president donald trump reportedly reveals classified information to the russians as the white house does damage control again. d.c. drama and the u.s. dollar. the greenback hitting the lowest level since the u.s. election and the euro stores is the trump agenda hits another roadblock. the pound drops. hopes for a speedy brexit agreement take a hit after singapore free trade agreement must cap national parliament approval first. david: welcome to "bloomberg daybreak." i am david westin along with alix steel. jonathan ferro's on assignment. there's news overnight that president trump reveals classified information to the russians potentially. euro stocksere, lighter, but the move is in the currency market. over that $110. not a ton of reaction unchanged on the day. david: is time now for your morning brief.

at 8:30 a.m., it is u.s. economic data as we will get housing permits for the month of april. manufacturing employment and the number of hours worked last month. at 10 :00, jp morgan holds its annual shareholders meeting in wilmington, delaware. at 11:30, the u.s. treasuries will sell for $5 billion in four-week bills. back to our top story about what president trump did or did not say to the russian foreign minister last week and whether put national security at risk. reportedington post" information that trump disclose information with the russian foreign minister last week and subsequently "the times" follow that story. our national security adviser h.r. mcmaster said that he did not disclose sources or methods. >> the story that came out tonight as reported is false.

the president and the foreign minister even reviewed a range of common threats, including threats to civil aviation. at no time, at no time, where intelligence sources or methods discussed. and the president did not disclose any military operations that were not already publicly known. david: joining us now is our chief washington correspondent, kevin cirilli, and marty shanker, both in washington. what do we know about what actually happened in the oval office with minister la vrov? house ise white vehemently denying a pushing back against the reporting, but the senior aides i've spoken with in the republican party on capitol hill are raising significant questions not only about the report but also about what has been a bevy of accusations and criticism against this white house and their ties with russia. i want to pull for you now what senator bob corker, a republican

from tennessee, told reporters in the capital last night. said, "the white house has got to do something soon to bring itself under control and in order. it has got to happen. aviously there are in downward spiral right now and they have got to figure out a way to come to grips with all that's happening." clearly this criticism is melting. david: that is senator corker, a republican. he is on president trump's side. i want to get back to what general mcmaster denied and what "the washington post" reported. he talked about sources and methods. that's a particular phrase used in washington, very sensitive about revealing sources and methods intelligence gathering. that's not exactly what "the washington post" reported. kevin: absolutely. continues to escalate, how this administration will disprove this reporting remains to be seen. business suggestion that president trump wrote the law. scholar says the

president has the authority to disclose classified information so chooses, but the question of the matter is whether this president's governing appropriately. david: there was reporting that senior aides reached out to national intelligence, such as the cia, after this happened to warn them about what happened to try to mend fences. is the white house denying that? marty: there's no specific denial about that. the mcmaster denial was really a non-denial denial. he was denying something "the washington post" did not actually report. what was significant where the direct quotes coming from the president of the united states, which suggests to me someone or some people in the white house are leaking misinformation to embarrass the president. alix: speaking of, and you called it, we would get some tweets from president trump.

the latest one coming out today and he says, "as president, i want to share with russia added open white house meeting which i have the right to do." nonetheless, the defense at 7:00 a.m. starts from the white house. david: i'm sure we are going to get more. he will not let this thing that. die. as i understand the facts, what "the washington post" is reporting is about specific threat from the islamic state and identify the city in terms of in referring the sources and methods. marty: as "the post" reports, many national security experts current and former suggest that difficult fort russia, for instance, to figure out where that intelligence gathering came from given the identity of the city. that jeopardizes that intelligence source and some people contend it puts people's lives and dangers.

in danger. david: where did the story come from? you have been injured was a for a long time. where did the story come from? marty: my thought is that it has to be someone in that room. someone in the white house and intelligence gathering apparatus who is concerned about what they deem is reckless behavior of the president always very sensitive matters. david: kevin, you are about to sit down with the majority leader, mitch mcconnell. do we have a sense of what the republicans up on the hill if they have a plan to do with this? kevin: we do not have any sense of clarity on whether or not the u.s. senate intelligence committee, the timeline for when they will reveal their investigation. there is reportedly turning now to president trump's financial disclosures. more expected to arrive financial -- provide more financial disclosures to the u.s. senate committee.

the spokesperson for house speaker paul ryan released a statement last night, saying that speaker hopes the president will somehow disprove this story and clarify the reported. ing. david: alix thank thank you for joining us. ambassador burns spoke with us by telephone and saying that if the disclosure, if true, shows a lack of discipline on his part. it's a disturbing story of true. it's important to say if through because we don't know that. the president is undisciplined and he has not shown ability to adapt to this job and effective way. david: joining us now is eli lake, giving his own take with the latest white house instance. undisciplined -- does that make sense to you? eli: i think it's a matter of undisciplined. sometimes we say it's unconventional. in this particular case, if the

sources for "the washington are correct, and the one part where people could disagree is exactly what the applications are, then it's a dangerous level of incompetence. ist i don't think this does i don't think it anyway verifies the leading "resistance" narrative of an example of collusion or that trump shared this information because he is disloyal to the country. trumpk there is sort of a audibled that may have gone very wrong. alix: what's it going to take at this point for republicans to push back in a more meaningful way that is more than rhetoric? eli: well, unfortunately it's a catch-22. if the information is as sensitive as it is, then it would be irresponsible for

people like myself are other news outlets to report more details of it. , it's hardculpatory to get a sense of it at this point. i would imagine you are going to see everybody is trying to figure out more details about exactly what was shared. this is now going to be the story of the moment. i would just say that the argument from "the post" and they wrote carefully was not that they shared sources and methods and the nondenial denial that you saw from senior officials last night. locationecifically the of where these plots were being plotted that the russians could that reverse engineer and find an important ally and intelligence source. i would point that that very well may be true. but the russians and the u.s. are essentially fighting the same enemy, which is isis. president should share carefully without

revealing sources and methods of threat information to russian airliners. that is something that george w. bush and barack obama would absolutely do. even at the height of the cold war, something like that would of been done. those are the kind of caveats. i'm not saying that the president did this. at the same time, there has been a counterterrorism relationship with the russians. david: take a step back from all this. does this totally derail the presidency so he cannot get back to be a debit he got elected on? at what point, if ever, do the republicans go to him and say we need a new house in order and we need to get disciplined? eli: may be staff shakeup could provide that kind of reset. i would say it was derailed before. firing the fbi director in the middle of a counterintelligence investigation into your campaign derails your agenda.

[laughter] we are not talking about building a wall. we are not talking about reforming obamacare. we are talking about this investigation. he has already kind of set this up. what we are finding out more and more is not staff, but it's trump, the president. david: [laughter] that says it all, i guess. eli lake from bloomberg view. are bringing, we you special coverage of the tax reform package going before the house thursday this week. later on this program, senate majority leader which may -- mitch mcconnell will be here. this is bloomberg. ♪

alix: breaking news this morning for you -- president trump offending himself through his twitter account. he says, "as president, i want to share with russia at an openly scheduled white house meeting, which i have the right to do, facts pertaining to terrorism and air flight safety. humanitarian reasons, plus i want russia to greatly step up their fight against isis and terrorism." the latest defensive president trump after "the washington post" report that he revealed information to the russians last week. in the markets, it has been all about the markets. equities and bonds remain calm. is the unicredit research global head of fx strategy on set. joining us from london. the move in the dollar, what explains it? >> in the very short term, it

has definitely been political develops. ments. the markets patients with the u.s. administration has been little. the dollar has been overvalued and it was due for a correction lower. for five months ago, the momentum was very strong in sentiment was overwhelmingly bullish, but this has definitely turned. reacting,he dollar is why are we not seeing it in yields and golds and equities. ? michael: we are seeing a lot of those flows read elected -- redirected elsewhere. is very much emerging-market centric and the weaker dollar is a positive boon for economies there. the eurozone in terms of the incoming economic data is the

one region where the surprise indices are still consistently in positive territory. one of the things that i think is a complete disconnect as you have alluded to in your lengthy preamble of the goings-on in washington is the very low level of implied volatility along the u.s. treasury on the move index. if you look at the various surveys of perceived levels of uncertainty, they have historically had a very strong correlation. at the moment, these things are way out of whack. david: it was not too lengthy and it did not come out of washington, but from moscow. the kremlin calls the trump secrets report nonsense. i'm not sure if that's good or bad for trump. going back to the dollar coming think it's overpriced. you are looking at an upward trend in rate hikes.

boj,e for the ecb or the -- unlike for the ecb or the boj, divergence as a practical matter. vasilelios: definitely. an assumption that we are making when we are making an assessment at each one of time is that the market at any point in time is at equilibrium. has diverged from that value. the dollar is running between 10% to 15% higher on what traditionally long-term relationships would trade and would tell you. the bottom line is that there has been a friendly with the dollar for various reasons, including the implementation of quantitative easing by the ecb two years ago and all that. i think the market right now is making a much stronger assessment right now. alix: here's what i don't understand at a base level. what does the last one for hours mean for markets when it comes

to russia and president trump? vasileios: if you look at the price action and pretty much the things we have discussed, it is mostly a dollar store it, but it's not really a risk story. the market has taken a view as far as trump and the u.s. and ministration are concerned, they're very much unlikely to deliver all the strength and robustness. it's not going to be bad for global trade. david: michael, do you agree with that? is this the final death knell of the trump trade when it comes to dollar strength? michael: i think so. you have to think about how the narrative is being written. after the presidential election, we were told that a trump victory would be calamitous for markets. all of a sudden donald trump was going to be the next best thing since sliced bread for risk. now if you look at the gdp forecast and the various latest data from the fed, they are certainly not expecting anything great on growth.

one also has to remember in the absence of any supply-side reform, the fed at any expense thinks the u.s. economy has no slack. if we did see higher growth at this juncture, that would just speak to inflation and higher rates. david: i do want to come back to alix steel's question. why is it that the s&p stays at or near record levels? if that is all right, shouldn't stocks becoming down as well, michael? michael: what worries me is that if you pull this back into a multi-year basis, i still see dynamics of a secular stagnation in the global economy. we are redefined sequentially of what good looks like in the same way perhaps in the political sphere that the u.s. is redefining what normal looks like. 2% growth is now a cause for celebration, but on a historic basis, these are not good numbers. i think it's particularly worrying to note that after a

valueyear d rating of stocks against growth, the rally that we saw in the fourth quarter of last year has completely fizzled out. even in economies that seem to have a degree of self-sustaining growth such as the eurozone, they are seeing value stocks coming right back. what this means that the stocks level is that you are having a lot of money being funneled into a few growth names. you have to look at the structure of these u.s. indices to a dive five -- identified the stock level where these are being bid up. this is not healthy price action. eventually it will end in tears, but the problem is we know calling up has been it will make a trade for years now. vasileios: my personal take is that it never really bought into the trump reflation trade. personally i think the reflation trade started much earlier than the trump election. if we want to talk about the

levels of the u.s. equity market, we need to put them into the global perspective. the equity market has been driven by the global growth upswing, which has surprised on the upside in the past two quarters or so. in order to assess the u.s. specific factor, you can see over the past 56 months or so that the s&p has significantly underperformed bureau stocks. alix: we're talking more euro stocks as they are sticking with us. all this week on bloomberg television, we're focusing on tax reform under the trump administration. at the bottom of the hour, we will talk to the snap-on ceo, discussing the presence impact on infrastructure, manufacturing, and jobs all in light of what has happened in d.c. over the last 12 hours. this is bloomberg. ♪

alix: elsewhere in the currency market, it's all about sterling reversing an earlier jump,

falling from a one-week high, showing the fastest inflation since 2013 coming in at 2.7% year on year. eios fromh us is vasil unicredit. i thought it was going to be positive for sterling. vasileios: i think all of us have probably thought about it iod of monetary policy easing. it rose real rates of return. i think we need to put it in perspective of the number of factors. seen a rally recently and sterling on the back of this election announcement, which personally i thought was unjustified does it relies on a number of assumptions. not all them will turn out to be true release we don't know about them. secondly we have that you'll be last week and a lot of people thought it had a hawkish been. it pretty much corroborated the

market. under the best possible scenario, you can expect at most 25 basis points in the hike. i think that was not enough for sterling. and now this. you have nominal rates being cut on the 2-3-year horizon and now you have inflation speaking out. that is compressing real rates. alix: what is the downside? vasileios: as far as cable is concerned, i think it's a bit tricky because you also have the dollar factor. i would expect some convergence within the 25-27 range and a multi-month horizon, but i think the currency people should be looking at is euro sterling. this is sterling factors mostly. and that perspective, i think euro sterling is due to a rebound. alix: the other information is that the european courts said a singapore free trade agreement needed national parliaments approval. the rhetoric making that brexit

agreement that much higher. do you buy into that story? vasileios: i don't think so. they probably had a short-term effect. there's a bigger story out there and the bigger story out there is that we are getting a eurozone that is turning out to be much more united than people expected one or two years ago. secondly we should not forget that there is no way on our that the eu is going to back down on a number of issues in the brexit negotiations. it will have to be the u.k. making concessions. david: he will be staying with us. former senate finance chairman max baucus and mitch mcconnell will be right here with us. this is bloomberg. ♪

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yields go nowhere. the action is in the currency market. the euro-dollar is up .7%. that's a big move for the euro. you also have more drama coming out of washington. the vix is a little bit softer and the monster rally we saw over the last couple of days, up .6%. it's the dollar movement and others in other markets. now nothing in what happening. emma: the trump administration has been rocked by report the present disclosed secrets to russian diplomats last week. according to the washington post, he revealed closely held intelligence about an islamic state plot to the russian foreign minister and ambassador. the national security advisor denied the story. >> the stories it came out tonight as reported is false print the president and foreign

minister reviewed common threats, including threats to civil aviation. were intelligence sources or methods discussed. the president did not disclose any military operations that were not already publicly known. emma: the president said he went to share information so they would step up their fight against isis and terrorism. the newrnment says president will visit the white house next month. they are concerned about north korea's developing nuclear weapons and long-range missiles. is its closest military ally and the trump administration is taking a hard line. they are showing up sagging stock prices and boosting profits. ford plans to cut 10% of its global workforce.

salaried workers will make up most of the cuts. it's unclear if any factory workers will lose their jobs. ford has 200,000 employees. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. i am emma chandra. david: thank you so much. when president trump talks about bringing manufacturing jobs back, he is addressing companies like snap-on. they produced tools in the transportation industry. ofs no coincidence that one his first visits was to the snap-on headquarters in wisconsin. joining us is the ceo. welcome back to the show. let's talk about the president he made. nick: it was an exciting day. everybody was excited. the thing our employees said to me was thank you. the pageantry of such a visit is reaffirming.

he came to highlight the essential nature of manufacturing, which is music to our ears all over. i had some time to talk to him. that's one of the things he should do. i emphasized to him and we asked our leaders for a long time to help restore the respect and dignity of work. he said we honor work, we honor grit. we honor working men and women who turn their dreams into reality. david: i went to a rally and it was the same message to uaw workers. respect is one thing. it a job is another. you had this report now that ford may be laying off 10% of its workforce. is this a reminder that there is a limit to how much washington can do in creating manufacturing? : there is a limit with any

company. there are 251,000 and you factors in america. each of them have a different set of strategic and economic situations. anything washington can do doesn't save one company or in the great a particular company. overall, we are looking for an administration that looks at their interest first read the is met with businessmen, he has proposed tax proposals. we are very encouraged by the tax proposal, lower the rate. ofh talk about taking care escorts. -- escorts we are very positive about this. we saw a couple of things that i thought were very resonating with me. one was we were talking about making these permanent. he was right on when he said permanent tax cuts allow huddle

planning going forward. that ignites more animal spirit and -- or it. david: they have been lost to automation. not just foreign workers, but to automation. there is nothing we can or should do about automation is there? : it's a good thing. we have automation it snap-on. we have hired every year since the recession. it's like this. snap-on model is instructive. we take advantage of the one and average that american manufacturers have. that is proximity to the world's greatest market. while we automate and drive improvement and consistency, we look for customization in the midst of that to create a high-value product that is matched to the customer. they will pay for those things.

automation enables you to do that. -- we need skilled workers. part of the idea of tax cuts is the manufacturers association cut,if we get a good tax 6.5 million workers will be hired. david: we don't hear about that from the president. nick: he talked about it in our location. that is something we want to push them toward. we want him to talk about that. what we are in is a competition for jobs and automation is some of that. thing we can do to arm the workforce is given the skills they need. 350,000 jobsnow is going unfilled. garages in the united states, mechanics, 25,000 needed. you need more of them.

david: the chairman talked about capitation and taxation. how concerned are you that the president will get distracted by things such as this incident with the revealing of secrets to the russians and never get back to it? can they get that done of the president is chasing after scandals such as revealing confidential information? nick: nick: that is a question. we would like to have the president focused on jobs and tax deductions. i think this, if you are a legislator and you are in the congress or the senate, if you are in the administration, the last election should have told you that the most important thing for america is focusing on getting them jobs. the message that he delivered and got him elected. at the same time, the president

this morning is tweeting out again about what happened in the oval office with the russians. if you were to give him advice, what would you give them advice about western mark nick: tweet about jobs tweet about the dignity of work. don't worry about the other stuff. in some ways, i can't give the president advice. that's what he got elected on. they are the american advantage. that will deliver us from evil. i am kind of depressed because i missed this offering. april 15.hin came on april 18 is tax day. i should've have handed my tax return to him directly. that was a historic opportunity. i am kind of depressed over it. david: it's great to have you here. he is the ceo of snap-on. alix: common, more on our top story. president trump revealed

information to the russians. mitch mcconnell will weigh on that. we're live from new york and all the action in washington. this is bloomberg. ♪

emma: this is the enterprise green room. it coming up, the former finance committee chair will talk tax reform. now to your business flash. of stolen and unreleased disney movie and they are threatening to release it unless they are paid a ransom. bob iger disclosed the threat in a town hall meeting with staff members. he said the company won't pay.

disney is not commenting publicly. rue21 is a latest casualty of changing consumer habits. they have filed for chapter 11 bankruptcy. began closing about 400 of its stores. the millionaire has come out with a new list of demands for change. the firm has cause for a spin off of oil assets. they have revised plans for you to find the corporate structure. bewould allow php to headquartered in australia. the ceo will meet with elliott this week. that is your bloomberg business flash. david: chancellor merkel that with the new french president and they made news over foreign so european union. here to take us through is the executive editor for international government arid

before we get to that meeting, i want to get what the initial action is to the story coming out of washington about the possibility that the president disclose classified information to the russian foreign minister. john: there hasn't been much of a reaction. people are wary about being seen as commenting on u.s. politics. there was an interesting facebook post i the russian foreign ministry where they said we can't believe your reading these newspaper reports. preposterous, the claimant the president gave privileged information to the russian foreign minister. then he tweets that there was some exchange of information. facebook report doesn't tally with what trump said. overall, the reaction in europe is pretty muted.

i think people will be waiting with interest for the g-7 meeting next week. david: let's turn back to the merkel meeting that happened yesterday. they really did talk about reforms. they went so far as to say they would change that. john: the germans have an open to that under the right conditions. it's open toaid doing lots of things, only of the rest of europe behaves economically and abides by the economic rules are in generally speaking, the chemistry between chancellor merkel and president macron are good. notasically said we are going to go to the germans and make significance. we have got our own economic

house in order. to euas a pledge to him reform. they will make reforms in the french parliament. david: thank you so much, reporting from london today. alix: there was very positive economic that came out. euro area gdp rose in the first quarter. the big downside was greece is in a recession. a german business survey hit expectations against two-year highs. michael, we saw a record flows into france and germany last week or it is this data that rings on itself and brings in more money? michael: exactly. there are a lot of sales to come out. as i mentioned earlier, you touched upon again, it's bottom-up in terms of the earnings numbers.

this is really the eurozone which is continuing to be the standout on the global basis. i'm not surprise we continue to attract. situationstical appears to be a lot more sedate andvery good for the market showing solidarity between france and germany. the tandem had been looking like a unicycle. now, we are back on track. inx: investors got burned 2013. if the flows come back in, what is the sign for the euro western volatility is much lower than currently. if you do get a lot

of equity, you will see euro stocks over s&p. there have been massive performances. deftly have pressure on the euro dollar. david: why is not priced in already for europe? since the first election in france, the geopolitical risk is gone down. we knew about rising earnings. why isn't it already priced into the market russian mark michael: there is an awful lot of skepticism out there that what we see in terms of the economic pickup and earnings is sustainable. that,k on the basis of looking at 2018 plus, i think there is a question mark. we have not rolled this back in political tension.

is nearlye market overestimating the populist movement. i'm not sure that is still remain the direction of travel. alix: what is your call on the euro western mark how fast we get there? he be is not as a cessna the exchange rate as it was in 2015. cast, the risk is on the upside. the next two or three months, until we get a clearer hint about the upcoming tapering and qe, we will fluctuate between 111 and 112. -- we can see ecb a further upside in euro-dollar. david: it's great to have you

here. thank you so much. alix: thank you very much for your time. if you've got a bloomberg terminal, check on our charts and communicate with us directly. this is bloomberg. ♪

alix: the question is how much more jews can receive from oil rallies? the money wti versus manager. the blue line has been pummeled the last few weeks. longs are going down. can they be rebuilt as oil prices go higher. charles, it's great to see you. we hearding it,

they're open to extend in the cuts into the first quarter. russia is looking into more countries to be involved in the cuts. what is the potential? charles: first of all, they would need to maintain these cuts through 2017 to make any dent on inventory. well into 2018 really. it's a must for russia in saudi to do this. they are going to see a collapse of prices. it was a foregone conclusion for some time. it probably won't have an enormous impact on prices this year. it prevented a real drop. alix: they will do whatever it takes? charles: do whatever it takes. saudi arabia has two reasons. you need $80 oil to balance your budget. they are trying to get this ipo floated. they are really strong reasons.

they need to keep prices propped up. alix: you are a private equity guy. you know the business well. are-- u.s. shale producers up 32% this year. $84 billion, where they spending so much money in a weaker priced environment? charles: that's a great question. i think they are outspending their cash flows considerably. that is because there is a lot of money available, capital markets are wide open for shale. they've got to grow ultimately. when you look at a shale producer, you're looking at a high decline rate. in order to maintain their value, it requires an enormous amount of activity. number two, i would say efficiency has gotten so much better. a lot of these guys can make pretty good money at the prices we are seeing right now. alix: i love that point during

we saw that on earnings. those earnings, when we saw oil prices really rollover, are we going to be in a market share war in the back half of 18 as they are immersed in the first quarter? opec says they have to get their business back? charles: that's the billion dollar question. a lothale is making opec tougher. their job is to increase oil prices. i don't they asked record the ferocity of response that we saw in the u.s. context,ut it all in the u.s. produces 9.5 million barrels a day. 5 million today is shale oil. we are talking about 97 million barrels a day in total demand. we are a small part of the market. if you see $800,000 increase

today, it's a drop in the bucket. the marketstory is remains oversupplied from an inventory standpoint. there is too much oil out there. daily balances are coming back into equilibrium. it's going to take another year with those balances to work inventory down to reasonable levels. go ahead. they hope they can stop hedging, which will reduce the supply from the market. that is 56. what does it have to get to impact shale producers? charles: they have done a lot of hedging already. they will jump in at any price signal when oil is below 50. they are going to continue to spend money as long as he capital is freely available, which it is this moment. they will increase production.

in the larger context there has been a massive cap starvation. we have lost $1 trillion in both roger x and etc. rolling out. that's going to have a norman's impact in the long run on oil surprise in the 20 20's. shale can keep supply balanced for the next year or two with these opec cuts. the longer-term story as we will reach a real supply deficit in the next five years or so. it's hard to imagine the market getting better today. it is possible and likely. alix: that's great stuff. we've got to leave it there. bloomberg television, we will be right back. ♪

telling secrets, president

donald trump purportedly revealing classified information to the russians at the white house this damage control again. d.c., and the u.s. dollar. the euro soaring as the trump agenda hits another roadblock andu.k. inflation pops inflation goes nowhere. welcome on this tuesday, may 16. i am david westin with alix steel. jonathan ferro is on assignment. alix: futures getting a bid up on two points. the big drama, the big move is -year-old-dollar, seeing the highest level -- movies euro-dollar, seeing the biggest jump. basiseld back by one point. it has been an exciting morning. the dollar on the move. david: it is time for your morning brief. it is u.s. economic data.

we look at numbers for housing and tilting permanence for april. buind tilting permits -- lding permits. at 10:00, jpmorgan hosts their meeting, and our top story this morning, the reaction on the market and elsewhere and then in the new york times and wall street journal, the president trump disclosed information. henry mcmaster denied the reports last evening outside the white house. >> this story that came out tonight as reported is false. the president and the foreign minister reviewed a range of threats to our two countries, including threats to civil aviation. at no time, where intelligence sources or methods discussed in the president did not disclose any military operations that

were not already publicly known. ourd: joining us is reporter from the white house, what does it look like there? from the a tweet president contradicting top officials, who said the story was false, there was nothing there. we saw the president say on twitter he believes he has the right to do it he did in terms of sharing information with what he did. to help russia combat terrorism, so the white house is scrambling to strain out the story now that the president has contradicted officials. david: we just put that tweet up. yes, i gave information because about it was the humanitarian thing to do. what is reaction on capitol hill? rolus >> a number of republicans are

unhappy. this is coming off the heels of the firing of james comey, which sends a lot of republicans scrambling. now we heard from susan collins, and she says she wants to have a day where there is no crisis with the white house. , aheard from bob corker republican, saying this is a crisis and that the white house is in a downward spiral and they need to get control. we are hearing a number of republicans who want more information and the white house to get control of the self-inflicted wounds and crises that they have gone through over the last couple of weeks. david: the president is about to go to the middle east. how is this affecting that trip? is an important and incredible meeting that will happen. the president's first four internet and we are hearing that some of the report said that it is classified -- president's first foreign trip and we're hearing that the president will

have a lot of explaining to do when he meets with our allies in the middle east over fighting terrorism that he will not share that they secretly obtain and share with the united states is therefore not bursaries. that is something that will dominate the meetings. he will meet with our allies in the middle east before going to europe. these are a lot of questions a number of people will want to know, why the president is sharing information with russia, who is not on the side of a number of conflicts taking place in the middle east and elsewhere. david: thank you. joining us to take us through the latest reports of president trump and the russians is george friedman. welcome to the program. thank you. give us a sense of how important or not important is this in terms of national security, a relation with the russians and the national security establishment. george: if you read what mcmaster said, they said the

same thing. he gave information that came from the source. he did not mention the existence of the source, the information isis wasapparently the developing some sort of computer bomb and that is not abnormal for the u.s. to show that intelligence, even with the russians. the claim is i sharing that information, -- by sharing that information, it is possible to find out the source. i do not know that and i do not know that it is not possible, but it isn't unusual for the president to share intelligence. this was not the sharing of a source. the interesting thing is who leaked the story. there were people in the room when it happens, who had access, the these were serious officials. so who were the people who gave the story to the washington post

, and is it to the cia called the post and asked them not to give out the details that were exchanged? atre are two ways to look this. one, this is a normal sharing of intelligence, battlefield intelligence, that revealing the source. the other is farther. david: we should talk about delete it, but before that, the important thing reported is the president revealed the city from which the attack originated, which would indicate, perhaps, which foreign country was cooperating with us in intelligence gathering, which would be sensitive. does that seem plausible to you? possible, i dos not know the background. remember that the united states and these computers from some countries, the european union also banned at the same time computers from some of these

countries, so that you have a situation like this intelligence was already shared. the claim was the source was never shared, probably true, possibly if you know the city it was in they could track it down if the russians wanted to, but it was more likely isis would find out that this stuff had the , that they had a source in them. detail, itwing more is hard to say, but i have to say that the president revealing the finding to a country that he is courting for helping isis is not that outrageous. of thef you are an ally united states, like germany or u.k., and you are a potential adversary like russia and north korea, what do you think when it comes to president trump and the george: if you're european coming have seen this information. the source was insured, -- alix: but i mean more about the drama surrounding it.

george: they think the americans are crazy. [laughter] alix: does north korea look and say, the u.s. is weaker now? on thee an implication downside? george: i don't think so. there is a feeling the united states has lost its mind, not simply the president -- they will say that, too -- but the media, that the media has gone storieswall, elevating that should not be elevated or revealing things that should not be revealed. i think they think all of us are nuts. alix: thanks, george. [laughter] george friedman, thank you. coming up, we are watching developments out of washington, d.c., this morning. plus, the conversation with max baucus. do not miss our interview with onch mcconnell, his take

what has happened in the last 12 hours. all of that, ahead. this is bloomberg. ♪

emma: i am emma chandra with dear bloomberg business flash -- with your business flash. according to the wall street journal, they plan to cut about 10% of the global work force. they sate salaried workers will make up most of the cuts. it is unclear at factory workers will lose their jobs. ford has more than 200,000 employees. home depot managed to escape the problems that plagued other retailers. first-quarter profit the estimates and the company raised its outlook. fromdepot is benefiting rising home prices, which is made people more willing to

revamp their houses. consumer prices were up 2.7% from one year ago. the big reason, clothing, and energy. that means more misery for british consumers, wages are failing to keep up with prices. that is your bloomberg business flash. alix: ambassador nicholas burns and raisedbloomberg questions about whether the reports of president trump's disclosure to russian officials is true, and if it does, does it show a lack of discipline? nicholas: i think it is important to say if it is true, it is mounting evidence the president is undisciplined and that he is not shown ability to adapt to this job in an effective way. alix: joining us is a global strategic advisor and a chief strategist. i want to get both of your takes

because we saw the move in the dollar. can we learn anything material? is nicholas prince right? good morning. i feel like i am on a roller coaster. i am in the front seat, things are going up and i am busy. -- and i am dizzy. we have never peeled the laws of supply and demand, and demand nowunited states generally is not as optimistic as some of the equity markets would make us think, so there are a lot of conflicts. it makes for interesting time and much more interesting trading environment going forward. alix: i think someone once the volatility to pick up. rich, equities are trading around record high and they look at the data. yields look at the weaker core cpi and then you have the dollar. richard: i think equities like profits, we are in a good part of the cycle.

the bond market reflects that we keep dialing back the size and composition of whatever fiscal package again out of trump. alix: can we get one? richard: i think there will be a package. the issue is will it be tax cut or tax reform package? tax cuts are probably more of a low hanging fruit. for the eurozone, give them credit. they have had nice data for nine months and i think the euro is responding to a positive macro data. has been, narrative maybe it is wrong and after the election the markets went up because we got there would be things like a tax package, doesn't it seem abstract and theoretical at this point given what is going on in washington? how would they get to a tax package? >> i do not see it happening. with the house passing their health care, now going to the senate, they'll go to the black cold degree have a you a selection not that far off --

black hole. we have a u.s. election not far off. finally, i do not think we newsd discount the ford from this morning. we had an election all about jobs. i keep saying, you cannot repeal the laws of supply and demand. the demand is not there for other automobile projects and they have to reduce their labor force. you see that with low and slow wage growth. gonerd: i think we have through a slow path but the u.s. data will pick up. we are in a 2% economy on average. i would disagree a little with peter. i think there will be a big incentive for republicans to come together with tax. i would think by midterm elections, there will be a tax package. in terms of the rest of the agenda, more uncertainty. david: with 50 votes provided, it is revenue neutral. richard: under the reconciliation process.

david: does that cuts out what you can do in the tax package? richard: it will and they may use the idea of a 10 year budget window for that. alix: we look at it but it will be watered down at the rehab north korea testing a missile back and hit the u.s., and then we have what happened in the last 12 hours comes to take a look at this chart. this shows volatility over a 60 day time frame for the s&p, the light nine, treasuries, the blue line, oil, the aligned and the dollar is purple. volatility is boring envelope except when it comes to oil. what will make it take up? peter: i have tried for four weeks to get this line in. it was not raining when noah built the ark, so here we are -- david: as far as we know. been theatility has losing strategy. we know that. peter: buying something because it is cheap does not work.

one has to have a risk reward. i am saying things do not stay low forever. risk management is about prudence, looking forward, where are we on historical curve? things will come together. markets kent state irrational far longer. that is where having a strategy comes to play. buying something because it is cheap does not work. i'm not saying to buy volatility . you look for a trigger, not outside the markets, the markets must give you that tell and we have not seen it yet but i have a feeling it is coming closer. david: why did volatility pick up question mark with will it be -- pick up? peter: there is the spread between reality and expectations. it is as wide as it has ever been. if you look at the bond market, 2015, that would be 100% increase but the 10 year is only

15 basis points higher. i believe in the bond market, the fx market because they are larger than the equity markets. they are telling you slow growth, low inflation. excellent point. i looking at the same charts and to me, the eye popper was we had handle, the a nine lowest prints on a daily close going back to 1993. i'm not an equity guy, but i do think the equity market is focused on what equity sector is like, which is what profits. but longer-term, we're going to have the transition at the fed, a new fed chairman. it is not a slamdunk that donald trump reappoint's yellen, but a lot of new fed numbers and a handoff on the balance sheets, so i think there are a lot of vol inducing events. alix: this is what i want to tie in the last 12 hours, the dilemma between the hard and

soft data. soft data was crushing it and hard data was going to meet up, but now it feels the soft data might roll over it confidence rose over. difference.hows the the purple line is the hard data, the white line is soft and the yellow is the difference between them. is that a risk we have to start calculating? richard: i think we will get a stronger q2 than q1, but the average will be around 6%. until we get the fiscal policy, which is probably 2018, then we are in a 2% economy and to the extent the markets are at a faster growth rate in equities, i think there will disappointed this year. a foundingr is also board member of the robin hood foundation. it combines investment to philanthropy. last night, they had the gala

and they raised $64.5 million -- then. robin hood will use that to fight poverty in new york city. congratulations. well done. .eter: thank you what is important about an event like that is when we talk about politics, the spread between the haves and have-nots, the people of new york city, a lot of the managers and gas on here are up -- and guests on here are about giving back, so any dollar anybody gives robin hood goes to those in need in new york city. alix: you are not -- we were not invited. david: just bring your checkbook, you are invited, check me. they are both staying with us. will bep, max baucus

here. later, we will speak with jim woolsey. this is bloomberg. ♪

alix: the movement in the commodity market, oil. proposal by the world's two gainst crude producers confidence. the market looks like it will tighten the opec has to do a lot more. joining us from london is commodities reporter copy of loss -- javier blas. javier: it was good news in a way for opec because it says we are consuming more oil at the moment. the bad news is opec is going to need to do more in the assessment of the international agency, probably with an extension of production cuts into the end of the year. it will not be enough to bring

inventories to that five-year average, so that iea is endorsing or telling opec that they need to do what russians decide yesterday, that they are extending production cuts into 2018. alix: do you have a read on how big the cuts will be? javier: opec, saudi arabia and russia are given an extension, so it will be the 1.8 million barrels a day that the agreed in the first of the year. talkedec countries have about deepening those production cuts, but we understand that the agreement among most members is what a rollover and keeping the size of the long-term cuts as it was in the first of the year. alix: russia said there could be two or three more countries not in the cuts before can to be doing, will we hear more of this over the next days? javier: i think we will hear and some countries

may joint production cut. if they join, i think they will pledged the one not increase production. production declines are already happening. it would not be a real but it is cut something that every oil analyst and hedge fund manager has already on the balance sheet. alix: what about positioning? we have seen longs cut in the market but the move has not been that extreme, just up after percent. -- just up 4%. our the oil investors to burned over the last months? javier: there is a lot of skepticism now in the market, but the long side of the market will reduce over the last few weeks and there is a lot of little were building those positions -- there is a lot of room for building those positions. well in what you were discussing earlier, the

discussion of the real data and expectations. if you look at the first quarter with actual data, we were expecting it would be a lot of rebalancing, strong oil demand. what we have seen, the hard data has come and it is not that good. alix: we have spoken on supply that demand is key to holding up the oil rebalancing. great to see you. two interviews from the nation's capital, max baucus , and an exclusive interview with mitch mcconnell, senate majority leader. this is bloomberg. ♪

alix: we are seconds away from data in the u.s. futures up by two points but not a lot of movement. by 35.es up i-35 -- up

a little bit of selling in the treasury market and yields backing up on the 10 year by one basis point rate the move has been in the dollar, euro-dollar up 5.7, at the highest level -- .7, at the highest level. we have housing starts month on month, disappointing to the downside at 2.6%. you have building permits coming down 2.5 percent, so a miss on both. the 10 year study at 2.35% -- study at 2.25%. to potential risk and the economy is how they have held up over the longer term. david: let's talk about what those data mean. we are joined by peter boorish -- we are joined by peter and rich. how important are the numbers to gdp growth? i think housing is important.

there is a direct affect and it production ofwith appliances and other parts of the economy. it is an important indicator and this was a number that was soft. another example up our data coming in below the soft data. david: there are some good reasons because prices have gone financing is getting tighter, so there is concern about affordability for the american consumer. cope with a down payment and you have a job, housing is affordable in most parts of the country. weathern we have this the next few months. is it too much to make or another data surprise for the downside? >> imf simple person. i will look at home depot opening at record because of strong housing. if it opens higher and then closes lower on the day, i will with theire voting

money rather than permits in different things, so that is something i will look at to see if the data israel. alix: it shows part of -- to the data to see if it is real. alix: the s&p continues to grind higher. does this cap need to resolve itself? >> will get the q2 data in july. currently, forecast are tracking and wishful thinking as it strong. if that number unto delivers again, i think the markets will have to rethink the story about the temporary slowdown in q1. rollover make sense then, right? you revise your estimates and then it disappoints, but how much of a pullback can we see in the s&p? that is the trading question,

what is the percentage. one should manage your expectations, considering we have not seen 10% pullback since the january 2016 and i think people will suffer a little from money illusion because levels are high, so the points of the decline will have been concerned in that may lead to further decline but we will have to see what happens. i'm saying 5% to 7% between now and when we get the gdp numbers, and that will be an indication. because growth is slowing and you look at forward pes, that reality has to come into play and we could see a larger correction. q1 andave had a soft last year came in around 2%. i think the general view is that the global economy is surprising on the upside. i think the stocks -- the stock driven by a huge

multinational presence, so that is part of the diversions talked about. it is roughly a 2% economy in the u.s. we had a soft q1. we should get a rebound in q2. alix: we do see that pullback, why will it happen? we have expected rates to grind higher, the sellout on any dipss to happen, we have seen in equities have been brought, same with treasuries, so i do feel confident we will get back on pullback? >> in the short run, it is supply and demand for money when it comes to trading. we had in administration that said we will double growth, that isn't there. you will see a lot of technical diversions is. grace came in with g -- greece came in at negative gdp. strong dollar leads to inflationary pressures in europe, the last thing they need

, so that will potentially weaken their growth. growth is going to slow and that is going to lead to less have -- less of an earnings expectation and we will have a repricing of the chart you show. of our economy is driven by the u.s. consumer. what are the data points telling us about the u.s. consumer and its health? there are two points, the u.s. consumer is healthy. if you look at income, the savings rate is close to 6%, fundamentals are there. q1 was soft on the consumer, so if we're going to get that rebound on the economy, the consumer needs to step up area debts are paid down -- step up. debts are paid down. david: and they are making more money. alix: and implement numbers -- >> and employment numbers are strong. david: how much is going to rent

and what does that do to the economy? >> households on average are saving more than they did in the past, as well, so dollars are being saved. brought up theou data drop in europe. gdp at 1.7%, greece in a recession but i don't think we are surprised. confidence onss surveys, what is your view on trade in the u.s. versus europe? peter: it is a surprise because they have had this policy that is supposed to help them, but it has unintended consequences of hurting them. that contractionary policy is going to affect italy, which is a large country. int spread, still, the u.s. my opinion growth wise, is better than europe and everybody is running to europe because they think it is undervalued. buyingaid with ford,

something because it is cheap, it is cheap for a reason. i would not be running over there now. alix: later -- we are later in the growth cycle in the u.s. and earlier in europe, so these data points are by the comparatively. peter: i look at the rest of the world as a beta of the u.s., so if we are going to slow here, they will slow over there and more likely more quickly, so the second derivatives, so that means it will go down at their equity market is correct. david: we hear the the reason why europe is relative to is because relative there a psychological scarring of the last of people crashed in the got burned, so it might be a bargain. >> i think prices are attractive for a reason. in this sense there are still challenges in europe, we have had some good data, but the fact is there are challenges in

european banks. obviously, there is still this political sentiment for populism. but therected macron, are uncertainties. you move out three years in the future, the reason euro trade is cheap, is because even there in the cycle, it has more challenges in than the u.s. alix: make me a portfolio then, where do you see the value? >> i do not see inflation picking up, so we are not big old people. goldnk -- we're not big people. i think the treasury sector isn't particularly bad if we see for you have to be judicious in your stock selection. yesterday, we made record highs but what was the one in? the big three were all down, so this is what we do. we try to dissect and go much

more micro in terms of trading decisions. we are one week to three months, so it is hard to build a portfolio in terms of the viewers carried what we are is looking for opportunistic volatility -- viewers. we are looking for opportunistic volatility. on theis the vix sunnyside because their stocks are low, which means it is a stock pickers market so you go to individual stocks? >> that is the irony. the volatility of individual everything except natural gas, so there is opportunity there. if you can use your derivative instruments wisely, there are some good things. particularly with earnings that come out around volatility, expirations, there are some interesting strategies that can take place. called, 1.5%yers

on the 10 year? >> i do not agree with that. that means slow u.s. growth in a global crisis. we think two-year yields are low , they are low for a reason. the risk is on the upside for yields. alix: real pleasure. thank you. some breaking news in terms of earnings, to dx getting hammered getting hammered, it's earnings were the first quarter were better than estimated but it was the outlook that hurt the stocks. second quarter at 81 cents a share and also, it wound up lowering its full-year estimates earnings on the high-end versus estimates the street had by a penny, but tjx has been one of the standouts of the retail market because of the discounting and it is getting hit by almost 5%. next, max baucus will be joining us and discuss the drama in d.c.

and the potential of tax reform. this is bloomberg. ♪

emma: this is the hewlett-packard enterprise green room. coming up, an interview with senate mitch mcconnell at 9:00 a.m. eastern time. david: this is bloomberg. i am david westin. to keep up with things in washington, you need somebody with experience in domestic financial matters and foreign policy. we are joined by next baucus, he most recently served -- max baucus.

served 36 years in the united states senate, including serving as chairman of the finance committee. great to have you. max: good to see you. david: we want to talk about tax reform. but the president of the united states and the washington post that conspired together to say we have to ask you first about this report coming up late yesterday, where the washington post said that the president revealed confidential, classified information to foreign minister -- to the foreign minister of russia and it caused consternation within the security circles. adviser,nal security general mcmaster, said he did not reveal sources and methods. right do you make of this -- what do you make of this and what you make of this issue having been an ambassador? max: this is very serious. he may not have mentioned sources specifically, but by giving up the intelligence he

did, laptop computers, etc., in effect, he is that bulging sources and methods. it is very serious. i would expect for a lot of republican senators to have a private conversation among themselves and with some democratic senators asking, gee, this is getting serious come what do think about this? what are we going to do? with each new revelation, you tol find senators starting stand up more and facing the question, are they loyal to the president or to the country? i think to ask that question is primarily to answer, after a wild, as more news comes out, more loyal to the country. david: having served some 30 something years, you know this institution well. is it more likely there would be an intervention were some leadership went privately to the president and said, we need to get this sorted out and stop making these mistakes, or is it likely they will part ways? max: i think the conversation

will occur first. it could be direct or indirect. that makes a lot more sense. the real question is whether the president will listen. he is a different kind of person. he is not an ordinary president with whom you can negotiate arian he has his own agenda -- can negotiate. he has his own agenda. you will find the republican party is slowly starting to go its own direction and it will be on health care, tax reform, and some other major issues we are facing. david: i wanted to ask with this and this is amongst the backdrop of firing the fbi director, is it possible for congress to move forward on some of these important and difficult issues, such as tax reform? : i have a lot of confidence in the senate. they are very good people. they care.

that is why they ran for that office. they are spending more time on health care reform. the committee that majority isder mcconnell appointed one indication. senator hatch sent a letter to stakeholders and they are approaching health care in the same way i did when i chaired and 2007.tee in 2006 namely, spend time, talk to the groups, republicans, democrats, businesses, labor groups, etc. it is hard work. it is not glamorous. it seems the republicans in the senate are starting to take that approach because that is the approach that is successful and it is one that is not that different from the president -- it is one where they are going their own direction. david: my understanding with respect to health care reform, you are the architect in

significant part of obamacare. the senate has decided to go their own way. they will not take up the house bill and mark it up, they have their own version. you have optimism they can come up -- do you have optimism they can come up as something to make it to the president's desk is to mark desk? -- desk? max: the president will sign it if the house and senate can work it out. i think they will find something , it may not be much, but they will find something because they almost have to. the republicans campaigned so aggressively on health care reform that they almost have to pass something. my guess is that is somewhat the same with a tax reform. version is much different from the house. kind of thumb his interestmission by

expense, much different from the house, and the senate will have to itself, so my guess is it's a not be at the president .uggested by the end of the of, some type of tax reform will pass. david: we talked with chairman brady yesterday, and he was pretty forthright. one, he said we want to do something permanent. we do not want something temporary, which puts pressure on the revenue brutality issue. do you think that is doable and how important is it? max: it is critical to get support of conservatives, republicans in the house, and also critical to get support of democrats. neutrality is going to be one of the key questions that house members and senators are going to ask her if a lot of it comes down to the congressional budget office. going to ask.

a lot of it comes down to the congressional budget office. is this revenue neutral or not, and if it is not, i how much? if it is by a large amount, i think will be difficult to pass. it will need some trimming but it eventually will be passed by the end of the of. david: chairman brady made it clear that he would like to cut rates. and expand the basis. in 1986.what was done can that be done in this congress today? max: it can and that is the approach to go. corporate rates need to be brought down. we need tax reform. the code is way too complex. it is a mess. rates can be brought down and a base can be broadened but it takes a lot of work. you have to put the pieces together and work with the other side. and/or up senate

republicans work with democrats, we can get some reproductions and some base broadening, but it will have to include tax cuts lowerddle income and income americans. it cannot just be for corporate america, which is what the president has been talking about. david: you mentioned the border adjustment tax, which is important in the house version in part to get to the revenue neutrality points, is that dead in the senate because we share resistance from prominent republican senators, as well? is: if it is not dead, it dying. it is on life-support. maybe someone can resurrect it with modification. i think it is way too complicated, that too many groups are opposed to it. i think it will not pass unless it is modified a lot. david: thank you.

that is ambassador max baucus. all week, bloomberg is bringing you coverage of the tax package going before the house on thursday. tomorrow, we will hear from orrin hatch. thursday, senator peter roskam. and friday, senator bill bradley. alix: thank you. from d.c. to your patio, home depot tops earnings estimates. they continue to avoid the slump in retail. shares moving higher and points open at another record high. joining us is shelly banjo. of a lot ofutlier the retail names. what are they doing right? thing people do not realize is 40% of their sales come from rational contractors -- from professional contractors and people. they are still dependent on the retail customer, you end i going

into home depot to pick up stuff to upgrade our homes, but they get a whole bunch of sales from these pros. if you look at the housing market, that is a good is this the them. alix: how much pricing power today have over margin? shelly: they do not have too much competitors in this field. lowes, and different hardware stores, but that is harder to compare prices all over to different hardware stores around town. david: are they more protected from amazon and other retailers? would, you think they but home depot went into online earlier than most. they really double down. they build new warehouses, they made it a point to compete online. storyit is a different with tj maxx getting hit in premarket, earnings doesn't seem terrible.

they lowered their full-year earnings investment by a penny. what is the read on tj maxx? lly: t.j. maxx quarter after quarter has been star in the retail world, really eating at these department stores sales. t.j. maxx to come in lower than to mean, that seems that there must be something bigger out there going on now. alix: do you feel it is a market share issue or does the industry will issue -- woe issue or a t.j. maxx issue? be a badt could quarter for t.j. maxx and they will continue to t.j. maxx create be pushing those -- could be pushing those limits. you are seeing other big brands like ralph lauren, coach tried to pull out of t.j. maxx to reestablish their brands. maybe that could be hitting t.j. maxx or maybe it is this general

retail malaise. david: who is doing well besides, improvement? shelly: that is the question about t.j. maxx pick if you had asked yesterday, i would say t.j. maxx. as you pointed out, there are still growing sales, unlike other folks. i am curious to see what the reader is on tj maxx. always theamazon is catchall, doing well. alix: retail does go to d.c. secretary mnuchin will meet with retail today, or doing all about this? wondering, may be why it the border adjustment tax is dead in the water, why are these retail ceos finding an important to argue against it? you have got to know that is the one thing they will talk about today. there is still a lot of proponents out there, maybe

industrial companies and exporters trying to keep this going and retailers want to really make sure it is not going to happen. alix: see why. shelly banjo of bloomberg gadfly. coming up, we are monitoring developments out of washington. mitch mcconnell will be joining us. in the markets, a relatively muted reaction. dow futures are up around the highs of the session. the futures getting a bid and sterling drops. the dax around neutral. as we head into the mitch mcconnell interview, the move has been with the dollar. treasuries go nowhere. crude getting a bid but watch the dollar over the rest of the day. ♪

alix: president donald trump

reportedly revealing classified information to the russians as the white house does damage control. again. the greenback falls to its lowest level since the election as the agenda hits another roadblock. it looks like another record high for home depot as it is an outlier in a struggling retail industry. david: welcome to bloomberg daybreak. jonathan ferro is on assignment. we are 30 minutes to the opening bell. alix: markets are, after all of drama happening in washington. a little bit weakness over in europe, but yields are going nowhere in the u.s.. the real drama has been in the dollar. the euro dollar is the highest level since the election. stirling is trading a little weaker of the day. the vix, you would think with all of this drama, nothing. it's down by 1%. cutting to balance the

market. it is still low the 50 handle. a look at some of the stocks ahead of the open. mentioned, home depot will open at a record today. this is after sales at the home-improvement retailer rose 5.5%. that is 3.9% higher than estimates. butil may be lagging, building materials been strong. yesterday we were talking with a 20 year anniversary of amazon and the 49,000% gain. thatdepot has at a gain of , almost 48,000%. 1981. did back in we are looking at pfizer. city lowered the stock to a cell from neutral. they are talking about pricing pressure on cancer drugs and risk on an increased over price

for medicare reimburse drugs. those shares are down 1.7%. it is down to $31 per share. ford is moving up i 1%. the wall street journal reports they may be talking -- cutting 10% of its global workforce. that would largely be among salaried workers. voluntary cuts have already been offered in europe. the shares are up today on this report. alix: thank you so much. you can feel the pressure to really get some costs down. heid: the stock is down and has a lot of challenges. he wants to move into mobility. it takes a lot of investment. alix: the noose is tightening. the real drama has been in the dollar as the drama in d.c. continues. the dollar is at its lowest level since the election. joining is the u.s. equities

driven strategist. explain to me the interpretation of what happened over the last 12 hours. is ath the s&p up, it positive. there is no necessary impact. the dollar is clearly a factor. one of the things we have seen over this administration has been the reflation is the agenda that has led to expectation of a stronger dollar. a lot of the actions have resulted in a weaker dollar. does that mean the trump premium is only in the currency market as of this week? or is it too extreme to make that read it? a very: that's interesting question. we can look at devon futures to get a read. right after the election, we saw the outperformance of these futures relative to s&p. that was the expectation of tax reform and infrastructure spending.

of the market.ut that does not exist in the current form. the market has gotten to this part on some of these expectations. treasuries are the last -- and. -- bastion. david: we went from the stock market being up to one that's up despite the fact that he is president? is that the shift we've seen? stewart: it's analogous to what happened last year. the stock market rally don some of the more defensive sectors. from there, the cyclicals took off. now we have the opposite with financials and energy rallying and industrials rallying after the election. now the growth fear sections and more high-quality sectors such as tech are leading. are: morningstar shows they not as intense as before. value is underperforming growth. the key i think one of

things after the election was the influence of value. now we are seeing some of that reversing. one of the conversations we had with clients is earnings are strong. macro data has been somewhat week. this time don't enter of acceleration? what if growth really was .7%. one of the goldilocks economy is the economy that persists? growth will out perform value and stocks with leverage european exposure will outperform. i think we have seen that. emerging markets of outperform. speakers of talked about that. we see a number of people bullish on the tech sector. david: we have remarkable earnings growth in the united states. what accounts for that? can that be sustained? can we keep growing earnings at those rates? stewart: that's the million-dollar question.

what we saw in the u.s. was 50% growth in quarter one. we saw 30% in europe. if you look at the contribution, a lot of that is coming off a week quarter one in 2015, where the weakest. that is coming from the affected energy prices were at their low. now they have rebounded somewhat. if you look at the contribution by sector, half of that earnings growth is just from energy. alix: explain to me the low volatility. how do you play it? i think there is a misconception about the vix and why it is so low. alix: why is it so low? david: give me a conception before it's a misconception. of the: i think one popular market thematics is certain products and how they influence one way or the other. ,hat it comes down to, the vix the key driver is recent volatility.

what is driving if stocks go up or down western mark its earnings volatility and expectations around macro events. there is a correlation between underlines. he will be staying with us. we are going to turn to an important interview. donald trump has by the top news from tax reform to punishing syria. today is no exception. he disclose classified information to the russian foreign minister, something denied by his national security advisor. we are joined now by our chief washington correspondent. he is with mitch mcconnell. kevin: i want to welcome our audience on bloomberg. mr. leader, thank you for being here. i want to get your take on the reports last night in the washington post. corker saidue bob the white house is in a downward

spiral. nick: i read the story and i read jennifer -- mcmasters response. it tends to refute the story. i think we could do with a little less drama from the white house. on our agenda, which is the regulations, tax reform, repealing in replacing obamacare. want to talk about that. a lot of attention is on who the president will select to nominate the fbi. have you spoken with the president about this? sen. mcconnell: i have spoken with the president. i recommended merrick garland. that may surprise people. he has a deep background in criminal law. it was the prosecutor in the oklahoma city bombing case. it would make that he would continue the tradition at the fbi of having an apolitical professional.

kevin: do you think he needs democratic support on whomever he picks to legitimize the nominee? sen. mcconnell: it would be good. if he picks someone with a deep ground in law enforcement who has no history of political ,nvolvement, a genuine expert harland is an example of that, it would serve the country well. it would lead to a more bipartisan approach. kevin: i do want to mention this tweet last week. the president tweeted about the james comey better hope there are no tapes of our conversations are in you expressed confidence in the republican-controlled committee investigating this. should they have access to those tapes if they exist? senator burr and senator warren are handling the investigation. they will decide what they need. in the meantime, for the rest of us not directly involved, i

think we to concentrate on what comes next. we do have a great choice for fbi director. i anticipate the president will do that in move on. kevin: how has the drama influenced your ability to get across health care reform? what is the timeline on that? elected alicans republican congress to fix health care. sen. mcconnell: we are in intense meetings. the bill finally passed the house. it won't be easier in the senate. we are in intense discussions with all of the members of the senate. want to get to 50 base to repeal and replace obamacare. those discussions are on the light -- underway. we can't take forever. the private market is collapsing. insurers are pulling out of markets. i don't think we have forever.

i'm not going to put a strict timeline on it. kevin: there is nothing more personal than health insurance. can you guarantee that whatever packages past, no one will lose coverage? sen. mcconnell: what we know is what we have now is a disaster. the status quo is unacceptable. we need to do better than the status quo. kevin: you have said this has to be revenue neutral. the president has approved a national -- huge tax cut. is there tension on divisions? are you confident we could have tax reform by the end of the year? sen. mcconnell: we have a $21 trillion debt. revenuehave to be neutral. i don't want to put a strict timeline on it. the last time tax reform was done, it took several years. we certainly want to completed

this congress. we want to make america more competitive. we did not have one year of 3% growth during all over obama. kevin: one of the most controversial issues is the border adjustment tax. i've spoken with a lot of senators who are against it. what are the chances? --. mcconnell: it's probably it wouldn't pass the senate. the way we are trying to go forward, the secretary of the to findy, we are trying a proposal to start with. it will start the house. we haven't reached agreement yet. we will at some point. border adjustability is a controversial thing in the senate. we will see once in the final thing we agree to. kevin: have you spoken with the presidents since last night? a final question.

we hear a lot about this, the need for regulatory reform. what the chances of that? sen. mcconnell: we are doing a lot of perform. we have done 14 repeal or's -- 14 repeals already this year. love to revisit dodd-frank. my committee bankers of taken a hit. the democrats on the senate don't seem totee want to change it. all of their committee bankers are complaining about. i would love to do it. it would involve some democratic involvement. kevin: the president is unveiling his budget proposal next week. there is a lot looming in september, potentially a government shutdown. when you going to be looking for in the budget? sen. mcconnell: we generally a who the president is don't pay a lot of attention to the budget.

we share some of his priorities. i think the increase in defense is something republicans think is import and breaking out of you hadar for dollar -- to have a dollar of domestic. we hope roque and at about already. most of the presidents priorities i share. some of them i don't. we work our way through this. it will have to be a bipartisan negotiation. kevin: thank you very much for coming on bloomberg. we appreciate your time. back to you in your. alix: that was kevin with mitch mcconnell. also still with his steward. do you have a take away from it? stewart: one of the key things and this is an true throughout the year, some of these things such as health care which don't necessarily have rod market impact and the become market driving because there implications for tax reform. i look at the week where there

thepotential passage of bill, which ended up being withdrawn. that was not a market factor or did not have any consequence until tuesday of that week. throughout that entire week, it was the thing driving markets higher and lower. the s&p was rallying and declining on that. alix: we are getting some hard data right now. it is up by 1%. a big upside. we had margins slightly lower. it increased .4%. month on month, industrial production rose 1%. manufacturing production is picking up as well. this is solid. this is solid compared to some of the softer data we started to see. stewart: cpi was disappointing. retail sales as far as the control group data was disappointing. some of the revisions were

positive. now we see this on the industrial production side. investors have to look at macro data which is extremely weak. they have to figure out what it means for the economy. as long as inflation doesn't pick up, i think that is a positive for the market. the trend is higher rather than lower. david: it's not just production being up overall, capacity utilization is up nicely. that usually translates into pricing power. you start squeezing down excess capacity. sen. mcconnell: pricing stewart: -- -- stewart: that perform during the back half of last year. those same stocks because of some of these weaker expectations outperformed some of the low pricing power of stocks has been a top former.

alix: what is your strongest conviction right now? stewart: europe over the u.s.. there is still some risk. we have french elections in june. we have german elections after. at the end of the day, much of the political risk in the eurozone has come out. at the same time, we have an economic surprise. economic surprise in the u.s. is rolling over. we got better data. i think the euro is not back to its 2015 highs. we're still not back there. alix: blinking off that ip data. we have s&p futures around the highs of the session. the dow is up 56 points. index, it is off the low of the session. it is still down by .6%. that data is dropping. we will be sticking with us.

more ahead, we will have reaction from hollywood. this is bloomberg. ♪

david: we're not going to get to alix steel's favorite subject. wall street's fear gauge. investors looking where to trade. a low fixed means high valuations. you have morgan stanley saying the volatility trade can offer returns. still what the -- stewart is still with us. it's not really a fear index.

wewart: i think it should name the thing that tracks realized volatility. what does it count? a lot of people think when there , thatitical uncertainty should drive the fixup. it doesn't seem to react to that. stewart: that's a matter of the market not being necessarily essentially 100% exposed to some of these events in foreign markets. equivalent of the the vix for euro stocks, the spread reached an all-time high ahead of the french election. now that has spread and compress. there is less premium in that market. whether certain candidates in foreign markets win an election not, i don't know with the implication for u.s. equities,

especially go back to a single stock level. what that actually means for those companies, that's the reason why we did not see that much follow-through ahead of the elections. david: does the fed affect the vix much more than congress does? stewart: it really depends. this is one of the tough things about examining equity markets. it changes from day to day and month-to-month. december 14of the when the fed was about to hike for the first time, there were outflows from emerging markets and the s&p was selling off area that was the driving factor. if you look at the market which is more politicized, what happens in congress makes a difference. i think it is shifted from one to the other. longer can the fix be going? this is the curve of the vix. the green line is what we saw about a month ago. the orange line is where we are right now.

this has huge re-rating. the whole curve has as well. we don't see it moving farther. what happened? over the past 10 days, the average realized volatility is for. the vix is still above 10. that is a signal never get risk in the market. the average has been around 20 for the past few decades. when you look at that on a basis, the vix is still rich. what is even more interesting is when you look at investor risk aversion, it is still rather steep. this goes back to the question that everybody asks, why is the market so high? what is the next crash? it's almost like a finance textbook as far as the lost aversion bias of investors.

when you look at up moves versus down moves, eight of the 10 largest moves have then to the upside. traditionally, the market grinds higher and crashes lower and people pay more than they do for calls. paying more and the market is exploding to the upside. alix: that is really interesting. take a look at this. the blue line is the vix, but the white line is the open interest on the short-term futures for the vix. more calls, the more people are betting on a short-term correction. does this make sense to you? stewart: i think it comes down to two factors why this is increasing. one of which is people view the vix as a reverting act -- asset. it's very low right now, people think it will go higher. secondly, people look at the term structure of the vix.

when you look at the current low level, it is very steep. right now, it is flat. down in the vix is not necessarily steep, you end up having a better scenario. people combining these factors, low-level flat rolled out and saying it's a good time to buy. alix: what is your favorite volatility call? stewart: the key way for people to look at volatility at these low levels is through soft replacement. if you look at why you would want to do soft replacement, this is a decade best environment for the strategy. sell the stock and replace it with a call option on the same stock. rates are not historically high and dividends are actually fully priced. for all of these reasons, you can reduce your risk to just a premium pay and replace your exposure. david: is this something that is temporary?

some people suggest etf is driving this. stewart: it's interesting you mention that in 2011, there were a number of wall street applications that said passive investing was at an all-time high and etf's are prevalent. if you look at that and we did the work on it, if you look at the volume, it's back to normal. you are sticking with us. the opening bell is up next. you're looking at s&p futures about 4% up. this is bloomberg. ♪ the show's about to start! how do i look?

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you have weaker housing data, but a better industrial production data. it was the biggest gain since 2010. even capacity utilization was back to the 2014 high. there is a lot of optimism in that data. other aspect classes, the dollar is the story. the index is down .6%. it did not get a boost. yields continue to go nowhere all morning. crude is up 5.6 percent. all eyes are on d.c.. julie: traders are making in the investment decisions based on d.c.. we continue to see a sort of lack of interest on that front as we see stocks continue to rise, albeit small increases. any increase for the s&p 500 and the nasdaq will meet another

record close. the dow still failing to attain that record level or re-attain that record level here. if you take a look at some of the movers we are watching, a lot in retail. depotked about home sales. home depot is it 160. dick's sporting goods is below analyst estimates. not to dothere, it's with earnings. they are disclosing an 8% stake in the company. finally, this has been a consistent performer. it rose by 2015.

we have talked so much about the pain we have been seen in retail department stores. this is a chart from bloomberg dry nongovernment data. in white, you've got the other retail. this excludes food, gas stations, holy materials. pretty consistently, this is a monthly basis. we have seen building material sales do better than the rest of retail. home depot is reflecting that. alix: still with us is stewart walter. story if certain retailers are doing well? story of a constant

migration to online shopping in all forms of retail. there are certain retailers that are surviving. home depot is one of those. they have done a lot better than the multi-line retailers. it's a story of the survivor of the fittest. alix: how does the value growth debate play out? stewart: a lot of retailers are in the value sector. alix: that doesn't mean you're going to be buying. stewart: that might be part of the broader performance we have seen this year. what surprises me is when you look at retail and you look at the q1 consumption figures that were the weakest since 2009, none of this is peyton before earnings. when you look at the discretionary sector and imply of moves, they were not necessarily high. i am surprised the market was taken off guard, especially when we saw the retail figures last

david: this is not a new subject. we've seen this coming for a long time. gina: a couple of things happen. the earnings season has been phenomenal. investors are rewarding companies that be to me topline trend. if you don't do that, the -- has such a strong earnings season, you get punished. retails have missed on topline or bottom line or in some cases both. they tend to be at the bottom of the barrel. they are come at the end of the earnings seasons where we had this optimism. that is part of the trend. the other is they are still missing. expectations are low, they are come in below those low expectations. that is creating the problems. does that mean for volatility in retail? what about retail? stewart: we have seen the large

earnings related move. s&p,u look at the broad the dispersion is and how much stocks moves relative to the index over the earnings time. the index itself doesn't move. this season, there has hardly been any of that behavior. stocks of had very little movement after earnings. the exception is retail. if you look at it, retail is the second that does move because the companies are driven by momentum. from one quarter to the other, there is significant trend of following that. i think that the surprising fact is how much they have moved and how much they probably will move in the future. alix: this is a great brought to us by gina. this shows the volatility of individual sectors. gina: the thing that is most stunning about this graph is the internet and catalog re-tylers

-- retailers, that segment is showing a decline in 90 day volatility over the last five years. it showed the most significant decline of the discretionary spect -- sector. this is the safe space. volatility keeps going up. that tailwind is pretty phenomenal. the segment that has showed the greatest increase is your traditional brick-and-mortar multiline retailer, especially the department stores. we saw it was a prime week for them to come out with earnings and most of them does pointed on the top or bottom. david: this is a structural problem, it doesn't go away it right away. if i said it was a choice between online or price discoverability. this competes at the monopoly change, weonsumer are told of millennial's don't

like to buy stuff as much. gina: i would not want to pick one. it's a combination of all of these things. the phenomenon is spreading beyond retail, everyone talks about amazon and it's the big gorilla taking market share away from these other retailers. priceline and netflix are changing the well -- game as well. expanded andve market cap has grown 60 times over just a 10 year time. markete gobbling away it share in media and services. it's not just retail. that is showing up in the stocks that are in the discretionary sector. it, netflix,ne expedia, they are eating away at everything. exactly. what is your broader take away when it comes to the individual sectors we've seen? what other rotations are we

seeing? stewart: i think as she mentioned, the value growth is what was mentioned as far as these dispersions and retail. another thing that is interesting is if you take what david's question about the price discoverability and apply that on a broader basis to productivity, robert gordon has been an advocate of the theory of low productivity growth graduated for time. what interesting about some of these companies that are in the online sector, they don't necessarily increase activity. they do increase convenience. one of the greatest innovations of our recent time has been apps to get cars, car services. you still lead a person to drive that car. it increases the consumer experience. that's it's going on in retail,

that's what's going on the sector. it's not a positive for overall earnings. alix: i am more productive. that's good stuff. you can see all of her analysis on liberty intelligence. it's great -- bloomberg intelligence. we have more reaction from washington. in the markets, amazon has another record high. the dow jones is up i-30 points. it's on a movement, but he'll banking those record highs. this is bloomberg. ♪

emma: this is the green room. we'll be joined by the former cbo director and talk tax reform.

david: this is bloomberg. the big news overnight were the reports that president trump showed classified information with the russian foreign minister. that is something the national security advisor has denied, but trump has defended himself. he is seeking help in fighting terrorism and for humanitarian reasons. for perspective for someone who knows more about national security and just about anyone, we're joined by the former cia director. jim: it's good to be with you. david: we just heard from the majority leader. we just interviewed him a few moments ago. he described what he would like out of the white house. sen. mcconnell: i think we could do with less drama from the white house on a lot of things. that way we can focus on our

regulation,h is the tax reform, repealing and replacing obamacare. david: is this drama or is it more than drama? coming from your experience, is there a serious threat here? is this the press and politicians getting stoked up about something? jim: a couple of things are going on. people need to distinguish between two things the fbi does. ,ne is criminal investigations mafia, etc.. the other is counterintelligence investigations to help the president defend the country. if they are working on a counterintelligence investigation with respect to what did russia try to do during the election, that's not a criminal investigation. there is no obstruction of justice going on if somebody

doesn't cooperate with a counterintelligence investigation. andy mccarthy had a great analogy in a blog today. he said it's as if people were on the field saying you're out, the infield fly real -- rule works. there is no infield fly rule in football. is very much at the heart of a lot of the confusion i think in this discussion. david: there's a fair amount of confusion about firing jim comey. in thenow been advanced press that in meeting with the foreign minister of russia last week, the president disclose some specific plans for attacks by the islamic state and identify the city from which they originated and the claim in

the newspaper is this might've pointed in the direction of cooperation with a foreign intelligence organization. the national security advisor methods.eveal he did not deny the attack. from what you know, could that be used against the united states interests? jim: could and might are pop -- powerful words. there are circumstances in which if you disclose something that may seem to be innocuous like it , when people put that together with other things people know, they could disclose a source or a method. without careful consideration disclose something that might lead to a source or method. what i think the white house is

saying as i hear it is they have disclose nothing of a source or method of collecting intelligence and nothing that would lead to that being discovered. that's what the argument is about. alix: it does seem there are repercussions. the associated press is reporting a european intelligence person is saying they might stop sharing information with the united states. do you expect more of this? what is the implication of something like this? jim: it depends on the information. the president has the authority to declassify according to his judgment. he may not have exercised his judgment well. he has the right to declassify something. circumstances in which such a disclosure would lead to other information that

an ally would say you indirectly what my intelligence services doing and i'm not going to share with you anymore. that is a possibility that exists. it is possible that whoever is leaking all of this doesn't have the foggiest idea what he is talking about as inventing stuff. david: there is a lot we don't know. understanding, how difficult is it to get human intelligence with respect to the islamic state. we have operations around the world. the islamic state is difficult to get human intelligence on. if this might lead to revealing human intelligence sources, how damaging could that be? jim: it is difficult to get human intelligence out of terrorist organizations. penetrating them is very hard. there are other ways to get intelligence about them.

came acan watch it terrorist when into with the drone keep it up there for hours and keep watching the cave until they come out. there is more than one way to get intelligence about the islamic state and terrorism. losing intelligence from a source that has penetrated a terrorist organization would be a real shame. that might be something we can exploit in the future don't stop terrorist operations. david: thank you very much for being with us. discussmmon up, we will tax reform with the former cbo director. all eyes are ron washington bc this morning. from new york and washington, this is bloomberg. ♪

alix: the s&p is flirting with a record high. downside, you've got real estate utilities. david: all week bloomberg is addressing tax reform. the house ways and means committee will start hearings on the legislation. the former cbo director douglas. welcome back. it's good to have you. chairman to the yesterday. we talked to the majority leader today. both of them agreed on one thing, whatever comes out has to be revenue neutral. is that right? douglas: that is right. going to use these rules in the senate called reconciliation, you can't create long-term deficits and have a bill protected. revenue neutral avoids that

problem entirely and you will get through the senate. chairman'se the coming from. that's where the leader is coming from. tax reform is hard to get. it's harder to keep. if you create deficits in tax reform, you sow the seeds of destruction. you look back to 1986. the running deficits in the 80's. for revenue arose and people wanted to open up the tax code. once you do that, it disappears quickly. help tonue neutrality get there. it helps you stay there. david: we have republicans in both houses agreed on this. does the white house agree? we had that one page outline. it looked like there were a lot of cuts. i did not see that many sources of new revenue. are there enough to make this revenue neutral?

douglas: there is not. to give them some cover, it's an outline and not a plan. it was -- they argued they would make up the revenue through growth. i don't think that is a legitimate path forward. if you look at what the house is done, they have done real tax reform. it's hard work. it is politically contentious. i think the white house has to send a clear signal they are willing to do that work. or they will settle for some short-term tax cut will not have the economic impact. david: can they get to the fix without the order adjustment tax? that is $1.1 trillion they can get. can they get there without it? douglas: every dollar you give up in base broadening hurt you with the rate. you will get to 28% if you give up order adjustment.

the legitimate to look at order adjustment as a source of revenue it's how you stop multinationals from cheating. that's important consideration. you could give it up because it's become politically contentious. you have other revenue and you have to come up with another way to do the enforcement. the border adjustment is not the only contentious thing to deal with. david: one of the things in the outline is eliminating the deduction for states. how much can they get out of that? how much can that get them home? douglas: they need everything that's in there. interest toance of duct ability which is going to be something they are going to have a big fight about. anything they choose to do in terms of limiting the deductibility of charity or scaling back mortgage interest,

they will need to touch those. that's why tax reform is difficult all the time. david: chairman brady said he did not want to mess with business interest to the actions. douglas: they have disallowed the deductibility of interest. i'm sure he does not want to touch it. they need the revenue. that's not a big problem in the long-term. it is a big upfront cost. to do those things, you have to have some offset somewhere. david: if they can get to neutrality, if they don't have to get the 60 votes, do they not have to worry about the income distribution issues? been adamant have that this has to be skewed to the middle class. -- douglas: they looked at the objections you can have for tax policy. better growth incentives, that is at the heart of the plan.

distributional objectives are secondary. you can't do everything simultaneously. they chose a tax code that is focused on growth and will generate the same revenue as the current system. that's the judgment they had to make. if you want to help the middle class, the most important distributional consideration. david: i think the president agrees with you. thank you very much. it is 25 minutes into the session. this is where we stand on the markets. we have better manufacturing data out. dollar againster the euro. that doesn't for bloomberg a break. this is bloomberg. -- bloomberg daybreak. this is bloomberg. ♪

vonnie: it is 10:00 a.m. in new york and 10:00 p.m. in hong kong. mark: welcome to "bloomberg markets."

vonnie: here are the top stories we are covering from around the world. it wasnt trump says right to disclose intelligence to russia. the latest controversy that sent washington buzzing. hands thedisclosures u.s. dollar to its lowest since the day of the president's election. is all the drama surrounding the trump white house finally rippling the markets? while many banks are making plans to move workers out of london, a canadian giant is planning to move in. we will speak to the head of pfp . a lot to get to in the next few hours. we are 30 minutes into the trading day.