the most complicated negotiation of all time, brexit negotiations kick off. and now he has to deliver. and who is next? the industry scrambles for the next big deal with the essence the test s&p for a big time. john for his -- >> features hitting close to a record high. stocks seeing the biggest jump we have seen since april. the rolling crude.

>> a driver in a van drove into a crowded -- shortly after midnight. they say he shouted he wanted to kill muslims. -- the 577 feet. the u.s. navy is promising a full investigation. the uss fitzgerald is back in port after being struck over the weekend. powered 24 hours a day. >> a year after britain's vote .o leave the european union

today, talks will how they are going to get that done. >> if at times like these, we are a reminder of the values and resolve -- we share with our closest allies. why there will be challenging imes ahead of us -- david: joining us now, bloomberg's euro chief. how does --

>> the big problem for the negotiators is that this is all a big distraction. since they voted to leave, let's get on with the talks. moreower fire and distractions for theresa may. it is probably going to be little difficult to focus as , saying we arent going to try to get something done today. for some time now, we do have -- 7 we had the outline of

their position. waiting for the u.k. -- what is the timeline over the next week and a half? -- the chief negotiator is going to report to the leaders and he will like to say we had a positive and constructive start. in and they talk going looks like they will have that.

if they don't do anything else today, they have to make sure they get that nailed down. melissa: -- about 10 will be independent. turnalley still trying to its way around. what more could you want? -- e will continue to your base case when it comes to exit? -- we will start to see -- what

the negotiations will look like. the town will be sensitive to .he profits >> take a look at the bloomberg. we have not releasing that till late. range, theto see the highest in almost three years. -- aboutoing to be the whether or not they can push through. nothing can breed, but it was set out by the european union. ted is a big initial bill and

done, done,- once that is >> when you talk about a soft brexit, it is a cauchy term. >> what the country needs is a. -- alm thesa is leading to government. most people in a the country will think. >> he started emphasizing jobs shift- which seems like a

. currently, the u.k. in u.k. economy class retail sales falling. everloyment is at it'salso in four years. governorficult for the trying to make a decision. >> if you are theresa may are, can you afford to make a trade-off. that is really been the trade-off. >> is a difficult negotiation

would suggest you continue to .ead however, the vast majority of people believe they were doing their $16 million native american the attack. that may mean a slightly softer position going forward. this is the first day of negotiations. comes: the queen's speech wednesday. ?hat is the market lists monthsink in about six

they should be able to -- to parties share quite common values. they continue to be southern in . strong and him >> coming up, we will talk to elaine chao. coming up next,

next breaking his want to fall for you. directors on the void.- 11 seat all this has to do about .nwinding their bet they move from john paulson to offset it. -- t has your >> the hedge fund loves it. in france, emmanuel macron has .on 350 seat sunday's turnout was lackluster,

below 43%. john even that, you had the left and far right both gaining. >> it is an achievement to manage in one years. , -- as you were is there -- for the first time gaining seats and of course, the downside is you is who -- political mps

missinglad -- alas stored. including of course, this label -- labor reform. the government will have to face proteststable wave of industry. now take a look at what it may mean for developments. a year ago, europe was nowhere and there was a lot of uncertainty. now, we have a growing europe. we haven't france that is stable

and center. --t year was the worst year the u.k. in germany, countries in 2017,ing elections but look at what has happened. the pure number popped up to 57. --ht if you are an investor, i've been moving around the last month or so. that is the question i keep

-- since the lows 500 has nine, the s&p 500 outperformed by over 100%. vonnie: part of that has to do with earnings. >> you can see how much europe has outpaced across the low. what regions can benefit? by setting the area we want to look at is going to benefit from the eurozone.in

they have certainly nonjury cash italy is the , trying to get the other factor we think that be important with the decades continuing to uncover. european patient is up and .ow walking

>> is a macron trade similar to -- how long will it take? the training time. that may lead to a little bit of a delay. we've is like to start seeing .ome market reform they are the background of the french economy. what is the trade in europe? >> if you are feeling

-- nturous, will be sticking with the spirit coming up later, an exclusive interview with sheryl sandberg. do not want to miss that. this is bloomberg.

; this is bloomberg daybreak. jet ints first new nearly four years. once amazon takes over, it plans to change the image.

to lower expected prices. and in japan, a newspaper reports that toshiba is in the final stages of companies conducted. buyers may pay about $18 billion. that is your bloomberg business flash. david: the term which can is with thesynonymous election of last year. >> president trump tweeted about it again yesterday. new -- and infrastructure are in the works.

keep us up today, kevin cirilli. kevin: i think a lot of people are scratching their heads this morning. you have one of his attorneys say he is not under investigations. there is an economic strategy to push back and put the allegations behind them. david: let's move on to other things. one of the things is the tech ceo summit. also, sheryl sandberg speaking

at 5:00 p.m. this was something put together by jared kushner. he has deep ties to silicon valley. they are really going to be david:g the opening let's put to capitol hill. how are they coming on the deadline? there is frustration among several republicans that this closeds been done behind doors. mitch mcconnell would like to this.

if they do, this would be a big clinical victory for the white house. the handsome -- >> thank you, so much. live.ing up, we will be we will be joined by u.s. congress secretary. in the market, futures pointing to a higher opening. in the currency market, allies start inbrexit talks brussels.

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open. the ftse is also seeing some gains. brexit talks start in brussels. we will look at the impact on the currency. at euro dollar, that's moving slightly higher and sterling cable is moving higher as well. what will be the catalyst for struggling to break out of its range? let's get an update on what's making headlines outside the business world. and not:. police and london are checking out an attack outside a mosque in london. one man died in 10 people were injured when of them go into a crowd shortly after midnight. prime minister theresa may condemned the attack. >> as i said here two weeks ago, there has been far too much tolerance of extremism.in our country over many years that means extremism of any kind including islamophobia.

emma: the attacker active alone and was arrested. london, the death toll in the high reservoir been fire is likely at least a nine and the total may increase based on resident reports of who was in the building last wednesday when the fire broke out. this isrnment expects inspecting 2500 similar apartment buildings across the u.k. a white house official said jared kushner will push for a peace deal between israelis and palestinians. this is his third trip to the region since the president's election victory. pka one theooks koe u.s. open. record and here for the seven straight first-time winner. this is bloomberg.

david: we have to talk about the u.s. open. ka got on this difficult of course and played it like you would not believe. alix: did you watch it? >> i watch the highlights. david: he was amazing. the guy who came in number two, harmon had a $250,000 pot on the 18th hole. --putt on the 18th hole. amazon purchasing whole foods for 13.7 billion dollars is the biggest ever. >> ic companies that are priced

for a very, very rosy future. if it's a great rosy future, people will do well. problems and it's going to be difficult for investors to recover. alix: one of on the phone is a scott mushkin. good to talk with you. likedea is that stocks amazon are so price for growth that that is a risk. do you feel amazon is priced for the right kind of growth questio? to a moved amazon down pair perform six weeks ago. -- 20 year perform six weeks ago. peer perform six weeks ago. stepping back and looking at what they are doing and what the

merger of foods means, this is an absolute perfect match. either take some time so so -- and so we have not change the rating. we have been doing this long time and thought about it a lot over the weekend and it was a that we did not see this coming in understanding the synergies here, it's a very good merger for both companies. that seems consistent with what i have read over the weekend. time we saw aast digital transformation merging with analog? is this not a bridge too far for amazon? >> i don't think so but one of the fascinating things about is a missionoods driven company. that mission comes from its founder and ceo, john mackey.

been a little uncomfortable in the skin of her foods, high-priced reputation. his mission has always been to bring healthy eating to everybody. this is fulfilling a lifelong mission he has had. perspective, they really want to become bigger and more dominant in consumables but they did not have the credibility especially in flash. when you look at our research, the whole foods brand really goes well beyond the urban elites who shop it. it's incredibly strong throughout society. it's an incredible brand. instantaneously, amazon gets that brand and guess the credibility of fresh. we think it's a very good merger for amazon. the core of it is brand

and culture. most mergers you know fail on culture more than anything else. the whole foods brand is more upscale in most people's mind. can they cut costs without undermining the brand? >> i think they can. brand's upscale to a degree but it's also about quality. a funny story. when they lose -- when the news broke the mold my wife called me and said is this true question mark i said it is. you mean him lower prices? she was excited. maybe a lot of people thought the same thing. they thought maybe they can shop whole foods finally. it's very synergistic. foods prices down will clearly be part of the strategy. brand first and foremost is

about quality. m&a: what will this do to in general? if you look at overall m&a volume, it has been very low so far this year. does -- on the big negatives back? moneyre is quite a lot of sitting on the sidelines. u.s. companies of lot of money overseas that they would like to come home. rates are still very low. backdrop economic hasn't. received out together could be conducive for more m&a activity over the next 12 months. thed: what about within grocery area specifically and retail more generally? if you are a grocer today and you're not foods, do you have to merge with someone else?

with retail, business trigger a lot of consolidation? >> our view is a kind of faster. competitors are should be afraid, very afraid. arething we ask of chrome on the conference call thursday is do you have enough scale? they answered yes. i think the answer is a resounding no. i think consolidation will have to accelerate meaningfully in the space to compete. for a lot ofllenge the traditional companies whether it be walmart or kroger's, is becoming obvious that the size of their stores is a problem. and that'st too big a hard problem to solve. it's one of the things we worry about most for some of these traditional retailers. it wasf you had told us these companies merging, who would not have believed it. what sectors does this most

apply to? techu are seeing consolidation as well as retail that historically been a laggard in m&a activity. broadly, this is another instance of silicon valley moving business. will this cause other tech companies to think about traditional business? or googlee a facebook saying we should get into the traditional media business. you anticipate that sort of structural development? >> it has been happening slowly. writtens been articles -- this companies have tremendous amounts of cash to throw around. what's fascinating about amazon and this merger is it's much more complementary. some of the other tech companies have been moving further afield. lookingf bezos, he is

to make money. short answer is yes but what this merger, it's a little different than what we have been seeing. david: thank you so much for joining us today. alex dryden will be staying with us. coming up next, the paris air show where we are joined by the u.s. secretary transportation of transportation. this is bloomberg. ♪

emma: mrs. the hewlett-packard enterprise greenroom. coming up soon, wilbur ross this is bloomberg.

now to your bloomberg business flash. there are three new business units. incomet will cover fixed and another will focus on etf's and the third will manage regional sales. google is promising to do more to suppress terrorist propaganda. google instituted new policies and practices to identify terrorist of videos. people are concerned that terrorists are using videos to recruit. signs thatore sides the housing slump and u.k. will continue. prices drop to 2.4% in june. david: thank you. it may be difficult to remember

but there is a lot going on in washington besides the rush investigation. there is legislation on health trade policy and bank regulations. to talk about the other side of washington are our next to guests. start with banks. we've got the stress test coming up. where are we with bank regulation in washington today? a slowink there has been but steady migration of expectations. that is a theme you see throughout, and managing of expectations at a minimum. with banks, there has been a shift from the legislative expectations were anything is possible to retrenching toward that's probably. what's probable here or administrative changes. u.s. treasuries laid out a concrete set of steps that can be taken with less of a

regulatory burden on banks. bank of america really quantified it. what does it take to get from that report to the ground? >> it's time. time is of one variable which is oft important in terms taking these administrative steps. what you look for it next is if we can get some of the present -- some of the president's .inancial regulators confirmed those the nomination of jim klinger over the weekend that the fdic. he is an eminently qualified nominee. that does not open up the end of november. to him over the weekend and there was a concern that the white house is not nominated folks for posts that are currently vacant, the most of

which is the vice chair for supervision at the fed. that still has not be named as we go six months into the administration. financials of the best performer in june. what's placed into that? as a smalliced in amount of deregulation making its way through washington in the next 12 months. i also think a stronger u.s. and global economic backdrop. what will really move the data is financials just move the needle is financials. the fed will tighten monetary policy and as they start producing for the balance sheet. as international central banks begin tightening monetary policy and international investors are shopping in u.s. markets come

alix: they will go home. alix:the spread is winding up flattening after thi the september hike. financials -- do financials need a hike? >> i think some deregulation would help. i think the year curve is what they were made. david: beyond the administrative possibilities, let's go to the hill. the senate has self-imposed deadline of july for to get a health care bill through. we really make the deadline? >> i don't think so. i think the july for deadline is more representative of leader mitch mcconnell's wrist and move on to tax reform that it is a sign that there is many is on legislation without care.

even if we get something out of the senate which is far from assured, it will meet a very disheartened and aggressively positioned house freedom caucus. the likelihood of getting actual legislation done on health care remains low. in my opinion, most of the market should expect a quick death to the health care act so that lawmakers can move on to tax reform. when will get to tax reform? the earliest you can expect actual legislative language would be the fall. i think you have to first get politicalonfluence of risk that is both the debt ceiling and the funding deadline at the end of september. if we follow through there, it's along the lines of perhaps getting legislative language in

moving/november, perhaps in into the house by the end of this year and the senate beginning of next year. this will get done on the first half of 2018. what's clear that every conversation i have had is that it will be retroactive and of 2018. january 1 i think we have to get through these upcoming fiscal deadlines and then i really think the fear of the midterms would be a motivating factor to get lawmakers into gear to get tax relief, not reform, but really done in the first half of next year. hope is not investment strategy. what is the best u.s. portfolio when there is that uncertainty? >> what we have seen over the last few months as investors go -- get excited about the possibility of fiscal policy. what we see now is a degree of fiscal frustration coming through. the dollar, yields, and stocks

and deregulation have almost theirtely retraced postpresidential job. where we are starting to see is there is room for a upside surprise because markets are very pessimistic about fiscal policy. if something gets passed, that's better than what's currently happening. alix: not a ringing endorsement, thank you both very much. check out tv and launches online. you can interact with us directly. this is bloomberg. ♪

alix: value versus growth -- value investors have fallen tough times including the one time morningstar fund manager, bruce berkowitz. erik schatzker sat down with him and asked him about the flood of money into etf's, valuation in

tech stocks like amazon and google. make sense to me but i am not a growth investor, am not a visionary. tom the guy who is looking buy one dollar for $.50 and if i'm wrong, i will get my $.50 back and if i'm right i will do better over time. erik: you are underperforming but you are hardly alone. why do you think it's so difficult right now for active managers to beat their benchmarks? the date problem when you are in an investor in public securities, people have to agree with you. in other words, i can be right but until other people agree that i am right, i will look very wrong. rightt takes for me to be is eventually for the companies i invest in to fix the problems that are fixable. are a value investor

so there are lots of other active managers who are not value investors and yet they are underperforming as well. it's like a disease. >> i don't know why. i must admit, i don't pay a lot of attention to other people. i try not to be biased with whatever is going on. i just go by the math. i basically follow the cash and invest with discounts and i stick to that process and as long as i still think the value was there, i stick with investment. normally what happens if the investment declines tremendously in value during my investment process, eventually the problems and thees are resolved clouds disperse and people get a better look at the assets and liabilities within the company and things work out well. that has been the case for 30 years. when you curious --

look at the must own stock, the banks for example, facebook, amazon, apple, netflix, google or some of the other highfliers, what do you see? pricedompanies that are for very rosy future. future,a great rosy people will do well. problems and it will be difficult for investors to recover over time. alex at dryden is still with us, value or growth? can be aif you patient, long-term investment. alix: how long-term an investor? >> it could be up to four years before these companies get to a position where other investors come to you. i might long-term kind of guy for value.

david: for most people, is it a little bit of each? >> that makes a lot of sense over the long-term. alix: thank you so much, great to have you here. we have a little bit of an mend is buyingnday, eqt rice energy for $3.7 billion. it's an integrated energy company that focuses on the appalachian area. is $6.7 billion. this is bloomberg. ♪

alix: brexit talks kickoff and

brussels. president emmanuel macron's historic win and his party gets the biggest majority in parliament now he has to deliver. amazon scoops up whole foods in the industry scrambles for the next big deal. david: welcome to bloomberg daybreak. alix: i missed you guys a little bit. s&p futures are around record highs. the 10 year yield goes nowhere despite the fact it was rolling over early in the session. eqt energy which is an integrated national -- natural gas supplier is buying reiss

energy for $6.7 billion. it's a 37% premium. energy is also a natural gas player. we still have more am a day activity heating up. let's get an update of what's making news outside the business world. emma: police and london are mentioning an attack outside a mosque in london is a third terrorist incident. a man drove a van into a crowd after midnight. >> as i said here weeks ago, there has been far too much tolerance of extremism in our country in many years. that means extremism of any kind including islam a phobia. emma: she says the attacker acted alone and was arrested. in france, it in manual macron's

political movement as one a large majority in parliament. he and his supporters are on track to win about 360 of the 577 seats in the national assembly. was the lowest ever for a parliamentary election in france. a member of president trump's legal team in washington insists he is not under investigation for up struck justice. the president has made repeated comments on social media that he's part of a witchhunt. lawyers said the president was tweeting about media reports and not an actual investigation. this is bloomberg. thank you so much. the terms ofover brexit are getting underway today in brussels. jones hayden joins us in brussels with what to expect. we talked about that there was this terrible attack from overnight.

we understand that overshadows negotiations but despite that, what do they plan to get accomplished during this set of meetings? >> i think the main thing that both sides want to come out of today's meeting is a positive start to the negotiation. they were optimistic so that's the take away that they want. eu leaders are meeting at the end of this week. david: we know the eu has said we want to talk about the brexit bill first. should we hope to have a

timetable as to when they will get down to brass tacks? if we will get that today but that's certainly on the euthat barnier side will be pushing for. they need that to get the whole sequence of negotiations go smoothly. they would like to have the brexit bill wrapped up and have a deal on citizens rights wrapped up by the end of this year. to they want to move them the other substantial issues that the u.k. wants to talk about. to have substantial progress made on those issues, time is wasting. they have a what deadline they're coming up against. any realistic hope they will make that deadline? >> hope is eternal and from here until the end of the year is still a long time. when there is continual domestic

issues like the vote in the u.k. and the fire and the terrorism incident, when these things keep getting in the way and messing up the attention span, the attention of the u.k. side, that it makes a difference and things inevitably will get pushed. today, they can get a timetable and will get messed up too much going forward. david: thank you very much. joining us is the goldman sachs cohead of market research. what is your best case for brexit. ? >> very uncertain at the moment. the central case is that there will be brexit so there is no turning back. the transition agreement that will be reached after the german ,lection will allow companies

the private sector to plan better. at this stage, we know very little other than the fact that the brits are saying rex it and no deal is better than a bad deal. on the european side, those principles and the jurisdiction of theecj seem to be sechrist sank. around these stark statements, there is a lot of leeway. are cases that both sides will try to find a compromise. as you point out, no one really knows that there is calm throughout the market.

do you think this calm is justified or do we need to protect ourselves as an investor? toi think the calm pertains the broader picture and the oneder picture seems to be where central banks will still be very tame in maneuvering rates. inflation is low and there is a big appetite for carry. anything that has a higher income will attract a lot of attention in these markets. specifically on sterling, our that the currency will continue to act as a safety valve for the u.k. economy. uncertainty will not go away over the next three months or so. that uncertainty will then reflect on movements in sterling.

i think that could be both sides. week that the bank of england is being a bit more red to the fact that inflation is above target so there could be something coming from the monetary policy end as well. precariousdoes a maintain for the -- a precarious may mean for the negotiations? how do you factor that into your thinking? very difficult to factor in any of these political events other than trying to immunize portfolios and stick to the macro baseline. theresa may stays through the entirety of the protest, markets are discounting that as an unlikely outcome but there is a good chance that she

may be in charge at least for of thising phases process. then who knows? if we stick to the macro, i think the broader asset picture butow favoring income carry with respect to the u.k., that uncertainty, we think that will hinge on spending decisions in this country and that pertains to investment which we have already seen to some extent but also consumption going forward. david: early on in the process after the brexit vote, there was fairly hostile sounds coming out of 10 downing street. they were more consider -- concerned about immigration.

is there a shift occurring which may put more emphasis on whatever needs to be done in rex it to make sure commerce is not substantially hurt? >> business has been basically thinking in that direction for a long time. it's essentially since the vote to putuck that the need transitional agreements in place, not just the private oftor, there is a big chunk ngos stationed in this country that rely on funding that has been coming from the european funds and they will be asking we stay hereould or relocate to the continent. from the civic society, there is a big interest in making sure the transition agreements are in place in order for the

to be as best as possible. alix: thank you so much, he will stick with us. ate a look at the 10 year, one point dropping like a stone. bill dudley was speaking at a conference today and said the u.s. economy is pretty close to full employment but inflation is a little lower than the fed would like. lots of questions if the fed actually had a hawkish hike last week. it seems like the market is buying the back end of the curve. he is confident expansion has a long way to go. coming up, we will go live to the paris air show and be joined .y elaine chao this is bloomberg. ♪

in france, emmanuel macron's party won 350 seats which gives him a commanding majority to drive through economic reforms. markets are already putting some money on that hope. cac outperformed. how much more inflow can we see into it europe and particularly french equities? specifically on french equities, it's hard to say. it will depend on many factors including how the economy continues to perform. we have seen some cresting in the pmi. onwill know more this week the pace of the expansion and

whether it will continue. the overall backdrop for europe seems to be quite good. we had a big conference just recently. i think 2/3 of an audience of big investors thought that europe would outperform the u.s. and i think that is leading to decisions. we continue to see inflows into the continent. not at levels we saw couple of years ago. money is definitely coming back. take a look at the bond market, the periphery is getting the majority of the performance. do we continue that or will it be spread across all the regions? story wasipheral basically around italy. it's primarily because of the .lection risk

the markets were trying to get their head around it. the italians seemed to have agreed. politics there are very fluid as always. they want their elections next spring of 2018. that will leave the market focusing on other stuff including that italy stayed behind. that's what we are seeing reflected in the market. not strategies and i'm prone to get carried away. i think italy still has a growth problem. there are spreads of 170 basis points over germany. below that, you are starting to either overprice the momentum in you would need to see something good happening in italy primarily on the growth dimension. ,avid: let's talk about pricing

go back to france, to what extent our markets pricing in a successful attempt by the new president with his new majority to reform labor laws there? if he fails, what happens to the market and what happens if he succeeds? fails, i think we will momentuma lot of stays inthis euphoria place. fails, it will be more like something we expected to happen. it will be very difficult i body for any president or to get anything done in france. if he succeeds, i think that will set the tone differently. feed on what we

are starting to see already. the outcomes are quite asymmetric. if he wins, there will be a spillover effect which will be positive overall. david: thank you so much. will stay with us. coming up later today, an exclusive interview with cheryl sandberg who is the facebook coo and we are live from world headquarters in new york. this is bloomberg. ♪

alix: dow futures and s&p futures are sitting around record highs following a rally in europe. i am watching what's happening with the pound as we going to the brexit talks in brussels. stirling is basically flat on the day in the euro is marginally wreak are -- weaker

and crude is slightly up. david: besides the big talk in brussels, it also marks the first day of the 52nd international paris air show where we learn what new aircraft is on the way. joining us now from the air show with a special guest is guy johnson. >> thank you very much. the u.s. airspace sector is one of the best performers. the ratings are pretty high. one person who is very happy to hear those statistics is the u.s. secretary for transportation, elaine chao. there is so much going on here with big representation from the u.s. you are 120 days into your office. >> just barely. around,ave traveled what brings you to paris and

what message do you bring with you? is theparis air show longest and largest display of aviation aircraft. it's an important market for the american economy. the american aerospace industry as a sector is the second largest export sector in our country. it has a value of $146 billion and create well over 2.5 million jobs for good paying american jobs for american workers. president wants to transform the u.s. in terms of the way the infrastructure works. one of the key planks is air traffic control. it's your job to figure out how to reform this. how do you make it work from an operational point of view? >> this is a very serious issue. experiencedho has

delays and congestions, they know why. the president has made a historic decision to separate air traffic control from the government. is two parts, faa it has the air traffic control regulatory has a safety part. in 60 other countries throughout the world, the operating unit is separated from the regulatory safety aspect. secondly, as part of the government, the air traffic control system is disadvantaged to be able to access the most up-to-date technology. let me assure everyone that the american airspace is the safest but it hasd maintained its efficiency and competitiveness because we will bye one billion passengers 2020.

newill have to integrate unmanned flying vehicles like drones. the airspace is increasingly congested. frome experiencing delays congestion now and if we do not do something now to prepare the system to take advantage of the new technology and make sure the air traffic controllers who are working so hard to make sure our system is safe get the best equipment they can, we need to do that. >> how will it be paid for? like it is now. the new air traffic control system will be liberated from the constraints of government so that they can access the latest, most up-to-date technology. the user fees will fund the system as it does now and the great news is 100% of the user fees in this newly created, nonprofit cooperative would be

plowed back into the system for further investment. right now, user fees are not filed back into the aviation system. it goes into the aviation trust fund, some of which is used for reductions. >> so how is it finance? >> nothing will change, no physical movement of assets. this is merely a different change in the governing structure and the financial structure. the user fees are currently funding the system now. it will continue to fund it in the future. the advantis is 100% of the user fee will be able to be used to be reinvested in the air traffic system which currently it is not. >> how much does what's happening on the white house delay what's happening? we are still waiting on health care. the investigations.

-- the white house is still facing the investigation. >> we have to work in partnership with congress. this is a democracy so we want pass wage the concerns of general aviation who are concerned about user fees and are concernedd about access. we want everyone to be comfortable so we will work very hard with all the stakeholders to make your all of their concerns are addressed. partnership going ahead, it would not be the best system. we want to make sure we have the best system and enhance safety. we want to enhance the ability of hard-working men and women in the air traffic control system to access the best technology. in the past, the air traffic controllers union has actually endorsed the concept of liberation of the faa. and getting out of the

government so they can have the equipment, the best equipment in the world to use. that's what they want. >> thank you for spending some time with us here. let me handed back to you. david: thank you so much. we will turn from airplanes to groceries. before the market opened friday, news broke that amazon will be buying whole foods for 13.7 billion dollars, making a big move into selling groceries. it did not take long for people to focus on what this could mean for walmart. to take us and to the grocery war is bill simon, for -- former u.s. ceo of walmart. thank you for being with us. >> glad to be with you. david: what does this mean for walmart? >> amazon is moving it to groceries is a validation to a certain extent that this battle will not be one online.

amazon for years has said and acted as if they could dominate all of retail without physical brick and mortar stores. i think this move indicates that's probably not going to be the case. the retail stocks were battered friday but in a way, their model has been validated particularly in grocery. having amazon in their guide think will be good for the segment. they will bring some innovation and technology and more competition which will make retailers better. good andlmart has been big in the grocery business but is already made investments online. what about the deflation in grocery prices? >> this probably won't by itself biggerwill have a a impact on price deflation and that will be the discount segment. food prices will continue to be

driven down. i think it will be making it difficult for premium prices at whole foods to remain. david: there were reports over the weekend that jeff bezos wants to get rid of the whole foods reputation for being high-priced. can they do that without undermining the brand they bought? >> that's a really good question. the brand built itself on premium, particularly premium fresh produce and meat. if they can deliver value and premiumness at the same time, they would be the first ones to do it. it's difficult to deliver because whole foods has not been performing very well. they have seen their margins and profitability decline. they have had management changes so they are not in particularly good shape. just cutting prices may not have the effect that jeff bezos would desire. -- what shouldd

walmart by to compete? i think walmart has to be good at brick-and-mortar because that's where their base is. to buy thetinue pieces and assemble them into the model they are building, they can compete. it will not be a single acquisition. walmart is phenomenal at legit six and supply chain and procurement. the think most customers don't see is what walmart is really good at. as they bring these in, they will be incredibly efficient and in an instant.st if they can continue to do that, they will reach critical mass. alix: thank you so much for joining us.

this is bloomberg daybreak. we are about an hour before the open in the u.s. u.s. equity futures are around record highs. to me, the movement in the 10 year has been what's interesting in the last 20 minutes, hitting a session low and now re-banding -- and now rebounding. it's in part because you have bill dudley speaking in pittsburgh saying that things are going reasonably well. they have not tightened conditions very much so he is sounding more dovish and the market is reacting to that. we want to welcome our listeners on bloomberg radio. there is a big conference outside washington on attracting foreign investment into the united states at the top of the list of speakers as secretary of commerce wilbur ross who joins

us now. welcome back to the program, good to have you. >> good to be on again. david: let's ask about what this conference is. you are talking about foreign companies investing in the united states, what is your main argument to them as to why they should invest in the united states right now? >> it's the same reason as american companies should be and , namely regulatory reforms, getting rid of red tape, tax reform, getting our rates down ,o very competitive levels unleashing our resources fixing our trade agreements, and creating a much more healthy environment for businesses and consumers. all of those reasons are the why. david: let's talk about fixing the trade agreements which comes within your purview. have beentent -- you

outspoken that you want trade but you want fair trade. to what extent do tightening the trade arrangements encourage u.s. investment in the sense that people need to be here to manufacture so they are not subject to whatever restrictions there might be? >> i think it's a factor but probably a relatively small factor. i think cutting the tax rate doely as we have planned to is a big benefit. the tax structure used to be a major decision vantage. similarly, our regulatory structure had been a huge this advantage. i believe we were the most going.ulated country when you are paying a lot of tax and having regulatory red tape, that discourages not only greenfield investment, it discourages any kind of investment in the country. mostly the's question of removing impediments

and coupling that with the normal benefits of the u.s., a huge population base, wonderful market, open access to it once you are here, highly educated workforce, those are the kind of fundamental factors that were always at work but are now supplemented with the improvements in business climate created by president trump. you have plans to cut taxes and reform taxes. there is a lot of euphoria about that. what do you say to would be investors who say let's wait to see if that happens. it looks delay from what we originally thought last year. the administration has very little control over the timing. that requires activity by the

congress. we seem to be making good progress on health care reform. that is really the prerequisite to getting the tax reform and acted. the first -- and acted - enacted. about the trade agreements, where are we right now? on nafta? where are we in the process of renegotiating nafta and who's responsible? is it you or your colleague? >> as to where we are, we are right now awaiting the maturation of the 90 day letter we are required under the trade promotion act to send to the congress. that clock ticks on the 18th of august. 30 days before that, we will be revealing to the congress a more detailed negotiating strategy

than we had discussed with them before. is a redof august letter day for trade. that, we have a big day very soon into the middle of july. that's our next announcement and meeting session with the chinese. as you know, we have a cop is wete a little bit ever sense had a conference with him and we hope to achieve still more deliverable items in the near future. ourd: we want to welcome listeners on bloomberg radio and tv. china, let's go back to nafta -- you say mid july, a more detailed outline of the negotiating strategy will go to congress in august 18 is when the negotiations. after that, what is your hope on the timetable when you might

have something concluded with the canadians and the mexicans? both governments are quite receptive to the idea of a renegotiation. bestboth know this is at an outdated agreement. it does not really address the digital economy, it doesn't very much address services in general. it certainly doesn't do much on financial services. it also doesn't do very much on national -- on natural resources so those are big gaping holes in part because the mexicans have changed their regulations for on natural resources. and in part because nobody way back when nafta and i was negotiated even knew there would be the digital economy. it needs updating. second of all, it needs some re- provisioning to adjust to the economic realities of today. for example, there are rules of rg, namely what percentage of

the total content of a product will qualify as true nafta product even though it came from outside nafta. in automotive, they specify particular parts to which the percentages apply. half of those parts are not even used in cars anymore because automotive technology has progressed. there are many things like that that need to be fixed. everybody is up to the idea fixing it. is currency manipulation on the agenda with canada and mexico? or mexico innada my view is a currency manipulator. specified thats determining whether currency is the purview of treasury. congress has laid out very specific tests to apply. are applied twice a

year, generally in april and october. recently, treasury secretary mnuchin released the results of this year. he found that there are no currency manipulations. that's quite different from the there aref whether misalignments. i think the mexican peso has been very weak against the dollar partly out of concern that the trade negotiations might go very badly. it lately has rallied some. my best guess is once we have goodew nafta, there is a chance that both the canadian and mexican currencies will strengthen because of removing the uncertainty from their picture. that's the way we are looking at current sees with these negotiations. david: we are speaking with wilbur ross. let's talk about one specific

product and that is steel. the administration has been outspoken and taken some action on steel. aboutare various reports what the approach might be including the idea that perhaps it would be duty-free going up to a quota and then a duty would kick in. what is the approach of the trump administration to the steel imports? it's now a work in progress. we have not yet submitted our report from commerce to the president. nor has he had a chance, therefore, to act upon it. enforcement has been a very big hallmark of the present administration. have 161 trade cases in place which have put either anti-dumping or countervailing duties on seal products from

about 37 different countries. a very bigen problem, the problem of global overcapacity and, more importantly, global overproduction. the report will address those issues and will address them in the context of national security to define it. there is a broad definition including strong reference to the needs of the economy. it will then perhaps make specific recommendations as to measures to deal with that. those could range from the ones you describe to more complicated ones. the real key will be what the president ultimately decided to do with the recommendations. he says he intends to take bold action. i find puzzling is

that u.s. steel producers are having trouble making money now even though you have severe anti-dumping tariffs. why not just let it go? you have to stimulate and user .emand how does any more tariff fix that? there is the potential for quotas, the potential for tariff rate quotas, there are all kinds of potential to be brought to bear. casesason the individual have been ineffective is that preciserules are so that you have to identify very clearly the product and very clearly the place of origin.

that means if i am a serial dump of wish there were quite a few lurking out there, all i would ite to do is trans ship through another country and i evade the duty or send it to another country for further processing however trivial it further or give it processing in my own country. help but theyses have not been able to cure the systemic problem. that's why there are 37 different countries involved. the dumping of steel from one country into another makes the second country have access capacity which they then dump and then the country they dump it into continues the saga. one time of dumped steel probably results in three or inr tons of dislocation

different markets throughout the world. 232 gives the potential for a broader solution that is less geography dependent and less individual products dependent. david: finally, if we just read the newspapers or watch the evening news, we would conclude that all of washington is consumed with investigations and lawyers going back-and-forth. give us a peek inside to -- you have been call perhaps the most powerful commerce secretary in history. to what extent does this impact on your ability to get your job done? how do you avoided becoming a distraction? >> it's not a distraction at all. i was in miami on friday with the president when he made his amazing announcement about how we will redo relationships with cuba.

excitement than at most average campaign rallies. it was a very heartwarming event. it was especially because they -- they had on stage a man who is 12 years old whose father was assassinated by the castro regime and shortly after that, the regime figured out this little boy was the child prodigy violinists of the ordered him to appear on some tv spectacular. the brave little boy refused. the next day, the stormtroopers came to his house, surrounded him and said you must play for us. the boy played the star-spangled banner. that's what the president had him play again on the stage in miami. it's one of the most heartwarming, heartrending tales i have seen a long time.

the president is going about his job which is managing the country. these investigations are something of a sideshow. as far as i can see, there is no .here there it's a series of tv appearances by the various investigators. there has been nothing tangible come to bear. of the overall picture, the president is carrying out his program. at commerce, we are carrying out our program. david: that is quite a story, thank you very much for sharing. wilbur ross is the united states commerce secretary. coming up, tobias left of it -- owich. this is bloomberg. ♪

emma this is bloomberg daybreak. : coming up in the next hour, tobias levkovich. this is bloomberg. make no mistake, we are beginning to build the wall and we will keep out the gang members, criminals, drug and human traffickers that threaten our citizens and that threaten our security. of the big losers in the wake of the president trump election was mexico. things may be changing and that's the subject out today from our editor chief emeritus matt winkler. during the election, you

could see the peso very with the likelihood that trump would be elected. it really took ahead -- took a hit but what's happening? all those relationships dissolved in 2016. it was the worst year in the 21st century for mexico. this year so far, the peso is leading all emerging-market currencies. oft's a good indication return of confidence to mexico. another measure is implied volatility of the currency has collapsed. when you have those two things together at the same time, it kind of sets the tone for a market that is rebounding. david: you also have etf flows. leavingtill have money mexico for places like brazil. you thought things could not get much worse to bear but they are getting worse politically in brazil. having said that, the market in mexico is poised to rebound.

part of the reason is growth in the mexican economy is actually stronger than the u.s. and canada. it's one of the strongest in this hemisphere. secondly, mexican companies are doing very well. their earnings performance has actually outperform. david: you have a bloomberg survey of economists projecting real earnings growth and mexican companies. those thingsll together and finally the issue no one was to talk about is wonderfulh has been for canada and the u.s. and mexico despite what you keep hearing from lots of people. this will continue. it does not look like anything like the redrawing of nafta or the scuttling of it that trump threatened to do is in the cards. you put that together in mexico looks pretty good. mexico is generally a

proxy for emerging markets. is that a factor in any of this? >> globally, emerging markets got very cheap. last year. generally, people were excited about emerging markets. they are especially excited about mexico now because mexico got cheaper than it ever had been in the past 20 years. alix: for more on what this markets, toerging piggyback on this, this highlights the flows we have seen an emerging markets. how much more juice is there in the rotation? we thought it would be death to emerging markets last december

because the fed would be hiking. >> you get these phases of exuberance and then the face of despair. phasek we are riding on a of exuberance still. i don't see any sign of bumps in the road. there is low volatility across the complex. theree emerging market are a lot of good stories to tell. there are places where you have high real interest rates with growth coming through. we have a pietists -- a positive

bias towards commodity complex. these should be the beneficiaries. overall positive, becoming more choice ofin the places where we want to be. david: talk about the selectivity. stable butuite brazil has a lot of trouble. africa, there is a lot of instability but we hear south africa's attractive. do we look past the political instability? we are globally at a point in time where people are getting more and more convinced that the macro will carry the day. if there is any truth in the statement that growth has resilience, that inflation is globally tame, central banks will high-grade but do it in

proportion to the inflation outlook so nothing really jerky coming our way. i think people will chase pockets of value. from time to time, you will have the political event like you saw in brazil, shaking investors a bit. it creates near-term as they latch on to the same cycle we are all investing in. do things look expensive? i can't really see anything cheap? . it's in relative terms and our research shows emerging markets r.o.k.. alix: take a look at argentina today. this speaks to the fact that there is so much money. there is an appetite for yield. we are in a low interest rate environment. were of the -- wherever there is

the possibility of getting attractive yields, that's where investors go. is where markets exist, you will see investors apply this relative value regardless of what the political landscape looks like. even though you have political turmoil and so many places including the u.s., by the way, people who are investing will look at relative value because that's for the market is. the market is pretty good in that respect. it basically rewards people who buy low and sell high. alix: fair point, great to see you. tobias lefkovich is up next. this is bloomberg. ♪

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values staging a turnaround forr underperforming growth 2017. growth versus value with stocks at record highs. amazon scoops of whole foods and the industry scrambles for the next big deal. m&a.s levkovich talks the most complicated negotiation of all time. brexit talks kick off today in brussels. we preview what lies ahead. david: i'm david westin alongside alix steel. jonathan ferro is off today. you have a preview. futures and dow futures along record highs following a rally in european .tocks of .7% the really interesting movement has been the intraday movement for the 10 year yield. moving lower off of bill dudley's comments. he said inflation is lower than he would like. 2.17%. he says

3% wage growth in the next year or two. did the fed actually hike at all last week? we will be discussing that. now some movers with abigail doolittle. >> we have one really big mover here. clovis oncology. the company's ovarian cancer ,rug showed positive data giving it a broader label for the company. something investors are clearly cheering. the data makes the company a prime takeover candidate. equally impressive is that stock is up over 350%. this company already has the broader label for its ovarian cancer drugs keeping investors a

bit wary. analysts intelligence said that one benefit to sorrow has is timing -- tesaro has is timing. billionaire john paulson has joined the board to help with the takeover three months after a fellow hedge fund or exited his position at a loss. stock down about 90%. quite a takeover ahead. david: when news of amazon buying whole foods crossed the wires it rocked the world of grocery sales and online retailing. coming war the between amazon and walmart and raised real questions about how walmart is trying to move online lori in.com's mark charge of efforts. accomplishedte

setting up the domain names diapers.com and soak.com. he had a ton of money. that compares to amazon's growth market value of 200 billion. barely making a dent in the online arena. hter ismichael packed back with us now. as far as i'm concerned in my view you called this. you said there is a coming war going on between amazon and walmart. amazon has just recruited a big army to help it. >> i think so. the missing element is the logistics management. what amazon is especially good is managing giant fulfillment centers and packing things and getting them on the road. they use small firms like on track.

thesey're going to turn whole foods stores into refrigerated distribution centers they still have to build logistical capability for the 440 domestic locations. that's going to take a year or two. that's not going to be a this year walmart ties type event. simon,we just had bill former walmart ceo. he went to logistics as well and said that's what we underestimate with respect to walmart. they are really great at logistics behind the scenes. who's going to win that part of the battle? >> amazon wins no matter what. walmart is going to be a survivor because they sell everything just like amazon does. it's likely that everybody buys everything online. there's always going to be

retail. there's going to be small box retail. supermarkets are in trouble. consumer electronics retailers are in trouble. i think walmart will be here in another 50 years. alix: what is the biggest retail issue that amazon could help solve for a company like whole foods? >> we don't focus on growth rate. we focus on clothing accessories and footwear. is thes been mentioned pressure amazon is putting on brick-and-mortar retail traffic. consumers engaging with content. are engaging digitally. that's where all of the growth is in retail. that's where brands need to be to engage with the consumers. amazon has been a big force within that. consumers are engaging mobile. u.s.'s 53 million

households are prime subscribers. amazon's got people hooked on very fast shipping. they have people addicted to digital and mobile commerce. alix: alibaba had to buy retailers. walmart could buy actual retailers to solve the issue and get a foot print? >> i don't think they want to do that. i don't cover amazon. i don't think they are looking to get involved in the mall. amazon essentially eliminating traffic to a lot of those centers. the doesn't translate well to other categories in retail. i don't think amazon wants a brick-and-mortar presence. as a lack of traffic and a lot of those channels. they will not be looking to buy big box retailing that's anywhere near the mall. told: on friday we were

that groceries were essential to amazon's long-term play. is there any other area of retail that is essential. i don't think there's another category. we could talk about a grubhub interplay. that's probably the next big category of where we spend money that is currently distributed among mom and pop rest runs everywhere. maybe amazon gets into restaurant delivery. spent $600 a month per household on groceries. that's a giant category. it's largely commodity. we select retailer based on the quality of their produce and meat department. amazon had to get a high quality footprint to that consumers will trust. you know it's good quality. there isn't that analog in any other category of retail.

david: thank you for being with us. alix: we're joined by tobias levkovich. always good to see you. m&a? imal spirits back in there was a big gap developing between what we call the cash flow yields of the companies and junk bond yields as the most expensive paper you can finance a transaction with. the gap has really widened as a junk want breads have come in dramatically. -- junk bond spreads have come in dramatically. the result itself in the second half of 16. you are starting to see the activity pick up. people were reluctant.

they were probably waiting for the election results. it just seems like it is starting to catch a bit of a bid depending on which side is coming in on the transaction. alix: part of the bullish conversation in recent months has been you're not going to see a lot of issuance because you are going to repatriate cash from overseas. does that story hold true still? >> when we survey clients what do you think companies will do with their money, not what do you want them to do with their money? them as a use conduit. capitall strong but spending is also picking up. it started in september. ofon't know the results yet that survey. we will get them in the next week or so. we are already starting to see the trend shifting through

december and march. david: what about the lemming affects? you can guarantee right now that the kroger's of this world are waking up and saying should we be pairing up with somebody? you have seen this in industry after industry in the media. can we expect that sort of phenomenon in digital? >> it's a question of scale. can you compete with the other networks if you don't have the same kind of scale. i think it's different in different industries. more important it's a function of what the stock prices do. it sounds a little bit simplistic. if the stock prices keep going down than the next board isn't going to be that excited about doing a deal if it ends with

their stock price down as well. you have to track the trend to get a better feel for it. tobias levkovich will be sticking with us. we will have an exclusive interview with sheryl sandberg. you do not want to miss that. this is number. -- this is bloomberg. ♪

alix: tech stocks quickly becoming a big concern among investors. the selloff last week and had shares falling 4% since june 9. bruce berkowitz warned investors about the stocks in a bloomberg

exclusive. . companies are priced for a very rosy future. if it's a great rosy future people will do well. and it'sof problems going to be difficult for investors to recover overtime. alix: analysts are not really helping the case either. still with us is tobias levkovich. what do you think about tech? >> in the software area of the valuations are pretty asked ended. you are seeing new capacity coming on and that's generally not great for pricing down the road. fundamentals for the industry are still very good. road. it pricedon is is

into the stocks. isre's one other piece which what do you think interest rates will do. if bond yields go up what we have seen year to date was bond yields came down growth out performed value. a lot of this is in the stocks already. whoyone already suspected has not heard of the internet of things at this point? alix: hedge funds are really overweight when it comes to tech. the question being how much more can be shaken out? >> i always get nervous about things being overweight or underweight unless they are talking about me. some people are overweight and some people are underweight and as a result there's no such thing as everybody overweight. up people kept tech isinto it -- as

moving up people kept jumping into it. if something happens like bond yields moving higher this is going to be a problem for the stocks. david: if you look at it as a long-term investor is it as revolutionhe biggest since the industrial revolution is tech. in the long term the fundamentals will have to be there. three're talking about five-year time frames. it's a whole different game. you are a long-term investor. professionalthe and individual investor start to separate a bit. portfolio managers have to perform every corner or the mutual fund flows continue to move to the passive sides.

as long as they are trending higher don't worry about the dips. we have had horrific dips in 2001, 2002 and 2008 2009. alix: we saw the nasdaq fly off the handle but the s&p was fine. you would have thought two weeks bigwe were in for a correction. what's the explanation? >> we created the fantasy stocks. david: you also added nvidia and tesla. have an -- those stocks important. the concept that these are great stories in the long-term but

they are pricing out a lot of good news today. they were percent less than 25% of the markets moved year to date. people were saying this was the entire market. over 250 names have outperformed the s&p this year. 30% have shown negative returns this year. onhink the tendency to focus five or six names is too simplistic as well. there is so much more going on in the markets. broad setwas a pretty of stocks. they went from 18% of the s&p tech sector market cap to 28% last week. they are even usurping all of tech. there are parts of tech that haven't done well. alix: tobias levkovich is

sticking with us. enderswe will join tom at the paris air show. this is bloomberg. ♪

david: new york fed president william dudley spoke yesterday and was basically up be about the u.s. economy thing the central bank wants to tighten policy very judicially -- judiciously. we have heard from quite a few other fed speakers. we will hear from charles evans. stanley fischer speaks out tomorrow. paul.l hear from jerome still with us is tobias levkovich. this is my basic question.

why doesn't the market believe the fed? the fed keeps talking. the market basically will have none of it. >> the market believes in the short end of the cut. they are worried about the longer end. you have the ecb acting in the market and the fear that maybe this economic growth story is not as robust. the idea of hard data soft data discrepancies. has ledg that i look at the unemployment rate by a year for 45 years. listening to small business done consistently they want to hire more people. the 10 has basically gone down. people matter of

basically believe there's going to be money coming in from europe? or is it a matter of dubious about the ability of the trump administration to get up. i think the question is the legislative agenda the republicans want to push. is that going to get delayed by things like russia hearings and other investigations. that's a factor. we don't think there's anything priced in the market anymore for expectations about the trump rally factors. any of those things have all rolled over already and tech has been the leading factor in the market place. if there is any hint there is movement legislatively there's nothing in the market currently for it. much the question is how does the fed matter anymore.

in the forests and no one hears it did they hike at all. financial conditions are looser. does the fed matter? >> we talked earlier about credit spreads having come in. the federal reserve survey. that's why conditions have loosened up. even if rates were really low but spreads are really high the corporate can't invest cheaply. that has reversed itself. the movement on bond yields broadly has moved in more than what the fed has done. i think there are so many different elements. lack of faith in the economic growth we have been seeing for seven years. lack of faith in the administration.

faith in other parts of the world keeping bond yields suppressed. alix: when inflation picks up real rates fall. when inflation rolls over real rates are increasing. seen tightening about 100 basis points. how do you square that? >> people have not seen inflation expectations change in a way we would expect them to change. is fightingy tightening labor conditions. to talkswe talked about skills gaps. there are difficulties in getting people to work a variety of industries. the trades are really expensive. david: if the market leave the fed where with the stock market be? how much are they supported? i don't think that's the

reason stocks are up. it's a function of earnings. you'll see the highest correlations for any relationship. the 10 year yield doesn't capture that. if you believe earnings are still going to be growing there's upside in the market. alix: tobias levkovich will be sticking with us. here's where we stack up. s&p futures up .3%. dow futures sitting at a record high if we open at this level. this is bloomberg. ♪

alix: this is "bloomberg daybreak. --are moments away "bloomberg daybreak."

we are moments away from the open. this is all about the macron rally. the nasdaq is catching a bid by up almost 1%. asset classes, take a look at what is happening with the 10-year. earlier, fine too cold. yields took a landfill dudley was speaking in new york. it reversed of his speech as he sees wage gains catching up. url against the dollar slightly higher on the day and crude was lower it is now a bit by .4%. the markets are open here in the u.s. and want to see how they are faring. let's go to abigail doolittle. abigail: we are looking at records for the dow and s&p 500. the dow and s&p 500 are up by

.2%-.4%. the nasdaq is not putting up a record high public the gains of .7%. last week, the dow finished up words for the fourth week in a row. the nasdaq down for the second week in a row area it will be interesting to see what comes with the tech selloff. will it continue or will we see a healthy consolidation? as the paris air show gets underway, we have movers. including boeing and airbus. nice gains here. news for each of these companies. $30ng is getting ready for billion in orders. airbus has gotten a $10.8 billion order from ge aviation. ge, it is down slightly but it had been higher in the premarket. they have created a $2 million leasing aircraft with a quebec pension plan operator. valued and we have seen a rotation into the values and the growth.

airbus in particular is there. this is a global chart showing that shift. we have the global world growth value of index. you can see it going into the beginning of the year, we did have value outperforming. and as the year has gone on, we have seen that growth has been outperforming recently on the tech selloff, we do have value outperforming once again on a global basis. not just in the u.s. alix: is that sustained? still with us is -- value versus growth, when the we get a sustainable performance? about the you think significant value of energy and materials and industrials, those have been the big plays. a great run around the middle of february andough it rolled off with the bond yields.

but if we look at the 10 year bond yield, you will see it. interest rates go down and the future value of the stream is worth far more. if rates go up, the secular growth becomes less attractive or less valued. you will pay a premium if you think growth is poor. if you think there is real growth there than you will start makeg, hey, the value guys sense. they are more cyclical and they are tied to the topline growth at a cheaper price. alix: if the 10 year yields it is, is not necessarily a function of growth but it is just foreign buying coming in yourhow do we assume that correlation once upholding clear? present value the cut is a function of the interest rate. it, therate piece of

economical and, could you get a higher bond yield in an environment where the foreign buyer could suppress that healed -- suppress that healed is a better question. last summer,k to the first week in july, we set the 10 year yield cap -- 10 year yield it down by 1.5%. -- i do haveok at the bund yield sitting at .3. so they have moved as well. if the u.s. economy gets movement then global economies who import or export also start to get a lift. and, everything starts to move higher on the bond yield. back.'t just pulled it is a broader economic belief system. macron might be generating that in europe now. and we have been the beneficiary of that as well.

there is suchnt, disbelief out there with investors -- a few weeks ago, i wrote a piece on new market seems to care. and we still hit ties. he said there was this problem and this problem and this problem. for decades, they said that everything was terrible. so the list of concerns are always there. and i think that we don't have the animal spirits in the markets. david: in the last two minutes, the supreme court issued the order list. he decided to take a case that will be decided next year over whether courts can redraw congressional districts that are based on too much partisanship. in the past, the court has done this but they have been reluctant to get into whether there is gerrymandering because of partisanship. now they've decided they will step into the

electoral process. fascinating to see what that means. particularly with the exception of the polarization of the country. what is your opinion on gerrymandering? [laughter] tobias: i'm canadian. [laughter] david: you clearly believe in growth story for equities based on earnings. where are the earnings going to come from? is it topline growth? you referred earlier to capital investment. will we get increased productivity? what will drive the increase in earnings? this year, it is earnings and comps. maybe the dollar having we get a little bit has helped. is that weterm issue have to get topline growth. we got it in the first quarter and we should be getting it in the next several quarters as well.

this is a tough one. -- can't thoroughly separate in terms of the margins because .ou get overhead fixed costs a fancy way of spreading your cost. so ia cyclicals analyst spent too much time on that. david: scope and scale. tobias: exactly. when dollar per unit is a fixed price. so you would have a 50% that becomes prophet. it is simple math. the other piece is the productivity question. that is a way bigger question. not because capital spending hasn't been there but it has been up for seven years in a row so it is necessarily -- but what it does seem to be is that we are measuring productivity wrong in the sense that the digital economy -- we're not getting widgets per man hour or

women-hour. i don't want to be sexist. are we giving people technological instruments where some of it is really good and can beive, some of it counterproductive? so on your smart phone, you have the ability to go into social media and see what your friend had for lunch today and play a game instead of working at her desk and maybe that is part of the equation as well. we don't want to say we can't ever respond to any mail from your friend, but on the other hand, you were detracting from the work hours that you should be doing. alix: yes, david,, on. [laughter] score inut his high candy crush is phenomenal. [laughter] alix: an interesting part of the market. it is not helping financials. help but nowmight it will be about the results. what you do into that result, which presumably could be the

last catalyst for banks? tobias: five things are driving banks. -- if you look at we'vei lending survey, it lending by six quarters and we're just about at the inflection point. so you will see this pick up in the second half. the return on capital tie to your question and the other factors are the regulatory environment. it will be lightheaded. we don't think we will see massive deregulation but deregulation is attractive, historically. so there are five different factors. i have no insight into the results. but i think banks in general have gotten far better in terms of capital structures and they do understand what regulators want, having worked for them over the last few years. what theyon't know say but i suspect we won't have that many failures.

dave cote why do you think it will -- david: why do think this will pick up? is it a timing issue? theas: if you look at lending standards for industrial by sixit always leads quarters. so i don't understand when the ceos of companies say think sometimes without looking at the history. my opinion doesn't matter because i can't force the outcome but if i understand the relationship over time than i understand what is likely to pay out -- likely to play out. i used to always debate when management says things in terms of issue. history counts. tobias levkovich, thank you so much for joining us. in washington, tech executives are heading to washington today as industry leaders -- tim cook

and jeff bezos are those expected to attend as trump's administration turns his attention to rein the government into the 21st century. joining us now is kris letang. thank you for being with us. good to have you here. explain this. we look at what the white house does for technology but a lot of technology like what can do for the white house? the federalused on government, technology. three purposes. first and foremost, how we improve digitally enabled citizen services to the people who rely on those services every day. secondly, we think there is an economic opportunity, over 10 years and cybersecurity is really making federal services cybersecurity. so it is internally focused with

a big agenda. david: we will take those up in term. everybody is for better services from the government. states, local and federal. but how doable is that? what experience have you seen that would tell you yes, that has worked there and we can do that. chris: we start with a problem and then the opportunity. if you look at the private sector and the quality of the service you get there and then look at the government sector, there is a significant difference. there's no reason let the government can't have the same quality in the private sector but how do we do that? they focusing on the things that the government should do and execute them really well. i'd we want to talk to the private sector about how they use techniques to do that. and secondly, i opening up data and apis to the private sector and letting them innovate on top of the government so introducing the private sector to the government and introduce innovations that we see on a

day-to-day basis here and the government. david: how much of the issue is trying to get the public sector performance up to the private? it is thef technology, not having access to the technology? as opposed to the incentives? because you could bring a powerful incentives to the workforce to get them to be responsive? : there are great people inside the government doing great things but we spend over 70% of our technology standard on legacy systems. we have 6000 databases. we have three or 4% of the government moving to the cloud. so these are problems that are solvable, and problems that big companies outside of the government have managed to solve over the last 5-10 years. so it is an organization issue and they control the right people are doing the right things. but it is as much a technology challenge as it is. what kind of capital

investment would be required? you cannot wave a magic wand. there is a fair round of investment in the cloud and in hardware and software. what kind of investment is required to pay off with that $1 trillion? chris: let's talk about where that would come from. it falls into three large pockets. a year already which is on legacy systems. huge economic opportunity in there. and that is not about how much we need to invest but spending the money more wisely. so that is a big area of opportunity. the second is the rest of the money that is spent on nonmandatory spending. if you apply private sector techniques to that in terms of shared services and aggregating that spin by using the power of the government -- we are the biggest buyer of everything we do buy in the country, there is huge economic opportunity in there. and third is fraud. so we spent billions of dollars

and there is the opportunity there which is huge. if you apply the private sector. so there is capital investment but a lot of it is just about spending the money we do spend more wisely and using private sector techniques inside the government. can you effectuate this fundamental change internally to the government? said, call a governor and switches over to one system that works, can you do this in the government or do you have to turn to outside consultants to do it? chris: it is not one size fits all. is the what we look for best ideas. and even companies that have moved to the cloud, it is a mixed environment there. they have public clouds and mix interests. so it will be a series of limitations.

we have broken this down into a logical part and we are having individual private sector ceos working inside each of these. down the going ecological path but it won't be one-size-fits-all. david: we both know that nothing works perfectly but let's say it does work vertically. when will it happen that we will see a concrete difference in the services, the way we get services from the government and in savings? are 10 to 20 years out of date and a lot of our technology. we will not surface in a day or a week. it is a multiyear effort. we do hope to see improvements on the citizen side quickly. we work with individual agencies and that we roll it out for the government and that we start saving money. it is a multiyear project. it is not a cyclical effect.

the hand you think by of the year, some people will see change in the services? chris: yes, the government provides thousands of services that we should be able to appoint individual ones and work on those. inside of this year. so yes, absolutely. but to literally get to the hundreds of thousands of services for the government does take time. some individuals will not be done, it will be one by one. l, thank you. alix: coming up next, we head back to the paris air show or we are joined by tom enders. we are live from new york and an interesting session is shaking up here -- is shaping up here. the s&p is above the record closing high although volume is light. the nasdaq is seeing better volume than normal. it in individual names, apple, facebook, microsoft.

a record high.ng in terms of sectors within the s&p, you're looking at tech and financials and materials. so it really is the cyclical with a risk on feel. this is bloomberg. ♪

ivid: this is bloomberg and am david westin. we head over to guy johnson in paris who is therefore the international paris show and he has a special guest. guy? guy: yes, i am joined by tom enders, ceo of airbus on home turf. good afternoon. the -- has had a fantastic run. you guys have been selling this airplane as fast as you can. the max 10launched today. will that slow down the sales report?

tom: i don't think so. 737 is competing -- the 321 is at least 10 passengers more and it flies 1000 not go miles further. it burns about 10% less fuel per feet. so that is a very competitive aircraft. guy: excellent. a big smile on your face. let's talk about the 380 plus. -- that improves fuel burn by around 4%? tom: that is correct. guy: what can you squeeze out of the engine to get it up to date 7% or 8% fuel efficiency? tom: we will see. we have constant improvements on the engine but now is the time to make a big improvement to the

aerodynamics. is up to 4% -- it is already most fuel-efficient aircraft but with , themprovements improvements in the cabin, the ability to seek an additional 80 passengers more, it is by far the most competitive widebodied aircraft. guy: is there anything more that you think you would feel to do? tom: plenty of ideas but that is something we discussed individually with the dealer. guy: re: getting close to the numbers that emirate will be looking for? we have to see. it is an ongoing discussion. this aircraft works beautifully for the emirates. hundreds --ill have the a3 80's that we delivered to emirates. the name of the game is to continuously improve the aircraft for our customers and

we are heavily engaged in that. do you think there is a 3:21 a.m. that will compete in the market? are you think that they will actually be able to take some interesting routes there? tom: they seem to have a problem in the middle of the market but we don't. we have to competitive -- we have two competitive aircraft there. from next year onwards, we do have the 330 neo, a competitive beast. it starts at 250 passenger seats. with a state-of-the-art engine. low cabin costs. we feel good about the middle of the market. do you think you see deferrals out of the gulf with what is happening on qatar? tom: we hope, like everybody in

the industry, that this is a temporary help over there. but i'm not going to speculate any deferrals or cancellations. it is a good discussion. guy: how do you manage the transition? it will be a tricky one. [laughter] obviously, john is 66 or 67. he will retire at some point. we have to allow that to happen. he has prepared over the last couple of years. very professionally. so i have no doubt that this transition, and it happens, will happen smoothly. let the ask you something that has been causing us to scratch our heads. events have the getting into the service business. we wonder if you are getting there because you think service

crafts will be flying longer because of low oil prices and as of which the cycle will start to roll over? and the way to keep your -- keep your margins up is by going into the service side? it is going to happen at some point. >> know, what is really driving it is like many in the industry and other industries, data is key. services that we are going to develop in the coming years will be data driven and you will see that, you see it at the air show with the stuff that we intend to do. i do see it as promising. more thee and data-driven services that we will go after. guy: are you expecting a soft brexit? tom: our interest has not changed. we want to see new areas coming up.

today, we are competitive. we want to keep it like that and we will see. i am optimistic, given the importance of the aeronautic industry. the importance of airbus in the u.k. -- i'm optimistic that we can hopefully get something that will address our concerns. guy: always a pleasure to see you. that was tom enders, ceo of airbus. you. great to see 25 minutes into the session here. here is where we stand. the dow was sitting at a record s&p. sitting about a closing record. the rally in europe continues. have a great day on behalf of david and myself. this is bloomberg. ♪

vonnie: it's 10:00 a.m. in new york, 3 p.m. in england and 10:00 p.m. in hong kong. a: welcome to bloomberg markets.

vonnie: here are the top stories frexit talks begin today. president trump will meet with advisers today. one of the executives at the meeting will be the amazon ceo jeff reseau's after striking a deal for whole foods. and what is the next big target? we will ask those questions in the next two hours. 30 minutes into the u.s. trading day, julie hyman gives us the latest. julie: risk is back on the