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Speaker 1: Broadcasting live to New York, Bloomberg eleventh, Yo to Washington,

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Speaker 1: d C, Bloomberg to Boston, Bloomberg dwell unders to San Francisco,

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Speaker 1: Bloomberg nine to the country, US Exam General one ninety

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Speaker 1: and around the globe the Bloomberg Radio plus a Bloomberg

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Speaker 1: dot Com. This is Bloomberg Surveillance. Welcome to Bloomberg Surveillance thirty.

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Speaker 1: I'm Michael McKee along with Tom Keene Economic Indicators brought

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Speaker 1: to you by Commonwealth Financial Network. When it's time to

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Speaker 1: change the conversation, talk with a broker dealer r I

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Speaker 1: A that's ready to listen, Call six or six two

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Speaker 1: three s. Visit Commonwealth dot com to learn more. Video

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Speaker 1: Del Judais is at the First World Desk with our

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Speaker 1: report Hunt Trade, the Advanced Merchandise Trade Balance. Michael, and

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Speaker 1: we're seeing a deficit fifty seven point five billion dollars,

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Speaker 1: little change from the prior months. Or the merchandise trade

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Speaker 1: deficit coming in at fifty seven point five billion dollars

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Speaker 1: in April, little change in the prior month. June three,

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Speaker 1: we get the complete trade report, incorporating goods and services

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Speaker 1: earlier today mortgage applications weekend in May up two point

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Speaker 1: three at the couple first work desk company call Judea,

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Speaker 1: let's go back if anythinks so much. Mike helped me

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Speaker 1: out here. And this is a good precursor into Conrad

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Speaker 1: to quadros rd Q economics. What is the merchandise goods

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Speaker 1: trade balance? I was on the second floor of Bergdorf

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Speaker 1: Goodman yesterday. I happened to wander into the woman's shoe department,

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Speaker 1: where my wallet was lightened. I can honestly tell you,

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Speaker 1: in umpteen years, I've never seen that busy enjoying eighty

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Speaker 1: percent off or whatever the sales Mike it was. It

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Speaker 1: was Italian shoes. It was like filings basement on a

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Speaker 1: bad day thirty years ago. If those were Italian shoes

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Speaker 1: or anything like it, then you've got the trade deficit

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Speaker 1: right there. That's part of the merchandise trade deficit. Right

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Speaker 1: we buy things made elsewhere. Uh. The the advanced trade

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Speaker 1: goods balance for port that we just got is relatively new,

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Speaker 1: and it is what is it? It's it's the trade

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Speaker 1: UH in goods for the month of April. They've moved

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Speaker 1: up their ability to get the numbers out sooner than

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Speaker 1: they'll add services to it for the overall number. Uh

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Speaker 1: And basically what it's telling us is that the economy

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Speaker 1: in the second quarter started off on a trade basis

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Speaker 1: a little bit better than analysts forecast, so maybe a

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Speaker 1: little bit better overall for growth in the quarter. I'm

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Speaker 1: not sure if Atlanta Fed changes their GDP now number

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Speaker 1: based on just this release, but it may affect some people. Um,

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Speaker 1: maybe the folks at r d Q Economics. We can

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Speaker 1: ask Conrad de Quadros, senior economists there, um what the

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Speaker 1: second quarter is looking like and to what extent trade

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Speaker 1: is playing into that. Good morning, Contrad, Good morning, thanks

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Speaker 1: for having me on. What's your read? What's your read

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Speaker 1: of they the net x UM number in the GDP

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Speaker 1: formulation so far well, obviously very early in the quarter.

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Speaker 1: This is just the first month of the quarter for trade,

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Speaker 1: and this is just the advanced release. As you said,

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Speaker 1: we don't get services until we get the full trade

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Speaker 1: report next week. But the report did show a little

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Speaker 1: less of a widening in the trade gap then was expected.

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Speaker 1: We're looking for trade to be a modest drag on

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Speaker 1: growth in the second quarter, but we still expect growth

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Speaker 1: in the second quarter in GDP terms to be significantly

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Speaker 1: stronger than what was reported for the very lackluster first quarter,

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Speaker 1: are is for growth needed to be close to two

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Speaker 1: and then does it sustain? Does it sustain off that

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Speaker 1: good second quarter? Does the stand after? I think it does?

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Speaker 1: You know, the first quarter, I don't, just don't think

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Speaker 1: it's very representative of the growth rate of the economy.

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Speaker 1: We know that for several years we've had this uh

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Speaker 1: lower reported first quarter of growth and then they pick

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Speaker 1: up in the second half of the year and second

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Speaker 1: quarter into the second half the year, and I think

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Speaker 1: that that continues this year. Now, by no means they're

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Speaker 1: expecting a very robust growth rate for sixteen, But I

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Speaker 1: think the two percent growth that's been maintained for the

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Speaker 1: last several years will remain the growth rate that we'll see.

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Speaker 1: For staying on the idea of um trade, do you

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Speaker 1: think the better than forecast number is a result of

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Speaker 1: better impact on terms of trade from the dollar or

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Speaker 1: is it because maybe overseas economies are picking up. Can

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Speaker 1: you read anything into it? Well, you know, it's I'm

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Speaker 1: always a little bit cautious about reading too much into

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Speaker 1: anyone report. But if you look at this report, we

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Speaker 1: saw a significant rebound in both exports and imports in

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Speaker 1: April UM. Exports in this report close to an half

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Speaker 1: percent and imports up two percent. Now, that's after some

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Speaker 1: significant clients in both exports and exports imports and exports

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Speaker 1: in the prior month. But maybe there's some evidence here

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Speaker 1: that there's been some improvement in global demand for US

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Speaker 1: products given the increase in exports. UM. I think that

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Speaker 1: domestic demand in the US is been pretty decent, and uh,

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Speaker 1: we know that from the consumer numbers, the retail sales report,

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Speaker 1: and that's probably part of the reason why we have

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Speaker 1: this rebound in in imports. The dollar is UM relatively flat,

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Speaker 1: it had come down into the quarter. Uh. How much

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Speaker 1: of an impact does it have on trade overall? Interesting

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Speaker 1: piece by an Arianna cultural Dakota on Bloomberg View the

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Speaker 1: other day, noting that so much of what's traded in

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Speaker 1: the world as priced in dollars, for the dollars movement

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Speaker 1: doesn't have the impact on the US economy that does

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Speaker 1: on other economies, and I think for trade, and particularly

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Speaker 1: for longer term trends, it's far more important, Uh, what

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Speaker 1: the what's going on with demand? Either if we're looking

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Speaker 1: at the US trade gap, what's going on with domestic

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Speaker 1: demand abroad. UM. Then that's one of been one of

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Speaker 1: the big reasons why we've seen, uh, the trade influence

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Speaker 1: on GDP that we have seen, and why we've seen

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Speaker 1: a kind of manufacturing numbers that we've seen. UM. Domestic

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Speaker 1: demand in other countries has been quite soft, UH, and

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Speaker 1: that's why there's been some downward pressure on US exports growth. UH.

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Speaker 1: And on the import side, it's it's determined by by

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Speaker 1: domestic conditions in the US. Domestic demand here, So I

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Speaker 1: think that over the more medium term, that's far more

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Speaker 1: important determinant of the trade gap than changes in the

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Speaker 1: value of the dollar kind of rand to Crotro. Economics

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Speaker 1: will continue this discussion a lot to talk about, not

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Speaker 1: so much the FED parlor game and all that, but

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Speaker 1: just as you heard Mr Decondros talking about just the

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Speaker 1: trying to figure out where this American economy is going,

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Speaker 1: and of course UH, that goes through the summer and

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Speaker 1: the conventions, it goes through in the labor Day into September. Mike,

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Speaker 1: I don't have in front of me, but there's a

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Speaker 1: g d P report like October that will be interesting

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Speaker 1: just before the election always of interest. Fisher's Advance up nine,

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Speaker 1: del Fuss up seventy three. The Yen one ten hour

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Speaker 1: surveillance brought to you by BMW mont Kisco. Visit BMW

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Speaker 1: mot Kisco dot com. Here's Michael R. With news headlines.

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Speaker 1: Mind Tom, thank you very much. President Obama has arrived

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Speaker 1: in Japan for a G seven summit meeting. Earlier today,

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Speaker 1: the President wrapped up his historic three day visit to Vietnam.

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Speaker 1: The President, during your speech before young men and women

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Speaker 1: in Ho Chi Minh City, says that support for the

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Speaker 1: Trans Pacific Partnership is a way to develop Vietnam's economy

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Speaker 1: that will open up a lot of opportunities and create

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Speaker 1: great confidence among investors here in Vietnam and US companies

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Speaker 1: who are interested in working with young people like you

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Speaker 1: who may have a great idea. The President will also

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Speaker 1: visit Hiroshima, Japan, where the first atomic bomb was drawn

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Speaker 1: during World War Two. The House Homeland Security Committee will

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Speaker 1: have some pointed questions today for the head of the

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Speaker 1: Transportation Security Administration t s A Administrator, Peter Neffinger, will

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Speaker 1: be asked today about the long lines at airport security

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Speaker 1: and exactly what prompted the outstair of the agency's top

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Speaker 1: security official, Kelly Hogan. The final vote is scheduled today,

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Speaker 1: and a House committee considering a bill to create a

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Speaker 1: financial control board and debt restructuring to help Puerto Rico

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Speaker 1: find its way out of a crippling seventy billion dollar hold.

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Speaker 1: Global News twenty four hours a day, powered by our

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Speaker 1: twenty four hundred journalists more than a hundred fifty news

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Speaker 1: bureaus around the world. At Michael Barr, Mike tom all right,

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Speaker 1: thank you, Michael Bar. Time now for the land over

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Speaker 1: Parsippany Bloomberg. NBC Sports Update with John s tesha Alright, Mike.

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Speaker 1: Nets were open for a fifth grade win get back

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Speaker 1: to the first place, but Washington hit five home runs,

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Speaker 1: three off Matt Harvey. Steven Strasburg struck out eleven to

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Speaker 1: get to eight. No. The Nationals won seven to four.

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Speaker 1: Mets had given Harvey the option of not facing the

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Speaker 1: Gnats after they lit him up last week. He wanted

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Speaker 1: the ball, but he dropped the three and seven. As

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Speaker 1: the r A is now over six. He did not

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Speaker 1: speak with reporters afterwards. The Yankee six nothing went over Toronto.

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Speaker 1: There's sixth win in a row means they've climbed back

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Speaker 1: to five hundred three weeks after falling eight games under

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Speaker 1: Carlos Beltron his tenth tomb run, Nathan Valdi one, his

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Speaker 1: fifth in a row, allowing just two hits. Alex Rodriguez

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Speaker 1: two hits in Trent, and he's expected back in New

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Speaker 1: York on Friday. The Warriors, of course one of the

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Speaker 1: NBA records seventy three regular season games, but unless they

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Speaker 1: now win three in a row over Redod Oklahoma City,

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Speaker 1: there will be a new NBA champion. The Thunder, with

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Speaker 1: a forty two point second quarter again built up a

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Speaker 1: big league They won Game four one eight four, lead

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Speaker 1: the series three one. Russell Westbrook dirty six points and

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Speaker 1: a triple double. NHL Pittsburgh won five to at Tampa Bays,

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Speaker 1: so they'll have a Game seven in the East tomorrow

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Speaker 1: in Pittsburgh. Stand Warrienka, the French Open defending champs, up

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Speaker 1: two sets in his match right now, Kentucky Derby win

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Speaker 1: a night Quest six with a fever, won't run the

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Speaker 1: Belmont next month in New York. His triple crown hopes

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Speaker 1: that by exaggerator at the Preakness with the Bloomberg, NBC

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Speaker 1: Sport that day on John's Dashing John thinks so much.

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Speaker 1: Appreciate that my Conrad Decardros coming up here on the

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Speaker 1: American economy, away from the the parlor game of the

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Speaker 1: Fed and yelling in June and July, Mike, what are

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Speaker 1: you most focused on? Uh? What's interesting is that is

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Speaker 1: that that at the moment um the markets are not

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Speaker 1: performing as as you would think, and you're seeing a

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Speaker 1: risk on attitude and uh, Wilbert Ross just told us

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Speaker 1: things look better to him than people are suggesting. And

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Speaker 1: so let's focus on this day in New York when

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Speaker 1: it's supposed to be ninety degrees and sunny on on.

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Speaker 1: A positive attitude doesn't mean the positive edis is consumer

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Speaker 1: And as Conrad said earlier, you know it's pretty darn

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Speaker 1: good across the challenges that one part of America's facing.

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Speaker 1: We will continue the Conrad Decardro's RDQ Economics on the

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Speaker 1: American Economy Bloomberg Surveillance. The Sports report was brought to

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Speaker 1: by land Rover Parsimity the spring sales of it is

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Speaker 1: happening now? Is it? Landrover Parcifity dot Com, Landrover above,

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Speaker 1: NBL global business news twenty four hours a day at

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Speaker 1: Bloomberg dot com, the Radio plus mobile lat and on

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Speaker 1: your radio. This is a Bloomberg Business Flash and I'm

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Speaker 1: ter in Moscow. This update is brought to you by

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Speaker 1: National Realty Returns on cash and rented real estate. Find

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Speaker 1: them at n r I, a dot net. Global equity

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Speaker 1: is rising to a two week high amid increasing investor

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Speaker 1: optimism that the world economy can we stand higher interest

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Speaker 1: rates from the Federal Reserve, oils advancing and gold falling

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Speaker 1: amid a retreat in the dollar. We checked the markets

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Speaker 1: every fifteen minutes throughout the trading day on Bloomberg. Futures

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Speaker 1: are higher, with SNP e Many futures of nine points,

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Speaker 1: DOWI mini futures up seventy NASDACI mini futures up twenty

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Speaker 1: to the acts in Germany's up one point four per cent.

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Speaker 1: The ten year treasury that will change yield one point

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Speaker 1: eight six percent. Nimax Screwed oil up one point two percent,

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Speaker 1: or sixty cents to forty two a barrel. Comacs gold

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Speaker 1: is down half per cent or six dollars fifty cents

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Speaker 1: to seventy and ounce the euro at dollar eleven fifty

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Speaker 1: three the N one ten point one eight. Hewlett Packard

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Speaker 1: Enterprises up thirteen percent this morning. It said it will

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Speaker 1: spin off and merge as Business Services division with Computer

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Speaker 1: Sciences and a deal value at eight point five billion

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Speaker 1: dollars for HPE shareholders. And Tiffany down almost three percent

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Speaker 1: after posting quarterly sales that trailed analysts projections. That's a

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Speaker 1: Bloomberg business flash, Tom and Mike, thanks so much, Karen,

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Speaker 1: appreciate that greatly appreciate uh that it is on Wall Street.

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Speaker 1: The following is from Bloomberg View. Opinions and commentary from

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Speaker 1: Bloomberg columnists. I'm Paula Dwyer, an editor with Bloomberg View.

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Speaker 1: When President Barack Obama last week re fired companies to

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Speaker 1: give overtime pay to millions of workers, it was a

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Speaker 1: reminder that government now orders by regulation what unions used

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Speaker 1: to get and bargaining with employers. With wages stagnant and

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Speaker 1: labor unions at an all time low, only eleven percent

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Speaker 1: of the workforce belongs more, such government actions will be needed.

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Speaker 1: Studies show the decline of unions is as much of

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Speaker 1: a drag on wages as is the lack of a

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Speaker 1: college degree. Problem is some unions have pursued interests to

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Speaker 1: the detriment of others, such as negotiating for public sector

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Speaker 1: pensions that taxpayers can't afford. If not unions what Donald

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Speaker 1: Trump promises to bring back factory jobs with steep tariffs

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Speaker 1: that discourage offshoring and block Chinese imports. His ideas, though,

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Speaker 1: would cause more harm than help to the economy. Hillary

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Speaker 1: Clinton proposes tax credits for companies that offer profit sharing.

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Speaker 1: She would also make work more attractive, especially for women,

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Speaker 1: with paid family leave and federal funding of preschool programs.

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Speaker 1: She's on the right track, but could do more with

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Speaker 1: tax credits that help with childcare, that reward workers who

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Speaker 1: upgrade skills, and that encourage companies to form German style

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Speaker 1: works councils, which have been shown to increase productivity. The

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Speaker 1: fate of the American middle class depends more on these

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Speaker 1: kinds of solutions rather than speeches at the factory gate.

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Speaker 1: I'm Paula Dwyer, an editor with Bloomberg View. For more

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Speaker 1: Bloomberg commentary, please go to Bloomberg View or view go

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Speaker 1: on the Bloomberg terminal. This has been Bloomberg View and

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Speaker 1: Bloomberg view commentaries can be heard hourly weekdays. I'm Bloomberg Radio.

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Speaker 1: Headlines out on City Group a little bit confusing, so

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Speaker 1: I want to step carefully here. The CFTC orders City

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Speaker 1: Bank to pay two hundred and fifty million on attempted

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Speaker 1: manipulation within the foreign exchange market and very critically and

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Speaker 1: this involves sawhow Japanese affiliates as well a hundred and

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Speaker 1: seventy five million dollar penalty as well. All of this

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Speaker 1: blended in to Yen liebor and euro yen taiebor rate rigging.

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Speaker 1: It is very unclear. We'll have much more on this

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Speaker 1: these headlines, Mike just out in the last four minutes.

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Speaker 1: It seems to be two separate events for City Group

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Speaker 1: in City Bank involving two d and fifty plus a

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Speaker 1: hundred and seventy five million. I believe the math on

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Speaker 1: that's four hundred million will have much more on this

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Speaker 1: through uh the day? Was that was that as unclear

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Speaker 1: as I could make it, Mike, I try alive math

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Speaker 1: problem for you there. Got right to kwaidros Is with

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Speaker 1: us trevardi Que economics, and we're catching up on the

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Speaker 1: US economy. It's obviously the center of the Fed's decision

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Speaker 1: in either June or July to go ahead with a

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Speaker 1: radio increase if that's what they do. Uh. Their v

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Speaker 1: who is expressed in the minutes, Kindred, was that things

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Speaker 1: were getting better in the US economy, and so i'd

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Speaker 1: like to get your your take on that. Your assessment

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Speaker 1: of the economy. Is it significantly better? Is it stable?

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Speaker 1: How would you describe things these days? Well, I think

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Speaker 1: that we're seeing continued moderate growth, and I think that

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Speaker 1: the FEDS comments from its minutes are relative to its

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Speaker 1: perceived slowing in the economy that happened in the first quarter,

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Speaker 1: which I don't believe actually happened. I think that they

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Speaker 1: pay too much attention to the initial readings on GDP growth. UM.

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Speaker 1: There's only some people at the FED, like John Williams,

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Speaker 1: who acknowledged this problem that there appears to be with

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Speaker 1: the semial adjustment factors in the first quarter, and so

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Speaker 1: that the FED grew quite pessimistic about the economy in

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Speaker 1: the first quarter and what I think was flawed analysis.

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Speaker 1: UM and now has sounds more more optimistic. But you know,

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Speaker 1: as we look ahead too, what their policy decisions are

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Speaker 1: are going to be in June July. UM and I

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Speaker 1: think this is quite unfortunate. But it seems like they

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Speaker 1: will hang on the jobs report that's out next Friday,

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Speaker 1: and I think it's a it's a terrible idea for

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Speaker 1: the FED to determine policy on just the latest report. Um,

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Speaker 1: the jobs reports for the last several months have been

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Speaker 1: pretty solid. We've been maintaining this trend of two jobs

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Speaker 1: per month on average over the last three months. But

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Speaker 1: but the main report that's out on June one is

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Speaker 1: probably going to weigh very heavily on their decision on June. Uh.

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Speaker 1: What about the idea that basically the FED has made

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Speaker 1: up its mind to have higher rates and therefore it's

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Speaker 1: not a question of what data will convince the FED

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Speaker 1: to move, but if there are any data that will

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Speaker 1: convince the FED not to move, I don't think that

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Speaker 1: that's the case. And of course we'll we'll learn a

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Speaker 1: lot more. We've heard from a number of the FED presidents.

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Speaker 1: We've heard very little from the governors, and we'll hear

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Speaker 1: from one of them tomorrow when Pal delivers his speech,

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Speaker 1: and then most importantly from Janet Yellen, who's speaking after

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Speaker 1: the jobs report on on June six. And I don't

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Speaker 1: think that they've made up their mind. Um. I think

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Speaker 1: that it will will depend on the data, and as

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Speaker 1: I said, I think it's unfortunate that it depends most

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Speaker 1: most likely just one report. But if we were to

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Speaker 1: get in a week jobs report for May um, which

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Speaker 1: of course could then be revised over the next couple

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Speaker 1: of months, and the report is very volatile for months months,

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Speaker 1: but if the initial print were to be low on

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Speaker 1: on job growth, uh, then I think it's quite rightly

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Speaker 1: that the FED will take a passenger June. I don't

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Speaker 1: expect that to be the case. I think we'll likely

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Speaker 1: see a fairly solid report and and that will result

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Speaker 1: in the said moving in the middle of next month.

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Speaker 1: Kind of well, we all know we live within the

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Speaker 1: great distortion of low interest rates. We've got the buyer

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Speaker 1: months Santo, a game playing out within negative right Europe

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Speaker 1: is well, do we risk malinvestment over investment, whatever you

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Speaker 1: want to call it, if we have a run rate

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Speaker 1: of low rates for years? I think we do. I

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Speaker 1: think there's likely to be distortions from the FED policy,

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Speaker 1: which I don't think is appropriately paid placed. Um. The

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Speaker 1: FED is focusing on too many variables and is and

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Speaker 1: not just on the variables that matter and the variables

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Speaker 1: that it's mandated to follow. UM. For for for, I think, unfortunately, UM,

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Speaker 1: we have a FED that has conditioned people to think

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Speaker 1: about two percent growth, which is the path that we've

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Speaker 1: been on UM. Despite the quote un quote of volatility,

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Speaker 1: two percent growth has seen the same whether we were

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Speaker 1: last year in the uneplommer it was five point seven percent,

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Speaker 1: inflation was zero versus now when inflation has risen too

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Speaker 1: close to one percent and the undeployments fall into five

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Speaker 1: percent UM, and yet we have policy that's positioned about

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Speaker 1: the same. We've had a twenty five basis point rate

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Speaker 1: hike UM. So I think that to me, that suggests

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Speaker 1: that that policy is not appropriately placed relative to the economy.

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Speaker 1: And I think that that's going to to some some distortions.

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Speaker 1: There could be built up in in risks in the

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Speaker 1: financial sector, there could be UM. And I know that

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Speaker 1: this seems remote at this point, but and I don't

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Speaker 1: think inflation is going to be a problem UM. But

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Speaker 1: we could see inflation rise by more than the FED

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Speaker 1: as expecting and the results of that might be the

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Speaker 1: FED feeling like it needs to get more aggressive. And

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Speaker 1: that's the kind of thing that in the past. The

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Speaker 1: FED is argue it wants to avoid But the way

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Speaker 1: you avoid that is continuing to normalize policy and not

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Speaker 1: pause every time there's something that worries you. The growth

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Speaker 1: rate of the economy seems to be stuck in the

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Speaker 1: two percent range. We used to call that the new normal.

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Speaker 1: Now it just seems like it's been long enough that

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Speaker 1: we call it the normal. Tom And if if this

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Speaker 1: is the normal, Conrad, then what's the appropriate interest rate setting? Well,

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Speaker 1: you know, again, I think we need to consider that

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Speaker 1: two growth rate that we've been seeing relative to the

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Speaker 1: potential growth rate of the economy, which has come down. Um.

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Speaker 1: You know that I think would be very unlikely that

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Speaker 1: the unoplumber rate would have fallen to the extent that

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Speaker 1: it has. Um if the potential growth rate was above

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Speaker 1: two percent. I don't think it is so two percent

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Speaker 1: is moderate growth. It would be great if we could

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Speaker 1: see the potential growth rate of the economy rise, but

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Speaker 1: that's not something that the FED can do. That we

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Speaker 1: have an environment of a very low productivity growth. Um

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Speaker 1: and uh, you know, I think that there are some

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Speaker 1: policies that could support stronger productivity growth, but I don't

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Speaker 1: think that the fed has any tools to do that.

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Speaker 1: I kind of read acrotis. Thank you so much for

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Speaker 1: the briefing with our d Q economics. Uh this morning, Michael.

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Speaker 1: We got a firestorm of response from Mr Ross's appearance

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Speaker 1: this morning. Yeah, firestorm. A lot of people um interested

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Speaker 1: in his investment advice and certainly people debating his political choices.

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Speaker 1: The political choices as well. We are balanced. We went

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Speaker 1: to our rolodex. The surveillance rolodex is eight inches in diameter.

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Speaker 1: It's one of those old rotating things. Nixon was president

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Speaker 1: and we went in there, Mike, and we looked for

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Speaker 1: a Democrat. We tried to find one Democrat in the

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Speaker 1: surveillance rolodex. We were successful. This is coming up in

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Speaker 1: our next hour. We will speak to someone about a

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Speaker 1: mystery guest about democratic politics. This after Wilbur Ross and

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Speaker 1: his support of Mr Trump. Always interesting Bloomberg surveillance