Moving average but oil is not getting sucked into the nervousness. last month, trump said he would tell automakers he will return the u. S. To the car capital of the world but last month we got Sales Numbers that point to the other direction. With us now is matt miller from berlin and from d. C. , Kevin Cirilli. To starter, i want with you on the cars. How bad are these numbers . Matt they were bad, for sure, especially compared to the expectation. We were looking for 17. 2 million and really got 16. 1 million. So that im sorry, 16. 6 million. It is about the vix. If you look at this chart have this you can see that isnt something new. Tracks have been trending up. Meani say a truck, i even the big station wagons. The blue line are the cars and sedans. This is a 17 year chart. This is one of the big problems here is that automakers are not adapting quickly enough to this new mix. The other thing i want to point out quickly is that the yellow line here is student debt. The blue line is car debt and the white line is credit card debt. It is turning up and that is a big problem. David it is a big problem with sub prime auto loans which are getting in trouble. But the significance of that is how much profitability there is. It wasntle sales, profitability, and they make more money on the suvs and the trucks, right . Matt absolutely. They make a lot more money on the suvs and trucks. Now they have to offer more incentives to get the inventory off the line. Another chart here. The big spike is 2009 when they had a real problem. They are getting back up to eate levels so they have to into the profitability. David great to have you. Heaven, i want to turn to you. What can the president do about this, if anything . We have talked about things like tax reform. He has problems on capitol hill. Kevin i am told on thursday and friday, the Auto Industry issue and tariffs will be one of the key points of discussion when trump heads down tomorrow lago to meet with the chinese president. And in fact, this administration feels that they might have leverage with china automakers as a look to extend into the United States. Here at home, the president is also facing several key issues. Regarding his legislative agenda. Trump will meet with the secretary this afternoon at the white house on a host of issues including, as you mentioned, the Supreme Court pick, judge neil gorsuch. David thank you very much to Kevin Cirilli and matt miller. Jonathan joining us now is in geoffrey yu. Great to have us great to have you on the program. Spark athat this could big bid for treasuries. What is the signal . Geoffrey yu it is an ongoing concern. The reflation on trade, is it working . And secondly, it is the realization that it will be hard to get things up. There is greater risk of ahead. There are lots of reasons but ultimately, dont be too defensive. Jonathan but dont discount the u. S. Yet. How are we set up yet . Is the start of the year coming off . Geoffrey i think this is pretty blurred. I think you could lump these categories into a safe haven. Because if you look at the positioning elsewhere, when there are overweight Global Equities, their conversation saying you need to invest right holding u. S. Assets. That tells us a lot about positioning. U. S. Centric, dollar centric. Alex code a deeper into that call. In in safety bid utilities or is it in financials and energy . Bidfrey i think the safety is the other way, going into energy in particular right now that is a sector that we would save her. Financials, effects of that should be more contingent on how reform will happen. But that will happen. We just need a bit more patience. But patients doesnt quite running for the hills, either. Alix how do quite for that with the s p Energy Stocks . To the dollar . Is the dollar different when you look at it . Geoffrey i think the dollar is different from you look at things. If you want the u. S. Reflation trade, you dont want to be overweight with the dollar. U. S. Companies taking the cheap recycling it and investing overseas to try to diversify somewhat. It is anthing excessively strong dollar. David if we look at the trade and whether the u. S. Will momentum, one question is, the leverage on the Balance Sheet as a consumer, i do want to put back of this chart which shows this growing substantially, particularly with Student Loans and auto loans, how big of a risk is that in terms of Forward Momentum . Geoffrey im glad you brought up this chart. On and ask what basis, it looks like it is rising but you have to look at it on a relative basis. And a few countries were really deleverage on the private sector. During the financial crisis. T is the u. S. And the u. K. So you can afford to leverage in the u. S. But the question is the distribution. Households can afford to leverage with auto loans and the if it goes to the less prime side then we have an issue. And in scandinavian countries, there is rising and the government cant do anything about it. Hand, studentone loans and auto loans just yesterday we had said president dudley saying that Student Loans are really a drag on the economy and are really keeping down because they are not as productive as the auto loans . Geoffrey that is correct. There are not as productive in two ways. Students, especially after they graduate, are they going to limit their choices in the labor market . I went to college in the u. S. Myself, and if you exit college with substantial amounts of debt, it in habits your future leverage ratios and your ability to invest and spend, of ahead. I think he is very right to talk about that. But this might materialize more in the longer term. A sign ofu. S. Sees shortterm demand. Jonathan we are talking about the hard data and soft data story. But the levels with the gdp, at a four handle. And then, what you just discussed with david. What does it lead to . More of the same . Geoffrey we always have to bear it is not a one to one gdp number. We have tonk acknowledge that. And i think the fed acknowledges it too. Ended us at five. I think that is the realization but at the same time, it doesnt mean we have to head for the hills, either. , the new circumstances u. S. Economy still has the capacity to support and hope right now is that reflation and demand in the u. S. If that can lift demand globally, that will translate into stronger spending power and investment demand, it will feed back into the u. S. Alix the hope. We get the jobs data on friday. Where is the asymmetric risk . Geoffrey i still think it is what we would call a bad recovery and still we get the robust job numbers but the wage Growth Numbers that is really starting to come off. It gives the u. S. Household story. Wage growth in real terms, really certain to come off, they will have to reassess. The fed is still quite confident about the labor market. Jonathan geoffrey yu is staying with us. Coming up, alan ruskin will be joining us. He says, do not change the market. Geoffrey yu says eurodollar is going in the opposite direction. 1. 20 in the next 12 months. The dow this morning futures are softer with weak auto sales and induced nervousness that have affected the risk buying. The dow futures are softer. S p futures are down by. 2 . This is bloomberg. Emma this is bloomberg daybreak. Boeing has agreed to sell 30 of iran airlines. To airlines generally get a discount on big orders. In december, iran and boeing agreed to a deal. The Worlds Largest luxury carmaker and the biggest Auto Component producer want to put driverless taxis on the street in the next decade. Mercedesbenz has teamed up for the project. They will compete with self driving car programs at bmw, google and alphabet. Buckshot the way has eliminated jobs at the newspaper groups. More than a third of the jobs are the positions that are suffering from the same industry. That is your Bloomberg Business flash. I am emma chandra. Frances 11 president ial candidates prepare for a new tv debate. Macron and Marine Le Pen the first round of elections. Be 10 versus one later today . Be 4ll, it will certainly 1. Those are the top candidates and they will be gunning for macron. The other six, it is just a question to be noted. Many of them are way down in the polls. So six will be trying to get noted. At the top of the ticket. Macron has to decide, does he just play out the clock or does he fight back and go for the kill . All eyes will be on macron. Jonathan the others have to make the big impression later today. How important is the debate today . Greg it is their last chance, in some cases. A few months back, Francois Fillon was the frontrunner to be the favorite. Jobs the local legal the socialist candidate was running high in the polls. He has completely faded. A very pale performance in the first debate. Fillon, theyois holland have to pull out the big performance tonight. Jonathan if macron came out of the debate unscathed, if it was seen as a win for a lot of people or Marine Le Pen, what does a win look like . Doesnt have to worry. She has 25 of the polls and that is not going to change. She has her supporters. Her supporters are the most committed out there. Frenchother hand, most people reject her. So she has very little upside and very little downside. She way, she just has to will probably try to soften her image a little bit. Picking up some of the undecided voters. But there are not as many of those as you might imagine. So i dont think the focus is on her. It is much more a question for macron. , wethan greg viscusi appreciate your time. Alix we talked to analysts who say you will want to buy if Marine Le Pen doesnt win at certain areas continue to price the Political Risk. The english law protects against redenomination risks and it has been moving higher. Still with us is geoffrey yu. Where are we in pricing in the Political Risk . Geoffrey it depends on what Asset Classes you are looking at. If you are looking on the analysis has a 40 chance that Marine Le Pen will win but i think the market is there yet. It is all relative. Where our markets pricing versus where we could be it will only take one or two polls, heading into the second round, which is expected to show things around. Nonetheless, there will be the opportunity in europe for the euro. Alix you mentioned one point 20. Is that based on Marine Le Pen not winning . Geoffrey it is mostly the european reflation call. The strong valuation argument. If you dont worry about eurozone integrity on the valuation side, the euro is up to value. It is headed in the right direction. And then i go back to what i said about too much money being in the u. S. There is very little positioning relative to benchmark that flow, heading into the euro, that could be very powerful. That is what we are targeting as well. Jonathan if you are targeting 1. 20 in the current spread for two years, what does that imply . That the spread will be in 12 months . Geoffrey so we are not putting a number on it. But that spread in flies that the market will be underpricing the upside potential in european yields, which translates into expectations for european policies, ecb policies, over the next 12 months. On the flipside, there is the dollar as well. We see the dollar as being a bit too strong. The march decision has promised a bit of a shakeup. There are some technicals that could drive europe. What about the fundamentals . Typically you talk about gross, real growth. The combination of democrats and republicans but i dont see the change in either of those. Are they driving growth . Geoffrey trend growth is a separate issue. And i think that is probably the outlook for a lot of the places around the world, getting it more challenging. On the secular level right now, the eurozone is more trading oriented but that will hinge on how emerging markets are doing. There will be going to be global reflation with a cyclical uplift and the euro is in a better position to benefit. Should Euro Currency start to price this value. Start hiking rates in the future, but it will depend on the price outlook. Again, we think the market is underappreciated with what could happen in europe right now. Jonathan all of the analysts are lining up to say by europe, by europe, by europe but the money isnt going there yet. Is getting over this French Election hurdle, if we do that and end up with a candidate macron, is that enough for the money to follow the analysts call . Geoffrey i think some will have to set in. On Earnings Growth in the eurozone. We are really starting to surprise the upside to the revision. That performance could be too strong to ignore. And with the german elections, italy could be back on the radar at some point. If they choose not to invest, they will always be able to be found. One risk is that the mentality is going to be around some time. Alix i want to talk about the sterling. Geoffrey a similar argument based on the fact that sterling is very cheap and also, the eurodollar will help performers. We do want to appreciate a bit more into the longer term over where the differentials will be. Not absolute growth. But we do see that you can growth could start to surprise to the upside. Trend could be helping the dollar. Corporate earning a repatriation of earnings and that is happening in the u. K. As well. David geoffrey yu will be staying with us. Coming up, the u. S. Air force responsible for moving our troops around the world wherever they are needed general Carlton Everhart is here to discuss the president s additional request for spending. This is bloomberg. Jonathan new york city, this is bloomberg daybreak. Lets get you up to speed on the markets. You have weak auto sales that induces a bit of nervousness as far as the long position is concerned. Two days of losses coming in and we are down by 51 points on the dow. Negative seven points on the s p 500. Two hours away from the cash open. If we switch up the board, there is a nice dollar did against pretty much everything in the g10 space apart from the yen. The euro is backing off by. 2 . Geoffrey yu said earlier that 1. 20 is on the cards. We are just grinding down towards the low end of the range through 2017. It is risk off everything in the last 24 hours. Alix here is the why. Weaker auto sales in march in the u. S. March was supposed to be better because january and february was soft. Daimler is off by almost 2 and bmw and vw. Fiat is muted but that stock fell 5 in the u. S. Session. And we are also seeing a Ripple Effect through the japanese automakers as well. Nissan off by 3 . We have the yen rising for a third day that is hurting autos and banks in japan. And wrapping up with kind of a car story. By 3 with cuts underway. They are talking about the need to transition to diversify away from videogame so we are watching that stock as we head into the open. Jonathan coming up, Carlton Everhart joins us on President Trumps budget. Up next, we talk about emerging markets and how the yield shakes off Political Risk in south africa. This is bloomberg. Jonathan from new york city to our viewers, worldwide, this is bloomberg daybreak. Futures are soft. Losses on the s p 500. Weaker there. Down one third of 1 . We switch up the board. The dollar is stronger. Treasuries had a big big yesterday. We are at the bottom end of the range so far. Reversible what a reversal. We talk about that in a moment. Lets take you up to speed on the headlight outside the business world. Good morning. In st. Petersburg, a radical islamist is suspected in the subway bombing that killed 14 people according to the government. A say the suspect was born there but became a russian citizen. Was aals believe it suicide attack. In the u. S. , Senate Democrats appear to have enough votes to block Neil Gorsuchs nomination. That may force republicans to use the nuclear option. Votes touire 60 confirm a Supreme Court nomination. Republicans could make the controversial move to require only a simple majority. Trump is beginning to deliver on a promise on the crackdown of the visa program that benefits silicon valley. It will make it harder for companies to bring overseas tech workers to the u. S. And the warned Department Employers not to discriminate against american workers. Global news, 24 hours a day. Powered by our more than 2600 journalists and analysts, in more than 120 countries. I am emma chandra. This is bloomberg. Downgrading the south African Investment grade rating for the first time in years. Hanging by a thread. That is what the Investment Grade rating is. What is the response from the government so far . Minister saidance that s p communicated their thursdayto downgrade and he only found out about that on friday, a few hours after he financeinted on minister. He also says his department will continue to engage with rating agencies. However, it is critical to note that s p has cut the rating but kept the local currency rating at the investment rate which is significant because South African has it nominated in rand terms. So it is not a catastrophe but it is sending a strong signal about the fiscal validation to reduce the deficit. And also to political leaders to eradicate some of the political turmoil that we have seen. This ideai love that that this was made after the Political Association was made. President . T for the if the pressure building for him to make a move . Pressure is certainly building. We know that one of the countrys biggest labor toerations came out today say that it is time for him to go. Theyre asking him to resign. They are also meeting with some of the members to discuss all of it seems li