punish with their worst loss since january. china warns of retaliatory tariffs as trade delegations land in d.c. exports fall, corporate fault surge, putting more pressure on the pboc. new zealand becomes the first developed central bank to cut rates. jamie dimon says 4% yields are not so bad. if growth holds up, the fed has to react as key yield curves continue to flatten. welcome to "bloomberg daybreak" on this wednesday, may 8. david westin is in washington dc with extraordinarily busy news flow out of the capital. david: i came here because of the trade delegation out of china. in the meantime, we have mike pompeo going to iraq because we have problems with iran because iran says we are going to start up our nuclear program in 60 days if you don't do something.

then we have president trump's taxes, with a report breaking late yesterday. now the president is out with a tweet this morning, basically giving us a tutorial on how real estate financing goes. and by the way, it's fake news anyway. and it's old. alix: well, it was more than 30 years ago, but it was a fun read. in the markets, it looks like we might be in for some kind of stabilization, but that has since reversed in the last hour. to take a look at the 50 day moving average, we are not yet there. euro-dollar eking out a gain of 1/10 of 1%. you have a big bid into the european bond market, particularly when it comes to bunds. here in the u.s., a bid in the long, and risk off percolating. de not taking into account

any geopolitical risk from iran. those headlines continue to rattle some physical traders in the market. david: you have to feel sorry for crude. it doesn't know which direction to go, given all the news. it's time now for bloomberg first take. we are joined by tom ehrlich and romaine bostick. of the tradeause delegation. where are we with possible new tariffs coming in on friday? are these abrupt -- are these talks about to break down? is that this case is an unusually public and messy end game to the negotiations, but everyone fundamentally still once a deal the truth is going wants a-- fundamentally deal. the truth is going -- the truce

is going to hold. robert lighthizer, the chief negotiator on trade, his press conference on monday, we have to factor in the possibility that trade talks will break down and we will go into another trade war. everyone is saying there has to be a deal because it is so terribly important. does that work? could it actually all go away? tom: politics are also important , and donald trump is not going to want to go into a 2020 election with a deal with china that makes him look weak. maybe china's been playing hardball a little bit too hard. they've been trying to pull too many concessions off the table. that's what's prompted this reversal by the u.s. david: and reversal in the markets -- alix: and reversal in the markets as well. yesterday, more than 90% of the s&p stocks were down, the broadest day of decline since

christmas eve 2018. how did you interpret the markets over the last three days? is just hows fragile investor sentiment is. people are trying to extrapolate the economic impact, but there is a sentiment impact. foreard how capex spending a lot of companies was being delayed or pushed back because of the uncertainty not just of the tariffs come about what is this deal going to look like? what is the enforcement mechanism going to be? you can't really plan out over months, year, 18 until they see what the deal looks like on paper. alix: a dovish fed now might be taken off the table. the resolution of a trade deal might be taken off the table. our next story is the weakness that we saw in export data. imports were better, but exports were down. is that like a third cloud now over the market?

romaine: it certainly is. when you look at that data, this wasn't endogenous. this was a sense that what is happening in the chinese economy is actually being affected by the global economy. we look as it the other way that china is signed of the slowdown in europe and other parts of the world is starting to have an impact on the chinese economy. that has to give a little bit of worry. the chinese also economy as an economy. one of the fascinating stories on the bloomberg is the rate of defaults on loans in china, which last year set a new record, and now is at a pace to triple that record. tom: i am going to take a non-consensus view. this is a volatile series. there was a lot of frontloading increasinge tariffs at the end of last year. i would want to see a few months

of data before i conclude that this is a downturn. in a normal market economy, if we saw a tripling in defaults, clearly we would be ringing the alarm bell. in china, it is not quite like that. defaults have been coming from an extremely low base as the government was almost maniacal about controlling defaults and preventing blowups in the financial system. so yes, the increase is a troubling sign, but also it is evidence that they are beginning to deal with that hazard. david: which leads us -- alix: which leads us to our third story. yields in the 10 year coming in at 2.42%. jamie dimon said something a little different. year atnk the 10 whatever it is today is extra nearly low. -- is extraordinarily low. of sovereign debt

has to have an effect on 10 year. i think 4% when you're having really good growth is not a bad number. ee what kind to s of growth we would have to get to to see 4%. romaine: i don't think he was necessarily off-track. i think we had the political climate change, the trade war escalate to the point where the fed couldn't look away much longer. you had a lot of these factors on the periphery. but at the end of the day, he is still talking about an economy that still seems to be resilient, and there is still a base case that rates should be higher. david: tom, is jamie dimon right? tom: i think you have to ask what kind of world we are in. are we in a traditional phillips curve kind of world, where wages rise and bond yields go up? that is basically what jamie dimon is suggesting.

a secularin stagnation kind of world, where demographics, globalization, onhnology all weigh inflation, and bond yields stay permanently low? we will see how things play out. alix: tom ehrlich and romaine bostick, thank you very much. all of the charts we use, you can check them out at gt vigo -- terminal.o> on your david: vw is out now with the pricing on their electric vehicles, saying they will cost less than 30,000 euros, and they will start taking posits on their new 3-d electric car. down is down -- it is about 3/10 of 1% now, vw is, but it is clear they are going to compete with tesla. alix: they are coming out with

earnings. $1.5eo expects to raise billion in capital. i will speak to the head of barrick gold and what they are going to sell. coming up, what are the impacts of trade talks on markets? headll speak to socgen's of global asset allocation. this is bloomberg. ♪

kailey: this is "bloomberg daybreak." uber has enough investor demand offering at at

least three times the amount of stock on offer. it is due to price shares on thursday, likely to be the biggest ipo this year. toyota has come out with a full-year forecast that fell short of analyst projections. japanese automaker is spending more on incentives to make up for sluggish car demand in the u.s. it also announced a share buyback program. facebook accelerating efforts to make money from its popular whatsapp messaging service, expanding global payments on the app. that is your bloomberg business flash. alix: thank you so much. u.s. stock futures looking at a third day of losses after the worst today selloff since january as china's trade delegation arrives in ec, with reports they are optimistic on a deal and could threaten retaliation if the u.s. imposes higher tariffs. bloomberg spoke exclusively to

jp morgan ceo jamie dimon to see if they can still get a deal done. it could slow down global growth and hurt a lot around the world. it may take a little more time, but they should do the proper trade deal. alix: joining us on set is socgen's head of global asset allocation. so what do you do on a day when you're looking at three down days for the s&p, when there is a lot of uncertainty, and people are saying we are already overbought? guest: obviously it is impossible to have a long-term view in these market conditions. at this stage, the odds that they will have a delay to continue negotiations to try and make that deal, we don't know

yet whether the president of the united states of america is playing the odds to put more pressure on china to deliver by friday or not. we don't know yet. alix: a big part of that has also played out in volatility. there seems to be more volatility priced in and one month then even in two months. how do you play something like that? there's still a lot of uncertainty. is a g1urrently it story. you have the g20, where you can diversify the portfolios. , we have been switching from 0% to 10%. you go back to the u.s. they are falling, but in a lower

manner than japan and so on. this is the protection for now. david: as we look forward to not knowing what is going to happen with trade, most people think that the markets have essentially priced in 100% of a trade deal. they've come off of that some. off?ar have they come where are the markets right now in the probability of a satisfactory trade deal? alain: i would say the pub 25%ity of no deal, we go to to 30%. 70% to 80% probability of a deal. david: is that fair? worthy markets looking for an excuse to selloff -- were the markets looking for an excuse to sell off? the s&p was at a level we hadn't seen since the dot-com bubble in 2000.

idea ofe agree on the an excuse after one of the sharpest, deepest rally in the first four months of any year in the decade. however, if you look, it is not only in absolute terms on the valuation, but relative to bond yields, bond yields have fallen back. the pressure downward on yields .as improved the s&p is not anymore expensive can's the treasury yields than it was a year ago. on that, it is less expensive. a new feeling also is the fact that we know that corporations on the return on equity basis are extremely profitable at the moment. the underlying economy is very good. if we were a corporate manager

-- [indiscernible] -- to start buying back. $500 billion to $600 billion of buybacks this year. alix: if you look at the safety of u.s. equities and buybacks, what are you selling out of? what is too risky for you right now? period, theis better way to look at the markets is the assets, which have been going up most since the beginning of the year, you out move since the beginning of the year.

the extreme debt and credit, the lower rating, you have energy. gold is safer. ,old has not risen year to date but energy has gone through the roof. [indiscernible] china equities have been more vulnerable than u.s. equities. alix: that's a great point. i'm glad you brought up gold. alain will be sticking with us. barrick gold reporting solid earnings, and talking about assets.some we will speak with mark bristow, the ceo. go to tv on your terminal. this is bloomberg. ♪

alix: barrick gold reporting earnings that beat estimates for the first quarter. joining me from toronto is ceo mark bristow. first quarter since the randgold barrick merger. what are you selling? assets thatn-core we feel would be better in other people's hands. i think be solid quarter in all of our assets, apart from those going towe had no assets that 't make a contribution to the bottom line. but as we said, we really want to focus on tier one assets and tier two assets, and those that don't particularly fit our strategic folders. we look to put those in other people's hands.

alix: who are those other people, and what is the interest you can gauge so far? mark: we started working towards that. the most important thing, remember, is ensuring that our stakeholders, the other part of the businesses, are consulted properly, that we do it in a way that they benefit, and it is not a fire sale. we will work with those stakeholders and let the market know when we are ready to let them know, what's we've got a way forward for each of those assets. alix: fairpoint. $12.89.ce is at is this a good market? ka, did you need to wait? -- a.k.a., do you need to wait? mark: if anything, we believe we can add more value to some of these assets before we engage with the market. we are going to be very focused on selling to people that we

feel will make a contribution because some of these assets are in countries where we want to continue to invest in those countries. it is an important consideration to work with our host country governmente sure that ing toassets are continu make a contribution to those countries. prices, whileld it is important, it is not a key factor in realizing these assets. some of the assets we would look to realize, we wouldn't accept from them immediately. we would be there to support the business going forward. we will exit overtime. again, we've always said our business is about creating value not only for our shareholders, which is very important, but also for all other stakeholders, including our host countries. alix: in order to keep adding

value for shareholders, do you have to buy anything else? or out -- or are you tapped out? mark: this is such a great business that we put together. the asset portfolio puts us way ahead of our peers as far as quality of those assets. we are absolutely comfortable with the quality of our people, and particularly the executive team, and when you combine a good group of people with high quality assets, you cannot deliver better results financially. that's what we set out to do. we are well on track to do that. this is a long game. we are very clear about delivering long-term value for our shareholders. we were able to reinforce our new policy that we -- i mean, dividend that we promised to the market at the top of the merger. it was supported by cash flow,

which is important. aren, if there opportunities that would create further value for our owners through another acquisition or some sort of deal, we wouldn't hesitate to pick up on that. but right now, really we've got a lot on our plate, and we are excited about the future and our ability to deliver. alix: you're definitely a busy man. i'm sure one of the questions on the call is how it is going with newmont, and what is the timeline for delivering on that. mark: we are working really well with newmont. we've set aside the past, and really, we've been working -- and again, another exciting opportunity. the commitment of the people in nevada has been absolutely out of this world. we are all excited about what we are doing. we are working hand in glove with newmont towards closing this transaction this quarter.

as you know, all the regulatory stuff is now behind us, but it is a big project, and we want to make sure that we do it right, particularly with regards to the people. alix: really quickly, the gold price. what do you think it is going to be while we have a lot of geopolitical risk in the foreground? mark: you've seen this industry is in a difficult position. the gold price is flat. it. is hurting the industry people haven't in ash it is hurting the industry. people haven't invested in their future -- it is hurting the industry. people haven't invested in their future. i think the gold price is bound to go higher before lower. alix: mark bristow, barrick gold ceo, good to see you. coming up, we will talk about the trade deal delegation. ♪ ♪

alix: this is "bloomberg daybreak." a risk off feel developing in the markets today. loss&p on its worst today

so far this year -- worst two-day loss so far this year. 1/10 ofsurprisingly up 1%. in other asset classes, we are seeing a move into safe haven assets. euro-dollar flat, but it is really a yen story and dollar story of strength. i want to take a look at the tenure spread. we are at 72 basis points, and now there is talk again about the inversion and any kind of trade you can make off of that. bunds stay in firmly negative territory. the vix elevated. crude in a risk off mode. david: i never roll my eyes at you about the yield curve. [laughter] david: time now to find out what is going on outside the business world. to that, we go to kailey leinz. kailey: a school shooting left

one person dead and eight in highlandsschool ranch, colorado, a few miles away from where 13 were killed at columbine high school 20 years ago. british prime minister theresa may is reiterating her opposition to a second referendum on brexit. may is being questioned in the house of commons right now. she says the government is still trying to reach a compromise on a brexit bill with the labour party. iran will no longer comply with elements of the 2015 nuclear deal. president hassan rouhani is giving european countries that toned the agreement 60 days reaffirm their commitment in response to u.s. sanctions. rouhani: we did not initiate the violation of commitment, and we will not initiate any wars. we have never, ever given into bullying, and we will never succumb to bullying, and we will respond to any aggressor.

kailey: the trump administration has refused to extend waivers allowing countries to import iranian oil. the u.s. bailed out of the nuclear deal a year ago. 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. alix: thank you so much. we have pompeo going to iraq. we are also sending an aircraft carrier strike group to the region as well. this is a very significant development. david: it is a significant development. i think inevitable, though. once president trump said he hated the deal and wanted to start from scratch, did we really think iran was going to buy it? they better stick to this agreement, but i'm not sure why they would need to. that not yet at all

reflected in the stock price for crude. david: as we both know, the big problem for europe is actually the u.s. dollar and the payment system through new york. if the u.s. wants to really get tough, it is awfully hard for europe to hang in there. alix: especially on secondary sanctions. oil, we willanian shut you out of the payment system. that would be a significant change for the global politics for the region. david: we have a big story playing out in washington this week with the chinese delegation returning to town to try to negotiate a trade deal even though the president has threatened new sanctions, new tariffs coming by friday. that friday deadline they are working against tightly. -- wecome vessel enough welcome back selena. back.h, welcome good to have you here.

you know both sides here. is this simply something to be expected, a little blip in the process? or is there something more fundamental going on here? guest: in every major trade agreement with the chinese, there is always a major crisis before the end. but what is a crisis is the extent to which we are hearing are the changes to the text. robertry mnuchin and lighthizer were negotiating almost 160 pages. the chinese are taking significant portions of that off the table at the last minute. that is real reason to be concerned. david: it is not the first time in these negotiations that has been reported. that mr. lighthizer thought they had a deal, and they come back and said this is not the deal we made. is that a chinese negotiating tactic, or reflecting something more fundamental, that may be the chinese government might have trouble delivering?

deborah: i think it is a combination. there are forces trying to counter some of the opening that is going on. there's a lot of money at stake, particularly for some of the state owned enterprises. there is some bureaucratic control going on. but for the administration, it is important to continue to push to break down some of those barriers because it is the only way we will start to see true market access for some of those companies i think there is a credibility issue at stake here. they have to come and show they can actually deliver on the commitment made to the united states. the vice permit or do that -- vice premier do that? how does he gain that back in the next 48 hours? deborah: i think it is not just about the vice premier. it is really ensuring that we understand as the united states that there is a commitment from the top in china that they cannot only make these

commitments, but they are able to implement and enforce them. that is going to be critical, and the vice premier is going to have to demonstrate that. part of it is going to be through the package he comes with when he arrives here in washington. david: is this too big a deal to fail? we hear that now from people up on capitol hill, from former administration officials. it is such an important deal for both sides, they will have to get it done somehow. could it go sideways? deborah: it certainly is an important deal both in terms of the content, because the timing is we have to have increased market access, we have to change the structural relationship with bute on china, psychologically we already see the reaction of the markets just at the hint it might not be taking place. i am always cautiously optimistic that the two sides can come to this. it may just not be on the timetable we were expecting, thinking we could get this done in the next month.

via drags out a little bit longer. david: what do you make of the distinction between a law and a regulation? is that a real difference? deborah: obviously there is a big difference in terms of how the united states looks at capturing things in law and how china does. in china, laws tend to be very general and vague, left to interpretation at many different levels. first, they are, lamenting regulations defined by the central government, and each of are implementing regulations defined by the central government, and each of the provinces are enforcing. it is very important the u.s. has a commitment in implementation. david: thank you. u.s. emerging-market levels.

what that means for global growth. okobzag with us, alain b of socgen. what region it's hurt the worst? alain: the most important direct effect would be against china. the move we had last year has taken 2% to 3% of gdp growth from china on a regular basis. 25%,u were to switch to that would remove around 0.5% of gdp, so it is a big number for the chinese economy. confidence level can deliver even more in terms of contraction of gdp. definitely that would be bad news for global growth if we switched to 25%, and the reaction of equities since the beginning of this week is perfectly rational facing that risk. alix: where does that wind up leaving europe?

one argument is if there is a trade deal that is going to be really good for germany, and therefore europe, is the opposite true as well? alain: it looks to me the story around europe on the trade war is lose-lose. remember, if we were to sign that deal so that we stay at 10% and not go to 25%, the story is that the trade war would move from u.s./china to u.s./japan and u.s./europe. if we go to 25%, europe would be hammered because china, which is a very big export for europe, would be hit. how it is a see lose-lose whatever the scenario, which might not be the reality, but it is a worry for europe. alix: if you come inside to bloomberg, this is the s&p versus the euro stoxx 600.

what is a value versus a value trap? you have value territory, you have cheapness of assets around. cheapness is never enough to make a recommendation. if it is cheap because of the story, because of sentiment that has deteriorated, we need to see what will cause investors to reallocate. you may have a deal in the u.k., so we have been waiting, not like godot, but for a long period of time. you may have also a change in the fiscal policy in germany. the german economy is 0.5% growth this year, extremely low indices in recession. they might do something with tax

cuts, and they had the means to do it. even though the ecb has not said they are in any hurry to do it, you might have a strategy to revise the credit distribution channels. you have a few triggers which might come or not, but that may force managers to reallocate. alix: if it does, what happens to yields? you're still looking at the 10 year german bund yields at -10 basis points. market isermine bond the safest of the safe havens -- the german bond market is the safest of the safe havens. if you were to change the growth outlook, change the confidence factor, it would be a bundscation out of the into equities. alix: we will see if. we have a couple of catalysts. bokobza of socgen, thank you very much. coming up, blackrock's ceo warns

of rushing into alternative assets at the cost of liquidity. this is bloomberg. ♪

kailey: this is "bloomberg daybreak." coming up in the next hour, carl or hill -- carla hill, former u.s. trade representative. ♪ this is "bloomberg daybreak." i'm kailey leinz with your bloomberg business flash. reported better-than-expected sales in its first quarter since going public, ensuring investors that s losses would shrink over

the coming year. shares of electronic arts are rising after first quarter earnings were much higher than expected. electronic arts was boosted by sales of new "apex legends" games. profit forer commerzbank fell by more than half, adding more corporate and retail clients come about revenue declined by almost 3%. we talked with the cfo, who said the bank has learned to deal with record low interest rates. >> it has turned from a nightmare to just a reality. if we examine a little bit what the ecb has said about rates going up or down for the upcoming year, i think there is little to no belief that we will see rates rising in the next two years at least. kailey: that is your bloomberg business flash. alix: thank you so much.

we turn now to wall street be at. goldman says it is not slowing investment in malaysia. a swiss firm denies entry to the former bond manager that sparked massive outflows at its annual general meeting in zurich. joining us now is peggy collins, who leads bloomberg u.s. investment coverage. let's kick it off with 1mdb. >> we focus in particular on asia, where our market share has never been higher. our top equity deal came out of asia austere. ouras had little impact on

business, but we need to watch out for our clients. peggy: it seems like multiple countries and the region -- multiple countries in the region are consolidating to get their money back from this scandal, but goldman is saying, in terms ,f our effect on the region they are feeling like investors are sticking with them. as we know, asia is so important in terms of dealmaking right now. david: exactly. he put a very brave face on its, but it is not over. today, law enforcement officials from the united states justice department, singapore, and malaysia have been meeting to decide how to coordinate. essentially rein in two or three rogue traders, or does it affect the company?

peggy: they are trying to do that, and continuing to push in the region, in part because it is so important in terms of not only dealmaking, but in terms of making a push for wealthier clients. we are seeing the number of millionaires and billionaires rise in asia, so that is another area of growth for banks like goldman sachs. alix: i can tell you goldman sachs is probably really unhappy about still getting questions about 1mdb. to a fink was talking conference in boston, saying he's concerned about certain investments. be clear, with alternatives you are trading liquidity for more return." i love this quote from him. peggy: it is interesting because we are going back into a unexpectedly for many, a low in tn environment, are.of where returns

you're really having to stretch for yield and go for alternatives. interesting because he is saying alternatives in themselves are not bad, and blackrock is raising for its own capital vehicle, but they are the largest etf provider in the world, which is very liquid. he is basically saying make sure you understand when you're reaching for yield, you're giving up liquidity. bad productsren't to get into, but if you don't have any understanding what you are trading without, like liquidity, that is when it becomes a real issue, especially for mom-and-pop guys. peggy: that's right. what we saw with warren buffett at his annual meeting this weekend is coming under more fire, because they have been getting hundreds of millions of dollars were capital, much of

which hasn't been deployed yet. there's more and more question about fees and whether investors are getting the bang for the buck there. david: now we have to go to switzerland and gam. the bond trader that they terminated, it really took a chunk out of gam. they showed up and try to crash it. losing one of these is unheard of. they actually lost the vote. peggy: this is a real live popper of a story for me, showing that shareholders are pushing back somewhat and demanding more in terms of sand we are not just going to sign off on a shareholder proposal that says the executives aren't without fault. we are seeing it pop up more, and we are seeing a lot more shareholder proposals come more stringent, and that shareholders are getting more active in terms of what they are asking for and

the accountability they are asking for. david: the question i had is what are they upset with them about? is that they got rid of the them, or the way -- rid of at all, or the way they did it? alix: there were like $25 billion of outflows. you should be mad about that. [laughter] peggy: that's right. the firm is trying to rebuild from those outflows and also potentially be up for sale in order to survive. it is something they need to resolve as quickly as possible. david: exactly. thank you so much to peggy collins from bloomberg. coming up, setting an agenda via twitter. what former white house chief of staff john kelly said about the president is what i'm watching. that's next. this is bloomberg. ♪

david: this is what i'm watching today, what former white house chief of staff john kelly had to

say about the president. he sat down with david rubenstein. this is what john kelly said about the president and his addiction to twitter. >> the president feels very strongly, whether you agree with this or not, that he is not dealt with by the press fairly, and that his tweeting goes around the press and gets his agenda out, his word out to the world without having to rely on a press conference. david: one of the questions i have, is this really a difference in degree or just kind? we had presidents increasingly going around the mainstream press already, going on daytime talk shows or radio or whatever. if the president just taking the next step? alix: it is a great point. does president trump have a point? you take a look at presidents going on "snl." "snl,"nd of idea -- on

same kind of idea. we talked about also the conference goldman sachs had in california. here's what he had to say in relation to the tweets on china over the weekend. >> they are largely focused on whether the president's tweet from saturday or sunday ends up being rhetoric, or ends up being policy. i think we are seeing the impact of the potential to be policy on the markets past couple of days. if it turns to be rhetoric, the market will snap back. if it turns out to be policy, it will be bad for the u.s., the markets, and the economy more broadly. alix: we are looking at a three-day selloff. when he tweets about oil, there is a 24 hour reaction, and in the market goes back to fundamentals.

it kind of depends what asset you are talking about. david: absolutely. people don't get believe the president means what he says, and yet time after time he does it. why are we surprised that he actually kind of means it? alix: the story on monday was that he was just posturing, but it came out at the end of monday that he really wasn't. he was upset because the chinese were reneging. interesting how that winds up playing out. david: we will find out for the week is out. alix: coming up on this program, john hancock's investment head of capital research will be joining us as we continue on yet another risk off day, with s&p futures down another 15 points. watch the 50 day moving average for the s&p as safe havens take the reins. this is bloomberg. ♪

♪ alix: the melt up calls in sick.

equities punish with their worst two-day loss since january. --na warns of italia tory warns of retaliatory tariffs as its delegation comes to d.c. new zealand becomes the first developed central bank to cut rates. the good and the bad for lyft and uber. uber could price at the top end of its range as driver strikes hit major cities in the u.s. and u.k. welcome to "bloomberg daybreak" on this wednesday, may 8. i'm alix steel, alone in new york. my colleague david westin is with all of the action in d.c. david: iran says they are going to get back into the nuclear enrichment again. president trump's taxes from a while ago released. "the new york times" has gotten

access to transcripts saying he lost almost $1.2 billion over that time and only pay taxes two years. he's saying, of course. that's the way it works. by the way, it's old and it's fake. that is what is distracting us today. alix: that is totally true. if you have huge losses, you wind up not having to pay taxes on it. but no doubt that is going to get wrapped into all of the geopolitical risk as well. in the markets, though, you have some strength into the open that has now reversed. s&p futures down by about 14 points. you had the worst two-day selloff since january. 90% of the s&p in negative territory yesterday. a critical level here for 110.08.yen at

crude trying to eke out a gain here, seeing if they can shrug off the risk off tone from equities. david: we had a pretty rough day on the markets, particularly the stock market. it was down across the board. to bring is up to speed today, we are going to turn to bloomberg's taylor riggs. taylor: it is all about equities, bonds, currencies, and commodities. we are seeing some dollar strength, you on weakness. we are looking at -- strength, yuan weakness. we are looking at a lot of those types of big moves ever since the trade fights really started to take off. about aontinuing to see standard deviation move in the yuan. spreads are widening here. it is not really the level, but the rate of change. that second derivative is up 22 basis points in the last three weeks on the high-yield

bloomberg ag index. finally, as we turn to equities, i wanted to look at what is going on with the vix. front end futures on the vix trading above second month futures, so investors really pricing in some shorter-term volatility. selloffs, equity follow this move. alix: thank you so much. joining us now for more, emily john hancock. days, whatast three is now priced into markets, and what is priced out? emily: it is clear that a deal on trade was largely priced in. this is not a great time for a trade war. we are watching a deterioration in terms of the economic data,

the macro backdrop really not looking as favorable to us today. reactings that we are to the fact that trade was largely priced in, and there could be a further down leg in risk assets as this drama continues. alix: david, for you, what do you want to do? where is the opportunity in specific names? guest: be patient. stocks have rallied when he 6% off of the christmas eve lows. sentiment had gone from unusually bearish to much less so as of late last week. borrow from the line from "casablanca." round up the usual suspects. what is causing the decline? the normal intrigue year selloff is still about 13%. 2.5% only sold off about to 3% at this point in time. you've got to be a little

patient if you are looking to buy this dip. david: one of the usual suspects is earnings. a lot of people thinking the second half would look better. have we learned anything new or surprising to the upside or downside about what people are projecting? what are they saying earnings are going to look like for the rest of the year? better-than-expected earnings have powered the market this year. negative earnings were expected and came in right around flat. we still have about 20% to go. the interesting thing to us is when we look out at 2019 earning backedes, that is all loaded into the fourth quarter. we have flat this quarter and the next couple of quarters and expecting about 13.5% earnings growth in the fourth quarter. we think that assumes some sort of re-acceleration in economic growth, and we are not exactly

confident that is playing out. david: david, where would that come from? certainly europe disappointed yesterday. guest: i think it still comes from that wall street underestimating that the impact of last year's tax cut is still going to be more positive this year than it was last year in terms of total dollar amounts. the real cost to capital is still quite low. i would add it is ok to look at net income for how companies are doing, but spend as much time, if not more, looking at the statement of cash flows. companies are still generating very high free cash flow margin. think that is still ultimately what gets stocks back on their treadmill and 2019 higher level. alix: what are you doing with volatility? next four weeks, we will see more polity than the last eight. how do you trade off of that?

guest: i don't know any better investment term then simply grind through the higher volatility. you still got probably some more weakness in the intrigue year selloff in the summer months we are heading into, but there is still great opportunity. in small caps, the bloomberg spinoff index is up about 19%. that is well in excess of the market, consistent with its long-term average. i think there are still opportunities in this market. you have to grind through the higher volatility. alix: emily, that is a little different than what you are seeing, especially for the back half. emily: in some ways, we agree. boring is beautiful in this type of environment. we've been advocating for a mix of bonds and stocks. investment circle when you to fixed income. with ticket makes sense to stay invested in this environment, but -- we think it makes sense to stay invested in this environment, but really not up on qualities -- but really notch

up on quality. higherpeel back on the risk parts of the portfolio areas, highly old -- high-yield banks and take this more balanced approach to risk. david: we could talk about what we expect in the back half of the year, but what i like ok is capital investment. if they see the demand coming down the pike, they will invest. are they investing? guest: if there is any fallout from this trade issues that surfaced in the last few days, it will have an impact on cfo and ceo psychology. if i had to talk about a risk in the near-term, that is one of the bigger risks. does this trade uncertainty lead to a pause in capex?

what does that do to gdp growth and bottom-line growth for companies? alix: that is the question. --ly roland of jan hancock of john hancock and david sowerby of ancora will be staying with us. this is bloomberg. ♪

♪ david: -- with elements of the 2015 nuclear deal. president hassan rouhani is giving european countries that signed the agreement 60 days to fill their commitments in response to new u.s. sanctions against iran. rouhani: we did not

initiate the violation of commitment, and we will not initiate any wars. we have never, ever given into bullying, and we will never, ever succumb to bullying. we will respond to any aggressor. david: joining us on the telephone is jim walsh, m.i.t. security studies program research associate. thank you for joining us. tell us how big a step this would be if the follows through on its threat to resume enhancing uranium in 60 days. rather modestre moves, and their origins are in sanctions the u.s. imposed this week. under the agreement, what you want to achieve with nonproliferation come up one of the things you could do to prevent the country from declaring a lot of material it could use for a bomb program, is require that it ship it out. part of the deal required that

iran shipped out extra heavy water and uranium. any shippers affect or country that takes that away, so the sanctions we imposed are producing the exact opposite you would want if you are trying to restrict a country's nuclear program. so iran says ok, we won't ship it out. that is not going to fundamentally change things, but it is the beginning, i'm afraid, they process that could lead to more serious moves later down the road. david: as far as we can tell, from your experience, is iran directing this at european countries to comply with this agreement, or is it really a way to get the u.s. to get serious at the bargaining table? well, the u.s. isn't serious about the bargaining table. all that is doing is issuing threats and sanctions.

your first impulse is the right one. the europeans, russia and china stayed in the deal after the u.s. violated it. the europeans have said they will help make this work, but haven't really produced so far. this is iran's attempt to put pressure on the europeans to step up and do more. david: is that realistic at all, that the europeans would really break with the united states on this? the united states has an awful lot of leverage, particularly when it comes to the banking system over the europeans. jim: yes, that is what the u.s. has used so far. the swiss accounts, and the banking system that runs on u.s. dollars. threatened to sanction our european allies unless they violate an agreement. that is a really bizarre sentence to have to say. europeans have now tried to set up a special purpose vehicle, i way that would allow them to especiallyiness,

humanitarian business, outside of u.s. extra to real sanctions -- u.s. extraterritorial sanctions. that is what the u.s. has forced the europeans to do, and they have said this again. will it work, that is unclear. we have used sanctions so widely for so many reasons across some any countries, we've incentivized them to try to find ways to get around the system. david: thank you so much for coming to the phone for us today. alix: in the markets, oil really trying to eke out a gain here. still with us are emily roland and david sowerby. are you buying oil right now? guest: one of the stocks i am liking as marathon petroleum. they've delivered shareholder

value over the last three to seven years, and generating the right amount of cash. a name like marathon petroleum, in spite of a little weaker revenue in the first quarter than expected, is a sound play in energy, where it's got a 3.5% to 4% yield and is growing at a dividend above the market. alix: emily, do you like oil here? emily: we are neutral on the energy section. there's a lot of different metrics to use for other sectors of the market. we've obviously seen these geopolitical dynamics pushing oil prices higher, but of course, the ability of u.s. shale producers to come online is going to essentially put a cap on oil prices at a certain level. we are neutral on it. there's other sectors we prefer more today. technology, staples and utilities being among our favorites. guest: one thing i know is nobody can forecast the price of oil. it would have to come down to

the merits of the underlying company. i am never going to make money in energy trying to have the price of oil forecast. alix: that is kind of my question. do you need to like marathon at a certain oil price, or do you look for correlated opportunities? guest: i love the word idiosyncratic. it is simply securities selection that will rule the day. if you look at the s&p 500, the average stock is 14% off of its 52 week highs, and the energy area is where you are going to do the best opportunity because still, and number of energy stocks are 25% off of their 52 week highs, when the economy is just fine and the underlying fundamentals of the company make them an opportunity to be a buyer. david, think you so much. s bumpy ride.er' drivers boycotting ahead of the ipo.

this is bloomberg. ♪

david: it's time now to look at three companies worth watching today. first of all, vw came out earlier this morning with a price for their new electric vehicle model, which is going to be under 30,000 euros. you can put a deposit down for 1000 euros right now. this is their attempt to take on the model three from tesla. they are going at the low end of the market, competing with the former vw bug, as opposed to gm, which is going at the high-end with the cadillac. alix: those are the people that wind up needing necessities. we are watching oil. mplx, controlled by marathon petroleum, are going to buy endeavor logistics in a $9 billion deal. it is going to have a big impact

in take away capacity, adding capacity to the permian basin in texas. the question for me is the market has not liked the a.k.a. chevron, occidental and anadarko. the love is coming, i'm sure. the third company we are watching today is lyft. joining us on the phone is stephen fox, who has a buy rating on lyft with a price target of $80. we got our first price report yesterday, and it looked like more of the same, more losses and more growth. growth was the impressive, and the losses were even less than people were looking for. the company is looking into reducing those losses over the next year or two. i think the first quarter was very good relative to what the

street was expecting. there's a lot of operating leverage in the bottle as the increase -- in the model as they increase liquidity and use technology to make the drivers more efficient and attract more writers. i think there's a lot of room for operating leverage, yes. alix: as an investor, because we have uber pricing this week, can you be bullish on lyft and uber at the same time? steven: i would suggest being a little more cautious towards uber than lyft. we like lyft's more focused model. being international in this business seems highly complex to us. just to give you one interesting stat, uber is still taking a lot of cash. -- 13% ofir gross their gross bookings are done in cash in places like india, brazil, mexico, and the middle

east. alix: if you like lyft because it is more specialized, what is the growth rate that they have to see from active riders to make up from the spending they are seeing in r&d? thelosses -- steven: losses, we think, are going to start to mitigate after this year. from a revenue standpoint, you are probably looking at a 40% this year and next year to start seeing that come down, and after that come up probably 25% to 30% growth as they advance their technologies. david: as we look forward to uber selling, and apparently it is going to go out on friday, one of the things they are very proud of not focusing on is just moving people. they say we are much bigger than that. we are moving food and goods, things like that.

does lyft need to make that move? is it critical? steven: i don't think it is critical right now. this is a highly untapped market. has 25 million riders. even if they double that number, which is possible, it would still be a small portion of the available market. theerms of uber, we do like eatsthat the uber platform can be highly leveraged against their existing user base. there's pluses and minuses to both. veryber offering is in early days, but seems to have a lot of potential. alix: thanks very much. appreciate your time today. still with us on set, emily roland of john hancock investment management.

are coming toes market with ipo's much later than they did back in the 1990's. it is yet to be determined if these are truly disruptive businesses. i don't think the market is entirely convinced of that they are. if we think about technology broadly, we think there's some great secular tailwinds. we like the sector. we think there's going to be a war on margins in 2019. if you think about the fact that late in the market cycle, it becomes harder to find growth, input costs become more expensive, and parts of the market that had the ability to maintain margins, particularly technology, we like that story. alix: where in tech, the? emily: -- in tech, though? emily: we had to create an entirely new sector last year because tech became so big, communication services. you've got amazon and consumer discretionary.

we have a lot of different pockets. but i would look for areas where you have the ability to maintain those margins. alix: if there is a trade war, if we escalate, how much of those margins are at risk? emily: that is certainly a challenge. a lot of these tech names are exposed to china. we have seen some consolidation there over the last couple of days as we reflect on that. a trade war is bad. it is going to affect a lot of sectors, and certainly technology won't be spared. alix: emily roland of john hancock investment management will be sticking with us. coming up, we are going to discuss president trump's latest tread deadline -- latest trade deadline with someone who's been at the negotiating table. this is bloomberg. ♪

alix: this is "bloomberg daybreak." i am alix steel. you're looking at a risk obsession evolving throughout the morning, though not as bad as an hour ago. the dow jones off by .4%.

as np off .4%. trying to get some stability. european stocks lower but the dax gaining a little bit. bund marketinto the with yields negative five basis points. you can see where we are at in terms of safe haven assets. the spread between the three month in the 10 year is now wider. versus the 70's we thought earlier. dollar-yen still lower. after seeing billions of dollars wiped out in japanese equities over the last two days. reversal, not participating in the risk off. not moving higher on geopolitical tension in iran. what it means for the markets. david: just when i thought there was maybe iran coming back to the oil market. alix: it came. david: now is time to find out

what is happening outside the business world. we turn to rentia young. iran will no longer comply with elements of the 2015 nuclear deal and the president is giving companies that signed the deal 60 days to fulfill their commitment. iran move is in response to new u.s. sanctions. we did not initiate the violation of commitments and we will not initiate any wars. we have never given in to bullying and we will never said, to bullying. we'll respond to any aggression. renita: the trump administration has refused to extend waivers allowing eight countries to import iranian oil. the u.s. bailed out of the deal one year ago. is raising the stakes in his battle with congressional democrats.

william barr threatened to ask president trump to invoke executive privilege to prevent democrats from getting the full unredacted report by robert mueller. the house judiciary committee is expected to vote today on to whether to hold william barr in contempt of congress. in soccer, liverpool shutout barcelona in the second leg of the semifinals to advance to the finals of europe's champion league. liverpool lost the first match outscore the spanish champions by four goals to go through. they did that without one of the world's top forwards. 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. renita young. this is bloomberg. david? david: the focus will be on washington for the rest of the week as the chinese trade ,elegation returns to town

working against president trump's friday deadline for the imposition of more tariffs. we welcome ambassador carla hills, hills and company chairman and ceo. she served in the cabinet as united states trade representative and as the secretary of housing and urban element. great to have you. carla: a pleasure to join you. outside, whate you make of the negotiations? what is the likelihood this is simply another blip on the way to a difficult negotiation? what are the chances there something more profound? carla: we do not know. i do not think the market thought there would be this blip. we have not been briefed on what the differences are, how far apart they are. it is too bad we did not join with other allies. if we had had canada, the eu, mexico, japan, south korea all

have the same complaints we have, to join together, china told have a difficult time turn its back because we would be representing more than 50% of the global economy. i'm hoping this is just a little storm and it will pass and we will get through it. the two largest economies must work together, not only for economic reasons but for a range of other things. avid: one hears it is sort of too big a deal to fail. neither side can afford to have this goes sideways. we fear that what has happened more than once as the chinese have -- when they come back the language is different. is that unusual in international trade negotiations, particularly with the chinese? amb. hills: i negotiated with the chinese in their first terror reduction agreement --

their first tariff reduction agreement. it was not easy, but we created a bond. i would not say that was my experience. i found that the tariff agreement we negotiated, then 10 wass later when china seeking to get into the world trade organization, i was asked to testify and i called back and said can you give me a report card on whether china has abided by the agreement we entered into. they said give me a couple days and they came back and said every single one they complied with. that is so interesting given the context right now. one of the things we hear is the united states delegation says we want this written down in the statute to make sure you do it. say we have -- it is all written down.

your experience is they fall -- they follow through if they agree to it. amb. hills: a tariff is pretty significant. you have a number. i also think the bonds you create and the trust you create are quite important. i need to know, what are the political impediments on the other side of the bargaining table. the fact of the matter is, in china, some of the clients we represent are more worried about how the regulations are implemented then how the law is articulated. i do not know. i'm not at the bargaining table. i am hoping our team is able to create the bond to get a trust, get a good agreement. david: one of the things we here is some question, whether it is the case the chinese pullback, whether that is a negotiating tactic or it might indicate that president xi does not have the authority and support he needs

to do some of the fundamental reforms president trump is asking for. do you have a sense of that? does president xi have the political support to make fundamental changes? emily: there is a debate -- amb. hills: there is a debate in china as to how fast to open up the markets. the economy is wobbly right now. , becauset is magic what we are asking china to do in terms of making their regulations more clear, to funnel more credit to the private sector, to stop funneling money to the state owned enterprises, would give a boost to their economy. we ought to be working with them. david: ought to. we will see what happens. that is ambassador carla hills, hills and company ceo. alix: if you bought 2018 was a bad year for chinese defaults,

2019 is looking worse. companies default at $5.8 billion in domestic bonds, more than the same kvitova last year. other signs are -- more than the same period last year. we spoke to u.s. investment bank's chief china economist yesterday. >> the stimulus, the credit, and the credit easing that has helped oozed confidence in the economy, profit is stabilizing. the overall economy is stable. joining us is emily roland at john hancock investment. how do you look at it? emily: china is wobbling. we saw data overnight indicating maybe things are ok. we do not like the direction. china is the growth engine of the global economy. ambassador hills it on that. when we saw the big stimulus out

of china in 2016, that lifted all boats, particularly in europe. we see plans from policymakers in china that they will step on the brakes. said, last commentator that is probably a good thing, but in the short-term it could impede economic growth globally and in europe that could be a big challenge. alix: does it have the offset of more opportunities? oaktree has been talking about buying into china. >> there a big pile up of mpl in china and we are looking at those. the numbers are very big. everything in china is big. we have been moving incautiously, we will continue to do so. we are ramping up. alix: do you see any bargain-hunting opportunities in china? a skeptical face. emily: no.

when we think about china broadly, what we are thinking about is the bottom up. hear a lot of talk about fundamentals from an earnings standpoint. if you look at the emerging markets broadly, we are seeing a pretty significant deceleration in terms of earnings growth. we know that over time stock prices follow earnings. until we see those earnings estimates bottom out, we are reluctant to go more positive on emerging markets and china is a big part of that. -- to wet about europe see an increase in earnings if we see a deal? what do you think? emily: i do not think a deal will be enough. we are seeing a major deceleration in terms of economic growth in europe. pmi's continue to disappoint. thatone is cheering germany is now 44.4 instead of 44.1. 44 is pretty bad. we wake up every morning and there is more bad data out of

europe. bottom in see that order to go more positive. alix: not impressed by the industrial output number from march. emily roland of john hancock investments, great to see you. thank you so much. david: coming up, south africa heads to the polls. the president's economic revamp could be at risk unless he gets a decisive victory. eurasiadiscuss with our group expert in africa. that is next on follow the lead. this is bloomberg. ♪

renita: this is "bloomberg daybreak." coming up on bloomberg markets, an exclusive interview with sam's sell, equity group

investors chairman and founder. this is "bloomberg daybreak." lyft reported better-than-expected sales in its first report since going public. the company insured investors that big losses would decrease next year. of $1.1ted a loss billion, larger than the company's loss for all of last year. do the the losses were ipo and stock-based compensation. in germany, more of the same after the break down of merger talks with deutsche bank. first quarter profits fell by half. commerzbank at it more corporate and retail clients but revenue declined by almost 30%. a formerase involving morgan stanley dealer in paris may change banker pay in europe. the firmarotta says

unfairly withheld deferred pay a year after he bought in more than $100 million in fees. the case raises the question as to whether new york law is the bottom line when it comes to how american bankers in europe are compensated. that is your bloomberg business flash. alix: thank you so much. what is interesting to me is that has big implications for the entire banking sector in terms of pay. david: i did not read the fine print and did not know i had to stay with the company to get the bonus. the more important question is what law applies. is it new york law, or french law, which is quite different in this regard. alix: 100%. you have to make the argument we're always talking about labor laws. how does that play out for the yellow vests. there is a deeper conversation to be had. david: my impression is french law is more favorable to

employees than u.s. law. alix: a little bit. david: time for follow the lead. a deep dive into stories making headlines in moving markets. our focus today is on south africa, where voters are going to the polls for a national election with economic and business to moment on the agenda. joining us in washington is amaka anku, and from new york, damien sass our. up chart up that shows how south africa's doing according to a per capita gdp growth. it has not been a pretty sight. at stake today in the election that could affect that chart. . at stake in the election is the president's ability to show to investors he can control the parts of his party that of been pushing for investor unfriendly policies, populist

policies, rhetoric like they want to nationalize the central bank. there has been a lot of talk about by what margin his party, the african national congress, will win. david: what is the magic number? the talks is he does not have to win but wind by a certain number. amaka: the focus on the margin is overhyped. regardless on what the margin is, he will still face a lot of pushback from that faction. that faction will try to remove him regardless of the margin. the reason it is significant is because the greater the margin, the stronger he is in fighting back. he will either expand all of his energy fighting the faction, or half of his energy. our view at eurasia group is either way he will be spending a lot of energy fighting the faction and that will not help the numbers we saw. alix: do you agree?

damian: i do. it will be about building a coalition with the democratic alliance and the economic freedom fighters will be difficult to bring around. on theight -- this hype 50% to 60% is overblown. the deficit is at 2.2%. foreign holdings have declined to 38%. the need to draw offshore investments back into the country. alix: fair point. you come inside the bloomberg, you can have a snapshot of what the market is. that is looking at the rand, at five your credit default swaps, what is accurately priced and what is mispriced? damian: moody's and fitch have south africa rated two notches lower than brazil, but u.s. dollar 10 yield -- 10 year -- brazil.rrency 8.9% in

despite the fact that it is a higher rated credit, the market does not agree. yields are higher. you need to be compensated more. you saw a risk reversals in dollar rand spike this week ahead of the election. there is a lot of risk their. -- a lot of risk there. if you look at history, as you lead up and the election the rand tends to rally and then after they are over it gets knocked again. david: it is clear there is a lot at stake for investors. is that with the voters are voting on? do they understand the economy is front and center? amaka: yes, but in a different way from the investors. the biggest economic problem and the political problem is the transformation of the economy from largely dominated by whites , the former settlers, to the

majority blacks. there is a lot of resentment in the population that all of these 25 years since the transformation to inclusive racial democracy has not yielded inclusive growth. david: it is interesting, as i listen it sounds like there is a risk factor. is there a discount in the marketplace? damian: the real risk is unemployment. 27% unemployment in south africa. we cannot fathom that. the unemployment in south africa was agricultural and mining related. those sectors are lagging. having a challenging time. unemployment is on the rise. that is the risk. the amc is a political engine. there are many factions there. there is a lot at stake in the elections and south africa has

performed amicably. we will see if it can hold onto those gains. david: what can the government do going forward on that unemployment? that cannot be good for the economy or the people. amaka: you need to grow the economy. david: is that more mining or some new industry? amaka: they are trying to attract more investment into the mining sector. they are trying to grow the manufacturing sector. that would create more jobs. the biggest problem is power. they have had lots of debt and mismanagement at the main power company. that is affecting the ability to manufacturing produce which affects the ability to create jobs. anku of eurasia group and damien sass our, thanks for being with us.

alix: what you do on a day like today with so much uncertainty? we will talk to michael purvis. this is bloomberg. ♪

alix: here is what i am watching. all the market action. you are seeing a little bit of stability. still down 12 points but off the lows. joining us is michael purvis, we can chief global strategist. what you do on a day like today? : you have to backup and think about, if it is trade tensions that got the volatility party started, what kind of pandas trump hold? frankly i do not know if trump has ever had a stronger hand to start pushing on china given the

market has made fresh highs. his approval ratings have been very steady since he started the trade stuff a year ago his approval ratings have been very stable. ask yourself the question can he afford a dip in the market at this point. if he is going to achieve his policy goals and validate himself as a master dealmaker. i would say there is a reasonable chance we will keep pushing this thing through. you have to not dismiss every tweet as one more tweet. alix: fair. we just got a tweet saying that the u.s. says tariffs on chinese goods go up on friday. that was the note we heard and you had president trump to tweet on china earlier today. how much of a deal is still priced into the market? michael: that is much more art than science.

i would say there is still a fair amount of complacency throughout risk assets. obviously we saw an acceleration of the selloff yesterday. i think people have to be cognizant of the fact that even if the news is good, we have a huge run on the markets, some sectors and equities have had extraordinary valuation expansion. the relative valuation of the tech sector as of last friday was a record levels. therewe have to leave it but it is a good point. michael purpose of weeden and company. friday it will go into effect. alix: that does it for bloomberg daybreak: americas. this is bloomberg. ♪

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equity markets on edge. the s&p 500 delivering his biggest two-day drop since january. china's trade surplus with the united states expanding through 2019. jpmorgan's cheap sounding optimistic. jamie dimon putting the odds of reaching a deal at 30%. 30 minutes from the start of trading, futures downtown on the s&p, negative .33%. the euro 1.1198 against the dollar and treasuries with another bid. we begin with the big issue. investors weighing the odds of a trade deal. >> the equity market trade deal is not done. >> it may take more time. >> i do not think people should lead into this like there is an agreement, it is all over. >> is making the grim'