the fastest pace of revenue growth in four years or it -- four years. the bank leading a solid quarter. thank you china. stimulus gone as the country looks to taxstimulus cuts and sl bonds to support its economy to offset trade and global growth fears. david: you have more than paid your dues. welcome to "bloomberg daybreak." i'm david westin and i'm glad to be back. alix: him taking a day is a big deal. david: it is a long way from croatia. alix: how was it? david: it was spectacular. teamwere so proud of their , we were watching with a group of croatians at a cafe with a big screen.

alix: favorite food? david: the fish is unbelievable. david will take his next vacation about three years. the market with a bit of a response after the chinese stimulus. 1%,stly stronger up 2/10 of the services number coming in light. german manufacturing was strong. a rate hike or something like that, the answer is not yet. days of steepening here. we've seen the biggest today steepening since february. does that change the conversation? crude off that one-month low. time now for bloomberg's first take. bloomberg'sd by global finance editor.

google getting a nine -- nice higherer reporting earnings. the expectations were somewhat low but they basically beat on pretty much every measure you can imagine even when you factored in the fines, they would've factored in. heading into the earnings season not just with google, but with a lot of faang. most of us is over performed in the market the last few weeks. now you are getting a little bit of optimism for those companies to be compared to alphabet in terms of their business call. it was interesting after the fine from the european union we thought we would get rhetoric , changing business models. it's like they couldn't care less. >> they are sticking to their guns and it's a linear up arrow story.

a lot for the market to get excited about today. just look at plain old revenue. and show the revenue growth. 24% year-over-year. before you get to cloud. the top line numbers have been in focus. bps numbers are so easy to manipulate. numbers thatp away can be massaged, alphabet did tremendous. i think you are seeing folks look at a company able to write its own story despite some issues in europe. it can still dominate the medium for now and that will put a lot of optimism in the stock. david: let's turn to a european company that didn't do as well, ubs. it's did very well, but there was a question about their wealth management because they

had net outflows in the united states at the same time we got to talk to the ceo earlier today and he explains he is not worried. >> we also had a very good .ignal of good momentum 6tside the u.s. we had almost billion in new money. overall i am still positive with developments. i am quite confident that the rest of the year will be ok. david: is there any hesitation here? ubs has been so identified with wealth management. caroline: one of the things that was positive for them this quarter wasn't the inflows they were hoping for, but there cost-cutting. fruiteems to be bearing even if the inflows aren't coming the way they like, they still do have a positive story

to tell. stories the individual of earning wealth on the overnight news we will get stealth -- stimulus out of china. we are at a 13 month high even though you are seeing off the highs of the session. then is the global growth story reliance on china stimulus? we thought we were doing well without it and it feels like we needed again. romaine: i think we have needed it and you saw that in -- saw it over the last couple of weeks. i think the fiscal stimulus they are proposing is being welcomed. i think that is because the narrative is you cannot have this disjointed global economy no matter what type of changes are being made on a country by country basis, we are still so intertwined that we are

dependent on the second largest economy to do well. full thing wea can pull up for you. tax cuts lowered, individual government bonds will move forward. more loans. is that a domestic story still? caroline: it is a softening of the tightening that it been taking place. eraging storydelev that it been weighing on markets. the banks's helping are adopting some language around wealth management product regulation, that is giving markets hope that perhaps the government will help lift up china. alix: thank you very much. this leads us to turkey. turkish central bank does not hike rates, the lira dropped like a stone and equities

rollover. david you warned of this in our meeting. they: analysts are saying need to raise as much as 100 basis points to curtail inflation. the big question is will the central bank pay attention to president ertl on. he said they should -- president erdogan. there was a forecast the lira would plunge. you wonder whether this does indicate that the president may have some influence on the central bank. but i'm not sure markets will appreciate. alix: you are looking at lira at a record low. at a fundamental bases there was no real reason to not hike rates. so you would have to assume it was pressure and there is no more independent central bank in turkey. david: also crossing the bloomberg, a headline about stocks. the istanbul 100 is down 2.5% so far. really wanted some

strong showing from the central bank of turkey and they did not get it. inx: they also pointed out the language they said the bank says it will wait for delayed impact of previous monetary policy decisions and fiscal policy on inflation. that seems to basically be president trump stream. -- president trump's dream. remember the central bank earlier increase the rate and did not do enough and they had to come back for a second bite. i will be following that for the next couple of hours. you can find all the charts we , click on our chart we used and hang out with it all day. more on the big earnings week for the s&p 500 companies. we will discuss. this is bloomberg. ♪

alix: -- >> this is "bloomberg daybreak." verizon wants to partner with google and apple in its effort to rollout 5g service this year. verizon wants one of those companies to provide televisions when the services offered in los angeles and sacramento. the wireless giant came up short in trying to develop its own tv service. -- after a month-long review, they've decided to spin off its animal health unit. that thousand medication for pets and had $3 billion in revenue last year. to take over --

psa says it's now showing a profit that has shares rising the most in six years. that is your bloomberg business flash. david: big news out of turkey this morning. the central bank did not raise interest rates. the market expecting as many as 100 basis points. the reaction was immediate. the lira has plunged. the stock market there has plunged substantially. the question is what does this say about the central bank relationship with president erdogan? he brought his son-in-law in as the economic czar. it is raising questions in the market minds. alix: the bank getting crushed. equities getting crushed. they came out with a note saying a must the policy mistake is corrected, the market fears will

translate into further substantial lira weakness. what will that mean for corporate and bank balance sheets? inflows in the country? it is a falling knife. they need foreign direct investment in right now are you going to go into turkey and invest in this climate when you don't know who is running the show in terms of the economy. the central bank said it keeps rates unchanged because it cited a balance and economic activity. what is that? the economy slowed down therefore we won't raise rates. david: the concern was if they don't raise, it was going to spike of inflation and get out of control quickly. they have had a challenge with the market. from istanbul,s what does this mean for the central bank and mr. erdogan

going forward? >> investors were looking for the central bank to prove its independence and restore market credibility and that's what it failed to do. they were expecting a rate hike of 100 basis points and they got nothing. is this a surprise? not really. ever since president erdogan said he would win the election again and go on to an executive presidency, he will take more control and responsibility over economic and monetary policy. it is knows a price he hates called in, he once the mother and father of all evil. he holds an unorthodox view that low rates will help slow inflation. isseems the central bank following in the steps of president erdogan. alix: david pointed out direct foreign investment is critical. if you are an investor outside of turkey and you get this news and see the disaster in the markets.

what is the long-term effect of that? >> some investors are saying the central bank raises rates, the turkish financial markets and assets could see a complete market route which is what we are seeing today. the government and the central bank really needs to do something to get hold of the situation. david: does president erdogan believe he must have to do something? does he care about the markets in a nutshell? erdogan sometimes -- >> sometimes he says he doesn't. his son-in-law yesterday came out and said we will not fight the market, we will not do anything.

the central bank is independent. it is quite surprising. after that message we were thinking the central bank would be free to raise rates by at least 100 basis points, which is what the market was expecting. erdogan versus the market and even though president erdogan fights and fights. in the end, the markets always win. the central bank has raised by 500 basis points since april. that is because the lira was at an all-time record low. bonds were climbing. markets do seem to get their way one way or the other. alix: thank you so much. just to recap the news. the turkish central bank does not raise rates. analysts were expecting 100 to 100 based -- 125 basis point hike. equities just getting crushed. dataentral bank says the

indicate a more significant rebalancing trend in the economic activity. external demand maintains the strength. that's the excuse for not hiking rates. the question is is there any central bank independence and how will the country stem the slide of the weaker lira? alphabet shares rising after results show google's advertising engine going strong. this is bloomberg. ♪

david: alphabet started out with a boom yesterday. shares rise after the google parent reported results beyond anyone had predicted including an increase in its advertising business. it blew past expectations. we welcome paul sweeny.

thanks for joining us. it is impressive what they have done. what struck me was the advertising revenue number. paul: if you are facebook or google you are well positioned for the shift in advertising towards digital media. we are seeing huge companies, , they grew alphabet advertising revenue 24%. extraordinary we are seeing that in facebook as well. the dollars continue to flow to digital and primarily to google and facebook. david: they seem to a blown past and he told desk any sort of regulatory fines -- any sort of regulatory fines. earnings call they don't seem perturbed by that. paul: it is certainly an issue. i think the regulatory overhang will be there from the europeans and that something tech companies and investors have been comfortable with over the

years starting arguably with microsoft. tech investors are pretty comfortable with that oversight. the new wrinkle that may be out there for tech companies and investors is the u.s. regulatory environment. does congress step up and take a heavier hand in technology regulatory issues? historically they have taken a very light touch, but if that were to change that would be something for investors. she couldn't even come up with something for google. the best was that usually investors don't like how much they are expecting. do we need to be worried about a capx over $6 billion? >> we like to see the opera bets and amazons's of the world step up their spending in r&d -- we like to see the alphabets and over the world step up

their spending in r&d and we saw a big increase in headcount as they add engineers. the majority of their investment has gone into their cloud business. we hear the same thing at amazon and microsoft. investors feel good about that type of expenditure because the cloud is one of the best growing businesses within the tech sector. alix: paul sweeny joining us from bloomberg intelligence. the questions are will earnings deliver it up to justify the price? the white line is the last price for the technology sectors and the blue line is the trailing 12 month earnings per share. -- lindas is linda duessel. , will we gett tech the beats to support? linda: i don't see any reason why we shouldn't continue to get beats for the market as a whole. it's been a good earnings

seasons -- earnings season. of stocks within the s&p 500 have beaten earning estimates for the second quarter by an average of 4%. technology stocks will be included in that as evidenced by google. david: no question that so far earnings per share have beaten and been substantial. does that matter more this earnings season? i don't know if it matters more but it's definitely been very bullish this earnings season where in the past number of years, all the great news from earnings was from i don't s and this time it is very interesting that sales are beating. sales or something you can't manipulate. people wonder about the quality of earnings. you can't manipulate sales in general and in this quarter they are surprising for the upside

which is really great because analysts have been raising earning estimates all year but can't seem to keep up with very strong earnings growth. it's been a good year for earnings. alix: what about next year? if you take a look at the chart that shows earning estimates for individual sectors, they have grown, especially trade related sectors. overall equities have underperformed or have not match the earnings estimate increase. which gives? the price for the earnings estimates? linda: the earnings estimates are excellent and remain so. we are bullish on the industrial sector but the industrial sector seems to be trading as a group, it is trading on macroeconomic concerns and it was back to the trade war. it is a binary question that leads valuations reasonably priced. is close to the

long-term average and you haven't been that way through the whole run in this rally we have enjoyed. that is the market saying today there is a concern about geopolitical risk, trade wars, the price isthat is the market o say your downside isn't as bad and it's worth going in the water. we have verizon earnings coming out. second-quarter operating revenue beating estimates. earnings beating estimates as well. still holding up. the numbers continue to calm in. you wonder how isolated verizon will be. david: also verizon is in the middle of a ceo switch. 5g, how muchove to it will cost them at how fast

they can get there. a look -- the question here will be where will it take them through the second half. plan on 5g has specific cities for the second half. alix: you mentioned earlier a partnership with google. maybe a 5g tv with google or apple. david: google has started talks with them about teaming up. the question is can they take on the big cable companies. alix: and they all have different strategies to do that. david: it is coming. lilly, aalk about eli strong second quarter. that is right here on bloomberg. ♪ retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store near or far covered.

leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. alix: this is bloomberg daybreak. they westin is back and the markets are happy because china is looking at some stimulus.

also getting solid earnings coming in from every sector that you look at and we are waiting for more like lockheed martin coming out in just a few moments. what i am watching has to be the 2/10 spread. it has steepened both most we have seen since february. the dollar is weaker. euro-dollar up by about 1/10 of 1%. coming in likes but manufacturing holding its own and crude up by 1/10 of 1%. a lot of different sectors coming up. kimberly-clark roundup -- their earnings beat on the top line. it also seemed to beat on the bottom line in terms of sales. and 3m is out as well. david: 3m is out and they matched analyst estimates. at 8.39.timated

28.6% off the margin. alix: lockheed martin boosted their 2018 financial outlook for all metrics. that only did they beat on the top and bottom line, but they raised the guidance as well. 3:00, lockheed martin holding their own as well. -- 3m, lockheed martin holding their own as well. i wanted to get more on kimberly-clark. their sales were light but their earnings came in strong. read on whata good that is comparative to but you get some industrial negatives and kimberly-clark down by over 3%. david: it does not seem like the market likes the kimberly-clark information that much. andunited states government the president keep reminding us we are spending more money on defense and it is taking lockheed martin jakey estimates up for the rest of the year.

they had a pretty healthy beat on price per share. things are looking pretty good for the defense contractors. alix: the full-year earnings for lockheed at the top end, $17 five cents per share -- $17.05 per share. f-35: also i think the helps them a lot. president is going around the world and saying you really should buy more military equipment from the united states, as well as our own budget. a win for defense spending. alix: you brought up 3m. sharere seeing $9.38 per versus the estimate they did see before the high-end. another upgrade for that industrial company as well. this feels to be the theme. earnings are going to be really good. david: it looks good so far. alix: it is going to be the

outlook and the dollar and trade and geopolitical risk. the base fx that you compare year-over-year. all that geopolitical risk. it looks like right now, it is going forward but as of this particular quarter, it looks very good. a company that just reported its earnings just over an hour ago, eli lilly handily beat estimates on both earnings-per-share and increasing guidance for the year overall. you can see what is going on with the shares, up 5.4%. to take us through all of this, we welcome the ceo, dave ricks. i expect this is a good day for you to be on television to talk about your results. dave: a very strong quarter for the company. revenue grew 9%, driven by our newest products and based on volume worldwide both

internationally and in the u.s.. as you mentioned, earnings are up 35%, a strong beat of expectations and we raised the guidance again for this year. we are pleased with the performance and yet we know we can accelerate even further toward our goal which is to end of this decade with a growth rate of 5% over the top line and power through some patent expirations. david: tell us what is coming up. what are you expecting and what is going to take you to that goal? we had some of our internal projects read out positive based on data. our collaboration with pfizer for a non-opioid pain medicine for chronic pain, in this case osteoarthritis pain, so we are pleased to see that. another pain medicine is being

reviewed for migraines. this time, we study did in a much more severe headache condition called cluster headaches. one of our new sellers, a positive study for a condition which is a spinal arthritis which is lifelong and debilitating. this is a positive result. we also made an important acquisition in oncology, adding a phase three to portfolio. a hot field and this is part of our strategy. david: that was not it. you also talked about your animal health business. there was talk that you might sell it as much -- for as much as $30 billion. why did you make that decision and why did you make an ipo? dave: last year, we announce we're going to have a strategic review of the business unit.

it had to be pretty substantial in growth and scale and we had to reflect on whether this was , reallyt position controlling it for our shareholders. we concluded that review and look at selling it and we look at the ipo path and we chose it because it maximizes value for our shareholders after-tax. i think it will give a lenchon -- it will give -- a clear position to work with veterinarians to improve animal health and allow the parent company to focus on its critical mission, to keep producing life-changing medicines. david: what is an ipo going to do for your margins? as successful as it has been, it is not done as well as your core business. short-term, it is a bit of a headwind on margin expansion for us. we don't expect that over the long term, but in the short

term, that is the case. we are in the quiet period here and there is not a lot i can say about the quarter projections. we look at the assets that will and those that are expiring like patent expiration, 8% growth in q2. how much can we expect to get in an ipo? dave: we cannot comment on pricing before we file the s1. we look at all the options and we believe this is the best one for our shareholders. 20%ope to issue and have a or little less than 20% portion fall. ownership ipo this probably next fall to separate the rest of the company. david: let's talk about the

president of the united states. you had a statement in your earnings release talking about drug pricing and what your expectations are. to what extent are you responding to pressures from the president saying that drug prices are too high? dave: i think policymakers and patients want us to do something about patient cost, out-of-pocket cost for medicine and we agree. something should be done. the administration has rolled out a sweeping potential set of reforms and in this blueprint, some we like and some we don't and while that conversation is going on, we think it is important to be prudent about how we think about u.s. price. we have not raised price since that blueprint was released. our guidance does not include any u.s. price increases for the balance of this year. when those changes are implemented, we will take a look at things but that is how we think about this problem. david: it is not just drug

prices but trade that has been on the international agenda and just a little while ago, president trump said tariffs are the greatest. either a country negotiate a fair deal or it gets hit with tariffs. we are the quote unquote piggy bank that is being robbed. what effect could trade destruction have on eli lilly? dave: does not much -- there has not been much impact on the pharmaceutical industry but our position has been for free trade and lower tariffs. there are differences between market access, regulatory standards, localization required minutes -- localization requirements. there are problems in trade and our industry and if the administration can work to reduce those problems, that would be a good thing. typically we have not been for that, but i have to say that

there are some markets where we are seeing movement. china is making pretty sweeping reforms that are positive for us. there are other markets that are problems like canada and parts of europe. david: thank you so much for your time. dave ricks, eli lilly's ceo. alix: the other big news from the morning is turkey not raising interest rates. expected they would, by about 125 basis points to combat inflation and the market reaction is severe. the lira at a record low. equities get crushed. joining us now on the phone is an emerging markets economist. what is the fallout for this? >> this is a major surprise for the market. inflation trends and the recent communications.

-- you are seeing the lira reacting very negatively to this. i'm afraid there is more to come in terms of the negative reaction because now the market assumptions regarding the futures and monetary policy decision in turkey will be -- and it is likely that the lira is going to put pressure on the balance sheet. toa result, it will lead more concerns about turkey which will result -- which will mean a reduction in capital influence , a vicious pressure

circle. in that regard to fallout from this decision in action today, it could be quite significant. alix: what is going to be the reaction function for president erdogan? you mentioned a severe increase in borrowing cost. they have redemptions coming due in april and november -- and november. has so far tried to -- the market pressure although we did see him sanctioning rate hikes of eventually. i think we will see this scenario playing out at the end of the day. the system.lly know being, i think we thereasonably say that

system lowering bank rates does not translate to lower rates for the economy. the 10 year turkish government bond yields increased by more than 100 basis points just today in response to the no hike decision by the central bank. the turkish economy will be paying the cost of high rates anyway, even if the bank does factor i think they will in south -- at some point. david: explain the politics of this. is president erdogan really pursuing a low lira strategy sort of the way that president trump favors a low dollar strategy? at what point does that put pressure on the president? >> so far, there has not been a significant factor affecting the president's trophy and's. it was less than a month before today -- president's trophy and's -- president's the

surgeons -- decisions. >> it was a month before today -- the political costs for him have not been significant enough. coming to us from london, thank you so much for being here. now it is time for an update for what is making -- on what is making headlines outside the business world. emma chandra is here with the "first word news." emma: president trump would agree to an interview with special counsel robert mueller jakey investigators, but there is a catch. his lawyer said he would only take questions whether his campaign colluded with russia. 's lawyer says the president does not want to be asked about district -- obstruction of justice in the russia probe because he is concerned about a possible perjury charge if prosecutors believe other witnesses. u.s. congressional negotiators transferold back the

of at-35 fighters to turkey. f-35 at-35 fighters -- of fighters to turkey. in greece, the death toll from wildfires near athens has now risen to at least 60 according to reports. more than 100 people have been injured. the fires are being spread by wind reaching 15 miles per hour. hundreds of people fled to nearby beaches they could be evacuated by boat. global news, 24 hours a day, on air and at tick toc on twitter, powered by over 2700 journalists and analysts in more than 120 countries. i'm emma chandra. this is bloomberg. david: we turn now to wall street beat where we cover three things wall street is buzzing about. first up, solomon starts with women. goldman's new era kicks off by doubling the number of women on its top committee. fortnite's revenue royale.

spanish soccer eyes u.s. turf --er losing one although losing run although -- losing renaldo. -- alix: let's go through some of the women that will have a prominent role at -- as david solomon takes the helm. >> the strategy chief, a very quick ascent for her. allison made partner in 2001 as a critical job overseeing the relationship with private equity and other key clients. the head of the international asset management, we should also note that the chief in a street of officer was also named to this management committee. alix: not a woman though. >> not a woman. --s is critical in terms of as you look at what is happening

at goldman, we are coming into the david solomon era. david solomon named to succeed lloyd blankfein. his fingerprints are all over this is of the mechanics of how it works. also because he has been very public about this being a high priority for him in terms of gaining something resembling something close to gender parity. david: let's turn to a second kind of game. fornite. i know about candy crush and pokemon. i don't know fornite. i am not a gamer although i am a little bit sad that i'm doing this story while my kids are at camp. they love to talk about fornite. my younger guy definitely plays it. is definitely a phenomenon -- it is definitely a phenomenon. it is played by children,

rappers, athletes and middle-aged accountants. going to pay not $40 for a game, but you are going to buy the add-ons. i am a huge board gamer and i cannot tell you how much settlers of catan stuff i have bought like magnetic boards and special boards. jason: it is the same kind of thing. these in game purchases and these skins you buy in the game. it is a great read about tim sweeney, the founder of this. he is the guy who became a computer guy early in his life. alix: in his parent -- david: in his parent's basement. jason: the is a bachelor who lives in this massive house. he has a corvette by the way. 2019. david: mine is 62. alix: as i brought up on

television, you should see the cars david has. david: third story, a different kind of game, football. it is amazing, the spanish league which is very successful but cannot get as much money in the door. jason: the good news is they have overtaken -- as number two but still less than half of the revenue that the premier league brings in. but they arealdo, talking about, we may see some games in the united states as it still continues to become more popular in america. david: where does the money come from? is it television and media rights or is it stuff? jason: it is definitely merchandise. that is one of the compelling reasons to come to a huge consumer market like united si still plays mes

in the league, obviously a very well-known player. you after you lose ronaldo, still get those jersey sales. david: a big upside. thanks so much to bloomberg's jason kelly. lockheed martin second-quarter results beating results -- beating estimates. more on industrials come up next. alix: check out tv . you can watch us live and interact with us directly. you can scroll through and check it out. this is bloomberg. ♪

alix: united technologies and lockheed martin said second-quarter results both be estimates. different capital requirements and low profiles and debt capacity. there are few obvious benefits

to packaging those together but there is an obvious reason for breaking them apart and improving valuation. brooke sutherland joins us now. did the quarter kind of change that conversation for you? brooke: no it didn't. we did see margin pressure. this is nothing to be alarmed about but when you compare that with the absurd growth we are seeing out of the aviation business, it just sort of furthers -- this is not going to investors int united technologies to let up the pressure about a breakup. i would be very surprised if they do not get asked about it on that call. david: with the increased defense spending sort of get it past this? alix: especially with the european union defense budget or nato. a lot of companies are benefiting from that pressure on nato but this idea of a breakup

has been out there for so long hasunited technologies thrown so many excuses and reasons not to do it. a lot of the reasons have been mitigated by the rockwell collins deal and by the tax overhaul. their biggest complaint against it is that they need the cash from the climate business to sort of fund the aerospace operations as those tend to require big upfront investments but the rockwell-collins aerospace business has a lot of cash. david: the other one we heard from his lockheed martin. did they have any different -- from is lockheed martin. did they have any difficulties? brooke: they are not one that comes up as an activist target. they have committed to putting a lot of money toward their pension this year. there were concerns that maybe that would temper the cash flow and revenue they are seeing from this increased defense spending but lockheed martin is upping

its cash flow forecast. alix: the question is, getting to hear high watermarks on the call. that happened that caterpillar and totally wrecked their stock. is this what we are going to start to hear from these guys? brooke: there are definitely concerns about that, just as you have these tariffs and commodity prices rising, labor shortages, supply chain issues. all of that is working against what is a very strong industrial environment right now and that is what people are focusing on. that is a difference between longer cycle companies like lockheed martin and united technologies and shorter cycle companies like 3m. david: there is also another difference. the president may be disrupting trade relations on the one hand and he is out there selling f-35's.

brooke: investors don't necessarily think that way. they are looking ahead to 2020 and are democrats going to retake the white house and rethink how much money are we going to spend on defense? there is a lot of money going to defense now, but is not going to last? -- but is that going to last? part of that is just the nature of being in the defense companies is that these dynamics tend to shift every now and then. alix: thank you very much, good to see you brooke sutherland. coming up, jeff currie, goldman sachs global head of commodities research is talking oil. ♪ this isn't just any moving day.

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biggest increase since february but the treasury 2/10 auction could weigh on the front end. thank you china stimulus. is gone as the country looks at tax cuts and special bonds to offset trade and global growth fears. alphabet amazes, google beating estimates with the fastest revenue growth in four years. david: welcome to bloomberg daybreak. i am david westin, finally back with alix steel. alix: welcome back. he goes away for a week in cambridge and i said comcast is going to break and there is going to be some big news and you are going to be off on a boat with no cell phone reception. david: you did not miss me one bit which is the way it should be. alix: in the markets, earnings optimism plus that stimulus from china really helping lift the mood in the equity market. s&p futures over 2800.

interesting that that steeper curve is not leading to a dollar, in part because you had some pmi data coming out from europe. it feels like a steady as she goes for mario draghi as we beat the drum. dollar, in part because you had some pmi data comingas p for two days in a row. i remember when you were gone, the world is going to end and then there we are at 32 and you had a conversation about the yield curve on your vacation. i brought the subject up and we were hiking down from a castle on top of a mountain. i was with someone who is in the irish ministry of finance and i said do you pay attention to the yield curve and he said absolutely. he is going long duration, by the way. time now for the morning brief. and 9:30 this morning eastern time, united states trade representative's are going to be holding meetings on proposed tariffs on another $16 billion

worth of tariffs. and 9:45, we are going to get u.s. pmi numbers for the month of july. than a 1:00, the u.s. treasury will be selling $36 billion into your notes. alix: get a big market mover is what is happening in turkey. turkish lira at a three-year low. the central bank did not hike rates as the market was expecting. is -- fromnow istanbul. walk us through why this was such a surprise. >> it seems the investors are losing faith in turkish central bank's independence. they were expecting a rate hike by at least 100 basis points and the central banks failed to deliver anything. of course inflation is running more than triple the central bank target rate and even though since april, the central bank -- and that is

exactly what they were expecting, but it seems the central bank has other ideas in instead. david: thank you so much, simin demokan. several companies reporting already. we welcome now to take us through some of the results, bloomberg's taylor riggs. taylor: we are starting with harley davidson in the last few hours, coming in at growth margins that beat estimates. the company has moved some operations overseas. their operating margins will .rop versus previous estimates i want to come over here and look at united technologies. the big news, they are adjusting their 2018 outlook for the second quarter in a row. they are waiting to close in on that $23 billion purchase of

but stillollins waiting on chinese and regulatory approval. come over here to verizon as well, that is something we just heard from recently in the past few hours, posting strong subscriber numbers. five straight quarters of growth, pretty good for what is the largest u.s. wireless carrier. to wrap it all up, stocks a lockheed martin, another beat and raising their 2018 guidance for the top and bottom line. you can thank rising geopolitical tension and lawmakers are moving that military spending cap. alix: thank you very much, taylor riggs. -- that is theis numbers. the backdrop is still going to be like is this the high

watermark? what about trade, that stronger dollar, what are we going to see in the next year? >> i think the stronger dollar is the real key. that is a sure sign of risk on, risk off if the dollar is actually strengthening, so that is the backdrop and there is a lot of discussion around trade and concerns around trade have pushed the dollar higher. is ultimately going to be stronger for the dollar so it is a real balancing acts -- balancing act but i do think in the second half, we're going to get better growth in the first half and for the first half of the year, we were very helpful and -- very hopeful. now we know how the table is set and we know trade is an issue and a lot of things have been put in the price. some assets have sold off in the dollar is one of those but it

actually rallied and that -- that has caused selloffs in emerging markets. it is important to follow. david: go back to the second half and take a longer-range view because equities are priced off of longer-range. we have the tax cuts earlier this year. what are we looking at in the long-term? say?does it jim: i think that fiscal stimulus has yet to hit in the u.s.. that is starting to get traction. you are seeing it in some of the earnings and employment. where we are not seeing it is in spending and wages which leads to consumption and consumption becomes a bigger part of gdp. i think that that is the high watermark for this year. i still think we get gdp somewhere around 3% for the

year, maybe 2.8%. still a healthy number. if you have bond yields that are low and even if you have corporate bond yields which are relatively low based on history, equities seem to be a place for you want to hang out for a while. multiples have contracted. next six toover the nine months, this could be a sweet spot for riskier assets were you could get better returns. alix: are you fading the steep? jim: the path of least resistance is a flatter curve. what signal does that send for the future of the economy, and i would argue that is a weaker signal for two reasons. the first is the fed is not tightening right now. they are not trying to slow down the market. they are trying to get to neutral.

when theus periods yield curve has flattened, it came with the fed was tightening. the second point is term premium. we have the qe effective -- affect which has pushed long-term yields lower and the yield curve flatter. therefore, our estimation that the curve is about 40 basis points flatter today because of qe. still flatter than the long-term average, but it is not sounding the alarm bells and that is the way i look at it. that is a warning sign that things are going to start to slow down, but we are not at the edge right now. alix: jim caron of morgan stanley investment will be sticking with us. -- joiningicymakers us will be jeff currie, goldman sachs group head of global commodities research. this is bloomberg.

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emma: bloomberg daybreak, i am emma chandra with your bloomberg business flash. after a month-long review, eli lilly has decided to spin off its animal health company that sells medication for livestock and pets. he makes europe -- the maker of oxycontin is bringing in a corporate turnaround legend to distance itself from the opioid crisis. they have named steve miller to be chairman of the board. also served as chairman of aig. barclays says the u.k. -- is trying to reinstate full charges against the bank.

's those charges have to do with the 2008 capital raising. a judge in london dismissed the case back in may. if barclays had been convicted then, it could have heard the bank's ability to do business globally. alix: the chinese markets rediscovering an appetite for risk. it is called reflation. policymakers introduced initiatives to stimulate the economy like tax loans, more loans to banks. they are trying to soften the regulation of wealth management products. if you come inside the bloomberg, you can see that dramatic increase in dollar-yuan. you are seeing the fixing moving lower. at the same time, ever since september and in march, gdp starts to roll over. joining me now is jeff currie, goldman sachs global head of commodities research. oil demand will remain robust. goldman express -- expects brent

prices to reach $80 a barrel. together,ou put it the weakness in the yuan or the strength or the dot -- in the dollar, rising commodity prices and u.s. rates, the three are not compatible. i like to call them the terrible trio. if you want to get something sustainable, you need stable to declining rates, rising commodity prices and a weaker dollar. the question is in thinking about -- are we at a turning point for the dollar? is the dollar going to start getting weaker? if we think of the bullish view on commodities right now, it is the headwind created by the stronger dollar which is a reflection of weakness in demand in emerging markets like china, brazil, turkey. the question i ask is are we on

the cusp of a turning point on the dollar which would be an indicator of stronger growth? alix: are we? jeff: i would say yes but i felt comfortable saying that two weeks ago after we saw 17 consecutive days of selling in copper. i thought we saw the bottom but then we saw two or three more days. if we think about our view, why am i less confident today that i was two weeks ago -- then i was -- than

can oil go above 80 right now? it is difficult considering -- can it go below $70 right now? unlikely with the saudi's ready to step in. the one thing i think we all agree upon is china is likely to be successful in terms of its policy. demand growth is likely to be good. you are likely to lose the rainy and barrels. -- the iranian barrels. there is a lot of uncertainty right now, given the policy backdrop. david: how much harder is your presidente we have a of united states who seems willing to intervene in markets. you go down the list and president of the past do not want to talk about that and this president has no it -- no hesitation. jeff: i was just thinking yesterday my job was what it was like pre-reagan and regulation. that is a belief out there we get past the midterm elections and this is all going to go away and we're going to go back to business as usual. even there, i am becoming less confident. david: the president is not doing anything differently then when he was a candidate. he is not veering in some direction. jeff: i question when our

clients say that. the world is playing a bilateral game. in the old days, if you had a president come out and say i will impose sanctions on iran, oil goes up. now you have a multilateral game theory problem that says ok, the situation in iran is no contingent on trade wars, venezuela and -- is now contingent on trade wars, venezuela. you need china to cooperate and not take the iranian barrels. a trade warave going on, are they going to fund venezuela or are they going to not take the reigning barrels? -- the uranian -- the iranian barrels? jim carons bring in of morgan stanley. seehat point do we start to

demand destruction because of prices? still at a relatively high level, so things are fine. when we think about global growth, whether it is europe or the u.s., developed markets are ok. it is emerging markets where the question is. they tend to be much more dependent on the dollar. effectively, if we get a turning point on the dollar, and part of the reason is that some of that dollar strength had to do with tax reform. a lot of repatriation created a liquid shortage of dollars and created an increase in demand in dollars. a lot of that longs the dollar by a lot of these surveys that show we are almost at -- it is the exact opposite of where we were in january when we were short and the dollar rallied. i think we are in a good position right now and get some

of the tax reform has gone through the repatriation has taken place, that is in the price and we could now see logical fundamental reasons why the dollar could start to selloff and a be overextended and that could give a boost. alix: no one has taken the bait on a global growth story. i will try one more time. emma: -- jeff: i firmly believe that an egg -- that in a global growth story, you look at our current activity indicator showing 4.3. i don't think the market is pricing growth. i have said over and over, growth is not as bad as you think. these markets are going to go up. alix: this is the oil price in rubles and the real. i don't see how you don't see demand destruction. jeff: that is why we say something has to give. is it going to be commodities, the dollar, rates?

one of those three has to give. is it going to be the dollar or commodities? in our core view, it is going to be the dollar. that creates the opening for these markets to go higher. david: you've got jim and jeff both against you. [laughter] alix: i am inciting drama. of morgan caron stanley, thank you for being with us. jeff currie of goldman sachs is going to be staying with us. -- isrly results show raking in those advertising dollars. more on that next. ♪

david: alphabet had a huge second-quarter. shares are rising in the premarket on news that google's parent exceeded all expectations including a 24% increase in advertising sales. we now welcome brian white, monness crespi hardt head of

software equity research. he has raised his price target to $1415 after the company taking results last night. andhere anything you saw did not like? brian: across the board, it was a great board -- a great quarter . they decisively beat on profits. the takeaway is that they are investing a lot but they are still able to beat expectations on profits and that is the most important thing. david: what is driving the 24% increase? they were a big advertising revenue source to begin with. what is driving 24%? brian: it is the digital transformation. people forget behind the scenes, while the advertising market globally,700 billion $210 billion is in digital advertising. just like you have a shift to

the cloud, you have a shift to digital advertising. ofgle might have a 40% share the digital advertising market, but when you look at the overall pie, it is less than 20%. about regulatory threats and they got a $5 billion fine from the eu last week. are we passed that already -- already? brian: they plan on appealing. we will see on -- we will see where that goes. i think the other thing is that there global dominance -- their global dominance, you don't have much of a choice. if you are not using ios, you use android. if they have to tweak the way that they bring chrome and

search into the play store to market with android, so be it. they are dominant. alix: jeff currie, head of gold commodities global at goldman sachs. jeff: if you look at the strength in tech, it creates an attractive investment in the united states. u.s., itows into the strengthens the dollar and weakens em currencies. the last time we saw this dynamic was the.com boom -- was the dot com boom. stronger dollar, rising rates. alix: interesting. what would make you positive this would be a different kind of story that is more sustainable? brian: i lived through the tech

bubble and stocks were trading at 150 times earnings. even pretty older tech companies at the time. you look at alphabet, currently at 23 times earnings. you can look across my universe. there are a couple high flyers but you look at a company like alphabet and a few others. i just looked it up, you also covered facebook. we are just about to go into the tech earnings season. do the alphabet results tell us anything about what is coming up? brian: the advertising spending because the economy is decent and you have this secular shift in digital advertising is strong and that is what drives facebook. there is nothing heroic about expectations in terms of this growth.

it is well below historical averages because of all of this noise with cambridge analytic up. -- cambridge analytica. alix: brian white of monness crespi hardt and company, thank you very much. jeff currie of goldman sachs is sticking with us. carlyle energy managing -- carlo energy partners managing director will be joining us. you could see oil topped $80. this is bloomberg. ♪

alix: this is bloomberg daybreak. jones upeing the dow by about 142 point. the rally taking over in european equities spread from

asia to europe. european banks stops -- bank stocks up. ubs off the highs of the session. many things we are watching, one is the -- is what is happening with the lira. governing -- jumping by about two and a half percent. the central bank does not raise rates. what that means for foreign direct investments. this spread that david loves to talk about. 32 basis points, the biggest move and yields over the last three days we have seen. since 2007 the longest. winning streak since february. some fundamental supply and demand which we will get to. david: it was worth going to create a to get you some -- going to croatia to get you some material. alix: i still talked to david about croatia even though he was not sitting next to me.

israel said it has shut down a syrian warplane that entered its airspace. two patriot antiaircraft missiles were filed at the jet. it is the first time israel has shut down a syrian plane in four years. in greece, the death toll from wildfires near athens has risen to 60. it is expected to go higher. more than 150 people have been injured. the fire is spreading from wins reaching 50 miles per hour. hundreds of people fled to beaches to be evacuated by boat. in the u.s., congressional negotiations went to hold back the transfer of fighter jets. aat is part of a compromise spending bill agreed to yesterday. lawmakers want the pentagon just

met a report for what the measure would mean for u.s.-turkish relations. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. crude taking a nosedive over the last 12 days. it has been a rough ride. on july 10, that is when it started. we are down by 8%. joining me now is marcel van poecke. as well as jeff curry, he heads up goldman sachs commodities research. you guys know each other and being in the commodities business for 10 years. jeff, your explanation for the selloff in oil. >> the basic backdrop is a strong late cycle gdp growth growing demand. a high probability you're going to lose the iranian exports.

why is the market going down? let's take a step back and look at the balances. i like to define commodity markets is being two types. crayola crayon type and sharpened pencil types. a crayola and -- a crayola crayon is when you can do supply and demand and in balance is so short. that is the way the market has looked for the last 18 months. you did your crayola crayon balance. more recently, it has become sharpened pencil. the market is rotating back and forth between being slightly imbalanced and slightly in a deficit. when you are in that environment and when we think about the deficit created by iran, that becomes a policy driven market. policy driven markets become affected by shifts in policy. i like to use the term policy fatigue because that is what the market feels like. you have seen the defense of the sanctions.

you have seen the potential for waivers. it is moving at all over the place. lots of policy uncertainty, that creates a lot of volatility. the backdrop is bullish. you look at the rest of the energy conflict. it gives you a positive carry. the potential for this to go up -- alix: someone has to buy and that is marcel. carlisle is weat see a $25 billion global platform. i am focused on the two and a half billion we focus -- we america.tside north what we see is that most of the private equity capital goes to north america.

80% of all the private equity. 80% of the opportunities are outside north america. there are lots of opportunities. very good solid companies to invest in. what we have done recently and those are the last two deals, we bought a big global portfolio of $2.7 billion with two partners. this is a global e&p portfolio. when hundred 70,000 barrels of production a day. in england, norway, holland, and norway. we think it is a good time to invest in energy. energy is still cheap if we compare its other sectors. david: one of the thing that makes oil so interesting is it tends to be located in countries that are not stable. america,move off north

have you account for geopolitical risk? there might be very attractive oil reserves, but who knows what is going to happen with the government? >> most of our investments are in the oecd. it is a relatively small part. we look at distributions. lots of countries where we will not invest. if you look at the breakeven prices for the properties we invest in, it is on opec's level around $12. it is a very robust or folio. very low breakeven prices. alix: does the private equity world make up for that? iswhen you think about what driving the gap, it is a lack of x u.s.ent in non-opec

question is you have to ask is shale and the low-cost reducers, -- producers. term,d argue in the near it likely can. between now and 2020. if you begin to think further out, it becomes a larger question mark. the theme we would like to put forward is we have seen a sharp investment and long cycle projects. you pick your industry. it is a long cycle investment. capital from those sectors. we refuse to invest in short cycle, tech. anything that has a 12 or 18 month turnaround. alix: yours is long or short? >> this is long cycle. once you drill them, they

produce for 20 years. david: does that mean the prices are lower and creates a greater opportunity? >> absolutely. the backdrop is increasing demands. not enough supply coming up. all these reservoirs are declining. if you do not reinvest, you get a supply gap. that is what we are looking at. >> we think it is a theme of mining and the entire commodity complex. it is the structural catalyst everyone has been looking for. meantime, you have to have a lot of volatility. that is what you are seeing. have you deal with that? -- how do you deal with that? >> what is very important is we have the largest team in this space. it is focused on buying these properties.

the team has an incredible experience both operational and in investments. we do not invest because we think prices are going to go up or down. we invest because we see operational improvements in those properties. that is what we do. david: thank you very much. jeff curry and marcel van poecke. coming up next, some pushback on opioid use. we date into america's -- we dig into america's opioid epidemic. live from new york, this is bloomberg. ♪

>> this is bloomberg daybreak. coming up later today on bloomberg market, an exclusive interview with the first reserve ceo. this is bloomberg. harley davidson continues to predict -- the forecast for profit margin this year. operating margins will drop between 9% and 10% from that expected impact from tariffs. united technologies has raised its forecast again. productschnology makes ranging from jet engines to elevators. it is working to close its acquisition of michael collins.

wealthly combined management business of ubs is delivering on its target. profits were slightly better than expected in the latest quarter. we talked with the ubs ceo. positive about our developments. confident the rest of the year is going to be ok. ubs's investment bank had a better than expected second-quarter. david: thinks very much. health care's biggest names are out with results. --started with my region biogen. all week long, we have been looking at the biggest issues in health care. we're looking at opioids. an epidemic that poses real

risks for companies. the market is still worth well over $3 billion a year. exposing some pharmaceutical companies to potential liability. welcome now from princeton, new jersey alan krueger. is the authorger of a major study on opioid effects. travis lenker's firm has launched many class-action suits against opioid distributors. travis, let me start with you. what sort of liability are we looking at here? why are they liable and what are the damages? >> the companies are liable because they essentially manufactured this public health crisis and created it based on their marketing practices that began in the 90's when they were

underselling and lying about the addictive nature of the drugs themselves. you sell prescription rates spike. those rates led to higher abuse rates of street drugs that are spinoffs. all of that has led to what is pretty much universally acknowledged as a massive public health crisis. the lawsuits we filed our on behalf of the health insurance purchasers in several states who shoulder premiums -- who saw their premiums go up. there is a large batch of litigation in federal court in ohio. about a thousand states, counties, and cities who face increased costs for medicare and public safety and all the other related taxpayer cost of the epidemic caused by the manufacturers and distribute is. david: most of these cases do

not go to trial. they end up settling. is the liability so great that they cannot afford to settle? purdue change the chairman of to someone who is known as a turnaround kid. litigationederal that is in ohio, there are two tracks in parallel. there is a track preparing some of those cases for trial. really as an experiment on both sides to see what juries will think. there is a settlement track. there are negotiations that are ongoing. said hein cleveland had is anxious to move the parties to a resolution. the numbers here are so large it would be difficult to see how an early resolution would be something that all the

plaintiffs would agree to. krueger, yousor have done a lot of work on some of the costs. give us a sense of what the opioid crisis has done to the economy. >> the council of economic advisers released their report, which estimated the total cost of the opioid crisis is around half $1 trillion. that is $500 billion a year. the costs are quite broad. it is beyond those imposed by the. medical system. you have the loss of life. you have loss of work. a large number of people. i estimate 45% of the men who are out of the labor force are taking pain medication. there are tremendous losses for the economy.

we are told there are some alternatives to these powerful painkillers that are not as addictive. are those coming into vogue? >> we are seeing prescriptions decline. we are seeing overdoses rise. the aftereffects of the tremendous increase in prescription rates. there is a big difference across regions. if you look at the counties with the most -- where the most opioids are being described, the difference is a factor of about 30 to one. fully out of proportion to the health differences in those areas. we need to target our responses in terms of treatments. is there any prospect that some of these pharmaceutical companies who you suit could help with ace -- who you sued could help with a solution?

>> with some of the supposedly addictive and resistant drugs, it is a little too late. the effectiveness is not entirely clear. the companies will be involved not only in paying damages but also as part of any relief treatment programs or other things set up. professor krueger is right. it is like a heat map for this epidemic across the country. it is out of proportion to the health needs. it is based entirely on these practices. marketing the companies will need to be involved in those areas and to be part of the solution in bringing this crisis to an end. david: why did they target those particular counties? why is there that great disparity? >> time and some deposition

testimony will probably tell. the theories out there will probably include economically disadvantaged areas. people who are coming out of the labor force for various injuries might turn to opioids. think of manufacturing areas. there is one story from west virginia where a small town of about 3000 people had two pharmacies. over 10 years, there were 21 million hills directed to -- 21 million pills directed to those pharmacies alone. if we start to have some kind of shift from less opioids and into anti-addiction drugs, what is the trickle-down for the labor force participation rate? think this is an area where the economy can benefit

administration for making this a priority. i wish they would stay more focused on it and be more aggressive and lookingi commendp administration for for -- in looking for a solution. i think we could see some recovery in labor force precipitation. i think this is an area where improving treatment -- david: thank you both for being here today. alix: the lira plunges to a record low. interact with us. go to gtv go. click on it and check it out. this is bloomberg. ♪

alix: we are watching what is

happening in turkey. the lira plunging to a record low. how far do we go in this round? >> i think we probably go further in the short term. clearly this was a major disappointment to the markets and a major surprise. this will partly be determined on what happens in global markets overall. ofiously this is a piece negative news for turkish financial assets generally. you would expect to see more short-term weakness and everything. -- in everything. david: is it to flip it to say elections have consequences? you have a new fellow whose

son-in-law is in charge of it. is there any prospect this might change? >> that is very hard to argue that it will change anytime soon. we did have some pretty aggressive rate hikes from the central bank in turkey. then we had the concern that even president erdogan's election that he would try to interfere. in the face oft turkey, thatn in you might see a revision. it is a hard one to call. i do not think you put it down to simply the elections themselves. we have a president who can be in power for many years.

i think what is going on is does this mean postelection that the goal posts have changed for the central bank? so far, the answer seems to be yes. has to get hold of monetary policy against. jeff dennis, thank you for that perspective. there are credibility issues now. that does it for bloomberg daybreak: americas. coming up next on bloomberg markets, the open. jonathan ferro is joined by terry haines. this is bloomberg. ♪

jonathan: 13 minutes until the start of the trading. this is the countdown to the open.

global equities rallying in china. earnings looking better than good. google delivering a monster quarter. sales beating all estimates. ubs posting better-than-expected results. 30 minutes away from the opening bell, here is the story for you. futures positive. the dollar weaker. euro-dollar approaching 117. treasuries fully stable with yields floating by the just single basis point on a u.s. 10 year. the main story, investors embracing a little more risk. china slowly sifting -- shifting towards stimulus. >> weakness in china would be problematic. it is still a tricky handle.