♪ >> the second quarter goes off to a rough start. the trouble missed ration says they will work on up linn energy on nafta by the next week. the peso and canadian dollar rise. spotify presses play. the streaming service goes public today. how successful with its untraditional listing be? ♪ >> welcome.

i'm in london. let's check on markets today. stocks fall in the u.s. yesterday. falling for the fourth day in a row today. the worst quarter in two years. gauge also fell for a second month, worst stretch since august 2017. the bloomberg dollar spot index is down for the third day in for. it's dropped for the last five quarters. worst stretch since 2008. we are seeing stocks fall, bonds fall, look at the yield on the german ten-year. it's up a couple of basis points. bond yield rising in europe today. gaining for the first day in seven. from 77 basis points, which is the highest in

two and a half years to 52 basis points today. today on surveillance, we hear from the uae minister for once next on the oil price. armstrong let's get the bloomberg first world news. nejra: the trump administration is pushing for preliminary nafta deal at a summit in peru next week. ministers are set to meet in washington to's try to achieve a breakthrough. they say the white house was leaders from canada and mexico to join in unveiling the broad outlines of an updated back. -- packed. -- pact. the trump administration has announced that fuel efficiency regulations for cars and light truck's are too stringent and -- changingsed, big

a process saw by the u.s. car few years. change it drew criticism from consumer environmental groups. donald trump and vladimir discussed holding a summit at the white house. press secretary sarah huckabee sanders confirmed the two leaders had talked about a meeting a number of potential venues. of putin visiting washington is likely to sharpen division on u.s. relations with russia due to allege it kremlin meddling in 2016 elections. unions push forward protests in france. strikes are planned at railways operators with only one in every eight long-distance trains

running and one in five short are trained to do to depart today. air france said it expects to operate three quarters of its flights today. saudi crown prince mohammad bin salman on -- some on says he recognize the right for israelis to have their own state. he said israelis and palestinians have the right to their own land and the needs to be a piece deal to ensure stability. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i'm nejra cehic. mark: let's kick it off with the market stocks decline today. of once much favored u.s. tech stocks deepening. the vix index jumping as well. joining us now is 10 from

bloomberg intelligence and stephen gallo. thank you for joining us. this is my favorite chart of the day. you will like this, tim. u.s. stocks, i know it's just one day but we love our stats. worst start for an april quarters since 1929. i know it's one day. i know we like blowing things up. but it's an incredible stat. it is and it's the worst first quarter that we've have years as well. is this into question, u.s. are we see migration into europe today and for a longer. of time? on the u.s. pacific part, clearly technology is front and center. it's a quarter of the marketplace. europe doesn't have to worry

about it. it's a different sort of tact. europe does have trade, even if affect of u.s. versus china. europe has a momentum break just like the u.s. and there's a lifecycle in the moment -- in the market. we need to either reset the value or growth in past currencies. currency is a big deal here unlike the u.s. and its negative right now. mark: we saw a big move up in the fixed yesterday. is a chart going back to 2015. it's a great chart because it shows that china volatility, the brexit volatility. in french elections as well the volatility earlier this year. we are near those sorts of levels. should we be worrying? volatility is one

of those side effects. in spikes when the market has other problems. from a technical perspective, it lies to see the relaxed couple in thele peaks lower initial spike at the beginning of the year. chances are today, with a knock on effects from the u.s., we could see a further spike. news is, once it resolves itself, that's only get on with life and hopefully life is still a good income a fundamental basis. his life a good thing or a bad thing for the dollar? falling for five consecutive quarters. worst stretch since march 2008. what does the second quarter hold? i would say one to three months the dollar will be roughly flat in our view. i would point out as well that the natural energy for the dollar is still lower.

you are not seeing at the moment the volatility in equity markets amid fx. that's important. i think it's because the fx market is waiting and watching. whatare waiting to see impact the equity market volatility, does it spread to credit? if it spreads to craddock, do trade tensions start to cause global growth expectations to sour? if that happens, it will change the dynamic considerably. . mark: do you expect to happen? stephen: it's not our view now happens it could suffer. aggressive tariffs by the u.s. on china, exports from china into the u.s., that could have knock on effects on the whole of southeast asian supply chains.

these are big issues. assets start to sell off significantly, now you're cooking with gas. there's only one place for that money to go, back into the dollar. not because the fundamentals have improved but because the new rare for the monetary system. --are waiting and washing and watching to see what happens. pretty bad q1.a most of the weakness was confined to january but it was down by around 3% for the quarter and that's a sizable move. for the time being, the dollar will be pretty flat but on a long-term -- medium-term base is a goes lower. to the currency and the impact on earnings. the earnings season gets on the way. what impact is earnings, the

euro, particularly going to have? deal.t's a big it's one of the things where he just finished the reporting. and it's quite robust. broadly, a low to mid teens basis. it was a surprise for most .ompanies growth expectations decline from where they were. earnings growth and made single digit. that's because of the translation impact that you have from a rising hound and euro. trade weighted pound in europe are up about seven or 8%. that's a big headwind.

it's a question of whether a strong pound or euro or weak dollar. nonetheless, it ends up being a headwind. see you soon. tim goes, stephen stays with us. plenty coming up today including daily nafta. besident trump said to pushing for initial trade deal at a summit in peru next week. and bracing for a hard brexit. the ecb has apparently warned businesses to prepare for a worst-case scenario. this is bloomberg. ♪

♪ this is bloomberg. i'm mark barton. let's go to a bloomberg business flash. nejra: apple is said to be

plenty use its own chips and mac computers as early as 2020, replacing processors from intel. according to people familiar, the initiative is still in the early development of stages but comes as part of a larger strategy to make all of apple's devices including max, iphones, and ipads with more similarly and seamlessly together. ande declined to comment said, quote, we don't comment on speculation about our customers. 20 century fox's offer to sell sky news to of disney as it seeks to win over u.k. regulators. foxx said disney had expressed an" -- interest in acquiring sky news. said it had proposed the news channels sale to guarantee the editorial independence of the operation. ceo linda cook says she would

seek to expand santos in asia and africa have a making a 10.3 forion u.s. dollar offer australia's third-largest energy company. the plant in the northern territory and papa new guinea. indicative ofhe herschel. santos shares jumped. the world's biggest music streaming service, spotify, goes public today. last week analysts filed bullish research. the target is set at approximately $193 m flying a 45% premium to where it had traded in private transaction. spotify indicated the low and high rate -- range from 40 two to 150. that's the bloomberg business flash. mark: the trump administration

is pushing for a preliminary nafta deal to be announced at a summit in peru next week. that's according to three people with knowledge of the matter. they want leaders from mexico and canada to join in unveiling a broad outline to the retro pack. to hammer out the final details. stephen gallo is still with us. stephen, bear with me. i want to show you this function for the day. let's look at the peso. and the canadian dollar. we have the peso in there as well. both those currencies are coming off their lows today on the back of -- there's a bit of hope, isn't there. the nafta deal be struck. what does it mean for the canadian dollar? it was the

worst g10 performer against the dollar and the first quarter for its own reasons. stephen: it's positive. for the past month or so there has been a distinctive shift in the u.s. is tone in these negotiations. have been concessions from both sides. on automobile production in the u.s.. but also mexico has agreed on programs to raise wages. that is made the u.s. side happy. we been headed in the right direction for a while. we have something definitive? think, a possibility i as each day passes, that that could happen. mark: they are saying it has to happen by the end of april. stephen: but you never can trustees. inre could be another round may. but yes, probably by the end of may at least.

there has to be an amicable break, a bad break, or some kind of real fundamental -- mark: spell out the effects, the implications. an amicable break you would see the dollar go a little bit lower. a bad break would be a distinctive shift from where we are now. that could push dollar cad back to about 130. mark: why was it at the bottom? stephen: one of the reasons is nafta and another reason to pull back and growth in canada after a very strong second half 2017. particularly because of the rebound in oil prices that boosted the upper dichotomy. there's been some deceleration in the canadian economy. mortgage macro potential policy has also had an impact on the housing market. .hat's waiting as well

these factors. by and large, we expect to more rate hikes this year. china started reciprocal tariffs valued at about $3 billion. the u.s. now has an to the sixth of april two release the list of the other chinese products to be targeted with tariffs for the intellectual property violations which china says it will respond to. are you feeling about prospects for global trade war, given that we are in the early stages of a tit-for-tat cycle between the u.s. and china? as far as we are concerned, these are token measures and they are not really terms of overall trade. we are certainly headed in that direction. it would be wrong to say the risks of an across-the-board blanket trade war, those risks

haven't increased. the tacticsthink will bring the two sides to the table. we think that's overall direction the u.s. administration wants to head although they are doing it by unconventional measures. we think that's the direction they want to head in, to bring the relative parties to the table. it's different from the china issue, but mexico. a collapse in the mexican economy could ruin the u.s. administration. are points of strength and weakness on both sides of the table. it applies to the china u.s. situation as well. he will stay with us. still ahead, ecb's brexit warning. tell financial institutions to prepare for a new deal scenario and thousands of job losses. this is bloomberg. ♪

♪ the ecb is telling financial institutions to brace for hard brexit. the times ofing to london. the central bank has warned firms to prepare for a no deal scenario. somecould lead to automatic losses of five and 10,000 jobs from the u.k.. .till join us, stephen gallo keeping up the energy today. this is almost as good as my

stat that they started the show with. u.s. stocks of the worst april start since 1929. this is my favorite currency status the day. sterling has appreciated versus the dollar every april during the last 13 years. peers wouldot of my sit here and say they did know that i'm into the office and said it not. mark: it's a great stat. is it going to continue? i think last week, the q4 balance of payments, if found -- the astounding thing was the net capital inflows of u.k. has seen. that in the eyes of foreign investors, those that finance the u.k., the pound were seen as chronically overvalue in the economy fundamentally week,

i don't think even with the weakness in sterling that we seen, net capital inflows would have picked up as much as they did. the balance of payment data despite the current account gap. net capital inflows on the calcite is very promising for the u.k.. for their ability to finance the current account deficit. a lot of it depends on brexit. we think there will be more incremental process therefore more incremental sterling depreciation mark:. enter mental sterling of appreciation. leaders of industry to the uae energy minister. this is bloomberg. ♪ 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. surveillance, i'm mark barton in london. it nejra: the trump administration is pushing for a

nafta deal to announce improve next week. according to people familiar with the talks, cabinet members will meet to try to achieve a breakthrough. they say the white house wants leaders to join in on unveiling the brown -- broad update a week from friday. technical talks will hammer out the finer details. it the trump administration has announced fuel efficiency regulations for cards and light trucks are too stringent and must be revised. the environmental protection agency also said it was considering whether to revoke the waiver that allows california to set its own tougher admissions rules. it grew criticism from consumer and environmental groups. and vladimir putin have discussed having a some of the white house. they talked about a meeting at a

potential number of venues, including the white house. the prospect of vladimir putin visiting washington will sharpen kremlin meddling in the presidential elections. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. thank you. we've got breaking news. i've actually brought this ready on the manufacturing. the u.k. factory sustained , manufacturing maintains its space of expansion and march. there was a sharp slowdown in new orders. from 55 in february. it's encouraging giving the destruction from the beast from the east, that snowstorm last month. employment, they are

reporting strongly positive outlooks. new orders rose the least since june. ihs said the average pmi reading was the weakest in a year, consistent with manufacturing growth. that compares with 1.3% in the final months of 2017. there is something for everyone there. the manufacturing sector is in pretty good shape. you are painting a positive picture of the economy as well. everything rests on brexit when it comes to sterling. stephen: from the perspective of downside, the market is interested in tail risk. we've seen incremental brexit progress, there is more clarity on the transition. there are pieces that need to move into place.

what the fx market will be concerned about is a cliff edge brexit or not. that would be sterling negative. you don't know how you're going to conduct trade. it would be in the 137 range. i was looking at an earlier. what is going to break us out? stephen: if you go back -- i like the february example. it was a major route in equity markets. currency barely moved. they barely came off. maybe they retraced half of their january move in february. oft's indicative we think very firm underlying demand for both of those currency pairs. the natural energy for the u.s. dollar is still lower. i know it sounds trite and

commonplace, that is the trade in both of those going forward. anything below 140 in cable is a bargain. is aing between 122 bargain in euro-dollar. of englandhe bank raising rates looking nailed on? stephen: given once priced in, if they didn't go in may, it would be a de facto easing cable would fall. the found would paul -- fall. need't know why they would an easing of monetary policy given the data we've been looking at. our view is they go in may. possibly once more this year, we are not nailed on with that. mark: euro-dollar, where are we today? like i said, the net direction here is still higher. mark: how far from 130?

stephen: i think one to three months, we are flat. we don't seem to be able to break. mark: that's the recent cap. stephen: it's a slow normalization process by the ecb, but a clear direction forward in that regard. general dollar weakness on the u.s.,of deficit in the fiscal risk, political risk as we approach the midterms. mark: we are talking about november already. surveillance, the streaming service plans to go public. but not in a traditional way. details next this is bloomberg. ♪

mark: i am mark barton in london appeared the streaming giant isn't going public in a traditional ipo. spotify's direct. >> spotify is becoming a public company. don't colin ipo. the streaming services sidestepping the traditional public offering process in favor of a direct listing. the company won't be selling its shares and it will skip the share price discovery process. typically, when a company goes decides onagement evaluation and go on a marketing roadshow. they make their pitch to wall street and judge interest. the night before the stock

starts trading, they have a final price and a number of shares to be sold to investors. then the shares open off that dollar amount the next day. spotify is skipping that and going straight to the trading part. existing private shareholders will be able to sell the stock and apartment market investors. they rarely do direct listings. the risk is the stock will tumble immediately or swing wildly because the company has not gone to the exercise of matching supply and demand. they are betting their rain will get investors excited. it they were valued privately asked $8.5 billion. since 2017, the shares have from $6hands valued billion to $23 billion. that means more investors will be able to bet on the future of

the music streaming company. things, promising big up to 96 million subscribers by year-end. that's 36% more than it currently has. revenue is up 30% more this year, reaching 6.5 billion dollars. they will be looking at operating losses. new shareholders can't count on having much of a voice. according to people familiar cofounderstter, the will have voting power. industry will reach $34 billion and they hope to be plugged into the market. set isoining us on caroline hyde.

thank you for joining us today. when you hold on to your shares? >> we've been an investor for more than four years. in 2014.ed if itt really comment on will hold shares or when we will sell. we think there's an opportunity now, the same beside 2014. severe format for listening to music. they are the leading service in the world. we think this could get to $60 billion and beyond. we season going to $20 billion more in revenue. that's what they should trade at. caroline question why do it this way? why not sell more shares?

why do this on way of listing and in avoiding the bank fees? >> i think it's a sign of the times. question of why you should have to pay fees to a bank. why'd do you need to dilute your shareholders? your shareholders that have supported you along the way? that's allowing them to trade the shares when they want, not paying fees to bankers, i think it's a great way to do it. caroline: what about scaling to the valuation? how will it become that size and scale? >> i think they should ride the wave of streaming subscribers coming all over the world. there are present in more than 60 countries. i think billions of people are going to start a streaming subscription or use the free

service. that's the benefit of spotify. you can try the free service for as long as you want and switch to the premium surf -- service. mark: the premium subscribers will continue to grow at a percentage of total subscribers? >> that's a good question. you have to trade-off that balance of attracting users into the free product and then getting them to switch to the premium product. mark: what are they doing? your forecast in this wonderful future. what are they doing that apple isn't doing? can apple do that model? >> i think apple has a lot of advantages.

it's a great brand. thathave their ecosystem they can put their own software ahead of spotify's. taxify has to pay the apple in the ecosystem. spotify has come to where they are. .pple is good competition it keeps them on their toes. spotify can practice voice-enabled opportunity with the google home, alexa, apple's hardware. they can really cracked that market to get the feeling of radio, which is a great product. roadblockshat about put in place by amazon, apple, google. it's quite difficult when you use an alexa to get spotify. they could stunt the

growth? spotify will have to play their game right. i think they need hardware competencies to deliver the hardware integrations to capture the opportunity. i think spotify should really -- it's the only independent player. between appleses spotify, i think they will go with spotify to enable integrations. ,aroline: you said independent will it remain independent? the founders will retain a lot of control, even to the share sale? >> they want to create a long-lasting company that

impacts the media industry in a good way. they've done a lot for the media industry in terms of getting people over from piracy and into the subscription services in getting that market backed growth. is this the time to have a direct listing? the last few weeks of been dominated by a tech selloff. once they are listed, they can never choose with the market is going to do. you could wish for a better day. in terms of the broader arspective, they created great company. they have done amazing things for the ecosystem. impact thatthe attracts confidence and capital to europe.

caroline: what's interesting in the analysis, you say you want them to take on the world, facebook and google as a major advertising revenue company. we see a lot of regulatory concerns in the way they have advertisers and they use data. growo spotify continue to in an ethical way to ensure regulations don't become an issue? the adou're doing , then he torsion work and how they deliver the ads, making sure people get what they are interested in. that's what the whole industry has to do, getting more people in control of their data. it's also creating a lot of value, getting that music when

on your saturday night party. handled theify has balance in a good way. mark: it's great to see you. thank you for joining us. theext, we are live in global leaders forum in dubai. energy talk to the minister in an exclusive manner the. -- interview. this is bloomberg. ♪

mark: there is the risk of a trade war between china and the u.s. the global leaders form is in dubai. we have an interview. manus: thank you very much. it's good to see you. trade war's are the top ranked story on the bloomberg. how concerned are you about a trade war impacting the oil market?

about at that concerned trade war getting to the oil market. i think the commodity is unique. affect the cost of overall,n, but i think that effect is going to be minor to the oil prices. resilientity is overall over the years. i think it's more affected by supply and demand than trade war's. manus: let's talk about the supply side. you're looking at the benchmarks. i understand there was a bit of a view in terms of a five-year average. there is a seven-year average. which one does the market need

to focus on? suhail: we need to achieve a basis of what we're getting. that is talking about the five-year average. we've been talking about it. it's based on the five-year average. is that fair or not fair, that's another question to analyze. i would prefer to focus on achieving the mission first and the we can talk about five-year average or something else. the situation we are in today and juggling if it's this or that. manus: let's high that down. in a quarter to or quarter three, tighten that up for the market. to 44.e come from 293

is it going to be balanced? suhail: projection is very difficult. more thanis advancing some of the analysts expected. there is a meeting happening in april. chairman,there, the the cochair will be there. is the discuss how market situation, how is the .ompliance i think it's giving you until we meet in april. manus: what is the discussion when you hit balance? what are the initial thoughts? ?ive us some

suhail: we try to keep that balance as much as we can. you work very hard to the benefit of everyone. what is next is how do we keep that balance for longer rather than seeing it spike in the market and then you. manus: would you like to see an enduring opec relationship? how would you describe the next phase of the relationship? hardl: we are working very with the secretary-general to put together a proposal, a draft proposal for the charter of how we keep this together. i think there is a logic.

is supportive.e they need to see some form of what would be the shape of that. manus: is russia fully on board? suhail: i like russia has been a great partner. they have been on board with us despite the speculation from everyone. they are supportive. we thank them. manus: thank you so much. we will continue the conversation. we have more to come from new york. ♪ 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. the president talks tough on

mexico in china. a bear market. hour, nafta off and nafta on. spotify is doing a non-original ipo. with guy in new york johnson in london. a lot is going on in the markets. what is the view from london on how the president is causing this pullback? guy: we are playing catch-up a little bit. we had yesterday off. we are trying to understand if he is causing this disruption or whether this is the tech stocks or if he is causing the tech stock problems well. there are a bunch of factors. tom: let's begin the morning

with our first word news. taylor: president decided to pull out of nafta and he's pushing a deal on a new north american trade agreement next week. the white house wants canada and mexico to join in unveiling the broad outline for the deal. they will hammer out the details. the white house considered firing scott pruitt. that's according to politico. he is hanging on because john kelly is waiting for a new inspector general's report on his travels. he has a very expensive travel habit. france's hit by another round of strikes over macron's labor reform plans. there will be changes at the national railroad. deny future would hires job security and

retirement of existing workers. the eu has more. according to the times of london, that could lead to a loss of 10,000 jobs. the tyrants cite sources that blame french lobbying. there are suspicions that france will use uncertainty over brexit to win jobs for paris. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. thank you so much. we are doing the data check to see a regularly stable market. we've got a good chart on that in a moment. the curve does nothing. the euro does nothing an american crude is 6343. taylor riggs is telling me when she did this yesterday, the vix is 25.

equity orven the markets closed. mr. johnson? transatlantic media award taking place, disney is offering to buy sky news to buyw 21st century fox to sky so disney can buy the lot. they are trying to buy sky as well. sky out of the u.k., we've got immediate deal this morning. the global transatlantic media story is getting more complicated. the other stock in there as well, this is part of the apple story. ship is looking to take

manufacturing from intel. tom: the benchmark of that is in the united states. the at&t time warner mystery of how the government will treat that. there are a lot of questions from how the government will handle the combining of media and health care as well. over at the bloomberg to look at the damage done. ins is the dow with a high january. we come down again right on the 200 moving average. we are here with a little bit of an elevation and a bear market on the dow jones. it is 21,300. guy: let's talk about the vix a little bit more. it is struggling. i think that's interesting. what's more interesting is you've got the upward slope.

that's only 50 day moving average. that changes the risk profile. as that goes up and the average on the vix goes up, it means they are less willing to take on risk and that has a dampening effect on the market. is things to focus on, one the 25 level and the other is the upslope of that moving average. the quarter is over and we are returning for london. these are the worst three months on global stocks in two years. let's start with you. how was the last quarter for you? what worked?

what didn't. >> we were short treasuries. they were pretty terrible in the first month. we netted out with nothing. we had a quite on volatile. we netted out into nothing. : does the next quarter look like this quarter? point about the trend in volatility picking up is going to bother credit investors. if you have consistently high volatility, you will see credit adjust. our licensese have yesterday but emerging markets than they were. i think that's the same story. we are all watching tech stocks.

angst. that, there is an tom: i'm looking at the bloomberg on across asset aces. the yen was not part of the story until 10:00 yesterday. one of the correlations of those benchmarks we look at on the bloomberg to win equities go down? is it tight coalition? markets havety barely risen. they have hardly reacted. i think that's why the yen is a maybe he's getting a little bit of help in this. generally, the things that correlated with a big problem in u.s. equities aren't. you've had a degree of correlations everywhere collapsing, which speaks to a

different regime. i think other markets are on the shore how much to extrapolate what's happening. tom: i was walking up the door yesterday after my four hour day . i saw patrick yesterday, three disparate views of first quarter gdp. anybody having a clue about what the economy is doing in the united states and globally? is that affecting market uncertainty? patrick: gdp is not going to be terrible. they are slowing down. the index has come off. unemployment is very low. jobs are being created. it's hard to put too much stock in gdp anyway. i think it's going to remain positive now.

guy: we had a moving average for the s&p. if you are a momentum investor, things are looking more tricky. in two weeks, it's going to be earnings season. this is what's going to turn stocks around. what side of the fence you on? --rick we think usa goodies u.s. equities are expensive. i disagree with them. disappoints, that would be out of the blue. no one is expecting that. tom: what are you doing this morning? are you using cash? what a you actually doing when you see this linkage of politics and presidential discourse with market gyrations? things to move

out of line a little bit. conversation,his getting short treasuries again might not be the worst trade. we may get a week q1 because q1 is half the growth rate of the other quarters. if we get those things coming through, if we get the earnings, i don't know what it does for the equity market. we may have shaken out the market. we might put yields a little bit higher. i would like to get betty -- getting back to the dollar. april is not a good month for the dollar. the day after a long weekend, there is more opportunity. tom: there's a market update. we will have many more of those through the day. there are different opinions across equities. in our next hour, you know him

from sanford bernstein. seth masters is an angel investor now. he is wise to the markets. he will be here at 6:00. this is bloomberg. ♪

taylor: let's get the business flash. it through from mark cox takeover to push the at sky. they are offering to sell sky news to disney and give editorial independence. acquiring looked at sky news.

apple is considering a move that could be a big blow to the largest maker of computer chips. apple plans to use its own chips as early as 2020, replacing processors from intel. apple accounts for 5% of intel's revenue. shares of spotify begin trading today in an unusual direct listing. the price will be a mystery until they begin selling shares on the new york stock exchange. bullish -- was bullish reports on spotify. tom: with the president's comments on nafta and the confusion over does he want nafta done or is he racing to get it done with some early agreements before meetings in peru, we look at the adjacent currency. with kit andat

patrick. let me go to you first. and is your wheelhouse you're in the trenches view. can you make money off the president's angst over nafta? kit: the market response has been to him not -- being matt over not getting a deal done. this is doable. there a lot of longs on the mexican peso. people not worried on mexican politics. then't understand why canadian dollar doesn't get any help. this is going to be ok. all of those fears about walls on the mexican border and the death of trade is going away. tom: let me show the chart of the mexican peso. this comes down to the heated discourse where it the basic

idea is a strong mexico again. how do you make this an opportunity when you hear the president going on with six tweets by 10:00 yesterday morning. how do you combine the two? kit: the bigger move would come if this hit a serious roadblock. thehe market is bullish and currency is rallying. it is fundamentally a cheap currency. it's the most attractive of the emerging markets. as long as you're prepared to live with the volatility, i think we are bouncing toward something that is deal. we are going to go on buying the peso. we are not going to be put off the noise. patrick: i think there is a lot of rhetoric, nothing on policy.

he started to put on some policy. my worry is he's gotten with the and on a whimroom he does some things he would have done last year because he doesn't have tillerson there. it's a risk now that he follows through on his impulses more than last year. francine: there's a lot of volatility around china and trade globally. he needs of it looks positive on trade. tosn't he need a win here counterbalance it's happening elsewhere? patrick: you might see china say we are going to back off on these tariffs. china may open up some things like that. he could claim of victory with china. i agree with kit, the u.s. goes into recession.

that's terrible for mexico and canada. the consequences are huge for america as well. bill gross as a liking for short-term mexico. the real question is mexico is a debt opportunity, you buy the coupon and you see the price up and make a total return. patrick: that's a great return. we have a basket of emerging market returns. it's been a very nice carry strategy. there is a huge run on emerging markets, that will offset any capital drawdown. it's not risk-free by any means, but most will lead to a positive return tom:. we will continue with that. nextmasters is in the hour. we will speak about the insanity

going on in the capital. cheap stanley has a public policy. strategist in washington, that's quite a title. it's hard to get your hands on. this is bloomberg. ♪

tom: guy johnson is in london

and tom keene is in new york. the carnage yesterday, dow futures are up 44. actuallyg else is ready stable in the markets. the yen has curve flatness. that's where we are right now. guy: this could be a perfect day if you're looking for a stable ipo. or is it an ipo? ipo -- spotify shares go live. without the traditional ipo, shares have no price range. this has recommendations. caroline hyde joins us. want to dootify

today? caroline: they want to list and a stable point. they wanted to the seamless. they want to at least allow their investor base to make money, to have a liquidity moment. this is the way they want to own the situation. the founder of spotify doesn't want to pay for banks, he doesn't want to devalue his shareholders or have a liquidity event. public. to go guy: it's not the traditional method. .aroline: we don't want it some are saying it will. $220, argets are up to 70% jump. the other side of the coin

on this is absolute arrogance. saw,n the document that i bring up the banner right now. than do noe worse evil at google years ago. can you explain to me what imagine for the long-term means? is it $125 billion? is it we will see not just 71 million people streaming music and pain for it. musicant this to be streaming, streaming is going global. spotify is a number one player. guy: thank you very much indeed. it caroline will be back later. we have a very quick straw poll.

patrick: i think it's been 18 years. guy: caroline has never bought a cd in her life. you are a vinyl guy? ok. we're going to leave that there. tom is already listening to one of those. there is a positive start in the united states. we will show you what is going on. the stoxx 600 is down 1% in europe. this is bloomberg. ♪ 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. guy: agents in london, tom keene in new york, francine lacqua off this morning and back later this week. i want to take you to paris.

the train stations in paris look like this, trains and planes. they are protesting against macron's plans to strip benefits from some state workers. this is a different strategy. usually there are two strikes and they move on but this is a rolling strike every week, which will become a problem for those commuting. who wins? >> macron in the end. this spike in terms of trying to source out prince's labor market --france's labor market has been going on since i was a teenager. i think the economic reality is, he will keep on forcing it. these rights always get won by government and macron has a lot of power to play with at the moment.

he is currently enough in his term that i would second. tom: let's bring up the website. i just went over to euro store, which i love. --bureau star, which i love euro star, which i love. they have a whole bunch of reallycanceled, so it is tiring. >> and the so be interesting to see how this speeds up the rest of europe and if you are in berlin, watching the story and trying to figure out if macron can deliver, this is it because there is an expectation if you want to push on with european reforms, you have to do fr ance first. if you can do that, that is huge. tom: patrick, is france working from an investment standpoint? have you been focusing more on french multinationals?

patrick: we have banks in french, so they are trading at tangible book value and all of that is attractive. an update their own france and the strikes. so much more in the coming days. right now, first word news in new york city. outlines for the deal announced it will be outlined next week. the details could wait for later. announced ause ante summit in peru. they will have talks on finer points of the trade deal and legal tax would continue. energyattack affected transfer partners, and they say they are confident the system is working properly again. they say it had no impact on the

flow of natural gas. last month, u.s. officials warned russian hackers are attacking the u.s. grid. atlantice told the that there is a lot of interest in the xiao jie share of israel -- and the saudi share israel. villanova is the best team in college basketball. last night, the wildcats beat michigan. it is their second title in three years. villanova was led with 31 points. they won all six of the tournament games by double figures. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. guy: thank you. planning tod to be

use its own chips in mac computers as early as 2020, replacing intel processors. early to metn the the mental state/developmental stages -- developmental stages. bloomberg's gadfly columnist joins us now. is this a defensive move? is this about cost-cutting renovation? alex: it is both. on one hand, if you make your own chip, you can make your own software work more seamlessly with the said hardware. you can improve battery life and short work quickly, but with apple at the moment, sales of hardware is flattening, and that means they have to get more profit out of the hardware they

the, so that stretches into supply chain, for the backwards, and they are trying to come up with their own innovations. can thereforeey deliver things on their own schedule. guy: so intel suffers as a result. a, this is hurt until even more? and b, is intel in the wrong is this? it is easy to do this if you are apple but there are more complicated bits of an iphone that they are not in, so i wonder if whether the intel business model is more flawed? alex: if you have exposure to risk, and, that is they have been tried to prove that by developing on modems to enable connectivity and iphone. if you compare it to the peers apple has in the pc space, like

hp and so on, those guys get their chips from intel. if apple is able to develop better chips than intel, they get a jump in the competition and are theoretically able to deliver better hardware in the long term. tom: did you know, no one likes to talk about chips? i make it a big deal when phones come out to talk about engineering upgrades. -- bring upwebsite the website, it is 95% that touchy-feely apple and in the middle is the heart and soul of the iphone 10. i mean, upgrade to upgrade, much better does the chip technology improve in this miracle product? alex: it is interesting. i was at the iphone launch, or press conference, and -- tom: alex, excuse me. you call that an iphone launch.

at bloomberg, we call that a junket. so you are at the iphone junket three continue. -- junket. continue. it a no, i said, i call press conference. but, yes, a junket is a good way to describe it. they drew attention to the chip innovation with every new product and failed. they said, look at the 11, look at the w2, all the terms for in-house chips. partly, there was a part of the head marketer apple tried to prove he knows about tech, but they are trying to differentiate themselves and show they had the tech jobs. but they really do have an edge on their competitors. said that they design

the chips, and then today tell intel what to do or do they do a lot of value add for cupertino? alex: apple designs its own chips and they are largely made andaiwan semiconductor, with the macbook and the mac, intel will work closely with apple. the chips they delivered to apple might be off the shelf, but they are fine-tuned to apple's needs. if you look at the terminal and look up apple r&d spending in up aboutars, it is three, and if you look at the most intensive part in the industry, it is by the chip business. that is what a lot of apple dollars are going, whether processors, memory, this cold damage -- this gamut that apple does throwing a huge amount of money on. guy: let me finish this chart

and we can look at it. this is the philadelphia semiconductor index. patrick, let me just get this to maximize, that is not right. and has had a huge run-up the semiconductor business has been amazing. is that it? those -- ithink think there is a capital spending surge we will get from the economy as it moves forward to their cyclical stocks fairly priced and i don't think we will have the runaway momentum that we have had. i think there fairly priced with the positive economic backdrop. guy: if you look at the philadelphia index, you can notice consolidation in the industry. ofre has been a huge number

consolidation and that means they have more pricing power with negotiations like apple. that is why they are doing it, because they recognize where they might have had four supplies in the past, they only have one or two. tom: alex, you killed it today on the tech technology. this is the income statement stream of apple. research, development, 10 to jillian, 12 could jillian, it is really true that they ramped up. where does that r&d number go if they bring all the chip architecture over to themselves? alex: i think it will be interesting to see how they stop merging chips together. you will see more stuff done on the processor, bringing memory into the processor. they just bought a stake in toshiba's memory chip business and that improves the performance of your ipad, imac,

and that is something that hp cannot do. they don't have the capital to spend on their own chips. samsung is the only one that can compete on that front, so we will see more of a two horse race then so far. tom: what is mr. cook doing us mr. zuckerberg goes after him? it is appalling to see them go after each other. this tim cook just a quiet and at the moment pass? alex: i think that is the case. i would imagine he wants mark zuckerberg to be seen as the teenager and he is a built in the room. -- he is the adult in the room. they have said, we do not want to monetize consumer data and they believe they are reaping the benefits. let's see how much facebook's subscriber numbers dip, if at all -- numbers dip, it would all. i don't think they will dip much. tom: alex webb, tech nerd, thank

you. this,k armstrong is with as well. right now, let me tell you about your morning briefing in america from coast-to-coast. sirius xm and all of our radio platforms, bloomberg daybreak: americas state with this -- bloomberg daybreak. stay with us.-- this is bloomberg. ♪

♪ minutes past the hour. i am guy johnson in london and tom keene in new york. the new york fed decide to publish its three new reference rates at 8:00 a.m. eastern time today, including the secured overnight lending rates.

call it what you will. we will figure that out later, but people are calling it america's libel or libel replacements for joining us to discuss this is bloomberg's market team leader tom dobson and hat trick armstrong. -- and patrick armstrong. this is the start of a long journey. libel is sort of a huge sway in the financial sector -- libor is a huge sway in the financial sector. the first about coming in, where are we now and where will we go? what is the difference and lies to support? ground, where we are is zero. the hope is the first publication will become the first reference rate over time and there is concerned the industry is being slow in terms of taking this up. until theting

infrastructure develops around rate, youou get the get the futures trading and then the hope is it becomes adopted into contracts and libor eventually gets -- guy: explain the differences. why are we doing this? why is it important? we know the backstory to libor. it is a reference rate and this is not one. well, it is, what it is constructed in a different way. why? aul: libor became theoretical level interbank loans -- into banks between banks. it is also different because it builds with collateral, as it isd to libor, and so

supposedly a lot more robust and reliable and has liquidity and backing, and therefore, should be a safer reference rate. tom: and you don't need the tuxedo at lunch to make the number work. has there been a good study of this new reference rate? how many decimals is it off of libor? do we know what the normal differential will be on the two processes? >> one think that will be interesting is to see if it works with the libor spread worth it works independently. that is something we need to watch and we won't know for sure until we start to get a history and people can analyze it. >> theoretically, will the difference be the embedded credit risk with libor? >> it should be, should minute? that should be a main factor people take into account and then you have to think about

love the actual trading that accident become more liquid and will that help or will the quiddity migrate to other places? us, andl dobson joining patrick armstrong will stick with this. you can watch this show using the function on your bloomberg. so you get the television string and the functionality. you can see that on the left-hand side of the screen. tv . this is bloomberg. ♪

♪ tom: bloomberg surveillance with more data checks in london. guy johnson in for francine lacqua. bring up the print screen on the data check. we have a date to the market and the real news is what is not going on, the 23.15 right now, a nice lift with not a lot of other market and a this morning -- panic this morning. let's go 60,000 square feet this morning off of the wonderful new book, the return of marco polo, and we do this with patrick armstrong.

there is the book, a great book, and i cannot say enough of it. very controversial from good mr. kaplan. let's talk china and their new silk road. they want the renminbi to be a dominant currency and talked about they will use it for oil and all that. here is the chart, back to 2005, which is the basic idea they lead it strengthen and strengthen, and we do it again. government does the controlled the renminbi or does it control the government? kit: it is a bit of both. the government chooses stability asets number one interest -- its number one in trust, so they wanted the currency to weaken until they saw a cause capital outflows and more political consternation from the united

states. it generally upset the control over their domestic money market , so the more recent strengthening of it is a reflection of them saying, we will lead it weaken and generally but we would much rather have stability in our balance of payments and capital flows and be able to focus on dealing with our debt problem internally than try to manage the currency towards any dollars that it wants. the key is to say cannot have everything at the same time. china jesus stability almost every child -- chooses stability almost every choice. tom: whether it is the international monetary fund, bank of england, etc., do you have half a clue what the fair value is of the renminbi? if you were sitting with president trump and he says he wants a stronger renminbi, do you know any idea where that is the chart? >> personally, i think the

renminbi is an expensive currency in terms of where it is now. we could talk for hours about it and the difficulty you have with an economy emerging in many places and not in others. i don't think the renminbi is a dirt cheap currency. cheap go there, it isn't and it is rallied in real terms in the last decade by a eye watering amountn, so it does not look at all cheap where it is. let's call for value 6.5. guy: so we have an april treasury report and fx manipulation coming out. before and after, what does the renminbi do? what is the tactical story? >> tactically, they will not stop at strengthening. they don't want it to go too far, but part of me thinks that if euro-dollar is that 1.30 in a

month's time, and dollar-yen that 100, and it australian dollar does well, we have to stop looking at the dollar mindy and look at the trade weight -- dollar renminbi and look at the trade weight. guy: that is like the eurozone is as lacks as it is about what is happening with the single currency. you look at euro-dollar and you think it is crunchy, but in reality, it isn't because of what the chinese are doing. >> everything has been strengthening against the dollar for probably 15 months now. good looks like the renminbi will strengthen against a mutual trade basket, especially with strength in japan now. a lot of currencies going up against the dollar. tom: i am making this chart real quick and will do a better job the next time. this is the jpmorgan real renminbi. as you say, over 20 years, it is a massive migration of strong china, strong china. this that a trade weighted proxy

for lebanon the and have -- renminbi, and have they done the heavy lifting of the currency? >> that is a proxy, but that shows you the long-term picture. if you never again on the last two years, you would left fast by the more recent strength because it is an so dramatic. tom: brilliant. kit juckes, thank you. after grandson, to -- patrick armstrong, thank you, as well. we continue the conversation on economics, finance, and politics. mr. masters joins, as well. this is bloomberg. ♪ 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. ♪ tom: this morning, stocks find a bid after the president talks to mexico and china.

what is the shortest path to a bear market? nafta off and then on. reading is tweeting and spotify streams and the original non-ipo . good morning. this is bloomberg surveillance, live in new york. i am tom keene. for francinen lacqua in london. what did you see in the markets in london, follow up to the carnage yesterday? guy: not really. and we saw this in the asian markets, as well, and towards the back end of the session, asian markets turned round and that limited the losses in europe. we are down but not that hard. tom: i do agree there is a good amount of stability as we speak are you right now, -- as we speak. right now, we are stable with first word news. taylor: president trump threatened to push out of nafta,

but now will announce a new deal next week. the white house wants canada and mexico to join in unveiling broad outlines of the deal at a summit in peru. details will continue. there is a report the white house considered firing the environmental protection agency and ministry, scott pruitt. he is thinking on now because john kelly is waiting for an inspector general's report on his travel. he is under fire for extensive travel and talk of security. france is being hit by strikes over the president's labor reform plans. unions planned their biggest protest of the national railroad. his proposals would deny future hires job security, early retirements, and special pensions for existing workers. the eu has more british banks operating in europe not relying on a brexit transition deal.

and that could lead to a loss of up to 10,000 jobs. the sources say they blame french lobbying and there are suspicions friends hopes the uncertainty over brexit will win business for paris. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you. here is the data quickly. we have real instability. futures are up. ec stability and currencies and fixed income market. next screen, the vix not where i thought it would he. taylor riggs had it out yesterday and we are back to big numbers. guy: let's talk about one of the big media deals that operates on both sides of the atlantic, europe, and the united states. sky news is potentially going to

be bought by disney so that disney -- so that sky could be taken over in its entirety by mr. murdock's 21st century fox and then we could see disney taking over that business. that sounds convoluted. basically, sky news could be push through and there is another deal between mediaset and sky and that makes sky a more attractive takeover for 21st century fox. and the other stock to mention is part of the apple transaction. it is down as intel falls aggressively. peaks in january, the bear market down here, 21,300, down 18% and we are nowhere near that. we sit elegantly on the two

moving day average. guy: i want to come back to your six-story -- vix story. it fails at 25 again and that is significant and i think something the market will pay attention to. i want to talk about the 50 day moving average because this is what risk officers ok attention to. pinke fail at 25, that line, the moving average, is moving up. if you are a risk officer, you'll pay attention to that. that means you will see less liquidity and that is significant that the markets. while we fail at 25, it is sloping upwards and it is still relevant for the markets. tom: right now, one of our most popular guests, for years, said masters waseth

thinking about what to do with money. now, he is alone. we still have them on to get wisdom with his wonderful experience in china and on wall street to what to do and what not to do, as well. what is the masters' recipe know not what to do? distracted. get there is a huge amount of noise in the system, and we are not used to that case we went through a long time of volatility and now i think we will have a lot or choppiness. it is important to have a strategy and take advantage of the rationality as opposed to getting wood stocked. tom: how do you know when to get? i just showed a chart. when you go to correction, how do this and that has opportunity or do you wait for the transition of a bear market to begin to invest more? seth: there is no good answer. tom: i knew that, i was setting

up mr. masters. set that is whyh: it is important to be --seth: that is why it is important to be diversified to moves. huge there was a huge opportunity building in the equity market a couple of years ago, and right now, it isn't like that. you want to be careful now but not abandon at all the whole idea of having a long-term goal and staying diversified. guy: good morning. it'se s&p went a little too day moving average yesterday, is momentum over? is that done? is done.on't know it what you will see is a lot of choppiness, probably in both directions. what we have is an interesting push me, will you, between you betweenull- strong fundamentals.

corporate profits are extremely strong. i think the last quarter on quarter quarter growth is about 18.5% and probably will be about that higher in the u.s. and in double digits outside the u.s. those are incredibly strong positives. geopolitical uncertainty with potential trade wars, and to knows what else will hit tomorrow. you will continue to see swings. the key challenge is how ticket advantage as opposed to getting what stock -- guy: which report will they focus on, the great economy with the risks from trade? the market will take a lot from that. seth: it depends on the company you look at. companies with structural growth are going to talk about opportunity as much as possible because they are favorably positioned.i think a lot of

companies have to worry about trade because they are exposed to it. they companies like boeing have a problem with the trade war. tom: later in the hour, we will spotify.eth about we have decades of experience at watching price discovery within the initial public offering process. is this a dose of arrogance and something you in different we are seeing where the tech world says, we are not going to discover price? seth: if you go back, it is in a new development. companies like google experimented. tom: it is google equivalent. se it reallyth: -- is.there's noy real way to go public . spotify is trying to save money and some internal problems. tom: but this is a public company and there is such control of the dominant founders and institutional venture

capital types, angel investors, if you will, and spotify is not a public company, even compared to the initial google effort. seth: over the last 15 years, there has been a structural change in startups that are successful and how they built their business. it used to be it was typical for a start up once it got to evaluation approaching the $1 million to automatically ipo. now, because there is so much private capital, it is cheaper and more expedient the company's to stay private longer. that makes their eventual public offering a much more high-stakes and complex process, but you can see why they do it. tom: years ago, i used to sit with a credenza full of writing hearings, physical documents, and i would read them to see that the people are involved.

and all of the red herrings, i never saw, we went to imagine the long-term. what does that mean? spotify wednesday imagine the long-term -- one stock imagine -- spotify wants to imagine the long-term? seth: some of it is kind and some is imagining. many of the companies are really in the data and information business and that is getting architected today. it will look different 10 years from now than today, and the companies that survive will be those who anticipate the changes. tom: this is a really important conversation going back to how we finance, going back to the 1930's, and what was done with legislation. later, we will go into the nuances of what spotify is trying to accomplish. wonderful to have seth masters here to give wisdom. maybe he has some

wisdom. we have a chief u.s. public -- u.s. public strategy strategist area this is bloomberg. ♪

♪ bloombergt's get the business flash. it is rupert murdoch's latest attempt to persuade british regulators that the 20% treat box takeover of -- convince british regulators of the 21st century fox takeover of sky. disney had interest in acquiring sky news. whether or not their takeover of most of fox goes through. shares in spotify begin trading

today in an unusual way. the trading price will remain a mystery until existing holders share their holds on the new york stock exchange. lastly, research was released on spotify. opec and allies will not quit cooperating once the deal ends. that is according to the united arab emirate oil minister, also the president of opec. he spoke at bloomberg is this week middle east conference in dubai and wants to stick with the current arrangement. >> i would prefer to focus on achieving the mission first and then can talk about something else after that. confusing that would situation today and juggling this or that does not help. taylor: that is your bloomberg business flash. guy: thank you.

apple is said to be planning to use its own chips in my computers as early as -- mac computers as early as 2020, replacing processors from intel. it is still in early developmental stages but is part of a larger strategy to make apple devices work more seamlessly together. caroline hyde joins us now. why is apple doing this? caroline: many elements, maybe control the profitability and not having to pay heavy margins to intel when you get the supplier processes. but largely, seems use when you have an iphone and being able to use the mac and have a similar functionality. at the moment, they have two different systems. they are trying to bring them together. and then what about the chi functionalityp -- chip functionality?

also, it is about not being at the beck and call of chipmakers. a lot of times, you have to work alongside another producer. if the control their chipmaking, they control the timeline. guy: do they keep doing this, eating out the supply chain? caroline: this is why we saw the selloff and intel shares so much. it is a significant drop-off when intel only gets 5% from the revenue from apple. this could become a theme, which is why you have the big concern in the market. also, this could become what other computer makers start doing. tom: what is interesting is apple with this story angle reaffirms their hardware company. they have apple music, itunes, and all the, but -- and all that, but i find their bundled in as a tech stock and they are radically different from tech

stocks you follow every day for bloomberg technology. caroline: they are so radically different because they are the most valuable company in the world but they are all over in terms of deyverson fine with the company is -- diversifying what the company has. they're becoming a services company. they have not only have bututers, like the mac, your phones, smart watches, and they are a much bigger player and a different type of company from the rest of the tech stocks. tom: thank you. we appreciate your work on spotify and apple. she is with bloomberg technology. let's look at the cash on apple off the bloomberg. seth masters is with us. when you look at total debt, there has been a buildup to liquefy shareholders, but the build, is the vector

still going up, even with tax cuts? seth: basically, it gives apple optionality. the key challenges to negotiate the process of maturation of their business and becoming more of a hardware company. tom: you are out there looking for newbies. a seth masters' angel company cannot move the needle tim cook. is he boxed into only looking at twitter and upsize companies? i'm trying to make news talking about twitter. seth: i have no idea where apple is a. tom: you don't know what he will do with twitter? seth: no. couple has to do both.i think they're always -- apple has to do both. i think they're always trying to bring in house with talents, and when they look at bigger deals, it is transformation infrastructure we. -- it is infrastructural transformation. guy: thank you, seth masters.

he will stick with us. let's talk about how european markets are faring before the u.s. open. this is the picture at the moment. we are looking at markets that are not down but are not down as hard as the u.s. markets monday. this is our fair values on the bloomberg. we will have more in a moment. this is bloomberg. ♪

♪ tom: good morning. guy johnson in for francine lacqua. and tom keene. with us now, seth masters, a private investor, and we love to have him on. we will try to get to china. masters, oneth chairman powell in the tea leaves in the system, i went to lincoln a fed discussion with the ghost of 2008, which blew up. the trust of the system blew up. interview after interview, it is no big deal. i heard the same thing 11 years ago. seth: as of right now, there is a bizarre similarity with what happened 10 years ago because of p/e ratios are about the same dividend and u.s. stocks are

most exactly the same but many things are different. one of the things different days the financial system is more robust. there isn't this an kind of magnitude with problem brewing on balance sheets jets, and the other thing different is you are starting from a different position, when there has been so much stimulus in the system and now the challenge is how central banks extract themselves from that. job ati.t. did a great this, and so. the institutional greed of 2007 was the need to make 20 more basis points on conservative paper. marketnew secured loan in the certitude of secured loans, is that the new greek mechanism? i can make -- new greed mechanism? i do not think it is as

bad. the reason is the balance sheets where it is bidding currently is more appropriate for it to rest. the challenge in 2008 was you had a huge amounts of balance sheet risk because the people taking those positions in small spread things where basically doing it with short-term funding. that is a mismatch you cannot solve. today, we have less of that problem but something to watch. guy: one of the mistakes we made into that period was and risk was disaggregated the system could cope because it would be fine. do we understand where the risk lies now? when you think of the markets, do we have a real understanding of what risk looks like? seth: of course, you only know the answer and line side --

answer in hindsight. to the extent we are at risk now, and maybe because we think we have such sophisticated bottles and we may be tempted to overreliance on them, as everyone looks at the market through complex risk models that are fitted to the world the way it has been the last years, the things i worry about is we might be estimating systemic risk because it has tended to be low. as it creeps up, my hope is the models will adjust fast enough and do not get into a situation where people take way more risk than they thought. guy: thank you. seth masters.coming up , david lipson, this is bloomberg. ♪

tom: bloomberg surveillance. all of washington, all of their brackets were better than mine.

surrounded by geniuses on ncaa bracket basketball. congratulations to the villanova's of pennsylvania. here's taylor riggs. >> president trump wants to unveil the broad outlines of a new deal on nafta next week. that's according to people familiar with the matter. the white house once a preliminary agreement with mexico and canada. technical talks would continue. a cyberattack hobbled the electronic communication system used by a major u.s. pipeline network. energy transfer partners says it is now confident the system is working again. attackers are targeting the nation's electric grid. as --udi crown prince says israelis and palestinians have a right to their only and. he told the atlantic there are a

lot of interests the saudi's share with israel. villanova is the best team in college basketball. for their second ncaa title in three years. the team won all six tournament games by double figures. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. i'm taylor riggs. this is bloomberg. wearing blue today for villanova. i went with yellow as my color theme this year. i thought michigan would do a little bit better. i went down in flames with purdue. >> brackets are not my specialty unfortunately. tom: that's a surveillance

exclusive right now. let's go to the bracket known as washington. we're honored to have with us marty schenker and michael zezas of morgan stanley. seth masters with us as well. we could do in our show right now on what we are seeing in washington. is the president acting presidential? >> he is acting presidential because he is the president. that's the reality we all face every day. tom: jonathan bernstein killing it for bloomberg review. here it is right now, presidenting. presidenting is hard. a staff structure that limits the ability of the president. the president doesn't get his way because presidents aren't dictators.

he goes brilliantly back to reagan. and onto the art politician from tennessee, howard baker. is that what we need to get back to? quarters-- in certain that's what they think. he has decided to go with people who agree with him. he wants people around him who are going to toe the line. tom: what is craig gordon and is the back story that we are missing on the cable tv news flow? this isackstory is that a presidency of one. it is donald trump's presidency and all of the people around him have a certain degree of influence but ultimately nothing gets decided unless donald trump decides it. how do i figure out what the signal is and what the noise

is? >> i think the signal and the noise are the same thing. when donald trump says he wants people in his administration to cut a deal on nafta before the peru agreement and donald trump comes out and criticizes mexico for their immigration policy you wonder what really is the truth. it is both things. cut a deal on nafta so he can have a triumph. how he gets there is still very unclear. with theael zezas quote of the day out of morgan stanley. we usually want our vegetables first at the key and household. the president and policy prescription down there to get the vegetables in before the desert? >> i don't think it's possible. a lot of what was prioritized in

the policy agenda was all of the things we heard about in the campaign that we were worried about as market participants like the trade issues. the president's authority to execute on those always required study periods and time. last year we could easily say trade issues are a future problem. all we are going to do is look down the barrel of $1.5 trillion on the goodfocus aspects of bad. now the story is a lot more complicated. you got trade issues and the way the tax reform is put together there are some interesting cliffs we come on in the next few years. just amplifying all the other things going on in markets right now. a line between presidential volatility and i come back to this issue of signal and noise and market volatility. are these factors correlated?

should they be correlated? how do i relate these two issues? noiseon't know that it is the difficulty investors should have when trying to price in as complex strategy on trade. the u.s. probably once a relatively benign outcome on its various trade negotiations. the tactics they are following require escalation. you have to price in both of that you are taking on a riskier dutch the most likely outcome is probably something that looks like the bush 2002 tariffs. tom: what's the fiscal calendar right now? the ramifications of the tax cut

, what's your calendar forward? muchdon't know there's else to watch until after the midterm election. the midterm elections are the next catalyst that tells you what direction we are taking. tom: we are going to have a point where we know chronic one point whatever trillion dollar deficit. are you telling me the market is not going to care about that? >> it is going to care but it doesn't know how to think about it yet. economicoing to goose growth in the near term. around the horn -- we are talking baseball here. what's important here is the 1.5 trillion dollar deficit. does our washington team have any clue when that is? >> we don't really know. i think the point about the

midterms is key. if the drama kratz -- democrats take control of the house and everything is up in the air in terms of how this president executes his policy and how the treasury react. back on at to come slightly different subject. why is the president taking potshots at amazon? >> that is a good question that would require me to tap into the president's own psyche. other than him explaining his own behavior as not being comfortable with the power that certain folks in the industry have. guy: there must be an endgame. you talked about -- this strategy requires an escalation. is this going somewhere or is this not going somewhere? is there a reasoning behind this that explains something? are butmystified as you

i'm trying to understand if this is part of an escalating strategy. >> the difference between trade and something like amazon, there is some level of personal grievance. there are several laws giving him power to deal with that. in terms of something as complicated as taking on a certain industry the regulatory process even rewriting rules under the executive branch is something that takes on average aren't anyand there clear laws. the postal service is an independent agency. there is a straight line between the president's intentions and what he says and what he can actually do with trade. tom: have we had a gilded age? michael zezas is in the trenches of policy and analysis and all of this cacophony of news flow is wrapped around a true gilded age and the president represents

part of that. >> in some ways you are right. there has been this huge increase in inequality and powerful people with lots of money. importantly the gilded age was a huge time of structural economic transition as we moved through the process of industrializing and turning into a service economy. what's happening now is a similar transition as we move into an information economy. whenever you have big structural change like that you get a lot of concentration. changeduct of that is that is both exciting from an economic standpoint but also very worrisome. you going to be in the front row of the trump joint news conference today? >> i'm going to be in the front row and watch it from my desk. i think he may actually get thrown? the stock market today. two questions.s

it will be interesting to see if the white house press corps goes there. , driving thehenker market ever higher. this was great. marty schenker, head of content for bloomberg news. michael zezas and seth masters. this is what we like best on surveillance. the president will have a joint news conference with members of the baltic state. that is a really actually interesting foreign-policy discussion. somehow i think there will be other topics at hand. look for that in the 1:00 hour worldwide. this is bloomberg. ♪

>> this is bloomberg surveillance. i'm taylor riggs.

energy is harbor taking aim at australia's third-largest energy producer. harbor has made a 10.3 billion dollar offer for santos. the ceo says she would expand the company's operations in asia and africa. shares rose as much as 22%. walmart is in talks for a deal that could change its pharmacy business. retailer islargest considering a takeover of startup pill pack. general motors says that when it comes to sales figures less frequent information is more. on datas have relied for years. instead the company will issue reports every quarter. gm says 30 days is not enough time to separate real sales trends from short-term fluctuation. that's your bloomberg business flash. let's get another angle.

spotify shares go live at the open today. prices still a mystery because of the drought that is being taken. without a traditional initial have notfering shares good traditional public -- morning. all the way out there in san francisco. the buyer recommendations are coming say can fast. what i want to know from you is spotify has a revenue model but i'm still trying to get my head around the profit model. what are people buying today if they buy spotify? >> this is a subscriber growth story. it's hard to make profits in the industry as you know. if you look at the total market we expect that to top $30 billion by 2025 so the industry is going to double digit from a subscription standpoint

advertising. spotify data advantage that for now can fight with the competition so we believe carry the growth and revenue. longer-term competition sort of waking up to the marketplace and showing that defenses can come into play. for now that 30% the growth and revenue. longer-term competition sort of waking up to the growth is likely for this year. guy: if the stock pots today is that an indication of a failure for spotify and the route that it's taken? >> i think the main goal is controlling volatility. .here's a lot of uncertainty more than 55 million shares are registered or it we don't how much of them will come online because spotify has an trading in the private market so investors had the opportunity to exit. we don't know exactly how limited if at all the supply would the and that's what does

controlling volatility is more important. tom: we have talked about price discovery. let's talk about what this means for the industry. i have been listening to taylor .wift like 24/7 she has to capitulate. she has to go out on spotify. can the industry get the artist behind spotify or is there still going to be a digital tension with the creative side? >> it's interesting. themselvesioning as an artist marketplace for users with data in between. this is a model that isn't

unique to spotify. competition has not really leverage that as much. they personalized music better and i think that could help them sort of standout until competition really wakes up. tom: when do they make profits, 2040? it's like aol a million years ago. >> exactly. flow ine netflix, cash the negative story for a long time. this is sort of similar in that regard. couldt think the multiple be as high because the original content strategy is very difficult for spotify to pull off. long-term we are hoping that music categories like podcasts and live sports and things like that could help them. for now i think it's not going to be profits. it's going to be subscriber growth. tom: i have to 4000 acres in montana. they are going to cash out at

what, 11:00 a.m.? >> we will find out today. , thank you.a waral masters saidseth earlier about the idea of what this means in terms of financial engineering and the new process of going public as well. seth masters with us. michael zezas as well. coming up, a conversation with a twisted and interesting guy. always interesting to talk to him. look for that tonight. this is bloomberg. ♪

tom: bloomberg surveillance with all of the nation. we follow the president's tweets. he has been tweeting on fake news and of course sinclair. this on nafta moment ago which

is purpose -- perfect for seth masters. a big caravan of people from across mexico. it better be stopped before it gets there. cash now -- cash cow nafta is in play. congress must act now. we have michael zezas of morgan stanley who does public policy and has a state and local revenue not space to work off here. foreign aid for san antonio, san antonio and frankly, topeka. >> the economic benefits to a lot of that part of the country are pretty clear which is why when it comes to nafta you have seen a pretty clear feedback affect with republican senators and some members of the house

been pretty vocal in that they do not want to let the u.s. leave. it was three weeks ago when senator hatch said he didn't think there was much of a chance of the u.s. leaving nafta because the u.s. would exercise its authority to ratify or do you ratify treaties. now says theact president. peso, down we go. peso. it's all intertwined. within your study of the municipal architecture of the south and the greater midwest how intertwined is nafta? the president wants to believe it's one big polarity where we must act now. >> it's very intertwined. the ip conflict with china can kind of raise the same feedback loops which is to say that to the extent that there is

negative feedback to agriculture because there is responses from trading parties around limiting imports and we start seeing agricultural prices go down we are actually watching agricultural prices very quickly. if there is a feedback loop that can finally start eroding at the present space -- tom: it's to watch agriculture. issueser is very local that if their pocketbooks are being hurt directly than the popularity in those areas is going to perhaps start changing behavior. until now you haven't seen that feedback the -- loop developed. naftahough going after and china and putting agriculture at risk is something that hypothetically you would think of republican president who is relying on that risk

wouldn't want to do he has not suffered the negative consequences of that yet. tom: this is been wonderful. seth masters, sorry we didn't get to china. private investor. and michael zezas with us from morgan stanley. it really shows the removal from the market upward. londonnson mentioning certainly did better than the carnage we saw in new york yesterday. euro slips back under a 123 to 122 handle. stronger dollar in the last hour. stay with us for the president's press conference later today. this bloomberg. 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. >> technical tests.

the s&p closes between key support levels. goldman says it's time to hedge. the white house pushes for pulmonary nafta deal next week while president trump says the nafta cash cow still in play. launches its direct listing in the midst of this tech route. david: welcome to bloomberg daybreak. i'm david westin along with alix steel. yesterday we had a route. worst start of the second quarter since 1929. david: you're talking about equities. i was talking about michigan villanova. did something to on with equities yesterday? alix: you didn't watch it though. david: i did not stay up that late. alix: did you want to cry? it still looks like a beautiful day out. upid: the sun will come tomorrow. alix: in t e