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Speaker 1: Global business news twenty four hours a day at Bloomberg

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Speaker 1: dot com, the Radio plus mobile app, and on your radio.

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Speaker 1: This is a Bloomberg Business Flash and I'm Karen Moscow.

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Speaker 1: This updates brought to you by National Royalty Returns on

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Speaker 1: cash and rented real estate. Find them at n r

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Speaker 1: i A dot net. Stocks are slipping on winding some

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Speaker 1: of the March rebound that had the m s c

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Speaker 1: I All Country World Index on the brink of erasing

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Speaker 1: its losses. For sixteen U S Dock Index futures, they

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Speaker 1: were lower for much of the morning. They are now

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Speaker 1: little change. Dowie Mini futures up seven and the docks

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Speaker 1: in Germany is down half percent. Ten year Treasury up

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Speaker 1: to thirty seconds, the yield one point eight one percent.

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Speaker 1: Yield on the two year points seven four percent. NIMEX

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Speaker 1: scrude oil also little change now it's up three cents

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Speaker 1: to thirty eight thirty six of barrel Comex gold up

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Speaker 1: a ten percent or ten dollars to twelve thirty eight

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Speaker 1: sixty announced. The Euro at a dollar thirteen seventy seven

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Speaker 1: the year one twelve point three zero. That's a Bloomberg

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Speaker 1: Business Flash. Tom and Barry Karen, Thanks so much, Barry

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Speaker 1: Red old Tom King getting you to the end of

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Speaker 1: the corn Jobs Day. Tomorrow, Bill, Bill Gross and Jim

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Speaker 1: Glassman will join us right now with a wonderful update

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Speaker 1: and titled Tuget War A J. Rogerdos with Barclays wonderful

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Speaker 1: I have you here, um a J. This week one

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Speaker 1: of the big changes is in the five year five

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Speaker 1: year four looking out five years and another five years

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Speaker 1: out on where inflation will be in Deflation roared back

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Speaker 1: this week, Um, it's so far removed from two thousand thirteen.

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Speaker 1: Is this a structural change towards low inflation in parts

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Speaker 1: of the world. Yes, Europe and Japan have struggled for

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Speaker 1: a while, as you know with getting that inflation numbers up.

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Speaker 1: You mentioned the five year five year in Japan. It

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Speaker 1: is basically forecasting zero inflation for Japan forever for all

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Speaker 1: time to come, which you know is just a difficult

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Speaker 1: thing to and was it's got investments of that duration

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Speaker 1: there you are. You just have to go to Japan,

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Speaker 1: yain hedged and you're fine. M hmm. I don't know.

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Speaker 1: Tell me about disinflation now, is it structural or you

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Speaker 1: if you if you're given do you have some hope

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Speaker 1: for Jenny was long term. So take the United States

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Speaker 1: for example. There, we do think that inflation it's picked

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Speaker 1: up over the last few months, as you know in

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Speaker 1: the actual spot numbers, and we think that it will

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Speaker 1: keep at least at these levels for the rest of

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Speaker 1: the year. But there is no getting away from the

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Speaker 1: fact that in two thousand four to two thousand six,

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Speaker 1: when the last hiking cycle started, right in the two

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Speaker 1: years before the last hiking cycle started, services inflation in

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Speaker 1: the United States averaged three percent. Now it's averaging closer

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Speaker 1: to two percent. So this is not just a good

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Speaker 1: story associated with a stronger doll than weak commodity prices.

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Speaker 1: So when we look at actual inflation in the United States,

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Speaker 1: you really put your finger on it. It's not necessarily

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Speaker 1: of goods and commodities. Its services, it's healthcare, it's education,

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Speaker 1: it's things like that. Can the FED risk getting behind

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Speaker 1: the curve if that's where the inflation lay and food

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Speaker 1: and housing and energy are very much i hate to

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Speaker 1: use the word contained, but really modest levels of inflation there.

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Speaker 1: So if you look at what the FED chat is saying,

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Speaker 1: it almost seems like she wants to be behind the curve. Right,

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Speaker 1: So one argument for why the Fed could considerably stay

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Speaker 1: stay behind the curve if inflation next year was average

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Speaker 1: in closer to two and a half percent, say, is

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Speaker 1: because what they have is a symmetric They're supposed to

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Speaker 1: average two percent on inflation. So they've been years and

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Speaker 1: years and years where you're below two persons. So it's

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Speaker 1: not the end of the world if you're about for

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Speaker 1: some time and still remain accommodation. So if we saw

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Speaker 1: inflation levels in seventeen in the United States at two

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Speaker 1: and a half percent, wouldn't that be an enormous victory

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Speaker 1: for the Federal Reserve. Haven't they been trying to get

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Speaker 1: inflation higher? No, no question about it. It is difficult

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Speaker 1: to see that necessarily playing out the two and a

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Speaker 1: half percent for code inflation code PC the metrid that

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Speaker 1: it tends to use. But if that were the case,

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Speaker 1: then I think the FAT would actually be more pleased

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Speaker 1: than worried about about being who's winning the tug Award.

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Speaker 1: I'm not saying they're done the ropes polled, but there's

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Speaker 1: always when you watch the tug of war that vector

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Speaker 1: that a little bit this who's winning? I think ultimately,

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Speaker 1: over the next six to nine months, it will actually

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Speaker 1: be the risk bears. If you will write people who

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Speaker 1: expect risk assets to go down, who will win out

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Speaker 1: Because the passage of time here doesn't help Tom last year.

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Speaker 1: Let me tryst like that. The punch bole is gonna

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Speaker 1: get a little empty. I think that is exactly correct.

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Speaker 1: You know, the passage of time gets you closer to

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Speaker 1: a point where central bank policy turns a little less accommodative,

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Speaker 1: or at least helps less than ities. Critically critical question, Barry,

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Speaker 1: this goes to the derivatives. Can we manage it in

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Speaker 1: a gradual sense or we learned that what you predict

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Speaker 1: is a jump condition involving a lot of market um.

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Speaker 1: I think for the next for the rest of two

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Speaker 1: thousands sixteen, we will be able to manage it. But

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Speaker 1: all markets have recency by a storm, you know. So

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Speaker 1: what I mean by that is, you know, if you

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Speaker 1: are someone who has not followed the US labor market

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Speaker 1: for the last two or three years, you come in,

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Speaker 1: you're looking at an unemployment rate of four point eight percent.

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Speaker 1: You wouldn't be that surprised if they just suddenly started

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Speaker 1: to jump more quickly. And if that happens, then I

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Speaker 1: think markets in fact, that seems to be part of

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Speaker 1: the plan. Hey, we now have You know, if you

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Speaker 1: say we have full employment, there will be a lot

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Speaker 1: of pushback because so many people are underemployed. But when

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Speaker 1: we see the likes of Walmart and McDonald's raising their

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Speaker 1: minimum wage, it's telling you they're having a hard time

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Speaker 1: finding workers to fill their position. That's right, and at

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Speaker 1: some point it should translate at an aggregate level, at

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Speaker 1: an economy wide level, and sort of just you know,

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Speaker 1: it's been very slow though, hasn't it. It absolutely has

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Speaker 1: been one of the puzzles. One of the reasons it's

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Speaker 1: been slower is because of how low, how little productivity

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Speaker 1: there has been in the US economy. But even then,

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Speaker 1: you know, beyond a certain point, you should start to

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Speaker 1: see wages turn higher and a little more quickly. Frame

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Speaker 1: frame the two year or the ten year or what

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Speaker 1: you choose, from here to there. Where's the new there?

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Speaker 1: So the new there is the Federal Reserve at some

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Speaker 1: point starting to hike or continue it's hiking cycle. The

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Speaker 1: tenure does nothing. The ten years ends two thousands, sixteen,

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Speaker 1: we think at two percent, Because what matters is not

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Speaker 1: just whether the FED starts to hike, but where it stops.

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Speaker 1: And critically we think that stop is much much much

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Speaker 1: lower than it has been quickly or than what's the

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Speaker 1: two years. The two years I think will probably move

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Speaker 1: close to one percent by the end of this year.

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Speaker 1: And you know we are in some extent starting to

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Speaker 1: be conditioned by how debbish the US FED chair is

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Speaker 1: for the rest of the year. So if you have

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Speaker 1: one or two hikes, then it's hard to see tools

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Speaker 1: selling off a lot more. A J Roger us thank

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Speaker 1: you so much with Barclays. He's gonna come back with

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Speaker 1: us here and continue this discussion the Litmus paper if

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Speaker 1: you will a fixed income into his Tuggert war Barclay's

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Speaker 1: out with the important recalibration as they look into the

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Speaker 1: second quarter of this year. The ten ure yield one

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Speaker 1: two two year yield is a lower yield to four

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Speaker 1: digits points seven four eight seven currency markets. Un here

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Speaker 1: I would point out oil, as Bob Sinch mentioned well

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Speaker 1: Worth watching thirty eight thirty four in Brent Under forty

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Speaker 1: thirty nine seventy three Barry Rittenholtz and Tom Keane A

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Speaker 1: Thursday before Job's Day, Bloomberg surveillance Surveillance brought to by

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Speaker 1: Flushing Bank. I'll put a complete business checking account with

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Speaker 1: fifteen thousand dollars and more. Get a phrase sixteen GID

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Speaker 1: WiFi tablet business Plushing Bank dot com for details. Member

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Speaker 1: f D i C Equal Housing Lender Broadcasting live to

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Speaker 1: New York, Bloomberg to Washington, d C, Bloomberg to Boston,

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Speaker 1: Bloomberg twelve hundreds, to San Francisco, Bloomberg to the Country

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Speaker 1: Series Exam Channel one ninety and around the globe the

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Speaker 1: Bloomberg Radio Plus Appen Bloomberg dot Com. This is Bloomberg

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Speaker 1: Surveillancene Street. Good morning, I'm John Tucker, two hours away

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Speaker 1: from the opening Dell and let's get you updated on

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Speaker 1: the news you need to know. Let's stay at the

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Speaker 1: first quarter dollar headed for its biggest quarterly declining in

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Speaker 1: five years. Treasuries have returned two point nine percent this year.

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Speaker 1: In fact, bonds worldwide or a set to kick off

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Speaker 1: the best annual starts since at least n The British

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Speaker 1: economy ending twenty fifteen with more momentum than previously estimated,

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Speaker 1: GDP rising six tenths of a percent in the fourth

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Speaker 1: quarter instead of the five tenths of a percent previously

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Speaker 1: estimated standon and Porrez has got the outlook for China's

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Speaker 1: credit rating to negative from the stable, saying the nation's

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Speaker 1: economic rebalancing is likely to proceed more slowly. The ratings

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Speaker 1: firm had expected one on Wall Street and that's time

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Speaker 1: for it. News from around the world, let's get the

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Speaker 1: IC this morning from Bloomberg's Michael Varr John. Thank you

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Speaker 1: very much. The lawyer force Alam obdu Slam, a prime

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Speaker 1: suspect in the November thirteenth Paris attacks, as his client

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Speaker 1: is ready to leave a prison in Belgium and fly

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Speaker 1: to Paris, where he is willing to cooperate with officials.

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Speaker 1: Obduslam was captured March eighteenth in Belgium. He fled the

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Speaker 1: day after the Paris attacks. Brussels Airport will remain closed

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Speaker 1: for passenger flights at least until this afternoon. Officials are

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Speaker 1: trying to complete an evaluation of temporary repairs of the

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Speaker 1: airport after last week's suicide bombing attack. President Obama will

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Speaker 1: huddle with Asian leaders on North Korea today. The nuclear

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Speaker 1: summit will try to seek waste to put more pressure

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Speaker 1: on North Korea. The summit in Washington will also trying

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Speaker 1: to smooth with over tensions with China over cybersecurity and

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Speaker 1: maritime disputes. President Obama will meet with China's President shi

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Speaker 1: Jing Ping. On the sidelines, South Africa's top court says

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Speaker 1: President Jacob Zuma has failed to respect the Constitution. The

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Speaker 1: court says Zuma failed to act on the National Ambudsman

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Speaker 1: order that he repaid taxpayer money spent on upgrading his

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Speaker 1: private home. Global News twenty four hours a day, powered

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Speaker 1: by our four hundred journalists and more than a hundred

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Speaker 1: fifty news bureaus from around the world. I'm Michael Barr,

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Speaker 1: John all right, thanks to Michael seven thirty two odd

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Speaker 1: Wolf Street Now with a Bloomberg NBC Sports update. He

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Speaker 1: was John Stash Howard. Thanks John. Yankees thought they had

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Speaker 1: the deepest bullpen in baseball, but are all this. Chapman

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Speaker 1: will be suspended the first thirty games in now. Andrew

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Speaker 1: Miller headed for the disabled this. His only pitch yesterday

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Speaker 1: was a line drive that got his bare wrist on

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Speaker 1: his glove hand. X rays were negative, but later a

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Speaker 1: CT scan revealed a chip. Factories headed to a hand specialist.

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Speaker 1: No word on just how long Miller will be out.

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Speaker 1: Yanks still have Dellan Vetansis, but now no proven set

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Speaker 1: up relievers. They just shut out the Braves to nothing,

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Speaker 1: six scoreless from Ivan Nova, who's battling CC Savathia for

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Speaker 1: the last spot in the rotation. Another loss for the Mets.

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Speaker 1: Washington won twelve to one Mets winners in their last

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Speaker 1: thirteen spring training games. They have left Florida. They'll play

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Speaker 1: the Cubs tonight in Las Vegas and Dallas. Nicks took

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Speaker 1: the lead of the fourth quarter but fell to the

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Speaker 1: mav to eighty nine. Carmelo Anthony scored thirty one in

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Speaker 1: the lost. Christops Porzingis didn't play injured shoulder Golden State

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Speaker 1: one and overtime at Utah Warriors. Now sixty eight and seven.

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Speaker 1: If they win five of their last seven, it's the

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Speaker 1: best regular season ever. With Bloomberg NBC Sports Update, I'm

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Speaker 1: John stan all right, thanks, John, had ahead of the

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Speaker 1: market open on Wall Street. We have the futures right now.

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Speaker 1: Listen to pretty much flat SMP unchanged the Dalla futures

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Speaker 1: up just eight points. That's also I'm gonna call that

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Speaker 1: unchanged the nastaic of future sunchanged. As we look at

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Speaker 1: currencies right now, Bob sin she in a little earlier

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Speaker 1: saying the dollar is gonna weekend right now, uh euro

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Speaker 1: dollar one thirteen eighties six the yet at one twelve

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Speaker 1: eight the ten year yield right now a ten year

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Speaker 1: note that is right now, the tenure is up just

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Speaker 1: a fraction nine. Wall Street time down for the Bloomberg

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Speaker 1: n g I T STEM report being draunts you by

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Speaker 1: New Jersey Institute of Technology, investing more than a hundred

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Speaker 1: and ten million dollars a year and applied research to

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Speaker 1: solve problems in improved life. Learn more at Stories of

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Speaker 1: the Innovation dot n j I T dot E d

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Speaker 1: U here' stop moon, John, thank you. Here's what's making

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Speaker 1: news in science, technology, engineering, and math. Ice covered the

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Speaker 1: smallest extent of ocean in the Arctic for a second

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Speaker 1: year in a row this winter, after what one scident

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Speaker 1: has called crazy warm temperatures that stopped large areas of

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Speaker 1: sea from freezing over at this rate, The National Snow

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Speaker 1: and Ice Data Center at the University of Colorado and

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Speaker 1: Boulder says the Arctic see ice free summers in less

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Speaker 1: than fifteen years. Google objects to Oracle's bid for eight

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Speaker 1: point eight billion dollars in damages in their court battle

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Speaker 1: over the Java programming language that's set to go to

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Speaker 1: a jury in May. In its five and a half

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Speaker 1: year old lawsuit, Oracle alleges Google's Android system infringed on

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Speaker 1: copyrights for Java software, Oracles basing its damage demand on

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Speaker 1: how much the search engine company has earned from its

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Speaker 1: mobile operating system. Google is accused of using Java without

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Speaker 1: paying for it because the Internet Giant was in a

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Speaker 1: rush to create Android, now the world's most popular smartphone platform.

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Speaker 1: And video games, are they lines of software or works

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Speaker 1: of art? You can probably guess where the World Video

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Speaker 1: Game Hall of Fame comes down on that question. Among

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Speaker 1: the games on its second annual list of finalists, Minecraft,

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Speaker 1: Space Invaders, Sonic Adgehog, tomb Raiders, and John Madden Football.

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Speaker 1: The winners will be inducted May fifth in Rochester, where

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Speaker 1: the Hall opened last year. Last year's inaugural inductees include Pong,

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Speaker 1: pac Man, Tetris, Doom and Super Mario Brothers And That's

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Speaker 1: This Morning's Bloomberg and j I t Stem Reports Sounds

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Speaker 1: like Your Day, John Tucker, who accepts on behalf of

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Speaker 1: pac Man. Thanks Bob on Walster. That would be Mrs

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Speaker 1: Pattern miss I suppose, So who's deserving it of award herself?

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Speaker 1: You're listening to Bloomberg's surveillance on Bloomberg Ready a Barry

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Speaker 1: Dholtze and for Michael McKee this week along with the

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Speaker 1: Tom Keane, Good morning Berry, Good morning. Uh. We're having

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Speaker 1: a lot of fun this morning looking at the futures

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Speaker 1: turning green from deeply negative. Here we are starting the

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Speaker 1: quarter tomorrow and markets are back to break even, which

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Speaker 1: is which is quite a recovery. And we have a

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Speaker 1: perfect guest to discuss this with. I have a j Rajadacs.

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Speaker 1: He is the head of research at barclay and m

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Speaker 1: Barclay's and we were discussing earlier something that I was

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Speaker 1: reading in your quarterly outlook about China. How is China

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Speaker 1: doing these days? So this is an economy that is

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Speaker 1: still growing impressively by international standards, but not so much

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Speaker 1: by their standards. There's also an economy which is adding

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Speaker 1: new leverage from an already extended base at a frenetic base,

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Speaker 1: and by their standards, generating ever slower growth. Now, so

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Speaker 1: let's let's come back to the credit. In about two minutes,

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Speaker 1: let's just talk about their economic growth. We look back

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Speaker 1: last decade or even just a few years ago, China

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Speaker 1: was growing at a double digit rate, if we believe

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Speaker 1: their own data, whatever the numbers are, they were really

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Speaker 1: robust growth for a very large country. Now they seem

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Speaker 1: to have run into a problem with the law of

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Speaker 1: big numbers. That's correct. What what's the growth rate of

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Speaker 1: China these days? So I think too much attention gets

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Speaker 1: paid to their official growth numbers, especially they're real growth numbers.

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Speaker 1: So last year, if you look at the real GUTP numbers,

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Speaker 1: it was six point nine percent, right, and they've slowed

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Speaker 1: from ten percent a few years ago. Like you said,

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Speaker 1: the more important thing in my mind, Batty, is nominal GDP.

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Speaker 1: Four years ago, China's nominal GDP was last one, it

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Speaker 1: was six percent. That's a much much bigger deal. And

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Speaker 1: the world lives in nominal terms. You have a big

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Speaker 1: debt that base, you need to service that with nominal growth,

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Speaker 1: nominal learnings, and that is where they will start to

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Speaker 1: struggle in the inst So let's talk about China's debt.

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Speaker 1: The US just came out of a giant surprime debt crisis.

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Speaker 1: We were probably south of a trillion dollars in in

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Speaker 1: annual debt production. For a country with a sixteen trillion

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Speaker 1: dollar g d P, what is the debt service? What

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Speaker 1: is the total debt look like in China? So take

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Speaker 1: the banking system, which is where the vast majority of

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Speaker 1: debt has accumulated. Right, So the banking system, if you

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Speaker 1: include the shadow banking system as that comes back on

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Speaker 1: banking system books at the end of two thousand eight

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Speaker 1: is ten trillion dollars. Now it is closer to thirty.

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Speaker 1: So you three out twice two years US g d

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Speaker 1: P worth it just that that is correct for an

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Speaker 1: economy which is about ten trillion dollars in in injury,

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Speaker 1: How on earth is China ever going to service that

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Speaker 1: massive debt? So they have two giant advantages. The first

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Speaker 1: is that the vast majority of this debt is local currency. Right,

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Speaker 1: Emerging markets, whether it be banking systems or sovereigns, do

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Speaker 1: not get into trouble because debt to GDP goes beyond

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Speaker 1: the magic number. They get into trouble if they have

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Speaker 1: dollar denominated debt because they don't have the ability to

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Speaker 1: print out they have their own currency. They're not a

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Speaker 1: slave to US dollars, so they don't run into the

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Speaker 1: typical Latin America debt. That is exactly correct. That's one advantage.

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Speaker 1: The second is that even as corporates and local governments

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Speaker 1: and the banking sector has the banking sectors lent, and

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Speaker 1: the corporates and local governments have taken on enormous amounts

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Speaker 1: of enormous amounts of local currency debt, the consumer is

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Speaker 1: the one part of the Chinese economy that is not

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Speaker 1: clevered by international standards. You know. So the consumer basically

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Speaker 1: stopped spending on everything else as they were buying large

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Speaker 1: amounts of real estate during their property bomb, and that

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Speaker 1: was one of the reasons why you had the missing

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Speaker 1: Chinese consumer the last end of fifteen years. That was

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Speaker 1: one of the reasons why China strage surpluses exploded the

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Speaker 1: way they did. So they have some cushion. They're fascinating,

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Speaker 1: fascinating stuff, and I would expect that we're going to

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Speaker 1: see more and learn more about the Chinese dead explosion

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Speaker 1: relative to the rest of the world. Um, what's going on, talker,

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Speaker 1: take us out of here. I'm gonna say futures are

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Speaker 1: pretty much flat for the equity futures. No change across

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Speaker 1: the board right now with the SMP, DOW and NASA

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Speaker 1: even manis you're one thirty one thirteen eighty four, the

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Speaker 1: ten year yield one eight one forty one more reacted

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Speaker 1: two year yield at point seven four age seven, and

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Speaker 1: you're listening to Bloomberg Surveillance with Verry rich Bolts and

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Speaker 1: Tom King right here on Bloomberg Radio. Saveillance brought to

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Speaker 1: you by Ancient block and ancient name. The best accounting

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Speaker 1: term in North America for the sixth year in a

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Speaker 1: row by hedgeweek dot com