s&p and nasdaq fit at record highs. dollar find its footing. fed as vicehe chair. the yield curve continues to flatten. to ecb, please, sir, by more -- buy more. welcome. was not on television, i would do the english accent, but i don't know if you are ready. there are 3.5 people trading. things, stocks at 52-week highs. maybe there are some cracks in the weakness. david: it is on a tear. alix: we are losing a little.

the reason why, the dollar finally finding it footing. it is down 3/10 of 1%. the dollar come up over the last two weeks. potentially finding a footing. will we have seen the bottom? 20 basis points is how we sit with the 2-10. there is maybe a market thing happening. david: sounds exciting to me. time for your morning brief. canada's foreign minister will be going back into talks in washington. they are trying to come to terms before the friday deadline. we get pending home sales data for july. at 1:00, the u.s. treasury will auction $31 billion in seven-year notes. we are joined by peggy

collins and gina martin adams. talking about the ability of the rally to sustain, a look at bottoms up analysis, that is a bit optimistic. >> it is optimistic based on our macro outlook. --it lies the fair value we expect gains to continue to incrementally move higher. close for a strategist's work. the story is we are all suggesting fundamentals are supporting this advance. to the dollarpens and emerging markets -- that is a good tie in.

you can see the dollar stabilizing and the emerging market continues to get hit. stabilizes a little bit. it is the contagion spread through fear. it is something the market has not worked out. >> you balance and off the shakiness we have seen with trade war tensions earlier in the summer somewhat settling out in terms of expectations for investors and financial advisors . the record and the stock market we start to hear, another record, another record, is leaving investors to -- should i get in before the end of the year? we are seeing short bets start to rise and see people hedge. there is fear we are not seeing everything. have a story out about how short bets has rallied around a

group of faang stocks. been: a friend of ours has confirmed for vice chair of the fed. we talked about how he felt about the yield curve and how the economy was doing. this is what he said. following markets for 30 plus years. one of the few reliable rules of thumb is when the u.s. yield curve inverts, a recession happens. david: it is not inverted yet. we will put up a chart showing what is going on. how worried should we be? it is getting flat. debatethere is some around whether or not the central bank easing we have seen over the past few years changes the calculus in terms of how much that matters.

research came out of san francisco earlier saying it matters a lot. that gap is closing in. it is something fixed income traders are watching. david: the said it would be worried about this as rich clarida. are we expecting more increases? what does that do to the equity market? fed suggests it is going to do more than what is priced in. the equity and bond market together suggest the fed will continue to tighten. will flattenve until we barely get above zero and then they stop. they is implied perception will time this perfectly and make sure we don't get an inverted yield curve. whether or not that happens depends on the events over the next year. perfection, kind of like a

brexit deal. if you come inside david's terminal, leverage funds are short. blue bars versus the white bars. who throws in the towel first and how does that reverberate through the u.s. equity market? time you get two points in where you have extreme positioning. so many people were long on the euro. it created a dollar surge. now you have that in the treasury market. you could see volatility and yields in the coming months. right now, one reason we are not seeing weakness spreading to develop markets is because you haven't seen the contagion effect. you have not seen the dollar store or the oil prices get creamed.

those are things you want to watch. the treasury market is the center of attention with respect to being called on one side of the boat. alix: to italy, my favorite headline. --ly reportedly wanting asking the ecb if they will buy more bonds because they will get a downgrade. this boggles my mind. it might go to china. trump saying maybe we will buy your ecb's. -- i expect italy to be in the headlines for the next several weeks. peggy: there is a lot of watch on whether they will follow the october,e expect and moody's and s&p. they are trying to watch what follows in italy. ,avid: going beyond traders

what we see is volatility, political volatility every day. peggy: it has been a rough summer for europe. we talk about u.s. equity prices . european equity markets are struggling. the combination of political and debt concerns, there is a lot of weakness that could filter through as well. you have italy and brexit, this combination of pressure coming down on europe harder than the rest of the developed markets. you see that in the exchanges. this is a time when it is a good time to look at european asset because it has been such damage and the euro is turning around. the conditions for better earnings growth is there. there are so me? marks.o many question not: the value trade has hand out. it is about growth.

until tech rolls over, how can you buy value? with the u.s., we have seen enough rotation. globally, i don't think that is the case. lead au.s., it could value rotation globally. it is so early to make that call. you need to see the yield curve steepen for financials to power that trade. it has been about health care. names people don't generally reference who are not big players. you need to see more rotation in the u.s. to lead that trade globally. david: thank you for being here. a reminder, you can find although the charts we used and more by running gtv on your terminal. coming up, more on the s&p and

nasdaq sitting at record levels. we will talk about that with mark howard and what he says we should expect for the unpredictable month of september. live from new york, this is bloomberg. ♪

>> this is your bloomberg business flash card the maker of james bond's favorite car is going public. they are considering an ipo in london. the company is filing registration papers and will decide whether to go ahead by september 20. aston martin is said to seek a valuation of $6.4 million. parent out forle

that have a new fan. morgan stanley bumped up there target by 35% and 14%. the bank sees amazon cloud services and waymo as catalysts. hewlett-packard came out with better-than-expected profit forecast. they are starting to benefit from cost-cutting and a move businesses such as networking and services. we welcome mark howard. i want to put up a chart on my terminal. it compares the market b readth, s&p is broader. neither one is nearly as broad as it was at the end of last

year. mark: the important thing is a broadening of the s&p. it was narrow before. nasdaq was on par with it. companies across a broader range companies, large gap they are benefiting from some of the advances in the tech space that contributed to the strong run in mastec. the implementation -- run in nasdaq. the implementation and ai is being employed more broadly and revenuecontributing to growth and better earnings. david: they are making more money off ai and technology. is that showing up in earnings? mark: i don't think it is. you hear it in comments from corporate management, discussions around employing blockchain more broadly. it is on the horizon.

investors are starting to discount the benefits in the future rather than income today. long is this sustainable? you look at state profit margins, i cannot imagine how many times i have heard peak margin and you are not going to buy the s&p because you have more margin. you look at the profit margin, 9.7%. how much more can that expand and what does that due to the record high? there are a lot of moving components including trade and currencies. it is not just one variable. we are moving towards what has historically been peak earnings. there are sectors of the economy that are likely to experience better longer-term and sustained profit at these high levels because of the implementation, not just of technology, but

better understanding of their customer. that is a critical component. look at a world when health care, tech are sitting at record highs, where? same storebuy with sales stronger than expected. lowe's, home depot. some of the more and previously discounted sectors are harnessing data better and they understand their customers, provide fresher selections and price more appropriately. david: it should show up in productivity data sooner or later. are we seeing it? it should, but there are relentless secular changes offsetting that. marketplace was discounting a traditional slick google turn

on -- cyclical turn on the trends technology imposed on these old-school companies. now there is an offset. investors are more comfortable pushing out profit expectations. expand, you need to borrow more to do that. that leads us to rising interest rates. rich clarida confirmed as vice chair of the fed. here is what he had to say about the yield curve. >> site have been following markets for 30 plus years. one of the few, reliable rules of thumb, when the u.s. yield curve inverts, a recession happens in the next 12 months. i would be worried with an inverted yield. alix: why we are inverting, let's put that aside. thanks might not loan as much. higher borrowing costs will hurt

expansion. mark: we monitor the yield curve and think the trend is of concern. we think it will flatten further for the next few months. that is of concern. we don't overweight that for reasons of the germanic distortion in the -- the dramatic treasury distortion that has happened. it is not just treasuries, but in european assets and japanese assets as well. we think when you add it all up, the curve is distorted by policy moves. it is not as disconcerting as it might be. david: we hear various fed members are sensitive to this issue. is gdp growth or earnings of corporations to the rate?

between 2.75 and 3.5. does that make a big difference? i am not an economist. unlike other regions, like europe, where bank lending is a greater portion of the financial markets. it has a bigger impact on savers and spenders. in the u.s., there is a boom on the credit providers. there are huge pulls of money and much more sensitive to generating return. there is ample money for transactions. i don't see that going down lending activities as much as prior cycles.

alix: mark will be sticking with us. italy may reach out to the ecb to buy out its bonds. ♪

alix: italy looking to the central bank for a new round of government bond purchases to shield it debt and threat of rating downgrade. ilan, ours from me reporter. are these potential claims real? > what is clear is the italian government is seeking the ecb to start a new round of government from to protect its debt

speculation. a couple members of the government have been vocal. ecb tolready asked the intervene. while this report is not confirmed, what is crucial here is the budget flow, which is coming next month. the government is nervous on which could be the reaction of the investor on the budget. they may or may not break the union,, but the european this is gathering a lot of attention. alix: indeed. if you want your bond yields to go down, maybe you should deal with your budget. tommaso, thank you. with us, mark howard. this is the italian-spanish 10 year spread here. 150 six basis points.

we haven't seen this since 2011, 2012. anxietyere has been building around italy. these concerns ebb and flow. it is a new government coalition . how they present their budget next month and how they incorporate recent events such as the bread collapsed -- such as the bridge collapse. on top of that are new rules that narrow the buyer base. that is a double whammy. the market, it is one of the few sovereigns trading at a 52-week wide. spot in the region. people are concerned post turkey the next push may be on italy. this news may stem that. david: with turkey, is it loui eriksson craddick -- with

turkey, is it idiosyncratic? are the issues limited to italy? in the short term, i don't think market participants think there is a systemic worry. could be a knock on securities, which have a correlation to italian sovereign. more broadly, we would not see an effect. .lix: you have the euro index they have been tracking each other, but now the diversions. -- divergence. what do you have to see to see it be more systemic? rating agencies would

have to act and create another level of anxiety after the budget process concludes in october. that would be one piece of that. i would expect you would have to see a broader change in risk sentiment. with a cheapening in btb versus bunds or other assets, it can draw investor interest. people are going to dip in for value when you see this cheapening. bex: market our will sticking with us. canada rejoins nafta talks after the u.s. and mexico reach a preliminary deal. ♪ .

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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: this is "bloomberg daybreak." i am alix steel. happy wednesday, everybody. again, s&pking out futures are flat.

health care at a record. how much more juice is there? in europe, you see a little bit of a comeback from a minor dip. equities now flat on the day. in our asset classes here come of the dollar finding the footing here. .3%.dollar down by we see some stability with the exception of the lira, yet another record low with the lira down 3% again. it is like catching a falling knife. what can the turkish government actually do? we have seven-year notes, two-year floating-rate notes coming out, but the seven we will watch. crude up by .5%. david: let's get an update on headlines. ,hat, we turn to kailey leinz who is here with first word news. kailey: the u.k. and the

european union are privately backing off their october deadline for a brexit deal. bloomberg has learned they hope to finalize terms by november. the pace of the talks is picking up. canada's foreign minister has now joined nafta talks in washington, as she is facing a friday deadline imposed by the u.s. she says she is encouraged by progress made by the u.s. and mexico. president trump has threatened to impose tariffs on canadian auto exports. voters have elected a trump republican to go against democrats in november in florida. congressman ron desantis trail in polls that took the lead after a vigorous endorsement from the president. he will face andrew gillum, who was endorsed by

self-described democratic socialist bernie sanders florida has never had a black governor perry global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. the mexican peso slumping slightly after mexico region preliminary trade agreement with the u.s. canada is set to make a concession for nafta. still with us is mark howard b.n.p. paribas. we look at the three-day chart as well as the c.a.d. what happened yesterday would be peso, as a starting to slip up a little, this is the inverse reaction to the next dollar and the c.a.d. dollar. is this idiosyncratic? what do you think? mark: alix, they're obviously was a lot of anxiety around the this year, and it was not

just the issue of nafta and trade, but it was the election, the border issue, and how the trump administration will sympathize those two and -- synthesize those t andw whethero we will even get a nafta deal. i do think there is a little bit of anxiety, because it is not just a one-to-one issue. n theow have to weigh i canadian discussion, because of canada does not work out, then it impacts the mexico deal. lopez,what about mr. because also from mexico's perspective, they have a new president with a very different economic approach? imposedd a 90-day deadline. that is a good question, david. views.t an expert on his alix: mark howard bnp paribas,

thank you for joining us. david: for more on a trade negotiations, we are talking about the negotiations going on right now between robert lighthizer, meeting with canada's foreign minister as we speak to try to reach an agreement before friday's deadline. this is after reaching a preliminary deal. with mexico. here is what wilbur ross had to say on the subject. nafta to clearly wants be trilateral, and that has been a process we have been engaged in in the last year. asking canada to consider joining the agreement that we already have with mexico. david: ok, we have three countries involved. now we will bring in people who can tell us about all three of those countries and all three of those areas are joining us from

rafael moises kalach mizrahi, grupo kaltex sa de cv. we also have dale moore, american farm bureau federation. and from new york, we're andy novakovic, cornell university professor. how is this being seen from the mexican point of view? will this deal, if it goes through, because from mexico business? rafael: for sure it is a good deal for mexican business. we took two years to get here. this is a positive sign. hopefully we can get our canadian friends to join, and it will be an even better deal, but we are all thumbs up for this deal now. alix: in order to get the canadians on board, it all has to do with dairy. andy, what will we see canada came a little bit?

prof. novakovic: it is a tough proposition because this very issue has become a single, iconic issue for canada in these trade discussions. dealn th auto industry is a lever. outside looking in with respect to respectingse her agriculture that has become deeply embedded. david: including kerry is a big issue for the canadians. is a big deal for the united states? i talked to the republican senator from wisconsin, and this is what he had to say. exports double the quantity of dairy than ban imports. we basically have -- than it imports. we basically have a two to one. david: that is what i do not

quite understand, andy, it sounds like we are already exporting what to canada. prof. novakovic: there is a pretty high level of exports and imports between canada and the u.s. when that agreement was first made, both of us were being very protectionist. this was in the early 1980's. in about a decade, we completely changed and did a 180 on our attitude about trade. canada did not. now the tension is really different, because we got agreement that made sense 34 years ago, and today, it does not seem like it makes as much sense. yes, there is a change now that is more favorable from their standpoint, but i think what really is annoying us is they seem to be leveraging their highly protectionist system to

sort of create an export advantage and play games and export markets troubling not so relationships trading with canada but with other countries. alix: that leads us to the u.s., and dale, weigh in on this. mexico and canada are two of the top three players when it comes to where our farm stuff goes. questionmexico, the mark with canada, what is best for farmers? dale: when it comes to canada, one of the things we look at is, you know, in partnership with mexico on the dairy farm business. our hope is that we can because of deal bee with canada that we have with mexico. it has worked across the country. one of the things that plays into this is the ability to level the playing field but also in whatmoving forward is a trilateral agreement or the

two agreements working side-by-side. we see this as a very important step forward. the agreement with mexico that was announced on monday, and we have is processed now with canada coming back to the table, for our français and ranchers that is a big deal. david: moises, how is it received by farmers and ranchers in mexico? is this a good deal for the mexican farmer? moises: i think so. lot rain and other products from the u.s., and we sit back things like photos and b-- send back things like all avocados and berries. this new deal is beautiful, because it permits growth to be there for the future for the producers. let me get you one more information. typically what is done under the assumption that the u.s. was going to be there.

now that it is not, canada and mexico, other countries from the asia-pacific am i do have a deal, and that includes some market actors in production, gary market in canada. i do believe the u.s. ones that market into nafta, too. mr. clarida: the other part of the western national and alix: the other part of the question is you have to pay workers more, $16 an hour, potentially. can businesses handle that kind of increase, and do businesses feel certainty that this will remain was we get into government? moises: i think that is a misconception. we do not have to pay more money to the employees. it really is -- parts of the car have to be done, produced on a high-wage zone. that does not mean we have to pay that amount in mexico. you can buy those arts from the u.s. or canada, which is 40% that part of the deal, and you

can actually get 60% from mexico. i think it is misconceived, it has not been well informed, but it is not a wag focus, it is a geographical area where you produce those parts. david: dale, let's go back to the u.s. farmer. you call it a "big dang deal," was i love. it will be pretty good to the american farmer. at the same time, the export market as china. is the american farmer still under a low stress because of retaliatory actions already taken or to be taken by china? dale: absolutely. farming economy has been taken a hit over the last five years, over 15% with net foreign income. onn you have time tariffs top of the trade war, they are getting farmers and ranchers right in their populace, pocketbooks,

right to go into the season. they need a bridge to stand on in these tough times. as we look at the agreement with mexico, canada coming back to the table, a bright spot that we hope will get those particular issues resolved, get our north american trade back on track, and then continue the hard work soget china issues resolved that that part of the very important market, as you mentioned, our top two markets that i getting them back on track would be a good shot in the arm for the u.s. agriculture economy. david: many thanks to dale moore, american farm bureau federation bureau of public kalach of grupo kaltex, and andy novakovic, professor of agricultural economics at cornell university. alix: sporting goods not having a good day, stocks sinking 9%.

here is the why. nest sales for the quarter -- $2.18 billion. dated raise their guidance to the high-end, so you have short-term bad, longer-term not so bad. they also see the full-year comp sales -3% to -4% after they miss comp sales for the second quarter. so revised is not enough to combat what is happening in their business. david: so we missed on earnings that we missed on comp store earnings, but it is going to get better? alix: apparently it is going to get better, even though the cons for the school year is down 4%. just like the jcpenney story, not a terrible. david: the market is not like it very much. alix: no, significant declines in their under armour sales. part of it seems to be may will pay more to expand, but also

under armour not holding up. david: coming up, iran sanctions breach. standard chartered may be facing more fines. more on that next in wall street beat. this is bloomberg. ♪ erg. ♪

kailey: this is "bloomberg daybreak." i am kailey leinz. coming up in the next hour, citizens financial's ceo. ♪

david: we turn now to the wall street beat, where we cover three things wall street will be buzzing about. first up, standard chartered no no. facing even more fines for violating u.s. sessions on iran. then banking on the pga, tapping to takeutsche bank ceo the lead. and no muzzle on lusk. -- musk. elon musk 62 twitter again. showing erotic tweeting -- musk takes to twitter again, showing tweeting tendencies. alix: there is now a tendency against standard chartered. mark: this is very bad news for

standard chartered. you got the sense that they were done with this. they ate not a significant amount of money. things were especially that back then -- not they are great right now -- but especially back then. david: it is not like this guy walked up the street and said "i am not a radio." iranian." >> that is the key to this whole story. is you are inside standard chartered, you worried about this from a parochial standpoint, but if you are watching from afar, you have administration that is of two minds. increasinglyen an

hardline against iran specifically over the past few months. negotiations, all sorts of things about the iran deal that the obama administration brokered, yet you have brought rosenstein, the deputy attorney general, saying you know what, we will lay off the banks for a second. you haveeresting as sanctions coming back on iran from the u.s., could it make the sanctions hurt even more than they did before? david: that is interesting. meantime, let's go to the golf course. [laughter] alix: we will tweet from the golf course. david: a greater basically has been brought in to run the pga. i wonder what his handicap is. jason: i imagine he is a pretty good golfer. there are some people i imagine we could ask.

where there are some big -- dare i say -- existential questions around the game of golf, and they were reminded them golf fans and people who make their living, held a factor tiger woods is and how big a factor when he is not there. david: it all depends on the watching of it. as you know, the solution is very simple -- over 18 holes to 12 holes. buddies say 12 holes is fine, 18 get a little long. jason: here is a phrase alix steel have never used -- "all my golfing friends." [laughter] david: let's get back to you on musk. it has been too long. it is remarkable that he is still tweeting, first and foremost about that "new york times" interview, he alternates

-- and crying. he says "no, my voice cracked once during the "new york times" article -- there were no tears." on: i laughed out loud at that. "are you crying?" "no! i am not crying! my voice cracked." responding tos this @yoda guy. if you are the director of communications, what are you thinking? do you believe so much in the product -- like paypal investors do -- that you are defending him? jason: i am not sure. there was another long these in the "new york times" this morning detailing the last few days, where he is somewhat when he is doing, all of the back and forth, and there are some big governance concerns. one of the real things hanging out there, as the sec starts

digging into the committee couldty that the sec impose innovative bar him from being a director. david: the thing most markle is spacex -- most remarkable is spacex. it delivers on time, it does thing, and they cannot be any more different. jason: i think you nailed it. different people run them. david: many thanks to bloomberg's jason kelly. you want to tune in to listen to jason kelly on "business week" on bloomberg daily from 2:00 to 5:00 eastern time. coming up, pimco. more on what i'm watching next. alix: check out tv . you can watch us online, go right the tv on your terminal. this is bloomberg. ♪ bloomberg.

♪

david: this is what i am watching -- a little bit of fun unusual story. the status broadcasting system, and a lot of some television, theirasically something bonds, but he entered a deal, pimco have a lot of bonds, the interview where they will be seeing interest, because they have a lot of cash coming in, and they are paying pemco a lot money,- pimco a lot of

and you have people in the middle, the preferred shareholders, who are saying wait a second, at the same time the ceo likes this to keep going, and the poor chair has actually sued, saying you should buy our shares. alix: the company cannot go bankrupt, the bondholders are left behind. andd: it is up to pimco, they say no, we like it, we have got cash. alix: i am sure they do. coming up, jim caron, morgan stanley investment and portfolio manager. we will speak with him about richard carrin. -- richard clarida. this is bloomberg. ♪ . this is bloomberg. ♪ retail.

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

near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. this is moving day with the best in-home wifi experience and millions of wifi hotspots to help you stay connected. and this is moving day with reliable service appointments in a two-hour window so you're up and running in no time. show me decorating shows. this is staying connected with xfinity to make moving... simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. alix: another day, another record.

the s&p and nasdaq have record highs. the dollar finds his footing, hurting e.m. and mr. clarinet goes to washington. the yield curve continues to flattened. canada counts down to friday. candidate rejoins nafta talks, a three-country trade deal. issued a deadline friday with no wiggle room. david: i am david westin alongside alix steel. terminalt crossing the the second of were $.41 and it was also $.39, so it is a bit on that, and $656 million as million.o $658 great earnings from them after they had some disappointing once earlier. alix: that is one i'm watching,

too. alcohol trades. david: is jack daniels, i am sorry, so let's get serious. it is burdened. i actually like -- bourbon. i actually like malt. but would reserve is a very good burden. alix: american eagle on what they have to say about the earnings report. comp sales coming in stronger learning that $.34 a share, however, that stock is down by about 4%. it looks like they downgraded their third-quarter earnings forecast. the estimate was for $.49. or kind of slight miss disappointment really get hit quite hard. and the american eagle now falling short. in the markets, we are sitting

right at record highs. the s&p pretty much flat on the day. euro-dollar a little downside, down .3% on the dollar. bottomed? are there any more upsides to be had after two weeks of coming off those highs? 25 basis points. will we see relatively ok take down like we saw? and crude up by .7% as the dollar finds his footing. something is going on with iran and exports. david: canada's foreign minister christer friedland -- chrystia withand resumes talks robert lighthizer. at 1:00 this afternoon, the u.s. treasury will issue seven-year notes. let's look at headlines outside

the business world. kailey leinz is here. kailey: the u.k. and the european union are privately backing off the october deadline for a brexit deal. they'll look to finalize by the middle of november at the latest. is an indication that negotiators are struggling to make progress. meanwhile, prime minister theresa may's spokesman says the pace of the toxicity of. canada's foreign -- is picking up. canada's foreign minister is facing a friday deadline by the u.s. chrystia freeland says she is encouraged by talks between u.s. and mexico. more terrorists on canadian auto exports of a deal is not reached. , congressmanlican ron desantis trail in the polls in florida but took the lead after a vigorous endorsement from the president. democrat andrew gillum was

backed by self-described socialist democrat bernie sanders. florida has never elected a black governor. 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 kailey leinz three this is bloomberg. alix? alix: thanks so much. we head into a historically unpredictable month. how brought his support? market strategists waited. >> you have a u.s. economy on fire and you have the rest of the world slowing. turk, andouse saying, others been such -- why has sp ain, turk, and others been such excellent performers? >> we turned in june. we upgraded totally at the time. we have been signaling this call all year. at some point, we felt a peak rate of change would be in, and that would be the time to get more defensive. the time that quite well. in fact, defensive sectors

reported extraordinarily well, better than we had hoped. alix: joining us now is jim caron, morgan stanley investment management, senior portfolio management, and gina martin adams, bloomberg intelligence equity strategist. how much further does it have to go? gina: short-term, it has been very strong. maybe it will take a little breather. but frankly, when we run our technical models, they say it will be higher over the next 12 months. the short run has something urgent signals. gent signals. the longer-term is still in tech. peaking is not really meaningful. as long as it is not led by a real deterioration in the local earning -- cyclical earnings growth rate is not likely to create a major price choice

fall. david: two of your points and put them together, both diversions as well as breadth. if you look at the terminal chart that i have up here, you can see the blue is the s&p. the white is nasdaq. you can see they are on an upslope in terms of turning broader. not so much nasdaq. should we be concerned? jim: i am not sure that we should be concerned. the s&p will be a broader base. nasdaq is obviously a whole lot more technology-focused. one of the things i do think about when i look at this is what is actually affecting some of the equity markets right now, when we think about trade talks. when i think about trade, i think about sectors that not miss certainly have -- not necessarily have as much of a trade impact. we are seeing a very d ivergent market.

we are seeing much more idiosyncratic events. indexnot so much a broad story but more about the idiosyncratic factors. alix: is that why there is not a clear rotation? i was looking at a great article about how much money is short right now. --a: yeah, and i think investors have a little bit of a lack of conviction as to where the new leadership should come from. time, att is point in the last month, you have seen strong gains in health care, telecom. recovery in industrials and financials but not enough to get investors really gung ho excited about these sectors. in tech come it has been solid support for several years now. ahen tech take th see aer, if you do not

huge surge elsewhere, they are at a loss. correlations are generally falling across the market. you have got to pick your choices very carefully, particularly as a big, secular theme is really driving performance. david: jim, we have had some changes at the that even today with richard clarida, who we all know well, joining as vice chair. he talks to us earlier in november about how he regarded the yield curve. here is what he had to say. mr. clarida: i have been following markets in different years,ies for 30 plus and one of the very few reliable rules of thumb is that when the u.s. yield curve inverts, a recession happens in the next 12 months. that it's really a fallible indicator with very few false signals. david: we do not have now, although if you look at the chart, obviously it is getting flatter or heading in that direction. many people think it will

in perjury how concerned should we be -- will invert. how concerned should we be? jim: we have to look at what is taking place, which is that we have good growth, but inflation has just been reaching target and having really been accelerating. doesaying that the fed talk about here is yes, an inverted curve is important to think about, but the reasons why it is inverting are very important, to. when the curve inverts, when he is tightening above the neutral rate, that is the fed actively trying to slow the economy. that is not what the fed is doing now. it is trying to move from accommodative policy to neutral. when it occurred in verse the fed is actually tightening, that sense a stronger signal. when it inverts when the fed is moving toward a neutral rate,

that still bolsters equity pricing, risky asset prices, and i think it is something to concerned about and to look at, but i do not think we are at the warning level yet. gets abovehe fed their news rate, which might be 2.5%. the: there is a ladainiani market -- there is a lot opinion in the market that. the white bar is here, our asset managers and their long positions, and blue is this short position. how do you expect that play out? jim: you have to really parse this a bit. you have the short-term hedge fund type traders that are very short. you have the longer-term asset that are long the market at this point. the short-term players are basically under waiting treasuries versus buying something else, so it is a positive sign to the extent that they are buying something a little more risky, that has a

little more yield. the longer-term money traders and insurance companies, pension funds, they are basically saying look, we're trying to offset our liabilities, or pension liabilities, it is a direct hit to earnings. that holds off to the market. they are more pricing the indiscriminate fire to some degree -- i am not saying 100%, but to some degree. i use this as more of a relative value trade who are under waiting treasury versus buying something else that is a little bit more risky. david: bloomberg's gina martin adams, thank you for being back with us the second time here jim caron of morgan stanley investment management will be staying with us. coming up, got milk? dairy is the main discussion of canada rejoins nafta talks -- or what we used to call nafta. more on what investors are watching. this is bloomberg. ♪

avid: canada has rejoined nafta talks as the u.s. is trying to reach a try country agreement. mexico clearly wants nasa to be trilateral. that has been the process in which we have been engaged in the last year. mr. ross: canada is considering joining the agreement. authorities have already been reached with mexico. that is what we have. what remains to be seen is how close the canadian attitude is at. the accurat

david:david: still with us is jim caron of morgan stanley. you are a fixed income guy. how does a fixed income that react to this? jim: impacting the dollar really since february of this year, a lot of uncertainty and tension. the key takeaway, at this point, i would say it is more understanding than it is an agreement at this point. it is still not a done deal. it does show that the u.s. is softening some of his positions, and it really does make a deal and negotiate at this point. when that happens, what does that mean for canada, for europe , and possibly even the big kahuna, what does this mean for china? we may be at a stage here where most of the bluster is over. maybe. we can't count on it. now is the time to actually put pen to paper and getting deal eal, and that should

calm the markets and create an asset rally. david: so is the risk goes back on, and this has been more of a headwind, what does that feel for the -- what does that do for the 10-year yield? does that fall off? jim: a should take some of the pressure off the 10-years, though i am not that hopefully get that much about 3%. if we are still in a position where the fed may be down rate hikes going into 2019, it is going to be very difficult and 10-year treasury yield the shorter we get above 3%. that is not mean we cannot see it for a period time, it just means when you look at the neutral race that the fed is talking about, when you have a cycle between 2.5% and 3%, and that is sometime in 2019, and 10-year note is probably not going to be too far from 3%, so close to where we are now. alix: how do you factor in trade + fed = e.m.?

the dollar is having a significant rally, stabilizing the downside. how do you do it? jim: that is a fair question. there are three drivers of e.m. one, you have decent drivers of global growth. i think we kind of have a. the dollar cannot be too strong. weakens ahat little bit were is softer is helpful. the third is commodity prices. you get better growth, trade deals to get done, and the global economy starts to come back into play again. now you have the dollar, commodities, and growth. those are the three components that drive e.m. higher. rafael: today, -- e.m. today, when you look at dollar-based the deals are somewhere around 6.75% some of local yields are 6.8%. you've got good growth in

emerging markets and relatively low inflation, so the real yield remains high relative to they develop market. emerging markets is a. fundamentally attractive asset right now the problem is when riskiness comes in from all of the trade talk. if that starts to slow down or if the worst-case scenario does not happen, then that is actually bullish. so people case or the bear case is not happen, that could be in an emerging market. fan of thenitely a space. we think there are some idiosyncratic factors going on right now. we do not view this as a systematic problem across the u.s. we are relatively upbeat on it. david: jim caron morgan stanley, investment management, will be staying with us. coming up, first quarter results this morning and the other company stories that you need to know about today. that is coming up next, and this

is bloomberg. ♪ omberg. ♪

kailey: this is "bloomberg daybreak." i am kailey leinz with your bloomberg business flash. it will be the biggest loan offering of the year. bloomberg as learned marketing $8 billion in risky corporate loans and reuters risk operations. they had agreed to buy a 65 percent stake of the business in $58al valued at about billion. shares falling in premarket trading. order net sales miss analysts' estimates. comparable sales also were lower than it did. -- than expected.

under armour shares are also trading lower in the premarket. that is your bloomberg business flash. alix: thanks so much. what is fascinating to me about dick's is their people, and they continue to reinvest. they struggle with investors, how much they will be rewarding. "bloomberg daybreak -- rewarded. david: the sporting-goods stores have been challenged for some time. but under armour, are they not doing enough marketing, or are people just not buying more? it is disappointing. alix: definitely watch that as we head into the open. david: we have three other companies we want to talk about. a car company -- aston martin has registered to have an ipo over in london. i talked with ceo andy palmer about whether they have a partnership idea to raise the capital they needed. this is what he said.

relevance of the an ipo or not is not relevant to the particular argument, but we are making a new kind of company, a company that can highve on 17,000 14,000 cost cars a year, but it can survive because of his partnership. david: the question was -- do you need the capital to transform? he has a vision of the very limited company, very high and, and he has done quite a jump with aston martin as he has taken over. alix: sure, and it continues to be luxury. morgan stanley, amazon, and alphabet -- both raise the high price targets. amazon and morgan stanley like things like high-margin revenue, rapid rose, etc. -- growth, etc. that price target -- a whopping $2500. they saybet/google,

they are in the early stages of monetizing. shorts.ion worth david: it keeps going up, but you have to think, if you are trying to compete with these guys, how do you compete? the rich get richer. alix: i don't know. our third story, brown-forman makes jeff daniels. we already talked about that. kailey: they are out today with their earnings, and they are cutting guidance or their fiscal 2019. if we can pull of a chart now, analysts' estimates for 2019 have been coming down here today happening by think some kind of impact from the eu retaliatory fs, particularly mervin, which comes from kentucky, mitch mcconnell's homes a but what we saw today was significantly more

than what analysts had been anticipated. brown was looking for 165 to 175. analysts were expecting about 179. i want to point out that brown-forman maintain their sales growth guidance for the year. up, are looking at 6% to 7% which to me says the demand is still there. really what you are seeing is mostly just a tax rather than a deterioration in the brown-forman business. david: they have to be breathing a sigh of relief today. e.u. tariffs are still in place, and the deal with jean-claude juncker that president trump struck calls for a cease-fire. pretty significant shock. the sales growth, as i mentioned earlier, most of that us from international markets. u.s. market is a little more

mature. it is really where you are getting that growth, which is overseas. david: interesting -- alix: interesting third looking at germany and u.k., they are doing really well. france be a little lighter a lot less they are big players on the market. they said they will be looking at a 10% rise increase. -- price increase. the fact that you see people buying these bourbon brands is important to them. alix: fairpoint. brooke sutherland, bloomberg opinion, thank you very much. michelle gerard will be joining us. this is bloomberg. ♪ this is bloomberg. ♪

alix: this is "bloomberg daybreak." i am alix steel. happy wednesday. just a few minutes from the second quarter gdp.

s&p futures in touch negative after setting a record yesterday. equities inching their way up into positive territory. the dollar declined on the euro-dollar. a breakthrough at $117, now we are back at $116. the lira is still getting pounded. interesting, we have a revised upward revision to 4.2%, despite the fact that personal consumption was revised down slightly by .1%. third quarter say the same at 2%, but second order gdp revised up 4.2%. that is interesting. david: i know the number the white house. about, because it was 4.1%, you remember, the first reading, and people thought it would go down, and now it is 4.2%. alix: how long can something like that last? can it sustain? can you get it in the fourth quarter?

you look at the trade data, that would apply these are order is not going to -- the third quarter is not going to move up the same kind of way. david: i think many thought it would take her off. this is the second reason, second quarter. alix: profits are up here on year in the second quarter, up 7.7%. the first quarter, they were up .9%. and financial profits also almost 4%. david: joining us now from stamford, connecticut is michelle gerard now with market -- natwest markets chief u.s. economist. michelle, give us you are real gdp. michelle: i am encouraged by the fact that it was an upward revision, despite, as you said. but let's face it, consumers were very healthy in the second quarter. i like the investment.

i was very encouraged by a strengthened the durable goods that we saw for july, which suggests that the importantly spending is continuing. there has been a long concern that the tariffs were causing companies to pull back on capital spending. there is no evidence of that. to me, that is probably the most important thing i am looking for going into the second half of the year. i think consumers is in very solid shape. i want companies to continue to invest as well. david: jim, we heard that it was still growing and it could keep raising. jim: yes, the question is how this translate into wages, and so far, wages have been going up, but they have been going up at a very slow pace. as michelle was saying, consumption and investment is really going. there strong component of gdp. what does this mean? if we have the cataracts, if we if we have capex,

the investment, it could lead to higher productivity moving forward. how sustainable is this? can we say at these levels for very long? well, you can if you get a substantial increase in productivity. what we are seeing now are the keys to that. it is still early to say. . it could take a while for it to go through. nevertheless, it is a strong number. is supportive of what is going on in the markets. grew,3.8%, how much it down from 4%, which is what we thought it would be. if you take a look at what we saw as consumer confidence yesterday, blowing out here, michelle. beforetoric is that handle cannot continue. continue?ur handle andelle: the key is income job growth. it boils down to that.

boils down to the business sector continuing to want to hire and invest, and what jim was talking about is absolutely critical. you can see the productivity growth being planted. it is better productivity growth. more money in consumers markets, and again, it makes the case for sustained growth. the really important thing here is how sustainable, because a lot of the recession talk that i here, the 2020, the "looming fiscal cliff," is focused on the fact that this is a sugar high that we see particularly in the consumer sector as a result of tax cuts. i do not think that is the story at all. stimulus encourages businesses to hire more, invest more, sowing the seeds, as jim said, for better productivity, which growth. better wage

i think it can be sustained as we look ahead. david: i want to get to wages, and particularly, we had waived expectation numbers with an expectation chart that shows that expectation for wages are going up. jim: yeah. very fast, that will cut into profit margins, and that will hurt the equity markets. you want wages to go up, but you wanted to go up for the right reasons. growingonomy is and you have more activity, if the data is sound, then that is good. what these numbers are telling you right now is wages being relatively low and consumption being strong, this tells us we are in more of a midcycle as opposed to late. alix: michelle, what do you think? michelle: we are, we definitely are, and i am not saying it is because of that, but i think he is absolutely right. first of all, the cycle has been

to from the start. i think it has always been called into question. we have certainly made up for it in terms of its length. the fact that we have had almost unprecedented fiscal stimulus at this stage of the cycle coming in to 2017, i think it sets the stage, focusing on expanding his life side of the economy. cycle. it can extend the it almost makes the comparisons to the old cycle, how long can it go on, and it is the second longest. it almost makes all of that irrelevant. it reset the clock in many ways, i believe. david: do we need wages to grow up in order to drive productivity? is that the way it works, where the company said -- i do not want to have as many workers, i want to be more efficient, so i will better invest. michelle: i think it goes a little bit the other way. i think companies want to see increases in productivity.

they want to get more of the workers in order to justify paying them higher wages. inflation is low. it is not easy for companies to have higher costs to consumers. is very difficult for them to pay more for workers, as desperate as they are for the if they will not add more to the for them, for- the bottom line. alix: we have heard from companies, like 3m, that seem to versusre pricing power, a walmart or a target that are not passing those costs to consumers. how are we watching the situation? michelle: we are watching the care situation, and we see companies getting more cautious. if we see tariffs put in on a more broad scale, if you saw tariffs on consumer products, the way it will show itself is more on the inflation side than on the growth side -- at least

initially. and those that are not subject to tariffs or seeing their costs go up may think it manage of the fact that in general, tariffs are making it easier, giving an excuse if you will, making it easier to raise prices as well. that would be the biggest concern. i am extremely watchable for the higher inflation risk associated with tariffs. i am pretty optimistic. maybe i am being too pollyannaish, but i do think it is about negotiation. i think it is narrowed down to china. it was that we will make an agreement with mexico and canada, moving away from auto. i think the developments are often, a narrowing of focus. i not think it will lead us to the more dire scenario. jim: hey michelle, how are you? michelle: hey. that iscal stimulus,

one of the most important ingredients to take us higher, productivity as well and sustainable growth. how do you factor that in, fiscal stimulus versus regulatory reform? does this really extend the cycle? that is the question we always get. michelle: i know we talked about this, and i am so glad you brought up the regulatory piece of it, because for all of the focus that we had on tax cuts and expecting to bolster the economy, i would argue that perhaps the regulatory relief that companies have felt under this administration has been even more powerful. in 2017, companies quite honestly did not even think they would get tax relief because there was so much skepticism. fiscal policies we see put in place to set the stage for better sustainable growth, higher potential growth, many the economy can grow faster without causing inflation.i

think it is a good story all the way around. alix: all right, michelle gerard natwest markets and jim caron of morgan stanley. higher than estimated consumer spending, 3.8%. you have downward revisions in motor vehicles, health care, but nonetheless, consumers holding up. david: we can see the market reaction, which is basically the futures went down. i think maybe that means rate hikes are coming down the path. meantime, news is breaking across the bloomberg as we were talking, and that includes argentina. president of argentina, mr. economists tong speed up payment of a loan, a $50 billion loan to a agreed to -- had asked for. peso is not trading it, so we cannot tell you what the effect on the peso is.

but again, argentina asking to speed things up. has seen a huge amount of cash out of that at a record pace as policymakers really slashing their bets. you are shaking your head. jim: yeah, i was looking at the bloomberg terminal, looking at e.m. currencies getting hit, and now we have a good reason why, asking for the imf to speed up payments. argentina's going through very interesting period right now. they need fiscal reforms, they need help from the imf, but they are doing the right thing. we have seen the cycle over and over again. david: maybe it is a matter of time, but in turkey, where most people say they are doing the wrong things, where argentina is doing the right thing and it does not seem to be helping them yets, . alix: they get hurt because they cannot grow.

david: it is a short-term pain. jim: i think "yet" is the key word. david: jim caron, once again, morgan stanley, thank you. i'm really glad that you were here for. we will sit down with bruce van saun, citizens financial ceo. that is coming up next, and this is bloomberg. ♪ s is bloomberg. ♪

kailey: this is "bloomberg

daybreak." i am kailey leinz in the hewlett-packard enterprise green room. "markets,"ater on ras baraka, the newark, new jersey mayor. sanctions on a rancher in the country -- on iran. that they already paid millions of dollars. an investigation of standard chartered's iranian business is more expensive than it is made it. the bank is now - it admitted. the bank's operating with investors. that savings predicted increasing regulatory requirements what force banks to consolidate. withche bank in a tie up

crosstown rival commerzbank. and bloomberg has learned the japanese automaker wants to triple car production in china as soon as 2030. toyota hopes to make 3.5 million cars a yea in china by venture that is your bloomberg business flash. david: u.s. bank lending has been climbing to a record high, even if the spread between the two-year and 10-year has narrowed in the years before the financial crisis. and indication a recession might be imminent. what does it mean for the state of lending at regional banks? joining us now is bruce van saun, citizens financial ceo, original bank rich consumer and commercial bank is with more customers and 1200 ranchers -- 5 million customers and 1200 branches. what discourages a bank from living?

i could have a chart that shows the blue line going up, the commercial bank loans. you can see the green is going down. that is the citizens. how is it affecting your business? bruce: happening right now is the back end of the curve was probably suppressed statement from where it should be naturally. so there are a number of factors -- low global interest rates, to rule issues -- temporal issues around tensions in the markets, trade tariff tensions that i think have the 10-year over bid. the economy is strong. you have to be there for your customers and make loans. we see good demands in commercial real estate, and there are pockets in consumer where we see nice activity. david: you cannot charge as much interest as you otherwise would. bruce: the good news is most banks are asset-incident and

more exposed to the short end of the curve, so as the short answer going up, our long-term repricing astro-med deposit still. you are right, that the short race are beneficial to our margin. alix: still, but for how long. alternative lenders and all of that, is going to start pushing up the data. bruce: yes, that is something to watch. certainly. the size of the market around commercial depositor, more affluent depositors in the wealth segment, they want to participate as rates are going up, as the loan costs are going up, they want to get more on the deposit. will lower balances in the markets are not as rate- sensitive, so banks are really holding the line there. we continue to see the margin expanded. alix: nontraditional lenders, like jpmorgan mentioned, they low rates -- how

does that not hurt you? bruce:bruce: they are playing in particular niche is in the marketplace. if you look at where they are raising deposits, they are not bricks and mortar, it is the digital channel, and that is the more and the channel to raise funds. i think there is a limit to how competitive, at the end of the day, they can be. the broader places where we have relationships we focus on niches education like refinance debt, we can bring the millennial customer to the bank. sofi is somebody that we provided liquidity to, so really we and sofi have really built up that market, and we have had $4 billion in originations over the last few years due to those

loans. if you have to go into personal unsecured is more competitive, but if you are very focused, you can find attractive pieces to lend money and make good returns. david: you are moving into the online or mobile banking. then you will be to compete worldwide, certainly nationwide. at the same time, it brings a letter competitors against you. when you talk about picking your spots, in terms of online, what is your spot, and how do you compete in the space? bruce: business markets are moving toward digital, so you have to have great online space and mobile capability, and that has to be integrated with your physical branches. i think we are doing a great job. customers have great experience with other industries. it is simple, easy-to-use, intuitive. those other companies use data really well. we have to be as good at that as other industries.

i think banks have been playing catch-up. when we look at our digital channels, we introduced some great new products. we have a protocol specified, a small business loan origination platform that we do, so we're really playing kind of forward leaning and embracing the new digital approaches. alix: what is going to be the biggest differentiator in that? bruce: i think it is really the customer experience. it is all about providing an easy to use experience where you are making fast decision in. ultimately, you want to become a trusted advisor for your customer. there is tons of competition in banking -- big tech has been coming in, money centers will go back -- but ultimately if we have a great relationship with customers and be their trusted advisory, it will be harder to this intermediate us. alix: with the biggest risk to your business right now? bruce: two.

recession or cyber security threats. alix:. interesting. . i was not expecting that one. bruce van saun, thank you so much, of citizens financial group. feed?ews or fake news president trump against what he calls unfair media coverage. this is bloomberg. ♪ ge. this is bloomberg. ♪

alix: what i am watching -- president trump vs. google. the president says his news fetus bias against conservative biass news feed is against conservative sources. he says "anonymous sources are really starting to burn the media at fox news. fiction? look at the line.

when you see "anonymouswhen you" stop reading the story. is fiction." alix: what with that have been like with nixon? david: president trump is extreme and many degrees. but i have to tell you there are a lot people in washington who have told us we think anonymous sources are made up. this is going years back. alix: when you have a 24/7 new instantw, and you have with twitter, it enhances the pressure to be first, which means you could be wrong, and it enhances the pressure to get it out. david: a cnn reporter about whether mr. cohen was set to testify, that is what he is talking about, but it is not just 24/7 cable news, but it is the online. it becomes really difficult to maintain the sort of quality control. it used to be in the olden days when you got ready all the long for a fiscal and 30 broadcast,

you would check that stuff out. alix: multiple fact checking. david: exactly right. alix: you have facebook, jack dorsey going to capitol hill, it puts them in a spotlight, and this is a risk that is uncalculated yet with these companies. david: i think we have the politicians always saying that the media is inaccurate, the the the politicians are inaccurate, and the entire american people cannot leave anything, which is not good for the entire american public. alix: on that note, alix steel and david westin. coming up, how he will play the train game. this is bloomberg. ♪ e. this is bloomberg. ♪

alix: from new york city for our viewers worldwide, i'm alex deal . -- alix steel. this is the countdown to the open. alix: coming up, happy ever

nafta? signsan unity is showing of cracking. the trade negotiations continuing in d.c. today. antisocial. donald trump taking to twitter to campaign against what he calls "unfair media coverage." google is the latest company in the president's crosshairs. vice chair of -- in the markets, the s&p and nasdaq sitting on record highs, but the s&p futures now pretty much flat on the day. you had some disappointing earnings from dick's sporting goods and american eagle. in the currency market, 1.117 on euro-dollar? that is a different tory. we are down 3/10 of 1% of the dollar stabilizes and the yield goes nowhere after gdp is up 4.