has agreed to substantially up their commitment. taylor: collegial spirit following the summit. he has agreed to reaffirms the ommitment to nato. it's a buying opportunity. u.s. inflation expectations dropped short term spikes and a long term rise with u.s. c.p.i. >> welcome to "day break." what would it be if we didn't have the president making things interesting before we come to air. >> it never happens to us because we never get press conferences in the morning and may get a tweet and it's usually in the 8:00 hour. we got a full on press conference. and some good superlatives in the press conference. in the market we were debating whether we'd call it a risk on or a recovery after that sell-off yesterday. s&p futures up by 16 points. i wanted to point out dollar yen. 112.59 is how we trade and in

the u.s. in terms of the bond market the spread flattens. morgan stanley saying by mid 2019 the spread is going to invert. and a nice relief rally, up by 1%. i don't want to get up the balloons because i have skepticism. jonathan: time for the morning brief at 8:00 eastern time, we'll get perhaps the most important economic data. the c.p.i. numbers for the month of june and find out how inflation is doing. at 12:15, u.s. federal reserve patrick parker will have a keynote conversation with mike mckey at the rocky mountain economic summit. at 1:00 this afternoon the u.s. treasury will alkts $14 billion in 30-year bond. >> the nato summit in brussels opened up and we heard from president trump about the u.s. commitment to nato. president trump: i let them know i was extremely unhappy with what was happening and

substantially upped their commitment so now we're very happy and have a very, very powerful, very, very strong nato, much stronger is sthan -- than is was two days ago. >> we heard from other officials from different countries, do they share the same optimism and numbers mr. rump does? annmarie: we heard from the german chancellor before president trump spoke. earlier there were reports he was threatening to leave and threaten if expenses weren't seen. it sounded like he was using a harsh language with his counterparts to get the spending up and is touting it as a complete victory saying he extracted a firm commitment by all nato allies to substantially increase the target to 2% quickly.

he said countries will increase by $33 billion. he's saying even more will come and he's looking forward to a 4% target in the future. alix: annmarie hordern. hanks very much. jeremy: lisa, looking at the markets at the moment, it looks like there's some relief maybe or maybe they're not paying attention? was this a crisis that never happened? lisa: it's hard to say. there was some focus on nato but think there was more perspective on tariff. certainly with nato you do have president trump caving to a lot of pressure, not only from our allies, u.s. allies but also internally from congress. congress has actually passed a resolution trying to take some of the power away from trump. jim matusz has tried to massage relationship and is also a former nato commander and tried

to be the supporter here. it's not a unified front when it comes to the administration dealing with nato. jonathan: is this a head fake? do the markets care what's going on at nato at all, does it deal with tariffs? david: it started with a nato interpretation and ultimately, yeah. when is the last time you can remember nato being any sort of market issue? i mean, never in my -- alix: thank you. lisa: typically these meetings are boring and a formality and people get in a room and sing kumbaya and go home. the idea there could be a disruption of world order is not exactly reassuring. how you price that into markets -- cameron: if you argue the markets might go up and down on something that may play out in a decade, godspeed and leave it to you. jonathan: even in the press conference we saw, president

trump linked up nato with trade and talked about the problems he's having with western europe with trade and that's a markets issue. cameron: if you want to be cynical, you could say the push to get the allies to spend 4% of g.d.p. on defense would play in nicely to one of the manufacturing industries where the u.s. is strong. the defense industry, i would bet very heavily against western europe spending anywhere near 4% of dpped -- of g.d.p. on defense. alix: our next story has to do with commodities. come inside and look at the rout we saw yesterday. there were some really big moves here. if you look at the white bar, the bloomberg index and you see a massive drop we saw yesterday and then the green bar is here is the bloomberg dollar spot index. cameron, what was your takeaway?

cameron: a perfect storm, you had the narrative of the trade escalation and the tariffs. you had the dollar trading very, very strongly across the board. and you had speculators a at least in certain segments of the commodity complex leaning long, notably in crude where you saw sort of a wily coyote type action falling off the cliff and even if you believe the futures reports, there's still residual longs in compra and gone down the pan, if you will. lisa: to me it's interesting because of the real tension of the possibility of trade wars slowing public growth and then you have the idea we might be running into a problem with how much oil there is to come to market, the i.e.a. coming out and tracking this, how the gulf members of opec may be stretched to their limits as far as production to offset the declines from iran if taken off

the market and from libya if that is ramped up and venezuela's production going down the tubes. you have a weird inner play of a possible oil shortage paired with the possibility of slowing growth and how does that get traded in the market long term? a great deal of uncertainty there. alix: you come upon some break evens. this is our third story of the day. the five-year break evens and the rollover we saw is around 2%. lisa s with am i making that correlation to the drop in commodities and then leading through to break even? lisa: that was brilliant, alix. it plays into this idea, are trade wars inflationary or deflationary? people might say they're inflationary in the short term making things more effective but they slow growth and make commerce more difficult

internationally and people have less spending power and purchase fewer things and leads to a slowdown in the economy. there is a confused picture as far as inflation goes and you see it in the break evens. jonathan: let's talk about the sexeak stations are for fed policies. the euro-dollar is down to zero. is it coming down presumably because of the disparity between the fed raising and the e.c.b. not raising and this the market telling us enough already? cameron: so this is tensionly pricing the spread in euro dollars which is the market's estimate of three month libor between the end of 2019 and the end of 2020. it's basically gone to zero with the implication saying the market saying the fed won't raise rates in 2020. alix: maybe not raise but cut. cameron: i wouldn't read too much into it.

alix: it could be either. cameron: the fed will say we keep going 2020, and the wild curve is there are sort of market based recession prediction models counter where you use the old curve to predict when the next reception comes. it's an emergent consensus, the next recession will start sometime in 2020. if that happens will the fed raise rates? almost certainly and almost certainly not. i think going to flat tells you we're moving towards that sort of tipping point. now, if we see evidence emerge the rest of the world is starting to pick up again and/or we see a resteepening in the 210's curve naturally you expect the money market curve to rekeepen much more in line with the fed's predictions. but that's the next macrogame in town, if you will, trying to figure out when the economy is going to sort of run into a

brick wall. and 2020 seems as good a time as any, a, given the pace of tightening we've seen and b, that's when i have to start paying for college and naturally that's when markets will roll over is when i need to start forking over some serious dough. jonathan: as good a time as any. cameron: the best indicator i can think. jonathan: a thanks to lisa and cameron. find all the charts we used and tvo. by running f coming up, more from nato. president trump says the alliance is strong. now you see french president macron is speaking in brussels. one of the things, you can't just frumple from 2% to 4%. president trump said we want to go from 2% to 4% and mr. macron is saying that may be harder than it sounds. live from new york, this is bloomberg. no

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>> it's bloomberg daybreak. i have your business flash. next move is up to rupert murdoch. they increased their takeover bid of sky to $34 billion and ps the swedened offer from 21st century fox. now they have to decide to accept it. b.m.w. will become the first foreign automaker to join a majority in a chinese joint venture.

the germany company now holds 50% of the venture with china automotive. and one of the world's biggest miner is watching the trade war between the u.s. and china closely. bloomberg spoke to rio tinto c.e.o. juan sebastian in sydney. >> there are two keys in the business, not only rio tinto but the mining business and g.d.p. growth is strong across the graphic at this point in time. the other is about trade. if i jirio as a proxy, 99% of the product will go from one country to another. so we're watching the trade issues very carefully. kailey: that's your bloomberg flash. jonathan: thank you. the winding up of the nato summit in brussels. we've heard from president trump who gave his remarks in a 45-minute news conference. right now president macron of france is talking and this is a bit of what president trump had to say a few moments ago. president trump: i let them know i was extremely unhappy

with what was happening and they have substantially upped their commitment, yeah. now we're very happy and have a very, very powerful, very, very strong nato. much stronger than it was two days ago. jonathan: we welcome now from brussels, the senior deputy. you heard what president trump had to say, nato is stronger than two days ago and we're hearing from macron, don't be so sure about the 4% number. is the president right we come out with a nato that's stronger after this fairly tumultuous two days? guest: thank you for having us. i think nato is stronger but not because of him and not because of numbers but because we have seen from members of congress that we're at the site of event in the nato summit and a strong commitment to the transatlantic alliance and shouldn't go along with the

theater trump is playing by using some bias that work with some constituencies. we should wait tomorrow and take a measured approach and have the other members of nato with its view of american allies and partners, discuss what the future of nato really looks like. here was a communicate day yesterday and so far the nato summit has gone well until this morning. we have lots of positive things to look at and shouldn't focus too much on this press conference and what he's been saying this morning. jonathan: from your point of tightly woven is this? because even in the news conference, the president tied the two together. corinna: yes. no question about it. security trade is interrelated. we're looking at a complex

world where domestic policies have to be used at together in its global contacts and international relations. they affect development policy and counterterrorism measurements so we need a holistic approach. but pitting one against the other is not the way forward. there are other voices out there from the populist but to the women who want to be a part of the conversation and we need to make that space and it's an opportunity for new kinds of conversations. we just need to adopt the system, the structures that go along to create that space. trump is one voice in this larger picture. jonathan: as we look to the new conversations, will we have a new conversation in helsinki between president putin and president trump? there was concern about what came out of nato and how it would appear to president putin, does this increased spending in defense strengthen his hand with nato as opposed

to president putin? corinna: again, we should go into this u.s.-trump-putin meeting and see what the discussions are like. they're probably going to be very amicable and afterwards here will be some additional comments with respect to the home media and we need to see what the other contributions are, especially from the european side. many of them who are actually a whole lot closer to russia and have real concerns about their own security and then we can move forward with new solutions and new approaches. jonathan: we talked about a new dialogue, new approaches. is there any movement within the inside or russia with moving towards a new discussion. but a lot of the discussions we're having are from the 1950's and 1960's when we were worried about the soviet union

having tanks come across in west germany. are we talking about the real issues of the future instead of talking about how to fight a war of the past? corinna: you're talking to somebody who has been looking quite a bit on inclusive security, who has been looking about bringing women in the debate. looking at women with a decisionmaking power and i'd love these debates to be more diverse, new voices and more women around the table bringing in different opinions and different perspectives. also, original players. we need to look at the e.u. with european elections coming up and it's not just for the leaders to sort of look to how we're drassing this complex world and associated policies but actually the political parties that need to realign themselves and come take in those political topics and find

ways of engaging the contingencies and come forward with programs actually addressing the future of nato and europe and the transatlantic alliance. jonathan: thanks for staying with us, corinna horst reporting from brussels. coming up we'll get to the market perspective with our long view economics c.e.o. live from new york, this is bloomberg. ♪

>> we put $40 million in intelligence. it will rip through the economy like a tsunami. ♪ alix: the headlines coming out from president trump's conference from the nato summit and you see movement in the currency market. look at euro-dollar which took a leg lower halfway through him speaking earlier in brussels. with more market reaction, chris watling, chief market strategist and happened around the time he was talking about trade and things could actually work out with china. as an investors, as a strategist, how do you manage

the geopolitical headline unrest particularly when it comes to europe? chris: you never know what will happen next. the rule of thumb is normally geopolitics doesn't matter that much but in this instance it seems to up the game a bit and becoming vaguely significant. the main story in markets at the moment is not really being properly focused on and that is the pressure we see coming through in china as they try to deleverage their economy. i think you're seeing it in commodity prices. you've been seeing it in the shanghai comp. the trade war is negative for the shanghai comp but more has to do with the chinese economy itself especially when you add he trade war on talks. alix: we're seeing a death cross for the u.n. with the long term averaging following the short them. what's interesting is you're not seeing the response in volatility across asset classes and in bloomberg you can see the different indexes, and we're higher elevated since the

beginning of the year and we go back a few years ago to the end of 2015, we're way far below that. how do you hedge or manage the risk when the risk is being what ignored in the markets. chris: to a large part of the markets. we're brewing to an event with a dislocation in markets that's quite severe. it's great the volatility is low because you can hedge g.d.p. at the moment and buy something like yen volatility on the floor and that's a classic safe haven and if we do get volatility because the chinese problem spills over to the u.s., which i think we will, a bit of 2015 and the volatility will do well with a good hedge. jonathan: where will we see the quite severe change? chris: we're seeing tightening across the world, particularly in asia and seeing the chinese trying to deleverage their economy. i think we've forgotten china is a large credit bubble that's

been let off the hook a couple years because they presented $7 trillion and we're starting to reverse it and see the pressure come to bed. the core opponents in china are moving quickly. jonathan: there was a time not along ago when global synchronized growth was the answer to all questions. let me put up these numbers with china and the u.s. this is going alongside ways. europe is coming down that blue number and the u.s. is the only one going up. what happened to global synchronized growth? chris: monetary tightening came into effect and europe picks up on what's going on in china. the industrial sector in china thinking eak or tight 6-12 months. oombings lix: what's your favorite market? chris: we like equities, flat

global equities and i like u.s. treasuries and 30 years and 10 years. alix: like a short cover rallying trade or a weaker growth down the road? chris: i think we have a problem in the markets in the second half and want to edge against it. alix: chris will stick with us. the e.c.b. meeting notes coming out. we talk about the end of q.e. and potential rate hike. there's been translation issues, reading it in french, german or english you may have a definition of the first take. ♪ retail.

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near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. alix: this is bloomberg daybreak. i'm alix steel. is it risk on, recovery from yesterday, will be get into debt cap bounce conversation? european stocks up, the ftse

also up by .9%. part of that story is the stronger dollar we had seen. euro-dollar down by .1%. dollar-yen a real breakout. 1.1256. the curve continues to flatten here in the u.s.. 26 basis points. ecb minutes are out, so we want to go there them. the ecb council was concerned about a traits that impact on business confidence. they want to retain sufficient policy flexibility and the qe nds palm ball connectable policy shift. like they are recognizing some clouds potentially and will move forward. onid: also taking a bow paying banks money, exceeding what they expected in terms of

the economy. at the same time, the effect of asset purchase inflation is going down, not helping inflation as much as it was. which may influence how they tighten their balance sheet. alix: inflation convergence becoming self sustained, to your point, with reliance on bond buying waning. they were saying we can take the training wheels off a little bit. they don't need our help as much as they did before? at leastord low rates through the summer of 2019. apparently the english version of the minutes, the statement was correct. in the markets we are looking at the commodities crash. posting his worst day yesterday since 2015. is what -- white bar happened to the bloomberg commodity index. green is the u.s. dollar.

a perfect storm of trade wars, china and global growth questions. citigroup says it is time to buy. goldman sachs downgraded their medals forecast. we will take you through all of the action in metals. we have andrew cosgrove, julian lee, and mike mcglone. andrew, what caused the selloff in the metals market, is it over? >> the selloff yesterday was the escalation of tariffs so to speak. the indicators we look at show copper has caught up to the macro malaise that started in january, big divergence. right now we would say copper has caught up with a lot of the macro fears. so long as the dollar rally does not continue, that would be cause for a bit of relief, to

see copper find some support and the whole industrial metals complex. copper a read on global growth. is that something we need to read into? i would say commodity prices somewhat lead to higher inflation. the tale kind of wines the dog, whichever way you want to look at it. we would look at commodities as a leading indicator for inflation, not the other way around. thank you, andrew. let's turn to oil, julian lee. we had this incredibly bullish eia report yesterday and the market could not care less. brent saw its biggest selloff since 2015. what happened? >> i think it got swallowed by the treaty story and also by the announcement from libya, the

national oil company had regained control of the export the libyan exports we had lost a few weeks ago would start coming back within a matter of hours. , think the trade war issue there are two fears here, one that it has an impact on global growth and therefore on consumption of oil at an individual and corporate level. in terms of aink, slowdown in trade, that has an immediate impact on the number of ships and airplanes needed to carry goods around the world. that is a secondary effect. alix: citi blame the algos. is that true, you want to buy? >> certainly a point of view that that drop was huge, possibly outstripped what was really justified from the fundamentals. a lot of moving parts in oil at the moment, and not least of

those are these sanctions on iran that have not had a real effect. alix: when you cannot explain, blame the algos. other commodities have been getting hit for a while. it was there a new trigger here? >> pretty close to the bottom here. 10-year low in soybeans. soybeans are in the center of that perfect storm you mentioned. we have already taken out a lot of exports. great production year. the brazilian riau has been hammered, which has been hurting u.s. soybeans. soybeans are at the narrowest range in the last two years in their history, basically back 20 years. so the bottom is at the bottom end of this band. -- we have ais, report coming out today and i think the markets are pricing in for that. we also have to

distinguish between the trade fears, china buying less beings from the u.s., but also that we have an amazing crop in the u.s. crop -- we have to see how it lasts. you get about two or three weeks and the beans could pop up. china should come back and say we can only get so much beans in the world. alix: thanks very much. that is your snapshot of all things commodities. david: what i took away from that is commodities are cheaper, so what does that do to inflation? we want to bring back in chris watling. in the last couple of days, down three basis points. is this a response to the commodities phenomenon? >> that is part of it. particularly oil.

on commodities but more generally they are telling that global growth is coming under pressure. that is what inflation expectations are telling us as well. commodities as a group tend to roll over when monetary policy gets tighter. the fact that copper has broken in the last week or two from nine months support is telling about the chinese economy. david: what about manufactured goods? i'm going to put out a chart. this is laundry equipment. in january, the united states slapped tariffs on this and you can see what happens to the price. i'm not sure i know what laundry equipment is. david: washing machines, basically. if we are going to put tariffs at one point does that

read through and consumer prices go up? >> it is starting to impact that we only have tariffs on $34 billion worth of goods, which is trivial. i think it is more important because you are undermining global trade, the way the world works together, globalization, at a time when china is weak. you are adding to the pressure on china, that's the real issue. david: if china is that we come is the president right that he has the upper hand? >> i'm not sure it is the right way to play the game but i think he has the upper hand, the u.s. is strong, china is honorable. alix: strong now, strong later is the question. if you look at the5/30 breakevens fred, it has started to invert. that? you treat >> the curve is moving toward

inversion. basically, the more the fed tightens the closer we get to inversion. i think with a slowdown in china and europe, will eventually be back to the states next year. we will get a fed pause, particularly if i'm right about volatility in financial markets. possibility that the fed will be cutting next year. alix: cut next year? >> if we get an event, like the russian crisis. is nothing wrong, per se, economy, but if we get a significant dislocation in the markets, we may see the fed cut in 2019. david: that says the administration's plan may not work. big tax cuts will cause economye get a significant dislocation in the capital investment which will increase productivity and sustained longer-term growth. if i'm ajust said, ceo, i'm not investing in that environment. a what i'm talking about is

financial markets event that feeds back into the u.s. economy that troubles the fed. the u.s. economy is robust, the corporate sector has a lot of cash from the tax cut. it is about these short-term bounce of volatility. alix: i know you said you liked a 10-year and a 30-year. do you also need to rotate into utilities? morgan stanley turning defensive on the margins, warnings about small caps from other banks. >> i would go defensive on sectors, by bonds. i would buy gold in maybe a month or two. then down the hatches for the rest of the second half. alix: what does that mean for the dollar? >> it is strong until the fed starts worrying about this. at the moment the fed is very resolute in hiking. once they were about the feedback from markets, the dollar will start topping out maybe fourth quarter this year -- i don't really know. alix: bumming me out, but

thanks. good to see you, thank you. recapping those ecb minutes. seems like they are sticking to keeping the rights low at least through the summer of 2019. there was a fun debate happening yesterday, depending on which language you are reading in, what it meant. it appears through september. david: this was the issue we had last week. speculation in the markets about december. we might mean september. alix: euro-dollar not really moving much on it that they want to maintain some flexibility in that rate guidance. they do note inflation convergence is becoming self sustained. bmw becomesg up, the first foreign automaker to take advantage of easing regulations in china.

we will talk about their joint venture next. live from new york, this is bloomberg. ♪

kailey: this is bloomberg daybreak. coming up in the next hour, michael chertoff, former secretary of homeland security. now to your bloomberg business flash unit shares of chinese telecom equipment makers eta surge today. the companies signed in a room and with the u.s. that allows it to start doing business again with american suppliers. the ban will be lifted as soon as they complete the $400 million payment. the moratorium may have cost the

company $3 billion in total losses. the parent japan's unique low numbers chain posted that beat estimates. they have been opening more outlets in china and europe and they also signed tennis star roger federer to be its brand ambassador. alix: covering three things that wall street is buzzing about. bmw shifts into china. bmw become the first foreign car company to take advantage of regulation rollbacks in china. broadcom chips away at the software business. comcast increases its offer for sky $234 billion. joining us now is jason kelly.

bmw, the first one to say we are going to take a majority interest in this. why does bmw want to do this? they export a lot of cars to china. from the united states. >> this is largely about, in part, the trade war. bmw is so relying on a factory it has in the southeast part of the united states, they are worried about the cost rising, and that is what's happening here. they are also taking advantage clearly of the chinese government loosening regulations on foreign ownership. this has been one of the big challenges for any company trying to do business in china. david: the most immediate result of the trade war with china is on the auto companies are going to china to make cars. first tesla, now bmw. >> exactly. certainly there is more to come. this is a complicated element of the trade war when you have

global companies, especially non-us companies. u.s. companies not being able to extricate themselves because of this joint ownership but european and other foreign companies will have an easier time. one of these unanticipated consequences. alix: a next-door he has a do with broadcom buying ca technologies. we saw the huge selloff in semis. i wondered if that was the trigger for this or if this is a strategic need for broadcom, or both. >> china comes into this once again. u.s. regulatory policy comes in once again. broadcom tried to buy qualcomm, that was not done by the government. now you have one of the most aggressive dealmakers reshaping the chip industry buying a software company. a couple things at play. it is a very different business, expansion.

much more likely to get regulatory approval because you don't have the antitrust concerns you presumably had. david: the regulatory problem was not an antitrust problem. it was a security thing by the treasury department. the president has been up on his high horse about china getting involved in our technology. you might be right, but i'm not so sure. >> you don't have that problem with ca here as an american company. david: comcast. we have to go through this a little bit. say, i sat down with you and said you have to break this down for me. there are problem is two different contexts going on. fox looking at the assets of disney. forget that. fox has also been trying to buy the 61% of sky than it does not own. they put a bid in.

up to $32 billion right now. you have to play it out. won and spentely all that money for fox and they may end up with brian roberts as a senior partner in sky. >> there is so much more to come and a lot more to talk about here. david: a lot of money. thank you, jason kelly. alix: the white paper is finally out. the u.s. banks will lose easy access to the eu under may's brexit plan. what is easy access? u.k. banks will lose easy access to eu under the brexit plan. david: that is the passport. leaving, the banks that is a done deal? >> this is the thing that wall street has been the most concerned about in all of these negotiations, how are they going

to be able to operate or not operate. david: frankfurt and paris are happy because their subsidiaries will have to be incorporated in the eu, regulated by the eu. they cannot do that from london. >> good week for paris. london, not so well. alix: u.k. seeks permit free transport over northern ireland border. u.k. seeks continued participation in eu safety body for asia. david: regulatory organization. does not feel like a soft brexit. this feels like a firm line. david: i think theresa may once a softish. will be subject to a lot of the eu rules, which upsets a lot of the british people. it doesn't have any boundaries across islands, which was a nonstarter for everybody.

we don't want to go back to the bad old days of northern ireland. it sound from what we described, the banks will get the worst of it. doesn't sound that they got anything. alix: i think they were expecting something easier. based on the fact that everyone resigned because they were so unhappy with the agreement, i would have expected something a lot more conciliatory. david: one of the things they were upset with was being subject to the rules and regulations without a say. we are subject to rules we don't get to say anything about. that is what they're upset about. >> going back to the very parochial wall street view of this, you have to think emails and phone calls are flying around now saying, remember that office talking about in paris? let's do that. people are packing up and looking for schools. alix: u.k. banks losing easy access to eu rules. this is bloomberg.

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alix: prime minister theresa may is now leaving brussels, but the news is what is happening in the u.k. the 100-page white paper finally hits. details of what the brexit plan actually looks like. the primary part is the banks will lose easy access to the eu under the plan. they do seek a post-brexit aviation deal, like the eu has with canada. we are getting little details as well about ireland. david: that aviation deal is critical. some aviation people, if there was a hard brexit, they would not be able forth.back and the passport is gone, that is

what losing easy access means. london next will have to be subject to regulation on the continent. at the same time, subject to various rules and regulations of the eu even though they won't have much to say about what goes into those rules and regulations. seems like they will end the free movement of people as well. david: that was critical, the migration issue. that was a driver, i understand, of exit to begin with. here is my question. if you are michel barnier, you look at this, what do you say? great, let's talk? are there are some issues and we are not ready yet? david: you are not demanding that we give your banks free access, which is a gift. you say you'll be subject to various rules and regulations. we will address the northern ireland issue, so you can go

back and forth. end of the day, you will write me a big check every year. a lot of it has to do with that, i would guess. alix: interesting on the heels of boris johnson and david davis , after agreeing to this. the cable rate coming off the lows of the session but you are still seeing some buying on the margins. yields down by one basis point. much more on that white paper coming up. coming up on investing in global infrastructure and lng products. timing with president trump talking about natural gas in europe. this is bloomberg. ♪ europe. this is bloomberg. ♪ phones have made our lives effortless.

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made, everyone has agreed to substantially up their commitment. alix: collegial spirit following the nato summit in president trump says allies offer more money for defense reaffirming the commitment to nato. iteris tantrum. goldman lowers their forecastc. iti says it is a buying opportunity. u.s. inflation expectations rollover. markets see a short-term spike. u.s. cpi on deck. david: welcome to u.s. daybreak. we don't know where to turn. nato, brussels, brexit, london. the market seem to be dealing all right with it. alix: the question for the equity market is is this a relief market from yesterday? s&p futures up by 15 points. dollar-yen breaking above key levels, 112.51 is how we print. we are seeing a stronger dollar story.

spread, 20 basis points. mid-2019, morgan stanley saying you could see the curve in burning. of after its worst day since 2016. it was a very dramatic session yesterday, cooling off today. david: time for the morning brief, as if we did not have enough happening. at 8:30 we get perhaps the most important economic data of the week, u.s. cpi numbers for the month of june. 12:15, after carter will have a on stage conversation with our own mike mckee at the rocky mountains summit. and then the u.s. treasury will be auctioning $14 billion in 30-year bonds. let's get an update on what is making headlines outside the business world. kailey leinz has first word

news. says hepresident trump is committed to nato and everyone has agreed to increase their financial commitment. the president spoke in brussels after an emergency session prompted by president trump's attacks on allies over defense spending. french president macron said spending plans have not changed. president trump's latest threat make the u.s. and china resume talks through a new round of negotiations. the trump team is also willing to resume talks. the administration ratcheted up pressure by unveiling a list of $200 billion of chinese products that could face higher tariffs. opec's oil output may be stretched to the limit by supply crises. the cartels gulf members may have to pump almost as much crude as they can to cover losses from venezuela and iran. saudi arabia may have to draw re than ever before on it

spare capacity. 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'm kailey leinz. this is bloomberg. alix: earlier we heard from president trump speaking at the nato summit before leaving for brussels. >> i let them know that i was extremely unhappy with what was happening and they have substantially upped their commitment and now we are very happy and have a very, very powerful, very, very powerful nato. but stronger than two days ago. alix: we also heard from angela merkel and president macron, all causing confusion as to how much allies will up their defense spending. president macron says going from 2% to 4% is very difficult to do. daniel skelly is and carl riccadonna. when you look at the

geopolitical risks that will have an implication on markets, what do you do? >> the most important thing to pay attention to is what do companies say across the earnings season that we are about to encounter? the earnings themselves will be fine but in the guidance, the companies started talk about the impact of tariffs and uncertainty. fully invested but we expect volatility to zoom out quick. we have had 36 1% swings in the s&p this year. those of 2017 we had a of moves. there are twos very divergent forces pulling markets in different directions. up bys are being pulled strong earnings and the confidence from the tax cuts. but markets are being pulled down by the ongoing trade rhetoric and light cycle fed tightening. we don't see a change in those

dynamics anytime soon. alix: what did change yesterday was the selloff in commodities. big move down. carl, when you look at that, how does that selloff translate into a global secret eyes story that we are supposed to be looking at , solid inflation that we are supposed to be seeing? >> it tells you it is less synchronized than it looked to be heading into 2018. a whole array of european economic statistics this appointed, the chinese economy is not faring particularly well. meanwhile, the u.s. is accelerating. it does not surprise me that you see that decoupling of the economies, reflected in commodity prices as well. alix: you did see the five-year breakeven rolling over, a lot made about the spread rolling over. you can see the dip lower in the bloomberg. sn the one hand you have tariff that could have higher

inflation, but higher inflation could be stickier to the downside. s are an inflationary impulse but you will not have a sustained take up in inflation pressures until you see a sustained pickup in labor costs and household income creation. we are not seeing that. average hourly earnings disappointed to the downside. even though we are at 2% of the fence metrics, the core pce deflator, given where the income trend is, it is not historically consistent with 2% inflation. the fed continues to say we are not quite there yet, but the income data reinforces the notion. we will see in the cpi that we are there. if you look at the rate of change in core inflation, it has shown signs of decelerating. david: what about in put prices? up the chart that carl had in his piece. i have never done this.

basically, that blue line in the .iddle is ppi edging up the other lines, steel, aluminum, fabricated metal products, we are starting to see an uptick. >> upstream price pressures. the reason i put that into the piece, if you look at the right, you can make this great there are creatingffs this inflationary impulse, but then you look on the left side and the we have been here before. this is not uncharted territory. the point of the piece, if we add up the price tag of the , 200 billion more coming this year, trade wars are not unfamiliar territory. at a price tag of what we have seen. you snicker -- there is no comparison. david: i don't think about that as a good comparison.

>> we have to find a familiar framework. so we add up those tariffs, which is essentially a tax increase. $33 billion. put another way, it is the same thing as if gasoline prices were $.33 higher. alix: oil prices would be $30 higher. >> tariff actions to date really don't move the needle on a 30 join dollar economy. alix: would you be betting on inflation, how would you be hedging it, or not? >> inflation is happening in incredibly slowly. this cycle has been unlike any other cycle in the past. the key variable that is different from three or four years ago when we started to see higher inflation is we are much tighter in the labor force. what is the single most important thing small businesses are saying in terms of attracting labor? it is no longer uncertainty about taxes or health care, it is skills.

when they find those skilled workers, they will pay out for them. we still think energy and commodities is one of the best ways to hedge. it tends to be a light cycle of performer, we have waited to see that light cycle of performance. david: carl riccadonna, thank you. dan skelly will be staying with us. we want to turn back to the u.k. and the white paper. theresa may's government just released it. it says u.k. banks will lose easy access to the eu under her plan. to take us through the details, we welcome david merrick. thank you for being here. you have had more time to go over this. take us through the headlines of this white paper. >> 98 pages long, so lots of detail. at its heart it is proposal for a new free trade area between britain and the european union covering goods, everything from

cars, airplane wings, to food. that means britain will effectively stay in the single market or good. but it wants to break free on the question of services. that is the lion's share of the british economy. that includes financial services. it says the british government accepts it will be harder for britain and the eu to access each other's service markets, so that means banking as well. supposedly bring britain up to strike new trade deals around the world. they're in mind trade deals in services are kind of rare. they tend to be around goods as well. maybe that point is a little bit academic. will be very controversial this question about splitting the single market access between goods and services. we have heard it repeatedly from the european side that that's impossible, the full freedoms of

the european union single market are indivisible. we will see how they react on that front. the other thing to look at is the question of the irish border. this idea of a free trade area was supposed to solve that but the document has nothing new to add on the question of solving that deadlock. backdrop of a agreement, what happens it talks collapse. that has been a huge ticking point to getting a withdrawal agreement. nothing in the document on that. right now the new brexit secretary, who took over from david davis, who quit over the weekend, laying out the details. when we should look to now is what the reaction will be. not only from the europeans but also from the fractious different ends of mrs. may's own party. a lot of things that brexiteers will not like, things that the european court of justice will have influence in the area of regulations on goods. there is a hint in there about

freedom of movement, maybe we can negotiate some preferential treatment. that will go down very badly as well. this is going to be a very controversial proposal and will have to see how it plays out in the days ahead. david: she has already lost three members of her cabinet over it. thank you, david. coming up, jim barry, black rock global head of real assets on investing in global infrastructure and lng products. live from new york, this is bloomberg. ♪

kailey: this is bloomberg daybreak. the next move is up to murdoch. comcast has increased its

takeover bid for sky $434 billion. that tops the offer from 21st century fox. it's the latest move in an international m&a fight. comcast and disney both want fox's entertainment business. broadcom is raising questions with its latest acquisition. the company agreed to buy ca technologies for $18.9 billion. the deal offers no significant overlaps. shares are lower in premarket trading. up thatt trump brought russia plan natural gas pipeline again. the president called germany a captive of russia because the germans will buy billions in gas from moscow. >> we will have to figure out what's going on with the pipeline because the pipeline is coming in from russia so we will have to figure that out. i brought it up, nobody brought it up but me and we are all talking about it now.

actually i think the world is talking about it now. kailey: that is your bloomberg business flash. startedresident trump his nato meetings yesterday criticizing germany for its alliance on russian natural gas which raises the question of if it should be looking to the u.s. instead for its energy needs and what investment would be required to buy natural gas from the united states? we welcome an expert on lng, jim barry, black rock global had a real assets. cannot imagine a better day to have you here. >> to contradict the president? david: just tell the truth. if angela merkel wakes up and says forget about this pipeline into russia. i'm going to buy it from the u.s. what would be involved? billions of dollars of investment, 10 years to make it happen. security has driven european energy policy for the last 20 years. 2009, russia reduced gas thisies to the ukraine but

has shaped european policy. more thanare driving anything else is a diversification of sources. i think there will be significant quantities of u.s. natural gas transported into your over time. david: so will they be investing those billions of dollars? >> no question you'll see on the back of this shale gas dynamic, it has turned the industry on its head. export facilities in the u.s. will begin to export into europe and you'll see new import facilities built. alix: perfect segue because you just raised a $1.5 billion energy infrastructure fund. where would he want to put that money, europe or u.s.? >> wherever i get a good return on the capital. it depends. we are seeing structure shifts in the global energy power market. it is all technology driven. changede dynamic has

the world of oil and gas. it is driving massive new investment. the corporate to digit balance sheets are capital constrained, so the turn to financial capital -- we just had a first close on $1.5 billion -- to invest into that. power generation is the same. renewables, natural gas has turn that on its head. traditionally, this is how i would look at pipelines, terminal exports. build this thing, commit to using my terminal or pipeline or 30 years and give me this much money. how has that world changed? what opportunity does that create for you? >> in substance, that world has not changed. the developer will still look on those long contracts. as well as the debt they need equity. historically it's been the large oil and gas majors that provided the equity for those projects.

in this mark appel constrained they have cuthere back capital expenditures, they are looking for capital expenditure to come in and supplement their equity. alix: does that mean the pipeline guys will come to you and say let's talk, or will it be a producer that is not a big integrator that will ask and do a deal. their different needs but we can play anywhere in the value chain. the big majors will come to you to work alongside you, smaller developers will come to supply most of the equity capital. you are seeing much more of that partnership around capital than you ever saw before. david: when you go back to the putin situation, he doesn't have to go out to get a loan from a bank. private equity always have a disadvantage when they are going up against a sovereign? being scale of what is

done means the sovereigns cannot supply it all. we are seeing massive growth and opportunity. that is throughout the world. alix: a lot of people think the way that you do. kkr raising and infrastructure fund, a ton of money in general and private equity. you is your offer set if want to picture yourself when there is somebody else that has invested money? >> at blackrock, a couple differences. we already have a legit a major corporate in the world. that is very easy to leverage, looking for opportunity. second, we have a global footprint. wen we turn up in a country, are already part of the business, political, regulatory ecosystem. that is a phenomenal advantage when you're looking to underwrite. strong on isery very deep expertise in assets. more expertise means you are

less likely to make mistakes in the future. david: a lot of money has been raised for these funds. a lot of it has not been invested yet. are we waiting for public money? there was a time where the administration said and they would be doing public private partnerships. >> the energy and power markets are already deregulated. they are market-based. it dominates the infrastructure market in the u.s. what the government was trying to do here was stimulate other infrastructure -- social infrastructure, and that is much more challenging. it is not eminent. to catch up with you, jim barry. coming up, earnings or wall street's biggest banks ticking off tomorrow. jpmorgan, city, wells fargo. this is bloomberg. ♪

alix: bank earnings season begins tomorrow.

still what does is dance kelly of morgan stanley. >> they have the rated about 10% year to date. the issue is there will be two positives that we see coming out of bank earnings. even the people are picked up about the curve flattening, they are still making money off the short end. the 2-year note is up 40 bits for the quarter. they will be profitable because of that. we have seen stabilization and loan growth. wii clones for the last quarter. may hear better loan stories coming out of the store and pick me from seeing a commercial industrial and m&a. david: what is alone demand at this point? part of the issue has not been an ability to lend the people have not been demanding loans. will seeular areas we positives is on the industrials on related to the capex erred we are seeing related to tax cuts. we may see more weaknesses on the mortgage side. that is a verse the trend of the last two years and a lot of that

has to do with higher long and rates. david: what about cost controls and deposit data? >> that continues to be a significant competitive situation. think are managing their cost very prudently right now. you have not seen people spending that aggressively. i think that will continue to be supportive. there has been a rolling correction across different asset classes inside theirs. banks have felt that come industrials have felt that. but we are saying from a portfolio construction bases you don't want to give up on those areas that have degraded. you want to be more cautious about those areas that have held up well like technology. the reason is technology is not going to be immune from some of the supply chain rising cost to tariffs.ed alix: kind of why mike wilson downgraded tech and small-cap. we had an earnings chart up by to tariffs. alix:sector for the second quar.

top three exposed by trade. how do you do it better earnings, trade macro? >> over all. you multiple in the s&p has the rated 10% this year. we are up 3% on a total return basis. the issue relates to guidance. as we get into the financial -- as we get into the bulk of earnings over the next couple of weeks, the question is do other companies come industrials, technology, consumer mention rising costs? alix: dance kelly will be sticking with us. speaking of rising costs, june cpi numbers will be out momentarily. onwill look at u.s. tariffs chinese goods. this is bloomberg. ♪

alix: this is "bloomberg daybreak." 30 seconds away from cpi. dow jones futures up by 183 points.

the dollar gaining strength of the highs of the session but dollar-yen is one to watch. commodities making up some of the selloffs from yesterday. the curve continues to flatten. 26 basis points. initial jobless claims coming out at 214,000. cpi coming out. core cpi year on year coming in at 2.3%, in line with estimates. overall core year on year coming in at 2.9%. i think that is the biggest increase, highest level we have been for cpi in six years. core. overall cpi the highest in six years. david: in line with the survey. the question i have for you is are resorting to see the ppi's leak through to cpi? that is what we've been waiting for. imports have been higher. there is a move higher here.

alix: i want to date through especially numbers, if you have to back out energy. hotel rates fell. cpi coming in at 2.9%, core coming in at 2.3%. it does say we have upward pressure on services and some goods, consumer spending is study. what you said is true, companies seem to be looking for ways to pass along those higher production. the things that fell were hotel and motel rates, which may end up helping consumer spending. david: we will see what happens when the tariffs go into effect on consumer goods. after we saws breakevens rollover, fed rate hikes for 2020 get priced out of the market. we will see how the market

reacts to that. simona mocuta.is good to see you. what is your reaction to the numbers? >> you would be hard-pressed to see anyone shocked to see inflation picking up in the u.s. we always say inflation is a process, not an event. we also have to be mindful over the last seven months we have thrown in some catalysts, tax cuts, tariffs. in the context of a long expansion, we should not be surprised. a going upis it faster, given the stimulus that you just mentioned? 1.5 show dollars in the economy. you would think it would show up in inflation. >> when i think of inflation, i imagine two streams of influence. there are a few things that happen quickly, exchange rates,

commodity prices, tariffs, things of that nature that bubble to the surface quickly but are fairly transitory. what really matters in anchoring inflation are the more fundamental things. wage inflation. thatvery hard to sustain without high wage inflation. that is the main reason why this process has been contain so far. we think the labor market is tight, and no question it is, but there are other forces raining that in. big focusave seen the biggest weekly inflows since february. i know you are hedging through energy. if you hedge inflation, do you lose, our markets to complacent? >> i think you need to be hedge. biggest weekly are different inflows since february. i know you are hedging through energy. and new stages in 2016. the bottom 80% of the u.s.

income distribution got a raise for the first time in eight years. that is what was so unique about this cycle, why it's taken so long to get here. a lot of that has been a function of all the changing technologies, this intermediate in some of those lower end jobs. nonetheless, you want to hedge with energy and commodities. we have a component to tips in the portfolio. david: we had those people get the raise, do we know what they did with the money, did they spend it or save it? , looking atmbers consumption, most likely are spending. you are certainly seeing them confident. confidence levels are searching. but me not yet all of it know the propensity for the consumer at the lower end of income is much higher. alix: bank of america had a report that said the rising gasoline prices have wiped out about half of the monthly increases people have seen in their paychecks. have $78, now you have $34. , aid: on the lower income

regressive tax. alix: i want to go into the terminal to look at the 5/30 breakeven spread. is au believe this short-term inflation versus long-term inflation sustainability story? >> you have to conclude it has to do with that. it is interesting, we talk about inflation nowadays, but a year ago we were talking about inflation going the wrong way. those mistake to assume deflationary forces that have to do with technology, demographics have moved away. they have not. they've just been overtaken by more cyclical forces pushing in the other direction. i think the market is trying to weigh in the long run which is more powerful. david: we were talking about cyclicals, you said energy does late in the cycle. how can we turn things around?

>> we think we are probably in the eighth or ninth inning. you want to start tilting the portfolios defensively today. we upgraded staples and telecom. keep in mind, those were two of the worst areas of the market the last year or two. we think we are certainly later in the cycle. morgan stanley has talked about an inverted curve by the middle of 19. we think the time is now to start rotating defensively into those sectors. a call forat recession or just another way to hedge the risk? call don't have a formal for recession, we are just hedging the risk. we are trying to be tactical with our position in the portfolio. alix: we still have not seen the money come out. we may see some puts getting put on, but that is it a why is the money so sticky? >> small caps had lack of a large cap for a long time.

much like croatia overtaking their bigger counterpart in the , small caps have been on a massive surge. a lot of that is a function of the trade rhetoric. people deem them to be more insulated from global trade revenues. david: overlay the trade rhetoric with this. do you think it will have a material effect on inflation because things will cost more, order term global growth? doesn't have material effect on the global economy? >> i think it does but we have to understand how sustainable. take inflation. coming.ou have tariffs that will push inflation higher for a year, but the year after, you are back to the old basement. it is a reversal of the verizon telephone service charge. sense, itrs in some is like the uncertainty is worse than the fact. businesses need to be able to plan.

it is almost better to say i have to deal with this, i will plan around it. but if i'm not sure, it complicates decision-making more. simona, dan, thank you for being here. alix: let's recap the cpi headlines. headline inflation coming in in line with estimates, at the highest level since -- in six years, 2.9%. back at food, energy, 2.3%, the highest since 2008. on thees trying to pass wholesale producer prices that are rising to consumers. on the downside, hotel rates rolling over a little bit. a solid picture holding up. if you look at the dollar, i have not seen much reaction. david: inflation is moderate, you'd have to say. alix: i wonder if it is that

goldilocks conversation. let's get an update on what is making headlines outside the business world. isley: president trump trying to deflect questions about nato. the president said his commitment to the alliance is very strong. he also said the nato members had addressed one of his complaints and has agreed to of their financial commitments. french president macron says that spending plans have not changed. the nato secretary-general spoke moments ago saying nato leaders had frank talks on defense budgets. both sides on the u.s. china trade war are signaling they are willing to resume negotiations. the chinese vice commerce minister called on the u.s. to renew rounds of talks. the u.s. is also in favor of negotiating. the trump administration increased pressure by unveiling a list of $200 billion of chinese products that could face higher tariffs. minister theresa

may has unveiled her blueprint for a soft exit. at the heart of it is a new u.k. -eu free-trade area. but the u.k. service sector will suffer significant disruptions and british banks will lose their access to the eu markets. 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'm kailey leinz. this is bloomberg. coming up, president trump floats doubling nato arms spending. is he talking about planning for the last war rather than the next one which could include cybersecurity? we discuss cybersecurity in the digital age with michael chertoff. this is bloomberg. ♪

kailey: this is "bloomberg daybreak." coming up later, evan greenberg. david: much of presidents two days at the nato meetings have focused on european spending and defense. nato members have reportedly agreed to up their investments in security. michael chertoff has been a good deal of his career focusing on security issues in the first as homeland security under resident bush, and now the head of the chertoff group. in his new book, he writes, cyberattacks that can cause physical disruption are no longer science fiction.

we welcome michael chertoff, former secretary of homeland security. welcome, good to have you here. congratulations on the book. you really point in the book to rethinking a lot of our world, legal world, law of policy, because of the digital age. we still tend to think in analog terms. thinkingpresident, about fighter planes, tanks, soldiers. how should we be thinking about our security when it comes to nato, russia, in this cyber age? >> first of all, obviously, the hardware is important. we have seen all over the world traditional military fighting is still going on. but a lot of it is now moving to the digital area. part of the military doctrine of the russians and the chinese is to use information operations and cyber as a domain of warfare.

one of the things which caught people's attention in the last year was the department of homeland security putting out a bulletin saying they found malicious cyber tools on critical infrastructure. we now have to be prepared to fight in cyberspace as a companion to fighting on land, sea, and air. david: how should we be thinking about the relative investment? we can put up the rough numbers on how much the u.s. spends on cybersecurity for defense as opposed to overall security. roughly.on probably classified, so you cannot tell if that is right. the overallo military budget, which is 10 times that number. are we sufficiently investing in cybersecurity at the national level? mind one big difference between the defense budget and the cyber defense budget, the defense budget is largely military spending. most of the money being spent on the cyber defense is in the private sector because that is

where the assets are. the obligation becomes not just where the government invests but where to companies invest, where do platforms invest, where do critical interception companies invest? that gets challenging because you have to make the case for investment. this is our number one priority for many banks. at the same time, what level of coordination is there across the country? if you have 1000 flowers blooming with a lot of people spending money, it may or may not be effective. can the government play a role in bringing all of those private actors together to defend the country? >> you are right, the challenges coordination. banks, utilities tend to be very up front and deeply invested in this. other critical infrastructure companies are not quite as advanced. the government is trying to bring together through various coordination mechanisms, information sharing analysis, and they are talking to

financial communities particularly about bring them together to create a fusion cell where you have the private sector and the government working together to identify critical vulnerabilities and good responses. david: it was fascinating going back in history, letters are mark is written in the constitution, where the government can commission privateers to seize. there could be a new version were private actors could be deputized by the federal government. >> one of the big debates right now in this cybersecurity area is should people engage in after defense? hacking back and taking the law into your own hands. i think that's a bad idea for companies to do on their own. but you could imagine a circumstance where the government supervises companies that would do very limited and that wouldresponses multiply our resources in the cyber realm. david: that is in the national security and military realm.

what about us as people that have our own smartphones with all of our data? so many instances now that we hear about hacking where our personal data is taken. people imitate us. what can we do to defend ourselves? >> there are two challenges we face, hacking, people stealing our data. the other is the data we voluntarily furnish to private enterprises that subsequently resell it or made themselves get hacked. david: or the cambridge analytic issue, which was such a big issue. >> one of the reasons i wanted to write the book, the amount of data we generate far exceed what we understand. it is not just what we put on social platforms come it is what others say about us, vocational data that is generated, our credit card data, our loyalty card at the grocery store which what we buy it all of this is fused together, so people have a surveillance

picture of themselves that is operated by the private sector. thed: whether we call that horse out of the barn or the genie out of the bottle, isn't it too late to put that back? >> it is in the sense that we are not going to be able to hide our data anymore. the question is can we control the data once it is collected? that requires us to take a look at some serious legal changes. the europeans are doing some thing similar to this now with the general data protection regulation. the supreme court in this country is beginning to address this issue. david: even this term the supreme court started to do with some cyber issues, like warrants to get location data on your cell phone. we have had for 100 years or more a privacy notion. you suggest it is no longer privacy so much as autonomy? >> right. privacy to most people means keeping data hidden behind closed doors. as i think we are beginning to

understand, you cannot do that anymore. there is too much digital exhaust to keep it hidden. now the question is what happened to the data. is it used to manipulate us or course us? do our employers look at every thing we do and say we don't like the fact that you are not eating healthy, getting enough exercise, so we are going to cut your salary. that strikes at the heart of freedom and we need to talk about how we protect our freedom in that world of ubiquitous surveillance. david: how do you get from this world to the world you describe? is it a matter of the courts, executive branch, private, multilaterally through agreements? >> all of the above. it would be nice if congress did some things. i'm not optimistic in the short run that we will see that. the court is now beginning to get involved. this is a global issue because you have a global data flow but you have laws within borders. one of the problems we are seeing now is what do you do

when a nation's laws conflict with the global flow of data? we have to reconcile that. david: and president trump gets to meet with vladimir putin. maybe they will talk about it. >> we ought to be tough with them. david: particularly with respect to our elections. >> exactly. david: great to have you here, michael chertoff. commodity starting to recover after getting slammed yesterday. how you should position yourself. to tv sers, go to look at all of the tools that we use on the show. david used a really cool one today. this is bloomberg. ♪

david: welcome back to "bloomberg daybreak." we are watching air force one as it is taxiing north of london.

on thesident of the u.s. second leg of his european, now going to england. from here he will take a helicopter to the ambassador's residence and will also be visiting with the queen of england tomorrow for tea and will be visiting with theresa may the prime minister at her home in the country. alix: apparently more stressful and difficult than latimer bruton. -- vladimir putin. also having dinner at the ancestral home of winston churchill. recovering from the deep selloff we saw yesterday. the bloomberg commodity index had its worst day since 2015. citigroup says it is time to buy, goldman sachs lauren their forecast on those metals. joining us now is bob iaccino. i want to get your take on how

you handle a selloff in what you do right now. to be honest, the selloff was somewhat expected but not at the rate and the pace it happened yesterday. there is seasonally factors that come into play. certainly yesterday's selloff was not part of that. we have been lightening up on crude oil longs for the last three weeks. the depth of the selloff was an adjustment in prices on the just like you see anywhere else. when you see things affecting equities, affected ebs, guidance, prices readjust. crude oil in the front month does the same thing. that is where all the speculation takes place. when we saw initially, mike pompeo dial back the hardline on in iran, we saw the canadian sands oil get tied up in bottlenecks of pipeline issues, 350 barrels a day there, and the force majeure in libya, all of that in the face of strong demand. if you look at the capacity utilization numbers from eia, they were at unsustainable

levels. then we have libya back on for 500,000 barrels a day, optimism from canada, and might on video. ,hat selloff was getting long getting out of the short position for the seasonal trade. alix: quickly, do you buy now? >> not yet. waiting for more stabilization. brent is coming down and the spread is tightening. either brent will go up or do bti will go down. i think wti goes lower. you. bob iaccino, thank david, i wish you a godless vacation. we will miss you. the market open is next. i'm joined by diane jaffe. this is bloomberg.

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

coming up, u.s. inflation hits a six year high. longer-term inflation in question. a possible cooling of trade tension. hinting at the chance of resuming talks. commodities caught in a trading across hairs. goldman lowering its forecast for metals. in the market, it feels like a relief rally. on.isk i can't quite tell. futures up by about 16 points. a stronger dollar story. adolor coming off later on in the session. we are pretty much neutral on the day. bond market. 26 basis points. you want to do a little bit of selling on the margin. the 30 year auction coming up later today at 1:00. 4014