balance sheet unwind will begin. the senate debates the future of u.s. health care. republican lawmakers will consider a simple repeal bill today. the s&p 500 begins the day at a record high. it is fueled by better-than-expected earnings. from new york city, good morning. this is "bloomberg daybreak." i am jonathan ferro alongside david westin and alix steel. it is been five years since mario draghi said he would do whatever it takes good the euro-dollar -- would do whatever it takes. we are sitting at a record high today. seeing somee earnings coming out right on time should -- right on time. ford is above estimates from last year. they also beat on the revenues.

pre-check profits though felt a bit short. short.about $5 million that is because of commodities such as steel and engineering costs. we will be talking with bob shanks, the cfo, and about 29 minutes time. alix: the stock seeing a nice move in premarket. coming up, we will have home sales. then, we have the weekly crude inventory report. at 1:00 come at the u.s. treasury will sell five-year notes. yesterday, the two-year was solid. what will be five-year be? bloomberg will have special coverage later today. david: the senate voted yesterday to move health care forward. this is despite the fact that there does not yet seem to be majority for any particular approach. we are joined by craig gordon,

our executive editor of washington knows -- news. -rama.s about vote-a >> we could have dozens of amendments thrown out on the floor for people to take a vote on. mitch mcconnell, it is like target practice. he is trying to figure out where he can get votes. what things are popular, and what things are no go. they are going to try this much them together to vote on something. outd: mitch mcconnell throw -- he threw out his own bill for a vote, and he missed by a country mile. when did they start taking up these votes? >> we are looking at thursday afternoon for the vote-a-rama. is a repeal only vote today, but that should also fail. you are going to see a lot of ups and downs, but until we get

a final vote on a package, a lot of people are calling it a skinny repeal. a lot of it is people throwing ideas around in the senate. everyone gets to have their say. the real vote will not be until mitch mcconnell throws it all into a bag, and believes he has something that can get 50 votes plus a tiebreaker. alix: what is the timeframe on that? >> all up thursday into friday morning. we know the senate likes the poll on minors. alix: is it realistic that on friday morning we will come into have something health care analyst and investors can look at? >> that is a possibility. that is why we are in this rapidfire series of votes so mitch mcconnell can try to figure out how to triangulate the bill. do not underestimate yesterday's bill. even getting into a vote, three days ago i do not think that was possible. mitch mcconnell is good at this. he knows when to push and when to pull back.

there is a chance they could get a bill that he can get 50 senators to say aye. jonathan: from an outsider perspective, this does not look like the best way to pass legislation for a sector that counts for about 1/5 of the u.s. economy. is this just about finding legislation or getting something done? >> this is about survival mode. the republican party has been talking about getting rid of obamacare since it was upheld by the supreme court seven years back. this is something to take home for the 2018 midterms. i would like to tell you that there are actuaries sitting back there making it all work for health care, but i believe that is not what is happening. political exercise which will have huge policy implications in the health care market. alix: is this good or bad for tax reform? >> every day they are not talking about tax reform is a bad day for tax reform. it is so very complicated. donald trump will tell you that

we are still going to get a tax reform bill by the end of the year. if you believe in santa claus, you can believe that too, but it is hard to believe. in mid-september, early october timeframe, they could begin to talk about it. they have a timeframe for getting tax reform principles on the floor, but tax of form makes health care look easy. david: it almost makes your head hurt. we not only have health care possibly but also a tax reform for basel. ceilinghave a budget and a budget itself all coming together in the same time period. isn't that going to create a jim -- a jam? >> yes, it is why i am so exhausted. we all know that congress cannot walk and chew gum at the same time. it will see -- it will be interesting to see how everything falls into place. inathan: we want to bring

our next guest. talk to us how difficult it bias fromo divorce economic analysis at this point. >> i think market practitioners have to do that. ishink what has happened that, since the beginning of the year, the trump political ranking has gone down so much that whatever bias there is that it was not in the right direction. ineffectiveness has been driving the market cents. i think if they manage to get , including ahing skinny obamacare repeal bill, it does give them some money to play this -- to play with when it comes to tax reform. when it comes to the lack of party discipline with republicans, it may be able to get together at the last minute. the market would pay a lot of attention to that. maybe be a bit more optimistic

if they can get anything past that we will be talking about tax reform on monday. if that is on the agenda, there will be ups and downs, but it becomes a more serious proposition. jonathan: is it possible to have tax reform conversations on monday? >> no, i do not think it is. the question is if they can get even the skinny reform through. vote,k, even in an open some democrats if they did not have their party affiliation locking them, the question is whether they can get enough say weto stand up and are going to move in that direction. alix: early last week, we thought health care had completely blown up. it was the dollar that reacted most. why is that? >> i think the bond market in the past couple of months has been much more focused on the inflation story. died somewherery

between january and april, and markets lost confidence. i think what has been the in february, march, april, may is the ongoing disappointment on the inflation side, and the bond market has already reacted to that. alix: if this ends up being on the upside for the dollar, what is the currency pairing that needs to be revalued the most? guess is that there is a lot of upside to the yen. i think the tax reform would be viewed as an equity market. i think the dollar-yen is going to jump. ollar which has been writing on the fact that the u.s. is going to do nothing and the europe is going to reform, it also will be affected by this as well. david: there's also the market

uncertainty about when we could have a bill. how much of that is weighing on the market this morning? think the bad performance so far -- markets are kind of ignoring this and thinking that there will be some shadowboxing going on and nothing much will happen. priced into the market is that they will go home without a vote on anything at this stage. i think that would be bad for the dollar, but also friendly towards bonds and things like that. we saw how difficult it is to forecast five or 10 years out. how can we forecast even five years out when we do not even understand what is going to happen down in d.c. when it could fundamentally change the trajectory of the economy? hard to even forecast

five weeks out with any consistency. i think you just have to be humble. you have to recognize that if you go back over a period of three or four decades and think about what you would have you realize1970, that you would have been completely wrong. the forces you thought at play were structural and just evaporated, and so you have to be very careful about what you think is going to be the driver. alix: great stuff. great to have you back on the set. with us.taying second quarter earnings for ford topping estimates. they are also boosting profit forecast for the year. this is the first result sense jim hackett became ceo in may. questions about driverless cars. coming up, oil continues to move to the upside am extending gains

after hitting a seven-week high. u.s. stockpiles could be reducing. head of commodities research will join us for his outlook on oil and copper. this is bloomberg. ♪

alix: the fed decides today at 2:00 tm -- p.m. donald trump says he may reappoint janet yellen to a second term, or he will consider gary: as a top contender for the position. joining us now with more is stephen englander head of research and strategy at graffiti capital management. we are also joined by carl riccadonna.

i want to talk about the re-rating we saw just sent the last fed meeting. this is the market implied policy rate. this yellow line is where we were at the end of the last policy meeting in june. the green line is where we are at as a right now with hikes. to hikes have been forecasted over the next two or three months. has this rating been justified? karl: i think it is justified given by this backsliding in inflation which seems to be a more enduring problem then a one or two category idiosyncrasy which janet yellen initially terrorized it as. -- characterized it as. so, we are seeing slower growth partly due to the deadlock in washington and a lack of any major fiscal policies coming down the pike. so, you have slope love with very little -- slow growth with very little inflation. the market doubts that the fed

could deliver on the rate past it was suggesting at the time of the june meeting. alix: we will have to see the fed maintaining its outlook to keep the market from getting too pessimistic. it all depends on how they categorize inflation. what word are you looking for? >> i think the market has discounted that they are going to say something about inflation in their opening paragraph. the question is, whether when it comes to policy paragraphs, they say something more interesting along the lines with what we have been seeing the past couple of weeks. that further hikes depend on it seeing inflation rise at the pace we are expecting it to. if they are honest about it, that is what they should say. it would still be a real surprise. the biggest possible surprised the fed could bring, that they actually follow up their comments of the past month with some adjustments to say that there inflation views were more tentative than they thought six

months ago. jonathan: how did they do that and reconcile that with their views on financial stability at this point? the language of the federal reserve speeches over the past few months, if you put in that language of concern, it does create some risk in the market. >> that is what i do not see any risk return in betting on what the fed is going to do. it would seem to reflect the evolution of said view. -- of fed view. and then there are the other guys who say that financial conditions are easier than they were in 2009 we thought the world was going to blow up. there was the concern about getting a margin versus the zero bound. so, they took the possibility to swing the other way. i think at their heart of hearts, they would like to be in a position to hike. that is why all you need is a good inflation number. if they do not get that and reflecting what they have said,

they should probably be more tentative than they have been. jonathan: on the balance sheet, we have had some in a conversations about it not being data dependent but data independent. that policy is going to happen regardless of the victory of the economy. in this statement, it says something quite different. they have made it quite clear in this statement that to some extent it is data dependent. it is -- is it on autopilot not -- or not? >> nothing is ever on autopilot. i think they are hoping that will have this dragging moment where they say it is not going to hurt and you will not even notice it because it will be so boring. nothing is going to happen, the market believes it, and that is what gets priced in. if we have a situation where the or therket is faltering bond market says there is more bonds out there and we have to buy and we are not going to buy them as cheaply as we have been doing, then i think the

conversation will change. for now, the market is where they want it to be. think it will probably signal that they are going to do it sooner rather than later, because there is no point for them delaying it at this stage. everyone has their expectation, and there is no angst in the market, so why not signal you are going to be doing it sooner? david: can you answer that question carl? they have been signaling in this direction, so what would cause them to change their path right now? karl: you need to see some -- carl: you need to see some deterioration in the marketplace. if inflation continues to move lower, that could potentially impact them. rather, i think they would just clear the deck on the rate hike schedule. growth is not bouncing back to a 2% sustained basis, then they could potentially pull back on the balance sheet as well. they want the balance sheet to be on autopilot. they may be able to successfully

execute that, but even if it is on autopilot, that does not mean they are not going to hover over the controls and grabbed them as soon as things deteriorate. it is data dependent to a much lesser degree, but it is certainly sensitive to those develop its. david: carl riccadonna from bloomberg, thank you and also thank you to stephen englander for joining us. we just saw the ford second-quarter results. ford's cfojoined by in the next hour. also, we will be talking about another company's earnings right here on this program. live from new york, this is bloomberg. ♪

david: this is bloomberg. i am david westin. we are looking live in washington, d.c. where the

senate is considering several approaches to health care. kevin has a guest within who knows a little something about how the senate works. kevin: we are being joined by jim demint. you have just formed a new group. tell us about what they do. >> the question i hear about the country most often is what happens to conservatives when they get to washington or any other politician. i can tell you that once you get there, you are in your flat sole and everything about washington pushes against conservativism and dallas budgets. -- balanced budgets. what we are doing is creating a support group for members of congress and their staff. we will have a job bank and constantly train staff. washington is very staff driven, because congressman it so busy. we want to make sure that the interns and chief of staff are ready to run it office, no the

parliamentary procedures, how does the house and senate work together, and that these people together. we have already been doing that on the health care issue. what i'm going to do is going to do some of what i did in the senate is get house conservatives and house -- house and senate conservative members together to develop some camaraderie. one thing i think we can do to help the country the most is for conservatives to come together and have a consensus on what needs to be done. kevin: let's talk about health care. esther day the vote to proceed, we saw several senators, your guys, voting to advance on a motion to succeed. the house an aide on from caucus that says if that city version of repeal advances to the house, then it is dead on arrival. >> i do not think it will advance unless democrats vote on

it, and i do not think they will. kevin: do you support a skinny version? sense it makes no kind of at all. the only way it does if it gets to the house and they can hold a real kind of repeal bill. the mistake they made with obamacare is just not repealing it. they need to go on to reform the health care system in a way that we now know needs to be done. as long as there is a repeal in the bill, you cannot get democrats to help you. but you can get democrats to help you expand medicaid, get more subsidies, bailouts for insurance companies. these are things that moderate conservatives want. the way this has been done is pretty disappointing. kevin: i want to talk to you about attorney general jeff sessions. the president and his top advisers have been publicly putting distance between jeff sessions and themselves. they are saying he's not going after democrats enough, not investigating hillary clinton enough. should the president force him to resign?

>> absolutely not. i can understand why the president is frustrated with the recusal. however, we do not really know what they are investigating right now. it would not be smart of them to tell us what they are. what i hope will happen, and i know what is going on -- there is a lot of pressure on the white house right now, and they are starting to turn their guns on each other. jeff sessions is one of the most honorable people i know. he is more passionate about the trump agenda than anyone else i know. if you stays there for the next four years or eight years, then the president will be very proud of the justice department. i hope is that they can get together to solve this. getting rid of jeff sessions does not help the recusal problem right now. again, jeff sessions has had my back a lot when i went out on a limb in the senate, and he will

have the president's back, too. so, the president needs to know who his friends are. kevin: they do for joining us. we will have you back on when it comes to tax reform. back to you. jonathan: coming up, bob shanks will join us to talk about the ford earnings report. we are seeing equities being taken to an all-time high. we are coming into the session with a record on the s&p 500 for the 28th time in 17. city, for our viewers worldwide, you are watching bloomberg tv. ♪

♪ jonathan: this is bloomberg. you are watching "bloomberg daybreak." two hours away from the open. getting to an all-time

high once again in 2017. 28 times we said on the s&p 500, going into the market opened. the polls are not getting bored of it. and in the bond market, the yield lower by three basis points. going into more supply today, this time in a five-year segment of the treasury curve. later we will get the fed decision as well. the euro and dollar is unchanged. mario draghince said he would do whatever it takes. 13057, and the pound not really reacting to the gop 0.3% but the office of national statistics calling it a notable slowdown in the first half. cable rate, 130.57. alix: boeing a bit of a conundrum. they beat earnings by a

substantial amount, but revenue came in light. the estimate was for $23 billion. interesting because a lot of analysts were bullish going into the quarter. they did say that their backlog for the second quarter was over 480 billion dollars. there was optimistic news. also, operating cash flow is up. we will get more color on this. it had been up slightly before the earnings came out, so we are watching that. update on what is making headlines. we take a work at first word news. taylor: considering another proposal to repeal in replace obamacare. -- no clear idea on what they will be asked to pass. the house and senate with a

message to president trump on russia. voting to impose more sanctions and limit the president's ability to lift the penalties. they had already passed similar legislation, but the white house has been sending mixed signals on whether they will sign the measure bid and u.k. banning -- measure. and -- onanning polluting vehicles. it is brought on by tough emissions rules, even though the u.k. is preparing to leave the block. france announcing it similar ban two weeks ago. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. ago,: just over 30 minutes reporting quarterly earnings, beating for revenue, but falling short of last year on as adjusted pretax profit. we are looking at ford and we have bob shanks, cfo. good to have you.

reagan style these two things. you beat expectations on earnings per share by a good margin and he took up guidance for the rest of the year, but you did fall short on the pretax operating profit, so how do you reconcile those two things? bob: we did have a solid adjusted pretax profit, as you mentioned. what is behind the numbers in term of net improvement and as adjusted eps is a favorable tax rate. the tax team here has done a terrific job in anticipation of tax reform in the future to identify measures that we can take to recognize some of the taxes on the balance sheet related to foreign tax credits from overseas, so it gave us a low tax rate for the gooder, below 10%, and a outlook for the full year. david: what about the total amount of pretax operating

profit for the year? have you changed guidance on that where you will, for the year? bob: we are provided a range for guidance in terms of eps, 165-185. at the top of the range there is a small change in terms of the pbt element of that and it reflects basically somewhat higher incentives that we see across the region. some additional warranties in north america. offsetting that is stronger results of ford credit. david: talk to us about margins. where do you find yourself on margins and what about squeeze in the might now? bob: we came out at 5.9% for the automotive segment and it was down on the year-to-year basis. the biggest factor has been commodities. we talked about it earlier this year. we had nearly $4 million of headwinds from commodities in this quarter and we had nearly $6 million for the first half. we expect about 1.2 billion for

the full year. and then in addition, we had unfavorable exchange. that was in europe related to brexit, also in asia-pacific related to the weakness of the chinese currency and we had a one-time gain last year that is not repeating this year, those are three factors. david: when you talk about commodity prices, we think about steel of course. things are pending in washington that it could increase the price of steel. how could it affect your bottom line? bob: it depends on what happens. we purchased most of our steel in the u.s.,, so if there were actions and the consequence was to increase prices it would have an adverse effect on this. commodity price increases we have seen so far, the biggest portion of it has been steel. david: and talk to us about product mix. it has been an issue for all

automotive companies, as volumes tend to go down it has been tipping toward passenger vehicles and you make it up with suv's and pickups. how is your product in the second quarter? bob: we have had a product mix that has been positive, fewer cars, more utilities and trucks entire derivatives with a series. that is a reflection of what the consumers want. they are moving away from what we call traditional passenger cars and they are moving toward suvs and trucks and that is not just happening in the u.s., but every major market in the world. so we are responding to what the customers want. david: will there be further adjustments in the product line because of that? did you see ford motor coming out of passenger vehicles and adding more models of suvs? bob: let me answer it this way, we will be deploying more

capital toward those products. the announcement of the action that we are taking in terms of the next generation of focus in the u.s. by building that in china, primarily bringing it here to the u.s., ended up saving about a billion dollars. we are taking the and investing it in other parts of the business where we can get higher returns and it would include trucks and utilities. david: talk about geography, you are doing pretty well in china because of the lincoln, but what about europe? how much has brexit hurt you? yearwe expect for the full it will probably have an adverse impact of about $600 million. the biggest piece is exchange. we expect the u.k. industry to be a little bit lower and we have seen signs of it happening. that is partially offset with more pricing that we and others in the industry have taken. we expect about $600 million to float through and it will be the change in terms of the european profit that we see this year. billion last$1.2

her, so we will do about half of that this year. david: the new boss, jim hackett, what changes do we see already because of him running the company? that includes your area, are you taking reserves, anticipating costs -- where do we see the footprints right now from jim hackett? bob: no change in my area in terms of reserves. let me tell you what it looks like. there is a lot of energy, a lot of excitement, we are reassessing the business from top to bottom and there are interesting things coming out of that. we are seeing better clarity around decision-making and there is less bureaucracy. so i think the feeling is actually quite good. and what he has said is when we are finished with a 100 day unpacking of strategy and reassessment, we will come back and talk about the takeaways. david: already, as you look at the possible changes, when he

first came in, the reason is there is a desire by the board to move the faster into things like economists vehicles -- the new technology, so it will require investment. how do you maintain or improve profit margins in a softening demand, when you have to make those kinds of investments? as cfo, how do you come up with the capital money? bob: we have a lot of capital on hand already. we have got a very strong balance sheet, but i think what you are getting at is two areas we are focusing on, revenue opportunities and the president of global markets really pushing as hard in that space, and in terms of the fitness of the business, we have a role to play in that and jim, along with joe hendrix, finding opportunities that will be able to put on the table and generate the type of capital improvement you're talking about. david: thank you so much for joining us. cfo at ford.

dingemansng up, simon will be joining us as his coming reported earnings today that beat on the top and bottom line. this is bloomberg. ♪

♪ alix: this is bloomberg daybreak. taylor: coming up tonight on the david rubenstein show, an interview with paul singer, at 9:00 p.m. eastern now to your bloomberg business flash.

at&t showing it can handle looking at giant more subscribers in the second quarter which will help it bided time while waiting for regulatory approval of its $85 billion takeover of time warner. and glaxosmithkline ceo putting her stamp on the biggest drugmaker in the u.k., allocating capital to fighting hiv,ments for respiratory, and other disorders. it posted second-quarter earnings that beat estimates. that is your bloomberg business flash. jonathan: thank you. joining us for more on glaxosmithkline, the chief financial officer. great to have you with us. thank you for joining us. we will begin with some reaction. they have called today's numbers on inspiring, bernstein has referred to gsk as safe and

steady, but hard to see the upside. are you satisfied with that description of your company? is that ok? >> no. i think we have made good progress in the last quarter, and the first half as a whole, excluding the priorities to drive the needle. continuing toalso drive up the cost savings and restructuring the company so we can allocate to the next waves of the pipeline, so i do not agree with the description. we are making continued progress. jonathan: what are you doing to change the perception? >> i think as emma highlighted in her comments in the release today, we are looking at a good degree of focus on prioritization in the rmb portfolio. i think that will really start to shake up the priorities, allow us to make better choices

and really invest behind those products that we see will make the biggest difference to us as a company. i think of the past, we have had a broad range of launches, some of them not as significant as others, but we have had significant successes such as particular launches that have made a difference and we want more of those and we are prioritizing rmb as a result. we also need to continue to execute on the priorities of the existing business, driving those existing launches, and the others coming up that we have with shingles, the close triple, and the first of the dual hiv treatments in 2018. jonathan: so looking at the focus on rmb, in the immediate term what i imagine it will do is release pricing pressures you are getting from elsewhere. where are you most sensitive surprising and is there more to be done on cost because of it? >> the place we see the greatest pressure -- there is always more

we can do on costs and we have announced a billion pounds in savings we are adding to existing programs. across the company, driving a much greater cost consciousness in terms of where we spend money and how we make her choices and make sure we are really backing existing and more products to come to drive the margin forward and give us flexibility and strength in cash flows. alix: simon, taking a look at over all m&a this year in terms of third quarter up about 63 is the deal count, what is the biggest factor in holding back in the night -- m&a in your space? >> there is uncertainty in our sector. potential tax reform, what is going on in congress, those are two big issues people talk about a lot better holding back activity. environment in a sector where there is quite a lot of pressure, pricing being one of

them, i think that we should certainly expect to see more activity over the next several years. jonathan: given what you are seeing at the moment with the pricing system, what needs to change and how is your company positioning for that? >> i think we've always tried to take a responsible approach to pricing. we have launched a series of launches below existing standards of care pricing and we've tried to manage carefully the price increases that we have asked the market for, while remaining competitive and delivering return. so i think that is something that we have been doing individually. i think more broadly for the sector, greater transparency is probably keep two in gauging and constructive debate. so that is what i would look for most. cfo off i ask the another drug company, they would probably say something similar, but in actuality are you looking

at specific things? outcome based contracts, lowering drug pricing to get ahead of any criticism in washington dc? >> i think where open to dialogue on those issues. we certainly have looked at a number of similar outcomes-based structures in the u.s. and elsewhere. we have for a long time talked looking at where we are already putting that in place to make sure that medicines, vaccines, in consumer products are available for those that need them in different parts of the world where the economy operates in different ways. i think we have a number of models we have tried to use and we will be putting those into the discussion in the u.s. as well as elsewhere. jonathan: to wrap things up, there were reports that suggested your company was prepared to buy out a stake in the consumer joint venture.

i understand they have the option to sell the stake in march. can you give us the latest on what you are hoping to do and how it fits into the strategy update you gave us this morning? today thatit clear one of our key capital priorities is to acquire the remaining stake in the consumer joint venture if they choose to exercise that - that is their call. i am happy to buy the stake and we would like to get 100% of that business. it is up to them. i think as they said previously, for the time being, they are happy to remain in the venture and we are happy to have them as partners. jonathan: have you had discussions with them recently? >> we sit on the board together and we talk with him regularly. but i think they have made their decision clear. jonathan: ok. simon dingemans.

thank you very much. alix: basically, yes, but they have not decided yet. jonathan: there is always a price. alix: the money. you can watch us online, click on charts and graphics and interact with us directly with bloomberg go. go back and rewatch what you missed. this is bloomberg. ♪

♪ market,: looking at the getting you up to speed. equities big across europe. we are up on the s&p 500, a quarter on the dow after closing at an all-time high yesterday. that is where we see it coming into wednesday. other side of the story, bond market, two basis points. and going into the fed decision in about four of the six hours. i cannot be bothered to do the math.

and in the fx market, we are unchanged on the day so far. 130.55 on the cable rate. and a stronger pound story, curiously, even as gdp data confirms a slowdown in the first half. and getting a little support from recent data out of the u.k., growth picking up modestly last quarter compounding what the office of statistics called a slowdown in the first half. the pound rallying back into positive territory after a dip following gdp results. we go to christine, she joins us from london. walk us through the data. not as bad as some people thought it could be, but still concerning with what we have seen in the trend, slow gdp growth over all. >> this is probably something that people in the market already anticipated, given that earlier this month we got a mixed picture for different economic measures for the u.k. retail sales better than

expected, but some manufacturing not as good as some people forecast. all in all, the pound took the data in stride. a little bit lower as we got the lower gdp figure for a second quarter, then it moved on. jonathan: taking a look at the story of the bacon the england next week, what about a rate hike? >> you know, it does not seem like there is much really, because combined with the slower data for gdp that we got today as well as pullback in cpi, we have not seen much for a rate hike, at least not right now for the boe. especially at a time where they are still at the juncture of brexit negotiations as well as an uncertain outlook for u.k. companies. alix: i feel like the market did respond to the numbers. for those that you speak with, what is the call if we get a boe that stands back a little bit? market, i think the gilt

has been more responsive to the feel for the bank of england interest rate. if we do get a pullback from the bank of england next week, leaning more dovish than expected, the gilt will price accordingly. especially because we have seen that pricing over the last month as the boe has been fine-tuning communications and we have heard from different places on different numbers. there is debate in terms of timing for the next set of the the oe so gilt will respond accordingly. especially if we get a dovish tilt. jonathan: thank you very much. a week and a day away from that decision. i struggle to see how they go in with much fuel with the recent data, but i guess it depends on how you interpret your mandate. with alook at inflation

target of 2%, you are not getting their. -- there. david: but they are signaling they want to be hawkish, people are talking about it. alix: it brings up a good point. if you have inflation, employment and financial condition, what outweighs what? it looks like employment is outpaced. jonathan: i wonder how much of the hawkish language is about managing those channels as opposed actually getting the market set up for a rate hike anytime soon. coming up, we get to the earnings. facebook earnings coming up. and we will take a look at a preview. from new york, you are watching bloomberg. ♪

♪ jonathan: it is federal reserve

decision day and we are looking at clues as to exactly when to the balance sheet unwind will begin. looking at u.s. health care, lawmakers preparing a simple repeal bill today. year,r the 28th time this the s&p 500 begins the day at a record high, fueled by better than expected earnings. good morning for our viewers worldwide. i'm jonathan ferro with david westin and alix steel. futures are positive. the euro and dollar treading water. and treasuries just below the average of 2017, the 10 year yield at 2.32. alix: take a look at gilds in europe. second quarter gdp coming in a little bit light, but the pound is getting a boost. you know it, i am watching copper. a monster rally, hitting a

two-year high at one point. we will be talking about this later. david? this: coming up at 10:00 morning coming new home sales for the month of june. and 30 minutes after that, the weekly crude inventory report. at 1:00 p.m., the u.s. treasuries selling five-year notes. and all eyes will be turning to washington for the rate decision. bloomberg will have special coverage of that later today at 2:00 p.m. jonathan: we are not really selling that decision are we? david: dramatic. jonathan: not expected to raise interest rates today. low inflation more likely to be a key discussion point when they hold the meeting. president donald trump says he may reappoint janet yellen for a second term. he has indicated that gary: is a top contender for the position as well.

we have with us from washington michael mckee. set this up for the statement we could get later, which paragraphs we need to look out for? >> i do not want to undersell it either. adopted a policy of not surprising the markets, so nobody expects a policy change today. we might get a little bit of change in the language for inflation. take a look at the chart for inflation and it is obvious what has happened, it is slowing down and it gives the fed no room to move higher with interest-rate without explanation. there is no press conference today, so what do they do? they may be take up the word somewhat from the statement when they say it has been running somewhat below the 2% target, and just leave it as it has been running below the target and do not say much else about it.

they will not get too upset with that. jonathan: i have the following exercise, somebody was not meant to watch financial news today and they come across us when we are talking about the federal reserve and you realize how ridiculous it sounds, changing a word from somewhat -- why is this where we are at in 2017, looking at changes to one word? michael: well, there is a two-part answer. they do not want to surprise the market, they do know what to make major changes because it gets everybody upset. it has also gotten a long statement, into a very long statement, so if they do too much it confuses people. now they have set out a path and they want to maintain it. they need to find a way to explain it to the markets without getting them to move too much. david: if the fed becomes more dovish, is the president going to be happy? he gave an interview yesterday,

saying he was not very upset with janet yellen and he likes a lower dollar. michael: he is a real estate guy, he loves the low interest rates and janet yellen is probably his best pick to keep those interest rates low, that has been her philosophy, keeping them low as long as possible to generate more jobs and growth. we do not know what gary: would do -- cohen would do. it is a markets guy. alix: ok. michael mckee of bloomberg international economic policy correspondents. for more on the outlook on the fed, we will go to david and his colleague, the number one research team in the bond market every year between 2006-2017, quite a track record. economisto have chief

stephen stanley. you guys are old buddies. take it away. i wanted to but you two together because of a modest hawk and dove debate. back, youared it think we could have a balance sheet unwind as soon as today -- so was it the data? >> it was the data. the reason for moving in july is keeping the rate hike option open for september and i think it was something in my mind was still at least worth keeping open, until the last set of inflation data, which took it off the table. alix: what is your forecast for next year? we're looking at one rate hike right now. >> i think inflation will get back on track. a good part of the slowdown has been transitory, labor market is strong, and i think we will eventually get back to a gradual turn of inflation. i think we will get back to the

gradual pace of rate increases and it will look like maybe 3-4 rate hikes next year. alix: you disagree, because you said september is not in the cards and you think that they will want to hold back on rates in 2018. >> i do think the market is telling the fed they could be risking a policy mistake at this moment and of they are risking a mistake we expect to see the curve flattening and that is what we have been seeing. the data is not necessarily going to rebound immediately and look constructive at the end of the year. we are going into an important period in washington dc where we have the budget debate and a potential government shutdown. if the government shuts down there will be data distortion and they could be flying blind into the december meeting with data that is difficult to interpret. any incoming head of the fed will want to give some time for this to take hold and see how it

will impact the economy and i expect we will see a wait and see attitude for the beginning of the year, even if it is janet yellen. jonathan: strange story for the markets and federal reserve, looking at the dot plot, north of 2.1%. 10 year yield around 230 something. not much of a stretch, but either somebody is wrong or we will get a flatter curve? which is it? ian: i think you could see the fed continuing to tighten. that comes with higher probability that the 10 year yield will stay in its range or get lower. it is the new conundrum. but it is the same story, look at what is going on globally. we have a lot of talk about how the ecb will taper next year and it is something that people were worried about to push domestically, but it has not.

jonathan: it could be a situation where nobody is wrong, the fed does exactly what they will do and we end up with an aggressive yield curve. ian: the faster they go, the more aggressive they are. jonathan: what do you said? stephen: the markets have been distorted by global policy. i think it is funny, in the u.s. it feels like we talked about this other times and qe from the ecb is having an effect on those u.s. levels, but not u.s. treasury yield levels, but risk spreads. anywhere you turn in the u.s. market right now it is telling you that there is too much stimulus in the system, too much money, spreads are narrow, people are just grasping for yield. so i am very much hoping we will have an unwind of the qe here and eventually in europe that will hopefully take away some of that. david: ian, the fed is signaling

they will unwind the balance sheet, gradually. is there anything that would stop them from doing it at this point? and when you talk about a new fed chair, all indications show that it would be unwinding the balance sheet, because the isology of president trump we should have done it in the first place. page thaton the same the september meeting is when they will announce the taper. they have done a masterful job of communicating that will happen and they want to do it. i think it is a done deal to a large extent, but what i am worried about is the mechanism between prior rate hikes and effectiveness on the real absorbeds liquidity is on the front end of the market and i think it is a risk the market has not necessarily fully priced. david: what about that? if you taper gradually and you take of the debt balance she

come a does it increase the effect of the rate hikes and increase the danger of a policy mistake? yes.en: in theory, but i think it will be a long time before it comes into play, because with excess reserves and liquidity, measuring it is such that the first of the month of unwind will not be binding in a way, you're just sucking cash out of the system that the banks are not using in the first place. the pace they have laid out, it feels like that is a couple years down the road. alix: i feel like the neutral rate is the elephant in the room and currently it is around zero, but the divergence is medium to long-term. janet yellen signaling it will rise. what is your call? stephen: i think the fed is wrong about this. look at monetary policy right

now and unemployment has been falling very fast for years on end, and the economy, even though it is not growing fast by historical standards, it is still growing. monetary policy is easy and a think the neutral rate is considerably higher, up where the fed thanks it will eventually be -- thinks it will eventually be is where it is right now. ian: they have effectively become the central bank to the world, and in doing so they must consider what is going on globally and in that context i think the rate is higher than where it is, but not much. alix: ok. stephen are but sticking with us. oil moving to the upside after hitting a seven-week high. the u.s. stockpiles could be plunging. we will talk about that and coppper. this is bloomberg. ♪

♪ david: this is bloomberg. here is a beautiful shot of the capital on a nice summer morning and what they are doing right now is they will start vote-a- rama, as the senate goes through different approaches to health care trying to find something for them to agree on. we have kevin cirilli. when does this start and how likely is it we will come up with a bill as a result of it? kevin: unlikely that there will be a bill that will ultimately end up on the president's desk in the near future. that is because the consensus we hear from the republicans on capitol hill is that there could be coalescing behind a skinny version of the senate majority

leader mitch mcconnell's proposal, somewhere in the middle between a full repeal into the modern version put forth. that said, i spoke with the chairman tom perez who said the skinny version will attract no democratic support because he says "it will allow the freedom caucus to hijack the debate" once it gets to the house of representatives. and i have spoken with those on the freedom caucus who say the skinny version would really delay the timing of there to be any significant repeal, by about several months. the closer we get to midterms, for those watching outside of washington, from the republican standpoint you don't want to have a major controversial vote close to midterm elections. david: the democrats not liking much of anything right now. even if you lose collins and murkowski, those against cutting back obamacare, you still have

50 votes and a vice president, so could you not get something through? kevin: it goes through, but that to the house of house -- but back to the house of representatives. so it could get out of the upper chamber, but from the standpoint of the white house, they hope that they will be able to put a lot of pressure against the pulpit on members of the freedom caucus to get some of them and really capitalize on the opportunity to make a significant dent in health care. that said, we saw tweets from the president this morning going after those that oppose. he targeted senator makowski early this morning. david: thank you. ian andill have stephen, how much does this actually affect your life? ian: from a day-to-day trading perspective, i think the market is responding to the probability

that they do get something done. if things look good, treasury market will sell off and it is less about health care and more about what it means for the budget this fall. the higher probability of success, the more likely the budget will be fine and there will be no shutdown and things will move along on the economy side. jonathan: there is an adjustment in the market. yield curves kind of looking like that, rates rising, and it extends out. when you look at the three-month and a six-month, there is a spread emerging, from the last couple of weeks, is the market think about how important october is? ian: they are worried about a shutdown and temporary delay of payments and when you see it come through in the bill market politicians should take note. jonathan: will they take note? stephen: i think the arguments in washington will keep going. i think the key for the health care vote is really whether the

republicans show themselves they can come together and get something done, because there are many other things -- i mean, health care was tough to start with because it was the toughest thing to get something done on. the more important thing for the markets and economy is whether they can get a tax reform package through this year or next year. i think, even if it was some skinny whatever, if they are able to agree on anything i think we would feel better about the prospect of tax reform. and that is something of the markets would feel is pretty significant for the economy. jonathan: tax reform will be different from health care, repealing something and just getting something done, tax reform will actually take more time, isn't it? stephen: it is probably more, look at it, but something they are more unified on in the republican caucus. most of them in favor of less taxes, so in theory you have a

consensus to build around. but the devil is in the details. jonathan: there is a consensus worldwide on less taxes, but they are looking at whether it is revenue neutral or not. there will be a split their -- there? stephen: for sure. and the frustrating thing is health care has dragged on. we thought we would move on to tax reform by now and we're still dealing with health care and while i think the republicans are holding out hope to get something done, there is a point at which they will have to move on because everybody agrees tax reform is the one that is most important to getting growth up in the economy, certainly more important to the trump agenda in many ways. alix: is the dollar the proxy? it seems to be the asset most sensitive to the headlines out of washington dc, so why is that? stephen: i think that is a flow to what it implies for the real economy. ian: i think what we saw in the

strength of the dollar over the last, i mean, the beginning of the year, is the inflation. fedthe question is, is the making the policy mistake? will they need to reverse course? is what is dragging on in washington taking too long and the possibility of something good coming out of washington, is it finally down to nil? health care is a big issue and what it signals to the market on what could come out of washington, but they need to also cut the expense starting in 2018-2019. if they cannot do that, horse trading in washington in the fall will be contentious. alix: you already have unemployment trending below 4%, so what happens if we do get something out of washington? stephen: in terms of tax reform? alix: for anything. stephen: i think the good news, if we get tax reform, that is

the big question, it can boost growth without being inflationary because what is being discussed with the supply side is you would get investment picking up and i think productivity perhaps finally accelerating, on the back of the better financial incentives or tax incentives for companies to expand and invest. i think you could get a pickup in gdp growth without necessarily accelerating inflation or driving and employment rate lower. sure, it could go, more likely to go lower than higher on something that boosts the economy, but i do not think it is an inflationary thing. david: thank you both for being with us. coming up, we speak with the senior senator from connecticut, richard blumenthal it will give us insight on what is going on in the senate with health care. this is bloomberg. ♪

♪ jonathan: in the u.s., earnings keep delivering and futures are from. -- firmer. s&p 500 futures are positive. count ate record high the close, 28 of them on the s&p 500, 26 of them on the doubt and we could get another one today. that is the story. let's get you the movers. alix: all the earnings definitely going to propel equities to another record high. and macro devices jumping over a percent, beating estimates, really dealing with a new chip that is helping the company. they raised revenue outlook from the mid to high teens, year on year. good story for amd. and u.s. steel is up. we are talking about potential still barriers, imports not getting an, raising prices and

it helps the steelmakers. $251 million for the net income, a loss of $40 million earlier, so put that in perspective. it was dismal for the first quarter. now on the uptick. that verizoning should actually be purchased by comcast. because on that news, verizon is viewed as the most likely buyer of dish. if you had a tie up that leaves dish in the cold and citi downgrading them on this potential deal, it is interesting stuff coming out of the industry. the cable type of, telecom tie up, and it will be left standing. jonathan: thank you. making sense of the commodity market. not very much on crude. what is going on in the metals market? alix: that is what we will talk to edward morris about. i think it is positioning.

shorts may be rolling out. fundamentally, what has changed? jonathan: right. it is the old story. copper up. crude running up as well, up about 6/10. coming up on the program, we will catch up with edward mor se, citi head of commodities research. we are talking about copper, crude as well. what is next for the oil market? that and more hopefully answered in a couple minutes. join us from new york. this is bloomberg. ♪

♪ , onehan: here is the story hour away from the cash open. sentiment decent for the bulls, we are up across the board, and 2/10 on the s&p 500 with

earnings coming through and they fail to disappoint. that is fueling big gains in the last 24 hours, to new records on the s&p 500. and ahead of the fed rate yield on 2.32 is the the 10 year. about two basis points. cable rate is higher, that despite gdp confirming what a lot of people thought already, the first half soft in the united kingdom. pound is stronger. and euro-dollar is treading water after kissing 1.17 in yesterday's session. we are not treading water. that is the story across assets. we want to get you headlines outside of the business world. taylor: the u.s. senate considering another proposal to repeal obamacare today. they rejected the health care

plan must buy, at the start of several days of debate on how to scrap the affordable care act. no clear idea on what the replacement plan they will ultimately be asked to pass. sending a tough message to the president on russia, the house voting to impose more attention on moscow. and the senate has already passed similar legislation. the white house sending mixed signals on whether the president would sign the measure. u.k. banning sales of gasoline powered cars starting in 2040. local authorities will be able to impose penalties on the biggest polluting vehicles in 2020. the decision partly brought on by tough emissions rules, even though the u.k. is preparing to leave the european union. france announced a similar ban. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. alix: commodities always in the spotlight, but i am focusing on

copper, surging to its highest level in two years. the headline, the demand in china will be hoping to trigger a global shortage. i am skeptical. here is ed morse to break it down. recently cutting the oil forecast, and looking at copper in the fourth quarter -- help me, i do not understand what is fueling the rally. ed: it is china-based. the rise was unexpected in the past 24 hours. what goes up can go down, it vice versa, so underlining this is the tightness in the balances. we have gone from growth in inventory in 2016, to what was a very tight balance that could easily turn into a deficit this year. the moreked largely by solid base of growth in china. it was looking like it was a

housing market growth, but in addition to that we have had strong investment with production growth and we have had strong consumer spending. consumer spending has seen an increase with car sales, the real estate, like goods, -- light goods, and rebuilding of the transmission grid in the country, so this is going to go through the congress later this year, but the odds that, that is the question. alix: is it sustainable? china has not really fallen out of bed in the past two years and we have had these rumblings before, labor shortages before, and the market usually ignores it. ed: we also had increments of supply a year ago and there is no forcing increment of supply this year or next year, so we are looking at a solid deficit. 2018, 2017,ng into

the market could have been in surplus and it looks like the growth spurt in china, however politically induced it might be, will sustain the rally for a couple more months. alix: so the deficit looming, but one -- says we could have yourr prices going up, call is about 1500 a ton, so how do we get there? ed: we get there by prices continuing to go up? how do we get to 8800? alix: how do we get to what you have now? ed: i cannot answer that question. alix: how do you get your price for copper? marketx, by the adjusting itself. alix: what happens with china? your price call for the fourth quarter, hitting $5,800 an

ounce, how do we get there? why do we see pullback? ed: the pullback would be, you know, you are getting me in a tight mode. i have to do what we publish, i cannot talk about what we have not published. sorry about that. alix: ok. i thought you published $5,800. but we will move on. we will talk about oil. you are one of the last holdouts, so why did you wind up downgrading the oil price forecast? ed: let's be clear. we downgraded the price do something that is 10% higher than where the current prices are. we pulled back by seven dollars a barrel. and $63 the vpi, to a price level in the 70's. that is adjusting to the surprising market. of all the surprises, the biggest one has been sustainability on the return of

thatian production levels nobody would have thought about in january. what was unforgettable to opec was unpredictable to the market and we have seen the consolidation of power in the eastern part of libya, leading to production growth to about 1.1 million barrels a day. filled by a third of what the peak was, we do not think it can go up any further. we have seen in nigeria the president and the campaign taking a holiday for health reasons, a new acting president taking over and it forces in the southern part of nigeria that thought that there would be no hope of a revenue sharing effort on the part of the government, so piece was -- peace was brought to that part of the delta. neither of these things in nigeria or libya were predictable.

what we can say is the world as a whole has seen the lowest level of supply disruption since february of 2011, about 1,400,000 barrels a day online right now as opposed to a year ago when we had formally imperils a day -- 4 million barrels a day. 1.3 millionted a barrel a day increase in combined libyan and nigerian production. as you will know, there is not increasing likelihood of a disruption to supply coming from then as well yo -- from venezuela. alix: to your point, that is why we saw a downgrade in your price. but i have to do it, we have seen the oil market tightening a little bit. take a look at the chart, this is december 2017 price versus

the 2018 price. when it is negative, it means prices are cheaper now than in the future, so that is reversing a little bit. we are now about $.81. what will add the field to the fire? -- fuel to the fire? ed: it is there. in both, slowing down the move to a tighter market was of course the return of nigeria and libya. prices related to wti. we could absolutely move not justified in it -- to flatten it but the backwardation. we have a poll of demand at of the atlantic basin and into the far east, so these are signs of a tightening market and a reason in part why we feel comfortable with our $58 a call for the end of the year. alix: the other part of the

market is earnings coming out of the u.s. you have halliburton saying things like we are seeing the top, a pullback from services. ofhas the marginal dollar shale and oil been hit? do we know what it is now? ed: it is actually not the marginal dollar yet, so much at is it is constraints of other sorts. i think there are two things we have to look at, the most critical at the moment could be congestion in getting material into the permian basin in particular, which has been leading the growth in the country. there really are tightness is in the market for the pumps. they are moving to a high level of capacity utilization. we are not there yet on utilization, getting that into the program basin has been -- permian basin has been problematic due to infrastructure.

this part of it is temporary. on the other hand, we have price that is determination on whether production is going. quarter thee fourth opec agreement. so the price of oil went up. for deferred price going up wti above $52 a barrel. we had a record for a quarter of hedging 32017, but a like amount of hedging -- light amount of heading into 2018. the market needs a price a note at the back end of the curve to get it going. meanwhile, we have seen a drop in the rig rate. if you have a chart it would be pretty instructive, dramatic doubling of the rig count, but week after week growth of 21 about 12.ng to and last week a negative number.

that is because the price is not there to signal the addition of more rigs. you have to see the price go up and backend go up and hedging go up, and if and when it takes place we will see the rigs go up again. alix: great stuff. good to talk with you on oil and copper. david, i got it out of my system. david: that is good. coming up, facebook reporting earnings after the bell today and we have brian weezer -- wies er joining us to talk about what he thinks instagram could be a boom of growth for facebook. this is bloomberg. ♪

♪ alix: this is bloomberg daybreak: asia taylor: coming up in the next hour, stephen -- tors cio. this is bloomberg. not year bloomberg business flash. uber hoping to name a new ceo by september, looking at six candidates. among the candidates, -- whitman, said to have been meeting with the leadership in recent weeks. and mercedes-benz looking at separation of businesses that could pave the way for future spinoffs. the company has been looking for the unit to become more nimble for growth. one of the biggest data breaches in europe, italy's unicredit saying hackers accessed bank accounts. the great has occurred twice, as

recently as this month. they were able to obtain customer data relating to personal loans. that is your bloomberg business flash. jonathan: how much money have the banks spent on protecting themselves from that happening. david: not a good headline. jonathan: not a good headline. big stories about the hackings over the last 12 months, hitting sector after sector. every expert that came on said it was because financials have spent so much money protecting themselves from that happening. take story. getting you up to speed across assets. futures are firm, up on the dow. and you know the story, 28 records, for a 28th time coming into the open with a record high on the s&p 500 this year. the story elsewhere in the bond market, five-year money coming into the markets. we are looking at the yield on the 10 year.

down two basis points on the u.s. 10 year. at 1.3049.le rate senatein washington, the is or is not moving closer to resolving the health care debate. it has taking the matter to the floor for different approaches, hoping to find one that will stick. chris krueger joining us now. welcome to the program. chris, as you look at it in washington and the possible alternatives that they have with all the approaches, what is the most likely outcome? chris: i think the most likely outcome remains that the senate is incapable of fighting 50 republican votes -- finding 50 rebel gunboats. publican a -- re votes. on friday, the whole thing could

collapse on itself, or somehow they get 50 votes on what is being called the skinny repeal, and then this will basically through the hot potato back to the house. house and senate will come together and hammer out an entirely new bill that will have to go back to the house, and then the senate. david: unpack the so-called skinny repeal so people understand what it would mean for health care. chris: it is essentially the lowest of the low hanging fruit. none of the senators believe this is the end all, be all, but maybe something that we they could -- that they could get conservatives together on and it would eliminate the individual mandate, eliminate the employer mandate, and in the medical device tax. toentially it is just a way move the process forward. it is not -- it would basically

signal not the beginning of the end, but the end of the beginning. david: to quote churchill. it is ironic. let's say it did become law. i know they would have to compromise with the house. but what would that do to the insurance markets? what we hear is when you eliminate the individual mandate, and employer mandate, it reeks havoc within showing its -- wreaks havoc with insurance. chris: absolutely. it is not going to be signed into law, even if the house longes -- agrees, it is a putt. what is a big problem with the republican effort thus far, the inability to get any industry groups on their side with this effort. what you saw with the house and senate, just sort of brutal

opposition from both grassroots and from the industry stakeholders. david: thank you very much, chris krueger. and for a view from inside the senate, with the consideration of health care, we will welcome senior senator from connecticut, richard blumenthal. a democrat from connecticut. good to have you with us. sen blumenthal: thank you. david: we have been talking about possible alternatives going through the vote-a-rama. you are there, how do you see it playing out? sen blumenthal: simple answer, we have no idea how the senate is going to proceed. we know we will have a vote today on repeal and run, as it is called, repeal without replacement. which will go down to failure, just as the proposal last night went down to failure with nine

republicans voting against it. in some ways, even more significant than the first want to proceed on that motion. so the path forward is by no means clear. what the outcome will be is even less clear. everye basic problem is one of these republican plans puts tens of millions of americans out of insurance, it costs states hundreds of billions of dollars, and it provides tax cuts for the richest while it deprives americans of basic health care. republicans have not been able to surmount that dilemma. david: your colleague john mccain came to the floor and adedeted -- and ple everybody in the senate to come

together and be bipartisan in their approach to this, admonishing republicans and democrats. is there anything that would bring the democrats to vote for some sort of revision of obamacare? sen blumenthal: absolutely. we have said from day one that the affordable care act needs improvement. there are repairs that need to be done without repealing it. our approach is to mend it and there are steps that can be taken to introduce greater exchange,n in the more choices, drive down the cost of health care, specifically pharmaceutical drug prices, which are too high. and these kinds of common sense statutes can be done with very strong bipartisan agreement and consensus, but first republicans must abandon the reproach -- the approach of destroy it.

that is the approach that has doomed their efforts to form a consensus from the start and i think that they will have difficulty forming a majority, becausee the 60 votes, neither of them voted against a proposal aimed at conservatives and moderates to bring them together. david: finally, another one of basically,gues said to that point, republicans did not even open up the door to discussions with democrats. are there discussions in the senate about possible ways you could have a bipartisan approach? any discussions you are aware of? sen blumenthal: there are ongoing discussions among my colleagues. i have been involved in some of them. there are different views, and

there is attempt to go back to what john mccain described so movingly yesterday as the regular order. what is the regular order? it is what we tell high school students from civics class when they come here, the way the senate is supposed to work -- you have a bill, then a hearing, give and take, an amendment process on the floor with debate -- none of the regular order has happened here, which senator mcain so elegantly announced yesterday. republicans only, without democrats given a seat at the table. that is the approach we need to avoid going forward. once republicans decide they want democrats to participate, to have a seat at the table and follow the regular order, which john mccain urged yesterday,

then we can have real compromise. david: thank you for spending time with us. jonathan: thank you. we turn to facebook quickly. looking ahead at the earnings release, happening later today. expected to reflect strong user growth. and looking at instagram. we have brian wieser, great to have you. we want to go through things quickly. facebook has said that increasing in the newsfeed to slow -- is the market prepared? brian: i do not think so. rapid usually thinks growth is a durable thing, so the specific comments, yes, they have been warned to be mindful of it. the bigger issue is if you assume digital advertising keeps

growing for the next five years, all of the digital advertising is everything and there is no other business, sorry everybody else. that is not realistic. i do not think the investor expectation appropriately reflects that, given how much of a share google can get. on top of that, there are risks -- the regulation from the ec, gdpr, a major data protection privacy issue that will have a global impact. the fact proctor and gamble and other large marketers are unhappy with facebook with respect with how they allow third-party data sources, tools to be used on facebook. a lot of negative things that are being ignored. jonathan: what is one metric you will be looking for in the earnings release? brian: revenue growth. they will still grow in the 40's, it is -- whether it is 40%

or 50%, same story. they are growing fast, faster than google. they own the universe like darth vader and luke, nothing wrong with that. that has been the case and it will persist for years to come. jonathan: we appreciate your time. we will get you on for longer next time. coming up, the opening bell right here from new york. who wasus is stephen -- bullish before the election, stayed that way after the election. what does he think now? this is bloomberg. ♪

♪ >> it is fed day.

unwinde balance sheet will actually begin. the senate debates the future of u.s. health care. republican lawmakers considering a full repeal bill today, which is likely to fail, and the s&p 500 begins the day at a full-time high. better-than-expected earnings. from new york state and the u.s. worldwide, this is bloomberg daybreak. counting down to the opening bell. we are 30 minutes away, and futures are firm. up to 10 sub 1%, the earnings come through and deliver a of 1%, and the10 earnings come through and arevered a series -- yields down by two basis points, and we printed just north of 117 just -- 1.17y from the euro

just yesterday from the euro-dollar. >> and here is where we are stacking up. irobot jumping about 19%, having a nice earnings beat, but softbank is also buildable 5% has also built about 5% stake in irobot. this stock up over 4%. it boosts its year earnings-per-share, the estimate is about nine dollars 40 cents. and free cash flow really's , a very solid number out of boeing. up over 8%, advanced micro devices. they beat the higher estimate of earnings. they have a new chip that allows them to go head to head with intel. that strategy paying off. we also are seeing 2017 revenue up to hide year on year.

bmo is coming out, doubting the valuation and downgrading the stock, and the risk reward is no longer to the upside. but nevertheless, a solid season in earnings so far. >> after seven years trying to repeal obamacare, republicans have their chance. in the senate, that chance depends on the outcome of a so-called votto -- vote-o -rama, were they will vote on each proposal to see which they like best. we just talked to michael -- richard blumenthal of connecticut, who said they are dead set against anything that guts medicaid, but that they do think there could be improvement and that there are discussions going on between democrats and republicans in the senate. what are the chances of something that is a bipartisan approach year? >> i do not see them as great. there are some senators that are genuinely trying to find a path

to compromise. i think i would throw some cold water on it in the sense that we need to her member what is happening here. republicans have been running against obamacare for seven years. this is democratic orthodoxy right now. trump has not been very nice, the way he has talked about it, mitch mcconnell has not been either. the fact that there could be some coup by our moment is kind of hard to picture. there might be some ways on medicaid in particular where they can find common ground. >> if that is right, the republicans will have to hold all of their votes if they lose the two that have been negative, collins and murkowski already. they will have to have all of them and vice president pence. is this all an act of desperation by mitch mcconnell, or is this really clever, crafty legislation? >> i think what we saw yesterday was a nice piece of what is letting, who sometimes gets a reputation -- of legislation by mitch mcconnell, who sometimes gets a reputation for being a little lost. we were talking about that they could not get to a debate on the

floor. i think if he feeds the fire and said his -- it is the put up or shut up time, you better vote. i think there will be others like dean heller out of nevada, ron johnson had mitch mcconnell on the floor of the senate, but in the end he was right. his bet got paid off and the debate got started. a big, big step. but a bigger bet on getting the bill out. can he will defeat to the fire with their constituents back home, that they keep telling them they will repeal obamacare -- if they do not do it, are there consequences for them? >>, yes there are. people in deep red states cannot go home and say we did not repeal obamacare. ohio andlicans in wisconsin, they're going home and saying i will not help them with a bill that will not help people in our state.

we have problems on both ends of the spectrum. >> think you're a much for being here. jonathan: after several weeks, investors in market watches have thrown up caution flags, citing potential bearish technical patterns. low volatility and the fact that there are worries that no one is worrying, and it has amounted to nothing. the s&p 500 closed at an all-time high on tuesday, the 28th record close of 2017. the dow at 26, the nasdaq, 43. joining us now to discuss this north, and the market is mountable to correction, your words. why? >> we are close to our long-term target of choice for hundred. i think the market is fairly valued now. it needs to get earnings to 141.50, which i think it will. we think there are four drivers

that have been pushing the market forward. all four of them are about to go into stall mode. one is the fiscal side, the market needs tax reform. on to either going to go it with momentum, or with momentum, or was desperation depending on what happens with health care. but the sausage making process has been so ugly, i think it is hard for the market to discount the reality of tax reform until thist closer to this, and is probably december, january. next is the fed. the fed has to start buying -- selling 10-year note's, right? that is the down sheet shrinkage to get the spread on the yield curve better so that thy financials that are a key part of the market can start showing better spreads. >> are you anticipating underestimating what that means for risk assets? issue is actually the

opposite. i think the fed, and initial attempts to raise rates, it has thrown fuel on the fire. i have said that before on the show. i think it is actually a positive. my concern is that they will be in apology tour mode over the next 3, 4 months. yellen is inherently dovish. she wants to not upset the market. so i think as she approaches the start of the balance sheet strength edge -- shrinkage, the last hike in december, she will be very dovish in her tone. i do not think that will help. the market actually needs to see the balance sheet shrinkage getting going, and i think it will be a slow going. later, that is again a this year, early next year development. the deregulation piece, which ourbeen a key element of thesis, is kind of in place now. unfortunately we will not get any headlines on this. we get big headlines when you pass regulation, but you do not get much when you fail to execute on regulation or

pullback, you do not pursue relative rate -- regulatory action. late 2018,bably 2019. that is earnings. what i have been observing in the market is with a few exceptions, generally meeting and beating modestly is not being rewarded with much market moves. these stocks had a big run into earnings. -- to geten big beats halfway through the earnings season it has been solid. we are grinding toward the 2500 level. we will get that in the next week or two, and i am still trying to figure out if there are clients and the possibility that there is a lack of possibility in the near term, we could see a little volatility. if we get it, it is another chance to reload. here, becauseling

our long-term targets are actually quite higher and we think we are in a bull market environment. said around the table and say they are still constructing on u.s. equities in general. are they still solid? that is not rolling over anytime soon. but your points -- take a look at the bloomberg here. this is titans at the end of june. not updated yet for earnings that have come out in july. the least number of guidance issuing its 2000. the pink line is the moving average, but it is the white line that really counts. we are seeing 18 guidance issuance. does that's because ceos -- is that a washington issue? how do you look at the market and know how to place your bets when ceos cannot even talk? >> i think this is where investors have an advantage over wall street. we are willing to put our own guidance on the numbers. so our 150 target on s&p 2019 is for late 2018,

based on our view that we will get a tax cut in there. but company guidance is not going to take that bet unless they know you have got it. same with wall street. they will not put it into their numbers. so a lot of the numbers right now do not include some of those positive things that i think the market will start to believe in once we get them. but the sausage, as i said, has been so ugly on health care and uncertain. nobody will be willing to do the psychological analysis i do to say look, the republicans -- if they do not get tax reform after --sing on health care >> tax reform or -- >> they can forget about the midterm elections. they will lose the congress. >> tax reform or tax cut? -- for the market, tax cut would be better. i think the minimum, we will get a tax cut. on monday,p next,

two great guests, two great conversations. joined momentarily. as for the fed day decision, 2:00 p.m. eastern. we get the interest rate decision. special coverage here on bloomberg. 19 minutes away from the cash making a surge after a couple of ugly days. this is bloomberg tv.

markets focusing for two reason. one, policymakers will and to refine their assessment of particular economic data, as itally the contains --

pertains to the weaker inflation reading. any surprises, they will probably come from plans to start shrinking the balance sheet. will we see this soon? reading those fed tea leaves. authing us is stephen and michael mckee, joining us from washington. mike, let's strip it back. what we hear from this statement? michael: you will hear what you thed in june, except for part about raising interest rates. the fed will be on hold, because if they did they will have to explain why they move when inflation is moving lower. if you look at this chart i brought along, by any measure, inflation has followed in recent months. that does not give them much of a case for a rate rise without a news conference. janet yellen could not explain that. chartave my own inflation

. take a look at the bloomberg here. the white line is the core sticky cpi, and that has been cpi,g, versus the median which is on par with what we have seen. how do explain the random inflation divergences? michael: it depends on what you are measuring. out theseng cpi cuts levels, the other one cuts out energy and food. there is some sticky inflation in some areas, but we have seen inflation fall far beyond just oil and food recently. the fed has a dilemma. it is a little more widespread than the one offs that janet yellen has been talking about. that is why the markets would really react if the fed did anything on the inflation front today? jonathan: you were talking about the apology tour of the federal reserve through the summer. that sounds like something i to be on.ant

while they apologize for the markets when there is some concern about financial stability at this point? she cannot spend a lifetime studying this mistake. to drive do not want this inflationary economy into another recession right now. we do not have a lot of tools to get us back out. we still have our backs to the 1.25%.ates at she has to get them up a little higher, start shrinking the balance sheet without upsetting people. the only thing that can happen as a result as if the markets keep going up. she will be gentle on the markets, but i review her is i viewely dovish year -- her as relatively dovish year -- here. once she gets the balance sheet in place, she can walk off into the sunset.

her legacy is set. she is on autopilot to do that, but now that she has got it and got the market accepting it, she wants to make sure the market in the economy does not overreact. the apology tour. jonathan: the apology tour, financial stability. had he reconcile goals around that, if they actually have any, and getting the inflation rate up as well? can you reconcile those two goals at this point? michael: it is very difficult. they recognize their policy has pushed equities higher, and there is always a danger of a bubble in various asset classes. they do not see one yet, but they are worried about valuations. the problem is they do not have any tools to do something about it. rates toere to raise slow down equity advances, that could hurt the economy. the best they can do right now, it is job own. but they need to be careful

about that because they do not want to scare the market. it has been a dilemma for the fed for many years. >> i understand what it would be concerned with the standing market. if there is anything in recent history that would indicate they would scare the market? i think it would improve? stephen: ironically, most of the studies with fed rakes heights -- rate hikes causing the economy to shrink is based off of normal levels. we are hiking off of zero. this initial set of hikes does it slow things down, improves things. the baby boomers, retirees start making a little bit of money now, and go out to dinner. the banks, if they can get a spread on the 10 year versus the two, start making some money with their loans. unusually low conditions. this is kind of what she means about getting back to normal. i think these initial set of hikes year have been bullish for

the market. jonathan: you are not the only one who thinks about this, rates and high rates being better for the economy. but do you think fed chair janet yellen agrees with that? >> no, i do not think she fully get this. and in its hiking process, she is concerned she might cause the economy to slow to quickly, hence the apology tour. she is inherently dovish. >> and when we talk about slowing the economy to quickly, quickly, we have this a decision, but we also have the gdp and qe2 coming out on friday. how important will that be to janet yellen in the fed on this pursuit? michael: it would be important of the fed had any clue what they are. they have to meet and decide and but before they get the letter. but meanwhile, the atlanta fed and new york fed gdp forecasts

are too not the different versions. the question is growing fast enough to keep the unemployment rate falling, or is it significantly slowing as the new york fed would suggest? that is a real problem for them. janet yellen does, i think, appreciate the fact they can slow the economy too much, because historically that has been what has happened, and they are worried about that. they do not know where the neutral rate exactly is. conversation, that elephant in the room. michael mckee, great to see you, and stephen auth, you are sticking with us. coming up, bloomberg will have special coverage of the fed rate decision at 2:00 p.m. eastern, but we have you stacked up with the guests. we have an all-star lineup for you. this is bloomberg.

♪ >> this is bloomberg daybreak.

volatility in washington, not on wall street. 90 lowest level on night he -- since 1993 on tuesday. we could see 10 410 today as well. joining us, oliver renick and uth.l with us is stephen a the global vix is nothing new, but the options volume for the vix is jumping. when you make of this? story today,is a and it is interesting because it basically goes to show how much interested there is in volatility, despite their not much volatility. this is looking at the number of people and contracts out there betting on gains in the vix, loss in the vix. ofare seeing an average 740,000 puts and calls tied to the vix.

that is pretty big, a pretty big number. that means there are a lot of questions about where it will go. it is a big part of the market here, and there is money to be made on either side of this trade. but despite the fact that the vix is very low, we are seeing some strategists start to discuss the fact there is still a premium built into betting on the mix. people say the vix is low, so we are betting it will go higher. it depends on what you are going to pay for that, because everybody else is doing that it gets steep. >> the catalysts are taking a backseat over the next few months. how do you handle that? stephen: there are certain products where we have it, certain products that carry that protection but there has been a markets like that. there is a lot of natural providers and protection who are buying the vix, and that is sending itown -- down. volatility across the market has

been higher than the volatility of the market. for the last six months of the year, the tech stoocks have been up big, but it has actually been a rotational month. i think you'll see rotation away from tech. they are not getting much mileage out of their earnings numbers. they are up 30% in the earnings. the sectors starting to get some traction here are the ones that have left. you make of the vix as an indicator anyway? a large sample size, and a lot of people identify these times of low volatility and say look what happens next year, and boom. they expect it to happen again. does that restricts your ability to use it is anything reliable? stephen: that is it exactly. there are so small sample sizes

out of economic theories that you cannot use them. he will have done studies of implied vix, looking at the market over long. of time -- amounts of time. it can be low for an extended period of time, but that does not mean it will stay there. jonathan: we count you down to the opening bell, four minutes away. stocks at all-time highs on the s&p 500. the earnings have been solid in the sentiment is solid as well. s&p, 4/10 2/10 on the on the dow. this is bloomberg.

jonathan: from new york city, this is bloomberg daybreak. we are moments away from the opening bell, 22 seconds away. futures are firm, and another record high on the open, another

potential all-time highs we get open. the s&p 500 of about 2/10 of 1%. as we found out in the market yesterday, we had another decent day of gains with numbers pretty solid. byasury and humans are lower a single basis point. some supply coming into the market today, $34 billion worth of 5-year note's coming through and a fed decision as well. we are up about 1/10 of 1% on and here isdex, alix steel. record, the s&p has not yet reached its intraday high, but we have a record for the dow and a record for the nasdaq. the move, not a ton of velocity. 1%, butup 4/10 of

earnings really fueling the fire here. let's look at some of the big names that came out. at&t is popping over 3%, earnings beat their as wireless customers rose by 127,000. verizon, fish is getting really interesting. up 2%, city coming out and down grading dish, saying that comcast should by verizon. the timing is right, leaving dish in the cold because verizon was a better for them. that is definitely -- verizon bidder for them. we had more bullish sentiment, particularly in europe. we also had some interesting commentary on the call. the ceo saying that the u.s. has been in a trade war for decades, and it needs to end. there should be a combo of tariffs and does -- quote has, so i am definitely

watching that stock throughout the day as well. today interesting poll overnight. talking to 30 financial professionals on four different continents and here is what they found. nd at therun will e end of 2018, and in part because of this. combined is the balance sheet of the fed, boj, and ecb, and the blue line is the worldwide index of stock. , having ae story record rally in stocks, but that is a big concern with financial participants that could lead to the end of the bull run win the end of the unwinding starts to come and stocks start rolling over and what this bill out should be. what is interesting is that they could not agree on what assets were the most exposed to a balance sheet unwind. they stopped in the bond market

cannot figure out where. jonathan: i want to get everyone up to speed in the session. all-time highs of the closing bases were the dow, s&p, and the nasdaq as well. what a record run we have had on the dow, 26 record closes so far and017, 28 on the s&p 500, 43 on the nasdaq. in terms of the earnings, they have been solid over the past couple of days. 25% through earnings season here in the united states, and as of last night they were up over 8% year-over-year, with 70 percent of the company -- 70% of the companies being estimates. toppedthe companies have revenue estimates as well. up next, oliver renick. the earnings are good. still solid. oliver: a little bit of weakness in some of the industrial companies we have seen report

largely. some disappointing expectations for revenues and future earnings from companies like csx. that is something investors and strategist have been talking about because there was also this idea that industrials are a aod place to look at for referendum on the economy. if you have some of these big industrial economies that transport goods and commodities, if they are not seeing this strength it gives you a bit of a worry. overall, green across the screen. looking out a couple years on the earning expectations, they are also positive. as long as that fundamental backdrop is there, it makes the 20th 18 -- 2018 bear case a bit more solid. jonathan: you have projected your views forward as to what is going to mean. walk me through that. >> we have had a big one in tech. next ones waiting to move our the financials, industrials,

energy stocks are on their back, almost back to where they were pre-trump. we think the next move in the market will be a rotation into the stocks. that is where there is value in the market, we are seeing earnings beat from these companies, and even this morning the industrials that are beating are getting big moves, and the text that are beating are not. that is a sign that buyers and sellers -- that is what makes up a market. in thes a lack of owners financials and industrials. i think that is where you will see the move. alix: is the big takeaway from this going to be value? oliver: i think you are able to identify were some of the investors leave that companies are fully valued and where companies can continue to gain if their bottom line improves. we are seeing good numbers on the bottom line from companies that do not rally afterwards, or stay where they are. that is because they are already

that in -- and you see sectors like tax, one of the more highly valued sectors -- that investors feel that they do not feel they want to pay more being in those stocks being comfortable there. the rotations that have happened in the market have been outstanding from sectors sector -- sector to sector in the past year, so there is no doubt that is valuations become more clear and earnings become more clear, there will be more money to chase. not just in sectors, but valuations as well. alix: do you agree with that bloomberg poll, that by 2018 the bull market will come to an end? stephen: i'm working on a piece, and i might talk about it next time. i have been torturing lot of the concept that come to my office. the keep talking about cycle, and what cycler we talking about? how many data points to we have on the economic cycle? one dozen. what is a cycle?

what we have got, a psychology of all players here that was really terrorize its -- by 2008, 2009. so we will see that excess year in the markets or in the economies that you would normally be using to project a cycle and -- end in 2018. jonathan: how do you identify pockets of exuberance? you think about those kind of things, if they are sophisticated markets could that be where the exuberance actually is? long ago, you had negative return european credit. they could come back to the market with a century bond and it gets away ok. greece comes back with five-year money yesterday and it is at a yield of 4.5%. how will we view this in 10 years looking back 10 years?

>> that is a great question. wrong in thishing market with the internals, it might be where we are not used to looking. it might be in this discussion about the vix. we have all of these natural providers of insurance that are buying the vix, and it is driving it down to extraordinarily low levels. but one of the things we have been looking at -- it is not our base case, but there could be some kind of an accident that could cause those players to have to deal ever and sell -- and sell -- delever everything to get back in shape. that creates a really big buying opportunity. that is not our base case, but we have to ignore knowledge that those kinds of risks could cause a little pullback to become a larger, scarier one. but the underlying fundament of

the the economy we think are actually solid, and the stock market, which retail is really not in, the valuations there are reasonable. i do not think that is where the vulnerability is. oliver: i wanted to come back to this chart. what happened in 2009 was that central banks pumped a big amount of money there. it had to go someplace, so a lot of it went into stocks. is that supporting a lot of the valuation than we are seeing? and even if it is through earnings, companies are benefiting from the fact that we have low interest rates and getting capital through. once we start taking that off, that will affect the stock market. simple?t not that all of it is hard to post out what degree of that valuation gain is because of that. there are good points to it, because companies are able to do things like -- will it in the economy -- lower rates in an

economy where the future is uncertain means bigger buybacks. but there is some kind of cyclical history that we can look at does not really exist. this is a fairly unprecedented amount of low rates. you have to look at the cycles. we wrote a story about one years ago that covered companies that went through individual bear markets. if you wanted to cover that, you would have looked from august 2015 through august 2016, and that was the bear markets. >> said that was your recession. jonathan: a great conversation. thank you. day of gains potentially, and another series of record highs at the close. let's get to the market. 10, 11 minutes in. .25%, heavy nasdaq up why and a lot more earnings a little

bit later, including facebook. from new york, you are watching bloomberg. ♪

daybreak, bloomberg and we will have special coverage of the fed interest rate decision, 2:00 p.m. eastern. >> taking a peek right now at the senate chamber, mitch mcconnell was speaking moments ago that they will take up the subject of health care once again today. reportedly considering whether to repeal obamacare and do not replace anything -- it is expected that will get voted down, but we will see. in the meantime, kevin cirilli is in washington with a guest that has played an important

role in the health-care care debate. kevin: we are here with the freedom caucus chairman, mark meadows. what is in this version of the bill? the skinny version in itself, if it comes before a vote in the house, would not pass. it becomes a vehicle. the biggest thing is we look at what is happening in the senate. if they do a skinny version and it gets rid of the individual and the employer mandate, will we are hearing now is the device access. so all of your viewers, as they look at that, they should see it is a good sign for medical devices and the like. it would repeal that. that will not be what gets signed into law, or just that. that will be used as a vehicle, where we come together on conference. get some people in the senate, the house, and they come together and will hope we continue to negotiate. kevin: as we talk about conference, this puts us in the

two dozen 18 calendar year? >> it could, but it does not necessarily do that, and your well taken. it should not. if we are going to do a conference, the conferees need to come together overall breast -- over august, and in september we need to make sure we pass it and send it to the president. orit goes past thanksgiving january of next year, premiums will not come down. you and i agree it is all about making sure those markets are complete. kevin: earlier this morning, i interviewed tom perez. he said in his words that the freedom congress will "hijack the debate if this goes to conference." your response? >> i do not know if i will even be a contrary, but tom perez, i appreciate the koppelman but he gives us far more credit than i actually have in terms of the debate. a force?e

certainly. we know to get 218 votes in the house we have to bring them along, but i found most of our members are really willing to make concessions. this started out that we wanted 12 mandates repealed. we settled on four. hopefully in the end we still get those four, but maybe in a tangential way that we address this. it is all about premiums, and i'm sure tom perez would agree with me that we need to lower premiums. kevin: i want to make this clear that best any version -- that the skinny version does not have any support among the freedom caucus? ? it does not have any of the provisions in there that we want, it is not even close to a repeal. but we want to appreciate the senate hanging in there to find condo -- find common ground. >> and what about tax reform?

>> i know this is critical to your viewers out there. in the last week, there have been movements in the senate, house, and white house on finding foundational issues for us. we wanted to get that before we went home in august so we could talk about that and socialize those particular aspects. i believe i see that before we go home in august in terms of some broad principles, hopefully working on the legislative text over august and voting on it in september and october. kevin: there is some question there could be some debate on whether or not to raise the debt limit. will there be a debate? >> we talked to secretary mnuchin, he wants a clean debt ceiling. we have never had one in our history, there has always been something attached to it. there has been some friction, but the full faith and credit of our country is not to be messed with.

we will find a way to do that. the freedom caucus believes we need to do that sooner than later, and we do not need to wait. at the same time, i think there are some vehicles that get close to a clean debt ceiling increase , but we will not be talking about that. chairman, the president tweeted moments ago on banning all transgender members from serving in the military. there has been some conservative debate over funding for these procedures, but there has never been a debate on whether or not transgender americans should be able to serve. your thoughts? >> when you are the commander-in-chief, you have to make tough calls. we are right now about to vote in the next 48 hours here in the house on funding our military. $621 billion, another $10 billion for overseas contingency operations. when we are talking about

bullets and other things, this highlighted, this surgery that was there, started to highlight in terms of policy and what we do and where we go. but -- >> i agree with the president taking this position. this is not only a distraction according to the generals, but this is one of the things you have to deal with when our national security is priority one. i support him in that decision. and that a tough decision? yes. could it be misconstrued? yes, i think it can be, and it is important for us to look at what our military does from a national security standpoint and make sure it does not take on a personal attack against any particular people group. 15,000 transgender americans are currently serving in the military. back to you in new york. alix: it is interesting you talk

to republicans and house republicans, how much sway to they have at this point when their lifespan is really about the senate? theou have to get through senate to get to a conference committee ipo and the house is out of session right now. and the houses out of session right now. his transgender situation is one more bright and shiny object we are chasing after to be distracted from things like tax reform. jonathan: everything you need to know about the distractions right now in d.c.. very little focus at all. alix: and playing to your base. the harder it is to get something done, the more you play to your base. check on our graphs and interact with our charts. do that on tv . this is bloomberg. ♪

jonathan: let's get you up to

speed on the session. a series of records in the united states on the dow, s&p 500, and the nasdaq as well. screen,et to the other the bond market, here is how that looks. up 2.33 on a 10 year. and another influx of five-year notes coming through the markets as well. that fed decision drops at 2 -- 2:00 p.m. eastern time. the cable rate at 130.41. the headline now is the record high in the market. denny, we are losing count over here. how many records so far? >> it is weird because we are hitting records but it is a slow melt up. it is not like we have these huge gains and the bell rings and there is a big celebration on wall street. it is amost like

hesitant, painful new high this people here to wait from the fed, which could derail things. but earnings are having a big impact here. i wanted to go to financials for a second, because they are at the highest rate since 2007, and that was citigroup saying they are giving some solid numbers, 15%-20% of earnings growth, and only 10% of that is because of interest-rate normalization. there are buybacks and dividends there. that is sustainable and has nothing to do with the d.c. were fed -- with d.c. or the fed. >> and this is in areas where equity trading is not quite profitable for them, but you are seeing other areas in financials ramp up. a lot of debt out there that is certainly helping them, but it is certainly interesting to see the financial come back surpassing that march high, even as we saw -- and again, the central bank is not playing into

this or politics, before we saw the trump bump that was helping banks disappear. that seems to be carrying things higher at the moment. >> that is not behind this, but they are releasing capital to be distributed. how much of the ramp up and financials is both the president and the anticipated? especially in capital. we have been building capital because of regulation, but another they sent that that will be released back to shareholders. a sense of that, but until we have to hear what the fed has to say, concentration does seem to be on earnings. the fed is the number one story here. we did a story yesterday surveying 30 strategist managers across the globe, and everyone, their number one concern across all aspects and industries -- mostding banks and importantly, the fed. there was a concern.

a going to start tapering too soon, acts too much, not enough? investor's mines. jonathan: -- minds. jonathan: a second straight day of gains on the cards as well. as we count down to the fed decision, bloomberg will have special coverage of the interest rate decision at 2:00 p.m. eastern time. out for that a little bit later. this was bloomberg daybreak, bloomberg markets is coming right up. you are watching bloomberg tv.

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vonnie: it is 10:00 a.m. in new york, 3:00 p.m. in london. from new york, i am vonnie quinn. mark: live from london, i'm mark barton. welcome to "bloomberg markets."

♪ vonnie: the fed decision is coming up later today, but last-minute economic data for the fed to chew on, potentially. let's get to julie hyman. new home sales for june coming in at 610,000, 5000 less than estimated. it still makes for a month-over-month gain of .8% here. we have seen choppy housing data recently. looks like this is largely in line with expectations. canfocus is more on the fed as well is on earnings. continues to be busy on the earnings front. all three major averages rising to records, largely on the back of strong earnings reports here. yesterday we had the dow and s&p