jonathan: prime minister theresa may goes on the defensive. an urgent mediation effort in the middle east, the saudi's tighten the screws. m bit.r crack in the big e south african economy falling into recession for the first time since 2009. good morning, i am jonathan ferro alongside david westin and alix steel. let's get you up to speed on the market action this tuesday morning. futures, little bit softer. a bit of a risk off tone this morning. it treasury yields grinding down toward 26 -- 2017 lows. negative three basis points. the euro-dollar decision of bit later in the week. 9:30 general motors will hold a shareholder meeting in detroit that will feature a proxy fight for board representation. at 10:00 we get u.s. job openings and labor turnover in

april, a key indicator of jobs and the business roundtable releases the second quarter ceo economic outlook surveys. jamie dimon will speak at a 10:30 a.m. inl at washington. let's get an update on what is making headlines outside the business world. emma chandra is here. president trump vowed to crack down on the leaks of classified material to the news media. a government made its first arrest. a former air force linguist who works as a contractor has been charged with espionage. he is accused of sending a security port on russian hacking to a news outlet. tim cook says the company helped british officials investigate terror attacks. emilyke to bloomberg tv's chang. tim: in cases where we have information and they have gone to -- through the lawful process, we not just give it, but we do it very promptly.

emma: law enforcement officials have criticized apple for its standards for tough encryption. we will have more highlights with our exclusive interview with tim cook throughout daybreak: america's today. it is less than 24 hours but for -- before voting begins. boris johnson is sent to the northeast of england today. those areas voted to leave the european union. he will say that only theresa may will get brexit right. jeremy corbyn will try to shore up his support in working-class areas. global news -- global news 24 hours a day, powered by more 2600 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. jonthan: let's get more on the u.k. prime minister going on the offensive. let's head over to bloomberg's and a redwood outside westminster. there is usually a message on

campaigning takes place. interesting that she is going on the offensive. is that message one of confidence or complacency? anna: perhaps confidence. interesting comments coming from my bloomberg news colleagues suggesting that as we see theresa may and other bigwigs of -- conservative party perhaps that suggests they are hearing different messages on the doorstep than what the polls are giving us. perhaps they believe they've got more of a chance and some of these labor strongholds and perhaps the polls are suggesting. remember boris johnson is the foreign secretary and he was a prominent leave campaigning and he is headed to the northeast of england. anyone watching the coverage of the brexit vote will remember the role played symbolically by the northeast of england in driving home the markets just how big a brexit vote was going to be on that night.

he heads to that part of the country with a message that this is a moment to believe in the huge potential of exit britain. party also trying to turn the story away from security warning about winter fuel payments and the security investigations really go on and there seems to be concern in markets as to just how much of a concern about theresa may's record at the home office or homeland security would be -- the u.s. equivalent, just how much her record will stick to increasingly reports emerge about how much the police knew about the three men or at least one of them who perpetrated the attacks on saturday. jonthan: that is at the front page of every u.k. paper this morning. the conservative party were the party that put leadership and personality the forefront of me, campaign, vote for strong and stable leadership, you look for chaos if you vote for jeremy corbyn. what is interesting if you look that actuallys

that is where she isn't performing at all. only half of those polled now believed theresa may would believe -- would make a better prime minister the jeremy corbyn. may dropped by 10 points. had you make sense of that when this was meant to be her position of strength? anna: she doesn't seem to be losing on many fronts relative to where she was. remember she started with this huge lead in the overall polls, some of the biggest leadership gaps shoe was given are closing and some of these specific areas she seems to be losing her edge. she doesn't seem to be still ahead of jeremy corbyn in many of the leadership polls, but not closing the gap the way she would've wanted to. the gap is down one percentage point for the overall lead they get to the tories, but the polls have a wide range between one

and 12 points seems to be the average -- the makeup of things we have seen recently. gilt markets, fx investors, strategists in stock markets as well increasingly talking at least about what a labour victory would mean even if that is not their best base case. jonthan: anna edwards, great to have you with us. the momentum of travel is pretty clear, you can see it through the prime minister's favorability rating falling where as the leader of the opposition, jeremy corbyn climbing the bottom line. those lines converging. the spread is still significant, but -- but the direction of travel is as well. daniel morris, couple of weeks ago you would have been called crazy in london if you put out a potential for a jeremy corbyn win.

daniel: expectations are that there will be a conservative victory. we are just talking about the margin that will matter. our base case is certainly that. as you suggested coming always consider all the options. jonthan: hung parliament a onsibility when we wake up friday. we caught up with andrew at pimco and he turned around and said it would play out in fx quite badly for sterling. i see a load of people taking the opposite try -- side of the trade that guilt could actually climb. daniel: certainly it will be the most noticeable in sterling. onhink on gilts -- i think gilts it will take longer for the market to assess that. the ftse 100 has become a never -- negatively correlated proxy. see a bigger move in sterling, the correlation and neatly with the equity markets.

in the end as we think about certainly the ftse 100, it is an international index so it will matter more what is happening outside the u.k.. take into effect the one-off currency adjustment, doesn't change that much depending on what is happening in the u.k. jonthan: i want to get a sense of how london is geared up. outcome -- acome lower probability story for the likes of jeremy corbyn. is it still high impact and only local? daniel: i think at this point it is like to be local. global markets and european markets care more about what is happening in the u.k. it's when you get closer to the end date for brexit. six months before it will be an issue. for now it is going to be sterling and gilts that will react. jonthan: we are around the 130 level on the cable rate. you want to be long sterling come thursday? edward: i think what we learn with these elections taking

possessions -- positions when you have binary outcome is pretty risky. i think we would be neutral on sterling and see what the forward at and move that point. jonthan: dan morris will be sticking with us. alix: even morgan forward at stanley was go along sterling and he is backing off that a little bit. there is a shift in the market for that. jonthan: it wasn't easier call to make at 125 or 126 up toward 130. the base case for most of the people i have been speaking to, it's still a conservative majority. it is just that the tail risk is less of a tail risk. we are watching it. 48 hours to go. coming up, and interview you will only see here, a one-on-one with apple ceo tim cook talking politics, the paris accord, and the latest on the new home pod. this is bloomberg. ♪

♪ a good afternoon from london, a good morning to new york. alongside alix steel and david westin. emily chang caught up with tim cook yesterday and what i need from him is a phone that has two sim cards so i don't need a u.k. one and a u.s. one to call different people. when we going to get that from apple? david: that's a great idea. i am not sure emily got to that in her interview. jonthan: i imagine she did not. david: apple ceo tim cook actually disagrees with president trump's decision to pull the united states out of the paris climate accord. he spoke exclusively with emily

chang from the apple worldwide developers conference in san jose. listen tonk he did me. he didn't decide what i wanted him to decide and i think he decided wrong. i think it is not in the best interest for the united states what he decided. terms -- the way i look at this thing and do you interact with politicians or do you not, my view is that first and foremost, things are about can you help your country? if you can help your country and you do that by interacting, then you do it. country the clips -- country eclipsesif you politics. emily: you have other people leaving the table like bob iger and elon musk. is the president jeopardizing

his -- one of his key constituencies? tim: i am not speaking -- for those guys, but i would differ in -- differentiate leaving a council and advising in a way that you can think can help our country. i think the first one is a judgment call that people make. council and soa it is not a decision i had to make. i understand both sides of that, but advising on something that you believe will help america i ceo. is a requirement as a you definitely do that. honestly, if i get a chance to go pitch the paris agreement again, i would do it again because i think it is very important that we engage to on a globale change basis. this isn't something where you

can solve it country by country. it requires a global action. emissions created in one country , it isanother and so something we feel very strongly about and i wanted to do every togle thing that we could do tell how important it was to stay in the agreement and, unfortunately, he decided something different. emily: why didn't you join a council? tim: why didn't i? two reasons. my primary job is being ceo of the company and i spent the bulk of my waking hours doing that and i do so willingly because i love the company and the people in it. a traveling back east isn't forward tohat i look doing except when i need to do. thesely, i don't find

councils in general and committees to be terribly productive, but it was not about not wanting to advise on something where i thought that we could help or we had a point of view that should be heard and , ii am doing the latter cannot imagine a situation where i wouldn't do the latter because i think it is in the best interest of america to do it and i am, first and foremost, an american. that was apple ceo tim cook speaking exclusively with our own emily chang. the markets are still doing the same. take a look at the huge indicator of the 10-here spread. -- 10-year spread. 85 basis points. ,till with us is dan morris daniel, we have jim comey testifying on thursday in front of the senate intelligence

committee. if that is not a smoking gun, is there a bias for higher rates? daniel: what i think is going on is the impact of hauling inflation expectations. if you compare where we were before the election of trump, they have come back down to the level they were at that is being reflected in nominal yield. is thisadly the story reflation trade and what assets we see it in. it has certainly come out of inflation expectations in the u.s. that is what we are focusing on in terms of the decline of the two-year and 10 year spread. i think that is the key thing right now as opposed to an indicator on u.s. growth or the likelihood of a recession, but to find a reason again for the inflation trade to come back be it a recovery in oil prices or a more hawkish tone from the fed or progress on the trump or republican agenda items we hoped for in november. david: is what we are seeing coming down on what some would

call a sugar high after the election and back to the fundamentals of the economy?" if the trump trade washed out where will the economy take us? daniel: you want to ask where are we now compared to november, we are back to where we are there. are things really no different prior to the election? i would argue that the market is overreacting in the upper direction. even got to expect there are -- inflationary pressures. inevitably, markets tend to overreact on both sides. too much enthusiasm, too much sugar as you put it. now we have crashed, as you will. we are looking for stabilization and that argues for higher yield on top of the fact that we cannot forget the fed is going to hike. of course it comes down to the tone that accompanies that hike. for us, another hike in september is the other case and that will argue for higher yield. david: where do you see

indications of a renewed -- for -- is anything tapering off? daniel: that is the biggest mystery we are facing. if you look at what the data is doing and tried to come up with an expectation of why that is happening, probably not a very satisfactory expectation because it does not really make sense. if we look at the tightness of the labor market and taken to rate, the participation companies to believe are having difficulty finding workers. of that has got to translate into higher wages at some point. it has certainly been a surprise that hasn't happened yet. those economic fundamentals are going to reassert themselves even if it is delayed. it's another way of saying the united states is not japan yet. alix: honestly the treasury market not taking a more positive view on that. my question i was asking yesterday and i will follow through with today is why do we have equities at record highs.

i do not want to hear goldilocks because you will have goldilocks -- equity investors look at the same data. explain that divergence to me. daniel: what you have got to understand in terms of the reaction to the equity markets, it is really a two edged sword in november when you have the increase in treasury yields an increase in equities at the same time which generate -- generally speaking we think has been anomalous. what is happening now is we the samenestly, have growth expectations we had before, but the inflation expectations are coming back. that by itself should be negative on the margin for equities because we would like to have revenue growth to support profit growth, but we have to keep in mind ultimately there was going to be a risk to the equity market with the rising growth and increasing fromtation from more hikes the fed. what you are seeing is equity market is dialing back expectations for the fed. equity markets like it when expectations are following, but

that is what it is pricing in now. -- falling, but that is what it is pricing in now. alix: what is your strongest trade? daniel: it is actually equity markets. is difficult to be overweight. it really is emerging markets, local currency emerging markets in particular. we see central banks cutting rates, brazil and mexico and the expectation of the depreciation of the about -- of the dollar. i think that is where you see the biggest upside. david: daniel morris will be staying with us. coming up, mark weinberger, a member of the business wind -- roundtable executive committee. he will discuss what lawmakers want out of touch business's is want out of this congress. this is bloomberg. ♪

♪ emma: this is bloomberg

daybreak. it sprint merges with t-mobile, lenders make it left out in the cold. according to people familiar with the matter, the wireless carriers are considering an all stock option if they combined, which would eliminate the need for financing. the majority owners still are not sure if they will attempt a deal. it is the most dramatic attempt to revive the struggling clothing retailer, j.crew. -- will be replaced by the president of williamson noble -- williamson noble -- williams-sonoma. a company has been hurt by the shift in e-commerce which faces a restructuring deal with lenders. the founder of muddy waters tells bloomberg tv he has a new target and it is a company based in hong kong. he says there are a number of companies -- companies listed in hong kong committing fraud.

carson block with the tease waiting for tomorrow for that short. here in the markets, we are seeing movement in individual holdings. on the day, the worst loss since january 2015 making up about a quarter of the loss on the stoxx 600. it was coming out with a new breast cancer drug to replace a drug facing a lot of copycats this year and that drug disappointed. these copycat medicines could actually steel $1.3 billion a 's cancer roche franchise. the ceo is stepping down after 14 months on the job. new activist investors are pushing for changes. if you change the ceo, you could see strategic changes like a share of generic. is up basederrigo

on the price of gold. -- barrick gold is up based on the price of gold. gold stocks have really been beaten up when gold was kind of out of favor. david: thank you so much, alix. an interview you will only see here, one-on-one with apple ceo tim cook. he is talking the paris accord and his new homepod. -- will be telling us what he thinks of the new homepod. live from new york and london for all of our viewers worldwide, this is bloomberg. ♪

jonathan: from london, breaking news in the bond market. 10 year treasury yields going down to a new low for 2017. here's the story -- the chinese are said to be ready to buy more

u.s. treasuries as the yuan steadies. the back stories is a weaker chinese currency, and trying to stimulate demand for it, to prop it up, they have had to come into the market and sell down dollar-denominated assets. you sell dollars, you stimulate demand for the chinese currency. but as this currency continues to steady on its own around market forces, it enables the chinese to build up fx reserves. the chinese are said to be ready to buy more u.s. treasuries. the cue for the market is to buy more u.s. treasuries, down five basis points on the session, 2.13 is how we trade. alix, there goes the function on the bloomberg. over the last 6-9 months, the chinese are really paring down their holdings. alix: we had it right here on the terminal. the worry that they would continue to do that, this david, it'sing,

interesting because when we had the trade war aspect between china and the u.s., the worry was that, will th china selling treasuries? that has come to down. david: sounds like good news. that's good news in terms of the global economy. alix: indeed. interesting development here, really seeing that reaction in the bond market. jonathan: new lows for the 10 year treasury, following that breaking news on china. let's get to the markets in a moment, but i want to get you some headlines. here's emma chandra with first word news. emma: in london, the mayor says future terror attacks will be harder to stop if prime minister theresa may wins the thursday election. he issued a statement praising what he called the "tremendous bravery" of police during saturday's terror attack, warning that london could lose close to 13,000 officers if may wins. the economy has

unexpectedly slipped into recession. gdp fell for the second straight quarter, down .7% in the first three months. economists had expected an increase. kuwait isler of trying to resolve the dispute between qatar and a group of arab nations led by saudi arabia. the saudis, uae, bahrain, and egypt have cut off qatar's diplomatic ties, over ties and support for the islamic state. global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries. i'm emma chandra, this is bloomberg. alix: thank you. the qatar exchange index continuing to sink, it did wind up moving from the lows of the session, but nonetheless a brutal two days. joining us, yousef gamal el-din, and matthew martin. yousef, let me start with you.

what has happened over the last 24 hours? yousef: a dramatic set of measures from various airlines and authorities causing major disruption over air, land and sea. in terms of the political developments, the qatari and kuwaitis are trying to patch things up, but last time in 2014 when there was a diplomatic crisis, the worst that happened was a recoloring of ambassadors. a completely different scale. that ook seven weeks to fix. they think nothing short of capitulation will bring saudi arabia and qatar on the same page. alix: a much different circumstance for a few years ago. over the last year when oil were lowering their fx reserves to survive, the worry is this will happen for qatari.

take a look, this is the foreign exchange reserves. you can see how they have fallen in the past two years. what happens now? one of the things we need to remember about qatar is they have this phenomenal amount of asset builds up in the sovereign wealth fund. the guitar investment -- the qatar investment authority has a rainy day fund diversified around the world, it has stakes in the likes of volkswagen and ross nest, barclays and credit suisse. they have that if they start to get into the sorts of problems where they need to bring money in. it's important to remember that i don't think this crisis has come to that stage, but if it carries on in this way, then it is probably quite likely they will have to start to take some measures to try and support the currency, to support liquidity and the local banking system. that will depend on how long the situation takes to resolve.

david: let's go to that question. how long will it take to resolve? you said reports are it will require capitulation. what does that consist of? if they wanted to capitulate, what would they have to do? yousef: nothing short of submission. it would basically eliminate the role of qatar as an independent global player. that is something that has been irking the saudis, that they don't toe the same line, and that is what they are trying to do. we don't have a clear statement of goals, but that is what some of the experts on the ground are telling us. also, just a pick up on that point in terms of the market impact, because we are seeing some comments in the last hour, the duration of the diplomatic dispute is going to be key to the qatari impact, and at the moment there is no immediate impact on the rating from the latest cutting of ties. david: so the white house in the united states says they would

like to play a constructive role. is there a role for them to play? is this crisis really precipitating by donald trump's signaling to the saudis that they can go after the iranians and the hard way? yousef: the visit in bold and ned the -- embolde saudis, and they felt they could pull some muscle. but ultimately this will come down to the cooperation council to try and resolve. it's going to come down to the united states. where is the track record of the u.s. being able to resolve conflict in the middle east over the last 10 years? it's going to be a very live track record. this will come down to the gulf leaders hashing it out, but given the scale and the enormity of the latest move, that is at the moment it very unlikely. alix: you mentioned that sovereign wealth fund. you look at the top five holdings, what is the likelihood they will be selling a ton of shares of volkswagen?

what it will take -- what will it take to get to that point? >> i think this situation would have to run out for quite a long time before they got to that point. have already got cash they can draw on, they have other investments. we have seen when some of these companies were going through the emissions scandal, the qataris held on to that. they weren't for sellers. they were reluctant sellers in this process as well. as yousef was mentioning, the qataris have had diplomatic issues with the gulf before. they are not entirely unprepared for this. they will be very reluctant to start dipping into the sovereign wealth fund, and they will be trying to save that for a much longer term problem. i don't think we will see the qa making anything soon. alix: it's a fascinating story. thank you so much.

yousef gamal el-din, matthew martin. with us in london, daniel loris of bnp paribas. you mentioned on your last segment that you like e.m. and qatar is considered emerging. how do you wind up hedging that? where do you go for the safety em trade, if there is such a thing? >> i guess that is the bigger question. generally you will find it in the markets where you will have lower yields, and you won't get it relative to u.s. or germany. what we find with situations like qatar, is you think back to brazil. we are going to be investing on the front based on the fundamentals, when you have opportunities that open up, when you have a political shock. we tend to look at those as opportunities to take advantage of overreaction in the market. that is our perspective, where do we have the opportunity to open up? think that is the

perspective as opposed to looking for safe havens. alix: when you talk to emerging-market investors, it is mexico, argentina, and brazil. do you subscribe to those three or are there other values? >> looking elsewhere at this point, i think what you are seeing is the sensitivity of central-bank policy, what's happening with the dollar. so we are looking is where currencies could see appreciation versus the dollar, because that will be a big part of the return. focus, our primary looking at those countries. alix: great stuff. great to see you. daniel morris, b.n.p. paribas. and you have south africa, a recession, the second time in eight years. jonathan: south africa a risk, brazil a mess, what is going on in the middle east? everyone says long em. we will continue to work it out. coming up next, mark weinberger ceos are putting their

cash to work in the second quarter. plus, more on the u.k. election man the cobra founder, a with the factory here in the u.k., and in belgium, and he sells to pretty much every country in the eu. he has a the sale brexit. from london in new york, you are watching bloomberg tv. ♪

emma: this is "bloomberg daybreak," and this is a hewlett-packard enterprise greenroom. we will be live from paris, eking to india's finance minister. now to your bloomberg business flash. the world's largest -- is

getting closer to the brink. airbus is running out of orders for the superjumbo, and plans to cut output to below one play per month unless it finds more buyers. wasoduction cut last year widely regarded as the beginning of the end for the a3 80. a federal judge has find dish million. record $280 the money will go to the federal government. dish plans to appeal. the company blames contractors and subcontractors. households were keeping the lid on u.k. spending. the british retail consortium says consumers are starting to feel the pinch from higher inflation and stagnant wage growth. and that is your bloomberg business flash. jonathan: thank you. the consumer is feeling the pinch. what is clear to me is the prime minister is trying to get back on her agenda, make the campaign about brexit.

the newspapers dominated by the coverage on the london attacks, even "the financial times." "london attacker was known, a member of an extremist group." carried on "the times" as well, and "the daily telegraph." what's interesting for me, and what makes it difficult for the prime minister, is she can't get away from the subject on two levels. one, it happened while she was prime minister, and two, when she was in charge of security, what this meant for her -- the questions about them that she will not answer. david, it was meant to be a one issue election, and what's clear is it is not. the prime minister campaigning, trying to make it about brexit, the newspapers and general public dominating their conversations about what happened over the weekend. david: as i understand, it is

not just the cuts she made when she was home secretary, but also potential cuts going forward. jonathan: the london mayor has been very vocal about this, it has been interesting. but the backdrop, the president of the united states coming down and criticizing the london mayor. many people in the u.k. criticizing the prime minister for not defending the london mayor. but sadiq khan has been very vocal about what a vote for the conservatives may mean. what should not have been a politicized issue, naturally, quickly, has become a very politicized issue. thed: as you suggest, president of the united states of the united states has not been able to resist the temptation to insert himself into this by tweeting about what the mayor of london said, and the prime minister o defending him. aside from getting involved in the u.k., he has a lot to do here. it is going to be a big week in washington. here to take us through the

major events is our chief washington correspondent. take us through the big ones. there are a lot of events, but take us through the big ones. >> it's a busy week in washington. president trump is set to visit ohio tomorrow, where he has plans to continue touting his infrastructure plan. it is based on that transportation committee, who is speaking to him later today. then you have a house vote on the financial choice act, that i am hearing is likely to come up on thursday. it will pass out of the house, but it is unknown whether this will move anywhere in the senate. the banking committee chairman has been to bullish on reform, and they need democrats to move it. let's not ignore the elephant in the room, which is the testimony of now former fbi director james comey. he will be testifying publicly thursday morning, and it is going to absolutely dominate national news flow here coming out of washington. this is the first time we will

be hearing from him since president trump fired him. he has spoken briefly in some memos, but he has not spoken publicly. we will be hearing from him directly thursday at 10:00 a.m. yesterday the white house press secretary said the president will not use executive privilege and silence the now former fbi director. david: it will be very high political theater in washington. the question for a lot of people in the business community is, is this signal, or is it noise? is it theater, or could get done on capitol hill, for example tax reform, infrastructure? >> great question. i have been speaking to sources all week on this, and i can tell you that the feeling right now is that there isn't a smoking gun, as mark warner said, in terms of linking the administration to any type of russian meddling. we are in an environment where anything could come out. right now, all eyes will be on

the fbi director, the former fbi director. but in terms of when and the timeline for this investigation, there is none. david: thanks so much. one of those following washington closely is mark weinberger, a former assistant treasury secretary under president george w. bush in charge of tax policy. he's also a member of the business roundtable, which came out with its quarterly survey of ceos. thank you for being here, welcome to the program. >> thank you. david: give us a sense of this quarterly survey. what to the ceos tell you about what they really need and want out of washington? >> they are the things that you and kevin have been talking about. we need to move forward on the policy initiatives, tax reform is the number one priority. there was a recent survey that suggested 76% of the members would actually increase hiring

if the tax reform passed, 80%-some would be inclined to invest more in capital expenditures. the converse is 90% said if it keeps being delayed, they will be less inclined to do so. infrastructure is on the table is important, deregulation is continuing, all of those issues need to continue to move forward. david: for most ceos, in question -- the question is demand. of the things he talked about, which are the most important in your judgment, or the judgment of the ceos at the roundtable, to getting growth in the economy? >> the consumers are actually spending, and the economy is growing. the key is having the long-term security to know they will remain competitive. removing the extra cost to hire additional workers, providing more services, i think is going to give that extra opportunity.

if people are more secure in their jobs, and wages start to rise. if people are being hired again, that will increase the ability to spend. that is what i think the business community wants to do, small and large. all the small businesses are looking at the same things. david: certainty is the hallmark, it is the goal. and that really does tell congress something about what you can and cannot do when it comes to tax reform. kid needs to be revenue neutral, because they have to get it through congress, but you aren't going to get 60 votes. >> there are a lot of things to evaluate. first is how big of a priority as it. the president is calling leadership down to talk about tax reform and health care. that's an important initiative. congress only has 80 days left legislatively, and priorities are important. getting to this issue of tax reform and getting it on the agenda, making the policy decisions, getting through what you are talking about, the process of the budget

resolution, really important. revenue neutrality is not as important as being fiscally responsible, because it can be deficit increasing in the first 10 years, but after that tenure period it has to be back to revenue neutral so it doesn't create problems inside the beltway, and does allow for long-term. bottom line, in tax policy, nothing is permanent. david: ok. a few so much. mark weinberger from washington. jonathan, you come to us from london. jonathan: in. to westminster, not the only issue voters in u.k. care about. immigration and terrorism round out the top concerns. joining me for what's at stake, a cross bench peer in the house of lords and founder of cobra. he joins us from westminster. cobra, manufacturing in the

u.k., most of the eu pretty much. when the u.k. wakes up friday morning, what is the optimal outcome for business? the optimal outcome for business is always certainty, and the biggest thing that brexit has caused for us in business is uncertainty, and that uncertainty is going to persist regardless of the results on thursday. of course, with the conservative party, their tax policies are much more business friendly on the whole, however we have had a prime minister who has in sending out antibusiness rhetoric and sentiment. i think this has been a wake-up call for her, this election, that she needs to be closer to business, she needs to listen to business more, and if she is prime minister on friday, i think you will have that going forward. with the uncertainty of brexit is going to persist, because

business for sure wants to remain in the single market. business wants to be accessed by the 3.2 million people in europe here at the moment and in the future, that benefit all our businesses. it's not just unskilled workers, it's across the board and universities, in london. jonathan: let's talk about highly skilled workers. on the one side, is got a candidate looking to reduce migration, headline numbers. side, you have a candidate that could introduce a tax policy that will stop people from wanting to come. i think were tax policy is concerned, there's no question that business will be worried about a labor government where tax is concerned to put up the high rate of tax for anyone earning over $80,000. basically their labor policy has always been to tax and spend, and that has not been a

successful policy other than tony blair and gordon brown, who managed to run a policy where wheread 40% top rate tax, they had capital gains at 18%. you have had labor governments that have had tax friendly policies, but the norm that has been suggested by jeremy corbyn would not be business friendly. but on the other hand, where immigration is concerned, i don't inc. with the prime -- i don't think no deal is better than a bad deal. no deal is a very bad deal. business wants access to the single market. 50% of britain's trade, 45% of exports are with the european union. we want access to the single market, we want access to the talent from europe. jonathan: when this election was called and got the rubberstamp, it was positioned as a one issue election around brexit, and we still sit here and say things like, no deal better than a bad deal, and no one knows that means.

looking at the labour party, looking at the conservative party, as a business leader and someone in government, have you got any idea on what they are trying to negotiate? and allutely uncertain, this tough talk by this prime thatcher asmargaret andlicy of not turning, this one is regularly turning. when we oppose that, she u-turns. in this election, when welfare costs were going to go up, care costs for the elderly were going to go up, there was a u-turn. the fact that she is holding an election when she consistently said we will not have an election, she you turned on that. mostf course the worrying thing of all is the security of the nation and are citizens. here we have a situation where, as former home secretary for six

years, prime minister from of the year, we have had cuts from our police forces. we have less police force now than before 9/11. you don't see them on the streets anymore. we need to double up our recruitment of police force, we havehood policing, 5000 armed policeman on the streets of london. we need to get back up to that level. our citizens need to feel safe. it should be a priority. thank you very much for joining us. joining us from westminster. coming up, we can you down to the cash open. you are watching bloomberg tv. ♪

jonathan: treasury yields plunged to new lows.

the chinese are said to be prepared to get back into the market and buy even more. another crack appears in the eem bit. south africa's economy falls into recession for the first time since 2009. in the u.k., prime minister theresa may goes on the offensive in a bid to conquer brexit supporting labour strongholds. from the city of london, good afternoon, good morning to new york. i'm jonathan ferro alongside david westin and alix steel. let's catch up on the market action. futures look a little something like this. tone, a marginal risk off yields lower. 2.15 on the u.s. 10 year. and that is also playing out in this spread -- 85 basis points tighter on the day. a yield differential playing out in the fx market as well, dollar-yen down by almost 1%, a

killer auction overnight. it pretty much goes nowhere, but brent crude under $50, unbelievable considering the geopolitical risks bubbling up in the middle east. david: timeout for your morning brief. at 9:30, general motors holds its annual meeting in detroit, where shareholders will vote on a plan to split the stock. 10:00, u.s. jewel numbers on job openings and labor turnover for the month of april. at 10:30, jamie has a conference call in washington going over the business roundtable survey for the second quarter. let's get an update on what's making headlines outside the business world. emma: thank you. president trump about to crack down on the leaks of classified material to the news media, and now the government has named its first arrest, a former air force linguist charged with espionage. she's accused of sending a national security agency report on russian hacking to the online news outlet "the intercept." in beijing, california governor

brown met with xi jingping. he spoke to bloomberg about china's global infrastructure plan. >> it's a very global aspect. compare that to economic nationalists, focusing on protecting cities and markets, however understandable that is from a political point of view, it's very different than the boy uoyant,pensive -- boy expansive orientation of the chinese. emma: california and china have agreed to coordinate in developing electric vehicles. in u.k., less than 48 hours before the general election. to reason a is sending boris labour to some neighbo party hotlines that voted to

leave. johnson will say only may can get brexit right. meanwhile, jeremy corbyn is trying to shore up his support for working-class areas. global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries. i'm emma chandra. this is bloomberg. jonathan: thank you. for more on the last few days of campaigning in the u.k., let's turn to nejra cehic in westminster. nejra the prime, minister trying to get it back on course, to focus on her strength. the brexit agenda, the front page of the newspaper is just somewhere else. is the election somewhere else as well? nejra: well, it's interesting. you can look at it in two ways. you can look at it as cod confie on the part of the conservatives, going for the labor hartline's, which voted in

the brexit referendum. that you can also say this is a position of weakness in the sense that theresa may and the conservative government are coming under fire and questions in terms of cuts to the police that happened while she was home secretary during 2010-2016. perhaps this is a sign of her government trying to turn the attention away from that in the wake of that terror attacks that happened on saturday night, more toward brexit. that seems to be what she is doing in sending boris johnson to the northeast, where you would expect her to say that only make can get brexit right. as we have heard, the labor campaign is focusing more on the welfare side of things, cuts to fuel subsidies for the elderly, and it looks like they are trying to target the older voter, that tends to vote conservative. jonathan: that's what's interesting. the attention isn't on brexit. the attention is on the individual leaders. that is exactly

where the conservative party campaign would have wanted it to be. unfortunately for them, it is looking like a sign of weakness relative to where they were a month ago. the polls in the last 24 hours, two weeks -- is it still just about prime minister may against jeremy corbyn? is that all that matters on thursday? nejra: i think what you are pointing to is the poll that came out overnight, which did show the conservatives just one percentage point ahead of labor. but it also showed that 50% of the electorate saw theresa may as the stronger leader, down from what we have seen in previous polls. what i would caution is putting too much weight on anyone pull, because as you know, we have a big range in terms of where we are, leaves of between 1% and 12%. in terms of whether this is just about leadership, that's an interesting question, because

the focus has shifted so much now on security, and the question of whether theresa may is better on security, that will have to come out more. you could cut it both ways. she has more experience as home secretary previously, on the other hand, how could all this happened with her in leadership? jonathan: there a chance -- nejra cehic in westminster. i want to bring in looks like more -- bring in luke tak hickmore. this spread is massive, but we can bring you up. this shows you the momentum, the decline in momentum of the prime minister, the climbing momentum of jeremy corbyn. that spread is wide but narrowed. have we seen a repricing in the asset classes? >> currency has taken all the lifting. guilt has started to react. when i left the office we were and five, six basis points,

up until today we haven't seen a lot of movement. it has all been through the currency. maybe we are just starting to see the first signs of people worrying about how this pans out. jonathan: a big big in treasury, and across the board. but for guilt it is a real debate. yields higher or lower on the labor when or a hung parliament? which way? >> i think the worst outcome is a hung parliament. i don't think that gives labor the government. you could see quite as stable gilt level, looking at how parliament works, you need 468 mps to throw the government out. can you covered with 310, 320? those questions will come to the fore. if we start seeing labor forming a coalition with a lot of people involved, i think our concerns

around brexit and how that gets to go shaded will be to the fore, and i think it will see selloff. jonathan: let's see how you want to get yourself set up going into friday. the day after brexit, governor carney wants my gilt auntie can have them. can have them going into thursday? duration, we are short going into thursday. risks theof reflects more medium, longer-term economic picture than it does this week. i think if i had to put on trades for this week i would be more and more concerned by the narrowing of those polls, the risks to the u.k. finances postelection with the labor coalition. jonathan: price signals. i asked this earlier -- if you get yelled yields climbing and

the pound going lower, which would be counterintuitive, would that be assigned to you that foreign investors are finding status and saying, i'm out? >> one of the key indications, isn't it? we have seen that big drop anyway. a further drop from here would lower growth as well. we start talking about stagflation, and that is the last place you want to have as an overseas investor coming into the u.k.. jonathan: lukacs more, great to have you. david westin, what a week we have coming up. david: we sure do, particularly you. jonathan: you do, too. thursday for everyone. ok.d: in the meantime, coming up today, an interview you will see only here, one-on-one with tim cook. he's talking politics, the paris accord, and the latest on the home pod.

this is bloomberg. ♪

david: this is bloomberg, i'm david westin. china is getting ready to increase holdings of u.s. treasuries under the right circumstances, as the government concludes there are good investments and that the yuan has stabilized. internationalour economics and policy correspondent, mike mckee. take us into the specifics of the development. >> it gives us a broader market. the chinese had been cutting but on treasury purchases, it's an interesting development at a time when the federal reserve is talking about starting to cut back on treasuries. china has been trying to stabilize capital flight out of the country and has been weakening the currency. by november you saw the

biggest drop in chinese holdings since 2000. then reversed starting at the beginning of the year. the chinese yuan dropped, but is up this year, and they are already buying more treasuries. obviously it's good news for the treasury market, and it signals a change in chinese currency policy. david: that has real ramifications for the bond market, but what does it tell us about what china is feeling about the yuan these days? they were selling the treasuries because they needed to support the yuan. >> italy, this suggests -- in a way, that suggests they feel the yuan is out of danger. i brought along a terminal chart that shows the change in the yuan value and the change in treasury holdings as they tried to weaken the currency, and now they are starting to strengthen again. you can see the change in the far right-hand side. the chinese have this important

policy conference at the end of the year, and they want a stable yuan at that time. they are backing off on their yuan manipulation, perhaps because they are ready to play, it has worked enough. alix: is this good or bad for the fed? >> it doesn't really affect the fed except that the treasury purchases might affect the dollar. if it does trade through the dollar it raises questions, of the dollar has come down so much it would depend on how much china is buying. they have been buying big amounts the last month in march. the latest data we have increased treasury holdings by the most in two years. as they keep that pays up, that could have an impact. alix: if they want to pare back reinvestment, there is a natural buyer. the question is who will end up buying. on the flipside, they need the fed to not control longer-term yield the matter what they do. >> you could take a look at

what's happened in the treasury market, yields down on another global flight to quality after we saw what's happening in the middle east, the terrorist attack, people coming in and buying treasuries. the chinese had a slight impact in the 10 year, but it is almost washed out because there are so much else going on. jonathan: luke pick more. we talked about whether governor carney can help with gilt, but can't chinese up with treasuries? >> i think the long-term prospects have to be positive. is going to go three short-term period of growth slowing down, in you see the difficulty selling skills jobs in the u.s. is rising, partly around immigration and reducing high skilled jobs, and that will start feeding through later this year. jonathan: let's talk about signal versus noise. we have a treasury curve that is flatter, flatter, flatter.

noise?or l, the belly of that curve needs to go higher, and we will see a flattening or inversion, or actually the whole market is starting to get concerned, that trump is not going to deliver the fiscal stimulus we need to see. jonathan: michael, is the flat curve a pretty strong signal to take notice of? >> not necessarily, because it should be what's happening. if the fed is raising the short end, that should suggest you are choking off inflation dangers, and that would have a tendency to flatten the long and. the fed a may be losing a little bit of control because of what's happening around the world in this flight to quality. so many people are buying treasuries that it is harder for them to have an impact. financial conditions in the united states are not getting tighter, even though the u.s. raise rates. "the marketo day,

seems to have a manic depressive you a fed policy." luke, what is going to change the narrative anytime soon? >> maybe september. there's a story going around at the moment talking about the liquidity shift in march. that move, the liquid situation dramatically pushed the dollar down, pushed yields down. that could reverse in september if we see an extension of the debt ceiling. it could reverse in september as we start to see a closer move toward fiscal stimulus from trump. a sneaking suspicion that there's enough going on geopolitical he just -- geopolitically just to keep people content. 2%, i thinkng below that's a great entry-level for a short. this is a market that should be %.ading at 2.70 fiv5

david: you talk about raising the debt ceiling again, the president saying we are running out of tax receipts faster than we thought. we could potentially have something of a crisis in washington, with a debt ceiling and budget coming together. what would that do to the treasury market? >> it wouldn't be pretty. if it looks like he is going to get this tax claim through that budget pretty much intact whilst raising the debt ceiling at the same time, yeah, we head toward 2.5%, 2.6%. if we are convinced that will lead to growth in the patriot should, be will get toward 3%. every time i say it, it goes lower. massive caveat. jonathan: michael mckee, thank you very much. luke hickmore.

coming up, we will discuss the cracks in the market. she will be coming out to talk about where she thinks the market is going. investment management at charles schwab. good morning, you are watching bloomberg tv. ♪

emma: this is "bloomberg daybreak." if sprint merges with t-mobile, they may get less access, according to people familiar with the matter, they are considering an all stock option as they combine that would eliminate the need for financing. the majority owner of t-mobile and sprint majority owner still aren't sure if they will attempt the deal. the founder of muddy waters tells bloomberg tv he has a new target, a company based in hong

kong. he says he will announce the name of the stock is shorting tomorrow. he says there are a number of companies listed in hong kong. and apple is putting its first major new product in two years at the center of a growing home tech empire. it's the biggest asset yet. she is a siri digital assistant. can be used to control smart home products. stay with bloomberg because we will have highlights from our exclusive interview with tim cook. cancer bloomberg business flash. jonathan: thank you. the fx market, the single currency clinging to highs for 2017. we trade right now at 1.12, down hours the last few ahead of the policy decision this week. that decision is not expected to be a surprise, but the bank may

reference possible downside risks to growth and reiterate a week growth. still with us, luke hickmore. when you watch the comey testimony or the draghi news conference? >> as always, the transcripts for the testimony will be most interesting. it can be entertaining in a press conference occasionally, but he is going to be talking more about balance risks. he is going to be talking about low core inflation. anis possibly going to give indication that they will be prepping for further tapering in september. but i am not sure we will see much of that. comey has got to be more interesting. jonathan: i guess so. interesting is significant for market. that is a question for the ecb is how do you continually acknowledge the growth that has picked up and justify your

balance sheet doing this and sucking of the corporate debt in europe? >> this month, we get the staff forecast, coming from the national central banks. of bundesbank is going to be going in hard, to .5% growth. real problems just starting to notch up, and job shortages in the key areas where the unemployment rate is close to the u.s. movement toward a more hawkish start, but it is very minor. september feels to be the big meeting coming up. jonathan: chancellor merkel earlier talking about ecb monetary policy being a challenge, also about whether the euro is down because of the ecb and what that meant for the german trade circus. is that german argument alive and well? is the bundesbank argument alive and well?

a lot of people thought it was dead and buried with negative rates went down, sucking of the corporate debt. >> if there was nothing else going on in europe, no, but spain is recovering, francis seeing these and growth, and we have more stable politics in the u.k. then for the next week. this i think gives them a platform to advance their agenda, and they have been pretty nervous about kiwi all the way through. we have tapered it twice already and will see more coming in september and they need to do something for the t really hit hard in june. that is the point where we feel -- jonathan: how brave do you need to be going into thursday short euro and long bunds? >> got to be a better trade then being long gilt. jonathan: yeah? >> short bund is an easy trade.

i think it's a better trade than being old euro-dollar when you are worried about the u.k. jonathan: you. luke hickmore. coming up, a one-on-one with apple ceo tim cook, talking politics, the paris accord, and his new home pod. later, we will hear from an analyst from new york. good morning and good afternoon, to our viewers worldwide. bloomberg tv. ♪

jonathan: from london and new york, to our viewers worldwide, this is bloomberg daybreak. i am jonathan ferro alongside alix steel and david westin. let's get you up to speed on

market action. futures softer, down a quarter of 1%. -67 points on the s&p 500. we just went further back from those all-time highs on the back end of last week. in equities, compared to the cold hard reality of treasuries that seems to be the story of the last couple of months. year, 2.14 is0 how we trade, down for basis points. this is the fundamental story about china getting back into treasuries. an extra led lower on the yields. is remarkably quiet, muted, unchanged. the cable rate goes nowhere. an election on thursday in the u.k. and an ecb decision on the same day. markable column in the fx market. with get you up to speed on headlines outside the business world with emma chandra. >> the ruler of kuwait is trying to resolve the dispute between

qatar and a group of arab nations led by saudi arabia. they have all cut off connections and closed qatar's only land border. saudi arabia accuses them of supporting iran and islamic militants. the chic travels today. will beerror attacks harder to stop if prime minister theresa may wins thursday's election. sadiq khan issued a statement commending the tremendous bravery of police during saturday's attack. he warned that london could see as close to -- could lose 30,000 officers due to proposed budget cuts. in melbourne, australia the islamic state is claiming responsibly for a fatal hostagetaking. a gunman and three others were killed and three officers were wounded. police are investigating whether the gunmen killed a man and woman to your police into a shootout. -- to alert police into a

shootout. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. david: apple held its developersal conference in san jose yesterday and it announced a new product to compete with amazon's echo. as well as upgrades for other products. cook, sat down for an exclusive interview with emily chang to explain the importance of >> all of this. we have tried to build something >> that is a breakthrough speaker first. >> music is deep in our dna, dating back from itunes and ipod. we wanted something that, number one, sounded unbelievable. ithink when people listen to , they are going to be shocked over the quality of the sound. of course, it does a lot of other things. all of those are important as well. a high quality

audio experience. >> you are focused on how this could reinvent music in the home. what about these other things? would i be able to make a phone call, order groceries? >> one of the advantages we have is that there is a lot of things that siri knows how to do from the phone. we will start with a patch of those and we will show those during the keynote and then you can bet there is a nice follow-on activity there as well. >> let's talk about e-commerce. e-commerce is important to these devices. i can order paper towels on my amazon echo. does this tell us something about apple's aspirations in retail? >> i wouldn't read anything into it in that regard. what i would read into it is apple is a company that deeply cares about music and wants to deliver a great audio experience from the home.

we feel like we reinvented it in the portable player area and we think we can reinvent it for the home as well. we know that people want a speaker now to do more than that. honestly, we want a speaker to do more than that. we are sort of combining what has been thought to be two distinct the different things until now. i think people are going to love it. i know they are. i am a user and i think they are going to be blown away with the experience. >> how long have you been working on this? >> multiple years. so if you have the underlying technology in here, it is something to behold. experiments -- the experience we wanted and the quality we wanted, like apple products in general take multiple years to do, starting from the core technology and

then building up to the product. >> you have people out there saying finally, what took so long? >> for us, it has never been about being first at anything. if you think back, we didn't have the first mp3 player. we didn't have the first smartphone. we didn't have the first tablet. there was a tablet shipping a decade before. few people used it. arguably, we shipped the first modern mp3 player, the first modern smartphone, the first modern tablet but we were not first. for us, it is not about being first, it is about being the best. and giving the user an experience that delights them every time. impatiencet that result in shipping something that is just not right. >> it is the 10th anniversary of the iphone. you have unveiled the new ils, ios 11. >>? i canthat tell us

tell you that ios 11 is unbelievable. both for iphone and for ipad. you have incredible things in it, peer-to-peer payments, is the biggest ipad release ever, and in the area that i have i am personal excitement, incredibly excited about a.r. use of the demos done today. i think this is profound. thesek as we get developer releases out in the hands of the developers, we will have the largest augmented reality platform in the world. a.r. inwe have launched a way to large numbers of people and i am incredibly excited to see what some of the developers are trying to come up with. >> you talked a lot about a.r. . but what about

consumers? when will consumers see it? >> that is another thing i can't answer, but with a core platformy, and the armor, the first thing, arguably in some ways the most important, is to build the foundation and from that foundation you can do many things but first you have to have a really solid foundation. so i think the developers are really going to love what they find in the developer field on a.r. david: that was apple ceo tim cook speaking with emily chang. abheyre, we are joined by lamba. welcome back to the program. >> good to be here. david: were the headlines this high? how big was it? >> it was definitely one of the

things apple has been lagging behind google and amazon and they needed to get in there with some product. and the product they have come out with is clearly a significant premium to both of those devices. talk up itsd them capabilities in the capabilities of the speaker and how it is really well done. we have to see when the product hits the market how it delivers. and the price point could limit the adoption but we have to see. it all depends on how it performs. david: that is exactly what i am curious about. i do have an echo at home and i am pleased with it. i can understand switching to an apple product but why what i pay twice as much for something because it is a better speaker? must be more to it than that. >> i agree with you. done the road they might be able to integrate it with the iphone and create more monetization opportunity for applications and

we could see applications down the road with those technologies but at this point, especially for version one products, i think it would be very tough to justify just from what we know today. david: you heard tim cook say to emily chang it is the follow-on. we have follow-on coming up. we have a sense of what this is? >> looking at the products they have done in the past, they have all just kind of enhanced the software for optionality on it seems like and with this -- they are opening up developers to build applications. when these applications come up, you talk more on echo. echo does a great job on the shopping side or if you want to use any of the other applications that amazon offers. apple would have to come up with a similar ecosystem of applications and monetization opportunities. if you look at apps on the

iphone, you have to see many of those getting ported over. david: as someone who follows apple closely, as you watch that, did anything in the home pod or the alternative reality system, did they change your view for better or worse? point,company, at this the company's future remains we want toones and see this in the upcoming iphone cycle. expectations are high and we are expecting a good product cycle. from the stock point of view that is the most important thing for them but for the long-term sustainability of the company, yes. many of these issues are extremely important. it is not just the amount but how much they deliver and how well they do in the market that is going to be key. we will have answers probably in the early part of next year when these products have been on for

some time. alix: thank you so much. coming up, the qatar crisis draws an urgent mediation effort in the middle east. the saudi's are tightening the screws with kuwait stepping in the middle. we have that next, this is bloomberg.

>> this is bloomberg daybreak. i am emma chandra. coming up in the next hour, liz ann sonders, chief investment strategist. this is bloomberg. jonathan: from london, good afternoon to new york. good morning. i am jonathan ferro. thursdaydown for that

and i am trying to fight your corner. draghi. the only thing i am hearing in london is comey. alix: but i want to listen to draghi. and wales with me can do the same thing. in the emerging markets, qatar stocks are continuing to fall. the uae is banning all flags chipped from entering its port while kuwait is trying to play mediator. president trump weighing in, supporting the move to isolate the gulf nation. he wrote on twitter "i stated there can no longer be a funding of radical ideology leaders." joining us from dubai is bloomberg's middle east and north african managing editor. now that the conflict is escalating out, what have we learned? >> exactly. , after that announcement early yesterday, today we are seeing this

limitation of some of those announcements with airlines dropping and canceling their flights. the ports coming out and saying they are beginning to stop qatar flags shipped to and from qatar to pass through their ports. we also have the issue of the airspace be enclosed. -- being closed. we are also seeing the kuwait efforts beginning to mediate in the whole issue with the emir on his way to meet with the saudi king. alix: it is easy to look at this as a result issue -- as original issue, but qatar has a huge amount of foreign effects reserved. they also have a lot of ownership in equities from volkswagen, barclays, and the concern is that if their economy gets squeezed enough they will have to start selling their reserves and offloading their shares. what do you hear about the

process of something like that? thehe issue is more that funds drive to increase its assets to buy more may be slowed by all of this. it is not like they have, and said, now we have to stop buying or stop selling but we are seeing, the cost of borrowing has been rising in qatar in the last few days. we have seen the stock market selling off, there was a big drop yesterday. today it is up and down a bit. i am more nervous and already, the qatar banking sector is more reliant than its neighbors on foreign efforts, foreign deposits. about 24% of deposits in qatar banks are foreign, compared to less than 2% in saudi arabia and 12% in the uae. john, you hearken back to a year and a half ago where

we had a lot of the oil exporter nations having to sell down the reserves and that has caused a ton of volatility and anxiety in the market. and that is the broader question in some ways. jonathan: what happens with their holdings is some of those big companies, runner -- remember this time last year they came to issue debt and went away. joining us now is gershon distenfeld, vice president and director of credit. great to catch up with you. the big, strong em bid has some cracks in it. some tension in the middle east. brazil is a mess. south africa is in recession. give me the long story now. >> we always think you should really not have a dedicated allocation to em. you want to make sure your exposure is part of a broader income allocation. that is why in our fund we have roughly 20% of our fund exposed to em but in a very diversified manner. that is up from essentially zero

a couple of years ago. with the trump election and instability around the world, we are seeing more valuations in the em space it would make the case. jonathan: help me understand the market. you usually offer a clear framework for thinking about various securities and markets and asset classes. look at the rising rate environment for something like emerging markets. it is easy to take the picture that it was negative. look at what happened in 2013 and draw your own conclusions. but technically, is it supportive of risk assets more generally? >> 2013 was an anomaly where risk assets sold off. usually when rates are rising it is because economic conditions are better. all else being equal, it should go down. those tend to offset and some of the best returns for both high-yield and the em have been in irate environments. -- rising rate environments.

jonathan: when you put that in with credit risk, how are you doing that currently? >> we always think the best strategy for the fixed income portfolio is to balance those risks. you want roughly half your risk coming from credit, being high-yield and emerging-market and half of your risk coming from interest rates. that means we have a lot more since it isunts less volatile. there is a third risk which is fx risk. david: have you handle that? do you look at bonds in local or hard currencies? >> we make that decision separately. example, in brazil, we have been long local bonds there, given inflation being coming down. we have been owning that for years. there have been times when we have had it fully hedged. there are times we have had it fully unhinged -- on hedged. david: are you basically making your own fx decision where you

think the currencies are going to trade? >> when it comes to developed economies, i would say we are making that decision. when it comes to emerging economies, if we have a strong view it will take a large condition but it is also a source of carry. overnight rates are a lot higher than in the u.s. david: gershon distenfeld, you are staying with us. alix: if you have a bloomberg terminal, check out tv . like on our charts and graphics and interact with us directly. go to tv on your returnable and feel free to check back. this is bloomberg. ♪

>> this is bloomberg daybreak. alix: we talk a lot about what equities versus treasuries are telling us. on treasuries and credit spreads, look at this chart. this is the return correlation of treasuries in the high-yield market. it had only been positive three

times in the past seven years. why do you want to buy treasuries if you are going to buy high-yield? now the correlations are zero but this year has seen something interesting. here is gershon distenfeld. remember, they both have positive returns. they both have coupons. they both roll down the yield curve. in low volatility, we don't have a lot of price action. people tend to get positive correlations but they are normally negatively correlated. that is not putting them together in the portfolio is valuable. alix: how tight can spreads get? in europe in particular, they are yielding more than jump funds. what is going to make them widen? >> history suggests you can remain a tight levels for a long period of time. in 2000 10, before the european debt crisis, spreads got to very high levels in people got complacent and something happened. david: morgan stanley is out with a note saying we are late in the credit cycle,

particularly in the united states, and you should stay away from high-yield and go to investment rates. do you disagree? >> we have been staying late in the credit cycle for six years now. if your time horizon is very short then yeah, we are a little dangerous now. but given the low level yields overall, the positive carry in some of these risk markets, it is pretty expensive. i think the odds of sitting on the sidelines and putting money in the bank, the odds of that beating high-yield are very low. david: are you getting paid for it on high-yield? >> high-yield is a lot of different markets. there are parts that stress retail and health care. overall, a large part of the market is in good shape. spreads are tight end yields are low and that means you might blow up. alix: with the lowest issuance for high yields since 2012, how much is it if it is technical play?

>> there is a bid for income all over the world, particularly from asia. we are seeing strong flows from many investors and that is going to continue. there is -- anybody who has needed an issue has only issued of the past couple of years. alix: as we tend to increase issuance, there was so much demand. it was crazy. just a the point. david: the fact that a lot of people want to buy it doesn't mean it is necessarily worth that. >> to the point, they were able to increase it. they didn't have to. that was what is going on in the floating-rate bank market. everyone was so enamored, but that is allowing issuers who should be coming to the high-yield market and paying 10% to issue in that floating-rate market. people were taking more credit risks. alix: did you want to buy triple c's? where is the best play question mark single bees and double these. >> you don't want to stretch for

the riskiest security. gershon distenfeld of a b. lizng up on the program, ann sonders of charles schwab. with bond yields, and equity markets near record highs, where do you go? how much risk is their relative inthe optimism or pessimism the price? -42 on the dow, negative six points on the s&p 500, the opening bell just around the corner, 30 minutes away. you are watching bloomberg tv. ♪

jonathan: treasury yields plunged to near lows for the year.

the chinese are said to be prepared to get back into the markets and by even more. another crack in the optimistic emerging-market story. south africa's emerging economy falls into recession for the first time since 2009. equity market heavyweights going head-to-head. apple takes on amazon with its first new product in two years. the homepod speaker. tumblr the market opens. alongsidehan ferro david westin. from dealingay bell. futures software, down one quarter of 1%. treasuries yield below four basis points. 214 is your yield on the 10-year and euro-dollar is going nowhere, 1.1256 in the fx market. alix: equities are calm but there are some cracks beginning to show. we want to take you through a few of them. gold futures have been rising steadily. looking up by $12. it has been a pretty good year

so far for gold. there is a lot of risk. you have qatar and saudi arabia, the u.k. election and the ecb, you have french parliamentary elections on sunday and you have jim comey testifying before the senate intelligence committee. cold reflecting some of that anxiety. that playing out in the 10 year. that yields, 2.14%. now down for basis points. you have a little bit of safety but you have china coming into the market saying they will be buying treasuries as long as the conditions are right. strategists continue to believe in the higher yield. bank of america still think they are going to touch by the end of the year some to because you see a lot of supplies and things are not really that bad. this is the float on the a reflecting. out of u.s. blows, the blue bars are u.s. equities etf loads and the white line is international. out of the u.s. and into international.

now the concern is, are we looking at a crowded trade in europe? if you see so much money flowing in, are you looking at risks when european equities have a higher yield in junk bonds over there? three interesting talking points. is everything really ok? jonathan: some big consensus trades turn out to be the pain trade. short treasury, longer dollar. both of them pain trade so far for the year. now to bloomberg senior markets editor mike regan. it got to pay for it and right now, treasury yields are at what he 17 lows and xp markets are near all-time highs. speak?s risky air so to >> good questions. this rally is definitely catching a lot of the equity polls offguard -- not just in the 10 year but the yield curve is just relentlessly flattening. to -- tendstors 10

to think the bond market knows something and perhaps might be thinking, if the money market is know this time, i don't how much concern you can glean from a recent rally in treasuries, especially as it does make this comparative evaluation look at her. -- look better. jonathan: this time last year we had a similar conversation on treasuries but yields near low for the year as they were multi-year lows in that occasion on the 10 year but equities are at all-time highs. it is not unusual, given that we experienced it just 12 months ago. >> you have to think of how much -- them the start market stock market could have. some of the technical things we have such as the relative strength index, those types of things, all signaling that may be a pause was in order this week. based on that which we came into, it is hard to really feel

like it is too much of a risk off feeling now. you hit the nail on the head with this super thursday that everybody is calling now. a little bit of a concern going into three major geopolitical events on thursday. alix: here is liz ann sonders, chief investment strategist at charles schwab. thanks for being here. we were talking about underlying potential risks. we have a super thursday coming on. how do you interpret what is happening with bond yields? >> if you look at long-term correlation, we have been in a rising correlation mode for quite some time and i think it reflects that we are exiting what has been an inflationary environment. if you look at the two major periods in the past where we did that, after the great depression and out of world war ii, what happens when you are exiting a deflationary period is bond yields are rising but they are rising from a low level which takes a while before it starts to bite the equity market.

good news as it relates to the economy. bond yields come down, inflation -- bond yields go up and inflation risks are relatively tame but that is also good news for the stock market. i think that connection is likely to maintain. art of the reason why stock markets have struggled lately is because of this retreat. alix: you do have those bullish calls still out. morgan stanley says 2700 on the s&p by the second quarter of 2018, part due to a fear of missing out. >> there is a momentum trade because there is money going into vehicles and algorithms that trade-off of momentum. i also really think what is being missed in this discussion is that this is a massive liquidity trade. it is affecting almost all asset classes with the exception of commodities. ,quity markets, u.s. and global high yield, currencies, and i think that reflects that money

growth, globally, not just in the u.s. is higher than gdp growth. excess liquidity, courtesy of central banks, that has to find a home and it is finding a home in asset classes. david: so in a way you get massive liquidity because of the central bank and at the same time you have demographic factors which show the bond market as the population ages. do those two things come together to mean that the bond market is not as reliable an indicator of future growth and future inflation as it once was? >> as you look at the yield curve which has historically been considered a great forecaster of the economy, and indeed, it inverted yield curves have predated recessions and bear markets, but as you look at the relationship between yield curves and following years gdp and then the s&p and following years gdp, which of the better forecaster in terms of near future gdp growth? it is actually stock market. the s&p has a higher correlation to next years gdp growth than

the yield curve. thatconcern that many have this flattening is sending a dire warning about the economy, i would say unless recent patterns are falling by the wayside, i think the s&p is telling a more accurate story of what the economy is going to do a next year. -- in the next year. jonathan: it is interesting you bring up a liquidity trade as a factor of what central bank said doing but central banks are failing and quite a significant way. when the federal reserve started conducting qe, the story for the market was a story of success. it wasn't that treasury yields went lower but that treasury yields went higher. we see a different experience in europe and globally we see a different experience as well. bankso think that central , broadly including the fed but less recently, realizes there is not only a law of diminishing returns to all of this excess quantitative easing but in many ways, it may offer something that is not initially intended.

so the move to negative interest rates on the part of other central banks actually sort of cemented the deflationary wind as opposed to taking them out of inflationary winds. i think that is one of the reasons why the dollar has suffered a bit. the realization that other central banks are going to move more towards what the fed has done, which is starting to rein in some of this excess liquidity. i think other central banks look at this experiment, maybe without a view that it was a perfect success. alix: it is interesting, because the trade after trump was elected, you've got value and dollar and short bond and then equities like the cyclical. >> financials. alix: especially small caps, they really got hammered in the worst outflow since 2014. we expect this to continue, at some point we will with back into small caps? with small caps, they are so heavily weighted towards financials that this yield curve has had an oversized impact on them than it has on the s&p 500.

i think liz made this great point. liquidity trade. with all of this liquidity, we are still not hitting these inflation targets. my question is, will the fed sort of back away from this 2% target and say, this is an something we can achieve. there are other things affecting inflation. technology is affecting inflation. i have been reading about how gml crops are affecting inflation because crop prices are so low. the question is, will they have moreghten even aggressively without hitting that inflation target? david: that is the question i am wondering. at some point you need to talk about fundamentals, basically earnings growth. that is what drives the price of stock. what is most likely to get earnings up. does liquidity helped or hurt? >> keep in mind that earnings are earning back into the double-digit territories for what has been a fourth

consecutive quarter profits recession that ended in the second quarter of last year as he moved into positive territory. i think that was a much more important underpinning for the rally we saw in stocks and the election. i think this latest rally in the nongovernment bull market has been more about those fundamentals and less about the so-called trump trade. most of that turn in earnings or at least a good chunk of it was due to the turn in the energy sector and we will start to lose that as a driver. looking into the end of 2017, we are still in 11 or 12% earnings growth territory which is sufficient to keep the bull market in tact. we don't need valuation expansion because we've got earnings doing more of the markets heavy lifting. david: i want to thank mike regan for being with us and liz ann sonders from charles schwab is going to be staying with us. apple picks up rod from amazon's playbook but it leaves investors wanting more. shares falling by the most in three weeks. more from our exclusive

interview with apple ceo tim cook on why he is betting on some tough competition. at his coming up from new york and from london. this is bloomberg. ♪

jonathan: it was an optimistic story to 2017. and by emerging markets. emerging-market currencies and debts and equities have delivered a big way. some emerging market have underperformed the dollar so far this year. then the cracks started to appear. south africa's economy fell into recession for the first time since 2009. the brazilian economy, one of the political factors, a total mess. is it time to stay with a trade

or get out? still with us is liz ann sonders from charles schwab. great to have you with us. e.m., the big long, something that in cracks now. is it time to start paring back some risks? >> we have a neutral on emerging markets, which means within a broad strategic allocation in a portfolio, whatever your normal weight is to emerging markets, i think emerging markets has been interesting. that has sort of but the tide of commodity prices. it is one of the only asset classes that has struggled. i think it is, again, because of this liquidity trade and the momentum and the money, particularly by retail investors that has gone past vehicle investing in e.m. and that might still have some more legs but there are some cracks. you already mentioned the commodity prices, and the fact that growth is weaker in china and related to economies, one thing to do with emerging markets is differentiate. in an environment of falling

correlations, a differentiation has to be made in terms of producers or commodity consumers or whether you are a reform nation or a current account deficit or surplus nation. i do think the spread in terms of performance among the countries within the emerging markets is likely to be wider. alix: is it a fundamental story though? jonathan: a lot of people talked about the growth of the whole complex of many of those countries. are talkingountries about china through the years as well or is it just evidence of something you spoke to earlier, the liquidity trade. liquidity trade into non-us was at least initially a function of the turn in the fundamentals. the fact that we don't have any major economy in recession right now is the fact that economic surprise index is like that in south lake city. we were accelerating sharply across the board. pmi's have picked up. now the question is, did we get enough of that fundamental driven trade with some of this

stuff rolling over? the question becomes, is there enough of that momentum to carry further. one of the reasons for our neutral rating right now is be concerned that a lot of that good fundamental news had already gotten priced into the asset class. david: some of the people on the program talk about valuation first and foremost, that u.s. equities are fully valued. europe, maybe not, but the bargains that are left are left in e.m.. >> one of the points that my and consistently makes is a very good one as it relates to global valuation. be careful about doing valuation comparisons in an absolute sense, by saying the pe of the and it ist is x discounted by europe and emerging markets, but you have to look at the second representation of each of those broad indexes. because there is more of a commodity in a orientation in

emerging markets, less of a technology orientation like in the u.s. those areas are naturally lower valuation areas. you have to apply that sector base when doing that comparative evaluation and analysis. i think a lot of investors don't do that. alix: which brings us back to a broader point. how much risk do you want to take on? when you have money flowing into high yields, when you have european equities yielding more than junk bonds, how much risk do you want? many people answer that question directly and specifically with an answer. we purposely don't do that because it depends on who you are as an investor. i could have a very singular view and a high conviction view on where i think opportunities are greatest, where risk is highest. but what i would tell a 22-year-old investor who just started putting money in and goes bungee jumping on the weekend, isn't going to obsess about returns, long-time horizon, versus a 75-year-old investor who is retired, needs

every dime of what they have, can't afford to lose any of it, needs to earn income on that money, two different answers in terms of allocations and how terms of take in single review. it depends on how much risk you're willing to take. alix: i want to be the 22-year-old bungee jumping. david: of course. alix: love it. liz ann sonders of charles schwab. you are sticking with us. stuck in e.m.'s have been in reverse. will a meeting with shareholders get stocks back on track? continuing to evaluate business units and analysis shows that david einhorn's plans were just too risky. more next, this is bloomberg. ♪

david: this is bloomberg. i am david westin.

ceo mary bar is presiding over gm's annual meeting today and on top of the agenda is the proposal to create two classes of stock which would unlock hidden value in the company. this is how mr. einhorn explained it to bloomberg. >> one area where gm is weak is in capital structure. with so much value locked in cash preserving for the downside, it means it leads and innovation capital structure for the company and shareholders have been rewarded with the lowest pe multiple in the entire s&p 500. it trades at a huge discount even to ford. the stock would be 30-40% higher. i think that something needs to be done to unlock the value. david: we turn now to our detroit colleague jamie butters. give us a sense of this proxy fight, which is what it is. esther einhorn's three candidates of the board to get his plan through. is this likely to prevail?

>> it doesn't seem very likely. we didn't see the jump in the stock value when it was initially proposed. there are a lot of institutional forces against it. but it definitely reflects the ongoing pressure that mary barra is under. the stocks have been very depressed. he gives her credit for doing a good job on the operations but driving that value, making a compelling case to wall street has really eluded her and her team. david: that is the central puzzle. not only in general motors. as you say, mr. einhorn says mary barra has run the company well but their stock price does not come up. mary barra is getting news coverage in advance of the meeting, saying "i've got a problem with stock prices." what can she do? and she says she doesn't know why. >> she missed the point she is sitting on a lot of cash and in a perfect world, maybe they wouldn't want to carry so much. i was just talking on the phone with kevin, the bloomberg

intelligence analyst and he was saying this is just the worst possible time for him to try to make this case. gm has made a lot of strategic moves to get out of money-losing businesses focused on north america and now north america is heading into a downturn. they've got to have a big cash pile. to get through whatever might come next. also, to continue to invest in electric vehicles, to fend off tesla and invest in autonomy and mobility. these are big cash needs down the road and they have to be ready for them now. david: thank you so much, jamie butters from detroit. back to liz ann sonders of charles schwab. tell us, what is the source of the problem? stock price does not reflect it. what is the problem? >> there are some perception issues, and in one case may be a misperception. his got that unit sales have come off the boil, which at this stage does not look like

anything more than normal cyclicality. it is a cyclical business and volatility is in reversion to the mean in terms of sales. the concern i hear more about is on the credit side and whether we are seeing some sort of bubble in auto lending, maybe it can to what people perceive to be seen in student loan lending. i think there are some misperceptions. the average age of the life of cars has expanded to over 11 years. lifes become a longer asset class. therefore, it is somewhat rational that more people are buying autos on credit for the same reason that housing is a long line asset and most people don't buy houses with cash, they finance them. david: for longer-term loans. >> but also auto loans still tend to be shorter term loans so the problems fixed themselves more quickly and lending standards have already

tightened. so the ratio problems in auto credit are starting to improve. i think that problem will be solved sooner than a lot of people think. david: how much is the electric vehicle and autonomous vehicle problem. the elon musk problem? traditional auto companies who are behind the game when it comes to technology, every version of technology, electric or autonomous, i think that is part of a problem. and i think those credit concerns are more of the reason why these stocks have suffered a bit recently. david: does the vehicle sales number feed into the credit problem in the sense that they need more incentives to keep those vehicle sales up and they might be stretching a little bit more? >> i think that is a factor too and also the gap between used-car prices and new car prices has been a factor. a lot of cars are coming off of lease and as a result, there is a depression in the used-car sale prices. that affects new car prices.

>> absolutely. and because of the better technology in cars and the fact that they can stay on the road longer, there is that bias towards picking up a new or used car. alix: charles schwab's liz ann sonders will be staying with us. jonathan, over to you in london. jonathan: continued on to the opening bell, let's get you up to be speed on the action, four minutes away. equities.n to global down one quarter of 1% on the dow. futures on the s&p up 5.6 points as well. the dax back to where it closed yesterday, back to one full percentage point. the cash open in the united states up next. from new york and london, you are watching bloomberg. ♪

jonathan: from london, good afternoon, to new york, good afternoon and good morning, this is bloomberg daybreak. i am jonathan ferro. let's get you up to speed. ark like this ahead of the

opening bell. we are about 50 seconds away. the scores as follows. futures softer, down 45 on the dow. down 5.25 points on the s&p 500, one quarter of 1% after printing an all-time high. we pulled back, a little bit further. switch of the board -- switch up the board quickly. we have a new low on treasuries. yields off by four basis points. 2.14 on the 10 year. the economic reality of the bond market hiding a little bit, including the reality that the chinese might buy more treasuries and yields just keep going lower and they grind lower. treasury yields lower, the dollar softer. 96.59 on the dxy. with the cash open, this is bloomberg alix steel. alix: waiting for markets to open up, it is a pretty soft they. the nasdaq has a four record intraday high.

it doesn't look like we are going to hit that today. the s&p is coming off its smallest trading range in about a year so it is a soft market. weaker indicators like oil run under 50. you mentioned the yields, 2.14%, that is hurting spread as well. 85 basis points for the election is the last one we saw that. stocks, foror bank mac of america, jpmorgan, and citigroup, they are down by one half of 1% or over 1%. no help from china on this but it has been a really rough go. no volatility, no yield curve. m&a is pretty light. all of that boating -- boating not well for trading. now we make a lot about pushing ahead to super thursday. the risk in volatility being so low. jpmorgan had a really fascinating note out yesterday that gave another explanation

for why volatility is low. no big deal. economic surprises are steadily grinding -- are steady basically. chart. this this white line is crossed asset implied volatility and the orange lines are economic surprises. economic surprises relatively stable. volatility, relatively stable. you can see the correlation between the two going all the way back to 2007. we make a big deal about the complacency in the market. jpmorgan says it is not that. economic data is in terrible. we are growing steady. a great change from what we normally here. jonathan: the story we have actually heard before. i want to bring in liz ann sonders from charles schwab and jenna martin's from bloomberg intelligence. the vix looks kind of boring. is that the juvenile way of putting it? >> to some degree, yes. people underestimate the fact that economic volatility is down.

and therefore equity market volatility is down. let's just focus, politically, based uncertainty. i think what is keying off of is that if there is one benefit to what has been an incredibly slow growth period of time, is that there has not been a lot of move up or down around that. ,o the consistency of that maybe not quite goldilocks environment, but slow growth contained in inflation environment is equity pressures. jonathan: i know some of the market purists are infuriated when we refer to the vix index as the fear gauge but it looks like the complacency gauge. how misplaced is the idea of using the vix as a complacency gauge? >> the fix is merely a representation of what is happening in price, first of all. with prices rising at a relatively slow pace, they so-called melt up. the fix is relatively low. i think in the end, what matters

is the direction of market price and the change in prices. i don't know if market participants are terribly complacent. the only thing we hear about on a day-to-day basis is the fear of policy change. where is policy had? are we going to see volatility? when you get to a point where markets are no longer talking about low volatility, no longer talking about the risk out of washington, then you have the true evidence of complacency. alix: that is a nice way of putting it, nobody cares, stop talking about the fix. no more. >> [laughter] >> the idea is that especially ahead of super thursday, we have comey testifying and as an investor or strategist, how do you view those events? do you just wait until something actually winds up happening? >> i think as it relates to volatility, trying to trade in , youce of things like that know, and ecb meeting or the comey testimony is very difficult. you have to make the decision to

get out and get back at the decision correctly twice which i think, in general, is an impossible task. we saw from the initial comey news the big reaction by the market. on a single day where we saw that 1.8% decline in the s&p, and the spike in volatility. that we came off the boil it equally as quickly. i would be very cautious about trying to trade around that. however, knowing that events like that could cause these sort of swift increases in volatility. david: i wonder if this is a case of the boy crying wolf. we had the brexit and the trump election and the french election and people kept saying, be afraid. and in every case, with the exception of the pound, there was no long-term real effect from what appeared to be very disruptive political events. >> i think the reality is you just need to keep your eye on the prize. either you have a disruption of economic growth evident or you

have a disruption of interest rates imminent. if you find a way in which these events come, you have a real impact and a real investment case. the one thing that has occurred as a result of all of these political activities over the the several years is direction of the dollar. the direction of the dollar has been very meaningful for allocation within the equity market. the dollar is very important. whether or not policy impact energy prices is also important, whether it impact interest rates is important, but was really moving is the dollar. david: we are talking about the possible disruption of the economic growth. how much are the central banks making the possibility? it may be papering over other differences. >> the key is going to be future economic disruptions, at a point where they have not reloaded the gun.

that is one of the things the fed is concerned about, part of the reason they are plowing ahead. in addition to the fact that liquidity conditions have loosened since the fed began raising interest rates, that gets some cover to continue to do more that they want to make sure that they have some traditional and maybe nontraditional ammunition at the point of the next economic in andn, which i think, of itself, is a force behind why they and other central banks want to move towards some semblance of policy normalization. alix: we mentioned the dollar, which ties into your conversations, that the index under 97, what is it telling you? >> it is telling me the market is changing its price in the ecb policy action over the years. over the last few years, we know the fed is tightening and going to address its balance sheet. what we didn't really know and what we didn't price in coming into this year was that the ecb was going to stop inflating the balance sheet. and maybe even talk about tightening policy over the year. that is what participants are starting to price into the

trade. that impacted a lot of things. it helped elevate the tax story, it helped d collate the energy story, it has been underrepresented. >> one thing what i would add to what gina represented is that more than just difference rate differentials, and the driver not being just the dollar but currencies, currencies have also byome more tradable vehicles individual investors and other investors as a result. you get crowded trade affects, you get sentiment effects more than we have ever seen before. part of the reason for the retreat in the dollar in addition to those central-bank forces was simply at the recent peak. it became a crowded trade on the long side. alix: then to your point, if that is why we have seen the rotation, what happens if that is a disappointment? mario draghi has been consistent in saying that inflation is great. do we snap back to different reality?

>> we could. it remains to be seen but yesterday, energy and financials were leaders in the market. this could be a signal that something is shifting. maybe it is just taking advantage of inertia levels. it is hard to tell from one day of trading. do interest rates move on the ecb action and do they move your drastically? is what will drive the allocation in the equity market. alix: thank you so much. liz ann sonders and gina martin adams. you can see gina's latest equity strategy coverage, on the xbox go. -- on b.i. stocks go. i dropped the mike. jonathan: i wasn't even trying to argue with you, not once. thursday on the ecb, full coverage right here. something that has not changed in this market, 10 minutes into the session, apple is debate outperform on the s&p 500. as of about one half of 1%. it is the big performer relative to what is happening elsewhere.

in global equities, we are up one quarter of 1% on the s&p 500, a softer tone across the mc market in europe as well. treasury yields down for basis points. in point 14 is below earlier the session. a remarkable calm with an election on thursday. the u.k. cable goes nowhere at 1.29 flat. euro-dollar, 1.1274 ahead of that ecb decision. it is super thursday coming up. we are counting you down on bloomberg tv. good afternoon from london, good morning to new york. you are watching bloomberg tv. ♪

>> this is bloomberg daybreak. i am emma chandra in the hewlett-packard enterprise greenroom. coming up on bloomberg markets, founder and ceo of milstein and company at 12:30 and eastern. >> it is the home pod, the next big device from apple. emily chang sat down to discuss the future of the tech giant after the big unveiling. >> what we have tried to do is build something that is a breakthrough speaker first. music is deep in our dna, dating back from itunes and ipod. we wanted something that, number one, sounded unbelievable. when people listen to it, they are going to be shocked over the quality of the sound. and of course, it does a lot of other things.

all of those are important as well. but we wanted a really high quality audio as well. >> you are focused on how this could reinvent music in the home. what about these other things? what i be able to make a phone call, call a car, order groceries? >> there are a lot of things you can do with it. one of the advantages we have is there is a lot of things that siri knows how to do from the phone. with a patch of this as still showed today during the keynote and then you can bet that there is a nice follow-on activity there as well. e-commerce is very important. i can order paper towels on my amazon echo. does this tell us something about apple's aspirations in retail? >> i wouldn't read anything into it in that regard. whatever you would read into it is that apple's company deeply

cares about music and wants to deliver a great audio experience for the home. reinvented it in the portable player area and we seek to reinvent it in the home as well. we know that people want the speaker to do more than that. obviously, we want them to do more than that. so we are sort of combining what has been thought of to be two distinct lee different things until now. i think people are going to love it. i know they are. i am a user. i think they are going to be blown away with the experience. >> how long have you been working on this? >> multiple years. the underlying technology in here is something to behold. and to get the experience that we wanted and the quality we products in apple

general which take multiple takes to do, starting with the core technology. >> do you have people up there saying, finally? what took so long? has never been about being first at anything. if you think back, we didn't have the first mp3 player. we didn't have the first smart phone. we didn't have the first tablet. there was a tablet shifting a decade before. not many people used it. arguably, we shipped the first modern mp3 player, the first modern smartphone, the first modern tablet but we were not first. it is not about being first, it is about being the best. giving the user and experience that delights them every time. we don't let that impatience result in shipping something that is just not great. >> tim cook speaking with emily chang. joining us is shira ovide of

bloomberg gadfly, gina martin adams with us from bloomberg intelligence. andmight be totally shocked jaw dropped but the price can also be jaw-dropping, at 347, almost doubled from what we saw with amazon and google. >> it was striking how tim cook is talking about the device. he is not talking about the homepod, as a computing device, but a consumer electronics device. in the home, it is a high-quality audio speaker. they are betting people are willing to pay $350, or at least some people are willing to pay $350 to have a really great home speaker the way they might have bought something else. alix: you made a great argument that to really move the needle they have to give up the handcuffs of profit margins, that it is hurting them in their innovation. talk to us about what you meant.

>> it is interesting to see that apple optimizes its business to make roughly 40% gross margins on its hardware devices. that means in some cases it makes decisions based on the prices of its products or what features to put in this product taste on how much money you can make from selling each device. it is just a thought experiment. imagine what apple could do if it didn't mind losing money on these home pod speakers and use it as a loss leader to sell more people on using siri, on getting apple music, and other apple technologies in the home. apple has been trying to pitch it to wall street as more than a hardware company or a software and apps and forward thinking technology company. if that is true and wants to prove it then it needs to stress its software and services over .he margins on its hardware nobody wants to discount the ability of apple to produce a consumer product people want. david: much less market it.

is this really material to apple stock at this point? or is it all about the iphone in the fall? >> yesterday i found it interesting that the stocks fell. my impression of that was this is not the apple that is leading the way towards those new software services, towards the new devices. these are all things we have already had from other providers and they are playing a market share game again. it is telling what they want to see. they want to see apple push themselves into the leadership position, develop the device nobody has seen before, come out guns blazing. alix: that depends on whether apple is a growth or value stock. you are describing in amazon thele growth story but apple that tim cook is talking about is a value story where you preserve those profit margins. has the market reconciled that? >> the market wants tech to be the growth story. it is clear to me that we have pushed off all value trades in

favor of growth trades, given the deteriorating inflation expectations that have been taking shape over the last several weeks, going on months. a premium is putting on growth. that is why we are seeing a rotation in the tech and the discretionary. some has led to industrials and health care over the last several weeks. david: the market -- what about the pd multiple? the traces are commensurate with the tech stocks. >> that has always been true of apple in the last decade. the multiples look like a tech stock but apple is quite expensive relative to itself, historically at this point. alix: great stuff, thank you so much. check out her column, it was really interesting. jenna martin adams of bloomberg intelligence, check that out as well. in the bloomberg terminal, check out tv . check out charts and graphics and interact with us directly. if you miss any of tim cook's to be with only chang, click on it

and watch it back. this is bloomberg. ♪

david: breaking news out of detroit. apparently mary barra has got a vote of confidence. 91% of the voters and shareholders voted against the proposal of david einhorn. and of the directors, the least anybody got was 89% of the shareholders so essentially, mary barra wins with a vote of confidence. forward: we are pushing to thursday. three big events on the calendar, beginning with the u.k. election. the polls are a whole lot narrower than they were just a month ago. just a few weeks ago. then we have policy decisions from the ecb and hear from president mario draghi. his risk on the economies forward guidance and then it all goes to d.c. fire former fbi director james comey testifying on capitol hill. way into the big debate, michael

mckee, economics course policy -- economics correspondent. which one would you watch at a significant interest? >> if i had to pick one that would move the markets, which is why we are here, i would look to the u.k. election because that has the possibility, not the probability, but the possibility of upsetting what people have put money into right now. somebody said this morning that scientifically, the pollsters have managed to narrow this to between a labor victory and a blowout conservative win so it hard to know what will happen but there is a possibility for upset as we saw one year ago. but james comey, behind that not necessarily because of what he is going to say -- people have an idea and a don't think they would be shocked -- but how is donald trump going to react to what he says? he has gotten very active on

twitter. that could be something very interesting as well. mario draghi has to take third place because we have to wait until the fall before they start to really give us any hints as to any change in monetary policy. he will try to keep people on board at this point but not really signal that anything big is about to happen. jonathan: the question i have about jim comey's testimony is that this was such a big market event when the news first broke around this individual. why was there a market event where he testified this thursday? >> markets have had time to process it and price it in. what comes with this is the real question. the only thing that would really change thinking is if there was some evidence of a crime committed that would then expand this whole thing in the possibility of what might happen to the administration. but the idea that it might delay any of the trump policies, that is already starting to beat prices into the market so i don't think it changes anything.

jonathan: michael mckee, bloomberg's international economic and policy correspondent. great to have you with us as we count you down to thursday with jonathan ferro, alix steel, and david westin. thursday, the election in the u.k., and ecb decision and the comey testimony, one for each of us. alex on draghi, david on comey and myself on the u.k. election. as we wrap up bloomberg daybreak, here is the state of affairs. -1/10 of 1% on the dow and on the s&p 500. we pulled back from record highs. pulled back from 2017 lows. we are still down on the session by four basis points. 2.14 is your yield. from london and new york, good afternoon and good morning. ♪

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 bloomberg and around the world. havens rally, gold heading for a seven-month high end of the yen yen climbs. testimony this thursday. in an exclusive interview with bloomberg, tim cook says president trump's decision to quit the paris agreement was just wrong. plus, president trump originally said he wanted to defuse the --sis in qatar