Good morning. This is bloomberg surveillance. Im Francine Lacqua in london. We have a packed show. , we talk infrastructure spending. Are joinede show, we by mark mobius, starting at 9 30 u. K. Time. We do have a little at a breaking news on oil. The iea just released the reports. The goal is to outstrip demand gain for 2018, this is interesting because it follows those cuts from a number of opec producers, including saudi arabia. The ieaclear whether expects demand globally to be a little stronger than we were expecting. This is the impact on crude oil after the breaking headlines came in two minutes ago, up 45. 87, down 1. 2 . It is fed, so i want to look at the dollar. The dollar is weakening for a third day. U. S. Treasuries are edging up. European stock markets are opening up a little bit higher following a mixed day in asia. If you look at the generic two year yield, that should be in red. We are trying to fix that glitch. Gold, 1267. It is always a good thing to look at gold and to look at havens. After macron talked to theresa may, look, they could always decide to stay within the union. London fire commissioner says there has been a number of fatalities after a huge blaze engulfed a tower block. More than 50 people have been taken to hospital. This occurred around 1 00 a. M. U. K. Time and was attended by 200 firefighters. In the u. S. , the federal Market Committee is widely expected to expect an Interest Rate increase today at the conclusion of the tow day meeting. They will also at knowledge recent inflation declines, well sticking to previous guidance for another hike by the end of this year and a First Step Towards unwinding the Central Banks 4. 5 trillion Balance Sheet. We will bring that announcement at 7 00 p. M. U. K. 10, followed 30 minutes later by live coverage of Janet Yellens news conference. S. Attorney general denied any allegations that he was colluding with the Russian Foreign intelligence. He spoke in front of the senate unti intelligence committee. To suggest that i was part of any collusion, that i was aware of any collusion with the russian government to hurt this country, which i have served with honor for 35 years, or to undermine the integrity of our democratic process is an appalling and detestable lie. There is the assertion that i did not answer senator frankens question honestly at my confirmation hearing. Colleagues, that is false. Nejra meanwhile, Jeffrey Gundlach says the establishment in washington is trying to undermine donald trump by running out the clock on his administration. He manages the 53. 9 billion return bond fund and called the u. S. Political conflict a side show of entertainment being used to obstruct the president s agenda. Raised its growth estimate for china for the second time this year, while cautioning deep reforms are still needed to break away from debt fueled expansion. The washingtonbased fund said the worldss economy will expand by 6. 7 in 2017. Global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. This is bloomberg. Francine thank you both of the u. K. Prime minister theresa may is coming under increasing pressure to abandon a hard brexit as she tries to put together a parliamentary deal to stabilize her minority government. Two former conservative Prime Ministers will reassess her approach to leaving the european union. In separate interventions, David Cameron urged the Prime Minister to collaborate with rival Political Parties after she s failed to win the mandate for the hard brexit. Wolfgang schaeuble made clear that the door is open, as did u. K. Uel macron, if the changed its mind about leaving the eu. We would take the decision out of respect. But if they wanted to change the decision, of course, they will us welcoming, but it is not likely. Manus, welcome our guest for the first part of the program. Its great to have you on the program. Im delighted to be here. Francine give me your view on how brexit plays out. Change the way you do business . At the moment, it is difficult to make key decisions with your businesses because we dont know where we are going to land and there is so much uncertainty around it. Byyou make a decision now definition, youre likely to get it wrong. I think what we are hopeful for is this concept of a soft brexit to us, it is a welcoming agenda item to put back on the table. For us, it is critical to have access to the Single Market as a financial institution. We do business across europe. And to try to have a second hub and r replicaed everything is costly. We will do it if we have to. But it would be welcome for us. The second key thing is this idea that we can have some mitigation to the hardcaps on migration. For us, we are desperate for highquality talent and for us, Diverse Talent is good talent. If we are really going to put. K. , wearecaps in the uk. Will have a problem attracting the right kind of people to our business. Francine does this impact the way people want to do business with the u. K. . Or whether people say, im not sure what happens next, so i will hold off investing . Isi think the proxy for that m a back to i activity. When chief executive are uncertain, they dont transact. That is what we are seeing now. Our m a market is down 20 year on year. That is a function of the psyche of the boards. Without some form of clarity, you will be making decisions that are more than likely to cause you to get it wrong. Francine does pound weakness make a difference in peoples minds . I think the greater issue is this uncertainty, which is causing people not to transact, rather than saying, let me invest right now because assets are cheap. Cheap is a relative term. When things are uncertain and the economy spirals as a result of brexit, things can look cheap, but it will prove to be a problem. It very do you follow closely . Does it change your perception for the world . Absolutely. We are in the business to move capital around the world and to assist our clients and doing the transactions they want to do. If politics are going to cause economies to ebb and flow in dramatic ways, that is something we have to be on top of every day. Francine is there something bigger . There seems to be when you look at europe you seem to cover europe very closely. You were concerned about populism politics taking hold. Is there a danger that we underestimate that influence because macron won in france and we placated some of the populism vote we saw . The issue is we have had this great divergence between i will use these words the mass and the elite. That population has felt the mass has not been listen to. If you look at real wages, they have been on a decline and that hurts and a population is speaking out and they are voting with their voices and emotions. Unless we are able to bridge that gap, or at least figure out ways to right soem of those ills, that will keep playing through with politics, and that of course, affects economy. Francine lets bring you uptodate on the latest in the fire in west london. The fire commissioner says there has been a number of fatalities. The Ambulance Service has said more than 50 people have been taken to hospital. The fire started around 1 00 a. M. In North Kensington, and was attended by 200 firefighters. We will bring you updates throughout the morning as we get the live pictures. Lets get straight to the Bloomberg Business flash. Nejra Quarterly Earnings rose at the fastest pace in almost two years. Operating profit gained 18 , a hundred 34 Million Euros in the three months through april. Ceo told staff you want to take a leave of absence without disclosing a return date. The company will be run by a Management Committee as it tries to navigate a wave of scandal. When he returns, uber will strip him of some duties and of point an independent chair to limit his influence. Walt disney will delist its first and only outlet in your, ending a 27 year run as an independent company for the paris theme park. It had to be bailed out by its parent at least three times. Does he now holds more than 97 of the capital of euro disney. That. Is the Bloomberg Business flash. Francine the u. S. Federal reserve is widely expected to raise rates later today, despite softer inflation. Mark cudmore says the fomc has no choice but to hike. He warns investors could come to regret that lack of ability. That lack of flexibility. S we dont know how the data i dependent. We know the fomc can look at any data it wants to end aside if that is important for a policy and change their minds. So, i think it is important to be data dependent, but you need more information about how they will use the data and what data matters. Is kime joining us now schoenholtz. Thank you for joining us. What are you expecting from the fed . They have no choice it seems but to hike today . How many for the rest of the year . I think the fed it never disappoints Market Expectations. If you want to recalibrate the june meeting, it had ample opportunity to do so. We are in the 25 basis point rate hike camp. And then next year we are looking at three rate hikes. Francine how does it balance . They hike rates today, but they need to give a warning sign to the markets that they were a little bit disappointed with inflation, especially wage growth inflation. Absolutely. I think todays numbers could be quite crucial into that input of thinking. We have cpi and retail sales. The fed has been quite happy to talk about the transitory nature of these inflation misses to the downside. Looking over the net couple months or so, that presents a policy challenge, should that continue to happen. For now, given the historical nature of weaker 1 activity, which is extending into q2 as well, the fed my consider the study course. Hike,sk is of this dovish which in the rates market could be perceived as a policy mistake. Francine i would urge everyone gvtv. It looks at financial conditions after rate hikes. Means conditions were tightened. How do they navigate that, kamai . The fed has got a broadly global risk on environment, whih ch is very supported. The fed obviously will be concerned. We are heading into a period where it is monday with Interest Rate hikes, and that will be coupled with reducing the Balance Sheet, which will gain increased traction, which could become a more prevalent factor towards the end of the year. Financial conditions are likely to remain a challenge for the fed as it tries to navigate both the rate hiking cycle and the normalization process. Francine how much are you expecting them to reveal on this shrinking Balance Sheet . Is this a little bit too soon . I think they are gaining a b it of momentum in terms of the commentary around the Balance Sheet. Some investors are expecting the risk of some commentary around that. We expect that to become more active in the third and fourth quarter, probably before the quarter more particularly. For now, they want to get this rate hike out of the way and heading into the summer months and watching the data, they can have a more lively debate on the Balance Sheet normalization process. Francine if the fed sounds more hawkish than expected, what does that do to the dollar . At the moment, i think the dollar is caught between a couple of headwinds. Historically, the dollar tends to underperform through a fed tightening cycle. We saw that again yesterday with recalibration of guidance on the rate policy. There is some speculation the bank of japan might follow suit, with ecb and riksbank. If its slightly more hawkish, yes, of course, it helps to support the dollar, but we think we are likely to see a green map, particularly over the nearterm and we have a short dollaryen position. Fiscallarly from the reform side, where there is not enough traction there. Francine kamai sharma, thank you so much. I in looking at the 10 year yield, 2. 2022. We also consider the conversation with Mohamed Elerian. Next, after the warnings that all Financial Markets are at risk, where should investors put their money . We are asking that question next. This is bloomberg. Francine you are watching some live pictures of the city of kensington, where people have died in a massive fire that raised through a highrise apartment. There were 27 floors in this apartment. We have been tried to get a hold of the london fire commissioner. At least 30 to 50 people have been sent to hospital. Many of you will find this distressing and we will give you any news on the number of casualties when we get them. Certainly, those pictures are extremely impressive. Low Interest Rates, aging populations in Global Warming are big risks to investors. The is according to bill gross. In a note released yesterday, he said, dont be mesmerized by the blue skies. Markets are increasingly at risk. Capital is blocked by secular h lows, which combined wit in negative fueling safe assets promised to stunt u. S. And Global Growth far below historical arms. Where are people wanting to allocate capital . First of all, it is to want to try to find yields. We are in a low Interest Rate environment. Areinvestors chasing yield. We have seen the asset price run up in the states, we are starting to see a flood of capital come into the european markets. Our ipo business has been extremely active this year, again, chasing nice returns. That has outperformed the u. S. Markets. That is partly because we started with a low base. That performance is striving more people to want to put capital here and bridge some of those gaps. The other place where we have seen a real shift in mindset is the emerging markets. For the last couple of years, people have been largely handsoff due to the geopolitical risks that exist in the system, but when you start to think about the geopolitical risks in the western world come investors are saying, i can get paid for the same types of risks, so, why not . This year there was a period of six weeks when we set more emergingmarket inflows than we suffer the whole of last year. So, peripheral europe is quite interesting. Was in turkey two weeks ago in on the day after i was there, after having not seen any capital raises for two years, on the same day we saw two issuers access the markets for around 500 million. Those are some of the themes that are playing out in the market. Francine ipos in europe. For sure, very active. We have been busier this year than we have been in quite a long time. Our market is up over 100 in terms of the ipo activity. Each of the deals we are bringing seems to perform. That fuels more demand. Francine there is also this push to have the Investment Bank working closely with the wealth management. Absolutely. One of our Strategic Ambitions is to make sure we are capitalizing on the fact that we are a worldclass private bank, and we have a global best in class player in the Investment Bank. If you look across at the competition, there are very few people who say they have both. We are standout in that respect. For us, an absolute natural is to make sure we are reaping the synergies of those two businesses, and they are very synergistic. If we are banking well, an ultra High Net Worth individual, in the developing markets you have whole ago a tight markets where the tentacles are into the private world. The natural person to act for them on the other side would be Credit Suisse. If we monetize through the ipo markets, for example and we have done a good job, the next thing that would make sense is for us to manage the newfound wealth. Francine what about infrastructure . We talk a lot about infrastructure. You say you have done deals in infrastructure and those will increase. Yes, out of the mouth of every politician trying to create growth in their economy and create jobs is infrastructure spending. Obviously, very vocal with the trump administration, but clearly here we see the same. By virtue of the fact that there is going to be investment in most of these economies, we are starting to see capital flying in that direction because they see deal to be done. There has been half of 1 trillion of transactions over the last two years in infrastructure and equally from a Capital Raising point of view, there has been over 100 billion of capital raised in infrastructure funds. Francine marisa drew, thank you. We will also be joined by mark mobius. This is bloomberg. Francine you are watching bloomberg surveillance. We are expecting a little bit of data and just before that you can see pound erasing gains. First lets get straight to the bloomberg word news. Heres nejra cehic. Nejra we are looking at live pictures in the u. K. Londons fire commissioner says there have been a number of fatalities after a huge blaze engulfed a tower. The Ambulance Service has said that more than 50 people have been taken to hospitals. The fire started around 1 00 and time at Grenfell Tower was attended by 200 firefighters. U. K. Prime minister theresa may is under pressure to abandon her plan for a hard brexit as she tries to stitch together a deal with Northern Islands democratic unionist party. Yesterday, french president Emmanuel Macron and german finance minister Wolfgang Schaeuble both said it wasnt too late for britain to change its mind. In the u. S. , the federal open Market Committee is expect