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tv   Bloomberg Surveillance  Bloomberg  May 7, 2018 4:00am-7:00am EDT

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sodiumrude covers percent -- $70 a barrel. the u.s. treasury prepares to auction $73 -- $73 billion of notes this week. starbucks $7.2 billion to use its brand. how much further has the coffee consolidation trend got to run? ♪ mark: welcome to surveillance.
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let's check in on markets today. is up by a 10th of 1%. 50% below the average. for the second day after gaining for the sixth consecutive week. march 2015.ce euro falling for a fifth day. the dollars resurgence is continuing. euro, lowest level since december last year and check out the 14 day. 27.5. any figure above 30 shows the euro is oversold. $70 30. that's the number you need to look at today. -- 70.30.
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that's the number you need to look at today. coming up on surveillance, we are live in xeric. -- live in zurich. still to calm, a conversation with the former greek finance manager -- minister. plunged afterhas salary demands by unions could sink europe's largest airlines. on france's ceo resigned friday after failing to reach a wage agreement with employees. in sixdropped the most months after warning full-year results may fall short of 2017 levels. the u.s., donald trump's lawyer is leaning toward stash lean against making the present available for a interview with robert mueller.
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trumpiuliani also said would not have to comply with a subpoena by mueller if one is issued. when asked if he is confident the present would not take the fifth amendment in the russia probe, giuliani said quote, how can i ever be confident of that? >> we don't have to. he's the president of the united states. we can assert the same privilege as other presidents have. uk's foreign secretary has said a man in the iran nuclear deal would be a mistake. has said abandoning the around nuclear deal would be a mistake. the trumpto convince demonstration not to walk away from the agreement. said theran's leaders u.s. would come to regret their decision if they plot of the deal. nestle has reached a deal with starbucks to market the chains
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products globally. pay was company will starbucks $7.2 billion up front in cash for a business that has annual sales of about $2 billion. nestle expects the deal to contribute positively to organic growth target's -- targets. global news 24 hours a day powered by more than 2700 journalists in more than 120 countries. i'm taylor riggs. mark: let's get to the market story. , aboveil is on the rise $70 a barrel for the first time since november. traders brace for u.s. sanctions to be reimposed on iran. president trump says he will decide whether or not america will stay in the 2015 nuclear deal. let's bring in andrew barton.
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he is in dubai. have we seen any signs that trump may back down from pulling out of the iran nuclear deal? andrew: i do not think we have seen any such signs. i'd say we are seeing the opposite signs. the market is pricing in the u.s. pulling out. macron and boris johnson go to d.c.. the market doesn't believe it and the flurry of diplomatic activity that we are seeing would suggest that trump will pull out. he has a track record of doing that. he made breasts -- threats on nafta and we are renegotiating it. he made threats on climate and pulled out of it. he is a president that follows
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through on his threats and i don't think anybody thinks that he is bluffing. saudi arabia and iran seemed to be on opposite sides when it comes to oil prices. why is iran resisting a push for high oil prices? andrew: i said earlier these two countries will always find a way to disagree. they couldn't even agree on the color of the sky and this is part of a dance. while i am sure that it iran would benefit from higher oil prices, a wants to make sure as it ramps up supply that the demand is there. pushing or nott helping push into renewables. itsaps more importantly, it breakeven is in the mid-60's. saudi's breakeven is somewhere in the 80's. it's much more painful for saudi arabia than for iran.
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iran knows it's hurting their archrival. these saudi arabians try to reboot their economy they need the prices to stay up so that playing the long game. -- so they are playing the long game. mark: thanks for joining us on this big day with crude above $70 a barrel. mark.get over to mark, how are you positioned? how should we be positioned? ahead of the big decision by trump later this week. i think it's very difficult to know what goes on in the mind of donald trump and how he will react given, as you said, the flurry of european leaders. i think it's a little different from nafta. or the climate courts.
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-- climate accords. rightlyld be, as you pointed out, an immediate hit to oil prices and they would go higher. it's hard to know what to do. what we are trying to do is rather than make it decision on will he or won't he, try to look through that and judge the secondary factors area -- secondary factors. a lot of this oil is exported to china and india. will they buy more? even if the united states applies sanctions. supply of is more u.s. shale going to come online to mitigate some of this rise? are you -- mark: looking at ceilings on the price of oil?
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wantingabia seemingly $18 -- $80 with iran wanting $65. once priced in? -- what is priced in? expect a spike to 85 on any kind of pullout by the united states. i think iran would prefer no sanctions which would contribute to loyal or prices as a secondary affect. we have heard the news that the saudi's would like $80 a barrel as is -- as part of their new strategy. their badgett doesn't really ballot -- their budget doesn't really balance until $87 a barrel. demand has been rising as global growth has continued.
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to look at this is energy companies and energy stocks and it's one of our preferred sectors. mark: iran is just one piece of the global geopolitical puzzle. we have trade, we have the trump /kim jong-un the potential meeting taking place, how are you looking at all these parts? how are they influencing your thinking? i think it's a great question because we often say the market can only focus on one story at once and you just laid out several whoppers there. war., oil, china trade i think the market is having trouble digesting that right now. trying to look through it
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which has been successful in the starts to have a real impact on economic growth. at this point we are not seeing it. what striving things maybe more is the federal reserve and these ranks of the u.s. economy. perhaps a little bit more than geopolitics and a market that is searching for a direction. mark: we will talk a bit more in the next section. us.ill stay with it's a bank holiday monday. coming up a turning point for italy. is five-star movement leader ready to give up his question for prime minister. plus we will speak with the former greek finance minister. this is bloomberg.
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♪ mark: economics, finance, politics. let's get the bloomberg business flash. >> air france has swamped after the french finance minister says that factors could sink europe's largest airline. he also said employees must show responsibility. resigned on ceo friday after failing to reach an agreement with employees.
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the arab ceo resigned on friday after failing to reach an agreement with employees. according to the financial times, enthusiasm has waned in recent weeks. the japanese company has been in talks to buy a stake in the swiss group. about buffett had warned a nightmare tied to accounting rules and now it is beginning. the rules that require berkshire hathaway to report unrealized gains as net income helped fuel a $1.14 billion loss in the first quarter. it marks the company's first net loss since 2009. that is your bloomberg business flash. mark: treasury officials say they have no concerns about the man's of the ever increasing offerings of government debt. u.s. will offer 73 -- $73 debt.n of
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jp morgan says that it could be disruptive to global markets. still with us, mark haber. are you as relaxed as the treasury is? mark h.: i would say no. we think this will end up being reflected in the value of the dollar versus other currencies as we get further into the year. mark: you are in the dollar bullish, less bearish cap? give us a sense. i think it will get reflected in the dollar and the dollar will be weaker as a wonder, as you have, how this will all play out.
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if the treasury did express concern or worry about the ability to float u.s. debt than i think they will be the last ones to admit defeat. i think, their markets will start see it a little bit sooner. there are so many factors playing into this. hand, this fiscal stimulus and the need to float more debt is something of a sugar high for the u.s. economy. and then the hangover may come later. let's talk about levels. it's going to weigh on the dollar. it at its highest level since the end of december last year. what is behind this recent bounce in the dollar?
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you are suggesting it's not going to last. what ends it? mark h.: i think the recent strengthen in the dollar has to do with several factors. lesss a little bit risk-taking in the markets around some geopolitical noise. also, we saw a small slowdown in the first quarter. particularly in europe. that has contributed to the dollar strength. as we get further through the year, several factors could weigh on the dollar. one, as this spending comes through and the tax cuts come through, if the american consumer becomes more emboldened, they are going to be doing what they always do which is by more goods abroad an increase that current account deficit.
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to, dollars need to be sold buy these foreign goods. we talked about this issuance issue. do people start to lose a little bit of confidence as the united states as a place to invest because they don't like the debt dynamics developing there? clients around the world certainly wonder why the u.s. is applying some fiscal stimulus at this point in the cycle. the downside of the dollar's recent upside has been a decline in emerging-market currencies. emerging-market dollar debt and emergent marking stocks. how is this going to play out? mark h.: it's a great question. what we have seen is a very rapid move up towards 3% in the 10 year treasury.
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think that may have contributed a little to the dollar strength. as you said, the emerging-market complex, which is sensitive to a stronger dollar and higher yields, hasn't done so well. we see a lot of this momentum as therefore perhaps something of an opportunity to position for weaker dollar and better em. catalysts are getting through a little bit of this weakness and having some of this strong global growth story reemerge as we move forward from here. mark: you will get back to you. thanks a lot. he stays with us. after two months of political deadlock in italy, the five-star movement leader signals he's ready to give up his west to become prime minister. this is bloomberg.
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♪ mark: economics, finance, politics, this is bloomberg. italy me be -- maybe at a turning point to end a two-month political deadlock. the ouija mouse signals he's ready to give up his question become prime minister. is signaling his
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ready to give up his questec to become prime minister -- his become prime minister. what is the backdrop of europe right now? what is your overall assessment of the european backdrop? when you're assessing european asset? mark h.: i think there has been a couple of factors that have weighed on europe little bit in the first quarter. slightly weaker growth than expected, this has been that may be ecb more dovish than people anticipated. that weighed on the euro a little bit. the concerns about trade and a trade war are really hitting europe more than the united states.
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germany's largest trading partner is china. those factors or out there. -- we'veone of the gone a long way from talking andt a european dissolution using this. of strong growth to try and build towards a stronger europe could be good for the currency. we could see even more central banks reallocating towards the euro. we think the political calendar in europe is a lot cleaner now and maybe some of the fireworks have died down and maybe they can make some progress there. mark: is this shift out of u.s. assets? is it cyclical, is it structural, what is the view when it comes to holding u.s. assets now versus the rest of the world?
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we have been in this cycle now for so long. i'm not the difference the -- i'm not sure what the difference between cyclical and structural are. this is a. of global growth coming through typically the time when europe in othertter currencies besides the dollar. we think that. -- we think that moment will continue. thee move through some of places we were in a more cyclically bearish. for some of the more existential questions around europe, that too can maybe provide a little bit more of a boost in the european project. mark: what other shifts have you been making?
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said you are holding some --sert -- divert -- dessert diversified positions. one of the things we did a month ago is get overweight in european equities versus u.k. equities. we saw a gap between the prospects. we expect the u.s. to continue to do well but some of the fervor around u.s. 10 year rates this something we don't see. while we are overweight in equities of roughly, we would stick to world equities. also overweight in emerging-market equities but not think that the u.s. 10 year is going to run away.
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be underweight may be in the japanese 10 year. how are you on sterling? is all the bad news priced into sterling? this is the week the bank of england meets and it seems will not be hiking interest rates. has it reached its low? mark h.: we recently closed a position overweight sterling versus the swiss franc because we thought that there was room there after the swiss franc have done well on a safety trade. right now, i think you are right. there's a lot of mixed views. the political noise around the brexit's coming up.
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there's no reason to take any decisions around exit -- bre xit. we don't think this is a point it will move markedly into you get some more political decisions out of the u.k.. mark: thanks for joining us today. let's get the bloomberg first world news. in the u.s., donald trump's lawyer has said he's leaning against making the president available for interview with robert mueller. giulianion abc, rudy said trump would not have to comply with a subpoena by miller if one is issued. when asked if he is confident the president would not take the fifth amendment, giuliani said quote, how can i ever be confident of that? we don't have to. he is the president of the united states. we can assert the same village
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that other presidents have. the uk's foreign secretary has set a pending the iran nuclear deal would be a mistake. timespened in a new york opinion piece as he embarks on a mission to convince the trump administration not to walk away. warnednian president has that the u.s. will come to regret its decision if he chooses to pull out of the deal. nestle has agreed to enter a partnership with starbucks to market the company's products globally in the first type of major rivals in the java market. will pay company starbucks $7.2 billion up front in cash for a business that has annual sales of about $2 billion. totle expects the deal create positive moves for stock price and future market share.
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this is bloomberg. mark? mark: thanks a lot. air france has slumped after the french finance minister warned that biggest airline in europe could sink. the company's ceo resigned on friday after being unable to reach an agreement with employees. now is bloomberg's global editor for business. what is next? .ou haven't got the ceo you still have strikes. how will this be resolved? benedict: it will be difficult to cut through this noise. it's a company that now doesn't have a ceo and it's hard to imagine who would want that job. year or two ora
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you might get your shirt worked off -- ripped off by angry unions. it's an almost impossible task. continued unions their strike today after making a point that they are not done here yet. that was the big surprise. was in the post for about two years and try to different style. tried to be more forthcoming and cooperative and less confrontational than his predecessor. he said on friday he was done. those words seem pretty harsh. strident. the company's survival is at stake. is it that bad? will agree with you that those are very hard words
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coming from a finance minister. is a national treasure and it has the name france and its company name. on one hand, there will be interest from the french government to keep the company going but it's a sign of the new france under emmanuel macron who is saying that we have to move yard this cycle of back-and-forth and never getting anywhere. we have to reform the labor market. is -- at been doing , he mightal railway try and use that as a blueprint for the broader economy and if he will be able to inject some of that into air france is the next question. investors probably spooked by the comments. nobody wants to hear that a company may not survive. let's talk about nestle
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and starbucks. $7.2 billion to spell the starbucks -- to sell the starbucks brand. is this from the position try and -- of trying to cap -- tackle a more competitive u.s. market? nestle has a huge global reach and they're hoping to harness that network to push the starbucks brown through its channels -- starbucks brand through its channels. have the brand, nestle has the network and they are coming together. it's the nestle ceos first big deal. one of the biggest acquisitions in nestle's history. they usually don't do deals this large.
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they clearly see an area of growth here. coffee is one area they want to grow. -- some other brands have grown aggressively. some people drink more large gulp coffees so they see an opening here. motion but things in these two brands coming together. nestle season-opening. bloomberg's managing editor for global business in berlin. bloomberg -- former secretary of state george schultz says america needs to be more engaged with the world's number two economy. we want to be sure that we have fair trading relationships with other countries. there's no doubt that china does
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some things that we ought to have persuaded them not to do but if you look at the trade deficit, you're not going to get there by messing around with the arrangements for each country. -- iner to trade the order to change the trade deficits, you have to change the expenditures. if you had a balanced budget, you wouldn't have a trade deficit. >> what about exchange rates? the chinese are letting their exchange rates move a little more freely now. >> exchange rates and trade agreements are two sides of the same going. whatever you do on the kind of thing, you have to change the overall balance of trade. you have to do that by having work ased states
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producers. if you consume more than you produce, you have to get it somewhere. >> what about international property rights? u.k. and japan have joined in on the u.s. is complaint at the wto and feel the chinese are not playing according to the rules. >> that's a big issue and it's worth looking at. but it's not going to change our trade deficit will. to have a strong working relationship with the chinese. >> there seems to be a concern there that the u.s. is pulling back. donald trump is getting involved in negotiations. he said we are pulling out of the tpp and this has been a concern with many nations like japan. >> i think he now realizes that was a mistake and i see that he
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wants to get back into the tpp. not so easy at this point but i think probably that would happen and it's a good thing. that you seenrend for a while? >> there's been a lot of rhetoric but we seem to be preoccupied with china, japan, north korea so we are engaged heavily. we should be. mark: former secretary of state george shultz there. remember you can interact with the charts. analysis.n key this is bloomberg. ♪
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mark: i am in london. here's taylor. re'sr: softbank and swiss deal is close to collapsing. citing those close to the situation, enthusiasm has waned in recent. warren buffett had warned about a nightmare in accounting rule changes and now it's beginning. the rules that require berkshire hathaway to report unrealized income, losses as net pagenaud fueled a 1.1 -- a 1.1 4 billion -- as net income, has fueled a $1.14 billion loss in the first quarter. to minimizeng diesel cars in europe. they will stop offering diesel
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versions of passenger cars in the coming years. they will instead concentrate on pushing sales of electrified vehicles. health care and technologies initial public offering has fallen below the low end of the range. on friday closed unchanged in the for -- in the worst first day technology performance in a must for years. it had a $1.1 billion ipo. thefrance has swamped after finance minister -- minister has warned the airline could be sunk. air france's ceo resigned on friday after failing to reach a wage agreement with employees. shares dropped the most in six
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months after warnings of results falling short. thanks a lot. let's talk central-bank. traders will scrutinize decisions for any signs of rate increases. , berkhold. bankems the probability of of england rate hikes this week is minimal. does that suggested the bank won't go this year at all or could we, as one bank suggests, a hawkish neutral tone from the u.k. central bank this week? what do you think? >> thank you and good morning. to imagine the u.k.
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central bank being a hawk among doves. there are a few reasons to do that. .t's a delicate point in time it's unlikely it seems the u.k. central bank will go to the hawkish side. mark: what does that mean for sterling? it's down by at least 5% from its highs in april but reached levels it hadn't seen since the day of the referendum in june 2016. the sterling have much further to fall? burkhard: it's probably oversold and there's more room to recover but bear in mind the ultimate tocome for sterling is tied the outcome of the brexit talks. much speculation in sterling into we get more clarity on how brexit will be resolved. the flipside of sterling
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is the dollar which earlier today hit its highest is december last year. guests suggesting that the dollars rebound won't last. do you concur? this recent rebound in the dollars fortunes is only a temporary thing? burkhard: it doesn't seem like a temporary rebound more than a lasting one. the deficit won't go away. whatever comes out of those trade discussions, the u.s. will continue to have the largest trade account deficit. government deficits will continue to balloon. the weakness of the euro is the main advantage that has been lifting the dollar but both of are likely to be transitory.
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when they move away, investors will look more at the fundamentals and that should lift the euro against the dollar as well as most other currencies against the continued weakness of the dollar. mark: what about the interest rate? this is a central bank, the fed, that could raise rates up to three more times in 2018. why won't that boosted the when ecb won't even contemplate raising rates until the beginning or the middle of next year. the bank of england won't raise rates this year. the boj is way behind. you're right but i would argue that it's the only count on which the dollar really stands out against its main peers.
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usually strong currencies have strong account surpluses with rising activity. relatively high levels of real interest rates. when you look through the nominal level of u.s. interest rates, real rates are still fairly low. they don't outshine a lot of though global peers, especially not the emerging market peers. look at all these criteria in totality, the argument stands stronger that over the next year or so the dollars should weaken both against emerging-market currencies as well as against the euro and the swiss franc. what shifts to your asset allocations have you been making recent they? we viewed the emerging market category in general as
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one that is still strategically under owned by investors. this is a big way that will lift many boats. it will drive both the local and the emergency -- emerging market. it's lifted not only by low valuations and rapid earnings growth but by changing character. these markets have really become tech markets instead of commodity markets. this is a strategic opportunity that we have held that strongly in our conviction. we continue to hold high. besides that, we still like the technology sector as well as the energy sector are when you look at the equity position. least, we should mention that comparing stocks to
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bonds, they offer the better value. as a buyingew this opportunity in equity markets where we are overweight globally. mark: thanks for joining us. let's get to russia. this is inside the kremlin. this is the grand kremlin palace. putin is getting inaugurated today. he starts a new six-year term today. this is bloomberg. ♪
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♪ mark: economics, finance,
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politics. this is bloomberg. want to reiterate what is happening russia. it's putin's inauguration. he starts his fourth term today. it's taking place at the grand kremlin palace. comes out ofhat that big event in russia today. president putin heading to the inauguration in moscow to be inaugurated for his fourth term. the vote counting is underway in lebanon after his first parliament theory -- parliamentary elections in nine years. it will have to take steps to control its debt to claim millions of dollars offered. welcome our guest. what is the post ballot focus likely to be?
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yousef: people are holding their breath for the results of the vote. a bit of concern on what kind of progress either block can make. what investors and analysts are looking out for is whether the iran backed has the group can make any notable gains. it's the first vote in nine years. you have the pro-western bloc as well. there are some official -- unofficial results flowing around. any change in the position of power could wring more leverage in parliament. thanks very much. yousef gamal el-din. in the kremlin, putin is getting it'surated and then russia
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the fourth term for president putin. there he is walking down the staircase. promising russians a decisive breakthrough in living standards. even to be said planning to nominate a in important economic reformer. he is hoping to dow back the tensions after the latest and most painful salvo of u.s. sanctions. that's putin's inauguration. this is bloomberg. ♪
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♪ tom: this morning, a barrel of oil, $75.
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the return of higher energy costs. we go to dubai. consider europe -- we draghi. and the waiting for higher inflation. and we would like to assure you that our teams are doing the utmost given on this industrial .ction can air france survive as we know it? am tom keene.i francine lacqua has the morning off. nejra: you have the finance minister over the weekend saying that the company could disappear this is a result.
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that. have taken a at one point they were down -- they were down. london markets are closed today. let's get to the first word news with taylor riggs. taylor: boris johnson says it would be a mistake to walk away from the iranian nuclear deal. he writes that it has the fewest disadvantages among options. they are close to a deal. the president has threatened to pull out of a deal by the end of this week. trump's lawyer is leaning against him.
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rudy giuliani says that such an interview would be a trap. rudy giuliani says that trump wouldn't have to comply with a subpoena if it was issued. that air france will disappear if worker unions keep blocking reform. excessive salary demands could sink the largest airline. aftero quit on friday failing to reach a wage agreement with employees. starbucks are tuning up in a deal. they will pay the coffee shops for the rights to sell starbucks products in retail channels. moreas the company wants upscale coffee drinkers. discussed the
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company's future without him. he avoided controversy when investors asked for his take on some of the most polarizing issues of the day. he said berkshire hathaway will continue to be the first place companies will call when they are looking for a deal even after he is gone. global news, 24 hours a day. powered by our more than 2700 journalists and analysts, in more than 120 countries. i am taylor riggs. this is bloomberg. you look and hear about beingve pictures of putin inaugurated for a fourth term in moscow. as putin has talked about wanting a breakthrough for living standards for russians. they may put limits on policy shift.
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putin is now speaking. tom: real protests this weekend with a lot of arrests. of 1000excess arrested. there is real debate about the of this election. the holes are extraordinary. then going to cathedral square in a parade. a beautiful day in moscow. look at that sky and so much gold in those high ceilings. data we can jump to -- the inauguration of vladimir putin, eight years in power.
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let us turn back to the markets. currencies and commodities. i could get the ruble p are. friday, report on enthusiasm of the dollar strength. theme today. -- a american oil. next screen if you would. vix -and the gerbil, feeds the gerbil. ok, we have a board crashing. atra: the ruble is trading 62.76. european equities are struggling for direction but unsurprisingly have seen the stocks with the
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spacet gainers for the where it is. cable has dropped below the 200 day moving average. it has dropped 6% after hitting the post-brexit high. we will look back and see what is to come with the doe. the best week for the dollar since the u.s. election last week. and i put the 10 year italian yield up because markets seem pretty saying green about any political risk. tom: a weaker turkish lira this morning. let me show you the bloomberg with a shout at to kareem brown who has written a spectacular article about the new farm depression in america. this is an extraordinary inflation-adjusted chart going back to 1958.
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eisenhower and kennedy. 2002 on aown we go to four year moving average and we are getting quickly to sustained, and dirt cheap wheat prices. not a depression yet. that, butd to say almost a depression across agriculture. that is a new story for 2018. nejra: i want to move to emerging markets. you mentioned the turkish lira. this is a great chart. markets singing the dollar blues. when you look at the gap between hard and local and currency bonds, it has been shrinking. outperforming dollar debt. crude oil is on the move for the
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first time since 2014. sanctions could be reimposed on iran but trump says he will decide whether or not america 2015 deal.n the whos bring in andrew barden is in dubai and from singapore, dan murtaugh. let me start with you on the politics. does it look more likely that the iran nuclear deal will be week?y the end of the it would look that way. i say that based on two things. record -- he made threats on climate and they did w the pledge.ew b
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you need to take him on this word and investors are doing that and it is being priced in. but if you look at the flurry that is taking place we had angela merkel, boris johnson, clearly- they are trying to bring this back from the precipice. and if you look at what trump has done in the past, it is the view that he will05 pull out the next: few0 days. nejra:0 it looks like the geopolitical risk premium plays into the oil market. is this about uncertainty forward the oil will come from if the deal is dead in the water? dan: you look at the big fundamental shift in the market over the last year, opec production cuts, stockpiles have plummeted.
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down and opec is sticking to its guns. falling apart. and healthy risk over iran. so people are raising the price to risk. vulnerable is the oil in the street of what you are observing in singapore? the oilerable is industry to any constraints around single or? ?- around singapore biggestis one of the ship refueling spots in the world but the constraint you want to focus on are closer to you. they are into west texas. where the permian basin is producing so much oil that it is over mining the pipeline.
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and shale producers are having trouble getting their oil to market, to potentially meet up with the iranian drop. tom: give us an update on saudi arabia versus oil independent america. --t is saudi america doing what is saudi arabia doing? andrew: fair in a tough spot. they are trying to reboot the economy and society and the country and they need to get the price of oil. they are trying to persuade people that aramco is worth $2 trillion. we had iran come in and say they wanted to see oil lower. the breakeven point is in the mid 60's and saudi is in the mid 80's. so you have a geopolitical issue taking place.
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is all playing into what we are seeing now with the pressure on the iraq deal and how the rivals are facing off against each other. tom: andrew barden, thank you so much. taugh fromr singapore. images here of pollution as he extends his tenure in brescia. speaking to the ensemble in the hall in moscow. to a has been inaugurated fourth term. an 18 year tenure. this is bloomberg. ♪ this is bloomberg. ♪
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taylor: this is "bloomberg surveillance." hasnew ceo of volkswagen gotten to dl from the u.s.. the justice department will travel without -- travel throughout the world a roughbeing worried of being arrested. -- agreed to buy the industries in cash and stock. it represents an 11% premium for the are israeli company's closing price yesterday. china is putting a positive spin on trade talks with the u.s. week'sge that the last negotiations continue that that
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the u.s. shouldn't make unreasonable demands. china is now studying ways to lower tariffs on imported products. that is your bloomberg business flash. tom: thank you. i have never put this chart up on bloomberg television. i will do it now. this is the unemployment rate in the united dates of america. i will throw this out for radio and twitter in a bit because over here we have dropped down below 4%. extraordinary to see that on friday. extraordinary. it gets you back to 2000 and a get you back to the time of eisenhower with a little bit of a blip in the 1960's. this really speaks to the diversions of the united states
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versus everybody else. thisreat is the diversion morning between america and the 3% handle unemployment rate and everywhere else? correlatedtill in a world. when we look at the u.s. labor market, it is clear that the gap has closed. that means the cyclical recovery and the great recession of a decade ago is complete. is worry is that u.s. policy nowhere near that. and with the rise of the real interest rates through the fed actions -- probably two or three more rate hikes this year -- we we in an environment where -- marking the diversions the divergence between the u.s. and the rest of the world. tom: we see it in dollar
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strength and in oil. do you just assume more of the same? oil out to brent, it $80 a barrel? lena: i do. and as dollar interest rate, this is marking a belated compilation between u.s. global demand. some of the early easy gains of the recovery that were happening in the labor market is now complete. and we are now moving towards normalization. when i look at debt and gdp and productivity rate, it is not inspiring. nejra: jpmorgan says this could
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be as disruptive to markets, could it? lena: absolutely. it is like a bubble market. an intended consequence of that correlation out the and to deliver yields across equities and bonds. thethat we are seeing slowing of the global bank liquidities this year, we see the correlation between the dollars and yields and yields and equities. yes, it will be disruptive. will be withileva us through the hour. a lot to talk about including the central bank dynamic. the next hour, on the
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dynamics of washington, primary elections this week. 6:00hudak joins us in the hour. from london, new york -- a new york yankees new york, this is bloomberg. ♪ bloomberg. ♪
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seen awe have just gorgeous shot of the sun glinting off golden domes in russia.
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having his inauguration for his fourth term and walking down the hall after his speech has wrap up. treasury officials say they have no concern about demand for the ever-increasing slate of debt. combinedwill issue a three, 10 and 30 year securities this week. let's go back to lena komileva. can they survive? lena: at a higher rate. it is just a matter of time before we are between 3.5%-4% for the u.s. tenure and that forests that the question the markets is how fast we get there. let's hope we don't get there too fast. --re is room race on the there is room based on the dynamics.
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the chances are that we may get there faster because we see what is happening in the markets and in the last 10 year yields over the last month, and acceleration and uninspiring wages growth. us that much of the normalization is happening through the return of moral -- normal terms risk premium. we are still at the beginning of the process. treasure volatility is still subdued. inflation for the bond market, i have the chart on the employee cost market. average hourly earnings came in shorter. and this is the highest in this cycle. perhaps more broad-based. sign that weg us a
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will see the inflation that the fed is looking out for? lena: great news that the inflation line is live and kicking. that is for the first time than a decade. so it suggests we are in a late stage of economic normalization. let's not forget that it is a lagging indicator. we did havel years jobless recovery and now the inflation for the recovery is over. tom: lena komileva is with us and we will continue the pageantry in russia. those beautiful churches. this is bloomberg. ♪ . . .
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near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. office.years in celebration of another term for mr. putin. the kremlin going back to the
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, and of course the palace, the cathedral, be heart and soul of the russian federation. the festivities we saw earlier, mr. putin speaking in beautiful ,alls as well, but right to it it seems like things are moving at a good clip this morning. we are not in the long speeches, maybe even on a long parade. there is a good clip to the celebration. nejra: certainly keeping up the pace. look at all the pomp and pageantry on a beautiful day, like you said, tom. tom: mr. putin in moscow. we will continue to cover the. holiday, theyank are calling it, francine lacqua is off. nejra cehic is with us. nejra: it is a very sunny bank holiday here as well, tom. the french finance minister has sinkd that demands could
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the largest airline. resigned on friday. this morning, the stock dropped as much as 13%. "bloombergnow is markets" and guy johnson. bat?ed 30% off the guy: it took 30 minutes to get it open. i can't fix this. i do not know what to do about it. see ya. and then you get the governor minister saying they need to get their act together, because otherwise this business will not be around much longer. it puts the pressure on the union. nejra: can macron do anything to fix it? guy: does he want to?
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different from the other story. when you have a railway, you have one provider. air france, you have lots of providers. you get all of the similar stories. the french are not as engaged with this story at the or in the railways. what, you guys need to get this done as soon as possible, getting to work under similar metrics as other airlines, and if you cannot do this -- tom: guy, you go to the airplane shows. we have our thoughts about british air, air france, and the rest. let's bring up the mediocrity of the decades of air france. this guy is 17% or whatever. is this the national carrier of france? is that perceived at the airshows and perceived by the am"?h as "our pan answer. is the simple
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the french do not care. like every part of the traveling public, they go "cheap flights, please. good service. otherwise we do not care where we fly with." competition will only get fiercer, as local carriers have demonstrated. they are increasingly turning to long bull markets. as a result of which, there will be problems down the road as they continue to have to deal with it. so the french, like every other nation out there, don't really theciate vfat that -- as facts that the flag carrier has the flag. they just want the cheap flights. tom: which institution because the salvation of air france? is at the board. as nejra mentioned, is it mr. government?he with its decision comes to the rescue of a dominant airport north of paris? guy: the union, tom. that is where it has to start,
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and that is where it is ultimately going to end up finishing. with the union gets on board with a business plan they can work with, this will be a company that can ultimately end up driving. but it is the union that has to make the decisions. the union's decision to carry on with the strike and end up forcing another ceo out is effectively pushing the self-destruct button. is start and finish with the union. nejra: does this complicate things anymore? guy: for an airline, staff and kerosene, jet fuel. they are both going up, so yes, it complicates things. it will not impact instantly, but it becomes more expensive. tom: guy johnson, thank you so much. they have a full page on the air france website this morning of their industrial action with updates. we needed an update now with our first word news in new york city, here is taylor riggs. taylor: vladimir putin has been
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sworn in for a fourth term as president of russia. putin says doing everything for russia is his life's work. he called for international cooperation for stability and peace. to a was reelected six-year term in march with 77% of the vote. iran is signaling a bid for higher oil prices from fellow opec members of the arabia. a suitable price of the closer to $65. others have said $80. it could disrupt the country's world exports. the european union is considering a compromise to avoid a transatlantic trade war. according to officials, the quota is on metal exports if president trump imposes tariffs. a moderate response until november, when elections in the u.s. could change the political calculus. in the u.k., more tensions of
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am conservative party members. theresa may may provide a unit plan. business secretary gray clark told the bbc they so-called partnership plan is still on the table. global news 24 hours a day on air and on to talk on twitter, powered by more than 2700 journalists and analysts in over 120 countries.. i am taylor riggs. this is bloomberg. thank you so much, taylor riggs, in new york. 64 days after elections, the second-largest period since 1992. as it stands, sylvie and clashed with his partner, silvio burlesque any come over the idea issue.pulist-led
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lehave a new guest, and then g+ economics is still with us. gilt has been traded for some time -- are we talking about italy or brexit? nejra: italy. ena: the markets have been relatively sanguine. there is really nothing that we can put it to get a fair value out of it. banks arean central at the end of the bond purchases this year. a tiny government bonds are going to be at the mercy of market supply conditions. it is also having a huge level of interest savings in the banking system, which is being kept their through regulatory
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constraints. it is not easy to shift money, and that money is affecting funding. it is allowing treasury bonds on the side of italy. they will consume more later. nejra: should we be concerned about the impact on the economy of the government impact? lena: i believe so. italy is a large trading economy with the rest of the world, and it has got a productivity problem, and it is leaving the unproductive labor to the rest of europe. to italy,t even go they go to london, paris, frankfurt. population,aging and the question is who will find future liabilities? it is a timebomb. nejra: lena, i know you really
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want to talk about brexit. theresa may caught between both sides of the brexit demand. i want to show you a chart of the pound. dropped below a 200-day moving average. i know this is about the bank of england as well. is the political bad news priced in now to the pound? lena: not yet. i think the markets have been very pragmatic and the way they have traded anything with the risk. the assumption all along is we are going to get some kind of a deal. new markets are important for the u.k. and less a political disaster happens, we will get some sort of an agreement. the question here is about the level of trade integration between the u.k. and eu going forward and the cost of those tradings. is ae extent that the u.k. small economy with a large financial sector with huge exposure to the eu, i do not
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think the plan is presently worst-case scenario, which is between london and the eu, which is, i after the speeches in london a few weeks ago, where we are, i am afraid. tom: lena, where to the festivities start? -- wedraghi in control, have draghi in control, powell in control -- i do not buy it for a minute. where do we get instability? lena: tom, i think this is a great question, and i love the way he formulated injury it is a global question, and government banks are losing control of the markets. we are moving away from a theictable environment, taylor, gdp, cpi forecasts that we can put into our mobile and out comes a prediction for the policy rates that will allow us to navigate bond markets, equity markets, and credit.
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this is the kind of world we are in at the moment. a veryoving toward som secular way, positive thinking and international financial and trade relationships, which will become more as time goes on. and to the extent that the fed lost control of financial conditions of the last year, because while rates were going up, it was easing in the u.s. and globally. yields were not responding to the fed. that we have seen is very rapid normalization, which is not happening with the fed's actions, by the way. the 10-year yield is 18 basis points higher. that tells is already the central bank has launched financial conditions, which is a worry. we do not have the effect of the next downturn. continue, going to lena komileva with us, we want to continue with carson. $75.72, i believe you round
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that up to $76 on crude. maybe that is a bit of a reach. markets elevated by dollar strength this morning. a morning briefing, catch you in your car, coast-to-coast, worldwide. "bloomberg daybreak" on bloomberg radio. stay with us worldwide. this is "bloomberg surveillance ." ♪
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tom: "surveillance" exclusive -- rudy giuliani will not be joining us this morning. he has joined everyone else over the weekend. what, no of you won't doubt the talk of washington is television, asni
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he goes network to network, interview to interview, speaking of the president's view on many different topics. primary week, election week, really diving into may here. martin schenker will join us in the next hour. nejra cehic in london. i am tom keene in new york. carson joins us. good morning to you. our theme this hour has been the divergence we see between europe and the united states. from where you sit, is strong dollar a new theme, and will mr. draghi have to react to a stronger strong dollar? i think mr. draghi will be truly happy with a stronger dollar. i think the new theme for the couple of weeks and months, it will help the ecb to soften its tone, to be extremely dovish,
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and to gradually prepare for the way to taper. only once they announce how they voted for, they should then turned the eurodollar around, and once again we will talk about the strengthening of the euro, but this will only be something for the end of the year. tom: when you come into the office at ing, was it you are trying to observe of the trilemma or the tripod of issues brzehere, what is carsten ski most focused on? now, it is the euro economy in general, because we have disappointing numbers. i still hope we will see a rebound of the european and the german economy in the third there isbut obviously the challenge itself in inflation. why don't we see inflation picking up in the digital sectors, is there enough to
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explain a low inflation target, or is there more? nejra: a lot of people have talked about that. i will the ecb deal with it? you think by just sort of going more slowly than they are at the moment? carsten: i think it is a one-off. a strong economy, we have mr. said toast week when he the view to the capacity issue, the supply-side issue, the european economy is not having enough capacity. issue ticket couple of months, and then we should see the economy gaining more speed again. for the ecb renault, it is fine. the only question will be -- it will there be any impact on inflation? i do not think it is happening. the june meeting, with the ecb said, its projection for 2020 and their
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inflation forecasts. revision, wenward see a more dovish ecb. the boe,ore get to with the ecb, they have been very article when they managed positions. neither side has been a vocal about it fact that they have the curve come receiver within the even thoughurve, the ecb is printing money while the fed is tightening rates. draghi has set, as far as forward guidance is concerned, the position away from the immediate outlook signaling the end of positive easing and the ending of asset purchases, it more measured, study, and flat rate hikes when they do begin. , beyond the term of his tenure at the ecb, for the bank of england, they have a
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very on flexible position, because inflation in the u.k. has been falling much faster than they expected. time, disappointed with more than anybody anticipated, even when we factor in the effects at least two real sortpticks, the of gdp yield is falling while the bank is preparing to raise real rates. the not want to have that, and as they try to prepare the markets, they are probably not hiking. be probability of a hide from 10%, dropping nejra: from april -- nejra: probability of a hike from 10%, dropping from april. lena komileva is staying with us. carsten brzeski, thank you. you can go to the bloomberg and ony around with it, catch up key analysis and save a chart
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for future reference as well. this is bloomberg. ♪ eference as well. this is bloomberg. ♪
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tom: an inauguration moscow.
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we see that in the images of mr. putin. in turkey, salvation for the currency. headlines ins of defense of turkish lira. moved fractionally stronger, no need for concern. one -- central bank hands are not tied with real question about the independence of the turkish central bank. mainly developed to developments abroad. that would be open to debate, thenejra. nejra: let me go to lebanon, where the country held its first parliamentary elections in years. daybreak" anchor gamal el-din
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spoke exclusively with the lebanon central bank governor, riad salameh. mr. salameh: as the growth is sufficient to fund the public and private sector, the bond market, which has seen higher leavings than the equity market, today,act undervalued and the government don't intend to make new issues to the market. they made an issue for the central bank. and our intention is not to sell more than $2 billion of eurobond in the next few months. yousef: to the question of what that means for asset allocation,
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are you diversifying more into gold, then, if it is a more turbulent time in global markets? eh: lebanon is a holder of gold in the middle east. sef: you can never have enough. lameh: [laughs] we have more than one playing the gold notes and we have also a local market that provides us revenues that are enough to keep the central bank has fillable and not to have to take larger risks. yousef: so that is no to more gold. i will not buy more gold, but of course he will not tell the stoxx.
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tom: a window into the economics and politics of lebanon this morning. lena komileva, we say thank you, from g+ economics. i look at the bloomberg. futures up 7, dow futures up 55. we drive for this conversation in next hour. jens nordvig will join us on dollar strength. just noted the turkish lira weakness. far more dollar strength across many different complexes, including the idea of a euro with a $1.18 handle. we are not there yet, but we are getting there this morning. stay with us. from the new york yankees new york, this is bloomberg. ♪ ork, this is bloomberg. ♪
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this morning, a barrel of oil $75.
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the dollar strengthens. jens nordvig on an oil-independent america. democrats consider a house majority. and we would like to assure you that our teams are doing their utmost. -- the day foron strikes. the ceo gone. can air france survive as we know it? good morning, everyone. "his is "bloomberg surveillance live from our world headquarters in new york, i am tom keene. nejra cehic and london. bank holiday. nejra, what is a bank holiday? nejra: a bank holiday is when the banks, the financial markets, are closed in london. it is very quiet. it is like a tumbleweed. i'm not sure where i will have lunch, to be honest. but it has been a holiday since the 1980's, i believe. tom: very good.
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bonk," that is the "bonk."und stock, it is nejra: i say "bank." [laughter] let's get to taylor riggs. taylor: boris johnson says it will be a mistake to move away from an iranian nuclear deal. in the "new york times," he said he has the fewest disadvantages among the options to ensure iran never gets a nuclear weapon. he says negotiators are close to a deal that would address president trump's concern. the president threatened to pull out of the deal by the anything of this week. is president trump's lawyer leaning against having him sit for an interview with special counsel robert mueller. rudy giuliani told abc news that the interview would be a trap. the also said president trump would not have to comply with a subpoena from moeller.
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that is a hot topic for legal experts. the french government is warning that air france will disappear if worker unions keep blocking reform. lemaireminister bruno says union demands could sink the largest airline. after failingdown to reach an agreement with employees. leslie and starbucks reaching a million dollar deal. -- nestlé and starbucks reaching a multimillion dollar deal. nestlé to pay starbucks $7.2 billion to sell upscale coffee in the u.s.. starbucks will use the money to buy back shares. and warren buffett discussing berkshire hathaway's future without him. at the annual meeting, he mostly avoided controversy when asked for his take of some of the most
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polarizing issues of the day. he also says berkshire will be the first place people called when they're looking for a deal even after he is done. global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am taylor riggs. this is bloomberg. nejra, tom? tom: taylor, thank you so much. equities, bonds, currencies, commodities. great chart. let's get through this quickly. 7, dow advance up futures up 48, euro weaker, dell stronger, oil listed, american oil, $70 a barrel. 15.28. cast your futures. i -- castor seed futures. i have no idea why i put that in there. maybe my diet this. weekend. and important headline on the turkish lira this morning. deputy i above $70, brent
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dropped,nd cable meanwhile, equity bids, you see the 10-year yield moves down in italy, political risk not really priced in right now, tom. tom: very good. let me do a little bit of a vamp here on wheat in america. brown writing this article. this is weak adjusted. this is not a depression but getting there quickly for kansas with lower wheat prices. nejra: i am looking at emerging markets, tom, on the back of a stronger dollar last week. of kilis oil rising -- of course oil rising as well. stuck with a gap between higher in local currency bond shrinking. local currency debt
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outperforming. tom: we do everything we can on "bloomberg surveillance" to get someone who was not on the "saturday night live" opening this weekend, and that means chenker, he said no, i cannot come on. it is funny, but it is not. observation, can you sustain this for the president? arty: he can sustain this as long as he wants. a strategy,nk it is i think it is rudy giuliani taking an activist approach, which is something that donald trump wants. tom: i want to bring up a morning must-read from the wonderful cook political report writing and asking us, mike allen, who is gone, the gop house majority is so endangered,
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that party groups personalizing, localizing, getting nasty, by on leasing damning opposition research to disqualify democratic nominees rather than mike allen is scaring away fish this weekend #drivingtheboat. this is where we are right now. do this isy we can to go after the candidates one by one by one. marty: you can throw away the social media issues, ultimately in politics to identify the people who support you and get them to come out. that is what wins elections. let's go to west virginia, the state elections, cover and ohio, frame for our global audience the two or three republicans that would go after a beloved democrat senator. we have three republicans
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running for the primary not in west virginia, one of a convicted felon who actually spent time in prison. the former ceo of melon crop. is fascinating in this braces that he is from to cast -- he is trying to cast himself as the true trump republican, even though the president has decidedly not woodhead. tot is a fascinating race see whether he convicts can win the republican nomination in west virginia. democrats,can the marty, good morning to you, seize on this opportunity, both the political and the legal side of things? arty: bloomberg politics has fascinating story this morning about a 537 women who are running for either congress or the senate this year, so clearly part of that has been energized by the victory of donald over hillary clinton, but ultimately,
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as i said before, it will be determined by the amount of money these candidates can raise, their ability to identify with voters, and turnout. only, it is about getting the people is for you to actually come out and vote. nejra: is impeachment still a concern here, marty? it is definitely a concern. in the white house commission should the democrats take over the house, the talk of impeachment is going to rise exponentially to what is now. of course, there is the ability to have impeachment hearings, but then there is the actual impeachment itself, which has to happen in the senate. if they do not take the senate, impeachment is not going anywhere. tom: looking at the new bloomberg.com, in the politics segment, laura is killing it with this graphic. gave this great interface, the graphic we have on republicans and democrats.
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california to me is fascinating for the emphasis this morning in various meeting about where are republicans? yes, but the story also trying to tamp marty: down the narrative that democrats are going to sweep in a wave election. republicansny women running for races, especially among governors races, who are very supportive of donald trump. so the fact that there are record numbers of women does not necessarily translate into a democratic wave. you marty schenker, thank so much, some of the nuance we are trying to bring into bloomberg politics, the nuances and the locality of it. of course we will have coverage of it on tuesday. i believe it is may 15 of the pennsylvania primary, as well. much to talk about. we will continue this discussion. bloomberg radio this morning. one of the candidates in west virginia, attorney general, senate candidate and west virginia. we will speak to him in the 7:00 hour. please stay with us in london
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and from new york worldwide, this is bloomberg. ♪ this is bloomberg. ♪
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marty: this is "bloomberg surveillance." i am taylor riggs very let's get to the bloomberg business flash. the new ceo of volkswagen signed a rare pitched deal from the u.s. according to people familiar with the matter, the justice department will allow him to travel throughout the world without fear that he will be arrested in the u.s. diesel rigging investigation. the u.s. has filed charges against vw's former ceo, martin winterkorn. international flavors and
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ff, hasces company, i agreed to purchase frutarom for $7.1 billion in stock. china is trying to put a positive spin on trade talks with the u.s. negotiations continue, but it conceded that the government's position did not make unreasonable demands. according to one report, china is now studying ways to lower import tariffs on some products. the u.s. has threatened to propose tariffs on $350 billion of chinese goods. that is your bloomberg business flash. nejra, tom? tom: taylor, thank you so much. let me show you a chart right now, folks, which will get your attention. this is the bloomberg dollar index, which is really good math, and it is a trick chart. i have it off to the right to what we have is a weak dollar policy. this is where we were three months ago, and that if you just drag the chart over, there is the surge in the dollar.
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one of the great thinkers on his denmark, jens nordvig, and also on the strong dollar. is it a strong dollar reality? will we get used to this? well, we certainly have a pretty broad dollar strength year versus euro, versus emerging-market commodities, and it is surprising people because of january, we had a unusual situation where interest rates were rising dramatically, and the dollar was never the less going down. ishink the key thing here that as opposed to january, we actually have some concerns about global growth. in january, all interest rates were rising with the u.s. interest rates. now they have a very big isergence, and i think there doubt about what is going on globally that is making the dollar rally. this is your work on the
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euro crisis, you are so good. the inertial force of this trend. it is baloney. it is behavioral, it is cultural, it is capital flow, it is a diversion. do you believe in the natural force that once a dollar strength is going, it feeds on itself and keeps going? jens: i think at this point of the cycle, it is pretty dangerous to have a 12-month view. a lot of people are forced to write down a 12-month view -- tom: yeah, it is called a selfie. good morning, goldman sachs. [laughter] tom: are you going after francisco cars a really today? think a 12-month view is just dangerous. i think of a cycle, if you could write him a multiyear view, but this point in the cycle, i think you have to be more tactical, and we have a tactical between
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two and three months. nejra: jump in here, narrow, please. is showing thert story about central bank, however, that divergence is still in a close mark your, so why is it happening now? january was the anomaly. we had an incredible breakdown ,n the correlation, and that if you think about it from a strategy perspective, do you want to flip-flop your framework all the time? flexible but not totally changing your framework, and i think a lot of people got really wrongfooted by that break down correlation in january, and now we're back toward what is more normal. we should not be overly surprised. it is just a matter of discounting the special forces in january, really. nejra: "back to normal" -- got it.
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is there any reason for a dollar strength in the year ahead?? very firstld say the thing to monitor is what is going on on trade. we have the chinese negotiation going on. we do have the nafta process where we could get a formal resolution within weeks, and that is obviously going to impact the currencies in north america, but it could also give a little bit of a boost to the dollar on a global basis, because it is wanted to go with some of that concern about protections, and that was dragging down the dollar earlier in the year. tom: i want a visibility here euro $1.19. can you be dramatic and go to something bigger? huge we can mount up this downdraft in the euro, $1.40 and
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now down to $1.05 roughly. we have recovered and are now bouncing of the lower end of the range. $1. not1t will go to far from where we5 are now, but going down to the lower end of the range, i do not think that is, realistic at this point. turkey coming out today with headlines. the key headline is blaming outside dynamics for turkish lira weakness. we see this country to country as well. ., is it about internals? jens: we have talked about kaiser of internal factors, remember? of deficita lot without having to rely on dollar
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debt. it is the classical emerging market crisis in the fact that they have negative balance sheets. when the currency goes down, they create more problems for themselves, because they have this debt in dollars. so it is the classical situation. nejra: we see it in -- ra, we see it in the emerging markets today as well. nejra: yes. we also have the oil price. does that give you want some others?es vs. the jens: there isjens: one country that comes to mind when you have rising oil prices, and that country is india. it has the external balance concentration of people have had over the years. that is one. overall, the influence of oil is not a bit extreme level we have when we had the collapse in oil prices a couple of years ago, or 160 backreally rose to $
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before the crisis. it is not a dominating influence. exantejens nordvig of data stays with us. later today, francisco launch, 2:30 p.m. in new york, 7:30 p.m. in london. you want to catch that on a day when wti is above $70 a barrel for the first time since 2014. this is bloomberg. ♪ s is bloomberg. ♪
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nejra: i am nejra cehic in london with tom keene in new york. starbucks are teaming up a multimillion dollar deal. intlé will pay $7.2 billion cash for the rights to sell starbucks. shares are higher in premarket trading. ising us now from geneva bloomberg's news editor thomas. this is not about nestlé getting assets -- this is about marketing licenses. is right.at nestlé will pay about $7 billion to get the license to basically sell coffee, packaged coffee products outside of starbucks chains in various outlets, such as supermarkets
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and food service. nejra: is this a big m&a test for nestlé? a lot of deals in the passive not gone all that well. well, it is the third biggest acquisition for nestlé and the biggest for the new ceo, mark schneider, who has been leading the company since january of last year. it is $7 billion, have a look at the average valuation for similar food deals, it is about 20% higher than that, so some analysts are saying it is an expensive that come up on the other hand, it is starbucks, which is the name and coffee. tom: if it is the name and coffee, i guess it is a great association for nestlé, what is the sweat level here, thomas, on the product? they will brand starbucks worldwide -- i get it -- but
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what is the urgency here for nestlé? nestlé, while they are one of the biggest coffee companies in the world, their achilles heel is the u.s. if you look at the u.s., mess nescafé is a huge brand elsewhere but has a 2% market share very they need to go out and do something. thank you soulier, much, greatly appreciated this morning. coming up in washington, amid the primary week that we have, john hudak on the administration and challenges. stay with us. this is bloomberg. ♪ this is bloomberg. ♪
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♪ i'm nejra cehic in london with tom keene in new york. u.k. markets are closed.
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let's get to know who's -- to news with taylor riggs. putin says doing everything for russia is his life's work. he called for international cooperation for stability and peace. he was reelected to a six-year term with 77% of the vote. iran is signaling a split over high oil prices with saudi arabia. a suitable price would be up to $65 a barrel while the saudi's to set with a price closer 80. the european union is considering a compromise to avert a transatlantic trade war. on block may tolerate quotas exports if trump imposes tariffs.
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midterm and elections in the u.s. could change the political landscape. there are tensions among conservative party members. there is speculation of prime minister theresa may might plan to revive a custom union land projected -- rejected last week. clark toldcretary the bbc the partnership plan is still on the table. over in italy, the head of the center-right alliance was asked to try to form a new government and break a political logjam. he is confident he can come up with a majority in parliament. italy held elections two months ago but the result was a hung parliament. global news 24 hours a day on twitter powered by more than 20 -- 2700 journalists and analysts in more than 120 countries. this is bloomberg. tom: thanks so much. john hudak is in the brookings
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institution where things about governments. onmaries were all focused november 2020 four elections of this year. we forget about primaries. , are primaries more important now than they were 20 years ago? alwayshey are are 8 -- important in american politics because they help determine outcomes in general elections. we have seen republicans fall down when it comes to primaries by nominating individuals in key races who are just frankly unelectable. they were not palatable to republicans in those electorates and they miss the opportunity to either hold seats or pick up seats in left them with smaller majorities or previously without a majority at all. tom: if we look at west virginia as an example, are the republicans learning from their lessons and do the democrats have too much confidence in the
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primaries or where they will be in november? john: democrats are confident about where they will be in november. west virginia is an interesting one. democrats are running a very well accomplished, very well-liked incumbent senator in joe manchin, but it's a republican state and increasingly republican. republicans are running a tight primary to see who can take him on. qualitye some very candidates in the race and there race.nd gusts in the people who would be an embarrassment in the state -- to the state. public,or the american what ways more on their minds, is of the domestic politics, rudy giuliani, that story or more what we have seen from the weekend over the u.s. china trade tensions and even u.s. and iran? john: american voters tend not to vote according to international relations.
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trade tensions with china or the iran nuclear deal tends not to factor into how individuals boat on congressional races. congressional races are often determined based on pocketbook issues and the quality of candidates before them. a strong economy is typically good for the incumbent party. assignnds on how voters the benefits of that economy. whether it is to the president and republicans or elsewhere. nejra: how significant was the job data out on friday without unemployment rate dropping? >> the jobs data every month is good for the president. and then unemployment rate is lower, jobs being created, whether they met expectations on the street or came in under, those are numbers easy to explain to the american public and they are numbers the public likes to hear. tom: tell me about turn out right now. for me, everything is about turn out.
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is there anyway we can gauge potential turnout or is that a mystery where we learn about it when people show up? john: we have a good idea during off your congressional primaries and that is it is some of the lowest in american elections. that is anbang unfortunate outcome because it means only the most older eyes, the most extreme voters in an electorate tend to select the candidate and that's the trouble republicans have had over the years. tom: this is important. i level you just said. is it different this time? john: we do have some indicators it might be different this time. if we look at the special elections being held, we have seen significant increases in democratic turnout. we have seen significant increases in turnout overall relative to special elections and relative to primary races in previous years. you see voters coming out in droves because they see this is
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a critical election and they see the choices they have as critical ones for the success of their party and we probably will see anbang uptick in turn out just an uptick in turnout this year. jens, how much of a story for the dollar will be politics be this year? >> we have seen examples that when we have extreme turmoil within the u.s. administration that the dollar takes a hit from that. that's something we have to watch all the time. is itrket is learning really needs to reach an extreme , negative headlines that come across very often these days is not something that moves the dollar dramatically so it needs to be something where impeachment would come into question or on a trade side something dramatic. tom: we will come back on the peso and loonie.
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good morning to all of you in canada. us anddak will join continue with us with brookings as we look at -- we look forward to this discussion. that's what we love to do on bloomberg, coming up, dollar canada coast-to-coast. on our digital product, boston, new york, washington, san francisco. this is bloomberg. ♪ ♪
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♪ let's get theor: bloomberg business flash. in turkey, the deputy time -- prime minister is blaming outside development elements for
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the week earlier up. a. the weaker lir the government has plans to boost public spending before next month election. takeo phillips plans to assets from venezuela state run oil company after a $2 billion award in an arbitration. the company is targeting assets and the caribbean. venezuela seized two conoco phillips projects in 2007. the latest avengers movie is a record breaker. war" took infinity $1 billion at the box office faster than any movie ever. movie to pass that milestone. that is your bloomberg business flash. the screenwriting, the screenplay was extraordinary.
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nejra: i will have to go in cf. tom: the drama. .he language, the use it was shakespearean in tone. this sort of looks like a monday morning meeting for surveillance. there we are in the movies this morning. john hudak with us at brookings, a senior fellow. , let me start with you. trade weighted canada. strong canadian dollar and then weak and a rebound. critical is nafta for canada? it is a hugely important deal for north america. the difference between mexico and canada is that canada has a
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free-trade deal signed before nafta that they can fall back on. so it's not that they are left with nothing if nafta breaks down. so it is less critical for canada than it is for mexico. nextnk the key bit in the couple of months is that we are -- in moving into a new terms of u.s. trade policy. we've had all this focus on nafta. they can't have trade tension in north america, whereas for china , they feel much more threatened by china for all kinds of reasons. just a much stronger argument to get really aggressive on china. a deal for the nafta countries including canada, but for china, they will go for escalation before a real break. tom: do you have a loonie call? i think canada is going to get a slight boost from the
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nafta announcement that are expected in the next to three weeks. the problem for canada is the central bank is sending confusing messages and right now the interest rate is rising to more rate hikes this year. i'm not sure the bank of canada is confident enough. tom: give us a washington update on nafta. onl there be any affect nafta. where are we exactly? john: it is unclear where the administration is taking free trade or trade agreements generally in north america. i agree with jens. you have an administration that can capitalize on vilifying china in a trade war or in a language. it's hard to convince the american people that canada is doing terrible things do that i'd states and that they are playing unfairly. what we have is this disconnect between what was easy campaign rhetoric for the president and
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the hard work of negotiating or renegotiating with our north american partners. the president needs to show he has done something because he promised to do something, but those negotiations are actually quite difficult because the trade agreement in place is not as unfair as the president made it out to be. nejra: what sort of timeline are we looking at for a resolution to nafta? john: for the president he would like to have some sort of resolution in advance of the november election. that would be something would help his party quite a bit by saying we have renegotiated trade and we are helping the american worker. that will help a lot of swing districts with republicans on the ropes in places like ohio and wisconsin. if he is not able to deliver that i think a lot of voters will look at this administration and say what have we really bought into here. is changing better option for us.
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midterme change in a election right now would be a shift towards democrats and that the last thing the president would want. you were saying earlier you do expect a nafta deal but for the u.s. to push harder with china. wouldn't an escalation of tension with china would be more risky for the global economy? jens: i think in the next few weeks we have to get some progress on the nafta front because otherwise the mexican election is getting very close. that really pushes the timetable forward. right.a, clearly you are it is a huge part of the global economy and the amount of terrorists talked about in -- tarriffs are very large. another another list of hundred billion. -- $100 billion worth of goods. we're talking a huge numbers. that will be a huge shock to the global economy. we are at a negotiation phase. these are in the chore that can
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be put into effect but are not really coming to fruition yet. tom: all this is about saving face. the china negotiation of buried by the news flow very cash flow. how do we save face on nafta? how do mexicans in canadian save face? how does mr. trump save face? john: for a lot of american businesses and across north america, nafta is working out pretty well for them. so the one way to save face would essentially be to unveil a new agreement that each of the country's leaders can take back to their people and say we are now doing better, but actually not abandoned north american trade desk not up and north upend northnot american trade. they can rearrange deck chairs and call it a new agreement and allow the markets to absorb what
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is essentially the status quo with a new name on it. china, china has softened its tone on trade. but it has gotten a bit buried in the news flow. how do you think this will evolve from here? jens: i think they know this will be a drawnout negotiation so of their first goal was to make sure this negotiation is happening and we don't have immediate escalation. i think it is something that will only come to the floor in june, july. there will be talks, different proposals on the table and in the big question for me is the u.s. administration going to do a fake escalation to force concessions, how aggressive will they be. for now will be a drawnout negotiations. tom: thank you so much.
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greatly appreciated. a real estate transaction. i will call a pretty vanilla. blackstone to take out gramercy properties cross rounded up to a billion dollars -- $8 billion. worldwide, this is bloomberg. ♪
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♪ us, an behalf of all of moment of silence for nejra cehic who had to work today. it is the one gorgeous day of the year in london, everyone is off,francine lacqua is everyone is off except nejra cehic. enjoy the view from our freezing london on thed in only beautiful day of the year. in the united kingdom. bank holiday. nejra: tears running down my face. tom: thank you so much for being
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here. let's finish up strong. this is a chart we have shown before. it's a long-term law depreciation -- law the depreciate -- log depreciation of the turkish lira. it's a must a strategic plan of a government and that only goes on for so long. are we at that point with turkey , argentina and others where the strategy just ends? jens: i think. in turkey's case we've had monetary policy has been partially influenced by what the president has been pressuring the central bank to do and we have had loose policy. the currency is depreciating significantly. inflation has spiked. it looks like it is not really
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fully under the controls and a pretty dangerous cocktail for currency. we have this negative balance sheet. down, it has negative implications for the currency so they don't get the benefit. tom: i am going to show this quickly. 12.2% core cpi, another indexes out at 11% as well. that's the domestic affect, forget about all the fancy suits and ties like you or me. turkey,people of inflation is how that turkish lira depreciation is expressed. jens: when the public starts to smell there is something going on, they might get concerned and that is when the capital kicks and. this is a dangerous cocktail and we can see it already in how the currency is hard to get under
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control. nejra: i love how tom has done the granular with turkey. i want to take it more broadly across the emerging markets face. we had losses in equities, a fax -- affects. --fx. jpmorgan says the real money has not gotten involved. when real money gets involved does it get worse? jens: we do a tracking of e.m. flows globally. we look at these in real time and we had an extraordinary had an extraordinary situation where january saw an incredibly strong inflow into em and we had very weak flows in february and march and april and it looks to be still weak. structuralto be a turn in the overall flows so that should include real money lows is a bit disturbing. ecb is alreadyhe tapering so we have less flows from europe?
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there are a lot of forces at play and we need to have growth remaining strong otherwise we have a problematic cocktail. anthony got ahead of me showing this chart that i showed em debt and the divergence you are seeing between local currency debt in dollar debt. local currency debt outperforming. stay with me here. and we a dollars story see euro weakness and further sterling weakness off the individuals tories there, -- individual stories there. jens: that's a very tricky question. on the one hand, the euro is a big part of the dollar trend. europeanher hand, inflows are a big part of the em flow sure. if you see the euro rally it could cause -- into the euro.
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it is summing where you want to look at the details. i can't give you a one-sided answer. tom: thank you so much, greatly appreciate it. have two stories right now. i want to go to germany first. if you can bring it up on the screen, this is very important. the foreign minister germany speaking right now live in germany and the headline, he says we will uphold the iran accord regardless of the president of the united states. over to mr. trump, how about a tweet from mr. trump that says remember alabama, remember alabama. this is bloomberg. ♪ his is bloomberg. ♪
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john: -- ♪ alix: oil prices break 70 at
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head of the decision on iran's sanctions. all you central bankers. em currencies get whacked on the stronger u.s. dollar. air france's nose dive. the ceo resigns, strikes continue and politicians warn the survival of the airline is at stake. david: as we look at new york city, welcome to bloomberg daybreak. i'm david westin here with alix steel. spring has finally arrived. alix: then you come out and it's a dust of pollen over every single car. and then you have allergies and you get shot with two types of medicine you are still in pain. a pretty steady world when it comes to the bond market. , not a lotutures up of action except for that stronger dollar. at one point

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