Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20170731

Are positive, up. It is a Dollar Strength story in the session. The euro is on cti. The headline number is largely in line. Treasuries are unchanged on a 10 year yield. Crude is softer. We did trade norse of 50 a barrel earlier in the session. Alix it was 52. M a monday, Discovery Communications is buying Scripps Network for 14 billion. It is up 1 . It is 90 a share in cash. This comes on the heels of discovery saying net income was down 8 in the second quarter. Its all about the unification of these companies as they compete for ad dollars. Versus Congress President trump. The president said on twitter dont give up republican senators, the world is watching. Repeal and replace and get to 51 votes. This comes after he threatened to remove government subsidies. Meanwhile, you get a joint statement from the house. They emphasized the importance of tax reform. They said we are united that the most important action we can take to grow our economy and help the middle class is to fix the road can tax code. Now is hes here. It is our chief washington correspondent. When you have the president and Congress Like this, what happens . Cabinet it makes it hard to cover. Congress wants to move on. They have been wanting to move on for some time. They have the foundation for a policy standpoint for us to move on to tax reform. They cant. This is something the white house is pushing for. It is why President Trump brought in reince priebus. It it was to work with paul ryan. They had such a positive relationship. Lisa this is been on my mind with all of the threats from the president. Do the republicans care . Kevin thats a good question. Shrug, its a keep moving. Thats the attitude that his leg washington and the Republican Party. Whether you are a democrat or republican, a lot of these they thought they had control. They thought they had control. They thought they had control. We dont need it right now. Maybe we that changes will need that boost. Im trying to work out where the Inflection Point may be. Towardnversation shifts tax reform and tax cuts, will that change the mood . Change the mood. What the market is concerned about is the lack of consensus. Those growth expectations have been revised down. We dont see that reform the market had an hoping for. We do see a change in the dynamics in terms of the discussion. Growth expectations are probable. If it goes back to the fed. The path of least resistance is a lower dollar. We are not in a correction yet. Markets are repricing expectations. The discourse in washington is not doing anything to support market expectations. Lisa once the biggest risk . Is it a surprise to the downside and the market response . There are two risks. One is china does not keep its growth track going. There is aighten and leakage in the system starts to come down. That doesnt seem to be happening at all. Policymakers are figuring out which levers to pull and which not. Risk ofan that, the is expecting to more hikes over the next few years. Usually those dots come down over time. If that is the disconnect it stays, that would require repricing of the bond market area we could see a 10 year yield above 3 . Undermine the conditions we see right now. This is my question, if we 3 , if we seeover a safe haven bid in the market, would it still be . Yieldse were to see going up to 3 , the u. S. Dollar would be in much better shape. Interest rate spreads are favorable to the u. S. On theuld have an impact dollar yen. There is a concern about a risk if we failed the deterioration. This may have impact on Traditional Service nations. This sees the dollar yen coming down. Possibly we could see reversal in recent moves against the frank. The is potentially good for dollar. Dramaticd would have a implication. We have seen a positive correlation with that and risk assets through the year. Do you see that continuing . I was not addicting a 10 year. If the fed is going to raise rates, the market is expecting to get there. Said, the weak dollar is very much a part of this rally. It is the driest financial conditions. The dollar is in a very solid downtrend. You have lower lows and lower highs. I dont see much changing that. Its not a disorderly decline. Its the on pricing of the consensus that took lace at the end of last year. Weve had the opposite. Em has been on fire. A weaker dollar in a controlled manner is very controlled. I dont see much change in that. Alix you are sticking with us. We focused there. That is something. Lisa you have to compensate. Alix coming up tomorrow, we have an interview with howard marks. He wrote a great ts last week and we will break it down with him. This is bloomberg. Joanathan touching a fouryear the turnaround plan might finally be gaining some momentum. Joining us is the u. K. Banking reporter. What struck me was how broadbased some of that was. Stewart allgh it. Of them posted again including the investment bank. That but the trend. Also impressive was the low growth in asia. He really bet the house on that two years ago when he unveiled the new strategy. It was something of a watershed moment reaching the stock price level lesson in 2008 when they were in the midst of the financial crisis. They are starting to sort something out eight years later. Alix how much of this is management and the incredible rally with any merging markets across the board . Stephen that plays a big part. Base from large around the world. When rates start to rise, its very much a rising tide that benefits all the ships. They do deserve some credit. They reinvested it wisely. Toc looks like a smart way backup a fairly wellrun institute and get the benefits of an asian uplift. Joanathan this is what the cfo had to say about the brexit situation. A few thousand employees. Customers inrt our commercial banking. Its a very natural move for us. All those licenses and it technologies are already present. It is no doubt the most efficient approach to adopt. Joanathan i havent met many that want to move to paris. On brexit . A price that was another interesting thing. We saw the first cost estimates. Its going to cost 300 million. Theyve only spent 4 million so far to movies bankers to paris and pay the fees around them. Thats a benchmark for a large bank, every bank with operations in london is looking at frankfurt, amsterdam, paris, and elsewhere. Alix thank you so much. Its not just hsbc that is reporting earnings. Its a busy week in the u. S. Pfizer, tesla. E, it sets the stage for a earnings conversation. I want to bring in a chart for you. I will walk you through it. The top panel is earnings estimates revisions. The blue line is euro stock did and that is been coming down since the beginning of july. The s p earning provisions have stayed busy. The bottom panels what investors are paying. They are paying more for the s p. They pay even more for euro stocks. Is that justified . Remembermportant to its different. The u. S. Has more tech. Tech is 20 of the market. In europe its more energy. Its not necessarily an apples to apples comparison. From my perspective, Earnings Growth is happening across the globe. Em earnings are up 17 . Underpinningy the of this story we see globally. We are seeing this. Who i take a look at the bloomberg and i see what the aggregated numbers are. Usually there is a downward drift in reporting season. That did not happen this year. Its not happening for the full calendar year either. Chances are we may be at plus 12 or 13 when its all said and done. Is earningsine growth is improving. Global story. Its a global synchronized story. Think we can have a discussion about that and currencies play a large role in that. Part of the euro is diminished picture in europe right now. Alix i wanted to ask about the potential upside for earnings in the u. S. Because of the weaker dollar. At what point does that to the balance . Its true that you have to look at the effects in terms of those earnings. We have seen a strong appreciation in the euro the last few weeks. That will have implications for overseas back into euros and the same context will see a benefit into the translation into a weaker dollar from overseas earnings. Maintaina story to with the trajectory. Ongoing,e the recovery which we agree is very much in place. Of we are going to see a positive earnings trajectory. How much further can these currencies go before we see a reversal . We have a little further to go in terms of the euro. We can move up to the 120 four the end of the year. That keeps the dollar on the defensive. That will be beneficial for some of those. Joanathan its a huge work for earnings. Apple is making up 8 of the nasdaq. Can you be bullish on equities without the 45 stocks at the same time . You can. Its not the 45 stocks. Technology and health care and financials, its a broader based in some people assumed. Having said that, there is a tugofwar between major stasis in the equity market. You have the secular growers in some of the computer consumer names. You have industrials and energy and those havent done much and financials are in there as well. You have the bond proxies. Those were in a bubble year ago. Now those of the long forgotten. It hasnt been completely uniform. The market is never completely uniform. Im not worried about that. Lisa i want to get your sense about the ecb. Growth state at 1. 3 in june area it hit the low bar for the ecb target. Theconcerned are you about talk of tapering western mark tapering . I dont think we should steer the ending of the cycle as long as Central Banks are in do no harm motive. The fed just raise rates two times in a row. Financial editions are easier than when they began. The stock market is up. The dollar is lower. The fed is tightening. We dont have to fear the end of the cycle as long as there is enough growth to withstand an increase in the rate or the removal of the Balance Sheet liquidity. Growthat balance between and what the Central Banks are doing. Example,ive you an 2015, the theyd could that could barely get one rate hike out of the way. The markets would like it. Now they have tightened three times in a row and the markets are fine with it. We have Earnings Growth. In 2015, we were in a recession. Its all about that tradeoff. The ecb will probably remove look witty and start to taper if the fundamentals supported. We are fine with that. You will be sticking with us. Coming up on friday, its an allstar lineup of guests to react to the payroll report. We are can it down to payroll friday. Thats coming up on this program. From new york, this is bloomberg tv. Emma a big takeover in the cable tv business as discovery will buy scripts that work, the parent of hdtv and the food network. The deal is valued at teen billion dollars. The acquisition could help discovery cut cost and gain negotiating leverage. 3 has finallydel arrived and with a surprise. The 44,000 version will go 310 miles between charges. S coststhe tesla model almost 100,000. China has asked the company that but the story hotel to sell its overseas assets. The government once them to bring the proceeds acted china. Growth is that fueled banned i regulators. That is the Bloomberg Business flash. Alix we are seen them down on m a. They dont go overseas as much and they want to keep the money in the company country. Will that continue western mark continue . Lisa will it continue. It depends on the bond market area market. Joanathan lisa is sticking around with this. Be joined. We will we are counting down to the market open. Futures are marginally positive. The s p futures are positive 3. This is bloomberg. Is this a phone . Or a little internet machine . [ phone ringing ] hi mom. It makes you wonder. Shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. [ laughing ] so all you pay for is data. See how much you can save. Choose by the gig or unlimited. Call or go to xfinitymobile. Com introducing Xfinity Mobile. A new kind of network designed to save you money. From the cash open. We will get you up to speed. Futures are up seven points on the dow. There are some decent gains across the board in london area is there is a buy back into the mix. This the situation in the bond market. Bid, in the fx market, the Dollar Strength is the story to begin the training week. Upside on coren inflation pulls back in touch. Update onget you an the world. Expecting donald trump not use force against north korea. They fired a missile for the second time in a matter of weeks. The top American General called his south korean counterpart to discuss a military response. The u. S. Will reduce Diplomatic Missions and russia by almost two thirds. That is 755 people. That is in response to sanctions imposed i congress. Inflation in the euro area is below the centralthat is in ress imposed bank target this month. Consumer prices rose 1. 3 . The ecb will debate on unwinding the stimulus program. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. Its not the inflation data ands to make you run away to the ecb and pull the trigger on rates. 1. 3 is different than at 1. 7. I think the bottom line is 1. 3 is different than zero. Thats for you have to unwind qe. To remove the whole program in march toward raising rates, its not going to happen anytime soon. We have a big week of economic data. Tomorrow, we get auto sales. Thursdayof england on as a news conference. On friday, the major data point of the week is payroll. That stretches to the ibc. Get me set up for friday and the payroll. If it drops, do we have the same old question . Where is the wage growth . Probably. Wage growth is being held down by the fact that the Retail Industry is under pressure as people go online. Notemains that alans of whether the fed is going to remove accommodation, but how quickly. We are in this extended expansion where there isnt much inflation. The fed is looking at the phillips curve. The fed is doing the right thing by going as quickly or slowly as the market will allow. Talents,s we have that as long as we keep that alans i think the market is ok. The key thing to remember is we move with liquidity or global easing. That should not be a thing that we need to worry about as long as there is enough rose to justify that removal. Joanathan help me explore the inflation story and folded into the investment. The risk reward of inflation, we had an ugly issue. It wasnt aggressively brought in. Has it got cheap enough to go long on inflation again . Recovered quite a bit in the last week or two. Below 2 on the breakeven, that seems like a good value to me and to us. That is not a very expensive option to buy some protection. The inflation story hinges on the legislative story in the u. S. Stimulus, thatal should generate something. I think the inflation story will be tied to some degree to if and when momentum we get back in terms of tax reform whatever that comes, it does not look the eminent. Momentum, iins think the inflation story will change. Alix i was struck by the tenor. Lisa are we going to get the same story all over again . You are really selling it. Its going to be more of the same. I was noticing that auto sales numbers. Are you looking more at these specific, deeper industry specific data points to get a clue and wants going on with the market since there is more of the same on the mac or level . Its true. We do have to dive deeper into that data to understand what happening in terms of the consumer spectrum. The wage component will be hugely important. Its also how the earnings are being spent in terms of the consumer side. We will dive down into the deep data and see how the consumers are purchasing these items. That is one of the key inferences. Confidencen consumer soften in jurisdictions. That is reflective and those they ticket items. Them runningsee out of retail stores. That suggest there is a moderation in the momentum. That expansion will help we accelerate. For now, it doesnt look like the data is slowing slightly. Alix how tight is a labor market . Thats the big question. The phillips curve model says its around 5 . , inflation is still mia. We saw this back in 2000. There was still not really any inflation then. Nobody really knows. Until we actually get there, i think the fed is trying to be proactive on this front and remove accommodation. They dont really think of tightening. Its just moving to lower bond. Point,r it is, at some this very goldilocks scenario could be challenged area the s p is up 30 . The volatility is only seven. The market is up three times. This extended mix cycle. We have decent growth and inflation. The fed is in no harm a. We can wonder what is going to upset that and if that is going to be inflation it. Investors have gotten spoiled. Alix this is killing me. Lisa boring. Alix its really depressing. Boring is good. Point, there was a piece on bloomberg today. He outlines the first three things federal bankers dont get about wages. There are significant economic changes in recent decades that are holding down wage growth. Are we in a structural decline for the dollar if we cant get any juice . True that there are structural changes in the labor market thats just those are ins curve models need of recalibration. Causing acal changes degree of distraction in terms of the wage growth. It is going to be the case that we are in this slow or low inflation environment. Wages are going to be relatively benign as we try to find a way in the labor market. We will see what shakes that environment in the short term. Markets are still looking to be maintaining and assuming if there would be a dislocation the central bank would be there to sustain them. That creates this boredom that is creating low volatility. Alix get me out of this segment. Thank you very much. Coming up later this week, on wednesday morning point blank fine will join me. This is bloomberg. Emma coming up, the ceo at 2 30 p. M. Alix violence rocked venezuela over the weekend. The president defied International Pressure to hold a controversial election in an attempt to deter the president from rewriting the constitution. Administration put sanctions on 13 venezuelan officials and their oil industry may be next. International sales make up any 5 of the foreigncurrency earnings. We can see the amount of Venezuelan Oil imported from major refiners like chevron and phillips. They would be hurt if we wind up seeing sanction on the oil industry. On the phone to discuss the latest is Bloomberg News. What happened over the weekend . About the vote was electing a body to bring about peace to a nation rocked by months of violent protests. Ae opposition said this is president is the trying to install a dictatorship. We had lots of violent protest across the country. 10 to 16 people were killed on sunday. The opposition is in the street. Alix what to go now . Part of the conversation was the opposition did not wind up voting at all. How many people voted . Theew according to opposition analysis, there are between 2. 2 and 3 Million People that voted. The government says they had more than double that, over 8 Million People. There is a huge discrepancy and many skeptics surround the numbers the government puts out is in the big variable now how the u. S. Reacts to this. The Trump Administration promised strong and swift action. Many fear they will sanction oil exports to the u. S. Joanathan where are we with sanctions right now. There could be some oil export sanctions. How could that escalate . Heard, the last we state department reiterated what the administration had said a week before. They will follow through with sanctions. We are not sure exactly what those are. Orit will be a ban on crude if there will be dilute ands or things that make crude oil lighter for refiners. Says thet administration is mulling over what they want to do. Lisa i was struck ryan ian bremmer quote on twitter. He said the u. S. Should stop importing Venezuelan Oil and and the regime. There are assumptions baked into this. A u. S. Halt to any venezuelan fall andg in would forces hand and cause him to lose power. This is an like accurate representation of the u. S. Could do in this situation . Andrew it is the main fire that pays cash. It is the major source of cash flow to venezuela. If it would ban crude oil, it would have a devastating effect on venezuela. Importantry is very dependent. Groups estimate the third of goods consumed in venezuela are brought in from mexico. It would have an effect on the economy. Most analysts that i haves of into our warning against this. We are not sure what the Trump Administration is going to roll out or it up it is scary for average venezuelans area alix thank you very much. And is joining us from caracas. We are joined by a technical analyst. Analysts say you could add seven dollars a barrel if you have an extended threemonth crisis. It is at an important juncture right now. The rally that has occurred off the new low this past june has risen to the top. Around 55 apped barrel. T was a large that started this massive decline in our viewing. At this point in time, oil prices could be interpreted with a bullish breakout. It is sitting right there this morning. We could have a technical breakout. In my view, as long as this holds, i think its a decent point at selling oil. Sometimes charting can seem like that here in its like astrology. We look at this. Are some of these predictors . Amrita we had a 40 rise in crews. Will we see a 40 rally now. Will we see some kind of a cap. Paul if you concentrate on the chart, Market Action discounts everything into prices. Right now, all of the information we have as investors should be discounted into the price of crude oil. Whether the sanctions against venezuela are happening or not, the market is telling us its not going to. We dont think its much going higher. Market has sold crude oil prices. Something that occurred over july was the average highest price of crude oil over the last 10 years was july 5. This july 5, they made some comments about increasing supplies and prices plunged. This repeats itself. To makingimportant our forecast. Oil appear at 50, you can probably sell it. You can protect yourself given their is venezuela and russia north korea that could cause a spike. Rally,here was a monster a twoyear high. You get some good data out of china. Are we ready for a 16 rake out western mark paul the copper chart going back to 2011 belongs in textbooks. Where copper started to bottom in 2016 with a small pattern, that projected up about 50. On the broader term, there was a triangle autumn that formed it it was much bigger. We put this in our report. 300 is a significant level. Was five or six times on the way down. Its going to act as a magnet on the way up. 300. Also line up with i think the upside. It could go further. Alix paul, great stuff. If you have a terminal, check out tv go. You can look at our charts and graphics. If you like the technicals. This is bloomberg. Joanathan a big takeover. Discovery will by Scripps Network. The deal is valued at 14 billion, including debt. Withwill be negotiating expanding internationally. Secrets the worst kept in m a . This was the deal they tried to get done three years ago. They could not get it together on price. We thought this was going to happen. We think it will be more deals in the media space. We saw a lot of consolidation. Now, we need to see this first wave of consolidation on the content side. Lisa they tried to buy it for and it all apart and paul the Scripps Family said this cord cutting thing is a risk to our business. The benefits of hitting scale with another player, that makes more sense. I think that was the big issue. Price helps. They are getting a full value from discovery. This is a great transaction. Joanathan who wins . Paul the eager winner is john 21 shareholder in Discovery Communications. In theve lots of chips table, including charter communications. Continue to be a major determinant about how this Media Business continues to evolve. Joanathan there is another one on the table. We will spend more time talking about it or it by question begins with the following, what is softbank meant to be . Paul i dont anybody understands what they are trying to do strategically, other than getting larger. The most recent issue, is the leading shareholder of sprint and the united states. They are the smallest of the companies,wireless desperately trying to fix its Balance Sheet. The latest move was looking at charter and combining with charter. They were unable to get a deal done with tmobile. I do think that deal is going to happen. Charter said they were not interested in a deal with sprint. That does not mean he cant come back in the context of softbank and do something down the road did road. Joanathan amazing stuff. This guy right here, why he is sending the alarm on bank stock. Thats coming up that 8 30 a. M. Tomorrow. From new york, you are watching bloomberg. Joanathan divided republicans stare down a year without a policy achievement. The president wants obamacare repealed. President moves closer to rewriting venezuelas constitution. A 2 billion buyback or in the turnaround plan finally starts showing momentum. From new york city, good morning. A warm welcome to bloomberg daybreak arid david westin is off today. For the next hour, Lisa Abramowitz will be joining us. Lets get up to speed on the market reaction. Futures are up. Europe is a little bit softer, even with that upside on the core inflation. Treasuries are stable and have been through the session so far. 329 is your yield. Crude is not doing much arid we have some crucial levels and we went to them briefly. Alix brent is over 50 a barrel. Its holding that level. Dow 22,000 . Ng at as the fix continues to become sure. We are still under 11. The conversation continues, complacency or not it not. Lisa the title was please stop talking about the fix so much. This is not an indication of future volatility. Relies it has been low. Rotation that is the important part. D. C. , yesterday donald trump set on twitter dont give up republican senators. The world is watching. Repeal and replace. Paul ryan statement, emphasized the importance of tax reform. We can grow our economy and help middleclass and get ahead and broke our fix our broken tax code. Joining us now is peter from height analytics. That controlsy the white house and congress but they are at odds on the agenda, what can get done . This is like the godfather part three. Its starting to feel like groundhog day. Here we are at a point in the calendar where the houses adjourned for five weeks. They are not going to act on health care. In december theyve got 11 days before debt ceiling. Its unrealistic that the Affordable Care act repeal is going to get off the ground in any form or it. We are looking at a bipartisan fix, including the cost sharing reduction subsidies as part of a september pack is do with the debt ceiling. The debate will go on. President trump hates to lose. Is taking his frustrations out in a very public way on the centers he feel let them down. The pivot is finally here. They pledged to redouble efforts and find common down on tax reform. Joanathan we said you have to we said you have to do Health Care First with tax cuts. We are not going to deal with a lot of those issues as part of tax reform. They are tightly focused. The Corporate Tax code, the International Tax code, joanathan i want to wrap things up with something you mentioned. I think we all understand the division in the Republican Party on things Like Health Care and tax reform. The Repugnant Party would shut down the government at the back into this year . Think its unthinkable. The debt ceiling deadline getting moved up to september 29th of the weekend bodes well for avoiding a shutdown in september. Get an agreement on the continuing resolution, there will be a lapse in funding. We think that risk has been the risk. They will have to package this with a funding bill. Failing to raise the debt limit is unthinkable. The pressure will be enormous on congress in the 11 days of session they have in september and punt the issue into november or december. Thats when you see the issues like the border wall funding come back into the forefront. That will be more concerned about a government shutdown. Joanathan thank you for joining us on the program. We will talk to you very soon. Joining us is the chief economist and michael hansen. Lets again with you. Noise and signal gets very difficult when the noise is cranked all the way up. How difficult is it to spot the signal . Megan its not that difficult when we have so much noise. Given that there is so much liquidity in the market, very little will influence economics. Its not shifting. Even investors are ignoring these signals. Lisa a lot of people when President Trump was elected said we are going to give him six months to get his feet on the ground and then assess. We are here. He hasnt gotten anything done. Our people kicking the can down the road . Megan i dont think investors have the ones i speak to have accepted that he will not push to his agenda. I dont think they care anymore. Its not about policy, its about the opportunity you wouldve missed if you hadnt jumped into this bull market. Its that trigger point that is difficult to forecast. Analysts, you talk to they say earnings are strong. It was about earnings. Thats why we are in the market. Why should anything be an upside . Michael hope springs eternal around the regulation. Say they have to get tax reform done. The reason they failed on tax reform is a lot of things. Its a dead session. Some people make that argument. I find that a little less than compelling. You definitely hear that. Everything is a list. People are chasing returns. For the stock target, until you get clear evidence that republicans are going to lose houses, equities are going to look past things they sleeping shortterm blips in the road. Something is going to get done, the window is going to narrow. Alix is that anything at this point western mark we ask if its Corporate Tax rate. They say any tax cut. Is that we see . Amazing how much the debate has just gone to tax cuts. Maybe it will just be 25 . That is accepted. Lisa you say they dont care and you say they are still hope. Think if you step back and look at the disconnect across the market. This is becoming more pessimistic here it youve seen some rumblings in the market that they are getting worried. Are we really going to be able to get a deal done before we go over the cliff. Calamity withg fundamental treasury markets. Everyone is nervous about how this is going to look. Stocks are very much still whistling past that concern. The fixed income market is getting nervous. Joanathan you are saying something different, but we dont have a market area everyone is long. Justifyative changes to the price action. At the start of the year, they said dont worry. The guy from the campaign will be different from the guy in the white house. He hasnt been different at all. The growthed on to story that would be beautiful and wonderful. I just dont understand. Year, beginning of this everyone was long equity. That was for the wrong reason. Now they are staying with a. They are changing the story to suit the price action. Michael as we get into september, you will see the geopolitical risk out there that is not raced into the market. If you look at volatility, its extremely low. It does set the market up to be wrongfooted. Suddenly, everybody rushes to the exit and alix there is a trigger point for return externally. Election,the italian that could bring markets that. Bond investors are smarter than stock tickers. Joanathan thats the smart money. From new york as we kick off a new trading week, youre watching bloomberg tv. Emma a big takeover in the cable business. Discovery will take over Scripps Network. At 14. 6is valued billion. The acquisition could help discovery cut costs and have negotiating leverage. That is the Bloomberg Business . Alix its a big week for some moving market events are in tuesday, euro area ep. Thursday, the boe decision. Friday, the u. S. Jobs data. For a look ahead, we are joined by michael mckee. Obviously, jobs will be the focus on friday. Walk us through before that are theichael we get data on economy and how its doing. We saw yields rise a little bit in the bond market its going to be looking for justification. They want to see additional strength. Week, we get the jobs. The problem that we track, all of this growth has not pushed prices up. Ofare getting another piece the index and thats expected to fall. Oil prices are going up. That may change things going on. I know megan loves this one. Its been a year since sterling fell in the wake of the brexit vote. We did have a rollover last month. Prices continue to rise. There is pressure to raise rates. Its going to be an interesting week to see how prices develop. It arey will announce needs for the coming months. The question there, do we see a change in the debt ceiling dates. Henathan as soon as mentioned the treasury, they turned the lights on him. Wrap it up. I know you are getting excited. Themis actually very orton. The treasury announcing funding requirements for the next quarter, i dont know how they do that with the Federal Reserve about to raise rates. I think the fundamental question is whether or not we are going to get the politics on one side of washington rather than the other side. Thats the real question. Joanathan in terms of the shift, the treasury has got to somehow yet how the Federal Reserve will reinvest going toward. Its going to be shifted toward the front end. Is that the friend and from the treasury . Said as he likely out him. Its not clear. The fed has not given a strong indication of how they are going to partition the investment. They have matched funds and options. That will probably be the case. Lisa the fed doesnt want to do anything. The Treasury Department, are they the same . Do they care . Megan they talk with the fed. Janet yellen is a fierce defender of the feds independence. I link to treasury can put so much pressure on the fed. They certainly care. Theyre worried about what will happen with the yield curve. I think it probably wont. Japan, the bank of japan was trying to stabilize tenyear yields. Do you think the fed is entering something similar, or they will work your hardest using the Balance Sheet . Megan thats a good question. They are not there yet. Stiffenot significantly. It is still going with the 10 year yield. In reality, it is fallen. They dont have much of an explanation for that. The fed does not have white as much control as they hope. Maybe eventually they will get there. Joanathan a couple of months ago, we would be waiting to see if they would issue 50 year debt. Every given up on that now . At of the treasury is completely given up on that story. I dont think that is viewed as the most like scenario Going Forward. Megan they are still looking at that. They are not sure the rest of the treasury has been on board. All they need a Steve Mnuchin to push it through. The market has responded by saying its not going to work. Lisa its incredibly unpopular. Alix does he want to extend charity . Might they want to issue more . Megan there is some demand for longterm debt. We would love to buy it. We are all trying to match assets and liabilities. Funds,look at pension there is a huge pension crisis in the developed world. Longterm debt help with that. Alix we are all getting excited. We are excited about wednesday. Will the jobs day be as exciting . Its probably more interesting. Well be watching with happening. We not really focused on the headline. The fed hass done a reasonable job. We know as the economy continues forward, we are that much further along. Its about wages taking up. Will inflation turn the corner . Then the market continues to secondguess. Both your sticking with us. Up, the head of global oil and research will weighin on the unrest in venezuela. This is bloomberg. Alix 310 miles, that is the range of a 4000 version of the tesla model 3. 500,000e taken in deposits of 1000. Joining us with more is jamie butters. Jamie it seems too. It lit up the internet over the weekend. Teslane who is a fan of who was excited about the model 3 is very excited. They are feeling vindicated by the longer range and the fact that the event was held on time. Alix thats a low bar there. I asked about how to value the company. This is what he had to say. Its a disruptive company. Its going to change the paradigm around transportation and energy consumption. I hate to say this, its both. Cap a 55 billion market today. Opportunityat the going to 1. 6 million vehicles, the stock the a lot higher. Patient investors should the reported. Alix is it a battery or car company . City asou have solar part of this company. They are very much an energy company. When you look at the car company, it is hard to justify that valuation. They dont make any money. They dont make very many cars. Achieve expecting to something that toilet did not do. There is a lot of hope built into that. Alix has anyone in the public gotten one of these . Sales and first deliveries, the 30 that were delivered right a went to employees. There have been some to motor enthusiasthe car magazines. Its getting pretty good reviews. Joanathan its great to have you on the program. Common up on friday, do not miss our payroll coverage friday. We will have an allstar lineup. From new york, this is bloomberg. Jonathan i am jonathan ferro. Lets eat you up to speed on the market. Lets get to the board quickly, i will whip through things for you. 57 points up on the dow, positive 23 points on the s p 500. In london, decent numbers out earlier. The other for the mining sector, just continues rallying. That waiting from the minors, we are up by about. 3 . Treasuries stable throughout the morning just of of the morten of of the margin. One thing that has held throughout the session is the eurodollar pulling back. Across your stories asset. Emma john kelly takes over as a white house chief of staff today. He has been serving as secretary of Homeland Security and till now. Kelly will have one thing bus nevernever prie did. China called for restraint after testfireds regime listed missiles for the second time in two weeks. Hasident putins government decided to reduce staff by about two thirds. That is in response to the new sanctions. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im emma chandra. This is bloomberg. Jonathan thank you. In the world of banking, hsbc touching a third high. The turnaround plan may finally be gaining momentum. Joining us now is stephen morris, six years into a turning around plan, and now we get the fruits maybe . The latest of buybacks of 2 billion takes its as bc up to. 5 in the past year. They are seeing a lot of capital filled up there and they are starting to get some back. I think shares are probably rising on the commentary, the ceo and cfo there will be more to come, we disney to find out more about future regulations and more global issues before we can set a dollar amount for you. Londonn those in pointing out this morning that may be right in water tomorrow. The amount of spending they might have to do over the coming decade, is it a right approach to be doing these kind of buybacks . Is they aregument not spending extra capital out there. They are just using organic growth as rates rise around the world, their Balance Sheets will arise much more than others. As an example of the cost you mentioned, today, they put a ill on brexit for the first time, about 300 million to move investors to paris and the legal costs. Imagine that on an end or street scale from london to the rest of europe large. Jonathan yeah. We force e u. K. Transitioning thousands of is a veryto paris natural move for us. All of the licenses, capabilities, technology, Risk Management capability is already present. Jonathan when you look at the location issue around banks, you ask one bank ceo, you that a very different answer. If you ask in the u. S. , they say dublin or frankfurt. Hsbc years ago bought a large French Retail Bank which came with a banking license and already had several offices in the country. The new president will look at the tax rate which executives and hsbc and a lot of banking investors will comfortably fall into. Factors being brought in by the new overlords in france. Thank you so much. Stephen morris, joining us from london. The hsbc highlighted the good, but there was roughness with Deutsche Bank and credit suisse. Bring up earnings here, versus. Urope, which are better some say its actually the best since 2008, and the flipside you have sales apprise only 1 in europe, and you had revisions going down into the quarter here it these should have been easier. Which is the best place. The trend in europe was by an, cyclical recovery, has that changed at all . Megan i think it is probably just strengthening. I think in the u. S. You have bifurcation between soft and hard data, and it is not changing. In europe, it is actually shifting to match some softer data. It is from a really low base. And might do a little bit better this year, but that being said, i think well continue to see the hard data match the soft data. How to explain the differences from the to europe to some extent, and then at in the weaker dollar. Megan it could. Particularly with the currency. You will see the fed and the ecb are starting to go in the same direction. In the bond market, people were saying that the u. S. Was about 1. 5 years ahead of europe to monetarys policies, can the same be said with respect to the equities cycle in europe . Michael to some extent. Earlier cyclical stages right now in europe, that is a good part of why youre seeing more optimism around equities in europe. The big question is whether the diversions we are seeing he come becoming a convergence will happen or not. Low aion remains little pickup this morning, but still quite low. Conversely, the market is starting to question how aggressive it can go as well. What strikes me is how constructive people seem to be about european politics your know the expectations and the bar are somewhere down there, and they managed to hop over it. Looking at emmanuel macrons approval ratings, they have already started to roll over. Megan yeah, and actually if you consider the labor reforms, he actually manages if he actually manages to push them that just when you results in a lot of layoffs. There is a risk that macron earns a lot of Political Capital burns a lot of Political Capital early on. Jonathan it raises the question of whether europe is the trade quickly,g in and out or in investment, whether you truly believe in the fundamentals or get out in a short, no of time. Michael there are things for longterm investment are sure, but i think you are really playing the fact, europe is just a little earlier in the cyclical recovery. A lot of the structure reforms have happened, not just in france, but elsewhere to change that and i think they have a long road ahead when it comes to investment rather than trade. You mention the italian election being a big risk, but we said that about the french europe, brexit, things that didnt pan out. What you think italian will be different . Megan it is the one country after brexit where support actually fell. In all of the other countries, except for the u. K. Are you predicting megan im not predicting it. . Would you call it italeave [applause] megan more french support italy leaving. With we face, the Fivestar Party has been ahead in italy. Pfizer gets in, maybe they cant do much, but having it populist party is something you have to think about. Banks are not doing that well, all of its time when ecb is talking about tapering there qed program here to things could get ugly in italy again. Great stuff. You are sticking with us. Coming up later this week, tune in wednesday morning. Goldman sachs ceo will join me live at 8 30 a. M. New york time. We will talk about global growth, u. S. Growth, this is bloomberg. Emma i am emma chandra here in the hewlettpackard in apprise greenroom. Why he is sounding the alarm on stock. That is a 30 a. M. Eastern. Violence rocks venezuela over the weekend. The president decides to hold a controversial election. And to enter the president from reap to deter the president from rewriting the constitution, Venezuelas Oil industry may be next. Joining us now is our reporter who covers the country and has been closely following this weekend. He joins us from miami. The big question Going Forward oilell the u. S. Impose sanctions on venezuela, where are we in that conversation . We are still waiting to see how the u. S. Sponsor this year to President Trump promised swift economic action should venezuelas president proceed with the election, and he did yesterday. Everyone is waiting to see how the u. S. Response and whether it will impact than a swale as oil exports to the united states, which accounts for a third of its reduction. Alix where are we in terms of violence in the country . How do the politics play out from here . Nathan it was very controversial and you will hear more in the coming days. They had an unofficial plan to reject the rewriting of the constitution. Two weeks ago yesterday you have the government, late in the evening, say they had over 8 Million People vote. That is more people than voted dura when first elected for president. Hadalmost more than chavez at the height of his popularity. There will be people questioning the validity. You will see there have been over 100 People Killed in violence. Much, joiningu so us from miami. We wanted to take a drill down at oil prices if we did see sanctions. This is oil imports as a total percentage. About 700,000is barrels of oil a day. ,oining us now is mike wittner global head of oil research rent by bloomberg as one of the top five most accurate oil forecast. Megan green. Lso is who stands to be the biggest loser if we see sanctions . The biggest loser would be venezuela, because the u. S. Takes about about half of venezuelans exports. It were really hit them pretty hard. The other thing to realize though, is it would hit and hurt u. S. Gulf coast refiners as well, because it is shortfall crude and it gets from venezuela to the gulf coast and about three to five days. It is hard to replace that. Alix there are a growing number of analysts who will say that venezuela will be what oil needs to break out of range. In other words, if production is frozen or halted, youre going to see a rally in oil prices, do you buy into that at all . Depends if the u. S. Does it, it depends how they do it. If they just say, hey, were not going to take that and it is off the market, yet, that it is taken off the market, so in a sense it does help opec. How much would it boost prices . That could be five dollars, maybe even 10. Also, the u. S. Has a couple of different ways to play it. If the u. S. And i hope they are thinking about this in washington. If the u. S. Wants to hurt venezuela, but not its own suppliers, and not increase prices they could announce a release of u. S. Sbr crude to make up the supply. So that, if you think about it it is clever, because it hurts venezuela, does not hurt the u. S. , does not increase global crude prices. I havent seen in the thing that they are considering that, but in the past in the white house when there has been analysis, a they aren that creating, that is usually one of the options that comes up. I have heard that, too. It would be ok for about three months, but the quality wouldnt be one for one. Megan, what is interesting is the oil industry was in decline before this happened. I have had a host of robbins for many years. In the spread into a regional crisis . Megan i think that is difficult. It is mostly unfortunate for venezuelans. For the most part it is a pretty contained crisis. Reasonces are the main through which it could spread. In addition to the u. S. Buying a lot of Venezuelas Oil, it provides most of venezuelas cash. Default,ela were to and it is shocking we havent immediately or spectacularly, i dont think there would be a huge fallout for the rest of the region. The other part, though, if you look at supply disruptions supply issues have been disastrous for a while, but other than that we havent seen a lot of supply disruptions recently, how do you project that Going Forward . Do you them going the way of night year a, nigeria as well as venezuela . I dont think it will be an outright shot in. The issue the air, clearly, would make it worse. Venezuela is in simply lack of investment. That is why production has been declining the past couple of years and that is why it is headed south. I dont think it is necessarily a case that they would shut production, they would do their best, but it is not good enough here it is not working. We have already seen that. Thanks so much nevertheless, we get a little bit of oil price support today. Interact with us directly, go to tv on your terminal. This is bloomberg. Emma do your Bloomberg Business flash. Saudi a arabia is considering thats according to people familiar with the decision, Oil Prices May rise. The saudi plans to sell shares in our aramco and then ipo next year. Discovery communications has agreed to a high network, the Parent Company of hdtv and network. The acquisition could help cut costs gain negotiating leverage with distributors and expand. Also, a direct bid for charter communications, that is according to someone familiar with the matter. An offer by sprint was already rejected. It is the secondlargest table operator in the u. S. Here it softbank,for more on paul, lets just get into it. What is the goal of and softbank . That is the 64,000 question for all watchers. Betsd via softbank have all over the place, all over the board including a very big that that was sprint. He is clearly looking to get bigger in the u. S. , perhaps offlly here off pair sprint with a strong asset in charter. I dont think charter, given their comments, is interested in doing a deal with sprint. The question is does it have to come back with softbank. If you dont buy us, well buy you, seems to be the message from them. When we think about price, we are talking a big chunk of change. When you talk about charter and take over will be somewhere number two, john malone is a large shareholder of charter, so he will have a big say on the future of charter in whether it involves is us on and softbank or sprint, or a combination of the two. Comcast has an agreement with charter, and that goes for about a year. You say that charter is the Strong Player compared to sprint, sure, compared to sprint. It is a triple be rated company, with a lot of debt. What does masa sans bring to this . It is a highly leveraged company, but it is a company that the bond market loves. Business, it cable d leverages quickly. Charter is in a strong credit position. Masa sans brings cash, to may be tight in the wireless assets that they own be a sprint. The real question and Cable Television is, do the Cable Companies and need wireless, do they need a quad play to go along with live mine, voice, highspeed data . It is uncertain. The ceo of comcast came out and said basically comcast doesnt need to do anything. They are happy with their collection of assets, less clear if thats the case with charter. Softbank and the strategy here, stake in alibaba 2000 and is it except able. Extrapolate is he just a lucky man . Alibaba is a major player on a global scale. And there are those trying to find the next alibaba. As ank as it relates operator, certainly in this country, much less clear. Jonathan great to get your insight, from new york you are watching bloomberg. Jonathan republicans stared down a year without a major policy achievement, the president wants a obamacare repeal, the speaker wants tax cuts. Into knowing the march toward uncharted territory, the attention returns to the company apple. From the bank of england super thursday, payrolls friday in the united states. Good morning, for our viewers worldwide. This is bloomberg daybreak. With 30 minutes to go, lets get you up to speed. Threat the morning, they stay there. The dollar has been stronger throughout the first day of trading this week so far. And it stays there at 117. 33. Treasury pretty stable 2. 30 onut the morning, the 10. That is the Current Asset story. Lets get you some movers. Alix Discovery Communications and talks about its script , 34 percent change over the close. Scripps parent for the food network, hgtv. The most interesting thing has been the drama between sprint and charter communications, the talk was charter good merge with a sprint. Charter came out and said not interested, the latest news is will makehi and a bid for charter. The deal would be they could combined cable and wireless. It is hard to count him out. Dont count him out and his huge deep pockets. You loving this story, like may stock in the open. Snap, definitely watch the stock. Ipo lock expired over the weekend. Stock is down 18 since ipo, how much pressure will we see in the next few days if we see internal selling . Jonathan republicans may have to prioritize their agenda, pursuing another Health Care Bill or pushing tax cuts through this year. Joining us now is kevin cirilli. Kevin, which way do they give it . Kevin they want to deal with tax reform here to when you look at last week in particular with the demise of Health Care Despite Mitch Mcconnell really wanting to pull republicans on board, they just didnt have it. It wasnt there. Too many policy divisions. But they do a temporary fix . Yes. But they are already starting to correct course on political mistakes that were made for health care. You could say political mistakes, but there are really ideological divides. Are those same divides of their when it comes to a tax plan, or will it be an easier task . Kevin there is a clear division. That is why the most lobbyists and trade experts i have spoken with say potentially there could be a lowering of a Corporate Tax cut by the end of the year, but not universal tax reform. Did see theside, we president and administration really weigh in on a key divide last week when they released the skeleton version of the tax reform framework and that was on the border adjustment tax. Speaker ryan really wanted that. Theboats want there, but Freedom Caucus and the administration chose against speaker paul ryan. For the Republican Party, the following question, how many parties are there within the Republican Party at this point . President trump, moderates, and ultraconservatives. I would argue three. Seeill be interesting to how democrats respond, because no one is leading them. . Is trump on his own . . Kevin i dont want to opine. Jonathan no. We dont have the time here at kevin cirilli, thank you. Alix tax reform comes into question and we are joined by koesterich. Why dont markets care . Doingsome have been better in some parts of the world. We are still in a world where Monetary Policy is accommodative. We are not seeing any of the fiscal stimulus, any infrastructure that might have changed the trajectory six month ago. Talked tohat point we Compass Point research on friday and he started to warn when markets might start to care in d. C. At the moment is the markets sentiment toward washington is going to the into sour even further in the weeks ahead. Many of the trump trains have retraced from their postelection i think a d. C. Is set to shift from an action over the past six months to a state of dysfunction. In particular, im concerned about september. Alix is that when you might care . Russ shirley when we have dysfunction evidence, people start to care. What could change things, a government shutdown, billiard to pass a budget failure to pass a budget. Markets have discounted a bid of tax reform in the face of corporate earnings. Jonathan there was a bit of tension in the Treasury Bill market, counterintuitive, the reason being that threemonth will was approaching the october potential shutdown. That spread is close, we have gone back to normal. Is that a spread pricing out and saying its not going to happen . Is. i think it markets dont care, because they have been paid not to care. Every political event in europe or united states, it is by the dip so investors have developed a pavlovian response, the slightest bit of lyrical tension, you buy. For now, investors are looking past that, because over the last five or six years they have been burned. Jonathan are we building up leverage . We are building up leverage. Jonathan in a significant way . And small parts of the market, we are. It started in 2007, there was a lot of leverage. The vix was a 10, volatility was dead, clearly it came back. When it does come back and you see crowded trades with leverage, that could spur violent reversals. Are you talking about hedge funds barring shortterm to invest longterm . Russ it will obviously depend on the hedge fund, but youre seeing in credit markets and equity markets particularly in the united states. Credits, do you think high yields will be the first to fall and fall precipitously if something squeezes leverage out . Uss thats not clear it is an interesting question. I dont want to fight the same battle as last time, even 2016 when the wheels started to come off in january was the high yield market. We have seen a lot more resilience now, part of that is because energy is not as large part of the market. Energy has become more resilient, but we are still in a world where financing is easy and cheap. That has to start to change until you see too many crocks and highyield. One of the reason to think that equities have done as well as they have in volatility as low as it is is highyield and credit markets have held up. Jonathan the pr will be a nightmare. We have to turn that down. What youre saying seem to be different than what we have gotten from lack rock over this program. There takeaway is people are under invested, under risked. Russ those are not mutually exclusive. They are totally online at some point. Russ i dont know about that, but blackrock has many views in the house. This one is not contradictory, because you have different segments of the market. If you think of certain sectors of the market, you see many Retail Investors dont have enough inequities over the longterm, yes, i would completely agree. That segment is probably under invested. Where should they invest . Russ if you are looking at a 30 year horizon, a significant portion of their portfolio should be in equities. With one caveat, most people tend to have a home country buy. In the u. S. That means few are markets, if i were looking, i would pull back on that and i would want to have more of my longterm savings in global markets, which dont look as extended in pricey as in the u. S. Jonathan very well answered, as well. [applause] 20 from the open. Coming up on friday, a fantastic lineup of guests. Full coverage including on hold of him he credit umi credit. From york city, this is bloomberg. Week fora busy earnings, the big one from the worlds most valuable company. We will hear from apple, tesla, berkshire hathaway, and many others are out the week here at joining us now is equity russ of this and blackrock. Pretty solid across the board, what has been your takeaway thus far . Were the same, really. Come on. There are a couple of things i want to get in, but not in the current earnings season. This is about beating expectations, Still Producing doubledigit growth, similar to the first quarter. If you are looking for risk, there are a couple of things happening beneath the surface. One thing that stood out to us is the rate of revision. If you look at the doctor quarter estimates, they did follow. They did Fourth Quarter specifically is where they are taking down expectations and specifically for the consumer. Our Holiday Season forecast is already at risk, maybe the expectation that consumers will bounce back is a little bit too robust for the consumer to hold up to those expectations. That is the only thing that i can say that is disappointing, everything ounces pretty strong and stable. Excluding buybacks, you can take your go at trying to hit at earnings. Not a lot of weakness there. I have to think about auto sales coming out this week and whether that will weigh in to expectations for the consumer. Russ, i would love to bring you an on this, how concerned are you on the weakening profile we are seeing in the auto loan sector . I think there is fragility and the auto sector is further along than other parts of the market, because they were early in a fisheries of low rates early beneficiaries of low rates. Im curious, when you think about the four quarter numbers, is any part of that related to growing skepticism about tax cuts . It doesnt seem to be the case here to most of it is autos, expectations falling and still falling. Even though we have reduced expectations for auto sales, the expectation for bounceback is fading quickly. They have bought so many over the last few years. And they are lasting longer. Lasthan is there any one to buy the 1000 iphone . That is quite a market right now. , is where the market is going. You have to understand the price point of this new phone, winnable comment, and how many out, how many will come and how many will they have to deliver. Apple is a big factor. One of my nagging concerns for the market at large is whether apple is the it has been a huge source of optimism. They have hid in tech, confidence in energy recovery, investors have hidden a lot of money in tech. Suggests this iphone cannot possibly live up to expectations. Amazon was described as a safe haven, remember that . Frankly, to support that case, the volatility is a lot lower than the rest of the market. The entire netflix amazon Priceline Group is pulling down volatility as a Consumer Sector at large. Russ good point. We remember in 2000 where tech were the high volatility names. You are seeing them score low volatility, that is not what you think of when you think of technology companies. Right and earlier when youre talking about risk, you see Interest Rates rise and nationally auto sales pull back a little bit. What is the least sensitive group, it is tech. It tells you we are really sensitive in the s p to a lot of factors, especially Interest Rates as investors have hidden in tech, but if tech and sustain expectations, what happens to the market . What we saw on friday is amazon rolled over of it, but it closed at. 2 . There were disappointments for the quarter, but you had any in there. There is still a wall of worry, were going to climate, but we are less exposed. The market will do well as long as you have this low rate, easy money environment. But that is a good question, people went to tech because they were looking for a sector that could do well in a low growth environment. If we are still in a world of low growth and tech rolls over, what do you do . There is a much smaller set of stocks to roll into. When you say these are the it has beenle, one way, it has been up. They did have their down day. A little bit, but for the most part, there has been so much enthusiasm. The amazonification of the shopping industry, there is one way, up. Is a reflection of price consistently going higher and i probablyf shouldnt and put my opinion. [applause] all right. Thank you. But the viewer sticking with us. Coming up later this week, be sure to tune in wednesday morning as Goldman Sachs ceo will join me a 30 a. M. Eastern time. This is bloomberg. Big oil earnings out of the week, here is where we stack up in terms of earning estimates sector. Energy that is the blue line there, earnings estimates came down throughout july. Oil price was relatively stable. Russ of blackrock. When i think of a value trade, i think of energy. Then we are thinking of what they are doing in terms of debt. Where do you stand . I think you have to pick your spots. It is a value trade, one of the few left in the u. S. Having said that, we are finding a lot of the best value outside of the u. S. Some of the Largest Companies overseas are not only cheap, but are better sources of yield in the market. It is hard to find cheap dividend plays like five or 10 years ago. You say energy, are you talking equities or bonds. There is quite a lot of disagreement. Neutral for the bearish, do you agree . Russ we have taken down some of our highyield exposure. I do think energy is still vulnerable on oil, the do the break point is lower. In 2016 with oil on the 40s. I think you have to have a three handle given how much more resilient have become. That is a big deal. Oil prices would have to go down into the 30s. When we got down to the mid to low 40s, you didnt see any. Ffect the breakeven as lower than it was. Ofwhat you think in terms energy, how disciplined will other producers be . Not particularly. We can never count on Energy Producers being particularly discipline. Oil prices bottomed at 42, they rallied at 49. Russ, i dont think u. S. Energy is particularly compelling from a value proposition. Ideas in theter s p 500 in telecom and health care, primarily. What i will say about energy in terms of its share of the s p 500, it is just six percent of the market cap. It is pretty clear at has been totally washed out, but over the long term, Energy Stocks perform when oil prices rise, and fall when oil prices fall. Will they accelerate beyond 50, it seems unlikely. Does that line up with a by euro call . The weighting is so much higher, how do you square that . Russ i would agree. The 40s, maybe low 50s and you have some cheap names in europe. On and 70,sed i agree with gina. I dont think we will see for a long time sort of supply disruption. Jonathan Stanley Fischer scheduled to deliver a speech in brazil, we have the content of that speech. We will bring you headlines here at some rates could fade over time, this is from Stanley Fischer. Under Political Uncertainty. Iss, do you see that . It opposite to the story at the beginning of the year. D. C. ,nfidence is down and didnt spur much activity off of the back of it. Does the opposite apply that may bite into the u. S. Economy . Russ i think there may be a bit of it here it i think companies are waiting to see what happens i also bring up what rick rieder brought up many times. Are in a light economy capex light economy. Companies simply need less Capital Equipment than they used to. Thank you so much. Your be sticking with us. Fantastic conversation. This is bloomberg daybreak, from new york. This is bloomberg. Who knew that phones would start doing everything . Entertaining us, getting us back on track and finding us dates. Phones really have changed. So why hasnt the way we pay for them . Introducing Xfinity Mobile. You only pay for data and can easily switch between pay per gig and unlimited. No one else lets you do that. See how much you can save when you choose by the gig or unlimited. Call or go to xfinitymobile. Com. Xfinity mobile. Its a new kind of network, designed to save you money. Jonathan opening and new york city 29 seconds away. Futures are firm up. 25 on the dow. Last week, pretty flat, a very small moved to the dow side. I had of big earnings this week including apple out tomorrow. If you get to the board quickly, the score on the bond market as follows. Yield are high at 2. 30 on a u. S. Tenure. Payroll friday and the elusive search for wage growth. The dollar has been a story of strength, we continue about a high of. 10 . Crude, north of 50 a barrel and we are down by a third. Open, crossnto the asset check it here is the catch open. The dow closed at a record high on friday and building on gains today as well. Likep i. 2 and nasdaq up. 3 percent. Individual markets and individual close interesting things happening. One is the m a landscape. Scripp trading slightly below that level now. Adjusted earnings the whole deal is to build leverage in the cable world. Charter communications, love this story. That stock is up by on most 7 , said no thank you, we do not want you, sprint. Softbank who owns sprint says hey, think again. Now the conversation is will sprint by charter and create a will merger between a wireless and cable provider. The death of retail means opportunity when it comes to real estate. An active investor is targeting dillards and wants to unlock real estate portfolios. We see this every once in a while when we get rotation down in retail. The broader macro question, you look at the tenyear yield and they wind upcally and positive correlation. You wind up a buying the smp, selling the bonds and have yields when it is going higher. Hence, positive correlation when it comes to yields and equities. In the past three years you have only seen it three times or you have a negative correlation between the tenyear yield and s p meaning you are buying equities and bonds at the same time. Now they correlation is deeply negative and it looks to be touching the negative saw back in 2015 in march, potentially should we get there. What does that mean for rotation . We talk about volatility being low, but within the sector there is a time of movement, you have a lot of buying and bonds. Russ, make sense of it for me. Russ this is a big deal. ,his is a pretty geeky topic correlation. But when you think about multiasset portfolio, the one thing bonds have in good for is they are reliable hedge. Bonds have always been your cushion when equity risk spikes. If that changes, that is a very different portfolio. That is a portfolio with more cash, different types of hedge. Jonathan has that changed . Russ not yet. If you look at the shorter term numbers, you will see fluctuations hear it if you think of the risk models most investors rely on, models that go back three or five years, the stockbond correlation is still very negative. It hasnt been reliably positive since the 2000 crash. Jonathan gina, when . Gina there is another story story, interest stock the correlations are also at a low for the s p that we havent seen for the entire cycle. As suggest to me that this is the time for stocks to shine here. Can i make a comeback, it is a big question for the year. And if correlations are suggesting it is going to be tougher as an asset allocator to create that diversified portfolio, that is a time when an active manager can make it real difference. The second half will be a testing time, will we have a budget debacle, a debt debate, will that create spiking prices and what does it mean for bond prices. These are big issues and the average stock picker maybe cant perform, but the professional can possibly. Like the conversation is much like what we had in 2015 when we had the china big devaluation, it was about the risk parity funds if you have a shakeout in equities and bonds, you will wind up getting killed. Jpmorgan warning about that last week, there could be as much as i billion dollars in risk parity funds, but what happened . The stock market went higher and it was fine. Russ we havent seen that consistently positive hearing in a long time. 2015, ande victory in you have to be careful about this, because we dont have that many independent economic cycles to be able to judge, but what has happened historically is that stockbond correlations have moved in tandem with monetary conditions. The reason we have seen it remain negative over the longer term is monetary accommodations remained easy over the longterm. My guess is that needs to start to change for us to see a real shift in stockbond correlations. You mentioned something earlier about portfolio construction and what it meant for hedging here it if you said i want to risk a little bit, how does the correlation change now in terms of how your think about it and portfolio construction . Russ what risks are you protecting against. Risks have always been economic ifck, concerns about policy, the next shock is from the central bank because accommodations were quickly withdrawn, that is a different shock. The ecb has been so shocking , and that is a relative term we were extremely easy across the world, but the ecb started guiding us that we dont need to. E as accommodating that has created a big diversions between European Equity and u. S. Equity returns in local currencies. In dollars, it is a totally different story. Experiencingy interesting movement from Central Banks creating complexities in the currency markets, which are feeding through to asset Price Performance across the board. The dow at a record high, the latest from johns office of oppenheimer boosting his yearend target to 26. 50. He joins us now on the phone. Why the upgrade for the s p . We are have to say upgrading because the market is politicss the message geopolitics notwithstanding, the equity markets are climbing a wall of worry that they were climbing in march of 09. With Central Banks being able to take care of take it manage of global normalization, it can happen in smaller increments than many expected. As a result, we think there is later risk nearterm and a bonds and an stocks, so we think stocks are likely to rise higher. Earnings, we are closing in on a Fourth Quarter of positive Earnings Growth for the s p 500. The dollar is weak or year to date. Last year we thought that in the Fourth Quarter the dollar was overbought and bonds were oversold. We have seen rallies in bonds and dollar move lower. Good move for competitiveness of u. S. Multinationals, but at the same time, if we dont see the euro getting so strong, we just think the euro is it is it has moved sharply lower. People were thinking it was parity, so now it has revived somewhat. Exit doesnt look like a problem brexit doesnt look like a problem. We have raised estimates in terms of earnings from the s p to 129. 125 we think where the dollar is now and likely to move modestly, there is a good chance that will be recognized. They price mean that is setting your narrative rather than the other way around . You know, i would say the fundamentals are setting our narrative. For example, right now where we see of we have seen bonds have rallied along with stocks, we think that represents two different constituencies. Bond people are buying bonds, and stop people are buying stocks. People are using bonds mainly as ballasts in portfolios recognizing that this is prone to rebalancing and rotation. Revenues and Earnings Growth on a global basis, looks like there is more upside to be had. What is the outlook in the next three months . John one is the resilience of the economy even though we have had a spade of modest growth and even a lessening growth. When you look at manufacturing data, looking at the consumer, it isably resilient, but not that the consumer has disappeared. If anything, the market has shown us that the influence of the trump bump is more helping to tap confidence of recognizing where it needs to be based over the next few years and not even thinking that any kind of stimulus is around the corner. Pres. Trump we appreciate your time jonathan we appreciate your time. Strategist, the chief here in new york. Great to have you. Lets get up to speed on what our session looks like. Record high on the doubt as we close, the 30th record in 2017 . About. 3 we played doubt 21 k, there is a group of people in the studio playing dow 22 k. They will freak out if we get there. Jonathan the ftse 100 up about. 6 . Yields cribbing a little bit higher, up about a basis point. 117. 39llar cable back to 131. 18. This is bloomberg. Emma im, chandra here in the hewlettpackard enterprise green rim. 30 2 30, tooth p. M. Eastern interview. Right there we are looking at President Donald Trump with new john kelly. Ff he was just sworn in and mr. Ident trump wil said kelly will do a fantastic job. Marine corps general coming into steady the ship and maybe put some authority down. Understand from people familiar with the matter he has been given full authority over the president s staff. And deed and will it have any discipline or more of the same. Also, he is in a washington insider, right . Is that a good or bad thing. In other news, it is m a monday. Softbank wants in on the cable market. Getting him there is another bid for charter cable. Discovery medications has agreed to buy Scripps Network. We are joined by paul sweeney, rector of north american research. I want to know about charter, that deal would be incredible. Talk about the reality. Paul if you put a take on charter, this is a company with over 60 billion of debt, a big number. Over the weekend, discussions merge with charter sprint. I dont think john malone, the Controlling Shareholder of charter, has any interest in doing that transaction. The latest we have is masa sans coming back and saying softbank, Parent Company out of japan might be making an acquisition of charter. I think what he is trying to do one of his biggest assets is sprint, a damaged asset, the fourth wireless carrier in the market, the smallest of the big four. Combining with a landline Cable Companies seems to be in his mind the way to fix that asset and bring sprint into a competitive position. I think this will be a difficult transaction to propose, much less to close. Is sprint off the table . Paul it is never off the table. If you look at the three and four carriers, sprint and tmobile should merge. Assets tod pull their be a more competitive competitor to verizon and at t. Jonathan do we have any idea what he wants the company to become . Often find this companys name in so many different stories across different stories and i think, what is he doing. Paul for the sprint asset, he is simply trying to shore it up. One of the ways to do that is combined with a strong cable company. I dont think charter, comcast, or anybody else is interested in that. Masa sansrent, company in japan, softbank, there are a lot of different regions in the world and his shareholders dont know what he is doing. Jonathan he wants to associate his company with every other under the sun. Have we got a better feel of where this Administration Stands on big m a . Paul the expectation is it will be much more lenient. Undere a big transaction regulatory review, at t and time warner. The chairman of the sec will has at any transactions, said he expects to be very d regulatory. Thetime warner will be first big test for this administration and the republicancontrolled fcc. You are talking about overseas companies coming into that will be challenging. Russ, what you think the potential is for m a . Russ i think this is one of them. He spoke eloquently about opportunities in telecom, and technology and going back to our conversation before, this is where you are seeing a lot of share. In market it is not hard to believe we will see more of it. Globally there is a lot of opportunity for European Companies to buy. I think there have been an incredible constraints on growth, but we will see elevation there. In the u. S. , it is across the board. Financials have an opportunity, a lot of chatter in the utilities sector. It is really across the board. There is not a single sector that we cant find opportunity for m a transactions. When you walked away from militants, i have no doubt you thought the guy was cure magic guy was charismatic. Did you walk away saying this guy knows what hes talking about when he puts the money to work . Russ i dont want to make too many conclusions from a 45 minute presentation, i walked away with the idea that there was a vision for the longterm. The other thing were not talking about, this is a Japanese Company. Theres a change in Japanese Corporate culture over the last five years, when is the last time any of us were talking about a Japanese Company coming in with a big acquisition . Good point. Thank you so much for joining us, great to see you all. If you have a bloomberg terminal, check out tv , click on charts and graphics and interact with us directly. Just go to tv on your terminal. Charter at a record high. This is bloomberg. Jonathan a busy week ahead with up,rket moving event coming today, u. S. Home sales at 10 00 a. M. Eastern. On tuesday, vehicle sales. On wednesday, we get the weekly employment report her. Then we round out the week with the payroll report, 180,000 has been the median so far. To look ahead for more, we are joined by michael mckee, policy correspondent and matt mosley, Bloomberg News reporter. Give us a set up for friday. Thing everybody is interested in, but what people want to see is what is happening with wages, the average Hourly Earnings the focus of that report. And that is what we will see all week, you will see it in the highest them report at prices paid, the numbers paid for july. They want to see numbers going up, and it is not right now. Did speaking brazil, what did he say about matt they have been harping on Political Uncertainty in washington could be slowing Economic Growth at this point. That is something we have seen an anecdotal surveys about the produces. Uncertainty causing them to delay or reduce investment spending, part of the recovery we have been waiting for. Stanley fischer is saying, look, if we want to get this and move forward to the next phase of expansion, maybe some of our colleagues need to get it together a little bit. Jonathan uncertainty is not the same as pessimism, they are optimistic, but didnt put money to work. So now they are uncertain, but still not putting money to work. Does it change anything . Matt great question, tying it to the jobs report, we have seen a job growth over the past few years without capital investment. Firms are substituting cheap labor and we havent seen wages go up to cause them to move in the other direction. Wednesday,erested in refunding from the treasury. The Treasury Department will announce, to money and needs to borrow. Int everybody is looking for that is any further word on what they will do about the debt ceiling. Over the weekend Steve Mnuchin said we needed by september 29, they bring you the date and then how do they replace the fed when a is no longer buying treasuries. Jonathan thanks so much. The session,to lets wrap things up for you. The dow north of 29,500. The 30th record so far this year. The s p 500 up. 1 . In new york, youre watching bloomberg tv. What should i watch . Show me sports. Its so fluffy look at that fluffy unicorn hes so fluffy im gonna die your voice is awesome. The x1 voice remote. Xfinity. The future of awesome. Vonnie it is 10 00 a. M. In new york, 3 00 p. M. In london, and can 00 him in hong kong. Im vonnie quinn. Mark and in london, im mark barton. This is bloomberg markets. On this monday, from a 12 billion media guilt to President Donald Trump Cabinet Meeting and earnings out. We start with us home sales. Month over month in june of 1. 5 , better than estimated. Yearoveryear number of 1 10 of 1 . We have had housing weve had choppy housing data. It is not usually a market moving number. We continue to see all major averages slightly higher. Track for another record close, potentially. We have seen that divide over the past few sessions. Get performance of the dow versus the other major a