-- trump looks into higher tariffs. china says we will talk. plus, the $1000 iphone cells. a stock set to open and a record after the company beat its earnings estimate. the fed snoozer. watch the yield curve. policy decision out today at 2:00 p.m. welcome on wednesday, august 1. i'm alongside alex. whole new month. >> did you know august is not good for stocks? liquidity. on vacation. i remember those last two weeks in august 2015. i was there every second. >> july was very good for stocks. as we kick off august, here is where we stand in the markets. futures down about three points. earning going to be in focus as we go throughout the day.

euro-dollar pretty much flat. morgan stanley, by the euro. a little subdued for all the euros. 2/10 spread. 30 basis points. what we want to be focused on. global yields moving higher. starting over in japan. the yield at an 18 month high. accrued by 1%. the largest monthly loss for crude since 2016. we are continuing lower. >> remember when we were talking about 80? accruedtime for the morning bri. at 8:30, the u.s. treasure has been announced as the quarter. taking a close look at that. i.s.:00, we get eyes on and manufacturing data for july. that is ahead of the fed's rate decision at 2:00 this afternoon. finally, more earnings. marathon oil and tesla. posting their earnings. >> and the call. time for bloomberg's first word. bloomberg intelligence chief u.s. rates strategist.

a fed day. come inside, the bread and butter. that of the 2/10 spread of 30 basis point. moderate where we were. still near the tight levels. >> the fed is still talking about this. they worried about how to have the curve invert because that seems to be a signal for recession. the legs are very long. it is not obvious that a flat curve means recession. the fed wants to avoid that. one of the things they will talk .bout is when should we stop is going once every quarter going to invert the curve? they continueif to go every quarter, yes. the curve will invert. i don't think they will go that fast. i do see an end sometime in the next six months to a year. it is modest expectations. bonds are moving something else entirely. out with a tweet this morning. in a -- in the run-up today,

large moves in yields on government bonds have been due more to what is happening abroad including japan than the u.s.. explain this to us. i read about liberalizing the band here. changing around the world. they have not liberalized the band yet. they are going to before the end of the year. is one of thehad reasons why yields have been so low globally is the amount of quantitative easing. from the ecb, federal reserve, the bank of japan that has done it for over two decades. as you liberalize these bands, global yields wind up rising. even if only modestly. only talking about five basis points. this is the highest level in several years. treasury market tends to move three to five basis point every day. when you're talking about yields going from eight basis points to 13 basis points, it is meaningful enough that people take notice. that has had an impact on yields.

>> and the 20 basis points for japan really matters. how does the market participate? > this is the slowest rate normalization in history. at some point, we will get there. i think today, you are not seeing a huge reaction. not only because we don't think anything is going to happen, i don't think there will be any real change in the guidance that we have gotten. or the general narrative. i think there is a question, we talk about the flattening of the yield curve. some steepening over the past couple of weeks. it makes you wonder if some thinks are starting to that maybe powell and the fed might not go the full for this year. we are still seeing that priced in. we could see the pull back a little bit. happens today. yesterday, apple earnings. he will turn to a colleague. a great quote without apple and what is going on with apple.

apple is blessed drill and more financial guile. apple does not stay out late on weekends. it purchases on the sofa with a cup chamomile tea and a cardigan. it is sensible and a good life. >> best quote ever. i love it. it is right on. that is what this stock is. we were talking about this last week. people were asking why there wasn't more of an apple stocks. why it was not in the same growth trajectory. the reality is apple has not been a growth stock for a while. it is a value stock. that is a good thing for investors. tim cook and the rest of the vote up or the trajectory is companies on. it also raises the question on has the market recalibrated. iphone sales slow. asp is continuing to rise. that was a big surprise to

come and $25 above what they were expecting. that was the good surprise. that is why you are seeing the stock of the three or 4% premarket state. on servicesrease revenue is a good sign. this is also showing a company that is not going to be the growth juggernaut that it was. it is still able to generate revenue and cash. this is still not only the largest company by market value, one of the largest companies by possibility, what is not to like. >> we have got the numbers up there. actually under -- underperformed the number of units sold. the average selling price, over $700. they were coming up for a low 600 number. >> we were late in the cycle for this iphone. for them to be getting an increase shows that they are getting people to migrate to the higher price phones. the expectation is we will get new models later this year. if you are looking forward with this company you have to be feeling pretty good right now.

>> central bank has a cardigan. not the federate now. the fed is trying to scramble a little bit. when you have decent earnings and equity markets, you still have, i know we will get this in a minute paired trade tension. inflation. partially for the right reason. growth in the u.s. is good. partially for the wrong reason. which is that you have these trade tariffs going on. prices from imports are going to be going up. how do you respond to that? what is the response something that is not being build from within the u.s.. if inflation was going up because the u.s. was doing well, it will have to keep hiking. the fact that some of this is bad inflation seeping into the market is not going to be great for the monetary policy. us to our third story. the debate between china and the u.s.. yesterday, we went appearing the talks going on, a private talk.

we wind appearing that we are going to potentially be looking at 25% tariffs. $200 billion worth of goods. 10%, this morning, china comes out and says stop messing with us. don't blackmail us. the market still remains. the question is you cannot hedge this risk. >> the fact came out today, it is interesting. you have a company like apple, then you have the china issue develop overnight. this encapsulates what the market has been doing all year. we have good economic fundamentals, good corporate earnings, we are still in this cloud of trade issue. and whether it will be resolved. anytime soon. it does not appear to be. you look at the price action on the market. particularly commodities. it is concerning. >> can you hedge >> is difficult to do that. china is a large -- has a large holding of u.s. treasury security. certainly, people come to me and the chinese just sell all

this treasuries and how will that impact the market. they will not to that. it would harm them more than it would harm us. they also don't own a lot of 10-year and 30 year bonds. they mostly own short-term securities. 3, 4, 5-year year security. not a lot of market risk in there. even if they were to let those rolloff, it will have an incremental impact. it will not mean yields are going to go up 100 or 150 basis points because of any action that the chinese might take. >> thank you both very much. some earnings across from bloomberg right now. autonation is the largest auto dealer in the country. dollar 14 as opposed to the dollar 13. just a tad under what it was supposed to be. the real news is the sales projected to be 2.4% appeared 3.7% up. that will be an important number. we will be talking with mike jackson. the chairman and ceo.

those results. what they tell us about the u.s. and consumer and the u.s. economy overall. hiringalso interested in activity. what kind of wage increases they may or may not see. >> they have adjusted their standards in hiring. they need to hire more people. we will talk about that. >> and justin. you can find all the charts we have using threat the morning at g tv . browse recent terminal features. check it out and save it. up, apple shares rising in premarket trading after reporting with tim cook says best third quarter ever. the results with brian white. and leaf average. this is bloomberg. ♪

>> this is bloomberg daybreak. your bloomberg flash. wells fargo warns it will take a titanic effort to meet the goals this year. the largest automakers going up against trade tensions and emissions rules implement it after the cheating scandal. to help vw's centers. the world's second-largest mining company wants to keep using cash returns. dividend payments. 50% to a record. buyback program by $1 billion. and approves plans to hand investors $4 billion in proceeds from investments. expected 23% jump in profit for the second quarter. the british bank also upgraded its financial guidance for the year. having to shake off troubled past. the bank will take a $602

million charge to compensate customers. that is your bloomberg business flash. >> it is all about apple. shares crack that climbing in the premarket. tim cook says it was one of the best ever. >> today we are proud to record our best quarter revenue and earnings ever. thanks for the strong performance of iphone services and wearables. we generated $53.3 billion in revenue. a new q3 record. that is an increase of 17% over last year's results. making it our seventh consecutive quarter of accelerating growth. our fourth consecutive quarter of double-digit growth. and our strongest rate of growth in the past 11 quarters. >> joining us is brian white. global head of internet and software equity research. a buy rating on apple.

joining us from boston is leaf average. a global markets head of microstrategy for north america. let's start with you. are we in a world where apple is a growth stock? whereapple a value stock we are selling less iphones. getting people to pay more. >> it is growth at a reasonable price. it is a value at 12 times the cash. it is delivering excellent growth as well. 17% sales growth. i think what you are seeing is an exceptional quarter and the virtues of planet apple are all coming into play. you saw that in the quarter last night. >> what is next for them? can they keep going up in the average zoning price? is it something else? wearables. increased services. >> up 60%. services up 30. what i think about what is next, think about the smartphone market.

the 15% market share. as the global middle class grows, the iphone could still do well. services will continue to do very well. wearables, in the whole trend, is something they will be a part of as well. >> this is my favorite quote. apple is less thrill, more financial guile. that is perfectly fine. apple does not stay out late on the weekends. apple perches on the sofa with tea and a cardigan. it is sensible and good life. wasexpectation yesterday maybe apple can helps -- stem the tide. does it have the power to do that anymore? it is a good point. what we are seeing is more differentiation amongst that tech stocks. overall, that is generally facing more headwind. the states are tightening by the fed. less by the ecb and the boj. these are headwinds. you look at the stocks, you

could say that the priced for perfection in terms of the macro backdrop. it will not be as supportive as we go forward in 2018. >> do those headwinds apply to tech? what i think about the second half of the year, it is strong protect. fx is definitely a headwind for a lot of our companies. tariffs, there is some potential hit to apple. the brought that up on call. we will have to see. i don't think it will be material. it is a risk. >> let's listen to what he had to say. >> our view on tariffs is that they show up as a tax on the consumer. and wind up resulting in lower economic growth. it sometimes, converting about significant risk of

unintended consequences. >> when you say we have headwinds, how much of it is tariffs? of it, foras a part sure. two main ones. tariffs being the first, it is a tax on the consumer. the second is qualitative tightening. equity markets, for the last eight or nine years have been boosted by a tremendous increase in central bank balance sheets. at the g3 balance sheet, the have gone from $3.5 trillion to 15 and a half trillion. that is 12 trillion of by an. the feather is striking is balance sheet. , starting along the path of normalization. be -- albeit slowly. equities and risky assets. that is coming to an end and starting reversed. that, combined with the threat from tariffs, significant headwinds. stocks,you're picking

the more idiosyncratic circumstance. when you take a look at apple specifically, what will be the next catalyst for the company? >> i do think there is a revaluation going on right now. when you see the services come you hear the subscriber number 300 million paid subscribers, apple music is off the charts, there is a revaluation. that is one piece of it. when you see the services come you always have excitement of the iphone cycle. conference, there weren't any hardware products available. you will have ipad, mac. apple watch. a lot of refresh outside of iphone. i think those are the two forces. longer-term, working on vehicles. also a our glasses. >> as you list those things, how do you price the stock? is this a consumer product? i don't what it is. >> a lot of different pieces. it is a tech company that has

services software and hardware. that is unique in the mobile device market. to have all three pieces of the puzzle. the company relies on android. >> if you don't want to miss out on any kind of idiosyncratic upside, do you need to head to the same time, come inside bloomberg, this is the triple fuse. the cost of hedging one-month downside versus upside risk is actually quite high. is that the way you need to start thinking about the market? >> i think you do. i think you really have to look at the risk now. be it through macro taxes, or be it through other such as tariffs. you have to look at those tail risks. head to the way you can. it is not cheap to do. as i said before, you have to start looking more individually. label tax stocks as one thing. they are very different animals. very different things. you have to look where the

potential growth is. where the risks are. for the good news is priced in. price foro much perfection. if we have a stumble on the macro backdrop, which one is the most honorable. >> coming back to where you started, how much of it is the overall -- it is not global tightening coming off of a global easing. be mindful of the fed this afternoon. >> i think it is huge. it is a big risk in the market. you look atwhen performance, this year has been somewhat more mixed. we had a good june. if you look at the snp this year, last year, there were only four days with the s&p was down by 1% or more. since 1964. lowest so far come of this year, we have had 17 days like that. the difference is the liquidity. it last year, the central banks per month, added $125 billion to the market. this year, the average is 25 billion. the second half, it becomes a

net drain. that is the big change in market conditions. that is something the market is not talking about enough. when earnings are good, that support. look at what is happened. it is related to the same thing. this is something that will be a significant headwind. i think the market just is not pricing it properly. >> always great to have you with us. we will focus on tariffs and specifically the potential trade dispute with china. we talked about tim cook saying these terms were attacked. as he talked, we learned that mnuchin is talking about talking with his chinese counterpart. we also found out the tariffs the u.s. is thinking about an additional 200 billion. maybe 25%. instead of 10%. the chinese government was quick to respond. this is what they said. measures totakes

further escalate the situation, we will surely take countermeasures to uphold our legitimate rights and interests. we welcome from hong kong, chief asia economics court -- correspondent. let's start with you. there was not much hesitation. let's be frank. how worried are the chinese about this phenomenon? how worried are they about the potential effect of their growth? are nervous.ey weston i kumal we had an interesting statement from the public euro to the effect that the authorities are ready and willing to go to take whatever steps are required to keep the economy on track. we have had all kinds of tinkering and tweaking in recent weeks among the fiscal and monetary authorities to ensure there is enough credit going to the economy and to ensure that they are talking up the economy. they feel that there is a potential hit coming down the road from this trade war with china. that is why we had the foreign minister so stress this

afternoon accusing the u.s. of blackmail. interestingly, for all their rhetoric, they also said they believe in negotiation. they believe there is a solution if both sides -- both sides meet with equal respect. they are still willing to talk and come to the table. >> from president trump point of view, does he have them where he wants them? our colleague has made some objections about what could happen here. and what he has said is if u.s. and china just stick to this round of tariffs, that is $50 billion of imports. the drag could be .2 percentage points of growth and 2019. if things escalate that will be bigger cutting as much as a half a percentage point from growth. a half a percentage point. the gdp is a big number. made it clear that it wants to orchestrate its growth process. so that it continues to support the huge population in china. a worrying thing for

china. it can't be seen to be worried -- week and kowtowing to donald trump. there is this dance going on between trump and his base and china and its economic imperatives. >> there seems to be a trump approach here, we saw with the juncker overad mr. and said we can make a deal here. we are hearing about nafta, is this basically the approach? >> yes. i think that is emerging as a kind of process. one thing we have to be clear on is those deals have not been done yet. there has not been an agreement on tariffs. on autos with mexico. there has certainly not been an agreement account. there is still a lot to play out here. chinese. how hopeful are they of getting these talks going again? i think they have been

consistent in terms of their official commentaries throughout. they are willing to come to the table. they are willing to put offers on the table and buy more goods. the more difficult side is on the structural story to the concerns of u.s. has around china's ambition to create a very high-tech economy. with a little bit of paydays. in doing so, that is the red line for china. >> thank you so much. i just told you yesterday in the hall, we have not had --. boom. global credit strategy research joining us on the fed. corporate cap -- corporate credit. this is bloomberg. ♪ retail.

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european stocks lower. it is not the materials, it is the utilities. despite the fact there getting hit earlier in the market. often over 1% as sterling climbs its way higher. other asset classes, be watching for a dollar-yen. pre-much flat. have the yield over in the 10 year. 18 month high. yen is actually flat. the fedsee more into today. 2/10 spread a little bit deeper. copper getting hit to an half percent. trade war. >> some numbers out. their first net operating revenue. first-quarter net, is $8.13 billion. we have had a .08. they met their expectations. beat 3.3 billion. this was the 3 billion projected. a estimate ferns per share. they were projected to lose about a penny. the story is they are trying to do the deal with t-mobile to get more scale.

to get it a larger competitor for at&t. and verizon. you can see now the premarket is unchanged. sprint numbers coming out. a close look at that after the bell today. we really look to the earnings to find out where the debt merger is. let's get an update on what is making headlines. good morning. u.s. and mexico are close to resulting one of the biggest sticking point in the rewriting of the north american free trade agreement. learned the two countries are in the final stages of negotiating a deal for cars sold. mexico's economy minister will come to washington tomorrow. talks of u.s. trade representative. mayident trump says china be getting in the way when it comes to u.s. relations with north korea. florida, the presidents of the u.s. is doing very well with north korea. he has a good relationship with kim jong-un. as the chinese interference, he said we are going to figure that

one out before you can even think about it. it willis signaling take a tougher stance toward investments from china. merkel's time, angela government has been vetoed a possible chinese takeover of a german company. bloomberg has learned that michael's cabinet turned down a company that want to do by german machine tool manufacturer. earlier review said there were national security concerns. global news 24 hours a day. than 2700 more journalists and analysts. in more than 100 and 20 countries. this is bloomberg. much.nks so this afternoon, the results of the two days of meetings with no news conference scheduled and no one expecting any big changes to be announced. one of the things they have been talking about is the slope of the yield curve. several members have already been talking about it in public appearances. reversing the balance sheet. rates could go up.

10 year rates could go up and a healthy environment. >> there is a flattening of the yield curve. somewhat reflects peoples future wheref the rates and where rates will be. i don't think that is indicated. we will see an end -- in version of the yield curve. sometime this year. i don't believe it means we are going into a recession. it may not be a normal time. i do think it warrants careful attention. it does not show a lot of confidence in the long-term. when you don't see long-term rates starting to creep up. when short-term rates are being forced up by changes in monetary policy. >> the flattening of the yield curve has not been good for fixed income portfolio investors. unless they have been very careful and cautious. trading around looking for opportunities in credits and someone. it will be increasingly difficult for fixed income investors to do well. who iselcome brad

barclays global head of credit strategy. with us from boston is lee. you to question we always ask. is it going to invert and should we care? that, iecond part of have some strong views. the is and when. it usually does at the end of the cycle. more of a question of when. should we care. i heard some of the quotes around the performance. and just in lyon off, if we look thatedit, you have seen the long end of credit, where rates have not moved nearly as much as the front end, is underperformed a bit. from the spreads standpoint. that has made a tough year for credit with a duration is a lot longer than the rest of the fixed income. if you believe that we will continue to flatten and stay close to 3% range, there probably is some value out of the curve. the last point, when we look at

banks and say when you get to a flat yield curve, how soon does that tell us things go pear-shaped and credit. we find when you look at the yield versus curve, it takes about three years to spike after you get to a flat yield curve. >> i will put up a chart. the pattern on the 210 spread. it is pretty dramatic how far down it has gone. bet we hear is we should not too concerned because the long end of the curve has been artificially suppressed by tengion plan and because overseas, central banks have negative rates. the bank of japan just changed things. might that change the phenomena? yes. the move by the boj certainly put a little bit of a push on the 10 year yields in the u.s.. let's look at the flattening yield curve compared with other ones. there is a crucial difference.

go back to the mid-1980's. there is a crucial difference. at the real fund rate, every time we plan previously before, the 91 recession, the 01 recession. the financial crisis. the fund rate was positive by about 300 basis points. the central bank with distributed money policies, the yield curve reflected the fact that points to recession. stillime, the rate is negative. we don't have restricted monetary policy. this is all about low rates in the rest of the world. the size of the balance sheet. 15.5 trillion dollars in the g3 compared with 3.5 previously. that is a big buyer in the market. if we see the yields rise elsewhere, we can see 10 year yield here rise. you have to think of these

spreads. you look at the spread of treasury over funds. to treasuryard yields to go higher. when you have got that sort of spread. you also have the central bank. ethical's in the u.s.. the treasury refunding. we have a question. to treasury yields and the year higher or lower than 3% when you have the technical factors? you also have the big macro picture. i think we end the year below 3%. that is predicated on the view equities and risky assets in general struggle over the second half of the year because the headwinds from tightening. you get a safe haven in the long end in treasury. below 3%. we end the year not far from where we are now. maybe a bit lower. 280 to 290. equities are slow -- are lower from here. that predicates the safe haven. >> translate this all into what

it means for your world. corporate credit. i have a charge on the terminal that shows high-yield versus investment. the outperformance of triple c's yielding to 8.39%. how do you wrap this all into your view on credit? >> the triple c has been really impressive. to be fair, there is a scarcity value in something. triple c are the lowest proportion of the high-yield index. a positive thing in terms of we have not gone to the extremes of re-leveraging and those kinds of things. there is some scarcity value. people grabbing for yields -- yield. they don't feel cheap right now. high-yield's, we think doubled these are probably the place to be. they do suffer when rates go higher because there is a little bit of a scare. we end at 290, 10 year. they perform pretty nicely.

general yield is a little compressed to investment grade right now. i foundhing interesting, we are putting up a graph, the difference in performance of m and a. on whether someone borrow to do the deal or used stock to do the deal. it is quite stark if you look at it. the extension to which are in credit is not supporting very well. you have done better if you use stock. why is that? happened is that when you think about some of these big megadeals, we have had year after year of record supplied investment grade. this year, we are down high single digits percentage. last, an increase from year. in terms of the size of the market. the investment grade market cap growing and growing. over time, you have not had the same demands. as a result, things have struggled a bit in our market in terms of these deals after the come to market. very cheap financing. they have struggled to some

degree. you have seen some of these barely holding on to their triple b ratings. as the integration has worked quite a plan. arethings that are relevant health care and farmer states. the consumer space. >> what you want of doing with investment grade? you now have inventory dealers are the network for investment grade network for the first time ever. issue tothat technical be bullish. on the nonpolar side, triple b's make of the big portion of investment right now. if we see the cycle turn that is a huge amount of potential. how do you play that? >> when the market really does turn, it will definitely be painful for investment grade. is not just that they are a greater portion, it is they have very long duration. for a lot of the fundingturn, ie yields, even if the spread moves are not that huge, the loss in terms of price and returns are going to

be ready painful. we don't feel like that is the answer in the second half of 2018. we feel investment-grade debt tightening from here on out. it has been on a great run. for about the last month. we are comfortable with triple b's. if we look from now to the next six months, there will be a time where you are going to want to cut back on the risk. we have got time until that. to be fair, the companies, if and when they do get downgraded, these are still companies that are going to produce robust cash flows at a double b. these are not things that are really falling knives. there will be fallen angels. that is your sentence. >> thanks so much. to us fromor coming state street. for more, you want to stay with bloomberg television radio. special coverage when the fed decides at 2:00 p.m. eastern stat -- eastern time. coming up, green lights rough quarter has -- re-syncing tesla.

we discuss the fund of 19% decline next in wall street beat. live from new york, this is bloomberg. ♪ oomberg. ♪

>> bloomberg daybreak: europe here in the hewlett packard green room. coming up, we speak to mike jack's. we will discuss the earning support. this is bloomberg. >> we turn to wall street beat. first up, the debt trading disappoint. how the trading conditions are impacting the bank returns. drive green light red. really tightened. greenlight capital sliding 19%

this year. charts stall out. also returns the tesla keys. finally, property market cracks appear from new york to sydney as the markets may be at a tipping point. >> joining us is lisa. a story about -- the cfo. talk to us and they do do so well with fixed income recurrences. they did all right in equities. ago, theed to a year context is less favorable. for ci be. and particularly on fake and in europe. nevertheless, the bank keeps on continuing is transformation plan. wrapping up to 2020. and continuing its sustainable finance as well. >> the atmosphere is not quite as favorable. >> put this in the context of the negative deposit rates that we have seen in europe. yields have been low. it is hard to make money as a bank trading debt with yields that are negative in many cases. that is number one. number two, you have seen a

slowdown in european high-yield bond sales. a sort of headwind to their investment banking. division. they have a u.s. ownership in the u.s. bank. they have a consumer lending side which has benefited from these low rates. this is partly a european story. this is partly also where they are in the whole european geography. >> also, how much of that is craddick and how much of that is market share being stolen from u.s. banks. >> that is basically what people were feeling. the execution was there. we saw it equities. the shares initially rise. european banks have been suffering in this backdrop. they are weathering the storm. do they plan on expanding? no. decidedly. this is where they are. they're going to stay. where he is not staying is tesla. a really bad performance of the second quarter. the headline is he said his

results for the second quarter were far worse than we could have imagined. it has been a bull market to boot. it has been the bazaar thing where he owned the model threes. also shorting. >> i thought the same thing. >> did he short the stock first? is he wasan say taking some jazz at -- jabs at elon musk for being a rhetoric. why would he come out and talk about how crappy the car is? to say theile dashboard is not perfect. i'm giving my keys back. when the short has been the second biggest loser in the fund that has been plunging. it is not exactly a fight without some kind of look at elon musk. >> the short short. maybe it was a hedge.

maybe the car is hedged against his position. >> there you go. brilliant. >> there was a lot of frustration built into this look, with david saying we have gone everything wrong. we are sticking with it. take that for what you will. >> today is an important day. a tesla earnings call. the last one was eventual. elon musk went after this. a fellow analyst. he said next, boring. bonehead questions are not cool. next. these questions are so dry they are killing me. people are concerned about volatility. they should not by our stocks. i'm not going to convince you to buy our stocks. do not buy it if volatility is scary. don't say that. don't say that don't own our stocks. avoid that the sentence.

>> why are you doing the earning call if you don't want us to buy your stocks? >> shares fell out of bed. people did not take it well. you have to wonder what it will be today. >> let's go to our favorite subject. real estate. how much does it cost to live in london? >> bloomberg broke the story about cracks forming among a number of hot property markets. they talk about london, beijing, new york city. australia. values fell the most since seven years. what is this? is this a sign of an impending housing bubble and crash? or just weakening in markets that have been hot. this in theput context. london, brexit hanging on over the heads. >> london has to do with brexit. >> property values have gotten ahead of themselves before that. they were incredibly hot before

that. put that into this context. maybe this is some kind of normalization of prices. beijing. we talked a lot about the housing market in china. sydney. there has been a lot of development. luxury high-rises. there is a question, is this a softening? that is healthy, or is it a start of something bigger? >> a slight correction rather than a downturn. >> different for different places. >> great to have you with us. lisa. talking about you. up,ng more on tesla coming up. the company said to be weighing chinese funding for $5 billion factor near shanghai. >> tech out tv . all our charts, graphics. check it out. this is bloomberg. ♪

>> tesla turns to china. to becomeer is set the fastest-growing auto market to partially fund the $5 billion of the building of its first factory there. near shanghai. we welcome craig trudell who is bloomberg's u.s. autos coverage. thanks for being with us. we heard they will build a plan over there. i had not heard they will ask for the chinese partially funded. -- fund it. about a deal with the shanghai government. that was a huge missing piece of that announcement a few weeks ago. factory was the most recent big factory that tesla has built. they talked about the costing them $5 billion. this is in the range of what the cost of that plant was. that is a huge facility. musk recently talked about how walking that is a good exercise.

it takes couple of hours. this is on that scale. there going tose need some help with financing for it. they ended the first quarter with $2.7 billion in cash. they are probably going to burn through a few hundred million again in the second quarter. we will find out later today the specifics on that. they are not in a position where they can be throwing money around on new facilities. on, itn everything going is awfully tempting to say maybe this is a response in part to that. china was saying they will be targeting electric vehicles. how much of this is really elon musk saying let's get together almost against president trump? >> i think it is very likely to be a case where this is coincidence. tesla has been in talks to do this for such a long time. they have talked about going

back a year ago trying to get a factory built in china. there is an imperative that they do that. the writing on the wall. to sayly, it is fair that there was an added urgency to this because of the trade environment. and the fact that they are just in the precarious position. being a complete -- completely an importer. so much of the rest of the auto industry has already localize production in china to get around the tariffs. it is a country with high barriers. >> how does this fit into china's overall policy toward electric vehicles? it might say this is a way of getting more electric vehicles faster. hand, it may be saying why we backing u.s. company rather than chinese companies. one of the big things that china give up was allowing tesla to do this without a joint venture partner. part of the policy for so long. i think they want to generate a

tension and excitement about electric vehicles. maybe the tesla brand will rub off on some of the local players and help spur interests. in the space which is sorely needed. theee that every day with look of the skies in beijing and shanghai. future that they >> need to head in the direction too. >>thank you so very much. >> they need all they can get. at the end of the day. coming up, we will talk through the second quarter results with mike ask and. get his take on tariffs and where that leaves his company. this is bloomberg. ♪ two, down and back up.

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blackmail. president trump looks into higher tariffs. china says we will talk but you have to stop the pressure. sales, the company beat earnings estimates. can it stem the tech route? curve, the doj and politics. >> welcome. i know you need a new iphone. did earnings make you feel different? i wonder if it is going to cannibalize this sales of those that come out in the fourth quarter. maybe i need to hedge my bets and see if they lower the price. i am attached to my tiny phone. take a look at the s&p, flat on the day.

will apple help the sentiments in the market? we will have low volatility. not a lot of liquidity. pmis.d mushy the conversation in the market, high, crude off 1%. do not like trade war sentences were commodities,. . david: they are not going to end any time soon. time now for morning brief. under a half hour from now the u.s. treasury announcing its borrowing plans for the quarter. have i.s. am manufacturing data ahead of the rate decision out at 2:00 this afternoon. after the bell we get some earnings.

they all posted earnings after the bell. alix: tim cook is calling the ,est third quarter ever analysts feeling good about the company. >> the numbers were just fine. the services results, which suggests wearables are doing well, the platform is broadening and you have multiple growth drivers. >> if you look at where apple needs to be stronger, growth in the right places. >> we were full penetration with the top of each of those cycles are. taking a look at the top of this cycle when we expect new iphone seeing 76, we are million. flesh it was 77 million. we are at -- last year it was 77 million.

mostly on the basis of the strong sales of the top line, the iphone x. many said it was too expensive. it seems to be picking up. >> the lesson for apple is if you have a smart phone with more than $1000 selling price you can sell fewer units and their -- and bear the financial fruits. >> they are beating everyone. joining us now, brian and basically he covers apple. from aversation turning super cycle to one where they can sell less phones at higher prices. .alk to us about that >> apple has a huge installed

base. one of the analysts was a loading -- alluding to it. they want the steady business selling devices but the services and the accessories that go with that platform are where the growth is. if you look deeply into quarterly results, services were up 30%. the other products category that includes the air pods, the homepod, that was up 30%. 25% of revenue. you have a transition from iphone really dominating sales to dominating less and you have this other category including services and other products coming up strong. david: we are putting up the .verage selling price well over $700. can that keep growing?

arehe year on year comps going to get tough than into next year. i don't think they are going to move the whole product line of. david: services helped them a little bit. it is growing fast. as a percentage of revenue it is modest. quite still between 15-20% in any given quarter. a third of app store sales is gains. -- games. games and other apps. david: explain services. is that $1000 more? is that a significant component? >> apple music is a big driver. icloud is a big driver. is a third of the nut. you have smaller contributors like apple pay and the health care initiatives.

when you think services, think app store, and to a lesser degree, icloud. alix: i am using apple pay at regular stores. david: do you like it? alix: yeah. it saves me when i forget my wallet. that all thedo time. i am scared. is -- you just put it near the credit card stand. david: they thought that was more secure than other alternatives. put dignity it in the chip reader. apple is front and center. apple is less thrill and more financial guile. that is fine. apple doesn't stay late on the weekends anymore. the narrative was a good report from apple can help alleviate

the pressure on tech. if apple is sitting down with a chamomile tea at night. david: apple sounds like a millennial that is older. tech sector as a whole, 16% revenues year-over-year, apple is on top of those numbers. we have seen tech over perform. the technology sector, do we add here? have not do we think we hit a soft patch in tech. >> given the experience we have just had it is fine to have substantial growth. expectation is for double what you had. it goes back to the chamomile tea. what happens to the companies out clubbing at night?

sales decelerate. earnings are 20-25%. in an environment that we might be next year where we have annualized thing at nine-8% those growers have a chance to stand out more. the ones that stay out late at night should stand -- stay out more. alix: people are paying more up for hedging against tech, come etf, the skew is picked up. not the highs we saw in february. we have seen rotation. is there a way to get defensive intact? still risk on but we talked about is tech a source of defensive protection in a

portfolio? we don't think it is the same category but if you are comparing to energy, industrials that have had good quarters, we think it may straddle that a little bit. david: this is a level -- little point. who cares who gets to the trillion dollars first? this is a projection what has happened, the white is apple. i raise this in part because there is such different companies. amazon are expanding to something new. they have everything. apple has focused on consumer advice. which is the better approach? is apple more vulnerable?

>> diversification is going to be an inherent strength. having a diversified business plan will make more sense. the one thing about both of these companies getting as big as they are, you have seen the percentage of the s&p 500 market cap has started to pick up. that is something we get questions about. david: thank you both for being with us today. autonation second quarter results, live from new york, this is bloomberg. ♪

>> this is bloomberg daybreak. itstanic effort to meet profit goal. tariffs could hurt the main profit centers to audi and porsche. tesla is going to ramp up production in the world's fastest-growing auto market. plansectric car company to spend $5 billion building a factory in china. they may like to china for part of the funding. chipotle has been here before. shares of the mexican restaurant chain closed down after reported getting sick in ohio. the restaurant was closed for cleaning. has fallenock

because of foodborne illnesses. alix: you well and up having -- it was free guacamole day. then, it crashed their servers. chipotle tweeting freak walk on national guacamole day. they said i'm sorry. i'm sorry. i'm sorry. bummer. david: you wonder how sorry they are. their eggs -- their idea was to get people to use their app. isn't that good news? alix: hopefully they worked out the bugs with the app. maybe we will see the fruit of this. get outbut, you can't from underneath this.

you just don't know how the markets are going to feel. >> you wonder how they have this. alix: this is a man who doesn't like avocados. i don't understand. news is i didn't help crash the server. alix: that is entirely true. from avocados to cars. we want to get a read. the biggest car dealer is autonation. jackson.ark welcome back. good to have you here. >> good morning. >> take us through your earnings. you basically beat on earnings per share. the comparable sales number was better than what analysts expected. >> we had an excellent quarter.

overall, 5.4enue billion, up from a year ago. a strong performance where we increase volume by 5% and increase profits. the powerful combination, we increased by 22%. that is a reflection of one year of moving to one price consumers love. service business was strong. of 10% year over year. 7%, up byay was up 4%. very small quarter for the company. one of the things we report on, it seems to have gone

away for the moment. we still have issues from china. is your business one that could -- that would reflect well on you. >> there is no one in the automobile industry that wants tariffs on motor vehicles. first the price per unit is high. it has a big impact. it would be inflationary. massive price increases. it would be disruptive to the industry and push the u.s. economy into a recession. very encouraging to see the discussions with the european union are going to try to go down to finding solutions rather in posingsing --

these disruptive tariffs. and brinksmanship. onleads to lower tariffs vehicles going back-and-forth between the u.s. and europe. everyone would welcome that and consider it a major step forward. it is not over. we have to see how negotiations go. the department of commerce continues their investigation into whether the auto industry is a national security issue and they have the authority to impose tariffs. i think that is a stretch. they will probably find some way to get to that conclusion. the u.s. can take yes for an answer. europe has offered tariff free when it comes to vehicles going back-and-forth. administration doesn't like to talk about it. pickup trucks have a high tariff coming into the united states. the cash cow of the american automobile industry is protected

by tariffs. we will see where it goes. alix: the eco-environment regardless of tariffs, the private employees, we have the jobs number. how hard is it to find workers right now? >> you have a low unemployment rate. you have workers who left the marketplace during the great recession. the prospects are good enough to go into the workforce and look for work. that is a healthy sign that says you can grow the u.s. economy without inflation since you are adding workers.

>> on the technical side it is difficult. these are high-paying jobs. over $100,000 a year. expertise.certain the education system in the united states and the culture of the united states is not putting these jobs out there is something someone should aspire to. we take it into our own hands. university.nation we are training our own technicians. it is a challenge. david: we appreciate your being with us. ceo.ation share of the atlanta fed. i'm cars to health care. health care insurance is one of the most important issues across the country. continuing concern about availability and price for the federal government is announcing a program to help some get more

affordable health insurance. césar.ome alex >> great to be with you again. david: tell us what your plan is. tell us what you are adopting today. act isaffordable care not working for so many people. premiums doubling. with the president has been committed to is getting more options that are available to people. we are announcing his the approval of short-term limited duration plans, individually underwritten, an individual does apply for them. they can cover various conditions, price to whatever is being covered. these were available throughout the entirety of the obama administration up to 12 months. obama end of the administration they allowed only

three months coverage because they wanted to force people out of these cheaper options and to to shovecare exchanges people in there. we are restoring these plans to be available up to 12 months and renewable if the insurer an individual agree for up to three years. these can be 50 to 80% cheaper than obamacare exchange plans. this is an important new option for millions. david: it is difficult to argue with cheaper. you get what you pay for. part of the reason it is cheaper is because it covers less things. >> they will be cheaper based on individual underwriting in the negotiations between the individual and the plan. they may not be right for everybody. these are right for people who are in transition between jobs, the gig economy worker who doesn't have employer insurance,

the person with three part-time jobs, the kid headed from college to their first job and has a gap. maybe the person in rural america with access to one plan but it is an affordable or doesn't have the network they need. people should go in with their eyes open. controlsore stringent than even president obama had. those arebe clear disclosed to the person they are not getting coverage for as many things as they would under an affordable care act approved plan, is that correct? >> that is part of the disclosure. they do not qualify as essential health benefits. people should go in with their eyes open. the days of telling people the insurance they have to have want to have are over. they need to choose, they need to be in the driver seat.

individuals can make the right choices rather than just bureaucrats telling them. david: fair enough. to be fair midway insurance works is you want people with higher risks put together with lower wrists. -- lower risks. we have a full complement of people on the plan. might this not lead to people who have less risk, they can afford less coverage getting separated out and making the price go up for the people with more risks. >> that was the flaw of was designed over subsidize at the expense of others. those people being asked to foot the bill so extensively flood the market. 87 percent of the

people in those exchange markets are going to be subsidized for us. we are paying for a large portion of it. the people have largely flood the market because they find it unaffordable. they are either uninsured or having to find other vehicles. we are providing additional options for them. these are for the forgotten men and women who have been left out by the false promise of the affordable care act, not having access to different plans, not having access to the doctors they wanted. the peopleou believe who sign up for this new plan are people who will not have had any coverage at all coming into it as opposed to people who have been in more expensive plans under the affordable care act saying i can get a cheaper plane with less coverage, that is smarter for me?

>> very few people are going to give up free insurance and decide to choose to pay for their own with individual underwriting under these plans. these plans are going to be most attractive to those people i mentioned in transition who don't have access to affordable care, priced out of the obamacare markets. that is where the population is going to come through. go in with their eyes open. david: fair enough. it is good to have you. up, the best first-half profit since 2014. we will speak with the ceo, next.

>> this is bloomberg daybreak. here is where we stand in the first day of august. nasdaq futures up by 20 points. theapple help reinvent

story? european stock softer. it was materials but it is utilities leading the way lower. sterling moving into positive territory. the interesting development, despite an 18nged month high. commodities continued to get pummeled on the trade war circumstances. , salesasury refunding three months.ext what pressure will we see? >> the first-half earnings today, the ceo of rio tinto. >> the ceo of rio tinto joining us now. great to catch up with you. out of the executives i speak to you have a unique insight.

building up the multibillion-dollar trade, people trying to understand what is going on. i'm wondering what your insight is. a few words about the results today. first half our results. including $2.2 billion, the company.n the entire , the outlook is pretty positive. see, we are seeing copper and so forth. it is clear they are coming down as forecast. at the same time you saw a few weeks ago the chinese government deciding to put stimulus into the system.

when i look at the other books , i do not have any concerns whatsoever. the chinese situation is good. experience, i go three or four times a year. it was clear in his discussion restructuring of this industry is here to stay. china would be considered to buy a high-quality product. >> do you see them hitting an inflection point where they , pulling awayd from deleveraging? happen, i think it could . absolutely. optimistic the most people.

i have been saying it on this program in the past. i'm not concerned. the economy is still growing. , it is a massive number. china is not as great as it used to be. >> rio tinto in the eye of the storm or you are the second largest aluminum producer outside of china. in acanada that puts you point of tension. i don't see that in the numbers. do you have confidence it will stay that way? strongs clear we are layers in aluminum. ,he bulk of aluminum we produce we represent one third of all of consumers.m

there have been no issues whatsoever. in relation to the trade and tariffs. works, theypricing vary by customer. that is the first aspect. we need to step back. the best interest is to have .ccess to a source of aluminum some people would say access to a green source of aluminum. , if you combine this with two things, they are hydro-based. a second element , and think about apple technology, pretty soon they be the greenest of the greenest across the industry. barry green.

today, to answer your questions, no issues. >> it doesn't matter what i throw at you. you seem to be optimistic. when i woke up this morning and came into the office and saw london trading, the stock was down. it is down 4%. what is your read on what is going on? the mining industry was down. that is one aspect. let's step back. i'm not driving this company on the back of a share price in london or new york. $7.2is a company -- billion including the highest dividend in the history of the country. what is important, there is uncertainty in the marketplace.

we have a resilient business case on the back of the criteria. deliver super returns long-term. return, which was just $10 billion, those are big ticket items. >> i have two minutes. the increase in cost. cost inflation is looking like a problem. why do i see it in rio? >> what you see is two things. inflation was coming back fast. we acknowledge it as early as november and december. we have taken actions early on. is theu see today

ability to maintain margins. 44% on theres to full-year basis. $9.2 billion. >> the most antagonizing question until last. you have promised $7 billion to investors. you have said there is more to come. there is no real sign of growth from this company. critics would say this mining company has become a utility. it has become boring. why is that a good thing? .> we have to be clear we are committed to the superior return. the last couple of years have been good. $10 billion last year.

time, growth has to be an element of our strategy. don't, we have attractive growth options. investments,he think about the investments in both sides we are doing in copper and gold. what is important for us is to focus on growth of high quality. doview is it is better to projects very well, to pursue creatingthings -- value for shareholders. the ceo of rio tinto great to

catch up with you. back to you. alix: treasury refunding announcement, dollar dropping, yields moving higher. coming on the backend, 30 year yield is up. the treasury increases its selling of treasuries. leaning more heavily on the five-year auction as well. mckee, joining us. despite in yields, dollar lower. walk us through what we learned. >> for the markets, how much and for theupply, economy how much additional debt does this add up to? they are bang on what analysts expected. they sold 73 billion in the

second quarter. we are going to see whether the market can absorb them. .here is nervousness all of these numbers are going to go up a billion dollars a month over the current quarter. the issue of the debt is a big one. all this adds up to, the second-biggest borrowing since the financial crisis where we had to borrow to finance government programs. issue $769g to billion in the second half of the year. that is starting to add up. let me take you through a couple of charts. the deficit itself is rising. the total u.s. marketable debt has been rising over the last year in order to pay for that. what does that mean? interest rates rising as the fed

raises rates. the government is having to pay more. not justit is growing because we're spending more, we have to pay more in interest. $100 billion in interest as the fed raises rates. this will have an impact on the economy. >> this is the part we might not like as much as. you get what you pay for. -- we have known for some time how much we need to borrow. >> it is a process. the process is continuing with an adjustment. the strong adp number suggests it will continue to grow. you have the supply coming to market. 3%.10 year threatening

analysts are saying we are going to cross that today. we may hold over it for a strong jobs report on friday. that raises borrowing across the economy for everyone. thank you. that was michael mckee. fed watching for the decision coming up at 2:00 eastern time. here withchandra first word news. >> trade can be resolved through negotiation and blackmail won't work or the u.s. wants to ratchet up pressure on china to resume trade talks. bloomberg has learned the trip administration may double planned tariffs on chinese imports. they may be waiting for the u.s. itmake -- take action before reveals its next move.

learned twog is countries are in the final stages of negotiating a deal on rules for cars sold under nafta. mexico's economy minister will come for u.s. trade or presented to talks. and theresa may cutting her vacation short to gain support for her brexit plan. meet manual macron and the south of france and emphasize the risk of the u.k. leaving without a deal. eu projected a key part of mays plan. global news on-air and on twitter powered by 2700 journalists and analysts at 120 countries. this is bloomberg. david: coming up, telecom earnings are in focus. towill have the man here explain it to us. this is bloomberg. ♪

>> this is bloomberg daybreak. coming up later on bloomberg markets, stephen joyce, this is a bloomberg. now to your bloomberg business flash. the report google is preparing oflaunch a censored version its search engine for china. the search app woodblock terms and results that beijing considers sensitive. google is largely blocked in china. the 12 straight quarter of growth in phone subscribers, the

is trying to complete its $26 billion merger with t-mobile. investors are expected to get an update on the earnings call. bloomberg business flash. david: 5g. we seem to hear about it every time we turn around. telecom plans to build it out. it is big. >> 5g. 5g is an imperative. the nation's leadership is at stake. we follow behind to china. >> we have driven the 5g ecosystem pushing the industry to adopt the next generation several years ahead of original expectations. i believe the impact will be bigger than any previous generation.

within the not too distant future, there is a big demand. we see a lot of interest from the industry. faster. 100 times it will be able to really take data from car to car, and card to infrastructure. this will help industry. >> the amount of speed you can have versus non-5g is a big opportunity. you're going to have a network in the world wireless network that will allow you to do services. bloom.we welcome herbert welcome. it is big. tell us how?

most say it is beggar -- better phone service. >> we see increased broadband speed. what is exciting, not only are , where we seeter consumers more finding it difficult to distinguish between whether this will be fixed, versus what you experience on will noile devise, it longer matter as much whether we have a fixed or wireless connection. all sorts of industry dynamics. the part that is often they'reed, because willing to inject capabilities between when the time talks to the network or pinpointing our

actual location with such theter accuracy that multitude of these capabilities things they think about today to create exciting things. >> how much is it going to cost me, to make that conversion over? , the moref the people the naysayers and pessimists look at it. this will cost a whole bunch of money. we are only getting a bit more speed. what they are missing, when you did deep, how these 5g networks going to be built. networksbuild these that they are having today. >> why do we hear things like we heard?

we have to put t-mobile together with sprint? >> a big part of that is spectrum assets. need spectrum you assets that any individual character hardly has. in the lower bands were this builds the 5g networks, it would have the spectrum map that would allow you to break out the pace. telecom company go public. they needed the money to build out their five g network. who is a winner, who is a loser? >> you can't pick a particular name. , those who play on

the side will be those winning this game. customers will appreciate the latest network and the best product. you will see good returns versus waiting. david: there is a first mover advantage. >> no question. there is a first mover advantage. the economics in the telecom markets are such that if you hold back, you may save capital, but you have a significant price to pay later down the road. >> coming up, tesla reporting after the bill. the analysts call has more interest. more on what we are watching, next. this is bloomberg. ♪

>> tesla, given what happened

last time, he gave analysts a tough time. we have to go back in the capital market. we can put up the things he said. book next. bonehead questions are not cool. these questions are so dry, they are killing me. if people are concerned about volatility they should not by our stock. -- buy our stock. alix: i'm interested in his tone. thatl he got fooled after attitude. what investor relations person is going to say yes. i wondered if we will see a mea culpa. >> this man has to buy more money, i think. despite the fact even if the stocks say they were

recovered. >> he is building plans in shanghai. he has these grand plans. >> markets are on the move. the selloff centered in the back in as the curve steepen's. here is the why. $1 million per quarter. what yield will you need to absorb that? david: maybe the congressman can answer that. alix: maybe. market opens with jon ferro. ♪

jonathan: from new york city i'm , jonathan ferro. 30 minutes until the start of trading. this is the countdown to "the open."

the united states said to consider slapping more tariffs on chinese imports. jay powell is planning ahead for gradual hikes. and wall street raising expectations for 2018 from apple. up 1/10ures looking ok, of 1%. euro-dollar treading more water. and we are up for basis points. the united states threatening to more than double the plan to tariffs on chinese imports, china warning the u.s. to stop blackmailing and pressuring it over trade. wall street weighing in on the escalating tensions. >> tengion will continue to escalate, because so far there has not been a market reaction. >> the trend toward protectionism did not begin on january 20.