From germany and we are now getting gdp from the italian economy, growing 0. 3 in the First Quarter. The vague question is whether a lot of this growth comes from the ecb and a lower euro or whether it comes from Sustainable Growth thanks to reforms put in place for example by the italian government. Gdp growthent, that pretty much in line. This is your market, or these are your markets this morning. Stocks in europe dropping a touch because we had quite a lot of earnings that disappointed. We also had subdued Economic Data. Gdp in germany was a little better than expected. Haven assets including japanese yen, gold, also in fencing. Also advancing. The Australian Dollar slid to a twomonth low. Were also just kidding, i believe, breaking news from china. Aggregate financing number, 751 million. Lets get straight to the bloomberg first word news with nejra cehic. Nejra germanys economy grew at its fastest pace in two years. Gdp rose just north of 2 in the month ended march 31. That being economist estimates of 0. 6 growth. Time for Chinese Companies to repay the u. S. Dollar debt may be coming to an end. The greenback is rallying after its worst corner since 2010. That is driving up costs for businesses. Capital markets said as much as 3 trillion were borrowed, including by individuals and foreign companies. Buyers expiration of a potential bid for monsanto, with a market value of 43 billion, has triggered speculation that the German Company might need to sell assets. According to a chemical analyst, bayer could shed its take in its plastics unit to help make the acquisition work. Global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. You can find more stories on the bloomberg at. Com. Francine in the u. S. , we are hearing from members sounding less dovish. Overnight, weird from two officials usually on opposing sides of donates making similar cases. Any on wall street, they are expecting at most one increase over the course of this year. That would be consistent with an economy that was pretty weak. My own view is the underlying strength in the economy is stronger than that, that the fundamentals are strong enough, that we are likely going to be removing accommodation more quickly than is currently anticipated in financial markets. I support moving forward with Interest Rate adjustments to a more normal level. But i view the current level as too low for todays economic conditions. Francine markets are pricing just a 4 chance of a moving june and only one hike this year. Lets welcome our guest, kamal sharma. Great to have you on the program. When you look at centralbank divergence, it seems that today is pretty clear. Governor kuroda saying he can do said officials saying markets should be more hawkish. Kamal we have pushed back the timing of the second rate hike to september. We do have two great hikes priced in for 2017. That is more than the market is pricing in. We do see that policy divergence. By our expectation is moving so slowly . I dont understand whether the markets are looking at other data, more risk, or just ignoring what fed officials are saying. Kamal i think it is one yelling is saying, the idea that there is a third mandate, potentially the impact of the dollar strength. The market is challenged by the view that were seeing good data. Nominal yields are relatively static. This compression in real yields is weighing on the dollar. Francine but that may change . The happens to wirp, function we look at to see what markets are expecting . We just need very strong Economic Data domestically, or does Financial Stability need to increase at a global level . Kamal we need a confluence of strong u. S. Data. Weve seen a further rise in underlying in nation inflation pressures. That is the catalyst for a more broad yield. Francine why is june not on the table . Kamal because payrolls were week. Francine and brexit . Kamal potentially. We look at this in the context of what the fed thinks about Global Financial conditions. If the fed thinks the brexit story is a risk, but potentially is the reason. We had a softer payrolls number and that has helped push back the call into september. Francine what does governor kuroda need to do to make yen stop strengthening . Kamal ultimately, i think it is down to whether he believes that further negative rates can stimulate the economy. I think the most important thing is if he can get the nikkei to that could well be the capitalist for the dollar to outperform the yen. Francine the further yen strengthens, the more earnings are down for these big companies, which means they cant increase wages, which means inflation goes nowhere. Do negative rate work when it comes to yen . Kamal this is a great tonight the markets are having. In february and march, we had a plethora of Central Banks easing policy. Currencies are appreciating. The market is challenging the view that negative interest has an impact on the banking stocks, which you certainly saw in europe following the events in february. Francine hes considered probably the most experimental central banker. Will he manage it somehow . Kamal our best Case Scenario is there will be some further easing in june. Etf buying is the first call for action. They could potentially move further into negative territory. Francine kamal, what is your favorite currency play at the moment . Kamal were looking at idiosyncratic stories. We pared back our eurodollar forecast. We were at parity. We are now at 1. 08. We are looking at idiosyncratic stories like the swedish krona, further weakness in commodities currencies, and weaker sterling heading into the eu referendum. Francine panel, thank you so much for now. Kamal sharma stays with us. We will be talking more about brexit, concerns on pound, and we will ask him about emergingmarket currencies. Stay with the pulse. The worlds biggest maker of insulin. See the pharma dealmaking novartis as predator or pray . Plus, as bank of england flags the dangers of recession, we talked brexit and bring you the best of our exclusive interview with irelands Prime Minister. And the sun rises on a new government in brazil. We will look at the entree for the acting president. Francine welcome back. Lets get to the Bloomberg Business flash with nejra cehic. Ubea apple has invested in rs china rival, dd. The platform handles more than 11 million rides sunday and serves about 300 million users. Idi also counts alibaba among its investors. Deutsche bank is to cut clients according to a report. Citing unidentified persons close to the bank, the paper said it is accelerating plans to eliminate Investment Banking quires. Clients bank has 65,000 , but most of them exist only on paper. Royal dutch shell has shut all oil and gas wells flowing to its platform in the gulf of mexico after an oil spill. The Company Reported a sheen and 97 miles south of louisiana. The spill was estimated to be 2100 barrels. Shall said they are mature fields and there is no drilling in the area. That is the Bloomberg Business flash. Francine lets talk more about Central Banks. Denmark has lived with a subzero Interest Rate longer than any country in the world. Speaking to bloomberg, Central Banks denmark centralbank governor defended his Monetary Policy. Negative Interest Rate are in fact working almost like very low positive Interest Rates. We havent seen any large negative consequences of negative Interest Rates so far. Francine denmarks central bank governor. Lets move the conversation on to corporate earnings. Novo nordisk is the most valuable company on denmarks stock exchange. Im pleased to welcome the ceo of novo nordisk, lars rebien soerensen. Still with us is kamal sharma from bank of America Merrill lynch. Thank you for joining us. We will get to your company in a second. How hurtful is it for your company to have negative rates . Ars our company has predominant part of our cost in euros, a predominant part of our yen,ue in dollar, japanese and some of the emergingmarket currencies that are very soft at the moment. It is a mixed bag. In general, a weak euro is good loss, evenfit and though it often means a weaker economy. Francine how much time do you spend looking at hedging, and how much time do you focus on your products, possible m a, and things like that . Lars i dont look at currencies at all. Our finance people are taking care of that. We are trying to hedge on an annual basis. We not speculating in currencies. Francine when i look at pharmaceuticals, it seems that every week there is a new pharmaceutical deal. You backed out that way. Why is that . Lars we believe we are better served focusing on what were really good at, diabetes, pharmaceutical drugs, and since theres ample Growth Opportunities in our field, diabetes, theres no need for us to diversify. Francine so theres not even potential for an asset swap . Lars not very likely. We are the largest Diabetes Company in the world. It is hard to add to our business. We grow that organically. Francine you must feel under pressure. Diabetes drugs make about 79 of your group sales in 2017, but competitors are aggressively trying to come in it. Lars i dont feel any pressure to diversify. We are the best in the world at it, so why not continue to grow . Wins,ne you know, if it it is probably the best. Give me a sense of what your sales are looking like in the u. S. Lars our sales in the u. S. Is approximately 40 of our business, and we are seeing relatively strong growth because we historic we have been underrepresented in the u. S. , which is quite unusual. Our main growth reasons are u. S. And the emerging markets like china, more sluggish, europe, more sluggish, and japan. Francine how does it compare with europe . We were talking about kamal with it talking with kamala noted. Do you see similar patterns . Lars we see a slightly better europe than we had in the past five years. Sluggish growth in the economy in japan. We see a break on the economy in china. Influencing the ability to afford health care in china. Whereas we were usually growing 15 per year, we now grow 5 per year in china. The biggest market for us is still the united states. What is your biggest risk right now . Lars the biggest risk is the general risks you have, competition, pricing, difficulty of getting reimbursement for new drugs, and the one we control, which is the quality of our products, that we protect the lives of our customers. Francine when you look at this m a wave, do you ever feel like you could be a target . Your strategy is to be very good at one thing, which makes you a very attractive target. Lars theres two things which protect you against takeovers, strong equity, being expensive, and also our ownership structure. We are part owned by a foundation that controls 70 of the votes. The foundation cannot relinquish control of the company. We cannot be taken over. Francine one last question on your products. Are there any exciting updates in your pipeline . Lars we have probably had the best news flowing from the pipeline in the last three months that weve ever had. Weve had strong news on the profile of our leading receiver, and we have shown that one of the big products for the future is actually protecting from cardiovascular disease, which is going to be tremendous. We are so excited about this. Were looking forward to meet the press and the experts. Francine when you look at negative rates, and kamal, this is part of the conversation we were having, you realize that it is not only part of the corporate and how you manage a company, but it is these headwinds. We were talking about japan. What are the side effects of these negative rates in europe . Lars we look at it from a financial stocks perspective. The move into negative Interest Rate has had an impact on the banking sector. Ecb policy has been to improve the financial transmission mechanism. The banks have started to complain that negative Interest Rates are hurting their ability to lend. The ecb is trying to do the best thing by keeping money cheat but is hurting them online for the banks. Francine so you are lucky you dont work for a bank right now. But i guess you miss priced risk , or Financial Assets are being mispriced. Does that link into your world . Lars we have an interesting situation. Were not borrowing money. You are generating cash. Francine good problem to have. Lars but our shareholders, they in some ways would prefer we invested the money. They cant invest the money elsewhere in guinea return. We are very prudent about this. We dont want to accumulate liquidity. We give excess liquidity knocked to the shareholders every year. Francine lars, great conversation. Lars rhodium Sorenson Lars rebien soerensen. We will be talking about accident pound next. Breaking news out of honda. There has been quite a lot of news out of carmakers. Volkswagen reducing its market share. Honda coming out saying it has to recall more than 21 million more vehicles because of the airbags. There was a concern they were harmful to people thought of their cars. We will have plenty more on that. We will also be talking about apple and alphabet. The metal to be the worlds most powerful company continues. Francine welcome back. Apple is investing 1 billion in duty, dealing a blow to uber in china as it tries to build its business in the country. Investors are worrying about the future of apples revenue growth. It is on the verge of losing its status as the worlds most valuable company. That brings us to the chart of the hour. In white, we benchmark the apple market value. We brought it back to early 2015. In blue is alphabet, formally known as google. I still refer to it as google. I probably shouldnt. Back in february, the lines crossed. Google became the most valuable company. Dont worry because these are still huge companies. Lets get the thoughts of kamal sharma. Thank you so much for sticking around. When i look at this chart, this gives us a sense of how enormous these companies are. We talk enough productivity. Theres a huge productivity puzzle in the u. S. And the u. K. Could Companies Like this explain it . Theres a deflationary impact because of all the technology and ridesharing apps that we use. That for these governors has been the lack of productivity growth since the financial crisis. One of the reasons growth remains below trend. What we are looking for is this improvement in productivity to hopefully take the broader economy on to a more Sustainable Growth trend. Francine what does it mean for you look at economics. Central banks havent been to raise inflation. Do we need a new set of models . What do you use . Kamal some Central Banks are now beginning that thought process, the riksbank certainly begins to think about the process, where potentially inflation targets sticking rigidly to 2 may give way to a range of 1 to 3 . Central banks are concerned that hitting out of this financial crisis, weve not been able to get inflation on a meaningful uptrend francine . Francine kamal, thank you so much for now. Kamal sharma stays with us. We will be talking pound and possibly emergingmarket currencies next. Word. The r the danger of a u. K. Recession. We talked brexit with irelands Prime Minister, enda kenny. Francine welcome to the pulse live from bloombergs European Headquarters in london. Im Francine Lacqua. Lets get the bloomberg first word news with nejra cehic. Nejra germanys economy grew at its fastest pace in two years. Gdp rose 0. 7 in the three months ended march 31. That beat economist estimates of 0. 6 growth. Domestic spending helped offset weakness. Chinas broadest measure of new credit rose the less than expected last month. Aggregate financing was 115 billion in april compared with a median forecast of 200 billion. The data suggests the central bank is starting to temper amid warnings of the debt binge. Yers expiration of a potential bid for monsanto has triggered speculation that the German Company might need to sell assets. According to a chemical analyst, bayer could shed its stake in its plastic unit. Representatives declined to comment. Global news 24 hours a day powered by 2400 journalists in more than 150 news bureaus around the world. Find more stories on the bloomberg at top. Francine we and talking about china. Hong kong, firstquarter gdp contracting quarter on quarter by 0. 4 . This is much worse than expected. We were expecting an extension, expecting gdp to grow 0. 1 . That hong kong gdp has contracted. They seem to be still sticking to their expectations. They are talking about the First Quarter the Second Quarter being on track anyway. Onhave to keep a close eye what is happening in hong kong, whether it is linked to softness from china or maybe crackdown from china on outflows. We will get you more throughout the show. Irelands Prime Minister enda kenny says his country will stay linked to the eu even if the u. K. Votes for a brexit. He also said europe is stronger with britain included. Mr. Kenny clearly we identified the fact that britain might decide to leave as a major Strategic Risk back in 2014. Clearly, a decrease in british gp would result in a contagious impact on irelands economy. We are focused on the fact that it is important the british electorate be as informed as possible about the implications of the decision they must make. While nobody likes to be lectured, we have a unique arrangement with britain since the 1920s, with almost one million irish People Living in britain. We take an interest in informing those people who will have the opportunity to vote. In ireland, over the last 40 years, weve had a lot of experience voting on european referendums, with different treaties and so on. People in this country are very well acquainted with the issues that surround the european project and the european process. From that point of view, ireland has clearly made its decision, that irrespective of the decision of the british people, and we hope it is positive, that ireland will continue to be linked to the euro and the european union. We made that decision in a referendum in number of years ago. Guy youve had some interesting referenda in the past. Not always as you say being as clearcut as you would have thought. ,ack to the issue of the upside have you been actively courting u. K. , european banks, american banks, trying to make it very clear that you offer an opportunity where this, as you say, not good outcome, to come into reality. Have your guys been out there trying to make the case for ireland . Mr. Kenny we have not been actively courting the processability the possibility of further investment here if britain were to leave. Those who wish to invest in well thenow full opportunities we have to offer. Weve had investment from the corporate industry, banking, financial services, and so on. Those who are in a position to make investments know full well what ireland offers. Clearly these are implications, but for us, its important in having close arrangements with downing street, having signed memorandums of agreement with britain, that we work in britains interest and in interest that they should stay. As i said, it is a matter for the british electorate, of which a small portion, but a significant number of irish people, will have their opportunity to cast a vote. Francine bank of England Governor Mark carney invoked the r word as well yesterday. Governor carney notable increase in inflation. It is the judgment not based on it is a judgment not based on a whim. It is a judgment based on rigorous analysis and careful consideration. It is the judgment of all members of the npc. Of course theres a range of possible scenarios around those directions. Which could possibly include a technical recession. Could possibly include that. Francine the response from those in the brexit camp was to take the forecast with a bucket full of salt. Lets get more with kamal sharma. Thank you so much for sticking around. For the moment, all of this uncertainty. Lets not even talk about brexit. The uncertainty of the referendum means that pound took all the brunt of this volatility. Kamal were looking through the lens for sterling in terms of the impact on the current account deficit. The travails of the deficit are very well known. It relies heavily on investment to fund that deficit. Consequently, any uncertainty has implications for the currency and has implications for volatility. We can see that volatility is rising as we approach the referendum. We are looking at implications for the broader macroeconomic picture. So what does that mean for pound . Lets say the country stays in the eu. What happens to pound after that . Is it weaker anyway . Kamal we do think that pound will continue to weaken heading into the referendum. 1. 40, 1. 35 potentially. After the referendum, i think the base Case Scenario is the u. K. Remains and we see a meaningful recovery in sterling. We could head back to the 1. 45 levels. Francine what happens if brexit happens . Kamal that is the great uncertainty. We pitched a couple scenarios. The lens through which we are looking at is what does it mean for investment in the u. K. You think that sterling will continue to underperform. Francine why is everything playing out in pound and not guilt . Is it because it is a much currencyskewed risk, or because of volatile markets . Kamal i think there are mixed views on what may happen to the gilts. Appetite may decline because of the uncertainty. Other people believe it could be a safe haven play. The impact on sterling is more clearcut. More liquid currency. It is actively traded 24 hours a day. Francine do you look at the polls . Do you have an internal poll about if brexit will happen . When you speak to clients, do you stay away from it completely . Kamal we see what you see. The polls and the discussions around those, how valid they are, we see what you see. Francine if brexit happens, one euro automatically week in . Kamal one of the concerns we have is that the euro market is underpricing the risk of brexit and in that vein, we are looking at short euroswiss positions potentially on concerns that brexit may have for the euro. Francine lets say the polls dont change. , 5050, but it is not really priced in. People dont believe it happens. The day after, if the u. K. Decides to leave the eu, euro falls through the roof, or collapses, or what does it do . Kamal we are looking through the lens of volatility. Our view has been that euro would generally euro is generally underpricing the risk. The volatility move is more important for us. Francine very interesting. Thank you so much for helping us understand what could or could not happen. Kamal sharma, director of g 10 fx strategy at bank of America Merrill lynch. Up next, a new dawn for brazil. The government shows up for its first day of work. We assess the path ahead. Francine welcome back. Breaking news. Honda to recall 21 million vehicles to fix their airbag function. Lets go straight to tokyo and bloombergs dave mccombs is there. First of all, what i dont understand, 21 million cars being recalled. They come out with a statement saying how much it will cost, but they dont give us the number of vehicles they need to recall. The total is still rising. They are investigating how many vehicles are affected. Earlier this week, jeffries gave us an estimate that this recall affecting takata airbags could increase to more than 180 million before it is contained. We can expect more of these announcements. It is not a huge surprise that the number of vehicles affected is expanding. Basically all the vehicles honda makes include airbags. Most of them are affected by this. Francine how much can this affect honda . We probably will see the number of airbags they need to recall increase. Us honda gave gave us an estimate for their forecast today that didnt include the impact of this because they dont have their arms fully around it. ¥436year, it cost them billion, a very large chunk of change. ¥345 net income was billion. The year before that, it was ¥120 billion. Theyve been paying bigtime for these recall costs. How much they will get reimbursed is still up in the air. It is very hard for them to give a clear picture what their net income is going to look like. Yesterday, we talked about mitsubishi. A lot of asian carmakers were hit by the emissions scandal. Are we going to see a lot of the asian carmakers lose market share because of the recall, because of emissions, because they are seen as less trustworthy . Volkswagen has been hard hit by scandals, by emissions scandals. A year before that, gm was hit with a large recall. These are global. Japanese carmakers have had a reputation for topquality and that has to be tarnished by this. In particular when you were talking about the kind of problems caused by these airbags. These things can be lethal. That might close a bigger threat to the brand image than the other types of scandals that have to do with fuel economy or emissions. That is a concern that rams face, that brands that have previously had really high Quality Images might be losing that. You can be sure the carmakers are trying to restore that reputation. Francine thank you so much, David Mccombs in tokyo. The sun rising on a new government in brazil. First full day of acting president michel temer. Hes assembled a cabinet to undertake the daunting task, writing a nation roiled by corruption. For more, we are joined by Bloomberg News executive editor john fryer. Great to have you on the show. Yesterday, we were talking about the fact that the challenges are huge. The acting president has a new cabinet but theres not much diversity. Theres no diversity. This is a country which has been run by a woman, a country where denote 51 of people themselves as either black or mixed and everyone is white and theres not one woman in the cabinet. Earlier i tweeted a photograph s swearingin ceremony and someone thought i photoshop it because it was all white men. It is really quite striking how little diversity there is. Francine how much of a hindrance is that . Brazil is known as the worlds biggest melting pot. This new government needs the support of the people. It does feeding to part of bruce fs narrative. It was partly fueled by gender issues. She was the first woman president of rozelle. Of brazil. It is a very divided society where many people wont feel like they are represented by this cabinet. I think it raises questions about the medical judgment, the fact that he should have known this would be a big issue. Francine the person in charge of finances, he used to be centralbank governor under president lula. He is one of the bestknown financiers in brazil. He straddled the public sphere and the corporate sphere. He is seen very much as a safe pair of hands. Some argue he could use the finance Ministry Position as a springboard to a president ial run. Were going to hear the first proper sort of when he gives a press conference. Hes very clear, hes going to be a fiscal conservative, get inflation down, and bring brazil to the surface within two years. A pretty ambitious agenda. Francine Dilma Rousseff is on trial. Does the cabinet including the finance minister have full power . In theory, yes. In the background, you have this awkward position where you have two president s. If you are the acting president , you would prefer it is wasnt the case. In paper, temer is the president , but there is someone in the background saying this is a coup and you are illegitimate. It is still not great and of course you have the Workers Party in the background also every step of the way. They will try to obstruct him. Francine john, thank you very much. Our executive editor for international governments. Up next, china credit. As the countrys broadest measure rose less than expected, is the ecb starting to temper the flood of borrowing . Francine welcome back. These are your markets. Today is friday, 9 52 in london. Stocks are dropping, oil falling, yen and gold rising after we heard two Federal Reserve members talk about markets mispricing a possible Interest Rate hike. We seem to be better equipped to understand centralbank divergence. In the being played off risk off mood. It is not being played out in Investor Expectations for Interest Rate rises. Weve had surprising data out of hong kong. Shrank 0. 4 . Gdp nick wadhams is beijing bureau chief. What is going on . There are a few things happening in hong kong. Retail sales are down by quite a bit. That reflected a dropoff in Chinese Tourists coming. You see the chinese economic slowdown. Tourists areinese spending less in hong kong. The other is a cooling property market. The number of hong kong residents whose mortgages exceed the value of their homes has skyrocketed. What youre seeing is a traitor spending environment a tater er spending a tight environment. Francine been more breaking news, china reported that new credit rose less than expected. He is china trying to temper its debt binge . That certainly has been a huge topic in recent weeks. Whether todays data really reflects that sort of mandate from the government, we have yet to see. This may just be another sign of underlying slowdown in china. The government is clearly starting to change the equation a little bit. It is sacrificing growth and saying, this debt binge that we have been on sneads to stop. Weve got to address these debt issues. Weve got to real that back in. Were still waiting to see whether todays data is a reflection on that new line or does reflect Slower Growth in the chinese economy more generally. Francine are we any wiser about the endgame for pboc . I think at this point, they still do have quite a bit of room to act if they desire to do so. Interest rates are still high. The amount of money banks are required to keep in reserve is still quite high. The yuan is depreciating. It has restarted its depreciation slide. There are a lot of factors to consider. The big one is debt. Weve had all sorts of signals out of the government that did is a problem they need to Pay Attention to, even if that means sacrificing growth. Francine thank you so much, nick wadhams. Here are some of the other highlights. In just a few minutes, eurozone gdp data. Germany better than expected. Italy pretty much in line. At 1 30 p. M. U. K. Time, u. S. Retail sales. Hostsoday, barack obama leaders of denmark, finland, iceland, norway, and sweden for a u. S. Nordic leaders summit. Im sure they will talk about the refugee crisis. Im sure he will ask about more extreme party movement, much like we are seeing in the u. S. Not sure they will talk negative rates. Who knows . Maybe the president wants to know what Monetary Policy is like. Surveillance is next. Tom keene will be joining me from new york. These are pictures of new york. That is where we go to live, next. Francine markets beware, a near hawkish turn welker wrote a signals there is more easing to come. Rise. D gold we year from the head of chatham house. He is robin niblett. And the first day on the job, the enormity of the task ahead. This is bloomberg surveillance. I am Francine Lacqua in london. Tom keene is in new york. We had better th