lash out at the u.s. theets rebound ahead of american jobs report. sick and tired of bad news. christian sewing tries to cheer up his staff saying there is no reason to be discouraged. daybreak. to it is big news. jobs day. alix: you have a populist and a socialist government now in europe and the markets do not seem to care. david: two governments have changed, italy and spain. the first time in spain, a prime minister has been ousted by a no-confidence vote as sanchez comes into play. david: this is changing

direction. the parties coming and have a different approach. alix: will they be euro skeptic? rhetoric clouding over them? alix: talk is cheap. how do you hedge that? that is our fourth story. in the markets, it is a definite quiet before we get to the jobs number. s&p 500 up on about 12 points for the whole month. despite the volatility and drama. euro manufacturing hit a 15 month low in may. in terms of the treasury market, selling. yields moving higher by about two basis points. the difference between crude in the u.s. and europe is $11 or $12. time for the

morning brief. for the weekend. will beations concluding their meeting in british columbia. they may have a tough time providing a joint communique. wilbur ross will meet with chinese officials in beijing. with the threat of chinese tariffs looming. and opec is meeting in kuwait city to talk about the possible relaxation of limits. and it is time now for the bloomberg first take. we are joined by the bloomberg economic chief. they announced tariffs yesterday, and it did not take long for those countries to respond. texaco responded. there will be taxes on a variety of products and then canada came out.

and the eu has been saying all along that it will up the steel prices. , blueing on bourbon jeans, and other consumer and agricultural products. right away, we have a response. are we heading towards a simmering trade war? >> it is a skirmish. bleeds, its -- if it leaves. this is a shaving knick. tariffs on orange juice and whiskey will not materially change the growth trajectory for the u.s. in terms of economic consequences, this is still pretty low-grade. knick orshaving

like kids playing on the playground. >> i think it is hard to price in exactly the impact. we do not know how far the tit for tat will go. we do not know if this will put the u.s. at a this advantage in dealing with china. also interesting to note that this is also splitting the republican party. brother's come up big andncers of the tariffs paul ryan from wisconsin says this will be harmful. alix: i also think the question percolating yesterday was is this going to be a step down to quotas or will it be a continued ramp-up? does nothere it is seem like that is where the white house will stay.

leaders are coming out with a strong words like "illegal." what is your take? >> there is the question of tariffs versus quotas. we just have to keep an eye on the escalation. seen is not we have escalating the situation. european leaders are frustrated. i suspect that a lot of rust belt voters will pay attention to what is going on with this regard. alix: and farmers. this will bite. lot more factory workers than farmers in this country. interesting point. our second story, deutsche bank. dakota the morning. christian sewing -- the last few years have been tough. the price is at a historic low.

earned arove we have better valuation on the financial markets. you send out that kind of a letter to staffers, that feels to me like a hail mary all the way. >> this is deutsche bank and they have been under pressure for a long time. s&p downgraded deutsche bank to the third lowest investment grade rating and the shares rallied. why? confidence that deutsche bank had enough capital on hand to be solvent. this was the big worry. david: is that the big worry? at the same time, we learned that the fdic has the subsidiary on a watchlist. can they comply with regulations? -- auctural change the structural change like that cannot be made overnight. >> that is correct.

now, this is part of the reason for the reorganization that deutsche bank is undertaking. all of this questions management which was the real reason for the s&p downgrading. executing risk. can they execute a turnaround plan? can this bank be solvent? -- that ist is why what you are seeing priced into the stock. david: fascinating. good luck to mr. sewing. alix: it is going to be ok. david: returning to the big news of the day. the jobs number. let us look at what is expected. 190,000 news is jobs and the unemployment rate remaining at 3.9%. that is what is expected. carl, you have slightly

different expectations. >> slightly more rosy. jobs expected. the economy is escalating. with the unemployment rate low and payroll gains solid, once again the focus will be on average hourly earnings. as i was writing my preview for the report, i look at the average hourly earnings and their relationship with the core pc inflator. what i found was it is not that headline average, what is more important is the non-supervisory and production average hourly earnings and that is running at about 0.5% below where it needs to be to be consistent with historical 2% inflation.

consistentlyve higher which means we need to level at 0.3%. holesd has been poking through the fact that we have been at 2% in the headlines. there are dismissing financial service costs. one more piece of evidence. david: sounds like the st. louis fed is listening to carl. if you listen to carl, we still have a ways to go. >> it is all about wages. wages --up faster than the disposable income people have to spend on the stuff they want is going down. unless you see the wages go up. alix: he agreed with me. david: that is wonderful. alix: i did it.

david: i cannot talk about the muppets. i'm sorry. thank you so much. coming up, more on trade. the ambassador, former u.s. the eu and former undersecretary for commerce and trade. this is bloomberg. ♪

alix: this is bloomberg daybreak. your bloomberg business flash. the trump administration has

begun an investigation. learned that a criminal probe has been opened. the focus is on secondary market trades for the corporate debt of the mortgage firms. he is martian net -- unveiling his final strategic roadmap for fiat chrysler after 14 years in charge. disney is trying to break a logjam in contract talks with its union. to $15 aning the wage hour in the next three years, 836% increase. union officials have not responded. that is your bloomberg business flash. david: the u.s. fired the first shot in what could turned out -- in what could turn out to be a trade war and it is aimed at its allies. >> let me be clear.

these tariffs are totally unacceptable. been50 years, canada has the u.s.'s most steadfast ally. do, will bethey encountered with a similar weighted action from mexico. mexico will keep on at the openiating table in an dialogue to try to reach a solution. >> if we were to liberalize to thethe g7, services same degree that we had liberalized goods, these imbalances would be cut in half for the u.s. for the u.k. as well. >> it no longer appears to be america first. -- it appearsme to be america alone. deal orit is the iran

trade. it is not healthy for the western world. >> we are now heading into the an off-againf on-again possibility for a trade war. today really proved the case stronger than ever that there is a remarkable shift from everything being a about central banks and quantitative easing to the political issues. david: joining us now is stuart eisenstadt. a former u.s. ambassador to the eu. , mr. ambassador and thank you for joining us. of somed the reaction world leaders and also some business leaders but what is your reaction to these tariffs?

ambassador: even the steel union -- this is absolute chaos. the most protectionist administration since the 1920's. the whole basis on which they are acting, the national security justification -- how is it possible that there is a national security threat and we are getting these products, aluminum and steel from our closest allies? the real problem with excess capacity in these metals is not these three allied countries but china. it is like shooting a machine gun at the wrong target. if they want to deal with excess capacity, go after china, not

our closest allies. this will invite direct agricultureat our and a whole array of products. brings uncertainty to the economy and it really is an -- it really is a chaotic situation. been involved in many international negotiations regarding trade. some say you have to threaten as partr impose tariffs of the negotiation and not as part of a shutdown in trade. amb. eizenstat: that is a good question. tradernt carter, a free himself, put a fast track on ofel but it is the breadth the uncertainty created. with threatening tariffs,

president trump did get other countries to restrain. but, further action could have been accomplished through direct negotiations. there is such uncertainty. wererch, tariffs threatened. and then temporary restrictions were given to canada, mexico, and europe. it is the absolute uncertainty that is so troubling. i do not think this is going to lead to the kind of concessions they want. it will simply lead to retaliation and they will go in effect immediately. in the meantime, we have complete chaos and uncertainty. david: as you suggest, the u.s. did get what they want out of south korea, argentina, and others.

you saw this happen in the 1980's particularly with japan. is that a sensible approach if we can get to that result with for example europe, canada, and mexico? amb. eizenstat: it would be a sensible result if those countries were responsible for the excess capacity of steel. but they are not. china is a problem. again, we are aiming our guns at the wrong target. will gettimes threats you action but here, the threats have been going on for months and now we have the actual which willof tariffs lead to retaliation against us. these countries are past the point where south korea, brazil, and argentina were not -- they are passed the point of saying ok, we have a deal. we are now imposing the tariffs

and these are major countries, major allies, and they will not sit back and let it happen. they are retaliating against us. you have a really chaotic situation. i would guess between 30-60 days this will be resolved. in the meantime, we will have gotten very little. we will have created uncertainty. and we will have missed the real target which should be china. david: mr. ambassador, thank you so much for joining us. julia,oining us now is president and founder and member of the new york fed economic advisory panel. bullard spoke earlier in this is what he had to say. >> everyone is talking about how the trade talks might change world trade arrangements. however, the proof is in the pudding and it comes down to

what is actually agreed upon in terms of trade arrangements. i am not sure in the end that much will change. alix: do you agree with that, julia? julia: i agree that we do not know. that sounds like a very dated fed which is what we know and love about the fed. businesses does lead to invest less and respond less to the incentives provided by the tax cuts. that is the concern. president bullard is right in saying that we just do not know. dois right in saying that we not know if that will crowd out the extra investment people expected to see this year. we will see if there is a material restraint made by businesses. capitalu can see spending expectations have fallen off a cliff. this is the philly 5 -- this is

the philly fed's six-month forecast. timing ties it to the trade development. you saw a surge in expectations even before the tax cut was passed based on the global strength we were seeing. there was an added boost with the tax cuts and now those have issue.f with this tariff around this trade dispute. we do not know the goal. there is no clearly articulated strategy. there is an impact on confidence. we will have to watch the data to see how confidence translates into investment making. there is always some slippage. coronado, thank you.

anotherquity market -- setback for the new ceo for deutsche bank, christian sewing. he is taking some back to back hits. the credit rating has been dropped. isning us now from frankfurt the bloomberg financial regulation reporter. we have a letter to employees saying -- i know how you feel. rings are bad but it will be ok. we will have a better valuation. motivating employees is key. the equity and bond markets have not reacted that badly. it is surprising how they took it in stride. stock prices have been in freefall. you have to wonder how motivated

the staff will be to go out and generate revenues. your investment in the company is worth a materially less. that is what i'm worried about. david: it seems to be going from let us cut some costs and get of the earnings to -- are we sure that we can comply with the regulations? they are on a problem bank list. we have the report out from the fdic. and we have the two erroneous payments. how long will it take them to redo their systems? >> it is a multiyear process. they are starting from a bad base in that sense. they still have to do a lot of work on that. they have to take the automated processes that had been done by hand. and make sure that the machine does notmake that --

make the mistakes that the people were making. the ecb though is kind of happy with the progress that deutsche bank has made in correcting these problems. but these negative headlines do whichn image of this bank is still nowhere near completing the overhaul and putting himself up for scratch. alix: if your share price is that low, you have to be a takeover target. are you hearing any rumbles on the street? and if not, why? nick: that is the big question. will it be taken over or merged? regulators care deeply about it being too big to fail. these innatekled problems before. now, in germany, the evergreen

topic about will they or will they not merge with comber's bank here in germany. -- commerzbank here in germany. aat is more likely than takeover by another company but as a regulator, you really want to make sure that before anything like that happens, that the company is on a sounder footing. alix: nick comfort, thank you for joining us. new governments. how the political developments in spain and italy are impacting the markets or not. this is bloomberg. ♪ what's a gig of data?

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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: this is bloomberg daybreak. number,from the jobs the market is feeling pretty good. are now triplees

digits and spanish equities are up over 2% even with their new socialist government. -- investorsnot be do not appear to be panicking. the dollar is pretty flat. mixed on the day of against g10 currencies. in italy, they have a populist government. the 0.2%'s red appears -- continues to deepen. we have the spread between wti at $11.t crude holding we have not seen that number since 2011. david: beyond the oil spread, we are also looking for the jobs number coming in one hour. we do not know that number. ourpresident and carl, colleague. we are looking forward to seeing

those numbers in about an hour. is going hint that it to be a good number. alix: this will move some markets at the end of the day. even the two-year yields are up twoout two -- by about basis points. david: the first time the jobs number came out when the president was in position, he tweeted too early but he may be foreshadowing. an update on the headlines outside of the business world. trump has as collated a standoff with canada triggered by u.s. tariffs on steel and aluminum. has been warned that any renegotiated free-trade north american agreement must be a freer -- must be a fair deal.

, mike pence,ident insisted that there is a sunset clause. prime minister mariano rajoy has been booted losing a no-confidence vote in parliament setting the stage for pedro sanchez to be calm prime minister. -- to become prime minister. news, 24 hours a day on air and on tictoc on twitter. this is bloomberg. david: yes, that gets us to what is happening on the ground in europe. earlier today, europe gained two new governments. area on a rajoy -- mariano rajoy has been removed for sanchez. populistaly, two parties agreed on a new

candidate. welcome, our two bloomberg reporters on the ground. maria, where are we now? our twomaria: good morning. spain -- out with the old and in with the new. mariano rajoy has been ousted from office. no prime minister has ever been unseated by parliament. he is gone and we have a new prime minister, pedro sanchez. the country taking a turn to the left. we have a socialist government in place and a new prime minister. anne-marieg over to inroads. anne-marie -- in rome. anne-marie: as long as this administration receives a vote of confidence, they will swear in new members.

an economics professor has publicly called for a debate. i want to bring something to your attention. -- he says people who call for an unconditional departure of the eu. is celebrating its 20th anniversary today. -- this is the burst not the birthday gift that mr. draghi was hoping for. minister worked for the european commission and he is known in the international community. he is looked upon as an eu friend. coronado is still with us. that is the set up. here is the market.

come inside the bloomberg. bond --the italian bund. it is spiking. spain versus italy. the spread has narrowed. is that the appropriate reaction in europe? julia: i do think the spanish situation is better than that in italy. beenpanish economy has doing better than the italian economy. the government was stable for and hasperiod of time been able to implement the structural reform so key to keeping the european union together. inhink some of the questions italy are more existential and potentially more disruptive to the european experiment. david: julia, you talk about the

reforms that help keep the eu together. what about fiscal restraint? italy wants to spend more money. we do not yet know what about spain. it is quite possible that we have seen the end of austerity there as well. they may is possible want to move in that direction and that will create tensions and that is the weakness that remains, the lack of a fiscal union and a structure for pulling these countries together. testes look like we will those boundaries. even though there may be some market relief today, i would expect these questions will remain unresolved as we watch how these governments operate and the policies that they propose. that this will

create for policymakers outside of those countries. hedging political risk has not worked out well. >> you are seeing the resilience in the markets here and in the run-up in europe. people are pulling back and looking at what is going on in both of those governments. is somethingseeing that will not pan out to the extreme as investors had believed at the beginning. spain is not in the same position as italy. they are already within the eu budget limits to begin with. they do not have a lot of room to fall. italy is more of a wildcard. you say it is resilience in the market. there is a sense of complacency though. p spread.ok at the bt look at where we ended up. not that far off from where we started. this theion is -- is

market saying -- this is not too bad? >> here is the thing. you have to understand that a lot of folks in this market in terms of the run-up, this is a way to cash in on what many saw as an anomaly. that is not to say that yields may not drop back down. we also had a report that we know that the italian government went in and bought about 5 million euros of its own bonds as well which is helping matters as well. when you look at the short-term risk versus gain, there is a lot more reason to be in this then out of this. six months down the road though is another story. alix: the big story of the day is jobs. saying --trump is

looking forward to seeing the jobs numbers at 8:30 a.m. this morning. market reaction. look at the two-year yields. the dollarok at inching its way into positive territory. twong up in the u.s. by basis points. is this going to be something special, julia? subparwe did have two numbers in the last two months, the consensus is expecting a rebound and a much stronger number. there is an expectation that it will be a good number. given the noise, could we see something stronger? yes. i believe you had a discussion earlier with carl about the real issue for markets and where the two-year settles at the end of

the day will be the wage numbers. and those have been stubbornly disappointing. we are still at 2.6%. that is not enough to sustain inflation and economic momentum. see ak we may very well solid jobs number. the question is -- what happens on wage growth? what does that mean for federal policy? i expect the wage numbers will continue to be subdued which will allow the fed to continue to be patient and at the end of the day, it will not the a sizzling hot report but a nice warm report. you doyou mentioned that not think it will be enough. what would be enough? you talked about 2.6%. carl said 2.7%. is that enough? julia:i think average --

i think average hourly earnings need to be above 3%. 3% wage growth would give you 1% growth which is decent. historically, that is ok. number wee kind of would want to see to rely on the consumer outside of wealth affects or tax cuts to really organically have a strong economy. romain, what is the market pricing? the wishy-washy inflation? >> you are seeing a lot more inflows. the small are outperforming pretty much every other index. it has been the leader. large cap hashat

taken as a bit of a safe haven as well. you do see people guarding against the potential economic slowdown in the u.s. and globally. they're looking at the company's that will be the most resilient in the face of that. the large cap and mid -- midsized cap. thank you both for being with us today. growthup, gm's push for finds a market hungry for cars. we take a look at gm's china push next. and through your day today, you can listen to your bloomberg radio. bloomberg surveillance can be heard in new york, boston, and the bay area on xm radio. live from new york, this is bloomberg. ♪

>> this is bloomberg daybreak. coming up in the next hour, patrick doyle, the -- domino's ceo. now, to your bloomberg business flash. it is a rare win for organized labor in a state that is traditionally hostile to unions. the first collective-bargaining unit. the union will represent just 180 of the workers.

in australia, three major banks take an unprecedented criminal -- face an unprecedented criminal prosecution. they are braced for cartel charges over a $1.9 billion share sale. all three banks deny any wrongdoing. a short seller has scored a dramatic victory over a household brand name. educational his credentials. allegations have been made. shares rose the most in five years. that is your bloomberg business flash. alix: thank you. time now for business week beat. we will go through three stories. g.m. assembles the market in china. possibility -- in popularity. planting a community. abandon community.

they are trying to establish a framework for their future. and spending and drinking habits. lessons an app that the price of drinks for free. david: the cohost of bloomberg businessweek. carol, thank you for being here. we know g.m. is big in china and they have been for quite some time. buick is a huge branch. i think of buick and cadillacs. >> that is what they got smart about in terms of strategy. they looked at some of the smaller cities and they look at the growing middle class in china and the bought about the price point. they are tapping into the market. they have sold a lot of cars. 4 million cars in china have

been sold. one million more than in the u.s. global 18% of their profit and growing. than: they start at less $7,000. carol: what general motors is thinking about -- what they did in the u.s. you purchased a chevy and then you upgraded. that is what they are thinking in china as well. that you start with a lower price point and then you go up. alix: and then having to do with the migration of jobs. have this with a cocktail. part of the headline is that early in the 1990's, 3% of americans moved across state lines every year. and now it is half of that.

2017's how the lowest migration in the century. think about our ancestors. they moved around to where the opportunities were. we are not seeing that anymore. really movedants the economy. by then you had a company out -- buy out the community. and people were leaving. do you revitalize the area? david: you have a real problem. and then you also thought about the oil industry. alix: here is what he had to say. we have to find folks that are willing to move out to west texas. i have lived there most of my life. it is a great place to live. it offers a lot.

>> this is great. i have been in the dakotas and you did see incredible migration. kids coming out of high school and making $100,000 a year because that is where the jobs were. david: as someone that comes from flint, michigan, this happened to our industry. it is a little early for the cocktail hour. about thisus talk fascinating story. this cap in london. you can get a free -- this app in london to get a free drink. it is sponsored. device and a data devices from millennials. that ithey discovered is difficult to get data on

millennials. away your data, you get a free drink. there is no charge for the app. they are gathering a lot of information. they are determining the kinds of drinks that people are interested in. those it is great for purchasing -- for those selling the drink. the way to market to millennials is not through funding expensive commercials on television. carol: straight to the consumer. there is a lot of competition though. alix: either way, even though there is competition, david's point is a good one. this is a huge change in how you market. millennials are now dumping facebook is a new issue. you need to catch up with that.

carol: go directly to the consumer. david: great to have you with us, carol. up, roman abramovitz has a chelsea football team, soccer for us, and they are trying to build a new stadium. that is what i am watching. can: the bloomberg terminal enable you to watch bloomberg go on your terminal. this is bloomberg. ♪

david: this is what i am watching. a russian oligarch. and in english football team and

brexit at the same time. bought theovitz chelsea football team. soccer, we might call it. he spent 700 million pounds. he wants to redo the stadium down there and invest a lot of money and they will not let him in the country. they will not give him a visa. because of the english retaliation for the poisoning. it could affect the economy. alix: a big part of that relationship is that a lot of russian money comes in there and that is a negative because it makes it sound a they are home for that money but they need it. david: they gave a lot of these golden visas. we have a chart that shows how many of these big investors -- this is the time that they need the investors. the foreign direct investment. as they pull out of the eu.

that was the thought. they could attract a lot of these investors. alix: looking at this chart. the business investment is going down to basically zero despite the fact that they want to attract that money. david: and they need that money as they leave the eu. we will see how it plays out. roman abramovitz is not a happy man. alix: this is not right. will be watching for that jobs number. in about a half hour's time. we expect a good number after the president tweeted about a good jobs number report. 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. >> allies strike back.

canada, mexico in the eu lash back at the u.s. with tariffs. show me the way to growth. president trump excited about the jobs report. news,nd tired about bad deutsche bank credit rating is missing significant execution risk. >> welcome to bloomberg daybreak on this friday it is job babe we have the president -- it is jobs day. jason furman saying if this is conveying good jobs you should never get them again. it depends on what he is looking at. if you look at the headline number it may be killer.

but there is some seasonality numbers. a nonsupervisory worker wages, he is not going to get that and tweet about it. >> there is a danger the market will overreact. the dollar shows that move. it was negative territory. market,r part of the , nowng that risk on field they are around the highs in the session. the dollar winds up getting some strength. yield moving higher, dublin but it did in the session. that isn't now. take a look at the entire weekend. , trying toconcluding come up with a joint communique

which may be difficult. over ross is meeting with chinese officials with the threat of $50,000 in goods looming. contemplateing to relaxation of limits. up, the investment manager for michael bloomberg. us, the dell common industries executive. what is your initial reaction to the retaliation from mexico, canada and the eu? >> the holes that is unfortunate. it is a broader measure. was touting we need to redo nafta.

he has been an office for 18 months. tohink this is his attempt speed this thing along. chaos andt to create it is doing that. he need to sit down in a room and get this done rather quickly. we are almost there. >> is this a way of moving across the finish line. this is a way of getting their attention. or are we headed to a structured world when it comes to trade. >> he cannot hear us. >> steve, i will ask you the same question. they didn't those tariffs on all of the countries. they had essentially quoted agreements. >> in fairness to the trump administration they are trying to make deals. the reasons they got they

tariffs in place come other countries did not want to make deals. >> we have had structured trades in the past. in the 80's we did this. what were the results? we had gdp growth. is i remember them they were more on how many cars the japanese would send us. they were bilateral agreements. comparison, the steel tariffs. those tariffs cost more jobs than they saved. mckee is up in canada . what has been the reaction? >> the overwhelming reaction is

the same as around the world. we are getting all kinds of comments noting this is unacceptable and unfortunate way of doing business for the united states. central bankers gathered for their opening dinner. steven mnuchin was nowhere to be seen. he did not want to be on camera. earlier he met with the finance ministers from other countries including the german finance minister. they had a brief sit down. the germans did not appreciate what he had done. germany calling it deplorable. steve mnuchin tried to defend the administration. the idea that anyone is a national security threat to their allied with the united states is ridiculous. it is not going over well here. >> we want to come back to you.

across based in windsor the river from detroit. you own several plants making pipe. you are the largest independent maker. let's ask this question about quotas.versus what is the right way to approach this? >> the right way to approach this is with quotas. your last guest, talking about 2000's, itthe early was unsuccessful in the end because they stopped it after 18 months. this thing needed to be in place for longer if not permanently. that was a temporary measure. stopped it because there was a deep -- wto proceeding. would you advocate going forward dismissedeven if it wto? what this is a different

argument. the wto is a joke in my opinion. a games top to be the u.s.. vote is a farce. wouldn't a honest i much attention and would tell them to go pound salt. the most openen market in the world and has been abused for many decades. we see the end result. a chronic trade deficit is not healthy. we are heading down the wrong. i advocate for quotas. the product of comes in cheap at that point. we draw a line in the sand and we have to make the product here . i have multiple plants that are shut down that could be restarted if illegal imports were held at bay and we could great american teammates

and canadian teammates, and people in mexico as well if we stopped the world from abusing our trade systems. what's canada, mexico and the eu, they do not have illegal trade laws. they just import more. >> say you went up getting a cheaper production profile, just not in the u.s.. why does it have to be these tit-for-tat trades to make your business operate well? if it is all the free market. business is canada and u.s. base. more plants in the u.s.. there is not a tit-for-tat to make my business operate better. we are talking about competing governments. competing gains companies who are printing money. don't tell me we are not manufacturing efficient here where a take a ton of steel, at a lower cost than it is for the ocean from china, the

philippines or vietnam. that ocean is more extensive than what it cost me to make the products. in the u.s., iron ore, electricity, all of those imports are less than they are in the rest of the world. theoretically we are more competitive. this is the issue. they use massive amounts of circumvention and third-party shipping, and third party transformation to move this product, and take our jobs. and take our employment. it takes away from the economic engine. this has to stop and it is going to stop now. this a trade issue or physical issue? as much as we are borrowing as much as we are does not lead to a trade deficit?

>> troop. the math is such, if you run a budget deficit you will run a current account deficit. number one, there are a lot of trade abuses around the world. we should policeman as best we can. if you go back to your study, some make steel more efficiently. , otherin a situation countries have gotten good at making this using the lower-cost labor. we will make less of it. that is simply economic change. we are not going to always make the same amount of steel we made in 1945. to thewith respect tariffs, they cost more jobs than they saved because we raise the cost of steel. you then drive employment, people who use that out of this country.

i take exception to that. when you talk about the cost of is 16-18 steel, it dollars per ton now selling for $800. don't tommy it is the cost of labor. it is a low labor product to make. when talk about the cost of that forcesproduct stuff overseas let's put in perspective. the cost of steel in a car is miniscule compared to the price of the car. the price of steel in a building is miniscule. two or 3% of the cost. please don't tell me the cost of steel has driven away jobs out of this economy. it may have been done through sheer greed but the cost of steel, even though steel is and everything is a small component. that argument is a farce.

>> let's move to the weekend. michael mckee, what can we expect? what happens next? >> ministers are going to have a series of meetings this morning designed around the theme of increasing growth for everyone around the world, inclusive growth, much of the conversation is going to revolve around these trade tariffs the president has put on. the canadian finance minister saying there is no way we can avoid it. expect more fireworks from that. of thestion at the top show, will they be able to come up with a communique? they have struggled with that in the past. now the tariffs are in place what do they say? tradecommitment to fair no longer seems appropriate. there will be some drama over that as well. next week, the meeting of g7

leaders in quebec where donald trump meets the rest of the g7 should be interesting. >> thank you mary much. much.nk you very tune in for mike mckee's interview with the euro group president, philip hammond, and bruno le maire. >> we are going to get more on jobs, and reaction to the report from bill gross. this is bloomberg. ♪

>> this is bloomberg daybreak. claimedysler ceo has victory. the automaker will become net cash positive. he is in failing his vital strategic roadmap after 14 years in charge. investors are happening -- hoping abercrombie & fitch will be able to hurricane its clout -- the able to regain its clout in the mall. business hases come back. the commodities unit became emblematic of goldman's trading problems last year. it dropped by 75% to the lowest in the bank's history as a public company.

>> 10 minutes away from the latest read on the u.s. employment situation. when hundred 90,000. president trump came forward to these numbers. he said he is looking forward to the employment numbers. on it.ket moves hunter.us now, thompson let's stay with me effect of whether or not he should between about this at all. what part of this will be a good number? what will sound good but there are problems? >> we are expecting somewhere between 160 and 200,000. that variance is due to whether or not employers can find workers they are looking for. if you read the most recent book by the fed, labor markets are

getting type -- tight. finding workers is difficult. you're probably going to get a higher end of that number. one of the things i'm going to look at, the diffusion index. people hiringe versus not hiring. theant to see it closer to i'll. pay,e wages they have to the wages should be going up. >> that is what has not been happening. they are saying i can't find them. wages are sticky.

one of the things we hear from, if i raise them for new hires i have to raise them for existing riders. >> capital investment sticky, why should you invest more? >> i almost agree with you. capital investment is lacking. companies don't see the growth. is the key aspect of the job situation at the moment. i'm happy to see people are talking as much about the wage number as they are about the jobs number. why have wages not gone up? that is the conundrum of this economy. i think the power of his notice has grown.

if workers are paid too much you can outsource to mexico or china . recovery, making america great again is to get wages to start rising. >> pointing this out, if you come inside the bloomberg this is what he wants when it comes to wages. the white line is he -- his key thing. related to the core pce deflator, a longer trend line. we need to see that content up to 3%. in order to have a sustained pce . that is what we are not saying. productivity to go up. employers are willing to pay more for workers when productivity increases. if we don't see productivity

increase employees will get nominal wage increases but not real wage increases. go upy of living will not substantially unless we see productivity increases. point. is an important productivity has not been going up. we don't know why. you cannot have sustained real wage growth without productivity. >> thank you for being with us. steve ratner will be staying with us. , we will discuss the currency market. live from new york this is bloomberg.

>> president trump tweeted, looking forward to seeing the

unemployment numbers at 8:30 this morning. brad comes from his office -- great to see you. >> clearly the tweet indicated perhaps a positive surprise here. if we do get a positive surprise the dollar may be moving a little bit. perhaps we will get a cell of the facts. the dow is going to be one to watch on a positive surprise. we will see. president to tweet like that. especially when it moves the market like that. with the risks in italy and spain, what is your take on how the euro is trading?

it is very much keeping eyes on all of those things, really. you have the italian crisis, spain but without much fanfare. then there is going to be the german response going forward. -year-old -- euro-yen will probably move away from the extreme it was on. the safe haven bid will probably be the case for the next couple of weeks. buying a curveball. there is always the potential for a curveball out of this administration. it is going to fall into a greek like scenario. we have to keep an eye on it also do our day-to-day jobs. >> for the politics, the position of tariffs do we see any currency reaction?

>> the canadian dollar and mexican peso are going to be key . the euro has a lot of stuff going on. the trade related terror information was part of that but that is going to be a more italy and spain story. canada and mexico a nafta story. mexico has elections in addition. canada just turned a little hawkish. i would keep an eye on canada and mexico. i would be short dollar canada given the market is moving to a stronger canadian dollar. >> interesting trade. thank you. we were talking about

productivity and wage jobs numbers. the bifurcatede economy? >> i am not sure the way this jobs number is helps us understand productivity. are productivity numbers they get released on a different cycle. what do you think of the economy's overall? george soros says there is a major crisis on the line. >> the economy seems to be doing well. we are humming along. inflation is muted, etc.. i'm humbled by the fact i have said many times the imf has 214 years ofdict

over a 10 year. each one of them have missed the fact gdp was about to go down. economists cannot get recessions. they do happen. of how youthe order think it is going to go down. year,?ed 3% on a 10 what happens first? >> that is a hard one. hitting treasuries three. >> wages. wages. i am not sure we are going to get to three. unemployment at 3%? i don't think we're going to get to three. we can't sustain three at this point. wages withet to 3%

that labor coming back. wage growth can accelerate. companies have to pay more to get work. they are paying truck drivers would hundred thousand dollars. eventually this works. >> and that is going to get tighter as well. steve mystic with us through those numbers. -- steve, stay with us through those numbers. president trump is ready to see the numbers. you have a rally underway in up 2%, spanish equities despite the fact they have a socialist populist government in italy. it is now a story of a stronger dollar slipping into negative territory down on that tweet. yields moving higher as well.

before at 43as basis points. oil keeps getting weighed on here. now, live at the u.s. labor department with the numbers. 223,000 jobs added. unemployment rate taking down unexpectedly. , revised two months up. what we're seeing here, more people in the labor market. is the lowest since april 2000. ,hose skeptical of that number that is also down 7.6. the lowest since may 2001. participation rate down slightly.

people fewer unemployed in the u.s. in may. who is working? which industry is gaining and losing? it was broad-based. utilities were the only two that saw job losses if -- in the month. retail quick transportation added in may. manufacturing up 18,000. that is lower than what we were expecting. we have had about 20,000 for the last eight months. employees are working the same number of hours. 34.5 is the average work week. wages is a big one. up 0.3%. those are the month over month gains. both are actually higher than what we were expecting. for-over-year we're looking

2.6. we are starting to see that pressure coming in. >> thank you very much. trump see a president said he was looking forward to the numbers. >> good news and positive on all fronts. we talked about earlier this morning the wage number was important. >> 2.7%. >> it is ahead of expectations and moving up. >> the market is moving in kind. the dollar index was shooting higher on that. the bond market is a similar kind of thing. the two-year on the 10 year anywhere you look. the good news is bad news for the bad news is good news. sawre off the peak that we before the number.

223,000 jobs added in the month of may. your average hourly earnings jumped higher to 2.7%. thank you. keene with ao tom special guest. >> we are up 11. >> we welcome bloomberg television, bloomberg radio worldwide as well. jpl and, now joining us, bill gross. let's get the jobs report before we go to other issues including trade policy. this is bill gross, a make america great american -- make america great again jobs report. can those rate increases be beneficial for america?

another one if these types of numbers continue. important was the average hourly earning. 2.7%. are we making america great again? from jobs in gdp, inflation moving higher, in terms of wages, the fed hawks basically think they can move forward once, twice but three times. june is the last. .ome states this goes to your work on financial repression. we get a higher rate regime. with that, higher inflation. could you see a volvo eight?

higher rate?see a a 10 year yield. five-year a little bit less. they are better than zero. it is not exactly the financial repression we nuclear four years ago. it is getting better. still, we're in for a long time thatnancial repression should be around 2% real. or 75 basis points. >> i wanted to talk about performance. it has been a week in which

everyone has reported on your fund's performance. you the right to respond to what has been criticism. can you talk about how you have set up. inthere has been a strategy the german bund. between the two is historically high. for instance, on the 10 year u.s. treasury is 250 basis points. it is never been at that level. theuld say in terms of labor market, for the u.s., on , 220 basis points, higher than in germany. i would suggest at some point

this has got to reverse. states are the night equal credits. what is the difference except fed inction and the terms of their monetary policy. that was the basis for the bad day and bad trade that not the basis for the negative publicity from the new york times. , i think itl trade was outrageous. >> i would rather talk about your stamp collection for the 49ers. this is so important. we show the articles the other day.

i want to go to the chart. this is what bill gross is talking about. we are going to come in here. this is the linkage looking at sustained higher u.s. yields. this reduced german ten-year yield. there has been an upset here. germany and 10n years is massive. >> we are not going to make you talk about a divorce. let's keep it on the markets. >> darn. >> we can look about a few other things. market, what are your thoughts on that?

>> let's talk about that. why are they so low? funds, we are going out six years. where are they still negative? is low inason the ecb terms of their chart rate. second leg, i haven't really dealt in italy. that hasn't been the problem with the trade. ultimately it is italy from the standpoint of a political direction. severe.nces are , back in the day when greece was a significant problem there was talk about germany. they did want to share the burden.

their bonds become german marks. that makes them appreciate significantly. of thely because potential for leaving the eu. >> that was tom keene in. let's recap those may jobs numbers. unemployment rates 3.8%, year over year. only negative. it eased a little bit but it is hard to find a negative. coming up we will talk with a ceo about what he is doing with

hiring. patrick doyle will join us. this is bloomberg.

>> this is bloomberg daybreak. on bloomberger markets, an exclusive interview with the your group president and minister of finance. >> jobs right. if you were shorting bonds you are feeling pretty good right now. a better than expected number. .nemployment rate drops 2.7%.

sure the treasury market, if you are doing it you are feeling happy right now. >> we were actually selling off in this. us ofent trump's pizza the numbers may be good. the trends may continue at a reasonable pace. is fact that we bounced back a positive sign. they're are likely to be on the same path. inside, the line moving back up to 3.2. the yellow line, moving a little bit higher.

>> that would be three total hikes. , this is whatant the bond number is worrying about. next year is not as important as what is the terminal rate. james bullard. they have said we are close to neutral. how much further are they going to go? neutral. above some others are more skeptical they will bill to do that. that terminal rate is going to matter more. >> agreed. thank you very much. the largest private employer, annual holding its shareholder meeting. joining us, taylor riggs.

with wages front and center what are you hearing on the ground? >> huge. they use the tax benefits to increase wages. we have $11 an hour. there was talk about if the board needs to do more. they recognize that it is a tight labeler -- labor market. interestingly they are working on the other benefits as well. russianounced a new policy pre-they will fund employees to go back to school to keep good progress in the school -- in the store. these fast robots, it will help the employees go to the front of the store. that is something they are doing. it is a tight labor market.

9%, they are up at the lowes. they realize a tight labor market is something they are focused on here today. >> we turn to domino's pizza. domino's is the second largest pizza restaurant chain in the world. it is responsible for 310 thousand employees. the stock has shown strong growth through the currency yields. we welcome them. it is good to have you. >> you have a lot of jobs around the country and around the world.

we are adding, how may give are coming into the workforce, and we are not seeing real wage pressure. what are you seeing at dominoes and your franchises? >> it is a good economy for us right now. .ou start from the top as we do the analysis on our business the biggest predictor of growth for our business is employed people. more employed people buy more pizza been unemployed pizza. the job growth is a good thing for the growth of our overall business. isthe wage and labor side it a strong market right now but you are seeing increase in wages , under 3%. higher growth than that. , which is terrific. that is a good thing. number, even as

you see unemployment down, the workforce participation rate is still under 63%. i think that can get up to 64, 60 5%. i think we are in a good place right now. we are seeing people come into the workforce. we are seeing unemployment continuing to inch down. the workforce participation rate is what is preventing a dramatic increase in wages. >> it actually ticked down. even as unemployment went down. evidently because more people are coming in. how many people are still out there? percentageer is each is about 2 million people. the u.s. has had a partition rate as high as 67% over the

course of the last 10-15 years. you still have a lot of people who could come back into the workforce and helped to fuel it is a gooderall situation right now. any pressure?ling franchiseeseeing feeling margin pressures? >> we certainly are. some of that is minimum wage increases. it is needing to the more tire great people, getting more , from a delivery driver standpoint, the majority of the workforce in our stores the the more funds they can take, the more tips they are earning. we are seeing some of it. they are managing it well. , therofits of our stores

transfer our franchisees are it is a over all healthy situation. the u.k., ireland, over and mexico, how do the tariffs and ramping up at your business decision? read forlly does not each of those markets you're dealing with those markets, resourcing our food locally in things those markets, going on with trade. they do not have much of affect on us. people buying pizzas, are you seeing affects of the tax cut yet? >> i think it has been a good thing for the economy overall. i think that is going to help growth we're ramping up investment.

we have done some things with benefits. on partnerg better benefits, taking time off when people have kids. overall it has been a good thing. >> gas prices are on the rise. how does that expose your customers and change how they are going to eat? >> i don't think they will have any near-term effect. they are simply not going to refinance like they do might have before. gas prices can eat into disposable income. the levels now, idle thank you see a lot of that. what i would watch for is whether or not that starts to flow through into food costs. that is something we saw in the past. we are still pretty good with their forecast for food.

that is the thing i would be looking for. >> thank you very much. patrick doyle. coming up, the hits keep on coming for deutsche bank. that stock down for it. this is bloomberg. ♪

>> what i am watching aside from markets, deutsche bank. the new ceo, taking hit after hit. s&p downgrading its rating. down 4% over the last two days. interestingly up today. s&p globalause rating saying they had enough liquidity. that is going to wind up being ok. >> but can they make money? saying wend the fed are not sure you have your arms around your business. that can constrain a bank.

>> that is the next conversation. we're recapping the may job numbers. dropsment rate year-over-year. african-american unemployment record low. interesting tidbit. >> and a great and important fact. >> the markets like it. that does it for bloomberg daybreak. with the, michael gav chief economist. ♪

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