david: jamie dimon says we are heading to 5% rates and the 10 year should already be at 4% even as it struggles to get above three. saudi arabia suspends trade and investment with canada after canada criticizes them for jailing women's rights advocates. war of attrition. china is prepared for extended battle with the united states over trade. trump claims tariffs are working big time. i am here with julie hyman. julie: good to be here. at what is going on with the markets this morning. s&p futures, not much has tried just has changed. volume.o see low we see there are bigger moves in the british pound.

we have britain's international saying a fallout is more likely. i want to mention breaking news. the top ofhange at pepsi. the long time ceo will be stepping down. be followed by --. the company has been dealing with some challenges, notably, a decline in soda consumption. david: she has been an icon as a ceo. she has been outspoken and people have followed her.

people are moving away from sugared beverages and they have to deal with that. she had a different hand to play because of frito-lay. they have been very successful. frito-lay makes up about a quarter of the company's revenue. hassnack business flourished under her leadership. she is the first ceo of pepsi, of first foreign-born ceo pepsi. with her departure, we were trying to do the count of the female ceos in the s&p 500. we count about 26. this would take it to 25. david: one of the things, they

that saidan attack let's separate the beverages from the snacks. >> she has been trying to talked a lote, has publicly about being a woman in the workforce. leader as a a person and a professional. she is going to spend more time getting women into leadership roles. what about the performance of the company under her leadership. stock is up about 80% or so. did asgs what coca-cola

well as a lot of the consumer staples indexes that she would be compared to. when you think about the fight with nelson peltz, there were concerns she wasn't as inquisitive as they wanted her to be. she has a stellar track record. she leaves the company in a place that is stable. she said we would be -- in the online's. >> she is saying it is the right time who is going to be my successor and make a call man strategic and systematic transition of power.

david: some transitions seem to be pretty rocky. this seems to have been orchestrated. she said it is like a relay race. >> pepsi has created an atmosphere for an orderly transition. who is going to lead this company to the next step and it looks like they have that in line. julie: jamie dimon is doubling down on higher rates. it is a higher probability than most people think. terminal, itt my

is having trouble holding 3%. he also isn't talking about the timeframe here. what do you make of this? >> he is a smart guy, but he needs to talk to his bond traders. a time you come close to it, you see buyers come in, which pushes the yield down. what is this timeframe getting to four or 5%. you have a market that does not seem to be ready to go there. david: it is not clear to me what he is really seeing. julie: we have seen the fed say

we are not seeing the wage growth we would have expected. to your point, it is unclear to me in what time frame he is calling for this 5%. the other thing to note is we continue to see investors pour money in. part of that is a democratic shift we are seeing. baby boomers are retiring. we see demand for bonds as well. about why these yields are not pushing through that 3%. one saudi arabia made a dramatic announcement to suspend all trade and investment with canada, they said they should bring it back from canada because kennedy has expressed display with a canadian citizen who is a women's rights activist being imprisoned in saudi arabia.

>> they have been trying to open up to other investors. it felt, like when you were on the field, once someone criticizes you and you walk off. be expecting more people to ask them questions and theire to articulate response. we don't know the details of this arrest and the process they planned going forward. >> they have been doing more marketing of the kingdom. had more conferences. erik schatzker was there for a conference six months ago. viewed in the market? >> it is concerning they would do something like this. spat withnto a

germany when germany criticized them and they made flippant comments about how we don't need german weapons. we have to find a balance here. about some of the potential market entrance, this is some of the concern baked into that. david: you can find all of the charts we used and more by goning gtb -- by running gtb on your terminal. on yields.more live from new york, this is bloomberg. ♪

from growth numbers to the increased government 's ceo saysjpmorgan we should not expected to stay that way for long. dimon said you better be ready to prepare for rates 5% or higher. welcome now, david kelly. >> glad to be here. and did not get over three. it wouldrs indicated have. what is suppressing it? there is latent demand from older investors trying to find an income stream in retirement. inflation numbers last week were not bad. saw on the jobs report,

anyone in america can find a job, no one can get a raise. that is holding down wages. warning is reasonable. prepare for the unexpected. we could be in an environment where we are baiting the inflation cash. you take it back 50 years, the average yield over 6%, not just 5%. julie: you did not mention central banks. stuff,n't do unexpected especially if you are talking about the --. how much of a next factor is that in supporting yields? >> i don't think it is much of a

factor. everyone is getting tighter. , we are giving up on 2% going to have to allow the financial system to normalize. britain just raised rates. europe is moving slowly, but it will raise rates next year. they are behind the fed, but moving slowly. they are moving in the same direction, higher rates. david: the blue line at the bottom is where the fed funds rate is now. why is the 2 --- white is the two-year. if the fed continues to hike the weight is going to, we are going to get a flatter yield curve. >> what is wrong with that? the yield curve is a broken barometer of recession. people expect the federal reserve to cut rates.

are hugeentral banks buyers of long-term bonds, there is a story in the yield curve itself sitting in the long end. what does it hurt? you are pushing up income to consumers. you are holding down mortgage rates, stimulating the economy. it is a symptom without a disease. i am not worried. the central bank should not be that worried. folks we talked to are talking about recession in 2019 or 2020. are you looking at other indicators that tell you that is coming? >> we see slowdown. we have 4% growth for q2. that is unsustainable. 3% is unsustainable unless you

see change in the demographic patterns in the united states. unless you see long-term growth in labor force. growth will slow to 2%. you have effects of monetary tightening. goneed something else to wrong to put us into recession. money if we are borrowing as a government at the rate we are, at some point, those things don't come together well. whatever we produce, we will have to consume less. if we live beyond our means -- we will have to live beneath our means at some point in the future. we will gradually be impoverishing ourselves. taxes to finance retirements of people overseas. depressing is a long-term future. how do you make this investec

bow? >> you take a deep breath and realize the dramatic short-term things may not come to pass. you look at valuations. the earnings seasons has been great in the united states. it makes u.s. stocks a fair value. the u.s. slows down, the rest of the world begins to catch up in growth. the normal discount is about 10%, but it is about 10% off. that is cheap. over wage international stocks right now because i don't think people appreciate --. isid: how much of that

overall global growth? >> i am not worried about global growth. outside of that, europe looks fine. japan is going to bounce back in its numbers. the world is moving forward at a steady pace. it has room to grow. it can come down more. ofre is some threat escalation in a trade war, that would be a risk. be prettywth will good. people underestimate the stability and momentum of the global economy. julie: you will stay with us. the ceo of pepsico is stepping down. we will discuss. this is bloomberg. ♪

>> a semiconductor company that makes chips for iphone says that was crippled by a cyber virus. severalreak shut factories as the company ramped up for the new iphone. full operations have resumed. it expects a 2% drop in revenue this quarter. the bet on asia has not paid off. second-quarter revenue missed estimates. hsbc ceo plans to spend $17 billion to grow the presence in asia and improve technology.

antitrust regulators could kill a deal to create the world's largest gas producer. there is a higher likelihood the touirement could push assets beyond an acceptable threshold. david: indra nooyi is stepping down as her seat -- as the ceo of pepsico. she will be preceded by ramon laguarta. with us. for being is this a complete surprise? >> to hear her say it, the minute someone steps into the ceo office, they are already planning secession. it is kind of a surprise, but in the community, people have seen

this coming. veteran is being appointed to take over in the form of her lieutenant. even though pepsi has weathered challenges, it is interesting they seem to be staying the course with disappointment. >> it is worth noting they shifted their performances .oming out of the snacks food is 53% of their revenue. soda has been challenging because of the issues around diet and changing consumer habit. he is coming in at an interesting time. david: she was very accomplished, weathered a lot of storms. it was not a knockout performance completed --

compared to coca-cola. of ceo,the first woman the first woman of color to be ceo. >> i came into the workforce when there were hardly any women in senior executive positions. when i first started working, there were not too many women. was -- it was difficult being a woman in the work force. got men indian immigrant attention because i was often the only colored person in the room. i had to work to prove the color and the gender should not be counted against me. david: that was from last september. she said there are more women in the workforce, but not that many more in the sea suite -- in the c-suite.

raisesdeparture questions about the numbers. we saw this with denise morrison, there has been a steady drip drip. the numbers are not as great as people expect. julie: she said she is going to devote time to promoting women to try to encourage them to seek leadership positions. any kind of organized effort on that front, particularly by the women you just talked about, who stepped down. >> she is open to hearing ideas. she is trying to figure out what her next steps are. she is a role model, mentor, advocate for female leadership.

not quite sure what it looks like him practice, but it is something she wants to continue. she is open to ideas. david: what is the biggest thing on the to do list for ramon laguarta? >> to turn around drinks. carbonated soda, sugar drinks, bring back growth. david: coming up, saudi arabia against canada. we will talk about that next and what it did to the looney. this is bloomberg. ♪ retail.

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

near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. julie: this is bloomberg daybreak. let's take a look at the equities around the globe. s&p futures are little changed. we still have trade talk

percolating and are in the midst of earnings season but it's trailing off. the earth stoxx 600 is trading of 1%. there were disappointing numbers for hsbc but the automakers were doing better. the dax took a-- leg up. not clear exactly what caused the spikes but it is now higher by half of 1%. a different story in china where a selloff extended into a fourth straight session there. the trade tensions are appearing to have more of an effect in relation to some of the action pboc to stabilize chinese currency. we are keeping an eye on the turkish lira and turkish bonds. the turkish lira is falling today. the dollar is trading a little bit higher and the pound is the

lowest versus the dollar in the gentlenths after man in charge of brexit talked about not much optimism that a no deal rights it will not happen. crude oil is rising. with get to the turkish lira. it's moving, falling against the dollar for the six day. we go now to istanbul. talk to us about the movement in the currency and the treasury market in istanbul. been weakening for the sixth day now. also tanking are with the yield on the 10 year. it's trading near a record low. this is due to what has been happening between the turkish and american governments since last week. the u.s. government has imposed

sanctions on to turkish key on the continued detention of an american pastor it leads us to believe that what happened last wednesday may not be just a one off spike in the bilateral relationship. instead, it might be the beginning of further genitive actions from the government. also are other issues threatening ties between the two countries. julie: thank you for joining us from istanbul. david: now to iran, the u.s. is ramping up sanctions on iran. we go now to dubai. thanks for joining us. give us a sense of how this is being received within iran. how much of a threat is this to their economy?

>> as you mentioned, there are a number of sectors that will the impacted by these sanctions. it has to do with gold trading and it targets the auto industry which is dynamic and iran. -- in iran. it targets exports of pistachios . the businesss that from iran has already been, the mood has been darkened for weeks and months ahead of the sanctions. what iranians foresaw is the possibility with a new deal is to have foreign partners, companies coming in and and they want a boost through fresh money and fresh technology and this is now out of reach. that's a feeling that

businessmen and companies have been having. david: thank you so much. still with us is david kelly. talk about geopolitics overall. we talked about iran and turkey and do we want to throw in china? what will affect investors? what's going on between the saudi's and canada and even turkey are really small potatoes in the global economy. those relationships are not that important. what we are seeing is a lot of nationalistic chess moves around the world. equivalentopolitical of tariffs because it gets in the way of trade relationships. trade, theobal stronger the global economy will grow. these conflicts are real issues in all these cases that you would like to see us

working toward a resolution of these issues in a peaceful way rather than just issuing threats -- taking actions tit-for-tat actions. that will slow the global economy. you talked about a slowdown in the u.s. that will bubbly not be recession but is this a big risk to that scenario? >> it is potentially a risk if you go out 12 months from now. there's a good chance we could see a trade war cease-fire because the political pressure on washington from people who are getting hurt by this is intense from consumers who have to pay higher prices at walmart a imported goods and from bunch of manufactures and middlemen who are involved in international trading. we are too integrated to just shut the borders. the political pressure could

lead to a cease-fire but if it does not, that's a threat to the u.s. and the global economy. david: you mentioned china might be slowing down more than we appreciate. that's a big part of global growth because they have generated the overwhelming portion of global profits. is part of china's problem because of the pressure on president -- of president trump? on theirinese depend exports to the united states rather than vice versa. it is worrying people in eastern asia but that does not mean they will capitulate. the xi jinping does not have midterm elections to worry about. smaller imports to the united states but they also own $1 trillion worth of our treasuries. it is vitalegion,

to have a working relationship with china so we cannot just go to an all-out trade war with them because we will get hurt badly as well. just because it's hurting them, yes, it's also hurting us. being disguised by the sugar high of a lot of fiscal stimulus hitting the economy this year and it will fade next year and when it does, we need trade to work around the world. julie: let's take it back to where you put your money. will europe or other parts of the globe have less to lose for all of this trade back-and-forth than the united states question ?ar if you look at europe and japan, they have a massive trade surplus so they are vulnerable. the base case is that we will probably the escalate trade tensions in the long run. it just gets too costly.

tariffs are a bad idea. shakespeare said that mercy is a quality twice blessed and tariffs are twice cursed. it's such a bad idea. that will cause them to whether from political pressure. david: where should we be looking to put money right now? i think geographically, japan is extremely cheap will stop it has had long-term problems but there is a lot of cheap japanese companies. i think europe also has a lot of room to grow. the u.k. is trickier. they have a big current account deficit. probably lessts so china but more other emerging

markets that they have long-term growth prospects. it's all selling at a discount relative to the united states now. you've got these spectacular earnings now but i don't think earnings for the u.s. will be that strong from 2019 on that will be stronger overseas. david: thank you so much for being with us. julie: i want to talk about earnings from tyson foods. the company cut its full-year earnings forecast because of the effect of pork tariffs in particular but is coming out with earnings for the third quarter that eat analyst $1.50 versus $1.38. sales were a little light. islooks like the company forecasting for 2019 a bit above analyst estimates. risingthat seems to be -- raising the shares.

tot shares are down 28% year date. into them andre update you have anything else catches our eye. up, the kushner's strike a deal, signing away 666 fifth avenue for 100 years. this is bloomberg. ♪

>> this is bloomberg daybreak. michael coext hour, hen. this is bloomberg. daimler will make that repowered cars in china with a local partner. there are in talks with beijing electric vehicles for a joint venture. daimler is pushing smart cars. bloomberg has learned that google is in talks with tencent and other chinese companies to offer its cloud services. the talks began earlier this year and google has narrowed its partnership candidates to three companies. one -- are wondering when they will get benefit of the berkshire hathaway shares.

111en buffett is sitting on billion dollars. the strength of the results may make a buy back to expensive. that's your bloomberg business flash. david: we will turn to the wall street beat where we cover three things that wall street is a zing with this morning. first is indra nooyi steps down. she plans to end her 12 year run at pepsi. jim esposito is close to being the goldman ceo. york: we go to our new bureau chief. down.nooyi is stepping we were trying to do the count of female ceos in the s&p 500

because it's dwindling. leftr sure, ursula burns her post recently. as you look around at whose left, the ceo of oracle and mary barro of course and then you of, -- you play this game it's notable. especially at a time when we have more and more on wall street and we talk about this lack of women. david: it's an orderly transition but as these transitions happen, you don't your the names of other candidates. three,e there was two or it's all men that we hear for the most part. >> that's true and it will be interesting to see. it will be interesting to see in all eyes are

on jpmorgan as the next big transition where there are a couple of prominent women in line. there are obvious names that jump into the mix. what's notable about this pepsi transition is the lack of notability. david: no scandal. >> no one woke up and went what/ david: let's go to goldman stacks -- sex. jim esposito, the trading has been the hallmark of goldman but it has not done as well in recent days. that's not his strength. >> 2017 was one of the roughest and ithat business had led to the departure of the two cohead's. the good news for goldman sachs is the illness and this has been tracking a little better for the first two quarters of this year.

to hises really speaks david solomon putting his mark on the bank. he is succeeding lloyd blankfein in october. we saw changes a couple of weeks ago at the management committee level. david solomon increased the number of senior women on the management committee in roles that are real and operational in terms of running the bank. jim esposito is not a woman, to be clear, but it's him putting his mark on the management team. julie: why is he seen as a good choice? >> he is capable and well-regarded within the bank. this is notable because no one is surprised. david: he's one of six people who has been helping run the operations. >> we always hear the debate on are atreet if co-heads

good idea. story turns out not to have been a good idea. jared kushner, his pet project fifth avenue and he will tear it down and build something new. this is an iconic building in new york. avenuewalk past on 5th and there's retail in the bottom and it's notably a nice skyscraper and its memorable. they had big plans for it. at one point, they were talking about demolishing it and doubling it in size. was jared -- this kushner's ambitious product but it did not go -- project but it was not going the way they wanted.

rescuenotable is to the is brookfield. david: they said they will take it for a 99 year list and take over the debt. a notably, they are paying huge portion of the rent in advance. instead of paying it over 99 years. kushner's done exactly needed. what went wrong here? it a function of the industry or mismanagement? >> it's sort of all of the above. it bought it at a high price and got to ambitious with their plans and then they could not manage the finances of it. it will be interesting to see what brookfield does with it. people say it's not easy to renovate this building.

brookfield is one of the least appreciated and most powerful investment firms in the entire world. the ceo is incredibly powerful and influential. david: they have done very well. thank you very much. coming up, the federal trade commission could kill a $42 billion deal that could trade the largest gas producer. we will discuss that coming up. if you have a bloomberg terminal you can watch us online and interact with us directly. this is bloomberg. ♪

julie: the federal trade commission could kill a deal to create the world's largest

industrial gas producer. it once a german company and a proxy to sell more assets before it approves the merger. joining us now is our opinion columnist. this deal was announced two months after the full come deal. the ftc is kind of late to the party here. >> people were not really expecting regulatory push back. this deal was announced in one of the concerns was about an issue with regulators. at this point, people were expecting this to go through and they already announced a number of divestitures and the ftc is saying that will not be enough. they want them to sell more assets. are the economics still attractive in this deal? david: do we have a sense of that? >> it depends how much more the

ftc wants. we don't know but we know they wanted to go beyond the limits that have been set which is about $4.3 billion of assets they were willing to divest. that andg to go beyond it will eat into the synergy number. the synergy number is based on consolidating operations with a german-based company and linde, part of the reason why the deal has apart in 2016, linde members on the strategic advisory board and were concerned about jobs in operation cuts. it's not easy to acquire these european companies and cut costs. though this is not the department of justice, we have seen an activist sort of -- iistration challenging

don't know if there is an uptick but it feels like. >> in this case, you already saw s deal so it creates an antitrust issue and you are seeing each and sees be willing -- you are seeing agencies be willing to step up and make a deal. are we worried about may be seen deals done for the sake of energy and cutting those positions? at the comes a political concern. we said there would not be problems with mergers when president trump was elected but that's not the case. be acting off on t-mobile/sprint. >> they have sort of take their spot.

disney/fox got approved very quickly. other deals like at&t/time warner was not a traditional antitrust issue. you didn't necessarily have they all horizontal overlap. it's really been difficult to get a sense of what they are looking for. david: it's fair to say it's harder than we thought. thanks so much. coming up, michael kelly from pine bridge investments, live from new york, this is bloomberg. ♪

david: getting to normal. jamie dimon says we are headed

to 5% rates and that the 10 year should be out 4% already, even as the 10 year struggle to get above 3%. generous and next. down,s indra nooyi steps saying it is time for her successor to take up the baton. ready for an is extended battle with the united states over trade. the president claims tariffs are working big-time. welcome to "bloomberg daybreak" this monday, august 6. i am david westin alongside julie hyman. jamie dimon got a lot of attention over the weekend. maybe it is summer, so it is quiet, but everyone is talking about this 5% number he is talking about. julie: he did throw it out. know if the bank is making policy based on that, we do not know the timetable, but it is a good talker, if nothing else. it is not having a number -- it

is not having an effect on the market. s&p futures very little changed this morning. seeing movement in the pound to its lowest versus the dollar and about 11 months. this is after liam fox, the international trade secretary in britain, said a note deal outcome -- a no deal outcome for brexit is likely. mark carney expressed concern about that outcome. bitdollar strengthening a versus the chinese currency. the people's bank of china taking action over the weekend to stabilize the currency, having a negative effect on chinese stocks. 1% thissing about morning. the saudis cutting supply, saying to have curbed production. and the iranian sanctions playing into all of those crude

dynamics. david: we will talk about those sanctions in intricate bit. right now, time for the morning brief. go up new u.s. sections against iran, part of the president's attempts to renegotiate the nuclear deal. 21st century fox and disney of theng thursday, head bid for the part of sky fox does not already earned. and china will get key economic data. let's get a look at what is making headlines outside of the business world. emma chandra is here. dramaticre has been a escalation in the dispute between saudi arabia and canada. depomed ofsuspended ties and halted investments rates. the canadian ambassador to saudi arabia criticize the saudis for arresting women's rights activists. the saudis told the ambassador a 24ave the country with

hours. the president claims he has the upper hand in the trade dispute with china. beijing does not think so. an editorial says china is prepared for a protracted trade war with the u.s. and says the nation is ready to go through the economic fallout. another challenge to the european union from italy's deputy premier. he says the government will not populistrules block it program. he says it will be fine if italy can refinance. lethe said he will not rules stand in the way. global news 24 hours a day on air, and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am emma chandra. thanks. the federal reserve has given tory indication it plans

keep raising rates. jamie dimon thinks it should, saying "you better be prepared to deal with rates 5% or higher. it is a higher probability that most people think." we welcome michael kelly, pinebridge's head of multi-assets. people are focusing on the 5% number. a differentcus on number -- he think it should be at 4% already. is he right? is no question that 10-year is being distorted by the ecb and boj. overseas pressures are pulling it down. the old-fashioned yield curve was the market determined the tenure, central banks determined that short rate. you have a comparison of the two different views. and thehe central banks boj are really determining the 10 year. we saw that a week or two ago when the boj suggested they would lift the cap on the jgb 10

year. instantly, the u.s. 10 year went up. we know it will be higher. a lot of people are looking at .he2's t -- the 2's to 10's the are used to that being compass. and here you have the fed themselves putting out a new paper saying really look at this new portion of the yield curve, where the forward rates -- the three-month treasury will be 18 months from now versus where it is today. historically, they have been in 10's.ith the 2's to stilladitional one is weighed down by the ecb and boj. what is interesting about what mr. dimon says is as we go

through next year, the ecb will be taking their from -- their thumb off of pushing down rates. we will seeto 2020, where the 10 year should be. no one knows except for "higher." julie: how rocky will that transition be? we have not seen very sharp moves in the bond market, unless you go all the way back to the taper tantrum. you saw volatility earlier this year, but not like you saw back at that time. will they be difficult for people to navigate that, is there a good strategy to navigate that? michael: you are right. 2004, we saw a94 little hint of that earlier this year. but the bond market predicts it will not happen, as they did leading up to 1994, 2004. the obsession with the 2's to

10's. drop.depends on the back we think this is not a sugar high. that we have removed a lot of the downward, depressed, post crisis drags. with that out of the way, the pace ofrage, the global economy is not accelerating. that is one reason to believe it will withstand a higher 10 year. badlyybe not even due to for markets as you go through that. -- and maybe not even do too badly for markets as you go through that. you know it when you see it. david: i will put up a chart that shows -- the blue line what the fed rate is. the white is the 2's. the yellow is the 10's. question for you -- you sugar to the -- you referred to the

sugar high. as an investor, how do you figure out how much of this is because the ecb is sitting on the low end of the rates? market -- ao the vote by the market as to whether the president can sustain the present? a lot of economists say they cannot. michael: which is why this new yield curve, looking at 18 months out what the market believes the three-month will be, and says higher, which means this sugar high, if it is one, will go on, certainly longer than just 2018, go on at least another 18 months. and that the three-month will still be rising. there is an undertone that a stronger than we give it credit. after suppressing the global economy force along with this post crisis lulls.

julie: does that mean you get more aggressive? because the market is -- if you look at stocks, they do not seem to be rising in a high degree of risk. it is not as though there are enormous bargains out there, one would not think. do you bet on growth? do you go along cyclicals? ithael: i would not describe as more growth. we have been cut short of for some time. we are aggressively selective. we like u.s. small-cap stocks. people think it is a place to hide because of global trade pressures. but if you look at earnings, they are coming on strong, reflecting the strength of the u.s. economy. the revenue run rate is now higher than larger companies pay the earnings run rate is higher. that is pretty and -- that is pre- and after tax. so you believe that the growth will be more long lasting.

we are of the notion we are in a midcycle posture rather than a late cycle posture. this would support that. when you look at how much the 10 year could be suppressed by other policies, other papers by the fed say 50 basis points -- if you added that back, you would be in a midcycle posture for the yield curve. david: fascinating. michael kelly will be staying with us. coming up, the first phase of the restoration of u.s. economic sanctions on iran takes effect today. we will discuss with shawn golhar and michael:, barclays head of internet research. this is bloomberg. ♪

emma: this is "bloomberg daybreak." headirst woman ever to pepsico is stepping down. indra nooyi is ending a 12 year run at the beverage giant. she will be replaced by insider ramon laguarta. he has been a candidate to take over since being promoted to president last year. a semiconductor company that makes chips for iphone says it was crippled by a cyber virus similar to wanna cry. the outbreak shut several factories just as the company ramped up for the new iphone. it says full operations have resumed. learned the parent of mercedes is in talks with beijing electric vehicles to set up a joint ventured to manufacture a smart car rand.

that is your bloomberg business flash. david: thanks. the u.s. is ramping up economic sanctions on iran as part of the president's efforts to get the irani and's to renegotiate -- theiranians to renegotiate nuclear deal. golhar,us now to shawn barclays head of public policy research. and michael cohen, barclays' head of energy market research. take us through the first round of sanctions. disparatede range of products and activities to how much pressure is as likely to bear? shawn: we are seeing pressure anianhe irani and -- ir economy already. the administration's goal is to

-- renegotiation on buses ballistic policy and how to contain iranian behavior. david: the president has said he would like to sit down with iran to have negotiations. he likes these one-on-ones. is there any indication the iranians want it? shawn: so far, no. a lot of the hardliners and others have said there is no benefit to negotiating with the united states now. they are likely to run as -- renege on promises. julie: bring it to the oil markets. the has been this perception on will have athat we decrease of supply from iran. is that how it will play out? michael c.: eventually it will. iran produces around 24 million barrels a day. in the last round of sanctions,

we saw sections, off by about one million barrels a day. the more bullish expectations are that we could see anywhere one million to 1.2 million barrels cut off, but probably not until closer to november 4, when the next round of sanctions start to come into place. questions about whether these different parties will receive waivers for exports of iranian oil. which oneslear to us will receive a waiver and how that is calculated -- whether they will get a significant reduction, which is what the state department is using to determine what you can have a waiver for. julie: if it goes down 2 million or 3 million barrels, what happens to that oil? michael c.: iran has a large of capacity.

they have some capacity on land, anywhere from 10 to 15 days. significant amount offshore. the important thing to keep in mind is there are other offsets. saudi arabia does have some spare capacity. it can continue to raise production levels. the other thing is the market is dynamic. if prices move higher, the u.s. pressure may not be as severe as if the prices stay lower. that is the other important take away from our thoughts and discussions, that this is yet another cook in the kitchen of trying to keep rises lower. david: the president has said he does not like multilateral trade deals. that may or may not work on trade and when it comes to sanctions, bilateral is not so effective. sense of they

extent to which these new sanctions come into play may be gone around by other countries? are a china and india problem. you see a lot of indian cooperation with iran. on the china side, they inked a large trade deal with iran, talking about a one belt road. you curtail chinese operators from continuing to buy uranium crude -- iranian crude oil. a lot of this is the president putting pressure on it. we have not -- a lot is happening behind the scene. as november 4 comes around, there will be continued pressure by the administration to get everyone on board. julie: in the meantime, as is

this hanging over the oil atket's head, if you look the hedge fund positions on oil, total positions are in blue. crude, wti, and brent positions in blue. crude oil positions in white. it seems people are holding back. there is uncertainty which what it will go. it sounds like you have come to the conclusion it will not necessarily have a price boost affect. >> what is important to understand is the highest is skewed to the upside. possibility it will move to the end of the year. we are in the summer now. we are seeing demand signals that are not as great as they were at the beginning of the summer. we are seeing the broader market balance is not that conducive, at this point in time, to see prices go rapidly higher. what i would say is when you

look at u.s. production, it is continuing to increase. it will continue to increase next year. the market balance is not as tight as what many had expected as we move into the summer. that is causing this skepticism. the other thing going on is the broader question about the macro economy. you look at the hedge fund positioning, not just in oil but other commodities. you look at commodity price activity outside of oil, prices are moving down. that is part of what we are seeing pressure from. julie: do you have a particular year and target? .ichael c.: mid-$70's prices will move slightly higher in the next quarter but basically stay range bound. the iran's sanctions issue is yet another thing where the u.s. government can play a role. the president has another

agenda item, which is the midterm elections. he does not want gasoline prices to get too high. shawn: absolutely. the way the current point looks now, anyone's baseline shows democrats have a clear advantage in the house to flip. the senate side is tougher. before the president looking at this, he does not want to give control to democrats in the house. the roadmap he has for the 2020 election could face obstacles if the house control -- is controlled by democrats. to talk with you guys. coming up, -- just weeks after warning about the effect of pork tariffs. this is bloomberg. ♪

julie: time for three company

stories we are watching. first up, pepsi. the company's ceo will step down in october. tyson foods -- the company beat earnings estimates weeks after warning about the impacts of prok tariffs. producty schein is a distributor come also beating estimates as investors struggle -- shrugged aside the threat of amazon. we are digesting this pepsi news. two themes have emerged. one is study as she goes. the second is that the s&p 500 is losing one of its two female ceo's. me to seestriking to indra nooyi is stepping down. ceos are not many s&p 500

-- female ceo's. she was talking about how she made he has more flexible it a more ability to push for women roles,n these executive whether in business or other parts of the economy. moreaid she may have had freedom to do so. voice,t like she had a that she is not going away, and she views this as an important topic. david: let's go to tyson. weay, they came out and say did really well on -- saying what tyson was was fourth-quarter numbers are not coming in as strong as expected. so they are still sticking by the lower guidance. the problem for tyson is twofold. meat and poultry production is at an all-time high.

they need exports to continue to soak up some of that supply. so we end up with too much meat in the u.s. for diners to consume. meanwhile, restaurants like mcdonald's are featuring beef and pork because prices are lower because of the tariffs. julie: henry schein. amazon not proving to be the threat people thought? brooke: i am not sure about that. there were signs of pressure. that is the sign you need to watch going forward. david: coming up, we need to talk about earnings. live from new york, this is bloomberg. ♪

julie: this is "bloomberg daybreak." i am julie hyman. alix steel is off today. s&p futures have gone almost absolutely flat this morning as we see just a tiny tick up in

futures. movement in europe, but it is to the downside. a spike in european stock. in the dax, more specifically. they have come back down. some of the banks are putting pressure on them, including hsbc. --saw the composite fall that shanghai composite fall amidst ongoing trade tensions. we have been watching individual movers in the u.s. as well as across asset. the u.s. dollar index in the u.s. up three times of 1%, in part because we are seeing offset in the british pound. following pessimistic comments on a no deal brexit by liam fox. below the 3% mark. crude prices gaining one third of 1%.

berkshire hathaway out with earnings over the weekend. the insurance business is doing well. their reinsurance business helping profits in the second quarter. shares higher 2% this morning. perhaps i backs for the company. cash pilot at berkshire is now at $11 billion. investors are wondering if it will go to the. seaworld entertainment reporting earnings, shares up or team percent -- up 14%. praxair under pressure after the ftc in the u.s. questioned the company's acquisition by linde. it is a $47 billion merger. it could collapse for the second time after the ftc asked for the pressures -- divestitures. david: there is a red headline

across the bloomberg. wynn resorts settled with elaine who, the wife of steve wynn inherited and got a lot of shares. there has been litigation going on following the divorce. they established the successors. the former -- a former executive, phil satre. this does not resolve ongoing investigations following allegations of sexual misconduct from steve wynn. but his wife has now settled with the company. agreement, sheis will not significantly increase part of this page she owns just under 9%. she will not join groups seeking a takeover until 2020. david: it at least bring some quietude to that company, which

could use it. let's get an update on what is making headlines outside of that business news. the u.s.na is warning that it is ready to end your a projected trade war. beijing responded through state media after weekend claims by the president that he has the upper hand in the trade dispute. an editorial says that china does not see it sacrificing its short-term economic interests. president trump changed positions on his son's meeting with a russian lawyer. the president tweeted that the purpose of the meeting was to get information on hillary clinton, contradicting a statement he made last year. in venezuela, six people have been arrested after what is said to have been a drone attack on a military parade being watched by president nicolas maduro. officials say maduro was

unharmed. a number of soldiers were wounded. global news 24 hours a day on air, and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm emma chandra. this is bloomberg. strengthought continues to define s&p 500 earnings season. names reporting this week, yet to come, disney, fox, cbs -- cvs, and viacom. give us a snapshot of what we have seen so far. michael k.: we have had about 406 companies in the s&p 500 report. beatslly, most of these have been in line with what expectations were at the start of earnings season. we have about 20% year-over-year growth.

that is what we are expecting going into this. we are seeing that reflected in the price action on the post earnings day in terms of how much shares rose or fell. you are not seeing a lot of enthusiasm built into the reaction. julie: what is interesting is going forward amidst the debate of peak earnings, there seems to be a divergence between analysts and investors. romaine: analysts remain bullish. as you look out over 12 months, you tend to get more optimism on the analyst side. with investors, there is an issue of sustainability, not only in revenue but in the broader economic picture. not a lot of investors are convinced. that is why you're seeing a stocksty, where certain are benefiting this earnings season, but in terms of a broader sense, you are not really seeing the same strength we would normally see. david: michael kelly, how much

of this earnings beat is because of tax cuts? if that is true, what happens next year, because he will not have the same delta -- you will not have the same delta. michael: the beats are on the top line, pretax. the issue is sustainability. we are in the camp it will be more sustainable. what lies ahead is another step up to growth. off --ed we are seeing consumers spend more confidently. we have not yet seen companies investing more confidently. if they do, it is another step up to global growth. the worry on that is all of these trade tensions make it unlikely that they do. what we are seeing its small business confidence continuing to go. the big surprise so far -- it is

still very early, but the big surprise so far is how confidence is holding in there, despite everything thrown at people. we think the big reason why is companies are really under investing since the crisis. they have not been minding the store. some point, when you see your neighbors being disrupted over and over again, and you know you have not been minding the store, you have to step up. that will be hard to shake. if they do that, you will see another length of growth, and it will be more sustainable. but sustainability is the big issue. the numbers are impressive. how long can they stay that way? we are in the longer cap. -- camp. julie: what about the

sustainability of consumer spending? if we see wage growth at this low but steady level, you think that could perhaps slow consumer spending. michael: we think you are right, but it is very impressive. restrainedng wages because there is a big remixing of the liverpool. -- labor pool. we are having a lot of higher, more price point people going out. if you have been in the labor , the wagesast a year are very impressive. they are growing much faster. even there, we like what we see. is escalation of wages slower than it has been in the past, but you can argue they are more sustainable.

we think it will be a longer cycle for the consumer, for the companies, for the investors than many would guess. david: how much would the earnings -- how much of the earnings beat is because of buybacks and dividends? is a huge factor. especially for some of the companies. playing as certainly big part of it, but at the same time, you cannot completely discount the underlying businesses, particularly for larger companies. -- i would like point out when you look at the numbers coming out of technology companies, they are actually very strong. capt of the focus on is -- ex is the focus on machinery. investors have warmed to that.

it shows the disparity in the way in which investors are embracing it. it is the other companies not doing that spend are getting hit a little bit. julie: perhaps investors are willing to be patient with a bit more spending in the meantime. thank you, romaine bostick and michael kelly. coming up, indra nooyi stepping down as ceo of pepsico. this is bloomberg. ♪

emma: this is "bloomberg daybreak." i am in the hewlett-packard enterprise green room. misra, td, priya securities head of global rates strategy. now to your bloomberg business flash. regulators could kill a $40 billion deal. linde and praxair to sell more assets before it approves the deal. iwg plunged in london. it decides it did not want to be sold at the price private equity firms are willing to pay.

quarterly profits soared at telecoms the japanese provider. it was boosted by big earnings at its vision fund. it also sold the china unit of its subsidiary. is stepping nooyi down as ceo of pepsico, we learned today. she will leave in october. she will be succeeded by one of her top lieutenants, ramon laguarta. joining us is bloomberg intelligence's reporter. give us a sense of where this company stands today and what her successor will be inheriting. >> good morning. today's news, while not a total like an, timmy looks

orderly transition -- to me looks like an orderly transition. arta will hear some concern about the fit of north american beverages. david: whether it fits or not, the question revolves around where will the growth come from. what will be the answer to that? why it will splitting the two lead to more growth? kenneth: the people who would support that vision say the capital devoted to beverages may not be getting the return it could five investing in its powerhouse frito-lay. the north american beverage unit is suffering from these stellar performance of frito-lay. it is such a strong business that the performance gap is becoming more glaring. these companies rely heavily on

internal organic innovation to drive growth. that will be her legacy, that she drove innovation. this was a very innovative company. but to grow faster rates within mature industries, it may require them to put their balance sheet to work to make more aggressive acquisitions, particularly outside the u.s., where you will see faster growth in developing markets. julie: that is why it is interesting to me that they are ,romoting someone within seeming to see a steady as she goes strategy. it is sort of an endorsement of the strategy they have done for the past 10 years that has not necessarily made them as successful. >> it is interesting. this guy is an insider. he has been there more than 20 years. experience is overseas. they are thinking on

international markets as a place to grow. the u.s. is a very mature market. frito-lay is a power house. they are looking at international markets as a way to grow. floaters -- sodas are not as popular as they once were. is at soda consumption its lowest in 20 years. sugar is the bogeyman when it comes to health. toy have done a lot of shift healthier, better for you product. they talk a lot about that, but the mainstay pepsi product has not done well. julie: i believe he also cover the tobacco companies. in tobacco, at least in north america, you have a secular slowing growth situation. do you have the same thing with soda? is there a way of managing through that? kenneth: there are some

similarities. one thing about tobacco is it is with suchque industry high barriers to enter, given the high regulatory and legal risks and concerns in the investment community, that it has ironically worked to the tobacco companies' favor. by having little competition, it is able to raise prices on a regular basis. contrast with pepsico, it has a tough competitor in atlanta. having a tough time raising prices. it is resorting to lower packaging sizes. that raises unit prices. but it is a more difficult business to run than the existing tobacco companies. julie: sounds like the new pepsi ceo will have challenges. kenneth shea and craig giammona, thank you.

departures we have been discussing is bigger than just pepsi. when she steps down, it will make the already short list of female exited is even shorter. -- the already short list of female executives even shorter. not only is she a female ceo, she is a foreign-born ceo. we heard sound from her earlier about how she is the only woman of color in the room. how significant is it? >> it is extremely significant. she is foreign-born, so it means she is a female of color. with her departure, the number goes down to 24 female ceos in the s&p 500, which is less than 5%. kind ofhen you see that movement, you would think there would be some kind of organized effort on the part of women in these leadership positions to

try to promote more women. she has talked about -- you wants -- now she wants to get more women. jordyn: we are seeing more women in the boardroom, but they are normally in human resource departments, not revenue generating departments. it will be interesting to see , but you also fall into the situation where you have such few female ceos, you are constantly looking towards them, what we -- when we should be asking this question of all ceos. david: she is willing to address the fact that she is a woman and a person of color. there are some who say it just regard me as a ceo, not a woman. she talked about this on the david rubenstein show. >> is it possible for a woman to

have it all, special in our society? >> i think if you have the right support system. if you have an understanding spouse, if you want to be married. you also need to make all the trade-offs you need to make. you can have it all, but while you do that, there will be heartache, there will be pain. there will be damage under the surface. you have to live with it. david: she also talked about being a mother, especially the responsibilities of being a mother and a ceo. jordyn: she is in a very high, stressful job. we talk about that all the time. are there additional, unique burdens on women who need -- want to rise to the top? that needs to be addressed. julie: do we ask that to mail ceos? -- male ceos? do you have trouble being a dad? jordyn: exactly.

david: goldman sachs has named james esposito the head of trading at goldman sachs. we talked about it earlier on about thet beat importance of the new head to be a trader. coming up, six people arrested in venezuela. more on what i am watching, coming up next. bloomberg users can interact with the charts shown using tv . you can save charts for future reference. live from new york, this is bloomberg. ♪

david: this is all about what we are watching. i am watching venezuela. over the weekend, dramatic video of a drone with c4 attached to it exploding near where nicolas

maduro was. it is interesting to speculate over whether this puts him in a stronger or weaker position. they are cracking down now. ironically, it may indicate he has a stronger position in a country it is fair to say is failing. julie: it is interesting that he has, up until now, maintained some level of support he has, in part by giving away food in certain areas of the country. ,he situation, one would think would have to reach a breaking point at some point, when you have an economy in tatters with inflation. david: he has the army on his side, which counts a lot. what are you watching? all else fails, at least you have a lot of money. that is the case at berkshire hathaway. it is reporting cash at $111 billion.

the debate continuing over whether berkshire can buy back shares. the issue is are the shares to expensive? the company's requirement is the price has to be below berkshire's intrinsic value, conservatively determined. david: warren thinks he can invest the money better than shareholders. julie: but he has not been finding as many places to invest in. david: coming up next on "bloomberg markets," priya misra will be joining jonathan ferro. this is bloomberg. ♪

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

jonathan: coming up, china indicating it is ready for a protracted trade war. president trump said the u.s. has the upper hand. washington is beginning to reimpose sanctions on iran. beijing rejecting requests to cut iranian oil imports. theygan boss suggesting better be prepared to deal with 5% 10 year treasury yield. more in a moment. 30 minutes away from the opening bell. as follows. futures dead flat. s&p 500 futures down just a single point. in the market, you see some dollar strength. euro-dollar down to 115.43. treasuries.ty and just over 200 basis points. 295 on a u.s. and year. trade tensions between the u.s. and china flaring up your