threat at all. alix: that is ridiculous. james gorman says george soros warning of an eu breakup was unrealistic. he sees higher yields and four that hikes this year. mariano rajoy on the brink of being ousted by socialists while the italian president giving populist leaders one more chance to form government. hello inflation. upside with latest readings on u.s. prices on deck. david: welcome to "bloomberg markets," i'm david westin with alix steel. things have been better? alix: italy seems like a thing of the past. david: james gorman. alix: spanish politics is fascinating. it seems like no one is interesting. two-year yields in spain are negative versus italy now positive. huge move this week. fascinating. socialist government, no-confidence vote, no one seems

to care. david: how many times have you overreacted to geopolitics? alix: 100%. david set it, things are looking better. s&p futures flat. euro-dollar at 1.17. dollar getting strength. we will have rebalancing in different classes. treasuryll a sell story, yields higher by two basis points. 2.86. crude down, perhaps we see more inventory, online, perhaps a dollar off the lowest session. david: time for the morning brief. a lot of economic data. personal income and spending, jobless claims down at 8:30 a.m. and at 2:00 this afternoon, facebook has the annual shareholders meeting. g7 financeumbia, ministers and central bankers have a dinner tonight before

meetings focused on global growth. alix: that was nice. whistler. grammatically correct. david: i think she is making fun of me. alix: i never do that. david: [laughter] now for the first take. bloombergn adams, news america global macro slot. we start out with where we are in the economy overall. we heard germs -- we heard james gorman and he thinks the fed is still on course with rate hikes, listen to what he said. >> all they are trying to do is get back to a normal rate environment which gives monetary power when the next crisis occurs. it is to keep the economy in balance. inflation target has not been hit. my gut is that the fed will raise four times this year. david: if they go four, how will

markets react? gina: not 100% expecting it. we are waffling between three and four. with risk in europe, markets have pulled back expectations for a fourth. it is not particularly meaningful with respect to earnings, as long as the economy continues to improve robustly, earnings outlook improves, stocks hold up well, the way the fed hikes play out through the market is through the multiple and we are already seeing that. the multiple has come in a lot. it is a market driven by earnings growth. you have to watch the economy for cues, the fed becomes the driver of the multiple. david: what about as a former trader, vince, what does it mean for currency? >> it depends on the real yield situation, the dollar becomes more attractive as real yields rise we see inflation steady and

yields continuing to rise, that will be a big attraction for dollar bulls. alix: thank you for leading me into the next topic, eurozone moving higher. core cpi higher. higher, wehe euro saw a nice bike. is that a commentary on data? vince: both. monday rebalancing leading up to euro buying today. .t is a dollar sell month. folks have gone overboard and bought too many euros. have expiration in the europe. middle,ying for the guys trying to break the barriers, everyone is fighting

to see that done. we will probably and up in the middle. alix: those pesky traders. europe, don't go to defensive on europe, they like a mix of cyclicals, value in growth. stock market says, returns are weaker compared to economic data and that makes it a buy. shawn: european -- gina: european equity strategists are in a mixed camp. they still have cyclicals as well as defenses recently, health care and utilities have moved up the scorecard while energy stays at the top. that tells you it is a mixed view out of europe. that is consistent with what you're seeing in data as well as currency. something to watch for --, what i have been conditioned with respect to the european equity fund it, watch the euro. it will work to the benefit of earnings later this year.

be on guard for those exporters starting to produce better earnings result later in the year. it is hard to see now because political risk is so high but finding opportunities is important amid this dislocation. david: the more they export, the last the president likes it. gina: that is the other problem. alix: we didn't even talk about italy and spain. you cannot hedge against politics. euros on andry -- moving to u.s. inflation. that is the core cpi as well as the headline. did we learn anything about the stickiness of inflation? it makes mario draghi's job higher when he looks at the risk of italy versus data. gina: when you look at core numbers, that is the measure of sticky. the ecb and the fed are on to the game. while we are likely to see volatility with respect to energy prices specifically, metals as well, what is

happening with core cpi, deflaters,pi or pce those are sticky components. frankly, wages. wages are a key component, that investors have been watching for years for signs of life. will we see wage growth and how will that filter through? david: this friday, the labor report. today, core pce and consumption. a chart shows core and headline. the yellow line is 2%, the magic number. is white is core, the blue the headline. core at 1.88%. we are getting close. vince: we are getting close. while the fed looks at core and the rest of us look at cpi because that is where we shop and spend our money. when people say energy prices

and such do not filter into core, eventually it does because manufacturers take that into account in terms of pricing. we are seeing pricing pressure filtering through, retail and we are seeing core bump up through avenues. the fed is close to target. europeans, even with the bump in coretion and core, inflation in europe is running around 1% for the last 10 years. they are away from where we are. that big difference in real yields between europe and the u.s. long run, that favors u.s. investment, dollars and do not buck the fed. david: thank you both very much for being with us today. coming up, more on market reaction over the political uncertainty in europe. torsten slok will be joining us next. this is bloomberg. ♪

♪ >> this is "bloomberg markets," i'm kailey leinz with your bloomberg business flash. more downsizing on the way for sears. the struggling retailer, controlled by eddie lambert says it will close 72 stores after $424 million loss in the first quarter. comparable sales with kmart fell 12%. google wants to turn the phone into a legitimate challenger to the iphone. the company is working on an upgraded pixel line released this fall. one of the models has edge to

edge screen, it has gotten critical claims but it has not had a sales impact. of deutsche bank trying to dispose rumors about the future in the u.s.. he told a dinner in berlin that the u.s. is the most important market for the bank. deutsche bank cutting back business in america and bloomberg has learned 1/5 of u.s. staff could be cut. that is your bloomberg business flash. alix: thanks. is pixel a thing? i didn't know it was a phone. soros'orman said george view of the european union breaking up is unrealistic. atspoke with tom mackenzie, the morgan stanley china summit in beijing. >> i think that is ridiculous. i don't think we are facing a threat at all. i think this is something playing out over 10 or 15 years. there is essentially in many

countries around the world, a sense that the average performance of the economy is better than the individual performance of the citizens in the country. that is what is giving rise to populism. alix: joining us now torsten , slok -- there are two ways to look at it. how do you view them? torsten: it is hard to quantify. the headlines continue to come in. good news, more tilt in the direction of wait and see if we can get a government. the answer for investors is, there is no one who can predict where this process is going other than looking at incoming music including for now, we have stepped back from the worst scenarios. alix: you have a great chart showing bank exposure to italian from 2011, 2012 in a cataclysmic event. walk us through the change. torsten: this is a very long

process. politically, italy has to figure out where they want to go and what is going on. exposure toows italian debt has gone down dramatically. in that sense, it is not a surprise that euro area is going through ebbs and flows of political process. many know, this will be a risk. david: i want to do justice to the chart. 2008, what that shows is exposure has gone down 50%. exactly. fascinating. there are some places, there is contagion. i have a chart comparing the strength of the euro to the degree of italian risk, expressive in the spread to the bund. as the risk goes up, euro goes down.

as risk goes down, euro goes up. it is migrating to euro. torsten: in global finance worlds, interest rates are negative and people are paying money into europe, this is a confidence vote on the euro, the euro exchange rate. that is important of why this correlation is one-to-one. alix: how does the ecb deal with this? on multiple levels, rising inflation and political risk? torsten: it must be a huge headache. inflation would say they should be easing, the plan all along has been to qe this year, this september or december, the pen all along, quarters have begun to raise rates by the second quarter of next year. now this came out of the blue -- how do you quantify risk? it has required craftsmanship in terms of writing the statement and what will mario draghi say it is conferences in june, when you're faced with a difficult

quantification issue that the macro textbook tells you we have to exit, but the political environment is more sensitive. alix: i'm curious as to logistics of ecb. who is losing money now? rally for two days but a 300 basis point move for two-year -- how much debt does ecb hold? visit the national central bank that gets hit? individual investors? torsten: the issue with central banks is, there are some considerations, market to market basis whether they are losing money one-day or winning money another, central banks cannot be insolvent. we are nowhere near that. the discussion here is mainly still on what will the ecb do and the decision be given this challenge? david: the one person we have not heard from -- mario draghi. crickets. nothing. torsten: coincidence. david: is he agreeing with james

gorman? not that big of a deal? gooden: i think it is a idea to take a walk in a green park and take a deep breath. there is a political crisis everywhere, including the u.s. it takes time, sometimes it swings in different directions. the italian process, let's let it play out. alix: that scenario came with more firepower. a chart showing ecb buying italian debt and how they overbought. if they want to reassure the market, what could he say? david: a great point. do they have anything left to devote to saving things? how concerned is he about italy? torsten: both fed an ecb hold 20% in round numbers of domestic debt. down,he trend going

treasury outstanding going up. the ecb, trend going up. bottom line? there is still room in japan. it is not to say it is ideal but, his statement about whatever it takes, hangs over all of us and should be an important reminder that there is a strong commitment in the ecb to hold things together. alix: yields? bones? unds? torsten: it should be going up. clear on the strategy view in the short-term, turbulence, italy has been a roller coaster. fundamental should come back, higher rates and higher bund rates. alix: sticking with us. if you look ahead to the jobs numbers, how ceos are tackling labor costs and worker shortages?

exclusive interview with the apache ceo is next. this is bloomberg. >> it will be a battle. we will work the cost side and find ways to find efficiency. there are shortages and it will be one of the challenges. ♪ ♪

♪ wages, the key number to watch in tomorrow's job report. paying the price as costs rise in a tight labor market, one sector is energy. the apache ceo discusses how hard it is to find workers and how much more he has to pay. >> we came into this year and budgeted 15% increase on most service sides. adjusted lastates year, they started to rise late last year, two increments last year. it is the other things. the truckers, hot shot service,

welders, electricians. all of those, anything that requires people, there has been pressure. we budgeted 10% to 15% increase. we have seen that as we have envisioned this year. it will be a battle and we will have to keep working the cost side and find ways to find efficiencies. there are shortages, there are a lot of people trying to do things in small areas. it will be one of the challenges. there is infrastructure needs to be built, a group of companies that have been working together on -- how do we organize to help do those things? the communities are going to need it. it is one of the things we are to come together and take on because those communities need infrastructure. alix: where do you think workers come from? >> hopefully most our local. alix: from construction area?

from other trucking industries? how do you find the humans? u.s.ucking is tight in the not just in our industry. it is probably spilling over to other industries. you have to find folks who are willing to move out to west texas. i have lived out their most of my life, it is a great place to live, offers a lot and we need folks willing to move out there because there will be good jobs. increases, doost you expect that to continue for labor? what do you think for next year? >> that will hinge on where count ise, where rig and where budgets are and the demand for equipment. banked 50%% -- this year. -- 15% this year.

it will depend on activity levels. as the count goes up, cost will go up. alix: that was the apache ceo. still with us torsten slok ,and the question he could not answer, where does he get workers? companiesesterday, are relaxing positions on drug testing and criminal records testing. that is an anecdote telling you labor markets are tight, the trucking industry, retail, health care, across the board in many sectors, it is very clear the labor market is getting hot. david: the numbers tomorrow. torsten: we have details about based effects. 2.6%, our expectation -- david: euro-yen? torsten: some other indicators like employment cost index continues ahead, very significant debate about why indicators are showing strong

trends up in wage growth where others are showing flat development? the fed is going to tell us we are seeing a tight labor market. alix: in certain areas. we learned consumer spending was soft. you cannot raise prices if consumer spending is soft. you may be able to deal with wages if you are in energy but the other part -- not so much. torsten: the reason gdp is strong is not consumption. it is more because of taxes. all of that suggests it is not a consumption boom we are seeing late in the cycle. david: it is hard to put them together. why are companies involving investing in -- torsten: it has been low for a number of years. they are catching up to where they should be so one explanation ise so low that it needs to catch up

and that is why it is so strong. alix: hikes? torsten: fpour. -- four. the expectation is gdp growth above 3% for every quarter for the rest of this year. that is way above potential. we are still seeing well above potential gdp growth which should continue to push the rate down and put pressure on prices and wages. alix: torsten slok sticking with us and for all things commodities, watch commodities edge today at 1 p.m. in new york. shameless plug. coming up, central bankers on trade. this is bloomberg. ♪

alix: this is "bloomberg daybreak." welcome to the last day of may, futures are off by 14 points. euroher asset classes, the

was higher against the dollar in part because eurozone inflation is 1.9% for that headline, kissing the 2% level with selling continuing over here in the treasuries market. david? david: major announcement out of general motors, announcing right that vision fund will be investing $2.25 billion in cruz automation, taking the value to $11.5 billion. it was founded back in 2013 and $580 million in 2016 and this is an autonomous vehicle application that they are putting together with the chevy volt, for example. gm will put an additional $1.1 billion in. this will give them the capital that they believe they need to go to commercialization sometime

in 2019, which is i counted is just next year. they are talking about really going commercial by then. alix: which i find really staggering. autonomous driving is revealed to have little impact until 2030 and next year will be commercial? sometime, they believe, they will have a commercial application out and running, which says something about how capital they are and how confident soft tank is. mary barra, the chairman and the ceo said that they believe the doegrated approach needed to both, they think they are ahead and at least softbank appears to agree with them. major, major investment. alix: intelligent mobility suites are going to grow to 20 million vehicles by 2040. that adoption rate, i wonder how far ahead of the back gm will be.

they were heavily criticized when they invested $580 million purchase all of kroos automation. softbank, giving the motivation. alix: ford is very much behind where gm is with rough ability issues. i wonder what they have to buy, and a sense. david: that is why the chairman .f ford made a change that's right, ford is generally perceived as being behind and trying to catch up fast. it's difficult for a legacy company to move into the new space of online digital. anything that you buy is dilutive. this is not going to be dilutive in any way to gm as far as i can tell. this is an interesting way for them to make a substantial of dollars.billions if anything, it will free up capital from general motors. question of softbank,

two, $1 trillion to invest in their vision fund? how are they even going to find enough stuff to buy? they will be investing in this tech. with a car company, different than what we thought. , it's an valley startup melding between the old and new economy. we are going to keep following this, obviously. one hour from now we will have one of the senior representatives on to talk this through with them. briefing is coming from the trite and we will have representatives there and we will bring you up to date on anything more that we learned. right now let's get an update on what's making headlines outside the business world. kailey leinz is here with first word news. iley: the president plans to carry out his threat on

tariffs in mexico and canada. it could happen as early as today and the eu said that they will not negotiate with washington while being threatened. these were the highest level talks between the u.s. and north korea in 18 years. a top advisor to kim jong-un met with mike pompeo in new york. they will eat again today to theuss preparations for summit with the north korean leader. the italian president has not given up on the populists who called him an enemy of democracy. out whether find the populists are ready to revive the bid to form a government. carlo cota rally is waiting in the wings if needed. global news, 24 hours a day on by and on twitter, powered 2700 journalists and analysts in more than 120 countries. this is bloomberg. ministers and central bankers from the group of seven nations oversee over

half of the global economy and are beginning a two day meeting tomorrow in canada trying to tackle some of the most pregnant -- pressing economic issues in the world. we welcome now michael mckee, our economic and policy correspondent. this is justin trudeau hosting this in canada. what is it that he wants to accomplish and what does the united states want to accomplish? david, this isy, one of those situations where the agenda kind of gets thrown out the window, the stewards of the global economy are stents of the year to talk about growing the economy and including more people in it. this time the ministers are bringing their own elements to the room. u.s. trade policy and italy, multiple reports suggesting that president trump will impose tariffs on most of the rest of the g7 as soon as today, including the eu and the host country, canada.

steve mnuchin will be under a lot of pressure and treasury official said that they anticipated that and will give a vigorous defense of the president's policies, particularly arguing that the steel and aluminum tariffs are needed for national security reasons. other members of the eu say that that is absurd. be sure that they will be pressing the treasury secretary, even though he's not a trade minister, for some kind of last-minute relief. like mr. navarro, he's been disabused of that notion. when they are talking about global growth of their, how much of a wet blanket, if i can put it that way, is the u.s. posture on trade really going to be? definitely a wet blanket, the u.s. is the largest customer for all the other members of the g7. any kind of trade barriers the u.s. puts up is going to be a threat.

so far the u.s. seems unbending and there is a real concern about that. david: great to have you there, mike. alix: u.s. tariff executive -- exemptions are set to expire tonight at midnight. joining us now is the bar clay head of public policy research. merkel, saying potential u.s. tariffs are not compatible with wto rules, what happens at 12:01 tomorrow morning? >> it's possible that they will go forward without granting these exemptions. they are quick to retaliate on this and things are getting more heated right now. from the administration point of view, they want to come forward and show this being tough on

jobs and domestic job creation, tough on tariffs. this will complicate the situation on nafta negotiations, which we are still in the middle of right now, it will be tricky with nafta. with a temporary waiver? shawn: absolutely. and the problem with nafta is if you get a new -- a new deal, they will be asking for right before the midterm election. with mexican elections in july, that person may not decide to go back to what his predecessor wanted to do. i had a question about how much money was involved. $50 billion in china, to reduce that by 20%, that's not that much money. let's listen to what he had to say. >> reduce those points by 20%, that would take 10 billion off of 500 billion, a 2% move in trade, is that really was going

to change? is it that important? david: is it that important? shawn: that's correct. we put out a lot of research on the showing that the effect on the first order isn't that significant, but we have to keep in mind that the second order effects could be quite significant as well as people begin to think about round two in round three as tensions escalate. the only alix: solution from an economic perspective is to import less. i can't be the right way forward. 2.2 trillion, absolutely as they are talking about, the magnitude of what we are discussing is relatively small. in some cases even less eerie at the bottom line is that it doesn't have much impact right now, the only impact is that we don't know what retaliation will look like or what's the. from the equity perspective, many will say -- is my industry also going to be hurt or help? there is all this uncertainty about which industries will be

benefiting or losing. it's just not a level playing field and that's the main uncertainty we are trying to quantify. rationale that would come the right way. we are borrowing more and more money with a budget deficit. as long as we are borrowing more and more money, doesn't that translate into a trade deficit? torsten: page one would say that someone has to pay for that and depending on what your economy looks like, it will be coming from abroad. also deteriorating. getting into another deficit situation on this internal there are some real challenges with emerging markets in that situation. the u.s. is a worse different, as we have spoken about many times, but absolutely it is the recipe for going down that route of spending money that you really don't have.

alix: midnight is the first deadline, then we have june 15 with this list of products subject to tariffs in china. what's your base case for what happens then? you can see the u.s. administration holding off on tariffs. it's quite possible. we won't know what they want to do until we hear more statements with what's coming up from the white house and what we are getting towards is this idea that the rules-based international order for trade is beginning to break down and we are starting to see a bit of fracture in that. some thing that the u.s. has been building since world war ii , this idea of multilateral trade deals, this president has taken a sledgehammer to that idea. shawn golhar, torsten slok, thank you for both being here. developingors

autonomous vehicle devices, valuing the company that they saved $580 million for. you can see what the shares are doing already in the premarket, up almost 6.4%. thus far the market really likes this development as general motors brings in softbank as a partner, thinking that they can commercialize by sometime in 2019. coming up, we will take a look at the biggest earnings in the hedge fund industry and the one man that has topped the list for three consecutive years. this is bloomberg. ♪

this is "bloomberg daybreak," coming up in the next hour, citigroup global chief economist. david: turning now to wall street need, we cover three things that wall street is a zynga about this morning. the most recent rich list reveals the biggest earners in the hedge fund industry. on of them will you surprised. warren buffett cancels his ride, calling on a $3 billion deal over disagreements on terms and size. deutsche bank reversal.

to wallurning now street week, where recover three things wall street is housing aboutthis -- is buzzing this morning. buffett cancels his ride, warren buffett calls on a $3 million deal with uber.

and the deutsche bank reversal, ceo savings says the u.s. remains its most important market. alix: joining us now, james simon, he was the winner of $1.7 billion. alix: as he as last year and the year before. it's his performance on these funds that are unreal. >> that's right, the the toallion fund, it is closed outside investors and has done incredibly over the years. they keep it caps off at a certain amount so that they can do a lot of the trading they want to do and they are one of the best and earliest funds of all time. learned this the euro to ago, they only invest their own money now. only the people working get to participate in it and it's like

40% returns. >> is incredible. and as you said, they keep it cap so that they don't get too big and not have the opportunities they want. they really are one of the best computer-driven hedge funds. two and 20, 5 and 44. david: 40% after that? you take that deal. >> its job dropping. david: but we should feel bad for dolly oh, he fell in the ratings. om a made $1.3 billion. >> that is tough. this is a fascinating story, he essentially tried to do it again.

bad news in the marketplace, you need to stop and make that convertible investment. offer $3 like he billion in a capital injection. this was an eye-popping story for me. buffett has been measured in going into tech funds, startup, staying longer than many startup companies have, but it was interesting to see, obviously the deal didn't convert and was complementary of the ceo, which buffett doesn't always do. -- david: heys always bets on the brands that that brands. alix: -- brands. inx: but he tends to invest things he can touch, things he can understand.

even apple was a surprise for many investors and now it is considered more of a value stock. >> you said that about his friendship with no gates. forgive my confusion, but he said he didn't understand them. he did a lot of good work, but he can't do it, maybe he understands uber. think they have studied it closely because of geico. uber, in terms of the self driving car technology, it has been on their radar, the whole technology. it's possible that he studied the business and like you said, amassinge, buffett was that big stake there, too. uber is trying to lower that interest rate on the loan that it got about two years ago and i found that interesting because a lot of companies were going back into the market trying to renegotiate fees lower.

so far a lot of the market has been happy to do that, taking less money, no problem. if that goes well, why would they need a buffett three bill? exactly. >> berkshire has $100 billion in cash sitting around. it looks like look at it and said it might not be the best deal for us. >> the last story that we are watching is deutsche bank. now the latest is that the ceo savings saysank no, we like the u.s. and we are committed to staying here. what do we believe? he will have to cut of the 7000 jobs, right? is the u.s. in, is the u.s. out? you don't know where the 7000 is.

it wreaks havoc in an organization. >> that's a great point and it feels a bit like the new ceo is racing to get the cuts done so that he can then turn shareholder and employee attention towards how he's going to grow and what they are going to do with the technology but it seems they are investing a lot of the u.s. fast and giving it to their remaining workers saying -- don't worry, we are still committed to the u.s. the u.s. ambassador to germany was at the meeting so i wonder what can of external pressure they are getting when that headline comes out saying that they will be paring back in the u.s.. >> closing their houston office, which i found interesting as well. getting into a better position, fast. >> we know who owes money to the donald trump organization, right? donald trump. they got him a lot of money for the trump organization. to peggythanks

collins. next, it's not going to surprise big investment in kroos automation, up 6%, 7% now, approaching eight are sent, the market is really reacting. what it was, an investment that they made in a be start up the got a lot of criticism and now they have this big load of confidence from softbank. in 2013 and ited was an application with a take a car in figure out how to drive it. 2016, gm goes out to silicon valley with autonomous vehicles. we don't know exactly, roughly $580 million, buying goal company startup. highly criticized at the time by people who said that is ridiculous. $580 million for this company that hasn't done much. they said they need to integrate this fully with basic operations . the army way to do this is to build the car with the technology and they brought the

people out to detroit, putting the people in silicon valley, moving forward. flash forward, we have got a vision fund that is now investing $2.5 billion for a 19.6% interest in the automation, valuation for the whole company at $11 billion. i found most important, and i know you agreed, that this was needed to make a commercial by sometime in 2018 and that is stunning if it's right. alix: if it is commercial, what does that mean for the adoption rate? finance had a report out saying that they see growth at 5 million cars in 2020. is not a commercialization kind of conversation. david: we will be talking to the president of general motors about this. i don't know, we will find out, but one of the things the last time she said was that they are starting with with kroos

automation people that can be taken to the office with autonomous buses. it would necessarily be at the beginning, we will ask him. >> i also wondered at what point we begin to talk about gm as a tech company. we talked about tesla as a car company and the opposite seems to be true for gm, which seems to be a good thing. barra so that they were hiring from silicon valley. well, in the next hour they will the weed andith chief investment strategist as the markets are pretty call him, headed to jobs friday. this is bloomberg. ♪

>> i think that that is ridiculous. i don't think we are facing an

existential threat at all. alix: that's ridiculous, james gorman says to george soros, saying that an eu breakup is unrealistic. a big vote of confidence, soft rank makes a 2.2 $5 billion investment in the kroos automation of self driving car units and gm critics commercialization in 2019. hello, inflation, the upside is there with the latest reading of u.s. prices on deck. besides gm, you know what i love best question mark you don't really get the head of the egg banks and get someone else is ridiculous and it's george soros. no one is ever that direct. >> jamie dimon probably is. but james gorman doesn't give on a interviews and isn't call calling people ridiculous. aside from gm, it's a calm day,

the euro-dollar continuing a climb to the of right now. a broadly weaker dollar story, still selling treasuries on the margin, crews are getting hit in inventory numbers in just a couple of hours, off by 1%. david? 8:30 a.m. wenow at will get a lot of economic data, including virtual income spending an initial jobless came . and then facebook will hold its annual general shareholders and from british columbia, the g7 finance ministers have an opening dinner tonight before to did -- two days of focusing on global growth. amid concerns on the global economy, george soros view that the european union is at risk of breaking up is unrealistic and he spoke exclusively with the bloomberg china correspondent in beijing.

a set i think that's ridiculous. i don't think we are facing an existential threat at all. this is something that has been playing out for 10 to 15 years and there is, essentially, in many countries around the world, the sense that the average performance of the economy is better than the individual performance of the citizens in the country. that's what's given rise to the wave of populism. isx: well, joining us now .im paulsen, and catherine mann on the slowdown and synchronized growth. catherine, you said you are close to the first global downgrade since 2016. what crack so you seeing? catherine: there are a number of high growth marks that we have reached and moving forward there will be a lot more financial turbulence in the market. that's our view, as the federal reserve continues down this

normalization path and the real question is whether the turbulence feeds back into the economy. particularly for the united states we have already seen that turbulence falling into the real economy in europe. back here in the united states, people produce this question to cyclical. you think there is a simple way to decide that? >> i don't disagree with catherine, we could be on route to some slowdown in the global economic recovery. despite that, despite how well cyclicals have done, i would still stick with them. looking back historically, when consumer confidence is at its highest quartile relative to where it's been since 1950, that's where we are at right now. cyclical stocks outperformed defensive stocks by 700 basis points. i would continue to stick with cyclicals until the confidence measure falls below that upper

collaborative. even though it is a little bit uncomfortable facing the turmoil that we see in the political scene. history that is suggested, when confidence is good, stick with cyclicals. alix: this is all part of the backdrop for the g7 meeting tonight. growth is on the agenda, as well as trade and we welcome michael mckee. give us the backdrop, what's behind that conversation? mike: the behind the scenes conversation is about the tubing elephants that the ministers are bringing into the moon -- into the room on their own. this is about the threats to u.s. trade policy and italy. most of the ministers are already here and there will be a series of i o trade meetings today and steve mnuchin will be getting an earful about this idea. ofmight see most of the rest

the g7 as soon as today, defending it on national security grounds. others will say that's ridiculous. the europeans will have to answer for italy. this is the relevant issue for the ministers here. riffling through the markets this week, it's a taste of what's to come. i spoke with the senior international financial official yesterday who said that the danger is real because the numbers are so big that the potential for an accident is so large. named two issues there. trade with the united states and italy. increasingly feels like the trade thing is a done deal, those exemptions will not be extended, but italy, which seems to be far from a done deal. yes, it's probably more of a case of complaining in terms of u.s. trade policy. steven mnuchin is the treasury secretary, not the trade

minister here. in the italian case, yes, these guys are the ones who are going to have to deal with the fallout should there be a problem the issue is whether or not one leads into the other. it may be difficult for aerybody to work together on reaction plan for italy if someone goes wrong there. that's a real question. in the past haven't even been able to agree on a communication for these meetings, let alone a plan on a coordinated response to the financial crisis. alix: catherine, i want to get your take on factoring in global growth. catherine: we have seen it take a hit because of the trade issues on the table. the three to one cards and talking about steel today, cars is a much bigger market. the national security ground for cars is quite questionable.

we've got the china issues coming up on trade. it's clear if you look at the rhetorical analysis of the statement as well as a data analysis, this sentiment has already been heard by the trade rhetoric and probably nile -- now the trade reaction. that has really been the foundation of the typical upturn we have seen so far, business investment. if that is hurt, we are setting the stage for the slowdown in growth perhaps moving forward into 2020. david: as a practical matter, jim, are you seeing an effect on business sentiment because of the rhetoric? let's be honest, there hasn't been that much action on trade. jim: there is certainly a little bit at the margin. i don't think it has been hugely detrimental yet. i think a lot of businesses,

like the rest of us, are getting used to regular volatile rhetoric coming out of washington, the response rhetoric other parts of the grow best the globe, with little that happens fundamentally. that could certainly change, it could blow up at some point. i think that people have kind of that it the idea of the initial tariffs going into effect and the impact that that could have on these one-off industries. i think it has been there already. i don't think that that is as big a risk right now to the global economy as is just the general rise in yields that we have experienced for the last 12 to 18 months. the general slowdown in money supplies, particularly in the at 3.7% right aw, the rise and currency is slowing force that will slow down global growth, probably

more important than the trade rhetoric. what: i want to play with james said overnight, which is that it is not that big a deal. those by 20%, taking 10 billion off of 500 billion. is it that important? david: is it that important? catherine: the actions themselves may be small but if they are viewed as the opening salvo of a broader set, and we do have other trade issues on the table, we can add in the geopolitical issues with respect to iran, which can have a big impact on some industries in europe, if certain kinds of retaliations are put into place. change in the the rhetoric, you add a little bit of action.

i think that the trade issue is not going to be downgraded. , my viewrds to yield is that there has been a lot of cheap money around for a very long time. the rise in yields is an important agreement particularly in the united states. alix: jim paulsen, catherine sticking with us. on target, accelerating at the fastest pace in more than a year, what does that mean for the ecb? next. this is bloomberg. ♪

kailey: this is "bloomberg more downsizing is on

the way for sears. the struggling u.s. retailer, leastmpany will close at 72 stores after a $424 million loss in the quarter. comparable sales of sears and the company pause other chain fell 12%. chinese telecom companies are taking steps into getting off the u.s. stock risk. one of its most powerful executives, china is trying to persuade the u.s. to impose a seven-year ban on purchases of technology. president trump said he would allow them to resume business if a $1.3 billion fine and changed its management. the japanese softbank is betting big on autonomous driving technologies, investing more than $2.2 billion in g.m. kroos. gm says they are also investing $1.1 million.

they hope to put self driving cars on the road next year. that is your bloomberg business flash. david? it's up well over 10% now in the premarket, so first of all is a vote of confidence from soft tank -- softbank. it's a major statement that they think they will be able to have this commercialized, as they call it, sometime in 2019. it's also a way of getting a lot of capital into this new attack area. partner, it'ss a pretty clever. how does this kind of thing disrupt the economy? had you think about that terms of global growth? catherine: if there's an actual changeover is a huge boost.

you have an increase in productivity that's great for a long-term surprise out of the economy. disruption has a very good upside. balance, it's got to be a good thing. >> in g.m. saying that they will be putting in another $1.1 billion as well. dan hammond, the general motors president is joining us to discuss the latest on g.m. kroos automation. alex? european inflation is coming in stronger than expected , at its strongest level against the dollar in a week. coming inside the terminal, if i can pull up the chart fast enough, debatable, you can see how strong euro zone inflation wound up becoming. i'm getting it right now. kissing thatation 2% level with the core at 1.1%.

.till with us, catherine mann how do you take this number? the european number? it's higher than we expected. on the other hand, it's not too surprising from the standpoint of oil and wage growth in europe , which has been more robust when you think about this contract agreement in germany. one of the other things that we know about the wage dynamics in beope is that they tend to related not just to the unemployment rate, but also the closing, how rapidly unemployment is going down. some of the gains in europe that are welcome on the unemployment to drive wages higher compared to the dynamics we see in the u.s.. alix: basically saying that the equities are running below where the pmi is. going through the support for a

stronger europe. do you like that right now? jim: i do, i do. is interesting that inflationary evidence in europe is bullish overall, whereas in the united i find that dichotomy sort of interesting right now. i do. i think that the inflation evidence in europe suggest that the economy may be slowing down, but there is a good base underneath it, better than what people fear right now. behink the question will will this global slowdown, if we have one, will it bring down inflation? we could have more serious fears from the investor standpoint of inflation, or it may just amount to a stagflation where growth scales a little bit here in europe and it continues to climb. that might give us a new issue to worry about, stagflation fear and pressure put on the federal

reserve. david: there are good fundamentals underlying europe, but what if there isn't a europe? what's going on in italy, for example? bank of america and merrill lynch talking about italy today, is a good or bad? this is what he said. are suddenly faced with the possibility of an election that might be about italy's position inside of the eu and that is where the market started price what we saw yesterday, having a meager five star government, at least they have got to try to present some pulses to the government and we don't have an earlier election that looks like a referendum. simply put as an investor, the you have to price that in? jim: you know, david, i guess you think about this recovery

for 10 years, and i don't know how many times we have had waves through the marketplace. affecting risk positions on investors, every time people ran away and went to risk off, it was the wrong thing to do. something that will be the wrong thing to do again. it wasn't nearly the disaster everyone thought it would be in the united kingdom. europe, officially aligned or not, they will be aligned if they blow the eurozone apart, going back to put the negotiations back together. they call the union. ultimately, i think it is wrong to get to defensive about the possibility of italy leaving the eurozone. alix: thank you so much, jim paulsen, and we will have more

with catherine mann and what the volcker rule will mean for morgan stanley. this is bloomberg. ♪

david: coming back with deutsche bank news, but by the fdic on the list of problem banks according to an unidentified person close to the bank, deutsche bank is not coming, they have been reported to be on a list of problem banks and you can see what's happening to their stock, down over 2% right now. we reported earlier about this huge payment that was made over the course of two years for $30 billion. you have to worry about the system is and how reliable they are. that thee ensuring u.s. is part of deutsche bank, you have to worry about how solid it is. alix: and why hold up to those

shares right now? they still have these overwhelming issues at the higher level and then you have this basic how does your bank function right now. i would say that the problems of risk management in your systems are more than cutting costs. other than that, making sure you know where the money is. for u.s. banks that mike it easier, bringing us to the volcker rule and the potential changes we might see. here is what we know, potentially they are going to make some changes to make sure they are helping clients without doing prop trading. andibility with risk limits a presumption at a trading position for you within 60 days being proprietary. spoke about what the rule meant for the bank. it's not material. it's an efficiency benefit for the markets.

the sack change morgan stanley's fortunes, but it's a small part in it should happen. joining us.ine mann how does the deregulation story help with lending? lending has been on the rise from the tier of banks that are below the threshold for some of these most significant regulations and the change in not the volcker rule, but the other regulation a couple of weeks ago altered the capital requirements and will further allow the smaller banks to continue on lending. the big banks, keep in mind, they have a different business model. it's not so dependent on lending. rule -- so, the volker will not have that impact on their. some, if they do cut back

is a going to help the big tanks in terms of saving money on compliance? or will they change their behavior and become more speculative? catherine: i don't think we know the answer to that. one of the things at issue is whether or not the banks have sufficient room to maneuver when it comes to providing liquidity. is one of the big questions and whether or not the interaction of the regulation will alter the availability for liquidity in the marketplace. as we go into the situation where we have more volatility in the markets, having the banks be able to provide the liquidity in the role that they play is an important ingredient to smoothing out some of that volatility. alix: second quarter not looking as good as the first quarter, my question as these go down for trades at the end of the day, at some point you are competing so much for other people's money you need to for other returns. it's a fundamental shift in how these banks think about

themselves. catherine: banks are always in the process of reevaluating their business model. the impactng else, is on investing and there are always changes to what it is that banks have to do. this is just another change in strategy. alix: still laughing at me. [laughter] david: delighted you are here, please stay with us. coming up, softbank and the votto condom -- votto confidence in autonomous vehicles. shares are up in their investments in the av units. we will hear from the gm president, next and the latest on inflation. this is bloomberg. ♪ retail.

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

near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. alix: we are just seconds away from the latest read on inflation here in the u.s., with equity futures at a positive open barely as futures are up,

other asset classes have generally weaker dollar stories as the euro moves higher out of the eurozone, the euro dollar is up 2/10 of 1%. here in the u.s., things continue to get flatter, 33 basis points with cruise coming in weaker as well. numbers, we have a core pce year on year coming in. we didn't have march revived slightly lower. personal income, coming in banging wide at 3.1%, but personal spending is much higher, 6/10 of 1%. interesting, yesterday on a spoke the fed cited some softer consumer demand, so the big takeaway seems to be that inflation is steady as she goes. withtially running flat, personal spending being the big story here. catherine mann of citigroup is still with us. give us your take on these

numbers. with what westent have in mind and it means that the federal reserve has plenty of room to maneuver with regards to making a decision about june or maybe a delay. we have three total for the year, there's a lot of the year left. on the spending data, the thing that i would want a look at carefully, the headline is looking very good. we thought that some were going to come back from the winter order, but i think that another ingredient is looking at the non-gas components of consumer spending, because gas has been higher-priced. a little bitto see inside the weeds before making a judgment about that. alix: i should point out that the savings rate in april was ticking lower, up by 2.8%.

but what does this all mean for your take on the jobs number, where are we? catherine: what we are looking for his wages eerie a that is the key ingredient. there. we think things could go faster as they come in for the marketplace but in terms of the marketplace its wages. alix: energy goods and utilities were actually the contributors, to your point, more transition very. catherine, such a great pleasure, thank you so much. general motors had a big announcement this morning, the softbank vision fun had invested in cruise automation and is trading significantly higher with the news up, we can see, about 9.2% right now. welcoming at the gm

headquarters, welcome to the headquarters. it appears the market likes what it sees so far. what do you like about this deal? a bighink it is recognition of the rapid progress we have made over the last couple of years in developing this technology and more importantly it is the recognition of a huge potential impact of positive impact that this technology can have on the world and the business opportunities that will come around and we are just alighted to have them on board as a partner, sharing in the vision that we have for what autonomous can do for the world. david: did softbank come to you? were you looking to raise capital? >> we were not. we were not looking to raise capital. we obviously are in a position where we are absolutely prepared to fund this opportunity ourselves, but we did find that softbank, like i said, was a partner with a very online division of what autonomous

technology can bring to the world and we see the opportunity for a new and different source .f capital we saw the opportunity to get aligned with the world's largest technology investor on a big scale and it's all about the foundational alignment and our visit and vision for what the technology can do for the world. out there are working on autonomous vehicles. what did you have to believe that softbank really liked it? >> as we've talked about before, what's unique about our approach is that we have really all the capability under one roof. a general motors. with the cruise team we have the vehicle side engineering capability. we have the integration of those two things, giving us control over the whole system allowing us to move quickly and iterate a rate of development very rapidly and giving us a holistic , which isn safety

obviously paramount as we deploy this technology and given our expertise in large-scale manufacturing, it's a unique ability to bring the technology to life on a large scale when it's ready. numbers,ing over the no one knows exactly how much, but we think around $600 million , putting aside those numbers, one thing that struck us is the you think that this would take you to commercialization of autonomous vehicles sometime in the year 2019? that seems very aggressive. >> lastou get there? november we said that based on our current rate of progress we see a path to commercialization in 2019 and we continue with that rate of progress to see a path to commercialization in 2019, but importantly our ultimate decision to deploy truly driverless technology will be get other by safety and we will only deploy when we are at the level of safety performance

that we think is necessary to launch this technology out into the world. that will be the ultimate decision factor. commercialization, what is that mean? does it mean more of a us or truck perspective? >> commercialization means you will be able to pull out your phone, hit a button and have a driverless car come to wherever you are and take you to where you want to go. you have been experimenting with this some in the silicon valley area in san francisco, is it operational this point even as an experiment? >> we are running a small scale internal pilot program with our employees. the model runs at a small scale, obviously with a safety driver in the vehicle. we are learning a lot even from that relatively small-scale activity going on. that's in addition to the larger scale testing and development work we are doing.

>> as i understand it, this plus another 1.1 million the general motors is putting into the venture will give you enough capital to get into commercialization. how much more capital will you need after that? you will not be making a profit on day one and as you look at the likes of the investment what do you anticipate in terms of capital requirements? >> as you pointed out, the talking about today takes as well into commercialization. it will be a function of how quickly we want to scale and what the competitive environment looks like. there are a number of other unknowns at this stage, but we believe that once we get to the point where we are commercializing this technology we will have a lot of options in terms of growth and capital at that time. david: are you open to other partners? said, ins stage, as i terms of the capital in place right now, this is obviously

going to be an enormous market with a lot of opportunity to it. we are open to other partnerships overtime. we are fully funded, ready to go and focused on bringing that technology to reality. sense as tou have a whether softbank is looking for other similar investments? >> they have voted significantly here in terms of the scale of the investment that they have made. i think that what they saw in us is this unique integration of the full software hardware stack. we view that as an important validation of our approach. alix: was the biggest risk that you have seen to meeting these goals? >> we are obviously working the technology as quickly as we can. it will be mitigated by safety and as i said, it's a regulatory toironment that continues evolve. most importantly we think that this technology can have a

really significant and positive impact. it's on the availability of transportation and the affordability of transportation and it is ours as a result to bring that to market as quickly and safely as we can but with the right level of safety. you havedavid: mentioned safety as her top priority in the past. there have been various incidents involving other companies were people have been injured or killed. at this point are the regulators giving you something of an open door or incur that department of transportation in washington or the state level? what is the sense of resistance >> there'sgulators? a general recognition that on our roads today, we still have far too many accidents and fatalities. there is a strong recognition that this technology properly deployed could make a huge positive impact on that. so i think it is all about how we make sure that the technology is going to deliver that kind of improvement and how do we make

sure that we deploy it in a wholly responsible and safeway so that we can have that egg positive impact. it's still true today that 95% of the accidents on roads are caused by human error and we think we can have a positive impact on that. david: we really appreciate you taking time today and this is a fascinating and important development. we will keep watching. what was your biggest take away? david: i have been talking with him for a while about this and he's been consistent on what he thinks the issues are and what he thinks the path is and so far he is sticking to it. alix: what impressed me is that he's not just talking about losses and trucks. i was struck that when he said commercialization for them means a program to take you where you need to go next year. >> in that amazing? liked the point about

regulation as well. airbnb, those startup companies, they are so far behind the innovations, that winds then proposing some kind of risk to scale. david: it's true. but i did spend some time with people at the department of transportation on this issue and they seemed enthusiastic. they are very much leaning into this process from the senior administration. they want this to work. i also wonder, as a car company do you make a choice on av versus ev? would what general motors tell you, if dan were here he would tell you that you do both. ford has done more with ev rather than av and we will see how that develops, but general motors basically says it has to be integrated all at one time. alix: david: then i will get a

drivers license. but you won't need it. making headlines from outside, kailey leinz is here. the european union's briefing for a trade offensive with president trump, who players -- plans to carry out imposeeat to import -- tariffs on canada. the eu has said that they won't negotiate with washington while being threatened. these were the highest level talks in the u.s. and north korea on american soil in 18 years. a top adviser to kim jong-un had dinner with mike pompeo in new york. they met again today to discuss preparations for president trump's summit with the north korean leader. the lawyer for harvey weinstein will ask the court to dismiss rape and sexual assault charges. the grand jury in new york has indicted him for allegedly tax on two women. another step in a criminal case brought against him after the

accusations of sexual misconduct. global news 24 hours per day on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. alix: the economic data that we got 50 minutes ago, the core pce, the measure that the fed line withright in estimates, march was revised slightly lower. the real number they sent to everybody was personal spending coming in strong, revised upwards as well. however, the spending for gasoline and other energy goods, as well as household utilities, those were the leading contributors to the increase, not necessarily underlying it, but potentially just sort of an inflationary move from gasoline and energy and in the market, the tenure yield coming in at 5% , just in time to have equities moving a touch higher in the markets and the euro-dollar consistently moving higher, now

sitting at, as i can tell you as i pull it up on my screen. my gosh, i cannot type fast enough. the euro-dollar, off the highs of the session. nonetheless, consumer spending is here in the u.s.. coming up, my exclusive interview with john christian. david: really looking forward to that. if you're listening on the radio, you can listen to our colleague tom king and jon ferro. "bloomberg surveillance" can be heard across the united states on sirius xm radio. ♪

kailey: this is "bloomberg

daybreak," coming up later today, the democratic representative from rhode island. alix: oil dropping today, compounding monthly declines, oilhe is blaming higher prices conservatively and still planning on $60 for this year and it is exclusive interview i spoke with john christmann about his outlook for oil. john: if you look at what we have been through in the reset, we went him 100 down to 30. really coming into this year, we were planning on 50 and $60. seeing things go above that for corporation, a five dollar movement in oil price means about a 300 billion -- $350 million increasing cash flow.

it's helpful to our budgets, it helps us to you know, open up some things, but from a planning perspective today it doesn't do a lot. it's just more dollars that we can invest or potentially return to shareholders. what is your priority for that? capex? why backs? >> we preserved our credit rating and it was important to us, preserving that has been the key. today we budgeted to, like i said, 5860. there would be the potential to increase some of the things we wanted to do, as well as potentially considering returning to shareholders through an increase in the dividend or potentially, you know, some vivax over the existing. alix: with venezuela and the iranian sanctions, talking about ramping up production again, we have seen a lot of movement and volatility in the new oil price.

to make the decision as ceo, your decisions cannot be volatile. what you need to see? a sustained level of 74 how long? john: we plan conservatively. so, today we are at a level above were preplanned, in our comfort zone, meaning that incrementally it is more cash flow, generating more cash flow than we have the ability to invest in that activity or return to shareholders. the key is planning a little bit conservatively in that way you have got the luxury. things took that step function one way or another, then you adjust. one of the biggest things we can do is increase or decrease your activity set. alix: that was part of my exclusive interview with john christmann. for all things commodities, tune in a 1 p.m. to watch "commodities edge." it was interesting when i asked him about his priorities, buybacks and dividends were in the mix there in a way that these companies did not prioritize before, which is a big shift and i wonder if it

holds. alix: you know this world -- david: you know this world so much better than i do. he knows his business and he gives you an answer. he comes across as an oil guy. alix: we talk a lot about the midland differentials. tune in for that. he had some surprising things to say about it. coming up, softbank betting big on a $2.5 billion investment in g.m. route. more on what i and david are watching, next. check it out, you can interact with all of our charts that we use in the show. this is bloomberg. ♪

alix: what i am watching is the g.m. rally after the $2.5 million investment g.m. crude,

of over 10% in premarket. we have a guest, or bloomberg intelligence director of credit intelligence. i was surprised at the velocity of the stock move on this announcement. what was your take away? brexit was tremendous, an easy win for shareholders. toe is a way for the company show the monetization of it and the valuation that is clearly superior to what the market was. david: this had been a plan of g.m. for the last year and a half or so, to convince the streets that they are not just a legacy company, but a new company and their stock rice has gone up before on this and this is a real leg up, softbank saying that we really like your approach. >> it something that the manufacturers from a technology standpoint don't always have. alix: from a capital level in

from a pattern -- practical level, what do they have? news, but see any new there is news that the market is taking now that there is a car that is coming. david: the new things are closer to 2019 than they were. they persuaded softbank that this was plausible. dialing up a car in 2018 to come pick you up. alix: and the question is will they be able to do that. >> and you said that they were well into the process? >> you are totally right. they get closer to 2019 every day in the fact that they keep affirming it tells you that they are more and more confident in their ability to execute on what they said they will deliver. >> for example, tesla.

>> will be keep comparing it to companies like ford? tesla, meeting those demand schedules? that's one of the buckets we will see. >> what pressure does is put on ford at this point? , if made the change there you wake up and you are ford you say -- my goodness, where are we. >> jim hackett has been there for a year and you haven't heard a lot of well-defined growth plans. you have heard that we need to stick and drink and reduce from any manufacturing company comparing margins against others. there's a lot of heat at ford, it's one of the reasons why we continue to the g.m. bonds as more attractive. thank you so much, that's a fascinating shift in the market, doubling down. you mentioned ford and a softbank investment, that's

fascinating, too, that's a trillion dollars they have to offload. >> he said that this is big enough that they are not sure they are going to end we will see. you got nissan, you got toyota, you got daimler. >> softbank has to go somewhere with all of that capital. it is a softer day in the markets as we wait for jobs friday, using equity futures up by one point, despite the fact that inflation is steady as she goes here in the u.s. and consumer spending came out 6/10 of 1%. coming up, the goldman sachs chief u.s. equity strategist. do not miss that conversation. this is bloomberg. ♪

>> 30 minutes until the start of trading. this is the countdown to the open.

>> coming up, the deadline approaching. facing a last-ditch attempt to get relief from tariffs. euro hitting the fastest rate for more than a year. another major crisis might be in store. morgan stanley ceo says that his route -- ridiculous. yesterday, sizable games. features unchanged. of dollar weakness. euro strength at 116.74. 15 hours to grope your u.s. preparing to impose tariffs on steel imports from its closest allies. global leaders and investors waiting in a negotiations. >> it is only the eu that is insisting we can't negotiate. >> u.s. has more to lose in the long run because they have got