tv Bloomberg Surveillance Bloomberg April 27, 2016 5:00am-7:01am EDT
decision day for the fed at brexit looms. has janet yellen been taken hostage by global concerns? is optimistic. investors are not impressed. trump and clinton score big. the front runners extend their leads in the white house race. this is bloomberg "surveillance." with michael mckee new york. it is another busy day. concerns.exit better having an impact on currency. the fed and tomorrow's boj. mike: the boj mise tonight in
japan. by the time we come in tomorrow, we will have to central-banks. we are going to celebrate with a double dose of central-bank-itis. francine: let's get to first word news. vonnie: a big night for donald trump and hillary clinton, both scored dominating wins in the northeast and presidential primaries. ve states,all fi pennsylvania, connecticut, maryland, delaware and rhode island. he widened his lead over ted cruz and john kasich. trump calls himself the presumptive nominee and took aim at the democratic front runner. mr. trump: i think the only card she has is a woman's card and she has got nothing else going. frankly, if hillary clinton were a man, i do not think she would get 5% of the vote. the only thing she has got going is the women's card and the beautiful thing is women do not like her. and look how well i did with women tonight. clinton returned fire
after winning four of the five states. mrs. clinton: mr. trump accused me of playing the "women card." if fighting for women's health care and paid family leave and equal pay is playing the woman's card, then deal me in! clinton's victories put her within reach of the nomination, bernie sanders won in rhode island. but he is showing no signs he is ready to give up. spain'sfirst time in democratic history, the parliament has failed to select a new prime minister. lipe has called for elections. after a third round, the king concluded that no party has enough support to win the ball. the latest solution to a power shortage. two day work week. the president says the public sector will work only on mondays and tuesdays for the next two
weeks. a threatened power generation at the dam, the main source of electricity for caracas. mike: people are probably thinking maybe we could be spain and failed to elect a president. vonnie: it is europe-itis across the continent. mike: too early to be trading the central banks, but we have disappointing earnings. you look at s&p futures. they are lower. we have some reaction in the bond markets. the potential of the fed doing nothing with the 10-year yield. the euro gets stronger. look at oil. higherinues to creep towards $50. the dollar index is lower today ahead of the fed. once again we see some flattening in the u.s. yield curve. no real problem for emerging markets seen today but look at the australian dollar. inflation gone there. a negative print on inflation
for the first quarter, fran. and the australian dollar is -- bankssn't about central meeting today. it is about the australian central-bank meeting next week. everybody thinks they are going to cut rates. you tickedi love that up australia because i had it in my chart but i did not have enough space. that is one thing we are watching. european stocks -- a little bit volatile because they changed in front of your eyes. banks lower a touch. barclays, that net income was down but when it was in line with estimates. better thans -- expected. i want to show you the pound, actually because it is unchanged at 1.4583. but we did have u.k. economy losing pace. services are slowing and manufacturing is shrinking in the u.k. mike: when you are talking central banks, you're talking about currencies. the currency markets as far as the dollar and the yen have gone
through the looking glass. let's take a look at this chart on my bloomberg. you see where the fed raised interest rates and the bank of japan went to negative interest rates and look what happened. the dollar should get stronger but the dollar is going down. the bank of japan goes to negative interest rates, the yen should get stronger. it is getting weaker, going the opposite way, it is getting stronger and stronger. what do you do today when the fed and the bank of japan make their decisions? francine: buy gold. [chuckles] that is what a lot of investors are saying. buy gold. we do not know what the endgame of that is. this is what i picked out. now, this is european bank earnings. in white is the eurostoxx put and call ratio. in blue the europe stocks 50. banks in white.
it shows the number of bearish contracts on the bake index has halved since january. what it means is it kind of -- means a better earning season for banks from now. but let's get back to everything that is really combined. a bit of bank earnings. the fact they are being punished by rates. our guest host is a senior currency strategist. jane, as always, great to have you on the program. welcome to "surveillance." there is a lot of central-bank action. the fed, the boj later. what are we hearing from janet yellen? is she going to be more hawkish than we have heard? jane: the markets position is for a dovish fed. 21% chance of a june interest-rate meeting at today's meeting is about what clues we
are going to get for june. i would say on a risk-reward, it is better to position yourself for hawkish. because the chances of a hawkish surprise a bigger because the markets are so dovish. gain, -- again, yellen could carry on arguing we have got downside risk. perhaps they have gone away little bit. asset prices are in a better mood than they were at this time of the year. we do still have concerns about whether or not the global low ay is gorowing at too pace for the fed to hide. i still would say there is some indications probably coming that june is still very much alive meeting. for me, i would rather be long dollars that short. francine: it is it is using position. you are right. there is so much dovishness in the markets. the gdp figures coming out this week. the most closely watched gdp figures. jane: if we look at apple --
we know they are still companies that are had by the strength of the dollar. we know that monetary conditions have been touched, not by a lot of fed tightening. we only had one. last year, we did see tightening economic condition because of the implied -- the strength of the dollar. we know that corporates are still trying to put that to the system. the dollar has come off its high s. there is a softer position. we have indications that expectations of inflation will begin to rise during the year. and we have seen indications of cpi in the u.s. strengthening as well. i think june is going to be a live meeting dependent on the data we have between now and then. statementgame this today, if the weaker dollar is good for the united states, what is in it for janet yellen to signal that any kind of increases on the table in june? why not just say nothing? jane: she has to be careful with their communication. if we look back to june, 2014. that is when the ecb first went negative with their discount
rate. that was a detractor in the currency wars. we had many european central banks following the ecb. we saw the market move into dollars at a rapid rate. the dollar lifting quite rapidly in the second half of 2014. what that janet yellen and the rest of the federal want to avoid as another big move into the dollar on interest rate differentials. if we look at the fed, even if they do nothing this year, they are still going to be perhaps the only, one of the only central banks in the g 10 that are not easing. on a relative basis, it is difficult to call them dovish. we've got us trillion next week got australia next week maybe cutting rate. new zealand, japan, ecb. potentially easing further. that means that on an interest rate differential, the dollar may still look attractive, even
if the fed does nothing. janet yellen will have to be very careful not to encourage the market to be too bullish on the dollar. vonnie: if we look back at michael's chart, is when the dollar started easing that the fed got into a quandary, because other currencies began to tighten. that is when the fed started talking about the rest of the world. jane: what we see reflected in that chart is a lot of positioning and a big unwind of positioning spewed i mentioned in the second half of 2014 the market went long the dollar. it went very short at the euro and the yen. a lot of those positions have been unwound. certainly if you look at data, we are back to where we were on euro and dollar. back to june, 2014. i think that leaves us in a much cleaner position to react to forthcoming data and messages from central banks. we will find out this afternoon in the united states.
i'm francine lacqua in london. michael mckee is in new york. a busy day. a very busy week. we had a lot of earnings. i spoke to the ceo of standard chartered, bill winters. the first on the record interview since he became ceo. yesterday at they unveiled revenue that dropped, but -- w ere better than expected. this is a banks skewed to
emerging markets. i asked him about china. that 6.8%much of growth is simply manufactured to realase in debt versus underlying growth, i think the majority of it is real underlying growth. most of us would be quite happy with 4% or 5% growth with no increment of increases in debt stock. especially in the second biggest economy in the world. francine: this was very measured, very thoughtful. and a thought-provoking interview from bill winters. he is expecting the macro environment to be challenging. you will be focusing on continuing to restructure the bank. in thisaying environment, it is difficult to grow revenue. that my biggest concern is the cumulative effect of extraordinary monetary stimulus time, together with an element of fiscal stimulus, that is differing from region to
region, to militant, that is building up and balances. it does feel like a rubber band that is being stretched. there is a risk of snapping. francine: we will have the whole half an hour interview a little bit later on this week. sticking with banks, we have another number of banks reporting today. for a breakdown, let's bring in michael moore. our u.k. finance team. also with us is jane foley. when you look at banks, it seems that they have not been great. it is still a challenging environment but we do not have the disastrous interviews or earnings some analysts are expecting. the outlook is not been terrible and the results while they are down from a year earlier are not the doomsday some were calling for. so there does seem to be a bit of a relief rally. we have seen both the standard chartered and barclays today. mike: the interesting result was banco santander.
you expect standard chartered and barclays to report losses but banco santander comes up a winner. michael: yeah, they did better than expected. as you mentioned, they are going through quite a bit of a change. moving more towards digital, trying to cut costs, cutting branches in spain. so significant, when you are running into the low interest rate environments these banks have been facing over the last few years, it is forcing them to make some real structural changes and you're seeing that with santander. francine: overall, when you look isbarclays, santander skewed towards emerging markets but when you look at standard chartered and credit suisse, the investment bank was not as bad as we were thinking. you saw u.s. banks
them down 20% in trading and investment banking. the european banks have done worse than the u.s., people say. we are's expecting even worse. but barclays held up reasonably well. there were some give-and-takes there, but their credit trading was up meaningfully year on year. so, they certainly did better than expected there and investors seem to b encouraged by that. emike: what are the banks basically saying about the interest rate environment therein? in the united states is certain is not helping that rates are so low. they can't get their return on equity up. michael: in europe you're facing negative rates. it introduces a lot of uncertainty and unusual circumstances for these banks. i think that is why you're seeing them be so aggressive in talking about cost-cutting, because it is the one thing they can control. whereas central banks are really driving the train on interest rates. francine: actually, jane, i
spoke to bill winters. i tried to get them to talk about currency. is this it for the dollar rally? he was hesitant to call it that. they need to be, when you see the volatility in currency and trading, this is one of the biggest risks for banks. jane: volatility can because for some traders. it might mean we get more business. if it does mean we do not see the investment in other parts of the business, that really could suffer. the negative interest rates, from an investor, from a consumer point of view, there is uncertainty about how exactly this will impact banks. the japanese when they went negative on rates in january, that did create a big impact on consumer. we did see the news that last year hundreds of danish customers were paid to have a mortgage or that sort of news does not do much good for investors taking about buying bankshares. francine: you live with the actual banks, they have so many risks coming from all sides.
michael moore, thank you. michael heads are banking coverage in the u.k. coming up in the next hour, conversation with ahead of the european stability mechanism klaus regling. guess what? we will be talking about greece. that exclusive interview coming up at 6:00 a.m. in new york and 11:00 a.m. in london. ♪
washington, d.c. after last night's primary. for donaldg night trump and hillary clinton. for dominating wins in primaries. margaret joins us on the phone pitch is headed to that he capital..c., t donald trump is less than 300 delegates shy of that magic number. did cruz and kasich team up to late? margaret: they will find out next week when we see the next major test in indiana, nxt tuesday. -- next tuesday. there is still a way to stop donald trump but it is difficult for either of them to make the case they are the natural nominee. after the sweep in the five states last night, it is increasingly difficult to suggest he does not have a massive wave of support behind him in the republican party. relieved byd to be donald trump stimulus night -- obnoxious, condescending towards women. the donald trump remake does not seem to have taken. margaret: we need more
excitement between now and november. look, he himself sort of answer to both ways when asked whether he is going to change tack. on the one hand, he suggested he may have to change the message heading into the general. on the other hand, he says why quit now? i'm winning. why change? francine: which goes to the question, is he stoppable? hillary clinton and her team like to think he would be stoppable in the general election. they are eager to run against him. but the republicans, inside the republican establishment have not quite figured out. it is increasingly difficult to keep the momentum alive for a contested convention. indiana andest in california will prove pivotable. as soon as next week we will have a much clearer indication of whether or not he's going to have the momentum to go all the way. singlehere is not a
member of the united states senate who has endorsed donald trump and only a couple of french congressman. -- fringe congressman. is or anybody in washington suggesting donald trump can unify the republican party coming out of the convention? on thet: the pressure establishment republicans to get on board the trump train from the trump guys is going to pick up. he will have help making the case based on last night. when you look at polling and general election, pulling his trouble for trump with both latino voters and women voters, the very voters he attacked in his message, the shot across the secretary clinton. there is a tremendous amount of internal disagreement. his speech on foreign policy, this will build a narrative one way or the other. very close to being a force that cannot be stopped before the convention. francine: thank you so much. you need to get some sleep. she's on the way to the airport. if you are janet yellen, how do
look at this? jane: political uncertainty is negative for currencies. if we do have trump looking like he might win in the the election, it is fair to say the dollar would be negative. that could boost inflation in the u.s. but it could have some detrimental impact on growth pitch you might be unwilling to hike interest rates. seecome november, we could a lot more volatility. tomorrow speech on foreign policy will be interesting. in theoming up later hour, we have the political campaign down the road by the fed today. rate strategy for fixed income at nomura. how the bond market trades into the decision today. ♪
x1 makes it easy to find what blows you away. call or go online and switch to x1. only with xfinity. e.t. phone home. when you find something you love, you can never get enough of it. change the way you experience tv with xfinity x1. mike: good morning. i am michael mckee in new york. vonnie quinn is here with us as well with the first word news. vonnie: it sounds like a repeat
of last year's crisis over greece. a fight over bailout terms almost was the country out of the european union. the greek prime minister will speak at a summit to resolve disagreements between his government and creditors. the problem? creditors will not agree to more bailout money until he imposes more austerity measures. found out how to hack into a dead terrorist iphone. agency officials do not want to tell apple how they did it. willirector james comey make the final decision. ae fbi -- bought tools from company has not named. senator john mccain was the air force to agree on how much it is spending to build a new b-21 bomber. the air force says disclosing the amount it will pay would give clues about the capabilities. mccain is chairman of the senate armed services committee. he plans to force the issue next month when the committee votes
on defense spending. there is nothing funny about a new comic book that came out in tokyo. it's 300 pages and tells what would happen if a catastrophic earthquake hits the japanese capital. and it begins with a warning. chance of a0% killer earthquake hitting tokyo in the next three decades. japanese officials say the "big one" could kill 23,000 people. employersployees and are worried about where they will find low skilled workers if the u.k. leaves the european union. according to report from the national institute of economic and social research. the british construction business relies on migrants from the e.u. so do the hospitality industries. dayal news 20 for hours a powered by our 2400 journalists and 150 news bureaus -- global news 24 hours a day. francine: thank you. the biggestably financial experiment of our times. i'm not talking fed. i am talking boj.
we spoke to governor kuroda. then he went to negative rates. the 40 year is the white line. the 30 year is in blue. we had a record 0.4%. 30 and40 years are now matching. the boj meets later on for more on yen and negative rates t's get to jane foley. negative rates make banks record. says we cannot look at the counterfactual he believes he can further go to the negative. is he right? jane: what he might do to ease the pain on financial institution is to allow them to have negative rates in some of their loans. we will see, of course, tonight into our morning whether or not he pushes through and does that. of course, it has had a massive psychological impact on negative rate.
the bank of japan, more so than -- even the ecb. we did see a lot of retail investors -- not beingsome models, able to get hold of -- [indiscernible] we did not see retail investors affected by the fx directly. they were concerned thata, they could see a ban of cash. if also, of course, negative interest rates impacted the balance sheets of banks, with that mean that they would get some sort of haircut? retail investors have been indirectly affected. and this is one of the stories behind negative rates. meanwhile, of course, -- they seem to have pushed away from supporting this policy. that is another interesting thing. with respect to the story in japan. francine: even if they do either
go further negative later today or whether they put more q.e., will anything really have an effect on yen? jane: one of the problems for the bank of japan when it comes to the yen, they do not have a huge amount of control and their currency. it is a safe haven currency. similar with the swiss national bank. when they went negative, we'd come off the back of a big selloff in equities. which is what pushed the yen higher. a safebuying the yen as haven. as we went into february and march, equity markets recovered. the yen remained firm. it is not selloff as you might've expected. it is difficult to know precisely why there is -- that is. they're probably a lot of reasons. it was because investors are still hedging themselves in case, it went
horribly wrong to china maybe wont to produce bad data. for whatever reason, the bank of japan to not have full control of that currency. that is a problem for them. mike: you can see that in today's single best chart. we have this. for whatever reason, japan and the yen remain a haven when things go bad. you can see how the yen. this is when the bank of japan when negative. the red circle. you can see how the yen continued to get weaker as its volatility, the orange line was going down. now, the volatility rose. the yen got stronger. now volatility going down again. and theyen getting stronger. what is going on in the world seems to drive the yen as much as what is going on at the ministry of finance for the bank of japan. jane: that is exactly right. volatility -- a safe haven appetite. one volatility is low, the yen
should be softer. one volatility is high, you see people looking for a safe haven such as the yen. this is a big problem. there are two ways for the bank of japan to try and hope the yen will we can. the first is if we have a dollar rally. that is dependent on the fed. and the other thing would be if we saw this enormous move back into risky assets. and while we have seen a recovery in risk appetite after the selloff earlier in the year, there are still a lot of investors out there still concerned that we could see bad news perhaps in china. bad news from e.u. havef course, we still very slow global growth, which, of course, is still confining to some degree risk appetite. require suggest that maybe the best thing for the bank of japan and the fed and the ecb is to do nothing. he says everybody is becoming japanese, not because of economic conditions but they are all using the same solutions. and every time they cut rates, it means they are going to have
to cut rates again. is what we're going to see this week a big mistake? jane: of course what we have noticed over the last couple years is a lot more of the side effects, some of the extraordinary monetary policies we have. talk aboute, we can negative interest rates and impacts on banks balance sheets. we talk about how that has affected the consumer behavior. negative interest rates for consumers, although we have not had that yet, you could say it is supposed to mean investors save less and spend more. to some savers, they reckon they have to save more to get to the same pension. so, there are side effects for, from these policies. also, of course, you can talk about income inequality rather from the fact that negative interest rates are extorted policy have sped up the price of assets. such as equities. lots of side effects. the central bankers know that all of these policies are flawed. yet they are cornered into this
position where they feel they have to keep on doing them. mike: jane, we will continue to follow the bank of japan overnight. the fed this afternoon and see if they take mr. mcguire's advice. we will let you know a 2:00 this afternoon with a special coverage starting at 1:00 p.m. in new york and 6:00 p.m. in london. the fed decides here on bloomberg television. ♪
good morning, new york. look at that sunrise. just coming up over the horizon as everybody gets ready to work and watch their trading screens and see what the fed does today. i'm michael mckee in new york. francine lacqua in london. and vonnie quinn is here now with first word news. mr. regling: thanks. universal pictures parent
comcast is in talks to buy green works -- dreamworks animation. dreamworks is the make of "kung fu panda." if there is a deal, comcast could merge dreamworks with universal. of twitter took a dive in premarket trading. the company forecast second-quarter revenue that fell short of estimates. twitter added more users than expected. the major brand advertisers did not spend as much is expected. year growth streak has come to an end. in iphone sales. apple predicts sales will decline again in the current quarter. shares are falling in premarket trading. apple is down 20% in the last year. and that is the bloomberg business flash. francine: let's get more on apple with jeremy caan a senior writer for bloomberg's technology team. still with us is jane foley.
when you look at apple, how much of it is that investors are expecting too much or how much shares afteroff in hours is the fact that there is a significant slowdown in iphone sales? jeremy: there is a zynga can slow down in iphone sales. it is the first time they have reported year on year declines -- there is a significant slowdown in iphone sales. selling them at an average price point or more people are opting for the cheaper version rather than the newest, most expensive version. that is bad news for apple. all of the smartphone companies are dealing with a slowdown in the market. the smartphone market is not growing the way it was before. francine: at the same time, tim cook was trying to be optimistic. are investors just not believing because they are expecting it to be significantly lower? jeremy: tim cook is trying to play this is a temporary slowdown. i think a lot of people are looking at it and saying it
might be a secular slowdown. that is the concern. i think that is why people are punishing apple shares. mike: tim cook also suggested at this point it is not apple's fault because people bought too many iphones in previous quarters. how is that going to play with investors? their comps do get easier as they go forward into the year. jeremy: they have just warned that the next quarter is going to be a tough one. eventually, yes, if you adjust expectations enough the comparisons will start to look easier. they had a very strong year last year. there is some truth to what tim cook is saying, but i think investors are nervous about the overall macro economic environment and the picture for smartphone growth. for: let me just note here the record that west texas media, the u.s. benchmark it, is over $45 now. $45.03. crude up to 47. apple uses petroleum. francine: i have a chart up.
you're right. 45, we have not hit it since november. you can see we have been talking to a lot of ceo's. it seems that a sweet spot for twi for a lot of the producers --for wti is 50. we are in a range, as soon as it hits 50 shale producers come back online. i'm not sure if it will go above this line of 45. this is technical analysis but this is what we seem to understand. mike: i want to go back to apple. one of the more interesting things tim cook seem to suggest yesterday as a company that famously wants to build from the ground up might be considering acquisitions. jeremy: that's right. they may go out and start acquiring. i think the market is looking at that possibility. tim cook alluded to that fact yesterday. this will be a big change. this is a company that has built its own products, build its own systems. designed its own components. if they go out and start
acquiring, that will be a shift. vonnie: and just on the iphone, again, the next iteration of the iphone, so far we have not hurt it will have -- heard it will have anything -- does apple need to come up with something between now and then? jeremy: they do not have another product in the pipeline for immediate launch and then a couple quarters. so, people are looking that and saying, what are they going to do to drive growth in this company? that is one of the concerns weighing on the stock. some people are looking at their other blue sky projects, the car project that has been talked about a lot that apple never confirmed. maybe that is something that could come along. but that is pretty far out there. i think we are looking at drivers of growth being phone sales and phone sales are not very strong. mr. regling: what about -- vonnie: what about services revenue? even music streaming . can apple put a push into that
side of things and make a difference? jeremy: it makes a difference at the margin. they can,'s eight -- they can compensate for lost growth and services. they are making a big push. but it is mostly about the phones. they are not getting the increase in the average price of the phones they are selling. and those two things combined are going to continue to weigh on the company going forward. a hugee: this is company. it sits on a lot of cash. there is a read across into productivity but a good barometer of how much technology we are using. and therefore, how much we are growing. phones, there is an element of saturation to people are happy with the technology they have got. really the market, that is very interesting is china. i pick up on these results, that chinese growth was weak. again, this perhaps gives us some clues as to how china is growing.
but also to the markets for goods such as apple in china. how much competition is there to home grown technology. jeremy: china growth was down 22 6%. wascook tried to say that due to hong kong and fewer people making trips to hong kong. i do not know. i think analysts are skeptical. i think they are worried about the china picture. francine: thank you so much. jane foley stays with us. we will talk about central-bank action next. coming up in the next hour, a conversation with the head of the european stability mechanism. he is klaus regling. we don't speak to him very often. we will talk greece. that is in 10 minutes from now. ♪
we have had a lot of earnings. bp that they can vanish their cash flow at 50. the new swing producer is no longer saudi arabia. it's definitely shale produces in the u.s. mike: did you hear that sharing coming from north of the border? is canadian -- jane foley still with us. now we are joined by george goncalves, head of u.s. rate strategy for fixed income. george, obviously, the fed is a major deal for the short-term. if they are not going to do anything today in the bond market. what role has energy and oil floyd, and does the fact that we are seeing this kind of rebound change any fundamentals for you? george: i'm sure the fed is going to be pleased to see oil above 40. not under 40 as it was in q one.
i do not think it is going to sway their opinions today. be interesting to see how they characterize how inflation is moving towards their targets. oil playing a key role there, obviously. i think it is more a function of if oil can maintain the momentum it has had. will it carry into quarter two. francine: one of the great theowns is why are markets correlated so much with oil? is now the end of that? oilge: in general, plays a huge role in capital flows and understanding what it means for inflation, as we just went over. i think the central bank around the world watch this closely. and i think to break the correlation down completely, you see oil continue to rise in equity markets continue to do their own thing. i think we are still correlated
to the movement in oil. mike: one of the big problems with the correlation starting in january as everybody thought the le producers were going to go bankrupt and that would drag down the entire sector. are we pass that? it is too early to call them. a couple years ago, there was nice momentum in oil. the technicals look good. at a moments notice we can turn around. it is impressive how oil has climbed -- everyone was concerned about it. 50ould like to see oil above before we can say a lot of these credit concerns are behind us. francine: how do you look at this? wti over 45. brent above 47. are we feeling better about the world economy? jane: maybe that is the reason but i think in europe there is a huge amount of relief for this. the reason for that is because it means that inflation can go
up -- the reason why that is so important is because we are worried in europe, the ecb, worried about the second effects from low-inflation. that means if inflation stays long for a -- low for a long time it fx expectations and that affects wage costs. then we get into a situation where japan has been. it has taken 25 years to try and break out of the cycle. the hope is higher oil will impact inflation expectations, bring wage inflation and hopefully put us back into a much more normal type of economy. that is why it should be celebrated in europe. vonnie: why else does the fed really care what oil does? george: it is a big part of the u.s. economy now. there are large sections of the u.s. economy that have been suffering. you can argue that the manufacturing recession we have had has come as a result of
lower oil prices and less production of pipelines. and the midwest got hit pretty hard. i think the fed is looking at oil is not just in inflation measure but prove the u.s. economy is opening up a gun. -- opening up again. you need to see oil maintain about 50.you need to believe that this oil impulse were to trigger further inflation pressures, but i'm not there yet. mike: that is the question here. where are we with inflation? you have got australia, the australian dollar falling because they have no inflation yet. jane: this is interesting in australia. the market has become optimistic hast, the domestic market become optimistic about the economy. if you look at labor market data it looks pretty good. if you dig deeper into that australian labor market data, you see very weak wage growth. some of that is because they lost a lot of high paid mining jobs. what low wage growth means is
that there will be low levels of growth demand in the economy and basically i think that was already the case for interest rates cut there. mike: we going to talk interest rates in our next hour. george goncalves is going to stay with us. we will also speak with mickey levy from baron burke securities. he's not real wild about additional stemless from the fed. "loomberg "surveillance. continues. streaming on your tablet, your phone, and bloomberg.com. ♪
has janet yellen in taken hostage by global concerns? the iphone maker forecast another fall in revenue this quarter. and the front runners extend their lead in the white house race. this is "bloomberg surveillance ." francie likewise in london. michael mckee is in new york for tom keene. 47, wti hitting 45. "if this continues" is the phrase everybody is using this morning. impact onve an afla inflation numbers. we have the fed meeting today, the bank of japan overnight. you have the bank of australia meeting next week. everybody things because commodity prices are down and they had no inflation down the first quarter, they will cut rates.
but what if they look ahead to commodity prices rising? francine: we know shale producers in the u.s. can just switch on the tap, so we just wonder if it sticks above this level and does not go much further than 48 or 49. here is vonnie quinn. vonnie: and big night for donald trump and hillary clinton, both with dominating wins in the northeastern presidential primaries. .rump won all five states he widened his lead in the delegate race over ted cruz and john kasich. he calls himself the presumptive nominee and took aim at the democratic front runner. donald trump: i think the only card she has is the woman's card. she has nothing else going. frankly, if hillary clinton were a man, i do not think she would get 5% of the vote. the only thing she has going is the woman's card, and the beautiful thing is women do not like her, ok? look how well i did with women
tonight. hillary clinton: mr. trump accused me of playing the "woman card." if fighting for women's health care and paying family leave and he will pay is playing the woman card, then deal me in! vonnie: clinton's degrees put her close to the nomination. bernie sanders won just one state, rhode island. he shows no signs of giving up. democratic parliament of spain has not elected a new leader. none has the force to win a vote, according to the king. apple's growth streak has come to an end. fell 30%.rter sales
it is predicted it will decline again in the third quarter. apple is down almost 20% in the last two years. global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus i am vonnieorld, quinn. michael: we have some breaking earnings news from hilton. maybe this is good news for people watching business investment. helton comes in on the strong side. earnings per share of $.17 -- hilton comes in on the strong side. earnings per share of $.17. here is where we are in the markets this morning as we get ready for the fed decision, 2 p.m. wall street time this afternoon. we see equities training -- equities trading lower. same story with the 10-year note yield. it is down two basis points. the euro stronger on the day, and we have mentioned oil rising.
it is right around 45 right now. when you are talking about central banks, you are talking about currencies and we are keeping our eye on the dollar. we are also keeping an eye on the yen. they are going in opposite directions. the euro is stronger. look at what is happening with the australian dialer -- the australian dollar area everybody selling out of the show you and dollar. there is the thought they may cut rates next week. francine: i am going to be quick looking at the pound. in economy losing momentum the first quarter, then overall these shares are practically unchanged. european equities fluctuating. we had a lot of earnings following barclays gaining. michael: we are focused on central banks and the -- we're still was george can call this -- george goncalves. this is another fed meeting where we say nevermind but they
do, watch what they say. you are telling us earlier that this is one of the trickiest statements janet yellen has faced. george: think about it. we are heading into the june meeting and we still have our house view as it most likely height. up for thatting hike in june, we have to get more prepared for that. at probabilities are still the very bottom of the range of recent levels, and for them to convince us they will hike in june, they have to deliver a hawkish message. but at the same time what we have heard from yellen is that they want to be behind the curve , take time to understand the global factors and how it impacts the u.s. economy. it will be a tough two-step dance,nd they will try to deliver a message that keeps hikes on the table without sounding too hawkish. michael: you say they want to be
behind the curve. inflation,ers hate and that means they hate a central bank behind the curve. are they risking their credibility here? want to seethey sustainability in all these metrics. they want to see oil higher, inflation turn higher. once that happens and we have a outlook -- growth michael: vigilantes keep the guns in their holsters for the moment? george: they have been going at it for many years. the fed being behind the curve is trying to ensure their credibility is maintained. we heard that from yellen a couple of weeks ago when she spoke in new york. their loss of credibility to the deflation downside is worse than fighting inflation. thatine: one of the points jane foley was making is that if you are going into the fm -- if you are going into the fomc meeting, you would likely take a hawkish position.
even his janet yellen is a little bit more hawkish, we could see a big swing and markets. is that a fair assessment? george: that is fair. that is a great point. we think they are trying to keep it on the table for better, for worse. within the markets are going to react to that. we have been seeing rates rise higher for the last week and a half. that is reflection of the markets getting ready for the fed. think really this double-header of the fed, followed by the boj, the fed needs to deliver a message that they are not terribly worried about the outlook. improving financial conditions, oil up 20%. we have a metric that looks better now. the key is, will we see those things continue before we feel confident about raising rates. francine:'s janet yellen being held hostage by world growth, or actually is she worried about
dollars? is a currency wars? george: i do not think she is being held hostage, she has jumped on board. we are driven by other forces, not just u.s. fundamentals. going into the december meeting, the fed was being too myopic, only focusing on domestic factors, and they lost sight of the global factors that were going into q1. they had to take time to turn the needle and go into being more hawkish. they will do that in the coming weeks. --nie: does the fed like does the fed have a wish for the yield curve? george: not too fat, not too steep. they realized by hiking rates they will flatten the curve in the process. the gradual, slow pace that they have signaled, they put the dots last time in march down, and it
will be hard to drop that further. we give them a lot of credit for that. the market was more skeptical after they did that, and he took out all hikes for this year. they would like to see a parallel shift higher in rates with a little bit of a steepening, to keep the banks making money. at some point as we look forward, if inflation is sticky, the curve will probably flatten. francine: many to find that sweet spot. george goncalves, thank you so much. for now, stay with bloomberg or all the news from the fed. special coverage starts at 1:00 p.m. in new york, 6:00 p.m. in london. coming up next, the conversation with the head of the european mechanism. will greece leave the e.u. mechanism? ♪
francine: i am frenzy and likewise in london. michael mckee is in new york, in for tom keene -- i am francine lacqua in london. michael mckee is in new york, in for tom keene. to e.u. has achieved a lot adjust to the nobel prize-winning economist who told us yesterday that the eurozone has been a dismal failure. nichols, with klaus regling. hans: behind me, you see the brandenburg gate, the four horses known as the quad riga. the esm is the fourth force. when we told that's when we talk about the old troika, it is now the quite riga. you look at where the esm is now, what has it accomplished and what more does it need to do? klaus: we have come a long way.
we have provided loans to five countries that have lost market access. if the esm had not been created five years ago, some of these countries probably would have been forced to leave the area. that is a big achievement. hans: you are keeping everyone together, low interest rates. sometimes it seems the different institutions do not have the same economic forecast. the ifn -- the ims is on one page. who is right on the forecast? klaus: that is impossible to say. we will know in two years. the forecast has a high degree of uncertainty, even forecasts for this year, what happens at the end of the year. it becomes more uncertain as we go over time. we need to come to an agreement by 2018, so a two-year period. not surprising that there are different forecasts, so i would not say one is right and the other is wrong.
the greeks have to live with it. that is why the idea came up to suggest contingency measures, in greece, which would kick in only if the more pessimistic forecast of the imf were to materialize, if the more optimistic forecasts of the european commission, which i support as correct, then the contingency measures are not needed. it is innovative, it is a possibility, and nobody should claim he or she really knows which forecast is right. hans: will the imf ultimately stay part of the greek bailout? klaus: i think we have to live that fact that it could happen. different forecasts over a two-year period. i am confident that the imf will join the program. we started last september and we have already dispersed one 286ter of the program, up
billion. it is up and running. the imf is fully aware of what is going on, and i hopefully can join, and the fact that they have a different forecasts, a different assessment of the situation, we can find ways to bridge that. hans: what more does greece need to do? klaus: they need to take measures to move to the target. when the third greek program was adopted at the head of state at government level, a month level -- a month later the details the key decisions were taken, likely primary budgets for 2018. how much to privatize, what kind of structural reforms to do. and system reform. we need to get there because in that sense the esm is exactly like the imf. -- that is where
we see lax on the greek side, that it is to be fixed. hans: why the delay? klaus: because some of these things are not easy. reform is difficult under the best of circumstances. advanced reform is technically complex and politically very sensitive. hans: is the political world there? klaus: it is politically difficult to do advanced reform, even countries like germany and the u.k., everywhere. the political will is there a lot more than a year ago. a year ago, that is why greece now has more problems than the other countries that went through esm programs. they fell behind last year because they move backwards, and that is why they are in trouble. they have to catch up with that. but the political will compared to a year ago is much better, and prime minister tsipras agrees on the program targets. hans: how quickly does the
eurogroup need to meet in brussels? klaus: the chairman of the eurogroup last week said in amsterdam we might meet tomorrow . yesterday when we assess the progress, the conclusion was that there was not enough progress to justify the meeting. it could happen at any moment. cons: if we see a meeting called, we should see that there is august being made -- that there is progress being made? klaus: that is the correct interpretation. mentioned pension. what are the other difficult areas? .laus: privatization less than half the greek people pay any taxes. labor market reforms. nothing is completely new because greece has gone through reforms in the last five years, and they deserve credit for that. but they have to do more in order to bring things up again. one position seems to be
that you do not need to have an overall cut to the debt. greece's debt burden is not that high. are you sympathetic to that view? square that with what the imf seems to be saying. klaus: there is not a big disagreement with the imf. it is correct to say that at the moment greece has no debt service payment problems because they already did things in 2012 many things. official creditors in parallel interest relief with referrals, reducing the margin on interest rate. so the national debt service came in and said that greece has to do these operations. one can look at that and provide more help, but here the eurogroup -- they were very clear -- they said we have to provide more debt relief, not haircuts but that relief, if
needed, and if greece implements reforms. that is the sequence. we are waiting now to conclude the current review. at ifrogroup will look debt relief is necessary. nominal haircuts are not needed. cons: 5 -- do you see any other potential programs you will need to implement? klaus: no. these other four countries that received a lot of money from us are accessible within the markets. they are also successful in the ireland had a gain of more than 7%, spain more than 3%. hans: thank you very much. we appreciate your time. francine, i will send it back to you in london. francine: what a great
interview. there is one word that you really need to listen to, that klaus regling talked about, and that is "conditionality." that was hans nichols. we come back and we talk markets. also, later we talk about the fed, special coverage with a great lineup of guests that york, at 1:00 p.m. in new 6:00 p.m. in london. we will be joined by larry fink. ♪
vonnie: you are watching "bloomberg surveillance." a big night for donald trump and hillary clinton. both scored dominating wins in the northeast and presidential primaries. megan murphy joins us now from washington. i want to start with hillary clinton. she did lose one state to bernie sanders, and she invoked his name a lot. the clinton campaign and the democratic committee more broadly, need to be worried up to now that bernie wins in any kind of bernie-trump matchup. she had a huge win again. she lost rhode island but she racked up the state that she need -- the states that she needed to. --n will see in the next what we will see you next few , which hasis race been fascinating, topsy-turvy, and has had a surge of interest, diversify andot
divide the democratic party as we head to the general election. michael: bernie sanders says he would reevaluate after this tuesday's primaries. what does that mean? is he thinking about getting out? megan: he is definitely not getting out. he is clear about staying in until the last vote is counted. we will see if he is under pressure and he needs to move forward with some plan to get out. we do expect him to recalibrate the conversation as he said. look at what the message is doing among voters and look at how they can take that forward unified-- to a more message. they do not want to expose the democratic party to the kind of infighting we have seen in the republican party and the division we have seen that could lead to a potentially fractured republican party in this cycle. michael: in his victory speech, donald trump meant to insult hillary clinton by saying she is only succeeding because of the women's vote. is there any truth to that? how did in his hillary on the women's vote?
megan: what you saw last night was a very concentrated effort by donald trump to pivot to the general election, to make hillary clinton bigger focus of his victory speech. you could say that hillary clinton has won the web so -- the women's vote and that she is dependent on that. she has actually won the minority vote that has elected a barack obama. what she really needs to do is to come in with white working-class voters, to raise her game among that group. michael: thank you very much, megan murphy. the conversation on politics continues. halperin on "with all due respect." ♪ iaae-m"
they say 50. this is what we saw today. wti, inchingso upwards. we actually touched 45 on the bpi, 46 for brent. this isnot -- we is -- something we have not seen since november. we talked about the show producers in the u.s. this time andng the power to turn on be the swing producer of the world. let's get to bloomberg first word news with vonnie quinn. it is venezuela's latest solution to a power shortage. atwo-deck -- eight the -- two-day work week. israel's prime minister, benjamin and yahoo!, is changing his approach to -- benjamin
netanyahu, is changing his approach. he's cultivating ties with china, india, and kenya. he says even some arab countries are drawing closer to israel because both sides are concerned about iran. the fbi found out how to hack terrorist's iphone. agency officials do not want to tell apple how they did it, according to people familiar with the matter. james comey will make the final decision. bought a hacking tool from the company it has not named. this tells what will happen if a catastrophic earthquake hits the tokyo area in the next three decades. say the "bigcials one" could kill up to 23,000 people. british employers are worried
about where they will find low skilled workers if the u.k. leaves the european union. this according to a report from the national institute of economic and social research. the british construction business relies on migrants from the european union. global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world, i am vonnie quinn. michael? michael: george goncalves is still here with us. he is nomura's head of rate strategy. and now the chief economist for the u.s. and asia, which means you get to step -- to stay up all night, right back up i do not want that job. we are talking earlier -- we were talking earlier about how the fed has a tough job today. how do they signal that they want to raise rates without letting the markets get ahead of themselves? you would say do not signal anything, right? >> the fed has created this
extremely unhealthy relationship with markets. the markets look to the fed, the fed looks to markets, and in a sense, in all this posturing, the fed has seemingly lost sight of its longer run objectives. what i note going back and reading the march statement is it is only six paragraphs long, and three of the paragraphs they mention global market, international concerns. even though some fed members have said in the past when have had international turmoil it has not had much of an effect on the economy. i think that is one of the indicators to look at. i just think that the fed is just caught up in its own forward guidance and needs to get on with things. michael: let me ask a question that jim bullard keeps coming back to. given the economy we have right now, what is the proper level of interest rates?
because zero or 25 basis points is not it. is a greatt question. we do not know the answer, but we know it is not negative real rates. if the federal funds rate right now were about the level of inflation, maybe a touch higher, i would not be concerned, but it is just inconsistent with even moderate economic growth and moderate inflation to maintain negative real rates. francine: the problem when you going back tonks, what mickey was saying, this has a huge impact for all the banks. i had an exclusive interview with bill winters, the first he was on the record since becoming the ceo of standard chartered. he is not really sure what the end game is to have a listen. bill: my biggest concern is the
cumulative effect of extraordinary monetary stimulus, to get to an element of fiscal stimulus, that is differing from region to region. cumulatively that is the gelding some that is building up bigger and balances. there is a risk of snapping. to what: going back mickey was saying, do we just need to get on with it? does the fed need to turn a little more hawkish because otherwise it will unravel pretty messily? george: be careful what you wish for. if the fed wants to normalize rates, even if they go in june, the break between december and june is one of the longest breaks in the normalization cycle that we have seen. i think they get scared of their own shadow whenever financial conditions are tightening. data is starting to turn, but i think that they are still
beholden to financial conditions until they met -- until they admit that they are not. but are they scared of their own shadow, or are they trying to prevent a dollar rally? this could actually get rid of the little growth that we have in the u.s. mickey: i think they are worried about the dollar, but i disagree with the assessment you just made. the stronger dollar, of course manufacturers, exports, but it increases consumer purchasing power. so once again, i think the fed should follow the fundamentals. the other critical element lost in all of this posturing is the reason why the economy is not grown faster has nothing to do with the fed. that has been obvious for the past several years. it has to do with a wide array of nonmonetary factors, not just the way some households and
businesses change their behavior post crisis, but also some government policies that are businesses andng , addings adversely uncertainty and the like. these are factors that go way beyond the fed, and the fed has to acknowledge that potential growth is slower. it just cannot do anymore -- it just cannot do any more if you have strengths on productive capacity. michael's question about , youthe rates should be are ok with negative real rates, i am not.rge: no, negative real rates are attacks on the banking system. tax on the -- negative real rates are a tax on the banking system. i think that what we are realizing is that, we are
getting to the end stage of efficacy of central banking, and it requires fiscal policy. that does not mean the central banks will stop. i think they will keep doing it as long as it is described with this ultra-keynesian philosophy. they will remain dovish until proven otherwise. michael: what is more important to your market, the fed decision today or the bank of japan's decision? george: i would argue the bank of japan. global rates have been so highly correlated, not just with oil but amongst themselves. global rates is what have -- -- if we have a positive shift, if the bank of japan can tweak the message is delivered in q1 and provide more of a positive environment going forward, i think people that are hiding in bonds will jump out of is truend i think that for japanese investors as well as u.s. investors which are out
on the yield curve. if inflation does actually end up being more real and people are worried, inflation will start to impact long-term bonds. we are at a critical juncture where the fed is important for how they tee up future policy. but the boj could shift things going into june. there is a lot of positive catalyst coming from stimulus. we will continue the discussion over on bloomberg radio. george goncalves, thank you very much. we will continue our conversation with mickey leavy coming up here on "surveillance. ," ang up on "bloomberg conversation with blackrock ceo larry fink. this is bloomberg television, worldwide. ♪
francine: i am francine lacqua in london. michael mckee is in new york. let's get straight to the bloomberg business flash. here's vonnie quinn. the universal pictures parent, comcast, is in talks to buy dreamworks. comcast is a deal, would merge dreamworks with universal. it would also acquire a big library of animated films for use on cable. shares of twitter took a dive in premarket trading. the company forecast second-quarter revenue that fell well short of estimates. twitter added more users than maybe brandt advertisers did not spend as much as a fact -- did not spend as much as expected. slump in iphone sales, and apple protects the sales will decline again in the current quarter.
shares are falling in premarket trading. apple is down 20% in the last year. paul sweeney is with us. in there anything surprising the report, and if not, why did shares take such a dive? line was top telegraphed to people, but the weakness stemming from the iphone weakness decline itself, probably the magnitude took investors by surprise. investors,estion for which it has been for the last year plus is, this was obviously an iphone company, and can it continue to be an iphone company, and can the iphone dependence drive growth over the next several years like it has over the past several years. we need either a new product or a refresh, but a new product category to drive the next five years of sales, and now investors do not see it. it is not the watch, it is not television, so investors continue to say i am dependent
through the apple announcement, but also this morning, was greater china fails for apple. down 26%. does this point to the fact that we seean do more or do local incumbents being so much better and so much stronger that the iphone and apple are going to have a much harder time in i think the company last night talked about a couple of things. there are some structural issues in terms of competition that were difficult for them to deal with this quarter, and for next quarter as well. the question is, how are their phones positioned against the relative local competition so that they are bringing a lower price point unit into the marketplace to better compete? china will continue to be a good market for apple, but there is much more local competition. michael: let me shift gears and ask you about this comcast dreamworks deal. the dreamworks guys did not want
to be a part of a big company. why are they selling, and what do they get out of it? paul: this is a great deal for comcast because they are buying obviously -- arguably the best in the marketplace. for the dreamworks folks, it is difficult to be a standalone studio in a global media marketplace when you need scale and their competitors are all these countries like 20th century fox and comcast and disney. it is the reason why you see only a couple of standalone studios out there. it is a hit-driven business. to compete against the big guys, i think they want to be part of a bigger company. quite frankly, jeffrey katzenberg has been looking to sell his company for a couple of years. francine: are we going to see more consolidation in general? whether you talk about media and tech stocks, the prevailing attitude seems to be winner takes all. the media side of the
equation, in the last couple of years we saw a lot of consolidation on the distribution side of media. at&t and directv. now we will see more consolidation on the content side of the business. dreamworks is one. there are other smaller studios that have been in discussion, so we have written in the last year that we will see more consolidation on the content side of the media space. francine: paul, thank you so much. paul sweeney heads up our research in north america. this is a picture for a lot of the equities. we have a lot of earnings in europe and are expecting a lot u.n.,nings with the european stocks down flat. it was not as bad as certain analysts thought. then you have to look at crude oil. we are now at 46.73, but we did reach 47 and 45 for wti. ♪
the fed is not expected to do anything. the yen a little weaker today. but look at the canadian dollar. we are getting a reaction to what is happening in oil prices, over $45, over $47 today. that is expressed in dollar terms, up to $.79. everybody north of the border is happy. australian dollar -- they talk about rate cuts ahead really hitting that currency. francine: coming up on "bloomberg ," david westin and jonathan ferro. jon:, i know you're all over the boj. it: many people are calling the federal reserve non-decision, a weak dollar. apple down on my premarket screen by seven percentage points. 41 straight quarters of growth over, and it will not resume if their guidance is anything to go
by in the next quarter. you guys are all over this -- crude, 45 bucks a barrel for wti, for the first time since november. michael: jon ferro, thank you very much. we will talk about the same thing, what is going on in central banks in particular with the bank of japan. that is the subject of our single best chart. can the boj manage its own currency with its monetary policy? we have seen the bank of japan and the yen be affected by what goes on around the world. the yen is always a haven. you can see how the yen has reacted over the last couple of months. the circle is where they went to negative interest rates. but the yen kept getting weaker. one reason, everybody buys in when things go bad. yen volatility is starting to come down, and that has the yen getting stronger into today's meeting. bloomberg terminal users can access this chart. we are going to bring in making
leaving now, the u.s. and asia chief economist at berenberg capital markets. eye oneans you keep an both the fed and the bank of japan. george goncalves said that the most important thing for u.s. markets today is the bank of japan, not the fed. do you agree with that? i agree with that assessment because the boj is going to come out with a big announcement. michael: how big? kuroda has governor expressed concern that the stronger yen is hurting corporate profits in japan, pushing inflation down, and so i think they are going to come out with a package designed to weaken the yen. that will include probably some subsidies to banks to offset the negative rates, probably increase purchases of etf's,
meaning stocks, and maybe some kind of open-ended qe. they want to do something to push the u.n. down, even though that is not what they directly talk about in public. francine: you think this will come today? i know governor kuroda has talked about everything you are mentioning, but he surprises the markets. if anything is priced in, he probably will not deliver. well, i do expect a rather big announcement. keep in mind japan's economy is struggling. it really has not bounced back from the significant hike in the spring of 2000. abe, theyminister want to reinvigorate things, jumpstart psychology. so i think we can expect
something rather significant to be announced at the doj. -- at the boj. francine: i have a chart for you, and it shows that the 30-year grew by 40 years. this is when they go negative. they go to 0.4, but does not do anything for the yen. to surprise the markets, he needs to be so bold that the side effects may be too big for him to handle. mickey: i expect him to do something bold, but you just hit us -- you just hit upon something interesting. will it be enough yack at whatever the boj does will probably not help the japanese -- will it be enough? whatever the boj does will probably not help the japanese economy. gdp isel of nominal lower than it was in 1999. it is all about nonmonetary factors, demographics, everything else. but here again, the boj is
responding to markets, responding to currencies. watch the fedll decision, 2:00 p.m. wall street time. the bank of japan, overnight. tune in tomorrow morning. we will have market reaction to all of it. before we get there, stay with bloomberg television. special coverage of the fed decision this afternoon. myself, 1:00 in new york and 6:00 p.m. in london. "bloomberg " on television now. "bloomberg surveillance" continues on radio. ♪
from janet yellen later today. david: crude rally. news that u.s. stockpiles dropped last week. welcome to "bloomberg ." we want to extend a special welcome to our cohost, gina martin adams. great to have you here. jon: also coming up in just a few minutes, blackrock ceo larry fink. do not miss that exclusive interview. let's get the scorecard up on the screen for you. futures in the u.s. down by