china strikes back. beijing says it doesn't want a trade war, but isn't afraid of one. safety, stocks fell off and the yen rises as does gold is washington piles on more uncertainty. there will be no government shutdown it, but it took $1.3 trillion for everyone to agree. how on earth are we going to pay for it? welcome to bloomberg daybreak. alix steel is off. you moved away the way from the afternoon to the morning. happy friday. global risk aversion is the theme of the day. weakest spots are the in more than a year. you can see the level. the dax is the real underperformer.

funds are down now for the s&p 25 basis points. the dollar yen is at the epicenter for many reasons. right now, trading is just below that figure for the first time. also, it's the only country that a problem from trump's tariffs. range still stuck in this , 282 is the level. david: there is a lot of red on that screen. it's time now for the morning brief. president will hold a news conference on the last they of the council. of 10:00, we get new home sales data. we will have a lot of fed speak from atlanta. the minneapolis fed president, the dallas fed president the

boston fed president. live one hayes will be bluebird tv and radio. i want to get to the top three stories of the day. we have gina martin adams. ourael mckee is correspondent. we have to start with the china issue. we have a statement on the chinese embassy. -- this is what they said. china is not afraid of a trade war. to the end itght defend its own legitimate interests with all necessary measures. let's take a quick look. we don't know what tariffs might be imposed on. we have some of the largest imports that they might be getting. mike: capital goods and

industrial supplies, what the administration is doing is listing 1300 products and they will publish that. there is a 90 days for people to say this to be on the list, this shouldn't be on the list. the question is one of a trying to accomplish? there's a list called made in china 2025, where they think the future of the economy will be. that,onics, things like that's for most of those tariffs are going to be. it's going to be a while before we know what the u.s. actually puts sanctions on so kind of probably will retaliate until it knows was on the list. had a broader announcement, we're going to have tariffs on all countries. then it's like russia and japan. we've exempted for of the top five producers.

steel70% of the imported is exempt. the president still has until may 1 to reach a deal with the united states. basically, there are support for the chinese sanctions. .e is talked about paying up they don't pay us. he's going to get them to. these are temporary exemptions. it could de facto the tariffs a resident -- around the world and not do anything for the united states. julia: that was the irony yesterday. it's exclusions flying around. they were like this is not going to be as good as we wanted. talk us through the market action. it's about more than just trade tariffs. : that caught my eye.

so financials underperformed much. they were at the loss leaders in the index. yesterday was all about sell now and think about it later. exempt find by the underperformance of financials. the rally was lend and financials underperformed. you the market when into a risk off mode. utilities started to outperform. it's clearly sell now and take about it later. we will work this out as we go. the market try a worst case scenario, we are moving toward a trade war with china. volume, we sawng this pattern for a number of weeks. david points out the average to me and says we need to watch

this. within a great chart to look at. is closing up the average. gina: we started out the week on week footing. when we failed to sustain the 50 day moving average, there was a turning point. the weakness extended through the week. the news only pushed the weakness further. if you're looking for levels, it closes very close to the early march close. i think we will test that level. we will crash to the 100 day moving average. the next level of the lazaridis to in february. that coincides with the 200 day moving average. if we continue to crash through those initial supports despite the selloff yesterday, it does look like we will test. story,we have a third

$1.3 trillion being spent by the government. they have a summary. about .4 hours to consume all of that, having never seen it before. they have money in there to fight opioids, quarter wall construction. what does all of this mean? they came up with a compromise. why not if you just give everybody what they wanted? mike: this is what they did. this is congress at their worst. they can't get anything done the proper manner. it's a 2300 page bill. none of them have read it and they don't know what senate. there will be errors and problems. the president is a loser here because much of what he wanted he did not get.

wall on a 2000 mile border, best not going to make much of a difference. there are losers like to dreamers did not get their protection either. they just threw money at it and walk away. david: this is where i am this morning. a week ago, we said the fed it would be big news. now were talking about trade war. we've got a longer-term rotation. is this a blip? gina: i think it's notable the first meeting as the chairman and the first hike this totally overshadowed. it's as if it didn't happen. sequence of is a events. the have stopped offering the possible to the open market. we know that. we've priced in. we know we will get three or maybe more hikes this year.

that's the issue we are grappling with. trade policy is something new. it migrates to the new issue. we've got to contend with this. we don't know where we are headed. we haven't had to deal with trade policy for years. mike: you don't know where you're going to land. we don't know what companies are going to end up being targeted. david: we won't know for a while. it's not like they said these are what the tariffs are and these are the products. were going to have this waiver process going on. mike: we don't even try to price this. we don't think about it because there's no way to do it. how do i value a trade war? not only that, with john bolton taking over last night, now you've got security questions with the iran deal and north korea. those things you can't put a price on will make it difficult. david: mike pompeo it state and

house,udlow in the white it's a whole new team. very inexperienced and a lot of issues. you are going into an election year at the same time. it's a recipe for disaster. i can imagine where the markets are going to go. david: remember the days when we were worried the vix was too low? we were worried about why it wasn't moving. you to gina mark adams and mike mckee of bloomberg news. tensions between the u.s. and china escalate with the u.s. urging china to talk rather than fight. this is bloomberg. ♪

david: trade tensions are escalating with no end in sight. tariffs on still aluminum. at this and would more coming of u.s. goes over tariffs on $50 billion through intellectual property action. correspondencen coming for us. give us the perspective from china. it's unclear how this unfolded. it seems to be ramping up. >> david, it's unclear in china. let me make two points. the tariffs announced on the steel pipes and pork, that was in response to the steel and

aluminum. that wasn't what president trump assigned yesterday. china doesn't know the details. we don't know what goods are on the list. china's response has been subdued. they will respond it somehow and defend their own interests. there's a feeling they are playing along game. all of the narrative has been around we don't want to trade war. protect ip's, we won't force technology transfer. the ball is in the u.s. court until china can respond. david: they said we have a plan to deal with real one, but were not going to tell you what it is. it sounds wicked fairly sophisticated game. who was a largest pork exporter in the united states? is i what.

politically, that's an incredibly important state. enda: it's no different than the eu a few weeks ago when they were talking about levi's jeans and bourbon whiskey. it's important was not on the list. buyers of sorghum. orders for boeing aircraft in making much more difficult for huge multinational companies that operate in china. weston that even talk about exchange rates and treasuries. they have been sophisticated in their response. they are subdued compared to where they can go with this. david: thank you so much, our chief asia correspondent. reacted. the yen strengthened against the dollar.

we welcome frances donald, the adviser. we put this chart. the white line is the dow versus -- dollar versus yen. strengthening.n the blue line it usually goes along with that. it's gone up. what's going on? francis: frankly, we are talking about decimal changes when it comes to gdp, mildly down. the big concern that i have is something that powell brought up , it may not be meaningful in the outlook, there is a little bit less confidence. that's going to work against the spending bill coin -- it's going to be a headwind. there are two measures working against each other. this is the part i most worried about. julia: as you said, there's so

much uncertainty and we can't have a ultimate conduit. what kind of downside are we talking about? frances: u.s. dollar is underappreciated. if we continue to see it weaken, we will see that translate into inflation down the road. when we talk about inflation being an element, we're not just talking about taxes that get passed on. we are also talking about the the u.s. dollar weakness. that's a critical part of the story. we are talking about taxes on consumers in the united states. that's the direct opposite to what we've seen. frances: you have these two counter stories working against each other. you have more spending from the federal government which is been lifting business investment. what we need to see his business

investment take over from that dwindling consumer. that is the key to the expansion. we are positive and enthusiastic about it. i'm less confident in the business sentiment that i was 48 hours ago. that's going to be the u.s. narrative. david: is your biggest concern the soft data? we just heard from jay powell. we have growth. reverse both of those. you get higher inflation and less growth. frances: soft data never moves the gdp forecast. we see this in other countries. -- canada,n cap there's been movement. they wait and see. issueould be the biggest in the united states, more than exports and imports. that could take several years to develop.

the confidence starts the plummet, that will have a much bigger impact on gdp forecast. julia: this looks at the scale of the trade deficit. billions and billions of dollars. we quantify the numbers this tariffs, we are talking about 12.5 billion dollars. this is peanuts relative to the deficit. to you?ients saying how concerned are they? we are talking about minute numbers. aances: i can't give you probability if we are heading into a trade war or not. indexes haverisk been growing. was betweena fundamentals and asset prices. if creating a distortion in the

market and is not going to go away. this is something that is critical to the trump administration. they think they're going to get rates up. how sensitive are business leaders to what going on with the uncertainty? that could derail the entire planet. frances: you are seeing this reflective the equity market more than fx or the treasury markets. we are talking about a company specific impact. 50% of the earnings are coming from abroad. these equity markets are focused on global trade. that's the part of the economy where they will be most aware of global trade dynamics. it's the international domestic focus as well. how do you see this playing out?

frances: if i had a crystal ball i probably wouldn't be sitting here. what we need to realize we are in uncertainty and it's not going away. how is this movie the dial on our forecast? i think we are in a time of further u.s. dollar weakness. that will translate into the economy. we have had good news in the united states and business investment may not be the tailwind we will are expecting. i'm less positive that i was this time last week. david: thank you so much. it's great to have you with us. coming up, president trump is ditched the moderates and taken a hawkish turn it, giving john bolton national security adviser. this is bloomberg. ♪

david: president has taken a hawkish foreign policy turned by pointing -- appointing john bolton's national security advisor. the trump white house has seen more resignations and other administrations. we are joined by marty shanker. welcome. we have a chart here with how many departures. marty: they're running out of people to the part. the one person that has not depart it is jim mattis. a lot of people feel he is the loan moderating voice. ascension of john bolton and there is a lot of reported that says he is not impressed by generals, he will assert himself even when he's in sharp opposition.

does: what kind of shift the arrival of john bolton mean for foreign policy? these men -- made some excitable comments. this came from the wall street journal. i spent some time with him. marty: that would be bad for markets. it's easy to say that when you are outside the government. julia: that's the key. marty: he made some comments of fox news where he tried to scale back his hawkish rhetoric and say i'm there to serve the president and to help execute his vision. bloomberg wrote a story last week that said this is a presidency of one. any pushback on

some of the more right-wing policies from anyone like jim mattis, does it matter? battle couple decide these things. he really does believe he's going to be the best foreign-policy person in the government. is goingshoe to drop to be the north korea talks. they have yet to schedule them. this issue with a trade war with china, trump does not what one. up, bankingg deregulation front and center. we will talk with roger cohen. fly from york, 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. frances: alix steel is off today. let's look at how the markets are behaving. futures are down from 24 basis

points. european markets right now are the lowest level in more than the year. the global risk aversion we are seeing, all sorts of reason with a trade tensions, higher volatility, white house staffing changes. dollar-yen is above one of five. that's the lowest level the japan has been relative is not excluded from the tariffs on the united states at this stage. those safere you see havens. out,d wanted to point this oil ties to the conversation we were just having. deals with how ambassador told will relate to the iran deal.

this is an interesting one on the s&p 500. i'm showing you want support. the s&p could've gone either way. freight we continue to see. we are watching that, stocks are the bold white line. let's go to an update. kaylee: it's another shaken at the white house. this one involves the national security adviser. president trump has made john bolton replace h.r. mcmaster. he is known for his hawkish views. the present is preparing to meet with north korea. congress is narrowly averted another government shutdown. the senate passed a $1.3 trillion spending bill that raises spending.

it strengthens background checks for them buyers. it is tooves complain expensive, but president trump will sign it. hours after president trump board tariffs on $50 billion in chinese products, beijing announced its own tariffs. the chinese say they don't fear a trade war with the u.s., they are calling for dialogue. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. julia: thank you very much. whiletionist talk markets. it was the financial sector the got hit particularly hard. they dropped 3.7%. that's the worst day in more than six weeks. joining us is our cross asset reporter. we were just having this conversation. talk to me about the financials.

>> the most interesting way for me to frame this is to go back to early february when we were worried that rates were too high and is going to create a competition for capital. now the prime thing to be worried about is non-trade war tenor. yearyields are falling, 10 has relative performance. that's been a huge drag on the overall index if tech is going down and financials are going down, there's not a lot of support for the broader market. support for the large financials. we have heard report after report that trading is down. those days appear to be gone. luke: i'm rather confused by this.

you wonder how much it's overblown and was good for one -- what is good for one part of the bank isn't for everyone. growthspects for loan takes off. we need to be positive for the banks. they are not keen in on it at this point. are trades, technology as well taking a pounding financials have been popular. i would expect them to lose ground. luke: it was very odd during ls to be for financial e outperforming. as we see during a trade war, we leading the way down. other things you wouldn't expect to see his fx volatility.

excess --de war, but ethics volatility is the only one. julia: thank you for that. david: this is one of the priorities when trump came to office. congress has been working away at relief for parts of dodd-frank is regulators are beginning to modify their approach. welcome now the foremost expert on bank regulation. he is rotten:. rogin cohen. we have the possibility of a trade war. bank and giveany it the choice, would you rather have more deregulation or strong economy, they would opt for the latter. david: they don't have much control over that, even influence.

let's going on with the dodd-frank rollback. the senate and the house with different versions. will something be enacted it? >> there is a strong possibility. reflectsrapo's bill the fact that modesty and legislation is equally as the coming. it's a modest bill, but it has significant relief for smaller banks. i think there is a widespread understanding that small banks need this relief. julia: netting percent of the banks are less than $10 billion in terms of assets. to thoseompare that that are beyond.

>> let's divide it into two pieces. bill is a major step in the right direction for the under $10 billion banks, whether it's relief from voelker where they don't care at all about trading securities, but they have to develop the expensive infrastructure or relief from the more onerous capital requirements. there are steps in the right direction. david: we have seen this on equities. presumably, they are not as influenced by trade wars. they get the tax breaks. things escalate on the trade for, they will hit the larger banks much more than the community banks? banks are the large international in scope, what happens internationally affects them.

trade wars can affect a small agricultural bank if soybean prices decline. agriculture banks could be heard. julia: what are we seen so far with the pickup in regulations? there is a consolidation because of cost. what are banks saying about what their plans are and how they've adjusted? >> i think the small banks have issues other than regulation. is eminently scalable. that's a problem for smaller banks. muchsts them for customer more than the large banks. david: it's not just what will be done stats for elite, there are the regulations. even if you don't change them, how you apply it, how is that

perceived? inue seen april will change the degree of regulation? >> i think we see the beginning of a palpable change. we haven't gotten there yet. the new heads of the agency are clearly determined to determine a more balanced approach. we are 10 years pass the financial crisis. there have been significant opportunities in the market as well. can you type into what you were just saying about the limitations some the smaller players have? how do they post a new environment to recapture the last ground? there are great restrictions. >> the only way that i see the smaller banks going to be able to compete effectively is with regulatory commission do things

together. for example, vendor management. every small bank has to go out and do its due diligence on the same vendors. create a utility that does that for them. beia: will the opportunity in the new environment? >> it should be. our heads of agencies understand this and would encourage it print -- it. got a chart here. it shows how much it's gone up. i want to talk about it self. what is it going away? loans outa lot of there tied to libor. >> no later than 2021. that sounds like a long time,

but there's a lot to do between now and then. there's a real effort underway to ensure the problems. totally going to be effective. you have contracts, loans, derivatives that go out past 2021. they are based on libor and don't provide what will happen if it disappears. it,d: whatever replaces will it make it easier or harder to actually borrow money? day, ite end of the will make it easier because there will be more integrity in the setting. effort ledconcerted by the federal reserve bank of new york to come up with a replacement. i have confidence they will get there. julia: less input from the markets itself? -- what sayrbitrary

people understated their costs. david: when you think we will have a draft? >> i think it could be this year. david: it's great to have you always. it's always good to have him with us. a quick turnover at ubs, the top executive. we will look at his departure next. if you can't watch the television, listened to radio. lisa abramowicz is in for tom keene. pimm fox will join at 10:00. bloomberg surveillance can be heard all across the united states of america on sirius xm radio. this is bloomberg. ♪

kaylee: this is bloomberg daybreak. incomeup, the fixed chief economist. now to your bloomberg business flash. shares started trading today. the file sharing company is above the market range. a -- strong demand helped close the gap. dropbox will begin trading with the value of $9.1 billion.

apple wants to return to its roots in the education market. they will introduce new low cost ipads and education software. the goal is to win back teachers and students. it will be the first thing they've held a product launch in a school since 2012. the ceo and credit suisse saw his paycheck shrink. $10.2 million for 2017, 5% less from the year before. this page will return to the level in line with the expected improvements. flash. your is this after a year on the job, he is reporting from ubs. will --ntertainment

steve wynn's stilling the remainder of the shares. had on byron allen's parade he buys the weather channel for $300 million. david: joining us is jason kelly. banking,nvestment what's going on? jason: it's surprise. he arrived about a year ago. of a joblittle bit helping investment banks did he was put into a position to run the investment bank and now he's leaving. only a year there, not a great time for was happening at ubs and its ambitions. he is a 17 year veteran of credit suisse. he's a relationship guy. milken.ed into the mike

it's not a great sign was happening. was there a problem with the global head? jason: there was a matter of thegreement between him and direction of the bank. we will see what happens next. as you guys both know, investment banking -- david: it's all about relationships. ubs is not the leader in this area. it's hard to get started when there are big competitors out there. jason you bring in a guide to get thejumpstart and name out there. we will see what happened next. david: steve wynn we covered yesterday. we discussed the idea this was all about macau. galaxy steps in.

5% as steve and by wynn is selling all of his stake. this is arguably good news all around. it probably answers some existential questions for the company about macau. regulators were concerned over there. david: they started an investigation. you assume the licensing in macau. what about the broader prospects for increasing? jason: we don't know what galaxies plan is. it also raises the question of where does the company go from here? this was a lane wins divorce proceeding. she was really active in the creation of the resort in las vegas. she was active in the management

of the company. julia: edelman people understand that. you know them both very well. david: she hired a lot of those people. she was very active in the business. be interesting to see what her role is going forward. people have stepped out financially. brand that aside from the recent turmoil is a very strong brand. one of the things that galaxy is interested in is the vip element. julia: that is very much. byron allen is the buyer. has grand ambitions for a media empire. as you know, this is private equity owned. digitalone sold off the

assets a few years back. whenis the tv channel hurricanes are headed toward florida or texas. david: he's not the only comedian. tyler perry has been very successful in atlanta. he has an empire down there. jason: the weather channel is based in atlanta as well. there is some atlanta pride coming through. there is obviously something there. that we havek me seen this notion that media companies are better at running via properties then private equity firms. seeing this retrenchment. such asedia companies mild company took a hard look at weather channel and couldn't make the numbers work.

we all scratch our heads and could not see where it went. it is replaceable online. you have to watch a television show anymore. julia: we saw snowstorms and rain. this is the super bowl of weather, 30 million people watch when the weather is exciting. jason: the challenge is getting people to watch when the weather is an exciting. are there things byron allen can do in a more creative way? david: we are going to watch michigan basketball. they won by handy margin last night. jason: we're watching this very closely. i tell you, they are ramping up. females are starting to come in.

he was blaming it on moving to the west coach. -- coast. doingle of names who are right -- for a well. pam hendrickson was literally last last weekend. she has duke in the final. david einhorn looks really good as well. he still has his two finalists in there. david: thank you very much. coming up, one of the biggest banks on the street takes a point on gun control. julia: if you have the bloomberg terminal, check out tv . you can look at charts and

graphics and interactive us. we would love to hear from you. send us your questions. from new york, this is bloomberg. ♪

david: this is what i am watching today. it's gun restrictions. citigroup is stepping up and saying they will impose their own restrictions on companies and issue credit cards. i don't know how you police that. they are putting financial treasure. we are watching you. david: we have much more coming. 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. ♪ shery: china -- david: china strikes

back.beijing says it doesn't want a trade war but is not afraid of one either. flight to safety. stocks selloff and washington piles on more uncertainty. show me the money. there will be no government shut down this weekend but it took $1.3 trillion to agree. how are we going to pay for it? welcome to bloomberg daybreak. i am david westin with julia chatterley. alix steel is off today. i enjoyed myself. from the week handover united states. and we have european stocks. point 01%.wn

relatively unchanged for s&p futures. that is interesting and worth watching. dollar-yen back above that 1.05 level -- 105 level. safe haven demands, they talk about japan is being the epicenter of the trade tariff intentions, particularly in the china region with the united states. to safety bidight we did not get earlier on this week, in particular, we have 10 year yields now, inching higher again, so that fit to it a more positive sentiment in s&p futures but watch this space. david: i should say we will. time for the morning brief. at 8:00 this morning, president of the european commission will be holding a news conference on the last day of the european

council summit. at 10:00 a.m., you home sales data for february. and we will have a slew of events from atlanta fed president to minneapolis fed presidents, dallas fed presidents, and boston fed president. our own kathleen hays will be interviewing mr. cash. live. julia: let's get an update on what is making headlines outside the business world. kailey leinz has first word news. saidy: last month, bolton a preemptive strike would be legitimate and now he will be trump's national security adviser. he will replace mcmaster next month. he is known for hawkish views. congress has narrowly averted another government shutdown. early today, the senate passed a $1.3 trillion spending bill that raises domestic and military

spending, and strengthens background checks for gun buyers. conservatives complain it is too expensive but the white house says president trump will sign it. china says it doesn't want the trade war with the u.s. but is not afraid to fight one. beijing announced for plans on tariffs on 3 billion of american products, among them, pork, aluminum, steel and wine. they came after president trump talked about imposing tariffs on $6 billion of u.s. goods -- of chinese goods. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am kailey leinz. this is bloomberg. thanks. the threat of an escalating trade war is leaving investors on edge, with stocks selling off in a rough week for global markets. we welcome nathan sheets, who spent many years at the federal reserve. economist atef

pgim fixed income. the markets are selling off, are the right to? have fundamentals changed? nathan: i would say we are seeing an increase in uncertainty in the global economy. there are huge questions out there. what is the united states going to do next in terms of its trade policy? for example, the announcement yesterday promised restrictions on chinese investment in the united states. howard the chinese going to respond to that -- how are the chinese going to respond to that ? and then, what will it ultimately mean for the macro economy? all of these are open issues and i think it is right for the markets to step back and say, macro fundamentals are now different and there is more uncertainty than without they would be. david: i think president trump says, yes, there is more

uncertainty because i am trying to change the regime. we have been putting up with china for a long time and we talked and talked and that the has gotten done. we have to shake it up to change the terms of trade. does he have a point? nathan: absolutely. there are real issues regarding china's policies. openness to its foreign firms, whether or not the playing field in china is level, but the question is, what is the best way to tackle that? is a better to do things unilaterally or work multilaterally and try to resolve these challenges? julia: we spoke to the commerce secretary yesterday and he confirmed the united states and china are discussing a $100 billion sum reduction in the deficit. that is huge, so you can have this war of words over potential tariffs, but if they are having a discussion on how to go about that, to me, that is probable.

this inane on how they might go about that. >> china needs to import their week, very large amounts of lng. from their point of view, what would be logical would be to import more from us if you are no other reason than to diversify their sources of supply, but would also have decided that of reducing the deficit. -- have to side affected reducing the deficit. julia: lng is tough and oil is a better prospect and quick. that sounds like progress behind the scenes to me. tohan: if steps can be taken open the chinese economy and facilitate trade, i think that is a win-win proposition. what i am more worried about our steps taken to destroy existing trade. just create other macro problems. david: gina, this sounds good but the markets had none of it yesterday.

are they right for wrong? gina: the market isn't focusing on the positive potential in the long-term future. instead, they're focusing on the near-term protectionist measures and attempting to price it in. on top of a week technical position anyway. weaktarted off on footing for the s&p 500 and attacks are locked became a trade related selloff as of yesterday but markets have gone into full risk mode as of yesterday afternoon. i think will are heads will prevail over time as we get -- i think cooler heads will prevail over time. this is about risk tolerance and uncertainty, and we have not had to deal with that for a long time. stocks are struggling to price this in. it is a natural default of an , to pricemarket everything first and then pedal back when you have more understanding later. david: go over topline numbers. where their indiscriminate

sellings or was it really a shift into bonds and where did the money go? gina: the bond market did not rally much yesterday. bonds typically would experience strong benefits from a big risk off move in the equity market like yesterday. that did not happen. yet, stocks exposed to interest rates did sellout to the most extreme level in the equity market and financials underperformed, which would suggest the stock market is trying to price in increasing risks and the bond market might not be as convinced that ultimately this is damaging to fundamental prospects. nathan: bond yields had declined some the previous day, so going , it was fed meeting trading around 2.90, and my sense is that the more of that is about these trade measures and less about the fed.

there are varying views on how to interpret the bond market. david: i want to talk about the possible trade war. there was a statement out of the chinese embassy yesterday were they said china doesn't want a trade war with anyone, but china is not afraid of and will not recoil from one if it was in the seated with the u.s. tona would fight to the end defend its own interest with all necessary measure. you have seen this development over the years. that is sprayed talk. what president trump -- that is brave talk. what president trump i think would say is even if they start a trade war, they have more to lose. is he right? nathan: i think the core of the chinese response is they want to look like they had taken the moral high ground. retaliated, but they retaliated on $3 billion of u.s. exports when we put tariffs on 50 bunion is towards -- $50 billion on their exports. they will go to wto.

if provoked, i think they will respond more vigorously. for now, i think that they are going to try to the escalate this. -- de-escalate this. i think chinese response will be a dampening factor rather than amplifying. julia: gina, talk about the markets. i was talking about this chart earlier, significantly lower, not only for wage support. if you want to29 look. at what point do we look at the market and go, you know, there is fear of missing out that kicks in, this relative valuation, particularly given the sounding versus what we see in terms of price action? gina: we cannot miscount it could happen today. yesterday, we closed a few kicks low our most recent low in early

march. we have to decisively break the low and open before stocks are going to potentially go back down. the 200 day moving average coincides with the early february low, when we were down a full 10%. julia: do you think we test the lows? nathan: my sense is that there is more macro uncertainty out there. equity margins have responded. it doesn't seem to me at this point this will be a long run of adverse market conditions, unless there are further announcements that we don't know about in the near-term. julia: i am waiting for my $100 billion deficit reduction but i could be waiting a while. [laughter] gina martin adams of bloomberg intelligence, thank you, and nathan sheets, you are staying with us. dust settling over president trump's trade measures, but what are the mechanics behind applying them?

complicated. we will have that complication, next. this is bloomberg. ♪

♪ kailey: this is bloomberg daybreak. glaxosmithkline has dropped out of the bidding for pfizer's consumer business. they had made an offer that valued the unit up to $20 billion. the company says any acquisitions would not meet its criteria for returns now. shares are rising in premarket trading and investors are encouraged by a turnaround at the sports apparel's north america failing -- business.

the ceo said the picture had brightened i've ended the week. apple wants to return to its roots in the education market. they will introduce new low-cost ipads and education software. teachersis to win back and students from microsoft and google. it will be the first time they have held a launch towards goals since 2012. that is your bloomberg is this flash. david: breaking news, a magazine is reporting program and target are in talks about a possible merger. this is target and kroger. reportedly, they started talks last fall and neither company wants to comment, but shares of both countries are moving up in the wake of the announcement that amazon would by whole foods. everybody is teaming up with everyone understands the struggles they are facing, not only with amazon but with

walmart and their push, as well. david: target wants to get into groceries and this would be a quick way and kroger needs to move into the online -- julia: merchandising e-commerce. they could make justification on both sides. david: digital, i hear it is the future. julia: vicious rumor. david: we want to turn to trade as president trump imposed tariffs on $50 billion or more on chinese goods, any industries will make the claim to the white house that they should be exempt. take us through the affected mechanics -- the affected industries and the mechanics they're up against. sheets.th us is nathan is naboth van den broek. welcome. thanks for having the time. i wanted to go through what is going on in washington, not in terms of the president

announcing things but if you are representing the company, what are you doing now? even the steel and aluminum side and now the other products. ofath: there are a lot actors -- naboth: there are a lot of actors involved in the agency. department is believed agency and some run straight out of the white house because of how important it is to the president and his team, and then there is capitol hill and you see a lot of lobbying starting of individual starters and then reaching out to the administration to come -- protect their constituents. david: talk about steel and aluminum. it seems more developed. according to a statement from the president, do you want to make a pitch your company should be exempt from this? you have to say you do you cannot get it from u.s. reducers or there is a national security

interest in it. who do you make the pitch to? what are the standards? set of: there are a forms. the aluminum and steel process is developed and there is a section the commerce department ask you to provide and it is detailed information about how much of the product you use, what exact product, who was making it in the u.s., if anybody? if someone is making it in the united states, what is the reason you cannot use that u.s. aluminum or steel and that you have to import? there is a lot of information to provide. there is a process set up where they will review these requests for exclusion from the tariffs on a rolling basis, so one of the things we are expecting and starting to see is the company is getting ready to submit exclusion requests and that will probably continue for weeks, months to come.

julia: what happens when we even have a temporary exclusion at the country level? what does that mean for the companies within? do they continue with the negotiations and submitting the form requirements? how does that work, in particular, outside of the united states and the united states company? naboth: it is a good question and one that goes back to uncertainty that now exists. and ambassador said several countries would be excluded and pretty soon after, it became clear that exclusions for imports from certain countries might only be temporary, for 40 days or a shorter amount of time and then reviewed again. productsnies importing from those excluded countries, the question is, what do you do? are you better off still submitting a product specific

and company specific exclusion request, as well? because if you don't, 40 days from now, you might be in the same situation again. julia: mind-boggling. david: nathan, you have had experience. you were in the treasury market at a high level. what is the disruption caused to investors and economy in uncertainty? no matter how it comes out in the end, just not knowing for an amount of time. when investors are uncertain about the future, that passes into physical investment that is likely to restrain consumption in the economy. it is likely to make those less riskital have appetite, and the bottom line is slower growth and a list dynamic economy. i think this is a possible risk and side effects of this trade policy that is being pursued.

what are the real growth implications of this? julia: exactly what jay powell was saying about business investment and it could have an impact. specializing in international trade, naboth van den broek, thank you. nathan sheets, you are staying with us. coming up, boeing has been hit hard by escalating talks, shares hitting their worst mark in two years. we have talked about target and kroger, said to be in possible merger talks now. both of the share prices are higher in their premarket trades. you can see. justification on both sides. the one word -- amazon affect. this is bloomberg. ♪

♪ turbulence.g hits

they have fallen nearly 12% in the past four weeks, their worst month in more than two years. joining us on the phone from dallas is our team member covering industrials and the midwest. this is in direct affect with the broader trade war affects but with china being a big buyer for these guys, brendan. brendan: that is right.china is a crucial market for boeing and airbus. at this point, you would not necessarily expect severe direct retaliation against boeing, simply because china needs the planes and it is an that easy to switch -- it is not that easy to switch in the short-term from boeing to airbus, but that is one concern, as is, as you said, the broader economic outlook and whether there could be a slowdown in trade flows and growth that could put a dent in aircraft orders. julia: great illustration, g 8 in the bloomberg

showing you the percentage of revenue from china. we are looking at just under 13% of revenue. my argument would be, airbus cannot build the capacity, so are we panicking no reason? brennan: -- brendan: the potential effect, all of a sudden canceling a large number of aircraft orders, that seems like a pretty unlikely event in the short term. knowing is -- boeing is investing in finishing center in china to put the final touches on its single aisle planes, which it will be shipping from india to china in the years to come. time, there is the risk, and if there were some type of broader economic impact,

others,iffs lead to where we see already a little of that, does that and depth affecting the global economy? that would have a fallout and a bad effect on boeing. david: is the market getting ahead of itself? we don't know if the terrorists are coming from the united -- ta riffs are coming from the united states, much less china? brendan: i think they're predicting a dire scenario. last year -- david: thank you. sorry, we have to get out of here. brendan case, thank you.coming up, a good data -- ecodata. this is bloomberg. ♪ mom you called?

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it's a drone! i know. find your phone easily with the xfinity voice remote. one more way comcast is working to fit into your life, not the other way around. ♪ julia: this is bloomberg daybreak. i am julia chatterley. alix steel is off. aversion was the name of the game but what we

have seen is a pickup and performance as far as the s&p futures, now indicating higher by 15 basis points. nasdaq still tilted to the downside. the handover from whether asian or europe, you can see stocks are off, seeing some of the weakest levels in europe for at least a year. and the key export of the german market down 1.5%. we have been waiting for the durable goods data and it is out. a significant improvement on what we saw last month. february coming out at 3.1%. we care about x transportation. we were expecting strength, so significantly better than expectations. significantly better than the survey expectations of 1.6% overall. inis slightly improved provisions in the prior month, so significantly better data. let me get excited about that on durable goods and transportation.

joining us is michael mckee. us.an sheets is still with michael: it is capital goods orders, aircraft, take out boeing and defense orders, and there is a big rebound up to 1.8%. however, on a three-month annualized basis, you are looking at a gain of .6% because we have had two that months in a row and that is down from 3.7% in january. maybe we are seeing a little bit of the tax bill at work or maybe a catch up. i have the chart that shows where we were, g #btv 7090, the capital goods orders with defense and transportation and you can see the rebound that it there.months below zero it makes it hard to tell exactly what this is. durable goods volatile, hard to say if biggest the tax bill or a rebound -- if it is the tax bill

or rebound. nathan: reassuring to see data surprise on the upside, and more broadly, the economy has decelerated a touch in the fourth quarter, maybe a payback for the strength of private spending late last year, or may be still residual seasonality we often seen the first quarter, so it is good to see stronger data. our sense is that the real strength associated with spending from the tax bill is still in training and we are likely to see that in the spring. michael: i can tell you that the airline,is driven by up after being down the prior month. aircraft up 37% after being down 49%, so you get explains on expensive items. julia: and we are ready have reports from boeing indicating

that. david: and the could be noise around the numbers that we are spending more time and attention on durable goods than before because if you look at what the fed says about their growth rates, we need productivity to get up. this is something jay powell specifically addressed earlier this week. >> i think there is a general view, as well, that supply-side there could be supply-side effects, as well, and you would see that the higher investment through lower corporate tax rates and investing, which would drive productivity and make investment more attractive the companies should do more of it. david: this is the chairman saying, maybe we will increase productivity in the past inflation we would otherwise expect. michael: this is the biggest macro question, are we going to see an increase in investment? and as we see the increase in investments, it allows

productivity to rise, and with that, firms can pay more without raising prices. it is an exquisite equilibrium if we start getting more investment, and with the tax bill and reduction in corporate tax rates, and where we are in the cycle, it is reasonable to expect it. julia: we had the countertrend now, the positive effects of the tax overhaul, spending bill as far as business investment, and then you have been near-term factors at the potential trade and implications and the two opposing forces. what is the dominant factor? michael: you don't really know, that is why jay powell was debating that question. julia: [laughter] yes. michael: you cannot tell with the crosscurrents. you look at today, communications down, so companies are not putting in productivity and enhancing orders at the moment. question, youhe have lowered the cost of capital

now, what do they want to buy more capital? we don't know. david: it isn't just crosscurrents. when i talk to economists, they say there's no one for one relationship between investment, equipment and productivity. we had this curve and the taylor rule not working so well, but economists saying, i cannot tell. michael -- nathan: economic relationships are messy, but i am willing to stick my neck out that if we see an acceleration investment, that is likely to bring with it a stronger labor productivity growth than what we have seen over the last few years. julia: why? nathan: the theory of the case is as you invest more, that means there was more capital goods for the workers to use, and with more capital, that makes each worker more productive than he or she was before. julia: but why today versus what

orhave not seen the past two 3 -- mason: we have a strong influence in global -- nathan: we have a strong influence in global economy, a tightening labor market and with the tax cut, firms have more money in their pockets and anyone of those could be determinate. all three together makes me optimistic we are going to see more investment. michael: i will follow up about jay powell, the atlanta fed president speaking out and said, there is uncertainty in many parts of the economy. the tax overhaul present some uncertainty in the terrorist strike depends on what -- gt tariff drag depends on what is put in place. david: i want to get to productivity and capital investment. i have a difficult time at which comes first, the chicken or egg? do we need investments to go up invest andloyers to

drive productivity? michael: that would help. you generally have to see consumer demand outpacing supply, so companies have to invest more to me that. what will create consumer demand? normally, you say higher wages but now it might be the tax cut. we are watching retail sales in spending so closely because of that. they had been down the last two months. if more people had jobs, they should be spending more. the other thing is this first quarter seasonality question every year. julia: and that is from the retails sales angles, and yet sales are a concern. nathan: i think the consumer is in a good place. household balance sheets are strong. we have seen retail sales in the .irst quarter that is a puzzle as i mentioned, maybe it is payback for strengthening in the fourth quarter or the seasonality affect. i wentmfortable as

investment that the consumer will remain solid through the course of the year.i think 2018 shapes up as a year where growth on the order of 3%. david: we had this tariff issue now, and i wonder if we see the rotation where equities were shooting the lights out. are we going to go the other way around, where the economy is doing all right but equities are not so sure? nathan: on one hand, pricing in equity markets is aggressive trade on the other, the projections for earnings this year is strong, double-digit gains. part of it is the effect of the tax cut. how that balances out is an open issue, but it isn't likely in this environment to be that for equities. julia: quite an optimistic look. david: jay powell did his best.

he was doing just fine, thank you. michael: and we had strong growth overseas and then yesterday, we got disappointing emi numbers, down in europe. julia: they are whoppers, trust me from the european girl, when we talk about pmi's and 56, maybe they are softer but still great numbers. bingo. david: exactly. the european girl she called herself. michael mckee and nathan sheets, thank you for being with us.coming up , the maker of brass dolls wants to save toys "r" us. commute today, turn on your radio and tune into our colleagues. it is 7:00 to 9:00 on the radio and then pimm fox joins the conversation from 9:00 to 10:00. can berg surveillance heard all across the united states on sirius xm. live from new york, this is bloomberg. ♪

♪ kailey: this is bloomberg daybreak. i kailey leinz. coming up on bloomberg markets, neel kashkari, federal reserve bank of minneapolis president. and now to your bloomberg business flash. there is a report that target and kroger are discussing a possible merger. the talks began last summer about a partnership. now, the companies are trying to decide if it is the best option. a surprise move involving two of the biggest casino operators

could reshape the gambling landscape. galaxy entertainment has agreed to buy a 5% stake in its rival and positions them as a potential owner of wynn if it went up for sales. shares have dropped -- shares of dropbox began trading publicly today. their ipo price is above the market range. they initially targeted a value of about one quarter less than the $10 billion it was valued at but strong demand help close the gap. they will begin trading with the value of $9.1 billion. that is your bloomberg business flash. david: thank you. toys "r" us is on its way to liquidation and it isn't too hard to see why if you look at the chart, where operating has fallen below the cost of service, never a prescription for success. there is one person in the toy industry who thinks he can be saved still. joining us is isaac larian, mga

entertainment ceo and founder. we are going to put up a chart that shows the problem for toys "r" us as it went well below the cost of debt service. why do you think this can be turned around still? issac: -- morning.od i cannot hear you well. david: i'm sorry, can you hear better if i speak up? isaac yes,l: please -- isaac: yes, please. has dipped "r" us well below its service the debt, why do you think this can be turned around? isaac: the amount of debt put on it that stopped it from investing, bringing interaction with children to the stores, i think it can be turned around for sure. and with new management and

entrepreneurship. david: as i understand, you are trying to put together a group to buy it. i understand you need $1 billion and you have $200 million. how much more have you gathered besides what you put in? isaac: i have not put all the two hundred million dollars. i personally put $100 million and have other investors who have put more. i am very confident we can raise the money to do this at the right price. and that is our goal. separately, we made the bid for toys "r" us canada, which is a profitable organization. david: how much time do you have? they're going to go into liquidation and celebrating off at some point. isaac: i don't think we have a lot of time, but maybe a month, 1.5 months, maximum, but there is a lot of value in the toys are us name and the assets that they had. i think the toy business needs

toys "r" us to keep growing. if toys "r" us is not here, i think the toy business as a whole will have a devastating year this year and the following years. julia: this has been a slow burn crisis and then a faster burn crisis. with all due respect, why did you wait so long? isaac: to be frank with you, julia, i thought, and i always believed -- i mean, the management and advisers told us the company will get turned around. and it was a shock for me when i heard that they were going to go into liquidation, so i decided to take action personally. julia: so you got that even up until the point where you decided this bid that the situation could be salvaged? isaac: yes, i think it can be salvaged. i have sentimental affiliation

with toys "r" us. i sold my first product at toys "r" us 39 years ago. people say i am a toys "r" us kid and never grew up at 63, but i think it is a great business to be had. julia: it isn't just sentimental but also financial and for mga itself, their critical to the distribution of your business. in particular, what will it mean for mga is toys "r" us does go broke? isaac: well, mga now is the fourth-largest toy company and growing very fast. we have to hardest toy line out there, so we are in great shape to keep on growing. i am making this investment personally and not through mga. david: you said you were surprised. you got it would work at the last minute. you are not alone. a chart shows how toys "r" us debt was trading and in september, it was trading almost

on the dollarts and then all of a sudden, it went down to 18 cents on the dollar. what happens when a publicly traded company like this -- what can -- how can it be the market is mistaken for so long? isaac: i don't think toys "r" us was public traded. 4 -- was publicly traded. frankly, from mismanagement and miscalculation. julia: are you expecting to have to fight amazon for some of these stores going forward? you talked about a price that is right. do you expect to fight amazon in terms of buying toys "r" us stores and also potentially how as thefight toys "r" us business going forward if you manage to save it? isaac: i think that amazon toys "r" us because it has been that

, and if itr amazon isn't me, i hope jeff bezos saves toys "r" us. my goal is to save towards arrest, whether me or somebody else, or amazon, but i think -- save toys "r" us. i think everybody in the toys business needs toys "r" us.that is where the kids go to have magic and play. it feels like disneyland for people cannot afford to pay $140 to get into disneyland. david: let's assume you are successful, how many stores would you have to close? isaac: realistically, in the u.s., we can save about 200 stores to 400 stores. that is our goal. david: thank you. really good to have you on, isaac larian, mga entertainment founder and ceo. coming up, dropbox's wall street debut. shares again trading today. more on that, next. if you want to check out tv , watches online, click on our

charts and graphics and interactive this directly. you can also ask us a question or we just on twitter. it would be at alix steel -- julia, what is your twitter? or at david westin. live from new york, this is bloomberg. ♪

♪ julia: dropbox debuts on wall street today, raising $756 million after its ipo price above range. joining us is our bloomberg reporter. great to have you in new york. what kind of confidence does it

take for a company like this to raise the band and then prices higher, particularly in these markets? >> you have seen the big tech selloff and volatility fight -- climbed to 30%, which is not a friend of ipos, but dropbox got it above the last range, which was increased from their initial marketing range. i think some of the demand this a, it is a big tech stock. you have not had a lot of is, the second-largest silicon valley to price and ipo this year. also, a name that has a decent financial profile. this is a company that not only has more than 30% growth on the top line, revenue at $1.1 billion last year, but they are cash flow positive. not only are you potentially betting on a growth tech stock but you have more risk aversion with nicer numbers on the bottom line. david: what is the mode around their business? i think of them as a cloud storage business but they have big competitors.

>> they do, and they were the first mover, which is how they amassed a 500 million registered users. the tricky bit is only 2.2% of those actually pay them for their cloud storage tools, so yes, you have google, apple, and box pushing into the cloud storage space. dropbox is taking more of a growth story, focusing now on collaboration tools, so if you are putting your files online, they say, look, we are rolling out new technology that is great for teams to access the files and start collaborating in the tech stock forms. julia: we will see how it trades today, but what we have seen from blue apron and others, it is neat to watch, but what valuation market cap does that give them ultimately? because the valuation we had was $10 billion. alex: that is right and this gives them an $8.2 billion market cap, so still shy of that

$10 billion private valuation from 2014. the people i have talked to in the ipo ecosystem in silicon valley say they hope this is the one that removes the negative stigma about going public at what they call a down round. david: if we think about ipos at this point, to what extent is it a world of 25 vix versus seven picks? a different world and if you think to early 2016 when the fix was consistently about 25, killed off -- ix was above -- vix was about 25, he killed it off. deals are still getting done but we have only had a few days of increased volatility. as long as this comes back to stable or predictable volatility , the deals will get done. julia: where do expected to open today? alex: they help for 25 pop to put it above that $10 billion valuation. julia: exactly.

alex: we will see. david: are they calling on mr. trump to settle things down? alex: i think the markets would like that. david: great to have you. do not miss her interview with the dropbox ceo, coming up at 11:00 eastern time today. before that, tune in to bloomberg markets because they will have a lot to talk about at the open. their guests include john dingell the credit suisse -- shawn golhar from barclays. live from new york, this is bloomberg. ♪

. .

from new york city for our viewers worldwide, in jonathan ferro. ams is the countdown -- i

jonathan ferro. this is the countdown to the open. ♪ warthan: coming up, trade concerns rising again, china fighting back with arabs of their own. -- with tariffs of their own. and stocks finding some stability after the biggest losses in six weeks. the equity market, 30 minutes away from the opening bell, the story in futures as follows -- the treasury market after yesterday, yields are up a basis point now on the u.s.-tenure and in the fx market, the euro 10-year ande u.s. in the fx market, the euro former. aars of a trade war becoming reality. while the white house