own party as the republicans fail to get a health care bill through the house. week to takeors their frustrations out on long-term positions. business confidence rises to its highest level since 2011. from new york city, good morning and welcome to bloomberg daybreak. the tone of the markets this monday morning is as follows. scores pointing to a lower open, the digital -133 on the dow -- potential -133 on the dow. strong data and treasuries -- david: in washington, the theme was if the first you don't succeed, move on to tax reform. does the failure of health care reform maybe -- make the job on

taxes that much harder? for answers we turn to our chief washington correspondent, commence really -- kevin cirilli. kevin: house speaker paul ryan and president trump for the political losers, last week. they were simply not able to get the votes. the big winners were senator ted cruz and rand paul. after every meeting that freedom caucus members had with the white house, those sensors in the upper chamber where the political puppeteers, calling freedom caucus members and working with the freedom caucus chairman to make sure those members stayed in line and continued to oppose the health care proposal. david: the white house was explicit in moving on to tax reform. does it lead through the freedom caucus and come to terms with them, or with the democrats? kevin: republicans i speak to say they will go to republicans

because this border adjustment tax that speaker paul ryan has such aed for has been issue similar to the way health care divided members. after all the march madness political theater unfolded on friday, i caught up with the house ways and means committee chairman about what exactly what happened next. >> we will assess this. we will not dwell. we will head straight into the next game, which is the biggest tax reform in modern history. kevin: i followed up with him and asked what exactly would be different with tax reform as opposed to health care in terms of the political optics and he told me a lot of members have learned how health care works and he went on to say they are now starting to understand the complexity of reconciliation. perhaps the political learning curve for some members of congress. david: they have to go through

the freedom caucus, what does that mean for the border adjustment tax? what does it do about things like interest rate deductions? then: this is something republicans are going to have to offset at the table and work on, cohesively. there are no full committee hearings scheduled this week in the house ways and means committee. over the weekend, my colleagues at bloomberg reported that there were several meetings that white house to administration officials this -- attended, trying to map out a political strategy. david: we will check back in, later. starting many people to write -- itching to write a post presidency. david: we have a long way to go before the first 100 days. jonathan: have you adjusted the potential probability that the rest of this agenda goes through, based on the weekends

events? david: you have to adjust the nature of reform we are going to see. the market initially rallied because the assumed tax reform in theean a dramatic cut yearly rate and a huge rise in listed earnings for the s&p. i think the power of the freedom those deficit hawks is going to change the complexion of corporate tax reform. you might get something more revenue neutral and more balanced. that is just my impression right now, but i think we are at the beginning of something we have wanted for a while, that there is a possibility of this agenda and it is not just with the equity market where you see that

implication, you see it in bond yields. spending,ture corporate tax reform, individual tax reform, boosting growth and inflation. the bond market is telling you people not get much done. jonathan: that is certainly what the 10 year yield is screaming at the moment. the dollar is weak or. looking -- weaker. will beat that, there some people watching this program, asking should i buy the pullbacks? you have not participated in the u.s. equities, you still need to find entry points. economy that has room to grow over the next few years. the trump agenda was not the only reason to own equities globally or the u.s.. if you look at the strength of the consumer, if you look at the outlook for regulation, i think

we still have a very positive view on where the u.s. equity market can go, especially given that it's not the only global economy right now. we do believe risk assets are going to move higher in the next few years. david: you said you may have to adjust some of the size and scope. what about the timing at this point? are you pushing up a time when we might have effective tax reform -- out the time when we might have effective tax reform? david: if you think back to george w. bush's big tax cuts, they got signed in early june. my expectation for any major tax -- republicans have been stopped by this and it will be interesting to see how they react. it is more important they get

something done quickly, but the nature and complexity of the tax report -- proposals is just going to lead to a lot more of the sort of -- sort of like health care. longer,f it does take what does that tell you about those entry points into the u.s. equity markets? there is potential for the next couple of courses for the u.s. equity market to trade sideways as you get more data coming in and showing you how strong things are, more voter confidence. expectations around the trump administration continue to sag. i would not be surprised that is the case. the economic cycle is more important than the political one. the trump trade was always something that was in addition to the baseline case of investing in the in it states

and things like a potential pickup and productivity, if we look at wages continuing to accelerate at a gradual level, i don't buy that the fed is going to be rushed into a huge amount of interest rate hikes because of inflation. in thise reasons to own market, but it has come a long way which is why we could have consolidation. i still think there is money to be made in u.s. equities. jonathan: is it too early to phil indicated -- the field vindicated -- to feel the dedicated? -- vindicated? david: there was such a huge gap the between some of the rhetoric on the campaign by the now president and the kind of things that paul ryan had always said. congress had been emphasizing revenue neutral tax reform, not a big fiscal boost.

there is plenty you could get from this tax code from cleaning it up. i hope that is what they end up , a flatter tax code that encourages investment is a limit could be posted without spending a huge amount of money, but i think if you look at the power of the freedom caucus, you will look at the balance, which is also pretty close to being -- for -- fore scope huge increases in the deficit are limited. i think stocks are the better bet over a 12 month horizon. jonathan: david stubbs sticking with us. coming up throughout the week, a whole host of meetings with that presidents. charles evans on wednesday, eric rosengren on friday -- thursday and then on friday, it is james bullard. you are watching bloomberg. ♪

jonathan: from new york city, this is bloomberg. it is a stronger euro, weaker dollar story across the board. on the one side, the dollar on as doubtsss the or increase and emerge about the administration's agenda and the ability to implement fiscal policy and stimulate that stronger dollar story. the other side of the trade is german business confidence coming in at the strongest since july 2011. that is the data and the political picture in germany looking cleaner as well.

our germany bureau chief joins us now. significant win for 10 -- chancellor merkel's party over the weekend. >> the christian democrats won in the german state on the border with france. one of the two smallest german states but a critical win for the party. they won by 11 percentage points. what's important is that they social democrats had been the party in the pre-election polls and they ended up coming out with this really big win in the state. they are already governing the state but everyone thought it would be much closer. the important for merkel on national front. havesocial democrats really close the gap and there has been talks about the scholz affect in germany.

jonathan: has sentiment indicated that you could extrapolate and apply to the rest of the country or it is -- is it something particular to this state? >> we will have to wait and see. we have not had any national polls since the election, yesterday. , theit does do for merkel social democrats have been on a roll. had been wayder behind a few months ago when everyone thought she had a very easy reelection, and then stepped aside on it -- unexpectedly and martin schulz came in and they had a surge. while we don't know how this will play out nationally, it is certainly a positive for merkel

that they did so well in this state voting. i chose that the social democrats are not going to cruised to victory. cruise tong to victory. we have two more german state elections coming up in may. one of them is the most populous in germany, and it is run by the social democrats. it will be a test for both parties on how they are going to do that. we have heard that miracle does not intend to campaign to heart until later in the fall. -- campaign too hard until later in the fall. she wants to appear presidential throughout the summer, attending conferences and big summits and using the pounds -- the power of the chancellor see to her advantage.

jonathan: green shoots, are they real this time? david: i think they are. they have been very real as you pointed out. unemployment the in 2013. it has been falling like a stone ever since. consecutive -- the issue has been equity earnings. they have not shown up which is why investors were disappointed with the european equity story. we do think this is the year when that changes. there are not deteriorating as they have for the last four or five years. there is an awful lot to like about where european equities are, from the violation to edm,

which is improving to the domestic story as well and a central bank that is still pretty aggressive, so i don't think that there is going to be more political attention or turmoil that is going to affect the european markets this year, but when you do get any kind of selloff or volatility, you should be adding to the european holders. david: when these green shoots real plants, into at what point does the ecb have to start thinking about their tapering? david: later this year, we are expecting real discussions about that tapering to take place. you have to look at the situation globally, where central banks are right now, there has been a regime change. you have rate hikes coming out of the fed, yield control coming out of the bank of japan as well. i think the ecb is going to be

swimming with the tide. accommodation going forward, but i think people expecting really major shifts and a big turn toward a hawkish ecb are going to be disappointed. the main issue there is the level of full employment is a lot lower than people think it is. ever central banker in the world has had to revise down the level of unemployment. that is what we will see in europe and that is going to andt how fast they taper how soon they raise interest rates. jonathan: the political picture may look a little cleaner. if the bottom line we are expecting a .8% rent on core cpi later this week, is that going to be the bottom line that tribes the ecb through 2017?

-- that drives the ecb through 2017? david: inflation tends to be stickier in europe. that will continue to dominate the internal debate, no matter how fast the unemployment rate falls. any changes we get this year or next will be very gradual because the drivers of core inflation and -- in corinth -- of core inflation are going to be modest in europe. you will not get huge amounts of wage growth in europe. we know that nominal gdp is kind of capped in europe. buy the fact that the ecb is going to be in any rush because of that core inflation outlook. david: david stubbs will be staying with us. coming up, oil drops as producers say they need more time to cut stockpiles. cohen. opec with michael

this is bloomberg. ♪

emma: this is bloomberg daybreak. the european union has approved a $77 billion merger between dow chemical and dupont. the companies overcame concerns with hefty concessions. dupont has agreed to sell a significant part of its pesticide business. there were two other megadeals coming that could shape the agrochemical industry. sayssh home secretary facebook's messaging service should open its encryption to intelligence services. -- also said online services need to be more aggressive in shutting down site exploded by terrorists. the president of emirates airlines says so far there has

been no complaints from travelers not allowed to take laptops on flights to the u.s. or u.k. tim clark tells us they are watching the man to see if it has any impact -- watching the ban to see if it has any impact. >> if demand the meshes for raised of issues being or whatever actions the united states takes, we will have to adjust accordingly. emma: clark says he believes the u.s. imposed the ban in response to a clear and present threat. david: the u.s. has been driving global growth in recent weeks, but europe may now be taking over and that is what some analysts including those at jefferies conclude european equities may be ready to start outperforming u.s. stocks. still with us is david stubbs from jpmorgan in london. what is your take on this?

over the medium-term, we absolutely agree with that. we have been pointing to the fact that on any kind of five-year view, where there is room to grow in the economy, europe looks to have a higher potential return over that period. you have the political calendar in calendar -- in europe and we are certainly not done with it yet. those who robert about the potential for an upset in the french election are sitting on the sidelines for european equities. investors in the united states has been told that international stocks in europe are the trade for a number of years. each year, they have been disappointed. europe needs a prove it year for global investors. then you will see investors

engage. david: and the way they will earn it is earnings. the earnings rate increase in europe will greatly outstripped the u.s.. do you project that? david: yes. that is our forecast, at the moment. europe has tremendous operating leverage. affect is at cost problem in the downturn because you can't cut cost aggressively to restore profitability. once you past a certain threshold, it starts to rise and you have greater leverage to the upside. that is a potential people have been aware of for a number of years in europe. we do think this is the year were that starts to deliver. -- where that starts to deliver. the potential for further dollar strength are up the next couple of years as the fed increases the monetary convergence. you want to have some divergence to the u.s. dollar as well. jonathan: look at the euro

specifically, what is the story i'm trying to capture? just a global cyclical -- cyclical pickup? if you look at -- i still think there is value at play, what is going on in the unit states. i like a barbell between the u.s. and emerging markets. i think the emerging markets have started to outperform, last year. they outperformed, this year. they are very domestically focused. jonathan: david stubbs, thank you very much. you are watching bloomberg. ♪ live-stream your favorite sport

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xfinity. the future of awesome. the biggest week wow, watchathon has netflix? hey, drop a beat... [ beatboxing throughout ] show me orange is the new black. wait, no bloodline. how about bojack? luke cage. oh, dj tanner. maybe show me lilyhammer. mmm, show me last chance u. on second thought, maybe pompidou. narcos, fearless, cooked, the crown. marco polo, lost & found. grace and frankie, hemlock grove. season one of... show me house of cards. xfinity watchathon week starts april 3. get unlimited access to all of netflix and more, free with xfinity on demand. juliette unwind ofthe consensus positions, futures are softer.

negative almost 19 points on the s&p. another consensus position, short treasuries. this much, bid on treasuries. yield at 236 on the 10 year. that gives you a sense of the unwind. the other consensus position, long dollar. this morning the dollar is very much on offer. the euro pushing higher, flattened by strong data out of germany, up .6%. let's get you some headlines and say good morning to emma chandra. emma: good morning. in the u.s., president trump will reverse many of president obama's acts to reverse climate change. he will sign a sweeping executive order to promote domestic oil and natural gas. some of the changes would take place immediately. others would take years. in russia, they appear to be the largest anti-government

demonstrations in 2012. millions gathered to protest official corruption. an opposition leader called for the demonstration. he was detained by police and appeared in court today. in asia, south korean prosecutors are seeking to arrest the former president of graft allegations. that she allegations colluded with a longtime friend and former aide to get bribes to south korea's top corporations. global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries. i'm emma chandra. this is bloomberg. david: thank you. when opec and 11 other oil producers agreed to cut production in december, it was big news. now there are two questions -- is it working, and will they extend the agreement? representatives from seven countries met in kuwait city, and we are joined by yousef gamal el-din reporting on that meeting. simply, is a working? -- is it working?

and are they going to extend it? david, there is considerable enthusiasm on the sidelines of the meeting that took place here. conformity is what they are 64% forit, 106%, non-opec. overall, sitting there and speaking to the ministers, it was like they were handing out report cards on performance so far. saudi arabia stood out for going above and beyond the call of duty. but again, that united front really underscoring that they feel this is going to work. they say don't look too closely at inventory. we expect the data to reflect what we are doing in four-day weeks. momentmoment -- at the you have issues like refinery maintenance and rising non-opec supply cladding efforts. david: if they are handing a report cards, what letter grade did russia get? yousef: well, russia is

considered non-opec, at 64% compliance. in my conversation with the russian energy minister, he said that is going to improve. opec, through the secretary-general, underscored that as well, saying that in the coming weeks it is going to be resolved, the issue not being a lack of compliance intentionally, but because of structural issues in terms of how the russian oil economy works. that is expected to be rectified, and full compliance are close to full compliance in the next month or two. jonathan: yousef, for oil watchers out there, what is on the calendar? yousef: well, the next step is a meeting in april in a formal meeting at the end of may. key, because to be this is where they decide on a possible extension of the six-month agreement. the algerian energy minister said we have heard six-month

extension, and this comes down to whether or not the inventories, whether prices respond. because if they don't, they might have to redraw the entire game plan. jonathan: yousef gamal el-din, great work. joining us around the table here in new york, dan dicker, merck. great to have you. the story so far around opec, they aren't going to come to an agreement to cut production. two, no one is going to implement it. three, it's not going to work, crude is going to roll over. there seems to be a strong bearish bias toward everything that comes out of opec. why? >> it looks bearish right now, and part of the reason is financial. there are huge hedge funds that have jumped into the game looking for a big bump, based on this opec cut, and they didn't get it. i think they were looking for something close to $60 per barrel. over the last couple days we have seen a lot of them have for the hills, a lot of longs come out of the market. for a trader like me, that is great.

that makes it easier to get constructive. jonathan: reconcile the story with the demand supply story. >> what the problem is, looking at this market, we are very much focused on domestics. the united states marketplace. the opec ministers mentioned it. don't look at stockpiles. we have american shale players who have done a great job in increasing efficiencies and major shale zones, and they have also increased production. they are close to 9 million barrels per day here in the united states, and that has really swelled inventories. that on top of opec members who have imported or exported a lot of supply leading up to that cut in production, so there has been a time of product here in the marketplace, in the united states. that is what they are looking at. they are looking at stockpiles. i think it's a short-term view, but that is where they are. that's why there's a bearish tone. david: what about this rig count

issue? this shows the relationship between opec overall output and rig count. the shale guys are coming back online. is that affecting the price? >> i think it is. this is affecting u.s. production, which i didn't think would come back this strongly and this quickly. it slows the rebalancing effort opec is making, and that is where people are. they know this rebalancing is coming in the second half of the year, and baby for the first couple months of 2018. that is taking a timeline that has extended. american production and opec. jonathan: yousef gave us the opec calendar. most of it is assuming the production cuts get extended. why is plain and simple, an ipo coming up in saudi arabia. >> exactly right. jonathan: if you are a traitor with a long-term horizon, you are going to look at this and say, once the aramco ipo is done -- >> well, first of all, i don't want to get too far ahead.

we aren't even getting that meeting until june 1. that's a long time to wait for this market to bounce around between $47, $50 -- i don't know where we are going to go. i'd like to look at this as an opportunity, for the next month and a half, that there is not necessarily going to be an extension and there are opportunities to buy. jonathan: let me ask the question another way. do you buy the aramco narrative out there? after the ipo, it is back to business? but'm not sure about that, yes, you write a narrative -- you ride the narrative. they are the ones controlling opec, controlling the need for an extension. right now, the compliance numbers have been outstanding. if you look at the history of this cartel, they have not been very good at compliance. for the saudi's they are over 100%. david: at the same time, you

heard what yousef said about inventory. do you buy that? >> i do. they hadre-cuts, the amplifiers up to 11. they tried to extend as much production as they could before cutting. that amount of inventory, that is what is willing the market. jonathan: if you are another oil producer and you buy the aramco narrative as well, wire you pulling back to get the saudis an ipo? what's in it for you? >> for the americans, nothing. they are pumping as fast as they can, and every report i have seen is increasing production 8%, 12%, 15%. they don't care. jonathan: let's for when another relationship. the saudis have this key partnership with china. they seem to be keen to keep the russians are boosting

production. i want to understand how the russia/saudi arabia target of asia comes together whilst they try to pull back production. >> it is hard to keep a cartel together, especially if you are extending it to non-opec members like russia with nearly no skin in the game. this is really a first for them to cooperate. we're going to see how it works. they say 64%, but i wouldn't hold my breath. david: you are skeptical about the russian story. >> 100% skeptical. if they cooperated with opec to the degree that other opec members have, i would be really surprised. david: ok. many thanks to dan dicker, merck. coming up, a whole host of interviews with that presidents this week. today this charles evans. wednesday, eric rosengren. then jim bollard. you will see right here on bloomberg. ♪

emma: this is "bloomberg daybreak." this is the hewlett-packard enterprise greenroom. coming up, alix steel has an interview with lee boost be. this is "bloomberg daybreak." this is bloomberg's business flash. the president of the afl-cio says his organization will soon as the trump administration tries to water down obama era eligibility regulations. he told bloomberg the impacts could be devastating. millions of white-collar workers -- weregible to become

eligible for overtime but were blocked. the labor secretary nominee did not say. if they would defend the rules in court. suspended testing of a self driving vehicles. it crashed in self driving mode. police say the uber vehicle was not at fault, and they're are waiting for the results of the investigation. the pentagon is lately to give the go-ahead for a new helicopter program that could cost of the $29 billion. lockheed martin is transporting heavy cargo for the marine corps. the pentagon's acquisition board meets to decide whether to approve production. that's your bloomberg business flash. i'm emma chandra. this is bloomberg. david: thank you. markets are reacting to the legislative failure of health care reform, but with the federal reserve -- but will the federal reserve follow suit? we start with the former atlanta fed president, dennis lockhart. >> i certainly would have supported it. i think it was well represented

by chair yellen's conference, and i think the solidlye is pretty optimistic about the outlook for that wouldterm, and be the continuation of a moderate pace of growth. the other thing that i think is affecting the committee's thinking is that the fed is relatively close to a statutory mandate, to full employment and stable inflation as they define inflation. it's appropriate to remove the altra accommodation that led up to this point. alix: you are saying someone changes the data, the mindset, market conditions -- what about the prospect of fiscal policy? do you think federal officials

are factoring that in? >> that's an interesting question. a few months ago when the election occurred, and the optimism actually started, the optimism improved, i think some of my colleagues, and i was still in office at the time, factored in the effect of fiscal measures on their sins of what the growth way would be -- their sense of what the growth would be. since then, my reading of the committee is that many have backed off that assumption, at the fiscal measures would influence the outlook, but they are somewhat more confident in the outlook. so i think last week's, to week decisionago, the was largely premised on what the data was telling them,

independent of fiscal policy. scarlet: we are coming to a time where we saw quite a big low for forident -- big blow the republicans in repealing obamacare. does this set for a test of whether the trump administration in the president can perform when it comes to progrowth policies? what does it mean? what i ran the markets, would be doing is i would be thinking about adjusting my assumption in terms of the speed of fiscal policy. i think there's the larger question of what is this actual impact, and howlett play through to real economic activity? of the friday's outcome health care nonvote, the health care situation, suggests that maybe reality is that things will take a little more time, and they will be a little more -- it will be more difficult to

impacts thatscal were assumed in the surge of optimism just after the election. jonathan: that was dennis lockhart speaking to our colleague, yvonne man. fed chair janet yellen tomorrow -- aggressively pricing just a month ago, the head of the new york fed. he spoke this week on financial conditions in the conduct of monetary policy. that will be interesting to me, to set :00 as to whether we will get this move. for those that did not factor in fiscal stimulus into their outlook i wonder how vindicated they feel. david: what lockhart seemed to say is they might be right for the wrong reason. even if they did built it in, the economy will make up the difference. jonathan: that's true as well. columnisttomorrow, a

will be joining this program at 7:00 a.m. eastern time. from new york city, long equities, short treasuries, long dollar. they were the consensus moves. this morning, stocks are down. -18 on the s&p 500. treasuries are bid, yields are lower. the 236, the dollar weaker against every single currency in the g10. you are watching bloomberg. ♪

david: this is bloomberg. harry mac low is a legend in new york real estate development. he was forced to sell the gm building in the great recession, and has come back to build the tallest residential talu building in the hemisphere. we sat down with him in new york to talk about the luxury real estate market and what it means

to his business to have donald trump, a fellow new york real estate developer, sitting in the white house. is slower and less exuberant than it was two or three years ago, and there is a reason for it. it's not something to be not discussed. tremendouseen a production of housing in brooklyn, in queens, in lower manhattan, and to a degree, i think the east side has lacked agged behind the development of the other areas. the production of housing is the best possible thing for new york city, even if it's an overproduction. >> overproduction is great if you are a buyer. not so great if you are a seller or developer, is it? >> a development community knows

how to protect itself, and it should be able to price itself intelligently enough so that it is able to meet the peaks and valleys of the market. i think the market is slowing down, demand is coming down a little bit, and if it comes down enough, it will allow our community to abandon the condominium and go back to rental. infiniteisn't an supply of condominiums above price point, but there is the steinway tower, the nordstrom tower, the helmsley lane apartment -- there's 200 central park south, 50 free west, 53rd street -- did they all get built? -- will theynk so find it as rapidly as we found

it? 57th street, it will take longer and that's ok. >> so none of these projects are doomed. only think at -- i property in the condominium world is doomed if it's over financed, if it's not built with a heavy faculty component. >> how deep is the market for those kinds of units now? >> it is somewhat reduced. with the present administration, seeming to look very good for the next few years -- there's a feeling of confidence in the united states real estate market. >> what is it about having a

developer in the white house that's not just, i presume, good for your industry, but good for america? >> it is really phenomenal. i know donald trump from the real estate community. we all do. his accomplishments have been extraordinary. that he's president is totally astonishing. i think it is wonderful that we have a strong business leader in the white house. i think that the cabinet choices that he has made have been very wise. >> you know many of those people . >> i am really privileged to say that i know many people in his cabinet. i have done business with them.

they have a high degree of integrity. they are leaders in the business community that are very accomplished, and they should be able to take and transport these accomplishments to our government. david: now we are joined by erik schatzker, in the flesh. talk to me about donald trump for a moment. what is the transmission mechanism between having people --t he knows and trusts erik: excellent question. part of it has to do with reflation. it's an expectation people are beginning to question today, the way they weren't when harry mac eand i sat down, that it will spur economic growth. that is good for real estate. incomes go up, people are able to afford more demand demand is

transformed,. that's the bet on trump. people are beginning to question it. but there's a lot about real estate development doesn't have to do it the president, and macklowe has seen those highs and lows like nobody else, even more so than donald trump. as you mentioned earlier, he lost the gm building. he acquired it famously and lost it infamously. >> he admits there is an oversupply. erik: yes. none of these slender spires overlooking central park is doomed in his opinion, but it is tougher than it was. david: erik schatzker. jonathan: from new york city, you are watching bloomberg. ♪

jonathan: a d.c. reality, the president lashes out at his own

party as republicans failed to get through the health care bill. that's increase about the trump agenda. futures drop, u.s. treasuries rally, and the dollar weakens. fuel for the euro bull. confidence rises. from new york city, good morning , and welcome to "bloomberg daybreak." i'm jonathan ferro. euro optimism under u.s. pessimism, futures negative, down on the s&p 500. switch of the board. a euro-dollar cross that rises .7%, the dollar weaker against everything. treasuries very much bid. 235 on the 10 year. david: as you suggest, markets are reacting to the failure of of congress to move forward on health care.

joining us from capitol hill to sort through the aftermath of friday is our chief washington correspondent, kevin cirilli. how is it at ground zero today? >> they are still picking up the pieces after what was a march madness political theater day on friday, in which president trump as well as house speaker paul ryan's health care proposal fell flat and ultimately did not have the votes. just as all of this was concluded, i caught up with the house ways and means committee chairman, kevin brady, about what exactly went wrong. take a listen to what he had to say. >> i think reconciliation is still perplexing for the house. it's the rules, they are strange, it's hard to know what you can do. a lot of members now have learned how health care works, and they are now starting to understand the complexity of reconciliation. that's the tool we are going to use. >> so it was a political reality check of sorts for the republican-controlled congress and the trump administration,

but i can tell you that chairman brady also told me they are still moving ahead with plans for a comprehensive tax reform, the best way to unify the republican party would be to have an "bold new tax agenda." david: are we moving potentially to the heart and soul of what president trump wants to get accomplished, as opposed to what house republicans want? they have an after obamacare for some time, but president trump campaigned much more on economic progress. >> absolutely, and during the campaign trail he was criticized for lack of policy specifics, a lack of taking positions on certain political policy nuance. case in point, in the fight ahead on tax reform, the administration has yet to take a position on the border tax proposal put forward by speaker ryan. the freedom caucus opposes it, and they feel emboldened right now, because if he wasn't able to get the go from them on

health care reform, why she had the political mustard to get through on border tax adjustment? again, this white house has not taken a position on the issue. david: kevin, thanks so much. an eventful week. jonathan: let's bring in doing turner, the ceo of macro. great to have you. on the margin, people questioning the rest of the of ministration. we see risk on equities, we go back into treasury, the dollar weakens. are you looking at the situation friday through the weekend and questioning the rest of the agenda? >> i think there is at least some reason for pause. let's rewind to the trump win , equities went up, the xlf did very well, the dollar did well. there was a lot of anticipation built into asset prices. it was a setback. i think the notion that the derailed, there

is some version of that we should be considering. the let's also step back we had a 1%, the shot heard around the world. not that big a deal, and today 80 basis point seems like a lot, but isn't all that much at this point. jonathan: what is your base case for tax reform and fiscal stimulus? >> i'm not in d.c. i would say it's a messy process, complicated, and the inability to even bring a bill with control of the house and the senate and a republican president doesn't bode well for giving big things done like tax reform. word, butsy is an apt how big will the bill be? does this affect how big it can be, how much they can cut taxes, when the border adjusted tax has to be put into it? how does it really change the shape of what they want to do? >> it does seem like the setback on health care is an issue, because there were certain parts of that bill that were going to provide leeway in terms of

making the tax cuts possible. they lost that, being able to get the taxes from that side, repealing some of the obamacare taxes that gave them leeway. jonathan: let's talk about how we want to manage risk. set up into 2017. days case portfolio, the consensus trades. short treasuries, longer dollar, and aggressively long equities. that was the 2017 playbook. right now that is unwinding. how do you play this the next couple months? >> we are de-risking a little bit. i want to step back and realize that the equity trading has been good so far, but the best trade, the best sharpe ratio trade has been short equity volatility. the cell volatility and what they are doing -- they sell volatility, the vix has not been above 15 for 90 days. but the been a low vix,

realized volatility is stuck around 5%. that sprint has been a boon for folks selling volatility. david: let's talk about the vix. it's nudging up. the vix has just picked above the 200 day moving average. does that tell us we are getting volatility come back in the marketplace, in light of what happened in washington? >> what do we know about volatility? low volatility periods tend to persist, almost self reinforcing. high volatility tends to cluster. a little hiccup last week, 80 basis points down. you are going to need more follow-up to justify the vix staying above 15. we could be in the early stages of something like that. is how the market sentiment lines up. jonathan: something you touched on, we have been conditioned to buy through several events.

does it leave us under protected through events that could happen over the next couple months, when many people would look at this as an opportunity to reenter? doing isof what we are identifying risks and designing trades that are helpful in combating risk off events. in our conversations with risk officers, it leaves us with the conclusion that hedges have been something to run away from. as it all goes lower in the realized volatilities are even lower, people avoid hedging. strong say yes, a conclusion we have is that the market is generally under hedged. david: they have had a couple scares, and the markets reacted quickly. after brexit, after trump. it's understandable that they wouldn't have to hedge. >> it's a great point, and it does embolden you to take more risk.

this next event on the horizon, the french election, is something to pay attention to. long, but theseem potential for spillover back into the u.s. has implied volatility. jonathan: to wrap things up, give us a trade. >> i think you are supposed to have hedges on here, but i would say they are low premium hedges. you're playing for a modest decline in the s&p 500. the way i would see that is use utilized options to pay a little bit now, so if the market falls a little bit, instead of running away and saying i wasn't able to buy implied volatility at 12, now it is at 60, at least you have made money. david: and finally, presumably, hedges are a bargain right now. everybody else isn't hedging. >> it is cheaper nominally. as i said, low volatility has made it an opportunity loss in

terms of spending, and this is back to a jonathan was saying. the under hedged profile of the market seems to me like a consideration. jonathan: there's going to be a lot of appetite for this kind of stuff. what do you say to them, and how do you factor in the optimism that still exists on wall street? >> that's a great point. it's hard to disentangle what's going on in the market. the survey data has been good, and there has been this hope of deregulation, of tax reform, this progrowth trump agenda. it is hard to say what's what. i'd say equity prices are high, valuations are stretched, and they say never short a market on valuation, but it does give you some reason to be more cautious. i wouldn't jump in right now. in fact, i would step back and think about doing some of the opposite trades. low premium hedges, for a small decline. jonathan: great to have you with us. a whole week of fed speak here

at bloomberg, a whole host of exclusive interviews. today is charles evans. wednesday, eric rosengren. friday, jim bollard. you are watching bloomberg. ♪

emma: this is bloomberg daybreak, on emma chandra with your bloomberg business flash. the european union has approved the $77 billion merger between dow chemical and dupont. they overcame regulator concerns with healthy concessions. dupont agreed to sell a significant part of its pesticide business. there are two other mega pending

that would reshape the global agrochemical industry, monsanto and syngenta. has agreed to sell its hygiene and cleaning operations. the price, $3.2 billion. it -- is in a bind over how to modify $300 million in loans to donald trump's business. according to a person familiar with the matter, the issue is a personal guarantee that the president signed. the bank has tried to eliminate the awkward prospect of collecting from a sitting president, but if deutsche bank removes the personal guarantee, critics they accuse it of trying to cut a favor with the trump administration. on emma chandra. this is bloomberg. david: 14 fed speakers this week, including chair yellen. should we be expecting more of the same we heard before, or

could there be a subtle shift? still with us, the ceo of macro risk advisors. we just heard overnight from the former fed president dennis lockhart that it will be just the same. they are paying attention to the economy, not the trump administration. do you buy it? >> the fed has a dual mandate, growth and inflation, but they also have asset prices. they are very asset price contingent. sure, theone, economy is doing fine, that asset prices were perfect. volatility was low, the vix was calm, you had to find this opportunity to get this hike in. so long as asset prices continue to behave, i think the fed will continue to tighten. the market is allowing it to do so. jonathan: you seem to be suggesting that the federal reserve -- is there another

angle to this, that they have financial concerns? >> i think that's right. looking at june, a little below 50%, we know there's a dance between the fed in the market. thefed will tighten, and market won't if it's too low. it needs to create some high degree of consensus that the market knows what it is going to do. at 50, we are at this interesting time, and the speeches will be interesting in terms of where it goes. david: but the market has been pretty consistent and underpricing the risk compared to what the fed president has talked about. in order for them to move it up, what will they need to say this week? or will they be trying to move that, market or not? >> i think the market, ultimately -- where they are most different is longer. think that's an inflation premium to some extent.

we look at five-year break even, those metrics have crept up, still in the midland zone. for longer data yields, you will have to see more inflation premiums built into yields. jonathan: the risk spread between the data, the deflationary forces, then just a breakevens, which seem to be doing this, not a whole lot of treasury yields rollover? -- seei see in the data it in the data but not the price? >> we have seen this differential between the soft data -- that is what i think the equity market has been mostly focused on, this more forward-looking, more real-time data. the hard data, production and inflation, has been more middle-of-the-road. we will see how it resolves itself.

a lot of hope has been built into this soft and favorable survey data. david: we were seeing pmi's around the world, but historically, from your experience, does the hard data catch up with the soft data? >> i have seen both. it's a little unclear. right now, the differential is quite wide. back to the equities valuation question, there seems to be a lot of anticipation that is built-in by way of this very favorable survey data. another thing we would say is if you look around the world, this is the first time that on the synchronized basis we have had the upswing. i think markets are excited about that. you go back to low volatility readings, one of the things that is at work in the market is that the two weakest links and the global system, europe and japan, while still week, are out of intensive care and doing better. they walked away from that deflationary cliff. jonathan: you mentioned the federal reserve, and i want to

get to a question from twitter. how many down days in stocks before we go from the fed is so far behind the curve to what were they thinking raising rates in march? >> it's all about the speed. here's an incredible stat. i look at down days in the s&p over auntil the 1% move, two-month period it was less than 5%, nearly unprecedented. it was down three point, four points. that's ok, right? that is moderate moves. it's all about speed. when you start to see 2% moves with greater frequency, i think that's when the financial stability concerns creek back into the thinking. jonathan: to what extent -- david: to extent is it factored in by china? has been a while since we've had a shock out of china. the markets were really roiled -- >> to step back and look at

china, and every single characteristic of a dead bubble is present. that said, these things take a long time. you look at some of the readings, things like implied volatility, extremely low. david: dean curnutt, he will be staying with us. coming up, oil drops as producers say they need more time to cut the stockpiles. more on opec with michael:, barclays head of commodities research, coming to you from new york. this is bloomberg. ♪

jonathan: from new york city, the fx market, a weaker dollar story against everything. look at these two currencies, the euro it's a 2017 high, up .8% on the session. the cable rate at 126 for the first time since early february. vix, big moves.

as far as the price is concerned. as far as the politics is concerned, german chancellor angela merkel's party easily won elections, highlighting the challenges facing the sdp and trying to deny her a fourth term. the data supported the euro as well. german business sentiment climbed to the highest level since 2011, indicating the economy is sustaining momentum. our guest is still with us. politics is messy, but why would you be putting any hedges on the head of all this political action when the base case still remains that merkel comes twin, ande pen one the data looks good? allith brexit specifically, the concern and hedging that went on beforehand wound up being almost a risk on type event when the dust settled. it's an important point. it is hard to say. it comes down to cost. if you can't by hedges that are

extremely low, you are supposed to at least think about them. and that's just looking at the euro versus the dollar. a lot of the talk about the dollar is the dollar is driving the ship, rallying against everything else. people just say europe is mired in its instability forever, but the data in europe is actually getting better. some of what the ecb has done seems like it's starting to work. david: if you want to hedge, what do you want to hedge against? is in france, le pen? is a germany? italy? french,irst one is because it's on the counter and you can see at. if you look at the price of options in the euro, things like the french term spread, they are actually relatively expensive. u.s. investors are

focused on the s&p 500. we are looking at the potential for spillover back into the u.s., to the extent that the vix or s&p doesn't imply any volatility. david: one of the risks we haven't talked about is that of a trade war. even as donald trump failed on capitol hill, he could turn to things he can do on his own.trade is one of them . >> i think that could be very disruptive in so many different ways. it's even hard to fathom how disruptive it could be and where the channels would be, but fx would certainly be one of them. there's a trade war version where the dollar just rises substantially. that has proven, at least in the past, to be very destabilizing, certainly for em we know the fragility of the china-u.s. fx relationship, and that is the sort of thing that can amplify its way around the world. jonathan: you mentioned

situations where investors have rewardedr hedged, and for being so, because you come out the other side and get a rally. wednesday we get brexit triggered. that will be one of the events that happens this week this event hasn't mattered to u.s. investors. every time there is a mess in europe, we wait for it to blowout. youe's no -- how do convince them to take on protectionism when this hasn't mattered. >> you want to step back and ask yourself, what does the market want to focus on? we have this unconventional president that wakes up on saturdays and fires off tweets, most of which you would think de-stabilizers that they have not been at all. you have to think the market doesn't care. that doesn't mean you let your guard down entirely. you have to figure out when and how the market might decide that some of this stuff matters. the first thing that matters is losses.

losses is what raises people's risk antenna and creates risk aversion. we have had some of the popular trade start to unwind, and people are still long,: there's a great sponsorship for a trade, that is what contributes to the selloff, because it's a crowded condition. when it turns out to be wrong, that is where you get volatility. jonathan: it has been great to have you with us and get your thoughts. coming up, we have a whole host of exclusive interviews, a whole week of fed speak. it's chicago's charles evans, eric rosengren, jim bollard. from new york city, you are watching bloomberg. ♪

>> from new york city, this is bloomberg daybreak. i'm jonathan. if you came into 2017, your financial advisor, your broker, whoever it may be, would have told you three things. be short treasuries, be long the dollar, and be super long equities.

those consensus moves this morning, you've got an dow negative 155 f. you're looking at futures, negative 21. on the s&p, we're at session lows in futures markets ahead of the open, one hour away. if you switch up the board, the other asset classes, treasuries, yield by five basis points. 236.two weeks ago today, euro makes a push toward a 109 handle, up .9%. dollar-yen back to a 110 handle. it is a dollar that's on offer against pretty much everything in a g-10 space. that's some of the price action for you this morning. let's get you up to speed on the headlines outside the business world. emma: thanks. in the u.s., president trump is to reverse many of former president obama's acts to address climate change. tomorrow he's expecting to sign a executive order aimed at coal, oil and natural gas. some of the changes will take place immediately, others will take years to complete. in russia, they appear to be

the largest anti-government demonstrations in the country since 2012. thousands of people gathered in moscow and other major russian cities to protest government corruption. opposition leader alexei had called for the demonstrations, he was then detained by police and has now been jailed for 15 days for disobeying their orders. in canada, prime minister justin trudeau will reportedly move to legalize marijuana by the summer of 2018. cbc news says the government will introduce its marijuana legislation next month. that would follow through on one of the prime minister's campaign promises. global news 24 hours a day, powered by more than 2,600 journalists and analysts in more than 120 countries. i'm emma chandra, this is bloomberg. david: thank you, emma. oil has pulled back in recent days. jonathan just told you crude is now under $48. it's down again today. this came after it seemed to be headed up off of that december agreement to curtail production. this is the price over a two-week period of time. the question for us now is whether we're seeing a longer

term trend or is this just a short-term blip? they're take us through it is michael cohen from barclays. welcome back. so, short term blip or longer term trend? michael: we think this is more likely to be a short-term blip. i think first you have to look at what caused it in the first place. we were in a period of time where positioning was stretched, where sentiment started to sour for a couple of different reasons. first, we had this opec meeting that, you know, tried to address whether producers were actually complying with this overall cut. we had a conference that took place, saudi energy minister attend and had saw that u.s. producers were continuing to increase their drilling activity. basically from what they've done, all the way back from september until now so. we've seen drilling activity increase. the other thing is you have to remember this is a seasonal period of time where we usually see some weakness.

we think prices will start to rebound. i think they're going to be weak again because of this period of time during this season. as we move further into the sandape may time frame, refineries are going to ramp up again. crude demands should start to pick up. the most important thing to take into account is that from last year until this year, last year we were seeing a period of time where supply was in excess of demand, and now supply and demand are basically balanced. david: a lot of people are saying this is a longer term trend. number one, they really talked the price up to begin with. with the agreement in december, they talked it up, and as fast as they cut production, number two, we're starting to add rig counts here in the united states. the u.s. shale guys are coming in with a vengeance. why doesn't it keep the price down? michael: even if you assume we get a very robust response from shale this year, the broader

market construct, the broader balance is one that still remains where we have supply equal to demand, or even periods of time in the coming quarters where demand is in excess of the supply. the issue right now for january and february is we were still running on fumes of opec producing at very high levels at the end of the year. so it takes some time for imports to start to drop off, and we think that's going happen at the very same exact time that refiner utilization starts to pick up again. the other thing to keep in mind, we see stocks in the most observable parts, not really starting to decline. yet we don't really have much visibility on what stocks are doing in the not so visible parts of the world. and we think that on balance, we continue to be in line for a constructive correction. jonathan: we went through this with it earlier, when we talked about production cuts, the deal, everyone said that's not going to happen. when they got it through,

everyone said they wouldn't supply. now everyone is saying it doesn't matter because the rigs will come back on. what he wants the trigger point to bring the people to come off the last week to get back on again? again, we have to look at what is the catalyst. i think it's going to be a whole recipe of things. the first thing, several different ingredients. the first thing is refinery utilization has to pick back up. if we don't get that, there's a risk to the down side. for example, if underlying demand is not good as we head into the summer driving season, the second thing is that if we don't actually see opec cuts come through in the data, right now we've seen export numbers start to fall off, but if we don't start to see the actual production cuts sustained all the way through scommay even into june and arguably whether or not they actually extend them, that is also going lead a correction. jonathan: i want to talk about

how crude is impacting high yield. i want to do it through this chart, a chart we visited a couple of times on this program. it's the high yield energy index against crude. on the far left, when yields were this low, crude was 80. on the far right, crude, of course, is now round about 50, but yields are still this low. >> i think there's a lot going on here. high yelled, per that chart, has a huge correlation with crude. it's not just the sector, it's the overall market. what we actually found is that when crude trades below 80, the correlation jumps pretty significantly with the rest of the high yield market. this is something we've been watching very, very carefully. on the flip side, similar to michael, the b of a house view is that crude is going to go higher throughout the year, average about 59, hit a peak of maybe about 70 by the surgery. so as we sit back and have these dynamics of falling

sandrude what that's done recently, but with a longer term outlook, that's relatively constructive, we actually brought up our way on energy and high yield. we were underweight oil field services until friday, and we just made it market and think it will perform in line with analysts. jonathan: do these companies have that index a lot more high quality than two, three years ago? michael: well, there's some of that. they're not necessarily the highest quality, and they are challenged fundamentally, although there are some large fallen angels in our index that are higher quality. 26% of the energy index did default over the last 12 months. so you removed a huge portion of the worst credit and high yield. but i think it's important to note that the story hasn't played out . there's a playbook for many producers. you ramp up production, stall, cut production, wait for oil prices to get higher, and we think from a fundamental perspective, there will an lot of m&a transactions.

we think there's enough liquidity to survive for some time. we're relatively confident that we'll at least perform in line with the index, if not outperform. david: if this is good news for oil companies more generally, is it great news for the shale producers? they've really increased their deficiency so dramatically, and if the saudis are going to keep the levels up, it's goinging to higher. isn't that a bonanza for the shale producers in the united states? >> right, i think you have to look at the overall trend for what we are expecting this year. i think if he had two pick one time of the year where we would expect to see the most weakness, it's right now. it's the next two to three weeks, and from here, we think that the market is constructive. some think it goes higher and then lower, this is what our view is. some people think it's likely to go higher and continue to go hire. but either way, this next period of time for the next two to three weeks is going to be a period of weakness. the other thing to keep in mind is what these producers have

done in terms of hedging their output. already, what producers have done is they've runged ruffle 28% to 30% of their oil volumes for 2017, which is they hedged for the last two years at the end of each of the last two years, which is an amazing amount. they basically have been able to ensure that they can continue that drilling activity for the next year. jonathan: let's get back to 35,000, which is high yield. as we set up this morning, we derisk on the margin, high yields backed up to some extent, also on the margin. for those that come out and say now is the time to go back up in quality, now is the time to go back up to capital structure, what's the message from you this morning, convince them to do the opposite? >> well, i think you should start nibbling, i don't know if you should necessarily dive right in and feast on high yield at this moment, i mean, as we look at high yield, there's several things that are going on right now. in the high quality portion of high yield, double these and even higher quality, you have

more rate risk than you've ever had in the asset class. so double these are negatived convexed for the first time in history. it means they're the most sensitive to a rise in interest rates, and our skull for another hike this year. as we sit back and think about rates going higher in q-2 and over the course of the year, we have to be careful about going up and going into higher quality. on the flip side, i think the biggest risks to market in general this year is policy, ok? one of the things that i'm actually fearful for is the g.o.p. blueprint in its entirety as it exists today on tax reform. as i sit back with the high yield strategist, i think about with the healthcare and resandeel replace bill now shell and the focus now on tax policy, for me, i'm going to be watching how likely is it that ryan is going to push the g.o.p. blueprint if its entirety where you don't have interest, where you have border

adjustments, where you fully expense cap knicks year one. these are big things for the high yield market, particularly those companies, maybe some of them in energy, where you have poor free cash flow and you need that. so that's my biggest focus right now, focusing on policy and what's likely to get done and how that's going to affect my market. jonathan: the michaels, thank you both for being with us. coming up in the next hour, the president of global strategies joins with us his take on the federal markets. i'm guessing he's still bullish treasuries. he's coming up from new york city. this is bloomberg. ♪

emma: this is bloomberg. this is the hewlett-packard

greenroom. coming up on bloomberg markets, alix steel has an exclusive interview with newfield exploration c.e.o. this is bloomberg daybreak. this is your bloomberg business flash. deutsche bank is in a bind over how to modify loans to donald trump's business. according to a person familiar with the matter, the issue is a personal guarantee that the president signed. the bank has tried to eliminate the awkward prospect of someday collecting from a sitting president, but if deutsche bank removes his personal guarantee, critics may accuse the bank of trying to curry favor with the trump administration. goldman sachs wants to take advantage economic reforms in saudi arabia. goldman is in preliminary talks with equities license there, according to people familiar with the matter. the license would allow goldman to invest directly in saudi equities. the head of supervision of the european central bank says proposed banking rules are close to being finalized.

>> i would see as a natural step to be taken before we can move forward to add the name of the replacement, and then i guess we can work closer to get things done. we are very, very close, in my view. i am very optimistic because we are quite through to get an equity. emma: the e.c.b. needs to have the power to oversee the branches of foreign lenders doing business in the area after brexit. and that's your bloomberg business flash. this is bloomberg. jonathan: back to the high yield conversation. let's take the high yield index, chop it up by sector, and show you your to date where the underperformance has come from, banks, retail. let's bring in the head of high yield strategy. retail and equities, retail, retail. talk to me about that story. >> retail has been a big story

in high yield for a long time. these are overleveraged companies that have a lot of high yield debt historically. they're in that index as well. these are full of mall plays, pretty much the areas of retail that are most hurt by online shopping. so you combine sort 6 a secular decline, in the retail industry, amongst these types of players with capital structures and balance sheets that maybe are unsustainable in an environment where yields are going up, and that's obviously bad news for retail. jonathan: let's talk about compensation given versus risk taken. at what point do you see that as an attractive industry point? how much compensation do you need to take the risk for things like more exposure? >> i think we're pretty wary of the retail sector. we think we can see it in a separation where sprelleds and yields have blown out so much over several years relative to

the index, where maybe it kind of performs in line with high yield. but in terms of an overweight position, we don't feel comfortable doing that any time soon. the other thing that as i mentioned earlier that really affects retail is border adjustment. if we get bored air justment, where you can't deduct your foreign cost of goods sold, that just kills retail. in high yield, you feel it all the worse. you're sort of in the secular design. david: even though it seems more likely in order to get the tax package through, turn to a different subject, autos. there's been a lot of pressure on auto loans we've seen. real difficulty there. where's that going? >> on the auto side, in high yield, it's a small portion of our market, right? in terms of affecting overall high yield, the auto space in particular is not employing to drive it. in terms behalf that means for the broader landscape, we have to look at not only auto loans, but we should be looking at

reported, senior loans officers surveyed to see how banks are tightening or losing credit standards. bank lending standards are still relatively tight, and then we have to go one step further and say, ok, is policy going to allow banks to lend more? are we going to free up capital to do so? is the consumer balance sheet, because of optimism, because of we saw the small business charter that looks almost like a cartoon, if that continues to increase and consumers begin to relever their balance sheets, which right now they're fairly unlevered, then that becomes a problem. i think at this point in time, poor not overly concerned, and high yield in particular isn't a big focus of ours. jonathan: that chart that looks like that doesn't translate into high loan. the banks, to your point, have been tightening, so what's the message for the investors that are piling into risk at a time when the banks seem to be derisking, at least on the

margin, pull back just a little bit. >> i think there's a lot of optimism around deregulation, reduce the regulatory burden. that's what we've heard over and over again. i think there's real optimism around that, and freeing up capital for the banks to lend. if that optimism ends up not playing out, then i think it's a big problem for markets. david: there's a supply issue or demand issue? is it that banks aren't putting it out? >> i think the surveys will tell you that's a little bit of both. we're willing to lend, but the banks feel a little bit ham strung by many of the rules and regulations. i'll give you one example. in the high yield market, you have six times leverage, sort of cap, or guideline is really what it is in terms of how you can lend to risky, you know, l.b.o. type issuers, and so if you can't lend to a company because they're six times levered or you're at least given a second, third look, that limits your growth right there. david: bank of america lifrpbl lynch's michael, thank you so much for being here today.

coming up, we hear the latest take on the fed and on markets. plus, michael, morgan stanley public policy strategist, will be here, live from washington and from new york, this is bloomberg. ♪

david: this is in a takeup that was announced about a year ago. shares are up slightly in the pret market, and joining us is jeff mccracken, bloomberg's executive editor of global deals. so this was somewhat expected, right? >> yeah, but right now we've got three huge global agro chemical deals going on. dow dupont just got approved. we also have the huge chinese company buying this huge european company. and then we've got bayer monsanto. so had this been blocked, that

would probably have been jeopardized the other two deals as well. david: in europe, is the bayer deal a much more difficult deal to get through the e.u. than dow chemical? jeff: no, it will have some challenges, but every one of these companies knew they were going to have issues, and they were going to be divesting a lot of assets. so in the case of do you dow point, i think they're going sell off the pesticide usiness. they're just kind of standing back, waiting, if you will, for these things to come on the block. david: so it's let's make a deal. what about here in the united states with the dow dupont deal? jeff: i think that's probably going to get approved in the next couple of weeks. that's the expectation. the whole regulatory world, it was very -- there was a lot of strute knee, a lot of deals being questioned or blocked under the obama administration. now we're in a whole new world, is no one is really sure. most people expect that trump and his administration, there

will be less scrutiny, they won't be so concerned about number one buying a number three kind of thing. but the unknown is how is he going to deal about a deal where jobs are lost, where there's a lot of synergies and thousands of jobs are sacrificed. david: in the dow-dupont deal, they said they're going to break up in three companies. jeff: that helps them get across the hurdle. david: at&t-time warn certificate other deal pending. that's not a lot of synergies. that's a vertical deal, not horizontal. jeff: right, but there's a lot of symbolism, if you will, with that deal f. that deal goes through, gets approved, regulators let it happen, i think the floodgates open and the really big cross-border deals, those will start to come out of the wood work. but let's say he starts tweeting about that deal or it gets blocked for some unknown reason, then i think a lot of activity is really going to slow down. it's all right starting to slow down as people are wondering how is this administration going to handle big deals?

david: he's spoken out about t. even on the campaign trail, he took a position on this deal. i don't know the last time a president or presidential candidate spoke on a specific merger and acquisition. jeff: you're exactly right. it was in october after we broke the deal. he came out and said i would block this deal. we heard later, he was telling people around him, i don't like this deal, i would block it. so that's why i'm saying it's so symbolic and important to the rest of the world, will this deal be approved? will it go through without too many deductions, or not deductions, or divestitures? david: can they go forward before they have someone to review it? who makes the decision? jeff: a lot of those are supposed to be filled by people that are number two in treasury and in the pentagon and other places, and he has not appointed the people necessary or appropriate to that. a lot of things are on hold right now. where's the time warner and at&t?

jeff: they expect the deal to get approved, but there's a lot of concern. people just don't know what kind of divestitures are coming out. david: thanks so much. that's jeff mccracken. jonathan: thank you. treasuries are catching a big bid today. coming up on friday, bloomberg real yield, noon new york time, every friday, 30 minutes dedicated to fixed income, another big week potentially for that asset class. in a market about 34 minutes away from the cash open, new york city, we continue to count you down to the open here on bloomberg day break. futures deeply negative, almost down 21 points on the s&p 500. negative 158 on the dow. you're watching bloomberg. ♪.

jonathan: the president lashes

out at his own party, as republicans fail to get through the healthcare bill. doubts increase about the trump administration agenda. equity investors are forced to take their position out on long positions. president trump drops plans to repeal and replace obamacare. now we get the diagnosis from. new york city, good morning. good morning, and welcome to bloomberg daybreak. i'm jonathan farrow and alongside david westin. alix steel is on location. almost session lows down 21 points on the s&p 500. it is the 2017 consensus unwind, at least as long as monday morning is concerned. switch up the board, treasuries and six basis points at 236. the dollar weaker against pretty much everything in the g-10 space. that's across asset situation. let's get some movers. >> good morning to you, jonathan. we have lots of movers this morning, especially to the downside, helping explain why the futures are lower.

starting out with the banks, a lot of the big banks trading sharply lower in the premarket, including bank of america. it's worth noting that these losses, if they hold on the trading day, will add to the nearly 5% decline since the fed raised rates about two weeks ago after the fed was a little bit more dovish than expected. but, of course, the whole reflation strayed in question. yields and rates rally. bonds are rallying too. it's going to be interesting to see how that plays out. financials have been the leading sector to the down side on the recent reversal for the stock market overall. another sector that's really feeling some pain today, some of the u.s. steel stocks. we have cliffs natural resources, u.s. steel all down sharply, and this follows losses for some of the u.k.-based miners. the metals are dropping, especially iron. iron had been up more than 30% earlier this year, now about flat on the year.

this too could reflect some of the worries if president trump is unable to deliver on pro growth stimulus. david, a goldman sachs strategist just came out with a note saying he does not think that tax reform will happen until 2017, the earliest, this, of course, is hurting the reflation trade. this is 7167, and this is another reason reason that iron ore is dropping. in blue, we have china. in white, iron ore. we have the supply is abundant. iron or se just dropping. this could just be coming to an end. david: the story of the day. thank you so much. we're now about 2/3 of the day through president trump's first 100 days, and right now things are looking choppy i think it's fair to say. here is our chief washington correspondent, so bring us up to date. how is the president doing? >> well, he faces a major policy setback with a collapse of speaker paul ryan and president trump's healthcare proposal. now, they're all sayinger that

going to pivot towards comprehensive tax reform, but again, congressional aide that is i'm speaking with this morning in the halls of congress tell me that they are still waiting for the white house to take the lead, because on issues like tax reform, there remain divisive issues, such as, of course, the border adjustment tax. david: that is a great question, kevin. who is going to take the lead? paul ryan, speaker of the house, had taken a lot of the lead on healthcare. he'd been working on that for years. is this a situation now where the president is going to say, ok, you had your shot, let me now take over from speaker ryan, i'm going drive it? do we know? >> we don't know. over the weekend there were several meetings with president trump's top administration officials, trying to map out a strategy, but that strategy has yet to be communicated with here on capitol hill. there is no time line for comprehensive tax reform in terms of when when they hope to get it through. but we're just around the corner from april 28 when government officials will have

to vote on a partial government spending bill as a result to keep the government open so. we're facing a turbulent period here, where there could be threats of a potential government shutdown. david: that's just two days before the 100 days left. thanks so much, kevin. new york ere in city, michael, morgan stanley u.s. public policy strategist, michael, i want to begin with you. an audience of global investors who aren't interested maybe in the d.c. intricacies and just want to know one thing, what does it mean for tax reform? what does it mean for tax reform? michael: well, that's a great question. you got to break down tax reform into timing and content. it's not just about whether or not tax reform gets done, it's how long it takes to get done and what's in the tax reform. i think the failure of the healthcare bill on friday tells you a couple of things. one, it's not as batted as it could have been on the timing

front. if we are might haved down in healthcare debate, it would have pushed tax reform clearly into 2018. so it's not as bad as it could have been there. on content, it tells you that the conservatives who tend to be more fiscal hawkish, they really didn't assert themselves. it's all else equal, the idea you're going to get a tax reform that doesn't include in order to make things revenue neutral. it's probably lower probability than people have appreciated a couple of months ago when the optimism from investors was we're going to get a clean tax cut. jonathan: we were told you had to do healthcare before tax reform. now you can get on with tax reform. how does the one inform the other? not on the time, but on the content. michael: there's a lot of qugs here, for reasons of process. i think some people took that to mean legal reasons, other people took it to mean statutory reasons. but the point there was, what the speaker was trying to

achieve was built-in cost savings and carried forward to tax reform. i think they made the political calculus they could get it repealed rather quickly and get it done, and that turned out to be the wrong calculus am now you're left with pushing tax reform with less political capital and financial wiggle room to accommodate lower tax rates in the revenue neutral tax reform. david: let's ask you the question. is it possible that the fail air of healthcare will mean we will actually get tax reform sooner, even if it's smaller? komal: i don't think tax reform is going to be speeded up at all as a result of what happened, because i think that there are details they have to get right, david. among them, do you give the tax cut for the higher income groups or lower income groups? if the emphasis is going object on estate tax cancellation, that's not something that is going to be liked by the democratic side. and then you're going to fit some of the high tax states,

california, new york, new jersey, against florida and texas on the other side with no state income taxes, about the deduction of the state and local states. and even republicans from these states with the high tax states are not going to be able to go with the president. easy to think the tax cuts and everybody would go with it. jonathan: yields up on the 10-year. we're back to 235. you've been very, very bullish on u.s. treasuries when the consensus said it's very, very bearish. the yield still goes a whole lot lower from here. come a.m.: yes, jonathan, i tend to remain bullish on the 10-year treasury at 235. my expectation is still 2% and lower. and the reason for that is, again, many. things that i had anticipated are coming through. economic growth is not going to pick up any time, i think it's

more of a 2018 or 2019 story, so we'll face that when it happens. second, infrastructure spending was supposed to increase. the fiscal deficit is not going to come through very quickly either. and then finally, you are looking at development in the rest of the world and globally that you have interest rates which are substantially lower than the 10-year treasury, and you have to believe that the united states has a lot more risky than germany or the united kingdom to think that the u.s. should have higher interest rates on the 10-year. if you do not, you sthee the market has a mispricing, which over time is likely to get corrected? finally, i don't think that you're going to have a big new inflation. it is not going to come, and i think you're going to see expectations falling lower than expected, so every single component of the bond yield to

me say is going lower. jonathan: the dollar very much off this morning. i want to bring up a chart of euro-dollar. euro-dollar through 10e9, a 20107 high, so up by by one full percentage point. the dollar very much off this morning. david: the markets are clearly beginning to get skeptical about this fiscal stimulus we thought was coming. is it possible i'm going to reform this tax package? what if we did it piecemeal? one of the things people agree on is repatriation. let's figure out how to make sure we can repatriate those funds, what kind of effect would that have on the markets? michael: i think positive. however, i think it's difficult to achieve politically. the reason you've seen so many politicians try to bundle together personal and corporate tax reform is because, when you start reforming the corporate code, then the small business lobby gets upset that you're not reforming the personal code, which is where most

businesses file under. so if you were to somehow isolated this in the obama administration tried to do this, then yeah, i think that would be a modest positive, probably fall short of the expectations i think were really built up that there's a major, major reform coming with major stimulus. jonathan: walk me through the conversation you've been having. i imagine they're incredibly bullish about what's coming from d.c. before friday happened, had you noticed they changed? michael: yeah, i think so. i think november, december, january was very much the idea that there was complete republican control of congress, and that trump had sort of put his imprint on the party, and that major tax cuts accommodated by defense spending, clear fiscal stimulus. i think the view kind of got more mixed, and i'd say to the point this morning we are having equal conversations with people who say shouldn't the market be limited down on all of this, because this was a major disappointment.

people said, well, this is actually a really good outcome. i think the sentiment is more mixed, to be fair. even though i've been on this program and others talking about, throwing cold water on the idea that tax was going to be the save-all, i think it's also important to say there's a wide range of outcomes, and we put about a 40% probability on kind of good market, positive outcomes as well. the truth is also probably not as bad as some people think this morning. jonathan: michael is sticking with us. komal also staying with us as well. coming up tomorrow, right here on bloomberg daybreak, reed reading the tea leaves. up not quite limit down this morning, 1 minutes away, futures set up like this, a little bit softer across the board, almost a session lows. negative 22 points, over 170 on the dow. could be a messy one at the open from new york. you're watching bloomberg. ♪

david: this is bloomberg. as markets react to the trump administration set backes, a big sque whether the fed will also be reacting. and we'll get a sense throughout the week as 14 fed members will be speaking publicly. overnight, former fed president dennis lockhart talked in asia and suggested if he were still in the meetings, he'd be staying the course. >> i started the year with the assumption of two moves, and, of course, these are not set in stone plans. these are just ones forecast at the time. theernt a commitment. i would have adjusted mine to three moves. and i think the strength of the economy justifies that. david: still with us is komal,

and here in new york, michael of barclays. out to los angeles and you, you've already said that you expect the 10-year to come down to two and even below two. do you expect that the curve will just really flatten out, or do you think the fed is going back off the three rise that has we're looking for? komal: great question, david. first of all, in terms of flattening, i would say look at what happened with the first rate hike in december of 2015. look at the curve the day after that happened, and then go, fast forward six months and look at june 16 of 2016. you'd find that the yield curve had shifted downward and had become flatter. so the yield curve does not steepen just because the fed increases interest rates. it flattens or steepens based on economic growth expectations and inflationary expectations, and as i said in the previous block, david, i don't think

either of them are really picking up in a significant manner. so my expectation is, first of all, that the yield curve is once again going to flatten again. this is part of my story about the 10-year yield coming down. the second regarding the fed action in the future, i don't think they can increase three times. as soon as they said that, after the december of 2016 hike, i have been saying that is simply not going to happen. they keep saying that every year. they expect growth to increase. i'd liken lightenment, it is a mantra the fed repeats repeatedly, but it doesn't happen, and i don't see the conditions for three or four rate hikes to take place in 2017. david: any week that begins monday with nirvana has to be a good week. thank you. but sri, what expectations are you baking into those assumptions for g.d.p. growth in the united states? i mean, what would change your mind if terms of growth rates?

sri: that's a good question, david. i am looking for economic growth in 2017 to be very similar to 2016, which is 1.6%. it was the slowest growth we had since the beginning of the economic recovery in 2009. so it is somewhere between 1.6% and 2% in 2017. and with inflation rate still staying lower somewhere in the range of about 1.5% for the core inflation rate, those are my assumptions in terms of my expectations for the bond market. and the other point here is that the fed will keep talking about rate hikes, would not be able to deliver, and that also is going to be dovish for the bond market. jonathan: have the bond bears underestimated the structural forces that have helped deliver a 30-year bull market?

it's a request asked a couple of times over the last week, but i'd like your insight as well. sri: i think they have. i think they repeatedly expected the 10-year yeeled to go to 4%. it doesn't happen when the yield falls to once again get back on the same, and you forecast it's now giving to 3.50% or 4%. but the basic conditions do not exist. and i think what the bond buyers are missing is not only the structural impediments that we have in the united states for higher yield rates, jonathan, but also the global influence. even the fed doesn't take into account the impact that china would have, that germany would have if, in fact, they retail ate to any attacks on the part of the united states. they're all going to be negative for growth. they are going to be negative for global trade, and they in turn push the yield down and force the fed to delay rate

hikes. and those are also events that i think they started ignoring. david: michael, what's your view on fed rate hikes this year and also growth for the united states? michael: well, our chief economist thinks we're going to get two more hikes this year, four next year. mostly predicated on the existing growth trajectory that we have. the fed has weighed in, and not been explicit about what they're presuming from fiscal policy, but what we know is only half of them right now are presuming a boost from advertise cal policy. he said we maybe should expect about .3 percentage points. so at this point, i don't know that the trump administration is really driving the outcome -- i'm sorry, in monetary policy one way or another. so we think we're sort of on the, more or less 2% g.d.p. growth trajectory. that's probably enough to help the fed achieve what they want to continue hiking through the balance of this year and next year. jonathan: let's talk about the news this morning. futures are lower. we're expecting a lower open.

treasuries are rallying. dollar is weaker. con everyone is going to call you up and say something around the following, healthcare failed, what does it mean for tax reform, and three months in, is it far too early to wrote a post mortem for this administration? michael: on the latter part, i think the answer is yes. it's one of the common questions we got on friday and again this morning, basically is the trump administration already a lame dumb? the answer is no. as i said earlier, there's still a lot of avenues towards tax reform that may or may not be clearly risk positive or negative, but still matters a lot on a sector basis. on top of that, there's still a lot the president can do on his own, just by changing enforcement of regulations. for example, our large cap banks analyst has noted in a number of dvent areas that this can change the trajectory for bank stocks, for example. i think just because the legislative agenda is different and somewhat disappointing, doesn't mean that the ability for the trump administration to

really impact markets has changed. jonathan: i wonder if you get that question every day. sri, fantastic to have you are with us. michael, thank you very much, sir, for your time. coming up, a whole host of explosive interviews, a whole week of fed speak, with presidents of chicago coming up today. and on wednesday, boston's eric. friday, jim buller of st. louis. the markets, nine minutes away from the open. futures deeply negative. you're watching bloomberg. ♪

jonathan: futures are deeply negative. the top performing sector since the u.s. election is poised for another tough session today. the big banks all point to losses at the open with morgan stanley leading declines. the stock is down by two full percentage points. if you're looking at goldman. j.p. morgan, over three.

joining us now with his outlook for the financials is art hogan, chief market from the gist. great to have you with us on the program. there's going to be two reasons that people hit the stopper today. one is the administration's agenda, it's not going to happen. the second is going to be treasuries rallying, and that's not good for the banks. give me the reason to buy. >> i think we're going to overreact for sure. i think we've seen financials as being the beneficiary of the new administration, and certainly a lot of the things the administration went against them direct al fect the financials. if we question their ability to get anything done, then the parents are probably still here. i think it comes in because we are going to look at this and say, wait a minute, nobody really wanted to replace healthcare. it was working. no congressman wants to go back and tell their constituents, hey, good news, i got rid of your healthcare. they want to say, hey, good news, i cut your taxes. we're going to create jobs here. this wasn't popular to begin with. i think the agenda just got pivoted. i think you see the agenda now, tax reform, deregulation, all of that's good for banks, and i think we'll start to her more

about that. the problem is the financials have such a significant run, 25% run, they've got it give back. david: and they've had that run because of fiscal stimulus. one's estimates of that have to be somewhat moderated today as opposed to a week ago. art: if you look at tax reform and said trump told us 15%, ryan said 20%, i think the reality is 25%, that's better, but doesn't sound as great. that's ok. that's stimulative. i think what's more important is do you get deregulation, that helps the financials. do you get repatriation of capital? i think there's a lot of runway in front of the financials, just not today. jonathan: outside of d.c., it's been a poster child of the trump trade, but give me the case outside of d.c. what's happening elsewhere for some of the evaluates? art: we've got steady growth and job creation. we've seen slow, incremental increase in wages. i think both of those are plaping out well.

if you look at existing new home sales, that's been very positive, new home formation, the first time we've seen that in that cycle, and that's just picked up. i think the economic growth picture is better. you can use the steeper yield curve, but that's next week's business. jonathan: art hogan sticking with us. the opening bell is up next. the stage set as follows, after the biggest weekly loss, futures pointing to a deeply negative open well. we're down 175 on the dow, negative almost 23 on the s&p. it's the administration's agenda becomesing unhinged? our guest says no. from new york, you're watching bloomberg. ♪

jonathan: jonathan:moments away from the opening bell. year of three consensus traits. one was long stocks and the other was short treasuries.

the other was longer dollar. this morning, and unwind. futures are negative. treasury, very well bit. the euro reclaimed briefly up. very briefly. some big price action. that is your cross asset check. abigail: we're looking at one of the worst opens for u.s. stocks in weeks. we have the dow, s&p, nasdaq all lower. one of the sectors really trading sharply lower, the cars. stocks are down after ever core isi has cut estimates for the next two years on gm and ford. tesla trading down in sympathy. health care, some of the big drug stocks trading lower, including pfizer and merck.

this uncertainty around what is next for health care, will drugs prices be used as a weapon between the democrats and republicans? it will be interesting to see how that plays out. the big story this morning is whether or not we're seeing an unwind of the reflation trade. looked at this job before. big macro risk events, the vix spike higher last year on the big global selloff. on the brexit, u.s. election. it appears we are starting to see the event spike higher on this trump policy fall. it may suggest we see the s&p 500 dropback down as occurred in the past. jonathan: thank you. stocks do rollover. is art hogan and joining us is cheryl skolnik.

you, as weegin with rollover, there are going to be some people say it is the beginning of something other say, look, we have been waiting for pullback and here's your entrance point. what do you say to them? theeople have to realize markets go down. it is been 100 some all days. the first one was last tuesday. on market was correct average every three months. do we believe the new administration will not build a legislative anything for the next four years? probably not. estimates fors repeal and replace obamacare, infrastructure spending and deregulation, you probably add 10% in next year's earnings. you'll probably have to add less than that. we will get all of the six except repeal in replace them a 2.0, little bit later, little bit later. david: one of the things triggering this has been the ahca.

what is happening with health-care stocks? we saw farm is down. what about hospitals and insurance companies? onhospitals had a lovely day friday when it became apparent the thing that were dreading was that this repeal bill, which told have been damaging medicaid as well as the exchanges would have collapsed. they were the indicators on friday that the bill was probably in deep trouble. i would expect there to be some follow-through today. this morning we upgraded our view on the hospital space. we're cutting -- calling it a nicer neighborhood. a whole lot nicer than it could've been. we now have by ratings on universal health services by my colleague as well as hca with race price targets david:. where is the risk perhaps they could go do damage to obamacare if not utterly repeal it? >> there is an executive order

in place that we have been quite concerned about from the day he signed it, which will allow the mandate not to be enforced, for example. there may be things that congress will do as part of a tax package when he got a reconciliation bill that could defund medicaid -- excuse me, could defund the exchange subsidies, the out-of-pocket subsidies, and even move medicaid to block. at least it is not the loss of whether it is 24 million or 10 million lives over the next three to four years of coverage. we now have some stability in which these companies can execute their strategies and that is important. it is also import for the managed stocks. this company also has exposure to medicaid expansion through its business and conversion of

value-based care. that is another trend that might well have been damaged by the bill and wasn't, but could be, backed your point, could be damaged by the actions of the regulators, by secretary price and this executive order. jonathan: can you divorce some of those ratings from the politics of d.c.? >> never. health care is extraordinarily politicized. the fact the hospitals a managed-care stocks can be up at the drug stocks down on a day when health care is generally breathing a sigh of relief tells you that politics matter to this sector. --athan: do technical smart do technical's matter? we just rolled beneath. how significant is it? >> very significant. we have been up to the right and not tested the 50 day. i don't think we have to hit the 200 day on the s&p. i certainly say keep an eye on that. my question to you, if

you're looking up looking -- picking up the sector, which one do you pick up and where is your entry point? >> the rule of three. friday was day one. we had a tent it wasn't going to happen -- hint it wasn't going to happen. i think today is the first day -- second day and tomorrow. you wait until after tomorrow a look at how much damage has been done to technology because it has nothing to do with health care. how much damage has been done to financials. look at some of the industrials. i think infrastructure is still on the table, just the agenda pivoted a bit. , some tax reform now deregulation infrastructure spend some time in 2018. david: given the fact he said to jonathan that the health care business is entirely dependent on washington, does that make it more attractive sector or less

attractive given the uncertainties around washington these days? >> overall, we are not at peak multiples for that reason, what i will call the tail risk for that you can never really divorce yourself from what goes on in washington. aroundhat the intensity this failure has to be felt deeply by the actors in washington, they probably won't want to deal with health reform for a little while. my guess is until the third or fourth quarter, we're probably in good shape for these stocks. i think we have some breathing room. i think we have time where it will not be the center of attention in washington, and that is good for these it companies to execute and growth strategy. jonathan: art hogan, what is the message for the bulls losing some conviction? is a very normal market. we have not seen this in quite some time. i won't say it is healthy, but it is part of the process. bys is probably driven

pretty good reason. when you think about half of the reason the market has been up, just pick a number, since the election, has been the hope of progrowth policy. the assumption we made is we will get $1 trillion over 10 years in savings of repeal and replace that will make tax reform a lot easier to push across the goal line. that is not going to be -- tech reform will be something different, but it is next on the agenda. the good news is, maybe we get it done by the august break and that completed 2018 to earnings -- and that means it can play into 2018 earnings. think of this as normal market activity and things will get better. jonathan: thank you for being with us. we are about eight minutes into the session. let's get you up to speed. the s&p drops below its 50 day move an average of the first time since the election. we are down on the s&p. we are dow on the -- down on the dow as well.

switch out the board. yields are much lower. the dollar weaker against everything in the g10 space. from new york, you're watching bloomberg. ♪

this is bloomberg daybreak. coming up, i very own alix steel has an exclusive interview with lee boosting. david: energy in the news as producers met in kuwait city

with a week in a president trump to sign an executive order on wednesday, rolling back some of those obama regulations. alix: has travel to new orleans for the scotia howard wheel energy conference where she is with one of the most important players in the natural gas part of the industry forced upgrade to see you down there. alix: welcome back, david. the chiefd here by commercial officer over at shin near, the only company that connect sport natural gas here exporteds. and now has to 18 countries. great to have you with us. friday's the keystone and now dakota access potentially will be built. >> our own pipelines to be built. we have launched to take gas away. the only think -- anything that

helps the hydrocarbon development helps us as an exporter of lng in our case, but any hydrocarbons as the north american production base becomes more and more long these wonderful resources. alix: you are basically in charge of the supply chain for the lng a broad. you're in the sake of it. you been getting gas from canada. how much do you expect to get in the future and how much of an exporter can you get? >> great. thank you. we're the only game in town in terms of exporting lng from the lower 48. we have a very broad swath of supply choices all over u.s. and now canada, as you pointed out. we're happy to get as many molecules from canada as we can logistically supply to our two facilities. it is a wonderful resource that we plan to avail ourselves of as much as possible. alix: basically, part of your job, you can market lng, selling

your self. the other part, you have contractors like shell coming in a basically reserving space. you were just able to get a permit for commissioning for the fourth area in sabin. >> we said train for will come online in the second half of the year and we're still working .hrough that as you know, we have done better and better as we bring these trains online. we learn more as we continue to andlop the plant of sabin corpus. we are optimistic. alix: still on target for the summer? >> the second half of the year. alix: you deliver taking countries. what is the one market you want to target this year? >> it depends. the beauty of north american lng summit u.s. lng model is it will go to the best available market. cargoes.ve those we have done it to have the lng --

alix: europe hasn't been there. you a lot of competition from your russia. europe has been a point of contention. have not been able to get in there. >> it is a question of prize. the instant europe since the price it is the most attractive, cargoes will go there. alix: what is the price? >> a penny higher than the net back from any other country. we are flexible, as are our customers. you pointed out shell and other customers. they will move their cargoes so they don't have any destination restrictions to the market that raises its hand and says, "i want a cargo of lng." $7.52the price was about in january. 2016,as very high versus right around a record. does that impact your ability to sell? >> it does not in the sense we are able to place every cargo as they show up, so as you said, we

have foundation customers who have reserve capacity at the terminal and they are served as well as our market and affiliates as we ramp up these trains to get more volume out of these trains, marketing has these additional cargoes to sell and we have been able to play some successfully, as you pointed out, very attractive prices. that is purely a function of what the market needed to pay to attract those cargoes. alix: demand has been quite strong, particularly from asia. do you expect that to continue the summer from asia? >> in general, we expected to grow. as you probably know, the two biggest growth markets for china and india last year. we think that is a secular shift. we think the north american business model fits very well with their growth trajectories and growth patterns and offers the flexibility and the very attractively priced product, so we fully expect that to continue. it will then flow depending on their weather in demand patterns and prices. volatility out of

those markets that played out in the last couple of months. alix: and supply. the global glut of lng is like the worst covert secret -- kept secret. when do you see it ending? >> we had a terrific beginning of the year and had very attractive pricing. that is in a period a year ago everybody said was going to be this huge glut with all of the u.s. volumes in australia flames coming online. we are optimistic -- u.s. volumes and australia volumes coming online. we are domestic most of these plants take four plus years to build. anyone who needs terms apply starting early next decade has got to sign up for that capacity to start being built today. as you know, we're the only guys out there that have two fully permitted shovel ready trains. alix: to that point, your final asestment is still in doubt the basically, you need these guys to come on as they were committing.

what is holding them back today? is a common nation. if you look back to the success they had early this decade, it is really shocking from some standpoint that all of these customers signed up for this henry hub lng thing. it was a brand-new thing also the market has been around for 50 years as an oil index market. it is very early. as you know, we have only been delivering for little over a year. the market has been adjusting to this and getting comfortable with this product that we continue to think will get more and more attractive as all of the other for dispense of this conference get better and better producing this resource. alix: anatol feygin, thank you for your time today. lots more coming up from the howard will conference in new orleans. we will be speaking to all of the major shale and premium players. come back quick, ok? coming up, a whole host of

interviews. today is charles evans. wednesday, eric rosenberg. friday, jim bullard. coming to you right here because this is bloomberg. ♪

is bloombergs daybreak. we are 21 minutes into the session. we went 109 without a 1% drop. that finished last tuesday we wrapped up with the biggest weekly drop so far this year. this morning, another week. dell futures pointing to a significantly lower open. we bounced a little bit. we are down on the dow and s&p 500. thanks getting beaten up as well. switch out the board. yields come in six basis points on a 10 year. treasuries bid, the dollar very much an offer. we kissed 109 on the euro. we kissed 126 in the cable rate,

up by one full percentage point. joining us, roughing up the action, joe. from market participants, one very basic question this morning. what does it mean for the rest of the agenda in the second part is, do i want to buy? pretty simple, isn't it? >> the answer is, it depends on what you expect the tax reform to get going and goldman sachs said today that it may not be coming until late 2017, early 2018. if you're willing to wait for those positive attributes to filter through two stocks, i would say to buy this dip. a lot of people have used pullbacks in the last several months as an opportunity to buy. we are below the 50 day moving average in the s&p 500. that is a key technical indicator. it is kind of a mixed bag.

i think today we can expect remain lower. like you said, it could be just another opportunity for the bulls to strike. david: matt, on the bond aside. -- bond side. is the bond market back? >> i brought you a chart that i think this illustrates this well. beenan see stocks have teetering a bit over the past few days. expectedks well the fed funds rate by the end of the year. that is an interesting contact -- context for the fed speak. they've been focused on upside risk with all of the buoyancy of the market. now the markets are coming back down a little bit. circled,is part february 28, where we really had the new york fed president come out and say, march was definitely a possibility. that is when there was this big shift in markets. now we are back down to where we were before that. we're kind of getting back to that pre-march rate hike

paradigm in terms of what the fed is going to do. david: the heels are coming off as the equities come down. jonathan: it is not like limit down drama. we're firming up a bit. we are de-risking. if you've done a good job of ignoring the noise coming from washington, d.c. and the political realm, the signs indicate not including some of those optimistic forecast for fiscal stimulus in your own economic forecast given the events of the last few days. >> that is interesting. we have a hold a to fed speak this week. i think i counted 10 of 17 members are speaking. we have a nice balance. one of the most interesting will come on thursday with deadly speaking again and is full speeches about this interplay between monetary policy and financial condition stocks and how those are sort of supposed to bounce off of each other. i think we should get a lot more clarity on this. i think it will continue to be front and center throughout the week.

david: were we to early ins and we passed over into fiscal policy? did we declare that transition too fast? >> i think it is possible that is the case. now investors will be looking for signals as to what is to come. in the equity market in particular, there will be watching companies that have the highest effect did tax rates, companies that are being tracked by the major wall street strategists. i think investors will want to see how vulnerable they are to some of this uncertainty, and also if you want to look further down the spectrum and maybe stocks expected to be affected by negative border adjusted tax, part of the tax reform package that might be a little more off the table now that the affordable care act reforms were pushed to the side. you might see a little more of a reaction to the downside in those stocks. it is really a mixed bag. it depends on what you want to focus on.

it is too early in the week to tell how investors are going to be digesting this information. jonathan: the announcement this morning a bit of a bearish one. thank you very much. the markets, we open lower across the board. we are bouncing off session lows. and s&pown on the dow 500. coming up, a whole week of fed speak to getting today with charles evans of chicago. tomorrow, eric rosenberg. we wrapped things up on friday with jim bullard. from new york city with the bulls questioning the advance of this equity market, you're watching bloomberg. ♪

♪ quinn. on vonnie mark: welcome to bloomberg markets.

vonnie: we will take you from new york to london the next hour. here are the top story we're following on the bloomberg. stocks are sliding and the dollar is dropping as failure of waves.lth care bill cast mark: oil builds on, getting excited from the latest pledge from opec. vonnie: the european union gives conditional clearance to dell's merger with dupont. we are