We get adp, weekly initial jobless claims and trickling out all morning, may auto sales. Fracturingsn and you manufacturing results. Jonathan for the last 24 hours its been all about the financials. Declining trading revenues. 3 wall st executives in 24 hours went into inspect haitians expect expectations management road. Mode. Jpmorgans cfo at good the sentiment. Bloomberg spoke with james gorman who is knowledge to he is seeing a similar trend. I think it would be hard to be anomaly. Have similar kinds if not the same in some cases. Theres enormous uncertainty which typically would read tremendous volatility and its not. Its was very passive perspective. The Downside Risk at this point is up weighing the offside risk. Now,han joining us Charles Peabody. Lets just begin with you very quickly. Anr take on what seemed like orchestrated move by 3 wall st executives to come out and temper great expectations. I think the expectation was that we would have some sort of seasonal slowdown. The guidance proved to be much weaker than expected. There were other factors beyond just trading. Bank of america guided down on Net Interest Income and Morgan Stanley talked about some of the catalysts to their Wealth Management losing visibility. The issue was broader than just trading. Its the one thats looking a little bit weaker compared to the others given the client makes mix . Take all the various factors, bank of america was rather disappointing because trading revenues were only down 10 to 12 . They also guided down on their Net Interest Income. Had been projecting 100 50 million increase for the Second Quarter and now they are seeing about 100 million of that increase probably wont happen or that was disappointing. Then they announced to some special charges to consolidate their call centers and for severance. That was really to frontload some expenses so they could meet their 53 billion target next year. Gamesnancial engineering playing. Its disappointing. Approach toality generating earnings. All expected bank of america would benefit the most from rate increases for the fed. The fed is on track. What explains the hit bank of america says theyre going to take . We are at a point of diminishing returns from higher rates. If the fed continued on autopilot with rate hikes we would actually see a negative impact from higher rates. Case theyly in their are being heard by the long end of the yield curve flattening. About 600 billion dollars of mortgagebacked where the premium amortization accelerates as longterm rates fall and that squeezes their margin. Alix do you buy the dip . I think longerterm what you are looking at is an improving economy with improving consumer. The consumer,n almost every metric looks really good. You have to think financials would benefit from a stable consumer thats growing. In contrast to what charles just said, we think a few more rate hikes would actually still be helpful. We would like to see the 10 year yield moving in concert with economy expectations. Alix you have been expecting the downturn in banks. Your call has been because of increased volatility. The warning we heard was lack of volatility. Are you rethinking how you think about banks in terms of why . It has been inactive rather than bad or good. You have had reduced Client Engagement. We are moving from a fixed income commodities currency as the driver of Capital Markets revenues to m a and that transition never goes smoothly. I would pointg out is in terms of a source of revenue, multiples bigger than m a and equity. A 10 drop in fake revenues it you need a 30 increase in equity trading revenues just to stay even on the trading front. Transition from six to equities is a very difficult transition. Back to your question, the comments companies are making are about the Second Quarter. The Third Quarter seasonally includes reduced Client Engagement because of the month of august. Jonathan i want to bring in drew matus. We have been fading the banks for quite a while now. Own 10 or 11 the regulatory story was quite powerful. That we were going to get this evolving regulatory story in favor of the banks to we dont hear much about it anymore. That these policy ideas will become policy realities anytime soon. You have to bear in mind to there is much more leeway for the administration to do what they want on that side. It takes time to get everyone in place. As the administration continues to build out, people in place at the treasury and the fed begin to see more of that. Thats going to be a longerterm story rather than shorterterm and one that probably will continue. Softeninghave had disappointment. Relative value play in europe. Jpmorgan says the risk reward is now in u. S. Banks. Can you make a comparison . U. S. Toest rates in the the point on net interest, think of all of the things that could drive yields higher. You have the Balance Sheet thats going to begin. You have the potential for inflation expectations. Ands are beginning to move thats usually a precursor for slightly higher levels of inflation. I think all the pressures are building on the inflation front. Part of the reason, even though we have had some tepid data as of late, they also see it. David it used to be the case off ofnks made Money Lending money to people and getting paid back. If we are not making money off why isnt as much, bank of america for example making it up on volume . Growth has been decelerating. We are lucky if we are getting 3 or 4 year over year loan growth right now. Thats the problem i have with what the fed is up to. If you look at the commodity we are lucky if we are getting 3 or 4 year over year loan growth right now. Complex or the Interest Rate structures they are all warning and Monetary Policy mistake that is a fed on autopilot with rate hikes. Tohink theyre going to have pull back and i think the bank lift thatstarting to out. It may be the last for the balance of the year. The Margin Expansion story i think comes to an end and if you dont have that and you dont have loan growth how do you grow revenues . David thank you, Charles Peabody of Compass Point research. Drew of metlife will be staying with us. But stringent sebastian from london with first word. President trump will announce whether the u. S. Will remain in the paris climate agreement. That happened at 3 00 p. M. Eastern time. People familiar say hes walking away from the landmark deal. The president has called Climate Change of folks and says the paris accord is onesided against the u. S. Thes pushing to rescind rules on power plants and methane lakes. Subpoenaed President Trumps ousted National Security adviser michael flynn. There are also demanding a number of documents. The president s personal lawyer also was subpoenaed. Cohen has said there is nothing russianhim to a fake conspiracy. In the u, theresa may is getting slammed for skipping last nights televised debate. Leaders of other parties say it shows shes not fit to lead britain. Shows conservatives 20 point lead over labor has dwindled to just three points in the election is a week from today. This is bloomberg. Its aoming up tomorrow, jobs friday. A great lineup of guests to the numbers. Its all going to be about wages. This is bloomberg. Alix 24 hours away from jobs friday. Moderate growth in the u. S. Economy. Jim gorman is a little bit more of the. Upbeat. We hope the administration can pull some of this together. We need progress on these legislative programs. Are you concerned about the u. S. Economy . No. Im very encouraged about the u. S. Economy. The dirty little secret in the u. S. Economy is doing just fine. Chief Market Strategist from metlife joins us. Its it true with the fed or james gorman . I am more in James Gormans camp. The economy is doing fine. We all know there are problems with q1. If you take a longer view on the economy, you see accelerating growth, a consumer thats in pretty good shape, the prospects for more investment Going Forward. All the concerns about administration, i would rather see a tax cut next year than this year. One of thehave longest cycles in history. We can expect that cycle will continue. When it begins to wane you might get a tax cut. Lining up to be a longterm positive growth experience. Companies want to invest. They have the money to invest. Larry fink yesterday said ceos should actually look to europe. To be the trigger for money to actually start being put to work . I wouldnt look for policy certainty to be the driver. If you live in an environment long enough what you find is that people become used to that environment. Policy uncertainty is unimportant. Trend growth in the u. S. Is probably higher than the fed thinks it is. Productivity has probably been restrained by low growth. Level where up to a we can operate on a very efficient operating level. The rpms in the engine just cant go fast enough. If we can spike the engine a little bit we will get the productivity pick up. Thats Economic Cycle expansion. Jonathan what do you make of the excitement about europe when the likes of larry fink are saying its going to outperform the United States and hes not alone . Theres a strong believer across a number of different groups of people that Monetary Policy, quantitative easing are big drivers and they cant help but look at something thats been down and expect it to go up. Is ahole underdog story great story. Everyone loves the underdog. In this case i would bet on the front runner. Jonathan in 2007 people remember wanted to be paid in euros and not dollars. The euro a couple months later topped out. Totballers in the u. K. Want be paid in euros and not in sterling. Alix by far the best story. Jonathan are we approaching that kind of moment where people are getting excited and optimistic about what europe can do for the rest of the world . Premier League Players probably live in europe. Getting paid in pounds probably didnt make them happy. Europe looks better. We have taken up our European Growth forecast for this year. It looks good. We are expecting ecb to begin tapering at the beginning of next year. Eggs are looking better. Just because things are looking better at their doesnt mean things in the u. S. Are looking worse. Part of the reason things are looking better everywhere is the u. S. Growth story is a positive one and a rising tide is lifting all boats. David is find good enough . Ofare about growth in terms two. Historically that hasnt been very exciting. To 3 ,re not going back three. 5 growth rates partly because of demographics. I think we can get above two because the productivity story, theres this argument about structural stagnation, i am not a structural stagnation the lever. We invested in housing which is not a productivity enhancing last 10 years instead of investing in computers or technology. We will begin to see the productivity story improve. Do the ceos have confidence in this economy Going Forward . Rates move higher people are going to lessen the duration of their investments and the way that ceos respond to that is by trying to focus on growing rather than cash return. Alix we are 25 hours away from jobs. I take a longerterm view now. The greatest things about the change i have made. When are we going to see real acceleration as far as lower income workers . You have already seen the lower income earners get the wage boost. The midst of it its just a matter of which weighed you are looking at. Alix hedging the numbers. David will the rate of increase go up or down . The rate i expect to accelerate. David one prediction. Drew will be staying with us. We will continue our conversation on the health of the u. S. And global economies. Merrill lynch head of Global Economics will be with us. And later, andrew balls will join us to explain what he thinks investors may be too complacent. Live from new york, this is bloomberg. Jonathan this is bloomberg daybreak. This is your Bloomberg Business flash. Biggest maker of Farm Machinery is buying a leading manufacturer of road holding equipment. Point 5 million in cash for a germanbased company. It plans to keep the existing brand. Ended its unwanted pursuit of akzonobel. It has withdrawn its proposal and wont make another. It had rebuffed the latest 29. 5 billion bid. Elliott management wants the company to hold talks with ppg. The firm failed in illegal attempt to fire the chairman. Volkswagen may make more suvs at its factory in the u. S. That could be complicated by uncertainty over President Trump and possible trade barriers. Thats your Bloomberg Business flash. Chinese manufacturing maybe contracting for the first time in a year. Thats according to the index released overnight. It dropped to 49. 6. Gormanstanley ceo james tells bloomberg he still bullish on china. Been stable. Has consumption is increasing. Overall gdp growth and liberalization of the capital market. Ofid here with drew mattis metlife. How fast is china slowing down . Think that number is probably pretty good. Its slowing down very gradually. Youre not going to see much more of that. You do have some imbalances in china. Are veryortterm there few concerns or limited concerns. In the longer run there are going to have to be other transitions made like any economy does when they are moving from one driven by exports to one driven by domestic consumption. Avid they still want growth still north of 6 . On the other hand, to date they have been funding their growth to really expanding credit faster than the growth. Are they going to have to give up some on the contracting of credit . Is thenot sure give up right word. You cant have credit expansion forever. Its all kind of the private side of the economy. The transition will have to be a little more Government Debt and a little less private debt. Where you question is are investing it. Are they investing it in productive assets . To they have a problem with the state owned assets getting a lot of money which may not be as productive . The way they are managing the economy and changing the rate structure actually tends to lead some of those investments away from state owned enterprises and more towards the private sectors. They could be trying to solve that on their own. Theyre just doing it in their own way. Jonathan drew mattis will be sticking with us. Live coverage of President Trumps announcement on his decision of the Paris Climate Accord will come at 3 00 p. M. Eastern from the white house. We will bring you full coverage of that decision. Lets get you up to speed on the market action. 3 on the session so far after a number of days of gains including a series of all time highs. Two days of losses on the s p 500. Features stable and marginally positive. The euro pulls back from 2017 highs. Youre watching bloomberg tv. Jonathan this isjonathan bloomberg daybreak. I am jonathan ferro. Futures are going nowhere. Switch of the board very quickly for treasuries, in terms of the data, the adp or comes out in about 1 45 minutes. We will bring you that appetizer before the big main course, the payrolls, that come tomorrow. Eurodollar, the high for the year, 1268. We are down by. 2 abroad Dollar Strength in the fx market. Very quickly, lets get you uptodate to date on the headlines outside the business world. Here is sebastian salek. Sebastian thanks, jon. The president announces his decision today about the paris Climate Change accord. People familiar with the matter say he is leaning toward walking away from the deal. Among those urging him to stay coo border apple tim and teslas elon musk. Two leaders have appeared to leo make amends with leaders last month. Trumbull spoke with bloomberg tv. It is more important than ever as President Trump and i demonstrate that we are together on the uss intrepid in new york. That commitment, a commitment of our two nations, based on our history, taste on our shared values, based on our mutual interests, is stronger than ever. Sebastian trumbull also called on china to rein in north korea, saying it is becoming increasingly reckless. And russias president vladimir countryses his involvement in the hacking. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. I am sebastian salek. This is bloomberg. David thank you. As sebastian just found us told us, we will find out whether President Trump is in or. Live on Bloomberg Radio and on television. Joining us now is chief washington correspondent kevin cirilli. Varioushearing from sources he is leaning toward withdrawing. Kevin is he in or outkevin . 3 00,l know it today at david. He will be announcing whether or not we will remain in the paris accord agreement. Top ceos, particularly elon musk, coming to the defending of the paris accord agreement. Circulated letter back in early may by the Business Community and big banks prominent groups like Morgan Stanley, Goldman Sachs, citigroup urging the president to stay in the Paris Agreement. They feel like this is the kind of agreement that will help set the course for the world in hopes of reducing Carbon Emissions as well as a host of regulatory issues. That said