the apple ceo makes his first trip to india. the price, one billion sales in the next five years. ♪ a warm welcome to you. i am jonathan ferro here with lisa and david. an exclusive interview with erik schatzker about what we should doing with our money. we will preview the f1 see minutec minutes. >> and we have the earnings. jonathan: let's start with the

equity board. s&p 500 futures negative not even a 10th of 1%. minors leading the losses. switch of the board. all eyes on crude. inching to the $50 mark. wti 48. this is what i am looking at in the fx market. a dollar on the front foot. switch the board and get to this. 14483. one pound, camp. the remaining 37% in the leave. the referendum is ahead on june 23. that is when we are now where you get one pool and you get the spike. lisa: it wasn't one single pole, there was building up to this. jonathan: a bit of momentum may be. david: now let's go around the world and check in with our

bloomberg team for in-depth coverage of our top stories. mike is an anchor of bloomberg surveillance radio. cook's first trip to india. matt's house and joins us. let's begin now with mike. this is the fed's april meeting that -- and minutes of the fans april meeting are out today. , what are we looking at? michael: they have been trying to talk the markets of present time and we are finally getting some reaction. investors are going to be in michelle wie mode -- in show me mode. the meeting was three weeks ago, but i pulled some stuff out of the march minutes to show you the kind of thing we would be looking for. several expressed the view that

a conscious approach to raising rates would be prudent. in contrast, others indicated an increase of the target range at the next meeting might be warranted. that is putting things down the middle. in april, did one side or the other get more weight? might we see many or most substituted for some or several? they also talked about the dollar inflation going forward. . david: are the markets listening for what the fed had to say? there is still only a 12% chance of a june move so are the markets really listening to them? mike: they have not been listening even though futures is a kind of silly way to look at it this way because banks have so many reserves they don't need fed funds. curve,look at the yield end,icularly the short

after the meeting in april, we saw the yield on way down. , it the last couple of days is about the range where it would be if the fed raised rates so they are starting to price this in. tomorrow will be a big day as well. we will have three fat speakers. i will be interviewing geoffrey lacher tomorrow on bloomberg radio and then we hear from stanley fischer and bill dudley. a lot more for traders to incorporate. we could see a big change in the outlook this week. david: thanks very much to mike mckee. jonathan: with the big guys coming up, over to japan now where the economy. a recession. we want to get the details. 2015 was ugly. it looks ugly of the first quarter. put it all together for me.

>> good morning. japan escape recession, but if you look, there is plenty to be cautious about. japanese are sitting on a lot of cash, there is a real drive on the economy to drag on confidence. it is important in the context of the big policy debate and raising sales tax. spending, government is across the lines so today's numbers are preliminary. when you consider the soft backdrop to the economy, is eager the headline but plenty for the government to worry about. jonathan: with a good headline, maybe that is a problem because the fx market has stabilized as well. what is going to be the message from the japanese authorities and their counterparts.

they are demanding an intervention sort of speak. there is a feeling they should push for this idea that can intervene in what you might consider disorderly circumstances, but defining what those are is much harder. the focus might be on fiscal spending. japan might look for a green light. they have a statement coming up anyway. they may look for support from the likes of canada but expect resistance from germany. cushions on fx but no major resolutions. jonathan: i think it is very to say that when your outlined is you -- your headline is you got a recession, that is good news. from japan to the u.s., another busy day in the u.s. for retail earnings. bloombergs matt townsend is here with us in new york.

fill us in. we are getting a better picture of how u.s. retail is doing. .ois came out today they raised their forecast for the year and kept their sales the same. waiting tostill spend on their homes. the report was mixed. this company is figuring out what to do not because of the big idea for a merger with office depot fell apart. lisa: in about one hour, we will get earnings out of target. what are you looking for? the ceos whole strategy of bringing in private labels and exclusive brands is taking hold. target is a good bellwether for the economy.

again, it is a mixed bag. willing to spend on their homes and things they value. lisa: thank you so much for being with us. david: now we go to the united states to india. tim cook is in india for the present ever. is introducing an accelerated program for iowa's developers in bangalore. we are joined with more from mumbai. is always interesting with tim cook going to india for the first time, but how important strategically made this be for apple? >> is going to be hugely important. india is the second fastest smartphone market in the world just after china, but the dynamics continue to be different. iphone has been the only bright spot in india.

is underscores why tim cook has chosen to come here. here is the interesting piece. the challenges will be twofold. one is on price. iphones are extremely expensive here. the cheapest iphone is $399 compared to a cheap smartphone of $135. the demand for smartphones in india is at the low end of the market and apple does not operate that at all . tim cook will have to write a new playbook and that is what he is really here for. india is on the cusp of 4g. reliance geo is a huge venture in the 4g space. here andis going to be meeting executives of these two companies hoping they can get some alliance and distribution as well. david: you put your finger on

it, this price point issue. apple has been a high price provider, high-quality and not cut price. is he going to have to rethink that to make progress in india? harsha: you bet. cannot be a cut and paste model of china. and india has a peculiar market with its own dynamics of the game. hasung for instance redefined a strategy to india. it is tough to be a price conscious market. he wants all the apps and features at a lower price point. mind you that apple does not have this division and retail model because the laws do not allow them so it'll be interesting to watch how apple will define all of this customized for the indian market. the headline is extremely interesting and the potential seems to be large.

they have to scratch through the surface and that is what to cook is trying to do. revenues are small, but the potential is going to be extremely large. david: thank you very much. he is coming to us from mumbai. let's get an update on headlines outside the business world. sherry is here with first world news. >> call this one a split decision. bernie sanders one the democratic presidential primary in oregon and hillary clinton claims victory in kentucky. the primaries do anything to change the dynamic of the race. clinton is inching closer to the number of delegates she needs for the nomination but sanders is not giving up. senator sanders: let me be as clear as i can be. we are in until the last ballot is passed. shery: the next big task, delegates in new jersey and four other states. the wildfires in canada are

threatening oil operations again. suncor energy has evacuated. oneda has lost about million barrels of production a day because of the fire. global news 24 hours a day powered by our 2400 journalists in more than 150 areas in the world. jonathan: check out this charge. investec confusing leaving to periods see volatility come up in the end, it is a mission to know where it's the start of 2015. this is easy. more next.

itid: yogi berra might call

market déjà vu all over again. ofre has been a lot volatility and shifting investor sentiment and when you add it up, the market is moved to less than 1% since the start of 2015. did you identify our mystery chart that jonathan said everyone should know? it is the s&p 500. it has been stuck sideways in a treating range for years now. joining us is our hogan. the s&p had an all-time high almost a reg out and it has been ranged around there since then. >> first and foremost, we need to see earnings. we have had four quarters of negative earnings growth and that included the last quarter reported. importantly, we are probably at an inflection point where we start to see earnings in the back half of this year. guidance was benign to mildly positive. two key factors there we are seeing stabilization in energy

prices and a pullback in the u.s. dollar, which i think is real important here. in both of those former head wins state tailwinds into the second half, we may see earnings. that would help a lot. over the last seven months or so while we have been in the primary election season, we have had a massive negative drumbeat of absolutely everything wrong with the country, which obviously has an effect on consumer sentiment, consumer spending, and corporate spending. what regulations will apply, who is the next leader of the free world has certainly pulled in and will dissipate as we focus on the general election where things get a little less negative in the two candidates focus on each other and stop but everything wrong with the world. lisa: you said something important. you said we are at an inflection point where we see guidance neutral to positive for earnings going forward. if this is not enough for investors to start deploying

cash, having more confidence in the market, are they going to be too late? what are they waiting for to see to finally jump in and start deploying their cash? art: a couple of things. you start to look at valuations. we have had amazing dislocations, but what you start to see is a real trend that will turn the s&p 500 is rotation of some of the darlings that are overbought. tradingout the telecoms at extremely high historic levels on multiple basis and very low levels on a heel basis basis.ield i think that is the first leg area that becomes self-fulfilling. when you start seeing some of the underperforming sectors get a lift, that has probably already started happening in the second quarter. it was certainly evident yesterday. that trend continues and starts

to give people more excited about the market moving in the right direction. jonathan: help me understand something. the s&p 500 will join 20 other periods without making a new high. in london, that is nice but do they have any significant start for me as an investor? art: does if you look at what happened after all of those periods of time to markets. if you go back in history, after that extended time of lamarcus, we had a significant outperformance in the following year. i think that is the good news. the good news is that when you think about the drivers in this market, one of the things we are starting to see is europe that is stabilizing and getting better. china is doing a better job at their currency pegs and certainly rationalizing some of the monetary and fiscal policies so i think some of the outside or external effect of the market

are getting to be less of a headwind and turning more positive. if you are going to use history as a guideline, understand that when you went to that sideways action, coming out that tends to be more positive than negative. david: last question. that overallut values are at 86 percentile over the last four years. can we expect it to go higher than that? art: that would be true except what you have to layer on top of that when using the five model and bloomberg ran a great story on this just this week, so if you look at the yield on a 10 year and compare that to valuations, we are at a lower level than we were in terms of valuations with the one in three quarters on a 10 year versus valuations in the s&p 500. we are lower than we were the entirety of 2002 to 2007. 50 basis points lower than the yield on a 10 year. we'll see that for an extended

amount of time. i think that will drive more investment into equities. david: thank you. that is art hogan. coming up next, with so much uncertainty across the globe, where is your money safest? steve gives us his two cents in a bloomberg exclusive next on .

♪ jonathan: this is "bloomberg ." good day to you all. markets firming up in europe. get to the boards quickly and i will show you. benchmark in germany down 1/10 of a percent. futures a little positive on the s&p 500 in the u.s. a stronger dollar story. 1.09. yen at

get to the other screen because here is some price action for you. the pound bouncing on lows through 145. 14527. guess what time a poll came selling well in the lead? guess. up for tens of one point. thingsteve pagliuca market shares are still a safe haven. erik schatzker sat down with him . is seen as a very safe haven for money, a strong currency. but as world. it still fundamental growth. and look overck the history of time, we are not at a major war right now. we had world war ii and the korean war, so there was a lot going on outside the country and a lot of bad things happening,

but the country is not in a major war. we have had a huge oil and gas dividend. gas prices are probably the lowest they have been. 5% unemployment. i think we are struggling with that sense of trying to get ahead. probably the biggest thing we are struggling i with is the income gap. to me, that is something the politicians that are not talking about. this should be talking about education and reforming education in this country and investing in education and a big way in this country. it is the only industry that has not changed in the last 100 years. 100 years ago, we had horses and buggies and now we have cars and airplanes. if you go to my classroom, they are basically teaching the same way. they have little technology. region pay our teachers more, put more money the system, reform the system. that is the solution to income inequality. it is not building a wall or any of those kind of things.it is

really education because we are not going to get the jobs that are paying three dollars an hour from the rest of the world. there is an oversupply of labor. we need to get people educated for the economy. lisa: that was steve pagliuca speaking with our own bloomberg erik schatzker. i have to say, i think it is really fascinating that increasingly the contrary view and the increasingly popular contrarian view is if the u.s. economy is doing better than a lot of people out there are saying based on the bond market, based on the stocks. david: the other thing i keep hearing more and more is geopolitical risk. with the election in june, it has taken a wild, but people are talking more and more about the uncertainty. lisa: when is the not going to be geopolitical rhythm or uncertainty? david: i think it is a little more wider range of possibilities than we have had. jonathan: the situation to be diplomatic is fluid. [laughter]

the policies on the table are fluid as well. you can say let's think seriously about policies on the table. on either side of the aisle, i cannot get a handle on them right now. david: particularly with donald trump, it is difficult to figure out what policies he would pursue as president. jonathan: up next, from politics to the great debate. speculation of a summer rate hike hits a fever pitch. will it be a game changer? maybe with a little bit of a hawkish tilt. that is the vibe in the market for expectations. we will break on what is happening next on "bloomberg ." ♪

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jonathan: this is "bloomberg ." let's get a check on the markets for you and go straight to the assets board. is stronger dollar morning with the dollar yen.

rule inption to today's the session, the price action on cable. the pound bounces to 14525. nothing to do with the queen, this one. one single poll showing remain well in the lead. that is coming from the evening standard. leave at 37%. a lot to discuss. david: momentum building. we are two hours away from the opening bell on wall street. here is what you need to go with at this hour. japan's economy dodged a recession as gains in government and computer recession make up for a slide. lowe'sprovement retailer was the first quarter profits to top analyst projections and raised forecast for the year. shares are down almost 5% at burberry. they lowered estimates for the second time in a month. now, first word news from sher.:

shery: bernie sanders has won the democratic presidential primary in oregon, and hillary clinton is claiming victory in kentucky. a race that is still too close to call. the results do not change a lot, though. clinton is getting read closer o winning the nomination. june 7 is what california, new jersey, and four other states hold primaries. joe biden will announce new rules on overtime that may give more than 4 million americans a pay raise. it may also give them a reason to vote for democrats in november. haveules say workers must made $47,000 before they can be considered managers and eligible for overtime pay. that is twice as much as the current threshold. on capitol hill, it is likely to be a confrontation between the senate and house over the zika virus. the senate has voted for $1.1 million to find zika virus.

spend 600illing to $22 million would only if money is cut from other programs. the white house calls that woefully insufficient. jonathan: thank you very much. tom keene joining us now from bloomberg surveillance radio. 240 was the line i heard on bloomberg surveillance -- 2 for 2 was the line i heard on bloomberg surveillance. >> these are projections at a point in time. they are not promises. i don't know how many rate increases we will have. currently, my assumption is two possibly three are possible, but i don't know. it depends on how the economy evolves. >> i think two to three is more given seeing how the inflation we're seeing. jonathan: these two guys came

out and set the plant. you get a sense of a shift in 24 hours. tom: exactly. every three days or so, we oscillate back-and-forth based on the data. it way i would suggest is when you listen to optimists or the pessimists, somewhere in the middle is a data dependency of an ok economy. what i find most fascinating within the good macroeconomics of the two presidents we just heard there is the idea of raising rates so you have some room to move if there is an outside shot where you have to come back down. when they have to get back to normal just to get back to normal for no other reason. jonathan: around 200 basis points, something around that figure to respond to a recession. i just don't get the idea that

it doesn't really work, does it? tom: there was a great chart yesterday of the percent of the world in a negative interest rate. another way to look at that is knot there and we are not in that. we are having a normal america within a wildly on orthodox international matter. the presidents and the governor and janet yellen have to adopt a that. -- to that. jonathan: what were the regional event presidents talking about the two or three? dudley fisher tomorrow. janet yellen next week. is that the guide? tom: i want to see the data. i want to see data dependency, actual progress. recently, the mood is better.

there is an idea of america that janet yellen is focusing on that is doing well. we may see the gdp number go up to 3%. there is a whole of america saying what about us? jonathan: where the ftse rates and where the market sees rates. north of 10% for the june meeting. around 4% before. tom: still. not going to happen. jonathan: right. tom: it is a fascinating moment. i would counsel people to not look at the minutia and focus more on the real economy, which frankly is pretty good. jonathan: tom king, an optimist. a realist maybe? tom: i am just try to get a cup of tea or coffee. lisa: talking just like the fed, right? more evidence of anxiety building over a possible summer hike.

the w.a.r. be function increasing. irp function increasing. perhaps it is not yet time to raise rates. alan ruskin joins us now. sayingiefchs they are not understanding the market right, not facing the recession. what do you think? alan: at the front end of the curve, it looks like a bit of a surprise to me. i last looked around 16% of a hike in june. a hike in july, 36%. that is the high side. they are not listening to what federal officials are saying. look at the two-year or three-year rate hikes possible this year. lisa: i have to say, i was talking with jim beyon yesterday and he made a good point. that is wanting the market just

as much as the market is watching the fed. alan: i think the fed can steer the market very easily. what you have here is a set of circumstance where fed officials have spoken in the past and the -- and they have not necessarily delivered. when janet yellen speaks and suggests there will be a rate hike out of the market will price quickly. jonathan: what do you think her job is? alan: to not speak too soon. you do not want to say what you will do a lessor very confident you will deliver. i think she speaks on june 6. she will deliver in july, that i believe the semiannual maybe a good point to signal that. by that time, the data will flow in her direction and the market will price that in. jonathan: the question about the

yield curve, maybe the market completely gets what the fed will do because if they do what i think it will do, i will sell 10's.and buy is thehe two-year and in best single as far as the fed is concerned. the back end of the curve i -- when you have negative rates in japan and germany, it will suck yields down at the back of the curve. that is great in some ways. the back end is behaving itself. it is not threatening for the fed and the fed can do more work at the front end of the curve. i think the yield curve, the flattening will be a misleading signal. does it really signal a sharper slowdown as it would have done in traditional circumstances? david: we talked mostly with the bond markets likely going to do, what are the fx markets telling us? alan: think it is that different

from a you are seeing at the front and a bigger. boilollar went off the from february to may. you are starting to see the beginnings of a market taking it more seriously. lisa: the think the fed will go in the summer? alan: there is a decent probability. the official view is the end of the year still. lisa: just one rate hike this year? alan: that's right. jonathan: do you think they look at the fx market and it acts as a stabilizer for the fed? the event comes down and hikes rates and says two or three even if the day towards it you get the pushback from the fx market, everything is pushing against a stronger dollar off the back of it and the fed back top again? -- backs off again? alan: i think you hit the deal on the head. it is a stabilizer. it has tentacles everywhere. is for commodity prices and high heels and earnings of the s&p

and the china and the dollar peg. the fx market and the fx market response is crucial. david: what about the point jonathan was making with tom king? if they go into early on raising rates, they can drive us into recession. if they go too late, the consequences are not severe. alan: that is the way they have behaved. what the fed has to do, the message they have to comply is we are very easy right now. janet yellen has said neutral interest rates are zero. they are only going to get to the current neutral toward the end of next year. that is a message they need to impart. what is the one thing you are looking for in the fed meeting minutes that will come out today at 2:00? alan: i would like to see if the sentiment aligns with the comments not just of what we

have seen from williams and lockhart but also what we saw from the even more dovish spectrum. if that all aligns with the statements, the market will run with this. lisa: you think we see a bond movement if that is the case? alan: yes. the front and still has plenty of room to go if it is evident these are not two isolated beneficial speaking yesterday. jonathan: just to wrap this up, is this an increasingly divided fed? alan: i feel it was more divided. what you saw, the important message last time, the end of this year came from four rate hikes to two rate hikes. cameawks and the doves together and that is a stronger message. the fed believes in two rate hikes. we aref you are right,

going to see a little bit of a bond market sell out later in the day. thank you so much. up, untapped territory. apple ceo heads to india to find the next boom in iphone grown. the price to be more than 5 million iphone sales in the next five years. david: take a look at shares of apple this year. they are on pace with the biggest decline since the financial crisis. more ison -- on the way. ♪

david: this is "bloomberg ." up in the next hour, fast cars and big money. brian francis joins us on "bloomberg ."

this is "bloomberg ."o> let's get to the global financial scorecard and i will get you up to speed where markets are. the s&p futures down not even a 10th of 1%. over in europe, rolling over a touch in the last 15 minutes or so. now down a quarter of a percent. switching the board to the bond market. the story in the fx market is a stronger dollar against every single genes and currency about one. year it is. it is a stronger pound story. session.f of 1% on the a: the u.k. showing well in the lead -- a poll in the u.k. showing remain well in the lead. let's get to julie hyman now.

julie: i want to start over in the u.k. with burberry. cutting is forecast for the second time in the past month, saying earnings and he in march will likely be near the bottom of analysts project range. this puts a lot of pressure on the ceo over whether he can lead the company effectively while also acting as chief creative officer. the company said it will scale back on a number of products to reduce its product assortment by 20%.o 20% -- 15% to they don't plan to exit categories entirely but rather moving from breadth to depth. the company will increase its back marketing. it has been trailing in that particular category although handbags have been under pressure overall. we bring up a name you have not heard in a while.

this is his company. it is an investment company run by the former hedge fund manager. it is making an unsolicited bid for one of the largest remaining independent grain traders in the u.s.. $1.04 billion is the offer. it is $37 a share. shares are down this morning but i wonder if we have a bad trade here. year today trend would be why. they have been rising on this number for the company. it is an unsolicited bid so we will see what the anderson's does come back with. we are taking a look at valeant. the company may be exploring the sale of some of its smaller cosmetic and pharmaceutical aspects, including a treatment for advanced prostate cancer that the company purchased last

year. getting a little bit of a bump up. coming back. to europe, we are seeing the miners under pressure as gold and copper trade lower. some examples of the mining stocks that are falling this morning. jonathan: thanks. copper down 1.5% in london trading. ceo tim cook looking for growth and setting sites on a massive market potential in india. he is visiting the country for the first time, unveiling a data center and introducing the next limited program for ios developers in bangalore. let us bring in a bloomberg team. i remember on the hubble called, tim cook specifically referencing india. he followed it up with five to 10 years ago where china was. that does not sound like a 2016 story. how long is this game for you?

>> this is a long-term story and one that needs a lot of work. the in the china story is not comparable from a smartphone theet by any stretch -- india-china story is not comparable from a smartphone market by any stretch. a lot of workave ahead of work and then if they want china's growth rate, china's prices, china's profit from an iphone perspective to be anywhere near that. lisa: tim cook must know this. is what is he going to do to address the fact that there is disparity between the price point that indeed consumers are willing to pay and what apple is willing to sell for? harsha: they have to have a completely redraw map. it cannot be a cut and paste china model for india as anand was pointing out. two interesting points.

they don't have a regional this division strategy here in india. also, it is a completely competitive market. samsung owns a majority of the market. the average price of an iphone dollars compared to an average smartphone that costs $135 so this has to be a completely customized playbook written for india with a partnership as far as distribution and marketing is concerned and more importantly, reworking the pricing and strategies as well here. the last point is, you have to understand the india is all because of a 4g revolution. early adoption of 4g technology would mean more smartphones, and that is exactly what apple is hoping to bite off. david: apple is on a march to greater revenues and greater profitability. it took a stumble in its last earnings. a lot that was because of china. they have relied on it so heavily.

my question to you is, was this always part of apple's long-term strategy to move to india or is tim cook: an audible because it calling an-- cook audible because it looks like the same?ot harsha: it underscores the fact that they have never taken -- now in the last six to eight months you have seen a new management team come to place that expanded operations in new delhi with tops of new strategy and so on. the arrival of 4g technology will be launching and is excited to change the telecom landscape. this gives us a sense that perhaps apple is we working at

strategy, but the bulk of the business, the large chunk of consumers at the low end of the market when apple does not have a product and is not operate at a price point. it will be interesting how they create a customized product and strategy for india. jonathan: and then they have to sit and wait for the infrastructure to be built up as well. special thanks to the bloomberg team. thank you very much. david: coming up next, happy anniversary, facebook. on this day four years ago, the social media giant went public. a lot has changed since then. we will discuss when we go off the charts next on "bloomberg ." ♪

david: this is "bloomberg ." it is time now for off the charts. it is the four-year anniversary of facebook's ipo, which was priced at $38 a share. julie hyman is here to show us how it has performed since.

julie: in a word, well. hadcan see the game it has through today, a gain of more than 200%. if you price and from the low, which was $17.50 is more like 5%. at various points along the way for facebook, there have been moments of doubt, right? david: this was the interesting part here because they came out this big ipo and it was a disaster. everyone said how do they have done this? it was priced wrong. it went down. three years ago, we were saying this was not going to go well. julie: yes i was it is workable where we are now.facebook incredibly yes, it is remarkable where we are now. facebook very dominant. this is the holy grail for social media. how do you monetize?

in part by doing more advertising and by doing more mobile advertising. let's take a look at our second a look at with his mobilizing percentage of overall ad revenue. the percentage is on the side of the screen and the overall revenue is on this side of the screen. david: this was the big question when they had the ipo. julie: they have it figured out. what potential downside of mobile is the margins are smaller. david: they are doing well so far. thanks so much for that often charts. coming up, we are minutes away from target earnings. they will be coming up here on "bloomberg ." ♪

david: moving target. shares are down. we did deeper into numbers coming up. oil prices hovering at

a seven-month high as unplanned outages cut into global outlook. forecast unveiled in a bloomberg exclusive. lisa: to start a string of encouraging data, the yield curve is telling us it is a dangerous time to raise rates. will the fed listen? jonathan: breaking news from target. $1.29 a share, the estimate was one dollar 19 a share. a adjustedow seeing -- the estimate was 1.36. we bring in shannon pettypiece to make sense of the numbers. shannon: you see that they beat on earnings-per-share. they will say that they are

controlling their margins but what analysts compare about is same-store sales. sales increase? it was not as good as expected. analysts were expecting 1.6%. in the world of retail analysts, they really needed to meet the same-store sales numbers. david: cost control? shannon: cost cutting. it is good, it shows the ceo is going in the right direction but it didn't look good with same-store sales and second quarter is not looking good. so a lot of questions about what the consumer is doing. lisa: is this another says -- another symptom of the amazon effect? what can target due to generate interest in sales? we side with macy's. in march and april, consumers seem to pull back on everything except cars and travel. we are seeing record travel.

and homes really great depot looks pretty good. consumers are spending money on cars and travel, not traditional retail. and if they are, they are going to amazon or online competitors that have come up. liketional companies target, walmart, gap -- they have been trying for years to catch up. david: a few months ago, they had a major reset. to have a report card on whether that is working? i think it is hard to say that the target strategy is not working. analysts like the ceo strategy or he. home, kids, baby and apparel. really goodries did but food, grocery, perishable, diapers, auto parts -- those are dragging down the rest of the business. so the areas they are focused on are doing well. there are improving the grocery

offering. it is an area for amazon that is hard to compete in. their online sales were up 23% which sounds great that it is a bit of a deceleration. and it will cause a bit of concern given how much emphasis they have been putting on the web operations. projects could target embark on to give shareholders confidence? shannon: grocery is a big one. online. mobile. delivery speed. everyone is two steps behind amazon when it comes to delivery speed. he consumer is expecting today delivery or same day delivery. they are trying but a lot of days it is still 5-7 days. delivery speed matters. jonathan: breaking news. hd to holdings, the investment company made an unsolicited bid

of $1 billion for a rain and ethanol merchant. the andersons have rejected the unsolicited proposal from hc 2. trading at 29%. we'll bring you more as we get more news. let's continue the conversation on target. it is hard to get the story when revenues are in one place but earnings beat. you expect the margins to still say ok. isnnon: the other fact discounting. consumers are addicted to discounting. something else we saw with gap. there were some analysts who accused the company of buying sales. discounting things so low and offering free shipping and free shipping on returns. the promotions to get customers in the store and that is going to cost you something on margins. so can they grow if they have to curtail the discounts?

same thing for target, macy's and other apparel retailers. shannon pettypiece, thank you for breaking it down for us. positive data coming out of the u.s.. joining us now is gabriele santos. outlook from the retailers, which are not terrific. and now the bond market as well, what is your view? >> looking at the consumer these days is not looking at the traditional retail names. in order to have an accurate idea of the strength of the consumer. last friday there was a strong april retails report that we got in the jump in consumer sentiment for may but retailers, the brick and mortar retailers are negative on the outlook. lisa: traditional retailers? who are the new retailers? those who are able to take advantage in the online

shift in behavior. it is not a temporary one. as well as the consumer's desire to focus more on experience. we talk about travel being up record levels. a different kind of spending and that is a long-term thing. are they spending? they have built up ballot sheets. are they starting to spend that money? gabriele: consumer spending is really not that bad. definitely not as dire as it seems when we listen to reports. last year the consumer was spending increasing at over 3%. that is not bad. bit of a slowdown fourth quarter-first quarter but overall, doing just fine. jonathan: would you go along in equities given the information you just gave us? ,verything you are saying says go along u.s. stocks and play the domestic story. gabriele: we do. we like the u.s. equity story.

it is playing it selectively. you have to think about it more creatively. i think the earning story will turn around. especially in the second quarter. we have seen the bottom and earnings in the first quarter. and that is supportive for the domestic story. lisa: and story that has been popular has been wage growth. haven't we and why seen more? i want to point to a chart showing the difference of the profit margin of the s&p 500 versus rage growth. you can see that at a certain point they start diverging. pay,ore companies have to the more that is cutting into their profit. this is a problem. a tension in the market. how are we going to reconcile this? on how put a pressure much inflation and growth we can take off the u.s.? lotiele: we have talked a about where wage growth is. we want to see it. we want to see enough growth but

not too much so that it starts eating into margins and it becomes a problem for companies. it is a conversation we will keep having this year and next year. our company's going to grow the top line and not have the margins be out of control. what you say is that we will look for better earnings growth on the back end of this year. why is that? dollar weakness? why are you confident that we will see better earnings? two variables that last year were a huge drag. the energy story and the strong dollar story. as those fade, the negative effect comes off earnings. in order to get really constructive on earnings, you also need to see topline growth and we have not seen that yet. that is something we will be watching. lisa: i'm going to go back to something you said where traditional retail is not indicative of can were standing.

atit instructive to look traditional sectors anymore to figure out where to invest? or is it company by company that you look for? company by company. i find it tough to look at results from specific retailers in order to get a gauge of the strength of the u.s. economy. lisa: which companies are you looking at? gabriele: we don't speak specifically on companies. [laughter] our managers would focus on specific names. jonathan: gabriele santos. you can take a break. she is staying with us. david: let's go to the bloomberg first word news with shery ahn. hillary clinton closing in on the democratic nomination. bernie sanders says he will stay in the race. organ primary but clinton claimed victory in kentucky in a race that is still too close to call.

bernie sanders is running out of chances to stop hillary clinton. the next big test is june 7 with the primaries in california, new jersey and other states. u.k. shows thehe biggest lead in three months for those who want to stay in the european union. according to the survey, 55% of those polled say they will vote to stay in the eu with 37% backing up a brexit. vote is june 23. in venezuela, opposition leaders have called for followers to take to the streets again today. they're trying to force a reelection. been suffering from shortages of food and consumer staples and inflation is in triple digits. global news, 24 hours a day. powered by our 2400 journalists in more than 150 news bureaus around the world. i am shery ahn. jonathan: coming up next, set up with reports on inflation. how speculation with the fed may

raise rates this summer. returns.omberg " this is how things are shaping up. s&p 500 futures are down .2%. by .3%.is down ♪

jonathan: it is another u.s. retailer with another negative outlook. for sales in the second quarter. target down by 7.55% in the premarket. revenue was a miss. the outlook for the second quarter is getting the stock be right now. this is one to watch ahead of

the open. david: not a good morning for target. we want to turn to rate expectations. fed minutes are being released at 2:00 p.m. eastern time after said residents have taken a hawkish tone. -- gabriela santos is still with us. if there were a faster rate hike, would that be a catalyst to get this moving in a sideways direction? gabriele: you could argue that it could be but initially it could cause volatility. if you think about what sector that would benefit, it would be financials. such a key sector of the market. in the end, maybe faster rate hikes could be a positive thing for the market after the initial

volatility. jonathan: i find that interesting because thebanks are so sure but what we saw in the first quarter, volatility we got january and february, they hate that. paralyzing volatility. and it is not just what happens with the yield curve but it is also how much stimulus there is for the banks to lend more. and that could be helpful for bank earnings. youf you have higher rates are more inclined to lend to consumers and businesses. but you are right. for the banks who have a trading component, extreme amounts of volatility are not helpful. want to ask you something that is not a clear-cut answer. the fed move without the market on its side? if the market doesn't price in a great hike, can the fed do that? gabriele: no.

they have shown they are extremely cautious and they want to prepare the market before hand. lisa: can they? gabriele: i think that they can. expecting a rate hike in june. we are not there yet. but they could into the market closer to the next rate hike in july or september. david: has the feedback mechanism broken down? we have all of the fed statements coming out and saying that june is on the table and we will be doing two this year -- it seems to me that it is a 50-50 chance of one this year. it appears there is a breakdown in communication. what is the risk that the markets could react badly? gabriele: investors take some of the fed speakers with a word of caution because it has not ended up being the view of the committee. yellen,ially with janet

her speech on friday, she is speaking for the committee and not necessarily her personal opinion and that is what we should watch. lisa: what could she say that would be a sign that she is preparing the market? gabriele: in april, they cited concerns about a slowdown. she could come back and say, we are seeing signs that the market the secondup in quarter and she could talk about her view on inflation. has beenrgued -- she reticent to argue that inflation was picking up. that could be another sign. jonathan: the global concerns and whisk and worry in the global economy -- what we have learned from the first quarter is the dollar story. there are obvious winners and losers. the softer dollar stabilizes china that causes problems for japan.

going into the g7, how did the global officials handle what is going on in the fx market? japan goes into the meeting wanting to depreciate the currency and get the market going and inflation going on at the same time, everyone is worried about china. coming inerybody is with their own agenda and at the end, each central bank has to do what is best for them. when it comes to the fed, getting going. the economy is strong enough. lisa: we were talking in the break, is this the worst case forario for a going into -- abe going into the g7? what is his argument, saying they need to depreciate? gabriele: looking at the , it isls of the report

not that the economy has rebounded in japan. a lot of the improvement was due to a complete collapse in imports. that is not something you want to see. i think he could look at that for an argument. as well as the japanese equity market which has fallen tremendously this year because there is no more currency to support. great report about a stronger or weaker dollar on asia. is it as simple as that for janet yellen? do i want to help china or japan more? i think she is looking at what poses the biggest risks to u.s. financial security. her mandate. shes a tricky response but doesn't want to see a complete collapse in china and emerging markets. that is very destabilizing. instead of japan not growing as strong, that might not be as big

of a risk. , thankn: gabriele santos you so much for joining us. it about tog up, lose its luster? it's lower over speculation of a boost in the u.s. dollar. ♪

jonathan: one hour and eight minutes away from the open in new york. let me get you up to speed with financial markets globally. isr in europe, miners leak losses and a stop to the session for copper. the ftse 100 down by .6%. check out the board quickly. in the fx market it is about the stronger dollar story. in theft in sentiment last 24 hours or so. 1.09.llar yen is

-- is 109. the target retailer missed. that is what is trading on this morning. target is down by 7.5% in the premarket. one of the commodities to watch is gold. old retreating for the first time in days. the fed rate hike could boost the dollar. joining me now is alan knuckman. talk to me about the big by in old. gold. it comes back to the dollar. the dollar was sluggish the last time we had a slam. gold wasn'tn targeted. the easy money from a risk reward standpoint has been made in gold.

is, will be dollar continued to recover or will we see this overall slide that has been helpful to the middle market? isathan: the other thing also the currencies in the central banks. on the horizon is the u.k. referendum, how much do you factor that into your thinking? a big play. the june rate hike went from a zero possibility to a very slim possibility. i don't think the fed will pull the rug out from europe ahead of the brexit. so june is off the table in my opinion. in there do we go future? we had good inflation numbers. we were waiting for inflation. what does that dictate for the dollar? that is the million-dollar question. we have had a nice pattern where we have had over highs and higher lows. said, every time we get

to 1300, we get a big stall in the metal. jonathan: looking at what is market, for the fx the fed it is acting as a stabilizer. is that the story that keeps the laid on old? somewhat. the dollar is the giant story. that is why we had the reversal that we did in 2016. the dollar stock is going up. it looks like there is one more great hike in 2016. .25 point hike. we did see the dollar relax over the last two months. it all comes back to the interest rate talk. we will be having this conversation day in and day out. jonathan: what do you make of china buying darkly's old fault?

alan: interesting. they have always positioned themselves in commodities like oil and in africa. it is interesting that george soros has raised his bed in gl bb. to read fromwhat that. he is prepared. -- alan: alan bachmann knuckman joining us from chicago. lisa: go buy some oil. crews in reality is coming up on "bloomberg ." ♪

jonathan: this is "bloomberg ," i am jonathan ferro. global futures are lower. self possession, it looks like.

.5%.es are off by about .5%, switchoff by up the board. the story is a stronger dollar with the exception of -- the pound is at 1.4547. remaining well in the lead ahead of the referendum. david: under an hour away from the opening bell in new york. are sliding this morning, first quarter missed analyst estimates. theretailer ceo says company faces a volatile consumer environment. we get the minutes of the federal reserve meeting at 2:00 p.m. eastern time. leasteakers said that at two interest rate increases may

be warranted this year. japan's economy dodged a recession last quarter. gross thomistic product expanded by an annualized 1.7%. now we go to shery ahn for what is going on in the rest of the world. in sri lanka, rescuers are looking for families in mudslides from heavy rain. the mud is making it difficult for searching. nice president will announce new rules on overtime that make it more than 4 billion -- 4 million americans a pay raise. it may also give them a reason to vote for democrats in november. that workers must make $47,000 in order to be considered managers who are ineligible for overtime.

according to the latest financial disclosure form, the former president in $1.7 million down 93% from the previous months. the likely republican presidential nominee, donald trump, says he made $57 million last year. his company provided few details of how he earned money. global news, 24 hours a day. powered by our 2400 journalists in more than 150 news bureaus around the world. i am shery ahn. lisa: when last week's merger between office depot and staples went bust, 2016 lost the title for biggest year of the own making. kalvaria remains positive. he joins us now. so you are not discouraged to see -- discouraged, you see good signs ahead for the m&a market? will be thek it

second or third best year over the last decade. last year may not be a record but it was very robust. the pipeline going into the back part of the year is good. down 20% so far but activity has picked up. given the volatility of the first quarter and the smoothing out that we are seeing, i am reasonably optimistic. regulatory a few issues that have canceled a few transactions. people will be cautious going forward. lisa: what is the driver of the action going forward? lower borrowing costs? leon: people want growth. interest rates are low. the market is stable. chief executives are feeling more confident. all of the above says, we are not doing buybacks. cost seven has probably run its course although it continues. we will see more strategic transactions being done on a focused basis. the other aspect to touch on is

cross-border activity where china has been a significant in the first quarter. and may continue on. we see a robust pipeline out there for cross-border activity as people look at strategic assets. coming to the u.s.? are chinese companies coming to the u.s. to buy? leon: they have been looking globally. we have ge appliances, there have been significant transactions out of china on a strategic basis. that will continue on selectively when they come across a sale that they are attracted to. we are positive from that aspect. lisa: i want to turn to pharmaceuticals. valeant has been the story. they are thinking of selling specific businesses to raise money to pay down debt and to cushion the profit. do you think that this represents a larger problem in

the pharmaceutical company of a broken business model of raising drug prices and borrowing to acquire other companies? leon: no. i think this is a narrow issue inside the market. valeant has a great chief executive in place. they have not announced anything significant, smaller things that they will trim. selfodel will stabilize it and rebuilt going forward, given the fact that, at the end of the day, they have important drugs and patients need the drugs. they will be careful going forward regarding how they operate. lisa: what will be the most active sector for a midday? leon: i think health care will be active and industrial with a combination of china out. those will be the biggest factors going forward. lisa: health care it is. leon kalvaria. david? m&a to oil.rn from

inventory will show another decline in the stockpiles. earlier this year, goldman sachs raised the price for the year -- for the year. thoughts what oil is still an attractive bet. i don't know if it is a bullish view on commodities or coil, specifically, as it is the alternatives out there not being appealing. so even if there's a potential for prices to move up to $60 a barrel, which is not a substantial increase historically, relative to other types of investments within the broader economy, oil still looks attractive. when you think about how you cut the capital off, and about the context of relative investments.

that the forward curve needs to go down? not to divers, but that is an important point. in the last week we have seen 50 million barrels of selling on the back end. and that tells you that if the market tries to get up to the $55 range on the backend, producers come in and start selling. do wen we think about, need $60 a barrel to bring on isply for 2017, all you need a strip to get up there. they still end up producing and he end up with lower stock prices. so the key there is that it is difficult for the long end of the curve to get up into the 55-60 range given the selling pressure. >> so you have hedging at a lot of debt and investors are more

than willing to give money to certain companies because there is nowhere else to put it. what will be the trigger to fix that? that will fixing that on the longer-term basis is some kind of capitulation in terms of expectations. >> of future prices? pricesdon't need the themselves to do it, you just need to get the capital out. but the problem is, given the to in canada andions siberia, expectations have increased. the market is trading rationally. stock prices are going up relative to the back end. trying to price in the spot shortage today and not trying to price in the future. i'm happy to see the market behaving rationally but a lot of that has to do with the producers selling the back end. >> producers are smart and mike it's -- and markets might not be. david: that was just curry --

jeff currie. . want to turn to javier blas he basically said, don't get your hopes up too quickly. market isg term, the not buying a set potential increase in prices. is that what your report is showing? there is similar. we are seeing a significant amount of hedging on the future. selling oil for 2017. that is keeping the back and more depressed. prices in the future remain more contained. how long that will last? that is the big question at the moment. the market has been driven by supply disruptions. if those's supply disruptions last longer we could see prices move up higher.

we have seen it in nigeria and canada. is that having a substantial effect on the market now? having a very big effect on the market. take nigeria. it is at the lowest level for nearly 30 years. militants in the delta are blowing up key pipelines owned by companies including chevron. that is something we have not seen in at least six years. securitying consultants and analysts worried. a point that is difficult to repair. canada is probably a short-term story. they are putting pressure on production but altogether around the world, we are looking at 2.5 million barrels. oft is like losing the whole

kuwait for a few weeks. jonathan: a few weeks. i had a conversation with my producer and you expect inventory to decline in the summer months. you expect that to happen. maybe the downturn is exasperated by the temporary outages in canada and europe. so how much of a hedge fake is this move now? the disruptions are having at the worst moment spring demand does ride into summer. we are preparing for the holiday season. americans drive a lot more. gasoline consumption will go up. so essentially the disruptions are exasperated by seasonably high demand. but i think that truly, the was getting into balance and it is moving be balanced earlier than expected. we are expecting the market to balance by the end of the year. david: thank you very much.

that was javier blas. jonathan: coming up, nascar is making big investment in racetracks. find out when nascar is speeding too. ♪

jonathan: this is "bloomberg ," r.i.m jonathan ferro. coming up, the virginia governor. ♪ shery: this is the bloomberg business flash. americans may not be shopping at the mall but they are still

willing to spend on their homes. beat-quarter earnings estimates and the second largest home improvement chain raised the annual forecast. home depot reported better-than-expected earnings. if used to dominate smartphone sales but nokia is returning to the game. former nokia executives have licensed the name and they plan to bring new mobile phones to the market. nokia was the biggest name in smartphones before apple and other u.s. markets came on the scene. sotheby's has set a world record at taking in $175 million at a jewelry sale in geneva. the star of the sale was the 15 carat pink diamond. it went for $32 million and was bought by a bitter from asia who wants to remain anonymous. that is your bloomberg business flash. david: a leak known for speed,

nascar. they gain traction this year. traction -- do you like? [laughter] wonderful. briang us for more is france, the nascar ceo and chairman and he is up for a big award. good luck with that. let's start with the daytona renovation. tell us what you did? you took capacity out of the stadium? we took capacity out. it looks and feels like you would be at a football game in an arena. the amenities, cnn, club seating, mezzanines and all the rest. lisa: so if you reduce capacity that must mean you increase cost of the tickets? brian: that's true. it is a higher value with premiumseating and

offerings. and better experience and obviously, the revenue has to be there to match that. it is private capital so it has to return. lisa: has the response been good? brian: great. we sold out and the fan base is great. it's never been done before, motorsports. we are one of the few that puts all climate capital up. much in the private partnership arena for us as nascar so we are proud of how it turned out. not everyone in our audience will understand the nascar business as a business. give us some insight. one of the statistics i saw was that nearly half of the 100 fortune top companies advertise with nascar. where do you get your revenue from? ticket sales and television advertising and other? brian: media is the largest source of income for us that

tickets and corporate sponsorship and commercial involvement means more to us than anybody else. , moree more companies fortune 500 companies -- they get to own something as nascar. they're not a billboard. they are not buying media. there actually helping us run the events. it is their team on the racetrack. it works out great. growthn: is your potential restricted within the borders of the united states? no.n: north america is the most competitive, right? but auto racing is played all around the world. with our opportunities style and brand but it is tricky because road racing and formula one around the world are the most popular so our brand is tight. we are going to have some contact out there. jonathan: matt miller is not

with us, he is in relation, that ,he question asked by him was can we get tickets? and we said easy, because it is still not huge in this country. do you worry about that? brian: they can only run a couple of events, at most. so to get any frequency, it is hard for anybody. we are running every weekend. our style is a global track, closer than you park your car. that is very different than formula one. the: how much has viewership and fan base increased over the years? brian: we have increased in some regards our social media. we are blowing it up and all the one or -- we are still two coming in or out of the weekend on cable with fox and

nbc, those are our partners. we have done well, however you measure it. but i tell people it is the most dependent marketplace in the world for sports. culturally, you put all the in and they leagues are well entrenched. so to do as well as we do is a testament. lisa: people love their cars. brian france. nascar ceo and chairman. up next, the gap is widening ahead of the june 23 referendum. the whole the charts is next. ♪

david: this is "bloomberg ." time for an intercontinental battle of the charts. mark: a couple of polls are out today about the referendum. it has me thinking, it is time

to look at the valuation gap between britain's biggest companies and the small companies. is the best performing major benchmark this year. what it has done is boost the valuation of the ftse 100 by five percent this year. i have normalized the start of the year at zero. you can see with the white line that the valuation gap has widened to plus 5%. oil and mining companies. mid-cap companies and small cap companies, we have had a divergence in valuation. they are valuation with the ftse 250 and the that the small cap have fallen by 15% this year. evaluation between the ftse 250 and ftse 100 is the lowest in six years. that is fascinating. why is it happening?

he gets these types of companies, the smaller companies are u.k. centric companies. and if the u.k. votes to leave the eu we will see the u.k. economy hit and these companies hurt. ftsemall-cap index and the 250 are outperforming the european benchmarks with the stoxx 600. roll on june 23, you can find this chart. david: that was pretty strong. technical,going which is not something i usually do. but i got the idea with intermarket strategy. this is a chart send out this morning pointing out the dreaded death cross. when it goes below the 100 day moving average. points out that back in 2001 and 2008 when this happened, it preceded a sharp selloff in the market.

2001, 30 7%. 2008, 48%. he also noted that the selloff had already begun going into that whereas this time, as we talked about frequently, the trading has been sideways. something else he points out is that may 21 will be the anniversary of the record for the as of you 500. if this technical indicator is a predictor, which a are not always, as we know, we could be in for more trouble. we have a lot of fundamental strategists saying similar things. 2000, every back to time it has crossed, the market has come down. is that what the chart is saying? julie: yes. david: a powerful point. ofa: but i will say the idea

the referendum causing divergence is fascinating. jonathan: it goes to mark barton. the story there, it seems like investors have got it figured out but it keeps driving lower. it is the market dynamics that i find fascinating. to see awould like chart with the similar u.s. stocks. i vote for julie. ♪

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presidents say we could see as many as three rate hikes. lisa: bankers, beware. with lower trading and higher volatility take its toll on the bottom line. jonathan: to our viewers worldwide, a warm welcome to "bloomberg ." how a market shifts in terms of sentiment. last week, it was listening to the fed and then it wasn't. lisa: this time, i feel like people are saying the fed is going to matter. more than before. jonathan: all coming up in the next week and that is what we

should pay attention to. up to speed on global markets -- dow futures are -54. in europe, still rolling over. quickly, ite board is a dollar stronger story. stronger on trading a poll that shows remain in the leader of the referendum. , that will be the story. find said speak boring and we are going to watch the three stories that matter to markets now. amato. us is joe billions ofrsee dollars under management. the top stories we are looking at today, let's talk fed.

the nude calls for the fed to hike as many as three times this year. and targets disappointing earnings. jonathan: top stories. this is painful to do, the fed, rate expectations. john williams said, there could be 2-3 rate hikes this year after the markets have discounted a potential rate hike next month. lisa: number two, goldman sachs latest warning to investors is -- oh. let's bring in our guest, shall we? least that was so excited to get past the fed. matter, oh, doesn't it matters. it might matter in july. we try to stay focused in the fundamentals.

this fed president says this or that. others say, don't vote. that the two fed rate hikes in the september and december. these two fed members don't even vote, why do we listen? in theey are seeing data sectors and that feeds into the decision-making apparatus that the fed has. david: do you think they will have two rate hikes? is that the right answer? joe: i think the fed has to get off the low interest rate policy and return to rate normalization. he process will be slow but it is important for the fed to do that. and underlying economic fundamentals in the u.s. are profound. jonathan: at this point, it is an important point that you raise. emphasizedthe fed

the positive pause to go forward and normalize. i don't hear that anymore. why not? joe: well, you came off a first quarter where you had .5% gdp growth. that was disappointing. we are seeing improvements in the data that we haven't seen confirmation in that and that is why we don't think a june rate hike is likely. while expectations are for growth in the second quarter, that is right before the meeting. lookingat is the fed for? are they just hiding behind something that will always be there? joe: the global economies are interrelated. they have to be sure that the u.s. doesn't operate in a vacuum. trends need to be considered when you'd think about global rate hikes.

in the last few days, emerging markets have sold off a bit because of an increased likelihood of a rate hike. ago, the or two days market was waiting on june going up to 15% and then it fell off again. david: the number -- lisa: the number two story. a note forhs has investors. strength for dollar will hurt u.s. earnings. they are lowering expectations for equities over the next few months. they're recommending being overweight in cash. i have to wonder, it is this flight to cash overdone? what will it take for people to start deploying the cash? joe: long-term fundamentals, we see the u.s. economy that is growing at a reasonable rate and we think that will be a foundation of earnings growth over the course of the next several years. we think equity markets

represent reasonable value but it in something we want to chase at this point. we have been in an earnings recession in the last three quarters. while earnings expectations for the second half of this year are for improvements, have yet to see that. some headwinds. if you think about earnings for a valuation that does not scream attractiveness. on one handthe fed and what we are talking about now -- you are saying growth is about earnings. goeseakening dollar exactly against the fed hiking twice. when is that going to do to earnings if the fed hikes twice? joe: certainly, the stronger dollar is a risk. we saw the impact of a strong dollar last year which was a headwind for the multinational earnings. so we watch the dollar very carefully. that is why our sense is that

they will be cautious. my own view and our team, we are expecting to hang. if you think about the sequencing of the fed meetings. a meeting occurring right before the election and two meetings with the september and november election. so to move then, i am more in the cautious cap. david: exactly. from the fed to a company. the number three story is target. disappointing earnings coming plunging ines are the premarket. they missed estimates even as cost-cutting efforts boosted profits. warned investors that the company faces a volatile consumer environment. tell us about the american consumer. everyone seems to agree that it is critically important to u.s. and global growth.

is the consumer there to drive the economy? joe: the consumer is vital. 70% of the u.s. gdp. we think the consumer is in reasonable shape. we have had a modest and decent wage growth. the most recent data showed hours worked and wage work increase. so take-home pay was up i percent, a good environment for consumers. lower gas prices which provide a significant boost in dividends. , and numbers last friday were strong. brick andnge is the mortar retailers, they are having their share of challenges. issue?is that the the traditional retailers are getting hurt but the money is going into online? what we are seeing. the consumer is in good shape of the retail is challenged with secular changes. in myan: i want to bring biggest fan, my mom. i reminded how ridiculous things

are what we talk about markets. i told her that data is good but the markets sold off. your point, the data is ok in this country but the bearishness -- you can't even describe it anymore. my question i have been exploring all week with investors like yourself is, at what point does that capitulate and all the downside protection notn out turns into people getting bullish but turning into an epic squeeze? joe: we saw a bit of that first quarter. act to the point on fundamentals, we saw the data in january and february as being reasonably solid as it relates to the u.s. economy. we saw u.s. markets on the equity side and credit markets trade off significantly. onif you are focused longer-term fundamentals you would not have gotten with sod over january and february.

the market is focused on data points which does affect mover markets. joe amato is sticking with us. we have a lot of free market movers. julie: not all of retail has been negative. one of the bright spots has been the home improvement industry. shares fell and blows came out with earnings that raised earnings for the year. sales of 7.8% in same-store sales up 7.3%. from home depot yesterday, we heard the first quarter was likely to be the apex. it doesn't seem like the same thing has been happening. let's take a look at staples. the deal with office depot recently fell apart. earnings here beating estimates but north american comparable sales are down or percent, more than analysts estimated. they will be closing 50 north american stores this year.

turn to tesla. stock was upgraded to buy versus neutral. and analyst writes about the company's disruptive potential that the shares are not pricing that in. also pricing in an economic backdrop that is more stable and there is more confidence in model three demand from this company. 2%.e shares are rising by and finally, a company called church & dwight. you probably know the name of products they produce. armand hammer baking soda and trojan condoms. a website reported that png and your ex might be interested in -- png mightojan be interested in buying the

business. take a look at the bloomberg. i'm looking at the intraday chart at what happened overnight. shares have since come back down. analysts are saying that a procter & gamble bid is unlikely here. that is why the shares have come back down to some degree. by the way, all of the companies named in the story have not responded to requests for comment. we are still watching the church & dwight shares. thank you so much. let's find out what is going on in the rest of the world with shery ahn. is on tow it california. it was a split decision for hillary clinton and bernie sanders last night. bernie sanders won the primary in oregon while clinton claimed victory in kentucky. the results don't change the dynamics of the race. bernie sanders is running out of chances to stop hillary clinton.

next primaries are california, new jersey and four other states. israel and egypt are close to resolving a dispute over natural gas. may settle for half of the $1.7 billion fine that egypt was ordered to pay. egypt was fine for violating a natural gas supply contract with israel. wildfires in canada are threatening oil operations. sitesave evacuated three they were restarting in northern alberta. canada has lasted one million barrels a day because of the fire. global news, 24 hours a day. powered by our 2400 journalists in more than 150 news bureaus around the world. david? david: in a few hours we get the fed minutes. we find out what the rate -- what the fed is talking about with rate hikes. up next we have goldman sachs's

chief economist. the exclusive interview is next. ♪

jonathan: to our viewers worldwide, good day. we are 14 minutes away from the market open in nyc. let's get you up to speed. equities look soft ahead of the open. the s&p 500 futures down by six points. lisa: this is "bloomberg ." investors will look for hints on the timing of the rate hike when minutes from the central bank's april meeting are released. -- said two hikes may be warranted. that we willold us

not see a hike in june. >> a less likely case. partly because the data was weaker, partly because of the fed commentary. noncommittal more about the case for rate hikes and partly because if you look at market pricing, the hurdle for them to generate pricing that is consensus is pretty high now. lisa: back with us is joe amato. joe, what is your take? joe: we have a lot of respect for the work that jan hatzius and his team do. rate hikehink a june is likely, one way or another. i don't think the fed will move. the question for me is september and december. lisa: why are hearing a

crescendo of noise coming out from fed officials, trying to warn the market? joe: there has been a level of market complacency over the last number of months. i think the fed should be sensitive to surprising the market. so there is some chance, that if you have a live meeting in june youuly of an increase, don't want to surprise the market. when markets gets a prize, everything sells off. if they raised in june, it shouldn't be a surprise. they keep saying they could do it that given the numbers, the markets would be shocked. all they talk about is data-driven and data-driven. that doesn't suggest june is likely. coming off the first quarter with a .5% gdp growth. lisa: it depends what the data is. if you look at core inflation,

you start to see a real pickup. signs that inflation has not died. so for the fed, what data are they looking at? going to show a willingness to let inflation run a bit. to let it overheat a bit. they have said that in not so many words. and i think that is a clear indication. if inflation is a little bit stronger than you expect, i don't think the fed will panic. lisa: moving this to jonathan ferro's neck of the woods, how much is the fed watching what is happening in europe with the ecb and the bank of japan? joe: some of the decisions the bank made over the last few years have concerned areas of the globe, whether it is china or european growth. these are things they have to consider when thinking about overall rates because the u.s. rate structure is something that every other market in the globe

prices in itself off of. jonathan: joe amato is sticking with us. 10 minutes to go. julie: i wanted to bring up apache, which is surging. website a report on a saying that occidental petroleum is about to announce a takeover of apache. the current market cap is $20.8 billion. a have a town hall meeting today. we should emphasize that we have not confirmed this news but we want to point out that the stock is moving on these headlines even if they are not correct. occidental is moving lower in premarket trading as well. it should be noted that as we watch. we will bring you any developments on this as we get more. that news forup, banker bonuses. a new report says the bonus pool could be cut by as much as 20% this year. next on "bloomberg ." ♪

recordafter last year's bonus drop, bonus pools could continue to decline by as much as 20% for some wall street workers according to a new report. joining us with more is laura keller. is not looking good for bonus pools. how did we come by this information? from a consulting form that looks at this every single year. they make this prediction around may and they take a look at what is happening around the first quarter and a half. they make a judgment and they tend to be pretty on spot. maybe not the actual number but they do give a range for the different categories they look at. 20% is the overall number for certain categories. back to thatto get point. are there any gainers or bright

spots? laura: there is one tiny spot. tiny, tiny. it is more in the commercial and retail bankers. to about 5%re flat up but everyone else is down. private hedge funds, equity and different sectors in different parts of the banks. jonathan: how much of this is regulation versus performance? laura: they are tied together. if the regulators pullback, then of course if your bank is making less money you are going to make less money. these are tied to how much revenue and profit and total referring -- total return you are making. regulators are looking at these bonuses. jonathan: they're coming in and doing this. bonus.t to the the feeling you get with this is that they will cut bonuses

regardless of performance. lisa: it seems like they are cutting because they can. where are some of the bankers going to go at this point? if everybody is cutting, there is no competition. laura: you don't have a lot of power. cutting, yous can't say look, i'm going to jpmorgan. is a powerful point that you raise. at the same time, in any business, if the income is down, you have to find the money somewhere. it's not unusual to cut bonuses. laura: it makes perfect sense but it is the sort of turpitude that people exist in. they make so much out of that and the percentage of their pay comes from bonuses. so to not be sure what it is going to be is hard. the reduction in in bonuses has come from the fact that banks have put more of an emphasis on salaries and have

tried to increase people's salaries to offset the decline in onus is? laura: you saw that with a lot of different jr. bankers. showing them that there was big -- there was more of a stable package. wouldn't have the rocky years, as much as possible. he think that is important. in the end, it is still a large percentage of the conversation. jonathan: laura keller, thank you so much. this is "bloomberg . " futures look soft. negative five points. there is a strong dollar story in the fx market. ♪

jon: mrs. bloomberg . -- this is bloomberg . this is the situation on the futuresd, futures, dow

down a quarter of 1%. fed rate expectations starting to rise a little bit on the margin. futures negative four points on the s&p 500. over in europe, the ftse down by 6/10. -- advancing his crude. 1% on theup 1/10 of session. brent, on $50 watch. with thellar story exception of cable with the -- the pound at 1.45. julie, about 30 seconds into the session. julie: over the past couple of days oil and stocks, the correlation is not there. we should mention we are looking ahead to 10:30 when the weekly

oil inventories numbers come out in the u.s. we might get clarity as to how the wildfires in canada are affecting supply and the united states. we could see changes in oil and perhaps in stocks at that point. we're seeing a selloff not as big as yesterday. down about 2/10 across the board . some of it does have to do with retail. we can lay it at the feet of target. the stock is plunging a .5% today. comparable sales coming in with a rise of 1.2% but analysts had been predicting a rise of 1.6%. isecast earnings-per-share below estimates. brian cornell says it is a volatile consumer market. costco.g walmart and we have yet to hear from walmart with its earnings as well. there could be another shoe to drop. you heard jon talking that was

going on with the minors in european trading. we see the prices of underlying commodities fall. freeport-mcmoran, an example of that phenomenon. we are watching fiat chrysler. yesterday was falling on an analyst downgrade. today shares are bouncing back but off their highs. there was a report earlier in an italian newspaper that gac might be interested in buying a stake in the company. gac denied that report to a different newspaper so that is what shares went up and had come back down to some extent in italian trading. the u.s. hanging onto a gain of . jon: the fed is very much in focus. joe amato says there are too many unknowns surrounding not just the fed with the u.s. presidential election as well. if you want an example that

politics matters look at the move in the fx market on sterling's. , aftersidential election the june referendum in the u.k. will be the next one on the horizon. what do you say to clients with the ask you about it and say what is it mean to me? joe: i think the u.s. elections are going to take a lot of air out of the room over the course of the summer into the fall. if we go back to what does it really mean and one of the fundamentals, i go back to the comments we talked about earnings growth. what's going to propel earnings growth, economic growth to stronger than what we seen over the course of the last 12 to 24 months. the equity market has essentially been flat since 2014 read we need to see more earnings growth and when you think about the fiscal picture, whoever ends up getting elected president is most likely going to be the least popular elected president or with the most negatives than anybody we've seen.

david: that is empirically true. if you take hillary clinton and donald trump by far the highest negatives ever at this point in the race. joe: when you think about what can they get done, it will depend on who controls congress. if you think about things that can help the equity markets, corporate tax reform, repatriation, lower rates, what is the likelihood of that cutting done with an unpopular of thated government -- getting done with an unpopular government? maybe corporate tax reform. it seems like both sides are supportive of infrastructure yet it may get caught up in the corporate tax debate. that could help. more sensible regulation. how does that play out? those are things that can help propel the market but if you have a divided government, more hardened positions on both sides, it does not present an optimistic picture. david: if the senate were to go --mocrat

joe: certainly it was divided government in terms of getting something done is better to see. it is so early today to speculate on which side is going to take the senate or the house -- this has been probably one of the most unusual election seasons we've seen in a long time. jon: i don't want you to have to predict the politics. for the markets, is gridlock the best solution for equity markets? it's the status quo. we got what we got and move on with life. joe: gridlock could help avoid extreme results on both sides. there are important fundamental things that from a fiscal perspective are important in developing economic growth. what has happened over the last three to four years as the fed has had to really carry the bulk of trying to get this economy moving again with monetary policy. stephanie: is the fiscal drop

more important than ever before in history just because of how big a role the fed has played in dominating markets? joe: the fiscal not played its part over the last 45 years. that has been caring more than water. lisa: if they do not take over on the fiscal side, the fed, what do they do? joe: i think we have a bit of more of the same which is grinding slow growth, not breaking out from that 2% range that we have achieved over the past number of years. it you really need to see to get more significant income growth. you will see growth in the three to 4% -- 3% to 4% rate for the gdp and that is unlikely if you don't have helped from the fiscal side. david: we were talking about sideways movement for the last year or more in the equities market. listening to you, are the

markets reflecting reality? when you talk about slow grinding growth, not a lot getting done in washington, not awful, not great. p/e ratios around 17. maybe the market, is it reflecting the reality? joe: when you look at the longer term trend the answer is yes. markets generally take into account the fundamentals. of volatilityds were fundamentals got disconnected with how the markets were reacting but that bounced back. if you are asleep from january 1 to march 31 you woke up and said the market is flat, what happened. during the quarter it was a huge amount of volatility. lisa: do you think an indicator like the yield curve that has narrowed to the smallest margin since 2007, do you think that is an accurate indicator of a lot of concerns about u.s. health? joe: i think the yield curve is

something to watch closely. there are lots of factors economists look at to predict recessions. many of them are not particularly accurate. the inverted yield curve is an accurate predictor of economic recession. the fedarrowed because is increasing rates in the short and/or the expectation rates and the long and is being way down because our rates on the long end are so high relative to what you can get on the development of. david: is it as reliable and indicator when we have negative interest rate policy in some foreign locations which draws people into longer-term u.s. treasuries to get yields? does that skew? joe: i think that is an example of qe skewing traditional economic activity but it is still subject to watch closely. jon: my perspective against the yield curve -- on the margin, it may not indicate a domestic recession but it indicates global softness.

there's a search for yield for a reason to read the fact that the ecb feels it needs to be -- it needs to pump qe every month. for me it still tells you something globally. lisa: yield curve, still accurate. joe amato, you're sticking with us. coming up we take a closer look at targets earnings and look ahead at what to expect from walmart. david: in the next hour charter communications ceo tom rutledge, his deal to buy time warner cable was sealed making chart the second largest cable operator in the country. ♪

david: this is bloomberg . i'm david westin here in the enterprise greenroom. virginia governor terry

mcauliffe on his state's economy. shery: this is bloomberg . volkswagen is trying to diffuse investor criticism in the wake of that image and cheating scandal. vw is working on a plan to in improve profits. .t is outlined in a letter hot has slammed vw for excessive pay and bloated costs. security breaches are prompted jpmorgan to restrict access to the system that transfers money around the world. in recent weeks jpmorgan has imposed tighter controls on the interbank messaging service. cyber thieves used swift to steal $81 million from bangladesh's central bank. whole foods is trying to get rid of the idea that thanks to its prices its name should really be

whole paycheck. next week the grocery chain will open the first of several smaller stores that will so cheaper private label products. 365 by whole foods markets. latest business flash. david: now we will go down to the nasdaq. that's abigail doolittle what the latest on two specialty retailers moving in early trading. we start with staples. abigail: staples is volatile today. up more than 2% in the premarket. opened down more than 1%. really flipping around. all this after the office-supply company beat first-quarter earnings and sales estimates offered in-line guidance. second quarter revenues are expected to decline any year-over-year. of all of this bloomberg analyst saysshe mus it is expected considering the company outlined strategic plans last week after the merger with

opposite depot was terminated. ceo ron sargent emphasized plans . this could be welcome news for shareholders with the stock down with a 50% from when the merger was announced last february. equally volatile is the other side, office depot. shares are sharply higher as investors evaluate what results could mean for office depot. another stock down sharply from the merger. thank you so much. let's take a closer look at target earnings release earlier. of the company is down more than 9% in trading this morning. the most in seven years after they beat estimates. amato, andus is joe joining us is shannon pettypiece

tout make sense of it all. why are the shares down so much? shannon: they beat estimates, doing a good job. on earnings-per-share. shannon: they're doing a good job and trolling costs but when it comes to same-store sales, how many more sales did you have it the existing stores compared to year ago? i was up 1.2%. that's not great. analysts were moderating expectations on what those sales would be coming into this. some of them lowered expectations and they still missed expectations on same-store sales. then the ceo said second-quarter that's not going to be great either. sales would be flat or down 2%. a really ugly picture in the second quarter. the company stuck with guidance for the year. conference call with reporters a few minutes ago. he says he's still optimistic. saying it is too early to roll things out. we are in the first quarter for retailers and what the rest of the year's going to look like. no doubt a challenging

environment for them right now. the consumer has slowed down spending in april. jon: stock lower since 2014 november. we close here for the biggest loss's 2008. but there's love the 2008 parallels. always the temptation to make a micro story in macro story. the temptation is great in this case. should you? shannon: target is making a macro story. the areas they focused on a, home, kids, babies, they say things look great. macro, the environment is not good for the consumer. what we've seen with other retailers is the consumer spending money. april consumer spending numbers look good. spending it on home improvements. lowe's had great numbers. home depot was pretty good. auto sales have a record month in april. travel is supposed to be a record high this summer. they're spending it not at gap, tomorrowt

is walmart. lisa: let's make a micro story macro. sense of how far these cost cuts have gone at retail companies. how much more these companies have to cut? joe: this is not a macro story to go back to the point. lisa: in other words, fight the temptation. joe: i think the health of the u.s. consumer is good. we have seen a number of different data points that suggest the consumer is in reasonable shape. these are secular changes that are going on at retail that are affecting these different segments. department stores are terrible numbers. brick and mortar retailers generally tough. home goods, the situation in u.s. housing is actually strong. it is reflected instructor performance and retail. david: this is a potentially

profound change within the sector. it's not just they missed same-store sales. they missed overall revenue. if there is growth in retail sales and they are losing market share, they are losing to somebody. if they can't figure out a way to get in the online business and where those other dollars are going to can really change the structure of retail. joe: i think retailers have to rethink the cost structure they have. they are in many cases stuck with bricks and mortar that is expensive real estate they will have to reshape. lisa: as we undergo this transformation you have to wonder, shannon i will ask you, how much more room does target have to cut costs? shannon: that is in connection point. we talk about labor costs. the ceo was asked about it. they know they have to increase labor costs to be competitive. walmart has been increasing minimum wage, target reportedly had to follow walmart in a lot of cases and raise wages. they have online. they have to invest in online to

compete. where do you squeeze? that's why think you can get a micro story that turned into a macro story because these are big retailers. walmart has 1.4 million employees of the largest employer in the u.s. if walmart is not doing great, what happens to those 1.4 million employees? at this point walmart is still investing in employees but how long does that continue? jon: target, over 340,000 as well. thank you very joining us. joe amato, neuberger berman, great having with us on the program. coming up, bloomberg markets with mark barton today. we are waiting for fed minutes and not just equity selling off what bond market as well. yields backup of it. mark: patrick show its will join us. jpmorgan assets management. he will be talking us through the fed minutes. big news out of the u.k. today on the labor markets.

some interesting referendum polls. all of that to look forward to. big news from burberry. andrew roberts will be talking through this big turnaround. the luxury company has announced . is it time for chief executive officer christopher bailey to rein in some of his responsibility? maybe share some of those responsibilities? that's what some analysts are saying. great story on the bloomberg entitled the commodity that no one knows about but everyone wants to buy. you know the commodity, what a wonderful story. we will tell you everything you obe. to know about nai tom rutledge joins us as the company closes its $55.1 billion takeover of time warner cable. jon: looking forward to the program. something for you guys to keep an eye on. s&p 500, close to erasing the

gains this year. the story is flat. david: we keep trying to find a way for it to break out and it won't. i don't we have the power. it's not a potential brexit causing hedge funds to sneak to london but taxes. we will find out next where they are going. ♪

jon: this is bloomberg . let's get you up to speed. the s&p 500 down about 1/10 of 1%. very close to a raise in all of -- close to erasing all of the gains for 2016. in europe going into the close near session lows on the ftse. very much a stronger dollar andy with euro-dollar dollar yen. we were talking about a flatter yield curve repairing some of that. 10 year yield up about four basis points.

that is the scorecard. is interesting that the 10 year is gaining because -- losing, rather. you have got that optimism. that underscore a feeling that maybe things are not as bad as everyone has been expecting in the u.s. sort of an underscore of a lot of the talks we have been hearing. david: maybe people in japan are saying they are not going to go deeper into kiwi or negative japan.t rates in -- into qe or negative interest rates in japan. it's time for bloomberg trends when we take a look at top stories on terminal. this is what is trending. you find these if you go to readgo on your terminal. lisa: i was looking at a story by mike columnist colleague, christopher langner come a looking at how

even though hedge funds in new york and london have been cutting back hong kong is still hiring. you think of china as being an area where people talk about a debt bubble, the economy slowing yet it has been a right spot for tax reasons. people are still saving. i find that so interesting. generally in asia they are growing. singapore, hong kong. lisa: people talk about the asian economy is struggling and yet they are building. david: the one i singled out was deutsche bank. which of bank is having their annual shareholders meeting tomorrow. they have had some rough times of it. last year they got rid of their ceo because of it and the things that jumped at me were, there was a demand for more capitalization. is an incredible overhang of their legal problems . they still have more legal problems than any other european or u.s. bank. jon: the capital rate initiative will not go away.

we have this contest in europe, who's got the hardest job in the name that comes up more often than not is mr. cryan. mr. gilbert said the same thing. one of the hardest jobs in banking. that's the start for tomorrow -- that's the story for tomorrow. coming up later in the day, 10:30, betty liu and alex sherman speaking with tom rutledge. 2:00 p.m., fed minutes from the april meeting. about 26 minutes into the session. stronger dollar story. all of that ahead of the fed minutes. ♪

betty: 10:00 a.m. in new york am a 3:00 p.m. in london. live from new york, i'm betty liu. mark: i mark barton.

this is bloomberg markets on bloomberg television. betty: we will take you from new york to london to boston in the next hour. shares of target are tumbling after first-quarter sales missed analyst estimates. the discount chain delivered a disappointing forecast. we will preview the latest fed minutes which come out a bit later area at how concerned is janet yellen about a potential brexit? will it affect the fed interest rate decision next month? betty: we will talk with charter communications chairman and ceo tom rutledge as he completes a $55 billion purchase of time warner cable. what will that mean for the future of the cable industry? let's hedged trade to the markets desk where julie hyman s