for the first time in two months, boosting risk sentiment. goldilocks and the three bears. the bears out of harvar hibernation. to "bloomberg daybreak" on this thursday. we are waiting for walmart. alix: macy's crushing it, but getting punished. maybe they are spending too much. david: you had to feel sorry for them. alix: a little bit. i guess if you are a long investor with that 65% rise over the next nine months. david: take some off the table. alix: yesterday was a traumatic day. today, futures up 14 points. on the front foot. it is a stronger dollar store

that has rocked markets over the last week. now that strength taking a pause. the 2-10 spread deeper. i want to point out copper. an unbelievable move yesterday. it would be hard to look at another selloff in commodities that did not have a specific trigger that had such a deep impact across assets. david: i looked at copper over the year. it has been drifting down. alix: what is so impressive is that on the structural level, some deficits are coming up not being counted for in the metal. that raises the question of the sentiment and how easy it is to change. about investors may think appetite and whether growth will demand copper. alix: exactly. david: let's go to our first take. we are joined by gina martin adams. as we wait for the walmart earnings come out, let's talk about what we have had so far,

rachel. home depot did well. the stock was not punished or rewarded. then we had maces. goodness gracious. alix: here we go. walmart is out. gas beats without estimates and the company boosted full-year adjusted earnings view. quarter, earnings $1.29 a share. for the full year, on the high end $5.05, so in increase. there only u.s. store second quarter comp without gas is 4.5%, pretty solid. particularly the cousin the estimates were 2.2%. were --mates particularly because the estimates were 2.2%. second quarter e-commerce

sales rising 40% sequentially. unbelievable. 44% year on year. david: the goal for the year are 40%. some analysts were skeptical. the consensus was below 40%. that is what they were shooting for. that is a good number for them. alix: their revenue beat nicely. the full-year growth is boosted to around 3% from it these 2%, hedging on those numbers, but strong. david: let me ask for margin. that is the other question. they are growing, but also increasing costs with acquisition. i'm going to disappoint you. what is going to happen with the margin? alix: the international was up 4%. sam's club up about 5%.

operating income did fall report 7%. david: that might go to margins. alix: their operating costs rose. david: in fairness, doug mcmillon is investing in the business. he is trying to upgrade and get that traffic and sales. alix: rachel, we will stop ignoring you. gina, i'm interested in the stock reaction. a huge job remarket, rolled over quickly. what does it take for beats? >> margins are a big sticking point in this earnings season. the stocks that have beaten on sales and earnings expectations, they have done well. if they guide lower, they have done poorly. it is about guidance.

what is walmart saying about guidance? it sounded decent. what about the cost? this is characterizing the broad s&p 500, margins mean everything at this point in the cycle. we did see operating margin estimates peak and turned lower. that has the investment universe nervous about where margins are headed. we need to see margins expand to continue the cycle. it is at this point, short-term and long-term issue. doug mcmillon said we will invest for the longer term. he is trying to catch up or beat amazon. thinkinginvestors are about the longer term. if you look at what the s&p has done, it is unremarkable. bound andn range trend-based. we have seen earnings, four out

of five companies have beat expectations. should suggest the s&p 500 will take of like higher. people are looking at margins and whether to see the short-term can backup hopes for the long-term. walmart seems to be doing that with these results. we saw how yesterday with macy's. david: i look at the increase in premarket trading. yesterday, macy's were up, then down 14%. this will depend on the broader market sentiment as well. there was a lot of concerns about turkey, commodity prices, signals for the global economic outlook. today looks like a solid day for s&p 500 stocks. we did trade down to support levels, so today potentially a brighter sentiment day. hopefully that will allow for some room. alix: are we starting to see

what kind of companies have pricing power yet? >> i'm not sure that will become apparent yet. what we and investors have been bets,ng on his sector what will drive the s&p 500 going forward. we have been seeing a selloff in tech. yesterday, we had negative earnings out of china for tencent, which played into the market performance yesterday. we saw stocks globally moved down after those results came out. it tells us more about where retail is headed. at retail so far, retail has been beating. we have j.c. penney shortly, nordstrom this evening. it will be interesting to see what town they set. whether they follow walmart or macy's. alix: walmart having a huge jump

in premarket. it boosted its full-year view, quarterly earnings topping estimates. the big number is what they expect full in terms of earnings at the high end. the best sales in more than a decade. we will be discussing what it means for the broader sector throughout the hour. also, we want to look at the tough day yesterday. these are the air markets to pay attention to. s&pe is copper, yellow is -- european financials, and the purple line is emerging-market equities. gina, which is the most oversold. >> that is a good question. i think the commodities market has been eaten up, as well as emerging-market equity prices. it is not consistent across emerging markets.

became arican selloff china selloff became a turkey selloff, so there are still some winners in there. africa is still holding up well. there are potential shoots in emerging markets. with copper, copper is just copper. the metals complex has been under pressure recently. all three have had a really tough few months. david: our third story has to do with china. there is a risk on sentiment today due to reports mid-level people from china will meet mid-level people in the u.s. these of the five points bloomberg is reporting that will be talking about. transfer, ip, industrial capacity with steel and aluminum, state-owned enterprises reform, cloud computing. rachel, the market seems to be reacting to a modest

announcement that mid-level people will get together. >> we have to remember where the market went yesterday. when things go bad, people look for something that will help them get back in. even the debt cap bounce is the phrase we think of here. long-term, we have seen things get to this point before. we had talks in china and washington. there seem to be an agreement. china was agreeing to import more, and then trump quashed that idea. about the think prospects for talks, people are happy to see optimism in this, but whether it translates into anything remains to be seen. i am personally a little bit skeptical with the elections coming up. the china rhetoric plays well with the base. therefore, it seems unlikely they will suddenly become best buddies. up,: if markets don't hold

i believe they will be more interested in talking to each other than the other way around. thank you both. you can find the charts we used at gtv on your terminal. check out the features and save our charts. coming up, we break down walmart's earnings with our .uest that stock up a percent after raising its full-year forecast. this is bloomberg. ♪ this is bloomberg. ♪

david: walmart surging in the premarket after it beat earnings estimates and boosted its full-year outlook. guest. us now is our

he has a neutral rating on walmart with an $85 price target. tell us what you really takeaway. it shows walmart is executing on their main objective, to get traffic growing consistently in the stores. they had a nice acceleration this quarter. the good news was the comp. one of the key questions will be how much earnings get hurt year. some dilutions coming up. how much is hitting this year? >> in their guidance, they did not give a number. we think it will be $.40, then $.60 next year. because of the strong results, they did take guidance of. -- up. there will still see earnings below five dollars next year. david: they are clearly investing for the future, which

may be hurting present earnings. where are we on e-commerce growth? >> they were making good progress, especially with the rollout of click and collect. walmart is not going away. we have a very good u.s. consumer environment. u.s. retail sales were on 4.7%. tax cuts and jobs growth are helping. amazon is still 35% of u.s. retail growth this year. walmart is doing everything they can to position for the future. alix: what is your number one question for the call? >> how do they keep it going? how do you keep traffic of 2%, ticket up 2%, and do that without margin degradation? that is the key question. david: that is my question. do we have a sense on the margins for this quarter? >> no, i think we have to go

into the detail as to where the benefit came in terms of the line items. that hopefully we will have later today. alix: in terms of the sentiment, it has been positive for the sector, however, is that a good thing or bad thing. check out macy's yesterday. is it a similar situation for walmart? >> that is the risk for retail. the index is up 30% this year, including amazon, a key driver. you take that out and retailers are in line with the market. those with a nice rally is that people are focused on the near-term results, a healthy consumer, but what people are not fully anticipating is that our work on tariffs suggest if this goes of 10%, it could take away half of earnings growth next year.

will besomething we watching from walmart and all retailers, how they will handle a significant tariff it. david: why are you neutral, trade, fully valued? of 20 stocks.rth we think walmart is doing the right things for the long-term, but traded at a multiple close to home depot. we think home depot is in a better position to grow consistently. we think walmart is trying to do the right things long-term, but the fight ration looks a little rich. the retailabout landscape going forward? who is best positioned to handle that macro landscape? amazon is close to 7% of u.s. retail sales and 10% in the next 3-4 years, companies that win in multichannel and do it

profitably our best to hold. we like home improvement, home depot, lows and sherwin-williams. cosco is also well positioned. sayind some other things, tractor supply where we think they are well-positioned cyclically with less pressure from e-commerce and amazon in particular. david: as you look out to other retailers, what is projecting in terms of retail sales and the u.s. consumer overall? retail sales are pretty good. our forecast is for .5% for the back half of this year. that is what we are using next year. the key trigger is can we continue to get jobs growth. if we do, that number can be sustained. flipside, if the trade war ends up hurting jobs, income, or the wealth effect side, you could see a pullback in that retail sales figure.

tax cuts we think the are working on the corporate and individual side, helping put an ps into retail sales. we think the u.s. consumer looks in good shape. alix: thank you so much. we have been pouring over the press release trying to find something on the margins. , butting income down 3.7% they forecast a margin of 4.4% for 2018 further full-year. that is in constant currency terms. that is not sound terrible to me. one to watch on the call. the other big story is commodities clawing their way out of a global rally. inside the bloomberg, you can see the individual sectors. the purple line is the one to watch, industrial metals over the last five days.

the yellow line is agricultural. the blue is precious metals. the white is energy. energy holding up better than the rest. one columnist writes that commodities are meeting their wily coyote market moment. copper has leaped chasms like this before to fight another day, but such a rebound should not be taken for granted. a senior metals and mining analyst. that is a creative way of asking, have we bottom? >> i like that analogy. i don't think so. the macro picture is driving the bus. micro gets pushed to the side with these crosswinds. the way we are thinking about it is you have the dollar, the yuan , chinese monetary conditions,

and emerging-market proxies. we think capital flow proxies have more room to deteriorate. even though the yuan has limited downside because the ebs he has not intervened so far, and chinese monetary conditions are loosening, you still have two of the main four drivers that have more scope to deteriorate. copper is catching a break with the 50% retracement line, but as david pointed out, it could be a false bottom. alix: that is a great question going forward. all of this is sentiment, china-driven, but there are supply and demand fundamentals here. are we looking at a deficit marketing copper? estimate since the end of last year and more so this year has been for a surplus, although the consensus has been for a deficit.

we see the market oversupply this year. the micro fundamentals in copper don't look that great. the market is not that type. for a aluminum, 25%, 30% is underwater, hence aluminum down 10% and copper down 30%. exciting to watch. thank you very much. tune in this afternoon at 1:00 p.m. eastern sign and we will break down the anatomy. david: a lot to talk about today. amid the route and commodities and tensions between the u.s. and turkey, emerging-market stocks have entered bear market territory. shows we are 20% below the peak. joining us now to talk about it is joyce chang, j.p. morgan global head of research, and he set ericsson -- and lisa erickson. what is going on with emerging-market stocks, have

they bottom or is this a trend we can expect to continue? >> it will depend on how turkey plays out. they announced a number of technical measures. the market is waiting to see morethet -- will they have orthodox economic measures. the bigger attention will be that china's story and whether discussions on trade result in and the heightened rhetoric is taken down a notch. >> we have a neutral view on emerging-market equities. it is a more difficult environment overall. there is global tightening on the horizon. the u.s. has already started. other countries have signaled following that. that is making a more difficult environment. a diverset, you have set of economies in particular areas like turkey where there are hotspots of concern.

as to whether this presents an interesting opportunity to answer -- enter, it is something that needs to be evaluated. a mixedo backdrop is dashboard of indicators. there may be some individual opportunities. the slide no doubt was the dollar and the u.s., and the question is how much longer can the u.s. outperform if other global assets get it. you have the msci world is the blue. you back out the u.s., that is the white line. ateverybody will be looking dollar strength. dollar strength will take a toll on earnings in the u.s. the u.s. has been outperforming from a gdp perspective, but dollar strength will hurt on the earnings side. tradehe discussions on ratchet down and alleviate some of these concerns? david: how much of that u.s. dollar strength is the verge in's and monetary policy?

>> that is a big part of the story. the fed is tightening, and that is the forecast going forward. in fact, when we look at what is going on worldwide, it does seem like there are signs of softening across the globe, the u.s. remains in the lead in terms of top-down indicators and the bottom-up. that will be a continued emphasis for the dollar. alix: so maybe you want to go into the u.s., but you have to rotate sectors. optimisticautiously on the u.s. and advising investors to stand pat on their investments. if we look across a broad array of indicators, two thirds are still positive. the corporate earnings story still comes in nicely. there is a solid backdrop for u.s. equities . we are cautiously optimistic.

you are sticking with us. david, walmart crushing it. up 10% premarket. david: it is getting credit thus far. alix: those far. we are waiting to see how much they have to spend to keep topline growth growing. at-z paintings earnings due 7:30. we will break down there report as well. walmart beats and raises its full-year view. this is bloomberg. ♪ ♪ . xfinity mobile is a new wireless network

designed to save you money. whether you use your phone to get fit. to find meaningful, thoughtful, slightly-weird gifts. or just to know which way you're facing right now. however you use it, your wireless bill is about to cost a whole lot less. ask how you get xfinity mobile included with your xfinity internet. so you just pay for data -- by the gig or unlimited.

saving you hundreds of dollars a year. plus, get $300 back when you buy a new smartphone. xfinity mobile. it's simple. easy. awesome. click, call or visit a store today. alix: this is bloomberg: daybreak. the risk off day we had yesterday reversing with dow jones futures down 200 points.

the value in the market is investors coming in. european stocks up 20% and european banks up .4% with italian banks struggling. european banks lurking with a bear market in part due to exposure because of risky assets like turkey. the dollar strength eases off one day, relief to other asset classes. two thin spread stevens -- 210 steepens.vens -- crude up. commodity rebound. italy's 10 year yield down five basis points, it was around a four-year high and so much to be said for that. is what was going on in politics in italy and others parts is the general risk on. david: a but -- a budget they

cannot afford and bridges are collapsing. alix: jcpenney's loss on adjusted basis is $.30 per share, worse than estimate -- $.38 per share, worse than estimated. an ugly loss. comp sales coming in lighter than estimated, up .3%, the estimate was for a full 1%. stock retreating from the market-based it got from walmart. they say full-year loss at about $.80 to one dollar per share, estimated a four cent increase. we will look to see if that is comparable. david: analysts did not think it would be good news but it is worse than expected. they are still looking for a ceo and in the early stages of a turnaround. expecting a loss of not this big at not this bigger problem with comparable-store sales. alix: i guess -- i guess it is a

good thing that comp sales and positive territory. david: they were already going into a turnaround. more on jcpenney, let's go to our senior u.s. retail analysts from princeton. correct me if i'm wrong, we knew it would not be great news but this is worse. >> this is definitely worse. with better spending environment is concerning for jcpenney. interested to hear about the apparel side, women's apparel has been down double digits last year. place in thene business they have really struggled with. alix: they did have positive, sales in women's and children's apparel. which they both meaningfully outperformed their total second-quarter top results. -- comp results.

is that good or bad? other weaknesses in jcpenney we are not adjusting to? >> women's apparel up is good thing, 25% of their business but it brings the question -- what went wrong at jcpenney? what was weaker, home, beauty? where is the weakness coming from? that is what i am looking to hear about on the call. alix: part of that potentially will be inventory. they said they had to did necessary actions to mark down and clear excessive inventory. they have to keep taking action to right size inventory and because of that, they reduce guidance for fiscal 2018 at $.80 to one dollar per share in loss versus an increase of four cents. why is it so hard for them to manage their inventory? >> this is a problem for them. last year they took massive

markdowns unexpectedly on their apparel. for them to say they will still be inventory problems into the back half is more of a concern concern -- concerning what they were up against last year. david: where the -- where are they in their tournament and search for a ceo? >> still looking. i have not heard anything. david: doing the job search, why when i want to take over this company right now? >> if you're interested in turning around something hard to turn around in the environment we are written with retail challenged by a shift to digital , you have to be up for a challenge. alix: if you were on the call, what would be your biggest question? >> what went wrong and why do we have such a big problem with inventory over and over again because sales in the quarter were ok. where does the inventory mismatch come from in the second

quarter and wire more markdowns expected. ? alix: walmart boosted jcpenney is gone and the stock down by 6% , the loss at $.38 per share on an adjusted basis. they revised down full earnings you in part because of inventory. the good news is that children's, jewelry, women's apparel were top performers in their divisions and there had been problems. the bad thing is their inventory , they could not get it off their shelves fast enough and it was slow-moving. david: they have not found a bottom. alix: they have not. conversation is the retail story. walmart handling things better than jcpenney rather than a macro worry. david: do they get the credit or does the market but them together -- put them together?

joyce, did we learn anything, is this idiosyncratic of retail or broad macro? we have u.s. growth in the third quarter at report 5% and we see u.s. growth taken up as other -- 3.5%. the u.s. story is very strong. the question is confidence going forward. you do have a trend that does look positive for the third quarter. in the fourth quarter, are you at a turning point? you get into the midterm elections. the key things investors are focused on, trade, strength of dollar, what the fed will do, the messaging, and u.s.-china trade talks. overall, whatwth about retail sales growth? 4.5%shows steady growth,

year-over-year. do you expect that to continue? driver isunderlying how strong the consumer strength is in their level of confidence. if you look at those measures, the consumer is in a good place. tight labor market. modest growth in income. spending remains good and that is stable. overall, we think there is a good effort this for the consumer to hold up the economy and retail sales. alix: david has a chart on his terminal, a huge bit of retail sales was eating out at restaurants and it worried people will not, it will have a material impact on retail sales versus getting strength from apparel sales. what is a run off -- one off risk or something like that? >> do not know if you will have that risk to see these change, you have seasonal patterns as well.

you have the back to school stuff coming up. all of the summer vacations. i do not know if you will see trends different as far as a seasonal pattern. alix: jcpenney stock down 14%. because of that lack of inventory. david: let's turn to trade. how much of an overhang is the u.s. economy, particularly in retail business. ? >> trade is a key issue and we are hinging on how much of this will be positioning versus, to comes through in terms of actual tariffs or other protectionist measures? if things continue to deteriorate or are increased in terms of what happens on the trade side, that could impact, not just retail sales, but the economy as a whole. there will be two sides to it,

the price pressure side, and potentially disrupting some supply change in the growth prospects. david: we have talked about this but that's -- let's look at a chart how bad it could get come illustrating exports to china and imports from china. we export a lot less. the yellow line is the two letters $60 billion. -- $260 billion. joyce: that would take a quarter of a percentage point off of global growth. if that works are going to affect, what is going into tiny,, $34 billion, is .1% off of u.s. growth and .2% off of chinese growth. what material -- materializes from the rhetoric that has been put out there. talks resuming between u.s. and china. alix: it was no surprise to me we had a huge market selloff yesterday.

and of it was also in china. today, the headline they are meeting. i have to wonder, are we in a world where the geopolitical risk is to the upside? if we have a market selloff? >> you have a situation where everybody is wanting to keep the economy on track. it gives effort this for some coordination -- and for this for coordination -- impetus for coordination. much.thank you both very we have to cover jcpenney because the stock is still plunging in premarket, they change their full-year guidance based on inventory mismanagement. david: a larger loss than expected. we knew there would be a problem with cop store sales. -- comp store sales. alix: if they have to inventory, more discounting --

hair back inventory, more discounting -- hair back inventory, more dispute -- while inventory, more discounting. david: we have the first word news. >> for the first time in two months, u.s. and china will resume negotiations in the trade dispute but at a low level. china will send an advice minister to the u.s. to talk later this month. the chinese delegation will met with the treasury undersecretary as they appear to have reached an agreement in may but president trump backed away from the deal soon after. the jury in the paul manafort financial fraud trial deliveries today as prosecutors say he lied to get millions and bank loans. his lawyers tried to tarnish the credibility of the government's star witness, his longtime associate, rick gates. the turkish lira has rally for

the third day in a row, rising almost 4% to a one-week high against the dollar. investor calls later today. that may provide clues about further action to shore up their market. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am amit chandra. -- emma chandra. this is bloomberg. david: deutsche bank wins big on a turkish waiter. -- wager. live from new york, this is bloomberg. ♪

daybreak. bloomberg coming up in the next hour, credit suisse, this is bloomberg. ♪ >> to your bloomberg business flash. amazon may be on the verge of industry, another some shares fell today after reuters reported amazon is holding talks with insurance companies about creating a rival website. it says there are no imminent .lans to launch the site a report that activist investor star board is taking a stake in symantec, and wants to make changes. star board has nominated five directors to the board and the

firm says symantec is lagging its peers in previous deals have done little to boost growth. more legal problems for bayer. shares fell after the california supreme court denied an effort to prevent the state from putting roundup on cancer-causing chemicals. a san francisco jury awarded a man for his claim that exposure to roundup causes cancer. -- caused his cancer. >> private equities, public dilemma. old-school partnership. the noble art of accounting, the man who triggered the $10 billion collapse gets out of the shadows as the company prepares to restructure. turkish delight and despair, deutsche bank raises 35 million on turkey as berkeley faces a $19 million loss.

i wish i could take credit for that headline. david: joining us is jason kelly. one of your favorite subjects. -- tpg woulder rather be private. >> publicly traded private equity firms do not do so well. they have done very well, made billionaires of a dozen or more people over the course of time. in terms of going public, that has been a rocky road. david: for the shareholders. >> exactly. the public has not embraced these firms as publicly traded entities. terms --are -- to use lumpy, they do not buy and sell in a predictable way. smaller than a lot of their peers.

they are staying for the moment private. david: are they comfortable staying smaller? a reason to go public is to have the currency to make acquisitions. one ofone bought gso, the big things they did after they went public, one of the biggest and best deals they have done for the firm. tpg has not done them. you also go public to cash out your founders. a question that will come up -- some speculation is that does tpg sell a stake to a pension fund, sovereign wealth fund, to get some of the money back. in that case, selling stake in the firm itself and different than a regular one. alix: in general, companies may be opting to stay private longer even than to cash out

shareholders. uber. david: tesla. a trend. alix: an amazing story in the commodity world. asia with company in gigantic commodity trading firm. wasne point, the market cap $18 billion and now it is almost zero. a part of it was a man, who said there was fraud, county fraud and we finally know who he is. he said that companies have to die. die.d companies have to jason: he came from behind the curtain. that they have been talking to a source that a turnout was this guy since 2015.

tracking it along the way. see accounting fraud potentially like this and you see the decline, you think of shorting the stock to get a profit. he said he is not. david: shorting other stocks that not this one. fees to pay for legal while bringing this accounting fraud into light for noble. jason: i do not say this often about commodities that there is a movie. alix: a fuse me, "-- excuse me, "trading places." jason: that was 40 years ago. alix: if there is, alix steel will be writing it. david: the third story is turkey. markets go up and markets go down, traders win and lose. jason: you have political and economic fallout.

who lost money? barclays was on the wrong side of the trade and deutsche bank, god bless them, on the right side. alix: they needed a win. >> $35 million profit over a couple of weeks for deutsche bank. we were talking about this as it was unfolding, there was a trade. when a currency moves that much at a currency that is closely watched as the lira has been. somebody was doing something. bet.sche bank maybe right people thought turkey would do sensible things. alix: how do you position for those things, and how much risk you take on your balance sheet? risk, that on more can pay off or not.

what does that mean if your capitalization is not what it should be? jason: absolutely. a reminder to watch this space, not just in turkey but across the broader emerging market. david: are very of jason kelly. wn jason going. -- jason kelly. notes halted after falling 22% in milan. havingtory reverberations in europe. this is bloomberg. ♪

david: this is what i'm watching, italy's atlantia. the company that has the license to run the motorway is under a lot of scrutiny. they blew out the cost of

insuring their bonds and are now down 88%. the stock opened briefly today down 24% and has been suspended. the prime minister said we will terminate their license to run. the company is saying did not go so fast. company says you are going prematurely. the benetton family says he may be right, they own it. it involves the overall on market in europe. -- bond market in europe as italian corporate bonds have dropped. see they have come down because of politics but down again because of the bridge disaster. the government says the problem u. the you -- e

italy has been a beneficiary of the corporate bond buying program. david: the populist government says you should let us spend more money and we could keep our bridges up. alix: it is not us and our physical spending. coming up, he is a dartmouth college professor of economics. and we breakdown the retail half and have-nots with walmart stock up in premarket. jcpenney getting completely whacked. revising down earnings forecasts because of earnings -- inventory issues. this is bloomberg. ♪

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included with your internet. plus, get $300 back when you buy a new smartphone. xfinity mobile. it's simple. easy. awesome. click, call or visit a store today. alix: retail have and have-nots, walmart with the -- best sales

in a decade while jcpenney got hammered. on inventory management issues. goldilocks and the three bears, emerging markets and european banks and copper all flirting with bear markets, is it a signal or a trade? u.s.-china trade talks rescue markets as low-level talks restarting between the nations for the first time in a few months visiting sentiment. -- boosting sentiment. david: i am david westin with andrew levin. -- alix steel. alix: jcpenney off 24% in premarket with inventory management problems. david: home people -- home depot did well but did not get enough credit. walmart went through the roof and jcpenney did poorly. alix: interesting to see if macy's stock will go down because of the risk off day yesterday and it feels like now,

it is a better sentiment to report your release. s&p futures now up double-digit's, dow jones up triple. relief after the selloff yesterday even though the u.s. market held up better than others over the world. euro-dollar up .2%. a mix dollar story after dollar strength as the over other asset classes. i wanted to highlight copper. a 1% increase after a 4% selloff yesterday. does not feel to me like everything is clear. david: a lot of ground to make up. time for the morning brief. we will get economic data, including housing starts, building permits, weekly jobless claims at 8:00 -- 9:00, the turkish finance minister having a call with investors that

investors are looking forward to . and more earnings after the bell tonight with nordstrom reporting. alix: walmart shares rising in premarket trading after the largest retailer in the world posted desk sales and more than a decade -- best sales in more than a decade. joining us is patrick, as a neutral rating on walmart with a price target of $92. do -- see you have to to upgrade the stock? >> i want to hear the call at 8:30, the investor relations call, they do not do a formal call with management, it comes out as a recording. it was a great quarter. 4.5%,an't -- compu more than twice when i was looking for, traffic up 2%. sam's club up 5% with same-store

sales. the negatives, not trying to highlight these, the overarching -- my overarching view is more positive but they have not rolled flip court into the numbers. that is likely to be dilutive. aree-commerce business they in the process of purchasing. they see heavy or good margin pressure. margin pressure, i have a hard time learning from the press release is what their costs or and how they were dealing with that. how do you predict they are dealing with it going forward? >> they are dealing with it pretty well relative to the rest of retail. a bigre big and with

logistics network and supply chain. the most buying power when it comes to container rates, and shipping, they do a lot of the round with around trucking fleet -- they do a lot of their own with their own trucking fleet. it is a factor, a little bit of a headwind. what is carrying the business now is what we talked about initially, very strong sales growth. alix: thank you very much. david: i get the ugly, jcpenney reported results with shares plunging in premarket as they forecast a full-year loss. joining us is michael of credit suisse. an underperforming rating on jcpenney. looking at it, you will have to go up to go to your price target of twodollars --

dollars. >> their ceo left and they struggle with seasonal weather issues that led to clearing more merchandise at low prices during the quarter. that weighed on sales and margins and reduce their outlook for the are substantially. yesterday, macy's came in light of expectations that were rising. this will hurt probably more. this is not a rising expectation but a tough situation for jcpenney. david: are there the assets, including the name brands that merit a buy at some point or do you have to figure out the plan and who will execute it? >> prematurity think about it as we need to hear where they're headed. they have had rush -- rough patches that have led to high debt levels and constrained cash flows.

big changes needed to keep up like e-commerce. it is really hard to say where we are headed without the new ceo being announced and telling us how he will navigate the dynamics. david: not aware they will offer you the job. you do follow the stock. what are the strength potentially -- strength eventually? >> competitors going down around them. there are other retailers that have locations we would call c a nd d locations in suburban and rural america that are going away fast and you could target those market shares. you can become the only game in town and a lot of situations for apparel. you have a falling knife as oppose of apparel and footwear being bought in physical stores but can be a share gainer and a big dollar world -- in a big dollar world.

there are things you can do but we need to have a clarified strategy. david: overall headwinds with overall department stores that you see different people addressing it in different ways, walmart investing and macy's moving forward with new experiences. for shoppers. do they have ability to make investments? >> you do need investments. those entering the digital world have to justify figuring out how to generate returns in a different way. the digital future is a constant reinvestment cycle. constantly updating your digital capabilities to meet new demands from the consumer that are changing every day. it is very expensive and you have to have a much higher debt profile. alix: i am confused as to how the inventory could have been so mismanaged. and communicated so poorly to

the street. >> it is not clear and we knew -- we need to hear the conference call. the ceo left. havenk he probably did not his eye on urgently getting out of inventory. there were weather issues called out in the first quarter. wentest of the peer group more aggressively to get rid of the inventory. perhaps the ceo look the other way. -- looked the other way. alix: the stock getting hammered in premarket. can you imagine if the report had happened yesterday? david: it would have been worse. alix: coming up, the goldilocks and the three bears with emerging markets, copper, european banks flirting with bear markets, is it a signal for global growth or an

idiosyncratic trade? we will break that down. this is bloomberg. ♪

alix: goldilocks and the three bears taking the markets by storm. european banks flirting with bear market and so is copper and emerging-market equities, potentially they could be selling -- telling three stories. anding us is andrew levin from chicago, thomas digenan a -- from ubs. andrew, you can make the argument this is a trend slow down, turkey political issue, or trade issue? >> one crucial issue is china. not just about the current trade

friction. hopefully those will be resolved but it will be a tough bargaining -- tough negotiation. there are bigger structural issues china has been facing about shifting from an investment-based export-based economy to a more consumer-based economy. like we have seen in the u.s., strong retail sales and consumer striving the u.s. economy because consumers feel confident. what we have seen in china is something very different. retail spending is weakening and fixed investment at record low levels. i imagine that is making commodity investors, commodity producers uneasy all over the world because historically in the last 10-15 years, china has been a huge driver of commodity booms. david: we see increasing divergence in the u.s. and the rest of the world, in various

places. equities, a chart that shows the u.s. numbers, the blue number at the top and quite number is the world excluding the u.s. and increasing divergence and a we values. can this continue -- equity values. can it continue? >> on the earnings front, the u.s. equity market from an absolute sense, you look at the earnings and the price movement, the price movement is not ahead of the earnings. if you look at it at the idiosyncratic level, companies having difficulty are not missing on earnings are revenue, they are missing on guidance. i think the u.s. is in a unique situation. the fed has a tough path to navigate because they are focused on the u.s. economy and the u.s. economy argues you can keep raising rates and we are all of a sudden separating from other parts of the world. david: it is not just in

equities that you see it in the spread in the ranks. -- rates. as the fed tightens, the difference grows between us and the germans and the japanese. >> the challenge in japan and in europe, inflation is still low there, lots of room for recovery in europe. moving to tighten monetary policy even though inflation is still very low. these trends are part of what is at work. alix: it becomes a global liquidity conversation. onammed el-erian wrote monday talking about turkey, saying when it comes to global liquidity the world in is in transition to a trade acted -- protracted time, this is affected technically more fragile asset, especially emerging markets which have can -- experienced capital outflows. is this what we have seen this week, starting with turkey and

with china? this is the result of a fed tightening monetary policy and the ripple effect across the world? >> ripple effect is the right word because the fed, that was not the focus on what they were trying to cause. i think the fed is taking the correct path. we are hitting the point from a liquidity standpoint where some economies are more hampered by that and others. you do not have an economy spending on its own, not a good environment. >> the good news for u.s. investors is that we are concerned a year or two or three ago, it would be hard to keep the economy from overheating. over the last couple of years, we have seen strong u.s. economic growth, payrolls, retail sales, pretty much across the board with strong consumer confidence. wage growth and price growth

relatively subdued. price inflation not that different than where it was a couple of years ago. it means the fed making gradual changes to interest rates here andbeen appropriate so far they may not need to do much more tightening if they are getting close to neutral rates. good news for u.s. stocks and the u.s. bond market. maybe if the u.s. comes close to a neutral rate, the pressure on emerging markets subsides a little bit. still a question about china. david: you mentioned china. imports and exports from china and we import a lot more than we export. billion it on$50 its way and another -- what is this the wildcard to change the climate? >> i think wildcard is to lose of a term, china now is the

driver. you can look at the last 5-10 years, china has been a big part of growth economically on a global scale. to the extent china pulls back, it will be a sneeze where the world catches a cold. whether a u.s. investor or global investor, you have to pay a lot of attention to china. david: china is driving global growth but how could we inhibit that if we go in forward with this $250 billion in tariffs? >> this fall, i think the chinese and americans will resolve the great contingents, it is in their interest and our interest. that is just one part of a bigger issue, china is facing huge structural problems. a multi-your thing. china will be growing more slowly and maybe has bumps in the road. that is tough for emerging markets who have a lot of trade

ties directly with china. alix: is that what we saw this week? >> in part, yes. you mentioned three-baggers -- three bears, concerned about developments in turkey, political issues, involvement in china, but the chinese thing is a critical factor. the extent to which trade negotiations show progress this fall should not make people relax and say everything will be fine with china as there are deeply structural issues. alix: even banging the table, that is how passionate you are. david: andrew levin, thank you for being with us and thomas digenan will be staying with us. coming up, the next steps tesla needs to take do go private, potential funding from the

saudis. this is bloomberg. ♪

david: the saga is elon musk trying to take tesla private continues, the latest news is he said he said he has the finest lined up because he has been talking to the saudis. the sec is subpoenaing information to find out what the basis for his talking about having financing lined up was. we are joined from seattle by michael --michael maduell. you know sovereign wealth funds. do you know whether the saudis are interested in playing a role in taking tesla private? >> it has been well reported that they came to elon musk

about two years ago and recently it was revealed that the saudi's to get 3%, 5% stake in tesla motors. there is interest and part of the conference goal is to help diversify the kingdom's oil revenues. with tesla, it is a company that fits the mold of a green car company. solarcity, electric cars. a lot of interest in these investments. an takes stakes in uber, e-commerce startup in the middle east, i think this will be an interesting thing to play out. david: 5% is one thing. if you on most needs them to take more than 5% to do this deal, from what you know about the kingdom, would they be interested in something more than 5%? >> let's take a step back. to the softbank

vision fund that ran almost $100 billion and they were a big part of that. andy blackstone infrastructure fund commitment was fully funded. they have the capacity to do the whole thing, highly unlikely. they will probably bring in other players. silver lake partners, goldman sachs. they will probably reach out to others. david: they say elon musk does not want to relinquish anything close to control. does not anybody with a say in the way tesla is run. the way the saudi fund or other sovereign wealth funds work, whether make a substantial investment without wanting some say in what is going on? >> they would want some say, uber deal is a great example, and newsworthy deal, they would probably want one or two board seats. is thatind interesting

they would want elon musk in the driver seat because part of tesla is elon musk. without him, tesla would have a tough time and he is a celebrity ceo, cheerleader of the company and visionary. i think that would be a part of the deal, they would want him to continue to be at the company just like apple with steve jobs and amazon with jeff bezos. david: what about other sovereign wealth funds? are they interested in electrification? what about kuwait? others in the gulf? >> a lot of sovereign funds into an electrics, nio, car company out of shanghai, they just filed. an asian electric car manufacturer. there is a lot of demand.

looking at sovereign wealth ,unds for tesla, just guessing abu dhabi investment authority could be one. you may have some of the large pension plans. some of the pension plans have a mandate. to identify environmental investment. tesla fits the mold because they are not a traditional fossil fuel company, they are an electric car company. you may have large corporate's, foreign corporate's, i would not see a lot of action in china, especially with the legislation and large deals are being unwind it. -- unwinded. the severn -- david: difficulties for saudi process? get to the

>> i read some of the new reforms and it is an interesting law. i am not a lawyer. with saudi arabia, it may be easier. versus china and other interests. david: that is michael --michael maduell. alix: we are paying attention to the retail have and have-nots with walmart up after best sales in a decade but jcpenney, if it open right now, it would be a record low. based on inventory mismanagement , they have to much and have to discount. and the users -- the u.s. housing market on deck. we will break it down. this is bloomberg. ♪

alix: this is bloomberg daybreak, i am alix steel. today is a risk on. dow jones futures up 217 points as we wait for the latest on housing. european bank stocks up .2%

despite their flirting with the bear market and italian banks getting hit hard. the dollar rally taking a pause. bonds selloff taking a pause in the commodity route taking a pause. we have building permits month on month coming up 1.5%, better than estimated and the previous month which was hammered, down 2.2%. provides upwards and now down only .7%. housing starts coming in light. 7%, which isersus what had been expected. permits are better. starts not as much and jobless claims grinding, 212,000. david, it is hard to get a good read on housing right now. david: stuff coming down the pipeline. permits.

have not started building. good before a number of reasons. alix: philadelphia fed business 11.9, wes much more -- expected 22, 25 for the previous month. business survey had been relatively strong. empire manufacturing was strong but this is not as much. as we at -- new orders really not good, 9.9, wonder if it is a trades intimate conversation. david: it may be the most important number you just went over. alix: let's get good insight good joining us is our economics editor and thomas digenan of ubs wealth management. housing starts rebounding on the single-family increase, really good, is this the beginning of the better housing data? >> it is very lumpy and hard to figure out anything from a single month.

overall, housing starts are constrained by tightness and availability of construction workers. it is a skilled job. you do not come off the street and start building houses. it is hard to get permits because of constraints on land. softwood lumber, crucial to building, there are tariffs on canadian softwood lumber. homebuilders are in a squeeze. david: housing caused the great financial crisis. are we out of it? fully recovered or a way to go? >> we are recovered but the housing market right now is almost like nothing we have seen before. we have a supply problem. there is a demand for housing. normally, we more than meet the demand. some of the factors he mentioned, supply has been hampered. if anything, we are where we are

in the cycle, probably delays the cycle turning over because there is not an overbuilt and excess inventory. frustrating for homebuyers and prices are elevated. david: are interest rates affecting it or have they not come up to make a difference? >> people talk about interest rates affecting demand, interest rate, the tenure of around three and mortgage rates at 4.5%, i do not think that is hampering home-building as much as people think. alix: if you look at the terminal, you see the cost of living in the u.s., the mortgage rate is at the top line, the utility prices are the bottom line. housing affordability is at the lowest since 2008. walk the through-line, if construction costs go up and labor is a problem, but you are building and there is a shortage , what does that do to affordability? >> it will be constrained. made, housingtom

market crashes when there is over building. builders overreact to demand and build too much. we are not at that point. frustrating if you are a buyer it costs so much, not the kind -- that lede saw in to the last financial crisis were prices went out of line and builders go nuts taking advantage of it. david: are we to the point, constraint in supply in housing, prices are going up for housing, rental or ownership, that is taking the money out of other places like retail? >> i do not think that is taking money out of retail. i could not see your chart but it did not sound like you mentioned tax rates. all of the things hampering the consumer, there are benefits to the consumer. one of those is tax rates. we have not seen wage growth. the retail sector, the biggest

problem, you good draw a been diagram and show who is with amazon the most and the companies and affecting the most with amazon are struggling. the ones outside that, consumer discretionary, the more experienced franchises, they are doing very well. wex: i like you brought up will not see eight 2008 crash. talk aboutends housing prices, i worry about where we are. friends of mine says, if we have a trade war and do not have overseas buying, them coming up to buy large apartment complexes, does that help the supply and demand dynamic and leave us more to an oversupply world? >> i am working on an article for business week, the biggest problem with housing in the u.s. is zoning. overly restrictive zoning,

especially in hot areas, san francisco, silicon valley, new york. constraint onhe the availability of housing in just those three areas accounts for depressing the overall gdp growth in the united states according to a recent study in the american economics journal of macroeconomics. alix: thomas digenan, thank you very much. to recap, we had a better -- that of housing permits, not housing starts. philadelphia fed index not great with new orders falling and inventories rising and prices received fell. coming down,ields into theme buying market and the dollar rolling over a touch, a little bit of

selling on margin treasuries. david: news from outside the is this world. china have and agreed on a new approach to try to stop the trade war, beijing singing -- sending a low level delegation to the united states and they will meet with a team led by the treasury undersecretary. there have not been talks for two months. they appear to have reached an agreement in may but president trump backed away. president trump believes his tariffs on imported steel will rescue the industry, he told the wall street journal that people may complain of steel prices being more expensive but they will eventually fall. he said the tariffs protect industries essential to national security. the jury in the paul manafort financial fraud trial begins deliberating today. prosecutors say he lied to get many in bank loans in his income dropped. his lawyers tried to tarnish the

credibility of the government start witness, one-time associate rick gates. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. alix: thank you. about up, we will talk how oil companies are monetizing a midstream assets with the credit suisse head of america origination. you go to him when you want money and you are an energy company. this is bloomberg. ♪

daybreak. bloomberg coming up later today on bloomberg markets: balance of

powers, the former u.s. secretary of education. this is bloomberg. to your bloomberg business flash, more legal problems over herbicides made by the german , shares fellnto after california supreme court denied an effort to prevent the state from listing roundup on a list of chemical -- cancer-causing chemicals. a jury last week awarded a man to enter $89 million for his claims that exposure to roundup caused his cancer. bayer says the decision is that also a scientific evidence. star board wants to make changes to semantic, they have nominated five directors, the firm see semantic lagging its peers and previous deals have done little to boost growth.

cisco appears confident and overhaul of its computer products will boost corporate demands as they gave a bullish forecast to the current quarter that beat estimates. they posted higher than expected profits and reported sales rose for the third straight quarter. we will not long talk to their ceo and out :00 a.m. new york time -- 9:00 new york time on bloomberg television. alix: what was interesting about the commodity selloff was that oil did not do so bad. the white line is energy and the purple line is industrial metals . it shows the disparity of how disproportionately copper got hit. does oil need to roll over more? in your opinion, does oil stabilize or do we need to roll over more? >> in the short-term we probably will have stability. alix: why, where does it come from, a dollar thing?

is we see expectation tightening supply over the course of the next handful of months. you will see pipeline constraints in the permian basin start to put a damper on u.s. production growth as we roll into the fourth quarter. my expectation also is that we see a bit of a reduction in iranian production and exports as we roll into the fourth quarter. we have the november 4 deadline in terms of sanctions ticking in, which want to restrict a lot of the world buyers from buying iranian crude because of the key evidence. alix: a lot of macro events taking place but still the m&a. what we saw in the permian basis, contrary buying rsp, agent resources, yesterday, energ. who will be the next buyers and sellers? >> difficult to predict the

timing but i think the company that have been consolidating the permian basin will continue to do so. over the last couple of years, key buyers in the space, i think, occidental has been a large consolidator in the permian and i would not be surprised to see them do something in the near future. you cannot rule out a major, exxon mobil made a significant acquisition about 18 months ago. there will be more buyers. , still aof sellers plethora of small to mid-cap out there and some of those could be consolidated. since any resources, -- centennial resources, resolute energy, and a number of other ones that could be acquired over the next couple of years.

alix: thank you very much. the other thing companies are doing to capitalize on the oil market is spinning on their assets -- spinning off their assets. apache is partnering to create a midstream asset, $3.5 billion. considering a spinoff. joining us is robert santangelo from credit suisse. the first time i saw the ipo news, i said i have to call you. how much more will we see? >> step away from individual transactions and talk about why there is interest in these assets. we have talked about production growth and you talked about the m&a and interest in investment in the permian because of the attractiveness of the basis. you talked about where the price of oil is going. nobody knows for sure. we feel like we have confidence in the fact that production in

the permian will grow and grow and move through the infrastructure that has been invested in and needs to continue to be invested in. opportunity for institutional investors to participate in volume growth in the permian. alix: what has been the response as you market the ipo? there is so many macro headwinds when it comes to oil prices. >> a significant thing on the buy side is an interest in participating in the u.s. energy complex in a way that can generate reliable and sustainable free cash flow and growth. midstream assets are appropriately positioned provide that because there was situation against the volume growth and not subject to direct price risks. they generate high degrees of cash flow. david: the simple question i have -- you can produce all you want but if you do not get it to market, does you no good and there is a bottleneck. what will resolve that?

>> time. texas is one of the easier states for infrastructure and a variety of estimates is winky infrastructure will be -- when he infrastructure will be finished, most expect 12 months. you will see relief on the infrastructure side during the next 12-24 months. --x: what israel pipeline what is your pipeline? it is pitiful, when you look at ipo's in general in the energy complex, very small so far this year. what is your pipeline? , youth prices increasing will see an increase in activity to the back half of this year and into next year. it will be moderate and off-peak levels. investment into the sectors has been constrained an investment that goes in tends to be more widely made. a good opportunity to put money to work. alix: will it be big deals,

small deals? what type of deals? >> i think it will be a range of deals. midstream sector, and you will see activity in the mineral sector. that is another play on free cash flow in the energy sector. david: is there a fundamental need for capital? is that why you have an upswing and ipo's? >> absolutely. if you look at the permian, you will hear talk, you have a protection bottleneck by midstream infrastructure. you see in investment to relief -- we leave the bottlenecks. alix: energy is just one specialty you have but in general when you look at equity capital markets, how are they? >> generally they are quite strong. earnings have been good and transactions have come to market over the summer have generally been well received. aftermarket performance has been

solid. the shape of the calendar looks to be pretty active. post-labor day across the same sectors that have been active. alix: when you have the headlines, emerging market selloff, assets going into a tweets,ket, trade wars, how do your clients look at that? do they want to wait, pull ipo's? >> the way we have to think about it is sector by sector and company by company. the market with low levels of volatility, people are making rational investment decisions asset by asset. we need to look at the company that wants to come to market, how their sector is performing, whether prospects are in light of macro news, and whether they are infected? alix: great stuff, robert santangelo, you look great i told him, you are arrested. capital markets are doing well. great to see you, thank you.

coming up, catch the oil on oil, metals, join me for the commodity wrap at 1:00 p.m. eastern today. their up, jcpenney, conference call underway saying they plan to cut inventory. that was the problem in the unexpected full-year loss. we will break that down as we had to the open. this is bloomberg. ♪

what we are both watching his retail, jcpenney says they need to restructure inventory. david: that means right off. -- write-off. alix: they saw strength in areas like apparel, women's, cosmetics , but inventory mismanagement that was the real problem.

it's a price the street. -- it surprised the street. david: no ceo. quarter, theybig posted best sales in more than a decade and second quarter boosted the full-year outlook with shares climbing in premarket. joining us is david, the consumer research analysts who has an equal weight rating on walmart. give us your sense on these earnings. >> thank you for having me. it is an impressive topline. this is a combination of a lot of effort walmart put together to answer questions that came up following how the stock was acting an investor excitement levels early this year. time following january and february and this second quarter print really answer some of those questions. david: comparable store sales

look good, e-commerce growth look to good, any weak spots? >> not yet. the long-term for any retail company is what does the growth rate look like and return on capital look like. there are no weak spots in this quarter as we have looked at it now, inventory is tight. better on the gross profit dollar line. time is how over much does walmart have to spend to be a growthier company? seeing that there is growth coming through helps extend that conversation. it gives them more time. that what -- that was what was so important about today. , market punished macy's for having to spend more to give their top line and

jcpenney with inventory mismanagement. how does walmart handled those issues? >> the fundamental answer and how these stocks are performing as the print. let's start with stocks, keep in mind that walmart has since early this year had a lot of questions about the cost of growth. what is the new walmart going to look like? answering those questions while the stock is under relative pressure on the multiple side is going to react -- you will see it react differently to more and more excitement levels. some of this has to do with what is embedded in the stoxx going into print. -- stocks going into print. fundamentally at walmart, the ,igitally -- digital outreach some through acquisitions and something built and something branding, is starting to come together nicely with stores and

a relationship with customers. we talked to 2500 families per month in our tracker and do math around that, coupled with digital data, that combination is key to understanding the holistic relationship walmart has with customers. david: thank you for joining us. alix: interesting day shaping up. that does it for bloomberg daybreak america's, coming up, mohamed olli rehn -- mohamed p.li rehn -- mohamed oll ♪

>> from new york city. -- 30 minutes until the start of trading. this is the countdown to the open.

>> coming up, talks about talks. the u.s. and china preparing for the first official exchange since negotiations broke down. confident in the american economy. pessimism elsewhere. a bear market beckoning for tm after copper in european banks dropped 20%. ahead this morning. the s&p 500 up 4/10 of 1%. stability and treasuries at 286 on the u.s. tenure. the united between states and china are seemingly back on. the reaction from wall street so far, cautious optimism. the twod sign that sides are talking to each other. or resuming talking to each other. the people that the u.s. is sending into the discussions are not particularly high level. i don't think this is