u.s. will address north korea. the officials threaten not the beginning of the end despite an improving euro zone economy. just when you thought the worse was behind, credit swiss turn around plan faces another blow. from new york city, good morning. welcome to bloomberg daybreak, i'm jonathan farrell alongside david and alyx. alongside the presidents of the two largest economies, let's get to the markets. this is how we're set up monday morning. futures in new york, stable and going nowhere. the euro goes nowhere. at one point 0.56. where is the price now? alyx steele, treasuries, unchanged. alix: you have sterling moving slower after the manufacturing data in march. .4%. and gold and crude relatively soft.

the markets are rebalancing. let's see if the traders wind up agreing. chinese leader is going to mar-a-lago in florida. oining us now is kevin cirelli. kevin: last week he was tweeting it would be a difficult meeting and then he tweets there will be a lot of great things coming out. here is he headed? kevin: north korea saying if china won't handle north korea then the u.s. will have to do it alone. two things, national security as well as trade policy are the top two items on the agenda for the summit in florida for later this week. of course president trump has tough talk for china on the campaign trail saying they were currency manipulators and saying they haven't gone that far yet in his administration but did of course last week call for the reviews and executive orders with foreign countries to see which countries are taking advantage

of the united states, whether or not china makes that list remains to be seen. david: kevin, give us the perspective from the president's view, what is he coming to mar-a-lago with, does he have something to present? kevin: they want to see whether or not they can work with this administration on trade. they want to be able to see whether or not they're going to be able to work with this administration on foreign policy. but clearly when you look at the issue of trade, when you look at the issue of some of the more issues on property rights, these are types of things i would anticipate are going to be discussed later this week. david: kevin, from the president's point of view, what's a win coming out of the summit? is it a matter of not not avoiding anything bad or something good out of it? kevin: no political hiccups for one and secondly, to be able to walk away i think with the understanding that he is going to try to remain tough but still be able to work with

china. these two leaders have a storied history. they have not always spoken that highly of each other. but this will be the first time that they are meeting since president trump assumed the office. david: thank you. we'll check in later. jonathan? jonathan: wouldn't it be nice if we had something to take away with substance, a lack of handshake in the case of merkel or it would be nice to have substance. david: president trump could use that now, a win. jonathan: bigtime. the president spoke with the financial times saying the tariffs with china will not happen but creditized the country's policies and when you talk about devaluation being china, are world champions. joining us is the chief f.x. strategist in new york and ethan harris, bank of america, merrill lynch chief global economist. i want to begin with you,

shawn. the story with the f.x. market, we heard the line from the president again and again and again. is that just noise that they are world champions of currency manipulation or will they follow it up with something? >> i think it's been sort of a bit of a light motive of the president, really, and the campaign. we're probably not going to get away from it any time soon. he doesn't necessarily from that point of view still reflect the reality of what's going on in china or what china has been doing more recently and trying to stop the yuan from weakening more recently. president et the painted will probably stick for the moment and we won't hear anything different from this meeting. it's all about i guess the art of the deal and keeping your opponent on the defensive. so i'd expect that rhetoric to stay very much a part of this discussion process. jonathan: ethan, as far as foreign policy is concerned is

it a bargaining chip on the economic side of things. when you talk about north korea, you're trying to achieve something else where? ethan: north korea is in a serious problem in its own right. i think what's going on is the currency manipulation designation is symbolic of a much broader discussion that the u.s. needs to have with china. it's about intellectual property rights protection. it's about supporting local industries with subsidies. it's about the currency manipulation part was probably an important problem a few years ago but not really an issue right now. alix: from where you sit what can president xi bring and say this is what i can give if you stop talking about currency manipulation. ethan: this will be a long negotiation. i don't imagine anything quick. alix: underwriting projects and committing to buying more u.s. goods, where do you think president xi's focus will be? ethan: i think the chinese will offer to help the u.s. out on

infrastructure and things like that. we've seen it in the past where china would go into a negotiation by doing kind of a shopping trip, quote, unquote, in the united states. but really this is going to be a very long process because the concerns the u.s. has with china are very deep and in an essence new when you look at the trade representative under obama wrote about u.s.-china relations, a lot of concerns on many, many fronts. we've got a long road ahead. david: so much of the politics get played out in f.x. before you see them anywhere else. let's assume they come out of the summit with an increased investment in the united states though china has been trying to cut down on that, what would that do to the dollar? sean: in terms of the dollar and yuan exchange rate probably nothing. the yuan is probably somewhere close to what we see fundamental fair value around current levels and close to seven yuans is the long term

equity point of the yuan from our perspective. in terms of direct impact on the yuan, it's still a currency that doesn't really move that much. it tends to reflect the broader trends in the u.s. dollar to a larger extent on a day to day move and don't think we'll see anything significantly very important coming out from this meeting that has a significant impact on the exchange rate in the sense it's going to move it by more than the typical volume illustrate tilt we see -- volatility we see day to day. david: suppose they talked about the u.s. involved in china, same answer, doesn't make a difference? shaun: it's still a slow process and we've seen the walls come down with regard to investment into china and investment out of china. it's been a very slow process i think for a lot of western investors, european and north american investors getting comfortable with the idea of

putting money to work on the chinese mainland and still i think a very slow process and won't change in the near term. jonathan: what kind of message does president jump need to send? ethan: he needs to show he's serious about addressing trade issues. this was after all his most important campaign promise and trade has been pushed aside with the health care reform and tax reform and so i think with a the meeting is about is kind of putting the issue right back on the table. alix: what is trump's policy towards asia and china? ethan: i think he wants to reduce the u.s. trade deficit with china. and anything he can do that will do that i think would make him happy and as i said, i think what they want is a laundry list of things, not new, people have been looking at u.s.-china trade relations being this stuff for a long time. alix: it's not really clear. we saw sort of "the wall street journal" had that nafta piece

on last week saying there will be a softer line between mexico and china which the implication was there would be a softer line between the u.s. and china. we get he's hard-core about trade surplus and currency manipulation. we don't really know how aggressive he's going to be. there have been conflicting signals across the board. ethan: i agree and what we're trying to learn. i'm interested in the next step with china is not this meeting so much as what's the list of specific complaints the u.s. brings with china and what list does china bring to us and how do they react to those list is what i'm waiting for. david: wrap this up, if the primary goal is to reduce the trade rate can that be done in a master stroke fast or are we talking about a long, hard slog which doesn't seem to be the way the president likes to approach things? shaun: no, but i think that's the reality of the world. i think china's message at the moment both from a monetary point of view and currency point of view is very sort of

stable as she goes message. we had that over the weekend with the most recent meeting from the pboc in terms of monetary policy. i don't think china is really an actor that typically moves with a great deal of pace. i think everything they do and have done over the last few decades has been considered a long haul game which is typically the way china plays things i think and the idea we're going to get a quick fix on this front from legislation or from some sort of decree on the currency i think is quite well in the market. it can be equity and can be addressed but won't be tackled overnight in my opinion. alix: good to see you, shaun osborne of deutsche bank and ethan harris. thanks for staying with us. it's car sale day in the u.s. honda total sales were down still was nd the

4.9%. we'll continue to bring you numbers and are we at peak car sales? jonathan: let's get the market up to you quickly, about between hours from the open. equities are flat in europe as well. if you switch out the board quickly, treasuries in a week, we'll get payrolls and fed minutes. we go nowhere. 239 on the u.s. tenure and flat on the euro as well. from new york, you're watching bloomberg.

>> would you say the u.s. economy is in reasonable shape? >> america has the best hand dealt of any country in this country today ever. emma: this is bloomberg daybreak. record bank is considering a sale of its food business for the acquisition of johnson. they're reviewing the unit they

call noncore and includes french's ketchup. mcdonald's is entering the final stages. they're gathering information hether mcdonald's unfairly benefited from a tax break in lux upberg. a ruling is expected before august. says la said -- benefited from a tax break tesl record production. they shipped over 25,000 vehicles in the first few months of the year. tesla will start building its lower cost model electric car in july. this is bloomberg. alix? alix: they used to pare bond purchases to 60 billion euros a month and what to expect in the markets. you see buying across the curve. germany is the biggest outperformer in europe today. with us is shaun osborne and ethan harris.

what's going to be the impact on the bond market, all good? shaun: we'll see the trends we've seen generally continue, negative yield are off the lows we saw a few months ago and expect yields to stay relatively depressed. the e.c.b. made it clear despite the confusion we had around the march policy decision when there was maybe the impression given that the e.c.b. was looking to become a little more active in terms of reducing accommodation that that probably is not the case now. so i'd expect the situation to continue pretty much status quo. yields are going to stay fairly depressed and think we'll see the difference between which is important from an f.x. point of view the differential between u.s. yield and euro zone yields remain significantly wide in the u.s. dollar favor and the yield spreads there and is a major source of support for the u.s. dollar. i think it's a case of steady as she goes in terms of the

impact of effects and probably impact yields as well. alix: what i found interesting was you had the hawkish rhetoric or interpretation out of the last meeting and you wind up having the officials coming out and trying to walk it back and the lateer is peter pratt saying it's not end of q.e. and in the u.s. you have a hawkish statement and the opposite and officials are sounding more dovish. who do you believe? ethan: i think what happened in europe is investors got way ahead of themselves. remember, european inflation is dead in the water. they have a target of almost 2% as their inflation target, core inflation europe is sitting there at 1% and not going anywhere. they are long way from getting back to normal here. this idea they're close to hiking interest rates is not correct. in the u.s. what happened is the fed was trying to make sure the markets weren't at all surprised when they hiked at the march meeting and really

wanted to take all the drama out of that meeting. but people interpreted that as a new hawkish fed that will be much tougher on policy and then we find out the truth which is this was a tactical thing by the fed. this isn't a change, a fundamental change in direction. they're still going to move slowly, do nothing to hurt the economy. i actually am not worried about the fed as a risk of the markets. i think they'll go very carefully going forward. jay: i sat down with peter praet to find out where he's at and where his framework is as well and that was two years ago and there was an intense paranoia you could sense about an economy that could roll over and inflation trap that could wage negotiations, etc. that was two years ago. here we sit and it's a completely different world it feels. negative 40 basis points as a rate and looking at the data, is it justified in any way? ethan: the negative deposit rate, are there collateral impacts you don't like? raising interest rates back to

zero you could argue makes sense but a tightening cycle any time soon doesn't make sense. because remember, the goal here is not just to avoid deflation, it's to get inflation back to normal. so they are years away from that. so i think as a technical adjustment it might make sense. but to go on a tightening cycle now when you still have a very weak periphery of europe, vulnerable to shock, i don't think so. jonathan: that's what the market is looking for to be fair a rehe moval, accommodation, not looking for tightening cycles. do you suspect the e.c.b. may remove more accommodation as this year progresses? ethan: i don't think so. i think they've got their plan in place. they're going to -- they've gone to the $60 billion purchase rate. i think him the lessons of history have been learned which is don't pull out too early. and so the fact they're cutting back on the bond purchase to me

is more of a political constraint the e.c.b. faces rather than a policy decision. david: if your only goal was to make sure the real denveren shal rates remain the same could the e.c.b. stand pat or do they need to titan bit given what the fed is doing? shaun: conditions looking too loose in the u.s. from my point of view and a little too tight in the euro zone and broader financial conditions. so i think with regard to the fed, i think the fed wanted some neutrality in how they introduce the tightening they probably intend to introduce and something changed this year to get them thinking about march and maybe was the idea they might have to go a bit more and wanted the freedom of movement to go in march and june and possibly again later in the year if they want to. but it's important to remember we've got jonathan's point and what's changed the last couple years is related to two years

ago and one of the key considerations from the e.c.b. point of view or should be is inflation expectations which is one of the prime motivations for the very aggressive monetary policy they've pursued in the last year or so was the very low expectations and on that front haven't made any progress whatsoever. i agree with ethan's points, we're looking at the economy and inflation, it's very difficult to get a sense that the e.c.b. should be doing anything other than keeping things as neat as possible as this point. jonathan: thank you both very much. now coming up, president trump's supreme court nominee neil gorsuch faces a senate committee. and we'll discuss the nomination to the supreme court and what the trump administration will mean for business law more broadly. from new york and washington, this is bloomberg.

jonathan: in another potential

blow to credit swiss, the turn around plan, credit swiss is facing tax evasion and money laundering investigation spanning five countries involving thousands of account holders. the news comes as the firm tries to recover legacy issues and surprise losses. joining us from zurich is henrik foster. great to have you with us on the program. walk me through the latest roblems at credit swiss. henrik: the bank last week or several offices of the bank last week have been visited by tax authorities in the netherlands, france and the u.k.. the investigators are looking at several thousand accounts at credit swiss at least this is what we've heard and they're looking into the question of the potential for money laundering here. the bank has said we have a zero tolerance obviously towards any tax evasion issues

and cleared a lot of legacy in the past already but haven't heard much from the bank of where the investigation stands so all we know at the moment is that there is an investigation going on in these countries. the timing of it comes a bit surprising because there's a w exchange of information in place, right? so the dutch authorities they could have had these information as of today without doing a raid. so this is still a bit puzzling and where it stands. no employees have been suspended so as of now it seems some people suggested it seems like a minor issue despite the headlines and despite the amount of data being seized here. jonathan: thank you very much. got to say no drama in the market either. the stock down 1.2%. david: still not great news as he tries to move his bank forward we're joined by jay

polsky. in the past you've been bullish on european financials more generally. does it make you have any second thoughts? >> the fact europe is addressing the bank issues as a positive, no one is surprised european banks have issues. i think the point is they're priced that way and traded a 50% discount to the u.s. bank. the economy is europe is growing faster and loan growth is doing better in europe than the united states. european banks in the first quarter are up 7% versus 2% for the u.s. bank and i would use any pullback to buy more. david: at the same time europeans have a tough time getting away from the share pitch. u.s. banks had the promise and put it behind them. jay: they're priced at a discount. the u.s. banks and economy definitely move first, right? now europe is falling behind and they're finally dealing with these things and the bad loans and dealing with a lot of the legal issues and i think we'll see a european bank structure in the next couple

years that will be much more competitive and dominant in their own region than they have een. david: are you confidence they have their arms around the problem? jay: if they don't get their arms around the problem someone else will. jonathan: coming up on the program, a conversation with the former president of south africa. that's coming up next. is it a reality check for the consensus trade? political risks fight back. from new york you're watching bloomberg. [ engine revs ]

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whoo! boom baby! rated pg-13. [ screams ] [ [ screams ] ] [ shouting ] brace yourself! this is crazy! [ tires screeching ] whoo! boom baby! rated pg-13. [ screams ] jonathan: from new york city, this is "bloomberg daybreak." let's get up to the markets. a real lack of price action if you're looking at the bench marks. futures go nowhere and positive eight points on the dow, not even by a single point of the

speed-wp. looking -- s&p 500. treasuries are not changed. a big week ahead with fed minutes and payrolls on friday. 175,000 the median estimate at bloomberg so far. the euro is stable at a dollar and six cents. that's the story in the market. let's get you up to speed on what's making ed lines. emma: in the u.s. the president could act alone on the north korea threat if china refuses the pressure of kim jong-un's regime. if china won't solve the north korea problem, quote, we will. president trump meets this week with china's president jinping. u.k.'s refusal to negotiate a date for a referendum is untenable. the first minister spoke with anna edwards. >> i don't think the position of the prime minister which at the moment stands in the way of

the scottish parliament is sustainable but to discuss it with the u.k. government in a civil manner but the will of scottish parliament has to be and must be respected. emma: the british government said a second referendum is not up for discussion while the brexit process is ongoing. in south africa the pressure is building since the finance minister was fired and shook up the cabinet. the leader made the changes without consulting officials of his own party. now the speaker of south africa's parliament may have to discuss the issues. bloomberg, powered in more than 120 countries. this is blerk. jonathan: more on the political turmoil in south africa, joined by the former president of south africa. great to have you with us on the program. let's start with what investors are looking at.

jp morgan saying the s&p may cut south africa to junk in the coming days. give me a sense how important the investment grade credit ating is to your government. >> well, it's very important to the south african government in terms that they determine the premiums to be paid for loans. and overnment is in debt it costs quite a bit of money. so that's why it's important to to ensure that the agents can be assured. jonathan: the question i want to ask you is whether it's a catalyst for the current president who stepped down from office? is that that big a deal to the current government or something he can sidestep and continue? guest: you know, we don't have a presidential system where a

proportional representation of assistance which means that the president is elected by members of parliament. so it's still -- we'll see when the emotion of confidence is table as to how the thems of -- them% of parliament respond. alix: there's a potential for a no confidence vote and it's been blocked four times as well as a call for peace from mr. zuma. do you expect them to do this now or has the tide started to turn against him? guest: well, there are shifts that are not yet seismic shifts ut there are tremors that seem

to indicate where anything is possible when it is both of no confidence is stable. alix: do you think he should step down? guest: yes, i do believe, yes. alix: why? >> simply because the highest part of the land have judged him out of office and i think that in itself makes it difficult for him to command the kind of respect which would able to rally and unite the sections of the south african populations. david: if in fact mr. zuma were to tell down what would come after him and should investors be encouraged by what's in line? uest: yes, investors should be cottaged but obviously the members of parliament would elect the next president of the republic and plenty are left but it's important we elect

someone who is honest and offers integrity. david: are there specific individuals who can step in and are prepared and have the experience and know-how and expertise to run this economy more effectively than mr. zuma has done? guest: well, you know, the current president comes from the private sector and being a successful businessperson and he was general secretary of the biggest union in state africa, the national union of mine workers. and that's also been the secretary-general of the governing party. so he brings with him good experience. jonathan: thank you for your time. the former south african tlanthe. , kgalema mc

alix: if you look at foreigners buying into south africa they bought $835 million worth oftla bonds last week, jay. when you look at the relative value in the search for yield versus the political drama, is it just noise to you? >> yes, it is noise. the search continues and emerging markets offer yield, not only south africa but the broader merging markets, bond index and the dollar, yields over 5.5% and in a yield where the treasury yield is 2.3, that's compelling. emerging market have been the epicenter of the anti-trump trade. the trade in the first quarter was to buy all the countries that president trump on the campaign trail bashed, buy mexico, up 16%, buy china, 16% and emerging markets, 12%. that was the trade it is tougher to make the trade but investors will continue to buy any pullback in emerging markets. alix: there's a distinction doing it between of -- because

of the fed or the growth or good stuff in the emerging markets, so the white line is the surprising index for emerging markets and the blue line is the emerging market index. the surprise index has started to roll over. what is fundamentals telling you? david: first you're talking about a lot of different companies but amerging markets are doing ok. i would agree absent a shock or a gig overshooting in the, they'll probably do fine. the fed will go slowly and that's good news and the commodities are relatively stable, that's good news. so the fundamental backdrop is fine and the local economy is picking up. he index rolls over. if it didn't roll over we wouldn't be doing our job so eventually expectations get too high. jonathan: to alix's point is the optimism and you need the upside to price more optimism.

is it all priced in if the analysts are catching up, the investors as well? jay: i think that's a great point and in mexico where i was bullish the end of the year i would be taking profits. take some money off the table. if you were smart enough to get in early, i think you take profits. other places such as china, for example, you continue to buy and any weakness coming out of the summit this week i think i'm a buyer of chinese equities, for example. david: you made the crucial point, in dollar terms, not the carry trade of what happens but also what happens to the f.x. you take on risk does it give you some pause? jay: i want to get paid. you look specifically country by country and that's another important point, david. emerging markets now up 12% in the first quarter and equity terms, not just a blanket trade. don't simply buy e.m. now you have to be more specific and focus on, as you

said, alex, one of the fundamentals and in cases like china there are good fundamentals and cases like mexico the fundamentals are getting better but the price has gone ahead of the fundamentals. up 20%, i'm taking profit. alix: seven countries defaulted in nine bonds in 2017 so far. this is enormous. do you feel investors are being compensated for enough risk when you have the default level picks up in china? ray: the economy is stable. we've had a preslow down from the 10% clothe gays but stabilized it, 6% plus the g.d.p. growth. think do china is a lot of problems, they're very high def. and china has to come to terms. but when you're talking about trade the next year or two, it eels ok to me. jay: i would say defaults are a good thing and showing finally

china is allowing market discipline in the financial markets and there needs to be more of that. the point about china is it's denominated in local currency for the most part and held by local institutions and therefore they control it. the problem in emerging markets when you have big crises is when the debt is denominated in another currency david was talking about as you had in latin america in the 1990's and asia in the late 1990's. that's when you have problems. in china the debt is by local currency heldly local institutions. david: that's the dollar estimated debt by e.u. economies. how successful does that make to a stronger dollar because at some point it puts pressure on the companies. jay: that was the fear the turn of the year when president trump was inaugurated. the fear was the economy was going to rocket and rates spike and the dollar get stronger and e.m. was going to sell off and none of that happened. so in fact you have to really question particularly given the lack of success in policymaking terms so far in the trump

administration the likelihood of stronger growth and a stronger dollar. that now is being faded and i think it's appropriate. look, we're almost at the end of the first hundred days of the trump administration and what we're talking about is not wins in terms of policy success but about averting a government shutdown. that's not success and like bare minimum survival. so i think from a market perspective as long as rates don't go higher the dollar is not going higher and e.m. debt is fine. jonathan: many thanks to both guests. now coming up, david boies will be here to discuss the gorsuch nomination to the supreme court and what the trump administration will mean for business law more broadly. this is bloomberg.

alix: coming up, oppenheimer funds portfolio manager joins us at 9:00 a.m. eastern time. emma: i'm emma with your bloomberg flash. there is talk oil is rebalancing the markets. six members of the cartel called for production cuts to be extended beyond june. credit swiss said it has viewer tolerance with tax evasion. it was surprised by the money laundrying investigation and paid for advertisements in the u.k., credit swiss terminated relationships to clients who can't moved they paid their taxes. google is changing ad policies again to try to end a crisis. a number of big advertisers quit spending on youtube after

ads were highlighted running alongside hate and violence ads. they expanded their definition of content and will let outside firms verify quality standards. that's the bloomberg business flash. alix? alix: we'll be joined if an interview discussing all things distress. eric? eric: i'm here with jason, the top performing fund manager with returns of almost 39%. he is a distressed debt investors. jateson, good morning. jason: good morning. eric: i'd like to start with the industry many see as the new poster child for distressed debt and that's retail. give me your sense of what's going on in retail right now. jayson: retail is a myth to say the least. from a 10,000 foot view, this trend, these retailers had declining top line for a number

of years now and this is not a cyclical issue. the economy has been good. consumer sentiment is good, unemployment is coming down, oil prices are low, this is a secular issue and a forever trend. you think about how things will look 10 years from now or 10 years from now, our parents will be dead and more will be shopping online and this is the amazon effect and here forever. from an opportunity set, to get these credits, they're trading in the distressed debt world at around six times cash flow and that's the multiple of a stable to growing business, not a declining business. we're not long on any of this. eric: they're overtraded? jason: three to four times. eric: you say "they" are those the ones people should be familiar with, the neiman-marcus, macy's, the list goes on among the large e

distressed credit. jason: most of the retailers are smaller but there are 50 companies that can file for bankruptcy. eric: 50 retailers? jayson: american apparel is gone, filed twice and is claire's.g, rue 21, if you want to talk about trade, the trade is the shortest sector but it's hard to short these credits. you can't short term loans and bonds trading at 50 cents can be cost prohibative to short because if you're borrowing the bonds you have to pay the coupon and the prime broke tore borrow the bonds. even if you could get comfortable with the expensive cost to carry it's a good risk reward and can't borrow enough even a firm our size and we manage $1.5 billion and to take a shore credit on rue 21 where

the bond trades five cents on the dollar is almost impossible. the only way to short the sector is through the larger liquid names you described. we short neiman-marcus because they have a active falsified arket. neiman-marcus has about $3 billion of term loan. that's the reference security for part of the default markets. you can short the term loan by buying insurance through the c.d.s. markets. so we shorted that cred anytime bond terms at around 115 and it's trading at 80 today. eric: what about the mall trade? eric: that's the second derivative and the answer to short retail thesis. if you talked to retailers a year ago, they had the same message, all our stores are profitable. it's a merchandising problem and we made bad decisions and

got the merchandise wrong and we were late to the e commerce game. if you talk to them today, they're all saying we need to shrink our footprint. it's amazing. i would describe it as a paradigm shift. even jcpenney in the fourth quarter were saying we're perfectly comfortable with our footprint and came out in january and said we're shutting 135 stores down and that's the beginning and they'll shut down at least another hundred. eric: the way to express that is through the c.d.s. market? jayson: when every retailer is looking at their footprint they have to pick which stores they'll shut down and they're looking at the same data and mall traffic data. if you have a turstein mall here and 10 miles down the street you have a t.n.a. mall, they're going through an exercise they're talking about sales recapture, we shut this mall down and this store down in this mall, how much of the sales will we recapture in the

tier a mall. tier c and d malls it crushes them when you have a mall anchored by macy, jcpenney and sears and they all simultaneously shut down. eric: how about energy, oil has been at $50 relatively speaking, what is left for a distress? jason: energy is exciting but a different trade today than it was two years ago. there are sort of two chapters to the story. the first leg of the trade was extreme price dislocation driven by forced selling. 17% of the high yield market was in energy and that was puked out. values have got completely dislocated from reality. it wasn't a bet on oil at all. these were multibillion dollar companies trading for a couple hundred million through the credit. >> that situation has more or less corrected. so now what do you do? jason: a lot of these credits

went through bankruptcy and restructured and came out as private companies. if you look where public comparables trade relative to the private post bankruptcy equities, there's a huge gap. i'll give 2000 examples. eric: in other words, the privates trade at a discount to the public? jason wirkse priorities should always trade as discounts but it's extremely -- it's extreme with commodities. the reason is the conspiracy theory on why that exists is equity investors tend to be much more optimistic than the credit guys. eric: they just want to be paid back. jason: we're worried how we get hurt and lose money and a lot of companies come out of bankruptcy and trade five or six times current cash flow and the equity markets are talking about recovery earnings, 2018, 2020 earnings and get an extreme gap. eric: how do you narrow the gap? jason: if you're a private company that just emerged from bankruptcy you can merge into one of these public companies or i.p.o.

two examples, 77 energy which was a large investment for us in the oil services industry, they came out of bankruptcy in august of last year at $15 a ebida. ich is six times and patterson u.t.i. at 20. what do you do, we were on the is e and sold and we told at batterton and it tripled in less than six months and that's a win and backward looking. eric: what looks good now? jason: sincora is a portion of the alpha natural which is a coal miner and came out of bankruptcy last year when the stock traded at $65 a share, 2.8 times 2017 ebitda. there's a private company and there's a ticker and you follow it on bloomberg but it's

private. the closest competitor that emerged from bankruptcy and i would argue is depressed because it's a post bankruptcy is arch coal and traded 2.4 times this year's ebitda. that is worth $50 a share. that $65 stock, if they were to share themselves or go public could trade at $110 a share if it got the multiple they're anticipating and they are similar businesses. eric: great insight from the number one performing distressed debt manager of 2016. alex jason mudrick. alix: for those of you on the bloomberg, join eric and jason for a q&a on your terminal for that. this is bloomberg.

jonathan: from new york city and worldwide, the state of the markets monday morning look

like this, futures are very stable after the best week of gain since february and the biggest quarterly gain since the s&p 500. alix: estimates are beat in the first quarter for tesla. the goal is 50,000 deliveries. the company is building model 3 versions and the cheaper ones later on this year. that's a nice boost there in premarket. john? jonathan: let's set you up for q-2. we'll be joined from a representative from oppenheimer funds this monday morning with a big week ahead. you're watching bloomberg. .

jon: setting the stage for a meeting this week, president

trump says the u.s. could act alone to address north korea. down itsales -- scaled bond buying process, saying it is not the beginning of the end despite an improving euro zone economy. following the big quarter for bm, the rands tumbles 46 days. for six days. i am jonathan ferro alongside david westin and alix steel. we are kicking off q2. futures unchanged. the euro unchanged. treasuries for the market yields lower by a single basis point. alix: a little bit of action for you. sterling weaker on the day, u.k. manufacturing coming a little bit soft. four basis points at the ecb steps back into the bond market. gold relatively flat, oil on hope, over $50 a barrel. jon: the big event for this week is xi jinping coming to visit

mar-a-lago. coming to visit mar-a-lago -- who thought that was going to happen? david: it is a good question. does the gulf? abe golfs? alix: golfing is important. david: to set up this big meeting in mar-a-lago, is our chief washington correspondent kevin cirilli. what are we looking forward to when the summit happens this week? >> trade and foreign policy. in an interview with the president -- with the financial times, president trump says if china would get tough on north korea than the u.s. will have to do it themselves. that is the backdrop for all of this because not just north korea and south korea remember what happened with taiwan and president fronts wrangling with them during the transition period. on these you of trade this is a president who has said that

china was a "currency manipulator." but he has backed off on that somewhat. with these you of trade he feels that china has taken advantage of the united states and whether or not the chinese will be reciprocating -- will accept that message, we will have to see. david: but in fairness, other parent -- other president have gone after china on north korea and trade as well and haven't had that much excess. why is this president going to have more success? >> i am not sure that he will and we are going to have to wait and see. in terms of whether or not this summit comes at a time when xi is facing political pressure on many fronts, not only from democrats looking into the russia investigation on the campaign trail but also from republicans who are not only raising their questions that are serious questions, but also on the issue of policy. i think that whether or not he can prove to his party that he can be tough on china, for fill

those campaign thomas is, all eyes are going to be on him. david: thank you so much, kevin. alix: in an interview with the financial times, president trump commented on how he would bring the trade surplus down by telling china that we cannot continue to trade if we have an unfair deal like we have right now. i don't want to talk about terrorist yet but when you talk about the currency regulation, when you talk about devaluations they are world champions. coming up now is megan greene, chief strategist. look athen i take a that quote it says to me we are still going to talk about you as currency regulators. tariffs are off the table for now. is this a bargaining chip? >> it may be but if you want to talk about china being a currency manipulator, you don't have the data to back it up. china has been manipulating its currency upwards and downwards and if you look over the past 10 years you haven't really been able to make the argument that

china is a current unit later. so you might be using this as a negotiating tip but they are not really going to feel the argument. david: we talked about literally versus seriously. whether we may be taking it too in fact president trump is pointing at something, that it is a state-controlled economy which also has distortions. forget about the currency being manipulative. a lot of things are going on. >> from certainly doesn't like our trade balance with china. that will have to shift. it could come down over the past decade, but that is an issue. something that the white house will try to address, hopefully with tax reform. alix: we talked earlier in the program about what president xi can offer. are we looking at buying more u.s. goods? what is specifically on the table? >> i think it is going to have

to be something that china can be accused of dumping. i think they are probably going to go the route -- washington will go the route of looking at specific projects in specific reasons -- regions. tit for tat, we don't want to get into a trade war of any style with china because the truth is everything in the markets is getting to the point where it involves around the u.s. and china. the u.s. needs china as an ally. jon: what does success look like on friday and what does he learn from the chancellor visit several weeks ago? success is some kind of statement about trade. that will be a measure of success. what did he learn from merkel's visit? that interpersonal relation matters. xi dozen fact that play golf might be an issue. jon: every takeaway so far has been of style. no handshake with the chancellor, holding the prime ministers hand. how can he get us on the substance and get the wider

media out on the financial news. >> this meeting is the biggest one that trump has had in mar-a-lago. so just the fact that it is china might help the media interest. 's hand?shake xi we will see how it goes. david: by all accounts, president xi pressed for the meeting. what is he trying to accomplish? >> i think it all comes back to the fact that the coordinated global economy is good for everyone. it is good for china and great for the u.s. and we are starting to see that. politics aside, i know it is very important. nominal growth is picking up. that is underpinning a lot of the rallies you are seeing and a lot of the risk on sentiment. we are expecting some good things from washington and hoping to see that but a lot of the equity markets, for example, is based on fundamentals and earnings and not necessarily the noise in washington. david: other things that present

could come up with to help donald trump here >>? i am not certain. we have to see how to meeting those, like you mentioned. the gulf, the handshake. it is too early. biguickly, we do have the heart conference later this year. i don't think we could expect much out of china to change for that conference. >> what i find interesting is that u.s. farm exports are on a record export in china. the rust belt did vote for president trump. is there a fine line that president trump has to walk? >> i think by the time people understand where specific exports are going we will already have a deal. for trump tosier push a simplistic message rather than to think about the invocations for every state.

david: who is setting china trade policy right now? apart from the president himself? different people in the white house have expressed very different points of view, peter navarro versus gary cohen for example. >> it hasn't really reach the market yet who is setting what policies. i can think of something along , we have of tax reform heard different policies from different parties and it is too early to tell. the markets pricing in the best case scenario for everything, something we are a little cautious about, we would expect a bit of volatility and a bit of unease as things may be worked out. perhaps not how we are david: expecting them to. thank you very much, they are both going to be thing with us. coming up, super lawyer david is talking about the supreme court nomination, what the consequences could be for business and how he expects the trump administration to change the rule of law in country. this is bloomberg. ♪

>> this is bloomberg daybreak. i am emma chandra with your business flash. car companies are reporting u.s. sales will much today. -- for march today. thomas 5% increase. 17%. sales fell sales for the honda accord were down 12%. european union investigation into mcdonald's is entering its final stages. according to people familiar, officials have been gathering information on whether mcdonald's unfairly benefited from a big tax break in luxembourg. the ruling is inspected before august. canada's -- is bowing to widespread indignation. they delayed compensation plans or its six most highly paid officials until 2020. with public anger in quebec raise compensation

50% and received a billion dollars in taxpayer aid and announced plans to cut 14,000 jobs. that is your business flash. i'm emma chandra. jon: for the ecb, rhetoric has been decidedly dovish. joinxecutive board member the chorus, deciding with policymakers. samantha azzarello is still with us. one thought is the data is good. we should have a -40 basis points. the other is good. don't do anything silly here. where do you stand? >> to the same degree we are seeing in the u.s. there is a difference between hard and soft data and the soft data is looking great. the hard data is only starting to come in. in terms of inflation, any acceleration we have seen has clearly been driven by energy costs since dropping out now. the data doesn't look fabulous.

aet has beenr pr leading the chorus. this kind of a cannot last forever. the markets financial conditions make it harder for them to actually make the hike. jon: what are the consequences of maintaining this aggressive monetary stance? back from eight to 60 but it is still 60 billion months and we still have a deeply negative deposit. >> the negative deposit rate is hurting banks. that is hurting lending data. it has been looking better in .he eurozone than in the u.s. but in terms of actually buying up all these bonds, it is certainly creating distortions. particularly in the sovereign debt market. are incredibly low, but not much of a spread between countries that might look a little dicey. jon: who is looking dicey? >> italy comes to mind.

year,ly a the end of this they have issues with their banking sector but there was a lot of political risk. , it isitalian 10 year smaller than it otherwise be without ecb support. david: investors put one and a half million dollars into stock funds. how much of that is based on ecb that might pare back? is fundamental? it is not dependent on the ecb. >> europe has been lagging the u.s.. they have a lot more runway and we still like u.s. equities but we still acknowledge the fact that they are above fair value whereas european equities are not. the earnings uptick has not come through yet. we are expecting it to come in this year. we know if you look at previous cycles, historically, latest changes in the cycle, development it -- developed market equities tend to outperform. we forget that because u.s.

equities have been on the tear. i have been more loved by investors. alix: where you see the survey data good but the real data -- eh -- with the overwhelmingly bullish paw. we have had it in the u.s.. -- in the u.s. init might get stronger assets, but the u.s. might be overvalued. europe, not so much. risk,ms of political given they were connected so much this year, we could end up this year with everything being the status quo. david: so at what point do we have to get concerned about this difference between soft data and hard data? we have seen it both in europe and the united states. it is prolonged for sometimes -- for some time. >> i would put it in the fall. in surge in data we saw january. some analysts are saying that is a bad indicator, that we had in hard data a u.s. take up with

the extent of soft data. we don't really know how to model off of it, how to put it into an excel spreadsheet. >> is it starting to deliver on those promises? >> we often forget that the u.s. expansion has been a really stable friend, operating in the background. it has been unloved because it has been slower and it has been unloved because it is slightly inconsistent geographically. really stable. that has been able surf for the equity market in itself. there is a risk that we don't get the growth that everybody is hoping for but even the status quo would be enough. jon: we are inspecting his brees -- a squeeze. left, french goes to the asset management rose over the weekend. i will give you an outcome and then we will get the expected price reaction. the outcome would be deeply negative. everything bounces back.

then i give you the president trump election. the price reaction, you would expect with everything to roll over. i give you another one. the outcome of health care failing. the reaction everywhere expected, things rollover. so we go into another one, where the outcome everyone expects right now is the french election and emmanuel macron. then you get a big squeeze in europe. are we going to see this disconnect in outcome and expected price reaction? >> we may do that. in terms of the back of a macron election, that is broadly positive. if macron wins. we have the alternative which is a le pen reaction which we would -- jon: the expected reaction is set up for a positive outcome in the sense of emmanuel macron. recoveredigher, euros . why would it play out that way? >> because investors are really

focused on the french election given that they could potentially pose an existential threat to the european budget. i think there is a lot of money that is waiting and we will come in off the sidelines of the french election. >> how would that have been different in all of these scenarios? like a brexit for president trump? >> possibly, but also because the french elections really do represent an existential threat in france if they choose to have le pen as president, chooses to leave the eu. there is a much bigger market event in the u.k. deciding to leave the eu. alix: that is samantha azzarello of j.p. morgan and megan greene is staying with us. oppenheimer funds portfolio manager will be joining us. plus, u.s. equities strategist on positioning here. in the second quarter. we will be joining. this is bloomberg. ♪

>> a killer quarter for u.s. investment grade issuance. new issues for more than $450 million in the first quarter. trumping the previous record in 2009. running is in new york is hans mikkelsen, head of u.s. investment strategy at bank of america. does that issuance surge continue? >> i think it does not. a little issues being bit faster in the beginning of the year and i think this year the number of reasons why you have seen a little bit more has been normal. the number one reason is federal companies expected higher interest rates so they wanted to grow early. some wanted to growth ahead of basically inauguration day. in the near term you have seen a that arepply companies hoping the interests built together and were grandfathered into tax reform. i think those impacts are going to be behind us. we see them slowdown.

>> that is the supply equation but demand is also being killer. influences into ig debt, a huge info that we saw in the first quarter especially in march in particular. the supply was there but the demand is also there as the search continued. demand was an issue. >> one of the reasons you are getting a lot of supply is there is a lot of demand. if you look at investment grade bonds, we estimate that we have seen about $80 billion in inflow. that is $66 billion more than last year. that is a bigger increase in the increase in supply and that is how you basically come in in the beginning of the year. jon: so hyped high as well. -- hike high as well. is that quality? >> as interest rates grow up, you should expect to see basically them moving up in credit quality. it could hurt some rates for

yield asset class. i think investment is in the right spot. we already have a lot of money coming in from below. >> demand did exist, with this wall of supply in q1 -- >> for the long. of time, you have had a bomb flow into the market because of a lack of esp globally. that is the u.s. investment rate. jon: the question over the last several weeks, a good deal of companies come to markets with low rates but not much longer. >> i think right now, obviously, the company's are it. a lot of them have opportunities in the room markets. i wouldn't call it a bubble but it spreads. not because of valuation. alix: are you on fundamentals or technicals? oni am bullish for most

technicals. that is 95% of the story basically. we are also beginning to see fundamentals turning around. alix: let's talk about the potential technicals. getting money from overseas, you are going to need to borrow in the debt market. another is former tax rates. the other one is m&a. how are we going to see the big issuance? >> i think we have seen the big issue in volumes -- issuance volumes slowing down by now. on tax reform, given that you're are going to see a lowering of the corporate tax rate, and maybe even illumination of interest, i think companies will basically deliver. and so, it is going to become relatively smaller overtime. david: let's assume for the moment, that that interest rate reduction changes. we met with expense in. which gives you incentive for more money in. x. in cap

>> we don't have the details on what they are going to be. so we don't know if lack of interest comes with the ability to expand rights. those are the details we will learn. david: with that possibly keep up the supply of ig? they are going to want to be to expense all of that. >> that is going to limit how much survival declines in the short-term. alix: what about the big issuance? verizon, at&t, big guys making big deals in the market. can we still keep that? >> i think one of the key features last year was the related supplier that came to the markets. this year, basically don't have the pipeline. the pipeline right now is less than half the size of what it was a year ago. companies looking at with higher leverage. a lot of people say, no thank

you. step back. >> these are the companies that will be incentivized to reduce debts. jon: where did you see that? which sectors? >> for example, telecom. alix: technicals are really going to outperform. >> yes. hans mikkelsen, great to have you on the program. reports over in russia that 10 are dead in a metro blast. it is according to a report by identified sources. on casualties in the blast, seven stations closed on the cities -- on the city's subway network. you are watching bloomberg. ♪

jon: from new york city, this is bloomberg daybreak. let's get you up to speed on the market action. one hour 21 seconds away from the cash open. futures firmer on the market.

500, after the biggest week of gains since february of this quarter. switch up the board a little bit. payroll is in focus. 175,000 is the median estimate in the bloomberg survey. unchanged on the morning. the euro with a little bit of a up.p hire the manufacturing pmi the best since 2011. that is your final reading. that's the situation across assets. let's get you on the headlines. here is emma chandra. >> in st. petersburg in russia there has been an explosion on the subway system. the news agency posted a police force and said 10 people have been killed. there has been no further confirmation of casualty numbers. the death toll from a flood in southern colombia has climbed to 200 as hundreds more are missing or injured. heavy rain caused three rivers to overflow friday night, sending a torrent through the streets.

in europe, nicholas surgeon says the uk's refusal to negotiate a new refusal referendum is untenable. >> i don't think the position of the prime minister which at the moment appears to be to stand in the way of the will of the scottish parliament is a sustainable one. but i will seek to discuss this with the u.k. government in a constructive manner. my view is clear. the will of the scottish parliament has to be respected. >> the british government has said that a second scottish referendum is not up for discussion while the brexit process is ongoing. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. david: overhanging the chinese summit this week in florida and capitol hill on the supreme court, is work being done back at the white house on that tax plan? joining us now, ethan pollack of the future of work initiative.

still in new york is megan greene. let me start with you in washington. where are things on the tax plan? in the weeke source and perhaps the trumpet ministration would try to reach out to democrats by attacking -- by tying taxes into infrastructure. >> that is one of the things they are talking about. tax reform is going to be very difficult. the last time that tax reform was done was 1986. what that means is the tax code we have today was designed for an economy that existed over 30 years ago. as you know, with waves of technology, trade, automation, they have really changed the structure of the economy and in particular, the types of jobs that are available for american workers. i think that this is going to be a big list on the part of the democrats and the republicans in congress.

david: one of the things people talk about his 1986. the last time there was for the mental tax reform, under the reagan administration -- people are quick to point out that it 1981.86, not quite how fast could the trumpet ministration move fundamental tax reform? >> i think it is going to be a slow process. i think what you saw with the health care bill was that this process matters, input matters on going through a lot of the normal procedures. it is something a lot of policymakers appreciate. they were elected to represent their constituents and participate in this policymaking process. i think it is going to be really hard, especially given the challenges that face is tax reform -- that face tax reform. for the 21st century economy we have today, and not to have the economy that existed a century ago. from david kelly of

jpmorgan, he says gridlock is going to be good because you will not get the blowout deficit you might have gotten if you got the infrastructure plan. is there a thesis to be made around that? >> in the medium to long term, but in the short term investors won't be sympathetic to that at all. we saw when the health care bill was pulled the markets went up but it was largely because they were thinking, great, now it is to tax reform. terms the longer term, in of worrying about the fiscal dynamic that makes some sense. jon: how much time do you think markets will give president trump in the white house? guess thecan inflection point when markets decide to pick it in and maybe not release. alix: they even started to roll over a little bit, not keeping pace with a pce inflation. the 10 year yield rolling over as well, you are starting to see it. >> i think probably going into the august recess we will have a lot more information about what

the government is able to achieve by then. for the midterm elections and experiences, what we see before then would be very difficult. jon: we have seen signs of it already. in the first quarter, it was the anti-trump trade. then for the first quarter, banks opposed the charter of the trump trade. i think the headline numbers are little bit deceiving. you see the rally but underneath, on the second location basis, it is bearish. >> and pulling the health care bill certainly started that. the markets are probably most excited about tax reform and deregulation. in those two debates, as they progress, the markets will adjust. david: so ethan, give us your best case for the trump administration. you say it will take a long time. is there a tax reform light that might get through more quickly?

>> that is a great question. i think there is something that policymakers can unite around and that is a lot of the same concerns that were highlighted in the last election. what is going on in the economy? in particular with workers and outsourcing the traditional stable worker relationships. when you look at tax reform, i think one of the areas they can unite around is how can you create a tax code that really encourages investment not just in physical capital. not just in plant and equipment but also in human capital and american worker. how can we change those declining trajectories and provide training and make sure the american workforce is the most productive in the world? david: isn't pollack of the future of work initiative. megan greene will be staying with us. jon: you think it could just get them like that. everything counts. can you get p.a.t. through? probably not.

alix: democrats wanted to do that under the obama administration. alix: it doesn't matter if the corporate tax rate is 50 or 20%. just the fact that you get it done is all the markets are going to care about. currently that is not the case. >> every but he is happy, right? jon: when they all go to buy -- i'mhat will really being super sarcastic. africa, pressure building on the president after he shook up the rest of his cabinet. earlier we spoke with former south african president on what he thinks should be his next move. >> the highest court in the land has judged him to have breached his oath of office and i think that, in its self, makes it difficult for him to command the title -- the kind of respect

which would be able to rally and the various sections of the population. >> joining us now is our south african reporter. much pressure is on the president to step aside? >> the pressure does seem to be mounting. we have just had newsbreak stating that the ethics theyttee has said that presented it to the party's secretary-general, saying that they would like the president to come before them and calling for .resident jacob zuma to resign they will meet the top officials of the party and possibly the president himself next week and they will formally asked him to resign. it is pressure within the actual ruling party for him to step down. africa'smay cut south in the coming days. from an outsider's perspective,

on the perspective of a market .articipant that is significant within south africa, is it significant at all? it is extremely significant. we know the former finance minister was fired last week. governmentntain with and labor and business all the way to the u.s. and as well as london to make sure that he engaged with investors and he engaged to stave off a possible downgrade. acting mayhis abrupt have caused concern in the markets not only on that but also for the agencies. we are waiting to see what s&p may say. desk for president jacob zuma's cabinet reshuffle next week. it is critical for the country going forward. jon: thank you very much, live from johannesburg. still with us, megan greene. top-down favorable

forces. treasuries stable, a dollar weaker. the fundamentals improving on the ground in countries like south africa. the politics, not so much. that is just what you get, isn't it? >> to a certain degree. there is a lot of political instability although there is a lot in the developed world these days as well. alix: what about the actual financials? global growtht and reflation trade. our emerging markets backing up in developed markets? >> emerging markets are in a better position than they were a decade ago in terms of foreign exchange reserves and account balances. the idea that we might eventually run into another emerging market crisis is much less likely now than it has been in the past. for the metals are backing that up. david: thanks for joining us today. coming up next, he has litigated some of the biggest court cases of his generation. boid

>> this is bloomberg daybreak. i am emma chandra. coming up in the next hour, alessio de longis from oppenheimer funds on where he is seeing market risks and market rewards. david: this is bloomberg. i am david westin. the senate judiciary committee will today send judge neil gorsuch's name to the senate. publicans either have to come up with the 60 votes for confirmation or exercise the so-called nuclear option and

change the way the senate does it business. knows the business like no one else. centerhe has been at the of more cases than anyone you can name. anyone from preventatives of the united states government to vice president gore in the infamous election, totial successfully challenging california's ban on same-sex marriage in the supreme court. welcome to the program. let's start with neil gorsuch. you have argued before him. if you are running a business, or if you are a leader on wall street, why did you care whether neil gorsuch is on the court or not? >> one of the reasons you care is because more and more cases are going to the supreme court. not just on constitutional issues but on statutory interpretation issues. one of the things you are looking for is what is the court going to be doing on issues involving the regulation of business? one of the things that happened

starting in the depression with franklin roosevelt is more and more power to regulate the economy was given to administrative agencies. that has been cut back a little bit over time. the real question is, how much is that going to be cut back in the future? i think if you are looking judges like judge gorsuch and others on the court, it would be how much leeway they are prepared to continue to give it ministry of agencies in terms of control on the economy. david: there was a day when they were presented big companies and new the ins and outs. my old boss spent an entire career resenting companies. we don't have much of that in the court now. do these judges understand the way business works? >> i am concerned about that. i think we have gotten away from having people on the court who actually practice law and represented businesses and individuals for most of their career. some people on the court have done some practice but

predominantly they have been in academic life, government life, on the bench. those are important qualifications but i would like to see some people like powell, who brought to the court a perspective on the way businesses operate. david: coming back to gorsuch because he is up for a vote today, is there any question in your mind he is qualified? is there any question in your mind? >> there is no question the that thisn the world is an extremely qualified person. he is intelligent, work hard, person of enormous integrity, great judicial temperament. the problem is that if that was enough to get on the supreme court there wouldn't be a vacancy. merrick garland would already be on the supreme court. one of the issues that the senate has to face is what really are the criteria for putting somebody on the court who has been nominated by the president. i think we got off track with merrick garland and i think one

of the issues is that if only republicans are going to play one way and democrats play a different way, you're getting an unbalanced court. i think one of the things they are trying to wrestle with is you've got a very qualified candidate here. on the other hand, you got a starting a long time before -- but empathized -- emphasize with garlands, it is not just how qualified some but he is. david: but is there a larger implication if they support judge gorsuch and go nuclear, is that likely to lead to a more partisan supreme court? you've got 51-49 judges so they don't have the broad support we have historically expected? >> i am not a big fan of the 60 vote requirement, however when you are dealing with the supreme court, dealing with somebody who is going to be on for life maybe

30 or 40 years, you want to have somebody that represents a broad consensus. the 60 vote requirement plays a role in making sure that you don't get people on the court that are 51 to 49 in terms of approval or that you have that kind of divisiveness. the last few judges have had 60 votes. i think that is important to the court. on the other hand, if they do go nuclear, that is a rule that in a lot of respects has held back progress. if you eliminate the requirement generally, in the long run, that is probably not a bad thing. david: you have litigated on behalf of the u.s. government. and you have litigated against the u.s. government. if you look at the trump administration more broadly now and how they approach the law, what changes do you see it you have to take into account when you represent your clients? >> one of the things we don't know yet is how is the trump

administration going to enforce existing law? what you have seen is the administration cutting back on regulation in the areas that it has the power to do by executive order. that is important. but what you don't know is what approach they are going to take to actually administering the existing law. that is going to be challenged in the court one way or another. that is something that, in terms of the freedom of the administration to act, they've got substantial freedom but it is going to be constrained more by the court. >> that has been raised in a very specific incidents. -- specific instance. when you have a president versus a candidate. but speaking out on the antitrust accents -- aspects of a merger, which i don't member happening for a president. >> if it ever did happen it certainly would be very unusual. i think nexen got in some trouble in terms of a couple of mergers.

david: exactly. >> i think it is unusual for a president to act that way. we generally leave that to the antitrust division and maybe the attorney general. on the other hand i think one of the things that the trump administration is signaling is that it is going to take may a different approach to antitrust been taken inve the prior administration. it is not just the obama administration but the republican and democratic administrations. david: if you see a possible retrenchment at the federal level, what does it mean for state attorney general's? you just settled a big case involving eric schneiderman in new york. do you expect state attorney generals to be more aggressive? >> i think you will see that. i think one of the issues that you are going to face is that we have had a national regulation of things like securities laws and uniform national regulations

are very important in certain areas. i think there is room and it is desirable for state attorney general to step up in some respect but at the same time, you've got to be concerned that you don't fragment business regulations in areas which need uniformity. david: was that a problem? >> that was one of the problems of the greenberg case where you had new york applying math in a way inconsistent with federal security laws. you had one for new york and one for the rest of the country. david: thank you so much for being here. that is david boise, founder of the law firm. alix: now you are geeking out over there. we got bloomberg terminal tax on tv . interact with us directly. you can send us a question in the middle of the segment and we will ask the guests for you. type tv on your terminal. this is bloomberg. ♪

jon: from new york city, this is bloomberg daybreak. let's get a check of the markets. a big week in terms of news flow with the president of the united states meeting the chinese leader on friday. payroll on friday as well. i all of this, the price action really good out there. 500bout 12 point on the s&p after the biggest week of gains since february. biggest quarter since the end of 2015. if you switch up the board, the euro this morning with a little bit of a squeeze off of the back of some strong pmi numbers in the eurozone. the strongest fraction is since 2011. of 1%.o about 1/10 treasuries very much on the margin with yields coming in about a basis point. there is your yield on a 10 year. crude as well, $50 and $.70. -- $50.70.

alix: talking about the rally in the bond markets, a huge rally if you have yields coming down by as much as four basis points. that winds up putting pressure on the banking stock. almost 2% off following suit as well. the bank index has been up as well in the last five weeks. we are in the beginning of the second quarter. we are beginning with some rebalancing as we head into earnings season. learning over the last few days, five countries are in an investigation now into the credit squeeze on their clients potentially voiding -- avoiding taxes. it is down about 1%. nonetheless, that whole pessimism weighing on the bank sector. uplett-packard enterprises by 1%. shareholders overwhelmingly supporting its merger to the a ce. that valued at about $10 billion. wrapping up with wynn resorts

topping 2%. macau market revenues are up 18% from last year. the best month for macau gambling in the last few years, highrollers or not. macau with 64% of revenues in the full year of 2016. that is a look at the movers in the market. we will have that micro and macro theme in the next hour. jon: up next, we get you setup for q2 with alessio de longis, as the ecb scales back to 60 billion euros. officials say this is not the beginning of the end. the conversation continues from new york. you are watching bloomberg. ♪

jon: setting the stage for a meeting with the chinese leader

this week. president trump says the u.s. could act alone to address north korea. bank of america says improving economic growth and global inflation have analysts the most bullish on local growth and profits in six years. political risk bites back. his 60 day as political drama in south africa continues to unfold. consensus trade under pressure. from new york, good morning. welcome to bloomberg daybreak. i am jonathan ferro alongside david westin and alix steel. futures go nowhere. up 12 points on the dow. a big quarter, we leave behind. the best quarter since the end of 2016. we kickoff q2 with a slightly lighter tone. almost everywhere. treasuries going nowhere. 239 is your yield on the u.s. 10 year. thereally see some with

manufacturing the highest since 2011. q moving over to alix steel. alix: pencil up over 3%. the first quarter deliverance up 25,000, beating estimates. that goal for the first half is coming in at 50,000. again we are seeing least hassle market -- leaves tesla market caps close to ford market caps. ford, six point 6 million, putting that into perspective. granite construction unchanged on the day but earlier this morning it was up 3%. neutral, it is upgrading because california's transportation bill could help restore the stock momentum. stocks got hit on infrastructure delays from the trump administration. orville is denying any planned acquisition of that takeover idea which first floated in a british tech blog. the register says that idea was

never considered. they also cut it from neutral over at goldman. david: joining us now for the latest out of washington, bloomberg's chief washington correspondent kevin cirilli. i should say washington and mar-a-lago because that is where the president is meeting with president xi. before he gets to meet with president xi? >> setting the stage in that interview with the financial times, he did have some top talk for china -- tough talk for china on their relationship with north korea. last week, let's not forget about that. it is a difficult conversation he has to have with the chinese when they had down to mar-a-lago thursday and friday of this week. but whether or not he is going to be able to find common ground on trade in the issue of currency manipulation, that remains to be seen. that is something that he has hammered home.

that is the broad issue for him on the campaign trail. whether or not they can find any common ground on trade agreements been currency, that is the number we are watching for. david: the last visitor we had was angela merkel. there was not a lot of a lot of common ground -- there was not an awful lot of common ground. >> if you look at these visits it is worth noting that the ones where they have success versus the ones where they haven't, with chancellor merkel in particular there was a lot of criticism that perhaps it didn't have the personal chemistry that political watchers and policymakers are serving during these visits. every photo matters. we should note that egyptian officials will be at the white house later today. he does have a busy week in terms of foreign leaders. a lot happening on capitol hill. let's not forget about neil gorsuch whose confirmation moves

into sentence today. david: if republicans can't get 50 votes, if they actually go nuclear and just put gorsuch over the top with 51 or 52, is there any chance that this resident will ever do anything with these democrats? >> no. should they do the nuclear option and go boom, then they will be able to essentially bypass all democrats because of majority.-- when they are looking to work with democrats it is going to be people like senator joe manchin. it will be on energy policy and cold. coal. jon: president trump still criticize the country's policy. "when you talk about currency manipulation and evaluations, they are world champions." joining us now is alessio de

longis, oppenheimer portfolio manager. we have the gary cohn's of this world, and the former president will be well aware that they are not manipulating the currency down at the moment. what is the objective? >> it is an excellent point. market participants are seeing them going, do you really want china to let go of the exchange rates? they get a lot weaker. the rhetoric really belongs to 10 years ago rather than today. i think the objective here is to bargainingion and power around other issues that we may not be even aware of. me, what really -- to could have negotiation powers is not really the story of the currency here but we know that there is, from other trade laws, other aspects of global trade that definitely, china could play a more fair game when we talk about environmental

regulation. when we talk about human rights. the laborlk about force. there is an unfair advantage if companies move from the developed world to the emerging world because they avoid the cost of more expensive regulation around certain things like these. i wonder if all of this is part of the large intricacies of trying to get other things done rather than the threat of wanting the currency. jon: i read a headline in the national newspaper this year which described a chinese commerce office building which had flowers on the outside and sticks inside. you know when they are going. say, the chinese and please, we are executing a fair free trade strategy, you are not. around everybody in the ministration, that is what is happening. a huge barrier point to entry. why are the chinese going to give up anything? what is in it for them?

the day, chinaf is largely very dependent on global trade and it is trying to move gradually away from that. stimulation of ongoingnsions and increases in pensions on the bilateral basis and the risk of direct ties, it disrupts the environment. also, rising global uncertainty around trade with a reduced level of -- actually with an increased level of uncertainty around global investment and global trade, and where these are going in a long-term. by reducing that global trade turnover china is one of the countries. agent is most loose. alix: we haven't talked about the political risk. how the rhetoric on friday will wind up impacting.

how do you wind up looking at that kind of rhetoric. >> it is an important question because these not only geopolitical risks but also risks on elections, all of these are permeating financial markets. a direct view on way weut they formed the point out tale hedging, planning for the unexpected and they never really go into isolation. it is really coming up with our own sickle views -- own cyclical views and geopolitical risks as well as valuations. the combination of these things really informs how much standing or how much pension and should we do around those core views. it is more of an art than a science that is how we systematically incorporate in our investment process. david: look at this from .resident xi's point of view

is this meeting and mar-a-lago important for what he is trying to a compass back home in china. important to talk about trade wars and that but for his point of view it is trying to keep the economy growing. he is trying to privatize, move away from state-owned industries. getthere things that he can that could help him at home? -- here you go to a president that has had a very harsh rhetoric against you and your country for a long time. resolutiont showing from this and the fact that you come out of these meetings without having conceded on any of these harsh rhetoric, it is a victory. for economies and political systems like in china, the signaling of the image of china being a big player on the stage,

bringing back that confidence that you don't come out of these meetings with the tail between your legs is a big accomplishment. a lot of the chinese growth really rests on that. alix: so here we are back to the golf game. is lookingident xi forward to a leadership review in the fall. is this even important to him? as opposed to what happens in the fall with his leadership? >> more the latter. i think these are just obstacles along the way that they need to navigate. getting into these events without any incident or without any major step back is really what allows you to get more important business. >> always fun to talk to you. alessio de longis is speaking with us. hasng up, economic growth analysts turning bullish on global prospects.

how earnings will stack up against the building momentum in em and europe. this is bloomberg. ♪

jon: from new york city to our viewers worldwide this is bloomberg daybreak. i am jonathan ferro. in the last hour and explosion rocks a subway station in the second largest city of st. petersburg. vocal prosecutors have confirmed the blast in the center of the city but have not yet confirmed the noble -- the number of casualties. running is now is bloomberg's moscow bureau chief. a sad tale of events in the last hour or so. can you give us an update on the details? >> yes. this attack in st. petersburg has killed at least 10 people.

the blast itself was confirmed by city officials. unfortunately, the number of dead as well is coming out. >> president clinton in the city of st. petersburg today. what is his response to the event? president clinton is aware that there is a blast in his hometown where he is holding meetings today. he has told law enforcement officials, security officials to investigate the blast, find the cause. he says it is too early to confirm what might be behind it. jon: we appreciate the update from you. we will hear much more throughout the programming on bloomberg television this morning. alix: analysts are turning bullish on global prospects. look at burning upgrades. for the first time in six years, this is according to bank of america. bank of america says typically you see in equity rally in the next 12 months.

revisions came from japan and the u.s., lower on the scale. here was this is alessio de longis, oppenheimer funds portfolio manager. where is that for the rest of the year? em hasink europe and more potential to surprise. we areu.s. i think starting to run the risk of disappointment. in the u.s. you are seeing an important difference between soft and hard data. summer, most last of the rebounding indicators in the u.s. which then lead earnings growth have really come more from the sentiment survey, business sentiment and consumer sentiment. but we have yet to see an income -- a pickup in the hard data now. disappointing that fact in reform, in health care in for health care to

be the building block of everything else, it is difficult to sustain private sector momentum without more fiscal expansion. outhe second quarter turns -- if the french elections turn out to be a nonevent from a risk standpoint you could really unleash a lot of demand in europe. jon: you're talking about a setback in hard data. vehicle sales down 7.2%, significant surprise. the estimate was down 5.9%. the report is slumping u.s. sales for passenger cars. the automakers under a little bit of pressure. alix: consumer consumption has really been in the auto sector. .hat has held up so well if this part of the economy rolls over, how do you keep those up? >> it has to be either external demand, let's remember that 40% -- 35 to 40% of the s&p comes from abroad.

emerging markets growth will also help u.s. companies. pointoint is an important . the business cycle is the most advanced. it is one of fiscal expansion of the at a unique stage plan. fiscal expansion is never going at this stage. this could have really push the cycle much longer and supported earnings growth. remember, the private sector continues to be on a moderate deleveraging situation. at this stage it is very difficult for me to see the private sector holding the earnings momentum by itself. we could go back to the situation we had in january of 2016 where the u.s. economy was slowing down. the private sector was not able to pull all of its strength and at the same time the fed wanted to raise rates. now, we know the fed has stepped up its rhetoric with respect to its hawkish values but without

fiscal support it is difficult for me to see the rate hikes. topou are talking about line only. that does not translate into earnings. you actually could be making more money selling that vehicle. could you keep demand going by other sorts of restructuring in your product. jon: the average transaction prices increased by $800. but underlining the numbers there is a story. but on the volume story it is going to be difficult compared to what they were delivering a year ago. >> not only that. we know labor costs are rising. that is the other important thing. price sales are one of the easiest -- one of the cleanest way to look at valuation. u.s. equity markets up 30%. alix: when does european equities start to outperform u.s. equities based on your evaluation? .> it has been a give and take

more recently it has started outperforming again, but i think if you go through without a french election -- without that risk materializing, you could have, i think, over the next 12 months, starting pretty much now , 12 months from now the european equities have outperformed. that is where we would believe we are in this cyclical spring. david: because of the political uncertainty -- we will get past that some point, presumably. on the equity market itself, it is more difficult to measure. also because it is not just taking in and out the french election results. there is also a lot of -- a lot pent-up that has yet to materialize. the cleanest way to look at it is look at french and german spreads and see that that is part of the discount factor and how much that risk premium is

built. spreadsa version of the , just 10 to 20 basis points or even less than that is what we would argue for had markets organized. in the equity market -- jon: there are going to be some people pushing back. it is probably the most artificial thing on the planet. what is happening in france currently and where the economy has been going -- >> artificial, yes, but enduring. jon: enduring is the key thing. is -- the ecb is now endogenous to that system. it has been enduring for a while. is goingssio de longis to be thing with us. stocks are coming off their best course 2015. next, we get the outlook of q2 as earnings and the drama's take center stage. that is all ahead right here.

this is bloomberg. ♪

jon: for the second quarter of 2017, bullish u.s. equities. check out this chart on the bloomberg. seven minutes away from the open. the top line, the white line, is the all country world excluding u.s. index. the s&p 500 is the blue. we want to bring in a less you longest. .- bring in alessio de longis the story of everything but u.s. and the u.s., i was told the u.s. is going to be the leader. that was the big story. we see the breakaway. what is behind that? the s&p was the leader in 2010. the market was ready for debt storing to start. then we have a surprise

election. what we talked about earlier, unexpected fiscal policy innovation that could keep the u.s. mentum going -- from going for much longer. what we are seeing is that that story, because of the disappointment on health care. valuations are playing an important headwind for this to continue. i think the only area of the world where you really reach evaluation and therefore, the lining up of sticking opportunities, both the medium and the long-term drivers of equity returns are in emerging markets. i think partially that is what the story is. david: this is fundamentally good news for investors in the sense that we get nervous the u.s. is driving the entire global economy. is this better? >> it is an excellent point.

this situation you just haveibed is also where we seen this workout for the last seven years. since 2010, the u.s. both economically and in terms of equity markets performance has done extremely well while emerging markets were underperforming and in a recession. if you judge the recession as growth potential. we have been able to have healthy global equity market ,erformance despite china brazil, mexico, all these countries. reality is the global business cycles, the regional business cycles have been de-synchronize for seven years. that is, to your point, where asset management comes in. harvestshere you have attracting diversification properties and taking the market as being long, it doesn't represent being long everything.

alix: so do you like south africa? >> it is an interesting point. is shock that we are seeing the political risk you see in emerging markets every time. but you are now paid to think that way. valuations are attractive. and the cyclical conditions are favorable. alix: you must really like the price. jon: alessio de longis of oppenheimer funds. great to have you. four minutes away from the opening bell. for q2 this week, futures positive, up 10 points on the dow. on the s&p 500, you are watching bloomberg. ♪

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the morning. treasuries unchanged, as well. the euro was a little bit of a swing higher. the manufacturing pmi comes in at the strongest since 2011. this morning, no cross-section whatsoever. let's get over to alix steel. alix: the futures market pause continues as the markets open. s&pmber some of the dow and are coming off their first down month. in individual names, we are

seeing a lot of action when it comes to tech suppliers, in particular apple suppliers. the news started earlier in the day. imagination technology down over 61%. fromts 62% of revenue apple. apple is now going in-house for graphics chips. semi falling over 2.28%. qualcomm is in a lawsuit with apple and down 0.08%. suppliers through the day. all morning, we have been talking about the reflation trade and how long does president trump have to deliver something like tax reform to the markets to keep them happy? graphican interesting from credit suisse. we can see they track each other mostly as they move.

the trump favorability rating has stalled out as you have treasuries and equities moving a little lower. you need to have something pick up in the trump administration to have yields pickup or equities pickup. this level we are in store for? shales --gm auto sales at 1.6%. the estimate was up 7%. far, like -- ford, light vehicle down 5.9%. a series of downside surprises for auto sales. joining us now for discussion is the credit suisse u.s. chief equity strategist. i want to begin with the chart that alix had. everything is flat and the united states. what do you make of that?

>> it has been all just one big trump trade since the election. you look at small cap versus large-cap, banks versus the markets, cyclical, they have all been moving in tandem with the approval ratings and they all kind of peaked out around the same time. jonathan: the headline numbers tell the same story. outperforming, -- outperforming. , it think tech got hit hard has been a crowded trade for a long time. i think you had a little bit of a reversion of that. alix: what is your take, chat? do we see the sectors shakeout? tod: our opinion is you want be more defensive now. you have been on a sugar high, the entire global financial markets. we would be moving up that

quality, we would look at consumer staples, we would look at some discretionary names, as well. we do believe that the fiscal stimulus program and the negotiations all get water down overall going forward. that is how we think it is going to land. we don't think there is going to be this huge keene's ian pushed where the deficit is going to -- push where the deficit is going to expand. alix: that is what i don't understand. they say the market is moving on underlying growth, and then on the flipside this morning, they say this is all president trump. we don't get it. how do you reconcile that? lori: i think it is all a question of your time horizon. we have a market trading on new flat washington. the context of not getting any answers anytime soon on big agenda items, i think you are vulnerable to the pullback. i think the bulls are

longer-term correct. economists are sanguine will have north of 2% gdp growth and they are not baking anything in from trump. this will probably be a pretty good buying opportunity. david: you like consumer facing stocks particularly. why are you betting on u.s. consumers? chad: we do believe they will get a tax break in 2018. we just don't think it is going to be as vibrant as everyone is considering. the other aspect of this is the leveraging schematic, that is reversing itself. you could look no further than mortgage debt. used to grow at 6% in good times. you are starting to see mortgage credit growth of 3% or 4% improving. we do believe the consumer is on firm footing. thatnly concern is valuations are extended, market

cap to gdp. everywhere you look, every credit spreads. do you really think the tax break is going to result in high spending? u.s. consumer got tax breaks if you years ago and they saved it. the savings rate is grinding higher, as well this year. we are not looking for this to be a huge gap in consumption, just another modicum in improvement in an incremental format. ofdo think that gdp growth 2%-two .5% in 2017 and 2018, but we don't think there is going to be runaway inflation, nor do we think that the federal reserve is going to be that aggressive in raising interest rates. what are the traits that are susceptible to a shakeout if

we don't get a big stimulus measure here? lori: i think the text trade is really over-owned. it does not matter what you are looking at. foras been very over-owned a while. over-ownedks look from a certain perspective. what we saw after the election is that mutual funds played a big push to get equal weight to sector. basically, if the banks to continue to run, the mutual fund community will continue. i think there is a debate on the banks. david: you could get some of the fiscal stimulus in ways that does not help the consumer. things like the border adjusted tax. does that affect your analysis? chad: i think the border adjustment tax will get water down if it does get through. if it does go through as proposed come you will have a massive increase in the u.s.

dollar. i don't think they have the nonetheless, i think that overall, the schematics are watered down. it is not going to be as huge as the market multiples are justifying the growth backdrop on the growth stuff. us get specific. what do you like? chad: dr pepper and jurrjens -- ergins. on the consumer discretionary brand, i do like nike and starbucks, those are two new ad portfolio.the alix: even though their future orders are rough? chad: we believe if you have a horizon,5 year time

they are consistently profitable and we believe the dividend is going to continue. jonathan: we have to leave it there. thank you so much for joining us. chad morganlander, you are going to be sticking with us. we are up almost 1% on the dow and the s&p 500. coming up, we talk about the $1 trillion u.s. auto debt market revenue little bit darker. the autoeans for sector and the related equities. you are watching bloomberg. ♪

emma: this is "bloomberg daybreak." ubs and deutsche bank. david: this is bloomberg. i'm david westin. fellcar and truck sales more than expected in march. gm auto sales beat expectations. joining us now is james albertine, coming to us from d.c. on the phone. take us through these numbers. , right that gm actually beat expectations? james: yes, we are. the numbers are hot off the press.

not all demand is created equal. there are certain technological advances that are new and differentiated. consumers are willing to pay full freight for those. there are differing levels of incentive activity. driver andare a big we think that is a fundamental underpinning of the retail weakness we have seen in prior months and continuing in march. david: i'm so happy you are on the phone because you can clarify this. on my bloomberg right now, it says that gm march u.s. auto sales are up 1.6%, but the estimate is seven percent. is this mistaken? , we need toly consider expectations for cars, trucks, retail, it is a little bit more complicated then an aggregate absolute number.

we are still going through the gm sales. broadly, suvs and trucks are in line or slightly head. cars were significantly below where the street was expecting. that is probably a country beating factor. david: which is terribly important because they make a lot more money on suv and trucks than they do out of the all cars. in terms of profit, this is a better story than numbers might indicate. it could be. we will get the incentive numbers as the day wears on. the larger question is about the stock price. it has been lower than what the ceo's thought it should have been because the market seems to be approaching a downturn. are they going to get to prove they can handle this? james: it is a great question, it is a difficult want to answer.

gm is doing well navigating a environment. i think investors are probably expecting a sharper decline and that is going to be driven by underperformance of residual values and not to get too complicated over the phone, but when residual values fall, oem's like gm have to make changes to leasing practices. lease payments will go up and that will hurt car sales and truck sales and we think that is the big issue people are waiting for. david: before i let you go, i want to talk about a different part of the auto force. tesla, their stock is up. how is that going? james: it is going very well. model x deliveries were 2500 -- wehigher than the estimated. demand is very strong for the higher-end teslas. we think the stock is a model three focused stock for this year and we have a few months

until we see whether or not they can hit their targets in terms of production starting and ramping over the back half of this year, but clearly a better number out of the higher-end tesla units in the first quarter. david: james, thanks a much were jumping on the phone. that is james albertine from consumer edge. is your market manufacturing pmi. the isn's of the manufacturing come a little later. david: now we talk about auto debt, not just auto sales. the clouds are auto debt are getting darker. delinquency is up. prices are coming down. witten --owicz has written a new colleague desk column. she is here along with chad morganlander. now it is starting to hit.

what is it doing to these leasing companies? lisa: some financing companies are getting into trouble, specifically the smaller ones that catered to the lowest subprime borrowers, the deep subprimes. almost one third of all subprime auto loans that have been bundled into securitization are considered deep subprime, that is up from 5% in 2010. to give you a in 90 how much the least credit worthy market has boomed. there are notg going to be that many losses for the investors. alix: the chrysler out with auto sales. down 5%. 0.7 5 -- 0.4%.be u.s. march auto sales falling 5% for fiat chrysler.

david: what about this problem, chad? could this spread into other parts of the economy? chad: we don't think it is systemic to the whole financial system, but nonetheless, the loosening of credit standards, obviously only within the auto industry and the commercial loan industry, is a concern for us over the next 18-24 months and that is the reason why you see high. spreads understand the difference between subprime auto and subprime mortgages, what is the biggest difference? lisa: the amount of money at stake. it is a much smaller amount of money at stake and a much smaller length of time at stake. you don't have 30-your auto loans, got for bid. [laughter] there is not this massive

derivative portfolio magnifying losses. that said, the real economic impact of this will affect specific consumers, particularly those on the lower income end of the spectrum because they are going to have to pay higher rates and this is going to lead to pain for them, maybe not the banks, but for them. jonathan: the repossession story, i'm sure, is very different, as well. [laughter] jonathan: chad, the opportunity for the investor connected to the situation. where does it live? chad: it certainly does not lie with the auto stocks. auto sales have been quite high because of cheap financing. as they tighten lending standards, that has a potential of rolling over. nonetheless, we do believe that promisingn will be over the course of the next 18 months. is it all played out yet?

started to play out? is it the beginning of the end of the trade? lisa: from what i hear, no, it really has a lot more to go because they're all these leases rolling off and resale values are going down. it will only can -- continue to go down as the year goes on. there was a big wave of leasing activity in 2014-2015, those are three terms, those will be coming up, that will depreciate the value. more supply, less demand, that will increase the hurt. chad: lisa is right, we are in the early innings of this. alix: guys, thank you very much. good to see you. if you have the bloomberg terminal, check out tv . on your terminal, you can ask a question in the middle of a segment. this is bloomberg. ♪

alix: we do have more breaking news from auto sales. toyota u.s. march auto sales down 2.1%. the estimate was down 1.2%. a little less bad. fiat struggling. march auto sales down 5%. gm, those auto sales were up 1.6%, but well below the expectation of a 7% increase. what price are they selling them at? if you want a discount to shrink the inventory, the profit sinks. that is what we will be watching. david: we are going to go to your favorite subject, college basketball. [laughter] david: brackets for a cause march madness charity is coming to a close. aga will face off against north carolina in the championship game. argue commissioner? >> absolutely. this is very exciting.

it has all come down to this. david: i'm not in it. michigan dropped out early. >> all the duke fans are gone. it comes down to a lot of private equity guys involved in this at the end. we have tony roessler if gonzaga wins. he would take the crown of it ares capital in los angeles. and jack bogle, of all places. he would have come from dead last to come in second would come in second if gonzaga wins. tom farley would come in third. if carolina wins and carolina was one of the favorites for our fetitta wouldilma tie with bill ford. then our own peter brower, unc alum i'm a would come in third. david: just remind us what happens if somebody wins. , theyh of the players

each pledged $10,000 and picked a charity. whoever wins, they're charity will get a substantial share of the pool. david: if there is a tie? >> if there is a tie -- this is breaking news -- if there is a tie, which there would be of carolina wins, bill ford and fertitta have agreed to split the number one and number two money evenly for the charities. david: who did particularly badly? [laughter] >> a good buddy of mine, joe , made some bad picks. he may end up as the cellar dweller. david: we will probably do it again next year. >> absolutely, but bigger and better. david: many thanks. jonathan: am i the only one who gas never met a gonza

graduate? alix: me. >> island of them because i went to a jesuit school. alix: that make sense. jonathan: let's get you up to speed on the markets. the cash open took us nowhere. the nasdaq hit a record high and it is on pace to close at an all-time record if we stay where we are in the current moment. payrolls and fed minutes ahead. the meeting of two presidents of the two largest economies in the world. the dollar flat against the euro. you are watching bloomberg ♪

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vonnie: we are going to take you from new york to london in the next hour with a couple of stories out of chicago. and south africa. we have some breaking economic data. >> the institute for supply management is out with this manufacturing number and coming in at 57.2, that is in line. a slight decline from 57.7 which was reported in february. ,icking up more than estimated reading at 70 and a half. new orders falling month over month to 64 and a half of this. showing someely relative strength regarding many factoring's. we are seeing the non- manufacturing numbers which is the larger part of the u.s.