estimates, and equity tradings zero in on demand spurred drops. nikki haley says that fresh sanctions will be imposed on russia. high expectations. about the strength of a global synchronized growth bubble up. david: welcome to bloomberg daybreak. we are not showing up in new york city because it is so miserable. alix: been you play tennis for 24 hours? david: four hours. alix: will be sick of the whole week. in the markets, i would not categorize it so much of a risk on but taking some risk off. as of the futures of about 17 points as investors were hedging risk into the weekend. you can unwind some of that hedge. if you look at euro, slightly higher.

year yield, you are seeing a selloff all across the bond market. the underperformer in europe comes from the u.k. 1%.e oil, down by the story was that syria was going to be a disrupter of global oil prices in the middle east that did not materialize are taking some of that risk premium off of the table. david: is time now for the morning brief. this week, we will your from every member of the federal reserve except the chairman. a whole lot more to come through the week. bank earnings after bank of america today, goldman sachs tomorrow, and morgan stanley on wednesday. and shinzo abe will meet with president trump was trade in north korea high on the agenda. alix: bank of america out with first-quarter results. , but bankingates revenue fell short of estimates. similar story from what we saw

with citi and jpmorgan. joining us now on the phone is a senior banking analyst. alison williams. why is the stock not reacting more positively? jpmorgan and citi on friday, and we saw similar today, equity strong. is a littleica's bit worse, but it is important to keep in mind the business mix. bank of america is relatively credit focused. that is not an area that we saw ti orgth in ci jpmorgan. the core initiatives of bank of america are basically and line a little bit better. credit coming and a little bit better than expected, that is something that we saw at the peak. david: it looks like they are

doing a good job on costs because they have fis -- they have that efficiency ratio. alison: particularly from bank of america, and we are going to want to hear about the yield curve and the expectations for the fed and also what is happening with deposits repricing. we have seen a little bit of althsure there in the we business so we are going to keep an eye on it, but this quarter is continuing to help. there were a lot of concerns about the yield curve in the current -- in the quarter. still flat to in-line. billion,5% to $11.6 but jpmorgan was about 10% over $13 billion. on these banks capitalizing increase in short-term that

investors thought they would? alison: i think they are but the question is what's next. last year was probably the peak in terms of the expansion of the interest market versus -- we saw a reserve releases across the board and retraction of the energy from the prior year. this year, we are going to see a little bit less in terms of the market expansion. we did get better expansion so far across the banks. also wells fargo, that was a bright spot in their quarter. that continues to be good because that is the offset that people are looking for. again, we are probably not going to get as much less this we did see last year from the rate aspect. david: the return on equity got up above 10%, which is been something that has been a

target. alison: correct. return on up on equity, a big step up on return on tangible equity, but keep in mind, there is the tax benefit that is helping these banks this quarter. that is one of the reasons we are seeing very strong earnings growth in the quarter. bank of america that last quarter. part of it is some of the things we discussed before in terms of cost control, the pretax margin in the wealth business -- the worry for investors going forward might be with fic missing, what does that mean for the rate? strong --bout very that is sort of the focused -- what is the outlook.

the other is loan growth. not as strong as we saw in jpmorgan, but not necessarily comparable to citi or wells fargo. strong asnot as jpmorgan, but still a pretty decent result. david: thank you. that is alison williams of bloomberg intelligence. coming up, markets seem to be shrugging off the syria strikes over the weekend. this is bloomberg. ♪

♪ >> this is bloomberg daybreak. i'm here with your bloomberg business flash. itsier has agreed to sell

cancer unit. scheier wants to focus more on treatments for rare diseases. meanwhile, japan pharmaceutical is considering making a bid for shire. says that all options are open. interview, he said he wants to find solutions by 2022. those comments follow a bloomberg report that the automakers are in talks to merge. for the first time, the world's largest advertising company is searching for a chief executive. the resignation followed allegations of personal misconduct while it is searching a newceo, it is named executive chairman into operating chiefs. that is your bloomberg business flash. david: thanks so much. bloombergtime for the

first take, we are joined by gina martin adams, bloomberg intelligence chief equity strategist, and david kelly, jpmorgan chief global strategist. where the u.s. ambassador to the u.n. say there are more sanctions coming against russia related to this. see that russian sanctions will be coming down. secretary mnuchin kobe announcing those on monday if he has not already, and they will go directly to any companies that were dealing with equipment related to assad and chemical weapons use. everyone is going to feel it at this point. everyone knows that we send a strong message. david: one of the bellwethers of this conflict has been how the dollar has done. on the right, that shows that ed after sheaken said this and now it has strengthened. where is this conflict leading us to? >> it is interesting because the

friday markets was worried about the repercussions. the receiver conflict escalates. are is actually saying we going to continue to put pressure on where russia is hurting the most, the economy. but has stabilized somewhat. was interesting that when a u.s., u.k., and france coalition because it seems like we cannot get anything to coordinated with this administration, but it does seem they had back channel success in terms of the romantic relations. david: did administration do the markets of favor by doing it friday night? >> in some ways. markets price things and when they hear about it and then it happens and that is good news. you can characterize it. we priced in the likelihood for some sort of missile strike on

syria well into last week. now we are moving on looking for next news. what is coming next? possibly sanctions. you are seeing a lot of movement and commodities space. -- and commodities space. alix: does that mean we get involved in other asset classes? >> i would suspect so. it is been very quiet in the currency land particularly. the dollar has been in this really tight range, and is bigger reversal from last year which is this persistent downtrend in the dollar. so i do think you are going to see volatility sort of shift. i do not want to see we will see volatility explode. we saw that already. we saw the in the rates market as well as the equity market earlier this year. there is an unusual sort of quiet. the rest of the financial

assets where they are more prone to experience risk. alix: banks. the bank of america's earnings are out, but why aren't these banks getting rewarded? ing earnsead growth. overshadowings all of the bank earnings this season? >> it is mixed. one of the things that happened is we saw a lot of the bombs from that tax reforms at the end of the first quarter. on the other side, they are benefiting from the volatility in trading side of things. on the loan growth aside, that is part of tax reform, too. on the housing side, you are seeing people lean back what the state and local benefits may or

lack thereof may mean for housing growth. alix: what do you think? >> it is likely what is going to happen for the rest of earnings season and that is, the market has already price and bottom seats.earning where we are lacking a lot of growth is on the top line. sales are set to grow a mere 5%. that is a really slow rate. where are we going to see this sort of earnings growth continue if we are looking at the 2019 -- it is going to be incredibly difficult if we do not get an acceleration in sales. investors are looking for is some upside on the top line and how does that result in better growth in the future? david: let's expand beyond financials to the globe and earnings overall. we have a chart that shows revisions and earnings.

typically they go down. they actually have shot way up. what is going on with what analysts think is going to come down the pike on earnings? the vast majority is u.s. and that is the result of tax reform. lowers the result of much tax rates which have created this incredible explosion and earnings estimates since last year. otherou are seeing in parts of the world is much less optimism, but still a degree. they were expected broadly to see benefits in the equities onket and the earnings line the global scale, but a lot of it is concentrated in the u.s. and tax reform. david: when you see a chart like that, you ask about sugar high? can we continue this. is this a momentary blip? people are really looking at momentary earnings. we could see a really big bump in the markets where we have

been thinking about the markets is mostly volatile and possibly to the downside. i think it could be a sugar high that could last throughout the year. when you get that big of a tax cut and you have a lot of cash on hand, it is about how to distribute that and where you invest in your own business or where do you buy and make acquisitions. that could ripple effect out in the market for months. , thisto gina's point highlights which were talking about. sales estimates is that blue line, so that 1% versus 5% earnings growth. can we inferred that the global synchronized growth recovery has at least peaked> gina: i do not know for we are right there yet. this year expecting everyone to have this fantastic growth year, and so far, the economic data has generally disappointed our expectations across the world. is up right of

these expectations. we came in on a very big high, expecting a lot of the globe. there is nothing to suggest that economic growth is slowing down, but certainly, it is not as robust as we had hoped. there is a lot of uncertainty that has been injected into the financial markets as a reflection of trade policy, geopolitical tension, these are things that were not necessarily forecasted by the analyst community. certainly the global recovery story is in some degree of jeopardy. weis not a synchronized as had hoped, but i would not suggest that it was all downhill from here. alix: and that is how you price markets. thank you very much. up, oil markets responding to that u.s. tax on syria. crude is lower on the day. what is still priced in and how do you trade? this is bloomberg. ♪

♪ measuring political risk. check out oil. take a look at what happened. week to a8% last three-year high and its biggest weekly surge in nine months. that was all in the response the military response in syria. we are seeing the risk premium received from the oil market. joining us on the loan is tom petrie. -- on the phone is tom petrie. always great to catch up with you. how much risk and needs to come out of the oil market is things in syria continue as they have been over the weekend? tom: syria is part of it. there was a run-up on that but the real key is, we have got global growth to the degree of continues, we are going to be in a position where i think that global growth along with the

abilityn in venezuela's to produce oil gives us a workable mid 60's oil price. is it a little ahead of itself? perhaps. but i think the gap between wti and brent could narrow in favor of brent coming down some versus the bti. alix: the question -- versus wti. the question is whether the u.s. has to decide if they will give waivers to iran. how do we trade around that event? tom: that is a big one. it feels like the u.s. is going to look to do something additional. that along with what may be announced today with russia. it really keeps it, located. -- it really keeps it, located. -- complicated.

is to createys more mischief in parts of the world that are unpredictable right now, but it would not surprise me if we have some pushback one way or another where they can push on the instability in that part of the world. david: there is been a lot of reporting about possible iran sanctions. how effective are they going to be because often sanctions have a criminal leakage in them? tom: very good point. it is not all clear that europe wants to align with the u.s. on this one. i think leakage will be a problem. going to bring in david kelly, jpmorgan funds.

as you look at these oil prices, david, how does it affect your view of where investors should be going up we are talking about $70 oil? i am not too worried. we have the geopolitical issues, but i do not know that sanctions would be that effective. more you push a oil prices, the more incentive for countries like china to import the oil that we are not going to import. based on the growth in u.s. trade oil industry, $70 a barrel may be as high as it gets. that is a price that i do not thek will help -- hurt u.s. consumer too much. alix: is it through equities? david k: i do not know my view is that constructive. i think we have got to where we are going to get in terms of oil prices.

for sustainedng price much higher than this and when i look at energy stocks in general, they do not look that cheap. i would rather say the u.s. economy can take this. if you think that higher oil prices is going to push our -- up rates, you still go with cyclicals, companies that can benefit from higher interest rates. david thinks we have peaked at $70, but the saudis want $80. a lot of geopolitical risk is -- what would it take for us to get $80? it would take some pretty severe action on our part. i do not think that is going to happen. the mindset within opec and especially within the saudis, is

this is a manageable situation, they are in a sweet spot. they do not plan, notice they have pushed off the ipo timing, so they have that time to get to where they want to be presuming we get additional growth. in the meantime, i think they believe that the u.s. ability to continue to get production even would in a level that begin to challenge their market share is not that likely. i think we have comfort on that. david: i do think we need to recognize that one of the biggest beneficiaries of higher oil prices is russia. the best thing we could possibly do is take the price of oil. forget about sanctions on iran. try to encourage more production the united states, if we get the oil price, that would with

russia. alix: sentient on russian oil companies? >> it might help, but a lower oil price definitely helps in terms of hurting russia. alix: david kelly from jpmorgan funds, he will be sticking with us. tom petri, thank you for sticking with it. banks face a battle for deposit and bank of america deposit rate was up only three basis points year on year of 3/10 of 1%. this is bloomberg. ♪

alix: this is bloomberg daybreak. are we an arrest on market or are we in a market we are unwinding the rest. dow jones futures up 135.

s&p futures up. u.s. reaction to the strike on syria not as bad as the markets anticipating. in the currency market, it is a weaker dollar story, euro-dollar climbing higher by 3/10 of 1%. all across the curb, no matter where you are, here or in the u.k.. the deepest underperformer in europe. talk about your flatter yield curve. 36 basis points is where we half with a million and a fed speakers coming this week. that risk premium getting drained out just a touch after a killer week last week. david: there are not a million and a half fed speakers but we are talking more than one. you may be accurate. alix: it is possible. david: now we will find out what

is going on outside the business world with first word news. administrationmp will impose more sanctions on russia over syria's use of chemical weapons. the goal is tos discourage syria from using the weapons again and to keep russia from covering from the assad regime. it iss. told the u.n. ready to attack syria again if necessary. james comey calls donald trump morally unfit to be president. james comey appeared in a highly anticipated interview on abc as part of a publicity tour for its new book. he said it cannot rule out that russia has incriminating information on the president. president trump called comey a slimeball. president trump has asked a federal judge to temporarily block his own justice department from viewing evidence about his private lawyer.

a court filing says some of the material may involve the president and should be reviewed first by him. prosecutors want to government team to look at the material first. global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. bank of america's earnings per share came in above analyst estimates although its revenues fell a bit short of expectations. joining us is giraffe desk -- welcome, gerard. great to have you here. give us your take. it looked like they are pretty solid earnings. gerard: you did highlight the trading was weaker than expected . investment banking numbers were down and we saw that from the other banks that reported on friday that have capital market

activities such as jpmorgan in citigroup. the real strain for all three came in equity trading. the volatility in the markets came in and helped the equity trading, in particular equity derivatives, it benefited hike of america as well as the other players. the numbers for bank of america and their core businesses were good. speaking of core businesses, we look at basic banking. they were up in making deposits and loans. were they up as much as you expected? gerard: they grew 5%, we saw deposits grow about 3%. we would like to see stronger growth. what we are going to see as the year goes forward is we are sensing the loan growth is popping up -- is picking up. you're starting to see a pickup in the second quarter of loans and we expect bank of america and others to benefit from that.

alix: deposit rate was up only three basis points. when do you think we start to see banks competing for our deposits and raise that rate? the $64,000 is question. the banks have been good and not s andng their deposit beta i would suggest the loan to deposit ratios remain quite low. there is no urgency or need to -- when your you loan to deposit raise yet desk ratios or as low as they are. i do not expect the banks to raise them rapidly. as we get into next year, we do expect those rates to start to go higher. david: when bank of america was down 6% or 7% return on equity, what about now that it is up over 10%? how important is that? erard: the return

on assets came in at a hundred and 20 basis points. the tax rates had a lot to do with that. investors start to see that the banks are increasingly more profitable in delivering these kinds of returns, the valuations will improve as we go forward. alix: thanks a much gerard cassidy. is david kelly, jpmorgan funds chief of global strategies. so far this year the financials down about 2%, do you like them? david: the central issue with the stock market -- this is about as good as it gets. we will see earnings gains. the market looks like operating earnings per share will be up 25% this year. in a normal year we have 5%, so it is like five years worth of

growth. it is like if you ordered five course dinner and all five courses showed up at the start. i am like what is the second course? the story on profitability is good. alix:. we have to be cautious and how we are positioning? if you're going to eat all your food now, then you will probably throw up because you had five appetizers. the point being you will have better growth but if it is all up front how do you plan the back end? david: you will take your time. i think investors should appreciate how good things are right now. the earnings yield on stocks is over 6%. bonds, 1.5% above dwa that is a good earnings yield. for a while just live off the good dividends.

this for a while until normal gdp growth gets earnings going again. david: that is encouraging. i will put up my favorite chart of the day which shows earnings expectations. every year they go down. they have skyrocketed because of tax cuts. to continue the restaurant analogy, you did on the first course, what you have to eat on the second and third and with dessert? doesn't this mean it has to come down? david: it does mean it will be tougher. this year not only do we have tax cuts, we have the dollar down 10% helping overseas resident -- revenues, we have oil prices up helping revenue stocks. those will go up. look at it from the perspective of bond market investors. you're getting an income stream from equities right now, which is extremely good, it may not be growing that much but for the will treatars you

stocks like a good bond, almost like a convertible bond where you will get good income for a while and then you will benefit from further increases in the economy down the road. just have to change our minds to recognize we have a good level of earnings here and we should appreciate that. alix: does the same hold in europe? david: i think it does. we will get better earnings growth in europe. the unemployment there is still over 8%. they have more cyclical growth ahead. i think european investors do not appreciate the income that is been thrown towards them. dividends yields in europe are significant lee higher than the united states and much higher than local on yields. david: if earnings go up you hope the gdp growth will go up with it? well it? these tax growth -- these tax cuts are good for companies but do you think it will translate

into fundamental growth in the economy? david: i do not think it will change the story. it is a stable economy. this is likely to be the longest economic expansion we have ever seen. ,f you take 2% or 3% inflation a little bit over 2% growth, and roughly 5% gdp growth, year after year the economy will grow to where the level of profits compared to the economy does not look excessive. alix: how does that translate to the bond market? you can senior record positions for the 10-year and the market. i think the critical issue here is the federal reserve will be resolute in raising short-term interest rates. the more they raise short-term rates, the harder it will be to justify taking duration risks. i think the yield curve will flatten but i do not expect an inversion for a recession. if it does not go inverted, you

will see some pain at the long end of the bond market. david: let's assume you do not see inflation or expectations. david: that is right. numbers frome cpi friday suggest the consumption rate will be 2% year-over-year. airline fares are down about 6% year-over-year. how can airline fares be down in the 10th year of economic expansion? it is because of incredible competition. it is hard to get consumer prices to rise. i do not see enough momentum and the global economy or the us economy to cause upward inflation. 2%, but sticking at 2%. david: the airline has done this again again again. they have overcapacity. is that an indicator for the economy? david: i do not think it is a capacity issue. flight, youto buy a

go on a computer. i cannot think of any human activity that requires less output than the click of a mouse. with the click of a mouse, you get the cheapest fare. it is hard to raise prices no matter how high your capacity. alix: now we are making a connection between higher inflation and less downside risk inflation. no officials are concerned by downside -- that does not mean we will get to 2% or 2.5%. david: 2% is fine. that is where we want to be. they know this amount of fiscal stimulus is inappropriate and they will lean against it. be a little tighter in monetary policy. that is what that lack of risk in inflation is telling us. david: maybe is that is what they will all tell us for the rest of the week.

david kelly of jpmorgan funds, always great to have you with us. coming up, the abrupt exit of wpp's ceo leaves the company's future in question. as you commute, you should turn on your radio and listen to tom keene and jon ferro. bloomberg can be heard across the country on sirius xm radar -- radio. live from new york, this is bloomberg. ♪

kailey: this is bloomberg daybreak. coming up in the next hour, the

reserve bank of zimbabwe governor. now to your bloomberg business flash. the pentagon has cited boeing for deficiencies first noted more than two years ago. that is according to documents and pentagon officials. the problems involved boeing jets. boeing says it is working to fix the issues. another chinese tech company is headed for an ipo. retailer is inon talks with investment banks about a public offering in the u.s. according to people familiar with the matter, the startup to be valued at about $4 billion. it is bounced by china's internet giant tencent. it is a milestone for the ceo of blackrock. he is now a billionaire. more than half of his fortune is

in blackrock. since the shares were listed in 1990 nine, the stocks have returned more than 3600%. alix: that is in appreciate number. now we turn to wall street. three week -- three things wall street is buzzing about. founderpt exit of wpp's leaves questions about the future. the cana takeover -- the japanese john bryant meets wasn't -- meets with investors. david: joining us is bloomberg's ed hammond. with sorel.art when we asked about disruption, he says we can handle it. in his statement he referred to destruction, saying it brought undue pressure on the company.

in the lookahead, i say -- i see the current disruption is putting too much pressure on the , there are and their dependents and the clients we serve. is he the victim of a substantial transformation? ed: to an extent, yes. the other thing he is blamed is the shareholders and what they have done in terms of spending, articulated by some of the big corpse like png -- the big groups like png. there is also the investigation that seems to been the trigger for his departure. the company has said it is not material. we do not know what the findings will be. someone decided they wanted to leak that this investigation was going on in that put pressure on him. david: martin appears to be

suggesting the board decided to give him -- the stock has been -- let's useially this as an excuse to make a change. ed: i think that is right. if you went back further, someone on the board decided to leak that the investigation was happening. martin sorrell did not leak himself that the investigation was happening. that has added to the pressure on him. if they're doing it because the stock is down it is a dumb move. the stock is down another 6% this morning. alix: you should of had a plan. if you want to kick him out, where is your plan? let's just throw executives at the top roles. ed: the succession plan seems to not be in place. one interesting thing people are talking about is does martin sorrell try to come back and take this company private? david: there is no noncompete. ed: he is out the door, he can do whatever he wants.

he would be the obvious front man to try to take this thing private. alix: the other story we are watching is the never-ending saga of barclays. and branson is going to court other shareholders to shake up the bank. activism asunusual much as he is a single target activist fund. he finds something he wants to make changes at and he goes all in. , yet alreadystand met with them and i think the ceo of barclays came on bloomberg last month and said he had had initial contact and was not clear yet what bramson wanted. -- doesget block plays he get barclays to exit the in investment bank? i think the company have looked at the investment bank over the years and decided this is something we do want to stay in. alix: in the ft over the weekend

there was an article that barclays set up a new venture capital unit because they want to add millions of pounds to annual revenue. it is like see what sticks. ed: i think barclays has been going through identity crisis since the unwinding of some of -- they are going to be doing fine tuning of the areas and get out of areas they are less prevalent in. david: and european bank that cannot get out of the news. ed: it was supposed to be the success story of the financial crisis. there are repeated reports that the head of takeda has come to the united states to try to woo financing, they are talking about buying shyer.

-- about buying shire. ed: is a huge deal. this is an unusual situation as much as to cana -- takeda actually confirmed they were working on a bid. they came out and said we are trying to put something together . david: the reports that they were having trouble raising the financing. this might make it easier, a .maller morsel to bite off ed: the financing is going to be difficult. they already have about $11 billion of debt. from what we understand there have been some conversations from the chairman of takeda to the ceo of shire to outline how this will work. it would be in exceptional deal.

$50 billion is a big check. david: we do not see japanese companies with $50 billion takeovers. many thanks to bloomberg's ed hammond. great to have you with us. up, japan's prime minister heads to mar-a-lago for a meeting with president trump. alix: more on bloomberg with tv . you can check out our charts and interact with us directly. this is bloomberg. ♪

♪ david: this is what i am watching. there is big summit going on at mar-a-lago. the second time prime minister shinzo abe is visiting donald trump. president had a

tweet about trade which took a shot at japan and said would only join tpp if the deal were significant better than the deal offered to president shinzo abe. we are working to make a deal with the biggest of those nations, japan. that is just a part of their agenda. abe in aleaves shinzo weaker position because the latest polls shows that his approval rating is at a record low. we have party leadership coming out in september so there is a race there. that puts him in a weakened spot. in thate has been scandal, the real estate transaction, maybe this strengthens his position going in. japan's relations with china are quite extensive. this shows trade with the u.s. versus china, japan, south korea, australia. the orange one is the china trade. japan does more business with china than the united states. it is clear that rhyme minister

abe -- that prime minister shinzo abe -- maybe it is triangulation. alix: president trump saying that maybe tpp is not dead is maybe a shot at china, and i wonder what japan would think about that. david: if president trump could get shinzo abe to say we want you back in tpp, it would strengthen the hand against china. it is like chest -- it is like chest. alix: i do not play chess. walter todd will be joining us next. this is bloomberg. ♪

♪ alix: looking for loan growth.

bank of america earnings beat estimates. investors zero in on demand for loans. -- u.n. shoe to drop ambassador nikki haley says fresh sanctions will be imposed on russia from the u.s.. markets shrug off that threat. global earnings estimates surge. questions about the strength of global synchronized growth start to bubble up. david: welcome to bloomberg. halfway through the bank earnings season. alix: i thought you were going to say halfway through the week. i was like no, no. david: it is interesting the reaction in the marketplace. a year ago we got these results, it is good news. alix: with goldman and morgan on deck it will be interesting to see how the market response to morgan stanley. how much of a bead to the have to get for the market to be happy about it? david: city and bank of america have set a fast pace. the market, it

looks like taking off some of the risk off positions you had over the weekend. s&p futures up. the dollar weaker. the selloff in the bond market continues to pick up speed, yield funding higher in the u.s. by four basis points and getting -- after thethe serious strikes were not as bad. david: you can spend most of the week listening to fed speakers. we will hear from every member of the federal reserve at least once starting today. continuing bank earnings after those bank of america earnings today. it is goldman sachs turned tomorrow and morgan stanley coming up on wednesday. prime minister shinzo abe will meet with president trump for does go days with traded north korea high on the agenda. and maybe a little bit of golf.

alix: isn't shinzo abe terrible at it? david: he loves golf. i wasn't there. let's get an update on first world news. kailey: the trump administration will impose more sanctions on russia. the u.s. ambassador to the goal isations says the to discourage syria from using chemical weapons again and to keep russia from covering from the assad regime. the u.s. told the u.n. it is ready to attack syria again if necessary. james comey called donald trump morally unfit to be president. comey appeared in an anticipated interview on abc as part of a publicity tour for his new book. he said he cannot rule out that russia has incriminating information that would make the president vulnerable to blackmail. president trump has called james comey a slimeball. has taken anmp

extraordinary step. he has asked a federal judge to block his own justice department from viewing evidence about his private lawyer michael cohen that was seized in an fbi raid. some of the material may involve the president and should be reviewed first by him. prosecutors want a government team to look at the material first. global news 24 hours a day on-air and on twitter, powered by analysts and journalists. this is bloomberg. bank of america with first-quarter results showed little change after earnings revenue beat estimates. investment banking revenue fell short of expectations. joining us is alison williams, bloomberg intelligence senior analyst and walter todd, green good -- greenwood capital ceo. allison, i just want to start with the report. we are looking forward to the analyst call at 8:30.

what is the biggest thing you learned? alison: just that they are executing. expense of efficiency is a major initiative for the company , to focus on investors, and they are delivering on that. the trade results coming in weaker. we had that flagged by their competitors the other day. executing on mobile and from a near-term perspective, the does -- the deposit pricing class coming in very controlled. that bodes well for them but that is something will be continuing to watch. alix: walter, why are we seeing a bigger reaction to bank of america? walter: that is a good question. i thought jpmorgan's earnings were good, investors disagreed. you are seeing a muted reaction with bank of america. i think it is around concerns for deposits.

you are starting to see that pick up. and why loan -- and while low demand is good, it is maybe not as strong as people expected. david: as a shareholder, are you happy with the loan growth or are you disappointed? walter: i think the earnings were good. you talk about the efficiency ratio and the return on the average tangible equity is immediately improved. i'm happy with results but i was happy with jpmorgan as well. investors shrugged that off. we will see how the day progresses with the share price. can youe question being buy banks here, would you be adding to that position what it feels like the best did not? think the still valuations are attractive here for financials. if the stocks were to come up again we would be adding exposure at this point to financials. we do think does the economic

growth picks up as we exit the first quarter that loan growth would pick up and follow that. that would be beneficial for financials and banks. david: one of the things i have not heard much about yet is deregulation, even though the fed had does go different proposals to reduce the reserve requirements and streamline the leverage ratios. do we expect there'll be a further uptick in bank stocks or is it just not big enough? thatn: this is something investors have already been looking for. since the trump victory. what was important about the proposals we got is that we are moving closer to clarity. i think that is a key positive. we have the proposals and then immediately have earnings, we have a lot of stuff going on in the backdrop. there a lot of noise around it so far. again, we have the earnings but we are going to be looking

forward to the next thing. what the proposals do is give us a base going into the upcoming stress test we will get in june, that is the next big events for the bank. as we start looking forward to that, it is going to be helpful that we are moving toward clarity. it could be helpful for dividend. was pointedterm, it out that friday, even though we had strong results with jpmorgan, the stocks still fell off, all the banks were selling off on friday and i think today with bank of america we might be getting some noise in the background. on the call we will want to hear a little bit more in terms of the outlook. 5% loan growth with bank of america was still very good and the positive is we are starting to see stabilization in loan growth. will that continue to play out throughout this quarter? what will that mean for the

future? alix: walter, we know you want to buy bank of america, other banks that could have a catalyst in terms of loan growth that you want to be buying? walter: we like the smaller regional banks. regions financial would be one. keybank is another that we like. alix: overall, i feel that the issue is upbeat might not be good enough anymore for earnings season. if you come inside the bloombergs you can check out sales estimates versus earning estimates. 1%.nue growth up just if we are at the peak of growth, how do you play that? walter: i do not think we are at the peak of growth, so that would be a main difference. alix: where does it come from of the bottom line expectations are not matching the top line? does the growth

come from and financials or for the market overall? alix: the market. we think economic growth will accelerate through 2018. we think earnings growth is going to pick up as we move through the year as well. that will come from increases and improving retail sales. all those things should benefit earnings as we move through the course of the year. alix: why are we seeing sales estimates start to rise? walter: last quarter you saw one of the biggest percentage of , ipanies that beat revenues think we had 65% to 70% of companies beat revenue estimates. we will see at the end of this earnings season how that looks. i think sales are due to improve due to increase in pricing and inflation that we will see in 2018. we'll see if that plays out in the numbers.

the things we are looking forward to his retail sales numbers coming out for the united states. how important will those be to find out where the economy is headed? walter: i think all the economic data points are important because we have seen softness in the first quarter. we have seen three straight quarters of down retail sales. , if thatlows locally is any indication of what the retail sales environment is it is any good. we would expect a pickup in retail sales as we have seen the tax cut have an opportunity to flow through on paychecks for about a month and a half. in terms ofp it up sector allocation, you are positive on the banks, particularly the regionals, what other areas express your view of a more optimistic economy? if you believe growth will pick up you will want to be in those more cyclical sectors.

industrial. energy would be another area that can catch up with commodity that is up 11%, and materials. those be the place if you think economic growth is going to pick up here and around the world. david: alison williams with bloomberg intelligence, thank you. walter todd will be staying with us. coming up, we will turn to zimbabwe. we will discuss the country's path forward with the reserve bank of zimbabwe's governor. live from new york, this is bloomberg. ♪

kailey: this is "bloomberg daybreak" more consolidation in the gambling industry. icon has agreed to sell tropicana. the buyers are leisure properties. tropicana has seven casinos in six states. drugmaker shire has agreed to sell its cancer unit for $2.4 billion. shire wants to focus more on treatments for rare diseases. this as japan's takeda is rumored to be making a bid for shire. the chairman of nissan and run alt is reviewing the companies interview, he says he wants to find solutions by 2022.

those comments follow reports that the two automakers are in talks to merge. the international monetary fund and world bank group are meeting in washington this week with some people questioning about continued global growth. there is one country that is eager to make sure they get that growth and that is zimbabwe. with new leadership in the country, that leadership is determined to turn around the country that has gone down by 50% since 2000. we welcome john mangudya, john -- zimbabwe central bank governor. this is a tall order. zimbabwe has had difficulties with its economy. .hat do you do what priorities do you have declare that you are open for business? john: thank you very much. we want to change the brand of zimbabwe. economyto open up the

for the local investor and the foreign investor. we now want to make sure we do what is right for the country by inviting foreign investors and domestic investors. david: let's start with the foreign investors. those are people who are watching us right now. if i'm a foreign investor, how do you persuade me this is a good place to put my money? we have amenities to ensure that all companies and -- the platinum sector. we wind up having bullet points that says since november you have seen investments and deals from china. what country do you expect to see the most inbound investments? john: we expect the global economy. alix: who would you be courting?

involved with a number of product -- a number of projects. we also talk about the western countries, u.k., germany, france . the french companies and the british companies. do you provide assurances to foreign investors that if they invest their money, they can get their money back out? now we are saying we need more commerce coming into the country and others will come in and others will bring out. zimbabwe is open for business. some will be coming in and others will be going out. companies can take money out of the country. alix: you mentioned natural

resources, you mentioned palladium. what area of zimbabwe do you think you can sell the best? john: the first one is mining. a number of minerals are unexploited. gold. we also have platinum, the second largest country in africa in terms of platinum. lithium, nickel, all of those products. .ining can invite investors the second part is agriculture. good, perfect for agriculture. areas -- if people invest and invest well zimbabwe can be

eight hub of africa. david:'s land reform one of your priorities? there have been difficulties in getting the most out of the soil. [indiscernible] we know investors will be secure in zimbabwe. alix: how do you introduce the currency? [indiscernible] we make sure we have demand which would create an imbalance. achieved, we will have currency and that requires

zimbabwe to have access to foreign finance. that using our minerals and that we can have our own currency, one that is high enough [indiscernible] john mangudya. great to have you here. martin sorrell has stepped down as the leader of the wpp. theoing so, he says that current disruption is putting too much unnecessary pressure on the business, two hundred thousand people and their dependents, and the clients we serve in a hundred and 12 country. joining us is jason deland, anomaly founding partner and walter todd of greenville capital -- greenwood capital is still with us. let me start with you, jason. martin sorrell is a great salesman. disruptionabout the from digital, he would say we are handling it just fine.

maybe it is not find. is there a fundamental transformation of all advertising? jason: you are seeing it in this business with platforms like facebook and google, etc. there is a tremendous amount of disruption happening with how consumers in just their media and how quickly the digital transformation has impacted the advertising agency business. martin was right for many years was a major title wave on the business and he went after some of the major platforms. the norm absolutely now in this business, it will continue that way and i see martin departing as a big sign that the industry is going to have to take some things seriously to create more value for itself and its clients. david: does the industry have to become smaller?

just do not need to spend as much money on advertising the way be did before? problem -- jason: it probably does have to become smaller to an extent, but the most important thing is it has to evolve. the area of one-way, non-digital communications that dominated the 70's and 80's and 1990's has changed so dramatically that all of the rules that were written are no longer effective. once we start to see more millennial ceos and major clients start to take the helm, then you will start to see some of the major changes. alix: if you go inside the bloomberg, this is wpp's revenue growth. it is changing. does it break up? jason: the news of martin , and being such a strong

grip on the company, is only natural to go will this thing breakup? break up acult to holding company like wpp because everything is so connected and so centralized. it is difficult to imagine a breakup at a time when everything is changing so dramatically. i would imagine that what they need to do is set a course for a new strategy for the company, try and continue the same kind of services that they have been trying to integrate for many years. scale that. at the exact same time, reduce costs a little bit and try to become more strategic. ofid: a huge amount disruption with digital, and then we had the hearings with mark zuckerberg and facebook. is there a role for advertising agencies to protect advertisers with respect to data and how data is used? is there a possible backfire coming along? jason: we are in an era where

everything is changing. the pace of technology has outpaced regulation. the you have is responsibility on advertisers and brands and platforms to make sure they are doing things above and beyond to protect people's data and security. advertising the agencies out there need to think about how to we actually sell more products, grow the businesses of our clients, as opposed to spending all of our time trying to grow the business is for ourselves. if you do that right, you create value. alix: walter, how do you play the changing trend? walter: we own disney and lions gate. disney is the diversification of the platform. they are exposed to the ad business which is changing dramatically. they also have the diversification of the parks, the sports entertainment which is live media that requires -- people want to watch that live.

they're coming up with alternatives to reach consumers in different ways. isney was a bit behind but catching up with this evolving landscape we are talking about. the importance is scale to compete in this market. what: that is obviously they're doing with the 20th century fox assets they are trying to acquire. is there a chance disney mail-in eight the middleman, historically they have had to go through -- disney may eliminate the middleman? can they just go straight? is yes the short answer and i think that creates a challenge for companies like wpp. you have seen this with procter & gamble and other big advertisers. they are using these platforms to go directly to consumers and i think it creates challenging for traditional ad agencies. david: what is the future of the ad agency? jason: the future is to do just

what i said -- work with clients, figure out the changing landscapes of media technology and deliver more value, sell more products, and do so in a way that is responsible. get that right, you will have a successful business. alix: if i pick the right numbers, i can also win the lottery. jason: i am rooting for you. walter todd of greenville cap touch of greenwood capital is sticking with us. .hank you, jason we will bring you the latest read on retail sales, next. will consumers finally spend their tax cuts? this is bloomberg. ♪

♪ alix: this is bloomberg daybreak. about 30 seconds to go until we get the retail numbers for the month of march s&p futures getting by about 15

wednesday the bond market is -- about 15cell points. the bond market is a much sell everywhere. we are hearing that the syrian risks of the u.s. military. back outles if you up 0.3%d gas coming it is a little lower than estimated. the retail sales control group going up 0.4%. overall retail sales coming up about 0.6%. that is relatively close to what we were expecting to we were expecting that expecting. the tax cutsting to come through. the question becomes how sustainable is any kind of boost to retail sales?

upail sales for march coming 0.6%. if you take out autos and gas, the number is 0.2%. cars: they sell a lot of and gas is more expensive. it is auto sales and more expensive gas. alix: the weaker categories were building materials, sporting goods, and apparel was down about 0.8%. music stores were down about 1.8%. we are bringing in and talking -- gapen andave in walter talk. does this slough off the last three months of weaker sales? >> i think it really does. autos.the factors was

we were coming off of post hurricane highs. i think you are starting to see the effects of the tax cuts from federal, personal income tax receipts fell sharply in february. that suggests after-tax income is rising. that should come through in the rest of the year. you mentioned the weakness in building supply stores. that is consistent slump goingsing forward. this will give us a better take off point for private consumption growth in the second quarter. david: why aren't we seeing more increase given that wages are going up? isright now i would say it going to take a while for tax cuts to filter through. after-tax income could go through right away when you cut taxes, but it takes households many quarters to gradually improve their rate of spending.

it will be coming, but it will be more of a second half of the year effect. alix: what is also coming is higher gasoline prices. gasoline prices are at the highest level since july 2015. does this offset any boost from tax cuts? .> a little bit you can look at the geopolitical concerns as it translates to commodity prices. you can look at anti-trade policies. the tax cutainst plan because they act as a tax like on households and -- hike on households and businesses. it does counteract the effect. alix: how do you deal with that? on one hand tax cuts, on the commodity higher prices. how do you offset that? >> we like to play the brands versus the retailers themselves.

the exception is home depot and lowe's, which we like both of. we think that will improve through the second quarter. rands that are agnostic to their distribution channel, whether it is amazon, these are all doing well despite the challenges of some retail stores specifically. we think that is the way to play it. we think consumer spending should improve for the remainder of this year as the job market remains tight and wages increase. , for: by playing it example nike, you don't have to worry about the bricks and mortar versus amazon problem. you are projecting consumer spending going up. what kind of increase are you projecting? >> if you look at the number we just got, and if we see some

consistency on a month over month basis through the rest of this quarter at 0.3% or 0.4%, we think that would be very healthy. wanton't necessarily consumers to spend 100% of the tax cut. if they save some of that, that is ok, too. that can build the strength for retail sales down the road and repair the balance sheet. alix: are you looking at rate hikes this year and next? >> we are still at the outlook for four this year. that thenly a view fiscal stimulus should outweigh the effect of any higher gas prices or geopolitical risks. we think the fiscal stimulus is coming, particularly the federal level spending no matter what. the hard part is to gauge do we get too much anti-trade, too much concern out of the middle

east for example? when do markets capitulate and change their view on the outlook? a change in those events would cause us to adjust our outlook. if stimulus comes through the way we expect him with think it hikes.e and four rate alix: michael mckee lacked this for us. the outlook for manufacturing firms is now at a two-year low. you could chalk that up to some disruptions seeping into the market. at what point do you expect the stock market to rollover? >> i think the way you described that is exactly right. for me it is a combination of what happens in financial markets. what combination of movements in equity markets, bond yields, and the dollar tell you it is a risk off move?

if that is sustained, you should see that downstream into macro activity data, just like employment. employment activity growth would slow, which would make me think is this is and households have lost confidence in the outlook. i think a combination of financial market moves and high-level employment growth. alix: how do you wind up playing that in the market? hedging has not been playing off. how do you deal with the political risk as an investor? >> i think you can keep a little more powder dry. keep a little cash to take advantage of these market pullbacks we get on a daily basis to put money to work. instead of taking 1% to 3% in cash, hold 3% or 5%. comments early. we will have to see the data

points improve from first quarter into the second quarter. we should hear about this in your time from the companies themselves as they talk about what they are seeing in april during their earnings calls. you, thefore we lose city economic surprise index comparing the u.s. versus global is down a little bit. you can see it is down a little bit for the u.s., but it is global economic surprise. the blue is specifically u.s. what is going on there? >> it is really europe. if you were to isolate europe and that global component, that is where it is really good. this is an notation line. -- an expectation line.

we think we are about to see an inflection in europe and the u.s. in terms of the data. we will see. david: thank you both very much for joining us. as we go into the break, i want to talk about another tweak. --tw tweet. the president has come full circle. russia and china are playing the currency devaluation game, not acceptable. when he came to office, he said we are going after china. then he decided not to do it. there have been reports that is something china might use in a trade war with us, which would really hurt. alix: when you think about the dollar index over the last year, it is down quite a bit. it went from over 100 all the way down to 89. i would not say we are seeing a stronger dollar due to fed hikes. the dollar is moving a little higher versus the ruble, the ruble taking a little hit. it is down 1.68%.

a little uncertainty on potential sanctions for russian companies. proxy to can be a good play for oil as well. david: we will turn from russia and china to latin america. we will talk about make or break issues for nafta. talks are expected to keep going until a deal is struck. tune into the radio and listen to tom keene and jon ferro from 7:00 to 9:00. bloomberg surveillance can be heard in new york, boston, the bay area, and across the u.s. on sirius xm radio. this is bloomberg. ♪

♪

>> this is bloomberg daybreak. today on later bloomberg markets, an exclusive interview with the crescent capital founder. now to your bloomberg business flash. ceo of milestone for the the largest money manager in the world. since the shares of blackrock were listed in 1999, the stock has grown more than 36 percent. problems involved production of boeing jets. the lay-ins airlines is pushing back against the u.s. discount

carrier meeting all federal requirements. 100giant had more than mechanical issues in less than two years. the program describes an aggressive business model and lax safety culture. david: technical talks are continuing on nafta in washington. we welcome now christopher sabatini, a professor at columbia university. welcome. we are putting up on the screen for our audience some of the basic issues that the u.s. has raised. do we have a sense about where those are? >> not really. the official rules on after for automobiles are that 52.5% of automobiles have to be made within nafta. the u.s. wants to push it to 85%

and the counterproposal is 75%. that is a real issue for donald trump. automobile manufacturing in the us is one of his main points. there is a lot of margin. isid: part of the problem candidate in mexico are saying give us a piece of paper about what you are thinking and we have not reduced it to writing yet. >> there is a lot of uncertainty overall. given donald trump's impetuous this on nafta whether he will decide to walk away. the negotiators think once we get to this point where we think we can sell it to donald trump, we could wake up one morning and see it has all been blown up by donald trump. david: there is talk about getting a deal by early may. >> that is unrealistic. especially given the mexican elections on july 1, which will

ist -- elect a popular populist leftist leader who would make it impossible to get a lot of these changes. they have got to get it done. dairy is another issue. conflict dispute resolution is another. these are tough issues. alix: if i am an investor that is always on the mexican economy -- bullish on the mexican economy, how do i think about this? >> i don't know. if you were in optimist, the administration is beginning to realize that the longer they kicked the can down the road, the harder it is to get an actual deal going. you are looking at the fact that maybe this is a hard and fast deadline. the one thing that is positive is that if you look at businesses and farmers that stand to benefit, 5 million jobs

in the u.s. depend on nafta. just friday last week, trump was meeting with farmers. he is beginning to get the message. as long as he understands this will hurt his campaign issue, which is jobs, he may start to realize these timelines. if i were an optimist, i would say it is a good chance it gets done. alix: we are also looking at the venezuelan elections in may. one interesting thing that has happened to the venezuelan bond with a yield of over 9%. it was trading at $.19 on the dollar in january and now it is trading at $.32 on the dollar. is that a regime shift play? >> no. these elections have been totally gamed. they were supposed to be held at the end of the year. they arbitrarily set a new day. you are basically saying the fact that this is a government

despite all of its flaws among which is failure to feed its own people and acknowledge a humanitarian crisis is that it largely pays its bonds when it comes to the state oil company. they are in partial default which i realize is like being almost semi-pregnant. they are in partial default. they are not paying their government bonds. beingassets are threatened with being present, but they are paying on those. they are it knowledge and the risk of not paying. the risk in latin american countries comes from when the military decides to go in a different direction. is there a risk there? >> this government has done a great job for its own sake of politicizing the military, keeping the military in their

pocket. you are not likely to see the nilitary intervened to tamp dow the chaos that is erecting. -- erupting. alix: if we can bring up this chart. at one point oil production was at 1.5 million barrels per day. do you feel it goes under one million? what happens to the venezuelan economy if that happens? >> it goes down. was first elected it was at 3 million barrels a day. it can only go down. they have been completely nationalized. they have no investment for r&d and technical a key. they have large oil reserves that have gone untapped. they have floated their own bitcoin based on barrels of oil they have not tapped.

they have not made infrastructure upgrades. 95% of their exports depend on oil. no oil, no hard currency. alix: they have the most oil reserves in the world. it is criminal that you cannot access it. >> good way to put it. alix: we want to move to bank of america. earnings beat as well as equity trading. aylor riggs has been listening to the media call ahead of the analyst call. taylor: some of the things that are different between bank of america and jpmorgan is the focus on cost cutting. they had talked about the 15% gain in pretax income, lowering those expenses, and cost-cutting has been a priority for brian moynihan. there was talk about the drop in

branch locations down to 4400. they are looking to expand in ohio now. the geographic mix is interesting. one thing they have in common with jpmorgan is the focus on digital. all of the banks have made digital a big push. digital banking is up almost 20% from a year ago. digital sales made up 20% of all sales from consumer sales. that has been a big focus for them. another thing to note is volatility in fixed trading. the ceo said they saw an improvement in their equity trading largely driven by increased client activity. bond trading was hurt. when he was asked about that fic heard the same thing friday from jpmorgan, the first quarter last year was hard to beat. is a little difficult,

it was fic trading, debt origination, and more to come. alix: thank you. that stock is trading up about 1.1%. up, international traffic data. you will get to know what foreign buyers are doing with u.s. treasuries. much more on what i am watching next. this is bloomberg. ♪

♪ alix: what i am watching is the tiff data coming out of the bell today. foreigne percent of treasuries held is down. what wanda happening in march? demand good to watch as

drying tire. david: it means we have to buy our own bonds. how much of this is currency hedging? alix: it definitely is less profitable for japanese treasurieso buy u.s. . david: this is expensive. alix: you will want to go to europe as well, particularly the gilt market. chris harvey and ian lyngen will be joining us.

♪ jonathan: this is the countdown to the open.

coming up, the stock market is shaking off limited missile strikes in syria. the president is declaring mission accomplished. bank of america delivering big revenue gains. u.s. retail sales bouncing back, suggesting consumer demand is gaining steam on the back of the tax cut. futures positive 20 points on point --up about zero .75%. yields are up on the u.s. 10 year. consumer demand has regained steam on the back of tax cuts and a refund. michael gave in reacting to the data just moments ago. >> i think you are st