tv Bloomberg Surveillance Bloomberg May 8, 2018 4:00am-7:00am EDT
it also bears emphasizing that eme's themselves have made considerable progress in reducing vulnerabilities since 1980's and 1990's. many eme's have improved their policy frameworks while adopting more flexible exchange rates which provides better insulation from external unanswered shocks. corporate debt with limited debt service capacity has been rising in eme's as shown in figure seven. this rise has been limited and has begun to reverse as stronger global growth has pushed economics. i do not dismiss the risks emanating from policy normalization. some investors may not be well-positioned for a rise in interest rates, even as markets
widely dissipate. future conditions may surprise us. linkages among monetary policy, asset prices in the mood of global financial markets are not fully understood. noted thaters have u.s. monetary policy influences capital flows through its effects on looser policy leading to more positive sentiment in markets. while those channels may well thatte, research suggests actions by major central banks account for a small fraction of global financial volatility and capital flow movements. risk sentiment will bear close watching as normalization proceeds around the world. the question is, what can the financialfoster stability and economic growth as normalization proceeds?
we will continue to communicate our policy strategy as clearly as possible to help align expectations and avoid market disruptions. we will continue to help build resilience in the financial system to support mobile efforts to the same. -- to do the same. cooking thanks so much -- >> thanks so much. i will turn to the bif. >> thank you very much. you forlike to thank inviting me to this event but for eight years, it is a very good tradition that you have kept it going. value to has a lot of our understanding of key issues. with oneike to start comment on the presentation.
it was a force. francine: we are hearing from jay powell, the chair of the federal reserve speaking. what we heard from jay powell is financial markets have gotten the message on your central banks land for gradual interest rate increases. he said they should not be surprised by the actions. to put it into context, he says the market is now well aligned with the fed's rate and dot plots. dimon, heard from jamie what do the markets make a volatility? we need to look at the some the financial conditions and the tightening of these positions since august 2017. garzarelli, great to have you on the program. we were listening together.
he is basically trying to reassure the markets that they are there -- that if they go. they are very well-positioned. are they taking too much notice of the market? or is the market taking too much but notice desk too much notice of jay powell? francesco: every central bank has taken notice of the market. these times of uncertainty and with high asset price violations, the concern is moving too abruptly in generating abrupt change. they are all trying to does the retreat of monetary stimulus in a general way. the market for this year is fairly aligned with the fed's dot plot, particularly if you add on the s curves, the term premium which we know is negative.
throwing from his speech, an interesting set of remarks pertains to the connection between bond markets and different monetary policies around the world. francine: is there anything markets are misunderstanding about the fed? it was interesting to hear chair powell talk about dot plots. francesco: it is there. it is another piece of information that the market closely looks at. particularly given there's a lot of macro uncertainty, people are trying to piece out from how the fed sees the world, more information to be gleaned. that is why we look at dot plots. the difficulties is the terminal dots. lookine: how much do you at financial positions? let me bring out a chart. conditions titus
since august 2017. what does that tell us? francesco: the fed has more room to normalize rates. the terminal rate debate is formed from this chart. time, fed hikes another that in my book means the market can tolerate even higher cash rates. therefore, it will adjust the endpoint for the policy normalization. francine: as we were saying, we spoke to jamie dimon a little bit earlier on and he said it is possible that u.s. growth and inflation could be strong enough the fed to raise interest rates further than many anticipate. it would be wise to bear for benchmark yields to rise. >> someone asked me about what are the odds of a recession. it is 100%.
the question is when. the american economy is strong. household formation is going up, houses in short supply. the capital markets are wide open. there is less leverage. it looks like 2007. things are twice the capital, twice liquidity. america looks pretty good. yield.yond the we had 20% growth over nine years. the nine years is really good. the 20% is really bad. it should've been 40% over a shorter time period. it looks like it has links to go. other things happen, it will not happen exactly the same. the rest of the world is doing better. japan, 1.5%. europe, 1.5% of proximally. it is 1.5%.
europe for the last 10 years was 0%. that is a positive. americas in pretty good shape and you got some benefit of regulatory reform some benefit of tax reform. those things will drive growth a little bit. cu i read your note to clients in april. you said one of the biggest risks is underestimating the ability or the potential of the fed raising rates more aggressively. inflation could rear its ugly head. we have oil at $70. >> get to prepare for all possibilities. it is a possibility that growth accelerates and inflation accelerates. expect the fed raises rates more than you expect. year.ht force the 10 you can deal with 4% bonds. if it is because america is strong and healthy, i would call
it like normalization. the government in total, the 1.25" --ould go past those things may cause more volatility, higher rates in a way that we do not understand because we never had qe or reversal. we are growing. i always try to keep a view on both. the financial markets are one thing, they fluctuate. rates go up and down. what matters to most of the world, including the government's, is jobs, wages, stability and the economy. not necessarily the markets. francine: that was jamie dimon talking about rates and yields an interview. us get back to francesco garzarelli. just let's get back to francesco garzarelli. the concern is we focus so much on 4%.
if you look at 3%, it has taken 17 months to get their. -- to get there. do we need more sustained -- do we need 3% before we start thinking about 4%? francesco: when we look back at the tapes, we had janie rates above 3% in the context of global rates being in a different place. that needs to be taken into consideration. i disagree with the 4% call. have as to me that you missing ingredient which is bund and the gge is if you're willing to entertain -- the j ge is. if you're willing to entertain the tapering, it is possible. we need to have those ingredients in place. francine: how long will that take?
we are looking at the end of a 30 year bull market. these things are very difficult to predict. going back to 1951, the transfer of the epo has been ever going down since 1984. when can we hear about 4%? in the next six months when you say there is a repricing of jgb's. francesco: i don't have 4% in my 10 year forecast. the reason is the ecb will keep policy rates very low, even after removing the qe. the qe fx will stay in the price of for as long as they do not shed the balance sheet expansion that they built over recent years. that shapes off the 10 year bond. hence i don't think the
treasuries will have the power on their own to go much above 3.5%. that is the lay of the land for what we know today. when we look at that chart, the past decade, it is been characterized by very stable inflation expectations around 2% . activity has gone down, so that is why we have lower rate -- lower ranges -- lower wages. something fundamentally has not changed in the price. it has been flat for a long of time. just for a long the oh of time -- for a long period of time. we will have a smaller output gap in the world. we have commodity prices rising. the best you get in wage growth , germany, u.k., u.s.
there is room to grow to 3% from their. -- from there. francine: stay with surveillance. decision day for trump. the president will announce if you will leave the eu raonic -- the iranian deal or not. will italy's five-star movement abandoned its efforts to form a government? could the country be headed for another election? we discussed that a little bit later. -- we discussed that a little bit later. this is bloomberg. ♪
trump says he will announce his decision at 2:00 p.m. westin time. -- washington time. the dumbest of deals and one of the weakest contracts i have ever seen of any kind. we are not going to sign deals where we have four prisoners over there and they are still there and we don't even ask -- one of them is there is a christian. the all think is insane. the iran deal is one of the worst and most open sided transactions. the united states has ever entered into. frankly, that deal is an embarrassment to the united states and i don't think you have heard the last of it, believe me. >> in the event we are not able to reach a solution working with congress and our allies, then the agreement will be terminated. it is under continuous review
and our participation can be canceled by me as president at any time. >> you are not going to be restarting anything. restarting, they are going to have big problems, bigger than ever had before. francine: let's get more from andrew barton. if you listen to a lot of the rhetoric from france and others, do we assume that trump will pull out of the deal? is it 70/30? andrew: that collection of clips that you played was pretty good. if you -- you have to take trump at his word. in the past he said similar things like this and they are not bluffs. he has followed through. i think of macron who was just there. he came back and is take away was look, we fully expect to walk away from the iranian nuclear deal.
i think you've got to take him at his word. francine: there were a couple of things when the president macron went to washington and talk about possible second record. what can we hear from the andrew: we have been doing a lot of talking about that today in the newsroom, kind of strategizing the way that it might play out. i see for options. the deal is dead. europe and iran find some way to make the deal survive. he will come out and say something but he will not give us any details. you are left scratching your head to try and decide what it all means. the curveball he might come out and say, this is the worst you'll ever and iran is in violation of it, so we are going to stay in the jcpoa but we are going to go to the dispute mechanism and call them out on it.
they could be the worst case for iran. the u.s. has not walked away but it makes life difficult for iran from the inside. you have the possibility of sanctions. we have no idea what he is going to say but he is going to say something today which will not be good for the iranian nuclear deal. francine: andrew, thank you so much. how important is the president's decision for an -- four markets? reaction, let's look at oil and whether this will have an impact. it has had an impact in the last couple of weeks. i want to bring you to my chart. is higher.ice of oil depending on what we hear today, how big of a move can we get on oil? francesco: look, it is hard to say. i would suggest that the movements we saw so far in oil
have a very strong basis. there has been inventory draw, , we big demand forcing this had venezuela already in play. that party is in the price itself. importantly, head of the opec meeting, the enforcement of the quota has been very strict. all this adds up and again, in my mind, if we are at 70 with these conditions, if you introduce another source of uncertainty around this situation in iran, that could create further outside -- further upside to crude. the point shown buyer chart is the fundamentals, the geological fundamentals for oil is more in the 60 range. that is why the market will
gravitate toward that price point. term, therehe near is this political stuff to navigate. francine: how do you deal with the clinical stuff? -- with the political stuff? we have policy everywhere, europe, italy. we tend to treat it as a residual because everything is human. what cannot be explained by fundamental norms tends to be bucketing as the political risk premium at what i am saying here as far as the experts at goldman suggests indicates most of the price action can be traced back to fundamentals. fundamentals, hence why that could be upside. trump policy is a very difficult science. the market has formed an opinion
that the deal is really the buzz word. he wants a deal. it doesn't mean the deal has to be catastrophic. he wants something with his name attached. we see him make very strong statements and backpedal. this isthis is what partly in the price as well. francine: we are still keeping and i on what jay powell was saying at the conference organized by the swiss national bank. he is flanked by the dis. just do did he focus you focus on monetary policy or the ecb does with the possibility of the capital markets union compared to the big geopolitics of it? where do you see the main risks? francesco: we all know what short rates do, central banks know what they do. they tell us they are going to move gently all of that is small
fried. the big friday here is we are back discussing correlations in bond premium, and there is a very heavy-handed management of long dated yields. at some point, this will and. -- this will end. the fed is putting maturation back into the market that will increase what the 19 onwards. -- increase 2019 onwards. that is in big challenge for central banks alike understanding how this will play out in the international markets. as you change at these prices, what happens. francine: i will ask you about the markets but let's start by recapping the politics of italy's five-star movement. it is gearing up for fresh elections. the rival leagues struck a similar tone: for a note about just calling for another vote. -- calling for another vote.
how would markets respond if italians had back to the polls. i don't know if markets are right to ignore the italian risks. francesco: i think the markets are not ignoring the risks. that should be said up front because we are in a very low systemic risk regime in europe. within that regime, the market has been punishing italy for having worse fundamentals then spain or portugal. the spread to balloons -- spread than -- withigher italy being five times more liquid than portugal. that goes some way in saying the markets are focus on fundamentals and the politics. francine: the spirit -- the
spread between italian and 10 year, and you can argue there's been an increase in the spread. haveesco: if italy did not political turmoil, probably that spread would be 20 or 30 basis point tire. it would be on par with portugal. it would be half of the way it is versus spain. in the european context, italy is sticking out from a pricing perspective. why do we have more political risk premium because how bad the situation is. i would say in the marketplace, there is a presumption that at some point there will be a breakthrough in these negotiations, or the elections will be postponed the next year. that is the prior in many people's minds at the moment.
to thee: what happens markets if we do have elections in july? francesco: a markets will go to the announcement of the elections in july net long are not as short as it could be. that will precipitate a more abrupt price movement. francine: francisco, thank you so much for coming on. deals., diving into -- ast -- s decatur takeda agrees to buy shire. this is bloomberg. ♪
this is an important currency that we have been looking at for the last couple of weeks and months. it is one that tom keene was all over. this is pretty amazing, a five-year regression. if you look at turkish lira, it is something that has been moving significantly and you can see it is moving today. if you look at the lira and its longest losing streak against the dollar, there is a chart we will bring up for you and it is looking at short-term currency rates pushing to new highs as a prospect of higher u.s. interest rates. that is a five-year regression. something that we will push out of course on the terminal. and as a your colleagues at the tuesday morning meeting. let's get to the bloomberg first word news. nejra: u.s. oil prices have fallen back after donald trump
tweeted that he would announce a decision on the iran nuclear .eal today germany, france and u.k. have lobbied the president to remain in the agreement which he has criticized. boris johnson is in washington arguing the deal is flawed but can be improved. >> after 2025, it allows the current deal allows iran to go forward with enrichment programs which could lead to a nuclear weapon. no sections go back on. we need to find a way of fixing that. the president has been right to call attention to it, but you can do that without just thrown the baby out with the water. nejra: jpmorgan ceo says it is possible the u.s. growth could go fast enough to pump the fed to raise interest rates faster than people anticipate. comment in made the
an exclusive interview with bloomberg in beijing. >> it is it possible to the growth accelerates higher than you expect, the fed raises rates more than you expect which might force the 10 year up, not down. you can easily get 4% bonds. nejra: donald trump doesn't plan to attend the opening of the new american industry in jerusalem next week. he will send a delegation that includes his daughter and son-in-law. the group will be led by john sullivan and include steven friedman anddavid jason green black who is heading the trump administration's middle east and peace negotiations at elon musk is putting money where his mouth is. he has bought the company's shares, his biggest purchase since march last year. .e has a stake putting 20%
the purchase comes days after the tortured short-sellers in a series of tweets. eric schneiderman has said he will step down today as the state's highest law enforcement official. the announcement came hours after the new yorker posted an article outlining allegations of abuse by formalin. women.ed -- by four he denied abuse of anyone. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. cehic.jra this is bloomberg. francine: a bidding war may be blooming for fox's entertaining assets. comcast says to be lining up a bit. -- lining up a bid. in.k you for coming this is what a last-minute deal, why are they after the facet? who they see this desk >> they
see this giving disney a strong presence in europe. comcast is a rival. it is worried about seeing that kind of deal coming in his backyard and abroad. that would put comcast at a disadvantage. their viewpoint is should begin back in their. on aey pull the trigger bed in an auction for the already lost last year. francine: is it an all caps offer? offer ahey will need to significant bid. the finances there raising would give them the firepower for an all caps bid. it is going to need to be punched up. they cited antitrust. that would be much easier to do a deal with disney. give them certain roles in the future, combined entities that they favored over a comcast offer initially.
francine: what would they need to do to satisfy the regulators mark -- satisfy the big leaders? aaron: in the u.k. where fox's looking at sky, comcast will have an easier time to get that through than fox which is under significant government scrutiny in the u.k. for that offer. francine: you are like the m&a expert. this could last for how long? aaron: that is a good question. up to this point, we are in the highest pace of deals since 2015. this might be the biggest deal of our lifetime if it sticks to the space. what is driving it is a mix of a lot of ceo confidence. europe has rebounded, low tax and low financing. a lot of companies are having the confidence to do deals. a lot of sector specific pressure to do deals as well.
francine: erin, thank you for thank you-- aaron, for coming in. we are looking forward to an interview at 9 p.m. u.k. time. stay with surveillance. but the coming up including burning rubber. we will be speaking to the company's chief financial officer next. elon musk it's his money where his mouth is. he buys up almost $10 million of outburstsock after against short-sellers. this is bloomberg. ♪
francine: this is "bloomberg surveillance." i am francine lacqua in london. this is the currency rancor, one of my favorite bloomberg functions. this is what we're looking at today and there is quite a lot of movement when it comes to currencies. we are seeing emerging markets selloff. -- and his plan on iran. effects, you can see a little bit mixed. if you look the iranian call, it may have an impact on a lot of the fx. i'm looking at euro, their spine with a lot of big companies, big banks coming in and saying the bearish buyers may test a 55 weekly using average support. that is to currencies. let's get to the bloomberg business flash with nejra cehic. nejra: comcast will maintain sky headquarters and carry upon its brand-new services if it takes over the forecaster.
that is as the u.s. company is lining up financing for still bid for 21st century fox. countering the offer from disney . according to a person with knowledge, comcast is talking to invest in bank about bridge financing for an all-cash bid. a comcast representative declined to comment. bob iger will join us after 9 p.m. u.k. time. cicada -- takeda has reached an agreement to buy shire in a cash deal. pounds on a-- 49 penny per share of -- penny per share. it will transform takeda in a top drugmaker. a unit of shell has agreed to sell its entire stake in oil plant producing canadian natural . so guess will sell its shares in canadian national to 3.3 billion
u.s. dollars and the transaction is expected to be completed by tomorrow. at shares are being offered $34 each, a 2.9% discount. qualcomm is preparing to give up its push to develop processes to data center servers. the biggest maker of mobile phone chips is exploring whether to shut of the unit or look for a new owner. the division has been for ways to get technology into the market for chips that is at the heart of service. a qualcomm spokesman declined to comment. that is the bloomberg business flash. francine: car parts maker, continental says it's -- in the first quarter here that comes as the company sees is adjusted ebit margins at 10.5%. joining me now is wolfgang
schaefer. thank you for -- thank you so much. you said that you're looking at a separation of the powertrain operation periodically could that come? -- operation. how quickly could that come? wolfgang: we are doing and analysis on the overall corporate structure of continental to make sure we are adjusting always to an environment which is changing very fast. we do that every couple of years and we are looking at that. months, we will have more news on that. francine: what is the feedback you are getting from investors on the current corporate structure? what would they like you to do? like always, there are
different opinions. there is of input which we take into account. it is not only from investors, it is from our employees, from other sources. this is what we are doing at the moment. we put it together and look at our expectation of the environment, how is it changing? how is technology changing? how do we need to be set up to be successful? francine: what does that mean for -- would you consider outright sales of units? do you plan to maintain majority stakes? wolfgang: i notice you are doing that, francine, but we are still in analysis and portfolio discussions. we look at the company as a whole and we look at the environment and target it to make sure continental has had a
great future -- continental will have a great future. this is what we are doing, something we do every couple of years. wait a couple of months and then we come up. francine: i completely respect that. i am try to get these out of you and you are limited in what you can say. can you give me the three things that you are looking at that will impact your decision? what is the reason behind what you will decide to do? you know the main topic which not only continental has at this time is that inhnology and markets are [indiscernible] -- there is car sharing in the environment it all of these sectors, we have to make sure that continental stays
in able to adjust to an environment. whatever prediction we do is hard to predict. these are the cornerstones. we are trying to make sure that we are set up correctly. francine: when you look at raw material costs and how that is changing, when you look at currency situations and how that is changing, what kind of impact are you expecting on earnings? actually we had to change our expectations for the total year. from around 10.5%. it will be more than 10% because of exactly those two sectors. particularly, exchange rate. the first two quarters of the year will have some negative effect on our profit ability. expected to fade out in the second half of the year.
there is an impact on our profitability. that is the reason we changed our guidance for the total year. francine: do you worry about a trade war? obviously i do worry. i do not worry for just continental. i think free trade is one of the most important things to worldse the wealth of the . continental, a company which is present in all of our regions, this would have a significant effect. without specific measures, you cannot qualify this but continental is sending product from country a to country b. we rely on free trade and it makes our product for the consumer. francine: thank you for joining us on bloomberg tv. let's get to one of our other top stories, one that the chief
financial officer of continental is worried about. that is trade tensions. jamie dimon says his main concern is the u.s.-china relationship. that in improvement was achievable. jamie dimon spoke to bloomberg at the summit in beijing. >> you just had your fireside chat to the 2000 plus participants here. what was your main message? everyone --thing, the america-china relationship. the rising easily is a good thing. making me a little nervous which they need to understand and it is around trade. the president has raised some concerns among trade. talk about how you can improvement in mckinney win-win
for everybody. they have been having more detailed conversations. they continue next week in washington. who the general contest >> the general consensus is the talks last week in beijing -- the general consensus is the talks last week in beijing did not bear much fruit. are you disappointed? who know. -- >> no. they're just getting to know each other. the chinese side laid out what they want. that is how you start the conversation. now they are working on specific things. hopefully, they will make progress. we need there to be progress to be made. >> do you think the trade war is possible? >> it is always possible. >> do you think their list of the bands are too far apart? >> no. when you go to trade, you talk cap'stariffs or equity
and where you can invest and how you protect investments. there is no reason it cannot be bridged. both sides have good faith. it may not be bridged. then you have a different economic relationship between the united states and china. >> he says he was approach has been all stick and no caret. >> the president has laid out certain issues. property, nontariff barriers. the chinese know that some of those are true. they are not going to give into anything if they know exactly the deal. president trump would say -- they don't of a bond of trust. they want some of these trade things fixed. he has negotiated. tweetsess attention to and more to what they are negotiating, what is on the ground.
having analking about agreement in the next week or two. it is doable. both sides do want it. do you think trump is getting the best advice on how to handle do you think trump is getting the best advice on how to handle china? >> the business of roundtable is not disbanded. gotten very specific advice about what the issues are, how we think this should be resolved. we're not in favor of tariffs. sit down and negotiate the deals. i don't know the advice inside. i don't agree with the advice he gets from someone like it or not borrow. -- from peter navarro. he understands the issues.
francine: economics, finance and politics. this is "bloomberg surveillance." i am francine lacqua. elon musk has put his money where his mouth is buying almost $10 million of tesla shares. in a series of tweets, he promised to burn those betting against the company. we are joined by -- he has been following the story from the very beginnings. alex, remind everyone. last week he was on a cop is called and it went really downhill that she was on a conference call and it went really downhill. he is saying i'm going to buy myself.e of the stoxx -- he has now recovered
those losses. that was the question we were all asking after the earnings call. would those declines be sustained? it has recovered largely. francine: has he borrowed it? alex: as far as we know he -- it is his money. charity. biggest when he compares to a company valued at $50 billion right now. a big chunk of cash. francine: what are you looking at for the rest of the week? in your conference calls? -- anymore conference calls? you were saying people like him. >> these people, he is asking them and having -- does that mean they get more [indiscernible]
they don't need anymore orders right now. even if they had their 5000 cars a week old, they would still be delivering cars through the end of next year. ultimately, he is going to tweet . he has to deliver on some of those numbers. he's got a little bit of time. francine: alex, thank you so much. we will continue to follow tesla as it develops. bloomberg surveillance continues in the next hour. we will be talking about u.s. politics. this is bloomberg. ♪ mr. elliot, what's your wifi password?
jamie dimon says the group should prepare for serious shifts in benchmark deals. d-day for the iran deal. will announce later whether he is pulling out of the nuclear agreement. tehran warns against it. and comcast is said to be lining up for its potential bid for 21st century fox's entertainment business. this is "bloomberg surveillance ." i am francine lacqua in london. tom keene is in new york deified him looking at a lot of movement when it comes to currency. that is partly off of the back of the iranian decision due later today. and boris johnson trying to weigh in on brexit. tom: i would focus on chairman powell. extraordinary,re really reaffirming a higher rate regime.
we will do an extended data check -- massive strengthening in the dollar, with real adjustments. i will show an indonesian chart in a moment that is extraordinary. francine: i like that, indonesia. i am also looking at the turkish lira. it also had quite a move paper for we get to currencies, let's get to the bloomberg first word news. taylor: the state of the iran nuclear deal is in the president's hands. he says he will announce whether the u.s. will stay in the agreement at 2:00 p.m. eastern. he has called the agreement the worst deal ever. the president says it does not do enough to address threats from iran's ballistic missile program. u.s. and china will battle over trade today in geneva. they will be at the wto, where china will criticize the trump administration's proposed tariffs on 100 $50 billion on
chinese goods. the u.s. will find fault with china's plan to retaliate. saysgan ceo jamie dimon the interest rate may race faster than people expect. he spoke in asian -- beijing. is possible growth accelerates higher than you expect, the fed raises higher than you expect in the short and -- end. you can easily get 4% bonds. people she did prepare for -- people should be prevent for that. taylor: dimon signaled that trade tensions will not derail jpmorgan's plans. comcast is threatening to derail buyey's $52 billion bid to 21st century fox's assets.
comcast is lining up financing for its own potential bid. the company already made an offer for sky that fox does not already own. tesla ceo elon musk is putting his money where his mouth is. million of tesla shares days after he said he would burn short-sellers and the company. largest already teslas stakeholder. he now owns 20%. global news 24 hours a day on air, and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. tom: equities, bonds, currencies, commodities have all changed in the last 20 minutes. spread down.- 2-10 oil up, finally beginning to
adjust to a strong dollar. it is important we have seen that. better equity markets. i did the euro a second time -- i do not know why. there is the turkish lira, up 0 .03. francine: this is what i am looking at -- overall, european stocks drifting lower tuesday, despite broad advances in asia. crude following as investors -- crude falling as investors are bracing themselves on the back of the president's announcement on the irani and -- iranian deal. the pound falling. shire reaching an agreement to takeda.t by rival tom: right now, bloomberg dxy index, this is really good
mathematics of what the dollar is doing. the nuance here, if i assume in we wonder is where where he will be going from convex. headlines to drive the two days in a row dollar strength. francine: intriguing, because he basically says the market is aligned with the fed's plot. he says trust the fed. let me bring my chart up, if i and get it out. i cannot actually see it, but i am sure it is up somewhere. this is financial conditions. you can see we brought it back to 1990 -- thanks to hillary clark. of 2019 -- record
easing. show this chart -- this could be the chart of the year. i will tell you in november or december. this is the memory of 1997. wasindonesian rupiah, which rupiah, with a weaker and now we have new indonesian weakness, going back a solid 20 plus years. really something to watch. it is one of those whatever in the coal mind. the idea of little things to watch as we focus on the big picture, like draghi, kuroda, and powell. get to our other top stories. deadline day for the iranian deal. the president says he will announce his decision at 2:00 p.m. washington time. he has long derided the 2015
deal as the worst deal ever. >> it is one of the week is contracts i have ever seen. we will not sign deals where we have for prisoners over there, and they are still there, and we do not even ask them -- one of them is there because he is a christian. we have a writer. the whole thing is insane. theiran deal was one of worst and most one-sided transactions the united states has ever entered into. frankly, that deal is an embarrassment to the united states, and i do not think you have heard the last of it. believe me. in the event we are not able to a solution working with congress and our allies, then the agreement will be terminated. it is under continuous review, and our anticipation -- participation can be canceled, i
mean, as president, at any time. they will not be restarting anything. they restart, they will have big problems, bigger than they have ever had before. francine: for more on how the president's decision will impact other global leaders, we are blas and javier charles myers. if you look at oil prices, the have fallen back after donald trump tweeted he would announce dealision on the nuclear at 2:00 p.m. today. if you look at what the president has said, and that was kind of beautifully put together, he does not like this accord. is that mean we will get another deal, or is he just going to scratch this? >> i think it will be something in the middle. it is clear he is very unhappy with the deal and truly believes it is a bad deal for the united states. he has three options.
completely pull out of the deal and reimpose sanctions immediately. buy time andcan impose sanctions just on oil, which would give other countries six months to comply, or keep the status quo. i think he will buy time. he may impose sanctions on oil today, or announced that today, giving six months for other countries to comply. i think he will be able to spin that as a win. and his current cabinet composition, with a veil and bolton in the, hostile to iran bolton inmpeo and that cabinet, hostile to iran, there is the risk of potential conflicts, either by proxy in yemen and syria with iran, which is a bigger issue. francine: what does it mean for
oil? if you look of the various scenarios -- we got have the president just say i do not want the record, leaving us in the lurch as to what kind of details it means. will the price of oil move significantly on that? javier: we could see a spike in oil prices. the worst-case scenario is the united states polls are completely of the deal and onoses immediately sanctions oil supply. potentially, the option two could give breathing room for the market. if you only pulls out of the , triggering the one-month resolution mechanism, and 180 days, giving countries time to adjust to the sanctions, that could be more easily absorbed by the market. it is not only what trump is doing with iran, it is also the reaction of opec to any
potential loss of iranian oil supply. the last time this happened in 2012, saudi arabia increased production. whattime, we do not know the saudis will do, because they want higher oil prices. tom: and i think we all have a general idea in our minds of -- saudibia and fiscal arabia and fiscal dynamics around oil. i have no clue the iranian structure around this key commodity. inform us now. what is it? javier: saudi arabia needs higher oil prices than iran. northudi's need something of $85 a barrel to break even on a fiscal basis. with iran, it is something between 60 dollars and $70. room,ve it legal -- wiggle
because the financial structure of the company is opaque. but at current production levels, iran needs lower production -- tom: thank you. look for javier blas on bloomberg.com. we will continue with mr. myers advisors.global this afternoon, our coverage of the president. it is expected he will have a most important announcement. david sanger says this will be the most important policy announcement for the president in his tenure. this is bloomberg. ♪
taylor: this is "bloomberg surveillance." i'm taylor riggs. takeda pharmaceutical is shaking up the drug making business, for 60% buy shire premiums of shire's closing price before takeda expressed interest. to aansforms takeda lucrative business. the -- ited to sell stake in the canadian shale producers, offering at a 2.9% discount to yesterday's closing price in new york. shell wants to sell assets to reduce debt. the parent of the new york stock
exchange has been working on a trading platform that would let investors trade on bitcoin. international continental exchange has had talks about the subject. that is your bitcoin bloomberg business flash. francine: thank you. jpmorgan chief executive jamie dimon laid out his long-term vision for the group's expansion in china while expressing hopes that trade tensions will not derail the plan. he spoke to stephen engle exclusively in asian -- beijing. >> we want 100%. it is better for the chinese. joint ventures, a lot of these are hard to govern, not very successful, do not set the highest standards, and do not bring the best of all of jpmorgan. where does the research get done?
you sell here but cannot sell -- once weu have to 100%, jpmorgan will have recruiting, credit, products, services. .e represent we are optimistic we will get there. that is part of the process to making sure -- stephen: do you see this as a step-by-step process, and after three years, allow 100% ownership? jamie: yes. stephen: where are you in that process? jamie: we are in the process. stephen: what is the timeframe? jamie: as soon as possible. when it comes to jpmorgan, we will make sure we got all of our ducks in a row. stephen: what is a key priority? last year, you said joint venture is our sloppy corporate
governance. jamie: but at 51% control, where you know the other owners and have a path to control, that actually works. stephen: how involved have you been in the consultation. for the security joint venture? about the practicality of new rules in forming new joint ventures and other requirements? jamie: i am not worried about it. people have very complex rules. the intent was real. our people have been in constant contact, and will be able to work out all of those things. is these arethat properly capitalized companies. jpmorgan is a properly capitalized company. if you were running a security business, you want to make sure what comes in is right. just try to get it right. stephen: by what timeframe would
these liberalization's -- do you expect foreign banks to see significant material increases in revenue and profit? jamie: that is not the way we look at it. as china grows, we will grow with their companies, with some of the state owned enterprises going public. there is more and more multinationals coming in. traderse, bankers and -- one day, if i have a tower here, it looks like the tower we have in new york the multiple trading floors. desks servinghina chinese companies in brazil, france, the u.k. i do not worry much about whether we will see revenue benefits. francine: that was an exclusive interview with jpmorgan's
zurich. what you need to know is stronger dollar. at oneint on sterling point. euro well under 1.19. right now, we a marriage into the political -- we emerge into the political maelstrom of the first day of political elections in the u.s. every four years, presidential elections. still with us. it is the beginning of the midterm elections. what will you look at at 9:00 or 10:00 p.m. new york time tonight? >> it is absolutely the beginning of the midterms. the markets will really start to take notice of it now. the most important thing to focus on is the democrats will most likely take back the house. the democrats need 24 seats,
which is doable. every midterm election, since -- half of every midterm election since 1994, we have seen a swing of tory four seats or more -- 24 seats or more. the senate is more difficult. the math is not in the democrats' favor. seatseed to defend 26 this cycle. tom: where do you sit with your study of political policy? does this president help or hinder republicans? on the: it depends state, but on balance, he is a liability, because of the we havepolicymaking seen. and looking at almost all of the polls, even though there is a slight uptick in his popularity, he continues to suffer from almost record low popularity in almost every poll. with the exception of a few
states, he is a liability. francine: thank you, charles myers. we will talk a bit about the markets in the 10 year yield and maybe the 30 year yield. intel's chief diversity and inclusion officer, also vice president of human resources. i know they will talk a little about the markets and probably also the #metoo movement. this is bloomberg. ♪
>> fed policy normalization has proceeded without disruption to financial markets. figure red figures in six, expectations, seem while in line with policymakers' expect ations from the march fomc meeting, suggesting the markets should not be surprised by our actions if the market evolves in line with our expectations. with us, stephen macklow-smith of jpmorgan asset management. first of all, welcome to the program. if you look at what jp might -- jamie dimon was saying, he was focused on 4% yield. if you have a percent and folded into what jay powell was saying, which is basically they are following the guidance, and markets are getting it right. stephen: that is absolutely
right. in the background is the fact that although nominal policy has been tightened, actually, there has been no significant tightening. i looked as a press coverage the last month or so. there is a moderate deceleration in eurozone growth. the u.s. economy is about to benefit from the tax cut, which will clearly have a positive impact on growth. it is very premature to be thinking about the end of the cycle. i do not think the moves on monetary policy will accelerate that. francine: i guess you just need to take a simple bet, binary almost, which is does that that have to increase their rate of hikes? stephen: it is probably heartened by the fact that despite the economy performing well in the last two or three years, you have not seen a massive acceleration in u.s. inflation.
watching wagebly inflation closely. there are proxies you can look whether core wage inflation will be taken away. at the moment, the outlook is benign. is heartened by this and is normalizing policy in a way it would like to do, but it is not to get me tightening monetary conditions. tom: can equity investors ignore currency gyrations? stephen: in the short-term, probably not. in the medium-term, you have to have a view about currency direction if you're going to decide how to allocate assets across the world. if i was to take the bones out of your question, you're probably looking at a sharp rally in the dollar. if you pick out the narrative
from the first quarter, one of the things we saw the first three weeks of january was further exhalation of the euro upwards against the dollar, which started to spark concerns in people's minds about the andction of the eurozone also european earnings. but with the dollar rallying very sharply in the last two to three weeks, those worries appear to have receded. interesting is i just did a study of 10 currency commercial break, and a lot of these is too standard deviation-y, where we start to click into moves. this jpmorgan assume the stronger dollar continues? stephen: in the short-term. one of the things we have been saying the past six months is the weakness of the dollar has it being a bite
of a savior. and you see people being really short. what they needed was the dollar was to continue weakening. any strengthening in the dollar, we thought, would spark modest repositioning. , on a medium-term purchasing power basis, we have the dollar modestly overvalued, so we see it going against the euro in the end. francine: if we look at the , how much does a have to do with what jay powell was saying and how much does it have to do with the iran nuclear agreement? theou see an exit from u.s., that would likely put upward pressure on oil prices that are already on a three-year high. onphen: i will put something top of the indonesian rupiah and what jay powell said about interest rates. the dollar has acted against kerry for the last 18 months. a change in the interest rate environment, i do not think, spark a significant movement in the dollar.
the positioning i mentioned, that propels the dollar higher. i would say one of the things that has changed in the last few months fundamentally is the tax cuts coming in, with moderate the separation in eurozone. the growth differential with the united states is moving back in the u.s.'s favor. i would put that back on the table as one of the key propellants to put the dollar higher. tom: stephen macklow-smith, blending cross assets into equity exchange. on this tuesday with your first word news briefing, here is taylor riggs. taylor: the president will announce today whether the u.s. will leave the event nuclear agreement. european allies have lobbied him to stay, but the president called the agreement the worst deal ever. he says it does not do enough to address threats from iran's ballistic missile program. the u.s. and european the mets
are trying to work outside agreements that would address his concerns. a wall street watch dog and courtroom flow of the president is quitting amid allegations of physical abuse. new york state attorney general eric schneiderman resigned last night. four woman accused them of physical violence. he denied the claim. china's trade surplus with the u.s. rose in april to more than $22 billion. that is the first time the gap has widened since november. the president has threatened to impose $150 billion of tariffs on china. and theresa may faces another defeat on brexit in the house of lords. parliament's upper chamber is expected to move the fixed timing of exit on march of next year.
global news 24 hours a day on air, and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. francine: thank you. tesla chi's executive elon musk bought more than $9 million of tesla shares monday. he is already the company's largest shareholder. the purchase comes days after he taunted investors in a series of tweets. joining us now is alex webb. still with us, stephen macklow-smith. before tom gets riled up about tesla, what does this tell us -- $10 million is not much, but is it just a market signal that the chief executive wants to shut critics down? alex: there is an element of that. there is a lot of baiting of
short-sellers on musk's part. this is him putting his money where his mouth is. $10 million is nothing to be sniffed at, but big picture, it is a tiny piece. francine: he does not have to speak to investors until the next earnings, but is he going to try and limit damage? call scheduled. we do not know if you will speak. over the weekend, we got more detail on earnings. one of our colleagues pointed out that it looked like growth margins had improved from last year, but they changed the way they but some of it. they booked leases as revenue. provehat does he need to in the next earnings call? what is the sweat right now, mixing manufacturing into financial? alex: at the moment, we know
they have any number of preorders, and people pay the deposit on them, but they do not get that full check of revenue for the body of the car until they deliver their car. they are not meeting their targets yet. when they do that, that is when things get rosier, and he can tell everyone he was right and they will be cash flow positive. that is the "if." do they have the internal capabilities to get a firm grasp on manufacturing? gloom casethe against mr. musk and his marginal $10 million investment? alex: for him, other personal risk? that is always the risk the shorts are proven correct and he loses out. but the risk of throwing $10
million is less than if you were short $10 million. some people see a huge upside ted tesla stock. if you look at the way they pay packet is set up, it is predicated upon the company reaching a valuation of the $300 billion range. same sales as the apple, but are clearly have far and crossingns, that delta, i find hard to do. but there are those out there who have that believe in the company. tom: alex webb of bloomberg technology -- opinion, working on technology in europe. we will continue the discussion with foreign exchange markets really on the move this morning. 2:00 p.m., the president on iran. your morning briefing -- excuse me. am gasping over the lovely
francine: this is "bloomberg surveillance." little bit of movement on the italian 10 year yield, because there is market chatter about possible early elections in july. rising 10 basis points, the most in two months. also, looking at the spread between italian and spanish 10 year yields, and it is actually moved a little bit. italy's five-star movement abandoned its -- is called for
another vote. yesterday, they rejected the president's idea of a nonpartisan prime minister. still with us, stephen macklow-smith. when you look at the spread between italy and spain, it is pretty much contained, and you see a little leg up for the tenure italian yield. if we have elections confirmed in july, would italy be the worst in class when it comes to european financials? italy isin some sense, already -- it art attracts appetite. political risk is already high. so the question is has political risk actually changed dramatically? you had inconclusive general elections last year. heading towards elections in july, which is market chatter, you would have to check to see
whether anything significant would result from that. one of the biggest issues, though, is what you said -- five-star and the normal league, which emerged from the last election relatively strongly, not seeing any grounds in which to cooperate at the moment. they're looking at the electorate to say endorse us. francine: from the two main parties that did well in the last election, what is the insect -- incentive of forming a government amongst themselves? different things. stephen: clearly. but one of the things that has changed from the election is in both cases, particularly in the case of five-star, you have a much more emily and -- emily and -- emollient
tone. the electorate endorse that. tom: are italian stocks attractive? is there an italian stock market to play with, and is it of value? stephen: good question. if you look at the italian stock market, it is one of the cheapest markets in the world. a lot of that is because the italian stock market, from a large cap point of view, is in anyed i energy stocks utility stocks and banks. by energy stocks in any utility stocks and banks. but in terms of composition, it does not really represent the italian economy. there are many italian small and mid-cap stocks that look more attractive. tom: but are they shareholder
focused? to me, it is very management focused, board-focused, and removed from representing shareholder rights. which is it? stephen: shareholder rights have come a long way. when we look at that small and mid-cap space, we find that their interests are aligned with us. sector, banking is now dominated by regulatory issues, particularly in italy, but if i was going to paint a positive picture for you, i would point to the fact that italy is one of the key beneficiaries of on easing from the ecb here that was lower in yields means as you read price for outstanding stock of italian government debt, you reduce interest payments. so there is a fiscal tailwind
from which to benefit. and the banking sector, one of the interesting things is the stats that people seem to know is italy accounts for one third of outperforming stocks in the eurozone. so italy is around 300 billion. but because of the changes made to a bank capital structure and ,he ability to insert capital that is now falling. about $72 billion of deals were has acted last year. this year, on the basis of what is under convert -- discussion, that is another $52 billion of npl's. the ideal picture in italy is changing rapidly. francine: thank you. stephen macklow-smith, of jpmorgan asset management, stays with us. bloomberg users can interact with the charts shown using gtv
taylor: this is "bloomberg surveillance." i'm taylor riggs. qualcomm is giving up its event -- attempt to break intel's hold on the data server market. the company may shout or sell its server processor unit. qualcomm is the biggest maker of mobile phone chips. it is focused on making cuts in non-core product areas. in the u k, shares of virgin money are rising. it has received an offer from cypg that values it at $2 bg the valuesom cy it at $2 billion.
it uses technology to differentiate it from normal banks. share.at least $40 a that is about a 40% premium. icahn country is about 40% of xerox. icahn controls about 40% of xerox. tom: this is one of the coolest functions on the bloomberg terminal. taylor riggs has this memorized. and then use,st down the corner at 11% return on invested capital. they ran through an analysis, which is wonderful. over year,r -- but they have a cost of 3.1%. the bottom line is cash is dirt
cheap, isn't it? >> it is. we are seeing a huge amount of m&a activity in europe and the u.s. it reflects a last window of opportunity, potentially. ballet of do this comcast doing an all cash transaction can't the other side of the same thing? disney deal is an all-share deal. there are broader considerations to take into account. from what we have seen on the filings on this is it is not just about the amount and whether it is cash, it is about rigor terry century. fox away from a high offer on comcast because they are not sure whether the deal would get through.
and there were not convinced by the termination fees comcast was willing to offer them. that is where the at&t time warner deal comes into play. that would be a great signal. what will they have to give up? if comcast gets these assets, what will they have to give up to please regulators? sureen: we are really not about that, but potentially some of the key assets, just to make sure there is no significant control and blocking out of other competition. we would have to see how the deal unfolded. but from the filing we have seen, they are prepared to give up substantial parts of the portfolio. potentially, it could mean some of the fox assets in the disney deal would stay with fox are go to a third-party. francine: does it make it more
attractive? there is interest from corporate buyers, but equity investors are not prepared to. at the margin, it does help. tom: stephen macklow-smith, greatly appreciate it. matthew bloxham, i am sure we will talk to you again about sky and fox. next hour, with foreign exchange on the move, julian emanuel of btig on the dynamics of the dollar and volatility and how you wrap that into the equity markets. also, kevin cirilli on primaries. this is bloomberg. ♪ . ♪ retail.
under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store
chairman powell speaks in zurich. forget north korea and china, forget this, forget that. on president will reneg president obama's iran deal. midterms begin. there are primaries across the nation this tuesday. good morning. this is "bloomberg surveillance." i am tom keene. with me francine lacqua. what are you watching in fx this morning? francine: i am looking at yen. the yen is gaining against its 10 major peers. i think it is a haven. you watch out for the currency markets exposure, the energy markets very weighted to oil.
tom: i am watching swiss franc, which has been off the radar. i am watching dollars swiss franc. we say good morning to canada. we look at the loonie and the reciprocal as taylor riggs calls it. here she is. iranr: the fate of the nuclear deal is in president trump's hands. the president says he will announce whether the u.s. will stay in the agreement at 2:00 p.m. eastern time. he has called the agreement the worst deal ever. he says it does not do enough to address threats from iran's ballistic missile program. the u.s. and china will battle over trade today in geneva. they will be at the world trade organization, where china will criticize the trump administration's proposed tariffs on $150 billion of chinese goods. the u.s. will defend the tariffs
and find fault with china's plans to retaliate. dimon says the federal reserve may raise interest rates faster than people expect. he spoke to bloomberg in beijing. thatere is a possibility inflation accelerates, higher than you expect, the fed raises rates higher than you expect, which might force the 10-year up not down. i think people should be prepared for 4% bonds. taylor: he asked that he hopes trade tensions will not disrupt their plans to set up a new venture in china. -- ast according to a person familiar with the matter, comcast is lining up financing for its own potential bid. it has already made a $30
billion offer in european tv group sky. fox and disney are also interested in buying the business. is putting his money where his mouth is. $9 billion of tesla shares. he was already the largest shareholder, now approaching 20%. global news 24 hours a day on air and at tic-toc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thanks so much. we will get to the data check and then good conversation on all that is going on in the markets. futures with a weight to it. there is the first indication of where we are in foreign exchange. the next screen right now. the vix is 14.93.
429 it's your attention. looking athat i am is the dollar reversing a drop to strengthen, treasuries isengthening, and crude bracing itself for the iranian nuclear deal. garde in thea audience, here is the chairman at the swiss national bank. market expectation for policies, the figures seem reasonably well aligned with fromymakers' expectations the march fomc meeting, suggesting markets should not be surprised by our actions.
tom: an affirmation of the fed moving rates higher. someone that understands the messiness of all of this, julian emanuel at btig. i want to go into your derivatives. what separates you from so many is that you really get the movements that are out there. the dollar movement you called. maybe not,ak dollar, strong dollar. does this have convexity and acceleration? julian: we do think it has acceleration. it may not be the type of acceleration on par with the 1.16 but certainly 1.15 or is in the cards. change hasar and
rising rates in the u.s., rising .pread for us, those sorts of imbalances with the u.s. growing at a better rate than europe. gamma means acceleration, does the gamma giveaway to a persistency of trend? julian: that tends to be how currency market of all. -- evolve. if you look at the last few weeks, it has been catching people by surprise with the persistence of that trend. will it spread to the yen? we have not seen acceleration in the yen yet. that could be in the cards. francine: what do you think the dollar does from here? we think it continues -- >> we think it continues to appreciate.
we made this call at the end of february and beginning of march. catalyzing the price action in the last few months was the realization that in the marketplace the u.s. trade deficit in all likelihood will be reduced in the months and years ahead. francine: if you look at what we heard today, which is jay powell saying we believe in the markets, the markets believe in us. if you look at how president trump may or may not pull out of the iranian accord, what do you think will be the main catalyst for market moves this week? julian: it is certainly going to be both of them. if you look at the action in the markets, the moment president trump announced his decision would be 2:00 p.m. today, the market sold off, recognizing the fact that there is uncertainty in front of us.
the certainty with is with the fed chair. if you look at us, the stock market volatility is less important than the treasury market volatility. that volatility we measured by the 10-year vix index is close to all time lows. that is the market saying we are comfortable with the course of the economy and fed policy. we think the market will fully embrace that as we passed passlitical -- geopolitical events. f need todoes the do moreed? julian: not necessarily. without their would be three rate hikes all along. with -- we thought there would be three rate hikes all along.
with inflation, they have begun to moderate. that is a sally torry benefit for the strengthening dollar and gives the fed more strength going forward. tom: are you in the market? julian: we do. for a variety of reasons people have looked at the class half full. it is time to buy. tom: love that conversation. that on theinue currency markets this morning. later today, the president of the united states will speak on iran. we are looking for this at 2:00 p.m. in new york, there ran nuclear to announcement. -- the iran nuclear deal announcement. look for that across our networks. this is bloomberg. ♪ bloomberg. ♪
♪ is "bloomberg surveillance." i am taylor riggs. south african chemical and energy company sasso sees oil prices on a roller coaster ride. their ceo forecast a long-term price of $60 a barrel. >> we see a volatile environment for some time. it is going to bounce. it is going to move back and forth depending on what is happening in the world, supply disruptions, other issues. some, it is not unexpected for us in terms of what we plan for in this space. sasol has been cutting
costs to turn a profit with oil at $40 a barrel. shares of canadian natural resources will be offered at a 2.9% discount to yesterday's closing price in new york. shell wants to sell $30 billion to reduce debt. decatur pharmaceutical is shaking up the truck making its 60% by selling takeda expressed interest. tom: thank you so much. for our global audience, as a refresher for those who went through the american election, let's listen to the president on iran. >> it is one of the dumbest
deals and one of the weakest contracts i have ever seen. we are not going to sign deals where we have four prisoners, and they are still there, and we don't ask about one of them because he is a christian. the whole thing is absolutely insane. the iran deal was one of the worst and most one-sided transactions the united states has ever entered into. frankly, that deal is an embarrassment to the united states, and i don't think you have heard the last of it. believe me. in the event that we are not able to reach a solution working with congress and our allies, then the agreement will be terminated. it is under continuous review, and our participation can be canceled by me as president at any time.
we are not going to be restarting anything. if they restart, they will have big problems, bigger than they had before. tom: there we are with some thoughts from the president of the united states. i want to get to the primaries, but first iran. what happens this afternoon? what happens tomorrow if the president backs out of the obama agreement? the question is whether european allies continue the deal. it looks like the french and germans are working with theresa may to keep some framework from the steel together. -- this deal together. those soundbites we just played, this criticism comes at a time when he is also negotiating a deal with north korea. president is expected to make that announcement inside the white house in the diplomat room, but before that he is
meeting with senate republican leadership and vice president mike pence most likely to say whether or not he will stay in that deal. it will be interesting to watch that, but also with the business immunity is saying. -- community is saying. peter teal is a huge worker -- t hiel is a huge worker behind the scenes on the iran nuclear deal. francine: is there another deal on the table? what are we going to hear from president trump? will he get the market something else? kevin: good morning, francine. first and foremost, the criticism of president trump will be loud and vocal. face a large constituency in his conservative base and allies such as israeli
prime minister benjamin netanyahu who will agree with his decision to pull out of this deal. it is that basis for moving forward as to how they will inotiate some other deal terms of working with iran moving forward. if you look at the experts from tehran inexports from the last three years, there are several u.s. businesses that feel they are losing out on that market. iran has neverel wanted to broker this deal and have been ignoring it. tom: the midterms begin today. we will see the results tonight and tomorrow. vox mentioned 16 key races. i don't care. what are your key races that
will indicate for the president the future of the majority? kevin: i am watching west virginia. it is fascinating. you have interesting democratic congressional primary races. notice how folks are looking at what conor lamb did in southwestern pennsylvania the other month running as a centrist democrat and unifying unions, speaking to the union base and trying to speak to them in a trumpian tone. that is something former vice president joe biden will be watching and will be the cookie-cutter model for the midterms and the 2020 cycle. it is those working-class voters that matter. tom: i spoke to patrick morrissey in the middle of nowhere in west virginia, gst over theis an
president to ohio. is this a referendum on president trump or more nuanced than that? kevin: i think it is more nuanced than that. just with mr. morsi, you have to notice the angst in the republican base. people are trying to position themselves as political outsiders, and they are using president trump's model to do that. there is no better thing to do whether you are a democrat or republican then running as an outsider. republicans are running against the notion that congress is so unpopular. tom: thank you for the briefing. we look forward to your reporting today on iran and tonight on the midterm elections. with us now, dana tannenbaum of pwc, i have eight things to talk about, and it is not the sanctions on ohio or
pennsylvania. explain how the iranian sanctions are different from the russians sanctions. sanctions in the relief in the last two years has been a deal to push out the ability for iran to have a functioning nuclear weapon for sanctions really to open the european market. this was the relief of so-called secondary sanctions. these were more sweeping. the russian sanctions have been more targeted in oil and gas. tom: the iranian wants were not -- ones were not targeted. not focused on individual entities. they were focused on sectors. tom: if we assume the president walks away from the obama deal what does it mean to you? >> walks away. there is a lot of rhetoric.
tom: what does it mean? >> exactly. the president can decide not to extend the waivers, but that does not reimpose sanctions. by walking away from the deal, it starts a lengthy negotiation between the p5 plus one to decide what the way forward is. there are a variety of steps that would have to be taken. my prediction is this will largely be focused on the most noise with minimal impact, and the path of least resistance that would garner the most support is a focus on the ballistic missiles that iran still has, which have been out of the scope of the deal so far. francine: if you look at the sanctions from the start, could you argue that the only sanctions that really worked
where the u.s. sanctions against -- and if you look at how that company was shut out of the market, could they do something similar? >> they did. this is what drove iran to the negotiating table, the secondary sanctions that forced european companies out of the market. that was powerful. that cut any institution off from doing business with both iran and the united states. that largely worked. to reimpose those after several large european companies have entered the market and which have large operations in the united states would have implications on the market beyond this deal. francine: can i have more teeth than what they had in the past? >> if you put the teeth back, that would be enough to spur a
behavioral change. the challenge is all the evidence to date has shown that iran has complied the deal. provisionck wa --t would reimpose prior still speaks to the deviation from the existing deal. tom: lets him appease the base. how does the president today at 2:00 p.m. save face? >> it is going to be focused on an expensive package to take the ballistic missiles that iran has and are outside of the jpoa focus on that. there are a number of trump held states that have european operations domiciled in them.
this could turn on the u.s. and forced an additional trade war. tom: between who? >> the eu nations and the united states. there is an idea today to go the other direction where the eu could force its own member states to make a choice. tom: johnson does a charm offensive over the last 48 hours, writing up in the new york times and other issues as well. who are you watching in the eu who could really go after the president? >> i think it is merkel. there is very limited support in the european business community to amend this deal. there are a variety of large global companies that have and haveeentered iran a lot to lose if sanctions come back. francine: when do sanctions work
at their best? is it when the person at the top is weak or strong? what do we know about the iranian political system? if this has teeth and is too aggressive, do they back out? >> you are right. you have seen a different offensive from the iranian government to speak to their compliance with the deal and that it is actually the u.s. that is out of compliance with their portion of the deal. this deal was focused on one issue, but it is being completed with another, that inflated -- is being conflated with another. that is the complication. there have not been a lot of specifications about what is wrong with this worse deal ever.
francine: thank you so much. pwc globalebaum, financial services sanctions leader. holds,y the deal andident trump hedges, three we cannot figure out whether they are in or out, and four the u.s. exits the deal with punitive measures. bought more than $9 million of tesla shares on monday. his stake is approaching percent. the purchase -- 20%. after --ase comes days joining us is our global team had a new street research.
like elon musk now like him even more because it was us versus them. a lot of shareholders probably want nothing to do with this company. >> thank you. rightd put it into the context. this transaction is $9 million. owns $10 already billion in tesla shares. it is not a massive move in overall ownership. it was kind of a statement. make ont he wanted to -- call last week is against which is about the cash burn. about $1ny is burning billion per quarter at the moment.
elon musk says it will be able to break into positive cash flow next quarter. the bears challenge that position. francine: talking about why tesla should answer some of these questions that analysts were asking him. wantquestions do you still answered from tesla? >> i think it is always good to do your best as a ceo to reassure your shareholders. the reason why elon musk decided to pass on these questions last he saidprobably because he had answered these questions simply in the past. explainedompany has for more than nine months is that the company is burning cash today because it is not ramped up the model three yet, but as
it is ramping up, cash flow is going to turn positive. the math is very simple. at 67.reaks even this is what analysts have said already. he is ramping up cars to 5000 and eight. -- a day. tom: do have a storied career at sanford bernstein. financials ofhe tesla? can you analyze tesla on a traditional financial basis? >> i have no confidence with the disclosures of the company. finance is.t
you always want to get more information. when i reviewed the financials of tesla today, i can see enough that withconfident 60,000 units produced per quarter, tesla breaks even with cash flow. from what i have seen so far with the disclosures is enough to build my convictions. tom: let's leave it there. greatly appreciated. now, much more coming up. let's go to taylor riggs. taylor: in armenia, the opposition leader who led weeks of protests has been elected prime minister. supporters are hoping he can do something about widespread corruption and poverty. maintainsty party control of parliament.
european allies of all body president trump to stay in the iran nuclear agreement. the president has called the deal the worst deal ever. u.s. and european diplomats are trying to work outside agreements that would address his concerns. the announcement is due at 2:00 p.m. eastern . a wall street watchdog is putting over accusations of physical abuse. new york state attorney general eric schneiderman resigned last night. a new yorker article of for women claimed physical abuse. ae government is forecasting $1.6 billion surplus in 2020, australia's first since the global financial crisis. cutrs will get a modest tax
for low and middle, earners -- and middle income earners. the house of lords is expected to remove the fixed timing of brexit. lawmakers are likely to allow future governments to take part in eu agencies following brexit. global news 24 hours a day on air and at tic-toc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: thank you so much. jpmorgan chief executive jamie dimon says it is possible u.s. growth and inflation could be strong up to prompt the fed to raise interest rates further than many anticipate. he says it would be wise to prepare for benchmark yields to climb to 4%. we spoke to him in beijing. once what asked me
are the odds of recession? i said it is 100%. the question is when. the american economy is strong. houses are in short supply, which is positive for the economy. the capital markets are wide open. there is much less leverage in the financial system than in the past. have twice the capitals and twice the liquidity. the way to look at the recovery is to look beyond one year. we had that 20% growth over nine years. the nine years is really good. the 20% is really bad. it should have been 40%. that is part of the reason wages did not go up and all of these things. this has links to go. a year or two. the rest of the world is doing better.
europe 1.5 approximately. >> china getting out of his funk? >> i don't know. it is 1.5%. the last year it was 0%. america is in pretty good shape. you have some benefit of regulatory reform. you have some tax reform. that all drives growth. >> i heard after the quarterly earnings in april that one of the biggest risks is underestimating the potential of the fed raising rates more aggressively. inflation could rear its head. is this a wory? >> you have to prepare for all possibilities and probabilities. you have to anticipate the fed raises rates more than you expect, which might force the 10-year up and not down like in
the past. you could easily deal with 4% bonds. if it is because america is strong and healthy, that is more like normalization. at the end of the year, the government total could pass for hundred billion per quarter. that is a lot. those things make us more volatility, higher rates. we have never had qe. we have never had reversal. there is more growing. i always try to keep a view in both. the financial markets fluctuate. rates go up or down. commodity prices go up or down. stability, the economy, not necessarily the markets. francine: that is jamie dimon, jpmorgan chief executive. joining us now, jacques
rousseau, clearview energy partners managing director global oil and gas. let me start off with julian emanuel. if you look at what jamie dimon was saying on the 4% you don't can we start thinking about 4% if we have not even touched 3%? we touched it one day in the last 18 months. maryn: that is an external caleb -- extraordinary tale of events that would likely to destabilize markets. the 30-year bond bull market 2016.in july the pathis one of growth. it is well for us to remember
that the reason the fed hikes is to maintain the course of recovery. it is not generally to crush for inflation. tom: it has always been this way. are higher rates good for equities? that has been the debate forever. it always wins out. julian: it tends to be a tipping point. the other thing we know if you look at the cycles, the fed can tendshike too much -- to hike too much. at this point in the curve, the greatest growth potential since the fed started liking is still ahead of us. higher rates are fine. tom: let's turn to the oil ousseaus and mr. r
of clearview energy. what are you listening to today in regards to the president and the oil business? jacques: that is a good question. the whole situation with iran is complex. you need to focus on the level of operation with the european -- cooperation with the european union. that could determine how much oil will be off of the market. francine: how much do you think will be off of the market? i am looking at the structure. jacques: what you are seeing now is the big issue is venezuela. that is the reason oil prices dollarsed up 20 per barrel. they are taking barrels off the market. what is happening with iran is still up for debate.
that could be a few hundred thousand barrels per day or nothing. when we go into that speech by president trump, there are four ways he could deal with iran. what do you think is the likely scenario? we even talked when president macri on was in washington -- of an was in washington separate agreement. be a waiverre could on the sanctions, but unless the european union steps into this, don't expect much oil to be taken off of the market. francine: we are on a new level on oil. you are very good at synthesizing the macro into the micro. does the macro and micro analysis get you to $80 a barrel? jacques: i think it could in the
second half of the year. the thing to focus on is global inventories, down 5% in 2017 and declining in 2018 also. the first half of the year is typically when oil inventories get built, and then demand goes up and inventories go down. because of venezuela, we are seeing a decline in inventories all around. in: will we see a decline inventories globally? are there other venezuelas out there? jacques: one is enough. producing,a was supply would equal demand. , we are seeingla a decrease in inventories. withwe will continue julian emanuel.
♪ taylor: this is "bloomberg surveillance." let's get to the bloomberg business flash. qualcomm is giving up its attempt to break intel's hold on the datacenter server chip market. the company may shut or sell its server processor making unit. it is now focused on making cuts in non-core product areas. in the u.k., shares of virgin
money are rising today. the bank says it has received an ater by cyb g that offers it $2.1 billion -- $2.2 billion. it uses technology to distinguish itself from more traditional banks. investors at stepped up their campaign to shake up the xerox. they say they will consider any cash bids of at least $40 per share. controls 13% of xerox and has stepped up calls for the ceo to resign. francine: thank you so much. a bidding war may be brewing in the media space for fox's entertainment assets. from int more now
whitaker and julian emanuel. thank you for being on the program. the last time we talked about this was three weeks ago. the cards have changed. what does comcast have to give up to satisfy regulators? >> if you were to take the u.k. in terms of sky, the answer is very little. if you look at the comcast announcement today that they will not only sport verse -- newspapers in five years, that was a given. the issue would probably be more in the states, given the fact that comcast has a variety of assets through nbc universal on the tv and content side, that might be where there could be an issue. what else is going on in the states at the moment is the at&t and time warner case. that has implications for this bid, what comcast would do if
they blocked it. if there is going to be any regulatory investigation, the issue will be the u.s. francine: is there a danger that comcast will overpay for this asset because they had disney at their doorstep as a direct competitor? >> there is those a risk when you have two major companies that can leverage and get themselves a lot of my that potentially you get into -- money that potential you get into a bidding war. when it comes to sky, the crucial thing is the distribution power it gives you. it gives you the number one pay-per-view player in the u k, italy, germany, operations in switzerland and spain. the only major market you don't have is france. from the european distribution site, this is an asset that once
it is gone, you cannot get it anywhere else. tom: if this was flipped, if it was a united kingdom or other conglomerate asset, americans would be hysterical. >> the chances would be quite small. if you take those respective markets, you have the u.k. were sky has been effectively controlled by fox for a number of years. there has always been the murdoch angle on the left in politics. probably germany would be relatively ok. germany might be slightly more
difficult. when you look at european markets, the one european market that would stand out where you expect the government would not want the u.s. company would be friends, but with -- france, but with macron who knows? tom: this comes out of the quality of m&a now. are we at the point where m&a becomes stupid money? we have shifted from accretive to a traditional m&a where there is a loser? >> that is over. it is your traditional arbitrage. cquirer tends to be soft. capital markets are healthy. there have obviously been impediments to cross-border
dealings in the last year and a half, but they are still deal doable. tom: julian emanuel with us today from btig. thank you. here is your headline, francine knows more about this. the european union has plans to nterests inntry's i the iran deal. president trump on this momentous foreign policy issue. worldwide, this is bloomberg. ♪ mberg. ♪
♪ tom: "bloomberg surveillance." good morning. francine lacqua in london. i am tom keene in new york. btig, we have, julian emanuel with us today. day is the btig charity hat. i'm thrilled to say this will be won by michael bloomberg today. tell us how you raised $45 billion today. our founder started this
tradition in 2003. the idea was to build the firm with a culture of giving. allday a year, we donate our commissions across the firm to charities chosen by our clients and our guest celebrities such as mike bloomberg, who join us today. tom: this is a great event and growing every year. right now, we want to grow our single best chart. we do this by going back to the financial crisis of 1997. i showed this in the previous hour. arenesia rupiah, you qualified to speak on this. we remember 1997, 1998. we are not in that fragile system now are we? julian: when these systems move can it is all about the speed of the move.
yields movedyear to 4%, it is all about the speed of the move. the jump function like you had in the late 1990's really disrupt markets. see the: where do you biggest dislocation? i don't know if it is a bubble or something that could reprice quickly and bring markets out of whack. julian: consistent with the message,sage, -- fed's there are not that many profound dislocations. credit is quite stretched, but we don't see anything in there. as jamie dimon said, we will go higher in terms of the 10-year yelled, and that will be a market positive. francine: i don't know if you're unds or at german b some of the pressure points that
could be like a valve that if they move too quickly, the market gets taken by surprise. julian: that is a good point. if you look out bund -- how bund yields have been moving, if that gap between the u.s. and german yields move, that is where the pressure really lies. tom: one question about the core equity believe. what we have heard is this as good as it gets for earnings. julian: it is as good as it gets because the tax benefit is not going to deliver us with 20% growth. tom: what are we going to get? julian: we're going to get double digits. that is good enough for stocks to head higher. tom: you have a double-digit outlook on earnings growth. julian: it is going to materialize. the economy is good. tom: julian emanuel, thank you
so much. tig celebrates their charity day today. we have the midterm elections today, look for our coverage through the night. as well.that tomorrow this afternoon, 2:00 p.m., the president of the united states will speak on iran. we could go an hour with a forex report. the yen is stronger. turkish lira 429 as well. we will do more data checks today. we will do that next. this is bloomberg. red sox and yankees, cannot get better than that. ♪
most one-sided transactions the united states has ever entered into. >> the worst deal ever. countdown on the decision on the iran nuclear agreement. -- $70 perelow 70 to jamie dimon says 4% of a 10-year is possible for a fed hike faster and he sees more volatility. you can handle it. in emerging markets can handle fed hikes. >> as we take a look at a beautiful white house where the president will announce the iran deal. welcome to "bloomberg daybreak." alix: all the reports i am seeing has big changes for the .x markets you will see flow back