francine: the global rally fades. china stocks drop the most since february. european shares opened lower. donald trump and hillary clinton continuing a victory to tighten their grip on the party nomination. the bank of england governor says leaving the eu -- we have an interview with his intercessor -- with his predecessor. ♪ francine: welcome to the pulse live from bloomberg's european
headquarters. we have a great show lined up. we speak to baltimore -- former bank of england governor, mervyn king about his book. ceo of theo the new volkswagen about the progress of his turnaround plan. let's look at the markets. we have a lot going on. a little bit of a global rally in the last couple of days now it is fading. you can see the stock share of 600. the shanghai composite, it was lower by 4%. now retracing some of its losses. away .93 --- one 108.93. let's get to bloomberg first word news with nejra cehic. nejra: donald trump has reasserted his status as republican front-runner after a
big win in the new york state primary. he built and that she built a business and put he built a business empire there. -- he built a business empire there. hillary clinton was expected to do well in new york having been twice elected as senator. expecty of london should its preeminent role in the global financial system to fade if britain leaves the european union, so says the governor of the bank of england, mark carney. he said that membership of the and leading the eu -- leaving the eu would diminish that. japan's forty-year bond yield has fallen to a low. yields less than 0.4%. negative phrase have pushed investors into longer dated that. -- longer dated debt.
kuroda doesn't think that easing has reached its limit. -- after evidence of an acceleration growth -- by private economists. it takes chinese companies in record 192 days to collect payment for goods or services. that is up from 125 days five years ago. the weight in payment increases the increase that increases the risk that businesses will not be able to pay their debt. increases the risk that businesses will not able to pay their debt. the fbi dropped the claim against apple over the cell phone used by one of the san bernardino shooters. apple also revealed that china has asked for access to encryption but it was denied.
global news, 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world. you can find more stores on the bloomberg at top . francine. francine: nejra cehic there. the biggest inlets in the history of the world. that is how my next guest response to the response to the global financial crisis. the bank of england governor for 10 years and -- 10 years. mervyn king describes the economic results. -- the economic results as a dismal. we are pleased to welcome lord king. thank you for coming in. francine. thank you it is great to be here. francine: it is amazing when you look back at what happens between 2008. it seems we are in the middle of the next central-bank --
fromking: someone coming -- central banks, governments have said the answer is monetary policy. it is not generating significant recovery is the reason is we are not facing the normal business cycle conditions. we are facing a need to restructure many large economies . the world economy is a major disequilibrium. the chance to do something about it. monetary policy is not the answer. danger?: is there a banks, thecentral governments do not use to put in place the right measures here it we are putting off -- right measures. we are putting off the things we need to do. francine: what is wrong with the business cycle? lord king: it is the basis -- the basic intellectual
framework. central-bank selected use the word headwinds a great deal. if you give enough monetary policy stimulus and are patient enough, the headwinds will abate of their own accord. they will not because we are facing a major disequilibrium. countries need to spend less and save more. countries like china and germany need to spend more domestically and export less. francine: what is the endgame in this? central-bank going to continue to do too much? are central banks at some point saying i cannot focus on inflation. i cannot bring inflation up so i am going to abandon the fight. lord king: did you banks need to argue much more forcibly and they are doing. i think central banks need to
argue more forcibly and they are doing -- more forcibly then they are doing. since a banks have become like a cyclist cycling up a hill that is becoming steeper. i have to pedal faster and faster. this is likely not to work. at some point, it is impossible to judge where governments will exhibit the audacity of pessimism. they will come to realize the outlook is sufficiently pessimistic, and they will summon up the courage to do the more difficult things that are necessary to do to get us back on track. francine: that is looking at recession? lord king: we'll see further crises and that. debt.ses in i think you can see in china
some the state thrown at the crisis, defaulting on their loans. this is going to become more common. the strength of the dollar is making life more difficult for them. crises.see further debt that will feed back to the financial sectors in some countries at least. francine: you make a good point in the book talking about central banks. you hear from governor kuroda. he tells you very clearly the marketswould've left much worse had he not gone into negative territory. lord king: service bond it and no to spohn economic growth. if you're in disequilibrium, monetary policy cannot be the answer. it can only by time. is if you allow yourself to be painted into the corner then you let other people off the hook of doing the
measures they need to. francine: we will talk about the productivity puzzle. lord mervyn king, former governor of the bank of england. he stays with us. stocks.lls off it down the most in two months. we hear from the boe governor, mark carney. he says brexit would be the beginning of the end. more cause for concern. we speak to the spanish ceo and less than an hour. in the last five minutes we got breaking news from mitsubishi. they are doing a news conference the- admitting manipulating fuel economy test data. we will have plenty more on the car a emissions scandal. -- karim emissions scandal.
nejra: in the last few minutes, mitsubishi motors admitted to manipulating fuel economy test data. it issued 225,000 cars across for models. shares closed more than 50% lower, their biggest drop since july 24 -- 2004. analyst sales that top -- topped analyst predictions. analyst estimated 1.6 5 billion euros. there are signs of progress and yahoos a turnaround plan. first go to sales beast -- beat estimates topping expectations by 1.5%. -- -- he led the policy response
if the central banks were to stop using wood the world and not crumble? lord king: central-bank could not jump to raising central -- raising interest rates quickly. central banks are taking further easing murder josh easing matter -- easing measures. you get a short-term recovery for a few months, then the future becomes the present. you dug a hole in the demand. you have to do more easing to try and keep economic growth going. there is a limited time before diminishing the incentive to invest it monetary policy cannot be the answer. it can buy time -- invest. monetary policy cannot be the answer. it can buy time. ckle thel gness
this equilibrium is what is holding it back. francine: we are at a funny time talking about courage. it could be really cross-border. is there a danger that governments are shy of putting reform because there's a sense the world is far more unequal than it was four years ago? surprisingit is not because the centrist parties have failed to produce a recovery and grapple with the underlying seriousness of the situation. i think the anger which did not really come forth quickly after the crisis but gradually built up, which is something we foresaw and predicted. i think it is not surprising that we characterize as more extreme.
this will carry on until it governments summon up the courage to do something serious to rectify this this equilibrium. -- this disequilibrium. francine: have you modeled the effects?eled the cautious: we should be of what the conferences should be. -- i amough to remember old enough to remember the referendum written in 1975. one thing they were wrong about is it would make a genetic difference. it did not. we should not exaggerate the impact either of staying in or leaving. i do worry that proponents on both sides treating this as a public relations campaign, rather than a debate about the future of our country. or are inclined to exaggerate
because they are filling a position. what is more important is that we have a reflective debate about the role of britain in europe. that is what it is about and our relationship with the content -- with the continent that we have struggled with for years. to theot be reduced level of a cost level benefit analysis. again they are exaggerating. europe faces to existential threats. one is the euro area where the problems are so fundamental. the second is the migration crisis. neither of these are easy to predict what will happen. they are outside of the control of individual governments. these are the big threats to europe. british membership is not an accidental threat to the european union -- is not an existential threat to the european union.
there are big problems facing europe, but british membership is not the biggest risk or threat to europe as a whole. francine: i know you talk about the risks and the downside risks to the world economy. you believe we will see a crisis . is it soon? lord king: i think it is impossible to say. what is revealing a bunch of questions is that eight years ago, when we were sitting in washington agreeing among the g7 countries that we would engage in unprecedented measures to expand money, to ease monetary policy and fiscal policy, that eight years on no one around that table ever imagined we would be in the situation that we are today where we are saying we cannot get a rapid world recovery, despite the loss of output in 2008 and despite the
biggest monetary policy stemless the world is ever seen. -- policy stimulus the world is ever seen it -- ever seen. francine: what are the underlying causes? china had a large debt crisis. it is a most impossible to bring it up. i know we should not worry about it too much. we were talking about the emerging markets not being there. there are so many things that we need to sort out. lord king: once a look at the underlying development in the world economy in the last 30 form has been a persistent and long-term interest rates -- form in long-term interest rates . i do not see how a market economy can easily function when real interest rates fall 20 -- fall to zero. the market does not expect these to get back to normal.
this is a message that this is a most extraordinary position where -- this is a most extraordinary position we are in. germany, they want to make a successful monetary union. they want to join in with countries that have not adjusted to the anti-inflationary discipline. to countries like the u.s. and u.k. who are determined to maintain growth who cut their own term -- the own interest rates. no one country designed this outcome but the failure to cooperate and realize the consequences of this would lead to a situation with very low interest rates, this is the basics of the problem. francine: china would never be a part of it. lord king: what we need is agreement which would recognize we need some kind of agreement
about the timetable along which we need to take our own measures to rebalance our economy. it is very hard for us to be confident that we should take measures to rebalance our economy unless we are sure other countries are going to do the same. 2010, we try to rebalance our economy but the weakness in the euro area made that project one that did not proceed. we do need to see countries recognize the less they do their bit, for other countries it becomes more difficult. francine: china needs to consume more. lord king: china needs to switch from exports to domestic consumption. -- they have not progressed and shifted resources from one sector to another. we have not made as much progress as we would've done and
shifting resources from domestic spending to exports because of the weakness in the rest of the world. it is very difficult to get out of this. some sort of cooperation will be needed. part of that is the recognition that the worst thing we can do now would be try to fix exchange rates. i fear we are on a path where people are hemming themselves in on restricting the flex ability of the exchange rate. the worst road to go down. francine: can we chest china's authority -- can we trust handle thehority to economy? sameking: they face the problems that politicians do in the west. if they close down sectors of the economy, they lose a jobs. where will the jobs be created elsewhere? i cannot tell them which firms will grow and expand. they have to be prepared to take
some risks. the need for restructuring of our economists and short-term political risks as a result is one of the main expeditions of why so little has been done so far. francine: i have to ask when you step down of the board. what is the future of the company? lord king: it has a terrific future. i hope the sale will proceed speedily. i think the fans have a loyalty which is quite remarkable. they deserve much better than what they have seen in recent years. francine: was it a tough decision to step down? lord king: a very difficult one. it is been a big part of my life. -- letter ofask resignation expense wife stepped down. we very much hope that the events will be back on track to
where it should be. it is one of the great clubs of this country. europe, we will get back there after a period. francine: lord king, think you so much for a great conversation. that was lord mervyn king. think you so much for coming in today. -- thank you so much for coming in today. as much as 4.5% during the session. enda, where hoping for -- we were hoping for pboc would announce more easing. last summer,a [indiscernible] it is hard to put a finger on particular reason. traders are going to say it is
only one thing. from thecommentary chinese last night saying you look at central-bank edging away from further easing so to speak. it was followed up from the research bureau who had similar remarks. the urgency to cut rates may not be there as it has been, that is because the backdrop has been stabilization narrative in china. some picking up on the pmi front. of course that extra ordinary credit surge we saw in the first quarter that really drove gdp. the net result is the economy is stabilizing. it doesn't seem to be in crisis mode. none of those structural problems have gone away in china either. francine: enda curran from hong kong. we are seeing live pictures from me to be she. they have admitted -- from
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x1 makes it easy to find what you love. call or go online and switch to x1. only with xfinity. francine: welcome to "the gulf," pulse," live from london. we are getting breaking news -- u.k. wage growth. going up as expected. probably the most important is u.k. wage growth, including bonuses, is flowing to 1.8%. we have estimated a figure of 2.3%. remember, we are concerned about inflation; this feeds through, and this is the picture. chiefe our london bureau
and will get us figures in a couple minutes, but first, let's get to the first word news with nejra cehic. nejra: thanks. donald trump has reasserted his status as republican front-runner after a big win in the new york state primary. he built his business empire and has been urging his supporters to vote, saying his main opponent, ted cruz, doesn't like new york or new yorkers. hillary clinton scored an equally big win over bernie sanders. she was expected to do well. meanwhile, u.k. justice said ary michael gobe vote to leave the eu would spark a reaction that would force the 28 nations to change beyond recognition. >> this is your. brain voting to leave would be something else. the democratic liberation of a whole continent. if we were to leave, we will have, in the words of a former british prime minister, --
nejra: japan's 40 year bond yields have fallen to a record low, meeting on japanese sovereigns no deal less than 0.4%. negative rates have pushed investors to think positively over longer dated debt. the boj governor haruhiko kuroda says he doesn't think positive and qualitative easing have reached the limits. global news, 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. you can find more stories on the bloomberg at top . francine: thank you so much. european markets are lower this morning. lets head straight to the bloomberg with mark barton for your asset check. mark: let's just have a little peek at the sterling against its major peers in light of the latest unemployment data. unemployment rising for the first time in seven months, suggesting that the labor market is crawling. average earnings, excluding bonuses, are in in line with earlier month figures.
was below the previous months adbul-malik abu assessment. these currencies arising against the pound; a few currencies falling against it. that's today, and to put it all in perspective how this year has been, concerns about the upcoming referendum are listing on all these currencies, all 16, against the pound. this is a nice chart. this is the stoxx 600. it shows us how it has broken out of a holding pattern. this pattern here for march 14 came down 5% after that. it rose from there and broke through yesterday. that's important. we are coming down today but still above that holding pattern we had been stuck in. that isnings today; what's dominating today's
session. the biggest maker of power grids saw first-quarter profits drop less than estimated, which is throwing emerging markets like china and weaker demand from the oil and gas industry weighing on the company. heineken shares were higher, not as high as they were. 1%, reporting bureau shipments that rose more than analyst estimates, led by growth in asia, led by growth in the americas. it also reiterated guidance that it anticipates stronger sales and profit growth this year despite a slowdown in some emerging markets, where it generates nearly tw2/3 of its earnings. francine: nice chart. thank you. this is the chart of the hour. ahead of our guest of the hour. this is the picture of the s&p 600 and europe.
we want to show you because we are seeing losses. the global rally is faltering a touch, but what this shows you is that the rally in european shares is gathering a little bit of steam. nce rangen in this bala from the beginning of march, and we are breaking through that. even if we are sliding today we have broken it. an interesting chart of the hour. let's get more on the u.k. unemployment figures with our london bureau chief, and our chief economic correspondent. great to have you. you have some great pieces out. i urge all of our viewers to go on bloomberg.com or the terminal to check it out. we talked a lot about negative rates and inflation. this goes back to wage growth. wage growth in this country is going nowhere. >> it is, and that is the take away from this morning, that the unemployment rate is pretty little, around 5%. that's where it was precrisis.
wage growth hasn't kicked in. neither sides or around and for a moment, this gives them an economic rais reason. francine: because in a break that and the referendum, the boe can't really do anything. >> it can't. it's on the sidelines. there is some talk that they may want to cut rates at some point. they have tooment, be on the sidelines and not looking to raise rates, and they are pretty unanimous. francine: the bank of england has a tricky. they have the result of june 24, like the rest of us, and they can either go to ways. the economy isn't going to badly, so they could raise rates quite quickly if brexit doesn't happen. >> if brexit doesn't happen, you start to see this reassessment, where he takes his huge hurdle away, in the talk is that you
start talking about november. you get through the summer and that the economy is still doing well, if the scent of wage growth is going back, then they will raise rates toward the end of the year. time, howat the same much should a look at external factors? how much with a look at china. in the last three or four weeks, janet yellen verbally eased by talking down or talking of the risk she sees outside the world. 're sowing the seeds of the next crisis. >> we have a very internationally minded bank of england, mark carney running that, there are others on with ford experience or background, and they think a lot about the world economy and how britain fits in. when you look at the start of the year and what's happening in the u.s., of course they are going to say, no, we have
nothing to do with the fed. it suggests that they do, but in reality, if the fed is not hiking, the bank of england has another reason not to. francine: how should we look at brexit in the world economy context? we have the imf and christine lagarde saying this is one of the three top risks to the world economy. then again used the former governor of the bank of england, and he says they are overestimating it. >> kind of has that lehman -esque quality. you don't quite know what will happen. some say it is exaggerated with thenigration crisis, but britain has always had financial linkages throughout the world economy. the eu sets a precedent and we have party seen the politics picking up in the populist movement. if britain leaves, it could be similar with greece.
someone can leave, what does that mean? suddenly you start to see others breaking away. then it becomes a confidence issue. ultimately markets are driven by confidence, and a exit might have very little economic effect, but the animal spirit will be the easiest thing to point to. francine: your very good at looking at the animal spirit in world growth. what are the animal spirits telling us about negative rates? is there a wave that is countered by the governor kuroda saying that they not only not work but they are detrimental to the world economy? >> i think that has been the big surprise. when they were looking at scandinavia, at switzerland, there wasn't much fallout. the economics are questionable but i didn't have that downside. than the ecb goes deeper, it goes back to japan, and suddenly
everyone is talking about what the central banks are doing. they don't want that reputation; they don't want their credibility questioned. they don't want to be seen as a detriment to growth when they are trying to work in the other direction. a story on the terminal today, talking about how ceos both at the banks and elsewhere are increasingly talking about the downsides, and you are starting to see that. there is notsaying an imminent push below zero. certainly there is a reassessment going on. francine: thank you so much. great to have you on the program. check out his piece on bloomberg.com called "the world in a subzero growth rate." up next, mitsubishi. you are seeing pictures from the news conference, just a minute to manipulating fuel economy tests. shares are down quite significantly, down the most in a decade.
improve fuel economy claims. the affected models includes -- the two companies are discussing compensation and mitsubishi is checking whether it is being affected by overseas models. earlier, shares closed more than 15% lower, the biggest drop since july, 2004. europe's largest semiconductor quitman maker, asml, has forecast sales that top protections as they ramp up in new machinery. the dutch company sees second-quarter revenue of about 1.7 billion euros. analysts had estimated 1.6 5 billion. asml shares are among the biggest gainers on the european stocks 50. there are signs of progress in yahoos turnaround plan; sales beat estimates, topping expectations by 1.5%. the investors are turning their focus on the sale process. people familiar with the matter
wererivate equity firms among the first round of bidders for the company's core internet business. answer bloomberg business flash. francine: thank you. mitsubishi motors has admitted to manipulating test data in order to improve fuel economy claims. shares of the carmaker have dropped some 15% today. for more, let's bring in our cars editor, greg trudeau. workd this and in relation -- this manipulation work? >> as we have learned from the volkswagen scandal, a lot of fuel economy testing doesn't take place on the road; it takes place in the lab. mitsubishie, what has admitted to doing was using improper running resistance values. tos is a figure that you use assume how much resistance is generated by tires out on the road in the real world.
if you assume less resistance, you therefore increase your fuel economy data, and that is what mitsubishi motors has admitted to doing today. francine: how has nissan wrapped up in this? >> right. this involves four models of minicars here in japan; two are badged as mitsubishi, the other our nissan. nissan in mitsubishi were working on the next generation of those models, and nissan came across this discrepancy, went to mitsubishi and suggested they look into this. mitsubishi did its own investigation and reported this issue to japan's transport ministry. this involves more nissan models than mitsubishi, but mitsubishi is saying it will take full responsibility for this issue, because it developed and did all the production of these vehicles. it's really just an arrangement
where nissan takes the mitsubishi car and puts its badge on it. francine: the share price is down 50%. are there parallels with the vw scandal? >> certainly with just the way this transpired, it was an issue lab,al-world versus in the so it really raises questions. there has been increasing pressure about making real-world testing more of a part of how we evaluate the fuel economy of models, so certainly this is only going to add to that conversation. that has more parallels to do and hyundai and kia ford, who did some similar things with improper testing of their cars and claiming higher fuel ratings than they did. another parallel is the idea consumer, you went out and bought a car thinking it
was going to be more economical than it actually is in reality, it in volkswagen's case, was the fact that these cars were going to be green when in fact the emissions are much higher than what they would have liked you to believe. francine: craig, thank you so much. volkswagen says it does not believe the u.s. trial will be necessary of its emissions testing scandal, as the company prepares to update a judge on the proposed fix for polluting vehicles. last week, there european market share hit five-year lows; this morning, i'm please to welcome the ceo of one of vw's major brands. thanks for coming in. we were lucky today because we were going to talk to you about some of these figures and your forecast, and then mitsubishi happened. what was your first thought? every time there is a scandal like this, does it bring you back to euro brand, and the fact
that people will be hesitated buying your cars? >> i think this is very fresh news and i don't know the details, and i'm in charge of sales, so if i go back to that situation, the first thing we started to do is cooperate with with wherehorities we have the majority of our models in order to find the right condition to start the service campaign, which we started a couple weeks ago to six the issue with the customer. obviously our task is to make sure we need to be for the customer -- without cost, that's what we are doing, in the organization this week is one of the service campaigns we did. francine: of course. it affected 700,000 of your cars, right? so how are the recalls going?
his of progressing is expected? >> yes. it will take some months, an we d we are treating it in a very structural way. it's a fantastic opportunity to show the best face of the brand, that we care about customers. we'll fix it. francine: talk to me about sales. there were strong sales figures thanks to the newly unlocked -- what are you expecting? >> the european market is growing for the first couple months, which is good news. after many years of people coming back to replace their cars, of course, we are taking -- we're pretty optimistic, because in the next 18 months we will probably have the deepest product offensive. we'll enterred --
in june the suv market, which is the booming segment. we're pretty optimistic that this turnaround and this success story will continue and will accelerate. francine: so you are expecting a profit this year? last year you had a profit of many years of losses. >> our ideas to keep above the zero line; obviously after eight years we talk about numbers, and it's just the first step, but it is a first that. francine: what about margins? >> of course margins aren't improving . we have seen a phase of consolidation after many years of recovery or emergency credit stopping in 2013, with production in the biggest european segment, which is the compact. we include all the transaction price of our cars, but the suv
call for a bigger premium price. i think our product brand will, in a way, serve the idea -- francine: thank you so much for coming in. the ceo. and of you come back to the city a very soon. breaking news -- this is bank, saying its slow first quarter means it will beat up to reach the 2015 profit target. this is important is because we have had a lot of the u.s. banks reporting; the biggest at last one to report yesterday was goldman sachs. it said it had to implement more cost cuts because of the slow trading environment. commerzbank saying that the slope first quarter means it will be tougher to reach its 2015 profit target. it had forecast a slight increase from what it saw last year. 2.4%, inbank down 2%,
frankfurt trading. it said it is expecting a slow start to the year because it is considerably more challenging conditions. we will be following commerzbank closely. onto a little bit of politics -- barack obama opened his presidency by calling for a new beginning with the middle east. seven years later, as he arrives in saudi arabia, the region has undeniably changed, them not as he wanted. let's speak to hans nichols. hans, what can president obama offered to the saudis, given that he is out in six months? hans: well, he can offer them support on syria, saying he will redouble his efforts. at the same time, he will offer them honesty. listen to how he talked about the problem in the challenges in syria ahead of his visit. >> i think there is no doubt that there are many in the middle east to a preferred me taking a shot at assad. the reason is not because of some abstract notions of relevance.
the reason is because they v iew assad as a client state of iran. their view was, it continues to be, to some extent, that what we veryd be doing is being a clear military arm of an an ti-iran or anti-assad middle east strategy. look, iran's an adversary of hey go after any u.s. assets, if they are threatening us in any way, we will go after them and they know that. assad is a horrible leader. horrible dictator, who has shattered his country. it continues to be our position that we need to get him out of there. hans: francine, the interesting part of the answer is his bellicose language, or prepared to be bellicose, on iran.
he is leading in saudi arabia later today, a country in transition, dealing with a whole host of transitions. how obama navigate that at the start of his trip is going to be a challenging leg. francine: we also have a new york primaries. i'm interested because i'm always smarter when i hear your thoughts. what's your main take away? trump?now clinton/ hans: no, it is becoming increasingly difficult to see how bernie sanders gets across. trump did better than expected, but it's still difficult for him, and it still looks like the most probable outcome is a contested convention. we'll see it come down to really a delegate count, which is going to be nasty and bloody and leave the republican party divided. the question on the democratic side is how quickly can hillary clinton, if she is the nominee,
how quickly can she unify her party? and not how quickly, but how convincingly. yesterday, she directly addressed bernie sanders supporters. i suspect they will come into the fold; the question is will the enthusiasm be there, not just for the election, but the enthusiasm for an agenda if she does become president. where is the real driving force going to come from, if it is indeed another democrat? what is going to drive that person, and what are the voters in the coalition going to look like? those of the conversations we will start having this summer. francine: hans, thank you so much. hans nichols. full interview of president obama airs tonight at 7:00 p.m. new york time, 10:00 p.m. in london. everyone should check it out.
francine: the global rally. china stocks dropped the most since february as the pboc signals a reduced appetite for monetary easing. european shares of the lower. donald trump and hillary clinton win clear victories in new york and tighten their grip on the party nomination. and obama rides to saudi arabia, where he will meet with the king. oil and security are top of the agenda. we will speak to a former advisor to the saudi government. this is "surveillance." tom, we have a lot of market movement. wa