the yen is dropping the most in seven weeks as the bank of japan ways offering negative rate loads -- as the bank of japan weighs offering negative rate loans to banks. david: welcome to "bloomberg ." i am david westin, with vonnie quinn. jonathan is in london. the cohead of global fixed income, a lot on the plate for him today. blackrock portfolio manager will talk emerging markets with us. mayo,nking analyst mike managing director of cms a americas. jon: what a guess lineup we have. let's get to work. stocks down across the board.

the dax down by about a third of 1% after setting a fresh 2016 high just yesterday. futures firm, dell futures up about 10 points. switch up the board quickly. dollar-yen is up the most. that is a weaker japanese yen on a bloomberg report that the boj may offer banks loans with a negative rate. should that have a fundamental impact on the fx market? we will discuss that later on. crude keeps keeping -- crude keeps creeping higher. shares in alphabet definitely at the top of my list today. biggest loser after -- posted earnings that fell short of analyst estimates. profit margins can be pressured by higher cost for mobile phone customers. they are more costly to get. dramatic advertising technology that is more costly to google to

use, or it had lower margins. alphabet shares, not including today's trop because it has not opened yet, but over the last two weeks they are up 40%. microsoft has had a big run but disappointed on earnings for the first quarter and has had sales in the current quarter that fall shales -- that fall short of analyst estimates. results are being heard by weaknesses in one-time purchases of software. we all used to buy software as the company tries to pivot into cloud and subscription-based products. we all have to pay taxes. microsoft shares are up 30% over the past two weeks. there you see a couple of major tech stocks that are falling premarket. german autos are all down across the board. daimler's diesel engine emissions came under scrutiny after the carmaker was asked why

the u.s. justice department to investigate the certification process of its cars. anything having to do with diesel and emissions ways on -- on sharesons weighs dramatically. volkswagen has been running up, up on the last -- in the last 10 days on the news that the justice department settlement will cost only $10 million. all german carmaker shares are heavily weighing on the dax. speaking of heavy, shares in apple have officially entered a technical bear market territory. that is what we call it when the stock falls 20% from a high that has happened since the high that it hit on february 23 last year. it was at $133, now trading at one -- at 105.97. 44 analysts out of 50 call it a buy.ck -- call it a he also calls google's stock,

out of that, a buy. vonnie: ge out with earnings in the last hour. the effort to transform the company seems to be paying off. shares in the company are lower and ascending. karen uber hearts is here. this is potentially a margin story, because most of the segments beat estimates including oil and gas. flat: margins were from a year ago, the industrial a 40%, 50% gain year-over-year. little short. overall, they have been doing a very good job. wasie: even alstom accretive. i want to read a quote from jeff immelt.

a stronger ge is on track to meet investor goals for 2016. you say that things are getting simpler? 12.8 compares against different number. it was 14.5, and the 17% is for the year. the first quarter is also the lowest quarter in terms of margins. they can still make that 17%. vonnie: talk about the shift to digital. it announced today a partnership with oracle. bign: i think that is a deal. it is hard to move the needle on ge. it is growing at over 20%. we have done work on it with the software analyst, and he believes they are going to be a player. i do, too. funny cup we will keep an eye on that stock -- vonnie: we will keep an eye on that stock. david: we will get more earnings out.

we are looking at mcdonald's and caterpillar. right now we want to turn it over to matt to get an update on where we are on earnings so far. ea,: if you take a look at 123 companies have reported. one of the changes is some energy companies have come out and reported. southwestern, and camera morgan are now out. down 51%. you probably expected energy to do poorly. it has met your expectations. but financials have taken a hit, down 17%. we also see tech stocks that are down 6%. all in all, the companies that one reported are down 6.4% the earnings side. sales, we are seeing some growth here. that is a good thing. the other interesting thing to take away from the ea page, click on the historical analysis chart down here, and you can see

what analysts are forecasting for sales and for earnings going forward. to getorecasts continued taken down, so we expected a big rebound in the second half of 2016. no longer the case. david: we are going to turn to oppenheimer funds portfolio manager. you take a larger view of the economy and markets, but where do you think earnings are taking us at this point? >> from a top-down view on the u.s. economy, we have a hard time seeing earnings growth accelerate much from here. we are at the later stages of the business cycle. we are in a slowdown regime for the u.s. economy, which means we are still growing at a potential, but we are decelerating. the real problem, nominal gdp growth at best has been 4%. when you are at that low nominal gdp growth, it is hard to get meaningful higher earnings

growth from here. we feel that the stock market is valued to slightly extensive on a pe basis. if your multiple expansion can happen through more monetized stimulus, at this point you have much more upset in the stock market. you need the earnings growth. david: what about the relative strength or weakness of the u.s. dollar? now the dollar has come off some of the highs. shouldn't that help earnings? alessio: where we could get the biggest upset surprise, and what i just said could be wrong, is through the external sector, whether through the u.s. dollar -- we had a two-speed economy, the manufacturing sector suffering because of the dollar and the consumer sector into suction doing much better. surprisenk the upset could come from abroad, especially as we see some green

shoots in emerging market. if the manufacturing powerhouse from outside the u.s. -- asia -- is that picks up, we could see weakening of the dollar as a result because of more portfolio flows through emerging markets. weakening of the dollar strengthening external demand. but in that environment, i would feel more comfortable with them owning emerging markets -- emerging equities directly than u.s. equities. jon: you do not see the potential for higher earnings or further pe multiple expansion. you tie that together -- on a balance of risk, is this a bump along the top for a while longer? alessio: i think we could hang around here for a while. latter, aobably the balm for a little longer. but eventually, i see more downside risk for developed equities in general.

emerging markets have rice more of the bet deals related to dollar strength and commodity prices. jon: do you think you have to withat the relative value emerging-market stocks versus developed market stocks? is that where the performance was in the first quarter and get out of stocks and follow the money? withio: i am going into q2 the thought that that relative value, e.m. versus to let equities. we are seeing wage pressures in the u.s., and if we get weakening of the dollar and trades,ily deflationary especially with the bouncing back up in commodity prices, bonds will have a hard time. i do not think q1 for bonds was great -- i mean, q1 for bonds was great, but it will not be a momentum indicator for q2 at this stage. david: alessio de longis, thank you very much.

vonnie quinn, we have some first word? vonnie: one and 150 companies signing the paris accord of the united nations. countries have agreed to reduce fossil fuel in missions by changing the way -- to reduce fossil fuel emissions by changing the way they power factories and fuel their cars. and the president will have lunch today with queen elizabeth ii. he met leslie with -- he will meet with the prime minister later today. in an opinion article for "the telegraph," mr. obama wrote, "the european union does not moderate british influence, it magnifies it." global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus fighting wordsd, from the president. the queen will not be allowed to weigh in on this, will she? time,n about 24 minutes'

he will get on marine one and head over to windsor castle, where he will have lunch with the queen. coming up, though, back to the markets. japanese stocks up, the yen down. the bank could be talking about taking their interest rates policy one step further to loans. details next. ♪

vonnie: this is "bloomberg ." -- maker of mercedes-benz is daimler says it was asked by the u.s. justice department to certificatione process of its diesel cars.

there is a complaint that mercedes-benz violated the u.s. --missions standards, but u.s. emissions standards, but the company says it is baseless. says damage from the earthquake in japan may hurt its operating. seven months after apple launched its movie service in china, it has been shut down. china just impose new regulations on content. offering loans with a negative interest rate. the yen has dropped seven weeks against the dollar. i am happy to bring in our international correspondent, simon kennedy, in the city of london. let's go over the plan that may

be implemented in japan. any idea what the -- what they're going to do? simon: the idea that bankers can go to the bank of japan and borrow from it and that at some point they might get a negative interest rate on those loans -- jon: the pushback on this plan is similar to the pushback on the ecb's plan, but even more companiesapanese sitting on a pile of cash. it is a demand problem, isn't it? simon: a lot of people will say that it is not a problem with the supply of money, it is that there is no demand for it. and consumers need to take the money there. has is a problem that arisen for negative interest rates. jon: this is not about rates, this is not about the expansion of money supply or the balance sheet, it is all just about an

adjustment of the price of money to banks. simon: unless this is part of a package. be idea that they might going more deeply into negative territory there on the main rates. be adea that this would carrot for the stick of other things, that is what is pushing down value. jon: next week, more banks anticipate more action from the boj. is this the only option they have got, that they had to do something like the ecb is doing? that: you get the sense they cannot not do anything. it is a fixed like draghi has faced in the past. they deliver, the market punishes them. -- it is lesser of too the lesser of two evils. david: i want to bring you in here. the bank of japan and the ecb and the fed, it seems to be a big -- a move away from negative

rates come a form of qe. what does that do to the fed, ultimately? alessio: in europe, they are trying the negative rates that fireback, so there is this issue that at this stage -- and this goes back to what jonathan was saying -- without enough credit, this a compass is little. in the case of the bank of japan in particular, part of a package that may actually weaken the yen and get a little bit of pressure on the other side, combined with fiscal policy, there is some talk that they may postpone or -- there wouldon be physical expansion -- there would be fiscal expansion. you would address partially the lack of demand for credit on the economics side of it, as well as make it more effective on the weakening of the yen. how doable that is? if the private sector does not come in with a demand for

credit, this is buying time. jon: from the boj to the ecb, the ecb buying time -- he was so defensive yesterday. did he give germany a big enough slap down? simon: it was a lesson that the more you go on, the more i will have to do this policy that you do not like. that was a shot across the about of germany. kennedy, thank you very much for joining us. david: please stay with a spirit we are going to turn next to the fallout from volkswagen's in missions -- volkswagens emissions scandal. we will bring you from the that we will bring you the latest from their headquarters in germany. on "bloomberg ." ♪

jon: four hours, 21 minutes into the session in your. stocks down across the board.

the dax up by 1/10 of 1%. the ftse, down by 9/10 of 1%. switch of the board quickly. dollar-yen, on the back of the report here that the central bank may offer loans with a negative rate. that has weakened the yen at 110.62. $.47.bucks david: we are going across the channel to the continent, to germany, as volkswagen's supervisory board is holding a crucial meeting on the state of the investigations into their emissions scandal. compensating consumers in a $10 billion deal. ryan chilcote joins us from wolfsburg, germany. what are we expecting from this news conference today? ryan: we are expecting to hear

what the results of that conversation has been. they have been in there for hours. one thing we expect is how much money they have to set aside that they have to pay. but then they have to decide on this $10 billion as part of this deal with the department of justice. the actual provision that they take today may differ from the bat. we are also going -- may differ from that. they are also going to discuss bonuses, and how much shareholders can count on in terms of dividend. how much money they can get back. those are three big questions we will get answers to at this press conference. david: the hits keep on coming with german automakers. we have a daimler story today. tell us about that. ryan: even more recently, there is a report out now that the german government may recall as many as 600,000 cars on the back of emissions concern. the daimler story, daimler came

up with earnings that beat expectations to get a share price down. why, because we also learned that overnight daimler is cooperating with the department of justice, the investigation into how they certify their emissions with the department of justice. saying, asked daimler to investigate the certification of their emissions process. there cfo was on and he hasonded to one suit that been filed by a gentleman in illinois, claiming that some of the clean diesel mercedes are not quite as clean as we all thought they were. he said he thought that suit was groundless. but investors are concerned, and we have heard problems with other european carmakers. david: those pesky lawyers. ryan chilcote is our own bloomberg colleague. let's go to matt miller. a couple of notes from analysts today. amex kicks it off, entering friday on a four-day winning streak, up roughly 6%, on pace to the best week of gains in

nearly three years. the shares are down today, after deutsche bank cut amex to a hold from a buy, saying rising expectations limit upside. also, shares of the cell are falling as they agreed -- shares of visa are falling. the deal may not be completed until june 30. visa is going to boost the cash consideration in europe to almost $2 billion, replacing a performance based component of the originally agreed purchase terms. now prepare to have your minds blown. coca-cola could be the next big target for ab inbev to create megabev. recentlyt says abi mentioned a new incentive plan called 2020. pro forma mega brew would have $26 billion of consolidated revenue in last year's plans

paired that leaves a gap of $44 billion, which would need to be bridged, with coke coming in at 44th -- at $44 billion of sales last year. starbucks posted earnings that missed estimates, revenue that missed estimates. it rose 10% to $5 billion by the end of the quarter, but that missed the average production of $.53 billion. vonnie: coming up on "bloomberg obama landed in london last night, hoping that he could help keep britain in the european union. why tension is building, next.

>> good day from the city of london. the ftse 100 down by 1.4 percentage points. markets andon the

what is happening in the u k, but first let's get to vonnie quinn with first word news. insidersop republican have been told that it is a net. has sent runner emissaries to ease tensions with party leaders. trump will raise money for the party if he is the nominee. -- moren 17 years ago than 70 years ago, a u.s. nuclear bomb devastated the city of hiroshima. reportsusiness daily president obama will be the first sitting president to visit the city. president is in london now, meeting with the clean, followed ,y -- meeting with the queen followed by a meeting with david

cameron. japan has been the fourth country to test fly new planes. the government has not decided whether to put the planes in production. , the built by mitsubishi one that built the zero plane in world war ii. and breaking news now on caterpillar. matt: caterpillar out with earnings that missed estimates. $.67, meeting in the estimate of $.68. it is cutting the high end of its year and sales of you. $643 quarter revenue at million. -- t quarter project per share, $.67. analysts were looking for $.68. $9.46 billion of revenue in the first quarter. slightly eating but cutting its first year -- slightly eating

but cutting its first year view. looking for stocks to come down. now down 3.4% in the premarket. getting beaten up in london as well. in the u k, attention on the president. president obama landing in the city of london yesterday, hoping to urge the u.k. to stay in the eu, which is causing controversy. francine lacqua joins us now. if you cast your mind back to the referendums, it is the first time in living memory, we see a sitting president writing in an op-ed. he says do not mess this up. he says he does not want this to mess up the trade relationship. a lot of is -- a lot of people surprised --ot

this is economics and math. if the u.k. leaves, it will affect trade with the u.s., argue willrexiters get us closer to the u.s. jon: and the daily telegraph is some part -- is somewhat sympathetic to the brexit. and then the most conservative newspaper on brexit, the sun. also has an op-ed today. it is a scathing one of this kind of intervention from the president. francine: this goes back to the rule britannia sentiment in the past generation. if you are president obama and , tode to write an op-ed intervene to let the people of the u.k. know what i think about this referendum, you will on air

force one and think these are my allies and friends. the europeans love me. the u.k. used to love me. then you see so much acrimony heateddid debate and -- debate and hate among the party and think why do i get involved? so this is a breathtaking example of do as i say but not as i do. it is incoherent and downright hypocritical. the question on bloomberg radio was who was going to get more isy, the president, who relatively popular, or boris johnson writing in "the sun" on the same day. i would argue that boris gets the most sway. francine: you are probably right. it depends if the 2 million readers of "the sun" vote. is himu wonder if this

thinking it is bad for the u.k. or the president thinking this is a fragile global economy and i am worried about my own country. francine: it is difficult to put figures on it. i spoke to a former bank of england governor. he was attacking christine lagarde for writing on the brits as well. it's like glass, you can break it easily. the real pomp and circumstance is taking place right there. that is marine one, from winfield house, the ambassador's residents, which just landed at windsor castle, because the president will have lunch with the queen. and later, he is invited to kensington palace, hosted by the duke and duchess. jon: i am more excited about the news conference with prime minister cameron and what he has to say. frankly -- francine lacqua,

thank you. vonnie: and the queen should not way into much in politics, but we do not know what is behind closed doors. and the brazilian president is the climateto sign agreement. in the handsazil of someone she has accused of leading the coup against terror, the vice president. landers believes that rouseff's removal will be good for brazil. say you are about halfway invested. why should the vice president be better than dilma rousseff? will: what we need is a change in direction. has failed toseff

get the economy moving in the right direction. we saw currency grow to almost 4.5. inflation is back in double digits for the first time in several years. we need congress to work with executives, and this congress is not willing to work with the president. she has been too involved in the -- we will see if the vice president can put us back in place. vonnie: we should mention you are from sao paulo. will this take years to play out? will: it will be a quick reversal in sentiment. you will see putting a good finance minister in place, who starts to start -- to move back to fiscal responsibility, which will get inflation in the mid to low single digits, can get the

economy going again. in the can get growth next two years, rather in 2020. david: you have ridden brazil top and down. what makes you confident the market has not already priced in the advantages you described? will: we are 65 percent below our u.s. dollar hard. we will not get to those levels anytime soon. the world was in a different place. but when we look at brazil in 2017, forecasts have the chance to go up for the first time in a couple years. that will give us support for equities. yearmonth was the fourth of net loss. this -- what we are seeing is a sign things are

improving. matt: what do you think about valuations relative to other south american stocks? stocks the brazil relative to the line i may or have risen to the highest valuation in the last decade. the: earnings are still in 420 range. in a while,t time we will have a earnings being revised, if nothing else that the currency will be stronger. cheapest market in the world, but we know that valuation is not the main driver. so oppenheimer funds, take us into the macro picture of brazil. what is the state of it? >> we second a lot of the thoughts that were just expressed. it ismportantly, while

not necessarily economic change, you see you are now being paid to take risk. with the other london american currencies, it is among the cheapest in the world. you have attractive equity valuations across the board. allin latin america, commodity countries. arctic and not -- are ticking up for the first time. only exports around you and percent of gdp. it is an economy trayvon buy services and the domestic side of the equation. classwe get the middle growing again, that will be the most important thing. vonnie: where is the other 50%? with oil re-stabilizing,

it will get better. mexico has been doing the right things. in peru, elections are coming up in june. it will be great telecom and -- to come ande politics.my and not alessio: columbia looks attractive. chile less. vonnie: we love when guests around the table agree. andnks to will landers alessio de longis. up next, we talked to a wellness investor on "bloomberg ." ♪

matt: i am matt miller. coming up at 8:00 eastern, onathan beinner weighs in the potential of negative loans by the boj. ♪ is "bloomberg ." beat estimates. the company has been transforming its business around manufacturing and software. ge has been selling off large parts of its finance unit.

boeing's pitching several u.s. airlines on a potential upgrade of the smallest version of the 737. delta, isarrier, poised to buy narrowbody planes. aroundand facebook are two thirds of the advertising market last year. initial reports say google spent $30 billion and facebook had $8 billion worth of ads. smaller companies lost market share. david: thanks. one market moving fast is fitness. businesss new york chief jason kelly releases his book. it covers the rise of the wellness movement from the stories of entrepreneurs. one being aarti kapoor. .he is with us here now

i remember when spinning became a big thing. i remember when it was in the new thing. what is the new thing now? tough.that is the new thing comes up every day. there is rowing, boot camp, fusion classes. david: what is a fusion class? aarti: elements of core training , etc. it is hard to keep track. we will talk a little about some of the trends gaining traction. vonnie: it definitely feels like the trend has gone away from yoga and pilates. >> there is an intensity and a wellness implement -- component. things we talked about is this notion of who the consumer is. who is actually driving it. what is the demo. a number of are

driving forces, but women and millennials are the big ones. women control 85% of household spending consistence -- decisions. isy control where the money going and tend to spend higher on beauty, wellness, health, and antiaging. and millennials are hugely influential. they have a distinct set of preferences. they are savvy shoppers. with social media, they research what they are doing. they expect more for what they are getting. 95% of them say wellness is important to them. andiven that millennials women are spending money on this, how do investors eager out what to bet on? -- figure out what to bet on? aarti: the exact thing that investing isrs --

a call -- finding the right horse to back. first, they are concerned about sad risks. and modality has staying power. who can stick around through the waves? who has strong union economics and a prototype that can be replicated? gymse: i was going to ask, are notoriously difficult to keep functioning over a period of years. how do venture capitalist decide what to back? jason: they are wary of going all in on one thing, though cycling is obviously something. talkedf the operators i to for the book said they want some flexibility to go with the next side. -- next fad. ability to invest

or offer different things depending on what their customers want. david: how big is the market? aarti: some will say it is trillions when it comes to wellness, more broadly, what you eat or joining, what -- what you eat or drink. take the 42 billion. how concentrated is that? aarti: the largest health club players, traditionally held the strongest market share. the emergence of a boutique specialty group has been chipping away at it. but that is collectively chipping away at large players, but no one boutique has a large share, because they are still relatively small. to be a large company in the boutique space is still small,

with only one going public. about the interesting shift towards boutiques is that the margins are insane. any of us who have done a flywheel class -- you know how much you are paying. a have talked a lot about soul cycle, 60 bodies in a room paying $35 or $40 per person. willscounts in any meaning -- meaningful way. vonnie: you do have to say you are paying trainers and equipment. a lot of advertising as well. the retention rate really makes it a very high margin business, right? of the type of advertising folks are doing is different. consumer direct to marketing on tv. it is social media and word of mouth. people talking about these grants -- brands. vonnie: so two things have the

potential to hurt this. one is the cost set. you can do it anywhere. you do not need equipment. , howutside major cities will the likes of soul cycle do. questiond is the investors are focused on when they think of scalability. 3ill this work in tier 2 or cities outside the u.s. even. at a couple of folks who have tried to do that. think of the camps opening franchises in nashville and san francisco and austin. there are a noble -- and boston. there are a number of cities. and a competitor has hundreds of locations in tier 2 cities. kapoor and jason kelly, thanks for being here.

preorderjason's "sweat equity" now on amazon. i am expecting a free book from jason kelly. coming up, london's best blue-chip stock. find out which one it is during off the charts. ♪

♪ vonnie: this is "bloomberg . " off the charts. european mining shares off more than 20%. tell us why. there are a number of reasons. chief is the rebound in the underlying commodity. but they have also become much more efficient and gotten hit

harder. ubs out with a note saying anglo-american had gotten a bigger punishment for the drop then it should have and now raised its target price. here are a couple of the big mining stocks. anglo american and glencore. you can see how massively they ine outperformed the ftse the yellow. which is basically a flat line. #btvan get this on the g 1022. what i think is interesting and what hillary pointed out to me and what jamie point out to her and what bloomberg pointed out to him is if you look at analyst targets here, which is the yellow line -- the white line is the price -- you are now starting to see the price come

up far over analyst targets. the share price has left analysts in the dust. you can see these spread. they have a lot of catching up to do. we are seeing notes, out today -- notes calm out today raising estimates. vonnie: they want to. matt: exactly. look how many cells there are. coming up, noted analyst mike mayo has a note for bank executives. something they may not want to hear. details, next. ♪

vonnie: earnings disappointments. microsoft, and caterpillar falling in the premarket following their quarterly report. earnings from mcdonald's -- we

are live with the latest. and why wall street executives may have to wait at least four years to collect most of their bonus. ♪ vonnie: welcome to the second hour of "bloomberg ." way david westin and jonathan ferro. earningsnt to go to from mcdonald's. in terms ofeat growth. sales in the u.s. and revenue also beat. for across the board mcdonald's. and we have an analyst on the line. joining us is will slabaugh oh, though with a target price of

$175 on mcdonald's. t across the board. do you see anything negative? will: no. as expectations began rising during the quarter, it is still in line or better than what was expected. really impressive. vonnie: is this thanks to the expansion of breakfast offerings? isl: all day breakfast something we have heard as being a big driver. 2 forhe mcpick 2 and the 5. we heard the 2 for 2 was not as strong. a combo of all-day breakfast and the 2 for 5 drove traffic. want to asklso

heard fasthich has food. but he has not heard mcdonald's as much. heard --one has really are is something investors taking a second look at and getting excited about. the path benefit down we have not seen in a couple of years. vonnie: will slabaugh, thank you. we want to get a check on the broader market now. jon: outside mcdonald's, we had a couple misses. futures staying in positive territory. dow futures up by about 12 points. s&p up barely three. in london, the miners taking a beating. great on the year but not on the section. down by 1.4% on the ftse.

a commodity story. , looking for to half that to 35. so metals and iron ore taking a beating. but the crude up. that's the mover. dollar-yen up. the back of a report. the boj may move to lend money to banks with a negative rate. and the fx market is churning on the back of it. let's get to matt miller for stocks to watch. and generalillar electric will way down. the red.s in lowered earnings and sales

forecast for the year. investors don't like that. ge, despite topping estimates, in the red. questions are raised about their ability to meet full-year estimates. and honeywell down a little -- just about 2/10 of 1%. it is first quarter -- its first -- its as the mean first-quarter earnings also went up, but it is moving in sympathy. in plastic, visa and amex in the red. the top end of its revenue forecast, setting a weaker global economy -- exciting a weaker global economy. no longerhe bank saying by the shares. -- buy the shares. weighing on the

session. alphabetreported -- reported missing earnings -- missing estimates. the margins are compressed. microsoft took a step backwards. reporting third-quarter earnings that missed analyst estimates because of a higher tax rate. disappointments are cross of the dow jones industrial average. david: a few upsides as well. matt: mcdonald's. david: right. hern's stocks jumped to there was news that the bank of japan is mulling over negative rates. joining us is jonathan beinner. you talked about how the central banks are adjusting their approaches, with the fed acting off a number of rate increases,

the ecb moving to quantitative easing. is that what the bank of japan is thinking of doing? jonathan: it is. basically, if it will not work to pay banks a negative rate, why not try the opposite? where is banks borrow, they receive a negative rate. david: sort of a carrot and stick. exactly. escatly -- they are not really passing it through to end-users. so it hurts the banks and hurts risk sentiment. you saw markets when the bank of japan when negative on the deposit rate. the yen rallied -- markets did not like it. so rather than try to take your rates down and weaken your

currency versus everyone else, tried to make it easier for the banks and cost less for the banks to lend in the real economy. say toit is one thing to a bank that you ought to loan. talk about the mechanism, which does not seem to work well. jonathan: that is going to be a challenge in europe, with the policy they are putting up with the tltro. it will be a challenge of the bank of japan goes through with it. central bankers are saying we need to get inflation to the 2% target. big way missing in a and going in the wrong direction. they need to be policy. this is a policy they think, at the margin, can get a are aware that may be would not have our money before and you make it more appealing and get more demand.

but will a bac change, i do not think so. >> you run fixed income. you see these policies in japan -- stocks rally. what does it mean for credit? jonathan: it is probably good for credit. the sentiment is generally more favorable on the back of this news. if you go to an environment of less about her see war, less about trying to weaken your , but trying to lessen the market impact, the volatility spikes we have seen from more aggressive policies, and try to stimulate domestic demand, that should be good for overall growth and trying to avoid some of these surprises that have backfired and created volatility. and volatility is not good for assets. when you think of the credit market, as long as we can have relatively benign growth outlook

and a policy outlook that will be less susceptible to creating market shocks, that should be good for risk assets broadly and credit markets specifically. reallywonder if we understand what the central banks are doing, more specifically the ecb. buried in details released yesterday was that they your system will do due diligence procedures on an ongoing basis. that tells me they could be sellers at some point. jonathan: we are a little skeptical about that. that is a theory. the ecb,at the fed, the bank of japan -- their balance sheets have gone out. policy thats as a will keep inflation from falling and have a positive effect on the real economy. we are skeptical these talents sheets are not only going to go out -- these balance sheets are

not only going to go up. they may just reinvest. that is what you see in the u.s. the fed has moved to a tighter policy -- still aggressive -- but they are reinvesting the cash flows. the original plan was to sell. they say they may let it wind down over time. that is -- the most negative outcome is that they let it wind down rather than selling assets. fed the point is that the was buying treasuries, not corporate credit. the ecb will buy corporate credit. really appreciate how effective these programs will be and how it will play out in the come?to jonathan: all of these policies are experimental in some sense. these are aggressive policies. they are consistent with an ugly outlook in terms of growth and

inflation. a central bankers have set we will do what is needed to achieve inflation goals. they are being aggressive and it is not clear what the end will be with all of these. --n you talk about stimulus everyone loves stimulus. fiscal, monetary. they do not like the ending of stimulus, because it seems like the opposite of stimulus. they will take risk in the corporate bond market. in japan, they are buying equities. that may be part of the program as well. there is risk and political risk associated, but in the near term, it will put a positive emphasis on risk markets and probably continue to dampen volatility. vonnie: is the bank of japan learning a lot about communication. we have a report that it is thinking about doing something. jonathan: it used to be the case

bazooka, to of the shock the market -- shock and awe. we have been at this so long ist shock and awe backfiring. so you want more transparency, you want to get the market prepared for policy change. david: jonathan beinner of goldman sachs, you will be saying. jon: thank you. coming up, currency wars as the yen weakens to the dollar. ♪

vonnie: this is "bloomberg ."

the maker of mining and construction equipment is cutting forecasts. caterpillar was hurt by slumping demand. the company is eliminating 10,000 jobs and shedding factories. american airlines' first quarter beatts be estimates -- estimates. demand for domestic travel stayed strong. to atf says it may have restructure british units. douglas flint says hsbc has the ng staff to paris if needed. the market. the yen weakening against the dollar. the bank of japan is said to be iming it possible negative rate

on loans. this having an impact on the yen. still with us is jonathan beinner, goldman sachs asset manager cio of fixed income. note highlighting an end to currency wars. that agreement people suspect to happen in china. it is happening to some degree. the bank of japan is not happy the yen has rallied so much. i am sure they are happy it is weakening a little today. against theue export sector. but this idea that central banks will get growth out of exporting weak currency, all their neighbors really is not working. if everyone is trying to do it at the same time, who are you outcompeting? before, it creates

market uncertainty and volatility, which can however negative impact. it is happening to some degree. given how much of the yen has rallied in the past, you would have seen direct intervention in the currency markets are the central bank, and you are not seeing it. see thatikely you will unless you see the young really strengthened. yen really strengthen. the central bank focused on trying to increase domestic demand and activity. ecp just cut the depot a month ago to -40 basis points. that is really aimed at the fx channel. a lot of verbal intervention. the chief cap at secretary, the central bank. is it the end of a currency war

or their effectiveness to affect currency that has diminished? jonathan: it is not everyone -- it isice, it is not just not working. japanese policymakers would love to see the yen weaker. the fact that they are talking it down or saying they are noticing the yen is strengthening and they are not pleased with that, that is not surprising. but the specific policies that in the past would have been an outright -- trying to do base your currency, those policies have gone to the wayside. now focusing on lending and interest rates. those things, at the margin, should be trying to create inflation and in some sense, databasing -- debasing your currency. u.s. 10 year yield

moved up to 1.70%. how much is that impacting global sovereign curves? argentina has a new curve now. jonathan: the u.s. is in a different part of their cycle. the fed does want to normalize policy. they also a struggle because of this linkage. likange --y where there is a negative feedback loop. to a muchpointed slower tightening cycle in the u.s. but inflation in the u.s. is rising. we think you will get to that target starting into next year. clearly, capital markets are so linked these days, the ability of interest rates in the u.s. to

go significantly higher when the ecb and bank of japan has negative rates, there is limitation there. you are seeing it in the curve. but interest rates could continue to go higher in the u.s. vonnie: 10 year forecast? jonathan: we used to see 3% plus. we threw in the towel on that in the near term. we do not see a huge leap, given where we are now. by the fed probably will tighten. the market has taken all of the tightening this year. they are likely to tighten at least once, possibly even twice. pressure,put upward but you are seeing demand outside the u.s. for u.s. fixed income. that will put limitation. argentina, that is exciting. they are back in the market. with $15 going to come

billion debt. people were like can you do it? it is not a problem. we are excited they are back and capital markets. and emerging markets are actually doing better than developed markets. jonathan blinder, thank you. blinder -- jonathan beinner, thank you. vonnie: and we will talk to mike mayo, coming up on "bloomberg ." ♪

david: we are all over an hour away from opening bell. what are analyst say and -- saying? matt: changes due to earnings.

amd sorin. agreeing tor license chip technology to china. amd also beating estimates for the current quarter. sending shares to a 52 ahead of the open. thatt you point this out this company was doing well where intel was having trouble? david: just because i do not understand. matt: they are taking shares of graphic processing software is an cpu. and mcdonald's. first-quarter profits beat analyst estimates as customers route of old in their ability to eat breakfast for dinner. now they are doing it with hash

and you can pick two items from this menu and get 2. estimate is not warming donald came out. in thear shares higher u.s. analysts were looking for a four point 6% gain. shares opened just below a record high. i am gladn i just say they did not, because they would have had the best eddie murphy sketches other. when he went to the breakfast -- matt: i thought it was buckwheat. airlines, another earnings story. jet fuel prices fell to a decade low. $1.25. to

all for them out of the u.s. airlines have beaten. and jonathan beinner, where are you liking in the world now? thethan: it is hard to say fixed income market is cheap. have some long positions, but some of our positions are on the short side. on the long side, we have been talking about low volatility. the credit markets probably have more room to run. where we like shorts is short rates in the u.s. and japan. you so much to jonathan beinner of goldman sachs. coming up, major changes to wall street bonuses. we dive into that with mike mayo. ♪

♪ this is "bloomberg ." let's go to matt miller. matt: there were recalls that

germany was going to recall 30,000 cars. now they say they are going to do it voluntarily. audi, talking about porsche, and volkswagen. mercedes as well, we have been talking about the sox getting crushed today -- stocks getting crushed today. and opal is what chevrolet is , so all ofermany those cars are going to issue voluntary recalls in order to address the thermal engine protection device. i don't know a lot about engines and cars, i am not sure what a thermal engine protection device is, but i am going to check it out. jonathan: thank you very much. vw a fifthn by 6%, week of gains two percentage points. speed onp you up to

that story as we head into the close in europe. over in the u.s., new regulatory proposals could force wall street executives to wait for years before they collect bonuses and be forced to return cash in their companies. it is a controversial proposal on the street. joining us now, a controversial analyst, mike mayo of the seal clsa. of the have a already changed on wall street, are these practices already implemented? mike mayo: we are fighting the last few in many of these cases. balance futures are safer than they have been. we are not having another big financial crisis. banks are safe. this is micromanagement that really misses the picture. a better way to improve bank to holdbility is really the board of directors more accountable.

many management teams, go over the past couple decades. i have been doing this under five years. at some point, the managers say if a baseball team is not getting it done, year after year , you want to ask questions of the general manager, and that is the equivalent of what we are doing here. going to the board of directors and saying, what are you doing to hold the management team accountable? and it is not quite compensation. is this micromanagement with payrolls, that misses the point. if you really want incentives aligned with behavior, let's hold the boards of directors more accountable. at this point as far as you are concerned, is it enough willingness of the company for shareholders to do what you want them to do, or is the bank themselves preventing it from happening? mike mayo: i think the banks are preventing you from the shareholders' questions from

getting answered. this is the fourth year i am going to meetings, and i am frustrated at the unwillingness of bank management, ceos, chairman and most cases, to allow shareholders to ask enough questions and give substantive answers. i want to see banks going back to the future. wayeholder meetings the they were a long time ago. the once a year chance to ask questions of the boards of directors, what are you doing to hold management accountable? that includes compensation. it has not been executed. you are saying get that in place instead of coming up with new rules. we have boards of directors that are accountable, so let's do that. jonathan: if you are an owner at these companies as a shareholder , you should be frustrated. matt: back to the future or from the future back to the past as far as the share price is concerned, here you see bank of america and lugo america.

you don't think ese banks have created any value over the last seven years? you can see them trading at relatively the same spot as they were. what do you want them to do, what do you want to see from them that gives you some confidence they are going to improve value? mike mayo: we see upsides in all the stocks. we are more positive in the banking industry that we have been in 20 years. there is a lot more upside if there was a better town at the top of these companies. -- tone at the top of these companies. banks hasf those above to create returns the cost of capital for every one of the last eight years. that is unacceptable. the question for all three of these banks or any bank that has destroyed value, if you are not getting it done, if there is not up clear plan for deleting it done -- for getting it done,

what is your plan? we think all options to be on the table including breaking of the banks. jonathan: before we get to breaking of the banks, i want to know the problem with ownership is. i bring up wells fargo and use the atf function on the bloomberg. you can see blackrock with five, then go with five. doing it to do something about that? not just the size of the bank but the ownership and try to avoid concentration we can see across the board? mike mayo: we are seeing a positive direct to an -- direction in the money management. you also have a active asset management, and we think you are going to see more of the active asset management. it is not just selling and buying stocks. it is also being active in how you engage with these companies.

we see more of that among asset managers. we see more of that in the coming weeks especially at original bank comerica. side, thehe opposite way it works in practice is with the concentrated ownership, those people have a real seat at the table. i have been to a shareholders meeting. there is not a lot of real business transactions. when that happens, it is behind the institutional shareholders. those boards of directors -- no one can disagree. but isn't that where it comes, from the big institutional guys? mike mayo: absolutely, behind closed doors. they say, get your act in order. what i am saying, that has not worked. look at the banks, the large banks have stock prices from two decades ago. david: why hasn't it worked?

mike mayo: there is not enough accountability. i would like to see transactions out in the open where boards of directors can be more accountable. we want to put the directors feet in the fire. if you can't get the job done, you need to restructure, sell assets, break up the bank, or replace management. vonnie: how is that different from any other large company? mike mayo: banks are held to a higher standard. they are the heart of the economy. they set a tone for corporate behavior generally. don't forget, we do have insured deposits. when you see that tone at the top of the company, a lot of this times, the ceo is the same person as the chairman. they will not answer a question. they will literally pull the microphone away from somebody asking a question at the center 22nd meeting. and the person was a

representative of albers calpers and-- calsters. this person past his limit for meeting that lasted 15 minutes. that is not good shareholder behavior. it is not good human behavior. ceo and director right in front of you doing nothing. david: but they can vote with their feet, sell their shares. mike mayo: that is a lot of times the way it happens. but they have been there for several years, some of the shareholders. so no more, we want to see improved accountability. annual meetings are check the box affairs. and started going to annual meetings. there is free food. by onesome quirky people shares of they can go into the

podium for a while. mike mayo: i am a proxy for a chair. david: i am not saying you are quirky. mike mayo: these are sometimes crazy affairs, but they have the , we are -- potential talking about compensation a banks. it is your job to make sure compensation is correct. citigroup requires analysis of breaking up the banks. so is the math. and it bank of america we think there could be substantive change that comes out of their annual meeting on tuesday. i agree they are check the box affairs. we think that should change, and the government sued sake let's get wall street and make them more accountable with pay. the person on the board of directors in terms of compensation accountable. ham with so many rules, there are so many ways around it. it will not get the job done. clsa. n: mike mayo of

japan mayshowing that come out with a low program for the banks with a negative rate. the again has weakened straight through it. has weakened straight through it. up 1.3% on the session. matt: i want to focus in on the equities market right now and the morning meeting. we would hear what key banks are doing. i am joined by steve tsang does from jeffries. bad newsaring so much guidance even a lower as far as mega-caps are concerned. how does earnings season look to medium companies? steve desanctis: i think if you look, it has been an early start

for salt companies -- small companies. minus eight minus nine number for the overall quarter. i think we will do better than that obviously. the real thing is that numbers have come down pretty dramatically. upyou are looking for a ramp really in the second half of the year, which, you know, i am a little skeptical on based on the fact that we had a very big move bottom, upaps at the 20%, and that valuation is looking pretty stretched, 17.5 times earnings. so we have had a little bit of a cautious view since i have joined jeffries. caps,so much like a big most analysts expect early earnings, earnings for small and mid cap companies to pick up in

the second half of 2016. you are saying, you don't really buy that and small and mid caps are up 20% well big caps are 15% so they do not have much room to run and disappoint. steve desanctis: we have had a very big move. it is attributable to the fact that they are thinking earnings growth is going to come in a lot better than expected, especially in the second half of the year. economic forecast is looking for much better growth in the back half of the year. the last several years, we have not really seen that play out. it is much more cautious. and then you look at where you valuations are, people are not focusing on that as much given they are waiting for the earnings acceleration. i just -- we wait to see what the economy does. last several years, we have not really seen a big acceleration. so we could see disappointment. matt: thank you.

ctis from jeffries. vonnie: high-tech cells, microsoft focusing on high percent. ♪

♪ u.k. prime minister david cameron and president obama holding a joint news conference at 1150 -- 11:50 a.m.. we will have it live on bloomberg markets. you are watching "bloomberg ." mcdonald's, the

fast food chain beat estimates. sores in the u.s. also did better than expected. mrs. because of the turnaround plan, picking up -- this is because of the turnaround plan picking up steam. diesel problems, the cars involved include volkswagen, audi and porsche. general motors opal unit as well. launched the investigation after bw admitted last fall it had cheated on emissions test. release is claiming the of the forecast because of the earthquake -- delaying the release of the forecast because of the earthquake. it will be pushed back until may. damage from last week's earthquake in japan may hurt operating results. david: alphabet missed on first order earnings as first-quarter

earnings slowed more than investors had expected. shares are down more than 4%, 4.5% actually in the premarket. joining us is mark mccamey. thank you very much for joining us. i need you to explain this to me because i have gone over the numbers, they miss under earnings share, but there is a lot. one thing i saw, i looked at the bloomberg, and of the substantial increase in revenue, they delivered something like 65% to the bottom line. that is a pretty good performance for most companies. mark: we would call this a headline mess, but fundamentally in line quarter. ,hings you need to keep in hat fx came in, and secondly there was 400 million swing, dollars swing.

some investment losses, perhaps right down on some of these unicorns that are out here in the valley. that is my guest. without fundamental demand trends were very subsistent -- consistent. this company this guys -- size and scale is impressive. margins are expanding. that is a big statement for a name like this. that is due to the impact of a new cfo who is more efficiency oriented than the cfo they have had in the past. they really tried to go down, set up for all the business nits, set up pnl's. they are trying to take away the investment spending. that makes it a better asset. mobile,ut the move to that jumped out to me of how effective they made the move to mobile that some people were skeptical about. mike mayo: it has been a multiyear tradition --

mark: it has been a multiyear transition. materialtain to become for google, not from consumer's perspective. they started running the searches off of mobile devices. advertisers took a long time of running mobile campaigns. but now the e-commerce, online -- trafficccurring is occurring via smartphone. that is a new tailwind for .google there should be a sustainable sort of growth for google in the next year or two. david: thank you very much for being with us. jonathan: thank you very much. coming up is the transatlantic chart, my radio coanchor, and what a my best friends competing with chinese commodities. ♪

♪ jonathan: it is time for battle of the charts. matt miller take this very seriously. this is my last day in the city of london working, so i thought i would bring guy johnson to join us and represent my home city, the city of london. guy johnson. >> let's talk about a story that has returns. .his is tracking chart you remember last year, you remember the shanghai, that huge fight. it is happening again. this time it is not happening with something as sexy as stocks, it is happening with fuel. you look at all of those guys posting the big steel together and they pour concrete, that is what the chinese are getting excited about. this is the new renzi. -- frenzy.

more contracts in steel, the exact number is two to 23 million metric tons -- 223 million metric tons. it is all leverage money. the market is going crazy, they have limits on it. that is more steel than china produces in a year. so the chinese are added again, but this time it is rebar steel. but as with the stock market is doing, flipping out of the stock market and going in to steal. it sells you the chinese are not done yet. can you beat that? ,att: speaking of flipping out i have a new chart on new york city real estate. this made prove more interesting to john than to guide, because he has to come back here and pay his rent. luxury real estate rentals, i

assume moving into a high-rise on central park, is coming down as condo prices are going up. to be clear, this chart goes all the way back to 2001. you can see this trend, basically the financial crisis. we have not seen condo prices come down, but rent has been going up as well. and it as it rolls over, will the condo market roll over too? there was a great story, hampton stories are really dropping down. and second chronic and walk are quok areagaponic and going down. as with bonuses go down further and goldman sachs is no longer the vampire squid. the latin slug, that means you can see prices were high-end real estate coming down and the

new york city market up acted as we see the hamptons market. david: but you haven't yet. matt: that is why this is interesting. you can see a change. you can see a in rent, maybe you will see it in condo prices as well. david: -- paris: there is always because people are leaving because the president is raising taxes. matt: i would definitely not want to domicile in france. matt miller has problems he does not need to worry about. you guys are going to have to kick off the voting. vonnie: i love to guys conviction. i thought he would break into a wrap, tuna 23 million tons? ? 223 million tons i love the hand gestures and the story. is a: i think that guy's more important subject.

have a benchyou for steel. i find itn: fascinating, the wall of the guilt of money in china that has gone from property markets and back to theacau shanghai composite, so thank you very much. mike dear friend in the city, 3-0. thank you very much. next up on "bloomberg ," the ceo of dean koerner for consumer stocks for a host of earnings in the last 24 hours. that is next on go. ♪

jon: tech problems, google and alphabet, disappointing forecast. estimates for the brexit, first quarter profits that beat the street, the best quarterly

growth in a few years, and the yen drops as japanese stocks, and they waited negative rate on bank loans. rate on bankgative loans. ♪ we are about 30 minutes from the u.s. opening bell. also with us is dean curn utt. jon: we get a quick check on the market counting down to the open, this is what futures look like. earnings, we have had real mrs.. -- misses. negative three points on the dow. in london, a rough ugly day led by the miners, one percentage point.

equity markets globally, and i will go to other assets very quickly. 111, up 1.6%.in, we'll discuss that in a moment. crude is higher by 1.3%, $43.72. let's break it down with three stories that matter to markets right now. this is ahead of the open. caterpillar cutting forecast, and the yen sliding on speculation the boj may actually do something next week. tumble, stocks take a microsoft and apple bit -- i will bit deep in the red. alphabet shares down 5%. both of those companies, , warned parent alphabet of margin pressures. tech earnings continued next week with apple, amazon, twitter, among companies scheduled to report.

take a look at the earnings we have had so far. across the board, about valuation. investors getting too excited last year about the prospect of some of these companies. david: you can make that argument in one hand, probably too early to tell. we are interested to see what the other l weathers have to author -- bellwethers have to offer. dean curnutt: the moves back and microsoft and google are in the boundaries of what the officers are forecasting for the magnitude and price move. as the s&pe out futures are unchanged. you have got idiosyncratic moves for companies, but does it translate into a broader change in market sentiment? we are not seeing that at this point. it is too early to tell. david: when you talk about , alpha that,google they are still growing.

their positive year-over-year. this is a positive sector. dean curnutt: and valuations. , a decent move for both of these companies. that is certainly a large one day move. google still added 2300 workers. as you say, they are growing fast. the expectations are exceedingly high, so it is easy to the point from earnings as well. vonnie: do you consider this a leading indicator? dean curnutt: in some ways it is, but it tracks what is happening in the database. the more the macro, the vix is 25% at different points in the first quarter, so down quite a bit. that is because the market has resumed a very low volatility profile, a lot of it due to the fed compressing volatility and trying to make waters calm her for investors. david: also earnings, not very

happy with caterpillar. their shares are low in the premarket, they have lowered 2016 earnings and sales forecast because of the slump and demand their products. it is the largest mining and construction equipment provider. what does this say about commodities, mining, even infrastructure? dean curnutt: it is one stock, but it certainly speaks to what is a very challenging environment for industrial demands. we often hear about global economic growth. the u.s. is doing ok, it is not awe-inspiring. but it is a difficult time for industrial companies, you have access to commodities. we are trying to work through that. caterpillar cut the guidance down. up takes in a few commodity prices, but we are not out of the woods. david: there is a pattern for caterpillar overtime. dean curnutt: they have not done the best at managing investor

expectations. but the options market was handicapped and about that level. it is not genetically different from option prices vonnie:. vonnie:how are using -- how are you using underlying commodities? dean curnutt: after the big scare in q1, we have been bullish on crude specifically, and the framework is really to translate crude into what it means for other asset classes. two things important about crude , there are 70 industrial companies linked to its performance, but also a source of financial stability. it is up here in the 40's, a lot better than $25 and falling fast. exactly junk bond. -- it takes away junk-bond market. matt: releasing provisions or raising provisions for the emissions scandal at 15.2 billion euros

they did see sales down by 5% on 2015 sales, and it is raising its provision, so it is going to lose money as well. there you see the shares right percent.about three they have run up so much the last week. as you look at that last 20 days, they just zoom up as speculation is they are going to come to a settlement with the doj comes out. ryan is standing by. what have you got? from the more financial information, we are getting from volkswagen. we are expecting a press conference shortly. they just released an ad hoc statement. 11% point to the dividends, , that is ordinary share, 17% for preferred share.

that is symbolic return for investors. last year, they got three euros your so i would also point attention to the loss for the fourth quarter. these are fourth-quarter results, delayed because they were trying to assess the cost of the diesel scandal. this is the company's first loss since the 1980's, an operating loss of over 4 billion euros. these are very bad results. matt: and punishment really for the family, porsche that owns a significant stake in volkswagen. their dividend is getting cut. this is their payout. you were talking before about the information that we are going to get on compensation, on bonuses for some of these executives, whether or not they get any kind of payout at all. we knew it that the owners would

theyastically reduced, shareholders feel the burden of the emissions scandal. vonnie: we will keep an eye on all of that. number three that we think markets will be watching today, bank of japan. officials are buying a positive -- possible negative rate. to bloomberg. the yen is fighting against the dollar. rallying on the topic, banks index surged on the report. the boj meets next week to decide the next policy move. so is this the rumor or the report, bank of japan governor kuroda was waiting for? mentioned 1.7%ou move in the again, it is dramatic.

let's a how to involved markets are with policymakers. the river is self caused -- the room itself did not cause this dreaded move. he rumor itself did not cause this dramatic move. apt to move most dramatically and the most short period of time is the boj. they are up against tremendous demographic in induced inflation, deflation. they made a significant error trying to introduce sales tax, which sent them into recession. and now qe and buying bonds, how much stock can we buy? so the market is handicapping some of that. if they fail, they do expect a

dramatic selloff of stocks that have rallied in anticipation. back fromalternately financial wealth back into the real economy? these are questions for all of the central banks. david: we talked about macro risks. what is the upside? we are talking about the state of decline, the graphic problems -- demographic problems. what is the possible upside potential? dean curnutt: is there enough gasoline on the fire and it works. we should not underestimate how much policy is being done. they are pushing against really significant demographic challenges. they have got inflation built into the economy. there is no doubt there is a lot of policy being put forth. at some point, it actually catches on and you are in a position with the valuations are reflected of the pessimism, and you can rocket higher in the short. of time -- in a short period of time. vonnie: stories that matter to

markets right now. time for the first word news. president obama is entering discussion about whether they had a kingdom should leave the european union. -- whether the united kingdom should leave the european union. mr. obama wrote, the european union does not moderate british influence, it magnifies it. newsll hold a joint conference with david cameron at 11:50 a.m. we will have live coverage on bloomberg. the top european officials are planning to travel close to turkey's border with syria. they are talking about a troubled month-old agreement to manage the refugee crisis. x -- will include visits to refugee gaps. a suicide bomber killed 16 people, it will reopen monday.

this was a brussels metro train during rush hour. the station has been closed since march. a wall of memories has been installed at the station, so emotions byexpect leaving drawings are messages. powered by 2400 journalists in more than 150 news bureaus around the world. matt: the quick update on volkswagen, getting updates that the company expects 2016 passenger car sales to be down sharply, and also saying with the current crisis it is having a huge impact on financial decisions. those are there words. for them to use words that are that dramatic is very interesting indeed. especially because they are german. here are shares coming down 5%, usually 2% in the past.

down 6% now. they are going to hold a news conference at 9:30, and we will bring you any headlines from that. let's get to good news, mcdonald's is selling breakfast all day, and that helped first-quarter profits beat estimates. it also shows the value meal as well. you get two items for five dollars. americans have been loving it. belowtes, they were just 12980. they are at 128 right now. visa is lowering revenue, citing a weaker global economy and falling oil prices. today.shares on weakness sharp looks -- starbucks shares are down today. is slowing in the americas region showing rivals may beginning market share on the coffee giant.

but still, they are up 10% globally as far as revenue is concerned, so still selling a lot of coffee. jon: who writes this stuff? i know who writes this stuff, we talked to him after the break. dean cussed brexit with to his laterte today for the joint coverage of the president and you came -- you came david cameron. ♪

♪ this is "bloomberg . there are so many stories in the market, do not be followed -- fooled. dow futures up or ports -- four

points. s&p futures one points. we will get to that story later on. president obama weighing in on the brexit debate. , the op ed out, he said european union does not moderate blue british influence -- moderate british influence, it enhances it. meeting withently the queen and has a joint news conference later with prime minister david cameron. this.is take on dean, are we cynical voter he is worried about the consequences of the back of it more broadly, am i right or wrong? dean curnutt: he is concerned that europe as the region has clearly got failing growth, also pushing up against

inflation with tremendous effort on the monetary policy side, but still not really from a results standpoint, of course, terrorism is a big growing concern. pointk obama is right to to the issues that would come from the hard landing type brexit. they become not just european issues but weigh on global growth. vonnie: he is not exactly helping the case right riding in a british newspaper that europe magnifies britain's greatness as opposed to -- that will cause the brits to rebel. dean curnutt: obama is pretty well liked in the u.k., more than here. but as well liked across europe. -- not as well liked across europe. but it comes down to europe skepticism. when i think about brexit, i think not necessarily about that a result of the brexit, but the

vote, and how it magnifies the skepticism already showing up in the fracturing of the political parties. jonathan: showing up in the fx sitting in someone the states, i wonder what this really means to you. dean curnutt: that is really the focus, it has been to note how well imparted the brexit risk is in british pounds. you look at prices, the cost of -- it is substantial. it is very costly. if you step back and look at the united states, and if you have the view that brexit becomes a more global systemic issue, there is absolutely trade to do where this sleepy market where the s&p is not really moving around, that is the option prices, making the cost of hedging quite cheap.

and june is a quarter end, so you can do hedge is in the u.s., -- you can do hedges in the u.s. out to june 30. so our view is strongly that those of the hedges you want to own because they will hold values considerably because the vote promises -- it is a very unpredictable outcome. jonathan: let's about the hedges specifically. outside of the fx market, you play the options around some of the u.s. companies with exposure to the u.k., anything else you are looking at? dean curnutt: we are looking at the straddle standpoint, when you bet on the magnitude of the up and down. clearly on the brexit itself, i think the trade may frankly not even seem like the foot in the u.k. pound, but the euro stocks as well. there is a lot of potential impact on europe that comes from

brexit with trade considerations. a failing growth, you look into the u.s., you have got opportunities to do things like eem. erly hedges and that etf, that is a very interesting one. and something we found striking, if you look at options that expire in june, the regular june expiration options which land two days after the meeting, but before the brexit meeting, they have a different price than the quarterly xl options. ,o just going up to the quarter and one trade on the snap back, it is clear the pricing of u.k. could snap back considerably on a remaining vote. there is trade to do there as well. jonathan: how do you straddle

the magnitude of the move, and then you don't even take a political view. thank you very much for joining us. make sure to catch our coverage of president obama's joint coverage with david cameron in the 11:00 hour break your on bloomberg tv. david: up next, stocks on the move in new york ahead of the opening bell. ♪

♪ beer a few minutes from the opening bell. a lot of things moving around. let's go to matt miller for a look at stocks moving ahead of the opening. matt: volkswagen down 6% in frankfurt after the company expects car sales to drop

sharply in 2016. it also expects a huge impact on its financial from the current crisis. it just came out a few minutes provisionssed its for this diesel gate crisis. 16.4 billion euros. volkswagen is close to a $10 billion settlements with the u.s. justice department. that is beyond a huge rally in shares over the last 10 days. over today, investors are taking money off the table. amex is up 6% since monday on paper, the best in three years. other stocks coming down, deutsche bank cut the stock to a buy, - from a hold to a you see amex down 7%.

visa also down. coca-cola could be the next big target for ab inbev to create ega bad of -- mega bev. it would get $100 million in revenue by the end of 2020. it has only got six alien dollars right now, but coca-cola has got $43.81. you can see shares up a little in the premarket. back to you. jonathan: thank you very much. going down, wees will look at indexes as we give you the real tory and keeping an eye on vw with the news conference coming up. ♪

.. ..

percentover one a lot to discuss, let's get to the stock movement.

onedow is down 200ths of percent. the nasdaq absolutely crushed because of a lot of the earnings i'm about to display take a look at mcd's. a good quarter relative to we are getting closer and closer as more people, picked to, and more people wanted breakfast all day long. take a look at valeant, reports that joe pop-out, the ceo of the parago isng to -- of

going to go run valeant. it could not be more in tune for parago shall shareholders. valeant up 7% on this news looking to replace their embattled ask ceo. -- ex-ceo. microsoft said it had a disappointing quarter and the region, people did not buy software like they used to. they had to switch to this cloud thing. alpha that, the parent of google, down, and margins are getting compressed because of how much they have to pay for eyeballs in advertising and search. david: we want to spend more time in the tech sector right now. we want to turn to bloomberg intelligence and corey butler. we are talking about apple and

microsoft. becauseart with apple as matt pointed out earlier in the program, they had a technical bear situation. that 20%? ? down 20% what needs to get turned around? there are reports in production cuts. the big issue with apple is that people are worried that the iphone product cycle is getting long in the tooth, it is 68% of sales right now than it was last quarter. it is even a higher percentage than profits. if you get the product line rolling over, apple has a problem. they really don't have had good onboard to the iphone right now. they have a lot of stuff in the works, a good pc business. the tablet business has been doing ok, it is volatile. david: but it is not a growth

business. so if you are running apple, your tim cook right now, do you double down on hardware for the new iphone, or do you go somewhere else like in software? reporter: content, software, services. there pushing hard on the services in particular with apple pay, apple music. they are trying a lot, they are going to do more. they need time. david: it is still a zero revenue business. let's not understate how profound that shift would be from hardware to software for apple. the girl that they brought to the dance was hardware. reporter: apple pay is another system. they pulled a lot of the sales forward. it used to be they would launch in one country or two. now this all pulls forward.

you see these aloe periods. -- fallow periods. cycle right now, a year-and-a-half ago, they introduced the large screen iphone 6, huge pent-up demand. and the upgrade, all eyes are on september and what they are going to roll out the iphone 7. vonnie: i also want to put in perspective the bear market. it is still pretty high levels. >> it is really a very cheaply valued stock. it is not going right now. that is what typical is. but we have had a product go long in the tooth and they come out with amazing new version of the iphone. they turn it around.

>> i have sold 2 million watches, a ton of these things. but the iphone is so huge they feel embarrassed. >> what they have on their side, and incredible global brands. it is like nike. everyone knows apple, they can really capitalize on that. and frankly, no one talks about itunes, but they have a distribution system, i think they should leverage it and get more into content. david: i want to turn to microsoft, which matt was talking about. they are still growing, but is that all sort of the cloud at this point? .> that is a focus it is second only to amazon web services when it comes to web services, cloud services on the web. they are having great success. a lot of this is about a guidance game.

you saw in the pc business. vonnie: it does seem to be turning the shift. >> imagine that. they are growing. it is the first prophet growth. >> what about apple? there stock was down four percentage points, but they are growing. a really strong thing for google. it looks like a very strong quarter all across. a little lost in the other bets category. revenue is higher. i think that we saw from these guys, undressing -- interesting to see the price per click, going on for years and accelerating in the last two quarters is no longer accelerating at last. there is a little bit of hope that the calls for clicks will

stop falling as much of it has been that the number of clicks is rising 20%, fantastic. david: thank you very much to cory johnson and john butler. thank you for being with us. vonnie: mcdonald's profits tops estimates. u.s. bringing in dollars. brazilian eye on the president dilma rousseff. she is speaking right now the united nations general assembly. one of the heads of state for climate change. she said she would not speak and then changed her mind. there she is at the united nations in new york. ♪

david: stay tuned for live coverage of president obama and david cameron joint news coverage on bloomberg markets. this is bloomberg go, americans paid more to rent homes in march. the increase has moderated in much of the company. rose 2.6%d the rent to nearly $400. los angeles, phoenix, and portland, oregon. american

its forecast. the company is eliminating 10,000 jobs and shutting factories. let's go over to matt miller with a look at the -- matt: a lot of big movers. in germanyminister say they are investigating fiat. volkswagen restating or given -- seeing a big drop in sales. that is different from a bunch of german carmakers. , saying it iste cooperating with the u.s. justice department on a mission standards? -- on mission standards. standards.ion

it cost -- it cuts the top end of their year range. stocks are a discounting mechanism. amex down today as well. with aks came out earnings, sales i should say, that missed analyst estimates. we were looking for sales of over 10%. they came out with sales growth of 6.9%. thatsts are concerned local coffee shops are taking market share away from the gigantic chain. you a coffee drinker in

london? >> stocks higher on the dow. but the under performances on the nasdaq. let's take a look. >> one stock that is not underperforming today. .t is a chip company the company reached an agreement for chip technology in china. second quarter offering a sales forecast for the second quarter that is above consent. amd may be on the -- on the verge of a resurrection.

american airlines shares are down with the company. shares of american airline are now dropping back into reach. suggesting this stock could reach its recent lows at $35 per share. >> is that media vacant? >> this is a brand that was struggling. there was no oprah -- no buzz of around the buzz brand. the big thing is the value play. there was a sense when they were

struggling, consumers just want cheap food. mcdonald's is getting its mojo back. >> now they can get the food for cheaper. >> that was the concern when they came out with all-day breakfast. maybe the guy goes for an a commitment. there is no sign they are cannibalizing the sale. that guy is also grabbing a hash brown. there is no sign of that in the results. >> what is next? >> you just have to keep it going. this was the biggest sales gain for four years. they may have added a point to that. that is a big jump. you keep it going? you can't move to breakfast all day again. up the are tightening

operations. doing pretty well, they are recovering in japan. they had big parts in japan. that supplier scandal led over in japan. international also pretty strong. germany has been a positive one. make themat vulnerable to fx variations? >> all company citing the fx headwinds. haven't seen that much from mcdonald's. spot line market,

that is what people focus on. >> howard schultz had this challenge and it appears investors aren't giving them credit. >> starbuck trade is very high. it is near the top. the revenue is a little bit disappointing. most other ceos would sign up for that in a second. reports, doinge pretty well. is a company that has operations down. scholz has it down at this point. some concerns about the loyalty program change. they said there could be choppy results. we will see if that upsets people.

>> they are massive, bar -- massive, both of them. their arm that many starbucks and more. people are spending -- there are that many starbucks and more. >> thank you so much for joining us. breaking news. a scheduled event taking place, a news event taking place. speaking after we have learned that the provisions for the scandal will have to double to $18.2 billion. those provisions to pay for the scandal, we will keep you up-to-date over the next few minutes.

next it isp bloomberg markets after bloomberg go. betty: we are going to continue to monitor that press conference. the announcement of those details, trying to wrap up this emissions scandal situation for volkswagen. we will continue to monitor that and vw trade. also for a little bit of fun on friday. what is matt miller going to do? he is going to interview another ceo of a car company. an off-road on road vehicle menu at -- vehicle manufacturer. >> up next on bloomberg ago, we are going to take a look at what is ahead on the agenda today. including a busy schedule for tech earnings next.

jonathan: the s&p 500 going nowhere it seems. we see those earnings and stories really representing the underperformance of this. disappointing numbers from the likes of google. tech stocks getting hit hard on the nasdaq so far. if we can just keep you up to speed on the other three -- other stories. 1.8 percentage shield. still all their to see.

>> stating for coverage of that. >> we had this op-ed from president obama. does obama feel a little bit of exposed now? >> they are expected to do a slap down. conference two news newspapers that

lean with sympathy towards the op-ed camp. >> explain that to me. isn't johnson just taking his base? aren't they just preaching to the choir? right leaning in newspaper but it does well more broadly with certain aspects at the north of the country and around. the daily telegraph goes to one kind of specific demographic. that doris johnson -- probably more. both sides to sway of the base. >> in the end president obama is going to do what he thinks is best.

that is what we pay him four. on the agenda for next week, the brazil special senate votes on the impeachment. are saying policy makers will leave rates unchanged. we get the initial reading for u.s. first-quarter gdp as well as the doj position. we also have a pretty busy week next week. ,> a special thanks to her working overtime for bloomberg go. a happy friday and happy weekend. bloomberg markets continues next.

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this is bloomberg markets. >> we are going to take you from new york to london in the next hour. here is what we are watching. atkswagen announcing in just the past hour the new plan to satisfy 18 point $2 billion to pay for the omission cheating scandal, doubling the prior amounts. we are going to monitor the press conference as it happens. we will bring you any update. >> with 30 minutes into the trading day, 90 minutes from the trading day close. the mercedes maker is