to a chinese tech company. congress says nafta has to get result of this week. with worldwide oil demand early, troubles with iran and venezuela are key. this week we get retail sales and investor production numbers in the u.s., gd growth numbers for germany. all telling us whether we are headed in the right direction. welcome to "bloomberg daybreak." i am david westin with julia chatterley. alix steel is off today. julia: shall we take a look at the markets? never a dull moment. a culmination of the news flow and anticipation of the data. .2 percenther by file -- following a sideways move from the european sessions, investors eyeing what we are seeing as far as coalition talks in italy and heavy spending

related priorities. the dollar reducing a little bit , euro-dollar higher by .3%. we've got the dollar at a one-week note following softer inflation. retail sales very much in focus in tomorrow's session. what else are we looking at? the 530 spread, the shape of the curve and the relative flattening going to be a focus for central bankers. focus. that in right now trading above the $70 a barrel. we will talk about those very shortly. to cover.s of things the united states will officially open its new embassy in jerusalem with the ivanka mnuchind secretary attending. wilbur ross will address the national press club in washington talking about the

factors driving u.s. economic growth and this evening in new york, the robin hood foundation will hold its annual gala, the newest annual fundraiser in york city. last year they raised nearly $55 million in one night. now it's time for bloomberg's first take, joined by julie evans. thet story up is all about trade story. i want to read what you know already, president trump tweeting "resident gigi -- president xi and i are working together to give a massive phone company a way to get back in business, fast. congress department has been instructed to get it done!" this is a company that basically stopped doing business because the president has said we want to get them back. it is a bizarre story. the president is undercutting his commerce and treasury departments, which condemned zte

when they imposed sanctions because they were trading with iran in violation of the sanctions and they are expected .n being involved of cybercrime if the u.s. was going to be really cracking down hard. donald trump really cracking down hard and now he is not, apparently. it is all tied up in the sanctions and negotiations. you mentioned a life preserver , it is te, it -- zte more like one of those rafts you blow up. we don't know exactly what kind of result we are going to get. david: ironically, he invoked chinese jobs, not just american jobs. there is a sense maybe this will not be as bad as we start -- thought. china came back and said the qualcomm deal, that is -- we will take a look at that as

well. >> this seems like a olive .ranch as we saw a couple of weeks ago, we had a particularly good result when u.s. officials went to china. they were hoping to see more progress this week. i think this is really an olive branch that says come to the u.s., we can try and find a compromise. steve mnuchin has talked about trying to tackle the deficit. that might be an easy win and wilbur ross talked a little bit about allowing the u.s. to export a little more to china rather than curbing chinese export. looking at the comments wilbur ross made when they sanctioned zte, they said it is -- he said it is egregious behavior and cannot be ignored. the north korean summit is coming up june 12 and this is

probably all tied into that. chinese sanctions are supposed to be published next week. a lot of things coming together at the same time that would be inconvenient for donald trump. we problem is, any country sanction is going to say, if we threatened to put other sanctions on, maybe the president will back down. julia: perfect introduction to our second story and the impact of sanctions, the iran nuclear deal the big story last week. a whole host of voices weighing in on the prospect of seeing reduced iranian supply and the uae energy minister was one of them. >> we have been there before and i think opec has been resilient to deal with many of those issues in the past and some of the member countries have definitely a spare capacity that whenever production

is required. julia: the uae energy minister saying don't worry, we have it covered. listen to what the bp ceo had to say. >> we withdraw from the agreement, which seems to be another negotiation, implied partially -- you could lead to $1 billion a day off the market and would affect things. there's a lot of uncertainty and i think that is reflected more with what is happening in venezuela. julia: i am glad he mentioned that, it is not just a rainy and -- iranian sanctions. we've got venezuela also impacting this market. there's a lot of uncertainty. have we know the saudis spare capacity and they say they can make up the billion barrel difference. if they do, we are looking at $80 a barrel for brent crude and

that is the target price. that is what they have said they would like it to be. the feeling this may be the worst, they may bring more oil to keep that price under control. the u.s. economy, you get a $10 increase in the barrel and it raises gasoline by about $.25 a gallon. the more you put in the gas tank, the less you spend at report -- department store and retail outlets. david: gasoline prices i think r $.50 a gallon higher this year than last year. what does this do to markets overall? uae orot just up to the opec companies to decide where oil is, we have something called shale in the united states. rachel: it will be interesting to see if u.s. companies ramp up production to take the place. ." me, that is a big "if

you have european leaders meeting in brussels and they will discuss ways they can continue having the iranian deal. what was interesting over the weekend is you had john bolton talk about the prospects of sanctions getting to european countries. -- companies. does iranian supply stay in the market or do we need to find a replacement? if we do, shale could be an interesting prospect. stocks will be a place to watch as well. given that we have geopolitical uncertainty, we will -- i think defense and energy is what you want to be watching. david: for our third story, we move from iranian oil from shopping to united states of america. we get retail sales and industrial output on wednesday. want -- there is a chart i to put up that shows retail sales. it shows -- this yellow line

says they are basically flat since 2012. since the middle of 2015, they have been trending upward. what are we expecting out of retail sales tomorrow? basicallyre expecting no change. a little bit less on the headline number. it will be influenced by the price of gasoline and sales of service stations. the retailthey call sales control group. that leaves out gasoline and cars and home improvement and things like that, basically what is used to partially calculate consumer spending for gdp. that is expected to be up .4%. it doesn't show a lot of acceleration. people seem to be confident about the economy, but in wait and see mode and that is not good for retailers. julia: confirmation or not, the weather related softness we

problem -- we have seen. mike: it has been a lousy spring. david: to see some rain over the weekend, that was nice. julia: it will also be included -- important for the u.s. dollar this week. we have seen softness and people questioning whether the rally is potentially going to run out of a bit of steam. behel: i think people will watching and one of the things that will play into that is what the future outlook for retail sales will be. we have earnings data coming through this week that i think will be an interesting bellwether. home depot is reporting tomorrow. that is our appetizer and later in the week we have jcpenney, acs, and walmart. those three are particularly interesting. macy's and jcpenney, you have that ongoing story of whether big-box retailers can take on amazon. had a pretty good end

last year. jcpenney, less so. we will be looking at whether sales and these cutprice lines can make up for amazon. walmart, we saw the flip card deal announced. deal announced. assetsosing of other or buying more things in emerging markets. david: we will spend all week on retail and have a segment every day and look at the earnings we just talked about. thank you so much, rachel evans and also thank you to michael be staying with us. coming up, more on the big week for trade negotiations. we will discuss what markets are watching with bob sinche. live from new york, this is bloomberg.

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>> this is "bloomberg daybreak." i am kailey leinz. it's a major victory for activist investors. takeover byf the fujifilm. the company parted ways with the ceo jeff jacobson. of strikingacobson a deal that secured his job. the money manager who that big against housing before the shorting crisis has -- deutsche bank.

deutsche bank has fallen 33% in the last year. more change at the top for airbus. harold wilhelm plans to step down after 27 years with the playmaker -- playmaker. they are -- with the plane mar ker. that is your bloomberg business flash. david: thank you so much. as the united states and chinese trade tames begin negotiations, the countries appear to make gestures to one another with the u.s. and china taking steps to ease trade tensions. president trump tweeted he wanted to find a way to get chinese phone and you facture zte back in business and the chinese saying they want to take another look at the qualcomm proposed nsp of semiconductors. michael mckee is with us. is this relieving any anxiety might of had about u.s.

--chinese trade tensions? bob: i think it is creating uncertainty, but it dissuades the positive sentiment the u.s. was trying to put on the trade talks and i think the objective all along from the u.s. side has really been -- they talk about in terms of the trade balance, i think it is about exports. it is exports that create jobs. i think the u.s. is focusing on how to open up the china market, how to increase exports and creating this kind of trade over trade as to the sentiment -- adds to the sentiment. david: is it about export and trade deficit? nationaltimes it is security, technology, licensing, investment. i'm a little confused about what we are focusing on. bob: you use the security issue when it serves trade purposes.

i think that is part of the process and the trade balance is something easy to point to. exports, a little more difficult to get people to focus on. with the people i have spoken with in the administration, the definite focus comes from u.s. jobs to exports to the trade relationship with china and it's all about opening up markets and expanding the pie for u.s. exports as opposed to shrinking u.s. asked -- imports from china. cohesion inere a those involved in the discussion after -- over they want something that packers -- tackles the shorter term or a longer reform access to markets and in both of those things cap --be achieved? mike: nobody really knows what the total thinking is, what the end game is for the united states. i suppose you would say in the long run the white house would

like to see more open markets and the trade deficit start to shrink because the president puts a lot of emphasis on that. how they get there is harder to see and next week you have this final list of u.s. sanctions that would be imposed if the u.s. and china don't reach a deal. many of the things on the list that were initially proposed are that woulde inputs be exported -- imports that would be exported again. a lot of people are saying these don't make sense. the president may have climbed out on a limb he wants to come back on and he can do that. it creates a lot of uncertainty in the markets, though, and it may hurt him politically. this tweet about saving chinese jobs, how does that play in west virginia? david: it's a whole new base for the president, the chinese job base. julia: remember a chinese nationalized zte and you've got that going bankrupt and analysts going around offering services

to other companies. i should be working for the u.s. administration. i think there is reason here. does china ultimately want to achieve greater cohesion here opening up? we have had all sorts of noises from china and access to the markets particularly for financial start -- financial firms. it seems like they are trying to meet the united states some part of the way. bob: as soon as it has a negative impact on chinese companies and chinese jobs, that is when the chinese have backed away from some of these reforms. withe sense, maybe helping this workforce and china staying employed is one way of cementing some of these gains we are seeing in other sectors of the economy. the administration, the main goal is to shrink the

trade deficit through exports. iw you get there is where think there are disagreements with hardline people on trade and it's a little bit of a good cop, bad cop thing in terms of trying to open up the avenues for increased exports and that leads to growth and jobs here. david: bob says the main goal of the administration is the trade deficit. another main goal is overall economic growth and the question is, at what point does pursuing the one goal get in the way of the other? data,e important economic tomorrow retail sales, industrial output. at what point, if ever, do we see diminishment in growth because of uncertainty in trade conflicts? mike: we may be already. if gasoline prices keep rising because oil is coming off the market because the president pulled out of the iran deal, that will cut into retail spending on other items, overall

gdp may not change, but it hurts a lot of companies and that brings down the markets and amongconfidence corporations and consumers and the idea of trade sanctions with it the intermediate inputs that may be on the list. if you are a company, you will not invest until you know whether you will be able to spend that money productively and then we have the nafta deadlines coming up. according to the speaker of the house, this week, although really they have another month they could maybe they can work. you have a lot of trade issues that could impact the price of goods and impact consumer confidence and the overall economy. julia: we will continue this discussion, no doubt. michael mckee, thank you so much for that and bob sinche is staying with us. italian bond market calm over popular -- politics. all the details on the arrangement, next. this is bloomberg. ♪

julia: italy inching closer to forming a unique populist government with the antiestablishment five-star movement and the far right northern league reaching a tentative governance plan. romeng us with bloomberg's bureau chief. i have been looking at the details of the spending priorities and they look pretty whopping. talk us through some of the details. right, you are absolutely right. there is so much they want to do, but how are you going to pay for it and justify it with the e.u.? there's a flat tax of course, that is what the leagues wants,

sometime -- some type of help for the poor. there is the lowering of the pension age, which is extremely expensive and it would be very complicated and a hard-fought battle for past governments. they would be going back on that. just those three things would be a huge cost for the economy and nobody is sure how they would pay for it. julia: both of these gentlemen have ruled out being italy's next leader. do we have any sense to the next prime minister will be if this coalition holds together and how relevant he will be in the face of what is being negotiated here? >> that is right. we know it is going to be some kind of third person that is neutral between the two. it cannot be either one of the two leaders because otherwise, it out.ld slug probably a professor or somebody they can both recognize as an

authority and certainly, this is quite common in italy. even if it is not a leading charismatic figure, it is not unusual for italy to have that kind of prime minister. the problem is finding a deal between the two because they have different philosophies of how they want things -- you can see from flat tax versus citizens income, so it is important to find a prime minister they can both agree on. you also need the president in italy as the check and balance. he needs to agree, too. david: thank you so much. coming up, oil holding below $71 a barrel as futures are down. we will talk with francisco next., this is bloomberg. retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store

near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. oh hi sweetie, i just want to show you something. xfinity mobile: find my phone. [ phone rings ] look at you. this tech stuff is easy. [ whirring sound ] you want a cookie? it's a drone! i know. find your phone easily with the xfinity voice remote. one more way comcast is working to fit into your life, not the other way around. julia: this is "bloomberg daybreak." i'm julia chatterley. grinding a seven-day win

streak, the longest since thember appeared 6.7% in closing record paired s&p 500 just over 5% below its high close to give you perspective. also watching what is going on as far as italy is concerned, under pressure. the spending priorities for the new coalition government. the big question is -- how on earth of a going to pay for it? byhad the ftse 100 lower .2%. we have seen five straight weeks now of gains supported by weakness in the currency. morgan stanley saying it is an unloved market and time to go over the commodity sector. the dominance was pointed to. selling higher by .4%. dollar weakness is the trade to trade of thehe day. weaker inflation data and retail

sales will be key as we talked about this week. , crude tradingt right now beneath the $71 a barrel as david mentioned earlier but gaining slightly in the session. david: time to find out what is going on outside the business world people turn to kailey leinz. u.s. and china say they want to avoid a trade war. president trump reversed himself on telecom makers. he wants the company to get back into company fast. last month, the u.s. cut off it from its suppliers or chinese regulators said to have restarted review of qualcomm's bid to buy semiconductors. that have been halted because of trade tensions. the controversial u.s. embassy in jerusalem opens today. president trump filed to move the embassy from tel aviv during the campaign. the decision has angered much of

the middle east. palestinians say they can no longer be a mediator in the region. the new leader of malaysia is moving quickly against his predecessor. the prime minister has banned some from leaving the country. in anill be caught up investigation into a multibillion-dollar scandal at a state fund he helped set up your he faced allegation that millions of dollars ended up in his personal count. global news 24 hours a day, online and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. leinz.ley this is bloomberg. david: this 1mdb story keeps on going. goldman sachs is involved. it didn't allegedly go to the former leader but also funding movies and buying expensive apartments in new york. it is quite a story. julia: we have the new leader suggesting he will open the investigation. he is showing some level of a zero-tolerance as far as the

approach and the scandal is concerned. david: the good news for malaysia is they are highly correlated with overall price of crude. this shows the correlation overtime between the white number and the equities and the blue number in crude. they do all right and crude is doing well. today, equities are -- julia: the highest since they since -- since june -- rallying crude prices. david: let's stay on the subject of oil. steadily rising. in part because of curtailed uranian threat. the cartel has dealt with issues in the past and it was said don't worry about the supply and there will not be issues as a

result of the sanctions. julia: i am glad you got that name, by the way. david: i practiced it. lynch head of commodities recently said oil could reach $100 a barrel next year. bob sinche is still with us. welcome back. bob: thank you. david: what is your base case and how do you look at it? bob: it will be meaningfully higher moving forward. if you think about where we were a couple of months ago, i said i think oil will be $80 a barrel. we are pretty close barrel -- pretty close now. will pricethe market in an outcome. we are saying it is going to be close to 75 average. we think the high point could be

over 90. we think we can be as high as 100. part of its is that we realize there is a big gap very we are not even assuming there is a large amount of it rain and oil. million -- one million barrels a day loss because of the sanction -- julia: that is what it was being said over the weekend. bob: venezuela is in complete chaos. before we lost 600,000 barrels a day from venezuela and we are losing more every day. now we could be losing it rain in oil. i am not sure the market is prepared for that. you have the spare capacity, a we try to replace. what do we do it the next shock. julia: when the energy minister says we have a covered don't irry, do you disagree? bob: disagree.

a pet can cover it in the short run. the problem is, we could lose half a million barrels are in million barrels from venezuela. we could lose barrels somewhere else. what are we going to do then? the irani and sanctions are a bit of a problem for the market. i don't think we fully appreciate how much of a problem. if you think about aluminum, that gives you a sense of how tariffs and sanctions can't affect prices. julia: some people rubbing their hands together at the prospect of this. david: take a look at the question of balance. we put up a chart. the white line is overall world demand for oil. the purple issue blue line prices which suggests should be driven higher. this is happening seasonally at a tough time. this is pete gasoline season in the u.s. and i think seasonally

it is a bad time to be losing some supplies. hasother side is that this been very positive for u.s. producers. we were talking about the u.s. economy earlier. the rig count in the u.s. is up from 740 to 840. that will show up in production numbers we had later this week. there are offsets on both sides of this. is, how quickly can u.s. producers continue to ramp up supply them and can we get the supply transported to the right places in terms of getting it used in the short run? the supplyt run, constraints will go against the background of solid demand and prices will be volatile. i think the big question later this year and into 2019 is whether the u.s. can still be the swing producer. we are pretty optimistic that in fact they can be and that will

continue to show through the rest of the year. said, in the short run when you get constraints and supply disruptions like this as we had in aluminum, prices can bounce around. julia: frances:, way and. weigh,: -- france in. reserves and the u.s. that could come out. those could be released. the problem is you use one or two of those in your cap prices the first time if it stays strong and we have another gap somewhere that is where the problem will come up. we were talking about the forward curve and futures as far as oil prices. one of the interesting things we have seen is the lack of

follow-through and energy stocks from the underlying price we saw in oil. we have a chart here showing the underperformance of some of the energy equities compared oil per do we need to see some capture of future prices rise in the forward curve in order to get back to confidence that some of these can outperform? what do they need? abouthe uncertainty future prices and what they look like next year. the second is to what extent have the companies put on hedges as prices had gone up already and they may not be getting the full benefit of further increase in pricing. this becomesof company specific, which i cannot really go into details on, but who is producing where and who has the capacity to add to production. there are a lot of details that go into it, which is why we have

oil analyst and company analyst. julia: there is a genuine nervousness. more the issues is effectively if over prices are $50 a barrel five years of, the market resumes it will get back. wencisco: the issue is, if run out of capacity, we will get back there quickly. what we have said in the last few weeks is that the back end of the curve could become the anchor game this will supercharge the equities if it happens. david: what about geopolitically? the run-on could go away tomorrow. venezuela is double the not so much. that is not going to go away tomorrow matter what happens. even if the regime changes, and we see no indication, it would take a long time. which is driving oil prices more?

we have lost barrels now for a whole year. we lost 30% of the venezuelan supply. if we lose 30% of iran exports, you would see much higher prices at this point. the market is only priced in geopolitical risk and that is low saw during the speech when the news came out that right that thee announcement u.s. was going to leave the iran deal, and the oil market came up. three dollars. iran is about to get priced right now. thank you both very much for being with us today. up, icon wins big as the rex house off a $6 billion takeover of fujifilm. we take a look at the -- that next. you can turn on the radio to listen to tom keene and jonathan ferro from 7:00 to 9:00, and join the conversation from 9:00 to 10:00.

"bloomberg surveillance" can be heard in new york, boston, the bay area, washington, d.c., and all across the united states on sirius xm radio. live from your, -- new york, this is bloomberg. ♪

i'm kailey leinz in the hewlett-packard enterprise green room. now to your bloomberg business flash hurray j.p. morgan chase doubling down on china. head.nk named it global j.p. morgan is seeking to create a securities company in china

and we'll take a majority stake in its local management joint venture. ibm is invading capitol hill this week to lobby against the european union privacy law. within 100 of the executives will tell lawmakers the u.s. needs its own privacy framework. they say the new law should not be a global standard. the measure imposes topple wools for how data collectors gather and use personal information. sony is taking a stake in the company the snoopy and charlie brown. sony's is it unit will buy 49% of the 80% stake is dax x media. the crisis is $185 million. the family of the late peanuts cartoonist charles schulz owns 20% of the company. and that is your "bloomberg business flash." julia: we turn to the wall street be. -- beat. though --of grip icons picture-perfect victory,

xerox calls off the takeover by fujifilm. the new short. subprime mortgages has a new poll and that is short deutsche bank. joining us is jason kelly. it is blockchain week. put snoop dogg -- julia: say that again. jimd: jack dorsey and bullard together is an interesting sentence. jason: it will be an interesting week for all of those reasons. if you think about what this conference really was a few talking aboutare 7000 people for one conference. that is just part of blockchain week. it is the type of people that are showing up.

snoop dogg notwithstanding which is exciting for all of us, but the ceo of fedex, very interesting. you are also starting to hear -- and this is the theme around bitcoin and blockchain over the last year, even with the topsy-turvy roller coaster or how you want to describe it performance of bitcoin, there is a lot of very serious interest and a lot of very serious money. david: snoop dogg is not going to be talking about cryptocurrency, he is going to be performing. jason: in the meat district somewhere. will sayybe he something about cryptocurrency. he makes surprise us. talk about xerox and fujifilm. jason: this is almost a throw back. you have carl icahn you have board room and deal gone bad. -- a ceo of allegedly

making a deal for himself. jason: i feel like writing a screenplay about this. the ceo who oversaw the transaction and this brood controversy across wall street and in the minds of investors because it looked like he cut a deal that was favorable to himself. ,nvestors, including carl icahn were not into this deal. it did not look like they were going to prevail, but last week, they really gained momentum. the question is now -- where does it go from here? carl icahn installed one of his guys on the board. it is a busy time. .avid: a clear win the question is, does he make is going? jason: what

to determine that is whether they can either do something pretty genetic and magnificent or perhaps more likely if they find someone else. $40 plus. jason: they have been very transparent. mentione should fujifilm has responded and said they are contemplating legal action as a result of this. jason: it also sounded like reading between the lines that maybe fujifilm could come back at some point. economic creatures after all. .e must get to deutsche bank coming from a different direction now. jason: i want to play some sound quickly from the man who is predicting another big short. haseutsche bank respectability issues. they are probably

undercapitalized. they will probably need to raise capital again. deutsche bank is a problem bank. david: not a ringing endorsement. jason: steve eiseman, for fans of the big short, this is the character who is played by steve carell in the movie adaptation of the big short. largelyit -- called it subprime mortgage crisis. he is the voice. alone.he is very much this is not a huge surprise. julia: he did said it will have to raise capital as well next year. performanceesent from banks. mentioned, this is a constant theme. deutsche bank is coming up almost every day one we are talking about what wall street is talking about, and not in a good way. people are not buzzing about

deutsche bank just kill and it -- killing it these days. that only beats the drum even louder for some. exactly right. the only way to break in there is move. read story ont reallyomberg is this nice package with a lot of graphics and charts about where is" and it "really is not on wall street anymore. what you have seen, and the story lay this out is that wall street started and then moved to midtown and now is largely moving west to hudson yards. companiese related massive project over there. you and i hope spent time looking at it. david: the largest private real estate deal in history. it is huge.

jason: you are getting names like wells fargo and kkr who are moving their entire operations and blackrock very notably. it is a story that in some ways talks about the evolution of this business. wall street said in part that the story was tethered by paper. they are rate -- literally hand-pickedecks i when midtown came on, it was much more attractive for commuters. you are coming into grand central. now, new office space, and this has the potential to reshape manhattan. julia: the buildings are incredible. david: when they first said they were going to build skyscrapers, look at it. jason: they are building it over the train center. you come in from under the hudson, and it is a spectacular place. it speaks to how companies are trying to -- and we talked about

this in different ways over the weeks and months, how they are recruiting new employees and a shiny new building with lots of amenities is a way to do it. julia: a cool place to be. david: thank you to jason kelly. coming up, one of president trump's most contentious foreign policy projects. the us and the u.s. embassy in jerusalem opens today could what -- more on what i am watching. julia: check out tv up you can watch us online, and interact with us directly and dissent us questions. go to tv on your terminal. it is the place to be. from a new york, this is bloomberg. ♪

i am: this is what watching today. it is jerusalem, not tel aviv. it is opening in about an hour from now. the embassy is the first time in jerusalem. we will show you photos here. .t does not look that new that is because it is the same building the consulate has been

in. they have not billed anything -- built anything can steve mnuchin is there, president trump is going to do a video conference. a big deal. julia: this will be many defining moments of the presidency, but this, more than any others will be a pivotal moment in what we have seen with the iran nuclear deal. david: so controversial. this has been talked about for years. of a a bomb in the middle difficult place. it turns out, there wasn't much reaction. supporters.tian david: this is bloomberg. ♪ mom, dad, can we talk?

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life preserver to a big chinese as trade executive travel to congress to say that nafta has to get results this week. up, worldwide demand of oil problems with iran and venezuela archie. how high can the price go? we get detailed sales and production numbers from the united states. in ony and china weighs its production and consumption, all telling us whether we are still headed in the right direction. welcome to "bloomberg daybreak." i'm here with julia chatterley. julia: let me give you a look at what is going on as far as the markets are concerned. aftertures higher by .1% a sideways session in europe. to give your perspective on where we are sitting, the s&p 500 5% below its high close.

smaller cap stocks are outperforming. the dollar sitting at a one-week low. retail sales are going to be key for getting at sense for sentiments. curve,g the shape of the the relative flatness and whether that impacts the flatness of the ability to raise rates further. crude just below $71 per hour. the uae saying we have supplied covered in the face of iran supply cuts in relation to the sanctions. merrill lynch telling us that risk is deeply underpriced. morning, the0 this united states will officially open its new embassy in jerusalem with the ivanka trump and secretary treasury mnuchin attending and president trump joining by videoconference. at 1:00, wilbur ross will

address the national press club in washington addressing the factors affecting economic growth. the robin hood foundation will hold its annual gala in new york , the largest annual fundraiser in new york city. last year the event raised nearly $55 million. they always have huge celebrities. julia: maybe they can be that record this year. incredible. let's get an update on what is making headlines. the bloodiest day in weeks of violent demonstrations in the gaza strip . officials in gaza say is really fire killed at least 18 palestinians the protest was collected at a blockade of the territory. palestinians are also angry about the opening of the u.s. embassy in jerusalem. the u.s. and china are signaling they want to avoid a costly trade war. president trump reversed himself on chinese telecom company z te saying he wants the company

get back in a business fast. zte was cut off from its suppliers for violating a sanctions agreement. u.s. is ready to let american businesses invest in north korea, but there is a catch. first, north korea must prove it has given up its nuclear weapons arsenal. says the u.s. can create conditions for real economic prosperity in north korea. the leaders of the two countries hold a historic summit next month. airl news 24 hours a day on and on tick-tock on twitter powered by 2700 journalists and analysts in over 120 countries. david: europe is in the news with meeting scheduled in italy later in the day with leaders of the two populist party expected to form a government. german gdp growth numbers are out tomorrow.

we welcome the unicredit cohead of strategy research. we talked with the governor of the bank of france about european growth. this is what he has to say about europe. the eurozone is robust. the last quarter of 2017 had a growth of 0.7% which was especially high. some type of stabilization at this stage, we think temporary factors are at work. agree with the governor of the bank of france? is growth robust at this point. >> i would tend to agree. inre are two it gradients this year -- there are does going gradients in this eurozone -- there -- there are two

ingredients in the eurozone recovery. it has been sink resides -- it has been synchronized across all the members of the european union and we have had a rotation to higher investment. this is important. debt crisis, we have had a plummeting investment as a percent of gdp in the eurozone. back,now it is coming which means we are getting a robust recovery and at the same time it is still below 2007, 2008 levels. this means there is room for it to go higher. that is why we have gone through a soft spot, largely because growth rates were running at s by historical standards of their was a case for normalization. we have to consider the due to theespecially first quarter of this year. julia: if you look at some of

the german data, particularly the sentiment data, there is real concern about the prospect of trade. we saw exports declined in the numbers they put to us. how cautious should we be about what we see from germany? it is a powerhouse of eurozone growth. >> i am not concerned about germany. if indeed we go down the road of full-blown global trade more, which is not our case scenario. the recent evidence seems to be quite rating with you. -- and seems to be cooperating with you. have early indications been running on multi-year highs. it is only natural when you get an escalation or concerns about a potential escalation of trade tensions for such an opening do you see a normalization and a

decline in these numbers. the fundamental strength of germany remains very much in place. scenario,he central meaning a further raising of trade tensions, and the latest iws seems to suggest that, think we will see a normalization, a small rebalance to the german numbers. chart.i will put up a you can get it on a terminal. it is the european economic surprise index, at a six year low. what accounts for that? these are quite intuitive indicators. i do not want to downplay their importance. will tend, analysts to lack what is happening in the

real economy. you have the eurozone economy during strong momentum 2017, which means that expectations had to revise higher. at some point it became impossible for the actual data to be able to beat these expectations. what happens is that you are still getting numbers which to 2.5% growth in the eurozone, but because expectations have been built up strongly, it has become impossible for them to beat them. that is why you're getting such low ratings in the surprise index. julia: can i ask you about italy and what your thoughts are there? the what i know of five-star movement and the northern league and some of the promises they are making as far as spending is concerned, there is reason to be cautious. i look at the market, i look at the spread and i think perhaps

we are underpricing the risk. what do you think? >> i will not deny that as far as italy using credit risk itself, there might be an element of small complacency on the part of investors. there are a number of things here that should not make us too worried about developments there. it is being treated by the market and rightfully so. a large number of other issues have been addressed in the eurozone. there is no concern in the market about a potential escalation into the eurozone and then discussing the possibility of disintegration. as far as italy is concerned, the paradigm we have so far, when you look at portugal or when you look at greece is that to have parties that tend

declare a number of populist policies, but then when they are confronted with reality, they make a backpedaling and water down their stance and the end outcome was not as bad as markets might have feared. i think this is the view markets are taking right now. that is why you see the bdp bund spread trading at 135 basis points. it has not exploded by any stretch of the imagination. david: it is great to have you here. we will ask you to stay a bit longer. oil trading higher today as opec says that can withstand renewed u.s. sanctions. we look the potential for $100 a barrel oil. this is bloomberg. ♪

kailey: this is bloomberg daybreak. who bet dateager against housing before the financial crisis has recommended shorting deutsche bank. the bankbloomberg tv has profitability issues and will have to raise capital next year. deutsche bank has: 33% in the last year. it is a major victory for investors carl ichan. the company parted ways with the ceo. icon said he opposed the fujifilm deal and accused

fujifilm of striking a deal that preserved his job at shareholders expense. the older -- the company that manufactures iphones reported profits lower than quarterly estimates. barely sold enough iphone tends to meet wall street's water down expectations. that is your bloomberg business flash. opec signaled today it could fill in supply gap sparked by u.s. sanctions on iran. oil is trading slightly higher on the news but wti remains below $71 a barrel. spoke with francisco from bank of america and he gave us his call for oil. toit is going to be close $75 average, the high point to be over $90 and we could be as high as $100. we realize there is a big gap. we are not even assuming there is a large amount of iranian oil

that leaves the market. david: still with us is vasileios gkionakis. give us your take on where we are with oil. do you agree with what francisco said? vasileios: it is a tricky one. i am getting slightly concerned with development in oil. initially we had the rising price that was a combination from some geopolitical disruptions. was thetain extent it strongest global demand speaking up and pushing the price higher. now we are moving into a territory where the supply disruption is likely to start dominating to the point where we are seeing normalization and growth rates. that if we start gravitating above 85 dollars and , myas francisco mentioned

main worry is this will start ,queezing real incomes especially in oil importing countries, the eurozone being one of them. at the same time, we are going to have the wrong type of inflation because it will be a supply dripping -- a supply which kind of inflation is not what the central banks are looking for. i think the risk is deftly to the upside for oil prices. i'm keeping a close eye on that for implications on inflation and growth. julia: you think the market is underpricing the risk, when it is venezuela or the prospect of tightened iranian sanctions? what is the house call as far as oil prices are concerned? we have been lower on our forecasts, lower than where oil prices are trading because

our central scenario and not factored in the sanctions on iran and we were largely playing into the equilibrium between supply and demand, which to me seems to have made a lot of sense. right now this is a new unknown. i'm not sure the market is downplaying the prospects of the iran sanctions. there is also an element that there will be further discussions down the road. proven -- you never really know. the way i think about the world right now is oil, even slightly higher from here, i think we are levels that global activity remains resilient enough to be able to cope with it. if we start playing in the $90 to $100, i would start getting

worried. david: this leads us to the question of whether we will get up to the $90 to $100. in of the shock absorbers place, whether from opec or u.s. shale. we spoke to the abu dhabi manager. he said opec could have a -- what we are concerned about the next meeting is what is the right level of inventories we should see and can we put this group together for longer. you agree they have the capacity to meet shortfalls because of iranian sanctions? vasileios: i think to a certain extent they would be able to do that. the question is if they actually are willing to do that. for me in this equation is where saudi arabia stands in all of this. it is benefiting on the back of all of these increasing oil prices.

whether it has the right incentive to curb oil prices from rising. i do not have a strong view on that. i think if they would like to do that, they could step in and be able to substitute a part of that supply shortfall. julia: a potential had to consumers as a result of high oil prices could be stock price change for the oil and gas sector. i know you are expecting outperformance of the oil and gas. we have just come off a strong earnings season for the oil and gas, too. vasileios: it is quite interesting that what you do get is during the period when the business cycle becomes relatively mature, and it is especially mature in the u.s. and you start not getting the outperformance of aggressive sectors and you hit the

defensive sectors getting a boost in relative terms, then you get energy prices, energy related stocks start outperforming. this is going to be something that is likely to play out, even if prices do not go higher from here because they have already accelerated substantially over the past two quarters and i think this has yet to reflect in valuations. the million-dollar question is what is going to happen to the rest of the stock market if oil prices keep going higher from here. i think the rest of the market is going to take a hit. julia: vasileios gkionakis, thank you so much for chatting with us. xerox backs out of its merger at fujifilm. we will discuss all of the details. from new york, this is bloomberg. ♪

julia: a major victory for activist investors carl icahn and darwin deason. xerox has called over -- has called off the takeover of fujifilm and parted ways with jeff jacobson. joining us is a columnist. the deal is off. great news for carl icahn and darwin deason. >> it is funny because they have settled with carl icahn and darwin deason and then xerox backed down. this seems like it is going to stick. they are backing away from the deal. it will be interesting to see what fujifilm does. they have said they do not believe xerox has the ability to terminate this agreement and they are looking at legal

options, looking at what they can do to preserve the deal. itid: it is a victory, but -- but is it a pure victory -- is it a pyrric victory? brooke: a lot of the pushback that analysts have been giving is there a logical buyer beside fujifilm? these companies are intertwined. they have a joint venture that represents a lot of xerox business. xerox gets its products from these venture. david: what is the rocks? brooke: old-school copiers and printers. in some ways it is a good thing for fujifilm because i do not think shareholders were thrilled about the deal. shares of fujifilm are up which tells you something about how shareholders feel about this transaction. julia: they cannot get hold of the audited financials.

beingrts of questions asked about the contours of this deal. what are the prospects of fujifilm coming back and saying we will give you $40? brooke: i do not know you can rule out fujifilm coming back, but this is strategically important for them to diversified. on the other hand, shareholders say you probably have other aspects of your business, they care and cosmetics, things growing faster than office copiers and printers. david: do we know of someone else brought xerox -- of someone else bought xerox -- heart of the drop of fuji might be having a partner they do not want to work with. brooke: i think the brand name has value in asia. it is in fujifilm's interest to keep that joint venture going, but you could see a situation where fujifilm buys xerox.

the one buyer we have not talked about his apollo global management. it will be interesting to watch what happens there because the new ceo of the company has a lot of connections with apollo. he has been brought in as management of companies. david: we will have more to report on. brooke sullivan, bloomberg opinion columnist. great to have you with us. a big week for trade negotiations between china and the u.s.. we will talk to a senior fellow about the trade negotiations. that is coming up on bloomberg. ♪ mr. elliot, what's your wifi password?

wifi? wifi's ordinary. basic. do i look basic? nope! which is why i have xfinity xfi. it's super fast and you can control every device in the house. hey! let's basement. [ grunting ] and thanks to these xfi pods, the signal reaches down here too. so sophie, i have an xfi password.

and it's "daditude". simple. easy. awesome. xfinity. the future of awesome. julia: this is "bloomberg daybreak" -- the futures tilting to the top five. the doubt riding a seven-day win

streak. these two markets just over 6.5% and 5% under their record high closing. it is aownside, sideways move for european equities. by .6%.market down you heard vasileios gkionakis saying it is not really mispriced. morgan stanley going overweight, still down 2/10 of 1%. dollar weakness is the story in currency land. sitting at a one-week low. we have seen a softer dollar. shape.hot of the curve 26 basis points there and crude oil still sitting below $71 a barrel.

david: it is time for updates on what is making headlines outside the business world. kailey leinz is here with first world news. weeky: it is the bloodiest yet after weeks of violent demonstrations in the gaza strip. they say israeli fire killed at least 18 palestinians. palestinians are also angry over the opry of the u.s. -- over the opening of the u.s. embassy in jerusalem. the new leader of malaysia is moving quickly against his predecessor. he has banned his predecessor from leaving the country. in awill be caught up investigation in a scandal. he faced allegations that millions of dollars and it up in his personal account. the united arab emirates says opec house and of capacity to cushion oil markets when the u.s. imposes sanctions on iran. minister spoke to bloomberg in abreu dobby. dhabi.n abu

>> we have been there before and opec has been resilient in the past. some countries have spare usedity that can be whenever it is required. kailey: global news 24 hours a day on air and on tick-tock on twitter powered by more than 27 than roast in -- by more 2700 analysts and journalists in more than 120 countries. david: united states in china trade teams meet. president trump tweeted that president xi of china and i are working to bring vte a way to get back into business fast. too many jobs in china lost. commerce department has been

instructed to get it done. the chinese said they would look at another look at qualcomm semiconductors. are michael, bloomberg's international and politics commissioner. ted, let me go to you first. must benge of interest tied to these negotiations going on in washington. showshe cde case clearly -- the vte case shows china is vulnerable to trade sanctions. this week they will be hearing from the international trade commission. i think it is a wake-up call that the chinese said they are vulnerable. i think it will factor into the talks this week. the chinese also have a lot of leverage. julia: if we look at the difficulty this administration is having with a nafta deal, are

we underestimating the difficulty that has been taken with trying to agree with something with china, particularly if we look at how different the negotiating stances of the two sides are? beard: the markets may underestimating the difficulty, i'm not underestimating the difficulty. the closest thing i have ever seen are the u.s. japan talks over automobiles in the early 1990's. that took two years and ended inconclusively. the nafta seen from talks, which are under a hard end of the week deadline if they will produce anything which will get through the congress, those talks have been moving slowly. this is far harder than most people recognize. mike, what can we glean from what president trump has done already, specifically south korea. that may be the one trade deal they have got done.

insaid we make huge changes our trade deals, but if you look underneath the hood, they increased the quota but they have never been approaching the old quota. we have seen a lot of bark and a little bite. it may be he is just looking for something he can portray as a win, he concedes to the chinese maybe gets the qualcomm deal through and maybe the chinese say we will not impose sanctions on certain areas of u.s. agriculture. there may be something there that he can claim as a win. it does not look like he will be following through on bellicose threats. there is one difference between down the japan talks are public decades ago that edward was just talking about. japan needed us because we were there security umbrella. china does not feel that way. it will be tougher to bring the chinese into what the united states wants than it does with

japan. julia: let's turn this to nafta. the mexicans would argue they need the nafta deal. the united states continues to push back. go back a week we felt like we had a deal and it feels like it has been a scramble to reach a preliminary deal. where are we on nafta? mike: we are a long way from a deal. under the deadlines they are imposing, they will not get a complete deal done. what they're hoping for is a deal in principle where they can say we agreed on things like autos and can then move forward to less controversial topics. there are things they have not yet tackled, like the derry dispute with canada and fruit and vegetables from mexico. there are still things they have not begun serious negotiations yet. it is hard to see what happens next if they do not get things done. david: i was struck by the fact that mexico had offered 70% on

automobiles. that is not the 75% the united states wanted, but it is still a big move. edward: the problem is another clause the united states is insisting on. the clear goal of the trump administration is to force some relocation of auto production from mexico to the united states. they've included a clause that to 40% has to be done in higher wage countries, countries paying at least $16 an hour to auto and auto parts workers. canada and the united states. that would have the potential for moving a lot of production from mexico to the u.s.. the mexicans have taken a hard stand, saying we cannot accept that. it is not the rules number that is the problem, it is how you break it down. they are stuck on that at the moment. be adjustedafta rather than a new deal form without having to get a sign up from congress?

is this one way around it -- if you just tweak nafta rather than wholesale change? edward: it is hard to know where tweeps end and wholesale chains begins. with the korea deal, there were a series of tweets that did not go to congress. on nafta, everything you need to do will have to go back to congress. the changes are substantial. anything that could be done without congress would be minor. it would also be a change of direction for the trump administration. they have said we will do a deal and get it through congress. mike: this is not a treaty. this is an executive congressional agreement. anything that changes u.s. law has to go through congress. if it does not change law, they were not have to go through. the problem is they promised congress that they would, even if they do not need to. lyrically, they probably have

to. cover one moreo subject, sanctions involving iran. talkard fairly aggressive about the possibility of sanctioning european countries if they were doing business with iran. listen to michael bolton. >> they would love to stay in the deal. they got everything they wanted from the obama administration. i think the europeans will see that it is in their interest to come along with us. is the u.s. going to impose sanctions on european companies that continue to do business with iran? is it is possible -- it depends on the conduct of other governments. david: the struck me. right toserving the sanction european companies if they continue to do business with ironic -- with iran. edward: the europeans are going to fight against this. there is a long history of the

europeans objecting to u.s. sanctions for actions not taking place in the united states. et connects back to the zt issue we began this segment with. the long-term effect is going to be that countries are going to begin to say we cannot be dependent on these far-flung global supply chains. a lot of companies are going to say we have to be able to supply our own components because there is the threat of third country sanctions that will harm our business. the effect of this is going to be a lot more economic nationalism, a lot of countries looking inward to try to bring some of the supply chain back to reduce these vulnerabilities. i think there are long-term implications to these actions that people are only starting to wake up to. even ifhe problem is the europeans tried to form support for these european countries, in the end it is down for them to choose. one company said they will not contribute -- not counter u.s. sanctions.

they have tobasis, be careful, irrespective of what european leaders do. edward: they will be hard for the companies because they make end up toward between what the europeans want and the americans want. on a company company basis folks will have to make tough decisions about who they stand with. not something companies want to be doing. it is not something they want commerce to be working. julia: i know who wins that battle. david: ted aldon and bloombergs michael mckee. thank you for being here. retail earnings -- macy's and walmart out with results. we will get a look at the readings with oliver chen. you can turn on your radio and listen to tom keene and jonathan ferro from 7:00 to 9:00. bloomberg surveillance can be

heard all across united states on sirius xm radio. live from new york, this is bloomberg. ♪

kailey: this is "bloomberg daybreak." coming up on "bloomberg markets" and asset management managing greenblatt- jeff from gotham asset management managing principal and out your bloomberg business flash. j.p. morgan chase is doubling down on china.

jpmorgan is also seeking to create a securities company in china and will take a majority stake in its joint venture. ibm is invading capitol hill to lobby against the european union capital -- the european union privacy laws. they say the new eu law should not become a global standard. the measure imposes tougher rules for how data collectors gather and use personal information. there is a big medical marijuana deal in canada. aurora cannabis has agreed to buy a rival company for $2.5 million. it has led the effort to consolidate canada's marijuana industry. that is your bloomberg business flash. david: retail earnings are in focus this week as we get a starting tomorrow when home depot reports before the market opens.

wednesday macy's reports and to wrap up the week we will be hearing from walmart, jcpenney, and nordstrom. we also want to be taking a closer look at different aspects of the group in our retail therapy series. today we will focus on the bright spots followed by high end versus low end. we will end the week with the death of the mall. joining us is oliver chen and seema shah and mark rosenbaum, professor of the department of retail who joins us from columbia, south carolina. oliver, let me start with the theme for today, which is bright spots. where are the bright spots? oliver: i like customers in terms of devalue -- walmart is a name we like because of the clear value proposition. cowen one we think -- at we think about convenience,

culture, as well as products that offer clear coupons and values. is convenience and duration in terms -- and curation in terms of products. david: we hear about amazon all the time. are there some parts of retail that are more resistant to the amazon affect. depotmprovement, the home of the world, it is harder to get the stuff if you do not look at it. oliver: that is part of the stuff. fitness is on amazonable. david: i was looking for the world -- i was looking for the word and now i know it -- amazonable. oliver: how do you get people to your physical stores? julia: we have a great chart that shows the relative

resilience of luxury and the home improvement sector. mark, you pinpoint this is a way to differentiate yourself as a retailer. it is about personalizing the experience. give us examples of where you see this but to the best use. to startailers need thinking about how they will start serving an older demographic, especially a senior -- senior consumers and elderly consumers. these consumers will need personalization and i have done a lot of research that shows that loneliness is a driver of consumption. i encourage small business owners to learn the names of their customers. it goes back to the jeers song, everybody wants to go where they know your name. personalization is going to be the key among this older demographic. look foroing to personal friendships and deep relationships with retailers. great until iunds look at the fact that amazon's

opening experience centers to do exactly the same. mark: what i would say along the lines of personalization as we are seeing the shift in man versus machine, thinking about personalization and data to drive this experience. as the world gets digitized, people do yearn for the analog. 70% of customer still like stores. there are shifts happening. you think about all the data that walmart and target and others are using to drive a personal experience for millennials as well as baby boomers. sensible,s all sounds but is it showing up in the numbers? seema: they have to target the consumer to make them want to come into the store. improvement. home i would say that is probably more resilient than many categories. they are seeing increasing penetration of online, particularly on the non-pro categories. overall, they are seeing

penetration, but not as much as you would see in apparel. you cannot buy that plank of wood. david: i would not think of doing that on amazon. some of the old mainstream retailers are moving into this area. -- for example, macy's. oliver: what story does is it is like walking into a magazine. it is sponsored by different companies or vendors. macy's needs to rethink that. there are two bank many macy's store -- there are too many macy's stores. what happens next is it is a lot about walking into a store that is different. you can get everything online. add stores need to do is food, entertainment, at culture into the experience of getting you to walk into the store. you also talk about the

idea of having a web presence, having a share room -- having a show room. many small retailers tell me they cannot afford a website and i encourage them to go to where theywix.com can download a template and be online in 15 minutes. this idea that i cannot afford a website or i do not know coding is ridiculous. every small business owner can be online quickly with a downloadable template. julia: how profound is this change professionally. is story enough to save macy's? oliver: the concept of stories is enough but they have thousands of relationships they need to rethink. having a lot of vendor relationships adds complexity to the need for speed and experience. what is happening is the customer is telling us they need to be customer centric, you need

to offer curbside pickup, lots of convenience. people do not want to see much stuff when they shop. they wanted to be simplified anyone have a deal that makes sense that does not complicate the transaction. julia: it would be remiss to get you on the show and not ask you about the thoughts of -- your thoughts on walmart and the potential that represents. oliver: we like what walmart is doing in the united states -- curbside pickup at a thousand locations and 90% of america is within 10 miles of a walmart. as they go global, we think india is a great market, particularly with the payment ecosystem. we are seeing the future of payments, the future of loyalty, capturing the customer in semi-ways. it is an interesting -- capturing the customer in so many ways. walmart wants to be early to the

market, they do not want to be late. julia: great to get your insights. , andr chen, mark rosenbaum seema shah of bloomberg intelligence. thank you for kicking off our retail therapy week. coming up, what turkish officials are doing to protect the currency is what i am watching, next. bloomberg users can interact with the charts. you can browse the charts featured on bloomberg tv to catch up on all the key analysis. this is my favorite chart of the morning. there is italy, there is retail sales, you name it, we have it. from new york, this is bloomberg. ♪

julia: what i am watching today is the emerging-market currencies.

focusing on turkey. weakness in the turkish lira has been a key point. turkish officials meeting to wrestle with how they can protect the currency. we have analysts saying the whackl bank needs to rates. david: we want it sure you turn in -- you tune into bloomberg tomorrow. there be a conversation with president erdogan as elections are underway. bloomberg. ♪

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jonathan: from new york city for our viewers worldwide. 30 minutes until the start of trading. this is the open.

♪ coming up, trade tensions using, trump offering the chinese a concession. settling worries about the iranian crude supply. opec saying it has enough supply to cushion oil markets. and investors seeing resilience that was once considered a market nightmare. 30 minutes away from the opening bell with futures of four points on the s&p 500 after the biggest weekly gain in almost two months. the euro dollar -- the euro/dollar up almost 1%. we begin with the u.s. and china. president offering a lifeline to beleaguered telecom giant as the country since its top economic advisor to washingt