president trump. larry kudlow says, don't blame trump, it is your fault. times"he "financial reports unicredit is developing a merger plan with socgen. analysts are skeptical. and facebook fumble. more questions about how facebook shares data with device makers. the company defends itself, as the stocks hit a record high. >> welcome to "bloomberg daybreak." i'm david westin. the summit going on in singapore next week -- >> what's interesting about this market in general is you have tensions, italy still has issues, spain as well, get the markets are following the jobs data in the u.s. and ignoring everything else. >> either they don't react or the react for a minute. >> i was talking to a ceo over the weekend, how can i make a decision based on threats? i have to operate as i can. in the markets, that is what you

are seeing. a a rally underway in the futures market, the dollar index is 93. flat, and crude rolling over off .6%. parently we will see more opec oil come into the market, the question is when. >> time for the morning brief stop apple holds -- morning brief. conference, but the rest of the week is about geopolitics as they get ready for the summit with north korea. then on friday, it's a showdown with the g7 leaders meeting in quebec. president trump's peers will try to persuade him to change his stance. we're joined by martin adams, the chief equity strategist, and michael mckee. even more important, great job,

well done. let's get your quote from the communique. this is part of what the chairman had to say. "concerns were expressed that the tariffs imposed on its friends and allies on the grounds of national security undermine open trade and confidence in the global economy. finance ministers and central bank governors request that the united states secretary of the treasury communicate their unanimous concern and disappointment." we are trying to patch these things together. it's not just the g7, it is 6 minus 1. >> there have been times when the g7 has said china needs to fix its trade policies, or japan needs to deal with the current account balance, but i have never seen a country singled out for specific criticism like this, particularly at the top of the german state. they didn't do a communicate because they couldn't agree, but

they say six of us agree on one thing and you are the bad guy. >> it doesn't seem l they are backing down. larry kudlow came out over the weekend, and here's what he had to say about it. trump, claime china, -- blame china, blame europe, blame nafta, blame those who don't want reciprocal trading, tariff rates, and protectionism. trump is responding to several decades of trade abuses here. >> so gina, i guess my question is, whose fault is it? whether he is right or what does it do to the markets? >> it depends on where we go from here. for now, not a lot, frankly. if you look at the first quarter alone, the s&p 500 companies guided us to to 18% growth in capital spending. really strong anticipated growing economy in terms of the business confidence levels, so

businesses are not holding back necessarily. i'd suggest that the markets are also not held back. three months ago, this was a big issue. we were worried about tariffs and trade. we try to price that in, and now it's sort of a peripheral issue until we get some real action. all this talk is potentially damaging longer-term for confidence, but it is not showing up in the real data yet, and until it does it is difficult for markets to trade on it. >> president trump has threatened and threatened and threatened and continually backs down, the markets may still be anticipating that to be the case, especially when they see that kind of criticism. if something starts to happen, if he doesn't back down and goes ahead with china -- >> the boy who cried wolf, sooner or later -- >> switching topics, let's go to european banks. unicredit is said to be making an offer for socgen.

this comes from the "financial times." the rhetoric in the market is that two wrongs don't make a right. neither of them are in the right phase to make sense of that me>> this adds to the deutsche concerns of last week. the european banking system is still in disarray, rel the u.s., which is incrementally improving over time. we saw a results this month, which will probably be another catalyst for optimism, whereas the european financials at large can't get the mix right, whether it is the wrong merger, the wrong restructuring, the wrong mix of growth. investors are making a choice in favor of the european financial. >> on analyst pointed out that it is hard to make a cross-border merger banks if you don't have a banking union among the european leaders, and there's a lot of different analysis about whether macron and merkel are closer or farther apart. >> right now, they seem to be

closer than macron does to the --t of europe, but there is they have been moving in that directiobut thero one banking regulator who hasn't deposited insurance. there are still a lot of reasons why local regulators who have more power in europe and the united states would want a merger or would not be in favor politically it would be difficult to do. it could be done, but they wouldn't necessarily get the results they were expecting. >> there was a fascinating report out of "the new york times" about facebook, saying that for years they have allowed device makers -- a long list that includes amazon, apple, microsoft, samsung, giving them access to user data to build their own apps. readily facebook came out with a statement, saying they signed agreements that prevented their information from being used for any reason other than to re-create facebook-like experiences.

we are not aware of any information being misused. tech has been such a driver in the marketplace. did we just get another possible threat? >> possible, but it is the only sector breaking to new hei in the s&p 500. possible but not probable, at least right now. maybe it ultimately becomes a problem, where tech should have legislation. there's a lot of speculation as to what does it really mean, and what it really means for long-term sales and profits growth is minimum. sales forecasts are still extremely high over the next 24 months. tech and energy are dominating the index, which is why these factors continue to perform incredibly well. it gets to a point where this becomes a real, meaningful driver of earnings trends, and we pull back on profit margin trend, which are extremely high for the sector. >> it feels like a d.c. trade issue in overall markets. it seems like we are at an idiosyncratic time, were if you

do have issues about regulation, it will weigh on that particular stock. >> yeah. in case, when we say tech, it is a very broad category. we are talking problems with information sharing and problems with cybercrime, and that is something people have seemed to absorb. congress has working on legislation. if they get there, we don't know. but it does appear that the average person has shrugged this off and says, i know it is out there, it happens to every company, in can't be prevented, and i'm not too worried about it. i did see a survey the other day, they surveyed the kids from 11 years old to 15 years old, and none of them like facebook. to me, that is a bigger issue. >> do they like instagram? i think that's a good point. you are starting to see the rotation in the tech sector. leadership has favored the

traditional software providers, semiconductor companies. so there is some discernment within the tech sector at large. >> snahat may be coming back. thank you both for being with us. coming up, china is warning it will pull back from trade commitments if president trump follows through with his threat of $50 billion in tariffs. eu officials continue to keep open the subject of steel and aluminum tariffs. this is bloomberg. >> i'm glad we decideto put sanctions on iran, have decided steel andariffs on aluminum when the product comes from china and not the eu, so it is up to the americans to find the solution. ♪ tion. ♪

♪ >> this is "bloomberg daybreak." microsoft may be about to return to its roots. bloomberg has learned that the world's largest so has agreo buy github, a popular company with software developers. microsoft was found her give hobbyists a way to write programs. the details of the deal are not known. by aware closed its -- bayer --ts to close its deal with financing was one of the last hurdles for completing the takeover. and the battle with airbus has moved from the u.s. to india. bloomberg has learned that the indian affiliate of singapore airlines has decided to buy the 80. instead of airbus's a3 ,he airline will buy six 787's

with an option for four more. they say that the sales team is the most aggressive in 20 years. >> thank you. welcome back. it has been a long time, we are happy to see you. wilbur ross met with secretary vice premier to discuss trade yesterday, and while he said the friendly, china is warning it will withdraw commitments it made on trade of president trump carries out his threat to impose tariffs. the state-run news agency reported, "if the u.s. rules out trade measures, including tariffs, all the agreements won't take effect." joining us from hong kong, our chief asia economics correspondent. good to see you. walk me through the rhetoric in china, what the next steps will be. >> good morning, alix. the hint here that china is losing patience with the trade talks, they have said from the beginning that the alliance has but willing to negotiate,

now we are getting this language coming out and suggesting if we go ahead of these tariffs, then all bets are off. we had one line from the "global times" making clear that the u.s. can't have its cake and eat it, too. it has been along the lines of, yes, they are waiting to come to the table to do a deal, but if these tariffs go ahead, the shifting dynamic of the u.s. -europe trade tension now also falls in china's favor and gives them extra ammunition to push back. >> talk to me about the broader geopolitics in the region. how did taiwan, china, and the north korean c-- play in? >> of all of those, north korea is the most important one when it comes to trade dynamics. remember, mr. trump's strategy needs china on board if he is to

get north korea to agree on a durable settlement. mr. trump has tweeted in the past that he needs them in north korea. those talks coming up next week in singapore will be a critical wider, in terms of the u.s.-china corporation. there is a ceiling here among trade analysts and economists that the trade talks are probably on hold until we get over this hurdle, and depending on how that goes, it will influence the next big play. >> enda curran, thank you. >> china was a very important part of of the u.s. trade, but it is far from the only front on which it is in open conflict. we have someone who is experienced in trade negotiations, the chairman of -- and has served as the united

states trade representative and the secretary of housing and t. matamela massar, thank you for joining us -- madame ambassador, thanks for having us. i want to go back to last week and the communique that came out of the g7. i'll just quote part of what the chairman had in summary, was that concerns were expressed about the u.s. imposing tariffs on friends and allies. finance ministers and central bank governors requested the united states secretary of the treasury communicate their unanimous disappointment. have you ever seen a communique that looks like that? >> no, we have always been a leader in the g7, trying to get our friends and allies to open markets. this is shocking. >> we are hearing a reoccurring theme, in china or in europe. we don't want to negotiate with a gun to our heads. the chinese are saying, if you impose those tariffs, all bets are off.

the way trade negotiations go, how does it happen? to you impose and negotiate, or negotiate first? >> you negotiate first, absolutely. what the administration has said andhe glut of steel aluminum in the global market has created a problem. this is a problem that all our allies feel would have been much better off to join with our allies and sat down with china, which is the source is 50% of global steel, and said let's stop this overproduction. but we didn't. and to hit our allies is shocking. >> did you just lay out not just the aluminum and steel situation -- let me play will larry kudlow said over the weekend, saying it is not president trump's fault. >> this is so -- don't blame trump. blame china, blame europe, blame nafta, blame those who don't

want reciprocal trading. trump is responding to several decades of trade abuses here. assumingam ambassador, that there are trade abuses, or things done that are disadvantageous to the united states -- you say the u.s. should turn to china, but on a range of issues? >> i think it is important to identify what the problem is. if the problem is an oversupply of steel, what is its source? if the problem is the forced transfer of technology, who is doing it? then develop a strategy for addressing the problem that has been identified. we haven't done that. we import very little steel today from china, because we have more than a dozen cases against it.

ourut the tariffs on closest allies is really extraordinary. even the defense department, which is responsible for our national security, warned against widespread tariffs and suggested that ere was a greater problem by imposing restrictions on our closest friends and allies, because of their reaction. that would affect our national security much more. >> at the same time, you have held various senior positions. it is hard for the president to back down once he has taken a firm position. if you were advising president trump today, how could he change his approach and not lose his high ground with his base? >> you have to be willing to negotiate, to sit and know what it is you are trying to accomplish. but frankly, we put steel restrictions on in the past, and

we lost twice as many jobs through the industries that use steel and we created in the steel industry. whatst more revenues from it did to our economy then gained in tariffs. we really ought to find out and identify, what is the issue we are trying to address? what is the best way to address it? steel is not the problem. >> ambassador, if a country calls you up and says, where should i build a factory if i was going to build it today? what would you advise them? steel, youy for would have to decide where there was a shortage. for example, we don't make finished steel at all. to put a tariff on it is extraordinary, because we are going to have to import finished steel. i'd advise them, they must know

if they will make an investment of what it is you are going to invest in, and then look at the communities that need the investment and would be more hospitable >> ambassador carla hills, chairman and ceo. thank you for being with us today. >> pleasure to join you. >> coming up, facebook is fighting back, disputing a report about how it shares data with phone makers. this is bloomberg. ♪ is bloomberg. ♪

♪ >> facebook is disputing a report about how it shares data. webb,g us now is alex bloomberg opinion columnist. this came out of the blue for me, at least, that they are ati's given access to a lot of device makers to get data from facebook. how big a problem with this -- problem is this?

>> it seems to be an extension of the behavior we have seen come to light. a lot of this behavior was limited to people that don't use h anymore, but nonetheless, only crackdown on it as the cambridge analytic a stuff was coming out. it is not something which they put to bed years ago. >> how do we know there aren't more of these? any time we turn around, there is some other little company someplace getting access to our data. >> this is absolutely the key question. facebook, with all of their defense, they have all said, please just trust us, trust our intent. we do not want to be evil, we are trying hard to do the right thing. if facebook was coming out and saying, we discovered these misdemeanors ourselves, our bad, i think you could give them some trust on that front. but it seems like, because this is still coming out from reporting and not from faith look, -- from facebook, that

any number of things could manifest unless they really do come clean. >> and as facebook was disagreeing with this report a said partners could not access their facebook features or without th permission. but stock is down by 1%, closing out a record on friday. it does not seem that investors care. >> it'll be interesting. we've had four or five months now, or three or four months of negative news flow around facebook. the stock hasn't been impacted at all. but we are now starting to see the regulatory environment is changing. gdpr is coming, there is an appetite for strict regulation. -- those are the sort of ramifications that will really have an effect on their ability to do business. it probably too early to see hard facts. >> does this open doors to competitors who don't have this in the background? google,ly, facebook and

those companies who already have access to vast pools of data, in some ways are at an advantage. whats happening now is that there's a crackdown on what data you are willing to sacrifice to companies who make money from the data, and you go through all the terms and conditions. people coming fresh to the table and only now trying together of data, it is hard for them to do so. >> great point. good to talk to you. coming up, it's consolidation in the banking industry. canada unicredit-socgen merger actually happen? this is bloomberg. ♪

♪ >> this is "bloomberg daybreak." it's a risk on day-to-day, it feels like that jobs number from friday is outweighing trade tension over the weekend. 1239 up.

this is despite the fact that they havst government, whatever's fine, sure. banks.e really led by morgan stanley says they are taking off their short position. they say the merkel-macron conversation brought them closer together than they were before. here in the u.s., the 10 year 91.lds are at 2. a conversation but no panic,. ny crude up. down about 9% in nine days, but gasoline prices are only down .7%. >> the demand? >> no, because if you are a gasoline retail owner, you are like, i need to keep that extra profit. >> always. >> cool, right? [laughter] >> now we are going to find out what going on with emma

chandra. >> good to be back. the white house economic adviser says don't blame president trump for the trade crisis. larry kudlow says rule breaking is going on all over the place and the president is responding to years of trade abuse. china says that the u.s. imposes tariffs, beijing will back out of commitments it made. in one imola, a -- in guatemala, a volcano has killed at least 25 people. authorities fear the death toll will go higher. the volcano erupted in a hail of ash and molten rock, sending lava into south-central guatemala. two of europe's biggest banks are considering a merger. "the financial times" say talks between unicredit and socgen are in the early stages. unicredit's ceo has been developing the idea. he is french and once

works for socgen. global news, 24 hours a day, powered by over 2700 journalists and analysts in more than 120 countries. i'm emma chandra. this is bloomberg. >> thanks. i want to stay on that story, unicredit and socgen. in response to the news, we heard unicredit's shares go up as much as 4%, but came down after that. we are joined now by our bloomberg opinion columnist in london. thank you for being with us. i guess my first question, both of these banks trade at roughly $.50 on the dollar on book value. when did it make sense to take two companies that are weak and put them together for a strong one? >> not now. i think this is great talk, it's a great idea, because obviously they have plenty of other reasons to get together. there's an interesting potential match, one is in the investment bank, the other in the

pan-european corporate bank. there is logic here, but the timing is all wrong, and the fact is that regulators will call the shots on this. right now there is very little appetite for this. they want to talk about it and get the conversation going, to prepare the road and pave the way. >> emma reported -- what we have heard is that it's not right away, hasn't gone to the board. as soon as it did go forward, who would need to approve it? is not like you have a set across france and italy. what approval would be required? europeanfirstly, regulation is still led by national member states. you do have an ecb, a common european supervisor, but this is a very slow process in terms of harmonization. say.one will have a it will be one of the national regulators that want to see the control and risk slip away, and

that is what i think this conversation targets. i don't think this is likely at all in theerm, but it has been years since we have been comfortable with this kind of deal and i think you need to fly the kite to get people talking about it. >> thank you very much. joining us from boston, art hogan, chief market strategist. his call is avoid financials in europe. if we did get to see a place where we are looking for cross-border deals in europe, what would make you come in? >> matter of fact, we look at proposed, or perhaps announced, deal, it reminds me of the fellow that tied two rocks together to see if they would float. there's a reason both these banks are trading at .5x tangible book. they are both undercapitalized assets, and i wouldn't touch anything in italy until

something settles down. european in general,bout post 2008, they are about three or four years behind getting recapitalized, and that is only half the problem. when you look at the yields on a 10 year, you have 40 basis points. you just don't have anything to lean against in terms of lending. in terms of the structure of the european banking, i would favor u.s. financials. >> ok. stay with us, we are turning now to the politics. three days after being sworn in, his new populist government is preparing for one final hurdle before putting his plans in motion. it's a no-confidence vote scheduled in both houses of parliament. we welcome our rome bureau chief. alessandra, thanks for being here. what differences are there

between what they want to do and what oer they want to put on it? >> that's right. we think this will work out. the vote is likely to be tomorrow, tuesday and wednesday. the problem won't likely be this vote, and considering they have a relatively small majority in the senat -- the parties are very different, the leak was elected in the north, in an area that is doing all right and is supporting small business. their interest is cutting taxes, getting rid of immigrants. the other party was predominantly in the south, and the problems there are unemployment, economic growth. the five-star proposed things like citizen income, in the north tax cuts. those are too expensive policies that can't do both together, it is too much. we will have to see how it works out.

there might be some serious tensions going forward. < >> to put it lightly. thank you very much. and i thought it was hard to govern in the u.s.! [laughter] >> i wananet brown. for manages etf's nt plans. still with us, our token. where our etf's ranked? >> not well. we have been in a large domestic and small caps and domestic are the place to be because you are in tech. up, so we are coming could see a change. >> at what point does it become a bargain? >> i think it's an opportunity aw will stop we have been large-cap domestic market for an extended period and it is about

time more,. >> tech continues to be an stay with it in a disciplined way. of the months ago some europeans came up, but those that have the courage to follow the system followed and it went better because they did. >> how do you look at a situation like europe -- there are different interpretations of whether or not they are closer together than they were and if this is a positive or if they are far apart in terms of the union. >> our concern into whole lot less about whether or not france and germany are getting closer together, it is what do we do about italy? as italy tries to govern itself, it has big decisions to make, and not all of them will sit well in brussels.

therefore you have this lack of referendum, and i think that's the biggest concern. it's not necessarily going to be like brexit, but it is going to be italy trying to govern itself. what they shake out of that will be something we will talk about for years. >> this story over the last 10 days was by the panic. you are feeling pretty good if you bought at the bottom, getting out of those shorts. how do you view those kinds of trades? >> well, if you want to make that trade quickly, with the iory of how it makes itself, feel like that trade is analogous to picking up twigs in front of the steamroller. it's not just about germany and france, it's the long-term health of italy and how it wants to move forward, and i don't think -- with the emotional

political turmoil, it will recur as it starts to implement its new policies and i think that will have on set brussels. >> it feels like it's almost all about geopolitics. do you see a reaction in your funds? are people more reluctant to invest? people sitting on the sidelines? >> there's a lot of cash, we have seen a lot of cash and for a long time. many people are underinvested. it is based on what's doing well now. we really can't predict the future. so let's go with it. respond in a logical way. >> it feels like the last couple weeks the rhetoric has been defensive will be good sooner than we think. the end of the year, the beginning of 2019, do you notice anything? >> well, no.

those that have been most defensive have missed out. we have seen the greatest games in technology, some of the more aggressive smaller and mid-cap companies. go with what's working. how do you see it? at some point, you want to get defensive, presumably. at some point there will be a downturn. how do you time that when you are investing your own money? defensive, look at you want to look at 2000 versus the s&p 500. i think being domestically focused is less prone, less affected by a stronger dollar, more benefits from the lower corporate tax rates. i think the best way to be defensive is small to mid cap versus -- when you think about

the revenue exposure, international fund, i think your best defense. >> i want to wrap it up in terms of the dollar. david came in and said what is catching your eye on the market? nothing today, but a lot of conversation about whether the dollar has peaked, which has been having ripple effects. where do you stand on that? >> i don't think we have peaked yet. i think we are at a point in time where we had a sharp increase, for when you think about our expectation for 2018,ry policy as we exit we are so far ahead of the rest of the global central banks. >> ok. jason brown and art hogan. thank you both for being with us today. coming up, fiat chrysler is going back to the financing business. why will it work this time? more on that next. joinu commute in, you can

our colleagues from 7:00 to 9:00. "bloomberg surveillance" can be heard in new york, boston, the bay area, washington, and on sirius xm. this is bloomberg. ♪

♪ >> this is "bloomberg daybreak." in emma chandra. coming up in the next hour, the energy word. ♪ >> now to your bloomberg business flash. investors and analysts are puzzled by nintendo's biggest two-day selloff in 18 months. the japanese company fell more than 6% after losing 4% on friday. volatility in nintendo shares

jumped in april. investors are trying to gauge whether the company can maintain sales momentum of its popular switch games console. the media company that brings you shark week on's to become a global source. discovery has agreed to pay $2 billion among the national ranks for the pga tour. it includes online rights for the u.s. based men's golf circuit. movie could end up with a dubious distinction -- the first movie in the star wars franchise to lose money. north american box office receipts fell 65% in its second weekend of release. one analyst estimated it could lose $50 million. >> thanks, i didn't even see that one. now we turn to wall street.

rogue,fiat chrysler goes taking steps to form its own finance arm as automakers seek to recapture values from emerging platforms. and the future of carlisle. as ceos take the reins from their billionaire cofounder forming a second generation of right of equity. and finally, the walls of wall street. billionaire art collectors steve cohen says he isn't sure what painting he is hanging in his office at the moment. >> welcome back, jason kelly, bloomberg's new york bureau chief. fiat chrysler, they want to go back into that business. he was in that business before, as chrysler was, and they had to get rid of it when it went bankrupt. >> this is a startling story to me. you're a car guy, at the end of the day, and all of us really remember very sharply those

years ago, the financial crisis, the bailout, and chrysler specifically really being at the center of all that. >> part of what he came here to do was get rid of that financing. not too surprisingly, fiat chrysler went down. santander had a joint venture, and went up. if they have to buy it santander, they will have to overpay. >> right. the reporting that we have this morning -- or yesterday -- show santander is very excited. the new ceo last year, first day, one of the first things he did on the job was figure out how do we get more business. when rates are going up in the u.s., and you have auto demand moving sideways, that is where a lot of people are concerned, particularly from the fed. -- and gm, they are

making money now. >> let's turn to the carlyle co-ceo. we did a whole piece on what it is like to code government -- to co-govern. that.s through these are going to be extraordinarily difficult. >> well, the big thing here is that this is the first time that one of these big private equity firms has handed over the reins. we have talked about it at this table quite a bit. kkr, blackstone. the big deal at carlisle is you have two guys who have really been handed the keys. they are the ceos, running the company. thato issue is one everyone wrestles with on wall street. we have seen it play out at

investment banks, investment firms, private equity firms. sometimes it works -- >> we all think of david rubenstein -- he could do it by himself. >> that's the other thing about carlisle. they are going from three to two. in some ways, three founders, the investment. they had been the co-ceos. they are going from co to co. the other thing to note about these two specifically, one grew up at the firm, it is the only place he has ever worked. other did most of his career at another private equity firm, he really made his bones there. that is very rare, to move from one private equity firm where you have achieved partnership and a high level in the firm to

another. do you get a sense of how they felt when they were asked? what was going through their minds on that happened? >> it's an interesting question. ild, but iong bu think they both felt the weight of this responsibility, especially -- he started 25, 30 people at the firm in the early 1990's. i think for him, the responsibility of $200 billion in assets under management, he was interested -- we talked to him about the idea, did you always think this is something you are going to do. say i thought i would be an entrepreneur. >> i will get your issue of "bloomberg market" and read your piece. on of the things we have to sort out -- what they put on the

wall. a great piece. -- he says, but people really don't like circles, they like squares. >> i like squares, i like circles. gallery, hedern art says i really mean that. >> he's just being cryptic. but no, seriously. [laughter] exercised, andws amanda gordon, who does such a great job -- she talked to henry kravitz, who has a deep connection to moma. interviews, taping an -- you always know the art on the walls.

currently, according to amanda, has a robert ryman. >> gladly work that out. thank you. coming up, will stocks rising after the president'ed for action on power play enclosures. more on that next. and if you have the terminal, check out tv . watch us online and interact with us directly. this is bloomberg. ♪

♪ \ >> coal stocks were rising after president trump ordered rick perry to stem power play enclosures. basically was the deal we to go you- wants the doe to say have to buy certain power from coal and nuclear plants to keep them alive.

because national security. apparently, is much more at risk for terrorists, because you have to go through a pipeline. terrorism.ear anything could be a national security issue . >> i didn't know we were so insecure. biofuels have a different approach. >> the administration is taking a look at different ways to calculate biofuel. that was -- coming up, allianz' global investors portfolio manager it will be joining us. this is bloomberg. ♪

alix: showdown with g7. finance minister/out condemning

-- larry kudlow says it's all your fault. reports --al time analysts are skeptical. facebook fumbles. facebook shares data with device makers. the company defends itself as stocks get the record high. david: i'm david westin. the world is in turmoil in the markets are just fine. york in degrees in new it is like chilled for and i was freezing yesterday in hite not becket i should wearing because of this summer. i'm getting cranky as the day goes on. some sun over the weekend. it was cold but at least it was sunny. alix: always glass half-full this guy.

s&p futures up by about seven points. alldollar rose over against g 10 currencies. has the dollar pete? -- dollar peaked. ? 5/10 of 1%,own by more of a supply issue anticipating more oil from opec. david: apple holds its annual developers conference in san jose with augmented reality on the agenda. the rest of the week is about geopolitics with shinzo abe visiting president trump in washington as they get ready for the summit with north korea next week. president trump's peers will try to persuade him to change his stance on trade. alix: headlines outside the business world. great to see you back, emma. emm president trump is headed for a showdowna: over trade

later this week. members of the group of seven are meeting in quebec. the european union and canada are threatening to retaliate unless the u.s. reverses its course on tariffs. china will back out of trade commitments if the president carries out a separate threat for tariffs on chinese goods. in italy government faces confidence votes. the premise to should win approval for his 18 member cabinet. majority in the senate could make the vote risky. russia -- a british lawmaker warns russia is using tactics of the kgb to which a covert war on the west. nonmilitary methods of attack could be more powerful than conventional warfare.

this is bloomberg. david: the united states and some of its closest allies are set for showdown over trade after president trump introduced -- sent leaders reeling at the g7 summit over the weekend. tothe americans have decided take an action that is not at all constructive in our minds. it is destructive. >> we are disappointed. as close partners of the u.s., that they have taken this step. we are close security partners with the u.s. we continue to talk with them. severe problemry for the relations between the european union and the united tariffs on steel and aluminum.

>> unjustified, unjustifiable and it is dangerous for economic development all over the world and dangerous for all jobs in the eu david:. joining us is burned mckinney -- burns mckinney and michael mckee . i won't blame you for what happened, mike. in the chairman summary they the treasuryuct secretary to go back and tell president trump of our unanimous disappointment with what's going on. what kind of pressure is on president trump as he heads to quebec? michael: the leaders are going to get together and deliver the same message to him. you need to roll back tariffs and stop taking a trade wars. you need to understand how global trade works and how it benefits people. we can talk about dealing with some of our problems but none of us are going to negotiate with a

gun to our heads so you need to do something. he has backed down in trade confrontations up to this point. does he do so now or does he push forward? david: we have a speci h china. june 15, when it will be tariffs o. we have canada, mexico, nafta, the eu, china. michael: china told wilbur ross if you go ahead with these tariffs all bets are off. we will stop working with you in trying to solve the trade problem you are complaining about. does he risk it all by going ahead and hoping the u.s. power pushes through? does he fall back a little bit? swallow his pride somewhat and try to negotiate? it does not look like he is in a negotiating mood. alix: the quote that really stood out to us. concerns were expressed that the tariffs imposed by the u.s. on

the grounds of national security undermine open trade and -- governors the requested the u.s. treasury communicate their concern and disappointment. no holds barred. how rare is michael: i've never seen this happen before and i've been doing it since 1995. there have been individual criticisms of companies policies -- of country's policies. the united states needs to deal with its current account and trade deficits, but never anything like this. a member of the g7 singl out for that kind of criticism. alix: has your asset allocation or how you view the market changed in the last 72 hours based on all of this conversation on trade? not necessarily shifted positions. at the same time we've been cognizant of all of this year

that trade talks and tensions e the defining policy trend of 2018.it is concerning when you e talking about placing tariffs based on spurious reasons such as national security specifically with allies. if you are watching the stanley cup playoffs, canada is not even winning in hockey. i'm not sure what type of a threat they are. one of the things we look at from a portfolio perspective is to say what are the areas, the sectors and industries that are most exposed. some of the places would be ,utos, planes, industrials technology companies generate a lot of operating income overseas . at some of the places that have less exposure would be a financial services, health care, telecoms and utilities. if you start a trade war, that will slow down economic growth and potentially lead to interest rates, if anything, pulling back

which would hurt financials. one of the things we've been looking at more, saying health care is a place that perhaps offers a stability in this type of environment. david: i want to pick up on where you started. in you're a long-term investor. this might actually not be a bigger issue -- might this not actually be a bigger issue? larry kudlow came out over the weekend in saying don't blame trump because we are trying to change something that's been in place for a long time. listen to what he said. >> don't blame trump, blame nafta, those who don't want reciprocal trading, tariff rates and protectionism. trump is responding to several decades of trade abuses. david: you heard we are going to change several decades of the trade structure and there is

talk about the wto, which they say -- might ask underminthe wto. is there a longer-term implication here? burns: i think that hits the il on the head. contrary to some of ,r. kudlow has made the wto when it was instituted, ushered in decades of global economic prosperity. it lifted hundreds of millions of people in the developing world out of poverty. in the u.s. it has brought down prices for everything from appliances, clothing, electronics. people don't necessarily get excited about price cuts. even if wages are slow to grow or stagnant when you get those price cuts, that acts as a wage increase. we mention nafta as well. the one thing i think we can blame nafta for is creating 4 million to 5 million u.s. jobs. for fridaysets us up

when president trump will meet with his peers at the g7. what kind of fireworks are looking for? michael: there will probably be fireworks behind closed doors but we will not hear much about it or get truncated information. they are meetit a resort two hours away from where the press is going to be. keeping the press far away from this one. they will be talking to the president in no uncertain terms about what they want him to do which is back off and negotiate instead of giving ultimatums. it would be fun to be a fly on the wall. alix: at least we have twitter. rn mckinney will be sticking with us. consolidation. could unicredit and stock jen joined forces? ♪

alix: unicredit is considering a .erger w socgen that is all according to a financial times report. unicredit ceo who once worked -- we take a look at the stock prices. unicredit down 3/10 of 1%. this socgen going to be in plano matter what? mckinney., burns jonathan, can two wrongs make a right?

jonathan: unicredit sold nearly 28 billion in securitized loans. on the way to clearing out its balance sheet. investment bank struggling with domestic retail as well. those are the key areas for them. -- certainlymost they will know each other quite well. is now the right time for a french bank getting in with an italian bank with all that is going on?that will be one of the questions thanks to answer. alix: how easy it will be to do cross-border m and a without thanking union. what do you think? jonathan: i still struggle with the banking union per se. we don't have a deposit guarantee scheme, etc.

germany already big in and austria. socgen is in russia as is unicredit. they've got romania, czech republic. these are not quite big pan european banks already. whatnk it is more management wants. is it a merger of equals. they both got a one cent buffer. a lot of people would say is that another issue. i think the timing will be the issue and the fact that at the moment italian cds is well above 200.david: how do you feel about european financials? if there starts to be consolidation which has been rumored for some time in europe, does that make it more enticing or less? burns: i would argue the greater level of consolidation would make the european financials more attractive. one of the things european regulators have discussed

positively has been the idea of seeing the banks grow gainis a merger that would diversification across product lines as well as geographical regions which should give it more stability. to the extent to which the regulatory environment allows degrees of consolidation it should make for a more positive investing landscape. david: if that consolidation happens, is that a substitute for regulators cleaning up the banks? about italyicularly but more broadly that they did not clean up balance sheets. burns: that is certainly a possibility. the analogy some have used with these banks when they merge, the on of two drunks in a bar leaning up against each other to hold each other up. at the same time, there really

has been a lag between the dirty work that was done in the united states for cleaning up the bank balance sheets versus what is being done in europe. they are starting to make some concrete progress going forward. so it's not necessarily a substitute. something that would at least help along the way. alix: valuation also key to that. i had a chart up that showed price-to-book ratio for european versus u.s. banks and how much cheaper european banks are is the white line. the takeaway from today is that european banks are in play? is that what we learn from this? jonathan: i don't think so. to the comments that were just made, these banks return lower than u.s. banks. the cost of equity being discounted in the fact that there is no growth in europe they are not cheaper per se.

capital is no longer a concern as it was. they don't generate much capital. do i think this will be kicking a? large-cap m and absolutely not. years.off for 15 to 20 one of the few that has a few merits. david: accounts for the apparently growing disparity between european bank financials and the u.s. well.e doing very is it because of what regulators did or did not do in the two places or because of the nature of the markets themselves? if jonathan: you look in europe -- al lending horrible place for mortgages for example. rising rates, margins have been expanding.

balance sheets have stopped shrinking. corporate lending is going gang busters in the u.s. in.ou said the fed stepped u.s. banks -- european banks have years and years. carrying too many bad loans on there sheet. a lot of it with the environment and the fact that the u.s. topline is growing. growth five cents loan -- 5% loan growth. david: burns mckinney will be staying with us. global airlines are prompting the industry's top trade group to slash its profit forecast. this is bloomberg. ♪

emma: this is bloomberg daybreakemma:.

-- bloomberg has learned that the indian affiliate of singapore airlines has decided to buy the 787 instead of airbus us new wide-body. an option airline -- for four more. boeing's sales team is the mo aggressive in 20 years. both playmakers will be competing for a piece of a big order from china air craft group. as many as 200 planes this year. help to place an order next year for ultra long-range jets. the planes must be able to fly orstop from sydney to london new york while carrying a full load. qantas has a 17 hour nonstop --ght from paris to from perth to london. that is your bloomberg business

flash, airline edition. david: companies haven't grappling with higher crude prices. american airlines profit is ceo doug parker says higher fares may be inevitable if you'll prices and remain high. this is what he said. i think you would see over time less capacity growth in the industry. therefore, higher prices but i don't think this will happen in the near term. joining us from berlin is bloomberg's managing editor for global business in europe. benedict, welcome to the program. give us a sense of where airlines stand now. berlin.: hello from fuel prices are the single airlines.pense for something they keep a close eye on but something that can't really control. some try to hedge. we have seen brent crude rise 55% over the last couple of months. that is eating into profits. you see that feet through the industry body three they

represent about 290 airlines, the bulk of airlines. theyave a meeting in sydney this week. an annual forecast for this year for the profit development. a slightly less upbeat than it was a couple of months ago. 1/10 lower than what they expected previously and the single biggest reason they mention is fuel. wage costs are another element, particularly in the u.s. but globally speaking fuel costs are the big expense they all have and that is something that is keeping the industry up at night. david: a chart that shows the relationship between brent oil price to the ratio of fuel to total cost for airlines. that blue line as the price of fuel goes up the overall cost of fuel becomes a bigger percentage of total cost. to what extent are there differences according to regions or countries and how they are affected by fuel cost? benedict: benedict: the fuel cost over here is something a

lot of analyst and do not hedge. a mixed picture. wages, bigger component of airline expenses in the u.s. fuel is something globally speaking that keeps -- you see this move into more fuel-efficient aircraft. something that is homogenous across the industry. we mentioned it, a lot of airlines are in the market for these fuel-efficient aircraft. if you can shave 20% off your fuel bill, that is a huge expense. that is money you can pump into new routes, maybe buying a competitor. that is acrossng the industry something airlines are trying to get a grip on. david: some markets are growing like india. we had a report that singapore airlines made a big by with boeing at the expense of airbus. is that market growing particularly? benedikt: yes.

the indian market is a huge market. airbus, boeing and some of the smaller aircraft lines do not want to miss out. this is a market where there are a lot of first-time travelers to read new class that wants to travel, want to travel for that is a key market. china remained key market. we have the report there in the market for 200. .avid: thanks so much great to have you with us. alix: apple's annual developers conference kicks off today. we will look at the products apple will unveil next. the drama over the weekend with facebook, as well. ♪

alix: it's is bloomberg daybreak. happy monday. dow jones futures up 140 points. s&p up i-9. -- bank stocks up

stocks helping lead european stocks higher overall on a question of potential mergers a cross-border m&a with the financial institutions. i feel like the big question this week is going to be has the dollar peaked. stanley closing out their short position in part because they see a tighter movement toward the fiscal union between ms. merkel and mr. macron. much goyield pretty nowhere. the curve continues to flatten at 29 basis points. crude also a touch weaker. it feels like an idiosyncratic story until we get to the june 22 opec meeting. one area you want to watch is drug stocks. the latest president trump tweet saying we have to repeal -- we have repeal and replace done but it is getting done anyway. individual mandate and less expensive claims will be announced. drug prices coming down and

write to try. david: you know what this is about. november. democrats and republicans on the hill agree health care and health care costs will be at the top of the agenda. the republicans helping or hurting? alin oil cmu the conversation is starting to turn to november. gas prices at three dollars or over there will be a lot of pressure on opec to increase production or release oil from the fpr because no one will want to go to the polls with 3% -- with three dollar gasoline. david: the polls will be nice and calm. nothing irrational. that was president trump tweet today. his tweets from last friday. before the jobs data came out he had a tweet saying looking forward to seeing the employment numbers at 8:30 this morning. that gave markets some indication. markets moved immediately on this number. cohen,at today, gary

when he had a job, did not give the president the jobs numbers the afternoon before apparently because he was concerned something like this would happen. mr. kudlow has said i gave him the numbers. he had them. alix: that is hyster he purposely did not give him the numbers. sarah huckabee sanders saying the job number tweet was fine. david: it did not give you the number, wink wink. alix: if he does not tweet next job number that we need to sell the market? david: i think they will be more constrained. alix: mr. ku going to be like, hey guys don't give him -- david: the leader of the free world you cannot trust with the jobs numbers. an update on what is making headlines. emma: larry kudlow told fox news rule breaking is going on all

over the place and the president is responding to years of trade abuse. china says it the u.s. imposes tariffs they could back out of commitments to reduce its trade surplus with the u.s. the you cable seek a break in brexit talks. theresa may's government is the parent to publish its plan to keep the u.k. under european union customs rules for longer. the plan would allow goods to cross the irish border without checks. guatemala a fiery volcanic corruption has killed at least 25 people. authorities fear the death toll go higher. sendingfire erupted lava flowing into rural communities in south guatemala. airl news 24 hours a day on and on tick tock at twitter 20 -- powered by more than 2700 journalists and analysts in more than 120 countries.

david: apple holds its annual worldwide developers conference in san jose where the company will layout its software and tease future ambitions. we welcome shira over and burns mckinney. what are we expecting to come out of the conference today? >> the big thing about this annual developers conference, it is a tent revival. apple is trying to keep its developers excited about making new software and new applications for apple devices. the software tweet apple announces at these events get less and less important every year to be honest. in part because software and platforms like the iphone are relatively mature. david: one report was from the wall street journal saying apple was having discussions about possibly creating a network for

.dvertising i shira: think it could make them more interested in developing for apple. the issue is apple's revenue growth from selling iphones is inevitably going to start slowing down. they had revenue issues already. if they can excite developers by giving more ways for people to find their apps including through advertisements all over the web and third-party apps that could be interesting to them. david: according to the report in the wall street journal, would be selling advertising? so how does facebook feel about that? shira: the interesting thing i for facebook in particular one of the most lucrative categories of advertising is what is called at install ads. i have a videogame app for iphone, i want to find new users for my app and i put -- i pay

facebook to show ads to people so they can click on a button and download my app and that is the kind of thing apple is talking about doing that is competit facebook. alix: you are a value investor. apple is set to open at a record high. closed at a record high on friday. where do you see the value? burns: the stock is really behaving as it typically does. normally the stock does tend to rally ahead of these conferences or ahead of new hardware updates whenever a new iphone comes out. despite the recent rally, earnings have been growing as well. as a result of that you have a pe multiple of less than 15 times earnings. this stock is cheaper than the broader market. from our perspective, just about a month ago they raised the dividend by 16% and they are buying back a lot of shares. i think the shareholder buyback yield in the coming years is expected to be 6% to 8% per

year. the cash they are returning to shareholders is what drives the story for a value investors such as us. david: iphone has been such a big driver of revenue and profitability. to it moving into services so they can diversify away from iphone sales. burns: they continue to make that transition from a product cycle driven company to being more of an echo system platform type company that does derive current revenue streams. the key to that, it makes the customer sticky. one of the things we look for evan investor for pricing power, customers that are somewhat captive. i went looking for my home in between me my wife and kids we iphones,ht, between ipads and macbooks. eight of these.

regardless of what they do if i said i might want to switch to a samsung phone, i'm not even sure i could do it. they do have those captive customers on that platform that does give them pricing power. they are moving along with making the transition. alix: another tech company. facebook stock is down in premarket but it did close at a record high on friday. the headline is facebook is disputing a time to repo how shares data with device makers. is there any real risk in this report? shira: i think anytimeshira: there is any story about facebook and what they do with data about users there risk. we see that regulators and politicians smell blood when it comes to facebook. the more stories you have like this, people will sniff around and see if facebook has really changed and is being more closed with the data it shares with outside parties. i think that is the risk.

people are like here's another crisis involving facebook and data. do you view that as a risk or the whole tech sector? burns: i don't view that as a risk for the entire sector. currenty speaking the administration has been more hostile to technology. if you look at a transition that's taken place, whereas the prior administration was maybe a little more targeting financial services. the current one has been fairly friendly to financials but has targeted technology. reallytechnology, you are not necessarily seeing quite the same regulatory risk of some of the old world technology versus -- as a value investor the fang stocks are not written necessarily in our targets -- are not necessarily in our targets.

looking at this as an investor in terms of key differences for facebook, this is an ad driven model versus some of the ones that have insulated themselv little more, some of the ones that derived the boko revenues from substitution based revenue .treams alix: do you feel tech stays alone in its leadership in the s&p or will other sectors join it? expect thingsd should broaden a bit. technology is benefiting as well because it is a cyclical sector. we have been seeing economic growth a little above the recent trend. at the same time that should also con benefit industrials that are getting a boost from capital spending cycle. things like financials that still have regulatory tailwinds or even energy.

alix: energy, nice segue. think you for joining us. burns will be staying with us. we will get the latest on how to -- david: as you head in on your commute you can turn on your radio and listen to tom keene and jonathan ferro from 7:00 to 9:00. bloomberg surveillance can be heard in new york, boston and across the united states on serious xm radio -- on sirius xm radio. ♪

emma: this is bloomberg daybreak. coming up later, balance of power. republican representative reinke cello of pennsylvania -- ryan

can cello of pennsylvania. t's a report that two orope's b considering a merger. talks between unicredit and socgen are underway. unicredit is not commenting. buyer will close its megadeal with monsanto this week. they will raise up to $30 billion to help fund its transformation into the world's biggest maker of seeds and agricultural chemicals. financing was one of the last hurdles to completing the takeover. the trump administration is set to announce a compromise policy on biofuel today. the plan will try to take down costs for refiners in the use of fuel made from coal.

oil holding some losses after opec and other producers met this weekend to discuss possible disruptions and adding more oil to t market. here is a statement released by the ministers that emphasized the need for healthy market adequates stimulate investments in the energy sector to ensure stable oil supplies are made available in a timely manner to meet growing demand and offset declines some parts of the world. joining us is dan dicker and still with us is burns mckinney. it comes down to june 22. what is opec can do -- going to do? dan: i think that the announcement between the russians in the saudi's was the june put a second meeting. he only thing that could come now out of the june put a second meeting is bullish for the market. all they have to do is cut less than one million barrels a day which is what was in the statement that they would cut as

many as one million barrels a day. that is what caused market to drop six dollars. i think that is limitation on what the one million barrels means. 600,000 barrels coming out of venezuela and likely a half-million barrels will be added to that biotime the year is up in venezuela. iran targets in 1,000,002 barrels -- 1,000,000.2 barrels does 1.2 million barrels. -- 1.2 million barrels. there you get to the place where we were inf the ompliance with the reduction guidelines. alix: since we are over complying -- the only thing that would be bullish if you get under one million barrels a day. dan: this is what has been expected now that we have put -- million barrels a day

increase intrketplace, that is what everybody is talking about. how much of that one million barrels a day that is being promised. the russians will want all of it for themselves. they have no loyalty to the global supply chain. the saudi's, they are pushing a tight rope. they need a highroller low-price. -- aa higher oil price higher oil price. they are on a bit of a tight rope. alix: all of this has had implications. great in wti,n $10 a barrel. it was 11 last week. why the recent surge? dan: there is an infrastructure problem. you so what happened in canada. an interesting story of trudeau brian best buying the pipeline going to the west from oilsands going to the pacific. the reason the canadian government needs to go in and buy pipeline, pipelines have

become a good business to monetize. you are not sure how long the supply will last. this is what's happening in the permian, huge ramp up in production. waiting to get associated gas out. that has been killing the spreads and it does not look like it will get better. those pipelines into west texas are not coming along so fast. for the same reasons the canadians had to get involved. it is unsure whether pipeline builders are going to get a good return back for the amount of money they are spending to put pipelines in. david: as you are making investments have you take into account things like the price of oil? the difficulty with the pipelines? burns: from an investor's perspective we are looking at oil stocks. the equities. one of the key factors to focus , as oil prices have run up

over the past year the stocks have been largely left behind. last year they lagged by a wide margin. you have a lot of players that can be profitable. a lot more disciplined. they have cut costs. they can be profitable at prices far below what they are today. one of the themes that has continued to work well this year has been a group of names referred to in the press as the pleasures. companies that pledge cost discipline, capital discipline. a focus on dividends. that has probably been one of the best ways to play it this year. alix: you like big oil? burns: some of the big oil's look very attractive. at discountshell, to exxon. it's cheaper in terms of price-to-earnings. is at ae-to-book

reasonable level. they have a higher dividend yield. one of the names and continued to focus on keeping costs low. benefits for making a large contrarian acquisition. they look interesting. chevron does as well. alix: brian lam said he might stop investing in the permian if the midland discount continues the blowout. dan: we have been out of the permian for several months seeing these spreads below. you need to find those, maybe ,ore mature shale players trying to find those that have not hedge all their production for 2018 going forward because those are the ones they will be able -- that will be able to take advantage of the higher price of oil.

now, with oil prices above that they will not be able to take advantage of the big run. a name that jumps out as someone who never hedges, harold hamm's continental. that is an easy play to make right now. david: you are talking alex's book. alix: taught me everything i know. david: dan decker and burns mckinney, thank you both for being with us. coming up, the supreme court may release themes on a number of significant cases. alix: bloomberg users you can check out the really cool charts we use during the show. gtb go and you can check them out and get it on your terminal. ♪

david: if the supreme court. -- it's the supreme court.

10:00 every monday they bring something down. something might come down today. we are joined on the telephone by supreme court reporter greg story. we don't know which ones will come down today. the story about whether you have to pay union duals if you -- dues if you are a public union. >> if you're a public sector worker you have a first amendment right to say i don't want to pay for the cost of collective bargaining because i don't agree with some of the things the union is doing. the supreme court in 1997 that that's ok as long as workers don't have to pay for ideological or political

pay for ideological or political activities. citizens united case, that was the first amendment.

this is very different. it is still the first amendment and it is a way to push back some of the court's more liberal victories on things like gay marriage. david: we will be checking back in with you later to see if those decisions come down. alix: if you're a business you have to be watching these cases. affecting revenue, unit labor cost. --id: affect public alix: the g7 trade showdown. investor confidence. industrials and technology companies. jon ferro will get insight from michael buchanan. this is bloomberg. ♪ what's a gig of data?

well, it's a whole day's worth of love songs. 300 minutes of baby videos. or, it's a million chat messages. a gig goes a long way. that's why xfinity mobile lets you pay for data one gig at a time.

and with millions of wifi hotspots included, you'll pay less for data. it's a new kind of network designed to save you money. click, call or visit a store today. jonathan: this is the count down to the open.

coming up, the united states isolated at the g7. presidenteading for a a backseat to economic growth.. few signs the terror talks are hurting the u.s. economy. confidence,estor the lowest since 2012. thet 30 minutes away from opening bell after a decent week of gains for the s&p 500. futures up one third of 1%. -- inllar weaker against the treasury market, some stability. 2.91% is your yield on the u.s. 10 year. out abouters speaking the impact of u.s. tariffs and making it clear to president trump that he needs to avoid a full-blown trade war. >> no