talk still on. the chinese -- trade talks still on. willhinese vice premier still come to the u.s. and don't break up big tech. a progressive tax could be the answer for companies like google and facebook. we speak to a nobel laureate on his ideas. david: welcome to "bloomberg daybreak" on this tuesday, may 7. we have some earnings out already. alix: we are looking to see where it starts. it looks pretty ugly, though. losses of 41 since a share -- of share. they've been trying to sell themselves in a really tough milk market. david: but they kept positive cash flow. whiche regeneron out,

missed on earnings-per-share and revenue, although they are still in the positive. allergan beating on revenue. they also see their full-year adjusted earnings coming in above $16.55, so that is enough great for them. david: not so good for regeneron. alix: unchanged, though, so far in premarket. you had this interesting move yesterday. soldlt like the dumb money in the beginning of the day, the smart money in the second half. german factory numbers disappointing, but the bond market in the u.s. pretty much unchanged. the crude market off by about 1%. it feels like we are still recalibrating from renewed china trade war. how much risk do you really want to take on?

david: the markets priced in a trade deal. alix: so now we have to price it out. david: now it is time for bloomberg first take. we are joined by gina martin adams and luke kawa. let's go to that china trade talk. i will put a chart appear of one way to look at this, stocks that are exposed to china the most, both developed and otherwise. this shows it down substantially. to what extent did the market get ahead of itself with the china trade deal? gina: predominantly it was really about monetary policy. you did see liquidity shift dramatically. china exposed stocks on the s&p 500, there is no evidence to say trade was the most powerful driver of returns so far this year. when we look across the landscape, the companies that have the most revenue exposure to china are still trading at a discount relative to their

five-year averages. nonetheless, these stocks did perform in line with the markets, so it is not like we were punishing the companies that were trade exposed in the s&p 500. it hasn't been the drag it was in 2018. that leaves this group somewhat .ulnerable we saw that play out over the last couple of days. luke: i don't think it is a surprise. we have a playbook for this. yesterday was the biggest outperformance of the russell 2000 over the shanghai composite since february 2016. back to when you had the aluminum tariffs imposed. yesterday we pretty much closed with u.s. stocks at a record against non-us stocks. it seemed like investors are going back to the well. if there is a trade war, we will hide out in the u.s. alix: and is vol where you want to be?

16 on the vix. luke: to a large extent, this is a reasonable move given what you saw in stocks. if it were really more extreme, you would have seen a bigger move in vol and a bigger move in futures. you didn't see that. the only time you saw that was in the most liquid part of the day, before americans had shown up to work. david: where there is real big change is in the turkish lira. the announcement yesterday is they will start from scratch on istanbul elections. mr. everyone has gotten his way. the markets did -- mr. erdogan -- mr. erdogan has gotten his way. the markets did not like this. gina: political concerns are creating a tremendous amount of volatility across asset classes. this has been a story for more than a year, and it has constantly weighed down turkey. to dipime investors try

their toes in the water, they get smacked back on turkey. i think we are getting close to the give up point given the political uncertainty that is so tremendous. it makes this segment of europe totally uninvestable. frankly, there are other opportunities that have emerged as a result of the massive decline in equity markets globally last year, and investors are looking for those opportunities elsewhere. alix: and also a stronger dollar story, another reason why we see a stronger dollar potentially. luke: if you look at the variety of bloomberg carry trade indexes, the one that is the worst is the lira year to date. warningyou had a regarding these elections when they were happening. right before they happened, you saw that big squeeze where the overnight rates were jacked up in order to punish speculators. you worry that politics in turkey were going to be way ahead of p&l.

it is just another reason to not go, so to speak. our third story has to do with chevron, anadarko and occi. this is my favorite chart of the whole story, those three stocks and the different timelines. first when chevron made a bid, makewent occi was going to a bid, then its first bid and increased bid. i look at this and i am an energy company. &aam not going to want to do m when my stock is underperforming. luke: it is really interesting because when i look at this initially, chevron was the lone player in town. if you look at the integrated players versus the producers since early october of last year, there was this big underperformance of the producers. to me, it was like, this is obvious. this is why anyone is going to want to get in there. as this story has played out,

maybe it says something about just the price in this situation because occidental has been criticized for having a little too extensive financing on this. david: it really drives home the point that if you go into one of these bidding wars, you are better off if you've got stronger stock. chevron has an advantage here. gina: i totally agree. frankly, the problem for the energy sector as a whole is the stocks are all week. clearly there needs to be a catalyst. they're probably gusting to be mergers. however -- they're probably does need to be mergers. however, stocks for the whole group are weak. traditionally macro factors such as inflation expectations, oil out.s play there's still underperforming to strike the really strong rally in oil prices. it is that you are sort of

caught. you can't win, no matter what you do. as an energy company, it has just been a big value trap for so long. investors are skeptical that they can get their way out. alix: unless you are anadarko. guys, thanks a lot. you can find all the charts we just used and more at jide tv -- at gtt jide tv . [indiscernible] alix: we are going to give you a mike. your -- a mic. your mic died. provisions for loan losses were a little bit later than the estimates. potentially some good news there

in terms of quality. coming up, more on what the u.s./china trade tension meets for markets. markets.n means for this is bloomberg. ♪

kailey: this is "bloomberg daybreak." first-quarter earnings slumped at bmw. legalised potential charges upward to $1.6 billion. group hasnternational entered a six quarter losing

streak. overall earnings beat estimates. that hadn't happened in a year-and-a-half. the world's largest beer maker may take its asian unit in public. lookompany is willing to at new ways to take on debt it took on. that is your bloomberg business flash. david: thank you so much. weeky markets started the sharply lower yesterday on news that u.s./china trade talks might be in trouble, and then came back some when we learned top chinese negotiator will visit this week. this chart is basically all the allks in the world minus the stocks exposed to china. lale topcuoglu,

a top analyst. is theink the risk non-consensus view, which is the deal doesn't happen. alix: how much risk do you want to take on? we are seeing negative yields in germany again. what is that telling us about the risk appetite and the premium we are now willing to pay? from thethink china, trade, let's start with the u.s. economy. i think if you just look at the trade impact from what it would mean from a growth perspective, it is a very small adjustment. maybe 30 or 40 basis points. the biggest risk from a u.s. perspective, and i think this is the argument against people saying they are going to hide

out in the u.s., is what happens to ceo confidence? what happens to future investments? that is what is going to determine the future. if you are a ceo, you are making investment decisions and you are unsure where trade is going to go. how are you going to deal with your supply chain, which is not so easy to shift around? that is what it is going to affect. over time if there is new trade deal -- over time, if there is no trade deal, that is going to affect the u.s.. you look at the aconite in numbers -- the economic numbers in the united states last week, numbers were surprisingly high. it doesn't seem to have slowed down much. guest: the u.s., from an economic data point of view, is fantastic. the challenges really from a future guidance point of view. we will see what that really means. if you are investing, you've got

to leave yourself a little will room. what if you are wrong -- a little wiggle room. but if you are wrong? from a trade perspective, what does that mean for emerging markets? on china, what is really interesting is the shift happening in the economy, shifting from building bridges to nowhere to consumer economy. some of these luxury goods producers, they are printing phenomenal numbers out of china. i think there's a lot of moving pieces, and perhaps it is not so easy to look from a top-down point of view and make a judgment call of just hiding out in the u.s. or somewhere else. alix: it is a fair point. the pboc has a backstop of smaller players in china, so what does the fed do here? about itplan talks yesterday. >> biased towards the next move being up or down, i think we are neutral.

i'm going to keep an open mind in watching how the economy unfolds before making a judgment either way. alix: that whole trade war issue might be a problem with the relationship between trump and the fed, based on the trade war in the backdrop. without think with or the trade war, it seems to be a challenged relationship. at the same time, the fed has a job, and i think they will tune out the political noise around it. what is really interesting, and this will be the test, is i think the bias to cut is very low, given what we see from the economic data. i think to hike as you get to a potential election, that also could be a little tricky. that is where the rubber is going. to meet the road. . -- where the rubber is going to meet the road. david: it seems they are somewhat sensitive to the markets. maybe president trump know something we don't, which is equity markets make take a hit.

this at put pressure on the fed as a practical matter? guest: the fed monitors the stock market because of wealth creation come but they can't just be day traders. if that is what it comes down to , you would really damage the reputation of the fed. the united states is a big economy. our securities. that confidence in monetary policy is critical. i know they watch the stock market, but i don't think that is the key driver. alix: lale will be sticking with us. coming up later, federal reserve vice chairman ricard tired of -- richard tyler -- vice chairman richard clarida will sit down with michael mckee. coming up, the fed escalates warnings on leveraged lending yet again. if you have the bloomberg .nal, check out gtv

ask us a question. this is bloomberg. ♪

david: the fed keeps warning about leverage lending, and interest did grow 20% last year according to the latest financial stability report. taylor riggs has more on the market growth. taylor: that's exactly right. leverage loans are growing the most since 1997 on average, at 16%.nual rate of almost everyone else is only gaining about 7% to 8%. come into the terminal at gtv . you had a very slow start, and then look what happened in 2017 2018.

you are ensuring hundreds of billions in debt. it all comes down to the total return of these indices since the fed issued their first report in november, 2018. the consumer price index really taking off after credit standards have slipped since november. the market has ballooned. so has prices. as you know, it all comes down to spreads. you have the leverage loan yield loans.ow high-yield you can see the fed talking a little bit about how issuance has really ballooned and come up a little bit off their loads. -- off their lows. nonetheless, they are slightly worried about the leverage loan market. alix: here's what the fed wound

up saying. havee standards deteriorated further over the past six months, and historically high level of debt firms among the riskiest could pose risks. still with us is lale topcuoglu of johcm. what do you think? lale: it is my favorite subject. one is the default rate is going to be misleading. i took this phrase from a friend of mine, it is the swiss cheese of covenants. the problem is companies won't really default until there are cashr no assets left or no left on the balance sheet. the default rate from a top-down is entirely misleading. what is going to happen is the spreads are going to move wider

significantly. are the lending standards loose? yes. loose in high yields? yes. i think this is the challenge for people who just invest in the asset class, but not so much the leverage loans that make me concerned. the market can deal with it from a structured point of view. we've been through cycles. the biggest issue that i have is these loans getting structured into products on the mutual funds that mimic liquidity, whereas the product is not liquid enough. for me, the biggest risk is this liquidity risk we are creating that is getting off of the banks' balance sheet, onto shadow banking. that, i think, is going to be the challenge. david: how much visibility do we have in that phenomenon?

if it is really shadow banks, do we really know what those devices look like? lale: we don't. i think we look from asset allocator perspective and no from people who have going into these structures, and hopefully they know that they are trading off liquidity in search of higher yields. the fear i have is some of these products are finding their way into retail, into private wealth. i'm not sure that is where it's supposed to be. andn't think understand middle-market landing, you get more.00 pips is it enough for you not to be able to sell something for three years, four years? i don't know. i don't think it is. but someone is clearly making the judgment call it is. alix: where are the good spots

where you don't get sucked into that in some capacity? >> --lale: we dig deeper. when you look for businesses that have persistence comedy businesses that are asset rich, it really dwindles down the universe. we try to pick our spots. we've also increased our holdings a little bit in cash. cash is not trash anymore. 2.5% seems ok. we own more than 18 note. we are trying to find value outside the u.s., and perhaps some of these european stocks where people get worried about -- and and the value the valuation is extremely

attractive. me come on the credit market, i think there is a big tailwind, which is the flows into the mutual fund. if you see the flows slowing down, i think the data is indicated. lale will be sticking with us. a levy on why putting targeted ad revenue could give tech giants an incentive to change their business models. a nobel laureate will join us with his new op-ed in terms of how to deal with bigger and bigger tech companies. this is bloomberg. ♪

it was sell at the open, buy at the close. currency market going nowhere,

unless you are the aussie dollar. german factory orders did miss, and crude participating in a risk off field. real action is going to be in the lira. if you take a look at what is happening, we are at the lowest level in seven months as you have a mayoral election redo in istanbul, causing a lot of trauma in terms of relationship with local politics versus overall erdogan politics. david: we knew this was fundamental for president erdogan because of the way he came to power, the mayoral elections. he saw this is a real bellwether. so-called the independent election commission say they are going to do the -- going to redo it. it is clear he is the strongman. by the way, he is doing things our president would like to do. the question is whether it helps the country. alix: what he says goes, but that is not helping any kind of assets. we take a look at the lira or the equity market or anything

along those lines, it's been a lot of turmoil. it is theimately people who pay the price. alix: still with us is lale johcm.lu of how do you distinguish something like this from em? lale: whenever you go em, you take sovereign risk. think for the broad asset allocators, you cannot ignore the sovereign component in em investing. at the end of the day, you will always have strong political men in emerging-market economies. what is important is the economy. how the economy is doing. you can say whatever you want to say on any of these political leaders, whether you like their views are not. the reality is if the economy works, the market will overlook

it. the same thing will be set over here. as long as the economy is doing well, the stock market is doing well. you can tune out the rest. i am not saying that is right or wrong. it just is what it is. in the case of turkey, we are going to go through this period of uncertainty until the elections are redone, and that will create a little bit of challenge on the economy. but i have faith in my country, and i think they will come through it. it is just perhaps going to take more time. alix: and similar thing for argentina, really. lale, it's been a real pleasure having you on set. david: now it is time to to find out what is going on inside the business world was first word news. kailey: it is shaping up as a crucial week in the trade war between the u.s. and china. beijing's top negotiator will head to washington this week for talks, announced after the trump administration ratcheted up

pressure, accusing the chinese of backpedaling over previous trade ands on threatening to raise tariffs by friday. tensions raised after the u.s. deployed an aircraft carrier to the persian gulf. one iranian official says tehran does not plan to follow the u.s. in abandoning the nuclear agreement, but make minor reductions to some of its commitments. apple stores are being hit by accusations that customer service has gotten worse. they say the quality of staff has declined during an expansion thansaw apple open more 500 stores. 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 kailey leinz. this is bloomberg. david: thanks so much.

the runaway success of tech giants like facebook and google inevitably leads to questions about whether we need to rein them in through regulation. >> growing recognition that the socialild west days of media platform companies is coming to an end. >> what we need to do is make certain that they are responsible to the americans that are using their platforms. >> when you look at the big picture in the digital advertising space, with the sec allowed would the fcc chase or goldman sachs to own a nasdaq? the answer would be absolutely not. pres. trump: when you start regulating, a lot of bad things can happen. inid: and op-ed out today "the new york times" by a former nobel laureate. "i propose a

different solution, a tax that would be applied to revenue from sales of targeted digital ads, which of the key to the business models of facebook, google, and other dominant platform companies." we welcome the author paul romer . we tend to think about .egulation, as you say you say we should tax it. what is the advantage of that? paul: the first thing we need to remember is that regulation often fails. we end up with either a system captured bytors are the industries they are supposed to regulate, or regulation theater, where we are pretending to regulate come about where the regulators have no power. i think that is an approach we want to avoid, if possible. there are other options, like using taxes to create incentives for firms to want to do the things that are better for society. alix: what kind of tax would

that look like if you are facebook or google? paul: we have to ask where do we want to go. the market works well when people pay something, they get something back. if they don't like what they've got, they have a choice to take their business elsewhere. so we want choice and transparency. createson digital ads an incentive to go back to a subscription model that many online firms use, where people know what they pay and compare it to what they get back. the tax is also one that could be progressive, so that you pay a higher tax if you combine two firms. ifr total tax bill goes down one big firm with an innovative new product spins it out as an independent firm. that progressivity creates the incentives to have many more firms and more choice. david: i want to be clear about

this because a lot of the evils, as people see them, in these companies are things like bad speech, tampering with our elections, using private data to target advertising. your proposal would not .liminate that wrong is that right? paul: it is trying to go back to a system where we have real competition. competition solves many of these problems. think back to the days of print journalism. there was competition between "the new york times," "the l.a. times," and "the national enquirer." i suppose the russians could have taken out ads in "the national enquirer," and there was no real problem. other major newspapers could decide to establish some credibility in the reporting. the competition between the outlets worked.

what we are stuck with now is a choice like the national inquirer -- like open put the national enquirer," which has spread in critical parts of this market. alix: we look at google and facebook, looking at their ad revenue overall. they are obviously both on the same kind of trajectory. but if you take a look at amazon, it is also coming into the market, yet amazon in the e-commerce word it -- e-commerce world is a behemoth. how do you solve for that? paul: i think it is important to take small steps, one step at a time. there are many people worried about the lack of credibility in the news that we are reading, the opportunity for a former to -- some people are

worried that facebook is a big competitor, just like walmart is a big competitor. i am less worried about that. just like walmart gave people some better service, amazon gives people better service. if we decide to do something do that.t, let's david: this is a criticism of the regulatory krista him -- regulatory system we have, in some respects. right now we see crossing the bluebird at this moment that porsche has been fined in the diesel probe in germany. does regulation sometimes work, like in the diesel situation?

paul: imagine there was a single worldwide auto firm, and regulators found they had been lying about test results on emissions. you've got a stark choice. are we going to put out of business the only firm that makes cars, or look the other way and let them continue to do what they are doing? you can punish a firm if they cheat on the emissions test they are dealing with many in terms of a single one. and the united states, we have a single firm. the regulators here realized boeing has been so powerful that it persuaded the congress and executive branch tanda or mine the system of regulation that used to work very well, based on

the faa. the other problem is, now having seen there's some very troubling issues that have emerged from this system of self-regulation they wanted to put in place, there is a problem. how do we respond when this is made in theplanes united states and it is such an important part of our exports? said mark zuckerberg has in the past he actually wants more regulation. he wants to update the rules for the internet and preserve what's , freedom for people to express themselves and entrepreneurs to build all these new things. paul: i think you should understand that mark zuckerberg's request for regulation is a sign of how bad the situation is that we've ended up with.

imagine you had "the national enquirer" as the only newspaper. how far do we go with the space alien story? they say, let's have some regulators who can help us so we don't have to let the comment thread have too much discussion about this. it is just a sign. we shouldn't even have to have this conversation about whether the government is situating people. if we go back to many competing --lets with regulation for with regulation, we will be better off. david: these companies, facebook, google, or truly global companies. would this be on global

revenue? paul: one of the advantages of focusing on revenue instead of income is we know the jurisdiction in which a company collect its revenue. states,ple, the united if new york state wanted to tax the ad revenue a company receives for selling ads to consumers in new york state, new york state contacts that. if the united states wanted to tax the ad revenue generated u.s.,ds displayed in the it could do that. with income, a company can move the income to the low-cost, low jurisdiction. alix: it was a pleasure to talk to you. we really appreciate this conversation. thank you so much. david: in the meantime, we want to return to this volkswagen story. they have agreed to pay a $535 million fine to prosecutors in

connection with the admissions scandal. dave said they will not appeal and will go along with it. it is 4 million euros for the breach of duty. stock is down 2.5% in the trading, although would have to separate out from what is going on with the trade situation globally. alix: a risk off feel, absolutely. but just trying to get it done with. david: totally right. alix: coming up, goldman-s 12,000% consolation prize. r's ipo to ube morgan stanley could pay out. bloomberg. ♪

kailey: this is "bloomberg daybreak." coming up in the next hour, an exclusive interview with president . to wall streetow beat. goldman-s 12,000% consolation prize. despite losing the lead ipo for uber to morgan stanley, they could reap big rewards. liquid millionaires bullish on stocks. wealthy americans are sitting on piles of cash. david: joining us now is lisa

abramovitz from bloomberg. let's start with the goddess. i love this title. this reasonably young chinese woman -- chinese-american woman goes back to china and sets of the quantitative approach to trading, and does really well. lisa: she talks about how it has not been challenging for her to explain herself because her track record speaks for herself. she took the truck from stanford , usually to go to the imf, but wanted to have something a little more intimate with the macroeconomic backdrop. david: this chart illustrates how much she has beaten the back mark -- the backdrop. more is there any competition that winds up coming in? lisa: she was saying people have more of an acceptance of what quantitative strategies are.

she says that in the past, people would walk in and say started the beginning. now people know what the deal is. -- start at the beginning. now people know what the deal is. alix: let's go to the next story, and that is goldman. explain how this $5 million wager with their own money in 2011 could translate to a 12,000% return on an ipo. lisa: what i find interesting is that investment bankers at goldman sachs were given the leeway to invest in the bank's investments inl startups that they believed in. they can make the case to the investing committee and make these investments. so a $5 million investment in uber shares has materialized to a $600 billion stake. david: apparently this is not without controversy. lisa: who's the wanted to make -- who's the one who wanted to

make this? gary cohn. who pushed back? david solomon. sort of interesting that after gary cohn left, goldman sachs lost the intimate relationship it had with uber, losing to morgan stanley the marquis assignment on the initial public offering slated for this friday. david: the third story is the millionaires who still like cash. we have a ubs survey which is interesting. lisa: first of all, it highlights how much cash there still is out there that could be deployed into the market in a possible selloff. the idea here is that the 's assets were 23% in cash. how much of this is cultural? in asia, people tend to save more money, and china in particular. still, people are optimistic, risk.ere is

maybe.ome bias there, david: and latin america are the ones who like their region the best. lisa: although cash is still pretty high there, too. show if also goes to you are happy with your country, is it because you think you're going to have a different government, or because we are doing pretty well? also the structure is probably working for them. david: but they are seeing their optimistic, but sitting on a lot of cash at the same time. lisa: interesting to see the fact that there is optimism, and yet still a lot of cash out there. david: thank you so much to lisa abramovitz, joining us today. alix: we are hearing from the eu in their global growth forecast. the big news, they are cutting -- cuttingforecast

german gdp forecast. it appears they are looking at weaker german gdp. we will break that down. david: it would probably have been news if it went the other way. alix: exactly. [laughter] david: coming up, they weigh up to seven tons, eat 600 pounds of grass and tree bark a day, and some countries are complaining there are way too many of them. a call for a common elephant policy is what i am watching, and that is next. this is bloomberg. ♪

david: the president of botswana has convened a summit of african states with the greatest number of elephants, getting together to talk about common elephant policy. there are about 500,000 elephants in africa. the population is estimated to go down about 2% or 3% a year. they have a big problem with preserving the elephants because

they need a lot of land, there are a lot of poachers, climate changes affecting them, and some places like botswana saying we have protected them so well, we've got too many. alix: how do you protect them? david: interestingly, what they were talking about was hunting. in some countries, we are going to have limited culling of the herd. in fact, the president has promised he would get legalized hunting, the way it has been done with black bears in new jersey and things. conservationists have said these are really endangered animals. about a quarter of them are in botswana. alix: does that mean they will have to cull the herd more in botswana? david: and by the way, they have a lot of ivory. if they can sell that, it could help their populace quite a bit. alix: and maybe you could have some people write some elements. [laughter] alix: which david may have done. david: about eight years ago we

went to south africa, and there's a wonderful elephant preserve. alix: hold on. that's your scared face, though. let's be clear, you were terrified. david: i was terrified, and i was worried about my little won falling off. the fact is, it is a long way up, and it is a bumpy ride, but it is fabulous. one big elephant named timbo was the sweetest thing. it is an extra ordinary thing. happy.our son looks very [laughter] up, the call on potential chinese/u.s. trade war. this is bloomberg. ♪

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go beyond the expected, to do the extraordinary. take your business beyond. ♪ alix: trade talks still on. the chinese ice from ear says --

chinese vice premier will come to the u.s. for more negotiations. your cutting -- europe cutting german gdp forecasts. an exclusive interview with the eurogroup president. earningsreporting ahead of a driver strike and uber is on deck. david: welcome to this "bloomberg daybreak" on may 7. alix: eu cutting german gdp warning ofo 0.5%, risks like brexit and trade. they thought that the slowdown and slip -- slowdown in germany would be transitory. what make it not transitory? david: we sure don't see any evidence yet. alix: part of it is the auto sector was bottomed out and we

are over the vw. if we bought them out in that area, does that wind up supporting growth in some capacity? david: bmw was out with earnings overnight, and really took a hit, but said the rest of the year, people are going to buy our cars. alix: is the downgrade going to be more micro or macro? and factoryrade war orders? david: i think you're coming back to transitory. alix: in the markets, no doubt that is moving certain areas. you are also seeing a move lower in wound yields -- in bund yi elds. here in the u.s., you are seeing risk off in, as well as crude. david: now let's find out what is going on inside the business world. renita young is here with first word news. be aa: it is shaping up to crucial week in the trade war between the u.s. and china.

beijing's top negotiator will head to washington this week for talks. the vice premier's visit was announced after the trump administration ratcheted up pressure, accusing the chinese backpedaling on commitments. to tighteningnd u.s. sanctions by backing away from parts of the 2015 nuclear deal. that could raise tensions after the u.s. deployed an aircraft carrier to the persian gulf. one iranian says tehran does not plan to follow the u.s. abandoning the agreement, but iran is set to make some minor reductions to the sum of its --nt death of its commitment to the sum of its commitment. chevron has four days to either boost its offer for anadarko or walk away from the deal. 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. young.ita this is bloomberg. david: thanks so much. the chinese vice premier is making his way to washington to try and salvage trade talks that appeared to have hit a snag. he's working against the brecht drop of a chinese economy -- against the backdrop of a chinese economy that is slowing, but appears to have stabilized. we welcome sarah hunt, alpine woods portfolio manager. good to have you here. let's start with where the chinese economy is right now. hast true that it stabilized, putting aside the trade dispute at the moment? industrialhave seen reduction numbers turning up stronger-than-expected on the back of some recovery in export orders, but most importantly, the stimulus, the credit and the quoted easing has helped boost confidence.

the overall economy is stable. david: that is with some of the measures the government has taken to stimulate the economy. what happens if the united states follows through on what president trump has said will happen if we don't get a deal? not only 25% on existing tariffs, but also on all chinese imports. what does that do to the chinese economy? >> we think it is going to get percentage points of negative impact. was a little easing, china can still keep growth above 6% this year, but if 25% tariffs are imposed on everything come the additional impact could be more than one percentage point. i think chinese government would then have to step up the stimulus, and even in that case, growth may fall below 6%. bex: but yet the pboc would

in as a backstop in some ways. can the same be said of the fed here? >> i think the u.s. is on the bit of a different trajectory at the moment because things are a little stronger. i think the people are much more worried about the first quarter then it turned out to be in terms of earnings and everything else. gdp numbers came in better than expected. ,he u.s. is clearly a trade war probably slower to hit the u.s., but it is also an issue. it is not positive for anybody. alix: does that give the u.s. more leverage? you saw china reportedly backing away from some agreements they had made, is that they are bad -- is it their bad? >> i don't know what the details are and why it changed from the u.s. side. has, indeed,hina

made a bigger effort than before to reach an agreement. there's been a lot of announcement about opening to mystic markets, -- opening and also theets, government is putting out policies more supportive of the private sector. they are reducing subsidies to the industries. so i think they are moving along. china generally wants to have a trade agreement. david: if the worst happens on the terrace go into effect on the entire chinese imports, what are the options? what are the most powerful options open to president xi to stimulate the economy? still beual levers can used. for example, increased infrastructure spending. i would say also, push through some of these structural reforms that domestically, there has been a lot of support for.

reforms and i so we introducing more private sector participation. growth may be below 6%, but that kind of reform will boost domestic confidence. to me, that is more important for sustainable growth in china. alix: does that mean any kind of stimulus that comes out will have less of a global effect then we are used to? seen.vei think but i think these structural reforms are more positive for domestic growth. david: the u.s. economy may be in a different position, from somewhatrong -- stronger than the chinese economy. and the sideways, markets particularly, as we saw

a hint of yesterday, does that give him a stronger argument with jay powell to cut? >> the tough thing right now is that loan demand isn't that strong. you think that is a panacea, and cutting may not be. the likelihood is that we end up staying flat instead of continuing to raise. if you don't have a lot of strong loan demand, cutting isn't going to do that much for what is going on. i think you are already at fairly low rates. in the end, we are sitting here interest rates low. alix: does outperformance continue? >> they haven't caught up to the left of the averages -- to the rest of the averages.

the question is, can the small caps now catch up? you would think if the u.s. economy was doing better, that would be much better because most of them are u.s. focused. i think you are starting to see that come through, but i think there's been some obvious concern and some of the equity markets that things have gone a little too far and the economy will slow eventually. david: as we continue this comparison of two economies, what about small caps in china? what does it mean for the chinese economy? yearthink especially last when chinese government was staging the deleveraging , more companies suffered more, and smaller volatile toe more trade tensions. there has been more liquidity smalleaper money given to

companies. large, state owned banks are mandated to increase spending. they are trying to make the effort. also, the government is trying to push forward the tax board to find a new way of pushing funding to the companies. alix: it is great to get your perspective. sarah hunt will be sticking with us. coming up, the european commission cutting its german gdp forecast to 0.5%. more risk in the air rose and, as well as an inflated -- more risk in the euro zone, as well an inflated -- from italy. this is bloomberg.

renita: this is "bloomberg daybreak." first-quarter earnings slumped at bmw, hit by earnings pressures and facing revised million -- $1.6 billion. is tesla's biggest investor, holding about 19%. last week, tesla said it is raising $3.2 billion through debt and stock sales to increase liquidity. a newys is hooping electronic trading platform will boost returns. fixedcombing through income currencies and futures on its revamped platform. it is affected to help barclays

lower prices. that is your bloomberg business flash. david: thank you very much. the european commission's spring report came out a short time ago, in which it cut its german gdp forecast to 0.5%, trimmed its euro era gdp forecast to from and said that risks trade and brexit remain pronounced. joining us from brussels is mario centeno, eurogroup president. thank you for joining us. did this come as a surprise to you, the cut in the german projection? mario: thank you very much for having me. haveast revisions that we -- i mean, the form on the global growth and european in theand the revisions

a forecaste have now then is substantially lower than a few months ago. we must, of course, be concerned with those, but there's a couple of good things that i want to highlight. first, europe has been growing quarters, acutive record for the euro zone. also, the forecast that the commission put forward today shows that this slowdown is temporary. to haveis expected pronounced recovery already year from the low growth that is projected for 2019. still is seenhis

as temporary. this is good. it comes in the stream of .ositive growth there is a low level of unemployment. we must act politically, take political decisions very quickly on issues that have been accumulating in the last one, and give usready the expectation for a better second semester. confidencegives you that the weakness in germany is only transitory? we still have the evaluation that the slow down is

transitory, that this is a temporary phenomenon. far,been quite vocal so urging politicians to take clear decisions on trade come on brexit -- on trade, on brexit. within the euro area, we also have to prove to ourselves that we are able to take the reform of the euro area forward on the budgetary instrument. policies, weal need to understand that we also need to reduce the risks that are accumulated in some countries over budgetary performance and on the economy. this is not an issue of the fundamentals of the euro area. the fundamentals are strong.

low unemployment, huge external .urplus we need to take political action at this stage. , eurogroupo centeno president, thank you for joining us today. alix: still with us is sarah hunt of alpine woods. still convinced that the german slowdown is transitory. when would you want to get invested in europe? sarah: for germany in particular, a lot of it has been out -- has been auto and how it is going to do. i am guessing that part of the reason to think this is transitory is because people think you have a slowdown in auto, but it is going to pick back up again because you borrow a lot of purchases. i think there is a positive hope for that. you want to be looking at some of those areas now, but it is very difficult in the middle of potential trade escalations to

start looking at economies very based on exports. germany is quite an expert-based economy. we need to get some sort of resolution on if we are going to keep talking or escalate. i think if we keep talking, you've got calmness in those markets for a while. david: sarah hunt of alpine woods will be staying with us. ene's assetcent management challenges. this is bloomberg. ♪

david: time now to look at three companies worth watching this morning. first, beyond meet. you had to watch -- beyond meat. you had to watch it all week long. this is a blowout ipo this week. we have estimates that maybe the market cap should be $41 billion.

off of thelike 200% ipo out of the box. they could go their own way, but i don't know. i'm taking a look at dean foods. bizarrely, the stock was up for a hot minute after earnings, now down 6%. they missed on the top and bottom line. positive cash flow for 2019, but said in the report, "transformative actions implemented over the past 12 plans through a product has been put on hold." like a toughls sell come about at the right price, i guess you can sell anything. the third company where watching is centene.

for more, brooke sutherland is with us. maybe having a little bit of trouble? down onthe stock went the day they announced to this deal. i think there was some concern about whether or not they would actually be able to get this through antitrust regulators. we seen a lot of managed-care deals blocked by the antitrust apartment of the u.s., but there's have been typically commercial insurers merging on the government side. in theory, that should help them come up with their earnings that they were targeting from this deal was not great given the risks they were taking on. now, reportedly you've got hedge funds saying maybe we should rethink this. maybe we should not go through with the wellcare -- with the welfare deal -- with the wellcare deal. this has sort of been a

combination that has been bounced around for a while now, with humana. when asked if they were interested in expanding in medicaid, they have sort of equivocated. it is not really clear where they stand. on this. i do think they would want to see -- where they stand on this. i do think they would want to see some court of friendly reaction. unless you have shareholders stage a proxy fight, it could force the deal to not go through. typically they just don't like the deal or think there is a better deal out there. alix: i think there is a big part of it. obviously you would rather someone pay a premium for you. the deal was not to get really all of thiscause talk about medicare for all and potentially repealing obama care really weighed on the stocks, but there is so much risk there.

alix: let's ask someone in investment stocks. today make a good value play right now, or is there too much overhang regulatory risk? sarah: you saw the group start to recover yesterday. on a lothis downdraft of presidential candidates on the democratic side talking about medicare for all. that has put an enormous cloud over the entire space. these are fairly inexpensive given the fact that most of them are showing decent growth, but the argument is about how much we are paying it is the cost of medications and everything else -- how much we are paying. it is the cost of medications that everything else that is driving everything. david: put these together, why do you have more than you started out with? is it cost settings? brooke: they hope when you have more policies, you can better weather changes in the

regulatory landscape. on thatee savings front, you could add on the humana side that could be an easier antitrust because there is not as much overlap. in theory, that might be easier than the wellcare deal. alix: thank you. hunt of alpine woods will be sticking with us. this is bloomberg. ♪

alix: this is "bloomberg daybreak." i am alix steel. at risk obsession developing in the market. s&p futures down .6%. dow jones off as well. dax down .5%.

factory orders came in weak. you also have the eu revising down its growth forecast for germany to just .5%. in other asset classes, you can see the risk off permeating. a couple currencies in the green. the dollar, the yen, and the aussie dollar. the central bank in australia did not wind up cutting rates as the market had anticipated. a one-off in the market. bund yields an negative territory. david: there is always a risk with this. now we will get an update on what is happening outside the business world. we turn to read need a young -- renita young. beijing says its top negotiator will head to washington for talks. wasvice premier visit

announced after the trump administration ratcheted up the pressure. it is accused the trump administration of -- accused china of backpedaling on comments made on trade. in turkey, the election board has ever turned a rare defeat for president erdogan. it has ordered a rerun of the mayoral election in istanbul. party urged widespread irregularities in the vote which will is won by the opposition party. drivers for uber and other ride-hailing services in the u.s. are planning a two hour strike tomorrow to raise awareness about their complaints. the drivers are seeking better pay and working conditions. over is set to go public later said to bend what is the biggest ipo of the year. global news 24 hours a day, on air and @tictoc on twitter,

powered by more than 2700 journalists and analysts in more than 120 countries. i am renita young. this is bloomberg. alix: thank you so much. nothing like you are going to release earnings and there is a strike. david: it seems to be true. the taxi drivers are set because they are out of work. now the uber and lyft people say the department of labor should protect us. the department of labor says your contractors. alix: in a world where it is hard to find workers, not with pay raises -- david: we would have thought organized labor would come back with uber? alix: speaking of, lyft is going to release its first quarterly earnings after the bell today and it is not looking great. the share price down 16% since its debut in late march. taylor riggs has more. taylor: we look at lyft and how that can push us forward in

uber's ipo which is said to be big news this week. i want to come to my terminal at gtb go -- at gtv . now down to about $61 a share. that is below the street average estimates. still $74 there per share. i want to look at uber and how it relates to lyft. their marketng share and how much bigger and more global they are and the diversification of revenue relative to lyft. as we know, just with the new york city, four times as many rides and the present of rides relative to their total is much higher. 22% has been declining as they tout how global they are. growth in the margins are much higher per uber relative to lyft. we also have analysts talking about how uber can compare to amazon.

amazon did books in the beginning, that is not who we are today. ridesharingey did in the beginning, that is not we are today. the problem is food delivery has low barriers of entry, autonomous vehicles has lots of competition, so they are still heavily relying on ridesharing. freight could promote growth going forward. asestors looking at this they look at that compared to lyft. rhett wallace.me sarah hunt is still with us. what taylor is talking about is how do we put a taiwanese companies? people -- how do we put a value on these companies? rhett: how you establish a

rational value and how you establish an analogy for the future? for lyft, private market investors said lyft is worth $15 billion. jpmorgan took it out at a much higher price and is still trying to find that level of support. definitely better than $87 a share. morgan stanley got a lot of credit for freeing the value range of the work -- of uber much closer to its valuation. from looking at all of the numbers, you cannot get to a discounted cash flow valuation unless you look for proxies. hasd: neither lyft or uber made any money or has any prospect of making money. what you look at to say that is when they will make money in terms of value? rett: what we did at our place, looking at uber, is looking quarterly to see how they ever make money and what were the

settings that allow them to do that. it turns out the economics are reasonably favorable for uber. when the competitors are blowing headlines, the model works. when everyone is discounted to attract new drivers and get new customers, you have to invest to do that. that gets you to the amazon analogy. to befavorable for uber used as the amazon of its category. a totally dominant player of a huge category will eventually get profitability. you can see why they are making the argument. the other argument is platforms give birth to new products. when you bought amazon and its ipo you do not know you're getting kindle and prime and all of those other things. uber is trying to give birth to the future as well. is that amazon distribution center workers were not going on strike the day before the ipo. you do not have global warfare with regulators.

you were not outright banned in entire countries. you do not have legislation to control your cost of drivers. are the employees employees, are they contractors? uber has a lot of challenges amazon did not have in how to control its revenue and costs. alix: great points. to an investor, do you like bloomberg? -- do you like uber, would you be interested in an ipo? sarah: the tricky thing for me is amazon has a platform that came public very early. i can take lyft, i can take in uber, it does not matter much. i am sure at some point there will be loyalty programs, but i look at that from a barrier of entry standpoint, i say what does that do? even overeats, which does not have as great of margin as , can that have

exclusivity around it the way amazon does? that is what they are trying to sell, the question is can they get there? rett: uber is so much bigger than lyft. uber would say we have competitors all over the world. lyft is a small part of our problem compared to other well-capitalized efforts. and on food delivery they have real competitors. what we do not know is at what point does this competition for passengers, driver, and meal delivery settled down so people want to be profitable instead of having share. we are still in land grab mode and there's only so many billions thinking going to the companies. they cannot keep this discounting up for long. gdc and others have been very articulate that we are not in a sustainable place. and the competition cools

people decide let's not try to loosen much money, what to the shares look like at that point? david: to the point about barriers of entry. amazon had warehouses. with uber and lyft it is not clear. you get drivers and they show up. rett: what i think the amazon analogy shows us is leverage on price. amazon built distribution centers. when the post office decides not to give amazon the rates they want, they turn the post office off and give it to other people. this is where uber has the advantage over lyft. the bigger your pull, the more bad to get on insurance. that is the problem on all of these things. you make up with leverage the things you cannot get if you are just the start with drivers and passengers. alix: if you go to the ipo

market, we saw the performance of the big ipo that have come into play. you like buying opa owes -- buying ipos in this market? sarah: if i look at some of the things that have gone public, that in the unicorns in the background for so long, there's a part of me that is cynical and says a lot of that money has been made because they waited so long to go public. for the larger ones it is difficult to say there be a next her value add. the fact that lyft is trending below its ipo price does not help that discussion. pinterest looks like you did ok relative to expectations. beyond meat was a huge move people were not expecting. value or be more a garp sort of person. i want to see what that is before i get excited about the height. a lot of those companies, unless you are trading it for a short

to whatnot live up people were looking for when they first became public. rett wallace, thank you very much. sarah hunt of alpine woods will be sticking with us. chevron now has 40 days to respond to occidental's offer for anadarko. more on that coming up next in today's follow the lead. this is bloomberg. ♪

renita: this is bloomberg daybreak. coming up on "bloomberg markets" an exclusive interview with rich

clarida, federal reserve vice chairman. daybreak." omberg allergan has raised its forecast for the full year. the company reported rising sales of its flagship project -- flagship product, botox. earnings beat estimates. apple stores are being hit by complaints that customer service is getting worse. current and former employees tell bloomberg that brand building has become more important than serving shoppers. the quality of staff has declined during an expansion that saw apple open more than 500 stores. apple announced that retail chief would be replaced by company veteran deidra o'brien. ritual meyer squid is kicking off what will likely be the biggest corporate debt of the year. the company is looking to finance its takeover of the

that wouldgene create a cancer fighting giant. bristol-myers may -- the debt. the corporateut bond market being open. you're looking at two years, just over 50 basis points for treasuries and we just have 120 basis points over treasuries. david: you can finance anything you want. .lix: time for follow the lead a deep dive into stories making headlines with industry veterans and insiders. today we are at the bidding war for anadarko. here's a look at the players. occidental, anadarko, and chevron. the white line is anadarko. the vertical lines are the different phases of the deal. you can see the underperformance of occidental stock. sommers,s is mike

american control he am ceo. my ongoing question -- american petroleum ceo. does that set us up for more m&a or not? you're seeing a continuation of american energy leadership. all of these companies are proud members of the american petroleum institute. because of the rise of the permian and other basins in the united states, this energy leadership america is part of will be a continued theme you will see throughout the markets. schools of are two thought as to what this leads to. one is we will have better and more efficient production in the permian. two is you will have less production, less oil services. what you see as the stories developing? mike: the oil and gas industry is riven by consumer demand and consumers are demanding 100

barrels of oil per day. this industry is focused on meeting the demand in the united states and the world. you take a, when look the equity market, when you want to invest in energy? sarah: i'm amazed that how the energy prices have not kept up with oil. you saw them go down when oil went down. a lot of these stocks are .agging against crude price there is a lack of belief that crude prices can stay higher. i think they can. onshore production in the u.s. growth is steering people, but you'll also need offshore and other things. i agree the u.s. will continue to be a big producer for a long time. we are tapping into ways we are not able to produce before. as a shareholder, when people start to look at bidding wars they get antsy and think people will overpay. the biggest issue in the commodity business is did i ever pay for those assets?

i think the story will be different, but when you see something reacting like this, people are probably not thinking i will go make acquisition, especially in places where things are expensive. the permian is expensive because prices have been so good. mike: i think you are also seeing the diverse city of the american energy mix. 20% of our oil production is still offshore. that continues to be an important component. offshore worldwide is only increasing. that will continue to be a foundational defect within the united states. alix: there is some question about leadership in the united states, but that in and of itself limits the upside. we are producing so much more now and we are a constraint about world -- on world global oil prices. i think from the perspective of american national security --

david: i am talking is a company. mike: what you are seeing is a consequence of the boom which occurred in the last 10 years because of the shale revolution and the energy revolution in the united states, because of what is happening in the permian, you will continue to have these energy producers looking for value in the permian and other basins. become an has also issue to david's point is the quality of the crude we have in the u.s. is different from or the world needs. not only do we have a bottleneck issue in the permian, but you are also equality mismatch. how you think that involves over time? mike: the key question the united states is this infrastructure question. i do get product from the permian to the consumer? that is a key priority of the american petroleum institute, making sure we have a pipeline infrastructure that can transport this resource from where it is to where it needs to

be. ask where the m&a will be, you want to buy a company that has a midstream asset where you can get the oil out. what do you like? sarah: i agree with that. what we refine in this country is heavy sour. we have a mismatch in terms of the crude slate with what our refinings are. the pipeline assets and infrastructure assets will continue to be important. there has also been this idea that somehow as we move to an electric car, we will have less demand for oil. and is an overtime question people are putting that timeline so close from a psychological standpoint when i do not believe it is that close from a physical standpoint. there is an undervaluation and some of those assets especially the commodityove that will be overlooked. the other point i was

making, the iga says our energy mix will be 50% natural gas and oil even after 2020. the united states has to be there to meet that consumer demand. alix: where do you see the value? sarah: i think there are some pipeline companies. i look at something like charter resources. because there are issues in terms of commodity pricing, they are doing a lot of growth. there is concern they have to raise money for the growth, they have said they do not. they have interesting ways of financing things. other pipeline companies are also looking interesting. for investors, see courts are better than mlk's. a lot of folks have gone into the see courts -- the sea corps. that space is becoming more investable to regular investors where before it was more of a

fund space. they could handle those issues with k ones. alix: great stuff. mike sommers, american petroleum institute resident and ceo and sarah hunt of alpine woods, a pleasure to have you with us. coming up, the european commission slashing growth forecast for the european area. next.n what i'm watching, bloomberg users can interact with the charts shown throughout the show on gtv . browse recent charts and say -- and save charts for future reference. this is bloomberg. ♪

alix: here is what i am watching. the downgrades to certain areas of growth within the european union. the eu cutting german growth outlook and seeing pronounced risk in the euro area. in some areas, it was not as bad. they tried to put an optimistic

spin, saying the euro area of economy has proven resilient even though we are in a less favorable global environment. not so much when it comes to germany. 1.1% was their growth forecast. david: everything is fine except for germany. that is the one you need the most. alix: a lot of that winds up dealing with trade. as initial deadlines for u.s. china trade and brexit have passed, various uncertainties continue to loom large. it makes me wonder is this like an imf where you are constantly behind, or is this actually new in terms of the trade conversation? david: if they are waiting for trade relations in the united states the calm down, they should get in line behind china. it does not feel like that will settle down anytime soon. does it means president trump's i will zoom to the auto industry. you can make the argument you are seeing more unity of the euro bloc.

it will not just be france and germany. they will unite against president trump. that is an argument we have seen since brexit. david: as the economic pressure grows we will see where they hold together. alix: in the markets you are seeing the euro take a leg lower. bunds now negative. a programming note, talking about global growth in trade. coming up on bloomberg markets, an exclusive interview with rich clarida. do not miss that. coming up on the open with jonathan ferro, morgan stanley equity model portfolios had. 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, china confirming its top trade negotiator will be heading to washington, d.c. this week as the u.s. administration ratchets up the pressure, threatening to hike tariffs as soon as friday. global markets on edge, investors hopeful differences can be reconciled before the weekend. here is your tuesday price action. futures lower by 20 on the s&p. down .7 on the s&p. euro-dollar weaker. treasuries, after yesterday's bid stable and unchanged on the 10 year yield -- 2.47%. we begin with a big issue. investors betting the president straight threats are just part of the plan. >> i would like to believe it is a negotiating tactic. >> i would see that more as a game. >> it will bring a lot more uncertainty. >> uncertainty. >>