pro-business images tarnished. steve bannon comes out fighting in a rare magazine interview, he says the u.s. is that economic war with china and a confused federal reserve, the majority of officials still committed to gradual heights, but lose conviction in their inflation forecast. from new york city, good morning, good morning. this is "bloomberg daybreak." alongside me, david westin and assignment.s on futures are a little bit softer, down three points on the s&p 500 up by a 10th of 1% and the fx market standing out front and center is euro we -- weakness and some dollar strength. off by .6% and what a choppy week it has been for treasuries. on offer on the back of it this -- decent retail sales bid. yields are higher by about two basis points at 2.24 on the u.s.

10 year. let's get your earnings. walmart coming out with earnings, second-quarter adjusted eps coming at $1.08 above the estimate of $1.07. walmart seeing years adjusted $4.40 to $4.30. nothing that stands out in terms of missing or beating estimates. in theown by about 1.23% premarket. on the year, what a performance so far this year. jonathan: they have really come back -- david: they have really come back. jonathan: up 17.4%. david: time now for the morning brief. we will be getting weekly u.s. jobless claims and the philadelphia fed's business outlook. bill ackman will prevent his adp thesis, addressing questions from investors and analysts as

he makes the case for improving the company's performance. we get u.s. industrial production data for july and we hear from robert kaplan speaking time.as at 1:00 eastern all through the day, we are all going to be focused on washington and the aftermath of the collapse of the president's very is leadership councils. kevin cirilli joins us with the latest. what happened? kevin: the president this banded two of his ceo council and forums, tweeting the news after a trip, drip, drip of resignations from the board from top level ceos. everyone from under armour come merck, under armour to kenneth frazier the first one to distance himself. that said, republicans on capitol hill have also been quick to distance themselves from the administration for the president's response this week during the press conference in new york regarding

charlottesville. lawmakers still trying to get some type of policy initiative done. republicans gathered in california to discuss tax reform and that -- negotiations are underway here in washington. all of this comes as the president earlier this morning disdain foreeting the media including senator lindsey graham and senator jeff flake, both of whom he says is characterized his remarks regarding charlottesville. david: it was lindsey graham he really went after an lindsey graham was one of the relatively few republicans that went public and challenged the president. is the president having a suppressing effect on republicans with his intimidation? kevin: i think in terms of the distance they are trying to create, this is a different political battle they have to face unlike ceos. at the end of the day, republicans have to answer to constituents and report -- ceos have to answer to shareholders. become anthis has

issue of morals and american consciousness rid of several top republicans including mitch mcconnell and the speaker of the house, paul ryan, have all sought did announce the president -- to denounce the president's rhetoric and try to keep the party together. david: think he so much. we are now joined by somebody that knows a great deal about marketing and branding. he is scott galloway, and why you stern school of business -- nyu stern school of business professor. when i spoke with the chair of the strategy counsel, blackstone chairman and founder back in april, he said it was much more than a vote off. >> these are terrific meetings because we have a group of remarkable ceos and it is not a photo op group. we work between meetings and in this case, we had a one-hour meeting before the meeting with the president with five cabinet

secretaries and they had an agenda in terms of telling us what they are doing and our job was to help them do their objectives better and share our knowledge base. galloway is with us, nyu stern school of business professor. isn't there some value having a formal way for the united states to talk to business and vice versa and haven't we lost something here? , first off, good to be with you, david. i think there is value if there is a -- this is a functioning council where folks feel as if they are being called on for the right reasons and not just a if thereortunity and aren't sideshows created by any constituency or member of the council such that they can get to work and actually make some

progress. neither of those things happened here. one, i think these folks felt like they were being used and kind of put through this sort of equivalent of a corporate walk embarrassed being by their participation here. they were being shamed by shareholders and they felt, in my view, that the whole thing wasn't being taken seriously by the president. in theory, this should have worked. in practice, it was a total disaster for everyone. david: speaking of disasters, you said when you are with us on tuesday that it was a no-brainer for ceos to go off this council. we saw this cascade yesterday and it was unclear whether the president was shutting them down or whether they were thing at the same time. as you look back now, who came out well in terms of the ceos on this experience and who didn't come out so well" ? scott: 100% kenneth frazier from

merck. the majority of the people on this council are now at a point where they are economically secure, they are not looking to be reelected, they performed well in terms of their shareholders, and i think a lot about their legacy. ken frazier, his grandkids are going to look back and say granddad was a leader. granddad stood up for things and was unafraid. the people who lose here are the people -- the ceos that sat on their hands and looked as if they kind of were hoping the problem would go away. obviously, the really big loser here is president trump. this makes him look just absolutely terrible. the ceo president cannot keep the council of other ceos together because they are so embarrassed to be affiliated with him. jonathan: is this a constituency that no longer wants to be around of the president because a the weekend's events or

constituency that lost faith in his ability to deliver the kind of things they wanted -- tax reforms, tax cuts, etc.? scott: i think the answer is yes . i think he has become radioactively and this is effectively an individual that emerges from the core nuclear reactor without a protective suit and your instinct is to run and that instinct is correct. he is radioactive and the agenda has become somewhat -- this is the incredible shrinking presidency and there is very little downside now to publicly distancing yourself in exchange for a few mean tweets, which are becoming increasingly flaccid in terms of their impact on the markets. you had president trump go after merck with the ceo resigned effectively accusing him of predatory pricing, but the stock was up the same day. jonathan: great to have you with us. joining us is libby cantrill, the head of public policy from

boston. we have learned several reports indicating gary cohn is unhappy, unhappy with the comments from this administration of the president of the united states and unhappy at the pace of getting reforms done, getting tax reform through. have these events translated into more people moving further away from the president, but not companies -- eagle inside the white house? libby: it is hard to say at this point of what gary cohn will do. with the press conference and reports, the way president trump reacted to the events in charlottesville. it also seems like he will hang in there. he is committed to getting tax reform done and committed to the progrowth agenda. even without this -- and this is at best a distraction for the president, the tax reform is already going to be very hard to do. it took president reagan under much better circuit --

circumstances three years from soup to nuts ticket tax reform done. this idea they can get something done in a few months with this as a background seems aspirational at best. wasd: as you say, it already difficult think the question is how much more difficult has it been made by these recent events western mark we speak -- spoke yesterday with larry summers. some: maybe there will be tax cutting, but i think the reform,s for structural which was the aspiration the president laid out, are minimal at this stage. david: he says minimal aspects. do you agree with that analysis? libby: at pimco we are probably more inclined to be skeptical of headlines. we thought back in january when trump laid out this ambitious legislative agenda that it was going to be difficult to see really. tax reform. just looking at -- to see

really. fulsome tax reform. i think we would agree with assessment would be that the best you get is tax reform lite. we still don't think it will be big enough for meaningful enough to impact the economy in 2018. jonathan: is it a little premature to say they are not going to get that much achieved just seven to 8 months in? >> in the first three weeks after the election, small caps rallied about 20% and the number of fed hikes that were priced into the market shot up by several more hikes and for a few months, that kind of held in and for the last four months or so, it has been on priced and now -- unpriced and now small caps are just large caps and that is my

-- trump trade is back to him it -- election lows. 2.25.-year is at in terms of how the markets are responding to all of this news and basically, when you look at the s&p, you don't really see any response because the s&p is driven by the global earnings cycle, which is robust. underneath the surface, all the markets that priced in more of the agenda, including the dollar, have completely unpriced it. if it comes now, there is quite a bit that can happen in the market in a positive way. for me, a lot can still happen. obviously, it hasn't and it seems unlikely it is going to over the near-term. the markets are already there. i do not agree with this kind of notion that the markets are out over there skis and if we don't get something, there is this disappointment because the market is being driven by the

global cycle, which is robust and driven by china, not by washington and i think that is what we need to keep our eye on. jurrien timmer stands with us alongside libby cantrill. robbins,, charles cisco ceo and the drama from d.c. tv.are watching bloomberg ♪

♪ jonathan: the majority of federal reserve officials are committed to gradual hikes. the latest minutes reveal a divide. most officials were sticking with the forecast of higher inflation eventually showing up, but the debate over slack models and whether data sources were

telling the whole story show convictions about the forecast starting to fray. still with us from boston is jurrien timmer. this was a confused come along, padded out set of federal reserve minutes and in conclusion, for the market, they are not going anywhere anytime soon quickly at all. jurrien: yes. the fed obviously has a lot of figuring out to do and it's good they are spending so much time doing it. from my perch over the near-term quarters,xt 2 to 4 they have it made. they have hiked rates and financial conditions are easier than when they started. we are out of this mode from a couple of years ago, 2014 when they were tapering, 2015 when they try to get the first hike in and china devalued. for several years they were in a mode where they try to normalize policy and the markets would not let them.

the reason for that is that earnings were declining and you cannot raise rates when earnings growth is negative because it really impact the markets and an outsized way. of 2016, first quarter earnings growth has been double digits in the global economy is back in a synchronized way. that has given the fed the green light to normalize policy up to a point. the fed, i think is actually in a really good spot and with inflation at 1.5% well below their target, they have the luxury to taking a pass at december and according to the odds on my bloomberg, the odds are about 40% and it's ok. they can go in march of next year if they wanted in the meantime, they will start paring the balance sheet and the market is ok with that. they have telegraphed that will be a modest thing. if there is a risk, it is for 2018 where the dot plots adjust a lot more hikes than the market is pricing in. i think that is kind of a story

for four quarters from now and not right now. jonathan: we have to find out who is running the federal reserve in 2018 as well. in many ways they are victims of their own transparency because it reveals and debate they don't have much conviction despite your thoughts that they are in a good spot. i did not see a federal reserve in a good spot reading these minutes. what i want to talk about is the take away from the federal reserve and other central banks go early, go slowly, make it credible and keep the rate hike really shallow. if they were all on board with that, why are they disagreeing about the pace now? jurrien: i think they are just trying to figure out what the right pace is. for this year, the markets and the fed have been exactly on the same page. every fed hike has been blessed more or less by the markets and that is a pretty good spot to be in. it would be a much worse situation if inflation was running at 3% right now and the market was pricing in two hikes over the next two years, which

is what it is doing and the dot was suggesting seven more hikes, which is what it is suggesting and inflation was running hot forcing them to do what the for.ts were not ready that would be a very difficult situation, but we don't have that at all. they really do have the luxury and the fact they raise rates three times, financial conditions are easier than they were before, is even better because it allows them to normalize policy whether it is the or slowly to some level that they deem to be neutral without upsetting the markets and ultimately, that is the needle that they are trying to thread. with inflation running at 1.5%, you know, it's nice that they are having very deep debates, but it's a pretty good deal right now and -- to your larger point about central banks generally, it is clear that central banks are trying to find the exit. the fed is already doing it and the ecb is probably next and it

does make you wonder about the overall market and going from this very unconventional era of global easing since the financial crisis until recently to maybe the exit of that global easing cycle and what that is going to look like and how much luxury they are going to have to do that very slowly and gradually, like you said, start early and go slow. as long as market conditions or economic conditions allow them to do that, i think the markets will be ok. david: ok, jurrien timmer of fidelity will stay with us. coming up, chad morganlander will be joining us. live from new york, this is bloomberg. ♪

♪ jonathan: in the markets, futures a little bit softer. we had earnings a little bit earlier from walmart, the world's biggest retailer.

profits a little bit better than expected and the comparable sales of the world's largest retailer coming at matching estimates. the main point of the forecast falling short of projections, that's why you see the stock getting up gains -- giving up gains for the year. on the year, what a year it has been come up 17% so far this year. david: they have a great run after doing fundamental restructuring a couple years ago when they took a hit. remember china? president trump's policy on trade from china has ranged from openly to sometimes apparently friendly. steve bannon yesterday gave a surprisingly frank interview to "the progressively -- progressive prospect" publication. "to me, the economic war with china is everything and we have to be maniacally focused on that . if we continue to lose it, we are five years away, i think, tenures of the most am a point in which we will never be able to recover."

with us is libby cantrill of pimco and jurrien timmer. these are strong words. how big a problem is china in terms of markets if we really are regarding this as economic war? libby: i actually don't think any of what steve bannon said was necessarily surprising. we have known there has been this divide in the white house sort of between the so-called gary's, steve mnuchin's, and the steve bannon's. i think the statements are not necessarily that surprising. i think, however, and this is the question for the marketplace is that up until now, the bite has not been as severe as his bark on trade. there was talks about tariffs on china and we haven't seen any of that, honestly. i think the question now is that because of the unilateral authority the president has over

if he is isolated in terms of his legislative agenda, is he more inclined to go back to trade to give red meat to his base and i think there is a chance of that. as oneif you had china of them and problems with the debt ceiling, which is more important in your mind? libby: i think imminently, the debt ceiling and the dysfunction in washington. as a washington strategist, it certainly more important from the imminent perspective. it is relationship with china has been tenuous and will continue to be tenuous. the debt ceiling, however, i think is an underappreciated risk given the dysfunction in congress and the fact that they have 12 legislative days in september to address it. i don't think there is enough attention being given. jonathan: maybe steve bannon was surprised -- i wonder what john kelly thinks. what does john kelly thinks when

he wakes up and reads that story? libby: for any of us that have been staffers to principles in washington, they can only do so much. even if you are chief of staff to the president. has definitely added more process and structure to the white house, that you can only go so far depending on who your principles are. david: one thing for sure is it's not the same as the army. jonathan: libby cantrill of pimco, thank you for joining us alongside jurrien timmer. you will stick with us. just ahead, pablo goldberg will be joining us. just around the corner, we bring you the account of the ecb's last meeting. you are watching bloomberg tv. ♪

got you outnumbered. the dinosaurs' extinction... don't listen to them. not appropriate. now i'm mashing these potatoes with my stick of butter... why don't you sit over here.

find your awesome with the xfinity stream app. included with xfinity tv. more to stream to every screen. ♪ jonathan: in the markets this morning in the united states, futures a little bit softer, down about 37 points on the dow and off by about 4 on the s&p 500. the story in europe is really

interesting, soft equity session and sentiment a little bit light. the euro really losing some weight. down by one full percentage point euro-dollar pulling back down but -- below one pick 17 briefly. we are down about .6%. the ecb brings out the accounts of their last meeting. ecb officials expressing concern over the risk of the euro overshooting. if you wanted a message for the fx market, here it is. officials expressing concern over the risk of the euro overshooting. looking at the german two-year if we could get euro-dollar on the screen play. throughout the morning, we have lost some of the gains on the euro that we got over the last few weeks. rolling over to one .1669. up -- 1.1669. the degree of determination determined by all -- inflation

pick up is lacking. i rather dovish set of accounts. president rather -- mario draghi dodged questions about mentioning the single currency and whether he was worried about it in the news conference and it is coming out more explicitly in the account with officials expressing concern over the risk of euro overshooting. euro-dollar rolling over by about .8%. gordon joining us, specializing in the ecb. great to catch up with you. let's begin with a big fat red headline rolling down the bloomberg. ecb officials expressing concern over the risk of euro overshooting. what do you make of that, paul? we've got some technical problems with paul gordon. we can cross over to jurrien timmer jury to the same question

to you, looking at the situation in the fx market with euro-dollar at 1.1669, is this the ecb saying we are watching that and we don't like it? jealous the ecb may be of the fed which has been able to tighten as the dollar keeps going down. central banks are trying to go era toobal easing normalization. not tightening, but normalization and the question is not whether they are going to do it, the question is can they do it in a way that doesn't upset financial markets? obviously the euro rallied because the ecb has started to mention the exit as the fed has been doing for a while. i think they are just trying to thread that needle as everyone go, to exit, but do so in a way that doesn't upset financial conditions and for the fed, that has been successful and how it is the ecb's turn to do the same thing.

i think generally, they have been on the right track. again, they are not trying to normalize policy in isolation while the economy is collapsing or anything like that. the reason we are having this discussion is things are better and that's kind of a luxury problem. that's a good thing we should be celebrating. again, it's that pace. what is the market expecting and are they going faster or slower than what is priced in? with the euro, that's trying to the transmission mechanism to measure how quickly or if the ecb is going to quickly or not quickly enough. the ecb is still in easing mode. they only just began to taper, so it's early days for the ecb. the fed is a lot further along. david: -- jonathan: paul gordon, we want to cross over to you in frankfurt. ,he message is pretty clear they are concerned about the euro. this is the most explicit reference to the euro in months

out of the ecb, isn't it? paul: yes it is, very much so and relative -- moderately strong words. draghi alluded to it in his press conference, but this is more explicit and we can see the accounts of the meeting. there is concern generally that financial conditions have tightened a little bit over recent weeks or in the run-up to that meeting and that is something that will likely be weighing on policymaker's mines toward the september 7 decision when they may or may not decide what they are going to do with tapering or they may put that off to october. looking at the headlines across the bloomberg, we have the headline about concern over the -- euro overshooting. at the same time, they are concerned they do not have conclusive evidence of inflation. are those tightly linked? paul: there is a beastly a mechanical linkage as the euro strengthens, it -- there is obviously a mechanical linkage.

also ways on exporters and underlines growth, but the growth numbers have been solid lately. it all feeds into this general concern about tightening conditions. when draghi spoke in june, he said the ecb is willing to take its foot off the pedal in line with the developments in the economy. of the development in the economy aren't going the way they want, that may delay putting their foot -- taking their foot off the pedal. wonder if that is the purpose of these accounts from the last meeting, to get in that policy space, just a week away from the speech of mario draghi. i think people saw initially when it was first published that we would get this speech to tee us up to a tapering announcement. the optics are looking at it very different speech a week away. it's possible that line

about opening up policy space to move in either direction is particularly intriguing. it does suggest the ecb wants to gain as much brexit ability as possible to do whatever it feels is needed, exactly what steps you would take to achieve that remain unclear. when draghi speaks at jackson hole, he is unlikely to front run the decision or the discussion for september 7, but he may want to set up an intellectual framework which tells people what the logical next step should be. ,onathan: jurrien timmer looking at these headlines from the accounts, going through to jackson hole and pushing forward, do you see the risk diminishing somewhat after these comments? jurrien: i think these are sort problems and the fact the ecb is wringing its hands over euro strength and the fact the fed is having strong deliberations over when to go

and how much. these are all good things because it shows of central banks are very in touch with are saying. it's important that central banks do not run policy in a vacuum. the central banks could just as go here ande could we don't care what the markets are saying and i think that would be a whole different situation, but we don't have that. the fact the central banks are very in tune bodes well for the past going forward, regardless of what this speech is or that speech is. it suggests a gradual path when they over -- they only go in the markets are on board and if that is the case, financial conditions will remain accommodative and that will allow them to finally see the exit. david: let's assume this is part of a longer term trend and europe will not be strengthening

the way it looked i get was going to be. what does that mean for investors considering investing in the united's --europe versus the united states? jurrien: currency translation is one portion of your return if you are investing. if you are a dollar-based investor investing overseas. it depends on just how big that factor is. there is plenty of times where if you -- europe outperforms by 10% and you lose three present on the currency, you are still outperforming by 7%. up until now since the first quarter of last year when global reflation began, the dollar has basically been on the weaker side, so it hasn't been an issue. instants come up 50% come outperforming the s&p by 18 percentage points. europe had a nice run until about a few months ago when the europe -- euro started to strengthen. with all central banks essentially moving in the same position -- direction to less easing, the currency component

is not going to overwhelm the return component by investing abroad and you have much lower valuation. .ermany is at a 13 pe you have strong earnings growth, a better economy, lower valuations, and you are going to get maybe some of that back on currency, but i think it is still a very good story. jonathan: the federal reserve and you are worried about inflation dynamics, you are probably not happy at the ecb and the stronger dollar comes through again. paul gordon over in frankfurt, i appreciate your time and jurrien timmer will stick with us. let's cross over to emma chandra to get headlines outside the business world. emma: white house chief strategist steve penn and has gone public with his -- steve bannon has gone public with his feud over china.

bannon said he wants a tougher stance on trade with china. in beijing, america's top general says war with north korea would be horrific. general joseph dunford said letting north korea develop the ability to launch a nuclear attack on the u.s. is unimaginable. he told reporters president trump asked the pentagon to develop viable military options. in the u k, retail sales rose more than forecast in july driven by the biggest jump in food purchases in two years. the volume of goods sold increased .3%. british shoppers are changing happens because of faster inflation. -- habits because of faster inflation. global news 24 hours a day, powered by more 2700 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. david: coming up we talk with chuck robbins, the cisco systems

ceo about earnings, tech, and what it means to be a -- b a ceo in the era of trump. this is bloomberg. ♪

♪ emma: this is "bloomberg daybreak." i am emma chandra. coming up, the former housing and urban development secretary. this is bloomberg. ♪ verbaln: some intervention into the fx market, from the european central bank. the account from the last meeting thought -- showing a set of officials expressing concern over risk of the euro overshooting. we roll over a little bit enemy bounceback, down by .6% on euro-dollar south of 1.17.

down on the week by one full percentage point. if you were expecting a hawkish president mario draghi in jackson hole, maybe it is time to rethink that. euro-dollar, 1.1687 down by .7%. more concerned about the rising inflows. according to a new note out by citigroup after attracting $47 billion in new crash, -- have made developing nations -- jurrien timmer joins us now to discuss. is that a big risk? jurrien: when i look at the flows and wonder because people tell me em is up 6% and it's a crowded trade, when i look at the passive and active flows etf's,uity em funds and

it does not look like it is a crowded trade at all. there's been a fair amount of funds in abouto half of that has been going into em, but the numbers are not huge. 2009, 2010 after the financial crisis. nobody trusted developed markets because of debt levels and em took in basically all the share at that point and it was like 150 billion and there were big numbers. today it is maybe 45, 50 billion and when you look at the since 2011 it em, has underperformed the u.s. by like 150 percentage points, 6ally a huge number and since quarters ago, it outperformed by 18, what still behind by 132 percentage points. i think it is still relatively early and i think the notion of broad diversification, which is

what you are referring to outside the u.s. which has been or leader for the last five six years, into em and other markets including europe and other developed markets, i think it makes sense. jonathan: the essence of this a sector -- this is asset class if you will, i know people hate using that term for emerging markets, it becoming increasingly reliant on etf flows. is that something you dispute or accept? jurrien: i don't think that's necessarily the case. i don't have the actual numbers in front of me and i do think management istive very important because there's a lot of inefficiency and a lot of choices to make between countries, between commodity importers and exporters. if you are going to go active anywhere, it's probably em over most other asset classes. i have not seen the numbers to indicate that this is an overwhelmingly passive movement and that, therefore there are

risks to it. we could maybe argue in the u.s. 2000t where we saw this in , for instance, when there was a massive move into indexing. at the end of the day, the entire market was run by basically 20 stocks because large companies kept getting larger because of indexing. i don't think we're quite at that point. jonathan: just as a final question to fold in the move of the last five or 10 minutes, that dollar strength story off the back of the euro, it is an emerging strength story over the past couple of days. given how bearish sentiment has already got in fx market for the dollar and how bullish sentiment has got for em, does that spread need to close a little bit? jurrien: i don't think so. when i look at the broad trade weighted dollar and i pull it up on my bloomberg, we are barely off the lows. last week, the dollar barely moved off of flows despite geopolitical headlines. i think this is a pretty policy

force, the weaker dollar and that certainly feeds into the currency translation as we were talking about earlier, especially for em. i think maybe we don't go down at the pace we have, but i think the dollar is in a pretty good, solid downtrend. you can identify it as lower highs and lower lows and i think that a picture is going to be with us for a while. maybe not to the degree that we have seen, but fundamentals in the em are strong. global fx flows are now positive, 90 billion, they were negative a few years ago. the fundamentals are working, the valuation is working and we have had a five-year run of very consistent underperformance by non-us stocks and we are now reverting that. will stayrien timmer with us and if you have a bloomberg terminal and want to check out tv , you can watch us online, click on charts and graphics and interact with us

directly. go to tv on your bloomberg terminal. this is bloomberg. ♪

♪ emma: this is "bloomberg daybreak." walgreens will give u.s. antitrust officials more time to review the plan to buy more than 2000 rite aid stores. regulators were unhappy with takeover, soiginal the company said they would spend less to buy fewer stores. it shares of the parent of a tory us secret fell after he delivered a week forecast. they projected third-quarter earnings that missed estimates. the company said sales of fell more thanet expected in the second quarter. walmart gave a lukewarm forecast for the third quarter. they have been spending heavily to catch up with amazon and that

is taking its toll. the outlook tempered enthusiasm after walmart posted the best grocery sales growth in five years. that is your bloomberg business flash. david: thank you very much. to take us through walmart numbers, we are joined by jennifer, the retail analyst for bloomberg intelligence. said they were lukewarm results. they narrowly beat expectations. >> the results are pretty good, but the response is really about the forecast for third quarter and the fact that it's not as high as people were expecting it to be. that is really why you see the stock down this morning. about ahat do we know margins because there has been concern about the free delivery and discounting? how to the margins hold up? jennifer: margins are continuing to erode because of all the technology -- investment in technology and the cost of free

shipping and the lowering of prices in stores. although it is starting to get better, the erosion will continue for the foreseeable future. david: what about same-store sales and traffic? jennifer: same-store sales and traffic were good this quarter and traffic was up 1.3%, which is important because walmart -- as walmart is pursuing the online strategy, it's a small percent of overall sales. most of its sales still come from stores and because they are slowing the pace of opening new stores, it is becoming more important and traffic, which helps same store sales grow, is a key focus. david: at this point is there any affect on the stock price of walmart on this proposed deal for whole foods where amazon is buying them? jurrien: at this point -- jennifer: at this point i don't think there is an impact on walmart's price with regard to the amazon whole foods deal. in truth, it will take a couple

of years before any kind of real impact to unfold and that is providing the deal is finalized and when they decide to finally bring their businesses together, it will still take some time. david: thank you so much for joining us. she is coming to us from princeton today. jurrien timmer is still with us from boston. i will not quiz you on walmart earnings, but explain earnings more generally and let's start with the retail sector. to what extent is the retail sector helping to support the market at this point? jurrien: it's no secret obviously that the retail industry is under a lot of pressure. obviously, coming from online and there are too many malls in america. if you are a first-tier mall in a medium city, you are probably going to be fine. if you are a third tier mall, maybe you are not going to survive in less you can convert to that space. currently the whole sector is under pressure and it has had an

impact on inflation because i think something like 40% of the labor force is in kind of the service -- not in retail in general, but the service sector. as that sector shrinks, it has an effect on earnings. this is the way the economy works, there are sectors leading the charge higher and sectors that are contracting and that's always going to go on. picture,gger second-quarter earnings are up 11%. first-quarter earnings up 13%. 2017 earnings are up about 11% .nd energy even then up 9% global earnings are up, so this is an earnings story for the market in general and as we know, price follows earnings at least over the long-term. no member we are at -- no wonder k. are at dow 22 earnings are good and liquidity is abundant despite the fed quasi-and evaluations are on the

high side, but not super high. it is still a good story for the bull market. jonathan: thank you very much for joining us jurrien timmer of fidelity. , the head neil dutta of macroeconomics and pablo goldberg -- pablo goldberg. from new york, counting you down to the cash open one hour and 44 minutes awake futures are softer. -- away. futures are softer. the fx market, a weaker u.s. -- euro story, expressing concern about a euro overshoot. 1.17 flat down .6%. you are watching bloomberg. ♪ ♪

track your pack. set a curfew, or two. make dinner-time device free. [ music stops ] [ music plays again ] a smarter way to wifi is awesome. introducing xfinity xfi. amazing speed, coverage and control.

change the way you wifi. xfinity. the future of awesome. david: -- jonathan: the president's

pro-business image is tarnished. it is a confused federal reserve. the majority of officials are committed to gradual hikes. it is a rather explicit ecb. the central bank expressing concern over the risk of the euro overshooting. good morning. alongsidehan ferro david westin. alix steel is still on assignment. futures are down one quarter of 1%. euro-dollar bounces off the lows. we are off .6%. two figures below the intraday high for the year of around 109 -- 1.1910. heels lower.send --fed minutes send heels lower. david: it is time for the morning brief.

will look at weekly jobless claims and the philadelphia fed business outlook. bill ackman will present his thesis on a call addressing questions as he makes a case for improving the company's performance. we get u.s. -- a production data for july, then we will hear from robert kaplan teaching in texas at 1:00 this afternoon. that is coming up today. many of us will spend part of today watching the aftermath of the collapse of president trump's business councils. we are joined by marty schenker, senior is a good editor for government and economics. when you and i were talking on the air yesterday as this was happening, you called it a divorce between donald trump and corporate america. are you still there? marty schenker: i'm still there in that these were formal arrangements and the ceos had their names attached to the councils. a divorce does not mean you

don't ever speak to your ex-wife. the business leaders do still endorse a lot of what donald trump is trying to do in terms of tax reform, infrastructure, and those issues that are beneficial to their companies and consumers. so, this will work either with him, for behind the scenes to advance those agendas once congress gets back in september. of congress and ceos will do what is in their best interest. at the same time, has the president given up some of the bully pulpit -- we talk about the bully pulpit persuading people in congress or his people to do things. will it be harder to call up mary bar and say please don't move your plant, mary? marty: absolutely. there was some discussion to enlist some of the ceos to help

sell it around the country and congress. difficult,be more but not impossible. you might see that happen. jonathan: marty schenker, always great to get your insight. phone is aover the dmati.d marty -- anat a a lot of people saw these advisory boards as symbolic and nothing else. does this management them mean anything? admati: means -- it means that feelings about him and some of his agenda, so there is some symbolism that they are, sort abandon him,m to and of course, the spectacle of

him picking up right before their announcement. so, this is, sort of like what happened with donald jr.. emails were going to be published, so he immediately published them himself. jonathan: neil dutta, to pick david westin, if you think that the phone and says don't move the plant, will they do that, and what they have done that months ago? think ceos are catching up to where the market has been all year. the markets, initially, i think, overestimated donald trump, but they underestimated earnings. now, the markets, i think, are basically no longer sold on the idea of corporate tax reform, and that is in the case since february. i don't remember going into a client meeting in at least 4, 5

months, where the person i was talking to was actually optimistic about the prospects of a bold, corporate tax reform agenda in d.c. i think we are putting too much weight on it. to me, it was not really clear what was going on anyway, you know, with these councils. i think it is going to give investors an opportunity to focus back on the fundamentals -- the economy, corporate earnings -- the stuff you were talking about in your last segment. enough, but at the same time, when the president was first elected, there was a broad sense that finally we will have a regime that comes into washington, understands business, will have wrote-business policies -- were we all long back then because now you are saying it has gone away and it is not making a difference for the markets? neil: i don't want to get into

too much political -- was donald trump ever really a good businessman that we should have put this whole and optimism on this man as a cogent business person? i do think there are certain like, or thee market responded to, and some of those things are happening. some progressis on the deregulatory agenda, maybe that is offsetting things like corporate tax reform. to me, this is not an economy that needs much help at this point from d.c. we are converging on full implement. the housing market is in full recovery. the global market is in recovery. those are the things, in my view, were holding the u.s. economy back, and that is now shifting. anat, you focus on bank

regulation -- there is a lot of talk about deregulation. whether or not that is a good idea -- i think you have some doubts about it -- is that going on a forward pace despite what is happening with the councils? of the details that really matter, so it is really in the appointment, a lot of the many regulatory bodies, precisely what they do, little rules, changes, or the way they enforce them that are not on the front page, usually. so, there is a certain attitude terms of vigilance on some regulations. i am not crazy on some regulations and the way they are implemented, but some key ones, if they are weakening, could be dangerous. it is a fragile system.

you have china, cybersecurity issues. it can happen fast. you know, it is good, and with him, you know, a few months or less, it could be like, oh, my god. jonathan: we discussed the pocket -- potential for upside risk, and there is an argument big business has been successful lobbying the republican party to do things they did not want like the border adjustment, protectionism. steve bannon, unit publication i don't think he thought would publish his comments -- they did -- he revealed he believes we are in economic war with china. he said there is a lobby group pushing the likes of bannon to the side, from getting what they want, putting a tariff on china. now that the ceos are distancing themselves from the president, is it a president who is emboldened to the things they

did not want anyway? neil: that is one way of thinking about it. i don't think anyone was ever upbeat -- at least the business committee, on donald trump's trade agenda. a protectionist, economic nationalism -- essentially cutting taxes at home while raising taxes on imports -- an economic nationalist agenda. it might be politically popular. there is no question about that. i do think there are still voices within the white house , it do, sort of, project guess, what you would call a more pragmatic approach. you talked about the bannon article -- he mentioned gary cohn and steve mnuchin as people that he has to quarrel with every day -- he is fighting with them all the time. these are still people that have of the president it we will see. i am not particularly worried about big trade protectionism coming from the u.s.. economy no law in the

that's a straight has to grow at a potential rate relative to gdp. we knew some enforcement was coming, but if you look at it, look at what we have seen this year. the president has taken on a more aggressive approach with canada than mexico if you look at lumber, some of the dairy farmers. the narrative versus what has actually panned out is a bit different than we thought. dutta of neil renaissance macro, sticking with us. admati, thank you for jonas. we count you down to the market the story of the markets in a moment. futures are positive across the board -- rather they are negative. we are down by six points in the s&p 500. we are off by about 49 on the dow. you are watching bloomberg. ♪

jonathan: the euro weakened after the european central bank voice concerns about further gains in the currency, but it has sell -- since paired the loss. richard jones now joins us from berlin. richard, it is maybe not high-impact this morning, but it is certainly significant -- is that a line being drawn by the european central bank in the world of foreign exchange? richard jones: well, it certainly feels like it might be the start of the pushback, jon. if we look back to the q&a during draghi's presser, he seems circumstellar -- circumspect. we can see there was some concern voiced by the ecb. that hit the tapes today. it has taken the shine off the euro strength -- not only against the dollar, but against the pound. 9130, 9140, and

that is a resistance path. i think it is the start of resistance. if we see further euro strength, it would not surprise me. startling to see president draghi wasn't there given what he said when he was asked about fx channel. it was supposed to be the big event risk for central bank watchers -- president draghi delivering a speech at jackson hole. after the reports we had yesterday from one publication suggesting it won't be a big event and an account of the last meeting, it does not look like it will be a speech that sets us up for tapering anytime soon. richard: i think you're right. the ecb pushing back on that took wind out of the sails of people expected we might get a policy announcement or even a

hint of policy from mr. draghi. i think we will be waiting for the september ecb meeting, and many more so the october 1 before we get anything more concrete from them in terms of what their plans are going to be through this next -- this year and next year. david: -- jonathan: good to see you. it is an explicity cb&i confused federal reserve -- explicit ecb and a confused federal reserve. passages, minutes asserted most officials were sticking with a forecast at higher inflation would eventually show up, but the debate on the resource models and whether standard data sources were telling them the whole story also showed convictions about their forecast frame. still with us, neil dutta of renaissance macro research. a confused fed. long minutes and no agreement on anything. we talked about how they were a

victim of their own transparency. i imagine it is a debate they don't want playing out in public. neil: well, it is playing out in public. it is classic -- you put two economists in a room, your lucky to get six opinions. i think the reason this is so different -- difficult is because they don't have a very good explanation for why inflation is low. you know, you think about it -- you have a tightening labor market. you have less spare capacity in the broader economy. that should put upward pressure on prices. what is upsetting some of that is a lag of impact from the foreign exchange rate. we are probably still dealing with some of that. also, inflation expectations -- there has been a persistent undershoot on the fed's 2% inflation goal, and over time that begins to, sort of, for a,

longer-run inflation expectations. that is what is going on here. that is as best as i can figure. what i would say is if they can continue to allow the liver market to do what it is doing, over time that should put over pressure on inflation. i sympathize with that. we are seeing it. if you look at average hourly earnings, they have been picking up a little bit lately. you know, median wage growth is a little bit stronger. we'll see how this goes. jonathan: let's talk about the potential policy response. the bias of the start of the year, and as we progressed was yes, the data might come in softer, but we're going to hike, then it will come in softer, and we will still hike because the general economy is stable. get they still hike if we -- where does it change? where is the inflection point? neil: there are two ways of thinking about this. the first is there are a lot of

transitory and idiosyncratic factors weighing on inflation. i sympathize with the fed on that. it is also true that have been running below 2% for a long time now. where we are right now -- they need a very strong reason not to go. i mean, that has been the day, sort of, change since last year. so, i think if the jobs numbers continue to come in healthy and you get a takedown in the unemployment rate, the fed will ready -- be ready to take up -- tee another hike in december. late last year, nobody thought the fed was going to go twice in the first half of the year, but that is exactly what happened. risksk there are upside to the u.s. economy, particularly from inventory investment. so, i have been advising people -- i think now is an opportune time to take short positions on the front end of the treasury curve. the fed is going to see if europe market is underpriced for a hike.

david: neil dutta staying with us. coming up, pablo goldberg --blackrock's head of research. this is bloomberg. ♪

emma: this is bloomberg daybreak. i am emma chandra with your bloomberg business flash. boostingeat estimates, eminence in e-commerce my improving -- by improving the ad algorithm it uses to generate revenue from ads. in the u.s., walmart gave a lukewarm forecast for the third quarter. the world's largest retailer has been spending heavily to fend off amazon, and that is taking its toll. the outlook tempered enthusiasm after the grocery business posted its biggest growth in

five years. it accounts for more than half of warmer's -- walmart's revenue. david: we are joined by sarah, who covers walmart, and neil dutta. sarah, let's start with you -- take us through the walmart numbers -- they look like good numbers, but the stock is down in premarket trading. sarah: the stock seems to be reacting to the fact that eps guidance is not as strong as an answers were hoping for. if we zoom out and look at the big picture, it was a good report for walmart. they have been on this that he streak of growth for 12 quarters now. meaningful in a retail environment that has been really volatile. david: talk about the e-commerce part. inevitably, there is the question of what is going on online shopping. how is it paying off.

-- paying off? sarah: it is charged by to think -- they have done these strategic accident -- acquisitions. they are adding to the size of the total pot. but they have also, really expanded their own assortment online. they have 67 million views. they are offering shoppers more product and that is paying off, too. dutta, i read a note on walmart versus amazon, worry aaid do i want to tech company trying to specialize in retail, or a retail coming try to -- trying to specialize in tech? isl: the technology sector running on fumes.

it has had a strong run, where as the retail sector feels like it is making new relative lows every other week. whenis happening at a time major financial publications are running front-page articles talking about the death of retail, and also at a time, when, you know, u.s. same-store sales at brick-and-mortar sales are exorbitant. they are up 3% year-over-year. it is nothing to write home about the underbelly of the u.s. consumer is quite firm. balance sheets are healthy. gas prices are low. net worth is rising. the jobs market is strong. the fundamentals for the consumer are there. so, i think that at the margin, that will probably help brick-and-mortar retailers a bit more. draw an: have to try and distinction between wearing retail you are talking about -- walmart is doing pretty well. the stock is up 17%. goods up,k's sporting

getting absolutely hammered. have to look at brands. companies like ralph lorenz and michael kors -- i don't want to get to in the weeds here, but the restaurants are another area where there is potential upside -- people going out to eat, travel tourism -- novella categories that a car important, but also clothing sales. these industries have had a very weak run. if you look at the volume sold in the actual economy, it is picking up. david: sarah, take us into the weeds when it comes to retail. you look at jcpenney, it got hammered. i'm never said you look at walmart or target. is it really a matter where you have to take a company by company by company? sarah: that is right. it is a sector with a lot of winners and losers right now. i feel like we go through this dance where the department owners -- department source

report first, then we say the sky is falling, the me get x,rnings from the likes of tj and they serve the rest of the retail industry a slice of humble pie with excellent comparable sales and harley with any e-commerce at all. retail is one of these sectors right now is very company by company, and you have to assess each on its own merits. jonathan: sarah halzack, thank you. neil dutta is sticking with us. coming up later, chuck robbins, cisco's ceo will be talking us -- discussing earnings and politics. ♪

david: 60 minutes in about 25 seconds away from the cash open. futures are soft today, down about 1% on the dow and the s&p 500 after marginal gains

yesterday. let's get to the other screens shelley -- michelle wie? -- shall we? img, the ecb is expressing concern about potential for an overshoot. one .1697. is at initial jobless claims come in at 232,000. the survey, 240,000. just when you think this number can go much lower, it grinds lower again. when a multi-decade low you think about it. you have to go all the way back to the 1970's for these kind of numbers, david. david: in children's stories we talk about the "little engine that could." you --have that in the the u.k.? it is a job creating machine, it

just keeps going. jonathan: 230 2000 -- your initial jobless claims print. for reaction, we are joined by ira jersey and still with us, neil dutta of renaissance macro research. ira, it is a conversation we always have run the labor market and you take headlines numbers, in this case initial jobless claims, and you can paint a picture of a tight labor market. then we ask the question -- if it is the time -- tight, where is the wage growth? ira: that is a good question, but rivera, this is only half of the data. we know a lot of people are not toting laid off compared history, but what sectors are getting hired? if people are getting hired in low-wage sectors, you don't see the wage growth because lower-wage sectors are getting the bulk of the new job entrance.

that is good for the general economy and one of things i've been harping on is things are on trent, and they have been on trend for the same -- for eight years -- the aggregate paycheck for the economy, the number of people working, the wage growth, the hours worked, is all on trent. it is not a spectacular trent. it is not the 1990's and we are used to. you have to get used to the idea markets will not find this exciting unless we get a significant change in one of his labor indicators. factory: the philly fed index coming in stronger as well. we were looking for a team. we got 18.9. the previous number, 19.5. a little bit softer than the previous month. , you go back to initial jobless claims -- you look at them, and there is a strong signal, things are ok, solid, right? neil: more than ok. the labor market is not a problem. people talking about it as if it is a problem i think our out to lunch.

-- i think are out to lunch. for me, we are at low rates of unemployment, yet we continue to generate 200,000 jobs a month. if you told someone that a year ago that we would still be generated 200,000 jobs a month -- jonathan: they would tell me what they tell me now -- it will pair the games, will move down to 100,000, and the wage growth will come. neil: it hasn't happened. what -- where are these people coming from? i think it is tonya slowly, but quietly, the participation rate in the u.s. from prime age workers is coming back. that is where the people are coming from. david: you have a chart here to show participation rate. it has come down from the 62%, 63% range. it has come down, but the age -adjusted, the top line number is age-adjusted. how much of this is demographics? neil: a lot of the decline since

2007 is demographic driven, but the point that chart is trying to make is there is still a decent amount of cyclical, sort of, gap, in the present -- participation rate that is left. what the number does is hold the distribution of the u.s. population fixed to where it was in 2007. the fact the orange line is improving is telling you that participation rate among 20 52 54 euros are up. 54-year-olds are up. if you were a kid in college, you state in school longer because the labor market was not particular strong. the calculation is now different. word,an: he used the c cyclical. i wonder, if it is cyclical, the fed needs to take note of that, right? neil: i think it is a more nuanced discussion. has beenlegal, the fed

hanging its hat on neutral ansys rates. the fact that produced -- interest rates. it ultimately means that you hold policy easier. now, if it is going in the other direction, to me, it means higher terminal rates. that is not necessarily a dovish development. david: also at some point, a cycle becomes a structural if it is long enough. i want to talk about the possible connection with wage pressure. if there is this gap right now, despite the fact that we have at its many people to the workforce -- is it a problem because the wages are not high enough to draw back those people that otherwise are participating? ira: there are a lot of different factors that go into employment in general, and part of it is being able to relocate easily, and part of it is to be able to find the skills match for the different jobs that are out there. isng back to what neil

talking about with the federal reserve -- one of the reasons the fed is going to be cautious -- they worry that if they were to hike too fast, they would wind up being the cause, but they often are, of a recession, because they basically made a policy mistake and they slow down the economy by hiking rates too much. the structure of the economy is different now post-crisis. there is an underlying fear they could be the cause of it, and they don't want to be the cause because they see nation improvement -- improvement in the participation rate, in the job market. because inflation is not running out of the way, there is no urgency. i think that is going to continue to be the theme, at least for the next 18 months, where the fed is still on the going to hike a couple of times because they are worried about -- basically, the economy falling out of bed as opposed to speeding up too much. there are also worried that if they go to so they might

have to go more quickly later. they are also worried that financial conditions are too loose. how does that factor into what you just said? i think the financial conditions argument is an interesting one. it used to be that the federal reserve topic control with interest rates. in a post quantitative easing world with corporate debt outstanding, consumer credit outstanding, it is really how are all these web of credit interconnected, and what we have seen is when you have lower credit spreads like we had in the early-2000's, likely due today, the fed ability to control financial situations is reduced. that is the academic thought going through the fed. it hasn't quite caught up with market realities yet. credit end up with easy conditions a significant amount of hikes. may be monetary policy just

doesn't matter at this point, and you need some other type of regulatory or fiscal policy to change things. jonathan: ira jersey, good to see you. neil dutta of macro research will be staying with us -- of renaissance macro research. ising up, an update of what making headlines outside of the business world. let's catch up with emma chandra . gone steve bannon has public in his views on china. he says he battles steve mnuchin and economic advisor gary cohn. he wants to see a tougher stance on trade with china. topeijing, america's general says war with north korea would be horrific, but the chairman of the joint chiefs of letting north korea the steps ability to launch an attack on the u.s. is unimaginable. some sources said president trump asked the pentagon to develop viable military options.

2014tudent leaders of the democracy protest will serve sentences. the court overturned sentences the prosecution said were too light. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. david: coming up next, pablo goldberg, blackrock's head of fixed income research. he will be joining us here. live from new york, is blue brick. -- this is bloomberg. ♪

emma: this is bloomberg daybreak. i am emma chandra, and this is the enterprise greenroom. coming up, the ceo and founder

of founding circle. now to your bloomberg business flash. activist investor bill ackman is about to wrap up the pressure on adp. in a webcast today, ackman will make his case for changes in the payroll and human resources outfitter. he claims to have losing ground to smaller rivals. predicted revenue in the current quarter might fall as much as 3%. ceo chuck robbins is trying to transition's is going to a company that is less dependent on hardware. robins will speak to bloomberg television later this morning -- that is at 9:40 a.m. eastern time. low-cost could add routes to the u.s. if it buys part of air berlin. lufthansa could use air berlin's bases in berlin and duesseldorf

to let its low-cost carrier expand its network. that is your bloomberg business flash. jonathan: they have to get the flights they already do on time. david: whether they are cheap or expensive. jonathan: i don't want to call anyone out, but the expense of going through frank fort area -- frankford airport, that leaves something to be desired. david: a tough one. jonathan: president trump and china has raised from -- ranged -- and steve to bannon gave a surprise interview and where he left no doubt. economic wall with china is everything, and we have to be maniacally focused on that . jonathan: joining us now is

pablo goldberg. are we about to shift back towards we thought was done and down with -- the conversation about trade wars? pablo goldberg: i don't know, to be honest, but the truth is we have seen this administration many times of the nt on trade. it is not also that not only about china, but also the nafta deal. at the end of the day, when people look at the numbers, they come out with the view that maybe it is not convenient from a consumer point of view, from a global politics point of view. the u.s. has been trying to do, little bit of a horse race with china between help in north korea versus a more favorable trade situation, and so far we have seen much there. is andt i can tell you if that were to be a trade war with china, it would not be welcomed by markets anywhere -- it is not just emerging markets

pedal be a problem for developed markets and the s&p, for example. jonathan: what is your best case scenario for how this evolves? pablo: business as usual. a certain amount of open trade. maybe part of these trade were -- trade wars has to do with local content inside the nafta agreement. the idea of increasing the amount of content that comes from the region -- that is one way. maybe you will see some shock at the dumping area. you know, those kinds of subsidies to certain sectors. i don't think it is our base case, and is not the base case of the markets. david: why we have been on the are now we have a response from china -- a spokeswoman for the foreign ministry says there is no winner in a trade war. we hope the relevant people can refrain from dealing with a problem the 21st century with a zero sum mentality from the 19th or 20th century. of what mr.ing note

bannon had to say. if there were frictions, putting dire,war, because that is who is the bigger loser, china or the u.s.? pablo: both. the consumer -- this is a way to get inflation in the economy. maybe it is trying to get it through the back door. what is true is i think what the chinese are saying is having trade is of foreign something very old. this idea of let's focus on the trade balance -- that is not the only measure you need to be looking at. jonathan: from the point of steve bannon, though, we already in a trade war -- there is only one side fighting, and that is china. the united states has been rolling over. do you see any truth in that? pablo: we need to also think about the improvement in the quality and price of goods and services the u.s. consumer is getting. we need to decide, collectively

as a nation here in the u.s., if we want -- let's say and that is the case -- i don't think it is the right way to look at it -- if we want to trade just for higher inflation, and it is -- is that putting is better. you were talking about the unemployment rate before. it does not seem that we do have one. david: it comes at a point within particular development -- of particular development within china of them opening up their markets to the west. you had the stock connect to you can invest in stock, and now you have bond connect coming online. how would this improved pressure -- increase pressure on china read with that -- you could say it will interfere with it or expedite it because it would force them to open up those sorts of markets to us. pablo: it is interesting because on one side you have this massive trade surplus coming out of china, but on the other side, they are worried about capital outflows. it is a little bit of a tug-of-war. what is true is this opening of

the capital accounts -- from the point of view of the sauce the chinese market, it is not that big. bond connect will probably bring around 150 billion to china, but appeared to the size of the chinese market, that is not that huge -- it is actually a small portion of the market. it will be great that foreign investors will have more access to the chinese market -- we will welcome this development, opening the biggest economy, and that is great, because given that china is a risk from the point of view of the emerging markets -- i want to be able to actually play the chinese market rather than be hedging. david: by connect, as announced, is roughly modest -- relatively modest. is that thought it might be a first step, because that is a massive bond market,

potentially, for the u.s. another bond investors to produce a paid in cash participate in. -- participate in. pablo: chinese is about babies -- china is about baby steps. in the u.s., where more radical movers -- we are more radical movers. this is something investors will get used to. we are in the process of getting to know the systems, getting to know everything that happens, you know, behind doors of the trades and see how it works. david: pablo goldberg of like rock. he will be staying with us. -- all black rock. he will be staying with us. if you have a bloomberg terminal, go to tv on your bloomberg terminal, this is bloomberg. ♪

david: this is bloomberg. i am david westin. second day of nafta negotiations are underway in washington. -- spoke yesterday on

what the talks could mean for his country. >> mexico believes that nafta has been a strong success for all parties, but we also agreed there is room to make this agreement more successful. pablo still with us is goldberg of blackrock. watching the statements coming out of the respective parties yesterday, it felt of the united states was saying we have to have a really big change -- having around the edges. canada and mexico was saying we don't want anything fundamental. pablo: if we go back to what was said before about china, it applies to nafta as well. think about this number -- every vehicle that mexico exports to all the countries mexico has an agreement with the u.s. does not -- all of these vehicles go with a zero charge to another country has 40% in the u.s..

wages in the auto sector in mexico are five and change, where the u.s. is 23 and change. is a very goodp partnership for the u.s.. posturing, and they will go technically to the numbers. in this case, it is also going to work for the u.s.. it is about marketing -- how you present it to your base and make it work. david: but the president has taken a stern stance, saying we're going to change it fundamentally. can mexico give him whatever concessions might allow him to declare victory for his base in the united states? pablo: this is how i see it from the mexican point of view -- mexico has very good allies in the u.s. that also want to work with mexico. all the southern states are really in favor of trade with mexico. also, a very important part of the vote base for trump, the

midwestern i'll call subsector that are -- agricultural sector that are selling products to mexico. jonathan: how do you express it to the market view? hey people would have said would be tougher on mexico and canada, and he did not want to go near the pace of because this would be -- peso because this would be rough. how do you think about that now? i will tell you pablo: what our motto -- pablo: i will tell you what our models show. it was pretty wide. that was around 17.50. we came down to that level. -priced the nafta risk -- the new administration, new policy risks. i think that trade might continue for a little bit as we advanced on the technical

discussions rather than on the tweet headlines. now we are just really getting rounds ofeven to nine the boring discussion, chapter by chapter. david: it seems time is a wasting -- mexico has a presidential election coming up. they have a limited amount of time. can they get this done? pablo: the target is to try to finish the technical part, let's say, by january. it is an ambitious park -- target. we will be hearing a lot of this. so, it is going to be intense work. the idea is to have, technically, the recession prior to getting into the midterm cycle in the u.s., and the presidential elections coming in july. important -- mexico has some things to off to the u.s. -- the energy sector and financial

services. these are important things mexico can offer. if everyone walks out of the party, mexico reverts back to tariffs that are way more favorable for mexico to the u.s. than the u.s. to mexico. david: and that is before you get to security. jonathan: pablo goldberg, good catching up with you. coming up next, chad morganlander will be joining us as we count you down to the market open, about 34 minutes away. futures soft throughout much of the moment -- morning. we are up by about six in the s&p 500. from new york, this is bloomberg tv. ♪

♪ jonathan: the president's pro business image tarnished.

-- a confused federal reserve. officials are still committed to gradual rate hikes but lose conviction in inflation forecasts. the central bank expressed concern over the rest of the row overshooting -- euro overshooting. good morning. this is bloomberg daybreak. i'm jonathan ferro. alix steel is on assignment. let's get you up to speed. futures a little soft, down about a quarter of 1%. 116.95 is how we trade. 224 is your yield. crude down. that's the cross asset picture. let's move ahead of the opening bell. -- lots closet of running worker -- lots of earnings movers.

walmart down after the retail giant beat second-quarter estimates but is the third quarter guide that the little disappointing. apparently this have to do with grocery, more than half the revenue. the growth is surging but they have to spend to compete online for the likes of amazon. small but segment is it weighs in on margins. their shares are down at this time. looking at a big winner in the premarket, alibaba. the chinese internet giant surging, set to open in a new record high after they beat earnings by 27%. not small numbers. they put up more than eight dollars in earnings. they be revenues by 5%. more than $50 billion in revenue. consumer demand is surging. a-shares were already up 82% year to date. it is shaping up to be one of 2017's big winners. cisco systems down about 2.5% in the premarket. they did the fiscal

fourth-quarter estimates, the revenue contracted for the seventh time in a row. the outlook is a little disappointing. website the software turnaround they are trying to make happen is taking a little time. the wells fargo analyst says guidance is conservative in their moving in the right direction. time will tell. one byn: in the u.s., one ceo's of some of the biggest companies began to distance themselves from the president of the united states following his comments following the ugly rallies in virginia over the weekend. they departed his advisory councils. just as they were going to get together and get the latest band, the president closed them down altogether. the divorce between one of the most important constituencies of president trump, the world of business and the white house. joining us is the portfolio manager -- chief equity strategist at bloomberg intelligence. chad, is that with that is

yesterday or symbolic? chad: it's the real deal. they are trying to have a careful departure from the current administration. and majorll street corporations are trying to figure out what is actually in the white house. is it bannon's white house over traditional republican white house? that has to be played out over the course of the next several months and the next 18 months. jonathan: does it matter? in congress carry on and do what they need to do and ultimately want to do as well? chad: i don't think so. i think this is the ultimate gridlock. going into 2018, whatever they do pass in regard tax reform and fiscal stimulus, it is all going to be watered down. david: can a more general sense, markets generally don't like uncertainty. whether it is good or bad in washington, it is uncertain. we don't know day-to-day with going to happen.

are the markets properly pricing in the possibility they will not get things done, but they may do things we don't expect? >> it is a tough question. good question. markets have become so inundated by the day-to-day news out of washington we generally ignore everything. a true shock could have an effect on the s&p market, that all of our research suggests tax reform is no longer priced in. we tried to price in tax reform last year, and we slowly reduced the expectation and now we are not generally anticipating it. what has happened is anything priced in the stock in late 2016 slowly got priced out over 2017 through rotation and a slope ascension and prices. we are not expect anything out of washington. you have potential for both positive and negative shock to impact the market, but you have to have a policy move before the market really recognizes it and starts the president -- starts

to price it in. david: it has grown to unrealistic expectations, can we expect that to continue to grow at this rate? chad: certainly they could happen. you have negative interest rates overseas and you have rates here that are so low that asset -- speculative assets are moving in equities. you are having the slow melt down regardless of the type of fiscal push or economic vitality. i believe gdp growth for 2018 in the united states will be far less than everyone is expecting. david: what is your number? chad: 2% to 2.25%. the reserve will have a difficult time raising rates and balancing sheets as you see this deceleration of economic activity and inflation expectations coming across the globe. jonathan: the potential for action from congress anytime

soon in a significant way. have corporate ceo's done that? it is not in the price. gina: this is a controversial topic. corporate tax receipts of the federal level have grown 0% this year. at the beginning of the year, the cbo expected to grow 7%. in the last five years on average corporate tax receipts have grown 11% by this time in a year. there does appear to be some tax movements,tax manipulation going on. maybe this is an anticipation of potential reform. the other angle is buybacks have slowed tremendously so far this year. even though it has grown a lot, we have seen buybacks slow. corporate because managers are anticipating some former repatriation. is tax situation

interesting. this corporate behavior is telling you maybe there are managers holding on to the expectation we will have some form of reform. david: there is a fine line between tax regulation and tax planning. gina: true. definitely planning. david: talking about the uncertainty we are seeing in washington, is it having an effect on capital investment? chad" obviously yes. they are waiting to see with a layout their capital plans for 2018, 2019 and 2020. holding it back, a large majority of the capital investment, the growth in capital investment has been in the oil and gas industry. our expectations over the next 18 months is we will see it roll over in price. we will see depression in the capital investment. overall we believe capital investment in 2018 will not be as robust as everyone is anticipating.

importanti think it's based on this conversation. x growth was there to begin with. chad: i don't think washington has had a great impact on capital investment. the trump administration has not done that. capital investment overall is based more on global growth and global demand than on domestic policy. david: this is my problem going back to growth numbers, normally the gate growth from either increase in productivity which are tied capital investment or more people working. if you are anticipating increased earnings going forward, where will they come out of we are not getting increased productivity or more workers? : i do think it's underappreciated just how much growth in capital spending are actually is.

there is a rhetoric that capital spending is perpetually repressed. when we look to the number for the s&p 500 and exclude the energy sector from the calculation, capital spending is growing about 9% year on year. a lot of it is the energy sector. a lot of it was oil and gas. the recession in 2015-2016 skewed the numbers. the growth is the fastest it has been in the cycle. we are seeing capital spending accelerate. a lot of it is a somewhat surprising shock of growth outside the united states. europe has been stronger. china surprised us with its resiliency. there is a decent amount growth globally. it's forcing companies to spend money. are they spending a lot of money? certainly not, what they are spending. on the employment line, either love it or hate it, we are growing somewhere between 150,000 and 200,000 jobs from month. it is steady growth. it is not vast acceleration but it is steady. the big mover is oil and gas.

it has been a very volatile roller coaster ride. we saw major compression in sales growth in that sector, and now we are seeing a bounceback. excluding that, it is a steady growth pace. david: that is good. chad is staying with us. gina martin adams will be back with us before the market opens. chuck robbins, cisco ceo, joins us on the back of yesterday's earnings. his company predicted another revenue decline and it tries to remake itself among a changing network industry. this is bloomberg. ♪

♪ minutes: the fomc indicated most fed officials

supported midterm move. joining us to discuss is fed reporter matt and chad morgan. matt, what did we learn yesterday: matt: despite all the weak inflation data with these big one-off downward moves in different categories and services, the fed is mostly sticking with its framework where it believes if it allows unemployment rates to continue to fall, inflation will eventually be able to pick up. therefore we don't necessarily need to see much of a game changer on the inflation front to continue going forward with interest rate increases. jonathan: there is a big debate. to wait and see crowd. and the keep going crowd. who will win? matt: there is a growing contingency that wants to see some pickup in the inflation data in the next few months before deciding on a rating reason december -- rate increase

in december. probably do, you see a hike. jonathan: let's look at confused federal reserve. that think the federal reserve will carry on doing what it's done for most of this year, regardless of what the market expects, regardless of the data. chad: are expectation is one rate hike for 2017 and december, potentially two over the course of 2018. i do believe the phillips curve is dead in the water. overall the actual labor arbitrage that started in manufacturing, which was deflationary in united states, now transferred over to high education working jobs. you could hire a room full of phd's in india and have them work on a project at a fraction of the cost been here in new york.

there in lies the problem with the phillips curve. our expectation, jobs will be steady, but nonetheless you will not see an uptick of inflation in united states or across the globe. david: looking at the minutes released yesterday, we spent a lot of time trying to figure out what the fed thinks. they don't know what they think. there is no answer. how can we or people investing make projections when it doesn't like with the fed notes -- knows. matt: it's interesting what chad was talking about. the fed is starting to consider these other possibilities about how inflation works. you hear that in people like charlie evans of the chicago fed. day they still think there is a fundamental relationship between inflation and unemployment, and maybe just the parameters of the coefficients of that relationship have declined. it is not as strong of a

relationship but it will reassert itself. that would be a very answer to your question. to see it though we are not there yet. jonathan: next week, jackson hole, the main event was president draghi. we learned they are worried about the potential risk of a euro overshoot. in the federal reserve is concerned about where inflation is that, the last thing they need is an inflection point and a stronger dollar? matt: that is one of the thing supporting the inflation outlook, the decline of the dollar. that has been aided by a rise in the euro and other currencies of our major trading partners. there is an interesting dynamic, but as long as they can keep us in the sweet spot where we are at, that is one less thing to have to worry about putting downward pressure on u.s. prices. david: speaking of sweet spot's,

they think there is a sweet spot in the balance sheet. why are they so confident that unwinding this will not disrupt the markets? we have never been here before. chad: i don't think that's why they -- i don't think they are so confidence. that's why they will take this glacial pace. the balancing act of raising interest rates and making sure there is no dislocation within the credit markets, as well as what volatility in the currency markets, they will take a very glacial pace over the next six to 12 months. they are following the lead of the ecb. they want to be very careful about how they message here domestically with the monetary policy is. all eyes will be on jackson hole, as well as with the ecb and how they are going to message what they will do over the next three to four months. jonathan: but start about how the fx market has captured that. the lawns have been building for

the euro. i we stretched on either side? chad: in the short-term and intermediate run we are. i think it was he the dollar rally in the second half of this year as the realization comes out that the ecb is not going to be as aggressive as everyone is anticipating. jonathan what is market vulnerable? chad: in domestic equities and potentially credit markets. we are skittish about the overall financial system over the next six months. we believe there will be some deceleration of growth and policy issues here in the united states that could have a meaningful impact within the volatility the market. david: to talk about skittish in the financial system, one thing that came up were some members are concerned. that keeping the

long end of the curve down maybe creating some inflated asset values. they don't have forever. matt: that is another really interesting theme besides the inflation conversation. some people at the fed, most notably the new york fed chair, maybe they should raise rates faster. the question for them is, first of all, does that translate to hire consumer spending? second of all it's important to keep in mind that is equally important on the downside. if stocks were to fall and financial conditions were to tighten, you would see a slower pace of tightening. david: thanks to matt mosley for being here today. chad will stay with us. coming up, shares of walmart moving lower in the premarket. delivered aretailer lukewarm forecast for the third quarter. edward jones senior analyst will

be here to help us look to the numbers. one question is how the retailer can fend off the likes of amazon. live from new york, this is bloomberg. ♪

♪ david: this is bloomberg. still with his chad from washington advisers. some stocks he likes quite a bit right now. you have a couple you really like? chad: we are in the later half of an economic cycle. we want to stay with a steady eddies, the rising dividend companies. we like hormel. we think it will be an expansion of operating margins over the next three years, as well as a steady consistent revenue growth. -- one thing about or hormel israeli have a $200 million debt. the second is dr pepper.

we think overall this company will have a modest expansion of earnings. revenues will be higher. dividend growth will be substantial in the next three years. we see double-digit returns in this company over the next several years. david: you mentioned the balance sheet for hormel. how important is the balance sheet as you anticipate the possibility of things slowing down? chad: we want to buy companies that don't have a lot of debt on their balance sheet, that have a consistent free cash flows stream and diversified revenue lines, and a client base. every company i'm recommending has that thematic today. for example, if you go with hormel an dr pepper, look at church and white. people think they are overvalued, but these are sees opportunity. david: consumer discretionary? it looks like consumer discretionary did well in the last earnings cycle. chad: two company like is starbucks. i know it has come down a

bit. we have to look at three years on that one. again, double-digit returns overall we think with the dividend growth that will be double-digit as well. nike as well. well diversified. plays off the global somatic -- thematic. the valuation maybe a little stretched, but focused there his dividend growth, stability, balance sheet. david: transport? chad: we recently purchased union pacific based off valuation. we think they are diversifying the revenue line. the overhang was the coal segment of the business. the overall -- they will grow out of that issue. we will be lying union pacific -- buying union pacific. you have to look at 18 to 24 months. david: touch on health care for a moment. a lot of people talk about health care.

how do you like that sector and what stocks you like? chad: our belief overall over the next 24 to 36 months if the u.s. government will have to contribute more money to health care and not contract that. we believe that is going to continue to provide stability of revenue growth for the overall industry. we like amgen as a value play. we think the stock could be a close to $200 per share in the next 18 months, with a tremendous dividend growth. i will throw in another one. overall a similar kind of consumer staple company with overall 50% of the revenues coming from emerging markets. david: i concerned about cbo scoring on withdrawing from the subsidies for health insurance? chad: i think when you start -- whenever the falls out of this, you will notice three years from

now government outlays will be substantially higher for health care in general. the insurers, the hmos will be doing quite well. david: chad is staying with us. jonathan: coming up, the opening bell. down 131%e negative, on the dow and s&p 500. one third of 1%. yields creeping higher by a single basis point. the story of the fx market, ecb verbal intervention. a little bit of a bounce back at 117.13. this is bloomberg. ♪

got you outnumbered. the dinosaurs' extinction... don't listen to them. not appropriate. now i'm mashing these potatoes with my stick of butter... why don't you sit over here. find your awesome with the xfinity stream app.

included with xfinity tv. more to stream to every screen. york, to ourm new viewers worldwide, this is daybreak."a break -- futures are down a little softer. -60 on the down.

-70 on the eve 500. -- s&p 500. really emphasized and fueled by what is happening with the euro. ecbeuro, weaker as the comes in with a bit of verbal intervention, expressing concern from the accounts of the last meeting about the potential risk of overshoot. lasturo, weaker over the 24 hours. about one higher by basis point of 223 through the week. it has been a story of strong retail sales driving yields higher. we settle around the mid-20's, that's how we are on the 10 year right now. cashconds or so into the open, here it is, abigail doolittle. 2/10 or the bears open, more. this follows yesterday's bit of intraday volatility on d.c.

drama and uncertainty. very interesting is the fact that frank capillary just sent out his morning note and it's something called the hindenburg omen that has been triggered. typically it's pretty bearish when it works, but he says more recently it hasn't been working and nonetheless it something to keep an eye on for a potential for a big correction. big movers on the day, alibaba surging up 4% on a new record high after they put up a massive heat for therefore -- quarterly earnings by 27%, nearly eight dollars per share. not small numbers, looks like consumer demand is really helping out that chinese internet giant. walmart, not so much, down after their second quarter but the third-quarter guidance was disappointing as they spend to build out there online presence to compete against amazon. apparently those margins were a bit of a pain for a little while.

look at l brands, down eight percent. the quarter was solid, no surprises, but surprise was guidance and it has to do with weakness over victoria's secret. we of course have the trump trade in play. chart of thee-year russell 2000. we see a beautiful uptrend in yellow with a 200 day moving average and blue, sloping up. of the election, the trump trade is still in play. but, look at it hitting down onto the 200 day moving average, telling us the buyers are getting week and the sellers are's opinion. frankly that looks like a heavy test of support. led to a little bit of a correction. put that together with a hindenburg moment? who knows, stay tuned. jonathan: thank you so much. still with us is gina martin adams.

big play onchad, the back of the election. then the enthusiasm draws away for the market. where are you now? chad: we recommend that investors up into less volatile asset, reducing exposure to itll caps or eliminate altogether. on the large cap side we like growth over value at this point growth.e over weight we don't favor oil and gas or financials at this point. gina: i think that you are at a critical turning point at this point. the last time we broke through that 200 day moving average was brexit. this is a critical support level. we are also at oversold extremes. only 3% of the small cap index is trading at overbought levels.

we are at a potential bounce point. a lot of this is frankly going to depend on the dollar. if it keeps declining it will be caply difficult for small companies to outperform in the united states. these are companies that are somewhat dependent upon domestic conditions improving and it is tough to make a strong case for growth recovery in the second half what the dollar does means a lot. to the ecb than anything else, if the dollar continues to depreciate, large caps on x continue to outperform -- stocks continue to outperform, the dollar has a chance to do better. david: how important is what's going on in washington? or that matter, the band and saying that we want to have an economic war with china? gina: it's probably better for small caps than large caps? -- caps. the dollar depreciation is benefiting the multinational companies. if you have hints at work

legislative changes that would ultimately result in some sort of trade compression, particularly with canada and mexico or china, it's going to detrimentally impact the large cap space more than the small-cap space. david: joining us on the telephone, brian yarborough, who currently has a hold rating on walmart stock. good to have you here. give us a sense of what went wrong for walmart. their stock is down a bit today. brian: i think some of the whisper numbers of the last few weeks were a bit higher. closer to 2% plus. which is still strong, but i think expectations in the fact

latef you go back to january, the stock is off 26% on the bottom. expectations have again gotten high. the stock was selling at 18 times earnings at five-year averages at 14 times earnings. it had gotten expensive, expectations are high and when you factor that in with the guidance at the top end of the range, there is a bit of disappointment there. how much of it has to do with groceries? over 50% of the revenue at this, but they have to send more to that number up, so their margin is getting pressed. is that right? brian: if you look at the grocery business, it actually improved this quarter. but absolutely, i think that and look atp back what greg and doug said one year and a half ago. they are not this used to being competitive with grocery.

over the prior two or three years, they had launched into other players like kroger. they are definitely investing a price and they are right. in all as the investment of this e-commerce growth. jonathan: is it a decision between two companies, if you want exposure here, to amazon or walmart? don't yeah, i think we, i follow walmart that our analyst has a buy rating on it. i don't know, but walmart we think is a hold. that in our analyst who follows longer-term, there's a ton of growth here for amazon and a huge opportunity to gain market share. the problem is they are all in e-commerce, which is great, but for walmart they are losing money and the ones were making money, for most

is at as e-commerce much lower profit margin than brick-and-mortar. that is weighing on potential earnings growth. we just think that longer-term you don't get much more than three or four, maybe five or send earnings growth and a lot of that is going to be from share buyback. we think that 16, 17 times earnings today is priced in. we are eight minutes into the session. brian yarborough, thank you so -- sir. always good to catch up with you as well, gina. going through the options for you, the story as my -- as follows, marginal is up 1/5 of 1% on the s&p 500. losses in europe as well. the bond market, stable, considering how windy to be has been. the standout move in the fx market to the downside on

euro-dollar, with ecb and a bit of verbal intervention, worried about the potential risk of a single currency overshoot today. so, that's the story in the fx market. the story in new york is all about politics. you are watching bloomberg.

emma: this is "bloomberg daybreak," i'm in the chandler. -- m a chandler -- emma chandler. coming up, this is bloomberg. cisco announced its earnings after the bell yesterday and it narrowly the

estimates for earnings and for revenue. nevertheless, the stock turned down to read this may be because major turnaround it has undertaken. moving from hardware to software. revenue once again, chuck robbins joining us once again. her to have you here, chuck. chuck: thanks for having me. you are taking this major turnaround of the company really dictated by what's going on in the market ice. where are you in that turnaround? is it being stressful and why isn't the market recognizing it? chuck: first, again, thanks her having me here. two years ago one of the things i said was that we were going to accelerate the pace of information and particularly invest in core innovation. we have really begun in june

with this cycle of innovation that you are going to see from us over the years. he walked -- launched something called the network intuitive. we will fundamentally reinvent networking and the press reaction of our customers and employees, there's a lot behind it. we are very excited about that. it's the first of a cycle that we will see in the next few years. at the same time, we said that we were going to shift more of our business to a software subscription model and we have made unbelievable address in the past quarter. 31% of our revenue was from recurring, up four points from the prior year. we actually have our software andrred revenue grew 50% actually eclipsed $5 billion for the worst time. two quarters ago i said it at $4 billion for the time. business, 51% of

our software business now is actually from subscription. we have made a great deal of progress and the strategy we laid out is actually working and i'm very comfortable with where we are and i'm pleased with what our teams have accomplished. jonathan: if i'm a -- david: if i'm a long-term investor and i believe in you, what are we looking at the be sure that it's turned around? what's on the dashboard to say i'm sure it's working or, for that matter, not working? chuck: first of all, we provided new metrics to indicate that this transition is working. metrics like this recurring revenue percentage of our software business coming from subscriptions erie it if you look at our actual software business and you stacked us up against traditional software companies, you might be surprised at how big it is.

looking at the growth of the preferred software balance and the percentage coming from the metrics that we are performing now on a quarterly basis help you feel better about it, but at the same time we are executing on our financial models. in the midst of this transition we had record cash flows and earnings-per-share, executing on the financial side of it for our shareholders. of then: over the last last couple of days many american ceos in this country have distanced themselves from the president of the united states after the comments that he made following ugly rallies over the weekend. as you see it, is this an administration that you can still work with? chuck: first of all, hello, jonathan. the events of this past weekend, is franklyoremost, incomprehensible that we are in 2017 and having these discussions.

i think that most of america and cisco absolutely abhors racism, doesn't dan for it, doesn't dan for white supremacy, neo not he , racism ineo nazism any way, shape, or form. we have communicated that without lee's this week as we've gone through this. the second thing is we do have a lot to do in this country. we still need to drive gdp growth. if you look at where the country is relative to the latest numbers there are other regions of the world beginning to grow faster than we are here, which is great that we are rowing, but we should be growing faster in the united date area regardless of what's going on, we can't thosete the need to get things done. finally, from a country perspective, we have to find a way, our leaders have to find a way to focus more on the things that actually unite this country. the things that have made us rate and not focus every day on

our differences of opinion and the things that divide us. i think it's incumbent upon the business leaders here that the things that this country needs to be successful with over the next few years, the year's sure we are playing a role in making that happened very that happened. -- happen. jonathan: are you comfortable -- hopeful they can make those statements? the market is pricing it out, but when you sit in the c-suite, are you expecting them to? optimistic and in a dynamic environment. we have strategies to operate the business regardless of what happens, quite comfortable either way and we would certainly love to see tax reform

done this year and we are hopeful again that the gary made where these will get written, that we will continue to work towards getting that done. i remain optimistic, but that's who i am. jonathan: chuck robbins, thank you for joining us again, sir. david: thank you, jonathan. we turn now to two important guest. president trump disbanded his ceo conference. joins us now on the telephone. thank you so much for taking the time to be with us, secretary summers. you and i talked yesterday about this. what you wrote in the washington post -- "the washington post," for the ceos to pull themselves off the councils. in quick succession several of them quit and the president disbanded it altogether. was this successful from your point of view?

sec. summers: yes. i don't know if my words had any affect or not, but i was glad to decided this was not something they could be part of any longer. i think it's obvious from the record that the president disbanding the ceos and the councils was just an effort to preempt what was going to be a verys of announcements ,ritical of his presidency making it clear that they didn't want to lend their first east to him any longer. think it's a very powerful signal and an extraordinary thing that a republican issident who's agenda business tax cutting and regulation cannot maintain an advisory council of major corporate ceos without there tong too embarrassed

withdraw. certainly and like anything of everest in. , except that there have been so many signal so far that have been a board. it has to be a kind of wake-up call for the president and the white house. david: exactly. sec. summers: i also think that it -- i also think that it's devastating to any prospect that might have remained for serious tax reform. serious tax reform is incredibly difficult. we have had it once in the last 50 years. we had it when we had a popular great communicator as president. a master strategist as treasury secretary. and this year at a bipartisan cooperation in the congress. none of those requisites are present right now. serious tax reform is not going to happen. some tax cutting might or might not happen.

you know, this is an important opportunity that has been lost. where i think the attention no need to turn is to the members of this administration. yes, some with national security responsibility may feel they need to be there as a restraining influence area and but for the vast majority, i think they have to ask themselves whether they want to have a boss like president trump. whether they want to be part of the first administration to indulge neo-nazi is him -- nazi sm, indulge white supremacy or support or sympathize with people who walk around carrying torches. i've said it, i don't know how you face your children if you are doing that. i suspect -- august is a

vacation month and i suspect a lot of families, people who are working in the government, there are some very good discussions with children. i know i would resign if i were part of an administration that was even a small part of the way towards what this one is doing. david: that is exactly what i wanted to ask. we saw it sure on tuesday of that news opened. particularly steve mnuchin and gary:. -- gary cohn. it is up to them and their moral compass, but at the same time would you say they go into the country, if not themselves, to make a statement and resign? sec. summers: i have learned, david, not to walk in other people's shoes. if i were in a position like this, i believe very much that i

would resign. and if i somehow diluted myself -- diluted myself that i was being effective, my family would be all over my -- me telling me about the obligation to resign. jonathan: the general economy is doing ok, most economists would acknowledge that. does the chaos in washington, d.c. have any negative spillover? sec. summers: i think that over time it will mean missed opportunities for tax reform, mixed opportunities -- missed opportunities for tax reform and awful international cooperation. raise the risks of destabilizing confrontation with other nations. it's going to foster anti-americanism. which is surely going to hurt the interests of our companies

abroad. mistakeit is always a for those of us who have worked in policy positions to suppose determinesf what what happens in the economy is what the secretary of the treasury is doing or what the congress is doing about economic policy. the fate of the economy depends enormously on decisions that more than 100 million consumers make. that businesses may. -- make. and the ebb and flow of financial markets area i think that it's a mistake to judge economic performance. certainly a big mistake to judge policy performance on the basis of markets area and were very careful, i remember, heavily under the influence of secretary

rubin on -- in the clinton administration, never celebrate in the market went up, never despair when markets went down. i think that's the right kind of view to take. i don't think that it's one of the 20 things that i would worry most about. when the president tweets about a strong stock market, i think it's kind of embarrassing and it shows a very shortsighted heart of the economic performance. david: thank you very much for joining us, larry summers. jonathan: nearly 25, 26 minutes into the session, let's wrap up the session very quickly. marginal gains, futures were soft throughout the morning. we are off by one word on the dow. -- one third on the doubt. interesting story from europe, not in the equity market, but in

the fx market, the euro-dollar is down to 117.16. off by 4/10, but off by a whole lot more earlier. the account of the minutes of the last meeting from the ucb -- ecb suggests they are becoming increasingly concerned about the risk for an overshoot. euro weakness coming into the market ahead of jackson hole next week. beenbond market that has iffy all week, we were up on the back of some wrong retail sales. today was stable. this is bloomberg. ♪ whoooo.

you're searching for something. like the perfect deal... ...on the perfect hotel. so wouldn't it be perfect if... ....there was a single site... ...where you could find the... ...right hotel for you at the best price? there is. because tripadvisor now compares... ...prices from over 200 booking... ...sites ...to save you up to 30%...

...on the hotel you want. trust this bird's words. tripadvisor. the latest reviews. the lowest prices. and new york,a.m. 10 p.m. in hong kong, and i'm vonnie quinn. >> and i'm in a rich a heck. nejra wretch a heck --

chehic. welcome to bloomberg markets." ♪ funny: here are the top stories we're covering around the world in the next two hours. president slams the republican senators who are rebuking him over his charlottesville comments. how toxic is the relationship between the president and congress? and steve bannon opens up, being that the u.s. has to maniacally focused on the relationship -- economic relationship with china. walmart, spending big to compete with amazon and it is showing up in earnings. shares are lower as a mark issues a lukewarm forecast. we are 30 minutes into the trading