buy the rumor, sell the news in the market, the euro drops from six month high against the dollar. verbal intervention index stability into crude. saudi arabia and russia signal the good extend production cuts. goodnew york city, morning, good morning. i'm jonathan ferro alongside david westin and alix steel. this is what it buys you, not a lot if you bring up the i can ws for you. equities are pretty firm in fact nowhere, $46 going and $.19. we are softer by half of 1%. >> a few deals to tell you about here. $18.50 a share. deal adding to

adjustment earnings. havee battle for strength top hundred $84 a share in at&t's bid and verizon's bid before. they have a huge spectrum. it is all about 5g for these players. jonathan: emmanuel macron scored a decisive victory over marine le pen. 60% of the over votes. , guyng us now from paris johnson. fantastic reporting yesterday. the job for emmanuel macron. talk to me about what he needs to achieve over the next month

to make sure he gets something out of those parliamentary elections. >> this is just one piece of the puzzle. presidency a major leap forward for him and his political ambition. it is only part of the journey. he needs to carry the momentum into the massive assembly. he needs to be able to deliver the policies he has talked about. i think it is going toi think ie interesting politically. the prime minister effectively is going to run the domestic agenda and people are talking about that he needs someone

little bit right-leaning. he needs to bring in some people from the right to be able to give himself that ability. it is all about momentum now. the job is done, but it is only half done. he needs to make sure the vote goes his way created jonathan: how does he determine what his mandate actually is? many people went the voting yesterday because they do not want to vote for the alternatives. where does the mandate come from? >> i think his mandate comes from the center to be honest. will find that mr. mellow show -- i think a comes from the sense of grouping. these mandates in the central

custer both left and right. you have to remedy 10.6 my people who voted for marine le pen yesterday. france -- big part of he needs to find a way to bring france together. he talks about europe and globalization. that is not going to regulate to those people. succeed, then 2022 isn't really far away. jonathan: he was also the former chairman of publicist live. >> thank you for having me. why can emmanuel

macron proved to be different as the president of france? >> i don't think we can compare them. emmanuel macron is a young talented man and he is not a political leader by carrier so he has nothing to lose. dohink today he will have to two jobs at the same time for the next six weeks. at the same time, he will have to make some quick winds to fix a very important issue. spending makes up a large proportion of that.

when they start striking, how does he react? >> france, people say it is always an unmanageable country. i know many of them are coming right and coming from the left. they decided to vote for him -- [no audio]

>> emmanuel macron has shown that they definitely wanted a change. they don't the old guard to be running the country again. prime minister trudeau is the leader who sent the most congratulations to emmanuel macron and this is how he is seen today.

he will know how to talk to the private sector enabled -- >> on the one hand, he says he and onform labor laws the other hand, he has unemployment under 20%. has the't think he magic solution, but he has to make some reforms which are needed for years. corporations need a cut on social tax. this is the only way to create jobs.

jonathan: can he afford to have increased employment for -- increased unemployment? >> i don't think so. he said if i'm not able to reduce the unemployment, i will this is what in has happened to him. the second round of the u.s. leadern was the only despite the big crisis and in weree all the others fired. most of them were unable to

reduce the unemployment. our member many of your inleagues were saying if obamaa we go under 8% would be reelected and it happened. >> i final word on le pen, he points out he cannot get this job quick enough. what is the potential that the national front comes through down to europe to >> you are making it very important point. this is not the defeat of populism and i hope the french and european people keep that in mind. populism is very solid.

think we should be super happy today. we should be realistic and pragmatic. we have one third of the french people who voted for marine le pen. why is huge and scary and we need all the people in france to be the first ones to support -- the unions should be the le pen.es to support i think this is a very point to keep in mind. this is why the roadmap of is huge.macron president trump is going soon to saudi arabia and the middle east

. i hope that a minnow macron will be able to bring france with international dialogue and be back into foreign policy. he has a lot on his plate. >> thanks for being here. up, james aberdeen coming to tell us what this means for investors. live from new york, this is bloomberg.

>> the euro a little lighter today. take a look at what has happened the last few days.

a slow decline lower. join now from london, senior investment manager. let me start with you here. help me understand the medium turn issue for the euro. >> i think really it is the medium term story and a good opportunity for the euro. it will be very powerful for the market. the medium-term still whole tire. >> james, do you agree?

>> it is not going to surprise any of my colleagues. i think the slow aspect has been the more powerful and interesting. i will be looking at how spreads perform. it does seem quite difficult .ecause they are buying less they have been large beneficiaries of the policy. a cap onprobably put the euro increase. >> much has been made this past election. they're going to propose an idea. europe has a really delivered much of the gains despite the

french election. it has already outperformed the s&p 500. if you waited this long, you missed it. >> it looks that way. grand window to draw any conclusions, but it looks like -- we have seen individual names just last week. i certainly think there is an argument. if you look beyond this election, there's plenty to be .oncerned about when you takeicy away the punch ball, it has been good. we have seen u.s. assets .truggle

>> you look at the fx market, we had guests yesterday pointing out the rate differentials ahead of where the bond market currently is. can push back north on a 10 year. that spread continues to widen. what is the argument for stronger euros. the difference between the french election in the u.s. election is the u.s. had around 300 polls per week.

i still think people think is -- when the stories pick up, and actually positive as well, but the main thing is the fed versus the ecb and who hikes the fastest did when the ecb exits its policy committee you spread. very correlated the spread will get wider. germane have the election to go. there's a lot more political risk. >> the election --

what i am certain of is the market will get pretty bold and we will have more. there could be a big euro move in the market could get ahead of itself. because whensegue you look at risk, it really hasn't paid off. if you're nervous, no one really showed it. do you need to hedge risk going forward? >> i would not want to draw straight lines. i think there was definite case of investors fighting the last battle.

there was a widespread conviction within market the brexit wasn't going to happen when actually the polls or not telling you that at all. they were telling you it was within the margin of error. in the french election, the polls were pretty consistent. they missed the potentially more than the u.s. polls did in their election because they underestimated the level of mccrone's support. therefore, investors move the price out. it always depends. you have to build a portfolio that is capable of withstanding most of the range of outcomes. going into that ecb

meeting, that is -- what is the target now? a target ofill be 115. we will get to 112 before that meeting. that is the short-term value now. you are staying with us. coming up, bolivia michelle. he will be joining us from new york city. you're watching bloomberg.

>> equities softer, but you are seeing some deal action.

1850 per share. over on the march. trying to get new products to offset any price declines they may have to contend with. this is a great story. up.ing at $200 is now of $90 56 per .hare $184 per share. on the downside, you do have micron getting a downgrade.

overential -- the stock is 180% in just one year. in little bit of lightness there as well. stories asiderite from the french election. macronear-old emmanuel will be the youngest president of france. paris,w york city and this is bloomberg. ♪

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through straight weeks of gains. the euro reaction, the market has been fading. up selling, ended it. afterle bit of comeback four straight weeks of gains. that is the story of the marketplace. here is emma chandra. >> senate republicans plan a health care bill to keep some elements of obamacare. means president trump and house republicans will eventually have to face a bill that does not completely repeal obamacare. russia says it extends reports

extending opec cuts the on the end of the year. earlier, -- emmanuel, presently end ofcommemorates the the second world war in europe. >> we have the strength, energy, and the will because that is what has carried us to this position. that strength will ensure our feature. we will not give up debt given to fear, division, and lies. he is 39 and the youngest

toson ever to the elected france's president. it had ramifications well the on france. to go over this, we want to turn to alan crawford. take us beyond france. >> we have a series of .nternational summits , followed by g7 leaders. also, we've got the next big one

in the u.k.. in terms of european ramifications, this is a big one. >> there are quite a few elections coming up. changes the possible that this win might have for places like germany? germany is key to this and we saw an indication of that last night. ,he chancellor, angela merkel offered her congratulations. to make hispected first foreign trip probably to germany. expecting the french

german access that drives the eu. that will get a renewed kickstart from macron's election. i would expect merkel to make a statement shortly about intentions towards europe. bloomberg's alan crawford. .till with us from london having listened to this, take us the on france itself. victory did a cohen's change the appeal that one might invest in europe?

he is certainly and integration a list and pro-european. things have fallen to the category of a redline for other parts of europe. while that may be acceptable to some people within the german stands,l scene, as it that will require a constitutional change from germany. that policy could be viewed as positive for europe, the path to get there is by no means clear. and a lot of the problems that have existed not necessarily the wider eu have not gone away. as a move into a more normalized

world, some of those make come to the fore again. -- ore generally can we expect a close alliance between emmanuel macron and angela merkel? >> we don't even know if it is going to be angela merkel. bixby martin schulz who winds. than it waslose with francois hollande. when it comes to the euro crisis in the first place, nobody turned around and asked why the building was on fire in the first place. nominationthe

that existed in 2012 was sealed with the bond market and excessively the ecb came out and soul that issue. the ecb can't do anything about that. what can politicians do about it to take the question off the table? >> lower unemployment. , matt shouldo that push populism down. unemployment should -- has remained sticky. whereht be the one time --

he was talking about inegotiating the treaty so think this is another story we will be talking about in five years to come. imagine macron going up to germany and asking for? >> is not this year, next year. will be a nice story to talk about. christ good to see you guys. some breaking news for you. exploringd comcast operational efficiencies. the sword broke yesterday. they are trying to work together to's -- to compete with at&t and verizon.

that part of a story. this year up by about 15%. on inl discuss that later the show. >> we will be joining us after the election. what it all means for your portfolio. this is bloomberg.

>> this is bloomberg daybreak. coming up in the next hour come up morgan stanley chief global strategist at 8:00 eastern. ♪

>> now to your bloomberg business flash. ar is in talks to make preemptive bid for toshiba's memory business. kkr has indicated it would pay at least $16 billion. haveprices in the u.k. faced a quarterly decline for in years.time -- the changeover is costing southwest over $500 million. that is your bloomberg business flash it >> joining us from -- oliverya much out

michelle -- >> that is true. very strong sentiment of optimism in france this morning. the outcome was good news for economy andin the europe as well. >> we've seen countries take big pushes to achieve reform. the british did it in the 1980's. talk to me about how long it takes to implement the reforms and really generate the fruits of our labor. only talking years, five years, decades?

-- are we talking years, five years, decades? if you look back at the -- ple of germany that managed to turn around at the levelut it of economic health every know today. >> when you are talking to clients and advised leaders on marketing, how do they feel about this? ?o they feel populism is dead what is the feeling incorporates right now. >> well, to feelings. first of all come upon was him is not dead. remember, still one third of the .oters

we need to watch out what is going to happen. the second sentiment is one of hope following macron's election. reallynch community is in high citation. three having to do with social laws, taxation and the public sector in france. know, looking at president trump trying to get three things done at once, what is the number one thing companies could pick in france? >> one of the issues with the

french labor works system -- first of all, it does not work. it requires a number of things in particular to the reform. the first one is more flexibility. the number two is also very important. it is to reduce the level of payroll taxes that are extremely high in france and the highest in europe. timeis is not the first mccrone has taken a whack at reform. does he have the political wherewithal to take on the people who -- does he have the personal fortitude and political backing

to take on movements like that? all, change in france is always difficult. it is not an easy task. if macron can rely on a strong majority of its own party instead of reforms, then, he will be look move forward. obviously there will be resistance from the trade union in particular. those can be overcome if he has the courage to move forward and rely on a strong majority. q for joining us. if you have a bloomberg

go.inal, go to bloomberg this is bloomberg.

♪ rivalch agreeing to buy kate spade in a deal worth over $2 billion. what about the price is striking to you? >> the interesting thing is going back to 2015. kate spade shares were trading around $40. people were talking about $30 a share at one point. we've ended up at around a decent price at around $18.50. >> why does coach -- what does coach get out of this? >> they are trying to get sales

somehow. they realize there's so much they can do with their own brand , that ended up doing well for them. the realization is we can't push coach mutts -- much further. name jimmy choo is another people are talking about. >> are there a lot of efficiencies they can get out of this? >> that the great question. they say they are counting in $15 million. we are not sure how much overlap they can get.

in the very least, they can use the same strategies. >> thanks for the hustle. rough five days for oil. this is what happened on thursday. wti. of 44 for the last 72pened in the hours? the market was coming down for the last two weeks. u.s. oil production also very strong. what happened is we went below $200.0 and then broke the

there was a lot of option trading on thursday and friday. >> when i frying striking is the stock price went down, but also the time spread. we have seen a lot of weakness range. was really dexter they think? >> they are thinking too much oil. that is one of the main reasons -- i think the most important thing is they are saying they are extending the budget cuts in 2018. when you look at that, it is too much oil. opec is going to have to work

not going for six months extra, but probably another you pretty >> is this news of an extension good news or bad news? are they willing to do whatever it takes? it both ways.ead the price the thing as -- in also 2018 and signal they are not working. david: it seems like every time shale goes up against saudi arabia come up what is going to change that?

deciding to take a driving pricesn were the sale can survive. they try that in 2014 and the more.ic pain was a lot 2017 producers $50 oil for . whatever the price goes down, they have some time to drive in that is a main problem. >> are we being too dramatic russian mark usually a huge .ield

is it possible rebounding is a lot better. we have been hearing that for about five months. we don't -- is oversupply. , morgan stanley chief strategist will be joining us. you're watching bloomberg.

♪ >> the pollsters get it right.

-- and mentalon macron.- emmanuel from new york city, good morning. this is bloomberg daybreak. >> we are down south below $1.10. not so stable right now. a 46 handle on wti. >> taking a look at the french election. a nine-year high on friday. you also have a lot of buying happening. city -- the vix

-- the vix pretty steady. emmanuel macron scored thecisive victory, 62 6% of votes in somewhat of a blow to populist.ce -- >> he will have to find a prime minister, but that just might be for a month. who cano find someone momentum. the

someone who can gather enough support in order to carry the momentum. we had polls showing he could get a majority. to be a huge test. he would've had voters right -- bute middle budget is did not just want to vote. what is the mandate? >> you have to remember that 10.6 my people voted for marine le pen so this not something you should ignore. if he does not succeed in these left oute,

of course could be a return of the parties. this supportther and that is what he said last night. he said i respect those who only voted for me to defeat the far right and i will do everything in my power so you don't have to vote for the extremes next time around. >> thank you. john claude is spending too much on the wrong thing. how does emmanuel macron set

things up? of course france spends too much money into much on the wrong things. is theyresting thing say i'm not from the right end up from the left. he has to do a lot of things. in the strange way, i think most -- he things he stood piously outside the door. that is a similar mood. nobody voted for what she was about to do. it was all about bringing the country together. if macron is going to get things done, he's going to have to take on some hard decisions. really glad the dogs rip in a place like france?

how does he do that in france? ishink the battle for europe over, but the battle for france has just begun. there was somewhat skepticism about the european project. france, the support for the euro remains strong. the real battle now is going to be the one about the state of france. has the largest welfare -- france has the highest

government spending of gdp. income, of per capita has some of the worst. i think there is one thing important to remember. have the scandal not hit him, i would say he would possibly be the winner. main no bones about being something else. >> can we make the point that we

shared a quote from the lord of the rings and no one noticed but me. earth.tle for middle are the people of france there? when britain had margaret thatcher, britain was in bad shape. >> you are absolutely right. there is some of the same feeling of the klein. britain in 1979 have been going prettyl pretty gradually subtly -- solidly since the war. there is at least that

bit to put on and a general .ealization they know they have the biggest stadium in europe. they know they have lost power and influence with the germans. had the same plan and ifas reform france we do that, we will be look to persuade the germans to do what we need to in europe. >> what are the levers -- a budget deficit of 3%. no one it's getting there anytime soon. what can they do to help the

french? sure there's much they can do. europe is over, the battle for europe has begun. france's lagging behind other european countries as well. then you look in terms of the work we do. we look at the number of alien heirs and the country with the or largestber inherited is france. the population of paris is seven

times larger than the second largest city of lyon. i think that is the entire point. -- the next populace in italy possibly. france winds that, that opens the possibility of something happening in europe. >> this is the story about europe. for the past quarter, it probably group even faster than the united states.

portugal, spain, these countries back. least they cut back on neighbor cost. would leavetry that a cost that has gone up is france. france is really the sick man of europe in many ways and that is what needs to be corrected. remember, france is fundamentally a socialist country. if you read on the commentary, expectations are quite low.

expect haitians are quite low and -- low andis quite relatively optimistic this may be a moment of change for france because even the parliamentary elections to be held next month seems to be gaining traction. the voting block needs to respect it. this is a very decisive victory at the end of the day. there was somewhat skepticism even with the polls. done, buts to be

problems are transparent and don't large. splita country that is that is fit economically. i feel optimistic at the end of the day something good could come out of this. >> thank you for sticking with us. from new york city and cursed, you're watching bloomberg. ♪

>> market reaction to my crohn's

macron's win- pretty muted. euros and comes in number three. stanleyhere from morgan investment management. over the last month some -- does that continue? >> i think so. european equities versus u.s. equities are coming off a city or low. it tends to last for a while. for me, it is good news. the flow of the united states has seen many positives. many suggest the u.s. is a -- the dollarg

has gotten very expensive. been not ase has great. i think there is a case to be and itat european equity will eventually reflect that over the next couple of years. the other point is economic growth is turning around. europe has suffered to recessions the last seven or eight years. is the u.s. versus low in termsting a of relative performance. if you take a look at

treasuries, on a two-year bharat 1000 -- >> i think rates will continue to catch up. it sounds aggressive, but it is possible. it isk in the spread realistic to expect. david: when we talk about growth and investment rather than trade, one of the investors is demographics. an interestingn piece in the new york times about the unit dates saying for us to have growth, we need immigration. take us to create >> when researching this piece, i found if you look at the

growth of the united states, europe, and japan, it has been exactly identical. we often think of productivity as our superior strength, but what i found fascinating was there was a big difference in economic growth rates. largely explained by the demographics. a large part of the demographic -- the population is slowing down everywhere. that is one of the main reasons

the japanese economy is lagging. it is about the really important part of demographics, explaining to you why has the united states economy grown faster? >> take that analysis and put it right back in europe. short-term because you don't see a lot of growth. >> i think that is true. , in the matteres what i say about immigration, -- i think it will over theomic growth long run. in a way, europe there is not

much to hurt because immigration is not as big of a factor. driver so ich a big here rather that it does anything for europe and japan. >> -- with this on the program. just a begin with a conversation. chirac went against marine and had tother figure out what their mandate actually was. what is your advice to macron with that in mind?

>> it is different. jack schrock was at the end of his career while emmanuel macron .s very open-minded he a vice i could give is carry-on. he was unknown two years ago. nobody would have expected what happened. he has been the winner yesterday hist and had to implement program. he has convinced the french and they have to vote for the 577 candidates who are going to be presented to the general election in june.

where on the political spectrum do you think that individual will fall and you have any names in mind. macronink that emmanuel has been trying and successful. coming from the left side and the right side, going to choose a prime minister with a profile sympathetic to the right side of the voter so i would not be surprised that he chooses someone coming from the center-right. the people have been supporting him among the people who are also experienced in managing parliament affairs and expenses -- experienced in governing. he will choose the

right person. >> the next hurdle will be the parliamentary elections, two rounds. >> i'm confident he will get the majority in parliament. if you look at all the similar collections, most of the time i say every time the president got a strong majority. why? because it doesn't make sense to elect a resident and then a month later to deprive him of any power. they want him to be successful and even if they have not been totally convinced, now he is elected. they will will him to succeed. a third of the country will

certainly not want to see that in the majority of parliament. is this a chance for that group of people to change the conversation again? the two old parties are not competing. so have been failing for many years. they have not been able to fix the issue. they are not an alternative. that is why i think emmanuel macron is going to follow up on his victory yesterday and be able to convince a large part of to bring in support and confidence. you talked about how the battle for europe is one. how much time before we start talking about it again?

if emmanuel macron cannot succeed in the next five years will le pen be there? >> absolutely. there's a lot of skepticism about what macron can do. is france concern becoming italy. the battle for europe and france can begin a few years from now. jonathan: thank you very much. coming up, more from the french election. this is bloomberg.

jonathan: from new york city, you are watching bloomberg: daybreak. this monday morning, futures just a little bit softer.

s&ptive a 10th of 1% on the after three straight weeks of gains for the benchmark. treasury yields down a single basis point after grinding higher throughout most of last year. tradeg at the euro-dollar , the market has been fading the le pen risk. we breach that briefly in the last 24 hours, then we rolled over on the news that everyone macrond, emmanuel stealing the presidency in france. up to speed on some of the headlines outside the business world. emma: staying with friends, president-elect emmanuel macron commemorated the anniversary of the end of world war ii in europe.

the ceremony was his first public event since winning the election. he won in a landslide, beating marine le pen with percent of the vote. >> we have the strength, the energy and the will because that is what has carried us to this position. that is what has made us, and that strength will ensure our future. we will not give in to fear, division and lies. he is an independent who had never run for office before. he is the youngest person to be elected france's head of state. russia says they will extend opec -- extend support for opec's cuts beyond the end of the year. russia jay-z energy ministry says extending the cuts will speed up market rebalancing. saudi arabia said the agreement could extend past the end of 2017. in richmond, virginia, a federal

appeals judge will hear a case involving president trump's proposed muslim travel ban. key parts of the band were blocked by federal courts in ban were of the blocked by federal courts in march. jonathan: let's turn to the big banks. citi -- to buy more european equities. to sell the u.k. financials and socgen likes italy and the banks. joining us now is david kelly, jpmorgan funds chief global strategist. enthusiasm to buy europe has been there for a while. can that continue? david: this one has a long way to run. you were talking about the euro at 1.09.

it has been at 1.20. we are running a big trade deficit and you could see over the next few years, the euro moving back to that level. that is 10% right off the bat. the european economy is growing steadily with room to grow. of cyclicalars expansion in front of them. european stocks are cheaper than u.s. stocks with higher dividends. place,that is still in even after decent rallies. jonathan: the goldilocks situation in europe, how long cannot go on? the idea that we have this week currency and an ecb that is in a rush to go nowhere. can that situation stay stable? david: it will warm up, some more and the unemployment rate will come down. wage growth and inflation will

pick up. bank hasean central been -- it has been a bad policy to keep negative interest rates. it is amazing that the european central bank does not see this. is the waytter goldilocks would like the portage. alix: if we wind up taking off the risk premium in europe, where do you see it? is it more bond outflows? where are we going to see that repricing? david: in the euro, it is the simplest way to play this. marine le pen was a threat to the euro. what we have seen with the chrome -- macron's victory is the tide is pushing back with people saying we like to grumble, but in reality we do like a unified europe. david: why aren't the markets

understanding what you are seeing? this has been true for some time. all the factors you list have been there. why have the markets -- why haven't the markets reacted? european see the glass as half empty and americans see the glass as half-full. i think we are being too negative about political change in europe that would help the equity market. they have been down for a long time, but i think it is a prejudice. the nice thing about prejudice in finance is it is unsupported -- if it is unsupported by facts, it will evaporate overtime. alix: what does this mean for other risk? you still have the italian elections and the german elections in the parliamentary elections in france. i went up pricing in enough risk -- are we not pricing in enough risk? the alternative in

deutschland is not going to be the majority party. he will have to cobble to -- he might, i think his party will do very well in the french parliamentary elections, but even if not, there should be enough to -- and of centrist and socialist republicans in france to help form a centrist platform. i am not this pundits about change. you may not need to change much so long as the economy continues to grow. growth itself will fix a lot of things. there is a good trajectory. guess, whetherto the equity market in europe had been, they would say it was done a couple percentage points and now is the time to buy. germany is up over 10%, france's

of over 10%. outside the front pages of the newspapers of europe and the politics, investors want to put their money to work and they have already been reading a lot of rewards out in europe. david: there is a lot of catch-up. we have seen interest among u.s. investors, but there is still tremendous skepticism about europe. a lot of people think they can never get it right. what is interesting is if you look at the april numbers the theal pmi index, international is better than the u.s. for the best time in 6 -- for the first time in six years. the rest of the world is passing us by. for investors, it is important not to let it pass you by. jonathan: even though the big gains have already been made? david: i think the 2000s really , thed the melt up trade

idea that people will pile into something, and a big trade that will soar higher. i think gradually, europe will outperform. the right way to look at this is not as a trade, but over the next five years, european equities could give you double the return. david: if europe is under bought, is the u.s. overbought? the trick in the u.s. is u.s. equities still look ok and good relative to u.s. fixed incomes. for u.s. investors, i would avoid international. this could be the best earnings season in years. companies reporting this stage, it looks like we are up about 22%, year-over-year, almost the highest quarterly number, ever. we have had some positive news in the u.s., but this is a known expansion.

it is a old and venerable tortoise which will amble along, happily. it will not fall off the wagon, one way or the other. jonathan: next time, they will be a quote from david kelly and we will start with that. alix: finally, he brings back the tortoise analogy. you are sticking with us. coming up, paul richards, joining us on his trade after the macron win. this is bloomberg. ♪ >

emma: this is bloomberg daybreak. coming up in the next hour, paul richards.

now to your bloomberg business flash. -- has rejected a third takeover offer from its u.s. rival, ppg industries. the dutch paint on -- company says the offer still undervalues the company. it is defying pressure from shareholders to engage in talks with ppg. the private equity firm kkr is in talks to make a preemptive -- primitive bid for toshiba's memory chip business. kkr has indicated it would pay at least $16 billion. the two largest cable operators in the country -- in the u.s. have agreed to better compete with giants in the mobile phone industry's as verizon and at&t.

they plan to use their combined size to negotiate better rates for reselling wireless data. hear, thereu can are a lot of deals going on and one of them is coach, which has agreed to buy rival kate spade following months of talks. deepdustry wracked by discounting and struggling demand. -- n -- s is no hebert level, it isy high great for kate spade because they have been looking to move on and get that business sold for a few months now. it is not -- i'm not sure it makes strategic sense for coach. does not bring growth in terms of brand extensions, kate spade is not bring that.

it ends up bringing more of a fixer-upper project. think ofth of these, i as brick-and-mortar kinds of businesses in a world where we are increasingly going online. how does this help them in the online area? a business in mind, but they still have the of wholesale through brick-and-mortar, so it does not help them that much. there is a lot of work to do with kate spade because they have certain to go that route of extending the brand all over the place. coach is going to need to do with them what they did with themselves, which is rain in that -- rein in that brand of little bit. alix: what other pair ups are going to wind up making sense in light of a coach kate spade pair? >> you have a lot of the luxury

brand and guys that have a pretty nice portfolio. coach and kate spade is right in the middle. they are not super luxury even though coach wants to pivot toward that. they are also not super mass-market. some of the other players that have rumored to be in play, you can see some of them try to tie up or you can see coach go out once they resolve their balance sheet after this one. broader sense, is what we are seeing is a struggling industry with valuations going down and this is says -- this is necessary consolidation. >> i think so. luxury had been be protected market or little while. -- for a little while. i think to your point, you need a little bit of consolidation to bring those brands under roof and get them better targeted you

can keep them preserved and have a parental growth. david: noel hubert -- noel hebert, thank you so much. as you look at this, a rash of deals and a lot of companies with a lot of cash on their balance sheets, is this because of the optimism that donald trump brought into the market? david: the other issue is financing is still cheap, for doing deals. companies have a lot more cash and the problem is we would like to see more investment spending in a way that would enhance productivity. if you don't have labor force growth, you don't have productivity growth. we are seeing companies trying to find ways to enhance shareholder value without adding to their own infrastructure and facilities which is a negative thing for the economy. david: so-called organic growth

where people will invest in their own businesses and expand. >> we would like to see that, but in were to get companies to do that, you need to either believe you will have much faster economic growth domestically or believe you can use the u.s. as a base to grow around the world and to do that, you need a lower dollar. alix: a great segue from a chicago council speaker on global affairs and the headlines are no surprise. she basically ones of saying that conditions are there for a return to symmetric inflation goals. she says actions must be taken before fed policy goals are fully met. a suggestion that the fed is behind the curve. where do you stand? david: they have been behind the curve for a while. the irony is the first few rate hikes have sped up the economy and prevented the economy from going faster by not being more aggressive.

i feel good about the u.s. economy not overheating. when of the things i worried about was the big surge in fiscal spending and lower taxes. if you have a budget deficit which will be almost $600 billion, you can either afford nor do you need massive fiscal stimulus. the reason i am optimistic is an you look at the health care bill that went through the house, it is clear that that is going to get stuck in the senate. it will be a long time before it could push through and maybe never. it may be that there are enough republicans who do not want to add to the deficit that you could avoid that fiscal stimulus. not doing something to stimulate the economy. david: i just came from warren's shareholder meeting and they asked him and he said the most important thing for him to know in the term -- in terms of future of his business or where rates were going to be.

why is this so low, given the low unemployment rate, low interest rates, why? david: there is so much liquidity in the united states. people are searching for yield, but long-duration bonds are risky because as i read the statement, they are determined to gradually bring rates back to normal. we are looking for one rate hike at every press conference meeting this year and the next. over time, history shows if you raise short-term rates, you will raise long-term rates and eventually get hurt. jonathan: wage growth is still subdued. inflation pressures are still subdued. aboutis nothing to worry in terms of inflation repression? david: they have to worry about asset bubbles.

home prices are back at where they were in 2007 and moving higher and will continue to move higher and eventually you will get this situation where prices are so inflated that you cannot normalize interest rates. you don't just worry about goods and services, you have to worry about it across the board. if you keep rates at an artificially low level, there is no economic reason, at all. alix: david kelly a sticking with us. watch us online, interact with us directly, this is bloomberg. ♪

alix: oil trading at a 45 handle. still speaking with david kelly. you have saudi's and russians coming out and saying we would love to extend the deal. you have kuwait saying they are close to agreeing on extending

the cut. david: the problem is for dope -- is for opec is in some ways, their days are done. because of keeping oil for so high, so long, that has allowed the birth of the u.s. shale oil industry and production ramped back up again. they have the capability of cutting production when oil prices go down, ramping it up substantially when prices go up. i don't think there is anything opec can do to get oil up to $60 or $65. the opec dragon is finally dead and i don't think there is anything that opec can do about it. as an economist, i feel good about this. it is may be for some energy companies, but we will get stability from oil which has haunted us for decades. jonathan: when will people wake up and realize that part of a marketing vehicle for an ipo? when does the band actually fall apart? david: i don't know.

politics -- much there is so much politics in oil. they will continue to play political games. in some ways, it is irrelevant because there is nothing they can do to completely squash global oil supplies. alix: they have to make a choice. with a rather have higher oil prices or graded or -- or greater market share? they should learn to budget at $50 a barrel. so many of their dollars are spent for social activities, so they don't have it. issue i have is what is the trickle-down effect? wti and it is that yellow line. the lower it goes, the weaker front prices are and the blue five-years. breakevens and that rolled over at 1.7%.

they track each other pretty closely. what is the read through, there? what is the trickle-down? think -- i think we are overemphasizing the importance of oil in the long run. if we continue to gradually heat up our economy, if europe does and china sees higher inflation, i think globalization will pick up. if i have to take the over under on one point 8%, i would be over -- 1.8%, i would be over. we'll get more inflation than that. jonathan: making a call on inflation is one thing, making the call on 10 year should be as easy. two percentage points on a u.s. 10 year. david: you could get there. let's look at the fed tighten. why are they tightening?

to apply the brakes to the u.s. economy. there is no point in raising short-term rates if you don't raise long-term rates. they know this. if the 10 year does not respond or drips down, i would expect a even more aggressive rebalancing and i don't believe the 10 year yield can survive an aggressive rebalance of the dead's balance sheet. jonathan: to achieve that, they need to sell. they need to sell. david: yes, but i think they will be organized. it is not just rolling off. jonathan: david kelly, from jpmorgan funds. you are watching bloomberg. ♪

♪ emmanuel macron --

comcast and charter forge a wireless alliance and -- struggles to obtain some stability in crude. russia and saudi arabia could extend production cuts. this is bloomberg daybreak. i am jonathan ferro along with david westin and alix steel. let's get you up to speed. where is the risk rally? there is the question for markets. futures are lower. negative zero .15% on the s&p 500. the euro strength story was last week. .5%., down about that is the story from 35,000 feet. let's get you some movers. alix: you mentioned coach, buying kate spade for $2.4

billion. that is a 27% premium to kate spade at the end of december which is when all these takeout rumors started. competitors are down because it was rumored to be in the bidding for coach. coach will not see a profit appreciation until 2018. one of the most interesting mergers in my opinion is a huge amount of spectrum, pivotal to five g networks. at&t and verizon in bid. verizon is a multinational unnamed telecom coming in with a bit of $184 a share. they went from $1.8 billion to $3.1 billion. at&t's bid, they've got three days to up that did -- up that bid. its dividend, cork wrote for the first quarter, 2.5

percent, consumer products beating nestle. breaking news, sinclair broadcasting is now confirming that deal to buy tribune media for about 3.9 billion dollars -- $3.9 billion. sinclair is the largest owner of broadcast television stations in the country and they will become even bigger as they pick up those tribune stations. something a lot of people think is being made possible by the trump administration. now, it was billed as the establish and -- establishment against populism. the establishment came out the winner as emmanuel macron came out the winner against marine le pen for the french presidency. votes ined 66% of the what is seen as a boost in the european union. thank you for being with us, caroline.

we know who won by a long shot. take us behind the vote. where did he do particularly well and where did marine le pen do well? emmanuel macron, did much better then the 10 -- then left and -- then marine le pen. 85% in the second -- second-biggest french city. marine le pen did better in the cities along the french riviera. we are seeing the division in people with high degrees, living in big cities across france, really backing the independent candidate and marine le pen doing much better in some rural areas where unemployment is higher.

david: the next step is likely to be mr. macron picking a prime minister who will help him put together a parliamentary girardi? . do we have any candidates -- parliamentary majority. do we have any candidates? we will know the name of the next prime minister on monday. this is the day after the inauguration of emmanuel macron and many people would be -- we have been speaking with over the past 24 hours believe the prime minister will likely come from the center-right. emmanuel macron was to bring together the left wing and the right wing. someone from the center makes sense and someone from the center-right would be the most appropriate to carry on this momentum of pro-business,

pro-european policies. david: thank you so much, caroline, reporting from france. jonathan: joining us is paul richards. , i story of the fx market just wonder on the year whether the story really was buy the pessimism in europe and sapient is he has them because the big gains have been delivered. north of 11% on the ftse. paint us a picture from why european assets and equity can carry on higher from here. paul: when you go back to january, the market one today pessimistic year. -- wanted a really pessimistic year. we could have been sitting here to get -- today discussing the --t that the euro was some where does it go from here? especially when you take a big risk and it is a relief.

it is essentially a euro at 1.10 and that is a result. now we focus on the economic growth. the southerly good commerce out of the ecb. on june, you have the ecb meeting the same day as the u.k. elections. that will be a big day. stuffis -- it is positive as the market gets on with a big question mark out of the way. the markets will say what about italy and you will push italy out to q1, next year. they cannot even get election reform pushed out. 10% and: if we are up let's pretend you knew nothing of the politics and i give you all the data points from europe and all the earnings results, where is the equity market divorced from the economic and reality? if you spoke to asset managers the way i did in january, they thought equities

in europe could be down 15%. they thought -- they saw some parity in the currency -- sub parity in the currency. they start to had to run the fact that the ecb will engender their confidence and away we go. it is hard to find that starting point. i'm more focused on the point that we are not in a pessimistic mode and we are steadily growing higher. alix: is there a flipside to that if you don't have march getting a majority in parliament? do we have to start pricing that back in and you mentioned early -- earnings. you still need to grow and if you don't have macron delivering, that is a different scenario. paul: the good news is he has five years. alix: does he actually have five years? paul: i think he does. sitting with

coalition partners. a really similar mandate, 10 years ago and i think he squander that lead and he got tied up with special interest groups, worried about external factors. macron is going to keep it simple. his choice of prime minister is critical. i think it is going to be a flight from washington -- there is going to be a flight from washington to paris with christine lagarde on it. david: i understand why the markets might like that. explain to me why the french people will vote for parliament like that. paul: they may not like it. you can see the pros and the cons. david: that is a problem when going for a majority. paul: at the end of the day, this is a globalist in the way we are seeing mccrone and put -- macron and potentially lagarde.

it is easy to criticize, but let's look at it from a market perspective that if she were to be ordained, i think it will be a positive and i think he is not going to take that risk if he can't sell her to his electorate. he is a smart guy. look where he came from. i put my money on is his he -- on is if he chooses her, he did his work. he cannot look out the window when they start marching on paris, because they will. the french love to march. he has to keep it simple and he says he is going to keep it simple. he is focused on pension and labor reform and he has to get it done. he is going to get through june, get what he needs a respect to the parliamentary vote and get that agenda done. i think he can. he was a very successful economy minister. he had a reform agenda

that largely did not get delivered on. paul: it's france. alix: set the bar low. paul: he has a mandate and look at what france has just voted against. they say we really don't like the way the u.s. has done things and we really don't like that brexit vote. i think we are seeing leaders for the millennial's coming through and they have mandates. jonathan: let's bring in patrick --ists -- patrick atrus patrick artus. how optimistic are you about paris? -- the: i think macron numbers have been telling during the campaign. sense,has to reform in a to transform its bad jobs into better jobs and its bad

companies into better companies. it has to improve its education system, so i think what macron is doing makes sense. the problem is that basically, france stopped improving 20 years ago. you are looking at labor costs and looking at modernization of companies, robots, a share of i.t.. it is telling you the same story, but france stopped improving at the end of the 1990's. what macron is now facing is that he has to catch-up for 20 years of stagnant -- not stagnation but absence of reforms, weakness of companies, a stagnation of the economy. if you look at the manufacturing rate. manufacturing in france is

producing the same products as manufacturing in spain and spain is 20% cheaper. how do you correct that? you have to rely on moving up the ladder, improving education systems and having a more flexible labor market but it takes a lot of time and a lot of paper. problem one is that the challenge is enormous. it is correcting two decades of inefficient policies. a challenge to a lot of people. jonathan: for investors to ask the question what do they need, france, to really reform. the economy is on a decent trajectory. the ecb is very supportive. don you speak to investors, they need france to reform in a significant way? patrick: i agree. are very relieved

and macron is the president problem a as i just mentioned, there is a lot to do. -- problem two is that a lot of people in france will resist the reforms. take labor market regulations. with long-term labor contracts that are very protective. why would they want to have a more flexible contract to make life easier for the others? we will have a two-stage approach for the markets. stage one will be increasing confidence in france. younger people, really with a commitment to reforming and stage two will be to look at if macron is sufficiently strong and you have to look at competitiveness and taxes, education system.

you have an and or miss problem with -- you have an enormous problem. a lot depends on the parliament. if macron ends up with a very clear majority -- if macron ends up with a very -- the election in italy and perhaps a lot of resistance here in france to what should be required. jonathan: patrick artus, thank you very much for joining us.

paul richards will be sticking with us. coming up, the senior equity analyst at drexel. york, you are watching bloomberg. ♪

jonathan: from new york city, you are watching bloomberg. 13 minutes away from the market open. three weeks of gains, the longest since early march on the s&p 500. futures a little bit softer. weaker in europe as well, down by 2/10 on the dax open. market,y in the fx capturing risk sentiment, the dollar-yen going nowhere.

markets in a slow grind to know where. -- to nowhere. we printed 2017 highs on the euro-dollar and the rumor was marine le pen would not win the presidential election and that is exactly what happened. the aftermath, europe a little bit weaker. closing at a record high on friday and today, apple gets a price upgrade, saying it is the most underappreciated stock in the world. the price target is now $202. 836% premium to friday's close. aian joins us on the phone -- 36% premium to friday's close. brian joins us on the phone. >> we have cointreau things to look forward to. the iphone eight in the fall, a very depressed valuation which

will extend, going forward. capital distribution and a lot of new innovations on the horizon. if people were on negative apple -- were negative on apple for all the wrong reasons and you will start to see that change. alix: when are you concerned there is too much positivity? 87% of its ratings are buys. how long until the actual numbers in the iphone eight super cycle needs to live up to the expectation in the market? >> we are calling this a durable cycle. super cycles can get you in trouble. this will not be like the iphone six. when you look at valuation, 11 times x cash, the s&p is trading at six times. if you look at these sugar water companies, they are trading at 22 times. apple has grown much faster over the past nine years.

i think that disconnect is going to start to resolve itself as we move forward and we are seeing it. alix: apple expanded its capital return program through march of 2019. how much of the price target is because of buybacks and dividend growth, especially as we get some repatriation action? >> it is definitely one of the pillars. apple did increase their distribution to $300. -- $300 billion. if there is repatriation and 93% of their caches overseas, i think you could see something else happening. it could be a higher dividend or a one-time dividend. look at the mega tech companies well over 3%. i would like to see that on apple. i don't get it, because they are already borrowing money in the debt markets. how did they spend a lot of that

money already? >> they definitely have some debt, but the net cash is very high. this is a company that generates $60 billion in free cash flow a year. i believe, if there is a repatriation, something can happen to that dividend and you can open up some m&a opportunities. i would like to see that dividend hike because it would tap into a investor base that they are not involved with. jonathan: tim cook is struggling to find anything to buy, and increasing the by program. is there not anything in that argument? if they repatriated, they would have that u.s. cash and could spend it, here in the targets would be in the u.s.. that is where a lot of the innovation is coming from, and these next-generation areas. it would at least put it on the table. david: this is not a unique

phenomenon, a big u.s. company with a lot of cash. apple certainly leads the pack. is that a symbol of health because they have a lot of cash or that a symbol that we have run out of ideas that they cannot find ways to put the cash? paul: price is obviously a factor and they will bring the anotherck home and theg to note, sitting on laguardia runway, last night and i looked around and i was the only one with an iphone. i counted five samsung's and they were all old. i was wondering what they were going to do with that phone so just in terms of competition, it struck me that apple still has a critical competition, for what it's worth. david: but incredible brand loyalty. paul: i was looking around and i realized samsung had brand loyalty as well because all of those phones looked older than

my apple. you have to spend that money somewhere. at the end of the day, look at what the nasdaq has done. nasdaq has outperformed the s&p. it is a lot of people. the money has found -- the money is going to find a home. alix: the nasdaq has been driven by microsoft, and google. is that accurate? paul: it is very accurate. alix: is that a good thing? paul: it is a good thing as long as earnings are supporting it. the market feels very comfortable. it will only -- it would only take one earning cycle for the market to reach question that -- to re-question that. david: i was just out at the berkshire hathaway meeting and they asked warren buffett a lot about why he was investing in tech with apple and he defended we don't think it is

a tech company, we think it is a consumer products company. >> it's a little bit of both. what did steve jobs say? it is the cross of liberal arts and technology and that is what apple is about. it is technology, fashion. a lot of different facets to what apple does. jonathan: brian, you got some big coverage. you are incredibly constructive on the whole of the tech space. where are you less constructive? are tech coverage, we have been able to cover some very high-quality names. a piece of our cover that we don't like is the lcd area. lcd tv's, it is a pc market that has been a slow-growing to know growth market and the companies that sell into that, we still remain concerned with. apple has been highlighted as our top tech, it is one that i

think is one of the most undervalued stocks in the world and underappreciated. that is why we went to $202, today. i think you are in the early stages of a sentiment shift around apple. this depressed valuation has been around for years. i think people are finally coming to the realization that they will not turn into one of these consumer commodity companies that had to get out of the business whether it is blackberry or nokia or motorola. they only have 15% market share in smartphones and that will be a nice growth area. nonetheless, do you chase tech here? paul: i don't think you do. i like to look at where indices are, globally and the nasdaq struck me as looking at little bit strange relative to the valuations of the indices and even in the s&p and asia.

look at china here, today. obviously we have a korean presidential election coming up and it looks like moon will take that one. asia struck me as a little undervalued. i would not be putting new money into nasdaq. forthan: thank you so much joining us, paul richards and of course, brian white. the opening bell, about four minutes away on bloomberg daybreak. and the equity markets, futures a little bit softer. no drama on the s&p 500 after three straight weeks of gains. you are watching bloomberg. ♪

jonathan: from new york, this is bloomberg daybreak. moments away from the opening bell. this monday morning, futures negative about 23 points.

no real drama, just a little bit softer after three straight weeks of gains. if you switch of the board, you can hear the opening bell ringing in new york. a firmer dollar story. stronger against the euro despite that french election win fragment well mike roland -- for emmanuel macron. morning on offer at the margin, no big moves. 2.36 on the 10 year. let's get this market open for the trading week. alix: you have the dow closing about 21,000 on friday for the first time in two months. now you are down by about 11 points. you are seeing basically unchanged throughout the day. the nasdaq has closed 28 record

highs and the softness is not even one point lower. individual stocks we want to watch, it is all about the telecom. t-mobile, the -- and the quote, unnamed telecom which bloomberg is reporting as verizon -- straight path up by $.28. sprint and t-mobile have indicated they may search for emerging partners besides each other as telecom wraps up and tries to scale up to compete with verizon and at&t. the sec -- the fcc's recent comments could mean we will see more -- we had to take a look at where we are stacking up in terms of earnings -- we have to take a look at where we are stacking up in terms of earnings. the white bars are energy, the

blue bars are consumer discretionary. the orange bars are securities within the s&p. on average sales growth is coming in 8% where is earnings growth is coming in by about 15%. it is overshadowed by the jump in energy, energy sales growth is at a whopping 15% and consumer discretionary is also moving higher. is this a sustained recovery of earnings growth and is it really enough to justify the record highs that we have seen? jonathan: joining us from her office in new york is the u.s. equity strategy at bank of america, merrill lynch. are we passed that? are you seeing evidence that we are getting something on the top line? >> it is an important point. we have seen multiple quarters

where earnings growth was improving and companies were juicing their eps with buybacks and cost-cutting. sales growth is coming back and we are seeing sustainable trends. sales beat expectations, this quarter. this is the sixth can -- consecutive quarter we have seen that. when you take out the effects of energy and currency, we have seen constant -- i think it is a sign that demand is starting to come back and analysts are serving to pick up their sales numbers. is it -- it is a positive sign for capex as well. jonathan: where is that topline growth going to go? will they reinvest that back into the business? >> i think is certain to see a come back. it has been driven by energy, but investors are looking for companies to invest back in the business. you are seeing more of the demand, rather than just

returning cash to shareholders. there is a potential we could see coming back. if we see repatriation in the ,.s., that could spur buybacks but overall, investors have been looking for companies to invest back in their businesses and that will be rewarded cents with all the share buybacks we have companies thatat had been doing big share buybacks have not been out for arming. jonathan: you know the story, we come into my new year and the analyst estimates are somewhere up there but as the year progresses, they just get dropped lower. not happening this time around. if you are enthusiastic about the earnings, you talked to me about that, relative to the optimism that is already in the price. i think going into this season, we said the focus is likely to be on guidance. we were expecting a good

earnings season and it did surpassed our expectations -- surpassed our x -- surpass our expectations. optimistic,e really but the difference was they were not really changing their numbers. in this earnings season, you have seen companies start to change their numbers. they are guiding above consensus. they are sounding more optimistic. at this point in the year, analysts are usually cutting their numbers. it bodes well for the outlook for the share on earnings. we expect about 9% earnings growth. been a strong factor in this earnings season and more companies have been citing things getting better in their commentary on earnings calls. alix: the big concern going into earnings seasons is margins. where are we in the margin conversation?

where are we going to see the squeeze? been -- the s&p 500 net margins are elevated, but they have been flat and we are not looking for more margin expansion. i think cost cutting has run its course for a lot of areas and where the concern is, for consumer discretionary if labor costs are going up, this is the most labor-intensive factor in the s&p 500. that is an area where operating margins have been elevated and that is an area where we could see some margin pressure if these companies are done and labor costs are starting to go up. david: do you see differentiation between domestic growth, companies that are specifically domestic oriented? >> this earnings season was one where even though we had really -- relatively weak u.s. gdp growth, -- that was driven by

the multinationals and the s&p. companies that have a high proportion of their sales coming from overseas where the big drivers of the surprise, this quarter. we saw about 60% of the companies with high foreign sales meeting on both the top and bottom line, relative to a third of the companies that focus their sales in the u.s. our global colleagues are seeing that as well. europe has seen a really strong earnings season as well. a record proportion of companies surprising to the upside. we are seeing catch up from the u.s., globally the earnings picture does look strong. we are seeing this globally synchronized earnings recovery that is helping to drive the strong trends we are seeing. david: does that point you to the large cap rather than the small-cap? >> we are hitting new highs on the s&p. we are going to wait to see what happens with tax reform and

policy. we are at the point where especially for small cap, valuations look pretty stretched. the earnings trend has not been strong. we are looking large compared to small, but we found that the best predictor of the sales cycle is when earnings growth is starting to pick up and we saw evidence of that, this earnings season which reports buying value stocks over growth stocks since growth is turning to broaden out. david: that is jill kerry hall of bank of america, merrill lynch. it has been a morning for mergers. sinclair broadcasting has confirmed its deal to acquire tribune media and coach has agreed to buy handbag maker kate spade following months of talks. joining us now is bloomberg's deals reporter, alex sherman. this is not a big surprise all the 21st century fox flirted with it.

sinclair to be thought they had this in the bag -- thought maybe they had this in the bag. thely late competition for -- fox and blackstone took a look at combining and potentially buying tribune. they did in the bidding, but next target -- they did not end up getting in the end, but next target and that pushed the price level higher. david: while did sinclair want this so badly -- why did sinclair want this so badly? >> they basically rolled back a old regulation. it gets complicated. david: makes it possible to buy more television. >> that is the end result. now that they can buy more tv stations, tribune was on the table and the whole game in the broadcast tv universe is bigger is better is because it gives you better leverage, both when you are negotiating prices but

also more leverage with the content providers. david: when it comes to this deal in particular, they have said they will increase their free cash flow by 40%. anybody who knows about the broadcast business knows of course you will increase your cash flow by definition. what does it do to margins or profitability? >> unless something goes wrong, it is creative. there are some hangups with tribune that perhaps and claire was hoped -- were hoping would push the price down. it is not a clean asset. tribune does not just own broadcast tv stations. they also own wgn and part of the food network. we will see there may be to vested jerseys -- the best --

divestitures. a reputation of being a business oriented company, but there is $50 million of annual synergy. catesby has been for sale for months -- kate spade has been for sale for months. alix: record highs for the s&p in the nasdaq. deal count has been down. how does it work when you have record highs for industries -- for indices? >> everyone is guessing. there is no firm answer, but the most common thing i hear is that if the trump is going to pass tax reform, let's wait and see if we get a little more clarity on that until we do a big transformative deal. the smallest deals have not been down, they have been up. we have not seen that many big

deals that usually track -- jack up the numbers. i don't know if i've believe that, but the idea is let's get more clarity on this administration in general. let's see them pass at&t and time warner and get a little bit of sense over the ground rules. alex sherman, great to have you here to break down merger monday. subdued, wetion kissed all-time highs of the s&p 500 and the nasdaq. we are down by a 10th of 1% across the board. from new york, you are watching bloomberg. ♪

emma: this is bloomberg daybreak.

all week, bloomberg technology is live from -- david: this is bloomberg. warren buffett presided over his annual meeting at berkshire hathaway and it turns out he has a problem. he has amassed $86 billion in cash and has yet to ida way to put it to work for a shareholders. any number of companies from apple down have balance sheets that would support the real large acquisitions and at some point, it will have to either use the cash or give it back to shareholders. care to take us through the options is tara lachapelle. you wrote a piece on this over the weekend. what are mr. buffett's alternatives? he has about $106 million in cash. he needs to find a deal for it. if he doesn't, he has to decide,

does he backpedal on his comments about a dividend or can he find a really large acquisition? he mentioned something in the $100 billion range. david: at one point he even said $150 billion. tara: he likes to keep a good cash cushion. we could see a large deal. the question is, is anyone calling him? he needs a willing seller that is going to name a price and it is not clear in this environment if there are companies that want to do that and there is a lot of competition for deals. what his pattern has been in the past, what with the criteria look like? -- would be criteria look like ? tara: the stocks are not too expensive, very little debt, but also companies have gotten bigger. the targets of gotten bigger for him. -- have gotten bigger for him.

really --mpanies are with a really strong brand name, something with a lot of longevity. all of the consumer brands he owns like fruit of the loom, very big brands that will be around for a while. i did a little bit of a screening. david: what did you come up with? tara: nike, interestingly enough. he does own brooks. tara: he does. my colleague pointed out cosco. their margins are not as high as buffett would like to see, but everything else about the business makes sense. david: at the same time, he expressed concern about retail with amazon. more likelyk it is he will look at some industrial

names. 3mcomes up all the time -- comes up all the time. they have ankle monitoring for criminals and stuff. a brand like scotch. tara: or hershey. a long speculated target. it totally fits his portfolio and he can totally envision the hershey trust. what pointwhat -- at do they have to start giving the cash back to shareholders? tara: i would've thought he would wait until his successor takes over and then open that door so that investors are not surprised. it sounded like he is thinking about that now. if the cash gets too high and is just sitting there, does he need to think about returning it sooner?

it is very possible. david: thank you so much. alix: you were there, you just flew in. david: i did. seeing about candy, charlie up there with buffett answering questions and charlie is just eating peanut brittle. warren buffett was drinking cherry cokes the whole time. alix: you can watch us online, look at our charts and graphics and interact with us directly, just go to tvgo on your terminal. this is bloomberg. ♪

shetta mester -- alix: spoke earlier of the chicago council on global affairs saying it is important to the fomc to remain the clinic is on behind as we continue to make progress on her goals. joining us now is met those ller, bloomberg said reporter. no shocker she is coming out and saying it like this. is the rhetoric and the fomc turning more toward her side versus less toward janet yellen side -- janet yellen's side? >> i think yes. especially since the u.s. election, they are more focused on outside risk and kind of the idea that what is going to knock us off of this path as opposed to what is going to make them actually raise rates. the interesting thing is, some of the data inserted to look a little softer and like they are rolling over and so there is a bit of a tension that needs to

be resolved over the next few days and weeks. alix: saying the balance sheet not as big unit -- of an impact as earlier and to not worry about the credit risk on the balance sheet portfolio. what is the conversation about the balance sheet? what are we going to learn from the minutes? >> there has been talk about the balance sheet in the conversation and debate. it has been light on details. the one thing everyone seems to become a lesson around is the idea that they want to start this process by the end of the year. the question is whether we have gotten closer to hammering out details in the fomc meeting last week or if it is something that is largely to be determined. jonathan: we had david kelly on earlier and he said they should take into account the shape of the yield curve and you may have to sell some of the things that will take years to mature, the longer dated debts, to ensure you will get that steeper curve. is anyone talking about doing

that, actively selling some securities and not just taking this passive approach? on the fomc agrees that they don't really need to bother with asset sales at his point. they can let things mature and that will be a smooth process. as far as the yield curve control goes, that is getting into territory that is further than fed officials want to go because they are trying to figure out what is the impact of the short-term funds rate on the economy, let alone trying to control short-term and long-term at the same time and have some sort of affect. jonathan: is the consensus whether it is actually consensus on rates? is it more over what they want to do? >> it is interesting because there was a wider divergence on what to do with rates as well, but now there is kind of a tightening consensus on rates as well. everyone is coalescing on both fronts on what they want to do,

which is to more rate hikes. -- two more rate hikes. alix: what is the data point we will be looking at? think friday, with the consumer price index report, it is going to be big because over the last few months, we have had that slowing in core inflation. that is something that has really been propping up the consumer price index over the last several years and has accounted for a lot of gains. andal inflation is slowing that kind of casts out on the sustainability of higher inflation and that is something we will be looking out for. jonathan: helping out with this headline. the fed has stepped up discussion of fx impact on the economy. what does she mean by that? there has been this realization that with what happened over the last two years with the big strengthening of the dollar, we saw that we need to keep an eye on exchange rate

movement and not just be focused on interest rates because the exchange rate movements can have major impacts on the economy. they're going to be careful, going forward about that affect. jonathan: a week full of fed speak. thank you so much for joining us. that does it for bloomberg daybreak. inm the whole of the team, the markets, here is how the session is shaping up. we kissed all-time highs on the s&p 500 and the nasdaq, been a slight retracement. the price action is rather muted. from our viewers worldwide, you are watching bloomberg. ♪

>> it is 10:00 a.m. in new york, 3:00 p.m. in hong kong. i am vonnie quinn. mark: i am mark barton.

."lcome to "bloomberg markets" ♪ what kind of economy will emmanuel macron inherent in france? the challenges as he prepares to take command of europe's third-largest economy. the: market reaction muted, nuro falling, whether macro could spark a trump-like rally. crude oil bouncing around, failing to post significant gains. saudi arabia and russia are prepared to extend cuts. why investors are not buying the news. there is a new french president. emmanuel macron