. the u.s. and try not a great to promote shipments of american natural gas. finance ministers do not see eye to eye on trade. investors are focusing on the data, looking for evidence that consumers bounce back after a week first quarter. this is bloomberg daybreak. u.s. retail sales coming up shortly. grind lower continues, futures a little bit softer, down 2/10 of 1%. euro strength, not the story, the dollar on par 4 to best week of the year. >> all eyes on the u.s. economy. u.s. retail sales and vpi -- cpi for april. discussing monetary policy in dublin and the philadelphia fed

president delivering a speech on the economy. at 10:00, my favorite thing, universe michigan sentiment numbers, the soft data read. >> because it is michigan, that is why it is your favorite? [laughter] therade at the top of agenda and late yesterday, the commerce secretary announced a trade deal with china, exports of everything from beads to liquid natural gas. cirilli.s kevin we thought we were going to war with china and now we have cooperation. gashis influence is natural , which is a bit of a concession in some regard from the campaign rhetoric of president trump in that he is looking at this particular industry -- the coal industry may be snubbed but they feel this good help jobs.

beef and poultry is where things get interesting. the iowa governor is not been confirmed iv senate as the chinese ambassador, but driving the political policy point home. secretary ross said this will be a $2.5 billion net gain for the u.s. economy as a result of that portion. the third point is where it is interesting, details have not been fully released, making it easier for the u.s. and china to have more financial exchanges and interactions. the later of which will be interesting to see the back story on how it came to be. >> take a step back from the details. we were going to have them declared a curfew manipulator on day one and now let's have these deals. is this indicating the approach of the trump administration to trade overall and specifically with china? >> on the flipside, this is the -- largest deal

trade deal, there was something with canada. this is one of the biggest early on. that sends a signal. from a geopolitical foreign-policy standpoint, they're looking to work with china to pressure north korea. all of this coming under one week before the president goes overseas for his first international trip. >> we should give a wilbur ross credit. he did it all himself. not the way it normally happens. >> in the midst of a lot of political fire. >> thank you so much. great to have you in new york. >> we have the morgan stanley u.s. chief economist. and the jpmorgan global market strategist from london. one sector and country at a time.

the news, but how long will it take -- good news, but how long will it take? the news, but how long will it >> dig deep into what it may mean for trade flows or their sectors. and then the lobbying begins. that is why some of these can take a long time to be put into place. this is good news. >> what is important, the content of agreement or the direction of travel? >> direction of travel, the biggest challenge for emerging markets and the global growth picture has been a stagnation of global trade. the fact that, from a country that was previously labeled in the campaign to potentially being a currency manipulator and now a symbolic trade deal spanning not just into natural gas but all sorts of this subsector's and seven history's is a strong point that trade in the world may be stepping in that direction going forward, especially with one of the largest partners such as china. we are oversupply in the

market, you have russia building a chief of pipe like to asia and a -- and natural gas coming from australia. we say we can export more to china but that does not mean we do, so does not mean anything for the trade deficit or gdp, or will it? >> hkn, but beyond a reasonable time frame for what economists and market participants forecast out. you will get immediate reaction in futures around certain commodity prices. but where the trade deal comes to bear is so far out in the future, depending on how long it comes into place and how it affects flows. short-term trading it is on the new. >> you find this is better for sentiment but not like you will go by a beef reduce are in the u.s.? >> i would agree. learning from the political sides of markets is that it takes time for it to get

implications in the market but the symbolism is more important with the trump administration and global trade relationship with china. the question of soft and hard, you see data camp where a positive reaction from analyst and market participants. where does this play out in the specifics earnings projections for specific companies remains to be seen. >> what is the direction of travel? what is the objective, the trade deficit? the objective to get the trade deficit to zero, why does that make sense in terms of the world of economics? why is that an objective for the white house and should it be? >> always it has been a policy objective for administrations. the trade deficit getting down, means you are -- you have more savings in the economy that is not flowing out of the u.s. and a smaller current account deficit which puts less pressure on your currency. it is generally the economic thought is that you should not

run large trays deficits -- trade deficits. tohas always been a goal and this administration, the trade deficit represents unfair practices. ideally, you would not want a trade deficit because it means , in some sector or with some trading partner, there are unfair trading practices. some of it is symbolic but if you are always striving to getting rid of the trade deficit with another country, you must be striving toward more fair trade practices. it is not a good, sensational story as the trade deficit. you mentioned, we thought we would be in a trade war with china not long ago, one of the symbolic data points with the administration was able to point to was the trade deficit with china. >> what is the take away? you have a deal between china

and the united states, the g7, they cannot agree to talk about trade anymore. what does that mean for the future of global trade, if that is the new way of doing these deals? -- i am notsee that worried that we will not get trade deals at all. we knew coming into this election cycle that, whether it was a hillary president or a trump president, we would probably step back from globalization for a time. good, overall, this is because it shows we are not necessarily stepping back from globalization. we may be stepping back from bilateral trade deals to -- and instead unilateral trade deals, but it is still trade and keeping trade open. >> is this a story right now of the dog that did not bark? right now innvest

these exporters by you will not be hesitant to invest in general and exports to the united states. elected, people were concerned that exporters would be disadvantaged and maybe that means they will not be disadvantaged. point. is the key with looking at emerging-market equity flows, how much the exporters are really hurt after november. the flows of come back. with what recalibrate actually has been said and what can get through in washington and through the chamber where the trade deals are decided. it is a slight change in their readjustment to not all exporters should be couple of the aborted and you can pick and choose the one that have the benefits. this is a more symbolic news point than to completely reallocated now based on just the u.s.-china trade deal. >> the markets six month ahead of the political analyst gus r -- everything has skyrocketed. >> the currency molecular test

manipulator -- you don't call them at. >> they said the reason they are no longer a currency manipulator anymore is because donald trump told them to stop animated. >> thank you for explaining the fx markets to us. up, more on the top story, the trade deal with the secretary, wilbur ross joins us at 8:30 a.m. eastern time. later, an interview with the chicago fed president. the new york city this friday, this is bloomberg. ♪

>> i have your bloomberg business flash been spreads has started a merge with t-mobile talks. executive from spreads largest shareholder and sprint have had informal contract -- talks -- they would be open to discussion about consolidation. france, a $4.2 billion deal, the companies are controlled by billionaires. it would unite the media part with the marketing and advertising assets. it is the biggest ipo in south korea in seven years. it climbed almost 4% in his first day of trading, the mobile game developer has a market value of $12.4 billion, more than -- more than one of south korea's best-known corporations.

that is your bloomberg business flash. >> u.s. consumer price index and retail sales number for april will be out in one hour and 17 minutes. they take on special significance given the soft numbers in march. you have models you follow ,losely with the u.s. economy what are your models telling you about the growth rate right now? should we be worried about the numbers we just had? >> no, the fed as well telegraphed, transitory factors that held by growth in the first quarter. those have come off. we are tracking a pretty explosive rebound in the second quarter. our traffic fluctuates around 4%. the biggest delta is being driven by the consumer. >> 4% is higher than i would've thought. extrapolate that for the year, the soft numbers in the first

quarter, what do you expect for the full year? >> on track for a few tense higher than 2%. in the pocket of the two-person economy. .- two-person economy not -- 2% economy. not high sentiment around change that would be coming from fiscal policy. we do not think that comes until early next year. this is an economy that has been knocked off track nor is it an economy that has sued -- a new lift to growth. we are still around to present but i'm not worried about the consumer. that was an eye-popping number, close to flat for the first quarter for the consumer that a lot a very temporary factors in that. the consumer is just fine. >> you have cpi and retail sales, consumers, are they find? >> yes, look at the confidence numbers, they are soft, you can see them translate to retail sales but last month softer numbers is an example of one

data point not constituting a trend. we expect if not stronger numbers today, the trent to pick up and recover quite a bit throughout this year. looking at other factors that affect the consumer is a and limit, those numbers are doing just fine with initial jobless claims at lows and jobs added every three months, job support seems quite good. that is the key for an economy that 70 plus percent, you need people in work and when they work, and an ever tightening labor market, that will lead a strong support for the u.s. consumer we see and we like in the models. generalizations, the wealth scare on the consumer, subprime automobiles are bubbling away and loan origination in many of the bank when they recorded quarterly numbers, they were not terrific. are we seeing a weaker consumer down near the bottom end of the while scale that could bubble up? >> if you look at consumer confidence by income groups, it

looks like a barbell. the wealthy have lower confidence, the low on the income scale have low confidence. in the middle, this explosion in confidence. i would like to see people happy across the board. you can get more robust involvement in consumer spending across income groups, if you see that. nevertheless, at the end of the day, a very good point that we are still creating jobs. that means wages are still growing and people still have money. that is very important. so goes the job market, so goes the consumer. the subprime auto issue, typically, late cycles, you would start to see credit conditions for the household sector or credit quality deteriorate, it always starts at the bottom up. it can start several years before the end of a cycle.

i take that as normal late cycle funds. there is a question of the on sentiment, of people parting with the cash. auto sales were disappointing. does that give you pause about the consumer situation? >> it should be wrapped up into a little bit of a weaker first start -- first quarter in terms of sales. watching the oil price move dramatically in the past six months could have affected the consumer in terms of thinking about auto purchases for the course of the year. i would say that we are not necessarily worried about this very court large diverse part of the economy that benefits as the global growth cycle picks up and as jobs pick up in the u.s. one thing we speak a lot about is the consumer balance sheet, the income effect from slightly higher interest rates in the u.s. as the fed it normalizes, should help a lot of the savers in the u.s., not necessarily the middle of the barbell, people

who have more in cash to be the lower end of the income spectrum , benefiting in terms of those who have the accounts in interest-bearing liabilities. interesting to think about in terms of fed policy helping another part of the consumer space in the u.s. >> why do we see we consumer loan demand? -- weak consumer loan demand? >> nothing has changed for the consumer. we are still creating jobs and wages are still growing. we do not have more money in our pockets just because we have changed leadership in the u.s. personal income tax cuts will help, help lift a real disposable incomes. otherwise, if you look at disposable income, it has been on a significant slowing trend, which is typical late cycle. the only thing that can turn that around is either wage growth really accelerating, notably. or we get personal income tax cuts.

while consumers feel great, it has not translated to more money in their pockets yet, that is what will drive loan demand. cpi, a huget, disappointment in march, your expectation for today, was march a fluke? >> yes, the fx of changing global inflation dynamics come to a boil in march, we expect slightly higher, definitely higher number for the next month. generally, inflation is picking up and you see consumer spending more and more month on month. the fact the fed has remained confident about getting to their and maintaining there to present target makes it quite comfortable -- 2% target, makes it quite comfortable in the u.s. economy. usthey are both staying with . coming up, more on the top story, u.s. trade deal with china. we will talk with wilbur ross at

a: 30 a.m. eastern. at 1:00, i will speak with the -- wilbur ross's predecessor. live from new york and washington, this is bloomberg. ♪

♪ lowering thenley probability of a u.s. recession over the next 12 months to 25%. give us the 411. >> we see the strong pickup in the global growth backdrop, which is driving investment in the u.s., a stronger domestic economy. reform.delight of tax we think work together -- the delay of tax reform, we think work together to get that 25%. >> we thought we would get a tax cut and we have all this money ?nd a huge cycle

do you see it picking up without that? >> we see, without the stronger global backdrop, demand for u.s. exports has risen strongly which started over the summer of last year. the trade activity numbers turned up for the global economy . large business in the u.s. and investment has picked up because they're exporting. we think small and medium businesses are participating in the investment rebound because we have seen hiring among those sized firms accelerate over the past six months or so. even without tax reform, we are getting a nice increase in investment. the biggest upside surprise in the numbers this year is investment. that is key, because come on top of that, if you deliver a structural tax reform that also creates bigger incentive for companies to invest, you can sustain the cycle. you set the delay was

positive, most people say the sooner, the better, why do you say that? >> late cycles, a firm promise is better than a delivery. upon delivery, you may get disappointed. as long as we get a firm promise that it is coming, that markets can better digest that and say, something will happen but we do not see a lot of fiscal hope built into the market which gives me comfort, because if we do get disappointed later on, less of a knee-jerk reaction. >> does growth peaked for 2017 in this quarter? q rate of 4%, that will be the biggest because that is because it is a rebound rate from the first quarter and will probably's total around the 2% growth path, let's see what comes from fiscal policy next year, if we get income tax cuts, something on the corporate side,

you can have late in the cycle, stronger growth in 2018 them 2 -- than 2017. >> coming up, back to tray, wilbur ross midgets the deal on china and the comedy g7 with the form -- former fed governor. we will be live in italy. the home of the clan -- farro caln. ♪

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delivers consistent network performance and speed across all your locations. fast connections everywhere. that's how you outmaneuver. so new touch screens... and biometrics. in 574 branches. all done by... yesterday. ♪ ♪ banks aren't just undergoing a face lift. they're undergoing a transformation. a data fueled, security driven shift in applications and customer experience. which is why comcast business delivers consistent network performance and speed across all your locations. hello, mr. deets. every branch running like headquarters. that's how you outmaneuver. ♪ >> from new york city, i am jonathan ferro and you are watching bloomberg. about one hour -- two hours away from the cash open with futures a little bit softer and the dow

down 13 points. .t has been that kind of week the price muted but a slow grind lower. after three weeks of gains, we could have a week of losses on the margin. treasury yields have been slowly grinding higher for a fourth week. a little bit lower on the day, down by a basis point of 238 on the u.s. 10 year. euro weakness throughout the week as we fated the macron win. donwn.llar down by -- that is the situation cross asset and let's get you up to speed on the headlines elsewhere. >> the trump administration could ease the volcker rule. treasury secretary steven mnuchin has ordered five agencies to review what is allowed under the rule which stops make from betting on

markets with their own capital, critics say it has made banks to conservative and has dried up liquidity in certain markets. saudi arabia is preparing to cement ties with president trump by making investments in the u.s. that are unprecedented. saudi sovereign wealth fund will announce plans to invest as much as $40 billion in u.s. infrastructure according to people with familiar. that may coincide with the president's visit to saudi arabia. jes staley responded to emails from an imposter pretending to be chairman john mcfarland according to the financial times which says the center criticized the barclays shareholder who thought to get rid of staley at their general meeting. he responded with brace for mcfarland and cited his grit and compared him on the guitar to eric clapton. global news 24 hours a day, powered by more than 2600 journalist and analysts in more than 120 countries. this is bloomberg. apparently it was a

disgruntled customer who set up a gmail account and pretended to be john mcfarland. the males continued. -- emails continued. received aarrived -- point, the last line was revel eyes.eir bloody ry oute line spelled whistleblower with the first letter and he did not pick it up. >> he has a lot on his plate. >> may be too busy. --have you taken seriously how do you taken seriously -- take him seriously? >> anyone familiar with john mcfarland, he is not the guy who oems. you pollens -- p >> jes staley is looking for

help were ever he can get it. -- wherever he can get it. >> jcpenney's top sales down 3.5%. it reaffirms its full-year guidance. pretty brutal for the company. $520 million in outstanding debt. it reaffirms its full-year guidance. share.s of $.58 a >> it reminds you of macy's which was down 5% comparable stores. not good news for retail. >> adjusted earnings came in six cents, it did return a profit on an adjusted basis. >> stock down 3.6% in the premarket. in europe, the finance minister and central bank governors from the g7 nations gathering in italy, the first meeting since

the g-20 in germany where there was disagreement over trade. trade has been taken off the table and left for the heads of states. joining us is matt miller. and whatn the agenda is not on the agenda may be more significant. .> that is interesting officially, trade is not on the agenda but it seems to be the only thing anyone is talking about. from the italian finance minister to the japanese bank of japan head, everyone is discussing trade. whether you call it free trade or fair trade, mentioning protectionism or whether you call it rules-based straight. it seems to be the only -- rules-based trade. the only thing everyone is talking about but not on the

agenda. >> what about greece? >> greece is another thing they are discussing on the sidelines. not part of the official program. they expect to get a deal, according to european commissioner who we spoke to last night, he said he's optimistic that by may 22, they will get a deal, that is when the euro group meets in brussels. they hope to use the swap mechanism using european debt to debt, the imfmf are more sticklers for payment schedules and budget forecasts than the eu. much more conservative than the eu. out the debt, it may bring the imf on board more easily. >> you got to go to the south of italy, you did not draw the short straw. >> he is jealous.

>> it looks awful. >> and looks beautiful, that it looks beautiful. beautiful. >> right in front of jonathan ferro's house. >> i wish bit weird version your time. -- i wish. we appreciate your time. by mario draghi that the recovery in the region is getting stronger. joining us now is the head of fixed income strategy. the story with europe, people getting more constructive and the fact they have to talk about greece g7 tells you the problems are not solved but does it matter foreign investor? >> the cyclical force that is creating this optimism around beene as inflows, this has

multiple years of qe. it better work at some point, you should be growth, you have paid a lot for it. is it sustainable and will inflation be sustainable? the other side, the darker side, at some point, qe has to end by its design, technicality around how many bonds it can buy. as long as europe is on an upward trend and we see a pullback from an ecb taper, that will be great for the bond market in addition to the equity market. forow difficult will it be president draghi to move away from the kind of policy they introduced without having a significant backlash in markets? >> it will be easier in europe japan.an -- than the tricky part is the fed experience, you have the taper tantrum and the markets moved.

ever since central banks try to minimize their footprint, although they are the footprint in the marketplace, try to avoid creating disruptions in a onelity, it is not homogeneous bond market in europe, there will be winners and losers and spreads that will widen. >> most recent numbers in europe next -- suggest growth is picking up and inflation is dropping. does that give mario draghi more flexibility, particularly against germans worried about inflation? situation in the country, we have not seen across the world compared to the u.k. where inflation is going down but rope is strong. the german numbers proper that british, u.s., french growth numbers for the same time are a good sign that the ecb policies are working and they can have a little bit of wiggle room. they have a whole 18 other countries to worry about.

it is not just germany we should focus on but being the largest economy in the eurozone and a big exporter to the rest of the world, two thirds of european equities source the revenues from outside of europe. that positive global growth story will play out well in europe, a reason we are positive on european equities from a multi-asset perspective. >> we have seen in the united about it fromrd mark carney in england, more and more employment but not the ways pressure you think. is that taking place in europe and accounting for the lack of inflation? exactly, we get into where is the rate of unemployment that starts to spur the positive way growth -- which growth across europe, we have a ways to go with the unemployment rate in europe. a huge range between german unemployment and spanish or italian unemployment, as long as it for free countries have a weak labor market, the wider eurozone cpi numbers will not increase in the way you see some

countries that are having a tight labor market do a lot better. there is a lot of work to be done in the employment space and europe, but that does not tarnish the broader positive upswing we expect throughout this year. >> you see yields moving higher by the new york fed believes that paper yesterday that, for the u.s., safety and liquidity that has driven the rates much lower. is it the same situation when it comes to bonds, when you need liquidity and safety, why would you be selling them? >> a buyer base in terms of the banking system and they have a preference for liquidity, that will always be in the super sovereign, we call it guilt. if that is the case, that is fine, what is the right price level? this argument that qe was meant , should ites loaded not operate in the same way? not one for one but, as they pull back, you should expect

some sort reaction from the markets, we have not had that, we have yields well contained everywhere. >> we appreciate your time. much.you very coming up, the former fed governor will be speaking to us from italy. later, more on the u.s. trade deal with china, a conversation with the secretary of commerce wilbur ross. you are watching bloomberg. ♪

♪ >> this is the hewlett-packard enterprise greenroom. later today, trails evans, the president of the federal reserve bank of chicago sits down with us.

to your bloomberg business flash. a breakthrough in trade talks between the u.s. and china, an agreement will allow more exports of u.s. natural gas, and american beef will have greater access to chinese markets. the u.s. will allow the import of cook's chinese poultry. for an interview with the u.s. secretary of commerce wilbur ross at 8:30 a.m. eastern time. a dramatic turn in the legal battle about driverless cars, etc. to go judge has asked federal prosecutors to investigate the claims made with trade secret lawsuits against uber. not saying whether a criminal cases warranted. givene in delaware has approval to walk away from its $40 billion merger with anthem, it happened three months after

another judge blocked the health insurance deal for anti-competitive reasons. it means anthem could have to pay $1.9 billion in breakup fee is and $13 billion in damages to cigna. in the treasury market, two options, a 10 and a 30 year auction, both had weaker demand. 30 year yesterday, wall street had to buy the most since september. george, what did you make of the auctions this week? >> the trio, including the three-year, that was all week. -- weak. our auction stats, like the taper tantrum. it is usually a harbinger of something to come or perhaps not. the market cleared and we had yields lower than we were at the auction levels. it shows there is a tug-of-war between supply and demand factors that are driving the

bond market. >> the short are really rolled up and the net positioning was long. are we learning anything? no, there is a stalemate you are describing has happened and no one has a clear prediction, especially off the curve. the idea that how high can the fed raise rates? 240 demarcation line around in the 10 year is critical, the technical charts company technicians are pointing to a convergence we had to break out. if we trade sideways long enough , we break this reflation concept for good. the move from the brexit low in yields to the trump election high in print and yields and the continued rise of right did it took us almost two 270. if we cannot get back on track, the bond market -- >> in the bond market this week,

a twitter account for jeff. fascinating and real entertainment. he said, the ten-year treasury auction, where are the investors who turned a bullish at 217 talking about a 1.5% target, buy low, sell high. the market was super bearish. yields right is lower and the market got bullish. going?o you think we're >> there were some not economic, low yields, that should not have done so. a lot of it was fear of what is going on geopolitical he and people are starting to get cooler heads and figure out where valuation should be. we think will -- we will have a move towards 270 but not sure if it will be at this juncture. that,gan stanley said what is happening with the risk

parity funds show that they are more weighted to equities than bonds. do you agree and are we looking at rotation? we would agree from a multifaceted perspective that equities do look a bit more attractive at the moment, given the big theme we are talking about, global synchronized growth. that with central bank starting to ease off a little bit on the qb at low rates row graham, makes us think that the earnings out of the equity space look a bit more attractive. the fed, we place a call for june for the next rate hike and perhaps another in september and they will have to address the balance sheet issue and we like that in more december or later in the 2017 meeting. a normalizing fed next is a bit more enthusiastic about equities. -- makes us a bit more enthusiastic about equities. >> thank you. the trump administration starting a process that could ease the volcker rule on wall street banks. steven mnuchin has ordered five

agencies to review what is allowed under the rule which bar betting on market with their own capital. he went to italy yesterday to meet with top g7 finance officials. randy kroszner of the university of chicago school of business joins us from italy, he chaired the committee of supervision and regulation of banking institutions during his time as the fed government where he took a lead role in developing responses to the financial crisis. a pleasure to talk to you. yes, we do note, want banks betting with their own money, but it is hampered liquidity and the ability for banks to deal with her client. what a miserable should be adapted -- what in this rule should be adapted? randy: we have to think about unintended consequences, it was a good motivation for it. you do not want people to be able to gamble with other people's money and not have to pay for that.

however, this is not had the best impact. it has had unintended consequences of potentially reducing liquidity. it has been it difficult to -- it has been difficult to enforce on the supervisor side and the bank compliance type. it does not pass the cost-benefit test. hashe treasury secretary called regulators and said take a look at this and see what you can fix without congress. how much of what needs to be done does congress have to do and can the administration do it on their own without congress? randy: it depends. for example, the volcker rule is part of the dodd-frank legislation. it will be difficult to fully eliminate that. the of limitation of it could be much less burdensome, focusing on just risks that banks are taking rather than on this long list of compliance issues that do not have that much to do with risk and are much more of a distraction than the fundamentals of risk taking. >> does it need to be limited

altogether? we have had just eliminated altogether? ceos of bank say we do not it eliminated, just more common sense, is that enough to get the job done? >> in a lot of areas, they could be helpful. having a clear cost-benefit way of approaching banks, focusing on the issues of risk, rather than on compliance or a check the box set of issues. , careful cost benefit analysis a careful analysis of where the risks are in the system, we could get there. >> what areas of the markets do you think need to be focused on? where has liquidity been impacted the most, where we should pay attention to? >> we have seen some flash crashes in different markets. we are not sure what to attribute those to. we are not sure exactly how much is the volcker rule itself, but

a combination of higher liquidity requirements and higher capital requirements, the volcker rule, and other things that made it more difficult for firms to make markets. if the markets are not as deep and liquid as they once were, we have seen that in bond markets, you could have more volatility. it is not the intended consequence of the regulation. we want to make the system more resilient, the more fragile. >> if you are an investor, and betting on the banks because of is that alation, correct bet, or will we get deregulation late? >> i think we will get some sort of regulatory reform but in a competitive market, that does not mean the banks will become more profitable. if we reduce compliance costs, that will make it easier for banks to do the functions they will do, less costly for them to do it, but in a competitive

market, the main beneficiaries will be the people using the services. i am not sure it necessarily means a better return for the banks, but better return for people who are dealing with banks. >> i want to turn to financial stability and the risk as follows, is there a bigger financial stability risk at the federal reserve maintaining a balance sheet of four-port $5 trillion -- $4.5 trillion, or unwinding? >> that is the $4.5 trillion question. it has to be unwound over time. doing it in a gradual and gentle way is important. it is liable that the fed has raised the issue early on. that came out in the previous minutes of the fed meeting. we will get minutes and another couple of weeks where i think there will be further discussion. it is important to have that discussion. make sure, when the unwinding occurs, it is not disorderly.

>> how can you make it not disorderly and do it in any kind of size at all? you can say it will take 10 years, 20 years, and say it will not be disorderly, but will they want to do it quicker and do they have a size in mind, what would you think about if you were still in the fed? randy: what if you were just allow the balance sheet to roll up naturally? ten-year treasury securities bought nine years ago, they start to measure, do you replace them as mortgage-based securities start -- people in the mortgage backed securities, as they reap a mortgages and -- do you replace that? that is a gradual way to have the balance sheet rolloff. the new york fed did a study of this, if there allen she would go from $4.5 trillion to $2.5 trillion, this natural oh -- evolution would occur through 2021. that is a reasonable way of having the balance sheet decline

in a gradual way without causing disruption to the markets. we may want to move more quickly but we have to be very careful, if we do, to study how to do it in a way that is not disruptive. >> talk about volatility in the markets. even if you do it gradually, it must be the case that, having such a big buyer coming in and owning the securities has reduce the volatility in the trading, and therefore, if you reverse it, it will increase volatility. >> not necessarily. it might. what you describe is a possibility. it depends on how deep, liquid, and robust the markets are. if you have a strong market infrastructure, perfectly fine for those to come back onto the market. if it is done in a way that is only through the maturing of these securities, so there is not replacing them, that will be putting much less of a burden on the market, much less stress on the market than if the fed

decided to sell $1 trillion of securities, that would be more difficult for the markets to handle. >> randy kroszner, we appreciate your time, a former fed governor joining us from italy. low -- vix a 24 year at a 24 year low. what is the effect of term premium, 10 basis points? what is the equivalent? >> we have never seen this before so we have no idea how it will work. >> and either delay -- and neither do they. ♪

♪ jonathan: breaking down trade

barriers one country at a time. the u.s. and china agreed to promote shipments of american natural gas. finance chiefs in italy do not see eye to eye on trade and are leaving it off the agenda altogether. for investors, it is about the data. looking for evidence consumers bounced back. the data drop in 30 minutes. from new york, you're watching "bloomberg daybreak." i am jonathan ferro alongside alix steel and david westin. 30 minutes away from the data down in the united states. futures down five points on the s&p 500. grinding lower on the week. yields up by about one basis point on the u.s. 10 year down to 2.38. euro-dollar up by 1/10 of 1%. alix: time for your morning brief. from consumer numbers

april. at 9:00, charlie evans discusses monetary policy in dublin. economy a speech on the at judge so university. numbers, sentiment released. bigd: let's get back to the story overnight. the trade deal announced by wilbur ross, the commerce secretary, saying there is a new trade deal with china covering liquid natural gas to financial services. here with us is kevin cirilli to take us through it. .alk to me about the politics because donald trump campaigned on an anti-china. matt: current -- kevin: currency manipulator. david: does this fit with his base? kevin: polls suggest his base is within regardless of what he does. i would make the case that if they can make the case this

creates jobs, he will be ok. but you are right. there is a layering omission in this trade agreement. that is with the coal industry. this is a win for the natural gas in the sense that they are arguing that that will lead to more job creation. the other components are beef and poultry and other exchanges. another thing not in here is something the previous administration and some environmentale on protections. afters a reset with china a brutal campaign rhetoric and away into trump and the administrations of pressure china to work on north korea. david: what do we know of how it goes from here? trade that with china

in the trillions of dollars. what will this do to put a dent in that? kevin: secretary ross says this would yield about $2.5 billion with regards to the poultry industry alone. but this will hardly make a dent. it will be interesting to see what secretary ross says on bloomberg. alix: joining us now, lew alexander from nomura. as well as jean medicin, joining us from carmignac investment committee member. so you heard the setup. what would be your first question to wilbur ross? lew: is this enough? this was, in some sense, signaling the meeting between xi and trump. it is good in the context of that, but the real question is

does that really meet his objectives? these are all good things, but they are small. they will not dramatically change the u.s. relationship with china. jonathan: is a good news for investors the direction of travel from the administration? isn't this latest agreement validate that move? jean: a grade. the direction of travel as a matter of policy that will not disrupt the trade environment massively if we look at this disagreement. it does not really change things dramatically, but it means everything economically related will come to the floor and be much more important for investors that any kind of section that may come from political disruptions. g7 isan: speaking of, the in italy.

they are not talking about trade, because they cannot agree about it any more. what is the story for the g7 and that type of institution as they meet and have conversations? and then the deals that have been cracked with china and the u.s. one-on-one? lew: first, i am sure they are talking about trade behind-the-scenes. broader macro coordination, this is a good moment. the u.s. is doing ok. japan is doing better. in that sense, there are no big issues. but ultimately, they want to guide to get -- try to get trump to behave in a way that the u.s. is part of that system. a little deeper. we have retail sales and u.s. cpi. the story is a consumer withholding everything up, but march put a dent into that. how critical is this data drop?

jean: i think we expect from the beginning of the year that with inflation accelerating in the u.s., consumers may be under pressure. what is nevertheless interesting there has been confidence of gdp in the first quarter, like an investment or exports, that have been doing well. with regards to the discussion on trade, one reason people are more relaxed is we have economic recovery, which makes people and countries in a lot more collaborative mood. we have seen german exports, chinese exports, japanese exports being strong, and u.s. exports as well. everyone now is a winner. that makes things easy to handle. david: that is reassuring,

particularly since you are sitting in europe. but there are some indications there may be some cracks. certainly the united states, and china, with some pmi numbers. do you see any indication that global growth has peaked? jean: it is clear that reflationary trade needs more selectivity and you need to be more precise in the way you want to capture this trade. acceleration of the chinese economy on the back of stimulus last year is rolling over. hasnitely, inflation negatively impacted consumers. but part of the inflation -- thatation came from we are now seeing the energy impact in inflation numbers

which may support consumption. overall, it is not calling for being ecstatic in terms of the growth. the overall expectation is still low. but we are in an environment where, as active investors, you can find good investment opportunities and ideas. jonathan: this time last year, everyone would be freaking out globallobal troth -- growth driving the 10 year yield into the floor. now, it is better. some people point to china as being the epicenter of that. the data has started to soften. snapeason is maybe that back is tainted. we will not roll over but we will not improve with the trajectory? lew: there is mixed story from china. i think when you look over the

course of years, it will definitely be weaker rather than stronger. i do not think that happens quickly. export out of the region continues to be positive. i think growth will slow in china the course of the next 12 months, but it will not fall off a cliff. there are obviously financial needsis -- imbalances we to worry about, but there's nothing to be worried about. thank you. more on our top stories and that trade deal with the u.s. commerce secretary wilbur ross, who will join us in about 30 minutes. later, an interview with chicago fed president charles evidence -- chicago fed president charles evans. this is bloomberg. ♪

♪ jonathan: in europe, equities have seen record weekly inflows. german economic growth accelerated to the fastest pace in a year, underpinning assessments made by mario draghi that the region's recovery is getting stronger. still with us, jean medicin and lew alexander. i want to talk about these record inflows and how instructive people are becoming on europe. relative to performance we have seen in european equities already. gains over 10% in italy, france, germany. the question is are the big gains in the rearview mirror, despite the rhetoric and sentiment turning positive the last couple of weeks towards europe? where we areforget coming from. so many years of disappointing

earnings. for the first time this year, we are actually on the verge of delivering a more than 10% earnings per share growth. i would say we have not even seen some for -- form of aggressive expansion in europe. nevertheless be more careful that in europe, we have many corporations which are global by nature. if you really want to capture the european economy improvement, you have to be selective in terms of the sectors and stocks you are buying because when you are buying some of the big stables in europe, you are buying mobile growth, not europe. we like the banking sector in europe, which is very representative of a sector which is renovating and is also still domestic. question toput this

a lot of investors. if you say they want to buy the global story, but they buy it from your because of cheap evaluation. why by the domestic european story -- why buy the domestic european story? jean: well it is not very obvious that european stocks are much cheaper than american stocks or even emerging stocks. has aope as a whole market, but the reason europe as a whole is cheaper is down to the cheap and attractive valuations of the banking sector. so i think banks are a sweet activityapture this and also this valuation opportunity. alix: morgan stanley was out with a note that stock sectors perform when there's a three-month outperformance.

where is the biggest miss price? think we tend to look at one or two or even three months view. we have to give ourselves a little more visibility and a little bit of a longer time horizon. definitely, if you want to capture the cheap evaluation of europe, banking sectors is a nice place to be. it is not the only sector where if you are very selective on a case-by-case basis you can find attractive opportunities. if you look at one of our holdings in the automated sector, this is a company which is exposed to the rest of the world economy, in particular to russia and brazil. have verye encouraging signs from car sales in russia this morning. so you can also buy european companies for global exposure, timesy renault for six

their exposure and then by coal from them, for less than one billion euros. so this is an example of where you might find some valuations. alix: we hear about the u.s. versus europe valuations in stock. now we have germany growing faster than the u.s. will we hear that story represent itself in the economic front? lew: for a little while. i think the q1 number was too low. i think it is probably more like 2%. but there is no sense in that -- there is no question in a relative sense europe is doing better. that is probably a store you will hear a lot of. david: it also appears to be undeniable that u.s. stocks were withvalued in comparison

europe. how close are we to full valuation at this point? lew: i am not an expert on europe. in the u.s., it is hard to justify their we are given the outlook for growth and what will happen with that said -- the fed. earnings,the s&p 500 the estimates here on bloomberg, yesterday -- in a year earning 16.5 times. times,p, 13 times, 16.5 how much can that close from here? let's not forget two things. a 15% has been trading at to 20% discount to the u.s. part of the discount is historic by discrepancy between the index. let's not forget also that part of why american corporations have we have this discounted to

the leverage of american corporations, which is a lot more aggressive in europe. i would say the main story for european stocks is selected stockpicking in terms of cheap names you can find in europe. more importantly, it is about the gross potential and acceleration of the earnings. even if you were to assume the multiple discrepancies were not to close aggressively, you have more earnings power in some selective sectors and stocks of europe. medicin of carmignac and little exams are -- lew alex ander of nomura is staying with us. and we will talk with commerce secretary wilbur ross. and we speak with the former u.s. commerce secretary.

this is bloomberg. ♪

♪ i am emma chandra with your bloomberg business flash. barclays ceo got prank. he responded to emails where the barclayscized shareholder. staley responded with praise for mcfarland. preliminary talks to merge with t-mobile. executives from sprint's largest shareholder, softbank, have been in contact with deutsche's, calm -- deutsche telekom. that is your bloomberg business flash. alix: thank you. joining us from princeton is alex sherman, who wrote that

story. it has been three years sprint has had this love letter to t-mobile. what stage are these negotiations in? alex: we are still in the informal stage. what does informal mean -- we do not know. but we know that banks have not been hired across the board yet. when things become more formal, each side will pick banks. this will be a wall street bonanza if this happens. softbank will use a bank, sprint will use a bank or banks. bank or will use a banks. georgia telecom pull use a bank or banks. because softbank owns 80% of sprint. mosteutsche telekom owns of t-mobile. so all of wall street has been jockeying around this, thinking these sites could come together. we learned softbank and/or to telecom has had at least informal talks since the wireless spectrum quiet period

ended. wireless companies have not been able to talk to each other for more than a year because of government options of wireless spectrum's going on, and the government did not want them to talk m&a, because they could potentially collude and not bid on these wireless options. that is why these talks are starting up again. david: how informally are they counting on a looser regulation of mergers in washington? i think quote eminem, these companies have one shot to do this. that is why i think they are doing it. in a democratic administration, this deal will not get made thet blank is, in fact, democrats come to power. ins deal would not get done the obama administration. i'm sure sprint and t-mobile are thinking maybe in the trump administration this deal would get approved, but that is still

a maybe. you still have no idea how the doj with think about putting for wireless companies into three, particularly when t-mobile has had so much success gaining customers and pulling customers away from at&t and verizon. jonathan: wiest have a guest who would come onto the program with me. he would have a song given to him and would have to quote a verse from the song in answer to a question i asked. he shared it with me before he came on. so i am wondering, alex sherman, getting eminem into a report. alex: you have to appeal to the younger demographic now. is not thatt eminem young anymore. alix: exactly. still with us is jean medicin of carmignac and lew alexander. google, bankapple,

stocks moving higher. what is your bet on tech? jean: we like the technology sector and have liked it for a while. what are the issues we have is we have a bigger and bigger concentration of performance on the negative number of stocks. you take the five larger tech companies, they basically have the same market capitalization. the name of the game is you think of the winners, for example facebook or amazon, that have strong earnings growth potential, but also to diversify ,oldings, whether in the u.s. like in the cloud business, or even the rest of the world. like their apparent america e-commerce player.

where basically, you can whileify your risks maintaining high convictions on the stock you light. outsidending good ideas of more and more concentrated markets. ofathan: jean medicin carmignac and lew alexander will the with us. coming up, cpi and u.s. retail sales data. we will bring that data and market reaction, and an interview with this man here, nobel laureate angus deaton. with the data just around the corner, you are watching bloomberg. ♪ these days families want to be connected 24/7.

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it all adds up to our most reliable network ever. one that keeps you connected to what matters most. ♪ from new york, you're watching "bloomberg daybreak." i am jonathan ferro. we are seconds away from the u.s. breaking data. futures -- down 19 on the dow.

500 negative four points. such of the board -- treasuries. yields up by one basis point. 2.38 on the 10 year. potentially the best week for the dollar so far in 2017. let's begin with retail sales. , in a little softer on the headline number. the estimate of 0.6%. the previous month revised to positive 0.1 from -0.2. strip out the noisy oil and gas numbers, that comes in at zero point 3%. relative to the estimate, that is softer. 0.4 was the estimate. they retail sales control group for the previous month also revised higher to 0.7%. the actual number four april,

0.2%. -- the actual number for april, 0.2%. onth after month, we come on estimations. sales numberretail a little softer, but the revisions are positive for march. alix: the idea is businesses have pricing power is the question. through,data to go jean medicin and lew alexander. what is your biggest take away from the data dump? lew: retail sales are coming out of q1. weak before. you may mean a little less momentum coming into q2. alix: how about for you?

when you look at this, are we looking at a consumer that is stable or growing or weaker? jean: i think it is the goldilocks scenario, where we are growing but not too fast or not too slow. it is actually pretty supportive for financial markets, and in particular are this number calling for moderate and gradual normalization of monetary policy. alix: also how broad-based we are looking at. retail sales increased at nine added 13 categories. when we get headlines out of jcpenney or macy's, is it all about amazon rather than a commentary about what is happening with the consumer? lew: department stores are becoming less and less representative of what is going on overall. i think you have to look the on that. the other thing i would note is cbi was also below expectations.

it came in at 1/10. that is one of the things that jumps out as well. month ofsly had a weak the prior month. i think the market was expecting more of a rebound. i do not think this will change the trajectory of the fed but it inflation,ss core which is probably the single most important thing the fed is looking for right now. jonathan: retail numbers are noisy when you compare upward revisions from where we have come in before. but headline inflation numbers, and let's just take 0.2%, the ve factors from the commodity market, they were not going to be there at the back end of this year anyway. they will not be there if commodities continue to roll over. give me an idea of what the inflation picture looks like in six months. lew: labor markets are still

tight. we have the unemployment point at 4.6%. that will gradually push up inflation. that is unavoidable. it will go up and down month-to-month. it will not be a straight line. it will not be a huge increase. i think you have to assume inflation on a core basis will be higher six months from now. there will be less contribution from the commodity side, but we are dealing with an economy that is at or beyond full employment. i think you have to assume those price pressures will build. jonathan: light -- late cycle growth. not dramatically bad but tepid. the federal reserve does not have to go anywhere fast, does it? lew: no. isn't the issue here something you see in europe as well? where we have increasing

employment but we are not seeing a lot of wage pressure. they are up, but is -- it is 2.5% from a year ago. absolutely right. we have seen moderate wage pressure. that wewn to the fact are also seeing technology helping to maintain some of those wage pressures in check. i do not think it is necessarily a bad thing. fears are deflation over when we look at the numbers. it does not mean necessarily very strong a inflation acceleration are around the corner. this inflation is good news. the faith of -- of the strength of the job market will help support wages and therefore core inflation numbers, but it does not necessarily mean we will see

this kind of dramatic acceleration, which could be scary for investors. david: really the question is what does the fed think? you suggest it is good enough to keep going on the path they are without accelerating it. right.think that is i think the employment outlook a strong with an unemployment rate .alling from 4.7 down to 4.4 that is a degree of improvement they cannot ignore. the inflation outlook is generally towards the higher end. this is not as much as people expected, but i think you will see them go in june and stay on a relatively moderate path. david: lew alexander of nomura and jean medicin of, not here to be want to -- of carmignac. we want to head over to bari, italy. matt miller is on scene with a special guest. matt: i am fortunate enough to

speak with noble laureate princeton professor angus deaton. thanks for your time. let me ask you about the trade issues, which everyone seems to say officially are not on the table. but they still seem to be on top of everyone's mind. angus: i think that is right. there is obviously a sharp difference between the cosmopolitan policy makers make up most of the g-7 and the american position on these issues. matt: you have done work on the economics of on a quality -- inequality. is global trade partially to blame for the inequality we are seeing? angus: partially. i do not think it is the only cause. people worry about the decline of american manufacturing, but american manufacturing is not declining. what is declining our jobs in

american manufacturing. hass true globalization played a part in that, but so has optimization. matt: rise of the robots. is that more important than off shoring? angus: i do not think anyone has done a convincing analysis that allows you to parse these different dates. i do not think it matters. people's lives have fallen apart. one of the things i have been documenting is what we think of as the long-term decline of the white working class in america. people who used to come out of high school, did not go to college, they could get good jobs, start on the latter, get better off as they got older. they would flourish. that route is hardly there anymore. so that may be the group of people partially responsible for putting trump in the white house. will they be served well by his policies? angus: i do not think so.

first of all, it is unclear what the policies are. you hear different things on different days. he is good at making goodsistent but sound like statements at different times. first of all, i do not think anyone would have policies that would revive american coal, for instance. it isy had, i think possible, but you could do harm trying. when you talk to other finance ministers here, what do they make of trump's tax plan? angus: you would have to ask of them. i had a wonderful opportunity to talk to these people about some like tork, but they listen, and i am sure if we could all be in the room, we would find out what they really thought about those things. matt: what do you think of trump's tax plan? steve mnuchin is here and we'll be working hard on that as well. is his plan good for u.s. growth

is this plan good for u.s. growth and jobs? think so.o not i just do not believe, and i think data has shown it is not true, that you do not get more revenue, do not stimulate the economy by cutting taxes. done a lot of work on the rich getting richer in the u.s. and the middle class shrinking. what needs to happen? what can trump due to turn that around? angus: i wish i knew. one of the things up in the air as no one really knows how to deal with all of the issues frothing around at the same time. i have become something i have not for a long time, which is advocate for single-payer health care. warren buffett likes to call that the tapeworm eating way at american competitiveness. i think of it as a cancer on free enterprise in america.

we just cannot afford to spend $1 trillion a year for a health care system that is actually declining and causing american life expectancy to fall. we have one of the lowest life expectancies of rich countries. it is going down. other countries have life expectancy that is growing up. and we are spending an extra $1 trillion a year on health care. absurd. matt: one of the reasons for lower life expectancy in the u.s. is the opioid tragedy. that seems to be an issue of regulation that health care costs. yes, but opioids are like an accelerant in which they made something bad worse. enormousad is the increase in suicides. the number of people dying from the hall and liver disease.

we think it could be choking off the decline in mortality rates, which we have seen from heart disease. this is a tragedy that goes beyond opioids. much deeperre is a underlying crisis going on. matt: speaking of regulation, the president wants to take on that issue. deregulation was a theme in his campaign. deregulationut the of the financial sector. what is the right prescription for that issue? angus: i do not like to talk about that because i am not an expert about financial regulation. it is clear it is very complicated and the devil is in the details, but i know what happened during the financial crisis is certainly something that has an embedded in -- ofittered an enormous amount

the populace. peoplere the richest given huge billions of dollars from the taxpayers to make them richer, and none of them were punished. i feel angry about that. doingthese people are not well. done to this being reward misbehavior rather than to put them in jail. talking about collective growth -- the other leaders seem to want to hold on to maintain the status quo as far as free trade is concerned. with that not lead to increased inequality? lead ton't that increased inequality? doesn't there need to be some change to come? angus: there needs to be some

change. an economy has benefited enormous amount of people. we are sitting in the g summit and the rich people, but if you look at the world as a whole, you go back to 1980, there were more than 2 billion people living at less than two dollars a day. that would not have happened without globalization and trade. g-7 company, you say you do not really care about chinese and indian people. but we should care. we have to find an international structure. i do not know what it is, but there are a lot of clever people here with a lot of good ideas that continue to benefit those people well not wrecking -- while not wrecking the lives of rich people. matt: hopefully they figure out. nobel laureate, professor angus deaton. jonathan: thank you very much.

coming up, more on the trade u.s. commerce secretary wilbur ross. later on, an interview with charles evans, the chicago fed president. from new york city to our viewers worldwide, this is bloomberg. ♪

♪ am emma chandra. coming up later today, the former u.s. commerce secretary at 1:00 p.m. eastern. i am david westin. still with assist jean medicin carmignac and lew alexander of nomura.

deaton call -- if we really need to make ourselves competitive again, we have to cut that. do you agree? angus: i agree. -- lew: i agree. the fact that health care costs here are so high is a drag. how you get them down is complicated. it is not so much reducing premiums by shifting the types of insurance people provide, but it is crucial to u.s. business. one of the things we have to think seriously about is how to get costs down. david: you invest in europe and the united states. warren buffett says it is a competitive this advantage to the u.s.. the difference between the u.s. and europe. do you find that the case? jean: to a next up, that is a factor for workers in the u.s.

and the rest of the world that the cost of health care being so different has a tremendous impact on your standard of living. when we talk about employers, we have to be careful, because it is difficult to make comparisons of apples to apples. where a lotuntries of health care costs will go through tax season are paid by the government. so it is difficult to really make a case of whether corporations -- corporations and health care is a factor of the siding where you want to build a factory. david: -- jonathan: talk to me about investing giving the aging demographics. jean: an aging population is an caning trend that you

chapter out of the health care sector. as we have seen the past year and year and a half, it is far from being a recipe for a smooth journey and an outperformance without utility. this is because behind this train -- trend, you have financing issues everywhere in the world and not just in the u.s. governments around the world are struggling to maintain health .are costs that will define where you make money on that. i would argue you need to be quite selective in terms of where you want to invest in the health care sector. identify diseases like rare diseases where companies have a lot of bargaining power to extract deals in terms of financing in governments. then may be the traditional pharmaceuticals. --id: jean medicin of, knock

on medecin of carmignac and lew alexander of nomura. when trump became president, somewhere worried about a trade relation -- trade war with china. we now have results with a new trade deal covering everything from beef to liquid natural gas. running is now is the man responsible for the new deal, secretary wilbur ross. welcome back to the program. sec. ross: i am glad to be on. david: take me through the process. i have been around some trade deals. they tend to take a long time. this is pretty fast. at the same time, you did not have a special trade representative. deed you do this personally? this personally? are the co-heads

of the dialogue. but most of the work was done by our chief of staff. david: we know the deal covers a wide range of topics. takee same time, if you these together, how material are they in terms of the trade deficit with china right now? they are material in three regards. the first regard, as you pointed out, trade arrangements are normally denominated in multiple years. this first set has been denominated in tens of days. there is a huge difference in how rapidly we got something done. second, these are quite specific transactions with quite specific dates. all of these things are scheduled to start july 16. in the world of trade, july 16 is a wink and blink.

that is important for the third reason. we have more issues to deal with the people's republic of china. i believe the fact that we got these long-standing aggravations out of the way so quickly augurs well for the relationship pattern going forward. but we have many more issues. the next task will be figuring .ut a one-year plan then with some data points in deliverables in between. once we get through the one-year plan with success, then let's work into a longer-term plan. into thate us a peak one year plan. should we expect a series of these sorts of deals or is it a different approach? sec. ross: we hope to have deliverables. one of the historic problems with trade is it has become a kind of long-term debating society rather than something that was result oriented. both the chinese government and

we have to come results oriented -- have become results oriented. david: the things you are just are things that have been simmering for some time. what is next on your list? even when i was in the private sector, it was not my habit to speculate on what comes next. i am more comfortable announcing things as we actually accomplish them. i think between now and the end of the year, we hopefully have more announcements about actual kabul schmitz. accomplishments. a sense of the scope and magnitude you hope to accomplish over the one-year period of time? sec. ross: there are all kinds of sectors that have not yet been addressed. the methodology we will into

deuce is the same one we have here. the chinese submitted their wish list. we submitted our wish list. we decided which of the items were achievable within a finite period of time. that is what we focused on. now, the question is what timeframe we put on the issues we did not yet address. those talks begin probably over the weekend. alix: skeptics will say we have a trillions of dollars trade deficit with china. this will not close the gap. so what will? sec. ross: the gap is not just a gap. it is made up of hundreds of different items. and therefore, it is not one silver bullet that suddenly takes our trade deficit from the 300,000 -- $300 trillion odd.

alix: are you trying to get it to zero? sec. ross: no. we are trying to get it as low as we can. we want to do it by increasing increasing the ability of our companies to export. that is the number one objective. that is what will create more jobs here. number two is the trade deficit itself. that is the way we want to solve that is with beef. $2.5 billion market we have been effectively precluded from. your guess is as good as mine as to what market share we will get. but symbolically, beef has been a big irritant for the agricultural community here, because that fussing around has been going on for more than a decade. has been the objective

to make trade fairer. the agreements with china are meant to be win-win agreements. i pick out a sector like the autos. i wonder how you can come to a win-win arrangement when it is for china and lose-lose for the united states. you cannot take things in isolation, but none of our trade deficit comes from china exporting automobiles to the u.s.. it is an issue about the parts coming in and parts coming in through nafta and through other loopholes. but the chinese do not actually sell cars here, so that is not the problem. much our deficit comes is more with europe, with japan, and south korea. david: we want to welcome our bloomberg tv and radio viewers. we are speaking with commerce secretary wilbur ross.

with respect to china specifically, does this indicate a different approach which essentially takes off the currency manipulation question? sec. ross: while the currency manipulation question for the moment has been resolved. is they manipulation function of the treasury department, not commerce. congress has laid out specific criteria as to what constitutes currency manipulation and what does not. by that definition, are not currency manipulators at this point in time. that is why secretary mnuchin issued the order he did. that can change over time. the more important thing is how do we bring jobs back? how do we make gross thomistic product grow faster -- gross domestic product grow faster?

a lot of that will be in good. some will be in services. we started that with the credit cards. u.s. credit card companies had been effectively boxed out of china. .ll anatomic payment systems now, we have done that pretty well fixed. u.s. financial service firms have not been licensed to underwrite bonds or clear bonds. now that is getting fixed. andddition to agriculture natural gas, we also began in the services sector. there is a lot more to do, particularly in the digital other financial and nonfinancial services. services has become a huge part of our economy and a huge part of our international commerce. david: we have now made a specific step forward with china. does that free you up to move on

nafta, particularly with mexico? aboute spoke, you talked when we would get moving with nafta. what does that timetable look like? sec. ross: i hope that is eminent. theress finally confirmed united states trade representative. some people in congress had been reluctant to grant us the provisions of the 90 day letter until we had a senate confirmed u.s. trade representative. he was confirmed last night. i believe he will be sworn in monday. i expect he and i will be making the rounds of capitol hill the early part of next week. david: i did notice that confirmation. i was going to ask you about that. we know he has experience in negotiating create -- trade deals. will the pace picked up? sec. ross: he is a wonderful addition to the overall effort

to adhere to the president's agenda to fix our trade problems. david: finally, this may be a bit outside your jurisdiction, but you know about it. that is a report that steven mnuchin is urging regulators to look at the holder rule. is that essential to the derogatory effort in financial services -- de-regulatory effor t in financial services? sec. ross: i think there are some things to be changed, but i am busy in my jurisdiction. oach onnot coach -- p others. david: thank you very much. wilbur ross, u.s. commerce secretary. jonathan: david westin, wilbur

ross, thank you very much. 28 minutes away from the open. this is what the boards look like. future software. down 1/10 on the dow and s&p 500. likeuries look something this. yields lower for basis points. headline inflation coming in softer than anticipated. retail sales very mixed. the direction of travel is on the back of the cbi print. yields up for basis points. 2.35. the strong dollar story through the week. euro-dollar up by one half of 1%. for their broad retail sales picture, we are getting earnings from retailers that do not paint a rosy picture for rick and mortar. -- for brick and mortar. nordstrom is down over 2%. on the upside, you had an online business cop sailed rising 19%.

-- comp sales rising 19%. jc morgan -- adjusted earnings coming in positive. they returned a positive. but comp sales hit jcpenney than3.5%, five times worse estimated. this is the worst same-store sales fall for the company since 2013. up by one-times of 1%. this stock upgraded to a guy -- tiffany's up by 1/10 of 1%. this stock upgraded to a buy, citing international tourists coming in.

but you still have issues with individual stores. david: we just had this conversation with secretary of commerce wilbur ross. he made it clear that the trade deal announce with china last night is just the beginning. sec. ross: we have a lot more issues to deal with the people's republic of china. that wee that the fact got these long-standing aggravations out of the way so quickly augurs well for the relationship pattern going cap -- going forward. joining us now is our chief washington correspondent kevin cirilli. heard services. he focused on services. that is a big target. kevin: absolutely. he was almost resetting expectations, saying as of now, china will not be labeled a currency manipulator and

downplaying expectations of how close they can get the trade deficit to zero. 2.5 -- $2.5at the billion in poultry will not make much of an impact. one of the things he said that should not go unnoticed is how inh they are willing to work the digital and e-commerce space. financiala lot of institutions who are scrambling to try to piece together from an international policy system the reg out tory framework being developed faster -- much slower than apps on our phones are. david: and he essentially did this on his own, because he did not have the special trade representative. he says there will not be a one year plan with deliverables. kevin: completely on his own, because there is not even an

ambassador to china. governor branstad has not been confirmed yet either. the broader step back and just how much at the center of the storm secretary ross is, not just in a host of financial issues as a result of the lack of confirmations but also national security -- there was a hearing earlier on the senate banking committee with regards to sanctions in russia and north korea. he is at the center of the storm. clearly echoing secretary maneesh and on the volcker rule and saying that should be changed as well. from my reporting, he is someone who, in the white house, is well-respected, well trusted by members of the administration and members of the family. david: there are those who say he may be the most powerful commerce secretary in history. isathan: joining us now david lefkowitz of ubs.

for investors and markets, we really do not want to get involved. the story was we were going to have a protectionist administration. now we get an agreement -- i guess it is irrelevant, but they are just not talking protectionism anymore. david l.: this is a signal to the markets that protectionism is not high on the agenda. in fact, it is moving in the other direction. a signal tilde market that they are not focused on the risk from protectionism's at this point. november, december, january, everything from d.c. was downside risk. now it feels like the opposite. the market has shrugged its shoulders, kind of. do you look at d.c. as upside risk? david l.: there is a change in

the perception of what is driving the market. right after the election, it was all about the new administration at its policies. since, i think investors have common to recognize earnings have power the market higher. it does not have much to do with what is happening in washington. that is why we are seeing resilience relative to what is happening in d.c. alix: you had echo data -- eco-data coming out as well. it seemed the march slowdown was transitory. do these numbers give you confidence in the soft hard data debate? david l.: if i look at the leading indicators, everything looks solid. you have relatively benign inflation, earnings growth coming in at the best in six years. we will see squiggles on the monthly data, but in terms of the broad picture, things look solid. alix: what is priced in?

solid or awesome? david l.: i'd say solid. is trading at around 17.5 times earnings. it is above average but not off the charts. when you look at prior periods, this is the type of environment where you do get higher than average schmaltz up a. we see a continuation -- we see a continuation. that would be an upside case. the base case is the market continues to grind higher. jonathan: if he asked people to pick three pillars the last few months, maybe four months ago, they would have said for earnings. then they would have said the synchronize global growth story. then they would have said what is coming from d.c. to what extent has earnings they'll out everything else?

i think earnings has been primarily the big story. globally synchronized recovery is part of the earnings story. i would not discount that. if you look at things that benefit from policy, especially -- we have a basket of stocks are the highest taxpayers in the united states. they came out of the game strong and kind of game up their outperformance in that month since then. i think policy expectations have moderated. what it means going forward is it will be all about will this profit momentum continue. yesterday, we heard the financials were one. the rotation has been in tech. if you are waiting on the correction of the headline into the s&p 500, it has not happen. beneath it, it has.

does that resonate with you? david l.: there are always winners and losers. led one? but a d.c. david l.: it is possible. i do not think we get tax reform. there is downside risk. markets know it will take time for that to play out, and they are willing to wait until the end of this year before passing judgment on when and if tax reform will have been. thinkdo get tax reform, i there is upside. it is kind of symmetrical. alix: good stuff. -- davidz gets lefkowitz of ubs will stay with us. inflation pressures are still under the fed goal, but the real economy in the u.s. is holding up. it is time to recalibrate and begin the normalization process.

a year ago, i feel like he was the dove of choice. now, a more constructive review from charlie evans. coming up, more from charlie evans. he will join us for a conversation today. and moving growth stocks. could that represent a barricade? economists warning of those signs beneath the market. this is bloomberg. ♪

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alix: the trade should have been value over growth. that did not play out so far. the growth premium is the highest overvalue stock in 10 years. the white line is the growth value. the blue is the value index. the bottom panel is the spread between the two. still with us is david lefkowitz of ubs. if you wind up seeing a broad-based recovery, value should be where you put your money. growth means you only see it in certain categories. david l.: i think that is true. we have to bear in mind one of the biggest drivers of value are what is going on with interest rates and with oil. if you look at what is valued today in the market, it is financials and energy. those are big weights. we all know what happened to oil prices this year. so energy stocks are lagging. andrest rates are down financials have therefore taken a breather. it makes sense in that context. to get bullish on value, you need a real acceleration --

re-acceleration. we have a neutral view on growth and value at this point, but we likely see oil prices beginning to rise. the market is digesting the fact that u.s. project in -- production has been better than people expected. that said, the long-term is positive, because nobody is investing outside of the united states. to u.s. will not be able supply the world when it comes to oil needs. --t will be bullish for oral that will be bullish for oil prices down the road. longer-term perspectives are values that look more perspective -- perspective. -- prospective. through the opec meeting this month. we have to look at how much supply we get out of the u.s.

but 2018 and 2019, you will have production declines from outside opec and the u.s. you cannot sustain this level -- out david: to some extent, interest rates should track the economy. so basically the market now is not heading on the economy? really hadf we concerns about the economy, the markets would not be near all-time highs. alix: the bond market is not. at last: if you look summer where the bond year was at record lows, we had a strong rally and rates right after the election. markets are kind of digesting that. it has become a bit of a softer tone to some data. but overall, things have been relatively solid. i think you see interest rates

the klein a little bit from here -- decline a little bit from here. jonathan: is the real story that it is a little bit boring? just a factor of the lack of noise in the economic aid and growth being drastically bad, being tepid and boring? david l.: i think you hit the nail on the head. everyone talks about the vix being at all-time lows. economic volatility is pretty low as well. it is a reflection of the environment. that does not mean you cannot make money in these types of markets, especially for longer-term investors. buying and holding a still a great strategy. but if you are looking for opportunities, you have to look at the places that have been hit. energy and financials. alix: then the question is europe or u.s.? is net flows in its one

week. use our record flows into eurozone assets. you had net inflows into the u.s. but also $2.4 billion leaving. investors got burned when it came to investing in europe the last few years. now there are record flows into germany and france. does that continue? david l.: what is different now about europe is we looked like we have a sustainable recovery in europe. is a few years behind us in terms of its own recovery. it took a long time to get the bank and the banking system into fighting shape. i think they are at that point. that will mean a more sustainable recovery. clearly, there are still issues to work out, but with a cyclical recovery, those moved to the background. and the fact that the dollar looks expensive relative to the euro for u.s. based investors, that can be an attractive place to put capital given that the dollar looks vulnerable at this point. david: david lefkowitz of ubs,

thank you. we just heard from commerce secretary wilbur ross. later, we will hear from the former commerce secretary penny pritzker at 1:00 eastern time. this is bloomberg. ♪

♪ this is bloomberg. i am david westin. sprint has started preliminary conversations to merge with t-mobile. three years ago, softbank and deutsche telekom tried it then. now we will be joined by alex sherman, our colleague in princeton who broke this story. what got this going again? the price for t-mobile has gone up quite a bit in the meantime. both sides feel now is a unique opportunity in time to at least try to discuss if there is a deal to be done.

fcc realized there is a new chairman. world isize the entire kind of shrugging their shoulders as to what is going on. is probably more desperate to get a deal done then t-mobile, just because of t-mobile's success in gaining customers. sprint has not invested a lot in their wireless record, perhaps hoping the deal will get done. time, the chairman of softbank said his goal was to merge sprint and t-mobile one day. it is no surprise that they may be engaging in talks again. the question is will they think of this is the best deal to get done and how will they structure a deal if they get one? who willool by whom --

by whome? when they tried a couple years ago, sprint would be the buyer. now, t-mobile will be the buyer. t-mobile is much bigger than sprint. is georgia telecom gained control of this, with a even want sprint, which -- if georgia telecom gained control-- if deutsche telekom gain control, would they even want sprint? if bigger question is comcast and charter, the cable companies, want to get into betters, would they be a buyer? days, in the last few

charter and comcast came to an agreement that neither one individually would go after a wireless carrier without talking to the other first. does that make this deal more likely or less likely? alex: it probably makes sprint-t-mobile more likely. but only slightly. it makes sense for cable companies, if they were to buy a wireless company, to work together. because cable companies only operate in footprints. in york city, you do not get comcast. but in philadelphia, you do. this has been going on for decades. it is because cable companies sign contracts where they sort of have non-competes with each other for the state of the business, similar to how utilities operate with each other. ableu are comcast and were to buy t-mobile but could only offer your service in certain areas of the country, would it even make sense to have a national network?

that may be why cable companies would partner with each other to buy this together, then charter could offer in certain situations and comcast could offer in certain situations. david: great reporting today. bloomberg's alex sherman. jonathan: thank you. , -16 on the dow. down 1/10 of 1% on the s&p 500 after three weeks of gains. poised for a week of office after -- even with all-time highs throughout the week. the opening bell is next. you are watching bloomberg. ♪

jonathan: from new york city to our viewers worldwide, you're watching "bloomberg daybreak." but get you up to speed on the market action.

dow futures down 23 come as a p little bit softer as well by attempt of 1%. s&pow futures down 23, and 500 futures a little bit softer 1%.ell a by a 10th of coming in today we were poised for the biggest week of gains so far in 2017. down four basis points at 235 on the u.s. 10 year. the yield and the dollar grinding high through much of the week. we reversed it on that core cpi read. that's the story across assets on this friday. here's alix steel. alix: softness in some equities as the dow is off 1/10 of 1%. we have not seen a fourth straight day of losses since march. the. nasdaq still trying to engines way higher here. it would be the four straight weekly rise, the longest streak in a couple of months.

the top five nasdaq stocks are worth almost $3 trillion, supporting the nasdaq somewhat. in terms of individual movers, really take a look at what is happening with sprint and t-mobile. bloomberg is reporting that of the owner owns 83% company and is trying to make a deal with deutsche telekom, that owns 64% of t-mobile. sprint has wanted t-mobile since 2014. they have not been allowed to talk since a spectrum auction happened. t-mobile's market cap has come and sprint hasn been losing customers as t-mobile has been added to there's. pandora has a little bit of upside. steve: announcing a 5.4% stake. remember that pandora is actively looking for a buyer.

the chart of the week, and i missed it when i was on assignment, is the vix. realized volatility, which is the white line. the vix is the blue line. you can both see diverging but both weaker. the spread coming higher than zero. the point being first of all that it takes up a little bit and then went down. look i at where we came from at the end of 2015. positive bull reading on why we are seeing realized an actual volatility. you have animal spirits and investors are under weighted. they need to put money to work, so they buy the dip. is that the reason or is it complacency? one of my favorite charts of the week. jonathan: did she change the news agenda because she was away? avid: you give us the answer earlier, and it's boring. jonathan: i want to bring in our

guest. let'srtin adams, start there. was not one day with the stocks right up. bonds down right here and must be something wrong. gina: we so that 2400 resistance on the s&p 500, consistent with poor news out of the retail names. there's also the news of commies firing and washington. stocksare reacting, but are the first to the party and the last to leave. bond markets have been pretty weak. energy prices have been relatively weak as well. stocks are finally recognizing that maybe all is not so well. jonathan: you ask the basic fundamental question as an investor, where am i being compensated for the risk i am assuming? higher rates or whether through

higher projected returns in the valuation already? what is the story? where are you being compensated for the rest assumed? >> that's an excellent question. the cycle looks ok, but it's getting soft. you look at the hard data and soft data in your getting soft softness. -- and you are getting softness. the equities are pricing on valuations that are not going to be sustained by these fundamentals, the fundamentals are goo. but not good enough in the u.s. i think a primary destination continues to be europe, where valuations are neutral to ok, but relatively attractive to the u.s.. you have an early stage economic cycle. their central bank will be far more accommodated for far longer. you're making a very good case right now that these valuations begin to ri rebalance and

you will be more likely to be compensated. jonathan: signs of complacency do you see any? pick your favorite metric and there some flavor of expenses. these fundamentals right now are beginning to soften a bit. i think the fed is going to be having a lot of detail discussions over the next 6-9 months. david: jonathan asked are we getting compensated? let me ask for what risk are we being compensated? should the vix be indicating geopolitical risk at all? gina: it's a great point. historically stocks have struggled to price in any policy risk. is all about earnings and economic growth. as policy risk becomes policy change, which would therefore impact economic growth 18 months into the future, we start to president. -- to price it in. how do we price in risk when we are not sure what impact it will have on the economy in the broader stream? david: we have been too fixated

with this bright new shiny object called donald trump in washington. alix: both of you guys are killing you today. steve: policy risk is difficult a hammoc to handicap and geopolitical is even more difficult. if you are making big moves based on political headlines, there is no evidence that the good way to add value to portfolios. trump economics will be positive for the cycle and earnings ultimately, but the implementation -- i'm going to take the under in terms of washington being competent and smoothly implementing any policy , little less one specific policy. even if we were to get trumponomics, the real results would not be felt until 2018. the fundamentals we are seeing right now are going to dominate. we are going to have a modest view of how beneficial trumponomics will be. jonathan: i'm not talking about geopolitical risk for that matter. i'm talking about economic risk to the upside of the downside. debt, are in high-yield

are you going to be paid back? are you being compensated for the yields given? for europe, most of the people would have said no. at bones for 40 basis points and data improving and the ecb at some point going to have to make a move, and my being compensated for the economic risk to the upside? probably not. globallytravel whether it's from asia to oklahoma to europe. home country bias is the most common problem in any portfolio. if one can kick free of their home country bias, you open up the world and you're not forced into these choices. you can say what are the valuations globally, multi-asset, multi-regionally, and you can make sober long-term valuations. it's not a panic situation. it may be a good opportunity to use valuations as your ally as opposed to fighting them. speakinga, evans is

over in dublin and he says u.s. wages have not been grown strongly. you wind up having earnings growth recipe companies coming at 18%. what is the dynamic play between these two? what does that wind up impacting margins and where are we in that cycle? gina: this is one of the adjusting facts. usually wages follow revenue growth. you do not have an impact because wages are growing faster than revenues. revenue growth accelerates. companies start up a little bit more because the cycle is a self perpetuating positive trend. it is when revenues turnover and wages failed to reflect that turnover rapidly that you have margin compression. i'm frankly not terribly worried that we are going to see some sort of waged induced pressure that resulted margin compression for the s&p 500 because

companies are not going to pass along a lack of revenue growth. alix: is there going to be a distinction between sectors? i'm thinking about retail sales, but in retail, they are struggling. their discounting like crazy. is there a distinction to be made? ofa: there certain segments the s&p 500 where wages are a larger portion of the overall cost. retail is one of the segments. retail wages are problematic because frankly retail revenue growth is problematic. wages are portion of costs. there's not a lot of margin expansion to be had in a traditional retail sector. that is not the case when you look across the entire retail space and you segment out what's happening with internet retail versus specialty retail versus multi line. have to be in the portion of the earnings cycle where we hear about the traditional brick-and-mortar retailers who have performed very poorly. their costs are too high and they are not achieving revenue growth in order to sustain

earnings growth. steve: was in the bond market and inflation right now. inflation is that the feds target. the fed is going to be more comfortable normalizing the process. that said it is not bubbling up into the mid-twos either. the fed can take a cautious and planned full way of looking at rates. that's part of the market pressure as well. oil being in that 45-55 range is not likely to bump up to 60. inflation stability right now is a non-troubling component of this analysis. jonathan: great to have you with us on the program. ,re very own gina martin adams for a faculty. -- are very own gina martin adams, thankful to you. from new york city to our viewers worldwide, you're watching bloomberg. ♪

emma: this is "bloomberg daybreak." coming up later, charles evans, federal reserve bank of chicago president. david: this is bloomberg. i'm david westin. retail sales numbers were out an hour ago and jcpenney has joined department store rivals and reporting disappointing sales for the first quarter. joining us now is senior consumer analyst steve mistral and shelly banjo. stephen let's start with you on

the retail sales numbers overall. as bad as lastt month, but still not exciting. >> not as good as people were expecting and strengths came from the same categories, building materials and non-store retail. nonstore being online. david: people who follow these things closely as you do, what's going on with the consumer? >> i think there's a lot of different views on what is happening with the consumer. a lot of the macro indicators generally suggest that the consumer is strong. unemploymentt numbers, if you look at the retail perspective, the environment is a promotional and they are struggling to drive traffic into the store. some of it might be the amazon effect, but you cannot attribute it to just one other something ,. that's a huge pressure on retailers, but i'm concerned with the consumer going forward

with health care costs rising and uncertainty in the political front. david: we know they are getting some more money in their pocket and wages are increasing, not robustly, but modestly. they're not saving more, so the money is going somewhere and retail is losing it. >> it's probably going somewhat to online and to their homes. they are also spending a lot on credit. you saw charge-off rates rise for the privately held credit card companies. you have auto loan going currencies. -- delinquencies. alix: jcpenney got hit again today. adjusted earnings did come in at six cents. that was better and they did have a profit, but not enough. talk about jcpenney and the broader macro. shelly: people are spending, but they are being careful with what they are spending. if they are being careful, they are not necessarily spreading all that money around to every retailer, which is why you see divergence between

companies like amazon, home depot come at tj maxx, and that n you see department stores getting absolutely killed because they're not giving consumers a reason to shop in their store. alix: for the retail sales numbers today, you see that tensely tax returns are coming in so we are seeing more spending. watch was revised a little bit. -- march was revised a little bit. that doesn't seem to me that it's really bad. it seems to me like it's stable. as shelley points out, it's individual retailers that get hurt. seema: there was the easter shift, so that pushed some spending into april versus march. a big driver of retail sales was auto sales. we heard from the big guys last week and those were very weak. i do not know what would drive it going forward, what's going to drive this shift. it calls into question what many of the legacy retailers are doing. all their initiatives may not be bearing any fruit. --re may be a relative

relevancy question for these retailers. alix: fortunes as an example. -- nordstrom's is an example. and theywants online do well, but they don't get compensated for it. seema: with a big part of your business is going down in the small part of your business is growing larger, it's not enough. people were expecting more from nordstrom. nordstrom is supposed to be the best in class department store and it just kind of showed like everybody else. david: how much of this is simply losing pricing power? isn't amazon a factor in that? you can get price discovery in ways you've never could before/ . shelly: pricing is a huge part of it. the pricing of apparel sales have gone down and down every single year. closing prices are not rising. electronic prices are going down. the pressure from online, let's just that's doing not

from amazon but from their own brick-and-mortar retailers putting stuff online is also pricing pressure, but they have been increasing their inventory to be able to cater to the online and the brick-and-mortar. than they have too much stuff and then they have to discount on that. jonathan: is the gravity of what is happening here really reached the board room in a significant way? the banks went through a transitional period five years after the financial crisis. job losses were in the thousands. they were dramatic job losses. when will we see the same headlines for these big retail outlets? i'm not talking 20 or 30 here there. i'm talking big store closures. when will that happen? was on the macy's ceo his first call neds they come out with some grand proclamation on what to fix the department store.

he said we have all these initiatives and we have got to take it seriously. know, you need to be really passionate about how you're going to fix things. we are already seeing 50,000 jobs lost in the past few months. these things are happening. store closures are happening, but not as fast as they should be. seema: allowed to jump in and say it might be that the whole retail model needs to change. they grew too fast and too much in the 2000. they have to really step back and shrink their businesses because they are just -- the return on th investment capital is declining. that's the bigger picture that a lot of retailers cannot take that hard cut and say we are today. is not the way it's going to work anymore. david: we had sam zell on who knows about investing in commercial real estate. was listen to what he said about them all situation. -- let's listen to what he said about the mall situation. >> i would support the very

bottom strips analyst everything -- in almost everything in between is basically obsolescent. david: everything at the top is obsolete. you're talking about skating rinks and churches to be done with these malls. alix: we talked to pe guys and there is money out there, but usually that p guys are like it's dead. thanks very much. if you have a bloomberg terminal, check out tv . cook on our and graphics and interact with us directly. go to tv on your terminal. this is bloomberg. ♪

david: is bloomberg. i'm david westin. inre has been a breakthrough

trade talks between the u.s. and china. it will allow more natural gas and beef exporters will have greater access to chinese markets. the u.s. will allow imports of cooked chinese poultry into this country. is the first negotiated trade deal of president trump who promise to get tough on china. earlier we spoke with wilbur ross on the deal. chinese submitted their wish list. we submitted our wish list. we decided which two items were achievable within a very finite period of time. that's what we focused on. what timeframe do we put on the issues that we didn't yet address? those talks will begin probably over the weekend. david: joining us now is peter coy, economics editor of bloomberg businessweek magazine. as you heard secretary ross say, they made a down payment. this is not the end of the story.

he thinks there is going to be a series of these chapters over the next year. how plausible is this? peter: i think you made a fascinating point off camera. what we are seeing here is a completely different strategy wtom the gatt and the approach. get all the countries into a room and get them to agree that everyone -- on a deal that everyone will agree to. this is the first fruits. this is an actual success. the question is is it sustainable? is it the way to go for the long run? that still in doubt. david: and fairness to the president, he made no bones that he wanted to do this i laterally. -- bilaterally. this is a matter of tens of days, not tens of months or years. typically those multi-lateral trade deals require them. peter: that's a good thing about it. if things can happen quickly,

trump is not a patient person as we know by now. there is no reason we should be patient as a country as a country if their problems getting access to the chinese market. is understandable we want faster action. david: does this move the needle in a significant way? is is the press release? is this getting a lot of attention? peter: that's very valid because there have been many previous attempts under obama and george w. bush where we thought we had a concession from china and then somehow it mysteriously evaporated. alix: does north korea make this more real? peter: it makes this more real only the sense that china has more leverage. look, if yousay want help with us on north korea, you got to be a little flexible with us on trade. donald trump has actually made that almost concession to the chinese on that. if anything, north korea weakens donald trump's hand in bilateral trade talks. david: if your president pena

nato, are you happy? peter: it's great for mexico and even canada on this. jonathan: he doesn't have north korea though does he? peter cory, great to have you with us on the program. twice six minutes into the session, let's get you up to speed on the market action. we are down the 10th of 1%. the s&p 500 negative four points. -- daxdaq up almost 2% almost up to 10th of 1%. "bloomberg markets" is coming up next. you are watching bloomberg tv. ♪

vonnie: it is 10:00 a.m. in new york and 3:00 in london and 10:00 p.m. in hong kong. i am vonnie quinn. mark: i am mark barton. welcome to "bloomberg markets." ♪

vonnie: a lot to cover this hour from markets to a trade deal between the u.s. and china and stay tuned for interview with chicago fed president, charles evans. let's go to julie hyman with breaking economic news. julie: the latest is the university of michigan sentiment reading. it is the mayor preliminary number coming in 97.7. a little bit of an uptick here in sentiment numbers. we have seen relatively strong sentiment consistently here. it looks at this number is actually a four-month high. shows that americans remain relatively optimistic about their incomes here. it does not look like it's going to help stocks at the moment. typically this consumer number does not push stocks around.