tv Bloomberg Surveillance Bloomberg June 13, 2017 4:00am-7:01am EDT
i'm francine lacqua. let's check in on the markets. i put in treasuries for good measure. that is the two year yield. stocks overall are advancing after the global sellout with a yesterday. technological shares showed signs of easing. the pound starts to strengthen a little bit. and then of course, i want to show you crude, one of the stories we have been following on bloomberg, trading about $46 per barrel, following the first back-to-back game in three weeks. fromll have plenty more your markets shortly, but first let's get to the bloomberg first word news. nejra: firms that clear euro denominated derivatives will be forced to relocate after brexit. under the proposals to be rolled out today, firms deemed systemically important to the eu's financial system could be
required to accept direct oversight by eu authorities. s., the trump administration has laid out the plan for overhauling bank roles. urge them to change the regulations that bankers have complained about since the passage of dodd frank. isnwhile, donald trump planning to scale back his predecessor's effort to open cuba to u.s. tourism and trade. pairresident provided a options, including new limits on american travel to the island come and restricting partnerships with u.s. entities with ties to the cuban military. u.s. national security chief mike rogers met behind closed doors last night with the senate intelligence committee. sender's men clear they want him questions about any possible interference by donald trump in the fbi investigation into
russia's role in the election. jeff sessions will appear before the panel today to display his role in the firing of james comey, and contact he had with russian officials. in basketball, the golden state warriors have defeated the cleveland cavaliers to win the nba championship. kevin durant was named the series most valuable player after leading the oakland, california-based team to a victory. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. this is bloomberg. francine: thank you. five days after the u.k. election, theresa may will hold talks with northern ireland's democratic union party, as she seeks to prop up her minority government. yesterday, she met with conservative lawmakers to offer an apology for the catastrophic
election results. she said, i'm the person who got us into this mess and i will get us out of it. let's get the latest from westminster and anna edwards. good morning. meanwould a du.u.p. deal for the u.k.? anna: it is crucial to watch the conversation with three set may. there is no certainy that we will get a deal today. this is a party with just 10 mp's, only propping up with a conservative government in london. no doubt they are critically aware of this once-in-a-lifetime opportunity to wield some power over westminster, man something many in northern ireland would seek to drive benefits to northern ireland. what are the implications? investors are
watching the conversation about brexit. the d.u.p. has argued for an open border. how do you have an open border and at the same time, leave the customs union? that might not be possible, so do you decide to stay in the customs union? that might not be possible if you want to guarantee the control over euro tarade policy. this is one of the key questions. the d.u.p. also wants to have a conversation around taxation and investment into northern ireland, and they don't want any checks between those traveling in northern ireland and the united kingdom. how can you have that kind of lack of checks, if you have an open border between the northern ireland area and the republic of ireland? plenty of questions about where this d.u.p. conservative party conversation goes and the implications of brexit. francine: later today, may goes
to paris to meet the president macron, there has also been a warning with the chief negotiator. anna: she is going to paris to meet macron. two leaders, the wavy their leadership looks right now could not be more different. macron is still reveling perhaps, in some of the success he had in the presidential election and ongoing in the assembly votes we have seen. they will talk about brexit, technology, and how extreme content can influence terrorist acts, and they want to take on those technology firms, for them to bring or take down terrorist related content more quickly. this is something the g-7 has talked about in the past as well. the "financial times" talking about the risks of the u.k. of crashing out with no deal, which
is why the conservative party had said for so long, no deal is better than a bad deal because they did not want this kind of threat over them. perhaps, that threat means something. he also did talk about how there is no start date. they have been failing to agree on a start date for the conversation. and michelle barnier, saying, i cannot negotiate with myself. any to work out what they want from brexit. we are back to that conversation again, fran. francine: thank you, anna edwards. let's bring in nandini ramakrishnan, a strategist at j.p. morgan asset management. thank you for coming on. charles, how long does theresa may stay in power? far as she is concerned, she will stay there
as long as possible. she is already assuming i think that she will not be running the next general election campaign, so that will give her four years. francine: she will last four years? the maximum she can last, but i don't think she will make it that far. in brussels are already wondering who they will be negotiating with. they have made the calculation she will last as long as that. i think boris johnson would like to take over at some point, but it seems her party is rallying behind her in the short-term, just because on the brexit side of the party they fear the brexit talks will not get underway. and on the more moderate side as well, they fear if you waste timed you could end up with a disorderly system. as an is the party works out a coherent transition into someone else, i think she will be gone, i think three months to a year. francine: what does this mean for the markets? continuedonsiderin
uncertainty. we don't know what car they will play for the european side, is it free movement of labor? there are so many topics that remain at play. the one thing that is certain is the ftse 100 performs well in the pound is low. you can expect a lot of that to continue going forward. so now given where the pound is now, we expect the ftse 100 to do decently well. from an allocations perspective, we are taking ourselves closer to the perspective. francine: so, the pound moves in one decision or the other depending on if we see a hard or soft brexit. what are we looking at in the next six to seven months? >> first, we need to start the negotiations on the future of brexit. the u.k. would like to negotiate
the exit, in that argument will take place i think in the open next few weeks. hopefully there will be some kind of settlement on what the u.k. will have to pay. move on to awe can future relationship. francine: but what does the u.k. government want that relationship to be? this is a basic first question, and is a clear in your mind what they want at this point? army now looking at more of a softer brexit? -- are we now looking at a softer brexit? >> it was clear in the manifesto, which was leaving the single market, but seeking a close relationship, incorporating cooperation on security, etc. it has changed now, not just because of this in alliance of the conservative party with the d.u.p, which wants an open
t also in ireland, bu because this manifesto did not work. the british public did not vote for it. they voted to leave the european union. i think the strategy was not approved of, however. we are looking at all possibilities, including a second referendum, which many people say is far-fetched, but some investors seem to be pricing that in. will we see a lot more volatility within the market? >> yes, that is the one certainty we can say for sure. they will be more volatility, whether it is in sterling or the gilt market. the sterling rate definitely affects the u.k. stock market. we should expect volatility, especially for u.k. investors. there are ways to play it, though. the u.k. is actually very well valued compared to global
markets. it is not to say, turn your back away from the u.k., but taking a less active position in terms of size and sector. francine: we will be back with nandini ramakrishnan and charles lichfield. here is nejra. nejra: three former currency traders accused by u.s. prosecutors of conspiring to manipulate markets have reached an agreement to surrender this summer to american officials. all have agreed to be arraigned in a manhattan court the summer. uber has ousted the company's head of business's closest confidant amid an investigation into workplace harassment and culture. two people close to michael say he believes a lax legal team and is tied friendship ultimately led to his downfall, rather than the scandal. general electric and baker
hughes have cleared a second major antitrust hurdle in the effort to grade the world's second-biggest oil services provider. g.e. has won approval to combine the oil and gas business with baker hughes. this comes two weeks after a similar decision by european regulators and one hour after ceo willannounced the step down. francine: in the u.k. firms that clear euro denominated derivatives could be forced to relocate to the european union after brexit. they also said under these proposals to be rolled out today, firms deemed systematically important to the eu financial system could be required to accept direct oversight by eu authority. let's get more with our financial regulations reporter in brussels. which problem is the european commission trying to solve here? >> so, the issue is that, at the
moment, most of the euro denominated firms are in london. so, back in 2011, the european central bank already tried to repatriate the system to the euro area, whciich sparked conflict with the u.k. andthen brexit happened that gave the european union, if you want, the perfect excuse to have another go at this issue. and from what we understand, they are proposing mostly direct oversight to the euro denominated clearing business in the u.k., and they will keep the option to forcibly relocate the business to inside the eu. francine: alex, what does this mean? how would this proposal affect u.k. companies? alex: at the very least, this will add another layer of complexity for them.
the only do they have to deal with u.k.'s supervisors and supervisors in the u.s. in some cases, but eu authorities. immediately, it is good there is something concrete to talk about because this proposal was the elephant in the room in brussels for quite some time. there have been warnings about losses in the u.k., and what this means in terms foof costs. sense, it is good there is something to base these calculations on. looking further ahead, this means just more uncertainty in the context of brexit negotiations. because it is not a straightforward policy. it would not be easy to agree on supervisory arrangements between the eu and u.k. francine: thank you, alexander weber. we will get back on the story, one of the most read on the
bloomberg terminal. coming up, my interview of the an at midday, u.k. time, exclusive interview with the german finance minister, wolfgang schaeuble. i know there are plenty of questions on the euro, but also the u.s. and brexit. is fear affecting fashion? tells us dior's ceo why terrorism is his number one focus in europe. that interview is next. this is bloomberg. ♪ francine: you are watching
"bloomberg surveillance." i'm francine lacqua in london. kristen dior's -- christian dior's ceo says he is optimistic on the outlook for the european economy, but in an exclusive interview, sidney toledano told bloomberg that his great concern for the continent is terrorism. >> the french market is important. a new president and i think this will be very positive for the economy in france. reformsill start some positiveng some effects on the working rules. i am positive about that. we will see how they are going to do the new agreement in the u.k. majorly speaking, there is more
optimism. the only concern we have, the main concern we have in europe is the terrorist problem, which affects security of the nation and the tourists. francine: that of course is sidney toledano, the ceo of christian dior. still with us are nandini ramakrishnan and charles lichfield. i want to bring it over to my bloomberg terminal and this is a very simple chart, tracking the share price for merlin entertainment. merlin is the owner of madame tussaud's. they have been saying that recent terrorist attacks in the u.k. are starting to take their toll on the number of visitors. does the impact the way that we will shop? does it impact the way that you invest in your portfolio's in
europe? >> the big consideration for investors in this time, unfortunately when such events keep happening, is trying to find or separate that sentiment, maybe a specific stock story from the larger story. we are still positive on european equities and the consumer that spends globally. european equities source 2/3 of their revenue from abroad. sentiment might be dampened on the continent or in the u.k., but that does not mean companies here are not able to thrive. francine: i don't think we will ever get used to this, but is this something we need to deal with and move on? >> sadly, that does seem to be the case in the u.k. currently the evidence does not suggest that the attacks are connected, but there is a snowball effect and copycat effect. i have no doubt the u.k. authorities are trying to improve how they track potential
terrorists. it is not exactly managing to work out. i would say that in your chart, it does not show the value of merlin has gone down to where it was in january. i don't think we are too worried about the u.k. re ofine: and the co the story is pound weakness. they are a lot more cautious about trends because less people are coming. terrorism on european soil affect people worldwide? you focus more on the intelligence sharing between the european people in the u.s. >> i think it really is starting , and differented
events are starting to affect how countries think about their relationships with the world. so, you have a u.s. president who surprised many of us when he was elected. but i think the terrorist story was part of it, and his reaction is to tweet in an unusual way, and not necessarily to come up with a policy reaction. other countries are starting to think more holistically about terrorism. and in the u.k. general election campaign -- the u.k. does not normally think much about foreign policy within the election campaign, but people were attracted to the policies of jeremy corbyn, that rethinking our relationship with saudi arabia and other gulf states would be interesting. brexit willnt that maintain very solid security relationships with the u.s. and information sharing is to come. francine: what does that mean for how the markets see geopolitics? choose tokets largely
ignore anything that has to do with politics and geopolitics. >> politics was a big concern in the start of 2017, looking at fund manager surveys, are asking, what is your biggest fear, european tail risk was the top answer. we have gone six months through the year and a lot of that risk in europe has not materialized. it has helped earnings expectations get longer and has helped peripheral bonds spread. so, i would say politics this year has been playing on the market's mind. it is a big challenge ahead still. francine: but, we see this equities.t in. >> they keep surprising us in terms of how far they are willing to go. the u.s. earnings the season and the european earning seasons are showing extremely strong, near
10% earnings growth on both of for itand an expectation to continue. you would expect equity markets to rally. politics are weighing on the mind of investors and making valuations are more attractive when you see a lot about close out of europe. some of that money is coming back in, given the dissipated political risk. francine: nandini ramakrishnan and charles lichfield stay with us. up next, will price rises continue to eat into u.k. consumer's buying power? of course, this also goes back to the situation with brexit and whether consumers will feel a little more of the squeeze. this is our conversation next and this is bloomberg. ♪
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todaymocratic unionists in a bid to secure the vote needed to proper minority government. yesterday, she told conservative mps she takes full responsibility for the disastrous election results that parliamentary majority. she is willing to rethink our approach to brexit. the european union's chief negotiator says the u.k. risks leaving the block without a deal if they waste more time before starting to talk. up in an interview with the highlightsimes, it the three months that have elapsed since britain notified the eu of its intention to leave. in the u.k., firms that have euro dilutive -- derivatives may need to relocate after brexit. proposal, firms important to the eu financial system could be required to accept direct oversight by eu
authorities. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. thank you so much. we are getting some inflation figures for the u.k. for the month of may. it is higher than expected. inflation rises to 2.9% instead of the estimated 2.7% we were expecting. if you look at the rpi, that is arising month-to-month. it's the fastest growth we've seen since november 2012 for core inflation. the pound is 126.99. you can see the money chart, it's probably this one. this is the best chart to look at. it shows you inflation with basic wage growth. unless you were following each other, you may think you are
worse off than you are. how worried are you about this trend? it came in above u.k. wage growth and higher-than-expected worried this is weakness in the pound and negotiations on brexit could lead to tariffs. that could mean it goes higher. >> i'm not surprised the numbers are as high as they are and above expectations. you look at the purchasing when it shootss, up, you see inflation tech up strongly. expecting higher inflation on a low pound. i think you're right in pointing out that chart is what the most important charge for the u.k. future. growth is falling for a few months. it's falling even deeper than it has been before. that is really pinching the consumer.
how much of the going to buy future purchases, whether it's autos or whatever it may be. that is why mark carney is watching real wage growth as closely as he is. mark carney says he expects inflation to keep accelerating. it does seem like an increase in increased to this since june 2013. we will have plenty more on that. anna get straight to edwards in westminster who is joined by a former conservative party leader. anna: thank you very much. smith joins us here on the green outside the houses of parliament. for beingvery much here this morning. theave been reporting committee meeting, theresa may was talking about being open to a change of tactics on brexit, getting a national consensus.
you see room for change? n: she was talking about town and how we want to make sure the message is clear and what people have to say. in terms of the policy, no. put out a statement last night saying we're not changing the policy. we are not going to be in the single market. there has been some chatter on the outside. i have no idea if that's the case. this is the simple arithmetic. the labour party has the same manifesto. said not in awas single market and closing our borders and our laws and not in the customs union. you saw that reiterated on sunday with john mcdonald. they were explicit about that. those two are exactly same in
the conservative party. there are two manifestoes on this area we are pretty much the same. changing,talk about you're going to break the manifestoes. anna: you did not get a majority. don't you have to break the manifesto and find something you can agree on? an: 80% of the public found it in their own manifesto. labor had almost the same position as conservatives. it was reiterated on sunday. you have that, this means there is overlap between the two and it's very clear. the british public was given the simple point, when it comes to brexit, both parties said no to the single market and the customs union's control over your borders and money. ishink the opposition settled. we are trying to get the best deal we can out of the european
union. anna: the du p-1's to have an open border between northern ireland. -- the du p wants to have an open border between northern ireland. n: the issues on the border are peculiar to ireland. there has been an open border negotiated as part of the settlement. ,hen i was there in the army there was a border and we were in the european union. this is not always absolutely clear. it's feasible to arrange for an open border between ireland and southern island and that was on the negotiations before hand. that's what they will arrive at. that's not the issue. you don't have to be in the customs union to arrange that. it can be done as a chillier element between those elements. that was already being discussed
with them. when it comes to brexit, they back the conservative position on this. anna: there will be no checking of customs and passports on that border? : the delay on goods is five minutes at the borders. there, theyrrive are cleared before the goods are shipped. that's what happens in international trade. you clear those all. as the goods come in, it's an electronic swipe as they go through to check. all of those businesses, they are all done whether it's in canada or australia or america. they clear through very quickly. it's almost instantaneously. how it willssence work with us. that is what we aim to get to with the european union. the border will move quickly. you -- the eu doesn't
want to get to that position. : the eu does more trade with england than we do with them. they rely on exports to the u.k.. most profitable market for car producers in germany and france. there is a good reason. a deal is done between two groups of people and that benefits them as much as it benefits us. anna: do you think the passport is clear enough? : that nonsense about the venom? that isn't written until after the green speech. i think the bbc reporters. caught up on this one. caught upon got this one. i will be very keen for that to happen as soon as possible.
it will be simple. it will be centered around exit and the legislation. said he can't negotiate with himself. : next week. and that was guaranteed by david davis. anna: thank you very much for your time. francine: thank you so much there, anna. the picture for u.k. inflation. it did move upward, accelerating more than forecast to the fastest pace in four years. pound see a little bit of volatility on the back of it. this is u.k. inflation versus the wage chart. this says how much consumer spending will happen in the u.k. we will look at the pound and some currency moves. this is bloomberg. ♪
francine: you are watching bloomberg surveillance. mark: the global tech route is easing. this goes back to the beginning of the year. you know what happened yesterday. it fell by 3.6%. since the biggest drop june of last year. let's not forget this, the highest level of over 15 years. stirling is rising today after the biggest two-day drop since october. theresa may apologized to her mps, taking full responsibility for the disastrous election results. sterlingf forecasting at 128 in the fourth quarter.
we are at 126. 96. wager on theullish euro in more than six years, it is an speculative positioning for five weeks after three years of negative positioning. the euro closed up 112.79. analysts are forecasting 112 in the fourth quarter back in march. it's much more bearish. we have a death cross for brent crude. it moved below the 200 moving average. 2014,t last occurred in look where we were. 110. look where we went too, down to 30. sometimes history is a guide. francine: that's a great chart and it says everything for you. going to unwind its balance sheet in the fourth
quarter. by how much is still anyone's guess. the uncertainty could prove unsettling for investors. there may be a more ambitious approach. joining us is the global market strategist at jpmorgan. fed it?your take on the we don't know how much they will reduce the balance sheet. it's been telegraphed so much. are we whisking -- risking a temper tantrum? >> only by how much messaging the fed has been trying to do. we've got a fed rate hike this week that we definitely expect. we expect one more in september or december of this year. how that's going to play out in terms of how me treasuries, how much of mbs holdings will be rolled off the balance sheet is what we are expecting the fed to tell us. generally speaking, we do expect that movement in the 10 and 30 longer end of the
curve. we do expect that by the end of this year into next year as that rolling office explain more. francine: what is happening with treasuries? they are not really following the correlation we used to have between equities and treasuries. speaking, when we started the year we expect to these three rate hikes, maybe even four. it's not really ill the net and or anticipating higher rate hikes. we do expect that to raise as the year goes on. i would echo the point that we a largecting subcomponent of our equity calls in terms of value or in terms of financials. we are waiting for that rise in the treasury to help the equity markets that have not been loved because of interest rates. francine: this is a great chart looking at the fed balance sheet history. if you are a bloomberg customer,
you can look at this. how much will this change depending on who comes after janet yellen if she gets replaced? >> i think she has a more dovish leader of the fed. she has been in a time when extreme monetary policy has been the norm across the world. as we see new policy makers coming to play, there might be a more hawkish and aggressive stance. regardless of where we are in a cycle of the u.s., it requires policy normalization, whether that sees interest rate hikes on the table or newly explained balance sheet roelofs. i've -- rolloff. sense thats there a the central bankers are too shy in normalizing? and there is to it concern about unintended consequences? andt because politics
physical policy have not taken -- fiscalysical policy hasn't taken hold? the returns of equity markets have gotten since the start of the crisis and how low central banks of and keeping the rates, the s&p 500 is giving you 250% return at that time. markets are used to this money coming in. we expect later parts of the cycle to have policy normalization. some could argue with the tightness of the labor market, and wed to do a mandate have seen a bit of softer inflation data which may give them justification for going into the flow. where we are economically, the fed should be normalizing. francine: thank you so much. coming up next, we talk a little bit more about the u.s. and leaks and memos.
francine: this is bloomberg surveillance. chiefs. national security met behind closed doors with the senate intelligence committee. senator is made clear they wanted him to answer questions about interference by donald trump in the fbi's investigation into the election. appear beforewill the panel publicly today to explain his role in the firing of james comey and contacts he had with russian officials. let's bring in our washington editor. kathleen, thank you so much for joining us. testifying tos he win his request him -- recused himself from the russian investigation. kathleen: james comey talked
role in hisons' firing. how recused has he really been? what if any role did he play in james coley -- comey being fired? i think one of the big challenges is a lot of contradictory things of been said. comey was fired to begin with, once been done during the investigation, part of how this whole russia probe came about was there were questions that sessions answered during his own confirmation hearing when he was asked about the ties between the trump campaign and russia. he said he wasn't aware of any and then it came out that he himself had met with the russian ambassador. issue, there is this sessions is going to have to go on the record and talk about things and hopefully resolve some of these contradictions, but he could create more. aboutne: what do we know
how jeff sessions gets along with the president question -- president? kathleen it: he was in alabama senator for many years prior to his role now in the administration. he was one of the first lawmakers coming up strongly for trump's campaign. they were very tight during the election. it's kind of interesting as someone who expects loyalty from staffers and people in his administration, he allegedly a loyalty of.r trump may be considering getting rid of session just four months into the job. francine: we've never really seen an administration like it very it seems from the outside so complicated and at times messy. what does that mean for the markets? they are focusing on infrastructure and tax return and banking reform.
kathleen: i think the financial regulation and deregulation and corporate tax form would be the key issues the s&p 500 can rally on. when we look at earnings expectations that we have for companies in 2017 and 2018, those expectations for earnings haven't changed pre-election to postelection. there are still a lot of upside you can get if certain policies to get through. we put the focus on a corporate tax rate coming down from 35%. given the negotiations that may come into play, for the u.s. equity market it does seem like it's a bit of a pause on that big trump exuberance print -- trade we saw in november. does this anchor his resolve of getting tax reform through? >> the markets are a bit more hesitant and the volatility did play out in the last few weeks.
it's a distraction from the current policy that could have been more business friendly. it could bring the tax rate down and bring up infrastructure spending that helps the private sector. if you have this saga unfolding, there is shine away from the administration and congress that is not working on those policies. francine: what happens after this? is anything else coming up? we will see more people in front of the committee. >> there are several members of the senate judiciary committee talking about bringing comey and for round two. he would be testifying again to some of the things he said last week. as new developments emerge, he would testify to those as well. jaredis some talk of kushner potentially meeting in the next couple of days with members of the intelligence committee. not necessarily testifying, but having conversations, that sort of thing. trump said he would be willing to testify.
so much. thank you she is our washington editor. stay with bloomberg. at midday, we will have an interview with the german finance minister. we will talk a little bit about inflation, the euro, frexit. -- frexit. brexit. next, i will be joined by tom keene. we are talking about theresa may and brings it. that's having a little bit of impact on the pound. does it mean for wage growth? this is bloomberg. ♪
after apologizing to her own party, theresa may holds talks with the democratic unionist party. data independent. inflation expectations if the fed looks poised to raise rates anyway, the next question is, what is the state of the balance sheet? jeff sessions testifies to a congressional hearing over james comey's testimony. this is "bloomberg surveillance ." i'm francine lacqua in london with tom keene in new york. we are looking at the markets and the u.k. and theresa may. we are looking at the fed tomorrow, as well as u.k. inflation. tom: i like the idea of getting back to something concrete. overnight, a lot of news out of washington. kevin cirilli will join us as well. sessions' testimony jumped at us, coming out of nowhere almost. francine: yes, just like that, we do have a little bit of data out of germany.
investor expectation much he will estimates. -- much below estimates. and the interview i will be watching out for, the 12:00 exclusive with the german finance minister. first let's get straight to the bloomberg first word news. reporter: prime minister theresa may bought herself some time with conservative party lawmakers that are angry over the election. may told them she look at the party out of the mess and a signaled she will rethink our approach to brexit. she meets today with the head of northern ireland's democratic unionist party. she needs their vote to prop up her minority government. a few hours from now, it will be jeff sessions' turn in the spotlight. the senate intelligence committee will question him about his role of the firing of james comey, and he will be asked about contacts he had with russian officials. and several u.s. senators from both parties have reached a deal to expand existing sanctions
against russia. they also mock congress to review any move by donald trump to remove existing penalties. the senate might vote this week whether to add the sanctions amendment to an iran sanctions bill that is already being debated. it is another blow to taiwan. panama has agreed to open diplomatic relations with biggest seconds user of the panama can tell. only 20 nations recognize the government in taipei, rather than the government in beijing. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. i'm taylor riggs. this is bloomberg. tom: that is why i do "surveillance." how was i going to know that china was the second biggest user of the panama canal? taylor riggs, making a smart every morning. equities, bonds, commodities, futures up a little. oil is going nowhere.
it is sort of like the end of the fed meeting tomorrow, a press conference tomorrow. michael mckee in washington tomorrow. sterling is back over 1.27 and the dollar-peso is worth watching. the mexican peso has strengthened over the last week, up to 18.15. francine: i am not bored because i have a great market check. oil, tom, is gaining at $46. you can see the selloff we saw in technology stocks is now reversing. european stocks are gaining and the pound is significant not only because of politics, but because of inflation, much higher than expected. the u.s. two year yield is important because of the fed tomorrow. tom: i'm going to go amazon. there is the amazon simple and here is the big question mark. i don't know where amazon is in this series.
this is retail employed adjusted for population. we are over here at 15.8 million bodies in retail. you can see the collapse population adjusted since 2000. here is that big blowout of retail growth form the 1960's. we are back to where we were from 1985. ail, includes nonstore retia which i think as amazon, but i don't know where 300,000 employees fit into that short. francine: i love your chart and it does say amazon, "amen," it looks like that. i'm looking at a very simple inflation chart for the u.k., extremely significant because inflation recent its upward march last month, accelerating to fastest pace in four years. this is pound weakness and it goes back to brexit negotiations. it's not following this inflation report. what it means is that households
in the u.k. are going to be that much poorer. tom: this is a great chart for our esteemed guest, a fabulous chart of what has happened so quickly. francine: i know, and i have an even better chart almost, which is continuing to wow. this is cpi inflation compared to basic wage growth in the u.k. breakeven rates have dropped to the lowest level since november 9. the fed is poised to raise rates after tomorrow's fomc meeting. the dollar has been flirting with the pound's territory. .et's welcome randall kroszner he has chaired the committee on the supervision of banking institutions and is not a professor of economics at the chicago school of business. it is great to speak with you on
a day like today. overall the markets and equities are doing one thing and then we have inflation going up, right? but it is the bad sort of inflation in the u.k. >> in the u.k., yes. the bank of england has a much bigger challenge than the fed does right now. it is a tough combination for the central bank to deal with. in the u.s., we have had continued growth, not gangbusters growth. it looks like it will be stronger in the second quarter, averaging about 2%, both wage inflation and headline inflation are below where the fed would like them to be and going down a little bit. but the fed is on track for the rate rise tomorrow, and then we will see for the rest of the year. francine: we will go back to the fed and we have great charts tracking the balance sheet. how would you rate the world economy right now? >> it is looking much better than it did one year ago.
we are very concerned about china potentially crashing. it seems to be moving along at a steady pace for growth. europe is actually showing, the eurozone, not the u.k., but the eurozone issuing pretty good economic growth and i think draghi is quite happy about that, though he is providing a lot of support for that growth. and so, in the u.s., it continues around 2%. i think we are seeing stronger growth than we did before. tom: good. francine: tom, did you want to jump in? tom: i think this is really important about president trump. i want you to link politics into the kroszner world of politics. let's go to this model, which is not studied in chicago, but professor kroszner, can political uncertainty dampen gdp? can the craziness in washington,
whatever anybody's politics, can bring down or diminish economic growth? >> for sure, it can. so far, it does not seem to have interfered with the markets moving forward. tom: within this -- that was a chicago answer to politics. they don't do shoc politics in chicago. we have got no budget, we have got political testimony. how much do you take off of gdp gdp, doif we have a 3% you market down a couple tenths of a percentage point? >> to be able to move where we have been for a well, which is around 2%, to the goal of the administration to 3%, to have got to be able to execute. they have got to be able to do tax reforms and regulatory reforms. some of the regulatory reforms they can do without congress, but tax reform needs congress. the more fundamental regulatory
reforms, we need congress. francine: right, so how would you describe the current working relationship between the trump administration and congress? >> it seems a bit fraught, but it's amazing how things can get done in politics, even with people who seem to be in very different worlds. sometimes people can sit down and get it done. we have not seen that ina while, but there is the potential for that to happen, at least on tax reform. we have got crazy taxes in the u.s. whether you are on the left or right, the idea that companies will not bring $2 trillion to $3 trillion of the revenue back to the u.s., nobody thinks that is a good policy. francine: so, why is it taking so long to come to fruition? >> this is only one piece of a broader tax puzzle. i think there is more of a chance for it to get through when you have the same party in the white house and in each of
the houses of congress. obviously, we have not gotten there yet. hasink secretary mnuchin made it a high priority, the president has made it a high priority. i hope they can get proposals out there, otherwise we cannot move from 2% to 3%. tom: let me bring up a chart. 20is a two year yield, back years. we have got here a negative yield on the two year for a substantial amount of time to this financial crisis. -0.58%.own about i believe that is called financial repression. does janet yellen have an obligation to get us out of financial repression for retirees and savers in america? manus: >> well, she has an overall obligation to the dual mandate, to maximize growth in
key prices stable. i think the fed has done a good job of going to this very difficult time to maintain growth. the u.s., until recently, has been one of the strongest countries recovering from the crisis. i think the fed has a lot to do with that. now i think we need to have some support from other areas, from fiscal policy, from regulatory policy. the fed cannot do it on its own. tom: we will come back with professor kroszner. lots to talk about and we will do more fed and market's fina nce. today another round of the washington drama. the attorney general of the united states in testimony in our 2:00 hour. we will take that. this is bloomberg. ♪ reporter: this is
"bloomberg surveillance." three former currency traders in the u.k. accused of conspiring to manipulate markets have agreed to face charges in the u.s.. the trio will surrender to american officials and be arraigned in a new york court. prosecutors say they used in electronic chat room to share information. uber has ousted its senior vice president after investigation into the ridehailing company's workplace culture. michael has been condemned for workplace kindle for several years. briefedloyees will be today on changes at the company. -- thers at honeywell company's executive chairman spoke to bloomberg tv canada in montreal. >> it was very painful in the
short-term, but the payoff for a long time is quite good. so, that is a big part of what we are getting on investor reaction, gee, i hope you invest all of this money, now you are going to split this off and based on my ownership chatter, i'm not going to be able to own that company anymore. so, somebody else will get the benefit of the money i put into it. why does that make sense? reporter: honeywell's aerospace unit has been a drag on earnings. cote says it is a very long cycle business. that is your bloomberg business flash. tom: let me do a chart here for television and radio with randall kroszner, a former governor of the federal reserve system, truly our leading expert on the linkage of finance to economics. the two year yield, and for those of you on radio, back three years and up we go. up we go with a new leg up in
yield. have we reached escape velocity in our struggle to get yields higher? >> it is going to depend on which yield you mean. clearly the fed is able to raise the short rate, and has been doing that, but the long rate has been coming down. we have been getting a flattening of the yield curve. and so, i'm not quite sure we are there yet if you want long rates to be going higher. tom: within that is this physics idea, and this is something you excel at. i don't want to lecture the good professor, but the idea of this inertia force, almost the momentum within the economy and within society, where you get this feeling of up we go back to normal, where is that in the timeframe? is it one year out or five years out? when do we get back to normal within the kroszner framework?
>> i think we are getting there and we are on a reasonable path to get there. the fed is feeling much more confidence about that. tom: yes. >> we used to hear all about data dependence. recently they have been saying, we will look through the data. bitthe report is a little weaker, but we think the economy is coming back on a good track and we will raise rates anyway. i think that shows confidence, and that spilled over into the market. francine: talk to me about the big bond unwind. that me bring you over to my chart. this is the fed balance sheet. for our radio listeners, we are looking at how the balance sheet of the fed has increased quite significantly from 2005. this is a very strong projector trajectory upwards. it is a simple chart, but you need to start unwinding this. it could prove important for investors because we don't know how much they will unwind this
by. what does this mean for the bond market? andhis is why janet yellen her colleagues are trying to talk about these issues now, because there could be too much uncertainty if there is a new chair and a new approach. and so, that would leave the markets potentially tumultuous. so, by talking now, long before they will start doing anything -- and not think they would do anything before the end of the year, most likely tomorrow in the press conference, outlining the goals they have and how much they want to shrink the balance sheet, how they want to do it, that will try to stabilize things from their point of view. as one of the fed officials said, they want to make this as exciting as watching paint dry. tom: we heard that from mr. kaplan forrom dallas. we will continue with randall kroszner and drive forward the framework of the fed.
island democratic unionist party leader today as a she seeks to hash out an agreement. later in the day, theresa may will then visit paris, where talks with the french president will take place. joining us now from westminster is anna edwards. theresa may will go to lawmakers. she told them, i made a mess of this, and i will get out of it. how does she plan to do that? anna: she did a real mea culpa, didn't she? it took 75 minutes of questions and answers and apparently, she left to applause. at the moment, she has managed to hold onto her leadership. now, she needs to get to the next stage in that process, the .,nversation with the d.u.p and their biggest priority is maintaining links with the united kingdom, and that matters above all else.
the other thing that matters to them though, is trade with europe in the shape of the republic of ireland. they put a nemesis on keeping open the border. how do you keep open that border and how does that rub up against your plans to come out of the customs union? duncan smith is not in the cabinet anymore, but was a key part of the brexit planning in the u.k., a real campaigner for it. he says it is possible to have an open border and leave the customs union. we will have to see where that conversation goes, but the d. u.p. dialogue is key today. tom: i read the newspapers in the united kingdom and they all have their angles. is it all clear for the prime minister on this tuesday morning? anna: it depends how long you want that to apply, i guess. it is all clear for now. that seems to be clear. in positive, we have positive signs from the cabinet ministers, boris johnson, david
davies, all saying they are behind the prime minister. there are no coups planned. there does not seem to be an appetite for the overthrow of the prime minister now. how long that lasts, we will have to wait and see. there does seem to be a sense she will not leave this party into another election, but that is five years away. edwards innna westminster for us. let's get back to our guest in the studio, randall kroszner. randall, so coupled with this political turmoil is this chart looking at inflation. u.k. inflation is stronger than expected. wage growth is going nowhere. how difficult will it be for u.k. households? >> between 2015 and 2016 you had wage growth go up to about 2% and inflation went down much
below that. unfortunately, inflation is above the wage growth, meaning the real purchasing power, the real ability is going to start to go down. you don't want to make too much out of any one number, but it seems we are on an upward trend in the u.k. for inflation, making it tough for mark carney and company because they have to deal with higher inflation. francine: thank you, randall kroszner, former federal reserve governor. up next, we talk about your euro, and we talk to the german finance minister. that is an exclusive interview with wolfgang schaeuble, coming up at 12:00 p.m. london, 7:00 a.m. in new york. this is bloomberg. ♪
which is why comcast business delivers consistent network performance and speed across all your locations. hello, mr. deets. every branch running like headquarters. that's how you outmaneuver. tthat's why at comcast,t to be connected 24/7. we're always working to make our services more reliable. with technology that can update itself. and advanced fiber network infrastructure. new, more reliable equipment for your home. and a new culture built around customer service. it all adds up to our most reliable network ever. one that keeps you connected to what matters most. ♪ tom: good morning. "bloomberg surveillance" in london and a beautiful new york today. looking out to the east, the sun
comes up from the east. even i can figure that out. let's go to our bloomberg first word news. taylor: trump plans to roll back president obama's plans rollback limits on cuban travel. deal with cubae one sided, saying it allowed the castro regime to continue human rights abuses. and the trump ministration wants to ease rules imposed on wall street after the financial crisis but not eliminate them. loosening rules on trading and weakening the power of agency that overlooks finance. chief negotiators says that it has been almost
three months since the u.k. formally notified the e.u. it was leaving, and a half not been any negotiations. the two sides failed to agree on a day to begin brexit talks. in basketball, the golden state won their second nba title in three years. they won 4-1. kevin durant was named most valuable player. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. francine: thank you. of may, the german chancellor gave her strongest indication yet that europe and the u.s., under trump, had drifted apart, saying that reliable relationships since world war ii are, to some extent, over. is investmentis trade. joining us now is the former
e.u., andsador to the still with us is randall kroszner. thank you for joining us. how has the relationship between the u.s. and europe changed? is it irreversible? >> nothing is irreversible. europe and the united states have to work together closely, as they have for decades, under both republican and democratic administrations. also, the rhetoric is improving. but there is significant concern. you mentioned chancellor merkel saying that she feared that europe fall no longer rely on its american partners, both in .he security and economic field it was a statement of fact and a statement of great courage and a call for europe to get its act
together and move forward and depend on itself more than ever before. improvedou consider rhetoric, there is a change year. the united states is no longer the sponsor, if you will, of the international rules-based order europe was relying on. you can see that playing out in trade policy. francine: who fills that vacuum? europe itself? bold -- europe will certainly try to fill that vacuum in parts of the world. the belkin's comes to mind. but europe will have to deal with these issues without strong leadership. the chinese output themselves forward as an ally of the e.u., but there are significant differences of view between europe, the e.u., and china. there is no other obvious partner. tom: is the washington consensus
that -- dead? degrees a lot of fancy about fancy international relations from another time and place. is what you studied in school dead and gone? do not think so. i think we are seeing a shift, but that could be a shift of a years.ime period of four we will be back. we need to be back. we cannot afford to break those rules, the postwar order we built for the e.u. they have served our interests. what is remarkable is to hear this language that is very similar to language we hear coming out of moscow, that somehow this system that we built up has injured our interests, has undermined us, that every trade deal we have ever done is against our interests. i think that is simply wrong. we will return to play the essential role of leader. there is no one else who can play that role. tom: thank you for that
statement. very interesting. what would be your advice to secretary tillerson to jumpstart as getting across the so-called four years? advice, but i think it is water under the bridge, is do not decimate our soft power. there is a real risk here, even if the budget is not approved and anywhere close to its current proposal. we cannot afford to decimate soft power. during the three years of my time as ambassador to the e.u., it was the military, our top command is, both for africa and europe, who really understood the importance of soft power. one actually went so far to say if i could take $1 billion out of my budget and give it to the state department, i would. but i cannot, because congress is not trust people like you, diplomats, they trust people like me in uniform more.
do not decimate soft power and continue work with our foreign powers. francine: did me a sense of what brexit -- gave me a sense of what brexit means for the e.u. is it a distraction? anthony: what happened recently is bad news. welcomed theally letter prime minister may had sent a while ago, and they welcomed it because it was a clear break. brexit means we are out of the single market, out of the customs union. that made it is clear. and now that we are facing -- that made things clear. now that we are facing no parliamentary majority for the brexit sketched out by prime minister may, it is more complicated. also you have members of her government, boris johnson and michael gove, who are all hard ters, saying brexi lifewe should just leave,
will be fine, they will just live within wto rules. it is not an easy path to tread. an easy solution in the 15 months they have left is the european economic area, the norway solution. in norway, they are rule takers, not rule makers. there will be free movement, but they will have privileged access to the single market. that will not be an easy thing to sell to those who wanted a true brexit, but at least it will be the cleanest solution and possibly could he sold as a halfway house. -- could be sold as a halfway house. francine: do you believe we are underestimating medical risk in europe? they were kind of micro-analyzing what happened to brexit, but overall, we do not think it will spread. randall: it is not spreading now, if we look at france. it looks like chancellor merkel
will be reelected. five-star movement in italy has seen some challenges in the most recent municipal elections. it seems that the tide is turning a little against populism, but i think there is still discomfort. i do not think you can say everything is going back to normal. i do not think we will be back to normal. you can see it in the french elections. it is something new and hopefully good. but people do not the same system they had before. tom: ambassador, one final question to you. who should speak for europe to the united and him -- united kingdom? pissy, as oneen way to put it. who would be the best spokesperson for the united kingdom? anthony: with regard to these negotiations, there is a
negotiator. theel barnier is negotiator. what we have seen is a remarkable degree of solidarity and consensus among the 27 about what has been set forth as negotiating aims, including here in germany. germany obviously the most important player and has been absolutely clear they support the commission's negotiating objectives, including the money that needs to be paid for -- before they leave, the free movement of people. michel barnier eight does speak for europe in this instance -- michel barnier does speak for europe in this instance. francine: thank you. these are live pictures from berlin. the finance minister there, speakingschaeuble, is in berlin. then we will have a live exclusive interview a little later on. saying thatminister
passage ofsince the the dodd frank act. let's talk more with randall kroszner. regulation,k at deregulation or the change of regulation, are we doing it well or badly in the u.s.? anthony: it makes sense to rethink regularly -- regulatory reforms that came in six years ago. it is the time to gather data, look at if we have solved the problems we wanted to solve. it is a sensible discussion to be having now. not been able to look through all of the treasury report, but it seems most of the our reforms seen about how we can make things more effective, how can we reduce burdens but still maintain resilience and stability. francine: so not necessarily less regulation but better regulation. anthony: exactly.
that is what i have seen in the report. francine: there was concern five or six months ago that the u.s. would not be 1 -- would not want to be involved in regulation across the board. anthony: all major u.s. institutions operate internationally and all global institutions operate in the u.s. there has to be some sort of dialogue. tom: how do the regulations now hearken back to the securities exchange act of 1934? 6, 7, 13uments were pages long. dodd-frank could go from new york to chicago. [laughter] randall:nd back -- and back. tom: the complexities, are the even workable? randall: the financial markets are more how flex, and we have a
lot more regulatory and legal detail, just because of the way things have evolved in the united states. that said, we need to think about the right balance. -- tain a protect the taxpayer. but just because we have regulation does not mean it is a good one. is it serving the purpose it was intended to? is a having unintended consequences? there are a lot of regulations that are checked the box exercises that do not help to get to the fundamental risk issues that are distracting supervisory resources and not making us more resilient. tom: is the best regulation more capital on the balance sheet and less leverage? is that really all this is about? randall: that is one important regulation, but i do not want to put all of the regulatory issues into one basket. tot like you would not want
have everything in your portfolio rely on the performance of one stock, you do not want to have all of your regulation rely on one particular dimension. we have more capital than before. we made a lot of progress on that. but we cannot ignore a lot of other pieces, especially pieces outside of the traditional banking system. francine: a simple but basic question, are we right in thinking that bankers on the best ones to regular themselves? if theyto suppose that do put more proposals, is there an appetite to reform, and that the culture of risk taking is curbed? theall: i wish i could say culture of risk taking is where it should be now, but it is true not just of banks but other financial institutions. part of the troubles we had was not just at the banks but many other people buying securities they did not bother to do due diligence on. we're still making progress in
trying to improve the risk management culture. i do not think we are there yet. francine: randall kroszner, thank you. he stays with us. if you are a bloomberg user, you have logged onto tv . this is where we have cool analyses and charts. and you can ask randall questions directly. the gone the video screen and "ask guest a question." it can be anything you want. do it now, and we will ask him next. this is bloomberg. ♪
♪ taylor: this is "bloomberg surveillance." let's get the bloomberg business flash. in ireland, the government hopes to raise as much as $4.2 billion in an ipo of the irish bank later this month. the government is trying to get back some of the money it spent bailing out allied irish bank. houseo of french fashion christian the your is up -- dior is upbeat about
the election of emmanuel macron. that have a new president would seem to be very positive for the economy in france. reforms andt some bringing some working rules and things like that. taylor: toledano says china is a growing priority for dior and has grown market share their. tom: thank you. in london with francine is randall kroszner, the armor governor of the federal reserve system in chicago and the chicago blue school professor. discusses competency into the financial system. you are truly the perfect person to talk about of the future of
this institution. let me begin with the fed. phd as feda monetary chairman? randall: i think having a deep moderates -- a deep knowledge of monetary economics is valuable. a deep knowledge of economics in general. do we need a phd? i do not think it is necessary if you have the right person. tom: i think that is a fair answer. we see a number of names. taylor of stanford. what is the nuance of a conservative republican-like monetary phd versus a liberal like paul krugman? what is the difference in the coursework? randall: wow.
received a prize and it was richly deserved in the work he has done in international trade. many economists would say he has moved beyond the traditional framework, moving into more political economy analysis rather than just traditional economic analysis. it is a different kettle of fish . both may have phd's, but they are going in different directions. some of the names that have come up around the fed would have that more traditional economic analysis approach, would have an approach that would probably focus a lot on trying to be systematic and using rules to make decisions. francine: professor, we opened up the questioning to our have oneusers and i saying, "does the professor think that the global recovery will continue, and what are the major downside risks?" randall: right now, we seem to
be on a reasonable track for recovery. the u.k. is probably one of the weakest links of the major countries, but there is certainly a lot of potential downside risks. in some trying to rein of its rapid debt growth. that can be a challenge to do that, do that without having broader repercussions. we still have a lot of debt outstanding in many countries. there is fragility that comes from that. of course, there could be tragic terrorist and other events that would be a shock not only to individuals but the whole of the financial system. francine: how much is reducing the balance sheet -- and i am not just talking about the fed. a simple chart looking at how big the balance sheet for the fed is compared to the ecb compared to the boj.
who has the toughest job? randall: the bank of japan, because they have the largest relative to gdp. they are nearly 100% of gdp. and they have been buying equities every month. taper tantrum when ben bernanke talked about slowing their purchases of long-term securities. i can just imagine what will happen to the japanese stock market when the bank of japan says we may stop buying equities. i think they have the toughest job. all of them will not be easy, but i think boj is the toughest. tom: it is understood -- i believe you teach this to your freshman course -- the net present value of the bond market. they look to the present tense. do we do that with the balance sheet? value of net present the balance sheet adjustment to where we are now? question.reat the markets have not responded very strongly to this discussion
-- to the discussion of potential balance sheet normalization. will beven because this very regular and smooth, like paint drying. i think we will see tomorrow what the reaction is in more detail. janet yellen will provide more go,il on where they will and we will see whether markets react to that. but so far, they have been thinking this is not really a big deal. tom: randall kroszner is with the blue school in chicago. we will drive forward the conversation with a touch of washington. kevin cirilli will join us as well as gideon rose. from london and new york, this is bloomberg. ♪
this time, the attorney general on russia and a clandestine meeting at the mayflower hotel. meanwhile, could rosenstein, sessions, could they fire special counsel mueller? trump supporters ponder this morning. a yellen press conference tomorrow. and in francine's united kingdom, prime minister may survives another day, boris support.roviding good morning. this is bloomberg. crazyom keene with the news flow with francine lacqua. she is still prime minister, right? francine: yes, and she will meet the french president of little later on. she has negotiations with the d.u.p. and she starts talks with the french. will smoke and have an
espresso or whatever. issue like a prime minister or is it still up in the air? francine: it is up in the air, because she had to apologize to her lawmakers, saying clearly that she made a mess of it but will get them out of it. unclear how she will do that at this point. tom: to bring you up-to-date on the washington soap opera, here is taylor riggs. taylor: we will start in the u.k. prime minister theresa may bore herself some time with conservative party makers -- conservative party lawmakers. she said she is willing to read think her approach to brexit. she meets with the head of the northern ireland democratic unionist party. she needs there votes to prop up her minority government. and a few hours from now, it will be attorney general jeff sessions' turn in the spotlight. the senate intelligence committee will question him about his role in the firing of
james comey. several u.s. senators from both parties have reached a deal to expand existing sanctions against russia. they also want congress to review any move by trump to lift existing penalties. and for the first time, apple ceo tim cook has admitted publicly the company is developing a self jamming system. he made the revelation in an interview with bloomberg tv. >> we see it as the mother of all ai projects. it is probably one of the most projects to work on. autonomy is something that is incredibly exciting for us. we'll see where it will take us. we are not really saying from a product point of view where
it will take us, but it is a poor technology that we view as important. taylor: in april, apple received a permit from california to test three self diving vehicles. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: right to the data check. there is a risk in the market. francine has an awesome chart on dis-inflation in the united kingdom. oil does nothing on board. the vix, 11.04. the sterling rebounding. and the mexican peso has been on a tear. a stronger mexican peso. francine: i like the mexican peso.
i am looking at technology companies in europe, leading a bounce in stocks. the seller started in the sector last week. the pound managing to advance a touch because theresa may, so far, survived this showdown with rank-and-file lawmakers. what i am reading research notes, and it is unclear where she goes from here. we have to look at yields. 1.02,n see the 10 year, which is linked to inflation. there is quite a lot going on, especially in the u.k. tom: the yield should be green on the screen, up five basis points. is on the united kingdom 10 year yield this morning. right now in washington, to bring us up-to-date on this ness in the surreal world, kevin cirilli. michael o'rielly is out with a story that brings forward and begins to make clearer what is
russian hacking. that is a job dropping combination of the red phone between the obama administration and moscow. illinois comes into it. knowledgee kind of and information we will see in the coming days and weeks out of your washington? onin: it is a great story the bloomberg, but it is important to note all of this emerged because of hacked nsa documents made public. this just paints the picture of how significant the russian hacking effort was. again, early yesterday as well as today, there is an effort underway on the senate or to pass new russia sanctions. where the white house feels on that remains to be seen. tom: let's bring up the theme of
the moment. this happened around 7:00 last night. al hunt writing it up beautifully. and kevinty crazy cirilli's district of columbia. it could get more crazy. the president could fire the special counsel. if rosenstein is instructed to dump mueller, it evokes memories of 1973. the only confirmed justice official to throw someone out the door is rachel brand, the associate attorney general. talk about this. who is driving this dialogue last night on the special counsel? though -- kevin: the white house. chris ruddy speaking on on pbs and drawing controversy. the conservatives are arguing that mr. mueller is asked friends with now former fbi
director james comey, and they see that as a conflict of interest. but this only adds further confusion and negativity surrounding all of this. and it is the same day that attorney general jeff sessions is set to testify before the senate intelligence committee at 2:30. francine: i keep going back to the party, but what does the gop expect of trump at the moment? at the breach of 39 states by russian security, does the president need to calm out and say something on that -- need to come out and say something on that? kevin: a lot of republicans want him to. this is significant. 39 states were breached with security by the russians. i cannot underscore this enough. on the senate floor, you have a senator lindsey graham and senator ben cardin -- on the floor by
senator lindsey graham and senator ben cardin for more russian sanctions. you have the red phone for negotiations to moscow and how they will be punished. you have a growing call, not just by people like senator graham and senator cardin. i spoke with mark meadows, who was also concerned about the russian meddling. kevin cirilli, thank you so much. a terrific brief. how well-timed is this? us, fromse joins "forbes" magazine. we have to rip up the script. unraveling in washington, when you have an nsa leaker?
with the scope of the hacking, and all of the other soap opera as well. is it your process that things are unraveling? theon: first, thanks for blessing to serve your agenda. that is a quote from a cabinet meeting yesterday. tom: were you giving me the full vice president answer? gideon: that was the previous quote. "thank you for the opportunity to serve your agenda." of this stuff -- my initial reaction to it, all of the stuff you are saying, is inconceivable. longertrump era, we no know what that word means. the commentary of what constitutes crisis or something out of the ordinary out -- of these days, and everything we think we know about in politics
is up in the air right now. we are in a very strange period. tom: at 7:00 p.m. last night, i cannot emphasize enough coordinated effort to talk about this mueller firing. it is on the cover of the "new york times" and the "washington post." but is an use when people are gossiping about it on tv? that is the framework of it. francine: that is the question we need to try to address. given that everything is up in the air, is this not an opportunity to reset and reboot? and had he rebuked foreign policy -- and how do you reboot foreign policy in the u.s. at this point? right: the lead issue is about that. there is indeed an opportunity sort ofut forward a broad agenda for american foreign policy that is rational and responsible and serves
american and the world's interest together. there is no inherent contradiction between american patriotism and responsible global leadership. the challenge is how to make that work in practice. the trump administration have the people and situations and opportunities and support in congress for a real, serious foreign-policy. they have not particularly articulated that. yet. tom: we will dive into gideon effort -- gideon rose's pay there is so much to talk about. this afternoon, we turn to more testimony. the attorney general testimony -- testifying in the 2:00 hour. this is bloomberg. ♪
♪ taylor: this is "bloomberg surveillance." let's get the bloomberg business flash. three former currency traders in the u.k. accused of conspiring to manipulate markets have in theto face charges u.s. the trio who worked for jpmorgan, citigroup, and barclays will be arraigned in a new york court. they used an a la tronic chat room to share information. electronic chat room to share information. in else says the -- jeffrey exit processhe ceo began in 2013, which finished yesterday with the naming of john flannery. uber ousted its senior vice president for business. byl michael has been dogged
public scandals for several years. kalanick is said to be weighing a three-month leave of acceptance -- leave of absence. tom: thank you. of theood to get a view fed from outside. we do that now with carsten brzeski of ing germany. gideon rose is with us as well. public service for the netherlands ages ago. you have done a lot of work in europe on the dynamics of economies. how vibrant is the u.s. right now, when you look across the pond? do you buy three d-up -- do you buy 3% gdp? carsten: not yet. the cycle is coming to an end. we have seen the expansion of the german economy. tom: right where we want to go. trump's next steps.
is the next step anti-austerity? do we still need fiscal stimulus, whether it is germany or really struggling economies in europe? and in the u.s.? >> if you want to the -- if you want to extend the cycle, yes. not only in short-term growth but in infrastructure, long-term growth potential. francine: what is surround brexit? we heard there is no time to waste in brexit talks, but they are not wasting time. we need to figure out what does it looks like? . carsten: that is true. the europeans will look to see what the british government is bringing forward. the interesting question is whether something like a soft brexit is feasible. it always comes with some financial contributions from the
u.itish to the you -- the e. budget. may want fort does this? carsten: i think she and her party still one a hard brexit. leaving the e.u. and getting full independence in their policies. francine: what does it mean for currency swings? this something we try to look at clearly. we were talking about foreign policies with gideon rose. it seems like the world is do notresetting, but we understand the implications on economic trend yet. carsten: what it means for the currency extreme, hard to tell. it also depends on central banks. twofed will probably hike more times this year. the ecb will gradually move towardsthe tapering
2018. and the brexit negotiations clearly mean hiccups, tensions. compare it of it to the greek crisis. any time rumors, not in negotiations, they can impact the currency market. francine: thank you. andill be back with carsten gideon rose of "foreign affairs" magazine. this is what we have heard so far from the german finance minister, wolfgang schaeuble. saying year area economic development is a little better. thater, he is also saying we need to be concerned about geopolitical risks, because, by far, they are the main issue. then in about 20 minutes or so, we -- our very own matt miller will sit down with the finance minister and we will ask a little more about the german-u.s. relationship and what that means for currencies. that is at 7:00 a.m. in new york, 12:00 p.m. in london. this is bloomberg.
♪ ."m: "bloomberg surveillance welcome to all of you worldwide. francine lacqua in london. i am tom keene in new york. we are with gideon rose. must-read.e morning the future of globalization will depend, in large part, on china. china will struggle to replace america. politicians and policymakers all
over the world will need to push reforms that can preserve the achievements of globalization and fix its flaws before it is too late. what is its flaw? we need coordinated policies, because the global economy cannot run completely without coordination. tom: we did that in the 1930's, and the wto is dead. like --companies companies in china and germany need to coordinate on policy issues and global economic management. the distractions that are currently ripping things apart and stalling progress are the worst kind of thing. and the reason you get a physical copy of this magazine, the price of two martinis every year, is he not only get michael spence on china, but you also china's imagined
past goes into all of this. great. china is doing we also have a great piece on chinese corruption and whether that will be enough of a drag just all chinese development going forward -- enough of a drag to stall chinese develop going forward. there are fascinating and important issues in global politics and economics that are going unaddressed because we are wasting time with all of this other investigative tabloid stuff. we tried to cover issues important to u.s. policy in the magazine, but we also tried to direct agenda -- direct to the agenda. washington should do legislative things other than discussing scandals. carsten, doncine:
you look at pure economics? carsten: of course we are looking at this. coordination,tter more coordination on regulation, on a level playing field with china, especially with europe. it has become more important. -- europe isn can reorienting itself towards the east. tom: final question to gideon rose. this cover is great. the wall they are building around america goes all the way around the country, and you have two big holes. one is in canada and one is in the pacific. how big is the wall right now? how likely is the wall to go up all away -- all the way around the 48 states? gideon: not very likely. you cannot be open to everything of globalization, because there are that flows.
and you cannot completely close yourself off, because there are good flows. this is not rocket science. the trick is how do you develop mechanisms that are a functional equivalent of good lines to go onto a plane or fedex something. something that lets good flows through but blocks bad flows. you cannot do that except by coordinating with all of the players. it is cooperation amongst the players. that is why fred hu and michael spence were writing that together. for gideon rose, thanks those many different viewpoints. scarlet fu leading our coverage of the fed tomorrow. this is bloomberg. ♪
little bit more beautiful than yesterday when it was raining. let's get to bloomberg first word news. here is taylor riggs. taylor: president trump plans to roll back barack obama's efforts to open cuba to trade and travel. he will consider limits on travel and restrict partnership by u.s. companies. president called the deal with cuba one-sided. wantsump administration to ease a lot of the rules imposed on wall street after the financial crisis, but not eliminate them. the treasury department announced the changes last night. they called for the annual stress test on banks and weakening the power of agencies that lease consumer finance. the european union chief brexit negotiator warns the u.k. runs the risk of exiting without a deal in place. told the financial times and other newspapers it has been almost three months since the u.k. formally notified that you
they were leaving and there haven't been any negotiations. yesterday the two sides failed to disagree -- agree on a date to begin talks. second nba title in years. the warriors beat cleveland to win the best-of-seven season 4-1. kevin durant scored 39 points and was named the most valuable player. global news 24 hours a day, powered by more 2600 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. thank you so much. u.k. prime minister theresa may told conservative lawmakers that she takes full responsibility for the party's election results. arlene foster as she seeks to thresh out an agreement for the support of the 10 lawmakers in the house of commons. later today she will visit paris for talks with emmanuel macron.
joining us is bloomberg's anna edwards. theresa may still in power today. will she be empowered by the end of the week? anna: she seems in the first tour term have dodged this one. she got verbal support from ever -- many members of the cabinet and yesterday she faced rank-and-file lawmakers on her own. gave her a round of applause after she visit -- finished a 75-minute question and answer session. anybody who thinks she is not going to last that long. many people commented she is leading the party but not in power. be pushed around by all kinds of factions in her party. for the moment, she does seem to be the leader. the concern is basically making this deal with the du p. what will they ask of the prime minister? anna: some of the more
controversial policies and social policies we probably will not feature in any arrangement we get pretty things around gay marriage and abortion, that probably will not be part of the conversation. my colleague has been looking back at it. -- at a document they put out when they thought they would have to go into conversations around a coalition and they demanded $1.3 billion of investments. this will be a kind of show me the money conversation between dup andnd the tories -- the tories. tom: francine, you are going to go off and start another bloomberg day, which is fine and well. joining us -- francine, have a good day. joining us from germany, we are having special coverage today -- is a gentleman years out front on the challenges of his europe.
thomas mayer was a legendary chief economist at deutsche bank years ago and has gone up to other things including his summer place in italy. he joins us tomorrow. thomas, you say we are in the that yound of a crisis were way out front on. what is the distinction? what is the character of this third round? sayas: first of all, let me it is a great pleasure to speak to you again. i would define the first round as the crisis in the financial sector -- this lasted from early bust.o the lehman the second round was the crisis in the real economy and then we recession in the first quarter of 2009. then we thought things would calm down and we thought we would leave the crisis behind us
, but for the last one in a health -- one and a half in two years, we are seeing it in the political domain. we are seeing political forces responding to the fallout from the crisis, the meager growth, the ceiling by people that are being left behind. that has caused substantial political changes. think about brexit, think about the presidential election in the u.s. and here in europe. we have: -- that is the political boomerang. tom: do we need more stimulus? you mentioned to the challenges of italy. it seems like throwing more money at it has not worked out austerityare we in an mode and doing you to get out of it? thomas: we have thrown probably too much money at it. when you look at central banks' balance sheets -- they have
grown. it bought time. it was useful because they were running dry. it was like an engine losing oil. was really good and then they relied too heavily on monetary policy to fix things and that the people in a tranquilizer. announcer: tom: there is the keyword, tranquilizer. joining us in new york, carsten brzeski of ing in germany. is there a numbness or a lack of animal spirit and -- in nominal gdp? carsten: i don't think so. the boomerang thomas mentioned we have ame to -- window of opportunity right now with macron and merkel.
the fear factor with trump is that we will get more integration. was i knew what carsten going to say. with thomas mayer, there is a little bit of an uptick and political enthusiasm with the new guy on the block in france. do you buy the market consensus of a better europe right now? hopeful. am i would love to see it, but i have to say, emmanuel macron has a tremendously hard job to do. reforming a country that for years has suffered from very high unemployment, a very high share of government gdp. regulation will require a heroic effort and at this stage, i have to say i am skeptical that he can do it. i hope you will be able to do it , but i am skeptical he will succeed. tom: one final question if i
may, the idea of the balance sheet reduction. can you -- can we reduce our collective balance sheets do it with stability? thomas: i think we can do that, but we have to of course be very careful. the central banks are trying their best to implement the balance sheet reduction in a very gradual fashion, so that is to be applauded. at the same time, it should not be so gradual to defer necessary adjustment forever. it is really a walk on a tightrope. i think we should do it and we cannot delay it because if we leave it at that, at some stage the cycle will turn around and we will have a recession at some point. if we leave it at that until the next recession, these low balance sheets and interest rates will be much worse off than after the great financial
crisis. tom: thomas mayer joining us at our berlin conference today. wonderful to see you. we continue with carsten brzeski. yellow line is germany. for those of you on radio, put will talkter and we about it today and i normalized it to the peak of the good times . carsten, the white line is u.s. and the yellow line is germany with the united kingdom and the purple. queen the german distinction in europe is your if you double. chart unless it say so. is that yellow cap with the blue gap -- let me get it so it is clear, this gap right here, is that just because of currency? carsten know -- carsten: it is also structural reforms and interest rates and booming
infrastructure and extreme unemployment -- extremely low unemployment. tom: i want to go to the social policy of 2008, 2009, 2010 where germany said we will not have more unemployed. what is your take on that five years down the road? carson: i think it was a good decision, but the irony is germany implemented social policies that they for bit other foreign policies to implement. they have social policies and at the same time, afterward, they prescribed austerity measures to the rest of the eurozone pre-moving forward, we will get more fiscal stimulus. tom: dr. mayer has written with real concern about -- what should bundesbank and all of germany's policy be? >> i think italy is too big to come -- to be called periphery.
they need to clean up the banking sector. tom: do they have to take responsibility for their fair share of the debt? the people that issued all that money to italy to get them in trouble, do they have to eat some of that loss? >> that was retail investors and the thing is, we have new rules in europe, but we have legacy assets. this is not a black-and-white story, but this is about legacy and transition and transition means like stability. tom: carsten brzeski with us. we got germany with the great event in berlin today. it is really well-timed. here is carsten, tv for those of you on the trading desk for it you can go back -- i am going to the latest one. there is the chart. you can steal that chart from tv . we have heard that is the best thing as well. stay with us. much more, "bloomberg
♪ tom: good morning. british airways let them back into the country with bloomberg daybreak: asia after -- with bloomberg daybreak. what did you learn in the united kingdom? how many conservative votes wanted to vote for a different party. the big focus today, if i had picked the country six months ago that this administration would have friction with, i might have picked mexico and perhaps china. probably not germany. the politics of the german-u.s. trade surplus.
coming up with the german finance minister, we will bring that for bloomberg daybreak 11 later. -- a little bit later. tom: here is more of an important conversation with tim cook. executiveapple chief officer. this is an important point in the lengthy interview with emily chang. here is tim cook on the leadership distinction of the apple eras. tim: i would point out that steve's dna will always be the certainly asor long as i am ceo and i think as long as anyone is, honestly. inhink it is deeply embedded the company. things are all over time as they would if you were here interviewing with you today. that's probably a better
question to ask somebody that works for both of us in some form. tim cook, fabulous interview. always look for that in bloomberg businessweek this week. joining us with great perspective on the machine known as apple is alex webb. he is in our washington studios. let me start with an open question. how is tim cook doing? that is a big one. i think people will be able to quote that better in a few year's time. cooku look at the way tim -- the thing he has laid down is his market for apple is how they stand on issues like climate change, a quality in terms of gender, or sexuality. those kinds of issues. on those things he has made a real stand. that is different than what steve jobs used to do. they started to come out with a few more products other than just the watch. we have reported on what they are doing with augmented reality
and i think that is how we will really see judgment fallout in the years and months to come. tom: the leadership discussion with esther tim cook. i have a real john this view, but i worry -- jaundice view, but the financials can be folded onto someone who wants job success. that could be uber. what a train wreck we are seeing. can you give me some wisdom on this? in three years am i going to get uber car?d over -- an you will.ink five or 10 years will be more interesting. all the big carmakers have got their own uber competitors gearing up. volkswagen and gm, and these are really big beasts. if you talk to people in autonomous or automotive industry, the way they look at
it is this is going to be a commodity. you go on date night with your better half and you order it through google and say you want to go to a cinema or a restaurant and it says do you want a car to take you there and back? the way toing -- make big money on these will be quite limited. tom: general electric has financial integrity and operations ross is is of finance. apple has financial integrity and operations of finance. uber does not. what do they need to know to to moveneed to do forward? alex: it will be adjusting to see when they come to market. if they went to ipo. if you look at what is being reported, their net profit margin even at the best market -- in the best market is relatively weak. the problem is you or i are isikely take uber if it expensive. a lot of the rides are
subsidized. the proof in the pudding will be what happens when the right are not getting -- rides are not getting subsidized. if public transit is awful, that might be the case. but in new york or washington, d.c. or london, that may not be the case. we are going to come back with carsten brzeski of ing germany as well. coming up, conversation with the german finance minister. this is well-timed, to say the least. we will do that on the 7:00 hour on bloomberg television. this is bloomberg. ♪
♪ taylor: this is "bloomberg surveillance." three former currency traders in the u.k. accused of conspiring to manipulate market agreed to face charges in the u.s.. one who worked at jpmorgan, citigroup, and barclays will surrender and be arraigned in a new york court. prosecutors say they used an room to sharet
information. carlyle group expect to raise as much as $6 billion for the new asia buyout fund. the fund will close in the second half of the year. carlisle faces increasing competition for buyout deals. american cattle industry is one step closer to resuming beef exports to china after a 14 year band. the agricultural department says trades with beijing have been finalized. bloomberg business flash. tom: it is not a breaking news or even exclusive, but i think it is worth talking about. minutes ago, opec came out with the boring monthly report that gives a strange report for oil has notd -- moved on this, but for all of -- that philo oil, put that
-- follow oil. chart doing single best and show equity, but then we talked to an economist that cannot talk about companies. that will work out. i showed this chart yesterday. welsh in the 90's and we roll over. here is the ugliness. here is the boom off of 2009. carsten, so much of this was ge wanting to be more germanic. let's be more like siemens. what is it about german manufacturing process that makes other nations and other companies go we want to be like that? carsten: it is extremely efficient. it is cost efficient. we are investing in education and engineers and research and development and i think this is
what makes german manufacturing .ighly efficient german manufacturing is not as good anymore as it used to be in the early 2000 because the germans are trying to catch up when it comes to digital processes, developing new products and digital services and this is where they are lagging behind. tom cole and tom rice, the head of international and john flaherty taking over, we saw -- do german multinationals want to be more international or is it about getting germany and europe right? carsten: in the late 2000 stated outsourcing and they were one of the first going into china. more-- right now with political geo-tension, they are rethinking on europe. tom: does germany have a big advantage because they are going to talk to china and others that mr. trump does not want to talk to? karsten: they do have an
advantage because miss merkel is viewed as the last leader of the free world. tom: you are visiting us here in new york. he is with ing germany. we've got lots on your calendar across bloomberg radio. here is your foreign-exchange report. we do that at 1:00 p.m. with scarlet fu. the mexican peso stronger this morning. 18.1 two. sterling stronger 127.29 as well. don't forget the sessions coverage this afternoon. the attorney testifies. ♪
--s desk jonathan: jonthan: jeff sessions testifies today. fed two day meeting commences and rate hike is on the cards. the market wants more answers to this -- to this $3.5 trillion question. good morning, this is "bloomberg daybreak." i am jonathan ferro alongside david west and. alix steel is off today. bloomberg's matt miller sitting down with an exclusive interview manager -- finance missed -- minister wolfgang schaeuble. futures a little bit firmer. stabilizing in europe. the second biggest gaining industry group on the session so far. treasuries stabilize after four days of losses.