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tv   Bloomberg Surveillance  Bloomberg  May 14, 2018 4:00am-7:00am EDT

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francine: telecoms turnaround. president trump orders the commerce department to get zte back in this week after cutting it off. populist progress. closer to forming a government deal after a marathon weekend of talks. they are looking to get approval as early as today. and i will shortly have an exclusive conversation with the bank of france governor. good morning, everyone.
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this is francine lacqua with nejra cehic in paris. i'm about to speak to the governor of the bank of france. what is going on? nejra: lots to look forward to from your day in paris. let's check on the markets first. european equities struggling for direction a little bit. all the gains that we saw in the u.s. on friday, the euro trades against theonger dollar. the 10 year yield not really going anywhere. yieldn the 10 year btp rise a little bit. andre seeing the five-star league parties near the completion of a government plan. we have breaking news that the president will be meeting later today. we keep an eye on all italian assets. some weakness in crude, extending the losses from friday
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after opec says that it is ready to offset any effects of sanctions on iran. let's get the bloomberg first word news. here's taylor riggs. taylor: president trump has switched policy and ordered the commerce department to help zte stay afloat in the united states weeks after banning the company from buying american technology. he tweeted that he and president xi jinping are working together to help the chinese telecom company. it is a major turn for trump, who has accused china of stealing american jobs and technology. the u.s. is ready to allow investment in north korea once it has proof of its denuclearization. that is according to president trump's top national security officials. john bolton told abc's this week that we are prepared to open the trade and investment with north korea as soon as we can. secretary of state mike pompeo went further in an interview on
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cbs as he talked of the potential for u.s. investment in the country. duo have allist but completed a government plan that includes a tax, guaranteed income for the poor, and a lower retirement age. luigi of the antiestablishment five-star movement told the news agency that he and my tale of the anti-immigrant league have details of thet contract for the government of change. they are due to meet the president this afternoon. global news, 24 hours a day, on-air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. riggs.lor this is bloomberg. francine? francine: thank you so much. the ecb could be set to hike rates soon after the end of qe. governor hereance
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a winds said he expects down in bond buying. he joins me now for an exclusive interview. thank you so much for giving us a little bit of your time. when you look at growth in back toi want to come the normalization of monetary but do you think european growth has peaked? >> european growth remains strong. it was especially strong last year with 2.5%. setback in kind of q1 with 0.4%, but we think this is mainly due to temporary factors. we just published for the french economy our first preliminary estimate of 0.3% for q2, but economic orders remain
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positively oriented, and we do not see a trend change. let me stress one thing -- francine: the trajectory is kind of -- >> our forecast for the euro area economy this year is 2.4%. we will see how it will be in june. but it is not an acceleration compared to last year. it remains at a solid level. francine: you were at pains in your speech, saying that once the normalization process starts, you won't be too quick or too late in raising interest rates. theimportant is it that market understands this correctly? >> first we will have to decide about the end of net asset purchases. soon -- as i already said, whether it will end in september or december is not a deep
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existential question. we were very clear about the second thing. we said the first rate hike the end ofwell past these net asset purchases. what i explain is that we will give additional guidance before about the the year timing of this first rate hike and about its contingency. .et me explain about the timing and about the contingency, it will be contingent also on inflation. predictable and it is a clear virtue of our gradual normalization path. we look at data and the economic
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situation as it is and as it will be. francine: could we assume six months from the asset purchase normalization, or could it be nine months? >> english is not my native language, but i understand that some can mean several figures. francine: so it can be three or even four. when you look at the main concerns or challenges for the ecb, is it communication to the markets? >> i don't think we have specific concerns. we have clearly a mandate which is price stability. coming back in the midterm ,erspective to a 2% inflation close to below 2% inflation target, so we are making progress towards this target. effect,some transient inflation is at present rather low in the eurozone.
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willink that inflation resume its progress in the eurozone in the coming months, and these are clearly temporary effects. we are clearly focused on delivering our mandate on price stability. we have been efficient because two years ago there was still deflation risk in the euro area. 1.5% and we were at expect inflation at 2020 two b 1.7%. francine: how much does the higher price of oil help? >> it is a midterm objective. we look through transient phenomenon. energy prices are very often transient phenomenon. if you look at recent months, the effect of the oil price played down on inflation. it could play up in the coming months. fx.s our role to look for
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francine: how much of a risk is political tension, trade wars, trade tensions between the u.s. and china, to the european economy? >> our role is not to comment about political decisions, but it is to look at the economic possible consequences of geopolitical decisions. clearly, trade war's, or let us call it protectionism, could have a detrimental effect on global growth. tariffs,he effects of if they were to be introduced, we estimate a 10% general increase of tariffs to slow down the world growth by more than 2%. also, without having tariffs yet, business confidence could be affected by the threat of protectionist measure.
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it is what we have seen in great britain. it is what could be seen at present in some northern american countries like canada. aboutuld be very cautious avoiding such detrimental measures. francine: do you worry about the oflian economy because possible populist measures? maybe labor reforms being pushed back and fiscal spending increasing too much? >> it is not our role to comment --ut politics and it still except for my own country. this is my role and we welcome the acceleration of reforms in france, which is spectacular. it is a global picture in europe. it is important that all countries use this economic
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environment to pursue their fiscal consolidation, and we should be extremely clear. there will not be any kind of fiscal dominance. nobody should expect us to delay the monetary policy normalization to accommodate debt problems of any member state. francine: would you say the trend worldwide -- is growth strong enough? .e saw some concerns on growth adapted to policy is the domestic environment. it has to do with the eurozone in the u.s. or elsewhere. but what i said about fiscal consolidation is true probably for other countries outside the eurozone, including probably the u.s.
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government shouldn't develop fiscal policies which could accelerate the cycle. i know you don't want to talk about individual domestic growth, but is there a danger that german growth has peaked, and what does that mean for ecb policy? >> i come back to eurozone growth as a whole. it is high. you couldn't expect acceleration forever. 2017 had aarter of growth of 0.7%. there was some kind of stabilization. we thinktage, temporary factors are at work. we will study cautiously as always if there could be some threats we to the discussed about. francine: if you think the
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threat of currency wars has died down? , we see no signs of currency wars. clearly we all committed, the g20 members and the imf countries, to target monetary policies according to domestic goals. this is the precise wording of the g20. is the way it should work. this is the way it works at present, which is good news. it brings stability in this uncertain world. francine: i know that ecb officials won't talk about a target or a level, but is there a range you have in mind for the ideal euro level for french exporters? >> the short answer is no.
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effects of the exchange rate on our inflation outlook, which is a different story. ago, we had excessive volatility of the exchange rate. if it would be the case in the future, we would probably repeat the same thing. francine: final question, i think i only have time for one, on crypto assets. you were talking in relation to one of the questions. can it be dangerous for central banks that it takes so much weight? >> it is crypto assets and not cryptocurrencies. they don't have the key attribute of a sovereign currency. technologically it is very promising, blockchain, and we are developing it in a very innovative way, but there are
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risks associated with this. risk about money laundering and consumer protection. on these two issues, the g20 required the financial stability , including anti-money laundering. issues.ore on these two it is very important that we give precise guidelines to avoid threats from the development of these crypto assets. francine: governor, thank you for joining us today on "bloomberg surveillance ." that was the governor of the bank of france. i'm going to send it back to you in london. great stuff.
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let's talk sanctions. the u.s. withdrawal from the iran nuclear accord could lead to oil being wiped off the market. ,hat is according to bob dudley who said he isn't banking on $75 oil being the norm. he spoke with bloomberg's tracy alloway in abu dhabi. >> the withdrawal from the agreement seems to be the beginning of a negotiation of some kind. to one million barrels a day off the markets. there's a lot of uncertainty out there. that is more reflected in that along with what is happening in venezuela. >> has bp been buying any iranian oil? >> i think a couple years ago we bought one cargo of crude. it is probably best to step back and watch and see. >> let's talk about your earnings recently. a little bit by the market for fiscal discipline. do you think that was fair? market, butt is the
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we've been really clear. with $15tal framework billion to $17 billion a year, you can do a lot more with that capital today. last year we commissioned more projects. we've got a lot more coming on this year. i think it is all about discipline and care. we've got circumstances we are still working through. the mantra is discipline. >> given the focus on fiscal discipline, would you consider may be rethinking your interest in some of the korean basin assets? >> we will see. 60far as i know, there's companies involved in looking at that. there's lots of good opportunities around the world for us. prices, haser oil
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that made it easier or harder for you when it comes to these sorts of acquisitions? >> not really. we've got a framework. framework wethe have. there are places around the world we will get involved in. we've got good petrochemicals business as well. we are not planning the company on $75 a barrel. $65 feels like the right fairway for the world. i think u.s. production will see a jump. >> there does seem to be some tension between the fiscal discipline you are talking about and what the market wants to see. have you considered at all maybe raising the dividend or raising share buybacks? >> i hear the message about, there's not enough investment,
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we are going to stay with our discipline on that. we've always had a strategy of increasing distributions to the shareholders over time. as we get our financial balance sheet in shape and get our debt down, we will consider things like that. >> let's move closer to the region. you signed an agreement with the iraqi government to boost capacity. how is that going, and when might we expect to see the results? >> we are a big investor in iraq. it for abouton four or five years now. there were elections yesterday. i don't know the outcome. but we know we have a lot to add there. value we can add a lot of in production just by basic controlling measures. >> staying with the region
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again, we are seeing traditional trade groups with commodities being redrawn. a bp vessel is scheduled to carry the first u.s. shipment of lng to israel. how do you see that impacting the traditional gulf producers, the lng players in particular? >> there's two kinds of lng trades. those with very long contracts, and then there's this new world of shorter-term contracts. i think the market will respond. i think we will see all kinds of changes. close some ofg to the coal-fired power plants on their coast. that is what the market will do. it will respond fairly quickly. gas is a little slower than oil. the natural gas trade flows will change a little bit slower. francine: that was bp ceo bob dudley speaking with bloomberg's tracy alloway in abu dhabi.
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we've had a headline come through to do with italy. the league is proposing a prime minister. this is a development as we heard just before we came on air as well as the president meeting later on today in the late afternoon. both the league and five star are close to forming a government. if we look at what the boom spread is doing, in terms of how yields are moving, we have seen that 10 year yield move higher. it is up three basis points. the spread with germany widening ever so slightly. nothing too dramatic today. let's get the bloomberg business flash. here's taylor riggs. the money manager who famously predicted the collapse in subprime mortgages before the 2008 financial crisis has recommended shortening deutsche bank shares.
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he made the comments in an interview with bloomberg in hong kong. >> deutsche bank has real profitability issues. they haven't spent money on technology in a very long time. they are probably undercapitalized. deutsche bank is a problem bank. the uae energy minister has said opec has enough spare production capacity to cushion the oil markets should the u.s. reimpose sanctions on iran. bloombergsident told three big producers can offer an adequate buffer, adding that the cartel has dealt with similar situations in the past. >> we've been there before and i tonk opec has been resilient deal with that in the past. some of the member countries have definitely a spare capacity
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that can be used when required. taylor: the ceo of siemens has told bloomberg he's not planning an ipo. speaking in abu dhabi, joe kaser said the company is looking at the u.s. sanctions on iran to assess any potential impact on siemens. we need to look at what the sanctions actually mean. it is clear that it is a political governmental decision. that is exactly what we're going to do. taylor: and that is your bloomberg business flash. nejra: taylor riggs in new york. let's get to one of today's top stories. donald trump has ordered the commerce department to get zte
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back into business after cutting off the chinese telecom company from u.s. suppliers. the president tweeted that he and xi jinping are working together to save the business. this comes just days before the arrival of xi's top advisor in washington. let's get more with dan from hong kong. good to see you. is this reversal definitely going to happen? the white house has said it expects secretary wilbur ross to exercise independent judgment. exactly kind of unclear what is going on. i think the sentiment is definitely positive. tableasically laying the for these talks to happen. i think the chinese are still wary that this will go through. asmp could change his mind soon as he sent that tweet the
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other day. the two sides appear to be trying to find a way to make this work. nejra: does it set a positive tone ahead of the visit to washington this week? >> certainly. if you look at where they were a , they ended up with both sides giving each other a list of demands that were impossible to meet. it didn't look like there was much room in the middle. zte is a huge deal for the chinese. the u.s. essentially knee capped this company with sanctions. it would go out of business if nothing was done. that was a big part of this. the fact that trump is addressing it directly shows that there could be some room to
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move forward. very briefly, what is the message on investment in north korea? we've had developments there as well. pompeo saying the u.s. companies will go in. the crucial thing is when does the u.s. lift sanctions. completesaying denuclearization has to happen. kim jong-un once a more phased approach. nejra: dan in hong kong, thank you so much. still to come on bloomberg, an exclusive conversation with turkeys president as campaigning gets underway. this is bloomberg. ♪
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economics, finance, and politics. this is "bloomberg surveillance ." i'm francine lacqua in paris.
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is in london. i've been speaking to the country's central bank governor. we've been talking about normalizing monetary policy. he does not think european growth has picked. let's get to the bloomberg first word news. taylor: president trump has switched policy and ordered the commerce department to help phone maker zte stay afloat in the united states. weeks after banning the company from buying american technology, he tweeted that he and president xi jinping are working together to help the chinese telecoms company get back in business fast. it is a major about turn for trump, who has accused china of stealing american jobs and technology. bps ceo has said the u.s. withdrawal from the iran nuclear accord could cut oil supply by one million barrels a day. bob dudley made the comment in an interview with bloomberg. >> what we've seen is a withdrawal from the agreement
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which seems to be the beginning of a negotiation of some kind. it could lead to a million barrels a day off the market. there's a lot of uncertainty out there. that,s more reflected in along with what is happening in venezuela. siemens hasceo of told bloomberg he is not planning an ipo of its digital factory unit. joe kaser also said the company is looking at the new u.s. sanctions on iran to potential impact on siemens. we need to look at what the sanctions actually mean. [indiscernible] that is exactly what we're going to do. taylor: global news, 24 hours a day, on-air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries.
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i'm taylor riggs. this is bloomberg. francine? francine: thank you so much. italy's populist duo have all but completed a governing plan that includes tax as well as 15% guaranteed income for the poor and a lower retirement age. from italy.latest told the news agency that he and the antimatter print finalized their contract for the government of change. the italian news reports that the league has proposed -- while the five star wants giuseppe conte. joining us is our western europe economy editor. they don't seem to be able to agree on a prime minister yet. on the fundamentals, is there an agreement on what will happen if
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it is formed? reachedseem to have agreements on the key things such as lowering the retirement age. those are the plans they will be taking to the president. he has called them to the presidential palace this afternoon for more consultations. tell us a bit more about the government program and how it is likely to be received. the program includes also the flat tax as was mentioned before , and a guaranteed income for the poor. these are measures that will be costly. the newspaper today said they could cost between 65 billion euros and 100 billion euros. there is an amount of money that will have to be made up if and
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when these measures are implemented. francine: kevin, thank you so much. kevin costelloe, our western economy editor in rome. what does this mean for the euro? joining us now is the chief economist at asset management. thank you for joining us as always. we had an exclusive conversation with the bank of france governor. he doesn't want to comment about politics. he was saying that european growth is pretty strong. do you worry about italy as a stress point for the eurozone? >> sure. the real issue for the european -- yound the eurozone talk about the program on retirement age, on the flat tax. it is a situation, a program that is not sustainable. their population is aging rapidly.
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if people go on retirement earlier, it will be an unsustainable social environment for italy. -- there areear clear problems with italy. what willnow exactly be their position with europe, with the euro area. what the governor said in his speech this morning is that specific-- there is no , no operation from the ecb to italy. be,cine: it seems to because of the speeches we heard from the league and the five-star movement, that for the moment they are ok with the euro. but by being not as responsible as many would like, how much damage can that bring to the european economy?
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>> that is a real issue. we don't know exactly what could be done. we don't know the prime minister. we don't know how they would be able to manage one party with the other. the five-star movement, people in the south of italy vote mainly for five-star movement. how it will be manageable for the new prime minister. for me it is a risk for italy. the third biggest economy in the eurozone. that is a real risk for france, germany, and the eurozone as a whole. francine: what is the biggest risk for the european central bank? it was interesting, talking about the timing of normalizing
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qe, but then doing interest rate hike afterwards. is there a danger that the market determines it is tightening too quickly? >> mario draghi is clear on these issues. stop thewe will quantitative easing probably in september or december. it will be important to manage expectations from investors. how to manage expectations, not to make people expect that the interest rate could go very high very rapidly. remember that for the fed, when they stop the quantitative easing operation and they start moving up interest rates, it was more than
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one year. we have to keep that in mind. francine: will there be unintended consequences in europe or in asia, or emerging markets? atthe point currently is what we see on emerging markets is very important. the dollar is up since mid-april. we've seen capital outflows from emerging countries. argentina andt others are with them. what we have to be very attentive to in coming weeks, because the situation could change. the way the normalization will be done in the u.s. has changed with the arrival of john powell, accommodative fiscal policy from the white house.
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francine: what do you mean for the dollar? where do you expect the dollar to be from here? >> during the last three or four weeks, it has been trending up quickly, and it will continue. when you look at the main central banks, the bank of japan, the bank of england, and the ecb do not want to change anything on their monetary policies. the adjustment will go through a higher greenback. the global equilibrium will change. the main source of uncertainty will be on emerging countries. francine: do you think the fed should slow down its process of normalization us chin mark -- of normalization? floats theof
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normalization process. you have full employment. you have very accommodative fiscal policy from the white house. you have still a very accommodative monetary policy. this is not a sustainable framework. through more rapid normalization. we expect that the fed will increase its rate more than the three times it has mentioned. francine: there you go. thank you so much for joining us. he is chief economist at natixis asset management. coming up next, we talk about italy and get into the gas game. we will speak to the chief
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executive of the pipeline operator about creating a trading hub in southern europe. we will also talk sanctions on iran. this is bloomberg. ♪
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francine: this is "bloomberg surveillance." i'm francine lacqua in paris. nejra cehic is in london. here's taylor riggs in new york. taylor: the money manager who famously predicted the collapse of subprime mortgages before the 2008 financial crisis has recommended shorting deutsche
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bank. he made the comments in an interview with bloomberg in hong kong. >> deutsche bank has real profitability issues. they haven't spent money on technology in a very long time. they are probably undercapitalized. deutsche bank is a problem bank. it has to shrink dramatically. taylor: chinese regulators have we started their review of qualcomm. according to people familiar with the matter, china's ministry of commerce officials have been asked to hasten the review of the purchase and qualcomm's proposed remedies to protect local companies. shelved earlier in reaction to growing trade tensions with the u.s. the airbus cfo plans to step down next year after 27 years with the company. the european playmaker will have entirely new top management as it grapples with the future of
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the superjumbo and a long-running bribery investigation. airbus is searching for a replacement ceo. its $6.1 called off billion takeover by fujifilm and parted ways with its ceo. the move hands a major victory to activist investors. in an agreement with the two investors which own about 13% of xerox, the supplier said the ceo will step down, along with several other board members. john is expected to take over as ceo, while the ceo of icon enterprises will become chairman. snow is going to tokyo. sony music has taken a 39% stake in peanuts. payjapanese company will $185 million. the hx but the brand last year
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from its former owner. that is your bloomberg business flash. thanks so much, taylor riggs in new york. italy exported natural gas for the first time in march after years of planning investment as part of an effort to build a southern european trading hub to rival the likes of britain and the netherlands. how is the plan playing out? joining me now is the chief executive officer. good morning to you. great to have you on the show as always. given these developments, how far along are you to making italy a net exporter of natural gas? >> we began technically exporting last week. the infrastructure is there. you can technically say we are already a hub. but to be a meaningful hub, we need to complete more infrastructure. we are building the southern corridor that will allow us to
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bring gas into italy that will be ready in 2020. that will be a great time when more volumes can be exported. nejra: in terms of the challenges, is it the import side or something else? >> you need to have more gas in the country than you consume in the country. right now we are about balanced. import, we have more capacity to export. francine: good morning. it is francine here. talk to me about the sanctions on iran and whether it has an impact on the gas price, whether there's a strong linkage between oil prices and gas. at the margins, it must have an impact. >> thank you, francine. oil prices and gas prices used
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to be linked. the oil was inside the gas importing contracts. iranreally has happened is hasn't been able to build significant exporting infrastructure. it has huge gas reserves. it is not exporting gas into europe. the sanctions will have an impact. we would have an opportunity to bring iranian gas into europe. that opportunity will continue to slip. what is key for europe is to lower the gap between u.s. gas prices and european gas prices. natural gas in europe costs almost three times as much as in the u.s. that is not good for competitiveness. levels on oil you have a global price, natural gas is a regional market. that is why we need to create the energy union.
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is a delayed opportunity to get cheaper gas into europe. francine: when will the energy union happen? if you speak to a lot of chief executives in europe, they say this is hugely damaging. does it have to come from brussels? reducinganother way of general gas prices? >> you are absolutely right. it is a top priority on the agenda of any company that is consuming energy to produce their products. competeno longer effectively if you are spending three times as much for your gas. brussels has it high on the agenda. what we always say is that when it comes to energy, it is about
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de-bottlenecking some of the infrastructure. europe is surrounded by a lot of gas. we mentioned the iranian gas. there's russian gas, north african gas. the key is to create more infrastructure and more storage. the gas market has become very seasonal. logs onto a bloomberg terminal and looks at the gas market, prices in the summer and 60%,r go up and down sometimes 70%. gas europe needs is more storage, more interconnection, and more important capacity. nejra: germany is also creating a strategy. how does this fit with your strategy? >> i think there's some element of competition naturally, but i think we are very much aligned with germany to try to increase
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the import infrastructure coming into europe. germany has only russia as an option for their gas. diversified most pipeline gas market in the world. we have gas from algeria, from libya, from the caspian. italy is really well diversified. gast of the new sources of will be in the southern eastern corridor. there's a lot of new gas discovered in egypt, israel, perhaps in cyprus. our recent acquisition or announcement by the greek government that we are the successful bidder for the greek company goes into that direction of creating a southern european hub. you mentioned the bloomberg terminal. you get to come back anytime you want. talk to me about brexit and the energy issues related to brexit
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for gas companies. i really hope that brexit will not have an impact on the free movement of energy between the u.k. and europe. move.k. has taken acreages to not invest in new storage capacity. currently the u.k. has very little gas storage, which is one of the reasons gas prices move up and down seasonally so much. the u.k. is using a lot of the european storage for its own needs. pipeline physically connecting belgium and the u.k. and we can only hope that the flows of gas are undisturbed by brexit. not toly i'm surprised see energy so high on the brexit discussions. potentially that could have very big consequences. what is the worst-case scenario for your plans?
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>> you certainly have an irish issue with interconnections there and you certainly have the u.k. borrowing a lot of flexibility from the continent in terms of gas storage, electricity, so i think that has to be preserved. people need to find ways to preserve that. what europe loses from the u.k. leaving is a beacon of wise energy policy. the u.k. has been the first major western country to go against coal with a clear idea of exiting coal, which was very courageous, and a lot of countries are following suit. itself. still thinks of as a gas hub, somewhat of an exporting region. that is certainly true for oil. when it comes to energy and gas,
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the u.k. is importing a lot from europe. a lot of discussions are centering on what kind of customs deal the u.k. is going to get. do you have any preference of a customs arrangement that would work best for the gas industry? >> when it comes to energy, the less interference there is, the better. a customs union would be helpful for energy. the news that the norwegian government is looking at with greater favor as a norwegian model, that clearly has shown to work for gas. it is in the interest of norway that is exporting a lot of gas to have the least possible disruption. nejra: we hear that we are very close to forming an italian government. i know you don't want to comment on the politics, but is there any impact in terms of business sentiment or the perception of italy that has an impact on your industry?
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>> i think the markets have been very calm. italy has been without a government for many weeks. seenour perspective, we've 14 or 15 consecutive quarters of growth in gas demand. for is a very good signal how the economy is beginning to recover. economy and of the the reaction of the market is a positive. chance togive them a see what they can achieve. marco, great to have you with us. francine? bloomberg surveillance continues in the next hour. tom keene will be joining me out of new york. we will be talking to the cleveland fed president just after 11:00 a.m. u.k. time. what we want to try and
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understand is really the connection between inflation and jobs. , andtle slow in the uptick the possible inverted yield curve. on tuesday,so exclusive conversations with turkey's president. mr. erdogan is campaigning ahead of the elections on june 4. that is a little bit later today. look out for that, especially because of turkish lira depreciation. this is bloomberg. ♪ mom, dad, can we talk?
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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. mr. elliot, what's your wiwifi?ssword? wifi's ordinary. basic. do i look basic? nope! which is why i have xfinity xfi. it's super fast and you can control every device in the house. hey! let's basement. [ grunting ] and thanks to these xfi pods, the signal reaches down here too. so sophie, i have an xfi password. and it's "daditude". simple. easy. awesome. xfinity. the future of awesome. ♪ francine: telecoms turnaround.
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president trump orders the u.s. commerce department to get xce under control. the italian president is due to meet -- this afternoon. with the federal reserve bank chairman in just over an hour. this is "bloomberg surveillance ." i'm francine lacqua in paris. we just spoke to the back to banke -- back to france -- de france governor. it is an international surveillance today. francine: it certainly is.
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let's get straight to the bloomberg first word news. here's taylor riggs. taylor: a major reversal for a president who's accused china of president.s. jobs, trump ordered the commerce department help chinese telecom getpment maker cte -- zte back in business. the company has now suspended operations. china is said to have told the u.s. that resolving the situation was a condition for trade talks to continue. the u.s. is ready to let american businesses invest in north korea, but there's a catch. first, north korea must prove it has given up its nuclear weapons arsenal. secretary of state mike pompeo says the u.s. can create conditions for real economic prosperity in north korea. the leaders of the two countries hold a historic summit next month. the money manager who famously bet against housing before the financial crisis has recommended
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shorting deutsche bank. he spoke to bloomberg in hong kong. >> deutsche bank has real issues. they haven't spent money on technology in a very long time, probably undercapitalized. i think they will probably raise capital again next year. it is a problem bank. taylor: deutsche bank has fallen 33% in the last year. the ceo of bp said the global oil supply will be affected by the u.s. withdrawal from the iran nuclear deal. he spoke to bloomberg in abu dhabi. isi think what we've seen what seems to be the beginning of a-- of another negotiation of some kind, but will affect things. there's a lot of uncertainty out there, and i think that is more reflective of that, as long as what is happening in venezuela, that is affecting the oil prices
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now. taylor: global news 24 hours a day, on air and on tictoc, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. tom: thanks so much. equities, bonds, currencies, commodities. the dow extraordinary, with the vix coming in -- there's the s&p futures up five, dow futures up 89. the bond market shorting this morning, 13.03 on the vix with that big move in the dow on friday. that is the friday close. turkish lira down below the malaysian ringgit, which plunged weaker earlier today and then came right back. let me go to the american equity markets right now. the sixth back to the beginning of the financial crisis, the blowout way over 80 back in 2008. down we go with certain
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eruptions, think about hawaii and the horrific volcano news there. february, thein spike up you don't really see on a monthly chart. then down we go to this new bout of complacency. that is something to watch as well. the vix plunging toward seattle, washington. francine. so donald trump has ordered the u.s. commerce intotment to get zte back business weeks after cutting off the chinese telecom company from its american suppliers. in a major reversal, the president tweeted that he and xi jinping were now working together to save the business. this comes just days before the arrival of xi's top economic adviser in washington. joining us from washington is bloomberg's chief asia correspondent. great to speak to you, as always. interesting president trump was talking about saving jobs in china.
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the we know if the chinese have offered anything in return? reporter: good morning, francine. this is a very surprising development indeed. we certainly know that the zte was proving to be a source -- a significant for china. we don't know quite yet what has brought the two sides to this part of the table so far. we only have the tweet from mr. trump. there is a feeling that perhaps it suggests that zte is part of the negotiating framework now as a bargaining chip on the table, and that in return for some kind of u.s. concessions, china will step forward and make some offers to perhaps buy more u.s. goods or whatever it is to fill in the trade gaps. we haven't had any official comment from the china side yet. know from the tweet from
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mr. trump is that it is both a surprising development, but we don't quite yet know what china has brought to the table to get to this point. francine: i'm absolutely fascinated by this story. 5000s something like employees. at will point does it look just like a big win for china? reporter: at the very least it is positive. months ago we had a spokesman for the commerce ministry in beijing, standing up late one friday night and telling the world that there are no talks going on whatsoever between the u.s. and china. since then we had the u.s. delegation that went to beijing was a big list of demands. moode seem to have the that seems to have improved somewhat.
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we have the economic advisor going to washington this week. there's a long way to go yet another at the very least there may be some concessions on the table hear from both sides. sit, i knowere you it is a washington question but i will give it to you because you are so experienced, commerce secretary ross talks about explicable laws. does the president have the authority to drag zte into trade negotiations? linked toit was sanctions, to dealing with rogue regimes and the like, but now that view has shifted in recent days for two reasons. one, china views it as part of the trade story view it -- story. all the indications are that zte
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is negotiating -- is a negotiating chip just like all the other bargaining. ,rancine: thank you so much bloomberg's chief asia economics correspondent enda curran. joining us is bloomberg's chief economist. we were trying to figure out investment with this means. does it scale back trade tensions at face value? reporter: i think that is certainly true. we have to see what this develops into, as we always do. i think a full trade war is premature. francine: is it again the art of the deal by president trump? get people saying president trump won't let anything bad happen to be economy because he is trying to do a deal, and you have other saying he is doing
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this without a counterpart. reporter: it is hard to know what you're getting in terms of global trade. at the first pass, we are seeing negotiations. i think we have to employ some pattern recognition that this is how this administration wants to function, and this seems to be par for the course. tom: good morning. when you look at china, it is an international trilemma. there's a lot of different things going on in the currency, monetary policy, but also industrial policy. is it a changed industrial china? there's certainly a push in that direction. there is a desire to have manufacturing as a historical source of growth give way to services as a new source of
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growth, and that is probably healthy for any economy that develops over time. i think that is happening. i think there has been policy in the past that is focused on industry. but as we move forward, we would expect to see services take share, and that is becoming the new policy there. thank you so much. don is staying with us for the next half-hour. coming up, bloomberg has an exclusive conversation with turkey's president, mr. erdogan come as campaigning gets underway ahead of the elections june 24. they will be focusing on lira regression. that is what investors want to know about. this is bloomberg. ♪ >> first word is brought to you by athen. we see you going places you've only dreamt of. and we arene,
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driven to do more. driven to do more.
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♪ taylor: this is "bloomberg surveillance." i'm taylor riggs. another sign that trade tensions between the u.s. and china may be easing, chinese regulators have restarted their review of all, that's of qualcomm's -- of qualcomm's proposed takeover of chipmakers. a major victory for carl icahn and darwin decent, xerox has called off a takeover by japan's fuji film. the company also parted way with their ceo jeff jacobson. they accused jacobson of striking a deal that preserved his job at the shareholders' expense. the ceo of siemens doesn't appeared to be concerned over the prospect of new u.s. sanctions on iran.
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exposure is very minimal, so we need to look at what sanctions actually mean. if there is a political thennment position, siemens -- [inaudible] are also not planning an ipo of the digital factory unit. that is your bloomberg business flash. francine: thanks so much. the populist leaders that have forced ahead with their agenda with the anti-establishment five-star to finalize a political program after discussions yesterday. the italian president is due to
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meet both party leaders this afternoon. rissmillerler -- don is still with us. know about this next government and its populist stance come would you say it is irresponsible fiscally? guest: i think we are certainly headed in that direction. productivity and italy has been weak for the better part of a decade. economic performance has been subpar. that is what is creating some of these debt problems. longer-term, that is what is causing some of the fiscal policies coming to question. push to change that issue several years ago, so we are back to square one and a lot of senses here. i have no expectation will make
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any progress on fiscal policy a time soon. . francine: does it have any potential to derail the eurozone economy as a whole? this is a government that may want out of the euro. have af all, you would referendum on it, but what is the worst-case scenario? guest: the worst-case scenario is probably pretty bad, but not somebody to think about right at this moment. i think it depends when you get into the crisis what you do. this may change some of those options, when those options become necessary. the good thing is we are coming off a year of pretty good global growth come a pretty good growth in europe, pretty good performance in the italian market. it doesn't seem to be the biggest concern right now, but we are laying the groundwork, and i think this is worth thinking about. what happens in the next downturn? tom: are you in the as good as it gets camp?that seems to be the theme , thishe early part of may is as good as it gets when it
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comes to growth. guest: europe had a very good year last year. in terms of growth, this may be as good as it gets. but i don't quite see how things like peak growth have turned into just peak, whether it is gdp or earnings. the peak earnings growth story peak to have turned into story. fully come back to the u.s., we are looking for accelerating performance, partly because of the tax bill and budget. tom: within that is the idea of what monetary policy will do. have a real nuanced view on u.s. monetary policy. what should mr. draghi be doing different from what chairman powell is doing? europe's behind the
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u.s. in terms of normalization. to some extent there is the u.s. playbook to learn from. if there is some the to do right now, i think it is learned from the u.s. experience of how qe was ended, how you moved to eventual rate hikes, look at some of the concerns that developed over that time, and try to mitigate them in the process of going in that direction. there still is qe. at some point that will end. at some point even later, that will have to turn into a rate hike. but studying that transition i think will be important as we look at what is going on here. francine: what is the biggest risk? i guess what the ecb is fearful of is working the mistakes of when the market assumed that normalizing policy, also an immediate interest rate hike. re: focusing too much on that -- are we focusing too much on that, and does that mean the ecb is ignoring other risks? guest: there is a wall going on across the markets. some of it is in emerging markets, market currencies.
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that is not going to come home to the ecb right away, but i do think there is this idea that if we are moving to a more normal monetary policy in the u.s., maybe in the europe, not that can bean yet, accounted by tantrums, market dislocations. i think the history of figuring out how to say now might be the time to do something without saying we are going to overdo it is the challenge at the moment. rissmiller in paris with francine lacqua this morning. we will continue. what's to come. our expert on technology in asia. before that, president of the onveland federal reserve american monetary policy. this is bloomberg. ♪
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♪ francine: i'm francine lacqua live from the gac central making series in paris. tom keene is in new york. and just about half an hour, we will be speaking to loretta mester. first, abu dhabi oil giant mad to refineto invest its chemicals complex -- abu oil giant adnoc plans to invest to refine in its chemical
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complex. >> we find the sector to be a very important growing market, and as such we have decided to defund $45 billion u.s. our investments -- u.s. to fund our investments and expand. reporter: part of the unique proposition of your expansion plans is the partnership model, the emphasis on partnerships. give us an idea of what partnerships you might be looking to. >> adnoc is very much known for its commitment to its partners. they are those which authority established artists with adnoc and wish to continue on this journey of value maximization while also staying focused on stretching the dollar from every
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barrel we produce. providingrward to smart capital access and market toess in the growing market be able to capture new opportunities, as well as accessing technology and innovations with out of the box thinking. this is exactly what we aim to achieve with our partners. reporter: when might we expect to get some news on partnerships? >> it has been about three years now where adnoc has been going through this comprehensive transformation. delivered many milestones, and there are many more to come. reporter: with the drilling business -- would the drilling business be a particular possibility for partnership? >> we are in the business of maximizing value for our shareholders and stretching , likedollar we produce any other across the value chain of our business.
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we are looking for different opportunities of how we can maximize value. tom: tracy alloway from the united arab emirates. in boston this week on the road, "bloomberg technology." look for an update on all in technology in boston this week. 5:00 p.m. wall street time. coming up, loretta mester of the cleveland fed will talk about military -- about monetary policy and politics folding into economics. stay with us from paris, from new york. this is bloomberg. -- stay with us. from paris, from new york, this is bloomberg. ♪
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tom: good monday morning to all of you. francine lacqua in paris. i'm tom keene in new york. lots going on on an international basis today. we'll talk zte and china,
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particularly in the next hour with kevin crir ilie in washington. right now we go to jerusalem. bloomberg bureau chief for jerusalem, michael arnold, joins us this morning. michael, your title is of the palestinian territories as well. how will the palestine territories respond to mr. kushner, mrs. kushner, and others moving the embassy and celebrating it today in jerusalem? michael: well, they're already responding as we speak. there are protests going on along the border with the gaza strip, also beginning in the west bank as well. so the embassy move really coincides with the culmination of this month and a half worth of protests sponsored by hamas and others, protesting their plight as refugees. so it's the combination was just really all coming together today and tomorrow. tom: you say all come together.
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three religions all come together in jerusalem. give us the distinction of where this embassy is in jerusalem. what does it same blaze for the three religions? michael: well, it's interesting. this is actually an existing building. they haven't built a new embassy. there's a consulate building cated in the neighborhood of west jerusalem. this is not contested territory. and, you know, it kind of overlooks the old city where the holy sites are located. it's contentious because the palestinians feel that by recognizing jerusalem as israel's capital that president trump is endorsing israeli control over the entire city. but the administration has been careful to say that the final setup of the city will still have to be negotiated between the sides. tom: help me with your visibility in israel of american domestic politics.
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clearly mr. trump has a core of republican supporters, including mr. edelson, who have given strong support to moving the embassy to jerusalem. from where you sit, do the democrats of america want to move that embassy as well? michael: it's interesting. this has been the policy for 20-plus years, so both for democratic and republican presidents, it's been waived up until now. starting with president clinton through president bush and president obama. the democratic party in recent years has kind of struggled with this issue of israel policy. i would say that they are certainly less united in terms of seeing jerusalem as the capital than the republicans are, which is becoming an issue in israeli domestic politics as well, the extent to which israel has kind of morphed from being a consensus issue in america to much more of a partisan issue. tom: the "new york times" book review today played up the new
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one volume, mr. netanyahu, obviously in close agreement with mr. trump on these matters. does it have the support of the israeli people on this historic day of an embassy move? michael: it's not unanimous support, because nothing in israel is unanimous. it's a country with a wide range of views and people who express them vociferously. certainly many of the arab citizens are opposed to the move. some of the left-wing jewish parties are opposed. but starting with the center left labour party, moving further right through that, there's strong support for the move. there's a feeling, as mr. president trump said, this says recognizing reality. the government is based in jerusalem. so moving the embassy here kind of formalizes that. but as mr. trump has said, it doesn't rule out negotiations over the final status of the city. mike tom: help us, embassies and consulates about going there to get visa, getting things done,
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trying to get money to a child who spent a lot. is it going to be safe to go to this embassy for americans and, frankly, for all, any and all? is it going to be safe to walk to this embassy and get business done? michael: sure. the security arrangements there will be, you know, as high as they are for any embassy around the world. it's actually one of the issues which is delaying the construction of a permanent embassy, that the security standard are so high. but, you know, for now, there's only going to be a skeleton staff working here. i think a lot of the business is still going to be done from the existing embassy in tel aviv. the full move of the embassy won't happen for another four, five years at least, i would say. tom: thank you so much. terrific briefing this morning. mr. arnold is our bureau chief for israel in the palestinian territories. let us now continue on this monday, here's taylor riggs with news. taylor: the u.s. and china are signaling they want to avoid a
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costly trade war. trump reversed himself on chinese telecom maker zte. he says he wants the company to get back into business fast. last month the u.s. cut off zte from its u.s. suppliers for violating a sanctions agreement. meanwhile, chinese regulators are said to have restarted their review of qualcomm's bid to buy semiconductors. that had been halted because of trade tension. british prime minister theresa may says when it comes to brexit, you can trust me to deliver. may wrote in the "sunday times," she's setting out on the task to deliver brexit people voted for. the sunday telegraph reports almost half of may's cabinet will fight her plan for a close relationship with the e.u. the money manager who famously bet big against housing before the financial crisis has recommended shorting deutsche bank. steve eisman spoke to bloomberg in hong kong. >> deutsche bank has real
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profitedability issues. they haven't spent money on technology in a very long time. they're probably undercapitalized. they can probably raise capital again next year. deutsche bank is a problem bank. i think it has to swing dramatically. taylor: it's fallen 33% in the last year. the united arab emirates says opec has enough spare capacity to concussion oil markets when the u.s. reimposes sanctions on iran. the energy minister spoke to bloomberg in abu dhabi. >> we've been there before, and i think i've been resilient to deal with many of those issues in the past, and some of the ember countries, they have definitely spare capacity that can be used whenever an organization production is required. taylor: global news 24 hours a day on air and on twitter, powered by more than 2700
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journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. tom? tom: thanks so much. dow futures up 106 right now, off the bloomberg terminal. we're going to come back with francine lacqua in paris. nationwide insurance on the american economy. for your morning briefing coast to coast, bloomberg radio in london, digital worldwide. in new york, washington, boston, in san francisco, this is bloomberg. ♪
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francine: i'm live from the central banking series in paris. tom keene, as ever, in new york. tom, we look to central banks,
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the governor has signaled that policy movement from the european central bank isn't too far over the horizon. i spoke exclusively with him arlier this morning. >> we will give probably additional guidance before the end of the year about the timing of this first rate hike and about its contingency. et me explain about the timing . and about contingency. each will be contingent also on the auto. then we'll see exactly how we formulate it. we are predictable, and to clear the normalization path, but we are not permitted because we look at data and the situation as it is. francine: let's get back to david william, nationwide insurance senior v.p. and chief
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economist. david, great to have out program. thank you so much for joining us. we were just hearing about the concerns about the e.c.b. talk to me about the fed. what is the main concern the fed needs to watch out for? i guess it's communicating to the market that they won't rise interest rates too quickly. david: i think that's right. the fed has said it wants to raise in a very measured fashion, and it's laid out in its plots. the path it will do. but the key is going to be what actually happens with inflation. if inflation stays very modest, then the fed may not be able to raise as quickly as it current ly expects. alternatively, if we get a burst of inflation, 2.5% to 3%, then the fed may be forced to tighten faster than it currently thinks. francine: why has inflation, you know, not exactly been correlated with, for example, the strength of labor market? david: inflation has been very modest. it's come up some, and with the fed's preferred inflation target, the p.c.e. price index,
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we're about at 2% now. you know, if the labor market continues to tighten, as we think it will, i think by the end of the year, we'll see unemployment probably down to 3.5%. we'll see wage gains better, stronger. and with the low productivity environment, that should translate spew faster price gains. so knowing by the end of the year, we will be sustainably above the 2% fed target, not much above it, perhaps as much as 2.5%, but above 2%. tom: good morning from new york. let me give you the dumb monday question. is inflation the same in cleveland as it is in new york r it is in denver? david: you know, inflation is different everywhere, and it's different for every person. and when the bureau of labor statistics does its consumer price index, it's a market basket of goods and services that most people buy, but not everybody buys them. some people buy different
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things. they buy things in different quantities. it's an average over the countries, an average over each person, but each person experiences inflation differently, tom. francine: all right, we'll be back with david berson, nationwide insurance senior v.p., also chief economist there. to the fallout from the sanctions. the company's exposure to the islamic respub very minimal. he spoke at the investment forum. >> the exposure is very minimal, so we need to go look at what sanctions actually mean. it's always very clear that if there is a political government of decision, then siemens will, of course, honor the privacy of the political mandate, and that's exactly what we're going to do. >> do you feel there's room for europe to increase cooperation with iran, given that the u.s.
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seems to be stepping back? this is what we heard over and over again. >> look, i'm not a politician. i've got a company to run, which is complicated enough. but what i would actually always do is people talk to each other and not so much about each other. >> right. is there anything that europe can do to reassure you that doing your business there is going to continue to be possible? >> first of all, you look at our customers, but then again, the political world is complicated. there is a lot of things which are ongoing in syria, in ukraine, in crimea, also in the world, so the matters are complicated, and as i said, the government is coming together, and hopefully in syria.
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and not a place of the world, and if can be accomplished, i believe that the governor can help rebuild it. >> right. at this moment in time, would you say it's too early to make any decisions about what and you will will do -- or won't do when it comes to iran? >> first of all, we need to see at exactly -- what exactly the government has been laying out, what we need to do, and then we follow suit. tom: david berson with us of nationwide in paris as well. let me tell you right now about an incredible function on a monday. if you have a terminal, i really want you to try this today. graph tv, we call it gtv-go, and this will keep your job. this will get you dazzled in the office. just an example. here's a trade-weighted
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sterling, trade-weighted euro. if you're in europe right now, there's a chart, you can grab it, you can take it. we finally got this for you. gtv-go, give it a try on your terminal. this is bloomberg. ♪
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taylor: this is "bloomberg surveillance." there's more change at the top for airbus. the c.f.o. plans to step down next year after 27 years with the plane maker. airbus already is looking for a replacement for the c.e.o., who's also leaving next year. the company is dealing with future of the a-380 superjumbo and a bribery investigation. i.b.m. is invading capitol hill this week to lobby against the european union privacy law. more than 100 of the company's executives will tell lawmakers the u.s. needs its own privacy frame work. based off the new e.u. law, shouldn't become a global standard, and the measure imposes tougher rules for how data collectors gather and use personal information. sony is taking a stake in the
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company behind snoopy and charlie brown. sony's music unit will buy 49% of the 80% stake that canada's chx media owns in peanuts holdings. the price, $185 million. the family of the late peanuts cartoonist, charles shulz, owns 20% of the company. and b.p.'s c.e.o. has says the u.s. withdrawal from the oin nuclear accord could cut oil supply by one million barrels a day. bob dudley made the comments in an exclusive interview with bloomberg. >> i think what we've seen is a withdrawal from the agreement, which seems to me the beginning of another negotiation of some kind, but implied harshly, you could lead to a million barrels a day on the markets, and that will affect things. there's a lot of uncertainty out there, and i think that's probably more reflective in that, along with what's happening in venezuela that is affecting the oil price now. taylor: that's your bloomberg business flash. tom, francine? francine: taylor, thank you so
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much. now back to paris and the g.a.c., where we've been talking with the central bank governor of france. let's get back to david berson, nationwide insurance v.p. and chief economist. david, we were talking a little bit before about the fed, about some of the concerns that the fed should be watching out for. actually, if you look at global growth, has it peaked? is there a danger of that that, we were expecting too much? david: we had a slowdown in growth in the first quarter in the e.u. and also the u.s. i would not be misled by that. there's always ups and downs. i think growth in 2018 will be the strongest worldwide since before the great recession. now, this may be as good as it gets in 2018. that doesn't mean things are going to slow dramatically, nor slow very much over the next couple of years. so in terms of growth, i think we're looking at a pretty good 2018, and perhaps not as good in 2019, but still pretty good. francine: does the fed normalization hurt certain parts of the world, and should the fed pay more attention to that? is it actually central bank to
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the world? david: it is to some extent, but to the extent the fed is leaving the central banks and tightening, i think we could see a stronger dollar, which would be good for many of our trading partners, perhaps not so good for some of the emerging countries, however, whose currencies track the dollar. they may be hurt somewhat by that. but i think most of our major trading partners, certainly the e.u. and japan, will probably be helped by stronger dollar. tom: what do real rates, do, david? something a big insurance company does in america, they follow real rates, inflation-adjusted rates like a hawk, country to country, should we be spending more time talking about real rate dynamics, or is that a nonstory? david: you know, it's important for investors, particularly important for long-term investors, and real rates have been negative now for a number of years with the fed tightening monetary policy, and presumably the e.c.b. following at some point later this year. we may see real rates start to
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move out of negative territory. they're almost out of negative territory in the u.s. i think that we'll see over the next couple of years real rates rising modestly in the u.s. and rising even more modestly in europe. but i think we'll see positive real rates, and really, for investors, that's where rates should be. tom: tom: that's where i wanted to do, but will the path be destabilizing as we get back to some semblance of a new normal, lower real rates than what we 2006? david: you know, at some point, real rates will get high enough that we'll get the next recession, but that's not anytime soon. i think as the fed tightens monetary policy and we see real rates increase, that's not going to be destabilizing for a while. eventually, yes, but not in the near term. francine: ok, what is destabilizing in the near term? is there anything in the markets that you see as a we terrible to burst? david: i think if we see energy
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prices run up, but that's not related to fed policy. i think if the fed raised rates too soon, too much, that can be destabilizing. but i think the fed is going to be very careful want to raise rates very quickly. and in fact, the market may even be disappointed by how quickly the red raises rates. francine: what does a flattening yield curve mean for the sned should it be the number one deleam? is it still a sign that there's n economic slowdown impending? david: it does not mean an impending recession. we had a yield curve similar to where it is now in the mid 1990's, and we had five more years of growth. it's really an invented yield curve that matters. certainly it's much flatter than it was a few years ago, but it doesn't mean an imminent recession. i don't think the fed should be terribly concerned right now. francine: there's nothing they should do to try to avoid an inversion at the point? david: no, i don't think the fed should do anything right now. to the extent the fed is reversing q.e. with more sales and longer term scurebts in the market, that may serve to help
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steepen the yield curve over the next year. tom: as an insurance company, what are you doing with long duration? as you may, it's an improving economy, but does nationwide have a new confidence in making assumptions? does nationwide have a confidence in buying longer duration paper to match their obligations? david: certainly all insurance companies shorten a little bit during the aftermath of the great recession. i think as rates go up, we'll see long duration come back into style again, and certainly insurance companies will probably extend the duration a little bit. but i think insurance companies, by and large, have had a pretty good match of assets and liabilities, expected payments, and the assets that they've had over this entire period. so when we talk about shortening duration or extending duration, it's really very small changes that we're talking about.
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tom: david, thank you so much, in paris with francine lacqua. coming up, an important conversation. loretta mester of the federal reserve bank of cleveland, really timely as we look to mid-meeting what the fed will do, the wide presumption of higher interest rates, maybe some of the dynamics behalf it means for real interest rates as well. right now, let me give you a briefing on the markets. futures up six. dow futures up 90. yields really churning and flat today. i'm watching the malaysian ring as well. there is london, and it is beautiful. this is bloomberg. ♪ this is bloomberg. ♪
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tom: this morning, american
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stocks are bid. the dow approaches 25,000. turkey and the philippines, well, their currencies approach new record weakness. on china, the trump administration deeply divided. the first deal maker wants to let zte, a telecom company, get back into business fast. and a new american embassy in jerusalem. good morning, everyone. this is "bloomberg surveillance" live from our headquarters in new york. with francine lacqua in paris as well. these are images from gaza that we've assembled over the last number of minutes, and this is protests that were widely anticipated. it is today the day before a y which is may 15, set up by yasser arafat 20 years ago. it's an important day for palestinians, and they move it forward by 24 hours. this was the announcement of the u.s. embassy in jerusalem.
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this is from three geographies in gaza that we will watch through the morning. we'll have much more on this story as it unfolds. our kevin sir ellie to john us at the bottom of the hour. right now, news with taylor riggs. taylor: major reversal for a president who's accused of stealing u.s. jobs. president trump has ordered the commerce department to help chinese telecom equipment maker zte get back in business. last month, the u.s. cut off zte from its u.s. suppliers for violating a sanctions agreement. the company is now suspended operations. china said to have told the u.s. that resolving the zte situation was a condition for trade talks to continue. the u.s. is ready to let american businesses invest in north korea, but there's a catch. first north korea must prove that it had given up its nuclear weapons arsenal. secretary of state mike pompeo says the u.s. can create conditions for real economic prosperity in north korea. the leaders of the two
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countries hold a historic summit in month. the money manager who famously bet big against housing before the financial crisis has recommended shorting deutsche bank. steve eisman spoke to bloomberg in hong kong. >> deutsche bank has real possibility issues. they haven't spent money on technology in a very, very long time. they're probably undercapitalized. i think they'll probably raise capital again next year. deutsche bank is a problem bank. i think it has to strengthen dramatically. taylor: they've fallen 33% in the last year. and the c.e.o. of b.p. says global oil supply will be affected by the u.s. withdrawal from the iran nuclear deal. bob dudley spoke to bloomberg in abu dhabi. >> i think what we've seen is a withdrawal from the agreement, which seems to me the beginning of another negotiation of some kind, but complied harshly, i mean, you could lead to a million barrels a day on the market, and that, of course, will affect things. there's a lot of uncertainty
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out there, and i think that's probably more reflective in that, along with what's happening in venezuela that is affecting the oil price now. taylor: global news 24 hours a day on air and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. francine, tom? tom: taylor, thank you so much. we've got the time before we go to paris and a conversation with loretta mester that may not be global, but that is a name everyone in american economics knows. princeton, w, before dr. mester took his degree. wonderful to have you here. cleveland has a certain what we call fresh water symbolism. we've got the evil people on the west coast, saltwater people. we've got the san francisco is out, and you've got free market down southwest. what is cleveland and chicago, what do they symbolize?
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>> sure, the cleveland in particular has had this consistently moderate, hawkish bent to monetary policy. some of the other districts, for example, in kansas city and more ri have had a much extreme position with respect to policy really from the missouri fed on either side of the spectrum. but cleveland has really been kind of a straight down the center, a little bit of a hawkish -- tom: my favorite inflation series is the cleveland c.p.i. explain to all, except mr. mester, what cleveland inflation is. >> right, so what do they do here is look at trimmed mean c.p.i. so you're isolating the outliers on either end of the index. so you're kind of going more down the center of the calculation.
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that can be very useful at times, especially a present when we're looking at these idiosyncratic drivers last year with this very well advertised cell phone service contract pricing wars, which took a significant toll on the index. now as that's falling out of the calculations we've seen what appears to be an acceleration, but it's really much more moderate. tom: let's go to paris, francine lacqua. francine? francine: carl, thank you so much. tom, i have to correct you. this never happens, but loretta mester is a little bit of a rock star globally. everybody, even in europe, knows who loretta mester is. now to the cost for u.s. monetary policy, loretta muster says it's too soon to say the fed has reached its inflation goal on a sustained basis. that's after consumer prices rose less than expected in april. last week chair jay powell said markets have got the message on central banks' gradual rate hikes and shouldn't be surprised by its actions.
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we are joined by the fed reserve bank of cleveland president lore eight mester, who joins us from the g.i.c. near paris. thank you for joining us. first of all, world growth. is it a little bit shy of what you were expecting? we saw a little bit of bumps the last couple of months. does it spell trouble ahead? >> i like to look through the little bumps over the last couple of months always when i'm doing sort of forecasting, because i think we're going to see variation of the data over time. but the global economy overall, i think, is healthy, and on a better path than we've seen it for quite some time. similar in the u.s., we have a very positive outlook in the united states economy as well. so i think that the outlook is actually pretty positive. francine: are there any kind of data points or any indications or combrumples for certain economies that tightening in fed policy actually hurts europe, hurts asia? >> so there is a discussion always about, you know, does monetary policy in the u.s.
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lead and then affect the global economy, and whenever we're doing policy, we do have to take into account interactions between economies. we're in a global economy after all, and financial markets, of course, are global. but when we are setting monetary policy in the u.s., we our our dual mandate goals as guide, and we're always going to be setting policy to support those goals. on the other hand, we also want to be very transparent about our policy, and you mentioned the bot, i think of those as being communication devices, so we let people know kind of where we're seeing the economy going and what we think appropriate policy will be if the economy evolves as we expect. of course, there's always potential, you know, risks of the outlook and the economy may evolve differently, and we'll set our policy appropriately if it does. francine: when does inflation really pick up, and when does it follow the labor market again? >> inflation has been shy of 2% for quite a while. we have seen an acceleration.
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i wouldn't be surprised if we see the near term inflation readings go higher, just for one thing, you know, we do have those cell phone service plans that you were talking about just a moment ago dropping out of the some of the calculations. we also see commodity prices going up. but when the fed is thinking about our goal, dual mandate goal and inflation of 2%, of course we're thinking about it on the sustained basis, that we are going to look through the movements and look at where inflation is going. my own forecast is that we'll see inflation be at 2% on this sustained basis over the next one to two years. tom: dr. misser, good morning. tom keene in new york. i want to talk to you about the cleveland fed's historic bility to measure inflation. when are we going to get back to measuring top line? that's the largest amount of mail i get from people in every fed district. they don't get the idea of core
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inflation. you led on this with the cleveland fed's b.p.i. when do we get back to actually measuring the inflation? our viewers and listeners live with it every day. >> so we do have our goal in terms of top line inflation headline. but in order to be able to forecast inflation, we have to look at a variety of different measures of inflation. and some of the core measures, as you say, the ones that drop out food and energy prices, the cleveland fed's own median b.p.i., the measure you mentioned earlier, the trim mean measures of inflation, we look at those because they give us perhaps a better sense of the underlying trend in inflation, but nonetheless, it is the headline inflation number that we're targeting, and that's how we framed our goal am we look at the other ones, because it helps forecast
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inflation. tom: when i look at your geography, western pennsylvania, all of ohio, eastern kentucky, and a little bit of west virginia as well, what i see in the cleveland fed is a screen for a manufacturing renaissance. how do we do little switzerland in the cleveland federal reserve system geography? how do we boost real, tangible manufacturing? supe there is a lot of innovative things going on in the district in terms of manufacturing. as you just said, you know, we moved our economy in the district, fourth district, from one that was very dependent on manufacturing to one that is still more dependent on manufacturing than the average part of the nation, but nonetheless, it's also very heavily in education and also medical. so we transform the economy in the district to one that is a little bit more diversified,
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but we do have some technological innovation going on in the manufacturing space, and we have a lot of programs where we're working with -- where the businesses are working with community college and other training programs, actually trained workers for those new types of manufacturing jobs. francine: why are you so relaxed about inflation, not behaving like it should when you look at the correlation between u.s. employment and inflation? >> so, you know, lot of what's going on i think in the inflation numbers is that we had this huge, huge recession. and, you know, in some sense, it's a surprise that inflation didn't even go lower during the great recession, and the reason i think it didn't is because we did have very well anchored inflation expectations and people understood that the fed would do what it takes to bring inflation back to our goal. here i think we're in the same kind of situation in that we see that inflation expectations
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are fairly well anchored, and i think that's also helping in terms of keeping inflation at our goal. i do believe that we're going to get back to 2% on this sustained basis over the next year, year or so, and i do think that we might see some variation in the numbers over time. we may go above 2% for a time, but that doesn't mean that we're in a shooting off period where inflation is going to take off. i don't see that happening. i think it's going to be a gradual process, and therefore, the fed can stay on our gradual upper path of interest rates and, you know, basically meet both parts of our mandate. francine: why does this labor environment not force wages up by itself? >> so if you look at models and some cleveland staff research actual zl this, looks at sort of one of the indicators of wage growth, you can explain. it's not a mystery if you think about low productivity growth, which we had over this expansion, 1% as opposed to the usual 2%, 2.5% and other
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expansions. the low inflation rate, and also conditions. that explains the wage growth that we've seen. we've been hearing from a lot of our firms in our district that we are raising wages in order to attract workers. i think it's a matter of time we'll see more of that feed through into the e.c.i. measures of wages. we're already seeing that a little bit. i think that will continue. tom: two mathy questions if we can keep up from the mathematician from barnhart as best we can. i want to know what you learned about monetary policy. you've been doing this for years. you provided leadership on this idea of a fed that's trying to get out front of the data. is that possible, or by definition, is it an ex post fed, a fed that has to wait to ee the data?
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>> well, we always look at the data. there's no doubt about our modus operandi, we're going to take on board the data. but we're also, when we set policy according to what our outlook is. so our median run outlook is what guides our decisions on policy. so it's close. the data informs our outlook, and the outlook then informs what we think of this appropriate monetary policy. so we are out in front. but we're taking on board current data, because it's going to tell us something about whether we need to change our outlook or whether our outlook is on, you know, on track or not. tom: i was talking with my colleague. he's focused on the balance sheet challenges, the federal reserve system has, and frankly, all central banks have. chairman bernanke told me he's really not concerned with the balance sheet roll-off that we're going to see. what observations will you look for to tell you it's going
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smoothly, or far more importantly, how will you measure the balance sheet lined up is going poorly? what factors will you try to observe? >> so i look at whether the market is absorbing the runoff. and also what is happening on the long end of the bond market. so remember, we bought the long-term assets to put downward pressure on the long rate. so far, you know, we haven't seen any disruption in the market at all. and that has been running in the background, which is kind of how we planned it when we put out our normalization plan. vile to look, continue to monitor to make sure that markets are absorbing the scombonds also to make sure
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that we don't see sharp changes in the long end of the bond market. but so far, so good. francine: loretta mester, can anyone reasonably expect the fed and e.c.b. to avoid large-scale asset purchases again, given the long-term dynamics actually holding down potential growth and also holding down the neutral interest rates? >> that was actually a topic in our earlier session here at the conference. you know, i think those purchases as being something in due, when you get into a situation where you run out of room with interest rates. the fact that if we are in a world where the interest rate is lower than it's been and is going to continue to be low, then that raises the possibility that we'll be at the zero lower bound again, and then we might have to use the asset purchase tool, i think we've learned how to use it in an effective way over the past cycle. but there is a whole other discussion going on about, you
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know, should we be thinking and the framework fact that maybe we're in a low interest rate world mean for our framework for doing monetary policy. so my personal belief is that, you know, inflation targeting has served the fomc well, but i do think we owe it to ourselves and to the public to look at these alternative frameworks and see whether there's something we can learn from them and perhaps amend our framework to make it more effective. francine: some of your peers and colleagues have all supported governor who is actually raise the counter cyclical buffer for large banks. do you agree they should do that? >> at this point, i don't foresee that we are in a situation where we need to use that tool. however, i do think that the longer we go with interest rates very low and there's a potential that we would have to respond.
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so again, i think there is a case for, you know, monitoring very carefully, given where we are in the cycle, given where interest rates are. i still think they're accommodative. and then being, you know, willing to use that tool to build up capital buffers in good times so they can be used in bad times. tom: dr. mester, thank you very much. we really appreciate her attending with us. she is the president of the federal reserve bank of cleveland t. is good to have carl with us, our chief u.s. economist, taking notes. a couple of things i noticed, and one was your thought about the balance sheet reduction. ben bernanke is adamant this balance sheet is not a big deal. what do the pros say pushing against the belief that chairman bernanke has that this will be smooth? >> it seems to be good smithly so far. however, it accelerates ever quarter. so as this happens, we have to keep a watchful eye on
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potentially the spark and smoke that could emerge and president mester highlighted some of the factors she's looking at. untested territory for franks, at least to quantitative tightening in any scale. the bank of japan tried to back out of policies in the past, but we've never seen a major bank in a developed economy engaging in q.t., quantitative tightening, to a large degree. i think one of the programmers it we have to watch, which is very key to president mester's district, is the strength of the currency. one of the legacies of q.e., and we didn't fully how it would work when it rolled out, one of the legacies was a economy weakening of the trade-weighted dollar. it fell to a three-decade low. the risk is, as we throw these engines into reverse, we could see dollar appreciation. we certainly have started to see that in the past couple of weeks with the bloomberg dollar index rising to the high for the year. it's not a big move yet.
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but it continues to play out, that's a significant dampening factor on the fed hitting their inflation target and also slowing down economic gains. tom: if you painted this weekend at home, i will allow to you watch paint dry here as we talk for an hour about what dr. mester talked about. we'll continue this with francine lacqua in paris, i'm tom keene in new york. coming up, a conversation with the president of turkey. mr. erdogan, campaigning gets underway june 24. this is an important discussion, very important on two things. 5:00 a.m. in london, midnight in new york. this is bloomberg. ♪
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tom: "bloomberg surveillance," good morning. francine lacqua in paris. i'm tom keene in new york. now we're going to go nerd fest on you f. you're in the market, if you're in international relations, this is economics you can understand. carl, i want to go back to the headline dr. mester made on the cleveland fed on transparent. you and i remember arthur burns with smoke rings, where there was no conversation, and that our good friend, chairman greenspan, nobody understood. and then there was a little bit of discussion there. now we're like overinformation, ex ante, ex post. there's no way they got out in front of this debate. they got to wait for the cat, right? carl: absolutely the point they're trying to make, they're
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incorporating data into their forecast, so it does have the forward-looking element. it's not the reaction to the fed. tom: drag heat to delay. and i would say last week was a really important week for the ex ante, ex post ballet, and basically they had to go, oops, there's no inflation, right? carl: right. and they have to sect oni'll with the fact that we are seemingly are crossing through full employment, but we're not getting into consumer inflation yet. i think the fed has the markets right where we want them, because the fourth rate hike of this year, which would be -- tom: the red sox and yankees right where they want them. carl: the fourth rate hike, they got priced in at about 50% certainty. they can continue to kind of, you know, stay on that trajectory. tom: carl has an aunt rage, a combine of hundreds of economists. they're up like on 24, up the skyscraper here. team going to write team going
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on this week? carl: well, the focus at this point, really in the immediate term, tomorrow's retail sales number, where we'll watch to see if the consumer is coming back from a soft q-i. all signs suggest it should, but we have to see confirmation in the data that consumers are coming back. in the broader term, we're thinking about the inflation profile. tom: i'm going say this right now, carl is dead on, folks. the worst thing we cover in the media on domestic economics is retail sales. jobs, jobs, jobs, fed, fed, fed. we go, yeah, retail sales, so what? that's wrong. it's important. we'll have it for you tomorrow morning as well. bloomberg technology, in boston, go, red sox. ♪
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tom: good monday morning. "bloomberg surveillance" worldwide. let's get right to it. here is your bloomberg first word news with taylor riggs.
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usa embassyvirtual in jerusalem opens today. president trump had vowed to move it. palestinians say the u.s. can no longer be a mediator in the region. u.s. is ready to let american businesses invest in north korea, but there is a catch. north korea must groove it has given out -- given up its nuclear weapons arsenal. mike pompeo says the u.s. can create conditions for real economic loss parity in north korea. the leader of the two countries -- the leaders of the two countries hold a historic summit next month. the country possible electoral commission says he was the front runner in national elections. the officials results are in for just over half of the country's provinces. the record low turnout was the first since iraq declared
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victory over the islamic state group, and since the 2003 u.s. led toppling of saddam hussein. the united arab emirates has enough spare capacity to cushion oil markets when the u.s. reimpose his sections on iran. the uae energy minister spoke to bloomberg in upper darby. >> we have been there before, and i think have been resilient to deal with those issues in the past. countriesf the member , they have definitely a spare capacity. wheneverbe used production is required. taylor: global news 24 hours a day powered by 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: taylor, thank you so much.
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what a great briefing this morning from bloomberg opinions. tim colton, usually in taipei. we will go to him. this is one part of a phenomenal essay on the reality of business. is is the telecom cut -- it is the telecom company zte. tom: shock, the president found out. that is where we are right now. us with real expertise on technology, less on international relations. but on the zte in technology.
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as i look at zte and the importance, what is the so-what for the chinese leadership? do they need this company up and running, or is it a political check? it is both, tom. this is a company with 30,000 r&d engineers. that is larger than facebook has on its entire staff. be policy wants it to independent. they are going to use any leverage they have with donald trump to keep it alive. tom: what do they do in the united states? a good 20% or so of their product is u.s. based. most americans think it is all made in china or vietnam. what is it that america does that zte needs in the toys? tim: it is semi conductors. china is good with many areas of
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technology, but the united states leads in those key semi conductors. intel, broadcom, qualcomm, and others. they are irreplaceable. you may be able to change 99% of the parts they go into zte telecom equipment, but it is that one part of american supplied that if cte cannot get their hands on it, they are in trouble. francine: do we have any idea what the chinese could have offered the trump administration to get this 180 degree turnaround? tim: you know what, donald trump wants peace on the north korean peninsula, or the korean peninsula. he will meet with jim, -- with kim jong-un next month. , thatws, and china knows they need china to be part of these talks at least in the back channeling area because if kim gives of nuclear weapons, -- gives up nuclear weapons, he
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does not want to be baiting the shark. it is a bargaining chip. tom: tim culpan, thank you very much. bloomberg opinion on technology and asia. kevin cirilli would not know a semiconductor if it hit him over the head. he is our chief washington correspondent. i want to get to the immediate story of gaza. thet, on zte, what is pushback? can the president use a telecommunications company, a telecommunications company is an international relations treaty -trade bargaining ship? kevin: i think there is speculation in washington that president trump tried to use that zte about-phase reversal to get china to continue to work with both on the careerist on -- on the korean peninsula.
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diplomats are saying publicly that in order for north korea to get some type of u.s. capitol infrastructure program they will have to completely denuclearize. the u.s. needs china to do that. trade talks are ongoing. you have a small delegation of chinese officials in washington this week to continue those. the zte reversal is being interpreted as a sign of goodwill for the u.s. and the chinese. illuminateate us -- us on the report on gaza with a certain number of dead already within gaza right now. we have images coming up of israel. these are the protests. we have seen some that are a lot grimmer than that. tell me where the democrats fitting -- fit into this mix. obviously the president has some core support for the embassy injured was on. is everybody else on board?
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kevin: there is a lot of divided talk from right now. democrats are divided on this. secretary of treasury steven mnuchin will be accompanied by jared kushner as well as ivanka trump for the opening of this embassy later today. , we should note it is prime minister that now who meeting with -- by mr. netanyahu -- prime minister netanyahu meeting or it saying they have no plans to do this, plans to switch. there are a lot of moving parts. everyone is carefully watching it. this comes a week later for president trump withdrawing from the nuclear armament deal. good morning from paris, kevin. this may be a difficult question to answer. if you look at the reserve so
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gte,-- the reversal with what would need to happen for president trump to close down his new embassy in jerusalem? think national security as well as security at embassies is something that the administration, any administration, would take into account. we are watching these protests, watching the response of the palestinians, and i think that that will be carefully monitored. congressmanou that -- ofchiff, of them california, top democrat in the house of representatives, saying publicly that he has concerns about zte, particularly the role it plays in national security through a host of telecommunication devices, including many android-backed devices. francine: what are you expecting from when president trump meets
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advisersing economic from china? kevin: first and foremost, north korea, we are a few weeks out from the june 12 meeting in singapore with the north korean leader, kim jong-un. the second point i would raise, the administration has proposed 150 -- $150 billion worth of tariffs. in china, on sorghum, soybeans, and other commodities. as pressure on the agricultural industry to get a that are -- to get a better deal done. that trade policy has direct impact on midterm elections, particularly the midwestern part of the country. tom: kevin cirilli, thank you so much. chief washington correspondent. an interesting interview -- this will be at midnight in new york, 5:00 a.m. in london. a timely
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conversation with the president of turkey, mr. erdogan. look for that tomorrow. to be clear on the times -- 5:00 a.m. in london, midnight in new york. tuesday.round to worldwide, this is bloomberg. ♪
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-- cine: taylor: this is bloomberg surveillance. let's get to the bloomberg business flash to j.p. morgan chase is doubling down on china. the bank names its global cohead for equities to be its new china ceo. jpmorgan is seeking to create a securities company in china and will take a majority stake in its local fund management join venture. is is invaded -- is -- ibm
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-- more than 100 executives will tell lawbreakers the u.s. needs its own privacy framework. they say the new bu law should not become a global standard. the measure imposes tougher laws -- tougher rules on gathering personal information. b.p.'s ceo says the withdrawal from the koran nuclear accord could cut 100 billion barrels a day. isi think what we have seen a withdrawal from the agreement, which seems to me the beginning of a note -- of another negotiation of some kind. it could lead to a million barrels a day on the market, and that will affect things. there is a lot of uncertainty, and i think that is more reflected by that along with what is happening in venezuela. taylor: that is your bloomberg business flash. thank you so much.
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governorh central bank has played down concerns about the area upon economic slowdown while signaling the central bank is still likely to help quantitative easing this year. i spoke to him exclusively from the gic banking conference this morning. >> first we will have to decide -- assume that adjusted for inflation is fulfilled. wherever it with -- wherever it deepend is not the question. then we were very clear about the sequencing. the first rate hike would come -- past the end of that we i explained is will give additional guidance
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before the end of the year, but the timing of this first -- about the timing of this first rate hike and its contingency. let me explain about the timing. well past, meaning at least two quarters. and about they contingency, it will be contingent on inflation. then we will see exactly how we formulate it. -- we look atable data and the economic situation as it is and as it will be. francine: could we assume six months from the asset purchase kind of normalization, or could it be nine months? >> english is not my native language, but -- francine: so it could be up to three or even four? >> i will not commend more. francine: is it communications
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to the markets? >> i do not think we have specific concerns. , which clearly a mandate is price stability. inflation, to a 2% below 2% of inflation target, so we are making progress. despite some transient effect, inflation is at present well below in the eurozone with 1.2%. but we think that inflation will resume its progress in the coming months. it is a clearly temporary effect. on delivering our mandate on price stability, and we have been inefficient because two years ago there was a deflation risk or last year we were at 1.5%.
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we expect inflation in 2022 meet well above 1.7%. tom: he was -- francine: he was speaking to me earlier in paris. italy continues to be one of the eurozone nation's most call me ming -- most cal politically. alexandra,now is -- there seems to be consensus on scrapping the increase of the retirement age on basic income, but also about a flat tax. what else do we know about the new program for the new government? no.hose are the points for note that although those points are extremely expensive. so far, so good, but they are
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going to do things that are a bit unsettling for the market. the market is staying calm. we still do not know who they want for prime minister. we will have to see what happens. talk to us about the possible names to become prime minister. one is an academic. one is not. they seem to be very different people or different kinds of people. thate main thing we know it is not going to be one of the two leaders, otherwise they would fight it out here and it is going to be some third-party that they can agree on. there are different philosophies of life and work, and you can see one proposal. one is proposing a different way of handling economic issues. do we take a candidate that is professor, close to the league? the president is quite offended
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the president is one of the checks and balances and needs to be consulted. they need to talk together. it will not be someone known to the market. it is going to be some third figure that is asked -- that is not extremely well known. tom: thank you very much. butre going to continue, right now, without question, the news of the moment worldwide is protest in gaza. this is roughly 50 miles from jerusalem, and the new embassy of the u.s. may 15,one day before and the palestinians have extended that day to 48 hours beginning today. it has been substantial protest out on social and with these images as well. please stay with us. this is bloomberg. ♪
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tom: bloomberg surveillance this morning from paris. and from new york.
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francine lacqua in paris, tom keene in new york. bloomberg economics, with a killer single best chart. time i saw this was with olivia blind chart a million years ago. -- this is a financial crisis. adjusted for inflation and population falling off a cliff. i guess i feel good. we are back to where we were in 2006, but far more important, the trajectory is like this. gap, carlis riccadonna, of sort of where we were? we do not feel that good now because retail sales does not have the pop it used to have. carl: it is the cost of the unemployment rate going to 10% following the global crisis. now we are closing that gap to some extent, and the
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unemployment rate is below 4% now. that is a good sign, but talking about the unemployment rate mrs. bank some of the point. as janet yellen and president s some of thee point. we have to look at a broader perspective. when we do that, we look at the employment population ratio or employment of the rate. it tells a less complete recovery or a less complete expansion following the great recession. critical is really with that employment dynamic. we want to move this up to get back somewhere in the vicinity of what we felt like, or are we just not going to do that? carl: if we zoom back into that last circle, we can see a plateau. that is a key focus, to make sure that we are continuing on that upward trajectory. we saw a soft patch for
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consumers in the first quarter, and we need to see evidence -- tomorrow in retail sales, for instance -- that consumers are back on track because they have been the fundamental driver of this economic expansion. if consumers are petering out, that would significantly change the economic landscape. dots reallye the that clear? 8, 9 months ago we were just saying ditch the dots. carl: you cannot ditch the dots. they are important for guidance of fed policy. my own estimation, loretta mester is in the for-hike camp this year. tighten,e starting to financial conditions are tightening as a result of both fed hikes and the balance sheet policy. i suspect by the time we get to that december meeting, a lot of
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the moderates on the open markets committee are going to say, why bother with this hike right now? .nflation is still tame the economy has not overheated to the degree that folks are anticipating, therefore push that fourth hike back to 2019. tom: carl riccadonna, thank you very much. we are following many stories. one of them in gaza, where we have reports of seven dead. reuters with a report of 10. i am unclear of that statistic. definitely seven dead, including a number of protests in israel and gaza. please stay with us. this is bloomberg. ♪ ♪
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david: trading up, president trump hansa life preserver to a
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-- hands a big life reserve or to a chinese tech company. congress says nafta has to get result of this week. with worldwide oil demand early, troubles with iran and venezuela are key. this week we get retail sales and investor production numbers in the u.s., gd growth numbers for germany. all telling us whether we are headed in the right direction. welcome to "bloomberg daybreak." i am david westin with julia chatterley. alix steel is off today. julia: shall we take a look at the markets? never a dull moment. a culmination of the news flow and anticipation of the data. .2 percenther by file -- following a sideways move from the european sessions, investors eyeing what we are seeing as far as coali

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