governor says they will be keeping the yuan steady and markets rally on the news. not so fast. the president is not ready to pull out of the wto and thinks he may have a trade deal soon with europe. and keeping it clean. glencore stock plunges on news of the department of justice is investigating it for possible bribes in congo, venezuela and nigeria. welcome to bloomberg daybreak on july 3. i'm david westin alongside julia chatterley. alix steel is in boston for july 4. you can watch that coverage on bloomberg. fireworks coming up. in the meantime you have fireworks this afternoon for england. julia: we hope. do you know it's 20 years since england last faced columbia in the world cup. i like that kind of precedent. david: it has been 10 years since you have been this far in the world cup.

julia: it feels like longer. we always think we can wait. i'm not quite sure what that means. shall we have a look at some market -- a bit of stabilization. games for european shares. tech shares, energy stocks taking the lead. higher indicating so far out into the games a similar amount to what we saw yesterday. a touch higher for euro-dollar here. coeda merkel pulling her -- coalition together as per the. that very much ties to a brief out moment. support intervening to overnight. that it was going to be used as a weapon in the trade spat with the united states. we will talk about that in more

detail. crude oil approaching $75 a barrel. they are going to increase supply by a million barrels. the 2 million. julia: wistful thinking -- wishful thinking. david: u.s. automakers will be announcing their monthly sales. that will include general motors which hasn't reported since march. at 10:00 eastern time we will get u.s. factory orders and durable goods numbers. the new york stock exchange will be closing early in advance of the july 4 holiday. julia: we are joined by rachel evans and vince cigna relic. happy early fourth of july. talk to me about the fireworks in asia overnight. is this dollar weakness? strength of the chinese currency. it may just be temporary.

as is a central bank verbal intervention. asy can't be seen depreciating the yuan for a couple of regions -- reasons. does wonders for global stocks as we saw a year or so ago. we have a central-bank just trying to calm the storm. they still have a situation where they may have to lower the reserve requirement for medium-term lending facilities upcoming which would weaken the currency's so they can't have it all going one way quickly. david: there was thought that they were weaponize and the yuan. is this a form of disarmament? >> you could think of it like that. how powerful the yuan and currency can be as a tool. i think in that respect the last month has really done the business. china has shown that it can sort of rely on the yuan and we can

and suck up that paying for itself as an economy. could be very interesting if they choose to use that in a trade dispute. the kind of put a warning shot and said we do still have this currency tool that we can play. storm,to stabilize the put kind of a floor under the yuan. david: the u.s. has a spat going with europe. president trump appeared to come out and calm the waters. this is what he said. >> we are very close to making some good trade deals. fair trade deals for our taxpayers and for our workers and farmers and a lot of good things are happening. beid: how good would this for the markets if they did come up with a deal with the eu? >> a deal would be very welcome. we are seeing risk assets rally today. we are seeing the aussie dollar up.

i think that shows you with china perhaps intervening verbally to strengthen its currency. that's a suggestion that they would like to not get into a full on trade dispute. we did see a compromise coming through with the eu. that could potentially give stocks and other leg higher. seen these kind of back-and-forth rhetorical plays going for the last few months. >> we are desperate for the hope that this is all going to turn out ok. that makes a very concerned. think what you can't forget about this is all of this trade talks definitely plays to trump's political base. she is trying to drum up support as we head into midterm elections. this back-and-forth could still be with us for some time. comingnds what the eu is up to trump.

one of the big issues he has is autos. he wants a fairer trade with what our import tax will be. if the eu doesn't compromise with autos i don't think we are going to get a fair trade he's looking for. david: the president has been very explicit in saying this is a political issue. >> he won the presidency by playing to essentially the breadbasket of the united states. this is the heartland. this is that trade issue. whether it actually is real or not for economic gain for the united states it plays well. david: investigation of foreign corrupt practices investigation into glencore that we learned about. the department of justice is a subpoenaed document. to can see what happened glencore stock as a result. it fell right down.

i guess what i really want to know is it's about venezuela, nigeria and congo. can you do business in those places without at least some questions about corruption? >> i think the u.s. government would like to see people trying a bit harder. this tops off a terrible run of months for glencore. they have had questions from the u.k. about their connection to an israeli billionaire and now we have the subpoena from the doj. it has been a horrible run and you see that in the share price and the bonds. stocks down 13% for glencore. clearly they are not taking this particularly lightly. at 13%we were looking drop in the share price. i have seen some whopping fines int of justice my time. to what about a company's market cap that would have to be a pretty whopping fine.

>> i feel for the board of glencore because it is somewhat unfair in a way. you are pushing a company for trying to do business in countries that are notorious for doing sort of back channel deals if you will. julia: are you saying that's part of doing business? unusual that this would be the only company that has done this type of business. david: we don't know that glencore actually did anything at all. interesting is president trump has been really aggressive in saying he picks the foreign corrupt practices act is actually ridiculous and even as chair of the sec has written papers on it. study that they are enforcing it just as much as anybody else. >> you do practices with businesses and if all of your competition is doing the same thing you hardly have an opportunity to do anything different if you want to

participate in those markets. if you're going to call the ball, call it for everyone. julia: they are as active as they were during the obama administration. david: they have had as many investigations and prosecutions as other administrations. julia: fantastic. rachel evans and vince cigna relative you can find all of the charts we just used and more running gtb go on your terminal. can browse recent features. you can save our charts. you can deep dive into them all by running gtb go. coming up, more on the outlook for the chinese yuan and the strength of the u.s. dollar. is coming up.s this is bloomberg. ♪

>> this is bloomberg daybreak. i'm emma chandra. comcast hasn't given up the fight with disney over the 20th century -- 21st century fox entertainment assets. it is competing with disney's 71 billion dollar offer. comcast ceo brian roberts may be open to buying just some of the fox assets. the french bank wants to expand in europe's largest economy. stockton is buying market-making operations from germany's commerce back. back unit generated about $406 million of revenue last year. called a timeout. the electric car company has been working around the clock to meet production goals. bloomberg has learned the company is causing some production this week that will

allow tesla to do basic maintenance and upkeep. that's your bloomberg business flash. david: overnight chinese central bank governor said that the recent yuan decline had been a simple reaction. china will be keeping its currency stable. we welcome now from london to explain all of this paul dobson who writes for bloomberg markets live blog. welcome. is was a major statement at least for the united states because there was some concern that china would use the currency in the trade battle. does it appear that that is off? >> there are two things to think about here. the chinese central bank seeking to reassure investors and the rest of the world the news in the yuan is due to the strengthening of the dollar and not devaluing the currency. more important is the timing and

the signal. this is a message that the yuan is not a one-way bed and is turning speculators to back off and not to keep on pushing it lower. david: that's a great point. we saw that in 2015 when they really hurt the short-sellers. they really went into punch them quite specifically. how much of that is what's going on here yet -- here? >> there is certainly an element of that. the question now is how much is the market according to press which is obviously verbal intervention doesn't have the same sort of power as physical actions. it may be that the market puts that to the test to show us the money. david: really interesting. thank you for joining us, paul dobson reporting from london.

julia: we have an interesting chart here. particularly since the mid-part , theril the strengthening bloomberg dollar index is the blue line. you see the gap opening up the middle part of april. that acceleration we were talking about earlier catch up to the games -- games we have seen in the u.s. dollar. joining us now is gabriela santos. great to have you with us. we talked about the prospect of weaponization of the exchange rate. to what extent are we seeing that even just in terms of moves, language, recognition that this is perhaps a tool in the trade war? >> i think it's a tool but not one that china is particularly eager to use. 2015 was not a pleasant experience for china. needed to impose some capital

control and get the currency back on track. i don't think it's a tool they are very inclined to use. it's largely a response to a very broad best -- broad-based strengthening of the dollar. we think it is driven by the has that u.s. growth absolutely surged while we have had disappointments elsewhere. little bit of risk aversion in response to some of the continued trade uncertainty as well. david: u.s. economy is doing quite well. retail sales in china. you can see the white line is the u.s. which is going a different direction from much of the rest of the world. how much of that is fiscal stimulus? >> a lot of that is fiscal stimulus. we think our second-quarter gdp estimate is coming in at 5%. real gdp growth even without

taking into account inflation. if we think is that sustainable, probably not. perhaps we have more of that sugar high for the next 12 months. then that starts to fade. interest rates start to bite little bit more. u.s.erspective for the surge is very short-lived. that is something that should start wearing out while the rest of the world starts picking back up. julia: you're talking about the sugar high lasting another 12 months. what about the back half of this year as far as three acceleration for some of the weaker european growth we have seen? what does that mean for the u.s. dollar? >> we should see the deceleration and cool down in u.s. growth. and investors starting to think about it. we don't need to wait 12 months for that to start getting priced in. we should see a nice improvement in growth in europe and>> we shn the second half of the year. i don't know how much longer the dollar strength persists.

we do think we should resume downward trend of the dollar. we havet's interesting had this conversation without talking about the fed at all. anticipatedthe action is fading into the strength of the dollar. how much is already priced in? crocs it's a symptom of how strong the u.s. economy is. the fed has shown a lot of confidence to keep going with their path. the dollar surge in is more about growth differentials than interest rate differentials on their own. that growth about dichotomy we have talked about rather than just the fed path and of itself. julia: what is the determining here? the rally that we are seeing in the u.s. dollar is about risk aversion. what's the overriding factor with all of the headlines we continue to get over trade? >> i think it's a combination of both. as part of the trade

uncertainty. i think both determines need to work in our favor in the second half. david: when we were talking about the tax cut we were talking about fiscal stimulus. this is the wrong time given where we are in employment levels. in retrospect does it make it look like the united states was smart because the rest of the world is struggling a bit and so we anticipated this and we really helped ourselves or did we bring forward potentially a recession? >> i think we will know if it was the right timing until perhaps the next recession. i think people worry about it in the wrong time because perhaps we have run out of ammunition during the next downturn. we lose the ability to stimulate the economy out of the downturn. it's hard to call right now unless we see the next recession perhaps 2019, 2020. julia: how do you approach

building a portfolio in this kind of environment? you got interest rate differentials. how do you approach it? growth thatabout picks up in the second half of the year. that would mean that global earnings growth would really continue trending and growing quite nicely. base. talking about a 20% regionally we do want to have a significant portion to the u.s. that is a safe trade. we need to have a sizable portion in u.s. equities. going to explore this in more detail. gabriela santos is staying with us. .oming up more trouble glencore shares dropping the most in two years after the company was hit by a u.s. subpoena in a money-laundering

probe. all the details on this next. this is bloomberg. ♪

david: glencore's african troubles escalated after the department of justice has subpoenaed for documents related to possible corruption and money laundering. shares dropped 13%. the worst day in more than two years. commodities.overs this really hit the glencore shares quite directly. is really aand this subpoena for documents. we don't know that glencore did anything wrong or even will be pursued. >> that's exactly right. there is no formal investigation yet. i think what investors are reacting to firstly is the clear butcation from the subpoena

it's issues with its african operation aren't going away. there's a unique exposure that it has and the fact that the doj is looking its activities is a concerning investors today. the second part is we know very little about the potential but there is notice that they will be looking at their operations in venezuela and in nigeria as well. the prospectraises that regular scrutiny of glencore's industrial operations could broaden out quite a lot further. that's why we have seen such severe moves in the share price today. us through that. we knew there were issues in the congo. had we heard about issues in nigeria and venezuela with glencore before?

>> it's difficult to join the dots with any certainty. we do know they have had legal issues in both countries relating to their oil business. and venezuela there's a dispute relatingged in march to the state oil company and there are also legacy legal concerning a complaint made by someone who claims that glencore owes them money for --ilitating the release of david: -- julia: can you give us some flavor of how important these three countries are to the

bigger business here for glencore? talking it's over 10 to 11 years it's a lot of documentation to go through. >> absolutely. the drc is absolutely core and its key assets are cobalt and copper mines in the country. they are a huge growth business for glencore. burton.hank you, mark next, the former deputy director general of the wto. live from new york. ♪ retail.

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near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. david: we come back with breaking news out of china. us they docial tells not plan to use their exchange as a weapon in the trade war.

that.xplicitly said they said specifically they will not use the rmb exchange rate as a tool to deal with trade disputes. this is coming from an official at the pboc. they rarely communicate this way. it was implicit but now they are explicitly.ry julia: you could tie this to the strengthening in the u.s. dollar and as a result, you have seen the chu -- the chinese you want we can -- chinese yuan we aken. also in washington, there is a little thing happening. julia: the good news is it is not going to be used as a tool in trade conflict. david: no currency wars yet. julia: implicit or explicit. let's take a look at what is going on elsewhere in the world. the comments from the pboc

filtering into the asian session overnight. yuan inl in the chinese the past month. higher, 4/10nching of a percent, adding to similar size gains in yesterday's trading session. david: now let's find out what is going on outside the business world. we turn to emma chandra with "first word news." emma: the stakes have been raised for six reinstate mike pompeo's trip to north korea. there is information that kim jong-un ramped up his north -- his nuclear program. pompeo once a detailed disarmament plan from the kim regime -- wants a detailed

disarmament plan from the kim regime. china dickey exports to the u.s. rose just 5.4% in the first half of the year, almost 14 percentage points lower than a year ago and a former prime minister of -- has been arrested in an investigation. the arrest was made by a task force looking into corruption. the current prime minister is recoupto recoup 4 -- $5.4 million. global news, 24 hours a day, on air and at tick toc on twitter, powered by over 2700 journalists and analysts in more than 120 countries. bloomberg. david: we started off yesterday with a report that the trump administration had drafted a proposal to withdraw the united states from the wto. but then in the afternoon, president trump said he was not there yet. >> wto has treated the united states very badly and i hope they change their ways. they have been treating us badly

for many years and that is why we were at a big disadvantage with the wto. where are not planning anything now but if they don't treat us properly, we will be doing something. david: we welcome now rufus yerxa, former to be geo-deputy general -- former wto general. i have to say in fairness to president trump, he is not the only one who has talked about the need for reform at the wto. rufus: absolutely. reforming it is different than withdrawing or pulling out, which i don't think the trump administration will do. we need the wto. it had a lot of rules that create greater part of stability and certainty, not just in things like tariffs but things like product standards and the use of food safety standards. we want a strong wto.

the question is how do we make it stronger? it takes a lot of negotiating. there are over 160 countries in the wto. you have to reach consensus on issues and that takes time. that is one reason we pushed historically for free trade deals that go beyond the wto with many of our key trading partners. that helps to put pressure on the wto system. the trump administration will realize we need to show leadership and use it as a tool. they can be an effective instrument to deal with our china problem if we can get europe and japan and some of our major trading partners on our side. we are not going to if we are fighting trade wars with them over autos and steel. david: michael mckee, you have followed this for years. some of the reforms go directly to what rufus was talking about.

curbing what is called preferential treatment. greater transparency. what are the chances it could get done without the president blowing the whole thing up? michael: a better chance without the president because this administration is hostile to the wto. changes, andopose which case they could get to work on it and it would take a couple years to get done. nobody is quite sure where the ,resident is going with this but he does seem to be attacking the wto from the outside in terms of neglect. they have been blocking the appointment of judges to the wto appellate panel which threatens the system of adjudication of trade disputes and he is using the security reasons for tariffs whichteel could mean everybody else does

that and you have a breakdown in the wto. need: rufus, does the wto more teeth? doesn't it need to be able to say to china, behavior we are going to check you out? -- chuck you out? i am not sure how well consensus voting on these things works when so many countries around the table recognize that they rely on china for their vital important trading relationships. that is obviously an issue and a problem in the wto. we would like it to have more teeth and we gave it more, when we created it in the uruguay round. we also care about u.s. sovereignty and having the wto tell the u.s. what a canning can do in trade and that is an issue for every country. there are still good chances for

the u.s. to push the wto in the right direction. just take the whole area of digital trade and e-commerce, the fastest-growing part of the economy. the director general is talking about a work program that the u.s. has supported to get stronger and better rules on the digital economy. that could push the chinese. areas like cross-border data flows and the fast-growing business of data storage. those are areas where i think wto should have more teeth. i think state owned enterprises and state-controlled government entities operating in international trade, that is something we are developing a broader consensus on, and we could effectively push the chinese in the right direction, using the wto as a tool. david: the president talking about state owned enterprises or

was he talking about dispute resolution? doesn't the united states win the majority of cases before the wto? rufus: this narrative that the wto treats as badly, almost every country can make that argument. every country wins cases and every country loses cases. the u.s. has won a huge number of cases, even against china. important cases dealing with subsidy practices and discriminatory treatment. china has won some cases. they have lost more than they have won, but the main point is the rules are the rules. in the end for business, it is important to have predictability and a greater rules-based trade, then to have power based -- than to have power based mercantilism. that is so unpredictable. businesses around the world don't know what they are going to have a deal that is going to

create greater market access or increasing tariffs that is going to suppress trade and that makes it very difficult for american companies to know how to invest. julia: huge uncertainty. rufus, great to have you with yerxafus usurer -- rufus and michael mckee. gabrielle, very small so far, but the prospect is limitless. investors can go about this in two ways, the direct impact would involve greater escalation of these terrorists which could reduce output -- these terrorists -- tariffs which could reduce output. i think we are very much on watch for both of these factors and for the uncertainty.

david: have we seen any direct effect yet? gabriella: we haven't seen any yet. you did see a little bit of a drop in output expectations, that could be an expectation of some of these trade tensions but not big enough to train -- to change the growth picture. thea: how do you invest in second half of this year in light of everything we discussed? gabriela: we still maintain a risk bias. we still want to be a little bit overweight equities relative to fixed income. we don't want to swing too far because we have a lot of uncertainty. regionally, we want to focus on the u.s. as a safer trade and because we are seeing good

growth, but we don't want to forget about international either. david: brilliantly done. she did not need much. santos of jpmorgan, thank you so much for being with us. a pboc official has told bloomberg that china will not use the yuan as part of the ongoing trade conflict with united states. joining us now is the bloomberg executive editor for china. explain to us what we know at this point. it is following the statement about the yuan, overnight. very busy day a for pboc officials here in china. we had a central bank governor talking about the yuan, making sure it would be stable early in the day and then we had the central bank governor say the same thing and shortly, we had a pboc official come out and say for the first time, the most clearly that china will not use the yuan as a tool.

david: a lot of speculation about this question, why did it take them this long to say this and does it have anything to do with the friday deadline on the tariffs? john: i think it is the reason for why they have come out to speak, it has to do with more how the yuan has fallen. a did that, we saw some state banks coming into the dollars, toy support the yuan and after that, we saw the pboc come out more forcefully. is 6.7 the line in the sand? john: it appears to be that, given the way that the pboc has reacted. the verbal communications that they have given has not been all that new. they used a lot of standard language but it is rare for

three officials to come out on the same day. julia: that is called making a mark. john liu, thank you so much for joining us. david: coming up, one hedge fund manager returns 30% of the first year of his fund. we discuss that next on wall street beat. you can tune into bloomberg radio and listen to our colleagues. bloomberg surveillance can be heard in new york, boston, the bay area and all across the united states on sirius xm satellite radio. ♪ ♪

emma: this is bloomberg daybreak. coming up in the next hour, the vc property ceo.

this is bloomberg. julia: we now turn to the wall street beat. first up from apollo to achilles. after departing apollo's -- apollo, one hedge fund manager posts a 30% return in his first year. bridgewater. from federer's uniglo ace. he steps that the tennis champion steps away from 90. david: tell us about this achilles one. it is fascinating. you have to love the name.

it is like coming up with your rp name. -- your rap name. this is interesting because we are in this era of people leaving the big firms it feels like and one of the notable things here is this is a guy who went out from more private equity funds to start a hedge fund. year, up 30% and that does not include his performance where he had some mistakes in liquid cash in illiquid funds -- in illiquid funds. david: a source close to the fun revealed this. >> funny how that happens. money,speaking of more

billionaires arriving at bridgework -- bridgewater. butadical transparency radical transparency can be very profitable if you are bob prince. these are two key lieutenants and it is an interesting time to be looking at this, in part because of the news last week that ray dalio is going to spread the leadership. these may not be the last billionaires we see. david: he already had given a piece of the action to these two. more going to expand out and if they keep being a successful as they have been, that means more billionaires. >> we mentioned blackstone. these firms are generating wealth for larger numbers of individuals, larger amounts of wealth for larger amounts of individuals. you asserting to see billionaires coming out of single firms and that is amazing. david: quite the institution they have built as ray dalio pulls back.

third story, my favorite, tennis. roger federer, this is a big deal for retail because roger federer has left nike and has gone with uniqlo. >> uniqlo was more associated in the tennis world for a long time with novak djokovic who switched over to the cost. that left a gap and who better to fill it then roger federer? roger federer? well into roger federer's retirement. although watching him right now, he does not show any signs. david: if nadal he's winning tournaments, he just has to keep winning. -- keeps winning tournaments, he just have to keep winning. nike -- is another x ex-nike athlete closer to my

world in marathon running. he also won the boston marathon along the way. david: roger federer has a new racket. he played with a wilson for years. he helped design this one himself. it just came into the club i play in. they were so excited about this. i pre-ordered one for my son. he won his first match with the new racket. many thanks to jason kelly. julia: coming up, the bond -- we will discuss how -- if you have a bloomberg terminal, check out tv . you can look at our charts and graphics and interact with us directly. just go to tv on your terminal. this is bloomberg.

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david: del has announcedl -- dell has announced plans to trade publicly again. now brooks undlin, bloomberg opinion columnist to -- columnist who writes this is not necessarily the best outcome. explain that because i have read .bout three or four pieces >> this is -- i have read about three or four pieces. >> this is very complicated. they are buying the tracking stock. -- which at buying lot of people expected them to do as part of this process. another -- a number of the yen

where -- spot more in the sweet than dell. they wanted that to remain a separate publicly traded entity that they could own so they pushed back on this idea of a buyout. they seem to have gotten that but i don't really see how this full buyout of the tracking stock really solves dell's problem. buyout fromis silver lake. this does not really solve that. the benefit of doing these transactions was to take advantage of the balance sheet and the cash flow and they are not doing that. julia: what is the ultimate benefit because dell has to prove it can fly as a public company and it struggled in the past and it has been under pressure. it is a take two, but what is the difference?

i think the one clear benefit is you go from three entities to two by consolidating that tracking stock and reducing the complexity, that should help your overall enterprise value. you are not necessarily creating anything. it is mostly financial engineering. the underlying growth story has not changed and it is not that appealing. how public market investors are going to look at that is an open question. david: you took it private so how is he going to pay for it? a lot of debt on his balance sheet. but thate bought emc is the part that really blows my mind. investors are pushing back on this idea of being part of dell. they are already part of dell. dell is the majority shareholder. the next step is to consolidate

and take it manage of this faster growing asset. the environment is not to do this at this time but i have to think that that is the next logical step. the other thing is the tracking stock deal, a lot of people are looking at this as a done deal. they are buying this at a significant discount. some sort of discount is justified but this deep of a discount? david: you can tell us about that when that happens. julia: i'm sure at some point we will understand this. brooke sutherland of bloomberg opinion. thank you. this is bloomberg. ♪

david: steady as she goes. china dictate central bank

underscores it will not use the yuan as a tool to deal with trade conflict. this comes after a vow to keep the currency stable. president trump says he is not ready to pull out of the wto, at least not yet. so much money, so little time. the ask your market was stronger in the first half of 2018 then in four years -- 2018 than in four years. what is in store for the second half. welcome back. for steel is off in boston fireworks, music, everything you could want. julia: anywhere on bloomberg, you can find it. as you mentioned earlier, i will be watching. david: england against columbia. julia: 20 years ago, the last match, we won. apparently england is not one man knocked out in a major

tournament since 2006 -- has not won a knockout in a major tournament since 2006. we have all the optimism in the world that we're going to win. david: theresa may could use some good news. julia: all the good news she could get. a look at the european markets this morning. the stoxx 600 adding to the gains over the last half hour or so, no higher by more than 1%. 1%.jones futures up 6/10 of we do see wti crude trading ever closer to that $75 a barrel. as i mentioned earlier, the saudi's and the russians of opec

plus reaffirming their one million barrels a day pledge, irrespective of what we got from the president and his call for 2 million barrels over the weekend. david: very simple arithmetic. we will now turn to the morning brief. 9:00, we are going to start getting u.s. automakers numbers for monthly sales. that is going to include general motors. they have not reported those numbers since march. 10:00, we get u.s. factory orders and u.s. durable goods orders. 1:00 this afternoon, the new york stock exchange will be closing early in observance of the fourth of july holiday. talk of trade has been dominating the markets with president trump weighing in on whether or not he is going to leave the wto. has treated the united states very badly and i hope they change their ways. they have been treating us badly for many years and that is why

we were at a big disadvantage with the wto. we are not planning anything now but if they don't treat us properly, we will be doing something. david: to give us some perspective, we welcome burns mckinney. he is allianz's global portfolio manager. my first question is are the markets as sensitive to these ups and downs of trade as we make them out to be? burns: stock markets definitely are. i think there has been a diversion's between how is this going to impact the economy versus how does this impact the markets. a case could be made that unless you have a significant tit-for-tat escalation of trade tensions, the effect on the and notwill be muted large enough to offset a lot of the benefit that we got from the tax cuts and deregulation.

if you flip that to how does this impact the stock market, you can see the fact that those stocks have given back some of the recent gains that they are impacted and the question being why, when the tax cuts are clearly bigger. the primary reason is initially, the equity markets, they priced in the good trump but not the bad trump. they acted like they could get trump a la cart. they never really priced in the fact that he did run the most protectionist campaign we have seen in a long time and now they are just playing catch-up. secretthis was not a big during the campaign. we know what the tax cuts are. we don't know what the so-called bad trump on trade is, whether this good be negotiation or lead to a trade war.

how do you invest in this market? burns: there are a handful of ways you can look at it. a little bit keep of powder dry. consider that there are areas of the market that are going to be more impacted by trade tariffs and trade wars. the auto industry is always a major target. if we do have escalation and tariffs coming from china, places like soybeans can get hit. if you look at the markets that are less exposed, maybe you have a lower proportion of revenues coming from foreign revenues and from trade, you look at areas like consumer discretionary, financial services, health care. financial services has a counter affect. if we have a trade war, interest rates are going to remain low and that will keep margins lower. health care is a place you can

look to stable dividends. likewise, i think this creates a great opportunity for the smaller or the mid-cap space. the mid-cap is one that tends to be underexploited and underutilized. these are companies and industries that rely on exports a little bit less. julia: that has been outperforming trade, they small caps and the medium cap's. are you saying that is the right trade to remain in as we head toward the second half of this year? -- youi think because guys hit the nail on the head when you suggested that the issue with tariffs and trade talks is not our -- not what are they going to be but just the fact that there is uncertainty. are we going to pull out of the wto? are we going to pull out of nafta? is this just the president exercising the art of the deal? until you resolve that uncertainty, then some of the places to go that are the safe

harbors are going to be less payers ofnd dividend the text of companies that are returning capital to shareholders and they tend to be a little less volatile in shaking markets -- shaky markets. david: how much of that has the market already internalized? how much of that is already baked into the values? how much has the -- have they discounted it? burns: it is never fully priced in. we talk about something being priced into the markets. once you actually do resolve it and move forward, then you can actually move the rest of the way. as of this point, financial services, it is certainly one of the cheapest sectors in the market. it is pricing in lower interest rates. at the same time, the financial

services area is not really fully pricing in the fact that the fed basically took the training wheels off of the stress test. they had some of the most stringent stress tests we have seen a long time and 34 of 35 banks passed. it is one of the few areas that would have benefited if you see a rise in interest rates. with a lot of the banks, you that ister loan quality just flowing through the system. julia: you are long on a number of these larger bank names. why not some of the smaller cap financials? the we are seeing so far favors them and we have the greater resilience of being more internalized and focused rather than having international exposure. burns: for starters, the

strategy i am portfolio manager on is a top 1000 large and mid-cap strategy. that is one of the reasons for that. it is something that should benefit financial services across the board. we do hold stakes in some of the larger names like the jpmorgan's of the world. we are certainly bullish on some of the more mid-cap names like citizens financial or suntrust that have gotten the opportunity to raise their dividends. julia: that makes perfect sense. burns mckinney of allianz global investors. you are staying with us. coming up, the ipo market is open for business. we discuss the hot companies set to go public with kathleen smith of renaissance capital. this is bloomberg. ♪

emma: this is bloomberg daybreak. shares of glencore are diving today. they have been subpoenaed by the u.s. justice department to hand over documents related to money laundering and corruption. the investigation has to do with their business in nigeria, the democratic republic of congo and venezuela. theast is not given up fight with disney over buying 21st century fox entertainment assets. the company has considered a possible partnership to compete with disney's $71 billion offer. brian roberts maybe offer -- may be open to buying just some of fox's assets. -- wants to expand in europe's largest economy. terms of the deal weren't disclosed. the commerzbank unit generated

about $406 million in revenue last year. that is your bloomberg business flash. julia: thank you very much. the ipo market is open for business. initial public offerings in 2018 are at their busiest in years with biotech leading the way and even more companies expected to go public. for more on the ipo market, we are joined by kathleen smith, renaissance capital -- also still with us is burns mckinney of allianz global investors. great to have you with us. kathleen: thank you. julia: 75% of the ideas we have seen so far are tech or biotech. this is a blossoming industry. kathleen: the technology ipos are up to the 2% on average, so and therns are the fuel returns and at the markets have .een very strong

for thes it just a grab new issues because that would be my one concern, talking about that level of performance. something wrong in the pricing to see that level of optimism. kathleen: that is a good question. we often track how the ipo is priced relative to the range. on average, it has been within the range and then we track the first-day pop and on average, it has been 15%. thereafter, there have been strong returns, something like 25%. there are good returns in the aftermarket trading. that is what investors need to see. to get a point of comparison to that 15% first-day pop. 2000, during the internet bubble, that first-day

pop was 50% to 70%. i don't think we are going to get that but -- david: burns mckinney, i will bring you in here. the white line shows how the ipo's have been doing in their stock value and the blue is where the overall market has been. why is it that ipo's seem to be outperforming the markets so well? is that -- is that indicating a level of discipline in bringing the issues to market? we are good old-fashioned value investors so the ipo market is not where we tend to play. one of the things it stems from is the fact that you have such concentration in areas like elegy, biotech, like some of the areas that have been leading the markets upward. because they haven't coming selectively, that has something to do with it. it is certainly something we investor, asvalue

when we do see this level of concentration and the fact that so far, most of the stock market gains have come from a sow -- a handful of technology names. it represents a contrarian indicator that investors might want to be cautious about. julia: what do you mean? burns: it is something that suggests, it does not necessarily indicate that the market is topping, but we may be getting to the late stages of the bull market because you do have those big technology bets. the results of these names coming after the ipo is as whaty not as toppy we had in 2000 but it has been strong. kathleen: technology tends to be a late cycle segment. , the ipo market is also seeing, it is a little bit of immune from some of the

big picture trade issues that are happening. we would say that we are in a sweet spot, how long the sweet spot's last. -- sweet spots last. david: do you expect tech and biotech to continue? is that ratio going to hold up? kathleen: we see more markets tapping the ipo market. the numbers are so big in favor of tech and emerging growth. we expect to see in the real estate area, an ipo that is the third-largest commercial real estate broker. we also expect to see wealth manager focused financial come public and energy has been in the ipo market and we expect to see more energy companies tap the market. what surprised everyone was the b.j. warehouse deal. there is the reason why the very

good retail concept cannot get done in the ipo market the way it exists today. julia: we would be remiss to not use or global market expertise. tensions between the united states and china and perhaps restrictions on financial flows. what will this mean for that market going forward? kathleen: that is a good question because in the u.s. ipo market, there have been a number of chinese ipos, would -- most notably what people call the netflix of china. when it comes to hong kong, we are seeing in opening up at the hong kong market because they have relaxed their voting rules and are allowing founders to control. i am not sure if it is more investor friendly, but we have many are going to come out in hong kong, but the u.s.

is getting its fair share and i would note that we think we are going to see tencent music do a million dollar ipo. ,ne that i think people know the third-largest e-commerce company in china. we know the largest is alibaba. this company which filed under the name -- under a different name is not in china and is a very fast growing social e-commerce company. it filed under the name walnut street. that should be a billion-dollar ipo and i see a lot of our clients are looking at this. julia: i have not even heard of that. david: many thanks to kathleen smith of renaissance capital. burns mckinney of allianz global investors is going to be staying with us. coming up, or stronger-than-expected first half of the year. more on that next. this is bloomberg. ♪

david: less than an hour from now, we're going to start getting numbers for u.s. auto sales last month. we welcome bloomberg intelligence's senior auto analyst. still with us is burns mckinney of allianz global investors. give us a sense of what we are expecting for this last month and where are we, halfway into the year? >> right around the 17 million annual unit pace which is a plateau but at a high level. 2016 was a record of 17.5. 2017 was a pullback. we are thinking of coming in somewhere around the 17 million range of within that number, we have to think about vehicle mix. we are running about 70% light trucks and only 30% cars. a more profitable mix.

david: let's pull up that bar chart we have, showing what we are expecting for the entire year. variation among market share between these? kevin: i think it is going to be fairly consistent through the year. most of the automakers have plateaued. what you are seeing in gains is on the truck side. domestic guys who are 80% light truck are going to gain more market share. david: burns, i want to turn to you. it strikes me that they have been doing quite well in product makes and yet how much of their valuation is there successful effort to persuade the street they are a tech company? kathleen: i would -- burns: i would say virtually none. the take we have on industry is that the auto industry is cheerily -- is clearly based on concerns of peak auto or one of

the first targets of a trade war. we arethat, we feel that stock pickers and we like to find the best valuations and in the case of gm, you are getting priced in, and that of the benefits of the fact that they made great strides in autonomous driving. they have been paying a dividend yield of around 4% and they have been, since the financial crisis. they have been very aggressive at returning capital to shareholders. one of the benefits of it and investors do need to pick their points here, but really there are a lot of upsides, almost a call option on some of the new technologies that are not priced in. because you are getting it at such a cheap multiple, you are getting a cushion in case things go wrong. julia: this is a company that is looking at china as a huge

opportunity for leveraging growth going forward. if we we ordered that chart in terms of sales to chinese opportunity going forward, who is most in line? kevin: general motors in terms of u.s. automakers, a huge presence in china and one of the things about china that is interesting is electrified vehicles. that is the place where the volume numbers can advertise those costs over time and make them more attractive in other markets such as the u.s. or europe. julia: what you guys think -- what do you think these guys think when tesla is talking about producing 5000 or 7000? kevin: i think they are amused. when you think about a company like general motors and the chevrolet volt ev and people compare it to the model three and it is not comparable because general motors is not -- does

not actually want to sell that many of them because they sell at a loss. what they create is the technology, realize they can design engineer and market it and put it on the shelf and if the technology proves profitable, you go and put it in a compact crossover. it really does drive home the point that he made that tesla is making great strides but you do have the economies of scale with the fords and general motors of the world. julia: the market cap comparison is eye-opening there as well. burns mckinney is staying with us. this is bloomberg. ♪ ♪

♪ julia: this is bloomberg "daybreak." i am julia chatterley. alix steel is in boston today and as we have been mentioning all morning, you can catch the boston pops live on bloomberg

starting at 8:00 p.m. eastern. i think tv has an advantage. david: do you watch these every year? julia: i do, i watched it last year. should we have a look at what fireworks bring in the markets this morning? equity markets are higher by 1% in europe, a touch softer over the last 20 minutes or so. the euro also higher. that is in part what we saw followthrough from yesterday in terms of angela merkel shoring up her coalition government. as far as the u.s. dollar is concerned, the chinese renminbi is very much in focus, seeming verbal intervention from the pboc. we are getting a quote from the officials saying they are not recognizing the chinese renminbi and they will only use it as a tool in the ongoing trade discussions.

futures higher by some 6/10 of 1%. 1%.futures up for tenths of thear as risk sentiment, yen is slightly higher versus the u.s. dollar but that is more of a u.s. dollars story. 2.88 on the two-year -- 10 year. $1 million a barrel increase. the epicenter of trade concerns between the united states and china, soybeans. david: let's find out what is going on outside the business world. emma: president says if it was not for him the u.s. would be at war with north korea. he tweeted there have been many good conversations with kim severals regime, but reports point to evidence he ramped up weapons production before last month's meeting with

president trump. mike pompeo visits north korea this week. the former prime minister of malaysia has been arrested. the announcement was made by the task force looking into corruption in 1mdb. they are trying to recoup $4.5 billion from the fund. weaponize it will not its currency in a trade war with the u.s. two top chinese central bankers vowed to keep the currency stable. the lost almost 4% against dollar. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. david: thank you so much. tariffs on $34 billion of chinese imports are due to come into effect on friday, and in response, chinese companies are

expected to cancel most of the remaining soybean orders from the united states for the rest of the year. we welcome luis ribera, ofversity professor agriculture and economics. also joining us is adam jirga. to farmers were not doing so well already. luis: farmers are looking at a potential 12 year low in profit and that is the latest forecast. that was before farmers planted. farmers may be compounding some of the problems this year. they planted more soybeans than corn for the first time in 35 years. they decided that was the crop they would plow their investments into and it may be a bad debt. -- bad bet. david: you are an expert in

agricultural economics. what is the problem with the u.s. farmer and are they headed in the wrong direction? luis: thank you for having me. it is a big problem because about one third of u.s. farm income comes from agricultural exports. whenever we have a trade war, whenever there is a destruction on trade, producers will get affected and usually in a negative way. china, the with european union, as well as renegotiating nafta place -- as bad for agricultural production in the u.s. julia: we have been talking about this throughout the show, you have to separate action and what we are really seeing in terms of actual tariffs versus the threat of what might come. even if we see nothing, the uncertainty as far as agricultural pricing is concerned, is huge and that has an impact on what farmers do

going forward. talk about the impact you see already in terms of uncertainty. luis: when you look at the future prices for commodities, it does not matter if it is just the threat. they will react. we have stories from producers in texas, corn producers specifically that just because corn prices were down by one bushel, he lost about $10,000 to $15,000. it does not matter if it is a threat or just talk about tariffs or any trade issues. the markets will react and producers will be affected. david: just take soybeans, for example. if china does not buy them from us, who will they buy them from? is it brazil? who will we sell them to? alan: you have seen this date ramp-up of chinese purchases

from brazil. they have been preparing for brazild they should -- has a different harvest season so in the fourth corner -- quarter china will be looking for u.s. soybeans. there is speculation they will buy the soybeans despite the tariffs. the united states has to look for other buyers. be auropean union could big market for u.s. soybeans, but you will not replace china. it is simply the biggest destination for soybeans on earth. it is a mainstay of their cooking and even if you sell to the e.u., they may not be the most willing buyer. david: let me put up a chart that shows the extent to which china is buying more soybeans from brazil than they have in the past two years. and they take care of their problems by ramping up in brazil and other places? luis: and the short run, because of the growing season, they will come back to u.s. soybeans but

eventually will look for other suppliers. we worked on a project with 2040 whereed result we look at agricultural production and expansion in several commodities as well as as a market for u.s. products. can double their cropland and be more of a major player. playere already a major and we compete directly with many of the products they produce, mainly soybeans, beef, pork, poultry, corn. they are happy with this news because they think that i can get a higher market share from the world. julia: how able is china to go, we will order mass planting of these kinds of products? can they get greater independence?

luis: i don't think that is feasible. their agricultural frontier is pretty much maxed out. they can make a switch on their ,rop rotation or crop portfolio but they depend on the world market. it is an economic decision as well. the reason they do not produce all the soybeans and they are independent, they can produce everything that they need, is because they do not have the resources. they import quite a bit, import soybeans mainly from brazil and the u.s. and they will continue to do that. it is an economic decision that works best for them that way. julia: the bedrock of the vote that got president trump to the white house was the farm belt and these rural communities. how material are we talking about the damage right now and the fears that they face

translate into votes in the midterms? alan: farmers know their history , and i will take you back to the 1980's when the u.s. put a grain embargo on the soviet union. there was a lot of concern in farm country and political backlash. this time, we are dealing with south america. we are taking a look at where u.s. farmers may have to rethink some of their concern and some of their support for the president in the future, if indeed this policy has the material effect of making south america great again. julia: thank you so much for your context and history lesson. luis ribera and alan bjerga, thank you so much. still with us, burns mckinney. thank you for waste -- waiting patiently. europe is kind of the collateral trade among the weighted tensions we are seeing between the united states and china. we were seeing growth -- growth

there slowing. ec opportunity or stay away? burns: it certainly creates some opportunity. europe really has been caught in the crossfire of this trait rhetoric between the united states -- trade rhetoric between the united states and china. you have the steel and aluminum tariffs that impact europe. if you are to escalate to tariffs on autos, that would make a big dent in places like germany. likewise, europe is far more dependent on exports to places like china and like the united states. that said, this is certainly a negative at a time when you already had a slowing economy. challenges that are facing europe include populous elections. at the same time, the economic fundamentals in europe are probably better than they are getting credit for. you still have the tailwinds of

unemployment, it has been declining through the eurozone. judy. -- gdp is still expected to grow north of 2%, slower than last year but still reasonably substantial. the fact that europe is a little bit behind in their economic recovery where the usa, a lot of what we have seen in the cycle is things have been taking place there. the u.s. cleaned up bank balance sheets first and europe was later. every step of the way, europe has been a couple of years behind the u.s. as a value investor, you see better valuations in europe to compensate investors for that risk. julia: optimism about europe. that is what julia likes. it is burns mckinney of allianz global investors. money in gaming. the ceo of vc that is what julih owns caesar's palace and harris

las vegas will be joining us on our business leisure series. you can turn on your radio to listen to tom keene and jonathan ferro from 7:00 to 9:00, and tom keene and pimm fox from 9:00 to 10:00. live from new york, this is bloomberg. ♪

♪ julia: this is bloomberg -- emma: this is bloomberg daybreak. today,up later representative leonard lot, jersey.an from new now it's your bloomberg business flash. tesla has called a timeout. jersey.

they have been working around the clock in recent weeks to beat a construction goal for its model three sedan. they are now causing production this week to allow tesla to do major it -- basic maintenance and upkeep. billionaire property investors david and simon reuben has sold part of their stake in -- for $2.8 billion. global switch is planning an ipo next year. is moving to end losses totaling $5.2 billion. the ceo tony douglas has shuffled management, ray arranged business, and put the brakes on his attack -- attempt to bridge the gap between others. >> this program is about making sure we have case, we have urgency, and we have excitement in delivering on that. emma: you will have more from that interview coming up at

10:00 a.m. eastern on bloomberg. that is your bloomberg business flash. david: it is day two of our business and leisure series where we take a closer look at businesses focused on recreation, sports, and tourism. today is focused on casinos and the gambling industry. the legalization of sports betting in some space -- states could be good news. properties is one of the largest co-owners of gaming property destinations. where are we with the gaming business overall? edward: i think the supreme court -- eben: i think the supreme court decision to allow states to legalize sports betting will help casinos a lot. it has been a big year in the gaming world.

and a day lot of happening now, some of it is not itm&a happening now, some of is related. edward: regional gaming had a strong spring and the outlook for q3 is very good. of the business opportunity going forward is based around sports betting, or will that take time to translate as the laws change? edward: it will take a bit of time, although some states like mississippi, delaware, and new jersey have been making efforts to go into sports betting very quickly. theill be a means by which industry can develop a new generation of customers, both within the regions and in las vegas. you can look at las vegas to see the significance of sports betting in creating what are these big, gathered experiences.

march, hundreds of thousands of americans engaged in the highly irrational act of going to las vegas to watch march madness on big screens in casinos. they have tv is at home, but they gathered experience is a much rather way -- richer way to experience it. eben: is there a concern that legalizing sports gambling might cannibalize what you are talking about, that tourism you get to nevada? edward: there was a fear early on when regional gaming developed in the early days in the 1980's that it would cannibalize las vegas. what it did was create a whole new generation of customers to go to las vegas. i think that if the reasons are the way people get to experience what i can see no is all about thanks to sports betting, it should be good for los angeles. david: you provided a chart

about the differential between experiential real estate and goods. it is pretty striking the extent to which people are going to places where there is las vegas for the final four. will that continue? >> we think so. generation x probably deserves credit for getting it started but the millennial generation destinationd the blank. that this desire together we are seeing across the u.s. and globally. taking in place -- taking place in conjunction with the world cup, granted not so much for the u.s., but if you saw that huge square in moscow on sunday, there were probably hundreds of thousands of people. it is all about gathering. thus the value of owning real estate where people can gather. julia: it is reducing the reliance on traditional gaming. you are finding other ways to generate profits in the business outside of gaming.

edward: if you look at our marquee property, caesar's palace las vegas, it is 86 acres of the most productive real estate in america. you have the number one grossing restaurant in america, one of the best shopping malls, a great nightclub, a top theater created really for celine dion and populated by elton john and rod stewart. it is the diversity of experiences in this 86 acres that constitutes the business. eben: to what extent will sports betting and other states help your other businesses? edward: what we hope we see over time as a general migration of this diversity of experience from las vegas into the regions. the regions tend to be generally more gaming reliant the las vegas, but as they become more and more aware of what kind of

successes been created around diversity in las vegas, you should see more of that happen. the new hard rock in atlantic city is a new example -- a good example of that. have 20 restaurants and will be very much about diversity of the experience. about the's talk other part of the population that will have more time. edward: the greatest number of maybe bloomberg this year are 57 to 58 years old. over the next 10 to 20's you will have the greatest number of americans entering retirement or send eight -- semi retirement. positive have implications for gaming and other leisure and hospitality sectors. julia: great. eben novy-williams and edward pitoniak. thank you. coming up, one of the largest and oldest fourth of july events in the united states. what is in store for the boston

pops fireworks spectacular, that is coming right up. you can interact with the charts shown using g tv to catch up on key analysis, and you can also save charts for future use. you name it, we have it. this is bloomberg. ♪

♪ david: the boston pops fireworks spectacular is the largest and oldest public fourth of july event. zoneng us is bloomberg matt miller, all the way back -- bloomberg's own, matt miller. matt: indigo girls will be playing here. i've been a fan for 30 years. plus we have new musicians like rachel platen. we have real legends like rita marino, who has one and emmy,

tony, one of, and the few people in the world. it will be an incredible performance, because the boston pops put on such a great show and bring out such great music. they fire the cannons during the 1812 overture. it is really traditional, but we have a lot of new music to share as well. david: are the and ago girls going to sing through landslide -- indigo girls going to sing through landslide? througha marino sing west side story? anitashe was the original . we have the new i need to with .s -- anita with us it is a marriage of the old and new kind of passing the baton. it should be just a fantastic program. you can watch it not only on bloomberg tv, but on boston.com.

you can listen to it on bloomberg radio. sense matt miller, do i duet opportunities? thank you for that. have a great time. do not miss the boston pops fireworks spectacular tomorrow night on bloomberg. david: coming up, steven englander, standard chartered global head of research will be joining jonathan ferro. julia: futures, as we had toward the market desk had toward the market -- head toward the market open, or green across the board. ♪

jonathan: from new york city for our viewers worldwide, i am jonathan ferro. this is the countdown to the open.

coming up, the pboc pledging not to use the currency as a tool in the trade conflict. that move helping to lift broader market sentiment. nothing stable about glencore stock today, plunging after being subpoenaed by the u.s. justice department. touch more on those stories later in the program but ahead of the market open, futures positive malaise and or 12 points on the desk 11 or 12 points on the s&p 500. treasuries stable with the 10 year at 2.87. the main story, china stepping in with verbal intervention this morning. investors weighing in on the move. >> it is not in the best interest of the authorities to have bouts of volatility. >> this is not a simple task for