New deal. They say they wont talk about that unless you relief sanctions. What is left to sanction . Alix i really couldnt tell you. We are going to break that down and discuss more on that in the next couple of hours. In the markets, it is a little bit of just hanging out. The s p had a record high thursday. Now up by six points. We are just waiting for that g20. Eurodollar up by 2 10 of 1 . Forget about the germany info index just bad. You are see but you are still seeing buying into the bond market. Crude up by 7 10 of 1 . Not as much as you would think compared to the geoPolitical Risk. David absolutely. Time now for the morning brief. Secretary of state mike pompeo travels to india today in the midst of a growing dispute there over tariffs. Tuesday we get u. S. Housing numbers and the treasury options 2 billion into your notes. Wednesday is the first night of the democratic president ial debates. Thursday, major u. S. Banks get the final results of their stress tests. Friday, g20 talks that underway in osaka, japan. It is a very busy week. Lets turn to bloomberg first take. We are joined by mark cudmore and peggy collins. Lets go back to President Trump. He continues to talk a little on both sides of the issue. This is part of what he said. Pres. Trump im not looking for war. If there is, it will be up alliteration like youve never seen before. Im not looking to do that. What you cant have a nuclear weapon. Otherwise, you can have a bad economy. No preconditions. David no preconditions, but no talks yet, either. What do investors do given this level of uncertainty . Peggy i think investors are looking at multiple fronts that are up in the air. We have iran tensions waiting on oil, but we have the focus on china and the u. S. And the ongoing tariff battle. I think investors are basically trying to weigh the Political Risk of all of this, which is really difficult to do. Stocks hit another alltime high last week, so they are not too wary. Alix no. Speaking of, i was covering oil during the arab spring, and i am shocked we are seeing oil at 65. Mark oil is still down over the last month, despite the fact that u. S. Equities are at record highs. Many other Financial Assets are expecting a slowdown in growth from g20. Oil and commodities markets arent. Commodities markets are where the real demand is. This is a great reason for a little bit of a bounce, but no one thinks this will lead to a sustainable bounce unless there is an escalation in the middle east. Alix or unless you get a good deal out of the g20, which is our next story. A compromise will be a twoway street. Is it a twoway risk . Mark i think the main thing i would say is the perspective going into g20 is very different depending on what side of the globe you are on. Over here it is assumed trump will decide whether there will be a deal. In asia, people think china will not find a deal unless there is complete capitulation by trump. In asia, everyone is expecting positive pallet to expecting positive platitudes over the weekend. Over here, people are more optimistic because they know trump would like a deal for the election. I support the asian perspective here. China is in no rush to make a deal. David the question is, what happens to that 300 when he 5 billion of additional chinese imports . President trump says that 325 billion of additional chinese imports . President trump says he will go ahead with 25 tariffs. Peggy weve seen a lot of reporting by asian local news and our own reporting that china is ready for a long march, to dig in and basically say this is important for our country, and we are not going to back down either. The stakes are high for the faceoff between xi and President Trump. David that exist to our third story. In turkey, we had this surprise come out of the election. Around the a second go on the election for mayor. A dodent erdogan wanted over because he lost the first, and lost even worse this time. Peggy it is interesting because our bloomberg reporting is saying that this win is really a big sign of erdogan losing some potential power Going Forward, and potentially even a new person rising in the ranks to potential he take him on. Volatility do a lot for emerging markets, causing them to swing a lot. It is interesting to see how this election might be good for emerging markets, at least for the next few days. Alix sell into the news . Mark i dont think this is a game changer. Never write off erdogan. Hes very good at winning elections. There are signs there will be a doubledip recession taylor a doubledip recession. Bloomberg rebalanced its euro index. Year. H lira was 2. 4 last it is now removed from the index. It is losing credibility as a serious financial asset. Investors dont want to pour money into the country, so turkey is going to continue to struggle economically. David my question is what is erdogans next move . He will do something. Mark does he go the more nationalist route, or play to the Kurdish Group . I think erdogan has shown amazing flexibility in the past. Whats an ability to know the electorate wants and changes view without people challenging that changing view. I think erdogan will ultimately come out of this. There is still a sign of some democracy in turkey, and that is good news, but this is not a game changer. Bloombergs mark cudmore and peggy collins, thanks very much. A reminder, you can find all of the charts we are going to use at gtv on your terminal. Browse features and check it out. Coming up, more on how the u. N. Should respond to iran. We will speak to former ambassador to the u. N. Thomas pickering next. This is bloomberg. Viviana this is bloomberg daybreak. El dorado resorts is said to have agreed to buy Caesars Entertainment for a 7 billion in cash and stock. The deal is set to be worth more than 17 billion. It values caesars at about 13 a share. The combined entity would be split equally almost equally, that is, between those companies heads. Today, shareholders and japans biggest brokerage voted to keep their ceo. Hes been under fire since employees leaked market Sensitive Information that prompted regulatory penalties. Nomura sought to placate investors with a 4 billion stock buyback. Today, bitcoin traded above 1000 for the first time in 15 months. Creek the cryptocurrency recaptured facebookstention on push into the space with its recently announced token libra. That is your Bloomberg Business flash. David thanks so much. The standoff between the United States and iran continued over the weekend, with secretary of saying theo u. S. Would impose new sanctions today. C. Pub pao sec. Pompeo we will continue to make it understood that we will deny fundthe resources to terror and build out their nuclear program. David with us is former u. S. Ambassador to the u. N. Thomas pickering. Lets start with the un security council. The United States was to take this issue to the un security council. Is there anything reestablish thickly is there anything realistically we can expect . I think neither russia nor china will join us. They have opposed the trump pressure campaign. Everyone should go back to the fact that we walked out of the comprehensive plan of action, which has been limiting irans capacity to move toward nuclear and opened the door for iran to do things, and then we increased the pressure by putting sanctions on, including one agreement the iranian in which iran is allowed to. Uranium enriched david lets go to that. You heard secretary pompeo saying we would stop them having nuclear weapons. Is that doable you know i really is that doable unilaterally . The success the Obama Administration had in using sanctions meant to that they were you in sanctions often they were un sanctions, often. It has the capacity to say to people, you do business with iran, you can do business with us. That has a pretty broad scattering of effectiveness. There is a very strong u. S. Capacity here to put economic pressure on iran, and that is what it is doing. To say that it will be totally successful is very difficult in the absence of negotiations. The president seemingly has wanted negotiations with iran, as high a level he can get with he himself involved. That does not seem to be taken up by iran because they say how can we trust somebody whos walked out of an agreement with us to do a new agreement one way or another, and why should we ever negotiate with somebody like that . Alix the sanctions that were put on a little bit aco have crippled the economy and exports. Does the u. S. Need europe Going Forward . How did they get them on board with this . Thomas i think the u. S. Should have europe on board to achieve any effectiveness with sanctions. Europe has made its own views clear, that it is going to continue in the agreement with iran, something that at least 50 of the time come the u. S. Seems to want. They want to hold iran responsible for the obama agreement, and want to punish iran if it gets out of the agreement. This is all, in some ways, very confusing in terms of the strategy being pursued here. The europeans are under pressure to do two things, not to comply with the iran agreement with gotten out of on the one hand, and at the same time, being pressed not only to put sanctions in place, but potentially join us in a war with iran should iran violate the obama agreement. To me, this raises a serious questions. Are people in washington really think about what they are doing . David youve seen a lot of sanctions imposed over the years. When have they worked, and when have they not . Which category does this fall into . Thomas sanctions work both if they are universal and if they come in a situation, as it happened in the obama circumstances, where two prior steps had taken place. One is the iranians had badly screwed up their own economy. The second was this came after we started sanctions, that the oil price declined in the world, for reasons having to do with a lot of other factors, including u. S. Fracking. That has been a situation in which sanctions have had some effect, and we know that. The iranians, however, have always responded to pressure by trying to find a way to up pressure against us. In the obama days, it was to increase the number of centrifuges and enrichment of uranium they were engaging in. That is something they have said they are about to do june 27. Is supposed to exceed the limits in the obama agreement by june 27, and that is another question because any violation of an agreement is a serious problem. David ok, mr. Investor. Thank you for joining mr. Ambassador. Thank you for joining us. Alix geopolitical tensions playing out in the oil market. You got a three week high, though still subdued. Joining us is superior strategies head of macro strategy. Guest i think there is a real risk of escalation, particularly in how iran operates. Continue with to a serious risk of miscalculation. That would help wti in the process. Alix where is the biggest upside . Peter i think it is both on the bond and highyield side, and even on the equities side. In 23rdthe the etf is 20 below the start of the year. If we turn any part of our to domestic focus into Energy Infrastructure building, that could be good. I see a lot of upside, nothing a lot of the negatives have been priced in. Alix coming up, we are talking about the lira stronger against the dollar on a redo in istanbuls mayoral race. More on what president erdogans next move is and what you might see in the lira. This is bloomberg. David president erdogan of turkey suffered a surprising setback sunday, when the Opposition Party had a resounding victory over his party in a second election of the mayor of istanbul. Our correspondent in his temple. How did the mark in istanbul. How did the markets react over there . The Opposition Party had a landmark victory. The margin of the victory was definitely not expected. The turkish lira seems to have enjoyed the news. There is a rally on the news of the opposition victory that began last night. David so why the rally . Do people expect economic policies will change for mr. Everyone . Mr. Erdogan . R not necessarily. The outlook hasnt changed dramatically, but the election redo was a source of uncertainty. Now that has been removed and a somewhat smooth way. Investors have a reason to sort of cheer, but we dont know how long it will last. Investors will turn their focus on more pressing issues in the rally can come to an end. Alix where does president erdogan go from here . Does he tackle the issue, or does he go more broad . Onur the landslide victory by the opposition infinitely leaves him weekend at home it leaves home. Akened at over hising sanctions decision to buy missiles from russia, which are expected to be delivered as early as the first week of july. Alix bloombergs Turkey Bureau chief, thank you. Onur ant joining us. Ir of academic securities still with us. The lira is waffling here on the highs of the session. What do you do with turkey . Peter i still avoid it. Hes been moving significantly more towards russia, engagement with china. That could be problematic, given the amount of debt that turkey has and how much their bank has outstanding. David insofar as he had strong views on how to run the economy and the central bank, does he have to trim his sails a little bit . Toer either trim his sails relieve the pressure we are feeling, or he doubles down, which weve seen in the past as well. That would be my concern, that he really embraces pressure and pushes us further away. Alix do you feel like the dollar has peaked . If it has come a what does that mean for emergingmarket assets . That it has, what does mean for emergingmarket assets . Peter weve essentially entered a currency war. I think that is going to take some dollar pressure off. Alix so what benefits . Peter most of e. M. Will benefit. Places like india are going to be really interesting. I think south america can rebound, especially if we can clean up what is going on in venezuela. I would just avoid turkey right now. David why do we have a move to dollar as a safe haven . In general, it feels like people have been going into the dollar as the turmoil around the world increases. Peter i think the fed is trying to offset some of that. We had a very strong dollar rally, and the fed is saying we are going to be more easy in terms of Monetary Policy. We are pushing people away, effectively. Ago it was going to be a hiking cycle. How do you view the ecb versus the fed . We see different language coming out and how that plays in the currency market. Peter i think the ecbs hands are tied a little bit. I hate negative rates. I think negative rates are a bad thing. I think they are going to have to do something more like a itro, more qe, where as here think we will see the rate cuts. David where do we see the biggest list for e. M. The biggest lift for em . Peter asia, maybe latin america. I dont see any progress in the middle east or eastern europe. Alix what you stay away from . Peter one, mostly turkey. I am staying slightly bullish. The fed said we are going to help markets, we are going to help chris ask ats we are going to help risk assets. I dont think it is the right trade longerterm, but right now i like energy. I think it benefits from the fed, and because it has underperformed, you might see some ketchup. Alix see some catchup. Alix peter is staying with us. Meetingp, trump and xi this week at the g20. How you traded. This is bloomberg. Alix this is bloomberg daybreak. You made it to monday, and now youve got to make it to friday. Markets in a Holding Pattern until we get to the g20. 1 10, but still at its best june so far since 1955. I feel like the statistic will really be on the g20. European stocks a little light, in part because auto stocks are really rolling over. You are buying stocks, some bonds, and fell on the dollar. Eurodollar up by 2 10 of 1 . Yields are at 31 basis points, down by about three basis points. We are looking at another record for the bund yields. Here in the u. S. , 2. 03 is where we print. I dont know how you interpret that. Equities,nds and u. S. And sit and hold until the g20. David now lets get into headlines outside the business world. Viviana hurtado is here with first word news. Viviana Boris Johnsons biggest conservative rival is accusing him of being a coward. Jeremy hunt says johnson is ducking public scrutiny by not noteing to on a by agreeing to appear in a televised debate tomorrow. Johnson is under pressure to address a do mystics butte to address a domestic dispute that led to police being called to his london home. A panel will vote on if tele and conway will testify this week if Kellyanne Conway will testify this week on alleged hatch act violation. Hong kong protesters are planning another rally on wednesday ahead of the g20 quiet, as china seeks to any discussion of the demonstrations. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im Viviana Hurtado. This is bloomberg. David thanks so much. Lets stay in asia with the g20. Those meetings have everyones attention, as trump is expected to meet president xi of china, and what that could mean for u. S. china trade relations. Markets are clearly looking for the trade issue. It is really a lot of contingency on does trade get better or worse. Japan is quite important because they have the ability to reset expectations. As long as theres not a lot more negative news, we think that will be constructive. You could see in into the trade war. I think eventually you could see an end the trade war. I think we will eventually have a deal with china, but i dont ticket will come directly out of the g20. David we welcome now shawn donnan from tokyo, over there for the osaka meeting. We appreciate your coming on with us this morning. Set the stage for us. You heard a range of expectations. What should we be expecting . Reporter that range of expectations really speaks to the uncertainty. This is a pretty unique event if you think about the history of these g20 summits. They tend to be very dell, highly choreographed affairs. This one is anything but because of the highstakes meeting at the center of it between trump and xi. It is a pretty binary thing. They either come out of this with a pause on tariffs and an agreement to resume negotiations, or they go on towards a path of further escalation, which no one is going to like. David it is actually not the g20 at all. It is really about this bilateral meeting. What do we know about it . Has a time and a date been set . Shawn that is the fascinating thing. We do not yet know the time or the date of this meeting. What i heard from the administration is that they were still working out the details. We heard that again from the chinese today, who were saying they were still trying to work out the details. My sense is it is all going to come together fairly quickly toward the end of the week, when Bob Lighthizer and secretary Steve Mnuchin land here. They will go into a preparatory meeting a bubbly early on friday, possibly late on thursday meeting probably early on friday, possibly late on thursday. Alix you mentioned the chinese response, the comers head talking about it being a twoway street. They have to come to the table as equals, all of that. Is that something the u. S. Has to buy into, and will they do that . Shawn that is a really interesting question, and it is hard to see the u. S. Giving much ground here. Both sides, when these talks broke down in the middle of may, have pointed the finger at each other, and have been doing that ever since. They really havent talked much sense. The chinese were saying today that we need to meet halfway. There needs to become a vase on both sides. The Trump Administration there needs to be compromise on both sides. The Trump Administration has really been holding the line on this demands. One of the big differences we have between this meeting and the one at what is aires is there is and the one at one iresires at buenos a last year, they really agree they need to Start Talking and make that room for compromise. It is not clear that either of them is ready to do that. Donnan,loombergs shawn thank you for joining us from tokyo. Still with us is peter tchir of academic securities. S, treasuries,nd dollaryen, gold. Is this a trade for this week . Peter i think so. I think we will see some sort of extension. We will talk about negotiating. I dont think we are close to a deal, but i thing it will be enough to calm the markets. I dont think any disappointment is really going to push hard on markets, but i dont think we will have a big rally. David it is interesting geopolitics are negotiating down the price in the markets. Maybe they wont put on the full 25 . Weve really discounted the expectations already. Peter right. I think expectations are very low. If we get something really positive, i think we see equities rally. I just dont know that we can see treasuries selloff a lot given how dovish the fed was last week. Alix do you think what happens friday determines what happens at the fed in july . Peter possibly. How negative it comes away. , is it us is key is versus china or the world versus china . I would like to see a global effort to say we are going to work together. That would be highly encouraging towards a deal. I think we walk away with the of. As an island to the rest the world, and that is negative for markets. Our team is saying it could be a very substantial hit for the Global Economy. The u. S. , thee is yellow is the chinese, but the blue is the global. I think it hits autos fairly heavily across the globe. As we saw from earnings out of germany, the market is having its own troubles. I thing it would be very bad to put on these full tariffs. I think the damage to markets would be too much. I think trump has to maybe put on some tariffs, maybe reduce the number of things we put tariffs on. If he goes along with what he said, i think we have problems. Alix what do you do in the market right now . Peter remain cautious, put yourself a little underweight. I think you look for assets that are underappreciated like the energy sector. Alix if you look at where we saw Corporate Credit any money flowing in last week, it was bb and bbbs. Do you think that continues . Peter i do. People got way too concerned about bbb last year. Youve seen a big turnaround and some of the big market cap structures. I think people are realizing this was way overdone. We are the lowest all in yields on the bloomberg aggregate index. Because peoplet are still cautious about the lower end of the yield. It will benefit a lot from the treasury rally. David talk about the triple we the bbbs. If we have a trade war and it diminishes global growth, that has really got to hurt corporations. Peter if you want to think really wonky, that credit is really a put the company, right now the strike is so far away, equities have to bear the bulk of that. I think credit is going to be fine. You could see a significant decrease in equities. We are so far away from that strike that they are going to behave very well. David thank you so much for being with us today. Coming up, bitcoin rises above 11,000 for the first time in 15 months. More on that next in todays wall street beat. Alix if you are heading out, make sure to tune into bloomberg xm radioard on sirius and the Bloomberg Radio app. This is bloomberg. Viviana this is bloomberg daybreak. Coming up in the next hour, former congresswoman jane harman , wilson sister president and ceo Wilson Center president and ceo. Heres your Bloomberg Business flash. Agrees to sell a stake in its china unit for nearly 700 million in cash. Is primarily an electronics retailer. Lufthansa is investing its dividend policy a week after issuing a second profit warning this year. Europes Biggest Airline will pay out a regular dividend of 20 to 40 of its adjusted net income, nearly double its previous range. Lufthansa is struggling with the european fair war that has been european fare war that has been squeezing profits. Financier george soros and facebook founder chris hughes are among those signing an online letter that supports narrowing the countrys wealth gap by taxing the richest 1 of americans. U. S. Federal reserve data shows over the last 30 years, that group saw its net worth grow by 21 trillion as the bottom 50 fell by 900 billion. That is your Bloomberg Business flash. Alix does that make a difference to politicians when they hear the billionaires sending a letter . David it certainly doesnt discourage them. So has come out on this, and has Elizabeth Warren saying there should be an annual wealth tax. Although, remember Warren Buffett had one that went nowhere . Wholealso, maybe the idea of get out in front meant cash in front of it idea of get out in front of it. They want all candidates to support a moderate wealth tax on the richest 1 of richest 1 10on the of the richest 1 of americans, not lower income americans. I like the moderate tax. David im not sure you will get Many Republican candidates going along with that. Alix lets turn now to wall street beat. First up, malaysia takes goldman to court. The next pretrial hearings for the case is september 30. Natixis enters crisis mode. And bitcoin bounces back, trading at 11,000 for the first time in 15 months. David we welcome now sally basak we welcome nelson ali we welcome now so and we welcome now sonali basak. Does goldman offer a settlement amount . We did offer some composition. Some compensation [laughter] that is not usual for governments. I think Goldman Sachs made quite a killing on this gift. David it is interesting. Hes seeing the whole thing was fraudulent, and goldman helped with that, but even overcharged us for the bonds that shouldnt have been issued in the first place. Sonali it is interesting. Trials and malaysia start 90 they get the complaints, but this is pushing it back quite a bit. It gives everyone a little time to prepare. It is a little longer than we initially expected. David in fairness, what he said was that goldman offered 250 million. That is not nearly enough. Sonali and certainly not what they made on the deal. Courts in malaysia will be quite lic as well, so david im not sure i would want to be goldman going to court in kuala lumpur. Alix our next story is in the texas is natixis. This goes back to last week when there is outflow in one of their funds. Sonali in the middle of last a lotwe had a story about of liquid assets that were being baked into holdings that were losing money. After that, but investors started to realize this, and theres a lot of outflows and assets, we have not texas we weve seen nat ixis shares react quite positively. David they were pretty aggressive in the markdown, saying we are going to take it way down so you know how bad it is. The shares are responding today. Sonali they are responding so far, and it shows that investors are applauding the Fund Managers , rather than woodford, who has said dont worry about it. The ceo himself has tried to be patient with investors, and said we know what is here. Dont worry about it so much. Is is takingy natix a different view. David our third story is bitcoin. Safety. Rush into gold, bonds, everything else. Sonali bitcoin is safety . [laughter] david when it was first put out there, the idea was that it was for safety because it was uncorrelated. Sonali i was thinking about that. I was wondering how much it had to do with libra, the facebook stable coin, and whether those assets are correlated. I think fundamentally, what is happening here is the Asset Classes maturing, like everybody said. One of the things under report this morning was that people see it less as a security risk, so people are less worried about love the activity that goes around bitcoin that could be criminal, and seeing it as something that could be a potential asset class. Alix what is interesting is where wall street is on bitcoin. Sonali mixed. Everyone wants to see the institutions flow in. Tensions have been opening up to the idea of it. The Insurance Industry is another that was talking about it a lot a year ago. They have virtually stopped talking about it now, at least in terms of bitcoin as a theency, and more as Digital Infrastructure itself. David many thanks to bloombergs sonali basak. Coming outcome of the Supreme Court closes out its term this week, with three important decisions still to come. Live from new york, this is bloomberg. David heres what im watching today, the Supreme Court heading into its final week of decisions. The term will end this week. All eyes are on three court decisions, although there may be a fourth still to come. With us is our bloomberg port reporter. Reporter. Omberg Court Reporter it is a doctrine that tos judges will defer regulatory agencies when interpreting their own regulations. Businesses want that decision overturned. This a what happens now is that agencies are too unpredictable. Lets say a shift in administration. An agency may change its interpretation of a regulation. They would rather have judges make the decisions on what those mean. They say it would provide more consistency. We will probably see the conservatives siding with the businesses on this one. David that is particularly interesting. What is more interesting is the census decision. We may know where it is going . Reporter the indication is that it was going to be another conservativeliberal split, where the conservatives were going to let the administration add a question about citizenship to the census. Opponents say that would produce an undercount and mean that in specifically heavily hispanic areas, people would not respond to the census. Hey are hesitant the Supreme Court seemed like in arguments that the conservatives were willing to defer to the Trump Administration and let them add that question. David which could mean a lot of money twostate likes two states like new york, which have a big hispanic population. We have the gerrymandering question that asks, what it ever be so extreme that you get involved . Reporter and we are talking about partisan gerrymandering here. Racial gerrymandering is something courts have been involved with for years. Opponents say now weve got the case where the court should do that. Case out of north carolina, where republicans explicitly designed the congressional map so that there would be 10 safe republican seats. Theres also a case out of maryland where it was the democrats doing the gerrymandering. The problem for opponents is that you potentially have five votes who are going to say not only will we strike down these maps, but courts can never strike down maps. This is not something courts should be involved in. Letill let, we will politicians consider politics these lines. W alix coming up on the program, we will speak to jane harman, former congresswoman and current Wilson Center president and ceo. In the markets, it is a little wait and see, with the exception of oil. It is all on chinas meeting between President Trump and president xi. S p futures still up about 2 10 of 1 . European equities a little softer due to the auto industry, after daimlers triple warning on its profit forecast. Bonds,oes into pauses on the dollar. This is bloomberg. Hey im bill slowsky jr. , i live on my own now ive got xfinity, because i like to live life in the fast lane. Unlike my parents. You rambling about xfinity again . Youre so cute when you get excited. Anyways. Ive got their app right here, i can troubleshoot. I can schedule a time for them to call me back, its great you have our number programmed in . Ya i dont even know your phone anymore. Excuse me . what . I dont know your phone number. Aw well. He doesnt know our phone number you have our fax number, obviously. Todays xfinity service. Simple. Easy. Awesome. Ill pass. Pres. Trump im not looking for war. Im not looking to do that, but you cant have a nuclear weapon. Alix president threatens iran with more sanctions instead of opting for war. Trump and xi. The two leaders prepare to meet at the g20 this week as china negotiators say there will need to be mutual respect. And daimlers third profit warning. The company slashing its prospects again in the latest black mark for the european auto industry. David welcome to bloomberg daybreak, on this monday, june 24. The special representative to the United States has said we need to bring iran into line. When you talk that way, it sounds sort of like regime change. Alix true. Come to the table or watch the economy crumble. Really have to wonder what coming to the table actually means. David one of the problems is you put so much pressure on the country, they come together in opposition to you rather than saying rather than we want a new leader. Alix theres still so much demand worries offsetting geoPolitical Risk. Coming on to any highs into the g20. Eurodollar still up, up 2 10 of 1 , despite the german info data rolling over. It feels like a fed backstop story to me. David time now for your morning brief, looking at a busy week ahead. Secretary of state mike pompeo travels to india today in the midst of a growing dispute over tariffs. Housingwe get u. S. Data. Wednesday get durable goods for may and the first night of the democratic president ial debate in miami. Thursday we get jobless numbers and the third read of u. S. Gdp growth. Major u. S. Banks will get the final results of their stress tests. On friday, the g20 talks get underway in osaka, japan. Alix the standoff between the u. S. And iran escalating over the weekend. Official threatening new sanctions on the Islamic Republic that could come as soon as today. Joining us is Bloomberg Government reporter jack fitzpatrick. Jack, the latest. Jack late last week, the president tweeted that sanctions already happened come of so there is a little confusion about when exactly these are going to kick in and what they would hit. Has said the sanctions already on iran cover about 80 of the economy, so there is a western of how much further they can push this. Theres nothing a lot of trust for the president , at least among democrats, on capitol hill , pushing these sanctions after last weeks episode, and which the president flirted with a strike on iran that he said would have killed about 150 people. Might not be the most promising thing after there was relief on capitol hill that the president didnt go through with it. We are going to have to wait and see what the details and the timing are going to be, but there is certainly skepticism in washington, especially in congress, about where this would go. Alix jack fitzpatrick, thank you very much. Joining us from dubai is ddle east news mi economy reporter. What is the mood like in iran . Reporter right now we are just hearing basically the government is coming out and saying we will not negotiate under duress. We will not negotiate under sanctions. That iraniansse have held to their end of the , andin in the agreement not President Trump and the u. S. , so what is the point of having another lengthy discussion to be broken, basically . Alix thank you very much. With geopolitical tensions playing out in the oil market, wti rallying for a third day. The threats to crude continue to linger. Joining us is wells fargo strategist, and mark cudmore. We are out for 12 days. Is there a way to hedge right now . I think owning upside and call options is an etf that tracks oil exploring and producing companies. It is interesting going into opec on july 1. The option market is implying only a 2 move. Moves 3 on xop opec meetings. After the feds dovish most recent meeting, i feel like historically commodities have performed really well. We had gold rallying, metal rallying. effecthe u. S. Tensions on oil come i on oil, you can get exposure to those proxies. David you also have opec and whether they are going to extend, and fracking here in the United States. Is this a supply or demand issue . Mark at the moment, the shortterm story is clearly the supply concern. I think over the last few years, its also been a supply story. The bigger theme in oil is to continue to increase in the shale industry. However, this year the demand has been there. ,o we are in this kind of world and now supply is dominating in the short term. Im not sure this is a sustainable bounce. Alix fair. You see that in oil volatility. You play the vol side of the equation . Pravit i think you definitely can come about the way i look at it, most people are directional traders. You are not overpaying for these options. If anything, they are pretty cheap. If using there is a chance well jobs because of opec or the u. S. And iran, theres a cheap way to gain exposure to those assets. David what about agro demand . Overall, we have an economic slowdown which is not priced globally which will continue to weigh on prices. From thethe flow middle east in oil has not been that much of the moment, and we are still seeing increased supply from elsewhere in the world. Yes, this is a supply story in terms of the news flow, but it is not like supply has been overly disrupted yet. Alix when you look at how correlated oil is to other Asset Classes what have you noticed that is different from three years ago . Mark the big break down in just the last month is that despite the squeeze higher over the last week or so, it is still down over the last month. I think equities are more the outlier here. Commodities markets are trading that there is a recession coming. Treasuries markets are trading recession, whereas equities markets are completely oblivious of the moment. Commodities and treasuries are the ones that make sense. Bond traders are normally ahead of the game. Equities traders wait for the economists to change forecasts, and that is not going to happen until after g20. Is there a dislocation between equities and commodities . Pravit i would play catch up in commodities. I think you have a dovish centralbank backup on the ecb signaling they may cut rates or stay lower for longer. In china, i think we are seeing signs that they are striving to expand again. They are ending their Deleveraging Campaign of the last year. A lot of that is a tailwind for commodities. Plus, you get people at least believing in the inflation comeback story. Do i think there is going to be inflation because the fed is coming right is cutting rates . Not necessarily. Weve now started to see the early signs of that, where gold and Industrial Metals and mining companies, that has been rallying recently as well. I would see a catch up in crude oil and energy companies. David was if you will be staying with us. Coming up, but the main event. President trump and president xi meet at the g20 and could offer new signals on the trade war. We preview that next. This is bloomberg. Viviana this does bloomberg daybreak. Striping ans squibb agreement with u. S. Antitrust authorities to divest one of. Elgenes top drugs bristolmyers will sell off a psoriasis pill under an agreement with the federal trade commission. Last year that product made nearly 2 billion in revenue. Fila has seen shares rise 400 since friday, up 4. 3 billion. In an indonesian smartphone distributor rose the most in four years due to a partnership with electronic juul. Ette maker at the end of this month, it will begin to retail ecigarettes integrator sir greater jakarta area. Alix thank you so much. The focus this week is the big g20 meeting in osaka between president xi and President Trump, and the range of what that could mean for u. S. china relations. Everyone is waiting for the g20 meeting. Markets are clearly looking for the trade issue, and it is really a lot of contingency on this trade get better or worse at the meeting. It is quite important because they have the ability to reset expectations. As long as theres not a lot more negative news, we think that will be constructive. We would but something more affirming, that you could actually see an end to the trade war. I think eventually we will have a deal with china, but i dont think it will come directly out of the g20. The market is going to be disappointed by the g20 meeting. Alix still with us on set, andit of wells fargo bloombergs mark cudmore. So how do you hedge it . Pravit the g20 is important, but if you think some kind of grand deal is going to come out of it this weekend, slightly not. Have seen is a lot of options activity going into g20. Long story short, the Options Market is pricing in a fairly decent implied move. G20, i think we kept it open to percent higher on sunday night after the event. Unexpected like a deal or a total breakdown, people want to hedge the tail of something unexpected happening. Most likely you get a couple handshakes and some constructive talks. Alix this chart shows what the volatility markets are pricing in. , soe a 1 move in the s p then you get a quiet july 4 week. Then what happens . Do we go back to regular volatility . Chance sic good , withs a good chance that the dovish centralbank backdrop collapse. Look at puts going out to july. I think the vix is unusually high right now. I think part of that is the expectation for this event, and part of it because weve rallied so quickly. When you were on with us earlier, you said the buzz in asia is president xi does not have to make a deal. Basically, its got to be something he agrees with. Do you think they can simulate enough their economy . Mark i think they are willing to take the hits. It is very clear from china that they will not concede or surrender these kind of talks. We saw politburo that they really want a deal, but they will not do it unless they get concessions from the u. S. David you are based in singapore. How does the rest of asia respond . What is the hit for indonesia and other places . Mark we still havent seen World Economic forecasts downgraded, and thats because economists wait to take the reaction and see how g20 goes. If we dont have concrete steps Going Forward, we will see economic forecasts flat because the data slowdown has been quite remarkable in the last two months. It is now in contraction territory. It is likely to be contraction territory again when it comes next week. Theres a really bad growth story. War, thenut the trade we get the tariffs implemented in may, so weve got a severe slowdown coming everywhere, not just asia. The u. S. Is one of the most vulnerable places. Alix and not necessarily price into markets. To bloomberg,side we have no ethics volatility. The blue line is the move index. Situation on a macro backdrop is true, how do you moving . This it is true pravit that maybe vol looks a little cheap, but i would say look longer data. I think thats why the fed has decided to cut rates with stocks with stocks at alltime highs, and the ecb has signaled they are going that way. They see all the things that mark mentioned coming down the road, and i think theres a good chance that Central Banks move onto the dovish foot, that a lot is not where the market is saying. It is not really pricing in any sort of recessionary outcome. David can the fed make it up to us . Theres an assumption right now in the marketplace that as long as you are accommodative, we will be fine taylor we will be fine. At 2007. K the fed started cutting in august 2007, and the equity market topped out two weeks later. Policy does not rate cuts. Unfortunately, that feature is even less effective now, given the qe and abundant liquidity. The fed will be able to stop this recession. They dont have 500 basis points to cut. Alix no, but they have 50. Mark they will have to do much more than that unless we get a deal that removes all tariffs. If we just get a truce, there is much more negativity to price in. Alix you are seriously bumming me out. Thats some cold water. [laughter] pravit and mark, thank you both for being here. Coming up, daimler issues its third profit warning in a year. Analysts are concerned this may not be the last. More in todays bottom line. This is bloomberg. David time now to look at three Companies Worth watching this morning. First off, 5g and its effect on equipment makers. The u. S. Is saying 5g has to be designed and built somewhere other than china. Alix i mean, thats huge. 5g is the thing for telecom. That is going to be the place where you spend all the money and development. David this is a bigger battlefield, frankly. Lets get to the battlefield of shipping. Fedex reportedly slashing prices to sell up some of its planes, offering discounts to fill up some of its planes, offering discounts after they ended a shipping contract with amazon. Thex good potentially be on fedex could potentially be on the unreliable entities list in china. David china says this is the not this is not the first time this is happened. The Third Company we are looking at today is daimler. For more, we welcome back to new york work sutherland, fresh from airplanes back to new york work sutherland back to new , freshooks sutherland from airplanes to autos. Wemarie we have brooke have learned there might be software calling them to report lower emissions then what would be expected under regulatory a long listdding to of recalls that number in the millions for daimler. Do they really have a handle on what is going on here . They have not had to pay the fines that vw paid, about 30 billion. Right now it is making them compliant to those regulatory standards. David it is also against a much broader backdrop of trying to deal with auto emissions. Weve got new regulations coming into effect over in europe, and it was reported over the weekend that european automakers are not ready for that. Daimler has been invested in making a better day and jewel a better diesel engine, but is there a market there . Or should we be putting more cars . Towards electric a lot of these automakers are behind, looking at these new standards and wondering how they are going to get there. If consumer demand is going to be there to help them meet those numbers. Automotiveis an problem in general, but daimler particularly, three times you are going to cut your profit forecasts . How do you not know that . What does that say about management . David well, they have new management. Theyve got to bring electric vehicles on really fast, and they hadnt position themselves that way. Brooke theyve done a portfolio shuffle and made some of their business is more independent. Alix interesting. Sutherland, thank you very much. Coming up, there are already sanctions on oil and steel. Whats next . This is bloomberg. The latest innovation from xfinity isnt just a store. Its a save more with a new kind of Wireless Network store. Its a look what your wifi can do now store. A get your questions answered by awesome experts store. Its a now theres one store that connects your life like never before store. The xfinity store is here. And its simple, easy, awesome. Alix this is bloomberg daybreak. I am alix steel. A wait and see but you will going to certain safety. Money flowing into the u. S. Out of europe. European auto sector getting hit hard. Daimlers third profit downgrade for the year. In other Asset Classes, 31 basis points on the bund yield. In the u. S. , yields down another three basis points. One area where you are seeing dollar weakness across the board. The lira getting a jump although off the lows from the session. A Mayoral Election change the game for istanbul. The Opposition Party gaining a win. Currency holding on to its gains but nothing exciting. Iranian potential iranian sanctions. Nothing dramatic compared to the headlines over the weekend. David it is supposed to be today, whatever it is. Alix im surprised we do not have it by now. David we will let you know as soon as we know. Lets find out what is happening outside the business world. We turn to Viviana Hurtado with first world news. Viviana mike pompeo visited saudi arabia and met with the crown prince to discuss rising tensions between the u. S. And iran. The white house decided against striking back after iran shot down a 100 million american surveillance drone last week and iran warned its forces will not hesitate to take down any more drones that violated airspace. Cancelsanders wants to 1. 6 trillion worth of outstanding u. S. Student debt. How will he offset the cost . Taxing wall street. Sanders will propose legislation today. It will provide debt relief to 45 million americans. The womens world cup just past the halfway mark and the wall street journal reports it is already on pace to break several viewership records in the u. S. And worldwide. Estimatingfifa nearly 100 billion people could do union. News 24 hours a day and at tictoc on twitter powered by more than 2700 earliest and analysts global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. David alix thank you so much. What i love about the conversation is the chicken or the egg . Are you getting more viewership because it is on more stations . David no matter how many stations are on, it is not good people will not watch it. The fact that people are watching it means it is really good. There was a story bloomberg has about the french now getting sponsorships for womens soccer for the first time. Fox in 2015eless, only 11 of the matches were aired, and this time is 22. David that is because it is more popular . I hope we are getting there. There is mediation about the dispute of money and pay. In the meantime, we had this amazing weighing in times square this amazing thing in times square. One started from 42nd street and went up 47th street. They walked toward each other and then she sat down on the wire and he stepped over her and they kept going. It is unbelievable. He is stepping over her now. She said there was only one moment she was nervous, when she got back up. She was fine. Alix i have nothing to say but oh my god. I think it took her 36 minutes and it took him 26. David she was in a terrible accident earlier when she was badly injured by falling so this is an amazing comeback. In the meantime we have President Trump tweeting out that despite a federal that does not know what it is doing, raised rates far too fast very low inflation, other parts of the world slowing. David and did largescale tightening, 50 billion a month. We are in the court took one of the best months in june in u. S. History and then he goes on. David p does not like what the fed did. Alix you wonder then if he wants those rate cuts, what does that mean for friday . React markets do not negatively it will be difficult for the fed to want to cut rates. David that is not the only trump tweeted today. He also tweeted about iran, saying i do not know why we have to protect the strait of hormuz, everybody else gets their oil so why should we be responsible . He has talked about the flash he has two different views. I am not looking for war. If there is, it will be liberation like you have never seen before. Im not looking to do that. You cannot have a nuclear weapon. You want to talk, good . No precondition . Not as far as im concerned. David we welcome the president and ceo of the Woodrow WilsonInternational Center for scholars and a former congressman who served on the house intelligence committee. You understand geopolitics so terribly well. The u. S. Has said they will now impose more sanctions today. What can they sanction and what difference will it make . Jane i think we are doing better in womens soccer, and that is a good thing, then foreign policy. Theiran policy is all over place and are middle east strategy is nowhere. Lets start with that. Today we are imposing more sanctions on the iran economy. Bad, butaying that is what it does is strengthen the hardliners against the current regime, which is more moderate. Cybereek we did offensive , that was our strategy last week. It is not clear how well it worked or what the retaliation could be. Next week we will do what . This week there is a conference in bahrain that we called to promote our new israelpalestine plan which the palestinians are not invited to and oppose. There is that. Then there is the bombing by saudi arabia not by saudi by, i possibly possibly those armed by iran against an airport in saudi arabia. Our middle east policy is. And how this connects, not sure. We are picking the sunni arabs and the saudi over a longterm future with iran. Said ande president people around him have said the goal is to get the iranians back to the bargaining table. This has resulted in a negotiation. The president says he does not want a war. Is there a path to get the iranians back to the negotiation table . Jane negotiating about what . Deal, a deal, the obama which people out of, which had six parties in agreement, including the iranians but also the russians, the chinese, three european countries, and us on a containment deal for iran and nukes. He says iran cannot get nukes. The deal prevented iran from getting. What we should have done is made that deal stronger, continued to talk to the iranians, with whom we had decent relations at the time. Now are we starting over to get them not to enrich, which they just said they would start doing again . That seems to me not to get us even close to the deal we throughout. Bex part of it is going to stifling the iranian economy, which is already estimated to fall 6 this year. What is left to sanction . Jane if we are prohibiting them and those who buy it from exporting oil, i think that has a sharper bite. The i just heard you say president has tweeted something about why should we be responsible for goods transitioning through the gulf of hormuz, i think the whole neighborhood should be responsible, but if we are responsible for escalating tensions, shouldnt there be some corollary effect in terms of what we do about that . I think we can squeeze the economy more in iran, but that strengthens the hardliners in iran and those are the folks who never liked the nuclear deal with obama. Im not sure that advances us to a place beyond where we were in the last administration. David you have said we are picking sides between sunni and shia. President trump has formed an alliance with saudi arabia, and saudi arabia with israel. It seems to be israel, saudi arabia, and the u. S. Against iran. Inthere some logic in that the region because you need some sort of check in the region because after iraq fell it has been irans dominance. Jane lets understand why iraq fell. I was one who voted to go into iraq based on bad intelligence. It was wrong and i was wrong and we created a vacuum for iran to expand. There is also syria, where we have no closure to that war and it is another place where iran has expanded its influence. Picking sides to me is extremely dangerous. Lets understand it was just a u. N. Report which said that mohammed bin salman, the person or secretary of states meeting with, was responsible for the killing of an American Green card holder, jamal khashoggi. Congress is strongly opposed to the trump proposal to sell another eight alien dollars in military aid to saudi arabia. Billion in 8 military aid to saudi arabia. There are reasons to be critical of saudi arabia and iran to a great. Picking sides does not seem to lead to me to a better u. S. Policy in the region. David thank you so very much for being with us. Jane harman. Alix for more on how tensions will weigh on the oil market, a guest joins us from london. More sanctions coming online. Are we going to expect oil exports from iran to go to zero . They are quite close to zero already. Maybe they have managed to lower about 900,000 barrels a day. If you look at where they cap discharged, theres a bit about cargo into syria and turkey, and a couple floating up china that have not been discharged. Is maybe 250,000 a day max. It is rest a hundred thousand barrels a day. For all intensive purposes, we are almost there. Alix is the market accurately reflecting that . Amrita no because this is the demand fears. The curves are still steep despite the demand weakness and the fears and that is showing you that supplies are continuing to fall. We have seen refineries struggling, our numbers have come down since the start of the year, power supply numbers have come down even more because of iran, venezuela, and other outages. As ceo was talking to bloomberg and said i am more concerned about geopolitical incidents than the economic factors driving that. It is more likely political factors that will throw us off course in the general economic outlook. How do you feel the market is position to deal with these shocks like iran that you do not know how to price in . Amrita i think he is exactly right. The market is complacent. The complacency comes from the view that u. S. Shale will grow into infinity. As a result, there is not that much there is little bit in saudi arabia, uae, kuwait. If we get multiple outages, the world is not have the capacity to cope and that is when he sees Surging Oil Prices and you effectively destroy the Global Economy as a result of that. I think the market is in position to much on the long side. The cpas and the highfrequency side of things was short. We have seen some shortcoming rally because of things going on the strait of hormuz, but beyond that the market is not long on these levels. Brent is barely 65. Alix walk me ahead. How does all of this set the stage with opec plus . Amrita they are between a rock and a hard place because, for instance, saudi arabia keeps getting calls from their customers and were not buying iranian crude, we need more of your fruit. They are saying demand might be coming off, what do they do . Our best cases they go forward with the existing deal. Russia will oppose a little bit. The companies do not like being in this deal, but given where 75 orare, if we were at 80, i think they could increase production of it. Given the fragility of the Global Economy, a rollover should be the base case. Alix great to talk to you. ,oming up on this program investors awaiting the release of indians federal budget and steps the government could take two could take to the economy. Heading in your call, do not forget to listen to Bloomberg Radio, channel 119 on the Bloomberg Business app. This is bloomberg. Viviana this is bloomberg daybreak. Coming up on balance of power, christopher hill, former u. S. Ambassador to iran. Alix time for all of the lead. At time for follow the lead. Today we will take a look at india. Weighing the countrys federal budget and taylor riggs has a snapshot of the economy. Taylor asias thirdlargest economy look like growth was slowing, now down to 5. 8 . This is been on weak domestic growth and problems in the shadow Banking Sector causing some of that slow down. Credit growth has been slowing. Our Bloomberg Intelligence and economist are hoping a reversal by the r. B. I. Into looser Monetary Policy should start to help the Credit Sector and boost lending by some of these banks. What that means is the Financial Companies relative to the broader index in india has been outperforming. Like we said, theyve been tightening Monetary Policy last year. Now switching that a release or Monetary Policy. Looserching that over to Monetary Policy. David lets take a closer look at indias Banking Sector and how it is positioned to help growth. We welcome the president of the u. S. India business council, and damien sass our, bloomberg strategists. You meet with companies doing business in india. Is it in a position to help growth in the economy . The Banking System in india does need some overhaul as you see the government struggling with the issue of nonperforming loans and dealing with liquidity. You saw the r. B. I. Did take a step in the last couple of weeks on injecting more liquidity and lowering the repo rates and such but the Banking Sector writ large has been tightening and i think youll see continuing moves in the budget that comes down in early july where some additional stimulus to address some of the bad loans that are continuing to be on the books are addressed. David that was my question. Weve heard a lot about bad loans in the balance sheet. Have you clean that up . What is the process for getting it cleaned up . Nisha i think they have taken significant steps in that direction but there continues to be more reform needed and the Banking Sector. You see that r. B. I. Has taken a much tighter stance on regulating the banks. You are seeing that there has been some talk about setting up a facility for bad loans or bad bank loans so to speak. There have been many things discussed in india about how to deal with the Banking Sector. I think everyone recognizes that reform is needed and also there is some cause for optimism that the government has been taking significant steps and will continue to do so. The same time, yet the Deputy Central Bank governor resign. How does that play out . Damian i did it meets with what we are hearing across all of emerging bank is. Central emerging markets. Central Bank Independence has been called into question. The loan half has been calling for the fact that the federal budget deficit is rising. Another 50 bits expected by the r. B. I. Chief economist out of india. Hopefully that will impact the real economy. The mechanism for that transmission remains slow at this current stage. Alix if we are transitioning in india to be more of a cashless decided, does that cashless society, does that make the Banking System more manageable . Foreigners are not able to participate in a lot of the investment opportunities. You up a lot of stressed nonfinancial courts in india that basically need to stimulate. They have bad loans out there. Hopefully we can see some sort of reforms and measures to help those Companies Work their way out of the current system. We are hoping that 1. 8 trillion of capital reserves would be transferred from the central bank to the federal government and used to retire some of the banking debt. We were hoping from hoping for resolution on that. That is being delayed. We do not know at this stage. Thank you guys very much. If youre stressed about it, you isuld just do some yoga what we learn from the president this weekend. David i do not know we had International Yoga day. It, but can joke about a lot of the caucuses and business groups and retreats, they have these things were you do yoga, you can pet bunnies and hold copies to try to get into a better place of mind. There you go. Encouraging. David a couple of years ago i was in shanghai visiting a school and they started out the class of thirdgraders with three or four minutes of yoga. It quieted down. Amazing. Alix what is amazing is next thursday, the boston pops fireworks spectacular. Heres a look at boston pops by the numbers. Alix and dont miss the boston pops fireworks spectacular coming up july 4 at 8 00 only on bloomberg. I will be there. David how could we miss it . 20 minutes and 17 seconds of fireworks. I have be precise. Alix is pretty precise. What is also precise is what i am watching, and that is President Trump tweeting about the fed. He says the Federal Reserve does ,ot know what it is doing raised rates far too fast and did so with largescale tightening. On course for one of the best months of june, imagine how much better it could have been if the fed had got it right. Over the weekend, talking to chuck todd nbc, saying we cannot talk about demoting jay powell, but i could if i wanted to. David that is exactly right. He sat there like a stubborn child. One is you will get it to loosen. The market sort of agrees with them. Alix there is a story out there that maybe the fed would not have hiked in december if it were not for the rhetorical pressure from President Trump about not being aggressive in hiding. Another chicken or egg thing. If the decision does not turn out right, he will say it was not my fault. Alix he has that out. Coming up, market field as it management ceo. Money going into bonds, the dollar lower as you have the euro continuing decline. This is bloomberg. Lisa from new york city for our viewers worldwide, i am lisa abramowicz. The countdown to the open starts right now. Coming up, World Leaders attempting yet again to end trade wars. Markets preparing for volatility out of the g20. Fed speak has traders preparing for rate cuts. President trump doubling down on his powell criticism. Global tech as facebook threatens to up and currencies. We are resuming the rally as investors for see more fed a meal is. More fedgain stimulus. 10 following two basis points. Crude climbing the highest in three weeks. Lets begin with a big issue. Markets counting down to the g20. So much attention is going to be on osaka. Keep your eye on the g20