is it something more significant for the fed and investors? nearly one third of s&p companies report this week. ubs underwhelm spirit president macri has to washington, d.c., to meet with president trump to capitalize on their special relationship. david: talk about special, look at that view of new york. it is a beautiful spring day. welcome to bloomberg on this monday, april 23. alix: we missed you on friday. you were playing tennis for a few years. david: i missed you too. alix: it is a soft session so far. s&p futures are flat on the day. the stronger dollar story as u.s. 10-year yields inch forward to 3% is euro. estimates forer

the business outlook. 98%, will we had that 3%? will balloons come out? david: the bell will rain. alix: will it be the same old, same old? david: it is time now for the morning brief. french president emmanuel macron arrives in washington today. he will address congress to market he will be the guest of honor at president trump's first state dinner ever. on thursday, the european central bank will release its rate decision. on friday, angela merkel will come to washington to meet with president trump. the koreas will hold a historic summit in the demilitarized zone. alix: we are joined by gina martin adams and marty shanker. 3% on the 10-year, what does it me? -- mean?

the chief of ubs spoke about that. llure mayychological a drive investors to diversify and go back into long-term bonds. in general, it is hard to say. it is more psychological than anything else. alix: noise or signal? signal.noise than as we saw last week, as soon as that bond rate the tire, financials got a bid. financials all week produced stronger earnings results. not enough to get investors interested. but when the rates may tire, it did. higher, it did. this creates a lot of portfolio

rotation and asset allocation shift. from a relative perspective, equities are attractive compared to bonds up to 4%. there may be a lot of accounts looking at this 3% level as somewhat consequential. alix: when you take a look at the dollar closing at a three-month high, it is still not the same strength you would expect based on the differentials between the u.s. and europe. is that a d.c. thing? >> it could be. what the fed is going to do going forward whether they go for four rate hikes or not, the backdrop is increasing deficits in the u.s.. we talked about a search for yield for years, and now you have a 3% return on one of the safest investments you could think of. it is going to compete with equities in my opinion. i think it is something everybody should take a look at.

david: you and i are old enough to remember when it was a lot higher than 3%. >> 12% return. david: this is pretty moderate. ubs out with earnings overnight that exceeded expectations. the stock actually stepped down because there was disappointment about how they make their money, particularly wealth management did not perform. this goes back to what i was talking about. it is just not enough. investors are never satisfied. there was a clear theme across the board in u.s. banks. there is a clear theme here. different it divisions are creating a story for investors. it is very nitpicky. everyone is excited about the prospect for financials this year, and the result is every

time you get an earnings report, it is not enough. david: we have more european bank stocks later this week. there are high expectations for earnings, and there is a must nothing a company can do to outperform. gina: the one thing they should be doing going forward is guiding higher into the future. one of the overwhelming concerns from the investor base is that this is the peak. we have rates moving higher, the yield curve steepening in the first part of the quarter, that is helping, but what are you getting to me going forward? are you producing loan growth? is the economy really expanding? none of these companies can really say this to get investors excited. alix: except for maybe technology. you have the technology coming out today. >> there are high expectations for these companies. you could not get a more

favorable environment for the technology companies even though the whole controversy over the hacking and social media and facebook from all of that aside, the basics of this industry are phenomenal. i think in the context of financials, the technology companies are going to have to oo, this week. david: our third story is president macri and visiting president trump -- macron visiting president trump at the white house. >> we have a very special relationship because both of us are mavericks of the system on both sides. i think president trump's election was unexpected in your country. probably my election was unexpected in my country. we are not part of the classical political situation. -- system. david: they may be mavericks, but they are very different

mavericks. >> they cannot be more different in terms of their outlook and policies. they are both mavericks, but incompletely different political spectrums. is in favor of the paris accord, in favor of the iran nuclear deal, those things donald trump is against. david: what will be at the top of the agenda? is it going to be iran, trade, climate? he has a lot on the agenda. >> i think the most immediate issue is the iran deal. both macron and merkel will be trying to convince donald trump that it is better to stay in that deal and fix it rather than withdraw. withdraw is a monumental issue for the europeans. imf sounded -- the the alarm on that saying that historically high global debt and tensions threaten global growth prospects. how does that feature into the

conversation? gina: delicately. i think the trade question mark is going to lay over markets for the rest of the year. this tit-for-tat with china and what is going on with nafta, what is going on with global trade broadly, this is a situation we have been dealing with for years. has been decelerating for several years. will we see resolution on the part of global leaders to repair that trend? that will impact earnings over the long-term. alix: can you have secretary mnuchin going to china potentially. >> well, it is unclear what he is planning, whether that was just a line. obviously, the markets seized on that. china immediately issued a welcoming sign saying if you

want to talk to us, we are happy to listen. they have been asking for talks. it is unclear not whether steve mnuchin is getting his instructions from the present on this. david: it is unclear who is in charge of trade. so many people in this administration, ross, coke low, mnuchin and the present. >> it is very confusing. mike pompeo as secretary of state will have a huge influence on trade, north korea, the iran deal, and he will have the president's ear. alix: thank you so much for joining us. treasury yields grinding high. the benchmark u.s. 10-year approaching 3%. more on what that means for investing as we get ready for a big week of earnings with jay pelosky of pelosky global advisors. this is bloomberg. ♪ oomberg. ♪

♪ taylor: this is "bloomberg daybreak." i'm taylor riggs. walmart is on the verge of taking a leading stake in india's leading e-commerce company. the company's major investors are now on board. earlier they had considered a deal with amazon. company suspended its attempt to purchase a larger stake in the u.s. drug company. planned $4.3e billion takeover. accusations that it enforced its rights under the merger agreement.

china's hna has reduced its holdings by 1% to about 8%. they are dealing with financing problems at home. alix: in the market you are seeing the selloff across the bond market in europe and the u.s. we are close to reaching that 3% level for the first time since 2014. noise or signal? we spoke about that earlier today. >> the psychological barrier of 3% may drive investors, but institutional and private, diversifying into bonds and going back into long-term bonds. it is early to say. i think it is more psychological than anything else for the time being. pelosky -- jay pelosky of pelosky global

advisors joins us now. jay: i don't think it is that big of a deal. over the last month or two, we were worried about the slowdown in global growth. sold came in and stocks off. i think the key question for stocks is can they go higher with bond yields going higher? i think they can. it is unclear if bonds are going up because of growth. we have decent growth. there are supply and demand issues. the u.s. is a huge debtor. the yield appeal is no longer what it was two years ago. global growth is going to be ok. investor, that last point is the one i care about. global growth is going to be ok. david: i want to talk about financial conditions.

linechart shows the white is the investor sentiment, and blue's financial conditions. as that line goes down, that is tightening. now it is picking up a bit. investor sentiment has tracked with that. where are we now? at what point does the 3% start to hurt your financial conditions? jay: that is one of them that we look at as well. i think where we are now is not a danger point in any real sense. there is plenty of liquidity out there. i think the question of global growth means the fed is likely to go slower than what is priced into the markets. banks are lending more. we are seeing that in earnings results. there is plenty of money out there. from the perspective of tighter financial conditions, i am not that concerned. i think the opportunity has been that growth is going to be ok.

david: going the other way, plenty of money out there, a lot of lending, at what point is there too much lending? if you get really significantly higher interest rates, you run into trouble. jay: i think we are far from that point. there are some parts of the bond market that are in trouble. investment-grade in the u.s. has done poorly because there is so much supply coming out. the market is full. high yield, which people are worried about, has actually significantly outperformed because the supply and demand dynamics are better. alix: i think investment grade is performing because you have to sell what you can when you need to sell something. jay: i think that is possible, but i don't feel that is where we are at. i don't think people are selling because they have to. it has been a tough start to the year. you have a big melt up on equities in january.

you have worries about donald trump and what he is tweeting. you have worries about technology, a leadership sector. there are a lot of reasons for people to be concerned. i don't get the sense that there are huge imbalances in the economy or financial markets. david: let's talk about technology because that has been a leader as you said. we will get the technology earnings starting later today. will it continue to be a leader in equities? who will take over? jay: that is the key question in the equity market. technology has been the leader. i think it is under pressure from regulatory, tax, and monopoly questions here and around the world. in china, technology is under pressure. europe is carving out a role as the regulator of technology. in the u.s., we have a lot of back and forth in the sector. i question whether or not tech can lead. we have leadership that has not acted that way.

financials can help technology. i think energy has a chance to lead as well as industrial. we want to go old-school in terms of sectors selection as opposed to technology. alix: one of the upsides for technology is the overall weaker dollar. the trend is lower even though we are higher today. you see 3% treasury yields. what do you make of that underperformance of the dollar? jay: i think part of it goes back to supply and demand. we were the place to be since the financial crisis. everyone is massively overweight every u.s. asset from a global perspective. it makes sense as the rest of the world recovers, people rotate out. i think that is where people should be going. i am a believer in non-us markets taking leadership. alix: what does that mean for tech stocks and large cap stocks? jay: it should help, but it is not the driver.

the dollar has been in a sustained downward move in the near term. there is room for a bounce back. and the longer term, i think the dollar is headed down. you want to be outside the u.s. and in those local currency instruments so you get the benefit of growth and the fact that the currency strengthen. david: jay pelosky of pelosky global advisors will be staying with us. is europe's turn this week, as we hear from sergio ermotti of ubs next. live from new york, this is bloomberg. ♪ bloomberg. ♪

♪ shares down this morning as investment banking could not offset declines in local with management. here is what sergio ermotti had to say. sergio: in addition to a very reporting numbers,

the underlying numbers in terms of operating profitability were strong across the board. particularly in global wealth management and from a geographic standpoint in asia and the americas. contributings were to the strong performance. >> what does this mean for the investment bank, which you shrunk down, and there are reports last week that you were debating internally the investment bank? sergio: if i can say that that kind of report was poor reporting. results in at our the last five years, they have been very strong. we are very competitive. we compete. we choose to compete. aboutment banking is not shrinking. it is about growing in being successful. it is important to our wealth management and corporate

franchise. a 25% return on allocated to capital, it is difficult to see the merit in those reports. >> a 25% rise in equity trading and dollar returns puts you in line with u.s. investment banks. do you expect that kind of growth to continue? sergio: i would say those results are in line with our competitors is an understatement. i would say the numbers are very strong. put the part of corporate equities that we account into our investment banking business into the equities, we would have a 37% increase in dollar terms. i think we are very strong.

>> that would be what u.s. banks are reporting. beat what yo u.s. banks are reporting. sergio: absolutely. >> is meeting investors year to year a key part of what you're doing? sergio: i think there's always a reason to go out and talk to clients, create a framework of accountability and benchmark. do so manyneed to interviews or reports. our focus is to make sure we go to our clients and give them our best value and keep disciplined. david: that was sergio ermotti, ceo of ubs. still with us is jay pelosky of pelosky global advisors. there is a big difference between european and u.s. banks. i'm going to put up a chart that

shows the p/e ratio's between europe and the u.s. this is the biggest disparity since the mid-90's. jay: yes. part of that is the sector make up. europe is relatively light technology. part of it is the factor that europe has been in a slow growth environment since 2008. we are nine years into in economic recovery in the u.s. europe is only two or three years in. lots of room for growth to pick up. alix: the hard part will be the euro-dollar. in the euro will reduce earnings 6%. where do you see that? jay: i think it is unlikely we will get another 10% move in the euro in the near-term. long-term, i think it is about

to break out of the 10 year downtrend. it has not been able to do that in the last 10 months. i think we will pull back a little bit and energy to go higher. by month's,t the euro will not be stronger, but long-term, yes. alix: coming up, president macron heads to washington in the first state visit of donald trump's presidency. in the markets, we are all on 2.981r yield watch, percent is how we are trading on the 10-year. what will that mean for the fed? this is bloomberg. ♪

♪ alix: this is "bloomberg daybreak." the dow jones futures, s&p futures go nowhere.

european stocks go nowhere. you had the composite pmi in europe showing slower growth with weaker optimism in the business outlook. german data came in stronger. another bifurcation in europe. the euro-dollar weekend -- --ker by hot tenths of 1% 5/10s of 1%. i wanted to point out the two-year yield in germany -- out by while basis point as the selloff in europe is a bit worse than it is here. the spread between that and the u.s. two-year is over 300 basis points -- what that winds up meaning for diversification in your portfolio. and a potential trump tweeted bringing down the market because of oil disruption in libya. david: i did not know we celebrated 3% watch. alix: you were off friday.

the president was tweeting about oil. it was like a gift. [laughter] david: its time for an update on what is making headlines outside the business world. taylor riggs is here with first word news. taylor: the president tempering his optimism on north korea. he says only time will tell how things turn out when he meets with kim jong-un. halt nuclearto testing, but the "wall street journal" says trump will not be willing to make concessions until north korea has substantially dismantled its nuclear arsenal. a senate committee may vote against confirming my pale as secretary of state. it may not matter. republican leaders say they will the nomination to the full senate. some lawmakers question whether pompeo has the temperament towards diplomacy. in nashville, tennessee, police of searching for the shooter

a waffle house that left four people dead. meanwhile, authorities say the suspect was arrested in july near the white house. for guns were taken from him by police but were eventually given back to his father. global news 24 hours a day and on tech talk on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. david: -- i am an easy guy. very simple. straightforward. it is too complicated if you make war against everybody. making a trade war against china come against europe, against syria -- it does not work. we welcome from paris

nicholas dungan from -- where he focuses on france. and still with us is jay pelosky. you start with the president ma -- with president macron saying you cannot make war on everybody. can he make peace on trade? nicholas: he can. that pieces already made with peace is already made. but he is sort of taking the battle to the enemy. a statement on policy. david: when you say he has our ready-made piece with donald trump on trade, are you saying it is a done deal that they will make exceptions to the tariffs? they may not make it

permanent, but they may let them continue to be permanent. is there is no particular reason for the u.s. to take off the european union, which is a larger trading block then the u.s. i do not think that will be a major feature. statement was's more to the trump pace than to the government. alix: one area still front and center is data privacy in europe, particularly europe getting down on u.s. tech companies. jay: it will be interesting if that makes it to the conversation. alix: the kind of agree on that, to some extent. ai battle in the u.s. -- and the whole ai battle. macron wants to get europe involved in ai. he sees the importance in it. there is room to maneuver closer

together. on the trade front, i would agree with the guest. europe should not be the focus of our attention. we need to attract europe to the united states. otherwise, europe is at risk to being attracted to eurasia and china's one belt, one road infrastructure program. alix: what about the question of whether macron in europe could be with the u.s. -- david: what about the question of whether macron in europe could be with the u.s. on privacy? is that back on the table? nicholas: we need to think about to somes as being an -- extent, it is issue by issue. the syrian war is important for europe in ways that -- in different ways from the way it is important to the united states. the refugee crisis, etc. if we look at this issue by issue, even in the senate testimony that mark zuckerberg

gave, he was asked by senators, should we be regulating on the lines of the european union? there is no question, in respect to trade and intellectual property and ai, the european union has the best chance of anyone of being being the global standard set to -- global standard setter. i think a lot of these issues are going to be decided based on national and regional interests. in europe, mostly regional rather than national interests, and very much on a case-by-case basis. that is one of the reasons why i do not expect a lot of policy talk during the state visit, which is largely ceremonial pop and circumstance and feeling good about the french-american relationship. alix: but china has the come into the relationship. vestedas bought and in

amounting to $300 billion p.m. we have a map on the terminal -- you can see it shows the number of investments per country. the lighter you are, the more the investment, really focusing on the peripherals as well as the core. how do they make that conversation, whether yours is still confrontational with china but europe needs china for investment trade? that what wehink need to recognize -- i will give you the context of the answer of the question before a very specific answer to the question. what we need to recognize is that the u.s., under trump's administration, is in the process of dismantling the liberal order the united states created and cultivated since the postwar period. a champion of that

liberal international order. so is, to a large extent, the european union. so for direct investment in china, $300 billion is not surprising. $300 billion happens to be the number of the reciprocal direct investment between the u.s. and france alone. the trade between france alone -- not the european union -- between france and the u.s. is $100 billion a year in both actions. these are big numbers, but china is a big country. it is to be expected china would makingving this way, these direct investments in states. if you look at what the british, french, the dutch have, the chinese, to some extent, unless they make some mega acquisitions, which trump already blocked, then you will find that the chinese are just getting started. david: you find europe and attractive.- an

-- do you discount to almost zero the possibility of trade conflict between europe and the u.s.? jay: i do not. there is always potential for conflict, often self-inflicted. so i see europe as resurgent, particularly mccrone and marco -- macron and merkel can drive europe more. in terms of protecting against trade, there are ways to do that. one way is to go to the peripheral markets, which are less exposed -- not germany, but italy and greece. another way is to go to the small-cap sector, which are not exposed to tariffs, and also not exposed to currency. then, you can go to financials, which benefit more from higher rates in the growth recovery in europe, not really exposed to trade. within europe, it is less exposed to trade than the u.s.-china, going to the two big

actors. that is a concern for the markets. but with in europe, go peripheral and small-cap and old-school to financials and energy. david: you said this will largely be ceremonial. what do you make of the personal relationship between donald trump and emmanuel macron as two men? i spoke with someone who worked closely with trump and the white house, and he says that she does not stick to the agenda. he will just say to a leader xi, resident -- president let's just speak to the side. nicholas: that is the danger. the big danger is at the dinner at mount vernon tonight, because it is a private dinner. there will not be anyone else there. it is from a dinner like that that trump crude extract a macron statement and say macron told me this. they should stick to the

ceremonial, historical relationship. mount vernon just bought a very rare letters by the number three in command of the french during u.s.y force independence -- if we think we the change trump's mind on paris or cores or anything, he could change his mind next week. and if all goes well, macron avoids the temptation, which he has slipped into a couple of times, of saying i can control trump, i got trump to do this -- we know that is not produce a very positive effect aom trump, it produces reduction from trump, if macron can avoid that, he can come away

with france being the first among equals of u.s. allies. that will strengthen his hand in europe and will strengthen the hand of europe for all of the issues we have been talking about, from trade to terrorism. david: stick to burgundy, in my experience. [laughter] alix: can the president have that conversation? [laughter] david: we will see. i love the sound of it. atlanticdungan of the council and jay pelosky, thank you for being with us. coupled -- coming up hna cut its stake in deutsche bank. more on that, next. listen tour radio and tom keene and jonathan ferro from 7:00 to 9:00. "bloomberg surveillance" can be heard in new york, boston, the bay area, and washington, d.c. this is bloomberg. ♪

♪ taylor: this is "bloomberg daybreak." i am taylor riggs. coming up in the next hour, nick pinchuk, snap-on ceo. ♪ we turn to wall street beat, covering three things wall street is buzzing about -- first, hna scales back after spending $40 billion in bank toions in deutsche handle financing problems at home. fresenius the deal -- walks away from akorn. lose one third of their value. and tencent music following the

footsteps of spotify -- could see a $20 billion ipo. david: let's start with hna-deutsche bank. it would not be wall street beat without deutsche bank. being a bigig deal, investor in deutsche bank, saying they would stick with it no matter what. maybe not so much. >> maybe not so much. they have sold down some of their position. deutsche bank has done badly. shares lost a quarter of their value already this year. money, need to raise money. they have huge debt. they went out about $40 billion on this crazy acquisition spree. now, they are trying to get some of that money back, because they have a lot of short-term borrowing costs they need to cover. they told the market in february that they needed to raise $60 billion for the first half of the year. alix: that was my question --

was this a deutsche bank or an hna thing? feels like an hna thing. david: that is sort of what the stock market suggests. deutsche bank did not really hit -- get hit. last week,emember deutsche bank had this issue of $35 billion from one account to the other -- maybe they could hna.gotten that towards that would have helped. but this is not a bad news story for deutsche bank. it is a bad news story for hna. alix: let's go to the next story, fresenius dropping the akorn bid. tell us why this is so important in the industry. >> this is an interesting situation. fresenius has come out and said there is something really wrong in the way that akorn was reporting drug data to the fda -- saying that is reason enough

for them to break up the merger. we do not know exactly what they found. they put out a very brief statement that there was something not quite right. akorn hit back and said they would fight to get this done. a fresenius can prove there is something called a material adverse change, they will be able to walk. but no current party has ever proven that material adverse change has happened. what will likely happen is akorn will re-cut the price. there was a similar deal last sound also one side the things they did not like, but they still have to go through the deal. david: does akorn have any choice but to fight this? if theyom the deal, have been lying to the fda, that is a big problem. ed: and they have other problems. the chairman was caught up in a racketeering probe, so he left last year. there are a lot of problems, but

none of these things were secret when fresenius bought them. so they are saying you'd you all of this, this was in the conditions of closing. if you guys did not do proper due diligence, that is your fault. david: was there any deterioration in akorn's business that would say this is time to get out of the deal? ed: fresenius is saying if you are lying to the fda -- david: apart from that -- ed: they are saying the success of drugs is predicated on the fda. so what we bought is not what we thought we bought. alix: is there a termination fee? not gothis deal does through, and it is something that akorn lied about or misled the acquirer about, akorn would be on the hook. but as you said, akorn has to fight this.

market thinks this is, at the least, will be a drawn out a fair. david: our third story is tencent. tencent music is going out on an ipo, maybe as much as $20 billion. a big tech ipo. ed: we should note that this is very early stage. they are an industry base and off the banks. they are just interviewing banks, saying we would like to do this. what is the right way to do it? they are looking at new york as a place to take this public. you follow spotify, which was an unusually successful ipo -- and tencent is a success story. a ghost strength to strength. david: this is an ipo, as opposed to spotify? ed: this will be a proper ipo. alix: it does point out how strong, potentially, we will see

tech ipos. dropbox had a big, successful ipo. in the u.s., it is about $4 billion, 53% in the quarter. it could be make -- it could be big material. ed: even in their recent past, with unsuccessful ipos -- blue apron an example of that. that thed it is ironic vix is back out. normally, you do not want volatility when you go to an ipo. blue apron, there was little volatility. now, volatility is that cap. ed: but the vix may or may not have some rating issues. we are back on that one. david: that is a hot topic. many thanks to ed hammond. coming up, google is set to report earnings after the battle -- bell. how privacy standards could change the way google does business in europe. alix: and watch us online, click

on graphics, interact with us -- go to tv on the terminal. in the markets, still on the 10 year yield watch. 3% -- that is the question. 2.98% is where we trade. ross the bond market. the uk's leading the decline -- across the bond market, the u.k. leading the decline. this is bloomberg. ♪

♪ david: what i am watching his google. i am not alone. they are announcing earnings after the bell.

a lot of people are looking carefully at this and will look at -- the questions are to ask you there is an issue google has with data, similar to what facebook had. it may even be more. one of the questions is gdpr. google saying trust us with third-party data -- a lot of publishers are going to the e.u. and saying that is not the purpose. you have to have disclosure. alix: there is an interesting article that said google, in some ways, was more culpable in releasing data than facebook, in some ways. david: one of the things we learned from the senate hearing is a to tracks data of people who are not members of facebook. there is a similar thing with google. as many as 50 million or 60 million websites that they have access to information on pd even if we are not signed up with google, they can get information on us.

data some analysts -- collection could take a hit as of -- could take a material hit. david: similar to facebook. if they had to give that up, it affects the way the target ads, which is how they make money. trying, but in theory, it is still about advertising. coming up, a huge earnings week with around one third of companies reporting. we will meet with jim paulsen. this is bloomberg. ♪

♪ alix: 3% watch. the 10 year yield nears 3%.

is it just a wrong number or something more significant for investors? roughly one third of s&p companies report, while european earnings kick off with a whimper as ubs underwhelm's. and president macron heads to d.c. to meet with trump. david: there is the white house, eagerly awaiting emmanuel macron from trance to visit. i am david westin with alix steel. alix: what will they serve at the dinner? david: i suspect it will not be french. alix: in the markets, it is rating -- it is waiting for 3%. day.lat on the euro-dollar weaker. composite pmi out of the eurozone came in a bit mushier. germany did pretty well, but not enough to support the euro at this level. 1.22 is how we print as the

dollar moves higher. are seeing the biggest selloff. nonetheless, what happens when we hit 3% -- is it that magic number? david: you said balloons would fall. alix: or is it just financial media making a big deal out of it? david: time for the morning brief. as i said, french president emmanuel macron will arrive in washington today. tomorrow, he will meet with congress. and the day after, he will be a dinner. friday, german chancellor angela merkel will show up at the white house to meet with the president, while the koreas will be holding a historic summit. let's get an update on what is making headlines outside the business world. we turn to taylor riggs. taylor: europe is hoping that france's president can find common ground with president

trump. president macron arrives after a year of building bridges. the two will discuss trade disagreements. policeville, tennessee, are searching for the suspect in a restaurant shooting that left four people dead. a customer wrestled the rifle away from the shooter in the waffle house, probably preventing more deaths. authorities say the suspect had been arrested in july near the white house. later, for guns were taken away from him by police but eventually given back to his father. preventmay is trying to a cabinet war. herrding to one official, inner circle may be forced by parliament to stay in the customs union, which could

result in a leadership challenge from her own party. global news 24 hours a day on air, and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. 3% is what we are watching for. ermotti spoke about it earlier. for institutional and private investment, to think about diversifying more investment bonds are going back to the long-term bonds. in general, it is probably more psychological than anything else for the time being. is stephen.g me now will we be able to break the percent and hold it? >> yes, i think we will.

there is some concern about the economy, which is why the equity market is sluggish and somewhat skeptical about the bond market move. as data comes in and they are reasonably strong, i think three will be strong. alix: broken and sustained? steven: yes. it can go under, that two thirds of the rest of the year, i think will be above 3%. alix: let's talk differentials. the two-year treasury really breaking away. that spread is the on 300 basis points. how wide do you expect short-term differences to go if we see 3% sustained on the 10 year? has beenhe 2 consistent with the guidance the fed is giving. for the 2 to go higher, they need the market to think seriously about four hikes this year. i do not inc. they are quite

ready for it this year. the back end of the curve is playing catch-up -- i would not say the stakes, but over pessimism during the winter, with some unreliable data. right now, it is a long-end move. david: when it comes to the 10 year, we have seen a hover around 2.4%. you are talking about maybe north of 3%. is it going to keep going? steven: i tend to be optimistic. is it to keep going higher good news, not bad news. there is a limit to how far it can go if the only story in town is the fed will be more hawkish and inflation is picking up, because the business cycle and is coming. if it turns out i am correct, that the business cycle will extend another year or two, it can go well over 3%. that is good news. alix: why is the dollar not

really participating? we have seen a nice rally, but not to the strength of a 3% 10 year plus. steven: talking reserve managers, everyone has enough dollars. they do not need more. i do think there are funding issues for the u.s. the u.s. government has to borrow a truckload of money. they are trying to borrow it at the short end, where rates are limited by what the fed is willing to do. in order for foreigners to be crowded in, willing to buy treasuries, you need a weaker dollar or somewhat softer dollar, so there is upside on the dollar side to compensate for the fact they are not getting compensated enough to buy the short-term debt being thrown on the market. alix: steven englander, always great to catch up with you. joining us is jim paulsen, leuthold group chief investment strategist. equityes it mean for an

-- from an equity perspective? is broader than just the 10 year treasury going above 3%. that is on the cusp of breaking 3%. i think it will. you also have the embedded inflation expectation and 10 year tips threatening to break 2.2 percent, closing in on its highest level in five years. that will capture a lot of attention among the fed as well as bond vigilantes. it certainly affects evaluation of equities. you also have crude oil, wti barrel, for$70 a example. the key will be the u.s. dollar. if the u.s. dollar is only about two points above breaking to a fresh, new low, it may be looking to the low $80's. if it breaks that, it will be very inflationary. it will affect the valuation of

not only bond yields but also have you can pay for stocks. if they break, it could bring a lot more pressure on both the stock and bond markets. any, dohat role, if those factors play? with a subdued reaction in the marketplace to positive earnings reports? jim: that is right -- the key thing -- people are putting a lot of hope that earnings will return mojo to the stock market this year. we know earnings will be good. they will be good based both on the tax cut as well as synchronized global recovery. the question for the equity market is not whether they are good or not -- it is whether the market will respond favorably to that. in part, over the last two years, the stock market went up about 45%, while earnings rose or teen percent.

it may be the market already paid itself last year for the earnings they knew were coming this year. i think that has been the case. if you look at historically, when you are in the upper or tile of valuation, which is where we are at now, good months of earnings gains are often met with tepid response from stock market games. -- gains. also, employment, when you are a --l employment i think earnings will be good, but the earnings beta, the response of the stock market to these earnings, will be muted and disappointing for the bulls. david: we have had something of a correction. 18, 19 -- closer to 16.5 now. is that not enough? jim: i think we have further to go. that is a good question. it is the question of the year. i think there is a valuation level that stocks can find that

is supportable for wage inflation going towards 3.5 percent in the 10 year treasury or something. i think it will be more like 17 times trailing earnings, which we are still a long ways away from now. trading at -- maybe 21 trail. $150 per share earnings, which is possible, we would be at a level that i think sustainable,e and even for higher inflation, higher rates, the kind of character of the economy we are heading into. maybe, at that point, the market can start to trace earnings again. i think we have more struggle yet this year as yields and inflation move higher and pe moves lower. alix: jim paulsen will be sticking with us. question of the year -- you need a bad for that. coming up, energy earnings out this week. we will speak with an investor

about the opportunity he sees in oil. heading to break, and interesting headline saying the u.s. may relieve sanctions if --ipaska divests control aluminum dropping like a stone, down 5%, seeing the biggest selloff since 2010 as the market needs to rethink potential alleviation on sanctions on rusal. pen -- thatoke of a is the problem of the aluminum rally. it all depends on one person. alix: more, coming up. this is bloomberg. ♪

♪ alix: get ready for big oil earnings. halliburton disappointing, writing down its entire investment in venezuela. big names coming up this week -- chevron, exxon, shall at the end of the week. also, the focus -- rising oil prices not paying off. you have the yellow line as the oil price. the white line the s&p energy index. higher for s&p equities. however, there is a gap between that and the underlying oil price. joining us is david bahnsen, bahnsen group founder and ceo. still with us is jim paulsen from leuthold weeden. thanks for being here it -- how do you play energy stocks? david b.: i favor energy. chevron and exxon give you significant dividend yield and are more diversified in terms of

business lines. the most attractive spot is in that midstream. it is a story that is old for investors. people are tired. sentiment is out of favor for a long time. but mlps, pipelines, right now, more and more are getting into a self funding situation. they have a significant dividend yield, and supposedly, a lot of the big drop in negative sentiment came from commodity prices out of favor. commodity prices are back in favor, yet nothing has moved. is youart of this story want to own them because you need infrastructure, the -- but that seems to be primarily a premium play in the u.s. lother thing is spending a in terms of changing cash flow. how do you square that? david b.: structural change is

one of the reasons to be buying. you have to be tax sensitive. the reality is with the new tax law, there are arguments you could make for some of these companies transitioning their model to a different structure. what that does is invite you investors in. that is what they have lacked -- the ability to fund from equity. they have relied on a highly volatile and emotional retail investor fund to dry up. it has become a self filling -- so fulfilling prophecy. you will still get great free cash flow and great dividend, but it is in the context of a more sustainable is this model. when you talk about the issue regarding permian, there is a lack of eye blind down there adequate for the production they are doing. the liquefied natural gas story,

particularly if you believe our ability to export that will prove to be one of the great growth stories, we do not have the great infrastructure in place. companies like enterprise products at the houston area are well played. a company that already has tons of cash flow a safe balance sheet. alix: do you like energy stocks? jim: i do. he lays out a good case fundamentally. i will throw in a broader appeal to the entire group. for so long,eat up so if it starts to show positive momentum, there are a lot of portfolios that will have to at least reduce underweights, which will reduce upside spew the big thing is we have an economy transitioning from disinflation to inflation over all and rising yield.

if you think about the character of owning energy stocks, they are -- they give you some yield, which makes them a little like financials. if yields go up, they tend to outperform. they do well as inflation years tend to intensify. they have typically been an outperform are in that environment as well. and they are a great weak dollar play. the dollar has been weak. if they break lower, it will push crude prices higher and push portfolio managers into sectors that do well with weak dollar. there is a lot of attributes favoring these stocks right now. as you said, they still have not caught up to recent moves in the product price yet and are making a play to catch up to what already happened. i think crude will move higher in the next year. alix: we just got news recently that the u.s. is considering rolling back sanctions on rusal, which has been pivotal

to aluminum's huge rally. do you play other commodities? how do you factor the sanctions on and off in terms of overall outlook? david b.: i do not. and we do not see energy exposure as a commodity play other than we are pointing out now the disconnect between how the sector of stocks and operating companies have performed relative to the underlying commodity price. but commodity beta is not really a chart to to us. there are times where it is beta isle -- commodity not really attractive to us. there are times where it is investable. alix: but with fears on potential sanctions on oil companies, many argued that geopolitical risk is high in wti. that is what led as a couple dollars higher. if that comes out, how does that impact your thesis? david b.: that type of movement

is something that would be very transitory. it would be the definition of transitory movement. on a more fundamental basis, we saw -- we know what makes prices move. supply and demand. fundamentally, the demand and supply story on oil was misunderstood. we had a massive drop in 2014, 2015, 100% supply related. right now, global demand is on fire. supply is so low they do not have the production capacity to keep up. you have seen it move higher. there will always be a geopolitical orbit around oil prices -- maybe less so with other commodities. you have to take into consideration -- we are trying to look underneath the hood operating entities and the growth of free cash flow. is anand chevron incredibly consistent dividend yield. alix: jim paulsen of little old

-- ,avid: jim paulsen of leuthold thank you. avery johnson -- david bahnsen will stay with us. coming up, real estate. alix: and aluminum dropping like a stone, now down 6%. the headline -- the u.s. will provide sanctions relief to rusal if deripaska relinquishes alleviating some geopolitical risk. there are fundamental factors supporting prices. this is bloomberg. ♪

♪ david: retail has not been a favorable sector of late, but some think there are opportunities, at least when it comes to real estate. still with us is david bahnsen of the bahnsen group, who sees opportunity in reach now. some people say shopping malls

-- i do not want to be in that business. david b.: it is important to clarify -- it is a specific call, not across the whole reits sector. it is simon property group you the reason we are attracted to the name is the out of favor-ness. a regularerty is not mall operator. they have been through several reinventions. i do not want to buy the companies that are mostly tenants in these malls are often over leveled -- over levered and cyclical. in simon property's, you have companies in the double digits over a 12 month period, growing free cash flow, growing net income, operating a reliable dividend. you are investing in the management team and their ability to reinvent through what would clearly be a period of reinvention. david: you also like blackstone

a lot. whether it is hospitality, multifamily housing, retail in office, it has made a little name for itself. the reason is we do not have to buy the balance sheet risk. i first invested with them, they had $185 billion in assets -- they now have $350 billion in assets. you are talking about an unbelievable growth story, paying about an 8% annualized dividend. great free cash flow stay they have a diversified cash fund to credit and the private equity franchise. david: is the market rewarding them in their stock price? they came out in ipo and came right down. david b.: the market has never fully understood this story. part of that is self-induced.

there were a lot of tax benefits to the founders in parts of how they structured, creating a certain degree of opaqueness in the market. the reality is the founders do not sell shares. they continue to receive massive dividend yield. i believe the stock is substantially underpriced. in the meantime, i am getting paid handsomely to hold it -- a percent yield. alix: david bahnsen of bahnsen group, great to catch up with you. coming up, how trade tensions are weighing on u.s. companies. we will speak with the ceo of snap on -- snap-on. this is bloomberg. ♪

alix: this is "bloomberg daybreak." steel.ix

futures up by 41 points and you see that reflected in the dax also. also if we look at the asset classes, they are of the highs of the session, yields off the highs of the session as well. the euro-dollar continuing to be weaker as you have softer composite pmi numbers out of the eurozone and crude really rolling over. here is the wide. check out what has happened to aluminum. dropping like a stone. the biggest drop we have seen since 2005. taking the geopolitical risk out of the commodities -- how does that differ from the fundamental story, david? david: taylor riggs is here with first word news. taylor? david, mike pompeo may not be confirmed as secretary of state. it may not matter. republican leaders say they will

bring it to the full senate where he is expected to earn confirmation. some question whether he will have the temperament for diplomacy. president trump is tempering his optimism on north korea. he says only time will tell on how things will turn out when he meets with kim jong-un. "the wall street journal" says that trump will not dismantle sanctions until north korea dismantles its nuclear arsenal. the duchess of cambridge has given birth to her third child. it is a boy, eight pounds, seven ounces. prince william was present for the birth of his son. he will be fifth in line to be thrown. global news 24 hours a day. than hope more hundred journalists -- 2400 journalists in 150 countries. back to you. a communiqué a

about trade concerns. mike mckee is here. we see trade affecting markets right here, right now. what's going on with aluminum? the president tweeted that sanctions had been a great success because aluminum prices way down, but then aluminum went way up. prices across the board started going up around the world. now the u.s. is saying if one of the oligarchs who is close to sells his stake in the big russian producer, then they would maybe list -- lift the aluminum sanctions on russia, which is causing the sanctions to drop, but is not related to anything. it is a mix up model here. they are trying to buy aluminum and the prices are going way up away down. is this just noise? or is it you have some much

uncertainty about local trade at this point? concerns areimf that this goes beyond aluminum and steel. you get into the china sanctions, reactions from that, and the global supply chains that are involved in producing things in china but then come to the united states will be affected, so there is the potential for a lot of problems of the u.s. continues down this path. over the weekend, we heard steve mnuchin express optimism about ions with china, but we don't know about any negotiations with china. david: we see this uncertainty showing up in productivity. companies are not sure what the rules are. michael: we see this -- they are to the rollingt

stock. you talked to a lot of fed bank presidents who are always talking to the ceo's in their district, and to a man or woman, they are saying that they hear from -- they were holding up until they hear about what the trade results will be. maybe they will invest later on. it does not seem to make a lot of sense. alix: mike mckee, thank joining us. for news is bad manufacturing companies as well. bank of america economist pointing out the u.s. tariff on steel imports could cost american jobs. let's get a view about this -- nick pinchuk is the ceo of , which manufactures globally. thanks for being here. >> good to be here. alix: how have the tariffs affected your business? what we make, we sell. the tools we make in the united

states are made of u.s. steel. drops may be associated with the anticipation of tariffs or trait action, but we have been able to manage around that, i think. alix: what does manage around that mean? passing on prices, lower productivity, using u.s. steel. manufactures do this all the time for recurrent sees change. the euro changed 40%. prices change all the time. david: we here so much about trade these days, whether it is china or nafta, so many different directions. as ceo, when you are planning about the things that michael was just talking about, does it affect your planning? is kind ofr company insulated from this, but if i talked to my colleagues, they might consider that. they are optimistic. i think one of the questions you have to ask -- i heard someone on bloomberg say it's a great atmosphere, but it's getting

risky. i would say risky versus what? two years ago? we have better tax rates now if you are a manufacturer. the capital process is favoring the united states. david: i know you don't like to give guidance. i'm not asking for guidance. are you optimistic about the view for this company? >> in. we have great markets. our principal market is vehicle repair, and vehicle repair just going. in theep getting older united states, they have gotten older every year since 1980. an electrification of cars lays into our hands because we have the best database and diagnostics associated with that. when cars change, mechanics need new ways to repair them and we have the best. and finally, the snap-on brand -- mechanics or any working man or woman will display the snap-on brand as the outward sign of the private indignity

they take in their work. we are kind of h between are in that way. people do not fully understand our company. alix: how much pricing power do you have? >> weekend price for inflation. product hassnap-on always been above everyone else. people pay premiums for snap-on tools because they are more functional, get the job done faster. and when they display them, they show that, you know, you're doing something important, perhaps as important as -- alix: we talked about the impact of steel and aluminum. >> yes. alix: what are your other import costs that are rising? >> you have freights. we shift things all over the place. those are the three things. labor can rise, too. think is manufacturing expands, labor will rise. we can manage that. that is what managers do. they find productivity and opportunities. i see the current situation as

an opportunity. the president sees that there is an opportunity to renegotiate the trade deals and we have an administration looking at the american worker when it is renegotiating and that's an opportunity. david: have your wages gone up in the last year? are you finding difficulty finding skilled people for the job, at whatever price? every year.p i am proud to say that we have given greater salaries every year for 10 years after the recession. i think people are seeing these increases. we do have more difficulty finding these skilled workers is manufacturing expands. that is what the tax law was all about. theas not about raising individual compensation for workers all over the place. it was about expanding the manufacturing sector, adding good paying jobs. so, how do you manage that? do you hire less qualified workers and pay them less?

>> actually, someone like snap-on can train their own. we put more money into training. the cost is associated with small businesses that cannot afford to train their own. if you step back and say, what is happening here today? if you thought the american worker was the most important resource we had, you would say, you would not burden the company is with these tax laws, you would work on trade deals, you would have infrastructure, you would upscale them. we say as the manufacturing sector expands, 300 million americans, makers and producers, desk inribute the tribute the economy. prosperity follows. alix: your view is pretty rosy -- david: your view is pretty rosy. i never met a ceo that was not concerned about this. what are your concerns? >> taking advantage of this. for our company, we see

opportunities, so many opportunities, both for growth and improving our company -- alix: -- david: so what are the bottlenecks? what could keep you back from that? >> our principal value creating mechanism at snap-on is understanding the work. we observe the worker and we figure out what tool will release that work and take critical tasks and make them if your. that observation, understanding the work, we are expanding out of auto repair. oil and gas and aviation and mining and those guys of things, we are building that knowledge. that's the battle, but we are doing it. alix: nic, thank you. nick pinchuk, snap-on chairman and ceo. all this week, we are doing a series on the amazon businesses. first on the amazon primer, how they are playing and info game in washington. bloomberg surveillance can

york, the bayw area, boston, and all across the u.s. on sirius xm. aluminum dropping like a stone. the u.s. could alleviate some of these sanctions on an oligarch, alleviating a potential bottleneck around the world. we will have more. this is bloomberg. ♪

alix: -- taylor: this is "bloomberg daybreak." i am taylor riggs. coming up later, juan santos, president of columbia --colo

mbia. it is earnings season again. as part of our coverage, we will give you a primer on amazon. today it's time to look at amazon meets washington -- the various attitudes and issues it has down there. the vast -- the past two months, president trump tweeted repeatedly attacking amazon, is business, and its relationship with the postal service. becoming acompany is punching bag for the president of washington, are they seeing a return on investment? joining us, david kirkpatrick and ben brody. david, let's start with you. the president has been after amazon, after amazon, after amazon. has it affected amazon one bit? >> no, it has not. he is really after "the washington post." jeff bezos owns both.

he sees that significant as -- he sees that is being much more significant that it is. he does not like being criticized. he thinks "the post" does that. he tweeted -- the fake washington post has another in all caps.rong, reporting!"ad to your point, it seems like the issue he has is with the "washington post," not amazon. >> right. to the degree he can position his anti-amazon sentiment is very populist -- when he's talking about the postal service, people do not want the postal service to go away or be hurt, the question whether amazon is getting equitable treatment from them or not is

difficult -- i don't think anyone outside of the postal service knows. certainly trump does not know. alix: as you mentioned, it has nothing to do with what has happened with the stock. come inside the bloomberg, and you see the vertical line with equity stockd the price. not the relationship you would think with facebook and all the drama that has gone under. but what we have seen though, amazon's lobbying outpaced tech in a big, big way. what you think they are preparing themselves for? ben: that's exactly right. the last couple years they have been the fastest growing of the tech companies in lobbying. google is the biggest spender here. what i think they are really preparing for is not between its we get from the president, not these complicated issues, tensions, personalities, but expanding their business into so many different lines and leases.

it's their health care ambitions, their financial services ambitions and their logistics. they are everywhere and they want to do a lot more with their business. that's what they are preparing for. david: they do not need to invest in lobbying to expand their business. what they need to make sure is the government does not get either way. if the government were to get in the right, where would it come? thing we are watching this closely, the thing that i think tech is watching this closely, from amazon to google to facebook, these privacy probes, questions whether they have become too dominant, too big, whether or not they are keeping out upstarts. you had the head of the antitrust division of the department of justice just last week say he was open and receptive to the idea these tech companies have become "too big," and he says we need new thinking about this. as i from the microsoft case, that is not something we have

seen in the last 20 or 30 years at this point. alix: david? i think one reason amazon is lobbying -- upping its lobbying is that the government is becoming a bigger customer. it is preparing a massive, massive contract to host pentagon data. i mean, one of the biggest -- some people think the law was written specifically in order to favor amazon the cause, as you said, there should be one provider. believe it. amazon's ambitions are some gigantic, it is hard to keep track of them. in that sense ben is absolutely right. they want to do everything. they want to do everything for the government, as well as us. if they spent a few million dollars lobbying and get a billion-dollar contract, that's a good deal. after themd they go under the antitrust laws as currently written, or with a have to amend the antitrust laws? k --

ben: that is not my area. alix: go ahead, david. k: if everyone bought everything from amazon, but it was pretty much way that was a than havingto do it any stores or commerce, would that be the smart way to do it? probably not. chicago economist -- >> are you a chicago economist? david: no, no, but i studied them. k: here is what i think trump will never come down on amazon in any real way. they do drive prices down. we just want on your show inflation is a fear. amazon is a great way to fight

against that. trump does know what his voters to pay nor money, -- more money, no matter how much you may hate jeff bezos and "the washington post." alix: there was a great paper from acts he is the talked about the public desire for tech that talked- axios about the public desire for tech regulation has really climbed. if that were to come to pass, what would that regulation look like? yes, absolutely. isil that chart. i thought it was really fascinating. one of the things that might be particularly interesting, what would amazon look like under more privacy regulation, the same stuff targeting facebook and google? amazon has a time of consumer data and the haverhill data, what we are browsing on, what we have purchased, what we want -- and behavioral data, what we are browsing on, what we have purchased, what we want.

if that regulation came over here and they had to comply more, we start to see what they had on us and what they were doing with it. david, we're talking about amazon's relationship with the government. if you had to play their hand or facebook's, which would you rather have? rather amazon's hand. jeff bezos is a much more public spirited person than mark zuckerberg. on virtually facebook. age actually matters. it matters. so, facebook is in a much worse position than anybody when it comes to regulation, with google number two, i would they. and google, it's all about advertising. it's that third party data. for amazon, they just sell software in yes, the collector

data. you end up having echo and a lexa, but is that -- and alexa, but will that be a difference with comes to regulation? ben: i think it will be a difference. i would rather have amazon's hand. facebook and google have a pr problem -- facebook in particular -- which i think is very different from what amazon faces. ofhink there are a lot regulatory challenges. what's going to happen with amazon, the regulatory space, what is good to happen with the cloud space? that will be different. the third-party data is certainly different. that does not mean that amazon does not have exposure to regulations coming down. to see you, david patrick, ben brody. stay tuned for our special in-depth series "the amazon primer." more on what i am watching, next

and on the bloomberg terminal, check out tv . you can interact with us directly. just pick tv on your terminal. we thought today might be the day we got 3% on the 10-year, but some easing of sanctions has clipped that dream. 2.97% on the 10-year yield off the high of the session. this is bloomberg. ♪

is one i amre watching, aluminum prices -- at one point down as much as 2005 -- david: we are surrounded by lines. why am i not surprised the echo --surprised? alix: aluminum prices also, other prices like nickel, cold. they are concerned that thinks is good spread to embrace the produce those commodities, which

raises the question of the geopolitical risk factor. david: yes, exactly. the reason that it went down was the real political change in the market. refined ends up being is meltedna, which into aluminum. there were issues getting alumina. there have been issues supporting the price. not all geopolitical. .- not all geopolitical it will be interesting to see how that shakes out. coming up on "bloomberg markets: the head of jpmorgan interest-rate strategy with his call on yields. this is bloomberg. ♪

jonathan: from new york city for our viewers worldwide. i am jonathan ferro. start ofs until the trading. this is the countdown to the open. ♪

jonathan: coming up, the bond market selloff continuing. ae benchmark 10-year yield whisker away from the present. the white house cautiously optimistic about relations with beijing. steve mnuchin considering going to china. 30 minutes away from the opening bell in new york city. 500,7 points on the s&p and in the fx market, the dollar strength throughout the space, throughout the sessions of our, euro-dollar at 1.2339. to 3%.year so close the 3% yield in focus. the trade is filled with weak economic data. >>