Issues that may ultimately go behind closed doors. I think this is going to be fascinating and important how the republicans and democrats . Questionmocrats mueller. David turns out hes going to do a little more talking. Carol just before they all go out on recess. We are also walking the markets also watching the markets on this wednesday morning. S p 500 futures had a bunch of selling yesterday. S p down three consecutive days. A little bit of support here, up just about 12 point. The eurodollar 1. 13. Crude seeing some support. Concerns over the tensions continuing with iran. You got new york crude up about 1. 8 . David General Mills breaking their earnings right now, which is a bit of a puzzle to me. Net sales came out at 4. 2 billion, a little bit off estimates. 83 asngspershare was 0. 77, but they are down in premarket trading. It looks like there is a little disappointment creeping in. Carol the stock is up about 38 this year, so theres a lot of optimism. Any disappointment about some of those numbers, investors are going to pull back a little bit. David now it is time for bloomberg first take. We are joined by mark cudmore and sarah ponczek. We want to go back to the fed speak yesterday. Everyone was paying attention to the chairman, jay powell. He said there is some reason to be concerned, but we are not there yet. But ironically, st. Louis fed president jim bullock stole the show on what he thinks should be an insurance cut. Sitting here today, i think 50 basis points would be overdone. I dont think the situation really calls for that, but i would be willing to go 25 sitting here today. I hate to prejudge. Things can change by the time you get there. David i hate to prejudge meetings, but this is what i think we should do. [laughter] david hes perceived as a dove at the fed, and he says 50 is too much. Mark thats right. That hes saying were not going to 50 basis points means no one is going to go for 50 basis points in the committee. It is particularly important this time. They never precommit, but with the g20 decision to come out, we will have a lot more clarity by the time that comes around. He could very well be in that camp of 50 basis points by the time we get to the fed. We need to be not to married for the fed to do this not too married for the fed to do this this far ahead of the meeting. Theres a 0 chance today. It doesnt mean that there will be a 0 chance in two weeks. Carol a lot of data points to get from here to there, and a lot of changes that could come in terms of fed thinking. Sarah exactly. Rbc sent out a research note, and the subject line was rate hike not a lock. Powell was never going to tie his hands yesterday. You have the g20, another set of Economic Data, including payrolls, into beginning of july. Why would powell have ever changed his mind from a presser we could go to yesterday, when there are some any changes ahead . Carol i do wonder if investors are banking so much on a lot of fed rate cuts at this point that they might be setting up for disappointment. You wish it were true, so it must be true. Mark i think the only way they are not disappointed is if we get a g20 trade deal and still get a 25 basis point cut, which is not what people are factoring in. David we keep coming back to that trade deal. Lets talk about it. The g20 meeting is at the end of this week. In case you are worried about whether anything is at stake, it is billions of dollars. Sarah this is a lot of money. We heard about it over and over again. The effective gdp is pretty minimal, but it is the knock on effects that matter. Mnuchin came out and said there is now 90 of the way through a trade deal. He also said it is likely that even if we dont get a deal this weekend, we will probably get a kicking of the can down the road, so the next trench of tariffs wont go into effect. But weve heard this many times before. What is actually in that last 10 . Else . Ip, or something there are other parts of the trade deal that are more difficult than others. Carol you have Companies Making a lot of different decisions, changing their supply chains. They are thinking longerterm. They dont want trade talks to upset their operations. Mark absolutely. Theres an immense amount of damage that hasnt yet factored into the Economic Data because capex has massively been slowed. Businesses do not know with any certainty what is going to happen next. That increased uncertainty on the fed side and the trade side means it is harder to make decisions. Ultimately, business want to try to bypass the u. S. If they can. They obviously cant if they are a u. S. Business selling to a u. S. Consumer. If the rest of the world wants to, there is so much uncertainty. David lets figure out what tea leaves we are reading. Munchen said in may we were 90 of the way there before mnuchin said in may we were 90 of the way there before the chinese pulled back. Mark that is probably the more important point. The markets react to the mnuchin headlines because there was an impatient that this was new progress, but really he was saying that they were 90 of the way there for you broke down. I think some of the shortterm gains we saw this morning will probably ease off as people spend more time analyzing his statement. It is important that we are getting the messaging that they are unlikely to impose the next level of tariffs anytime soon. I would say we still havent felt the real economic damage of the last round. That is not good enough to save us. Carol meanwhile, the uncertainty continues. Meanwhile, youve got fedex moving ahead with a decision. This whittles it down to what specific companies are doing. Theyve fired a new weapon in this trade war. The Trump Administration is they are suing the trumpet administration to block those trade route the Trump Administration to block those restrictions. We heard from the ceo. We have been very disappointed over the last few years with the assumptions that inmade on the Growth International trade, particularly with the Trump Administration. But a you are smiling, ceo reminding everybody that this is a global world. These are companies with a lot of exposure overseas. Mark im surprised we havent seen more of these challenges come through. It shouldnt be too surprising. Hes doing major damage to major american names. Going about this is just too disruptive. It is going to cause longterm problems for a lot of these companies. David his relationship with ceos has come full circle, it seems. At the same time, maybe it is not as bad as we thought. Said micron and intel said we are selling to huawei again. Sarah they found a loophole. This is a big deal for micron. Over 50 from china, and the Semiconductor Stocks were so heavily beat down on the news regarding the trade war because they are so right in the middle of the fire. There is a bit of a concern. Find a loophole, will President Trump find that loophole and close it . Carol you know theres going to be some kind of response. Cudmoreloombergs mark sarah ponczek, thank you very much for being with us. Coming up, more on fed chair jay powells case for lower Interest Rates. Citi globals chief economist will join us next. This is bloomberg. Viviana this is bloomberg daybreak. Says the elon musk electric carmaker could be on the verge of a quarterly record for deliveries. Musk writing in a memo for employees they will have to go all out in the month of june. Buyers may be motivated and a deadline of july 1, when the tax credit for electric cars will be cut in half. Today bitcoin resumed its rally. The Digital Currency went above 12,000 for the first time in almost a year and a half. Cryptocurrencies have been gaining acceptance and attracting more interest from mainstream institutions. H2o assetrecord for management, the fund managed by net excess by natixis. In four days, they declined by more than 6. 4 billion. Last week, clients started pulling money out because of concerns over liquid holdings. That is your Bloomberg Business flash. David when chair powell talks, markets listen. Yesterday they were listening to st. Louis fed president bullard as well, and they werent necessarily saying exactly the same thing. Are thinking was to wait and see because so much of what happened happened in the few weeks before the last meeting. Most Central Banks do not want to let a downturn gather steam. I think 50 basis points would be overdone. I dont think the situation really calls for that, but i would be willing to do 25 sitting here today. David we welcome now catherine citi global chief economist. You hear chair powell saying we want to be patient, but preemptive, and then that president of st. Louis saying that 50 is too much. What is the market to make of that . Catherine theres a lot of events happening in the near term, and the outcome of the g20 matters. If we have to go another 25 on the 300 billion with the tariffs, that could have a very different application for the u. S. Economy than not having 25 on the 300 billion. Bullard was saying we need. To wait. Wait, saying we need to and powell was saying we need to wait because the outcome of the meeting could be very important for the u. S. Economy. Carol if we can take everybody inside the bloomberg terminal, weve got a chart that talks about what the market is pricing in at this point. They are looking for multiple fed cuts this year. Does the market have it wrong . Catherine i think there are two things about this chart that are important to consider. One is just how quickly the market flip from thinking there were going to be two rate hikes to thinking there were going to be two rate cuts. The amount of data that has come in over that time would not warrant that flip. That suggests that the market was too bullish and now is too bearish. Carol so is it an efficient market or a nonefficient market . Catherine i think the bond market is basically pricing entail risk. Six months ago, they were pricing in a very positive tail risk. Now they are pricing in a very negative tail risk. That tends to put all of the weight into one part of the return distribution. David give us your take on the key Economic Data coming out right now, and what it is indicating. Whether it is because of trade issues are independent of that, we have some pmi data thats a little troubling, Consumer Confidence data which was really surprising. So how soft is the Economic Data becoming . Catherine we still have to remember that weve got an Unemployment Rate that is about 3. 6 , and wages are continuing to rise. Consumers actually are in very good shape, but you are right. Confidence matters. Sentiment matters. Carol weve got a chart up there showing the close correlation between markets and confidence. Catherine and actually, real spending and confidence are not terribly related. I think theres bifurcation between what the markets are thinking about the economy and what the real data are saying about the economy. This is saying bifurcation has been in place for a while, but it is particularly wide right now. Carol you talk about the market flipping and how quickly it did. Lets assume we get some sort of resolution with g20 over the next couple of weeks. Do the markets flip again in terms of what they expect from the fed . Catherine i think we shouldnt overestimate what will happen at the g20. Carol no, right. Catherine we are talking about a ceasefire here, not a resolution of the major issues that started the whole exercise to begin with. Those are not going to go away. The real issues that the fed has to deal with is how much erosion to confidence and Business Sentiment and Real Investment might be a consequence of the ongoing uncertainties with regard to the application of tariffs. We hear a lot of rhetoric. Maybe we will put on tariffs, maybe delay tariffs. That tree 86 from it is amount of uncertainty and erodes Business Sentiment and actual investment spending. David talk about another point of data and how important it is, capital investment. Capital investment did pick up in 2018. That affects our future growth. Catherine there was a lot of spending on capex that was encouraged by the tax cut in the accelerated depreciation, but particularly on some of the smaller businesses for whom cash flow really matters, i think we are looking at some period this year where the building uncertainty, we dont know exactly what the rules of the game are going to be, so we are going to pause how much we are going to invest. The fed has to wait to see how eroded that business spending might be, and might have to wait until the fall, where we also have a debt ceiling. Arel a week from friday we talking about another jobs report. The last one was obviously a disappointment. If we get another week report, the marketay that has shifted . Catherine you can have a cascading effect on lacking of Business Sentiment, first with the tariffs, then eroding investment. Then you have jobs, and that leads into consumption, which leads back to slow growth. So youve got this cascade and then feedback. The very tight labor markets have been a fundamental support for the u. S. Economy. Carol and of course, part of the feds mandate. Lots more to talk about. Coming up next, fedex says fiscal 2020 will be h incision year. More on what that means will be a transition year. More on what that means, next. This is bloomberg. Carol fedex calls fiscal 2020 a year of transition over concerns for International Trade relations. Here to take us through that is bloombergs emma chandra. Emma one of the things that fedex came out and said was that they counted their growth in the ceo saidnd that fedex will become the lowcost carrier for ecommerce. There is a big opportunity for them given that growth in is supposed to outpace that of the global times. By four or five it is also a challenge. That last mile of delivery is the most expensive, suit eco mmerce delivery tends to cost more than deliveries to businesses. We have seen fedex margins under pressure somewhat, and that is particularly true of the express unit, falling to 8. 1 in the Fourth Quarter. When you take a look at the outlook and what might be clouds on the horizon, there is the u. S. china trade war. The orange line there is fedex over the past year. The stock down some 35 , well underperforming. Just this week, we had that china is considering blacklisting fedex for mishandled deliveries, and the trade outlook is really weighing on fedexs forecast. The company now expects their first annual earnings decline in some five years. Really0 performance is negatively impacted by the output for global trade and what that might mean for the global , specifically calling out the Trump Administration and saying that the u. S. Is now a protectionist country. Fedex arent the only ones concerned about that. Strategists at Morgan Stanley also worried about what this means for the global economy. You can see at the bottom here a big, steep decline. At a critical now level, and if it slips any further, we could be signaling a recession. David thanks so much to emma chandra. Still with us is Catherine Mann, citis global chief economist. As you look at your indicators, do you see any warning lights about the overall shipments going on around the country. Catherine absolutely. When we look at the global index, it is down at the same. Ort of throughput we are already there. Carol how quickly doesnt move around in terms of reacting to either headlines or news we are getting out of the fed . How often do we see that . Catherine it is a fairly sensitive index, but still very trade, so wews will look at where we go on the trade side of things. David we are looking now towards the second half being slower than 3. 4 . Is there anyway to read through what that might mean for growth. Catherine we really have to decompose it into consumption and Business Investment and trade. Those are the three main drivers. We are still very strong on the consumer side because a very tight labor markets. Most of the Consumer Spending is going to services. The Services Demand is still very robust, and what we are seeing is weighing on something that is a packet you have to ship. On thea story was out bloomberg yesterday that talked about the transports and small caps. What we are seeing in terms of the trade is indicating somewhat of a crisis coming forward. How closely are you looking at those specific groups and may be what to come . Catherine what we like to do with, for example, the russell is divide the companies into ones that are serviceoriented or product oriented. We see outperformance of the Services Oriented russell, and relative performance for manufacturing. We have a split between the part is using itsy that extra cash. This is where the benefit continues to be. Trade and manufacturing, those are highly correlated, and they are in trouble. Carol Catherine Mann is going to stay with us. Coming up, the United States reportedly willing to delay the next round of chinese tariff imports. We will talk about the state of trade relations with senator James Lankford of oklahoma. This is bloomberg. When you rest on a leesa hybrid mattress, bedtime is no longer simply the time you go to sleep. Its time to switch off and catch up. Enjoy me time, and we time. 40 winks or 8 hours solid. The leesa hybrid mattress combines two technologies to give you deeper rest and rejuvenation. 1,000 pocket springs provide edge to edge support, responsiveness and comfort, while premium foams relieve pressure. Keep you comfortably cool and limit motion transfer. Leesas hybrid mattress is not only recommended by experts, experts choose to sleep on it too. Try it yourself in any west elm store. Or order online and well ship it to your door so you can try it risk free. The leesa hybrid is american made. Built to last. And, because Everyone Needs a place to rest, we donate tens of thousands of mattresses to those in need. Live healthier, live happier by resting deeper. Right now, you can get 10 off, plus two free pillows. Go to leesa. Com today. Carol this is bloomberg daybreak. Lets get you caught up on the Market Action on this wednesday. You can see some support when you look at the equity universe. S p 500 futures up about 4 10 of 1 . Nasdaq futures also upbeat in terms of some of the comments out of micron. That index moving ahead to come up about 6 10 of 1 . Ftse flat in the dax up about six tens of 1 . Its take a look also at the dollar. The dollar spot up about just 1 10 of 1 . We are seeing more support in the oil market. Crude up about on. 9 . Pause. Taking a atht now that 10 year yield 2. 02. David china trade relations will be front and center at the g20 meeting in osaka later this week, with President Trump set to meet with xi jinping on saturday. The parties may be as close as 90 of the way toward an agreement. We welcome now one of the lawmakers with oversight responsibility for whatever comes out of it, senator james oklahoma, chair of the finance committee. Member of the finance committee. I know that Robert Lighthizer is very good at communicating. What you expecting . Sen. Lankford i expect to have a little pleasant conversation about the important of trade, how vital it is to be able to work out between two Major Trading nations to work out the details. It is a very good sign for them to be able to sit down together. Its been very public that they have a good relationship. I met with the Chinese Ambassador about two weeks ago. He was effusive about how good good thatap is relationship is. Theyve not said exactly how close they are, so we will see if they make a major announcement next week. David there was a report on bloomberg overnight that the u. S. Senate is very close to agreeing to say we will hold off on tariffs as part of this getting together. Have you heard that . Sen. Lankford i have not heard that, but i do know from the us tr s office, they do not want to have to implement that third tier because it is a very complicated come along process. They would rather resolve this issue rather than take those things on. At the end of the day, the president said hes going to do the tariffs. Low and noher us see tariffs and actually get an agreement. David theres something approaching bipartisan agreement that something needs to be done on relations with china. At the same point, its a little unclear where we are headed. What is the ultimate goal of this . Various American Companies and farmers are paying the price. Very concerned about the u. S. Position on trade. Just listen to a moment of what he had to say yesterday. Now we have a huge dispute hase the United States basically become protectionist, defined as i will make everything i need in my own borders. I dont need to import things. Quite frankly, dont particularly need to export them, despite the fact that andy 5 of the worlds is outside the that 95 of the worlds population is outside of the and estates the United States. Sen. Lankford i think we should have an open market as much as we can where we have fair trade options. President said his goal is low or tariffs. Lets negotiate to try to get a fair trade deal. At the end of the day weve got to deal with intellectual property, deal with open trade practices. When we haves win low prices coming from around the world and supply chains that interconnect us. At the end of the day, most of the world once american product, so we can open up every market around the world and get American Products places. Weve got to get the barriers down so they can get in. David theres National Security. Sometimes it gets lumped together with trade, sometimes not. But weve got the issue with huawei. Many people have said it is a legitimate issue. Overnight, micron says we can still send to huawei at least some of the products because of how much of it originates in the United States. Is there a hole in the bucket when it comes to National Security on huawei . Sen. Lankford the issue is going to be access to information. They are going to say we have never taken any information and we dont offer information. Its an access point. Is there a back door where the Chinese Government could get information . Thing about how much is on each persons cell phone srs data or any information. Ts a Security Risk persons cell phone personal data or any information. Theres a Security Risk that it would have Access Points and it. It may not be intentional. It may just be bad design. We have to figure out where those points are and what can be allowed. Am not going to say no while way ever on any product, but i would say right now that is a very strong National Security risk for us to have them in our system. David but also, this go to one of the central issues, the structure of the system in china . It is a very different structure for mars. The role of the government and private industry is very different from ours. Is that a structural issue that the chinese are clearly not willing to give up . Sen. Lankford they are not willing to give it up because they do massive data harvesting on their own population. That is the same thing with the russians. If you have information that moves through a russian server, the russian government has access to all of that by law. They want access to anything that moves to russia. Fores a real Security Risk any information that moves to china or russia. Very different than how we do it in the United States. David as you talk to constituents in up the houma, how does this play back home . There is a political aspect to it. Weve got an election coming up in 2020. How is this going to play . Sen. Lankford folks home understand trade very well. You may say that oklahoma is so far from the coast, they may not have much design there. That is not the case. We have engineering and design , and shippedturing all over the country. They understand the trade issues extremely well. Lots of agriculture that moves. Oward china china wants to be able to get some of our oklahoma products. Our number one and number two trade partners are canada and mexico, so the usmca agreement its exceptionally important to my state. We want to see that resolved. Canada andward to our house of are presented of taking that up in the next few weeks. David thank you for your time. That is centre James Lankford of the state of oklahoma. Carol thank you centre James Lankford of the state of oklahoma. Carol thank you. Still with us is Catherine Mann citi global chief economist. Tell us a little bit about this chart. Catherine we evaluate the effect of tariffs on all of on 2. 5 . Roducts, 25 , it is about 25 basis points off of Global Growth for our projection from our may Global Economic outlook. Alone is aboutct 25 basis points off of Global Growth, but then we evaluate the consequences of the tariffs for a potential equity market correction, and we evaluate global markets. Are whattors undermines Real Investment and reduces global gdp even more. So the tariffs are just the beginning of this cascade through the financial markets, accentuated and augmented by uncertainty, to inroad to erode investment and lower consumption. All of that puts us into a situation of a Global Growth recession, Something Like the Global Financial crisis. Carol here we are getting ready for an election year. All of this will matter. Catherine in this global scenario, which may not happen, but nevertheless, there are some pieces of it in place. We dont know about the g20. From our base case, we would get to 1 growth rate in 2020. It matters at home, too. David lets assume we just hold still. No more tariffs, we get usmca through, and we dont go to war. Thats one plausible set of scenarios. What happens than . Catherine the issue is how much do equity markets and other bond. Arkets we are just talking about a ceasefire. The thing about tariffs is the threat of tariffs and the threat of other types of investment restrictions and so forth arent enough to really alter the sentiment and therefore the real economy. Carol i also think whats a gets beyond u. S. china, what about europe or japan . Catherine those are part of the threats that are out there. Will the delayed consideration create a morep to certain Business Climate . The issue is Business Investment gets eroded. Once you start down that route, you have them locations for labor markets, consumption, and the feedback to growth. David Catherine Mann, chief economist for citi, thank you for being here. Protesters are beginning to gather in hong kongs Central District about the beijing backed government ahead of the g20 summit. David tweed joins us from hong kong. Give us a sense of what is going on down there now. David t we have a protest gathering in central hong kong. If you look, you can see that there are thousands of people gathered in the square here. I would say 6000 to 8000. Certainly not the huge numbers of one million or 2 million that weve had, but what we have is a very concerted protest sending a direct message to the g20 leaders as they are going to be gathering in osaka. While we have this as a student a what we have in questionage, theres a of whether hong kong has got the democracy and freedom that were supposed to be promised to it 30 years ago, when the british agreed with the chinese to hand back that former colony. We will be back in about half an hour. It is going to start in about. 5 minutes. David w thank you so much in about 25 minutes. David w thank you to david tweed from hong kong. H20 fundsnatixis steep decline. Carol and if you are heading out, jumping into your car, check out Bloomberg Radio, heard across the United States on sirius xm channel 119 and on the Bloomberg Radio at. This is bloomberg. Viviana this is bloomberg daybreak. Coming up later today on balance of power, publican senator mike braun of indiana. This is bloomberg daybreak. Gasoline futures in new york rising after reports of the largest refinery on the east coast will remain closed. Philadelphia energysolutions may shut down the facility after a fire there last week. Two weeks before, there had been another fire there. Fedex is forecasting 2020 will be a transition year. Delivered will be tempered by concerns that trade relations will. Get worse heres the ceo. Weve been disappointed over the last few years with the assumptions that we made on the growth and International Trade, particularly with the Trump Administration. Viviana they say earnings for the fiscal year will fall by a midsingle digit percentage. San francisco has become the first city in the u. S. To ban juul and other ecigarettes, fighting what is called a nicotine epidemic among some teenagers. Experts worry San Francisco is eliminating what many see as a safer alternative to smoking tobacco. Im Viviana Hurtado. That is your Bloomberg Business flash. Carol thank you so much. Kind of interesting you can still smoke cigarettes, but not juul. David but i think that last part is insidious, having a 17yearold being involved in school. It is an epidemic, and they think it is safe. The nicotine often is higher than in the cigarette. Carol i wonder if it will spread to other cities. Im curious where regulators are. David nothing too much yet. Carol we will talk a little bit about wall street beat now, where we cover three things wall street is buzzing about on this wednesday. First up, u. S. Prosecutors join Insider Trading crackdown. Prosecutors are investing a Global Network of traders who infiltrated banks and companies for insider information. H20 crisiss deepening, wiping out 6. 4 billion in just four days. Ubs feeling the bite from swiss regulators. Continued fighting headwinds from swiss watchdogs. Basak. Us now is sonali david give me a Good International criminal investigation any day of the week. [laughter] u. S. Authorities are cooperating, so this is really a global scheme. Our colleagues in europe is that there is a lowlevel trader in this ring that is cooperating with authorities. A have been using complicated shell games and Financial Instruments to hide these trades related to mergers before they are announced. David the story also reminds me a bit of politics, and people using social media to change politics. Part of this was they were talking to news media, including bloomberg, and sort of saying this is going to come up, and tried to get things planted in a news report that could move markets. Sonali not even just news reports, and that is a big part of the story. They were trying to use lawyers, advisors, government officials with cash and bribes. A very specific circumstance, but something to be on the look for. Carol we talked about this a lot, when there is a story or rumor in the newsroom, we need to have multiple sources and people who are directly connected with the information before we can report on it. David this is even more insidious. This is the release of nonpublic financial information. Theres very strict confidentiality rules around this, certainly in europe. David just a mckay player, newburgh News Reporters do talk to me just to make it clear, bloomberg News Reporters do talk to people within the markets and get anonymous tips and information. Policy prohibits telling sources when a story will be published. Carol good to know that. Lets talk about another story weve been talking about all week, and that is net texas that is natixis. Talk about hemorrhaging, we are talking 6. 4 billion. Sonali it is four days of straight declines, the worst being monday. Using a different tactic than their peers, which have tried to freeze outflows completely. We have seen natixis try to do the right thing. Today looks like a little better of a day. Carol but investors are worried about their investments here. David it is a liquidity mismatch, right . Sonali certainly a liquidity mismatch, and something we are seeing among different asset classes. There was an equity issue. What i am waiting for is to see when the first issue happens in the United States because i am sure this will be a global phenomenon as well. Meanwhile, in switzerland , you dont even assume we are going to stay in switzerland. They are opening up the financial system, not for everybody. In 2008 there was a government bailout. We are seeing european regulations get tougher, and the banks face a lot of issues. Credit suisse and ubs in particular. Carol to be fair, you have the financial crisis and youre going to see the Regulatory Environment swing one way. You certainly dont want to see another crisis akin to back in 2008. I think regulators are doing what they are supposed to do, right . Oversee these industries. Sonali in the u. S. , you see people doing their biggest deals since 2008. This is requiring ubs and Credit Suisse to trim down more and put aside tens of billions of dollars. ,t the expense of being safe they have very low Interest Rates. David ok. Thanks so much for being with us. Coming up, the democrats kick off to beat kick off their debate for the 2020 democratic nomination for president. More on what im watching next. This is bloomberg. David this is what im watching. The democratic debates, one debate over two nights, tonight and tomorrow night. 20 candidates will be on the debate stage. Actually there are 23, but three of them wont make it. We will get 10 and 10. It is not a record. In fact, there were 11 republicans at one point in 2015. Carol theres so many people up there, no opening statements, and 60 seconds each to respond to something. For 10 people in ours hours, is not much time. Carol this is a room where potentially Elizabeth Warren can own it. David that is the betting going into it, that she is the one really big candidate tonight. Tomorrow night youve got three or four big candidates. On the other hand, that means everybody is coming after. Really, what do they have to do to rise above the crowd and get noticed . E how im not sur much will be about policy issues or going against the current administration. Im curious about the questioning or the conversation. David and how much is pure drama. What snappy line will get picked up by us and everyone else . Carol is there a real dog in the lineup that could come out above the line . David apparently the former congressman from maryland will really go after those of us warren. We will see what happened after Elizabeth Warren. We will see what happens. Coming up, fidelity head of sector strategy. 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. David not there yet, but close. Fed chair powell says the case is getting stronger for cuts, while bullard says hes ready for an insurance cut of 25 basis points right now. Treasury secretary mnuchin says china trade deal may be as close as 90 done. Reports that saturdays g20 meeting between trump and xi assumes no new tariffs. And fedex says trade tensions will leak into profits for the. Rest of the year. The ceo for the rest of the year. The ceo saying he is disappointed in the Trump Administration. Welcome to bloomberg daybreak on this wednesday, june 26. Im david westin, here with carol massar. Alix steel is off today. We are looking at renewed hong kong protests today. Carol things are heating up ahead of the g20 meeting between president xi and President Trump. This will be another pressure factor back on president xi at home. David that is not lost on those protesters. They think they will have maximum leverage on xi. This is chinas arab spring, to some extent. I do wonder how this will factor in. David we will see how that develops. Carol lets first get a check on the markets for you on this wednesday. Lets bring up the boards. Relatively flat. We did see some selling yesterday. We had three consecutive down days for the s p. That tenure has some support as well. That may be as a result of mr. Bullards comments. ,ake a look at the eurodollar 1. 13. New york crude again, on concerns of supply and tension in iran, playing into the energy markets. New york crude 58 91 since a crudep about 1. 9 58. 91 a barrel, up about 1. 9 . More from hong kong is bluebirds david tweed. Give us an update, if you would is bloombergs david tweed. Give us an update, if you would. T it is just astounding to see how many people have come here. The square which was supposed to contain the demonstrators has completely overflowed. If you look over here towards my left and youre right, you can see there is a crowd of people all trying to arrive into the square where the protest is going to take place. It really is quite a next ordinary turnout. This time, the turnout is not just about the extradition bill that the government has put on hold. This is a turnout because of something else. It is about democracy. It is about the democracy that hong kongs people think they have been denied. It was a democracy that hong kong was supposed to have been promised when britain agreed with china to return hong kong to china. I am going to show you one of the main posters that they are using at the moment. It is a poster that says, Free Hong Kong democracy now. Give us our freedom back. It has really morphed into a message for g20 leaders to give to xi jinping when they meet him in osaka on the weekend. Carol david westin and i were just talking about the additional pressure that this in hong kong puts on president xi ahead of that g20 meeting. Can you address that for us . i think this is the sort of pressure that xi jinping is trying to resist. Weve heard from multiple sources in beijing that they are going to try not to allow these protests to be discussed during the g20. The position of beijing is that this is an internal affair, and that the g20 should not be talking about the internal affairs of countries. Yet kong is part of china, we have one country, and two systems. Theyll want to see any intervention they dont want to see any intervention from the outside. But the hong kong people dont see it like that. They see the agreement made by Great Britain and the chinese, and they want this message to get out to the international community. Carol thank you. That is david tweed joining us from hong kong. David w much attention will be on china and president xi jinping, from hong kong to trumps meeting on saturday. We welcome now on the phone from tokyo shawn donnan. Thank you for being with us. You spent a lot of time in china, even recently. Are we over reading the possible pressure coming on xi jinping from these protests in hong kong . I am seeing some of the chinese populists not backing presidency backing president xi. it is hard to figure out how that is going to play in the trade negotiations, and if trump will bring this up. He is someone who, in the past, has been very willing to ignore issues of human rights in favor of issues of commercial interest or economic interest. We seen that in relations with saudi arabia, relations to china as well, just in recent weeks. On monday, Vice President pence was due to give a speech on human rights in china in washington. That was thought to be a fairly provocative speech. It was postponed by the administration because they were worried about getting in the way of the trade negotiations this weekend. David go to the negotiations themselves. We had treasury secretary mnuchin saying we may be 90 of the way there. There was reporting on the blumberg overnight that the u. S. Is getting ready to essentially say we will not impose tariffs on the additional 325 billion dollars of chinese imports. It is sort of a standstill agreement where they are. What is your reporting on that subject . Shawn what we are hearing from sources is that the u. S. And china are working out the contours of a deal that the two leaders will agree to on saturday, and that has two basic elements. One is the resumption of talks, and the other is an agreement by the u. S. And President Trump to hit the pause button and not go ahead with a further tranche of tariffs on some 300 billion in goods. Those are the big consumer goods like smartphones, childrens as part of itsps efforts to raise pressure on china. There seems to be a deal to Start Talking again. That is good news. We are not quite there yet. Very whensuch a secretary mnuchin talks about the deal being 90 done, i think hes talking about where they were in may before talks broke down. There is a document that the sides have had out, but there is still some work to be done, and dowill need the leaders to that. David thank you. We welcome now Denise Chisholm, fidelity sector head. What are you looking at . Denise trade is a really unique variable historically. As much as we want to think it is different this time, i think history can help us in informing our investment views. When you study global trade back to 1948, you see some Interesting Data in the sense that if you have perfect foresight and knew that global trade was going to contract, of all those quartiles it has the highest average return of equities and highest odds of equities advancing. It tells you one of three things happens. The market discounts them advance deep counts. Iscounts them in advance we get stimulus to offset it, which we are seeing from the fed and increasingly in china over the last year, or there is more tailwinds that youre not categorizing versus the headwinds. When you put those three things together and think about global trade in the fed and the probabilities i see, in terms of that defensive rotation we saw during the Fourth Quarter and we seen in recent weeks, what it takes the defensive sectors like consumer staples, utility, and health care to alltime high valuations, you see increased. Dds on a forward basis carol so thats an upbeat kind of outlook. I want to take everybody inside the bloomberg terminal. Weve got a chart that takes a look at the impact the tariffs have had and dividing it into different sectors. That purple line is industrials, the redline s p 500, bike nine technology, orange line utilities. Youre seeing apparel makers getting impacted. What do you say to investors as a result . Denise from an apparel standpoint . Carol from all of those sectors, and various effects that trade is having. Denise what you see the sector must expose in terms of percentage of revenues is clearly information technology, at a high of 15 . That is your biggest swing factor. When i look at the aggregate level, theres going to be idiosyncratic risk down the spectrum in terms of who is exposed on a specific company basis. I think as much as we want to identify exposures and view this outcome of go or no go bending on how trade talks turn out, we need to think about the Historical Echoes of what has already been discounted in the market. Technology is a pretty unique sector in that it is the only sector with below average valuations on a relative basis, and higher than average profitability. David put the trade issue into larger perspective, if you will. Globalput up citigroups revision index. It is the worst its been since january, basically. How much of that is trade . Are we blaming too much on trade . Are there other factors as well . Denise it is hard to isolate the variables and talk about what is trade and what is just the natural manufacturing contraction. Global pmi is back below 50, so we have seen a fair amount of softness across the globe. How much of that is trade is sort of unknown, and sort of unique to tease out of the variables. Earnings is the critical driver we want to watch. What you didnt see going in for the last three months i should say the last six months, you saw pete to trough contraction in you saw peak to trough contraction in earnings. What i will tell you is when that happens to the extent that we have overplayed trade as a , andficant driver to this earnings estimates continue to rise, we see cyclical sectors outperform historically. So i do think earnings is the critical factor to watch. David thank you very much. Denise chisholm will be staying with us. Lets turn to Viviana Hurtado with the first word news. Viviana special Counsel Robert Mueller agrees to testify on capitol hill in the middle of july. That sets up what should be a dramatic confrontation over the trump presidency. In his report, mueller said he couldnt conclude whether President Trumps campaign conspired with russia. He also said he couldnt exonerate the president from obstruction of justice. The u. S. Is willing to hold off on imposing more tariffs on china. Bloomberg has learned the decision may be announced of a decision between President Trump and chinas president xi. U. S. Trade secretary Steven Mnuchin telling cnbc that a u. S. china deal is 90 complete. To st. Louiske said president ames bullard, but st. Louis fed president james bullard. His views on low Interest Rates were similar to President Trump. 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 thank you so much. Coming up, we discuss how investors are positioning for the feds dovish shift. Thats next. This is bloomberg. David we heard yesterday from fed chair jay powell and st. Louis fed president jim bullard. They had may be different messages for us. Our thinking was to wait and see because so much of what happened happened a few weeks before the last meeting. Reactanks are want to preemptively. 50 basis points would be overdone. I dont think the situation calls for that, but i would be willing to go 25 sitting here today. David still with us is Denise Chisholm of fidelity. What i heard from chairman powell, weight. From bullard, lets go 25. What is the market hearing out of that . Denise i think the market clearly, from a forward perspective, expects to cut. It is interesting. The fed is just a group of individuals that can change their mind, but the variables they tend to isolate on is inflation, not the Unemployment Rate or payrolls. That has been the variable that has been the driver between how they cut, if they cut, and how much they cut. That gives them cover on real Interest Rates for a basis point cut. We can see the market consequences clearly in a historic perspective. You can even see a dovish pivot on a bullish indicator. From there, investors need to make a choice. Half the time after that first fed cut, you end up in a recession, and half the time you dont. Thats been the differentiator in terms of market return. Till see 50 odds if you are outside, if you avoid recession 100 of the time, equities have advanced with an average 20 return. Carol you sound pretty optimistic and upbeat in terms of maybe where you would be sector exposed at this point. What is more likely in your view, a recession in the next six to 12 months . Denise i dont have a crystal history, itudying think it can provide us a little context as investors. After the prior two yield conversions, and actually going back to the 1970s, after the last two the continue to raise rates. That increased the percentage of defensible income come on factor that in both instances, we had a commodity price spike. Those two together provided a shock to consumers that contracted their income by about 2 . So if the yield curve is a signal, we might one to look at the corollary signal of we are on the lookout for a shock to the consumer to potentially to potential he put us in that position. Is at alltime lows 1980s. E on,are seeing accommodati not contraction. We do have to be on the lookout for consumer shock, but we are not seeing it just yet. David you said the fed potential he cutting. What if it fed potentially cutting. What if it doesnt cut as much as the market thinks . The white line on this chart is what is expected by january 2020, basically a full 50 point basis cut. By january, another 25. What is it doesnt deliver that . Who gets hurt . Denise when you cluster the sector odds around that next six months, they are like 5050. Theres no leadership trends we can discern from what the fed does under a shortterm scenario. The reason for that is what we talked about earlier, the market is more often than not a discounting mechanism. Those probabilities are actually going to be dependent on what is already discounted in the market. That gets back to those defensive sector relative valuations, and the fact that risk, if you want to measure in terms of beta, being almost as cheap as it was in the financial crisis, which is very different from the deterioration in credit yield or credit spreads. Dquities have actually deriske more than the bond market. From a discounting mechanism, regardless of what the fed may potential he do, that set up is in place to have a bias towards cyclical sectors over the next 12 months. Carol all right. What is interesting at this point go ahead. We had that chart up. You are saying that cyclicals make more sense for. Denise thats right, from a risk forward perspective from a risk reward perspective. Two, the evaluation levels i see from a defensive perspective. Three, the fundamentals in terms of the cyclical sectors. All three line up for me to get a bias in the data towards higher riskreward in those areas. That said, all cyclical sectors are not the same. A defensive rotation is very altogether, were you get consumer staples, health care and utilities. But cyclical sectors you actually have to pick. Carol denise is going to stick around. Coming up, tesla on the verge of a record for vehicle deliveries. The electronic carmaker expected to louver to deliver up to fourth up to 400,000 cars. This is bloomberg. David time now to look at three Companies Worth watching this morning. Micron came out yesterday and said they can ship to huawei again. Intel quickly said, we are trying to do it, too. Carol it is really lending some support to the market overall. Lets talk about tesla. Elon musk putting out a note, saying we could be on the verge of a quarterly record for , but thatelivered the electric carmaker is going to need to go all out in the last few days of the month. David isnt it always all out with things like that . [laughter] carol we know the stock hasnt been doing well. The point is, can they sustain this . David in the meantime, lets turn to fedex in connection with trade. But it wasnt only trade we heard about yesterday and the earnings. Here for more on that is taylor riggs. Taylor i think the key takeaway is they are struggling on the international front. We talked about slowing Global Growth and headline risk from china, but they can refocus on european operations, and they highlighted the strength of the u. S. Market. You had the top line match and bottomline beat. As long as they focus on integrating that tnt express acquisition david the european one, right . Taylor correct. Then they can look at improving their fleet and tackling the express business. While they did talk a lot about trade, there are some other areas they can focus on. Carol i think the u. S. Business is important. We talked with Denise Chisholm and others about some kind of shock to the u. S. Consumer, and that would be a tougher thing for the economy. For fedex to say that the u. S. Business looks pretty good, that is a really important broader factor here. Taylor the mix for them is always between express, ground and freight. They did note some weakness within the express business in the u. S. You have revenue per shipment increasing, so you can transition the mix of volume to the higheryielding assets. Thats another way they can boost those margins. Carol always an important want to watch. Taylor riggs, thanks so much. Coming up, education is one of the policy issues voters will be watching for in tonights democratic debate. 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. Bloomberg Dave Reichert dont im carol master alix steel is off today it this is bloomberg daybreak. I am carol master. Alix steel is off today. News out of micron that has given support to the nasdaq. Ftse, little change. Take a look at the dollar. Up. 1 . More support when it comes to new york crude, 58. 97 a barrel. Concerns about supply intentions in the middle east. The tenure at 2. 02. David durable goods is not a pretty number. It is down 1. 3 . ,ast year was revised as well down 2. 8 . Continued decline in capital investment. Carol you back out transportation, because that can impact the number. You saw. 3 increase. That was higher than what analysts were forecasting. We will see whether or not the markets view this as a positive or weak number. It is very volatile. Still with us is Denise Chisholm of fidelity. We are watching dana point to data point like the fed. Have you see that number . Setup is how would he would be looking for a recovery. Is not below 50, it is close. Durable goods have contracted. From a rebound perspective we are in the zone where it is likely you will get a rebound over the next year. I did see that core capital goods was above expectation and the prior month revised up. That is the key. That is what investors are looking for and that is a positive data point on the month over month to the extent it turns the year on year data, this is a positive setup. Carol gdp tomorrow, what is the next data point . Denise the data points over the long term will be inflation as the key indicator. That was the defining shift as we approach this year. We went from inflation accelerating to a high probability of inflation decelerating. That is the market hinging on the fed and which gives the valuation levels inequities from an equity risk premium, puts them in the bottom quartile bucket. Variablehat inflation is the key macro theme i am following closely. David Denise Chisholm, always a delight to have you with us. Thank you for joining us from fidelity. We turn to the debates. 20 candidates, two nights. We get the first 10 tonight, the second 10 tomorrow night. The actress will be a premium but expect there to be some important policy, including health care, education, and the economy. Substance,et to the talk about the efforts. We have that many people on stage, you have to break out somehow. 10 debaters, five moderators. Six date minutes per person to make their case. Try to reachphere, out on social media and Say Something that resonates with people. For many of these folks, especially tonight, they have to make a name for themselves with the American Public or at least the democratic primary voters. Carol looking to move the needle. Thatuch do you anticipate because they do have so much time therell be a lot of talking over, jumping in . I do not expect we will see a lot of that tonight. At least that is what were hearing from the campaigns. They are saying they will be respectful of each other and their fire will be mostly pointed at the president. Democratic primary voters want somebody who can beat donald trump. David to what extent can we expect progressives versus moderates. , youave Elizabeth Warren have john delaney who says he is more conservative. Will there be something of a war between those parts of the camp . Jeanne we are seeing that within the party. Elizabeth warren has had a slow rollout but she is been going up in the polls. Right behind Bernie Sanders as the leading progressive. And then you mentioned john delaney or beto orourke who had a strong rollout and who has fallen back since representing that more moderate joe biden way. Joe biden wing. We will see a lot of backandforth on those issues. Should the party go in the donald trump direction or the more jeb bush direction. Carol it is fair to say we are all watching Elizabeth Warren. Is there another name youre watching closely that could be an underdog but could make their name in this debate . Jeanne the person to watch tonight who is had a good last weeks cory booker. Has booker, from new jersey been leading the charge against joe bidens comments the other day and has started to make a name for himself. He is young, he has a lot to offer and he has been trying to have a positive campaign so far. David are we going to here the word socialism, and in what context . A good way or a bad way. We have some people on the stage for medicare for all and they embrace democratic socialism. Jeanne i think we will hear the word socialism over and over again tonight and tomorrow night. I the you will people try to define what that means. Medicare for all is a great example of something that differentiates some of these folks from others. You have Bernie Sanders who in 2016 was saying medicare for all , and now that is being embraced by many democrats. Havee like Kamala Harris said we should maintain private and public. She has wavered between the two. Nobody can explain how you would pay for that and many people do not want to lose their private health insurance. Carol where does the economy fit in all of this . What kind of conversation to anticipate around that . Jeanne this is such a big question because democrats have to be honest that the economy has been good, the numbers are good, unemployment is low. I would suggest they take at the oniff issue and the impact farmers and not make the case they will make the economy great because the economy has been strong under President Trump. They also want to talk about income inequality because that is an area where the positive numbers are not felt as broadly as people think. At the same time, people say you cannot pay for it. Talk about inclusive growth. Can they make a campaign stand on inclusive Growth Without saying we will just tax people . Jeanne it is hard. You have to tell somebody how youre going to pay for this stuff. Youre going to talk about taxation. There is only one way the government makes money, and that is taxation. Elizabeth warren and Bernie Sanders have been honest that theyre going to be taxing the very wealthy. Even democratic primary voters are not widely embraced ideas. Carol i wonder this will come up, this is about the independent fed. We have President Trump during an interview with fox this morning, talking about jay powell should never have raised rates as high as he did. He also said he has the right to fire jay powell. He says he has high rates while president obama had cheap money. The United States it have mario draghi instead of rfid person. David there is nothing new instead of our fed person. David there is nothing new about this but he is not backing off. Carol jay powell said he is here for the term, so we will see. David gives President Trump ability to blame mr. Powell. Will we seearol some of this conversation . Jeanne i cannot agree more that the president is trying to make sure if we see an economic slowdown he has somebody in place to blame and that will be the fed chair. He has almost moved up above nancy pelosi as is leading person to blame should we see a recession. David one of the things Democratic Candidates have embraced as the question of Student Loans and how to pay for them. Bernie sanders is working to fulfill his promise to pay off Student Loans, this time saying he will forgive the nations 1. 6 trillion of student debt with a new tax on all financial transactions. The American People bail out wall street. Now it is time for wall street to come to the aid of the middle class of this country. This wall street tax will have the added benefit of controlling wall street recklessness and reducing the likelihood of another Major Economic crash. David we welcome beth eggers, Manhattan Institute senior fellow and author of game of loans. You have studied this question quite a bit. Do the numbers add up . Have succeeded in getting student loan cancellation on the National Agenda in a big way. Idea thatobably an sounds good to the 70 of College Graduates who have student at. Theyre are graduating with about 30,000. It is an idea that makes about zero policy sense. Regressive spending plan that delivers trillions of taxpayer dollars to people who need it the least. When it to remembers College Degrees paid dividends for people. Aonomists estimate there is 15 rate of return on associates and bachelors degrees during that amounts to 1 million during the course of a career in a earnings for somebody who has a bachelor degree. If you offer to trade about 100,000 of tuition expense for 1 million next earnings, that is a trade i would be willing to take all day. Carol you know what the headlines have said about the staggering amounts of student debt, and you have folks on wall street talking about all this individual struggling to pay it off cannot put money into buying a home or contributing to the economy. You say the typical borrowers face affordable debt burdens. Talk to us about that. That goes against everything we have been talking about. Beth estimate suggests people are spending 3 or 4 of their income on repaying their Student Loans. That is reasonably affordable. There are people struggling. There are one million new people who default on their Student Loans each year, but something we do not talk about is the people are already eligible for student loan forgiveness that gives the benefits exclusively to people who find their loans unaffordable. The is missing in conversation about these huge plans we have in place. David as i understand the phenomenon, there are two different camps. There are people who go through four years and get a good jobs, there are a lot of these loans were people borrow money, they do not make it through, they do not have the increased income, so there are very different people in very different situations. Beth that is exactly right. When we talk about the student loan crisis, a lot of times the media is focused on people that large balance is. The problem is not theirs. People who have a lot of debt have probably finish their degree and maybe gotten a graduate degree. These are people who gone to be the wealthiest people in our economy. The highest rates of default are seen among people who have less than 500,000 in student debt. They started the degree they do not finish, they got the cost but they do not have the benefits of higher earnings. David this is what baffles me. Bernie sanders has a very progressive plan, pay off everybodys loans. Whys that a democratic point of view . Why not say lets pay off the ones who need it . Jeanne Bernie Sanders, Elizabeth Warren, julian castro, they have all, with these issues. Democrats have to contend with the reality. Youre asking many middle and lower class people who do not have the benefit of college to help pay off the loans for people who have that benefit. Philosophically, that is a hard needle to thread that the democrats have to address. It is the right issue. We do address the enormous cost of college. Are a bridge too far for many americans. Carol it plays well politically. Tax the wealthy. Jeanne it plays well with the Democratic Base but they have to remember the democrats need to reach the moderates and it is not a winning issue if you will increase taxes to do this. Jeanne enies a no zaino and beth akers, thank you vermont for being with us. We will talk about the debate on balance of power. Jared kushner released a plan on peace with the palestinian territories. We will have more on todays follow the lead. Inol if youre heading out jumping and your car, tune in to Bloomberg Radio across the u. S. On sirius xm channel 119. Check it out there. This is bloomberg. Viviana this is bloomberg daybreak. Coming up later today on balance of power, republican senator mike braun of indiana. Carol we do have headlines crossing the bloomberg terminal. Giving antrump interview on fox news and making comments about google and facebook that has the stocks on the move. President trump saying the United States perhaps will sue google or facebook. He says we should be suing or suing google or facebook and perhaps we will. Google shares down 2. 7 . We have seen the president do this time after time in terms of targeting specific companies. The Market Investors to react. That there were reports both the Justice Department and the fcc were considering these open investigations of these companies. When the president says we are pursuing it, that reinforces that. Carol people will say we are moving to Regulatory Environment where we see more oversight. David it is time for follow the lead, a deep dive into stories making headlines and moving markets with insights from industry veterans and insiders. Today were liking today we are taking a look at the new Economic Development plan Jared Kushner has released for the palestinian territories. It is a pathway, he says toward the toward peace. We welcome the head of a strategy advisement firm in to buy. In dubai. Asm 2014 to 17 he served head of the quartet. He is coming to us today from dubai. I described in brief terms what Jared Kushner has laid out. We have some of the details. He hass 50 billion and very aggressive goals of what he thinks they can accomplish over the next 10 years. What are they trying to do . Good morning. I think they are trying to get the economy moving. There was always a thought that in order to be able to get peace you needed three building blocks. Security, political, and the other is the economic track. He is starting to work on the economic track and what they put forward a 50 billion through a managed fund is certainly able first step. What specific categories of projects are involved. I know you try to pursue try to pursue some of these categories and you are in charge of that position. Distinguishve to between the four areas they are looking at, the three countries they are talking about, lebanon, egypt, and jordan. About half of the money goes to that and only have goes to gaza and the west bank. The idea of coming forward with a 50 billion plan is one the region definitely needs. If you look at europe after the europeanrld war, the bank for reconstruction and development was set up in china. In a way, what Jared Kushner has put forward could be a parallel to that. It would serve the three countries well. What is not to love with 50 billion and 25 billion of that going into three countries that need it is a good thing. Where it gets more problematic is when you look at the palestinian side of it. Palestine is not a country. It is a territory and it is under occupation. That fundamentally raises major challenges to anybody who is trying to make investments. To your question, if you look at the sectors they are talking about, they are primarily in the infrastructure sector. Into powerte a lot generation. You get into oil and gas, you get it into telecom, and you get a big investment in infrastructure. All of these needs sovereign guarantees. They need sovereign backups and that is lacking at the moment. David that is my question. You have done some of these investments and pursued other investments. Is it possible for them to achieve anything like they are setting out with the palestinian territories specifically with the current political situation on the ground . Kito it is unlikely. Youever there is conflict find it hard to create an investment environment. ,ook at libya, look at syria even iraq and yemen, these are countries that need investment. It is hard to invest in that sort of environment. If you look at what the Palestinian People are doing, they are taking money out of palestine and putting in places with a get better return, places like jordan. Carol what are the conversation we should be happening in terms of investment . What is a smarter conversation . Kito most of the research that is being done shows clearly that if there was an occupation, all of the eject gives laid out in the plan would be achieved. The world bank did a study five years ago and they said if there was an occupation, the gdp of palestine wooding greece would increase by much more than we are talking about here. Ideally, you should end the occupation and do what has been required and amended by the world for a long time which is to come to a sustainable peace for both parties. Do that, and none of what has been laid out needs to be done. The palestinian businesspeople will take on the around. Absent that, you will have to find ways of providing a substantial guarantee, sovereign guarantees an insurance for investors to feel comfortable investing in what is an occupied territory. Carol we will leave on that note. Boer, we appreciate it. Coming up, President Trump goes after big tech, saying perhaps the u. S. Will sue google and facebook. More on what im watching, next. This is bloomberg. Carol what i am watching on this wednesday, President TrumpBig Technology companies for bias, saying the u. S. Perhaps will sue google and facebook. We have seen the president go after companies and out is google and facebook. Wes david we saw before. Typically the stock goes down and back up. There is no law against bias i am aware of. Im not sure how they sue them. David he has gone to war with trump carol he has gone to war with Companies Like twitter when they say he cannot block certain people. He has had these conversation in terms of tweets. David there is been legislation proposed in congress that would go after this if it was passed. Carol stocks a little bit lower. He also said we will watch the boring debates. David is always caring about the ratings. That is it for us. Welcome carol, it is good to have you here. Live from new york, this is bloomberg. When you rest on a leesa hybrid mattress, bedtime is no longer simply the time you go to sleep. Its time to switch off and catch up. Enjoy me time, and we time. 40 winks or 8 hours solid. The leesa hybrid mattress combines two technologies to give you deeper rest and rejuvenation. 1,000 pocket springs provide edge to edge support, responsiveness and comfort, while premium foams relieve pressure. Keep you comfortably cool and limit motion transfer. 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Steve mnuchin saying theres likely to be some deal, President Trump than threatening to sue some of the big tech companies, leaving people unclear on how to position themselves. Lets begin with a big issue. Mark is looking for signs of a trade deal heading into the g20. Everybody is waiting for the g20. T i