the eu valves retaliation -- retaliation. and drug prices on parade. giants of pharma to testify before the senate. david: welcome to "bloomberg daybreak" on this tuesday, april 9. it was about midnight last night, which means and i didn't get to see it. alix: but one of our producers did. david: of course, virginia won the ncaa championship. for our importance here at bloomberg, we have to talk about brackets for a cause. -- jim for his charity won for his charity.

coming in at number two is bru ce, and number three is paul, an alum of the university. alix: very exciting. david: it is. great news for those charities. alix: markets not so exciting. teeny bit softer. the dollar weaker for another day. euro tries to climb a little higher. you've got that ecb meeting tomorrow. so why would it be higher? a little bit of buying on the blackened. blackrock says the market -- on the backend. tookrock says the market is confident.

the question for me is where do we from here. it feels like there is no strong direction being taken. i wonder what that catalyst is going to be in terms of the overall market. you come in and see the airbus news and think air will be down. note. not the case. now it is time for bloomberg first take. we are joined by bloomberg cross-ice at reporters. --cross-ice at reporters cross asset reporters. this case has been in litigation 14 years, and the time has come for action. when the eu ends these harmful subsidies, the u.s. duties proposed in response can be lifted. what possible effect could this have on businesses and markets?

>> these have been pending for quite some time. markets just clearly shrug it off. as it relates to businesses, we will have to see what the tariffs actually look like. how will that affect u.s. businesses and european businesses? what i also found interesting was the reporting that china and the eu joined together and finally got their joint statement going, and that is to show a common front to the united states. putting aside short-term implications, what does this mean going down the road? have a longe eu trading relationship. does this lead to a world when the u.s. is pulling itself out even more? alix: the flows go where? >> still generally nowhere. [laughter]

of u.s. companies with heavy exposure to europe, you'd be surprised to learn they are over performing since the start of percent. up 25 european exposure has not really been hurting. alix: good point. gina martin adams says that is the key risks to the market because china has been priced in. low volatility crushing the banks, in particular european banks. they want to improve profitability, so they're going to cut their way to profitability now when volatility is so low. nothing is going to help the investment banking. skeptical d

extent to which this is a -- i am skeptical to the extent that this is a low vol story. got aan banks, you've financial crisis out all in one go. it is this drawn out financial crisis by 1000 cuts that we are seeing drawn out. jobs in france, that is a little bit of pressure. david: it is not easy to cut 750 jobs in france. it is really interesting to me about the volatility issue. when you are a bank, you've got trading. we've got cross asset. this includes treasury. at the same time the european banks are getting hit by trading, they also have negative interest rates. >> typically it is hard for the

banks to make trades. that means they can't make as much revenue off of the trades. at the same time, to look's point, we just had a very volatile first quarter, and they also had a very rough period. ubs's ceo saying it was the worst in quite some time. you look at bank performance and the stoxx 600, it is the worst performing group in this half-year, down about 16%. flows are clearly not going to european banks. last year was the worst year ever for the fund, so clearly it is only getting higher. alix: we talk about yield curve in the u.s. they can't even have a yield curve. our next story is sentiment. where is it? the s&p continues to grind

around their highs. who's actually buying this rally? luke: i think we are starting to that clients had increased exposure to the market a little bit. more sitting dry powder in those accounts. but the story has been that no one is buying this rally except maybe a few hedge funds, a few retail investors, and corporate bid, which raises the question what kind of market is this. it is more of an apathetic market. all of this setting up this earnings season. david: we had goldman yesterday talking about the fear of missing out, saying in part these metrics to just a lot of investors have not participated

in the equity rally. might there be a trigger when everyone rushes in and says i'm afraid? sarah: that is why many investors are saying we can continue to go higher from here. luke called it apathetic. i think that is a great explanation. if we are higher today some dow and -- somehow and it is nine t is the days, tha highest streak since 2004. just been slowly marching upwards. but the large argument is if you still have hedge funds was very low exposure, mutual funds sidelines, if something happens, the trade could still be higher, and that means there's room for growth. luke: frankly, we just haven't seen the beta chase yet.

in november, hedge funds were exposed and having to get in there, and we know what happened next. david: thank you very much for being with us today. you can find all the charts we g tvused and more by using . coming up, fidelity's head of global macro. live from new york, this is bloomberg. ♪

♪ viviana: this is "bloomberg daybreak."

i care product maker outcome -- alcomre product maker surprised on its first day of trading. buy resorts is in talks to crown resort for $7.1 billion. in las headquartered vegas. crown is almost solely focused on the australian market. former nissan chairman kohler's ghosn says there's a conspiracy against him -- chairman carlos ghosn says there is a conspiracy against him after his latest arrest in tokyo. >> this is a conspiracy. this is not about specific events. this is not about greed. this is not about dictatorship sho -- dictatorship. this is about a plot. this is about conspiracy.

ghosn says his partners were afraid that his proposed partnership with renault would threaten them. david: thank you. we welcome now bloomberg's wto reporter from geneva. explain to those of us who don't know the wto the way you do, how could it take so long? the u.s. filed a complaint 15 years ago and got a ruling in their favor back in 2011. why did it take this long for a wto ruling? reporter: thanks, david. this marks the latest chapter in legendary more stories here in geneva. the eu and the u.s. have been battling out over their aircraft subsidies since 2004. we are now at the more exciting stage of the process, where the u.s. and eu are proposing

retaliation because both have been found to violate wto trade rules. time, the twosame rulings are very different in the amount of money talked about. airbus benefited to billions of dollars, as opposed to bowing subsidies in the hundreds of boeing subsidies in the hundreds of millions. bryce: that's correct. both will say they have won. at this point, the u.s. is proposing $11 billion in retaliatory duties against the european union in the form of airplanes, motorcycles, wine, cheese. in response, the eu has proposed an undisclosed figure of retaliatory duties against the u.s.. line with thes in

wto recommendations, that could be about three under $25 million, far less than $11 billion. david: thanks so much for your report. that is our colleague bryce baschuk. alix: now joining us is the fidelity head of global macro. why aren't stocks reacting at all to this? guest: i don't think they really will. europe obviously has many existential issues, too many to name, and also still some banking issues left over from the financial crisis. there's a reason europe trades at 11 times earnings, while the u.s. trades at 17. if europe was trading at a premium and this was out of the blue, the markets we be affected, but europe has already been down in the dumps so long that i doubt incremental bad news will move the needle, especially if we are on a cusp

of a deal with china. alix: a chart we are going to use throughout the program takes a look at the s&p continuing to grind around record highs. what is going to turn the sentiment? guest: the question is will we get some sort of foam a rally -- some sort of fomo rally. etf's, both and active and passive, got redeemed by about $89 billion. in the first quarter, the s&p did a perfect v, gaining 14%, anotherstors regained $66 billion. it is unusual that they keep selling after such a strong rebound. are thetion is demographics different these days? are people solving for different

outcomes? are they getting their equity exposure through solutions based funds? are people still looking around the corner for when and where the next recession is going to be and thinking to themselves, why am i going to buy now if we are going to be in a recession a year from now? i don't agree with that, but i think there is some of that thinking going on. how big of a turnaround is it from jay powell and the fed, and what do we need to see from earnings to support that kind of number? guest: i look at the market through earnings, rates, valuations, and sentiment. we just covered sentiment, which is good. valuation is in the middle of the range. we are kind of in the middle. the fed obviously did its full pivot. the question is whether it should be cutting rates, and the

yield curve briefly inverted a couple of weeks ago, to me. it really comes down to earnings. earnings season is about to begin this week for the first quarter. -3.9%reet is looking for contraction, and then a very sharp recovery into 2020 two match the v-shaped recovery. if that takes place, i think the fed is ok to do nothing. into an l, the fed will need to cut rates. alix: so your position, neutral or taking on risk? guest: if we see any recovery in the second half and the s&p is only 40 or 50 points away from its highs, new highs are very likely just from a mathematical

perspective. alix: coming up next, trading troubles hit stock jen -- hit stockgen yet again. we discuss what it means for european financials, up next. we are awaiting russian president putin to deliver a speech from the international arctic forum in st. petersburg, part of a panel with norway and before iceland and finland. this is bloomberg. ♪

david: societe generale announced plans to cut 1600 jobs. we now welcome bloomberg's senior finance editor. the stock price has gone up. was this expected? reporter: good morning.

yes, it was signaled almost from the minute they reported earnings last month. in the fourth quarter they signaled they were going to scale back trading operations, and we reported last week that these job cuts were coming, and they just today, so this was pretty signaled. david: what about the revenue side? are they backing off of other sorts of trading? doesn't that hurt them on the top line? reporter: you had the point exactly. people talk about cutting fat. the problem is when you start cutting muscle, it begins to hurt your revenue potential. that is exact a what's happening here, but that is the risk the french banks, both society general and bnp, have been counting on to drive their growth a little bit. both of them had disappointing

when he eighteens -- disappointing 2018's, especially in the fourth quarter. thanks so much for joining us today. alix: thank you, david. in the market, how much of this has to do with low volatility? come inside the bloomberg and see volatility indices all low. timmerith us is jurrien with fidelity. how much of this has to do with socgen? side,er: on the equity the currency side, if you are a trader and you don't have any volatility, there's not going to be a lot of trading to do. the market regime is certainly a part of that. with the of course, asset purchase program by the qe, and the u.s., what was

is now qt, but that is going to end. that distorts the price signal, so there is just not as much to do in the markets is there used to be. then you have the commodification of the financial industry. if you are a software engineer, you are in high demand, but it may be if you are in the financial markets, not so much today. , thehen you have europe whole malaise and slow growth, and the banks that have too many assets anyway. i do think it is a combination of all of those. david: bring it back to the united states, about to start earnings season for financial institutions friday. how many challenges are likely to translate over into u.s. banks in earnings? reporter: there was this -- that: there was this hope

less financial regulation would help the banks get its day in the sun, and then the curve started to flatten, and now rates are not going up and may even come down. we are back in this notion that maybe this secular stagnation inflation, of low low interest rates continue, and the bank doesn't do that well. david: you were talking a moment ago about a v bounce back in earnings in the second half of this year. does that apply to financials? guest: it applies to the whole market, but certainly not as much as financials. financials do not have that cyclicality. they do to some degree. the numbers are being weighed down by a handful of very large energy and tech companies. once those numbers go through the pipeline, supposedly you will see a rebound. the street is looking for 15%

growth again in q1 and q2 of next year. this debt we are seeing -- this dip we are seeing to contraction in q1 is expected to end. the question is, will that turn into a u? thank you so much. coming up, small business optimism rises in march. nfivre going to talk to president and ceo. plus, we are waiting for vladimir putin to give a speech in st. petersburg. this is bloomberg. ♪ want more from your entertainment experience?

just say teach me more. into your xfinity voice remote to discover all sorts of tips and tricks in x1. can i find my wifi password? just ask. [ ding ] show me my wifi password. hey now! [ ding ] you can even troubleshoot, learn new voice commands and much more. clean my daughter's room. [ ding ] oh, it won't do that. 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 daybreak." central banks day is tomorrow, so today feels like trade day. some conflict between the eu and the u.s.

no conflict between the eu and china. and it seems that the markets don't care either way. banks helping to lead the way higher. auto stocks down one tents. chinese car sales down for the 10th month in a row. david: they just had last year the lowest in 10 years in auto sales. alix: not good for german automakers. in other asset classes, still a weak dollar story. the cable rate jumping all over the place. the latest is that you did have germany potentially accepting a limit on irish backstop to get a deal done. then germany said that is not true. just more uncertainty there. david: a lot of clarity on brexit as we are three days away from the deadline. clear to me, at least. [laughter] david: now we are going to turn to viviana hurtado, who is here with first word news. viviana: good morning. the european union is preparing to impose tariffs against the

u.s. over subsidies to boeing after the u.s. vowed to hit the eu over its rival airbus. these are the latest twists in a 14-year-old trade disputes. have fought over aircraft subsidies at the wto. in israel, benjamin netanyahu facing the political fight of his life. voters must decide whether to embrace his -- to endorse his ornd of nationalism -- or opponent benny gantz. 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. this is bloomberg. david: we are going to go over to st. petersburg with a live shot of the arctic for them that is beginning -- arctic forum is beginning.

russian president vladimir putin is there with russia, finland, sweden, iceland. they are expected to discuss quite a few things, including what is going on with energy policy. a lot of international affairs. we will be bringing you more of president putin's remarks as he makes them this morning. alix: to be care, each of the leaders are going to be making a statement, followed by a half-hour later a cuban day. half-hour later a q and a. david: you've got the whole issue of money laundering through baltic countries in the news, but also i'm sure the issues about sanctions, which has curtailed things. there's also that little issue of ukraine. alix: totally. i know the last part they are going to talk about is climate change, which i am also

extremely interested in. it looks like president putin is going to make his statement now. david: he is going to give his opening remarks. he will be followed by the other leaders. alix: by the finish president, i think, and then iceland, norway and sweden. putin: ladies and gentlemen, friends, i sincerely welcome all of you to st. petersburg, the northern capital of russia. is a a said every -- it city whose history is connected with the legendary exploration of this unique region. the preservation of its environment and unique culture. that the fifth time international forum becomes a platform for a wide exchange of views on the agenda. we are grateful to our foreign

guests, to the representatives that are the countries of the arctic council for their leadership, as well as understanding that we've got a joint response ability for the future -- alix: the arctic trade routes are changing because of climate change. david: it is changing the whole world in terms of commerce and trade being able to go across the north pole, essentially. this is also against the backdrop of a russia that has been at times isolated, and you here,minded of nato forming an alliance with the fellow arctic countries. we will continue to monitor this and get headlines from mr. putin's remarks, as well as the question-and-answer period. we returned to america's small businesses. they are often an indicator of how the economy is doing

overall. for the latest, we turn now to bloomberg's taylor riggs. taylor: so far the overall takeaway is so far, so good. index atthe confidence thehighest level since previous month. the biggest negative factors on the index were current inventories and expected credit conditions. another thing that caught my eye was labor costs. he percent of owners now is theirlabor costs primary problem. it has fallen now to a percent. the problem -- to 8%. the problem is not actually wage cost come about finding a person for that job. alix: thank you very much.

as taylor mentioned, small business optimism improved in march. ceo aheado paychex's of last week's job report. >> the optimism is still pretty strong on small businesses, except that i have to turn down some work because i can't find the people, and you are finding more of what is referred to as fringe hiring. i may not have hired someone with only a high school diploma the before. now i'm hiring them and trying to train them. alix: joining us from washington is the national federation of independent business president and ceo. mmerl with us is jurrien ti of fidelity from boston. what have you seen in your business survey? >> thank you so much for having me. i really enjoy being here. nfib has been representing small

businesses for 75 years. the optimism index came out this morning, and i think one of the most important things about it is that the optimism index took a dip right after the government shutdown, and now after two months we've seen it has stabilized and is continuing to go up. there are a number of records that have been reached in the last six months or so. is that this month, i did the -- this month, they did more to retain workers. market is getting tighter and tighter, and as you mentioned, the single most important business problem is finding a qualified worker. alix: unreal. booksaramco dollar bond are reportedly in excess of what -- in excess of $100 billion. david: a lot of people want

aramco bonds. alix: you know it has got a price under sovereign yields at this kind of order. and to the question, is it really going to be about search for yield, were we believe in your underlying long-term business considering bonds are going to mature? david: we can attribute that thinking to jay powell. not raising rates makes bonds more attractive. alix: excess of $100 billion. david: we want to come back to nfib.a duggan now of sorry, we had to cover that news. there is some concern about economic conditions. juanita: members tell me every day that business is booming. if you look at the last 24 months or longer since the election, this is the healthiest

in the best small business economy and 45 years. my members tell me they have orders, but one of the problems they have is that they can't find qualified workers to do the jobs. our chief economist will tell you can buy a truck, but if you don't have somebody to drive that truck, it will not help grow your business. we can see they are doing a lot more to train qualified workers, and it is not just skilled workers. --is soft skills color thing soft skills causing business under problems right now. alix: they are spending on new equipment, vehicles, facilities. in your world, how much of the large money is going to versus a -- is going to capex versus a buyback or mna? >> obviously share buybacks are

at a record, and it is understandable companies would return some capital to shareholders. in the old days the dividend yield was 5%. now it is 2%. returningill back to 5% to shareholders. obviously we want to see capex as the small business survey on the smaller company side because that is ultimately what can raise productivity levels >> -- productivity levels. was labor markets where they are, you need productivity to grow in order to raise the speed limit for the economy, which allows it to grow faster without hitting inflation. timidly that is what we are all trying to solve four. . it is nice to see that it is happening. david: one eda, i want -- one , i want to come

back to you. is this pressing margins because they have to pay more money to their workers? does that cause more capital investment because they want to find other ways to be progressive? juanita: i would like to follow-up on your other guests. small businesses received the largest tax cut in history during the tax cuts and jobs act, and they are just now finding their taxes for the first time with a very large 20% deduction for a small business. so they have more money in their pockets to train. this got more money in their pockets to pay higher wages. thank you so much, jurrien tigin and mmer. aramco's bonddi book valued in excess of 100

million -- of $100 billion. and russian president vladimir arctics participating in projects over 10% of russian diplomat's. we will give you more headlines as they occur. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." coming up in the next hour, royal phillips' ceo. ♪

alix: tesla opens a new quarter with job cuts. bloomberg has learned the carmaker dismissed several dozen members of its sales team across the u.s.. elon musk is in the midst of a tweets with the sec. bloomberg did a nice chart showing the number of tesla-related tweets last month. good thing he paid attention to the ecc. david: -- to the sec. david: on the one hand, doesn't mean they are in trouble? on the other, does it mean they are making sensible decisions? alix: i guess the answer would be yes to both. [laughter] alix: by favorite quote comes from matt levine for blumberg opinion. accepted has kind of that sometimes, musk will tweet things about tesla that aren't true. the question is just how much of a sense of humor people should have about that." security laws are

based on a sense of humor. what does that mean? alix: it seems like that is basically what the world is feeling when it comes to musk. david: that is a unique defense. we turn now to wall street be to come we cover three things on wall street this morning. first off, saudi ramp -- saudi bond offer sores passed $100 billion. and wall street invest in your future, literally instead of taking out loans. students can hand over parts of their future earnings in return for investment today. alix: joining us now, lisa abramowicz. a100 billion-dollar order books for saudi aramco. how much of that -- a 100,000

building -- a hundred billion dollars order books for saudi aramco. lisa: the demand for the saudi arabia bonds completely overwhelming the $15 billion they may sell going into just saudi arabia and debt, despite all of the political risk, but are still outstanding. is going to have some new rules particularly focusing on liquidity. alix: the fed seems to be going after banks, u.s. subsidiaries they think it just portion it amount of risk -- a dispersion it -- a disproportionate amount of risk related to other banks. credit suisse and ubs would have to follow rules and liquid asset

requirements set by regulators rather than internal assessments. that is part of it. the estimate is this would .ncrease the cost your third story is you can buy part of a college grad. lisa: an increasing number of extending to college students, saying if you are an english major, we will charge you 4.5% of whatever you earn over the next 10 to 15 years. there are all these thresholds, but the idea here is your going -- they are going to own equity in you. they are millennial backed bonds. alix: i feel weird about this. david: but it makes sense. we'll see. many thanks to lisa abramovitz.

coming up, republican senator chuck grassley joins us to discuss drug pricing. and as we go to break, we are live from st. petersburg, russia, where the finish president is delivering a speech. we will continue to bring you headlines from this as they occur. live from new york, this is bloomberg. ♪

david: what i'm watching today is drug pricing, in particular the role pharmaceutical benefits play in setting those prices. we welcome now senator chuck senatey, chairman of the

finance committee. sen. grassley: i hold to -- i hope to get some information about the whole process from pharmaceutical companies sending prices down to what the consumer pays, and of the middle pbm's in have quite a bit to do with that. david: i am curious from your point of view, when we talk to companies and pbm's, both point the finger at another. into this, how do you sort that out and see exactly who is responsible? havegrassley: you also health insurance companies at the other end pointing fingers at both the people above them. so the whole point of the hearing is to answer your

question. why should there be so much secrecy in drug parsing -- in drug pricing? who gets the benefit of those rebates? then you end up with a lower price after the rebates. why isn't the lower price good for everybody? david: as i understand it, the secretary for hhs says we have a solution as far as the pharmaceutical benefits repaid by the government, and we are just going to abandon those rebates. these are for medicare, medicaid, government paid for. why isn't that applied more generally? is that a possible solution for you? sen. grassley: it is a good solution for me. there are some questions i still have about what secretary a czar announced last thursday, but i think he's headed in the right direction to benefit the consumers. but what he is doing can just

programs.overnment if we are going to go across the board to benefit every consumer, including those that aren't on government or grams, we are going to have to pass some legislation to accomplish the single he's trying to accomplish. david: there's a lot of partisanship on capitol hill. that's not an entirely new thing. is there partisanship over this issue? do your colleagues tend to agree with you by and large on these issues? sen. grassley: yes, and i've had conversations with members of the house of representatives that are democrats, and they tend to hold the same kind of line is i do on these things. i think we have a real opportunity for bipartisanship. that is what it is going to take , at least in the united states senate, to get things done. it would also apply to president trump.

last year when he gave a speech about getting drug prices a lot of other things the been done to protect legislation, but this is where congress can work very well with what president trump was trying to do last june. david: when you have the president, democrats and republicans all agreeing on something, you would think it would get done. at the same time, we have seen all kinds of possible reforms in health care get beaten back by a lobbyist. there's a lot of money. how realistic is it to expect we would get legislation, and how fast? i announcedy: when maybe before christmas we were headed down this road, not only on pharmaceuticals to get the price down in more transparency so the marketplace can work, it would be other players in the

health care delivery system. to answer your question more directly, once we announce that, we had all kinds of players come to our offices and say that they are willing to sit down and work with us, and that is a necessary first step to find out whether or not they are going to be intellectually honest and follow through with that. know the legislative calendar so well, as well as the political calendar is it realistic to think we could have this this calendar year? sen. grassley: if you don't get it done during 2019, there's a lot of things that are very legitimate, but much harder to ,et done during election year particularly a presidential election year. david: we have the announcement lighthizermbassador about tariffs on the eu.

particularort this implication potentially of section 301? yes, and that is not inconsistent with what i , evenas really subterfuge though he can do that under our u.s. law, but we are talking about the world trade , the rules of trade, whatever you want to call it. those sort of rules and laws are very necessary for protect ability and certainty in the international trade. which of the case several years ago now to the wto against airbus and europe subsidizing it. we won that case, so it is perfectly legitimate for us to put on countervailing duties.

they are legal duties we can put on, projects from countries that subsidize and don't have by the decisions of the wto, just like to be from't want the united states going into their country. duties on us.er david: there are talks that the trade deal with china might be getting resolved. talk to us about the financial markets community right now. should we be considered about a possible trade war with europe? in the meantime, this is right at a time when we are having delicate negotiations with europe. sen. grassley: i think the answer is no because i think the only legitimate terrorists the president is talking -- legitimate tariffs the president is talking about putting on under law would be on automobiles. it is pretty difficult to say that the production of

automobiles is a national security issue. i don't think so. but on the other hand, we would like to sit down and negotiate with europe. we want to negotiate everything. manufacturing, agriculture, services. all don't want a deal at with agriculture, and that is a nonstarter for us. david: senator chuck grassley, thank you so much for your time today. i find it interesting if they really go after the pbm's as the big issue. alix: and if they look to europe , also a big issue. does it throw china and europe closer together? ♪ alix: president trump's 11

billion-dollar tariffs. the eu threatens to tax cheese pushback threatening against airbus. trading revenue continues to sink. in the 100 billion-dollar order book. book blowso's bond out demand. david: welcome to "bloomberg daybreak." we are watching, of course, this arctic forum over in st. petersburg. it is fascinating looking at some of the headlines out of president putin's speech. now we have i think the icelandic president right now. he is talking about russia/turkey relationships, including that they could jointly produce weapons, which would not be good news in washington. turkey seems to have come up at the arctic forum. alix: there's also going to be a

lot more coming out, including a q&a, and the- a next few hours. david: mr. putin also says a rate hike will be a one-time, short-term thing. he is talking monetary policy in turkey as well as the arctic. alix: you mean there's a relationship between central bankers and authoritative politicians? that's surprising. [laughter] alix: in the markets, it is a slow market day despite a lot of news coming out of the trade front. take a look at the s&p. right around record highs, yet down by three points in the futures market. with the currency market. not a lot of conviction. really responding at all to this airbus news every tele-tory in the -- news

retaliatory tariffs. havel of this, you headlines, yet markets hold firm as this rally everyone wants to hate continues. david: the markets seem to be resistant to some of the headlines. alix: no conviction. david: time now for the morning brief. meets with premier eu leadership in brussels on trade today, with reports they will present a united front to the united states. heads face the senate finance committee today, led by senator chuck grassley. to berlin andads paris to try and build more consensus for brexit. and the imf will be releasing its report this week.

yesterday, u.s. trade representative robert lighthizer took the next step announcing proposed tariffs on exports from the eu to the united states. for listeners who don't follow the wto, it is unbelievable this has been going on for 15 years. reporter: this is the saga that won't go away. the trumpat administration talks about when they talk about the wto, that things just move too slow. there's this kind of morass. decided.forever to get the action we see today, and we heard this from chuck grassley earlier, this is really interesting on a couple of fronts. one, it is playing by the rules. this is an action the obama administration would have taken. administration says

they're going to wait for the wto to rule. thisecond point is prolongs the uncertainty we've got hanging over the global economy in terms of the trade wars because it is a reminder that it is not just about china. there's also the eu and japan. david: as you said, they are playing by the rules. it is before an arbitrator. of whathink maybe part they are thinking is to prompt the arbitrator? reporter: i don't think that is going to change very much. i think he is trying to frame the debate a little bit, and that is what we are seeing. this is the first time this morning we seen donald trump tweet anything positive about the wto. alix: exactly. just to wrap this altogether, are we going to learn anything about how trump has dealt with china and how he will continue to deal with the eu, or are

these going to be separate instances? reporter: they are separate, but they are interesting and how they contrast. with the eu he is playing by the rules. with china he's gone outside the system. that is putting unilateral , andfs outside of the wto that is in part because the tribbett administration says they don't think the wto is very good at restraining china. david: good to have you. nathan. are joined by when i saw the headline roque, i thought we got to blow up the show. this is insane. the markets aren't doing anything. what does this tell you? guest: markets have been focused on the situation with china. withoks like the trade war china is likely to land in the incoming months.

that trump is shifting to a possible trade war now with the european union. i really see this is the first barrage and that. it may be that markets are now a to this newnward kind of trade policy, and will say that we seen this before. there's a lot of noise. but ultimately, they will land a deal. i think that is probably the case, but there are risks along the way, including important risks took sentiment and confidence in the european economy at a time when it is already vulnerable. david: at the same time, might there be some method in the madness here? president trump got us all really scared about a china trade war. turns out it didn't really damage the economy much at all, and maybe the same thing could happen europe. reporter: make no mistake whatsoever, there is definitely

method in the madness. president trump got more concessions from china than previous of ministrations have been able to achieve, and i what the trump administration is ultimately focused on is what senator grassley concluded on, european agriculture. that they want to use these tariffs on aircraft. it wouldn't surprise me if we saw them on european autos as that would probably pick the germans against the fronts on agricultural policies, which could be very divisive to the european union. alix: it is a great point, and the idea of the s&p grinding to a record continually, but flows are leaving. why is sentiment so negative,

yet markets still hold up? would characterize sentiment as a little bit uncertain right now. people are definitely happier than they were at the end of last year. mode. are in wait and see some measures of confidence and so forth have changed and improved in the global economy, but the big question is when do we start seeing it in the hard data and gdp data? i think that is what people are waiting for, and that is the element of uncertainty that continues to hangover the u.s. economy, and quite frankly over the global economy. whenever coming to see this decisively in the heart data? david: how much of that is going to depend on whether chinese stimulus really kicks in are not? i think that chinese stimulus is the most important question. pmit week's chinese

numbers were very encouraging, but it hasn't really turned the corner yet. when does the chinese stimulus beijing intom frankfurt and the european union? we really need to see those internationals first. if we do, and i suspect we will in the second quarter come out thehat i think we will see market start to improve and strengthen. possibly too much. alix: that is interesting. [laughter] david: mason will be staying with us. alix: principle is going to buy 's retirement in trust branch.

that will not stop them from doing cheers. [laughter] david: coming up, u.s. bank earnings coming up this friday. we take a look at what we can expect. now, a live shot from st. petersburg, russia. we should be hearing from norway next, according to the schedule. we will keep following any news that comes out of that forum. live from new york, this is bloomberg. bloomberg.

♪ alix: some breaking news here.

a draft document from italy says it will cut its 2019 gdp forecast to 1/10 of 1% from 1% david: they are not going to make the numbers they promised brussels they would make? alix: really, the depth not that bad because we are going to grow 1%. trump at least president delivered on the 3% gdp growth. alix: that means they are going to have to raise their budget deficit goal. they have to raise it for this year and the following year. david: there's going to be some further discussions, i think. now we are going to turn to european banks. societe general just announce it jobs.ting 1600 for more, we go to taylor riggs. taylor: shares rising for socgen, but your to date clearly the under performer. just the latest bank in a weakened trading environment.

this also comes after ubs said the first quarter was one of the toughest quarters, and bnp cited harsh viability -- harsh volatility as an ongoing threat. also trading at a discount in the u.s. banks. vigo -- on gt v . you don't want to low volatility because that means nothing is happening, so we pushed forward to friday bank earnings to see how they are faring in that sweet spot. as we take a look at the financials here in the u.s. and pushing forward, we are still off from this record highs, even as another sectors has made

.ecords during this last cycle analysts are still cautioning that perhaps the first quarter of this year is as good as it gets is the fed starts to turn back to. alix: thank you so much -- back to dovish. alix: thank you so much. i have a volatility chart. the story that continues to be low, what kind of banks are going to have the best chances of staying profitable? guest: i think it is banks that have very well delineated and well articulated business models that know what they are about and are focused on turning profit in that space. i think that is the challenge for the european banks. i think they are still struggling to find out how they are going to make money. this is an issue that plagued them for the last decade. i think they've made progress in

recapitalizing, but this issue of how are we going to make money over the medium to long run continues to hang in the air. david: when you contrast u.s. with europe in this regard, you have the different dependence on the banks for financing. crucialt is a very point. for the united states, financing of the corporate sector and the economy more broadly is much more about a balance proposition between the banking sector and the financial markets, particularly the corporate bond market. dependent on its banks, like japan is dependent on its banks. we are in a place where the banks are clogged, where they have challenges with their financial positions, there's uncertainties about them. that greatly restricts the flow of credit, and there are at to

the same extent other mechanisms for firms to get that credit. alix: here in the u.s., we will get to ecb to how to fix that, been a real bid for financials, necessarily. there hasn't been a bid for value that is sustained. how much of what we are seeing is going to be just structural, shifting to other kinds of lending or how you trade bonds? there's a countervailing dynamic happening right now that banks and regulators are continuing to respond to and incorporate the lessons of the global financial crisis. i think that means here in the last decade, the regulatory controls were tightened. for financial institutions, these are much more cautious.

they are valuing the balance sheet in ways that was not the case before. financialeason, key metrics like return on equity are noticeably lower than they were precrisis, but i think that is because of greater conservatism and caution inside these institutions. some extent, the big banks decided we don't want to crush it anymore because the sometimes.shing it guest: that's right. precrisis, you would expect financial institutions to have return on equity relevant to the double-digit range. i think most institutions have now decided that a regulated thencial institution are in

8% to 10% range of what they can hope for, and is the appropriate number. alix: have banks revalued enough for this new landscape, or have markets not really truly understood that yet? nathan: my feeling is at this stage, this new reality is broadly priced in. i don't think there are too many banking analysts out there that are not fully aware of the kind of things we are talking about here. david: when it comes to the economy, we need strong banks. banks to dependent on drive the economy as we once were? nathan: that is a good question. i think the banks are still an important part, but a feature of this recovery is that we had slower growth in bank credit. we've also had slower growth in gdp. it is one of the factors that is

limited in the strength of this .ecovery i think that is one unanswered question that researchers will probably be looking at in the years ahead. alix: it is a really thought-provoking question. usually you would say you can't have a rally without saying the autos in the banks. so when they didn't rally, you said you can't sustain the rally. . i am wondering if it is like, now you can't have a rally without technology because that is where you get the reflection of gdp share. sheets of pgm fixed income will be staying with us. coming up, airbus and boeing are in the eye of a trade dispute between the eu and u.s. and we look once more at a live shot from st. petersburg, russia , at the international arctic forum. we will bring you the latest as

it happens. live from new york, this is bloomberg. ♪

david: it is time now for the bottom line, where we look at three companies worth watching this morning. first of all, snap. snap has been down and down since the ipo, now up and up. actually, in the premarket down a little bit, but it has been on a climb because they have really been innovating. people are liking it, and they got some upgrades. alix: bank of america raising the memo wage to $20 an hour. that is a company i'm watching -- the minimum wage to $20 an hour. that is a company i'm watching. only two years ago, they raised to $15. david: good news for income inequality. margins? alix: we will seealix:.

we will more -- alix: see. if it is more productivity, that is a good thing. airbusand boeing and back at it again. brooke sutherland is with us to expand. brooke: the u.s. says they will slap tariffs on the eu in retaliation for subsidies that have been given to airbus. the flipside is the eu has been arguing for years that the u.s. gives unfair subsidies to boeing to give it advantages. this has been ongoing for nearly 15 years, snaking its way through the wto courts. i think robert lighthizer said it has been 14 years. it is time for action. some might say it is 14 years, it is time to let this go. the global aviation industry has really been disrupted by airbus, and they have to make peace with the fact. david: the allegation is that because of certain launch incentives given by the

government there, a help to themselves three head of aircraft. that is a lot of aircraft -- 300 aircraft. that is a lot of aircraft. it is a lot of: aircraft. you know, i think that neither is wrong here. i think both have a point, but just be careful throwing stones at glass houses. alix: especially when boeing has problems anyway, so it might become a moot point at some point. of all, the eu and u.s. are supposed to be sitting down to have talks to reverse the tariffs already in place in retaliation for the trump administration's steel and aluminum tariffs. 737 max have boeing's facing global scrutiny. china taking the

lead on grounding that plane. they are not going to only have to appease the faa, but global regulators. it creates a really awkward dynamic. alix: thank you very much. and as we predicted, and a draft document, italy raising their budget deficit forecast to 2.5% this year after they cut their growth forecast to 1/10 of 1%. david: not good news. alix: no way does not, up the markets could care less. coming up, could sluggish europe be the next japan? we look at the slowdown in the euro area next. and we are looking at a live shot from think petersburg -- from st.

alix: this is "bloomberg daybreak." market quiet, soft despite headlines. equity futures are run record

highs. a little more softness in u.s. equities. s&p futures down 0.2%. the headline brought equities into negative territory as italy raises its deficit forecast 2.5% , cutting its gdp target to 0.1%. and 20% personal income tax brackets coming out as well. there might be reaction on the margin. david: how is that populism working for you? alix: fair point. in other asset classes, you have the dollar a little softer, euro-dollar up by 0.1%, hanging there the rest of the day. confusion with sterling. earlier but may be a softer start when it comes to germany, in terms of the ireland border. that was revoked and sterling was lower. now it is flat. if you know what is going on at the deadline on friday, you tell us. include a little weaker.

a bit of risk off in the commodity market. it is still soft. david: but i thought it was a masterful exhalation of brexit. you should record that. alix: thank you. the more you don't understand me, the better it is. david: perfectly accurate. nificationtion -- japa is what some worry might happen to europe with tepid growth and structural problems. not rapid growth. it is definitely tepid. withes cause comparisons japan's last decade of the 1990's. basically what has happened to japan since then -- you see the growth figures. we have europe and japan. euro is in white. japanese gdp numbers are in blue. they pretty much parallel each other in a narrow range between for about 10 years now.

the only hope for the europeans is that they are still running ahead of japan with growth. it has picked up a little bit. the hope is it will continue to do that with stimulus from the ecb, meeting tomorrow. one problem they both have is a declining workforce. aging,pulations are japan earlier than the europeans. you can see how the time-age workforce in japan has declined significantly. now that is happening in europe as well. that is a problem because the size of your labor force contributes to your potential growth rate. in japan it has john a lot of women and younger people into the labor force, pushed unemployment down to 2.3%. but that can't keep up. if they don't replace the population, they are going to have a problem. europe has an advantage because they allow much more immigration, but it is still something they are facing going forward. they cannot generate inflation in either country.

we should not talk because the u.s. is not doing a great job either. look at the white line, the core cpi for europe, and the yellow line, the core cpi for japan. below that 2%ell target. you can see where the policy rates are. gone negative, been negative since the beginning of the great recession. they have not been able to generate any inflation at all. it suggests the economies are still running very slowly. the hope for europe is they are getting a little higher and are seeing some games in wages -- gains in wages that may push up inflation down the road. as a problem, which is why people talk about the probability of japaninification. alix: nathan smith still with us. asserted that, what is your conclusion? nathan: there are striking similarities between the eurozone at present and japan

over the past few decades. , inflation, and so forth -- quite striking. in addition, as we were speaking earlier, both these economies sustainedajor, problems with their banking sectors and are very dependent on bank credit. together, there are some striking similarities between these economies. pointed out,e there are some strengths europe has that japan does not. japan at least is one country with one system of government. and with europe the fact that whether it is the banking system, fiscal policies -- they have all these different policies that have not come together. nathan: on the one hand, i would say it does complicate the governance in the euro area, and will make it more difficult to respond to problems when they emerge. but i think there is a flip side of that that is important in

this discussion, and that is beyond the aggregate euro area data there is a lot of heterogeneity and differences across euro area countries, and i would not want to call spain and ireland and probably portugal anything like japan. on the other hand, italy, with very low growth, very high debt levels, and political morenction may already be japan than japan is right now. so there is a lot of difference across those countries, when you look at that level of nuance. alix: to your point, on the flipside, debt to gdp is triple digits. capped,e, it has to be one good thing when it comes to being dispersed. david: except for italy. alix: obviously. michael, this conversation and what it means for central banks -- does the ecb need to look to the boj? what is the through-line?

michael: the ecb is already doing more than the fed is. i am not quite japan, buying stocks and etf's, and they are probably not going to have to do that. they are going to have to push bank lending, go back to the targeted long-term operations, hoping they can still relate growth that way. the biggest problem for europe at the moment is china, and the fact that trade wars are causing them to pull back on their trade. that is hurting germany, the biggest economy, and hurting france. if they can get past that -- in other words, the u.s. can get past that -- that would be a big boost for europe. is theblem the ecb has same problem the bank of japan and it seems the fed has. they can't generate inflation, get the economy going fast enough to create price pressures and anything moving up. it shows they are kind of stuck in a rut right now. david: if you were king of europe and had one goal -- don't

become japan -- what would you do? add fiscal stimulus? would you say, don't be an export company anymore? start consuming stuff? nathan: i think that would be an excellence start. the u.s. treasury has communicated that message the germans literally for a generation without a lot of success. king couldopean achieve it. that, i, along with would emphasize further steps to resolve the banking sector problems. continue recapitalization and streamlining of banking sectors throughout europe, including the german banking sector. i would say those would be the key things that would help unlock this monetary transmission and help us. the bank is on a

mission of fiscal stimulus. that seems easy. where are they different, where we don't want to make this claim? nathan: the europeans have advantages in terms of the fact they do allow migration. they have not done a great job of managing it, but in some countries better than others -- but that increases the labor force and increases potential growth. there has also been a change in the way they think of technology. japan used to be the technological leader. they have stopped innovating in the way they used to. if europe cannot develop innovation, that will help them grow as well. they in theory could increase productivity. they also have looser monetary policy, so they are not all the way down as far as the japanese. and they don't have the debt to gdp ratio, as you mentioned. david: nathan sheets and michael mckee, thank you for being with us. we go back to st. petersburg.

we have mr. putin speaking, the president of russia. he did get the sanctions, as we thought he might. he said that sanctions will not stop russian arctic development. alix: you are going to develop the arctic but ratify the paris climate agreement and enforce it? i don't get it. so you are going to develop it and also deal david: with climate change. i don't know. that is the advantage of being vladimir putin. alix: we have a money laundering. oil will be coming up. all of that is interesting to me. you: you also -- david: also see mr. putin putting it to the united states, able message to the united states. "we are good guy." alix: isn't president trump going to run on the environment? you have china and russia talking about climate change. david: he wants to be on that. makes sense. what's going on outside the world -- viviana is here with the first word news.

viviana: tariffs over subsidies to u.s. as the u.s. bound to hit the e.u. for its support of airbus. these are the latest twists in a 14-year-old trade dispute. the u.s. and e.u. have fought .ver subsidies at the wto actress felicity huffman is among a dozen people who will plead guilty in the college admissions scandal. will admit to paying to cheat on an admissions test for a daughter. the parents are making plea agreements which include at least minimal time in prison. prosecutors say they will file more charges. israel's prime minister, benjamin netanyahu, faces the political fight of his life. the voters must decide whether to endorse his brand of nationalism or denied him a fifth term. his party is in a tight race with the blue-and-white bloc. news on air and on

twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. alix: we do have breaking brexit news. reportedly, may has discussed a brexit extension to june 30, with german chancellor angela merkel. apparently they did agree on the importance of an orderly brexit. david: surprising it is this early. doesn't it happen in advance of parliamentary elections? alix: didn't they say "we don't want to get in the way of europe "? it creates conflict with other countries. they would have more representation in parliament if the u.k. was not there. david: it is politically damaging. we promised we would get out, but we will vote for parliamentary representatives. alix: the extension is june 30, and both leaders agree on the importance. i don't know where macron sits on this. david: that is where she has headed to. she is getting on a plane to

talk to micron, who does not seem to be in the mood. alix: maybe there is a little p.r. he needs to put out there. let's go talk smack. david: take a chapter from toughs de gaulle, be the guy in europe. coming up, a look at the future of health care technology. friends on how to -- franz vanhouten is next. ♪

viviana: this is "bloomberg daybreak coming up later on "bloomberg markets," a vice-chairman.

we go back to st. petersburg, where russian president putin has been speaking on a panel at the international arctic forum. he did make news that would be of interest to my colleague, alix steel. he said if oil prices go below $40 a barrel, u.s. shale output will be at risk. a burden for companies, and it should be shared by the state. believe it or not, the most read story on bloomberg's website yesterday focused on norway, and asked, is britain's largest petroleum producer falling out of love with oil? it talked about environmental -- i am not sure how it is pronounced. beenve the -- as they have discussing, will and gas exploration has disappointed in the arctic over the last two

years. every other week, we hear a story about another failure, dud location-- when it comes to finding oil. is normally falling out of love with oil? isi do not think norway falling out of love with oil and gas, but i think we are concerned about the co2 footprint our country is giving to the world. alix: that is pretty interesting, talking about is gettingnot norway out altogether based on news it would be diversifying out of certain oil companies. the norwegian prime minister speaking about that. that is a serious, legitimate question. they are all quickly trying to pivot and become these new energy companies, for reasons just like this. david: it is a problem so many companies face.

you do not want to move too fast. they cannot afford to fall in love with oil. alix: new energy does not give you the same margins, so that is a different thing. vladimir putin saying that if oil prices went below $40, u.s. shale output would be at risk. you can see him be like "please let that happen." they can sustain at a lower level. time for "follow the lead," stories moving markets. today we look at innovation in medical technology. is a global health technology company that operates around the world and makes products that range from mri scanners to electric toothbrushes. frans van houten is making big bets on ai, and says the health care market is robust. he shrugged off an economic slowdown in china. we welcome him from the

conference in boston. that was a couple months ago, and a lot has changed. sanktially, a global, when. what do you see? slowdown.l what do you see? frans: technology can help save lives, make health care more productive, more accessible. talked last year about it being robust. it has not fundamentally changed. i was in china two weeks ago, attending the economic development forum. is ake away is that it society where population is aging. there is going to be increased lifestyle diseases, cardiovascular cancer, lung cancer. the expansion of the health care infrastructure will definitely continue, and we are well placed

to participate. david: your priority is to save lives. at the same time, there is a uestion of "at what cost." a lot of concern about the increase in cost of health care. as you look at the innovations, which are most likely to bend the cost curve, if any? first of all, i would like to say we have embraced what is called value-based care. improveprove outcomes, the staff and patient experience, and become more productive. in our contract with health care providers, we are prepared to go at risk. in other words, we will put our money where our mouth is and help hospital systems to embrace technology to become more productive. it is my conviction that a 20%, 30% productivity gain with the current system is possible.

payback for the use of technology can raise outcomes. i think technology, and especially big data and ai, can help doctors and nurses take care of more patients at lower cost. telehealth.ble for many illnesses, it is not necessary to go to the hospital, to go to the emergency room, which is a very costly setting. telehealth will change all that. people would prefer to be in the comfort of their own living room when recovering from an illness. goingthat is on your end to deal with upfront costs, especially as you try to transform that business. in the shorter term, what is your outlook for margins and pay back for these investments? frans: we are in a close.

so you will appreciate i can only be general about it. marginsbeen increasing steadily for several years, to grow the company for 6%. we are executing on that. i am confident that we can continue to do that. and i see generally there is appetite for advanced technologies, as phillips develops. especially the type that brings solutions that deliver on that quadrupling of value-based health care i spoke about. tobe a good example elucidate it a bit for everybody is that if you have a disease and you go to a hospital to get diagnosed, it can take multiple visits to get to a precision diagnosis.

we bring the remains of radiology engine now mixed together in what we call precision diagnosis and link, through big data analytics, a treatment pathway so that for the individual patient we get precision medicine applied. timenk that can reduce the from diagnosis to treatment, and also enhance the chance that the treatment is the best one for you individually. i think this has huge promise. alix: it was really great to catch up with you. frans van houten, royal philips ceo. coming up, aramco's lackluster offering. a hundred billion dollars in demand for a maiden global bond. watching,at i am next. and we are still keeping our eye on st. petersburg, where the international arctic forum is taking place. you have vladimir putin, norway's prime minister. change,about climate

the last question was norway's prime minister talking about moving away from oil. she says we need it. ♪

alix: i am watching saudi aramco 's unprecedented bond order book. , whaty horton, -- amray did we learn about the order book? up,rter: we saw it tick starting around $30 billion for the offering in riyadh. today, it is coming to $100 million for the offering. clearly, wall street is hunting for yields. but also it is a sign of momentum to the saudi government after they were shot and -- they the killing after

of journalists jamal khashoggi. we are watching this all day. issues --this issuance will be enough to raise the money saudi is looking for, money to help move the government agencies, as well as appetite for ipo. wondering how much is a search for yield and how much is a statement about how people feel about oil. david: people are not afraid of saudi arabia. alix: coming up with jon ferro, michael cushman. ♪

y95óóo jonathan: from new york city, i am jonathan ferro. the cap down to the open starts right now. opene countdown to the starts right now.

up, one more trade dispute battleground. tension between the u.s. and europe escalating. $100 billion worth of offers. as the ecb governing council convenes, a market-moving wednesday. 30 minutes away from the opening bell this tuesday morning. futures negative. on the s&pr 0.3% 500. the euro further -- firmer against the dollar. 2.50 on basis yields at a u.s. 10 year. europe looking vulnerable as trade tensions escalate. >> europe has many existential issues. >> structural hurdles. >> too many to name. >> once the u.s.-china tension was easing off,