gary cohn is said to replace yellen next year as the fed chair gets ready to face congress. receipt with caution. u.k. unemployment hitting a low but wage growth is weak. he is not ready to raise rates. donald trump, jr. and russia stay in the spotlight as pimco warns the controversy could dim u.s. economic outlook. david: welcome to bloomberg daybreak on this wednesday, july 12. i am david westin with alix steel. jonathan ferro is off today. alix: here are the markets. s&p futures relatively flat, although the high for the assion, sterling getting boost. it was lower earlier and then we got those job numbers out of the u.k. with the 10 year treasury pocket , that is supply later today as markets handle that as they move lower. crude is getting a big relief rally by over 1.5%. they lowered the estimate for

production in the u.s. for next year but this feels like a call before potential more storms. david: time for our morning briefs. it is a big day for the federal reserve. at a: 30 this morning, 8:30 this annual monetary policy report delivered to the house financial services committee. she will appear in front of congress at 10:00 a.m. to deliver remarks and answer weston's. we will watch for indications on how fast they will raise rates or when they will start reducing the fed's balance sheet. in the afternoon, they will release its beige book and in the afternoon, we will hear from esther george in denver on the economic outlook of the balance sheet. with all the news today, the drama of the from family's relationship with russia will continue in washington. donald trump, jr. went on fox news to explain why his meeting attemptsian lawyers in

to get negative information on hillary clinton's campaign was a no big deal. the media has really done themselves a disservice by picking sides so flagrantly. they have driven people to think about it because it is just nothing. david: he did say he probably would have done things differently if he had it all to do over again. chiefg us now is our washington correspondent, kevin cirilli on capitol hill. was it a big deal or not? kevin: lawmakers on capitol hill think it is a big deal and several republicans i spoke with yesterday including house freedom caucus chairman mark meadows suggested that special counsel robert mueller should be looking into these emails as well as other conversations. there also have been increasing calls for donald trump, jr. as well as jared kushner and paul manafort the campaign manager at the time to testify publicly. i spoke with a democrat on the senate intelligence committee

yesterday evening. senator mark warner, a democrat from virginia, to make some sense of this. listen to what he told me. examplenever seen an when an agent of a foreign government, if foreign government that is an adversary who is trying to interfere in our election. the whole intelligence community has reached out in this way and then have a campaign respond with any legitimate campaign official would know that you don't take this kind of help from foreign adversary. kevin: federal reserve chairman -- chairwoman janet yellen will testify today and also, christopher wray, president trump's nominee to replace james comey will have his testimony before the senate judiciary to see the fbi director at the same time and he could face questions on the latest of elements in the last 24 hours. david: so what about out of the

white house? what is the white house doing to handle the situation? do we know what the president thinks about his son? kevin: yesterday, white house deputy terror huckabee sanders said publicly that the president says he is a "high quality person. oh the second point i would raise is when you take a look at the twitter account of the president. the president has gone after the u.s. intelligence community, whether it is now former director comey or others, but he has largely kept quiet in terms of tweeting about this controversy. he did tweet just before don junior went on sean hannity's show last night but besides that, we haven't seen much. it is 7:00 a.m. but who knows what he will tweak this morning? david: we appreciate it very much. whether it is donald trump, jr. sinking in his russian meeting was a big deal or not, people on capitol hill are taking it seriously.

here is a sample of what we heard yesterday from both republicans and democrats. >> any legitimate campaign official would know that you don't take this kind of help from a foreign adversary. >> we cannot allow foreign governments to reach out to anybody on the campaign and say, we would like to help you. manafort, the campaign manager, to let that happen, that is an inadequate campaign manager. >> i can say this. interference in elections, whether it be russians or the chinese or anybody else, is inappropriate so we've got to get to the bottom of that. david: whatever the political fallout of the emails and meeting, there is the question of whether he broke any laws. to help us sort out the low we are joined by a man who was, himself, an independent counsel, charged with investigating bill clinton as part of the whitewater investigation. today, he is a partner in the law firm -- in the law firm thompson and mike. answer the question that, if there were a lot broken, what

would it have been? >> a little hard to figure that out at the moment although, with regard to the meeting, it raises, as others have mentioned, the specter of whether or not you could consider what was being offered a form of an in-kind campaign contribution from a national source. david: there is a criminal statute that makes it a crime national ton contribute to a political campaign. >> it is a felony. it is serious. itid: does the law tell us has to be something of value? >> it is not limited to cash. so therefore, it would contemplate that it could also be an in-kind contribution. generally speaking, prosecutors have been reluctant to prosecute sort based upon what this of information is because

generally speaking, it is limited to the types of campaign contribution that would be deemed to be cash equivalents. for example, if you are a candidate for office and somebody offers you office space , that would be a prohibitive campaign contribution no different than cash because it is a cash equivalent. fairan figure out what the market value is and the square footage of office space is and a second, if a foreign national can't contribute a bundle of cash, they can't contribute free office space. that would be prohibited. david: in this case, donald trump, jr. says he did not get value information. at the meeting, she showed up and didn't give him anything. does that take care of it? does that answer the question? >> it doesn't completely answer the question. obviously, if things had followed through -- part of the investigation you expect bob mueller to investigate is you would look for collusion, not

just with this meeting but if there was follow-up and it raises the question of whether other violations may have occurred more significantly as this conduct continued and there is contact through the election and into the transition. obviously, you have significant questions that arise relative to collusion. if there were promises made by the transition about what the administration would do once it took office in exchange for certain information, that would present a serious question as people have mentioned, under the logan act which prohibits foreign policy conducted by someone other than the current president of the united states. alix: if you are a market participant and you don't know anything about the law and you are making bets on what happens in washington, what is the headline we need to watch for? david: you have to begin to ,hink about whether it is true as donald trump, jr. contends, that this was it and this was the full extent of his contact

with russian officials or people who have contacts or are acting on behalf of russian officials. i think you want to focus on whether or not any of this sort of activity continued on to a more significant period of time, after the president-elect was elected. that would present a more serious question. this one, yes, you could draw out a case where the is aitation, itself violation of the law. it doesn't require a completed act but it is fairly certain at this point, on the assumption that there is not more, that no responsible prosecutor would bring a case under those circumstances so i don't think donald trump, jr. is in legal jeopardy, honestly. it represents a political problem and he understands, himself, that it represents a political problem or he wouldn't have said what he said already. "i would have done something differently."

david: presumably, bob mueller will take a look at this. there are report he will be looking into this. if there were more there or if he decided to proceed, would he go to a grand jury? what would be the next step? >> people think about grand juries as being, the moment there is anything there, you go immediately to a grand jury and air this out. sometimes you do. i suspect the first call will be made to lawyers for the participants in the meeting, to say that investigators want to talk with those individuals about whether to include paul manafort, the president's son-in-law, and the presidents son. they may not speak voluntarily with fbi agents. there may be consideration of whether or not to bring them to a grand jury, or whether their clients will assert the fifth amendment. much of which will happen behind closed doors and the public won't see much in the way of a manifestation of what is actually going on but ultimately, those decisions are made by prosecutors. , about case, bob mueller

whether or not anyone should be charged but the charging decision is not about drawing a case. a responsible prosecutor doesn't bring a charge, not because a grand jury wouldn't return an indictment but you have good belief that a case that should be prosecuted should be prosecuted and you have to prove that the person is guilty of a crime. we are talking about a federal felony so you don't talk about that idly. a lot of people are talking about, there was a crime committed so we run off to the grand jury and bring a case, that these are for reasonable offenses, and all of the parade of horribles. that is not how we conduct the investigation. this will take some time. it isn't going to happen tomorrow. david: it is really terrific. former whitewater counsel robert ray.

alix: regarding oil, opec is coming out and saying demand for their crude in 2018 is below what they are producing and also lower than 2017. pumping too still much. oil really doesn't go anywhere on that news. still up i over 1% on the day. we are watching that headline as we head into the open. coming up, the former fbi director will be joining us. -- assistant director will be joining us. republican congressman french of the members who will be asking fed chair janet yellen questions today. live from new york and washington, this is bloomberg. ♪

>> markets care about political risk again. here is how the russia headlines played out yesterday.

stocks dipped and trading value spiked and then it recovered after michael barnier was speaking. it wasn't enough for dan isaacson to raise the flag on his economic outlook. we are becoming more cautious about the possibility of meaningful legislation. these distractions are going to make it difficult to gain consensus. joining us now, neil dwane, global strategist, and josh feynman, deutsche asset chief economist. good to be here. a dimmerarting to see outlook because of this? >> i was always skeptical about the grandiose expectations being bandied about, particularly after the election. having said that, i don't think we should throw in the towel completely. i think there is still a better than even chance we get something back by the end of the year but it is not going to be revolutionary all that much.

alix: i'm trying to get a handle on what are the headlines that market participants care about? >> to pick up on where we started, we have felt that the headline about the global synchronized economic period, we think that is over. the u.s. is stalling and without any effort from anything from can put together through the washington's want, we think the washington's want, we think the u.s. is going to remain dull. tide is a general rising that has supported risk assets but we think that is a verb. with china looking to be stable ahead of the congress in november, we can't see anything coming from there either. we think it is as good as it gets economically. david: so risk assets, to use that term, they are really void. they have done extremely well. what assumptions are there underlying about what goes on in washington and those equity

situations? >> there is an element>> they have been anticipating something out of washington. at least a corporate tax cut. something tax reform-y. i don't think they have jettisoned it completely. i think there is still, as i said, a better than even chance that something gets done because i think the republicans will say, hey, if we don't get anything done this year at all, that is going to be tough to take back to the voters so i think it will concentrate but it is going to be very pared back. alix: it seems like your call is regardless of what happens out of the -- of d.c. is it a term that many opposition against? neil dwane: we have been looking at clients, they are nervous about the russian event around president trump, and we think monetary income is the safer way to place.

whether it is the high-yield market or whether you take an emerging market debt, with think the markets are consistent that that is where there are some returns. for equity investors, like i said, we think the investment value is outside the u.s. historically, the u.s. market has done well. the fed fixed the banks and the economy has done better than elsewhere that we think you should be looking at either europe or asia as a relative value trade. alix: but you make the argument that the synchronized recovery is rolling over. that is why many investors wanted to buy europe in the first place. >> basically, europe is about five years behind the u.s. in terms of the cycle. it has taken so long to get some policy traction with the ecb that i would argue the u.s. and the u.k. are very light cycled -- very light cycled. it continues to travel on in a very european fashion while the

u.s. is staring into, is the recession in 2018 or 2019 or 2020? this is the longest economic expansion we have seen in the last hundred years. david: we will both stay with you. trundle to work at 7:20 in the morning. david: coming up, day one of fed chair yellen's semiannual monetary policy report to congress. we are joined by matthew hornbach, head of morgan stanley global interest strategy. this is bloomberg. ♪