oil falls into a bear market while the world's largest producer puts a new man in line to take over. queen elizabeth's speech presents prime minister theresa may's plans for brexit. whether the pm can find the support she needs to deliver. and fourth time is a charm. chinese domestic shares in the index are important drive to president xi's drive to put china in the center of the world stage. i am particularly grateful to have scarlet fu by my skype -- side. >> and i cannot believe you have not set on -- been on the set point.r until this scarlet: oil is the score would -- story of the day, but let's start with u.s. future. slightly lower here, but bonds are one and higher, so we're , soing about lowered yields

expect sluggish growth. he said he wants to take that think about and rates. oil is currently unchanged. it has been bouncing around all morning long. yesterday falling to as low as $42.75 a barrel. it is entering a bear market, the 21% to its peak, and dollar coinciding somewhat with oil. that is holding your a one-month high, gaining as much as 1% over the past two weeks. let's get an update on what is making headlines outside the business world. we are checking in with them on first world news. has won theel special election for the house seat in georgia for the gop. she took 53% of the vote against democrats. democrats have hoped to capitalize on debt -- president trump's low approval rating. in london, the queen said the

government will try to maintain its subtle relationship with european allies. she outlined prime minister theresa may's legislative agenda in her annual speech department. queen carried on without her husband, prince philip. he was hospitalized for an election. in saudi arabia, mohammed ellen solman -- has replaced his cousin as heir to the throne. -- this is bloomberg. scarlet? scarlet: and we have some breaking news. bank of england's chief economist is now reaching toward joining the hawks on the monetary policy committee. -- boe isthe b.i. we

split when it comes to what to do next when it comes to interest rates. this is the cable pound-dollar , and this is a cross euro and the pound, the euro losing strength versus the andd. it is now off by .3%, the two-year yields are moving higher, so selling in the u.k. bond. david: so yesterday this indicated that they did not want to raise rates anytime soon. and we want to turn back to the saudi arabia kingdom. for more on the changes over there, we go to bloomberg managing editor tracy alloway, coming from us -- coming to us from the by. this is not a total shock, the deputy prom prince -- crown prince is being promoted? >> what has come as a surprise here is the timing. there has been a lot of crown princebout

mohammad bin salman's ambitions in the kingdom. he was the architect of the the0 -- 2030 vision for saudi economy, some of the investments he has made, a lot of people have speculated this is because he was harboring some ambition, some deep ambition when it comes to power in the kingdom. these people woke up in the morning and saw those ambitions appeared to have come to reality. david: is this a vote of confidence on the part of the king in the direction that mr. been solman has taken there -- been solman -- bin salman has taken their? i think it is difficult to read it as anything but a vote of confidence. remember, they are related, as well. the deputy crown prince is the king's son, and he has had to offer some concessions to other

rulers in the saudi regime. they actually change the law, saying that going forward, the king and the crown prince cannot be from the same branch of the royal family. it is ok this time around, but in future situations this kind of situation will not be able to happen. when it comes to actual reform efforts, remain -- they remain controversial on the ground in saudi arabia. we have seen some grumbling about this, saying the king is giving away his crown jewels at a sensitive time, and some grumbling about austerity in the kingdom. it is interesting to note that part of today's announcement came along with a separate announcement from the king, saying they were restoring some of the salaries and bonuses that had been cut for public-sector officials previously. scarlet: that is interesting how that comes the same time. i would like to ask about foreign policy, because the inwn prince has led the war

yemen against the run back troubles. what does that say about how the kingdom will position itself? > >> that is a really good question. the deputy crown prince has been aggressive not on just the domestic front, but on the foreign-policy front. this is one of the reasons people have a controversial take on him. he is deemed aggressive himtarily, and we have seen take a relatively hard line when it comes to iran recently, and also to catch our -- guitar -- qatar. what this means going forward, this will be an interesting question, but at the moment a lot of people are questioning whether some of those tensions are set to rise. scarlet: tracy alloway, joining us from dubai for an important perspective there. we spoke yesterday with goldman sachs is jeff curry, and curry said he is confident about worldwide demand for oil, despite the drop in price. at the demand

picture, globally it is ok. i will put a check box there. i'm not too worried about it. joining us now is the chairman and chief investment officer of government and lies are's -- government -- , welcome. advisors thank you for joining us. when we look at the drop in oil prices, it is moderated today, but what specifically has pushed --down to 42 dollars $.75 $42.75 and is it matters that there is so much negativity? > have seen traders give up the ghost on oil here. this is the lowest level in 2017 over the last two weeks, and we'll see a bailout on those positions going forward. money is flying out of the oral market and means oil prices go down. on the fundamental side, we have an absolute death march of u.s. oil producers who continue to it being cash

negative. everybody loses money at $40 oil. saudi arabia, nigeria, u.s. oil companies, everybody uses that loses money, and we still see increased amounts of reduction from most of the major oil companies here in the united states, and when they cannot drill a well, they put it into storage in a duct, which leaves on thef excess inventory market for when oil does rise. every time you see a push forward in oil, they will come into edge and see some of these -- ductsockeds come into play. that negativity has caused oil to sink pretty strongly. >> this has been a big shift in the oil market, but someone is already ready to come in. you have libya, nigeria, somebody on the fringes coming in. it is it all shale at this point? >> what has changed over the course and were think i've

gotten it wrong in terms of this particular oil bust, it is not like 97 -- 1997, it is not like 2000 seven. this wholesale reconstruction of the oil companies that we saw during the two previous busts, and a lot of these companies going bankrupt and out of business, and they do not. they have not been, at least until the money runs out, they will not. for now, yes. the oil there'll's are on the hands of the americans right now, and that means until some of these companies decide not to continue marching down the road, we will have a top on oil and will not see that constructive move forward is that we would have seen by now. scarlet: nevertheless, jeff curry says it does not bother him right now. i also think of the seasonality at play right here. this is the chart from the last four years, and things have changed a lot since opec has collapsed. , to seasonality even matter anymore yakov the whole idea that there will be increased demand before the summer driving season? >> we were talking and i -- in

the green room before we came on set. >> we had some great in conversations -- conversations. >> we talked about demand was rising. if you have a long-term rising trend for demand, all of this volatility in both directions -- you get shocks investor actions, -- in both directions, and we have a swing producer in the united states. arabia thatin saudi has an enemy on the other side of the persian gulf and the most potent weapon the saudi's have is a low, low oil price because that is how the shutdown iran or make it harder for iran and their military. to what extent should we blame janet yellen in the sense of there is not a shakeup because it is so cheap that until the money runs out it is not running out. >> the fed is talking about

using reserves and getting serious about it. number two, ima defender of the fed. i never saw janet yellen on an oil rig. drillst think the fed for oil, they drill for money. they stopped, the balance sheet has been frozen for four years, they published the first indication at how they would shrink excesses, and will do it sometime before the end of the year. i'm not shocking the markets. the pump is now in neutral. actually, it is the financing of the tragedy -- treasury and the deficit, which is the problem, in the next six months the fact that current uses rising all the time -- currency use is rising all the time, we could dip into a rental mode with doing nothing. david: coming up on friday, we will have special coverage about the one-year anniversary of the brexit vote.

live from new york and from london, this is bloomberg. ♪

♪ scarlet: just last hour, queen elizabeth addressed parliament outlining theresa may's agenda. this marks the start of a two-year parliamentary session. >> my government priority is to insecure -- secure the best possible deal of government leaves the european union -- as the country leave the european union.

[indiscernible] we want to build the widest possible content since -- consensus on the country's future. scarlet: joining us now is anna edwards. pretty consistent message from the prime minister and queen, the best possible deal. interesting is that there was less pageantry associated with their comments than usual. can you tell us why? pageantry is still considerable. but yes, less pageantry. she did not arrive in a horse-drawn carriage or wearing a crown, she wore her regular clothes, not the cave and crown she would normally be wearing. this ceremony was supposed to take place on monday, and now it is wednesday. we're doing it right now because of the hung parliament that and of course,

there is a somber mood in the country, so that makes it appropriate also. that is not the reason that was given by the parliamentary organization or the government when we heard about the arrangement. the queen herself was referencing recently the somber the in the country after tower fire and devastating attacks. did we learn for about the queen had to say on behalf of theresa may, and what did she not that? -- say? anna: that is important point that you make, that this is not the queens speech, but it is written by the government. it is the agenda for the next and, the next two years, what was left out with some of the more controversial domestic policies around social care and education that are proving very controversial in the election campaign. that theysuggested

are relative to expectations at least because of those parts. subparts along that domestic straight are left out because they need to get this to the vote next week. david? david: thanks, anna. still up next, david kotick of cumberland advisors, and deutsche bank head of european equity strategy. sebastian, we have just been talking about the queen and brexit. let's start with the side and moved to europe later. aboutoes brexit tell you investment in the u.k.? sebastian: there are three investment conclusions. the first is that there will still be pressure on the pound sterling, and that is a positive flow as opposed to the european equity market. secondly, we have a town-sterling weakness, so the

domestic we focused best of ethically -- domestically the monitor her brexit going on, it should keep micron's certainty -- macron's certainty elevated. scarlet: we recently broke the headline that it might be prudent to tighten policy in the second half. he has been pretty clear about how he wants to stay on watch to see how things play out. what is the best course of action for the bank of england? scarlet: i've -- david: i think they are and if you go. we're looking at the queen, the pageantry, and the culture, and i'm here thinking about that image, the u.k., what to do about monetary policy, and the public division in the monetary policy authority. that is something we do not see in the united states but we have, they just do not do it

public way. and something we see with european central bank, and also in japan. julie think this governmental disagreement and put it into that seems tog? be stirring the pot in the u.k.. scarlet: i want to show you this chart on the bloomberg terminal. it is the state of the u.k. economy as frexit negotiations have begun. -- brexit negotiations have begun. inflation has gone up and up and up, approaching 3%. wage growth is sluggish, and the bank of england -- this was the rate cut following the brexit referendum of last year. as you look at the state of the economy, do you position yourself in any way for u.k. stocks to make a recovery or is it something you want to sit out until he get more clarity from monetary policymakers and the ecb?

on whatn: it depends you are focusing on. if you look at the ftse 100, it has little to do with the u.k. economy, so that is not so relevant. the main driver is what is happening to the currency and focusing more broadly on what is happening to the cyclical sources, because it depends -- it tends to be a defensive index. so this is positive for the ftse 100, and independent of what is going on for the brexit economy. you look at the domestically focused for two to 50 which we 250 referencing -- ftse which we were referencing earlier, what we see as investment is holding up well, but there is a lot of downside pressure now on the consumption side, partly because real wages and wage growth is slowing, and we will be certainly cautious there. the received wisdom seems to be leery -- be leery about

the u.k. for all the reasons you described. the place tocks of go for all sorts of reasons. is that right or is it overdone? sebastian: that is the key debate at the moment, and it is a very strong consensus. we are all about the consensus, and that fallacy is that u.k. stocks have done tremendously well because it economically -- economic leaders have remained very strong globally. fairly consistent with 3% gdp growth in the area, and this is on trend with gdp growth of 1%. so we are at a peak point cyclically, and the question is can it get any better? we think no. this is overshot. this should put downward pressure on european equities. scarlet: thank you for joining us from london, and david kodak of tamerlan advisors -- david

kodak of cumberland advisors is sticking with us for the hour. up next, we discussed china and where we see opportunity and growth across the world. this is bloomberg. ♪

concern forlation a investors, not so much for the fed. how quick to proceed on future interest rate increases. seeng up next, do you inflation staying low for a long time? i want to see how investors see inflation, and this is a big even for the 2, 5, and 10 year, and notable of course is that decline and big drop in the last couple of days here as oil prices tumble. did the fed make a policy mistake when yellen stuck to her guns and said they are looking past the drop in oil and the slowdown or anything is transitory?

debatewe had a fierce about that on bloomberg. i watched it with both of you. they looked at financial conditions, they looked at excess reserves, ample liquidity, and think about some behavior is in financial markets in terms of pricing, and the raise gave them a shot to the rate on quarter-point, and when you have a free shot, you take the basketball to the central bank in the rule is the same. if they get another free shot this year, there will take it again, because they're trying to get to normal. but what they have not told us is what is normal. 500 million excess reserves, no excess reserves, rating it back, these are the things they have not said, and the reason is because they do not know. they have never been at a place

like this to try and take a balance sheet down. this is a new experiment. and it is gradual? david: safer, broadcasting it early, that seems to be what is in forming monetary policy. david: coming up, the msci announces its latest additions and subtractions. and news all around, from china, to saudi arabia, to argentina. that will be coming up next. this is bloomberg. ♪

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this is read all around, and the ftse is down by .6% by a similar margin. asia, you saw stocks pull back by .5%, even as chinese shared gain -- shares gained. and oil prices -- right now it does not look like oil is moving enteredut yesterday wti a bear market. if you look at the trend overall, oil has been down five times in the past six days. this is exacerbated by pumping from a and u.s. drilling. and the pound rallying, a racing the loss after the -- the racing erasing the loss.

boe a split on what to do when it comes to interest rates. the dollar slightly weaker yen, so i end, -- think even there. and what is making had one that headlines outside the business world. emma? emma: democrats had hoped to trump'sze on president low approval rating, but karen handel captured 53% of the vote for the republicans. she raised less money than her opponent in what was the most extensive house race in u.s. history. president trump's son-in-law is returning to israel for peace talks. jared kushner will speak with benjamin netanyahu and palestinian authorities as well. then yahoos government just broke ground from a new west bank settlement in decades, and a spokesman says that that project was undermining

russian's mission. in brussels, a spoiled terror attack at a train station was of moroccan origin. the country has been at its second-highest threat level since last year's, when terror attack killed 34 people at brussels airport and a subway station. i'm emma chandra, this is bloomberg. david? david: the msci late yesterday announced its decision on which the docs it -- which stocks it will add to its index, with the ceo specifically saying they want to make more chinese shares relatively available to new investors. >> the new inclusion is probably going to have a larger inclusion factor, 5% of the market capital , large capitalization stocks, and potentially as well the

inclusion of new caps. the second category is also that we are very focused, we want to expand the universe of shares that are available to international investors. is michaeling us now mckee. michael, it is clear is important to president sheesh and paying -- xi jinping. how important is this to the markets in the real world? >> not important, because he said is a small cap waiting in the overall index. the chinese shares will be worth about .7%, but over the long run it is significant because it does put pressure on the chinese markets to conform to international standards. just to get into the index, because as we were talking about earlier, they have been turned down three times previously, they had to open up the shanghai and hong kong connections, the shenzhen connects, so investors

could get money in and out. they had put restrictions on a number of day stocks -- days stocks could be suspended from trading, so this could lead to more international governance that over the long run, this will make the chinese market more accessible. david: he is a reform candidate, as it were. does this give him more clout within china to say see, we need to keep reform and movement going to get this agenda accomplished? >> well though, in the sense that people can say was it worth it? do we get that much out of it and do we want to open up what will matter? but it is his people in place, and he will continue these reforms. when msci turned them down, they did act because they do seem, regime, to forward your, and that i have done it with stocks. david: joining us now is jeff dennis from boston, and still ko is david co. stock --

stok. think this is tremendously important in the short-term, what it is important in the long term because it is basically saying in terms of the main stock index provider, around the world are they comfortable with the form that the chinese have put in place very smallllow a waiting of china, asia, into their international indices. so symbolically that is very important. once the shares come into the index with a full weight, which will possibly take seven years, this will last and take about 38% to 39%o -- a stake in the market. this is a symbolic first step but is very important in our view. scarlet: here is the thing. into emergingce

markets from these tiny companies are banks, manufacturers, and producers of raw materials. they are charging high debt and low growth. are these companies that investors actually want exposure to, or are they looking for spaces to buy? >> there are you said banks, and -- therein lies the question. are we introducing clients parents he -- transparency in reforming, in which case they have to make disclosures they would have never made before? it is not clear what will happen with that, because the banks that you really care about for the most part are really trading overseas.

that is one of the reasons you have such a big weight in the emerging markets and stocks, it's the overseas markets. and they have already had -- it is the smaller banks that are troubled perhaps, that they want to drive investment to or make available. we will see how that works out. >> i was going to say there is no formal requirement, as far as we understand, for a new whennce into an msci index it is already listed locally to change its reporting standards. michael has it right. listed on the abr new york stock exchange, you have to conform to a new york reporting standard for a while. is absolutely correct that the china shares that are in the msci index now are basically hong kong listed shares, which have gone through typically these international reporting requirements. there is no reason as to why these a shares, which will not listing, need to

follow these accounting standards. and following what we said, i think it is fascinating that the weight of the technology sector 70%.ese shares will be the weight of technology, for example, in the existing msci china index, the a shares listed in hong kong are about 30%. a littler makes this more old economy style and there is a big difference. >> as we said, the lead story was no doubt china, but there is also respect to saudi arabia and argentina. what happened with saudi arabia first, and then argentina? >> they have eased up some of the controls on foreign investors investing in the market. this was late last year, and they have improved their settlement and made it clearer that -- on some of the settlement rose. so now they are in a

consultation process to become an emerging market down the road. so in june 2018, this is very interesting. becometually saudi does an emerging market as defined by msci, it will offset some of the increasing waste that is going , becausehina and asia saudi would be a very big market. it is the first step on this road. we do not know how long it will be before they do anything, but this is the first step on the road. with argentina, this is a giant surprise. what he thought they would not thoughtin -- nobody they would not go back in, and what the msci is saying is that you have made good progress, but we need to know that these innges are going to be put place long enough to be "deemed your reversible." -- irreversible." scarlet: and i have a chart that

highlight that exactly to your point. the benchmark index here on the bottom panel in blue, going up, up, and up, and investors pouring money into argentina stocks on the backs of that conclusion. looking for argentinian stocks to be added to msci, we also saw a government -- the government issued the 100 year bond and it got quite the reception. the timing seemed to be fervid that's perfect because of the -- perfect because of the spread. >> this has a history of six defaults in the last 100 years. scarlet: short memory. >> that is where we are. we were in argentina in march and had another msci meeting for next march, and we have watched that government change. are renegotiated the debt, back in the debt markets, and now they have a new economic advisor.

very smart, very well-trained, and they are trying to take a battleship of all the predecessors and realign argentina, and i wish them success because argentina has tremendous potential and very good trout fishing. [laughter] >> we will have to check that out. to thewhen it comes argentina hundred your bond, what is that tell us about argentina and what is that tell us about the liquidity in terms of low yields in places like in europe when it comes to bonds? >> i'm not a bond guy but i think it is a bit of both, actually. like you said, six defaults in the last century makes you little concerned about a hundred your bond -- 100 your bond -- year bond, but it shows how strong bond markets are in the world of being, and i think the point here is that there is a

bit of an odd juxtaposition the between a sellout bond and the msci, but i think they have enormous potential in terms of education levels, business culture, natural resources, the sheer size of the country. it is a tremendously rocky road over the past century. armor argentina in the early to mid-1990's, it was where everybody wanted to be. i am disappointed in the msci decision and we think it is a major surprise. and reading the past out of argentina that brings this to the people and their election coming up this year and next year for the president, and that is what worries msci. they want to make sure this continues. scarlet: a small setback but we will see how that plays out.

thank you all for your time. coming up next, the chairman of standard chartered bank will be joining us. -- heels ofhe she shouldn't paying -- xi jin ping bolton road initiative.

>> coming up, portugal's economy minister. that is at 4:30 p.m. eastern time. ♪ >> now to your bloomberg business flash. the ceo of uber is stepping down under pressure from investors. travis kalanick, the cofounder of one of the world largest

technology assets has been rocked by a series of scandals. the company's investigation reveals deep problems. this reflects the potential that the giant has made to handle e-commerce deliveries. and president trump's net worth has slipped. according to the bullpen or -- bloomberg leaders impact, the presidents net worth has fallen -- 22 $.9 billion -- to $2.9 billion. news did notig happen from washington come but from georgia. this was the most expensive house election in history. what happened? we were awaiting waiting with bated breath, kevin. >> the president has george on his mind, because -- i know, it

was kind of cheesy. the republicans won in george's district six -- georgia's district six. they poured more than $50 million into the democratic side, most expensive election in history. newt gingrich won the seat down there as well. i want to pull up what the special counselor to the president donald trump, kellyanne conway, what she tweeted earlier following result. let's pull up that tweet, if we have it. she tweeted "thanks to everyone -- breathlessly and starkly arkilyitaly -- sn #ga06 as a referendum

for donald trump." >> the democrats really did set themselves up for this i really -- by really emphasizing this, and they got together with republicans on health care, tax cuts, security, instruction does not work. -- obstruction does not work. thee also need to focus on fact that jeff foss lofted not even win in the district, so he did notry -- osslof even win in the district. we could see a new blueprint in the next couple of days, but again there is that division of why this has been done with the health care bill behind closed doors. grassroots movements are skeptical and so are some establishment members, raising concerns about why this has been

brokered behind closed doors. scarlet: and that is something democrats are trying to draw attention to. at the same time, the senate intelligence committee will be holding hearings later today. who is on the docket for that? >> you have dan coats, who will somestifying as well as top intelligence officials scheduled for this week in the house and senate. knots -- not much speculation in terms of what we were going to withike we did last week coming testifying, but democrats will be continuously hammering away on were there any undisclosed meetings, and whether or not people like rod shouldein as well as -- have to recuse themselves from these investigations. the back-and-forth between the presidents legal teen -- team and the office, the president going back and forth saying he was under investigation and he was not, now they are looking at more twitter characters because

they are alluding to a washington post story -- it is almost hard to keep track of all the different excuses. scarlet: our thanks to kevin cirilli, our chief washington correspondent near the white house. have somentime, we breaking headlines. iran says opec may decide to make further oil output cuts, and that is having an effect on oil prices. so far, we got a bit of a pop there, moving up .2% in the last hour or so, but they have been getting hit hard. david: and if you are fortunate enough to have a bloomberg terminal, check out tv . you can look at our charts, and send usaphics, messages. go to tv on your bloomberg. this is bloomberg. ♪

♪ scarlet: this is bloomberg:

daybreak, i'm scarlet fu. after a torrent of scandals, investor outrage, and pressure to step aside, uber's ceo has resigned from his job as the hailingthe right unicorn. he says "at this difficult moment in my personal light, i have accepted the investors request to step aside so bloomberg -- uber can continue building rather than putting up a fight -- be distracted with another fight." matt, obviously a self-inflicted wound is the best way to put it, and pressure from investors, including fidelity and benchmark thelly give travis kalanick push that he needs. how does uber stand up financially? revenue is still growing and the company is losing money but not as much as it once was. >> the arrows tends to be moving

in the right direction, although it remains far larger than its main competitor, left. it has seen loss of growth outside the united states, particularly in asia. there are narrowing losses in revenue, it is up smartly. while there has been an enormous amount of turmoil here, it does not seem to be having a huge effect so far. scarlet: i am glad you bring up lyft, because it does seem like there is an opportunity here for them and other ridesharing companies. what can a makeup in this time of -- they make up in this time of turmoil for uber? >> that is something they will be wondering about. aft has been trying to have image of being a friendlier company, less, perhaps, controversial among the driver community that uber has been, but this is a business where

there is a network effect. people using uber because they know uber. it is like xerox at this point, and this might not be the parent -- be apparent to those outside of the united states, lyft does not operate outside of the united states. so that international market is a game that lift is not playing right now. david: so you take him out of the equation, how much damage does that do? we have seen other tech companies grow up, lose their leader, and lose their way. >> there is a big question of is the leader who created the startup, who builds the culture, creates something from nothing always the right we are to take a company forward once it has reached a certain level of maturity? this is something that many, many big tech companies have gone through over the years with

varying degrees of success. i think apart of birth hardcharging culture is the idea fast andng -- moving breaking things, to borrow a phrase from facebook. and maintaining that aggression will also running a bit more , professional company. david: this is really remarkable the extent this is coming from. scarlet: but now they can take a breath and regroup. coming up next, the standard chartered bank chairman will be with us right here on bloomberg. ♪

david: crude reality. oil falls into a bear market

while the world's largest producer puts a new man in line to take over the saudi kingdom. the queen's speech. queen elizabeth ii presented the plans for brexit even as people cantioned whether the pm find the support she needs to deliver. the road to resignation. ceo travisma, uber kalanick quits the code giant he founded. i am david westin. jonathan ferro is off we are fortunate to have scarlet with us today. welcome. scarlet: it has been a pleasure. the time has been flying by. david: you make it easy. scarlet: so to you. let's get a market check. u.s. stock futures are lower. falling inetty much tandem with global equities. the european stocks are down, asian stocks are down. trend. a we have seen a turnaround in bonds. yields are kicking higher. the 10 year yield is moving up

earlier announced nonsense around. something to keep an eye on. oil prices are up after headlines from iran that opec may decide to make further output cuts on the heels of oil entering out there. atling to 42.751 and look wci. the dollar losing some grounds, we have seen some recent gains over the last few days that coincided with the drop in oil prices but overall, the dollar is holding near the one-month high even with today's decline. let's get you an update on what is making headlines outside markets. emma chandra is here. >> republican karen handel has won a special election for a house seat in georgia, retaining the seat for the gop. she took 53% of the vote against .he democrat, john ossoff the democrats had hoped to capitalize on president trump low approval rating. for the next two years, brexit will dominate you can prime

minister theresa may's agenda. the queen outlining her legislative priorities in an annual speech to parliament. the government plans eight new laws to ease the withdrawal. in brussels, suspects in a foiled terror attack of moroccan origin. officers shot a man after he detonated a minor explosive. the country is at its second-highest threat level since last year when terrorist attacks killed 32 people. 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. trump'sver since donald election in november, the democrats have been hoping to be taking seats back in elections and they had another opportunity last night in georgia. here to report on how things went is bloomberg senior executive enter for -- editor for international government. how did it go? >> well, the republicans came

through, not tremendously surprising. there was a big help among democrats that they might be wrest that seat in georgia but they failed to do so. it shows the perils of making the assumption that from some popularity will translate into local races. david: so he either that he had a sense of victory last night, kellyanne conway tweeting about it. there is a third rent of government in the judiciary. what about the fight about the travel ban in the supreme court? >> the political narrative could change dramatically starting tomorrow, we think. the supreme court may issue its rulings on the travel ban. there are two severed rulings, one on reinstating the band and the other on hearing an appeal so we are getting geared up for that tomorrow afternoon. it could change everything. it is going to be fascinating with neil gorsuch on the court and what they decide.

david: a potential setback for the president or a victory for the president. >> that is right. also tomorrow, we have the republican health care proposal. it is supposed to be released by mitch mcconnell. so that could have an impact on the political narrative. david: and if all that were not enough, we also have the situation with north korea and china, the tragic situation of the 20-year-old university of virginia student who came back and died. president trump tweeted about china's relationship with north korea. he said "while i appreciate the efforts to help with north korea it has not worked out. at least i know china tried." how difficult is this for the president? >> it is extraordinarily difficult. this is not just a problem donald trump has had. the last four administrations have all tried to figure out what to do about north korea. military options could be catastrophic so the only thing

left, probably, for donald trump do is turn the screws on chinese entities that are still supporting north korea. this tweet might signal that kind of escalation of pressure on the chinese. we will just have to wait and see. david: we will, indeed. thank you so much to our colleague in washington. u.s. relations with china are central to the help of the global economy and standard chartered bank has had an integral role going awfully back to its founding in the mid-19th century. is the chairman. good to have you here. >> think you very much. david: you have a long history in asia, specifically with china. wheres your stance of things are with china and the chinese economy and its role in the global economy. >> i think china's economy is doing well. recently, the forecast for chinese growth had been upgraded to a bit higher than the 6.5%

and i think this is good. china is managing to rebalance its economy in terms of consumption investment, etc.. in a way that is leading to more sustainable growth. growth rates are lower than they used to be a few years ago. do is now needs to make sure that it continues to rebalance economically and develop financially while safeguarding financial stability. i think that is critical for china and the rest of the world. i think china is going to continue to be a very important part of the world economy and that it can continue. scarlet: safeguard financial stability. i want to pick up on that because the government is also on this you leveraging campaign, removing excess leverage and liquidity in the financial system. it has caused rocking us and people and institutions are adjusting.

how does this play out? certainly, if it starts to hurt growth, that is going to be a concern and there will be questions or how committed china is. >> it is important that china continues to rebalance the policy. so there is a little bit less of monetary stimulus and a little bit more fiscal stimulus. so that rebalancing, i think, is healthy. but of course, china needs to continue raining in the growth of credit because the leverage in china is very high. the corporate leverage is very high. it needs to be managed. i think the situation is manageable but it does not manage well and it is not easy. skeptics point to two numbers. david: those are the growth and credit rate and the growth of gdp, saying the growth and credit is outstripping, by a good margin, the growth. they are buying growth through borrowing. until they turn that around, are

we going to be confident in china's economy? >> that is an issue every country which has had growth has faced. they have had some issues in the future. so this is why it is very important first that the chinese recognized there is an issue. that is the major difference with other national experiences where authorities have not recognized that. here, they recognize it and they are taking measures to deal with that. david: we focus in china because of the effect it has on the global economy. if it is growing the economy is doing well and if not, it is not. xie big issue for president is expanding throughout asia, infrastructure investments, things like that. they had a big summit just recently on that. what is standard chartered's role in that. are you participating? >> we are. i was president at the time in beijing if you weeks ago.

i think it is an initiative for the world. it is perhaps one of the most ambitious initiatives of the global level that can continue to enhance globalization. we are talking about an initiative which is involving nearly 60% of global population. you look at the 65 plus countries and more. it is an initiative which is accounting for 30% of gdp. this is major. we are very much interested in that initiative because it so happens that standard chartered is about brought expressions. 45 out of the 625 plus countries are countries where we have a presence. we have been there for years. we understand local markets. our knowledge of the local markets and our knowledge of china can be very important for betweenbusiness flow china and the other countries. that they build

conductivity to trade infrastructure that it takes to achieve, i think that would be a win-win for china. scarlet: i like that you say an important role in helping business flow. how much of a role to you think beijing will allow foreign companies to play in this initiative? should give companies an opportunity to capitalize on it as well? >> i think so and i think it is the road isnt that not only participated by public sector companies. you also need the private sector. the private sector, in addition to supplying a lot of goods and services which are first quality, think for example london. the city of london has lots of accountants and lawyers that can provide a lot of good advice on that. you also have international banks like us which can provide knowledge of the local market and china's market to make projects investable.

to make projects have risks that are specifically designed so they can have the results that are needed. so i think that you need private sector involvement in addition to public sector. not just for the financing but also, more importantly, in supplying the expertise and the knowledge of local markets which is needed for this project contribution to growth. david: chairman of the standard chartered bank, thank you for being with us today. coming up on friday, special coverage marking the year since the brexit vote. andd owen of jefferies james jefferies of aberdeen. live in london, this is bloomberg. ♪

>> this is bloomberg daybreak. i am emma chandra with your business flash. over ceo travis kalanick has resigned. he founded the world's largest technology startup. he is getting into investors wishes that he step aside. he will stay on the board. he has been rocked by a series of scandals including allegations of sexual harassment. toshiba has taken a preferred visit by its memory chip units. it is led by bank capital and a number of japanese investors. they are willing to pay $19 billion for it. toshiba is trying to raise money to make up for losses in its nuclear business. a big shakeup in saudi arabia. the son of the king, crown prince, has replaced his heir to the throne. the move consolidates the prince's power.

he already controls saudi arabia's defense, auto, and economic policies. that is your business flash. moreet: here to discuss about the saudi shakeup and oil outlook is kirk hartman. he is wells fargo asset management's global cio and on the phone with us is raymond james's senior vice president. the saudiget to story, i want to get your take on oil prices because they have come back a little bit after yesterday, entering a bear market, iran saying opec may further oil output cuts. that could be a factor and investors are looking ahead to inventory data later. -- are absolutely pivotal.

that the data is only encompassing 1/5 of the total picture. a lot of people don't fully get this point. it is not enough to just look in isolation at the u.s. because there is an import/export dynamic that could cloud the numbers. what our team focuses on is the global inventory picture which admittedly, we did not have real-time data on but it is important to focus on that and to model it properly rather than exclusively fixate on the u.s. scarlet: let me bring in kirk hartman, a wells fargo. as we talk about the chain -- the change in the leadership the the promotion of him as crown prince, does that give you pause in terms of thinking how saudi arabia may change its oil policy and how it is positioned within opec?

it is an interesting development. it means a harder line in terms of geopolitics. >> i expect the oil policies would continue. my mind, it speaks of continuity rather than change, meaning i don't think that the saudi role in the world will change. they will continue to be strong in terms of opec. david: who is controlling oil prices now? is it the new crown prince now? is it the shale guys out west? or is it the oil traders? how much of this is simply positioning as opposed to fundamentals? >> a lot of what we saw in the last month, it seems to be very technically and sentiment driven. let's go back to the opec decision three weeks ago which was to extend the production cut for an at the nine months. that's an extra nine months. there was nothing remotely needed for oil prices and yet that very day, prices tanked 5%. buy her overle of

seller in yields, that is a trading dynamic, not a fundamental dynamic. globalht now, given the fundamentals, which are maybe not great but generally quite good and getting better, and you compare that to oil at a seven-month low, there is a disconnect between fundamentals from the sentiment and sentiment, in our view has gotten way too bearish. david: when you go back to that decision to extend the opec agreement, wasn't it bearish that they had to make the decision at all? they thought they were going to be rebalance by that point. the fact that they have to extend it further, doesn't that say we are kicking the can back down the road? >> six months was never going to fix the problem which took many years to build up. that.ave acknowledged nine months of additional cuts. at a million barrels a day, nine

months of additional cuts, 270 million barrels of oil taken out of the system. there was nothing negative about that decision from a fundamental standpoint. let's not forget that people always focus on shale. 5% of the world's oil supply gets 95% of the attention. that is not healthy. don't forget about the countries where production is still shrinking, even now. china, mexico, colombia, argentina, venezuela. that is a lot that you have to counterbalance. we cannot look at it in isolation. scarlet: you mentioned positioning. i have a chart here, and how long positions on oil are coming in quite a bit. the bottom panel here is oil prices and that has just gone down over the last couple of days. when you look at oil prices and you look at positioning and you look at the things that are driving oil prices down, what would change the narrative?

>> what would change the narrative would be the continued growth in the world economy. you look at china and one of the outliers is what happens in china. it is one of the largest consumers in power. if china continues to surge and the u.s. continues to be strong, it will stimulate demand and worldwide demand is going to continue to drive prices. >> but that is not going to change in the next week. >> know, but i don't think you can look at prices day-to-day or week to week. it would seem to me, right now, to be a find opportunity. that's a fine opportunity. this is a technically driven market. but what is going to drive this is not only the supply side but the demand side. david: thank you so much for joining us over the telephone. kirk hartman will be staying here with us in new york. coming up, the winners and losers from brexit with manuel calderia cabral, portugal's economy minister. live from new york, this is bloomberg.

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>> my government's priority is to secure the best possible deal as it leaves the european union. my ministers are committed to , ising with parliament this, and others to build the widest possible consensus on the country's future outside the european union. scarlet: that was queen elizabeth addressing the u.k. parliament in the house of lords, outlining prime minister theresa may's agenda. possible deal, her speak at the start of a two-year parliamentary session. still with us is kirk hartman. when you consider brexit and the process for negotiating something decent, we don't know if theresa may will stay as prime minister. but you actually believe the odds of a decent package have now improved for the u.k. talk us through why. >> the election sent a message to theresa may that the folks in

the u.k. want a more moderate brexit. so i think you will see the u.k. in terms of the negotiations, as difficult as they are, probably be more moderate in terms of the demands. i think it will be a soft landing brexit. how can you disagree with the queen? i think they will try to get the best deal they can. but it is not going to be easy. scarlet: we also have seen, unfortunately, how there has been a recent spate of terrorist attacks and it has become the accepted reality in the united kingdom. it almost feels routine after a while, not only for the people in the country, but to see headlines of these incidents. will these repeated acts of violence start to wear down on the markets or is it something investors can continue to look past? >> it is obviously a very tragic series of events but i think investors will look past them. unfortunately, today, these things seem commonplace but certainly, for the people involved, it is very difficult.

what are the consequences of no deal? >> no deal would be very difficult for the u.k.. tag thatbout the price the ecb is going to put on the u.k. it will be interesting to see how that happens. the other thing we worry about is things like passporting, meaning if you have a mutual fund or a product that is registered in the european union , you can sell it in any of your jurisdictions. i think those kinds of things are very important in terms of trade. david: that is a one-time payment as opposed to every year . couldn't they buy their way out of this? make an investment, pay money and we can get traded? >> that is a good argument but whatever the number is, it is a lot of money. i am not sure the voters of the u.k. appreciated that so it will be interesting to see how that plays out. david: if anything, it would be the reverse.

>> i think it is going to be a difficult process. it is not simple to back out of a treaty like this. scarlet: so how do you express this view on the u.k.? >> you expect the pound weaken a bit. that is good for the u.k. exporters so i think you would play that. but overall, you have to be cautious in my mind about growth in the u.k. economy because it is going to be muted and in my view, somewhat less than it would have been if they had stayed. david: kirk hartman will be staying with us. coming up, crude tumbled into a bear market on supplies. we will take you to the energy selloff and discuss energy investments with robert thummel. this is bloomberg. ♪

>> this is bloomberg daybreak. i am scarlet fu alongside david westin. u.s. futures have come back quite a bit and repaired losses. still not positive but a recovery from earlier in the

session. as you look at global markets, there is the ftse and the dax, down by a quarter of 1%. asian stocks close down even after the msci added chinese shares to its emerging market index. we can't ignore oil. the story of the week. it went down but has turnaround as one indicated opec may extend production cuts. another turnaround has been the british pound after the bank of england chief economist said the risks of leaving policy tightening too late are rising. and he did consider voting for a rate increase this month. there is the 10 year yield, moving up i two basis points to 2.17%. we will monitor that along with rod kaplan as we consider interest rates. let's get headlines outside the markets in the news world. emma chandra is here. >> it is a setback for democrats who had hoped to capitalize on president trump's low approval

rating. republican karen handel has won the special election for the house seat in georgia. she captured only 53% of the vote against the democrat. she raised less money than her opponent in what was the most extensive house race in u.s. history. president trump's son-in-law is returning to israel for peace talks. jared kushner will speak with prime minister benjamin netanyahu. both leaders say they are eager to revive talks but netanyahu's government broke ground on the first new west bank settlement in decades. a spokesman says that project would undermine kushner's vision. in france, two more members of president emmanuel macron stagnant best have quit in the face of ethics investigation. are members of the party who is caught up in an investigation over expense allowance. other cabinet members resigned earlier this week. 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: the big political news overnight cannot of georgia, where they held the most extensive congressional election in history. president trump wasted no time letting his views be known, tweeting "the special elections are over and those that want to make america great again are five and zero. all the fake news in the money spent equals zero." you're to take us through what this means is kevin cirilli. 5-0 as the president scores it. tell us what the consequences are. >> i don't know. publicans touted victory today saying all the democrat efforts to make this a bellwether for midterms and failed. this was the most extensive congressional race in history, more than $50 million on both sides being spent. republicans have held this seat for quite some time. tom price is now the president's dhs secretary. this is also the land of newt gingrich.

but jon ossoff, who didn't really reside in the district he was running for. they are making this case that it was tighter than folks had anticipated but there is no question they would have liked to have one. david: does this make a difference in terms of the clout , the clout the president wields in washington? we have health care. i want to place -- to play something that we should expect a draft of the health bill tomorrow. >> i expect a discussion draft on thursday and we will go to the bill once we get a cbo score. >> so is that a victory for the republicans in georgia, more likely than the discussions? >> i do think that the republicans are facing increased pressure to have something, put something forward to have something to discuss, to have something to debate. it is not just conservatives who are pressing for the small group

of senators, republican lawmakers to put something out there. it is also moderates like lisa murkowski. they are frustrated they haven't seen anything and that they could potentially have to make a decisive vote in a very short period of time. and their political fate is hanging in the balance simple because this could have huge impacts on the midterm elections and whether or not republicans keep control of the senate and the house. david: we always want to get your scorecard from washington. joining us now is shawn golhar. kirk hartman of wells fargo is still with us. let's start with sean. let's start with health care. it is a substantial portion of the gdp in this country. 70%. but also, legislatively, it could be blocking things like tax reform. where is health care? >> i think there's a draft is going to be important. the secret draft was seeing a lot of politicians talking about

it and i think george's election helps in that moderates who were worried about supporting the agenda might feel more comfortable seeing this election in georgia payout but still, the mechanics in the senate is they need 51 votes to get it done and they had 52 republicans. if they lose two votes, they get the vice president to break the tie under reconciliation. it is a tight measure. even if they pass this by july 4, it goes back to the house to reconcile the differences between the bill before they can actually get the president to sign. david: will the senate version look anything like the house version? around,ber the first go when they tried to repeal obamacare, a lot of members went back to their home constituencies and got yelled at. this is something constituents care about. >> and i think it is going to be challenging how they reconcile those differences. there is obviously different versions in the senate so people talk about planned parenthood and medicare expansion and just

getting rid of the aca related taxes is the goal of the house republicans, get rid of those taxes and make tax reform easier. but how do you provide care for those pre-existing conditions? scarlet: kirk hartman, let's bring you into this conversation, cio of wells fargo asset management. how much are you waiting for a movement on health care to take a position on health care companies? >> health care has been a very strong performing sector this year. our institute called it right. we are up 11% in health care index and that is the second-best index versus technology. i think health care will continue to do well. it is very predicated on what comes out of the bill. there is anticipation that there will be some kind of measure that it will be more republican oriented, meaning that companies will have more pricing power which is one of the reasons the health care stocks are doing well. scarlet: you've got the repeal and replace obamacare effort along with the tax reform but perhaps more pressing and more immediate is the debt ceiling.

we will come up against that this fall. how do you see this playing out with treasuries where they are? >> one of the big issues that people are not paying attention to is the debt ceiling is coming up sooner than people think. we are hitting the limit. the administration has signaled they want to stimulate jobs, push the economy and they are pushing congress to say that congress passed the bill and they should raise the debt ceiling. i think you will see more supply in the market. actuallyy, this is driving yields down at the long end of the treasury curve because a lot of people are hedging their bets. you have strong equity markets but on the other side, they say, i am going to buy the safe haven assets on a meeting u.s. treasury's. david: so yesterday, steve mnuchin talked to bloomberg and he basically almost dismissed the debt ceiling issue. he just said we will get this done, no issue. mick mulvaney has a different view.

is this one of those brinkmanship things we see before where it all must chest on the government or will it just pass away? >> for years, this has been an issue member of congress can use to drive a wedge to the white house and try to extract confessions. try to get policy to the vote before the august recess, clear the agenda to take this off the plate post-august on, getting the spending bill passed and the fiscal year 18 budget and then move on to tax reform. i do think some members of the gop and democrats will try to extract confessions from the white house. it is hard to get a clean that limit. -- clean debt limit. david: we talk about health care and tax reform and the debt ceiling but we don't talk about the 2018 budget. i understand you explained it to us, you have to get something done in that budget to move forward on any of the other things. >> you have the budget reconciliation measure that you will use with legislative vehicles to pass health care reform in this current fiscal year. you adopt your budget, it is a

long process and the president signs the appropriation bills and then uses reconciliation in fiscal year 2018 to do tax reform. it has always been a sequencing issue. investors have a little and they didn't fully understand the issue at first but now is deathly out there. scarlet: do you agree with that? it needs to be dissected further? >> this is all tied together. >>i don't think investors are focusing on the debt ceiling and the budget process and those are extremely important. what is interesting is, to your point is that the health care reform is critical to getting a budget passed because we really need to reduce our spending and one of the key ways you can reduce spending on the government side is to get health care reform so in my mind it would be interesting to see if that happens. david: but it almost sounds like you can't get there from here. it sounds so complicated. are investors saying, i'm not going to count on anything out of washington that is good, i will worry about the economy and

businesses and things like that? >> i think they think the debt ceiling is going to be raised. there is so much liquidity as a result of central banks around the world. i think folks believe that as long as markets continue to do well. >> our thanks to shawn golhar of barclays and kirk hartman wells fargo. thank you. coming up next, manuel calderia cabral, portugal's economy minister will join us to get his take on that country's prospects especially with tourism and exports doing better. from new york, this is bloomberg. ♪

>> this is bloomberg daybreak. i am emma chandra. today, anlater

interview with mexico's finance minister who is at 4:00 p.m. eastern time. david: this is bloomberg. i am david westin. portugal's economic recovery picked up in the first part of 2000year pointing towards 17 maybe being the country's strongest growth year for two decades. the bank also just raised its economic growth outlook for this year to 2.5% from 1.8%. although it expects a slowdown later on. joining us now is manuel calderia cabral, he is portugal's economy minister. thank you for being here. >> good morning. david: tell us about portugal because it is a growth story. it is growing faster than much of europe. what is driving that? manuel calderia cabral the drivers of the growth our investment and exports. >> have accelerated and they are growing at 60%.

and they are growing in a diversified set of sectors, machinery, automobiles, and food services in soft sectors like tourism having good moments as well. david: so it is driven by exports and tourism. is that within the work is economy or do you see domestic consumption taking over. >> it is a balanced growth. growing butmand is more on investment. it is a solid base for continued growth. also, it is having a very good moment and it is showing that the economy, after the adjustment process that we have, is competitive not just in one sector but competitive in a range of sectors that go from

technology to traditional sectors that are recovering as well. and sectors of the new technology, which are booming in portugal with all of the enthusiasm that startups started towards 10 years ago. they are now growing and assimilating and creating more jobs and growing in the global markets. consumer is the somewhat restrained, not contribute as much as he or she could. what is holding them back? minister cabral: what is holding the consumers back was confidence. the austerity program in portugal and in europe lead consumers to have less confidence. but what we have in the last year was an improvement in confidence with a moderate inclusion consumption. i think we are happy to see consumption growing. because growing works in investment and especially

growing much less than exports. that we are managing to accelerate the economy while gaining a more balanced budget and also increasing the external position of the country that is already positive. but it will increase last year. scarlet: if confidence is critical we are also talking about fixing the banks, the lot -- the nonperforming loans. do you think there is collusion to this or will there have to be a portuguese collusion of some kind? minister cabral: we need a portuguese solution, french solution and italian solution but at the same time, we need some guidelines, european guidelines to help. what we have done in the last year was to capitalize all portuguese banks. the public banks were capitalized using public money and with donations from the european union. all the other major private banks were capitalized with foreign direct investment which

means the groups believe in their confidence in these banks and that confidence that the banking system is going to grow again in portugal. but at the same time, they made the banks stronger so i think we are starting this year in a much better situation and i think other countries in europe will follow. i think the european union should pay more attention to this problem. >> within the european union you have us>> -- you have an unusual situation with monetary policy set at the ecb level across europe. we look at the ecb every month, and we look at mario draghi about whether they might start tapering. how much would that affect the portuguese economy when and if they taper? minister cabral: i think it would affect the portuguese economy as it would affect all other european economies. once we are not seeing signs of increased inflation that would

justify the tightening of the monetary policy, what we are seeing is unemployment in europe is still quite high in several countries. so i don't think it is time to time the monetary policy and it is not time to do a strong expansion fiscal policy. but i think in europe, to unleash the austerity, it is a good time and gives more confidence to investors. and also, as you were saying, it is important to give space to create a recovery. we are seeing very positive signs of that already happening in portugal. so we are leaving as the recovery rose. but think we will see a recovery in europe which is going to be positive for portugal. scarlet: if the germans have their way, the ecb will start to make some concessions or at least some conversation with regard to tapering.

how are you adjusting for that? are you making adjustments to your funding plans in advance? minister cabral: i think we are no more prepared for that. what we are doing is reducing the investments of the public. we've already done a very important deleveraging on the private sector that decreased 40 points of the gdp in the last 2.5 years. lessans our firms now are invested and are investing more than we ever have to allow them to invest more on equity and foreign investments. very much in the u.s. from investors, to find these opportunities. and they see that now it is the moment because the economy is recovering. but some of the assets are still undervalued so there is a lot of very interesting opportunities. it is the way we see it. more equities investments, more

finance by equity and less by depth. and then you have the adjustment that allows us to grow, that allows us to reach the exposure as well. david: and finally, you started the discussion talking about exports. what are the exports for great -- to great britain? to what extent will brexit affect the economy? what we minister cabral: have seen until now is that the exports are growing quite well in european markets and they tourism.to the u.k. in u.k. tourists still come to portugal. the third safest country in the world. i think what tourism from recent scenes in portugal is a steady country but it is also a steady country with a lot of culture and the policy of life -- a good quality of life. david: it is a wonderful country but the question is, can they get there under brexit?

how concerned are you is there will be a distraction -- a disruption? >> i don't think there is going to be visas for the british to come to portugal. that is not on the table. i suggest we get good arrangements for brexit and this is where everybody is working. but what i still see is a lot of confidence from the british about exchange investing and also visiting and leaving in portugal. but we have seen a lot of investors moving from written to the continent and some in portugal choose the same hours in the same timeline and a lot of people speak english. >> lisbon has certainly benefited from that. our thanks, manuel calderia cabral. if you have a bloomberg terminal, check out tv where you can watch is online. here is jeff dennis from the last hour, talking about the decision not to upgrade

argentina to emerging markets. we've got charts on the site here and an interactive chart as well. you can pull one up. this is g #metv 233 from earlier. david: you are a wizard. no question about it. scarlet: go to tv on your bloomberg. from new york, this is bloomberg.

>> this is bloomberg daybreak. i am scarlet fu. losing out to lift after a torrent of self-inflicted scandals, investor outrage and pressure, uber ceo travis kalanick has resigned, but he will remain on the company's board of directors. from london now is bloomberg news. give us the back story here to his finally stepping down.

>> over the past several months there has just been one controversy after another. many of them self-inflicted. the board of directors said that he would be taking a leave of absence but now they have changed, they have shifted after some investors banded together and demanded that he resigned. so now he has. this is very unusual in silicon valley where they are really put on a pedestal and control the stakes in the company. so this is very unusual. scarlet: do we presume that in some point he will have to give up his chairman role as well? initially, he was going to step aside for an indefinite. putting aside his chairman role. >> it is hard to tell it this point but it will be an issue the next ceo will have to consider. this is not an easy job to be walking into in addition to all of the culture controversy surrounding the company. there has been a lot of competitive and business ones including the competitive threats around the world.

so on top of that, to have a strong chairman like travis like is going to make his job at 71 -- eight tricky one. it is unclear who we setting in. scarlet: any word on who the leading candidates are to take the top position at uber? >> it is really unknown. they have been searching for a coo, a deputy, but they haven't been -- they hadn't found anybody just yet. so now they will have to go on a search. david: that is bloomberg's adam satariano in london. next, we are talking about oil. how it has fallen and how we invest in the energy markets. that is next, this is bloomberg. ♪

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♪ david: one accrued de -- crude

descent. rotation roulette. butstors go cold on tech bullish on health care. and the road to resignation. dogged by controversy, travis kalanick quits the global ride hailing company he cofounded. welcome to "bloomberg daybreak," i am david westin. scarlet fu is here holding down the fort. we are happy she is. scarlet: thank you for having me. let's look at markets. you have s&p futures a little down, a bit of a comeback when they were down. the 10 year changed direction. andnow have prices lower yields higher as a result. crude has moved higher permit not extending yesterday's selloff which sent it to a bear market.

and as crude goes, the dollar has moved. it is lower by 0.01%. it is holding near the recent high. over to abigail doolittle looking at some of the big movers. abigail? abigail: good morning. we have some big movers and the premarket. ca, the old computer associates, of 12%. ca isis considering -- considering a deal of valve to take ca private -- a deal that would take ca private. well go could very through. if it does, it would be the largest leveraged buyout since dell went private. we have a earnings winner. lennox is higher by 9% in premarket after it beat top and bottom line estimates and analysts say subscriptions grew

i-19 percent, the best in three years. lots of price targets on adobe, shares higher by 4% on a beaten raised quarter and better than unplowedoutlook is demand. taking a look at carmax. shares are trading higher and this is a strong quarter out of the company. scarlet: thank you. stocks,look at energy they are losing some of their power. it has fallen out of favor going from first to worst and leading declines is oil continues to sink. sixgy's weight fellow below -- fell below 6%. joining us now for what is next in energy is michael cuggino and marc pouey. let me start with you, michael,

in san francisco. i know you are a long term trend or -- trader, when you look at how the different asset classes have been responding to the shift down in oil prices. do you get the sense oil is driving everything and everything is on hold? michael cuggino: maybe not driving a but part of the story. you have a lot of supply globally and demand has not picked up sufficiently globally to offset that access. you had last week with the rate.l reserve rising the the inflation numbers were less than everybody expected. you have this deflationary filling with that and oil would be part of that story. you saw that in the price of gold going down which was a deflationary story without the fed coming in and rescuing. it is part of the story. with values traitor

higher in other parts, it is an with valueser higher in other parts, it is an area you want to look at. scarlet: and marc pouey, why isn't it halfing morbid impact on the -- why isn't it having more of an impact? atc pouey: if you look back two years ago when oil was above it's contributed to s&p and now it is 5%. one thing to keep and a mind is a what -- is what to do with .print -- credit spread we ran analysis, if oil prices were to stay in the $40 range, that could take away eight dollars for next year, 6% down for next year effectively that could take away quite a bit of

what you could potentially get from tax reform as well. it is something to keep a close eye on. david: if we look at whether oil will affect others, how important is the reason for decline in oil price? how important is it that it is not really a slow down in china, which is was in the past as opposed of supply issue? michael cuggino: well, i think both are incredibly relevant. when you look at the price of oil, you have had a week of them global economic activity, excess supply -- week global economic activity, excess supply and a very strong dollar. those factors to some degree are still at play. global economic activity has picked up. the u.s. is in a cycle, it is anemic but the growth at high 1's and 2's.

featuring that would drive more consumption of oil is not there to sort that access. .- absorb that access it becomes a demand issue and we are betting on global growth long-term and china as well as everywhere else and we want to wait and see. david: low oil prices does not help an energy company. for those who consumed the oil and products really benefit, in terms of countries, india has as a net consumer, can is stimulate in other ways? michael cuggino: sure. it is like a tax will stop the lower -- tax. the lower disk, the more beneficial for producers and consumers and that is a benefit. that gets into the deflationary story were expecting inflation in the u.s. with the expectation

of a more dynamic economic growth. we have not seen it yet. we begin to look at the deflationary characteristics of cheaper energy prices and how that factors and. scarlet: let's talk about the s&p 500 energy index even with the recent stocks is at a premium to the broader index. 25 times versus less than 18 times for the broader s&p, does it make sense to you? marc pouey: sure, it is elevated on a pe level. when you look at what we saw last year, it looks more attractive. you hadin the index, if a chart of the energy sector versus the s&p 500, you will see you are at or below the levels it was trading at back in q1 when oil prices were significantly lower and into credit spreads and more exacerbated today. from that person active, it is a

little more track of the last year. youlet: where does it leave on how much you want to be exposed to the energy sector as long as you are unsure of what opec will do? marc pouey: we think the market moves into deficit the back half of the year. probably more range browned and the technical -- range bound and the technical's are more worrisome a you could see them in the high 30's. sentiment has moved quite cautious as well. we have seen selling out of energy from the run-up we saw last year. versus s&pive basis 500 is quite attractive. of energy price stocks, to some extent, supported toward dividends. some tend to really pay dividends consistently, very rigid dividends, how much is that valuation? marc pouey: that add support to

the total return, no question, absolutely. it is a factor. probably in the equity market, for somebody like us, we are diversified in our permanent portfolio. overe looking for areas the long term that we think or underperformed in the broader market. the equity market is near record and in a number of indexes some have driven it more than others. it is an area with a lot of negative sentiment. from a long-term investment perspective, it is the place you want to be if you have the long-term. we think it is attractive from that standpoint and within fossil fuels and global growth, these issues are not going away. period of ae bottom bigger commodity cycle and at some point, that will be growth and we want to be there before

that and take advantage. that is where we would be at. scarlet: you talked about the oil market move and what it means for central-bank policy. were held meeting today in the wake of oil tumbling into all bear market, wooded janet yellen and company have to make an acknowledgment to the -- woody janet yellen and company have to make an acknowledgment -- would janet yellen and company have to make an acknowledgment to the concession? michael cuggino: i do not think so. it is flexible and they keep their options open. the market has given them 25 basis point fed hike and they took it. i am not sure where it goes the rest of the year. do we see more? do we see watchful waiting for a while? and do have said spokespeople out talking to different aspects of that. the other factor is the growth

in the united states. q1 gdp was anemic. the fed has brought down the forecast for the next couple of quarters were gdp growth. we have not had the fiscal tax regulatory policy changes yet that we were expecting to drive dynamic growth. i am looking at the economy and seeing it does not look a lot different from the past couple of years. you look at high 1%, 2% and that may mean the fed slows down or does not move to the extent they would have otherwise and that growth environment versus if they see a more dynamic environment and they may move quicker and it to a larger degree over the long term. it doesn't matter going forward, something to watch. david: michael cuggino and marc pouey will stay with us. coming up on friday, special coverage since -- special

coverage of one year since the brexit vote. live from new york and london, this is bloomberg. ♪

david: this is bloomberg. the role of sector rotation has been on display since technology turned turbulent two weeks ago when one sector falls, another step in and compensate. health care is in the next off said to shore jumping up -- de pace forping up, on the biggest yearly game since 2014. still with us is michael cuggino of permanent portfolio and marc

pouey of bank of america. are you seeing this, marc, this rotation, has health care stepped into the gap? seen auey: we have not yet through our floats. there has been some by back. andcontinue to see selling positioning out of the health care. -- we have not seen it yet through our flows. it is on a relative basis, tech quite other hand, it is elevated. it is the highest we have seen in our history. we aremichael cuggino, putting up a graph you cannot see. it is a bar chart since the beginning of the year, health but and technology for of since the last couple of weeks, health care stepped up and technology has fallen. is that what you are seeing? michael cuggino: we are seeing

it in our portfolios. the sector rotation and the velocity we have this nowadays is a whole other question. i think from our stand point, the last several years, we have seen increased volatility in a lot of different sectors at different times. it is the same story continued. with a respect of that question on tech versus health care, no issue we saw it. we saw it in some for a biotech and pharmaceutical holdings, which is a subsector of health care and some out of tech. our text swing from perspective, the selloff did not last too long and quite a bit of buying back. you did not really have a chance to catch your breath and look at downtrend to see where you might want to be interested in before it bounce back up. the residual damage is that they

did not get quite as high as they were before and that money has floated into biotech and form a. scarlet: i want to bring in the idea that the president and congress are trying to get health care legislation passed and we have not brought it up in this discussion which may be significant. does the passing men we will see a concerted drive into health care or are the two completely separate and investors looking at valuations? : i think it is a sentiment, if it passes, we could focus on broader tax reform. on the health-care sector, it has been multiple years of sector unwinding of position, right? is at some large cap of the lowest levels we of seen in decades. it is discounted to the market and more market growth rate unless -- unlike tech, go back

to december of last year, tech was as 16 times pe and now 19 times and now it is at a premium. a valuation on a pe basis and relative but on easy sales, it is treated as some of the highest level since the tech bubble. scarlet: there is so much focus on whatever acronym you want to choose, less about over, active buying in short covering? which ise seen fang, 70% overweight, it is the relatively flat the past year and we believe more short coverage in a whole. what investors have been looking for is large cap tech with full brew growth. david: i want to come to you with what is going on, it seems like republicans are pretty intent on taking a lot of money

out of the health care system. they keep saying it is hundreds of billion of dollars and why doesn't that affect health care? you take the money out of the system, it is going to hurt the health care companies even to other companies through tax breaks? michael cuggino: i think it has hurt the health care companies. point, they have not grown as much as they would have otherwise. because of the big overhang of price controls on drug prices, that aspect of the health care sector, we are looking at an issue they have to sort of walk a thin line on because health care, biotech, pharma is one of the biggest, animal spirits growth in the united states and we do not have enough in enough industries. that is part of what we have anemic growth this cycle. you are looking at cost containment and rising costs of

health care. one easy thing to do is to capture a prices, it sounds good and makes sense. if you do it too much, you take away the incentive other companies to create new project -- products and drug and kill off one of those industries. the key thing is to pull costs out of the health care structure may be through streamlined fda regulation, you easier pass to the market, those sorts of things that capping prices. that is what thing that is working they are grappling with. scarlet: marc pouey and michael cuggino, you are sticking with us. later today, we have a rightsation with jose here on bloomberg television. from new york, this is bloomberg. ♪

scarlet: this is "bloomberg daybreak."

after pressure to step aside, trevor clinic has stepped the debt -- trevor kalanick has stepped down. he spoke off saying i love uber more than anything and it is a difficult moment, i have accepted investors' wishes. well he has relinquished power of ceo, he will remain on the board. joining us is adam of bloomberg news. i guess the first question here is, as the company is searching horrible place in -- is the company searching for a ceo, who is leaving the company? who is calling the shots? it has been leadership by committee. three people involved of the most prominent is a woman who runs the north american ride handling the business. the is kind of the mass

company finds itself in. there is a lot of inner turmoil after the investigations that have uncovered wrongdoing and a lot of executives have left and a lot having been a fire. they need to find a new ceo to come and and right the ship. scarlet: a change in personnel and policies. over them is adding a tipping -- uber is adding a tipping feature and drivers what it but travis was opposed. tell us about the change of heart. adam satariano: all of the controversy around the company, the company is finding drivers to basically to be the people behind at the company will be the ones picking us up. there's been a lot of tension with the drivers and one of the things they want is for to be able to tip. that is one thing they did.

that is one thing the competitor, lyft, has been doing. they have been making inroads against uber. david: is this really cosmetic? is travis really stepping down? he is on the border and owns most of the company. all is going to be calling the shots? is a veryiano: that fair skepticism and something that will make it a challenge to find at the next ceo. if you're looking to hire somebody high profile, the questions and they will have is how much power will they have, when somebody like travis controls a big stake in the company? founder and the obviously, he is brilliant. they did a fabulous job. he has not demonstrated self-restraint yet. i do not know when we will see it in the board room as chairman of the board. adam satariano: right.

this company is largely and has a population's personality and the company recently -- he has a pugnacious personality. they are trying to move into a new phase where they want to be a different kind of company with a different a leader. scarlet: adam satariano. the opening bell is up next. u.s. futures near their session's high. little changed for s&p 500. all around the world. asian stocks are lower. from new york, this is bloomberg. ♪

scarlet: this is bloomberg daybreak. moments away from the opening bell. we have seen u.s. stocks faltering yesterday, retreating

from the record highs on heavier than expected volume. nasdaq is seen a 26% jump compared to the 20 day average. as we head to the open now, we do see u.s. futures pose little change. they have ended near their session highs. they isn't clear whether will begin but we can hear the opening bell there. we are looking at a next trade at the open here. gains.-s&p and the dollar index, little changed. picking up hair and oil is making a comeback. that theyndicated will extend reduction cuts. let's get a closer look with abigail doolittle. abigail: we are looking at small gains for the major averages here on the open. the dow, s&p, higher.

any records yet here on the open but it is worth knowing that even with the out closing down yesterday in the morning, it did put aside another all-time high. on the week, it is interesting to note that we did have a flip up. yesterday, a rally. a pullback. investors could be on hold ahead of the energy inventory report at 10:30 as to how that could be an influence on the market. let's take a look at nike and other athletic wear makers. nike higher, big losses for foot locker, finish line and d. nike could be close to starting a direct relationship to sell products on amazon. -- right now,the nike only sells through third parties on amazon budget analysts says this could be a large and growing channel. investors are positive on that

for nike but the other athletic companies are trading down. speaking of flip-flops, there was a flip-flop on small caps. the lines here represent either the net when the short went below zero or the long, above. in recent weeks, we have had net speculative shorts, the most going all the way back to 2014. hedge fund investors have a rish. last week, look at this. popping up higher. the last time we saw something --ng those lines in 2015 perhaps we will go back in that short but last week was that long. a great graph. let's stay on that subject matter. -- and michael.

a rotation out of and into health care. is there another when one going on here? >> it is probably too early to call it that but it does seem that way based on the graph. and into health care. what causes that and how quickly investors move around these days, we tend to be more long-term investors. we have tax efficiency. --on a day-to-day business on a day-to-day basis, we are not as involved in that are. david: there is a report on this. credit stress -- some of them indicate that there are more smallerrough the enterprises that may help them -- that is the suggestion. >> we like financials quite a bit. an easy win.is

so for the financial sector, there are positives. if you look at large cap financials, they do deliver the goods. more than double s&p dividend growth within the financials. they are doing share buybacks. riskk at this more from a perspective. you have elevated valuation levels in small-cap and you have leverage.elevated so putting that together, when you look at the risk-reward, especially for investing as we talked about in the earlier segment, oil prices putting pressure, is probably not a good recipe for elevated leverage. scarlet: probably something you want to stay out of. you like financials. you say you like to trade out of stec and into financials. we in the process? what inning are begin? is it almost over?

are we in the middle with plenty of room to run? liking financials, i also like value. economicok at the supply index, it was just starting to roll over last time but it has collapsed now. and the market hasn't relax -- and the market hasn't reacted. happening,k what is it is actually tied in parts of a discretionary that have rallied here. and the overall markets have softened up. see you have seen all of those defensive actions. yield plays have outperformed here. on the back end of the year, financials really have quite a few positives 2.2 which will help value quite a bit. toquite a few positives point to, which will help value quite a bit. there are a couple of

aspects. i have a hard time with the definitions of value in growth stocks. they are all stocks and they all have the risk of common stocks. but i agree with marc pouey. text, generally, and the consumer yield equivalent types of stock and the broader market has not kept up. you may call them value stocks, the ones that are leveraged for our industrial growth. the trump trade. whatever you want to call it. those stocks have not performed. they have not kept up. so again, if you are an investor looking to buy low and sell high, those are areas you want to look. and we like financials as well. we like some of those areas that have not kept up in the long-term investment.

i think we are in the early and mid-stage of that. scarlet: that is the wildcard. i am looking at the sector rotation net is taking place right now. not much of a mutation compared to yesterday. energy stocks are down by .6% and yesterday they were the leading decliners. health care shares and tech shares are the leaders. marc pouey, i want to pick up on something that you've mentioned. you are more dubious because of the leverage situation. we have talked a lot about talking about one ratio. we don't talk as much about debt to equity, partly because money is cheap. should investors, at this point, start to think more about the leverage of companies? particularly over the longer term?

last year was a perfect example of why leverage matters. when you look at it globally, there has been fantastic growth everywhere. most has come from abroad and the u.s. has been more stuck in the mud. but you start to see gold pmi's soften. you are later into the economic so, yes, absolutely, we do need to pay attention to that. a bid: michael, as a longer-term investor, how big of a factor is look at ratio as you individual companies? michael: we are in an interest rate tightening cycle. so the cost of capital matters. interest costs may go up. they may leverage the ability. the ability to pay bills on time. all of those things matter. and they matter more in it rising rate environment because

the costs are higher with respect to that situation. scarlet: let's continue on the theme of rotation. one of the big rotation stories has been out of u.s. equities into overseas equities such as europe and emerging markets. when you look at an extended sector like technology, is it a better bet to go into asian or european tech companies? even though the kinds of advances we have seen in those big names? michael: the answer is maybe. this year has been a pretty good year for non-us stocks which was driven quite a bit by the dollar weakening a little bit from where it had been. and that carried over to the emerging markets and broadly into the global markets. the other thing is that i think so many countries are at a different stage of the business cycle than we are in the u.s. we are in a tightening cycle with interest rates. other central banks are not. they are staying loose.

that provides potential liquidity for equity pricing, going forward. in some of those areas where we may have our issues with the tightening cycle. so we are at a different spot in the cycle. and this strength of the dollar will come into play with respect to how the markets move, going forward. scarlet: michael could you know and marc pouey. as we conclude the first 10 minutes of trading in the equity session -- you can see we are up .1%. losses across the board. asian stocks close down even after -- added chinese mainland shares to the emerging market indexes. about thel talks dollar. if you look at the dollar-yen, there is less demand for the safe haven type trades. the british pound is moving

firmer in the last hour or two after some hawkish comments from the boe economist. crude oil up i seven cents. this is bloomberg. ♪

>> this is bloomberg daybreak. i'm here in the hewlett-packard enterprise greenroom. coming up later today, an interview with mexico's finance minister at four clock p.m. at 4:00 p.m. eastern. --rlet: the extension of comes against the backlash of oil.

withsteel spoke yesterday jeff curry on the demand outlook for oil. >> if you look at the demand picture, globally, it's ok. i'm not too worried about it. scarlet: joining us from his thummel.s robert still with us is marc pouey. let me start with you. you view this weakness as a shift down and an opportunity rather than a challenge. for you putting money to work here? marc: absolutely. we view this as the energy market being down but it is not out. so at tortoise, we look at the structure structure -- we look at the infrastructure sector as assets that are critical to the development.

as the global economy develops and inventories begin to decline, we do think the energy sector could be poised for a second-half comeback. scarlet: a second-half comeback but we've heard from iran saying that overages looking to extend reduction cut. there are questions about whether there will be compliance with the production cuts seasonally because we are in a different time that we were in the winter. what is your confidence that opec can hold to what has been promised so far? robert: a good question. opec's motto is "whatever it takes." it takes to get global inventories back to the five-year average is what they're going to do. that is consistent with what i ran just said. take more supply out of the global oil supply, that is fine. they will do whatever it takes. once we get back to a five-year average, it will be supported for oil prices. as you have seen a month over month over month decline in inventories, you will see oil

prices rise. david: once you get back to the five-year averages, but in the meantime, there will be pain felt someplace. what you avoid? would you avoid right now? robert: here's the thing that a lot of investors don't think about. -- the business of producing oil is a variable cost business. companies in the u.s. are making money. it is a variable cost business. fieldmes offshore services companies operate and actually don't earn enough money to be affable in this type of environment. buyinge so, we are infrastructure and oil and gas producers in the basin. and other energy properties that

are comfortable in the low price environment. david: if you are saudi arabia -- you do feel that way. andrt: the permeability's is -- in the u.s. the way we think about it at tortoise is that oil production has to rise out of the u.s. we know production is going up. market shares will shift. we think it will gain market share. so whether permian basin or the energy sector, you have to find oil. that is in the permian basin. companies have been the lowest cost producers for oil for an extended amount of time. -- cheaper than countries that are members of opec. we think that the u.s. and the permian basin are well positioned to grow for an extended amount of time.

scarlet: you have the reality of how investors are positioned at the moment. when you look at fund managers and hedge funds themselves, what do you see with regard to the underweight in energy? marc: we have seen continued negativity in the space. investors continue to decrease their position. we do see the supply-demand balance going back in the second half of the year. to the upside, you have not seen much producer hedging so it could cap some of the upside but you are in a sweet spot right now for the driving season. and if you look at the spread of energy sector versus the s&p 500, you are back where you were in q1 of last year. when oil prices were lower. think from a risk-reward perspective, given where the

energy space is, as long as the prices hold at these levels, the risk-reward is favorable. david: what about some of these companies? are they getting overextended on the credit side? there was a time a year and a half ago that we were so high -- because of energy. are some of these companies borrowing a fair-minded money to stay in business? robert: what we like to look at ratio and the the leverage ratio. and we like oil and gas companies that stay below two times -- that are producing oil and gas because they have a more commodity sensitive business. so the lower leverage companies actually are doing just fine. in 2018. less hedges and we don't see a lot of them be overextended. what we will see is that in a lower price environment, you are going to see u.s. producer start to talk about slowing capital expenditures.

this is not necessarily a bad thing. 50-60 dollars over the long-term. that is the price forecast. that is where we think we will be. companies in the permian basin will do well but energy and structured as well in that environment as well. we have invested in the company for over 10 years and over the last decade, enterprise partners has grown its cash. investors a 6.5% yield. companies like that in the energy and protector space are attractive and compelling. me end: marc pouey, let with you. once upon a time, it was seen as good for equities, overall because it is like a tax cut for consumers. and we thought about it in a different way. but we don't he about that anymore, do we? because we're in an era of low oil prices that we don't get a

recovery. what is your take on how it will help earnings in the long term? marc: i don't think we see that because it didn't play out last year in q1. it is a positive for the economy but not a positive for the s&p oil when it was north of $100 a barrel, 15% of earnings. today, it accounts for 5%. oil drives further, what does it mean for the sector derivative? and our 2018 numbers, it could shave eight dollars of earnings if oil stayed below $40. robert thummel and marc pouey, thank you for being you today. if you have a terminal, interact with us. than ithis much better do. go right now to tv on your terminal.

this is bloomberg. ♪

david: this is bloomberg. in washington, the battle over health care continues as senate democrats plan to slow work in order to highlight their disapproval. republicans have been behind closed doors. this as mitch mcconnell laid out a timeline yesterday to reporters. lex i expect to have a discussion on thursday and we will go to the bill once we get a cbo score. david: joining us now is kevin cirilli. kevin, i don't think you are in capitol hill. i think iu are -- just favorite. kevin: i am trying to get there. expectingwhat are we and where will this go? kevin: there it will go remains

to be seen. dese spoken with several ai to the lawmakers who are frustrated with how this has been negotiated behind the scenes. there are a couple of nonstarter issues for moderates. cutting medicare and medicaid. portions of obamacare -- they are concerned about the policy of this and how it will impact republican chances in 2018, particularly if they have to defend something that they are only going to get one week to look at. inid: we are all interested health care because we all have to use health care. but we are also concerned because of what it means for tax reform and infrastructure. what have you learned about what -- about where that stands? kevin: i interviewed representative davis and illini -- and delaney. -- is a member of the house freedom caucus. plane is working on a tax

with the members of the house freedom caucus that they hope to , and he august recess told me that he will include structure in that. what all of the house freedom caucus members want but it is noticeable that one is pushing to put that together. pushing upow you are to capitol hill, thank you for being with us. scarlet: 25 minutes into the trading session. equities aren't little changed right now but you are looking at nymex crude. a big performer after yesterday as we enter a bear market. that does it for bloomberg daybreak. this is bloomberg. ♪

>> is 10:00 a.m. in new york. i am vonnie quinn. >> live from london, i am nejra cehic. welcome to bloomberg markets.

♪ vonnie: we will cover oil inventories, the departure, and much more this hour. first with breaking economic data in the united states, let's get straight to julie hyman. annual paceg in an of 5.2 6 million, a gain of 1.1% month over month here. a little bit of a pickup in what has been sort of a choppy data reporting period here. potentially, the housing market is making progress despite inventory constraints we have seen sending prices higher and dampening demand to some degree. will watch the effect if any throughout the day. otherwise, we are not seeing much movement in the m