raiseare helping to capital and offload bad loans and crude reality. brent climbs back to a four-month high. the outlook remains negative. a warm welcome for the first hour of "bloomberg ." david: stephanie ruhle is off today but here with us instead is not mcclendon. good to have you here. jonathan: this headline, it warns some interrogation. if you are saudi arabia, you are looking and saying, my finances,

there is nothing wrong with them. david co and they have the capacity to borrow. vonnie: yes, and let's make it clear. they are the third to have cut this. jonathan: this as brent climbs to be four-month high. let's check in on the markets. futures are positive ahead of the open. the ftse up around two points, there is a story on the luxury goods in there. if you switch up the board quickly, the dollar-yen, a seven-day losing streak. can we break that? up .5% inflation as a 15 month high. and april -- it skews the number a little bit. we will get to that.

there it is on the screen. .7% and brent crude making a four-month high. we have lots of news to get to. let's get to david with the first word news. both menosecutors say involved in the brussels bombings were involved in renting apartment. 16 victims died in the attack 16d suicide bombers killed others at the airport. forces in syria are working on the strategic hilltop village. the area has been held by groups opposed to the government since 2012. a russian helicopter crashed and killed two pilots. and lawmakers have pushed -- a step closer to impeachment. it was the first formal test of congress. ae brazilian royale reached

high on speculations that -- would be out. the impeachment could amount to a coup. 2400 journalists and more than one edge of 50 news bureaus around the world. jonathan: saudi arabia's credit rating has been cut. this is a surprise to many. because on the financing side in saudi arabia, things look great. is that a justification for the move, where commodities are? >> you are absolutely right. they are taking a view on the oil prices and they are forecasting wti prices of $75 for this year. the finances of saudi arabia look weaker and that is why they are cutting the rating. the main undermining of the

decision are the very low prices. saudi arabia -- 50% of the gdp. david: the kingdom has already taken action to reduce the deficit. even though they are weaker than they were, they have large reserves and they also have not borrowed much from the capital markets at all. they have a lot of growing room. is there a chance they will not take the bills? >> there is no chance, whatsoever. they're getting the ratings cut but it is coming from a high level of ratings. they were aaa and they went to aa and now it is a aa minus two still a very good rating. there is plenty of room for saudi arabia to continue. they have one edge of $40 billion in reserves.

right, theretely is a lot of maneuvering. they could take loans from banks. the debt is very low. this is the first situation since 1999, at that point the debt ratio was very high. today, the debt ratio is 10% of the gdp. many countries would like to have that kind of debt. vonnie: exactly. is this just a warning shot on the part of fitch? 1.7 percent gdp growth -- a lot of developed nations would love to have that. >> yes, i think the rating agencies are taking a very cautious view. we don't really know where oil prices will go. -- if you a barrel

believe this is only a short-term drop in prices and we're going to go back to $100 that it is a different situation. there is a new king and there is a lot of tension in the middle east with isis and a population who will need jobs. and i think the geopolitical results on saudi arabia is one factor that is pushing this. just a few minutes ago, fitch cuts the ratings. it is clear where it is going at this point. crystal ball to look into saudi arabia's finances. they have a complex system. this is what the imf sees as far as the debt-gdp ratio.

you can see that for a long time it was negative. he can as they had so much in it didn't go above the zero line but the imf is forecasting this decline. i have to look into it to see what oil level the ims is assuming. it looks like they expect it to climb to 44% in 2020. japan's largest brokerage is shutting down operations here. it is the most in almost two months. michael moore joins us now from london. this is just another from the slew of banking headlines where parts of operations are shutting down. when do we see the end? michael: i think it will be a while yet before we see the end of it. a lot of banks have been cutting

back and we see that today with citigroup. there is a number of headwinds, whether it is regulatory or the market environment, and until those let-up, this is not the end. david: i will confess, i have not been following this closely. i understand they are ranked 49th in equities in europe with a 2.2% market share? michael: right. hey tried to build up in the equities business and never got to the scale where it made sense and it was profitable. they were running at a loss outside of japan for a while now. so as you say, this was not a business that seemed like it was going to turn around soon. that is why you are seeing the cuts. jonathan: stick with us. i want to bring in matt. story?s just a baking pulling out of europe and cutting jobs?

it is a difficult story. do you see more of this happening? euro,when we look at the we recognize that some of the symptoms are symptomatic of broader monetary issues. if you look at the total structure in europe, japan and america, it is higher today than it was in 2007. bout time we have seen a of risk aversion, we have seen central banks come to the floor with easier policies. the problem is, negative rates really hurt the profitability of banks because they take away the deposit earnings franchise. and that means the banks have a fortive net interest margin losses. so whether you are struggling with trading or the more

traditional banks, low interest rates in an environment of excessive debt make it difficult to absorb losses. one of the things we saw in japan where banks trying to deal with a similar dynamic. we think this is a very challenging environment. david: i wonder what the connection is between the banks who have to deleverage and have to come out and get the economy going. those things are pointing in different directions. matthew: they are going in different directions. you have an exchange rate in europe and that is a source of stimulus. you see unemployment starting to improve at very high levels. confidence is a improvement. but having said that, you have a dynamic where the banks are still sitting on large amounts

of nonperforming loans, and the sovereign mechanisms for any bailout of the banks is not clear and so you have this kick the can down the road phenomenon. vonnie: in terms of the economic need -- the bank to function much better then we would in the united states? matthew: the more qe that you have done or the lower interest rates are, it harder it is for banks to balance the balance sheets. the european banking sector went from above 20% to 6% today. you can't really grow your balance sheet. so the policy that is aimed at stability the economy has arguably slowed the ability of the banks to grow their balance sheets going forward. david: ok. thank you for joining us.

ofing of next, speaking banks, italy has come up with a plan to help the financial firms. details coming up on "bloomberg ." ♪

david: you are watching "bloomberg ." citigroup is planning to cut staff in london. that is according to people familiar with the matter. the lender will dismiss 70 traders this month. they have shrunk by more than 40,000 since taking over in 2012. with growinging

demand of suvs. point one million citizens, suvs and minivans were sold last month, 9.8% higher than the same month last year. mercedes-benz boosted their sales twice as fast as bmw in the first quarter. increased 30% in march. compared to a 6% increase for bmw. david: italian government officials have called for $5.7 billion funds to -- this is part of the push to focus on banks. italian banks have been among the worst performers and they did rebound on the nude -- on the news of funds. in go now to john for lane rome. how does this work? john: the numbers are a bit

disproportionate. nobody is saying that this fund will solve the whole problem. it is part of boosting investor confidence and getting the banking sector to try to tackle this problem. and there will be various investments and incentives. it looks as though they can be as opposedook value to market value. but we are waiting details. -- there on face value are the long-term issues. it looks like this fund helps the capital ratings but the long-term issues, the piece that you have written about, can it get through the legislation that makes it easier to recover the loans that have gone bad? john: he can get the legislation through the italian parliament, the problem is brussels. taliane talking to an i

officials saying they have been in touch with the european commission and they are confident that they will push it through. the whole problem with the aid component is crucial with this. there have been tough negotiations that will be ahead with brussels. vonnie: one of the ways that they will get around the rules? by making a private manager management. why didn't they think of this before? john: they should have done this when the eu rules allowed the state to step in, that is what germany did. the italian ministers complained that there predecessors did not take advantage of that opportunity. the way that they are trying to get around this is that the state lender is going to have a minimal role, it is not quite clear what yet. but the whole emphasis on private investors and lenders and institutions will enter this mechanism. david: this is important to

italian banks but also to italy overall. you wrote this profile of the prime minister. explain why this is so essential to turning around the italian economy? john: just a little anecdote. we walked into his office and there was a sword on the chair and he brandished it. we asked what he would do with it and he said, it italian banks and he brought it down with a slice. and a senior official in the -- isment told us that helping to slow down the economy and it is reducing the capacity of banks to actually lend and italy is only just clawing out of a recession. vonnie: that is some anecdote. 'su can catch john follain article on rebooting italy and we will have more with matt

mclennan now. i know that you are invested in europe and we will get to that in a moment. continue to join us on "bloomberg ." ♪

jonathan: long considered an moreings -- matt miller has on the outlook for this year. matt: really, for earnings in general, it has been a pretty bad start. some are saying the worst start since the financial crisis. take a look here. they are the most read story on global wall street. the biggest aluminum producer in united states. they're cutting manufacturing because of lower oil prices and because of shrinking margins as the chinese demand for commodities slows.

boeing is one of the biggest customers and cut production of the jumbo jet in half and that is not good. the shares are down almost 30%, 26%. and they have lost everything in the premarket that they gained yesterday. analysts are protecting a broader drop for on the s&p 500. we showed to discharge yesterday. we are looking at a contraction of 10% with calls for flood earnings back at the start of the year. if you check out this function on the bloomberg which i just pulled up, you can see that so far we have 21 out of 500 companies reporting but we are looking at disappointing earnings in other places besides energies. this is the surprise. as you want to do is click on this tab, the growth tab.

we are not seeing a lot of that. this is considered an earnings recession. let's check out juniper, shares falling in the premarket. the california-based company says sluggish demand from corporate companies and telecommunication providers cost q1 revenue to fall. they have weaker than anticipated demand across the from some major tony gwynn indications companies in europe. this company is a bellwether as well. had au know that lvmh disappointing earnings report, product had a disappointing earnings report. the luxury system in europe looks bad so it is not just oil. we are looking at telecommunications, aluminum and everywhere you look, earnings are contracting. european, japanese and u.s.

earnings are off. jonathan: it is not looking good. we are looking at low returns and a market that is incredibly correlated. where do i go for a non-correlated return? in a world of nonmonetary abundance, you are exactly right. the return looks disappointing going forward. ratios are high and margins are high. andeturns with duration fixed income are challenging. so we believe that if it returns you havence reforming, to scope the portfolio from the bottom up. if the problem is monetary abundance, focus on the assets that are here. we try to find individual businesses that have the

capacity to generate cash flow, whether it is companies like -- in japan that has a strong position in mobile and broadband networks or oracle in the united states with a 7% free cash flow yield and a strong maintenance revenue or even heidelberg cement in germany. they have a high free cash flow generation. it is finding those businesses right-a-kind with the free cash flow yields that make sense in this environment. if you want uncorrelated returns, you have to own funding that can be a head to your portfolio. for us, we find a potential hedge in the old. the cousin of its lack of utility as a commodity, it is scarce and resilient. david: give us a sense of

proportionality. 75%hew: we are about investors and businesses. if we can own businesses as good prices, that make sense to us. with equity, we have 12% involved with the latest mining shares and we have the rest in cash and short-term sovereign bonds. david: that is matt mclennan and he will be staying with us, i'm happy to say. up next, talking about inc. earnings. ♪

jonathan: good day to the city of london. tom keene, i miss you. you heard tom keene, he is on

bloomberg radio and joining us here on "bloomberg ." matt mclennan is with us as well. futures are positive throughout the session. a 15 month high, a big surprise for the pound, we broke through 1.43 on sterling. east of this year and march of last year, we are not comparing apples to apples. that is why we have the upside surprise we have this morning. secretary isavy facing off against marine corps leaders who resist hiring women for all combat jobs. he will discuss his intent for gender education. now to the race for the white house. -- hillary clinton

is criticizing bernie sanders record on guns and immigration. bernie sanders is keeping up an aggressive criticism of hillary clinton's ties to wall street. the next debate is on thursday night in brooklyn. and ted cruz is the and that quick hillary clinton in a matchup among married women who are likely election voters. against donald trump, hillary clinton beats her rival. global news, 24 hours a day and powered by our 2400 journalists. vonnie: thank you. today, our morning must-read is a morning must watch from an interview tom keene did earlier this morning. no, it wasn't posed red sox opening day. >> it was a wonderful opening day. jonathan: what are you doing?

tom: it was wonderful. i don't think jonathan ferro even knows who lobby your is. david: did you want to talk about oil? vonnie: i'm sorry. to jeff curryten on an inflection point. the inflection phase. we are seeing be supplied be curtailed but we are not there yet. that is why we argue for a trend this market until we see those deficits. tom: to review, he was really good. is $55 is theere terminal value, that is a low number. david: what is the ideal price for oil? tom: just for the mathematics there, the differential

equations going on, it is really interesting. there is a partial equilibrium and analysis where every production nation has a different equilibrium point, including the united kingdom. jonathan: i thought it was really interesting when he talked about how this is not going to be a market change. the output freeze is at an all-time high. what does he say about the rebalancing? how long will that take? are cuts to u.s. show production enough? tom: shale production is the key variable against saudi arabia. fitche upset with the rating cut. vonnie: yes, will banks owned the energy companies? tom: that is too dramatic. but what is interesting is that in certain nations, that may be true where banks will own the companies or will the

government's own it? onis exceptionally cautious the size of the debt. it is the size of the debt to the company at the nation that we can't perceive in the united states. david: how does that affect your portfolio? matthew: if you look at our portfolio, we are not huge investors in the energy market. we do worry about the fact that this is a market where we would acknowledge $70 to get oil out of the ground and with 80% of the reserves are state owned producers. they may not act rationally in an environment like this. or they may perceive rationality be -- rationality to be going up to volume. we are extremely selective and recognize that low oil prices could be good for the rest of the economy. so we focus on this but we don't have a direction. tom: that goes to the idea of interest rates.

what is the great distortion of commodity prices going down? matthew: ultimately, commodity prices going down is a good thing. in the short term there is a hit to fixed capital investment as you have the step down in commodity prices. but it helps expand disposable income in the world. and it can produce complexities. think of the situation in saudi arabia. they have a pegged currency. it may be one of the very few currencies that is over. -- we are great for bringing this out right now. every day, it is good with the national ambassador. david: let's go to the banks right now. their earnings reports come in tomorrow. jpmorgan kicks things off followed by bank of america and citibank later this week. two of the country's basic --

country's biggest banks are the worst performers. >> what we're going to find out tomorrow when jpmorgan kicks off the earnings, the great thing about that is that they provide the first window into how about the carnage was in the first quarter. analysts are expecting that the markets andthe ipo capital markets and debt capital markets, it will be the worst start for wall street since 2009. jonathan: what about the guidance? what about the guidance through 2016? >> but i want to know is, typically in the first quarter you get 33% of the whole year on revenue. that is where traders are making the first of the action, they put on positions. that can happen later on in the year. so jpmorgan will give us guidance on that to see what the beginning of april will give us.

tom: we were talking with your british counterparts earlier and i'm fascinated with your vision of how new york wall street can make this an opportunity. exits and is that an opportunity for successful american banks? >> every time you talk to them, they say they are sticking to the income and the breadth of the offerings. and they have used this before -- and game winners. we will wait for the other guys to retreat and when we come back we will have the scale and the welfare to kill it. have already seen the dire warnings. is only profit going to be wealth management? >> -- they have tilted heavily towards wealth management. m&a advisory is one of the lone

holdouts. apart from that, it will be universal banks leaning on their bread-and-butter of consumer banking. david: matt mclennan, how does this affect your portfolio? i know you think negative interest rates are hurting the banks. matthew: when we look at the institutions, we try not to rely on those that just rely on the balance sheet. focus a lot on the financial institutions that have other sources of earnings power, particularly in income generating businesses. , they tenda business to have huge credit card operations or huge custody settlement type situations that supplement the margins and give them the ability to withstand adverse credit advising's. tom: you are not only looking at

the two big to fail thanks but what does it mean for the guys -- >> it is case-by-case. if you are built heavily towards m&a, you could be doing restructuring bankers. they will have a big year this year. so because it is not all things to all people, it can give you support. jonathan: just to tie the stories together, we aware of the difficulties that europe has gone through. one of the things that came up was the amount of impairments of the loans of the energy industry. do you expect to see that increase through this year? >> jpmorgan has talked about a write-down for this quarter and let's see if it comes to that. 2% of their overall loans. they will be big numbers but in an absolute sense, it will not be that much. david: it will be a busy week to

look at all of these earnings. thank you to matthew mclennan. and of course to tom keene. thank you all. a committee in brazil has decided to impeach a president. the question is whether parliament will go ahead with that. coming up next on "bloomberg ." ♪

vonnie: you are watching "bloomberg ." i'm here in the green room and coming up in the next hour we have penny pritzker coming up to discuss trade deals.

♪ david: you are watching "bloomberg ." -- chinese on 10 retail online retail has offered to buy -- four $1 billion. it will pay five and million dollars for new shares. they are currently consoled by germany's rocket international. -- are among those weighing bids for chevron's geothermal asset. the assets could fetch as much as $3 billion. drillinghas canceled projects to slow the cash as energy prices plunge. -- it is oversubscribed. that is what people familiar with the matter say. investor demand is at least five

times the number of shares being issued. that is the bloomberg business flash. matt: i want to look at some of the analyst calls this morning. i want to kick it off with the itgest call on the terminal, is from hsbc. they are upgrading u.k. equities from underweight because british stocks have underperformed for five years and analyst cb typical balancing out. the brexit referendum is coming up june 23. hsbc also says europe ex u.k. is a buy right now because it is the one region in the world where earnings are priced positively in the face of investor skepticism. those analysts are raising their ratings on emerging markets. they say a weaker u.s. dollar and a macro stabilization trend

and heavy ownership of those stocks will lead to a 10% upside by the end of the year. and finally, hsbc cuts japan and switzerland. the most interesting in the report, they boost their underweight stance in the u.s. and say that they think the so-called profits recession is only just beginning. and that is the profits recession we have been talking about for a couple of days now. david: we will continue to talk about that. turning to brazil, lawmakers have pushed a president a step closer to impeachment. a committee has voted for her removal and in turn, and exchange traded fund -- signaling investor optimism. our bureau chief joins us now. take us through the steps. between here and impeachment, what do people have to get past? >> so what comes up next is a

vote in the full lower house which will last three days, starting on friday. friday, saturday and sunday. there are a lot of speeches that need to be made at all of the congressman need to vote. that is the most important step at this point. the opposition needs 342 votes out of the 513 for it to pass. if it passes, it goes to the senate. that is the next up. david: so a two thirds majority is what they need to get the vote of impeachment. where are the votes? how close are they? differente a lot of tallies. one of the newspapers is doing a daily tally and they have a hotline open for congressman to call and to clear the vote and they are at 299 out of three had 3422 needed -- out of needed. they can count

321, putting it a lot closer. vonnie: there are still a lot of steps before it gets to the senate and even then it can take 180 days before a decision. what kind of impact is this having now on brazilian stocks? >> for a while now, anything that is positive for impeachment gets a very positive reaction out of the markets. the tokyo etf is a good example. royalethe brazilian rallied back to the strongest it has been since august. so the markets are really looking forward to the impeachment process the done, even if it takes some time. arkets have moved well ahead of this. just looking at the flows going into was ill, it is a remarkable story. matt: it is. you can already see this because

-- is up 16%. the brazilian royale is a real killer in the currencies. this is an etf that tracks hedge funds in was ill. you can see that the flows were all over the place. but up 20% in march. so money is just pouring in to brazil. jonathan: listening to that story, the amount of money going into brazil, is it better to travel fan arise for the markets? as we are not clear what comes next. what the government will look like. we have an indication of what the government would look like? >> it really depends on how the process goes. the first person who takes over after the impeachment would be the vice president. he has been making some comments on what his government would look like. some market friendly names have come up as possible finance

ministers. but we would really need to see what he could do with the government and how much of a consensus he can build in congress to get things done. at this point it is more of getting her out rather than thinking about the next government. david: to your point, the vice president had a recording is played by mistake about what he would say if he took over. it is raising questions about the legitimacy of the process. impeachment doesn't have to do with the economy, it has to do with some accounting thing with state banks? >> that's right. the impeachment process has to do with fiscal maneuvering to close the budget deficit. she did it a lot in the first term but this is specifically to the second term, all last year. maneuvering from last year that she did to bypass congress and allow brazil to get a budget deficit, which breaks

the law. so they argue. vonnie: we are talking about a 9.4% inflation rate and 6% negative gdp growth. at what point does brazil see some relief? we are getting some relief from the currency adjusting from levels where it was very overvalued for many years. so we are getting relief in exports. that a lot of economists don't see a bottom because of the political gridlock. there is a lack of outlook involved and we don't know what is coming next. it is hard to predict when we will rebound. david: thank you very much for joining us today, julia. coming up next, the chesapeake pledges almost everything it does. we'll take a look at the charts coming up on "bloomberg ." ♪

jonathan: this is "bloomberg down to theing you market open. futures are positive, dow futures up 33 points. over in europe, the ftse 100 is giving nothing, trending sideways. under pressure for most of the morning in europe. not good for the luxury sector in the first quarter at least. the dollar-yen is on a seven-day losing streak. can we snap that trend?

t of what repea 108.29 --esterday, that is the longest losing streak since 2012, at least for now. heading towards four-month highs. let's keep it on crude and commodities. chesapeake energy is pledging almost all of its gas buildings and derivatives contracts in order to keep its $4 billion credit line open. matt miller, on the charts, what does all of this mean? matt: it is more than three times their market cap. chesapeake is worth $3 billion in market cap and their debt is $10 billion.

what we have done here is taken this function on the bloomberg network and you can see -- let me move my coffee mug away from the debt line, i'm sorry. it's not coffee. i drink tea. jonathan: carry on, please. matt: this is the revolver that is uncapped. you can see in green, uncapped revolvers. $4 billion and that made the market happy. they awarded the entire company to keep this revolver open. so they have this money until 2019 and they haven't cap any of it yet and that is key. that is why we saw they share jump yesterday and why the yield on their debt dropped. we have that chart if you want to pull it up, here we go. chesapeake debt versus oil prices. you can see the yield on their most traded bonds in white. at one point it was yielding 140

8%, now, 28%. undamentalsgly f looking less ugly but this is a company that is struggling to exist. what is the outlook for chesapeake? matt: it is really tough. they were in natural gas and they switch to oil and albert going back to natural gas and trying to make it with that. jonathan: tough times for to speak. matt miller, enjoy your tv. coming up next, penny pritzker. she will be with us to discuss trade deals and increasing challenges with doing business in china. on "bloomberg ." ♪

david: the largest japanese insurance company will shut down 100,000 jobs after not being profitable.

bank earnings come out to marlin estimates for a 16% tumble. will it be the worst quarter of the year? commerce penny pritzker joins us to talk about the debate on trade agreements and about china. welcome to the second hour of "bloomberg . jon: the numbers are quite remarkable in banking's. the five to discuss alien euro plan to tackle the problem in italy. it's set to be a pretty ugly report a sitting -- season. david: francine it's no fun to a banker right now. vonnie: we will look at what's

going on in the markets. let's get a check of the markets first. n: futures are positive at the moment. the dollar-yen has a seven-day losing streak. u.k. inflation surprised to the upside. it's at a 15 month high. you saw the transportation costs surge in the last month. david: in belgium, authorities

of charged two more men in relation to the brussels bombing and both were involved in rough -- in renting a brussels apartment. the suspected accomplice, 16 victims died the same day appear of suicide bombers killed 16 others. two suspects are being held in several charges including participating with a terrorist group. pro-government sources in syria launching an offensive south of aleppo to take a hilltop village from insurgents. the area has been helped by -- held by groups opposing the government since 2012. a russian helicopter crashed killing two pilots. researchers say the more they learn about the zika virus, the scarier it appears. for're urging more moneys thearch and they believe virus causes defects in fetuses and president obama has sought out $2 billion.

jon:yamura holdings is planning to cut 100,000 positions. hogan is with us as well as michael moore. specific orura- because it's not profitable enough for this many players? >> i think it's a little bit of both ar. bought a lehman's unit and tried to bring it up to scale over the last few years and not being able to succeed.

they remained unprofitable outside of japan over the last few years. you have specific issues with namura but you also have the equities business in europe facing compression on margins, facing lower volumes. there are some issues with pie to driveenough returns for all of the banks in that region. we have been following the european stock market which is had a rough year so far. is that affecting the profitability of all the brokerages? is there less trading going on questio? >> you saw some investors step away and that has caused less a unity in the business and certainly all of the banks locally have talked about trading being down in the first three months of the year.

that drove part of it and some of it is secular issues like the electron application -- electronification in the lower spread products. this is really the final death knell for what was lehman brothers. >> furry much so. what does the banking environment look like in the next five years? >> whether it's european markets or the united states, the markets themselves have been doing poorly. , risk offing risk on and there is popularity around etf investing so single stock investing has compressed and there was no banking business in the first two months of this quarter.

there is also no yield curve and no interest margin. a bank needs that. you've got regulation that continues to pile up and fines are being levied. that typically means it will get better. rationalizeably regulation and markets get less correlated into the second half of this year. typically, it takes a signal by someone. vonnie: it seems to be all about finding your niche. david: there may be a secular issue. is that changing the business and entirely so it won't come back to where was? >> it will but there are a lot of disruptors out there. it has not yet. tesla has taken -- has not

taken over for general motors but eventually it might. we are heading there but not there yet. david: thanks very much. u.s. dollar. the hedge funds are abandoning the dollar's biggest bull run in a generation. matt: this is an incredible chart which shows bullish positions for large investors. to theve been cut down lowest level we have seen in two years or a little bit more. what was once a slamdunk has completely turned around. this says a lot about the future path of the dollar. david: is this all janet yellen?

>> its expectations for janet yellen. meeting,e there is a they have act off on rate hikes until maybe december. that has changed since the beginning of the year. the trade got to be crowded. jon: the fed used the world normalized. >> as you look at the fed, they have two mandates we know about. there are -- they are worried about employment and inflation but then they have to worry about a global economy. it could be currencies or european economies or what china

will do. the problem with having a dual mandate is if you just focus on that, they would have already on it multiple times. since they have to be concerned about the global economy, there are other things that are taken into account. what happens when you talk about no yield curve? >> we would love to say it's time to get into financials. tradingnter banks are at multiple times their value. it may not get better until next year. the search for a yield has gotten a couple of sectors dangerous in terms of valuations. like consumer staples or utility or telecoms, they are up 15% on the year. the yield is lower but they are trading higher. be careful when you are tracing

-- chasing yield. when they get expensive, they will unwind pretty quickly. i think we are there now. jon: that takes it off the back of zero yield. inflation in the u.k. is at a 15 month high. the pound is weaker and inflation expect haitians may well pick up with the pound weakness of it remains. growth expectations to the downside, how does the federal reserve and the bank of england handles this if we get an upside risk to growth -- a downside risk to growth and upside risk to inflation -- >> that's the last thing we need. david: we've been there. >> we have and that's the hardest thing to break up. i don't think we're quite there yet. june 23, they will decide whether to up the rates.

situationt that sorted out, we will probably see normalization of the currency. we will see a modicum of growth in the euro zone but it will take a little while longer. we have a little bit of liftoff of inflation, it's the last thing we have to worry about. the consensus has gone toward the market going for -- fulltilt toward the deflation rate. what is the risk of that being wrong in the fixed income markets? >> we have proven that the market expect tatian when it gets that crowded and becomes consensus, it's leaning the other direction. we are starting to see a modicum of inflation pickup. we saw that at the core level on cpi in the last report and we will get ppi this week. we will back rings out that are volatile. we are only talking about

getting close to 2.5%. it's not hyperinflation. we are not going back to president ford. jon: thank you very much. a big week for bank earnings in the u.s. so what can we expect? we will break it down. we are 18 minutes away from the open -- one hour and 18 minutes from the open. ♪

david: this is your bloomberg business flash with mercedes

forting sales twice as fast the first in a decade. they delivered 13% through march. it says it wants to overtake bmw by 2020. rose nearly sales 10% in march with a strong demand for suvs. nearly 2.1 million sedans, suvs, and minivans were sold last month. that's 9.8% higher than last year. wants to tap growth in southeast asia. it wants to pay $5 million for new shares in lazada. byis currently controlled germany's rocket internet. about let's talk

earnings, specifically bank earnings. u.s. banks will report in the coming days starting with jpmorgan before the bell. financials as recently as august were predicted to see a 2.8 percent gain in the first quarter income are now estimated to suffer a 16% loss. is christinew an.per as well as art hog what are we looking forward to and which banks will do better than others? >> it's not going to be a good quarter. bigrevenue picture for the taxes down but the good news for u.s. banks is it's not as bad as european banks. japanese banks have their own set of problems. the banks doing better our wells fargo which is outperforming since the crisis. consumerused on

lending has paid off for them. the banks that are spread far and wide like citigroup and bank of america have shrunk back to doing less. we have a report today about more job cuts in london from citigroup. some of the worst numbers are expected from goldman sachs which is expected to have a dramatic to klein in revenue because of their reliance on trading and investment banking. david: if we look for one or two factors, is it trading or ipo's? >> it was a terrible investment banking environment. that affect trading as well. it's not the same kind of second market act cavity bringing new things to the market. that seems to be improving in march. it's not enough to help these banks show better numbers and it's bad news for the year. the first quarter tends to be

the best quarter for these banks. if they are having a big decline in the first quarter, it will be harder for them to make it up. i want to visualize the european financials versus the u.s. matt: it's incredibly dramatic area in green, these are the diversified financials. these are the goldman sachs and berkshire hathaway's, the amx's and black rock. blue is the u.s. banks. citibank, wells fargo, bank of america, these are priced to book. in white are the european banks. the red line is 1 which is a good place to put it. european banks are trading for half of their book value but even u.s. banks have dropped under their book values. they are trading at less than 1 price per book. q1 as underlying fears that

europe was coming to the u.s. with fears about energy. how wrong were those fears? >> they are wrong. contagion from european bank problems will not come here. when you look at exposure to energy, people like to say it's like 2008, like the mortgage crisis. they issued high yield debt. it's nowhere close to that. general to mortgages in were 48% of banks that have been exposure. exposure now is between 6-8%. are muchation rates better than they were in 2008. even if we get back to tangible book value come you still won't have a yield curve. >> if you talked the european bank executives, they are

jealous of u.s. banks. they don't have negative rates. fee is still 7% even with all the competition. in europe and asia, you can hardly charge money for that kind of deal. it's with great and the that the european banks look at the u.s. banks. the envyith great in that european banks look at the u.s. banks. wells fargo is trading at a more healthy price to tangible book value. david: as opposed to citibank. >> i think they are at 80. there's quite a big difference. it feels like we are in a vicious circle.

if goldman sachs reports its first quarter hour, we will see more layoffs. >> we have seen some already. they do it more quietly than some of the other banks. you see people start disappearing. nomura-ish ranking the european business and cutting back in america. that.vestor class likes are trying to satisfy clients and employees. and satisfying investors who want different things. vonnie: thank you so much. those earnings kickoff tomorrow. 5.7y announces a five billion loan but is it enough?

that's next.

jon: here is the weather. worse in new york city than the city of london. stay inside and keep your television on bloomberg. vonnie: it's beautiful out there. david: it's dublin weather. jon: from new york to london to italy, italian banks and bankers have come up with a 5 billion euro fund which will be used to help troubled lenders raise capital. those involved say it does not have the adequate capital to solve all the problems but it will essentially be a backstop thatuture capital raising

should revive the italian economy. italian banks of way down italian markets. milan iss now from john faylen. what will this fund achieved? >> short-term, it will try to get some investor confidence back into the banking sector and give the struggling italian banks a mechanism. the details have yet to be revealed, which would allow them to increase their capital and offload the bad loans. t-net can they solve this problem without a substantial infusion of government funds? >> that is the dilemma. the government is already in

contact with russells. -- would brussels. things are positive but three months ago when the government managed to set up a dad bank mechanism with the state guarantee, that took weeks of negotiating. time, they are trying to ensure approval by having a minimal state role. they hope it will work because the basis of this plan is based on private investors. julie:n: thank you for joining us. you want to catch the entire story on bloomberg markets magazine now. ♪

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i did not see that coming. don't deal with disruptions. get better internet installed on your schedule. comcast business. built for business. thank you. ordering chinese food is a very predictable experience. i order b14. i get b14. no surprises. buying business internet, on the other hand, can be a roller coaster white knuckle thrill ride. you're promised one speed. but do you consistently get it? you do with comcast business. it's reliable. just like kung pao fish. thank you, ping. reliably fast internet starts at $59.95 a month. comcast business. built for business. jon: this is a cloudy, washington, d.c. it's an improvement over new york.

the chief economist of the international monetary fund will talk on the world economic outlook. that interview is coming up at 2:00 p.m. eastern time we are about one hour away from the open. seeing a decline of base prices. the survey was looking for a rise in import prices of 1%. maybe not as much inflation as we have seenian the dollar impact currencies a broad. let's get first word news. the navy secretary's

facing off against marine corps female jobs for gender integration. ity want to keep certain battle jobs close to women. up ae sanders is keeping criticism of hillary clinton with wall street. brazilian lawmakers that pushed the president a step closer to impeachment after a committee voted for her to go in the lower house. reached aian reale high on speculation after her denial and says impeachment what an out -- what amount to a coup. foreign trade agreements,

the transpacific partnership, have gotten attention from all presidential candidates and none of it has been favorable. joining us now is penny pritzker, u.s. secretary of commerce. welcome back. liberalizing international trade is not a popular position either in washington are on the campaign trail. give us your best argument for why this is good for the american worker. back, thestep strength of a country is often judged by the strength of its economy. what trade agreements do is allow american companies to sell our goods and services around the world. therefore, it creates jobs in america. i think there is a lot of misunderstanding. agreements dong is give us access to those markets on a level playing field. that's what the transpacific partnership does is give american businesses access to

the fastest-growing marketplace in the world, the asia-pacific region. it's extremely important for our companies to compete in that area. you need to remember that other countries have negotiated about 100 free trade agreements in that region. our companies are at a disadvantage. they are experiencing high tariffs that would be removed if the partnership was in place. david: it strikes me that the economists accept that but that message does not seem to have gotten through to many american people. we see in the presidential campaign this way. what more can be done to persuade the average american worker that this will be good for him or her? >> i think that companies themselves need to explain to their workers that their market is broader than the united

states, 90 5% of customers are outside the united states. his country jobs in depend solely on our ability to export. i think it is incumbent upon business leaders themselves to talk with their employees about the fact about their business. david: talking about the transpacific partnership, it's important for the administration but you've got limited time this year in a presidential election year and both sides of the aisle are not supporting it. how realistic is it too think you can get it through this year? >> i am an optimist and i think we can get it done this year. at the end of the a, putting aside the political rhetoric, the facts are that if american companies don't have access to the fastest-growing markets in the world, we will fall behind in the attic competitive disadvantage. as it relates to the impact on workers, one of the things that

one needs to keep in mind is technologyization and other factors are affecting our workforce. i think trade is being conflated into that issue. we need to separate the issues and say it's important that we help our skilled labor force get the training they need to be competitive. trade agreements also make the american worker more competitive because, in the trade agreements are labor standards that insist elevates we trade with the conditions and pay they have for their own workforce which is extremely important to american competitiveness. david: talk to us about the politics and the process. you've got limited legislative days so as a practical matter, is it realistic to think this will get done in a lame-duck session after the election? >> i'm not the expert on exactly when this will get done.

i think it will get done this year. this is the window for this agreement. back the cover on the trade agreement, you realize how important it is for american companies. but iealization exists think there is a lot of political rhetoric in the way right now. david: let's turn to cuba which is another subject that is important because you visited. where are we on a u.s. companies doing business in cuba? our cuban relationship is one that has evolved. the president has created a policy of engagement. engagement, we now have direct mail and direct flights and more americans can travel to cuba. we have some manufacturing of

occurring there. it's limited. we are limited in what we can do which isbargo something the president has called for congress to lift so we can have greater commercial engagement. right now, you are seeing remittances have become unlimited so you are seeing greater entrepreneurship occurring in cuba. you are seeing some small manufacturing, some act to the t in telecommunications, more and agriculture but there is more that could occur if the embargo were lifted. part of your responsibility is to oversee trade disputes. that there are quite a few involving china.

are we on the brink of a trade war with china? we are not of the brink of a trade war but we need to recognize there is excess capacity in steel throughout the world. that's why the world is coming together next week in the oecd meetings to talk about excess capacity. state-owned enterprises are making investment decisions so they are not necessarily market driven so we need to address that as well. the way our department is addressing enforcement has been very aggressive. that's why you were seeing the countervailing duty cases related to steal at an all-time high. is the united states in act two discussions having to do with trade? >> absolutely, we are in active

to suck russian's -- discussions with china for at least a year and i have been personally engaged as it relates to excess capacity and steel. there is an understanding that the knees to the action taken. this is distorting the world market and having significant impact in the united states. we are also being very aggressive on enforcement so that we can try and make sure we are not intake and advantage of by virtue of excess capacity or dumping into the united states. david: how much is the reduced exacerbated yuan this problem? how much of it as foreign exchange as opposed to structural capacity? i would say structural overcapacity is the most significant challenge. that's why the world is coming

together next week and that's having discussions this week to better understand the factors that are affecting global steel prices as well as factors affecting our steel companies in the united states. david: thank you very much for joining us. let's turn to a morning meeting with a look into cyber security. china is a big concern. what heask keith weiss thinks about spending on security could do going forward. you are looking at a doubling of spending which is a huge market. where can investors take the best advantage of that? way we are looking at the is the facttunity

that security spending will always be attached to any asset. the digital service area expands greatly so the 55 ilium dollars in spending we see today could expand to $128 billion over time. it will probably shift a little bit because current security architecture does not work. they are not very effective in getting the job done and there is not enough human capital and expertise to get it done. people will not fund these ineffective solutions. money will go toward more effective and efficient security ongoing. matt: i think of mcafee. names thate company an like you looks at the most for ingenuity and innovation? >> we look for the companies that will consolidate a lot of the security functionality. they need to bring together point solutions that can now

share data and action across the multiple threat vectors. a company like palo alto networks has been an effective consolidator. they are now going into next generation security platforms. with think they are well-positioned to garner a larger piece of the security budget. a name that has been out of favor for a while would be sym antec. they are one of the largest names. we think that is a good starting point for a security platform. they have a lot of information and investors don't give them a lot of credit about being able to well executed. matt: thanks very much. we will take a quick break and when we come back, brazil is

moving one step closer to impeaching. that is next. ♪

david: i am in the greenroom room and we will have an interview with peter thiel, founder and president and we want to hear what he has to say. jon: we are about 45 minutes away from the open so let's check in with matt miller. matt: let's start with starbucks. deutsche bank is cutting shares of starbucks to a hold from a buy.

has it as ayst cell. to $64ce target was cut from $70. we're not there yet but starbucks shares, they see limited upside. rising ahead of the open after citibank initiated coverage with a buy and a $60 price. pandora's well-positioned in mobile. pandora shares have been crushed, down 40% in 2016 area . corning is spiking. the stock is upgraded to a buy from neutral.

they say now is the time to start buying shares. corning makes glass for a lot of the televisions we'll buy. david: thanks very much. ousseff is one step closer to impeachment. she denies any wrongdoing and says impeachment what amount -- what amount to a coup. real hit a seven-year high and the expectation that she will be impeached. rousseff isthat trying to delegitimize the chance to oust her. >> they say she has committed no crimes necessary for impeachment. they say every other president we have had since the return to democracy has done these sort of fiscal maneuvers which is the basis of the impeachment request. her because oust

she is unpopular and the economy is not doing well. that has been her whole on a defense. vonnie: there's the potential for this to drag on and on. do we need a speedy resolution? the markets have been rallying on the hope the impeachment will go through and hope it will be soon. we have no clarity on whether that will happen. in the loweray house will vote this week and the ghosts of senate and the government can appeal. this could be dragged out in the market likely will not hold this positive mood if it realizes it will take much longer. difficult to say which government comes in next but they will inherit a in economy that had gdp growth of 10%

heading for a deep recession. is it difficult for whoever comes into power? is this economy trapped in a downward trend? >> anybody that comes in after rousseff is facing a difficult situation. a 4% recession and over 3% is expected this year. 0.3$ in 20 17. they need to solve the political gridlock area there are no measures being passed because we're focused on impeachment. brazil, do they look at argentina and say they are turning around or is it a different situation? tend to look don't to argentina but it's an example that they had

unfriendly market policies for years. we could be in that situation but we could also be in a process which takes two or three years to solve itself. vonnie: what proportion of the electorate is in the president's favor? >> a poll that came out over the weekend showed less support for her impeachment, around 60%. want as many people would the vice president of either step down or be impeached. know what the day after the impeachment would look like. jon: thank you very much for joining us. the brazilians don't want to look south for good reason. investor, you probably want that government. david: it's looking good right now.

: but a tough environment. thes have the battle of charts next, 40 minutes away from the open in new york. futures are positive. dollar-yen is the seven-day losing streak. ♪

vonnie: you are watching "bloomberg . it's our fame it -- favorite time of day, battle of the charts. joe: i am looking at slightly ominous news for the u.s. labor optimismom the nfib

survey. how the economy and the credit and labor market is. asks if you are planning to hire more. it has been going down. lately, it has turned around a little bit meaning fewer businesses have been saying they plan to hire more. unfortunately, that tracks well with the unemployment rate. that's something to watch out to see if the unemployment rate will rise as the survey shows fewer businesses inclined to hire more. i saw the saudi news this morning that this downgrade of and it was said they were late to the party. looked at a graph on cds, the spread of the yield now and back

when oil would -- was at its height in june of 2014. insure againsto the default of saudi arabia when oil was this high as well as reserved. reserves of come down the price of brent has come down so much that the spread took off. as you can see, it was at its highest at the beginning of the moody's andy before s&p were doing their downgrade. now that the spread has gotten tighter, they come out with the news but it's late to the party. vonnie: you have my vote after that. you did not leave meet much choice. jon: i think the other chart is really important and how company profits reconcile with employment growth. when that red headline came across, matt miller started

digging aggressively into the terminal. that chart is about two hours old. i thinkmatt 's is much more attractive. i think joe's chart and the unemployment story has been underreported. can we declare two winners? david: it can be a tie. matt: i don't mind. david: coming up next, the world economic for past from imf. jeffrey rosenberg will join us next. ♪

nomura is getting out of its european equities business.

joining us this hour is black rocks jeffrey rosenberg. we are 30 minutes from the opening bell in new york and this is "bloomberg . jon: breaking news from the imf, they cut their 2016 global growth forecast to 3.2%. let's bring in jeffrey rosenberg fixed income strategist from

black rock. your thoughts on this initial reading? don't think there is a huge surprise. the market was expecting them to cut their forecast. they've got a consistent track record of cutting forecast. crisis what the post growth environment has been all about. were looking for a bigger recovery and there is a lot of disappointment and we see that again for this year. they are cutting for next year as well. they hoped growth would pick up in the u.s. and drive the rest of the global economy. they cut that to 2.4%. what's your forecast of growth in this country? this is the more near-term

conversation. the big swing in terms of growth expect tatian is occurring around the u.s. consumer. we will get u.s. retail sales. consumption read on and it will begin to get us out of these first quarter whether related, seasonal related impacts to the data that of some people dismissing weakness and waiting for second quarter rebound. here is thatlity does not show up and you are seeing a little of that negativity around the imf report. let's get a quick market check. futures were positive across the board. it's barely in positive territory. the imf warning, o we expected

this and the dax is only about 1%. a seven-day losing streak on dollar-yen. toasury yields are only up basis points. the big moving crude oil about an hour ago is heading for session lows at $40. are we trading lower on the headline? it seems so. let's get some top news. david: in belgium, authorities have charged two more men with the brussels arming and there were involved with renting a an apartment used by the terrorists. 16 victims died, the same day a pair of suicide bombers killed 16 others at the airport. a push to take back

aleppo from insurgents in syria. elsewhere in syria, russian helicopter crash near a central city killing two people. the u.s. navy secretary is facing off against the marine corps leaders who are resisting the equipment of women for all combat jobs. he will address 300 liters at camp pendleton. marine corps commanders have sought to keep certain infantry in combat jobs closed to women. david: thank you so much. it's time for the three stories that matter to the markets. we're talking about the imf world outlook, nomura and oil. talking about the imf, it is warming of global stagnation. joining us from washington is n as well as jeffrey

rosenberg. got the headline number, what else do we have? >> maybe it's not a big surprise that they cut the forecast but what is surprising is how pervasively pessimistic this report is. across the board, just about every country and region, they cut the forecast. they cut japan and half from 1% growth. they are seeing japan going into a contraction in 2017. u.k. forecast was that because of uncertainty over brexit. the only bright spot was a slight raising of the forecast in china because that country has been coming out a little letter than thought lately. that, the rebounding growth they are predict ring for 2017 hinges on emerging markets having a bounce back.

they give a lot of risk to the outlook. if this happens, things will be worse is the sentiment. these things are less likely to happen then perhaps 50%. is the glass half full? either way, this strikes me as more of a glass half empty report even though they are predicting a rebound. they list a lot of risk and a rebound -- they are practically begging countries to take further fiscal action to the monetary policy loose and consider structural reforms to get growth going in the coming years or else we will slip into secular stagnation. jon: the first question people floors is how

behind the curve is the international monetary fund? forecast, where are the economists on wall street? the median forecast is about 3.3%. hereigh forecast is way up at five point 5% or more. the low forecast you can see as well. one of the problems i have with this is that we are making a forecast one quarter into the year. we have not been doing these numbers yet. we have to make up that difference in the last three quarters which makes this existing forecast questionable from the beginning. >> that's what i was saying is that you had some very weak data coming out of the fourth quarter. secondectations on the quarter data and the imf is

cutting the forecast and that's not a surprise. the market focus will be much to ther the u.s. outlook q2 rebound in many expectations. we had seasonal affects the last five years where q1 is weak and q2 is strong and that is been blamed on winter weather. we had a warm winter weather so where's that effect. people are right -- are relying on the seasonal effect. they wanted to explain with a first quarter and hope or this strong second quarter. the markets looked -- look at is less at this i am a forecast and more on the high-frequency data we will get but not soon. april date into that had never will be focus on if we q2 response we are looking for? summers talked

about secular stagnation because the imf is echoing that. >> i think we have negative rates because of some deep issues in our economies, the set of issues i have talked about when i talk about secular stagnation having to do with the chronic excess of saving. over investments. david: this goes to his theory that the imf is now buying into this that there is acceptance and people are saving money rather than spending of which will affect growth area >> he has been talking about that for a long time. there is a debate about whether his perspective is right. when you get to the imf response, we had this persistent slow growth. the issue is what can policy do and what's the right policy description? we will hear more about that i'm sure.

that's the broader backdrop. what can policy do around that or anything at all. larry talks about the need for fiscal policy and infrastructure. that's were the focus should be. giving a global growth forecast is almost impossible but this is the regional breakdown. very pessimistic on china coming into this year. china growth forecast has been raised but it's pessimism on the u.s. people will look at that forecast and say 2.45? matt: the 2016 median forecast from all these sources, that

puts together all of the banks on wall street plus the world bank and the imf and the european commission. it's just too flat. to 2.25 and climbed int -- and back down to 2.2 2018. vonnie: thank you. what do you make of the treasury secretary's comments when it comes to exchange rate policies? the remits long been of the imf. has moved a rate bit to the backdrop enough focus has been on china. what we see in the policy community is a bit of that peddling.

the stability around currency is more important to the outlook then liberalization, free market setting of currencies because of what we saw happen in january and february this year when you saw the currency volatility spread throughout the market. there was a little pullback. on the flipside was the big push back to the doj around their position of ink -- of negative interest rate policies and not having that fully directed at currencies as the core of monetary policy. a couple of mixed messages around there when it comes to global currency matters. jon: thank you very much. do not miss our interview with the imf chief economist later today. ♪

up next, we will break down the markets for you. we will get to some of the big calls on wall street with crude oil trading lower going into the open and noticed up 2/10 of 1%. ♪ th david:raytheon is asking the

government to increase purchases of all missiles weapon. up comes after a $12 million mitchell -- missile was launched. the ford f1 50 score the top

rating in a crash test performed by the insurance industry. they evaluated 2016 models and said only the ford truck received a good rating. google is scaling up its digital skills training program to a comment eight one million africans in the next year. train is planning to 300,000 people in south africa worth 35% of 15-34 euros are jobless. -- year olds are jobless. jon: we are counting you down to the open. futures are off a high. is only upthe dax 1/10 of 1%. crude oil coming off the highs this morning.

third day of gains. we want to look at cable. it's at a 15 month high. let's go to matt miller. let's kick it off with chesapeake, a company in the news today because of the 20% jump we saw yesterday. it tois a note upgrading a whole from a cell so it's no longer a sell for them.

chesapeake as an access to four billion dollars that it did not have before. l brands, lower after a downgrade from goldman sachs. risks to theng victoria's secret sales growth. gobe not as many people will into the stores because of the restructuring and they also see declining mall foot traffic. the big call of the day is starbucks getting a rare downgrade from deutsche bank, cutting shares only to a hold but there are no sells. to 70.ce target was cut

the stock is 6% below its record high. next, we will get jeffrey rosenberg's economic outlook in what risk to the global economy are posing to markets. ♪

vonnie: you are watching "bloomberg . chief fixedk rocks income strategist with us. the fed is taking a dovish tone this month. we saw the import price index coming in lower so it's not exactly hot.

a long will it take? >> it will take a long time and that shift is important. we had china going up and the u.s. going down on that report. about elevating the economic conditions. one of the good news stories if there is any thing is the recognition that what china policy makers did over the course of january and reaction , ande january environment what we saw out of the npc meetings, stimulus measures and credit growth and infrastructure in real estate have all served to stabilize the china economic outlook. what the fed was reacting to was the uncertainty that the outlook had for u.s. domestic conditions. people get confused as to why china should matter.

it does not matter as much as much for the direct economic linkages. the u.s. matters more to the chinese economic outlook than the other way around. it matters in the global financial conditions. days comingive down into this year in equity markets back intoeems confidence levels in the u.s. : how much of that is a sales pitch? the ecb says the same thing. they are not worried about europe. they are worried about what's happening elsewhere. the fed chair cannot say they are worried what's happening in the u.s. economy. that thea recognition economy cannot take 4 hikes? thet's not just as

external events have no connection to the fed. the connection is the impact on the dollar. if the fed is normalizing at a pace of the announcement in december at 4 hikes per year with the rest of the world are weakening and cutting, you get a large dollar response, a stronger dollar. it's a stronger dollar for the rest of the world and that's a very bad outcome. it tightens their financial conditions of makes their economy work less and their indebtedness worse. thatmy point is not the economy can handle it but it feeds back to the economy. it's not just about global economics, it's about markets in the u.s.. . whatey are concerned about

a tightening cycle does the global conditions. the tightening cycle in the u.s. is more of a negative impact when results in a 25% increase in the dollar as it has. to a foreign eight economy, when the debt is denominated in dollars and the value of the dollar goes up, the indebtedness goes up and that's where it takes back into the united states. vonnie: if china is stabilizing, is this the green light for a rate increase? >> not so much for a fed in greece but less of the red and -- not so much for a fed in the globaless conditions. the fed has the window to tighten. most participants are not expecting anything out of april and putting expectations for the fed to hit that window in june but vulnerability is how do they

communicate that? does that take you back into another cycle of dollar strength and commodity price weakness? how they thread that needle of tightening again in june will be tricky. they won't be able to do it subsequently if it kicks off another round of dollar strengthening. jon: thank you very much. we are just ahead of the opening bell. it's less than four minutes to go so let's check on futures. we state positive -- we stay positive. the market open is next. ♪

jon: this is bloomberg go. bases loaded as always on bloomberg go. here with us is jeffrey rosenberg income strategist at black rock.

here is your scorecard. doubt futures up about 21 points. s&p 500 futures up three points. over in europe the dax up around about one third of 1%. ti on a winning streak. 4070 -- 40.78. yields higher in the treasury markets to 1.76%. 10842 dollars yen up by about 4/10 of 1%. the japanese finance minister had to come out with intervention to snap that seven-day losing streak on dollar yen. the crossover to matt miller about 36 seconds into the session for your market open. matt: take a look at the major indexes. looking at green arrows across the board. not substantial.

a three-point gain on the s&p 500. dow jones up 27. this can turn around at any point. i want to take a look at alcoa. we call it a bellwether. it is the kickoff of earning season and it was a really disappointing announcement. it was up about 4% yesterday in anticipation of earnings. it is down 3% now after it cut its outlook for its biggest manufacturing unit. it cut its outlook for 2016. global copper demand. it also cut its outlook -- raised its outlook for supply. it does not look good, the price of copper and alcoa have been falling and it looks like they have further to go. horizon pharmaceuticals although keeping its full-year forecast at least at or above analyst estimates, its first-quarter forecast for sales and earnings even at the high-end is below what the street was looking for.

you see horizon down 16% in today's trade. fasten all shares down today as the as much as 3.5% in first few minutes of the session. the company is reporting disappointing first-quarter gross margin, 49.8% according to steeple nicholas and others on the street area disappointed as the stock falls. jon: thank you very much. some breaking news that crossed the terminal. france set to be selling a total of 9 billion euros to 50 year bonds. prices as early as tuesday. 9 billion euros for 20's and 50's locking in those incredible yell lead -- low yields. to get in on french debt an understanding of where yields are trading. going to the bloomberg, straight to france. you look at the 30 year yield at the moment around

about 1.5%. 1.164%. trading at we have got blackrock us jeffrey rosenberg alongside david westin and vonnie quinn around the bloomberg go table. is that a wise thing to do to push it out and lock i low yields? jeff: when you have such low interest-rate a makes a lot of sense to lock in those low rates. you have seen that in other countries as well. i think when it comes to the issue of perspective that is certainly something that makes sense. for listeners this is about the investors perspective area doesn't make sense to move out .our portfolio in this case what we were talking about before, this downbeat message from the imf, the overall cutting of local growth expectations. disappointment in terms of growth and in terms of this fear of inflation which is really what you fear when you go out

that far. the backdrop year is we are still struggling with the global beef relation area environment. in such -- deflationary environment. in such an environment, the curve offer some value. we prefer the longer end of the curve in the u.s. because you get higher yields than what you can get in europe. for european investors who are struggling with the avoidance of negative interest rates, you can see why they are having a lower level of interest rates whereas here in the u.s. we have a higher level. it makes the attraction of u.s. global interest rates when viewed in a global context, -- david: i knew there was a 50 year french bond. it strikes me to come back to the larger picture of growth or no growth. larry summers -- christine lagarde said some countries who can go in and borrow long-term money at really good prices to invest in infrastructure, that is what will get growth growing again.

it depends on what -- this is what christine lagarde and others have been urging. jeff: when we go away from the financing side it is about what are you doing with the money and how is fiscal policy running. the big debate in europe and you have heard it every time mario draghi says we are going to help out on monetary policy, but without help on fiscal and structural, monetary policy cannot do it by itself. i think what we will see as we get to more of the limitations of how much further monetary policy can go is what can fiscal and structural reform do and do we see the structural reforms. vonnie: who is buying this paper? are you guys buying any sovereign european credit? the 10 year in france -44 basis point is so distorted at this point. jeff: to understand the distortion of negative rates and negative rates out the yield curve you have to understand from the perspective that it is impossible for him large

institutions to take their money out of a negative yielding system. for small deposits we can take 20,000 euros. you can put it in the mattress. for large deposits when you cannot take it out of the system , you are looking for alternative cash like instruments. the flattening of the yield curve, the collapse in yields you see throughout the eurozone is a reflection of people leaving negative yield rate and moving to the next closest alternative which is moving out the yield curve so you see the negative yield curves move out to 10 years and beyond. that is where you see a 50 year issue. there is demand from the long and, the typical long and investors, who need that long and duration but yields have been pushed down because they're getting competition from negative interest rates. jon: selling off right now. 30 years up, seven basis points to 1.488% in france. from an investor's perspective, i am hungry for yield. you're going to push me out along the

curve. not many people at this point will but let's say i will. i'm taking a lot of risk the next 30 to 50 years with a yield at 1.5%. jeff: when you think about it from the very long-term perspective, particularly when you talk about these kinds of maturity, what is the evolution of interest rate and inflation over that time horizon? what drives these yields today is not the 50 year investment outlook. it's the three month to six month to one year investment outlook and we have to add one other point which is the value of these investments is not taken in isolation. the value of investments is how do they fit within a portfolio. for many investors buying fifty-year assets it is against fifty-year liabilities so they are not taking that directional view on interest rates. they are taking risk off the table. vonnie: matt is going to show us what is facing investors now. matt: looking at the yield curve here and plotting a redline along zero. you can see at 20 it is only 1%.

out at 50 it is less than 1%. some people might wonder why not sell as much debt as you can at these levels. if you check out et bb we can see that france is the second biggest market for european -- they like to keep the proportion of their buying similar to the proportion of the countries that have things to sell. the ecb will be a big piece of the buyers here. 50. the ecb cannot buy they by two for 30. it goes back your point or udf to think about what is happening elsewhere. buying a big chunk somewhere in the tens as your average maturity. you know investors will still be there and the demand will still be there. the expectancy more of the things we think from france today? jeff: i'm not sure if we will see the expansion of that. i'm not sure what is behind the

story of france's issuance. each office has a different perspective. a flipside to moving out the curve, when we were just looking at the curve, it increases your short run interest rate cost. you have other countries who take a different perspective where it is a more short-term perspective, not looking at locking in historical levels but rather to minimize today's interest expense that pulls maturities shorter. in a very upwardly sloped yield curve you minimize your interest expense today by issuing shorter on the curve. i think you have some differences in terms of how each country pursuits it. david: it make perfect sense if you are an investor. the question is, what is the alternative. why isn't the alternative to go to u.s. treasuries which has better payments than french bonds? why not just say i want u.s. treasuries? jeff: i tried to make the point

earlier that -- think about this for euro denominated investors. in a euro denominated space when you have cash that is in euros you face a negative deposit rate. staying within the currency them forces you to move curb. when i start taking about global considerations the u.s. yields look more attractive but now i introduce a new risk into my investor portfolio. i introduce currency risk. vonnie: so many corporations in europe are issuing debt. thank you to chief income strategist jeffrey rosenberg for being with us this entire hour. we take a look at earnings season as major banks begin announcing their earnings. ♪

matt: our new green room. later today's emily chang emily -- linda conference in san francisco. it conference in san francisco. david: the international monetary fund is warning of a prolonged until of slow growth. raising the risk of global stagnation. the imf says the world economy will grow 3.2% this year. to cap growthking in southeast asia. the retail behemoth has agreed to buy control of lozada group four $1 billion. out a bottle says it will pay $500 million for new shares and also by stock from existing investors. lozada is currently controlled

by germany's rocket internet. rbc capital markets, leaving the bank as according to a person familiar with the matter. he joined rbc in 2014 from standard chartered bank. 14 minutes into the stock trading day in new york city. let's get a check on stocks moving at the open. matt: some of the big movers here. starbucks got a downgrade to a hold only but not a lot. there are no cells of about 30 analysts to cover the stock. down 3%. an incredible run in the analysts at deutsche bank say it's fair value right now. he has a $54 price target. about fair value their. let's take a look at pandora right now. we have been talking about pandora which has had real problems, down i think 60%

already this year. it has not been up longer. it got an upgrade so you see pandora looking at more than 1% gain. citigroup coming out and saying it is time to buy the stock with a $16 price target. still double what we are looking at now. one of the most interesting stories, i have to admit i poo pooed chesapeake and thought it is dead meat. actually, amazing story. they mortgaged entire company. get hold of a $4 billion credit line through 2019. chesapeake investors gained a lot of faith back area up 20% yesterday up another 17% today. this is a company with a ceo that keeps pulling the rabbit out of the hat and if they can continue to do that and wade through lower prices, they can actually survive.

vonnie: he is giving the hat with a rabbit in it to the bank. david: mullally and ford, mortgaged the whole company and it saved the company. matt: we did not know times were tough yet when he did that. that is for thought. -- that is for thought. vonnie: abigail doolittle taking a look at tech companies moving in the first few minutes of trading. abigail: trading lower in reaction or sympathy to a first-quarter sales miss from juniper networks. cisco systems am of the 800 pound gorilla or giant in the networking space. shares are lower dragging the most at the nasdaq at this .oint. corporate demand last week merrill lynch downgraded cisco to a neutral from a by. it appears the sellers may push shares of cisco systems toward support near $23. another networking stock trading lower on the juniper missed is sf i. 9% short interest.

michael genovese did trim estimates and similar to cisco the stock is in a trading range and appears to be moving toward the bottom near $70 per share. earnings season kicked off after the bell yesterday. it was not pretty. analysts forecasting the largest drop in first-quarter profits since 2010. is withenning and walsh us. also, jeffrey rosenberg. kevin, what is going on with earnings season? kevin: out: not get off to a great start. i think so many companies and analysts have revised estimates downward. such pessimism heading into this earnings season that this sets us up for positive earnings surprises. generally we anticipate a 70% beat rate with earnings estimates every quarter. i think we could be in the 75% plus range aced upon revised

estimates. i think earnings will be great, no. i think earnings will be better toward the second half of the year, yes. i think that sets the stage for the secular bull market. vonnie: are you casting an argument for catalysts? the first quarter last year we saw the big drop in back to flat and ended the year flat. why should this year be the same? kevin: i think it is different. last year we had weather-related issues that plagued the first quarter. this year we don't necessarily have those issues. we see a rising tide as it relates to the global economic recovery. i understand the imf came out and revised growth estimates downwards this morning but we are still looking at 2% plus in the positive. the risk of a global recession is low so i think it sets the stage for a good second half of the year. jon: i keep pushing this point so push back. the s&p 500 is trading at 17 times forward earnings. don't we need an upside surprise to justify where we are at?

we need upside surprise to justify where we are trading right here, right now. atin: i think we are looking overlooking estimates right now. most analysts expect the second half of the year to be better but i think the baton is going to be passed from u.s. to international development markets as we are seeing. that is where the growth will take place for the second half of this year and heading into 2007. david: one is surprise based on expectations. another is actual levels of earnings. if you've taken it so far down on the downside but you are still down year-over-year it wrecks your price-to-earnings ratio. kevin: i think the real earnings growth will take place during the second half of next year. surprises in the first quarter, maybe second quarter because of lower estimates but the fact that the fed has taken on more of a dovish tone and actually help multinational companies as the dollar gets weaker. vonnie: do we need some kind of inflation hedge? jeff: we are not going to get much on the inflation side so when we look at these earnings

we're talking nominal earnings so it is pulled down by the fact that you don't have a lot of pricing power. i wanted to ask a question. you called it a secular bull market but one of the telltale signs of getting towards the end of the bull market is not the surprises but the growth levels. growth in profits has been turning downward or sometime. that's usually a sign that we are getting closer to the end rather than the beginning. i think the secular bull market is starting to run out of steam and this could be the last year. i think we're going to see new leadership in the market coming out of 2016. we have seen value stocks outperform gross stocks. mid-cap outperform large-cap and small-cap area we have seen emerging markets outperform all developed markets u.s. and international including europe. i think this is the year the market leadership changes and we start new opportunities in the market to find value. vonnie: thank you so much to ahn and thanks to

jeffrey rosenberg for being with us this entire hour. coming up its bloomberg markets with betty liu and mark barton. of hours. couple the turnaround expert will be chatting with ari benmosche about his father on the posthumous memoir he has released on the turnaround of aig. that he will be talking to both of those. the cio of brooks mcdonnell will be talking to us about the imf possible growth forecast which is being cut today. the beginning of the u.s. earnings season. o.e for mr. ferr barclays is ending its relationship with the bush premier league. the sponsor for 15 years. barclays is raining and its inventions are yo.

one of the most read stories on the bloomberg today. vonnie: i was wondering why jon was deep into his bloomberg. thank you. [laughter] vonnie: up next we will have final thoughts and a look ahead to what's coming up later today and the week. ♪

jon: this is bloomberg go. let me get you up to speed on where we are with markets. in the u.s. we opened higher and stayed there up a third of 1% on the s&p 500 area dow jones up 4/10 of 1%. going into the closing europe, also in the green. the backs up one third of 1%. we with through the fx market. dollar yen snapping that losing streak. over in the u.k., cable giving up the earlier gains on the earlier gains on a session of 13247 and yield pushing higher.

we are up four basis points on the 10 year to 1.76% moving along with crude up to 40.68. genetic headlines from the imf. we will look at corporate earnings season in the u.s. it kicks off big-time tomorrow when we get earnings from jpmorgan followed on thursday, bank of america and wells fargo. friday, citi. next week it continues with morgan stanley on monday and goldman sachs on tuesday. vonnie: you might have thought it was a quiet week but boys that going to change. other events we are watching, u.s. retail sales out tomorrow. a huge you on that for the u.s. consumers. we will watch that very closely then we get the bank of england rate decision thursday. imf world bank spring meeting kicks off friday in washington. david: emily chang will speak to peter teal and an exclusive interview at noon eastern time today.

imf -- p.m. eastern, jon: you just lift the lid on that imf forecast. u.s. revised lower and china revised up to 6.5% which is where china tells us gdp will come in. vonnie: we had the u.s. economic data. retail sales. jon: a lot of echo data -- a lot ofeco data. that does it from david westin him a vonnie quinn and myself. bloomberg markets continues right here on bloomberg television. ♪

betty: 10:00 a.m. in new york, 3:00 p.m. in london, and 10:00 p.m. in hong kong. i'm betty liu. mark: i mark barton. this is bloomberg markets on bloomberg television.

betty: we are going to take you from new york to london to washington in the next hour. a warning from the imf this morning three at it says global economy could slide into stagnation. it is cutting the outlook for gdp. chief economist saying there is no longer room for error. mark: big news in the banking industry. citigroup and nomura are planning to slash jobs while italy is forming a fund to rescue its troubled banks. -- a: the late posthumous memoir released today. what the former aig chief said about the u.s. government bailout of the insurance giant. how he paid back that money. let's head to th