assets. they look for cover. ben bernanke warns of a wily coyote moment. trump goes after canada on twitter as they duke it out over trade and climate change and i run. and deutsche dilemma. and stocks take a hit. daybreak.""bloomberg david westin has left me. we are ending the week with a bang. the safety of dollar-yen here down .4%. 110.00bounce above the level.

crude is getting wrapped up in the risk off feel. .4%.by we are now joined by michael mckee and lisa abramowicz. happy friday. what happened over the last 48 hours? dropt a nine basis point and then a recovery. what happened? lisa: we should be clear that people don't know. i'm not going to pretend that whate have an idea of happened. years ago there was a 76 page report that it inspired from five government regulators to understand the market structure and what happened. the result?

we don't know. it is probably benign. there are more algorithms at play here. does it have to do with emerging market assets? we don't know. it doesn't mean there is something pernicious going on. alix: but you had the selloff in brazil that picked up speed and it didn't need liquidity and you were forced to sell. is that contagion now? not really. we saw some moves. oh, volatility. [laughter] is the normal market operations that we were used to that we see again. the question is, do we see the contagion that we saw in the asian financial crisis when an emerging market country gets

into trouble, does it spread to others? we are not going to. these are idiosyncratic regulations. there is obviously an emerging market issue at the fed raises us. there is a question about what u.s. denominated debt. but look at what we are used to. i want to send you breaking news this morning. for rise its succession plan. vestberg. he will be taking the reins. verizon is down in the premarket. .5%. i want to switch to the g7 and

the drama that will unfold in the next 24 hours. a tweet --his is being so indignant and bringing thethe relationship that " relationship that the u.s. and canada had over many years and also to things but he doesn't bring up the fact that they charge us up to 300% on dairy." to happen today? how bad will it be? michael: it will be ugly. we hope they will uphold the diplomatic niceties but it will be really ugly. it was bad enough for the finance ministers but now you see the president coming up these tweets. yesterday that

the u.s. has to do something about this and it doesn't look like there is any solution in hand given the president's tweets this morning. he seems to be doubling down on what he is saying. it is astounding. there is a question about what he wants to accomplish. and he sends a pretty big message. leaving the conference early to go to north korea. it is like saying, you know what, guys? i am one food in and one foot out. to the hand.s talk he is saving face. he is going to go there because he has to as the leader of the united states but he will get out of there as soon as he can. alix: but if we have learned anything from what happened over

they areand china -- meeting him contention with contention. michael: they sort of had. justin trudeau has taken a moderate line until now and it has gotten him nowhere. has high dairy subsidies and we have high tariffs on 131% on peanuts. alix: if we talk about subsidies, let's talk about corn. here's the two day chart of deutsche bank. was a bloomberg report that said basically, they are potentially again considering monitoring -- mulling over a

commerzbankk -- a deal. i don't know how many more times i can say they are in trouble. lisa: shares are down almost 40% this year. or is deutsche bank in trouble ?n a more acute way areael: what regulators watching is whether this is systemic. manufacturingrmal company, we would say that is an issue for shareholders. our shareholders in trouble? this time, does it mean that other banks are in trouble? the consensus is that not at this point. so there are a lot of questions about how they raised shareholder value and we have the possible mergers coming up

in the news. i loved what an analyst said about the potential merger. has had ammerzbank lot of trouble. alix: it is like two drunks owns the german government 15% of you and we have to support you going forward. by aaronas struck brown saying that anyone who thinks that deutsche bank would not be bailed out by the german government is fooling themselves. but the question is, it in what form and when. alix: lisa abramowicz, great to see you. and michael mckee, i am making him stick with me for the hour so i have somebody to talk to. from verizon.news down -- lowellep

mcadam will step down. vestberg will then step in. stock is down. how the market could react to the global leaders. this is bloomberg. ♪ al leaders. this is bloomberg. ♪

>> this is "bloomberg daybreak." the biggest one of

wireless companies in the u.s.. verizon has promoted the chief technology officer, hans vestberg. mcadam has been chairman for seven years. shares of apple are lower after a report that the company has warned the supply chain there will be fewer iphones her. they have told suppliers to in the secondrop half. the report says apple is conservative when it comes to ordering parts. -- stock rose by the maximum 44%. $61 has a market value of billion. -- cranking out iphones. summithe group of seven

against today and trump is already on the defensive. he tweeted this morning "canada 300% onthe u.s. with a on daily tariff products." macron called the tariffs illegal and a mistake. and he won't sign the joint statement unless progress is made on the tariffs and justin trudeau says this is totally unacceptable. nuttall.e now is neill and michael mckee is sticking with us as well. trade risks, how do you price them in? how do you hedge it? neill: it will be a very interesting week and thinking

about the trade side, we take a view, theand in our global economy remains in the expansion phase of the business cycle, admittedly moving towards the latter stages of the business cycle. and we believe that global growth remains above trend. and we ask ourselves, what are the trade tariffs likely to do to impact that? and we see over the next couple of years that if you implement all of the tariffs that have an sect someut, and the of those will be rolled back, you are looking at gdp somewhere .2% -- 4.1%-four point 2%. possibly something similar next year. while we are not suggesting it do think noise, we there are risks around an escalation.

we think there are risks through and wefidence channel would be surprised if as a result for this weekend, we were not change in policy. looking at it from a sector basis or a company by company basis, you wouldn't be by soybean contracts going into this deal with china. is that how you deal with it now? neill: very much so. perhaps some individual stocks within sectors, the micro side, we believe those decisions to the underlying managers and there will definitely be winners and losers. -- but within aggregate, not a significant shift. had toere is what -- say, "the failure to cobble

together the unity and common purses is grossly undervalued. -- grossly underpriced by the participants.the the latest equity break above resistance will have to be -- will have to reevaluated. " anderson what you are saying about the line between trade and a company but what about sentiment? we have to step back and remember that since the beginning of 2016, we had a very positive environment in risk assets. 2017 was the outsize return. iswas above 2% and that unsustainable. we have had a time of correction since february. -- the nasdaq, the ftse

helped by weakness in the sterling -- they have all made new highs relative to january and february. we think that follows through inaccurate -- in aggregate. growth will drive profits. earnings look positive and we think markets recover. there is shorter-term noise, we have troubles in emerging markets and we think that the dispersion in macro growth. we will get there. if we go inside the bloomberg, you can see what has transpired in terms of small versus large caps. this is around the highs that we saw in the election and it feels like a continued trade play. to this we graze earlier about markets telling us that they are not really worried but we never know what's going to happen. when you look at this and you

game it out, what could go wrong? -- trump removing us from nafta? big tariffs on china, where you saved the worst case scenario, what would that be? be an that it could escalation through the confidence channel. and one of the things we have observed in the recovery has been a lack of investment. if we look at the survey in the regional fed, the pmi indices, it suggests that people's ourntions to invest remaining high. the worst case for us would be to get through the highs and you that lowersce and people's hiring and investments. but we are seeing that.

come inside the bloomberg. this is the contention side with see the sameat we kind of expectations. it seems like a shift in confidence. at the year itok starts to rise. it is cyclical. rather there any other kind of cyclical push. maybe because of the expensing pull forward a little bit of investment that they were already going to make. people are adding that on top of it. alix: michael mckee and neill nuttall will be sticking with us. we will take a look at fertility -- we would be looking at volatility. the volatility is picking up. what kind of opportunities can we see? this is bloomberg. ♪ ? this is bloomberg. ♪

alix: will crack's in emerging

markets continue to grow? investors are weighing in. >> we see strong earnings growth for em equities. better valuations. >> i think emerging markets seem to be contained to argentina and perhaps turkey. >> globalization of disinflation is spreading across in emerging markets. turkey and argentina are the exceptions. crack the most important way that you are watching -- >> it depends on where you are in the world. and what central policy will be. we know that fed rates will go higher. we think em equities could do 30% earnings growth this year. >> interest rates in the u.s. are going up. >> the whole idea of having a

global portfolio is to blend all of this together and deal with cality.lic >> i think the dollar will strengthen against the emerging markets. they will see weakness. trade weighted weakness. it will continue and i believe equities will catch up. alix: today, south africa leading that it klein -- leading the decline. a disappointing economic data traders out ofg that area. back with me now is neill nuttall and michael mckee. em equities are the bright spot? do you still stand by that call? we do. in aggregate we believe emerging-market currencies are -- are attractive.

had -- through 2016-2017 as you now we are correcting that bounce. so within the currencies in the region of 50%-20% undervalued. within that there is significant dispersion. and we would suggest that there are some countries with currencies that are less attractive and it wouldn't surprise you to hear that by various metrics you get countries like israel and south africa and turkey. have improvedns and internal balances have improved since the taper tantrum. external varices have improved. all of that in aggregate. pockets.at there are and as u.s. rates rise, we have

to remind ourselves that the gross rise in the u.s. is em currencies. they appreciate during those currencies and em markets during that time. so we think the backdrop over 12-18 months, even 36 months, and even three-five years, remains positive. valuations are positive. internal and external values have improved. the premium is widening. veryenvironment for us is attractive. michael: very quickly, is this different? we think it may be different but in a positive way. within emerging-market over the

last 5-10 years, we have seen a build of domestic demand and we think that is something that investors are under exposed to and underappreciated. alix: top picks? neill: seven asia. alix: -- neill: southern asia. neill nuttall and michael mckee. southody likes em but not america. coming up, the latest call for the 10 year turning less bullish. this is bloomberg. ♪ bullish. this is bloomberg. ♪

alix: this is "bloomberg daybreak." happy friday in the modestly risk off feel. points.by 11

it feels like an orderly selloff but thenegative -- negativity from yesterday is spreading. .6%.ax is down more disappointing news out of the eurozone with economic data. production is weaker along with france'sd manufacturing data is down as well. the german yield on bund is down. euro-dollar down. $1.17 is how we printed the dollar. the worst performing emerging-market currencies today, bringing down other currencies as well. crude off by almost .4%. let's get headlines outside the business world. backlashmp will face a over his trade policies at the

g7 summit in quebec but he won't be around for the end of the meeting. he will leave canada for singapore tomorrow were reached -- tomorrow where he will meet with kim jong-un. hours to meet 24 with european leaders. and -- vowed to support each other. they vowed to keep the iran deal alive. there is a report that anthony bourdais is dead. it reports that he committed suicide. global news, 24 hours a day. powered by our more than 2700 journalists and analysts, in more than 120 countries. i am emma chandra. another celebrity suicide this week.

enough with those headlines. a gradual rate hike has a pass -- and the possibility of raising rates -- it raises the risk. stresses have been contained to a few vulnerable countries so far, the risk and the broader pullback bears watching. we have seen that over the last week but the market expects the fed to continue with the gradual rate hiking path. hikess the expected rate in the yellow -- rate hikes. we are looking at 1.5 for next year. us now is steven major. he just came out with a note saying he is still bullish on the treasuries but they offer

less value given the federal reserve policy trajectory. still with us is neill nuttall and michael mckee. can i call you the well-known treasury bull now? i get calls all sorts of things. i'll take what i can get. our forecast is 2.3% at the end of this year. think it was september 2017 will be first set it. the monthly views, the ebb and is a greatnk there deal of value. looking at the front of the you see anywhere around 2.5 percent, you are more than covered if the fed continues to rate a long -- continues to raise along the path they say they are. i think when the fed has

finished hiking, the curve will be flatter. the consensus view is the same as the fed's view. -- ais a number in your number 23%. closer to 3%. happen and the fed will pause. bet something might happening. you are telling me there have been a few fed official comments about what is going on in emerging markets. there have been quite a few comments about the shape of the yield curve. i think financial conditions globally are tightening fast and it may not be evident in the domestic data that the fed looks up. michael: ben bernanke said something along those lines. he goes back to the cartoons of the past, talking about how we

might come to the edge of a cliff we are not expecting. here is the former fed. >> we have seen a big explosion market,size of the versus what it was in prior cycles. those are thek seeds of the next crisis? >> they could be. alix: that isn't ben bernanke. isn't.: it he compared it to a wily coyote. falling off a cliff. alix: you seem to disagree with ben bernanke and steven major. make your case. if the fed isn't looking at the right kind of metric, what do you say to that? need toe believe we focus on the level of rate is, the pace of the increase and the end of the of the

cycle. the terminal rate. and in our view, the work reduced to just that equity risk premiums are attractive. we don't believe financial conditions are as tight as some suggest. and our work suggests that a 10 year yield is where the equity is valued.m we don't think the current level is a problem. before this year, the pace was sharp. certainly in january, the move was rapid. for us, it caused a catalyst for some of the volatility we saw. theughout the hiking cycle, fed has managed to anchor long-term expectations. if you look at the two years in the five years time across the curve, the expected end rate is

around 3.2 5%-three point 5%. for us, that isn't a challenge. michael: let me bring in steven major. fair value is a term for investors. when you look at where we are with rates which have been historically so low, do we have a lot of room to run before we start to tighten conditions so that it affects economies? or have we repriced so that the oil affecte seen growth going forward? steven: the last 10 years have been an operation. but -- people bought credit. that they probably shouldn't have bought. and as we move towards the import shifts

into negative territory, we see the reverse of that. there is plenty of evidence of the regime shift happening. termte a paper about the premium earlier this week with my colleagues and we identified how actually this is just strange behavior of decoupling on some historical relationships. to me, there is no problem with , i think we are priced to where the fed thinks we're going to go. is, where did all the money go in the last 10 years? ,nd what did you credit equities, and real estate. so if you change the behavior of risk thinking, you have to be careful. a.m. andappening in the events that seem to be happening around the world, they are linked to the tightening of

policy by the fed. it isn't just about the policy the inflationout of cash. alix: a lot of people say it is about the ecb. we are now at a little over 13 months. that wind up seeing an ecb goes on its own trajectory and in june or july they make a statement about the end of qe, what does that do to the market when you have bund spreads over 250 basis points? enden: asset purchases will this year. and then the options for high-grade is there. it depends on whether the window is open. next spring or summer. whenever this starts. we think the probability of the ecb failing has gone up a lot.

been convincing they would hike and get towards a more normal level but now we think they may have missed the opportunity. next bring, do you think the inflation will be where the ecb needs it to be to justify hiking? weaker.ming data is the ecb needs everything to be lined up in the right way before they hike and i don't think they will be there. so to answer your question, i think rates stay low in europe. alix: to wrap that up, you have been negative on corporate credit. what will you wind up doing when you see the high-yield in the -- as yields have moved up -- whatould you do would you do? steven: i would rather be too

early then too late. the last month was one of the for total return of investment grade credit. yields andhift in the spread widening, we go back to neutral. we have to be sensitive to the valuation shift. your way then it makes sense to pause and take a breath. look. i think there are a lot of things happening but if you ask me, valuations are going to shift. it has been emerging markets and credit in the last month. and we have to be cautious about those markets and for that reason i want to be close to home and that is why we see bullish treasuries and yields. steven major.

neill nuttall, thank you very much. michael mckee is staying with us. deutsche bank's chairman has a potential solution. can two wrongs make a right? probably not. as you commute in, listen to jonathan ferro in new york and then pimm fox joins the conversation at 9:00. this is bloomberg. ♪ bloomberg. ♪

emma: this is "bloomberg daybreak." in the next hour, a representative from missouri, --ent wickmayer -- missouri blaine luetkemeyer. return to the wall street

beat. first step, a deutsche bank solution? a chairman says they should --ge with commerce see bank commerzbank. in iphone component orders. and the guide to philanthropy. we hear from the ceo with his way of giving back. joining us now is jason kelly. michael.o his first wall street beat. this will be crazy. [laughter] jason: it will be crazy. thisis amazing to watch saga play out. almost every day there is some deutsche bank think that we are talking about in this segment. and what is interesting about thisew speculation is that

started a number of months ago -- bought substantial stakes in both. that kicked off speculation initially. by most accounts, it just probably makes sense. at least to some people. we will see. both of these things are clearly in some level of trouble. they are very important and you probably have insight to the german economy. michael: deutsche bank has been . german champion is it raising value for shareholders or the german economy? jason: that is the key point. theeels like a case where government will have a lot to say. and will have a role in this. michael: if there is a merger,

the final product will be called deutsche bank. bet. that is a good let's turn to apple. apple has now asked buyers for a .0% cut in components stocks are down and suppliers are getting hit. my thing with apple, don't they always do this? don't they under produce the phone for the release? and then they say, oh my gosh, there is so much demand. is such a reminder of how important apple is in the broader market to investors and it tends to affect everyone's behavior on a corporate level, on a deal level. on the m&a perspective. we will see how this plays out. it is hard to bet against apple. if you look at the last

earnings, it wasn't about the iphone. it was the services that were growing. so you could see a drop in iphone sales but then again, we don't know what they will come out with in october or whatever they have the next product launch that could drive demand in a different direction. alix: services is such a small part of the business but i think that investors are paying attention to the future of services and whether they can ramp up and siphon away when he percent or 30% of revenue at the end of the day? jason: the other thing people are looking at is that they are getting closer to the $1 trillion market cap. alix: yes. again. this goes back to the idea of that apple- the role plays in the economy. michael: which is interesting on a day when we are talking about

trade wars. fox, makes the phones in china. apple is trying to build stuff in-house. we watched apple in the premarket. and you spoke to george roberts, that must have been fun? jason: it is. he started the firm 40 years ago .ith his cousin george is on the west coast. doesn't talk a lot but we did coaxed him out a little bit to talk about his philanthropy because he does have a novel approach. to findwe wanted something that if we didn't do it, it wouldn't get done. so this is pretty risky. years, atf the 21 least half, it wasn't that successful. until we got carlotta who has

taken us to the next level. so it is risky. so much of giving -- and i am all for it -- is wealthy giving to wealthy. raise nine point $5 billion and they probably could have raised more. harvard is a safe bet. they love it. so much of that is that we want to do something different. just a couple of guys not wearing ties, talking about the b. one thing he did talk about in this segment is the leather be and how the big guys give their money away and he had a little line there about how much of it is wealthy going to wealthy. to find ad was try way that is much riskier to do seed investing and ultimately make a difference -- going back to the idea of jobs. howael: did he talk about

he finds the people that he gives to? it is difficult to find somebody who can use the money effectively. of trialere is a lot and ever. they have built an organization in san francisco and he hired a woman to put it together and they are going through the country where there is rigorous screening processes. like investors. they go in and they figure out operationally. alix: they are not just throwing money at their. thank you jason kelly. michael, how are you doing? do you feel good? copper bowls are cashing in after a six-day run of gains. it was at a 4.5 year high yesterday. this is bloomberg. ♪ ♪

>> there are factors going on in the copper market. and right now, there is the demand in china. we understand and what we have seen in the second quarter is a genuine improvement on that front. continuingseen covert influence from china. and at the same time, it is also important to look at the micro side of things. china has tried to clean up the environment. , it isn't the norm surprise that we had. together, that has helped the

market. and when you are looking outside china, what you are focusing on which a trade negotiation is one of the biggest copper mines in south america. quite ahave had disruption. investors are taking the market higher on concerns. showing a chart here that the copper to gold ratio is widening out. yen, where the yen gets a bid. copper isn't paving a -- copper isn't behaving like a safe haven. will this widening out or will we top out? we have to develop the strong dollar. and this market, we didn't worry at all about that.

if i look at the dollar from china, angle, i look at i can look at [indiscernible] prices justify the gold that haven't moved much. widmer.at was michael to leave washington shortly for the g7 meeting. he will be there for 27 hours. euro looking at a live shot of air force one. we will tell you what to expect with greg valliere. this is bloomberg. ♪ retail.

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

near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. ♪ >> market spasms.

a look for cover as emerging markets note down and ben bernanke warns of a wild coyote moment in 2020. and blame canada. president trump accuses justin trudeau of being so indignant. they are set to duke it out over as presidente trump only the summit over -- early to meet with kim jong-un. the current head of new tech taking the reins after apple falls after a report that they reported fewer components. i'm alix steel. david westin amazingly took a day off. feel, but youn have to keep trading. -- .3 of 1%..3%

we are below it. what does that mean for risk-taking? the 10 year yield unchanged. it looks like if you want to buy safety, you want to go into bunds. the interesting move over the last 48 hours came from the treasury market. this is the chart of the 10 year yield and the blitz that happened late afternoon, treasury yields dropped nine basis points, and then recovered some, but now, we are all five basis points. bellore on that is lindsay , an investment strategist. good to see you. >> good to be here. alix: we worked 20,000 years ago. yesterday, what you understand that happened to treasury markets? interestingwas an

look at treasury markets. it is been up and down in the treasury and stock markets. there is a lot of anxiety out there right now. if you are one of those types of investors that is anxious, you have to be in some safe havens to ease your fears, but we ultimately think the stock market will continue to go higher as a year proceeds. alix: how do you hedge? many say it is not the time to buy yet. there is a lot of short positions in the vix. how do go about doing that? lindsey: that is a very good question and one that a lot of investors have grappled with recently. your typical high yield inspectors have not done well. you have staples and telecom being the worst performing sectors in the s&p 500 index. thes are going to rise in is where you will benefit -- to rise and that is where you will benefit the most. , stickingsay bell

with me. the backdrop to the risk off is a group seven summit. the president on the defensive tweeting, the canada charges a 270% on tariffs -- on dairy tariffs. did they tell you that? negatively to his steel and a little month tariffs -- to his steel and aluminum targets. he said he won't sign a joint statement unless progress is made. justin trudeau says it is unacceptable and theresa may's government said they are deeply disappointed. joining us is a chief global strategist. greg, talk about that special friendship from trump and his allies. what would a win be for president trump? >> i don't think there will be.

if he meets with them and they smile, that could be a win. it will be very icy and very chilly. that is why he is leaving early. he does not want to be there for the final photo op because they will be grim faced. alix: the rhetoric from last nato was all g20 about the conflict between president trump's global leaders. of him and aoto much am alone. this is not a new story. why is it heightened now? one, an awful lot of republicans in the city are upset, especially republicans from the foreign belt. about tariffs. a lot of the agricultural community and republicans are worried. secondly, it is something i consider troubling, is a level of personal animosity we have seen in tweets from trump over

the last few days, especially toward macron and trudeau. that personal animosity is a new angle in my opinion. alix: so, how would something like that wind up playing out? what is interesting to me is that china and the u.s., trump comes full force to china and they wind up sitting in negotiating some yet you are taking a different stance . why don't they see what china is doing and say we will try that step? >> i think they may eventually. as far as the impact on the u.s., it will be modest. .3 ofit will shave .2 or gdp, but the bigger impact is in western europe. eventually, they may cry uncle and may compromise, but we are nowhere close to that now. alix: what would you think would make them do that? >> signs that their economies are sinking, signs that business leaders in western europe cannot

make any long-term plans because they worry about tariffs. that is it -- that is an angle that is in the u.s.. i talked to business leaders who were euphoric last year over tax cuts, rig latoya reform. all of a sudden, they cannot plan as easily. the center level has diminished because of the tariff talk that will persist. alix: that is a great point. theywe talk to analysts, think everything is going to be ok unless we see the actual hard data. but expectations have been rolling over -- but expectations have been rolling over. had you see ceos making business decisions? >> they will be hesitant until they know for sure. and what other countries like doesny will do if this degenerate into an all-out trade war. i guess one of the benefits

might be the fact that when there is this type of uncertainty, investors look for a safe heaven. haven foren -- a safe me is treasuries. alix: great point. greg, he is leaving the g7 going to singapore to meet with north korean leader. what is your expectation for that meeting and what is a win? stylistically,l, it will be pretty good, smiles, handshakes, but substantively, i am not expecting very much. [laughter] alix: ok. fair enough. thank you very much a great to see you. with me is lindsay bell. . wanted so you you can see the depth. the bottom panel is trade tension. you can see it spiking. many say it does not effected until it effects it. but the broad market sentiment

that is under price in terms of risk, how do you see it? lindsey: i think there is a little bit of fatigue with this trade talk and the uncertainty that surrounds it, so i think you do see the market move swiftly. at the beginning of this week, we were fine. mnuchin came back from preparatory meetings from the g7 and was very isolated, by himself, and there was a message about the g7 that they will not stand for these tariffs and not happy about it. they were in collusion on that statement, but the market moved higher. now at the end of the week, trump is cutting his short -- cutting his trip short. and then the concerns are now back out there in the volatility has returned. if we are focused on the fundamentals in the u.s., they are strong, but as soon as we look to trade, policy, and other parts of the world, that is where the concern comes in. small caps have been strong.

we thought the small caps would be a better place, but not only because of trump's protectionism, but also because some of the other things, when you are thinking about the valuations of the small caps versus the large caps, the small caps run so much. alix: maybe they'll will be sticking with us -- lindsey bell will be sticking with us. depart forrump will the g7 summit. we are still waiting for president trump to depart for quebec. first it was argentina and then came turkey and brazil, and now it is south africa. emerging markets are mailing. more on that next. this is bloomberg. ♪ ♪

♪ >> this is bloomberg daybreak. verizon has in the month of speculation about who will be its next ceo. the wireless company has promoted its chief technology officer who is a former ceo of erickson who will replace the former august 1. he will remain executive chairman through the end of the year. shares of apple are lower today. there is a report that the company will have fewer iphones this year. apple told suppliers to expect a 20% drop for films debuting in the second half. the report says apple is conservative when it comes to ordering parts. numeral, shares of apple's

shanghai,ebuted in rising above 44%. companye largest tech in china. that is your bloomberg business flash. alix: thank you. emerging markets -- cracks in emerging markets continue to grow and a big part is volatility in the emergency -- in the emerging markets fx. this is the blue line that has spiked up. the white line is g7 volatility. if you are able in emerging markets -- if you are able -- if you are a ball of, it creates uncertainty. olivia, you are a bull on emerging markets. where? >> the five pillars of the end

still a good. maybe there is wavering elements, but it looks pretty good. the five pillars are valuation, growth, economic growth as well as earnings growth, the fixed income and currency markets, and flows. on balance, things are looking pretty good. valuations to say are still looking quite reasonable, so versus developed market, they are trading at a 25% discount and of traded up to par in history. under those conditions, there has been very strong earnings growth. we are not quite there yet. therefore, there is still room to grow for emerging markets for valuations. alix: i understand the valuation standpoint, but i know you talked about earnings. as you take a look at earnings revisions for em and developed

markets, it has been held up by the s&p, not necessarily overall earnings, so what you make of that? --what do you make of that? >> the balance sheets look strong. one concern i have is that economic growth is, there is some signs it is starting to dip a little bit. it is still strong, but not a strong as the last 18 months. if we look at recent trade flow data, there was a big drop in march. probably and overshoot relative to --relative what they to bounce back. but some of those issues, we should continue to watch carefully. alix: specifically, olivia, what areas do you like? brazil is on sale if you want to get it on sale. [laughter] >> exactly. asia is where we have our focus right now and very little exposure to latin america. in asia, we got some of the energy plays. also in russia, russia is

keeping good cash flow generation. there is resilience there. and energy prices are strong. hurte i.t. sector, being recently, but we like the semi conductors and the hardware names. definitely not the bad stocks. their overvalued significantly -- there significantly. and in india, we have shares in the software play. do you think, how emergency market should be structured in your portfolio? lindsey: we are international in general. when you look at emerging markets, if you are comfortable with risk, you saw the volatility in the beginning, it shows you that is significant risk. we are in an environment where the dollar is moving higher very quickly. those are some of the concerns regarding emerging markets, but

we think you should have a little bit of exposure. alix: olivia says a little bit of exposure. there seems to be a risk as the dollar appreciate somewhat if we had more rate hikes, you will have central banks and emerging markets focused on inflation and not growth and that will come to pass and be a fertile. what you think about that? >> asia is somewhat protected from that exposure. and latin america as we have seen is aware of that exposure and that it is quite intense. thankfully, there are smaller parts of the emerging markets story, but what is interesting is the flows and the general exposure of a discretionary investor in emerging markets. so currently, people in aggregate are only 6% exposed in emerging markets. and the world is around 12%. people have been buying emerging markets, but still i think they are under exposed.

there is for the room to grow. alix: olivia and lindsey, thank you both very much. coming up, more on the report sending apple's shares lower. this is bloomberg. ♪ ♪

♪ alix: changes at the top of verizon in -- named a new ceo. effectiveplace and be august 1. shares of verizon have been lower in premarket. joining us is clayton harrison who covers media for bloomberg news. was this a surprise? >> not really. they had been preparing the market for this for a while and out. series of ceos coming we knew this was coming. there had been in narrowing down process and a number of executives left because they were no longer considered in the running and it would come down

those two. alix: can we take anything away from the direction of who they chose? fromon: hans vestberg came -- he has a background in technology. a lot of people are trying to figure out if they will do like at&t and by media company. hans vestberg is a network guy. i think the money is on him, focusing on getting verizon to buy ge, and improving the network quality and staying ahead of the game, not so much on trying to become the next disney or time warner. but he could surprise us. alix: i like that you said that especially with what we saw yesterday. it feels like that is their game . what is it going to be like to develop that in the u.s.? where with the competitors matchup? clayton: it is a tough game because in the u.s., there have

been restrictions on companies like while way supplying equipment. it has to rely on the european manufacturers. there has been a lot of verizon -- there has been a lot of pressure on verizon to maintain that. very good pricing on network equipment, so that will be one of the challenges hans vestberg will have to face, continue to keep costs down at the expense is network at a rapid pace. alix: interesting. thank you for being here. we are also keeping and i own apple. shares are falling as the tech giant more did supply chain of a 20% drop in iphone component orders. strategys is a chief officer and a longtime apple bull.

dan, how did you take these headlines? muchi would not be too into it. if we look at last quarter, i mean the debt was exaggerated. about september, guidance. i would not read too much into this. also the june quarter, this background noise, broader story going on. trillion market cap is going to hit in the next couple of weeks. everyone was waiting for the super cycle that never happened. we get the product refresh in the fall. what will deliver? dan: ultimately as we get into september, october, to see the 350 million iphones in an upgrade and what comes to the to nine months.

it is all about china. china is front and center where 6 million iphones are up for an upgrade opportunity. they are calling it 70% successful in those numbers. drivesely, that really us over this $1 trillion market cap. it feels reasonable and we think this is the start of this next cycle with software and services being a big component that we 2025.it's $50 billion by alix: i know you mentioned the $1 trillion mark. talking about services, how big of a business can services be until we stop paying attention to these headlines about component supply chains? dan: you know, apple is going to be an iphone story. there is no doubt about it.

the reason software services is margins,ant, it is the it is the growth opportunity. it is the second wave of the growth stool. part of the valuations that we have seen is a re-rating because of the software services. i think you will see apple becoming more focused on that to really focus on putting more of a fence around the software/services side, which will be clean -- which will be key. this will be part of the next strategy that we will see. alix: i want to get your broader -- onn the upper former the out performers. do you feel that tech can hold onto the leadership that it has shown apple and in the market? dan: we do.

we do think you are in the sixth inning of this kind of growth cycle. you have seen some broader, you know, success on the telco side with black cloud and the qualcomm side. -- we, netflix, facebook see it recovering. i think numbers will go higher the second half of the year. this is a green light to own tech. ultimately, the past few weeks speak to that. apple is a knee-jerk reaction here. alix: dan ives, thank you very much. coming up, we will speak to a congressman of missouri on trade in banking. this is bloomberg. ♪ this is bloomberg. ♪

♪ alix: this is bloomberg daybreak. i'm alix steel. you made it to friday, but there is a lot of trading to be done. it is a risk off feel, but it down justrly with s&p

six. german industrial production missed estimates, great quote from our traders says, there is no reason that the g7 hit so low it is unclear how markets will take whatever they come out with. in the fx and bond market, it is a buy the dollar and buy the bunds story, but off the lows of the session. the euro getting hit just a touch. the dollar is stronger. emerging markets across the board are weaker, weaker, weaker. that is the south african rand lower. again, i say it feels orderly. you want to say panic, but it isn't. let's get an update on the first word news. >> celebrity chef and travel host anthony board gain has

died. he killed himself and a hotel room in france. he was working on an episode of his cnn travel show. he was a chef in new york. and his memoir launched his career in television. he was 61. in other news, president trump doesn't appear concerned about being unprepared for next week's summit in singapore with kim jong-un. the president spoke before leaving for the g7 summit in quebec. he says russia should be allowed back into the group. in beijing, china's president president agreed to support each other on key issues. vowed to keep the iran deal allies. chandra.

alix: thank you so much. i want to go to president trump speaking moments ago before he aborted marine want to air force one. pres. trump: we will see what the report says. it just got announced coming out onto 14, that will be, maybe a nice birthday president, who knows. bloomberg.co[indiscernible] pres. trump: we are going to do with the unfair trade practices. if you see what canada, mexico some of european union have been doing to us for many, many decades, we have to change and they understand it will happen. >> will you do is a form an agreement without you? pres. trump: we will do very well. if we are unable to make a deal, we will terminate that and get a better deal. if you are unable to make a deal, we will be better off. by now, we are not going to live with the deals the way they are. european union, theresa treats

us very unfairly, mexico unfairly. with that being said, we will easily make a deal. >> were you serious about the tariffs? pres. trump: i said i was preparing all my life. i always believe in preparation. you know, these one week preparations, they don't work. just ask hillary at what happened to her in the debate. i have been preparing for this all my life. and frankly, it is just fake news. peter, a little bit longer the clip, you would see, i have been preparing all my life. i said that, but the news doesn't pick that up because it is fake news. [indiscernible] pres. trump: it is very interesting that they cost a leaker -- that they can't a leaker -- that they caught a leaker.

it happened last night and i'm getting information on it now. it could be a terrific thing. i believe strongly in freedom of the press. i am a big, big believer of freedom of the present, but i am also a believer in classified information. it has remain classified, and that includes james comey and his band of thieves to leak classified information all over the place. i am a very big believer in freedom of the press, but i am also a believer that you cannot leak classified information. i think it is very said. i want to extend to his family, my heartfelt condolences. that was shocking when i woke up this morning. anthony bourdfain is dead and i enjoyed the show. i willquite a character, say, but i want to extend my condolences. and also, to the family of kate spade.

[indiscernible] pres. trump: maybe. you can call it anything you want. it doesn't matter. it doesn't matter what you call it. it used to be the g8. and now russia is not in it. now, i love our country. i have been russia's worst nightmare. if hillary got into my think putin was going, man, i wish hillary won because you see what i do, but with that being said, russia should be in this meeting. why are we having a meeting without russia being in the meeting? and i would recommend, and it is up to them, but russia should be in the meeting. they should be a part of it. you know, whether you like it or not, and it may not be politically correct, but we have a world to run. used to beg7, which the g8, they threw russia out. they should let russia come back

in because we should have russia at the negotiating table. [indiscernible] pres. trump: what? say it? [indiscernible] pres. trump: i may leave a little bit early. it depends on the timing, but i may leave a little bit early. and it depends on what happens here. look, all of these countries have been taking advantage of the united states on trade. you see were canada charges our dairy farmers 270% tariffs. we don't charge them, or if we do, it is a tiny percentage. so, we have to straighten it out. we have massive trade deficits with almost every country. we will straighten that out, and i will tell you what, it is what i do. it won't even be hard. in the end, we will all get along, but they understand. and they are trying to act like, well, we fought with you in the

wars, but they don't mention the fact that they have trade barriers against our farmers. they don't mention the fact that they are charging almost 300% tariffs. when it all things up, we will all be in love again. [indiscernible] pres. trump: there will be more pardons. i thought alice yesterday was beautiful. wasought jack johnson who recommended by sylvester stallone and great boxes, i thought jack johnson was a great one. i am thinking about somebody who you all know very well, and he went through a lot, and he wasn't very popular then. and he was sent very popular then. i am not thinking about oj. only you could say oj. look, he was not very popular then. is-- certainly, his memory popular now. i am picking about muhammad ali. i am thinking about that very

seriously, as for some others, and some folks that have sentences that are unfair, but i'm picking about muhammad ali. in fact, we are doing recommendations right now on muhammad ali. what, peter? [indiscernible] pres. trump: no, no. i am not above the law. i never what anybody to be above the law, but the pardons are a very positive thing for a president. you can see the way i am using them, and yes, i have an absolute right to pardon myself, but i don't have to do because i did not do anything wrong, and everybody knows it. there has been no collusion. there has been no obstruction. it is all a made-up fantasy, a witchhunt. no collusion, no structure, no nothing. now, the democrats have had massive collusion, massive obstruction, and they should be

investigated. we will see what happens. yeah? [indiscernible] pres. trump: i haven't even thought about it. i haven't even thought about any of it. it is far too early to be thinking about that. [indiscernible] pres. trump: they have not been convicted of anything. there is nothing to pardon. it is far too early to be thinking about it. [indiscernible] scott pruitt is doing a great job within the epa. we are setting records. he is being attacked very viciously by the press. i am not saying he is blameless, but we will see what happens. [indiscernible] pres. trump: that is what i want to do. alix: president trump talking to the press before he boarded marine one on his way to air ince one at base andrews order to make his way to quebec for the g7 meeting.

some of the headlines, he said russia should be in the g8 and not letting up on the g7 at all. and coming strongly on canada as well as europe. it will be a very contentious 24 hours in the back. joining us from washington is congressman blame -- luetkemeyer -- blaine luetkemeyer. thank you for being patient with us. i want to kick off entree because missouri is the seventh largest producer of soybean in the country. you have exposure to dairy and beef. what do you need to see accomplished at the g7? blaine: i think the president needs to continue to press hard to be able to get some fairness in the negotiations to measure it is a level playing field. we have a problem with dairy. there is a problem with her pork sales -- it is a problem with our pork sales to canada.

in china, they put additional cost on soy and corn. this will play out over the next several months and it will be a two step forward and one day back -- it will be a two steps forward and one step back. but the president's goal is to level the playing field so our products can be sold on a level playing field with the rest of the countries we are dealing with, and to help our produces to compete. that is what is going on. in canada in particular, i know i saw a minister trudeau the other day on tv, sort of pontificating piously about some of the steal tariffs, but they will not talk about the dairy and lumbar problems we have in the port problems. he was very selected in his comments. friends,they are our they have not been for me when it comes to trade. alix: one last question on this. when you have mexico imposing a

25% tariff on cheese, and you have a potential 25% tariff on pork, that is going to effect your constituents. have you been having pushback from them on being more conciliatory so we don't get those kind of tariffs? alix: -- blaine: that's the honest. pres. trump: is a business guy -- blaine: let's be honest, president trump is a business guy and he understands it is a process. i am not sure i agree with his process, but it is very effective for himself and his companies, and he is using that same process to negotiate the same things. my people back home, they are concerned, but they understand the long-range goal of what they want to achieve. they understand there may be short-term volatility in short-term pain, but long-term is what they see. they see a level playing field and the fundamentals so that long-term, they will be much better off, and they are all supporting the president. i have had little push back from the standpoint of the producers

and the associations. they say, let's watch what is going on, but we like what the president is doing. alix: let's move to your role in your committee. what is the final shape of two reforms that were proposed in early april as investors want to look for clarity on the biting restraints of capital for the largest banks. what counts for capital? there are those reforms right now? obviously, we're still working on that. i have written a letter to the treasury department with regards to leverage ratio. we are trying to make sure there's adequate capital as well as the freedom and flexibility for the bank to do their job, which is invest in communities by manipulating their balance sheets to be able to maximize their ability to do that. and so, we got a bill that we passed and we will see how far it gets. it is something we need to be watching for because i

understand there is a difference of opinion in regards to capital versus liquidity. but i think there is no reason you cannot have a growth capitalized bank and illiquid bank to do that job. and it is a matter of where you draw that line. we are working on it. i really like the comptroller and the feds' approach on that. we are getting comments back. we will come up with something really good. alix: congress just passed a bill. you had a bill that would have heard banks like a pnc coming u.s. bank and capital one. they want to see that transpire. do you anticipate pushing this for this year? blaine: no, probably not. .t is a situation you raise the bar and set a new threshold and raise the bar again in the next session.

we got the bar as high as it can go this session, and in the next session, we will try something else. this particular approach is quite proper. ae federal reserve has financial institution score with a look at the risk of these financial institutions based on five separate criteria. we are not reinventing the wheel and coming up with something out of the air. this is a process already in place and recognized by the folks who do the global processes. apply now to our own banks only makes sense to find out which ones are important and which ones are not. by the same token, when you look at the federal reserve scores, it is obvious which ones are the risky ones, and the ones that are not problems. the banks that you mention fall under the categories that are not the problem. at some point, we will get this resolved, but it is a great step forward. we are looking forward to looking at this next year. alix: thank you so much for your

time. we have breaking news. the sterling is moving up. cable rate is dropping. you have the chief european union negotiating that theresa on the hardal border on ireland cannot apply to the whole u.k., rejecting a pivotal element of that proposal to be excepted. you also question -- he also questioned other elements of the proposal. he welcomed some proposal calling for pragmatism, but overall, the continued lack of momentum in the brexit talks is leading the panel lower. we have 133 now. turning to european banks, you have deutsche bank struggling to find a solution, but the chairman may have the answer merging with commerce banks. we are joined by matt miller live in frankfurt. give us some perspective on how these talks may or may not be? chairmanl, the

definitely held talks with stakeholders come and talk to shareholders at deutsche bank. as well as officials on the german government about this idea to merge deutsche bank with commerce bank. the two banks are not talking to one another, and there is a possibility -- and the possibility of a merger is a long way off, so this is not something that will happen right away, and there is a number of reasons why you cannot happen right now. it is not in the interest of deutsche bank shareholders right now, but maybe a part of the bank's future because this is an over banked country and the two could save a lot of money if they combined their resources. there are so many redundancies if you put them together that were caused a large amount of job losses. plus, the fact that deutsche bank shares are at a record low. i mean, they are priced at 0.3 right now, and shareholders are

concerned that that would give away too much undiscovered shares. alix: what would the government's role be? they would have to approve it. they have a huge say. not only because of the commerce bankshares, but also because labor unions, which obviously a lot of times operate very closely with the government, are very prevalent on both boards, deutsche bank and commerzbank because of the way german boards are made up. this kind of merger would result in such a large amount of job losses, deutsche bank already trying to get through job cuts this year, that it would be a huge problem if it happened now. however, at a time where germany's unemployment rate is at a postwar low, the time to take job losses is to do it when economy looks like the way it is now. since he has been chairman of

deutsche bank, they have gone through at least three ceos, and the shares have dropped one all-time low. they continue to have to raise capital. he has got to try something, and this is just one of the remaining ideas that they have not attempted yet. alix: thank you so much, matt miller joining us from frankfurt. banks in europe are still underperforming. u.s. banks have gotten a lift due to regulations. jason kelly spoke excessively to george roberts, cofounder, who told him things are acting responsibly. >> i don't see any credit bubbles out there. the banks are all acting pretty responsibly. and need to have a job to get a mortgage today. angstof the financial that we have had in the past have been created by the real estate group, the bubbles in real estate. i think earnings will be pretty strong. u.s. companies, not just the

u.s., but in our portfolio, europe is going faster than the u.s. of there is a lot uncertainty, a lot of noise in the world. that is always going to be the case in the global economy we have, but the underlying fundamentals are pretty good. alix: joining me now is jason kelly, editor and bureau chief. you talked a lot about the turmoil. in reality, that is not what investors are talking about. jason: sitting with george roberts, rbc, they have been doing that for years and investing in companies a lot -- and companies all over the world. they have a lot of insight into how ceos feel and how global investors field, and it feels like the markets are reflecting exactly what you're saying, you know, that you have president a veryoing to quebec for

contentious meeting, and you have two banks in europe trying to figure out if they are each other's lifelines. there are still investments out there, profits are growing, earnings look good, and so, it feels ok. alix: it feels ok. different kelly, thanks so much -- jason kelly, thanks so much. 10 year yield dipping. we have now -- we have yield down 10 basis points. more than i am watching next. this is bloomberg. ♪ t. this is bloomberg. ♪

♪ alix: what i am watching issue is treasuries and the big central bank week ahead. it is a big week next week from the fed to the ecb and the boj. i want to point out what happened in the last 24 hours to 10 year treasuries. take a look at the moment over the past two days. you see it moved lower down nine basis points, but we are down by just four basis points over the

last two days. rate strategist. what did you make of that move yesterday? >> definitely risk off. there was a lot of moment there. that were a lot of stops seem to be hit, especially in the futures' market. you look at options on futures and you saw a very big spike in the early afternoon. i think that really helped to set the tone for this week are yieldser emi and push lower. alix: it wasn't just the 10 year. you saw breakevens winding up lower. liquidity is really in the market. how does that set us up for next week? >> next week, we have some treasury auctions early in the week and they will be good indicators, are we pricing at the right level, or will we see slightly higher yields? we have a 10 year auction. the fed meeting on wednesday is

midweek when normally you get that 10 year auction, for the treasury department moved it. and then be have the fed. that will be one of the bigger stories. are they going to be continuing to be hawkish, and what will that mean the treasury market in general? alix: i am interested in the tension between the fed and the ecb. morgan stanley is going short the dollar, but the ecb could have a bigger impact in the overall market. take a look at the estimated hike. we are looking at 13. what is the effect the ecb could have on the market and how do you deal with it? >> i think that is one of the reasons why global yield will remain low. had of the angst we have going on in italy in the market means the ecb will continue to be more cautious. that will have ramifications to various markets. fx might be a most impacted by that. whereas treasuries could just wind up against think in this

range. let's call it to 75 to 315. spread isthe bund what i'm going to be watching. what will be the play? >> that could -- especially if the ecb is somewhat dovish, that could get wider. out towards some of the whitest levels we have seen. alix: thank you so much for setting us up for next week. it will be a very, very busy week. coming up on bloomberg markets, we will answer with a breakdown in international diplomacy is enough to derail global growth. that does it for "bloomberg daybreak." this is bloomberg.

jonathan: this is the countdown to the open, 30 minutes until the start of trading.

jonathan: low expectations ahead of the g7, united states and allies lasting out at each other before it even gets started. foreign-exchange is beginning to build appeals stepping up defenses without much success. considering an old solution of one more time. deutsche bank's chairman, they are about to extend friday. it's a little bit negative to end the week due to the s&p 500 futures. a stronger dollar story. treasuries are off just a little bit. one basis on the tenure. a war of words between president donald trump and u.s. allies intensifying ahead of the g7. investors are weighing in on what the trade sanctions could mean for markets. >>