to put the tariffs on hold while we try to execute the framework. alix: the worst case trade scenario is put on hold. can china nuy?b awaits,ng dollar dragon a stronger dollar crushes emerging-market fx. the big u.s. treasury options on deck. david: welcome to "bloomberg daybreak." maybe they made some progress? alix: may be. some in the administration think progress has been made. if you were a chinese ministry official, who would you talk to. who would that person be?

markets unhappy feeling today. some markets in europe closed. smt futures up 15 points. -dollar at one point at its lowest level for the year. six straight down days, the longest since november 2006. yields continue to push higher. steady.lding david: time now for the morning brief. week of u.s.robust treasury auctions, $99 billion in notes. meetsy president trump with the south korean president moon. all week long we will be hearing from the federal reserve board.

we start off with the atlanta fed president, then culminate on friday. the big news is trade. play what secretary mnuchin had to say yesterday on fox. >> we are putting the trade war on hold. to quit the turf on hold while we execute the framework. president has been clear we will reduce the trade deficit. agreement with china that they will substantially agree to it. david: the trade war was on hold. i'm not sure there was a trade .ar going on >> the administration has said

it is a negotiation, but now the markets are breathing a sigh of relief. this is just a temporary reprieve. longer term issues will persist. they still have a long way to go . david: this chart shows the u.s. deficit with china, getting worse and worse. the purple line is $200 billion. that is the line larry kudlow said i did not want to get in front of everybody. i thought this was extraordinary. over the weekend, they came out with something that allows the chinese and americans to claim a win. >> china saying we will not agree to tariffs, but we will buy more goods and and not

put a number on that. sides haveid, both room to negotiate or not do what they say they're going to do. alix: we got the headline that china said it would consider ending birth limits this year. was that something we did not already know? they plan toent issue that policy, china has been worried about the climbing birth rates for some while. ,t has had very little impact so they want to liberalize them some more. this is not just a china issue. population and growth is beginning to be an issue in the u.s. as well. david: it is also the disparity between boys and girls. there is a huge difference now come about many more men than women. >> you do need women for certain things like reproduction.

we have robots doing more things -- culturehe chinese prefers boys to girls. >> this has been a long-standing policy in china. lots of economies are trying to you with the fact they have a growing aging population and not enough people to support a workforce. it is really a growing problem. as life expectancy grows and a lot of countries, including china. is said to consider ending birth rate limits as soon as this year. johnson & johnson is one stock you'd be looking at, not moving in premarket. what is moving our italian yields. wow. ,t one point of 12 basis points the highest level since 2015. i love this story.

they will potentially issue short-term debt to pay off debt that is past due. that is potential double currency. this is interesting because it felt like a sleeper issue come back. this whole idea of the eurozone and countries that are weak versus those that are stronger. isdoes feel like italy rising in terms of concerns for a lot of people. ofy have the largest amount debt in region and a lot of nonperforming loans. the question is how does the larger region deal with the potential for italy to disrupt economies. interesting, but it all went away a few years ago. the fundamental issues of the poor versus richer countries within the eu is coming back whether it spreads

outside of italy to someplace like greece is an issue investors are concerned about. david: i want to turn to our third story, the strong u.s. dollar off the talk of trade and what is going on. we have a chart showing what the dollar index has done. it is back up to levels we have not seen in six months now. >> that's right. the u.s. treasury saw a roller coaster last week, some people questioning the triggers. the stronger dollar is affecting emerging-market currencies. the turkish lira has been getting crushed this year with double-digit inflation. we had the venezuela election and looking at possible threats of more oil sanctions in the country. that: we have a chart shows the negative correlation between the u.s. dollar and emerging-market currencies. it is pretty dramatic.

as the dollar goes up, emerging-market currencies go down. >> officials have said we have to take policy decisions on what is good for america and not really worry about emerging-market currencies, and you see the results, a basic free fall when the dollar rises. we haven't even talked about the political issues that are at the forefront as well. alix: that is coming. the conversation a few weeks ago was the dollar was not paying to yield differentials. now it seems like they are and we get $99 billion of fixed rate treasury auctions as well. >> that's right. it is worth watching the dollar levels. at a certain point it becomes a concern. steven mnuchin maybe on this morning and maybe asked about the dollar. alix: stronger or weaker, good stuff. thank you. coming up, a deeper dive into trade. this is bloomberg. ♪

>> this is "bloomberg daybreak." toeral electric has agreed merge its locomotive business. ge will get $2.9 billion in cash. shareholders will own a little more than 50% of the combined company. blackstone has stepped out of

one hotel deal into another. the firm has agreed to buy a luxury hotel owner and an all-cash deal. last week, blackstone sold the last of its hilton worldwide stock. there is a tank over in the banking business today. it is a cash and stock deal valued at $4.7 billion. that is your bloomberg business flash. david: there is a truce and the trade war with china. mnuchin said "we are putting the trade war on hold. we have agreed to put the tariffs on hold while we try to execute the framework." the u.s. dollar is responding this morning. welcome our guest. welcome.

the u.s. dollar as shot up. is thee chart shows extent to which there is a negative correlation between the u.s. dollar and emerging-market currencies. up, emdollar goes currencies go down. >> it is pretty significant. we have had a move in the dollar that has been global. in the last week or so, it has been led by emerging markets. we had big moves in turkey, brazil, indonesia. been catching a lot of investors by surprise because we had that breakdown in correlation in january. now we are back to more normal wear u.s. interest rates matter. if you look at the entire yield have had that move in the short end that has been very persistent going up, but now we

have the long end catching up. if you look at the whole yield curve, it is like a big move with the curve moving at the same time. that is one of the reasons we have the currency spillover being bid. or the long short end, it is the entire curve moving. alix: doesn't put anything on sale in the end? >> we essentially have from abilities being exposed. fromer aspect to migrate the u.s. interest rate discussion is there is a flow angle. investors bigan in terms of allocating into emerging markets because that yields were zero for so long, and now that flow is designed to taper as the ecb tapers. david: as you talk about interest rates going up, how much of that is because of anticipated increases by the fed , even this week we have the substantial treasury market.

>> in the first place, it is about the flows. even if the ecb does not move interest rates soon, the fact the qe amounts have come down from 60 billion to 30 billion, going to zero, that will reduce the flow into emerging markets because there is not that much for folio substitution. alix: the chart were looking at highlights the increase in treasury auctions and what it has done to the 10 year yield. how much more upside do feel like there is to the dollar? when can we top out? >> i think about it from a cyclical perspective. at the moment, you can ask when is the fed going to blink? are they going to say financial conditions are tightening too much and we have to slow down? financial conditions were so easy that the fed will allow

strength and movement in the treasury curve before they start to change. i think it will take something quite dramatic for them to deviate. alix: on the one hand you have the fed. -dollar spread.o you can see how it has moved. you can see what the market is pricing in for 2019, 40 basis points. three months ago, we were talking about the twin bill the deficit. why is that no longer mattering? currencies,analyze you have to be careful about switching your narrative too much. i think the interest rates is one you want to put a decent amount of weight on. when does the 20 deficit matter? -- the twin deficit matter?

one, when we have this priced in, then we have interest rates baked into the cake. i don't think we are there yet. first we have to price it, then we have to worry about it. , have if you are the fed they tighten that much already? how concerned are you if you are the fed about having something for when the next downturn comes? >> a lot of people have been using that argument to get the rate hikes in and have ammunition in this cycle. david: then you have the luxury of raising rates. >> i think that is right. at this point in the cycle the fed is very comfortable where financial conditions are. the dollar is moving a little bit, but after weakening tremendously last year. the equity market is strong and credit spreads behave.

they don't worry too much about emerging markets. the have to speak nice about it when they speak to g20 partners, but it is not a major concern. i think they are very far from blinking. i think it is a steady movement in the short end that drags the long end with it. million fede a speakers this week. what will be the thing you are looking for most? >> inflation is the key. we had a little bit of two way risk with the latest inflation numbers. any sort of sign that they have more or less confidence in inflation. ,ight now they are comfortable but the details are important. david: how will this sort of good versus bad inflation? inflation driven by growth as opposed to $1.5 trillion in fiscal stimulus coming into the

system, or oil over $80? >> i think it is interesting , a high oil prices petroleum price will be a drag cancel somemer and tax reform, but the u.s. economy is different. it used to be the case that high oil prices were terrible for the economy and bad for the dollar, and that correlation has changed. this is something feeding into this emerging-market chart you put up. why is it so weak? because it is a double whammy. that is different from the past. alix: another record low today. you are still with us. selling bonds,y but the selloff isn't over. this is bloomberg. ♪ this is bloomberg. ♪

alix: italy is inching closer to deciding who will be its next prime minister. emerging,le candidate but criticism from the french finance minister who said if the government took the risk of not respecting its commitments on banks andcleanup of the financial of the eurozone -- financial stability of the eurozone will be threatened. we have definitely seeing some dramatic moves in italian bonds over the last 4-5 sessions. was notthis election deemed to to be a huge event, and it turned out to be a pretty big event because it is pretty much the worst-case outcome with

populist on the left and right side of the spectrum. is when you have a government formed, people previously in a position, will they change? you saw that when you had left wing politicians elected in greece and 2015. they change their tune when they came into office. will we see something similar in italy? we saw a little bit of it already in the sense that the five-star movement started to communicate to their base. we promise these fiscal easing steps, but we can't deliver it all at once. i think they are starting to backtrack. the degree to which they do that will determine how much weaker it will go. alix: you can see inside the bloomberg, german and italian spread three rating. it is more on the front end.

owncally issuing their short-term debt. that is a parallel currency, is it not? discussion,ad this different currency concepts, for a while. it is unclear how serious it is. week weemphasize last had a look at what this government contract would look like. your skepticism in there that got weeded out. the five-star movement has become much less extreme on their euro over the last couple of months. they have officially taken out euro skepticism from the program. , but is discussion

fundamentally the five-star movement is moving towards the center on this topic. if were going to have a big selloff because of concern about the euro from a systemic point of view, and if the five-star movement is not pushing that agenda, we will not get there. david: how skeptical are we about the euro project overall, and the second is how much money do you want to spend? if you spend too much money, it brings real tension to the ecb and with europe. is this going to be greece? is about, thet it degree of fiscal tension in the budget, then the tension that creates with the eu. that is what is going on here. the proposals they are talking about add 1% from gdp to the deficit. they are round 2.5%. we have tensions brewing. that is what this market

instability is about come how big is the fiscal problem. from 124 to below 118. we had a decent move and a good chunk of that is the dollar. the euro is a tricky currency to trade. when you have risk aversion, you sometimes have this situation where you have repatriation into the eurozone and the euro starts to trade differently, so you can have quite a bit of volatility. be careful how you extrapolated. alix: thank you. , venezuela another six-year term. what are the implications? this is bloomberg. ♪ s? this is bloomberg. ♪

alix: this is bloomberg daybreak. i'm alix steel. off thesappearing table, potentially a trade truce. dow jones up by 27 points. becauseill be lighter

the dax is closed on the day but pay attention to any italian asset class. not just the fact that a populist government could be forming but we could see hints of a parallel currency, and that is weighing on all btp's but particularly the front end. yields moving higher by eight basis points. euro-dollar also weaker as well, a decline in the last six sessions come the longest losing streak since november 2016. yields in the u.s. -- i point out the three-year because we will see a lot of options. $99 billion of fixed. it will be the reverberation on the dollar? david: how much will the u.s. government have to pay? alix: you will find buyers, but at what price? the other options were solid. it will be interesting to see the short-term effect. venezuela,ing to

president nicolas maduro declared victory in the presidential election, saying venezuela will be a guarantee of stability in the region. >> we make a big effort for this country attacked by the american empire. i tell the empire, slow down. empire, slow down. i don't know if they will understand. therstand that venezuela is guarantee of political stability in the region, south america, and the caribbean's. david: we bring our bureau chief down there, patricia lyons. how is the rest of latin america reacting, that venezuela will be a source of stability? >> this morning, everything seems to be a bit quiet so far. david: were there surprises in the election?

most thought that president maduro and get a new term. what about turnout? >> the result is unsurprising but i don't think anyone would have expected that the turnout was as high as it was. empty andpractically we were on the western, more popular side. sometimes i was the only person there, apart from the people working on the buildings. it was really astounding. authority cited an extension of 38%, the highest since hugo chavez was elected for the first time. david: for those of us in the gringo empire, as president maduro refers to it, could anything change direction, the level of abstentions, would it cause him to change his other countries to recognize this election as legitimate? indication maduro

will changes direction from now on. we know venezuela is under review for oil sanctions from the u.s. that could change things, but that would be a blow to an economy that is already in collapse. david: thank you for reporting, patricia. alix: senator marco rubio expressing his concerns -- never mind, that is china. coming out strong against sanctions in reaction to the u.s. joining us now is christopher sabatini, a columbia university school of public affairs member. are we going to see more u.s. sanctions, particularly on oil? >> we saw them on friday, a new list of individual sanctions, freezing of bank accounts. treasury, the department is considering a wide range of things. one of the things they are looking at is sanctions, and

banning it exports of u.s. light crude and other chemicals that allows venezuela to treat its heavy crude. alix: basically, dilute and said, you have to grease the wheels of the pipes in order to send it down. if you are looking at 1.4 million barrels a day, what is the worse case scenario? >> first it was 3 million barrels a day when chavez first took office. it is already down as they are not putting in enough investment. conocophillipse, won an arbitration battle and is starting to seize venezuelan assets in the caribbean, including tankers. already, while oil prices are back up -- not where they want them -- but they are already seeing a crib in their ability to export. david: is there a point where financial pressure becomes so

great, president maduro has to change his ways? as a practical matter, the reserves are down to almost nothing. people are starving. people don't have enough food to eat. >> nine out of 10 people say they don't have enough food to eat, malnutrition rates around 15%. we are reaching hyperinflationary levels. i don't think anything will get nicolas maduro to change his ways. people are looking at fissures within the regime that may change course but i don't think he is capable of seeing the rift in his own country, he does not really even know what is going on. alix: conoco phillips is easing back assets. then there was that report that said the courts have ordered venezuela to continue to ship products to the caribbean because the caribbean needs the oil. the money will be put in escrow military go to conoco.

if that is a framework of international companies, how does venezuela pay for it, what do they do? >> i was speaking to somebody from conoco phillips the other day and he was saying that they were afraid all of their claimants may come in. you are looking at a feeding frenzy of assets. , 95% of its exports are dependent on oil. you start to crib into that and it will be difficult. david: what is the need for foreign exchange? oddly enough, hugo chavez converted a lot of their hard currency to gold. a lot of the hard currency is gold in their central bank. they are locked out of financial markets. among their sanctions, branded any individual or bank from floating any new debt from venezuela. david: as i understand it, they continue to pay down on their debt.

does that mean that they can go for quite a while in terms of getting oil revenues in? >> they still can, yes, but those revenues are declining. if they are going to escrow, they cannot get much benefit out of it. alix: there are three refiners here in the u.s. that are totally owned by venezuela, so how does that affect the situation? we also talked about this with argentina, but if you have a claim, you don't have any sovereign immunity. that is a real claim that needs to be paid in some way. >> people are already assessing in terms of what vacancies. it is -- this is what caught up doing right now. alix: gold companies also getting in on this. because they have a huge amount of gold. and ramps up the point that you have all this wealth and cannot extract it and productivity is so low because you cannot manage to work. david: if there is a race to the

courthouse, which is it, the southern district of new york? >> i think so. case came out of the world bank arbitration but a lot of it will be settled in new york. the meantime, oil prices continuing to rise on a chance that venezuelan oil could be paired back. is there a situation where production does not keep falling from here? >> no. , ifonly scenario possibly russia or china comes in and makes a huge investment. that is a concern among american security analyst. should the u.s. impose too tough of sanctions, russia may come in to step it up. david: how long before you can get production? as 10 yearsou a job ago, and at that point they were

disinvesting. how long would it take to turnaround production? >> not fast enough, years. supposedly they have so degraded the status of the equipment -- alix: they cannot necessarily use their refiners to make products because they are so dilapidated, so they need those refiners for their products to sell. also need for new investment for technology. who is going to go in at the second? why would you want to be a part of that? you reported that oil companies are starting to invest more in technologies. you cannot just have maintenance. alix: or else he will be in big trouble down the road. david: christopher, thank you for being here. tesla moves beyond the masses. we look at the rising price tag of the model three.

as you come into work today, listen to our colleagues on bloomberg surveillance. live from new york, this is bloomberg. ♪

taylor: this is bloomberg daybreak. i'm taylor riggs. coming up in the next hour, john berger, cenovus energy ceo. now to your bloomberg business flash. yet day as been under pressure

from elliott management. the conglomerate has dropped a controversial deal between two of its units. elliott says the arrangement would shortchange minority investors. sony is turning away from the gadget that made it famous. willompany's new ceo unveil a three-year plan tomorrow that embraces their growing reliance on income from gaming subscriptions and entertainment. in the last year, the company sold every television's, cameras, and playstation consoles. ergo annual earnings will fall for the first time since 2014. a pilot shortage forced them to agree to unionization and raise wages. air ceo also says higher oil prices could force norwegian air to go bust in 12 months. norwegian says that has no root in reality. that is your bloomberg business flash. david: trash talking your

competitor. alix: we now turn to wall street beat. three things that wall street is buzzing about this morning. once touted the model three as the car for the masses. now it is almost $80,000. sendai taps the brakes after activist investors elliott. and do what is right. at the carnegie mellon commencement ceremony, david pepper shared his advice with graduates. do what is right. david: sounds like good advice. kelly, us now is jason executive editor for global television. i think this is pretty ironic. we are having trouble making the $35,000 car, so let's make a much more expensive one that goes fast. tesla's have largely gone to the rich and not so famous but certainly the more affluent.

when the $35,000 tesla first came out come you get the sense that people on wall street would say, this is great, everybody can get a tesla -- wait, everybody? not so cool anymore. the lies some pretty interesting things going on behind the scenes in terms of production delays and production costs. you know the car industry as well as anyone. david: elon musk tweeted, with production first you need to achieve target rates and then slow down to achieve target costs. shipping right away would cause tesla to lose money and i. need three to six months to get it going. is taking a while, we have to get this short about and maybe down the road we will be ok. this assigning goldman sachs, but the company burned through a billion dollars in cash in the first quarter and may need $10 billion more by the end of 2020. alix: quickly on that point,

does it say that he cares about profitability now? that is something. david: don't alienate the capital markets, if you need 10 billion. let's turn to john died. dai.yun they had this financial management thing going where they would restructure some of their subsidiaries. elliott management said not so fast. >> holsinger started squawking. in this case, it worked. david: they had their annual shareholder meeting scheduled but now they had to reschedule it,, with a new plan. >> holsinger is one of the better-known activists out there. interestingly, from a korean perspective, a made a proxy battle with samsung, narrowly

lost, went back for another bite of the apple, went back for a different korean conglomerate. also from a different perspective, we have seen more activism in asia broadly. we spoke to dan loeb about some issues there, as well as carl icahn, who never seems to stop finding things to have an opinion about. david: with some success. >> he has done all right. alix: david tucker came out at carnegie mellon university and gave a really moving, poignant speech. it was a really nice moment to see. >> let's listen to what he had to say. >> you know what? it turned out all right. because i did not end up a partner at goldman sachs, i started my own company 25 years ago in 1993.

and ended up doing something that was a lot more fun and make my life better in so many ways. right,, do what is really. do what's right. >> this was so interesting because that sounds like fairly basic advice, but he backed it up with several anecdotes about his own life, and specifically his early career at goldman sachs. they went to legal and they said, it is ok, he said, i still don't feel good. then he did not make partner. really got into this idea that he never knew exactly what it was but he did feel like a blue back on him a little bit. the fact of the matter is not making partner and goldman and i would probably would have sent him on a different path, led him to found one of the most

influential hedge funds. we have been talking about this guy a ton over the past week, in part because of his performance, but also he spent two point 3 million dollars last week to buy the carolina panthers. let's talk about goldman sachs, talk about the shakeup we heard on friday. no surprise that you had david solomon replacing lloyd blankfein. now we have a potential retirement by the end of the year. i was surprised at this be that we got the news out. >> this was a report initially from the new york times that lloyd blankfein will step down around the partners dinner in december, david solomon likely to take over. it sounds like david solomon is artery -- already started to pick and choose his management team. he should want david solomon to start moving forward. you cannot wait forever. >> it will be interesting to see if other wall street banks, including jpmorgan, start to

think along the same way. david: many thanks to jason kelly. coming up, the supreme court term is coming to a close and several decisions are expected in the next few weeks. if you have a bloomberg terminal, check out tv . an erect with us directly. -- interact with us directly. this is bloomberg. ♪

david: the supreme court is coming to an end, which means every monday at 10:00 we get together to see if any of those big decisions have come down that day. we welcome our supreme court reporter to see what is on deck. fittingly, he is at the steps of the supreme court. greg, welcome. it's talk about the big ones, particularly of interest to the business immunity, starting with that union case. >> this is a case involving where the government sector workers can be required to pay for part of the cost of

collective representation. in 1997, the supreme court said yes, they can, as long as those fees don't go to political or ideological activities. the court is thinking about overturning that decision which would mean workers have a free-speech right to say i don't want to pay those fees. specifically these are public unions, but that is where the power is shifting in the country. the unions say this is critical to their future. >> we don't have a firm estimate as to how much money may be at stake here, people, unions. want to talk about how many people may opt out of paying those fees, but it could affect potentially 5 million workers in 22 states where right now workers have that right to opt out. david: could also affect on the other side people negotiating with unions? if you have a lot of people not participating, maybe the union has less clout to expect higher wages, better benefits? >> this whole idea that you could require these fees was

originally crafted in the interest of the government, the idea being it is easier for the government to have one bargaining unit to deal with, rather than have all of these workers say i don't want to deal the union is cutting. , want to form a separate union or i want to disassociate myself from the union's position on things. claim against this is a first amendment claim, right of association. air is another case of their involving wedding cake. explain that to us. >> this has caught the public's imagination. it started with a colorado baker who said i don't want to make cakes for a same-sex couple who was getting married in massachusetts, they wanted a cake to celebrate. he says, no, i have a religious objection, and i would be expressing myself by making a cake we are winning, in a way that i'm opposed to. a civil have -- has

rights law that says you cannot discriminate on the basis of sexual orientation. civil rights officials say this baker has violated that law. david: i am fascinated with this case because i thought we litigated this under civil rights, going back to the housing act. people making all sorts of claims, that i should have the -- the government cannot tell me who i should rent a room to. why is this a different argument? >> it is a similar argument. if you talk to folks on the gay-rights time, they will say it is almost identical. there is a supreme court case from decades ago that involves the owner of a barbecue restaurant didn't want to serve black people. wasg the arguments he made that he has a religious objection to doing that. is, is the question here the court going to treat discrimination on the basis of

sexual orientation differently than discrimination on the basis of race? david: thank you. we will be checking back in at 10:00. alix: i learned a ton, thank you for that. price,up, t. rowe sebastian page, will be joining us. equities rebounding in the futures market but you are seeing a steep selloff in italy. the bond market dragging on peripherals. crude brent slightly turning lower. soybeans and eating to grind higher. no trade issues? by some soybeans, china. this is bloomberg. ♪

>> right now we have agreed to put the tariffs on hold while we

try to execute the framework. fact thateteer the the worst-case traits in error between the u.s. and china is put on hold. the question becomes what can china buy? italy may have a government deal but it are basel to increase short-term debt increases worries over currency growth and stability. the sleeping dollar dragon awakes. a stronger dollar crushing emerging-market fx. big u.s. treasury auctions on deck. david: welcome to bloomberg daybreak. i'm david westin. it is really crushing em, the dollar. alix: we have been waiting for it. was, e.m.inning, it is totally different than 2013, they are much stronger, they are in a good place. all of a sudden, that story no longer holds. weid: how many times and hear that, when it turns, it will be different. alix: it is like the market

indicator. let's humor markets stand. s&p futures up by 15. european markets a little softer. the dax is closed. hitting a year to date low in trading. here in the u.s., heavier selling on the front end. 2-year on backing up by two basis points. that flat despite the fact venezuela has mr. maduro as their president for the next six years. david: surprise, surprise. today, we started a robust week of u.s. treasury auctions with a total of $96 billion to be sold. tomorrow, president trump will be meeting with south korean president moon jae-in as part of the preparation for the big summit with the north korean leader next month. and all week long we are hearing from members of the federal reserve board. it will end the week with a

speech on friday from fed chair jay powell. for right now, let's get an update on what is making news outside the business world. is planning to lift limits on the number of children families can have, according to people familiar with the matter, who say the move could happen this year. it would be a historic and to a four-decades-old policy that led to countless human rights abuses. there is a truce in the trade dispute between the u.s. and china. it is not clear how long it will last. steven mnuchin says the u.s. has put proposed tariffs on hold while negotiations are going on. a joint statement over the weekend makes the make commitments to rebalance trade. is justice department feeling the pressure from president trump. the agency has asked the inspector general to determine if politics have tainted the fbi's investigation into possible collusion between russia and the trump campaign.

that came hours after the president demanded a probe into whether the obama administration infiltrated his campaign. global news 24 hours a day, on-air, and on tictoc, powered by more than 2700 journalists and analysts in more than 120 countries. on taylor riggs. this is bloomberg. alix: mr. mnuchin to the rescue. here is what he said over the weekend that calmed the markets. >> we are putting the trade war on hold. we have agreed to put the tariffs on hold while we try to execute the framework. the president has been cleared since the first meeting with are goingxi that we to reduce the trade deficit, we have an agreement with china that they will substantially agree to it. president trump weighing in this morning saying china has agreed to buy massive amounts of additional farm and act products, would be one of the best things to happen to our farmers in many years. the dollar trading higher off of

that, highest level of the year. joining us now is michael mckee and sebastian page. good to see you. this is the u.s. china trip -- trade deficit. many b's can you buy off of that -- beans and you buy off of the? >> they by about $13 billion a year worth of soybeans. everything else, there is increased scope for aquaculture sales. the question is how many would be new sales as opposed to moving from other countries that you are exporting to from china? it is not clear how much extra they can pick up. liquefied natural gas, there is a capacity constraint. china is buying a lot of our liquefied natural gas. i brought a chart that shows both the opportunity and the

difficulty that we have. it shows that you are looking at -- the blue line is what china is buying overall. the white line below is what we are selling them. there is a major opportunity to sell more. we have only one operating terminal,natural gas five more coming. we estimate that we could triple the amount of natural gas sales to china over the next year. of course, thatwe estimate thatt a billion dollars worth of additional sales. so you have a long way with natural gas and agriculture to make up the difference. david: let's talk about that $200 billion number, sebastian. how could we get there? on the one hand, we had larry kudlow on the air yesterday saying this is a matter of eliminating terrorist barriers. the other is maybe the so-called

truck sure -- structured trade approach that president pregnant took. which one of those is likely to get us closer to the $200 billion number? think ultimately this is about the u.s. wanting access to the chinese market. from a financial markets perspective, you have tarana burke mother is a lot of noise around -- you have to remember, there is a lot of trade around -- noise around trade. the size of the chinese economy .s $14 trillion whether we get 100 billion, 200 billion, from a big picture perspective, there is some noise in there. there is no final agreement that's been made. it is not clear exactly where we go from here. probably mildly positive as you reduce the risk and you see the market reacting to that.

ultimately this is about the u.s. getting access to china. there is no agreement on the amount, by the way. china says we will buy significantly more from the u.s. that feels good but this could reverse also through the negotiations. as we know, things change quickly around trade. david: i'm curious about a possible ancillary effect. it is encouraging until perhaps it gets reversed. we could have a tweet tomorrow that takes us the other way. at what point is there an overhang of activity as businesses are not sure what is coming out? is one of the context a fairly strong global economy. so that helps. all this negotiation around trade is within the backdrop of very strong economy, most pmi's globally above 50, quite a few above 54. that explains the resilience.

the market reacts more on the upside than on the downside around trade news and generally around earnings and so forth. a lot of it has to do with strong fundamentals. i think there is an overhang of risk. you are right, things can change quickly. from our portfolio perspective, ultimately, we are neutral between emerging markets and developed markets at the moment. said todayt suisse that china's economic relationship with the u.s. is pre-dubya to period, regular confrontations, annual talks to resolve disputes. >> they still have not done anything on the idea of intellectual property. the trump administration seems to have backed off of that entirely. once they get through this north korean summit, maybe they will come back to it. that has to be the next thing, how do you deal with that. as we said just now, you don't

know what the numbers are on this, we don't have any firm agreements, no contracts have been signed. it will be something to watch in the month going forward. alix: i should point out, steven it was a trade dispute with china, never a war, so walking that one back. we want to update you on some breaking news concerning blackstone. blackstonefficial, will be by lasalle hotel's for $4.8 billion in an all cash deal. bloomberg broke that deal earlier, and now it will be official. david: helton worked out all right. coming up, italy edging toward its first populist government following a week of turmoil in italian bonds. this is bloomberg. ♪

taylor: this is "bloomberg daybreak." the biggest step yet in ceo's john flannery's plan to get rid of unwanted units. to merge its locomotive business with the lab tech. ge will get $2.9 billion in cash at the closing. its shareholders were alone over 50% of the combined company. checking other one hotel deal into another. they have agreed to by lasalle hotel. off week, blackstone sold the last of its hilton worldwide stock. fifth third bank is expanding in the midwest. the lender has agreed to buy chicago-based and be financial, a cash and stock deal worth $4.7

billion. the offer represents a 24% premium to mb's closing price on friday. alix: thank you. regional banks saying, let us go. alix: italy is inching closer to deciding who is next prime minister is. and law professor is emerging as a possible candidate but criticism is coming from everywhere, including the french finance minister. he says is the new government took a risk of not affecting its debt, the financial stability of the entire euro zone will be threatened. still with us is sebastian page. all, you seeys it the 2-year having a huge selloff today. are they cheap enough for you to want to buy? sebastien: when you talk about spending more and cutting taxes, of course, this will put upward

pressure on the bond yields. the jury is out whether it is a buying opportunity at the moment. reflect a broader trend toward populism. euroee, it does jeopardize stability over the long run. ,e also look at the stock side the economy in general in europe. that is a risk to the downside. european stocks are cheaper than around 14 peso relative to 16. we like stocks in general relative to the u.s., all else being equal. went throughear we a series of election in europe with populism at play. we got through the netherlands, france, germany, now italy. does this really give us concern about the strength of the eurozone overall, does this put that in jeopardy? sebastien: not necessarily in jeopardy but it is a trend to be

mindful of. there are second-level affect we have been thinking about. for example, we talk about inflation. what does populism mean for inflation? 3.9% unemployment in the u.s., decent growth, 20 trillion in qb since the crisis, poor and fiscal and gas going on top of it in the u.s. and you don't get a lot of inflation. argued that the trend toward lower inflation has been driven by automation, technology, disruptions, but also by globalization. one of our discussion points in our committee is, this rise in populism, if it is resilient, and italy shows it could be more resilient than we expected, what does it mean for inflation? all else being equal, it could speak to higher inflation pressures. and youdd trade war's have the secular trend of

globalization, not putting a downward pressure on this and you at all of these other factors, that is a resource watching for. alix: i want to highlight euro-dollar. at one point today it hit the lowest point of this year. concerns over these conversations over the weekend. are you a buyer here? sebastien: not necessarily. our view is someone neutral. the u.s. dollar has shown strength relative to the euro recently but it's been in a longer-term decline. one thing we like is to buy global bonds despite the low yields, but have some hedge back to the u.s. dollar. as an allocation perspective, we like that as a class. on the hedges you pick up that extra yield, and it is relatively diversified. it gives you a source of kerry that is not credit related, not entirely dependent on european

strength, the euro, the risk of rising rates throughout the world. david: sounds good to me. thank you. that is sebastian page of t. rowe price. coming up, revving up prices. tesla's electric car for the masses will now cost $80,000. what this could mean for the automaker. this is bloomberg. ♪

david: tesla maybe having trouble getting its model three out the door but ceo elon musk has a solution, a faster model that cost twice as much. with two electric motors, it will do 0-60 in 3.5 seconds. joining us now is our automotive correspondent. excited about the new model three? >> [laughter] you always knew the dual motor versions were coming anyway. good to the point that they are

getting to production of those but it also moves people away from this idea that there may ever be a $35,000 car. david: i am going to pull this up because you point this out. one of the things that elon musk said over the weekend was this is really a competitor to the bmw m3. you point out the difference between tesla and bmw in terms of their operating income. i am putting up a chart that illustrates that. >> i think that's the case with tesla compared to any other automaker. you see comparisons in various ways, market capitalization versus ford, performance of the model three versus the bmw m3. at the end of the day, this is a company that is an automaker, they will get margins. they are in a growth space right now but when you compare in the same sentence somebody like tesla from a financial basis to somebody like ford or, it is not

even the same animal. david: does this tell us anything more broadly about the electric car market? will a move like this really affect things? this really does encourage the nissan and toyotas. >> this was their plan from the beginning, upper plan market, premium luxury vehicles, then open down to something affordable for the masses. it just shows that that space is not there yet. the business economics of making a $35,000 electric vehicle don't exist yet. not only does tesla prove this by general motors cruises as well with the chevrolet volt. to get thatle vehicle engineered, designed, manufactured and to market, but they don't really want to sell it, you don't see a whole lot of marketing of it, simply because they lose money on everyone they make. as a science exurban,

successful, but they understand the economics of the drivetrain technology, and you understand that is why they are not pushing the vehicle. at the same time, they have a car that does cost $35,000 and is electric. kevin, thank you so much. alix: staying with ev's, bloomberg recently issued their latest report. china continues to be the largest ev market in the world through 2040. the blue bar is what you want to pay attention to. that is china's market share of ev. the yellow is europe, white, the u.s. joining us now is lee morrissey, our energy finance analyst. is this a subsidy situation, is that what we're seeing? >> the ev market today is a subsidy market. tesla is only about 10% of the global market. we have seen rebates and tax

incentives for these oems to sell these ev's. we expect that to change in the next five years, but for the next few years, it is subsidized. alix: what is interesting, india only makes up 7% of the overall market. when we talk about the potential for ev, it is all that india and growth. what are you seeing? >> we are not seeing much incentive in india. per capita income is pretty low, so the transaction prices of vehicles is also low. on a dollar basis, the cost for an ev is the same and is very expensive in india. the government has not putting incentives to deploy them. we believe they will take up but once the economics make sense. david: when will electric vehicles be able to pay for themselves, what will change that, the heart of batteries -- the cost of batteries? studyinge been

batteries. prices have fallen about 80% 2010. we expect that to fall another 50%. we think that is where the crossover parity is. when we expect the cost of electric vehicles to be competitive with combustion engines. you are seeing today on an operating basis, starting to make sense already. do you have to see cobalt be replaced, a smaller amount being used to make that a reality? >> absolutely one of the risk factors we have in our report. mainly concentrated in the democratic republic of congo, some supply issues there, reflected in the high prices in the market. the automakers are responding by areas.g to lower cobalt they are trying to hedge away from cobalt. david: there is a general sense that china is ahead of the u.s. and will remain ahead of them as it is a priority of the government. is that accurate?

>> absolutely correct. we characterize the chinese market ev policy as an industrial policy, leapfrogging competition in the auto market, becoming a leader in ev industrialization. that is what we are seeing in terms of rebates, oem manufacturing, and sheer volume. close to one million cars sold a year. alix: so what company wins? >> you're hurting your previous segment tesla being talked about a lot but we are seeing other oems desponding. they are not sitting idly by. by 2020, we expect over 300 models to be offered by incumbent oems. the response is aggressive and we expect that to change the landscape dramatically in the next few years. gm is way ahead afford. david: without a doubt. and others are

really going out. alix: great to get your perspective. nicolas maduro wins another term. we talk about this with the mastermind behind elliott management's bet. holding steady. this is bloomberg. ♪ mom you called?

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. alix: this is bloomberg daybreak. s&p futures are up by about 15 points. softer over in europe because germany is closed on the day.

at sign equities down 8/10 of 1%. you do have a potential government but they are going to issue some short-term debt which could pave the way for parallel currency. euro-dollar down 1/10 of 1%. two year yield up eight basis points. here in the u.s., you are continuing to see a selloff. crude holding steady. it feels like we are already priced in that maduro win. not a ton of buying. david: it is already gone up a long way. alix: still holding up. david: now we will find out what is going on outside the business world. for that, we turn to taylor riggs with the "first word news."

taylor: president trump is using the authority of his office to counsel sash to counter the special counsel's russia investigation. the president is demanding the justice department look into whether or not the obama administration if treated his campaign. the agency responded, saying it has asked its inspector general to determine whether politics has tainted the fbi's role in the russia probe. the country's may newspaper is reporting that -- is the front runner to head up a new populist government. ofe verily has the backing the anti-image -- anti-establishment movement and the anti-immigration league. mark zuckerberg meets tomorrow with parliament numbers -- european parliament members over -- lawmakers want to know how the data of up to 2.7 million europeans could have ended up in

the hands of cambridge analytic. global news, 24 hours a day, on air and at tick toc on twitter, powered by over 2700 journalists and analysts in more than 120 countries. -- cambridge analytica. global news, 24 hours a day, on air and at tick toc on twitter, powered by over 2700 journalists and analysts in more than 120 countries. this is bloomberg. david: venezuela has nicholas maduro as their president for the next six years which is not a big surprise. the world is watching to see if his new term will bring changes. we welcome jay newman, former per fully on management with -- former portfolio manager with elliott management. also with us is katia porzecanski. great to have you with us. i will pull up a chart that shows a difference in the spread between the bonds and venezuela bonds. you just corrected me and said that blue line is one bond that is secured and they are paying on.

the white line is the venezuelan debt, the sovereign debt. is this an opportunity for investors? jay: if investors have a long-term view, i think venezuela is an opportunity but in the short term, there is little to do. no one can negotiate with maduro , in part because he is under international sanctions. no restructuring you could ever engage in. not only that, they are pretty much running out of money. in the short term, nothing for investors to do. in a medium-term, if there is change, when there is change, it will be an opportunity for investors to engage. this withpare argentina because you are famous for that investment. it was trading low enough that sooner or later, they will have to pay off from these bonds and it worked out for you. is it a similar situation in venezuela? jay: i hope it is not longer

than argentina. alix: how long? jay: that is the big question, because what i call a day after problem, the day after maduro, there will be a new government in place and that is the government investors will engage with. katia, i was talking to one investor and he said the risk becomes like cuba where at some point, there will be a regime change and there will be an investment opportunity. but at some point has lasted decades. what would trigger political change? katia: there was such a low turnout for this vote yesterday. the government said it was about 48% participation. the opposition is saying it was 18%. it is really about a man without a mandate as some consultants are saying. maduro does not have the will of the people. it is not have this message that

he has to deliver on. the question is, how does he respond? a furtherspond with authoritarian type power and does he tighten the screws on everything and start going full-blown dictator in the coming years as he tries to resist any sort of opposition? that is what we need to see. does the military stand him -- stand with him or go against him? higher ranks in the military are not allowed to speak to lower ranks so there cannot be any plansng or potential coup in the works. we need to see if the military stands by this man without a mandate. the idea ofabout seizing assets? wasn't there a ship you seized over and africa? jay: there was -- over in africa? jay: there was.

david: what is the phenomenon where you have creditors rushing to the courthouse to try to get leins? legal action, attaching assets is a very tough game. asa has roughly $30 billion in debt. the sovereign has $40 billion. there are a lot of trade creditors -- lots of trade creditors. call it 100 plus billion of debt. go -- a special case because the companies that have the awards are dutch, they are suing in the netherlands, antilles, going after assets that are strategic for them. in general, with unencumbered

assets outside of venezuela, against $100 billion of debt, it is a fools errand to think you can recover that way. alix: so this is not going to set a precedent? jay: you can't stop people from going to court. i just think with the amount of assets available and the cost of going after them, there is no point in doing it. alix: that in the oil market was a big turnaround. the other question is are going to see u.s. sanctions against imports and venezuelan oil? katia: a lot of speculation that because this was a clearly fraudulent election and an election that nobody is -- that of the major trade partners of venezuela or the u.s. or the trade organizations are going to is -- are going

to acknowledge, they could impose stricter sanctions. there are steps they could take. allowing the u.s. companies to insure venezuelan companies. the u.s. ships products to venezuela. they have to import products from the u.s. to make their oil exporter will. -- exportable. --e the u.s. pull that lever pulls that lever of banning imports from venezuela, they cannot unpull it. if that does not have a positive outcome, we have lost all of our leverage. what if they risk pushing venezuela more into the arms of russia and china? does the u.s. want that outcome?

there is a lot of tactical planning. it is a geopolitical question. you have to figure out what is going to happen. we talk about leverage, what leverage is there with maduro at this point? is he worried about his or vacation with other latin american countries? is he worried about his reputation globally? what would cause him to change course? jay: i have no idea. beyond that, i have no idea what western countries like the u.s. would see as acceptable. bill livingood only thing that is going to be acceptable in venezuela is a new the administration -- the only thing that is going to be acceptable in venezuela is a new administration. there is a bull case and a bear case for venezuela.

the bull case is you have a country that is still producing oil from the first oil well ever drilled in 1914. that well is still producing oil. the largest proven oil reserves in the world, extraction costs are very low. $13 per barrel. not only that, mineral resources, the ability to write up -- revitalize agriculture. venezuela should be a very wealthy area. the good news is, the debt should be money good. the bad news is, venezuela has complicated friends like china, russia, iran and cuba. dictatorships don't usually go down easily. ,t is going to be a torturous complicated road for investors. alix: with argentina, you saw they were able to avoid dealing with holdouts and creditors for a long time because they had that commodity boom and they were able to keep exporting their grains and eventually

their luck ran out and they had to come to terms and face the music. with venezuela, is there any way without keep going completely dealing with their creditors anytime soon? ,ay: putting it beyond maduro venezuela will eventually have to deal with its creditors because it will want access to capital markets. it cannot get access without solving the debt problem. the debt problem means the entire debt problem. that, if venezuela and its creditors the you a asset class with different restructuring opportunities, i think you can go very well for both -- it can go very well for both. alix: thank you very much, jay newman, formerly at elliott management and kathy a horsey kamsky -- and copy of course he

ecanski.-- katia porz if you want to turn on your radio and listen to our colleagues, jon ferro and tom keene. bloomberg surveillance can be heard in new york, boston, the bay area and all across the united states on sirius xm satellite radio. this is bloomberg. ♪

taylor: this is bloomberg

daybreak. coming up today, jim sloan of wells fargo. now to your bloomberg business flash. google could face a $4.3 million damage british lawsuit involving iphone users. iphone users claim they unlawfully collected personal data by bypassing the iphone default privacy settings. google denies the claim. predicts -- a pilot shortage forced the airline to agree to unionization and increase wages. prices could force norwegian air to go bust in 12 months. norwegian says that has no basis in reality. u.k. crowns the

court has dismissed fraud charges. the bank was accused of conspiring with former officers and employees to commit fraud. the court also throughout a charge of unlawful assistance. the area fraud office is likely to try to get rid of the charges. that is your bloomberg business flash. aix: california has taken giant step in clean energy, becoming the first date to require that all new homes have solar power. what is going to be the longer-term effect? joining us now is john berger, sunnova energy ceo. he comes to us today from houston. also with us is hugh bromley, bloombergs newman inergy finance specialist -- bloombergs new energy finance specialist. it certainly has more growth to the marketplace and i

would predict that more states are going to look toward california as they do in other areas of the economy and see about implementing something similar to what california just implemented. i think he gets to the point of solar for your home and batteries for your home are normalized. this is a step in the direction of saying this is not alternative energy, this is energy and increasingly will become the majority. i think it is happening much faster than people think. alix: if you take a look at the companies involved, what was the market reaction and what is the reality? a jump across the news. you also saw firms that only tangentially touches solar -- touch solar. solar, it does not have a

roof top at all but they jumped on the news. it will be a different play that taps into the business market. the california mandate is more advantageous to groups that are rolling the cost of solar into a mortgage or building a new home. the firms did see a positive reaction through the news. alix: interesting. david: john, give us a sense of the market. i would assume they are pretty -- california is pretty high up there in terms of solar use already. the penetration rate in california for homes is probably approaching about 8%. we still have a long way to go. they put the mandate into accelerate that growth. we anticipate this will add around 650 megawatts of

residential solar demand between 2020 and 2023. it is a pretty significant increase in growth for california. david: this is for new homes. doesn't it take a long time to get the penetration of in california if you are just doing new homes? john: if you are just focusing on new homes although roughly 100,000 new homes are built every year in california. it will take a few years to add up, but it is a fairly meaningful amount of new homes. i would also say this enables a lot of other people in terms of companies like sunnova which is a residential service company to provide more services to these homeowners. not just even if you roll the solar system into your mortgage, you'll still want to have additional services, take care of the power service, put batteries on, there are a lot of other things that go with this.

you have to dig down into the details to find out how much growth is going to happen and it is a greater story then seems on the surface -- story than seems on the surface. alix: is there something on production the needs to be done to have a broader implementation? hugh: it is a bit of both. up until last year, it slowed down and nowhere was that more true than california. the california market has been seeing -- has been slowing. only 1% nationally, there is no saturation issue. one issue is pricing and the u.s. is paying about twice as much per unit of solar as you might pay in germany or the netherlands.

you installing bigger system and you are paying about four times as much for a rooftop solar system. that is a function of what the industry calls soft cost. it is a function of customer acquisition, the market finding a customer, arranging the financing to service that customer. that is not so much a fixed cost as it is a willingness -- if costs are defaulted here, there needs -- are to fall here, there needs to be a willingness to spend in finding that next customer. david: is that your experience, john? a soft cost holding things back? john: that is largely true. the cost in the united states is quite a bit higher than anywhere else in the world. part of this is in the way we subsidize, especially rooftop solar.

we subsidize at a basis of cost-effectively, so we are asking people, the more money you spend, the more money we give you. it is a flawed construct in the subsidy we would can deftly would like to see continue to see work down -- we would like to see continued to work down. most of the people around recognize a broken regulatory power system. when he to make sure that the current utilities are put on a level playing field and that competition and consumer choice dominates the marketplace, not decisions by politicians or borders on crony capitalism with the monopolies. you need to have a level playing field. when you do that, than a lot of costs are going to fall out of the system. a lot of effort has been put into how do you slow down rooftop solar and how do you slow down batteries. we need to set the table up to

let the consumers and the market decide. i guarantee we will see a huge pickup. alix: john berger of sunnova energy and hugh bromley, thank you. coming up, huge week for u.s. treasury options. more on what i am watching next. go.mberg users, go to gcv check it out and take a look. ♪

alix: he was what i am watching. u.s. treasury auctions. -- options. 99 billion, but the question is, at what yield where there -- will there be option size increases and you are seeing

shorts pick up on the 10 year as well. how is the market going to handle all of this? the longer-term options definitely did but this chart shows the 10 year yield spiking higher. treasury issuance taking out and we have not seen this large a sale since 2010. that is going to be a real testament -- everly to a real test for this market. david: and there is more coming. alix: coming up all over -- on bloomberg markets: the open, greg davis of vanguard group and bob michele. this is bloomberg. ♪

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

coming up, trade war on hold. the united states and china agreeing to a truce for now, risk assets rallying on the cease-fire. global equities catching a bid. treasuries taking a leg lower. that is ejecting a -- injecting a little more pain into emerging markets. in the markets this monday morning, 30 minutes away from the opening bell after a mild week of losses, futures positive by 15 points. in the fx market, what we have seen over the last morning through to the afternoon in europe has been. a dollar stronger story. in the u.s. session, -- has been a dollar stronger story. session, treasury yields pickup of the cut -- a bit higher. the big story worldwide is the united states and china declaring a truce. markets breathing a sigh of re