>> the context for the discussions is radically different than ever before. president trump and kim jong-un prepared to move for a historic face-to-face and will have the first minute alone to size each other up. backstabbing. an abrupt180 an -- 180. rate decisions within 24 hours of each other. the place the whole world is focused on right now is singapore. i am david westin with alix steel. this week's packed for alix: it is. you did work on singapore.

he is pretty nerdy and i made in a good week. -- this week is packed. -- alix: it is. david: the number three financial cter and number three in per capita gdp. malaysia kicked them out in 1965 d almost did not exist. a major force in the world. alix: see? there you go. the markets is a lot more simple. a very big week. a position is taken and features pretty much laid. they euros-dollar is trying to eke out a gain. the mexican peso is struggling. the treasury market is selling of the back end. of one basis point. over $190 billion coming on from t-bills and regular deals. more on that. crude is up 1%. apparently russia was pumping more this month above their

limit of what the supposed to do ahead of a soccer match, world cup. david: i am surprised about that. you think putin will talk about it? alix: turning to this start mmit between president trump and kim jong-un are set to talk. julia is life with the latest. -- is life been with the latest. the heat has been turned up after we had the remarks from mike pompeo saying they want to see complete, verifiable and irreversible denuclearization from the korean peninsula or the deal is off. they say sanctions will remain a get worse for north korea. a lot at stake for kim jong-un. this is a couple of days after president trump said he thinks he will know within a minute if kim is serious about giving up his weapons. is from thesaid he

optimistic of a good outcome from these talks. hours, 9:00 a.m. local time and we are starting asget relief from the heat we had in the heat turned up from mike pompeo. the leaders will meet on the island, which is the singaporean's playground where people go for the weekend with universal studios. they are meeting at the very famous cup hello hotel. we understand president trump and kim jong-un will have a handshake before they go behind closed doors and how the talks albeit with a translator. a lot at stake for north korea. here in singapore, you would not know anything is going on. people are going about their daily duties. david: that is juliette saly from singapore. heard that it is

official that kkr will buy the health care -- envision health care. fripp what it means for private equity and the kind of money that will get put to work. getting envision. it is about $10 billion. alix: a huge deal. will it to be the precursor of bigger deals going forward? buying -- ittone was mortars. it was a huge a deal. it was the start of the megadeals. to bloomberg first take. we are joined by a former trader. and michael mckee. i love that title. michael does not have as

interesting a title. to stay on this is summit. back to singapore. the expectations for both sides? it is notor realists, going toduce a lot of bug good pictures. if they continue talking and bring that the talks to level in which something can be done, it is good news. if they walk out, it will be bad news for the world and the markets. it is very unpredictable. the president has admitted, they will not reach a deal in a day to denuclearize the korean peninsula. a very complicated issue and difficult. maybe that the low retention. david: it seems like the president is setting up the world to be happily surprised. going into g7, negative, negative. into was looking to this

the g7 right from the start. how this turns out with trump' demeanor, anybody can guess but this is a huge win if he can pull it off. as a closer, this is the deal you want to close. it goes on the front page. manare set up for "times" of the year if you pull off a deal like this which has never been approached. >> i suspect the success will be narrowly defined, if you do not fall apart. that will be good enough. we have not negotiating with the north koreans before. if we keep it going, it will look good. it may eventually fall apart. david: you want to keep the deal going and not let the allies off the hook. we do not have data sanctions anymore. michael: does he imposed sanctions on china? the story out of beijing is that

chinese is not happy with north korea is they may be trying to use the u.s. as a counterbalance. dave: they you -- president trump is coming into the meeting out of the deal out of quebec that went sideways. justin trudeau took to the airwaves. justin trudeau gave a press conference and said we are not going to put a with the tariffs and the president put out a tweet week. here is what peter navarro had to say. >> there's a special place in thatfor any for later deals and battered diplomacy with donald j. trump and tries to staff him in the back. that is what bad-faith justin trudeau did. david: the markets fx reacted right away.

the u.s. dollar climbed against the canadian dollar. like theit looks president may be getting ready to do something with a nafta. this was throwing their toys out. alix: how old are you guys right now? ofhael: you saw the photo angela merkel staring him down. all reporters is inside of the meeting, it was not pretty. men are tryings to defend themselves for it justin trudeau did not said before. the president trying to deflect attention away from his own reforms. -- his own performance. the other six cultures said we believe justin trudeau. you worked on trying to price in political risk and that do not work. you have to price it out. what to do you do as an investor? vince: the biggest losers will be em.

the countries not represented. any time you see this kind of political risk, money flows out of the risk economies which are the emerging markets as opposed to 10 yearsgo where they had nice, big surpluses. there is either the potential and not a lot of backing. seeill be interesting to what we see continued pressure on countries like brazil and the mexican peso and the canadian dollar which of trudeau. alix: and something else is central banks. decision from arson -- from argentina and the fed. we are expecting a hike from the fed and news from the ecb. which will wind up being more important? the ecb if they end up

following. hike inthat fed will june. the ecb, a question on when they will announce on wednesday are ending the qe buying power and the leaks over the last couple of days have been going into the week they will do it at this meeting. that sets in motion of questions of when do they raise rates and shrinking their balance sheet? it could have a big difference. david: i am sure you are right for you why are you right? we know they had to do something before december. -- i am sure you are right. -- why are you right? doesn't the market expected that? michael: when the united states started the dams sheet reduction and raising rates on a normal pattern. it means we are in a different regime and a different era and

the eurozone will be joining. -- started balance sheet reduction in raising rates on a normal pattern. andd: vince cignarella michael mckee, thank you for being here. re on the market action and ahead of the summit between president trump a kim jong-un a. we will discuss it with megan greene and neil dwane. this is bloomberg. ♪

emma: i have your business flash. has agreed to buy envision

health care in cash including debt, it is valued and almost $10 billion. ision is a provider of physician services to hospitals. hsbc unveiled a new strategy to up.growth in technology the british bank plans on keeping the dividend at current levels and will speed up the pivot to asia. the new ceo said after restructuring it is time for hsbc to get into growth mode. in durability problems are getting worse at rolls-royce group it is found new issues that will require extra repair issues of the new turbines. the images are used on the bowling seven it is -- boeing 787. alix: a short consistence at the g7 fractured after president trump and justin trudeau came to blows.

justin trudeau said he would move for with retaliatory actions on the united states. >> i made it clear to the president, it is not something we relish doing but something we will absolutely do. canadians, we're polite and reasonable, but we will not be pushed around. was quickident trump to react on twitter and said -- joining us now from berlin is chiefgreene, manulife economist. where does this lead nafta talks? megan greene: i think the nafta talks aren't kicked into the grass until 2019 after canadian provincial elections and a u.s. midterm elections. i think they are pretty much done for now and will be picked up after these important

elections take place. alix: what do you make over the weekend? it felt like it would be more conciliatory. feels like we are extending olive branches and mrs. merkel saying maybe mr. trump had a correct stance on defense. what did you make of it? then greene: i think germans are terrified the u.s. auto that would hurt the german economy and the car lobby is pretty strong in germany. i think that is partly in reaction to that. i think the g7 meeting was another data point and how incredibly isolated the u.s. has g7ome, after the back of the economy ministers meeting in which the u.s. was isolated. the u.s. both alone for the first time ever. g7 communiques really hold anyway. important they are sort of a common

denominator in terms of what everybody can agree to but it is more symbolic. the u.s. is on its own. given how many geopolitical risks are out there, it is worrisome. alix: also joining us is neil globalallianz strategist. you heard about the geopolitical risks and this is tracking risk appetite. it is moving higher. how do you hedge any of the risk? do you hear me? looks like we do not quite have neil. appetite risk is up in a political summit. david: one question is what the g7 experience means for president trump as he meets with kim jong-un. this was tweeted yesterday --

neil, i think we are good with you now. how does this affect the possible summit in discussions between kim jong-un and president trump? the factual thought he had a dealer walked away. neil dwane: we know the south koreans do not want war. we have north korea talking courtesy of some of the policies we have seen president trump has favored to china. we have to get hope we have positive mom in further moments in singapore tomorrow. i think it is part of a journey and a first step. we probably should have expectations too high. david: an agreement to keep meeting? neil dwane: i think so. i think it is good to talk.

would like to see more investment from south korea into ofth korea and lessen threats. anything that allows president trump to say we are not under threat is fine for him. to the earlier question, i think it's important to see the factors. we are a long way from seeing trade policy changing and the u.s. we are hearing a lot of retaliation. i think the markets will become more concerned when retaliation is changing policy. agree?egan, do you what kind of risk does it present for you in the markets? i think a lot of investors are looking straight through the trade skirmishes. i think they are set to get worse. that's at the only direction they are probably going. what has been threatened, even retaliatory measures and it could -- in not aic terms, they are

game changer for global growth, u.s. growth or chinese growth. how will this escalate? will it escalate beyond trade? isticularly with china, it an issue. david: we are talking about the and singapore. we are not talking about china which is the big issue. how does it read at this the u.s.-china deal? : clearly, and $800 billion problem. the u.s. consumer buys and relies too much on goods made in china, including our oh iphones and other pieces of technology. i think it is a question of timing. and the bigjing issue from the chinese perspective was the shutting

down of ct. anything the u.s. does is a and tooncern to china the asian economy which is part of the same supply chain. david: megan greene of manulife willeil dwane of allianz stay with us. how many cars are made in the u.s.? how the trade dispute may affect the auto industry. that is next. this is bloomberg. ♪

david: one of the thing that triggered the breakdown at the g7 was close. president trump said he would impose tariffs. -- was autos. , it is complicated given the supply patterns across borders. why is it automobile and w could he do potentially to the auto companies? : i think autos are

focused on as far as the nafta agreement. it has to do with origins rules. and the complicated u.s. has unreasonable demands on them. there was an avenue of the mexico and canada to incur 2.5% penalty on autos which is not ideal but they could suck it up and deal. implementing 25% tariffs on autos is a game changer and closes off that avenue for canada and mexico. it was a way to strong-arm canada and mexico into an agreement on the rules of origins issue. it is extended, of course, to europe. trump has tweeted about germany, in particular. i think germany is worried about tariffs imposed on german cars. is underhe government pressure from the auto lobby to avoided. david: one issue is a nafta and

also expanded in germany is nervous. to what extent does the action of by foreign automakers to move them?plants protected we have auto plants from bmw and mercedes and toyota in the united states. megan greene: that certainly helps but not all the production is done domestically and the u.s. for anything coming from abroad, there will be a tariff if it is imposed. i think it is a headwind for the german economy. the german economy has really slowed down. year,a robust your last we have seen the economic indicators turnover. it is not great timing for germany. alix: we are looking at a chart. 2018 u.s. built vehicle sales forecast and the you can see toyota and chevrolet.

what i have seen in terms of the aluminum and steeliffs. play,f i put more jobs in will it offset or lower the tariff? will we see the tit-for-tat company by company? yeah, i think we will. not just company by company but maybe at an international level. in a way, the white house's approach is being vindicated to some degree i having some of this horse trading and we can expect on auto sprint alix: megan greene of manulife and will come back with us. bank of america said it is the most important week of the year of the global economy. it reminds me of the christmas song. the impact on the market as the dollar looks for direction between the fed and ecb. this is bloomberg. ♪

alix: this is bloomberg daybreak. i'm alix steel. it is a big week for geopolitics and central banks. futures up by six.

s&p futures flipping into negative territory. losing se oflier steam. stocks, up by 2%, who would have thought it? the new finance ministers said there is no proposal to exit the e.u. it is a total reversal. david: the markets really reacted. sincethe biggest gain february, the cyclicals underperforming on the g7 breakdown in the communique. it is a push and pull between the euro-dollar, as we go into fed and ecb meetings were something is going to happen. the canadian dollar, that has been one that has been hit by the g7 bank -- g7 breakdown. flatten, continues to a lot of supply coming on this week in the threes, the tens, and the 30's. potentially, russia could be boosting output, all ahead of

this meeting between vladimir putin and world football. david: let's find out what else is making headlines in the business world. for that, we have emma chandra here. michael pompeo sa the summit can have only one result. the complete and verifiable, irreversible, and denuclearization of the peninsula is the only outcome that the united states will accept. sanctions will remain and told north korea eliminates its programs -- until north korea eliminates its programs. if diplomacy does not move in the right direction, those will increase. u.s.mpeo also said the will help with investment denuclearize's -- with

investment if kim jong-un denuclearize is. supports the idea of a summit between president trump and vladimir putin. she told german tv that the president was not wrong in pressing germany to increase defense spending. voters rejected a proposal to change the way banks lend money in what is seen . global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm emma chandra. this is bloomberg. alix: i cannot tell you how much of my day was then reading about the -- was spent reading about the swiss vote. i went down the rabbit hole. david: that was further than i went. alix: the bank of america is

calling this the most important week of the year for the global economy. a series of central-bank meetings. argentina comes out with a decision to bar, fed, wednesday, thursday, japan and russia on friday. a central-bank policy divergence. the fed is continuing to hike is that yellow line. will that continue or is convergence of the theme? megan greene and neil dwane are back with us. what is the most important central-bank meeting of the week? >> it is the fed. seenthe problems we have in turkey, brazil, and argentina, the fed will be raising rates. it depends how hawkish they are. i think the most important thing the fed is doing is the quantitative tightening.

ins is going to happen more an accelerated fashion in the second half of this year, which underpins the dollar and we see further strength. do and saygoing to nothing, particularly now that italy is back. david: picking up on this team -- seem of divergence versus con virgins, i ha chart, overall, -- burgess -- versus nvergence, i have a chart, the overall global pmi's are misleading. is that your take? >> i think they are. the synchronized global recovery we enjoyed has broken down. the u.s. is keeping on, full steam ahead, because of fiscal stimulus and the tax bill.

europe, japan, china are slowing and we should have expected them to. europe was growing a full percentage point ahead of its gdp. that was never going to last. we are seeing a slowdown that extends beyond the weather agreement -- whether argument. alix: do you agree with that? >> i agree that global goldilocks has been -- has come to an end. we are hoping that the momentum we have started to see in the u.s. does continue and it does feedthrough to investments and activity. otherwise, the president has thrown $1 trillion at the economy for almost no return. europe is stabilizing at a high level. having spent the last two weeks in asia, china is fine. it is going to be growing at not the driveris

of global economy we have seen. alix: you are boring me. neutral, boring in china. investors are moving to cash. one investors said he is in cash for the first time in 11 years. then the play, as we are in this boring area. if i'm honest, we have got the u.s. equity market wrong. we have undervalued or under considered the etf share buyback value incentive activity we have seen in the u.s. is goingink the u.s. to have a dull summer, it is hard to advocate taking risk in equity markets which are going to be governed i the volatility we see in the u.s. -- governed by the volatility we see in the u.s. david: you cannot have earnings growthdriven -- earnings proceed at a faster pace than the economy is growing.

we are seeing earnings growth more than that. does that mean equity markets are in for a correction? >> equity markets are in for a correction. the question is when. i would agree the administration is throwing money at the economy without significant gains. hithe short-term, it is a for the economy. profits are up. that papers over problems. there will be a correction but it is not coming given we have got two more years of stimulus. come 2020, after the global crisis, we fretted, we are going to have one in 2020, and less lawmakers -- unless lawmakers decide they're going to extend these initiatives. alix: right now, the market is 3.5% or 4% next year.

the conversation seems to be, will be fed signal four at this meeting? what are the participants getting right or wrong? there is inconsistency in these market-based probabilities. expects inflation to accelerate and growth to accelerate and unemployment to come down. no one thinks the fed can continue to hike at the same pace. that does not add up. what investors are getting wrong, we are not seeing a cycle surge in inflation and growth might be more tepid. the fed will be producing more forecasts at the june meeting. they will suggest inflation will accelerate more than previously. inflation might be revised lower. the medium rate hikes might be moved to four. whether it is three or four might not be a game changer. david: fiscal stimulus is pumped

in. is it possible that the fiscal side is giving the central bank headroom to raise more so it has more for a possible downturn? >> i would like to think there was method in the madness. we think what president trump has done is put forward a boom-bust scenario for the u.s. economy. most commentators are nervous about the end of 2019, 2020 four 2020 fourl u.s. a potential u.s. recession -- for a potential u.s. recession. agree that the market is underpricing the number of great rises. we think it is 6, 3 this year, three next. the closer they get to delivering that earlier, because of the leverage in the u.s. economy, we think the u.s. economy slows under its leverage. alix: yet value is not

outperforming. time to turn defensive in your allocation. when would be the pivot point? >> what we value traditionally does well when you see the cycle turn and the rise of the underlying economy. in the u.s., we have seen a l economic recovery. ll economic recovery. we think there are specific reasons why much of the value industries have not done well the kelce have not been well-positioned for the change -- haveeeing -- well not done well because they have not been well-positioned for the change we're seeing. up, kkr is buying invision health care. we going to have more on that.

as you commute in, you can turn on your radio and listen to tom keene and jonathan ferro from 7:00 to 9:00 and pimm fox joins tom from 9:00 to 10:00. "bloomberg surveillance" can be heard in new york, boston, the bay area, washington, d.c., and all across the united states on sirius xm radio. live from new york, this is bloomberg. ♪

>> i am emma chandra here in the hewlett-packard greenroom. ming up, the ceo of trading system iex. investors are betting on rising demands for new energy cars. shares of the world's largest electrical maker batteries.

it rose by the maximum 44%. apec's partners may make a partner -- may make a offer for a private equity firm, the proposal was rejected last month. x has until july 8 to make a firm offer or walk away. prosecutors in germany have ceo as- have added audi a suspect in the diesel problem. it now covers 20 people, investigated for fraud and for fall supplying of public documents. that is your bloomberg business flash. david: we turn to wall street be, were we cover three things. the next big deal the , kkr will buy envision health care for $5.7

billion. cryptocurren get crushed, $42 billion wiped out over the weekend, with many putting the latest selloff on the hacking of south korea's exchange. banking on billionaires, white banks are catering to the super affluent. -- why banks are catering to the super affluent. joining us is jason kelly, new york's bureau chief. kkr, we thought it was coming. it is a big deal. >> if you factor in the debt they are assuming, it is a $10 billion deal. we have not seen a lot of deals that size. it was interesting, we sat down with the relatively new copresidents of kkr and they are buying complexity and selling simplicity. this is a company in the health care space. it has been under a rigorous

strategic review which i read as, this company may be a mess. that may be the reason. david: the shareholders wanted to change the company. >> exactly right. the worry for investors is that at a time like this in the cycle, this is a competitive deal, they're likely paying a full price. like wenot going to be are going to buy it cheap and sell it and make money. they're going to have to fix things. alix: i feel like, is this going to be the next big wave of why else -- buyouts? >> it feels like no. this feels like an exception rather than the rule. sellingequity firms are rather than buying because valuations are so high. david: blackstone is offering

discounts. >> that is right. this is the infrastructure fund that was announced two great fanfare in saudi arabia. a number of people were there with the president of the united states. infrastructure has been the white whale for private equity firms. david: nobody can find it. >> your got a couple of big players being the best known -- you have got a couple of big players being the best known. otr firms, like kkr, like blackstone, have not been successful in doing this. it is not a surprise they do have a big backer in saudi arabia. it is surprising they have been able to galvanize investors. alix: how about $42 billion. that leads to our next story. that is how much was wiped out in cryptocurrencies. it looks like a hacking of a south korean exchange.

it is the dynamic between bitcoin and blockchain. least,oin, to say the especially in asia, have been skeptical about bitcoin specifically. it has not been endorsed by regulators they are as it has around the world. what you have seen, you see the is-year chart, the trendline coming down over the course of 2018. people get spooked. avid: it is not good for brand that sells itself on security that you can hack it. i thought blockchain was impervious. alix: blockchain but not bitcoin. that is the problem. if you're going to build a business around blockchain, aren't big banks starting to get into that? >> it will be interesting to see

whether this reverses itself. alix: this is ultrarich. it is a great article on the bloomberg talking about members that are so rich that they are investment banks. >> what you've had, and i love the headline on this, ,illionaires at the gate ultrarich muscle in on private equity. it is $1 billion plus, serious deals. david: this is cutting out the middleman. we do not need bankers. offices have come into a term of art that encapsulate different ideas. what it does capture is that groups of individuals or groups who can do a lot of things that a investment firm would do. david: here are the words you refer to -- these family fortunes can make bankers

irrelevant. i mean, there is an interesting dynamic here as well. we mention jpmorgan. if you look through the scope of are new there jpmorgan's, not banks, then, people. like, the morgans, the rockefellers, and others. that is the sort of wealth. zos'syou think about the be and not just here in the united states, but around the world. there is a massive amount of dynamism into how that gets invested and it is lucrative to invest that. david: jason kelly, thank you so much for being with us. to tax or not to tax, that is the question the supreme court

may be answering for online retailers today. , whatout tv does online, click on our charts and interact with us directly. check it out. this is bloomberg. ♪

david: you know what i am watching. alix: is it every monday? david: every monday. they've got some big cases they're going to have an one of them involves sales taxes on internet purchases. greg -- we joined by are being joined by greg who covers the supreme court for us. i put up some bullet points. take us through who was for this and who is against it. >> the people who are in favor of people having to collect taxes are the traditional retailers who say they are being

put at an unfair advantage because you can buy the same products online from retailers and not have to pay the tax. go back in history -- david: go back in history. they said you have to have a physical presence in the state to collect taxes. we did not have this kind of online commerce. >> the most recent time the supreme court addressed it was in 1992 and it was dealing with a catalog retailer. the court said if it is somebody who es not have a store in the state, it is not fair for the state to impose taxes. we're in a different world where a physical presence is not as important and a internet retailer is present in a cyber weight in different states. -- a cyber weight in different states. hasd: president trump tweeted on this, as you know, back in march, he stated his

concerns with amazon. they use our postal service are putting retailers out of business. the president was wrong. taxes does collect sales on the stuff itself. it does not on third party. the president has a view. isn't it unfair for the states that forgo taxes? >> the president has made that takes -- made that case. they have been arguing in favor of overturning this decision. the counterargument has to do with compliance. you talk about fairness to the small retailers, saying it is complicated not just to figure out all of these jurisdictions that to figure out how our products fit in. what tax has to be imposed on them.

there are arguments of fairness in both ways. david: thank you so much. they have got two hours to get those decisions out. that is greg who covers the supreme court for bloomberg. alix: you clerked, right? david: i did, for justice powell. geopolitical tensions and decisions from the world's biggest central banks. , s&p, dowes struggling to keep in positive territory. equities get a boost, up by over 2% as a lot of supply coming on in the treasury market. the curve is flatter. this is bloomberg.

the complete and they're

reversible of the peninsula is the only outcome that the united states will accept. president trump and north korean leader kim jong-un prepare to meet in singapore for a face to face. they get the first minute alone to size each other up. trump backs out of the g7 communique after comments by prime minister justin trudeau. ecb announce rate decisions with investors looking for direction and science. -- looking for direction and signs. alix: we have a beautiful -- david: we have a beautiful night in singapore where all the world's focus. does that minute include the time for translation, or not? alix: they are alone but their translators are there. it is like you're going to know in a minute. i did not know i was going to marry my husband in a minute. david: he says that is his

specialty. that is what he does. alix: in the markets, where rotating into a risk off feel, s&p futures were up and now into negative territory. you have to question liquidity. the euro-dollar stronger, about 117 is how we print. lots of supply, you get the threes, the tens. crude rolling over as there are reports that russia not in compliance with that opec deal, i head of a soccer match on thursday that will be riveting. -- i head of a soccer match on thursday that will be riveting. of a soccer match on thursday that will be riveting. who has the upper hand? david: it is time for the morning brief.

starts two days of treasury sales, $193 billion. later on this evening, president trump is going to be having his meeting with kim jong-un. tomorrow, we get the ruling on whether at&t can purchase time warner. when say, it is fed decision day, with the broad consensus will be hiking. the ecb is on thursday. they will finally address the question of when they will be ending their bond buying program. i want to turn back to that summit. they meet in singapore and it is about 13 hours from now. 9:00 in new york this evening. the world is trying to get a read on what to expect. this is where they will be meeting. we want to figure out what can kim give us. for that, we're going to turn to stephen.

what can he give us? they can give us denuclearization. david: what does he want? >> he is on the global stage. he gets attention and that is important for a small state. he wants sanctions rolled back. he wants the ability to bring his country in out of the cold and to garner economic assistance. he wants diplomatic normalization that has never come. as you describe those positions, one of them can be delivered, the other cannot. we can relieve sanctions. we can allow him into the community right away. he cannot denuclearize right away. >> as a result, he will not get sanctions relief right away.

what the u.s. is looking for, is a short track on that denuclearization path. they want to see progress. could not wind up giving economic sanction relief right away, good they do things like cap the troops that they have in south korea. they want is a security guarantee and that has been said, pompeo said, they will get that and they will get an unusual guarantee. that may mean a peace treaty and other measures. david: that is important. they have given security guarantees in the past. how could they make it unusual, binding? >> binding is probably not it. and say, underscore it there is a regime that wants it security guaranteed. what we will do is roll back the nuclear umbrella.

perhaps, overtime take a look at the level of troops. north korea is not asking for that. what they want is a statement the u.s. will not engage in any attack. david: how does the united states reduce troops without raising concerns with our allies, south korea, japan, particularly? >> this is coordinated closely with south korea, japan is part of the process. remember, we have china out there and russia as well. this is a careful balancing game among major players with interests around the peninsula. david: is china with us or off to the sidelines? >> they are more on the sideline. they have shown support to meetings in the last two months. their concern is that they have been sidelined. they are afraid they are not included in this. alix: thank you very much for joining us.

hownt to take a look at markets are reacting to this meeting. i want to turn to juliet in singapore. we going to talk about the u.s. what is happening there a head of this meeting? there is a lot of optimism that if we do see the north and , thatagree to a treaty could boost relations. within construction stocks, on a tear. by 30% today. at the same time, you have seen , switch out of defense stocks where a year ago, people were putting money into that. error space down 5%. -- aerospace down 5%. you should be taking protection. you should be buying south

korean credit, particularly the five years which are holding at around a decade low. i was speaking with someone earlier who was saying this is great for the whole region. see the modernization of north korea, that is going to be anvestment opportunity. boost to aeeing a lot of those consumer stocks. optimism. alix: thank you so much. joining us from london is sebastien page. thati find interesting is risk appetite is still firm. you can see that. why and should you be hedging? >> you see a positive reaction out of stocks in korea.

we do care about whether we want to be risk on or risk off and risk appetite in general. the thing with geopolitical risk is it does not matter to the market until it does. we think of it in terms of a tail risk. investors, are we reducing or increasing this risk exposure? a broad perspective, on the margin, the trend is positive in terms of geopolitical developments in the summit in singapore. investors in general are more the noise,gnore reassess the change, probay neutral, and pay attention to what central banks are going to do. david: there is optimism about singapore. markets do not know how to price that in. with what camesk out of the g7 -- which is more important to markets?

>> what came out of the g7 is that things can change quickly around trade. over 48 hours we went from tariffs on to tariffs off to tariffs there is political posturing around these negotiations. we start with an extreme position, we roll it back. i think the market will be complacent around these issues. if you look at it from a broad perspective, we have gone through 75 years of increased trade. that is the broad trend. the tariffs that the u.s. charges on the rest of the world are about 2.4% and the rest of the world charges about 2.9%. is a discrepancy that the u.s. is trying to fix. arehe big picture, tariffs minor this week, relative to other issues such as central

banks. what you have to think about is the incentives. when all a trade war the glains a integrated? david: stay with us. we are going to talk more about g7. coming up, the g7 fractions over trade. we will discuss the market implications. this is bloomberg. >> i have made it clear to the president that it is not something we relish doing but it is something we will do because canadians are polite, reasonable, but we wilma be pushed around. -- but we will not be pushed around.

>> this is bloomberg daybreak. i'm emma chandra.

kkr has agreed to buy envision health care for about $5.6 billion in cash. ofision is the provider health services to hospitals. it has been conducting an auction review and strategic review since last fall. hsbc has unveiled a new strategy for investing in new technology. the bank plans to keep dividends at current levels and speed up its pivot to asia. the new ceo says after a period of restructuring, it is time for it to get back into growth mode. engine durability problems are getting worse at rolls-royce. the company revealed it has found new issues that will require extra repairs on its new turbines, the engine being used on the boeing 787. david: it looks like the g7 had

a deal they could agree to but then the prime minister, justin trudeau, had a press conference. president trump tweeted the deal was off. there is a special place in hell for any foreign leader that engages in bad faith diplomacy with president trump and then tries to stab him in the back on the way out the door. that is what bad faith justin trudeau did with that stunt press conference. david: i think it is fair to say that he does not mince words. still with us is sebastien page of t. rowe price. you have told us your approach to g7. how have the markets reacted? look at what happened to the canadian dollar versus the u.s. dollar. a reacted quickly. will react locally, specially when you deal with tariffs in a specific country.

trade is a consideration but not the consideration. it impacts how we look at emerging markets. emerging markets, we are neutral relative to develop markets. with the u.s. rate hikes in a stronger u.s. dollar on the margin, trade disruptions do not hike -- do not help. it impacts how we think about u.s. small caps. they have good valuations, good momentum. they benefit from tax cuts and you get m&a. we like the asset class and it is more domestically oriented. on the margin, we add trade considerations to different decisions. localized when you have news events around specific tariffs t from a broad perspective, it is not the consideration. what is interesting is if

you take a look: a sickly at president trump's approach when it comes to nafta -- take a look ically at president trump a possibility approach when it comes to nafta. it increases the incentive for and limit hisasks compromise. wrapped up in this our autos, continued steel and aluminum issues. that is something you can trade and play. how do you do that? mattersupplying chains -- the supply chains matter quite a bit. if you put tariffs on steel and inminum and you make beer the u.s., it is made in steel tanks and you put it in a aluminum can.

down orgins are going your passing increased costs for customers. that lookk pickers of at supply chains as globally integrated, it changes the equation. alix: are you worried about the overall impact on inflation and which companies can pass that along to consumers and how do you factor that in? >> it is a factor but inflation has been stubborn and has stayed low. we are now seeing an uptick but it is marginal. trade impact on supply chains will influence some consumer prices but overall, liquidity is still sloshing around central blanks globally. outside the u.s., they are in easing mode and we have not seen that much inflation. you have a lot of big factors. i go back to trade and tariffs.

represent 2.4% of the equation of what the u.s. rise. -- u.s. buys. alix: a lot of analysts say it is early to gove. s the right trade? >> we like cash. cash is becoming attractive, to .5% on cash, more than the dividend yields on th s&p. we are taking risk off and cash is one of the assets we are getting into to play defense and we are looking at ways of playing off assets, adding to small-cap stocks. alix: sebastien page, you'll be sticking with us. we are going to take into small-cap in just a bit. coming up, kkr with envision health care. what the company is all about and is struggling with. the stock is up over 2% in premarket.

this is bloomberg.

david: kkr's next big deal. the company will buy envision health care for about $5.5 billion. the biggest maker of electrical vehicle batteries surges in its debut. contemporary and next technology. making its founder a billionaire. they blastr fire, the e-commerce giant over labor conditions in china. pours 11 billion dollars into expanding key asian markets and improving technology. we welcome brooke sutherland. for joining us as we launch our new segment. wanted toout what kkr

get when it comes to envision health care. it did have problems. it did have an a to missed investor. tell us what is going on. and lookedptimistic at it as a possible takeover target. what is interesting is it just merged in 2016. integration on that has not gone well. you have not seen the revenue cost benefits they were targeting from that deal. , a tangled web of companies, they tried to buy team health. the takeaway is these companies recognize there is a need for consolidation but they are not great at executing it. there is an opportunity for private equity to take these companies off the public market and do the things they need to to make these work. health, you had

activist elliott management going in and they got rid of their ceo. there is opportunity. people see opportunity in the health care business, particularly when it merges with tech. they're not confident in the management. is a differenth situation, where that ceo did believe in growth, expansion. he was not good at getting profit out of that revenue. they splurged on unnecessary things. private equity is going to bring discipline. david: we are to turn to car batteries. china,s this big deal in where a lot of people have gotten rich. contemporary emperor technology limited. to be a rivalying to panasonic which provides batteries to tesla. this is an ongoing evolution of this electric vehicle industry where we are seeing this web of

players emerging all over. you saw gm dealing with softbank. they have a deal with honda. seeing rivals jump up all over and investing in this. what was interesting about this are set to cut this in half. they rolled it back, limiting the ratios. alix: when i first saw that, i thought are we overhyping this largest battery maker? it is a good thing, if you think about it. our third story has to do with amazon was blasted by labor groups over china factory conditions like echo and kindle made in not so great areas. this is an interesting headline. >> apple has a similar problem with a factory run by foxconn. foxconn is also running the factory with amazon.

billionis getting $4 from wisconsin to build that factory in the u.s. to have these happening where we are talking about rolling back regulations about these hurdles companies have to jump through, this is important to pay attention to, as we think about investing in manufacturers. david: we have seen this before with clothing manufacturers where it gets ugly. >> exactly. alix: they were required to work more than 100 hours of monthly overtime in violation of labor laws. they did not have safety had to arrivehey before their shift began. had problems with this before, in the u.s., where the workers sued because they had to go through all of these processes beforehd and the core rolled in amazon's favor and did not have to pay them for that time. hsbc, our four-story,

they're going to invest $17 , buton in asia, china tech, they're going to invest big-time. >> which makes sense. this is the next frontier, this is where we need to invest, whether in automation, or cybersecurity. you're seeing hsbc ramp up its efforts in asia where deutsche bank is ramping down. alix: where is it not scaling back? thank you very much. great to see you. we look into outperformance of small caps. this is bloomberg. ♪

alix: happy monday. this is "bloomberg daybreak." we have dow jones futures trying to eke out again. s&p futures have also been flat.

stocks underperforming after the g7 communique lands flat and the u.s. pulls out. italian equities is up over 2%. the finance minister said we do not want anti-euro rhetoric. in other asset classes, you can see that reflected in the euro-dollar. where you are seeing the weakest when it comes to trade has to do with the canadian dollar. potentially not the country we wanted to punish with trade. david: we are punishing them, for sure, as well as mexico. alix: have a lot of supply in terms of the auction, the 530 spread continues to get flatter. crude rolling over. more details throughout the week. i will have a g20 energy meeting

on friday. david: let's get a look at what is happening outside the business world. the white house says talks with north korea are moving more quickly than expected but mike pompeo says tomorrow's summit can have only one acceptable result. mike pompeo spoke in singapore today. >> the complete and verifiable and your reversible d nuclear uclearization of the korean peninsula is the only outcome we will accept. sanctions will remain until north korea illuminates its weapons of out -- of mass destruction. emma: mike pompeo also said the u.s. will help north korea with investments if they do nuclear ze.e -- denucleari

supports the idea of a summit between president trump and vladimir putin. that theeuropean tv president was not entirely wrong in pressing germany to increase defense spending. the fed willsaid not speed up the pace of federal rate hikes. according to a poll, the portion of those expecting a rate hike dropped. the projection is for three or more increases, which matches the fed's projection. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am emma chandra, this is bloomberg. bank of america is calling this the most important week of the year for the world trade tensions and geopolitical standoffs and a series of meetings. the argentine central bank comes out with the decision tomorrow,

the fed on wednesday, and the bank of japan and russia with their decisions on friday. the world's monetary policymakers are all weighing different issues. here'a look at the policy divergence is among the central bank. the yellow line is the fed and the purple one is the ecb. still with us is sebastian page. take a look at this from the ecb point of view versus the fed. the fed is what we're focused on this week. how different are the situations of these two banks? sebastian: they are connected to each other. the popular narrative is that rate hikes and up in recessions -- end up in recessions. the intuition is rising rates are bad for stocks. history, it is not the case that rising rates are always bad for stocks. when central banks are still

accommodative, which is deftly the case of the ecb and the fed in the u.s., stocks and risk assets can do well. about when you look at this divergence is the exchange rates and the impact on the u.s. dollar. rallye not seen the u.s. as much as you would expect from that rate differential. the growth differential matters. much of the lack of dollar strength is because of the budget deficit ithe trad deficit which is telling the markets the dollar cannot go that high? ,ebastien: that is part of it but if you expect stronger growth outside of the u.s. that should weigh on the dollar. we are earlier in the economic cycle in europe. if you look at the path of gdp and unemployment, europe is lagging in this expansion. the data looks like the u.s. in

2014. if you step back from the day-to-day noise and say where do we expect a positive growth differential, in the u.s. or outside the u.s., that also ways on the dollar. if you expect stronger growth outside of the u.s. fr longer-term perspective. -- a companyg news has agreed to buy usg, a company that distributes building materials, and that coming in for about $44 a share in cash, the deal valued at about $7 billion. sure vote in brook favor of the deal. i'm just trying to get a deal broke sure owns -- berkshire owns. knauf is said to be buying that company for $7 billion and berkshire hathaway will vote in

favor of that deal. wind upabout where you finding deals, you already talked about small caps so i wanted to bring in a small cap analyst. france and gannon is a small cap investor. i wanted -- francis gannon is a small-cap investor. this chart shows a different way of looking at small caps. , is the outperformance of small caps only about the dollar or is there something else happening? francis: it with small caps it has been about the stronger earnings story. you are seeing strong operating a strongeriven by domestic economy in the united states and i think that is the majority of the story. david: were they affected by the corporate tax cuts? francis: you have to think about it from a small-cap perspective.

small-cap businesses pay their taxes. they do not have the ability large businesses have to take losses. i think it has been positive for them. i also think small caps are capx.ting from david: are they making substantial investments compared to large caps? francis: i think some of the smaller companies are making acquisitions. analysts arex: more bullish on small caps going forward. the top panel here is the s&p 500 index. you can he sales expectations much higher for small caps. the bottom line is for sales for next year. how long do you think the outperformance of small caps will continue? sebastien: we've just talked

about quite a few factors that are favorable for small caps. you have sales, you have strong earnings, you have the effect of tax cuts and capx, we talked about m&a, and they are less exposed to global trade issues and the dollar. you look at these positives and ask is it priced in? if we look at our valuation those small caps are not expensive relative to large caps. in our portfolios we have decided to remain overweight. we expected to continue. alix: and what sectors? if we look into the overall s&p it has been about tech leadership. is it the same in small caps? francis: one of the more interesting areas are the economically sensitive areas. one of the interesting things about the russell 2000 is that over 35% of that index is comprised of not earning

companies. happen those businesses to fall and internet related software businesses. it is hard to believe i have to say this, but you have to focus on fundamentals in the small caps. it is one of the more interesting things you have to do. alix: what names do you like and is it value versus growth? francis: growth is where you have had to be in the last few years. i think we are at a turning moment where you are starting to see values outperforming. lywould think of the economic sensitive areas continue outperforming you will see value going forward. miller -- takeot apart miller industries. why do you like that stock? a company that manufactures tow trucks and is benefiting from economic expansion globally. it is a small company in terms of its overall market

capitalization. i would call it smaller than small. david: how do you analyze the business? francis: the beauty of this business is there is no coverage on wall street. we actually have to go kick the tires to understand the business and that is something we enjoy doing. alix: what other name do you like? francis: another would be one of the banks. trustco, which is a bank in new will benefitida from the steepening of the overall yield curve. the thing to stress about small caps is the idea you do not want to own the index, you want to be more selective within small caps and shy away from the bigger world. alix: to wrap this all up, when itanagement also comes to overall s&p, do you see -- is that a precursor for the broader s&p?

in our portfolios we are neutral between growth and value. for the longer term we prefer growth. there a better story for growth when you have low economic growth, it is usually good for growth stocks. we are going to remain neutral for the time being. david: francis gannon and sebastian page, thank you so much for being with us. or kind of risks does the rise of machines pose for the markets. we will talk about that with brad kutsuyama. "bloomberg surveillance" can be heard all across united states on sirius xm radio. this is bloomberg. ♪

emma: this is "bloomberg daybreak." later today, sean spicer, the former white house press secretary. now to your bloomberg business flash. a big takeover in the building materials industry. buy ahas agreed to company in a deal valued $7 billion. usg is a maker of sheet rock and fiber rock. prosecutors in germany have added audi ceo as a suspect in the omissions scandal. -- in the emissions scandal.

20 people are being investigated for fraud and falsifying public documents over sales of cars. a cryptocurrencies hack in south korea has made the bitcoin slumped even worse. there's been a selloff since friday and bitcoins decline this year has now gone past 50%. a south korean exchange says that some of its currency appears to have been stolen by hackers. david: another warning on the rise of the machines, this comes from goldman sachs. analysts say high-frequency traders are a risk the markets. -- when shocks cause price to klein, traders reason to assume the shop is being driven by fundamental news. their optimum responses to withdraw liquidity or withdraw from them altogether. katsuyama,come brad

the ceo of the first stock exchange to opera trading venue that shefra. good to have you here. how do you react to that allegation? it sounds right to us. machines can make mistakes. speedwhen you look at the with which machines to make decisions with which humans can make decisions, obviously there is a massive discrepancy. machines are looking at the world in microconds. the world has slowed down for them. they're able to react to different pieces of information. i agree with that goldman report. this is a market that is susceptible to volatility spikes. part of it is you have to dive deeper into high-frequency trading. there are strategies for high-frequency trading that are looking to capture spread. in times of volatility, they will pull back.

there also high-frequency trading strategies that are looking to trade in an aggressive way, in a predatory way. of au have a combination move downward, buyers are withdrawing but people are aggressively shorting the stock and the combination of those things that is unfolding in milliseconds can lead to these types of volatile moves that goldman discussed. i think what they have said, a lot of people forwarded that to me and i agree with what they are saying. david: there are risks in high frequently trading, there are risks in anything. thquestion icompared to what? the analogy i draw is autonomous vehicles. there are risks, but over time you'll will be safer wit machines making the decision. interesting piece is what is the role of the exchange and trying to determine the right balance of trade with fundamentals and trade based on

speed. our speedbump is 300 and 50 millionths of a second. when we tried to apply, it took us two years. they fought aggressively against the speedbump. we are just basically saying there are mont market where instability exists and we are looking to provide a brief eye, tohe blink of an allow all the participants to react on a more level playing field, and that was unacceptable. we have gone past the point where speed is a benefit. it is the exchanges role to try to create a balanced market for all participants. not everyone cares about microseconds. it is the exchanges job to be that referee among a number of different arches up and.

a number of different participants -- a number of different participants. alix: you will be the only stock change not owned by a parent. if any other industry have that, we would say forget it. how do you stay alive? brad: as they're gobbling up these exchanges they're keeping them open. the goal of the exchange is to match buyers and sellers. the less price -- the less places you have for that, the higher the probability of matching them. the new york stock exchange will have five operating exchanges. nasdaq has three. their goal is to keep investors apart, to create room for middlemen. it increases trading volume and gives him the abity to sell five market data feeds and five connections. the exchanges are making more money selling high-speed data and technology than they are for matching buyers and sellers. their role in the market has been twisted. i think the priorities are

different. we are proud of the fact that our business model is predicated on bringing together buyers and sellers. we have a lot of backing for long-term investors. see our position growing., i what a lot of people do not realize, we are larger than the swiss stock exchange, the australian stock exchange. ,e are trading a lot of volume but compared to the new york stock exchange, which is 12% of the market, we are 2.5%. is growing.ay iex are you taking market share, and from whom? are: shares trading on iex not trading elsewhere. when we launched we are around 1.6 of the market and we are up to 2.5%. we are also looking at other business lines so the company is growing. it has been a great couple of

years. we are coming up this september with the second full year as an exchange. we continue to see bright horizons. alix: you've been front and center on the rebates that other exchanges wind up giving. you get a rebate the more you trade. it takes business away from other players. you just give a discount, isn't that the same thing? brad: a discount is about saying if you trade more, you pay less. a rebate is a payment from the exchange to the broker. -- challenge is if a pension pension funds asset managers cannot send orders to an exchange by regulations. they have to go through a broker. if that order represents an asset management order, the broker keeps the rebate. the rebate is a payment to the broker on top of the payment they are getting from the customer. launches in exchange,

every exchange was paid a rebate. we can challenge the status quo. where the first exchange not to pay rebates. we are growing up by paying people, but because the execution quality was higher. there is now public data that shows the exchanges who pay in rebates have the worst execution quality. why are people waiting in the longest line for the worst outcome? i do not think there is a good comparable in a life when you get in the longest line for the worst outcome. iex is growing. you are also moving. how big can you get? brad: this will be our fourth office in six years. this is a plan for us to be somewhere for three to five years is the hope. we are moving from four world trade center to three world trade center. .e were at 7 world trade center

silverstein has been a great partner for us. they have shepherded us through different moves. this is another move for us to fill out a new office and launch a new business line this year with some large asset managers which we are excited about. standpoint, itr has been a move to fuel that growth. alix: a different kind of wall street. iex ceo, great to catch up with you. ae u.s. treasury is packing hundred $93 billion worth of debt sales into the next few days. this is bloomberg. ♪

i am watchingwhat is the u.s. treasury will be selling $193 billion of debt in the next three days. what i am looking at are the direct bids.

take a look at this chart. this is the percentage of direct bitter amount accepted in the last auction. the takedown was about 6.7%, for the three, about 12%. for the three-year, it is the worst -- it is the most we have seen since july 2017. a good indicator of what kind of demand we are seeing. david: the reciprocal the traders are on the hook. sayinglso we have ft end if you have a good three in a bad 10, near-term risk, long-term ok. coming up on the markets, jonathan ferro and the head of market strategies. this is bloomberg. ♪

,ohnathan: from new york city 30 minutes until the start of trading. this is the count down to the open.

coming up, g7 falling apart. the united states refusing to back the groups joint statement. president trump refuses to give an inch. , markets ares showing few signs of nervousness . equity futures are stable for a third week of gains. 30 week so it 30 minutes away from the opening bell. futures are going nowhere. euro-dollar 1.17. treasury yields higher by a single basis point to 2.96. the markets shrugging even after trump leaves the tense g7, now preparing for a start summit with kim jong-un. >> i worry that there is too much euphoria. >>