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

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Speaker 1: d C, Bloomberg to Boston, Bloomberg twelve hundreds to San Francisco,

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Speaker 1: Bloomberg to the Country Series Exam Channel one ninety and

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Speaker 1: around the globe the Bloomberg Radio Bloomberg dot Com. This

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Speaker 1: is Bloomberg Surveillance. Good morning. It is eight thirty All Street.

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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: two three six three eight, or visit Commonwealth dot com

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Speaker 1: to learn more. No numbers right now, but at ten

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Speaker 1: we get a very key number, the I S M

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Speaker 1: Manufacturing number for the month of April, due to come

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Speaker 1: in at four according to the consensus of economists surveyed

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Speaker 1: by Bloomberg. The number in March was fifty one point eight,

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Speaker 1: so a slight decline. Will be watching the New Orders

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Speaker 1: Index eight three, relatively high UH in March, and we'll

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Speaker 1: see what it is in April. And you nailed it, Mike,

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Speaker 1: as you always do. Beneath the headline number. Pros like

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Speaker 1: you look at the minutia. Do I care about prices paid?

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Speaker 1: Does that end bail? Uh? It adds a little value

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Speaker 1: in the sense of it gives you, I mean an

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Speaker 1: indication of of cost pressures and if they're rising, that

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Speaker 1: would lead possibly to inflation down the road. I mean

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Speaker 1: at fifty two where they are now, it isn't a

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Speaker 1: big deal, but but we'll see the The interesting number

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Speaker 1: this morning was the p m I number UM in Europe.

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Speaker 1: Eurozone manufacturing rises to seven from fift five, So a

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Speaker 1: slight improvement in Europe. And that's the that's the question, uh.

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Speaker 1: And that's the question we are now going to put

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Speaker 1: to a Brett Ryan. He's a Deutsche Bank economist covers

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Speaker 1: the United States for Deutscha. Are we seeing the wild

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Speaker 1: get a little bit better than it was in the

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Speaker 1: first quarter where we saw sort of a global manufacturing

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Speaker 1: slump and in general punk economic conditions. Bread. Yeah, I

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Speaker 1: think we've What we've gotten is the essential bank policy

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Speaker 1: reaction to the volatility in the first half. In the

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Speaker 1: first quarter of the year, We've had actions to kind

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Speaker 1: of stabilize currencies here, and I think that's now it's

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Speaker 1: up to the data just kind of prove that it worked. Right,

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Speaker 1: So you've had Bank of Japan, you've had Europe. Europe

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Speaker 1: takes some further using measures fed hit the pause button

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Speaker 1: and and rightly so and so now we kind of

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Speaker 1: wait and see if the data react and if conditions,

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Speaker 1: the improvement in financial conditions results uh in better activity

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Speaker 1: unfortunately for US. For the US in the near term

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Speaker 1: when it comes to manufacturing, we still see some headwinds. UM.

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Speaker 1: You know, the dollars come off a little bit, it's

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Speaker 1: down to five percent from its peak, but you're still up,

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Speaker 1: you know, substantially about from a couple of years ago.

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Speaker 1: So for the for the manufacturing I s M today,

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Speaker 1: we're actually expecting a forty nine reading and it's a

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Speaker 1: sort of in line with what we saw last week

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Speaker 1: with Chicago pm I, which is barely back into a

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Speaker 1: positive territory unfortunately fift around fifty UM. And the other

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Speaker 1: thing that's weighing on manufacturing in the US is the

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Speaker 1: the inventory overhanging in the US. So we have elevated

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Speaker 1: inventories to sales ratios and so some of that inventory

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Speaker 1: needs to be worked down and that's going to weigh

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Speaker 1: on production at least for the next month or so.

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Speaker 1: So we're not we're not sort of out of the

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Speaker 1: woods yet when it comes to manufacturing, and then globally,

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Speaker 1: when you kind of look around the look around, you know,

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Speaker 1: the p M I s are all you know, around

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Speaker 1: fifty and these aren't fifty five readings that would be

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Speaker 1: you know, signify a stronger manufacturing recovery. Believe China was

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Speaker 1: around fifty. It's it's latest reading as well. And I

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Speaker 1: think that's a key and that a lot of economists

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Speaker 1: are falling right there, that is there a new normal

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Speaker 1: in manufacturing. So there's a new normal in in what's

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Speaker 1: a reasonably good I S M number. Um. You know,

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Speaker 1: these these are these are industries that that are measuring momentum,

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Speaker 1: right so you know, they're always gonna, uh, they're gonna

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Speaker 1: when the when things are starting to pick up, it'll

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Speaker 1: it'll show up in these higher numbers. And I think,

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Speaker 1: you know, just for for the moment, we're hanging out

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Speaker 1: right around just barely positive, and you know, you want

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Speaker 1: to see you'd like to see these things accelerate further

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Speaker 1: into the fifty five type type arrange to get uh,

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Speaker 1: you know, confirmation that that things are starting as normalized

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Speaker 1: again within manufacturing. But at the moment, it's just there's

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Speaker 1: been weak global demand UM. And this is you know,

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Speaker 1: stemming from from issues in China and Europe. Uh. And

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Speaker 1: the strong dollars certainly hurt US exports. Now how much

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Speaker 1: so does matter what? On Friday? What's the Deutsche Bank

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Speaker 1: call for pay rolls? That's what the FEDS seems most

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Speaker 1: concerned about, right the Feds. The FEDS mandate is inflation

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Speaker 1: and then um fully a full employment. So uh, we're

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Speaker 1: actually looking for a weaker number of the consensus. And

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Speaker 1: there's been a couple of things that have been kind

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Speaker 1: of disconcerting to US. UM. One, we had growth in

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Speaker 1: the first quarter of only five you know, five tenths,

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Speaker 1: and yet the labor markets seem to remain fairly strong,

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Speaker 1: and we're not quite sure how that squares um. You know,

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Speaker 1: wire corporations hiring at such a fairly robust rate when

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Speaker 1: the economy is not growing that fast, and so we

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Speaker 1: think we're kind of due for a disappointment soon. And

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Speaker 1: the second thing is we're watching tax receipts which are

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Speaker 1: every day with held income taxes deposited the us not great,

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Speaker 1: not great. Growth rates decelerated over the past few quarters. Uh. Yeah,

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Speaker 1: these are the things that are just have us, you know,

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Speaker 1: are have raised our ant and we just we a

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Speaker 1: little bit more hesitant to you know, to declare the

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Speaker 1: all clear. Just Yett, Ryan, thank you so much. With

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Speaker 1: che Bank and Joelifornia's team as well. Uh. Features up

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Speaker 1: for down Features up thirty one. I'm gonna call it

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Speaker 1: a churn to the market. But Mike, it really underscores

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Speaker 1: the interesting point where we are, Mike, is they're a

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Speaker 1: consensus belief that we have left the first quarter behind.

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Speaker 1: And what you're so good at is the timing of

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Speaker 1: the data through the quarter. Are we at the when

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Speaker 1: when you get to know what the second quarter really

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Speaker 1: looks like. We don't know if there's a roy too early.

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Speaker 1: It is early, but the consensus is we're going to

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Speaker 1: see a rebound. There seems to be a feeling that

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Speaker 1: there's a seasonal adjustment problem with the first quarter. Yeah,

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Speaker 1: and look at what happened in the fourth quarter. The

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Speaker 1: initial print for g d P was and we're much

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Speaker 1: higher than that now, so things are likely to get better. Yeah.

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Speaker 1: It was really a nuanced conversation earlier this morning, you

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Speaker 1: and John Herman going over some of these distinctions. I

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Speaker 1: thought that was really quite good. The yen a little

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Speaker 1: bit stronger. One oh six. All right, let's check in

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Speaker 1: with Michael Barnow and get the latest world and national headlines. Michael, Mike, Tom,

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Speaker 1: thank you very much. Secretary of State John Kerry is

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Speaker 1: in Geneva for more talks to restore the broken down

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Speaker 1: truce in Syria. Kerry says we're getting closer to a

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Speaker 1: place of understanding, but we have some work to do.

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Speaker 1: We are talking directly with the Russians even now. The

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Speaker 1: hope is that we can make some virus. Saudi Foreign

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Speaker 1: Minister Adu al Gibert called the situation in Aleppo and

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Speaker 1: outrage and a criminal violation of humanitarian law that he

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Speaker 1: blames on Syrian President. The Sira Shan School District officials

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Speaker 1: in Detroit now say eighty seven of the one public

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Speaker 1: schools will be closed today because of a threatened teachers strike.

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Speaker 1: The teacher union rest yesterday encouraged instructors to call out

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Speaker 1: sink after the district said Saturday that it would not

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Speaker 1: have enough money to pay teachers this summer unless Michigan

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Speaker 1: provided additional funding. Tomorrow is the Indiana primary. Front runners

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Speaker 1: Donald Trump and Hillary Clinton are hoping to have strong

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Speaker 1: wins and knock out their opponents. Global News twenty four

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Speaker 1: hours a day, powered by our It's twenty four hundred

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Speaker 1: journalists and more than a hundred fifty news bureaus from

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Speaker 1: around the world. Michael bar like Tom Thank you Michael

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Speaker 1: for the Bloomberg NBC Sports update. Here's John Stash John

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Speaker 1: Mike as if the Yankees don't have enough concerns and

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Speaker 1: anemic offense and some questionable starting pitching now, even All

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Speaker 1: Star reliever Dylan Betances is in a slump. After not

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Speaker 1: allowing to run over his first nine games, he has

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Speaker 1: given up four runs. The last three games came in

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Speaker 1: Boston last night. Seventh the ant tie score his first

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Speaker 1: pitch hit out by Red Sox catcher Christian Vasquez, who

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Speaker 1: hadn't homeward all year. Red Sox completed the sweep eight

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Speaker 1: to seven. Joe Girardi on wasting the Yanks best offensive

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Speaker 1: games since April eight. It is good to see us,

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Speaker 1: you know, score some runs. Um, you know, Jake had

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Speaker 1: a big night, Alex had a big night. Texas had

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Speaker 1: an RBI and um, you know that's good to see.

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Speaker 1: But modern lines were lost. Lost five in a row.

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Speaker 1: The Mets at one eighth straight cooled off on a

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Speaker 1: cool day at City Field by Madison bum Go under.

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Speaker 1: The Giants won six to one to a synder Guards

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Speaker 1: first lost. Mets now came an a behind Washington Or

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Speaker 1: had a sweep this weekend in St. Louis. Their home

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Speaker 1: tonight for baseball's worst team, Atlanta. NBA Playoffs first rounds

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Speaker 1: over pair of game sevens in the East, one at

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Speaker 1: home by Miami and Toronto. They'll now play each other.

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Speaker 1: Clay Tompson thirty seven points. Golden State easily took Game

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Speaker 1: one from Portland one oh six the Donley Cup Playoffs.

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Speaker 1: The only team up to nothing in San Jose to

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Speaker 1: meeting Nashville. Between the two. St. Louis won four three

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Speaker 1: overtime at Dallas. That's tied at one. The Islanders game

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Speaker 1: through the Tampa Bay is tomorrow night in Brooklyn at

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Speaker 1: the Bloomberg NBC Sports Up Tea. I'm John Stapsha. Genten

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Speaker 1: thinks so much. We look at next responds. Currencies come

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Speaker 1: out of these futures A dance. Don't want to make

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Speaker 1: too big of a deal of it features up five

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Speaker 1: down features up thirty two. The fixed closing Friday from

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Speaker 1: that sevent been down to fifteen point nine three. So

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Speaker 1: the vix um, you know, better than the gloom that

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Speaker 1: we saw a little bit of down closing seventeen thousand,

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Speaker 1: seven hundred seventy three yields in this morning, not like

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Speaker 1: they were two hours ago. But the tenure in a

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Speaker 1: beep one point eight two percent thirty year bond two

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Speaker 1: point six seven percent yield curve flattens a modest amounts

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Speaker 1: three basis points hundred and four point five, just a

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Speaker 1: little bit. I'm wanna call it a little bit of risk, uh,

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Speaker 1: risk off, I should say risk off this morning old

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Speaker 1: oil infractutionally American Oil West Texas forty five seventy per

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Speaker 1: barrel Brent for two. And the story gold gold, gold

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Speaker 1: up eleven dollars. We had a thirteen hundred print now

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Speaker 1: nicely over that. Thirteen zero and ten and ten are

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Speaker 1: the important numbers for you Red Sox record. They're in

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Speaker 1: first place, Oh, you of little faith. Coming up, we're

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Speaker 1: gonna talk about gold one as Tom says James Steele

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Speaker 1: from HSBC, he is the gold guru will find out

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Speaker 1: whether or not there is indeed a big rally ahead.

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Speaker 1: As Jeff Degraff suggested, Global Business News twenty four hours

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Speaker 1: a day at Bloomberg dot com, the Radio plus mobile app,

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Speaker 1: and on your radio. This is a Bloomberg Business Flash

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Speaker 1: to buy Warehouser's pulp business for about two point two

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Speaker 1: billion dollars to add production of the absorbent raw materially

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Speaker 1: used in diapers and other hygiene products. The euro is

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Speaker 1: climbing against the dollar, strengthening through a dollar fifteen for

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Speaker 1: the first time since August. Right now, the euro is

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Speaker 1: at a dollar fourteen ninety two. The yen is at

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Speaker 1: one oh six point five six. We're seeing futures move higher,

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Speaker 1: with SNP E many futures up five points, DOWIE Mini

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Speaker 1: futures up thirty two, and NASA doc E many. Futures

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Speaker 1: up seven dacks in Germany's up nine tenths percent. Ten

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Speaker 1: year Treasury up one thirty second, the yield one point

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Speaker 1: eight two percent. Now I'm ex screwed Oil down three

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Speaker 1: tenths per cent or fourteen cents to forty five seventy

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Speaker 1: eight of Arrel Comics Gold is up seven tenths per

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Speaker 1: cent or nine dollars to twelve ninety nine seventy announced.

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Speaker 1: Alian said profits searched twenty one percent in the first

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Speaker 1: three months of the year, and the insurer reiterated its

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Speaker 1: twenty sixteen targets. Alliance is scheduled to report full first

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Speaker 1: quarter earnings on May eleven. It shares her up two

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Speaker 1: point two percent in German trading. That's of Bloomberg Business Flash,

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Speaker 1: Tom and Mike Karn, thanks so much again. Futures up five.

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Speaker 1: It is on Wall Street. The following is from Bloomberg View.

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Speaker 1: Opinions and commentary from Bloomberg columnists. I'm justin Fox, a

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Speaker 1: columnist for Bloomberg View. Washington's met trow, the country's second

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Speaker 1: busiest rapid transit system, has been having a tough year.

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Speaker 1: In March, the whole system shut down for a day

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Speaker 1: for emergency repairs. Soon after, a top official warned that

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Speaker 1: entire lines might need to be idled for up to

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Speaker 1: six months. Train delays a rampant, and ridership has been

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Speaker 1: declining since two thousand and ten, even as the region's

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Speaker 1: population grows. There are many reasons for these problems, but

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Speaker 1: one of them is lack of resources. Fares don't cover

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Speaker 1: operating costs, and Metro has to go to the governments

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Speaker 1: of Maryland, Virginia, and DC every year to ask for money.

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Speaker 1: It is the only major transit system in the US

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Speaker 1: that has no dedicated source of tax revenue. It Metro

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Speaker 1: is generating tons of tax revenue. Study after study has

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Speaker 1: showed that in the Washington area and elsewhere, having a

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Speaker 1: rapid transit station in the neighborhood increases property values, which

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Speaker 1: means more revenue from property taxes. Metro has found a

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Speaker 1: way to tap into this value creation along the new

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Speaker 1: Silver Line to Dulless Airport with special assessments on property

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Speaker 1: near the stations. But there's been a big real estate

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Speaker 1: boom around existing stations too. How about giving Metro so

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Speaker 1: more the money it's generating. I'm justin Fox, a columnist

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Speaker 1: for Bloomberg View. For more Bloomberg opinion in commentary, please

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Speaker 1: get a Bloomberg View dot com or view go on

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

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Speaker 1: View commentary could be here in hourly weekdays. I'm Bloomberg Radio.

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Speaker 1: Can't say enough about Muhammadelarians article today on foreign exchange

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Speaker 1: is last resort for policymakers. Smart, smart effort by doctor Yes,

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Speaker 1: definitely worth a read. He writes a lot, but you know,

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Speaker 1: every once in a while it's just brilliant, and that

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Speaker 1: was one of them. James Steele HSBC said Victory Lap

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Speaker 1: said gold would go to dred. How wrong he is

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Speaker 1: the twelve seventy earlier today, So yes, how right he was.

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Speaker 1: James Steele joining us with a Victory Lap. He has

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Speaker 1: a fundamental analysis, not so much gaming the price of gold.

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Speaker 1: And we're not gonna ask him too much about where

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Speaker 1: gold's gonna go. Uh and Mr Steele, congratulations on a

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Speaker 1: only call months and months ago. Is a supply demand

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Speaker 1: architecture there to sustained gold where it is? Well, First

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Speaker 1: of all, thank you very much, Tom, that's that's that's

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Speaker 1: very gracious of you. Um Uh, well we on on

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Speaker 1: that front. Um, there are maybe some concerns, but but

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Speaker 1: the the we have not seen a great deal of

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Speaker 1: interest this year from China. Uh. The imports are down

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Speaker 1: a little bit year on year, although not drastically so.

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Speaker 1: And India has withdrawn from the market because the price

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Speaker 1: has gone up and people go with the margin. I

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Speaker 1: can't buy it again mostly and we've had a very

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Speaker 1: weak groupee. But also in the case of India specifically, UH,

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Speaker 1: the the the there was a merchant strike six or

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Speaker 1: seven weeks in in reaction to the government putting on

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Speaker 1: one percent excise on gold and jewelry I uh sales items, Mike,

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Speaker 1: in addition to the ten percent paraffon on on bullion works.

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Speaker 1: By the way, Okay, so Mike, the mayor of New

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Speaker 1: York Mr. To Plasio, or the Governor of New York Mr. Cuomo,

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Speaker 1: or the president can put a tariff so that you

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Speaker 1: and I don't have to deal with Tiffany's and we're sorry, sorry,

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Speaker 1: my dear, I couldn't buy you gold. Earlier on the show, James,

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Speaker 1: we had were doing for the current count Oh he has, yes,

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Speaker 1: he has definitely done that. Jeff de Graph from restaurance Macro.

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Speaker 1: He's a technical guy, said the technicals suggested that gold

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Speaker 1: would continue to rise. Actually, you know, he predicted a

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Speaker 1: rather strong rise, but he said nobody knows really why.

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Speaker 1: And so I'll ask you, does can gold keep going

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Speaker 1: up from here? And if so, what drives it? Well?

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Speaker 1: I think much will depend on the dollar and and

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Speaker 1: and that's what we've seen this This has been two

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Speaker 1: three important things have rallied the market this year. And

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Speaker 1: just touch on on something that that Tom and I

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Speaker 1: had previously spoken about. The gold declines last year and

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Speaker 1: the year before. We're predicated on shar interest rate rises

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Speaker 1: this year of around four times by the Fed and

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Speaker 1: at least twice last year. We only got one rise

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Speaker 1: last year. Now we may only get two increases this year,

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Speaker 1: maybe even not. And and so therefore the gold market

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Speaker 1: is effectively recalibrating. It is, it is taking back the

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Speaker 1: losses that it made an anticipation of a much higher,

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Speaker 1: of a much deeper FED trajectory. And and that is

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Speaker 1: the essence I think to the rally. This has been

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Speaker 1: supported by what you were just talking about earlier, um,

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Speaker 1: the decline in the dollar. Uh, the the the euro

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Speaker 1: is a good way to look at it. It's the

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Speaker 1: world second reserve currency, and gold tends to move fairly

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Speaker 1: closely with it um and that is now over back

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Speaker 1: over one fourteen, which is very supportive of of the

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Speaker 1: gold market. As long as the dollar remains on the

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Speaker 1: defense of not just to the Euro but also to

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Speaker 1: the end and and some emerging market currencies, than the

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Speaker 1: outlook for gold will continue to be good. But what

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Speaker 1: I would just caution is that the physical end of

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Speaker 1: the market is not responding, or is responding by by

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Speaker 1: pulling back. And this is uh effectively a type of

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Speaker 1: sticker shock. Um. It's getting progressively expensive for people in

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Speaker 1: the emerging world to buy gold. It's where most of

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Speaker 1: the physical gold is brought. So we have something of

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Speaker 1: a diconomy right now. The investment demand is quite strong,

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Speaker 1: but the underlying physical demand is pulling back. Well. It

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Speaker 1: could be interesting because if if then the FED were

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Speaker 1: to surprise, if we get some good economic numbers and

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Speaker 1: all of a sudden the markets decide the FED is

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Speaker 1: back in play, could we have some serious volatility. I

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Speaker 1: think that's a fair comment, yes, And and that's another

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Speaker 1: reason why you've got to be a bit wary of

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Speaker 1: the upside when the rate rises come whenever they do

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Speaker 1: the FED that the gold market might react. Now, we've

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Speaker 1: already seen one FED increase in December and that actually

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Speaker 1: coincided with pretty much the low of the market. And uh,

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Speaker 1: some empirical evidence shows that the gold market tends to

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Speaker 1: weak and going into a FED rate rise, but then

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Speaker 1: rally for the next twenty trading days. If you take

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Speaker 1: Pepember as that as that level, then we're just about

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Speaker 1: exhausted through that. Well, what the what the A lot

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Speaker 1: of the public doesn't know, and particularly the gold bugs

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Speaker 1: and all that. No, is that the partition of the

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Speaker 1: industry in analysis of the medal, the evil medal is

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Speaker 1: very careful. You're a fundamental guy looking at fundamental trends.

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Speaker 1: Are you a friend of the gold bugs right now?

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Speaker 1: Or have we seen this James Steele rally for reasons

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Speaker 1: totally removed from what gold bugs look for. Well, there

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Speaker 1: sometimes can be a rather excitable element in the gold market,

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Speaker 1: and it's often tied to you know, worries, maybe excessive

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Speaker 1: worries about what's what's going to happen. And I said

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Speaker 1: out there, now, um, there's always an element of that,

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Speaker 1: but I I believe that most of this rally is

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Speaker 1: funded on pretty much a good reaction in the paper market.

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Speaker 1: It's too negative interest rates. Uh, and to the lack

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Speaker 1: of Fed FED increases and two dollar weakness. You know

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Speaker 1: what is interesting is if you look at the negative

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Speaker 1: indust rate argument, it's also very bullish for gold. Um.

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Speaker 1: The distress factor gold has is always weakened by opportunity

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Speaker 1: costs if rates are too high, and if you have

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Speaker 1: negative rates, then that removes that argument. Um, and you

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Speaker 1: also have the way to yield curve reacts under negative

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Speaker 1: interest rates is also positive for gold. And what is

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Speaker 1: interesting is if you look at the issuances of bonds

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Speaker 1: with negative rates, they began in full swing in December,

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Speaker 1: and that is when the gold market bottomed. So keep

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Speaker 1: your eye on negative rates. It's something we don't look

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Speaker 1: at in the US much because we don't have them,

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Speaker 1: but around of the world's GDP is under a negative

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Speaker 1: interest rate regime and that is positive for gold. James Steele,

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Speaker 1: thank you so much with HSBC gold here at Mike.

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Speaker 1: Is it appropriate that I have a correction just that

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Speaker 1: I mean I had to get a new boy. Russell

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Speaker 1: saves the day. Tom Keene, you idiot. The VIX is

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Speaker 1: now quoted in real time in the morning. So I

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Speaker 1: was quoting the VIX earlier, and because my eyes are

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Speaker 1: still glazed over from all the room I drink and

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Speaker 1: I couldn't see on my bloom bird, which correctly shows

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Speaker 1: the VIX is a real time number pre fifteen point

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Speaker 1: eight seven right now up point one seven. The VIX,

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Speaker 1: according to Russell in forming me out on Twitter, trading

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Speaker 1: from three fifteen am East Coast time, you've got to

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Speaker 1: get up pretty early in the morning to get Tom keen,

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Speaker 1: And apparently Russell did. But but Russell saved the day

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Speaker 1: there at his fifteen point eight the VIX just moved.

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Speaker 1: That changes fifty seven in the morning. That changes everything now, tick.

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Speaker 1: We don't have an opinion on gold. We get tons

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Speaker 1: of mail on it, Mike and I, like everybody else,

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Speaker 1: a differing and I will I will, I will just

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Speaker 1: go on record I say I I never have any

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Speaker 1: idea why gold does what it does, and you have

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Speaker 1: a lot of people who are experts saying they don't

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Speaker 1: know either. One of my first conversations many years ago,

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Speaker 1: the gentleman by names of John Templeton in I've heard

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Speaker 1: of him Toronto, and Sir John whispered to me, Tom,

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Speaker 1: I just don't understand gold, but he did it with

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Speaker 1: a Tennessee I feel better now. Bloomberg's surveillance