no way. opec and its allies keep trimming oil output in a tightening market. consequences, the u.s. is to punish china for violations of intellectual property rights. a good book chinese investment in its crosshairs. ge stands by its profit forecast as part of the latest earnings report. shares are up. a very warm welcome to you. we made it. david westin is off today. he's taking advantage of this beautiful day in new york. the vacation thing is really great. i wish him well for the one day off. and exiting session is developing this week. futures in the u.s. are flat. dow jones is flat as well. the dollar stronger across the board, 120 34 euro-dollar. 123 for euro-dollar.

there is not what happening after that steep selloff across the board. now, to 91 is how we print as rake even. rolling over a little bit now. president trump finally tweeting on my area of expertise, he does not want to lower oil prices. let's get headlines on with taking up. president has been told he's not a target of the investigation into russian election-meddling. or the probe into his long time lawyer. rod rosenstein offered the assurances to the president last week. that has tapped down his desire to fire either rosenstein or robert mueller. opec and russia used production cuts i-97 percent.

they are fighting reasons to cut more. they are meeting in saudi arabia. the cutbacks will remain in place until the end of the year. president trump call them artificially high. since therst time korean offensive and so it was divided, hot line connects the leaders of the two countries. the phone lines have been used and was tested today. their first call will take place before next friday's meeting. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. this is bloomberg. we are looking at the top three stories of the morning. the commodities rally is curbing chinese tech investments. our top live blog editor joins us now.

we are starting with commodities. it's important every day. come inside the bloomberg and you will see why. the blue line is industrial metals. the white line is the 10 year breakeven rate. you can see the impact of commodity prices on inflation. mr. trump attacks my commodities-based. he said it looks like opec is that again with record amounts of oil all over the place, including it shifts in c. that's no good. we will not be accepting that. lisa: it shows that we are dealing with. gives shale producers an opportunity to gain market share. what the president sees is rising gas prices is. to the income of middle and lower income americans. it's upsetting the tax cut.

having attacks on lower income people, including his base. this does not play well to. it slows the economy. tension is starting to brew here. if saudi arabia is serious about output, we will have some serious issues to deal with at home with the price of the pump. alix: if you look at the chart, you can see the impact on breakeven. that is the issue in the market. >> inflation has been the story all week. saudi is going to hold its ground. there's a huge incentive for rush to hold its ground given the sanctions there. they will benefit from oil prices. that is pegged in right now. when we look and how they sanctions and trade issues are affecting the price of aluminum and some other metals, this is the environment we are going to be in. alix: it's been the industrial

metals breaking up. that's because of president trump. lisa: i think you might find yourself laughing. the issue is there is good inflation and that inflation. good inflation is wage inflation. we are not seeing that fast enough. frankly, that's a people are worried about. this is what people are concerned about. : this is going to affect earnings down the fight. this is the worst time for this to happen. there was already concern about a slowing global economy and even the u.s. economy. here we are. now this is the environment we're in. if you can't pass it on to the user, they see price increases and they don't want to

pass it on, do we get to peek earnings? romaine: there have not been organic revenue growth. now that we get these pressures on the profit margins from higher input costs and that being passed on, what does that mean for the next quarter and year? and maybe trade war zenit global growth issues. we spoke to the south african reserve bank governor about a trade war. >> i don't think it's a war. i think about the content. what are the extent of the damage.

we have open trade which is good for the global economy. alix: this comes on the backdrop of europe. lisa: this is what people are looking forward the big tech companies. how much are they going to ,eference the tech trade issues particularly with the u.s. and china as a headwind. the u.s. confirmed they are wayne emergency powers to curb china tech investments. cap -- china said the u.s. is acting like a bully. this is not helpful to tech companies that have seen a shift in demand for things like iphones and semi conductors. romaine: i think the tech companies could of dodds that question on their earnings calls. there is a global interconnectivity that we have had in this market and economy. it's benefited the tech companies. that is being severed by the

tit-for-tat the we're going through. if you are a hardware company of any type, there's no way you can come onto the earnings call and not adjusted -- address it. alix: we've already seen a ton of inbound investment slow a little bit. the question, how does that valuations,ups, their ability to access cash? romaine: there's a lot of premiums built into a lot of stocks. that is based on the idea that they could be take over targets. a lot of private companies are waiting to come to market that could benefit from a chinese buyer. lisa: with china in the next the issue, they are trying to push back. they don't know if they are going to sign off on this now. has had more venture capital in the text based in the

u.s. in the past year. they have the cash for this right now. this takes us to our third story. we get a lot of industrial earnings out. we are looking strong. honeywell was a beat. ge was a beat. general electric to me, that was a surprise. promising we will be really bad and not be as bad. romaine: i was encouraged. that's what you want to see. less headachesw out of the capital unit. this is the worst performer in the dow, they have $100 billion of debt to deal with. they cut its dividend in half and suggested it might cut it further. lisa: one issue with ge is they underperform.

people did not know what kind of things they were dealing with. the full transparency, really clear in the deck, is there more pain to be felt. what we saw today was a bottom up. peakached some transparency and we can now move forward. alix: the stock is up 5%. if you head of the you want reward for it. morgan set -- stanley front and center. romaine: honeywell had pretty good numbers. even before today, there were big numbers out of the transportation names. i think there's a narrative in that if you want to bet on ge, you could look at this narrative about the industrial base improving a little bit. emerging markets play here. ist of their business weighted toward africa, asia,

where they are outside the u.s. up staying?t wind doesn't power through if we get rollover. i don't know if we know that answer yet. worried about a downgrading of expectations. with ge, the bar was low. with morgan stanley, it was much higher. alix: guys, thank you very much. it was a pleasure to see you. president trump is criticizing opec. oil prices are too high. who just fill that the gas tank? plus, this is bloomberg. it ♪

romaine: this is your business flash. the ceo of barclays will keep his job after an investigation by british regulators. his attempts to unmask wrestled lower, regulators say he should pay a fine, but don't say he should lose his role. they will recognize -- recommend his reelection at the shareholders meeting. it's now up to pharmaceuticals to make the next move in the fight for shire. they are the only public better in the space of a few hours. they said they might make a bid for shire, then said they would not. they have turned down the bid it, but they are willing to negotiate. erickson is making progress in an attempt to versus portion -- reverse its position. the gross margin almost doubled from a year ago.

they are facing a weak market for mobile equipment, cost cuts are helping. that's the bloomberg business flash. alix: president trump is up early, criticizing the price of oil, tweeting it looks like opec is out again. they have fully loaded ships at sea. oil prices are artificially very high. had aile, oil prices solid rally this week's energy companies underperform, but they play catch-up. the white line is the energy sector seeing that big. joining me now is brian velti. president trump is tweeting about opec. i never thought i would see this. brian: bring in the canadian strategist. good morning. forgettingestors are

the long diminishing returns with respect to his tweets. a year ago, we were reacting a lot more when he would tweet. it's a noise factor this beginning to dissipate. we love to talk about it, but i think the more important thing is from a year to date perspective, things like energy have been underperforming. we write about it in our peace. .- piece with a this infatuation lot of our competitors and our compatriots trying to diagnose the market. they scare investors that recessions are around the corner. we don't see policy back that up. energy, we had a nice move short-term.

there has been so much momentum building in energy, this may be an opportunity for trade to take profit. alix: basically, we saw the cycle. in theory, that would mean you sell tech stocks that have outperformed. it the issue? to investors have such negative seventh ward energy that they don't believe in a $70 sustainable oil price? brian: it's a great question. energy stocks are traditionally cyclical stocks. you want to grow into the pe. arevalue part of energy things like exxon, chevron, those types of names.

it's because of the dividends. and the refineries are the growth. the offshore places especially need to see higher oil prices. the value part of the market from our perspective is financial. tech is starting to show some very strong value discipline and respect to that. move,ms of a late cycle you will see some of those commodities. we have not seen that yet. alix: you would sell the rally? ryan: we are neutral. we have a big move in the commodity short-term. some of positions and some of these higher beta energy names. we like the higher-quality cash flow names. alix: i want to take a peak at this chart. wall street estimates of not really moved over the last -- at all.

we have some trade worries. do you think we will start to see some downgrades? brian: on overall energy? alix: if you take a look at that blue line, that's the average investor. the median is where we will end this year. does that rollover? ryan: it's interesting. our competitors are raising the numbers. now the market is rolling over in some people are dropping numbers again. we try not to react. we are investors. see bet you will start to that starting to come. the main thing is we believe the andet on a near-term basis the last two or three weeks of and fundamentally driven. this is all about earnings. growrespect to some may , they are macro data

dropping their numbers. who knows? the majority of people are reactive and more near-term. we are longer-term. we feel very good about our target. brian will be sticking with us. it was ge surprising wall street this morning with first-quarter earnings. if we will break down those numbers next. this is bloomberg. ♪

alix: investors get a sigh of relief. it they surprised with first quarter or in that are above estimates. join us is bloomberg intelligence senior analyst. also with his is brian. thoughtf disappointment, it came in better led by aviation. they do have a number of good

businesses. i think the consensus was they would not cut. .hat is coming up probably the company is still saying dollar. cash flow, they kept that estimate and they did very well in the first quarter. they maintained the cash flow for the year. that seems a little bit of a stretch. alix: will they have to cut later? of relief. is a sigh we only get better news from ge these days. people are overestimating the cut. help more than people expect. all about the big conglomerates, should they be trimming down? a the era of ge that is in

million different businesses over? will it be more about selling it? adam: we own the stock. we don't own as much as we did. irma value perspective, there are different ways to run a portfolio. you can own and build a contrarian value. ge is one of the best contrarian names out there. the 14-year-old had fun seven pounding the stock for two or three months. whether or not this is a relief rally or a shortcut, it's probably a combination. most investors are missing the fact that industrial stocks in particular should be in overweight. we believe we are overweight. from a stock by stock basis, you can't make a big blanket discussion whether 3m and these other companies like honeywell should start to peel off their divisions. it might make sense for ge.

we are starting to see earnings growth start to come back into the company. the key thing we think is looking at results. if the cash flow continues to generate, the dividend is not going to be in jeopardy. alix: why haven't they been rewarded it? they are pretty much flat. why are they getting that kind of value boost? karen: they ran so much. that is part of it. themselves ahead of and they have to settle down and people raise numbers a lot. i just think it's a pause. alix: what company will be best positioned for growth? karen: caterpillar has huge leverage in the recovery. every business has grown over 20%. usually, people tend to favor the more cyclical to get the kicker as opposed to the other

types. they should do better. instead.e saying i don't agree. icw, honeywell, 3m, they can pull it off. ge has to simplify. brian: you've got to look at lockheed martin, one of the most beautiful stocks for 25 years. they increase the dividend. people forget about that. they look at defense only. alix: brian is sticking with me. karen, thank you very much. 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. : of nothing is happening in the market. dow jones futures are up by 11 points. everything else is flat, europe as well. sterling is weaker after esther

carney -- mr. carney took a rate hike off the table. if the boe has the confidence of the hike in a couple of months, it's a stronger dollar story for the most part. sterling is down by .1%. that huge selloff we saw in the bond market, it's getting reversed today. mine is coming in with yields three basis points. in the u.s., it's not moving at all. .5%.e down we thought we were over asset classes, the president tweets about oil prices being too high. let's get an update on once making headlines. opec is at again. they are meeting in saudi arabia where they are discussing keep in production cutbacks in place.

oil prices are at the highest in three years. they can't -- president trump call those artificially high. sanctions on said russian oligarchs have the impact the administration wanted it. imposed, there ruble has fallen 8%. mnuchin said he would not rule out further sanctions. the stalemate over brexit negotiations is getting deeper. eu officials are rejecting a possible solution to the future of the border between northern ireland and the republic of ireland. it would mean the u.k. stays in parts of the single market. the eu only was to give a status to northern ireland. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. alix: thank you so much.

the economic leaders are gathering in washington for the imf world bank meeting. trade risk is on the forefront. the south african central bank governor weighed in. definitely trade consequences. growth. turn down i think policymakers want open places that are good at. isx: joining matt -- me now michael mckee. the tension between a trade war and a synchronized global growth, what you take away? michael: around the world, growth is picking up. the imf forecast is up 2.4%.

the leaders around the world are optimistic. the german chancellor and the french president met in berlin. they made progress on a number of issues. when you come here to the imf meetings, the worker level government officials are concerned. the europeans had a panel on the future of the eurozone. they are very concerned as you were saying about the trade impact, what happens, what does the united states do? the economy in the eurozone is heavily dependent on trade. with lower corporate taxes here, it takes away the arbitrage some european companies were taking a veil of. reformere factors like of the eurozone, what they are going to do in terms of acting -- banking. how is that going to play?

they have to be unanimous. how the global economy is going to develop even though the numbers look good right now. alix: thank you so much michael mckee in washington. let's head to the world bank meeting right now. francine and tom are joined by the european commissioner for financial affairs. francine: thank you so much. we say good morning to you for the second them coverage from the world bank imf meetings. this is an interview we both been looking forward to. it's the eu commissioner for currency. he joins us now. at europe, a lot of countries look more integration. others want to tone down the integration. feethey getting more cold on banking, capital markets?

elections for the german government to be formed, it's been done recently. the country is more divided than it used to be. the political balance is difficult to strike. why they areain reluctant or careful. europe they understand is positive for the economy and complex politically. they need to take the responsibility as economic leaders and show risk reduction might be respected. they showed solidarity. they are taking the commission's hand in order to reinforce the eurozone, which is stronger for all of its members and to re-create the economy. francine: can anything good,

from a trade war between the u.s. and china? we have heard in the last 24 months that european countries lack commonality. now they have something to avoid it together. yourselfnnot define against another one. we must not be divided by that. there is no french, german, italian interest in that. together, the commission is responsible for negotiating trade. fewll meet wilbur ross in a minutes. yesterday, i met steve mnuchin. i think we must get down on the tone of that. it's bad. nobody wins. it's lose-lose. ofe, we are in the couple multi-lateral is him.

some.eral is it is a problem and we must do that altogether. that's not enough for europe. we need to integrate more where it's necessary. i'm not asking for a federal europe, there are items such as , monetary union on which we must make progress in order for there to be more investment and stronger growth for the future. am: secretary mnuchin has trillion dollar deficit. how does that affect europe? your in recovery, the story is fiscal. has irresponsibility. effects we-term cannot really foresee.

growth isamerican picking up, with a booming american economy, it's good for the rest of the world. we are partners and allies. the medium-term. carefullyo watch that to avoid imbalances. this is worldwide. our situation is not the same. we have high debt, we don't have the currency. ourust be careful about public. that is still the problem. growth main risks for are on the one hand protectionism and on the other hand debt. our culture must not change.

we cannot balance. francine: is it easier to sell it to europeans and americans as thing.ical do we talk about it differently? i was not a politician. i am appointee. i think about that policy. i was never in favor of austerity. that's when you become poor and you cannot invest. you need to be fearless and next different. you need to use your debt. these rules and lessons. that's what we've done. contrite one of our members.

this is positive. deficit is under 1% in europe. that is getting down. we did that without austerity. that was the same case with greece. we will have them out of this program. being serious must not damage growth. that balance is what we are looking for. tom: four blocks down is the temple of my way or the highway. how does europe adapt to president trump and his bilateral discussion. do you weigh out the president of the united states? do you sense a structural change in negotiations? the change with president trump and his team is huge.

really in the vocabulary and the culture. need to defend our values. europe can be against trump. at the same time, we have to negotiate and discuss with the administration. there trying to establish best possible discussions. francine: could this hurt growth? i am talking about world growth and european growth. effects are medium-term that have to be stimulated. thatve to avoid the fact it seems to be overheated. protectionism is really a pain

for the economy. climate, for what the markets look at. sure we are different from the administration, we respect them here. they were elected and they run the country. the messages we are trying to work together. war.ed to avoid a trade we need to refute protectionism. we need to organize free trade. we need to fall -- solve some problems. we to resolve them together. francine: they told to they were ready to ratchet down the rhetoric? is theel the climate exchange of views, not imposing

views or confronting views. that is dialogue between different people thinking differently. we will find a way. francine: thank you so much for giving you the time. we are going to send you back to new york. german finance minister in the spanish when it. alix: thank you so much. be sure to tune into a special edition of bloomberg surveillance. you will hear from key world leaders in colluding the spanish economic minister. it's time now for wall street the. the tax man, hedge fund giants are pulling money out that pay a huge tax bill. the german lender says $35 billion transfer and survives whistleblowing a

probe. it's no big deal. joining us now is at hammond. thanks so much. happy friday. i want to kick it off your with a massive tax payoff. the -- in then hunt for billions. >> this is such a true wall street journal. david einhorn is pain $300 million. he is pain that tax bill. we are talking about john paulson, $1.5 billion. this goes back to 2008. it has to do with fees were earned offshore and were part to there. they had a decade to pay those taxes. they hoped something might change. it didn't change. alix: too bad.

>> the numbers are staggering. let's talk about a number that isn't as staggering. that is deutsche bank. a flaw that meant germany's biggest lender has sent $35 billion to an exchange. they already have problems with risk management. >> that's a polite way of putting it. $35 billion just walked out the door. assistantow an mismanaged. it comes at a time when the bank is under huge pressure, getting a new ceo. it doesn't look right. -- great. can'tif regulators believe in deutsche bank, why would they support it and let it take its time to sort itself out? >> it's like an individual that does bad things, when they do

another one, i am done with this person. it's hard to give them a second chance. >> if you still believe in doing space -- deutsche bank. >> they are germany's biggest lender. alix: look at commerce bank. that looks really interesting. let's talk about another big bank. that is barclays. he did not have a good time trying to find out who a whistleblower was. he got a big slap on the wrist. >> it was quite a lot of money .f you look at it it's 1.3 million pounds. it sounds like a lot. he is allowed to keep his job. they did not go very tough on him at all. this could've been looked at quite seriously. the new york regulator is still looking at it. isy said compromise

ingrained as courtesy. >> i have to say, many years ago i set down with jes staley. he was the heir to jamie dimon at the time. he has a brother who is very prominent in the gay community, in the wall street community. he felt like it was the right thing to do. i think there is a moral compass in there somewhere. it's hard when you are a bank that is under scrutiny and another thing goes wrong. losing hundreds of millions of dollars? alix: it's a good pleasure to see you. in the markets, i want to highlight oil. the saudi's are responding to president trump's tweet that prices are artificially high. they are determined by the market. there is no such thing as artificial oil prices. you wouldn't think that moves

the market, but it does. they are down by 1%. let's go back to washington where tom keene is joint by david lipton. ,: thank you so much. one of our most important interviews now is the spring meeting of the international monetary fund. he is the american representative. he has four titles. he is the important number two. he is from another time and place, serving in the senate. it's wonderful to see you. what do you do every day? was the real job? >> to manage the staff and the work of the staff and make sure everybody is doing with it got to be doing it, thinking about policy and strategy. tom: give us the stereotype of

us an example of who that is. >> we get people from all around the world. they are very well-educated economists. we are clinical economists. you have to practice what you preach. it has to work in practice. these are people who have been doing this around the world in situations, dealing with the actual problems and the leaders who have to bring about the changes. the zeitgeist is one or two days. >> we have to be agile. veryeveryone is saying is much the same, things are good, but they are getting risky. while things are still good,

it's time to try to prolong this -- bery in ways that will sustainable. let's be in a better position to deal with them if they materialize. tom: you have a beautiful social media effort. arsenal football will be different. bars of the imf, there is one video people are looking at. the the debt video of all nations. there is one with a red bar and is the united states of america. >> there are debt issues all around the world. that's a big number. that's more than twice global gdp. there are a range of countries around the world that will not have the buffers, will not have the space to maneuver if something goes wrong.

they should be doing something about that, trying to rebuild. it's important and we've been saying it for years, the u.s. soon reduces the budget deficit and tries to get the debt to gdp ratio to come down. you never know what will happen tomorrow. tom: the arch. for all americans is growth will solve everything. within your forecast in the blue can you yank it over to the fiscal space and say growth will be there for the next story? people,uld like to see all of our member countries, trying to take steps to improve growth in the medium-term. this is a cycle and you have to look over and see was going to come. potential growth could be

somewhat lower in the future. there will have to be affirmative steps there infrastructure and structural reform to improve the growth prospects. wildcards on the horizon. are onitional subjects everyone's mind this week. trade, technology, trust. trade is a semi traditional subject. everyone has been in agreement for years and there should be liberal trade. we need to pivot from where we are. countries have gained from theirization and no future is globalization, they are big enough to matter. they need to be thinking about opening up their own economy and the united states needs to be letting go of unilateral pressures to achieve its goals.

people are really now talking about it. they are trying to find ways to access andre market more competition. they are strong enough to open themselves up to competition. is athe template here multilateral effort against an isrica and a president who my way or the highway. how do you deal with the present administration in a more successful trust relationship? i think it's very broad in the united states and many places. trump is between international partners, trust in institutions is diminished. that's a problem.

people must cooperate and show the cooperation leads to gains. it you start to rebuild the sets that it can be pieced together. to jasons talking about the great economist. i did a panel on this. dr. lipton will do a panel on this. do large deficits and debt over the long-term, they must destroy trust. and thelization financial crisis, all of those things have led to an erosion of trust. thele don't believe government is taking care of them. globalization, we been saying this for years, globalization has to be managed and verbal.

you have to make sure you maintain stability. really recovered in the sense that people trust financial institutions. we had a huge reforms to make banks safe again. it is difficult to maintain public finances in order that people will trust in their government. tom keene is joining us there. this afternoon, we have a special edition of bloomberg surveillance where we will be live at the emf. you will hear from world leaders. u.s., we willhe talk about markets developing tweet, president trump criticizing oil prices. sv futures are flat.

it's flat over in europe as well. if you switch of the board, sterling is lower against the dollar. as the head governor of the boe throws a wrench into a mate rate hike. that's having an effect on the long end of the on market. they are moving lower by three basis points. yields are moving modestly higher here in the u.s.. 292 is how we frame the conversation. the market has crude rolling over as rhetoric between president trump and opec heats up. this is opec -- bloomberg. ♪

♪ anchor: now trump says opec is

at it again and that oil prices artificially high. the opec minister says there is no such thing. track, ge stands by its track, ge stands by its 2018 profit forecasts as part of the company's latest report. a warm welcome to you on this friday. d.c. asful shot of president trump is tweeting about commodities. take a look at how the market is playing out here. , startingy almost 1% to roll over after that week, down 8/10 of 1%. you are seeing some selling on the bond market. it is a broader, stronger dollar story. beenuro-dollar story has the third tightest range in a 60 day average ever.

what would unwind those? futures primus go nowhere. it feels very calm as i am here by myself. david westin has realized that vacation is a good thing. kailey leinz is here with first word news. kailey: president trump says opec is at it again. the oil cartel and its allies are meeting in saudi arabia, discussing keeping production cutbacks in place. oil prices are at their highest in three years. the president called those prices "artificially very high" and said that will "not be accepted. out -- not be accepted." line that hasne been connected between north korea and south korea before friday's historic meeting. brexitmate in

negotiations is about to get deeper regarding the future of the border between northern ireland and the republic of ireland. wants to give special status to northern ireland. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is bloomberg. global policymakers adopting a glass half-full approach to the world economy. joining me to break it down is rbc capital markets' head of strategy. welcome. happy friday. i wanted to start with the inflation expectations rise we have seen lately. top americanhe

breakeven, german breakeven, and japan's breakeven. you see in germany and the -- you've u.s.that climb in the and germany, not a japan. what do you see? >> all the industrial economic indicators are fairly strong. i think we've had such a robust re-acceleration we should not be surprised if we get a little bit of a pause at this point. >> i think labor markets around the world are pretty tight, so i am not surprised we haven't seen the wage inflation kick in just yet. i think there is underlying upward pressure on both wages, and therefore eventually on inflation. it seems like unemployment rates have been moving relentlessly lower.

i know it is not creating a ton of wage pressure yet, but i think it is still there. alix: do you have to reposition a portfolio for more inflation? >> i don't know that you want to drastically change your portfolio. i think the biggest change that has happened in the market is we are just in a more volatile regime. part of that has to do with the fear of a little bit more inflation, a little bit higher rates, a little bit more hawkishness on the part of central banks. client the part of the best part of the assets -- part of the assets clients need to think about hasn't changed that much. >> the prospect for the global economy continues to be bright. at the same time, while the sun

seeing morewe are clouds accumulating on the horizon then we did back in october. alix: you recently cut your price target for the s&p. was it because of some of these risks? >> we track six drivers in the u.s. equity market. at the beginning of the year we had four that were positive. now it is down to two. some of the clouds we see gathering are in washington. the tweet we saw about oil prices, we think we are going to get more of those. it is a more uncertain economic policy environment coming out of washington. we think investors need to curb their enthusiasm because of some of these clouds. alix: what are the two ucf youtive? -- ucf positive -- see as positive?

>> we think earnings are going be very strong this year. you are starting to see that come through. we think it will be a strong underpinning. the two negatives we see our retailr underpinning -- money flows. we had very strong inflows coming into the market. that stopped in february and march. very unusual to get that this early in the year. volatilityu see more , seeing some indicators rollover? how do you hedge yourself? >> i think you have to be careful. is view is we think there good upward pressure on the market, but we don't think it can be a one rate -- a runaway market.

i don't think there's any massive disconnect between where forward earnings estimates are and where the stock market is. we think the market will have upward pressure, but it is not a runaway market. we are sorted in this low beta world. many of the defensive sectors are somewhat expensive. you would lean towards things we can try to find that are cheap. there is not a lot out there that is cheap, but we like things like banks within financials. there are pockets of the value, there are strategies. you can hedge with options, you can do a lot of different things. what i don't think you can do is buy the classically defensive sectors that tend to be interest rate sensitive. i think we need to stop thinking about things as cyclical versus defensive. i think there are three buckets of sectors. there's the traditional growth

sectors like technology, recurring cash flow that got us through that sluggish growth qe. i think it is time to sell out i think it is time to sell out of those. the strongest but it is the value cyclicals. financial, energy. energy valuations have come in a lot. well with the fundamental backdrop we are starting to see emerge. then there's the traditional cyclicals -- defenses, rather. we don't think any of them look great in a rising rate environment, but utilities is probably the best of the bunch. lori and david, are of staying with us. big tex earnings on deck next week. what to ask -- big tech earnings on that next week. what to expect from the heavyweights. this is bloomberg. ♪

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alix: the quote of the morning, the cactus of investor banks. that is what congress called deutsche bank, saying it is spiky a slowly growing. joining me is bloomberg's german banks reporters. a lot of downgrades coming. what are we expecting? reporter: it is the cactus. last year it was shrinking. i don't know if cactus do that a lot.

they abandoned the costs target for this year, now up to 23 billion euros. people will be looking very carefully at the new ceo to achieve that cost target. the investment bank is another focus. it has been shrinking, and people want to know what is going on. alix: morgan stanley also cutting the bank's profit forecast by 20%, saying they continue to lose market share. 1% market share in investment banking relates to 30% readjustment. how much clarity will be able to get from earnings on this? reporter: it is going to be one of the focuses of the day. it is not entirely clear how much clarity the bank will be able to give that day. is lookingt the bank at the investment bank very carefully. it is undergoing a review of the whole business, and they are going to make an announcement at

some point. we don't know if that is going to happen next week. probably not. people will be looking very carefully at how much market share it has been able to gain, if any, especially in light of the good results shown by u.s. investment banks last week and this week. it is going to be difficult for deutsche bank to compete with that. alix: absolutely well said. very difficult to compete with the likes of morgan stanley and goldman sachs. thanks very much. great to see you. we are also going to hear from some tech heavyweights. google with its first quarter report monday, then facebook and twitter wednesday, and amazon on thursday. david. is lori and how do you view tech? >> we don't like it as much as we used to. going back to year-and-a-half ago, if you look at the managers , we probably had as much tech as anything else.

by thes presently driven fact that if you went back a year, year-and-a-half, tech was one of the cheaper sectors relative to the overall market and had some of the best earnings prospects. it is probably about averagely valued now. it isn't that we find tech unattractive, but it had quite a run-up, so we are not as optimistic as we had been. it was cheap. average to aut slight premium to the market, which it probably deserves, but it is not demonstrably cheap the way it was 12 or 18 months ago. alix: are there subsectors of tech that you still like? weightad been on market and pulled the plug on it last week. i would say that nothing really looks great to me within technology at this point. if i am looking at crowding and valuation issues, i think the equipment space looks a little better on those metrics, so i am not super worried at this point.

we've had tremendous not of crowding in the fang stocks. also i field that software and services, those are the two also if you look at software and services, this of two worst areas in tech right now. asx: you have the white line the s&p financial index, the blue line the s&p tech index. you see a rolling over as easy financials start to move higher -- and thatelation correlation between the two slips. does a flattening yield curve make the market say, hang on, i think i need to own tech and not financials? >> i think for now the entire flattening of the yield curve story is completely overplayed. the reality is that the short end, we don't see bank funding being as expensive as a typical

would indicate. the reality is retail funding, the deposit rates that an investor would get if they placed their money in a bank, hasn't risen nearly as much as, say, the two-year. we don't think the slope of the yield curve has flattened as much as the economic historians would say. we still like financials. we think the direction of overall interest rates is still higher. that should be good. yeton't think banks are caught in this sort of misery of the long end going below the short end anytime soon. i am not worried about the flattening of the yield curve yet, but there will come a time when i am worried. we are not there yet. lori, the question has been what will take tech's place. what will be the leader in the next leg? can financials do it? >> i think financials absolutely can do it. onm pretty bullish

financials. my work has gotten back to the sector. the hedge funds haven't. now that we are seeing hedge fund money rotate out of technology, i think financials will be a destination. i don't know that we have seen it go into banks yet. i think that is the next leg of the trade. but in the fourth quarter filings from hedge funds, you saw them pull down there tech longs already. alix: interesting. up, let's talk industrials. this is bloomberg. ♪

♪ alix:alix: ge shares of in premarket, but will it be enough to restore the industrial giant? lori and david. part of what was so helpful for ge is that they reformed their forecast. at some point to they have to cut it? >> it is going to be interesting to see. much betters were than expected, particularly in aviation and health care. the guidance is really still a big question mark. they did reaffirm it, but they have had some setbacks. they took that big charge at ge capital. they had that reserve shortfall. they restated their earnings last week to comply with this new accounting rules change, but you are starting off with a lower earnings base in 2017. the growth hurdles to meet that outlook are tough now. it is going to be a challenge, but they did get a good start in

the first quarter, so we will see. and marginsash flow also improved, but how sustainable is that, especially if input costs continue to rise or there is wage pressure? >> is a lot of counteracting themes happening for industrial companies right now. ge is not really getting the organic growth. you are against this backdrop of good growth, but there's a lot of other challenges looming out there, whether input costs, dealing with any sort of trade war fallout. there's still a lot of big question marks here, but still a good start. the big question is can they avoid any bombshells. theyast quarter disclosed the sec investigation and walked back guidance. if they can get through without any major bad news, i think that is a victory. it will be interesting to see what they say and hear more

color on what they are seeing in the aviation market in particular. mix in aviation this year is not going to be as profitable as it was last year, so some details and what they are seeing and how it might play out over the rest of the year. alix: you say that industrials can help lead the s&p higher. what kind of industrial companies are set to profit the most? >> think there's generally pretty broad appeal within the sector. i think there is based is still a little overvalued. machinery was somewhat overvalued but it's starting to look better. things that intrigue me, roads and rail has a good, nation of attractive evaluations. they are not too well loaned. i think there is broad appeal within the sector, to be honest. >> we are more optimistic about industrials. we like the fact that we are starting to see capex pickup. we hope that the tax cuts, that it will all go into buybacks and

dividends. we would be more optimistic about industrials if i really felt like a big part of that tax cut would go into businesses reinvesting and buying heavy machinery from the industrials. i would like to be more optimistic about it, but our view is probably a bit more neutral given the fact that on a valuation basis it is not all that different than the overall market. >> we actually love what we are seeing on. we just it a lot -- on capex. we are seeing improvement across the market, especially on energy, one of the drivers for that industrial space. based on all the strength we've just seen over the past year, it is a really great setup for this year, and you are starting to see it play out. >> i agree. i think it sort of depends on the company, but we have heard good comments from specific companies. others have said they are going to look to take the tax

benefits, but their suppliers will put it into their own credit. it will be interesting to see how this all works together and what we ultimately end up seeing capex. alix: you had baker hughes and honeywell coming in solid as well. what about margins and input costs? at the end of the day, how do they manage that? >> i think that is a clear issue for the market at this point. we thought our margin assumptions were a little bit too lofty, so we are anticipating a flattening of margins. we are not bearish, but we think you probably don't want to count on expansion this year. >> margins typically are extremely mean reverting, and they haven't been for a number of year. they have been defying gravity for quite a while. --ot of it has to do that has to do with wages that are under control.

it is something we have to pay attention to because i don't think they can do for -- they can defy gravity forever. >> it is too early to crunch the stats on this one, but the things that jumped out about it were wages, doing something nice capexeir employees, and was the other one. alix: we haven't mentioned trade war in the last hour, which is kind of a record. across our scorecard there are seven or eight things we are looking at. negative forare industrials are valuations, but also policy and trade. we are not super bullish next week or next month, but we like the longer-term story. brooks has got to run because she has a call. thanks for being here so much.

lori and david will be sticking with us. some responses from president trump's tweets that opec is artificially moving the oil price. bloomberg is speaking with mr. novak, the russian energy minister. he is saying that opec and the deal have no disagreements on goals. everyone is interested in continuing their operation, and that they do not wind up targeting an artificially high price for oil. in particular, he responds to nottweets, saying, "it is -- saying it is not legit. we will break that down more for you. this is bloomberg. ♪

♪ alix: this is "bloomberg daybreak." very calm and the equity markets and across all asset classes. .&p flat, flat in europe

if you flip the boards you can see stirring -- you can see sterling lower by 3/10 of 1%. a potential may rate hike is not a done deal, so will we see some dissent? the market quickly rewriting the prospect from one to two rate hikes this year. we are seeing buying on the margins. thiss been a wild ride week, but it feels very calm today. crude continues to roll over, down 6/10 of 1%. thank you, president trump. he tweeted that opec is artificially boosting prices and he didn't like it. the russian oil minister saying we don't manipulate the price. more on that in just a moment. let's get an update on what is

making headlines outside the business world. kailey leinz is here with first word news. kailey: the treasury department may use an emergency law to curb chinese investments in sensitive technology. authorities have until the middle of next month to report their options to president trump. ae president could declare national emergency, which would allow him to block transactions and seize assets. china says the u.s. is acting up a bully. the top democrat in the senate is on board with decriminalizing marijuana at the federal level. senator chuck schumer tells vice news he has seen too many people's lives ruined because they had small amount of marijuana. last week president trump endorsed letting states decide how to regulate the drug. there was a high-level exchange of tweets about oil prices today. president trump tweeted that opec is added again, calling oil prices artificially high. he says that won't be accepted. russia's energy minister responded, saying oil prices are determined by the market and

opec oil helped restore the industry. global news 24 hours a day on air and to talk on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. alix: i love when president trump tweets about the sector i love the most. want to bring in michael cohen, berkeley's head of commodities -- barclay's head of commodities research, and also lori and david with us as well. what did you make of the tweaks change with -- tweet exchange with president trump and opec? >> it is important to kind of keep in mind the broader context here. opec has this joint minister monitoring committee meeting this morning. what confuses me about this overall cut that we are still in is by the metric of getting back

to the five-year average level, they have done it. if you use the seven your average, they would do it by maybe july or august. if you look back at the interview here at bloomberg back in the spring, there are three different metrics they are looking at. not only the inventory issue, but also the investment cycle restarting and the health of the global economy. in those two other metrics they are not at the goal posts. for me, the thing that is confusing is why is saudi arabia producing at 9.8 and 9.9 million barrels a day when their cut level they agreed to is 10.1. when you talk about artificial, 200,000 barrels a day lower production than what you agreed to and not offsetting the lower production by many of these other countries producing a far lower rate for reasons that are

out of their control, that is what is confusing to me. alix: especially when you wind up having venezuela falling off the cliff, potentially iranian , and ifs being waived we do c-sections happen, is the swelling continues -- if we do it sanctions happen, if continues in venezuela, do we see these continue? >> as an observer, they want stability. i think from their perspective they are concerned that the macro situation could turn far worse as we get into the year. generally we went through a very demand growth,f and that issue is kind of lost amid this debate of supply-side cuts. demand growth was exceptionally strong in q1. partly because of whether, partly because of the global synchronous growth drop.

we don't expect that demand growth to continue over the course of this year. alix: what do you do as an investor? come inside the bloomberg. it shows the underperformance of energy equities. the red line is the actual oil price. the purple and white, the real oil performers -- the real underperformers. and the rallies are the integrated and oil performers in the s&p. >> i think the agreement and services space has the most upside. it looks the most under loved on our sentiments. alix: even know our producers are talked about being disciplined, not ramping up -- >> we gauge positioning in different industries within the energy sector. we look at the first one, oil and gas, basically at the high end of its range on a 15 year basis. equipment and services is near the low end of its range.

distillates really hated from a sentiment perspective. alix: you can make those arguments, but sentiment in this sector, our strategist said she has never seen sentiment as negative for a sector as she has for energy. you are on the fence. why? >> sentiment is usually driven by what has happened to investors in the past. i think you have a lot of people that felt burned. iu also have a world where wouldn't say we are drowning in oil. we are starting to come back where supply and demand are basically back to where they should be, but i would argue we had plenty of supply for a long time. it is very hard to get massively optimistic on energy if you still think we are fully supplied. 2.5, 3. has gone from million barrels a few years ago, pushing 10 mayor him -- pushing 10 million barrels a day today. it is one of the reasons why we

haven't been is bullish given how cheap the names have been, but it is starting to come back more into equilibrium now. alix: that brings me to the price of the curve. what is short-term geopolitical risk? what do investors need to pay attention to if there is a turn sentiment? the short-term is a geopolitical thing, right? 2020?are we with 2019, how do you understand the re-rating? >> high and easy was at the center for global energy policy yesterday, their ceo at this event, and said we are not hedging because the 2019 and 2020 levels for the curve are below levels we want to be at. i don't know whether that is really the case for all enps. i was surprised by that. i think that generally as an

investor, you're looking at this space at the two to three-year time frame, you want to have clarity on oil price at levels of $50 to $60, not sufficient in their view to see the restart of most of these final investment decisions. what thelook back at tracking has been for the last couple of years, you're not seeing the same level of new projects moving forward. the projects that have moved forward are small in scale. we do need to see that far end of the curve start to move higher. that is why we have a target for $70 by 2025. we think there is clearly upside risks to that if the situation in iran does not materialized and you end up with lower production by then, and frankly if you look at what is going on in iraq as well. alix: really interesting conversation. thank you.

great to catch up with you. coming up come trade is the hot topic at the imf world bank spring meeting. what world leaders are saying about how protectionism can curb global growth. you can tune into our colleagues , all imf, all the time. "bloomberg surveillance" can be heard all across the u.s. on sirius xm. this is bloomberg. ♪ >> bloomberg television's brought to you by interactive brooke burn -- interactive brokers. one world, when account.

kailey: this is "bloomberg daybreak."

coming up, the finance minister of france. ♪ imf and world bank leaders gather in washington for their annual spring leading -- spring meeting. bloomberg sat down with david lipton, the first deputy managing director. at the top of the agenda, trade war risks. is what we had -- here's what they had to say. >> you cannot find yourself against another one. we must not be divided by that. there is no french, german, italian interest in that. we are all together. the commission is responsible for negotiating on trade. my colleague is in charge of that. met, yesterday, steven mnuchin.

i met with people in the white house. i think we must get down on the tone of the trade war. it is bad. nobody wins. it is lose-lose. we will be at the g20 meeting in a few seconds. protectionismsay is not the solution. it is a problem. for europe, we really need to integrate where it is necessary. there are items such as migration, trade, as you mentioned, on which we must make progress in order to have small investment to better and stronger growth for the future. secretary mnuchin has aso giving you the gift of

deficit. how does that affect you? >> american growth is picking up. it is good for the american economy, it is good for the rest of the world because we are partners. there is no trade war for the time being. that is good for the medium-term. when you have a high debts, you need to watch that carefully to avoid and balances. politically our situation is not the same. we have high debt. we don't have the privilege of having the dollar. we must still be careful about our public and private debt. it is still the problem for the future. >> what everyone is saying this week, one way or another, is very simple. things are good, but they are getting risky.

that kind ofs in setting, while things are still good, it is time to try and prolong this recovery in ways that will be sustainable, and prepare for those risks. reporter: within your forecast in the blue book, your world , can you yankok it over to the ground book, the fiscal space, and say that growth will be there for every unique story, including the united states? >> we would like to see all of our member countries try to take steps to improve growth in the medium-term. you have to look over the crest of the hill and see what is going to come. we believe potential growth will be somewhat lower in the future than it has been in the past. there will have to be affirmative steps through infrastructure and structural reform to improve the growth

prospects. i would say that there are new wildcards on the horizon. ,he three subjects nontraditional subjects, that are on everyone's mind this week our trade, technology, and trust. trade is a semi traditional subject. it used to be a big deal, but everyone has been an agreement for years that there should be liberal trade. we need to pivot from where we countries that have gained from globalization and know their future is linked to globalization, but are now big enough to matter. they need to be thinking about opening up their own economies, and at the same time the united states needs to be letting go of unilateral pressures. that was peter moscovici and david lipton. joining us is michael mckee, bloomberg's national economics

and policy correspondent. i love that he brought up the trade, technology, and trust. reporter: it is not so much an emergency law as a broader application of what they have power tog with the block anyone's investment if they think it is against the strategic interests of the company. they are looking at doing that because they are worried about the chinese intellectual property, the idea that china comes income abides buys into home companies, and takes the ideas as part of their made in china 2025 plan. alix: whenever we see some kind

of tariff, china responded right away. if something like this comes through, what power does china have? reporter: it is going to get complicated. the tit-for-tat we have seen so far is the $50 billion in trade sanctions. ,f we do the $100 billion extra we don't export that much to the chinese, so they would have to look at some nonconventional ways of sanctioning the u.s. they could put on restrictions on u.s. investment in china, and american companies would not like that at all because they look like the cash cow of the future. they could dump treasuries, but that is against their own interest. look for some creative thinking on the part of the chinese not spoken to. a number of trade experts here in washington this week, the feeling is if the trump administration is serious, they probably can make a deal with china to at least bring down the trade deficit.

the chinese need to buy stuff. they might as well buy it from us. alix: how? any idea? they could increase agricultural and by more -- and buy more airplanes and liquid gas. what they don't think is going to happen is china is not going to give up on its made in china 2025 plan, nor do they think they will really back off on the joint venture stuff. the chinese do want to get a look at the best elegy, and they do what to control who actually because it is privately controlled. there is a deal possible, not as much as donald trump once, but they could -- donald trump wants, but they could encompass something. alix: coming up, the clues from

inflation curve tells us about commodities. check out tv to watch us online, click on our charts and graphics, and interact with us on your terminal. you can ask us a question or retweet me on twitter. scroll through and check it out. this is bloomberg. ♪

alix: i am watching the breakeven inflation curve. this is the two, five, and 10 year breakeven. a nice jump, and the five and 10 around 2%. so often in the bond market. is it related to higher

inflation, or something else? >> there's a little bit of pent-up unwind. we got kind of this flat in her link.- flattener we were still kind of in the process of unwinding, but looking at the dominant narrative and markets, i think it seems to be that everyone is focused on the light at the end of the tunnel, but it is an incoming train. it is the end of a cycle. , trump tradedlines policymaking americans less confident, bank of america's survey saying that people are the least optimistic on growth. folks are very worried, and it reflects itself and the fact --t earlier this morning

however, look under the hood of what the breakeven curve is doing. i believe we have a spread between two-year and 10 year breakeven. alix: the top panel is 10 year and two-year breakevens versus the oil price. you can see the oil price and 10 year breakeven are pretty much tracking each other. he bottom tracker is the ten-two curve. >> people don't extrapolate commodity price rises forever, but no it will hit inflation in the short run. we saw the breakeven curve completely invert in early raisingt was linked to the near-term outlook for price pressures more than the longer end. this time it is a completely different story. we've got commodity prices rising. the commodity index and oil are higher than than they are

now. in this relentless march towards flattening, folks are staring into the breach wondering when will be cycle and come when will this be over. this is one way in which the bond market is pushing back against that narrative even amid a flat in her. this is keeping the curve -- a flattener. this is keeping the curve from flattening too much. folks are getting more increasingly confident on how many hikes the fed will deliver, but still want to say this is the end of cycle now. they are staring at the black gate. thee will be a day in current of market investments in this economic expansion fails, but it will not be this day. [laughter] days like yesterday kind of reflects that. alix: you should know i am a huge "lord of the rings" deke,

geek, so i feel you. thank you so much. you really made my day. coming up, i am taking over for on "bloomberg markets: the open." currently you are taking look at an s&p flatter. the real action, if any, has to be in the commodity market, as well as the dollar. sterling taking a hit lower. oil talks lower by president trump. this is bloomberg. ♪ 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. alix: 30 minutes until the start of trading, this is the countdown to the open. ♪

alix: coming up, trading threats. the u.s. seeks to punish china for what it sees as violations of american intellectual property rights, raising another red flag in the traits that. electric shock therapy. afterrk of the dow earnings defied expectations. crude tweets. trump slams opec, saying they are added against. the saudi oil minister says no such link. thing. taylor riggs has the details. : takeda pharmaceuticals raising its bid to about $47 a share for shire, making a new bid in the coming days and they are not making a final decision yet, but raising that