opening up. alix: president xi jinping columns the markets talking about a new phase in opening of china's economy and avoiding a cold war mentality. protections over profits. mark zuckerberg testifies on capitol hill with a laundry list of actions facebook will take to secure user privacy. is it enough? lose $16illionaires billion on monday. david: welcome to bloomberg daybreak: americas. i'm david westin alongside alix steel. guess who's going to the capital? alix: all of the action overnight was in china. by the afternoon it's going to be all on capitol hill. how angry are these congressmen going to sound? david: they have to make a lot of points with their constituents back home. i can't remember the last time they had a joint hearing. they don't do that in the senate. alix: that's going to be a lot

of posturing for a very long time. s&p futures are up by about 27 points. 123 is how we print holding despite the fact that french factory data missed. 280 is how we print. the 5:30 spread keeps on flattening and commodities seeing an enormous risk on rally. a monster rally five-day winning streak. that's all a russia and trade story. david: gina martin adams's chief equity strategist for bloomberg intelligence. and michael mckee. jinping came out to try to make nice with the americans. listen to it. >> i am confident that with these efforts china's financial sector will be much more

competitive. our capital market will continue to enjoy healthy development. withuilding of a system modern industries will be accelerated. our market environment will be greatly improved and intellectual property rights will be protected. china will enter a new phase of opening up. we are going to be really doing well but we are going to open up and protect intellectual property. is this a way for him to almost over the air negotiate with president trump? >> no. the world doesn't like what china does in trade and china in order to continue joining the international community needs to do more. it's really the markets hearing what they want to hear out of this. matters is how does china followthrough and how long ?oes it take when does this start happening. the other thing that really matters is what does trump want?

he want to continue pushing negotiations and making things happen or does he want a pound of flesh immediately because it works well for his base and he can't wait until china actually gets there? david: almost the same time we were hearing this there were playingthat -- was tough with lighthizer. saying if you think you are going to have us cut back on by china 2025 you have another thing coming. for the u.s. to demand they do this is interfering in another country's internal policies. it's not realistic for the u.s. to get them to cut that on that. what the chinese want to do is buy more of our stuff. the problem in this negotiation as we understand it is that the chinese want to buy more of our high tech stuff and we don't want to sell it to them. so there's a standoff over how you expand trade. alix: the markets on the left reacted.

thecan see the decline into close yesterday. that was the worst selloff into the close since september of 2011. then we bottomed. over here is when we had the speech. rallying to the highs of the session. theou get the sense that market really wants to have a bounce but is having a really hard time sustaining it. it has been really interesting throughout the corrective process. the thing that is really missing is any upside volatility. we are really having a hard time establishing any buying powder -- power. it's pressure continuing coming back to pressure stocks lower. obviously actions speak louder than words. will we start to see actual trade action is a big question mark going into the next six to eight weeks. words are one thing. as the tariff deadlines start to

approach the market is going to continue to be nervous until we know where we are headed. news is we actually have earnings coming so there is a massive distraction available to the equity market in the form of earnings. the s&p is expected to pose 15% year on year earnings growth per share which is pretty strong relative to the pace we have been at. sales growth is a factor we are watching really carefully. growthng about 5% sales which is pretty solid frankly and those figures could help sentiment quite a bit. about where words and actions meet and that leads me to russia. you can just see what happened to the markets. you can see the huge spike in the dollar. the worst selloff since 2016 and equities also got slammed. it's not unusual that we have

russia as a top story. this has big repercussions. >> one is syria and what happens with the u.s. and russia and then there are the sanctions particularly on the oligarch with the russian aluminum company and there's a feeling that he is very close to vladimir putin. so far the sanctions they have put on and the reaction probably doesn't mean a lot to russia's growth. maybe a rounding error. it could raise inflation which could hit consumer spending. over the longer run it might be a drag on the russian economy. sanctionsook at the this is inward foreign direct investment in russia and when you look at the chart you can see that after the crimea inward foreign direct

investment selloff significantly. in the last year and a half it has rebounded a lot. nothing has really changed in terms of russia's policy but it seems the market and investors have decided to put that aside and say we are still going to invest anyway. david: does this make much of a difference to us? >> not in the short run. word triggers a little bit of fear in my soul and that is inflation. anytime we have any hints of inflation that could be problematic for equity markets at large. we have been an environment in which any hint of inflation is perceived as a big positive as we dig our way out ofproblematis at large. a deflationary sort of malaise. i think we are on the cusp of shifting that relationship and pe has come under tremendous

pressure as inflation accelerates. i would watch for any signs of inflation to pressure potentially stocks going forward. david: if there's a theme this morning it's actions versus words. this is really a question about protection over profits. says i haveerg directed our teams to invest so much insecurity that it will significantly impact our profitability going forward but i want to be clear about what our priority is. protecting our community is more important than maximizing profits. will this be good news for facebook investors or bad news? >> i think facebook investigators -- investors unfortunately face a year of relatively bad news after multiple years of relatively good news. in the last earnings season we

weren't really talking about election-meddling. as much as it we weren't talking about regulatory issues as much. we were talking about a general likely deceleration in ad revenue for facebook and subscriber base. those are longer-term issues the company faces that are only compounded by the regulatory issues. of elections. the concerns that consumers now have in utilizing facebook as a resource. to think that tech as a general rule is going to face these headwinds throughout the year. they are broader than zuckerberg in front of congress. unfortunately it's going to continue to be something of a headwind. just upgrading utilities, downgrading tech. it wasn't because of facebook. there are other issues as well. todays is a show trial

speaking of russia. he will be respectful. normally when you get a witness up in one of these show trial hearings one party or the other is sort of on their side and the other is in opposition but mark zuckerberg has no friends up there today. he's going to be very apologetic , we let you down, oh my goodness. and of that matters. there's a lot of talk of how social media should be regulated and no agreement on how it should be regulated. the regulatory threat isn't really that great as long as the business model remains the same that you are facebook's raw material and people are willing to continue giving it to them they will be alright. it will take a while for the stocks to recover but if they can keep the business model going they should be fine. the question is do people still want to do that. our young people going to continue getting into facebook? ask any between.

do that we don't anymore. that is probably more of a long-term issue for them than anything else. david: the real question is can they change their business model without changing their business model is that's really what congress is looking for. they don't want to change what they're doing because they are making a fair amount of money off of it. >> yes. david: coming up, more of president xi jinping's conciliatory tone on trade. that's coming up next. this is bloomberg. ♪

david: chinese president xi troubledried to calm trade waters, warning against a cold war mentality. curran.me enda thank you for joining us. i want to know is this a real change in the chinese position or is it more of the same? >> it's more of the same. he made a lot of the right noises. he took the high moral ground. he spoke of the need to avoid a beggar thy neighbor approach. making it easier for foreign banks and car manufacturers to rome china and buy more imports and the like. the problem is we had heard all of that before and he fell short in the crucial specific details that so much of industry groups

around the world have been yearning for from china. it was something of an olive branch and perhaps the headline win for the u.s. but we are really short of details and no sense that this trade dispute will end. david: do we get any sense that they are willing to address the center of what the 301 was about -- specifically patents and trademarks. are they willing to change their the sharing ofg intellectual property if they want to come to china to do business? he said we will do more to protect ip. we have heard that before. we have heard it from other chinese officials and we didn't get the tangible details nailed down in terms of how to do that. we will have to see if they do come forward with that detail. there's obviously some talks going on with the u.s. and our

colleague has reported that the big stumbling block in all of this seems to be not necessarily the good deficit by more goods from the u.s. but the usa of patients to stop china's state-sponsored merge up the value chain in terms of aviation and biotech and the like. message from today is china is willing to do more in terms of buying more goods. they might do more to protect ip and the like. thethere was no mention of section 301 complaints and that's where the hard work needs to be done. market, a risk on rally. good news for dollar-yen. seeing stronger currency over the last few days as well. joining us now from london is jordan rochester. how much upside do we have for dollar-yen? >> i don't think very much.

you took into account that the risk on might be short-lived if it's to do with the progress in quotation marks. we've got a lot of actual trade friction's to come up. a lot of people haven't been talking about how the steel tariff exemptions on the u.s.'s closest allies have come to an end. have the upcoming u.s. japan summit where that will be discussed at quite a lot of length. dollar-yen i think it's not really about trade talks. why not one of the reasons i'm short. it's more about fundamental dollar view and also an overvaluation in dollar-yen. in terms of trade i think it will be more short-lived than people think. you are less constructive on the dollar.

is that because we end up having twin deficits in the u.s.? we are going to hit a trillion dollars shortfall by 2022. how does that play into your dollar thesis? >> it's a large crux of the thesis really. you have an expanding deficit. you need to ask the market to fund that spending by the u.s. and at a time of the u.s. also going from a very strong dollar position we are still relatively high versus the history. going from a strong dollar to a weaker dollar. you still have a lot of overpricing the dollar to come off and dollar-yen is one of those pairs where a lot of that positive dollar momentum is there. how does the trade issue within the united states apply against this? does that cut the other way? does that allow us to pay off our debts with cheaper dollars?

dynamicsrent account if you want to fund your deficit in need either a high real rate of return to attract foreign investment or you need your exchange rate to weaken. usually you get both. this time you are seeing 10-year gilts moving next to the fed. the weaker dollar come through. that's how the deficit comes into it. you are also talking about the u.s. senate inflicting higher rates of inflation so real yields would go lower. if you went down that track we still have a while away before we get there. seeing further dollar negative as real yields go down. investors would need a lower dollar to compensate for that risk. alix: what is the carry trade that would have the most upside based on that? plan inerything goes to

the market commentary is right about how the u.s. is talking tough on china will soften up at the very last minute that's how most people expect that to play out. that dollar china is lower is still an attractive play. yesterday we saw some toculation -- in response hire u.s. tariffs. actually you saw a big downplaying this morning and the lessons learned from 2015 is that a devaluation of currency comes at a cost. china is still lower and in terms of g10 weaker dollar overall. jordan rochester, thank you. we have some breaking news. according to some great reporting by bloomberg, saudi arabia is said to aim for $80 oil price in order to pay for the governments very busy policy agenda and to support saudi eraramco.

this would seem to fly in the face of that and $80 would supply a significant continuation of those cuts. david: it makes sense what the kingdom trying to accomplish. the question is can they get there? it's nice to say i would like $80 a barrel. is u.s. shale going to cooperate with that supply a significant continuation of those cuts. goal? alix: saudi arabia has complete control over that. the just tough lose market share to do it. there's a big investment in keeping those cuts going. david: if they lose substantial market share that does not help their budget back in the kingdom. alix: correct. it's market share versus price. i bloomberg saying saudi arabia is targeting and $80 oil price. more coming up. this is bloomberg.

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alix: risk on market today just not when it comes to russia. dollar ruble is of the most since 2016 and russia also canceled a debt auction. still with us is jordan rochester. what kind of upside can we expect for dollar ruble? >> we have had a lot already. if we just take into account what happened. of that story was that ruble being long ruble was one of the market's favorite trades and in europe in terms of emerging markets it at one of the highest real yields. attractive of an play especially if you thought oil was going to go. is we have had a much bigger escalation in sanctions than we expected. the u.k.t it would be

that really pushed things off on its own so when theresa may had success in getting most of the leading nations and developed world to also the u.k. that really pushed things off on its own so expel russian diplomats that told us that things were getting more severe. the sanctions applied to non-americans holding russian assets. also in the secondary market. you have a lot of people trying to do risk and you have the market trying to extrapolate how far this goes. financial sector has de-risked quite a lot. russia,o holdings of that's a lot of money trying to find an escape. in terms of extrapolating where that goes in terms of the move is going to be quite similar to the sort of pace we have had. saying devaluation would help the russian economy offset these sanctions, i wouldn't be long ruble. it's always difficult when

everyone is trying to find an escape to say what number. it's going to be continued. i'm not looking for a snap back. alix: thanks very much. coming up, zuckerberg heads to the hill. what changes could be in store for facebook. the business model is in question. can they rely on our data to continue to make money? by about 28 s&p up points. the rally also over in europe as well. in other asset classes it's a mix of dollar stories. it's all about commodities flying higher today. crude up almost 2%. this is bloomberg. ♪ welcome to the xfinity store.

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with xfinity mobile. plus ask how to keep your current phone. visit your local xfinity store today. alix: this is bloomberg daybreak. the dow jones up triple digits. the s&p recovering after the worst selloff in history.

russian stocks also higher after getting whacked yesterday. it is a mixed dollar story. dollar-yen a little higher, up 2/10 of 1%. here in the u.s., the theme is flatter. we are at 40 basis points. will we get to that three handle? the market and investors seem to be very calm about that prospect. aluminum really rallying on u.s. sanctions. crude getting a boost as well. news that saudi arabia is potentially targeting $80 a barrel. david: let's turn back to facebook. yesterday was the prelude as mark zuckerberg went to the hill to talk to lawmakers including senator bill nelson of florida. this is what nelson had to say. >> if it is not his site,

somebody else can be misused by people who are trying to do us harm and i believe he understands that regulation could be right around the corner. david: if that was a prelude, today is the main event mr. zuckerberg testifying before a here with ag and preview of that is kevin cirilli. go thing i ask is when you up there, you look for some friendly member who was going to be on your side. is he going to have any friends? kevin: no. this is remarkable because this is a joint senate committee hearing between the senate commerce committee and the senate judiciary committee. he is not just facing one panel, he is facing two combined. that has drawn some criticism from lawmakers who wanted separate hearings but it means that mark zuckerberg will be facing questions for a long

sustained time from dozens of senators and those questions are going to be grueling. in addition to meeting with senator bill nelson yesterday, mark zuckerberg also met with senator feinstein as well as the chairman of the commerce committee. what exactly from a policy standpoint might get done when we start talking about regulating facebook? it could potentially be some wiggle room between the ftc and the fcc. doubling down on comments that the organization has made in recent weeks about how they are going to be disclosing political ads. senator nelson telling me yesterday that is not far enough. david: we saw the text of his testimony is going to be given tomorrow in front of the house. it looks sort of like a laundry list. if you were advising mr. zuckerberg today, what would you

advise would be a win for him? great questiona and i put this to some crisis communicators inside the beltway. they suggest he is going to be sticking to the message we have seen him give in recent days. that testimony is basically verbatim some of the talking points we have seen in the public comments. i would also note that because this is going to be such a long and sustained hearing, it is very hard for there to be any type of broader off message comment than what we have seen mark zuckerberg give. he was wearing a suit yesterday and we should note that he did not talk to reporters when we were chasing him. david: thank you so much, kevin cirilli. i have done this and i was told it is the 80/20 rule.

the temptation is you want to defend yourself but if you talk too much, to get in trouble. even if they are being really critical, you let them talk. alix: this could be a test for his leadership. david: and his stamina will be challenged. it is a long hearing. alix: as mark zuckerberg heads to capitol hill, we are learning more about some of the ways that advertisers have exploited the social network. it is all part of an investigative report in bloomberg businessweek. we are joined by the host of our bloomberg businessweek tv and radio program. >> a great story here. it all has to do with affiliate marketing. >> we have heard a lot about facebook and political advertising. most of the ads are for products and affiliate marketers are middlemen to place ads for products they don't control -- who place ads for products they don't control.

the people who take them up on that offer our affiliate marketers. >> there is a lot of legitimate marketers but there are also the scammers. >> a lot of legitimate but he do this but it is more appealing for scammers because let's say you have a sketchy pill that does not work or a skin cream that will fix your skin in 10 seconds or even those ads that say you might have a virus. they would rather have some distance between the product and the actual ad so these affiliate marketers will playfully deceptive ads on facebook and other platforms, promoting these offers. >> and that is the connection. mark zuckerberg going up on capitol hill, no idea if he will ask about -- he will be asked about affiliate marketers. these affiliate marketers

make tons of money. -- it was crazy. all of these scammers were there. their message board that hosts it is called stack that money and you would think facebook would be a million miles away from this, but in the auditorium, there was a facebook saleswoman on stage the entire time, presenting speakers. it sort of seemed like the conference was sponsored by facebook. do they know that there are these scammers out there? it sounds like they must. >> i got to know a lot of the scammers and they said they get mixed messages. facebook does try to stop the bad ads and will block them but at the same time, sales people will go to these parties and tell them to spend more and buy more ads.

it is very hard to stop them. facebook allows anyone to place ads. >> this gets into the heart of there is so much data out there. they have created these algorithms that allow marketers to really target certain individuals. >> these scammers said to me that facebook has revolutionized the game. one guy said facebook goes out and finds the morons forming. he meant that it used to be you had to sort of guests what kind of person might be gullible and say if i advertise on this tv channel, abi will reach some. on facebook, facebook will track who clicks on the ad, who buys the thing and over time, it will optimize who it is showing the ad to. facebook starts showing the ad to an audience of really gullible people and they are able to sell whatever it is they are trying to do. >> they are likely to get another ad to buy the cream that

is low -- that will make you look 20 years younger. >> sure. this was an actual example, an ad that looked like a 60 minutes elon musk endorsing a brain pill. if you bought them, you're going to be billed $90 a month. >> facebook understood about a year ago that they have a problem and they have been putting more effort to kind of finding out these scams. and iy hired a new person interviewed him and he says he had a message for these scary advertisers which is winter is scammy-- scam me -- advertisers which is winter is coming. they have increased policing efforts. >> it is kind of like a whack-a-mole. as soon as you get rid of one bad actor, there is another to find access to facebook. >> these guys told me that

facebook ticky algorithm -- facebook's out of rhythm is nothing like it. -- algorithm is nothing like it. wayswill try to figure out to get around it. >> a great story, a deep dive into what is going on. thank you. back over to you. alix: thanks. i have been so tempted by those fix your skin in 20 minute ads. you can read the full story and more in the march 29 edition of bloomberg businessweek. saudi arabia wants oil at $80 a barrel to balance their budget. brent getting a boost. we are joined from london with the man that broke the story. what happened to opec's target price? >> saudi arabia has been talking to a number of opec delegates

and market participants over the last months and it is not indicating a fixed price target, all the plans and reviews -- is to try to push prices to around $80 a barrel. alix: what does that imply in terms of a non-opec/opec production cut deal? >> we're going to see a continuation of the opec/non-opec deal when the group meets in june, in vienna. we are beginning to see saudi arabia is trying to change the narrative, saying the drop is not gone and that opec needs to continue controlling the market, slashing production in reducing inventory. -- theyrtant element is are indicating that they are , if it isverdo it

needed to over tighten the market, they will over tighten it. alix: all of that winds up implying a loss of market share. how is saudi arabia going to handle that. seems to bebia content to be losing market share in the united states. they used to sell more than one million barrels a day to the united states. today, saudi arabia is selling about half of that. the kingdom is ok to give away that market share to u.s. shale producers as long as it can retain market share in asia. so far, the kingdom seems to be happy to give away market share in the benefits of higher oil prices. alix: in terms of sustainability, you get the feel

sustainable because the longer that they over aghten, the more we risk $100 barrel at the end of the day. >> we were in houston together recently. it was christmas coming early for the show producers. at $80, they believe they can produce a lot more with the only constraint being the bottleneck. saudi arabia knows it has some bottleneck. it is going to be reducing the amount of reaction we see from the shale producers. alix: really interesting. blas, thank you very much. david: breaking news coming out of volkswagen. the ceo is -- has said he is willing to talk about changes in his role at volkswagen. this is a big change. he has really trying to get them past the scandals they had and

at the same time, they're going through a strategic asset review but he is now saying he is open to changes in his role. alix: i wonder what that means like what deficit does he have that would need to be fixed? david: i suspect that there is some ongoing negotiations. bloomberg will keep monitoring that and bring you up to speed as more news develops. coming up, the latest u.s. sanctions on russia cost billionaires and hedge fund managers billions of dollars. you can turn on your radio and listen to our colleagues from 7:00 to 9:00. bloomberg surveillance can be heard in new york, boston, washington, d.c. and across the united states on sirius xm satellite radar -- satellite radio.

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>> this is bloomberg daybreak. i am kailey leinz. david: we turn now to wall street beat. we cover three things wall street is buzzing about. first up, russian repercussions. a hedge fund known for russian calls goes all in and it does not turn out well. then, default drama. blackstone getting a lot more complicated. finally, banking on saving.

investors looking to deutsche bank's new ceo. alix: joining us now is peggy collins. this rush of that is unreal. this hedge fund industry -- increased its stake in russian stocks to 90% in march. that hurts me. peggy: it is quite the concentrated that. buildingger has been off his bet in russia for over a year now. believe it or not, his comments on the call to us was basically i wish i had more cash lying around to buy even more on the dip. someone who really believes in the underlying fundamentals of infrastructure, utilities and the other companies in russia. david: it seems there is a great lesson in here because he said global ratings took them up to investment grade. he was basing it on what the market said and then he got clobbered by geopolitics. saying ifis basically

the underlying fundamentals look , he is saying s&p these companies have a great shot of doing well. geopolitics is always the wildcard. alix: how do you hedge something like that? david: you can't hedge against the president of the united states deciding to do something, suddenly. they had sanctions against the seven but it turns out of the 27 russian billionaires, 26 of them have lost money, some of them a lot of money. peggy: exactly, and you wonder what pressure we put on putin -- will be put on putin. generally in countries like russia and china, when pressure is put on, the billionaires move their money, to real estate, to art.

david: particularly if they were moving their money to london real estate or new york real estate, that money does not look security more. alix: and you can't go to cyprus. david: the second story we want to cover is the great saga between blackstone and -- we have covered them before and the fact that they had this deal when they were going to trigger credit swaps. explain, as hard to diagram you have to draw to explain it. it is a face-off between a unit and some other hedge funds and even goldman sachs in the market. it is like a battle between blackstone which wants to refinance some of the company's debt and others who have sold insurance on credit default

swaps and they are basically playing a game of supply and demand in the market. david: the one thing i can figure out is something can't be right because they have debt out now theyterest because can exchange it for 3%. that just does not happen. alix: you pointed out this morning, should you be allowed to do this? becauset feels that way -- that is not why they went from 10% to 3%. peggy: it feels very arbitrary or manipulative of the market. these are credit default swaps and we are talking about refinancing the debt as something that is in that area. whenever you are talking about that, it feels very risky. alix: and then still reeling

from the shakeup at deutsche bank. had 24an sewing, you hours. what is wall street saying? are they chomping at the bit? peggy: there is a bit of an exhale going on. it got quite chaotic in terms of all the names that were flying around in terms of the potential ceo successor. ways, this did not drag out and kind of weigh on the banks for too long. think there is a lot of people who still have questions about where the bank is going to concentrate its efforts. are they going to pull back from investment banking? what is really the strategy going forward? we don't have a lot of answers. david: at the same time, we have had some investors saying they think it is a safe bet. they don't think he is going to go wildly in one direction or the other. , this is the turmoil

not the first changeover in ceos in deutsche bank. they are ready to settle things down. peggy: it felt like a safe bet. jamie dimon brought this up last week and said he is going to try to make decisions more quickly. that is not easy for tanker ships like big banks. david: quick wrong decisions are not so good. your age department -- your hr department calls up and says hey can we talk about a buyout? david: peggy collins, thank you. coming up, an attack on our country. that is what president trump called the fbi raid on the office of his personal attorney, michael cohen. alix: check out tv . you can interact with us directly. this is bloomberg. ♪

david: late yesterday, we heard word that the u.s. attorney of the southern district along with the fbi raided the home of donald trump's personal lawyer. that is pretty unusual. alix: in order to violate client confidentiality, -- attorney-client privilege, how bad does it have to be? david: pretty bad. the president yesterday gave remarks. this transcript from the white house saying it is a disgraceful situation, a total witchhunt, an attack on our country and what we all stand for. he said some people think i should fire bob mueller.

he raised the specter once again. alix: if i am a market participant, i don't know how to think about this. david: the markets went down when this news came out. it does sound like it might involve the president. he is back, tweeting again. he said attorney-client privilege is dead. it is an overstatement. there are situations were you can get access to that information but you have to show something really wrong is going on. he is a lawyer, so he is definitely going to know that. how do you hedge that? we will ask bob doll, nuveen asset management chief equity strategist.

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alix: xi to the rescue. president xi jingping talking about opening up china's economy and avoiding a cold war mentality. protection over profit. testifies onrg capitol hill today with a long list of actions facebook will take to protect user privacy. russian billionaires lose $16 billion yesterday as the ruble tanks. david: welcome to bloomberg daybreak on this tuesday, april 10. i am david westin alongside alix steel. what is going to go on with trade, mr. trump's lawyer? alix: you were going to say it is friday. david: wishful thinking. alix: in the markets, it is a risk on field. thank you very much to the words from xi jingping. worstday selloff was the

since september of 2011. the cohen headlines continue to pummel the markets and then xi saved it in the overnight session. a mixed dollar story but risk on despite the fact you had french factory orders rolling over a little bit. monster rally in commodities. saudi arabia wants $80 crude. david: let's find out what is going on outside the business world. kailey leinz is here with "first word news." president trump is stepping up his attacks on special counsel robert mueller following the fbi's raid on his personal lawyer's office. the president we did quote, attorney-client privilege is dead and called the probate total which i'm. according to the washington post, fbi agents seized documents related to the in hush money michael: paid to stormy daniels -- michael cohen paid to stormy

daniels. -- democrats agreed to boost the military budget in exchange for an increase in domestic spending. some republicans feel reluctant to blowup one of the few bipartisan deals in congress. mark zuckerberg will tell congress today that the social network's problems are his mistake. zuckerberg will say that facebook did not do enough to prevent fake news and hate speech. global news, 24 hours a day, powered by over 2700 journalists and analysts in more than 120 countries. i'm kailey leinz, this is bloomberg. alix: it is risk on as markets as investors look at trade tensions easing. over the weekend, president trump tweeting president xi and i will always be friends.

taxes will become reciprocal and a deal we made on intellectual property. great do -- great future for both countries. had to say. xi >> i am confident that with these efforts, china's financial sector will be much more competitive. our capital market will continue andnjoy healthy development modern industries will be accelerated. our marketing department will be improved. in short, china will enter a new phase of opening up. is boboining us now doll, nuveen asset management chief equity strategist. how positive are you right now? bob: intermediate-term, i am neutral but i think you have to buy some here. alix: where though? bob: that is a good question. we are more diversified than we

have been, and a while. -- in a while. a name name here and they are where you think the earnings are going to be intact. david: we are in a different regime than we were six months ago. what could happen out of washington, out of beijing. invest -- wheno you go in to invest, what are you careful about? bob: up until the change, we had rising rates, so everything went up. now earnings are going up but pe's are not going higher. now you've got to have the earnings. alix: you've got to have the earnings but how much exposure do you want them to have to china? stocks that have particular exposure to china versus the overall world index you can see underperformance of those equities like broadcom.

how do you factor those in? bob: with china and the trade issue and a slowing economy in europe, we want more earnings to come from the united states. the multinationals are underrated in our portfolios. david: does that also translate into large-cap? bob: it does, it pushes you down cap a bit because many of the big companies are huge multinationals. rbc trimmed their forecast. they are constructive but less because their liking utilities. they downgraded tech. -- because they are liking utilities. they downgraded tech. bob: telecom has some good yield. the stocks have not done well. i think consumer discretionary names make sense. they took their earnings estimate. there is a message there as

well. earnings expectations are high. i am not sure we can exceed them. alix: does it have to do it all with facebook and potential regulatory pressure? bob: it is facebook et all. they are the center of the storm. welltocks have done really and money is coming out of them. we are still overweight, just less overweight than we were. may be paying attention to value tech names like hewlett-packard as opposed to the high pe techs that did so well last year. david: which sectors are protected against inflation as we take a look at possible tariffs coming in? bob: energy is part of this story. energy prices have done better. you need to be in the portfolio, compared to before.

technology is usually a pretty good inflation beneficiary. the troublemakers when inflation moves up because interest rates -- utilities continue to struggle. that sentiment among those small companies is rolling over a little bit, so backing off to a five-month low. how do you track trade wars to ceo confidence to actual output? bob: with great difficulty. take the trade. there is a war of words, but not a lot of there, there. alix: sentiment does not mean there, there. bob: exactly right. we will see it in second-quarter guidance. say not so ceos will sure about what is going to happen. david: how concerned are we

about wage increases cutting in the margins? bob: not a lot, but eventually we have to go there. you take the unemployment rate see the wageou gains and eventually that is going to be a three handle and pricing power is not very evident. 2019 story.f a , we have beening talking about the backdrop of trade, global pmi's have started to roll over a little bit. take a look at eurozone, china as well as the u.s.. eurozone is rolling over and there is worried that synchronized global growth has peaked one will start to decline. bob: it has peaked in my view. u.s. pmi is 59, still brilliant. it is no longer expanding. we can't expect more

acceleration, from -- some deceleration. alix: what stocks do you buy on that? bob: you still have to own some cyclicals. make sure you don't overpay. technology, selected consumer names. financials benefit in this type of environment. alix: what kinds of names? at&t, verizon? bob: we own some at&t, we don't own verizon. in the energy space, i would rather own some emt companies rather than the ugly integrated companies. , cheap stock with positive things going on. home depot is still gaining market share. liningis there a silver in this perhaps rolling over of global growth? bob: yes.

i think that is going to be part of the positive story. back to the regime change, we had all positives. now we have when this happens, this happens. we did some deceleration that takes pressure off of interest rates and perhaps inflation. david: bob doll of nuveen will be staying with us. coming up, the market gears up for earnings season. what to watch for financials as they begin reporting. ♪

kailey: this is bloomberg daybreak.

is sellingrl icahn -- the price, $5.4 billion. they plan to split federal logo into publicly traded companies. at the setback for uber european union's top court. the ruling reaffirms a previous decision that uber should be treated like a transport company and not as a digital service provider. has unveiled five models in its push to revitalize its business in china. the new models will be built in china with a local partner. ford's chinese sales fell 6% last year. news, investors

are excited about earnings season kicking off later this week. it is all about the financials. blackrock, jpmorgan and wells fargo. joining us is bob doll, of nuveen asset management. kicking a look at financials earnings estimates, they really climbed this year. do we beat or do we meet? bob: i think financials have a chance of beating. they have underlying business that is doing better. the benefit from the rise in interest rates is certainly helping them. many of them reporting that lending activity has picked up. i think financials have as good a chance of beating pretty high estimates as anybody. alix: who is best positioned for it? bob: i would go with big banks. world,organ's of the bank of america should benefit. quite as goodt but the results should be pretty good. alix: what about the broader

earnings takeaway? saw and at some point, we are going to peak out. witha lot will have to do what does the company say about the rest of the year? the numbers in the first quarter of going to be good. expectations are high and we know markets move based on how do we do versus expectations? when expectations are now appear, beating them gets a whole lot harder and i think at some point, we're going to start and analysts19 still have a double-digit percent increase. i can't get there with my pencil. i think it is going to be a single digit number and that lets some of the air out of the tires. alix: take a look at industrials because there is a big gap between where they are trading. the blue line is earnings

estimates and the white line is the industrial index. what happens with that kind of gap? bob: it depends on where the earnings eventually go. the problem people are having with industrial stocks, trade, slowdown overseas. a lot of multinationals there. , watchingempted yet them carefully but i am not pulling the trigger. alix: what areas are you looking to pull the trigger on? bob: if we get disappointment, expectations are high in technology. they are reasonably high in health care. more importantly than others, hear what the guidance is going for. how tentative will these managers become around the trade issue, around the slowdown in europe?

that could cause this trading range to continue and flap around for some time. alix: bob, great to see you. bob doll of nuveen. david: we have some more breaking news out of volkswagen. we reported they were talking about the possibility of changing mr. mueller j.k. 's role.-- mueller they changed it. this is according to a german publication who is reporting diees is going to be replacing mueller as ceo. they are trying to modernize for the future. herbert diess will be replacing mueller as ceo. they learned a lesson from deutsche bank. we will keep you posted on that. live from new york, this is bloomberg.

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david: facebook ceo mark zuckerberg will spend the next two days testifying on capitol hill, trying to explain what has gone wrong. most important, laying out how he is going to make sure it does not happen again. to set the stage, we welcome cunyey jarvis, he is the professor of journalism. welcome, jeff it is great to have you here. you have written both that you think we are being too tough on facebook and maybe not tough enough. jeff: we have the danger of a moral panic occurring. thinking the world is falling apart and it is all facebook's fault and nothing is that simple.

i believe facebook as to get far beyond the tactics of what went wrong to recognize it's public responsibility about uninformed and civil conversation. david: is it facebook's responsibility to protect the data or is it there responsible it until it is no so we can protect our data. jeff: in this case, people went and did a quiz and gave information. you go on facebook, you share information. when is that yours and when is that somebody else's? david: i did not do the quiz. going to behis is shared with an organization that will give it to the trump campaign, i might not have done it. is it fair for me to take that quiz, not knowing what they're going to do with it? jeff: true, but facebook did not itw they were going to do do -- to do it. we are really risking going overboard. david: what can mark zuckerberg do or avoid doing in front of congress? wegoing to want to beat

him up and he has to sit there and take it. to some extent, he can admit fault and blame and he can promise change. alix: promise change. i want to take a quote of what he said in a testimony yesterday. he said i directed our teams to invest so much insecurity on top of the other investments we are making that will significantly impact our profitability going forward, but i want to be clear about what our priority is, protecting our community is more important than maximizing profits. if you are a facebook investor, how do you own this stock? jeff: you are going to build more value in the long run. amazon is about building more value. alix: but where do they monetize? jeff: they are still monetizing just like we do in media, your attention. consider where this is is a priority. facebook is hiring 20,000 people to do nothing but try to find

the cracks in facebook versus in america, we have 30,000 journalists in daily newspapers. that is the priority we are giving this as a society. peoplepaul sweeney, can actually do this and protect their data without undermining the value of that data? to the extent that they do limit the amount of data available to advertisers, that is going to impact the value proposition for advertisers. social media presents an advertising platform that has said -- that is superior to what they can get on traditional media. at the end of the day, internet advertising is still projected to grow high teens. andg to facebook and google the reason the stock is generally hung -- has generally hung in there is most investors

feel at the revenue story of facebook remains intact even though there may be higher cost. david: there are two things going on at least. one, data about what i have said or thought or done and giving it to people who i might not want to have it. the other is my getting information from places i don't know where it is coming from. why can't we have a rule that says facebook has to tell us who paid for every ad? jeff: zuckerberg is doing that with political and issue ads. i think it should be with every ad. we should have transparency across the media industry about the source of information. revenuefair point, but is still going to grow, you will have more transparency. this is daily active users as a percent of monthly active users. does this chart become the most important chart for facebook? if we don't hold 65%, that is going to be their downfall. jeff: the problem is we become

too much attention focused business. the mass media business model says i want your eyeballs and that is it. that is what leads to click bait. facebook said they once more -- they want more meaningful interactions with people. they have seen lower attention, less time spent on stupid quizzes. we maybe get something that is more valuable if that turns out. david: we saw this with ibm and microsoft, when the government steps in, it is not stopping technology company. it slows them down and allows competitors to come up behind them. what is the risk for facebook? it is going to slow them down. they will have to hesitate before they do things. paul: that is very possible. most investors and facebook say the future of this stock is not so much facebook but instagram. whatsapp, messenger.

to the extent that facebook has to maybe turn it down a little bit, the monetization of those platforms may slow growth over the next few years and that is what investors are going to be focusing on when they talk to the company. and: jeff jarvis of cuny paul sweeney of bloomberg intelligence, thank you both so much. the chairman of the commerce committee is going to be joining us. breaking news on volkswagen. ceo mueller is being replaced by herbert diees -- diess. will inflation trickle through? 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. ♪ alix: this is "bloomberg daybreak." i'm alix steel. rally s&p futures up 28 points. another asset class is the euro-dollar. dollar-yen is the one offset on

the downside. treasuries on the back end. the curve continues to flatten. 40 basis points. a monster rally in commodities. talk about ppi. that is a serious rally. part is trade and part is aluminum. producer price index for march, backing out food and energy come up three tense of 1% month on month. up 2.7% year on year. higher sequentially and higher than expected. ppi final year on year is at 3%. a solid read on producer prices they are in the market. not a lot of market reaction yet, but if you drill through the specifics, producer price is right. 3% year on year pdf to wonder at what point you wind up seeing filter through. can the economy handle price increases and user demands. we have always waited for

that. are we starting to see a glimmer? rose personal consumption 2.8% year on year. we are definitely seeing consumption follow-through. joining us is ira jersey, bloomberg intelligence interest rate strategist. whatthe challenge will be happens tomorrow. what tends to move margins and equity markets is the difference cpi.en core ppi and core you are not worried about margin contraction, but if there is not rising power by corporate sector, you end with lower core cpi and that could show margins will contract and that could end up risky. david: the main reason we look at it is that what the fed will make of it and what they will do when they meet next. there is nothing to dissuade the chairman.

ira: this is a continuation of trends we have had. 3% plus or minus on the ppi final demand. it is a final number. it is a nothing to be concerned with that you are having slower inflation. alix: to that point, bloomberg spoke to robert kaplan to see how he sees rate rises. this is what he had to say. robert: we should raise it rates and do it rightly and patiently because the underlying drivers in the economy are still challenging, even though the short-term may look solid. alix: do have a 5-30 spread? in theey have been range, but flattening care you are seeing the front end of the curve. the two-year and five-year under performing. seeink we will continue to the flattening, particularly if mr. kaplan is correct and we keep on having three rate hikes a year. the curve will have to continue

to flatten. that will continue to worry people as we get flatter. david: when we look at rates, we pay attention to producer prices. we also look at how much we are borrowing. the legit office came out with a projection yesterday that i found remarkable. -- the budget office came out with a projection yesterday that i found remarkable. they will hit one trillion my 2020. there is a chart you can pull up that shows just how far in the hole we are going. ira: estimates will be higher. they were all over the place. this was in line with what we were thinking we would see within $30 billion give or take in a $3 trillion budget grade that is a rounding error. it was close to what people were thinking in terms of deficit. and looking at the cbo's consumptions, some are conservative.

i remember 10 years ago where the cbo said we will have 4.5% interest rates, and now the assumptions for growth and unemployment are all a little -- at least in my view reasonable. david: i think the administration would think they are too conservative. coming off next year and then back to 1.4%. ira: they have this where we wind up averaging somewhere near 2% growth, which may be the administration doesn't like, but it is a conservative consumption -- assumption. in planning for budgets long-term, having more conservative growth assumptions is a good thing. what is the worst that happens question mark instead of $1 trillion deficit you get a $900 .illion deficit i alix: you see underperformance in the three-year today. what is your expectation into the auction? ira: the auction demand has been decent.

you have not seen too much slippage in demand. you have not seen demand go up with higher amount of issuance. you have seen ratios into your notes and three-year notes start notese off -- two-year and three-year notes start to come off. people will say we have to demand higher rates to take down supply. alix: what do you make of japanese investors selling $34 billion in treasury in february? is that permanent, and when do higher yields translate? ira: when you look at some of the data out of japan, the fiscal year ends at march. modestly worried i would not read too much into that directly. some of the trade with china is interesting because people are worried that maybe china could use the trillion dollar holdings as leverage with the trump administration.

i do not think realistically they can do that. at the end of the day, the chinese have a choice. they can let it appreciate against the dollar or not. if they don't continue to buy treasury, they will not continue -- they will continue to have a stronger currency and that hurts exports. david: great to have you all the way from princeton. we will turn to hedge funds. they were supposed to pay high fees to protect ourselves with unexpected concerns. when we took a turn, no surprise hedge funds had a hard time keeping up. those days are over, at least for now. is the time for hedge funds coming again? for that, we welcome pedro pizarro appeared welcome back -- abobio-- f

savoldelli. heard --ter you have o: in february, it was a bloodbath across the board. we put up -- david: we put up a chart and abroad. explain that. >> returns are disappointing. we ranked the vix and what is the lowest mix we have seen any medium the blue line is how did hedge fund index perform over the time. crosses 20.25, you see

fairly consistent losses. once it is about 30, it may -- literally never made money. alix: what did perform well in this environment? backspace.gage if you look at that area, it had no particularly powerful declines. in thehe macro space general case when volatility is up. , for carbon-based light firms, the computers in february when volatility picked got stronger across the board. there were double-digit loss. campbell lost 10%. these are big numbers for some

programs to have as a one-month decline. in many cases, it took a year negative in one month. david: returns have been disappointing. is the market correcting? it has certainly come down. people have hung on aggressively. --ple are more willing investors are more willing to concede that. it is down to 17 on average. it is in the 155. that includes legacy funds able to charge. and they arethers still charging two and 20. assetshe volatility with , we had a great report talking about affect hedge funds falling 3%. what did we learn about those

that cannot make money when there is volatility? fair, there are two kinds of volatility. proverbial -- and we discussed this, the good and the bad. the fx -- the jp morgan spike to around 9.5%. is aroundun average 10, and it is back down to 7.5. where we have seen the so-called spikes, you are right to say it is not a spy to long-run average, but relative to where we had been before and to a concentrated, it was short shock. that has resulted in better profitability because it was fundamental. it also was very difficult at core. carry trades got killed and trend following got killed. good volatility

and bad. what is the difference? is it geopolitics is bad and economic or market is good but short what is good and what is bad? that is a core question, particularly in predicting bank profitability. what is good volatility is one that creates paradigm shift. if we look at february, only 8% of people -- of investors thought in the long when the market would be corrected -- would not be hit by higher interest rates. 92% are on one side. also, we had the highest level in the merrill lynch survey of people thinking we are in the late cycles. everyone has their finger on the trigger. by the end -- by the time we took the february poll in early february, it was a 44%.

we went from over 50% to under 50% overweight. that kind of a shift, you saw cash levels go up by 10%. the kind of was thing trading loves, shift and an asset class shift. trading records were set in february. not much will carry through to banks, but it will for investors. alix: it is always a pressure -- pleasure. great to see you. economic data, treasury slammed on fire -- higher inflation. consumer prices rose .3%. also, it if you dig between the details, you saw margin costs

going for wholesalers as well as retailers read the question is -- can businesses pass it on to consumers. we will get that information in price index model. for now, higher inflation on the user level. you are seeing selloff in the curve as it continues to flatten on that news. much more coming up on bloomberg. david: coming up, facebook shares up this morning ahead of mark zuckerberg's testimony. senator of the chairman of the congress committee will be coming with us here. you can turn on the radio and listen to our colleagues tom keene and jonathan ferro. bloomberg surveillance can be heard in new york, in boston the , bay area, washington, d.c., and all across the united states on sirius xm radio. live from new york, this is bloomberg. ♪

♪ alix: "bloomberg daybreak." i'm kailey leinz. today on later bloomberg markets, patrick reed, the winner of the 2018 masters golf tournament. ♪ mark zuckerberg will face the senate commerce and judiciary committees. our chief washington correspondent is on capitol hill with senator john kuhn. he is chairman of the commerce committee. kevin: we are here with the chairman. a busy day pay what do you want to hear from mark zuckerberg? is facebookwhat going to do in the future to protect user data question mark secondly, what steps will they take proactively to stop the kind of harmful conduct we have seen in circumstances instead of

having to wait weeks or months or years later and then have to come back like he is today and explain it and apologize. kevin: this is like an apology to her. what -- they said they have taken steps. what specifically more do you want to see them do, and what house can they do and does congress play a role in that? sen. thune: the question whether congress lays a role is the question. we want to find out how pervasive the problem is. it has ballooned up to 87 million users. are there other firms or businesses who had access to this data and may have missed used it the way that cambridge analytica did. that is another part of this discussion, which we will get into with him today and later with other firms. i think they are taking steps. these particular types of agreements.

they suspended those and suspended another over the weekend. they are proactively taking steps that hopefully will address this issue on some level. the question whether we need regulation or legislation we will have to determine. about six month out from the midterm election, should america feel safe that facebook will not make the same mistakes again? sen. thune: as we head into the next election, it became clear that the platform got misused. there was the issue of russian meddling in our election and using social media platforms in an inappropriate way. get that and they put safeguards in place. they use artificial intelligence to weed out some of these things. the platform in terms of those types of misuses will be cleaner going forward and a lot more transparent. that is the one thing that the people want to see. it is what we want to see, more transparency and accountability.

to see clarity when it comes to what people are signing up for. what are they consenting to? how may there data be used? kevin: i want to talk about consent, particularly informed consent. i am talking to suggest that the european theyap in terms of what have implemented might be some type of basis for how to regulate this. if the ftc going to have to take the lead? is the european model what we could see for data privatization as something to look at? the ftc has lead responsibility when enforcing privacy in this country. communities -- committees jurisdiction. they have developed a model in europe. there are protocols that they will put in place. we are anxious to see how that works and how it is reacted to

buy social media companies. i do not think our companies are at this point heavily resisting the idea that there may need to be some form of regulation. mark zuckerberg has suggested he is open to that. will that european approach or model be affected? will it work? will it chill investment in these platforms and undermined the amazing benefits that come with it? those are the questions. zuckerberg, is he the face of the company? sen. thune: he is the face of a company and he is comfortable. the shareholders and users are comfortable. a lot will depend today on how he performs. i think he has an opportunity to restore the trust of the american people today. he knows that and that is why he is getting out in front of the issue. i think he has to area if he

performs well today, it might answer some questions. kevin: there is a report and political about your future leadership positions. care to comment? sen. thune: it is early. kevin: when you are ready to talk about it, you know where to come. thank you, i appreciate it. alix: that was candid are surly with senator john thing. two months after a fire spurred northern california's wine country, the most effective wildfire season on record. it took toll on utility companies. the stock had a big slump from to februaryovember on investor fears that the utility could be forced to pay costs related to the blazes. losses,ave clawed back but are down 22%. to talk about the financial issues surrounding that recovery is pedro pizarro. he is international president and ceo.

thank you for having me. alix: why are you on the hook? bero: it says utilities can held fully liable if utility equipment was involved in the cost of the fire, regardless of fault. was that utilities be able to recover costs from customers from that. the infrastructure is out there. government can recover from taxpayers heard there was a case last year that the public utilities decided for cost recovery was not provided. that broke the chain in terms of being able to get recovery. we are working with state agencies and the legislature to pursue ways to clarify that. it could be a court decision or legislation to verify. alix: what is the worst case scenario? o?n. thune

bero: if we continue to liable, that could make a hard time getting capital in the market. year int $4 billion infrastructure to keep lights on and keep it safe and enable reduction.push for that puts in parol if we don't have a fair framework. alix: are you trying -- put that in peril if we don't have the framework. alix: are you trying to change that? at reformsre looking recovery butost whether that means getting legislation or a determination from courts. this is a statewide issue. climate change in 10 cities and fire frequencies.

eight of the most destructive fires have taken place recently. where upping the state deal with fees and across the economy and preventing buyers and infrastructure in dealing with consequences. alix: i want to turn to electric vehicles. you have been trying to be at the forefront of interest rupture for electric vehicles. we also saw scott pruitt of the epa coming down hard on greenhouse gas emission standards that california has implemented. california wanting to convert more electric vehicles and you have the federal government which wants to reverse them. how does that affect investment? pedro: it speaks to the broader projective in california. emissions 40%. we understand the role federal government has to play.

aboutuitt talks california standards and the epa. it will be a process to work through that. mary nichols, the chair of the board, was talking about the state suing the federal government. but also looking for ways to have a dialogue and see if we good endp with a result. we see electric vehicles as being a big part in terms of california's greenhouse gas reductions. alix: moving to the third pond pawn of the -- talk. they say if the grade is unreliable, do you feel like it is unreliable? where would it be? how you look at grade reliability is region specific. in california, we have a grid that is fairly different from

the rest of the country. we don't have coal anymore. footprint andced it phased out. we have 50% fueled by natural gas. 30% by renewables. as we look to greenhouse gas reduction standards, we see a system that will move to having 80% of resources be carbon free. that means more renewable and we will need more storage. alix: pleasure to catch up with you. pedro pizarro. that does it for "bloomberg daybreak." this wi-fi is fast.

i know! i know! i know! i know! when did brian move back in? brian's back? he doesn't get my room. he's only going to be here for like a week. like a month, tops. oh boy.

wi-fi fast enough for the whole family is simple, easy, awesome. in many cultures, young men would stay with their families until their 40's. jonathan: this is the countdown to the opening. ♪

jonathan: the trade improves. how cool has a stock market rebounded facebook's problems -- facebook's problems, mark zuckerberg will take a growing on the hill. sanctions and escalating tensions over syria shaking investor sentiment. the market 30 minutes away from the opening. 1%.res up 29 over weakero catches a dollar. hawkish comments from the european central bank. treasury market, yields maybe high. up a two basis points. for the market, risk appetite returning to china and the united states striking and optimistic trade