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tv   Bloomberg Markets Americas  Bloomberg  May 4, 2018 10:00am-11:00am EDT

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vonnie: here are the top stories we are covering from bloomberg and around the world. april jobs -- nonfarm payrolls improved by 164,000, 3.9% unemployment rate. but earnings and participation disappointed. joins.r fed governor a former fomc member and one fed short-lister for the chairman position. warren buffett says he is buying more apple. we will be in omaha for what to expect from the animal shareholder meeting this weekend. more to come, but we are 30 minutes into the trading day, and julie hyman is here. we typically might see some selling. julie: we are seeing an indecisive day.
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there's is no room for stocks with the volatility we have seen. we are seeing not much change overall in the wake of the jobs were are dust jobs report this morning that was mixed when it -- in the wake of the jobs report this morning that was mixed when it comes to overall estimates. a lot to way here. if you look at the s&p 500 the past five days, we have seen four of the past five days be negative. this is as investors are trying this as good as it gets. that sentiment encapsulated in the caterpillar conference call earlier in the week. if you look at the economic data, there is the question that remains as well. we have the economics of price index for the united states. that is in blue. that is just buy what margin are economic data points beating or missing estimates. you can see the margin by which they are beating estimates is going down. they are beating analysts
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frequent rate. -- at a less frequent rate. we have the yield curve that has been flattening and flattening. this question of where do we go from here, are we at a peak in terms of earnings, in terms of the economy, etc. let's talk about the earnings reports today. we have a professional services company engineering services. those shares down 21%. the company slashed its full-year earnings guidance. it blamed up our project that did not meet company expectations. downgraded by analysts as well. v.f. corporation, those shares down 5%. and alibaba -- even though the company is going to have 60% revenue growth this year and next year, it is suspending to get that growth. the client in the income and margins. it is going to keep on spending. andecline in income
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margins. it is going to keep on spending. we have strength in the largest companies in the u.s. 11%, had a big week, up its best week in a two months. we learned from an interview with cnbc that warren buffett, berkshire hathaway bought an additional 75 million shares in apple. interesting, mark, that it wasn't enough to keep the overall market afloat. , do you want to see a preview of ethan harris? if you do -- there you go. thanks for the pause, julie. this is the chart you want. we will get to even in a few moments time. 22 stock 600 companies reporting today. what is adjusting is the european page, the benchmark stoxx 600 come is on track for the sixth weekly rise, the best month since march 2015. busy earnings day. let's talk about air france. the shares were much lower a little bit earlier. biggest decline since 2016.
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it is warning that fuel prices, rising feel prices, and the strong euro will add to the on a flightrden cancellations on and off since february. shares are down 2.3%. shares of the airline, europe's biggest, falling the most in a couple of years, after full-year results are expected to be notably below 2017. the fuel bill will be 350 million euros higher. at least 300 million euros in operating profit. let's stick with the airline fame and talk about norwegian air shuttle. repurchase from the owner of british airways because they undervalue to the committee. iag considering options. norwegian ton a
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initiate the discussions with scandinavian discount specialist. earlier, iag posted earnings that beat estimates. it issued a bullish outlook for the rest of the year. iag scandinavian discount specialist. earlier, shares, the white line, falling as much as 13% today, the most since july. shares of jump to buy 72% -- shares have jumped by 72% in the it haster iag announced got at stake in the company. the blue line is shares of iag, which are rising by 5% today. the airline industry is very interesting today. cars,move onto sports luxury sports cars. ferrari up by 7% today, exceeding expectations. the italian supercar manufacturer sold out most of its models for 2018 and part of next year. the client company; -- the is onn company's capacity the best is also full capacity. the family car -- he was
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speaking on a call with analysts yesterday after the european close. reaction in the u.s. market earnings beat on thursday. shares in ferrari motoring ahead. we have got some breaking news. vonnie: president donald trump speaking on his way to dallas. he says he has the date and location for meeting with kim jong-un, the north korean leader. this very anticipated meeting that could take place this month , as early as this month, potentially next month. president trump telling reporters he has a date and location for that meeting. on the domestic front come he says giuliani is a great guy, rudy giuliani mated news a lot this week to having broken the news that president trump knew about the payment to stormy daniels. finally, trump said he would love to meet robert, but he would have to listen to lawyers. again, he would love to meet mueller, but he would have to listen to lawyers.
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back to the u.s. jobs report. payrolls regarding in april. march figures were revised upwards. that really isn't the headline. the on employment rate down to 3.9%. -- the unemployment rate down to 3.8%. dissipation rate disappointed. joining us is ethan harris, former researcher at the new york fed. he joins us from his office in new york. explain to us -- we are seeing 3.9%,employment rate of and yet earnings are not stronger, neither his participation. statistic,an amazing the fact that we are down to 3.9% on the unemployment rate and we have not had more wage growth. i think the answer is it is going to take time. couple yearsn a ago running at 2%. and then picked up to 2.5.
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he has kind of gotten stuck year. we expect it to continue to accelerate going forward, because the unemployment rate is not going to stop here. but it is a bit of a mystery why we have had more wage inflation. fell tounderemployment 7.8%. is that good enough? ethan: i think the labor market is in very good shape. it is not just unemployment measures, it is things like the quit rate, people quitting their jobs to look for new jobs, which is a sign that they feel comfortable with the job market. there are very strong and still improving. if you look at the job openings, they are high. the labor market is pretty hot. what has happened -- what has not happened is that the fire has not lifted the wage growth numbers hold up i think it is a matter of time. vonnie: you say to her is slack in the labor market or no -- you say there is slack in the labor market or no? ethan: i think we are past full
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employment. one of the things we always go through every cycle in the united states is you go late in the cycle, labor markets tight, and then there was a serious debate about whether or not we hit full employment. it is always in hindsight that we know where the trigger point was. this happens with every cycle. this isn't new. we have seen enough of a pickup in court price inflation and wage inflation to say that we are at the threshold, and the disappointments and the speed of the acceleration of the total absence. mark: today's report reinforces forecasts of a rebound in economic growth after the slowdown in the first three months of the year. ethan: i think that the data going into april globally and this.s. is soft, and report is consistent with the softening. what i would say that i wouldn't
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get too excited about this. we know that there was a big tailwind behind the u.s. economy that is going to show up this summer and into the second half, and that is the massive fiscal stimulus that is coming. it is much too early to have seen that. we are still 30 confident that growth will increase to about 3% -- still pretty confident that growth will increase to about 3%, and the u.s. will take over as the main growth engine among developed economies. yes, softening data is confirmed to some degree in this parable report, but i don't think this is going to last. mark: ethan, where are we? few days toa digest the latest fomc statement. does the jobs report change the pace of rate hikes this year or not? ethan: the fed is almost on railroad tracks right now when it comes to their tightening cycles. they said they are going to hike three times a year. i think they will do three or
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four hikes this year and the three or four hikes next year -- vonnie: yes, even come if you could hold off on them that would be wonderful. we will get back to you and maybe we can all this is together to president trump. president trump: he knows it is a witch hunt that is what he knows. he has seen a lot of them. he has never seen anything so horrible. e-mailsample, 33,000 requested by congress with the subpoena, and they get burned, they get deleted, and nobody says anything. give me a break. rudy knows it is a witch hunt. he started yesterday. he will get his tracks straight. he is a great guy. but he feels it is a very bad thing for our country, and he happens to be right. >> [indiscernible] when did you find out -- president trump: you know come we are going to give a full list, and people know. virtually everything said has been set incorrectly, and it has
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been set or wrong or it has been covered wrong by the press, just like nbc and abc yesterday covered the story wrong. but you will be finding out. it is actually just wait a minute -- it is actually very simple. it is actually very simple. there has been a lot of misinformation, really. people wanting to say -- i say, you know what, learn before you speak. it is a lot easier. >> [indiscernible] -- north korea. we are havingp: very substantive talks with north korea, and a lot of things have already happened with respect to the hostages, and i think you are going to see very good things. as i said yesterday, stay tuned. i think you will be seeing very, very good things. also, the trip is being scheduled -- we now have a date and we have a location. we will be announcing it soon. very substantive talks with north korea, and a lot of things have already happened with >> [indiscernible] -- robert mueller? president trump: well, the
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problem with sitting is this. you have a group of investigators, and they say i am not a target, and i am not a target. but you have a group of investigators that are all democrats. in some cases they went to the hillary clinton celebration that turned out to be a funeral. you have all these investigators they are democrats. in all fairness, bob mueller worked for obama for 8 years. you look at the statements that were made. if you take a look, as example come at the rod rosenstein letter, to me, prior to the firing of james comey -- just read it. your viewers don't know about it. put that letter on the air. lovely,much speaks very and that is just what best it very much -- it very much speaks very loudly. i would love to speak. nobody wants to speak more than me, against my lawyers, because most lawyers say never speak on
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anything. i would love to speak, because we have done nothing wrong. there was no collusion with the russians, there was nothing. there was no obstruction. ,ery funny, if you fight back because you people say something they or they leak which have been doing, if you fight back, they say, "oh, that is obstruction of justice." somebody says something wrong, you fight back, they say it is obstruction of justice. it is nonsense. wait, wait, let me just tell you . i would love to speak i would love to go. nothing i want to do more, because we did nothing wrong. we ran a great campaign, we won easily. to, iundred six -- 306 think it was 223. that was a great victory, that was a great day for this country. we have new jobs numbers out. 3.9%. i would love to go, i would love
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to speak but i have to find that we will be treated fairly -- wait, wait. i have to find that we will be treated fairly, because everybody sees it now, and it is a pure witch hunt. right now it is a pure witch hunt. why don't we have republicans looking also? why are we having republican people doing what all of these democrats are doing? it is a very unfair thing. if i thought it was fair, i would override my lawyers. >> are you sure michael cohen wasn't paying the other women? president trump: i thought the jobs report was very good. the big thing was cracking 4. it hasn't been done at a long time. you tell me -- we are doing great. the stock market, i guess it is up 35% since the election. and now they are waiting to see what is going to happen on trade, because we are going to have some incredible traded deals announced.
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my people are coming back right now from china. we will be doing something one way or the other with respect to what is happening in china. let me say this, i have great .espect for president xi that is why we are being so nice. we have a great relationship. but we have to bring fairness into trade between the u.s. and china, and we will do it. thank you. president donald trump speaking to the press on his way to dallas. just want to point out he says that we are having still can't -- substantive talks with north korea and we will be seeing very good things. there are things happening on the hostage front already. and there is a date and location set for the meeting with the -- "we will leader be announcing it shortly" is exactly what the president said. he talks about domestic politics
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, rosenstein want you to speak to the special counsel but -- wanting to speak to the special counsel but he's not sure he will be treated fairly, no obstruction. he spoke about the jobs report, which we were talking about with ethan harris of bank of america-merrill lynch. the president is taking a lot of solace in the fact that we have a employment, according to him, 3.9, below 4 for the first time since 2000, in fact, ethan. on the one hand this could be seen as a good thing. but on the other hand, if we are through full implement and still not getting wage growth, wage inflation, is it just that we have to wake, or is there something structurally wrong with this labor market at the moment? ethan: now, i think this is very good news. we got a drop in the unemployment rate going on for eight years now. it has gone from 10% down below 4%.
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tremendous improvement in the economy. we just have to be patient. to get wage growth going. people's expectations have been diminished by the slow pace of the recovery, so they are reluctant to demand higher wages. firms are reluctant to give in and solve their labor shortages with higher wages. but i think over time we will see that final stage of healing in the labor market, with wage , we think ending the cycle and more like 3.5%. i think we need some patience. vonnie: you think of how many more times will be fed be able ethan,e -- he said -- how many more times will be fed be able to raise this year? ethan: you know, the funny thing right now is that the market and commentary in the markets got nervous that maybe the fed is making a policy mistake, the economy cannot handle these rate hikes can look of the week data and all that. we don't really buy that
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narrative. the fed's hiking cycle is less than half the normal pace. they are doing it in an environment where we about to get a big fiscal stimulus. this as a major challenge to the economy, and this top of -- this talk of peeking out of the markets is premature. we could have a serious conversation about that in two years from when the fiscal stimulus is fading and the fed is raising rates significantly. i think this is a soft patch in the markets and the economy, something that is quite normal over the course of recovery. mark: he sent, what is your read of the trade situation? president trump highlighting his good relationship with xi. it away, he says there will be some sort of resolution, whatever that means. where are you on the hopes for a good outcome, let's call it, between china and the u.s.?
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ethan: well, i think there is a the two sides taking very aggressive negotiating positions and then compromising into the middle. we will see that again. it is hardest to do vis-à-vis china. the challenge is our greatest with china that with any other country. you could argue that all of the trade pressure should be aimed at china not and europe, canada, or mexico. nonetheless, the pattern has been forwe will see that again. trade deals that are acceptable to both sides. we saw this with the south korean-u.s. trade agreement. it looks like we are headed that election on nafta for a compromise there. we are still cautiously optimistic that no big tariffs, smaller protectionist measures, but not the big shock to global trade which, by the way, would be quite negative for the u.s.
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and chinese growth. vonnie: our thanks to ethan harris, head of global economic research at bank of america-merrill lynch. he wrote a book on the ben bernanke fed as well. thanks to him for being patient as the president made comments, heading to dallas for a speech at the nra leadership for later today. still to come, said in focus. we speak to the former fomc governor of the federal reserve bank. that is coming up in a little bit. this is bloomberg. ♪
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vonnie: it is time for etf friday. here is julie hyman. vonnie,hank you, appreciate it. there is one etf firm that is bucking the trend of low fees.
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here to tell us more is tom from bloomberg intelligence. this is really unusual. one of our themes of etf trend is that low fees are winning out. chicago,burbs of naturally, the coverage of the industry leads us to blackrock, leads us to vanguard, because of the fee argument. it is almost like an enigma. i looked at all the average fees for each etf sponsor. julie: the big companies you are talking about. >> vanguard is 11 basis points. six times more than a vanguard etf. it is not just that you have one product skewing the average. broadave 130 etf's, offering of products. they're playing in that higher-end spectrum. julie: they are taking in money. >> that beautiful chart of
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flows, 20 basis points or less. they are quite the opposite. most of their flows are going to the more expensive products. managerin active getting in this business from i want to study what they are doing. they are barking the big -- bucking the biggest trend. julie: how are they doing it? >> they have a couple things working at the same time. performance always helps. tech ends up getting a lot of attention, but this product, you don't hear about it a lot. fdn, and internet etf. over the past two years it is the best-performing tech etf out there. you don't hear about it a lot. the other thing that has helped with them is the active etf business. when you think active etf's, that is not where your mind goes first. you think about pimco and these other firms.
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they have the largest manager of actively managed etf's. they can command a higher fee. what is unique with them is they don't have this big mutual-fund business there competing with. they have some mutual funds -- julie: this is very etf -- >> it is launching actively managed etf's. julie: thanks, appreciate it. vonnie: julie, thank you. still ahead, berkshire hathaway's annual shareholder meeting takes place this weekend. we get earnings some of. we will tell you what to watch. this is bloomberg. ♪ mr. elliot, what's your wifi password?
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wifi? wifi's ordinary. basic. do i look basic? nope! which is why i have xfinity xfi. it's super fast and you can control every device in the house. hey! let's basement. [ grunting ] and thanks to these xfi pods, the signal reaches down here too. so sophie, i have an xfi password. and it's "daditude".
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simple. easy. awesome. xfinity. the future of awesome. theie: breaking news -- president making more remarks to reporters before owing to dallas for the nra event today. he says the u.s. is not plan to
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withdraw troops from south korea. reporters were asking him about korea because earlier before leaving for the airport he said there is a date and location for the meeting between him and kim jong-un. he says "we will be announcing it shortly," he says "they are having very substantial talks with north korea and we will be seeing very, very good things. there are things happening with the hostages over the." we know the delegation left china without too much progress. mark: the only agreement seems to be they will have more talks. also, trump hinted he won't sit down for an interview with robert mueller, telling reporters he would love, to use his words, to meet with the special counsel, but he has to listen to his lawyers. it was quite a colorful president trump he spoke a little earlier. that's checked in on the bloomberg "first word" is. taylor has more from new york. taylor: the u.s. job market
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rebounded last month. employers added 164,000 jobs in april, at march figures were revised upwards. the unemployment rate dropped below 4% for the first time since the year 2000 wage gains unexpectedly slowed down enough to suggest that the labor market has some slack to exhort. the top market watchdogs in the u.s. are investigating the so-called fear index. according to people familiar with the matter, they are looking into the allegation that the cbo the global markets' widely used vix benchmark is being manipulated. for the third time this week, argentina has raised its key pesoest rate to extend the . the argentine central bank race 40%, highest in the world. the peso has dropped 17% this year against the dollar. inflation is running at about 25%. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more
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than 120 countries. i am taylor riggs. this is bloomberg. vonnie: taylor, thank you. i want to repeat that president trump says there is a location and a date set for a meeting with north korean delegation. it is an important thing to address, because we know that the president has been planning to meet with the north korean leader at the end of may, perhaps early june. looks like things are really progressing on that front. the president saying on his way to dallas that there are things happening with hostages already, and the trip is being scheduled. again, a date and location has been set. off to omaha. berkshire hathaway's annual shareholder meeting, the so-called woodstock of capitalism, takes place this weekend. attendees can expect everything from a 5k road race to a state dinner, and wisdom from the men of the hour, warren buffett.
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shareholders are looking for plan,ce on the succession health care, and this new news that he is loading up again on apple. joining us is someone who covers berkshire hathaway for bloomberg and is in omaha. we will get earnings on saturday, but that will be almost beside the point of this big celebratory weekend. >> it is definitely kicking off. we have people arriving from around the country and around the globe to omaha to see and listen to warren buffett. it will be interesting, we have earnings saturday, but the focus is the annual meeting, he will oftalking about a variety topics, so whether it is succession or his buying apple, every shareholder will be very intrigued by what he has to say. vonnie: exactly. the issues -- he issues a measure with his earnings are annual meeting every year, but
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he also talks to reporters and people in the audience. there is a set list of questions he answers every year to them strategically. katherine: yeah, it will be questions from analysts as well as journalists and audience members. it can really range. in my be about this specific stock picks, succession planning might alsoe, but it just be the economy and the political environment. they can really range from a friday bank of questions you might get --friday of questions you might get asked about. ulek: a new accounting r -- explain that to us. katherine: it is something he has warned investors about. essentially it requires him to report the unrealized gains and losses. it could make for some wild plea s, affording this $170 billion equity portfolio.
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keep an eye on that. it makes you want to focus on operating earnings from how the underlying businesses are doing. mark: as we know, he wants to reduce the reliance on insurance . he has eagerly looking for a target to put some of that $116 billion in cash to good use. any idea of potential targets? -- hard for him to find a deal, and i am not sure there is a was a great target. it is tough to tell what he might be looking for. said on noninsurance businesses he needs to make one or more huge deals for. a lot of the businesses are going for high prices, and he says it is making it tough. any indication that he
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is changing his style of investing at all? it sounds like he is taking advice from some of his managers more than he used to. katherine: definitely does. it's what it indicates there's a change in thought. we got news last night that he added more apple shares. then we got the news that he is almost completely out of ibm. it soundsbut this interesting sr he -- he once claimed spurned a technology, it's because he didn't understand him, and now he's going from an older school technology went to anyone in apple. it will be interesting why his thinking has changed. vonnie: charlie munger sometimes speaks of these events, too. do you have any idea might join buffett on the stage? katherine: i definitely know
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charles monger is often on stage with him for these hour-long sessions. he is good because he offers a nice perspective and nice sidekicks warren buffett when they are talking about their bets. we don't know if anyone else will join us. it will be interesting if they get time to talk. it will be seen -- something to keep an eye out for. katherine, don't eat too much gary made -- diary-made there. katherine: i won't. mark: let's move on -- payrolls rebound in april. important insight next with the former fed governor. that is just ahead. this is bloomberg. ♪
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vonnie: live from new york, i am vonnie quinn. mark: from london, i am mark barton. this is "bloomberg markets" on bloomberg television. time for the stock of the hour. the low-cost airline norwegian air shuttle rejecting two takeover proposals from the parent of british airways. i ag says it is considering what to do next. we are joined -- [indiscernible] funny morning. no role mention of norwegian. and then the news. >> news buried in an analyst presentation. we were not expecting -- i spoke to some of my colleagues, and the reporters were all expecting in the 70 5 a.m. statement. nothing came. deniede to the ceo, who
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flat out to come in. and then we saw this presentation and in there was a little nugget that's a they presented two different offers, both had been rejected, and they were considering options. vonnie: what is the next step? clearly what is done cannot be undone. ben: that's true. it is an interesting position they are in. we broke the news -- reporters broke the news that i ag is interested in norwegian. the norwegian share price has surged massively. ceoerms of valuations, the of norwegian has more leverage than iag wants them to have come and it is a question of what the shareholders want. we are waiting to hear from iag about what the next steps are going to be. overs no stranger to take
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to consolidation. that is how the group was formed. it will be interesting to see how he comes back. mark: who needs who? iag would take out a competitor. does iag need more than the other? ben: what seems to be norwegian's biggest lagos that they don't have the support from a bigger network in case something goes wrong. if norwegian has some disruption, the only wait for them to get passengers from london to new york is to use another aircraft or put them up in hotels, which costs a lot of cash. that is weighing on norwegian. otherag offers is airlines -- british airways. qataraught our -- airways. it generally support the
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norwegian mechanism. mark: iag strong today, outlook looks good for the year. that was very. ben: remarkable, actually, earnings from iag. they're quite bullish on the rest of the year. z on the tussle, we will call it, between iag and a norwegian. vonnie: we will be talking about telecom later on. interesting outcome there. coming up, the federal reserve is back in focus. we will speak to the former fed governor kevin warsh. this is bloomberg. ♪
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mark: live from london, i am mark barton. vonnie: from new york, i am vonnie quinn. this is "bloomberg markets." u.s. hiring rebounded in april. the unemployment rate fell to 3.9%, its lowest level since the
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year 2000. but there are other things in that employment report, as you would hear from michael mckee, international economics and policy correspondent. he is live at the hoover institution monetary policy conference at stanford university, and he has a key voice with him on the u.s. economy and the fed's perspective. michael. michael: thank you, vonnie, and nowre with kevin warsh, assisting with fellow in economics at hoover. i got to ask you, 3.9% unemployment, but on a year-over-year basis, wages go down. what does that tell you as a former policymaker about inflation dynamics? kevin: welcome to hoover, mike, great to have you here. the economy is strong, that is what it tells me. the economy continues to have some acceleration, have some positive momentum. 3.9% unemployment rate is strong. on the wage front, we are not
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capturing the underlying trends in wages. wages are moving up in the u.s. some of the reason why the data doesn't suggest it, there are huge changes in that. we see people with less than high-school educations coming into the labor force. but they have opportunities now. my guess is in a 2018 when all is said and done, you will have the biggest increase in real wages we have had in a dozen years or so. michael: given the statistics, with unemployment at 3.9%, pce inflation at 2% from the fed could argue it has met its mandates. to these number suggest any kind of different policy response? kevin: i hope not. i hope the fed isn't hanging there had on data that comes from the bureau of labor, department of commerce. it is noisy data. the underlying trends in the economy are strong. you don't want central bankers to be too myopic. the underlying trends are strong
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and there's nothing this morning that would fundamentally change their views. michael: the mission, low and stable inflation, they said that andet of 10% to get to that they could argue mission accomplished. but you have never been a fan of that 2% target. what is wrong with it? kevin: every once in a while i call it a clean, well lit prison of one idea. it is consistent with price stability. 1.63%. we shouldn't use the decimal point and take them too seriously. my views that the fed has been running policy that has been consistent with price stability for some number of years, and that we know somehow the difference between 1.7, 1.9, and 2.1% inflation is really silly. how data is not that good. on the way to run for my think the truth is that the fed, in my view, should not overreact if they see an improvement in wages over the course of this year. they catch up after a decade of low wages. they are around the price stability objective. they should be silly policy
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based on where the economy will be 12 months from now or so. as we learn from the crisis, price stability and financial stability are 2 very different things. michael: jay powell is seen by the markets as a steady hand, continuing the policies of janet yellen, basically. is that an accurate impression? jay for aave known long time. i think he is a really good guy, has really good character. my guess is those activities are more important over the next three or four years than some people in markets might believe. i suspect this is a continuity fed. what i'm looking for chairman powell and the new team that the president and the chairman assemble after they get their feet under them and put in place much of janet yellen's policies. they spend a few years after that reforming the institution. i think 2019 might be the first year before you see a new put his imprint on the institution, and for purposes of continuity that starks me as a good thing. michael: you argue to the one thing that is on autopilot that
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he would be cap -- would not be affecting, the balance sheet, needs attention. kevin: we cannot go back to 2014. my own judgment is the same as chairman bernanke he's in the depths of the crisis, which is that we cut rates to zero, we grew the balance sheet for symmetry, then we should shrink the balance sheet before we go to rates. the fed had other ideas. we end up with a $4 trillion balance sheet in the u.s. growing central bank balance sheets everywhere else in the world. the balance sheets strikes me as the thing that is most important to asset prices, about which central bankers and economists should be most uncertain whether trajectory changes. michael: we know what the plan is to reduce the balance sheet. is there a specific problem you see arising in the economy? kevin: as you suggest him interface pretty powerful at this point in 2018. the autopilot -- inertia is pretty powerful at this point in 2018. the autopilot says that whatever happens with central bank
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balance sheets, i'm not sure. as long as the economy is strong, the u.s. is going around 3%, global trade around 5% these are the kinds of numbers we were told in the last few years were a possible cause of that is -- were impossible was of that is encouraging. but there are real risks. the most principal risk is the gigi fight happening between the u.s. and china -- g2 fight between the u.s. and china. i would not underestimate the g2 fight ending up with a broader fight in the g20, and that could have a real effect on the global economy. michael: we did have what appears to be the failure of talks in beijing. what does it mean for the u.s. economy? kevin: it is not good news. trade is a win-win proposition when done right and lose-lose opposition when done wrong. i expect things will get tougher on this.
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i expect markets will come around to the view that it is harder to get a deal that many market participants might have thought the week for a month ago, and i suspect as we get closer to the elections here in the u.s., november, that deal gets harder and harder to get done. there are huge gains that can be made. one example is the u.s. could become a big exporter of services into the chinese economy to offset the bilateral trade deficit. but it is not obvious that the two sides have the depth of relationship and president xi to get that stuff -- the relationship of president trump and president xi to get stuff done. it is good to have a base of knowledge and relationships so you can have tough discussions. i suspect this has more rounds to go and there could be tough times ahead. michael: fiscal stimulus -- we have had it for a couple of months. people knew it was coming. and yet it is not seem to be any reaction in the economy.
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business investment going down the last couple of months. consumer spending very light. when does it kick in, or does it? kevin: unfortunately and economics we don't have the benefit of running a control group. we have two policy changes to the economy. one is a big increase in government spending that some would suggest what have huge of the players and grow the economy. at the same time, we have a pretty radical change in tax policy that could do a lot to change the supply-side. 12 regiments from now, i worry that both sites run to their corners and save my policy worked and the other one didn't. we are not going to know for sure. my guess is what we will see is a deepening of capital in the u.s. economy as we get through this year, especially in the second half, that you will see a criminal investment -- incremental investment in software. that is been the missing ingredient the last 10 years of the recovery. that is what productivity has been low and wages have been low. we will run the experiment about
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whether there's an opportunity for customers to invest, new capital, new workers can drive a whole change in the economy and sustain the level of growth of 2%. michael: save the tough question for the last question. you were an advisor early on to president trump. you interviewed with him for the fed chair job. there is an oppression on wall street that he doesn't know much if anything about economics -- there is an impression on wall street that he doesn't know much of anything about economics. is that right or wrong? one of thoseon advisory panels which was distended. i met with the president as a final interview for the fed and i did not get that job, so i am 0-2. i know what the president -- i think the president knows what he was looking for in many of these posts. the president has been in office 14, 15 months. being president is a fundamentally different job than any job in the economy. if you look at the underlying data, he has got to be pretty pleased with the improvement in the economy, but if you look at
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the risks, the china risk being one of many, he should not be, nor should the administration be complacent. lecture kevin warsh, joining us this morning at the hoover institution. --thanks for joining us this money of the hoover institution. vonnie: great conversation. michael mckee will be joining us throughout the day at that conference of the hoover institution, talking down to kevin warsh, former federal reserve governor. let's check on the markets now. the dow and the s&p 500 both up close to 1%. the s&p 500 being held up by 3.5%, up more than partially on the buffet news, buying 75 million more shares of apple. the worst performer is down 21% profitlashing its forecast and taking a chart on the gas-fired power project. strong vs. thee
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euro and sterling. the 10-year yield back to 2.95%. mark. we areoming up, following stocks. 35 minutes away from the finish of the friday session. we're heading for the sixth weekly gain for the stoxx are following stocks. 35 minutes away from 600. gains for all three major indices today. let's have a look at the currency board. sterling was lower for the seventh consecutive day comes the dollar. it is down by .4%. the closes next. -- the close is next. this is bloomberg. ♪
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mark: 11:00 in new york and 4:00 in london and there is 30 minutes left in the trading day in europe. from bloomberg's european headquarters, i am mark barton. vonnie: from new york i am
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vonnie quinn and this is the european close on bloomberg markets. ♪ here are the top stories we are covering. come equities rally in america and europe as u.s. unemployment falls to a near two decade low. talks between the u.s. and china on trade have an agreement to resume negotiations at some point but little else. but then the will take control of -- have a look at european equities 30 minutes away from the finish of the friday session with stocks up for the third day and five. 22 stoxx 600 companies reporting today, the companies the industry groups --

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