financial stocks are selling off on friday. the future of low interest rates tarnished the appeal of bank stocks. the dollar's demise, job portal says the biggest dollar drop until december. other central banks around the world adjust. david: welcome to bloomberg . i am here with pimm fox and amanda lang. program sincerst the stunning jobs reports. mm: the global market has been adjusting based on that one report. great going to have some

guests today. angela: she's going to be talking credit factors affecting the stock market in this environment. jack lew is going to reveal if china has made any progress or the market is more vulnerable to selloffs. that's another bloomberg exclusive. let's check in with our team for in-depth coverage. michael mckee is on janet yellen watch. anna edwards is talking about brings it. amanda kern is with the start of u.s./china talks. janet yellen will be speaking this afternoon. let's get the latest with michael mckee. what you going to be looking for most importantly?

mike: since the jobs report, markets have pushed any fed movement packet to december. that's gotten some blowback from fed voters. and bostonnd fed says a rate hike is still on the table. we want to know if she is on the same page and of so for when. she may not be as dovish as a lot of people think. she may take june off the table. she wants to preserve her options for july. she can go back in time to the 1990's when the economy was about as good as you could get and talk about the volatility we saw then. and 1999, you could see the jobs creation went up and down like crazy. number that discouraged workers. that has fallen to the lowest since 2008. an excuse for saying

we're just going to wait and see. we are going to be hearing from janet yellen at 12:30 p.m. you are going to have an interview with dennis lockhart. give us a sneak. mike: we want to ask him why june was so weak considering the economymber suggest the isn't going off a cliff. we saw positive growth in manufacturing and service. it is, but not bad. how afraid to see that inflation could break out? david: thanks so much to mike key. bloomberg go at the top of the hour. michael mckee will speak with dennis lockhart in an interview you will see here on bloomberg first.

angela: we are seeing the pound take a beating. a new pull says that more britons may be favoring leaving the european union. anna edwards is in london. : the markets are reacting to these polls. the pound is taking a pounding in the asian session. it's losing ground against all developed market peers. we saw pound volatility at one month. just to recap, we saw these two poles overnight. they suggested a lead campaign. the brexit camp 4% ahead. then the pound started to recover. just as the pound was recovering, we got another poll in the middle of this morning. it showed in even bigger lead

for the brexit camp. somebody there was telling me a lot of the research for these polls being released was done during school holiday. bear that in mind. that hasn't changed the fact that markets are reacting. angela: david cameron is saying it would light a bomb under the u.k. economy. what sense of clarity do we have? anna: it's unknown. onre is a lot of tension both sides at a lot of heated debate on both sides. toe colleague francine talk a labour member of allah -- parliament. he highlighted something a lot of people are focusing in on here. ton people go to the polls answer the question, that's a question they are answering.

there are other unknowns of go along with that. a lot of that will be up for debate end after the referendum. it would be up to the negotiators on both sides to work out what exactly that relationship will look like. david: now to another relationship. u.s. and chinese leaders begin talks on the economy. edna get the latest with karen in hong kong. edna: at least the talks are showing invested interest. jack lew is here. we don't want any shocks coming out. the exchange rate. china will agree with that. better communication out

of beijing in beijing will agree with that. tension might arise on steel. china is being accused of dumping steel around the world. there is a glut of oversupply right now. they are accused of shipping steel it very cheap prices. china is tackling the problem. not seen muchhave action on that front. we haven't seen widespread layoffs. china has to keep an eye on social unrest and its own unemployment situation. that could be three times higher than the official reading. pimm: you talked about dumping and one other thing is the stock arc it. salonl take more than big to get international bargain hunters interested in chinese stocks. nda: there is a view going

around that chinese stocks have a way to go. if you consider that it's fragile, the economic fundamentals are quite weak. look at the debt picture and the credit that keeps things going. , it's on a the yuan five-year low. there are grounds for china stocks to fall. you have to consider there is a lot of government money underpinning the stock prices. that's not going away anytime soon. on see the index coming up june 14. ais is all pointing toward baser chance on a stock races. maybe there is a floor and stock prices rally from here with some of these key positions coming up. pimm: thanks very much.

well done. let's turn to julie hyman. julie: everything we have been talking about, how is it playing out in the markets? chiefly among these items as people pushing back their expectations for when the federal reserve may raise rates. that is causing market disruptions around the world. if you look at bond markets, the australian 10 year, the yield is fallen to a 10 year low. you are seeing that play out around emerging markets. market,across the stock you see the ftse 100 rally. but else bears mentioning is the commodity market. it's also on some comments of the head of economic development in abu dhabi.

he expects oil to reach $60 a barrel by the end of the year. the oversupply is working down more quickly than expect it. above $50 pering barrel. the bloomberg yandex is rallying. u.s. futures are not changing much at the moment. amanda: here is shery ahn with first word news. ahn: more information from the panama papers. there were at least 2400 us-based clients over the past decades and they set up 2800 companies on their behalf. that's according to the art times with reports companies were established in the virgin and otherd panama places that specialized in hiding wealth. the islamic state militants of been firing at civilians as they try to flee the violence in falluja.

haveber of those civilians an killed as they attempted to cross the euphrates river. 50,000 civilians remain trapped inside a falluja. yesterday, the southern edge of the city was secured by iraqi forces. it's a largely agricultural area. tributes are pouring in for the man known simply as the greatest. homily was a three-time heavyweight champion, but his fame transcended lock seeing and made him a global icon. he died friday night in arizona. he shook upama said the world and the world is better for it. we are all better for it. muhammad ali was 74 years old. global news 24 hours a day 100red i our journalists in bureaus around the world. up, and extended

time with lower rates. what will drive the equity rates are here? we will reveal what parts of the market are headed for change. later, jack lew discusses china's during responsibility in the global economy. it's a bloomberg lucid you will -- exclusive you will not want to miss. ♪

amanda: it's time to check in with julie hyman. i was talking about a global commodity rally. some of the metals are trading higher. demand for steel

output in china, that means a lot of demand for iron ore and it means futures are up to most on record. you've got the european mining stocks rallying today. looking at some of the u.s. stocks, walmart is upgraded to buy. the analyst of been doing some store checks and consumer surveys. store investments are driving improved store conditions. particularly in north america, the stores are in the early innings of a turnaround. remember when we talked last week going into this meeting, it's the clinical oncology, a lot of study results get presented. there were some results that came out from a bristol-myers drug combination to treat lung

cancel -- cancer. that will be bad news for a company that makes a competing drug. the bristol-myers drug will look more attractive by comparison. those shares are do by 2%. david: thank you so much. european stocks are little changed after posting the first drop in a month. u.s. futures are shrugging off the disappointing jobs numbers. withed take center stage janet yellen speaking until delta. joining us is a chief market strategist. they reacted strongly to the friday report. equities did not. jonathan: there are two stories. you had the banking sector poll interest rates is a problem. the bond market did not respond. this is what you have.

we have unemployment below 5%. core inflation is above 2%. the fed is waiting to basically start. all signs are go. this is one week number. the general view is things are fine. david: you were relatively bullish on equities in the u.s. did it change or view it all? jonathan: this is the bottom line. this is the most uninspiring economic cycle we've ever seen. it just keeps going at this below normal level and it's not a bad thing for equities. that's what investors have a hard time with. it's the conundrum between stable and weak or tepid. as beingt uses that very supportive. amanda: theoretically, the fed doesn't care about equities. we did have the forecast lowered.

that does actually get the fed's attention. give me a prediction. what will yellen say today? will it be as rosie as we think? jonathan: it's heads language. where unemployment is, the fed has to prep market for the reality that between now and the end of the year we are likely going to have higher interest rates and she needs to bring the market along to that reality. vic's, it'sk at the way below normal. stress,ook at economic it's really draining out of the system since february when the market is under so much pressure. now does notght indicate the fed has a problem. encouragedyou

because of the dollar strength? to raise.ot likely that means the dollar will not strengthen and that will help is. -- equities. jonathan: the market once a stronger economy. the dollar is positive for equities if it stronger. it draws foreign capital into the u.s. market. it's a unit in yang. stock multiples. it brings in foreign capital. the dollar alone is not a concern. but is a concern is as the dollar get strong, it's bad for oil prices and commodities. june, july, or september? jonathan: july. pimm: and that's it? jonathan: i think we will have a couple is year. amanda: jonathan is going to stick along with us. the british pound was selling off today as the leave camp is gaining support.

we are trading the currency wars next. ♪

amanda: we are stuck in a sideways market. its benefit ride to get that way. take a look at that grade jonathan is with us. one of the question we wonder is how we break out of this. it's not going to be gdp expansion driving profit. is it going to be margins? jonathan: i don't think it's going to be profits being fantastic. i think it's going to be stock multiples. let me paint a positive scenario. 4.7%.ks have 70 yield of -- compares to

treasuries and its much higher than corporate bonds. its much higher than european stocks. i think that's the thing that investors underestimate. amanda: we can throw up. this is a very -- we have a chart we can throw up. growthg to see dividend continue? include this in the s&p, we just hit all-time highs. it's not as if we are a year away from this. corporate profits will be up for percent. that's not an inspiring number. that,keep at a place like you will see yields remain stable to positive. the only way that i know that stocks go up is if other

people are willing to pay more money for them. who are those people? where is that going to come from? they are not going to come in and buy stock. most people can't get them excited about the equity market. how is the money going to come into move the market higher? people are taking money out of the market. jonathan: traditional contrarian investors would say that's why the stock target goes up. when the public hasn't participated, if the public does thesome confidence in here, level of concern, i took professional investors and they are so inspired and concerned about the things that can be wrong. volatility,at

that's 30% below normal levels of volatility. it.ure we can measure it its way below normal. companies are running with much less leverage. they are more service-oriented. they don't have as many zigs and zags with their models. david: what do you like? jonathan: the ones that are least leveraged to the economy. health care looks really inexpensive. staples, the products we use every day, they make uniforms for restaurants or people who haul your waist. those boring businesses that have long-term contrasts -- contracts look terrific. this is really two areas. we have late stage industrials

that would sell mining equipment. have material companies. energy is much better. we don't consume copper unless we're going to build something. banks are in trouble if the economy doesn't pick up. amanda: it's good to have you here. up, avoiding another august selloff. jack lew reveals how china can avoid triggering another market meltdown. plus, what does the dollar's weakness mean for european central bank? volatility in -- the pound just begun? ♪

david: this is a "bloomberg ." we're going to take a look at which assets are moving the most. let's look at equities.

after the big surprise of the jobs market, there is a lot of talk in equities. up, it is directly related to the second thing we talk about which is the british pound, which is down. two polls came out over the weekend which said exit from the eu was more likely than they thought. , theuan is down interesting thing here is if you look at the level of the yuan, it is like last august. last august, the markets went crazy when it went down but the markets are not reacting the same way this time. and finally, commodities. commodities are green across the board. the interesting thing here is that this is up into a bullish markets now. commodities are back up. that is the report. pimm: we are two hours away from the opening bell on wall street. what you need to go at

this hour. wall street is on fed watch today. be speaking atll 12: 30 eastern time, you can watch that here on bloomberg television. economic growth will slacken to its lowest growth in four years, that weighs on the outlook. this is reported from a survey on the national association of business economics. and general electric is considering changes to the employee compensation program. they are reviewing whether to scrap annual raises and makes of greetingndard staff on a five-point scale. let's find out what is making headlines. >> some new momentum for favorite in leaving the european union. a new survey found 45% say they would choose to leave while 41% say they would vote to remain.

ahead -- thempaign race has tightened in the past have weighedtors the camp. hillary clinton was the tory us in the puerto rico democratic library. she is a few delegates shy of clinching the presidential nomination. she could achieve that tomorrow when voters go to be polls in california, new jersey, north dakota, south dakota and new mexico. bernie sanders campaign is denying claims that -- saying the allegations are completely false. bernie sanders is criticizing the way the islands primary was run. ad golden state jumped to two-game lead over the cavaliers in the nba finals last night. a 110-77ors cruised to victory.

game three is on wednesday night. global news, 24 hours a day. powered by our 2400 journalists in more than 150 news bureaus around the world. i am shery ahn. the treasury secretary is in beijing for the u.s. china strategic economic dialogue. , hen exclusive interview says he has seen china make progress on the currency issue but the country has a long way to go when it comes to market reforms. >> i think where we have challenges that are of the structural reforms in china. the question of excess capacity is a profound one. we are seeing global markets in steel and aluminum being distorted by excess capacity. for china's economic future to be bright, they will have to deal with the question of excess

capacity. effect onorrosive future growth if you let the problem linger. but it is a hard transition. erik: hard in a political sense? you have the prospect of finding work for aliens to would have to find different jobs. >> yes, and we know from our experience that dislocated workers is a serious problem politically and socially. it is a challenge. policyk to economic makers and they can retrain people who are 50 years it was -- 50 and younger. threading that needle is hard. but you don't have a choice. if you have excess capacity and you are grinding down your future potential growth, that is not good for people either. so they have made the policy commitment to make the changes and they now have to implement

and execute. china, the line between government and state owned interest is a hard line to see. the provincialf governments that are the owners of the excess capacity. make of theou market reaction to what we saw over the currency markets in the last few months? >> a couple of things. first of all, but i think the world saw was something that was confusing. and not well communicated. to fears thatse china's economy was in a much weaker place than it actually was. or was perceived by policymakers to be. china's economy is not an ink is economy is not as interconnected as the u.s. economy. what is interconnected is the

flows of purchases. imports and exports. if you are an exporter of a developing or emerging market of raw materials to china, i do think growth is dropping faster than it is, it has a huge impact on what the future looks like. i think the world saw a policy that was meant to be a move towards a world market or exchange rate but it was interpreted as an attempt to because ofthe r&b fears of economic weakness. communicated more clearly, i think it has kind of settled down. but it underscores how important it is when one of the two largest economies in the world, becomes more adept at communicating its policies and its past and analysis of the economy, because the world and what's are hanging on

china thinks will be the next step in its economy in so many ways. >> have you made that case to your chinese counterparts? that they need to regulate more clearly? >> i had many conversations. ofaugust, in the week disruption, i was on vacation but i was on the phone with china for a bunch of my vacation, urging them to explain what they had done and when i understood what they perceived to be reaction to be, i immediately said, the ad is not what the world.. and it took them a few days but the deputy governor of their central bank went out and fought for clear explanations and started to help settle down. the governor gave a long interview and that helps. the thing about communicating government policy is that, as we know, it is not something you do

once. it is every day, the world is wondering, are things the way the world was yesterday? are you on a new path? it is something you have to keep at. an exclusiveas interview with jack lew. one of the most read stories on the bloomberg this morning. nextconnected for the hour. sinking to pound is a three-week low and volatility is soaring. showis after new polls more britain's favoring an exit from the union. deker.eddic we are in the middle of the campaign. i would not like to comment on the campaign itself. we are talking about a triple

deficit situation. public sector that is in 4%. and all that suggests that sterling should trade lower. this country has to build up savings. it will be difficult to find domestic investment opportunity and you will have exports taking place, which will lead to a lower sterling. amanda: where the opportunities that you are seeing in the market? hans: where do i see opportunities? -- lateue to recommend last year, we were recommending that this would be the year of the japanese yen. that has a lot to do with the deflationary trading dynamics, they will come back again. what i mean with that is that interest rates are fairly low, difficult to groups that are

lower from here. and at the same time, you see deflation expectations are falling at a faster pace. the result is that we are supportive of the yen. the flow of the fund situation and what you see marketnd it is the money flow that drives the yen, and it has a lot to do with a substantial outpouring of , it does require more currency action. it does require money market flows going inside the japanese yen. that treesike to say don't grow out of the sky. at what point does the yen get so strong that they have to intervene? think about the avenues that are available. look at quantitative easing and negative interest rates. easing, you will

see that all of these have been deployed in the past. and the reason why this is happening is an exertion of the yield curve. the yield curve is in the negative territory rate. and that makes it so much more difficult to lower levels. that is where inflation expectations can drop. now that implies that at one point we could get into a situation where monetary policy will be conducted in a way that will change and we will get helicopter money. commodities and currencies. tells about the future? what about the aussie dollar? you are right. the australian dollar is in a situation where insulation numbers have been coming out for the months of may and inflation

year over year was declining down to 1%. therefore, you see the five yield sector into the tenured sector going to a record low and that is taking the australian dollar lower. the question is, why is that? it is very important with china. china devalued its trade over the past few months by almost 6%. and if you think about what is inflation on expectations of trading partners, and here you see that. thea is demanding 50% of aluminium market and the reason , it is because china is supplied driven. the demand of commodities will be much more in line with the

economic importance, and that is 30% of the global gdp. not the 50% currency reflected in the commodity market. therefore, i think that commodities will stay under pressure. amanda: jack lew is putting pressure on china around its floating rate. you think that will have any kind of effect? hans: that needs to be seen. but what he was pointing out, thee correctly, is difficulty concerning overcapacity. so you have an economy that is running overcapacity. then you have deflationary implications, and in as much the overcapacity is utilized by exports, it has a global impact on inflation rates. and he is also right to address this -- the question is, how do you solve this? you can solve it by making china

semester demand position be shorter. redeker, great to have you with us. still ahead, banking on a rate hike. jobs numbers seem to put the fed on hold. could bank stocks becoming too much on higher rates? ♪

david: this is "bloomberg ." bloomberg will have live coverage of janet yellen today where she is speaking at an event in philadelphia. banks feel the pain after

friday's worse than expected in jobs report. the s&p 500 had the worst day in two months. jeffng us from chicago is harte, he covers several large financial companies. , it is that dead money? jeff: i don't think it is dead money. a big focus is that the jobs number, what does that mean for fed rate hikes? is the economy. we weren't expecting a rate hike until later in the year, anyway. we do have continued economic growth. one data point is not a trend. couple revisions for a of months before do make it a little more concerning. when i look at bank stocks, i think as long as the economy keeps chugging along with slow growth, which we think it will, inc. stocks should be ok.

it will be a volatile ride in the short term. pimm: the fed is looking at new requirements to force banks to hold more capital on the books. will that affect their performance? jeff: it's never a positive to have to carry more positive, as far as returns go, but most of the big thanks are looking at higher and higher capital requirement levels and they are already in excess of where they need to be. they have capital more quickly than we can find uses for them. i haven't heard anything surprising recently. be, when willill be fed start letting them return higher levels of capital as opposed to retaining so much. big big capital ratios are going up each year, even with the andent level buybacks dividends. so capital keeps building but it is factored into the group. in this economic environment, we could still be talking about

north of 10%. but to the extent that capital levels keep going higher and higher forever, it would become a problem. amanda: is it not a problem when you have fed heads who are saying, we will not break up the banks but we will make it so difficult for them that they may consider breaking up? credit squeeze, there are banks that are really struggling with what their business model should be. what do you do with that noise? for starters, it is not unusual to hear that kind of talk. it isn't like anybody change their tune. at the right way to think about it is whether it inc. is too big or not shouldn't be a regulatory decision but an economic decision. looking at the numbers, even with the current liquidity requirements, it makes the case for a big bank, like a jpmorgan and even the other day -- even

--that is the key question investors have to ask. itn do we fall below what should be? we are not there yet. david: when to reload was on with us last week, he strongly signaled that the largest banks have pressures to go up. don't investors have to take into account the uncertainty of not knowing what their role is? jeff: when you look at the market in general, it counts for expectations. we are not looking at bank the currentg, capital levels are where they're going to end. we figure they will keep moving their way up. it would be inevitable that some force when the buffer works its way in. something else they said which the market has overlooked is that they expect there to be offsets to minimize the pain, i believe they said. to the extent that banks are

allowed to reduce or that their buybacks on suspension in a stress scenario, it would make things easier. is tot think the fed goal keep taking capital ratios up until they are sitting at 20% capital and can no longer function. a lot of the increases we are still hearing are still factored into people's thinking. it wasn't new news. the last point to you here, when are banks going to start giving out posters in order to have people to put money in the banks? jeff: yes, the toaster day may be in the past. toasters in general. but one of the reasons we like the universal banks with the larger cap is because it is a tough banking environment. and it makes the banking scale all the more important and the big banks have that. as we move forward, with a slow gdp growth, it is a tough

environment for banks but the big players from a scale perspective are better positioned. when you get down to the smaller side of the banks, the end and a wave that we have the waiting for, it is coming. there will be a consolidation of the smaller bankers. pimm: thank you very much. that was jeff harte talking about banks in america. jpmorgan is yielding 2.9%. amanda: you get nothing in your savings account but if you own your stocks, you get a decent yield. --ll ahead, we have official have we officially entered able market? ♪

amanda: welcome back to "bloomberg ." charts.me for off the it has been a rough year for the commodities but it may be turning around. a rally in the commodities? julie: the rally has been going

on but it is the sheer magnitude that we wanted to note today. officially, the bloomberg commodity index reached its low in mid-january and it is now up by about 21%. back in a bull market. the line here is the dollar index. we tend to see that inverse relationship between the two. that is what has been happening in general. the oneshat are jumping out? julie: oil has been a big part of the story. largereveral magnitudes than other commodities and i was curious to see if across the spectrum it was the same. heating oil is here in one -- in white. crude oil is here. heating oil rallied more but then fell more. and a quick check on soybeans. the premium of november futures has tripled.

that is the red circled area. it has to do with the weather. amanda: p regarding supply demand? julie: exactly. amanda: there he interestingamanda:. thank you. that is it for off the charts. pimm: that is it for the first but of "bloomberg ," much more coming up. howard marks joins us for an exclusive. ♪

amanda: monday morning quarterback. how will janet yellen respond to the payroll numbers? david: briggs it concerns. the british pound heads lower

amid volatility. could european stocks be the next shoe to drop? pimm: and commodity come back. hi.umps to a eight point has this rally gone too fast? we will go over the details. amanda: welcome to the second hour of "bloomberg ." pimm fox is standing in for jonathan ferro this week. janet yellen will speak in philadelphia and we will have it live. david: investors will be watching closely. have great guests still to come, including howard marks. from the central banks and politics, he will be joining us

in an exclusive in a few moments. pimm: later on, we will sit down with the atlanta fed president, dennis lockhart. find out what he has to say on a potential rate increase. around the's go world and check in with our bloomberg team for in-depth coverage of the top stories. is iniccadonna philadelphia, david gura is in beijing. fed andart off with the watching closely to the jobs report. janet yellen is speaking this afternoon. us now.cadonna is with what are you listening for today? carl: ordinarily, this would be the opportunity when janet yellen would pull up the generic economic speech and not respond to recent data but the stakes

are much higher given the that thee job effort entire fed chorus has undertaken. so i think what we have to hear from yellen -- june at this point is off the table. but i think we need to listen to the degree with which she defense a july move. july certainly is possible if economic data improves materially in the interim. if she only halfheartedly defense july and implies that september is more within the realm of her midyear move, i suspect september and a december move is too crowded with the presidential election. so she is only aiming towards september, i think two hikes are off the table. amanda: the fed has been trying to signal that this is coming. but data remains weak. thought with the

language around what can be done on that side? is tightening going to be pulled back? carl: i think she will echo refrains we heard from brainerd on friday, saying that we should not take the fragility of economic recovery and expansion for granted. then again, one report doesn't she issh a trend and confident that the growth outlook has not materially changed. hearis what we need to from janet yellen. has her outlook changed? what would lead her to change the outlook? the revisions show a disturbing pattern over a three months time where we have the celebration in the pace of hiring. amanda: that was carl riccadonna. bloomberg will have live coverage of janet yellen when she speaks at the world affairs council in philadelphia, coming up at 12:30 eastern. in thetalks have begun

south china sea. we go live to beijing and check in with david gura, who spoke exclusively with jack lew. gura: john kerry is pushing hard for a resolution. pushing for some movement on currencies. hoping to get more clarity from the government. there is a lot of concerns about the government. if you look over the last 6-9 months, a lot of china's intervention has been to defend .he r&b to keep it from depreciating. what we worried about for many years is forcing down to value. very much made clear that we need to make sure that the commitment to moving in an

orderly way towards a market to determine the exchange rate will as there ispolicy up and down pressure and that it not become a one way policy in the future. i think compared to where we ago, west a few years have seen real progress. he said that the intervention was not problematic. his word, of course. congress will be keeping a close look on the currency, going forward. david: one of the things that jumped out from your interview is the suggestion that there may be a division between the economic policy with the chinese government and the political field. you have a sense of how big of a problem that might he? isid gura: yes, that something he has been working with for a long time. secretary lew's background is not in the con -- not in the

economy. our are a lot of people in the withse economy who agree him when they said they should scale back production. they understand why he says that. who aree are others politicians from provinces where that would mean a lot of job dislocation. is something he could be occupied with a lot over the next couple of days. david: thank you so much. that was david gura. over buyers are taking bids, it is a work in progress. it is a $62 billion bid on the table. we want to bring in jeffrey mccracken to take a look at what is going on in m&a. $62 billion, they are raising a lot of money. jeffrey: the big news last week ayer is that they lined

up more banks. last week, they added goldman sachs, jpmorgan and hsbc. the interesting part here is that there is no deutsche bank. is not there is more interesting than who is there. jeffrey: this could be the biggest deal in history. around --were looking pimm: it is a conflict of interest. jeffrey: exactly. you don't give them an monday advice and just give them money, we are ok with that. so these buybacks are committing $12.5 billion, more than enough .oney to make a deal and they can bump from there. so why wouldn't deutsche bank knew the same thing? they haven't been able

to get the waiver. the bsf, stuck with because they thought they would jump in. are too cautious and they're not willing to jump into the deal right now. so for deutsche bank, not a good situation. pimm: do you think this will be regarded as a deal that is positive for the markets? jeffrey: monsanto shares are trading way down. they have been struggling for the year. they cut their earnings forecast. andr shares were way down they are not paying the top of the top. pimm: thank you, that was jeffrey mccracken. let's turn to shery ahn for the first word news. from there revelations leaked documents known as the panama papers.

law firm had at least 2400 u.s. clients over the past decades and set up at least 2800 companies on their behalf. that is according to the new york times. they were established in the british virgin islands and the penama. france, insurance executives are meeting with government officials to assess the cost of flooding as the river receipts from the highest level in more than three decades. one report says that costs could go well beyond $1 billion. the minister overseeing relief for victims is calling for quick compensation to those affected by the natural disaster. global news, 24 hours a day. powered by our 2400 journalists in more than 150 news bureaus around the world. i am shery ahn. up, the basic laws of economics. joins eriks

schatzker to reveal why monetary policy can't stimulate the economy or create growth. ♪ minutesth less than 90 until the u.s. open, here's a look at how the futures are trading right now. ♪

david: this is "bloomberg ." hisnext guest has earned reputation as one of the world's wisest investors. -- with assets now $100 billion. howard marks is cochairman of hope tree capital and he is sitting down with erik schatzker. i am always delighted to

talk to howard marks. and people are very into an with what you have to say. this morning, you are here to remind us of something we should know. it was the title of milton friedman's book, "there is no such thing as a free lunch." howard: i think people have to understand economic reality. in the context of politics? can't getndidates people everything they might like to give them and certain promises cannot be kept. there is an excerpt i would like to read from your latest memo. howard writes memos regularly. this one is called economic reality. "there is no free pass. there is little a country can do in terms of policy actions to improve a situation that doesn't have negative ramifications and

will enhance the long run in the absence of fundamental improvement in economic efficiency." who are you talking to here? howard: well, my readers. investors. i think that the investment community has to cast and informed ballot every year and they have to know how to push its candidates to do the right thing, economically. mind, speaks your the most economic sense? among the candidates we are looking at? howard: i'm not going to give a name. but, somebody who expresses the fact that you can't give everything that you might want to give and the government cannot do what it might want to do just by saying, we will do this. erik: as you point out in your memo, all three candidates are promising things that they can't

deliver without having a cost on the other side. you look at a number of different issues. it would like to talk to you about three. they are particularly relevant for american voters right now. trade tariffs, the minimum wage and taxes. let's start with tariffs. howard: a tariff is a charge that is put on imported goods to support the domestic component of that industry. it is protectionism. and we hear about protectionism from donald trump and bernie sanders, and there is a little bit about questioning the value of free trade from hillary clinton. howard: but what tariffs do is to protect the domestic industry. a protect the people who work in the domestic industry. is, with economics, it is a science of choices. and if the government chooses to

be in protectionist, it is choosing to raise the cost of thes in order to protect workers in selected industries. erik: and they will ultimately be raising the cost. howard: that's right. and the sentence that i'm happiest with in the memo is where we say that we can't have a high paying, manufacturing jobs that we enjoyed in the past and the low-cost imported goods we have enjoyed buying recently at the same time. erik: what is the wisdom you have to offer people on minimum wage? howard: i use a quote from church hill, who says you when you try to tax yourself into prosperity -- i would say trying to minimum raise yourself into prosperity -- is like standing in a bucket and pulling on the handle to stand up. there is a cost to raising the

minimum wage and it may be that people have a harder time getting jobs. harder for entrepreneurs to start businesses. it can't be good for everybody. it is hard to believe that one wage is right for the whole country, even the governments of new york and california have wages in theinimum stages over time, what with exceptions for certain parts of the states. if the less strong economy in california and new york require that, then how about the other states in the nation, which are not as economically strong? are as keen as you are to remind everybody about the laws of economics, why not take them be one step further in help them understand, your mind, by your view, who is making the most sense?

and perhaps, who is the most dangerous? you cite candidates by name in your memo. i do.: but i try to do it equally and without favor. and is thisomist person and investor, but i'm not a politician. erik: let me put it to you this way. do any of these candidates make economic sense? let me turn that around. none of them make complete economic sense. none. hand, everybody knows that politicians promise things they can't deliver. it is a sad fact of life. is deceived into thinking that the things the politicians say they will deliver, they will deliver. some more there are flamboyant promises this time

around than usual. would like to think that nobody is deceived but the sad fact is that there are people out there. we will continue this conversation after a short commercial break. howard marks. he has almost $100 billion in assets. ♪

pimm: this is "bloomberg ." let's get to more with erik schatzker and his exclusive interview with howard marks. howard, when you are here, we always talk about risk and reward, because the balance between the two changes constantly. a couple of weeks ago i sat down with another of the world's most successful investors, bill gross. we talked about credit markets. i want you to listen to what he

had to say. >> it is truly hard to change your psychological makeup into ba hedge manager that is .omfortable being short so i try to convince myself and clients. and clients try to convince me. they say bill, if this is the scenario, why aren't you just trying to reduce risk. the other you on side? and i say, i'm working on it. erik: what he is talking about there is the effort to try and short credit. he feels we are at the point in the credit cycle where the reward will come to those who are on the other side. do you agree with that? if you i would agree added the word "eventually." because there were people who

said this three years ago. five years ago i turned cautious on credit. my motto for the last five years has been "move forward but with caution." if i had been short, i would have some really big losses. one thing about credit and debt is that it has an interest rate. theou own it, you receive interest rate. if you are short, you pay it. so shorting a bond is not like taking a neutral position. that are we closer to "eventually" now? , february 11, they were 900 basis points and now, we are back down to 600 basis points. everybody is feeling better than they did in february. is that dangerous? howard: i like it better when

people are afraid, as they were in january and february. erik: should they be afraid now? howard: 600 basis points is still a lot. is littleield exaggerated by the oil component. that is an insurance premium. historically, they have never lost the whole spread to credit problems. so i think if you buy a high-yield bond today, and you sell in six years, the high-yield bond has to do better. there may be a moment when you say, i should have shorted it. run, thee long treasury is not going to overcome. when that comes, when the bear market with credit comes, if that is what is coming, what will it look like?

will it look like 2008? howard: it will not look like 2008. it was the collapse of a bubble and it was a panic. instarted to get there january. a lot of things were going wrong. oil, china and gross, in general. that turned people negative and he gave us opportunity but there was no panic. -- : so did it look like therd: it might look like 1990's and 2002, to some degree. erik: it always takes a trigger. could the trigger be the brexit? howard: it could be but i think it is unlikely. brexit would think that has squeaking negative ramifications for the u.s. economy and credit worthiness --

that is off. erik: howard marks is the cofounder of oaktree capital management. pimm: thank you. erik schatzker. coming up on "bloomberg ," dazed and confused. from an indecisive federal reserve, the global economy flies on an edge. ethan harris will be here next. ♪

david: this is "bloomberg ." we are over an hour away from the markets. let's take a look at where things stand. a lot of green and a little red. commodities are a big story.

they are back. from crude and the commodity index overall, we have gone into a bull market of the january lows. we also have green, the ftse is up and there is red with the british pound. the pound is down after two polls came out over the weekend saying that britain leaving is more likely. the yuan is also down, low levels compared to the dollar. now, let's go to amanda. amanda: gold futures are holding below a two-week high. waiting fore today's speech with janet yellen, we will have that lies at 12:30. we will take a look at the investment of bull's-eye options. let's start with the reaction. is it an overreaction? people are what thinking as gold as an investment?

it is very much a currency play. when the dollar stopped going up, we saw it reverse. easy money was made on that turn until february. it sold at $1200. so what we have seen here is the chance of a rate hike in june went from none to some and back to none and now we see it bounce in the gold market. we haven't seen runaway inflation but we are starting to see a pickup on the wage side. does any of that point to a reason for optimism? alan: when you talk about commodities, as a group, they have turned. we have been stuck in the range i just quoted and now we have gone back to 1002 at a 50. we have been trading sideways since february. almost four months.

week, we held, and it is important that we held. then, we will have to see where we can go from there. alan knuckman of bull's-eye options. time for the first word news with shery ahn. hillary clinton was victorious in puerto rico's democratic primary. fewis a few democrats -- a delegates shy of clinching the nomination. she could get that tomorrow with primaries in north dakota south dakota, new mexico and california. has denied claims that he saw fewer polling places in puerto rico. sanders is criticizing the way the islands primary was run, calling it shoddy. sinister -- private the finance minister has a lead

over his opponent. he has a one point edge. 90% of the ballots are counted. the margins remain too small to declare victory. his promise is to restore employment and for structure if he wins. global news, 24 hours a day. powered by our 2400 journalists in more than 150 news bureaus around the world. i am shery ahn. now, let's go to today's morning meeting. we hear what banks are looking at. bank of america, the strong job growth is inconsistent with the modest 2% gdp growth. it was a surprise, mays low payroll number puts the average much more in line with gdp. globalk's head of economics, ethan harris, joins us now. what inconsistency did you see between the data for the gdp and

the jobs market? ethan: gdp growth in the last year has been running around 1.5 percent. a little below the trend. of a disappointing economy. on the other hand, payrolls are running at over 200,000, consistent with more gdp growth around 3%. we are now seeing payment growth slow down to be more consistent. our hope is that the gdp numbers pickup so there is a meeting in the middle. but right now, it looks like it is coming from the payroll side. pimm: is that is the case, what do you make of the payroll numbers that we received last week? ethan: i think the fairway to assess them is to take a three average and take out the impact of verizon strikers. three do that, the last months are running at 130,000 a month, where we should be expecting for this stage of the

cycle. i am not concerned if that is the worst of it. week number four may will continue going forward, only 38,000, i will be concerned. the three-month average looks ok. pimm: what do you think for the federal reserve meeting on the 14th or 15th? it is very unlikely that they hike in june. not only do they have the uncertainty around the labor market data, but also, the markets aren't ready. it would be quite a shock to the markets and that is not consistent with the fed's conservative, careful exit that they would make in the june meeting. after june, when we get more information on whether this is a slowing job market and we get past the u.k. referendum and get further into the year, i think july is a possibility.

our forecast is that the next move is september. pimm: thank you very much. ethan harris, bank of america. bloomberg will have live coverage of janet yellen speaking at the world affairs council in philadelphia today. tune in at 12:30 eastern time. david: it has been two years since -- spend off. the stock has gained since then. they employ nearly 9000 people across america. earlier this year, they had to pull back on hires. mary laschinger joins us now. congratulations. you made fortune 500. mary: we did. and i am pleased to be here to celebrate team members who helped bring us to this point. david: so you both run your own

companies. and you supply goods and services close to 50%? mary: yes, we supply at least 50% of the fortune 500 to our customer base. david: so you have a particular vantage point into the u.s. economy. what do you see? mary: we have come across in number of industries, ranging from retail to every equipment manufacturing to food. we cut across all those sectors. we see various outcomes in each of those sectors and industries. we did pull back starting in january because we saw a sharp decline in demand in january. the first quarter was more demanding than we anticipated. but this has been a significant trend and there have been positive months to offset the more negative months. and i think that leads to

uncertainty, which i think is the basis of the concern around the economy in jobs today. amanda: we have a new prediction 2%,.9% gdp growth down from and it highlighted that business owners are nervous about the election. intoess confidence turns spending and hiring or the lack thereof. what is your field? does it affect you and your customers? at ourctually, as i look business, areas of concern are overregulation from the government and taxes, labor and health care, as well as the uncertainties with the election. so it will be a number of factors that companies are concerned about. do you put that at the federal level? mary: more at the federal level. amanda: is this keeping you from hiring and expanding?

mary: it slows us down because of the cost. great example.a our health and welfare benefits have increased, some by the double digits in the past years. companies have to try to offset those costs in some way. they either do it through growth or cost management. when the growth isn't there because consumers aren't spending, companies will pull back. david: you are one of the people they call up at the fed to see how they are doing. what do you tell them? mary: that regulation is not helping our business. there are pockets of strength. e-commerce and fulfillment is a pocket of strength for us. they do ask our opinion frequently. challenged, i believe. i'm not an expert with the they areeserve but

designed to help economic growth. when you have long-term low interest rates, that lever becomes less of a lever. so it is a challenge. you can sit here and wonder if the low interest rate is really helping or not. i'm not going to predict but it is a challenge for the fed. david: thank you so much. that is mary laschinger. will becoming up, when struggling ipo market come back to life? dana settle will be with us next. what trends are emerging in technology. ♪

amanda: this is "bloomberg ." i am here in the green room. bloomberg will have live coverage of janet yellen at 12:30 eastern today when she speaks. what will she say about the jobs numbers? david: this is a "bloomberg ." general motors holds the annual shareholders meeting. for anf that, i sit down exclusive interview -- take a listen. are you finding yourself able to beat out a facebook or a netflix as you compete head forehead with talent? >> a lot of it is what they are interested in. if they're interested in power, it is exciting. what they want to know is they are working on technology that

will add value and change the world. when you look at the technology that is putting out, we are seeing that. david: you can see my full interview with gm executives tomorrow. pimm: staying on technology, it thebeen seven months since silicon valley company went public. leaving others wondering if we are in a drought. by someone whoow can tell us about this, dana settle. thank you for being with us. good morning. why do you see the appetite for initial public offerings? why is it shrinking? has been ank your general pullback but when we look at things, they tend to go in cycles. we invest over the long-term. so we saw the public market pullback but in six months or 12 months, i will not predict that. in our portfolio, we have 12

companies who are doing over $100 million in revenue. we are not in a hurry to take those companies public. there are a lot of companies out there that will eventually be ready to go public. are there specific areas of the technology industry that you can describe for us? security or virtual reality? what are you focused on. ? dana: we are focused on all things digital. so everything we do touches all of those areas. those are growth areas. things that touch life every day. e-commerce companies and credit card companies. those are areas we are spending time. there are a lot of exciting things happening around the area , when it isn't artificial intelligence for something sci-fi what it is artificial

intelligence that improves your everyday life. it makes shopping easier and running your home easier. the practical applications of a lot of these technologies is really where we see exciting opportunities. david: there was a time when tech startups had to go public to get access to the capital they needed to grow. do they not need the capital because they are not growing as fast? dana: a good question. fundamentally, the cost to start a company has come down perceptively over the last 10 years. so getting to market takes less capital. continuing to grow always takes capital and it is a trade-off of growth versus have that ability. and if you look at companies in the public market like amazon, who have consistently opted for growth, and done so successfully, that is one option. and if you look at your market

opportunity and it is that substantial, it makes sense to continue to invest in growth. and those companies will continue to go out and raise capital. public market investors started last few years focusing on the later stage private companies, so there is a big inflow of capital at that stage and we are seeing that change a lot. havef the unicorns happened and we are seeing that capital dry up. the next fewver years, we will see more private companies going public again versus opting for the multimillion dollar unicorn rallies. amanda: david asks a good point. because we did see so much private capital available and uni here are orphaned

corns. that may even be true for uber. how long do they have to wait? , it hasah, you know been quite amazing, the resilience of a lot of these companies to continue to find capital. where there are great opportunities, there is capital that find them. i don't think all of the fallen unicorns will survive. i think that is a reality. for great companies, there will always be sources of capital. proving to be very resilient and a lot of the companies that we are seeing in our portfolio and otherwise are doing the same thing. pulling from lots of different capital sources. but i do think there has been a shift away from the larger public investors investing in companies. pimm: i'm wondering if you could

tell us a little bit about what, specifically, kind of companies you find in los angeles? i know you invested in makers studios? dana: yes. it is an exciting time in los angeles. i think a lot of the shift in -- it hasvideo games a lot of interesting applications in media and entertainment. we are seeing a lot of -- particularly in gaming -- people are applying virtual reality in ways that make the entertainment experience much more -- sorry, the wind is in my eyes, much more exciting and entertaining. i feel like everybody should experience it once to get a sense for what it is all about. because it really does change

your experience in a videogame or watching some form of content. go ahead? david: back to that point. if you were going to project, is virtual reality going to be mainly a gaming experience or it is going to be with content? definitely inrm, the gaming space. certainly the first application. and it already exists. thes very much involved in gaming space already. that is where we see a lot of the technology developed. i won't predict -- i don't think it is going to be completely mainstream for every single , i don'tm here on out think that will be the case. i think there will be lots of

practical applications in the health care space and even in the travel and otherwise where it will be interesting. in the short-term, gaming is the clear winner. pimm: thank you for helping us understand this. dana settle. coming up, just because the s&p 500 hasn't hit a new high in more than a year, it doesn't mean equities -- ♪

pimm: this is "bloomberg ." it is time for the battle of the charts. matt miller takes on julie hyman. julie, you begin. julie: this is the chart you have been alluding to all show long. this is the s&p 500 total return index. oflooks at the actual prices

stocks but also the dividends. on this basis, we actually have seen u.s. stocks reaching new records here. , they areof this year labeled here. dependence on the dividends for the rally that we have seen thus far and it raises happens iflike what companies start pulling back on the dividends? what impact will that have on total performance? miller, each that. interestings an chart and there are a lot more questions they are to be asked. first of all, most investors are investing in the sense that they keep their dividends reinvested. so mom and pop are seeing new highs multiple times this year and they don't do it any differently. warnedstion is, is that

by what we see in the u.s. economy? ,his is a chart that shows you in orange, all of the investment in structures in the united states. nonresidential structures, and in blue, all of the spending in equipment. plants,, manufacturing what have you. all of the equipment spending in the u.s. -- you can see over the last 25 years that when we see a downturn in those things, and this is a change over five years, and we see the slowdown in that momentum, we typically have a recession. orthe end of the last year the beginning of the last year, we had a turned down in spending on structure and equipment.

it turned around and dropped and the question is, does that mean we are entering a recession? or what could happen to turn spending back up? this is an amazing chart. financial engineering. it is buybacks and dividends. pimm: i vote for julie. there are too many lines on that one. i love this chart, because it shows you there isn't just one number but i vote for that. coming up in a matter of minutes, dennis lockhart is joining us for an interview. ♪ pimm: we will ask the fed

president dennis lockhart about the report. amanda: investors were dumping bank stocks after the jobs

report putback. david: gm -- ge is thinking about changing employee conversation. find how the change could be tied to keeping millennial employees happy. we are just under 30 minutes away from the opening bell. this is bloomberg . up, and interview you will see first year on bloomberg. today, janet yellen is speaking today. it's inkingt area to see what he might say that will dovetail with what she has today at -- today. let's take the premarket

for what's moving ahead. dow futures are up 3/10 of a percent. s&p futures are gaining five points. nasdaq is up quarter percent. let's go to julie hyman. julie: let's look at some of the other assets we are watching you the u.s. dollar is strengthening here across the board versus a broad basket of currencies. a rally is in decline. we talked about the latest poll numbers out of the u.k. and thou -- how that is hurting the pound. the also have the dollar strengthening versus the yen. if you look at bond yields this morning, they are rising for the first time going back to may 27. a little bit of selling is coming into the bond market. there you go. the 10 year yield is at one

thing 72%. for more on what we could expect from the fed meeting, mike mckee is with dennis lockhart. over to you, mike. mike: we're live with dennis lockhart. he is the president of the atlanta fed it. good morning to. this is the trading day after the jobs report. the last time we heard from you publicly, you said that june could actually be a decision at which the fed raised interest rates. now we've got this number. it's june still on the table? dennis: let me speak for myself. i think the combination of the jobs report on friday and he brings it consideration justify patients. i'm only speaking for myself. the meeting is live.

i don't know how it's going to come out. the committee could arrive at a decision to increase the fed funds rate. as i assess the situation currently, i'm prepared to be patient. mike: when july the a moment where you would it look at an increase? dennis: it that means getting beyond the brexit vote and see how the data come in it for the next few weeks. my fundamental view is the economy remains on a moderate growth track. let us say around 2%. it will be sustained for the rest of the year and beyond. changing mylly overall view of the economy just because of the jobs report on friday. the weakness of the jobs report is something i think justifies a little bit more patience. mike: what do you think cap to the jobs report if it's not a

new trend? dennis: there are two or three ways it can be interpreted. the first indicates a slowdown in the economy. i don't believe that's the case. interpretation is it's the natural slowing of job generation as we get closer and closer to full employment. that is clearly a possibility. the third is what we have said with this most recent report and the revisions to the earlier reports is simply the waxing and waning of data, the to and fro that we see in numbers in an economy that's never going to be totally linear. that is possible as well. the key point for me is doesn't take me off my basic view of the economy growing at 2%. risk ands where the reward lie is, there is the

greater risk? pce inflation is up. the non-manufacturing did not get a lot of publicity, labor is in short supply and prices are going up for eight months. that if thecost ratio at this point? dennis: i don't see a lot of cost to being patient in july at least. i don't think the fed is behind the curve from the point of view of inflation. -- i'm justan speaking for myself -- we can be watchful and see how things develop over the next few weeks. mike: let's talk about monetary policy itself and its current levels are extraordinary. is that putting a floor under growth and inflation? is that actually contributing to growth at this point?

believe theve to policy announced continues to stimulate the economy. putting ae that it's floor under growth and inflation. i think it's that stimulus. -- net stimulus. that's not to say the neutral rate isn't fairly low. i think we are at a stimulative stand -- substantial policy. we debate this all the time. you can argue that the neutral rate is currently about where the debt fund rate is. it is certainly within that range. i buy into the view that the neutral rate changes over time and as the economy continues to move ahead, the neutral rate will rise. at the current time i think it's

in the range of where we are, maybe a little lower, even to 1%. mike: where do you see the fed funds rate at the end of the year? where are your dots busted mark -- dots? dennis: i have been revising that since december. we have enough meetings. we have five meetings next week. there are enough meetings to conceivably -- if the data justified it to go to three moves. i am more inclined to think of two moves between now and the end of the year. i have to caveat that. it depends of how the economy performs. mike: when you look at the calendar for meetings, if i asked you whether the

presidential race would affect your thinking, you would tell me know. does it cross your mind, especially given the nature of the campaign where you could easily become an issue that decides the presidency? dennis: i really doubt that. as the final weeks of the campaign and the election unfold, much of the electorate will be sizing up the economy and their prospects. shown witht's been very good scholarship on the question. the economy and the state of the economy is part of the equation. decision wouldy swing the election, i find that very far-fetched. mike: in the april meeting there was a lot of discussion about the lack of business investment. water corporate leaders telling you about why they are not spending?

ouris: we talked to contacts in the corporate world a lot to try and understand what drag that has created a from business investment on a gdp growth. one answer is simply that we are still in a state of high uncertainty and the better part of wisdom on the part of corporate decision-makers is to be cautious. much of the investment that is taking place and the equipment is replacement in nature. it is not making a big bet on the future. i would say i think the uncertainty environment remains elevated enough that business decision-makers are very cautious about placing big bets. mike: we're talking life with dennis lockhart on bloomberg

radio and television. cautious,eaders are what are they uncertain about? is it the election or regulation in washington? is it obama care? is it the fed? : probably all of the above. let me parent what i hear. --. arrot what i hear. most of them have within their scan the whole world and they are uncertain about help exit brexitnfold -- how e will unfold. p y talk about future =fiscal policy.

we don't hear a lot of reference to the election. regarding the overall omentum of the economy and fed policy would be part of that. mike: would that be unusual? the world is always an uncertain place. dennis: is this people are always trying to have predictability. they are making judgments on the margin with the amount of visibility they have about the future. the kind of thing you hear probably anytime you asked the question. it's a matter of degree. i think it's more intense now that i have heard 10 years ago. mentioned brexit. how much of a threat to the u.s.

and global economies do you think it really is? dennis: that is the right question. ifave to be thinking not it's a big event for the world or if it's going to spillover back into the u.s. economy and ultimately affect our two objectives, inflation and employment. conceivable that if there is a leap, there is a great deal of unscented the -- uncertainty and the long-term prospects the european union. after mexico and canada, europe is our biggest export market. it's a very important market to the u.s. the here to believe that is vote goes that way, there could be effects in the foreign exchange market that make u.s. exports a little less price

competitive. there could be spillover back into the u.s. economy, near-term and long-term as well. mike: what about the foreign effects on the economy the fed is worried about this year, china and the exchange rate? dennis: we saw a lot of market volatility in february. globaln to reference financial and economic events or developments in our statements after the meeting. we thought that was important consideration. the things driving that volatility in the first part of the year or the slowdown in china, the shanghai exchange volatility, emerging markets feeling the effects of lower commodity prices, uncertainty about future fed policy.

seems to have abated for the time being. marketrivers of volatility early in the year are not prominent at the moment mike: -- moment. mike: the fed has a credibility problem. it keeps leading the market to believe that rates could increase and then they don't do anything. what do you make of that? sayis: i think that when we policy is going to be independent, where not giving much guidance to the markets at all. sometimesome in and the individuals on the committee or the committee itself will change directions to some extent. is that a credibility problem? tome, that's just being true

the guideline that we set or ourselves. we are going to let the economy's performance and how that shows up in data dictate what the policy decisions are. policy is, that means not set in stone. to shift as the economy evolves. i don't think that adds up to a credibility problem of any serious degree. i understand arrieta's point of view. mike: you said it you would keep your options open for july. there will not be a rate move until december. how'd you avoid the perception that you were being led around by the markets? dennis: that conclusion can be drawn by people. day, the verythe first grounding of any

policymaker is what do the data tell us about the momentum of the economy. what does that say about progress of our objectives? state our we try to own views in the inter-meeting. .hat gives the market market pricing is often affected by that. i think it's a dialogue with the market. mike: you were halfway through the dance when the jobs report came out. what would you tell investors about the rest of the dance? dennis: i think i've stated my views. i concluded that patience is called for.

i am only one of 17 people around the table. this is the last day and avis can speak. chair yellen speaks at noon and her voice is the most important. we will see what janet yellen has to say at lunch. we will go silent for a week. mike: anything you would like her to say? dennis: i am going to wait and see what her views are. i have not had time to consult with her yet. i suspect the theme of cautious and gradual will continue. dennis, thank you for stopping by today. we're live on bloomberg radio and television. we will send it back to you. amanda: that was dennis lockhart with michael mckee. i don't know about you, i heard patience is called for. he believes there are two fed

hikes by the end of the year. we will see with the markets make of this. the futures remain where they are. pimm: it's a little bit higher. also, he mentioned that he is going to pay attention to today's conversation with janet yellen. she will be speaking at the world affairs council in philadelphia. everyone is going to be listening to what she has to say. amanda: we will bring that to you live. 12:30 p.m. ing at philadelphia. david: one of the sectors most focused on the fed is futures. just how sensitive are bank stocks? that is next. tune in for an exclusive interview with greg lem cal.

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david: this is a bloomberg wrote. i am david westin. we just heard from a dennis lockhart. said to hikes are likely this year. g takeaway? they don't have anymore economic growth than the rest of us. there is not a lot of of framework for understanding where the economic growth is going to come from. if you think about the give-and-take, if you shrink dissipation rates, that's inflationary. you still see absence of pricing power and absence of small business creation. there continues to be a balancing act. we have no clear signs of growth. david: you are also seeing a

lagging corporate investment. don't you need productivity to get the economy going. >> this is a critical question. the one i am focused on is a lot of the productivity is tied to the transformational is this creation. small businesses drive gdp growth and productivity. decadentially had a lost in terms of new business formation. amanda: he thinks fed policy is working. is that a defendable statement? the purpose is to reduce rates. lower hurdle rates for investment, on some measurements they have done well. pimm: what have they done well? they didn't do it. the market does that.

they have avoided an economic crisis. they prod about a liquidity that was missing from the market. the third qe is debatable. interest rates are flat. over three. are >> they still have wealth effect. you still see capital market appreciation. that should bring about spending. david: theoretically is the important word in that sense. >> you have income disparity. those people have benefited the most from the rise in capital assets. they see rising savings rates. you haven't seen the economic spending. that's why policy is so inevitable. i know it's been battled around, i think it's inevitable. amanda: it's egregious to call on governments to do it.

we were just talking about the jobs numbers and how close. this looks like full employment. you start to see participation rate changes. is that just really seen the class as helpful? >> this is where the fed is uncertain. the labor participation rate is not behaved as you would expect. it keeps going down even though recovery continues. that brings the unemployment rate down. you want to get there through rising labor growth. david: dennis lockhart talked about uncertainty. the theory was when the central bank said we are going to keep rates low for a long time, that would bring certainty to the marketplace. it hasn't. what needs to be done to bring certainty to the marking place? >> the reason you have had uncertainty is corporations are looking at the pricing environment and it's hard to

justify capital spending. you need pricing. it's absent. it's absent because of the disruptive tech knowledge he's affecting the number of sectors. is there too much money chasing too few products? if you look it german yields right now, they are below zero. if it's not working, why keep doing the same thing? >> once you have laid out a process for implementing stimulative policy, you push this to the limit. it's critical to watch for fiscal policy across the globe. but it's china or japan, we will stop being alicy head wind and start being a tailwind. it will continue until we run

out of room. policy changes are created equal. you can invest wildly or foolishly as well. what's the difference? how do you make sure you put it in the right place? >> we will try some transfer process. there are limited series to tell you which is best. he is going to stay with us. thank you. financials fall sharply after friday's jobs report. it's the worst day in two months. what's next for banking? that's next on bloomberg . ♪

amanda: we are just moments away from the opening bell. let's get you caught up. this is a market on hold. america, we are waiting

for janet yellen. a fed governor could not raise these futures. in london, you're getting a bit of a pop. the pound sterling has fallen on fears of brexit. have hady, things slightly higher. this is what's happening in currency. look at the pound sterling. it has been worse today. you can see they're the 10 year yield is 1.72. there is crude oil with a nice pop to the upside. all eyes are still looking at 1230 -- 30 p.m. when it janet yellen speaks. julie: we've got a little bit of a pump. it's not much of one. it's a little bit of a waiting game following this hangover from friday's jobs report.

in terms of individual stocks we're watching, we have miners in focus. got some commodity price increases as well as iron ore in particular in commodities. that's a big gain in chinese trading. have increasing demand continuing for the steel industry in china. mostore futures are up cents 2013. we are looking at the oncology meeting over the weekend. at that meeting, they presented some study results from one of its drugs to treat cancer. the survival rates were not particularly strong. those shares are following. bristol-myers squibb is getting a little bit of an uptick. dissipate -- disappoint the market as compared to bristol-myers competing drug within that category.

we're looking at devon energy. they are doing a royalty in the midland basis. billion tos about $1 undisclosed buyers. those shares are up. we have seen the energy companies follow this playbook as of late. they are doing a lot of asset sales to raise cash. david: it's the continuing saga that has become five,. com.ia they want to examine it some there redstone to see if he is competent. he has signaled that he wants him out. he wants to hold onto his job. financial stocks are under pressure. bank stocks fall on friday. the sector had its worst day in

two months. we are joined by charles peabody. charles, let's talk about next stocks. is this just a knee-jerk reaction to the jobs data friday? charles: i think it will prove temporary. there is anticipation that if nato go in june, they will go in july. pimm: maybe it was a good time to buy? .harles: yes from a secular point of view, no. the next two quarters of earnings could rebound up. credit cycleed a that is now deteriorating. nothing good happens in that environment. we would use any rallies to sell into. where do you place the credibility of concerns of the fed will go further in capital

requirements for banks? do we need to worry it will get even worse and affect dividends? inrles: i think they will 2017. they will switch some of the metrics they use. this year, we think the banks will pass quantitatively. there may be some that fail qualitatively. the changes you are implying won't take effect until 2017. david: there is a new president in 2017. will a new administration change the paths of regulation of banks? charles: i always get politics wrong. david: join the ground. charles: the election cycle will play out. we are having an election rally this year. i think there will be a recession next year. david: do you concur? at least in terms of what will

happen to bank stocks? vadim: it's the worst performing sector year to date. i think the friday reaction was a knee-jerk reaction. you have a sector where poor fundamentals are meeting at low expectations. you get trading rallies. you get any sort of steepening of the yield curve, banks will rally between now and the end. to talk tos easy bank stocks as if they are all the same. let's break it down. charles: the stocks that will do the best are the ones you don't want to own a through the cycle. it's going to be those that are very asset sensitive like come erica or some of the texas banks. they are not the ones you want to hold if we go into recession. david: what is the difference between wells fargo and goldman sachs? we are going to have

a trade rally, the catalyst will be rates and not capital markets. capital markets are still fairly in naming. the shape of the yield curve is going to give the determining factor. someone who is tied to the short end of the yield curve will have a fundamental impact than somebody who is tied to the long end of the yield curve. that will actually flatten in a rate hike. amanda: we've seen a couple of major banks figure out their capital structure. citigroup and it credit suites are working through some big issues. that set them up for a bright future? vadim: the investment of business and refocusing assets, we're talking three to five years. i think the tradition and execution is the critical risk.

i agree with the short-term buyers. is place you get the most companies like schwab and federated. any upward pressure on rates could be beneficial to them. david: not all banks are the same place. is city farther along? charles: in some ways they are. they have building massive amounts of capital. you are going to see a tremendous amount of capital returned. three orgoing to add four percentage points to their rates. what does that seem at who should be investing in these stocks? charles: the money center banks have the greatest potential. citibank could be a $90 stock given the kind of money they

will retire. pimm: can you describe what that means? charles: it means the surprises are not going to be positive. fable be negative. but we are seeing on the credit size is deterioration in the energy sector. that has stabilize. i don't think that's true. ityou go back to the 80's, was a four-year process before the energy bust played out. most of the bank stocks failed by 88. you see deterioration in the subprime model and a student lending. a cards have gotten is good as they are going to get. i think you're going to see it on the consumer side as well. you won't see it in mortgage. david: you think we haven't seen all the defaults and energy were going to? charles: many of the money center banks are reserved debt

5% and regional is 9%. you're going to have to build up reserves of 15%. amanda: i understand that it's a turn in the cycle, is it an overreaction? it's not going to make their world suddenly rosie. the point was made that it's an overreaction. reason to watch the fed rate is the dollar. history is not conclusive. rates,the time of fed the dollar is not appreciated much. i think it's a red herring. , thanksharles peabody very much for being with us today. up, ge is the trendsetter for corporate management. they are considering a shift in how they reward workers. details are next on bloomberg go. ♪

david: this is bloomberg . tomorrow, an interview with gm ceo mary barra. shery: the world's biggest oil exporter is raising prices on most of its deliveries to asia and the u.s. crude byincreasing $.35 a barrel to $.60 above the regional benchmark. the highestsets

levels for asia since 2014. japan's mine corporation is aiming for the biggest ipo for a tech company this year with a major pitch to american investors. people say the company behind one of asia's most popular messaging apps lance to go public in july. the goal is to raise $2 billion with a valuation as high as $6 billion. office, thebox ninja turtles open to $35.3 million. that was half of what the first film opened two. it's the latest in a string of underwhelming openings for sequels this summer. apocalypse felt a hefty 66

percent in its second weekend. latest business flash area -- flash. pimm: let's check of a stock arc it members. julie: let's start with walmart. shares are up about 6/10 of 1%. daniel binder has been doing store checks. he has been doing it consumer surveys and he says that walmart investments in stores has been improving the store conditions. walmart had its annual meeting in arkansas last week. you can see the shares are getting a little bit of a bump up. we looking at gunmakers who are falling for the second straight session. we got background check data for may. it rose at a slower pace than we saw in april.

that has led to a host of commentaries this morning, including a- slowdown overall in gun sales and what that's going to mean for various companies. goldman sachs is doing a screen of company valuations. they remain expensive on a price-to-earnings basis and they may remain elevated. a is relatively expensive. the shares are not taking that much of a hit. now let's go over to abigail doolittle live from the nasdaq. she has the latest on the nasdaq stocks. abigail: do have some biotech stocks on the move. shares of the cancer biotech company are plunging, down 65%.

that's a disappointing result in their lymphoma drug. they are halting further developments on this drug. maybe some more news will come out. lbding to the upside is therapeutics. they had significant survival benefits in ovarian cancer. there is huge upside potential to the $20 price talk it's. also down our ocular therapeutics. there was a second phase three child for conjunctivitis. -- trial for conjunctivitis. investors may be pleased by these results. those are a few of the market movers here at the nasdaq. david: general electric will look to shake things up. they are known to experiment with management tech takes.

they may scrap their annual raise. joining us is bloomberg news industry reporter. why ge is me considering this. is this a cost-cutting measure that is masquerading as an hr issue? are they really trying to make life better for employees? rick: they are trying to be responsive to employees. it's a cultural shift. they want to be more responsive to their employees and more nimble and less bureaucratic and more like a startup. david: what do they get instead of arrays? what itey have not said would look like. maybeuld imagine that it's a little bit more flexibility in terms of what time of year the rays might come or maybe it's more flex time

instead of a monetary raise. advantages tothe increasing money is its equal. how you equalize if one person wants more time off or more flexibility to work from home, how you treat people fairly? rick: i couldn't tell you. ge is reviewing this right now to see if this would work. would beally, it rolled out across their professional employees. 185,000. about it's something that they really close look at. i think that's what they are doing right now. pimm: this is an being place to a vote? not asking these employees would you like to change the way we compensate you? rick: i don't believe that's how it's working.

they have taken several steps already. they are changing how they do performance reviews. they had a pilot group that they tested that with. year or so, they have role that out to more and more employees. they are trying things to see what works. , thereunder jack welch was an approach that you segmented your workforce and the bottom 20% you try to work out of the company. is that still the case? rick: they don't do that anymore. that's a really good example of how ge is a trendsetter for corporate america. infamous.omething it was copied by a lot of other companies. there are other example ease -- examples like cigna. does, a lot of other people will copy. david: do you have a sense of

the timetable? rick: they will make a decision on whether to scrap annual raises in the next couple of months. it would be rolled out after that. david: as they move their headquarters to boston. thanks very much. it's much appreciated. ge may be revamping their compensation program. .ur thanks also to vadim jeff bornstein will be joining bloomberg on wednesday. havea: coming up, we bloomberg markets with mark barton. the have the legend of the venture capital industry. he is the founder. we will ask him why there have

in a dearth of tech ipos. that is his speciality. we will move to the hospitality industry. we have the chief executive of marriott. they are taking over starwood. that would be the world's weakest hotel operator. what is the biggest challenge for the merger? they are the global index provider. we will chat with him before they are expected to allow china to join its indices. it's an executive fast. coming up in the next mine -- nine minutes. don't miss it. amanda: coming up, new polls itr a possible exit -- brags it suns pulls down.

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pimm: we are nearly 30 minutes into the trading system -- session. the dow jones is a half percent higher. london is up 1.1 quarter percent. gm will hold its annual shareholder meeting. i sat down with mary for an interview. i asked her what the main focus is today. ony: we are going to focus the fundamentals in making the

company more efficient. we're going to invest in technology. cells thate fuel change and leave the transformation. david: you can catch my full interview with gm executives tomorrow on bloomberg go. now, it's time for our trends. pimm: these are some of the top stories our terminal users are reading. let's go ahead and take a look i was actually thinking it would be about brexit. the story about the pound falling on the brexit area --. sometimes fundamentals get disconnected from those things. we don't know what will happen if there is a brags it -- exit

-- brexit. it could be nothing. david: we get a skewed view. the elites of been saying don't worry about it here and it's not going to happen. the people may be saying not so fast. the: i would look at petting. those are just a few of the top stories on the bloomberg. that doesn't for bloomberg today. bloomberg for markets. ♪

>> mark: -- this is bloomberg markets on bloomberg television. ♪

vonnie: we are taking you from new york to london to beijing in the next hour, here is what we are watching. brand-new concerns over a potential brexit. more of britain favors leaving the european union. mark: an exclusive interview with janet lou from beijing out of his talk with chinese officials. calling on china to improve monetary policy communication. vonnie: heating up on capitol hill, republican congressman tells us exclusively why he wants to -- how his plan would promote growth. first, let's head to the markets desk were julie hyman has the