opportunity. that was then. this is now. gary cohn up as president trump's chief economic advisor, and markets don't like risk quite as much as when gary was still on the team. gone and threats of a trade war looming, the president needs all the good economic advice he can get. where is it coming from? and in the wake of a notes tariffs, reports are that the white house may be planning something much bigger directed specifically at china. welcome to "bloomberg daybreak." i am david westin here in new york state. my colleague alix steel is still done in houston. is going to be the question -- that is going to be the question. a whiteyou think about house and u.s. presidency without gary cohn and more ramped up trade war? i will be talking to joe kaiser, ceo, talking about the

biggest manufacturing company in how it affects his thinking. the market reaction is very interesting this morning. markets feel relatively calm. euro-dollar is now unchanged on the day. we are now flat. in europe you're seeing very strong buying, but everywhere, spain, it is portugal or not something you would associate necessarily was a safe haven bid, and oil up by 8/10 of 1%. that is more of an idiosyncratic issue. for more we are joined by mice -- by michael mckee and bloomberg's taylor riggs, and gina martin adams.

gina, i want to start with you. you wake up this morning, comment, and futures are down 300. how does this change your view with a no-cohn white house? >> it doesn't, not yet. i think there is elevated trade policy risk. out andthis is playing we're in the midst of climbing out of a pretty severe 10% correction that played out through the early parts of february, so we are certainly vulnerable to negative shocks. i think the market will perceive this is a short turn negative shock, but it will be seen if this impact the earnings outlook. we do want to be on guard for this to potentially trigger greater risk in the earnings estimates, particularly with respect to the nafta exposed names because of the early stages of maneuvering to try to renegotiate nafta.

until you start to see earnings shift occur, it really is just a lot of noise. we want to be pretty careful not to read too much into just the fact that one other person from the white house has left i think over the last year or so we have got pretty accustomed to that has a trip. the loss of cohn in the white house would not be perceived slightly by the equities market. mike mckee, gina properly advises to be cautious about this. there was a big reaction to markets last week, not as much this time. was certainly a market confidence indicator, not something you can quantify.

the idea that maybe this in the trump'sunleashes donald trade war year is certainly a concern. the obamacare repeal failed. they are not going to get infrastructure done. really the changes going to have a material impact on the white house and what is going to come out of there in terms of policies other than the fact that donald trump may just start trade war's, but he probably would have done that with or without gary cohn. taylor, i want to take a look at what happened to the other times we were worried that essentially gary cohn would leave the white house. you can see the dollar index first the s&p pretty much went nowhere.

-- it was the dollar index that actually saw the movement. what are people on the street saying about what asset class will be hit the hardest? >> we've had a pretty weak dollar story, as you know. we saw a little bit of an increase here, a stronger dollar, but so far still really since the election it has been a weak dollar story. some of the other asset classes we are looking in our the banks. theare sort of seeing markets looking at dodd-frank to see if any of those will be look at this week. some of the banks have indicated , little lower, maybe around 2% after his resignation, and wondering if you really would be a steady hand and advocate for the banking market. >> markets clearly are reacting, a best a bit -- at least a bit.

is go to our chief washington correspondent. how much reaction is there to what is going on in the right house -- in the white house? president trump double down on a follow-up tweet regarding his proposed trade policy, the same that ultimately led. cohen to issue his resignation -- led gary cohn to enter his resignation later. fallout is likely going to continue around trade policy. lawmakers on the -- on capitol hill in the republican party circulating a letter urging president trump not to go through with this policy. just in the last hour or so we have seen reaction from the european union and also should note industry here in washington, the lobbying industry representing some of the large groups are out in full

force trying to urge the president to reconsider. what actually can congress to to slow down the president? they can urge him to really reconsider. that could get interesting with midterm elections here in washington. they can bring a whole lot of alternatives to the president, or ask him to reconsider a surgical approach, as speaker paul ryan put it in a press conference yesterday, which would allow for only certain businesses to fall under the --ge american -- the come withue of nafta nafta negotiations really nearing completion, the administration deal says that if

mexico and canada was to have steel tariffs removed they've got to come to the table with a better offer. bloomberg hadday a report out that the white house maybe on the verge of acting on a rio one proceeding about and let short -- a 301 proceeding on intellectual property from china. this may be something the markets react much more to if there was big action against china. >> i think that is a really important point. when you look at the tariffs enacted so far, it is a really small percentage. but if you have retaliatory acts by certain countries and a broadening of more restrictive trade for economies, especially canadian candidate, and mexican economies, or the

chinese, those are the biggest stories. when you look at the s&p 500, you have seen the stocks that are most exposed to trade. they do seem to be is in the index. there is no movement on the earnings lines, and this is an important distinction as we are trying to price this in but not pricing in earnings expectations yet. that is where you received the biggest shortfall come up in stock prices. i think you will see a much deeper and broader reaction. >> so we don't know they are going to do anything yet, but sayseport from bloomberg it would affect electronics, shoes and clothing, and also potentially invest that actually -- they might not proposed a reciprocal constriction. told that mean?

-- reciprocal restriction. what would that mean? >> that much, really. you give see the white line there is total foreign direct investment. europe is our biggest foreign investor. the red line, barely above zero, as china. china doesn't allow its companies to invest a lot in the states. they've also clamped down recently on cash coming into the country. if they restrict chinese investment, not going to hurt us a lot. the real question is what do they do about the intellectual piracy the chinese have performed on u.s. companies setting up joint ventures in china? you got to give them the technology. that is going to be a tougher question for the president and whether he imposes it worldwide. that is the key. do they asked the rest of the world to impose facings -- to

impose sanctions as well. to rounded out here, i have been talking to ceos in houston about this very issue. what have you heard so far related to this? >> kevin mentioned boeing, and i would also mention caterpillar was headed lower this morning. it could add cost pressures of up to three to six months after these terrorists are imposed. pressure could be put on these material costs. when we look at the gross margin we take a broad look, over the last two years they been in the mid 20's, low 30's range when we look forecast over the next few years, protesting best over the next few years. -- over the next few years.

interesting to see if that comes down a bit if these costs to increase and to see how markets will respond to these. much.nk you so coming up, more on market reaction to gary cohn's exit. i think you look at the markets. the dow is down by three digits, but i'm taking a look at the vix, at gold, at 10 year. not a lot of asset classes moving. we break down of the market reaction next. this is bloomberg. ♪

♪ >> the state of gary cohn's leadership has been under scrutiny as top leaders in business and government have in since the beginning of his tenure at the white house. >> i think he is one of the smartest in the industry. i think he will be a big positive. >> look at the policy. but the people on the ground. they are top professionals. serious people with the knowledge and experience. a if i was working for president of the united states who equated those marching for civil rights with white supremacists, some of whom had passed connections to the american nazi party, i would resign that day. trump: they say, will gary

cohn continual remain at the administration? i say, i hope so. if he leaves i will say i am very happy he left. [laughter] come here, gary. are you happy gary? we just passed a very big bill. i think he is happy. mr. cohn: yes i am happy. pres. trump: hopefully he will be staying for a long time. cohn's exit raises doubts about markets' friendly voices. i just want to develop at the different asset classes' reactions yesterday after we got the news. s&p futures taking a nice leg lower, that yellow line. , andlue line, dollar-yen the white line treasury futures.

ultimately let's look at what is going on here. people come and go from senior positions all the time. theve got to remember underlying fabric of the markets is still in place in good shape -- in good shape. on whatwe are focusing is going on on capitol hill at the moment and losing sight perhaps of the fact that the fed have had a change of guard. we are still seeing markets calibrate to perhaps a little more two-sided inflation risk. they are trying to work out ultimately the way it is going. earnings are coming for recently well, and markets over the long haul still are looking at what is a reasonable growth picture. while we get some gyrations will we get news heading the tapes, ultimately the reasons markets are reacting strongly to any

sort of news and bouncing back is because the underlying growth picture are still pretty stable. if we take a longer-term view i think that is very important in terms of being confident to take judicious risk in these markets. may haveossible those overreacted to gary cohn leaving? he was an important person for goldman's and in new york in the white house. wasn't the president going to do no matter what mr. cohen said? >> the president listens to a lot of people and talks to a lot of people. he has a lot of meetings. he has a lot of people looking for his ear. wasthought was that cohn one person that the markets have a lot of confidence in, who have a lot of common sense and good judgment. there was a lot of reporting at times that there were some odd wass out there that cohn

very good at squashing or at least getting the president to look and consider the other viewpoint, so i think that is why markets view him as a very important person in the white house. >> but in fairness, the president, when he was running for president, said he really what it to cut taxes. they agreed on that and . he also said -- and . you -- and got that done. he also said he would go to trade war, so did he really change the path of this presidency? >> that is a good point. he probably did not change it. he probably slowed it down. thishinking is that waiting a president from doing this sooner, pushing it back a little bit, i think cohn was also hoping to stay around to do infrastructure, but at the end of the day at the president has gone out and made promises he is probably going to go out and to fill them. the question is to what extent. you can do tariffs and the

protectionist, but you can go whole hog or part of the way. i think what cohn was trying to do was make it somewhat of a more moderate measure that the president would you. a market perspective, if you were going to trade political risk, you pretty much lost weather in europe or here in the u.s. is that going to be the lesson we learned today? >> when you have a strong underlying economy, global trade growing above trend, inflation to be contained, monetary policy is still relatively loose. wheres an environment ultimately the economics are going to dictate where asset markets go. noise,s always political and what we've learned is that it tends to be something markets react to quite quickly, but then discount over a longer period of time. in the short-term, markets act

as voting machines. in the long-term they act as weighing machines. they are weighing up what looks like a good economy, a stable path of interest rates, and reasonable balance of risk across the globe. i think for that reason, overreacting to political gyrations probably would be erroneous and we would continue to focus on the long-term growth patterns and opportunities within our portfolios. >> thank you very much. you will be sticking with us. coming up, trump setting his sights on chinese imports an investment into the u.s. to punish beijing for alleged theft of intellectual property. this is bloomberg. ♪

♪ david: china will wednesday to president trump

is getting closer to action on theft of an actual property -- of intellectual property. we will credit a screen with the bloomberg report is suggesting might be done on the 301, things like put tariffs on food and clothing and consumer electronics, and perhaps restrict investments to the united states. what is the reaction, if any, from china to this? reporter: this is where really start moving into territory that could hit china's economy if it comes to fruition, but reaction has been quite subdued. we haven't had much by way of official comment out of beijing today despite the fact that a rubberstamp parliament meeting is at happening at the moment. last week during talks in washington, both sides agreed to avoid trade war. it seems to be the mood coming out of washington.

the sentiment is if the u.s. does go hard in the 301 category, there's a feeling china would definitely have to respond, but white now they are rating -- they are waiting to see what the details are. there's a sense that beijing is playing a wait and see game. david: two illustrate your point about how big exports to the united states are of electronics and clothing, we will put up a chart here to contrast it with steel. metals is really a small portion of what china since here, and electronics and textiles are very big. to go back to your point, which is going to win? is it going to be the real one proceeding as opposed to these 301 ast going to be the opposed to these? china may open up

markets in certain sectors to buy more u.s. goods and the like, but remember the threat to china and the u.s. and its allies because you are talking about a degraded, deep regional supply chains for electronic goods and other kinds of clothing and footwear and the like, you're not just targeting made in china. you are targeting components and the rest of asia, including u.s. allies. you don't just and of harming china. you end up harming key u.s. allies. that's the balance the trump administration has to face. david: thank you so much for joining us from hong kong. coming up, we are talking more about how the markets might react to a trade war. live from new york, this is bloomberg. ♪

♪ david: welcome back to "bloomberg daybreak." my colleague alix steel is in houston.

there are other things going on in the business world, and some of it has to do with energy, which is why you are down there. alix: really it has been tariffs dominating some of the come a station -- some of the conversation. coming up later today, i am talking to the head of the americas president for chevron, and the head of siemens as well. we will write that down as chevron is very aggressive in shale here in the u.s. in the markets in equities, we are coming in the morning with the dow down by triple digits the s&p off as well. you do have risk, but it could have been worse, not like we got it would be yesterday evening when the had this news of gary cohn leaving the white house. onlar-yen modestly weaker

that safe haven bid, but the dollar index mixed on the day as well. you have safe haven buying into ve, butk end of the cur buying in the bond and spanish and portuguese bond market. ix not even above 20. david: let's go to kailey leinz with our first word news. reporter: president trump's top economic adviser quit after confrontation over tariffs in the oval office. according to people familiar with the matter, president trump asked gary cohn whether he would publicly stand behind a plan to impose the tariffs on steel and aluminum. cohn did not answer and quit hours later. he has been arguing against the tariffs. the administration has also stepped up its war on illegal immigration, suing california over three state laws officials stay interfere with immigration

laws and violate the constitution, preventing law-enforcement officials from sharing immigration data. south korean president moon jae-in says talks with kim jong-un are just the start and i cannot be optimistic get. -- optimistic yet. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is bloomberg. david: thanks so much. yesterday president trump once again addressed the question of a possible trade war, saying it would not be all that bad, at least for the united states. pres. trump: when we are behind every single country, trade wars aren't so bad. do you understand what i mean by that? when we are down by $60 billion,

$100 billion come of the trade war hurts them. it does not hurt us. david: he was us is jpmorgan's head of asset strategy. it seems like we are migrating a little bit. trade wars were good last week, now they are not so bad. does the president had a point, that if you are running a trade deficit is not heard as much? guest: no. [laughter] what you and of doing is raising costs for people and lowering the standard of living. trade is generally good for the macro economy. there are people who suffer. m.i.t. put together a great study that showed 2 million jobs were lost in manufacturing after china joined the wto, partly due to automation, but also because the chinese took a lot of low skill industries a lot of this country. but in general for the macro

economy, a trade war would not be good and it will be impossible to win because the other countries can always retaliate. david: even people on the hill who don't want the broadscale tariffs are saying there's lot of cheating, particularly by china, that the rules are not fair. is there something we need to do about this? >> i think this is why the wto exists. a better trade generally leads to a better macroeconomy, meeting more jobs, more consumption, and generally a virtuous circle. to say that you can have a trade war without consequence i think is incorrect, but equally it is incorrect to look at what has an openingively salvo and say we are now in a trade war. the wto are set up to pick apart the reasons for the introduction and tariff or control

effectively adjudicate as to whether those affected by them can respond in the way which they can respond. this allows targeted responses. if we think about a trade tariffs as being essentially a transfer of wealth from , it isrs to producers very inefficient. the idea that this is something which is necessarily a good thing to do, i am not sure you can say anything other than it is a bit of a gray area and will probably last a long time. i think we need to just focus on the fact that there are multiple players in this highly integrated global supply chains, and that means there's no real right a wrong answer as to what is going on here but on recognizing -- beyond recognizing this will play out over a long time. engle forhen bloomberg yesterday wrote that "we are witnessing a dance, not

a battle." a very optimistic -- battle. tariffcast is that proposals more than voluntary quotas and domestic producers and foreign exporters walk away le." -- walk away who an optimistic take on this. >> it isn't clear that gary cohn would have been able to restrain him in any way. i think one of the things the market is worried about longer-term is what we were just talking about, the wto. were to rule against the united states and say the terrorists are unfair, which a lot of people would expect them to do, and donald trump just ignores the wto, that puts the whole global trading system at jeopardy. it isn't an immediate issue, but that is with the overhang in the long run is. david: we've been talking a lot about china.

there's also a question about the eu. the trade commissioner for the eu spoke this morning at a press conference. this is part of what he had to say. >> on the list there are industrial products and .gricultural products are other items such as peanut butter, orange shoes, etc.. very soon -- orange juice, etc. this will be public soon. david: you've been talking about the wto you believe in. is this within the wto or not? is this taking the law into their own hands? >> as the trade commissioner has artie said, it would be within the pto rules. to expect partners of the u.s. not to have something to say in response would be incorrect, but i think getting a measured and targeted response probably is the right way to proceed with this, which is to respond to

these discussions and effectively push it back within the wto framework. there are statements that need to be made for domestic consumption in europe as well, and to be silent on it i think would be to accusations of europe not taking this seriously. it is right to take it seriously. it is not that it is also right to do is in wto framework -- it is also right to do it in the pto framework -- wto framework. did this come down at a time where we are off the peak of the global growth story, and is that growth story as strong as you thought it would be? >> if anything the synchronized global growth story has been rather stronger. we have seen stronger growth in places like europe, written off as a potential place for growth

just a couple of years ago. japan as well as had significant growth upside. when you are running with pmi's in the middle 55, to expect it to stay up there which suggests acceleration from an already , we areel of out put operating in places with some constraint. obviously labor markets are relatively tight in u.s., japan, the u.k. we have seen surges of employment within the eurozone. i would argue that rather than surprising in terms of the level of growth of of trend, there is scope that the world economy could surprise us in how well -- how long it can stay above trend in growth. david: there's an event tomorrow involving the ecb. there's a piece in the bloomberg became out overnight that question the relationship of

what is going on with monetary policy in the u.s. and the ecb are becoming more linked. the yield on the five-year u.s. and the germany five-year, they have split apart. the question is, are they starting to come back together again? >> they probably will over a longer period of time. we are seeing a cyclical timing difference. the u.s. economy was stronger, faster than europe, now the europeans are getting to the point where we were a year ago where you are going to end qe and and they look at raising rates because their economy is still trying to find its feet. it is interesting to note that there was a lot of talk early in ecbyear of the hawks on the ascended, that maybe they would and the qe a little earlier. this has gone away as has slowed just a bit. i have my own chart here.

you are looking at a situation where the economic surprise index, the continual good news in the eurozone has fallen since the beginning of the year. now we are expecting no change from the ecb in its policy, but that does not mean by the end of the year they are not starting to look at normalizing. alix: to wrap it all up in terms of investment strategy, i feel like going into the year it was going to be about central bank convergence and the ecb rolling back and yields moving higher in europe as the real changer in the market. jesus orvest with that have -- that thesis or have to go back to a divergent strategy? >> i still agree with that thesis. there is convergence in terms of the pathway of policy, but divergence exists in the timing of that policy. i think when you look at the

bunt, if you look at the europe and the united states, you can see that relative to short hand rates, the level of the german bund is not that far from where we expect it to be. we recognize that europe is perhaps a little earlier in its economic cycle, so we do expect mario draghi will gradually pedal back from the policy they had an gradually begin to ease back from quantitative easing, that will ultimately see yields rise upwards. the idea that we will see sharp shocks higher in european yields is not borne out by monetary policy or indeed the very subdued level of inflation within the eurozone generally. deals toll expects grind higher in europe, but this is going to be a relatively lengthy process and we invest against that backdrop.

john and michael, both of you, thank you very much. coming up, we are going to look at what wall street is saying about the recount's exit -- about gary cohn's exit. if you are waking up this morning, should you be freaking out?the feeling in the market is no . only 7/10 ofown 1%. the power of the yen using a noth of steam, and the vix even over 20. much more. this is bloomberg. ♪ >> bloomberg television's brought to you by interactive brokers. one world, what account.

reporter: this is "bloomberg daybreak." coming up in the next hour, morgan stanley investment management senior fixed income portfolio manager. ♪ we now turn to wall street beat, were recover three things wall street is buzzing about this morning. first up, how will wall street react to gary cohn's departure from the white house? then civil unions, the developer of new york hudson yards, cuts ties with so-called corrupt unions. finally, opera joins wall street heavyweights for a power lunch benefiting the art. is jasonining us now

kelly, bloomberg's new york euro chief. cohn.talk about gary reporter: you couldn't have a better adult in the sandbox. if you can run goldman sachs, you can run the economics in the white house and you know how to play politics. david: on wall street, all these people thought they had someone on the other end of the phone they could call. reporter: adult in the room is a quote you hear over and over again. as you say, this is a the guy they would go for. he's a tough guy, but very well known to not just other bankers, but private equity folks, hedge fund guys. he was someone who they really counted on, and i think especially as we've heard in the debate around tariffs, which

investors seem to be pretty worried about, certainly ceos are worried about coming was a makingt was seen to me this very strong argument, which it sounds like he lost with the president. do you feel like harvey schwartz and david salmon are sitting in their offices thinking, do i keep my job? or does gary cohn go somewhere else? reporter: i am not sure gary cohn goes back to goldman, although there is quite the revolving door. dena powell of course leaving the white house and going back to goldman. he could have another bigger job in the ministration. that has been -- in the administration. that has been floating around. it is more likely that if he comes back to wall street he could end up at a big private equity firm or potentially a hedge fund, or he could end up hanging out his own shingle. the boutique investment bank route is a pretty tried-and-true

one over the past decade or so. we will see if he comes back to new york or hangs around lawsuit can -- around washington a while longer. unlikely he goes back to go mad at this point. alix: next up we are looking to hudson yards, suing unions for corrupt behavior. to me the story is hudson yards again, another headline. reporter: hudson yards draws so many headlines here, in part because of all the superlatives. it is the largest private real estate development ever in u.s. history, according to those building it. this is of course stephen ross, the architect of time warner center here in new york city. this is a massive project. , ifthis seems like a good not really big, old-fashioned labor dispute. i love this quote from the lawyer. he said, "we are not about to be

forced to do business with people who spent an hour i -- who spit in our eye and collect rain." if -- and call it rain." if that is not a throwdown, i don't know what is. david: any story that has oprah winfrey and david geffen in the pictures --ith reporter: opera has drawn a lot of headlines over the last few months because she gave this speech which kickoff of his speculation that maybe she would run for president. part of the reason i love this story is i am imagining in the and over getting up speaking. she owns 10% of weight watchers. arounde speculation was her running for president, the stock went up dramatically. a social wallrom street theme, going to be

chairing the robin hood benefit coming up, so she is spending a little more time on wall street. who knows? maybe she and j -- she and gary cohn will end up starting an investment firm. apparently she was relatively well-behaved him about wall street is looking for a friend. you were gone for 48 hours because you had a baby. we want to put it out here. she is adorable. i literally cannot believe you are awake and network 72 hours in. reporter: this is certainly my corner of wall street. thank you guys. very exciting. david: congratulations. reporter: i am blushing under my makeup. [laughter] david: that's why we have makeup. mother and daughter doing well? reporter: doing great, and big brother very excited.

thank you very much. david: congratulations. thanks for coming in after that. many thanks to jason kelly. coming up, what does the united ytates treasury have to sa about the takeover of qualcomm? that is coming up next. if you have bloomberg terminal, check out tv . you can watch us online, check out our charts, and in rack with us directly. go to tv on your terminal. live from new york, this is bloomberg. ♪

♪ david: welcome back. david westin in new york, alix steel a long way away and houston. here's what i am watching today. it is about that broadcom bid for qualcomm. this is particularly interesting

because there is a review in the treasury that came out with a letter in which they said, "cfi us has come to believe that broadcom's successful hostile takeover a can of qualcomm could pose a risk to the national security of the united states." secretually are pretty and come out at the end, but they had issued this letter firing a shot, which basically helps qualcomm in resisting the bid. they think if they take it over they will invest less in innovation and the technology sphere here in the united states, and it will put us at it is advantage to countries like china. that seems to be their biggest concern, that it will suppress innovation. they are very concerned about technological innovation and television with china -- and competition with china. alix: it is so interesting in the world of mna -- of m&a

right now. you wind up having to tax cut, promised tariffs, but m&a seems to be in a place where you may not able to be -- you may not be able to get those deals done. inx: in europe -- david: europe, angela merkel and the germans particularly concerned about chinese investment. alix: protectionism. i feel it. it is coming. david: coming up on this program, jim karen, morgan stanley's investment management senior fixed income portfolio manager. live from new york, this is bloomberg. ♪ mom, dad, can we talk?

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>> i am extremely happy to do what i'm doing. i have a once-in-a-lifetime opportunity. gary cohen is out and markets don't like risk as much as they did when gary cohn was still in the team. the president needs all of the good economic advice that he can get. i do haven't seen anything yet. reports are that the white house may be planning bigger terrorist directed right at china. welcome to "bloomberg daybreak peter: i'm here by myself in new york. in houston.s what is the talk in houston? alix: it is really about opec here. only major reducers are here talking. -- all the major producers are

here today. to two big ceos. joe kaiser and carlos could be no. .oth of those are coming up if you take a look at the markets, it was a risk off feel the moment the news broke last night after the bell. now, it does feel calm her. by .1ro dollar up percent. the yen is the outperform or against the dollar. other than that, a stable dollar against all g10 currencies. -- you areeived by seeing dying in europe. and we heard a little bit softer now. the state of gary cohn's

leadership has been under scrutiny for some time. republicansand weighing in. >> gary cohn has been on my on my board for seven years. he will be a big part. >> look at the policy and the people on the ground. top professionals. these are serious people with serious knowledge and their mission is to have a growth agenda. >> if i was working for the president of the united states who equated those marching for civil rights with white supremacists, some of whom had had passed connections to the not to party, i would resign that day. we will continue and remain in the administration. if he leaves, i say that he has had left.

come here, kerry. are you happy? gary: yes, i am happy. has that? alix: joining me now is the morgan stanley chief investment is a garythink there cohn premium in the market? >> absolutely. we have to break this down. 2017 was about tax reform. gary cohn was the right guy and was instrumental in doing that. 2018 is about trade and tariffs. 2000 19 will likely be about infrastructure. 2020 is about reelection.

i would argue that if i look at this from a longer-term perspective, gary cohn has done a lot of the heavy lifting from a tax reform standpoint, which is really what has been helpful to the broader economy. alix: what i am hearing as a talk to oil ceos when i talk about tariffs is that they should aside. they say it will negate some of the benefits for the tax drop. the 3.10% -- 3.5% is off the table? >> what this political uncertainty does is it puts the cap on yields for the time being. we have to get past this.

we have to see who replaces gary cohn. we have payroll numbers coming out on friday. the economic fundamentals are what drive the market more so than an individual. i think it does tempt on the ability for heels to up as much with this level of uncertainty that is currently in the market. david: i want to bring in kevin cirilli. we comes after gary cohn at want to put up with the economic team looks like now. the people who are still on it. will be giving the president economic advice? -- isohn, wilbur ross very reconfiguration of the economic team? kevin: we should add other names to that list including mick vice president

top economic advisor. particularly, their focused on the international community response. on capitol hill i spoke with a republican lawmaker last night to told me that a large contingency of republicans are at an together a letter that they are sending directly to trump today, urging him to -- paul ryan calling for a surgical approach to the trade policy. this morning, trump tweeting out what he said yesterday which is that he feels strongly that the united states has been taken advantage of i several of these countries and china. david: there are various people who say hepresident

will back off but the president has been steadfast. is everything -- is there any reason when he will change his path? no.en: on the issue of what you mentioned which is leverage, i spoke with several sources who said this is an opening bid as the talks are ending their renegotiation. saying with steven mnuchin who testified yesterday on capitol hill that canada and mexico want to have the u.s. continuing to be engaged and they don't want the steel make a then they have to better offer. david: i want to come back to you, you are a fixed-income

guide. react to gary cohn? begrowth and inflation will the primary components. markets will look back and say, how does this impact growth point and inflation. uncertainty and risk premiums and things like that, certainly. the 10 year treasury yield dropped overnight. broadly speaking, the markets low.been relatively spreads are not pulling out on this. this is very opposite from the equity market. and i think some of the reaction in the markets today and asset classes be somewhat of an overreaction. the risk that there could be more protections going forward without gary cohen is certainly there.

but we have to wait for that to manifest itself. alex: if you try to play political risk, you didn't win. is it the same scenario? >> i break it down this way. trump,think about donald i think of him as a bond trader. trading jobs. one is wages. and the third is the level of the equity market. those are the three points they come back to. so any economic policy they come back to with tariffs or trade, he doesn't have an ideology necessarily. if it feeds back negative, he will back off. i don't think he will hurt jobs and wages and equity market too much. what isbe responsive to

happening with those three components. alix: interesting. you with us. he will be sticking with us. coming up, escalating protectionist talks. .ore on that risk this is bloomberg. ♪

>> this is bloomberg daybreak. twitter is trying to stop cryptocurrency scams on its platform. they are taking steps to prevent those accounts from engaging

with others. they recently banned ads with cryptocurrencies. there is trying to solve off more aspects in order to close the clock esther sale of monsanto. the company has been in exclusive talks. it helps to address all concerns of the commission. and univision has scrapped its plans for an ipo. that leaves david bond event without an exit plan. they call that because of market conditions. alix: the prospect of increased tariffs has put the dax in a positive areas at the moment.

ok, meanwhile, speaking out at a press conference in brussels today urging trump to halt the plan for the steel tariffs. vincent, i'mw is curious about the reaction of the fx market. you thought it would be a weaker dollar story. but i don't feel that with the exception of the dollar-yen. washe immediate reaction immediately muted. thisarket has built up to in the expection that gary cohn was one step out the door. it taught the equity markets more than the fx markets. we will see if this manifests a trade war with the idiosyncratic move.

we will see commodity currency take a hit. waitingthe markets are withe if this is trump thunder and small rain or the real deal? it in typically you see fx and then it works its way through. >> i think the fx market has been incredibly orderly. it didn't have as much of a move now. so whether the markets had theyipated -- i don't know anticipated gary cohn leaving but the rumors were swirling. looking atpect to how it has impacted fixed income, it has been a view to move. i think it is important to keep an eye on the fx barometer and the u.s. treasury barometer. think these things are the telltale signals. the equity markets are just

telltale. the macro markets are taking this in stride. alix: breaking news for you. the adp number coming in spreading strong. to enter 35 private jobs added in february. january resize up -- january revised up. so this is a prelude to the jobs report on friday. this time it will definitely matter. that is what we say every friday. i want to take a look at what is europeng in the u.s. and . take a look at what is happening with the 10 year yields. 10-year bund yields are yielding than if you bought a treasury and hedged at four risk. what does that do for investment season? >> that is a great investment for many dollars.

i give you an example. we could look at the italian five-year trade around 70 basis points and say, why would you want to sell a u.s. trade in order to buy that but the reason is the fx currency hedge. you convert dollars in two euros and then back into dollars and what that means is that by buying be five-year european piece of paper, i have 100 basis point break even. is't forget the u.s. curve flat. there is a lot more roll down and carry. european markets from that standpoint are a lot more interesting. there is money to be made. returns a 4% potential

with italy. and germany. alix: part of the reason white is so steep is because there are basis points. so where is the best valley -- where is the best value? would argue it is the five-year point. that is what we would look at the most. italy is the top one. second is spain. doing extremely well. portuguese ten-year yields traded 10 basis points tighter than italian yields. so this is actually -- bond markets have held up well. a great force of potential based for many u.s. investors. this is one of the reasons why the dollar is so weak. guys like myself are selling dollars and converting that into euros.

this can't go on forever. it will come to an end. but we have attractive breakevens to play with and returns to earn. alix: thank you so much. great to see you. coming up next, the third-largest corporate bond sale. a massive $40 million to buy. we look at the credit markets next.

alix: no big deal. cvs borrows $40 billion. to 2014this going back when verizon came into the market. the spread did narrow a little bit. but going into the bond market,

you saw a big widening in terms of spread and a little widening yesterday. neeson.us now is matt if you take a look at the 30 year portion, we are looking at the potential spread of 195 basis points. what have you learned about the corporate credit market yesterday? >> i have learned there is a lot of demand for debt. also into context here, corporate supply has been down by 20% versus last year. so when you have a deal like this into the market with reasonable attractive spreads from an investor's perspective, you do get demand. and then you have three times the demand of what was being offered by cvs investors. look today, the spreads are a little bit tighter. so those who bought are reasonably happy. it is a comment on the demand

for bonds and the money in the marketplace and overall, the attractive level. there is still a search for yields. alix: the theme over the last in years is that it has been the borrowers pocket. did you see that scenario play out yesterday? some degree. i'm not speaking about deals in particular but the market has been more covenant light. and it has been a little bit that is a reflection of the investor appetite. and that is to get the traditional yields are not demanding as much protection through the day. that being said, it looks like a healthy market and the economy looks good. the big risk for credit is the recession which seems far off. therefore don't seem like they will rise anytime soon so the market is wondering what -- wondering what

the political noise is out there. david: so nobody is pushing the panic button. but it isn't just this. there are a lot of little indications that this might be late in the cycle. hotly contested item. many people say we are late in the cycle. and that other sectors might be more midcycle. but what we think is that we are midcycle and we are seeing more idiosyncratic deals coming into the marketplace. for obvious reasons. we do believe it is a midcycle environment. this may be good news or bad news. you have a column talking about how this might affect the success of the merger. because they are loading up a lot of debt. and how will this work when they have the money?

into the deal with $25 billion in net debt and they are adding a whole lot on. it is a particularly ambitious deal. they are trying to create a new model of health care. this deal amake success, i really think they have to invest a lot. he does the real and if it is into cvs stores. some of that will come naturally. but they will have to do a little bit more than that. investing in clinics. need to keep costs down for what the insurance is now. alix: so basically the spending may not be over. just to wrap it up, what sectors do you like? leverage loans? loans,s and leverage they are attractive today because we are in a late rising cycle. we think default risks will stay

low and that becomes attractive. for me, that is a great space. we are still weighted towards financials. we think some of the financials look more midcycle than they do late cycle. which is another reason why we like them. more of the higher-quality sectors, we don't want to have a lot of inequality in the markets. so i say investment looks relatively attractive. david: a great piece on cbs. day.row is ecb three new reasons for mario draghi to play it safe. this is bloomberg. ♪ mom, dad, can we talk?

sure. what's up, son? i can't be your it guy anymore. what? you guys have xfinity. you can do this. what's a good wifi password, mom? you still have to visit us. i will. no. make that the password: "you_stillóhave_toóvisit_us."

that's a good one. seems a bit long, but okay... set a memorable wifi password with xfinity my account. one more way comcast is working to fit into your life, not the other way around. retail. under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. david: welcome back. it is wednesday, march 7. my partner alix steel is in houston. we are talking about trade there.

alex: i will be talking to the ceo of mx and the head of operations for chevron today. obviouslyversation has been about opec and shale. i will move the conversation today to really talk about what gary cohn meets for their investment. if they don't care and what winds up happening to nafta under trump and see how that may affect ceo decisions. there is a lot of political drama in mexico coming up. in thek we have problems u.s.? wait until we die down to look at mexico. in the markets, a very interesting session developing here. s&p futures and dow futures are down. but this could have been worse. european stocks are now in positive territory. you look at the trade war,

that would directly impact germany. that index is doing pretty well. aher asset classes with potential safe haven bid, as we 2/10h up the board, down of 1%. it does get stronger on the day. as much as before. yields going down by two basis points. that is not a safe haven trade but that is where the money is going. oil is softer. another storyike of moving along and not paying attention to political risk. david: i will tell you one piece of data that came in -- the trade balance deficit? it was a little bit acre. a larger deficits than was projected. and by the way, they did revise that up.

so trump will not be happy with those trade numbers. he really focuses on them. alex: i want to jump in there. what is interesting is that exports fell. you would think with the weaker dollar that they would have done better so i am wondering where the trickle-down is. looking at imports, this is strong demand. david: a strong u.s. consumer and strong growth. he would rather buy everything right back here in the united states. alex: one more thing and then i will stop talking. look at adp. private payrolls coming in strong and revised up for january. ok, i'm out. find out what's going on outside the business tariff world.

trump's top economic adviser is quitting. cohn mentioned the resignation in the statement. according to people familiar with the matter, he quit hours after a confrontation with the president after the tariffs. meantime, setting sights on chinese imports. on u.s. may clamp down punishing beijing for the theft of intellectual property. that may include deaths on chinese products and limits into the u.s. expectations for the settlement with kim jong-un. he says it is just the start and he can't be optimistic yet. the envoy team will boost the administration. the team is skeptical about whether he is serious about his nuclear program.

david: thank you so much. today the story is all about gary cohn but tomorrow, the focus goes back to central banks. still with us is jim from morgan stanley. mike, i will start with you. there's a great piece that -- may want to go softer. are we expecting to be a little bit dovish? >> only in comparison to where we were a couple of months ago. in september, a. but now they are talking about going through december which is the most likely outcome. and the reason is probably number three. i have a chart here. -- the economic surprise group. you can see at the end of the

year, the hawks were ascending on the ecb board as a talked about ending things sooner. but now it looks like the euro zone economy is slowing down. not terrible but slowing down and giving them reason to be more cautious. italy is probably not a major impact at this point. david: there was a time when we had people say that what the ecb does is drive on the long end of the curve. when we look at tomorrow's meeting, what i focus on is whether they mention anything about asset purchase programs. probably in the fourth quarter of this year. to the talk about raising interest rates? probably not until 2019. so everything between there is telling me there is a lot of supportive policy for the eurozone for most of this year and into next year. so in terms of what that means

in terms of asset prices and european bond yields, bid.g relatively well i think that is the case. the ecb is there as a backstop and i think that is the central message we have to focus on. we saw going into the election was that we wound up having yields on corporate credit. yielding less than what we saw in the sovereign market. of a slow ecbenon remaining? how do you play that? and io think it remains think we have to be careful. part of this is about supply. the supply of a certain sector of bonds and most tend to be a little bit lower. so i do think that with the asset purchases that the ecb has been doing, it has shown to be extraordinarily supportive. and they are getting international buyers. you have dollar buyers.

and that is picking up the extra yield from the currency. all of these are supportive factors. so i think mario draghi is going to marks the european economy for the market and say, here is where we are. we are on course and he is really not going to try to make more headlines than that. alix: we are failing today. normally we are good. it is my fault. my fault. you go. ok, fine. i will go. if you take a look at the big question for the u.s., the question is whether they will give the fed more breathing room. what about in europe? to remember it is a concept and not a reality. you are never measuring it exactly. but with the economy getting

stronger, the issue here is that no one is talking about and i am surprised that you haven't night,ed it is that last -- said there is a possibility that are star is rising. and there may be four rate hikes this year. suggesting that with the economy getting stronger, that is a possibility and she was seen as the dovish person on the board. so the fact that this could lead over into europe, the story is that the global economy is getting stronger and central banks are trying to mark the market. >> at this point, we are trying to move ourselves into an economy. and i don't think that the appetite is high-risk translating into higher inflation. inflation should start to rise and mathematically it will rise.

point that up a good this is a hotly debated topic on the fed at this point. so what is the appropriate number of hikes on the fed? three or four this year? the powellke after testimony, it could be moving towards the four camp. getyield curve could flatter and flatter and does that signal to the fed? all officials i've spoken to on this topic is that they don't factor in the yield curve. it is just noise for them. the market takes that on as a signal. so we hear from now, the fed can continue to move higher and what do they do with a flat yield curve? it is and our forecast but it is something we need to prepare. >> they are not looking for that yieldsen right now but

rise so that european money comes here. >> from a market practitioner stamp way, it should come in and this is a topic we should talk about more. they you for spending so much time with us. great to have you. coming up, senator johnson will be joining us to talk about gary cohn's white house departure. today, listen to the radio with that is onnd bloomberg surveillance. hear them in new york or boston or the bay area at and across the united states on sirius xm radio. this is bloomberg. ♪

daybreak.""bloomberg i'm in the hewlett-packard and price green room. coming up, the goldman sachs chief economist. alix: -- david: republicans have raised serious questions about the steel and aluminum tariffs and gary cohn has left apparently in response to the plan. we welcome a republican senator ron johnson coming to us today from the capital. thank you for joining us. start with those basic questions. what do you think the right answer is? some countries, including china, don't play fair.

a trade war -- what is the right answer? the president says he enjoys conflict. markets don't like conflict and investors don't like conflict. investors don't like conflict and i am highly concerned with this of ministration's move that could spark a trade war. the president says we could win a trade war. i don't think anybody does. globally butem from my standpoint, they are looking at the wrong metric. $2.3ld much rather export trillion from america and tolerate a half trillion dollar deficit. i think trading activity is good for the global economy and the american economy and the american worker. so i am highly concerned about

this administration steps that they are taking on tariffs. what hope do you have that president trump will rethink? kevin cirilli has been interviewing secretary ross who said that they are trying to view it as a surgical approach particularly with canada and mexico in concerned with what will happen with canada and mexico. do you have hopes that the president might change his mind on this? when i interviewed wilbur ross prior to his confirmation, that is the step he was taking. that there are things we need to address and that china is the primary problem. we do need to target that. let's not throw out the baby with the bathwater. canada is aize that valued ally. there is no national security risk importing steel from canada.

so i'm hoping this administration tales this specifically to address the real abusers and hold harmless our allies and trading partners. the fact that we are the world's largest market. suppliers treat their customers well. that is a foreign-policy tool that has worked for us and recently in open markets for the rest of the world. david: address that point. one of the points we initially made is that we don't import much steel or aluminum from china at all. from canada and brazil and mexico and places like that. why go to war with canada and mexico and brazil when many agree that china is the big problem. let's hope we are not going to war with them. target the real abuse and let's

strengthen our relationship with our allies. it is better for america and american workers. wisconsin we have a trade surplus with canada and mexico. to see us reengage in terms of cpp. i don't want to have america left out of the world marketplaces. so i think the attitude is hopeful about the president will listen to the markets and members of congress who have real concerns about what he is talking about. beyond the bully will put you have with your fellow selling as is, how much power and influence to you have? act onsident wants to and cane provision act you stop them? or do you just have a conservation role? there is a difficult argument to make that this is really a national security concern and

our largest supplier of steel comes from canada so that is a reliable partner. hasrtunately, congress given away because traditional authority to the president on trade. i think congress has given way too much authority to the president and i think it is time takeart demanding that we the authority back. david: have we come to that that thereou think is enough concern over the growth benefit on jobs back here in the economy. can we take action and take back the constitutional authority? >> i'm not sure. free trade hasn't been politically popular. hoping the american public takes a look at the market's reaction to this type of trade rhetoric. maybe we can come to our senses far too mucheen

authority when it comes to trade and tariffs go to the president. theeed a negotiator but in case of agreements and trades and treaties, congress should have a say. them and be approving not giving the president unilateral authority. david: thank you for your time. that was set of a ron johnson joining us from capitol hill. we join now to kevin cirilli who just spoke to over ross. tell us what you learned today. kevin: i just spoke to wilbur ross who told me off-camera that they were "trying to do a tradeal approach" to the tariff policy. that is something that republicans on capitol hill are advocating for. paul ryan advocating for that as well. human on to tell me that if the president indicated we could work something out with canada and mexico, they will be exempted it isn't inconceivable

that others could be exempted on a similar basis. suggestingy ross that other nations could be asmpted from the policy criticism mounts around the world and within the republican party. david: i find this puzzling. they are trying to do it president has the no limit on power. if he wants to do that, what is he waiting for? is what a lot of folks are wondering. last night i spoke to republican house members who say letter is being circulated among colleagues urging him to reconsider. another told me that gary cohn's resignation is just the first other potential negative impacts this could have should the president continue with this. on the flipside, i have spoken with sources who are in line with president trump who says this is an open negotiation bid and he is trying to bring

bilateral trade agreement. dave kobe don't have language yet. the president says it is coming. that'll tell us more. when do we get that? kevin: the fact that we don't have language is that sign that the president is in the working mode of policy. that is what he said yesterday in the press conference in that he would like to have a policy with aand have that go final policy decision. so it is a sign he is still working through this and hasn't arrived at a final conclusion. it is we haven't seen language. we have just seen a lot of activity surrounding potential language. david: thank you. great reporting there. check onl: let's get a the markets. an hour and change until the open here in the u.s. we did have mix to data out earlier in the u.s..

adp came very strong. private jobs up like to a 35,000. up 2.5abor costs are percent. we also had a trade balance that blew out again. imports were weaker. so the trade deficit was not helping markets. strong jobs are helping to sustain and the labor cost is increasing. what does this mean for margins? thether asset classes, dollar-yen is down. a mix to dollar story in the g10 space. u.s. yields are down. the part -- despite corporate supply coming down. joining us now is michael low walk. what do you do when you come in today? are you buying? don't think people should be buying the dip today. we have had volatility in the past month and the reason we are

dipping today is another step in the direction that the market doesn't like. it started earlier in the year when we had tariffs put on washing machines and solar panels. particularth this set of tariffs for steel and aluminum, you see the one globalist left in the white house, ready to exit. we are not heading in the right direction for markets. alix: we are not seeing gold get a real bed. where is the safe haven bid? now think the concern right is not so much this particular policy debate and the steel and aluminum tariffs, it is the fact that gary cohn has a view that is very different than most people in the white house in that when these policy debates that kevin just talked about, how important they are, when they came up, he came out on the side that most people in markets

feel comfortable with. so i don't think is a portugal so much be felt today. it will really be over the next year or two. a you need to have someone in .he white house policy debates in the future are going to be very one-sided. do you believe that gary cohn clearly had that much influence? he didn't change the president's mind on that. do we change the course of this presidency in this? he did.nk i think you probably provided some restraint. the president has changed course and move toward the protectionist measures.

i do think there was some restraint in the past and kept the president on an even keel. so if you are not buying the dip, how are you position today? >> i think you will intentionally see people -- you can't buy treasury bonds because you will see people move towards more defensive type assets like gold, cash. -- the assetuch allocation is protected should we see further volatility coming in the market. alix: we really appreciate your insight. this comes at an incident time. we have jobs data on friday and the ecb.

what does mario draghi have to do? to give him more breathing room? i certainly can't get in mario draghi's head. whether it is the italian can'tons or trade talk, i keep my powder dry -- so to speak. on the lot of emphasis jobs number. will wages hold up in february like we saw in january and what will the market reaction be? david: i want you to get back from houston through this storm. coming up, more on here he parch or at what it means for the market. this is bloomberg. ♪

>> 30 minutes until the start of trading. this is the countdown to the open. ♪

jonathan: coming up to much gary cohn exits the white house -- coming up, gary cohn exits the white house. protectionism gripping the administration, considering new curbs on chinese imports. equity futures are lower, havens in demand as treasuries rise for the first time in four days. the markets just 30 minutes away from the open. futures down seven cents of not percent, euro-dollar up 1/10, -- 7/10 of 1%, euro-dollar up 1/10. futures pointing to another day of losses in the united states e departure of gary cohn leads to increasing concerns of trade war. >> don't know where they find a replacement.