on cloud nine, amazon revenues soar. now it is up to big oil to keep pace. taking economy's temperature. numbers will give investors a first read and whether we need to be concerned about employment costs. the leaders of north and south korea have a historic meeting after 64 years of unresolved conflict. and angela merkel visits washington to seek her own form a piece of president trump. i am david westin here with julia chatterley. >> always a pleasure to be here. thank you david, and thank you amazon. take a look. intel, microsoft, and facebook end session lifting. be interesting to

see how the session plays out. the at the futures, performance of the stoxx 600 in europe. taking the shine off the broader tech story despite that stocks are highest and they have been in 12 weeks. a prelude to do what we get from the united states at 8:30 eastern this morning. investors liking the pool -- pull back. david mentioned, keep your eyes on crude with some of the big major oils reporting today. down 3/10 of 1%. 8:00 this morning, we will get earnings from big oil. exxon mobil out with first quarter. we are going to be getting u.s. economic data including first quarter gdp and the latest employment cost figures.

and this afternoon, president trump and german chancellor angela merkel old a joint -- hold a joint conference. we welcome peggy collins. international correspondent, michael mckee. amazon earnings, we want to talk to you about this. they announced really substantial increase in revenues and the stock reacted and went up. what is the story with amazon? was a lot of concern with the tech companies going into this earnings season because of the privacy concerns, increase potential regulation, but what we are seeing is they are huge driver in our global economy. amazon is up like 30% so far. they are really a driver in not only the economy, but the cloud services business is giant at

amazon. it is a sign that tech is a big driver in our economy. hemwe are used to watching t but while they are growing, they are getting more profitable. feeling so confident that they are willing to raise the prices by $20. >> remember when we used to ask -- they are finally getting their pay up. we talk about tech, but that is a broad area. when you look at the hardware providers and is going to be interesting to see if we get more from them, is hardware keeping up with what we are seeing in cloud and e-commerce? so far, the hardware segment is the laggard in tech. >> energy earnings out from some of the big majors in europe. when are we going to see some of the benefits as far as investors

are concerned? i've got a chart to show you. shares of these big oil majors simply have not performed. >> what shareholders are really looking for is discipline. we are seeing a lot of traders expecting room to run in oil prices, but what shareholders are looking for is discipline in too muchnot spending of their free cash flow and shareholders being able to get some of the benefit. >> the oil story has been the shale producers over the years rather than big majors. ank of america out with headline saying $80 in the coming quarter. of course exxon is going to make money at eight dollars a barrel, but it is important to see -- at $80 a barrel, but it is important to see.

are they going to continue or are they going to hold back some of their owners and give it back? just give us the money. [laughter] >> show me the money. gdp growth, we will get those numbers out of 8:30 in the united states. growth, and basically both at this point converging around 2.5%. there is been some thought that there might be softer in the first quarter. where do we think it is going to come out? >> 2% is the consensus. it is hard to know. the first quarter has been historically weak. we do know that consumer spending was weak during the quarter. business spending has not been strong. notdurable goods orders particularly strong, so 2% would not surprise anybody. question, that took

a big bite out of u.k. growth. the french growth figures were reported as disappointing at 2.1%, which is better than what we are forecasted to see. >> you have to keep that in mind. let's move on to our third story. the historic summit taking place between the leaders of the two koreas. joining us from south korea is bloomberg's stephen engle. give us the highlights. that right. they are going to work -- that's right. they are going to work for touting a peace deal at the end of this year. it has been a fragile feet. they are still at war for the last seven decades.

they could have an official peace deal by the end of the year. they have also said that they are going to aim for complete denuclearization of the penin sula. that will sound good to donald trump which has been the manning that before the two -- demanding that before the two could meet. this was all about the optics of having the two leaders arm in arm showing it is a new era of peace and prosperity possibly perhaps down the road. got this morning is the president saying the korean war is to end. that did not work out very well, we will see.

things, a lott of of problems that have to be dealt with before this could actually happen. has always per trade itself as the only korea and now they have to remap. of north korea and a collapsing economy, but the nuclear aspect of it, if that works both ways, that means the u.s. has to take its nuclear umbrella off of south korea. are we willing to do that with china on the other side? lots of stuff to be worked out. >> stephen engle over in korea, do the south koreans want us? >> that is a very sensitive question. there are some people who do not, and those who say they should. this is a very sensitive subject but my vantage point as

there wereo the dmz, lots of south koreans around to on this rooftop looking across the river today. those two leaders, the optics made so many people start crying. many of the koreans have been waiting for a long time. but as the guest writes a lee said, north koreans have made promises before -- but as the said, north koreans have made promises before. >> now we are here to talk about angela merkel going to the white house. this is only two days after president macron of france was there. --re is a lot of talk, peggy the difference of the personal relationships between the two leaders. i would to bring up the chart.

this is the trade deficit of the united states between france, that is the blue line up there and the white line is the german trade deficit. is this personal or business on president trump's part? >> i think it is both. he does care about the trade deficit but want to germany to spend more in terms of nato. , it is a damage control situation. she is not expecting big wins to come out, but what she wants is to potentially extended the iffs. on -- waives on tar that is one of her key goals for today. >> that is the main goal for germany is to try to keep the sanctions off. may 1 is the deadline. there are a number of ideas of how -- what the eu would

do to keep the steel and aluminum tariffs from being imposed? the world is watching to see if she will get a handshake this time. >> she will have to control her eyes, no rolling guys. -- rolling eyes. >> what they say and the a lot of them what they say in the joint session of conference -- [laughter] >> many thanks. coming up, what are earnings the saying about the health of the u.s. economy? we will ask torsten slok. that is next in this is bloomberg. ♪

♪ >> we are halfway now through earnings season with more than 250 companies from the s&p 500. take a look at the chart. this is showing you the aggregate earnings surprise. you can see the greatest weight is on the right-hand side. earnings beat. then on the y axis, the one-day price change. that is all over the place. rewarded.not being slok andow, torsten another guest. are you surprised by that are not surprised? torsten: the economy and earnings have an enormous headwind from the fiscal expansion. the big question, how long will that last? and will ago made -- and will it

go to buybacks? last, the expectation, that this will last of the several more quarters. that, are you saying by no, the quarter is not as good as it gets? that is the whole issue -- to what degree have we already seen the highest growth mays and saying that it be the case, but we are not about to go into any slowdowns. weare rolling off slowly, so are optimistic that the economy looks fine and gross and earnings. what about an elevated level of valuations?

i'm going to put up a yard stick . to can see that going back 2013, we are really at elevated levels and worn buffet would say, you have got to watch out. is very interesting because that is a valuation metric that probably has lost a , becauset of its oomph i do not know if we should be considering the market and earning power of u.s. companies to be limited to the u.s. anymore. the fact that we are able to grow market cap is in a reflection of how much multinational has grown. it is a law about that. david: to what extent -- a lot about that. david: to what extent does the u.s. still drive the globe? >> i think that is a worry. when we see that chart and we talk about a high water mark for growth, maybe we are just using

the lehman -- using filet m ignon this quarter and next month it is steak? julia: anymore meat r eferences? torsten: no, the market is a bit aeptical, but the fed sees strong tailwind and we see a strong tailwind from the fiscal expansion. we will continue to see growth being strong for the rest of this year. david: how long is that fiscal expansion keep driving growth? torsten: the key issue is how much of that fiscal expansion or to buybacks are buying new machinery? how long will this last and doesn't suggest -- does it

thatst -- we still think earnings will grow. julia: when we are talking about the fed tightening and we are talking about a rampant -- ramping up, can we argue that that is not a big deal? torsten: a really good point. arporate's really do not have big needs to go out and borrow money. they already have plenty of cash. if they wanted to invest in something, they could have done that. -- trigger.tric slok, deutsche bank. he is staying with us. coming up, primes for profits. amazon shares are. more on those, next. this is bloomberg.

♪

♪ yesterday, amazon reported that its profits of more than doubled in the first quarter. its revenue increased more than 40%, and it said it would do better going forward. the stock price moving up, it is up 7.12%. welcome now anthony chukumba. of $7,000.ice target thank you for joining us. -- $1700. thank you for joining us. in a massive company already, to increase revenue 42%, how do you do that? anthony: you do that by having great businesses. upud computing, it is year-over-year. america,g with north

we just found out they have over 100 million prime members. -- wastional with only up 35%, so you have great businesses which amazon has. david: you mentioned the increase in the cloud. microsoft reported that they are adding cloud as well. expanding sot dramatically? anthony: absolutely. are realizing that there are massive cost savings from migrating to the cloud. it gives them a lot of functionality, and a lot of flexibility. amazon, room for microsoft, and google to grow. to me about the other category which and capitalizes -- which capitalizes.

we are talking margin expansion we are talking about that kind of power in gross advertising. anthony: absolutely. surfaces scratching the in terms of advertising spending. it is high-margin growth, so it is going to help amazon's overall profitability. any indicationve that it might be taking advertising away from facebook? anthony: it is a little too early to tell, but certainly, we wrote a couple of weeks ago the problems that facebook and google is having with youtube is only going to make it easier for amazon to pick up market share in advertising. there is a lot of advertising dollars for amazon to take. it is not necessarily have to be a zero-sum game. julia: talk to me about the $20 rise in the price of amazon prime. do you think that put some people off but do they have

enough power with the content they are providing in the services to hike it? anthony: i really do not think of is going to move the needle at all. in terms of the rate of prime member adoption -- you have to remember. this is the first price increase in over four years, and amazon is added so many capabilities and so many benefits to the prime program since the last price increase. you have over 100 million items that you get with free two day delivery. you get one hour to hour delivery with prime in certain markets. there is prime video. there is prime music. there are a lot of different benefits. julia: you said amazon is a buy any pullback, would you still be getting in at these levels? anthony: absolutely. one clarification, we did increase our price to $1800.

this is a buy and hold stock. this is a stock of that i would recommend at these levels. no question. julia: thank you so much for your perspective. torsten, there was a lot of expectation on the tech earnings this time around. they seem to tailwind overall for the markets -- have they performed it well enough? torsten: earnings have still been well. but do make similar shares, it just tells you that across sectors in the s&p 500, we are seeing earnings growth driven by tech. asid: it may not make up bigger share of the economy, but what about the growth in the gdp? torsten: absolutely. tech is a critical part of high productivity.

we have had such low productivity, we have not had as -- and that has been lifting off of the last quarters. torsten slok of deutsche bank, you are staying with us. a three-day state visit, all the french president emmanuel macron, angela merkel joins president for a working lunch. that tells you everything. that conversation coming up next. >> thank you. 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. ♪ bloomberg daybreak, i am julia chatterley. let me give you a look at how the futures are looking at this moment.

nasdaq, the outperformer higher by 2/10 of 1%. plenty of time between this moment and the markets opens. facebook, amazon results, income, microsoft -- over post-market yesterday, gains for these stocks as a result of earnings. can they translate to gains in the session today. right now, relatively unchanged. some, therom managing to hold the positive territory. s further10 year yield pulling away from that they percent level, keeping the dollar yen in focus. thesedeciding to drop inflation target and stimulus going nowhere it anytime soon -- nowhere anytime soon. sterling.

the worst growth earnings in 2012 from the u.k. obviously, the exporters like that, 7/10 of 1% higher. david: surprise surprise. japan saying it is going to take a little time. let's get to your headlines outside the business world. taylor riggs is with a here -- taylor: a historic summit on the korean peninsula has resulted in a pledge. the leaders of north and south korea met in the dmz that separates the two countries. they promise to ended the korean war more than six decades after fighting stopped. the european union has issued a stark warning to markets, prepare for a messy, no brexit

deal. that is the new blow to the british government to which wants its banks to have better access to europe's single markets. president trump is warning other nations not to undermine eight joint bid for -- a joint bid for cup.2026 world global news, 24 hours a day powered by more than 2,700 journalists and analysts in more than 120 countries. iron taylor riggs, this is bloomberg. david? david: thank you. german chancellor angela merkel is in washington today after emmanuel macron. el will be talking

trade, but she will have a single lunch meeting to make whatever progress as she can. andten slok, deutsche bank, jan teschau. can us into what we expect from this lunch. the trade deficit from the united states on the blue line and the white line that is the german trade balance with a debit said with united states. those that explain this relationship -- trade balance with a deficit with the united states. does that explain this relationship? >> he has used this many times to criticize germany. this is the one thing that stands out because it fits his

idea of getting a better deal for the united states. germany is one of the main perpetrators that does not want to give america a better deal, and that is what he says. he wants to make is a big issue in this meeting amidst other issues which could potentially create tensions. trade deficits, you reach right against the question of whether the labor of steel and aluminum tariffs will be in place. it seemed like mr. macron was hoping to get extension and make them permanent. ela hope fors ang that in this meeting? jan: i think she does. there'll be speaking from the same piece of paper. president trump wants to make this a bilateral issue between germany and the united states. ean unity --e europ

so germany cannot even create a statesl for the united on a bilateral basis, and it also seems to be the wrong kind of dead horse you are beating good. the cause of the trade deficit between germany has nothing to , so it eu trade policy is the wrong remedy. this is something europeans have been trying to explain the donald trump to no avail. julia: this is a sensitive issue for germany. they are the exporting machine of europe. broader have a fromctionist threat coming the united states, this is a big problem for sentiment in germany. can she soften him in anyway? this is the big question. it seems that both the french

and the german side this week have really been trying to do expectation management. to really try to prepare the gress on this pro issue. but it alsocal, gives you some plausible deniability of things that failed. it seems to me that this issue is so close to the core messages that trump has sent an needs to continue to send and that is possible we do not see a remedy. what i find interesting what the attempts of the french president to list the in -- to lift the and the approach to the president and say we need to change wto. speaking of congress, it was not lost but he said, "we wrote the rules, we should abide by the rules." thank you for joining us. torsten, a more fundamental

question. germany has a trade surplus with the world. how much it should they be consuming themselves rather than just manufacturing for export? is there any prospect that germany might alter their approach fiscally? torsten: generally, the trade with china -- china plays an important role. -- but tos a role your question, germany is doing all of the right things. you have a student of the classroom sitting in the front row doing all of the homework, should you punish the one doing all of the homework and say you have got to do less homework so everyone gets on average? there is a lot going into this. some countries are very competitive. should they change behavior as a result of that. less easyit more or as a result the new coalition? torsten: obviously, the germans are going through thinking about

what they have. they have a clear program, but germany remains competitive. julia: speaking of appetites, spending appetites and treasury issuance, the sheer amount coming from the united states, i'm questioning the fiscal sustainability of the united states. talk us through. torsten: one important part of the u.s. relationship is what this chart is showing you, that foreign appetite for u.s. treasuries is really important. hold about 50% of treasuries, the orange line shows you the foreign demand which is been going down as the fiscal expansion has come through. the white line shows you demand for ten year notes. the u.s. is booming in terms of

issuance. if foreign demand starts to dry up, then somebody else needs to step in. this is an important reason why rates are going up. david: so far, so good. the same time, you have a very powerful bar chart that is making the rounds. if you think we are and a lot before, this is your charge. torsten: the yellow bar in 2017, that issuance in judge or is -- and treasuries -- in treasuries, but look at it as a 19. and thedd the yellow, origins is the budget act, and the red which is the tax reform in 2017, you could total amount of supplies. it is more than double. we are going to double the supply of treasuries in the next 18 months. we have not really seen anything

yet. we are going through an enormous increase. david: at what point does the problem turn into a crisis? seeing ate already problem in the front of the yield curve. if we continue to see issuance go up and rates going up, we will have some best way to a large zimbabwe style situation where inflation is going -- we are not saying that. but investments need to be coppin state is. -- need to be compensated. and treasuries are clouding out demand. this is having a very profound impact over the next 18 months. julia: how much compensation needs to be provided?

throwing the possibility of the ecb going, all fine, we are still planning to pull back on and the rewards that accrue for european bonds get a little more duty and that is a double whammy? torsten: that makes u.s. attractive. it sounds relatively modest. we have not even spoken about inflation. the worry and the bottom line is that there might be some upside risk to this. upside risks to the long end, as a result of two separate things -- inflation and treasury issues. david: it has repaid by somebody, what does that do to the american budget? where you have higher and higher interest costs and that takes a lot of other things you should be spending money on? torsten: exactly right.

debt levels are so high. both government and corporate sectors as well as household. easy money is going ok, but i what level will we get to interest rates before we get to a problem? the bottom line is, so far, so good. we are keeping our eyes on this problem. david: fingers crossed. coming up, the sprint to finish the deal. t-mobile and sprint in the final stages of their merger. you can turn your radio and listen to our colleagues tom keene and jonathan ferro from 9:00 until 10:00. all caps united states on sirius xm. live from new york, this is bloomberg. ♪

♪ >> this is bloomberg daybreak. i am taylor riggs. coming up today, mark august -- the president and ceo of expedia. let's get your bloomberg business flash. a sign that royal bank of scotland is well in a position to restore dividends once it puts its legal problems behind it. it higher earnings in the first quarter. mortgage securities investigation, their estimated deal to cost the bank about $9

billion. convicted inson that global crackdown on occurred in -- on currency rigging is now in jail. he was sentenced to two years and ordered he be taken into custody immediately. johnson was convicted of front three and a0 -- half billion dollar. microsoft is riding the wave of demand for its cloud computing service. revenue almost doubled and microsoft is trying to move customers to its internet based versions of its software. that is your bloomberg business flash. julia: thank you. buzzing about this morning, first up. sprint to the finish. sprint and t-mobile are a set to

-- are set to complete their merger deal. johnson, sentenced to two years in prison and a global crackdown on currency rigging. and $21 billion lost after being hit by the global stock selloff, its first loss in two years. david: with us now to go over these stories is ahead headmanned -- ed hammond. are they really going to do this merger this time? >> it looks like they are going to do it. they have fallen apart in the past. the obamaember, administration, they were told that the deal would be blocked. of ceoshe egos og -- get involved in these mergers. if they get involved, who controls it? party, the deal

andtime becomes irrelevant, so the control is going to be a sticking point. potentially get around that, is a stock deal. but you still end up with two runs the combined company. if you believe what has been written today, this is something that is moving closer and potentially will know next week. julia: i wonder if he gets less sensitive about price control. more difficulty, talk to me about a prison sentence. the currency rigging, a british person in prison. what he wanted to do, he wanted to be able to go home. he has six children. it is fascinating. front been convicted of running one of his clients.

instead of doing the right thing, they actually went and told a bunch of traders, we are going to do this. david: this is got to be a strong message to the street. a lot of people today saying, that could have been me. in the day, they said, you cannot even go home. take off your tie, you are going to prison right now. >> directly to jail. david: a big lifestyle change. people weres made, offended that he was in the wrong place at the wrong time. a lot of people were doing this kind of thing. the sole markets as an element of questionable behavior -- the whole market has an element of questionable behavior. his code phrase was, "my watch is off" -- david: --

julia: i think he got away with it was more intimidating. i think we got away with it. david: norway. they said they are going to go big in equities, 70%, and there were some consequences. >> there were. number looks huge, but it actually is a loss for them. 1.5% drop. the point of the fund is to divest away form oi -- from oil. they are moving to have 70% of global equities and they also have got the right rates in real estate. would make them one of the biggest real estate owners in the world. julia: the lack of money they have gotten an alternatives, and i've spoken to them twice and said, how can you only have 2.7% in real estate and the sheer weight they have in bonds and equities?

they are a conundrum. they are huge in a different mix. tio. should be a david: at the same time, how do they get their money? what is happening with the price of oil? >> longer-term, their whole plan was to divest. david: didn't they say they would not invest in any e nergy? >> and they alone a lot of the -- and they are in a lot of the big tech stocks. in this recent quarter, they have been rough. julia: 0.4% in bonds. david: if they were in amazon, they might have gotten a little bit of this back in the last 24 hours. many thanks to bloomberg's ed hammond. lawmakers, republicans and democrats alike have warned

president to keep his hands off of the robert mueller investigation. that is next. if you a bloomberg terminal, check out tv go. look at our charts and graphics and interactive with us directly. live from new york, this is bloomberg. ♪

♪ david: what i am watching a, what is going over in the dmz between the two leaders.

there are headlines, a banquet over there were kim jong-un says he will meet with his counterparts in south korea anytime, anyplace. they want to end mistrust between the two countries which have existed in -- since 1953. i did not realize we never had a peace treaty. it is an armistice. they are technically still at war. julia: the president announced this morning that peace has been restored. butttle bit precipitous, all of the signs incredibly strong at this stage. we were discussing whether or not the korean president, -- the south korean president, he stepped in. david: that was the report. in the dmz, there are these places where they have negotiations and the line -- you can step over the line when you are in the little meeting room.

north korean guards come in and watch it through the window. julia: you have done that? david: i have done that. at the same time, president trump has been tweeting this morning. tweeted, after a furious europe missile launches a nuclear testing, a historic meeting between north and south korea taking place. good things are happening, but only time will tell. julia: that is the point, isn't it? the proof is that really going to be in the pudding. david: we can be hopeful. julia: we can. coming up, we will break down exxon's earnings. this is bloomberg. ♪

♪ david: summits on two

continents. the readers of north and south korea hold an historic meeting after years of unresolved conflict. and angela merkel seeks her own pace in the united states with president trump. amazon had an increase in the cloud is this. -- cloud business. and taking the economy's temperature. u.s. gdp numbers this morning get investors a first read on how fast we are growing and whether we need to be concerned about it. welcome to bloomberg daybreak on this friday. we have exxon earnings breaking even. there are earnings per share of -- a dollar nine, and there is 4.8 7 billion and they were projected right on the nose, one of the issues of exxon

, with the return more to shareholders or invest as they are more? they have production of 3.9 million barrels of oil per day and that is a little bit off of what the estimate was. we had an estimate over 4 billion. stock is up now and didn't it has gone down since i was talking. the little bit up to a little bit down, where exxon is trading. that is the exxon earnings. julia, the stock has gone up substantially, so the question is, are they making enough and what are they doing with it? great, they are making more profit, but when will you push back more to shareholders? at least for these guys, we have had a hint of a better performance and hinted at pushing more back out so

investors been rewarded but also the disappointment and concerns about the spending for exxon mobil caroline: -- exxon mobil. no supplies is on that line. david: that is because they had already said. julia: exactly, no surprises. julia once to take us to the markets. let me give you a look at what is going on. we have made some slight gains in europe, as far as the nasdaq teachers. amazon -- nasdaq futures. . --se stocks in particular right now, the nasdaq higher. a slight tilt to the downside for s&p 500, but right now, crude of three -- .3. we have seen a strong performance in recent times, trading around the year high levels, just watching what is going on as far as the

euro-dollar is concerned. right now, the dollar making games. the dollar index having its best week in 17 months. a bit of softness in the european data and gdp data as a prelude to what we get from the united states and around half an hour. david: we promised we would go to an investor at exxon and we will do that now with eddie the $2 where he manages billion large-cap value fund. thank you. good to have you. we gave you a summary of what we have seen of earnings. is it in line with what you expected? eddie: bradley, yes. the debate on has been the capital spending and what is true for the industry isn't necessarily true for exxon, and that is this is an industry that over a long time has not generated good returns on invested capital, so they want to see companies be judicial with capital spending. in the case of exxon, they have

high potential projects, so that they are investing capital into good projects, we don't have an issue. julia: we were wondering if we would hear from the prospect of buyback secure shareholders. we were talking earlier as an industry as a whole, the underperformance that we have seen, is a test that the broader sentiment has been so negative that getting more comfortable with these guys takes time? eddie: i think that is a lot of it. in exxons case, they have been fairly guarded when it comes to what they share with investors. that seems it is changing. they had a more transparent approach to have they engage -- to how they engage. cherie moore will go over well. it has been a tough industry and people are wary. people question how sustainable they are and companies can

generate good returns and get money back to shareholders over time. david: i am curious about the production. when oil prices are up, you want to get as much out of the ground as you can. we had an estimate over 4 million barrels a day. the reports right now are that they came in under 4 million, how concerned are you about the difficulties of production out of around? they had problems -- production out of ground? they had problems in the fourth quarter. eddie: we will see what they have to say on the call, but they are ready many projects around the world and in some difficult areas politically and the environment. you can have weather-related issues that slowed things down. undoubtedly concerned about that. i think exxon has strong engineers, technical processes, someone, and they are one of the best in the world of doing this. over time, they will sort it out.

julia: what about the focus on margins? returnse, we got lower at refineries temporary blitz and it is now under control for excellent? -- for exxon? eddie: back end ebb and flow dramatically from quarter to quarter, so it is currently and we just got the release and we will see what they say on the call. julia: do you want them to say we will actually institute a stock buyback or are you happy with them investing the money and expanding? eddie: we are happy to see them spend on goods returning projects to the extent they are not available and we would like to see that capital return. they raised their dividend earlier and yielding over 4%. that is a healthy return of capital to shareholders. given where their stock price

is, i think a buyback would make sense. david: we have to hope they have those projects because as i was asking the question, exxon is not plan a buyback. i want to talk about natural gas. it appears they had a miss on that. we are seeing across the bloomberg they produced 10.0 4 billion, a million cubic feet equivalent, and it was a 10.5 tojection, so 10 compared 10.5. there was an issue with the dutch field, how sensitive are you to that? eddie: exxon is a global company and they have a lot of projects and good things in the u.s. and shale but they are multinational and they will have projects that are working and underdeveloped, and at any point in time, things will go well in some and not in others. we will wait and see for more detail as they convey more information. julia: they have got investments and operations around the world.

they talked about brazil, new guinea, what do you want to hear from them? you said you are happy for them to be putting money to work in and finding high-value projects. what do you want to hear from them on that point? eddie: we want to hear that there is still capital discipline. they had a recent analyst day that a lot of investors came away feeling like they are spending too much money. what do you want from a cyclical company? to invest in high returning projects and dialback windows high return projects -- when hyper temp arctic so not available. investing in a hyper cyclical way, which exxon has done, in an industry that doesn't always have capital discipline, so this company we are willing to give the benefit of the doubt and we do not need to see them cut back capex.hat --

the question is what is the price of oil and natural gas going out? with projections do you make to that and what are they making? eddie: we have seen the spot price of oil move up nicely this year. the equities -- actually, the oil sector has modestly outperformed the shares. it has lagged the oil price itself. the reason for the strong commodity prices, demand has been strong in india, china, places like that. the normal seasonal drops you see in the early part of the year have not been there. as we get into the heavier demand season, particularly in the u.s. as people drive over the summer, you could see significant inventory reductions and by the end of the year, inventories could be typed and that is supportive of the commodity price. you have the decision on dimon

sanctions next month, and if the president were to put sanctions back in place, that would restrict supply. there are a number of reasons to think the oil price can stay at higher levels. julia: we will wait to see what they say on the call today. perkin'sg is -- eddie statement this. coming up, a pledge to formally end the korean war this year. they are just about to begin. you can see the red carpet there in the pictures. plenty more from us and from the demilitarized zone with the north and south korean talks, next. this is bloomberg. ♪

julia: we come back -- david: we come back to live pictures and the demilitarized zone between north and south korea. these are the leaders walking down with their wives down the red carpet after a day of meetings, including a banquet. this is slightly to the south of the border by the south koreans. applause now for the two leaders. , the first time a north korean leader has gone across the border to south korea and he said he would like to do it again and have as many meetings as necessary. the two leaders say they finally want to end the korean war 65 years after a took place. they went to formally ended with a peace treaty.until now, it has been an armistice with no final resolution. now, they will go through official ceremonies. joining us from south korea is our own bloomberg's stephen engle.

bring us up to speed. that is right. we have been following kim jong-un's arrival into the demilitarized zone and crossing into the south korean side. isrting about 12 hours ago when he arrived at 9:30 local time. it is approaching 9:15 in the evening now. it has been a long day and kim jong-un has spent a bit of time in the area. there was a break in the middle of the day about four hours when he returned to north korea. some momentous headlines coming from the two presidents of north and south korea today. they have agreed to end their hostility with a peace pact, the formalization of that will be happening by the end of the year.also , more importantly, as we approach a potential summit between donald trump and kim jong-un in a matter of weeks is what moved and kim say will be

-- moon and kim say will be complete denuclearization of the is led to complete denuclearization. he addressed the western media for the first time ever this afternoon. again, he spoke to journalists at the banquet, which is just concluding the formal evening banquet with their wives and two presidents. he's making a few more comments and said north korea had a meaningful agreement with south korea and the two koreas informed the world of they start of a warm spring. they were a lot of these kind of symbolic language used by both kim jong-un and mr. moon of south korea. david: describe for our viewers because this is just outside of the demilitarized zone and we are looking at a light show going on with pianist. toave not -- i have been

south korea, and they have incredible artist there. it is quite extraordinary but you can see they are putting on quite a show for the leaders. showcase,s is a huge particularly with the north korean leader. to go back to what you were saying, flowery language and huge optimism in the statements coming, and even at this stage with the leaders. how much skepticism are you hearing beneath the surface meetings ofmber of denuclearization? steven: we saw the handshake in the arm and arm between moon and kim but in 2007, the last time the two leaders from the countries met, there were similar optics with handshakes and raising of the hands over the head. the father of-

kim jong-un, that relationship soured in the coming years and the toxicp to really fire and. and nuclear weapons and the potential attacks on the united states. that has all come about circle in the last few months with what many people say now is a new era of relations on the korean peninsula. however, promises have been made and broken. skepticism will still remain but today is a day of rejoicing on the korean peninsula. i saw people crying as they saw the leaders embrace each other. they were hugging at the demarcation line. julia: we are watching a dramatic live show. just to reiterate, plenty of emotional days for both sides involved.

this can hold true. why is this different? talk about the broader backdrop, newther we have the president to his optimistic about creating a result, and the chinese, why is today different from 2007? well, you have a president in south korea who has made this a key priority. he invested a lot of political capital to make peace the first pillar of his engagement policy with north korea, perhaps a oftle bit odds with mr. abe japan and mr. trump of the united states, who tend to be more hawkish. but moon jae-in has been about engagement and saying peace first and then cooperation. on the other side is north korea. he has been a bit of a hawk, as

well, however, things have changed this winter. you had the north koreans becoming what they claim to be a nuclear state now, and they can come on the international stage as equals, as an equal with donald trump, perhaps. they have also had a winter of economic sanctions, and a lot of their foreign exchange reserves have window. perhaps -- have dwindled. perhaps this show of unity, peace, and potential prosperity is a well orchestrated message to the world that kim jong-un is acting in good faith and it is now time to go easy on those international sanctions. david: it is interesting you say this because there are huge political differences between north and south korea. what we may not focus on as much as the economic differences between the countries. when they were divided up to world war ii, north korea was

affluent, the one that was the manufacturing capital. the south was actually quite poor and agrarian. what has happened since then is the reverse of those positions, so now the north is believed to be much former in the south much more -- be much more poor and the south more developed, and at the same time, it has been thought that the important part of the stability of the north regime has been the opposition to the united states and rest of the world. how can he reach out to the rest of the world and not undermine his political vision at home? even: that is right. the points he made about the economic differences are start. -- our stark. if you look at the per capita the northountries, , it is $1200, so it

starts different. if there is going to be a dividend, a greater cooperation and leading into the perhaps,beneficiary the most immediate of the peace dividend is going to be north we knew this was going to be historic and i'm not sure we

were going to appreciate how historic it would be. and north korean leader kim jong-il says he would like to have many more meetings like this as they overcome the mistrust between the countries. really historic and beautifully visual. julia: i think the butterflies are symbolic because you saw them climbing over the walls, complete denuclearization, what , andhad promised to pursue turning an armistice into a peace treaty. ven, theck to ste question is whether or not we do see the policy and if they agree to the compromise and demands? at least at this moment, look at that picture. i feel like we are always going to remember this. will it end up being complicated in this moment? david: the two leaders appear to be holding hands. you can think of what is at stake for both countries. they have been so isolated and relatively poor and isolated from the world. on the other hand, the south has been afraid of attacks because it has been believed the north

could wipe out sold in a matter of when our. so they have been living under the direct. seoul is very close to the north korean border, but whether they can bring it together, that is a different question. julia: wow. david: look at that. ♪ julia: some incredible imagery there. the leaders of north and south korea holding hands at the end moment -- atork historic moment, and formalizing the end of the korean war. david: there are so many things. remember that it was proceeded

,oon was soft on north korea including in the united states, with people thinking he should take a tougher line. he started having meetings and arranging things. i wonder what it this should have on president trump as he meets kim jong-un? does this change the dynamics? julia: that tweet little rocket man feels a long way away. we do not went to be perhaps too enthusiastic, but it does feel, for the reasons discussed, economic reasons, sheer political reasons for both leaders here, that perhaps it is different. david: the hurdles are unimaginable. so much greater than what happened with east and west germany, so much greater. over there, and it

is so different. at the same time, the possibilities are enormous. if you contrast this with saying they could attack the western united states, if you could get to a world where we were talking with one another and even though we have differences, it would be enormous because it wasn't many months ago we were concerned, and maybe we should still be, about the possibility of an attack on the u.s. mainland. julia: cute smiles there. you are still looking at live features. they are wrapping up the historic ceremony between the north and south leaders. they are shaking hands, smiles between them as they progress down the red carpet. i love the comparison you made to the east and west of germany and integration because we cannot underplay the cost of greater integration for this out koreans and the south korean president -- for the south koreans and south korean president. the threat of bombing is one thing but the cost of

integration is another. david: when you spend time in south korea, young people particularly expressed a concern. they say, we are not sure of further integration with the north because it will cost more money than it cost western germany. and that was a big bill. having said that, it is a lot better than throwing nuclear weapons at one another. julia: and how important that will be. we saw the importance for other countries like the united states, president trump, as we progress. this will be a significant foreign-policy breakthrough. david: huge, and japan. japan has been much more under threat in a sense compared to the united states and the chinese have had an uneasy relationship with north korea. they have been allies and worried that they will drop on hasn't always been

warm and friendly between china and north korea. julia: i'm glad you brought the chinese in here because we cannot underestimate the influence china has had in terms of sanctions. david: there is kim jong-un getting into his limousine to return presumably to the north with his wife. by the way, it wasn't not too long ago that we were not sure who his wife was. we identified a woman who was his wife and it turned out to be his sister. i am looking and i can see headlines, who is kim jong-un's wife? we are still asking the question. boko first ladies looking an interesting dynamic for the first ladies, too. david: for anyone joining us, we the demilitarized zone between north and south korea. the two leaders have been meeting today. we knew that would happen but coming out of the meeting, they

pledged they would try to negotiate a peace agreement. they have had in armistice since 1953 and will negotiate a peace agreement by this year. kim jong-un said he would like to overcome the mistrust between the countries. extraordinaryw an light show and musical performance in the demilitarized zone of the two leaders and their wives as the two leaders held hands together. we do not know it is his pomp and circumstance signify nothing or it could lead to substantive changes between the countries. risks say, with so much to the world, china, japan. julia: that was the image of the meeting, the handholding. . few seconds ago even just to go over the past few hours, actually seeing the south korean president step over the line as you were describing earlier in the show, and having a south korean resident in north

moments.en a few a lot of symbolic moments. david: the question on my mind is what is next? you never want to come out of a meeting without a to do list. what will we address? commerce, economy, the terry? -- military? julia: this is the easy part. the to do list is the long one. let's take a quick look at what is going on as far as the markets are concerned as we show you go live images. david: that is the president of south korea getting in his limousine driving away. julia: incredible images. the s&p futures off by .1. we are still holding in positive territory, .4 for the nasdaq teachers, and the followthrough from facebook gaming to us today, intel and microsoft the team technology stocks. can we translated into actual

gains with the markets open? the euro-dollar under pressure, off the lows of the session, off i .2. board games for the dollar now. we see the gdp meeting we got from europe, whether the u.k., friends, and right now, -- france, and right now, we have been reading for gdp for the united states. 2.3%. the estimate, 2%, so better than the estimate. if you remember from the prior quarter, 2.9%, so better than expected and softness relative to what we got last quarter with personal consumption at 1.1%. that is in line with expectations, expected to be significant give in the prior quarter and just looking at the cost index, also pretty crisp.

0.8% better than consensus estimates or higher. for the core cpu, we have 2.5% in line with estimates and the data we get hundred 30 will give us the year by year as we break down the more important information. eddie perkin by still with us and a small board of individuals. michael mckee, better than expected on gdp. michael: yes, but when you look at the breakdown it isn't all that great for you this is an inventory and trade story, trade subtraction lower than the previous quarter and inventory built about double. when you look at the business spending, which we knew consumer

spending was weak. business spending is what everyone wanted to say. it was up 6.1% but down from the fourth quarter at 6.8%. 11.6% in the fourth quarter, so we were supposed to see a benefit of the tax cuts and it doesn't look like that business went out immediately and started spending. there is a number that is really sort of the job dropper, one of those that has either the continued or a straight one up. when you look at the eci, wages and salaries of .9, almost double what it was in the first quarter, i don't have the number in front of you, but it is the highest in more than a year. it does look like there was more money in people's pockets. is is the question i pose

this sustainable? >> certainly the key question for the fed going forward. i think they will look at it and say, the phillips curve, this unemployment wage relationship seems to be kicking in. are we going to see that with their earnings report when we get the job support next friday and is it sustainable? michael: i will give you a statistic, this is the biggest quarterly increase since the first quarter of 2007, so it is a very big number. david: the equity markets opened is not like the jobs number from two months ago. michael: you may get it. isid: we hear about it inventory in trade but at the same time, people expect a week gdp read because typically -- weak gdp read because typically it is weak anyway, but it doesn't seem weak, does it? >> it is down from prior

corridors but better than expected. that can be interpreted as one, and market demand is not there, which should be a negative way of interpreting it, and the other is optimism on corporate records. optimism, sowith we see that with strength. so we will have to see an acceleration from these levels to hit that number. at 0.9it was said that zerontage points -- add point & percentage points and that is when the economy is running out. >> that is a good point. we were expecting a step down because they generally have the seasonality, so this number looks better than expected given the first quarter weirdness. are lookingeason we

at this is to see what the fed will do, so what will they do or not do? eciwo things, i think the number will be important for them in the market reaction right now, you have to your notes that are better. and you have higher yields and the front-end, telling you the market is thinking, the fed is still in play and we will get a andle of hikes this year three next, perhaps. that means you will continue on the same trend. data in general is on the same trend with tweaks here and there, consumption, inventories, but at the same time, it doesn't change the fundamental view that the economy is doing ok and the federal reserve will be in their tiny mode. julia: how closely is the federal reserve watching the ramp-up and tightening in the front-end? we had talked about this spread

widening and the ramp up, that is affected tightening, whether and is on the balance sheet it also has implications. it, it you think about started to come down significantly the last days. a big part of that is because a lot less out there, so there was a supply story. it hasn't come down all the way but those pressures are starting liber. on a lot less out in terms of the federal reserve and hiking, they know that front-end yields have to go up. it is a normal part. the worry is will they go too far? we did a report on this last week, what happens when the federal reserve hikes beyond when the curve gets flat? that is what has happened the last three hiking cycle's and

the fed has gone too far, so will they be an end in 2019 when curbs get flat? that is what we think the curve is going to get flat, where it will be at the same yield. david: let's talk to an investor face-to-face. as you look at the numbers, what tell you about the valuation. what does it tell you as an equity investor? eddie: i think the equity market in the u.s. is fairly rich and forward multiyear returns from here are likely to be in the low single-digit but i think there are pockets of opportunity in value. we talked about the energy sector, one place you can look revalue the dividend yields, and dividend yield sectors generally are good place to look is everyone is convinced long-term interest rates are going up. if it doesn't happen, people will rotate into the bond proxy. all these unloved areas that

have been behind and are cheaper than the last few years. julia: you did not mention financials and that is a component of your portfolio. what you have earnings, these guys have not disappointed and investors have not rewarded them. talk to me about financials. eddie: i think the theme of stocks having good forward outlooks but not been rewarded is a sign of where investor positioning is. technology,ncial, industrial, those three areas are heavily owned by investors and wildlife. the cyclical place on the u.s. economy and with financials, it is easy to tell. occurring,n is interest rates are going up, all good for financials but they have had a good run and we have been peeling back on it. we feel like it is fully valued dividend and bond

proxy's the better place for a contrarian investor put money. you.: dividend ok, thank you have been patient waiting through a long and elaborate process with south korea and north korea. eddie: i enjoyed it. david: chevron is that with their earnings. they beat nicely on their interest sure, 1.90. 1.47 was the estimate, so that others.ntrast with they are up by 1.6%, so chevron beating. coming up, cloud control. the final day of our amazon release, and we look at the cloud business. turn on your radio to listen to her colleagues tom keene and

jonathan ferro. bloomberg surveillance can be heard in washington, the bay area, washington, d.c., live from new york, this is bloomberg. ♪

♪ is bloomberg daybreak. coming up on bloomberg markets, robert swan intel cfo.

let's get to your bloomberg business flash. take mobil failed to advantage of the rally in oil prices. they fell short of projection targets, earning less than expected. they have been posting their best early results in years, thanks to higher prices from opec cuts. the european airbus company handed over the fewest claims in the quarter since 2011.delays avenging providers of the problems. they are delivering 800 planes this year, but it will require better performance from engine makers. is believed the bank of .cotland is well stored they posted higher earnings and rbs is going to settle a mortgage securities investigation.

there are estimates that it could cost of them $9 billion. that is your bloomberg business flash. david: thank you. it is the final day of our series that has looked at five aspects of amazon. today, we will take a look at amazon's cloud business, specifically collecting data and how to eavesdrop on your conversation on alexa. we see from the pie chart that that 11% in the blue is the web source, which is growing rapidly. you see that from this bar chart, where the rate of growth of their web service is 50% growing in their cloud service. to take us through this part of guests,we welcome our --n is the founder of

you have written a lot about amazon. let's talk about the cloud. how much money are they making? >> it can get much bigger than it is today. the annual spending on information globally is $2 trillion plus, so that is the size of the market. they will not get 2% of that market but it is a huge opportunity for amazon and that is why they go after that as aggressively as they have. david: microsoft is growing faster and starting from a lower base. they went up 100% and amazon went up 50%. >> if you look at the overall market, it is surprising the top two custom -- companies are going fastest in the market. small windows.f when it comes to the cloud world, you only have a large handful of windows. julia: we were talking about how

big the pie is for cloud, can all the big guys grow it rather than stealing market share from each other? you had a great points on how long they have got to grow it before we start worrying. >> it will take several -- easily a decade before you slow down the growth and they are actually taking shares from hardware and software and basically anybody building i.t. in the old way. and that is destructive for legacy companies. david: given all we have heard secureocial media, how do we feel about this cloud? fullon't really have control, and you are better off with the apple device. is there vulnerability in putting it in the cloud? >> amazon has done a good job securing their cloud infrastructure. and the clouda,

infrastructure that has been successful. the intelligence community can trust the cloud information and as tumors, we are capable of the line on the consumer infrastructure. julia: maybe this is a stupid question about echo or alexa, and we were talking off-camera about how it waits for you to use it. is it loosening the whole time? is that information recorded, and to consumers care whether it is or isn't? >> we know alexa listens and we also know that are apple iphone listens for the word siri and are google phones listen to ok, google. we had devices we carry in our homes that are listening for wake words. in some way, we have to rely on companies that they are not listening beyond that, other than the command. if they violate the trust, there will be market repercussions.

people should keep an eye out for that but i think the reality is that today these consumer companies recognize credibility is doing the right thing. david: i will ask a selfish question picture that can plug alexa when i use it -- i will ask is a this question. --pe i unplugged my ale should i unplug my alexa? >> well, it is kind of useless when you unplug it. listeninge that phone in your pocket for that wake words, it is a and amazon-specific problem but a move toward voice-activated devices. consumers like that functionality. devices attrue alexa my house so it is a big people move towards. julia: you are going through the house, unplugging and re-plugging. there is a bigger question

posed, which is ultimately there will be a consumer response and reaction. we did not see that with facebook. facebook has gone nowhere. that were talking about before. if you look at large technology companies, privacy and concerns about privacy are probably the only thing that could dent this year and beyond. everything else seems well. if the government says, you have to stop this or this is a good, that could slow the process. david: just when we think we have seen one form of disruption, there is a new one. cloud has disrupted a lot of businesses. what is the danger it will be disrupted and how long will we have and who will disrupt it? >> it is hard to predict in the future with technology and as you said, it feels we are seeing

this grand divergence, where the large scale tech players are taking share from the struggling or guard that are shrinking being lost by private equity because they stopped growing. to see what could you road their clouded damage. -- could erode their cloud advantage. maybe the will have computers and are brain and we don't need to fight anymore -- i don't know. it seems they have a long run rate for profitable growth. up on i was going to pick this point, whether it will ramp-up. we don't have time to answer the question, but thank you. amazon's business model transformation is what i

am watching. remember, bloomberg users can interact with charts shown throughout the program on tv and you can catch up on any here analysis -- peer analysis. it is a great resource. and i'm covering it with a pop-up telling me it is time for breakfast. plenty more to come from us. we will dig into the details of amazon's results. from new york, this is bloomberg. ♪

♪ amazon'sam watching gross profit margin and we will dig into more details. you put up a great piece pinpointing this and saying, you can pair operating profit margins, which are tiny amazon, but it is improving, and i compared to other big tech guys, but the way amazon is growing are high knowledge -- are higher margin, and that is the opposite the alphabet. >> it has been interesting to see amazon is spending gobs of money on things like shipping, video programming, and at the same time, you see the gross margins increased where it is 40%, which is highly unusual for amazon. the big difference is their court economist -- there e-commerce is this is no margin

but other areas growing for amazon include things like itstal advertising, even hardware business, all higher margin than the original e-commerce business. we are seeing fundamental profitability going up and amazon, a clever trick they have done. david: and the contrast with google because they look like they're are going from the other direction. shira: i almost feel bad for google. david: i would not go that far. i think they are doing ok. shira: the problem they have is they started out in one of the most high profit margin businesses, which is digital advertising and now the thing is they do is lower margin. including cloud computing and hardware, which is more profitable for amazon compared to their core business, so it is

a dilemma that alphabet has. julia: i used to amazon highly money back into investment and it is an exciting thing. still plowingis almost every dollar it gets back into their investments but the aret is because they improving the gross margin, they have the ability to be more profitable. david: great work and great to have you, shira ovide. coming up, the are improving the gross open. morganlanderchad and george rusnak joining us on bloomberg. ♪ barty and have james chad morganlander joining us on bloomberg. ♪

jonathan: from new york city i'm , jonathan ferro. this is the countdown to "the open." ♪

jonathan: coming up, gdp is better than expected, pushing inflation toward the fed's goal. kim jong-un crossing the border to declare an area of these with the south. and proven them on, amazon and microsoft and intel, all reporting solid results this morning. in the market, the story as follows, 30 minutes away from the opening bell, futures doing nothing. fx market, with a stronger dollar story and a lot more against the pound. treasuries moving by a single basis point at 297 on the u.s. 10 year. topping estimates, but calling off from the previous quarter. the report with the latest, though recent trend from around the world. and this economic global growth narrative is still intact. >>