inching closer and closer. withdent trump will meet chinese premier. unicredit on standby. reports indicate the italian bank considers a bid for commerzbank if it's merger with deutsche bank fall through. and u.s. equities had a six-month high while volatilities stay low. it is the unloved rally. david: welcome to "bloomberg daybreak." i know what they need in washington, jamie dimon. alix: he's king for a day. david: he's laid it all out in his letter. it's his own bank, but he goes well beyond that bank. alix: it was a little bit like he was running for president. this is how i would fix everything. about now let me tell you the banking system, about washington, about the world. alix: pretty much.

the real problem is you politicians. david: and we need the ceos to step up and do the job. he makes a lot of sensible point. alix: we are just mocking a little bit, but yes. we will be discussing that throughout the next couple of hours. david: in the markets -- couple of hours. in the markets, the unloved rally. s&p futures closing at a six-month high yesterday, but where is all the action? .uro-dollar pretty flat you seeing buying and the bond market. a little bit of a risk off feel, but nonetheless, stocks continue to get bid up even though outflows continue. that makes no sense to me. , it isif you only stocks doing pretty well. it is time now for the morning brief. at 8:30 eastern, we get jobless

claim numbers. at 1:00 we hear from cleveland's fed president, as well as philadelphia's. at six this evening, jp morgan's -- at six clock this evening, jp morgan's jamie dimon. time for the bloomberg first take. we are joined by gina martin -- and,d, o'brien o'brien.- and emma it is said that the chief negotiator for the chinese is going to meet with president trump today, and we are starting to get what since -- get a sense

of what they may be talking about. emma: i think it is pretty clear we will get some kind of interim agreement they will take home. we have xi jinping and donald trump having a signing ceremony. whether it will address those big fundamental issues, i don't think so. i think it will give them both something to sell to their populations, but then things will keep. alix: talk yesterday -- will keep on trucking. alix: that was the talk yesterday. generally the benefit goes to the u.s. because it is all about an intolerance of risk. that is one of the things that frames this wall of worry. until you get broader resolution of some of these geopolitical issues, you see the dollar retaining some degree of stability, u.s. stocks outperforming the rest.

it is just more of the same story until something truly changes, and nothing here looks like it is really going to truly change. maybe you get some agreements that china will amend. haven't possibly meaningful impact on the market for the near term. david: maybe that is not so bad. at one point we thought we were going to have a trade war, and this isn't that, it appears. did we really think we were going to have all of this fixed overnight? emma: i think this agreement we are looking at getting with -- weis going to be haven't thrown out china 2025, that landmark document that is guiding everything we are doing, but we can find more stuff. there's wins on both sides.

alix: let's take it to our second topic, the unloved rally. come inside the bloomberg. this is our examples of why it could be unloved. s&p are athe six-month highs. gina, when we talk about unloved rallies, it is only a few companies moving the stoxx? what is happening? gina: the broad market was in , so you had this broad rally. in march, the character of the market changed a little bit. it became a lot more about tech and defensive strategies. it is still rising. in large capscaps give a bit little bit. it has been a driver over the

market for the last month or so. i think with this breakout of new highs, investors are getting dragged in kicking and screaming. there's not really anything enticing the investor to the market aside from the price trend itself, which can create some degree of angst. investors can only sit on the sidelines for so long and watch stocks making new highs before they get dragon. i think we are in that dragged in stage right now. it suggests the market is moving into slightly different territory then in the first part of the quarter. our third story here, there's reports overnight that it is not just deutsche bank -- deutsche bank talking about getting together with commerzbank. there is really a drive for consolidation in the banking sector in europe.

emma: i think that is a byproduct of what we've seen in stock prices, particularly deutsche bank. what we see will depend on how these deals pan out. we could even see as soon as this weekend some kind of vote or comments about a merger. lots of activity and dynamism in this sector right now. alix: what do you like better, commerzbank and deutsche bank or commerzbank and unicredit? emma: i think it is fascinating that commerzbank is the bank everyone wants at the moment. this is pretty low valuation across european financials. we talk about trade all the time , but frankly the financial sector is much bigger portion of this market. the lack of operating efficiency, the lack of profitability.

there's a tremendous depressed sentiment towards the sector, a huge reason why europe is underperforming the rest of the world. there does need to be some sort of catalyst to entice the investor back. you pointed out it might not be bad for unicredit. david: at least it dilutes it and distributed over more assets. alix: gina martin adams and emma o'brien, thanks so much. appreciate it. you can check out more charts at g tv . this is bloomberg. ♪

♪ viviana: this is "bloomberg daybreak." italy's unicredit is preparing a bid for commerzbank if german negotiations fail, according to "the financial times." this is the latest twist in merger talks between deutsche bank and its rival. coming up short in the first quarter. the electric car maker record declining deliveries, stoking fears demand is falling for the cheaper model three. tesla introduced at less than two years ago. one possible reason, shrinking tax incentives for electric vehicles in the u.s. it is the second-biggest u.s. ipo of the year so far. raising $1.1

million. trade web also increased the number of shares it was selling, today the biggest stock trading on the nasdaq. that is your bloomberg business flash. david: the united states and china trade negotiators are back at it in washington today with reports that the chief china trade negotiator will meet with president trump at the what health later in the day. at the whitew -- house later in the day. we welcome now bloomberg's michael mckee. michael: economists would point that what the administration went into this to do was try to change china's business practices in terms of what it

allows companies to do. that may be a more elusive goal, and one that even if they achieve, is not going to help donald trump because that just means american companies can do born business in china. so it isn't clear exactly what kind of agreement we are going to come out with. david: president trump like reciprocity. i understand there may be not letting this take effect until 2025 fully, but also having penalties if they don't deliver. michael: that is one of the sticking points. window the tariffs come off, and under what conditions? he concluded a new nafta agreement and the tariffs are still in place. he has said he's a tariff guy. is he going to take the tariffs off? reports are that he wants to leave them on for an indeterminate amount of time to make sure the chinese are complying, and the chinese don't like that. david: that is surprising. [laughter] david: many thanks to bloomberg's michael mckee. doll,el: -- alix: bob

chief equity strategist, joins us now. does this potential deal change the game? guest: not really. as mike said, it is kind of half a deal. high standards around intellectual capital and trade, and we are just going to get a watered down piece of that. most of these presidents desperately want a deal. david: what did we need out of this, if you are a business or financial institution? do you need a big breakthrough with more trade, or just not to drive it into the ditch. alix: very glass half-full today. [laughter] guest: i would agree with you. given where we might have gone, this is not bad news. but where we would like to go,

we are not getting anywhere close that. so this is it between. if we could relieve the tariffs, that would be a sigh of relief for the business community. david: if you look at the philly oso x -- the philly esso x index , the blue line is what analysts y are going to be. guest: i think that is partially true, plus china is going to buy a lot more of this stuff. intellectual property will be mentioned in the deal, i'm sure. are we going to solve it? no way. this is a big issue. alix: do you sell? any kind of trade options. guest: i don't see enough for

the market to get excited, --ept for i didn't see from the beginning how this deal helps germany. it helps the u.s. two big powers fighting helps everybody, but specifically help for germany, not. this deal, whatever it is going sigh of relief will build business confidence a bit, and that will help china and the world. aboutjamie dimon talked china and said, "we believe china is well on its way to becoming a fully developed

nation, which will probably entail more uncertainty and slower growth like the rest of us. do you feel like markets have re-rated for that? guest: only to some degree taylor: china is so big -- to some degree. china is so big it is hard to call them and emerging-market, but they are moving in the right direction area they need to continue to open their borders, broaden their financial system, and they will doing to big boys, if you will. beyonds letter goe opening their windows, but they've got a long way to go. is that opportunity, or more of a warning signal? guest: i think it is an upside opportunity. everyone knows there are issues. the question is, will that political system encourage ?hings to be improved or a wave

the u.s. market is up 20% after going down 20%. we are kind of back to where we were. you've got a lot of these issues. every time you turn around, somebody is slowing their growth rate. alix: where is the value versus value trap? guest: europe will have a balance at some point because it is cheap. i don't want to play because you've got to get it right twice, getting in and get it out. a long-term global equity portfolio, the u.s., and emerging markets. the emerging-market consumer is going to make a difference whether the planner grows or not. hold your nose and put your seat belts on, but that's the place i think we've .ot to be

david: anything could tip either way. guest: i agree. to years ago there were big dark clouds of recession, and today the fed is not going to raise rates. we can get a blue time until blue sky. david: we overreact, don't we? please stay with us. theng up, ethiopia reports cause of the crash of that max.g 737 this is bloomberg. ♪

♪ david: ethiopian authorities

have issued their report on the crash last month of a boeing 737 max 8 aircraft, saying pilots followed procedures and calling on the manufacturer to review its control system. -- theome the geo group teal group vice president. thank you for being here. has boeing responded? i haven't seen what the responses. >> i don't think they said anything substantial, just that they are taking it into account in studying the findings and conclusions of the report. david: how bad is this for boeing> we had a similar story out of the crash of lion air that in fact the pilots did comply with what boeing said you should do if something malfunctioned. >> there had been that report, but it wasn't really clear that it happened on the day of the flight or the timing of it. at the end of the day, it doesn't look good, but on the

other hand, it still looks like the problem is largely isolated to this system, which played a role in these terrible tragedies. that means that is what they are working on now in terms of trading and software fix that should hopefully be able to solve the problem. david: budget said they came out -- boeing said they came out with a software fix. problem then we thought it was? >> i don't think boeing has fully analyzed what came out of this. there is no reason, however, that the problem would spread. there's nothing wrong with the rest of the plane. what we are talking about here is the level of system input, the procedures that take place

that might kick in. it just might take more time come but at the end of the day -- more time, but at the end of it is a system fix. alix: we have reports from the faa that potentially we can trust the fix from boeing. , therehe end of the day are at this point worldwide agencies, not just the faa, that are going to be independently verifying this, not just a one hour saw flow downward -- one hour software download taylor: you'll see several weeks -- software download. it will be several weeks of intensive testing. see multipleto

agencies put this through quite a lot of tests and to make sure this solve the problem. david: we always want to remember the tragedy of losing all of the lives and both of these tragedies come up but there's also the question about all these 737 max's sitting on the ground. how expensive is that, and who is going to foot the bill? >> it is extremely expensive. obviously first and foremost, human life is the main issue here. that has got fit priority rather boeing look good. the good news is from everyone is that there are multiple layers of ended nation -- of implementation. you've got insurance and reinsurance for boeing.

for the constant airplanes on the ground, you're talking hundreds of millions or billions of dollars, but this is why only there's no major threat to their future. alix: real quick, do you like boeing here? >> i do, especially as you can take your time. there's going to be a long time to put the stamp of approval. but the problem is now isolated. we know what it is. alix: thank you very much. coming up, u.s. stocks close out their best quarter since 2010, sitting in a six month high? on theare investors line? want more from your entertainment experience?

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welp, someone should. just say "teach me more" into your voice remote and see how you can have an even better x1 experience. simple. easy. awesome. alix: this is "bloomberg ."ybreak

this is the unloved rally. 3/10 of equities down 1%, german factory orders down 4%, and he dax actually up 1/10 of 1%. the euro-dollar flat, the european economy saving can g rwo this year, i net you have some buying in the bond market and crude up as well. the yield curve in the two tins is a little flatter. , where else are you going to put it this bike they're not being analogous convictions -- not being a lot of convictions within that rally. david: you remember what happens with the ecb decision where they moved fast, so we thought we ?ould here as well

that certainly is elevated. the risk of inflation expectations d anchoring as well. some people said they should be getting guidance out to the first quarter of 2020. they basically got the deteriorating outlook justified a new issuing of tltro's from banks, but need more selection by the governing council. david: we didn't get the details, that's for sure. david: we all talk about it, but it is sort of reassuring that the ecb gets it. they know they are doing some damage. what they do about this is a good question. alix: anyway, more discussion on that later in the next hour. u.s. stocks closing at a six month high yesterday. global trade optimism helps provide appetite for risk, but

some market participants are missing in action. taylor riggs joining us for more. -- likelike you said you said, ending up at a six month high. we know this ratio is still below the one into standard terminal, only 12% of shares have a 14 day rsi above 70. the index as a whole on the s&p 500 only at a 65. once you reach 70, that is over boutght -- overbought. if you come to my terminal, another market for this event not participating in this rally is the hedge funds. we are taking a look at the net long short positions.

they seem to think that net long is not the way to be right now. that is not the case for etf investors. we had and blew the s&p 500 index. , and the been climbing , which means etf investors other ones buying into the rally. david: thanks very much, taylor riggs. l.ill with us is bob dol explain that to us. guest: the market woke up and said we are not going to have a i think the market is where it should be. we are kind of neutral as we speak. said to that point, citi global equities are up, but there's bigger outflows.

that means there could be material upside? guest: we had $44 billion of outflows quarter after quarter, this entire bull market. it has been corporate america buying their own stocks back and guys down the street. individuals and institutions have been net sellers. david: one of the reasons you might buy stock is you think earnings are going to go up. we had a gangbusters year last year. then it got more and more negative. now analysts are starting to come more and more around and think it is going to get better. guest: that's part of why the markets moved up, no question. der numberser or showed that.

the economy is ok. it is not great, but it is good enough. alix: what sectors will do well on earnings? guest: i think financials will do better than people think. perennially, technology does well. i think they will yet again. health care should be pretty good. financial going to do better just because valuations are so low? guest: for sure. the dilemma for me is does the recognition of the balance sheet improved so much that it takes until next cycle they realized it. can give i think the fed -- guest: i think the fed will raise rates again. if the fed doesn't raise rates in the next 12 months, that

means the economy and earnings are not good. david: true. morgan stanley has been pessimistic on tech, talking about earnings disappointment a big way ino technology what you think of that? earningsagree that the are more mixed, so you have to be far more selective. we have fewer value tech names like cisco systems. the complexion has changed a little bit. there are earnings risks across the board to include technology. too many people think margins are going to go higher forever. alix: right. what taylor was talking about was the path of money in etf's, not the actives. but if you are taking a look value names, if you don't get money coming in he will not get the upside. david: he get all that money

pushing the good and the bad stocks up at the same time, doesn't that give an active investor a chance to make a difference? david: we will debate that for sure. [laughter] david: bob is going to be staying with us. let's turn to viviana hurtado was first word news. viviana: good morning. it is the first official word on crash of a boeing 737 max 8 in ethiopia. the government has called on boeing to review the plane control system. the report says pilots followed the emergency procedures when the plane on appended -- when system acted independently. today president trump will meet thatchinese vice premier

would allow a signing ceremony with xi jinping. even charities are making money from the world's largest oil field. those are expected to generate $62,000 in net cash flow for name. it takes over as the largest oilfield in the world. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is bloomberg. it sounds to me like a talk for evaluations. david: i'm happy for the foundation. why shouldn't they make money on shelf? it's four a -- on shell? it's for a good cause.

we will be discussing oil alix: and much more about saudi arabia -- alix: we will discussing oil and much more about saudi arabia later. we learned so much information, some good, some bad. david: this is what the saudi government says we didn't want to do, basically show us what is going on. if they go forward with their ipo, that would be even more interesting. alix: coming up in the program, a new sitter for commerzbank if talks with deutsche bank don't work out. this is bloomberg. ♪

♪ reporter: this is "bloomberg daybreak." alix: shares of commerzbank trading higher on reports that unicredit is preparing a bid for the lender should talks with deutsche bank fall through. joining us for more is bloomberg's european finance editor russ larson. e-up?would be a better ti reporter: a lot of people have said that mergers should increase, so unicredit could be seen as starting a process that people are encouraging, but no one seems willing to jump in on. in some ways, unicredit is not as sick as deutsche bank has

been, but it is really hard to assess what is the complete better deal because we don't know the details of how a deutsche bank, commerzbank would actually work. david: one of the things i've seen written in the bloomberg is that maybe you wouldn't have to lay off as many people because the retail operations unicredit already has in germany are more complement three rather than overlapping with deutsche bank. might that be attractive to the german government? reporter: reporter: i think that could be -- reporter: i think that could be. i think the whole fact that hp craft has a very substantial .nit in germany at the same time, if there is a lot of blowback against a go to bank deal costing jobs, a foreign bank costing jobs could be even more touchy. alix: thank you.

commerzbank kicking off our wall street team, where week look at all things red street. jamie dimon says in a letter to shareholders that recent market volatility is a harbinger of things to come. whenever like when you can put the word harbinger. david: that's a great word. joining us now is peggy collins. she leads bloomberg's u.s. intelligence coverage. and was a still is bob doll. let's go back to commerzbank for a second. as i recall, certainly deutsche bank needed something. if they don't have commerzbank, what if they got? peggy: one of the things that popped out to me was what happens to deutsche bank. they are clearly the embattled bank we've been following for

months now, and it does leave a question as to what they can do. . david: either of these deals require german government clearance. merger with deutsche bank calls problems -- deutsche bank cause problems? peggy: we can see there's a lot of blowback already in case it causes job cuts. david: bob, we talked to you about financials. do a compare and contrast with europe. how much of this is a bigger symptom with european problems as compared to the u.s. -- iner: in 2000 2008 and 2010, they loved it. that never happened in europe,

and these problems just continue. alix: just look at this chart. bloomberge inside the , this is as soon as the financial crisis. .his is jp then unicredit is the white line, georgia credit is the blue line. much of this is the ecb' fault. guest: it is europe. it has been horrible. there's no growth. there's no lending. the ecb has been forced into that corner, and i come back to -- to the balance sheets. alix: bob is really passionate about that. [laughter] a $1 billion,come

and not all of it, but a fair amount of the problem, will be be that. they are essentially saying we got to go back to basics and really make sure we are strong in japan. are reporting has been showing over the last several months that a lot of capital is unlocking and japan, so it does seem like if you're going to go back to basics, it is a good time. guest: there are more rays of hope in japan then there are in europe. they have tackled some of their issues, restructured more quickly. so i think more hope in japan. morgan's's go to jp annual letter to shareholders. jamie dimon says, "we must prefer to use our capital to "row rather than buy back stock

that we do not expect to use in the next few years. are investors going to like this? a few years ago, one of the bankss you what i do buy -- because of buybacks stocks you want to buy was because of buybacks. david: it sounds good to invest back in your business, but only if your investment is going to be more valuable than the alternative. does jp morgan have that kind of opportunity right now? guest: i think they do. if you've got something they can invest in, do it. . that's what investors want at this part of the cycle. it is not going to move stocks today. alix: what is your favorite

bank? guest: bank of america. next, and then jp morgan. alix: the more important question is if you were a king, what would you do -- were king for a day, what would you do? jamie dimon says everything. guest: i would make one of the two houses of congress term limits, and cut out gerrymandering. i think that would solve a lot of our problems. david: that's important -- alix: that's important! [applause] [laughter] david: that's her platform when she runs. coming up, tesla hits the brakes. model three deliveries hit the brakes -- three deliveries hit the point -- three deliveries disappoint.

this is bloomberg. ♪

♪ david: tesla shares getting crushed in premarket after a drop in deliveries. taylor riggs has more. taylor: shares are off more than 9% this morning with a slow number of deliveries, about 63,000 in the first quarter, below the 91,000 they were able to deliver in the fourth quarter. , specifically with model three, the company delivered just under 51,000 in the first quarter, missing estimates and less than the previous two quarters. this really is a setback, given that tax incentives were falling. i want to take a look at what is happening premarket. shares off more than 9%, down 265.on -- down below

analysts say this could translate into a billion-dollar revenue miss. we are taking a look at the short interest. you did have a record short interest coming into the year, less than 20% of shares. you come up a little bit to just under 24%, but remember, at a record high, the number of shares that were shorted was almost 70%. david: thanks so much. for more on tesla's struggles, we welcome ben callow, robert w baird analyst. thanks for joining us. you just heard what taylor had to say. may be a revenue miss of as much as $1 billion. do you agree with that? guest: this wasn't good, and there's no way to spin it. i think the biggest thing that stood out to us and other investors we've talked to is the miss on the s and x. we were looking for 17,000 within the quarter liveries.

they came in at 12,000. for a car that is seven years fiven the case of the s, years old in the case of the x, does the car need to be refreshed? i think we get new information on that to drive demand further. i think it has less to do with tax credits. deliveryree, the three wasn't great, but it was where we thought when we were looking for 50,000 deliveries. this has a lot to do with timing as they start shipping to asia america,e, now north asia and europe. be a lot ofoing to seeing is believing as we go forward here after this mess on the s and x.

david: how much of this is a flagging appetite for these vehicles? guest: with the three, we don't see that flagging appetite. did mention orders outstrips the ability to produce them in the quarter. for the s and x, a bigger question mark that has to do with the age and price point of the car. we've seen other auto companies struggling right now, especially towards the high-end luxury vehicles. there is some level of cannibalization from the model three, which is a newer, better made car than the original s, both from the battery architecture and the overall drivability. alix: you are painting a sort of cautious picture. do you have to rethink your price target? guest: we rethink that everyday. i think we will get more answers on april 19. .hey are doing an investor day

really, we will probably get the most answers when they do reporting in early may, and we will have a lot of questions around how the s and x proceed. i think at some point they would do some kind of refreshing, even if it is just the interior. these cars are refreshed all the time with updates. there is obviously something the need to spur demand here. david: thanks so much. that was ben kallo. alix: that was a really diplomatic way of saying maybe. -- this is bloomberg. ♪

♪ alix: inching closer and closer.

president trump will meet with as thenese vice premier u.s. pushes for binding agreements. u.s. equities at a six-month high while hedge funds sit out. it is the unloved rally. and ethiopian authorities say blame.aren't to david: welcome to "bloomberg daybreak." it is also the day of the jamie dimon letter. he talked to shareholders in the letter about critical issues in the banking sector, but there is section of his letter giving his views on what should be done with the world. alix: he basically says public policy is to blame for a lot of things in the world.

political gridlock is an issue and bad policymaking, and the best part is he goes on with a lengthy prescription on how to fix it. my favorite is if i was king for a day, this is what i would do. it felt like a jamie dimon stump speech. also said you should listen to ceos. we have a lot to offer. alix: and also we might have to tax the wealthy, but we are going to do it because we have to and it is better for the world. we will discuss that throughout the next hour. in other asset classes in the market all across the board, we are at six-month highs for the stoxx. what is driving it? it is something we will discuss over the next 60 minutes. ,s futures flat on the day euro-dollar -- s&p futures flat andhe day, 10 year euro-dollar also flat.

what is propelling stocks to almost hit that 2900 level? david: we will spend a good part of this hour talking about that. in the meantime, let's talk about the morning brief. at 8:30, we get weekly jobless claims numbers. at 1:00, we hear from cleveland's fed president, as well as philadelphia's. and elon musk and the s.e.c. file off in court here in manhattan. at 6:00 this evening we hear again from jamie dimon, appearing at the council on foreign relations here in manhattan. alix: u.s. stocks closing at a six-month high yesterday as trade growth and optimism. taylor riggs joins us with more. taylor: they are on the sidelines, and from a valuation perspective, we are still below the standard deviations.

the equity market doesn't necessarily look overbought either. if you come into the terminal, the white is less than 10%, and 12% of the over indexes. within the s&p 500 as a whole, only about 65%. you really do need to see that level hit 70% to be considered overbought. another market participant that is not participating in the rally are the hedge funds. we have the net short positions to the lowest since june 2017. is thee of slashes lowest since 2010. i will tell you who does like the equity rally, and that is the etf investors. we have created a chart of the new shares that have been created in the top three etf's that tracks the s&p 500.

they are going back the highest showing that investors are perhaps buying into the rally. we have david: some news crossing the bloomberg right now -- we have some news crossing the bloomberg right now. come down more, off 10%. they had disappointing delivery numbers that came out yesterday after the market had closed. tesla continues its downward move. alix: jp morgan analysts saying the reaffirm guidance could actually undermine musk's legal defense against the sec, referring to his twitter post where he said they would deliver about 100,000 cars in 2019. david: that analyst is pretty smart. that is adam jonas. alix: no, ryan brickman. david: i didn't make that connection, but you could see the tweet was about with the

deliveries would be that was overly optimistic, and then he had to pull it back. now he says it is even more disappointing that we thought it was as he goes to court today to say it didn't matter. 's defense is that it was irrelevant. that is a really good point. i respect that. i should have figured that out. [laughter] david: earlier today we spoke with bob doll, who said despite the market rally, investors are pulling billions every quarter out of the stock market. >> we've had $44 billion of outflows quarter after quarter this entire bull market. of stocksuyer consistently has been corporate america. individuals have been net sellers, institutions have been net sellers. david: we welcome now sebastian head of rowe price

global cross assets. there seems to be a bit of a quandary because the s&p keeps going up. we are getting close to a record again, and yet the funds are flying out. how does that work? >> we are sitting at neutral between talks -- between stocks and bonds. it seems like the market has made a leap of faith based on fed policy and more dovish central banks globally. we take different technical positions, but when we look at the level of risk want to have, we are waiting for more data. we are waiting for the data to come through. we've seen good numbers from chinese pmi, but that could be just the beginning. alix: if you are looking for good data, donald trump tweeting just mom is ago about how good it is in the u.s. -- just moments ago about how good it is in the u.s. becomes do ween wind up missing out?

that is why it is the unloved rally. ,ou have so many net outflows yet equities still at a six-month high. do you tough it out and buy it anyway? >> without a doubt. peter lynch once famously said the fear of the bear market has lost more money than the bear market itself. clearly from a probability perspective, a lot of our perspective returns have been realized. we are quite cautious about using de-risking to manage our overall profile versus non-correlate of bets in the portfolio. right now we are diversified across a variety of asset classes, and it makes sense to be invested in the markets. david: we have a little bit of a horse race going here because bob, you are overweight, and sebastian, you are more cautious. what do you see differently in the markets?

>> you have to start with valuation always come about you have to put valuations in the context of the business cycle. overall we are worried that we are getting pretty late in the business cycle with wage growth pressure, low unemployment. 16% to 18% price earnings ratio in the u.s. is fairly valued, but if you look at 12 month forward returns and compare forward returns with this current range, whether you are early in the like -- in the cycle or late in the cycle, you get a very different picture. david: bob, what do you say? well, we think we are probably closer to the seventh inning rather than the ninth, so it is an important difference of opinion where we are in the cycle. why we think valuation is above the historical average, we are

not purely driven by valuation >>. we think we will be in a low yield environment for an extended period of time. a reallyyields important to get us to the point where we are today where we think we are getting paid for the risk. that has turned out to be the case your today. the fed taking their foot off the brake has been extremely important. as you know, we thought the last two hikes were a mistake. we think by the end of this year they are actually going to cut, and that is going to be supportive of the markets. alix: on a fundamental level, you want to also look to earnings. inside the bloomberg you can see the earnings estimates in the u.s. starting to move higher. the blue line 2020, moving higher. the argument would be you are going to buy now because you are

anticipating a second half rebound. >> to be clear, we are neutral between stocks and bonds. in a 60% stock portfolio we would be at 60% stocks. expectations on earnings has come down so much that if we are going to take risk and get paid for risk and there is going to be a stabilization, starting from 15% equity returns year to date, there might be an opportunity to take risk exposures in fixed income. areissue is that spreads pretty tight, but if we see weeads widen a little bit, may be starting to add to high-yield, for example. david: to round out this discussion, what is the biggest determinant of whether you are right are not? is it the strength of the u.s. consumer? any further indications out of the fed? something else? >> probably the biggest risk scenario is we get our low-inflation theme wrong, and that forces the fed to potential he put them back in play.

it is a high-impact event, and the market starts discounting a higher fed funds rate, let alone a stable one. just the last two weeks if you look at the work function on bloomberg, the probability of a cut has moved up 30% by the beginning of next year. we think that number will only continue to increase as low-inflation expectations for about 2% gdp growth in 2020 increasingly get priced into the market, the yield curve, and what the fed will end up doing. that environment will be good for risk assets. alix: all right. buzz of you are sticking with us. coming up, end game insight. meet withtrump set to the chinese vice premier. more on that next. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." tesla coming up short in the first quarter, and shares are falling. the electric carmaker reports a decline in deliveries showing falling delivery for the model three. one possible reason, shrinking tax incentives for electric vehicles in the u.s. unicredit preparing a bid for commerzbank if merger talks with betting bank fail, germany would prefer a

cross-border deal if the merger doesn't happen. it is the second-biggest u.s. ipo of the year so far. raising $1arkets billion, also increasing the ,umber of shares it was selling today's biggest stock selling on the nasdaq. david: thank you so much. larry kudlow says we are not there yet, but all indications are that we are getting closer to some sort of deal between the united state and china on trade. we welcome kevin cirilli from the white house. if we are not there yet, what do we have to do to get there? kevin: i spoke with a source last night who said it is all coming down. whether or not china -- it is all coming down to whether or not china will be able to hold up whatever end of the bargain they decide on. president trump is set to meet with the chinese vice premier

here at the white house following a day long of talks between six terry nguyen, trade represented of -- between secretary mnuchin, secretary lighthizer -- trade representative lighthizer, and the chinese. sticking point is tariffs if they are left in place. alix: still with us, sebastian page and bob browne. if you take a look at the wto chart and how they downgraded overall forecasts, does this change what the chart looks like it would get the deal we think we are going to get? >> it would have an impact on trade numbers, of course. but the deal is more or less priced at the moment, so the risk might be moving to the downside. when you look at the trade

nevers and tariffs, you are looking at the tip of the iceberg of the issue with trade. below the headlines are deep issues with supply chains, for example. 40% of what china exports to the u.s. is from u.s. companies based in china. implications chain are real. erts on thexp ground report that ceos are worried about investing until this is resolved. so we need the deal for this to keep going. david: if there is a real trade deal that makes at least some reforms, is there a much more powerful reason to invest in this sense? here?re an upside could president trump have a point that we could liberalize trade from china and around the world and increase those numbers? >> this is going to be a multi-year phenomenon. i agree with sebastian that in

the short-term, a good trade deal is probably discounted in the marketplace. but as always, the devil is in the details, and what kind of monitoring and enforcement procedures are going to be a part of it, and what the review process is going to be. investors have to be prepared to revisit this as an issue for not just the trumpet administration's time, but any administration thereafter. this is a -- the trump administration's time, but any administration thereafter. this removes an important risk from the marketplace over the next one year, and that would be important. for investors, knowing what risks are taken off the table are just as important as identifying opportunities. taking that risk off the table for the next year would be a great thing. alix: great point. the question for me becomes about china being an overall risk. jamie dimon saying we believe

that china is well on its way to becoming a fully developed nation, though the future will probably entail more uncertainty and moments of slower growth than in the past. that is not going to be a short-term-ism. what do you make of that? >> you have to be a china analyst and expert if you are in the investment business now. the reality is china is the fastest-growing major economy in the world, putting aside the growth numbers coming out of india. china is still the most significant. it will be the number two, if not the largest economy in the world eventually, and certainly the number one contributor to dollar gdp growth. any slowdown in china is going to be significant, and more so for u.s. multinational earnings, and terms of impact on the market, and of course the local chinese market. that is the new world for investors. the impact of a china slowdown on the global markets is

something we all have to factor in, and we have seen the evidence thus far that the rebound in u.s. equities and global equities year to date is not just because of the fed taking its foot off the brake, but also because of the rebound in the japanese pmi data -- i'm sorry, the chinese pmi data and a sense that the worst is behind us in china. david: sebastian page and bob browne will be staying with us. ezio be a release the results of its investigation into the -- ethiopia releases the results of its investigation into the boeing 737 max 8 crash last month, pointing fingers at the manufacturer. this is bloomberg. ♪

♪ david: it is time now where we look at three comedies worth watching this morning. facebook -- three companies worth watching this morning. , a cyber security firm

found 500 million records still being published publicly, and facebook shut it down. alix: guggenheim actually upgraded shares to buy from neutral, saying that positive user trends offset negative headlines, but this cannot be good long-term. david: as long as they get more users, what do they care, really? alix: i'm looking at constellation brands. they came out with earnings before the bell and beat fourth-quarter earnings estimates, but the real story was yesterday, when they were going to divest $1.47 billion in assets to focus on wine and beer , and growth trends. nabis, with a big

stake. they are going to dedicate an amount of small space to -- of mallall space to -- of space to cbd stores. david: i think constellation is more interested in the part that gets you high. alix: i don't know that for sure , but if you look at trends first, cbd end of the legalization of pot, basically that is what they are saying. david: but what they have said back in the 1960's? --rd, boeing reporter: it is a confirmation of the reporting we had out of bloomberg and some other outlets that the pilots followed emergency procedures to

try to disable the system, and that was not enough to burden plan -- to prevent the plane from crashing. just the sheer amount of force , the put on the nose down pilots were not physically strong enough to counteract that. that is the leading theory for why they were perhaps not of you -- not able to overcome the system. this is very bad for boeing. the idea that their response to the lion air crash, they really sort of dismissed this. the idea was that the pilots were just not competent enough, that this was a basic procedure they should have known. this really undercuts that narrative. david: this is a terrible tragedy for all those lives lost, but boeing just seems to be missing in action. they have not been proactive it all to say this is what we are doing, what we know. we keep getting passive reactions that are very thin.

absolutely. there are legal liabilities involved. boeing obviously was to protect its reputation in the safety of we aircraft, but i feel like are not seeing accountability. we are not seeing really being sorry about the fact that all these people lost their lives, and i really think they do need to be more transparent. i think it is interesting when you look at the response. it is very much a u.s. centric response. the messaging was that american pilots would never have this happen to them. alix: not necessarily the best comeback. thank you very much. coming up, the latest on the u.s. economy heading into the jobs report tomorrow. this is bloomberg. ♪

alix: this is "bloomberg daybreak." i am alix steel. quiet, sleepy markets. we do get the latest read on jobless claims ahead of jobless numbers tomorrow.

italy growing .1%. markets in germany do not care. the currency market, not a lot of movement. maybe the euro modestly lower. a bid into postmodern markets, -- into most bond markets. it seems like we are on hold. initial jobless claims for last week, 202,000, less than estimated. claims continue to be in line ahead of the jobs number. david: the main thing is what it tells us about what we will see tomorrow. we are waiting for u.s. data. alix: exactly. david: the person who will be informed is jeanna smialek. we always talk about the fed when we talk about the jobs. what are we looking at for tomorrow and what will the fed be looking for? we are looking for a bounce back from a very weak

february number. economists are expecting to see that recover this month. i think the fed is going to be looking for something that gets them closer to the trend we had previously been seeing, somewhere in the 180,000 to 200,000 range. they would not be alarmed by a slow down because they have been expecting that to slow amid a tight economics outlook. david: it seems to me there are two things looking at. do we have close to full employment? we are pretty close to that. even of unemployment goes up a little bit we are still in good shape. the other is inflation and wages. jeanna: absolutely. wages are the pivotal part of this jobs report. what we have seen is a nice acceleration in wages but not the kind of numbers we have seen in previous cycles and others kind of numbers sustained. we are at 3.4%. that is up decently from where it was a year ago.

i think they will want to see something in that range sustainably. alix: what is the bar for the fed to react on wages? i would guess, just talking to them that it is very high. they are committed to this patient view. wages take time to react to tight labor markets. if we are seeing the economy slowing in the labor market slowing and what we see is a wage increase that has been trained based on previous tightness in the labor market, i think they will be hesitant to react sharply. still with us are sebastian page and bob brown. sebastian: we agree the latest numbers are probably a blip so we expect stronger numbers tomorrow. if we get a weaker number than there is a glass half empty you that is the effect of the previous tightening fiscal fading and that could scare the

markets. our central view is wage growth pressure is real. unemployment is to stay low and employment is strong. david: are we less data dependent than we were a year ago? powell,heard from jay we are not going to be raising rates anytime soon and we are concerned about the financial markets. that theree implication the fed is out of the markets. they took themselves out. to some degree the market took them out. the market got ahead of the economy. think the broader market is looking at issues like the potential for earnings growth, which we think will be low single digits this year and single digits next year. what the global economy is going to be like. will china's economy be real and will europe be able to pull itself out of this slump on a sustained basis?

2019 issues, at least for are probably trumping what the fed will do. up until jackson hole, if they do use that as an opportunity to announce a formal change in policy, changing to targeting an average inflation rate and than the fed will once again be a significant factor in the marketplace. talk about dimon inflation and he said it is possible a normal inflation could still happen, we just don't see it. the fed was to consider something of the same -- the normal. what is the new normal? jeanna: i think the fed was clear in communicating they are perfectly happy to allow and overshoot of their target. what they have not seen is an a compliment of that 2% target. we been hovering just below that rate. if you did see some of these

higher wages passed through the higher inflation, they might of relief because that means their tools to work to get inflation higher. relief, it is a sigh of how sensitive are corporate margins to changes in wages and cost? who can sustain and who cannot? in increase in wages and a reversal of the macro level of the economy of shared rockets to corporate versus a share of income to employees, that is a fundamental game changer for margins in the business. we are not accept -- we're not but itng that but is -- is a risk we are keeping an eye on. increases in q1, to what extent can they be sustained throughout this year? are they a reflection of a solid 28 teen and companies passing -- a solid 2018 and companies passing on the benefits as a one off.

does it represent a structural change in the wage dynamic of the u.s. economy? we are skeptical. we think it is asymmetric. the question for the fed is not what they do we see an uptick in wages, but what do they give we do not? slowlyu have a risk of turning into a european situation. wherein positive real wage gains. that means more money in people's pockets. in lowertionately income people who tend to spend more of it. in a consumer driven economy that is good news. sebastian: we think it is sustainable. it does not necessarily translate into inflation, but the key that was just mentioned is margins. margins are high for companies in the u.s.. margins do not grow to the sky. they may revert at some point. that is the risk to look for and

it will translate into earnings forecasts for this year. earnings forecasts have come down by a lot and sales forecasts are starting to come back up. if you start with low expectations you could get more positive surprises. the ratio downgrades to upgrade starts to stabilize. david: pivoting -- alix: pivoting off margins. the drumanley beating of operating margins disappointing for the fourth quarter. sectors are, what most exposed to a market compression? their high cash flow and phenomenal performance through the cycle, technology companies would be vulnerable to a reversal in their margins. a lot of that is weighted towards companies like google and amazon. they are reinvesting back in their business. i would take the more cautious stance with regard to weakness of those companies going forward.

they have sustainable business models. alix: great to get your perspective. bob brown and jenna smiled. -- and jeanna smialek. sebastian page stays with us. david: shares of commerzbank are trending higher on a report that unicredit -- should talks with deutsche bank fall through. this is an ft report. what do we know about the timing of this? there was some speculation we might have an announcement about a deutsche bank commerzbank deal this weekend. ross: that's right. remember that is also a secondhand report that said as soon as next tuesday we could get an announcement from commerzbank on whether it is a green light or red light and that is what we're looking at now. deutsche bank has indicated it would be later in april, around the 26th.

there is still some time. the next thing we are looking for is not the details of a tie up but will they go deeper or go ahead? we could find it is often a short timeframe. david: is is just commerzbank's way of making sure they have a dog in the hunt? ross: you could look at it that way. the idea they could be attracting interest from other banks would tend to strengthen their hand in talks and give them some indication there is another option is deutsche bank's offer does not please them. david: that is our colleague ross larson reporting. ask sebastian about commerzbank specifically. sebastian: it speaks to the issues with european banks and the issues with european banks speak to the issues with global

international value stocks. that is a concern for us. we have been bringing money out of non-us stocks, putting it back in the u.s. stocks and the way we decided to do this is to take from international value because of structural concerns with the european banking sector. ever lower rates are not good for those banks. you look at a japan situation, it is hard for them to make money on interest margins. alix: what you want saws value you now see is value trap? sebastian: correct. alix: when we talk about the of europe, there is debate as to whether that is true. what you look at to say that is what we see. sebastian: the rates and the yield curve, issues route unemployment, the banking sector. all of that is priced in. analysis,a percentile

non-us stocks are in the bottom 10% of were they are in in terms of valuations relative to the u.s.. we like to lean against valuations. we are overweight on u.s. stocks. on the margin we are moving the money back. david: sebastian, thank you so much for being with us. sebastian page of t. rowe price. coming up, taking health care to the next level. puttelemedicine could traditional doctors at risk. this is bloomberg. ♪

>> this is bloomberg daybreak. hour, up in the next centene chairman and ceo.

viviana: this is bloomberg daybreak. holdingsomorrow unveils plans to cut a billion dollars of costs at its struggling wholesale business. bloomberg learning the cuts have already begun at the country's largest security firm. about 100 jobs have been eliminated in europe, the middle east, and africa. there is a new way to beat the gridlock in traffic jam manila. helicopter ridesharing. the service is starting the philippines next week. by next year it hopes to expand to thailand, indonesia, and malaysia. the service cuts travel times from happen hour to three minutes and costs $133 per sheet -- per seat. carlos ghosn has been arrested again.

prosecutors accusing him of using millions of dollars from nissan for his own purposes. he calls his arrest outrageous and arbitrary. he vows he will not be broken. he has been free on bail for less than a month. that is your bloomberg business flash. alix: thank you so much. i hate to say it, but carlos ghosn arrested again. david: he is in prison all of the time and he cannot get out. they've different way of doing it in japan. they keep you in custody until they try new. alix: -- they try you. alix: the allegations are getting worse and worse. david: money going through an omaha car dealer? i have not heard of that. alix: maybe that happens? not so much. david: time for follow the lead. this week we are focusing on different areas of the u.s. job market. today we're looking at the health care sector. to get us started we turn to

michael mckee. moreel: nothing appropriate been talking about health care when you're talking about jobs. it is the one sector of the economy where job growth has continued no matter what. take a look at hiring. the white line is private sector jobs and the blue line is health care hiring. look what happened in the recession. we lost millions of jobs. what happened to health care? just kept going throughout the recession as more and more people get hired. we need more people because society is aging and we need more medical care and home health care. you can see what happens. the jobs in the future are in the services category, where people go into people's homes and help out. you can see the white line. services for the elderly rapidly growing. medical lab technicians falling off. i know you get into this idea of telemedicine. those jobs can be moved overseas

but we need people in homes. home health care is a rapidly expanding field. the bad news about that is if you want that job you will not get paid. look at the pay rate in health care. nowhere near when they are in other industries like manufacturing. this is doctors offices. people with some skills are making almost $17 an hour. you go to medical lab technicians, their pay has fallen up as jobs have moved overseas. rapidly growing home health care aides are only making minimum wage. it is not a job you want if you have a lot of skills, and that is making it harder to find people. it is not pushing up wages. health care is a dynamic area but one that has questions ahead. alix: great set up. thank you so much. in an inside read on jobs health care and how telemedicine is disrupting the industry, we are joined by hill ferguson, dr. on-demand ceo. demand-- doctor on

connects patients via video chat. he'll -- hill, great to get your perspective on this. what if you noticed in terms of how doctors use this and how many doctors you now have in your service? hill: we've been growing for the last several years. to the point about job growth, the problem with job growth in the health care industry is we're not hiring enough doctors. we do not happen up physicians to take care -- we do not have enough physicians to take care of our population of ill americans. there are two few positions -- there are too few positions in the u.s.. that is expected to grow to 100,000 too few. to focus on what

they got into the profession in the first place, which is deliver patient care and not be stuck doing have their hours in administrative tasks in the hospital environment. david: why do we have too few doctors? compensation is an issue for family practitioners and general practitioners, primary care physicians. it is also the work environment. two thirds of positions suffer from physician burnout. this is a state of people going into this career with the goal of helping people. they spent 10 years in a higher education, come out with hundreds of thousands of dollars in debt and that are being asked to run a small business they are in private practice, or they are stuck in a corporate environment where their spending 50% of their time on administrative tasks, doing things that have

nothing to do with helping patients. over time that wears you down. doctor on demand is providing opportunity for these doctors to practice medicine from their home, have flexibility with their schedule, and do nothing with patient care. remove all of the administrative overhead associated with practicing medicine in a brick-and-mortar setting. david: they can do it from home. do they give something up in the physical presence of the patient? do they get that sense when they're doing it through telemedicine? hill: where a 100% video channel. it is an intimate experience, even though it is remote. you have a contact the entire time. our doctors can provide a physical examination, we can pull vital data from hardware in the home. there is a lot more we can do than most people take with the

explode -- than most people ain't with the explosion -- than most people think with the explosion of interconnected devices. our clinicians -- our physicians are trained in video medicine to make sure they can consult with thepatient and teach patient to use their hands as if they were their own. there is a lot you can do over video. alix: based on that, what kind of people have you had to hire and pay them to make that happen versus a traditional doctor's office? physicianaverage comes to us with 15 years of clinical experience. we are a fully employed practice. a national practice of employed physicians. 60% or full-time, 40% are part-time. of the 40% that are part-time, they may be working in the system for their main job or they may be in private practice and they want to get a tow in the water -- give a toe in the

water and see what it is like. they enjoy the flexibility as well as the 100% patient care. alix: dr. on-demand ceo hill ferguson. good to get that perspective. coming up, tesla disappointing deliveries. more on what i'm watching. this is bloomberg. ♪

alix: here is what i'm watching. tesla shares getting crushed in premarket. joining us is jeff osborne, cowen managing director. he just lowered his price target from 180 to 170. what stood out to you is the worst information yesterday? jeff: the worst piece of the news last night was the model s&m that was the major -- the that have been paying

the bills for the model 3. seeing that go down 50% was the biggest his appointment. alix: we talked to a bullish analyst who had a $460 price target and said you could fix it. you can make it better and more snazzy and people want to buy them and it will be fine. what is your response? jeff: that is correct. wasighlighted when the y announced that there was not an update to the snx. of challenge with that round thinking is the company said they had sufficient cash. we assume they burned about $1.5 billion in cash. if you're going to fix it, it will take quarters to roll that out. if you announce a fix, it will stall buyers in the meantime. it is a ticking time bomb of cash burn until that refresh can happen.

david: take us through the cash situation. they say they will be generating enough cash to service their debt. is that the way they see it? -- is that the way you see it? f: they had the debt they did pay out in cash and now they have the one billion to fund the chinese factory. we see them being able to service that. our model does not have them running out of cash. it could get that way, but we are not there yet. david: not there yet. jeff osborne, thank you very much. coming up on the open with jonathan ferro, chris harvey, wells fargo security head of equity strategy. this is bloomberg. ♪

jonathan: from new york city for our audience worldwide. i'm jonathan ferro. "the countdown to the open" starts right now. ♪

jonathan: coming up, trade talks progressing. president trump meeting with china's vice premier at the white house. the industrial slump in europe continues. german factory orders dropping the most in a decade. tesla stocks plunging after a monster decline in q1 deliveries. 30 minutes away from the opening bell. good morning. here is your thursday price action. futures totally unchanged. the euro of touch softer in the face of more negative data. euro-dollar 1.1217. treasury yields coming in a single basis point to 2.52%. we begin with our top story. a trade deal widely expected and quite possibly already priced in. >> we may seem -- see an interim deal. >> likely to be a resolution to the trade talks. >> the positivity is already there. >>