nafta negotiators details it outthe move over eight will get pretty wild. it is aur insurance and highest estimized with.

in. is unless 30 profile .f there are other should let's get you caught up the markets. after he makes me last week, of rising to his highest

leader stock is down for both third much more first or and she knew. for some time to tear it but it will escrow the. i think there are questions you overseas for i'm

not sure there were. who knows ifd. buyingll buy the sign that year from walmart. introduced us to.

. able the is and a trade rumorsry is a. soody wins in a trade or about those steel aluminum is thator thomas all nobody is ind

.ational right now, they are paying the tariffs and hoping to be reimbursed by the government. quacks i don't think this is .ust some prophetess six people reviewing, bumped it up closer to 20 now. not a love people reviewing these things. investor, how deal of howard and make some sort of relative assessment about what their costs will be going manyrd tom: we have too clients to request for tots us. is happening simultaneously. and definition.

having to kick everything down the road a little hint how does this factor into the security that accompanies comp in preparing for the reduction meanwhile, we are getting a whole slew of economic have embraced this week, sony with a: 30 a.m. we will be classic run it. gina, you highlighted this chart less weekend. looking at eci versus those .glantine bonuses shared you can see solid across the board. people are getting paid more how will this factor into the data we see coming in? >> this is important for how the data interprets.

without wage pressures, we can see a lot more confidence. but because the fed is looking at rising prices at the time that wages are also rising, the economy is headed in the right direction. >> right now, you cpac for s acord for rate hikes and an increasing number of traders are placing four federal reserve rate hikes here looking in at explaining you to me. >> expectations have been going up a little bit. i am surprised they are not hired -- not remain higher.

look at the price action last week in equities. it was awful's. -- it was awful. i don't think the markets are prepared just yet. afterl see how it happens wednesday. >> marriott make agent is buying ilg. they think it will be accretive runaway. . extraordinary. they have $14 million in the deal. ,hares are not moving to much

tom: big we for economic details. we will talk about that next.

-- you are a

regulators are expected to take a close look at t-mobile's agreement to buys ran for 26.5 billion dollars. it will reduce the wireless industry in the u.s. to three companies. it is a deal that could create the largest independent feel maker in the u.s.

marathon is focusing on the midwest and gulf colors. pipelines are in the western states. u.s. --sition in the the uk's they could transform the supermarket. it would create a supermarket giant that word surpass the u.k. leader. that is your bloomberg business flash. potentially, more importantly, stressere those economic orders. purvis to ourhael

chief global strategist. thank you. were -- were people encouraged or discovered are that burgess quite some think it would be a sleep that's a silver lake towards her. so processing what does this mean in the two-year in the shorter the curb, we also started with getting back to its brutal normal. one priceen actually does not make a trend.

one of the matters alleged in. on the upside certain rise event .ou need professional and it's quacks the fed is driving an ocean tank air. a native.arily

click -- a club, you see acv. the sale of trans-among the only inive is the let's worry about something else. is of all the incidents .he the vix outperform other

volatility measures. european gain volatility. serious you'reds ,: whether it is terms so inflation are the fed, something to me. we are well into the in cycle. we have 90% of companies meeting expectations on earnings. irony and yet,us if you look at the stock, we will remarkable the our clia for

a change. usually, you have to have some skepticism. . have a trillion there you do not sell you a gone for a new developing

we had a number of family a change's thesis that you have her just to keep things going.

optedefore the volatility . coming up, big merger monday. not in birthday.

when it is time to sell, the place ago is home-line.com.

david: the third time appears to forhe charm for at&t -- t-mobile and sprint. t-mobile under $82 and a neutral rating on sprint.

jonathan, thank you for joining us. take us through this deal. why does this make sense for t-mobile? basically, what you are doing is putting together to massive networks for two companies that removescale to get -- to overlapping costs. the synergy from this transaction is phenomenal. we think it is really conservative if they get this deal approved and close. they will take that synergy valium up. we are talking about synergy value from the deal that is worth almost as much as the equity of t-mobile today. that is why it makes sense. david: maybe the issue is regulatory approval. a lot of people are doubting. if it gets approved. if you are an antitrust

authority in washington he is saying, efficiency is a, what is the pricing car? these two companies compete against each other on price. isn't that what is really during this deal? >> i think what you are doing is getting a company that has proven to be very aggressive on the pricing front very consumer friendly, a much lower cost lecture. that will allow the two be more aggressive still. impact sprint the has had on competitive dynamics in the market, it is really nothing. it has been struggling for survival for the last five years. with really aggressive pricing, you name what you're getting from your carrier at the moment, we will gain you that half off. even with that kind of pricing, they haven't been able to gain traffic with subscribers. t-mobile, on the other hand, has

had a transformative impact on competitive dynamics in the market. and you will give to billable a much lower cost base. that is good for consumers and prices will head lower. francine: that is what is interesting to me. that does seem that at&t and verizon, especially since active.legere was it is surprising to me that verizon and at&t shares are .lightly at the market trading do you agree there is not a lot of concern that this bill will be blocked by antitrust regulators? >> maybe the free market us all year there is a long read ahead on the regulatory front. interesting. legere is a guy who has already damaged at&t verizon.

given the german? japanesecompanies, ar regulatory point of vew. done, whates not get will the telecom landscape look like if sprint is a zombie company for the next three years? it seems some resolution is needed. take andw long will it how much damage and that due to a company when it is frozen in place? year.will take at least a the regulatory approval process will be brutal.

tough fight ahead with the doj and the fcc to convince them of two things. one, that the new t-mobile will be at its highest against competitors. this is a real project with infrastructure development. it will take at least three months and probably longer. thank you for being with us.

lisa: this is "bloomberg daybreak." i'm lisa abramowicz. alix steel is off today. s&p futures higher as well as the dow jones. the dax tipping down after being

in positive territory earlier. stocks in europe continuing to gain although barely. let's go to the boards to get a sense of what's going on across asset classes. crude dipping down low as the dollar strengthens. up one basis point similar with the german ten-year yield. the euro losing some steam against the dollar. the dollar strengthening to its highest versus the euro in about three months. david: let's check in on what's going outside the business world. we have taylor riggs with first word news. taylor: the u.s. will pull out of the iran nuclear deal if it can't be fixed to president trump's satisfaction. that's according to mike pompeo who met with leaders in the middle east. it will enrich uranium for peaceful purposes. the may 12 deadline to fix the agreement to fix the worst deal o ever. afghanistan, a

double suicide bombing killed at least 12 people. 45 were wounded and eight were journalists killed in the blast rushing to the scene. the islamic state has claimed responsibility. british prime minister theresa may has moved quickly to replace a pro-european ally on brexit. she has named the home secretary replacing amber rudd. rudd quit over and immigration scandal. he is a former banker who campaigned to stay in the eu but now supports brexit. global news 24 hours a day on air and on tech talk on twitter powered by 2700 journalists and analysts in over 120 countries, i am taylor riggs. this is bloomberg. david: the united states economic numbers out on friday show growth, but a bit of softening when it comes to consumption. when we wan to talk to the white house chief economist, he expected those numbers to strengthen going forward. >> all the numbers are strong.

consumer sentiment is strong. we expect in some some to rebound after the somewhat slow first quarter and the best theory of what happened in the first quarter is that there was a blowout consumption binge in q4 and people were rid building -- rebuilding savings in q1. david: we welcome now john allison. he is now executive in residence at the wait for school of business. welcome back. always good to have you. we talk about wall street, but you are more of the people we turn to about main street. i want to get your perspective on how things are going on main street across the country when it comes to loan origination from regional banks that you are so familiar with. john: overall the economy is doing well for main street. i think you can see that an attitude and a more positive attitude of small businesses who have been through a long, tough period and that's the core part of the banking business. i think for banks there's good

news and bad news. the good news is the tax law which is huge to beneficial and regional banks -- regional banks is beneficial. on the challenging side, margins are still mighty low for banks. thanks traditionally make most of their money for a long time buying short and lending long. they cannot get much of a margin to the. challenges the irony of the tax cuts for commercial customers is that they are going to have much better cash flow. they will need to borrow less than they traditionally would at this point in the economic cycle , which keeps loan growth relatively slow for banks. there has been some improvement in consumer lending. i think time usually raises more optimism. i think that will help banks going forward. lisa: you are talking about the

health of community banks and investors are perhaps the depositors and not necessarily being there. i was struck by a story in "the wall street journal" over the weekend talking about how the main regional banks in the u.s., half of them have lost deposits last year and i was up from a pretty small portion of them the year before. what do you make of this? john: i think people have been moving to other kind of investments, including the traditional customer banks. a lot of deposits come from obviously older people who have saved an amount and have been watching the stock market. a lot of them are jumping into the stock market now. that's an interesting issue. what does that tell you about pricing of stocks? when this group moves into the stock market, to that sign. -- it's a bad sign. i don't know if we can say that definitive. lisa: that's a huge deal if you are saying people are with drawing their savings to go to the market now, that raises some pretty serious risks.

john: it's an interesting question, but i think that's what's happening. lower slates have been so for so long and the stock market has done so well for so long that you are seeing people put a higher percentage of their portfolio in non-deposit investments including the stock market. david: when you are talking about the margins for the regional banks, at what point do they have to start paying more on those deposits? is that going to squeeze the margins even more? john: i think that's a risk. banks will do everything they can to hold down the deposit rates as long as they run demand is not really strong. they are not so worried about deposits. usuallyalk to bankers, at this point in the economic cycle, there really worried about deposits to fund their loan growth. since it has been very moderate and they had a huge growth in deposits, and now it's going to other way, they have not felt the pressure

get consistently percent growth, you will see additional pressure on the positive press. lisa: we saw in the gdp data we got friday the fact that consumers were not spending as much as some people had expected. there were some preliminary reports that people are using the savings they get from the tax cuts to pay down debt because they're pretty highly indebted at this point. it has been neede enough by higr gas prices. what is your perspective on how much the consumer has benefited from this tax cut? john: the consumer has not seen a huge amount of benefit yet. if you look at the tax laws for the moderate income consumers, it does have a pretty significant benefit. year kind of a delayed effectively. i think consumers will wait till they get more money in their pocket in that regard. consumers to get burnt last time around -- did get burnt the last time around and are more cautious, may be wisely so.

you see that in their willingness to control spending for nonessential items. also, we had a really big boom in terms of lying automobiles. -- buying automobiles. automobiles are lasting longer and that's u a pretty big driver of consumer debt. david: what about the benefits to stock prices? one of the questions is is this just a sugar high where they get more money flowing to the bottom line or are they reinvesting this in capital investment, which will bring down the benefit and longer-term events growth? john: there is no data yet to really answer that question. we will have to see a few quarters of how ceos really alter the behavior. so far we have not seen any company take that tax bill and just jump right into it. as what has happened over the last three months has been a lot more stock market volatility and confusion on tariffs and some of the ceo confidence metrics are

starting to roll over here. how the boardlear of corporate america is going to react here. a ceo and her board have to be stewards of capital and allocate just like a fund manager. there are precious resources to the risk return profile. if that happens to be buybacks, they are going to be -- the buyback machine maintaining and growing dividends may well be the case. i think there are so many new things that have happened that it's very hard for us. there's a lot of dust in the air right now. lisa: i think it's ok for us to do a baseball analogy this morning. given the fact that you are saying some consumers are pulling their money out of their bank accounts and savings to go into the stock market, what inning are we in right now from your perspective with respect to main street? john: i think we are probably in

-- bottomh .5 innings of the seventh would be my feeling. one of the interesting questions on taxes is historically an economic theory says most of the tax benefits will in the end benefit consumers at lower real employees in higher real wages. corporations will get a short-term windfall. that,sly they are giving but history says corporations don't capture a lot of that benefit because return on capital globally will not move taxes around in one country, even the leading economy in the world. david: if that's right, that should ultimately increased demand. startt point, don't they making capital investments because they are seeing more demand coming down the pike? john: that would be what you would hope. they have gotten a little bit addicted i'm afraid in the way

of stock buybacks and raising dividends. as a shareholder, it would make me fairly happy, but it's interesting when that psychology flips. i think they will see margin pressure and increased demand at the same time. that will be an interesting scenario. does probably keep the economy heading in the right direction for longer. we have party had a mighty long cycle. we are getting at the end of that time. it has been too long, too good and that's always a town. challenge. lisa: how concerned are you about the fact that we are seeing record levels of consumer debt? if you look at it that way, it's not concerning, but it has been creeping up. michael: one of the things that has defined the rally since 2009 is aggressiveness by central banks countered with conservativism by corporations and consumers.

as consumers and corporations become much more aggressive while central banks become to start putting their foot on the brakes, that will probably portend the end of the cycle faster. you might have one great last boost of earnings in the economy , but that will also disrupt this low nominal world we have been living in for so long. it's been great for pe expansion in equities. if you start to see a lot of aggressive old normal type behavior, that means we are near the cycle and and you have to react in a very different way. david: it's time for the seventh-inning stretch. [laughter] lisa: i want to go do that. david: michael and john, thank you both very much. coming up, more merger monday. shares hit a record after saying it's buying walmart u.k. grocery chain.

you can turn on the radio and listen to tom crean and jonathan ferro. pimm fox joins jonathan from 9:00 to 10:00. -- it can berd all heard all across the united states on sirius xm radio. live from new york, this is bloomberg. ♪

taylor: business "bloomberg daybreak." -- this is "bloomberg daybreak." i'm taylor riggs in the hewlett-packard enterprise green. room. coming up, joshua freeman. ♪

taylor: now look at your bloomberg business flash. will world's largest warehouse owner will get even bigger as it industrialto buy trust for a $.4 billion in stock and assumed debt. they serve amazon and other e-commerce tenants. the trump administration plans to extend really from tariffs to some countries but not all. they expire tomorrow but not all. wilbur ross would not say which countries will keep their exemptions. money managers are going all in on gasoline. hedge funds have boosted bets on rising gas prices to the highest on record. it comes at a time when gasoline futures are at the highest since august and inventories are hovering near the lowest since january. that is the bloomberg business flash. david: thanks so much. we will turn to the wall street beat where we cover three things wall street is buzzing about this morning. number one is supermarket synergy.

win. icons fuji estopped from buying. and finally, davos goes to hollywood. they will be joining the sports world first annual conference. lisa: joining us now is bloomberg's own at hammond. -- ed hammond. shares up 17% with a record one day pop. they bought the as the unit of walmart. a fascinating deal from the walmart side. what stood out to you? ed: it's an unexpected they and you have seen that with huge shorts. almost 15% of the shares are around shorts. it, awhen you think about qr was the biggest hedge fund that listed it as having high short interest. there were a lot of hedge

funds that held a short position because the bet was that it is one of the four big retailers in the u.k. and amazon is coming into that space the same way it's disrupted retailers here. the margins are tight and you have the thing going on with a hard big-box retailers to plaintiff. -- to play into. there was a short interest in them doing this deal. this is going from four to three. do the regulators take a topless at this or do they use amazon get out of jail free card where they say the market has changed? we are not competing against just these people. david: you are concerned about concentration because prices will go up. when you have amazon waiting in the wings, you cannot race prices too much. -- raise prices to much. how does that help them? ed: they say about 500 million pounds of synergy from the deal, which is a fairly conservative estimate. lisa: and also they have a much

better bargaining position with suppliers. ed: which competition regulators will look at. its much bigger than the south and it has a lot of local stores. their couple metairie in that sense. they are cutting prices 10% and a lot of goods. david: let's go to carl icahn's big win. a new york state judge is enjoying fuji from buying xerox and really gone after the xerox ceo. ed: just savage and it's a story that i followed closely with the judgment that came out friday. has been sort of annihilated by the judge, saying you are hopelessly conflicted when you negotiated this deal. it really backs the complaint by the investor who brought this complaint along with carl icahn, saying the ceo xerox was essentially fired halfway through the negotiations. david: he went to him and said you don't have a job anymore.

. better do this deal ed: he says come to fuji and us only if iand by stay on as ceo. lisa: that is so interesting. david: interesting but not news. lisa: he was a big shareholder in xerox, right? ed: darwin decent who brought the complaint is the biggest winner. the biggest and out is that fuji remains by the judge as aiding and abetting. of investors,ard they will reduce the fiduciary, but fuji aided and abetted. really see that where the other side is complicit. david: it's interesting that it's one new york state judge. the third story is davos going to hollywood. this is a big deal every year, but this year particularly with the people going out there. brady, david, tom

solomon, steve ballmer, just an extraordinary group of people that got coming together. ed: we need to talk about who's not going. it's one of these events that's grown and grown and it's the conference to go to. it is like davos. it's without the sheen in the smoke. lisa: what do people get done? is it a time for people to go and wax philosophical about their agenda of the day? there are actually deals getting them. ed: there's a lot of waxing philosophical with people grandstanding, but you also have a lot of behind-the-scenes stuff happening. there was a story this morning where you can attend private meetings with one of the founders of 3g. anyone in the investment world, that is money worth paying if you can sit down with him and hear his ideas. that is hugely important.

you see a lot of those behind-the-scenes offstage meetings. i suppose that's the real value to people. david: any doubts about redemption and the united states, mike milken has to be exhibit number one. and yetwent to prison he has really reformed and redone himself. is a very substantive person as you know and brought a lot of substance and they have substantive discussions. ed: are you same as the arts porch and not be that worried? -- are you saying the xerox board should not be that worried? [laughter] lisa: i'm always surprised that we are talking about xerox. does anybody xerox anything anymore? david: at this point, it does not need to be a verb. great to have you here. president trump was holding a rally out in michigan as members of the media gathered for the annual white house correspondents dinner last night without him. more on what i'm watching next. if you have a bloomberg terminal, check out tv .

you can watch online, close on our charts and graphics, and just go to tv . this is bloomberg. ♪

david: this is what i'm watching or at least was watching -- the white house correspondents dinner. i've got to these things, but they have changed quite a bit with the present not going. to do not keep the present from speaking out about what he thought happened.

this is what he said. "the white house correspondents dinner last year was a failure, but this year was an embarrassment as the comedian totally bombed and could not even deliver her lines much like the seth meyers weak performance. put dinner to rest or start over." it has made donald trump very sympathetic. lisa: he has come out as a big winner from this. while the elites were gathering in a taxi dozing gowns to eat find food and listen to a comment who is really controversial, he was there speaking to the people and talking about issues. from a visual perspective, he really comes out the winner. david: then they had a comedian that many people thought was not funny and inappropriate at the same time with very personal attacks against sarah sanders and kellyanne conway. lisa: did you think they were valuable? what where the purpose of these to begin with? avid: that's the

purpose. it was for the leadership of washington to get together with journalists. it was worth spending time over dinner with members of the cabinet. and then, and this is our fault. we started bringing entertainers in. they got more and more bazaar long before donald trump. lisa: frankly even to have a source across from you sitting on a beautiful table in a friendly way, i don't know. david: or maybe a major figure in wall street. coming up, the highland capital cofounder and ceo. this is bloomberg. ♪

♪ david: can you hear me now? t-mobile by sprint after three

tries for over $26 billion, but will the regulators go along with the entire market going from for competitors to just three? terms of trade. the deadline on steel and aluminum tariff exemptions is tomorrow. mnuchin leadstary a trade delegation in beijing and nafta regulators failed to change before the trip. packing it in to all one week. this week we will get pc data on inflation. treasuryn the borrowing money and the fed's latest monetary policy decision and u.s. jobs data. welcome to "bloomberg daybreak." it is monday, april 30. i'm david westin along with lisa abramowicz. lisa: thank you so much. i think i will step out and get a happy meal. david: there may be several burgers. mcdonald's numbers are out and they have a big eat here. lisa: the highest estimates of any analyst out there. david: as opposed to what

analyst thought it would be. a nice beat on revenues and earnings. come stores in the united states 2.9% up. that's a big one. lisa: shares up nearly 4% in the premarket activity. definitely interesting given the fact that they had the one dollars and two dollars and three dollar meals. morewere pledging to spend to a great technology because they have been behind some of their rivals. it will be interesting to dig into those numbers to figure out whether that has been paying off. david: it was only three or four years ago when this company was really on its back. they brought a new ceo and they were improving their stores and many lineup. it shows you can manage your way out of these problems. lisa: is also just not egg mcmuffin. people were saying breakfast was what revived sales. definitely a huge beat and we

will keep an eye on it. marketeep an eye on the activity with the nasdaq up. the ftse 100 at its highest level in nearly three months. the 10 year yield unchanged now and the pound dropping versus the dollar. david: now time for the morning brief. this is what is coming up later this week. on tuesday, apple will release its second-quarter earnings after the bell. on wednesday, the federal market committee will announce its rate decision. on friday at 8:30 a.m., we will see the u.s. jobs numbers of the month of april. all-important things. we welcome in jason and mark o'connor -- mark. welcome both of you. let's take off from the mcdonald's numbers and we will put up a line chart that shows consumer discretionary versus consumer staples. you can see the blue line is consumer discretionary and the

white line is staples. mcdonald's is 4% discretionary. what is that telling you? not working sos well in the stock market. the economy is in a different place in the markets right now. if we look at the fundamentals, we will see what happens. lisa: i can imagine some people don't like to hear that. reality is not what you see in the stock market right now. mark: we have great numbers and earnings coming out of the street and the stocks are just sitting there. starts again, but i think it's hard to take a move like this and say a whole lot about the economy. david: just to be specific about this, he really does the work behind the scenes and he pointed out that as of right now, we are well turning season. -- well into earnings season. beating on top line and

yet .2% increase in the share value of the stocks. in the second day, goes down to .1%. they are getting no credit for it. jason: we have had a lot of multiple expansion over the last several years. stocks that are beating are doing ok. consumer staples are getting pinched in the multiples are compressed. we are finding opportunities where the valuations are coming down. the overall market is struggling a lot with the fact that good earnings and a good economy may mean higher rates with the 10 year at 3%. that is causing people to struggle. i want to pick up on what you are saying. you were finding value in consumer staples right now could how much does that fly in the face of the amazon affect? some people saying consumer staples have suffered as amazon compresses the margin. is there a different story and where are you finding value? jason: every sector has

companies that are unique and we are looking for individual opportunities and how they can stand out. look at companies like coca-cola, they reported pretty solid numbers, but they are in the consumer staples category so people do not care. coke is making good progress. they did not have a amazon affect. we own coke and we like coke a lot. david: why is safety not paying off better right now? we have a lot of uncertainty and human think that would be a flight to safety. mark: it actually should is a good point. the thing that we are looking at and seeing is that there's a lot of this issue about flow. flow is really dominating markets across the board. the lack of flow when you are in these quiet periods in the stock market is who has been a net buyers equities? it's its companies.

all the volatility we have seen is in the quiet periods. we will see what happens when that is over. again, i think that defense is the right way to go overall. i think defense really wins championships in this kind of market. we will see. the flow is really the focus for us. flow will dominate fundamentals . lisa: if we are talking about flow and who is buying stocks come i want to go back to something john allison said last hour. he thinksat mom-and-pop are pulling money out of their savings accounts and putting it into the stock market. i'm wondering do you see the same thing? jason: what we are seeing is a lot of signs that pretty much after five years plus multiple expansion that things are running out of gas. you had a handful of stocks leading things higher and you are starting to see divergence. lisa: what about individual investors? are they coming back now?

jason: studies show there are individual investors coming back, but they time poorly. lisa: it's like a warning sign. david: do you agree with this? mark: it's difficult. net flow into the market has been only into sources -- companies themselves and foreigners. if we look at what is happening in the hedging market for currencies, it's harder and harder to own dollar assets. its to her 50 basis points for european investor to own credit in the u.s. -- 250 basis points for european investors to own credit in the u.s. it is overwhelming a lot of the fun rentals. i know i'm a broken record percent, but this is the thing that makes it very difficult for a retail investor like mom-and-pop to figure out why should they be growing their exposure in a market that does not look like it's acting properly? lisa: you said you were bullish and coca-cola. is there anything else you are

seeing value in right now? jason: samsung. it's basically a company that does not get much credit for changing as a business both from a governance standpoint and earnings standpoint. even the earnings are growing really rapidly and they sit at of a sweet spot in terms of selling memory chips to all the major new applications coming to artificial intelligence, virtual reality, the stock sells for four times earnings net of cash, which is like a nonvoting common. as a marketing cheap in a really expensive world. are bothson and mark going to be staying with us. right now we want to give get an update on what's making is outside the business world. taylor: in cabell, afghanistan, double-suicide bombing has killed 29 people. nine were journalists killed in the second blast rushing to the scene. the islamic state planned

response ability. -- claimed responsibility. the united states will pull out of the iran deal if it is not to trump's satisfaction according to mike pompeo. the deal is allowing uranium enrichment for peaceful purposes. there's a deadline of may 12 for what he calls the worst you'll ever. the trump administration plans to extend relief from steel and aluminum tariffs to some countries but not all. the temporary extensions expire tomorrow. commerce secretary wilbur ross would not say which companies will keep their exceptions. global news 20 for hours a day on air and on tick-tock on twitter powered by 2700 journalists and analysts in more than 120 countries, i'm taylor riggs. this is bloomberg. david: coming up, pouring into junk. credit markets are shrugging off concerns about inflation and higher rates, but are investors getting complacent? more on that next. this is bloomberg. ♪

taylor: this is "bloomberg daybreak." i am taylor riggs with your bloomberg business flash. regulators are expected to take a close look at t-mobile's agreement for sprint for $26 billion. the deal will reduce the wireless industry in the u.s. to three major competitors. t-mobile and sprint are hoping the accommodation will get them a jump on verizon and at&t when it comes to building the next-generation network. it's a deal that would create the largest independent fuel maker in the u.s.. marathon has confirmed plans to buy endeavor for $23.3 billion. that values endeavor at 24% more

than friday's closing price. marathon is focused in the midwest and gulf coast. endeavors refineries and pipelines are in the western states. and acquisition in the u.k. could transform the supermarket business. sainsbury's plans to buy walmart's asda in a deal that leaves the combined company as the biggest shareholder. it would create a supermarket giant that would rival or surpass the current u.k. leader in market share. as your bloomberg business flash. lisa: the lowest rated junk bonds have rallied the most recently. stocksough you have possibly selling off, credit markets have shrugged off all concerns about rising inflation expectations and higher rates. investors even throwing money at companies that have burned through cash and has an unproven business model. are investors being too complacent? still with us are jason and mark. i want to start with you.

i want to look at a chart showing the pretty dramatic outperformance of triple c rated corporate debt. you can see this is the blue line. it has normalized returns since the end of october 2017. outperforming both the broader high-yield index as well as the bonds.ted what does this say to you about risk tolerance and are investors being overly complacent? mark: a lot of that is energy. there's a lot of energy in that space. you have seen oil have a bid to it. and has had good tone as far as risk-taking. again, it's all about supply and demand. we don't have a whole lot of supply on the triple c side. lisa: did you buy it? mark: no, we did not. theells you the story that supply demand within high-yield has been very good. we have had nice technicals.

you come with a deal that has a lot of equity value to it. and has a lot of support from that standpoint. people or find a way to own that because that's a big coupon in this market. there is a demand for that because there has not been a whole lot of issuance in the high-yield space. the technicals have been really good there. it's just opposite and high-grade. that market has had the worst chart in the last 20 years and down 3.4% in the first quarter. that's an awful start to a higher quality credit across. it's really about technicals. david: what mark says makes a lot of sense if you are trading in debt. are you concerned at all about the extent of leverage that a lot of companies are taking on the balance sheet right now? jason: we certainly are. as equity investors, we look very substantially at how much debt companies have. one of the challenges you have is that earnings are really high. companies have loaded up on debt. if you normalize what companies

confirm or look at a more difficult cycle come a lot of companies have taken on way too much leverage at this point in time. intoe making sure we steer the conservative companies where the balance sheets are largely in good order and avoid companies that may not make it. david: as you review, is it debt da?vice to ebit jason: we look at what kind of assets they have to be able to manage through the debt in terms of selling things. da? we are both in equity investor, but we will buy that from time to time if rates are attractive. lisa: i'm so struck because you are striking out of caution. being flipped on their head where you have credit investors that seem like this not a lot of flow and we have a lot of money and we have to put it somewhere. and then you have equity markets that are really showing some caution. we're looking at a chart that shows how the extra yield that investors are in over benchmark rates has stayed pretty flat for high-yield bonds. if you look at p/e ratio on an

inverted basis, it has blown out. i'm wondering, does this indicate frankly that there's more room to run in equities because credit investors are the canary in the coal mine and they are singing sweetly and quietly? is this something different? what's driving credit investors in equity investors are different things right now. at some point, the rubber is going to meet the road as far as inflation. inflation as it continues to move in growth, inflation is much more like climate change versus the weather. we will get data today and that hopefully will be what everyone thinks it is. as inflation starts to work its way through the markets and we repress risk across the spectrum , it's definitely going to affect both markets in a meaningful way. you just can't sit there and be complacent anywhere in risk today. today. this is being defensive as far

as that inflationary pulse and markets. it will affect a lot of things in debt that are riskier. you go floating rate, which has been great and really helped. you get higher credit quality within your credit allocation. again, look at what happened with high-grade. that's higher quality and it's gotten crushed because of the inflationary dynamic because of rates and also because of flow. defensive, we look for markets where there's going to be decent technicals but also not have that inflationary dynamic. david: jason and a very defensive mark are staying with us. coming up, merger monday. after a long flirtation, t-mobile has agreed to buy sprint for over $26 billion. more on that deal next. this is bloomberg. ♪

david: of big weekend for mergers with marathon buying endeavor. the warehouse giant buying dct. and then t-mobile agreeing to buy sprint at long last. andelcome now ed hammond jason and mark are still with us. good to have you back. we keep saying it's twice $6.5 billion. -- $26.5 billion. really it's a lot more. ed: it's also an all-star merger with the extension ratio. it will move around and looking at sprint shares this morning, is 13%. they have traded off an absolute time and this is one of the problems. there is a lot of speculation that what this might be valued at an shares were going up and down. on the this is probably

conservative end of the valuation. david: speculate on what investors are doing right now. is it because they are afraid that it will get done or won't get done? ed: is a lot of risk on this deal. people will say the antitrust risk is huge. the government already said previously they don't like this deal. last time they tried to do this dance, the government got ahead of them and said we will block it. lisa: it's interesting because at&t shares extended gains from earlier up nearly a percent of ahead of the open. is this playing into the narrative that people think this will not get done? ed: i think there's a higher chance this does not get done. under trump, we have seen regulators do things very unexpected. qualcomm and broadcom was a different issue but that was on expected. the fact that they tried the time warner case was highly unusual. the one thing to add in on this

is that because the government will lose on the argument, it may embolden people to push deals that would of been potentially more risky. this is a deal that has been tried often and failed for various reasons not least of which was antitrust. david: we have a slew of mergers right now. the thing that struck me is that they are all stock are mostly stock. aboutoes that say ceos thinking of their stock? if you use your stock, you thought it was overvalued. use cash if you thought the stock was undervalued. jason: people have fully valued stocks. case-by-case, that's what's going on. for us, we have struggled to find a lot of undervalued stocks until more recently when there has been divergence. we have been patiently waiting with excess cash on the sidelines. lisa: elaborate on that. you put in percent in your portfolio in cash -- 20% in your portfolio in cash. is that correct?

you are not finding a lot of opportunities? jason: you saw multiple expansion drive the market. it was unsustainable and things were expensive. in more recent periods, we are finding opportunities. a little bit is overseas. as we find opportunities, we put it to work and it's about absolute returns over a full market cycle. this is a pretty late in the game market cycle. david: as you look at assets out there, do you find them fully valued? we never say overvalued. it's never overvalued. you find assets pretty much across the board fully valued? mark: fundamentals are strong across the global economy. fundamentals are always good. once more assets are in the credit space, we talk about that. there are parts that are decent value. i agree with what jason said. lisa: how much cash are you holding? aboutwe are probably

20%-30% higher than we normally would be. we are cautious across, but there are a lot of things for us to invest in that are higher-yielding safer places to be. we can go up to the igc 00 debt that has nice debt to -- yield to it. i'm floating rate and getting nice returns. i don't have to go to cash per se, but to us that's very defensive. lisa: you think credit investors are perhaps overly in optimistic? jason: most everybody is overly optimistic at this point in time. credit, equity, as investors -- everything is pretty fully valued. we think a lot of things are quite overvalued. david: as you look at all these mergers and acquisitions, is there any pattern? ed: zero chance that john legere thinks his stock is overvalued.

you're are seeing deals coming around for the second third try. we are late in the m&a cycle. you are seeing people bring stuff back to the table that perhaps at some point they tried and were pulled in the past for a variety of reasons. david: at hammond, thank you so much. jason and mark will be staying with us. later on bloomberg television, e and the sprint ceo. coming up, pc numbers for march are on deck. what this could mean for the central banks rate hike path. that's next. this is bloomberg. ♪

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getting into the red earlier. 8 basisut -- up points. the story is the dollar, climbing to its highest level against its peers in about three months, driving action and raising questions about whether the emerging markets bet can possibly be sustained. david: and we have the data we were looking for. core year-over-year, 1.9%, right on the dot. similar to month over month. deflated over all. it is really what we expected. personal income, 1.3% gain. and personal spending .4%. it looks like what we thought it would be. pretty much across the board. dramatic not a reaction yet as we process the numbers. david: now michelle gerard.

subotky anddy -- mark okada still with us. is this what you expected, michelle? >> not a lot of new information. we are focused on the inflation numbers. year-over-year, back to 2%, back to the target level from the fed. it is well anticipated, we have all known that when the low m 2017, we two an would say that sharp acceleration. it is meaningful that hewitt are back at 2%, a couple months earlier than expected at the start of the year. lisa: is this mission accomplished for the fed and does that mean for rate hikes this year? michelle: that is our expectation, we will see them

gradually hiking once a quarter. one of the things i spent some time talking to our customers about is, it is not so much about what they do in 2018, it is not that they hike three times, or four times, the bigger question is, what happens in 2019 and beyond? what happens if they get the funds rate close to neutral? do they have to keep going? to they have to go to restrictive territory, or are they ok to stop once we get back into neutral? that is the bigger question in terms of what will be happening in terms of market yield and how high they may or may not rise. david: looking out into 2019, in terms of the economy, not the fed, but the economy, went to the numbers indicated by the path we are on? numbers were disappointing in a couple of regards, but this indicates that maybe things are growing as we expected? michelle: the quarterly numbers

show the slowdown in consumer spending. you know, that follows a blowout 4% gain in consumer spending in the fourth quarter. so we were used to the slower, q1 numbers, so the market took it in stride. the monthly numbers show that as we moved into the spring, coming out of the first quarter, we were seeing consumers reengage in. i the fundamentals for the consumer sector are solid, so i expect a pickup in gdp growth and in consumer spending in the second quarter. and overall gdp growth forecasted to be around 4.3%. we are looking for growth to be closer to 3% for the full year. nothing here that i think the fed will be worried about, or us, about because of the week are first quarter numbers that there will be softening going on. david: how much is the tax cuts?

cutslle: i think the tax are a bigger story on the corporate or business side, rather than the consumer side. that is one of the things, in terms of our own forecast, the to look atd us business spending and investment and we did not do much on the consumer side. the first quarter numbers were softer on the business investment side as well, but spending are at high levels. so i think we have fiscal stimulus supporting growth and that is a big part of the healthy 2018 story. lisa: i want to pick up on something you said, it matters what the fed does going out into the first thing i did when i saw the data was, what is the yield curve showing us? i am looking at the gap between two year and a 30 year, it is contracting. mark, does this indicate that people are pricing in the

increasing likelihood of a fed erro where they will cut off growth in the short-term by raising rates quickly noww, leading to a lower long-term path of growth? mark: that is the right question, i do not think i have the ability to answer it. this is a difficult one. we have a fed that definitely is needed to react to hitting their targets on both sides, and try to exit out of a balance sheet. that is definitely in the four hike camp. the balance of the capital markets within treasuries are going to be very interesting to watch as we go from here. have $6 setup is, we trillion of our treasuries being owned by foreigners right now. that is the highest it has ever been. if we think about slow what is happening in the different leaders from a monetary policy, you could see a reversal of that isa time when the fed

raising and it would steepen the curve, obviously. we have a curve that is flattening. so as it moves ford, the shape of the curve is something that people are focused on, because they think that the fed will make a mistake and we will have a recession coming out of it, but there are so many other things overlaying the shape of the curve. really, who owns the curve and what it costs to own the curve on a relative basis really matters, because that technical has been massive within this market. lisa: michelle, the curve is noisy, but what is your take? do you think the flattening is indicating a fed error? michelle: i think that there are other factors helping to keep a long-term rate -- the long-term rates in check. that is something to keep in mind. flattening the - how far is -

the fed going to go? they pretty much take rates into neutral. the risk of a policy error under that scenario, where you would see the yield curve inverted and he would be more worried about the growth outlook, that is the scenario we see, but it does not always come to fruition because we can get the fed to take slow process to neutral, but without the overshoot to put the economy and it -- in in precarious position, i just do not think the story will be compelling. david: you are a long-term investor. what goes on with interest rate affects security overtime, because you have the discount rate affect. as an equity investor, if you had to choose on the one hand moving the rate faster, but having more ammunition against

the downturn, which will happen sooner or later, on the one hand, versus taking it slower, which would you rather have? >> we are happy seeing higher rates. we will probably actually have a lot more opportunities as people move toward safety of cash and thepaid on that, and reduce equity multiple expansion that has been happening for a long time. lisa: you are so bearish you are like him if rates go up we will get paid more on the cash we are holding. is that actually consideration for you? >> know. it was easier to hold cash in 2006 and 2007. we are fully invested in 99, 2000, because opportunities came out of favor. michelle, take out the crystal ball. friday, jobs numbers, what you looking at and what do you want? michelle: we see them rebounding

back above the two it a mark after the software february number, which we think was payback for the strong january number. the numbers are really noisy. i think it is important to take a step back and look at the underlying trends, which are very healthy. we are looking at the three-month job changes, the payroll growth in excess of $200,000. this is a really impressive performance, this late in the economic cycle when the labor market is relatively tight, so it is not easy to find workers and it certainly is a strong enough pace of job growth to put downward pressure on the unemployment rate. we think the unemployment rate will go to 4.0%. i think it will be a healthy report that will show that the economy is, it remains on a very solid footing. and i do not think it will change anybody's expectations about the prospects for monetary policy makers to stay on the course that they have set out. david: we have a question we

received from the bloomberg, from mark, something i have not focused on. for the last 15 years, we have fueled growth by borrowing. for every dollar of gdp growth, we have a debt. can the economy grew more than 2%, given how much debt is needed to grow it? we think of this in terms of china. is the same thing true of the united states and is it a problem for us? mark: i think that you hit the nail on the head. the question is something that rolls through my head, my bald head, all the time. we believe in the balance sheets everywhere as far as debt. sovereign debt, corporate, and high-yield. the credit quality is not great. credit quality within the ig market is as bad as it has ever been. on average, you get half of them at bbb. you think about the fallen angel problem. but the growth has to come after

you lever up, you lever up to get growth. i think a lot of the fundamentals that are going to and out of the tax reform the benefit of that, still yet to come. i am not calling for a recession anytime soon, unless we get a massive trade war, but hopefully he is all tweet and no meat. [laughter] lisa: i love it. mark: that being said, you are right, we need to have growth at this part, in a late part of the cycle, to deal with all the debt. it is at low rates, a lot of it is short, and as it rolls over into higher refundings and repricing's, it will be more difficult and create more pressure. this resurgence from a fiscal standpoint continue to keep this cycle as long as it has ever been, continuing to exceed growth?

i think that really is where the rubber meets the road. that is the question on everybody's minds. lisa: that number was for all debt. corporate, mortgages. david: michelle, jason, and mark, really great to have all of you here today. now and update on what is making headlines with taylor riggs and first word news. >> president trump hinted at a possible site for the summit with kim jong-un. numerous countries being considered. he asked that the pace house on the southern side of the the miller as the might be better. for a testge is set of president trump's into immigration politics -- and immigration politics. and caravan has reached the border with the u.s. and they are preparing to ask u.s. immigration officials for asylum. most of them could be admitted

while awaiting on court hearings. president trump has announced that practice. liberties prime minister has moved quickly to replace the pro-european ally on brexit. she has named a new home secretary, replacing amber red. rudd quit over a scandal. news 24 hours a day on ctoc.nd on ti i'm taylor riggs. this is bloomberg. ,avid: record health care m&a can they keep it up the rest of the year? that is next. turn on your radio and listen to tom keene and pimm fox. bloomberg surveillance can be heard in new york, washington, washington, dc, on sirius xm radio. live from new york, this is bloomberg. ♪

>> in this is "bloomberg daybreak." i'm taylor riggs in the hewlett packard enterprise greenroom. coming up, the goldman sachs president and coo. ♪ david: we have seen a lot of merger activity over the last year, nowhere more than the health care industry. the three biggest deals last year, the latest to buy -- the baine from london and company representative. way of summing announcements in this area -- we have so many announcements in this area, are

there areas that are prone to mergers and acquisitions? i do not think he can hear us. can you hear us? lisa: ok, we are still talking about the spread and t-mobile -- and t-mobile merger, can you hear us? i want to show just how big of a boom this year has been for health care m&a. take a look at the terminal, the first quarter, we had health care m&a, the biggest quarter on record. that is this bar. the little one is less than a month so far in this quarter. less than one month in the second quarter. record moment for health-care mergers and acquisitions, as people try to to reconcile with the amazon affect. and i think we have you back.

can you hear us? >> i can. lisa: fabulous. talk about the amazon affect. what david was asking was, which part of the health care complex are most pressured and most prone to merge as a result of the pressures we are seeing from amazon? >> amazon is going to try to disrupt the health care profit pool. as i've said before, the health care profit pool in the u.s. is a $4 billion pool, soy a lot of opportunities for efficiency in that system. the first place you will see disruption occurring is in products where there will be a consumer angle. you look at the flywheel it suggests places where they have commodity products purchased by smaller customers, that is where you will see the disruption. that is where you have seen amazon participate a lot over

the last 10 years. if you look at health and beauty, for example. then they will make their way into smaller customers across the different subsegments of health care. from there, you could see larger customers start to see the amazon impacts as well. david: as far as they transform the spread of health care, is it strictly distribution? you have that opposed to the decatur shire deal. >> what we have seen, and i think you started to alluded to it earlier, is a massive interest in health care dealmaking. plaster, $332 billion in deals. over the last four years, you have seen twice the deal activity over the previous year. what is leading to the pharmaceutical deals is what we call a person for category leadership. how can i get increased scale and the categories i am good at? because what you see is better operating margins, you see better peak sales, and use a

better are in the throughput. we you are an expert in a given category, you get those efficiencies. you see a lot of that related to category leadership. ita: how much of it is them taking advantage of very cheap financing rates and a sign of the top we will look back on? nirad: obviously, there will be some activity that is related to the market availability of capital, therefore a desire to go into the deals. canresearch shows doing m&a be hopeful to the total shareholder returns. folks who are doing frequent deal activity, doing the larger deals, that could be quite enhancing to total shareholder returns, versus doing nothing. so you are looking at some of that in the marketplace. will you also see from some of the deals you mentioned on the show, interest in blurring the lines between some of the different silos within health

care come again in a pursuit of expanding the profit pool reach of a company. there are a lot of different reasons people are doing deals. david: how much of this is vertical when you have, for example, a health insurance company merging with a distribution company? nirad: you can see that. as strategists, we would say that you have to have a good purpose for doing m&a. are you trying to get category leadership, trying to get digital assets, are you trying to expand profit pool reach, because you feel like you are following the customer by doing that? there should be rationale. lisa: it will be interesting to see this week, because we have earnings coming up with a bunch of different pharmaceutical companies that will be coming out. nirad, how far away into the m&a boom in health care? how much is left? nirad: every year i could say we

are at peak levels, but if you look at the last four years, two years ago we had more than last year. so as people look at the landscape, they see what is shifting, they see the access to additional profit pools, they say they want to build leadership positions, so i think you will continue to see a lot of m&a activity this year and for the foreseeable future. david: ok, thank you for being with us. lisa: the cyber blind spot in germany -- spot. energy companies not spending more on security in spite of hacks. you can interact with the charts shown. browse recent charts featured on bloomberg tv to catch up on key analysis and to save charts for future reference. from new york, this is bloomberg. ♪

lisa: what i am watching, the cybersecurity blind spot. it caught my attention. energy companies spending less than 0.2% on cybersecurity, that is a third less than banks. it comes, even though some corporations said that they are ,racking 140 groups of hackers actively targeting the industry. up from 87 in 2015. david: books have been written about this, novels. lisa: for decades. david: everybody's worried about what could happen. lisa: it raises the questec, is it that the executives think they already have enough of an infrastructure to protect against the hacks, were that they do not recognize the gravity of this risk, and doesn't make us more vulnerable?

david: or the stock price will go up because they buy a lot more production or return it to shareholders. lisa: it is a huge question, because it seems like a no-brainer with the hacks continuing to increase. i highly recommend this story, it came out in the past few days. david: basic rule, you do not get to the important that is in your inbox. lisa: something to be concerned about. david: coming up, bob michael and peter boorish joining jonathan ferro. that is next. this is bloomberg. ♪

jonathan: from new york city i'm , jonathan ferro. 30 minutes until the start of trading. this is the countdown to "the open." ♪

jonathan: coming up, big week ahead. federal reserve interest rate decision and of april payrolls report. before an american delegation goes to beijing, wrestling with tariffs. and finally an agreement for t-mobile to purchase sprint, taking on at&t, verizon and the regulators. flat trading week last week, we are positive this monday morning and up 6 on the s&p. fx market, the end of the last week, we have a stronger dollar story. 1.21.ollar, yields down a little bit lower. down a basis points. --week of adamant not a data