To it. But it is a mess. Alix this morning we are looking at the gulf of oman. We have two tankers under some kind of attack. About how or by whom. There are questions as to what it actually means. And who has the military capabilities to do that . Alix that is where you had those two vessels on their way to singapore, but a month ago we also had saudi tankers attacked, leaving questions as to who in the region would want that kind of attack and who would be able to carry it out. That is the real turning point for the markets. David oil was really on its way down before all this happened. Alix thats right. Yesterday oil prices really took it on the chin. A 3 rally on this kind of geopolitical risk right next to the straits of hormuz is kind of nothing at the end of the day. Part of that, to me, is still demand worries. Opecs monthly report lowering demand for the first quarter. Says, youre right, trade tensions and demand dont go handinhand. So we will see. David and had they set the date for the meeting . Alix not that i know of. In the markets, you can kind of see all of this playing out. , p futures off by 13 points not having the risk off field you might feel with all the turmoil. Down by 2 10 of 1 , despite the fact that bankers dont like the overvalued currency. Yields in the u. S. Pretty much go nowhere. Crude up over 3 . It could have been more. Now it is time for bloombergs first take. We are joined by Sarah Ponczek and vincent cignarella. Sarah, when traders look at Something Like this, daytoday volatility, are they trading that . Do they like that . Sarah volatility is good for them so they can trade in and out of it. However, like you said, it could have been more. Many like commerzbank are looking at the rebound and saying it could have just been that we see this rebound because of the extent of the selloff that we saw yesterday. It has just been such a roller coaster ride for oil. It is pretty amazing. Weve also really seen oil prices affecting the trade across markets as well. Tracks howi actually macro affects the other markets, particularly equities. Now oil is the most significant influential macro factor, according to their data. David you are our resident for to trader resident former trader. We dont know what actually happened. We dont know whether it will happen again. As a trader, how do you trade that . Vincent a couple of things. Oil has been leading markets since last october, so folks getting on the bandwagon now, welcome to the game. Traders have known this for at least six months. There are two factors that influence oil, supply and demand. When supply factors are hitting the market such as this situation, that is essentially an oil specific issue. You really shouldnt trade cross assets on that. If demand wanes, risk assets fall. Two trade risk assets in a positive or negative way on supply issues, i would fade it as a trader. Buying equities on this issue is the wrong trade. Alix not to mention the fact that overall commodities in relative value to u. S. Stocks are at the lowest level since like the 1950s or 1960s. Vincent oil has been in a big selloff this entire week, and i suspect that when this passes, if it passes, we will be back into the selloff in wti will be testing 50 a barrel again. David it is time to get to china and the trade dispute. We learn something important yesterday. The president says there is a deadline for how long hes willing to be patient with china. The problem is we dont know how long that is. Pres. Trump i have no deadline. My deadline is whats up here. We will figure out the deadline. Nobody can quite figure it out. David well, that is really reassuring to markets. Nobody can quite figure it out, and yet the whole world is waiting to find out what happens with china. Sarah right, very reassuring. You have the minister of commerce and china put much saying that china will fight till the end. This is kind of discouraging for investors because so many investors still do believe that there is a possibility to get something positive out of the g20 meeting, may be a potential push out further of those rising he 5s on that 300 when billion of goods. People are still optimistic that the informal deadline has to be a few months before the 2020 election. When you put the argument out there that a deal has to come to fruition, the argument behind that is that we have an election coming up, and people cant fathom getting to that point without a deal having been made. Alix what is striking to me is that the market does not seem to price in the fact that this might not happen at all. We are basically a penny throw away from record highs for the s p. Vincent and hearing the president of the United States saying i know something you dont know is not very reassuring. Alix and a secret letter from mexico im not going to show you. The things that developed yesterday, with the president saying china will make a deal because they have to, trying to push china into a corner, is not a good negotiating strategy. It is more likely than not to blow up. With the situation in hong kong potentially coming up at the g20, it is the elephant in the room. You cant just not acknowledge it. That is certainly not going to help the negotiations. I think where you see the 2020 election coming into play is more capitulation perhaps on usmca, getting a win in that area, perhaps getting a win with germany on auto tariffs. Dont forget, you see the president talking about about nor stream two. Alix lets get to the third area, and that has to do with tech. If you come inside to bloomberg, the nasdaq had its worst day yesterday in about a week. We do see overall nasdaq stocks outperforming the s p for the whole year. The move, though, came with facebook yesterday. When investors look at tech stocks, how do they start to value that conversation . Sarah it is a very good question, and one i havent been able to find a straight answer to. When i ask investors how you are dealing with the overhang of antitrust as it relates to these probes and the doj, many are saying it is probably going to last years, so why worry about amazingwhich is pretty because these names have been in the spotlight over the past week, the past two weeks, ever since these headlines really started rolling out. We have not seen really any serious damage. Theyve been holding in just fine. Yes, facebook yesterday dragged some of the names down, but that was also after headlines andrding privacy concerns things on the semiconductor front. So a lot of the big internet names you would expect be facing issues right now are still hanging in there. David and it proves there are bigger things than even the government. On the other hand, it sure feels like the tech guys are asking for it. Vincent leading with their chin. When you talk about what could happen in the 2020 election and a Democratic Party running on, for lack of a better word, a socialist agenda, this is the Oil Companies back in the day when you talk about what plays to the american public. Amazon has long been thought of as the big behemoth that has put Small Business under pressure. For Political Parties not to run on that agenda and try to get that groundswell vote behind them would be silly to not take advantage of, and i think tech is in a bad place at a bad time. David i think you can count on that. Bloombergs Sarah Ponczek and then cinderella and vincent cignarella, thanks for being with us. You can see the charts we used and more by browsing gtv under terminal. Coming up, more on oil, trade and technology with federated io manager. Portfol this is bloomberg. Alix trouble in the gulf of oman. Two tankers hit in a suspected attack. With us is annmarie hordern. Walk us through the last few hours. Annmarie a lot has been happening. There are unconfirmed reports that maybe it was a tornado maybe or two pito maybe a torpedo. Both of these vessels were s,ansporting Petroleum Product one to eight taiwanese refiner, one to singapore. We do see a spike in the Oil Price Due to the fact that this is inflaming tensions already in the middle east. Last month, four vessels were attacked. Iran, but iran has denied that. Alix you had the iranian president mr. Rouhani saying this before the issue with the tankers. Not beouhani we will starting anymore in the region, even with the United States, but if they wore wants to start, we will give a crushing response. Alix it raises the question, why . Why would iran do this . Who might be to blame . Annmarie i think many people would want to point their fingers to iran. One strategist at bloomberg iran isntn if to blame, they will likely get the finger pointed at them. But right now they are still suspected attacks. Even if we look back at what happened last month with those other four vessels, we still dont know who was responsible for them as well. It is a very fluid situation, and we are going to continue itnitoring it, but is likely to up the rhetoric between the u. S. And around. Mex which strikes because oil is only up 3 . I wonder how much of that has to do with demand worries in opecs report. Basicallythe price is where we were two days ago before we saw the drop with people worrying about demand. That, andning about talks about the trade wars and ighed on has we demand. This is what i heard from executives last week ats beef at spieth. It is Global Demand growth that should be higher, and it is not. Alix thank you very much for mth for that. We are with federated investor portfolio manager. What do you think . Guest our view, prior to blowing a cup to blowing up a couple of tankers, would be that you would sit in a similar range. You have production cuts at opec and these disruptions in places like venezuela and iran. We will see how that plays out. I think what youve got is that opec is talking their book a little bit on demand. This gives them pretext to continue to keep those cuts in place right now. Ultimately, as we get to the end of the year, demand is going to increase if we get some progress on trade. The last 48 hours probably pushes that a little more. David that, for me, is the tricky part, how to separate what is specific to oil and what is more generally applicable to local growth. Im going to put up a chart that really struck me. If you compare the commodities index overall to the s p 500, it is the lowest it has been in 50 years. Is that telling us something about growth that investors should be paying attention to . While the outlook is stronger because of real productivity, nominal growth is falling. The reason is because you are in periodflationary globally. It has to do with commodity intensity. The newthat parts of economy are less commodity intensity of commodity intensive. That is probably not bad for growth, by the way. Probably not bad for the planet, either. I think we are just in a disinflationary period. David markets tend to overreact in general. What are the chances that markets are overreacting with trade concerns, china concerns . Steve when you look at relative to the oil price, the oil price has stayed in a relatively tight range. It strikes me as a pretty fair range. You got u. S. Production on the upside, youve got enough craziness around the world to keep a floor on it. Could we test either end of that . Yeah, but i think it is more likely we will test the highend of that range rather than the low end. Alix why are we supposed to record highs in the s p . Steve we were a little bit surprised by this. We thought mexico and the threat of tariffs were going to have a more meaningful impact on the market to the downside. Clearly the market has responded area positively to the support by the central bank. I think it is appropriate for the central bank to be entertaining cuts. I am surprised at how strongly and quickly the market has reacted to the upside on that, given that we still dont know what is going to happen at g20. Youve got some issues geopolitically, and growth is slowing, so we will just see how it plays out. I dont think we are out of the woods yet. The fed meeting in june is going to be very tricky because if they dont cut in june and they choose to do that in july, what do they do with the dot plots . How do you bring those in a meaningfully if you are not cutting in june . The fed really has to navigate things in a not so easy way, but ultimately, with mexico on the sidelines antichina deal as the major Thing Holding us back, if we get progress there, you could see markets reach new highs again. , can the a nutshell fed backstop the president on trade . It seems to be a tug and pull between fed cutting at the president saying ominous things about trade on the other. Steve i think the fed is in a tough political position. If they cut before g20, does that embolden the president to be tougher on trade . There is a potential feedback loop. I think they need to not engage in that process. I think what you look at is where the longterm Inflation Expectations are. The idea that we would tolerate 2. 5 is laughable. The fed needs to maintain credibility on longterm Inflation Expectations, which is ultimately why they need to choose to make a move here or not. Alix which also relates back to oil because the correlation has been picking up between the two. Steve chiav arone will be sticking with us. We have more coming up on the Capital Markets and how ipos raise equity in this kind of environment. David youve got a perfect day for commodities for commodities edge. Well done. Coming up here, tech stocks take a hit after outperforming the s p so far this year. More on that next. This is bloomberg. David tech stocks has been leading the s p 500 for most of the year, but the last few days have been tougher. We can see that by a chart ive got coming up, led by trade concerns with china, and yesterday facebook got hit hard by a report that Mark Zuckerberg personally knew about privacy problems. Rone of federated investors is still with us. Take a look at this chart. You can see beginning in june, tech really got a big hit. That is trade, i think. Yesterday facebook got hit by that report that Mark Zuckerberg knew about privacy problems. Is this trade . Is this regulatory overhang . Steve i think it is both. You dont want the word big in front of your industry. If it is big banks, big oil, big tech, big tobacco. That is a bullseye on your back. What the market is trying to contend with is how bad is it. If you would have bought big tobacco right after the got regulated, that wasnt a bad time to buy the stocks from a price perspective. These are large companies. The question becomes, will regulation have teeth and hurt their business model, or will it lock in their advantage relative to Smaller Companies that cant meet the Regulatory Burden . In terms of pricing, trade aside for a second, these companies are monopolies. There is no question. If they are, they deserve higher multiples than they are getting today. Theres a risk that they become regulated utilities. If they are, then they deserve a lower multiple. I think the market probably weighs those two and tries to come up with a price. It doesnt really increase the risk that they will become regularly utilities become regulated utilities. David at t took a while, but they broke it up. Microsoft, it slowed them down. Are we talking about a month, a year, five years . Steve you also have to look at the business model. Apple almost sells privacy as much as they cell phones at this point. When you look at those thing names, youose faang need to be able to distinguish between those that engage in questionable privacy record his privacy practices. Alix how do you not own tech . Steve you were going to have exposure to these faang names. Do you need to have as much as in the index . Theres all kinds of wonderful Growth Opportunities in tech in secular themes that you can access outside of that group. Theres opportunities within the semiconductor space, theres opportunities within business services, software and services. Theres all kinds of opportunities around Digital Marketing that dont just rely on these companies as you move throughout that sector. Youve got to be able to balance those. Alix steve will be sticking with us. Coming up, President Trump lashing out at germany, threatening sanctions over Angela Merkels support for a pipeline from russia. This might be one of my favorite stories. David it is wild. Alix basically russia is dumping lng into europe. David he doesnt much like Angela Merkel, i think it is fair to say. Alix we will talk about that next. This is bloomberg. Alix this is bloomberg daybreak. Im alix steel. The big news is what is happening in the gulf of oman, and two oil tankers hit. We dont know exactly what happened or who is responsible. You are seeing markets respond. European Energy Stocks getting a nice bid. Part of that is the rally we saw an oil. It is an idiosyncratic knock on effect. I did want to highlight what is happening with the swissie. I think that story is super fascinating. We are highly valued. Please stop bidding up my currency. David how far negative can you go . Alix totally right. Eurodollar is flat. Notndustrial production turning out well either, although you are still having some kind of support for eurodollar. Bonds kind of go nowhere. Get an auction later on today, right . David its been pretty quiet, as predicted, this week. Alix and oil with the geopolitical risk shooting up. David lets turn to Viviana Hurtado. She is in washington right now with the first word news. Viviana to tankers have been damaged in suspected attacks in the gulf of oman, the Second Attack in the region in recent weeks. One ship is described as being on fire and having a hole above the waterline. The owner of the second ship says it was damaged by a shell. Four ships were damaged last month. The u. S. Pointed the finger at iran. President donald trump ramping up criticism of germany. Hes threatening sanctions over chancellor Angela Merkels support for a gas pipeline from russia. The president warns he could move some u. S. Troops out of germany because he thinks it is not spending enough money on defense. The head of the Swiss National bank has little p