tv Bloomberg Surveillance Bloomberg May 10, 2018 4:00am-7:00am EDT
far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. mahomet unlikely comeback as prime minister of malaysia after an election entry. we're live. excitations crest. architect sees little chance of rate hike by the bank of england today. thecohen connection. rudy giuliani says the president was unaware about payments. we will bring you the very latest. ♪
francine: good morning. welcome to "bloomberg surveillance." these are your markets. down earlier and now pretty much flat ending a touch against 0.07%. the biggest loser by far on the .tse 100 is bp we were speaking to the chief executive early on. this is on the back of concerning news about job cuts. telecom the most since january 2017. you can see the share price down 8%. speaking earlier to the company's chief executive, he was saying it should be smoother from now on. we will bring you that interview later on. inc.g up, it is all about of england and the brexit today. we will talk to andrew sentance. he is formally of the bank of england.
on, we get ater take on the markets. let's get to bloomberg first word news. ed: donald trump agreed to three american detainees freed from north korea. they landed in maryland accompanied by mike pompeo. a planned summit between president trump and kim jong-un. in the u.s., donald trump's attorney rudy giuliani has said the president did not know about ohenents that michael c received from companies to his firm were revealed by michael abernathy. he is resenting stormy daniels who was paid $130,000 to remain silent about alleged sexual
encounter with trump. royal bank of scotland has said it's reached an agreement to pay a penalty to resolve a u.s. probe into its packaging and sale of mortgage-backed securities. the k-based lender says while most of the cuts will be covered by money it has already set aside, it will cut second-quarter earnings. thatsts say deutsche bank rbs may have to pay $9 billion to resolve the matter. over the nextd three years of an 11 .3 billion pound tension deficit. it is shedding 13,000 jobs. program hasf its been one of the biggest overhangs of the company's stocks. >> this plan is an ambitious one.
the most significant we have had for the last 10 years. we will be reducing the number of roles, many in managerial and back-office in the next three years. importantly, we will be investing 6000 new jobs in service and the deployment of networks. also things like security practice which is growing quickly. ed: the republican governor of ohio says he wants to make his state "the wild wild west" to self driving cars. john kasich signed an executive order to allow companies to test cars on any public road in the state including without anyone behind the wheel. uber's ceo said his company has learned an important lesson in the face of the accident in phoenix. >> for us, a really want the idea that safety has to come first. tragedy,ates to that
we have grounded off our fleet and that was a decision that we made. it will be within next few months. former prime minister says he is open to the formation of a government by the anti-establishment five-star movement. said he would not veto such an administration and would support the policies led by the league. a populist led government would carry out policies that could jeopardize state finances. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. i am ed ludlow. this is bloomberg. francine: a historic shift of power. behind your mom and -- my dear mohammed has won a stunning election in malaysia.
, what aamaruddin stunning victory. is it a done deal? learn: we will potentially whether or not this is a done deal. when it comes to forming a new government at the head of the opposition coalition that was able to win the popular vote and according to the former premier was able to secure 135 parliamentary seats. it was a tense night as they waited on results. they provided the outcome state-by-state and we saw the coalition stronghold in three of the states being won over by the opposition. governmentes to the that is to exit, in a press conference earlier, he did
concede. he said the will of the people has been hurt. he did claim the simple majority was not insured by any party and therefore the decision lies in the hands of the king. we're learning that the mediaary general has told see the king has agreed former premier today. forcine: why did they vote a 92-year-old former premier. so many concerns about scandals involving the previous government? issues francine, the have been doing for some time. the key of this moment could be inwho still to be released
june. we have seen the erosion of when they lost the popular vote. seene years since, we have my dear mohammed with criticism of the issues. whether it be the rise and the gst. the good services that which was imposed -- tax which was imposed. we have a string of financial scandals, the most known of which is a part of the campaign pledge that the opposition coalition ran on was to review investigation into this scandal televised inonly malaysia but has trickled into other jurisdictions around the
world. he was the longest-serving premier. we have seen a new era of politics so it remains to be seen the new chapter to begin. francine: thanks so much, sophie. how does the results affect the currency markets in the region? us.juckes joins i want to show you some of the swaps that we are looking at. day.is my chart of the this is a chart that matters. what happens next? is yourt of the problem would like a new regime that would come in and fight corruption. you would like for them to shrink the size of the public sector, tackle some of those issues. -- get rid of
conception taxes because they need them. they are not a bad thing. this, possibly -- the trade that will benefit. sure bringingt someone who is a part of regime in a new party -- francine: doesn't make much of a difference. it is today a buying opportunity? it is closed today. kit: it will probably have a knee-jerk reaction. questionstoo many that cannot be answered quickly about what kind of policies come through. there is opportunity to change the way the country is run. from theis not clear
most visible proposals. francine: we heard from the philippine central bank. whether you would find opportunities in specific countries, either because of their exposure that would impact equities, or structural reform. kit: i think the ones that are vulnerable other ones that have been hit i just hit by the tech sector. something like the taiwan dollar looks expensive here and horrible. -- and the vulnerable to weakness. the philippines, i know a lot of people who have lost money in the last few months. it has had a roller coaster ride. the rate hike was expected. i'm not sure -- it is good at the margin. about taiwanried
and korea. francine: we have been talking about this, the turkish lira depreciation. we had this economy selloff yesterday. kit: one of my insistence lives in istanbul -- one of my sisters lives in istanbul. the contrast with the u.k., the problem with turkey is age-old come in the sense that it is most vulnerable of the emerging market countries. always be hampered by -- sense that the government i don't see how that goes away. the currency goes on weakening because of inflation is not kept under control. it is going to be the first emerging market currency people sell when we run into a big selloff. right now, geopolitics, domestic
politics, the state of the economy, none of it really fills you with a vast amount of confidence. we will all love it because it will get really cheap but not today. francine: kit juckes stays with us. stay with surveillance. plenty coming up including the bank of england's policymakers are not expected to hike today. what can their voting pattern tell us about the path ahead? we are live. ministerr type prime drops his opposition just the former italian prime minister drops his opposition to a new coalition. how much does this boost the chance of a populist government? we discussed this next. this next.ss ♪
francine: economics, politics, this is "bloomberg surveillance." the bank of england announces this latest decision today. investors see rates staying on afterarking an about turn the 90% chance of a hike. votingembers, what their patterns mean. nejra cehic joins us from the bank of england. what exactly -- what are the markets focusing on? markets are going to be focusing on the fourth guidance because as you say, those expectations are the -- of the hike have come down from 90% to about 12% to date.
it will be in a number surprised if we get any kind of move on interest rates today. expecting that to be unchanged. are we going to get a hawkish hold? i am not sure how mark carney is going to play this. signals that the market could take hawkish could be a vote split the conservative a consensus of 7-2. anything that mark carney says on fourth guidance and about the rates curve. back in february he said that hikes could come earlier and go on for longer. will be see those types of comments again? there will be an outlook for growth and inflation. it is the data that is really turned in the fourth quarter. aprilome of the pmi for that made carney come out and say we are looking at the data. also change markets perception
of what the boe is going to do today. inflation forecast will be key as well. there at nejra cehic the bank of england. we have it all-star panel -- we have an all-star panel. and also withe us, andrew benito. he spent nearly 12 years as a manager of the boe. kit juckes still with us. -- if you arethe in charge, how would you vote? andrew: i would vote for a rise in interest rates. it is not so much by the short-term economic indicators. we are mixed but there's strength in the markets. we know that weather played a part but it is about having a
strategy. we're moving interest rates of these rock-bottom levels. the bank of england has talked about possibly moving interest rates. but it continues to duckett. if it continues to duck it, it's credibility is weekend. mark carney talked down the possibility, does it go against the strategy? vote is.: and unchanged based on the benefit of awaiting a little bit longer quite high. at this stage and so soon after the weakest gdp data that we have had for five years in the u.k. the just just a weight -- just a wait a little longer with provide a little clarity. francine: kit juckes?
kit: i would vote to leave the rates unchanged today. -- they are both good points. idea are not keen on the of restarting quantitative easing in a big way, this country needs to get rates higher. we have missed a lot of sunshine . what do you want to do now? you are in a pickle. we get a decent opportunity while the economy is trudging along, pretty close to full capacity, you need to act when you can. it is counterproductive to do anything today. francine: this is the start. we have a full 15 minutes. sachs benito from goldman and kit juckes from socgen stay with us. let's get to a little bit from what we are getting from italy. the bank of england rate
decision will be at 12:00 p.m. u.k. time. let's switch gears and talk italy. the chances of a populist government may be rising after he said he will not stand in the way of italy's five-star parties forming it government. the government gave the two populist parties -- joining me now is john flame. will we have a name for premier by the end of the day? john: no, we will have to wait longer. the president granted them 24 hours but the two parties are asking for another 24 hours. the president is in florence today and he is in sicily tomorrow back in rome on friday. that is when the two populist leaders could meet and tell him about the progress. otherwise, of their talks.
francine: they agree on the fundamentals, the policies did what they don't agree on is who will be in charge of what. the two leaders want to be in charge. yes, there are three things to work out. policy, who will be premier and the minister. the policies have moved closer since the election. is policies of five start the citizens income. policies for the league are a flat tax and curbing immigration. there is work to be done on those policies. the key sticking point may well be the premier. francine: think it's much. just thank you so much. what does the situation for italy mean for markets? deskhen you look at euros kit, when you look at euros --
kit, when you look at euros, it is being implicated by ecb. kit: if you took that chart back to before 2012, this is the tiniest blip. alternately, spreads are here because mario draghi said he would do whatever it takes and backed it up by buying lots of bonds. that is what keeps all yields as low as they are. francine: when you look at -- this is a political story in italy but away from italy it has huge implications for the rest of europe. you now have one of the g7 copies desk countries with a g7 country. b.: now the andrew populist parties gain vote in the march election. the market reaction soon after that march election in italy was
assuming that the populist out.es cancel each other while mr. draghi was buying sovereign debt, that was really a green light to see a split in arrow it with these latest of elements, where we are seeing that needs to be reversed. a little more risk premium in china assets is warranted because we are seeing five-star movement. the direction they will go is more toward fiscal policy. that will raise tensions with europe. francine: andrew sentance, do you follow this? to see at the end of the day, the commission follows the political will. whether it goes through the economic reasons? andrew: on the qualification i would put is we are used to there being in a stable and not
very strong government in italy. big -- thet the european economies doing quite well. italy is one of the weaker performers. i'm not so sure this really has big implications. if i was a market operator, i would wait and see how things settle down. francine: when you look at brexit negotiations, italy had the most to lose by the leaving because of all of the trade. they were almost on the u.k. side in trying to get them a better deal. kit: you don't have a team to negotiate. i don't know. europe has done a good job of having a unified european come as a pose to an individual country space. i don't know if it will affect anything going on in the u.k. you had seen more of a movement
towards more populism without questioning the european union. you might have had a different european union for the u.k. to negotiate that is a lot of water under a lot of bridges. francine: guys, thank you for joining us. and wel stay with us will be talking more about the bank of england. sterling support while the bank of england gives its policy decision later. we'll mark carney shape a little off the pound? we will discuss that next. this is bloomberg. ♪
england today. at 12:00, we have the right decision. just to recap what we are expecting, we are not expecting to be a way to move but we are expecting depending on how the vote is split -- and we have a great graphic showing how it could go -- gives us a little idea of what could happen next. manufacturing for the month of march down 0.1%, better than expected. .e were expecting a -0.2% industrial production is weaker than expected. i am looking at trade balance, that is worse than expected. construction output, month on month pretty much in line with expectations. pound 1.3537. of expertsittle bit
on the boe, former head of research and kit has been all over the bank of england. when you look at data, you said you think they should move now and raise rates, and they should have done it for quite some time. why have they not? >> i think they haven't because they do not really have a strategy across the mpc for moving rates up to a more normal level. i would not expect them to move them up back where we were before the crisis, but inflation target is 2% so while we have a negative real interest rate, it is not a healthy thing. what the united states fed has done is to inch interest rates up and they have gotten close to the 2% level without any negative impact on growth. i think the same would be true here, but every time an
opportunity presents itself the mpc finds a reason for not doing it. that undermines their credibility longer-term. francine: are they not looking at data and credit conditions? andrew c.: data is always a bit mixed, but you should not focus on one or two data points. wage growth has started to pick up and suddenly they switch the focus elsewhere. one thing that happened in 2011, we got news of a snow affected quarter of gdp. by half aad fallen percent in the final quarter of 2010, which was snowy. up figures now show gdp is .1% in that quarter. when we get these weather effects, the data can be unreliable and you have to be careful to not put too much emphasis on gdp figures. francine: why risk it? andrew c.: in terms of the
tok's strategy, it is trying see the gradual and limited rate rises. today's inflation will implicitly endorsed three rate rises over three years. the second element of the strategy is to be data dependent. there is a slight tension between those two messages. messages are coming after a long time of low interest rates when the name of the game was to get markets to price low for longer interest rate policies, once those policies have been successful then you no longer want rates to be quite so low for so long. takenependency, if it is to mean being sensitive to the monthly flow of data, can impede the normalization process. that second element of data dependency needs to be linked to
the accumulation of data over the broader part of history rather than simply the month by month flow of data. that would help them reconcile the limited and gradual rate rises with the data dependency message. francine: we want to show our viewers a chart which is showing pricing in onee boe rate hike for november. you can use our charts for your morning meetings. if you log on to be tv , you can ask questions. and your bonito, if you are bonito, arerew they data dependent or are they waiting for mark carney to price it? he put marketw expectations from 90% to 50% and then we got that data. andrew b.: at times in the past
and through the year of easing forward guidance, the consequences of those policies was to suppress market volatility. as we leave that era of superlow interest rates over time, we would expect market volatility to return. bearer of the bank of england has been to encourage those market participants to follow the data more closely and not be quite so sensitive simply to bank of england communication. asre is a learning process we embark from the era of low for longer interest rates. francine: do they have a credibility problem? andrew s.: the bank of england, which is supposed to be a stabilizing force, is creating more volatility. as you see statements for mark carney and everyone else on the mpc, it is not a good signal for the economy.
the uncertainty about the past of interest rates is not helping people in the business community and the business sector. fed, who look at the have a clear framework for where the long term destination is and how far we are moving towards it, i think we are missing here a sense of the destination, where the low normal is that you would think is ok. we do not have a super strong economy. whether you raise rates in one meeting or another makes very little difference. we do not really know whether we are moving this month but when we are going to. francine: the fed, you do not have any dissenters because it is communal and no one would vote against the chair. kit: i like the debate in the u.k., is very good. i still think debating, you can debate where we should end up
and how fast we should get there , but not debate the data each month. andrew s.: there has not been enough to's -- debate on the mpc about the data you are talking about. as injure pointed out, we need to look at the data in the context of where we have been over the last few years, not just the fact that gdp may be weak in the last quarter. we are down at the lowest level of unemployment for 40 years. francine: how do you factor in brexit? how difficult is it compared to a fed that has to deal with an economy going one way, to an economy that needs to deal with brexit? we do not know if the government wants the customs unit or not. andrew b.: where we are with the latest data, the question of could that particularly week gdp print we had for the first quarter open up some spare capacity? here i think spare capacity, unemployment, these are the key
indicators because they are the best proxies for that accumulation of data over the , picking up something of the supply side as well as the demand side. cumulativeence that -- thosem it terribly, the newsnchors where is coming from brexit or otherwise, those of the domestic anchors for outlook of policy. -- it is a question of striking a clear sense of how that domestic impetus going forward is brought together with the most recent news coming from the latest indicators. i think brexit is a potential structural shock to the u.k. economy over a number of years and something monetary policy will respond to. when it comes to what is
signaling the market from the bank of england today, i think the worry that i have is that the communications have been a very unreliable guide to what will come next. i would slightly aim against any sort of communications they put out because the last meeting we were meant to believe it could be a rise in may. it seems to be going off the agenda. francine: maybe that is what they want, that the market focuses more on the data. talk about euro-pound. it is in a range and has been in a range since september. that the poundis has got less benefit from the euro's fall then you might have thought. there was a decent proxy for the trade weighted level of sterling. the pound is a very cheap currency historically. it is nearly as cheap as it was at the end of 2008.
that is from a foreign-exchange perspective. we are priced for bad news. we know we are in a mess. we know the brexit will be bad but that is priced in. we have priced in a lower trend growth rate. the pound will overreact to good news because it is so cheap. what we are not getting at the moment is any good news on a day-to-day basis. francine: do we have to look more at u.k. consumer credit? is it something the bank of england is doing that maybe the traders are focusing less? they have been particularly interesting lately. there is been a divergence in what is happening in consumer credit where conditions have been tightening, versus the secured lending market, the mortgage market, credit conditions seem to be easing. levels of competition in the u.k. mortgage market have never
been quite so intense and mortgage spreads have been coming down. there is a bit of an offset, and it takes quite a close reading of the credit conditions data as a whole, and how somehow they may be able to substitute toward some form of credit that is easing relative to where credit conditions could be tightening, in order to get the full picture of what is happening with credit conditions and the consumer. francine: is there one data point that you think markets should just be looking at more? andrew s.: i think the markets and perhaps the bank of england should be focusing more on the pound, but not in a conventional way thinking the week pound is good for the u.k. it is actually bad for growth and pushes up inflation. the fact that the hesitancy by the bank of england contributes to the weakness of the pound, it is not doing any good for the uk's growth prospects. kit: i would focus on the
inflation numbers because the pound's fall is sufficiently behind us. we had a big price adjustment and that is over. what will drive inflation now is we will either get lower inflation than people think and the window of opportunity to raise rates might close faster, or we will see increased inflation. francine: our guests this morning were andrew sentance, and kit juckes. he misses at the bank of england. check these guys out on twitter. bloomberg users can interact with the charts using g tv . browse recent charts to keep up on key analysis. you can save charts for future reference.
francine: welcome back to our weekly brexit show. the european union is starting to engage with theresa may's probe brexit trade plan despite having branded it unworkable. negotiators are still struggling to see how the scheme would work and have asked a series of .uestions to find a way forward it is good news for may, who is finding a way to get her cabinet to back her. joining us now is charles
faulkner, former u.k. justice secretary. what do we actually know about what the government wants? charles: the government wants a deal whereby they can have free traffic across the irish border. they want to be able to do their own trade deals with other countries outside the european union. there is a conflict there and they are trying to resolve that conflict. it is extremely difficult to do. the only way you can have an open border in the north is if goods can be passed freely and that means they would have no tariffs and no regulatory requirements that need to be met. that is the single market. this is may has said we are going out of the customs union and single market so how do she find a way through that? her proposal is the customs union would have a customs partnership whereby britain butects the e.u.'s tariffs
brexiteers are saying no to that. francine: can it even happened? charles: legally, it is hopeless on technology. , everyoneal as it is drives freely up and down. sort of an automatic number plate recognition will work out what you owe and take it from your bank account. it has never been tried anywhere . the technology does not exist. some people think you will be there in the basis is on the basis of five years. -- on the basis of five years. that is why the prime minister is going for the more complex, anti-brexiteers solution because she knows the technology solution is not a runner and
everybody realizes that. francine: who is the prime minister listening to? she has the house of lords beating her down because they do not agree. she needs to maybe soft and brexit if she wants to please a , and shehe population has people within her party who are pro-brexit. at 50/50, do we get brexit? charles: she is finding it difficult to find a way through all of this. your question is who issue listening to? sometimes she is listening to the remainers and sometimes the brexiteers. francine: does that give you strategy? charles: no strategy at all. you are trying to inch forward without there being a statement british people or the european union, this is our overall strategy. in relation to the trade deal, she once the deepest, best trade deal they can get for britain.
she is going to go for a free trade agreement but that does not do enough so she wants more. when you say what do you want, she does not really say. how do chief executives make decisions? they come on this program, and we thank them for their loyalty, but they are clueless about what happens so they are making provisions expecting the worst. if we do not get the worst, it would be business is lost. charles: the longer we go on drifting like this, the more the chief executives who come onto your program will say, we just need to make a decision and they may be moving to other european countries. francine: when do we talk logistics? charles: another year or so. she will not resolve any of these issues and we will be out of the european union by march 2019.
the end state trading relationship will not be properly identified by then. as this is happening, i notice more people will be talking, including brexiteers about extending the transitional period. instead of it ending in december 2021 maybe it will end and or go on years and years. she cannot politically make decisions, and the basic position of the european union, you can have the single market and customs union but you cannot have any changes to it. if you do not want to make changes, it will just be the free trade. francine: what if you are wrong and there is a secret plan that we cannot know because it is a negotiating tactic? charles: the way you have got to tell about the plan is the european union and they are not talking about it. francine: they are playing hardball but they are ready to give way. charles: i think they will on
certain things, but things around the periphery. their key position, we have to keep the european union intact, they are so protective of ireland they do not want it to be dragged out of the european union. the other principle they have got is if you are not prepared to accept all of the rules, including on immigration, you cannot be in the single market. francine: i just cannot believe that the government does not have a plan. this is the u.k. charles: i have got news for you. i am not in the government and i do not know their innermost secrets, but honestly all the things i am being told suggest to me they do not have a plan. see, plan is what you which is we want a free trade agreement, we want some of the benefits of the customs union and single market, and that is it. if they did have a secret plan,
it would've had to be prepared across whitehall and it is inconceivable it would not have leaked. francine: what are the chances of the second referendum and early elections? charles: the chances of second referendum are very slight, although there is some support. there would then be calls for a third referendum in this political iceberg we are in will continue for years. we are the only country in the world obsessed with brexit. the 27 are interested but not obsessed. we are stuck in this terrible time warp. what are the chances of the government falling? it is definitely there. if they do not have a plan, what the hell is going on? some knockback to the brexiteers, the remainers
, or the european union. francine: let's get straight to the first word news. >> donald trump and mike pence graded three american detainees free from north korea at joint base andrews in maryland. the men were freed during pompeo's visit to pyongyang ahead of a planned summit between president trump and kim jong-un. rudyd trump's attorney giuliani has said the president did not know about payments purslane michael: in -- cohen received. by payments were revealed the attorney representing stormy daniels, who was paid 100 $30,000 just before the 2016 election to remain silent about an alleged sexual encounter with trump.
global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am ed ludlow. this is bloomberg. francine: the darker side of the entertainment industry was leaked barrett last year following revelations of sexual misconduct by harvey weinstein, amongst others. one of the leading lights of british cinema, her efforts to -- at the same time, she is contending with brexit and the uncertainties it brings for the funding of british films. how will leaving the e.u. affect british films? amanda neville is joining us. how do you ensure that female talent is paid equally to male talent? amanda: the talent is being done is being donet
very well by the talent, the female talent. i think it is really exciting that this has ignited some really significant change, not just in the film industry but in the wider industry itself. the big question, to quote emma thompson in the 1980's, we thought we cracked it and we never thought that we would still be talking about this issue now. there are really concrete things the bfi is doing. we are working on diversity standards and a lot of productions are signing up to using these to ensure that in front and behind the camera it represents the population as a whole. francine: when you look at brexit, are there in us subsidies and will there be enough incentives to keep found producers for making films in the u.k.? amanda: britain is one of the
great, probably the second biggest center for film and television production in the world, because we are a fantastically creative nation. a very strong reason why this is the case, the important tax incentives the government puts in place and also brilliant infrastructure and an environment that films -- filmmakers like to come and congregate. they want toif come and work in the u.k. for three months and bring their children here, it is not such a big issue. neville, chiefa executive of the british film institute. ♪
the 92-year-old makes a comeback as prime minister of malaysia. , marketsons crashed see little chance of a rate hike by bank of england today. what forward guidance will carney give? donald trump's attorney rudy giuliani says the president was unaware about payments his personal lawyer oversaw from at&t, novartis, and a firm linked to a russian oligarch. this is bloomberg "surveillance." lacqua in london, tom keene in new york. i am looking at your president donald trump and everything bank of england related, including euro-pound. tom: we are going to go to kuala lumpur a number of times. it is a historic moment for malaysia and southeast asia. in america, it is about 3:00
a.m. east coast time at andrews air force base. here is the president of the united states. >> i want to thank you all. it is very early in the morning. i think you probably broke the all-time in history television ratings or 3:00 in the morning, that i would say. i want to congratulate, these are three great people, and congratulations. tom: the president with the coming back from north korea. there have been other releases over the recent years, but without question, this was extraordinary. the key distinction is the secretary of state visiting the second time in north korea. francine: the key distinction is the president showing up on the after greeting these americans released after detention in north korea and basically in the middle of the night, saying america has triumphed.
that changes the diplomacy and i speak directly to his base. i will be interested to hear kevin cirilli's thought. tom: no question. francine: here is taylor riggs. taylor: there has been a major escalation that inches israel and iran closer to full-blown contract -- conflict. -- israelurces filed says there were no casualties on its side. had thiss the israelis hit ammunition storage in radar facilities. rbs has tentatively agreed to pay $4.9 million to settle a long-running u.s. investigation into mortgage backed securities. the crisis.rbs for the bank will be able to resume dividends.
cte has suspended all major activities after the u.s. crippled its ability to buy crucial american technology. to resolve ats seven-year blockade imposed for violating the terms of a sanctions agreement and lying about it. mentioning, in italy, the chances of a populist government have gotten a big boost. silvio berlusconi dropped his opposition to the idea. open to theed he is antiestablishment five-star movement and anti-immigrant .eague ruling together they have until later today to form a government. global news 24 hours a day on air and @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 so much.
we are getting some breaking news. this is important news. it is on the bloomberg terminal, italy is set to seek a seven -- six month extension of the plan. let's remind all of our viewers and listeners what this is exactly. months ago, the ecb had already toned down a lot of the plans to ask banks to stomp out more cash for loans that turned sour. this had spurred a huge backlash in italy, one of the weakest banking markets, and backlash from european parliament. italy is seeking a six-month extension to that bad loan guarantee plan, so we will see if that is granted by the ecb. something that is quite significant. let me kick it off with the market data that i am looking at . this is what i am looking at overall, dollar dropping, treasuries climbing, oil
extending gains. the stock markets are zigzagging a little bit in europe. european equities still little bit steady. asian shares higher. tom: $78 brent crude. it is a stable em market this morning, that is the headline. there is west texas 71.67. 13.37. print on yen.10 this works out to a weaker indonesia. i am not sure that is a knockout for malaysia. there is some em stability as well today. i thought we would come over to the malaysian ringgit before we go to kuala lumpur. 40 yearsxtraordinary,
of malaysian ringgit. here is the previous term of mohammed, the president of a fractious malaysia for years and years and years. 2003, with the financial crisis here and a huge depreciation, devaluation of the ringgit, and further action here. he picked it up here at 92 years old, the medical doctor is back in the house at malaysia. francine: i also have malaysian terminal, which i will push out on social media. my chart that matters will probably be one of the biggest losers in the trading session. inistoric switch of power malaysia, mohammed has won a victory ending the six decade rule of the prime minister. we go live to kuala lumpur where we are joined by our reporter
studying the shift in power. the us a stunning and unexpected victory. were people just fed up with the lack of rule of law? yes, it is certainly a stunning victory, and a surprise in many ways when you take a look at what financial markets are placing -- pricing in and what the electorate was anticipating. we are expecting to see the doctor back in the house today and we are seeing social media flooded with pictures of mohammed making his way to the palace to make with the king for the swearing-in ceremony that would make him the seventh prime minister. he was the longest-serving premier for malaysia and the visionp was built by his . the iconic twin towers were during his time when he rolled
with an iron fist. in 2016, he splintered from the ruling party when he disagreed with the administration, and took particular criticism when i came to the financial scandals that plagued the administration. tom: there has always been a tension of religion and geography in malaysia, the a's a -- asia of islam. then there is the issue of the peninsula and the northern side of oreo. boreo. -- l'oreal -- explain the religious distinctions and geographic tensions. sophie: when it comes to the aligious overlay, it did take little bit more prominence in the late 1970's and 1980's, when the likes of mohamad came to
power. we have seen more elements of conservatism come into play. this is allowed, the islamic party to be seen as a kingmaker and this particular election, given this emphasis on religion. they have been sidelined to some degree that religious may have -- may not have been as good a factor going forward. when it comes to race, that has been a catalyst for elections in he led abut this year four party coalition made up of a multitude of parties that ,epresent several ethnicities the chief of which is the democratic action party, the chinese ethnic oriented party. when they get together with pk , while religious and
racial tensions have been played up to some degree by either side for their benefit, we are seeing some unity in this instance. you have simply erased years of these types of issues. francine: thank you so much. ,oining us now are john norman jpmorgan head of cross asset fundamental strategy, and -- let me kick off with you. i think the currency is closed today, but we do not know what a 92-year-old former premier can do. is it not the right time to go in? tradinghe currency is in the offshore and has weekend he lost thence election. investors are taking this negatively.
one of their key concerns is that mohammed ran on a campaign of removing the goods and services tax which provides a good deal of revenue to the government. there are some concerns around ongoing infrastructure projects which they want to review. in the medium-term, i do not think we need to worry particularly about his age. he has about to step down -- vowed to step down once his deputy is released from prison. we should see stability in malaysian politics and macro. it will be one of the beneficiaries of the higher oil prices which are likely to be sustained. francine: what is your take? john: fiscal policy is being loosened in a low yield economy when u.s. interest rates are going up. i would want to hold this on my perspectives. -- prospectus.
francine: is there anything in emerging markets you would like? abbas: we are going through a tough spot, especially on the currency side. there are quite a few falling currencies across the board. i think dollar offers value across a number of currencies. where there may be value is the south african rand where it has depreciated quite significantly despite having relatively low idiosyncratic risk by its own measures, having improved its balance significantly. that is an interesting story. across other markets, i think argentinian credit has widened quite significantly. relatively suitable policy responses by officials and there is value opening up in that space. francine: thank you so much. group up, eurasia
taylor: this is bloomberg "surveillance." in the u.k., bt group while cut 13,000 jobs or 12% of the workforce. they said revenue would fall 2% in the next fiscal year. we spoke with the ceo gavin patterson. x. we are increasing cape we announced a big transformation plan but some of that in the short term would be
offset by higher regulatory pressure, particularly on regulatory pricing. years, probably 2021 onwards we can see it growth. pay $2.9hey need to billion over the next three years to close a pension gap. in china, the former chairman of on bank insurance has been sentenced to prison for masterminding a $10 billion fraud. wut seals the downfall of zhong we. the chinese government seized control of the bank in february and injected $9 million of capital to bolster its solvency. that is your bloomberg business flash. tom: we are thrilled in london to bring in, with all the em uproar we are seeing, bank of england coming up later and
nejra cehic outside the bank of england, with us now john morgan aali.bas i want to go to correlations within em. dollar-yen did not go week and then it did -- weak and then it did for a 110 print. is everything correlating up or are these disturbances discrete? are we on the edge of an ecuadorian moment? john: i don't think we are. i am not sure i know what that means. i think you are talking about a confluence of systemic issues, which is the rate correlation of the dollar with interest rates. that is a pretty negative cocktail. i think u.s. two-year rates are starting to crest because a lot of the tightening is priced for the next 12 months and i think
the dollar stabilizes and starts to come off versus a number of emerging markets that have cheapened. it removes the systemic and full and's that has been pushing them down. tom: what does the fed due to adjust and adapt to this? i cannot believe they are not aware of imf bailouts of argentina or three standard deviations of the turkish lira. the fed has to be aware of that. john: they also have to be true to the data and there is nothing in the u.s. economic data and financial markets that would tell you there is a lot of stress in em. lowercurrencies were 10% you would see investors rethink their view on u.s. profits. that would have a view -- impact on the u.s. stock market and you would see it impact industrial data and manufacturing data, but that is a long way off. that moment is several months.
you could have more em stress without the fed changing the course of policy. it is not showing up in the data. francine: what specific emerging markets are you looking at? abbas: we are looking at across the board. fed to john's point, the tends to react to weakness in em when it starts affecting u.s. financial conditions and u.s. macro. from that level. we need to bear in mind the dollar is strengthening from a relatively low level, so we are not at levels where we can start looking at the fed to bailout em weakness. that is how we see the broad macro picture. one thing we are worried about is de-synchronization of global growth. that is one of the reasons the dollar weakened despite a strengthening macro, because the other economies were strengthening. we are seeing signs that global growth is not a synchronized as before.
that will not bode well for em as an asset class. francine: talk about the turkish lira. this is the classic regression chart looking at lira depreciation. abbas: there is a lot of things going on for turkey. from a valuations perspective, it is not even particularly cheap at these levels. it is probably the only major country in emerging markets which still has a significant balance of payments problem with the negative account deficit. it has geopolitical risks going on around it, domestic risks. relations with the european union, the u.s. on top of that, one factor the market has not focused on is the rising oil prices. turkey is the biggest loser from the significant rise in oil prices we have seen. we may see a response. what we need to see to turn the corner is a big rate hike and
first of all, it is the doj deal is done. how big a deal is this for rbs? >> it is one of the most important deals for them. they have been waiting a long time to settle this, and they can start resuming dividends. the u.k. government can starts -- start selling down the 70% share. francine: this is paving the way for rbs to resume buybacks and dividends. how soon? >> they can, already this year. they have to clear some hurdles and show they will pass the stress test, but they can start paying dividends as soon as this year. say theyanley would can offer a buyback as early as next year. francine: how soon can they complete the deal with the doj? >> at will take several weeks but the number will not change.
most of the agreement is already on the table. francine: that was the bloomberg european banks reporter. coming up in the next hour, james sweeney at 6:00 a.m. new york. tom will be talking about treasuries. it is the year we day. that is why john normand came in , to talk about credibility, the bank of england, and pound levels. this is what i am looking at when it comes to asset classes. shifts in the boe debate to rates. treasuries are flat. ♪
until the eighth-inning. yankees, two in a row. fortunately bloomberg has a wonderful mental health package for me as well. it is part of our full benefit coverage in america. red sox therapy. francine: i learned so much. audience, thebal red sox are a baseball team in second place. let's go to a first-place first word news. thankedpresident trump kim jong-un for releasing three americans detained. the president welcomed the men early today after they flew on a military plane to join race enters your washington. he was optimistic about the chances of a successful meeting with kim. >> i really think we have a very good chance of doing something meaningful. if anybody would have said that
-- five years ago, 10 years ago -- even one year ago -- you would've said that is not possible. an administration official says the president is leaning toward singapore for the site of the summit. russia urging a summit between donald trump and vladimir putin following the u.s. decision to leave the iran nuclear deal. minister told bloomberg a meeting would give diplomacy another chance. today to meethran with iranian officials. china urging the u.s. to stop the threats about trade. the commerce ministry says negotiators continue talks in beijing is still opposed to the plan to impose tariffs on chinese imports. the top economic advisor goes to washington next week. in malaysia, a stunning election results, has the 92-year-old former premier poised to return to power. mahathir mohamad is demanding to
form a new government. the coalition. the prime minister a shocking defeat. mahathir was prime minister from 1981 to 2003. he defected from the ruling party two years ago. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs, this is bloomberg. francine: thanks so much. breaking news out of italy. this is according to people familiar with the story, a populist government nearing formation. the five-star league, significant steps forward on the government game. let me run you through what we found out in the last 24 hours. it is the nine weeks since the election. not much progress. the president, a largely ceremonial role, was asking
people to form a coalition and there was always one person saying i don't want this, i don't want that. finally, the party will step aside and the two populists seem to have an agreement on the fundamentals. what they are disagreeing on now -- who they put in charge. the president to give themselves another 24 hours to come up with a name for a premier. straight to the rome bureau chief. what more do they need to work on for the government to be formed? reporter: thank you. it seems to be going well. ,e got a statement from both they said the talks are going well. they are discussing who will do what within government. we do not have names. presumably neither will be
premier because that would create a problem in conflict. it looks like things are progressing quickly. we may have a government soon. francine: let me bring you to our morning must-read. you helped pick this out. in italian and then in english. let's get the english version. this is what it says. " this political crisis is different, we saw the light around midday, after an unexpected turn in the long dark and uncertain road we have had for the last nine weeks." why was there such a quick turning point? the specter of fresh elections? certainly fresh elections had an impact. people do not want to go back to elections. they were wise and taking long to prolonging the crisis -- that
mp's had the time to realize it was not such a bad job and they want to stay. 'sny have told us that mp calculated, if they go to early elections, half may not be reelected. we heard rumors some of them were partying last night -- happy that if a government is formed they will remain in parliament and still have a job. tom: two in outsider, this looks like the two out parties that will run the country. where will the country be six months after they take over? do you perceive large changes in legislation? what we in america, would call omnibus legislation? or will they get nothing done? italy, it is a parliamentary democracy, all parties have their say, people
say nothing ever gets done. it will not be as dramatic as the markets feared initially. they will have to moderate. they will have to find a way to get along and find compromises. in the long run, they could come up with things the market won't like. they both promise voters a lot of things that are expensive from a flat tax, which they may not be able to do, their expensive with whatever they do. citizens income -- extremely expensive. tom: run the video again if you would of the gentleman from five league. to the global audience -- there is -- is he happy this morning? reporter: that is a good question. he recently came out and tried to bring the party back to its original, more aggressive stance. he came out against europe.
leader, is having none of that. maybe that has sped things up. he said, i will compromise with the league, we will go forward. either way, that is reassuring it will not go hardline. they will try to govern. francine: thank you so much. concern, if you have two populist parties that were both popular, they will try to vie for attention. i don't know if either party will win. credit default swaps, we like the spreads between italian and german bunds. mario draghi is ready to act. how much risk in the italian economy? john: growing above trend.
if you have to choose a moment to have a political crisis, this is favorable. the ecb is still doing qe. if you have mainstream, nonmainstream parties, you get budgetary policy and that should mean slight spread concession. this will not be dramatic widening because of cyclical policy forces. this is not a currency issue. to tighten fiscal policy to be an issue for the euro, you need such irresponsible policymaking, that they have a funding crisis. i don't think that is the direction the policy is going. it is modest squeezing. francine: now that you have a populist government, they either don't get along or you could see a reversal of reforms, a lot of money being given out -- if you movement,five-star even if they implement 20% of what they promised, italy will
be worse off from a fiscal point of view. john: it is a question of how much worse off? worse off from where they are? absolutely. so much that they breach the 3% deficit to gdp, that they have difficulty finding themselves. i'm not convinced the level of sub optimal policymaking will be that extreme. this is a reason why you would not want to own bonds. where is the optimal euro for italy? can they get business done it where it is or do they need different valuation to be optimal? john: with the euro where it is, they are managing to deliver above trend growth -- 1.5% rate but given that italy's trend rate of growth is .5% of now is impressive by italian standards. if the euro were 20% lower, this
would be more helpful to italy. 1.2%if it stayed around for the next year, i don't think this will be the binding issue on italian growth. it will be more where rates go, if you have irresponsible fiscal policy and qe has ended by the end of 2018 -- that is when things could get difficult. francine: do you worry about banks? sayingas a nice scoop the italian treasury is seeking european regulatory approval for a six-month extension of the guarantee program for the bad loans. request for an extension is the normal european process granting state aid. not particularly alarming. i would worry about how the situation would look into thousand 19 if you have a bank in 2019 if you have a bank issue and hiking rates. tom: thrilled to have you with
policymakers singing from the same sheet? unlikely. we need to look at the split. nehra. us, how will they vote? reporter: the split will be in focus for traders. 7-2 is the consensus. if we get6-3 or an even split for a hold -- that is the expectation -- that could be seen as hawkish. that is the simple question. a more difficult question -- will mark carney come out as hawkish? if he does -- how will the market react? fully pricing in a rate hike in august? better than even odds at the moment. another hike is not priced in at the moment until the final quarter. at thee: when you look
differenthis is very -- for a global audience there is a debate internally between the fmc, where is here, mark carney, -- is there a credibility problem? what is the market pricing in for one hike this year? reporter: we all know, mark carney did get that reputation as an unreliable boyfriend. that is something he will want to avoid today. we have market probability of more than 90% of a hike today at the end of march. that has come down to 12%. the market has done about-face. -- inflation softer, still above target at 2.5%. growth at 0.1%. pmi in april soft. meeting, first quarter slowdown, might be more entrenched. it could be risks.
wek carney in april saying, are looking at data, may is not our only opportunity to hike. will he say something hawkish today? he sort of needs to because inflation pressures but how far does he go? even if he does go far, will the market believe him? tom: within the press conference, what we listen for? i will be listening for what he says on the forward guidance, in terms of what will happen this year and beyond. anything he says about rates curve. said, rates will rise earlier and faster than the market is pricing in. he was trying to get markets up to the hawkish tilt. will he remain with that or how will language change? also what will he say about growth and inflation? about the soft this in the first quarter and what the bank of england expects to happen in the
rest of the year and beyond in their forecast? and how tolerant are they going to be of any inflationary pressures, did they see them continuing? -- if they see them continuing? francine: thank you so much, down the road from the new bloomberg headquarters. john normand still here. we have a couple people saying, they need to hike. they promised it. they need to have the tools for a downturn. others are saying, why hike now? john: why hike now? the data not supporting the idea of growth moving above trend in inflation on a durable path. even though we have one hike mightin, that is all you get from the bank of england over the next six months. it is not enough to lift the currency. there is not enough micromanaging. you're talking about the difference between pricing in no hikes and one hike, this is not a currency catalyst.
tom: applying the fed dots across the four major central banks -- how far is the market from these banks? mr. carney, massive data dependency, waiting and waiting. what is the dynamic? john: the. dynamic in the states is clearest where the fed has been forecasting higher rates than the money market curve. moving up to the fed over the last several months because the fed is have the right call in the economy, growth would stay above trend, inflation back to target. when people talk about credibility of central banks, it boils down to the central bank's ability to forecast inflation better than anyone else. they have done that pretty well over the last year or two years. the bank of england has had a tougher time with this. a lot of this is related to brexit uncertainty. we have to be charitable with how we grade them.
in their ability to correctly forecast the economy over a 3-6 month horizon, that is why you don't have consistency in bond markets and currency markets. francine: thank you so much. . john staying with us. stay tuned for the bank of england rate decision at 7:00 in new york. coming up on "bloomberg atkets,", former governor 7:30 a.m. in new york, 12:30 p.m. in london. this is bloomberg. ♪
♪ francine: "bloomberg surveillance," this is "bloomberg surveillance,". bigger deal scouting for investments, spreading presence over more industries after a recent high up with another local fund double its size. the chief executive spoke with bloomberg. >> is about scale and creating global champions. sovereign funds effectively, four. historically, the most successful abu dhabi has created continues to be the backbone of abu dhabi's investment strategy.
by other three vehicles -- combining the three, we achieved a scale which makes us are more competitive -- they give us a balance sheet considerably strong. it gives us the ability to grow in a more effective way. to really consolidate investment strategies -- that is what we're doing now. reporter: what should the world expect to see different, if you will? >> people know it well. mudabala creativity will continue, more or less what it has been doing over the last 10 years with more scale. reporter: larger deals? >> yes, possibly. we are in the business of generating return.
now we have market scale. that makes us more able to do potentially larger transactions, if that makes sense for us. reporter: i have unavoidably, berkshire hathaway in mind. buffett hashings, talked about the challenge and opportunity of being a large investor elephant hunter, if you will. having $250 billion of assets at your fingertips allow you to do the kinds of deals you could not do before? >> yes. we believe so. reporter: at what scale? what were you unable to do before that is now in your reach? think, it allows us larger larger, and diversified portfolio. let me put it that way. in terms of geography and sectors. that in itself, gives us a
better investment profile. that could mean larger deals but it is not necessarily the driver. i have to emphasize. we are not headhunting elephant deals. we are headhunting growth and returns. with this scale we have a larger world. to look at the reporter: why the apparent change in attitude toward monetization of assets? from globaloffering aluminum and other transactions youre considering? >> that is our maturity. when we started, when i started to do what i'm doing now -- the culture of these investment companies, the ones i have been involved in, was about accumulating assets. than maintaining.
-- then maintaining them. the principle of monetization was not part of the mindset. involved in the investment business, yes, it is about dividends and growth but it is also about monetizing when it is the right time. that is the shift that has happened over the last couple years that i've tried to push. a monetization strategy that makes sense. not with a view to cash out but to reinvest. ♪ mr. elliot, what's your wifi password?
so sophie, i have an xfi password. and it's "daditude". simple. easy. awesome. xfinity. the future of awesome. sure. momwhat's up, son?alk? i can't be your it guy anymore. what? you guys have xfinity. you can do this. what's a good wifi password, mom? you still have to visit us. i will. no. make that the password: "you_stillóhave_toóvisit_us." that's a good one. seems a bit long, but okay... set a memorable wifi password with xfinity my account. one more way comcast is working to fit into your life, not the other way around. ♪ tom: this morning, yen weakening to 1.10.
currency stable from tehran to tokyo, adjusting to a trump strong dollar reality. no one thought this would aspen, says president trump he greets three americans detained by north korea. and accountant, and agricultural consultant and a hotel services employee. from another time and place, from george herbert walker bush, malaysia reaches to the past in search of stability. good morning, this is "bloomberg surveillance," live from world headquarters in new york. on tom keene. francine lacqua in london. bank of england meeting -- is it a dead meeting? or it is a very live meeting this morning? francine: you could argue given the economy not expecting a rate increase, it is dead. remember where the market was priced seven weeks ago. 90% pricing in a rate hike at this meeting, talking it down.
we had subdued data. now market expecting something in november. look out for how they vote. we have this mpc split. morningr markets this quieter -- em markets quieter this year -- this morning. taylor: president trump thanked kim jong-un for releasing three americans detained. the president welcomed them men early today after they flew on a military plane to base andrews. he was optimistic about the chances of a successful meeting with kim. >> we have a very good chance of doing something meaningful. that,body would've said five years ago, 10 years ago, even one year ago, you would have said that is not possible. taylor: meanwhile, administration officials say the president is leaning toward
singapore for the site of the summit. iran now denying it launched an assault on israel held territory from syria. targets were struck overnight after forces in syria fired 20 rockets. a british human rights group says 23 people were killed in syria. israel said there were no cattle tease on its side. royal bank of scotland -- there were no casualties on its side. paying,nk of scotland the probe covers rbs actions before the financial crisis. the settlement will make it easier to resume paying dividends after a decade. u.s. penalties having an impact telecom equipment maker, zte has suspended activities after sanctions crippled.
to resolve a seven-year blockade imposed for violating terms of a sanctions agreement, then lying about it. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. riggs, this is bloomberg. thanks so much. quieter markets, equities, bonds, currencies. euro, 1.1875. oil elevated near $72 a barrel. brent crude, $77. the major news, yen weakening. we got a 1.10 print on yen. little weakening. em quieter. francine: i looking at the dollar taking a break from the rally we had earlier on, declining as traders figure out
what the catalyst from political risk, to missiles in the middle east mean for investments. european equities steady. they were gaining earlier on, they are now on the lower side. 10 year treasury yield -- driving up the dollar and exacting pain on emerging markets. tom: off radar but it should not be extraordinary. let's look at dollar and malaysia. back 40 years. simple. i will put this out on twitter and bloomberg radio as well. tenuren of the previous from the early 1980's, the asian crisis, perfect appreciation and the giant economic growth of malaysia, he isng, mahathir mohamad elected in a stunning reversal of the present government. the medical doctor of malaysia,
decidedly back in the house this morning. francine: what i'm looking at -- the credit default swap with malaysia. the 92-year-old former premier coming back, investors now asking what it means for government policy? that the tax increases previous government put in place is something analysts are telling me the government needs. this is the credit default swap. wider than the philippines. malaysia in white. that makes little sense if you look at the country, two notches higher. this is a nice compare and contrast. this is why this chart matters. tom: let us go to washington. a number of things including mr. cohen. base, kevinforce cirilli, a remarkable scene. what is the backstory you saw at
andrews? kevin: a historic one. of the administration is hoping this is a sign of goodwill ahead of the anticipated meeting between president trump and kim jong-un. president trump meeting with the three detainees kim jong-un released. they had been detained for some time. they released a joint statement thinking president trump as well as mike pompeo. president trump telling reporters he did not believe their release was going to be possible ahead of the meeting between secretary pompeo and kim jong-un. from here, back-and-forth geopolitical continuing. as this was happening, reports in syria, the escalation between israel and iran has escalated. this coming within the last couple of days as president trump announcing the withdrawal from the nuclear disarmament deal. tom: let's rip up the script.
you mentioned military efforts overnight between iran and certainly israel. what is the backstory? as we just now get the summaries and reports? kevin: critics of president trump's decision to remove the u.s. from the deal, say this is a concern. this would ratchet up tensions in the middle east. that said, there is also an argument that israel has every right to respond to what they israeliiran targeting positions in syria. tensions have mounted. it now becomes what exactly will get done to appease the situation? something the administration has to deal with in the immediate short-term. thecine: talk to me about,
president speaking at that base after the release of three americans, how that will play to his base? kevin: in place to his base but also, even beyond that. there is no question, for some time, several months ago -- the rhetoric between kim jong-un as well as president trump -- was ratcheted up. rocket man, for example. we have seen a complete turnaround between north korea and the u.s. even the north korean state run media is saying this morning, this is a sign of goodwill on behalf of north korea. 120,000 people are imprisoned in this country. i think all of this will come very muchat meeting, anticipated -- president trump said he was proud of this action but that he would not be -- but that he would be even more proud once the korean peninsula is
denuclearize. denuclearized. no final decision or date has been determined. francine: what happens next? over the next couple days, are we still going to be hearing more rhetoric from the president about korea or will he move on? kevin: two things on my radar. nominee to bes cia director, did what she needed to do, according to sources, yesterday in the senate. of did pick up the support the west virginia democrat, joe manchin, who said he would support her despite criticism. at the white house today, ceos from tech companies meeting on ai. tom: four ways to go. last night, the news flow -- a
dying john mccain came out decisively against her to be cia director. will that influence folks and votes? kevin: it is not a sure deal yet that she would be able to get through. the democrats support of her is something the administration is looking upon with confidence. tom: extraordinary out of washington. kevin cirilli, thank you. we will come back with james sweeney of credit suisse. lots to talk about, including inflation dynamics. later, from goldman sachs, look for this on bloomberg. at 11:00. this is bloomberg. ♪
♪ francine: this is "bloomberg surveillance,". taylor: let's get the bloomberg business flash. drops,p will cut 13,000 12% of the workforce -- 13,000 jobs, 12% of the workforce. ceo,berg spoke with the gavin patterson. >> increasing cap's, we have announced the transformation plan. some of that in short-term, offset against higher regulatory pressure, regulatory pricing. we can see through that. in a couple years from 2021
onwards, we can see growth. taylor: bt says it needs to pay $2.9 billion over the next three years to close the gap. in china, former chairman of anbang insurance has been sentenced to 18 years in prison for fraud. wu xiaohui brought global recognition to anbang. the chinese government seized control in february, injecting $9.5 billion of capital to boost solvency. that is your bloomberg business flash. tom: thank you so much. on u.s. inflation, the great calls, james sweeney of credit suisse. the absolute height of what we saw within deflation. he said no, stop worrying. james sweeney with credit suisse.
cti,ive forward to ppi, to two another bout of worries. can you go forward, saying don't worry? james: short-term, yes. risk ina little bit of inflation for the next 6-12 months. to have a troubling inflation story you have to go several will bet and think -- have a bigger shock in trade policy and tariffs in the fed will lose control? you need a sequence of further shocks before you get problematic. tom: brilliant insight. if the fed loses control. does the fed need the market on board with their belief? do they ignore the distance of the market from the powell theory? james: i don't think the market -- tom: they have narrowed the gap. james: in general, the fed in
market have had nice interplay in place for a long time. if things the textbook say would generate a shock away from 2% inflation, fed and market together, usually markets first do the work to push inflation back. meanwhile, firms and households don't think about inflation when they make decisions. againstal, i lean inflation fears, deflation fears. fears. you worry at some point -- that can be broken and shocks can break it, changes in how the fed can operate, can break it. there are things that could lead to inflation. the fiscal situation is worrying on the inflation front longer-term. maybe itoment, i think is priced differently from the fed guidance in the near-term. 3 more fed hikes this year into next year and not that much inflation from here. francine: that means risk is
tilted upside on the fed not doing enough? then having to catch up with interest rate hikes? james: as i said, we will get more than the market is pricing. we will get the fed delivering once a quarter this year. wage growth will accelerate somewhat further. we don't see core inflation moving significantly higher. i don't think if we had that scenario, it would be a traumatic shock for markets. it is consistent with a small move higher in yields. we are looking for longer-term yields, 10 year to move higher. right now, market is focused on the 305 level on the 10 year, any day now. this is not inflation breakout. the conversation is pivoting toward inflation and higher yields down the road. at some point in the future, we get a test of this 2.75 percent,
3% neutral rate, something that people in policy circles talk about. it will still be a while. inflation is not exciting at the moment. francine: where do you see dollar going? james: in general, bearish. -- recently things have gone opposite -- we've had a cluster of data surprises, much worse in europe than the u.s. a slowdown in global growth momentum. industrial production growth in europe on a three-month basis is sharply negative recently. i think that will come back. underlying demand in europe is good. we are looking for the european data to surprise upside again, which can restart the conversation about ecb in 2019. that should be supported for the euro.
dollar short term to be responsive to foreign data and expectations about what ecb policy is doing. tom: trump strong dollar reality -- is that true? it makes for good theater. james: i don't think so. tom: sweeney telling me i am wrong. i like that. james: between deficit issues will weigh on the dollar overtime. shorter-term it is about growth and policy differentials. tom: that important update on price change, front and center. price change, oil, $80 a barrel. who would have thunk? auto or early winter of 2019? jeffrey currie, global head of commodities, this afternoon at 4:00. from london and new york, this is bloomberg. ♪
♪ francine: this is "bloomberg surveillance," tom and francine from london and new york. a historic switch of power in malaysia. mahathir mohamad has won a remarkable victory ending the six decade rule of the ruling party. covering the stunning shift of power. like in thisle 92-year-old former premier? with mahathir mohamad
coming back, there is hope that there will be sweeping change when it comes to issues that have plagued the administration. losing power after 61 years at the helm of the country -- the rule of law very much top of mind in a press conference. mahathir mohamad did take note of this -- when asked if he would take revenge -- he said the rule of law would apply for everyone. there certainly will be sweeping's to be done. we will hear whether we will get a new prime minister by this evening. tom: thank you so much. her evening, our early morning in new york. james sweeney of credit suisse in charge of economics. the latest unrest in emerging
markets, strong dollar, this story -- is there a correlation lining up or are they audio syncretic? james: we had a slowdown in global growth. the dollar strength coincides with weakness in emerging markets. there is a strong suspicion of idiosyncrasy, -- argentina, this election in malaysia. i think it is a bit. not that bad, basically. emerging markets are ok. tom: from your study and your work -- are they still asian tigers? criticisms,ome versus singapore, are they still asian tigers? singapore, thailand, does that moniker fit? james: i don't think so. singapore has matured. south korea has become a
developed market economy. they are no longer growing -- for the last 15 years, share of global trade did not grow like in the 1990's. that growth was in china and china was the one who was growing the fx reserves and pushing export share significantly. they have gone their own ways and have their own individual stories. they are more mature economies. tom: james sweeney of credit suisse with us. an important day for governor carney. in 30 minutes, bank of england rate decision. this is bloomberg. ♪ retail.
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-- the commerce secretary says negotiators continue to talk and beijing is opposed to the plan to impose tariffs on chinese imports. the top chinese economic advisor goes to washington next week. russia is urging a summit between donald trump and vladimir putin following the decision to leave the iran nuclear deal. a meetingbloomberg would give diplomacy another chance. he is going to tehran today to meet with iranian officials. in malaysia, a stunning election result has a 92-year-old former premier poised to return to power. his opposition coalition dealt naji bray zach's government -- najee good raise act -- called
him a thief during the campaign. royal bank of scotland has tentatively agreed to pay $4.9 billion to settle a long-running u.s. investigation into the sale of mortgage-backed securities covering rbs actions before the 2008 financial crisis. this will make it easier for the bank to resume paying dividends after a decade. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you so much. you get lucky with your bookings. a first-class team at bloomberg "surveillance," we try to get in front of the stories. james sweeney is with us of credit suisse and we are thrilled to bring you meredith sumpter from eurasia group.
fabulous to have you with us today. i was thunderstruck by this repeat history in malaysia. singapore, george herbert walker bush, and here is the islamic centered leader of malaysia from 20 years ago re-doing it at 92 years old. how did this come about? meredith: with a broad sense of discontent with prime minister najib. ,hen you look at this election it is not so much a surprise as a shock. it came out by his own voters not coming out in force for him. we saw voter turnout that was lower than could be expected. hir thought he needed a stronger turn out to get the election win, and he got it because his voters came out. malaysiatensions from go all the way to the tip of
singapore and north borneo. it speaks to the child -- south china sea. is this an opportunistic moment for china to reaffirm its new dominance within the south china sea? if you have this shock, it has got to be an advantage to mr. xi . meredith: i would disagree. was muchr. najib closer than what mr. mathir will be. domestically, this 92-year-old prime minister to be has his work cut out for him in terms of thinking about the coalition of interests of parties he represents. they were unified against the prime minister, but now he will have to unify them in terms of governing the country. francine: what do you think the first signal that the new prime
minister of malaysia should be given to the markets? there were questions on some of the scandals that engulfed the previous government but some of the things the previous government put in place is what investors want, money and the coffers. foremost, hest and will be sending signals about the strength of governing and the rule of law. markets will be looking at what kind of economic and fiscal policies will he pursue as prime minister. that is something that we have to -- i think markets will have a wait and see approach. he is someone we expect to roll back the gst, which has been deeply unpopular but an important source of funds for that country government. we anticipate he will increase populist related spending. francine: how will mahathir and trump relate? meredith: we are going to have
to see how the leaders interact. we will be looking for a phone call from president trump to the new leader, and also we will aok to see how dr. mahathir matters of trade within the region. there is a gulf between how president trump is approaching matters of trade and how malaysia and other key countries are. tom: we go from multilateral, the advent of the wto over to the president's idea of bilateral, which is unilateral. let's cut back to your ability to read the domestic press of the government in china. how is my way or the highway playing in china, particularly with the conversation in the moment we saw this morning with north korea? meredith: i think the chinese are watching president trump with interest.
-- is coming next week. tom: the economic advisor. meredith: he is them use of xi of xig, -- the muse jinping. tom: is economic advisor is not pboc, he is part of the politburo. meredith: he is a vice premier that has oversight over the economy. tom: is he advantaged by speaking to secretary of state pompeo versus secretary of state tillerson? meredith: yes, but i do not think he is coming to washington to talk to secretary of state pompeo. we saw seven cabinet leaders go to beijing last week with a long list of demands. they had several hours of conversation. they are looking to bypass those cabinet members and go straight
to president trump, who xi jinping and beijing understand is the ultimate decision-maker on how u.s.-chinese tensions play out. thecine: when you look at trade tensions and the u.s. officials going to china, not really finding an agreement but not making matters worse, what is priced into markets? james: the market is pretty complacent about this. there is this view that we are going to have deals soon and everything will be smooth, but longer-term tensions over technology and investment will steep -- still be there. it looks like some of these tariffs make it in. there -- may kick in. there are some deadlines coming with europe, and there is no telling where this will go with the u.s. and china. our assumptions are in line with the market, that we will not have a major tariff shock. it does feel like the risks are
material. francine: what is your take on it? will these trade tensions escalate? meredith: i would expect that the visit to washington next week will not send off the risk -- fend off the risk of terrorist being implemented as soon as june or soon thereafter. 23rde looking at may 22 or is about the time the u.s. government has to close the consultation period and decide whether to continue with tariffs. whether or not we see tariffs happen, and our call is we will see one round before washington and beijing sit-down with negotiations in earnest, but the tariffs are not what the markets should be focused on. the big game is investment restrictions. two of the world's largest economies are sizing each other up and preparing to compete over
the long-term at the industrial sectors that will be driving future growth. tom: greg valliere, thank you for being with us yesterday, leaves a menu -- memo on trumps new world -- trump's new world order. the bottom line is president order is outorld due november of 2018 and if we are lucky, 2020. what is the xi new world order? meredith: ensuring that he is able to retain enough of the industrial policies that he will see the onward advancement of chinese industry and companies. tom: five years, 10 years? meredith: i would say he is looking probably in the five-year period to secure the industrial investment and fend off any threats we are seeing not just coming from the u.s. but from european economies as well is japan who are looking at
chinese behavior as market distortion. tom: this is the third revolution and it is so starkly distant -- different. trump in i think mr. the u.s. administration are not necessarily underestimating how strong and swiftly china is looking to amass power. what is more difficult is washington is having to reckon with a beijing that is much more confident in its ability to stand up to pressure from washington and chart its own course, regardless of the kind of pressure, whether it is tariffs or investment restrictions, that others are looking to impose. tom: meredith sumpter with eurasia group, thank you for joining us. we will try to get some of this conversation on our podcast. "bloomberg daybreak," always interesting. , on hisman of ohio
taylor: this is bloomberg "surveillance." let's get the bloomberg business flash. qualcomm unveiled a $10 billion stock buyback plan. the plan replaces a previous buyback that has $1.2 billion remaining. qualcomm is trying to complete a more than $40 billion takeover of an xe semiconductors. uber is hoping to get it self driving project back on track soon.
testing was halted in march when one of itself driving cars hit and killed a pedestrian near phoenix. in ceos spoke with bloomberg an onstage interview at an uber conference in los angeles. >> for us, it really brought home this idea that safety has to come first. and as it relates to that tragedy, we have grounded our autonomous fleet. that was a decision we made. >> any sense when you will start driving again? >> within the next three months. deliveruber plans to food by drone in san diego as part of a test program approved by the government. u.s. investigators are targeting former senior executives of a dutch bank that he'd money for money for mexican cartels. they agreed to pay $369 million. the justice department is
considering whether to charge the former ceo and the bank's ander security advisor compliance chief. francine: italy's populist d-leaguehe five-star -- jamesve-star league sweeney of credit suisse is with us. i have a chart that i will bring up very shortly and push it out on social media. it shows a little bit of shock in the markets when it comes to credit default spreads between btb's and german bunds. is that out of the way? james: i think you can fit this in with the emerging-market question you asked earlier, are we seeing a little bit of contagion? we have seen weakness and european data. you are always seeing volatility in italian politics.
maybe some volatility in italy fits in to a moment where there is a lot of focus on politics, focus on recent weakness and european growth. i do not think there has been anything very new here in terms of the underlying economics. does the populist government with everything they will present and the five-star movement, everything they have promised, makes you concern that a lot of reforms italy has been pushing through will be derailed? james: of course. the reforms have gone very slowly, and this has been true for some time. whichk with the rate at governments turnover in italy and the ability of a given government to really make structural change has been the
issue. this will continue to be the issue and markets will focus on it somewhat. spreadsreally justify blowing out significantly right now? i do not think so. tom: what is your written call on convergence or diversions of these economies? about e.m., just a simple transatlantic convergence or diversions. james: in the short-term, there will be a divergence. in this past -- in the past month, we have seen europe going south so i think we will see better europe. in the longer term, convergence continues. in general, the u.s. has a lot of stimulus, monetary and fiscal stimulus. these policies we have are positive for growth and europe has nice momentum and their
recovery at the same time. tom: i'm going to ask you in equity strategy question. everyone is telling me it is as good as it gets in the equity markets and yet i am not hearing that from james sweeney. i am hearing that things are pretty good and it can elevate nominal revenues and laid to earnings. , i am on anct investment committee right now which is a new thing. tom: let me make this clear, folks, this was not a promotion for james sweeney. did they show up at 3:00 p.m. on friday and say, guess what, a new duty? james: the house view is overweight equities, for some of the reasons you said. the overall earnings picture is good. the u.s. growth is peaking on an after-tax basis. we like stocks and think growth
is in good shape. tom: it is very cool to have a lead economist on an investment committee. that is a good thing to see. let me tell you about the coolest thing on the bloomberg. if you are at credit suisse your knees are shaking because you have a meeting with investment committee leaders sweeney today. you can dazzle him, i mean dazzle him, with malaysians a -- malaysian ringgit. where else can he do that? g tv . you can see those charts and steal them, even better. it is a site of beauty. will asian ringgit. -- malaysian ringgit. ♪
it is a 6-3 split or seven-to split. nejra: the consensus is that we are going to see a 7-2 split with two members voting for a hike and the rest voting for a hold. if we get 6-3, that could be seen as more hawkish. it's it is more evenly split, even more hawkish and a unanimous decision would be seen as dovish. the big focus will be mark carney's news conference in which he will have to manage expectations, because they have come down in terms of the rate curve, markets only fully pricing in another hike until the end of the year. better odds for august, but whether mark carney will be able to move the dial is a good question. tom: when we look at the bank of england today and the wait for inflation, where will they see
the inflation for the united kingdom? is it just a consumer hope that the consumer will bail them out? nejra: this is one of the key things we will be looking at in terms of the growth in inflation forecast. of inflation print was one the things that made markets pull back their expectations of a hike today. it came in at 2.5 percent, weaker than expected but above target. we had the growth picture softer in the first quarter and some of the pmi in the second quarter signaling it is more than just the weather affect. carney we see from whether they are willing to rise and how willing they will be to look through it, that is one of the key things they will be looking for. tom: nejra cehic, thank you so much. james sweeney with us right now. i want to go back to brexit and the gloom crew got it totally wrong.
this is the flows, the current account deficit of the united kingdom. here is brexit down here. the worry is we would have seen a widening current account deficit. here is the miracle. instead, it has gone the other way to less of a deficit. was that just pound movement? did sterling compensate for that deficit? james: two things happened immediately after brexit that prevented the recession people forecasted. one was the decline in sterling and one was that increase in household savings. reversed partly, but there are weather affects even in the u.s. it has led to a little bit of weakness and choppiness, but we think something a little worse
is going on in the u.k. because it looks like this decline in the savings rate that was sort of accommodating and increasing tradable prices, has ended. really, if you are a household in the u.k. you are facing higher prices because of this adjustment that happened so essentially the brexit bill is still there. we think the u.k. will get one hike off this year. my colleagues in london and i. i think there is a little bit of a dark cloud rolling in. tom: james sweeney of credit suisse. coming up, the decision of the bank of england and the carney press conference. ♪ mom you called?
its of england announces policy decision with credibility on the line. italy inches forward to a populist government as silvio berlusconi dropped his opposition. china's cpi disappoints and the boj's corona warns of more -- david: coming out to a bank of england decisions. alix: no surprise, they wound up not hiking -- or they did hike rates? no, they did not hike rates. the vote was 7-2. inflationes see cooling faster to reach the 2% goal in two years. part of the rhetoric of why they were going to be hiking was because inflation was jumping further because of sterling weakening, and now they see a cooling faster than before. you have sterling paring some gains. david: