cap is at record highs. markets say an important crossroads as investors are said to digest retail sales later this week. ji forever. all xi all the time. david: welcome to lumber daybreak on this monday, march 12. xi forever was my headline last monday, and it is my headline this monday. goldilocks, s&p futures are up. close at a record high friday. in the currency markets, the dollar is a tad mixed. we are getting supply coming on the two and three years today. there is a lot of chatter about headline risk.

down 0.6%. forall, what does xi mean growth? david: in our morning briefing this morning from we are talking about u.s. treasuries selling $23 billion in three your notes and $21 billion in 10-year notes. we will get cpi data at 8:30. wednesday, we get retail data. first, tariffs, and then why you have tech at record highs. you have xi for life. david: let's go back to those tariffs. joining us now is gina martin adams.

we heard from senator warren over the weekend saying she doesn't think tariffs are such a bad idea. a lot of democrats taking that position, but republicans more skeptical. >> house speaker ryan specifically urged donald trump not to propose these tariffs. it is gop orthodoxy. when it globalists comes to trade. it is sort of cats sleeping with dogs. you have democrats supporting president trump and republicans opposing him. alix: my favorite quote ever. david: to illustrate what you are saying, let's play what elizabeth warren said. >> i would like to rethink all of our trade policy. when president trump says he is putting tariffs on the table, i think those are one part of

rethinking our trade policy overall. david: to continue, there is one big dog who lives at 1600 pennsylvania avenue, does it matter what democrats or republicans say? >> has been talking about this -- donald trump has been talking about this issue of tariffs for decades. you should not be surprised because he has been saying this for years. it is an emotional issue for him. he is going to follow through. alix: this leads me to the technology question. you can see the outperformance of technology in february on that top line. we talk about headline risk, this does not say anything about headline risk. think this is reflective of the reality of the situation so far, the tariffs are extremely narrow.

if this becomes a broader issue and becomes a trade war so to , itk and moves to china becomes a bigger technology issue. technology trade is a huge part thehe entire sector across entire region. that is not what we are seeing so far. the market is not reflecting what aspects of the market are sheltered so far. technology is actually sheltered. technology does not have higher steel or aluminum costs. we are seeing accelerated earnings estimates for these segments. talking about strengths, this quote on the dexcom markets are in important crossroads. the vix closed at a high today, an important breakout. i am skeptical. new think we are in a

volatility regime. the more is the policy shapers try to do, the more monetary policy makers have to react. that doesn't mean the bull market is over. stocks can rise at the later stages of the bull market, but perhaps we have moved to a new phase and a market with very different characteristics. david: how much of that volatility comes right out of washington? involved.s risk speaking of tariffs, donald trump has said the next phase of his war on trade is going to be intellectual property. the technology sector seems to have completely ignored that. he needs china to help them on north korea. all of that is in the mix. he said he is going to impose some restrictions because of

intellectual property. really, during most of donald trump's first year, there has not really been a great deal of connective tissue to the they ask. -- the vix. it does now. david: the one place there is not much volatility is beijing. over the weekend on sunday, the people's congress voted officially to say there are no longer term limitations. i think there were three dissenters in the 3000 votes. i wonder who those people are. >> you will never know. alix: they are already swept under the rug. theme thatstandard china does not think in terms of years or decades. it thinks in the span of history. for them, not having term limits

is really an extension of their whole philosophical approach about life. they think generationally, not just year-to-year. alix: it is a broader question, if we end up with a slower china, what does that mean for global growth? about china's credit. can the markets adapt to a slower china? >> i think they have been adapting to a slower china for the last two years. if you take a look at the chinese equity markets, the biggest gainers are no longer the commodity sensitive sectors. migration.dence of a it has become a more technology focused index. most of the indices in china are technology focused. they are very financial and technology-heavy. that is like our markets.

that is different from the china we used to know. if you look in terms of trade, china is a very different growth engine than it was five or 10 years ago. that is starting to be reflected in the economic data. china intercession is something we haven't seen -- in recession is something we haven't seen. does this become something greater? i would say most of the desk just's it might be greater for a while, and yet we considered to proceed. i don't think china is a tremendous risk right now. we can absolutely absorb slower growth. there are a lot of question marks. if we have a war on intellectual property rights and trade wars with china, that is very different. that could be a bigger market driver in the near term. alix: thanks very much. great to see you on this monday. coming up, more on china and

emerging markets. hoganl speak with art with b. riley financial. this is bloomberg. ♪

>> this is "bloomberg daybreak." rangex has set a price for its ipo. the filesharing many plans to sell 36 million shares for between 16 to $18 each. dropbox has been privately valued at $10 billion. deutsche bank plans to raise up to $2.2 billion in an ipo of its asset management unit. that is seen as a key part of

its turnaround strategy. blankfein wants to cut 6000 jobs in the retail unit by 2020. the bank is counting on voluntary departures and natural attrition. innogy inreed to buy a complex acquisition involving shares. renewablewn the generation business and a large stake in eon. alix: china's parliament has officially voted to repeal presidential term limits. take a look at this chart. this is since xi took power in march of 2013. equities rising 63% on average. art hogan joining us. do you want to buy china on the

xi forever world? art: that is interesting. i had not thought of it in terms of investing there. one of the things we think about in china is that their currency continues to be artificially tamped down, and they put themselves at a competitive advantage in global trade and how much that could change in the next 12 or 24 months. i think the steel and aluminum tariffs are the beginning of a larger battle the u.s. government wants to have with china, whether it is intellectual property or with the wto, and i would guess that will cause turbulence in china and the rest of the world. my guess is it is less about the leader is forever and how much they can adjust to fair trade policy. xi has saiddent

he really wants to open up markets in china. if he is right, will that affect the currency? it is hard to affect a currency that is pegged at that low of a level. what they really want to do is complete this once in a generation change from being a producer of cheap goods to a net consumer. that has taken years and decades. what is at risk is the credibility of the regime in terms of what they are doing by controlling the currency and keeping it so low and being anti-competitive in a global marketplace. david: one thing we know is they don't like uncertainty. they like certainty, including with president trump and on trade. proposed trump has figuring out a way to get the trade deficit by $100 billion, just get it done, and we will leave you alone. does that appeal to them? art: interesting concept.

the problem with all of that is talking about budget surpluses and deficits and making sense of that economically. framing this discussion around exactly what our budget deficit is with china is one way to look at it. you have to look at a totality of the capital flows. you want to look at how we can make trade warfare. how can we open your markets more to u.s. goods and services and therefore have more fair and balanced trade. it has nothing to do with trade deficits and surpluses come which is a silly way to -- surpluses, which is a silly way to think of this. there is no economics behind that logic. alix: when it comes to the broader conversation around china, credit to gdp is obviously rolling over.

if you want up having a china to slow and not go overboard with china, what does that do to global trade or regional trade, and how do you invest with that? art: that is a function of how much china comes to a realization that they have too much debt, they have gone too far down the road to support this 6% or 7% gdp growth where their demographic might be marked close to -- might be closer to 4% or 5%. markets have a chance to get back into the game, like india for example. if china was too slow a bit, i think india picks up a bit in the global trade picture. obviously, in the developing, china is the largest player, but if you look at the u.s. currency, developing markets are

probably extremely attractive now. when we think about a global central bank synchronization in the summer, you have the opportunity for the dollar to stay where it is in the 88 to 91 range on the index. i think that helps emerging markets in general. david: there was a time not too long ago when there was a linkage between china and emerging markets. how china went, thus went em. are they de-linked already? can they stand on their own two feet? art: there is an issue with which you try to make that correlation at a point in time where china is slowing down. that all has to do with the commodity demand that came out of china. china has reached the point where that super cycle has been behind us for two or three

years. we see the demand for those commodities in emerging markets around the world has been picked up from other global players. china extent that as goes , so goes the rest of the world, that has broken down the bit. i don't think in 2018 2019 you can see china ratchet down growth and not have a devastating effect on global trade. investorsing up, are bracing for inflation to come roaring back? at least one indicator says they are. this is bloomberg. ♪

david: inflation remains the focus or markets with cpi data tomorrow and pbi and retail data coming up later in the week. should be worried -- we be worried about inflation at all?

i am bringing up a chart, there you go, core cpi numbers. b.t hogan of the riley -- riley financial is with us. corporate financial is not going up that pass. --: the closest think we can thing we can get to as the fed looks at this later in the week t 1.5%.ing at pce a should we be concerned about inflation? yes. imminent?he -- no. we need this market to grow. we don't need to have those fears that we extrapolate into runaway inflation. that happened in the january jobs report. that did not happen in the last jobs report. it reversed a little bit.

we would like to see a modicum of inflation. it is important for growth. i don't think we should be concerned about it. out, we have a lot coming a three-year and a 10 year, and a 30 year, do we test 3% this week on that supply? art: that is a great question. , whatas been the gobi man happens -- the bogeyman, what happens at 3%? we will have to get used to a very large schedule on a monthly basis of treasuries because we have a much larger deficit. part of that concern is that will push prices down and yields up. that could be some problem for the equity markets. into 2.85 a settled nd 2.95. i don't think that is the concern.

the concern is when we get to 3%, treasuries get more attractive, and i think there is a lot of nonsense in that argument. david: there is a new bloomberg and column today about tips maybe we should be more concerned about inflation then we are. thank you for talking about this. we have a chart now about inflows into tips. it is a spike. >> it is unprecedented. it is so noteworthy. of yoursommentators have suggested, there is no sign inflation is accelerating. even the fed has been reassuring on that front. why are investors suddenly acting up? wehink the answer to that is have seen this motion picture before. it happened at the early part of the century. we also have a big tax cut coming out of a much milder recession.

well.ficit started to we went from surpluses, the only topluses since the 1970's, deficits, ever rising deficits, and the financial system got overheated. alix: does this actually correlate to higher inflation? >> not necessarily. it does suggest anxiety is going up. what you saw in the first eight years of the century was a big spike in volatility. it started to accelerate, and that makes investors very comfortable because wonder there is a lack of certainty and more uncertainty, people look for protection. tips became a refuge. we are seeing almost the same thing now. david: is it a different motion picture? we have reduced apparent

bargaining power on labor, which might be suppressive. might it be different this time? >> it could be different. we are seeing greater imbalances. you are getting a bigger budget deficit as a percentage of gdp. at some point, that will make investors much more uncomfortable than they already are. that is the same as what we saw at the beginning of the decade. inflation is going up. it is not going down. he did go up substantially from where it was under clinton to bush. it exceeded 3% by the time we got to 2008. alix: we also want to talk about why it could be so important. this is the real yield for 10 year tips. we are flirting with heading that 3%. that is where we have real implications for the economy. >> everything is great right now, and the time to think about

when everything could go wrong is when everyone is feeling great. that is historically what the fed is supposed to do. when everyone is enjoying themselves, you take away the punch bowl. alix: goldilocks, we will be talking about that for a long time. thank you for joining us. art hogan will be sticking with us. up, goldman sachs about lloyd blankfein. what would that look like? what would that mean for revenue opportunity at the bank? we will talk about that coming up next. futures higher, yields go nowhere, dollar confused. yields staying under 2.9%. this is bloomberg. ♪

alix: this is "bloomberg daybreak." the word you are going to hear this week's goldilocks. s&p futures up by about eight points. about 88.up by

markets did not seem to care about tariffs. it was all about that goldilocks jobs report. we get $150 billion worth of supply this week. the question, will we test the 2.95% level on the 10-year with all of this supply? euro-dollar going nowhere. not a lot of catalysts coming out either. watch for the report from the eurozone. copper is off, and aluminum getting hit as well. forever world coming out of china. do we have to rerate certain asset classes because of that? we are talking about that. david: talking about what is going on outside the business world, kaylee is here. >> good morning. president xi jinping is set to stay in power indefinitely in china.

lifted presidential term limits, allowing president xi jinping time to centralize control of the chinese communist party. in new york, all five passengers were killed when a helicopter crashed in the east river. only the pilot survived. police and fire department pulled the helicopter from the river. in the u k, the poisoning of a former russian spy is putting pressure on theresa may to act. blame russialicly for the attack as early as today. she is also drawing up plans to impose sanctions on russia. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am kaylee line. this is bloomberg. alix: thank you. blood like fine -- lloyd blankfein has not set up the timeline for his departure.

longtime executive harvey schwartz and solomon are widely seen as top candidates by the end of the year. this is what the stock did, that dip lower immediately on the release of the story, and then closing higher 1.5%. joining us now is erik schatzker and art hogan of b. riley financial. i want you to outline the personalities behind this conversation. lloydof course, there is blankfein, and if we make the presumption that he is on his way out at some point, that is inevitable. let's say within the next 12 months. how deep is the bench goldman has to draw from? it is reasonably deep. the copresidents from back in 2017, and according to the journal and conventional wisdom,

they are front runners. lloyd blankfein was copresident before he became ceo. you have met harvey and solomon. solomon has a reputation for being more outgoing, harvey for being more reserved. that is a character that cannot more strongly when he was cfo. he was very buttoned down with investors. neither of them, and it is interesting given the history of goldman's leadership, are lifers. he went over to bear stearns and did not join goldman until 1999. alix: when i asked about succession recently, i asked about a co-ceo opportunity.

>> i have been ceo for 11.5 years now, but my predecessor started off as co-ceo. firm has had a long tradition of co-ceo's. that can work. it doesn't necessarily have to work. i would say it is not a guarantee. that is something the board would work out. that?any timeframe for >> we are closer to that then we were yesterday. alix: anyway, the idea is not ruled out. i find that interesting. erik: let's also point out that lloyd blankfein is 63 years old. it is becoming trendy on wall street to say you're going to retire before your 65. -- you are 65. do you have any idea who the

last wall street ceo was who stayed on longer than 65? alix: no. he knows everything. erik: i had to check. i thought i knew. i was wrong. turns out it was jimmy kane from bear stearns. one bear stearns burst into flames, jimmy kane was 74 years old. beyond jimmy kane, sandy weil was 70 when he left citigroup. rare.exceedingly leaves before 65. beforest everyone leaves 65. sometimes the board just decides they don't want to much greater around the table. -- gray hair around the table. here is a quote from james had in conversation we 2017.

leadership in this organization is probably the most important thing to focus on. too often on wall street, leadership changes happen around events. something goes back, the ceo steps down. they are very event driven. that is the scenario every wall street ceo wants to avoid. unfortunately, many of them haven't. the victim of his own flaws or from b of a, same john stumpf with missteps, neither was dick fuld and. david: i am not going to ask you specifically about goldman sachs, but to talk about banks generally and where goldman sachs is in that cluster. banks are looking up at this point. this is a good time for transition because the climate is better. art: i agree with that.

when you look at financials in general, you have tax reform, which helped them more than the average s&p 500 company. you have regulations cutting through 2018. in 2008, when things were on the downswing, you are looking at have -- issues, now you morgan stanley went to the financial advisor route of things. i think 2018 is a great year for financials. alix: if i take a look at what goldman was under blankfein and what it will be in the next five to 10 years, it could potentially be more about markets, lending, more cross-selling on the street as well. walk me through what you see as

the significant changes. >> i think we have to think about the management and then the environment. i think goldman at its core remains focused on the institutional business. it is a company that has always done well in their banking franchises. obviously the trading franchises have gotten a lot of scrutiny recently because of the extremely long cycle with low volatility. i think that continues to be the core for goldman. they are adding things. as different businesses in different markets have matured, they are also focusing on new markets and creating opportunity. are their first foray into the retail business. they think they have some competitive strengths there. we will see if that transfers over. even though they are growing rapidly, that is a small part of their business. that is probably the biggest change for goldman sachs under

lloyd blankfein. coming back to risk management, that is the one thing goldman has done very well over the years. it is a consistent part of their culture. it is something that helped them throughout the crisis with having a strong culture and consistent management. that will drive them going forward. alix: the first thing we will talk about with harvey is risk management. people think of harvey as being a securities guy because he was cohead of global securities before -- this goes back to the mid to thousands, he started his career at goldman in investment banking. is another thing he will you sayou of every time david is the banker and you are the securities guy. he will say i started here in

investment. dilemma? they have a as soon as they name a succession plan, when are you leaving? you are either too early or too late. obituarying my own prematurely. erik: our own reporting at bloomberg has established he has not had conversations about his departure with fellow senior executives at the firm, which doesn't mean these conversations haven't taken place in the board room. they are supposed to. the mere fact that it has not been widely circulated suggests that at the least either lloyd blankfein isn't on board with this plan yet or it is still confidential to the board. why? because that makes lloyd blankfein a lame-duck. alix: for they are not ready

yet. talk about investing in a company, how important is the issue of succession? would you be more apt to say hands-off? art: i think you framed that perfectly. you have to have a succession plan, but as soon as you say it, you feel it has to happen tomorrow. i think with goldman sachs, when you have a surprise resignation, the ceo leaves suddenly, our rule of thumb is to sell now and figure out what is happening later. andd: erik schatzker thousand williams and art hogan him a thank you for being with us. williams, and art hogan, thank you for being with us. you can listen to us on the radio. listen to our colleague tom keene. bloomberg surveillance can be heard in new york, boston, the

bay area, and all over the u.s. this is bloomberg. ♪

>> this is "bloomberg daybreak." next hour, even kathleen gaffney, eaton vance director of diversified fixed income. ♪ now, your bloomberg business flash.

according to people familiar with the matter, spotify will deviate from decades of common practice by not issuing any new shares in their ipo. shares of the largest bank in the middle east jumped today. it rose most in eight years after the nazi plans to almost double its foreign ownership limit. it will raise foreign ownership limits from 29% to 45%. according to the wall street journal, intel is considering a bid for broadcom. the journal says intel wants broadcom to fail because accommodation with qualcomm would make it a competitive threat. david: we will turn out to wall street, where we cover three things straight is buzzing about this morning. a new player in the qualcomm summer, intel is mulling a bid

for broadcom. issues thatk partial ideal of its -- business. trying to raise $1.25 billion by going directly to debt investors. picture is kind of the best. that was a good picture. >> kind of like a cat who ate the canary. alix: let's talk about intel. to make the saga more complicated, qualcomm buying nxp. broadcom.ants to buy intel wants to buy broadcom. erik: investment bankers are like give me some. this is obviously teed up to be the existing deal, the biggest deal in technology history.

intel reportedly coming in and saying maybe if things start to ky, we coulde han jump in as a defensive play. the broadcom and qualcomm deal itself seem to be going kind of smoothly from a shareholder perspective, but the government is saying that could be competitive concerns. they're trying to assuage those. april 5 is the date. intel is obviously just being smart here. intel was fairly quite when asked him -- coy when asked about it. we will see what happens. deal,rama around this which does not seem to be going away. david: it would not be a week at bloomberg if we did not cap john cryan. they have said they are going to do this. they're going to have a

partial ideal. erik: this is in unmitigated win for cryan. they said they wanted to do this. valuation according to some folks bloomberg news talked to is ok, has room to run. it could be higher. a little over $2 billion, it obviously sets the asset management unit up. david: it is costs going up. saying of the weekend they are cutting 6000 jobs in retail. that is a big cut. >> this is part of a pretty hasive overhaul that cryan had a lot to do with. the other thing with this asset management unit is they sold a piece of this unit to nippon, which will give them a toehold in asia. uber.now we are going to

they are excited about the qualcomm tie up in terms of m&a, investment bankers salivating, but not so much when it comes to uber. >> they come to new york and try to raise some debt by going to investors directly. they go around the bankers. all of these guys are showing up, and they get there numbers presentations handed to them, and then dara comes in with no tie and starts rolling it out. you can't take the company out of silicon valley, but you really can take silicon valley out of the money. this company makes no money. alix: i want a $1.25 billion loan, is that cool? david: they have $5 billion in virtual cash. pro-forma cash. what is pro forma cash? >> i don't think i can buy you a cup of coffee with pro forma cash.

i love this line cap what makes uber atypical is its lack of earnings. alix: a good one. you are looking at paying for it in order above liable. that seems to me to be a crazy number. >> i would say uber has found expectations in the past. we will see how this plays out. the new ceo is obviously making a passionate case about there is a growth story here, that he has cleaned up a lot of the cultural and structural messes that trevor kalanick left behind. david: it is march. march madness. >> oh, yes. alix: i have to pretend to care. david: my michigan wolverines are looking good. >> it is a wonderful time of year. we are excited about this at bloomberg because we have charity brackets, brackets for a

cause. jones,allmer, paul tudor very excited because he is a uva alum, and they are the number one team. mindy grossman, ceo of weight watchers, they are all playing. they take $10,000, selected cherry, and the first, second, and third place winners, money goes to their charities. one thing we are doing, if you come in dead last, you just have to write a $10,000 check to your own charity. just because people, friends of the program, they wish they could have done something out of that humiliation. he has assured us, he is not coming in last this year. david: this is a paramount of money going to charities. we are talking roughly

$400,000. not chump change. alix: we were in this meeting saying, uh-huh. david: ok. vicki so much. great to have you. -- thank you so much. great to have you. facing pressure to resign over allegations of paying to tamper documents. alix: check out tv . you can watch us online. you can interact with us directly. check out tv on your terminal. this is bloomberg. ♪

david: this is what i am watching today, big scandal over

in japan, which is a little company. the finance minister is in trouble and may have to resign as there appears to have been the sale of land to a school that is ultranationalist. the name of shinzo abe and his wife were on the document, and they came and took them off and came to the finance minister. it is a big scandal. known is sure why it happened. the yen strengthened because the abe haveif taro azo or to leave, it would take away some of the monetary and fiscal policies that have actually weakened the yen. alix: you could argue that the markets were a little more immune index monetary policy matters more than the finance industries. even though mr. broda was more dovish -- karoda was more

dovish last week. david: even though they have worked together, the monetary and fiscal under abenomics. alix: didn't he say he is never resigning? david: he said he is staying. the people who seem to know save this doesn't mean abe is going to leave right away, but it could make is 10 year shorter than it otherwise would have e shorter than it otherwise would have been. up, ben laidler of hsbc securities and kathleen gaffney of eaton vance. 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. takes on terrorist.

some support tariffs, some don't. markets don't care. goldilocks strikes back. markets are at an important crossroads. china ties its fate to one man. >> welcome to bloomberg. >> the word you have to note the goldilocks. s&p futures up by seven. the euro -- the dollar goes pretty much nowhere. when everyone is going to be watching is what is going on with the 10 year yield. tons of supply coming out, particularly today. it could be dicey. 2.5%we be breaching that

level? longer,lly slower for china economy. what does that do? what if we didn't have the i do not know what we would say. i been trying to think. fed president speaks in miami, at 1:00 the u.s. treasury will sell $28 billion in three-year notes. the u.s. treasury then releases the budget statement. treasury and eco-dad at, three-year auctions and cpi data tomorrow. favorites,ersonal you mesh consumer sentiment. us, kathleen, want to start

with the auction today. there is talk about the risk thing monday, not a good did to cover. the 10th cover. >> all eyes will be watching how this supply is taken down. we have seen diminished demand come down. it is still able to keep the study. i do not expect anything surprising, but it has everyone's attention. alix: what is surprising is the reaction to the market, which is now you're seeing a little bit of a flat in her. does that make sense? kathleen: we are on a path to normalization.

i think there is going to continue to be a lot of back-and-forth. we will see some flattening and steepening depending on how much demand is coming in at the long end and how much inflation data we are saying which could move the short end of a year from now the direction is we are going to see higher rates and a flatter curve. david: i want to ask what effect this has on at wendy's. -- on equities. fears other hand you have of inflation. >> it is important. why are equity valuations so relatively high? yields moving up definitely one reason why valuations have come down. one of the things we are not that bigbout, a lot of

valuation premium we were discussing and worrying about has gone. there is a small premium, but it is 12-14. is it going to stay? is it going to stay? i am skeptical. what do you think? >> that valuation was always going to happen. want yields were always going to go up. we think to 90 is the top here. we have both flattening took him. 20% number coming out of u.s. equities, which is incredible in the cycle. that is a big buffer to multiples. you still make overall money in u.s. equities. david: what about the volatility in rates?

we saw volatility when it shot up today. has it settled down now? it seems to have settled down a bit. the market is waiting to see more evidence of higher inflation data. that may not come this week, but when i look at how tight the labor markets are, and wages have been picking up come you look at the expectations for the equity market and what is likely to flow through with the tax cut. growth could surprise with those tight labor markets. that sounds inflationary to me. we are not so sure what is going to happen with the tariffs. inflation is likely to rise and i think will pressure yields to break through that important 3% level. alix: you mentioned valuations but are you being compensated in certain sectors?

come inside the bloomberg. yield,regate dividend bang in line with the 10 years trading. yellow is operating margins falling, trading off earnings per share. that is basically what the thesis is. what do you think of that? >> i like these stocks right now. environmenta good but what has been supporting isse steeper curves i think beginning to top out a little bit. top forelieve it is a the 10 year yield, inflation is going to continue to lag, these are the most upset markets. i think that is an opportunity. the credit about

markets? >> we've got a bit of a risk on tone back on in the market with the goldilocks environment here. pretty well credit bid for but not necessarily tightening and not necessarily widening. everyone is watching to see what is the next move. tiger wider? -- tighter or wider? with spreads so tight, those are expensive right now. knowing they are facing tough margins, we are seeing the market get nervous about activity.m&a lots of things to watch.

right, both of you will be staying with us. china ties its fate to one man. what it could mean for equities and bonds coming up. this is bloomberg. ♪

>> this is daybreak. dropbox has set a price range for its ipo. the two cell 36 million shares for 16-$18 each. at the high-end they would have a market value of $7.1 billion. the company is selling would hundred million dollars in stocks and a private placement. the executive chairman of the world's largest the muggle

company is stepping down. andrew levin woods will give up .is role he will be replaced as executive chairman. splitpont is planning to into three different companies. -- that is your bloomberg business flash. david: china has amended its constitution to do away with presidential term limits. president xi jinping can rule forever. of 2013.ower in march it has risen 63% on average. now, right here in new york, i will start with you.

you have a positive outlook on china. tell us why. marketa is the best bull equity in the world. that continues this year. gdp is going to continue to surprise, which is always looking for this fade. what other possible headwinds to that? >> china is a pretty closed economy. it is the master of its own destiny. we have the party congress over the last few days or so reiterating gdp growth continuing to cut back, leverage in china which people have been worried about has begun to come down. they are in control of their own destiny.

i think if those numbers stay close to what they are saying consensus is going to continue to be moderately surprised. alix: if you come inside the bloomberg you can see the credit and gdp ratio, we are off of the highs. if you get him forever you're going have stability in the market but that is still a slower growth. you think they have re-rated enough for that? >> they are beginning to take that into account. you have a global economy growing all around the world. this opportunity to slow a bit to ensure stability it is probably the prudent thing to do. a little bit of a slower china where they are focused on making sure they don't have a financial crisis, and social stability, which is really their focus. india is moving forward on

reforms. europe is doing extremely well. a lot of larger economies are holding up well. this is a good time to consolidate his power and let some of the steam out but not in a big way. stanley went from bullish to neutral. they say emerging markets are more sensitive going forward to changes in next journal factors like trade tensions and higher volatility. do you see that? >> i think emerging markets are probably the best spot to find good value in return right now. broad-based ast it was maybe a you are so ago. rising rates in the u.s. are going to impact countries that that arearge externals

sensitive to the rise in u.s. rates. turkey comes to mind. and south africa. there are plenty of other countries in latin america, brazil and the code that continue to do well. ish rising inflation that generally a positive in terms of trade numbers. they are a benefit for emerging markets. in many countries we're seeing inflation come down while it is starting to rise here in the developed world. david: where are you on this? >> we like brazil and next. we like china. the macro tailwinds have been strong. tois not the only reason like emerging markets. if you look at where investors are positioned, it's quite

surprising this far into the outperformance. >> aren't some more dependent on exports? therefore more sensitive to trade issues. >> some of them but the trade growth nearly 25% trade last year. trade is clearly important but there is a lot more going on. brazil is going have the biggest of any country in the world this year. the most degraded market in the world. more on will be talking trade later in the show. both of you are sticking with us. energyup, shares of surging. more on this megamerger, next. this is bloomberg. ♪

david: deutsche bank shares are up this morning. the initial public offering is art of the strategy to turn the bank around. stephen, is there any surprise to this? we thought they would have this partial spinoff. >> right. so, no, not really. that it wouldnt happen happened. it happened last year. we reported last year the valuation range will be between six and eight billion dollars. , the stake was known. no big surprises, but that they are actually doing it now is an

achievement for the ceo. that is the biggest thing. david: that is the most important thing, he said he would do it and he is. what you are saying? >> yes. the markets, they are influenced by the report we put out there looking to cut 6000 jobs in the retail unit until the end of 2022. and the bonus announcements, the management board will waive bonuses for a third year. all of that has influenced the share. referred to that earlier in the program. he came under some criticism because he said he was going to cut cost and has not done it. is this a surprise? >> i think it is reassurance for

the market. it was always clear they would not announce job cut's at the retail unit. ,he previous deutsche bank unit which they wanted to sell until last year and decided to keep an expected.synergy is the exact figure was not known until now. it is showing they are making good on the turnaround. alix: we have seen a lot of influence come in, which is different than you would have expected. walk us through that. >> i think that to your point they have seen inflows. been in line with their target. that is going to be key for the business, to get that acceleration. they have a 3-4% organic growth

target. they are well-positioned in germany. in thee well-positioned passive market as well. those are great assets. the growth has been lower than the three-'s 5%. we bank has said before that did achieve it so we think that is the right range. as we have seen, things have changed and flows have not been in line with historical highs that many managers. blackrock is the one company that has had strong growth. like european banks? we are neutral on european

banks. we are cautious on europe. earnings have one reason or another never really come through. with growth pete king, the euro being strong you are not going to see them do much this year. u.s.: do you like financials? >> it is focused on assurance in the yield curve, to the extent that it sits. people are ready own these things. >> there are two questions. is the tide rising or not overall? and where is deutsche bank positioned? move forward does with the plan what will distinguish deutsche bank and allow them to succeed against competitors?

>> the key has been this big restructuring they have had going on for several years. 2017 we had a tough market environment. what the company needed to do was regain market share. that is something they have committed to. even though they have made changes it still is the biggest driver of their earnings, especially fixed income trading. gameyear it is tough to that in a tough market environment. we did see stabilization in that fixed income business in terms of looking at relative performance versus peers. that is what the investors are looking for. the spit out of the asset management unit is something john cryan can do and say look, i am delivering on what i said i would do. this came a year ago when the

company raise their last round of capital. it is obviously something shareholders by into and feel strongly about. , there was a business run out and has done well since then. deutsche bank is looking to unlock the same value. >> the question we have all been asking for years, how long can john cryan keep his job? what does this do to prolong his tenure? >> i think it will help him. people say he has the ability to deliver on cornerstones of the strategy. deutsche bank has been trailing in trading and that is what most people are looking at. if you can't regain their, then people will ask important

questions about his future. thank you. you have some democrats supporting trump tariffs and republicans do not. markets don't seem to care. tech at record highs. more on that the next. this is bloomberg. ♪ feels like the goldilocks narrative is continuing. a falling rally in asia and europe. what i am watching is the 10 year yield. 2.9% is how we sit. week we will test 3%? this is bloomberg.

alix: this is bloomberg daybreak . we are looking at a positive open. tech closing at a record. dow jones up by two sense of 1%.

s&p above the 50 day moving average. the dollar a little mixed. you have some out performers against the dollar. the euro-dollar a little weaker as well. not a lot of positions being onen as we get supply coming in the treasury market. out.billion coming will we hit 2.95%? taking a look at the commodity sectors, if you have a china forever, whatx i does that mean? i have to wonder if that is what we see filtering through this space. say 38 people were

killed when a plane crashed cap mondayng at airport. the plane was a twin engine on a flight from bangladesh. in new york all five passengers were killed when a helicopter crashed in the east river. police and divers pulled the passengers from the wreckage. the helicopter had been chartered for a special photo shoot. and robert mueller investigation into whether president trump obstructed justice is almost finished. if moeller tries to bring charges in the assumption case the president might shut down the investigation. global news powered by 2700 journalists and analysts in 120 countries. this is bloomberg. is that theent up president is up and tweeting.

some might agree with him in congress. those might be democrats. warrend from elizabeth over the weekend supporting tariffs. usx what i would like to see is rethink our trade policy. when president trump he is putting tariffs on the table, i think tariffs are one part of reworking trade policy overall. now, with us, i love that idea, especially when you couple with the wall street journal article. >> republicans always been the free traders.

>> a democrat agree with president trump. >> we are in the alice in wonderland world. i am not sure what elizabeth worn means though. ttip, whichk to the is an interesting question? europesident is mad at but a trade deal that would have lowered european tariffs including on cars, he threw it out the window. where does anybody come down on this? a lot of talk is we're seeing traditional trump. he talked a big game and did nothing. he talked a big game on gun control, walked in that. then he came out with tariffs on steel and aluminum but is granting exceptions. does he really mean what he says ? maybe all this talk of what is

going to happen with europe and china is more talk than action. david: in the meantime there is chaos in the marketplace. when the president says something you are inclined to believe it. >> the real hard announcements have been lamenting. this is a global trade cycle. it has accelerated. if you believe the china trade numbers, they have gone gangbusters. alix: something we have not seen is a rush in safe haven. safe haven bids, neither of which we have seen. >> nokia we have not seen the safe haven bid and that is a real indication of the fact foreigners who have been big buyers of u.s. treasuries have

been slowly cutting back on demand. that has to do with the fact europe is going to be ending their stimulus program, and japan has mentioned 2019 as the year they start reducing they are buying. while it would still be there, we are losing important support. with what is going on fiscally in the u.s., we have seen the tax cut and budget deficits increasing. that is negative in terms of inflation and how that will weigh on the dollar. .oreigners see last opportunity if rates are going to be higher at home why not just go home? david: the president seems to say something and not follow through. isn't he following through? the discussion is us versus europe and canada.

awt -- a wto world. trade deficitst are bad, even he before he ran for president, he has railed against trade deficits with individual countries. it is a lodestar for him. the question is what he does about it. , theretarts trade wars is the question of if we could have this with steel. he could ignore the wto system and it comes down. that is what people worry about. in the short run there does not seem to be demand for bilateral trade deals. bluster and not something that is going to upset

the multilateral world we live in. recordech closed at highs. you can see the outperformance despite rhetoric about trade. you would think that is a big deal. the white line is tech. the bottom line, earnings estimates. the purple is s&p and the yellow is tech. do you think tech is immune? >> i like tech. i like that chart. it is clearly tied into this trade cycle acceleration. -- the lead earning indicators, that is still at a six year high. this earnings story continues to come through. services is by far the most expensive bit of tech.

opportunities are more in the hardware side. threate is one trade people are talking about as much as they are donald trump, the house and senate working on bipartisan legislation to give more powers to the treasury led group that rules on trade deals involving tech and military. if they can broaden that they will have congressional support. keeping china out of buying or startups and tech companies. that is something to keep an eye on. >> what about the debt or credit markets? >> in credit or rates? >> i'm assuming credit. are people saying i am nervous?

>> credit is continuing to be supported by the demand for the yield and the fundamentals in the u.s. are positive. i don't think you are saying that geopolitical tension move into the credit markets yet. valuations are tight. have themif you selling dead, and you have two heightened rhetoric does that impact the corporate market and drive things wider? >> i think it is more technical flow, if companies are repatriating cash you are starting to see selling pressure at the short end of the curve which is what is behind the flattening of the curve. a lot of that is pressure from repatriated cash already invested in the market and being

liquidated. that is weighing on the corporate market. take,i want to get your when do we break 3% in your mind? >> if only i knew. tell you.rtainly let's say it is going to happen in the next 12 months. how is that? , great to haveu all of you with us today. -- 2g up, to bankruptcies bankruptcies. turn into our colleagues. bloomberg surveillance can be heard in new york, boston, washington, dc and the united states on sirius xm radio. this is bloomberg.

♪

>> this is bloomberg daybreak. coming up on bloomberg markets, the former deputy white house chief of staff under president obama. now to your bloomberg business flash. spotify will live shares the week of -- will list shares on the new york stock exchange. they will deviate from decades of common practice not issuing new shares in the ipo. existing stockholders will offer

shares to investors. shares of johnson controls are rising. the company will explore options. controls offers air systems, building management and to solutions. elon musk's predicts the spaceship he is building for mars could make a test flight next year. sxsw that his timelines have been historically optimistic. >> thanks. two big bankruptcies in the news today, toys "r" us headed to liquidation and i heart media expected to file as soon as today.

i'm going to put up a chart now. on the i hearts story, illustrate the problem. above is their debt service. when you get that operating income below as you can see, you have a problem. >> yes. no kidding. it is a zombie ipo. that debt service, it is just their interest payments. they are spending more on interest payments than they are making. their debt load is unsustainable. david: usa this is a problem with the private equity folks, the underlying business is a decent business. >> i think the creditors would agree with that. but they can't make the necessary investment they need to adapt to new

technology and changes in the industry because they are spending money making interest payments. they have to go through a restructuring process so they can adapt, change and grow. alix: this is similar to toys "r" us. waye have to change the this works as the o's arrows are a thing of the past? >> absolutely. leverage has never been good at retail. 1980's, they the never wanted to have debt because it ate into operations. there are trends and different markets. equals, debt and retail if it doesn't equal, it is a good predictor of failure. david: why is it worse and retail? in anymuch debt is bad

industry be at retail, manufacturing, anything. gm and chrysler had a lot of debt also. margins are so thin. there is so much competition. look at the amazon effect. it is what the suppliers are willing to do. the suppliers are willing to give better product to companies that sell better. likeaybe you have things better toys going to amazon rather than toys "r" us. alix: in your reporting to we have to think of them differently? lastheart is one of the surviving beginning of the crisis era. we have seen almost all of those go under. i do think it is something people have to consider, that these companies can't sustain. alix: we are seeing huge debt

offerings. form?a totally different a huge issuance in the debt ?arket rather than lbo >> that depends on the company. they may be able to handle that. i don't know. they are facing massive competition from spotify, serious, pandora and they need to adapt. it depends on the technological advancements facing a company and whether they can make the investments to keep up with the times or they are falling behind because of that. david: how do you distinguish we have too much debt, we have to clean that up versus this report is coming to a conclusion?

>> we are liquidating our subsidiaries. who knows what is going to happen. if you have a good fundamental business, that is known as the bad balance sheet, good company. those debt will be the equity holders. it is their company. the underlying equity, it is not there's any more. there needs to be a fundamental realization of who the economic stakeholder is. --?hat do you look at it what margins? management. it is the trend. it is where the company is going. could it be nimble? the costs are something that need to be handled. all the energy companies/there costs. they were wiped out.

now oil at 65 are doing better again. if you have a good product that can sell you need to have the fundamentals strong. the thought was you would see a ton of bankruptcies. the underlying assets were actually good. we to assume there are not a lot? where would be the value? >> it is the supply chain. you have the internet. that is part of one ecosystem. amazon,ne buys a toy they are still buying it. if someone buys clothing from a retailer, brand loyalty has gone down quite a bit among consumers and millennials. you need to have the value comect you get good value a trends are changing and you need to respond to those.

>> there is still brand loyalty to an extent. even if it is to liquidate, it bed bathinteresting to & beyond, brands like that if they were to liquidate and by the brand name, that could be of interest. a cycle of bankruptcies? >> that is the million-dollar question. i can't answer that. there is absolutely a cycle. the stress supply is low. lot of theg up a debt now. it is the focus for a lot of major players. >> the multiples are through the roof now. there was a bus company that sold for 13 times what they thought.

i think there will always be bankruptcies. i think the world is changing to do the out-of-court restructuring. there will be loss if the nominal owner, the private equity doesn't realize there equity is worthless and that debt holder, who economically owned the company, they need to take over. alix: thank you. .reat to have you both a big day for treasury auctions. i feel i have been talking about all day long. also, some of the three-year. this is bloomberg. ♪

alix: here is what i am watching. treasuries supply. we get 100 billion dollars of treasuries coming online. $40 billion of corporate's. it could be interesting. take a look at this chart, the 24 month average of the 10 year on a two-yearsee basis we have weaker demand since 2009. two .46, the year average, it indicates demand is slowing as supply is coming online. david: what does that do to price? alix: you are always going to have buyers. it depends on the price.

the demand is not there, what is going to be that turning point, do we test that this week? you also have jpmorgan saying this particular option has more bearish risk because it is a monday. you are not going to have the same kind of volume. you have retail sales. there is a riskier for the market. up, kind of a chart man, tune in for that. 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. jonathan: from new york city to our viewers worldwide. in jonathan ferro.

tominutes for our countdown "the open." -- i am jonathan ferro. coming up, risk taking a backseat to the jobs report. -- is itived spike calling for a fed rate hike? and the russia dollar chip deals. market is 30 minutes from the opening bell, and this friday the story of futures looks like this, some cong, some quiet in the fx market, and treasuries, like a rocket, 2.89 on the u.s. 10-year. ofewhere, the return goldilocks -- not too hot, not too cold. muted inflation fueling risk assets. >> i thought it was a really good report. >> it's impressive. >> is probably the case that the