Transcripts For BLOOMBERG Bloomberg Surveillance 20170614 :

good morning. this is "bloomberg surveillance ." i'm 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 bank's $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 yellen's 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 franken's 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 washington-based fund said the world's's 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. it's great to have you on the program. >> i'm 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 don't know where we are going to land and there is so much uncertainty around it. byyou make a decision now definition, you're 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 high-quality 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, i'm 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 don't 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 people's 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: let's bring you up-to-date 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. let's 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 don't 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 today's 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 it's 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 near-term and we have a short dollar-yen 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 el-erian. 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 high-rise 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, don't 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 hands-off 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 emerging-market 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: ipo's 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 world-class 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 let's get straight to the bloomberg word news. here's nejra cehic. nejra: we are looking at live pictures in the u.k. london's 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 wasn't too late for britain to change its mind. in the u.s., the federal open market committee is expected to announce an interest rate increase later today at the conclusion of its meeting. it will probably acknowledge recent inflation declines while sticking to previous guidance for another hike before the end of this year and a first step toward unwinding the central bank's balance sheet. we will bring you that announcement at 7:00 p.m. u.k. time followed by live coverage of janet yellen's news conference. ,ber reeling from its ceo travis kalanick, taking a leave of absence, has been hit with the resignation of david bandar meant from its board. fundamental's exit comes after he made a sexist comment in a meeting intended to ber's scandal. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i'm nejra cehic. this is bloomberg. francine: thank you so much. little bit of movement on the currency markets. pound dropping after we had some unemployment -- first of all, the rate is at 4.6% for the three months february to april. however, the basic wage growth, this is extremely important because the basic wage growth is what the boe are looking at, that growth slows to 1.7% instead of the estimated 2%. you can see the impact on pound. let me bring you to my chart. for our bloomberg users, this is without a doubt my terminal chart of the week, if not the month, if not the year. shortd of, in a clear and snapshot, shows you what is happening in the u.k. this is inflation. this is mainly to do with pound weakness. if we see the so-called hard brexit, it could mean tariffs. inflation is expected to creep up. if inflation is down, it means house calls could feel a lot less well-off than they would have been. let's welcome investor mark mobius, currently visiting london. still with us, marisa drew from credit suisse. thank you for joining us. we talked a little bit about brexit. how much of a concern is this? marisa: i think what you are going to see probably as a ripple effect is a short squeeze of the consumer. everything is a lot more painful and it has been the consumer that has fueled the u.k. economy. if they start pulling back because they feel a pinch here, it will undoubtedly slow us in terms of our growth. what is going to get the u.k. back when you have this uncertainty? francine: does this have an impact on brexit? it has been a messy week. we had these elections that didn't go to plan for the tories. mark: i think it has a big impact. people are beginning to realize this whole brexit situation is causing concern and it is having an impact on prices. pricesgetting a rise in in a number of commodities, a number of things people by every day. i think you are definitely going to see a lot of concern about brexit. i personally believe the u.k. is not going to change very much in terms of rules. you are talking about 40 years now, adopting e.u. rules -- why change? francine: because they voted for brexit. i guess the problem is you have to try and implement it. mark: i feel it is going to be a very soft brexit. they are just going to -- things remain pretty much the same. the only difference is the u.k. won't have a vote, unfortunately. [laughter] francine: that would probably mean they are worse off. when you look at the markets, let's look at risks around the world -- how much is inflation having an impact on the way we view the world? talking about china, frontier markets, emerging markets, how would you quantify the world economy? a- or c+? marisa: somewhere between but with a negative bias. we keep talking about this inflation. here we have rising inflation, but in most of the world with got a problem with the inability to find growth, to get returns, and there's so much cash in the system looking to find a home. then you've got these risks everywhere, whether it is the tariff threats or the politics. all these things lead us to be a little negatively biased. the markets have been raging on. i think that is evidence of people trying to put money to work. francine: that is true in the emerging markets. marisa: absolutely. but that is a relative risk thing as we talked about before. mark: i think it has helped emerging markets. people are searching for outlets. some of these emerging markets are paying a much higher yield. i think higher inflation means the real rate will be negative and we will get more and more negative as we go forward if they keep interest rates the way they are. that would be positive for equity markets generally and particularly emerging markets. marisa: so different between u.k. and the eurozone. we are seeing the opposite, very low inflation. a lot of that is oil price-driven, but in the medium-term forecast for the eurozone -- it is not just a near-term thing. it is an intermediate term thing as well. francine: bill gross was warning that all financial markets are at risk. is there any truth in that? mark: they've always been at risk. nothing new. i think his statement concerning the u.s. and europe more than emerging markets. the risk in emerging markets has always been perceived to be higher. i think it is very much discounted. but you must remember, higher risk potentially means higher returns. you have higher volatility. francine: as long as you have the right bet/ . what are your top three bets today? mark: we've been very positive on china. people have been negative on the financial situation in china. we have not. we continue to be emphasizing china. india is growing at a tremendous rate. brazil looks very interesting. there's been a run-up that went too high. now it is corrected down. marisa: strategically, your point on china, we've seen a lot of banks pull out of china or reduce their footprint in china because they had a hard time making money in the region. our chief executive has taken a contrarian view and we've gone big in china because the long-term growth is what he sees and is willing -- it is going to be volatile in between, clearly, but the long-term that is something we believe in. mark: i think also foreign banks are going to have a better chance. china is going to have to be more fair treatment to foreign banks. francine: we will focus on china next. a report from the imf this morning. those are marisa drew and mark mobius. next, we are live in hong kong as the imf upgrades its growth forecast for china. more next. this is bloomberg. ♪ francine: let's bring you to the very latest on the news of the fire in west london, in north kensington. we're listening to a statement by the london ambulance service. we just heard from the head of the fire brigade. she was talking about the need for everyone to remain calm. this is a very important incident in a difficult time that they do not want to speculate as to the cause of what exactly happened. what we know so far, there have been a number of casualties. people have died in this massive fire that raced through this high-rise apartment. the fire started around 1:00 a.m. you can see the smoke. 30 to 40 people have been sent to various hospitals. we will continue monitoring the situation and bringing you any news. we're just getting briefed from central london. i believe the head of the police department now saying there have been 50 people taken to hospitals after this london tower fire. our thoughts and prayers go with those in the fire and the families around them. let's get to your markets with mark barton. mark: looking for a hike in rates. look for new economic projections. look for potential details on the unwinding of the $4.5 trillion stimulus. this is the msci all country world index. it% below the all-time high reached on june 2. the gauge is up 11% this year. love this chart. it is the bloomberg u.s. financial conditions index. it tracks the level of financial stress in money, bond, and equity markets. positive value indicates accommodative conditions. negative value indicates tighter conditions. tightening conditions after the , theate hike in this cycle one at the end of 2015. the subsequent hikes have led to lose her conditions, which is er conditions,loos which is something we will be keeping an eye on. rake even scum in down from highs we saw in march. soft inflation data in the u.s. raising uncertainty among investors about the path of rates after today's likely rate hike. aside from rates, investors will be looking for clues about the unwinding of the balance sheet, a process many central bankers have said will probably be appropriate to set in motion this year. remember alan greenspan's conundrum in 2004 and 2006. u.s. yields were declining. similar story now. is the conundrum going to continue? gulf states, china, putting money into the u.s. treasury market back then. the greenspan conundrum, many reminded of that in this current environment. francine: the imf has raised its 2017 growth estimate for china to 6.7% while cautioning that reforms are needed to break away from expansion. -- debt-fueled expansion. >> we see the chinese government providing some support through fiscal policy and the way credit policy was being managed. we think this is the right forecast. we expect the economy to slow a little during the year, but we think 6.7% is the right one. francine: retail sales in industrial output data in the world's second-largest economy remained resilient while signs have emerged that measures to cool the property market are taking some effect. lets the to malcolm scott in hong kong. first of all, an upgrade, a vote of confidence, but what is the biggest risk left in china? >> thanks, francine. we've got this recognition of reality from the imf. the chinese economy has been running along far more strongly than many anticipated it would. the first quarter was strong so they've had to upgrade for the second time this year. the growth may moderate as the year goes on, but it still looks to be fairly strong. most economists we surveyed matched that. we saw a robust conditions in the first quarter. slightly slower growth into the third and fourth quarters. the big risks that the imf have been playing for a wild are around debt and financial risks. the imf hit that drum again today, saying reform needs to quicken so that some of those longer-term risks don't materialize. francine: thank you so much. welcome scott, managing editor for bloomberg's asia economy team. let's get more with mark mobius. also joining us from credit suisse is marisa drew. us.k you for staying with let me bring you over to one of my favorite charts. we talked about whether we believed chinese data. in blue, you have the chinese manufacturing pmi. in white is the china satellite manufacturing index which monitors from space 6000 industrial facilities. actuallyany doubt that we are looking at the right numbers? mark: i think it is a reflection of a big shift in the chinese economy from manufacturing, export-based, to consumer-based, service-based. we're looking at the consumer in china, and particularly the internet space. china has embraced internet more than any country in the world. i think they now take about 20% of the total internet usage in the world. the amazing and very thankful thing is that the chinese internet companies, the big ones, are making money, which is a big change from what we had in 2000. that is where we are looking. we are looking at the service-based consumer economy. not all internet -- marisa: one of the things i'm seeing is huge innovation coming out of china, shenzhen, and the chinese government is doing something which i think is very interesting. previously all this used to be state-owned enterprises. china is fostering them. they might be giving them real estate, other support, but they are letting the entrepreneurs own their businesses in many respects. that has created sort of an ecosystem similar to silicon valley that has fueled really interesting innovation that i think is going to be disruptive almost more so than silicon valley. you see companies getting created that are going to probably leapfrog the technologies that have been developed on the west coast. francine: do you still have doubts -- they still have the reserves, aty of currency that is being propped up, and outflows being curbed. are you concerned that they do something wrong and we have a unstablization of china? mark: there's some escaping money, but a lot of it has been investment going into plants and infrastructure for a long-term return. like the u.s., all this money going out brings money back in in terms of returne. it may not be tomorrow, but longer-term you're going to get tremendous inflow coming in. to give an example, we talk about technology, while way, huawei has become a giant. they are a giant in the telecom industry globally. this is bringing returns back in. francine: what should china make of the fed? are you concerned about a possible temper tantrum or because it has been telegraphed, no matter what happens to treasuries, china will hold steady and even buy treasuries? mark: one of the agreements that xi said, we will support the treasury market. this is one reason you've seen an increase in their holdings and treasuries. there will be a limit because they need some of this foreign-exchange. at the end of the day, i think they've reached some agreement on that regard. francine: it seems that a lot of the outflow curbs impacted the money we are seeing in europe and the u.k. marisa: very much so. i year ago, china made up about 60% of the inbound m&a into the u.k. for cross-border m&a. that shrunk dramatically. what china said, i believe, is that money can flow out and it will be supportive of that so long as it is for strategic industries. china investing in longer-term infra projects, all good. i think what we are not seeing is the trophy industries. so investing in real estate, luxury goods, football teams, things of that nature. that is where we've seen a dramatic cutback. that was a factor previously. francine: stay with us. i want to also bring you up-to-date to the fire in west london. the fire commissioner says there have been a number of fatalities in the blaze. the ambulance service has said that more than 50 people have been taken to hospitals. the fire started around 1:00 a.m. u.k. timeout grenfell tower in kensington and was attended by 200 firefighters. we will bring you any updates we get as soon as we get them. there's been a lot of reports. we heard from the fire commissioner. they are saying it is too early to speculate on what happened, how the incident started or whether there were structural faults with the building. we will bring you any breaking news. the u.s. attorney general has denied any suggestion that he colluded with russia to interfere with last year's residential election. jeff sessions was speaking in front of the senate intelligence committee. >> the suggestion that i participated in 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 line. assertionhere is the that i did not answer senator franken's question honestly at my confirmation hearing. colleagues, that is false. francine: let's get more with bloomberg's congress reporter, kathleen hunter. mark mobius is still with us. so is marisa drew. what exactly did we learn from jeff sessions? he didn't talk much about his conversations with the president. >> that was the major takeaway. anyone that was looking for a bombshell revelation out of yesterday's testimony, we didn't get that. what we did see was sessions sort of defining what his posture is going to be going forward in terms of his relationship with trump. he was close to trump during the campaign. their relationship has been kind of on the rocks lately. we kind of saw sessions proving his loyalty to trump by defending him and refusing to go into details about his interactions and conversations with the president. francine: is he going to step down? >> i think we will probably see sessions staying around for a while. he looked like he's recused himself from the russia investigation. there's been discussion about whether or not robert mueller is going to be staying around or not. sessions' deputy attorney general was on the hill yesterday and he talked about how he had complete faith in robert mueller and wanted to keep that integrity of the special prosecutor investigation going forward. i think we are going to see the players stay in place. francine: yesterday we were talking about possible new sanctions for russia. mark, do you watch this and try to figure out whether it has an impact on russia or is russia a purely oil story? mark: we watch this very carefully. at the end of the day, who are the big nuclear powers? russia and the u.s. u.s. and russia have to talk to each other. we look forward to abandonment of these sanctions. from a purely investment point of view, there are wonderful opportunities in russia. francine: do you feel your job has changed in the politics used to be very domestic, and now foreign policy is emergin -- is impacting emerging markets? mark: exactly. this is going to be true in the middle east as well. we have to watch this carefully. the geopolitical situation will have an impact. francine: how difficult is it to geopolitic big events? again, it does speak a little bit to this investment in emerging markets. the geopolitical risks can surface anywhere. you are going to get more growth in some of these developing markets. that is one aspect of the behavior that i think has changed a little bit. when you speak to a market like russia, i think investors would love to go in. we would love to participate in the economy but sanctions prohibit us from doing that. there is business to be done. we shall see how it evolves. francine: what is the next testimony? >> i think things go back behind closed doors a little more. there could be some additional testimony coming from jim comey. they've talked about bringing him back to talk to senate judiciary. it is unclear if that is going to happen. it is going to be a matter of senate staffers doing the investigations having behind the scenes talks with people like jared kushner, other players involved. francine: a big thanks to all of our guests. kathleen hunter, our congress reporter, and mark mobius and marisa drew of credit suisse. "bloomberg surveillance" continues in the next hour. tom keene joins me out of new york. we will be speaking to mohamed el-erian. we will be talking about the fed. we also want to keep you up-to-date with the fire in west london. we understand that people have died in this massive fire. you can see pictures of smoke still coming through. 50 people have been taken to hospitals. ♪ francine: no flexibility for the fed. could market expectations be tying the market's hands, as we look ahead to this evening's rate decision. theresa may faces calls to abandon a hard brexit as european leaders say it is not too late for the u.k. to change his mind. what sessions did and did not tell us. he called allegations that he cooperated with russia a lie. good morning. this is "bloomberg surveillance ." i'm francine lacqua in london with tom keene in new york. we also have to look at the inflation figures and wage growth, which was smaller than expected in the u.k. terrible fire that sent 50 people in north kensington to hospital. newsa horrific fire, the of this coming out in the last couple hours. on the inflation front, i was really taken by the lack of wage growth in the u.k. you wonder where real wages are as we get into 2018. i guess we have the right guest for that in this hour. lagsine: wage growth further behind inflation. what does that mean for further household spending? that is what we will look at through the lens of the boe. let's get straight to the bloomberg first word news. reporter: in london a raging fire has engulfed a high-rise apartment building and there are a number of unknown deaths. the fire broke out around 1:00 a.m. at grenfell tower. it appeared to start in an apartment at the lower floor. london's fire commissioner says there have been a number of fatalities and a structural engineer is monitoring the stability of the building. at least 50 people have been taken to hospital. theresa may resumes talks aimed at keeping her in power. a government official says negotiations with northern ireland's democratic unionist party are making good progress. may needs that party's support. and attorney general jeff sessions says the idea that he colluded with russian officials during the election is a lie. he appeared before the senate committee investigating russian meddling in the election. asked if thereen were reasons he should not have been involved in the probe, even before he recused himself. >> there are none, senator wyden. i can tell you that for absolute certainty. this is a secret innuendo being leaked out there, and i don't appreciate it. reporter: sessions also said he was within his rights to sign off on firing fbi director james comey. president trump's lawyer tells bloomberg that in september he will testify before the house intelligence committee investigating russian meddling in the election. he says the liberal media has earned it cannot get under donald trump's skin. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. i'm taylor riggs. this is bloomberg. tom: equities, bonds, currencies, commodities. we have a very special guest this hour. curve flattening out, that is a higher wttwo year yield and a lower 10 year. that is an important signal into the rest of the year. oil is still below $46 a barrel. looking at the vix with that great equity market. you have never heard our guest say, go to cash. and the mexican peso. francine, uber way out in front on this. we have a killer chart on that this morning. francine: always look at peso. we have not heard a lot of guests say go to cash, but i am looking at gold as a haven, but i am also looking at the pound. as wage growth lacks further behind inflation, that is something we have to look at. i put the dollar up there for good measure and the bloomberg. this is the dollar weakening for a third day. the u.s. treasury is edging up in the u.s. stock market. tom: it is fed day. we use this with michael mckee this afternoon. here is the two year yield spread out over two years with the move up higher in yields here with a new jump up at the end of last year. three rate increases along the way will move this circle of today to where we are. what's so important, and we show this yesterday, the way the yield has come up to the point where you wonder, is it escape velocity for the fed as well? i will put that on twitter for bloomberg radio in london. francine: i had a conundrum this morning, tom. should i show you wage growth inflation, or the lack of? in the end, i decided to go with financial positions in the u.s. this is my bloomberg chart, thanks to hillary clark. it shows you that financial conditions tightened after the first hike of this cycle. however, the two subsequent rate hikes mean looser conditions. this is a great way of looking at things as we push forward to the fed. tom: we need to get an update from kevin cirilli in washington. he was wonderful yesterday. the zeitgeist last evening, kevin, where many people in the white house suggested the president not fire rob mueller. let me ask the obvious question, does the president want to fire the special counsel? >> nobody knows, tom. i was speaking with some sources last night on capitol hill who were essentially throwing their hands up in the air, saying why is this rhetoric dominating when workforce development week is now? yesterday, republicans feel it was a big nothing burger, that there were not any new developments. the democrats are saying,w ait a mminute, this is because the attorney general dodged questions by saying the conversations between the president and attorney general should remain just that, between them. tom: i spoke to a family member last night who said they basically turned off the television, they turned off the radio, they stopped reading about washington. they are exhausted by this news flow. is the white house exhausted by the day to day grind of what you are covering everyday? >> it is the new normal here inside the beltway. i don't think president trump is exhausted by it. i think there is a growing sense that perhaps, the frustration that -- the team surrounding the president, that there is going to have to be some type of adjustment, especially as they look to pivot to other issues. you know, in terms of where things stand, we should note the president engaged back and forth on health care policy yesterday, saying the house bill was "mean." i spoke with several conservatives last week to tell me the disruptions in the senate are very much ongoing, but it is hard to get into the policy back-and-forth, tom, when the russia probe is dominating every single day. francine: what happens next, kevin? does the russian probe go behind closed doors, or will we see jim comey testify again? >> great questions. i can tell you there is a large appetite on behalf of the white house to get the russia probe settled quickly. we should note that this week the senate is addressing russia sanctions and they are scheduled for a vote later this afternoon. this codifies the sanctions under the obama administration. it would also allow congress to have the final say, should the president at any point, look to walk back sanctions against russia. yesterday i heard the senate banking commission chairman say this is going to address the issue of the russia 2016 hacki ng, but there has been no conversation and hardly any hearings on the issue of cybersecurity and how to better address that problem from 2016. francine: talk to me about the tax overhauls. we understand that steve mnuchin wealthy back on the tax break for the country. he received ae, 10 of pressure from democrats, but also from moderate republicans, on the optics and how the politics would impact midterms. they are trying to walk that fine line between the corporate tax reforms, but also not being portrayed as just giving tax breaks for the wealthy. later today we will be speaking liberalis from dow. i'm sure tax policy will come up as well. tom: kevin cirilli, thank you so much. busy in washington, to say the least. with francine lacqua in london is mohamed el-erian. dr. el-erian has had a stored career in investment management and thinking about the greater themes of politics and economics, he joins us this morning. if you were to write for bloomberg this morning on the politics of washington, what angle would you take within your unknowns?e unknown what are the unknown unknowns of president trump? >> i would note we have had no decisive development on the russian probe. as such, they will remain a distraction. and the unknown is whether the technical work that is going on on tax reform and if a structure will ever make it to congress in a very constructive manner. i think that's an unknown because the longer these distractions continue, the harder it is for congress to move on the government. tom: one thing you want to do is get to a "t" decision. generalon seems -- the history with politics, "t" decisions are difficult things. what is a key "t" decision for the white house? >> to get the legislation on the hill and get a national discussion going on the economy and on the importance of moving forward on pro-growth policies. the longer we wait, the higher the risk. tom: is the president capable of that? >> yeah, he has the people around him who have been working on this. he just needs the political runway and for that, you have to clear the distractions, which they have not been able to do. francine: yes, but what needs to happen for the distraction to go away? >> that is the big unknown because one doesn't know how muc h is there. until people figure out how much is there, you cannot answer the question, what does it take before it to go away? francine: who does the president listen to? who could say, mr. president, let's leave the probe to one side, let's focus on this tax p robe to get it right. >> i don't know enough about the internals of the white house to answer that question. francine: nobody knows. >> but the economic data is company and there is a risk the economy will slip back. tom: very good, mohamed el-erian with us. we will continue on a number of themes, including the federal open market committee. dr. el-erian was not invited. maybe he will be invited next time. we will observe at 1:00 p.m. this afternoon after a generous lunch. mr. miggckee in washington. this is a nuanced fed decision today. the fed decides, one :00 p.m. we will be there without mohamed el-erian. ♪ reporter: this is "bloomberg surveillance." it was a rocky day for uber. the company was in the spotlight for its workplace culture. david bonde has resigned from the board, apologizing for his remark during the meeting intended to address gender bias. later, travis kalanick said he would take a leave of absence. and one of china's fastest-growing insurance companies says the chairman is unable to perform his personal duties. a local magazine have reported that wu was taken away for questioning by chinese authorities. that article has been a movement from the magazine's website. francine: thank you, taylor. the federal reserve is widely expected to raise rates later today, despite softer inflation. bloomberg macro strategist mark cudmore said the fomc had little choice but to hike, but he warns investors can come back to regret that lack of possibility. meanwhile, bloomberg has been told that the central bank needs to be clearer about how it factors data into decisions. >> we don't know how they are data dependent. it really means the fomc can look to any data it wants to and decide whether that is important for a policy, and change their minds. 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. francine: let's get to mohamed el-erian, a bloomberg view columnist, amongst many titles. when you look at wirp, is a difficult for the fed to balance? have they communicated so much that a hike today is a done deal, but then they have the softer data you were talking about? >> in the old days, the fed will look for any excuse not to hike. now the fed has become less data dependent and it is a fed that is keen on normalizing rates gradually. i think what the fed has embarked on is to, take the phrase that tom loves, a beautiful normalization. and is what it is seeking, that is why it will hike, despite the weaker data. francine: how much will they reveal on reducing the balance sheet? >> i think just a broad outline, and they want this to be as boring as possible. they don't want markets to worry about this. it will be look, here are the broad outlines, but it is going to be boring. tom: when i look at what the fed will do today, we have to move on with forward guidance to the next two meetings, to july and september. what will you listen for today from chair yellen in terms of this odd phrase you have nothing to do with called forward guidance? >> i think i'm looking for them to reaffirm one more hike this year, as the baseline. what i'll be really interested in is whether they point to a balance of risk, one way or the other. a few months ago, the balance of risk was that we would get more than three hikes in 2017. it would be interesting to see if they hint the balance of risks is now neutral, or less than that. i think they will reaffirm the baseline of three total hikes this year. tom: when i look at it and the certain number of hikes right now, can they do that with the new vector of rolling over inflation? in the united kingdom, there is higher inflation. we can't say that here, can we? >> know, we can't, and that is one of the issues we have to consider. but one of the charts francine showed earlier, which is ironic because financial conditions have been listening while the fed has been tightening. now you are getting broad-based concern that what we see in risk assets is a liquidity driven rally, that people are starting to get worried about. the fed will be torn between on the one hand, the inflation number and on the other hand, financial conditions. tom: we will come back to you with dr. el-erian and look at any number of ideas coming good and the idea of a federal reserve left dependent. we look at that further at 1:00 p.m. the former richmond fed president will speak to us. including a future governor or chairman of president trump's fed. this is bloomberg. ♪ >> we would like to see those reforms intensified, accelerated, and sustained and that means the rebalancing of the economy to new technology sectors to support the household sector, the household services that households will want and also, to begin to tame the problems of credit growth that have created vulnerabilties in the corporate sector. borrowing has been very substantial. francine: that was david lipton, the imf's managing director speaking to tom mackenzie in china. today we found out overall, the economy is holding steady. we had encouraging fixed asset investment. however, we heard from the pboc in a statement, talking to growth, saying lower growth might become the new normal. they say they need to keep the deleveragingeen delev and the stable economy. we had significant headlines from the pboc. have you put that within the general context -- we trust chinese numbers, it is getting better, but still there is a lot of intervention necessary? >> that was a great interview with david lipton. we see two transitions, a relatively easy one and a hard one. the relatively easy is they are slowly transitioning from an export led economy to a mark inception led economy. consumption led economy. that is going to be a very tricky operation. tom: i wanted to do the chart here later int h the hour on m2. these are extraordinary headlines out of china. this is my actual headline feed from the bloomberg. i can customize this. francine's looks different than mine. if you go down to headline 13, it is the headline from the chinese government and the pboc. china's pboc says lower m2 growth might become the new norm al. this is the money question. china is dealing with a new n ormal, aren't they? >> they are dealing with three, a lower level of growth overall, different drivers of growth, and now we have a third, and that is less dependency on credit. if the pboc signals that, they will follow up by making sure that actually happened. holloman ferdinand stays with us for another 30 minutes. the pressure builds for prime minister theresa may to abandon the hard brexit. she met with emmanuel macron yesterday. this is bloomberg. ♪ . ♪ tom: good morning. "bloomberg surveillance." theresa may doing better with strong sterling and a federal reserve meeting in the united states and a horrific fire in london. let's get to the first word news. >> multiple deaths reported in london in a fire that raced the rate apartment building. survivors said they heard residents screaming for help and say say -- some jumped from their apartment. the london fire commissioner says there are an unknown number of deaths. at least 50 people have been taken to hospitals and they say the fire appears to have broken out on a lower floor. in the u.s., almost 200 democratic members of congress have agreed to file a lawsuit against the president today, arguing that by retaining interest in his business empire come he is violating constitutional restriction against taking gifts and benefits from four leaders, merriment and the district of columbia have filed a similar lawsuit. a report that the president has delivered a surprising slap at the health care bill passed by republicans. toldresident allegedly republican senators the bill is mean and he wants to come up with a more generous version, it cuts the benefit for the poors. in china, the reports of economic activity holding up, the government says industrial output rose 6.5% in may from one euro ago and retail sales were up almost 11% which matched economic estimates. fixed asset management science that measures to cool off property markets are working. global news 24 hours a day, powered by more than 2600 journalist and analysts in more than 120 countries. this is bloomberg. francine: thank you. theresa may is coming under increasing pressure to abandon a hard brexit as she tries to put together a parliamentary deal to stay. minister andinance french president made clear the door is still open, if the u.k. changes its mind about leaving the eu. >> i think it would be helpful if we started speculation it would happen. respect.atter of if they wanted to change their position, they would find open doors but not very likely. francine: what does this mean for the future of brexit and given the inflationary pressures but no wage growth, what does it mean for the bank of england? we, the impact brexit has on the economy, the worry about that or regardless on what happens on brexit, the huge inflation pressure coupled with no wage growth? dr. el-erian: i worry about the latter, i worry about stagflation, the winds of that in the u.k., lower wages, more sluggish growth and inflation going up. part of that is uncertainty that falls back economic activity. there are more fundamental issue, the bank of england will have to decide what does it do in this environment. this is a complicated policy choice. they do:-they decide if not understand what the government wants? dr. el-erian: i like to think in terms of distribution. it has moved the mean of distribution towards a softer brexit but has significantly widened the possible outcomes of brexit. that is a hard environment to operate in. when you can have a range of potential outcomes. tom: i looked at brexit and i love your idea of stagflation and we will talk about that in china later. within the stagflation, the idea of wage growth going higher inflation -- and higher inflation, janet yellen, does she have to worry about united kingdom inflation or is that removed for the prime minister of the moment? dr. el-erian: that is to removed chair yellend for but she does have to worry about the puzzles that i do not think economists have a good answer for, inflation dynamics, productivity, she is struggling with these things. we do not understand the new dynamics of very important influence on monetary policy. tom: if you run a partial differential of inflation across capital, cross label, across a new technology, let's focus on the new technology, can we measure the inflation ramifications of all this digital stuff we do everyday? dr. el-erian: i do not think we can as yet and i do not think we are as yet. we do not have a good picture. i think of janet yellen and carney, and mario draghi, being pilots in an airplane trying to soft land the airplane but the instruments are not giving them proper readings. that is hard to do. they do not have the visibility enough to the runway. that is why monetary policy is getting more complicated. the u.s. is in better shape than the u.k. and europe. francine: because this is about political risk, about u.k., this morning must-read comes from the guardian and says that a tory leader needs more than anything to reconnect with mainstream british voters after tone deaf election campaign. d this field with the makes no senseup -- this deal with the dup makes no sense. where do we go from here? if you are an academic or central bank like mark carney, how you view this political mess? dr. el-erian: as complicating your handoff from monetary policy to more comprehensive economic response, which is what the u.k., europe, and the u.s. needs. the hard thing about the u.k. is what is ultimate. do you try a minority government which is higher cart -- harder? not a first, second, third best, fourth and fifth political best which is why it will be difficult for prime minister may to please everybody. francine: what does governor carney do, stay put? we have inflation figure, it is going up and he said so. for our radio listeners, you see the inflation -- there is a white line and you can see creeping up around 3% and wage growth is going to reversal. if you are a u.k. citizen, you will feel the pinch. dr. el-erian: you are being squeezed. what the bank of england will do is look to the higher inflation and argue that it is transient and result. i am not so sure. as a result, they will do nothing. tom: going down the food chain of nations, the united kingdom struggles. they were brilliant essay on the norwegian solution, can the united kingdom affect what norway and liechtenstein do within their relationship with is the calculus of the united kingdom so original and london and the city so original that the norwegian solution is out? dr. el-erian: the spirit of the norwegian solution is a good one, which is to have a working relationship with the eu that goes beyond not having anything. think of a member light. that is important but the u.k. , if- at the end of the day there were visions and people did not worry about president, the u.k. would end up with a soft brexit because not only in its interest but the interest in the rest of the eu that for that you need people to be convinced it is not a huge precedent. tom: i want to rip up the script , i know you go to london and hang out in the samuel library and read the ancient books. ,s the london you grew up with will it change dramatically in the next five or 10 years? the city, greater london and to the universities to the north? dr. el-erian: what we are seeing in the universities is encouraging, a surgeon all --ion, mindset steve mindsets evolve. there are in hand and -- inherent advantages to london that will not be erased with a hard brexit, but if london loses the passporting right, it will be a very different london. tom: i want to address the news out of china, which directly addresses the language of mohamed el-erian looking for a new normal. the normal for us on fed is to decides which we will do a 1:00 p.m., scarlet fu leading the coverage and michael mckee in washington. yesterday, charles p.m. lleague at 2:00 this is bloomberg. ♪ ♪ francine: bloomberg surveillance with francine and tom from london and new york. news from this morning, oil down after a report and they say there are new oil surprise from opec's -- supplies from opec's rivals and the national energy agency say it will be more than enough to meet demand for the next year, the first on the forecast what will happen next year and indicate that opec may need to further extend production cuts this year if they want to keep control of the price. let's get to mohamed el-erian. defense on your interpretation but what they are saying is that the demand is staying put but a surplus coming from non-opec countries, has opec lost control of the market or can they regain it by more production cuts? dr. el-erian: they have not lost control but being challenged by two things, one is the responsiveness of shale has been much higher than people anticipated. there continues to be more supply, even the oil settled in the $45 to $55 range, the non-attacks, if they do not deliver on their commitments, opec will face a difficult choice, do they become a swing producer and lose market share? which is what they used to do. what they did in 2014 and say they will not play that game? i do not know what i would do if i were opec. i worry a $45 level, if it breaks, opec will have to scramble to reestablish a new range. francine: what does that mean for the price of oil? let's go to the london digital radio listener, it just means, if you look at the chart which we will push out on social media. oil rigs in the u.s. are going up, this is shale. wti and brent going down, will be testing the range? dr. el-erian: this is a good graph. since the last opec agreement, the $45 to 55 of the range has helped. this fight that, the number of -- despite that, the number of rigs has been going up. if we go below $45, you may have different behaviors going on. tom: you are associated with egypt, your childhood in egypt and your father and the diplomacy of the nation and i sure you have observe the events in saudi arabia and qatar, many arab world, you told me that for years. what is the state of our many arab world, given the challenges they face in qatar? dr. el-erian: it is a fragile state. i would not thought it possible that we saw such pressure within the gcc. now we see and incredible pressures within the gulf cooperation council. that is a reflection of much greater pressures that are facing the arab world as a whole. you are starting to see fragmentation. tom: what do you need to see from the president? what does he need to do with the gcc? dr. el-erian: he needs to bring them around the table and have a discussion to try for an orderly resolution that is a win-win for people around the table. i think that is possible. it involves the president trump getting more interested in getting this done. as we said earlier, he has a lot going on right now, domestically. francine: thank you. in the meantime, if you are a bloomberg user, load up tv , you will get videos and great charts, listen to the oil discussion we just had and asked mohamed el-erian direct questions through tom and i. we will close those students shortly. this is bloomberg. ♪ ♪ >> this is bloomberg surveillance. let's get to the bloomberg business flash. got that begin at verizon's new digital unit after they completed its purchase of yahoo!'s internet property. is expected to cut about 15% of the combined staff, roughly 2100 employees. tom: thank you. sometimes the headlines come out and they get your attention. among the many headlines on china, three modest headlines on their central bank. we go to our malcolm scott in hong kong running our economic coverage for china. china, a good number. so concernedoc about the velocity of money and putting up these headlines readjusting to a new normal? >> there is a window to do it. ,hat is one of the key reasons the economy is going well, factories are reflecting and the property market are in the sweet spot. onyou will not hold back leverage now, you will never do it and they recognize the need to do it and that is what they are doing. in some of these shadow banking elements, things the imf have been warning about for a long time. tom: the shadows of china, when i look at pboc, i am assuming they are not an independent body , does the government know the shadow system of china's financial structure? are becoming increasingly aware an increasingly vocal that there is a need to curb it, the breakdown of the credit numbers which show there are about a trillion yuan flowing in the economy, not shabby, the breakdown is where the action is, a bill -- big pullback in shadow banking elements which show it is not all talk in china, the authorities have been raising because of money market rates and trying to push the cost of doing shadow banking higher. that seems to be putting a break on some of these elements. francine: we have the broadest measure of new credit, slowed in may which means policymakers have been doing a lot to contain excessive borrowing. will they continue to do so and with what appetite? be having theo appetite to putting more pain in the financial system. the bond market is showing in the stockle market related to the push to contain leverage with the real question being what happens if the real economy starts to slow which has not happened. retail sales were strong. if the real economy starts to may, maybe the central bank come in and relieve some of the pressure. for now, they seem to be doing a twofold measure, keeping the real economy humming and putting the brakes on some of the financial risks that have been swelling. dr. el-erian: i agree with you that they have an economic window to do this. what is your level of confidence they understand enough the shadow banking system to avoid tipping points, they can deliver an orderly delivered -- deleveraging of the shadow banking system? >> i am a mere financial journalists, i do not have to make these predictions, unlike yourself. the consists is seems to be, in the near term, this is what the imf recognized in their outlook today, the near-term risks have abated. the mid to long-term rates you will have to ask economist like yourself to predict. tom: you dodge that nicely and you get to return, greatly appreciated in the evening of hong kong, he runs all of our economics other bloomberg news in china. mohamed el-erian with us in london. i went to the chart on china. for those on radio worldwide, it is a interesting chart of over a decade of relative stability, financial crisis, mohamed el-erian the big ball over, two standard deviations of m2 slowness, basic economics. china is not basic. what is the new normal given the lack of velocity of money? dr. el-erian: the new normal is to depend on more genuine engines of growth. part of that chart is what happened to the financial system. it is changing which is part of the evolution of china. the important message of this, if you want one summary, is that china is continuing to soft land. that will reduce a lot of lori that china -- worry that china would drive the global economy down, every policy announcement speaks to a soft landing at an orderly soft landing of the chinese economy. tom: what is the state of their making system? what is the state of their commercial banking system? dr. el-erian: systemic risk is much lower than the nonbanks. particularly, the shadow banking. martin was right to focus on that area. it is the one they dollar question, can they deliver 8 -- d lever a shot of making system. -- shadow banking system. it is a complex sociopolitical landscape. francine: is there a worry that the markets do not truly understand the risks in china? they see opportunity and assume the policymakers have a handle on this. what if they don't? dr. el-erian: i think they do on average, they tend to overreact, but on average the market has bought into the soft landing and that is what the authorities are delivering. it does not mean there are no tail risks, there are. the evidence of far is that the economy is set to soft land at this new normal, growth rates. francine: do we not realize the risks at the end of this year when we get to congress out of the way? dr. el-erian: this is something that has to be evaluated on a high-frequency basis. given what we know now, i would not see that as a major risk to the global economy. why marcus worried is because the spillover effects of the global economy and i do not think china is a risks to the global economy right now. tom: how will their currency adjust? what would you expect from renminbi as the pressure cooker teakettle? dr. el-erian: i expect them to allow it to slowly weaken again. tom: we believe that as a short answer, we need an essay from bloomberg view from mohamed el-erian on the renminbi outcomes of all this in china. this has been wonderful, thanks to malcolm scott in china for his perspective. in the next hour on the fed, jonathan. this is bloomberg. ♪ ♪ tom: this afternoon, look for forward guidance from chair yellen and this morning we consider wage growth, a lack of inflation, we consider the path to july 26 and september 20. it was a test the attorney o jeff sessions showed up to speak to the senate intelligence committee. republican supported and , aocrats sparked outrage senator from california cannot get a word in. prime minister may consider's too hard and not to soft brexit. this is "bloomberg surveillance." from new york, i am tom keene. i tried to write the script and it went down in flames with jeff sessions. it was terrible. francine,ow was -- how is jeff sessions playing in london? francine: there is so much going on in europe politics, i doubt any politician in the u.k. will look stateside for entertainment. a are looking at their home market and say what do the tour is -- tory party need to do. distracted is the most diplomatic way of putting it. tom: someone from scotland publishing a letter to the prime minister. betweenever seen a gap london and washington like we have right now. let's get to the first word news. difficult news. >> in london, multiple deaths reported in a fire that raced through a 24 story apartment building with survivors who escaped say that heard resident screaming for help and say some jumped from their apartments. more than 200 firefighters on scene and the london fire commissioner says there are a number of unknown depths. at least 50 people have been taken to hospitals and witnesses say the fire appeared to have started on one of the lower floors. in china, a new report shows economic activity is holding up, the government says the industrial output growth rose 6% in may -- 6.5% in may from a year ago and retail sales were up almost 11% which matched economic predictions. back in the u.s., almost 200 democratic members of congress have agreed to file a lawsuit against president trump, they will argue that by beginning interest in his global business empire, he is filing constitutional restrictions against taking gifts and benefits from foreign leaders. maryland and the district of columbia have filed a similar lawsuit. a report that the president has delivered a surprise slap at the health care bill passed by house republicans, according to the associated press the president will republican senators of the bill is mean and he wants them to come up with a version more generous. the house bill cuts medicaid programs for the poor and limit services insurers must cover. global news 24 hours a day, powered by more than 2600 journalist and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you. and chris, bonds, currencies, commodities, a day, coverage at 1:00 p.m. this afternoon. 83.98, for theg, flattening on a higher two-year yield," and as we grind towards a flatter yield curve. next screenplays. the mexican peso is the surprise of the foreign exchange market with elevated equities, peso stronger, 18.05. francine: i am looking at european stocks, extending winning streaks. i am looking at dollar because of the fed. overall, the dollar weakening for a third day and treasuries rising. pound is under pressure because there is inflation increase but wages are not following. you have brexit negotiations, hard or soft? u.k. politics in limbo. tom: amazing, thank you so much. up, onesessions showed addressed by republicans and one addresd by democrats. here is the jeff sessions that took the headlines. suggestion i: the participated in collusion and i was aware of any collusion with the russian government to hurt this country, which i have ,erved with honor for 35 years or to undermine the integrity of the democratic process, it is an appalling and adjustable lie. relatedly, there is the assertion that i did not answer senator franken's questions honestly at my confirmation hearing. that is false. tom: there is the attorney general and the former senator from alabama. our chief washington correspondent joining us. was there senatorial deference? was he a senator from alabama at any moment or was this original testimony? points,rtain particularly when talking to more senior members of the committee, you saw the senator jeff sessions, someone a member of the club as it is referred to inside the beltway. someone with decades of experience within the senate but then with exchanges with newer lawmakers like senator kamala harris, you saw more tense back-and-forth. he was defiant and came out swinging, eager to push back. he got questions, not invoking executive produced -- privileged but saying he wanted to keep conversations between he and the president private. tom: the distinction between our cabinet officers, secretary tillerson, general mathis, removed from the politics of the campaign while jeff sessions was out front with the president. he was a loyal supporter of the president. what is their relationship this wednesday morning? >> he was one of the first, use -- when it was pressure for the campaign, get president trump get anyone from congress to endorse him and jeff session was caught in the middle with ted cruz and donald trump, all advocating to try to get his endorsement and he ultimately went with trump. stephen miller is originally from working with senator sessions. their relationship now is better. in the sense that, after he recused himself from the pressure probe, they had a freezing over but sources i talked to close to the attorney general say all of that was a bit overplayed and they are on good graces. francine: talk to me about tax reform. not as straightforward as initially thought. >> not at all, the devils are in the details. last week, house freedom caucus members led by mark meadows, a republican, the ultraconservative wing of the republican party announced their set of principles, trying to new -- try to usen's negotiations of how to pay for a tax plan a are against the border adjustment tax and not enough votes in the house or senate in the border tax. whether it has to be revenue neutral, freedom caucus members do not think that is the case, welfare, food stamps, the entitlement wrote grams, they are -- programs, they will be negotiating strategy for freedom caucus members. i can tell you begin bitcoins -- the gerry:'s at the white -- there are many experts on the president of the united states. worldwide and coast-to-coast, a cottage industry. no one was out front on the study of donald trump the citizen and donald trump the to be president than timothy o'brien of bloomberg view and bloomberg gadfly, his work at the new york times is legendary and he joined us a few years ago to build bloomberg view. the morning to must-read and bring it to me, the most interesting got in washington. this is on the attorney that few know, mark caso it's represented donald trump when you president in 2006 and o'brien the attorney claimed the new york times had published an article about comey-trump conversations and the attorney was wrong, the times first article about the conversations appeared on may 16, four days after trump. give us the big picture on the president's attorney. ,> he is like many, a pitbull often they do not end up in court. donald trump has retained him to intimidate people and there is a large circle of people like that in the president's business life and now in his political life. tom: is his real life after the process of being the bowl, does he sit down with donald trump and say you have to settle and will that happen in this administration? >> i do not think he is a guy who comes in first and says you have to settle, he says you have to fight. when we litigated with him, he had no experience in libel law and i have good attorneys, and they cleaned his clock in court. onrepresented the president the trump university case and they lost badly. he is now representing him in the midst of a big congressional investigation around subjects he does not have a lot of experience with. francine: go ahead. issue is whether he is up to speed where he can be a good advocate for the president when he has no experience in this realm. francine: who does he listen to two move forward -- move forward? the president? >> the issue now is the president needs to be strategically disciplined, intellectually disciplined, emotionally dump the -- discipline, he needs to build a strong team and he has not had that during this demonstration. it's all right with her reform, health care bill, and now mired in the russian investigation which will only be addressed head-on with good counsel. francine: he has people considered heavyweights in his administration. is the concern that he is sidetracked because of these memos leaked on the testimony or he does not listen to the people around him? >> he does not listen to those around him and will always default to jared kushner and his daughter. he has heavyweights like rex tillerson at jim mattis. there is no clear evidence he listens to them on a regular basis. that is the issue. if you build a strong team, you have to listen to them and he does not have a completely strong team and he does not listen to them. tom: what is the significance the first lady and their son moving to washington, he seems alone in washington. will there be a shift because of the family moving to washington? >> i am the shore, i do not think he likes washington, he likes florida. -- i am not sure, i do not think he likes washington, he likes florida. i do not think you will see him spending more time in washington. tom: has he invited you to play golf? >> no. tom: an important discussion on the travel ban coming up here a fed special coming up this afternoon, an interesting fed meeting driven forward by the press conference and forward guidance and we are thrilled to bring you michael mckee and his ability on the fed with scarlet fu leading the coverage at 1:00 p.m.. worldwide, stay with us, this is bloomberg. ♪ francine: terrible pictures from london. for our radio listening -- listeners, still pictures of a high-rise apartment in north kensington in central london. we know people have died in the fire that raced through since early this morning around 1:00 a.m. the london fire commissioner has updated everyone and we understand there are six fatalities with at least 50 people sent to hospitals. we are seeing flames shot from windows all the way up the side of this 24 story tower in north kensington. there were about 200 firefighters at some point on the scene battling the blaze. they are distressing pictures. the smoke could be seen from several miles away. tom: give us perspective on where this skyscraper is within london. if you are aine: tourist, you know it as notting hill. the london fire brigade received first report of a fire around 12:54 a.m. london time. there were high-rises with huge high-rises next to it and one of the concerns this morning was the stability of the structure. so far it seems under control but terrible. people were trapped and when we came and there were people trapped on the higher floors because the fire brigade could not get their. have aylor riggs will report, structural issues with the skyscraper. that coverage this afternoon -- fed coverage this afternoon, a boring meeting, michael mckee will give us wisdom and special guest throughout the afternoon. jonathan golub is with rbc capital markets and he joins us to move this forward within the languages of the market. -- linkage of the market, can you link skyhigh prices to the accommodative actions of chair yellen? >> the consensus narrative is that the fed is propping up assets which is driving this, not the economy or profits. i do not think that is the case, profits are the big driver and the second thing is, if there is no recession on the horizon, markets rise and that is what is happening. the two-year yield is out. we wanted to dazzle you with our map. slope matters and there is a condition to to rate increases ago, here is a rate increase and here is another, is this escape philosophy for the chair, the president's, the governors,? >> there are two contradictory things going on. have run backdrop, we out of extra people to put into labor markets, that should be concerning the fed that inflation is around the corner. on the other hand, not showing up yet and the fed does not know what it needs to address. at the very moment, this quiet time where the inflation pressures have moved back into a lull and it takes the pressure off the fed to be hawkish. , you sawyou showed inflation expectations jumping and a lot of concern. francine: talk about financial conditions. let me bring you tight oomberg terminal, my favorite bloomberg today,or radio listeners, it shows vertical lines looking at when the fed hiked and clear by looking at the chart that financial conditions tightened after the first hike of the cycle to be expected but the two subsequent rate hikes have led to looser conditions. how do they address this? level of look at the interest rates and compare that to the general economy or the level of inflation, rates are simply way below where they should be here i think everyone expected them to move forward. saying 6%,k fed is 7% chance of recession in the s veryear with global pmi' strong. the fed has to move rates higher, the question is at what pace. tom: we will continue this discussion on bloomberg television and bloomberg radio. we will come back with tim o'brien and address judicial matters of this administration. jonathan golub will give us financial and equity perspective throughout the hour. 1:00 p.m. this afternoon, scarlet fu leading coverage, the fed decides. on the professor tom carnegie million. this is bloomberg. ♪ tom: "bloomberg surveillance." francine in london and tom keene in new york. the professor from harvard law, here he is on the update of the night circuit approaches high risk when the president is acting under the authority given to him by congress, executive power is at its maximum under president derived from the legendary robert jackson's opinion in 1952, youngstown sheet and tube. that is diminution you get into -- the minutia you get to the where are we on the travel ban and do you assume it will be fought in the courts and the president will lose? >> the president intends to take it to the supreme court and it depends on what his advisors tell him to do. he has himself into trouble like tweeting about this because it shaded how the courts looked at this. they saw him as crafting this in a discriminatory way against a large class of potential immigrants. tom: here is the tweet. ninth circuit did it again. jackson, this is the controversy over the supreme court as he tried to pack the court in the late 1930's. within that is the new supreme court, do you suggest that will be the battle of this demonstration? be ado not know if it will battle, he will have a large leeway appointing people throughout the entire judiciary, not just the supreme court. always an available avenue to a president to influence public dialogue and the shape of the courts. no question he will have an impact on the courts. a lot of it will not be a battle. tom: what is the thing that intrigues you most about our economics, finance, investment, politics? >> china always looms large. interesting in the last couple of weeks now that china is back, sentiment running around. issue and hown the president positions himself on trade issues. he has been very aggressive on the campaign trail. as an public appearances anti-trader but when push comes to shove on things like nafta, he is pulling his claws back. tom: thank you. we will continue with jonathan golub and look at the fed. weing up, jonathan golub, look at the challenges of brexit, immediate news, scotland has spoken. a difficult election, missed version has written a letter to prime minister may and we will review that with simon kennedy here on brexit and on scotland. we will do that with simon kennedy. this is bloomberg. ♪ francine: this is the fire in north kensington, in central london. a certain number of people have died in this massive fire in this high-rise apartment. it is in west london and we understand six people have died and at least 50 people sent to the hospital. we will get more news as we get pictures, notg only for local residents for london as a whole. with a little bit more on this fire, here is taylor riggs. u.s.,: we will go to the two hundred democratic members of congress have agreed to file a lawsuit against president trump. they will argue that by retaining an interest in his hisal business empire come violent constitutional restrictions against taking gifts and benefit from foreign leaders. maryland and the district of columbia have filed similar lawsuits. a report that president trump has delivered a surprising slap at the health care bill passed by house republicans. according to the associated press come he told republican senators the bill is mean and he wants them to come up with a version more generous. the house bill cuts medicaid for the poor and limit services insurers must cover. global news 24 hours a day, powered by more than 2600 journalist and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. .rancine: thank you the u.k. prime minister is coming under pressure to abandon a hard brexit as she tries to put together a parliamentary deal to stabilize her minority government. the president of france and the german finance minister both made clear that the door is still open, if the u.k. changed its mind about leaving the eu. >> i think it would not be helpful if they started speculation. it is a matter of respect. it a wanted to change their decision, of course, they would find open doors, but i do not think it is very likely. francine: joining us is simon kennedy, our brexit editor, are we looking at a brexit at all, soft brexit, hard brexit? >> mohamed el-erian put it best, the range of risks have grown with soft on one hand and car crash brexit on one hand and no brexit on the other and in the middle, a softer brexit. brexit is still on the way. -- opposition labor party you add the votes for the tory party and labor party, 40% committed to brexit. before the election, 70% of people in april were saying they voted for brexit or they wanted to get on with the job. still a feeling in the country as a whole that brexit is merited and to reverse that would require another referendum and election and we are a long way from that. how stable is the government of theresa may? we have brought out lights -- outlines with a deal that may be delayed. >> it may be delayed another day , she is more stable since the meeting on monday for she spoke to lawmakers and said i am responsible for this mess and i will clean it up. have ars do not seem to desire to hold another elections anytime soon and maybe she gets challenged on the leadership front over the summer. that is more likely than another election. or now, a bit more stability than there was in the wake of an election and there will be talks next week. francine: talks on june 19? >> on that week, no date set. francine: when do we find out when the government -- what the government wants? do they tell the cabinet and the position -- people of the u.k. their position? letter,ve a article 50 the manifesto, the government ran on a manifesto of pulling out of the single market and regaining control of immigration. these are up for grabs. this will be a long negotiation. more likely we will get less a negotiatedd more a position that develops over time. she has to be careful, theresa may, she tried to escape this dilemma but is stuck in this vice. on one hand pro-europeans and on the other side, pre-brexit people and she has to navigate her way through that. before leading towards the brexit people and now momentum with europeans. tom: thomas penny, under your guidance, just wrote up a missile coming in from edinburgh , sturgeon writing a letter to prime minister may, what is the scottish prime minister after their defeat? takeaway is the independence referendum in scotland is now less likely to more conservatives winning in scotland. the message from those to put brexit aside, they are worried about the scottish referendum and the vote for the tory party nicola sturgeon, is almost as much as a defeated candidate as theresa may was. her vision for an independent scotland took a push back in the election. tom: thank you and thank you for leaving our coverage on brexit over what is becoming the last year. coming up, conversation with kim of new york university since school of business on regular and on the festivities at the building this afternoon. from london and new york, this is bloomberg. stay with us. ♪ ♪ >> this is "bloomberg surveillance." and thesey for uber, follicle workplace culture. someone has resigned for the board and apologized for making an a is -- and it's visible sexist remark during a meeting intended to address gender bias. earlier, the uber ceo said he would take a leave of absence the job cuts against they at verizon's newly digital unit after they completed its purchase of yahoo!'s internet property, the unit called and the ceo expected to cut 15% of the staff, roughly 2100 employees. the treasury is pushing to roll back some of the dodd-frank regulations on the financial industry. steven mnuchin said he was to ease the regulatory burden on smaller banks. >> if you look at the u.s. banking system, 50% of the assets are held in the top. about 12,000 other banks. we want to make sure we unlock the burdensome regulation on the other banks so that they can make sure they are lending in their communities to small and medium-sized businesses. >> he also said the consumer financial protection bureau needs oversight, just as the fed and fdic said. the episode airs tonight at 6:00 and 10:00 in new york on bloomberg. tom: thank you. jonathan golub is with us of rbc capital. now the truly eclectic guy in economics, kim schoenholtz, out of round and you -- brown and ya le, now with new york university. we turn our attention to regulation. people would not expect you to write a treaties on revelation rather talk about monetary theory what you do in your money and banking text. why are you looking at regulation? kim: great question. it is the big thing, seven years of dodd-frank and a love people think they want to make changes. the house just passed a financial choice act last week that would roll back many aspects of dodd-frank the that is what we wrote about, the house version. on monday, the treasury came out with a plan for changing the financial structure. it looks a lot like the financial choice act. tom: what does jamie dimon want, the old thing, nostalgic and go way back, i doubt it? does he want original dodd-frank? saidthe biggest thing he he wants is to reduce the amount of equity financing that big banks are required to use. that would be a big mistake from the point of view of the united states. we need the largest and most complex interconnected banks to have a lot of equity financing. there is a buffer for us in case there is a problem in the system. kim: we have a piece -- francine: we have a piece saying his financial reform is all right because you can have a theory but putting it into place may mean it could be a big step backwards. ? do you agree? kim: there are positive aspects to the choice act and the treasury proposal. it makes a lot of sense to reduce regulatory burden on most banks, which are rather small and have very little threat to the financial system. unfortunately, both the choice act and the treasury's proposals also appeared to reduce the capital needs for the largest and most interconnected, most opaque banks, the ones that can threaten the system. the choice act suggests that if we simply stop designating systemic intermediaries, they would no longer be systemic. that ignores history. we have seen investment banks failed in 2007 and 2008 without dodd-frank or systemic intermediaries destination. we need a system that protects us against these big players. >> we talk about a rollback on these regulations, how much does this matter for probability of the big banks and how much does it matter for the availability of credit in the economy, gdp, how do we measure the benefits of this rather than it being a regulatory discussion? much lessat question, evidence about how to do that today with we should have for that discussion. we do know that there are compliance costs associated with dodd-frank, especially for small and medium-sized banks that can be very burdensome. the smallest institutions in particular. one more compliance officer can matter. for the big banks, not the story. thatthe republican mantra regulation is bad, is there evidence that regulation reduces gdp? a good study that shows the republicans are right? kim: in general, can regulation reduce gdp, the answer is yes. if you think about occupational licensing or zoning in urban cities, these are things that prevent us from shifting resources to higher value added use. there is much less evidence that the kind of financial regulation we have seen in the last two years would limit gdp. individual stocks but what are your thoughts on kim schoenholtz 's thoughts on evil banks? comments mnuchin's about how we want to release the smaller banks because they lent to the little guy but there is something different about the big banks. you talked about the difference in the burden. the banking sector is important to a vibrant economy. loans need to get made in a frictionless way. tom: you didn't answer my question, should i belong to big to fail banks? of course, if you believe the economy is rolling forward, you want to be in the banking sector. francine: talk to me about stress tests. if we talk about regulation. easing lending rules for community banks and focusing on special supervision's for the two big to fail. ist is existing regulation weakening too much, especially the stress test? kim: great question, if you have small and medium-sized banks adequately capitalized with , youh equity financing could easily reduce the level of regulatory oversight. that is not true in my judgment for the largest and most interconnected and most opaque banks feared in that case, the idea of an offramp, if these banks show enough equity finance , they could be allowed to have less regulatory screening, that would be a serious mistake. it would invite gaming of the system and greater risk-taking and the kinds of problems we saw in 2007 and 2009. tom: kim schoenholtz will come back on the fed meeting. is this beach reading for the summer? it is not, but if you are part of global wall street and global banking, this is the read of the moment, regulating wall street, a great set of academics on where we are going. how about tv for traders on wall street, this is great and you can scroll on the right side , take a chart, click on it and bring up the lowly pop chart and steal it. habit is that? -- how good is that? ♪ ♪ up, bloombergng daybreak: americas with david westin and jonathan ferro. i know it will be a packed show, focusing on the fed but what is your favorite? >> it is the day, we had the at standishist mellon but the big issue is what happens after this. not much suspense about what happens today the question is what happens after this? what will the fed tell us? tom: i look at the federal reserve and the mystery of it and the boredom, and the way we drive forward. are you focused on interest rate dynamics or the balance sheet question? >> we will touch on the balance sheet and when they will announce what they will do with the balance sheet and start implementing it? i am also interested in the conundrum about inflation, where has it gone in the united states and in europe? a problem for central bankers who want to get back to normal and the inflation numbers seem to be softening. tom: look for that on "daybreak." we go to washington to begin fed coverage, we have michael mckee with his decades of looking at the fed. we are focused less so one june and much more on the end of the year. what is a question you need to ask in the press conference this afternoon? >> everybody wants to know the question david just asked, what happened to inflation? we get a move higher today, debate into the cake, it sounds like a cliché, we will ask what they say about the rest of the year more than what do they do. what do they tell us about the economic outlook, given the soft patch we have been in and what is their forecast for unemployment going forward, since we are below where they thought we would be the last time they made projections in 2019. and what do they do about inflation? where do they think it is going now that it has dropped? it leads us to your favorite chart, where do the dots go? what is the forecast? do they stick with one more rate rise this year and three next year or move the wall street consensus on one rate move next year? tom: how far apart are the market and the fed? >> a long way apart and low -- wall street is not listening to what is going on. when you look at financial conditions, they are looser now than they were in december when the fed raised rates and in march when they raised rates. what does that mean for the overall economy? that the fed is not having an effect and not really tightening , and do they need to move faster? tom: very good, thank you so much. for ourus at 1:00 p.m. coverage today, looking forward to that. let me do a single best chart, a great way to get to kim schoenholtz and jonathan golub. to mohamed el-erian for mentioning stagflation. this used to be up to 5% plus and over the last decade it has been down. 3.4%. mohamed el-erian with a lesser inflation, worried about a stagflation, what is that to you? >> something we do not have right now. an increase in pressure on inflation while the economy is slowing which we are not seeing. we are seeing weakness in inflation. the fed is pretty much on course to continue where they are going . francine: this chart is what michael mckee was talking about, financial conditions, given the fact that they heigh -- hiked twice, how many times do they need to hike this year? a balancing act. >> great question. i do not see the fed changing its predictive path today because they havetwo offsetting of the -- because they have two offsetting effects, the unemployment rate has come down and inflation has come down, you have added the financial conditions have improved. when you consider those three , mylopments, all in all guess is the fed will not change its outlook very much. you will get new data. you will probably learn about their plans for the balance sheet and learn a little more than you may have learned in the past. my guess is that they will make their balance sheet aouncements probably in september but i caot rule out it will be postponed until december. >> something else going on. with a simultaneous discussion of fed rate hike and balance this tightening, you have strange story where, i am not sure what it means in terms of is one more move in september and a move on the balance sheet in december, is that equivalent to two moves, what do the dots mean in that environment and how much of an economic impact is one have versus the other? we have heard this several times, i think the fed is in a quandary with virtually no fair labor, the an employment rate is at rock-bottom levels and you are not getting wage numbers you would expect. if i were a fed official, i would say the inflation eventually has to show up and when you do not have spare labor capacity. they probably will be more dovish in that backdrop. francine: i have the dots. if you had one question to janet yellen, what would it be? >> how do you think about the dots and a world you will user balance sheet, how do they combine those so that the market understands what your path is? tom: i saw vice-chairman fisher get really aggressive at a speech at the economic club of new york over the concept of ultra accommodative, are we still over accommodative? >> we are gradually withdrawing the accommodative but with -- >> way off a chart ultra accommodative. even with that short you have were nominal gdp is superlow, we should have a much higher funds rate. tom: i want to get you in trouble. >> should be in the low twos. given where the economy is. a damage to the banking system that hurt lending. tom: talk about what it does the retirees and savers. thank you both. this is most interesting and we -- there is the foreign exchange report, strong mexican peso this morning. this is bloomberg. ♪ ♪ it is decision day for the federal reserve. janet yellen and company are expected to shake off the softer data and deliver another rate hike. a series of testimony, steve mnuchin indicate that more relief does not have to wait for congress. theresa may will collaborate with rival parties to shape brexit. good morning, good morning. welcome to "bloomberg daybreak." alongsidehan ferro david westin. alix steel is off today. futures are firmer this morning on the s&p 100 -- s&p 500. the tech sector continuing to deliver well. this is what is coming up today, at a: 30 a.m. eastern time, we get some important

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