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 i