>> trump threatens to shut down the government if he doesn't get funding to build the wall across the mexican border. president draghi -- in his speech. the u.k. gives up more ground to the european union. says european may law will influence the u.k. long after brexit. get you set up for market action. here it is. strong gains on the s&p 500. features softer this morning. foot, up byfront 2/10 of 1%. manufacturing data. treasuries stable. we go nowhere. thefferent picture in european bond market. alix: in italy, yields up about two straight days.

the why is what is unknown. is the spreading commodities market everyone is watching. the spread is almost -$4. the global tightening we are seeing in the market when it comes to balancing. .10.r up by the vix, modest today. desk david says trump was back in campaign mode. he took on nafta, the media, and the republicans senators from arizona. he threatened to shut down the government over the building of the wall in mexico. >> we have to close down the government, we are building the wall. me be clear to democrats in congress who oppose a border

wall and stand in the way of border security. you are putting all of america's safety at risk. david: explain what the president was doing here. keep thee things is to government going. why did he reach out and say we may shut it down? >> he felt a need to draw a red line about the border wall. a number of republicans and all democrats are opposed to using taxpayer money to pay for a border wall. the president says this is something he campaigned on an something he believes in, something his voters expect from him. he said it is something he will require to sign a funding bill. congress has a number of things they need to do. this throws a wrench in the process and makes it difficult

to get a funding deal and keep the government open. onid: in the speech, he took both republican senators from arizona. you have seen about what the relationship is with mitch mcconnell. the relationship between trump and mcconnell has disintegrated and they have not spoken to each other in weeks. the rupture between the two tumultuous moment. there is scant room for legislative error. you have the majority leader taking on his own republican president. outhe president was lashing

yesterday. he is entering his eighth month in office with no pieces of signature legislation. he is upset with republicans. moreinks they should get done. he is not making nice, not trying to make friends. he believes his base will get him over the top in terms of squeezing some of these republicans who have not been on the team were supporting him .ully yesterday, he was sending notes and signals to republicans as they get near to getting back to work in congress, that no matter what, he believes his base will work with him. noisy at the white house.

you have a decision to make. you can shut down the government with him and outsource the blame to other parties. david: remember when newt gingrich shut down the government. it really helped clinton. jon: after the markets yesterday, higher after a move of almost 1%. futures were softer. now, looking at the dramatiction, nothing tell me what you think about it. >> government shutdown, no matter who is the occupant in the white house, this has been

well reversed. i don't think we will see a sharp market reaction until there is definitive evidence something dramatic will happen. i don't think we want to get there. the treasury build curve captured the story a couple of weeks ago. i wonder, are we going to see anything outside those moves in the market? could it be a broader story? dollar-yen and other potentially disruptive things that could happen, it is worth monitoring whether that feeds into other markets. this is something that has been off.me on and

a full shutdown will be disruptive. it should make everyone involved think twice. this reminds me of greece. there are only certain weeks of the year you have to care about it. risk, needed to do you where is the best area to do that? talk about politics, we have to see how much that can affect the fundamental scenario. if it impacts earnings and economic growth, people are de-risk already. event, is a political which could have long-term ramification, people may look into rotation. equities, we are not overweight in the u.s., but if there is a prospect of more

de-risking, that could be an area to go. isx: what perplexes me companies that beat on the top line did not give us stocks we are used to. is the catalyst for the fundamentals starting to wane? >> people are asking where is the next upside catalyst. heading into a conversation, we have moved away from -- what is , thatto happen to europe focusing how they are their investments. if that continues to hold, i don't see a reason why we should hold back in the near future. it has been this peso

strength story. this morning, it is not dramatic. it is only a move around 6/10 of 1%. it is bayer and off of the back of a combative speech. >> they have to justify staying where it is. another -- most important, when it comes to u.s., peso is most liquid.

we saw how dollar peso went through 22 at the hive. that is an early warning indicator in the market to look at. it is susceptible to repositioning risk. david: to what extent do you take into account whether a country is making its money domestically or internationally, given the talk coming out of trump? >> we have to look at a sector by sector basis. northrelevant given the korea related sanctions. escalate, howto does that happen. does china want to retaliate by where they companies are particularly exposed or do you want to start on the low

level and then you risk escalation. let's than a broad brush, look at it on a sector by sector level. if you look at the earnings, probably about 45% less than that. alix: is there any answer just cannot answer? ask the audience gets to questions at this panel and if jeff had a book, against each bang.ce member, bang, there is not a question he can answer.

-- he cannot answer. ♪

jon: mario draghi said research shows cueing and forward guidance have been a success. qe involves direct intervention by central banking markets through large-scale act purchases.ge-scale jon: he gave no clues when he might and monetary stimulus. joining us now, paul, who leads our coverage of western european central banks. was there anything we should take away?

read between the lines all you like and there is nothing they are -- nothing there. this, he was speaking in germany, one of his biggest critics. said you must be open minded, you must do your research and come up with policy and not get stuck on outdated paradigms that don't work. jon: there are policies you can divorce from the political pressure, as well. if politics in germany had its way, i imagine qe in germany would not be here. going forward, what do we expect ?rom the ecb >> caution at the very least.

stickb has said he will to the theme of the conference. main factors people are looking out for, what will happen with the bond purchase plan and any concerns about the euro. draghi had the opportunity to mention that and did not do so. theay be sanguine on matter. those are the two topics, but don't get your hopes up. jeffrey.are joined by what we had paul talking about, this is august. august has seen a huge run in the euro. they have never gained this much through august. the white bars are the full year.

but howot say anything, does he start to address this? >> i don't think he as as concerned. the important thing for the ecb is whether the recovery in the eurozone is broadening out and whether inflation is gaining traction. evidence that unemployment is falling faster than expectations. as the ecb was highlighted, the ecb qe fell. it is likely they moved to taper next year. the exchange rate is moving. i don't think the ecb is going to be concerned about the level of the euro. pmi data.had the the stronger euro is not

hurting. verbal intervention is nothing new for mario draghi. >> it is not levels that matter. it is a question of pace. may verbal intervention will come through. there is a process where the ecb can flag rings. is forecast for next year 4.3%. there will be downside risk. flag it in advance and the market will correct itself. that just the pace matters. jon: what is the base case now? 60 to zero and here is how it happens, or we go from 60 to 40 and here is how long it lasts. >> i think the latter.

much more sensible to say this is what we are going to do in the first quarter. we will come back and address the issue again. wouldng the bond rate make some sense. everything is data dependent. if the eurozone was showing signs of pouring over, it may be atficult to say anything all. the market is looking for clarity. whether we get that in october or december, we are not going to get it at jackson hole. david: some form of coordination is important among the banks, as you look at the fed and the ecb. general, moving away from the radical accommodation. those are basically coordinated together rather than disruptive.

>> they love to see some kind of the ferris plan. they would talk to each other and ultimately, it is determined by domestic fundamentals. we have seen some degree of synchronization in individual cycles. europe and japan are following along. the u.s. was ahead of the curve, now, look at where euro dollar is. the weakness in the dollar, that is helping the u.s. on the margins. about u.s.t is it economists choosing beautiful locations for these? both our guests are sticking

with us. , coming up, kevin rudd. from new york city, you are watching bloomberg tv. ♪

david: when central bankers gather in wyoming, one is and will the janet yellen's remarks on financial stability. as investors calculate the quantitative -- questioning whether central bankers will be as important as they have been. many believe central bankers are in control of markets, but with less room to cut rates and expand alan's sheets compared to 10 years ago. learn whethert to central banks are masters of the universe or emperors with no clothes. which is it?

>> i don't think they would claim to be masters of the universe. central bankers are mastering the arts of maintaining optionality. is the ecbf exit going to execute? keeping cards as close to their chest as possible. they will communicate. they will not try to disrupt the market. they will let the market know where the power lies. david: as they exit from the bond market, will they be less important to that market? the umpired you have playing in the game. >> there is risk of short-term market disruptions.

ultimately, it is about communicating the flow. as long as the two sides go hand in hand, the process can be managed, do no harm. bearing in mind, there is the ability to go the other way, as well. the ecb is doing its thing and the boj is doing its thing as well. we are about to find out how to removeit is accommodation and raise interest rates. how hard will that be and what will it mean for markets? >> you have interest rates and

equity levels. here, i think they are more exposed. not surge, they need the rest of the world to do its job, which we think it will. that is where the test will be. jon: good to have you with us. mark. up, the market open about two hours away. you are watching bloomberg tv. ♪

. .

jonathan: from new york city for our viewers worldwide, visit "bloomberg daybreak." i am jonathan ferro. two hours from the open, and move higher.

think the little bit softer this morning. the biggest up, and losing industry group today is media stocks. wtp getting absolutely hammered, down by over 10%. covering full-year growth and big moveok, making a your. david: there is a basic move immediately when the company is under stress, you cut the media by. when companies are coming under pressure on the bottom line, the first thing they do is look to cut the media by. jonathan: that is what they pointed out. sending a shock wave through the industry. you wonder what will happen. not looking good at the moment. david: the packaged goods companies are still under pressure. alix: and amazon will be

longer-term. if you wind up not having to advertise at all as you are on wtp?n, what is that for jonathan: let's get you some more headlines, shall we? here is emma chandra. emma: thank you. president trump threatening a government shutdown to build the border with mexico. trump professed to pass some sort of spending bill. the president wants $1.6 billion to begin building the wall. featuring a rash of accidents. the navy relieved the vice admiral. that happened just days after involvedohn mccain was with u.s. sailors dying.

british prime minister theresa may once down to take control of the country's exit from europe, now the government is willing to accept a relationship with the review court of justice. the ok is open to abiding by the ruling and sticking to it. global news 24 hours a day, powered by more than 2700 journalists and analysts. i am emma chandra. jonathan: thank you. let's talk about this. is it a red line or one that has been diluted a little bit? guest: it is a redline come and this is one that has been hugely, symbolically important. the reaction has been quite muted.

a very outspoken pre-brexit member of parliament says this is fine, but he does not see this as backtracking at all. theresa may had said in october, two great applause from the conservative party, that brexit meant leaving the jurisdiction of the ecb. what it means now is direct jurisdiction. mighte of the things they do, they want close cooperation, as you mentioned earlier, but they might refer decisions to the ec and they are abiding by and decisions of thej, ecj, as one of the ministers said this morning, they would keep half and i on it. half an eye on it. jonathan: will they establish a new court, some justices from europe, some from the u.k.? emma: that seems to be what they are suggesting.

they do not want an off the shelf solution, but norway is a member of the single market, and the court rules on dispute basically between atomism and the eu. that core does tend to follow for theng of the ecj, rulings are not binding. even with that in july, philip hammond raised the possibility of the model that the u.k. might seek to adopt. jonathan: thinking about things going forward, compromising, getting something back, what are they looking to get back. it was a stumbling block, britain's opposition to the ecj was a massive stumbling block to any kind of good brexit deal. whether you talk about the interim arrangement for a future trade deal, so in terms of compromise, there should be more scope for review. jonathan: bloomberg's emma ross-thomas come our london

bureau chief. still with us, geoffrey yu of ubs wealth management and david owen of jefferies. the strategy, they were not last long. o: i think what is happening is the obvious. in the real world, it is a very deep relationship with the eu, everything is going to have to adopt a lot of the ecj rulings. so the statement to me was the obvious. remember, a lot of this is just asked fo aspirations of the part of the u.k. government. is squeezingarnier again, saying actually we have to settle first the divorce, the irish question, and labor. those things have to come first in his mind, and the

negotiations kick off next week. geoff, we did see the low. at a two-month that is theresa may backed away from the redline, supporters what back away from her, etc. is that not the case? geoffrey: there will be some elements of political uncertainty, and that will remain with us, but i think the declining study has more to do with the provision and great the fact that the boe is probably not in a position to hike at anytime in the future. remember, the market was up. that will continue to drive sterling. alix: david, do you degree that the politicalhat risk, when do i really need to care about brexit? david o: you still have to care about it right now. a drop in fdi flows into the ok, so, you know, brexit is going to

have an impact on the economy. tomorrow, we get migration data. we have gdp data. all of those things will show some of the impact on the way to the economy. but it remains high, and the brexit clock is ticking. it should be done by october of 2018. we do have the transitional phase. it is going to be a long time, i am afraid. jonathan: footing to people with knowledge of the matter, bank of overca executive divided where they want to hold the brexit.hub after how material will is ultimately be down the road after these negotiations have taken place? once we do have an established role of the u.k. will have -- that the u.k. will have. geoffrey: most businesses right now need to prepare accordingly.

no surprise that decisions are being made as they are. one area of interest in these reports is what is going to have into commercial real estate in london. hand, we know we are seeing a strong demand from tech firms for commercial real estate. there are always offsetting factors. let's bear in mind this is a dynamic process, not an absolute. we do not have to deal with absolutes when it comes to investment decisions. i wonder whether the bloomberg report raises a larger issue because people are saying this is not one hub but they are losing more than one. maybe we have another part in dublin because brian moynihan often stays in dublin. this digital age may be the case that we no longer have to have a place, because

we get it all done with digits anyway. david o: it is interesting, with the growing use of the internet and so forth, how the forces really do work. we all like to work on futures around the world. working forare their clients and their colleagues. i think that is more the case to the growing use of the internet. at the end of the day, brexit will imply it is more. generally popular. decisions will have to be made, and silver will be a key month for all of the management -- a december will be a key month for the management to make decisions. transitional relations play could way enough, and firms will have to have a cliff edge policy, which means more companies make most quicker. jonathan: that is the drink, isn't that? take it to the beach, drop it somewhere. also, i get cold so

often, that is like my dream come true. jeffriesvid owens of and geoffrey yu of ubs. coming up, we will be talking with charlie falconer, former lord chancellor of england. we will be talking to them about how he will resolve brexit disputes. live from new york and from london, this is bloomberg. ♪

emma: this is "bloomberg daybreak." i have emma chandra. coming, an interview with sir the wpporrell on

earnings. david: china has been at the center of president trump's agenda since before he was elected. with demands in the trade relations, demands that the chinese get upgraded to give up nuclear weapons, and even as president trump try this week to help with you is investing, china plays a role because pakistan has increasing relations with china as well. what it is to lead a western country dealing with china, nobody knows more than kevin rudd does. he heads the asia society. welcome back, mr. prime minister. good to have you. kevin: good to be here. david: it all seems to lead back to china. new strategy in afghanistan, but we really need pakistan to help. do we have the pressure given the relations with china?

kevin: i think the president's approach to afghanistan is reasonable given what is on the ground and the taliban remains. so many brits contributed and lost their lives. present -- president just faced with the core reality that the whole afghanistan negotiation began with the city of new york, if you allow the taliban to take control again, qaeda, that isl the reality he is dealing with. i think his strategic direction timetable is no conditions-based approach, no public discussion, it is probably the right strategic method -- message to send to the taliban. but as you just said, what he is a to see from pakistan

plan inviting terrorists. holding u.s. military aid to pakistan, this is where your weight comes in, and that is increasingly china becomes a greater and greater supplier of military assistance to pakistan. road, ine belt, one whole other bunch of initiatives. you look at beijing, looking at ah, ington and saying ye think i can get through this. david: with one belt, one road, china is standing out. changeeally could geopolitically the status. kevin: i think below and beneath the whole public firmament of the global international relations debate at the moment, today's crisis and tomorrow's crisis, is flows can be rolled out of china on a footprint across the world.

one belt, one road is a trillion dollar initiative. in real dollar terms, significantly bigger than the marshall after the second world war, not just affecting pakistan. it is affecting iran, central and eastern europe, southeast asia. over time, you see a much greater degree of china's economic influence. david: so put that against president trump's approach, specifically with respect to china. he likes a bilateral deal. we talk about 5, 6 countries. he does not like multilateral. how do you deal bilaterally with china was north korea and trade with china, the same time, china is playing a multidimensional chess game throughout the region. kevin: china is an excellent strategist. they studied strategy professionally. chinese, when they approach negotiations with

president trump, literally, they are speaking five to 10 years out. he is five to 10 minutes out. therein lies the difference. for president trump, i think with the team he has got with mattis and general kelly, i think these are sophisticated folks. they will know that you can walk and chew gum, which is robust engagement with the chinese economic question, and not walking away from major trade conflicts expecting to resolve them and not disallow things to disappear. time, workinge out the long-term strategic deal, the grand bargain, i call it, on north korea, which is something that can only be done uno inmerao beijing. trade in lengthening north korea, and also linking with india as well, "you need to help us because we trade with you cocoa is that helpful when

it comes to china -- with you," is that helpful when it comes to china? kevin: traditionally comekevin: we keep the two boxes separate. if you look the way mar-a-lago was handled among they do that again. -- handled, they did that again. that the way in which, frankly, both sides for fear deal, because you are dealing with much more acute national equities, when it comes down to koreanss, will be north have mixed or not, and what is going to work, it is not so much how you segment the conversation , it is is there a grand bargain to be had. apparently there is, but it requires a level of trust between beijing and the washington administration. jonathan: this point, if you wrapped up the current situation and put in a box and went back

in time in january and headed into the chinese, they would be happy with that, wouldn't they? kevin: that is what i would call a fast-paced delivery just outside the office of trump. [laughter] david: it is symbolic. bad ati was always batting. i think the chinese are happy about this. mission, which is, one, rolling other economic interests throughout the world, and two, contesting the u.s. strategic place in u.s. asia is basically preceding on track. secondly, what is seen is u.s. strategic policy in some disagree for the -- disarray for the first several months of its of administration. departure, with grown-ups now giving direct policy advice to the president, i think maybe entering a different period.

david: steve bannon -- it is interesting that you mentioned him. what fundamentals as a politician come as a leader of the western country, you have to balance domestic pressures versus international. can president trump have a long term strategic relation with that is consistent tha with his base? kevin: that is another fastball up. it is a great question. number one, all international leadership has worked out probably in the last decade or so that traditional boxes, international, national, external, internal frankly it not worth a hill of beans anymore because what that market says right now is going to thect, for example, decision it might take effect tomorrow morning. that is the situation we deal

with. it is no longer this perfectly divided world. leader friendly is a level of challenge with previous generations had little to do with your on china, -- to do with. on china, the largest countries the u.s., but china is rapidly catching up. this country needs a national china strategy integrated at the top, at the center, which puts all of the parts together. i do not see evidence for the united states having them a. david: kevin rudd, head of the asia society policy institute. much more coming up from new york. this is bloomberg. ♪

alix: for samsung users, christmas comes early today.

it is the release of the samsung galaxy note 8. the big question -- will this one light on fire? joining us is mark newman, research analyst for global memory. we all remember it. you cannot even have them on plains anymore, the note 7 lighting on fire. what will be the difference was note 8? 8,k: i think the galaxy note clearly a lot of people looking for what type of phone this will be, however, i think by far the most important thing right now is the huge profits they are getting, particularly in memory. talking about the note eight specifically, given what a was with the 7 explosions, i think what we have seen some of the rumors out for the note 8 come about to be

launched, it has been infinity display muscle covering the itire body of the phone, and has a few other upgrades, including the camera that has a significant upgrade, too. i think it is a pretty good phone, but mobile phones only account for about 1/3 of the company's profits. fromthan 1/3 are coming semiconductors. alix: i am glad you brought that up because the target price from analyst is so far above where the stock is actually trading now. what do we need to see out of samsung that will help the stock? k: at the moment, there is a lot of worry around the memory cycle. is there going to be an oversupply situation next year? that is part of the reason why it is cheap. the other reason, frankly, is

what is going on with the li family, being in court at the moment. the verdict on him, he has the chairman's son. the verdict will be later this week. and it has always ben sheets, so the argument is it will always be cheap -- it has always been cheap, so the argument is there will always be cheap. jonathan: mark newman of sanford burstyn, thank you. from new york, you're watching bloomberg tv. ♪

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shut down the government if he does not get funding to build a wall on the border of mexico. jackson hole on friday. and the u.k. gives up more ground to the eu. city, good morning . this is bloomberg daybreak. is wednesday morning, futures miss session lows and the dollar missed session highs. the euro-dollar higher by about one third of 1%. we back to 118 after the big move from many factoring get out of europe put -- the dollar very much on the back burner. selling in the bond market. today's of losses. 10 basis points.

off the highs of the session. anyone like a commodities nerd like me, it is now about three dollars and $.87. the water it goes, the tighter it is for oil. some recent updates, who is to say? >> president donald trump went to phoenix last night. down theng to shut government over the wall he wanted to build. >> we have -- president trump: believe me, we were building that wall. let me be very clear to democrats in congress who oppose a border wall and stand in the way of border security. you are putting all of america's safety at risk.

>> a lot of people thought kobe hard enough to keep the government going without the president in the way. he is now saying let's loaded up with border wall, please. >> that is right. the president is throwing a wrench in the process. to washington with a number of things on their plate. the president is drawing a red line saying in order to keep the fundingnt open, we need for a while. also not too happy about spending u.s. taxpayer money for the law. this is something that will be incredibly difficult and the president made it much harder.

>> the president has not been going out of his way to curry avery. there is a report out now in the , a bad are these relationships? bad as are probably as we have seen. a republican president and a republican congress. they are not on the same page. the president of time to attack to home state senators, both john mccain -- not mention them attacking them. he specifically attack the majority leader, mitch mcconnell. words behind the scenes and it is spewing into the public and it will make the president have a difficult time.

>> it is pretty backed up. >> they look really good. quite fit talk about the pension he willthe promises and not give up on everything including the border wall. >> this is a real estate investor running the white house and the way position yourself in the way you position your business plan is very different than capitol hill. i think he has not learned there is a difference on how to do this. life stake to claims you

necessarily will want to give back at some point because you know there are achievable. yesterdayews report about the group of six to tax reform, you look at the proponents of the tax reform the -- you will lose enough republican spore that you will not get it done. there is no fundamental background to get any of this stuff done at this juncture. >> how do you think about the potential for a government shutdown? the president of the united states threatening one if it does not get done what does that mean looking ahead for september and october? >> i agree with what steve just said in terms of his assessment. investors understand the legislative agenda is already priced in.

there is a rising existential list. many investors are worried that maybe president trump will not sit out his term the way things are going. ceiling, it is highly unlikely it will get through, as much of the president would like it to. there may be a reason why the dollar -- i think it will be a bumpy ride going through september on the fiscal side. >> the conversation was about actual stimulus and tax cuts and

infrastructure. be able are we going to to keep the government open? it is a different kind of conversation. will we be able to stay at this level? were looking at this weeks ago. quite it was before all this drama -- >> what is happening is your moving it further further and people are realizing it is something that will take a lot longer to develop to get something done rather than it just he and a one-off issue. seriesl wind up with a of temporary extensions that will allow them to push things and they keep grandstanding until they view us public sentiment is not behind them and they will come along to do it. situation we're in is critical and i think for the global economy as well.

dollar had appreciated dramatically since 2014. a lot of this is a barometer of the worth of countries. differentials, we are seeing the government and cast is not too well and that could have global implications for markets and economies. >> it does not matter what comes out, we're seeing that. do you believe that is sustainable? >> as far as the situation with the states, it is uncertainty. in maybe at some point it is negative. if there is a situation where we had a stock market crash, valuations are historically very stretched and we know market

leadership is narrow. in market crash, president trump previously had elevated levels , he will be market in a difficult situation. the economy seems to be doing ok at the moment. a lot of the numbers have been on balance quite reasonable. change.sentiment can i think the later situation where the president seems to be , it willor tax reform be a contentious issue. we are in for a both market volatility that will be very difficult. >> how much difficulty will it make for the markets? if it is shut down for a few days? >> they have handout ious before.

prettyot a particularly picture. there is a discussion that maybe treasury could prioritize spending. in the old days, they call them green checks. jonathan: never mind the consequences, but what it means to get done as well. a bit of a a big -- problem if they cannot keep the government open. >> investors have been reluctant to take on board have bad the presidency has been unfolding. you can blame it on democrats and republicans. donald trump is not the leader of the republican party. that has been the fundamental problem. paul ryan thinks he is the leader here mitch mcconnell thinks he is the leader.

the tea party think they are the leader. that is been the basic problem. >> it is a coalition. >> if you go back and think about it, post-world war ii is a unique time what had two parties. i think it is true within the democratic party. it is not one party. they have been a party on the outside coalescing around saying, i don't want to do a darn thing. the democratic party could not do anything either. parties atave two all. we have a coalition that really cannot work with each other. alix: term limits. both of you guys are sticking with us. breaking news about fiat chrysler.

it plans to spin off its upscale brands, as well as component operation. potential value is what is under question. a lot of options on the table as if fiat chrysler really tries to move and make fiat chrysler more attractive with a competitor. david: they are not in play. they're edging their way. >> and hey guys, pick me up. >> look at the success of ferrari. it is now worth more. >> to spin them off is a great move. >> doing the same phil maserati. i imagine it will probably not such the valuation. >> it has not won as many races. we will have a terrific line of said voices in jackson wyoming. live from new york, this is bloomberg. ♪

markets, through large purchases. to influence the yield curve beyond the short-term. poinsettias mario draghi the policy saying they are a success. on policy, innovation, and be prepared for future economic development even if the concept is not clear to everyone yet. stephen, ian, and feel this chart is a thorn in their side.

excluding holiday packages, that yelling line. it, somecome you name indicators over 2%. the kind of mario draghi do we get tomorrow? speech, it is a summary of the ecb passes position and how they think about monetary policies. the fed with bank of england thinks as well. the mystery of inflation below , it is in the -- in the u.s. and other countries. , it may well be the reason why inflation is

missing targets and why it is do with excess supply rather than we demand. it will be difficult to reach inflation. a challenge for the major central banks. speculation that mario draghi be program, this qe is all ahead of the speech friday at the symposium. a sequencer draghi and his collies at the ecb will continue to be cautious. inflation dynamics aren't consistent in terms of economic recovery. it might be difficult to expect the ecb to announce moving a from its current policy position.

>> you can raise rates for the of -- cause are we still talking about something to virgins? class of thought bill dudley's, very important. to move away from the data dependent. it is something mr. delly refer unwinding of the balance that comes in play in october. there is financial stability.

this is something the fed is concerned about. it is very important. concerned should it be about the fx channel? think they will become increasingly concerned for the obvious reasons that a stronger euro could easily derail the euro and economic recovery. add to disinflationary price pressures. having the last ecb policy meeting where he seems to be very relaxed about what happened with the euro, we saw the ecb minutes last week that there is some concern. the fx markets have a tendency to try and find out where the pain threshold is for central bank and we might be in the middle of all of this.

the dollar is the key issue. for debts thethe barometer for investor confidence. that continues. i amuro key is going and pretty sure we will see some becausentervention clearly the euro zone stand ever-increasing currency. out today were he talks about low-inflation demon bothering the ecb and the fed, despite repeated attempts, they cannot get inflation up, they are not sure what causes it, and they're are not sure how to fix it. it might be worst trust in radically different because we do not know where it might lead. >> it is exit supply. we live in a world of goods and commodities. we know we live in a world where people are demanding

double-digit returns and we see corporations -- the net result is corporations behave here, also leading to the continuation of supply. part of the problem is the way we have structured financial departments, and then the technological solution. you have to get to the idea of allowing economies to run hotter than you would normally know how to do. the problem is central banks are living in the past with regard to -- it is becoming incredibly flat. why? world ofhey live in a excess supply. i disagreed they don't how to solve the problem. not looking at fundamental problems. the problems are supply. >> great having you on the program. coming up on the program, nobel chiefwinner and also

investment strategist, we will catch up with him later. from new york city, you're watching bloomberg. ♪

alix: earnings trickling out, lows for its worst day, missing consensus. also a similar story, sales, once raised, but it did miss the estimate, so sales also taking a hit down by 2%. up down 12%, its worst day in 19 years. cutting 2017 forecast, biggest clients cutting the ad budgets. a different field than when we talked to martin service a few weeks ago.

jonathan: and the pressure will not go away. david: some of that is cyclical. some of it may be more structural. especially online. we talked about what amazon might need and this is what he said. >> they will be a force in content and a force in search. calculate initiated on amazon. last but not least on him -- on advertising. >> a lot has figured out what advertising is in the amazon world. >> that is one thing but i will say we talked about activist investors. the biggest enemy right now maybe wpp. they're going to push them to cut costs. >> i should point out to your point, michael mckee had this point. it is pretty call. every time they have had a big

slowdown, they have had a recession. to your point earlier is when you wind up having a slowdown, that is the first thing that goes into your budget. sorrell's payrtin package might come up again? happy.board is very doing very well. you can ask him later today. you think they will talk about the pay package? later onl also join us the hour. this is bloomberg. ♪

mark: futures near session lows up by a third on the doubt.

gains of almost 1% of the s&p 500. groups trading lower today. switching of the board on the bond market, those speeches that later on the week. basis points, yields on treasuries, 218 at the moment. the dollar on the back of the euro. by about one third of 1%. manufacturing data coming in a lot further than expected. the euro a lot stronger as well. >> thank you. president trump is threatening a government shutdown if needed to get congress to pay for a border wall of mexico. the president spoke in a rally last night in arizona. he passed some sort of spending

to keep the government open. $1.2 billion to begin building a wall. the president is suggesting the u.s. may move closer with the country's nuclear arsenal. maybe something good will come out of it. rex tillerson says north korea -- the on proposed more sanctions. u.s. navy responded to accident by firing the admiral and charged -- in charge of the fleet. saying he lost confidence in his ability to command. it happened days after the uss john mccain found to the collision. global news 24 hours a day -- global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries.

this is bloomberg. david: one of the big problems for the election of donald trump was what it would do with the banks. marketnancial deregulation could raise profits 20% at six at the -- of the largest u.s. banks, and in $7 billion of gross product. jpmorgan and morgan stanley. joining me now is a senior writer on the finance team and is responsible -- great to have you back. explain why they'll make all this money. >> as we know, congress and trump are not really getting along well and they are not really passing all of these rules and changes and changes in tax breaks we were hoping for but trump could still manage to get bank deregulation without any help. the treasury secretary published

a report, on of the first in a series in june deal -- detailing the little twit -- tweaks that can be done in those are the things i looked at the -- that could help the bank a lot. >> specifically a tweaked or two. leverage is aw more crude way of capital requirement. and the the assets treasury wants to exclude haveury and the cash they and that will make their leverage ratios look better. they will expand deposits.

deposits, they just don't know to do with the money. david: the reason why this was on the first place is we did not want to get back to a 2007 or 2008 range. these will put us back in a risky situation? >> they look small but when you add it all up, they are undermining the safety. we do not know whether banks .ill not fail next time it is clearly safer than it was. the biggest thing was capital. we will let the capital go down is that going to be too >> thanks very much.

great to have you here. deciding, the people the meeting in jackson hole, wyoming, later this week. we will hear from janet yellen on financial stability friday and what she intends to do about it. still with us, stephen judo. how big a risk is coming back ?own on deregulation a stability is a big concern for the fed and some commentators actually argue the fed itself perpetuated a financial cycle that created these periodic levels of the fed has had an interest rate policy and a

monetary policy that has been too easy for too long and it is creating excess leverage. stock liv-ex have underpinned the market. low interest rates cause problems and we have this disconnect as well between wall street and main street. wall street has done well. it has been pretty static. financial stability is top of the agenda. values has ignored asset . we are seeing elements of to test conditions in various market segments. i think janet yellen will underscore some concern about that. she steps down february next year. she wants to leave behind a legacy where she goes down the

same road as some of her predecessors or she had problems with prime mortgages and elevated asset prices. time, no matter how much you move the conversation, it is still easy. many investors still believe central bankers are in control of the markets but with much less room to cut rates and expand the balance sheet. this may no longer be true. central banks, still masters of the universe were emperors with no clothes. >> i think there is truth to that portion of the statement. designed to distort markets and markets have been distorted. a lot of what we're talking about is a purposeful decision to distort markets.

the basis points off the risk premium, they say $500 billion worth of qe was worth 25 basis points. evidence ofwill get that. it will be implemented in october and she will get two rounds before she retires. he will not get this twice. >> distorted markets, they were trying to do that. a chart mike mckee created yesterday, it shows as the effects it had. the white line goes up substantially, which is the s&p. yellow line, people make money off of assets.

up hises not go household income. is this an indictment of the approach? the theory as it will inflate asset values and trickle down itular owed -- old joe's and does not appear to have happened. >> the ideas elevated asset prices will create wealth affects. flatter yield curves, that is why you have a big drop in unemployment. it turned out to be a political issue that traded wealth inequality.

consequences from all of this, and we will have to see what happens. a lot of these things, i think it is a question of how far and how much. jonathan: you mentioned the fed chair will stick -- step down at the beginning of next year. we talked about whether we recognize -- reconcile what it would be like. standardbearer for financial regulation and not deregulation, is that what will stop her from getting a second term? >> it is possible. trump said janet yellen is in the running. gary is post be in the running. i think the president thinks janet yellen has done a good job and he wants interest rates to go low.

theill still be stuck with same economic environment and the same regulatory environment. janet yellen does not want to dial back to foreign financial regulation comes otherwise, she just runs the risk of a repeat of 2007 and 2008, though the banking system is a lot more resilient. it will be a big topic in the months ahead. jonathan: that will be this friday from fed chair janet yellen. the financial markets about 50 minutes away from the open. by .4% on the s&p 500 and one third on the dow. the fx market, stronger euro, stronger yen, a weaker dollar. decent itry market, a handed there. market, gold is

higher. .> a big spike up calling for 1400. up, a chiefming investment strategist will join us in about 20 minutes time. you are watching bloomberg tv. ♪

>> i'm here in the enterprise green room. ceo of wpp at 11:00 a.m. eastern time. ♪ >> the question in the credit market is how tight -- we spoke to an outlier of asset

management yesterday. >> about 100 basis points over treasuries now. i know it is still wide from where it was a few years ago. at similar points of low volatility a previous cycles. corporatehave a question, do you agree a risk of high yields? >> i think it is ok here. herenk it makes some sense we have seen increasing leverage at the corporate level. really seeing what concerns me a little bit, the new issues come, have we over prescribed, we saw a large deal treading water. sign to me.a good

it shows there is too much saturation. we will have a pullback in terms of credit spreads. for too low volatility across the board. >> could you make an argument that foreign investors could extend the credit cycle longer? you have got investors coming in and funds, all of whom need to buy. that is why and concerned about the high-yield space. are in the space, and they have money coming in. that andready seeing that is hit by the energy market. equities down. that is where it is first. >> many people would say what really matters is that issuance and the new money, at&t likewise was new money. is the market discriminating against what they are issuing

for? >> i think that is also true. the deals do very well. there is a group taking out money and keeping allocations. amazon did very well for example anduse that is a new name it was a big in size, great market capital and the equity side. it just feels like an issue that has to be digested. >> there was a financial report yesterday that got hand -- hammered in the u.k. are there indications we're getting long in the tooth? >> i am not seeing them. i see the health care and energy sector and retail. i make markets are not just unilaterally buying everything. there are collectives going on. it feels healthy to me. there are opportunities. bonds ofthe long foreign cash are very effective.

it is a real opportunity where they might ride back some of that. >> what you make of this story, specifically on the index and investment growth? >> we have got to be a little careful comparing apples and oranges. you are keeping that constant. you see the leak when you look at agg or the big on industries. there has been a lot more corporate issuance. that is one problem investors have to do, it takes what has been issued and it takes more long maturity. yields are low. >> new issues trading low part, which are rather have the credit risk? >> you have to be selective and

cautious. following -- volatility is very low. as a bit controversial since we had the financial crisis but people -- pre-crisis, the traded better because they had so much assets -- access to cash. overweight and we have a 20 year bond market and there are very few treasuries in that -- at that point. if you want that 20 years point between duration and credit rish -- that is the way we like it. >> how important is the speech friday? >> i think very important. more than the fed, the ecb has been buying corporis. it translates to available bonds in europe and european investors coming to buy corporate.

that will have some weakness for credit spread. alice: thank you for being here. online and interact with a directly. if you missed anything about that conversation kobach and check it out. this is bloomberg. ♪

david: this is bloomberg. we turn to a former u.k. justice secretary and labor -- with the international law firm who joins us today from london. have yound good to here. we got word while on the program about a new paper that has come well, maybe there

will be something less than direct, something less than that. positionry to hold our . could you explain to us how we do those things at once? >> currently, where does the dispute between one citizen and regulations from the european union, if i cannot resolve the dispute, the local courts, they go to the court of justice and the court of justice reviews and strike on acts of the british parliament if they are against law. we will enter into other agreements about trade and consumer rights and citizenship rights. what happens when there is a about whata dispute is intended to apply to u.k. and the european union?

the government produced today says we will not because we are leaving the european union and we need some other method to deal with that solution. unfortunately, they did not say what that is. the question specifically is who gets the final say when there is a dispute? they might use the free trade agreement, which is an advisory binding.hat is not >> you are right the question is who has the final say. it cannot even year p.m. court of justice. the has to be a new court. a court the deals with countries

that trade with the european union but are not in the european union. the way to deal with it would be if the court gave an advisory opinion and both the european courts, france, germany, italy, etc., and the united kingdom, always agreed to apply whatever the advisory opinion said. if it was contrary to an act of the british parliament, it would need to be changed but that therebe quite rare where was a specific act of parliament that would prevent giving and 53 opinion. what people were expecting would come out today. is generally, it what the paper in effect says today. court of justice goes out the window and this premises european log without the window. we need some other dispute

method but it does not say what it is. >> whose court is this ball in? is it the european job to say what is next? >> we have got to come up with a more specific proposal. they tell us that he tell us what you want. probably not good enough. >> thank you for being with us and clarifying as much as you could. >> once again, another issue surrounding brexit. downg up next, carrying it to the open, you're watching bloomberg tv. ♪

♪ jonathan: president trump

threatens to shut down the government if he does not get funding to build a wall across the mexican border. mario draghi sidesteps the taper debate. now the focus turns to jackson hole on friday. whole food shareholders prepared to vote on whether to approve a amazon takeover. from new york city, county down to the opening bell, good morning. this is "bloomberg daybreak." i'm jonathan ferro alongside david westin and alix steel. futures are softer after yesterday's solid gains. down 4/10 of 1% on the s&p 500. the euro and the yen stronger. briefly, up one third on that trade right there. yields are down by three basis points. 2.19 on the u.s. 10 year. let's get to some movers with alix steel. alix: want to update you on breaking news and hour ago. this is fiat chrysler's adr up

4% in the premarket. it is considering a plan to spin off maserati and alfa romeo brands parts unit. with focus on jeep and fiat chrysler brands. that is above its october 2015 spin off price. how much would this be worth to fiat? they could be worth over a billion dollars with all those luxury brands. we can blame what is happening over with the slide, but let's take a look at lows come off 5% in premarket, looking at the worst day since 2012. be, butre sales did they really trailed home depot. quarterfifth straight that lowe's has trailed home depot in terms of sales growth. i've been hearing that story for at least 10 years with the turnaround plan really favoring hd versus lowe's. really hitting on the downside, la-z-boy off by 16%.

earnings misses estimates because they had a lack of cost controls. sales were not enough to make up for fixed costs that were rising. it made those fixed costs very difficult to absorb. maybe we are not chilling at home as much as we used to anymore. those of the earnings hammering stocks in the u.s. as the risk off move continues. jonathan: a risk uptown gathering a little bit of momentum. lower aftered a leg president trump's comment about ending the north american trade agreement and shutting down the government, spurring a pit of investor concern. >> believe me. if we have to close down our government, we are building that while. let me be very clear to democrats in congress who oppose a border wall and stand in the way of order security. -- border security. you are putting all of america's safety at risk. has movedthe treasury to session highs and the vix started to creep higher as well.

joining us now from stamford, connecticut, is liz anann sonders. let's start with that speech yesterday. is that something that should be of material concern to investors? liz ann: we went at this point that what a lot of trump said during the actual election campaign and even post election in a rally like this, more of a campaign rally than anything else, does not necessarily translate into reality. i think markets have learned to take a deep breath after some of these more bombastic comments knowing that is not necessarily what is going to happen. the threat of a government shutdown is a fairly serious thing. i don't think anybody wants that. it certainly would not be different markets. jonathan: i'm sure nobody ultimately once it, but is it ultimately what we are going to get? republicans controlled congress and the white house as well. will they come to any agreement before september? liz ann: the short answer is i

don't know, but i still think it's an the interest of both parties to get through the end of september without shutting the government down. i think we learned some valuable lessons from the events of 2011. i think both sides would not like to repeat that. david: explain one thing that i don't understand. election, the markets built up substantially and that was because of the promise of the new trump administration. that promise has been pushed to the side and yet markets have not come down. why? liz ann: first of all, i disagree that it was the result of the election that caused the market to go higher. i think the traditional fundamentals, but turn in economic growth not just in the u.s. but just as importantly overseas, the turn and the leading indicator and leading pmi's, the turn from a four consecutive quarter earnings session for u.s. profitability to a string of very strong quarters come all of that, those

inflection points predated the election. if you believe that, it helps to explain why the market has not gone into a more significant corrective phase given what it best a push off from these program policies. it is a turn of the fundamentals that predated the election. not only that, but this continues to be a massive liquidity story. when you have money supply not just the united states and global growing faster than nominal and real gdp, that money has to find a place to go and it's finding its way to equities. those are not politically oriented reasons why the market has gone up and makes plan why the market has not tanked on some of these concerns. david: let me ask you. coming off this earnings season, which was a really good one following a really good one before that, it looks like stocks beating on both the topline line earnings are not getting the credit for it. we put up a chart here that will describe to you the top line.

the white line is companies that are beating on earnings and topline. the extent to which they get a pop in the first afterwards and you will see it has come down to zero. is that something we should be concerned about in equity markets? liz ann: that's the national discountingnatural that the markets represents an anticipation of earnings off that trough that we saw in the first half of 2016, i think a lot of the movement and stocks occurred in anticipation of that. second, we are in a tricky period seasonally, not only late summer or early fall tending to bring some weakness in the market, but for a variety of reasons, and i know you have talked about it on the program, i've talked about it quite a bit , but the year ending in seven phenomena. it has scene and nearly 10% correction plus in every year

ending the seven since the early 1900s. the weakness contents to be concentrated in this october-november time. we suggested that we were going to go through a consolidation phase and investors get more discerning and the phase like that. they don't necessarily reward the winners from an earnings standpoint. i think those are the three explanations for why we are not getting this used during the actual earnings season. i think we got it in anticipation that of. alix: i'm totally superstitiou s. i totally buy that theory. i always have bed years and even number years. jonathan: that exactly what she join this program. [laughter] david: good for her are good for us? jonathan: i don't know. alix: i talked to the biggest ball on the street and here is what he said, echoing your sentiments. >> on valuation, we fundamentally have a different view than a lot of people come which is as long as interest

rates are being pinned and credit markets remain under control and financial conditions are loose, equity rich premiums are arguably still too high. possibility0 as a at the end of the year on the s&p. are you that constructive? liz ann: we do not do your and targets. we think that's a bit of a silly exercise. understand a lot of traditional from top do that for the benefit of their clients, but i'm not sure coming up with a number where the market is going to close at the end of the year is a value. our latest view is that we are probably in a bit of a consolidation phase, but it's in the context of an ongoing secular bull market. i agree. valuation runs the gamut depending on what metric you're using. if you're looking dogmatically at pearson pull p/e ratios, the market does look expensive. if you're looking at schiller's cape, the market looks quite expensive. if you are looking at equity

risk premiums and applying an inflation filter to traditional pe metrics, the market looks fairly reasonably valued. atould call it medium level today's level of both inflation and interest rates. unless we see a significant ship quickly and that piece of this, i think valuation is not a deterrent for equities eventually moving higher after we get out of this consolidation phase. alix: in order to be consistently constructive, you have to have a view on gdp and this is where we tight back to politics. if you have a 2% long-term view, how much more can multiple rerate higher? if you see three or 4%, that's a different story. liz ann: keep in mind that we have had a subpar, new normal secular stagnation, post that super cycle 2% kind of growth for this entire bull market. that has not prevented this from being what i think is an ongoing secular bull market. it is may be as simple as the goldilocks phenomenon of decent economic growth low enough though that you do not end up with an inflation problem and a

federal reserve that has tighten monetary policy significantly. the liquidity that brings into the marketplace i think versus. persists. be careful what you wish for and hoping for stronger growth from here because with that would come higher inflation and much tighter monetary policy and bring us closer to the end of the cycle. from an economic standpoint, from a consumer in america, i do not love a 2% growth environment. it certainly has not been a problem for the stock market. i think a little bit of a lift here particularly on the capital spending side of the economy would be good and a sense that maybe it continues to move companies away from buying back their own stock toward making long-term capital investments, which started this year. exceptionally strong growth has tended not to because of the stock market because back to the earnings point, stocks are leading indicator and anticipate inflection points. ann will be staying with us.

comingn, myron scholes to us from a meeting with fellow laureates in germany. live from new york, this is bloomberg. ♪

david: this is bloomberg. i'm david westin. we will hear from janet yellen as she addresses fellow policymakers in jackson hole, wyoming. the question is what she will say and what it will mean for investors. sonders is still with us. one of the thing supporting the stock market is a great deal of liquidity around the world. that generally perceived the fed and the ecb and maybe

the boj should start withdrawing some of that liquidity. to what extent will that have direct effects that we can predict because we have never been in this position before. predicting hask always been a difficult exercise and i would not attempt to do this when we start this process of quantitative tightening because to your point we have not done this before. befores never been tried as an experiment and this is uncharted territory. that said, the fed clearly at this stage is taking a methodical approach an initial phase of starting to shrink the balance sheet is somewhat limited. the benign scenario is that it happens over and extended time that is not necessarily disruptive markets. that may be a slightly naive assumption because monetary policy mistakes, if you want to call it that, by the federal reserve are other central banks getting too tight or behind the curve have been contributors to major market .vents to economic problems

to assume it's going to be completely different this time is a bit of a naive a something. i think it's very difficult predict. i do not think we will get much more from yellen in terms of details. think they will hold off on a rate hike. it will be interesting to hear from mario draghi with a few hints to moving back on their version of quantitative easing. i think that is a factor that has been a bit of a volatility driver in the reason why we are in this consolidation phase. at this point i would not call it the end of the world. david: the fed has not said how they're going to do it, but there have been suggestions in the minutes of a long-term plan. it will go over several years compelling that approach to what we may be seeing with the ecb. we will get to the rest of it later. liz ann: they are not told us much at this point and there

and they are not at the face of quantitative tightening it. that is one of the reasons we have seen the weakness in the dollar because of that differential between the u.s. central bank and other central banks starting to narrow and the mindset of investors. that has more of a factor in the currency markets to this point as it has an equity markets. there may even be more years than what mario draghi has to say and what jamie l has to say because it's more of an academic discussion about financial stability. as it relates to yellen, it will be interesting to see if she talked about asset prices and the concerns that many have that we may be in some sort of asset bubble here. i think that is going to be the focus of bit more on what comes out of the u.s. federal reserve's comments. jonathan: how do you interpret the current tension between the concerns about loose financial

conditions and was happening with market pricing and what is happening with inflation dynamics? it's very hard to manage both of those things when they seem to be moving against the fed different ways. liz ann: the fed's stated mandate on inflation is tied to traditional measures of inflation and particularly pce more so than cpi. the concern to your point in the question is that we have inflation in other areas, asset inflation. i personally think it's a concern. it's a concern that is felt by many. easy monetary policy over the last many years has contributed to this divide certainly from an income standpoint. this boost in asset prices has not been to the benefit of the broader economy, but to those asset holders. whether the fed decides that the bubble it wants to proactively prick, i'm not sure that's the case.

maybe they are using words to ease the pressure on those asset prices, but it's absolutely a factor that has come about by virtue of free rounds of quantitative easing in the fed taking its balance sheet to $4.5 trillion. how it ultimately ends whether it's a benign serio or extreme one, i wish a new. -- nine scenario or an extreme one i wish i knew. david: what it has done in terms of the growing disparity about the rich and poor, what it shows i will describe to you is the yellow line. this is income off of assets. the white line is s&p. they both have gone up dramatically since 2009. there is a blue line the hovers around the same level of growth and that is household median income. what this shows basically is that people making money off assets have been doing much better and people earning regular wages are not. is this an indictment on the whole qe approach that it did not get the economy going for us? liz ann: i think that is.

if you want to indict things for what they have done, that is the easiest mark. we have seen every measure of asset inflation. if you look at household net worth relative to where we are in the economy, not just because of what the stock market has done and other financial markets, but also the other biggest component of household net worth is real estate. not quite the appreciation we have had into the real estate bubble until 2006. it sufficient enough that you have those two things together and it has been to the great in a fit of those asset owners. the one thing i will say about the pure income-based measures of disparity, one of the problems that exists though is that a lot of the lower income folks don't calculate and the transferred benefits that are put into start to narrow that divide. --hink the map sometimes math sometimes of the loaded off by virtue of that. alix: you are going to be sticking with us.

coming up, we will tap into the highly competitive smartphone market. samsung hopes to put the company's battery debacle behind them as they debuted their new and improved galaxy note eight. will it light on fire? we will take you live to the event and the lines of demand. headline -- second phone lights on fire. david: will airplanes let you carry them on? alix: maybe, fingers crossed. this is bloomberg. ♪

alix: powerful device to do bigger things. that is how samsung is describing the newest member to its galaxy family. the company will reveal its new smartphones at the galaxy unpacked celebration in new york today. at this event last year, samsung launched the galaxy note seven, but had to recall it because it exploded. joining us now from the samsung event is our bloomberg tech reporter. is that a line i see behind you? >> there has been a line

building for hours outside of the park avenue building in midtown manhattan. there's a group of reporters and samsung brought a bus full of note 7 loyalists just to come to the event. accident extremely important event because this is the latest no device since the last one was recalled after reports of exploding and catching on fire. samsung has been given a clear second chance by consumers and the stakes are incredibly high for samsung to prove that the phone is reliable and much better than the last one. alix: they brought them in on a bus. jonathan: a lot of people are cynical about this whole thing and skeptical. they believe that people are paid to stephen news lines. we are finding out that their bust and. alix: joining us now is ramon llamas. we are laughing at it and it's fun to make fun of the bus and the phone lighting on fire, but how material is this launch for

samsung? ramon: they want to put it behind them and then the rearview mirror. they will bring up how safe it is in all the multi-point safety inspections and move on. that next step for moving on is showing the brand-new flagship device. if you're playing in busloads of note 7 users, great idea. they did not have an upgrade last year. here's your chance to do it. here's the fun that you have been waiting for maybe about two years. for most people in the u.s., we are at a two-year cycle replacement rate. this is the perfect time. alix: what do we know about the phone as of yet? selena: so we are expecting it to be even larger than the last one. the note line is the tories lead big and even compared to tablets at more than six inches. we are expecting upgraded camera and probably some other bells and whistles to compete with the iphone. a new version is supposed to come out in just a month or so.

alix: how critical is it to samsung's bottom line? i take it with this chart on bloomberg and it's the ratio price target for analysts subtracted for the traded price over the last year. analysts are much more bullish on the stock when it's trading. why is that? ramon: not just because of this entire note line. that is one tiny piece of the overall symptom picture. if you take a look at their phone and media and semiconductors and televisions, this is a conglomerate involved with so many different pieces. is known as an innovator going in all the right directions. if you go with internet of things, samsung is there. it will be there in consumer places, enterprise places. all things considered, if you take a look at how explosive and bullish people are, i think it is warranted. it is not just phones. it's not just hardware. and software and platforms and services. there's a lot to like about

samsung. jonathan: how important is the launch and how material is it for samsung and for the iphone potential next month? how material is that for samsung? ramon: on a scale of one to 10, this is an 11. i don't mean to put that as hyperbole, but if you take a look at where samsung wants to play, it wants to be everywhere. it will not do that with just one device. historically with note phones, this is in for the android power user. things like the s8 plus that came out earlier this year are really for consumers. jonathan: thank you, sir. bloomberg selina wang not paid to be outside the simpson store at all. we are counting down to the opening bell. you are watching bloomberg tv. ♪

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which is why comcast business delivers consistent network performance and speed across all your locations. hello, mr. deets. every branch running like headquarters. that's how you outmaneuver. jonathan: from your city to our viewers worldwide, this is "bloomberg daybreak." we are 24 seconds away from the cash open. futures breaking down of the last couple of hours.

1% off 500 up by half of the back of pretty strong gains yesterday. upside and% to the the story in the bond market seems to be around much of the session and yields a lower by three basis points. , stronger eurot and stronger yen and weaker dollar. the dollar index up a quarter of 1%. -- off the speech by the president of united states, threatening to shut down the government if he does not get money for his wall. 20 seconds into the cash open, here is alix steel. alix: the rally that we saw yesterday in markets comes to a halt. anddow off three tens of 1% s&p off 10 points and the nasdaq off 5/10 of 1%. looking at a doubt giving back 40% of yesterday's gains these losses continue to hold. visit technical selling on light volume or is it related to that rally yesterday and president

trump? earnings are trickling out and some of them are quite interesting. salesforce front and center. we can show that stock to see where trading and it should be down by 2% or so. it is now down 610 to 1%. earnings were better, but it's building and ended up being disappointing. lebron 11% -- around 11%. upkage consumer goods make 30% of their revenue and those guys while the pulling back on advertising. sir martin sorrell will be joining us to discuss. american eagle up by 10% in premarket. women's apparel actually helping them. same-store sales rising and a quarter of a revenue comes from online. one positive retail glimmer in earnings. i was really fascinated by a chart by credit suisse. he had this out yesterday and i

wanted to take a look at the world index consensus for earnings estimates. you can see here that they just had about $30 earnings per share. we have only seen that about three times so far since the financial crisis. you can make the argument that when you hit three dollars a share that you saw a big move and that was the financial crisis, but we also saw another down move when we hit it in 2011 and again in 2014 when he saw another down move. the question is it is a potential for another down move that we had that during dollars earnings per share estimate? aboutit as he is talking that perhaps this time it is actually different? n.nathan: let's talk to liz an i doubt she will disagree with them. have we reached peak optimism in terms of forecast? liz ann: i don't think so. i think to extend out

double-digit earnings growth in perpetuity is probably a bit of a stretch. i think the estimates right now for the u.s. growth, 2017 is up 11%, the same for 2018. i think that is easy to do unless we get to the circumstance we discussed, which is if growth picks up too much and the fed is tightening policy more quickly than right now, it will change the outlook. jonathan: is this sort of paving the way from small caps more toward the large caps? why? liz ann: we made that move back in march and there are several reasons for it. the earnings trajectory which we the been talking about -- outlook for earnings for large caps is actually a couple percentage points larger than small caps. small caps are trading at a premium to large cap. why would you pay a premium for a subset of the market that has lower expected earnings growth? if you look at the technicals of small caps, they have been

making lower highs and lower lows. you have seen that deterioration in some of the underlying technicals as well as threat conditions. when you look at the broader macro fundamentals that support small caps, i think tax reform, that had been -- the prospects for tax reform had been to the benefit of small caps. the fact that it has got pushed further out, it is more likely a 2018 story than the 2017 story. the weakness in the dollar has been to the benefit of large-cap stocks. a lot of things have conspired to really knock small caps out of their position that they held really just for a short time coming out of the election for the one month after. he saw that huge surge and they have given back all those gains and then some. we think the biases toward large caps. they are more defense of large caps, which is where you want to be right now in the short-term. david: if you are projecting out continued earnings growth, what would be the fundamentals underlying that?

it does not look like it's going to be a dramatic uptick in demand. is it further stock buybacks? is it cost-cutting? what is going to drive that earnings growth? liz ann: we are starting to see buybacks wane. the problem would be if you did not see anything pickup that slack, but you are seeing it on the capital spending said. the fact that companies are starting to take this excess cash and put it toward longer-term capital investments more recently the biases been in the interview sector -- energy sector. i think we will see a bit more broadly in the economy as you see tighter labor markets that need to continue to invest in productivity and efficiency boosting measures. i think that is to the benefit of longer-term outlook on earnings-per-share. i certainly don't hope that we have to rely on buybacks looking ahead to support the kind of earnings growth that is in place for 2018. maybe importantly i want to point out that a lot of people

think that earnings are likely -- earnings expectations are likely to come in if we do not get tax reform. for the most part, analyst and not build any numbers into the expectations for tax reform. it is not like we have to pull those out of expectations. that really would represent purely upside if we actually get something done on that front because it was not added into forward-looking expectations. david: talk about the capital investment and its connection with productivity. you are saying capital investment is picking up and you expect productivity to kick back and. has beenink this is in th a temporary respite? liz ann: i think productivity has been at least a little understated by the virtue of the age in which we live in the way our economy operates, which is very different from 50-60 years ago. when the calculus was put in for how we regulate nonfarm productivity, it has really not changed since its original founding of that formula.

when you think of how different the economy is as we have moved from manufacturing oriented economy to a digital economy how the sale is handle, how aaro airbnb is the largest lodging company in the world and think of apps that do navigation and whether or not that has helped your own personal productivity. by virtue of that, gdp and productivity are mildly understated. even if they are understated, you're talking about a fairly low level of productivity. this entire up cycle of the economy, i think we may be getting to that point where we are at an inflection. david: think you very much for being with us today. oday, the shareholders of whole foods market will get to vote on that purchase by amazon.com, something announced back on june 16.

--ws the grocery shares of the grocery chain have jumped and remained steady could will investors like it as much as the market does? joining us now is jennifer who it for us. i will start with the regulatory question. is there an antitrust issue here? jennifer: it does not look likely. this is likely ftc review rather than doj. , thethey tend to look for type of deals that usually cause harm our deals between two competitors and we do not have that here. these two companies essentially don't compete. the other deal that can sometimes cause heart but rarely is a vertical deal. you can think of these two companies is having a vertical relationship. you have a grocery store and a distributor of groceries. those kind of deals can cause harm if they foreclose other

competitors out there at either level, the upstream or downstream level. what you need in that case is dominance, high market shares of one of those levels. you don't have that here. whole foods is not a dominant grocery store chain and you don't have amazon as a dominant deliver of groceries. david: yet. jennifer r.: that's right. david: might that reduce some of the value of this purchase? given its growing position if not dominance in the online sales area in general, could they be forced to actually distribute other groceries than just whole foods? jennifer r.: at least in terms of this deal and whether they have to enter into some sort of concession or remedy, making that kind of behavioral commitment, that's unclear. maybe the regulators here under pressure will ask them to do something like that. for this deal, that is unlikely and possibly in the future deal, they might need to do something with that. alix: if you take a look what

happened to whole foods competitors, kroger drop off a cliff and has not recovered. what is next for those guys? jennifer b.: plays next is those retailers are really focused on improving the online game. and they are taking share. what a lot of people overlooked when this deal was announced and it really has not come back to the likes of program wal-mart yet is that kroger and walmart already have a dominant position in online grocery in the united states. amazon will be fighting an uphill battle. the acquisition of whole foods brings amazon to more suburban areas but not that many in all honesty. 40% of whole foods locations are in urban areas. there's a lot of runway before program wal-mart really feel the pressure from amazon. jonathan: anyone that gets their food delivered by whole foods will note that it's actually is so cart -- it is a

instacart. for anyone who think amazon is doing the delivery for whole foods, that is compensated. how will they w deal with that contract? jennifer b.: the contract extends for another few years, but that is explicit to produce and perishables. there may be a way for amazon to work shelfstable items like cereal and can goods. that is part of why amazon fresh is not going to be able to just instantly say powered by whole foods. part of what amazon wanted to get out of this deal is expertise in perishables. that if the cart contract could be a barrier to amazon fresh being able to accelerate operations. jonathan: jennifer quickly come is this vote today and on event? -- is this vote today a nonevent? jennifer b.: i do not think anybody is expecting any surprises here. david: many thanks to the two jennifer's. jonathan: 12 minutes into the

session, the initial market action -- features a soft. yields climbing lower as well in the dollar very much on the back foot against a stronger euro and a stronger yen. the dow -76 and the s&p 500 negative eight. you are watching bloomberg tv. ♪

emma: this is "bloomberg daybreak." i'm emma chandra here in the hewlett-packard enterprise greener. room. coming up on the david rubenstein show, the ceo of ibm. ♪

>> forward guidance have guided market expectations of future shortened rates. qb involved direct intervention by central bank and markets to large-scale asset purchases to influence the yield curve beyond the very short term. jonathan: that was ecb president mario draghi speaking earlier today. joining us with more from germany as nobel laureate myron holes. let's start with that speech. how will receive was it in germany given the ultimate defensive. e of qe? myron: the speech was very well received. mr. mario draghi went through the history of monetary policy and said how monetary policy combined together with research,

the combination of research and the policy regulators, had married that research together. they over learned what mistakes they had done and changed their models to accommodate that. the one thing they did miss was the interaction of the financial system. not only being able just to control the inflation rates without taking account of financial markets and the like. idea thatabout the obviously quantitative easing programs that were put in place 7-2008 in the united states and in 2012 or so when he became president of the european , theal bank here in europe effectiveness and how he felt that that helped stabilize the economy and at the same time

allowed for there to be economic growth in europe. jonathan: some people argue that the solution to the previous crisis is the source of a potential problem in the future. at the moment we have this tension between the loose financial conditions and asset valuations. has thether hand, he soft inflation prints. how will that resolve in the coming months and what can central bankers ultimately do about it? myron: they obviously have a problem in the sense that as quantitative easing was an in our times, quantitative tightening will be an experiment in our modern times. that means they have to decide at what rate and how they have to produce the large balance sheets that they currently have second is how that plays with increasing rates. i think at the current time, the markets tend to be sanguine in

the sense. let's watch them of all that process of reducing the balance sheet and increasing rates. my view is that the threat of inflation tends to be muted and that gives them more degrees of toedom to experiment and reduce the balance sheet size and not do it precipitously or with the great threat associated with inflation hanging overhead. alix: after mario draghi's speech, it seems like the trade was that you want to short bund s with the trade that played out in the u.s. the last two months as well. is that your base case? is that the smartest way to go into friday speech into an ecb taper world? myron: not really in my opinion . i think basically after the

trump election and the united states, there was a great believe in changes in policy for capital investment. and deregulation changes tax rules and infrastructure spending was a growth impetus for the market, and also with the inflation may be a steady increase in rates. obviously we have seen over the last period of time that rates and thated to fall off the view is the u.s. might be in a weaker position than europe. the market tends to be signaling strength in the euro and yen and the weakness in the dollar at the same time thinking there could be an increase in rates within the real rate within the euro land to greater extent than in the u.s. it's really more so that it will

be a headwind for equities but not necessarily a huge downdraft at this particular time. alix: great to get your perspective. thank you very much. that is myron' scholes. he looks like he is floating in the sky with that backdrop. jonathan: absolutely beautiful. i got to go to that forum. if you want to go, you have got to win a nobel prize and maybe you can go, too. alix: back to the drawing board on that one. we have a bloomberg terminal where you can check out tv . interact with us directly. just go to tv on your terminal. this is bloomberg. ♪

♪ david: this is bloomberg. i'm david westin. president trump is back on the campaign stump with a fiery speech to campaign supporters at a rally in arizona. he put more distance between

himself and fellow republicans, including the senators from arizona. he is at it again, tweeting, "i love the great state of arizona. not of jeff flake, weak on crime and border." marty, what is the president's genius behind this going on? he needs republicans to back him , but he is going at them with a hatchet. marty: don't think this president is strategic and anything he says. he went to that rally knowing he was going to be supported by 15,000 of his base and he played right to his base. this is donald trump in reality. he is very comfortable in that space. despite the new chief of staff, he just goes out there and says what he thinks. he is not thinking strategically at all. david: i don't quite understand his tactics event.

then. he is also tweeting, "if republican senate cannot get rid of filibuster rule, they are just wasting time." he doesn't have a republican majority on any of this, does he? marty: no. democrats and republicans do not want to end the filibuster. he is constantly making the suggestion on how we actually govern ourselves. there is no appetite whatsoever to do it. he is again just playing to his base, blaming the politicians for not getting anything done. what it really comes down to, i know that there is reporting about strained relationship between him and mcconnell, but mcconnell is not dealing with the president on these issues. he is dealing with his staff and that is the real relationship that counts. david: there's also reporting out and i don't know how reliable it is. they think the so-called gang of six, including secretary mnuchin and gary cohn, are making real progress on tax reform

package. do we know whether that is right or not? marty: we don't know whether it's right. all indications that we have is that they are still trying to figure out just what they can and can't do. there are reports about limiting mortgage interest deduction, but that's not going to go anywhere. there is no support whatsoever for that idea. it is really hard to see what kind of progress they are making if they are still talking about that. david: i'm not trying to pile on here, but apart from what they are going to do, do we have any sense of what priorities are in order? for my count, they have four things that they need to do. they want to do tax reform, the debt ceiling, appropriations and funding the government. there's also something called the affordable care act. they have to do something with the subsidies on it. do we have a sense of what priority they give these things? marty: clearly the debt ceiling

and the budget are the two greatest priorities. this adjuster and that he might shut the government -- suggestion that he might shut the government down, i am heartened that he did not say he is going to take a default on u.s. debt. you might be forced to make that decision if they combined the two bills and send it to him. those two are the key priorities to watch that. david: that is marty shanker. thanks so much. jonathan: that rubs our time on bloomberg tv. 26 minutes into the session after yesterday's big moves higher on the s&p 500, down by almost one full percentage point. we bounce off the lows for u.s. equities, down a quarter of 1% on the s&p 500. the euro-dollar advances. it is a weaker dollar story against the euro and the yen. ♪

>> is 10:00 a.m. in new york. i am vonnie quinn. marks: live from london, i am

mark barton. welcome to "bloomberg markets." ♪ vonnie: u.s. stocks open lower as the president threatens to debtdown the border wall over the border wall. more on that in a moment. first, here's abigail doolittle. abigail: a big miss for them month of july. in attual number came 570,000 homes. this is not entirely surprising. we are certainly seeing this expectedn a less than new home print for the month