That is hurting profits. David they were downing trading but they were expecting to be down in trading. Its all about net Interest Income. It sort of like wells fargo yesterday. More nettually Interest Income than last year that it was below what is expected so they are getting punched a little bit. David we will keep our ought alix we will keep our eyes out especially in that conference call. We are in a tight trading range. The tightest weve been in since nine days over the last week and a half or so. Eurodollar pretty much flat. In the 10of Movement Year as well. Crude up by 8 10 of 1 . I felt like a left and came back and everything was the same. Pretty much steady as she goes. David things will really happen now. Eddie 30 we will get used u. S. Housing starts at 8 30 we will get u. S. Housing starts. Facebook has it second day in congress on his liber proposal before the House Financial Services committee. At 12 30 we will hear from Esther George on the Economic Outlook. After the bell, netflix and ibm will release earnings for the Second Quarter. Time for the bloomberg first take joined by Bloomberg Intelligence chief equity strategist and by bloomberg macro strategist. Lets take a look at the trading. It is down, we knew it would be down. Bank of america down about 8 or so. What is causing this . I think it was a tough Second Quarter in general. Rates and currencies is the big drag for most of the banks revenues in terms of trading. I think honestly for the Bigger Picture this is not just about trading revenue, its about a general revenue shortfall at large which is dragging the sector lower. You look at things like and obviously investors are not happy about this. The trading revenues across other diversified financials were that have reported, the bigger story is not necessarily that rates are low, its that there is not enough activity in general to elevate confidence these companies will produce earning growth in the future and thats getting reflected in estimates for growth in the thirdquarter quarter, Fourth Quarter and first of next year. We have had low volatility, we have low vol, thats a difficult place to be. You need to take much larger positions and the banks are avoiding this. A smaller position in a low vol environment doesnt create a lot of revenue. Alix they said specifically when it comes to Investment Banking they were looking to take on more risk but i guess it depends on what risk it is. Vincent the prop trading is no longer allowed in theory by the banks. That is taken away a lot of risk. Environmentol without that it is difficult to see revenue go higher. David it really did do better but mainly on advisory specifically. To what extent is the chairman of the fed hurting the banks . Is it suppressing volatility . Gina i think it is to some degree. Policy in general has captivated Market Trends of large. They contributed to this greater suppression and volatility. What you have going on with Monetary Policy is the suppression and volatility. There is a little bit of a give and take when you think of policy at large. I dont think we can squarely blame this on jay powell and the fed. Its not their fault per se the economy at large is running at the slow pace. I think you have a number of levers keeping Economic Growth suppressed. First and foremost you have a tremendous amount of uncertainty on the part of the Business Investment community which is suppressing loan growth, keeping activities levels limited and thats getting reflected in financials. They are not going to escape the broader Economic Growth conditions. Alix trade is one of those conditions which leads us to the second story. This is President Trump speaking at a news conference. Long way to go as far as tariffs. Million buther 325 we can put a tariff on if we want. So we are talking to china about a deal, but i wish they didnt break the deal we had. You look at what happened in the cabinet meeting. How do you deal with that . Theres even more uncertainty when they thought we would do a pause. Vincent what we have done is a pause on trade but i will tell you from my sources and people i talked to have really good contacts in china, president xi presided over a committee july 3 and said that committee in essence until lighthizer if they dont drop the tariffs in place, there will be no trade deal, suggesting there will be more tariffs basically to me says we wont have a trade deal with china at least until the 2020 election, this will be used as a bargaining chip and right now from what i understand, they arent really talking. They are concentrating on the debt ceiling and other you on the usmca. The deal with china is on hold so out expect almost no news except for a little blustering until at least after Congress Comes back from recess. David weve been talking to the banks, do we have a similar sort of tension here between the consumer and Corporate Investment . Corporate investment seems to be affected by trade but the consumer not so much . Gina what you are seeing in the banks is reflected own in the broader economy. No real change in the consumer landscape, but the investment landscape, the Business Investment arms are deteriorating, the growth rates are deteriorating precipitously. Last year we had this boom in investment, capex spending did grow. Part of that was with tax. There was an incentive, broad spending increase for businesses. All of the trade kerfuffle started and businesses started to say what do we do, where do we go from here . Do we relocate operations, thats creating an investment shift but in general business started to slow investment. Capex has fallen in the First Quarter for s p 500 companies. The guidance has become fairly ited, analytics are losing analysts are losing faith that businesses will invest going forward. David lets go to one specific tech was on capitol hill. Facebook has got themselves in a bad place in terms of the Security Risk which is a big thing congress is talking about. Elizabeth warren, who is doing very well in the polls, talking about breaking up Tech Companies. The interesting thing this goes forward, you have china with huawei who has none of these distractions and they put investments in the tech and they the forefront of technology. The bigger trade pictures not just trade, but who will lead the economic world in the next three or four or five years. The United States is looking to Squash Technology by seemingly breaking it up and making it more innovative and making a more competitive but of the same time you make it less competitive on a global stage. This will be interesting to watch going forward. Alix europe with the antitrust investigation against amazon, that was news this morning. Do you feel tech is rerated for this . Gina i doubted. We have seen a significant rerating over the last year reflecting a combination of lower overall Earnings Growth expectations as well as the Regulatory Environment and pressures. I think some of the other companies, the consumer focused Companies Like the netflix is in amazons is a little different. Amazon has a retail focus and consumer focus, thats a different story than facebook or google. Then youve got apple out there as well which is the complete alternative story to whats happening. It is difficult to paint tech with one big broad brush. There are a lot of issues affecting tack in very different corners of technology and i think it has become a story of dispersion of results and returns. As opposed to two years ago with the rising tide will lift all boats, everything will rally. Like insulted for the toddler to be put in the same category. They mean well and are honest. Thanks a lot. As a reminder you can find all the charts we will use through the next two hours at g tv on the terminal browser. Coming up, a tough Second Quarter for banks. Capital cocio will be joining us next. This is bloomberg. Is bloomberg. This is bloomberg daybreak. Amazon is the latest american tech giant to be targeted by the european union. Opening anhief investigation into claims amazon misuses data from smaller traders. The eu will look at the dual. Ole the companys dual role amazon says it will cooperate. In europe, car sales concert resumed their downward spiral. Years halfway mark, europe is facing is it Second Annual sales drop. Quarter loss in its auto division. A rare setback for erickson turnaround efforts. Thatposted a earnings missed estimates for the first time in six quarters. Erickson said its rollout of 5g networks in asia will weigh on profits. David bank of america reported secondquarter earnings a half hour ago and it beat on earningspershare but missed a bit on trading. Most important net Interest Income. Is down a tad in the premarket. We welcome Allison Williams and troy gayeski, sky Ridge Capital cocio. What it allison, what is your initial take . Allison 444 on Net Interest Margin misses. Not as bad as some others. We saw credit come in better than expected. Those of the of the other two levers we are looking at and it made the difference across some other banks. Wells fargo missing. Citi down on net Interest Income, but basically talking about that guiding lower. Alix troy, do you like banks if they will be making lasts because of the yield curve but apparently the Consumer Banking division is doing well . Troy the biggest focus weve had on earnings is was the state of Consumer Credit. A lot of our risks are tied to that. Bank ofsee whether its america or jp morgan and improvement in Consumer Credit quality. Own themanks, if you youre owning for the dividends and share buybacks, you recognize its on its way down in the question is at what point do you see a higher multiple because the earnings streams are resilient to economic weakness. You recall this out of the crisis were banks shifted their model from being high risktaking to more utility like models, yet you havent been seeing that with multiple expansions. Equity,re long bank thats what youre waiting for is a final revision of longterm multiples to get some more material upside. David that depends on what the fed does. We talked about citi and what they expected the fed to do. What is bank of america expect the fed to do . Alison that was my point about citi. They factored in and one more rate cut later in the year and thats not what the market got. I think the other thing we are talking about trading, it is down, the fixed income came in better, but equities are worse. Some of the sharpest declines across. The one bright spot we are seeing is Equity Capital market fees. We had great ipo activity in the u. S. , im not sure it will be shared, but Equity Capital market fees almost doubling across some of these companies on a sequential basis. Thats a high point. , briannvestment banking moynihan saying this on improvement in the area. Theyd market share gains because they reposition their business. What does that end up meaning . Alison thats alluding to the equities business. We are hearing across banks about consolidating market share on the equity side. We had a competitor saying they were exiting that. We have seen over the past we can gas. Alison we look to 20 we can gas. Alison even though the total trading revenue shrunk, you absolute gains at some of the and youu. S. Competitors had an exit by Credit Suisse and Deutsche Bank and others. ,hat is the opportunity there even though the revenue climb continues to shrink, you can make it was sure gains. That helps overall profitability especially when you have companies that are not profitable pulling out to ensure the profitability of the business. David bank of america said they are seeing a loan increase. The consumers driving the force. Troy that was the point we were making before. We saw 15 and 16 the consumer stop deleveraging and would stop showing. We got much better growth and income. Whats empowering they are continuing to improve metrics on the gdp level which in turn is leading to more demand for credit which has been the main focus of earnings and Revenue Growth from all the large institutions in the u. S. The thing we should mention is if you look at the banks where they are Consumer Lending hadsed, they have actually much more meaningful loan growth , so we expect that trend to continue for the next several quarters and then back to with the downsides are. Take a really going to deterioration labor market and when you look at how low initial claim still are in the fact we are pulling people out of the woodwork and labor market, it doesnt look like those markets will deteriorate anytime soon in capex. E decline fed flipsing up, the playbook. Why Federal Reserve rate cuts have some investors bullish. This is bloomberg. Uncertainty around this outlook of increased particularly regarding growth. We are monitoring these and assessing them from the outlook and inflation. Jay powell continuing to signal willingness to cut rates yet it did spark a rally in treasuries and a move in gold. Troy, if youre going to lay out your perfect playbook, what is it . Markets are partially gotten that already. Whenxtreme of that was markets were priced in 75 basis points cut despite very healthy banks, very strong consumer. We know trade is affecting capex. Markets got carried away and that one is more technically driven. In terms of going forward, which would hold for is getting cuts where you inject more liquidity even though this is growing strong. This year or late early next, they can cut a trade deal and if that happens, Business Confidence comes back and then you see the capex numbers go back up and they were off to the races for a whole other length of sustained Economic Growth. If youre looking for the isld you dont want to see 75 to 100. That means the economy is curated. Isnt the only reason they are cutting as they are worried. Are they already signaling that . Clearly if you look overseas, europe is a train wreck. Partiallyheld, because their demographic issues of cause more capex than expected. The u. S. Has slowed. You look at manufacturing, is barely expanding. So i think what the fed recognized as you know is the phillips curve is very flat, they were little too aggressive in the ensuing inflation. It was anot admitting mistake but theyre trying to retrace that and make sure the last thing that causes an economic slowdown that is sustained is overly tight Monetary Policy which leads to overly tight financial conditions. Do you want to buy gold or treasuries . Troy gold, no question. If youre looking at growth and future fact that future path the fed and talking to a total return the next several years, particularly no doubt it is gold. David a weaker dollar, more inflation . You look at the future path of Monetary Policy not only in the u. S. , but overseas, it will be lower rates in the next recession, the fed is going to zero. 2. 1, 2. 15 . Is that. 5 to 100t going to basis points. Upside and you have the wind at your back from global central banks. Says value is a trade decade. People have been saying that for five years. Its tricky to call these big rotations from value to growth, that being said, in theory, we could be set up for a similar one we had in between 2002. In the late 90s, tremendous outperformance for growth of all stripes and then what finally triggered that reevaluation was a dramatic economic slowdown. So there is the potential for that. Its a leap of faith. Alix troy will be sticking with us. Big tech under fire. More on the showdown between the valley ndc. This is bloomberg. S bloomberg. Hey im bill slowsky jr. , i live on my own now ive got xfinity, because i like to live life in the fast lane. Unlike my parents. You rambling about xfinity again . Youre so cute when you get excited. Anyways. Ive got their app right here, i can troubleshoot. I can schedule a time for them to call me back, its great you have our number programmed in . Ya i dont even know your phone anymore. Excuse me . what . I dont know your phone number. Aw well. He doesnt know our phone number you have our fax number, obviously. Todays xfinity service. Simple. Easy. Awesome. Ill pass. Bloomberg is daybreak, im alix steel. Not a lot of movement in any kind of asset class. U. S. Futures holding onto gains. Bank of america, investors trying to figure out the outlook will be. We want to highlight european auto down 8 10 of 1 after rible sales, car sailing selling all across the board. The cable rate hanging out around the twoyear low. A have the secretary saying no deal is not priced in. The spread continues to get flatter. Rebounding after getting hammered yesterday. We want to turn back to washington with whats going on with tact. It showed how concerns lot concern lawmakers are and how much the tech players think they shouldnt be concerned. An exchange between the subcommittee chair and the representative from amazon. Do use consumer data to favor amazon products . Our algorithm aims to predict what customers want to buy. We welcome now from washington, david, he served as the policy director of the bureau of