jonathan: voters are heading to the polls to see if britain should leave or remaining in the european union. david: bank of america is under the national spotlight and given us come later today. climbed to akets two-week high. they had for a fifth straight day of gains. jonathan: is very warm welcome to bloomberg. my colleaguee david westin who is in new york. that: we are coming to the dachshund of a big week. we will dissect her testimony

later, johnnt and kerry tells us by china must address its cyber security issues. anathan: it is referendum right here in the u k. law prevents them from reporting on the voting or discussing or analyzing the referendum while we will follow the action beginning at 5:00 eastern time. a quick look at the markets. it futures in the united states are positive. dow futures are up. the s&p is up wonderful percentage point. the european rally continues. up for -- the board, it is one of 49 very briefly today.

is 114.-dollar treasury yields are a little but higher. now let's go around the world and check in with our team for in-depth coverage. francine is in london. susan is join us in it new york. london.moore is in jonathan: let's pick it up with the data out of europe. we have some disappointing news in france. let's bring in francine. sub 50 is not pretty. we sell a 48 in there. 50ncine: anything below indicates contraction. the matter what indicator you look at whether it's employment or gdp, they are not doing as well as expect. there has been a lot of structural reform. you have a weak president. his approval rating is 14%.

he is perceived as a lame-duck he can't get that velocity in the economy. jonathan: we actually had a 47. 47.9 on manufacturing. it's a six consecutive drop. it doesn't look good for the future. we would say what's the easy be -- ecb going to do? they are doing a lot already. francine: there are labor laws and we have the finance minister trying to loosen it up. you go to france and talk to enterprises, they would love to hire more and spend more, i am not confident in the future of the eurozone or an europe, we ut spain and italy and germany on its own. france has some significant

weakness and some soft data today. betweent's almost germany and france. they are going in different directions right now. janet yellen's testimony is behind her. she talked about tivoli to the financial service committee. >> i am a to mystic about the longer, we cannot rule out the possibility expressed by some prominent economists that the slope to the growth in recent years will continue into the future. vulnerabilities in the global economy also remain. inid: for more, let's bring suzanne. welcome back. this is not a new thing. she is concerned about product to meet. what did she emphasize yesterday? suzanne: what really counts is the impact on the

outlook going forward. it exacerbates that great area. it puts the fed in a quandary. you've got the international develop went. stronger dollar which has been an impediment and now we've got questionable strength of the economy, including but a private -- low productivity. to be more outspoken than the senate. some of the republicans criticized her. what was a response? suzanne: what they alluded to was we need fiscal stimulus. we need to see that included in that will help to boost growth. david: thanks very much. of course the fed is

still in focus around the world grid have another round of bank stress test results this afternoon. we will bring in michael moore with the latest. it's great to have you with us. no one expected to fail. one bank is very much in focus. michael: bank of america has the biggest leverage. they have been a laggard in terms of capital return relative to jpmorgan or some of their peers. if they can make it through this cycle cleanly, they can catch up on that and boost the dividend and start reporting the shareholders who have been waiting a while for this. european typically, banks look at their u.s. peers and say those stress tests are tough. he used to judge the test by whether someone failed. no is expected to fail this test. it is stressful enough. what is the commentary around that? michael: it's considered very

credible and stressful. the banks have been forced to court this capital the last five years. to payve not been able it out. it's just a matter of whether the fed will feel comfortable with the risks out there and letting them start to return some of the excess capital. jamie dimon has a ton of excess capital. regulators may be more cautious on that. jonathan: maybe the big problem is not the test at the monetary policy itself. it's great to have you with us. we are looking at the futures market. we are looking globally at equity. we are going to pick out some stocks with julie hyman. julie: back. -- blackberry just came out. last quarter.n

there was no profit and no loss. analysts were looking for a lost from the company. revenue came in lower than estimated. yearompany says for the the loss will be $.15. efficient more operating model. we will keep track of those shares. tesla, day to after acquiring solar city, is trading lower. influential person is downgrading the stock. that opportunity may not adequately compensate investors. we don't think solar city is going to help them make that occurs. we're seeing those shares continue that down trajectory. the u.k. grocer is coming up with growth. that's the first time it's had back-to-back gains in five years.

shares are trading higher by 2%. david: for an update on what's outside the news, we have the first word news. emma: case citizens are voting in a referendum on the membership in the european union. david cameron was among those casting ballots. while the polls are open. we will be following all the action as result come in across the day. houseicans adjourned the 16 hours after the start of an unprecedented protest by democrats. they staged a sit in on the house floor demanding leaders schedule votes on gun control measures. john lewis is a veteran of protests going back to the civil rights movement. >> i have crossed a bridge not just one time but three times to make it from selma to

montgomery. we have other bridges to cross. july, weome back in will start all over again. : paul ryan it called nothing more than a publicity stunt. -- claimingis a success. hit u.s. military installations in the pacific during the u.s. has called in the yuan to take action. the unit has imposed sanctions on north korea. global news 24 hours a day powered by 2600 journalists and more than 100 20 countries. this is bloomberg. jonathan: thank you very much. thed it be one and done for federal reserve? are taking rates

are going nowhere. up next ♪, jim grant.

david: janet yellen came under fire from house republicans for not doing enough yesterday to get the economy going. jim grant also has a bone to pick with her, but it's not because she has none enough. why have they gone too far russian mark -- far? jim: they have moved from central banking into central planning. it is ubiquitous and i think it's a net negative for enterprise and finance. when we see that manifest in the real economy?

jim: instead of saying interest rates, they would think about price control the fed doesn't control interest rates. it administers any. -- many. it creates a body english to various markets. ofs in the business administering prices. it would be discovered in the marketplace. david: if that were to happen in this country now, where one interest rates be? jim: the average interest rate is between 5% and 6%. that shows you how far we are from the average. i think they have missed their mark. i think the next move will be to reduce rates and not raise them. you've asked where rates ought to be. i am in a very personal to tell

you where they should be. fed, i would say they're going to do less. we would be less of a presence in the marketplace. name thew by little life story of a baseball umpire, we would not watch. you don't want the umpire to be the spotlight. it shows you how far we've strayed from the true path jonathan: a lot of people watching this agree with you. i don't want to offer prescriptions to the fed. they have not followed yours. i want to talk about the consequences that are likely to happen. , very few rate

hikes for the rest of the year. what do you think the consequences of the policy the? jim: the primary consequence for investors is the fed has talked up and has moved up various investment markets. the program has been to balance portfolios and raise up prices of real estate and stocks and bonds. it has detached those values from the underlying earning capacity of the assets that ought to be a center piece of valuation. the economy is weakening. the industrial side is near recession. growing think is a parting of the ways an asset

values, the fed is very sensitive to asseluthat might gr artificial lift to asset values which brings us to more radical policy. the danger is we are increasing. jonathan: people in vain saying that for -- have been saying that for five years. are we not there yet? where valuations are already too high. things are already dangerous. jim: i think asset values are high. the risk of monetary policy is radical policy begets more of the same. nothing says they have to stop where they have stopped. it seems to me they will continue. they will talk about the

abolition of currency and the currency. i think they are just getting started. david: we are going to be talking about china next. annual stress test will be released today. will the banks be able to survive a severe economic turndown? ♪

jonathan: we turn our attention now to china. according to economist, the when iteficit there taking off budget spending into account seed 10% of gdp this year. that's more than trip -- triple. an economist. in the state is stepping in. >> good morning. what we talking about here is

old school balance sheet funding. it's meant to be 3%. some of the private sector thinks it's going to be a lot more than that. toy are using policy banks to road and rail. is more debt. it's off the balance sheet. 6.5% it the economy at goes to some of the challenges of understanding the lack of transparency in the chinese economy. it illustrates the pressure the government is under to keep growth where it was. the private sector steps back in the step -- state steps in. you hope the state could do less. haveuch capacity do they

on a state balance sheet to pump things up and stimulate things even further russian mark is the conversation? >> the private sector doesn't want to spend money at all. they might say that is perfectly fine. the pace of the lip of debt in china is concerning analysts given the economic develop. it's still an emerging market. it will eventually act as a drag on growth. ainese officials gave briefing and said it can't the leverage to quickly. it's a real balancing act they are trying to pull off. jonathan: thank you very much for joining us. i guess this tells you once again if you didn't know already to top the -- ignore the topline number and look at the story beneath it. it's always a lot more worrying

than the topline number. david: you see that story time time again. we will continue this conversation with jim. ownhave expressed your concerns about the credit or debt side. must ask about the balance sheet. if the company were growing at a rate, we would not be so bullish. china is a financial dystopia. it is immensely leveraged. leverage is very dangerous. gdp grew 7%. at 17% insets grew the first. they had $1 trillion of new debt. you might be the one tells us. the wealthcombustion

management product area. it's quite worrying. david: the world is clamoring for china to keep growing. what is the calamity you see? jim: the bloomberg news department wrote this piece. $3.6 trillion worth of these things, closed end funds. they have tripled in volume in the past three years. they are kind of a ponzi scheme. the principal method of refunding these things is to issue more of them. this is one of the great unexamined potential calamities in the world. we spend a lot of time analyzing trouble spots. this keeps more attention. bad loansre have been

made before and it has to be reconciled. they grew their way out of it. is it possible for china to grow its way out of their problems? my answer.st temper no. it's not possible. david: that is their theory, correct? jim: it's twice as big as gdp and growing twice as fast. that is not a formula. david: what would your prescription be for china? jim: capitalism and freedom. dedicated to the suppression of free information and the poor reparation of debt. it's the wrong way forward.

we need freedom and less debt. david: that was jim grant. thank you for being with us. jonathan: what we need versus what we will actually get. coming up, are our banks healthy enough? test.l discuss the stress ♪

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viewers: to our worldwide in london and new york, let's get a check on the markets. futures are firmer in the united states. five straight days of gains on the ftse 100 in london. up another 1.23%. it is a risk on rally.

the euro-dollar is pushing higher. a 114 handle earlier. look at that. 1.34% in the here and now. and the treasuries, you can see that we are up five basis points on the u.s. 10 year at 1.73%. let's put together some headlines happening in the world of business. emma: thank you. u.k. citizens are today voting in a referendum on the country's number ship of the european union. david cameron was among those casting ballots. the u.k. is prevented from reporting while polls are open but we will be following all the action as the results come in across the day with special coverage. angela merkel signaling that diplomacy and deterrence is needed in dealing with russia. she is pledging to boost spending and the military

presence in eastern europe. they have promised to gradually increase spending. casino billionaire went to las vegas to gamble on the nfl. he is calling on the city to come up with a bigger subsidy so he can get the oakland raiders to move. the new tax could raise $750 million for a stadium. a committee of executives and leaders will review the plan today. global news, 24 hours a day. powered by our 2400 journalists in more than 150 news bureaus around the world. i'm emma chandra. jonathan: we will bring you a morning must-read. one of the top read stories on the bloomberg terminal. bill gross. the latest investor to bet big on argentina. it emerges that one of the top 10 holdings in his janus global and constrained fund in may is argentinian bonds.

and what interests me is that no other country's government debt makes the cut. not even exit code or brazil. so a big bet by bill gross. david: what a difference a year makes. argentina was an outcast in the capital market not long ago. it was perceived as not going anywhere fast. as you know, the team that he brought in with him, it is extraordinary what the turnaround is. declined janus capital to give a comment. incredible is that the president takes office and you see the big fund managers come in. you are backing leadership. a fight to reform is one thing. you are always going to have a nationalism pulling you back just a little bit. leadership, back

there is a course to obstacle. we are finding that out in india. it reminds me of the vets on moody. david: a great point. this is a honeymoon time right now but how long will it last? his the way that modi had honeymoon time. now we turn back to the united states. later today we hear from the fed on how banks did in the first round of this year's stress tests. hear a lot about how big banks do but what do they mean for the smaller, regional banks? joining me now is stephen stein hour. our. about how thislk looks to you, from your way to view as a regional bank as opposed to a big money center bank. the chick-fil-a with government regulation. how does that affect you? stephen: there is clearly more

regulation and more overhead. having said that there are a number of strong elements. stress testshe even if it was not required by the government. the same not do it at level but it is fundamentally, a sound idea. stress test results are one way to compare the facts -- to compare the banks in terms of their risk appetite. david: we had daniel tarullo on this program recently and he addressed regional banks and the stress test. take a look. under $250s that are billion in assets and are very traditional banks -- not that they can't have a lot of international activities or buttal market activities -- to that universe of banks, the

direction in which we will move is to take them out of the qualitative side of the stress test and include them in the quantitative side. david: said he was saying that there is relief coming for you out of the qualitative as opposed to the quantitative. how much of a burden has the qualitative part of the stress tests been for you? stephen: it is about 15,000 pages. david: 15,000 pages? stephen: reducing the qualitative or eliminating the qualitative will mean a meaningful adjustment. a much simply run for more model and to end perspective. it will reduce quite a bit of the burden. but around the management of capital, it comes out of the capital planning. david: how much of the relief is pure cost savings? the relief isf

freeing you up to do activities you otherwise might not be able to do? stephen: much more about the latter. i will forward and risk oversight committee work on these projects and provide an enormous amount of time and investment of significant energy. and reallocating that back to business will only help us. david: so you just are completing -- up to $100 billion level. to what extent are you compelled by things like regulatory burdens to ramp up in size and scope, in order to distribute the regulation across larger businesses? stephen: the more burden we get in terms of overhead -- -- there is supply a scale to the business, increasingly so, which is unfortunate because i think there are well-run community banks across america that are feeling much more pressure than

those of us of some size who can absorb these expenses. so referring to you as more of a traditional bank, and as a traditional bank, you have your finger on the poles of a good part of middle america. what are you seeing in terms of your customers and financial and economic activity in the world? ,tephen: we see a strong continuing, sustained level of growth. housing is rebounding nicely. auto is doing well. has driven export driven businesses for almost two years now. 4% in ament is sub number of our markets. when i studied economics many decades ago, 5% was structural. 4% andre sub strengthening. so we are seeing inflation on the wage side. david: did you see evidence of

inflation? does it disturb you? stephen: yes, it does. while i don't have a view of the total economy, in our region, the midwest, there is clearly inflation on the wage side and stress with the unemployment levels. yellen were janet to call you up and say, what were we to do over the next nine months, would you tell her to air on the side of rising? stephen: yes. ofid: and you have a lot branches. how is that shifting with the technological developments with mobile apps and digital? stephen: we are constantly looking at our branch network. every 12-18 months. but there is still demand for in service.vice and so while we are growing significantly, one of the fastest growth rates in the

country in terms of households and businesses, inevitably, digital will put pressure on the branches. david: stephen steinour. thank you. jonathan: coming up, we had to washington, d.c. for a conversation with john micklethwait. he will join us next to reveal how president obama feels about being labeled an antibusiness figure. plus, john kerry talks china and cyber security concerns at the global partnership summit in california. see both of those conversations and hear from john micklethwait next. ♪

david: this is "bloomberg ." ime here in the hewlett-packard greenroom. coming up next, tom porcelli. his forecast for janet yellen. this is "bloomberg ." emily chang set down with the u.s. secretary of state, john kerry. here is what he had to say about on to partnership and the state of cyber security. >> it can be, certainly. in terms of communication and speed, the freedom to invest and the nature of risk taking tends i think itnness, and works more effectively but it isn't exclusive to that. there are ranging capitalist enterprises going on in authoritarian governments in countries with authoritarian

governments. china is an example. is an authoritarian government and it is competing around the world. but i think china has challenges. because of its internet policy the nature of risk taking there and the nature of partnerships required with some things. i think there is a certain imitation in the long run. emily co mark zuckerberg was recently photographed with a shot of his laptop. he has taped over the camera and take over the microphone. what does that say about the state of cyber security? >> it is a challenge. if you are not aware of what you are doing and saying and the apps that you have, the telephone could be a listening device and a communications device. and the camera can work in different ways.

so people obviously need to be aware. we are working very very hard with countries to establish norms and to have rules of the road with respects to cyber. we made progress with china and we are still working at the limitation. but it is a challenge and we in government are particularly sensitized and careful. dallas u.s. secretary of state, john kerry with emily chang. it is tough for journalists. you go out there and get a big interview and then your editor-in-chief goes and trusts you. david: he is referring to john micklethwait. let's go to his estimates for the anti-business person. that is this week's cover story. johnne and only micklethwait sat down with president obama and he joins us now. this is an exclusive interview. i want to start with the title.

one of the first things you asked was, what about your reputation with the business community? my whole life has been spent trying to upstage jonathan ferro. david: give me tips. obama,n the issue of yes. we started with the perspective of business doesn't seem to like you on a whole. but the economy has done very well. and it is an interesting balance. he thinks about this a lot but he has some element where he can't quite help himself. asked him whether he would like to see his daughter is working on wall street and he frowned. , from a corporate for group position, he still feels like someone who is not quite there. on the other hand, there is no doubt that throughout the presidency, as this has done well. david: he takes pride in unemployment and the stock

market. the wife he think business doesn't appreciate what he does? he thinks some of it is because he gets the blame for regulation, dodd-frank and obamacare. he thinks that at least part of that, his argument is that his job is not to increase your profit. my job is tot create an environment that is there and safe. he said i know that bank profits have come down but that is what the country needed. bankers were having a good time at our expense. so now we have a safer system. and that might lead to less way it but that is the should be. that is his approach. he definitely has an element where he feels more at home with the tech. he talks about maybe ending up as a tech entrepreneur. david: that was fascinating. he thinks maybe he could run a company? john: he starts by pointing out

that lots of companies think they could do his job but they don't realize to have at least half of your employees rebelling against you. but he is obviously intrigued. his side is drawn to things like medical science and technology and i think he thinks that is the sort of area he could be. and it would be fascinating to watch him do it because suddenly he would face these problems that business people know very well from the other side. david: going back to regulation. if you give you any sense that maybe they could have gone too far in one or two areas? or if they haven't gone too far, could there be such a thing as too much regulation? john: he still fights back on that. i think somewhere, i suspect that he thinks there are things he could have done, in the same

way i am pretty sure that if you push him into a room in two years time and said tell us the truth, he would regret not having done things. every president has regrets. also talks interestingly -- which will involve regulation of some sort -- about where jobs of the future come from. because there is a big idea that is beginning to trouble him as it is troubling a lot of people. because as businesses automate and technology comes in and where will be jobs be going forward? and he talks about ceos having to sit there and they should think really hard about paying people more in order to -- attacks on capitalism that might come. takes us tohat another area, gross. that might be the biggest challenge.

does he have a concrete idea about what can be done and what should be done with economic growth? of it onblames some republicans. he says we have all of these infrastructure things ready to go and they will change the growth dynamic. and we can't do it. things like building more roads and putting more cyber out there. infrastructure things. and those, he is blocked by republicans. outsiders will say that is a reasonable point. america is not replenishing infrastructure and that is one thing he could have done. he still questions the idea, we asked him about secular stagnation. he doesn't jump on that idea. is the idea oft one of his closest advisers. so to say this isn't just to do with government, it is to do with this not making long-term

decisions and i think people might take a less favorable view of that. david: he went so far as to say that maybe -- there is a quote i will read. "there were a bunch of decisions made in the 1930's that were resisted by business but created a social compact. we just have to update those for the 21st century." john: we asked him about this. he goes close to this. you are beginning to see people on the centerleft and some of the center-right he getting to look at the idea that you will have a lot of people who will be the economy as further transitions, in the same way they did in the 19th century. in the long term, we need to keep markets open and obama is a firm supporter of globalization of trade. but he says we have to face the issue about how do we keep

workers? and does that mean we end up gettingversal -- people paid money by the state to say this will support you. he is prepared to talk about things like minimum wage but in the long term you can see him moving in that direction. i wouldn't say precisely in that direction but looking at the issue about how you look after the bottom bits of society. the people of the top will gain from these changes. your interview wasn't about the current race but you do get into it at the end. and it was humorous what he had to say about donald trump. john: we asked him whether he was surprised that donald trump -- he sees himself as the most successful businessman but he pointed out that the people he knew don't agree with that. wantady, he doesn't

him. david: this is a fascinating interview. a retrospective about how he sees his role. john: and also looking forward. his brain is beginning to engage with what centerleft politics, what capitalism means over the next 20-30 years. thank you so much. that was the bloomberg editor-in-chief, john micklethwait. coming up, as private businesses tighten their belts, we outline that up next. ♪

david: this is "bloomberg ." time for off the charts. china is stepping up fiscal stimulus to make sure it hits growth targets this year. there might be a downside and julie hyman is here to explain

that. julie: it might increase the fiscal deficit that you have to include the off-balance sheet spending. the self spending, because it is not on the official balance sheet. talking about things like bonds to fund construction, private partnerships. so what we are looking at is the deficit in the percentage of gdp. david: so rate is zero? julie: yes. germany is above that. official deficit is around 3%. 3.5%. david: and it is growing? julie: the u.s. is around 4.5%. david: and japan is improving? julie: yes. that according to jpmorgan, if you include the off out sheet stuff, it is something like 10% by the end of the year. david: so a substantially larger

deficit of gdp than the u.s.? julie: exactly. if you account for the other factors. that would be the downside. jonathan: a fantastic chart. coming up on "bloomberg ," we will have tom porcelli. 94 minutes away from the open in new york city. ♪

david: decision day. the united kingdom had to the polls to decide whether britain should remain in the european union. jonathan: asian equity markets climbed to a two-week high. the ftse 100 has the fifth straight day of gains. david: and janet yellen's next move. a cautious view of the economy during heard two days on the

hill. she now pushing for only one rate hike this year? ♪ david: welcome to the second hour of "bloomberg ." a big week for the markets is winding down. wrapping janet yellen up the two-day stint on capitol hill. she gave a prudent outlook for the u.s. economy. concerned about productivity. david: joining us shortly to talk about the fed is tom porcelli the chief u.s. economist. jonathan: and it is referendum day in the united kingdom, region is voting on whether to stay in the european union. u.k. law prevents us from reporting on voting while the polls are open. what we will be following the

action as results come in with special coverage beginning at 5:00 p.m. eastern. 90 minutes away from the market open. dow futures are positive. s&p 500 futures positive almost 18 points. day gain inght london with the ftse 100. , the poundhe board is at a 2016 high. we trade at 1.48. the yields are trading higher. at yield of the tenure is 1.73%. david: let's go around the world for coverage with our top stories. we are in paris with disappointing economic data. michael moore is in london. important

conversations are to be had. we begin in europe with disappointing economic data coming in from france. the french pmi dropping below the 50 mark across the board. tell me what that means? >> if you look at the french economy in the past few months, it is interesting. we saw the contraction of conception at the end of last year because of the effect of the terrorist attacks. in the first order, you have contraction driving the gdp, which grew by 2.6% in the first quarter. we have incorporated investment surging so it is disappointing to see these numbers or the month of june. the first contraction of the pmi in four months. if you look at the french manufacturers, they are seeing a drop in orders for the past six months. and a similar picture for the service sector. they fell to the lowest in six

months. but it isn't over for the french economy because if you take the average of this quarter, we should still see an extension of pmi over the second quarter as an average. the indexectation of actually shows that we should still see an extension in the third quarter. but in the short-term, not good news for the french economy and the french president. who has been trying to revive the economy with the reforms. there are labor reforms and the latest poll that we have had for showed hisay popularity still at record lows. he wouldn't even pass the first round of the next presidential election. thank you. ugly data out of france.

if you think the fed has problems, look at the data out of france. david: france has a tough road ahead of them. now to the u.s. with janet yellen. yesterday, the fed chair appeared before the house financial services committee and talked about the widening racial wealth gap. needs to be discussed and we have discussed related data on the monetary policy report. it is extremely disturbing. research been some that has tried to look at the links between inequality and growth. and they are, frankly, complex. and i don't think we fully understand them. david: let's bring in susanne barton. this is something we have heard from the white house as well as janet yellen -- the concern about gap in employment over

race. is fulled's mandate employment. and this would represent a headwind to achieving those goals. so the fed wants to see higher employment but then the racism did has been added -- she say that maybe, one reason for this is because of a lack of opportunity in education and training. that has dampened the unemployment that we see. david: when you talk about things like the lack of opportunity and education, that is certainly more than the power of the fed to control. what can the fed do to address this? on thefed can only focus mandate. employment.y and as much as they dedicate resources to doing that, it could affect growth. you so much.

the bloomberg news treasury reporter. jonathan: we have another round today and thes results come in this afternoon. let's bring in michael moore. the shift has been to looking at financial stability in the united kingdom. one isunited states, no expected to fail. but bank of america is in the spotlight. been is because they have a lacquered on the capital return story. and as you mentioned, it has gone from the macro credential story to the ability of the financial market and a company specific story. that is why you are seeing analysts to roll into bank of america or citigroup. it has become a story for the banks themselves in terms of being able to return capital. because they are not wrote the right now. they need to become income stocks. jonathan: when the ecb did their

round of stress tests, a lot of people asked the question whether someone needed to fail the stress test to prove that they were credible. looking at the united states, it has been the case of people viewing those tests as incredibly credible. the idea that no one fails, does that tell you that they are not credible? >> some of the banks would argue that regulators still feel the need to fail somebody. you often see them have a conditional pass for some of the banks or failing on qualitative reasons. butour numbers look fine you have to fictional process before we give you full approval. you have seen that over the last few years. sixs have to resubmit months later. so there is still the sense of somebody having to fail. in the last few years the drop has been the foreign banks who don't have as much experience.

so you have seen the u.s. subsidiaries of the deutsche bank and other foreign banks have trouble. and that is one thing investors will be watching. jonathan: michael moore, great to have you with us. let's get to some of the movers with julie hyman. julie: let's start in scandinavia. bourdais a bank stock is down by 5%. it has been downgraded by those at j.p. morgan. this is following a report that the company may need to raise regulatory capital. they have disputed and rejected the financial supervisory authority has corroborated what the bank is saying and yet the stock is still under pressure. benefiting from analyst upgrades. andchip maker was upgraded they are talking about pricing

in the chip industry. you can see shares are higher by 5.5%. 7% after then company cut its forecast for 2017. in part, it looks like a provider of application a fewmming, it will take sense of the earnings but it is unclear if there is something else going on here. the company also announced a $1 billion share buyback authorization. david: for an update on news outside the business world we go to emma chandra. emma: u.k. citizens are voting on a referendum on the country's membership of the eu . david cameron was among those casting ballots. reportingrevents the while the polls are open but we will be following the action as the news comes in with special

coverage. house republicans refused to give in to an unprecedented protest by democrats. they adjourned the house for the fourth of july recess early today, 16 hours after democrats begin a sit in. democrats are demanding republicans schedule votes on gun-control measures. donald trump will interrupt the presidential campaign tomorrow to fly to scotland. he is marking the opening of his golf resort on scotland's west coast. he had promised to create thousands of jobs and he now employs 150 people at the resort and has invested 150 million dollars, a fraction of the initial pledge. news 24 hours a day powered by more than 2600 journalists in more than 120 countries. i am emma chandra. up, what isming really holding janet yellen back from raising rates? he said continues to cite butinflation as obstacles

our next guest says that is not the real reason. tom porcelli tells us why next. ♪

david: this is "bloomberg ." jobless rates will be coming later today. we are seeing a pickup in growth. there has been a sharp increase in consumer spending. caseat turns out to be the , and i see the fundamentals as remaining strong, i am hopeful that we will see a pickup in job growth. david: tom porcelli joins us now. welcome back.

i don't think you are quite as bullish as janet yellen. is that right? think she was actually right to highlight that job growth will bounce back. we have been calling that. it is not consistent with any of the other data that we have seen as it relates so she has right to say we will see a bounce back. about,and i have talked we do not think they will gain a significant amount of momentum from the job growth and we think that job growth is in the midst of slowing. nevertheless, we don't think it is slowing down to what we saw last month. so i think she did the right thing. in your analysis, do talk about the labor market conditions and how important that is. explain to us what that is and why we should pay attention? tom: to amend something you just said -- i don't think that is important, the fed think that is

important. and they count. so for them, they created the l mci. it is 19 different variables. some of them you know about. the employment change is embedded in there. some of the variables you may never have heard about. some people may be unfamiliar with the quit rate. oft it is an inauguration factors and if you look, it has lost a bit of momentum. has been in negative terrain for the last five months. losing momentum for the better part of the last year. david: 2.5 standard deviations off? tom: from the recent average, that is hell because related it. -- that istical way how we rate it. right, she isn is

trying to drive home the idea that the loss of momentum can be then it willmci, take many months before it starts to regain momentum we have lost. it is why i would say july and september are off the table. again, is that is true. point, theo that conversation has happened about janet yellen one of the fixed dots at the bottom of the screen forecasts one hike for the rest of the year? how significant do you think that is? thinko be honest, i don't that is significant. i don't know where she fits in. thatad, i would say everybody falls over themselves to look at the median of the dots. but you do yourself a disservice

if you only look at the median. it is interesting to see how the composition has shifted. and there was a massive shift leading into this report. there was only one fed official who actually thought we would see only one hike in 2016. after the most recent meeting, there are only six officials who think there will be one hike. i think that is immaterial shift, and i think it went mostly unnoticed. we do think we will only get one hike this year. but it doesn't matter what i think. it only matters what the fed is telling us. and we have one third saying one hike this year. give me 60 seconds of your time. policymakers, fed -- coming out and saying maybe just one in the next two years. and you can't forecast beyond 2.5 years.

he looks like an outlier but can he get the fed to gravitate towards him? tom: i think he is doing a good job of that. and full disclosure, i'm not only in agreement with everything he says but i am in total agreement with him on this. i think that highlighting the dots adds to confusion and market volatility. the exact things the fed is trying to avoid. you had one other official say he is sympathetic towards james bullard's stance. -- getting rid of it now admits that they made a mistake. so we will be around for for quite a bit longer. that means the potential for confusion will linger. david: in closing. how direct is the transition tree be fed and what monetary

policy is saying and employment? tom: a great question. asyou think about the lmci these 19 indicators, it will the prize people to find that nearly half of the indicators actually have no correlation with the economic backdrop. point,ore clear on that if you looked at some of the indicators that don't have a expansion, with the it begs the question -- why are we focused on the lmci? for us, that is an important decision to make. halfto be clear -- fully actually have no correlation with the economic cycle. that is compelling. david: when people decide to hire or not higher, they don't

consult the fed. tom porcelli, thank you for being here. coming up, bloomberg news made its way to capitol hill. find out how president obama new banking regulations and why we are seeing a decline in banking office. ♪

david: this is "bloomberg ." since president obama took office, the s&p 500 has risen 130%. company profits are high but he is labeled "antibusiness." intalked about his legacy this week's cover story. megan murphy sat down with the president and she joins me now. you were there for the interview. i want to talk about something that you talked about. bake profits. not as profits are outsize as they were.

he is not apologetic about it. megan: absolutely not. this is one of the things that the banking industry has always suspected. the president didn't see the clampdown that we have seen on profits as a bad thing. of the dodd frank and other regulations. he is quite honest about how important the economy and futile has a and how america deep capital system which has allowed us to thrive. he signals out one executive in particular, an outstanding businessman. jamie dimon. david: let's turn to the current rate. we had a big statement coming out from hillary clinton and donald trump in the last 48 hours. starting with hillary clinton -- she came out with her economic

policy, she laid it out. what did you take away from what she had to say? megan: where she will focus on is jobs and bringing up income inequality through growth and that is her message. jobs, better paying jobs and harnessing some of the disruptive forces -- forces like technology and automation -- and how to turn that into something that is going to increase the all and boost growth. because right now we haven't seen growth numbers that democrats and republicans like to see. she will focus on the jobs and wages message. david: was the thrust of her message that she has new ideas or that she can implement them? megan: i think it is that she can get them implement it. she is very much trying to embrace the obama legacy. when we look at the economic legacy of the president, the numbers speak for themselves.

she also wants to say look, there are measures i can put in place that i can pass that i can get done. to actually improve the lives of ordinary americans and make you feel more vested in the economy we have now. equip youtuber dissipate in the growth and equip you for training and education. and to give women a better chance to enter the labor force through offering them paid leave and childcare. like minor things but put together, they form a comprehensive package. to donaldhave to turn trump. he had a major address where he went after hillary clinton, not on the economy, and what did you take away from what he had to say? megan: this was billed as a big attack is but there wasn't much we hadn't heard before. lying, crooked hillary clinton. he will talk about her e-mails and it will turn the path to the

forefront of his campaign. will workat strategy with voters who don't trust her. david: but not so much on the economy. megan: he didn't hit hard on that yesterday that if he makes it more of a feature going forward? david: thank you. that was megan murphy. you can read the full interview with president obama in bloomberg businessweek. initial jobless claims are coming out. ♪ you guy's be good. i'll see you later

[ bark ] [ bark ] bye. see ya pal. ever wonder what your pets do when you leave home? [ laughing ] aw you cutie pie. aw. aw. aw. aw. [ barking ] [ washing machine running ] party's on! know what your pets are up to with xfinity home. xfinity. the future of awesome. see the secret life of pets, in theaters july 8th. jonathan: this is bloomberg . i'm jonathan ferro. 60 minutes away from the open in new york city. futures are higher, almost one full percentage point so far. the ftse 100 on a five-day winning streak. we are rolling towards the close

in london. a strong pass story in the fx market. the economic data comes out in the u.s.. initial jobless claims dropped more than forecast. week -- falling 18,000 last week. the markets clinging to their highs to the yields. futures stand firm. up almost one full percentage point. let's get to today's morning meeting, where we hear what he banks are looking at. --p castille is lack rock chiefock -- black rock's strategist.

you are going to help me. how should we be viewing our portfolios as we look towards retiring? in several decades for many of us and years to come as well. >> thanks for having me. the environment is something we all need to be thinking about. it affects us in two different ways. what is happening to the portfolio itself. in a low rate environment portfolios allocated to bonds don't have the opportunity to grow as they have in the past. the other dimension of the low rate environment is i don't think it's widely understood. ,he cost of retirement income funding your retirement goes up dramatically when rates come -- expensive. in about three years ago we launched -- that helps

individuals track the cost of retirement funding through time. for a 58-year-old today over the years the cost of funding retirement has gone up about 43%. over that same time has gone up 21%. a conservative allen's portfolio that might be appropriate -- balance portfolio that might be appropriate for a 58-year-old has only gone up about -- it's really challenging for investors. jonathan: you brought up the bond market. what are you concerned more about? the low effective yields or the significant risk of capital lost? >> i think you need to consider both. let me give a way to think about this problem. set your retirement income goal. retirees are people saving for

retirement should be thinking about how much money am going to need to fund my desired level of retirement income? if you are not where you need to be what you need to think about it is, what can i changed? i can change my retirement age, my savings level, the goal itself. the last thing is changing the portfolio. those four things can help you get an understanding of how likely you are to meet your income goal. and low yield environment if that low yield environment changes to a rising rate environment, you will need to revisit on a regular basis and change those levers. you will need to change them to course correct as rates change. we have dealt a framework -- rock a framework at black

that helps individuals pull those levers. just quickly, blackrock very involved in passive indexes. talk about that. $1.7 trillion in the u.s. going while activefunds funds have seen a slight outflow over the last five years. as the market shifts towards index tracking strategic methods , what does that mean for me as i'm trying to build up a pension fund? if all the money is just following the same thing? tracking funds are really great at letting you understand what your market exposure is and letting you achieve that in a cost-efficient basis. you differentive type of return that can be above the benchmark. it's a nice opportunity to think about how to blend those things

together. where is it appropriate to think about active funds? maybe somewhere in emerging markets, non-us markets. passive funds, maybe for the core of my portfolio. place in their portfolio and when you understand your retirement income goal and the other leverage that i talked about it becomes pretty clear what your portfolio mix should be between active and passive. just a final question. negative interest rates. incentivizes hoarding. the conversations you are having with client, are they allocating even more funds to that tension -- pension because of the low interest rate? it is coming up on the

awareness radar of individual investors. when you get outside of the u.s. you see that there's a strong preference for cash and some risky assets. it'sve repeatedly said really important to think like an investor and not a savior. saver.r -- feel safe to be in cash. it is very risky versus your retirement goal. jonathan: chip castille, blackrock chief retirement strategist. i don't think the issues are going away anytime soon. david: no i don't but i think that was a terrific conversation. venture janet yellen came under fire from house republicans yes today saying the central bank has not done enough to boost economic growth.

our next guest says the fed has lost its credibility. joining me now is peter tchir, macro strategist at green capital. welcome back. why do you think the fed has lost its credibility and when? >> a couple weeks ago when they made this big effort to put june on the table. the market was very confused. the market had 0% probability. it went all the way up to 40% and then dropped. the market is wondering why did they go so out of their way to put june on the table only to look kind of foolish? i think they have lost a lot of credibility. when you think about what the fed is trying to tell you, you think you are doing the right thing and then they change the rules of the game on you. david: what are the practical effects of the fed losing credibility in the market? >> you have to be more careful on the positions you take. where you want to be in the yield curve.

because we have been in this mode for years now it really impact the real economy more than it used to. people want to know what the fed is doing. they funneled into the entire economy and now you are looking them saying they don't know what they're doing any better than we do. david: one more potential cause for caution. >> that's another reason we have seen so much activity in the hedging space. they are getting more nervous that the fed and all the central banks are using control. they entered this bond buying program, the ecb. david: what about the u.s. election? these newswe follow cycles. only as things become more imminent do they really hit the market.

is going totion start solidifying and we have to start inking, is going to win, but the makeup of congress going to be? the things youf do brilliantly as look at market mechanics and positions. you talk about the bearishness of this market. it reached in october 2011 hi just this week. risk-averse and has built up in the last year. are we so bearish it's almost bullish? it's almost limiting the downside at this point? >> we have generally been more positive than negative lately. if you look at other measures of volatility fund flows, vix futures have all seen massive inflow since february. you have this market that seems ed andearish the position

to me that means the downside is protected. not going to be fundamental driven. it's going to be very squeeze driven. we had a poll. it showed that the market favored anyone with an allocation in this market, the overwhelming majority favored a president trump. outcome of the survey is that people were going to be risk-averse no matter the outcome of the election. for me that doesn't make any sense at all but it didn't matter who won. does that make any sense to you? >> i think that's why we have seen yield so low even in the equity space. there's the net fund flows out of the equity space. or have been large inflows into dividends into utility stocks.

the so-called stay for stocks -- stockstocks -- safer have been getting inflows. if we get confidence in the central banks that pushes back into risk. one of the consequences of that sort of confidence would be job growth. what do you think we are headed toward? >> i think the job growth is very questionable. we had data as a whole and people said, that's an anomaly. of thelook at a lot data, q1 was really weak. q2 started off strong. we're kind of weakening. there is some risk that the job market has been petered out. we have the election and real questions about global growth.

i think the downside is minimal until we get one more big like -- spike in stocks. david: time for an update on news from outside the business world. u.k. citizens are voting today in a referendum on the country's membership of the european union. david cameron was among those casting ballots. u.k. law prevents us on reporting on voting or discussing referendum issues while the polls are open. results will come in all day. union workers in paris will march to protest labor reforms the proposed by francois hollande. protesters will march along a shorter route than initially planned.

david: coming up, the blackberry blues. remember when it was research in motion and trading at $70 a share? a lot has changed. we will take a closer look at today's results next in tech go. ♪

mrs. bloomberg . i'm david westin here in the hewlett-packard enterprise greenroom. coming up, j.p. morgan global cio bob michael. >> here's your bloomberg business flash. giant fund companies are warning that they are passing over for

active managers. the ceo of the world's biggest money manager black rock lyrics thinks is the shift of assets into index funds will be massive. jack mark keeps repeating this message. alibaba has zero tolerance for counterfeit. that has not ended criticism that site is a haven for fake products. the ceo wrote that brands and intellectual property must protect it. that's your bloomberg business flash. blackberry reported earnings this morning that exceeded analyst estimate sales missed.tions here to discuss is john butler.

great to have you with us. the company has made a push on transitioning from device sales to software. how is that going? >> that's the big move at like very. ceo iss video -- new really pushing the management software. the device division has and suffering for several years -- been suffering for several years now. they are trying to restore that business to profitability. they are close but they are not there yet. inis still a company transition. the latest trends are encouraging but they are not there yet. chen onwe had john three months ago. if you look at the overall numbers as a percentage of their revenue it was not that large. >> it's a little over 35% now. about a third of the business.

devices are a similar sized business based on the latest numbers. the transitionid is progressing. that wasn't true a year ago. software was a much dollar percent of sales. devices still dominated the revenue stream. that's changing but it's not changing rapidly. patients is the watchword of the day for investors. : how much of that has to do with cyber security? television ads for blackberry all the time emphasizing the dangers of the cyber world. >> they are playing to their strength which is in security. level, the network application level, and the device level. at the network level and the device level is really where black very has -- blackberry has strength. david: how much patience are

investors showing? >> not a lot. this stock has been under a lot of pressure. reflective of the dynamics in the device business. they are not quite there in terms of profitability. i think they might get there although hands that's are a hit driven business. they are one device away from doing better. fingers crossed. we will see what they have in store. they have two more devices coming out before year-end. david: how much of their businesses business to consumer as opposed to business to business? >> it is falling as device sales has fallen. blackberryrters ago made the transition from business customers to trying to appeal to consumers with their devices. david: thank you, john butler.

make sure to tune into bloomberg markets at 11:00 for an interview with black very ceo -- blackberry ceo john chen. what does john buffett use to gauge the health of the markets? that's coming up on bloomberg . ♪

jonathan: this is bloomberg . i'm jonathan ferro. futures looking firm in the u.s. dow futures up 157 points. almost .9%.up five straight days a rally here in london. the longest winning streak on

the ftse since november. up 1.25% approaching a year to date high. treasury yields of six basis points on the 10 year. time for battle of the charts. julie hyman takes on oliver renick. julie: i'm talking about yet another measure of the wealth gap in the united states and people who are catering to it. we are looking at home sales of homes are about $300,000" that are below. this goes back to 2002. in general there are more homes sold that are lower than $300,000.

in april 30 4000 of the 61,000 -- homes sold we are getting new home sales data for may coming out at 10:00. economists estimate that that number fell 9.5%. it is very interesting that buildings are catering to the high end of the market much more than the below 300,000 level. david: this is number of houses told. if you took the value, the blue line would be way off the charts. oliver, what do you have? at a way to think about valuations in the stock market. it's one of warren buffett's favorite ways to do it. he likes to look at the market cap on the stock market versus the gdp of the country. the s&p's market cap

versus the gdp of the u.s. we have the peaks. what's happening right now, an interesting trend. seen -- we know the s&p has been flat over the past year with a little bit of volatility. the gdp has been improving somewhat. have this idea that perhaps the economy is catching up to the stock market in some sense which would seem good. but this type of slowdown plateau does occur at these market peaks. david: if you look back historically that would suggest the market is fully valued. >> exact way. my chart is based on one made by the torilla stillwell. -- victoria stillwell. david: two great charts. do you want to go first? jonathan: you go first.

david: i like this chart a lot. it is fascinating and surprising. i'm voting with all of her. i like this chart very much. jonathan: i'm going to put the pressure on the control room and go with julie again to break it. david: ok the control room has weighed in. julie wins. coming up next, we are 30 minutes away from the open. michele global cio bob will be right here with us on go. ♪

in the united kingdom head to the polls to decide whether britain should stay or remain in the european union. passing the fed stress test would let the bank boost shareholder payouts. the results later today. david: and european and asian equity markets climbed to a two-week high. the foot he 100 heads for a

fifth -- ftse 100 heads for a fifth straight day of gains. ♪ david: we are just under 30 minutes away from the opening bell. this is bloomberg . i'm david weston. my colleague jonathan ferro is joining me from london. jonathan: its referendum day here in the united kingdom. u.k. law preventing us from reporting on voting or analyzing the referendum while the polls are open. we will be following all the action as the results come in with special coverage beginning at 5:00 p.m. eastern time. futures are firm. london.re up here in the pound with the 149 handle

earlier up by 1.31% on the .ession david: let's check in with our stock reporters. julie hyman has a look at what's moving ahead of the open on the nyse. let's begin in new york. uptrend thatg the jonathan was just talking about, tesla is down another percent after falling 10% yesterday. adam jonas at morgan stanley is downgrading it to eight away from overweight. -- equal weight from overweight. he says long-term it might have a good strategic -- but in the not adequatelyay

compensate investors and it won't help tesla make better cars. i have taken tesla back to where adam jonas first upgraded the .tock beyond shares are down sharply after the home goods retailer missed fiscal first-quarter estimates. analysts continue to look for a turnaround here. faring much better, blackberry. they are keeping this struggling smartphone company alive. the full-year loss is much narrower than the street is estimating. micron shares are sharply higher in the premarket on a elysian

upgrade -- bullish upgrade. to $18raised his target per share. micron could climb higher by more than 40%. mark: stocks in new york rising for the fed can second day. sincengest winning streak may. 663 billion euros. every single stock market industry group is rising. we have a slowdown in eurozone manufacturing and service is to the lowest level since january last year. news in greece today the ecb reinstating the waiver on greek debt allowing the banks more access to cheap refinancing. the move should provide a significant improvement in economic sentiment. this is the gauge of greek banks.

since november 2007. look at it down by 99.93%. that's 81 billion euros of value disappearing. on the back of the news from the ecb on the greek waiver we have yields on the 10 year declining today. in 2012 the 10 year yield was 37%. yield wase two year 259%. good news for greece. breaking news at the top of macy's. there has been a succession planning put in effect over at macy's. todd lundgren will remain as chair but give up the ceo title to the president. this was part of the board's plan for succession at macy's. the major retailer has had some .ifficulty with their earnings

some activists have said it is more of a real estate play. that's breaking news about macy's. get to the three big stories that matter to markets right here. jobless claims falling in the u.s. more than anticipated. eurozone pmi slowing. banks on the edge with bank of america very much in the spotlight. j.p. morgan asset management global cio and head of global fixed currency and commodities group is bob michele with the longest title known to man. unemployment claims fall more than forecast. 259,000. this after chair yellen wrapped up two days of testimony on capitol hill. she is focused on whether the economy will be ready for another hike and not when that will happen. looking at the data points i think the overwhelming this is

that the momentum has been lost and the economy has off and. when you look at the labor market indicators they are still very strong. initial jobless claims points to strength. what's on your dashboard right now? >> i think the labor market actually does look pretty good. i think what we are all anxious to see is a couple weeks from now when the july numbers are released what that looks like. will we see some bounce back from the june data and will the underlying trend be closer to the claims data which is quite good. yellen has boxed yourself in a corner where she has put out a very dovish statement over the and any possibility of an increase in the fed funds rate in july seems to have been taken off the table. i'm not so sure the data will be soft enough in a couple weeks to support that. david: hasn't she really about taking it off the table as a

practical matter? >> certainly when you look at what is priced in the market there is a one in 10 chance. but she does say every meeting is lives. they will be data dependent. will there be enough data between now and the mid july meeting for her to make a change? david: the fed has been diverting from the market for some time now. when there has been an adjustment it has always been the fed at the fed has moved the market rather than the other way around. why is that? >> they are looking at two pools of data. when they talk about data dependency we think of economic and inflation data. what does growth look like. when she looks at the data that is one pool. the other pool are financial conditions. they have been very transparent about that. if you look at some of the main ingredients in financial conditions models equity prices are a big one.

market volatility is a big one. and the dollar are big ones as well. things tighten it also takes tightening off the table for the fed. david: are second-story is about signs of a slight slowdown in europe. the euro area manufacturing and mrs. pmi data fell in may. data showed a contraction in the private sector economy with french manufacturers reporting a sixth consecutive drop in new orders. how important to you are these european pmi numbers? >> they are very important. and see how smart the ecb is? smart thingshe they did a couple months ago by increasing the amount of purchases, buying corporate debt, paying banks to borrow from them. in a way this data helps validate the decisions they made. any do feel there is still

underlying weakness across europe. unemployment is still quite high. monetary policy has to be somewhat supportive and you need time. i think the data does actually validate some of the moves they have made. jonathan: we used to think about two separateas it entities. france used to be considered the core. i'm looking at very ugly data. france coreonsider eurozone or should we start thinking about the economy as a peripheral eurozone country and germany really is flying solo? participants, you are right. we look at germany. to us that is the core. has accidentally opened the door to that thinking a couple meetings ago. they talked about fiscal stimulus and for those countries that have the balance sheet capacity to do so maybe they should. everyone understood that to mean germany.

i think you now have the core which is germany. which nowhe semi-core includes france and you have the periphery. challenging to set monetary policy across all those different types of borrowers. david: we have a chart showing the pmi numbers. challenge for the eurozone overall is there trying to manage it as an economy and it is several different economies in very different places headed in different directions. >> it's true. the ecb is trying to open the door to fiscal spending coming out of germany. if you think about the german condition, they benefit from a lot of things. they are an industrial manufacturing efficient powerhouse. but they're operating at a currency that cannot the deutsche mark. at anre operating aggregation that brings in the peripheral countries.

it has benefited them and you see that in the data and i think it's right for them to embark on some fiscal stimulus. jonathan:? later today the fed is releasing results of 33 firms on whether there are strong enough to withstand a potential economic shock. results are due at 4:30 p.m. eastern time. the main focus is bank of america which is not passed the last two exams. as you look at the financial system in the united states, the conversation we have had all morning. if everyone passes does that mean they are credible? do you still consider these stress tests stressful for the bank? >> i think they are quite stressful. what's interesting about them is whether the banks pass or not and what they can actually do if they do pass. one of the issues with monetary policy has in the extension of credit through the system and

banks being able to either make more loans or return capital to shareholders is another way that you can extend credit through the system. david: i also wonder whether -called tests. the fed asks for revisions and you go back and do it again. those are the stories that matter to market right now. let's go to first word news. u.k. citizens are voting today in a referendum on the country's membership in the european union. david cameron was among those casting ballots. u.k. law prevents us from reporting on voting or discussion of referendum issues while the polls are open but we will be following all the results as they come in. special coverage begins at 5:00 eastern. north korea is claiming success in the test firing of a medium-range missile. kim jong-un launched a missile

that it says can strike u.s. military installations in the pacific. called on the un security council to take action. it has already imposed sanctions on north korea for a nuclear test. democratic presidential hopeful bernie sanders is thinking about where we go from here. his campaign says that's the theme of his speech and news conference later today in new york. senator has not formally left the race or endorsed rival hillary clinton but yesterday hit knowledge that he's apparently not going to be the nominee. david: coming up, this year's second vc backed ipo begins trading in just a little while. --les of truly a -- tullio shares of tullio --

blackberry earnings are sending shares higher. the ceo ways in later right here on bloomberg television. ♪

jonathan: 14 minutes away from the market open in new york city. let's get a check of the markets. futures firmer in the united states. dow futures up. in london, a five-day winning streak on the session. , the year-to-date high. this is how we treat at the moment. euro-dollar a little bit earlier. still stronger on the session. risk on rally so yields

higher on treasuries of five basis points on the session. bonds treasuries a little bit lower. yields higher. crude is higher. very much a global risk on rallying. you see it from equities to fx to commodities to bonds. david: now we will turn back to macy's. shares are up after the company just announced that jeff jeannette will become ceo. this is brand-new news to us. >> it's a big surprise. david: jeff jeannette was named president in 2014. he was next to todd lundgren. what may have triggered this? >> macy's sales have been down for five straight quarters. they are also exploring real estate options to monetize real estate and we have not seen much

come from that. it may be that investors were shareholders or activists are looking for more on the real estate -- david: it is terry lundgren, not todd lundgren. he will remain as ceo until 2017. >> he will still remain as chairman and he will have a need on the board. he will not be as directly involved as ceo. david: jeff genette has been with macy's for some time. >> he understands the culture. he was on board with the mom strategy. in line toirst pioneer many of the -- fromgical initials an operational standpoint he's probably going to go ahead and take the same page that kerry had in his playbook. terry had in his playbook.

you may see something on the real estate side. david: even some activists pressing on real estate. in evenew ceo comes from inside, they bring their own ideas. what might he pressed for on real estate? the flagship is key real estate that they own. will they find a way to monetize that? that's probably their biggest asset. we will see if he unlocks any shareholder value from that. david: thank you so much. for a rough first quarter for the ipo market we are seeing a resurgence in volume. the latest billion-dollar tech company going public. that's next on bloomberg go. ♪

david: this is bloomberg go. i'm david weston. mobile and web alkylation -- raisedtion maker twilio

$150 million in its ipo. it is only the second venture capital backed tech company to go public this year. for more we are joined by elizabeth for near -- elizabeth fournier. tell us about this ipo. does it tell us something more broadly about tech ipos? is a san francisco-based software company. it makes the sort of technology that a lot of mobile and web applications used. whatsapp is one of its biggest. you get a text message to verify that it's you. twilio helps out with that sort of technology. not b toey are b to b, c. >> off to a good start and the pricing is really positive. were offered at $12 to $14. they priced above that at $15.

how important is it to get away this at a decent valuation at the same time? in the first quarter was an ugly performance in terms of volume. listed in 2014 and 2015 traded below the issue price. that way on appetite? >> i think in terms of appetite people are taking what they can get. the volumes have been really love. w. seen trading above the offer price which is a positive sign. investors are being careful but when they something they like this to be piling into it. whether that will happen here is yet to be seen. depends onsuccess the businesses. this is a company that is cash

positive bias. does it have real revenue? >> revenues have been growing really fast. they expect that growth to slow a bit. in newve been bringing customers. in terms of profit it's not profitable yet but that's not necessarily unusual at this stage. they want to use the proceeds to reinvest in the business and grow their offering. david: what's next? >> in terms of ipos? this one came off the heels of backed the only other vc company to go this year. we have a big one coming up in the next couple of weeks. a big japanese messaging app. that will be a much bigger bellwether for the market. about $1cted to raise billion. it's a dual listing between tokyo and new york. to picks the time right

back up on ipos after bringing them down? isi think it reflects there momentum in the markets coming off the mid february lows. you are back toward the highs again. the markets are open for capital raises and i think you see more ipos coming. there is capital looking to get invested. david: and the venture capital firms, are they eager to cash out? >> there's a lot of these so-called unicorns out there. at last count there was something like 160 of them waiting in the wings. whether that means they go down the ipo route is yet to be seen. they certainly raised bunch of money a couple years ago. there is a lot of heavy companies out there ready to do something. david: thank you, elizabeth fournier. jpmorgan's bob michele will remain with us. jonathan: every little ipo seems to count.

global volume down over 66%. every little one helps. the opening bell right here in europe with five minutes ago. the opening bell in new york city is coming up. futures positive. gains hereht days of in london. a pound in the fx market is looking strong. treasury yields just creeping higher. ♪

♪ jon: "bloomberg ." this is i'm jonathan ferro. futures looking firm in new york city. s&p 500 futures positive. five-day winning streak in london. what a move over the last five

days. as you hear the opening bell , we getnew york excited. switch of the board of fairly quickly. risk on rally, yields go higher and treasuries job -- and treasuries drop. crude anticipated in a global up.y on wti of 1.14%.outh let's send it over to julie hyman. julie: it means that u.s. stocks are trading higher this morning out of the gate. all three major averages are higher. we have had a close correlation between u.s. stocks and european stocks. the dow and s&p out of the gate adding 6/10 of 1%. the nasdaq closer to a 10th of

1%. we are watching the bank today. john and david will dig more into it. we will get results of the stress tests after the close of trading. they would trade more on the capital approval plans. that happens next week. we are seeing them trade in tandem with european banks. we have jpmorgan and goldman sachs and bank of america and citigroup all trading higher. i wanted to check in on macy's of the news of the succession plan. terry lundgren will pass the job off in the first quarter of 2017. he will still be executive chairman and advisor to the company. basic shares higher at 2%. here is the 10 year of terry lundgren at macy's. if you go all the way back to

2003, that is when he became the ceo. his tenure, stocks have been up. it had a downturn post financial crisis during the recession. then it was seen as best in industrysome of the before the downturn we have had broadly in detail, of which macy's has been a victim. elsewhere, looking at housing-related stocks, home depot benefiting from an upgrade. the analysts say that even if they were slowing home price growth, home depot has managed to keep up its sales growth. bed bath & beyond not faring as well, down a half of 1% and earnings missing estimates. jon: thank you. stocks opening higher in the united states following the global equity rally. later this afternoon, the fed

will release the first round of stress tests result used to determine if things have enough capital to survive their scenario like economic downturns. for more on what to expect, i turned to fred, global director of research. fred, the conversations we have had is whether the stress tests is successful. are they credible? fred: they are very credible. we expect good results at this time. it is a cover stress test this year than last. jon: early this year, there was a financial stability concern regarding the provisions built-in. does that concern you? is that a financial stability concern? fred: it is a concern.

you have the potential spillovers in cities like houston. when we look at the portfolio of the bank today and the capital levels, it is not large enough to be a systemic concerning u.s. banking. david: fred, i wonder if we call these tests correctly. in tests, you pass or fail. this is more of a negotiation. about whetheris they can pay out dividends must ? capital is about deployment. marks will beon about morgan stanley and citigroup. they have built up a lot of capital. david: what about bank of america? it is a question of whether they could distribute some of the cash back to shareholders. fred: especially after a big

stumble from last year. the expectation is lower for bank of america then morgan stanley. if i have a lot of capital, that is great when it comes to debt. the amount of cash ready to deploy, that is become an equity story -- will it become an equity story at some point? the problem is getting the capital back. help thisincremental year. the stress tests get tougher each year. bob, you know fixed income better than anyone. there were concerns in europe about a lot of eurozone lenders. we are talking about a fraction of what value. do you like the debt story, the credit story? bob: we like it quite a bit.

all of the things that fred talked about, the banks raising capital, they are becoming utility-like. as a debt holder, we rather they not pay it out by increasing dividends are buying back aares, but when we stressed lot of the banks in our scenarios, we found they hold high levels of capital. david: is it possible for banks to have too much in capital reserves? does the fed think it is possible to have too much? standpoint, equity yes. thatsonally think constrains lending, which is a problem for the fed. the fed has given no indication that return on equity is a concern of theirs. they are much more interested in the bondholders. >> if you look at some of the policies that are going on in europe if you go back to

jonathan's question, we think that is one of the reasons the ecb is buying corporate debt. they are giving us more money to buy corporate and they will buy them from us. they are effectively using the capital markets to replace the traditional extension of credit to the biking system. -- through the banking system. >> i consider them bad utilities with a are not giving a decent return to shareholders. -- he thinksd has there should be different rules when it comes to assets for banks under $250 billion. how important is that for regional banks? >> very important. janet yellen suggested that the 250 level would not the subject to the quantitative piece of the

puzzle, which would allow significantly more capital deployment at the large mutual banks. david: with that require a statutory change? >> the stress test is part of. quantitatives the -- the qualitative part is c-c ar. bob, are you positive on banks going forward? bob: i am. david: as a debt holder? bob: yes. they have systematically raise their capital. a lot of where they have stored their capital in previous cycles, they moved it to safer assets. we can have that debate whether government bonds and agency mortgages are safer assets given the yield. but they are there. dothey are in there he strong shape -- they are in very

strong shape. david: thank you so much for being here, gentlemen. trump'smay be one of most prized possessions. details of that next. nine minutes into the session. stocks in the u.s. opening higher at 8/10 of 1%. points.500 north of 125 leadcials and materials on risk on rally. ♪

♪ david: this is "bloomberg ." i'm david weston. later today, linkedin chairman and cofounder reid hoffman.

jon: we are 12 minutes into the session. stocks up over three quarters of 1%. let's find a -- let's find the movers with julie hyman. julie: it is a broad rally in the s&p. seeing 467 of the 500 stocks in the s&p trading higher. red hot is not one of them. the maker of the limit software coming out with the forecast that missed estimates after the company approved a $1 billion share buyback. it is the second quarter forecast of -- forecast coming in short. shares down nearly 5%. interesting split in the office furniture industry. veryompanies are trading differently. steelcase coming out with a

forecast low estimates talking about the lingering downturn in the energy sector and said it saw a decrease in orders in the u.k. herman miller skipped all of that business from north america. it shares are up after it's predicted first-quarter earnings above what analysts had been anticipating. we are looking at blackberry this morning. that company's sales short of analyst's estimates, but broke even last quarter. sold 500,000 devices in the quarter. blackberry says it is working on a new device. the shares of by 2%. barnes & noble, even after the company's numbers missed estimates, shares are surging more than 6%. he did predict no growth -- it did predict and the growth this year. that could be what it is --

what's pushing shares higher. jon: it is a broad-based rally. apple stock down by 1/10 of 1% and pfizer marginally lower. let's go over to mcgill doolittle. abigail: trading lower on top of , teslaays big 10% drop down 1.7% after long time -- he is throwing in the towel and downgrading shares saying the solar city acquisition risks outweigh the rationale. speaking of solar city, we have another downgrade. stephen berg is moving to the sidelines on a more balanced risk/reward. concern around the fundamentals for solar city down today on the open. lenorasoaring after

upgraded sales from a big bullish call. highlighting firmer pricing and raised his price target by 125% to $18 a share. shares could climb by as much as 40%. david: across of the new york stock exchange sits donald trump's bible property known as 40 wall st. it is also home to fraud, thieves and stock steelers. max, you got this piece out about 40 wall st. >> it is a weird place. my cali called me a few weeks ago when i was shopping in a salvation army. a fewcolleague called me weeks ago when i was shopping and a salvation army. no one has ever stepped inside 40 wall st.

some of the best businesses in the world are here he said in one of his books. every building is weird in its own way. i don't think i have ever seen a building quite like 40 wall st. you have a hedge fund manager who went to prison after faking his death when investors one of their money back. he wasn't the first guy in the building to try that excuse. there had been another con artist who faked his suicide. each floor, i mean, there are certainly upstanding citizens in this building. the girl scouts are in 40 wall st. looked, weere we found people who have gotten trouble with the law and regulators. david: compared to a mother building of this size and this many offices, this is out of the norm. >> this is what we talked about her editor. it is a big building. it was supposed to be the biggest building in the world. remember how the chrysler

building -- it is a huge building. maybe there were all of these people because of the size. we looked at lots of other buildings including the chrysler building. no other building is home to more of the unlicensed privileges that investors complain about then at 40 wall st. it stands apart. the people who get into trouble with regulators and prosecutors is outstanding. david: du jour reporting suggest why this is? suggestour reporting why this is? the big banks are mostly in midtown. -- if you have a boiler room, it may sound really good to say you are on wall street.

rents, theat the average rent is something along $30, $35, which is inexpensive for the neighborhood. david: what is donald trump saying about this report? >> donald trump, jr. -- we got a statement from him. is, the question is, what are they full of? donald trump, jr. mentioned 11 new tenants, the heads of four of them have been accused of fraud since that interview and it was only a couple of years ago. david: that is an extraordinary story. it is really worth a read. jon: thank you very much, david. coming up is bloomberg markets with mark barton and vonnie

quinn. got? liu, what have you liu,e: i make a fine betty right, john? we will be looking at emerging markets head of em at ubs. latin america will come up a few times in our two hours. copa breaking an advertis ing. i believe they lost to ireland, correct? and the stress test -- the first results come out at 4:30. and if we expect dividend increases from the larger banks. sorry,nnie, i am so please except my apologies. vonnie: you don't have to

apologize for your terrible socrates, jon. up: i think she is bringing italy/ireland. next up, you will break down the markets for you and the latest on the stress tests. ♪

♪ jon: this is "bloomberg ." i'm jonathan ferro. we're are 20 minutes into the session. let's get you up there he quickly -- very quickly. stocks are higher. up 7% on the dow. it is a broad-based rally. london, five-day winning streak, longest winning streak since november 2015. the stoxx 600 -- coming off the highs. the dax also higher.

comfortably up a 10th of 1%. the pound coming across session highs and did have a 149 handle. we had just come down a little bit. treasuries were up five basis points. not up three basis points. yields, 1.7% on a u.s. 10 yield. and a risk on rally extending from equities to bonds to fx to commodities. $49.76. david: pretty emphatic today, jonathan. now a look at top stories users are being on bloomberg. jonathan, what caught your fancy today? jon: the big story for me is

blackrock seeing a massive shift. the amount of money that is going to pass the funds. passive funds which are mimicking indexes that have attracted $1 trillion. i can see the attraction. the fees are smaller. the indexes have performed. as everyonendering looks to cut fees, whether the performance can hold up because it has been very easy to follow the indexes. months, thisle of has been a very difficult market. david: is this just a cyclical matter, or a longer term trend? if you are getting better performance and paying less and a passive investment, that makes sense. as well as they

have done in recent days? jon: you get fewer and fewer assets. you and i could have a conversation for hours. david: that is a good idea. volkswagen is back in the news. it was trending quite high. thee is a falling out in ownership of volkswagen. as you may know, the main ownership was between two families. but the second-most, the second-biggest holder of both .ike and stock is ryan they have now dissented. they had an election for their board and they have dissented in part because of mr. winterbourne as well as a former cfo. there is a real dissension and willpears, jonathan, they be looking at who is responsible in a much more detailed way. jon: i have to say, it is a

tightly held company. you can talk about investments being -- investors being disappointed. but there are big families involved. when those guys get together, they could have a lot of weight behind them. that does it for "bloomberg ." "bloomberg markets" is coming up. the u.k. is putting on a referendum today for the eu. starting at 5:00 p.m. new york time. ♪

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york is 10:00 a.m. in new and 10 upon p.m. in hong kong. from new york, i'm vonnie quinn. mark: and in london, i mark barton. this is "bloomberg markets" on bloomberg television. ♪ mark: we will take you to new

york to london to washington in the next hour. here is what we are watching today. voters go registered to the polls today to cast their ballot. we will be following all the action across a day of special coverage tomorrow. vonnie: federal reserve is set to release those from its latest round of stress tests on 33 banks. why banks like citigroup and bank of america and their shareholders are bracing for today's reports? mark: michael kors is announcing a partnership with