Tom keene is in new york. We have this possible merger, then we have the brexit news, and the market. Tom we will focus on commodities in the pacific. Francine, i totally agree this one month mark off to brexit is front and center. Francine it is. A lot of people have decided, saying, why we are even voting for this . It means a whole conservative the government. Now lets get straight to the first word with shery ahn. A summary and has joined the hunt for the missing plane in the mediterranean, trying to find the egyptair jets voice and data recorder. A french tv channel reports that the pilot spoke to air Traffic Control about smoke in the cabin just before the plane disappeared off the radar screen. One ofnt obama has ended the last symbols of wartime animosity between vietnam and the u. S. In hanoi today, he lifted the embargo on the sale of weapons to vietnam, hoping to strengthen commercial insecurity ties. The u. S. Has confirmed that a u. S. Drone strike killed a leader of the taliban. President obama called the killing an important milestone in the effort to bring peace and prosperity to afghanistan. Is considered the most significant assassination in the forces war since u. S. Killed Osama Bin Laden in 2011. Iraq has launched an offensive to retake the city of falluja from the Islamic State. The Prime Minister says the aching arces are appro moment of great victory. Fallujah is 40 miles west of baghdad. The Islamic State has controlled it for about two years. In the u. K. , the treasury warns there will be a yearlong recession if the country votes to leave the european union. The treasury lays out two scenarios in case of a brexit. Under the severe shock outcome, gdp would be 6 lower than otherwise, and Holding Prices would fall 10 . The referendum on the eu was to 23rd. Global news, 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. Im shery ahn. Tom thank you. Lets look at the data. Equities, bonds, currencies, commodities. Commodities front and center, up fractionally, yields churning. Continue to dollar strength. In commodities, some real weakness. Oil giving it up after a strong, tenday period. Euro stronger. There is singapore iron ore. That is a big move, 5. 5 . An important chart over the weekend, of all the tankers off the shores of singapore. Francine that is an important figure, because overall we are seeing quite a lot of pressure on these Industrial Metals declining. European stocks were down but are now up at touch. Huge, but at least they arent falling. Bayer, whoshow you made this unsolicited offer to buy monsanto. This is a big deal because of the valuation. People are concerned they are overpaying. Tom citigroup publish this morning out of london, suggesting that there could be a higher bid in order, 13. 5x. Back over to commodities, let me do this quickly to get to our important guest. Off we go with the rollover. Here is the stasis in commodities. This recent rollover in singapore gets everyones attention. The yen rallying after a slide into a threeweek low, pushing it i know you know what this is. Ichimaku, from monday. You studied it. It is used to predict currency direction. Its called the cloud you can see something happen in january and here. Tom all disclosure, i studied this years ago. Im not a fan. This is huge among Technical Analysis of asia. They just love this. Francine i started this morning for about three hours. But on a technical level, it makes sense. A lot of charts we look on tom where else can you get whatever its called cloud studies than from Francine Lacqua . Outstanding. Francine at 5 00 a. M. Tom there you go. Francine tom. Tom our guest host, we are thrilled he is with us. I know francine wants to jump in. What the imf is doing in greece the commodity roll over, which goes into your overarching theory of secular global stagnation, certainly a weak america. What does commodities signal . You have talked about the commodities having gone down a couple minutes ago. Two things. If you can do a chart with the Global Economic growth, and you do that with the Dollar Exchange rate, you would find all that you want to know about commodities. If you can forecast a dollar, global growth, you are done in terms of staying where commodities are. The problem is that the dollar has been appreciating massively since we 14. You had oil prices come down, commodities coming down. The dollar weaken . If the fed increases Interest Rates anytime soon which i doubt, and if the rates go up, once again the dollar goes up and the commodities get hit. This has been a huge deal we thank the team at hsbc. Im sorry, thats a classic rollover. Stronger u. S. Dollar, weaker aussie dollar. Would you suggest that with the commodity roll over that we get aussie back to 2008 crisis levels . I think the Australian Dollar will weaken. I have been looking at it closely. I was in australia visiting two years ago when i had to pay 1. 06. More recently, we went down a lot, and up again to . 76, but it is backing off. In the case of the Australian Dollar, you are looking not just a commodities that i what happens to china. China is important. What the reserve bank of australia is doing is important as well. They will have a change of governors, and a change of policy that will affect it. I say the Australian Dollar going below . 70 again. Francine sri, you say its unlikely that the fed will start to normalize. So why are the pains telling us that they may start hiking rates in june . The reason they do it, francine, is because they do not want investors to become enormously oriented toward speculation, to go and assume that the fed is not going to hike, so you in turn push of the equity markets even further. To push down bond yields further. You go on a risk spree. That is what they are trying to avoid, and you have had various members of the fed talk to you about one or even two increases this year, as John Williams said recently. The problem is you also have to be the chairwoman, and we shall aw what she did with everyone was expecting a hawkish presence. She essentially said there was nothing going to happen, and caution again prevailed in her interview with other fed former chairmen in new york six weeks ago. So i think that is where you are coming from. You have a few people who dont value to speculate too much. On the other hand you have the chairwoman, who is very cautious and dovish in terms of pushing the markets down. But the bottom line is the fed is stuck. They cant increase. If they increase even once, i think the market will correct. I remember conversation with tom lay last year, saying that if they hiked in december, there was going to be a calamity, and that is what happened. Francine the problems we have an talking about you wonder when the markets will start taking it in stride. Thats the conversation we will have. Umar, with plenty more on what the fed will do. Coming up, we speak to the chairman of bayer. Bayer made a huge offer, 64 billion, to monsanto. We will ask about that in the next hour. Francine live pictures from london. Look at that. Its actually sunny. It wont last. Would turner have been for brexit . Francine [laughter] i dont know. I will look into it. I wonder what michelangelo would have said. Tom keene in new york; im here in london. Lets get to the Bloomberg Business flash with shery ahn. Ayer is proposing a blockbuster deal that would create the worlds biggest supplier of Farm Chemicals and genetically modified seed. Bayer wants to buy monsanto for 62 billion in cash. That represents 20 premium to monsantos last close. It would be the biggest takeover ever by a German Company. Coming up in the next hour, we will speak to the ceo and chairman of bayer. The Largest Insurance Company in france, axa, is getting rid of all its assets and tobacco. That is 2 billion worth of stocks and bonds, after it called smoking the worlds biggest threat to public health. The largest Discount Airline in europe forecasts Earnings Growth will slow down. They expect net profit to rise 13 in the next fiscal year after 43 in the previous 12 months. Attacks and terror lower fuel prices will prompt airlines to cut ticket prices. Thats the Bloomberg Business flash. Francine thank you. The u. K. Treasury says britain will face a yearlong recession is that leaves the eu. Are chief european economist for Bloomberg Intelligence joins us now. Srikumar is still with us. Thank you for joining us. We are getting more from the campaign saying this is why we should not leave the eu. They are coming out with figures of how much we as house buyers or owners would pay the price. Yes. We saw have seen ouare the mediumterm implications. What we are going to see now is the shortterm implications, over the next couple years. These are enormously uncertain, and they depend in part on the first part of the analysis, the mediumterm. If you expect to be poorer over the next 30 years, you dont wait to cut your spending, you start now. That is what the shortterm is talking about, where the previous bid was over 30 years. Francine how difficult is this to model . When you listen to George Osborne, when he is at japan, they are trying to put concrete figures on it. House prices between 10 and 18 . How can they know it is 10 at 18 and not 21 . You have to love the precision. That sort of accuracy is spurious. 18 e is no way you can say or 10 . It depends entirely on complements. We just dont know. Havent to watch i happened to watch a couple movies on churchill. What would churchill do . I love how you cast aside the precision of the math. Is there a churchill out there in this debate . I dont see it. We know the economics as part of the argument, but it will not be addressing a lot of peoples concerns. Its more about sovereignty, feelings on migration. So no. I dont know which book you read, but i believe Boris Johnson wrote a book about churchill. Tom srikumar. This is the need to history. When you look at the prism of brexit, i would suggest you look at not only the economics but the emotion. The emotion has overtaken the economics recently. Look at the number of people who are opposing brexit. Prime minister cameron made a mistake in promising it a couple years ago; now he has to keep his promise. Obama,n George Osborne, all against brexit. ,ark carney talked recently that you would have a recession. Now it is being repeated. I think the hype is not greater than reality. Is a lot greater than reality. Tom can we do matthew . Math here . Does math work . I dont think it works at all. Game theory would work, if you are at expert at chess it would work. Quit, what areo the europeans going to do to you . Are they going to make more concessions or not . I think the big difference between remain and brexit you dont know which way game theorists go to. Tom francine, please. Francine jeanclaude yunker just said, look, there wont be any preferential treatment for deserters of the u. K. If they decide to leave. But if you lose the economic ground and if you move on to this more emotional do you believe the polls, that the u. K. Stays in . I dont think the polls are clearly suggesting they stay in. If you look at the difference, 40 ,ine, roughly 46 to that means another 14 or 15 are undecided. The question is are the undecided people that way because they are truly undecided . What are they waiting for . Or if you want to brexit, dont you want ttell your neighbor, and the poll taker, and the bookie . I find the big undecided word to be troubling for the remaining people. Tom thank you so much. Item sure we will see you in the coming days. Jamie murray. We will lookour, at the commodity rollover through the litmus paper of Foreign Exchange. Mark chandler from Brown Brothers. Stay with us. Tom good morning, everyone. Francine lacqua in london. I am tom keene in new york. It was in their 40 or 50 years Intercontinental Hotel in hanoi. The president has visited japan, and japan will be front and center. Today he spoke in hanoi, saying bill United States is lifting its lethal ban on weapons. With the president is our own toulouse. This carries all sorts of weight. How is he greeted how was he greeted . The president was greeted with open arms. President is trying to solidify and grow the u. S. Vietnam relationship, and the vietnamese are very welcoming, even though 40 years ago there was a war going on. Tom what kind of state is it . Compare and contrast the stereotypes we have a vietnam to their nascent capitalism in the form of government. Lets start with the democracy. It is not a democracy, is it . Is not a democracy, but it is a very young and dynamic country. It is opening up more and more to business. They want more investment from u. S. Companies, from foreign firms. They are trying to open up their economy. Even though it is not a democracy, it is very much open for business. Olus, president obama has also said they will lift the ban on lega lethal arsenals sales. Do we know what they are ready to sell . That is a question that hasnt been answered. The president said this would be a casebycase basis. There is still the issue of human rights for any of these sales are made. The u. S. Government will have to do an assessment and make sure the record is in line. They will most likely look at maritime access and equipment. This deal, where the vietnamese are looking for more help. Toluse, traveling with the president. Tom, when you look at trade around the world and the possible deals, this is quite significant. Sri, what is your take . Is it only the first process of a much more engaged u. S. . I think it is the first stage, as you said, in a much more engaged relationship between them. Even more important, i would say the 800 pound gorilla which was not in the room is china. The whole affected terms of selling arms to vietnam essentially puts vietnam on the same plane as the United States and japan as they counter the chinese domination, and that is where things will be positive. Tom thank you so much. This is bloomberg surveillance. Cameron, theid Prime Minister of the u. K. , talking about brexit. We had just a couple of hours ago the u. K. Treasury publishing their latest report saying they face a yearlong recession if they to leave the european union. Undecided voters say the risk of brexit is too great. Davidect to hear from cameron, and i believe he will be joined by a chancellor. First, bloomberg first word news. From greecekers have cleared the way for more loans. They have called for austerity measures including more taxes. That is one of the last things they have to do in order to unblock the next round of loans from the bailout. Angela murky has returned to turkey. She is trying to shore up an agreement on refugees. They agreed to halt the influx of refugees making their way to europe. They have been slow to deliver the almost 7 billion in aid and tosa free travel germany. Fors a virtual dead heat austrias election for president. One candidate has agreed to break with the role of decades of president s who have played a ceremonial role. Global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. I am shery ahn. I believe you have more on the elections. Francine thank you. This is my morning must read. Fromked out something bloomberg, writing francine what this goes back to is a little bit of what we are seeing from the u. S. That people are scared. They are voting for people in the extreme parties, which we probably would not have had just a couple of years ago. Tom absolutely. I think it is really front and center. I did the thing in the Washington Post the other day on fascism. Not to make it front and center, but that did be is there the debate is there. Francine through the central bank, you cannot openly talk about politics, but these are the things you must be looking out for. We speak with michaels feed. When you look at the rise of extreme parties, not just in europe, but elsewhere, how does the central bank look at this . Thatyou look at the risks the central bank faces, this must be part of it. Michael obviously, there is this continuing trend, especially over the last couple of years with the political ship. The way that Central Banks look at things, with they will be worried about is the economic policies that have been put in place will not be the best. Nothing best in terms of austerity needed and budget deficit targets. What is interesting in terms of the markets perspective is when Central Banks are delivering qe, it breaks down the risk between political markets. Francine how crazy is it we are eight years on from the political crisis but we talk about the austerity versus growth debate. Two reaches need to abandon the monetary qe that has been put in place because it is not word the way we worked the way we thought it would. You are right. Youre getting onto this chapter of needing lose policy and fiscal spending in order to get Inflation Expectations move higher. Tom lets introduce our best chart. We will introduce it in the next hour, but it works perfect for you. There is the plunge in swiss francs in the gradual measure managed weakness. I would suggest it shows the tension of currency dynamics. Do you just assume currency depreciation is the solution to the trilemma that europe and asia faces . Michael i would not say that currency depreciation is the only solution. It was originally thought that currency depreciation would help expectations. What we have seen is the than if it is quite shortlived. You get expectation moving higher for a year and then the effects wear off. You learn that you need other tools. Expansion, for example. Tom it is a more open system now. They are directly different system. They