. He crystallizes that and gives us things to talk about whether it is a tweet, a photograph, or a challenging meeting with a leader. This is a continual focus point for us to comment on something that is already happening. There is to recare if less of a relationship between the u. S. And europe . Why should america . If you for stronger ties with china, the middle east, and saudi arabia, maybe it is a winwin situation. Ian it is hard to see the americans are forging stronger relations with china. They had a very junior delegation at the one belt one road summit. President trump had a positive meeting with president xi jinping. The sustainability on ip and cyber is extremely tenuous. China rising will come up against u. S. Interests allies. Interests. The allies have been because shared values matter to create institutions that work over time. Those are the institutions trump has the least interest in. You see this in nato. Trump is more comfortable working with the philippines, the turks, and the russians in the Continental Europeans. That is a fundamental challenge to the global orders durability. Devils i am playing advocate, but you can argue the money comes from outside europe. If you are a dealmaker, these new allies need to be elsewhere, not europe. The most important Global Economy is the asian Global Economy. That would imply there is a strategy of the United States to work closely with the chinese. My point is in the absence of fact, throwing the existing institutions under a bus and not working with allies that actually are are a full and areng is going that durable and strong, that matters. Tom those that are Trump Supporters and those that do not support him, is this a one off, or is there permanent damage done . Ian i dont think the permanent damage comes just from trump. It comes from the china rise, the weakness of europe, the relative apathy of the french electorate, and the United States. Americas unwillingness to do global predates trump. Trump is symptomatic of what is a very structural change in the u. S. Population. Tom we will get there when we get there. We have ian bremmer with us for six hours. We will come back with dr. Bremmer from the eurasia group. Even dr. Bremmer will not work on monday. Kaplan on tuesday, the Federal Reserve president from the state of texas. This is bloomberg. Taylor this is bloomberg surveillance. Here is your bloomberg first word news. President trump in sicily with what could be an awkward group of seven comment. And disagree on trade Climate Change, but it is a great they will not gang up on President Trump. They will focus on terrorism and security where there is common ground. President trumps soninlaw is a person of interest in the russian investigation. Senior white house adviser. One of his lawyers said kushner will share what he knows about the meetings. Jeremy corbyn says the war on terror is not working. He is speaking live now and plans to lay some of the blame for domestic terrorism on british Foreign Policy. The Election Campaigning resumes today. The labour party has pulled within five points of the conservative. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. , this isor riggs bloomberg. Francine we are getting more on Jeremy Corbyn. He is just speaking in central london. Jeremy corbyn is saying that foreign wars is linked to terrorism at home. He has been criticizing the government for squeezing police budgets. He is the main opposition to theresa may. There was a poll in the last 24 hours that shows theresa mays , withinhe conservatives five Percentage Points. People saying we have to take this with a pinch of salt, but it is something we have to keep an eye on. Tom francine, can he win . Francine the polls came out in the last 24 hours that changed a. Ittle bit this race if you look at what this Labour Party Leader is doing, he had two weeks to capitalize showing the lead tesla to five Percentage Points. Two or three weeks ago, the gap was so big at the time no one auld say that labour stood chance. He needs to do something extraordinary in the next two weeks to broaden his base. Tom ian bremmer with us from the eurasia group. Particularly welltimed. Shahab jalinoos. This is Chinese Women the. Chinese renminbi. This is the quiet of the managed renminbi. This is 3. 3 standard deviations. Off of that quiet, it is a huge strength. Is it signal or noise we can ignore . That have to remember china looks at its currency and a basket form against a range of currencies, not just the dollar anymore. The basket, the currency was weakening. The strength of the euro and the yen against the dollar. Theave an environment where dollar is weak. The currency is strengthening, but against a basket, it is not so impressive. Tom there are so many signals of chinese belief in their financial system. This inversion, that inversion, cnh and on. Telling us anything, or is it so artificial that a pro like you ignores . Important isost that it has fallen against the basket. Not as necessarily optimistic about how things are going in china given that reality. Because the currency has fallen it leaves less of a Pressure Cooker blowout later down the line. We just saw aay Credit Rating downgrade from the chinese for the first time in some time. The politics in china look very good. A strong leader in the runup to a leadership change where he is doing a lot. From the economic side, would you say structurally in china, you see them facing a more significant problem and the likelihood of a hard landing is growing or not . Shahab the data has generally beaten expectations. Stillality is that we caution advice in china. On the one hand, there is a lot of leverage in the system. Every time there is a tightening in policy or clamped down on overzealous growth, you risk the economy slowing down. On the other side, if you do nothing about it you risk creating asset bubbles. I think the Chinese Government has more time. In the last couple of years there has been a payback of dollar debt by the corporate sector and less exposure to foreign currency. Tom we will come back. The g7 leaders take a walk. You saw mr. Trudeau and mrs. May. A turn left on the streets in sicily. There is chancellor merkel and trudeau. We will return to london and new york. This is bloomberg. Francine look at that beautiful sicily. Our radio listeners, we are looking at pictures of the g7. There is President Donald Trump holding court, speaking to the president of the European Council with Angela Merkel and Emmanuel Macron of france and theresa may. It is interesting they chose that as the place to bring their leaders. May be thought it was safe because it is close to mount easily accessible. The godfather was shot nearby. It is a famous place for a lot of the italian Beautiful People, the old film stars, as in the u. S. Tom that would include the Beautiful People like Francine Lacqua, right . Francine and tom keene. I think what is significant if you look at the body language amongst the g7 leaders, and i would point everyone to a Bloomberg Politics article that charts the leaders on where they stand on issues like trade, Climate Change, terrorism, and relations with russia. Ian bremmer is the president and founder of eurasia. One of the risks you put it as number three is the popularity of Angela Merkel. What do you make if she can bring the group together, if she is the person to bring the g7 together, and what the election in september will bring to her . Ian if there is a leader of the free world, it would be Angela Merkel, but there isnt one. The germans are aware more leadership is needed, but aware of how challenging that position is giving her own election and the maintaining status quo on the european continent. In africaoing more and the middle east, but this is incremental from a low base. Reelection looks more like a layup, if not a slamdunk. You dont have the same populist challenges in germany as other countries. The german populace believe the economy is doing well. Well. El you have seen her challengers support of fabric. A solid win for merkel will make it easier. From a global perspective, we are far from that. Francine yesterday, he was mentioning german cars saying they were bad. I think this is market shares, he has gone after germany for surplus. Issue the right person to bridge this conversation between europe and the u. S. . With respect towards leaders. She is first and foremost an institutionalist and will treat the institution of the andidency with deference support that has been earned over several generations. There is no question that her relationship with trump and her administrations relation with trump is badly damaged. I know many of her advisers, and they will tell you that they think he is very far from his country or that relationship. Over severalioned generations. Maybe a Younger Generation knows George Patton from the movie but a lot of blood was shed generations ago. Have we lost that . Has President Trump so screwed that up that we are forgetting the collective memory of that sacrifice . Ian most americans are not thinking of the cold war and the importance of europeans as allies. Most germans are not thinking about the wall coming down. Younger populations are saying, me. Have neglected am i interested in sending troops abroad, free trade deals, democracy . What about with the lamia . What about lithuania . In the teeth and jaws of the russian population and government. Thats why theyre paying more for nato. If you ask is the g7 or nato be driven by estonia or latvia, you dont need to answer that question. Tom ian bremmer is with us. Courteous more than given the g7 imagery we see from sicily. We will be back on sterling xoma gratian today. You need a friday update. Taylor President Trumps soninlaw is the focus of the investigation. According to the Washington Post, they are looking into meetings Jerod Kushner had with the Russian Ambassador and a banker from moscow. He is a white house adviser. One of his lawyer says he will share what he knows about the meeting. Up with the administration and travel ban will likely be the supreme court. The Justice Department bound to ban travel. The ruling said the executive order is discriminatory. In montana, the republican charged with assaulting a has won the special election. Thats a step down for democrats who hope to capitalize on President Trumps low approval rating. In the u. K. , Voter Registration numbers are a boost to the operation opposition labor party. About 1. 4 Million People 35 years or younger applied to vote. That is 22 more than before 20xit area there has been a point lead among millennials. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. Tom we are talking about the chinese you one. There was a modest move in weaker sterling today. Lets get some perspective on where sterling is. This is the chart on sterling back to 1971. You saw the dollar strength. Is brings itthis right here. Brexit right here. We get a little bit of a bounce here. A lot of people have gotten sterling wrong. Where is Credit Suisse . One of our most important trade recommendations is to be short sterling. Nothing against the dollar. The reason is we think with respect to the u. K. Itself, there was a short covering. This is looking less likely. In europes case as well, there are reasons to buy the euro. We can talk about a better ecbtical outlook and the moving toward tapering. At the end of the day, the pound is one of the only currencies you can set against the euro where you dont see a negative story. That makes it attractive. Tom lets go to dr. Bremmer. Fromed for us to go sterling dollar to euro sterling. The imperative is to go up to at the one sterling level. Are we going to get there . How to we get to one . You can see very clear signs that a disruptive brexit is in the cards. Tom it is about the political linkage. Really takecant that from the politics. Francine give me a sense of what you think, i dont know if it depends on the majority if the tories win. The issue is this. The market was thinking it would have a majority of 100 seats plus. Thats a big deal inasmuch as it would materialize and it would give theresa may a lot of flexibility. There would be a sense that she would not necessarily be bound by any action. Sense of a that Strong Majority and you go back to a 20 seat majority which would not be that different from what exists now, what do we get out of the election other than more uncertainty at the end of the day. There might be a statement that there is not that much confidence in theresa may. That would be very negative for the pound. Itd be a green light. If we go back to the euro, i was struck by comments merkel made on monday when she said we need a stronger euro because of weaker europe euro has an impact on surplus. You could argue italy if it does have a week stronger euro will vote for a party considered extremists at the next election. Shahab there is a tension there. What suits the German Economy maybe the opposite works for the italian economy. There is always been a tension. On the level of 112 against the dollar where we are right now, you need to rise above 120 to get to a point where euro strength in itself is undermining italy to such a degree that it changes the outcome of the next election. There is still plenty of room to hold on. Issue, on the u. K. Theres no question threesome is looking for a smaller degree of victory than before. Before the election, no mandate. She has never actually won a popular vote in the u. K. I think the one thing she does get, even if it turns out the majority a small is that. The relative uncertainty of the brexit irrespective of how strong her win is, its still enormous. With microng merkel by her side to negotiate a relatively smooth brexit in terms of the fees that the u. K. Has to pay. The number of political pitfalls around that negotiation are in norm us. There are not priced into the market because they are far away. Its not about hard brexit versus soft brexit. Its a question of long brexit. Tom jump in here please. Francine i spoke with the home secretary. I was asking her about brexit and the narrowing of the polls. That was the democratic thing to do. We have a number of commitments. We want to guarantee the situation of the nationalists living in the u. K. Do you think the labor party has a chance in the selection . I would be stunned. I think Jeremy Corbin is one of the weakest leaders the labor party has ever seen. On the back of the bombing in manchester, they show the u. K. The need for a strong leader. May we still have two weeks before the election. Britain is reeling from these attacks. Its the most significant they have had in years. It is clearly a terrorist cell were talking about. That means this is going to dominate the headlines right to the election and theresa may as the incumbent and someone who is pretty implacable unflappable in the way she presents around these issues will do well. Maintains her lead or expands a little bit. I would be stunned to see the labor party under Jeremy Corbin improve their position. Francine i think a lot of people would agree with you. If they unexpectedly when . Shahab i think given the way it wouldaded recently, there be a fairly sharp fall in the town. The idea there is going to be a , ifng conservative majority it turns out labor wins the election, the new uncertainties that raises going into brexit negotiations are many. Even the entire structure of how the u. K. Economy would be organized without brexit would be a question. Tom alan krueger wrote a brilliant monograph. What do we need to limit in our democratic processes to actually get these evil people . What are we going to have to give up in our democracies to get the terrorists . If you want to go after every single one, you will have to give up a lot of privacy. You will have to allow a lot of surveillance and allow for a society that is more divided. The good news is the tools are already there and we are allowing a lot of it did thats not the way i would frame the question. I would be much more about to what extent do we to put terrorism in a broader context in terms of the threat it poses. Eating to aoid threat that in reality is vastly smaller than so many other threats and dangers to the American People and the european people . The wonderful thing about it in the worlds only superpower is other countries cant damage you as much can damage yourself. Thats also the bad news. The extraordinary overreaction to 9 11 with the wars in iraq and afghanistan did a lot of damage to the u. S. It home and our willingness to be a global leader. Its that overreaction is to be avoided, especially with the Trump Administration that could embrace looking for enemies globally. Tom somehow i think we will continue this discussion. On tuesday, an important conversation with the most eclectic Federal Reserve resident. Robert kaplan came out of harvard. Its a good time to catch up with dr. Kaplan. This is bloomberg. They have filed a classaction suit. It claims the environmental damage could surpass that of the vw the eagles. The british financier says he sees interest in europe for International Investors. They present a buying opportunity. Its an awful thing that and you sit there as an investor as opposed to somebody who is actually working in the system, you actually benefit from politicians messing things up. Was a disastrous decision. Business, its a great decision to give yourself opportunities. I would far rather be making money from those opportunities. Taylor he says an uncertain political environment is pushing british businesses to sell. Francine thank you so much. Oil is back in positive territory after the biggest slump in three weeks as opec will the late cuts for nine months. Manus cranny is in vienna. Great work yesterday. I know you caught up with the ministers. Was there too much priced in . Were they hoping for a lot more and opec couldnt deliver . Delivered,ink they they did not deliver more. If you look at this symbol i am holding, are they a credible threat . Are they all in for the long haul . There was a bit of a price war. There werent any new caps for libya or nigeria. Whatwe asked the minister is the exit strategy, he said this is my answer. Elaborated on a specific strategy for the second ofrter and the second half 2018 should not be interpreted that we will not have a strategy. We will develop an taste on the conditions presented it to us at that time. Manus dont over interpret the fact that the headline. Watch what we do in terms of iraqs boards to the United States. The data will flow through. Market will see the power of what they read yesterday. What happens after the extension . Can they really do anything with shale . Allianceg is this new between russia and saudi arabia western mark arabia . The 172nd meeting of opec. It, theyve about been out in a couple of dates together and they done a little bit of dancing, but they are not going to formalize the announcement. Thats quite a progressive step. Ande is a lot of hugging not a lot of highfiving. This was a very warm relationship. The officials ice up to suggested this is about the long haul and stability. Tom thank you so much, greatly appreciated. Manus cranny is in the end. We are looking at oil and commodity currencies. This is the dollar canada. This is the first trudeau weakness over the years. Down we go with a china boom. Backup we go. What does it tell you now . I think the big shock to the canadian economy came from oil falling from 100. Even the bank of canada acknowledges the shock to investments in canada, the negative gdp that posed. Thats the good news. The bad news is the price is not going to go back up to those levels again. The canadian economy outside oil is not competitive. The export sector has been so for years. That puts pressure on them. Tom can the currency be a weapon . Shahab i dont think so. No. At the end of the day, most oilbased economies and have freefloating currencies, it reflects what the price of oil is. You cant really use it as a weapon against anybody. If we look at the saudis, you have countries like norway and canada have smaller currencies. Theres not much you can really do. Tom we will continue here. Weve got a real treat did we will come back and speak to ian bremmer. We have huge use of this on the Trading Floor around the world. You get the live tv feed. If you come over here on the right side, you can see previous blocks and click on them. Up and goes and you can take that chart over to your login. That is cool. This is bloomberg. Francine coming up shortly, it is daybreak with david and jonathan. We will be joined by richard hodge. He has an around a fair share of g7 meetings both in the white house and in the state department. We will talk about the week with the president. What do we expect at the g7. What does this mean for longterm relations between the United States and the u. K. . What can we learn from what were seeing in sicily. Tom this is the g7 leaders and a perfect day in sicily. Kevin is there is well. David westin, thank you so much this morning. There is mr. Trudeau with the chancellor of germany. That appears to be mr. Trump. This is wonderful. Lets go to single best chart area chart. This is brazil. This is the green regression. This is the strength of the resilient reout. Its the commodity boom over and this is a good country dealing with a massive multidecade disruption. Is this just about commodities . Ian not right now. There is an enormous amount of investor concern over what is impeachment another of the president of that country. Tom you are predicting that . Ian i am. There is no question that the way the information has come to light about the potential of bribery engaged with the largest meat producer was shoddy. Tapes were manipulated. From was Insider Trading this oligarch on the back of it of about 1 billion. There are way too many questions around him and his senior advisers connected to people who were under investigation at the time. Bringing the military out and it feels like desperation. What does it mean for the market at large in brazil . It lowers the odds of a slower passage of Pension Reforms the economy needs. Beyond that, it raises the uncertainty mention about wholl actually lead result going forward. As far as the currency goes, the weakness was basically held back i the central bank intervening largescale. Theunderlying trend is to weaker currency. The central bank wont be able moneynd all of its stabilizing the economy. This is been wonderful. Thank you gentlemen so much for your perspectives on the g7. Look at that shot. That is spectacular. That is sicily, of course. As you look at that beautiful imagery from the g7 meeting. Stay with us. This is bloomberg. So we need tablets installed. With the menu app ready to roll. In 12 weeks. Yeah. The world of fast food is being changed by faster networks. Data, applications, customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Fast connections everywhere. Thats how you outmaneuver. So new touch screens. And biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. A data fueled, security driven shift in applications and customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Hello, mr. Deets. Every Branch Running like headquarters. Thats how you outmaneuver. Leaders touchdown in sicily, President Trump targets the german trade surplus. The u. K. Election is no longer a oneway bet, the polls continue to narrow. Nasdaq fall. Nd the good morning. Youre watching bloomberg daybreak. I am on alongside david westin. Lets get you to the markets very quickly. Futures are little bit softer after a sixday winning streak. 112. Uro is firmer at 22. Thats the story of the markets. Lets get you up to speed on headlines. Gunmann egypt, a lone opened fire on a bus heading to a monastery. At least 22 people were killed. Its not known who is responsible