u.s. accuses china and a new 35 page document. market jitters take a break. again, a voten, will determine the path of brexit negotiations. deal or no deal, iran rejects any output compromise and will leave the opec meeting early. oil prices are caught in the middle. david: welcome to "bloomberg daybreak." welcome back. big day tomorrow. opec. >> i am into it. right? questions as to what it will mean for oil prices in terms of how much capacity they can add back. saudis get tohe decide? alix: they kind of do, but how much market share do they want to lose?

in the markets, trade drama takes a pause, s&p futures up, and dollar weaker. the ecb says they know why they will get a weaker euro, central-bank convergence. the dollar broadly stronger against g10 currencies. apparently we are supposed to watch the spread, it may invert? it talked heard about, but apparently we have to care about that. morning, 9:30 a.m., central-bank has speak on a panel in portugal. 10:30, u.s. oil and gasoline inventories ahead of that decision on production do friday. in new york, 21st and treat fox

will meet to review comcast offer to buy most of its assets in face of its agreement with disney. alix: oil and disney are the two things you will get on the desk this morning. time now for first take. we are joined by our guests. i want to look at what has happened with the markets. deal,k about the risk off but this is the intraday trade for the s&p. it close lower each day, but we closed above the cap down. what does that mean? >> investors are buying the dips. defensive stronger than offense. the central bank news started this teetering in the s&p 500. it corrected to our march peaks, so it is behaving normally. isthe short run what you see general defense is very strong.

bigan't seem to get this offensive surge all spring, that defense is still strong and investors are willing to buy dips in the market. to the extent this was related to trade, the assumption is the posturing will get worked out. that is reflected in the price action. alix: you look at the correlation measure by morgan stanley, morgan stanley upgraded utilities. i wonder what the sector rotation is we are seeing. >> if you look at boeing, caterpillar, they were uniquely punished, people wondering whether apple be exempt, and today hearing from president -- that apple is not exempt. a lot of people think this will get ratcheted back. if they did believe that this

would become a full-blown war, you would see a different pattern. david: it seems right. solomonankfein, david on our air, but the white house does not sound like that. , it is said he should report, and this is what they said, given the size of economy, the economic aggression threatens not only the u.s. economy, but the global economy as a whole. they are not acting like they are backing down. are not come up it is difficult for market participants to price this. less than 8% of sales in the s&p 500 go to china. it is about selective industries , and pricing that is difficult. you have to see commodities prices start to move. we have seen that this spring

reflected in the equities markets. some products that go to china, automakers, the real exposures are being priced into the s&p 500, so how are importers affected, it is a question investors are struggling to price. alix: that leads us to opec. the confusion we are seeing at of the in a, intraday brent is pretty much flat, but you can see that dipped lower when the iranian oil minister said we will not raise output and blamed trump for some issues. trump has created difficulty for the oil market by imposing sanctions against the two important members of opec, asks opec and now somethingec to change

for the better price in the market. it is not fair. alix: it is not fair. at the same time, the saudi say we will come to an agreement. don't worry. gina, how do you understand it? >> the spread between brent and wti. brents prices have increased faster than wti, so clearly this is priced into a price constraint premium in brent specifically. to. producers will continue flood the market is the assumption, but we don't know what will happen with opec. supplyumption will be will remain constrained. that spread is the factor to watch following the opec meeting. tough time with the geopolitics. you listen to the iranians say that. the saudis they think are in bed

with donald trump and the united states. >> iran is in a terrible position. it is important to understand this. they are worried if they increase the output cap, saudi arabia and russia will cannibalize market share from iran and brazil and they will lose market share. leverage?eir the lose concept of credibility for opec. that is it to russia and saudi arabia could say forget it. we are doing what we want. alix: i'm saying russia and i run have their own -- iran have their own ties. david: we will find out friday. , the house of commons now. they are having the prime minister question time right now. there is a big vote coming up. jeremy corbyn right there, big

vote. they will vote on what they call the meaningful vote amendment. they did this last week. it is actually important. if we look at cable, the hip between the british pound end the dollar, it is getting hit. does theresa may get to run it, or her dissidents? lowest level since november last year, so definitely getting hit. theresaern is as continues negotiations with the european union, she has no power , because if parliament does not like what she comes back with, they could undermine it. it, it wouldmine remove the chance of a no deal brexit and hamstring the uk's ability to exit the european union. this is being driven by pro-eu

people that want the nation to remain part of the union. her claim strength in that no deal is better than a bad deal, and they're about to take no deal away from her, so they have to have a deal? she got a bad deal. >> what kind of negotiating position is she left in. the european union rubbing their hands with glee and saying, got you. it will be interesting to see how this affects the economy and the central bank. alix: the ftse 100 is increasing, explain question mark >> part of it is currency weakness. you have to separate the economic and political impact. there has been some sentiment compression. even the downtrend in the pound so far this year only eliminates less than half of the rally it had last year. the uk's stock market is one of the better performing stock markets in europe, so you have

to have policy become action so you can see an economic impact, otherwise the economy is muddling through, waiting for something to happen. alix: thank you very much. being up, markets may shrugging off the threat of a trade war, but are central bankers? peter navarro on fox business saying trump tariffs are protecting american high-tech after this scathing 35-page document. we will break it down with catherine mann. this is bloomberg. ♪

>> this is your bloomberg business flash.

the european union striking back against u.s. tariffs, imposing 25% duties on a wide range of american goods, including harley davidson, levi straus, and bourbon whiskey. the tariffs will take effect friday. 21st century fox paving the way for a bidding war. isert murdoch's company leaning towards starting negotiations with comcast, which made a $65 billion cash proposal. fox agreed to, sell the assets to disney. disney will have five days to make a new bid if they decide that the comcast offer is better. the last remaining member of the dow from the 19th century has been kicked out. general electric will be replaced by walgreens boots on alliance. ge is the worst performer in the dow. dow jones said the economy has

changed, and that is your bloomberg business flash. alix: take a deep breath. jittersshrugging off amid tensions between the u.s. and china, and lloyd blankfein seems to think they are right. he said he doesn't think the back and forth poses too much of a threat. i suspect we are not going to ,ause the economies to collapse but i don't think that is what is going on. some people have commented this is a negotiating pattern. that is my best take. alix: joining us now is catherine mann. great to see you. is lloyd right? >> it is a negotiating tactic, but when you are doing a game of , bluffsat high-stakes

are going to be called. alix: if you are a market participant or ceo, in terms of the markets, boeing, caterpillar , but abroad level we are not. >> we are looking at this question about how much volatility in stock markets will feed back into the decision-making process for the longer-term business strategy. maintained in is the financial markets and doesn't bleed into the decision-making process longer-term, then it is ok. traders make money going out, going down, but what matters is whether that volatility affects business capital investment, and you are seeing sentiment looking shaky, then you have to worry about the impact on the real economy. about a softking data issue more than a hard data

issue. it's $20 billion. that one not make much theerence, but affects sentiment of ceos and their willingness to invest. there is some decline to investing in capex. willyou looking at which to you which way this is headed? >> sentiment, orders, and outlays. sentiment is the early question. orders, they do the they are making a commitment and could still cancel. then there are the outlays when they are putting money on the table. that transition from sentiment to outlays is what we are looking at. david: there is a piece today saying donald trump is winning this because he thinks he will hurt china more than here. at the same time, how badly could china get hurt if this keeps going? been on the has

trade flows, exports and imports. if we look at those trade flows and gross terms, then yes, the u.s. imports more from china than vice versa. and there your metric is more stuff on the table that could be taken away, but that is not the only way to look at this. the businesses that produce in china, sell and china, un-american brand, and that is the nationalist approach which can be galvanized in china, we saw in the case of japanese and korean products, that could hurt american businesses substantially. that is an aspect of this trade turmoil that has not been fully factored in, not to mention the 3% of products exported to china come back. we've gotten estimates from different banks talking

about the damage to china's growth. , draw mealk me through a line from china growth to global trade to then central banks? .hey seem to be ignoring that does that continue? >> i don't think central bank ignore these things. alix: they factor it in. >> pal has mentioned it, so it's not that it is not on the radar screen. if you think about the slowdown down in china growth and trade, the thing that is most important to remember, remember 2015-2016, china,as a slowdown in it percolating through the global trading system in a big way because of the importance of the supply chain and it hurt a lot of countries, including the united states. when you think about that, it comes back to a broad impact on the global economy, and certainly it has a role to play

in making decisions about monetary policy. david: catherine mann will be staying with us. tune in to bloomberg at 9:30 a.m. when bloomberg's head of economics will moderate a panel with mario draghi and his counterparts from the fed, boj, and royal bank of australia. watch it live from the ecb form in central portugal on bloomberg ,go -- o, and on live . live from new york, this is bloomberg. ♪

annual bank stress test are underway, and even though tougher than last year, most banks in a position to increase distributions to shareholders.

yesterday right here on bloomberg, lloyd blankfein talked about the stress tests and said they have been tough, but made the u.s. bank stronger. joining us now is gerard cassidy, ecb's manager and head of equity research. catherine mann is still with us. what are we expecting on these stress tests? >> because of the financial crisis, every year these banks go through these stress tests. we will receive the results on thursday. i think we will see almost all of the banks will pass the quantitative heart of the test, and that assumes a dramatic whatne in the economy, and kind of losses due the banks take and do they have the capital to absorb those losses. david: you said almost. >> we always want to be cautious, because historically there has always been a bank

that fails. last year was the first year we did not have any bank fail, but sometimes the new banks struggle with it to. -- struggle with the tests. david: how is wells fargo fare?there is a bloomberg piece raising questions about wells fargo. >> quantitatively there is no question they will pass. quantitatively we think they will pass, but there is a qualitative portion of the test that comes out on the 28th when the fed allows the banks to distribute dividends and buybacks, of whether the controls and procedures are very strong, so i think there is an elevated risk. we are not saying they will fail, but there is an elevated risk qualitatively. ared: if the stress test tougher, how can the banks give out more money? >> i would say the capital is stronger. yes, the banks are very strong.

i think what you will find is the economic decline was more severe this year in the test, but the drop off in the dow was 65%, and typically it was 50% in the tests, so the capital market banks will struggle a bit. we think morgan stanley and goldman sachs will give back less this year because the test was tougher. alix: it also brings up how much money they have to do other stuff, like make loans. this is core bank loan growth. we can see it is falling. the three-month annual is that blue line. the white line is based growth year on year. y> this is not what m business is, but what we do see in terms of small businesses wanting to take out loans, wanting to undertake expansion it is clear small

banks and small businesses are on track for a very good year. i am curious as to what that particular diagram is picking up, whether or not cord loan is representing automobiles, housing, or there are some other issues. >> if i could add. point, theatherine's smaller banks are growing their loans quite rapidly. the larger banks are the ones not growing their loans as quickly. capitalhappening is markets are taking away the business because they are more competitive. what you can see with the weekly loan data is the smaller banks are growing high single digit rates of growth, which is strong in an economy growing at 3% to 4%, but the large banks are only growing at 3%. alix: jeffries is a precursor to big banks talking about trading slipping further. it goes to what you're talking

about in terms of capital markets being healthy. >> yes, the first quarter was very strong for all the players. investment banking was weaker, but investment banking should be good for all of the big investment banks. david: thanks so much for being with us. will be staying with us. coming up, volvo will open a new plant in south carolina. the car group president and ceo will be here to explain why they are building the new sedan in south carolina. live from new york, this is bloomberg. ♪ bloomberg. ♪ what's a gig of data?

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and with millions of wifi hotspots included, you'll pay less for data. it's a new kind of network designed to save you money. click, call or visit a store today. alix: this is bloomberg daybreak. in the markets, it is calm. points, but you won't get any help from ge, because it will be kicked out in

favor of walgreens. part of that is a fluctuating currency. a lot of dysfunction happening in parliament. they will be voting on a meaningful boat which brings in a question, will there be a hard brexit or not? the 710re watching which may invert. volatility coming down a little bit, but crude picking it up. conflicting headlines continue to come out of that opec meeting. david: now let's get a check on what is going on outside the business word -- business world. we turn to emma chandra with the "first word news." emma: the trump a is ramping up the pressure on china. in q -- they are accusing beijing of stealing intellectual properties and threatening national security.

the report was released while the u.s. continues to consider imposing tariffs. the trump ministration has carried out its threat leave the united nations human rights council. ambassador nikki haley called the group a protector of human rights abusers. the u.s. has also singled out the human rights council for being biased against israel. opec is having for a battle in vienna. iran has rejected the compromise that would raise oil production a small amount to appease members of the cartel. that sets them on a collision course with saudi arabia which backs and increased output. an increased output. >> and very strong supporter of the declaration of cooperation and therefore the issue does not arise. we have confidence in the wisdom ministerbility of our

who is the most senior minister in the opec family. emma: global news, 24 hours a day, on air and at tick toc on twitter, powered by over 2700 journalists and analysts in more than 120 countries. i'm emma chandra. this is bloomberg. david: we turn now to cars, specifically volvo cars. follow cars is opening a new plant in south carolina to build its sedan for sales all around the world, including back in china, the home of its parent company. $1.1 billion of investment in the new plant. 150,000 cars a year. we will come the ceo of volvo cars, the consignee listen -- a constant nielsen -- hakan samu elsson. why did you pick south carolina? think with all the

nervousness we have in the business, we are very glad we are here. into various alternatives and came to the conclusion that it is important for us to be local in the u.s.. trade credibility with our partners, but also to become closer to consumers, to learn about their preference so we can build even better cars for them. david: once you're up and running, what percentage of the cars manufactured in this plant will likely go for the u.s. market as opposed to overseas markets, including china? now, -- within three years time, we will add a will have around

150,000 cars and half of that we plan to export and the other half would be for the u.s. market. that means this factory the benefit of the two-way fair trade system. we would export as many cars as we import. the trade balance of the volvo world would be neutral. david: hakan, considering the trade dispute between the u.s. and china, one of the things on the table has been automobiles. could you be in an ironic situation if china imposes tariffs? hakan: we could very well be. there are already import duties for china. we believe in open trade, but

the issue is trade is two ways and we hope they can meet on a low level. that would be for the consumer'' beneficial solution. david: as you look at your plant in south carolina, when you are up and running fully, what percentage of the points -- parts you are putting the cars will come from across the border in either mexico or canada? it will be local content, close to 50%. 75% would be u.s. local and the rest would be imported from europe and mexico will be our biggest supplier. david: does that mean that you are not as concerned about nafta as some companies are? i would say we are not

going to build cars in mexico. there are straw -- there are strong suppliers in mexico and we would like to buy those parts from them, but i think the trade dispute going on between europe error the u.s. and china is our biggest threat for the future. sayinglloyd blankfein that he thinks it is a matter of negotiation that ultimately, the parties will come to terms. is that your anticipation? au have a unique position as u.s. manufacturer but with a chinese owner. my take is that the chinese government is fully aware that the auto industry needs to be competitive on a global market. i know it is a big understanding in europe and also openness to

agree on much lower tariffs on cars and other industrial products. can puto hope that we prestigious a side and come to a solution where we would have a fair trade with low barriers in both directions. finally, i want to ask about electric vehicles. you have set a target of 50% of your sales being electric vehicles by 2025. that plant in south carolina, is it capable of making electric vehicles? how many electric vehicles will you make? hakan: we have not made investments for that, but this factory can build our small platform cars, including electric versions.

we will bring specialist technology in around three years from now. david: thank you so much for spending time with us. that is hakan samuelsson, the volvo cars ceo. s are going to hurt 50% of cars made in the u.s.. catherineing us is man of citigroup. >> local content, local production that also exports and so in order to export, you need to be competitive and how do you be competitive? you have global supply chains. manufacturers are a perfect example of that. alix: what are going to have to eat their margins? erine: that is a really important question we are looking at because of the inflationary consequences of a tariff war.

we already see aluminum and steel being passed through at the so-called producer price index. there is more concentration in the industry, so they do have pricing power. what that means is when they can , the nextrough question is what about the final good producer? can they pass it on into the market, or do they have earnings compression? we see earnings compression because at the end of the pipeline which is the consumer, there is not pricing power. we do see consequences at the intermediate level not yet at the final good level. alix: if you take a look at the census bureau, how much we import from china, we talk about tech in cars, but it is also apparel, textiles. but is going to affect what you by nine buy at the store -- what

you and i buy have the store. david: at -- at the store. david: at some point, it is going to affect people at the cash register. catherine: at this point, there are still enough competition -- there is still enough competition for companies to take it on to their earnings as opposed to passing it on to the consumer. we don't buy everything from china, so from an inflationary consequence aspect, that is an important question. the other important question is that yes we did a lot of shopping but a lot of what we do is buy services and they would not be affected by a tariff. they would be affected by labor shortages. alix: or summer sales. mann of cityine

research, always great to have you with us. packers trick again, stealing $32 million of goings. if you cannot what's the tv, you can listen to bloomberg radio. bloomberg surveillance can be heard in new york, boston, the bay area and all across the united states on sirius xm satellite radio. ♪

emma: this is bloomberg daybreak. coming up in the next hour, an exclusive interview with howard marks, oaktree capital's cochairman. this is bloomberg. david: we will turn now to wall street beat.

thief.to coin a crypto's fall after hackers steal $32 million from the south korean coin exchange. pension officials scold a firm for a lack of diversity.