stay in the market despite fall till death volatility boat warns volatility butet warns of cyccal markets. fang.ble in goldman sachs is tackle rule for will ruleays tech for decades. david: i hope you didn't want to run an airline because -- alix: my bucket list net -- now for qatar airlines is cack. i'm like you can't walk that back. it's too hard, you need a strong person. alix: in the markets it feels like a very calm, quiet day into

that leaders meeting on friday. s&p up. dollar modestly weaker. story with some riskier currencies on the downside. 41 the differential between the two and brent crude getting hit disproportionately to wti. a report president trump called opec and ask them to raise output. the other big mover in the market is what's happening in 18 basisby about points as his jitters in the market. nowhere near the route we saw last week. he says will take care of immigration, get rid of minimum wage and move closer to europe.

everything will be great. we can handle our debts no problem. he doest's see how friday when they meet with merkel and trump. david: also when they meet mr. draghi. i'm not sure they like that over in europe so much. the morning read. we will get isn nonmanufacturing index. president trump hold a celebration of america of event. it is a brand-new invented thing made up at the last minute when the president disinvited the nfl champion philadelphia eagles on the ongoing dispute whether employees should stand for the national anthem. tesla holds its shareholders meeting at 5:30 this evening eastern time. some shareholders pushing for more dashboards changes. , thee joined by luke

bloomberg cross asset reporter. in case you are wondering by the markets can't decide, we heard ubs andgio, the ceo of this is what he had to say. clientse recommending to still be in the market does the profitability's and growth we see are still supportive of equities in general terms. signalingy careful in the cyclicality may, in -- may come in. thinking about diversification and edging is ain this environ't want them to be too complacent. , i listen an investor

to that, what do i do? where do i go? >> part of this is being cognizant of what happened. i think you can see what this does what we saw this year and see no edges. ciosi talked to one of the your exposuree , this year we said yes. what i'm amused by is what vehicles people are using to hedge because in the light of the blowup, we have seen a migration of activity from vix options. u.s. markets play catch up with italy. there was barely any volume. i'm wondering if that activity or how are people buying treasuries. >> let's assume i simple investor. equity,ave a six -- 60%

40% debt. do i go to 50-50? >> you could do that' not exactlg. that involves laying off a specific risk. you can laugh currency risk, interest rate risk, long-term short-term. he wasn't specific about any of that. it's not what he was trying to say is he's hedging his own bats by saying it could go up or down. it's kind of good, it's kind of not. alix: let's take a look at what's happened over in europe. if the eurozone pmi came out. the total eurozone pmi composite is the white line and france the blue and germany is the yellow. all of them rolling over adding on to that sentiment yesterday and this composite pmi doesn't really take into account what we saw in italy. when you talk to your sources, how much are we rolling over in me we saw it looks to

the u.k. doing better on its pmi. france and germany are the source of the problems on the european pmi, could be the weakest quarter since 2016, but we know we have the b schedule to and it's purchases in september. worried thatreally the economy was rolling over, we can keep making those asset purchases so there are still not to turn here. alix: even a month ago the conversation was buyeron as late in the cycle. the data is turning in getting better. was the conversation among investors? >> it's fueled more the political turmoil. 54, 50 4.5, you are pretty happy

it's been better than the recent past. flows, people paring to europe exposure pretty heavily last week, it has to do with the politics in the headache. this basket case and we could get this selloff based on what political actors, the idea of a float. we have enough headaches to deal with. nasdaq hitting another record high yesterday. seeing nasdaq or is the same old thing? >> we are seeing a lot of power from the main group and one thing i like to see is a like to track the spread between 25 delta puts on qqq view. this protection on qq versus the financials. that is completely blown out and

hovering around its lowest le the market can be worried about everything all the time unless is a bona fide reason to be. right now the markets had reason to be worried about financials.g s. there was nothing going on in the u.s. backdrop but that causes people to flock to winners. where is tech vulnerable? named as things he possible dangers or is impervious to all of that? ittech investors would say has been able to grow in a low growth environment for so long. i think this gives the heart of why people are back in tech.

we were really worried about that cap war ratcheting up worrying about regulatory risk and their earnings power, all three of those have been really swept quite recently. alix: facebook is still a running record high to. k you both very much. coming up, italy's new prime minister is speaking before parliament. the italian bond extending losses is yellow line his priority. want to get closer to russia, eu and the u.s. with ubsreak it down fxnd macro strategist. this is bloomberg. ♪ loomberg. ♪

>> this is bloomberg daybreak. saudis. has quietly asked

arabia and other opec members to boost production. the trump administration wants another million barrels a day to be pumped. gasoline prices of their highest level in three years or it president trump has publicly complained about opec and rising prices. the british government reduced its majority stake in royal bank of scotland. it sold 7.7% of rbs. the u.k. has held the states and failing at the bank in the financial crisis. u.k. government still owns 62%. maker of semi conductors and smart death of smartphones it is a new chip for personal computers and offering free wireless plans for devices based on the chip. the chipmaker is trying to get its technology into the market which is dominated by intel. that's your bloomberg business flash. david: italy's new prime

minister has given his first speech to parliament at set sold right will be the core of the new standard. he promising everything to everybody. what did you take awm this week? >> now you know why they call them populist. has been speaking for more than an hour there's plenty more for italian there. more economic growth, lower the debt, many things people will relate to and let's not forget he wants to cut the perks of italian politicians. david: the bonds are not responding positively. the market into spending too much money. how will they reconcile this? conte he did it not -- >> he did it knowledge is talking about a radical change. he's been clear on that from day one and know they will probably run into difficulties both with

the markets in european union in brussels. thank you so much for joining us from rome. alix: joining us is the ubs fx and macro strategist. euro-dollar, what's the downside? is how muchorward fiscal space they have. therelculations suggest is probably 1% of gdp in terms of expansion and that would still keep the longer-term debt on track to prevent that from exploding over the long term. , thato go above 1% of gdp becomes more unsustainable and that's the real risk. tos been really hard pinpoint exactly what the spending plans will be. this is the space we are watching. downgrading your expectations but we are not expecting a

return of 2011. alix: the last couple of days as a strategists down on their forecast. what have you done? vassili: we are looking in the same direction. some of the positives is l undervalued currency a little longer term. we are fairly constructive with european growth. there's been a slowdown but we ther wil a bounce back. backly it wants to p some political risk premium. ecpink ultimately velvety desk ecb more dovish. this is more of a seconf 20 nineteenths tory. 2019's story. david: tell us about the pmi's that came out. we put this chart up to show the

way i's trailing off. it still in the positive territory. it's not what it was before. how much that is uncertainty in how much is concerned about italy spending too much money. how much is it trade? we heard germany is starting to see negative effts otrade exper. this is a revised , t't of new information. we had some temporary factors. your writing terms of the pockets of more negative fence when it relates to trade. i don't think italy showing of the pmi's yet. that's probably going to be an issue. is probablyybody downgrading the european growth expectations. absent a significant global thek, i don't think

european economy will be derailed. is straight going to become that shock? -- so far has suggested no. what matters more is markets react very negaty so financial conditions tighten significantly. equity markets aren't selling off globally. euro-dollar will be really hard to get a true reflection of how you want to trade europe because of the overhang. if you were to look to play on a moderate just in a moderately bullish way, what is that process? >> we like those satellite curies. if you want to get out of the eurozone problem, norway, sweden , those have been more helpful recently. ,ome of the european countries poland, czech republic, they serve as a strong manufacturing

link to europe, i think those are still attractive currencies and of the end of the day it seems to us the global growth picture is overall going to a positive from that going to outweigh recent negatives. david: if you can take the geopolitics out of it, what is the actual value of the euro? i understand it necessarily reflective 12 right away. if you went for true value what would it be? 1.29li: probably around depending on the way you look. in terms of our own estimates i think 1.25 fair value. i think those ranges are typically what you will see. it's an important attractive point for the euro, the economy continues to expand. the ecb will normalize in

policy. will vassili serebriakov be sticking with us. coming up, it the ubs ceo sees volatility across markets. more of that exclusive interview next. bonds.tility spiked on if you go back to the levels of fx fix, and you look at movements. the's not a lot of build -- volatility compared to the standards we use. overall investors are very cautious and they are out there observing the situation and not panicking. they are starting to get concerned.

david: investors should stay in the market. muchng against risk is a

-- must according to the ubs ceo. clientse recommending to still be in the market because the underlying profitability and growth we see are still more -- equ. signalingcareful in the cyclicality may come in. there for edging , thinking about diversification and edging is an absolute must in this environment and want us to pay attention. david: still with us is vassili serebriakov of ubs. this is your boss so i don't expect you to disagree. , it can becomere quite a ways and came back up but now sees where is the dollar

going. the last year was a turnaround long-term turnaround. people of started getting nervous about whether this is a really corrective rebound or more than that. we think it's just a correction. you have to at this point be bullish on the dollar. you have to think about it. the u.s. side of the story is relatively played out. if you look ahead of the meeting , what is priced into the market? it's pricing in 10 basis points more of hikes this year. we expect this to move higher to four hikes in 2018 but that seems to be relatively well priced in. if you look at the two-year sector, it seems to us there is not a lot --

you are bullish on the dollar for u.s. reasons that probably not a good argument. where the dollar can still do well is during those periods in europe, some trade tensions and so on. that will be the main upside potential for the dollar but that's not our best case. it ordo you want to short rotate somewhere else? to bei: i think you want selectively bearish again some of the currencies. -- i against some of the currencies. europe is in a position where we think it's relatively cheap but we are concerned about the short-term political risk. commodities-based currencies are starting to look more attractive. they had a big selloff in recent months, not a lot of monetary policy in those countries. -- if global growth is good they will bounce. david: if you short the dollar

are you betting against the strategy of the trump administration? we know the money goes and the system but it's more than just money and more growth and we are expecting. vassili: if you get stronger growth, what does it lead to in terms of the market? does it lead to a fed repricing? does it lead to global growth expectations and risk sentiment improving? the argument here is that the fed is well priced so the strong u.s. growth is supports equity market performance, risk sentiment and so on. historically that environment actually do well. it's not that straightforward. buying some bond exporters, ef currency if this supports risk. alix: and how much above neutral

is being priced in a net yet to be known. vassili: that's a key point. there is some nervousness about overshooting the neutral. the more you overshooting the more the curve could flatten and concerns over the next recession are going to start building here. we are not at that point yet. in all the recent fed speeches they're relatively lax. alix: thanks for joining us. tech stocks rally pushing the nasdaq to record highs. more on the companies behind the fuel. this is bloomberg. ♪ loomberg. ♪

alix: this is bloomberg daybreak. i'm alix steel. happy pmi deal. could be opening at a record here after the indices closed on a record

yesterday. european stocks and the ftse mib up. i want to point out what's happening with sterling. 133. of the pmi's coming out eurozone. 2.10 spread, 41 basis points. 1.5%, down over apparently you have president trump asking opec to raise by 1.3 million barrels a day. david: i'm sure they will listen to him. tech,g from oil to microsoft has agreed to buy igthub. the deal helps microsoft buttress its growing cloud business. emily chang sat down with

microsoft ceo said shannon dela. >> we feel about the growth rates that they have you are a hobbyist or student or start up or person working in a large company, to be able to use github as a free service. they have done a good job of having a model of going from pain version for organizational use. we can stay true to building that service up and making sure it is an open platform for all tools, all cloud platforms as well. we think we can bring a lot in terms of scale reach to additional customers and channels but we feel very bullish about what we can do for developers on organically growing github. there has been some custard nation in the developer community about this acquisition. some critics saying this is a

independencethub's , the list of reasons is endless. how do you reassure them and bring them along? >> it's a very critical element in this. we are very committed to keeping that developer ethos github going forward. that is why, between chris, the ceo of github and me, decided to run this company independently, even post-close, operated as an open platform. a lot of open-source credentials , he will be the ceo post close. he will be the new maintainer, if you will, of github. he will stay true to what the github community demands, of anybody maintaining that community. we will have to earn the trust, no question of that. our actions of the recent past open sourceshore

developers about what microsoft's intent is, and they should hold us accountable. ceod: that was microsoft's speaking with emily chang. he mentioned the github ceo. he and his cofounrs are now becoming billionaires because of the deal. rankskes of the ownership . bill gates would be the only person that would hold more shares of microsoft. that is very interesting to people. microsoft was in real trouble after steve ballmer. he was the one that said let's go for the cloud. they are well behind amazon but they are really making a lot of money. this is part of his moved to say that we are reinforcing our move in the cloud. alix: going from a boring,

blue-chip company to a real startup company that can invent stuff, bring things forward, rather than just regurgitate their old products. david: they did exactly what ibm didn't. alix: exactly. david: interestingly, steve ballmer was open -- against open source. he thought it was awful. off itsple kicked worldwide developers conference yesterday. takeaways, those alex webb is with us from london. what was your biggest take away from yesterday? >> the big movement toward making you allow blocking access from people like facebook, others was interesting. a real point of principle, going out there and saying we are the privacy guys, we don't want the same business as these other tech giants.

david: one of the things i found interesting, they made a point about how they are going to go for private >> we believe that your private data should remain private. not because you have done something wrong or you have something to hide but because there can be a lot of sensite data on your devices and we think you should be in control of who sees it. david: is this a direct shot at facebook? already in the past tim cook has said that held never have gotten in the problems that facebook did. >> i think it is. apple trades at a discount to facebook and google. they are basically service operations, had a lot more recurring revenue on a more regular basis. apple is tried to push into services. it was reported last week that isle is pushing into ads, looking to develop its own ads platform.

therefore, they are king it harder for google and facebook to get on that type of platform that drives advertising. alix: thank you, alex webb. bubble warnings getting a littli continue to surgead of the market. according to goldman sachs, those valuations look reasonable as profit drives those stocks. joining us now is gina martin adams and steven pelayo. rating on apple. let's start with apple. does it get a $1 trillion valuation? >> absolutely. the company is demonstrating pretty good growth. then when you add the cap returns and a share buybacks, you are close to 20% earnings growth. the stock is trading at 15 times pe multiples. a little bit of

that from the capital returns, more on the margin as well. changed where has the iphone is now a stable business, a foundation business that they can grow off of. we are not modeling a lot of unit growth, but we see some we see somep, and growth in services, where they have a huge opportunity. alix: when you look at what has twoened in tech in the last decades, you can see the velocity we have seen in tech. are you seeing this within the leadership in tech, isn't going to be these basic cap stocks? what will be your next event for the next five years? >> i think the surpris is breadth. if you lat what is going on, whether it is in autumn resolution, -- autumn's asian calm automobiles, we recently wrote an article talking about

the digitization going on. you add on top of that the fuel you are getting from tax reform, asia infrastructure spending, all of this is adding to global spending. we see increases for google in their data spend. amazon web services seeing an acceleration this digitization wave is driving a much broader breath than we are used to. tech covers a lot of spaces. consumer facing versus not consumer faci. the consumer facing faces much more of a regulatory risk. will there be either virgins of that over time? >> i think we are beginning to see that. 12 months ago, it was all about the internet software and services stocks gather momentum, gathering investor interest they had the big secular growth pains, but as steve wanted out,

that has broadened out. semiconductors were strong he mket last year. software has been a big leader in the market this year. to see a lot of investor interest in the rest of the tech sector. so far this year, those internet e actung the sector.vice names growth has been concentrated in more hardware areas, communications and equipment. it is the best performing section of the tech sector this year. semiconductors is second. when we look across the s&p 500, the companies are telling us they will grow capital spending over the next 12 months 18%. there is absolutely a spending wave happening, and it is certainly going to benefit tech. it is not the consumer focus names i get the great benefit of those. david: the focus is on we just had the announcement with softbank. the productions are a really

substantial sign of that globally. which tech companies are set to win the biggest? >> i would folo your comments about what we are seeing in semiconductors. the silicon content per car is increasing dramatically. today, aboutehicle $400 in chip content per car. this will be doubling on average. the teslas of today have thousands. even in the grand scheme of things, 100 million cars a year is relatively small to 1.5 billion smart phones, but the content is the growth story. david: and a lot of those smart phones are already out there. gina martin adams, steven pelayo, thank you or being with us. coming up, the x heads of citibank are in australia.

as you tune in today, listen to our colleagues tom keene and jonathan ferro. bloomberg surveillance can be boston, washington, d.c., and all across the country. this is bloomberg. ♪

>> this is bloomberg daybreak. coming up on bloomberg markets, gene munster. turn toe are going to wall street beats, were recovered three things wall street is buzzing about this morning. pimco's couple.

ushering a new era at pacific investment management, placing the prior one man role. australia's cartel case. heads under aher corruption probe. and rubenstein's forecast. the cofounder of the carlyle group says a slowdown is coming but he doesn't know when it will be or what will cause it. alix: joining us now is jason kelly. let's begin with pimco. this is all part of the bloomberg magazine talking about two people running some kind of investment company. what is the difference between these guys and bill gross? >> this is an absolute must-read. theget such a good sense of men running the firm. of course, the man that david did not say, probably goes unspoken every day inside pimco is bill gross. somewhat, shall

we say, autocratic in running pimco. these guys came in from within. he came in fromtside and these are two very different guys. they sit alongside each other in the office. from: it is interesting what we discussed yesterday with carlisle. these two people have very distinctive roles. they are not doing the same thing, they are doing in next to each other. one is the executive running the place, the other is the investor. they seem to be working beautifully together but they have divided it up. >> you have a businessman's and an investment guy. interestingly, they did bring someone in who came up through the company, and then they brought someone and from the outside also. the story delves into their

personalities, their hobbies. david: what they eat, their diet. .hey are very different people david: one of them really likes polis sausage. >> the other grew up in paris. david: let's go to australia. there is a criminal charge having to do with some placement of securities of anz bank. they havthe former hands of oni and deutsche bank criminal charges having to deal withhese share placements. >> never a good thing when the word cartel is thrown around. syndicates, when you have banks going together to issue debt or equity, they agree on stuff. alix: you are not even allowed to call opec cartel. hit on the exact argument the banks are making. this is what we do, we get

together and we decide how to sell things. whether oneo say man's syndicate is another man's cartel. david: there is something unusual here about what goes on everday in the markets. alix: yesterday you had a great event, you spoke to david rubenstein. the big takeaway? >> let's hear what he had to say. he made kind of a conviction. -- prediction. >> at some point there will be a slow down. no economist is predicting in this year that i'm aware of, and even next year. but at some point there will be a slow down. i don't know what would cause it, i could not predict the last time went subprime mortgages being undone. >> the big takeaway aid it is not coming right now. it is interesting to see what others have to say around that.

i talked to a couple of private equity guys last week who were saying the same thing. it is further out maybe the people had feared. that raises a lot of big questions about whether you get out and get cautious too early and miss de. mention just want to frank clergy, who you recently featured. defense secretary. the whole idea was private equity mary to defense spending. >> he really set the table for carlisle, certainly, to become what it was. alix: jason, we have to let you go because you have a busy day. tune in for more exclusive interviews from the bloomberg invest summit. in just over one hour, he'll be speaking to executives from kkr, as well as carson block from muddy waters. brent sliding over 1% after report that the u.s. asked opec to hike its output by over one

million barrels a day. joining us now is our executive editor for energies. >> we already knew from steven mnuchin that he had been talking to allies to increase their production capacity. when you look around the world and you look at who is an ally with spare production capacity, it is a pretty short list. that we knew. we also saw the tweet from trump talking about how opec was niggling the oil price, how it needs to change. this adds a little bit of flesh to those conversations. no one suggesting the u.s. is somehow threatening opec to increase by this amount or there will be consequences, but there gives a sense of the scale of what they're facing. look at the iran sanctions. ae last time we lost about million barrels-plus out of the markets. as retail gasoline gets up to three dollars a gallon, you need

to find oil somewhere else to keep that stable. alix: to be clear, president trump reinstates sanctions on iran and then called opec to make up the losses that we may see from those sanctions. it is thatsure simplistic. there are lots of other conversations going on here and it is a complex issue. it is not just opec. key player in this is russia. there are other issues going on in the political sphere. it is not just about oil. but we are going into an opec meeting that will be pretty lively. they are trying to square a pretty difficult problem. you have russia on one side, a run on the other, opec producers, some of whom can increase output, others cannot. it will be hard to see what is the compromised position. alix: pressure also wants a one a day increase, and the saudi's what about 300,000.

does this put a u.s.-russia versus saudi arabia conversation on the table? necessarily put the u.s. and russia on the same side. maybe on this point they are not far apart but russia's position is they have a deal. they want to get rid of the glut in the global market. by and large, russia has never really acted by opec. this is an unusual time or they are working together. so we should not except -- expect that sort of deal to be done, so in that sense, russia is closer to the u.s. side. on the other hand, there are political considerations in terms of the dynamic between the and thereon and what is happening. they need the u.s. on their side. alix: there is also the question, if you change it from going 100% compliance to over complying, that might be enough.

if you just go to 100, good to go. david: north korea reshuffles military top brass ahead of the upcoming summit between president trump and kim jong-un alix: and if you have the bloomberg terminal, check out tv to interact with us directly. this is bloomberg. ♪

david: this is what i'm watching today, north korea in advance of that summit. kim jong-un has changed at his top military leadership just before the summit. he replaced the defense minister

with somebody else, and also the head of the army. he replaced both of them. it is interpreted as a move to make sure the people in those positions are the most loyal to him. people who are really thought to be loyal. the idea is it may give him more flexibility at the summit to negotiate, if he has his troops, so to speak around him. you can imagine president trump on the eve of it replacing our defense secretary and chief of staff. alix: does that feel like he is in a position of weakness or strength? if you want people around you that are loyal, that seems like a position of weakness. david: this has been his pattern. he has been on this theme for quite some time. my wife cherie is in singapore right now, about to fly back. she was there for something else but she just emailed me and said there are more fighter jets in the air and she has seen ever in her life ahead of that summit.

alix: you have the north korea summit and then you have skirmishes in the south china sea in terms of military practices, and then you have taiwan. i'm curious about how all thre of those things feet into the conversation that china will have with the u.s. as well. david: we are really at all to in the south china sea. we need to work with them on north korea and trade. malikcoming up, sarah will be joining us. she se buying opportunities given higher volatility, especially in the u.s. this is bloomberg. ♪ this is bloomberg. ♪

plea to opec,

please pop more. he asks to increase production by one million barrels. to set the contact steps into the limelight with his first address to parliament. g. bubble in faam withasdaq sits at a record day two of apple's developer conference on deck. david: welcome to "bloomberg daybreak: americas." i'm david westin. oil is in the news. president trump had it all figured out. off from iran, but you guys just pop more, it will be fine. the saudi's saying, you pump more, you get the infrastructure. in the markets, the s&p is up by about three points. calm as we shuffle through the rest of the week. the dollar gaining strength as we go through the session. .uro-dollar down 1.1%

2-10 spread, 41 basis points. brent crude now off almost 2%. wti not getting hit as hard, anticipating one million barrels of oil a day coming online. i don't think it will be a done deal, though. david: this morning, we will get market u.s. pmi and the ism nonmanufacturing index. 3:00 this afteresident trump holding a celebration with america event at the white house, a late minute change after he disinvited the philadelphia eagles over the dispute that he has with the league about whether players should have to stand for the national anthem before games. and tesla holds its shareholder meeting this afternoon with some pushing for more changes. alix: isn't every day america is awesome day? let's get an update on

headlines. emma chandra has first word news. asked saudihas arabia and other opec members to boost their production. the trump administration wants another million barrels a day to be pumped. gasoline prices have hit their highest in three years. meanwhile, president trump has publicly complained that rising oil prices. president trump is once again blasting his own attorney general jeff sessions. russianthe martian -- witchhunt continues all because jeff sessions did not tell me that he was going to recuse himself. in the u.k., the government has announced plans on the long debated expansion of heathrow airport. a third runway will be built. it will be the first new runway in the london area in decades. parliament still needs to sign up on the plan and opponents have warned that expanding will damage the environment. global news 24 hours a day, on-air, and @tictoc on twitter, powered by more than 2700 journalists and analysts in more

than 120 countries. i am emma chandra. this is bloomberg. david: investors should stay in the market but hedging in the risk -- is a must. that is what we were told by sergio ermotti this morning in and in. >> we are recommending clients to still be in the market. the underlying profitability's him a growth that we see our still supportive of equities in general terms but we are also thatcareful in signaling the cyclicality may come in, geopolitical risks, may be there. hedging andut diversification is an absolute must in this environment. i want us to not be complacent. sand: we welcome from francisco saira malik, head of equities at nuveen. welcome to the program.

he said we should stay in the market. we are in the market but it was not clear to me what you do in the market given the upside and downside he described. what do you do when you're in we see the u.s. as a safe haven. we are believers in strong earnings growth through next year, the world is becoming more uncertain, the u.s. is more of a defensive play. softe past the potential patch. strong ism data, ism coming out last week. inflation is pretty benign. the 10 year rate seems to be selling at 3%. onestors can get used to that level of interest rates, the u.s. should move up from here and potentially break outside of a range, especially as the political uncertainty around the world start to calm down. david: we are going to put up a chart in the terminal. it shows the s&p for the year has been going down but trading within a range.

that it has just broken above that range in the last day or so. what is that telling us? saira: people are starting to believe that our new growth will continue to be strong from here because of the tax breaks, regulations that are easing. is what takest bull markets up, strong earnings growth. we believe earnings can remain strong at least until the end of 2019. if the u.s. is more defensive, what did you insert your rotation? we spoke to a just earlier and this is what they had to say. >> the risk is areas to be right now are the so-called low vol investments. if you look at the fastest-growing trend within ats, passive investments, it is within these low volatility funds, which are basically a play on interest rates remaining low forever.

alix: does that mean defenses are not defensive anymore? saira: we would be avoiding lebron proxy stocks. we don't think they agree to own. consumer staples is another area that people usually think of as defensive but the fundamentals are not great. growth stocks from here. they tend to do better in hiring environments, fundamental drivers for compani going forward. these companies are a lot different than what we saw in where growth, stocks look like they were in a bubble. david: one thing that is a possible hedge is small caps. we are putting up a chart showing the extent to which the russell 2000 has been outperforming the s&p. is that something that you recommend? saira: small caps are looking attractive, especially in an environment where we are word about a strong dollar. we think small caps can outperform, especially if the

dollar continues to increase. alix: what about energy? theere talking about it on show, as brent rolls over. a conversation in a week ago noting about playing it only as a value trade but a ketchup for oil. at do you think about that potent now? the bigger picture story is a tight supply demand situation. inventories are tighter, generally making is bullish on prices going forward. we think it is safer to stay in the permian basin stocks were you get the highest quality rocks at the best level. we think that continues to form -- perform pretty well from here. alix: do you play e&p, services companies? like amostly companies concho, somebody that can boost their earnings from here.

alix: we are seeing a lot of trongds having s moves. do you look for quick trades, are you looking more longer-term? saira: longer-term. we have been waiting for the supply demand situation to tighten up. now that inventories are more manageable levels, energies should perform well here. you should make sure that you on the highest quality companies. david: we just heard from david rubenstein yesterday saying we are not going to have a recession yet, but we have a chart showing the treasury curve. it has been flattened pretty consistently. is that a warning sign to investors that there may be trouble on the horizon? like that is ag morning sun but we don't see it near term. we think that is quite a longer time away. bull market should be driven higher by earnings growth.

we are confident that should continue. what we think will end the bull market are the classic higher interestates, inflation ri now is not at ve ar worried the fed will have to raise rates faster than expected. we don't see that classic end of the bull market coming up at least until 2020. alix: at what point do you have to rethink the u.s. as a safe haven, still want to get into growth stocks? morgan stanley is looking at defensive plays, moving up that call. what would you need to see to transition? saira: it is interesting because stocks are at extreme levels compared to their discounted level. we would need to see continued economic acceleration that may make some of the more cyclical names more attractive. the adjusting th growth stocks is they have their own levers to pull. most of their upside is from earnings growth. nowhere neare where you saw in the prior bubble, so we are not at the

point where the s are overvalued. and are industry disruptors we got they can continue to grow structurally from here. those companies have sustainable, readable business models. to see you. you are stickin us, getting up at 3:00 in the money to be with us? k you. euro area growth losing some steam. germany and france slowing. we will discuss what that means for european equities. this is bloomberg. ♪

>> this is bloomberg daybreak.

steps to limit facebook possibility to collect data. the company is is updating , ipad, and mac software to ask you for permission before sharing content. they also allow facebook and hers to collect user data. general motors is joining a group of automakers to be not car market. electric introduce 20ng to new models by 2023. the company planned to make the cars with its new chinese venture partners. the british government has reduced its stake in the royal bank of scotland. 3.3 billion dollars by raising 7.7% of rbs. stake in theheld a bank since bailing them out in the financial crisis. the british government still owns 62% of rbs. david: thank you. italy's new prime minister guiseppe contact gave his first

speech to parliament today and promised an awful lot to a lot of people. we welcome our colleague in rome, kevin castillo. the speech ended. what did we learn, is he making any tough decisions yet? we learned he will really follow the populist agenda, a populist and costly agenda. some estimates put it as high as 126 billion euros. the question is if it will come back to when the previous government had, where is the money going e fro david: does he have any problem between his two populist parties? we have more of a right party, and a more left one. is he going to be able to pull those two together? the question might be are the part is going to be able to put him together because he has a lot of competing interests. the league is insistent on a flat tax.

the five-star once the active support for the poor. the middle. how he will handle it, only time will tell. david: thank you, kevin. alix: so what is the trade over in europe? still with us is saira malik of nuveen. staying with italy for a second and then broadening it out, would you be buying italy on a dip, have you been in the past two weeks? saira: italy is not an area that we are interested because of that uncertainty. when we look at the eu as a whole, we see it as short-term uncertainty, long-term attractive. bigger picture, it is a cheaper market and the rest of the world also at some point, we think it plays catchup at some point. right now you have some issues with pmi's. they are still expanding in that territory but they are much lower than people they would be this year, so that's been a bit disappointing.

our view is that is mostly due to higher inventory levels and cold weather. period, not as positive on the eu, with definitely avoid italy but watching the cyclicals in the european union. in the long run, we think this expansion will continue. let's look at those pmi's. thecan see the eurozone is white line, blue is france, yellow is germany. as we round up seeing calls to buy europe, that started here in the run-up to the economic data. now we have seen a slowdown since january. do you distinguish germany versus france? jpmorgan is downgrading the eurozone. would you be playing in regionally? saira: we are more bottom-up, so we are looking for companies in any region. a lot of companies there are

pretty global, so you are not often buying the country but the company and its fundamentals. we are a little bit concerned about wading through this pmi weakness, getting through some of the political issues, although we remain italy will remain quite localized. david: what are these purchasing managers seeing that we are not? is it just a matter of the weather, are they telling us something in terms of demand coming up, is that troubling? saira: companies in europe are still positive and earnings are upgraded a little bit this year, so all of that is stable. , our view is it was mostly weather and some inventory buildup that the eu needs to work through. once we get through that soft patch, pmi's will recover. remember, theyto have been in expansionary territory, so no sign that eurozone is going back into recession. alix: what kind of banks do you like? saira: those that are relatively

defensive. very involved in italy, high-quality balance sheets, those that can perform well. ofx: what kind consolidation, what kind of sectors do you see, is that an attractive opportunity for you? saira: consolidation is not a huge play for us in europe. i mentioned a company that we like. there are companies that play in the housing cycle that are nowhere near the levels of precrisis level. housing, some of the cyclicals can do well as the european economy gets o this soft patch. david: saira malik will be staying with us. coming up, the nasdaq is a record highs. more on the company driving those rallies. this is bloomberg. ♪

alix: no bubble in faamg.

tech willchs says rule for decades as the nasdaq sits at a record. you have appl's day two of the developer congress --conference. the first time that the stock rose during the conference was yesterday. saira malik is still with us. with goldman, that nasdaq will continue powering higher? welcomee think earnings to you to move tech stocks from here and will continue to do well for the sustainable future. e in particular is an interesting name. thatces have grown business, lots of cash on the balance sheets provide support for the stock. they did a great job in the recent quarter managing inventory levels for the iphone. proving they continue to do that is positive for apple going forward. david: some of us remember the late 1990's, 2000's what happened with the tech bubble. hereave a chart up

looking at total market capitalization of all companies compared to gdp. what this shows is we have not en this high in terms of market cap to gdp since the tech bubble burst in 2000. should that give us any possible in thstock market? a: we are looking at earnings and valuations for technology companies now versus the last bubble. if you look at valuations for technology companies, they are much lower than the last above all. the reason is the earnings for these companies. these are different companies than those that you saw in the 1990's. growth rates have been huge. these are real companies. remain as valuations reasonable, we are still interested and think these are attractive. alix: you mentioned apple. consumer facing or not consumer facing stocks. we have seen apple leading the way with amazon and others. does that me the way for tech

stocks? saira: we are interested in technology companies that have less regulation, more repeatable business models. some you like amazon, netflix, maybe even salesforce with the transition to the cloud. all of that is interesting. avoiding those that are caught up in the crosshairs of regulation. that is where we would wait for a better buying opportunity. david: when you look at the regulations, does that take you into the semiconductor companies , the people making the technology behind the scenes, so it is less likely in the government would regulate? saira: we are avoiding technology like that but also looking at other areas that could be interesting. financial technologies around visaorld, companies like that are benefiting from the transition away from cash. we think those companies are more interesting, they have more structural growth than the cyclical place. alix: what about the relationship between the nasdaq and the s&p?

the blue line is the nasdaq, the s&p is the white line. everme the nasdaq has topped out, the s&p has well. but in the past couple of months of the s&p has not been able to keep up with the nasdaq rally. what do you make of that? is theboth of that growth stocks of the s&p. the nasdaq is a more cyclical index. easily see the nasdaq doing well, while the s&p may lack a bit. alix: is that spreading to other areas? you mentioned your becoming positive in some areas. you take that thesis elsewhere as well? saira: definitely a disadvantage, their low exposure to technology. when we get back into europe, it will be more of a cyclical play for us as that economy starts to pick up after this soft patch. technologyhink of companies as being u.s.-based but we are seeing companies from emerging markets come into the

technology space. will there be a shift into some attractive overseas companies? saira: the global technology play outside of the u.s. is interesting. huge beneficiaries to the transition of financial technology. we like pockets of emerging markets in general for general reasons -- for a number of reasons, but em is a big beneficiary of that. saira malik, much more coming up with you, so stay with us. an interesting question. it is hard to pinpoint when the regulations will come down and bite. sara mentioned amazon, and that is true compared to a facebook conversation, but walking out farther, i don't know if it will apply. the question being, you may not come in and have regulation like we are worried about with facebook, but will you not be able to get any bigger?

that is a conversation that has yet to take hold with amazon's of the world. david: which is what we saw with ibm in the 1970's and microsoft in the 1990's. coming up, hundred concerns are hitting america's heartland. alix: and take a look at where markets are headed. s&p futures trying to inch out a little bit of a gain. dollar index also getting some strength in the g10 space. tech continues to lead the way, closing yesterday at a record high. could apple be the next $1 trillion stock? interesting number to look for. this is bloomberg. ♪

alix: this is bloomberg daybreak. here is very stack up market p -- here is where we stack up market pmi.

nasdaq futures up seven points, closing at a record high yesterday. can they hold on to their gains today? european stocks of 3/10 of 1%. in other asset classes, you can see any kind of selloff at 18 basis points but nothing like we saw before. euro-dollar a little weaker. cable rate having a nice rally. the u.k. pmi did really well last month and helping with the currency is the dollar. flatter.points, opec tot trump asked add one million barrels of oil a day into the market after the

u.s. added -- reinstated sanctions on iran. i find that bizarre. david: do you think he said please? alix: i think he said i want the congress to get a nice republican run in november. david: let's find out what is going on outside the business world. emma chandra is here with "first word news." emma: robert mueller has accused paul manafort of trying to tamper with witnesses. manafort is confined to his home while awaiting trial on charges of money laundering and acting as a unread -- acting as an unregistered foreign agent. the death toll from that guatemala volcano is likely to go higher. and lava caught people offguard. u.k., the labour party leader will accuse prime

minister theresa may of refused of failing to stand up to president trump. a spokesman for the pm said it -- said the accusations are unjustified and deeply troubling. global news, 24 hours a day, on air and at tick toc on twitter, powered by over 2700 journalists and analysts in more than 120 countries. this is bloomberg. david: commerce secretary wilbur ross has returned from china without progress on trade. president trump is heading to a g-7 summit in quebec where his counterparts are connected to give him at your full on steel and aluminum tariffs and now members of his own party are getting restless. we welcome our chief washington correspondent, kevin cirilli. the president has a meeting coming up with republicans who do not seem as enthusiastic about his approach to trade. afternoon, a0 this group of senators will visit the

white house to make their case to president trump to withdraw from this trade proposal. it comes ahead of the g7 summit in which the president is also facing pushback from global country -- global counterparts around the world. it also comes as majority leader mitch mcconnell, house speaker paul ryan and senator bob corker are all speaking out within the last four days, urging the president to reconsider, and arguing his proposals on trade, in particular raising those steel and aluminum tariffs would have an impact on supply chain businesses in the united states, including in conservative strongholds. vice president mike pence is expected to be on capitol hill today to attend the meeting and a lunch with lawmakers. he is going to get your full -- get an ear full. david: the plot thickens. republicanust senators and congressmen who are questioning president trump's policies. some of his strongest supporters in the heartland are asking

tough questions as well. we welcome mario parker who covers agriculture. bf is thatt the the farmers have. there are several issues right now, one of which is the trade issue and the fact that farmers find themselves in the crosshairs of any trade dispute. agriculture is an easy target and with the saber rattling between the u.s. and china, you are seeing threats to soybean exports. domestically, the president has been mulling over changes to the renewable fuel standard which is essentially a demand guaranteed program for corn and soybeans, to be turned into ethanol and biodiesel. alix: i wanted to hit on that renewable fuel standard change.

take a look at the renewable identification numbers. if you're a refiner, you get a rin for every gallon that you blend with ethanol and you can sell those into the market to other refiners to may not have access to them in the price has hit one dollar per rin. that has caused a lot of drama in the market. why is he doing that? who does that wind up helping or hurting? helping theends up refining industry. to be fair, the president andaigned on supporting maintaining the renewable fuel standard, even in his first year, he said -- he reiterated that promise. meanwhile, he has had another part of his constituency that has been complaining about costs.

a bankruptcy on the east coast earlier this year, and rins were cited as one of the culprits. that got the president's trophy attention --'s -- president's attention. increased likelihood of reforms to the renewable fuel standard, rin prices were decimated. alix: great stuff from mario parker. definitely not just about trade. the corn belt is going to have something to say. still with us from san francisco. how do you operate your allocation around that? >> the current trade situation is manageable from the market point of view. expect higher volatility as we work through this uncertainty. we're avoiding sectors that will be heavily impacted by trade if it goes further from here.

pharmaceuticals, china is getting a lot of press about trade. we are pretty positive on china. the u.s. need each otd it would be difficult to replace a lot of the imports we have from china. david: square two things for me. benefitedy has really since world war ii and open trade and increased international trade. these individual actions are not really making a difference in the marketplace. it is not just united states that has some issues about trade. how do you square those things? when does it become a problem? : a lot of individual

actions are hitting very localized areas like sectors and countries that are heavily involved in trade with the u.s.. it is going to become a problem if the tariffs become so high that it affects inflation. this is definitely one risk that is sitting out there. i think that would be a real issue. alix: we are having a different relationship with emf versus equity. the state equities first. -- let's take equities first. a short-term moving average goes longer. you mentioned buying opportunities. do you have to think locally in different countries versus those that have that kind of international exposure? saira: areas we like right now are latin america, quite bullish

on brazil. very good last year and earlier this year. we think there was a lot of economic leverage their. other areas we would be looking toward, india tends to be a little defensive. still a good reform story and recovery in place. china is an area of interest rethink the economy is stabilizing. it soundsheory, really smart when it comes to brazil, but it feels like they -- they no longer have an independent oil company. how do you invest in companies that aren't going to be run by the government? saira: we are pretty bullish on consumers in emerging markets. we are finding are in consumer areas because that is what drives the economy over time. we would be looking for more

interesting consumer companies around the world. david: mario parker and saira malik, thank you so much for ing with us. coming up, investors are calling for change at tesla. kern mcpherson of glass lewis joins us. colleague,e into our -- our colleagues, tom keene and jonathan ferro on bloomberg surveillance. live from new york, this is bloomberg. ♪

emma: this is bloomberg daybreak.

coming up later on bloomberg -- ets, the ceo of now to your bloomberg business flash. the been it -- the biggest maker of semiconductors for smart phones has come out with a new chip for personal computers and it is offering free wireless data for devices based on the chip. qualcomm is trying to move its mobile technology into the computing market, which is dominated by intel. one of the world's biggest candy makers is going green. it is spending a billion on sustainability and once greener practices to help drive prof -- help drive profit. the ceo of cutter airways says only a man can do his job. sydney the comment in

after becoming chairman of the international air transport association board of governors. he said his airline can only be led by a man because it is a very challenging position. he later clarified his statement in an interview with bloomberg ticky haidi lun. -- bloomberg's haidi lun. >> i was referring to one individual, not the staff in general. we have more than 33% that are female. it would be my pleasure to have . female ceo candidate that is your bloomberg business flash. david: thanks so much. elon musk takes the stage at tesla's annual shareholders meeting and this time he might have some challenges ahead of him. activist shareholders are calling for a vote against three of his board members, including his brother and james murdoch. tore is even a call for musk give up his jewel roll as -- his

dual as chairman and ceo. kern mcpherson of glass lewis joins us. welcome, good to have you here. , one of thes chances you are going to prevail on not having these people reelection -- reelected and why are you against them? prevailing,ance of i don't think is very high, considering elon musk controls a very large part of that vote. voices ofrtainly seen opposition intensifying over the past year at tesla with the number of shareholder groups calling for a vote against the nominees. cases intensifying over the past year. these are not concerns that are new to glass lewis. many ofbeen citing

thesns year-over-yea and it comes down to the independents of the board members. our consm from there not being enough of -- a high enough number of independent members, a sort of checks and balances on the management and one of the most important roles the board can play is overseeing the management and providing checks and balances on that power. when you have the ceo of the company also serving as the chair of the board, there is an inherent conflict of interest. as a practical matter, elon musk has not shown much propensity to listen to the shareholders. is it likely he is going to listen to the shareholders this time or near the future or is it more like the markets will send him a message? kern: i think it is a combination. the rise in

opposition that we have seen, these voices are becoming louder and louder. mpany is going to have to answer to its top shareholders. whether they secure a majority vote or not, they are still going to have to engage in dialogue around these issues, because i don't think the sentiment is going to go away. that are numerous factors investors look at but glass lewis in particular, our clientele are essentially looking to support the company versus short-term profit. requiresto do so, it engagement with the board and management over the long-term. they're going to have to answer in those conversations, regardless of the outcome. alix: it is not just tesla, it is also the investment in solarcity. joining us from washington is head ofndler, bloomberg

americas at new energy finance. we cannot forget that solarcity is in the mix. how much goes from tesla into solarcity? ethan: they have been repositioning the business to attract new money and new opportunities over the last year and a half. the solarcity business is built around the concept of leasing solar systems and now they are trying to sell them. that has been an interesting change for them. it has created new opportunities for them, but it has meant the volume of megawatts they are putting on roofs has been going down. alix: is tesla going to have to raise more money to sustain its solar business as well? ethan: the solar business is starting to come around. we think it will start to make money overall. the u.s. solar market, the residential market is poised to

grow. last year,t great but in the long run, it is set to grow because the cost of equipment will continue to come down. david: when tesla bought solarcity, you came out against it and thought it was a big bailout. now that they have had it for a wild, what is the drag, if any on tesla? while, what is the drag, if any on tesla? get -- kern mcpherson, are you there? has -- that it has been effectuated, is there a drag on tesla? kern: i'm not sure if i am in a position to say that will stop i can say that the acquisition of solarcity has diminished the independence of the board.

we would prefer to see entirely independent directors serving in those roles regardless of how the company's performance has been hit. it certainly has an effect on the corporate governance profile of the company. alix: if you are going to look , in reality, just -- hold tesla shares. be something behind or on the board level that starts trained -- starts changing that perspective? funds might have some concerns but they are often looking for stable investments, nonvolatile stocks that are viable for the long-term and while tesla has been an

incredible performer over the last five or 10 years, clearly there was a lot of volatility, so it is not appealing for some funds and that has made it a do not touch for some investors. alix: kern mcpherson of glass lewis and co and ethan zindler, thank you so much. next.n what i am watching bloomberg users, check out g tv . you can click on one and check it out. this is bloomberg. ♪

alix: we're going to take you to the bloomberg summit. jason kelly is taking a seat with kkr's copresident joseph bae and scott nuttall.

jason: we will go down memory lane, but i want to start in the -- sellers market? aott: on the whole, it is sellers market, in the u.s. in particular. we have been net sellers, especially in the u.s. and europe jason: joe, you are buying. where are you buying? kind of market, you have to be really disciplined with how you deploy capital. more like two dollars of exits for every dollar of investment. we are trying to take advantage of this high valuation environment. some of the more compelling

opportunities, comply is where you get the most value with firms like ours where the operational capabilities can ree value to the table. i think the other area we are spending a lot of time in terms is usingvestment existing portfolio companies as platforms for investment. internet brands like wet and deeper the an example -- like webmd would be an example. jason: who are the competitors and how fierce is it out there? scott: the competition is significant. both financial buyers and strategic buyers. you have to have an angle. our existing portfolio companies in a number of ways. we can extract synergy and i like a strategic buyer.

we are complexity and selling simplicity. some of these large corporate youeouts are completely -- have to stand on a completely new enterprise to carve out a large section of the company. that takes an a -- that takes a significant amount of resource. you have to be able to lean e others can it is in this complexity that we have been able to find value. jason: one of the overarching themes of this conference is partnership. we notably wanted you guys to kick it off because you are relatively new, but i want to take you back to 1996. two sittinglass of here on this couch. you show up at 57th street expecting what? what do you see when you get to

kkr, 22 years ago? i joined first. joseph: he joined six to two weeks -- six to eight weeks before me. -- thethe end is industry was small. it was not even referred to as an industry back then. we were the two analysts hired in new york and in those days, we did not hire anybody. we were investing, and wishing our 1993 fund. we were a small firm, focused entirely on private equity, just in the u.s.. quite a bit different than where we are, today. andffices around the world we have grown from 40 or 50 people to 1200. significant changes. jason: why did you join?

joseph: my story is more complicated than scott's. i had moved up to harvard. i was in the dorm and i got a call from a headhunter two weeks before classes started. he said kkr is looking to hire one or two analysts in new york this year. you would be crazy not to go down and meet henry. i jumped in my car and drove down, spent the day in new york and met all the partners in new york, got on a plane and met george and my partners on the west coast. it was really about the people. they were doing very interesting investments. more than the deals, it was the people you met, it was a mentor ship in private equity and i thought it was the perfect place to learn how to invest. jason: did you like each other in the beginning? scott: i remember liking you in the beginning. joseph: we spent about 20 hours

with each other everyday. scott: our offices were next to each other. we have been close friends from the beginning. jason: what was involved in being an analyst at kkr? scott: we were all generalists back in the day. 15 or so total on the investment team. in, who isity came less busy? that would -- they would take it on, all the way through ownership and managing it as a portfolio company. joseph: we have very structured investment committees now. back in 1996, it was a small partnership. yowere asked to look at a company over the weekend and monday, you talk about the company, why you like it, why you don't. days, thethose

investment committees would walk into henry's office and call george and those were your investment committees. i say that joe comes from the korean branch of the nuttall family. jason: that is something distinct and utterly unique about kkr, the sense that there is literally a blood relation between the founders. they are still there. that exactlylicate without some strange science. how do you replicate the east coast of that between the two of you -- the ethos of that between the two of you? working,e and i were our families have grown up together. we have spent most of our working lives side-by-side, both inside the office and outside.