The marks since the yellen conference a good 10 days ago. Francine yes, tom, i think they have been trying to look at the course. Now lets get straight to the bloomberg first reviews. Heres vonnie. Francine, thank you so much. Vonnie they want to know just how invested the banks are. They show how the rich and powerful shell companies, greece has their loan has otten rockier. And credit event in greece, the managing director christine la guard told us. And a poll shows 5 want to stay in the European Union and voters says undecided e more likely to maintain since the first time Global Military spending is on the rise. 215 billion, less than half the u. S. Figure. The philippines and indonesias response reas flaps to the chinas movement. And impeachment proceedings that are you receives lawyers says they took out ans to state banks due to global news 24 hours a day pouffered by our journalists around the world. Tom and a lot of Corporate News. Not only the Corporate America and the disney move well have. The tax aversion issue as well and we will do some economic right now its a food equities bonds and currencies. There are huge moves. And barely described yields in on the 10year. Currencies on the move and crude oil cant find a bit. I dont want to make a big deal of it. But still west texas under 36 get your attention. Thank you. The yen is my feature today without question. 11048 is a new stronger yen and the german we go to on the bloomberg. We go to three digits, and its a. 03. Its a positive number and is jawdropping and mad lamb guard just spoke to. Lets look at maybe the global litmus paper. Here we are. Heres on by momics. Weve shown this a million times. Oops. New leg down. Vonnie and slightly different move when it comes to the dollar and the yen. Tom well, francine . Francine tom, we were talking about the selloff with madam lagarde. Also with us from new york he is drew pat tis the securities deputy from the chief economist. Lets kick it off with you because we kicked it off with the la guard and yet theres nothing fundamentally that has changed. Is it just the realization that the she was talking about the last six months and of course during last six months the World Economy has slowed and we were talking about the potential of the u. S. Recession and still u. S. Growth looks weaker than maybe six months with d we had obviously the markets in europe we had a ard start into the year. Francine are they seeing something that we have not seen in world growth yet . One has to understand that with markets so difficult to assess the real economy that basically psychologically, psychology sometimes takes lead but of course the situation in the european pinking was very tough in the beginning of the year and you can see the result he ecp has taken more measures than the anticipating so you know theres no smoke without fires. So francine what does it feel like in the u. S. . When you look at the growth there seems nothing fundamentally wrong with it, but the well i mean i think thats one part of it. I also think that we really have to think of all these u. S. Policies in place. So it really is a matter of psychology, and a way out of sit to normalize it more quickry and continue along the path thats not worked and you need to move forward. When the u. S. Economy is moving and rapid declines, rates should be moving higher. We shouldnt be talking about risks. The only riss is that we shoumbt be doing something abnormally wrong. Obviously with francine. Tom i go to tom from Rbc Capital Markets who has been an optimist like you. He said i really dont want to say this but weave gron have you and maury aris had to adjust because of the tchards are being dealt to yellen right now . Its not the cards that are being dolt yellen its the cards she is playing. Tom but the backdrop, atlanta is 0. 6 . G. D. P. Isnt everything. G. D. P. Is if you look at all the Different Survey data and the labor market the market is doing better than the g. D. P. Numbers are saying it is. Tom francine, the real world gddepd with the 10year moving average. Dr. Schneider when i look at the 10year moving average looking at 3. 5 real growth down 2. 57 growth, thats a huge move a catch thening of g. D. P. Could sharon yell been independent from that reality . No. She can. But i think its also important to understand, what are we comparing . We have learned that pregrowth crisis because of hype involving the brick economies that has materialized now and its a wrong comparison. These this growth was artificially inflated and i would call it the new normal and theres little policy can really do about it and we have to adjust to it and we have to find a way ahead which involves structure that we have not seen n the euro zone. Tom and everybody from is that word fragile . That mad lamb guard brought up . I mean houston how fridge i will is the American Economy francine if you look . T and on the markets that also means that they are putting money into we were talking about the new normal and you were shaking your head. Are you a little more essimistic than to know that we were coming. And they overestimated the rebound which was supposed to materialize, wearned talking bout 3 3. 5 growth now. And not only for the country but for the world as a whole. So i think we have to adjust that and thats something they think is very difficult for them to with. Francine and at the moment its not the u. S. Economy thats in trouble but the global tom again parks reacting this morning that we have not seen d the to give you an idea,. 02 right now and well launch that through the morning. Later today on the bloomberg markets. Invested with secretary kerry. Look for that in the next hour. This is bloomberg surveillance. Francine im francine. Lets get trait to the bloomberg with vonnie. Vonnie the german factory order fell. A drop in export orders. French automaker peugeot says they see some speed bumps ahead and spending on technology will have a cut in profits. And big changes are on the way for the Saudi Arabian market. They will add dozens of companies and they want to make it easier for foreigners to invest. Tom . Tom very food. After francines very important interview with madam lagarde. Drew, i ry to think all of our heads are spinning on what Monetary Policy can do. I think even madam lagardes head for that matter. Now y plus g plus nx. World trade itself, for janet yellen, shes got to focus on kansas and wisconsin. Clearly you cant just simply ignore world trade but in the u. S. The export sector is much smaller than in other countries. So what that tells me is if youre going to get out of , one way is to accept and in other words by allowing higher Interest Rates in the u. S. And tom whats fascinating to me in this discussion and of Great Respect to the review and maury harris, the jd what would happen if any we raised rates once or twice . I get a huge doubt that the world would come to an end. No. The world wouldnt come to an end. Well, not that im right on everything but what i think is you would see a pickup in the United States. American consumers would respond favorably and some of that would be exported overseas which would help Global Growth and because our impress rates are moving higher, the Interest Rates that all these other currencys are trying to maintain means they would have to cut rates less into negative territory so you would begin to normalize global Interest Rates. Tom this is really the first time ive heard this. If they are the adults in the room and raise up the negative rates what, percentage of full faith and credit g and debt . Huge number. Huge number. What strikes me as very sod this whole idea that negative rates can help. Negative rates work a lot like tires, all youre trying to do is influence your currency and if seven influencing their currency at the same time then no one has as much of an effect as they would like so you end up not influencing it. Vonnie away from inflation is the deloor the number one concern for chair yellen . I think she worries about it but i think number one certain concern is labor market. I think she has a very different view of the labor market than i do and than most economists do. We nk its like people dont know exactly how many people are parttime for economic reasons what wouldnt have been in the Affordable Care act in the u. S. Tom bring up the chart, if you would. This is oil down. Thats the regressions from 100 a barrel. So thats sort of in our mind the trend that we have seen, the ugliness of oil and drew, what a nice pickup we have had in a rollover. This goes into the soup of what is the dollar going to do . Whats the economy going to do . When do we get the benefit of the increased oil prices versus the benefit we have seen . Its been the increased savings. Its not flowing into consumption. So theres still a benefit. Its just happening at an awkward time. Wed rather have people spend it. If you want people to spend more money. They need to think that they can spend more money and that means a higher Interest Rate environment that allows them to think about their retirement in much more normal terms than hey are. Tom wheres normal, 1 . 1. 5 rate . That would make people think when i move toward retirement Interest Rates will be positive and anything they put into fixed income assets will actually have a positive return. Save want to have people tom we will continue drew pad son and francine in frankfurt 1. 12 up next the vicks brian bells can i of bmo Capital Markets. Look for that in our next hour. From frankfurt and from new york, this is bloomberg surveillance. Tom a special bloomberg surveillance, Francine Lacqua is in frankfurt after speaking to madam lagarde, and we will have much more than to. This morning drew with us in new york and steffon schneider in frank ford and joins us right now. Stephon, we look at negative rates and drew looking for a more accommodative and immediately accommodative fed, you push back against that. What is the toolbox thats optimal for janet yellen and optimal for mario draghi . If you look at growth in the u. S. Its running at 17 , so the u. S. Might well afford slightly higher rates without killing credit economic theory states the opposite, but if you look at the rest of the world, credit growth is very mediocre, so i think the Central Banks are still trying especially in europe, which is a bankbased economy, trying to foster lower credit growth by lowering or fostering lower credit rates so if the e. C. B. Tried increase Interest Rates, we have also seen the savings and from lower oil prices, this is the major driver in the european economy right now, its bad consumption because of the real income gains and if you look at low inflation you have to take that into perspective when you look at Interest Rates. Because Interest Rates are not that the great but they are not that bad. Francine when you look at what the real im going to jump in with a question. Youre saying that the e. C. B. To remain very acome very accommodative, do you think janet yellen would raise the rates this year . Yes, after mario dragics remarks the unintended side effects was that the euro increased because drog mario draggy mario dragics comments. Francine do you think chair yellens speech was ate favor of the pvoc of china . To a certain extent that might have been the case but on the other hand it weakened the dollar, which obviously didnt help europe. But japan might have helped emerging markets a little bit twropt china. Francine Christine Lagarde said china is growing. We are concerned with the debt loads they have throughout but its the only economy that has something to write home about. Tom the number one moving part is the differential between the United States and to an extent a fewo developed economies and basically everyone else. We will continue this discussion. In our next hour on technology, blues sweeney will join us and gene munster and yes, we will talk about apple but much more about the disney news yesterday. Gene munster of technology in our next hour. From frankfurt, germany and a friday inch new york, this is bloomberg surveillance. Thank you. Ordering chinese food is a very predictable experience. I order b14. I get b14. No surprises. Buying business internet, on the other hand, can be a roller coaster White Knuckle thrill ride. Youre promised one speed. But do you consistently get it . You do with comcast business. Its reliable. Just like kung pao fish. Thank you, ping. Reliably fast internet starts at 59. 95 a month. Comcast business. Built for business. Tom good morning, everyone. Mark is on the move. Francine lacqua with madame lagarde. Im tom keene in new york. Dow futures at 112. But the headline number is oil, continuing to look for a bid. Solidrman 10 year is in a three basis points; thats a big move. Right now, we need a big first word news. Iceland, several thousand protesters showed their unhappiness with the Prime Minister, due to the socalled panama papers. The Prime Minister is refusing lawmakers demands that he resign. Meanwhile, a staterun newspaper in china says a powerful forces behind the panama papers. It says the u. S. Government stands to gain the most. It mentioned the brotherinlaw of xi jingping. In the smokey mountains, a helicopter crashed, killing all aboard. No word what caused it. Witnesses say they heard explosions. Donald trump faces his toughest test yet in the nomination race. He trails ted cruz going into the primary in wisconsin. It would reduce his chance of reaching the number of delegates needed. Hillaryemocrat side, clinton trails Bernie Sanders by as much as eight points. On well among unionized workers and students, but sanders is still relatively far behind in the race for delegates. The best finishes ever in the ncaa mens basketball tournament. North carolina is down by three, a wild, offbalance threepointer from high up, and villanova bowls. The victory, 7774, with seconds. Day,l news, 24 hours a powered by our 2400 journalists in 150 news bureaus around the world. Tom very good basketball. That was very exciting. Francine . Tom, how did we not take villanova . Thought, i need to make sure my coanchor fix the winning team. How did we not select villanova . We chatted with madame lagarde about that. She is an avid follower. Says,rld economy, she over the last six months, has been exacerbated by the chinese economy and tightening in emerging countries. Thats her view, who i spoke with earlier. We see the baseline as slightly lower, but we also see what we call Downside Risks a bit higher on the horizon, and we dont seek much by way of upside. We believe that these three key risks china, change of Business Model and lower growth the lower commodity price for longer, and the tightening of financials as a result of new monetary policies that has just begun as the three key factors. Thats on the economic front. On top of it, we also see some very concerning geopolitical threats that can have an Economic Impact of many countries around the world. Francine and then we have the brexit. Is that in your top three risks . Well, its clearly part of the uncertainty we have at the moment, particularly in the European Union and concerning the Financial Sector as well, because of the size of the Financial Sector that london represents. Francine you talked about china, and were concerned about the debt load. Are you concerned that despite all the centralbank action, were still in a no growth or low growth economic rut . Are we sowing the seeds of another recession . I wouldnt say that china is no growth. We forecast them at 3. 5 ; its really something to write home about, if we had more countries like that. But we see the chinese authorities as being determined to tackle some of the fragilitys of thies of the system. When leaders come out to say they will restructure the state enterprises, which are clearly a drag on growth, particularly in that change of Business Model, you dont need as much construction. You dont need as much of the heavyduty manufacturing work that had been done for decades in china. That is a restructuring which will apply a lot of hard work, a lot of manpower being g reachade rained, hopefully. But in a way, because china can produce those figures, its a bit of a badge of honor of being a critical part of the globalization of the economy. Francine that was madame lagarde, talking about the main risks that is facing the World Economy. We also talked about greece. We are now joined by our senior european economics correspondent. The weather in frankfurt is just as bad as in london. When you listen to madame lagarde, shes more or less talking about the same risks that chair yellen cannot normalize. Rced druggie to put the stimulus out there. Draghi to put that stimulus out there. Jeff although stimulus continues in the same way, the risk that something comes along y brings outside reall Monetary Policy to the limits of what it can do. Francine how surprised are you that given the Monetary Policy in the last three to four weeks we havent had any upwards growth . Jeff you could argue that we are still in this debt super cycle and that pertains to your the confidence, the animal spirit that needs to be present in order for investment to take off, for businesses to be able to grow are still not realized. Francine animal spirit is what we talk on surveillance, dont we . We like animal spirit, and yet we dont see or pinpoint what needs to happen. Jeff Monetary Policy can deliver that. Thats a