he did not get the fed chair he expected in jay powell, and the dollar falls. gaming the system. the president returns to accusing china and europe of taking advantage of the u.s. the yuan and euro respond accordingly. the largest sovereign wealth fund in the world is investing globalization. it paid the price last quarter. welcome to "bloomberg daybreak." alix steel is still off. that with julie hyman. have: as i sit here, we numbers coming out on the latest department store to report its numbers. it is slightly ahead of estimates. $4.1 billion. that is right in line. the estimate was for a gain of 2.6%. we are seeing a beat. you see the share is moving down.

just a word of caution, don't take too much away from it. gross margin in line with estimates as well at 39.5%. i am not seeing and earnings per share number. david: we're looking at comparable store sales. they beat a little bit. the other issue is going to be margins. eps at $1.76. they beat on that. comparable stores sales was up. julie: we are still seeing those shares fall even more. it is a bit confounding seeing that these numbers were largely in line, and we saw a similar situation with macy's. we had a similar situation in the run-up to calls earnings.

we had a similar situation with macy's where they are up 50% year-to-date. david: it does feel like macy's at the moment because it looks like the numbers are good, but the stock is not reacting. it looks like the futures market overall is up. julie: the company is out with a forecast for full-year earnings, 515 to 555. the estimate was 536. there could be a little noise around. we are getting numbers from smokers, the jam company -- smucker's the jam company. we know there has been a lot of dealmaking within the food industry as of late. er's coming in ahead of estimates. david: i have net sales of one billion, and the estimate was 1.94 billion.

julie: it was a miss. we will keep on watching these various stocks. smuckers not doing anything yet. they are out with their forecast, above estimates. the full-year earnings estimate is above estimates. $8.38alyst estimate is that could end up. boosting those shares. let's take a look at what is going on in the markets overall. we have s&p futures indicating a higher open. they are up 0.2%. we will dig into this in detail in a moment. a lot of attention is being paid to comments by president trump, which is having an effect on the u.s. dollar, which is trading lower. it is down for the third straight day. seeingyear yield, we are

an increase. a little selling going on in the treasury market. 10%er continues down, up after entering a bear market leslie. this is its best winning streak since june. david: we are joined by luke kawa, bloomberg cross as a reporter, and lisa abramowicz. the markets really reacted yesterday. take a look at what happened with the dollar. it really trailed off. is that justified? is the fact of the president saying something, is that enough? luke: i think if the president says the dollar should go down, maybe for a little while it will go down. the snap reaction in the markets, there was not one. you got a brief selloff that quickly recovered.

we kind of drifted lower through the rest of the day. we are seeing that mirrored in the options market, risk reversal for dxy. they have come in since last week pretty consistently. there is this sign of waning enthusiasm for the dollar rally, which a trump remark can help spark. a lot of the commentary i am seeing is it is going down for now, but the longer-term trajectory is higher. not only did president trump try to job own the dollar weaker -- jaw bone the dollar weaker, but china said we are as a weapone yuan in this trade war. we are not trying to actively weaken it. that does matter if you have the treasury market and the

president of the u.s. trying to policy,e or tinker with especially if he recognizes the stronger dollar offsets what he is right to do on the trade side. that has a much bigger effect on an unequal trade balance that any tariff. that brings us to our second topic where he said in this interview that he thinks china is manipulating their currency, absolutely, and the euro is being manipulated also. if you look at the dollar and the room nimby in particular remnimbi in particular, you see a slight weakening of the yen on the day. the esting that versus yuan, we did not see as the

of a reaction. they are at odds. officially anyway. the treasury has not labeled anyone a manipulator. riskingesident trump is being labeled a manipulator himself. china says they are trying to keep people from taking money out of china. in an interview with reuters, president trump says he is going to complain, if they raise interest rates more. president trump saying this. jay powell has a term. he cannot be hired by president trump. fired by president trump. this underscores the unhappiness that the trump administration

has that monetary policy is offsetting some of the bone from the tax credit. david: what is manipulation? every day we are talking about some central banker that is affecting currency. is that manipulation? has a coupleasury of criteria that they define. the reaction in currency markets, you would think this weakness in the dollar would currencies getm off the back foot, but it is the rest of the g10 rallying against the dollar, and maybe those currencies are in need of intervention at some point. david: with all of this presidential talk and action, what is an investor to do? the norway sovereign wealth fund, you can see the returns. it is really miniscule.

this is at least in part because they decided to get out of bonds and into equities. they are 70% in equities, sort of betting on global growth. not doing so well this quarter. i find this fascinating. when you have sovereign wealth unds in oil-rich countries, they want to get exposure to other countries around the world. a lot of the trade policies are profoundly attacking the very globalization they are trying to ride. how did they maneuver with that? they have been betting on equities, but where do you go? he tried to go to the u.s. it also emerging markets and china -- u.s., but also emerging markets and china. thatderscores this unease is pervasive around a lot of big funds and idiosyncratic

economies that are trying to get away from their particular will house. >> one of the other things that stood out to me in norway is they did well in oil and gas this quarter, but they also said they want to divest from oil and gas investment. you run into this conundrum where you have a huge fund that wants to be what it considers to be a more ethical investor, but it still has to return money to shareholders. we can chalk this up to them not doing well because of concerns about globalization. they did not do well because they were not overweight the u.s. enough. me forger picture for sovereign wealth funds, pension funds is we have returned targets, return assumptions based on the classic 60-40. that is not going to happen in your domestic or advanced

economy equity markets. they shipped more towards private equity. in the case of canada's biggest pension, yesterday announced they are stepping up em allocations. those are the kinds of things pension funds and sovereign wealth funds are going to need to do if they are going to hit that 7% or 8% returns they assume they should be getting. david: good length with that. oh, and lisa abramowicz, thank you. and lisaawa abramowicz, thank you. you can save our charts for yourself by running gtv . coming up, more on the fed and they economy with seema shah. live from new york, this is bloomberg. ♪ bloomberg. ♪

taylor: i am taylor riggs. there is a report some tesla suppliers are concerned about getting paid. according to the wall street journal, they believe the u.s. carmaker is a financial risk. several companies have reported that tesla has tried to stretch out payments. manager run by alan howard has cut back. they are shrinking the size of their london headquarters, cutting back on space previously used as a jim, kitchen, and meeting area. this is after years of mediocre returns. the u.k. is setting out an ambitious goal for exports. announcing a new national vision to raise exports

is a proportion of our gdp from 30% to 35%, pushing us towards the top of the g7. taylor: he says brexit offers britain opportunities in global trade. that is your business flash. david: thank you. president trump's acquisition that desk accusation -- accusation moved the chinese yuan higher against the dollar. shah, principal global investors global investment strategist. did president trump top bush what he wanted? seema: maybe for a day or so. ultimately, you will see dollar strength come back through. i don't know how much further the dollar constricted from here , but if you look at the strength of the u.s. compared to the rest of the world, given the

fact that they are bringing in the trade war, that does point to further dollar strength. david: you are for to the dollar positioning. i am going to show a chart that shows how strong it is. the green line is the strength, the white is the dollar coming off in the last couple of days. is it maxed out? seema: you could maybe see a little more. was thethis year, it positioning that brought along the strength of the dollar earlier. this is a technical that cannot be ignored. fundamentals are driving it until we get to the position that it is maxed out, and then i would expect weakening. looking forward, how much can the dollar weaken even once the technicals start to play against its favor? if you expect the u.s. economy to be stronger than the rest of the world and the trade war to

continue, rates are higher, everything is pointing to a strong dollar for the next year or so. julie: you are of the opinion that the u.s. economy will be strengthening relative to the rest of the world? what is interesting today is that we see the dollar strengthening -- weakening, excuse me, but we don't see emerging-market currencies strengthening. when you look at emerging-market currencies, do you think they continue on their trajectory this year? with emerging markets, they are having a tough time this year. if you think to the beginning of this year, there was so much potential. everyone was positive about yen. -- em. they have been hit by a number of risks. whered think that, given valuations are, they are a lot

more attractive than they were four or five months ago. investor sentiment is standard. it is time for a turnaround. you need to see some sort of catalyst that comes from the fundamental side before you get that turnaround. julie: to your point about valuations, we have a chart on that. we have the relative valuation of the msci e-index. the previous times it got to this level valuation, we have seen a balance in emerging markets. as you look at the signals around the global economies, what could be that catalyst? what are you watching for? seema: if we get a dollar weakening, you could see that positioning maxed out and then the turnaround. the biggest thing would be the trade war. if you see easing tensions between the u.s. and china -- we

are already seeing it with the u.s. and eu and potentially mexico, you could see a turnaround. propely be enough to em too positive -- positive territory. you have jpmorgan saying they think the dollar will continue to strengthen and tensions with china may well increase into the midterm election. seema: i have to agree with that. when you look at where trump is from here, it is a great political strategy to up the a nte on china. he has had very little criticism from the republican party on china. on top of that, trump has had a protectionist agenda or narrative for the last two decades. i don't see that changing now. after the midterms, we may see a

pullback at that stage. from now until november, i would not see easing trade tensions. early 2019, you could see a turnaround as tensions fadeout. u.s., isme back to the it a good economic strategy? we have not yet seen a big bite as the result of tariffs. we have seen it in particular industries, but not economy wide. does that begin to change as they take effect? seema: it is a risk for the medium-term, 2019. in the short-term, there will be some business sentiment uncertainty about the trade relationship. you may see at some point it feeding through to inflationary pressures. certainly specific states where china is targeting, such as the midwest, you could see push back

there. we don't expect to see that until 2019. for the time being, i prefer u.s. equities over international equities. we may see a reversal of fortune early next year. julie: seema shah of fiscal global investors is staying with us. thank you. globalncipal loca investors is staying with us. this is bloomberg. ♪ ♪

norway's $1 trillion sovereign wealth fund managed to bring in $20 billion last quarter. joining us with more on this story is our oslo bureau chief. thank you for joining us. talk to us about what was the stumbling block from trade.

why did that workout for norway -- didn't that workout for norway? >> the fund is invested globally. any trade barriers that are directed that will impede global growth will hurt the fund. in the second quarter, it was hurt by its investments in emerging markets and china. what really helped it was its u.s. stopper for -- stock portfolio, amazon, apple, microsoft. indicationhere any that they might rethink their strategy given what is going on in global trade? >> i'm sure there is a lot of thinking going on here at the headquarters. the fund is really invested in a generational perspective. i'm sure that it is prepared to sit out any short-term noise in

terms of trade, but if it gets deeper, i'm sure it will have to think deeper. right now, it is really long-term strategy, 20 or 30 or 40 years. it is still a major bet that globalization will continue, global growth will continue, and then it continues to spread its investments globally into emerging markets, frontier markets. it is a huge investor in china. julie: what about alternative investment? 2.6% in real estate. we were talking earlier to luke kawa, who pointed out that traditional portfolios, it is difficult to get the same types of returns investors have gone over the past -- gotten over the past decade or so. is the fund going into more alternative investments? >> it has been trying and asking

the government to get to investment in private equity and infrastructure, but the government is very conservative when it comes to the fund. for now, it is hard from investing in -- barred from investing in alternative investments. inmay soon be able to invest infrastructure projects that have to do with renewable energy such as wind and solar. that is a decision that is still down the line. david: thank you so much. that is bloomberg's oslo bureau chief. coming up, we will talk about whether the fed should be easing up as the president wanted to. this is bloomberg. ♪ s bloomberg. ♪ xfinity mobile is a new wireless network

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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. julie: this is bloomberg daybreak. i'm julie hyman. alix steel is off today. let's take a look at stock market around the globe. s&p futures gaining 0.2%.

the shanghai composite rising again yesterday. we have seen a bounce in that index, up about 3% in the past two sessions. those are its best back-to-back games it's july 10. since july 10. we are looking at australia. this is its biggest pullback since march. we had earnings from bhp weighing on stocks. the dollar strengthening very slightly against the offshore yuan after president trump talked about currency manipulation by china and the ecb. the euro strengthening against the dollar. we have selling in the treasury market as he made comments about fed chairman powell and saying

he has not been easy enough in policy. copper continuing its bounce today, a fourth straight day, it's best street since june. kohl's this is a bit of a head scratcher. shares slightly -- sales slightly missing estimates. store sales rising more than analysts anticipated. the toll brothers out with its numbers, beating estimates. shares rising by 5%. the company coming out with a number of different metrics. fourth-quarter adjusted gross from tollut 24.8% brothers, the high-end homebuilder. out with itsronic numbers. a medical device maker

predicting sales rising about 5% 10%.rofit up about that looks to be hoping those shares rise by 4%. david: time to find out what is happening outside the business world. we turn to taylor riggs. taylor: president trump thousand he will not make concessions to turkey to win the return of the detained american pastor. president trump said he has set a good relationship with erdogan until now. microsoft has uncovered a new russian effort to hack american political groups before midterm elections. the targets were conservative american think tanks that have broken with president trump. the hackers created web domains that mimic the sites. microsoft got a court order to take over those domains.

the british foreign secretary will call on the eu to impose new sanctions on russia. 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 taylor riggs. this is bloomberg. david: president trump appears to be disappointed in his appointment of jay powell as fed chairman as he told supporters that he expected him to favor cheap money, and instead he has already presided over two rate hikes. the u.s. dollar moved down on the news. andelcome back luke kawa seema shah of principal global investors. fed gdp measurement that shows where we are going, chairman powell may have presided over rate hikes, but it has not slowed down growth

seemingly. what is the president complaining about? luke: it seems the president is very bullish. becauseit is confusing dennis green said the bears are who we thought they were. weome powell is who h thought he was. he hiked as a governor. i don't know what we could expect from jerome powell now other than what he has done. larry summers, maybe policy would be different from what it is now. julie: how do you trade president trump? you get these comments. as lisa abramowicz pointed out earlier, jerome powell is not going anywhere. it is difficult to remove a fed chair. president trump appointed him.

how do you trade around this if at all? seema: with this kind of environment where there are comments like that coming out, you just have to ignore and remember the fundamentals. president trump came into power. he made repeated comments about the dollar and interest rates. i think we can continue to expect this. at the beginning of this year, the market did not know that powell's intentions. it is interesting, what did think he knew about -- donald trump thinking about powell? david: there is concern over the steepness for shallowness of the factor. -- the curve.

i am hopeful that as we move forward that we will not be faced with that. he said, i am going to vote against any rate hike if i think it is going to invert the yield curve. seema: i think that would probably be the wrong strategy. you cannot ignore the yield curve. -- signals it wants used once used to provide are somewhat different in the environment we are in now. if the market believes recession is coming, but at the moment there is nothing to suggest that recession is in the next year or so. julie: i know that you and many other investors question the utility of the yield curve. luke, you have another way of looking at the yield curve. luke: we talk a lot about the term premium and how that puts

artificial flatness on the curve. what this shows is the blue line is inflation protected yield on the two-year, and the white line is the 10-year inflation protected. the bottom panel is the spread between the two. that her is already converted. all the steepness in the vanilla curve is coming from the idea that inflation over the next two years will be less robust than inflation over the last 10 years. i don't find a compelling in and n environment with a tightening labor market and tariffs in the pipeline. we are making a lot of 1990's comparisons in recent weeks and tech em's superstars. the lesson of the 90's is you can have an inverted curve without a recession. david: some people are concerned

because we are so far into this cycle at this point. we have been in growth for so long. if you look historically, the thing that has driven us over the edge is the fed hiking too fast. is that what people think they should go slower? seema: i think people are concerned about emerging markets. they're looking at the e.m. world where they are struggling from strong dollar interest rates. maybe the fed should take consideration of that. if the fed does not raise rates at the pace that they are doing, we are looking at a situation where a couple of years if not sooner, it will overheat. the fed will have to slam on the brakes, bringing on a deeper recession than otherwise. being, that is further out in the future. and seema shaha of principal global investors,

thank you for being with us. six months before the bridge people inhat killed italy, the italian officials were warned about the possibility. this is bloomberg. ♪ this is bloomberg. ♪

taylor: this is "bloomberg daybreak." i am taylor riggs. hour, up in the next dove, saito, former -- sa former saks ceo. lower in kohl's are premarket trading. they fell short of estimates. second-quarter sales were better than expected.

bloomberg has learned that the german lender is offering to buy noble group unsecured bonds for 45% of face value. deutsche bank is a key backer of the firm's turnaround. pepsico is telling its bottlers not to be worried about its plan acquisition of soda stream. wrote that itiant had no plans to offer drinks such as pepsi and mountain dew on the platform. that means consumers will not be able to make those brands at home with the soda stream machine. that is your business flash. david: tesla staved off will was poised to be his longest losing streak in more than a month, but now there are more doubts about its ability to go private. can of us is barangay blank rome.

why is this so complicated? barry: good to be with you. normally, going private transactions tend to be difficult and complicated, but they get done. there is a lot of experience out there in terms of how the procedure should be followed with regard to going private transactions. indicated, is a little bit unusual. i think that is because of the fact that we have had some disclosure about different aspects of the going private transaction that typically don't occur. what we normally see in going private transactions is the first time you hear about it, the financing is in place, and there is a definitive agreement that has been signed. here we have some premature disclosure perhaps, and now we are all trying to figure out what is going on before the transaction has been fully

baked. julie: in these kinds of situations, does that premature disclosure, does the character of the ceo affect the ability to go private? when you're talking about an acquisition of public companies, personalities can be at play. is that still a factor in going private? barry: absolutely. going private transactions are very similar to mergers. we have a situation where we have a pretty freewheeling ceo, who likes to communicate to the public and shareholders. that is fine, but the problem is whenever those communications are made, they have to be accurate and complete. if they are voluntary disclosures, which these appear to have been cap it creates -- ben, it creates a duty to update.

disclosed, there is a continuing obligation to report to the public when those facts have changed and been updated. it complicates the picture tremendously. david: it is a big assumption that they did have the wherewithal to take it private. there are a lot of hurdles. assuming they had it all could the sec stop them if they decided there were substantial questions about the accuracy of the disclosures? deals the way the sec with issues like that is not stopping transactions but making sure there is appropriate disclosure. having said that, anytime someone is involved in a going private transaction, there are significant filings that have to be made with the sec. if there is an enforcement

interest during that time, it could affect the process by making it longer and that sort of thing. i don't think the sec would ever reach the conclusion of preventing someone from going public because that is not really the job of the sec. julie: he will see if elon musk can do -- we will see if elon musk can do that job himself. let's turn to wall street beat. first up, italy's transport officials were warned six months prior to the genoa bridge collapse. brevin on a budget, alan howards office scales back. hunting down the wall. agrees to fork over profits for book sales. is jasonining us kelly.

there is a great piece in the bloomberg saying if they cancel big-timerity, government would be on the hook for $11 billion. inspectionn in february where officials were told there is real weakness in this bridge. >> one of the reasons this is garnering so much attention is people are linking this to the canary in the coal mine for infrastructure all around the world. we have had this push and pull in the public sector and private sector about how are we going to fix this. you have a lot of money on the sidelines that have amassed pools of capital. we don't know when it is going to be put to work. iss is one of the reasons it resonating. julie: how is this going to inform that?

what are you hearing if anything? are they going to be more cautious? >> i'm not sure they are going to be more cautious. they may be more aggressive. what they are not getting is a lot of cooperation from the government. the trump administration has talked about this trillion dollar infrastructure plan. that has not materialized. julie: let's move on to our second story about brevan howard. we have talked about deutsche bank cutting back. brevan howard on the asset management side getting rid of space. the gym.ee howard mind, brevan assets have slumped 75% from the peak. they did not cut staff. they do have this office space

in london that is quite lovely. it is an old neiman marcus headquarters that has been refurbished back in the day when hedge funds were killing it. these are the perks that you needed and probably still need to attract workers. the edgesutting out here, not cutting personnel, but cutting facilities. we should point out that the founder is actually doing quite well in his own fun. a sign of top performance. tough -- performance. david: jordan bell for, the wolf of wall street. he actually owes $110 million for all the fraud convictions. he is going to pay $20,000 towards the $110 million. >> here you go.

the judge is getting grumpy with him because he did not show up for court because he was on a speaking engagement in the the when you. the judge said something about for he can find some time the additional $97 million. he is one of the notorious figures on wall street, obviously played by li na of dicaprio. julie: i hear leonardo dicaprio's voice every time we talk about him. >> the likes of which we have never seen on the silver screen before. he has reinvented himself, speakerelfort, as this around the world giving talks. it seems like there were convocations with how this book contract -- complications with how this book contract player --ause half the royalties

david: are immune from garnishment. he is trying to have a second act, but it is like the first. julie: who is going to buy the sequel? how much money is he going to make? >> maybe if he can get leonardo dicaprio to play him in the movie of the sequel. julie: i don't know if a guy talking in lithuania will make is good of a movie. >> good point. david: many thanks to jason kelly. you want to catch jason kelly every day on bloomberg radio from 2:00 to 5:00 p.m. eastern. survives a keyl leadership test. it is the economy versus australian politics. this is bloomberg. ♪ ♪

david: this is what i am watching today. it is australian politics. malcolm turnbull just narrowly succeeded in beating off a challenge from someone within his own cabinet. 48 to 35 votes. a lot of people think there will be a revote in the next few days. this is representing a fundamental problem with labor, the party outside of power pulling ahead of the liberal national coalition. the incredible turnover in australian prime ministers, they have had five in the last several years. the other reason is australia tried to back the paris accords, and the rank and file are really resisting it. you are spending a lot of money

coming away from pensioners for paris. julie: coming back to this idea of populism, the different ways it is manifesting around the globe. it seems like this is australia's version of that. david: i tend to think this is the united states phenomenon, that president trump and his base was pushing against paris. australia was green way before we were green. they are very progressive on the environment. the issue is not limited just to this. julie: at the same time, speaking about the president and issues here, we just got epa regulations. david: they would really liberalize: missions in a way that -- liberalize coal emiss bes in a way that would challenged of course. they are trying to cut back on epa regulations on coal. julie: there has been a lot of

analysis of these different regulations. it says that perhaps the benefits of the obama plan and the drawbacks of this change plan have both been overblown. that the market forces are already pushing the utility industry in a particular direction. david: how many people actually work in the coal industry? there are not that many. coming up, lisa shalett, morgan stanley head of investment portfolio strategies will be here to talk about the fed and currency. live from new york, this is bloomberg. ♪ bloomberg. ♪

♪ david: no cheap money chairman.

president trump complains he did not get the fed chairman he expected. gaming the system. accusing china and europe of manipulating currencies to take advantage of the u.s. yuan and it euro respond. selling tesla short. not believing the rosy projections and the money behind the skepticism. welcome to "bloomberg daybreak," i'm david westin, back with julie hyman, alix steel is off today. julie: we are watching currency markets. rates markets on the back of comments. david: the president wanted to stir it up. julie: that is weird. he never likes to cause a commotion. as of the futures up to tens of 1% by the u.s. dollar is what we pay attention to versus yuan versus euro. there are two currencies down among the g20 currencies, one of them is yen..

for a fourthdown straight day after the comments by the president. he talked about jay powell, saying that easy money has not been easy enough as we see the fed continue to tighten. yield on the 10 year, 2.84%, not a big movement. selling in the treasury market. continued rebound in commodity prices. theer moving up once again, fourth straight day copper rising, the vestry since june. -- the best streak since june. david: taylor riggs is here with the first world news. taylor: president trump accusing china and the eu of manipulating currency. he made the accusation in an interview with reuters about providing an explanation, conflicting with findings of his own administration, the treasury department stopped short of naming the eu or china as a

currency manipulator. microsoft has uncovered a new effort to hack political groups by russia. the hackers created web domains that mimic sites. microsoft got a court order to take over those domains. the british foreign secretary will call on the eu to impose sanctions on russia over an attack on a former spy. jeremy hunt is in washington where he plans to draw attention to the poisoning. the u.s. has already imposed sanctions in the matter. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs, this is bloomberg. david: thanks so much. president trump has new criticism for the federal reserve, expressing disappointment in jay powell's leadership. that is because he thought he would be a cheap money guy and

he has already presided over two rate hikes. ,e welcome now lisa shalett always good to have you. lisa: good morning. david: the president spoke out on currency manipulation and the fed. how seriously should we take us? the the atlantic fed -- atlanta fed is showing for gdp growth -- the economy is still growing nicely. lisa: the u.s. economy is doing well. we entered third quarter with momentum. pmi holding up. retail sales surprised on upside. we saw good numbers from retailers. the u.s. economy in third quarter is probably going to do fine. david: why with the fed back off of raising rates? lisa: they absolutely will not. the president will engage in his rhetoric.

much of it is aimed at the current negotiations in washington. we will see a, meeting between u.s. officials and chinese officials in the next couple days, as well as with mexico. that is rhetoric. at morgan stanley, we have been calling for a peak in the u.s. dollar for the last three months. we are starting to see that thesis play out. it has a lot to do with the fact that the long dollar position in the world has gotten to a point of extremes -- particularly reflected in the futures market -- we are starting to see that reverse as the markets recognize the fed is probably not going to back off. we are probably at a maximum of growth differentials, economic surprise differentials,

inflation differentials around the world and it is time to rebalance. as things outside the u.s. start to catch up, where they had not in the first half of the year, we will see currencies strengthening. i do not think it is manipulation. it is economic growth with europe and china catching up. julie: who is catching up? you said europe and china. you have the pboc coming out this morning saying, we are not using yuan as a tool or going to use it as a tool in this trade back and forth. that had been one of the things that was floated in discussions of the trade back-and-forth. many numbers we have been seeing on china recently have been showing weakening growth. still growth, obviously. where do you see the catch up happening? outcomesknow economic occur with leads and lags. his we have recently seen

policy officials in china pursuing policies to restimulated the economy in terms of reducing reserve requirements in the banking system, stimulate credit growth, etc. in the second half of the year we will see that growth stabilize and improve. tona has no incentives fundamentally an affiliate currency at the current time. it has to do with the fact that we know back from the episode in 2015, weakening currency too much makes them vulnerable to capital outflows. they are very conscious that they do not want to see a flight from the renminbi. they will be measured in how they navigate. julie: if you think we will see more stability in the chinese economy in the second half of the year -- is that the base case we will see a resolution to

the tariff back and forth? lisa: i don't know. a lot of it has to do with midterm elections. a lot of what is going on in washington is purely aimed at the base. it is all rhetorical in nature. at the end of the day, we will not change much and the reason arehat global supply chains so integrated, that actually making real fundamental differences in terms of trade flows, really takes a much longer time than a couple tariffs. david: turning from china to euro, the other currency the president referred to, we will pull up a chart and ask you about it u.s.-euro relationship. the white line is the spread between the 10-year and the bund. this might suggest to someone that there is further for the u.s. dollar to go,

strengthening. lisa: we have been looking at those trends for a while. the interest rate differentials have been persistent and persistently growing, quite frankly for the last two years. we think there are other factors at play and it is not just about those interest rate differentials. it is about improvement growth. growth in the second half in europe is going to be better, we think inflation will be higher, rethink monetary policy is going to start getting more restrictive. as a result, you will see moves and currency equalizing. is going toshalett be staying with us. coming up, protectionism warnings. warning that the united states is the ultimate loser in a trade war, or could be. this is bloomberg. ♪

♪ taylor: this is "bloomberg daybreak," and i have the bloomberg business flash. shares of coal lower in premarket trading. the four-year forecast fell short of estimates. second-quarter sales and earnings were better than expected. a luxury homebuilder reported quarterly sales that the estimates. says the average almost $913,000.

some tesla suppliers are concerned about getting paid. they believe it is a financial risk to their companies. they tried to stretch out payments are asked for significant cash back. that is your bloomberg business flash/ . julie: we are watching discount brokerages this morning falling. td ameritrade, charles schwab. slumps in all. this on a report that jpmorgan is planning a new digital investing service through a free app, which would include access to free trade and equity research. you invest.d this according to a report citing company officials.

a million customers who already use the website will have access to the service. you can see why discount brokers would be down on concern over this large competitive threat. david: we will turn to global trade. global ceos warn about what president trump's trade practices could mean for global growth. andrew mackenzie warned that united states itself could be the big loser in the tug-of-war over trade. >> obviously the concerns we have looking forward, when protectionism takes hold, it has a dampening effect on the global economy. that ultimately will affect bhp. we expect china will mitigate impacts it faces. we do not just sell to china. they will do more to stimulate domestic demand and as we have been reading, it will work harder to encourage exporters. from what i learned talking to trade ministers around the world, there are a lot of

countries who want to trade more with each other, now that it looks like the u.s. wants to trade less with them and china will absolutely walk into that area and look to export with others. we do not think the impact on china, even if trade issues become real, is going to be that significant in the short to medium term. we worry about protectionism generally, because it is bad for growth in the global economy. >> maybe this exit, you are lifting dividends, at the same time, couldn't you use that money to have -- if you did, dammedif you did and if you don't but could you use this for further growth in copper? money to expand current production. volume is up 8% year on year. we have nine significant

projects underway, a major escalation program. we have told the market we will not spend more than $8 billion in the next year or so. we continue to improve efficiency of capital. we are doing everything with our cash. we are investing in the future of our business, we have taken our debt down to levels at the low level of target range, so we do not need to put more on the balance sheet and that means excess can now find its way directly into shareholders pockets. there has been money left over to grow the company in the future and there is more to come. options for the short, medium and long-term in all commodities. we have to compete for capital and we have a strong capital allocation framework which keeps us to that discipline. julie: that was the bhp ceo

speaking with bloomberg. still here is lisa shalett of morgan stanley wealth management. we were starting to talk trade a few moments ago. we have a chart looking at global manufacturing pmi's, we compared eurozone in blue, china in red and the u.s. in white. do you agree with mackenzie, that the u.s. is putting itself at a competitive disadvantage? lisa: i do. between pushing the u.s. dollar higher, which obviously hurts u.s. exporters in terms of natural level of competitiveness, but also in terms of the bellicose nature of the rhetoric. you create openings for folks to potentially forge new trading relationships away from the u.s. saying -- look, we don't need to do this, participate in bilateral negotiations.

there are other markets out there. in terms of the growing middle class, there are a lot other markets much more dynamic -- china being the single largest, india, latin america, etc. they can decide -- we will trade with each other. david: as an investor, how do you incorporate trade possibilities? it seems winery. if -- it seems binary. has anoes away, it effect. you must think in the medium and long-term we will not have trade war's? lisa: we have tried to avoid that term. we have a lot of trade related rhetoric at the moment. we think a lot of it is politically motivated. roundaid, it is a energizing the base in front of midterm elections. of the day, not a lot

of structural is going to end up happening. julie: the other countries you referred to that may do more i o trade agreements, does that happen regardless -- do more bilateral trade agreements, does that happen whether or not china and the u.s. come to an agreement? lisa: absolutely. that is part of our thesis, recommending to our clients that they globalize portfolios. thatndamentally believe while the u.s. is growing faster than the rest of the world now, that is not persistent. in fact we will have a catch up over the next two years as the rest of the world rebounds from what has been a slowdown at the beginning of this year. david: one group of countries that have put away trade problems is europe. the president saying, we will work out deals. we put up a chart showing economic surprises. blue line -- europe. white line, converging.

for a long time, europe was in deficit. they are coming together. is that because of trade? lisa: what is driving that is fundamentally, the european union had disappointing results in the first half. expectations almost overcorrected. it is one of the things that contributed to euro weakness. there was a flight of capital away from european union because there were negative surprises. now we are seeing economic surprises are converging. we believe that is one of the things that will inflect the direction of currency markets causing u.s. dollar to weaken and euro to strengthen as people come back into european capital markets. julie: what about equities in europe? how concerned are you about italy and the effect that will have? lisa: we are always concerned about politics when it comes to europe. there is still so much work to more push them toward

fiscal integration and cooperation. that having been said, it is our perspective that at the moment, a lot of those issues are on hold. the european union and european markets have navigated the turkey issue so far. that has been encouraging as investors. while we are cautious about european financials, given that exposure, we think there are places to make money in europe, particularly around energy oriented sectors, industrial sectors as trade picks up. david: turkey is one thing. when you have an economy the size of italy -- not only -- france had the prospect of populism -- italy has it. they are saying, we will break the budget. how big a threat is that potentially to the fiscal integration you're talking about in europe? lisa: i do not think it is a threat. it is an opportunity.

clearly, everyone gets the joke in italy. this is the government that the people in italy want. i think there is going to be progress to give them fiscal relief. angela merkel understands that the future of the union depends on more flexibility in the fiscal regime. david: germany to the rescue, once again. lisa: i did not say that. david: i did. lisa shalett staying with us. coming up, you might not need a big wallet for the next line up of products from apple. more on that, next. this is bloomberg. ♪

♪ julie: a headline that caught our attention on tesla. morgan stanley is no longer going to be covering tesla. julie:the analyst, a well-knowno

analyst,'s calls usually get attention and can sometimes move stocks. tesla moving to, not rated. the price target is being removed. there are a couple reasons something like this could happen. david: one could speculate one reason could be if morgan stanley were retained by somebody in connection -- julie: they could be a conflict of interest. tesla shares up a percent. we will have a short seller explain. selfishly, i am disappointed if adam jones can't come on. he is obviously good. apple slashing prices, hoping it will improve sales. working on a new low-cost macbook. macbook. have a

>> they have not made significant changes to the laptop in a long time. upgrades, faster --cessing buffer consumers but for consumers there has not been a significant overall in quite some time. david: particularly for the price. >> that has hurt apple. google is taking a significant share of the education market because more schools by these computers in bulk. apple is trying to compete. david: the chrome book, it doesn't have processing power in the machine but uses the cloud. is apple thinking of doing that? >> that is a good question. we do not know exactly what this will look like. it will have a higher resolution screen and be at low cost. how do they make that low-cost? part of the reason it has been

more expensive is because apple does not get as much revenue from macbooks. they've talked about merging that with ios store on ipad and iphone's. you have more updated applications. that could be a way in which they could make the economics work. david: that integration makes sense to me. brooke sullivan, thank you so much. a read on retail after earnings. we speak with the former saks ceo. that is next. this is bloomberg. ♪

♪ this is "bloomberg daybreak," and let's take a look at markets this morning. equities around the globe, s&p futures gain 2/10 of 1%.

european stocks rising, stoxx 600 up half of 1%. continuing to strengthen shanghai, the best two day performance in more than a month. australian stocks sold off disappointing numbers. cross asset, currencies this morning. the dollar strengthening against offshore yuan. it had been weakening against onshore, after the comment from president trump that he is concerned the chinese and the europeans are manipulating currency. u.s.g up a gain, the dollar, 10 year yield holding steady at 2.84%. he also commented on the chairman jay powell, trump did. the fed chairman has been more aggressive than he would have hoped in raising rates. copper prices hanging above $6,000. david: tj maxx just came out as

you were talking. $1.77.s per share of up 2%. they took the full year earnings per share and guidance of. they had good news out of tj maxx as you are speaking. -- guidance up. julie: they have been a perennial high flyer in retail. here is the interesting situation. macy's, kohl's, rallying big this year, both of which selling off after earnings. year, close tos record yesterday, up 35% year to date. still up premarket because of the big beat. kohl's is a sharp contrast. the second quarter, earnings beating estimates but the stock is falling in premarket trading. perhaps expectations were running even higher. david: a quick review suggests

they were up across the board. julie: tjx. david: they also took their full-year forecast up, second-quarter net sales beat highest estimates. they got every single one of them green. right now, premarket, almost 5%. we areese reports, coming to the end of the retail reports in terms of earnings. it has been a mixed bag. walmart and nordstrom doing well. jcpenney doing poorly. a range in between. , former ceo of saks. good to have you. steve: good morning. david: i will put up a chart that shows retail sales. it has been bumping around, the growth level. it is around the same level for some time.

give us your sense of where they are? steve: the consumer is in great shape. retail sales, first half of the year, north of 5%. that would come out of the mastercard numbers. you are seeing a consumer that is seeing best results since 2012. it is a healthy consumer. they are shopping, buying. results second-quarter reflect that. first quarter results reflect, for six months reflect a strong earnings report. julie: one of the limiting factors for retailers has been cost. that has been a concern. you're looking at squeeze margins. freight costs going up. input costs going up. labor costs rising. how much of a problem is that going to be for retailers? steve: if i look at it over the last six months in the second quarter, margins were healthy. priced good at full

selling coming inventories in line and they are coming in to fall in good shape. having said that, you get into issues of tariffs, continued labor wage increases and risk going forward. it is fragile. i would be concerned as we look at the risks associated with tariffs but i feel good about where they are. line is profitow margin, the blue, operating margin. a dip in 2009. generally, on the upswing. steve: you have a positive trend now. this is the healthiest i have seen retail in years. julie: inventory management -- steve: it is better understanding the consumer. much more efficient in spending. overall, healthy environment. we have a ways to go. there is a lot of opportunity. david: a fair amount of diversions. you had different results.

walmart at the top, nordstrom doing well, jcpenney at the bottom. macy's -- strong numbers, they got dinged in the stock. steve: you have to look at long-term perspective. macy's was doubled, now we are closer to 38-40. it took a hit on earnings because it was a bounce back off expectations. there has been a remarkable run for macy's, kohl's, tjx. these are good numbers. you have a long way to go. these stocks took a hit off '09. they have recovered somewhat. in terms of versus several years ago, the comps are improving but they have a ways to go. julie: the last phase of out performers within retail have been characterized by a few things. improving inventory management by keeping up online. nordstrom's is an example. walmart too.

what is the next challenge for retailers? steve: we are in the early innings of what we used to call omni channel retail. these companies are becoming very major internet players. macy's is one of the top 10 internet players overall. you have a presence in internet but it is not just internet. it is not brick-and-mortar versus just the internet. it is the players that are able to be facile about moving inventory, consumers moving between the channels. you have to have the technological background, the infrastructure to make it happen. that is why you are seeing winners and losers. the ones able to play across channels are doing much better. even internet players -- they are opening stores. it is not internet only. everyone wants rick and mortar as well as the internet. julie: click and collect at walmart. steve: walmart is a terrific

example of having changed the culture. everyone is skeptical when they pay $3 billion for jet.com, they changed the culture. what doug mcmillon did in transforming walmart is a terrific example of what companies need to be thinking of. a pilotohl's has program with amazon where you can return amazon merchandise to kohl's. steve: that is a great example of how you have to change. kohl's is a terrific retailer. they have partnered with amazon, you can buy the echo, return amazon products. they are only doing it in a few stores, 7% overall comp increases partnering with amazon. what could it be? every retailer has to look at what is right for them to innovate in the new environment. julie: i want to bring back lisa shalett. talk to us about the investing thesis on retail and consumer discretionary.

maybe that is different from looking at the health of businesses overall? lisa: steve brought up a great point. where we are in morgan stanley, we have recently moved to underweight on consumer discretionary broadly as a sector. consumer discretionary, like technology, has been a sector leading for the cycle, for the past decade. we believe expectations and valuations is a sector, quite rich, and the time is for stock selection and active management. the point steve makes about focusing on winners and losers is one that resonates with us, where we would move away from a broad sector overweight to focus on companies that can navigate from here. we are late cycle. we believe consumer credit growth is peaking, the last three quarters we have begun to see deceleration. still growing, but deceleration in the rate. to us, that combined with the

rollover in consumer confidence -- for tells over the next six to nine months, slower backdrop. you want to pick the guys who are taking share. david: does that late cycle get extended by tax cuts? lisa: there is always the wood, should. we do not know the full impact of the tax plan yet. the reason is -- the effects 2019, whent april, people have to pay the bill. we see how people navigate the changes, the retail footprint overlaying with states impacted. a portion of taxpayers are paying more. on the coasts, california, new york, new jersey, massachusetts, higher state tax oriented states being impacted. we will have to wait and see.

that is why you want to pick and choose. julie: do you find retailers are loss backfor taxol tax roll offs -- tax roll offs or are they predicting steady? steve: you are now starting to get tougher comps. the turnaround started last fall. on the conservative side. positive momentum begets positive momentum. people thinking you are coming off a high basin you will have a low number. when you have a positive trend going, it feeds itself. i am expecting you will see a better number in the fall season than people think. the national retail federation said it would be at least 4.5% growth. i bet it is 5% unless it blows up with the tariffs. point, it iss about stockpicking and those

companies culturally changing and making the investment. you have this window. earnings were good in the first half of the year. companies were able to reinvest behind businesses and it is putting the money in analytics, omni channel retail, changing the culture in what kind of fashion and inventory you are investing in. the ones doing it well are bearing fruit. you have a lot of recovery. one year ago, everyone wrote off retail. when macy's was down, they had written it off and said, there is no retail, it is amazon -- david: [laughter] steve: brick-and-mortar anymore -- that is crazy. 80% to 90% of retail is still in store and the companies making cultural investments are winning. david: not surprisingly, bullish on retail. great to have you with us. stephen sadove and lisa shalett, great to have you here. julie: great conversation on consumer discretionary.

let's talk about another way people are spending money. or should i say, investing. chaseate on j.p. morgan -- offering digital investing service that includes free trades and no account minimums. we are selling the -- we are showing the discount brokerage. the service is going live next week and will give 100 free trade in the first year and the ability to earn unlimited free trading. this presents a competitive threat to discount brokerages, this according to a jpmorgan spokeswoman. 47 million customers are going to be offered the program. i do not know off the top of my head how many customers these discount brokers have but 47 million is a lot of people to be offered the program. it will offer access to hundreds of no minimum funds. david: over to morgan stanley. morgan stanley has stopped analyzing tesla stock.

a big loss because adam jones is well-known. there are a lot of reasons that could be. we do not know why it is but we have to think about the possibility morgan stanley may be being retained in connection with a transition to private. tesla no longer being covered by morgan stanley. julie: the analyst the not immediately return voicemail or email. david: i said, he is a wise man. julie: [laughter] david: we will talk more about tesla coming up. we will speak with a short seller, chris brown. live from new york, this is bloomberg. ♪

♪ taylor: this is "bloomberg daybreak," and i am taylor riggs. coming up later on "bloomberg

markets," let's get the bloomberg business flash. cutting back. thatberg has learned management is shrinking the size of london headquarters, cutting back on space used as a kitchen and meeting area. they are rebounding from years of mediocre returns. deutsche bank doubling down on the bet. the german lender is offering to buy a noble group, 45% of face value. deutsche bank is the backer of the turnaround. vote will beeek, a held. pepsico telling bottlers not to worry about the acquisition of soda stream.

the beverage giant wrote that it has no plans to offer drinks such as pepsi and mountain dew on the platform. that means consumers will not be able to make those brands at home, with the soda stream machine. that is your bloomberg business flash. david: thanks. elon musk tweeted about taking tesla private. he said it was secure. now it looks like it was insecure. stock has declined almost 19%. solarcity, which caused our next guest to take short interest in the stock. we welcome from detroit, chris brown. welcome to the program. give us your sense about where elon musk and this company is? chris: we are predominately focused -- we are a long short

fund. when we do short, we look for stocks where management has promised something they cannot possibly deliver, and where the valuation reflects the fact that shareholders believe that promise. it is better still if the company is running out of cash and burning cash and going to have to raise equity. we really could not resist the allure of tesla. we tend not to short on valuation. tesla has been a very overvalued stock for a long time. we got involved pretty seriously after the solarcity acquisition. point, thethis reason we increased short position recently is you have come to a culmination of things not going well. i will say, subjectively, why i

think things are not going well, from some of the things about elon's behavior and objectively things that prove things are not going well. firstly, an anecdote. if i say something bad about you, and everything is going ok, you are probably going to let it fall off, right? , thereay, james franklin was an anonymous poll that came out that said he is the most overrated football coach in america. -- thesense was not evil other football coaches are trying to bring me down. his response was -- we are going to focus on what we do here in our program and execute on what we can do. if you compare that to -- huh? david: back to tesla. the lady duff protest too much, fair enough. id you increase your short

position -- which way would tesla be better off? chris: there is zero chance of 420going private if $ happens. waslast conference call brilliant theater. they did a couple things right. they brought analysts on, said they were sorry, reiterated financial guidance. there were three red flags in the conference call if you are paying attention. number one. whether thereo was a regulatory notification they were unable to raise capital right now, was very scripted. people misunderstood the response to that question. the most important red flag that came out of that call was the

use of qualifiers. when someone is telling you something but they are qualifying it unnecessarily, that is a bad sign of dishonesty. ,lon musk keeps talking about he mentioned the term repeatedly out of the blue, he is never talked about that before. that is already covered in safe harbor. why would he mentioned that? -- mention that? julie: take a step back. at the end of the day, this is a car company. they keep making cars, people keep buying cars. there are questions about his leadership but, say tesla puts in a chief operating officer to be another layer of rationality? do you think that improves the prospects of the company? they are still churning out cars and people are still buying? . chris: if your car works, people of the car. there is the problem.

they have an imminent disaster. as they have ramped up -- i do not know if you have this graphic -- 40% of people picking up their car have some issue with their car. 25% of people picking up their car have an issue immediately requiring service. that is an immensely expensive way of doing business. it is catastrophically expensive. david: that is something that appeared on facebook. chris: that was on the facebook model iii group. the reason he mentioned that terms often on the last conference call, he knows it's something. i do not know that he would say that. what you've seen of the last week is a big slowdown in production. that could be potentially catastrophic. to put it simply, can this company survive with or

without elon musk? chris: right now they need a giant capital infusion. if they are smart, they are preparing a large equity rate. they need to take out a good part of debt, and raise equity capital. if they do not do that, this company is going into either in court or out-of-court restructuring quickly. they need equity infusion. julie: a big order, perhaps. thanks, chris brown. to tesla fort comment on the short and the company did not return our messages. this is bloomberg. ♪

♪ watching,t i am important story on wall street. everything keeps getting cheaper, to the point of being free. no fee etf's in some cases and now you're talking about free trading potentially.

jpmorgan offering a new digital investing service including free trades and no account minimums. this is a competitive threat for discount brokers but also it is a sign of what has been going on in the industry. consumers do not want to pay to trade. they do not want to pay fees on products they are trading. david: you can then up sell them. julie: if you have a no fee etf's and you're getting your clients there, it could be good. david: it sounds good. coming up on "bloomberg markets," with jonathan ferro, a conversation on tesla. live from new york, this is bloomberg. ♪

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

coming up, the president complaining that jay powell isn't the fed chair he expected. the eu ofhina and currency manipulation and offer no concessions for turkey in a diplomatic dispute that has rocked the economy. 30 minutes away from the opening bell with futures positive. weakerfx market, the dollar. treasury up by a basis point. president donald trump taking aim at the federal reserve. saying he thought jay powell would be a cheap money chairman. >> the fed's independence is guaranteed. they've got a crystal clear mandate. >> the only way the central bank can deal with this is to continue to do the right thing.