debt stop for now. no trade truce in china. tariffs plans to impose of $50 billion after secretary mnuchin says there was a trade truce. who is in charge? populists make a last ditch effort to make a government. the country could head to snap elections as soon as july. david: i am david westin, right here with alix steel. you know it is a crisis in italy if they are going to vote in july. they are at the beach. like eight weeks you get in italy for vacation? david: that is gone. alix: a sigh of relief after the deep selloff across all asset classes, equity futures up 12 points. a broadly weaker dollar story

with the exception of the yen. the selloff in 10 year treasuries on the backend continues. yields higher by nine basis points after the safe haven bid catapulted yields lower. crude pretty much flat on the day. is it a liquidity issue yesterday or is it a serious issue? david: it may depend a little on what they do over -- chaos. time for the morning brief. 8:30, second read on u.s. gdp and core personal consumption numbers. walmart and amazon will be holding annual shareholder meetings. at 3:00, the federal reserve officially begins its meeting on rolling back the volcker rule. now we want to turn to the bloomberg first take. gagee joined by caroline and romaine bostick.

i want to put up a chart of u.s. 10 year over the last five days. is the basically shows yield has come down a lot, although it has come back up, so maybe a little more risk on. romaine: we had a 17 point swing yesterday. i think we recouped 829 basis points this morning so that tells you a little something -- eight 29 basis points this morning so that tells you a little something. a little more buying before we got the italy news. i do not know if today is indicative of a huge shift in sentiment or whether it is more people taking advantage of the current one day, today market situation. david: does this tell us anything about what the fed is likely to do? caroline: we have seen this and the markets this year, the push and pull between the macro environment and geopolitical risk. you are seeing that right now so

with italy and everything going on in emerging markets, you are starting to see some questions, can the fed forward this year? the markets have gone back-and-forth as we have a variety of u.s. data points that were strong and now with that fighting there's a broad geopolitical risk issue. alix: it was three and a half in terms of heights but now we're just below three. the question had been about december. now the question seems to be, will they go in september? is that going to be the one i have to pull back on? italy, no government, through-line to fed. romaine: the market is basically telling you know. we have fallen in a week from a 65% probability in september two about a 30% probability this morning, and that is dropping. off.ber is pretty much we are down to about a 75%

probability in june, but we were over 90% three to four weeks ago. what the bond market is telling you is the fed may go in june but it will really be a day by day, meeting by meeting sort of pace from then on as to whether we get any signal. alix: a lot of that backdrop will have to do with italy. we take a look at what is happened to the two-year btp yield in italy, yesterday saw the biggest jump in record and now we are off that. we have not recouped the losses that we have seen. you definitely have some winners and losers in the payout. ,he ecb does not just by debt they buy corporate debt and bank debt. what the risk is on the corporate level has the ecb making tough decisions. yesterdaywhat you saw was a lot of concern just about liquidity and whether the ecb will keep buying. you just saw two-year yield in italy absolutely soaring and a lot of people were long italian

bonds, and experiencing some serious pain. alix: how much is going to be because the ecb is buying and how much is that bottom fishing by investors? wilcoxe will clocks -- weighed in on that. >> for me today, europe looks relatively robust from a fundamental perspective. bear in mind that from a valuation perspective against not only of long-term averages but against other regions, europe is looking incredibly cheap today. that should be the biggest driver of investment sentiment moving forward. alix: how much are you hearing that this is the time you want to bottom fish? romaine: you are hearing some of that. you so that reflected in the bond auction in italy this --ning on 10 and five yield five years. yield will drive demand, but the question is, is this a transitory play or are people

thinking it is the long haul? david: if you look at the risk and trade issues, wilbur ross is right now talking with ms. maelstrom, the trade representative for the e.u., and this is what he had to say going in. >> concessions that were perfectly appropriate for u.s. to make to europe, to asia, to everywhere in the immediate years after world war ii are no longer appropriate. the concessions were not time denominated. they were permanent concessions. that is a real structural problem. it leads to lots of inequities, lots of trade barriers that are quite asymmetrical. david: this is once again the administration saying, we want to change the entire rules of the game, not just around the edges, it is fundamental. what kind of risk does that pose

for various players in the marketplace? been one ofat is the key reasons for volatility and you have seen that in china. the unpredictable administration , and china is saying, you flip-flopped. things were looking good and you are seeing over and over again the trump administration's willingness to change their tune. david: the white house announced yesterday we are going to go back after that $50 billion. "the wall street journal" reporter that secretary ross was going to go to beijing after paris and may not go. romaine: they are basically trying to rewrite the entire rules of the game, but not within the wto framework. we know what it looked like when we did not have roles of the game and that is why the wto was created. the questions out of china and europe and other allies, why not facilitatethe wto to these changes so we have

something that can be predictable and sustainable rather than this ad hoc approach that seems to be throwing everyone for a loop? alix: it makes it easier to negotiate with. you know who to call and you pick up the phone. in the u.s., do i call steve mnuchin or wilbur ross? david: they are saying it just takes too long. he is dumping all over the wto. alix: caroline gauge and romaine bostick, thank you. italy's attempts to form a government, is this the time to buy or wait on the sidelines? this is bloomberg. ♪

♪ >> this is bloomberg daybreak. campaign to chip away trading restrictions imposed after the financial crisis is paying off. the federal reserve board meets today to start rolling back the volcker rule. the regulation is designed to keep banks from suffering outside losses because of speculative that's with their capital -- bets with their capital. the royal bankm of scotland, the ceo resigned to pursue another opportunity. stevenson was seen as a potential replacement for ceo ross mcgowan. more boeing 787's are likely to be grounded because of problems with its rolls-royce engine. it will happen before next month's deadline for mandated inspections for durability problems. the number of grounded 787's

will rise to about 50. that is your bloomberg bigots to -- business flash. david: italy continues to go through its political turmoil as every day seems to bring a new twist to the president's attempt to form a government. we welcome bloomberg reporter ann-marie on the ground. coalitionpopulist disagreeing with itself. >> that is right. probably while you were sleeping, early in the morning, they were talking about possibly an 11th hour last-ditch effort to ask the former government, but that quickly faded, sell vini saying he does not want to form a government and he wants a fresh election. now it comes down to when if we see these elections, when would it be?

the earliest would be july 29 and september has been floated. we are waiting on the president to make a statement. we know he met with cottarella this morning. nothing came out of it in terms of cabinet members or when they will get a mandate for parliament to get a confidence vote, so we are waiting on a signal from the president. david: in the first elections, there was a lot of issues and parties. if this election happens over the summer, can they avoid it being a referendum on europe? that seems to be the issue now. annmarie: that is what everyone is saying. there was a great opinion piece saying, you let the genie out of the bag. you brought it out of the bag and to give any of us any sort of clarity, he is saying it would be good if it was about this. the problem is, the populists

have thrived on being quite ambiguous about their policy towards europe. are they euro skeptic? where are they on the scale? it is a de facto referendum. alix: we got some 5, 7, and 10 year bond options in italy. how would you catalog -- characterize that? annmarie: the market seems to be doing much better, especially in terms of the italian bond market compared to yesterday. some of that anxiety is quieting down. not spectacular but not disaster us. think, andnt, i probably a signal to the market that things are calling down and there is appetite for italian exposure and bonds. one thing i should let you guys wiresone of the biggest is reporting that people close to cottarelli are not making any

statements yet because of the swings yesterday. they are waiting to see how the market reacts before they come out and make a statement from the president. alix: always good to make political decisions based on a market reaction, sounds good. thank you very much. for more on the political ,, it is a sighy of relief. does it hold? benjamin: i think david hit the nail on the head a moment ago, there is existential euro risk being priced into a broad array of european assets, and i do not think this goes away overnight. i think this as an issue and a source of volatility is somewhat

persistent. you could think of it also in terms of how do policymakers respond? do they have the tools to lean against that type of risk? i think the answer at the end of the day is quite possibly yes, but that is an exploratory issue. end ecb qeision to is a loaded issue right now. on one hand, they want to acknowledge the fact that the economy is doing ok. on the other, i do not think they want to be seen as subsidizing fiscal venture is a so qe becomes a loaded issue. alix: especially when they are buying more than the capital should allow in relation to italy. euro-dollar volatility picking up as well. how much more downside to we have for the euro? >> i do not think we are going back to 2011 crisis type numbers . i believe we will see some alatility and there will be

new slow to worry about, timing of elections and all that, but i do not think we are going into existential crisis for the euro. the backdrop is much different. the ecb has proved it has tools to combat the systemic contagion effect in the euro. as of last week, we were still treating italy as a problem for the euro and european growth potentially, something that exit, but note the global systemic issue. feels like today we are moving away from that. i do not think italy is a catalyst for global systemic problems. there is other risks, like the u.s. yield curve, that could cause problems over the summer. david: what does this do to the ecb's plans of coming down off of qe? they have not said, whatever it takes. can mario draghi really go out and say, let's start scaling

back? does that mean something for the euro and dollar? ben: markets priced into some extent the answer to your question yesterday. there are different levers the ecb can pull. one is the balance sheet and the other is rates. the pricing of the first rate hike from europe that pushed back dramatically. the first course of action is to set your forward guidance in line with what you think the level of uncertainty is and how that will affect the economic conditions in europe. qe, i feel like what they should do maybe, i am not sure if they will, take a page out of the fed's playbook and say, we are going to put this in the background. it will not be a dramatic change. it will be gradual, and hopefully markets forget about it. alix: let's pretend that happens. how does that get you to the

1.28 euros-dollar? daniel: the ecb is in good position because they were not expecting to make any changes until after september and would not talk about that until after july. they had questions on q1 growth and what the data will look like in q2, so the prospect of a change in message in june was receding. the actual incremental impact on the euro and markets in general is probably not that great. by year end, i think the ecb will be exiting from qe. italy will be a much clearer story by then and the fed will be getting closer to being done. the dollar will probably be a lot more vulnerable. david: one thing we know is we will still have our twin deficits in the united states, whatever happens. us.el and then stay with financials were hit the hardest

during the equity selloff. we will discuss the outlook for that sector next. this is bloomberg. ♪

♪ david: as equity markets were hit by risk aversion yesterday, financials were hit the hardest. you can see on this chart that shows it is not going so well for financials. the sector fell 3%. katzewith us are daniel and ben mandel. i'm going to put up a chart. what it shows is for the major u.s. banks, this red line across the middle is where we start out the year. we just had the final bank, which will go unnamed, go below that number. why are the banks getting hit so hard? >> the answer as of yesterday as they are following bond yields. a 15 basis point move in the treasury is not a normal move

and that will feed into the bottom line of banks. in some sense, what you are seeing in this chart is a reflection of the ups and downs of duration. now, we are right somewhat in the middle of our expected trading range for 10 year treasuries of 252 about 310. it would not be surprising if we went back up to test the 3% level. david: but the yield is not the steepness of the curve. for net interest margins, that is true. alix: only if you raise the positive beta. do you like banks? ben: notwithstanding the fact i would yield curve -- say there is fundamental support for bond yields going back up. you have a business cycle that is comfortably in expansion.

we are in the late stage and recession risk is low. you have an outlook in the u.s. that is fairly supportive, fiscal policy that is in train to support growth. you have policy that is moving, on the move, so the fed is still moving this year. it is not moving at an onerous rate. all of those things push the yield gently back up. alix: if you come inside the bloomberg, this is the expected fed hikes in 2018. we were three and a half and now we are three. as your base case for the fed changed? daniel: not at all. the markets will react to a day like yesterday by reducing the chances of fed hikes. the fed cannot hike if days like yesterday happen every day. the next meeting is a little ways away and everything seems on track in terms of the data. the message from the main people in the fomc is they will keep going. alix: how do you have a weaker

dollar call? daniel: fed tightening is bringing a little bit of support for the dollar but we are toward the end of the cycle. the ecb is probably still getting closer to the exit. that is a dangerous place for the dollar to be. it is expensive and has been for a while. the convergence of monetary policy means the dollar will get back to more sustainable levels. david: there's these twin deficits. to what extent is your weaker dollar call really based on that? makes: it is a factor and global investors less likely to stay with dollar at expensive exchange rates. ecb was on hold and euro-dollar went up to 1.25. desk a assigned to stay sign of reluctance to stay with the dollar. -- a sign of reluctance to stay with the dollar. alix: your best case? ben: i think we have four hikes

this year, three next year. it would take a lot to go faster or slower than that. i think it is on a relatively set course. part of that is what is going on with inflation and growth in the u.s. both are reasonably well supported. what would policy rates be? in a taylor role kind of environment, what would policy rates be given inflation at target? you are up over 3.5%. alix: thank you so much. what does canada's purchase of the pipeline main? ♪ two, down, back up!

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the ftse may have climbed back its declines, up 2%. it the buying opportunity? is it the calm before the next storm? what is happening with the two-year yield in italy, 105 basis points lower. we are not reversing all the damage we saw yesterday. it is a start. we saw pretty solid auction in the five, 10 year in italy. the dollar is the weakest g10 currency out there with the exception of the yen. selling treasuries is the call. yields have been higher by about 10 basis points. this feels like a far call away. crude holding steady, up half a percent. onid: time for an update headlines outside the business world with taylor riggs. taylor: in belgium, the federal

magistrate calls the three terrorists the city murder. he killed two policewomen and a bystander after being -- before being killed. he was serving a prison sentence but was on an authorized leave at the time of the attacks. china is warning president trump not to carry out his plan to ofose tariffs on $50 billion chinese goods. the foreign ministry says china will respond accordingly. the wall street journal says trade talks could be derailed by the trump administration's actions. wilbur ross is scheduled to go there june 2. wilbur ross called the world trade organization outdated and says the amount of time it takes to resolve disputes is a joke. forumke today at the oecd in paris and said that wto mindset is anything in exporter chooses to do is find.

do is exporter jesus to find -- chooses to do is find. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. david: quicktime growing short for a nafta deal, canadian prime minister justin trudeau is holding his ground. flanderswith stephanie yesterday and said he would rather the trade deal died altogether rather than accepting hard line demands. >> i will stand up for canadian interests. i will only sign a deal that is good for canada, and no nafta is better than a bad deal. we have made that very clear with the president. david: still with us is ben mandel of jpmorgan. you are a trade economist. explain all this to us. how big a risk is trade? it keeps coming into the headlines. ben: it is a persistent headline grabber.

i would argue you are making some progress on the trend terms. you have nafta, steel tariffs, and the china ip. on nafta, they are coming to some progress on the rules of origin. in the auto industry, it is very important and could open up the possibility of a deal being made in the near term. on steel, it is basically haggling over the price of what is acceptable in terms of how many exports the u.s. is comfortable with from europe. they are talking about a 10% reduction in i think they are in the finer details of negotiation. china ip is a bigger issue and prone to escalation, but you can view it in the same lens of posturing before the upcoming negotiation. the real risk year is that once these issues subside, you get new friends opening. opening.e -- fronts

on chinese investment, you have a continuation of the headline risk going forward without a meaningful affect. david: focus on the ip, because there are a lot of industries that say that is the issue for the future, not steel, not on those. china 2025he buy program that they believe in and i am not sure we are pushing that hard. ben: here is an interesting statistic. who are we dealing with? is it china and their exports of computers and electronic products, or u.s. firms doing business with china? sore is a serious interest, we often talk about our number one export category from the u.s. to china as being agricultural products, and can you guess with the second-largest is? computers and electronic problems -- products. bilateral trade is going both ways.

it is the u.s. firms who will ultimately have to stand up and say it is unacceptable. alix: prime minister trudeau also went over the purchase of the candor more -- gender pipeline. >> the project became too risky for a commercial entity to go forward with it. that is what candor morgan told us. we are now in the position where because this project is in the national interest, national economic interest, national interest in moving forward in our climate plan and getting a cost on pollution across the country, we have stepped in. we will get that pipeline built and we do not intend to be in the pipeline business long-term. alix: joining us now is libby toudouze. good to see you. does this become the new template for canada? libby: i think it is really important for infrastructure in general. it shows the critical nature of

infrastructure and the regulatory issues, whether in canada or the united states, that have pushed pipeline projects off. pipelines are done for the economic benefit of society as a whole. it is not just for the pipeline companies. i think this move in canada by kinder morgan to let canada take it is important, and it shows how important and for dish energy infrastructure is. -- energy infrastructure is. alix: how do you see that going forward in light of the fact that we could have more government actions within the pipeline space? libby: i think it is important to note that pipelines are being built every day. permits are being given to these companies. we get a lot of headlines about what doesn't get done, but it is happening and energy infrastructure is being built out.

haveidstream companies several other issues in play that they are working through, whether it is leverage on corporate governance or structures supplication, all of which are happening. that is why that sector has stayed depressed. macroin theory, the conversation is you want to be investing in pipelines because we have take away issues in the permian and that will be where the money will be spent. you have a parent and lps rolling up and that has created some dislocations in the space. how would you play those? libby: what you have to look for his mission critical infrastructure. mission-critical infrastructure. there are areas all over the country where we are under takeaway capacity because these are all new supply sources in the last 10 years.

energy technology has led us to these massive new sources. we will be the major exporter of these hydrocarbons and we need the infrastructure. david: where are you on energy and energy stocks? 2018, it has come back. and the longer-term, how do you see this investment? ben: if you think international trade, it is a speculative endeavor and gets into the oil price. that is what it is all about. infrastructure is a key part of this. one of the supply issues that help support the massive increase in prices we have seen over the last year or so, you think about opec, iran, and u.s. shale where there has been a response in terms of supply subject to capacity constraints. infrastructure is a key element of alleviating that and making the market flexible. long-term, u.s. shale introduces a competitive dynamic into the

pricing of oil which will drive down the monopoly of markups that opec enjoys. long-term, the supply issue seems to be very important and the competitiveness in pricing as well. i do not think those argue for high oil prices in the future. alix: either way, we have a gap and it feels like we will resolve it or not. the red line is oil prices. the orange line is the s&p services company and the blue line is the s&p production stocks. the green line is equipment and services -- the orange line is basic energy sector. where do you think the biggest three rating will be? libby: we play it through the mainstream. if the mainstream line -- midstream. if the mainstream line was up there have been structural issues plaguing the space.

these are companies that are not reliant, they are a fee-for-service business. they move the hydrocarbons. less than a $10 billion industry today and it will be $100 billion. we need all the infrastructure. david: there is a bottleneck in trying to get oil, particularly shale, to the places it needs to go. what is the cause of that? is it permitting and well it correct? libby: it is not permitting. that can be part of it, but midstream companies do not build a pipeline or other infrastructure until they have a contract in place to give them the economic returns they expect from the project. david: so canada has to buy a pipeline? libby: absolutely. david: there is a market failure. are a midstream company, unless the producer signs a contract you will not put a shovel in the ground. it is not, build it and they

will,. it is they will, and then build it -- they will come and then build it. they are reticent to long-term contracts. you: it feels as though if are going to get some upside in energy you have to have more investors come in. you have get people on the sidelines to say yes, i will buy equity stocks. this function takes a look at the forward curve of oil. the orange line is where we are now and the green line is where we were at the end of april. from 2019, 2020, it has started to rerate. what does the forward curve have to look like for people not like you to want to buy energy stocks? libby: for generalists to get into the end of an -- energy space, i do not know that you need to be in contango.

i think you need commodity prices out of the headlines. ben mentioned earlier, we are in a new era where the bottom of commodity prices has dropped off and we will be range bound, which is good because it means we have a normal functioning energy supply chain. investors need confidence that we are going to be range bound. david: libby toudouze of cushing -- asset management and benjamin mandel, thank you for being with us. james gordon leads on aladdin to help lure $2 billion in assets. turn on the radio and listen to tom keene and pimm fox from 7:00 to 10:00. bloomberg "surveillance" can be heard in new york, boston, the bay area, washington, d.c.. this is bloomberg. ♪

♪ taylor: this is bloomberg daybreak. i am taylor riggs. coming up in the next hour, the bank of america merrill lynch head of u.s. equity and clot strategy -- quant strategy. now, let's get your bloomberg business flash. the parent of snapchat launched an attack against facebook. facebook'smissed appeal and successful attempt to copy snapchat's features. he says the social network is all about competing for attention and facebook's success could hinder snap's growth.

returning to the london stock exchange after his ouster of ceo of wpp. it will be acquired by end of skewer investment firm but it is a reverse takeover that will leave sorrel in large -- in charge of a large company. plans as health bulking up its medicaid business. and asurance units pharmacy benefit from meridian, the price at about $2 billion. that is your bloomberg business flash. david: we now turn to wall street beat where recover three things wall street is buzzing about. italy's winners and losers as the country faces a governmental crisis. gorman's secret for success, morgan stanley taps blackrock for $2 trillion in assets.

questions that rbs, the cfo who was seen as next in line unexpectedly quit. now is theng us bloomberg opinion columnist. loser,alk about the field street capital management. they like betting on macro economic trends, headed for the worst month on record. if you bought long italian debt, that kind of hurt you. brooke: there is nothing you can do once you get stuck, because the problem has been lack of liquidity. some people are not even quoting prices on the spanish bond market or the italy bond market, so you are stuck with that position. david: it could hold to maturity. brooke: it depends on your time horizon. alix: and the fact that the ecb would buy it.

in terms of capital, they are already buying more than they should. david: whatever it takes. alix: what is the winner? brooke: western asset management. they were short italian bonds. basically the opposite side of the coin. they are now taking profits on these short positions because they believe yields will stabilize and we will eventually see a way out of this. those longold italian bonds to maturity and maybe get out of this. david: the second story, this is morgan stanley. wealthorman has a good management business and wants to make it better. he has a plan to do it involving blackrock. he has touted the fact that you can get a better deal with morgan stanley because they have allowed in. -- aladdin. brooke: it is basically to point out outliers in people's portfolios. you may not know you are over positioned in risk, but look at

what you are holding. ubs also has this technology. morgan stanley thinks it is a better position because it is fully integrated into its platform. david: that is for high net worth individuals. goldman has an app for you. brooke: it is interesting, both of these trends in technology are popping up and traditional banking roles and using that to subsidize the advice they traditionally gave their clients. the asset class looks at who your investors are, how your company factors into their positions. are you outperforming their other holdings? that gauges their likeliness to act as active investor. if you are doing that well in that investor's portfolio, maybe they are willing to give you more time. jump -- willing

to jump on board. the goldman sachs coleader of mergers and acquisitions -- the best defense is a high offense. in general, that is true. if you have the highest possible stock price and investors believe you, that is pretty good. alix: in a broader trend, it is all about technology. if you ask anyone it is about that, and that is where the hiring and money will go to. david: they see themselves as tech companies and they are hiring out of silicon valley. alix: where do they get the name a lot in? -- aladdin? brooke: the product names they come up with, they are always sort of left field. in the military, they have a group of people that name all their various operations. they have special names. they spend a lot of time on it.

at the pentagon, that is what they are doing. alix: our tax dollars hard at work. david: rbs is doing better and there are talks it might float some shares. their cfo up and says, i am out of here, which is a surprise because you thought he was one of two people who might succeed the ceo. brooke: he used to work at credit suisse as an investment banker. he participated in the government bailout of rbs all those years ago, so he would be considered an asset to have around if you are talking about the government winding down at stake. on the flip side, he has done all the heavy lifting he needed to do. they reached a settlement with the u.s. in terms of the sale of mortgage backed securities. that clears the path down the road, maybe talking about a dividend. you can argue the hard work is done. the current ceo has made some

comments about maybe wanting to stay on through 2020. maybe he was looking for another opportunity. david: who might be the other person to succeed this ceo? they said they would like to go in house for someone who has been there a while, and alison rose is the front runner. alix: is that the first time ever? david: i cannot think of another. alix: i think it would be. david: there are ceos like synchrony, and that is a smaller bank. not at this size. alix: i think you are right. when someone resigns shouldn't alarm bells be going off at some point? spend more time with family. david: you mean for opportunities? brooke sullivan, bloomberg opinions, great to have you. " can't.p, "roseanne

abc drops its top show of the season. alix: check out tv , look at our charts and interact with us. this is bloomberg. ♪

♪ david: this is what i'm watching. abc, i was there for a long time. yesterday they made big news. roseanne, whoing made an outrageous tweet about valerie jarrett. bob iger immediately said, you are out. it was a big hit of the season and they have been needing a hit . the ratings have been down of the board. it is a tough decision to make. at the same time, i want to take a look at the finances in a pie chart to show where the income, this is not revenue, income from broadcasting where roseanne

resides. it is at 8%. most of that i would predict comes out of the own television state work and not the network. alix: if you want to go back to "roseanne" when it was really popular the first time, and that world she would have more firepower to say whatever she wanted and not get that can. now if they are not even making that much money off of you, why bother? david: roseanne was on the schedule and was very difficult than. it would've been a much better part of the company. what bob has done is migrated. up, acoming representative from bank of america. ♪ what's a gig of data?

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pay for data one gig at a time. and with millions of wifi hotspots included, you'll pay less for data. it's a new kind of network designed to save you money. click, call or visit a store today. alix: markets exit panic mode,

hemorrhaging stock in italian debt. what is on sale, or is this the calm before the storm? no trade truth in china. the u.s. plans to impose tariffs on imports as secretary mnuchin said there was a tree truce. wilbur ross takes a hard line with the eu on his way to china. populists in italy make a last-ditch effort to form a government. the prime minister has trouble forming a. italy could be heading to snap elections as early as july. david: welcome to blame -- bloomberg daybreak. i'm david westin. are you feeling better or anxious? alix: feeling better. how desperate do you feel italy is that they may skip out on their vacation? david: who will turn out to vote? they might be at the beach. alix: here is where we are in the markets. a sigh of relief across all asset classes. s&p futures up 12 points after

getting rather yesterday on italy fears. euro-dollar is now 1.16. overall a weaker dollar day with the exception of the japanese yen as a savior and bid takes off. the 10 year yield is up by nine 2.87.points, crude is up .6%, a risk on day, but also recovering as we head into some opec meetings over the weekend. david: time for the morning brief. we will get a second read on u.s. gdp and core personal consumption. 2:00 this afternoon, the federal reserve releases the beige book. following that, the fed will also begin its meetings on rolling back the volcker rule for the banks to which it still applies. now we turn back to italy. italy continues to go through its political turmoil as every day brings a new twist to the president's efforts to form a government. , wholcome luigi zynga list in his latest podcast suggested

the italian political crisis could be worse than brexit. professor, welcome, good to have you on bloomberg. bring us up-to-date. you are following every twist and turn of this. at the present time it seems president month around may not be able to get these parties together anyway. one wants an election, one was to form a government. luigi: the situation is very confused. what is important is we were reaching an agreement for a government to be formed. toamela said he did not want have a particular ministry of the economy. i don't know whether constitutionally he has the power to do that. most say he does not but i'm not a legal scholar. what has been done economically and politically was a mistake because it spoke to the markets,

raising the issue of euro exit when this was not in the plans of any of the two parties forming the commission, or of the economic minister that was picked. but if the president says i cannot give you this power because i'm afraid of this, then of course this becomes the news of the day. isitically, i think this really a gift to the leader of the league who will campaign thatst the president, europe does not allow a government elected to actively run. we are a parliamentary republic. it is like if the queen of england would say i don't like you because you want to terminate monarchy. i don't think that is a possibility. there is the constitutional question you raise, important question. at the same time, it was not any

foreign finance minister, it was someone who is openly skeptical of europe. does that raise the question that if there is an election the summer am it becomes a referendum on whether italy will remain in the european union? all, the tactic is not equal to getting out of europe, and under what conditions. be a litmus test to government. we are still a democracy in which people can have different ideas. second, i don't think the populist party wants to make this central to the election. to be honest, you cannot run an with the strategy. this is the problem we are in. italy wanted to get out, it would be very costly to get out. run antainly cannot election campaign because there would be a run on the bank as we

vote. the idea of a referendum on the crazy, is understandable from a democratic point of view, but is incompatible with the financial system we have. david: it sounds like you don't think this is an extension of crisis for europe. we had the ceo of unicredit who says the markets are overreacting. the markets are coming back today but do you believe the markets are overreacting to what happened? luigi: yes, i think of it in the short-term. why? over long on over long on italn the basis of reaching for yield. it is hard to get any yield in europe. italy is clearly one of the highest yielding securities, among government securities. that is a way that people are long on the italian bonds, not

because they believe so strongly in italian fundamentals, but because in the short-term this was very convenient. toy were there but ready jump out at the first sign of a problem. when the first sign of problems came out, they rushed for the door. this might not be in the short-term and existential theis for the euro but italian situation is long-term problematic, is a problem that needs to be dealt. you cannot just kick the can down the road. the strategy for 10 years has been to kick the can down the road. eventually you have no more road to kick the can to. interim government forms over the summer and they called you and send the our finance minister for couple of months, would you do it? luigi: i don't engage in hypotheticals. it depends on the government,

the program, situation. be willing tod serve my country if i think i could be helpful. it is so much of a contingency thing that i don't think it is particularly interesting to answer the question. luigi, thank you very much. as global markets regain composure, the political stalemate continues. as global markets regain composure, the political stalemate continues. investors weighed in on how to play the increase in volatility. >> equities are the next place to start selling. >> hedging has been out of favor certainly through the balance of 2017. it's time to start looking at things like vix call spreads, things like what they call receiver options on treasuries. and the.s. and apec, nafta countries look extremely good for money. that is where you are seeing the treasury rally, which again trump must be loving. interest rates back at 2.88.

three weeks ago we were complaining about it testing 3.10. >> risk is normalizing. we are now entering what i would call a normal period of volatility where the markets get potentially scary information and reacts negatively, which is -- to me, this is normal trading. we should be responding in a portfolio construction way, making sure -- i use this phrase .ast time -- right risk alix: might us now is savita subramanian. come inside the bloomberg and take a look at everyone was looking at with verizon volatility. the top is the overall cross asset volatility. that has picked up although still in negative territory. in the middle is the banks -- vix. then the movie index is the last panel.

you see thee do biggest increase in volatility, is it sustainable? as the prior speaker mentioned, this is kind of a normal market environment. we had just gotten so i'm used to volatility, it all feels very strange. stay in apect to heightened volatility environment for the remainder of the year. markett way to play this come in my view, what's been working this year, is picking stocks, picking securities. the idea that not everything will go up on news, not everything will go down on news, but the market is starting to differentiate. what i find remarkable is this is the best year on record for active managers, stock pickers. ofhink that is emblematic the fact that the market has gotten a lot messier. italy, in and of itself, is not as much of a potential hit to the u.s. equity market. if you look at credit spreads in

the u.s., they have barely reacted relative to what we've seen. alix: italy, small caps, etc. on a broader basis, the world making decisions on low volatility, that has now changed. that has an impact on carry trade, growth versus value. paint the picture for us. savita: i think the risk is area for us to be in right now are the so-called low vol investments. if you look at the fastest-growing trend within the etf, passive investments, it has been in the so-called low volatility funds which are basically a play on interest rates remaining low forever. telecom,, real estate, even tobacco stocks have all benefited from the idea that interest rates will go to zero and stay at zero for the foreseeable future. i see that as the bubble in the investment landscape, the idea that investors have been piling into the most bond-like stocks

as sort of a save haven. in an environment where interest rates rise -- we are seeing this in italy. so far in the u.s. treasury yields have been depressed but if they do anything besides go down, that is the risk is area for investors, in the equity landscape. david: savita subramanian will be staying with us. coming up, the trade dispute between china and the u.s. continues as president trump flip-flops on tariffs. and wilbur ross heads to beijing, or does he? this is bloomberg. ♪

taylor: this is "bloomberg daybreak: americas." chipstreet's campaign to

away at trading restrictions imposed after the financial crisis is finally paying off. the federal reserve board meets today to start rolling back the volcker rule. the regulation is designed to keep banks from suffering outside losses because of speculative bets with her own capital. a surprise departure at royal --k of scotland, see if you the cfo has resigned to pursue another opportunity. stevenson was seen as a potential replacement for ceo ross mcewing. the meltdown across italian assets has rocked new york-based hedge fund firm field street capital management. their global investment fund has plunged 15% this month because of a bet on italian debt. that is the worst month on record for the macro fund. that is your bloomberg business flash. you, taylor. waiting for the hp numbers -- adp numbers to come out.

you have the macro fundamentals in the u.s. but the macro trade and any bottom-up analysis you have as well. it is hard to find out where the direction will come from. david: we keep hearing the fundamentals are there. alix: if you get inflation without the wage gains, or if it is bifurcated, that will be a problem going forward. we have the adp coming out. employment up 100 78,000 jobs, that is lower than estimates. we know that adp has not been a great signal for what we get on the job report on friday but nonetheless a disappointment. 178,000 jobs added for adp. and a proper sized down quite a bit to 106 he 3000. david: remember last week, the unemployment numbers were actually higher. initial jobless claims were higher. i don't know if that means anything or not. when you have trade

issues, how that is going to impact industries in the u.s. president trump has says he will move ahead with plans to impose tariffs on chinese imports and curb investment in sensitive technology, all right pressure on beijing before the next round of trade negotiations, maybe it will but there. we still don't know. savita subramanian is still with us. what is your trade playbook? savita: we have looked at historical precedent. the last time we had meaningful pterosaurs during the reagan years. the market was up, the s&p return 10% during that period. it is not necessarily pure evil for stocks. that said, the market has gotten a lot more global, the s&p 500 is a lot more global than it was during the reagan years. i think the way to think about this is which companies are going to be hurt from an import perspective from rising input costs. in particular, the companies that cannot source within the u.s. will be the most hurt.

so that is where the experts really come into play. within the apparel industries, sourcing caught that higher prices will hurt margins, and that is where you have to look at the cost structure of each company. tech companies will be hurt by the import tariffs on potentially ipp. this is a fairly nuanced backdrop. historically, you want to be in more defensive, more domestic areas of the market within these scenarios. it is really a security specific question. to find thoseard defensive areas, than it was in the 1980's? that is the last time we saw this. supply chains are very different from where they were. a lot of u.s. companies get their income from overseas, a much higher percentage than then. a lot of other companies involved in services and i.t., as opposed to steal and cars. savita: the knee-jerk reaction

would be to buy domestic small caps. i don't think that will work because a lot of these mueller cap companies are suppliers to multinationals will be hurt by this. is world has changed and it a messier problem, but this is where actual security analysis by people, not machines, is going to come into play. who knows better than the experts on stocks which companies are going to be hurt by trade friction? inside theu come bloomberg, this is the small cap versus the s&p. you don't expect that to continue? i worry about small caps because we have all kind of seeing them as the area of resilience within a world of deglobalization, protectionism. small caps are not that cheap, they are super levered. what i worry about within small caps in particular is the leverage ratio for the average company is at almost record highs. small caps are taking advantage of cheap capital, issuing high-yield credit, and they are

a lot more lever than a large cap counterparts that are sitting on healthy stockpiles of cash. david: you have made this point about stockpicking. are you talking sector by sector, individual companies? what do you look for, what tells you that is a good one? savita: i think there are a few engines that will be rewarded going forward. i think it is sector by sector, looking at the landscape. financials, not all companies will benefit from potential rising interest rates. not all companies are as healthily capitalized as others. it is a very new west decision. even when it comes to tax reform, you would think from tax reform the companies paying the highest effective tax rate would benefit the most. not so. where it comes down to is who will retain the benefits, who is going to see the benefit competed away?

think about the retail industry, mostly domestic companies that paid 35% statutory tax rates. today they pay a lower tax rate. on the other hand, the retail industry is completely this ,ntermediated by online players so they are more likely to see that benefit competed away, rather than keep it. i think all of these macro issues are playing through in the s&p 500 in very nuanced ways. wehave this barometer where gauge the messiness of the market. we look at how much company specific risk versus macro risk is in stocks. we gauge the messiness of the market. the messiness of the market is at the highest post crisis level we have seen. it is a stock pickers market, not a macro driven market. savita subramanian will stay with us, thank you. alix: i want to recap the adp numbers. 178,000 in may.

april also revised low. not a good through-line for the jobs number, but maybe some flashing warning signs as we get that jobs number. coming up, banks hit hard yesterday, but good a regulatory challenge come to their rescue? we will look at the fed's attempt to roll back the volcker rule. this is bloomberg. ♪ . this is bloomberg. ♪

david: the financial sector was hit hard in yesterday selloff among following more than 3% as investors flock to safe even treasuries. regulatory tailwinds could provide some relief for financials. today the fed begins formal considerations on how to cut back on the volcker rule. still with us is savita subramanian. one is going on with financials, why are they being hit particularly hard? savita: i think part of it is muscle memory. in 2008, when credit spreads

rose, when there were any problems, financials took the biggest hit. i think the market has this wrong. what is interesting is financials have traded almost in lockstep with treasuries for most of the post crisis area. financials could do well and it has nothing to do with treasuries. i like u.s. financials and it has to do with the cost-cutting potential. the regulatory and litigation cost that financial companies there today is almost 100% higher than what was precrisis. if there is any relaxing of the regulatory environment, that is cost-cutting that go straight to bottom line. david: take a look at this chart. these are the four big banks and how they have done over the course of the year. the yield curve has been going up. yet, they have not been going up. that is contrary to what you just said. savita: that's a great point. part of it is the idea that investors are not necessarily that bullish on growth.

i think the arguments for buying financials are manifold. there is the yield curve, economic growth, there is a pickup in lending conditions, less regulatory constraints, cash return. the reason i think banks should do well is they are actually one of the highest quality sectors today. i feel like i'll be struck down for saying this because they were so toxic in 2008, but financials today have done the opposite of every other sector in the s&p 500. they had consolidated capacity. a lot of companies went away. they short of their balance sheets. they have not been doing as many share buybacks and dividends raises, because they have not been allowed to until recently. financials is a high quality cash returns are her. alix: come inside the bloomberg. regional or big banks. which do you feel more confident about? savita: i think it will be the most regulated.

it is the big banks that stand to gain the most from any relaxing of the regulatory burden. the regionals look great from the credit perspective, economic perspective, but the big banks have been in his penalty box for a long time and could stand to benefit the most from cost-cutting, relaxing of the regulatory environment. i'm not talking about repealing dodd-frank. i think it is more just flatline and regulatory constraints. alix: savita subramanian will stay with us. the latest read on u.s. gdp and personal consumption. the second read. we will discuss with michelle girard of natwest. this is bloomberg. ♪

alix: this isalix: "bloomberg daybreak: americas." seconds away from that second read on first quarter gdp and personal consumption. and equity rally underway as we reverse the losses from yesterday.

classes, aset similar story, buying coming into peripherals in europe, selling in u.s. treasuries. the euro is up by .8%. crude also getting a lift up, .7%. is this the calm before the storm, especially with eco-data on deck. first quarter, the second read coming in lighter than the first. 2.2 percent. personal consumption index also coming in a bit lighter, 1%. core pce quarter on quarter also lighter, 2.3%. for revisions and downward gdp, personal consumption as well as core pce. the first quarter corporate profits also fell .6%, quarter on quarter. you're on your profits were up 4.3%, but sequentially they were lower. financial industry did pretty well in the first quarter on a

sequential basis here at an interesting read on the different parts of the economy. david: we sort of knew the first quarter would not be great. alix: weather. david: the last few years, the first quarter has been light. out, i should point spending on equipment, structures, ip did risetime .2% in the first quarter after rising 6% in the second quarter. so some fee through. david: can you spell tax code? alix: there has been debate about whether we are actually seeing it. joining us to discuss more from stamford, connecticut is michelle girard of natwest. savita subramanian is still with us. michelle, your take on the downward revisions? michelle: i agree with what's been said in terms of the fact that the first quarter numbers we knew would be soft, the fact that there are a touch softer

than expected. the most important thing, when you look at the monthly numbers underlying this quarterly report, you see the momentum was gaining throughout the first quarter. the weakness was concentrated early in the year on the turn of the year, the numbers then steadily improved. we enter the second quarter with good momentum. that really explains why most people are already looking ahead to the expected rebound in growth to above 3% in q2. david: shouldn't we be expecting something from the tax code? i refer to the agreement purchases, but shouldn't money be showing up in people's pockets? michelle: i am more focused, as you said, on the implications for corporate spending, that i am for consumer spending. it is very late in the cycle. in that sense, i'm not sure there is a lot of pens of demand on the consumer side that is suddenly going to be unleashed when consumers have more money in their pockets. this is not -- i don't think

you'll get the same impact on the consumer as you normally do when you get fiscal stimulus coming out of recession, or when the economy is much weaker. thee, the real bang for buck will come on the investment side. good capital spending numbers this morning, first quarter, building on strength. for the consumer, i want to point out, that is actually good news. if we get continued business investment which leads to better productivity growth to my that should bode well for wages. i think it could come around where the overall improvement in the economy being from a business investment led standpoint is good all around. of course, important to note if it is investment led, it is not an inflationary type of growth that the fed would be worried about. savita: michelle, i totally agree. what is really important is this is a big break from a nine-year trend of corporations spending

on very little except share buybacks and dividends raises. this is what is normally supposed to happen in a mid-to-late cycle type of market. this is bullish for economic growth and arguably bullish for the overall global economy. i think those are the drivers that could take the market higher from here. it's interesting, when you think about the economy, there are three components, government spending, consumer spending, and corporate spending. corporate's have not spent on anything economically beneficial for a long time. alix: i get that for the first quarter, but does that continue? i have a chart that shows the philly forecast for the next four months rolling over. that is a confidence thing. savita: we have been tracking what companies have been saying about what they will do with tax reform benefits. the most prevalent response is increase capex, and this has not happened yet. while some of these indicators

might be rolling over, the idea that companies are signaling --y will spend more on capex in fact, we have noticed that most companies are targeting below that above. your point of view, do you see that from a top-down perspective as well? michelle: i do. we look at those same capex spending plans and even though they are off their highs, you are still looking at a third of companies that say they will increase capital spending in the coming six months. this is on top of actually a very strong 20. even before the tax cuts come companies were reengaged. i think that goes back to the relation -- release they were feeling on the regulatory front. the lack of new burdens in terms of regulations being piled on, i think, got companies taking actions that would boost the

economic outlook. , i expect 2018 will be just as healthy as 2017 was in terms of business investment. alix: so what does this mean for the fed? this is the expected fed rate hike expectations in 2018. we were at 3.5 hikes, now we are under three, in part because of the drama we have seen unfold in europe. michelle, do we have to worry about contagion and the fed managing that? michelle: i don't think anything we have seen in terms of eurozone turmoil will alter the fed's path. the one thing that we talk about is the fact that fed chair powell does have a market background, as opposed to an academic background. i believe he understands that markets will have volatile periods and the best thing the fed can do is stay the course, stay focused on the economic fundamentals, inflation,

employment, all the things that , until policy decisions there is a decision where the turmoil and financial markets is having a tangible impact on the economic outlook. i just think the fed will stay focused on what they can control . we are not changing our view in terms of the fed moving in june. actually continuing to move once a quarter. for me it is all about the fed's desire to get the policy rate up closer to neutral, which is where it should be, given where , basically a both of their mandates. term picture is still those twin deficits and how the fed will handle that, what that means for inflation. justin trudeau spoke yesterday and this is what he said about the u.s. debt pile. >> i remain focused on the long term. what is the u.s. debt approaching now, a trillion?

we are talking about something that is not sustainable. we are talking about something that, over the long-term, we have to ask the question whether the tax cuts they have brought in in the u.s. are sustainable, in terms of long-term fiscal stability. alix: savita, the twin deficit argument, weaker story, has that filtered into stocks? savita: what we have seen at this point is good for the next 12 months, fiscal stimulus happened at a point where we probably did not need it. so i think it is good for the but it makess, things more painful down the road. i hate to say it but i think we are borrowing from the future and pushing all the good stuff into today's market. i think the fed will manage this effectively but it does make you worry a little bit about the next recession. not that i see it coming anytime soon, but it does suggest that things will be a little more unwind allwe sort of

that money that we have spent to make things great today. michelle girard, savita subramanian, thank you for being here. wilbur ross has been speaking at an event, a panel in paris. we will go to him when he comes on. he has already set a couple of things. the u.s. finds itself in a situation of a symmetric tariffs, that we don't have the same fairness that others have. at the same time, he says the u.s. trade process is already yielding good results. so he is bullish on how they are handling the trade matters, even as they say there are asymmetric tariffs that have to be addressed. part of the theme over all but he says the rules interchange. alix: second read of first quarter gdp coming in a bit light, as did personal consumption. corporate profits on a corporate profits on a

sequential basis up .6%. the macro in the u.s. and global in the markets today. this is bloomberg. ♪ the markets today. this is bloomberg. ♪

taylor: this is "bloomberg daybreak: americas." today, davider harrah of paris associates, cio of international equities. now to your bloomberg business flash. mcdonald says it's in a fight for market share in the u.s. and will new its focus on breakfast. the ceo of the world's largest restaurant chain is speaking at an investor conference.

he says mcdonald's still needs to boost customer accounts in the u.s. the company will invest $1.5 billion in u.s. store remodels this year. shares of dick's sporting goods are surging in premarket trading. earnings thatcast beat estimates. they also reported first-quarter earnings that were better than expected p are comparable sales fell but still did better than estimates. and more boeing 787's are lucky to be grounded because of his problems with the engines. rolls-royce says the increase .ill happen bloomberg has been told the number of grounded 787's will rise from 37 to about 50. that is your bloomberg business flash. amazon holds its annual general meeting today and the stock is up 36% so far this year. intelligence senior internet and consumer electronics analyst joins us now from san francisco.

good to have you here. the most recent news about amazon has been this spying, if i can call it that, by alexa. that is in the very nascent stages. ui research, in happening when we went from pc to smart phones. it is good some of these issues are coming up now. when billions of devices are depending on the services, you sot to be better positioned, these kinds of things were sort of expected and we are not really surprised, but it is good that privacy is coming to the forefront of the matter before the whole industry explodes. david: how important is alexa to amazon at this point? >> extremely. it helps him not only keep the prime members engage but also getting into other things like whole foods.

one of the things we have seen, if you look at what people are shopping on with alexa, the number one item is music, but number two is household products, repetitive purchases. groceries fall in line with that. with geographic expansion also critical for them, keeping the ecosystem together. mentioned that the fourth pillar of amazon could be prime video, or alexa. where are they with prime membership, how it would shareholders be about where there is going? jitendra: that was the big disclosure that came out of the shareholder letter. they did not have a badge of honor to attract brands, advertisers come a partners to their platform. now they have that badge of 100 million prime members. so it gives them a lot of leverage to seek bigger brands. so far it's been a story about small businesses coming on to the third-party seller platform.

the larger brands have just ordered to warm up to the idea. it gives them a lot of leverage to go after that. the screen some issues raised by dissident shareholders, things like pay conditions, working conditions, whether jeff bezos should be chairman and ceo. are any of those likely to rise to substantial levels? these are issues that will keep coming up, hopefully will be resolved. historically we have not seen this rise up to a level where investors get worried about it. david: really good to talk to you, thank you. now we want to turn over to walmart. also having an annual shareholder meeting in fayetteville, arkansas. the meeting kicks off today. joining us now before she heads down to cover the gathering is taylor riggs. welcome. taylor: it will be interesting.

just had earnings a few weeks ago. is there anything new, maybe an update on the business conditions? we were talking about amazon. any updates on the e-commerce industry is something that analysts and investors will be focusing on. there is a three-our shareholder meeting on friday and then a q&a with doug mcmillon. on the bloomberg, we are looking at amazon versus walmart. so often we compare the two. amazon's market cap certainly tops walmart, but on a revenue basis, walmart is crushing it. walmart is a staple where people , and at the bottom of the chart, the white line is walmart revenue. interestingly enough, online sales are only 5% of their total revenue. online sales growth, growing 40% versus the brick and mortar 2%, 3%. so making progress online. david: that is revenue, how about margins?

taylor: markets are getting a little bit squeezed. there is a bull and a bear case. if the company looks good, you see revenue growth, the bull case is at what cost? margins are being pressured. they don't see profitability in the u.s. e-commerce site, so the extent that they can start margins. analyst say they will to growth margin expansions because of the investments they want to put into the digital transformation. that costs money. alix: i find that interesting because you are willing to buy amazon stock without the profitability of growth, but are you doing to buy walmart? they have to grow so much in order to make that up. taylor: and the share price has been reflecting that. it's been falling a little bit. a lot of it has to do with the flip cart deal in india, where there was a big push for them but came at a card of $.60 on earnings-per-share. analysts were wondering, how they overpaid for that? toid: when it comes

questions like patients of capital, making investments online, there are a lot of investment is there. really, are the shareholders named molten? the family owns the company. taylor: that is a very good point. there will be some shareholders there as well, as well as some analysts that we are excited to speak with. the morgan stanley analyst. equal weight on the stock. we will see. alix: is there a big party? taylor: we are very business, the party is tonight. we will go out tomorrow. david: i have not been invited. one of the things i find interesting, two or three years ago, a big issue would have been pay for employees. they moved aggressively on that and it doesn't come up anymore. taylor: they have been investing in their employees a lot, and that is something they've been working on with the minimum wage

growth, investing in their employees. that is something they want to do. i imagine they will be showing that off this week when they put on that big party, teaching their associates about how they are transforming their stores, online space to continue to make that investment. alix: thank you so much, travel safe. david: once again, wilbur ross is appearing right now in a panel in paris. every time we see him come up we are not on the air, and then when he comes -- he says the trade process is going well, getting good results in the u.s. at the same time, the u.s. is in a situation of asymmetrical tariffs. he says global trade needs a rule maker, arbiter. there have been some questions as to the extent the trump administration is really devoted to the wto process. in a different appearance today, wilbur ross said it was outdated, too slow, very critical of the debbie to. but he says there has to be some

sort of rule maker, arbiter. you can watch that panel on your terminal. we have a tweet from mr. trump coming out this morning. seems to be about mr. sessions. representative trey gowdy is quoting now, i don't think the president is doing is expressing frustration that sessions should have share these reasons for refusal before taking the job. if i were the president and i picked somebody to be the country's -- i lost it. there are about three weeks here-- tweets here. by the way, i will not be able to participate in the most important case in the office. i would be frustrated, too. senator sessions, why didn't you tell me before i pick you? there are lots of good lawyers in the country. he couldn't pick somebody else, and i wish i did. david: somebody who knows the

president pretty well. this is on the heels of the report yesterday that president trump reportedly went to jeff sessions, asking him to change his mind and come back in to participate. in fairness to the attorney general, i'm not sure when he took the job he knew that this was going to be the most important case in front of the justice department. alix: remember those employees that are no longer there? david: and by the way, he serves at the pleasure of the president. if president trump does not like him in the job, he can fire him. alix: it would not look very good. david: what we call constructive termination in the business. alix: we will be following that story and headlines that come out from wilbur ross. this is bloomberg. ♪

exxonwhat i'm watching is shareholder meeting.

not just walmart and amazon. this is why i care. the stock has pretty much done nothing, down over 3% over the last year. we see the steep slide, the matter what oil prices have done, exxon cannot keep up. on the docket are things like shareholder pay, tying shareholder stock grants that are not adequately depended on how they perform. you want to link earnings to growth. there is all of that in terms of executive pay. the real issue is the pushback we may see from investors on why you keep investing in production rather than returning to shareholders. total outlier when it comes to big oil companies. david: plowing all the money back into the ground, drilling as it were. why are they doing that if shareholders do not like it? alix: they have to. this shows the daily production for exxon mobil and how much it has declined. because they are so big it had to keep discovering and keep producing to stay neutral. they had to run so fast to stay

in place. a different kind of world with other oil companies that have done a better job of the replacement ratio. david: that is my question, why are they in a better position? other companies making big bets on natural gas, for example. one thing that will not be on the docket cap, methane emissions. or 10 years and a row, every shareholder meeting they got hammered on that. this year it is chevron, not exxon. that wraps it up for "bloomberg daybreak: americas." coming up, bloomberg markets, the open. j polonsky will be joining me as the relief rally gets underway. this is bloomberg. ♪

alix: from new york city, i'm alix steel. 30 minutes until the start of trading. this is the countdown to the open.

italy's efforts to form a government stall at the possibility of early elections loom hemorrhaging in global equities. italian debt stocks for now. leaders from around the world pushing back against president trump terrace proposal. trade tensions intensifying days before another round of talks. banks are looking to rebound after plunging treasury yield. rally.f s&p futures up by nine points. gettingar rolls over back some of its safe haven gains from yesterday. treasury market as well. selling is the name of the game. by .4 percent. markets showing signs of stabilizing. italian bonds rebounding after tuesday's unprecedented selloff.