of development projects that would generate jobs in mexico could produce migration and improve security. president trump says he and lopez spoke with 30 minutes today. trade, nafta,out and a separate deal of just mexico and the united states. the president threaten to pull the u.s. out of the wto during an oval office meeting with the prime minister abe netherlands who said either outcome will be -- i hopeo which the they change their ways. they have been treating us very badly for many years. that is why we were at a big disadvantage with the wto. we are not planning anything now. if they don't trade is properly we will be doing something. mark: the u.s. wins 87% of the

otherit brings against countries and loses 75% of the other cases against countries bringing charges against washington. puerto rico's governor signed a budget approved by legislators exit of the one implemented by a federal control board over the weekend. his move deepens the disagreement over which budget the territory will use. the governor said it is not in puerto rico's best interest and he is prepared to defend his decision. many believe the issue might end up in court. thousands of french police continue the manhunt for a gangster who escaped from prison by helicopter. the pilot was forced to land in the courtyard. they then broke into a visiting room to retrieve the man as he met with his brother.

the helicopter was found burned out in the pilot was unharmed. the justice minister of france says several drones were spotted flying over the prison and speculated they were linked to the escape. andal news 24 hours a day on tictoc on twitter powered by 2700 journalists and analysts and 120 countries. this is bloomberg. taylor: live from bloomberg world headquarters, i'm taylor riggs. scarlet: i'm scarlet fu. joe: and i'm joe weisenthal. >> stock started off lower but are trading mixed. the nasdaq up by 4/10 of 1%. joe: what'd you miss?

scarlet: bmw and hyundai joined gm in pushing back against president trump's terror of threats. and tesla's 11th hour production push comes up short. the latest figures and not enough to disprove doubters. president of as mexico, the swing to the left sparking concerns the days of market friendly policies are over. u.s. exporters want congress to rein in president trump on tariffs. national security hawks want congress to force him to put cte out of business. trade experts are saying good luck with that as the indicate congress is unlikely to stop to turkey -- deferring to trump any time soon. a sea there seems to be change in the psychology of markets. many people have said the

president was just threatening tariffs, he would never let the situation get to a point where actual tariffs would be imposed, but perhaps that was a miscalculation. >> it is incredible how the mindset has shifted in washington and across the 'suntry about donald trump tariffs. it felt like the worst case scenario, it would just domino and have a ripple effect. that remains to be seen. everyone has digested the tariffs put in place, and the retaliation, even the 34 billion coming up on friday that will take effect against china. what is now going to a new level is the threats against the wto. no one saw that coming. the idea that they might withdraw. we heard from him today singh he is not there yet but he said if they do not change going to have to do something. that is a wow, what does that

mean? joe: is there anything trump could do on his own or through presidential order? or would he need congress on board? say youhe trade experts need congressional action and there is laws underlying the wto congress put in place. i think the big question, what people have not wrapped her arms around yet is what could trump do? could he change tariff breaks? could he ignore certain things that will take a long time to go through a judicial system even in the u.s. before they pull it apart these by piece. no one has explored too far about how this would actually be done and what our trump does or doesn't have. we hear about tears.

how big of a deal on friday? can you put into perspective how big of a deal this is on friday? >> i think at this point, all the economic analysis says this is not going to have a huge impact for any specific sector or even in china. it is kind of a gesture at this point. there could be some items that surprise us. but it has been wrapped into projections, and no real economists have actually told us they are changing their projections. i think it is beyond certainty. in segments before we have talked about the auto investigation. we have seen car companies coming out. i think that is a sector that would have a huge financial hit if there were tariffs put on it.

right now the tariffs have been disbursed. that is the big one. there are powerful car companies. i think there is where we would see a bit more deterioration. scarlet: we will be discussing that shortly. joe: friday a key date mother had been some questioning discussions, would there be any last-minute negotiations? what we have sizable news between now and friday in your view that could soften things or delay things? >> absolutely. this is the trump administration. we do know the situation is fluid and seems to be changing day by day. i would say even in the conversations i have with other caviar always lay that out there. we have no reason to believe that is going to happen.

they are going to go ahead. china has said it is retaliating. another 16 billion may follow. question, an additional $200 billion. we will have to look ahead to that and if there is any signs or tea leaves we can read that lead us to believe there may be more coming down the line. that would be where there is a shock. thank you so much. this is the trump administration. anything is possible. minute by minute. coming up, tariff with flash. bmw and hyundai pushing back against the tariff threats. why global automakers in particular are feeling the pain this week. this is bloomberg.

scarlet: global automakers are getting a dose of whiplash, on both sides of president trump trade dispute. carmakers are joined general motors calling the u.s. to step back from tariffs. david.et more from explain what is going on with automakers. just yesterday chinese duties were cut by half to 15%. this was a big victory by global automakers who had been lobbying for it for years. >> it is and it is not. that is a big cut but 15% is still hefty for any vehicle. no one is going to build a plant exporting. and start

you don't see cars going from the u.s. to europe, for example. they have a 10% tariff. 15% is a nice cut something the administration can tout but is it going to change things too much. voiced opposition to trumps tariff saying they import a lot of cars, it would make their u.s. operations uncompetitive. they import close to one million vehicles mostly from mexico. trump hasn't articulate which countries would have big tariffs. if there would be exemptions. gm is saying listen, we need free trade. we get parts for other countries. you raise the cost of countries -- cars and after they did that, which was unusual for gm, other

automakers have piled on. they have issued more sentiments. >> we think of the auto industry , the dealers as being entities with significant clout in american society. in the administration do they feel they have currency? a lot of power bases and lobbying groups feel they don't have the ability to talk to visit administration the way they did with previous ones. the answeris point is yes. the automakers were getting good leeway from donald trump on fuel in missions, and emissions standards. trump was talking about watering allowed standards which them to sell more trucks and suvs. what i found interesting about the statement friday, the backdrop is gm has been talking

to the trump administration about trade. it seemed like they had their gear. to come out and make this they reallyying don't see this as a good idea at all says maybe they were not being heard on this issue behind the scenes and had to go public. and get some other industrial companies to raise a core is saying let's keep free trade in place. everyone is going to suffer if we don't. announcements,he for traded off in sympathy. tesla has been trying to get into china more. what car companies are going to be hurt? what does that do to american manufacturing? >> the companies that will be hurt will be those who import a lot of vehicles. looking at the asian car companies, trump has singled out the german carmakers.

they import a lot. alabama,cedes plant in they actually export a lot of vehicles from the u.s. to other markets. that employs a lot of people in south carolina. they still bring in a lot of bmw's from their home country. the japanese would as well. they bring in a lot of vehicles. price for possible gm, ford and fiat chrysler because they make vehicles in mexico. pickup fromram mexico. exemption, not an then you are going to hit the home companies as well. taylor: thank you. let's stay with trade tensions. are already impacting businesses in a big way. , how thet of layoffs

lobster industry is now being affected. >> as talk of global trade wars keeps up, doing with most valued see product is already in hot water. >> it has a negative effect for us. >> lobsters are one of 700 american exports to china, targeted with new tariffs of 25%. the levees are the response to 25% tariffs on's $34 billion of imports from china. lobstermen says he has already been paid $.50 less a pound on the news. >> they are going to pass it to the lobstermen.

all hell is going to break loose as far as the price. total of the nation's last year. exports remain to china increased 30% year-over-year. >> we are hoping the domestic market can pick up the slack, but i am not hopeful. i think we become dependent on the chinese market. >> lobster traps are also caught in the trip -- in the crossfire. supplies 85% of the north american market for lobster traps. like some of this comes from canada. some comes from the u.s.. the price of the product is nearly doubled. tariff on steel from canada.

>> it puts handcuffs on us. materialsble to buy at a competitive price. to -- ay have trump wants to level the playing field for american companies in the global economy but some worry it will have the opposite effect. >> we have clawed back the exports that were coming in from china. this will give an opportunity to take them back from us. >> china is going to chase down canadian lobsters and the u.s. is going to be hurt. i think this could affect people going out of business. >> speaking of boston, complete coverage of boston's fourth of july concert on bloomberg

television. i watched it last your and it is wonderful. time for the bloomberg business flash. charles schwab is settling a lawsuit with the fcc over failures of suspicious reports by independent investment advisors between 2012 and 2013. no terms were disclosed. the firm included some violated the internal policy. the world's biggest private technology company announcing plans to trade publicly again. dell will turn the public with a -- public markets deal valued at $22 million. dell's common stock will eventually become publicly listed on the nurse stock exchange. and more reduced water --

more joining the club. the top two lieutenants of the messed fortunes of one billion due to the rising value of the world's biggest hedge fund. bridgewater was valued at $16 billion last year. they announced plans to spread ownership among a wider pool of employees. that is your bloomberg business flash. two big nike ambassadors draw big headlines. lebron with the lakers and roger federer parts ways with the company. nike is the stock of the hour. this is bloomberg.

scarlet: roger federer saying goodbye to the push. he is wearing a new uniform

marking an end of two decades with nike. is our stock of the hour. we brought in our sports business reporter to join us with more. nike shares are lower. nike had a big spike on friday. probably a bit of a give back. is this something that moves stock? >> antennas, this is fairly small potatoes. serena is the biggest name. i would argue federer, rafael nadal is a bigger name. this is a loss. you would rather have the grand slam winner but this isn't going to move a stock. was is this about nike willing to put one number on it and the other went higher? >> nike from what i understand had a chance to match whatever

the next company was and they declined. >> this is some who could be retiring. >> exactly. he has made $100 million on the court. this is almost three times his entire earnings. just for this end of career endorsement. this is a lot of money. certainly more than what nike was willing to spend. a figureo they have that it endorses sales? >> jordan is the ultimate but think about what jordan has done for nike. you can't even put a dollar on it. james, he moves the needle more than roger federer. but federer had his own brand. what she said today is going to go back to him and possibly as part of a new deal but for

tennis fans the idea of having a tennis shirt that has the logo on it, there is something to that. >> that is their second attempt at breaking into the tennis world. they may have learned some things about the tennis world through novak that they can piggyback off of. this is not totally new territory. >> they have allowed technologically advanced clothing. >> when it comes to gear they do not have the shoes. >> he is out there with all the nike but he is where nike shoes right now. who knows if that will continue to happen. you are right.

to pay for those on his own. scarlet: lebron james going over to the l.a. lakers. what is the thinking behind this. >> lebron is 33. he probably doesn't have more the five years left in game. off the court he is interested in entertainment. he has a production company. jam. that may continue. l.a. is a perfect launching point. towill have more time dedicate to that when he is done on the court. -- counteractsry the higher taxes in california. thatere was speculation one of the reasons he was doing that was to have low income tax rates.

he doesn't care about that as much. thank you. the market closes next. we are looking at gains in u.s. stocks. this is bloomberg. what's a gig of data?

well, it's a whole day's worth of love songs. 300 minutes of baby videos. or, it's a million chat messages. a gig goes a long way. that's why xfinity mobile lets you pay for data one gig at a time.

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.

scarlet: "what'd you miss?" all three indexes close their highs of the session. taylor: i'm taylor riggs. scarlet: i'm scarlet fu. joe: i'm joe weisenthal. if you are tuning in on twitter, welcome to our closing bell coverage every week from 4:00 p.m. until 5:00 p.m. eastern. scarlet: we begin with our market minutes. we were talking about how stocks started the day in the red, following losses in europe and asia. since then it has been a recovery, and in the final hour we saw equity indexes zoom higher. the numbers are not large, 229 points for the dow, but it is notable that there is so much concern from earlier the risk of sense, and it has turned around. joe: they are not worried about the trade wars, after all. scarlet: you are looking at this earlier, the volumes not particularly heavy. how they shortened the trading

week, so cannot read too much into it. taylor: volume off about 20%. scarlet: yes, let's take a look at individual names. we are keeping an eye on technology, given news out of dell. the largest biggest private tech company now announcing plans to publicly traded again, reemerging five years after its lbo as a more diverse leader in software, when that is burdened by quite a bit of debt. up 10% on the day. we also watching a couple of casinos. wynn resorts and las vegas sands tumbling after falling short of estimates. and tesla had engineered a liquid or production burst with a model 3, something we will talk about later. rallied earlier in the session, but has given up that advance. it gained as much as 6.4% earlier, but closed down 2.2%.

not at the lows of the session, but certainly a quick turnaround from what it had seen earlier. joe: now a look at the government bond market. rates higher across the board again, sort of like reversing the earlier lower rates and a sort of consistent with risk assets higher across the board. two year yield, 2.5%. 2.87% for the 10 year yield. increase at the short end, which implies the flattening story continues. taylor: taking a look at currencies. dollar strength mostly across the board. take a look at the relative to the mexican peso, dollar stronger among uncertainty for the presidential election in what it means for nafta. some leftist policies there. and the weaker euro, uncertainty over the german coalition. weaknessbritish pound with some uncertainty with brexit. and china, look at that, some

speculation they are evaluating currency as a tactic in the latest trade fight. dollar strength into the close. joe: finally come on commodities, where for much of the day we were red and ended that way across the board. oil slipping modestly, remember we had the tweet over the weekend from donald trump about getting an expansion of supply. unclear that that is really going to do anything, but a little bit of a selling in oil. gold down another 1%, really bleak there. platinum even worse, down over 4%. that combination of precious metal in industrial metal looking very weak. overall, the commodity index down near 7% from highs in late may. so some disinflation being seen, almost down 2% today. those are the market minutes. scarlet: so for more, we will bring in dan. head of fx strategy for north america. as taylor was telling us, the

dollar is stronger today against most of the major currencies. and when you look at what is going on in trade and trade headlines, there seems to be a rethink in terms of how investors are assessing the u.s.'s position. no longer saying the president is using terrorist threats as a negotiating -- tariff as a negotiating tactic, perhaps he is taking the extra step to see what goes back and forth with a tit-for-tat. how is that playing out? dan: i think the markets have transitioned a bit. increasingly, the markets looking as tariffs become a reality hit home for various economies in the g10, markets looking at the economic impact, so it will get hurt worse. you are talking about the general conclusion being the u.s. has something to lose from a trade war, but less to lose than most of other economies, which are more exposed to trade. meanso the basic idea, i

part of the dollar rally has been the relative growth differential. so is the u.s. growing faster than everybody else, and that is the story? tensions might exacerbate. dan: right now we think we are at the peak of u.s. outperformance, and as we go into the second half of the year the u.s. economy will be slowing down a bit from the strong second-quarter, and other economies are picking up again. but trade is a risk to that calculus. so it we really get the worst-case scenario for a trade war, you would see damage to export dependent economies, less tightening and then you otherwise, and weaker currencies, and i guess the market is reflecting that risk. scarlet: we still have dollar strength because we are growing faster than others? dan: so far. we are really at the peak of that story right now. the u.s. is having a strong second-quarter, the fed is hawkish, other banks have been

more careful and they are worried about trade, sending a more cautious message. but as we get into the second half, a lot of those effects should fade and we will not get the worst-case scenario we are talking about, and other central banks will be in a position to proceed with policy tightening. scarlet: talk about the other currencies. taylor mention the mexican peso, where watching that following the election. what does it mean for mexico and of their ability to negotiate a new nafta and how will it play out on the peso? dan: this is the expected result, so markets, it seems like the peso has weakened today, but a lot of what you see is just the dollar. nafta negotiations will take some time to play out. scarlet: a 2019 story? dan: exactly. they will not get the opportunity to vote on nafta, on a deal, this year anyway.

so most likely this is something in the background for some time and it is part of the whole trade tension story that we are talking about. joe: it is incredible how many different parties have traded tensions with the u.s. now, talking about mexico, obviously china and canada, and also europe. part of that story has been for awhile the stronger euro was perceived as having slowed the economy down, now we have the ecb using for guidance to say that rate hikes are far off. what will happen? do you think we will see a pick up in european growth? dan: our view is that what you saw on the first half of the year, the softness and some of the european data, that was temporary. and the second half you will have slow but steady growth, which will allow the ecb to begin moving more quickly towards the exit as we get into next year. trade is a big question. tariffs,are the auto this could really derail the story in europe. that is the risk scenario.

scarlet: talk about the pound. we had the two-year anniversary of brexit, but it is a slow-moving train. it has been two years and a lot of back and forth. do have a call on where the british pound will go? dan: we think is the dollar weakens more broadly, sterling will be higher than it is. the brexit story needs to get locked down because there is a lot of uncertainty there. by the end of the day, with a lot of ups and downs, you would assume you have some softish brexit and sterling goes back to being a cyclical story, a cheap currency with the bank hiking rates and it looks ok versus the u.s., but it is a lot of uncertainty. joe: emerging markets, that is the story of the last several months, just how much they have been clobbered, almost all of them down versus the dollar to varying degrees. at what point do you look at if you are being compensated enough going into e.m. for the

volatility and weak conditions and exposures everybody already knows about. dan: valuations are very attractive, yields a relatively high and he to get protected with the dollar rates going up. and global growth is ok. so maybe e.m. should not be so bad, there is probably value in some of these currencies, but it is hard to put those traits on right now -- trades on right now. but in the second half of the year, if the dollar is looking a little bit softer, then e.m. could be a better story. scarlet: what talk about how this is a short trading week, but the u.s. there will be less the volume and it will extend to other markets. so across the board, over the summer, is there less reason to read too much into fx trade, because there are not as many participants? dan: that is a fair question. a lot of times in port things happen over the summer when you think about the jackson hole conferences, over the last couple of years they have been

decisive, and to the whole financial crisis in 2007 got going in the summer to message cannot assume that anything that happens in the summer is make-believe, it could be important and set us up for where we are after labor day. what happens in summer could determine with the second of the year looks like. scarlet: always an august surprise. thank you. command, financials in focus. we take a look at what is moving u.s. banks and as of late, to the downside. this is bloomberg. ♪

mark: i'm mark crumpton with first for news. rand paul says he and his family were targeted by a man threatening to attack them with an axe in western kentucky.

he told reporters today in his own state, that capitol police issued an arrest warrant for the suspect, and then thanked authorities for arresting him. a spokesperson declined to give additional details. senator lindsey graham paid a surprise visit to the northern syrian town of -- telling allies that american troops should remain in the area. erasing deal between turkey and the u.s. has eased tension between the allies over the city. ankara considers the turkish led to be terrorists. he said that the place was a place of hope and that the draw on forces would be "terrible." demand building couple was arrested as they were allegedly set to travel to france to take part in a terror attack at a rally their last weekend. a u.s. delegation including the

-- including rudy giuliani attended the event for a group that opposes the iranian government. investors say the arrests were made "just in time." during the search of their vehicle, we found the same in belgium and other countries for terrorist attacks. were arrestedle in belgium, one man was arrested in france, another man was arrested in germany. he seems to be an iranian diplomat. mark: a french official source says that three others were detained for questioning in france, but that two of them were released today. the iranian foreign minister took the social media to call the allegations of a foiled extremist attack a ploy. the european union today warned the trump administration that levying tariffs on auto imports could lead to retaliation on u.s. goods in excess of $300

billion. a european commission spokesperson said that the investigation in washington -- "lacks legitimacy and violates international trade rules." the official compared them to the tariffs on steel and aluminum imports. global news, 24 hours a day on air and on tictoc, powered by over 2700 journalists and analysts in more than 120 countries. i'm mark crumpton. this is bloomberg. breaking news out of germany, the leader of germany's cfu party says immigration clash with the chancellor is resolved. this follows angela merkel telling lawmakers earlier today that she senses a willingness to halt the food over migration that had been threatening to tear apart the governing coalition that she had formed between her cdu and cfu, which

is at of bavaria. we have seen some relief for the euro. it is the weaker versus the dollar, but there is that line the end of the chart indicating that it is paring some of its losses. again, the party leaders saying that the clash has been resolved. and what did you miss? taylor: back here, financials closing higher on the first day of the new quarter, but they have been down for 14 of the last 16 sessions. joining us now, gerard cassidy from rbc capital markets. joining us by phone. thank you, gerard. it has been a rough few weeks. and reading your note after the stress test on friday, is the all clear for the financials? gerard: i would say it is. certainly, the stress test was a real boost for the banks. the stress test was very challenging and all of them,

with the exception of morgan stanley, goldman sachs and state street, passed the test and were able to give back the excess capital that they requested. and as a result, we think that this is one of the key reasons for investors to own bank stocks, that they are a return of capital vehicle for investors. scarlet: they were forced to freeze payouts the last year's levels, so did that have a larger impact on the sector, at least for investor sentiment? gerard: i am not sure about that, because the reasons that they did not do so well this year are correlated to the tax reform, rather than their underlying businesses. and i think that is what the fed took into accommodation when they reached out to both of those companies, as it is being reported, and that is the significant news. under the prior administration and group that ran the regulatory agencies, there was never any of this dialogue or

reaching out to the banks during the stress test and it was with this news coming out that the fed reached out to morgan stanley and goldman, expressing they were not going to pass antifreeze the return of capital levels at prior-year's levels, that is positive for future regulatory reform. joe: i am curious to what extent you could you but the recent weakness in the flattening yield curve. a, a lot of these companies that are financials are not really in the sort of borrowing short that we associate with banking in the yield curve come and two, it has been flattening for years, during which we have had pretty strong growth in a lot of financial stocks, so how do we decompose the contribution of the yield curve to what we have seen lately? gerard: it is probably the most important fundamental factor today in bank analysis, is the yield curve into the direction of interest rates. and i think what you will see, or what we have seen recently, and particularly the last couple

weeks, as we had a yield curve, the tenure, over -- ten year, over 3% very recently, and has now come down below 3%, and today was about 2.86%, so that yield curve, if it continues to rise, the steepening of the curve, which of course is the difference from the long end and it short end, will widen profit opportunities for the banks. but i am with you, most banks are not lending at the 10 year, however the market correlates the 10 year, the direction of that yield, with the bank stock prices. taylor: on the first quarter earnings call, we heard the banks talk a lot about the spike in volatility, how it was helping equity trading business. in the second quarter the vix is still moving, but not as much. so as we go into earnings season, what are you expecting to hear about banks in terms of

trading and the volatility we had in the second quarter? gerard: i think what we will see is relative to the first quarter, it will be tough the top those numbers. those were some gang buster numbers put out by goldman sachs, morgan stanley, jpmorgan, etc. so i do not think any of us anticipated we could repeat those numbers because of the volatility that you identified. there has been some volatility this quarter, but not as much. so i think the longer secular trend in equity trading, and when you look back the last 10 years how it has declined come i think that is still an issue for the trading firms, and is so second-quarter results in trading, relative to the first quarter, should be less. scarlet: final question, there was an argument that investors were dumping financials last week, or certainly in the weeks leading up to then, because it was the end of the second quarter, do you buy into that? gerard: there might've been some of that, but investors are trying to reposition themselves because there is concern the

economy could slow down if the trade issue gets out of hand, and therefore the fed would be less likely to raise rates the amount of times they said they are going to come about once there is evidence the economy is very strong, and assuming the trade situation does not get out of hand, i am assuming investors will come back. and when you go back five years, the first half of the year is less successful for bank stocks, and the second half they tend to outperform the first half with 2016 being the obvious year because of the election. so the second half of this year, 2018, we should see better performance, if it follows what we have seen in recent history. scarlet: think is so much, gerard cassidy. calling for recovery in those bank stocks. command, elon musk cannot -- coming up, elon musk cannot convince the skeptics. even though they have pulled off a production feet. at.

what happened? this is bloomberg. ♪

scarlet: "what'd you miss?" tesla succeeded in hitting its target of producing 5000 model 3's a week, but we should because for television is grading concern as the shares close lower on the day come off by 2.3%. here with more is our bloomberg tech reporter, dana hull. joe: start with the numbers they released today, the investors originally liked them and to the fact that i guess they had the 5000 number, thanks to a late cycle rush, and upped their target, but then the stock fell. so put it all together, what is the current number telling us about the capacity relative to the expectations and goals investors have. dana: i think the news was

digested yesterday when we got an internal memo from elon musk, congratulate everybody that congratulate everybody. the fact -- musk, congratulating everybody. i think investors are realizing that they made this mark late in the quarter and it will still be in a bubble battle -- uphill battle to make a sustainable. joe: why is that? why do people look at that lakewood a production first -- late quarter production burst i guess, that is not sound sustainable, but what is it that they have to do so that investors will not be skeptical? dana: there are some hail mary practices, like they flew manufacturing equipment from around the world and cargo plane, they hastily arrested this tent in fremont were 20% of the cars in the last week were

made. on the one hand it is like, they were nimble and inventive and did everything they could, but you have to be able to produce cars at a regular cadence. and now that they have managed to hit this number, they are saying they will be at 6000 next month, but they need to be making like 10,000 a week, so where does that initial capacity come from, will they need to raise money again? and the engineering chief is not coming back to the company, the news broke a few minutes ago. he had been on leave since may, so it is not a big surprise, but another significant executive they will be gone for good. taylor: i want to talk about the free tesla -- free cash flow, the negative free cash flow. come into my terminal, we have a at -$2 billion, so are there any signs the turnarounds -- this will turnaround or goes positive in the next few years? dana: tesla says they expected

the turnaround in the third quarter, but what was interesting is they did not reaffirm their previous guidance, which was that they do not need to raise equity, so some are worried about dilution and it is unclear if they can go back to that market. there are all kinds of questions. the company needs cash and it will recognize revenue as the cars get delivered, but they need more out the door. scarlet: you just mentioned how tesla was able to make do and put together all these different tactics in order to pump out 5000 cars per week of the model 3. but what about the other models, where they able to keep up production almost? dana: they produce those as well bid a lot of workers -- as well. a lot of workers were on the model 3 line, but they still had them on the other models, so they did make enough combined from all three, but this company has ambitions to do much more. we are talking about the model

y, semitruck, etc. scarlet: thank you very much. this is bloomberg. ♪

mark: i am mark crumpton with first word news. rescuers today found 12 boys and their soccer coach alive inside of a partially flooded cave in northern thailand, more than a week after they disappeared. rescue divers had spent much of the day making preparations for their final push to locate the lost soccer players, age 11-16, and their 25 euros coach. they disappeared -- 25-year-old coach. they disappeared after injuring a cave on june 23. divers had been blocked repeatedly by the rising water that forced them to withdraw for safety reasons. and the yuan secretary-general has said that the hundreds of thousands of what he go muslims that sold the -- the flood to

bangladesh have been victims of what he calls one of the most tragic stories of the violation of human rights. he made his comments after he take a tour of a refugee camp in the bazaar district in bangladesh. >> listening to the terrible stories of massive violence that , that is of torture, the villages burning. mark: he said it is impossible to visit the camps without breaking our hearts. two months after president trump announced that the u.s. would withdraw from the iran nuclear deal, the state department is spelling out their campaign of maximum economic and diplomatic pressure to drive iran towards negotiating a better deal. the director of policy planning, ryan hook, says mike pompeo has outlined a clear and compelling vision for a better future for the iranian people.

>> this feature can only be realized, though, if iran meets 12 demands to become a normal country. normal countries do not terrorize other nations, proliferate missiles, and impoverished of their own people. as the secretary has a said, this new strategy is not about changing the regime, it is about changing the behavior of the leadership. from donaldts trump, saying that they will face sanctions if they continue to trade with iran. the interior minister says it clear agreement has been reached with angela merkel to halt a feud over migration policy that threatened germany's governing coalition. the crisis raised questions over the future of angela merkel's 3.5 month old government. global news, 24 hours a day on air and on tictoc, powered by over 2700 journalists and analysts in more than 120

countries. i'm mark crumpton. this is bloomberg. let's get a recap of the market action. u.s. stocks coming off of their lows and closing higher. pretty much a straight line in the final hour. joe: nice comeback. earlier today, people talking about the fears of a trade war. they need to come up with a new story paid scarlet: they have not disappeared -- new story. scarlet: the fears have not disappeared. joe: just a break. scarlet: history made in mexico. the new left-wing president is elected andres manuel lopez , obrador. and he swept to power with a campaign against crime, corruption and poverty. after initial gains, the peso reversed course against the dollar and weakened. by thee, we are joined associate managing director at -- great to see you. when you look at his mandate, he

has promised big changes including tackling corruption, and a shout out for the poorest and the forgotten, so how but the priority is increasing economic growth for him? >> he mentioned last night, when he admitted he was being elected, that there was going to be important work on the crisis. so he will be -- able to push for his agenda, where he is focused on social programs. joe: we saw president trump congratulating him in a tweet today, saying he was looking for to working with him and that they could work together. but in your view, is that a realistic prospect? >> that is an interesting question. i think when it comes to president trump, he is going to have to deal with somebody who is completely different, not just in terms of politics, but in terms of personality. in a way, the new president is

similar to donald trump, in the way that he carries himself, in a way of the messages he has, so there could be points in which they coincide, but it remains to be think my because he is clearly coming from -- but it remains to be seen, because he is clearly coming from the left side and donald trump from the right. scarlet: the rating on the country's debt. taylor: he wants to increase spending without necessarily raising taxes, so how much more debt can the country sustain? >> we have seen over the last three years, the debt has been declining. the outgoing a ministration was -- administers and was conservative. they reduced the deficit and that is why we have been in decline. -- it decline. which is more or less what we have seen at that level. so there is room for the next administration, but not much. a the question is how they will

manage fiscal policy, because on the one hand he spoke about the intent to increase social spending, infrastructure as well, but he also mentioned he does not plan to increase taxes. so it is a big question as to how they are going to fill the gap. scarlet: how plausible is the idea that he can reduce corruption to pay for everything that he wants to pursue? >> it is difficult for us to see the connection between the reduction in corruption, which he may achieve, and how it will increase revenues for the government. scarlet: has it been done before? >> it depends on how you look at it. if you look at the indicators of corruption, at the beginning and end of this administration, it has clearly gone in the opposite direction. even if he is able to reduce corruption, the question is whether it will lead to higher revenues, which is how he expects to pay for the increased spending. joe: one of the points of

tension between the u.s. and mexico, at least with this administration in mexico, it has been the feeling on the part of this administration that the government in mexico has not done enough to help stem the migrant tied from central america to the u.s. this potentially plays into the nafta debates and other areas in which the u.s. negotiates with mexico. do you expect to see a change of policy on that front, or a different approach? >> that is an interesting question, because last night, once again, when he was speaking, he spoke about that but he put it in a different context. he said the economy must grow, so there is employment for mexicans, so they can stay in mexico and try not to find a better life somewhere else. so in a way that is indirect, he is saying he wants to reduce migration, but not by putting up a wall, but by promoting domestic growth. taylor: one of the victim

initiatives -- one of the big initiatives investors were concerned about is he wanted to roll back the opening up of the energy sector. how nervous are you about some of those reforms to halt the opening up of the energy sector? >> we have concerns or questions about him and the energy and oil sector. is so much for reforms, it really difficult from mexico to undo a constitutional reform, even though they have a majority in both houses of congress. for instance, he is saying he will review, there will be an audit of all the contracts that have been assigned. what will be the impact of that on investment, particularly future investment. he also said he plans to freeze domestic prices, which would hurt companies that are getting involved. so i think in the energy sector, that is one area where we have concerns, where the risk may be.

scarlet: i am glad you have brought that up, because amlo has delivered a lot of fiery rhetoric. he has also promised to govern as a pragmatist. do you buy that? do you think you will execute on that governing as a pragmatist when it comes down to it? >> we knew he was a pragmatist in his campaign. i mean, he brought everybody into his campaign. people from the right, from the left, from the middle, religious groups, he was open to everyone. when you listen to his speech, when it comes to economics, he has a clear view of what it should be. and the increased role of the government. in principle, it appears to me he is not all that problematic -- pragmatic, but what he will be doing as a president is different from his campaign. his message last night, he said

he would respect the economic rights. so that is up to him. scenario, it end was like, is there a chavez in the cards, where the economy for various reasons completely goes into a tailspin. based on what you know about his approach, his philosophy, which is say that this is far-fetched as a scenario for mexico? >> the references to go shop as, vez, yes, he is far from that. mexico is extremely interconnected with the world economy, but eagerly with the obrador knows and that that plays an important role. if we have to go back to stability, i think that will be part of the game. so the rules will change in terms of there is an element of

discontinuing things, but not to the extent we have seen with other countries. the problem is this is something different from mexico, so we are all trying to understand how things are going to work now that none of the major parties will be in charge. scarlet: thank you so much. the associate managing director at moody's. coming up, angela merkel survives judgment day. we have more on the last-minute deal in germany. and the conflict between the resolved, according to a party leader. this is bloomberg. ♪

scarlet: german chancellor angela merkel and the opposing

party have resulted clash, sending an -- signaling in and to the risk that could have brought down her government. tony, give us more context. what specifically unlocked this deal? tony: it has been a very tense day, as you can imagine, actually a very tense two weeks in german politics. the way it was resolved was the angela merkel, who has argued consistently for a european solution, in other words not to take unilateral measures at the border that would risk bottling up refugees on the other side of the german boarder, she has now agreed to a system of what they are calling transit centers, sort of holding centers, for certain asylum-seekers who show up at the border that germany does not want to admit any more. that is what on locked the deal today -- unlocked the deal

today. it is sort of a concession to the bavarian party who has been badgering her on this, that is part of her coalition. joe: does this put a permanent end to the infighting between her party and her bavarian sister party? tony: if you say permanently, that is a big if. right? this has been a very tense thing, it has been hard-fought, and it has been a very visceral and emotional issue, as migration is in most countries. the question is, where do you go from here? that remains to be seen. and whether -- and what remains to be seen is whether the cus, which is -- csu, which is a conservative party, whether they ned.k she has weake on the face of it i would say that she has not and she has fought up another threat to her long rain. -- reign.

but that is something that the future will tell. taylor: you talked about how the system party had to make some concessions, did she have to make any concessions, and where does he stand now going forward? tony: i think that as usual, with a compromise, and especially in germany which has a long history of doing politics by consensus, unlike other countries that i can think of tha, that is the deal that saved the deal today -- the day-to-day. and she basically gave in in saying, yes, we can take the y may havenk that the ugly scenes at the german border, but the deal also says we won not send them back to other european countries where they first arrived without those countries' consent.

that is her signature, which is we do not want to create further conflict within the european union over migration. scarlet: tony, think of for providing much-needed context. joining us by phone from berlin. we should mention that -- who heads that party says he will stay on as german minister, as well. joe: timing the perfect steak and rate hikes just right. we will have an interview with leader of the -- fed next. this is bloomberg. ♪

joe: it started with a tweet, the minneapolis fed president

into social media to brag about his grilling prowess and i went all the way to his minnesota backyard. mye is another look at cookout with him, where he shared tips for grilling steak and how to time rate hikes. ♪ >> the challenge with cooking steaks is how to get them nice and well done on the outside, but medium rare on the inside. 122 fahrenheit per steak. it will be very rare if you just could get here, but i know we will finish it on the grill. joe: the whole reason this segment him about is because i saw this on your instagram. >> i'm the only one so far that i know of who is cooking and -- joe: the only one? >> i think everybody at the fed wants to be more engaging with the public, so we are looking for ways to do it, and this is a lighthearted way of saying this is what i like to do when i am not working.

joe: what you get out of it? >> i think it is a low-cost way to engage people in a genuine manner, and that is the point. i do not do much for seasoning, i do salt, pepper and butter, then i put them in the bag, and put them in for one hour. and once it is done there, i put it on the hottest girl i can -- grill i can. 120 degrees, let's go ahead and drop them in. i was set the timer for an hour and we are good. joe: i guess we can talk some monetary policy. is there a point where you question the premise of this idea that there is full employment -- a full employment number out there? >> is a question it. economics, in a recession, they tend to raise the notion of unemployment when they think that skills are mismatched and then only begrudgingly do they lower it. i do not think it is useful in a recession to ratchet up the rate of unemployment, because we are so reluctant to lower it and we

end up being late to lower it in your recovery. we would be better up just a hold it at fixed. now it is lower than we think. we know that workers have more education today than they did 20 years ago, we know that things have changed, is it 4.2%, or is it 3.5%, we do not really know. in: so there is an asymmetry the estimate of the, or what is full unemployment and it is easier to month it up, then slow to bring it down. >> that is an observation i've made. in the deep recession, it hit 10% and most economists had an estimate, they ratcheted it up very quickly and then there was a narrative, i was echoing, it saying all these people who left were permanently lost and they would never come back. that has proven to be dead wrong. we would've been better off not having made that assumption than only slowly learning it happen to be true. joe: it is great that as the employment rate has come down,

maybe people will ratchet down there estimate of where the natural rate of unemployment is. is there something that the fed can do next time around so that it is not keeping the number too high and therefore implicitly running monetary policy that is too tight? >> once a booking is do not ratchet -- simple thing is do not ratchet it up. in this cycle, if we say it really is 3.5 or 3.7, next time we have a recession let's hold it and let's operate monetary policy using that. joe: in light of this, i know canada every five years has some sort of review where they look at their approach to making policy and whether it makes any sense and kind of raise of its -- and revisits all of its assumptions. would you support and they like that? >> i am not opposed to it, but way of work hard to establish

credibility and on 2.5% target and if we wanted to raise it, for example, make it 3%, as some have recommended, i am skeptical the market people would support it. i think there would be pushed back. we have worked hard to get a from that i think works, and i think we should live by that framework. and actually live by the symmetry of the 2% target you not treated like a saline. joe: the jobs are a little bit higher, maybe four rate hikes this year. when you talk about the mistake the fed has been making, so far running it too tight. >> my view is legitimately we are moving closer to our inflation target. core inflation is now run 1.8%, wade growth is picking up. so overall i would be comfortable moving to a neutral rate, not -- the economy, but not constrain in the economy, and once we get the neutral let's wait and see how inflation evolves, look at how wage growth evolves. we could be one or two rate

hikes from neutral. some people think it could be as low as 2%, federal funds rate, maybe 2.5%, somewhere in that zone. so we are not far away. i personally do not want to commit to a steep path until we see how wage growth picks up. joe: should we check the steaks? >> yeah. we're almost ready to put them on the grill. the outside is not very attractive yet, that is what the grill is going to do. joe: so what is doing it right on the coals achieve that you cannot do otherwise? >> they are hotter. hotter is better. and believe it or not, you actually get some taste from the chuckle. -- charcoal. and i love the flavor. i want to cut one open and assume what it looks like. i am going for medium rare. sometimes the temperature is a little off, but let's give it a

shot and see what it looks like. ♪ joe: perfect. delicious. >> it is a little more done than i would've liked ideally. but you get the first bite. joe: aw, perfect. >> tell me the truth. joe: i am not making it up. delicious. that is the only way i'm going to eat a steak from now on. got to get a photo of this. and that was mike's was of interview with the minnesota federal reserve president. scarlet: was there any question it would be medium or? -- rare? joe: before he was like, is that ok, and i would like, of course. this is bloomberg. ♪

.

>> so much for the risk off, stocks closed higher. >> bloomberg technology is up next. >> have a great evening. 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.

>> i am brad stone in for emily chang and this is "bloomberg technology." we just became a real car company, those of the words of the tesla ceo after reaching his goal of building 5000 model 3s the final week of june, reaction and analysis. again, going public offering a cash and stock deal.