boe moments away from its rate decision. ,rade is a decisive factor higher sales and higher cost this year. 600 billion dollars, argentina and saudi arabia added to the msci. goldman sachs says by local emerging-market debt. david: welcome to "bloomberg daybreak." we are waiting for the boe. alix: as expected, no rate hike. still holding at .5%. the vote 6-3. dissenters, now a third added. erasing any ofng its tech line after that decision. a hawkishke that as

backdrop that there are three dissenters. david: the question is not so much this one, but august. also, they say they are not going to increase -- reduce qe debt until the bank rate hits 1.5%. alix: the market reaction, sell anywhere you can and the market. up for basis points. let's go over to london for more. lack of rate hike not unexpected, but the dissenters were. at theere looking possibility of a surprise out of the boe, and we got one. the chief economist decided to switch sides, the vote count 6-3. that it's something very few anticipated. the market making that more live than it was before. what is interesting is what we

also get from the boe is that the in pc is more confident the q1 slowdown was temporary. there is a believe that will not persist into q2. the boe is providing itself with more optionality. we don't know yet. why take august off the table. the pound benefiting from this. alix: i find it interesting the qe unwind will begin when the rate hits 1.5%. i feel like a more specific timeline for the unwinding. >> they want to make that clear and make the market aware of the process. the fed did something similar. had a slightly more and egress approach from the ecb in terms of how it will be rolling off its qe generated holdings. bank is tryinghe to provide clarity for the market.

in theaying the slack labor market is likely used up. badboe has been very the labor what impact market will have in terms of wage growth. thates seem we are at neutral point and will see an acceleration in wage inflation. it is a more positive picture than anticipated. david: is it significant that that the center is the chief -- dissenter is the chief economist? it is the first time in seven years the chief economist has dissented. >> absolutely. it is fascinating. he is the chief economist. theoretically he is the guy with his finger and all of the numbers and understands all of the models. his models form the basis of this. he has decided slack has been

used up and we are at the point we need to get rates to a neutral position. the hand seems to be from that that he believes in august hike should be there and we need to start tightening into what could be theoretically some wage growth inflation. alix: i want to get market reaction. we talked about cable moving off the lows, selloffs in the market. how much position unwinding do you feel needs to be recalibrated? questionable.ook the market has sold off into this decision. you look at that line and you appreciate where we are on the day. we are not that much higher. sterling has been battered of late. down quickly. of a is a little bit positioning factor in all of this.

sterling is still relatively cheap compared to other currencies at the moment. may be short on sterling. there is some suggestion out does have the market the potential to move sterling lower. david: really good to have you. for more on the boe decision, deutsche bank's chief u.s. economist here. thatt to put up a chart goes to u.age growth. this is something mark carney refers to almost every press conference. it shows that finally the rate of growth of wages is faster than inflation. how does that explain the decision? >> in some sense it is interesting how the boe is the labor market is

showing some signs of wages going up. a little bit like the u.s. there is enough for central bankers to say this is telling me we have to do something. alix: how much re-rating do we need to see in the gilt market. >> we have brexit simmering in the background. we have this more structural issue, but generally speaking up to this point more recently it has been the brexit issue coming back, but the boe is standing firm and saying we are confident that we can have the door open for a hike in august. david: what do they see in the economic data be on the wage numbers? , the boe is stock

between moving ahead and holding rates lower for longer. is u.k. economy and boe trying to figure if they are more associated with the u.s. model, or go slower like the ecb. alix: what do think about the ford guidance they qe will end. >> that is breaking news. to say we will stop qe when we get to one point 5%, that is very specific, saying to the market don't expect we will have anything in terms of slowing down before we get to this level. they are giving very clear guidance. it is risky. what if other conditions change, other things turn up or down? it is eye-opening to be honest. mr. carney does not necessarily follow through

on promises. you will be sticking with us. to recap the boe decision. until thecontinue qe rate reaches 1.5% instead of 2%. were 6-3.ters in the which are seeing markets, the ftse negative, off .4% as sterling gets a boost. you can see 132 is the cable rate. not a huge move, but positive territory. the gilt market getting hammered. the spread in the u.s. continues to flatten. 1%.off i'm watching how much opec will raise output. output. that is the question for the crude market. david: first, how companies will be affected by the trade war spirit that is coming up next. -- the trade war's. that is coming up next. this is bloomberg. ♪ this is bloomberg. ♪

>> this is "bloomberg daybreak." it didn't take long for at&t to launch a new television service. the new streaming service will incorporate networks from time warner. it will be a package of 30 tv channels. it will be free for subscribers to unlimited wireless plans. as aost is $15 a month stand-alone service. comcast now deciding its next move. disney raised its offer to more .han 71 in dollars the company is close to winning antitrust approval for its did. comcast may have to offer more than $75 billion to have a chance. is parent of mercedes-benz

cutting its outlook and blaming it on global trade tensions. daimler said full-year earnings will be less than last year. many sedans and crossover vehicles are made in the u.s.. they would be caught in the tariff war between washington and beijing. alix: thank you. bloomberg first take, three stories we are watching this morning. central banker sounding off on the trade dispute on growth. yet companies starting to predict how much trade spats will hurt sales and margins. finally, goldman sachs says emerging markets are a buy. we are joined by peggy collins, and the chief u.s. economist at deutsche bank. the conversation was all rage yesterday morning. here is what central bankers had to say on trade. >> what is the effect on business investment, on exports, on consumer confidence? then lessonse have

one can learn from the past. they are all very negative. >> those concerns seem to be rising. decisionsring about to postpone investment, hiring, making decisions. that is a new thing. >> what is happening on trade is incredibly disturbing. can any of us think of a country wealthier or having boosted productivity by building walls? probably not. bethis situation could normal trading relationship between the u.s. and china would prevail. by powell'sstruck comments, nothing would deter the fed from the rate hike path. do you agree with that? >> they are saying everyone

knows trade wars are negative for gdp. if you are a cenal banker, it's not surprising you don't know how to discuss is because they don't know how to quantify where we are at the moment. fed,nder the doj, ecb, st be working hard on how to quantify these risks. david: it may be difficult, but companies have to quantify. mercedes-benz, fewer than expected suv sales based on higher costs. it must be assumed because of the increased import tariffs for vehicles into the chinese market. daimler stock went down and futures went down. bighey are the first company to say expect this to show up in our second-quarter earnings.

because we arent seeing companies have to measure this on both sides. company like miller coor's dealing with tariffs on aluminum , and daimler or bmw who have car plants in the u.s. who are shipping cars to china. it is something a number of companies are having to calculate. has powell, we are seeing companies deal with uncertainty as they have in the past, pause and spending. companies in the u.s. are getting a bump from the tax cuts that went into effect this year. it is still to be determined how much this affects. alix: fair point. at what point does the traits that the road the benefits of the tax cut? >> if you add everything together so far on imports and exports, it would be a drag on gdp of 0.3%. you have a tail wind fiscal that

is your .6%. the fiscal tailwind is stronger. this is the biggest uncertainty, where does this trade war in and how will markets react? what if company start holding decisions,, capex the impact then could be bigger than the fiscal tailwinds was so it is a struggle between product politicians. alix: it is so nice and convenient so the trade wars can get them out of that. david: they are a big exporter of suvs to china from south carolina. the tariffs will hit them. alix: the third story has to do with emerging markets. arei arabia and argentina added to the msci emerging market index. this is a percentage of the market cap as a percentage overall.

how big of a deal is this? >> getting into the indexes is like finding a pot of gold at the end of the rainbow. topanies and countries want be in indexes because so much money is going into index funds and etf's. for saudi arabia and argentina, it is a big positive for both of them. we have seen argentina struggling across the board among emerging-market countries. for them, it could be a bigger deal. broadly stronger dollar, right? the dollar index at the highest level since july. goldman sachs and we like global emerging-market debt. where do you stand? >> let's take the old textbook out here. rates, that raises has traditionally been bad for emerging markets. the question we are asking isn't the case the fed is done raising rates? clear, then it must be

there will be significant risks to em fx and the general picture overall. david: thank you for being with us, peggy. on trade withe wilbur ross, the u.s. commerce secretary joining us from the select usa investment summit in washington. live from new york, this is bloomberg. ♪

alix: this is "bloomberg daybreak." here is where we stand. then that theon, boe change things there.

off the lows of the session. the ftse 100 in negative territory. stocks, they automakers, dragging down the index today. , theonger dollar story dollar index of the highest level since last july, but off the highs of the session. part of that is the cable rate, up .2%. the hawkish part of the boe statement is the chief economist became one of the three on the dovish side. they said they were not into qe until the rate hits 1.5% versus is so push and pull as gilt selling off all over the place. italy, some euro skeptic officials, keep parliament offices in the new italian the 2-10 spread continues to flatten and crude getting hurt over opec news. david: deutsche bank's still

with us as we talk trade. that is a big issue today. we have seen that show up a central bankers and daimler. one of the themes of president trump has been reciprocity. we have be even stephen on this. you have a chart about apply tariffs in the u.s. as opposed to other countries. we have the highest applied tariffs. >> it is a marginally higher number for the u.s. this chart shows you what is on average the tariffs apply to goods imported. you can have other tariffs really high were goods are not imported or common small numbers, but this is import-weighted terrorist. the u.s. has the highest number. this just confirms the general story that there are many ways your interests, tariffs, tax subsidies come incentives to

companies. all of these things come into the general picture of how much is qualitative and quantitative support to industries, both the u.s., europe, and china. many countries have different forms, but this chart is on the tariff front. jay powellheard what had to say. are using effects on growth? , nonfarmthis point payrolls are the number one indicator. they look to be strong, but we are watching for any sign of a slow down in the boe statement and the fed. ecb, is that just temporary? are we off to the races again? is there something coming from the trade issue, and overhang of uncertainty that will hold back capex and hiring. alix: central-bank convergence

come than central bank eurosions, and -dollar. >> it is at the widest level in decades. it tells you the diversions has opened up here at it is coming from synchronized global growth. it is the u.s. going it alone. we better not have any negative consequences of the trade your because the u.s. will flatten out and we will have a different discussion. alix: with the trade wars in the background, where we have convergence but not in a hawkish way? essentially we are still hoping the expansion continues and we can get to the exit. may be trade issues are going to push the exit further away. either greater support from the

fed or ecb, and for that matter the boj and boe, pushing out before we see more rate hikes. david: does this mean the fed statement last week about raising rates is no longer operative? say we will hike three times this year, three times this yea and now they say they will hike four times this year. that was hawkish. they must be looking hard at their bloomberg screen and figuring out how we quantify the risk. has beenhat gilt emphasizing --jay powell has been emphasizing. david: thank you very much. we are waiting for wilbur ross. onwelcome now listeners bloomberg radio and bloomberg television as we talk with the man at the center of the united states trade policy, secretary of commerce wilbur ross coming from the select usa investment summit in washington. thank you for being with us. >> thank you for having me on.

david: we have been focusing on what central bankers have been saying. jay powell talk yesterday about seeingent to which he is businesses really looking at the trade nsions, frictions, even in severe war. this and to what he had to say. -- listen to what he had to say. >> we have a wide range of contacts in that this is world in the u.s. and around the world. they continually an increasingly expressed concern over trade developments. those concerns seem to be rising. for the first time we are hearing about decisions to postpone investment and hiring. david: you heard what he had to say. he is seeing postponement of decisions to invest. are you seeing that? , i am here at select usa, which is our big annual foreign

direct investment conference. we have over 3000 delegates here from 66 foreign countries, and they are all here because they are interested in increasing their investment in the united believe over the next couple of days we will have some very big announcements to make about new transactions that these folks are entering into, so i don't think that is true, that there is some big change. i think the media have been very negative on the trump administration. they pick up some little company somewhere and say, oh my goodness, this guy is having trouble, and they extrapolate that into the whole country. david: fair enough. let's take daimler, a big company. this morning said because of the issues with china they are taking down their profits. the stock price went down and futures index and s&p

down. that is not a small company, sir. don't it is not, but i think what we have done will hurt them. david: what it is is the imposition of tariffs by china on what we have done on exporting suvs from south carolina to china. there was a direct response to the actions we have taken. >> the retaliation, sure. naturally there will be some retaliation by the foreign countries. they will try to pick politically sensitive areas to deal with. we are ad of the day, net importer, not a net exporter, and that means a very fundamental truth. sell $500, they billion a year in goods. we only sell them $150 billion.

ite they click tariffs, if went that far, on the whole $150 billion, they have nothing more they can do. we could toretically go all the way up to the $500 billion. that is not an easy game for them to play, and similar ratios with the other countries. that is what president trump means when he says if it does get to be a big war, we have more bullets than these other countries. david: when it comes to tariffs, but there are other ways of hurting imports, nontariff barriers. china specifically said quantitative and qualitative, so tariffs are not the only way they can retaliate. is it theis true, nor only way we can retaliate. china, europe, a lot of other big countries have been using non-terror of barriers for a long, long time.

they have put on weird standards that are impossible for american products to meet. non-science-basediction. for example, some of these countries keep complaining, we cannot import u.s. meat because of mad cow disease. do you think mad cow disease is really rampant in the u.s.? i haven't heard a report of it in years. similarly, some country say we cannot import your chicken because of asian flu. when is the last time you heard a case of asian flu in the united states? it is all nonsense. the truth is they have been very protectionist and we have been very close to free market and now that we are trying to defend ourselves against their bad practices, they are screaming and yelling. they have been spoiled for many, many years in that game is over. david: mr. secretary, i think

there is no one who knows about the situation who would deny china has been protectionist. i don't think anyone would take exception to that. what happens when there is tension on the one hand between growth and jobs, which is what the president's first order of business was? that on one side and getting fairness and reciprocity. would you rather have less trade and growth and have it be fairer and more reciprocal? sec. ross: we want it to be fairer and more reciprocal. reciprocity is an important key note to our trade policy. the question is, how do you get there? the only way we are going to get foreign countries to lower their inordinate barriers is by making it more painful for them to continue those practices then continue them. game thatout an end

really is free, fair, and reciprocal trade. it is not about trying to make money out of tariffs, that is not really the end game here at all. we need something to induce changes in their behavior and it is already happening. in steel and aluminum, once we put our tariffs on, suddenly europe is taking safeguard measures all over the place to protect their border. they were not doing that before on.ut the tariffs japan had never had a trade enforcement group in their government agency. now they have a 20-person trade enforcement group. we are going to fix the problem of protectionism around the world and we are going to fix it by making it more painful for those countries to do bad practices then to do the right thing, which is to lower the

trade barriers and lower their tariffs. david: i don't think anybody would quibble with that as a goal. the question is how much pain are we willing to suffer to get this done? the pain goes both ways. deutsche bank is out with estimates trade war could take 3/10 off of gdp growth. if you knew that was the price you had to pay, would you be willing to pay it to get to reciprocal trade? sec. ross: it is hard to make a nominative if you do not break some eggs. we have no choice but to change the way these other companies -- countries are using unfair trade practices against us. we have to do it. it is unfortunate that it was not done at an earlier point in time. it would have been a lot simpler, a lot easier, and a lot less painful. it is really important that we

do it because we are talking about our future. david: and that is more important than the growth goal? republicans came up with, the president put forward a tax plan that was growing gdp nicely. e you getting a fair amount of that back to get to the reciprocal world that you want? sec. ross: we don't think so. we think we will continue to see very very strong employment. the biggest problem most american companies have now is finding enough qualified labor to do the expansion that they are putting forward. and is why you are seeing all of these apprenticeship programs, all of these joint programs with local immunity colleges. finding workers is the biggest problem right now for american industry. not anything else because we cut the regulations, released those shackles, cut both individual and corporate taxes, making

america a wonderful destination for foreign investment and direct u.s. and that is why we have, here at selectusa's summit, over 3000 attendees. we have 66 countries represented here, that is 15 more countries than we had a year ago. we have 5 cabinet secretaries here, 14 ambassadors, u.s. ambassadors to foreign countries, this is a real turn out and we will be making some announcements about new foreign direct investment into the u.s. that is the real world, not the whiners who have criticized every single thing the president has done. they said he would never get a .ax bill through, he did he they said it won't do any good for the economy, it will only help rich people. unemployment is at record lows.

corporateenthusiasm, optimism, relatively all-time highs. small business optimism, low unemployment. overall, very low unemployment for women, very low unemployment for african-americans, very low unemployment for hispanics. anybody who thinks the economy is being wrecked simply does not know what they are talking about. do not understand me, i am not suggesting the economy is being wrecked. let me ask a specific question, the zte situation. do you believe there would it -- would be a compromise that would allow zte to continue to do business in the united rates -- united states? sec. ross: there may very well be. the president and secretary mnuchin and i met with a bunch

of leaders and that was one of the many topics we covered. i think the important thing is zte's pave your from what it was before. we have taken to billions of -- $2 billion of fines and for the first time ever, we have the ability to implant into a company that violated sanctions, our code of conduct, our code of export control and we have unfettered access to the company in order to monitor it. if there are any further violations, we will shut them down just as we did before and we have the power to do that. david: finally, mr. secretary, there has been issue of short selling shares into a shipping company. i do not want to go fully into that, but you have talked about them plenty. many of us were surprised senior government officials are

involved in shortselling or derivatives of any sort. at bloomberg, we are not allowed to do that. would it be a better policy or rule to say senior government officials should not be engaged in things like shortselling at all? , this is not what you would call a typical short sell. some shares in one company were not physically in my possession and it was a whole process i had to get through to get them into possession so i could sell them. been begun selling those h-shares i had possession of months before. when i learned about the new shares, i wanted to close the holding and it happened to be a company called navigator. when the shares were delivered to me, my own shares, i use them to substitute, so there was no profit or loss on the so-called short sale, it was simply a

means of implementing a transaction and i had no gain or loss or change in the marketplace. david: there was nothing in my question that suggested anything improper had been done, ill-gotten gains, i am asking concession about the shortness of life, as it were. i am sure it was not pleasant for you to have to explain all of this. wouldn't it be simpler to have a rule that says senior government officials do not participate in something like shortselling? sec. ross: this is not a typical short sell. a typical short sell is you borrowed stock you do not own and you sell the borrowed stock, putting up collateral for it and then when the stock goes down, you cover it and make a profit. if simply is not what happened here. i do think that kind of short sale is not a good thing for government officials to do. this is simply a technical means of complying with the delivery rules of the new york stock

exchange. i did not gain or lose regardless of what the stock did after i entered into the transaction. , if the a short sale stock went up, i would profit and if it went down, i would lose. my situation was one where i was totally indifferent as to the subsequent price of the stock. as it happens, the stock is now at a higher level when it was --than it was when i sold it, anyway. david: fair enough, i think i understand. i want to thank you for taking the time, mr. secretary. i know you want to get back to your investment summit, that is wilbur ross, the u.s. commerce secretary. sec. ross: thank you for giving me a chance to clarify the situation, i appreciate that because there has been a lot of hyperbole, a lot of innuendo, and a lot of misunderstanding, thank you for the opportunity to declare that. david: it is our great

privilege, thank you, sir. sec. ross: thank you for the interview. alix: i feel like that was a no. your biggest take away from that interview? >> one thing we always need to remember is countries who generally speaking close themselves around themselves generally do not have competitive industries. a very important benefit of having open borders in both ways inin so many investment is actually that you put pressure on your industries to be the most innovative and competitive in whatever sector they are in. one thing the whole world has to be worried about is if we are basically creating more monopolies in different countries by shutting out competition, that can have comp -- consequences down the road. alix: we appreciate it, torsten slok. we want to update you on the market moves, particularly in the u.k. because you have the

gilt market really under pressure as you have the by four gilt yield up basis points as the boe came out more hawkish. qeo saying they will keep going until a rates hit 1.5% and still love -- instead of 2%. the chief economist for the first time since 2011 dissented. david: a little excitement coming from the bank of england. alix: and we thought it was going to be boring. said to be ineim talks with firms in asia and europe. this is bloomberg. ♪

>> this is "bloomberg daybreak."

i am emma chandra. coming up in the next hour, scott sheffield, prior me -- pioneer natural resources chairman. david: we turn now to wall street to beat. wild day.deutsche's a major trading loss adds more fuel to the regulatory fire. guggenheim ways a deal. the boutique firm selling stake in its $250 billion asset management unit to global insurers. the world biggest shipping company appoints a female ceo in its first time in the 100 14 year history. about time now. alix: woohoo. t's talk about deutsche bank for a second because this is the u.s. unit that suffered a one-day loss in the first quarter that was 12 times what

internal risk officers estimated for regulatory purposes. end ofote the ceo at the this story, many of you are second tired of bad news -- sick and tired of bad news. this is bad news. this is the kind of thing you just do not want to see. david: it is not just losing money, but knowing how much money you have at risk. the bar was way up there. alix: that is the whole point of doing -- deutsche bank, they were not able to deal with their risk factor and that is why they are in this situation to begin with. david: it is also about the time .here we know the stress tests what is the fed going to do with that? >> i also have to thank when was the last time we spoke seriously about var. about 10 years ago. alix: especially when like morgan stanley and goldman sachs has been going down. to see that bar jump on a

deutsche bank. immediately tells you about the bar, where it has gone down to. alix: you lawyers. at thescott minor now guggenheim, it appears they want to buy some other things and put it together with swiss -- >> and then sell the stake. this is a broader trend, i think we talked about this idea of big asset managers trying to figure out exactly how to play asset management in a broader sense, the banks especially have a little bit of a complicated relationship and one of the interesting things here because thehe insurance piece is uncomfortable marriage sometimes between asset managers and insurers and they have their investment strategies completely aligned. david: unless you are warren

buffett in which case they are one in the same. jason: unless you are warren buffett and it worked out just fine for you. david: i want to remind you what bob iger did with disney, he did it to scale. that's what it feels like asset managers have to do right now. familiar faceis a here on this program and a good performer, clearly, he knows how to run money. david: not just on tv. jason: not just good on tv. he has a real job as well. alix: can we just make a statement and say david was able to relate a reinsurer instance to disney? david: everybody has -- jason: everybody has their frame of reference. we all have disney on the brain right now. alix: our third story has to do with females getting into the shipping industry. this is maersk, basically having a female ceo for the first time in 114 years.

jason: it is a big story and one of the notable things about this from a numbers perspective, we talk about how dismal the numbers are on wall street in the industry, in shipping, 3%. alix: industrials, oil, yeah. jason: that jumped out at me in a meaningful way. i guess this is a first -- good first step, clearly being heralded within the industry. notably to me within this was this is at least in part from investor pressure. we were talking about yesterday with tbg and facing pressure from their public tension around this issue. this is not going away. i think companies are starting to realize they need to make meaningful demonstrable change on this front in response to investor pressure. wrong.investors are not an old boss of mine said more than half the brains and the world are female.

alix: we know. david: including the best ones, the bter half alix: what is also interesting is there is a conversation in specific commodity industries if you want -- is you want women on the board. is so small that if you draw them here, they cannot get over here and how you manage that in the industry. david: you have to work on -- jason: you have to work on, pun intended, the pipeline. commodities joke. alix: commodities joke. david: commodities -- jason: commodities joke for you, disney for you. david: jason will sit down with an exclusive interview with a foreman goldman sachs -- former goldman sachs chairman of investment banking. coming up, decision time for comcast, disney raised its bid

for fox, will comcast but in a counter bid? alix: check out tv and watch us online and click on our charts and graphics. and ask and us an ib question. check it out. this is bloomberg. ♪

david: disney made its bid for the 21st century fox assets yesterday and fox agreed and now the ball is back in comcast's urt as we it to see if they will stay in the auction. there is a great piece out and we will put a quote up from chris hughes. disney has an agreement with murdoch, but roberts has the will and tolerance for leverage, this battle may be far from over. you contributed to -- to this

piece. do we think they are coming back? >> it is all up to brian roberts. it is written in comcast's articles of incorporation that he is ceo for life for as long as he wants to be there, he can. he can almost do whatever he wants. he has a controlling stake shares.class b there are natural limits to how much debt comcast can take on and that is really the question, if they come back, is that going to be there final bid -- their final bid? david: it really is a family company, brian roberts' family -- father started a company himself. ceo, butis a fantastic not an owner. it is a very different mindset. brooke: it is, but disney has the advantage regulatory wise. bloomberg reported yesterday they are close to receiving antitrust approval, you might see that within weeks.

that is a significant edge over comcast. the original reason fox went with disney over comcast was that fox felt like a deal with disney would be better odds of getting regulatory approval, getting over that hurdle will be a positive step. alix: at the end of the day, it is still a public company and there are still shareholders. if you have enough of a revolt in the shareholder base and a big group that say we do not want the deal done, does he listen to them? brooke: i think it certainly isn't pressure and a comcast lost $32 billion in value since -- that has got to be sending a message and to your point, i think you have to listen to that. alix: and look what happened to facebook where they had the certain type of voting shares and then there was a revolt and they did not want mark zuckerberg to make all decisions on his own. david: and the rumor is this is personal for brian roberts, they

actually went after disney before and dropped out of the bidding because shareholders were so adverse to it. brooke: i think it is a bigger shift in ere everyone feels like they have to compete against netflix. if feel like they need this extra content to create a legitimate netflix rival. -- bewould you try to willing to bid for fox versus merging with netflix? brooke sutherland, thank you very much. wongtrakool,nnie western asset management fixed income portfolio manager talking about if she is diversifying into any safety assets. 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.

factor. daimler blames trade battle on lower sales and higher-than-expected cost. emerging markets plus $600 billion. argentina and saudi arabia added to msci and goldman sachs unafraid of the stronger dollar. opec deal or no deal? saudi arabia wants to add 600 billion barrels of oil a day while iran -- david: welcome to "bloomberg daybreak" on this thursday. we have bank of england, wilbur ross, and the longest day of the rear -- of the year. isn't this summer solstice? yes, we have not cover that yet, but now it is. alix: summer solstice and after that it gets sad and depressing until winter. euro-dollar in a downside here as the overall dollar index at the highest level since last july with the exception of cable, bouncing higher.

10 year yield moving lower by about 1 basis point. the 210 curve continues to get flatter and crude off almost a full 1.5%. who would've thought the oil would put that much pressure on the oil market. david: it looks like they might have an agreement? alix: i am skeptical. they might say it, but what really goes down in the room will be a different story. david: time for the morning brief, we will get weekly jobless claims. speaks ineel kashkari minneapolis and at 4:30, the fed releases the results of the 2018 bank stress test, at least the quantitative part as part of the dodd frank act after the financial crisis. alix: let's get an update on what is making headlines outside the business world. emma: president trump plans to meet with russia's president vladimir putin sometimes next month -- sometime next month. it could take place before july

11th before the nato summit or before -- after president trump visits the u.k. president trump has given into the political pressure over his policy separating families caught crossing the border illegally. he reversed course and signed an executive order he said would end the practice. previously, the president said only congress could take action. it does not address more than 2000 children who have already been taken from their parents. in israel, the wife of benjamin and yahoo! has been -- benjamin netanyahu has been charged with fraud. she has denied any wrongdoing, the prime minister says the family is the victim of a political witch hunt. global news 24 hours a day, on air and tictoc at twitter, powered by more 2700 journalists and analysts in more than 120 countries. i am emma chandra, this is

bloomberg. alix: thank you so much. in the market, it is buy sterling, sell anywhere on the gilt curve. the chief economist was one of three dissenters in the boe meeting and they will keep purchases for qe until the rate reaches 1.5%, about 5/10 lower than priestly estimated. yields are up by five basis points. joining us is bonnie wongtrakool management --t you did not have to get up at two in the morning to be with us usually on the west coast? bonnie: that is a bit of a break for me. alix: you really want to be selling or shorting the front end of the gilt market right now? bonnie: i think the key thing with the decision from the bank of england is not that it will be august or september. we saw the market act a lot in sterling and the possibility of a hike in august. it is about their true forward

path. central banks around the world are takingcautious approach to normalizing policies. it is not in their interest to .o on this predetermined path everything is codependent and we lastt want to see this week. their policy is it is patient, prudent, and persistent. that is true of every central bank around the world. alix: i feel like a lot of investors were taking off duration because they did not want to be caught flat-footed. oppenheimer saying he is overweighting foundation -- duration and moving to a more defensive stance. bonnie: we think that is the right call, to have some duration. in terms of what is priced in the market, it is a little too optimistic and there are risks to the downside and we see that in trade talks and in the fact

boost this year from the fiscal stimulus that is probably going totaper off and the boost the consumer, we have not seen a big impact yet and that is not a permanent boost, that will decline a matter the impact. david: let's talk about the risk to tnside. we spoke earlier to wilbur ross and talked about the possible risks of his approach to trade and this is what he had to say. david: but he said it somewhat louder. alix: turn up your volume just a little bit. it aftero not have all. i will paraphrase, there will be retaliation. we can inflict more pain on them than on us, but this is the way we can get to a different world. now i am told we have it, let's try to listen to wilbur ross. sec. ross: naturally, there is going to be some retaliation by

the foreign countries and they will try to pick out politically sensitive areas to deal with. at the end of the day, we are a net importer, not a net exporter, they have been very protectionist and we have been very close to free market and now that we are trying to defend ourselves against their bad practices, they are screaming and yelling. they have been spoiled for many, many years in that game is over. has a fairie, he point to be made particularly with respect to china. a lot of people think china has been protectionist. what effect could this have on u.s. growth? bonnie: i think wilbur ross is overstating the case we have in terms of our position of power. everyone is focused on the $130 billion for us versus china. china has other tools in their

box read one of them is they could focus the tariffs on our goods at a higher rate and i think also, people overlook the fact that u.s. com that are multinationals that have large presences in china, that is a big market and if you look at subsidiaries of big u.s. multinationals, they sold 220 billion to chinese consumers last year. the idea of chtting a boycott on american goods is not a crazy one given how china works. tooink it is a little bit sanguine to say we are in this position of power. it is definitely going to be a tit-for-tat . alix: when you take a look at the 210 spread, will we invert? everyone is looking at the 710. does your trade get reflected in what the spreads are going to do? bonnie: i think it is hard to

play trade. chairman powell said we have not put this in the forecast because we do not have enough information and i do not think anyone does. you have to look at what are the valuations? am i being compensated for this -- alix: we had walmart coming out yesterday, 105 basis points over treasury. what does that tell you about corporate market pricing an appropriate risk when the trade is the backdrop? bonnie: the long end has had a lot of support this year from the tax reform and the fact that a lot of pension funds are trying to fund ahead of september and in general because the funding status is so much better, you will see it continue to have that bid for the long end in general, including long corporate. david: what might happen to long end after september? it seems to be there is a timing aspect here.

what happens after september? bonnie: they think it will y willue, that the continue to have funding demand. they will continue to see contributions after alix: alix: september. how do you hedge anything? what is the best hedge you can get when you have one treasury bills basically yielding almost as much as s&p dividend? bonnie: treasuries have become a lot more attractive, especially on the shorter end. that has become a good asset for people to go into. we do believe that treasuries are a good hedge against almost any risk, the only one it does not protect against is higher inflation and that is not something we see in the cards. alix: is cash interesting? bonnie: it has gotten more interesting, but the five-year treasury 270 is pretty good, too. david: bonnie wongtrakool will

be staying with us. goldman sachs says emerging markets are flashing green. more on that next. live from new york, this is bloomberg. ♪

emma: this is "bloomberg daybreak." i am emma chandra with your bloomberg business flash. it did not take at&t long to launch a new television service that will incorporate networks from the company it just bought, time warner. watch tv will be a cable-like package. it will be free to subscribers with two unlimited wireless plans. the cost is $15 a month as a stand-alone service. comcast is deciding the next move in the bidding war for 21st

century fox's entertainment assets. disney raised their offer and bloomberg learned the company is close to winning antitrust approval for the bed. comcast may have to offer more than $75 billion to have a chance at the property. the parents of mercedes-benz cutting the outlook and blaming global trade tensions braided daimler says earnings will be lower than last year. any of the sedans and crossover vehicles are made in the u.s. and they will be caught in the tariff war between washington and beijing. or buy in to pull out is the question of two trades in the market. one trader sold 321 $1 million worth of jpmorgan's emerging-market local currency bond etf yesterday. the blue bars are the equity turnover, $453 million yesterday.

emerging markets are flashing green and local bonds are a buy. still with us is bonnie wongtrakool. are you on the investor who just sold all that etf for goldman sachs? bonnie: definitely in the goldman sachs camp. emerging-market local currency bonds are a really good by right now. the health of emerging-market countries in general is actually better than developed markets in a lot of senses, they have lower debt loads, better demographics so that part is really working. on top of that, you have better valuations and local currencies are flashing cheap now. david: if you buy a local currency, you are buying two risks, local currency and fx risk. you think em/fx will strengthen? bonnie: we think it will remain stable, there will be volatility, but you look at the

yield and make sure you are compensated for that. alix: many come out and say this time is different. theou come inside bloomberg, it did not prove to be the case over the last 6 to 8 weeks. jpmorgan local currency etf, the blue line is emf. that did not play out. what did you make of that? bonnie: if you look to see why this year em fx has underperformed, it hasn't really been because of weakness in emerging markets. it started with inflation fears in the united states and the dollar taking off. why did that happen? is inflation going to be higher. we don't think so. we don't think the u.s. economy has changed, the fiscal stimulus does not change that, we have days -- these problems that existed before. david: as an investor, are you toter off heading the market

take etf or some broad-based thing or cherry pick because there are a lot of idiosyncrasies? argentina has gone sideways, we have an election coming up. are you better picking and choosing or playing the market? bonnie: honestly, i think you are better off picking and choosing. e.m. is idiosyncratic. aboutve to be selective the risk. that is part and parcel to being a e.m.. you have to make a lot more alpha by being selective. alix: what do you like, where? bonnie: we like argentina. i know that is a topic of great debate, but if you look at the developments recently, we think they are positive. their funding is a lot more stable. for u.s. dollar denominated argentina debt, that should outperform. we think the new regime of the central bank is pretty solid and there is a political risk, but

you are being compensated and there's are -- there are ways to play on the local currency side. there are bonds linked to inflation and the policy rate and we like both of those. david: argentina has been in the news a lot and turkey. how do you feel about turkey? bonnie: we think turkey is overweight and we think the government side is more difficult. alix: it feels like the bullish thesis was they already went through their regime and now they are business friendly. we continue to see that not be the case. specifically brazil and petrobas. they try to rein gasoline -- raise gasoline prices and the country freaks out. what is your take on the shift we are trying to see? bonnie: these changes are hard to make, they take time and i think it goes back to you know knowrisk is there and you

it will not happen overnight or in a year, you have to make sure things are priced appropriately. alix: you are getting compensated in argentina, where else in latin america? bonnie: we like mexico as well. alix: bonnie wongtrakool, great to see you, thank you for ing us. bonnie: thayou for having me. alix: oriole right below $66. -- oil is right below $66. this is bloomberg. ♪

alix: it is less than 24 hours before a pivotal opec meeting. the odds of reaching a deal have increased as iran eased off on the threat to raise -- members seem to be optimistic about the outcome. >> every minute that i have met with -- member i have agreed with agrees it is time for us to change course and respond to the

market. alternativeseveral , we are looking for keeping the level that they are today versus going up to an increase of 1.5 million barrels or anything in between. countries are looking at this and countries have different agendas and that is the difficult thing. i think we have to, over all of that, look at the unity of opec -- maketity and come up sure we come up with a solution that is good for everybody. >> we are optimistic that we will have a successful seminar. from theseen that sessions this morning, people are very upbeat and optimistic. alix: joining us from the opec meeting in the and a is scott sheffield, pioneer natural resources chairman.

abovenks oil could rise $100 a barrel if opec does not increase production. it is great to see you in vienna . we are hearing 600 billion oils -- barrels of oil a day. what are you hearing on the ground? scott: a great to see you again. isn i spoke on the panel, it important opec increases production to make up for the losses in venezuela, iran, and libya. if they do not, we will see $100 oil or higher. also the fact that permian will see priceline -- pipeline constraints worried you will see very little growth in u.s. shale starting september 2018 to september 2019. alix: russia has been pushing or it has been reported, 1.5 ramp-up.arrels a day

do you feel like the members there are listening to the potential constraints and on a net basis, what will be the increase? as you know, they are not adhering to their quotas. i think the number will be orund 500 said -- 500 600,000. in reality, it will be 500 or 600,000 barrels a day and that will be over the next few months. alix: we see oil prices take a hit, but it feels like the prices should be supported by the increased because on a net level, we will not see a difference. what is your call? brent is close to a low and i think it is at a low now and we will see it stay between $73 and $80 for the rest of the year and next year it could be stronger depend on the -- depending on how much supply

they put in the marketplace and u.s. shale. alix: how big do you think the shut-ins in the permian basin will be? scott: as i said yesterday, i think you will see a combination of companies that will delay crack's -- fracks. some companies will allow for firms growing like pioneer, chevron, box seat and some companies will move rig into other basins. others will show very little growth -- until we see 3.5 million barrels a day added to andpipelines in late 2019 2020. alix: do you think we have seen the peak in permian rig count for now? we will see a

few, not much, maybe 5% of the rig count at the most. i think most people have long-term contracts and it is better for them financially to delay the fracks. they are about 60% of the cost of the well so i think people will drill and just not frack their wells. alix: i feel like what we are leading up to his drilled, but not -- is drilled, but not completed wells. are we looking at a situation where we have a backlog and all of a sudden in 2019 they will come on stream? how quickly do you anticipate that happening when the capacity is ramped up? scott: i think i agree with you and i think the ducts will build over the first half of 2019 and late -- 2018 and late 2019 and you will see production increases when the major pipelines come on third quarter of 2019 you will see a big increase in production in

the permian that will continue 2026.i way to 2025 maybe am a believer permian will get to $7 million, $8 million a barrel -- barrels of oil a day. see you, scott sheffield. for more on the opec meeting, tune in this afternoon for my show "commodities edge." the about a woman, she is car a diamond ceo at 1:00 p.m. eastern time. what is interesting in there is looking at the possible permian output issues. david: up next, we will talk media on bloomberg. ♪ dia on bloomberg. ♪

alix: "bloomberg daybreak this is "bloomberg daybreak." trading like a com getting underway here. by .6%. 100 down part of that story is the

stronger cable rate and part of that story is the boe. the dissent was 6-3. andy voting in favor of a rate hike and boosting sterling. broadlyom that, still a stronger dollar story in the g10 space. flat for the curve in the u.s. 36 basis points and crude rolling over at about 1%. david: jobless claims are down 3000 from last month. about 2000 off what the survey was. last month it was 221. a strongcontinually labor market. the business outlook is interesting because it went to below 20, well below estimates and a big decline from the previous month. david: we have been asking ourselves on a sentiment whether the turnover may be in part

because of the trade. we are holding off and jay powell said he is seeing companies hold off on investment decisions because of trade concerns. alix: they just did the prices where employees pay for goods and services for where they live and that is rising. if your wages not rising and the rising, thatng is will cause a little pain. david: that is not a good situation, it is fair to say. alix: first it was at&t and time warner and now viacom and now the media is consumed with disney's battle over comcast. and sonalik patricof basak. let's start with disney. mark, welcome.

i know you had a piece of that deal, so we will not ask you about it. is comcast going to bid? i guess that is the first question on people's mines today's -- mind today? sonali: there are definitely tax implications and the valuation now is sky high. is camey knows content and something that is a valuable asset on the market today and that is where the story lies until we see them make a play. david: ultimately, you will find out if it is working -- worth it after the deal is done. three stocks have done, 21st century fox is through the roof, way up. it is interesting to me that disney is up on the news of this pretty high bid and comcast is up a bit. i wonder that is because shareholders are thinking they will not get it. reportedhen we

yesterday disney got regulatory approval, comcast rose on that news as well. it is inching higher the more the likelihood goes down. david: mark, i want to turn to you, what is driving all of this? whether it is at&t, cbs, there's a lot of impetus toward consolidation in this area? mark: people got excited by the content creation opportunity in the last 10, 15 years. it is different when in the 90's and 2000s there were five or six companies making the majority of content that was valuable and all of a sudden it was wild west and everybody could do it and value increased for a lot of companies. i think valuations for these early internet companies have started to try and compete with of the old-fashioned company it way and still getting the same value for their dollar in terms of reaching audiences and seeing that increase was very appealing to a lot of people. david: a lot of the new digital

internet companies like netflix and amazon may be producing cheaper, -- mark: no longer, theyere. david: they have a different mechanism for their funding capital. the chairman in endeavor in hollywood, yesterday we talked about the advantage they give internet companies and here is what he had to say. >> talking about disney and presuming they get fox or comcast does, at the end of the day, they will create great content, but they are still in a system where investors look at on profit quarter to quarter and they will compete with people who in this one area may not have to have the same financial pressures. that is why you see all this talk and why they are trying to beef up and get bigger is because they will need that to compete against these platforms. david: i hear this repeatedly from my friends in that business and they say it is really toficult because we have

compete with them in spending a lot of money investing in content. at the same time, we are publicly traded and have to report profits every quarter. if you look at netflix or amazon, they do not have the same pressure. >> this is something we should ask mark about because in knowing that, do you bet on netflix in the long-term? mark: i get into trouble because i am constantly saying -- i would never be long on netflix because at that yen the of the day, it is a brand play. the idea they can create anything that is highly differentiated is wrong. if i am paying hulu and amazon prime and netflix and time warner cable, i will look in my bill and say why am i paying 5, 6, eight companies money when the majority of those libraries are concentric. at that end of the day, will i pay $150 a year for one or two shows i like on net ask i cannot get somewhere else?

long-term, if i am buying groceries from amazon prime and paying them a lot of money for that and they are offering me 95% of what netflix's offering, i will not pay for both. alix: now you go to prime and tv and it10 for brit gets a little annoying. what about the middle market? mark: many times the production companies start to own their libraries and create larger capital. disney was excited about getting rid of that company because about 10% max of that entire library was driving value. 90% had no value. companies try to create libraries and it is still a hit business. middle market expands, production companies become libraries and there is a component of libraries that have value and that gets sold and consolidate again. sonali: it has also done something for the demand for

talent? mark: you cannot fake talent. it is the one thing -- i think people tried and they separate. the talent agencies were prized to take private equity. patrick has silver lake. i think you will see other agencies do similar deals relatively soon. david: is there a squeeze on the middle market? one of the things happening with netflix and amazon, they have huge budgets for the scripted drama. that drives up the cost of the talent, whether it is above the line, the low the line, in front of the camera, behind the camera. mark: it happens over and over again and miramax was a film company and so was focus and weinstein company. bbs and flows and that is why consolidation happens and why you see crazy valuations. sonali: if you are not vetting

-- betting on netflix long-term, who can you bet on? mark: it is not a question of not bedding, it is about understanding you probably can see internet like valuations for multiple companies in that space. hbo in 2007 and 2008, we all thought hbo was netflix and they stopped knocking out hits because it is hard, it is an art, not a science and it settled back for the pack. can netflix consistently create winners in the public mind share? i don't know. they're big move is to have a global brand to get so far ahead like uber what is defensible at the end of the day about. uber other than its brand? david: to circle back to the comcast from a, one of them is not going to get it? you that mean you are -- if

are an owner of content you see your valuation going up? mark: absolutely. it has happened multiple times before. people are all followers in this business more than most industries. david: if i am comcast or disney and don't get it, what is on my shopping list? who are the big holders of content of substantial size? mark: let me ask you this question, were you surprised the weinstein company had any action around it this year? alix: no? mark: i was. alix: you were? mark: if i were them, i would have waited a year. they were a client of mine for a while until we let them go as a client. i don't think there are enough companies out there right now to select from, but if you have value, if you have a library that has value, if you have proven you are able to produce

content across multiple , now we have so many different distribution channels that you have to prove you can do it well on the majority of them and if you have hits that have sustained value, library value. david: that is a narrow, narrow list of companies. mark: probably. companies thate are creating purely online content that we call online content companies that over time will take that stuff they are doing for youtube or other channels and that might raise them to television and all of a sudden they fall into that category? i am not sure you can necessarily say there is volume in these companies. i think it will be another three or four years. sonali: you have a new venture yourself in this is your first justterview, jpmorgan

invested in you. what are you doing? you are working wiro athletes aing them. what do they want to buy? mark: i appreciate you asking. i raised a business that is kind of like an old-fashioned merchant bank. my client is professional athletes with a net worth over a certain amount you have historically invested in a venture deals and have lost their money or not seen the return they expected and the idea is to get them to pull their capital and migrate into growth equity where i can go invest in them. the perfect model is i bring a deal to the banker to carlisle or kkr and i get $30 million of that equity and i offer that to my clients and they take half and my fund takes half and we are in a transaction that would otherwise not be available to them and the returns are going to be much higher and predictable and they will recycle capital with us and we will manage a large pull of capital for them and hopefully

others. david: you are up and running? mark: 6 weeks into it. david: a lot of interest? mark: we have clients signing every couple of days, we will release in the fall when we -- the names in the fall when it is fair to do so. i love sports. alix: what is your favorite streaming show right now? what do you binge watch? mark: i like "done real." i did watch it on streaming, but you can watch it on television, too. i was a quick answer only because i watched some last night. alix: mark patricof and sonali basak, thank you so much. david, you are leaving me now. david: there is a bloomberg live event and i will get to speak to ursula burns, most recently the ceo of xerox. we interviewed your for various -- her for various things when she was here. we talk about what it means to

manage a company through a digital transformation. she is first and maybe the only asan who succeeded a woman ceo of a fortune 500 company. alix: interesting. david: she also has strong views about ceos speaking out about social and political interviews. alix: coming up here, kroger shares sng in premarket eat earnings b estimates. this is bloomberg. ♪ mberg. ♪

emma: this is "bloomberg daybreak." coming up later on bloomberg markets, an exclusive interview with henry cornell, cornell capital founder and former goldman sachs chairman of

financial banking. now to your bloomberg business flash. web.com is being sold. price, $2 billion. more on that as we get it. shares of france's government controlled power group rising today. french business elite reports the government is considering splitting the company in 2, 1 that have nuclear power assets and the other would put together new and renewable energy. a wild trading day at deutsche bank is raising questions according to a filing. traders at the u.s. unit suffered a one-day loss in the first quarter that was 12 times what risk officers estimated it might lose in a typical day and the office were offset by gains in london. u.s. regulators have tried for years to get a better handle on the bank's operations. alix: thank you so much. c-shares of kroger trading --

shares of kroger trading higher. investors have been watching the grocer's ability to hold its own in a fight against amazon and others. headquarters in cincinnati, mike. the whole year, how sustainable are the same store increases going to be? >> we feel good about the momentum and going into the rest of the year, we have made a lot of investments in the first quarter and redoing a significant number of stores. over 200 stores or roughly 200 we have in some form of remodel and space optimization in the first quarter. as those stores start to mature and others come online, the effect of that headwind will

subside and late in the third quarter, that will factor into a tailwind. you couple that with great merchandising strategies and exciting people to come to a store on a more regular basis and we think all of that will drive topline for the rest of the year alix:. alix:looking into your margins, we have a chart that shows your trailing growth margins, the margins for the last quarter right along that level, maybe a touch higher. do you feel like sales will pick up enough for you to grow your margins or are you going to be using any kind of cash you get to compete with amazon and walmart and out for lower your prices and your margin? mike: what we do on a daily basis is more than compete with amazon and walmart. there is a wide back from of competitors, over 40% of the share in markets we operate in are held by other folks, not us or amazon or walmart or stronger players in the market and it is really about trying to make sure we are the best full-service

grocery operator in every market we are in and the number one choice for customers when they come in. we have invested over 400 billion dollars in price in the last decade plus and we expect to continue to invest part of the tax savings this year. we began a lot of that the last five weeks of this quarter which also creates a slight headwind in sales. we feel really good about the balance we have struck so far this year. part of the trick is to continue to balance things. started the year with great cost control through process changes and got savings in the bank and made investments both in the price, our people, relative to they have more hours and certain service departments and other things we have done with tax savings to further our associate's educations. if you have been with kroger for 6 months and you are full or part-time, you can get 35,000 dollars a year. alix: that sort of goes to not

ju, but other stuff going on as a big employer. what is your biggest cost pressure right now? mike: i think the biggest cost pressure is what we spend the most money on isiates and wages and i do not necessarily look at that as a cost pressure. alix: is that rising? mike: it is, but we have taken a proactive approach in some contract negotiations where we wanted to raise opening rates and given them more dollars in wages and less dollars in some of the benefits that they are not as interested in and what we have seen happen in a some of haveeographies where we taken this approach, yes, we are paying a dollar an hour more, but seeing retention go up, meaning turnover goes down at every time i keep an associate for a year, if i pay them a dollar an hour a year, i save more than that in what the cost

of turnover is when you include training, hiring, the cost of doing all the drug and background checks that wind up happening and it winds up being a better experience for customers when you have a more experienced workforce. cfo of kroger, what is the biggest uncertainty you have right now? the biggest impediment to you investing money and growing the business? the thing you think about? mike: right now, i would say technology talent is something .hat is difficult to find our i.t. group is a great group recently named one of the top 100 places to work in the technology field in america by computerworld, which is a great recognition for them. everybody out there in the country is trying to look for that talent and as things become more technology-based and technology driven, when you look at that recognition and the level of talent, that analytics

group, that 600 people wake up every day trying to figure out how to interact and make our customer's lives easier. all of those things added together is why we think the momentum we have is something that will be sustainable. alix: mike's lockman -- michael schlotman, thank you very much. the russell 12,000, are the gains sustainable? go>.k out gtv < this is bloomberg. ♪

alix: what i am watching today is the outperformance of small caps. this is the percentage of the russell 2000 constituents in overbought territory. joining me now is the column -- luke kawa, back from an endless

vacation, i feel. good to see you. : good to be back. what that chart shows and what i like to point out is the rsi above 70. in the move in the russell as a whole, the move has been just as intense as the post 2016 election move when there was this first america first trade and we are getting that again because of trade wars. the share of components at 52 week highs or overbought is much less than that, half of that in much case. in one way you could say that means there is more room to run and in another wou look at what is driving it and a lot of it is health care, a lot of different health care sectors from biotech to health care services to equipment. when you look at this, you think maybe this is a defensive play and maybe this is a play on the safe u.s. population and a place to be in the time of turmoil and trade wars.

on the other hand, this is a huge m&a play. a lot of them are getting it up. p. getting bid u ar me, what would cause maybe rotation away would be you start to get yields up and maybe opec does something and we see a return to financials and oils rather than small-cap. alix: oil, the one i have been hearing about. luke kawa, thank you so much. coming up on bloomberg markets, week open with giuliana manuel. this is bloomberg. ♪

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

coming up, ceo's warning trade -- blaming the tariffs. counting down to a pivotal opec meeting, saudi arabia still pushing for a significant supply boost. --ding day at deutsche bank 30 minutes away from the opening bell. futures and set up as follows. negative five points on the s&p. bid,uries to receive a yields lower by three basis points. the trade battle front and center yet again. this time, it is the world's largest central bankers weighing in. >> concerns seem to be rising. >> there are lessons we've learned from the past. they are all very negative. >> for the first