one month. no date set for further negotiations. four weeks to agree to a deal. investors flee to safe havens. markets price and a higher chance of a fed rate cut. the u.s. prepares new tariffs on over 300 billion dollars worth of chinese imports come but cell phones and laptops are at the top of the list. david: welcome to "bloomberg daybreak" on this monday, may 13. the president is very busy this morning. i think you should have bought that cell phone earlier. alix: you're right. i was waiting for 5g. david: this latest tweet really is about the supply chain, saying china is baking a big mistake because companies will be forced to leave china for other countries. i think he's talking about moving to southeast asia and things like that. alix: or back to the u.s.

it seems like the rhetoric over the weekend was companies can handle some tariffs, but when he tariffsfs -- but 25% could cause big problems. friday it was like the markets were taking it all in stride. today it is a different story. s&p is down by almost a full 1.5%, down 36 point. european stocks getting hit as well. the yen higher, treasury yields lower. crude is the only one operating on different fundamentals, geopolitical risks in saudi and a wrong -- and iran. david: attacks on oil tankers, is that a problem? alix: attacks on tankers in the timess of hormuz, even in

of conflict, is extremely rare. on tuesday, opec releases its monthly oil market report. wednesday, we get u.s. retail sales and industrial production numbers for april, as well as numbers for alibaba, tencent and macy's. the u.s. reports housing and building permits for april. on thursday, the pga championship begins on long island, with tiger woods really in the center of it. bloomberg first take, we are joined by lisa abramovitz and marty schenker. let's start with what we think we are going to hear today about what other goods get tariffed. the difference is it may hit the consumers this time.

marty: this time it really is different with the 25% tariff, and the notion that u.s. consumers aren't paying for it is disputed by larry kudlow this weekend. we consumers are paying for those tariffs. what is interesting to me is the retaliation from the chinese has not been announced yet. i wonder whether they are planning something very dramatic. i think that is the key moment. we have to see how china retaliates. david: one of the things that struck me over the weekend was parties seemed to go further apart. over the weekend, we heard from liu he, mr. kudlow, and mr. trump, and it doesn't sound like they are coming together. marty: i think the whole notion of trump and xi talking over the phone and reaching some sort of deal, the devil is in the details. they can't reach a deal. it is the people underneath them who do. it is not going to get sorted by a phone call.

alix: that is when market participants tend to say it is too important, there has to be a deal. but when you look at the underlying issues within china, chinese pride and political maneuvering, it is a very different story. it also seemed like president trump really wanted to get a deal done. now it doesn't. now it just looks like he really likes tariffs, and he wants to be the tariff man. all of these economic theories that people are questioning. i do think that the tone has shifted to let's make a deal to i like tariffs, and it is complete different for markets. alix: and markets are now trying to absorb this. we have a really interesting chart that shows the gap between the s&p open in the previous close. what happens overnight as you get any rhetoric from china, those gaps are quite wide. we haven't seen those since

october of last year. do you feel what the market is finally coming to terms with the reality? marty: yeah, i definitely think -- alix: or is the reality worse? marty: the reality is definitely worse. with that tweet donald trump this morning, as if you -- this morning, s&p futures went down a notch. i think it is finally sinking in that this is an extremely uncertain time. there's no precedent for it. it is hard to price. david: if the markets were mispricing this, is because we were paying too much attention to the u.s. version of what was going on, and particularly secretary mnuchin's version? lisa: i think people are very far apart in terms of what the market response should be. you have people saying markets will hold because the u.s. economy is doing pretty well. you have other people coming out and saying it is already

affecting business confidence, and you're going to have a huge cut, particularly for global companies. i think there's sort of a big disconnect when i talk to different portfolio managers on how much the markets should respond today worst case scenario, and the worry is that they won't spot enough. bank of america basically saying if you don't see enough of a downside for the s&p, it won't push trump into a deal. david: one of the things we learned this weekend is it is all between president trump and president xi, and that necessarily makes it uncertain. third story now is tech and whether tech really gets hit the hardest in all of this. we can look at some of the goods that we believe are going to get tariffs, perhaps as early as today. it won't take effect until august. you see cell phones, laptops. these are the apples of this world. marty: this is apple's worst nightmare, especially in the

event of chinese retaliation. if they tax imports, it will have very serious effects on apple. tech is going to be very disproportionately affected by this. alix: the question becomes by how much. how much can they absorb? lisa: morgan stanley estimates that in a worst-case scenario, apple could see trumpets drop by 1/3, by about three dollars per share. that is amazing. it is not just profits. earnings drop by 1/3. it is not just a growth prospect. it is their actual fundamental business that gets slammed. they have to raise prices on key goods, and that will create a dampening effect to demand at a time and we already have a smartphone slow down. the question is how broad is it. is it a couple of companies, like apple and other big tech companies? or does this bleed out into a wider swath of u.s. companies?

david: and what does that do to the s&p overall? as president trump more focused on his base for 2020, who likes tariffs on china, or about the markets? he's also paid some attention to that, saying that is making me nervous. 401(k)s, having terminus returns. if you are a ceo in the united states, what do you do? what do you plan for? what do you do about manufacturing in china? do you move it? do you wait? this element of uncertainty is the worst thing for decision-making among u.s. companies. alix: but increases the possibility of the powell put remaining in place. lisa: right now the market is pricing in no fed rate hikes. but what we get a cut at this point? i don't know. given how much political pressure there is from president trump, on one hand, why should he be the political pawn when we

are talking about federal reserve independence? it gets very complicated. there's a pretty high bar. david: the reporting over the weekend was president xi interpreted trump asking for cuts as indicating trump is weak, and therefore they got tougher. lisa: although everyone who i've spoken to shakes their head about that logic. you agree, right, marty? marty: i agree. [laughter] marty: don't try to over interpret the strategy here. it is basic self-interest at work on both sides. alix: thank you so much. we leave it there. we are going to cover trade throughout the whole program from some different angles. you can find all of the charts at gtv on your terminal. coming up, more on the trade talks deadlock with absolute strategy research's chief strategist. this is bloomberg. ♪

david: this weekend we got a sense of how far apart the u.s. and china may be on coming to terms of trade come up with president trump tweeting things could get more difficult, and chinese vice premier liu he saying things could have far to go. "we hope our u.s. colleagues understand this. china firmly opposes the trade war, but is fully prepared for it, and will deal with it rationally." we welcome on the telephone alpine micro's co-founder and -- co-foundero's and chief macro strategist. play it from the chinese side. do they really feel pressure to make a deal at all? guest: i think as time passes by, it becomes clear what was the exchange here.

apparently the trump administration want to maintain the tariff, at the same time wanting a numerical target from china to reduce the trade balance. so the chinese side cannot and will not accept any trade agreement while still allowing the tariffs in place because that would represent a huge loss of face. they have a domestic audience to play with, so it seems like trump wants to play with trump's political base. the chinese government having to mr. audience that they need to take care of. bottom why i think the line is they cannot allow the tariffs to remain in place while they have any kind of deal. preconditioned on american removal of all tariffs. david: that is what the reporting is suggesting at this

point, but what does that say about resolving this dispute anytime within the for seeable future? president trump is clearly very enamored and really committed to those tariffs. he sold it to his base. he said we are going to keep them in. place until you comply as you say -- them in place until you comply. as you say, the chinese have the principle that they need to come off. chen: i do not know that there is any middleground, but president trump, if you look at larry kudlow, he basically admitted that if you do tariffs, it basically hurts both. he also clarified that it is not the chinese who pays the tariffs. it is american consumers and businesses that pay the tariffs. but it doesn't matter. i still think these are a pressuring tactic to do -- to get the chinese to agree to american demands. the chinese also understand that the cost is huge if they don't

have a deal. so i think they do have an incentive to get something down. i think the time will be when xi and trump meet in japan at about a month. alix: for me, the story also comes down to what tools does china have. the chart i'm going to show everybody is the s&p in the blue line the dollar-yuan. you can see the differences from back in 2015 and 2018 when the yuan cell. how much will ash the yuan -- the yuan fell. how much will the chinese let the yuan appreciate? chen: to diffuse downward pressure on many factoring businesses, of course, if you have no deal, then anything goes. the problem is they have to walk a very fine line. on one hand, they've got to tell american negotiators they do

have a bunch of the tools in their toolbox. but at the same time, they want to show that they are serious about talks. i think they are walking on a fine line. right now depreciation is not a huge deal, but if you have a gallon --e war, 550 $550 billion of chinese tariffs, i think the yuan will go down a lot. i'm pretty sure they are talking about that. at the same time, they will stimulate the mystic demand. and can cut interest rates let the markets drive down the chinese yuan. that is also a possibility. it can get very nasty on both sides. david: we know the pressure being put on the president from, for example, farmers who are hurting. what about in china? what political pressure might there be on president xi some of these producers get squeezed with 25% tariffs that may put them out of business and

redirect some of their business to southeast asia? chen: i think they are still in a state of shock. i have some friends in the manufacturing businesses. i talked to them, and they are still in a state of shock that their government is going to make a deal happen. everybody was assuming that the deal would be happening come about all of a sudden we have this. they don't know what to do. they are kind of paralyzed right now. the chinese government is thinking we will have to redirect the chinese sales to europe, baby do this and do that -- maybe do this and do that. i think the key point is they need to direct the mystic policy on the downward move -- direct domestic policy on the downward move. alix: what the u.s. actually can do. macro, thankalpine

you. national economic council director larry kudlow telling fox news you see suffering on both sides, but seems to downplay the effect on the u.s. economy. if you go the whole $200 billion increase in 10% to 20%, plus the added $300 billion, we reckon it would be 2/10 of 1% of gdp, which is a very modest number. in terms of possible job losses, we are way below that number. alix: joining us now is ian harnett, absolute strategy research's chief strategist. do you think the markets are appropriate pricing all of this?ian believe that is the case at all. if you look at the type of pressures you get from trade disruption like this, it is that negative hit to economic growth and that upward push in inflation, and that combination

tends to be an environment where you get a lot of downward pressure on pm multiples across the market on the whole. we still think the market as being pretty sanguine that there will be some kind of deal done around the g20 talks, but we keep on pushing these further back. i think we are worried that now we've gone to these tariffs, it is very difficult to dial back as your last gas was just adjusting. alix: that was the kind of rhetoric on friday as well. bank of america merrill lynch was saying equities are not reacting enough to put enough pressure on president trump to make a deal. if you agree with that, what would be enough? ian: i think you have to recognize that there has been quite a lot of pain in the real economy, despite what mr. kudlow was saying. u.s. exports to china down 30%. chinese exports to the u.s. down 13%. there has been some impact. we've seen these tariffs come

through further. i think it comes through to win the financials start to get hit, when you start to see this trade disruption start to hit financial disruption. both for thenk chinese, because there's a lot of chinese dollar-denominated debt that is going to be a problem. in america, trade flows will start to impact financials. david: you referred to the meeting between president xi and president trump coming up a month from now, at the end of june. differenthat be than what happened in when asari's -- in buenos aires? skepticalmain very that you will get a deal that is meaningful. what we are concerned about overlaying this is that while there is a delay on the trade talks, global growth in our models looks as though it is continuing to decelerate. 's question,to alix

we still think there is downward moment into these markets. we think we are in the late cycle, and we think it will eventually be those kinds of pressures that are going to force china and america back to the negotiating table in good faith, and to recognize that both sides are going to have to make some adjustments here. david: ian harnett of absolute strategy will be staying with us. coming up, more on the trade deadlock, looking at the effect on tech. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." uber shares falling again after friday's rocky debut. the ride-hailing company has been down more than 10% in premarket trading. one analyst says investors are skeptical about the size of the ride-hailing market. uber is also feeling the pain of the global stock market decline. softbank vision fun -- vision

cell,s investing in green which provides alternative supply chain funding to companies. they have delivered annual growth of more than 100%. cutbacks reportedly are on the way at oracle. according to "the financial the company is firing 60% of its research and develop an staff in china. that is roughly 900 workers. some employees say the job cuts are due to the u.s./china trade war. that is your bluebird business flash. alix: thank you so much -- your bluebird business flash -- your bloomberg business flash. alix: thank you so much. there's a difference between what private equity people think and what the market thinks. alix: correct. it is a really bad time to go public because of the trade war. tech is really in the crosshairs here.

there's a list of goods that may be hit by the trade war. top of the list, cell phones and laptops. buy or buy -- do you sell tech right now? ian: we are neutral to underweight on tech right now. you've got these trade war risks. some of that pain is already being felt in some of the hardware stocks. those have actually started to be pretty aggressively sold, both in asia and in euro zone. it is really the u.s. that is going to catch up now on that tech story. as we saw going into december, it was that tech selloff that was really at the heart of the weakness of the u.s. equity market global equity market in that december period of weakness. alix: if tech does get hit, what is the downside for the s&p considering tech is the best performing sector in the s&p

this year? ian: i think you have to say the downside comes back into those type of double-digit numbers. what we've been talking about is a structural bearish environment where you get these spikes of volatility that take the equity down. 8% to 10% enough to get the fed talking about something, but not enough to get them to move rates down aggressively. that is one of the big problems here. alix: ian harnett of absolute strategy research will be sticking with us. coming up, we discussed trade war's impact on american spending power and what it means for company margins. this is bloomberg. ♪

alix: this is "bloomberg daybreak." is ag up this morning, it

tough take. barbs still being thrown between the u.s. and china. equity funds seeing the biggest outflows since mid-march. european stocks also at the lowest levels since march. so where do you go for safety? the swissie back on the safe haven docket. u.s. treasuries in particular, yields down by about four basis points. germany also sold six months worth of bills for -66 basis points. the vix moving higher. one asset not really cooperating with the risk off trade is brent crude, and that is a geopolitical issue. david: can you spell it wrong -- can you spell iran? let's get to the first word news with viviana hurtado. viviana: president trump warning china not to retaliate against the u.s. for raising tariffs. he said "that would only make matters worse." the president also tweeted,

"china will be hurt very badly if beijing doesn't agree to a trade deal." according to mr. trump, "you had a great deal almost completed, and you backed out." swedish prosecutors will reopen a probe into rape allegations against julian assange, a move that may hamper u.s. attempt to extradite the wikileaks founder. authorities want to question him them over a nine-year-old rape allegation. its oilabia says two of tankers were attacked in the persian gulf, and a sabotage attack off of the united arab emirates. no one is clinging response ability. iran calls the incident regrettable and warns against vote for and seditious -- against "foreign seditious plots" to upset stability in the region. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is bloomberg. david: thanks so much. as you said, the straits of

hormuz have been almost sacred, no matter what is going on in the region. if there are attacks going on, that could be really big. alix: saudi arabia actually continued shipping through the strait during 1981 and 1988. if there was a time that was disrupted, that would have been it. 's foreignke iran minister's rebuttal was confused. i wonder what really went on their. david: and nobody knows, that i am aware of right now. at the same time, there's a lot of pressure being put on iran. iran has a lot of ways to reacting that we can directly trace to iran. alix: absolutely right. david: they have a lot of agents in that vicinity. alix: it feels like finally the stock market is catching up to the spread in that you belittle risk. david: from the straits of hormuz, we go to the u.s.

consumer now. up until now, the consumer has not been hit that hard by tariffs on chinese imports. president trump saying this there is no reason for the u.s. consumer to pay the tariffs which take effect in china today. this has been proven we certainly -- proven recently when only four points were paid by the u.s." is that about to change? remember, this is not just china. they structured it to hit businesses and not consumers, which is what you do in a sort of public relations sense when you are starting something like this. now the only thing left consumer products. the idea of the three headed twin of $5 billion going to 25%

tariffs -- the $325 billion going to 25% tariffs, how much with the consumer pay? a lot of this gets absorbed in margins. the president, i have no idea what he is talking about when he says four points. basically, the importer pays the price of the tariffs. where china could get hurt is if it forces a simile manufacturing out of china, or forces chinese company's to lower prices to keep market share. it would take a long time to move the product chains out of china, or they are just not going to go. david: insofar as this does affect the cost of consumer goods in this country, who is going to pay it? is it going to go straight to the consumer? can the retailer here absorb some of that? michael: there was a study on this that found estimating the effects of the tariffs are very difficult because we don't know the answer to that question. some companies absorb the increase. some companies pass it along to consumers, but maybe not the whole amount.

it is hard to estimate. they came up with the answer of a reese's consumer prices -- of they raise consumer prices by 3/10 of a percentage point. alix: there is a study that showed what would happen to margins and profits if we got the full inch alana on tariffs onk -- the full enchilada tariffs. how do you deal with this as an investor? ian: i think you have to take a cautious stance on it. one of the bits of the story that hasn't really permeated into the market yet is already there was a lot of negative pressure on margins, so we believe that looking at what we have at the end of last year, we were already talking about a three-point shift in u.s. margins and u.s. earnings for 2019 being down 5%. if you add on top of that a tariff factor as well, you are talking potentially about moving

towards almost double digit losses for eps growthf over an 18 month period, for example. that consumer hit is particularly important. you got billions of dollars of tariffs on consumer goods already. if we go into that tech space, one of the key things holding down core pca in the last few years has been the declining technology prices. if that starts to change, you will see upward pressure there that is going to worry the fed, and it is also going to hit personal disposable incomes. that is going to feed straight through into weaker consumer growth and potentially into housing demand as well. news? is this all bad it was only a week or 10 days ago when we were concerned inflation wasn't high enough, and the fed was going the wrong direction. at the same time, wages are going up, so the consumer can afford it at her than they could've year ago, can't they? michael: they can.

this is a question of careful what you wish for. if you want to push prices higher, you've got to be able to stop at some point, and this president is at what the fed to do that. but it is important to know that wages are going up. that has increased consumer purchasing power. we are not seeing a macro effect over a longer period of time from tariffs. the first quarter obviously affected by trade, but we are not seeing consumers hit so far. we probably won't see a huge hit from these tariffs over the course of a year. it will be there, but it won't slow the economy unless it really hits business hard. alix: nevertheless, the markets still pricing in some fed cuts. 2015is the futures from to 2020. you can see that the probability of a fed rate cut is moving higher. is that appropriate? do you feel like there is a powell put that winds up hitting

consumers? i think the question you've got is whether we start to see these higher prices start to constrain some of the fed's actions. it is at that point the market starts to get very nervous indeed, and that you start to see the financials come under pressure and people starting to say forget about inflation, we've got to focus on growth and the employment numbers. alix: on the one hand, if you wind up seeing some pass-through, that is going to be more inflationary. that means more of a hike. but if you see more damage to the economy, that means more of a cut. what do you think the path is from here? michael: staying as long as possible. there is one aspect the markets are not considering here, and that is the u.s. economy is in a pretty sweet spot right now, and the fed doesn't think that cutting rates is necessarily going to raise the inflation rate. they are kind of watching and waiting. just a cut alone, we were at

zero for seven years and got no inflation. they are looking at that saying why should we just cut to raise inflation if we don't think it will do anything. alix: explain this to me. we talk about the powell put in the fed patience, but maybe looking at a cut. why is the dollar still stronger? ian: if you see these china tariffs impacting chinese growth aggressively, than it is likely the chinese authorities full at that yuan come down and bind up the u.s. dollar. so with the fed only on hold rather than aggressively cutting , if the chinese are cutting, the rest of the world is being more active in terms of cutting interest rates, like india and some of the other emerging economies. then the u.s. dollar gets pushed

up and said, so it will take quite a makeshift in the u.s. sentiment. the key thing for the equity market is coming back to what mike was saying. the key phrase he had, the u.s. is in a sweet spot. if that gets damaged at all, those multiples on the market are going to come down, and that is the most likely route for seeing the market starting to price in more aggressive fed easing, and that is going to be the thing that takes the dollar back down. alix: so what are you buying, then? ian: for now, we are staying to people -- we are telling people to stay defensive. you want to stay overweight in those bonds. u.s. treasuries have still got more downside, potentially down to 2.30, may be somewhat lower. we had an aggressive view earlier. that has worked out nicely. we think that is going to continue. that is also going to take you into a world where you want to own gold. gold has not performed particularly aggressively so far. we still think you've got those

kind of assets, and bond sensitive plays. we would like to pick up some of the yield and some of these areas like utilities, telcos, some of those areas. those heavily indebted areas will probably still hold up reasonably well is bond yields stay relatively weak. alix: and gold down two dollars today. explain that one to me. ian: i think that is the worry about the inflation side, isn't it? alix: copy that. em gold wan -- i remember when gold was about 2000. where are we going to aspect from retailers when they come out this week? how are they going to address these questions about tariffs? michael: they don't really know. they could face significantly higher retail costs, but what we seen is apparel prices go down the last couple of months that held down the cpi. it may not be so bad.

do consumers keep going to the malls and going online and stuff? consumer credit has fallen off a little bit, but we are paying back our christmas spending, so we will see now that people have started to get their tax refunds, even if they are smaller. it is hard to know exactly what they will forecast going forward. we saw a weak consumer in the first quarter, but it may pick up now that easter is over. david: ian harnett and michael mckee, thanks very much for being here. coming up, morgan stanley's investment bankers rake in millions in fees from uber buyers. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." coming up in the next hour, lowery institute senior fellow richard mcgregor. ♪ this is "bloomberg daybreak." opposing renewed efforts by allianz partner renault to merge under a holding company structure. the reason, it won't help turn the japanese carmaker around. talks have been going on since renault made a proposal in april. tomorrow, nissan is set to report its lowest annual operating profit in a decade. lloyd's of london commissioning an independent culture crackdown following a bloomberg report on sexual misconduct. the report finding an atmosphere of near persistent harassment in the world's oldest insurance market. they have already threatened to

give potential lost time -- potential lifetime bans for, rate behavior. upcoin surging above $7,000, 11% from friday's close. other cryptocurrencies also rallying. since mid-december, bitcoin has more than doubled. still, it is a long way off its 27 peak of more than 19,000 -- it's 20 peak of more than 19 -- more thanpeak of $19,000. -- is it asearch search for yield in bitcoin? i'm not sure on that one. david: i just don't know. alix: we turn now to wall street beat. m&at up, unicredit warns of hurdles, saying european bank mergers are facing challenges. can morgan stanley investors

take the hit as the company's ipo doubles? and investors touring bearish on junk bonds and etf's as the trade -- turning bearish on junk bonds and etf's as the trade war intensifies. waitinguropean banks for consolidation shouldn't hold their breath. this is what he said. things whichlot of need to be followed. first, they need to be controlled. execution, risk and governance -- [indiscernible] david: so it doesn't sound like we are going to have consolidation anytime soon. she asked him about profitability. he said, well, it will be interesting. luke: he said it is an interesting time to be a european bank, trying to put a positive spin on things. the ecb has clearly been urging

consolidation, but i found it kind of odd that he listed things from a banker's point of view. you have powerful countervailing forces in terms of regulators, cross-border mergers, and labor. so many of those are not ever working in the same direction. that seems to be the bigger hurdle. you see the european banks index trading at near record discounts. i think that is what that tells you. profitability concerns are a lot more than negative rates. alix: even if the ecb does go to tiering, it will not necessarily be the saving grace we think it is. it is not what the cure-all. luke: he was essentially talking about we have certain outlines where we are profitable. concern isably more of a thing for the smaller guys, but i don't see myself being able to move in. it didn't sound what a guy who

is eager to get into it, but again, didn't want to comment on speculation or rumors. said that a lot of times. david: our second story of uber, morgan stanley did a great job of taking this company public. they will make a lot of money, without a doubt, but maybe some of their very wealthy investors are not very happy this morning. luke: i found this story really interesting. elite, wealthy morgan stanley investors were having to pitch to get in. but remember this timing. this was before the delete uber campaign, which was probably a material effect on their business and a risk factor. this is probably a time when it was around the talk for uber, but i wonder when you're getting that opportunity, how much of that is i'm getting this great investment opportunity and how much is i'm getting this that you can't have. . it is more a sign of perceived than anything -- sign of

prestige than anything. the ipo etf is still up 30% year to date. alix: it does raise questions. is there wealth creation in this? there was a great bloomberg opinion article that talked about this. if you bought shares private, it's kind of where it was when it opened, you didn't actually create wealth. luke: not at all. that's why it is interesting that we are highlighting this, but that is why i like to look back. there are other success stories. alix: ok, glass half-full. let's go to the third story, which is volatility. rhat are you going to b writing -- what are you going to be writing today on volatility? ane: this was priced like earnings report, like the g20, like the midterm elections.

now we are seeing the selloff rate intensify. the sb 500, if you're just going if you're are500, just going to sell cheap, people are wondering if this is a more macro selloff, what is my most cost-effective. they are looking at the high-yield bond etf's. even in china centric scares, it has reacted a lot. the primary yield last week was quite amazing, even in secondary losses. people are starting to wonder, does this hurt the american buyer? david: thank you so much for being with us. coming up, the pga championship kicks off on thursday, and tiger woods is testing how bookmakers are managing risk. more on that is next. this is bloomberg. ♪

david: -- david: this is what i'm watching, even if you aren't. the pga championship starts on thursday. first of all, they moved it earlier in the year. we all know tiger woods won the masters, which puts a lot of attention on him. he is now sort of the favourite, 8-1 odds. one thing that is really interesting is because tiger woods is back in the hunt, it is really distorting the betting. everybody wants to bet on tiger, and it distorts the rest of the field. alix: what about the other guys in the running here? david: brooks koepka won last

year, and he is a 10-1. rory mcilroy is at 12-1. it is supposed to be the hardest course in the country. they've never played the pgh ambien ship there -- the pga championship there. it is a famous course going back to the 1940's. alix: have you played it? david: no, it is way too hard for me. alix: in terms of betting, this is the first time you can do some serious betting on golf. david: for the majors, exactly. the interesting thing for tiger woods is, once again in his comeback, he is changing all of golf. the last time he won this was 2007. he's won this five times. people were worried about all of those spinal surgeries. he hasn't been playing for a while. alix: interesting. i'm into it. i'm not going to watch it, but i

will talk about it on friday. [laughter] alix: coming up, victoria fernandez and been lately or -- later will be joining us. european stocks looking at their lowest level since late march. u.s. equities taking it on the chin. and safe haven assets, money flowing into bitcoin and into the yen. but down by two points, yields moving lower by about five basis points. one stock that is just going to be rough is uber, down again almost 6% in premarket. fresh lows after its ipo on friday. this is bloomberg. ♪

♪ trump to china cup on --

trump to china, "you will be hurt very badly." president trump gives china four weeks to agree to a deal. andsury yields dropping markets pricing and changes for a rate cut. margins,down on earnings, and consumer confidence. david: welcome to "bloomberg daybreak." i'm david westin, right here with alix steel. it certainly is a different world today them it was last week when we thought we would have a deal. markets are catching up to the fact that it doesn't look like we will have a deal anytime soon. alix: if you look at emerging-markets, we are not really seeing any other movement in asset classes. s&p futures down by one point 5%, outpacing any downside from the european markets as well. , buying anden bids

the treasury market is yel -- market as well. the currency market very well behaved, and brent crude up by 1.5%, not participating in this as a story with saudi and iran. david: let's go back to trade moment. president trump has been tweeting all weekend and this morning about his version of what is going on in the trade dispute with china. that the chinese may have thought they could wait it out for someone easier. for the latest on what is happening in washington, we are joined by kevin cirilli, bloomberg's chief washington correspondent. the president is playing a tough hand here, and a lot of it seems to do with politics. kevin: precisely. the question now becomes how will china retaliate. according to their state run media, they are equally as frustrated as the white house in terms of how these trade talks are going.

on friday, president trump saying to the chinese they would have one month or risk even further escalation of this trade terrace increases when to do affect on billions of dollars of goods from 10% to 25%. now a host of different issues remain unclear. both the chinese and the u.s. say there is space between them on international property -- on intellectual property, forced .ransfers there are some rumblings behind the scenes that there could be another agricultural package that is moved through in order to provide assistance to farmers in the united states. remember, the crux of president trump's reelection hangs on states that are heavily impacted by farmers. the last point i would make is that president xi and president

trump are technically set to come face-to-face in japan in the coming weeks at the g20. david: as larry kudlow referred to over the weekend, watch that g20 meeting. thank you very much. that is bloomberg's chief washington correspondent kevin cirilli reporting from the white house. we also heard over the weekend from the chinese side, was vice "we areliu he saying, very clear that we cannot make concessions on matters of principle. we hope the u.s. understands this. china does not hope for a trade war, but we are fully prepared for it." an author onw chinese power and a bloomberg opinion columnist. richard, thank you for being here.

did we over read to the extent to which they could come together? richard: both sides are hardening. the chinese will have to respond. of course, as we know, there's not many more american imports into china that could be terrorist -- that could be tariffed. we will have to see what happens with the chinese sharpen their claws. it will likely have to target business is doing -- target companies doing business inside china. tech companies, financial companies, selling cars. i would wonder whether we get these consumer boycotts of angry, patriotic chinese targeting u.s. business. takeawayse were two and the lack of response from china. saying like what you are -- it sums like what you're

saying is that it tends toward the latter. richard: i think they can't tariff anymore u.s. imports, so it's got to be focused within china. in some ways, the chinese system is built for this. the chinese communist party is built on anti-for a nest -- anti-foreign and anti-imperialist sentiment. they can say we always told you the u.s. wanted to contain us. it's all true. look at this. that can get out of hand. surprised if we saw some consumer boycotts in china. david: explain just how important it is to the chinese, particularly for president xi, to make sure they stand on a matter of principle. there are certain lines they

wel not cross, for example, will not make a deal unless you withdraw all the tariffs. how critical is that? is that just negotiating, or is it important as a matter of politics? richard: i think it is a matter of politics rather than principle. it is fair enough for the chinese to say we will not cut a deal unless you lift tariffs, but the idea that the chinese can't change their laws as part of any deal, when the chinese entered the wto, and that was basically a bilateral negotiation, china changed a ton of its laws. they can do that if they want. that is what international trade is about. countries pool their sovereignty, in some respects. every country has their dignity. it is not just china. the u.s. as well. i think that is politics and

negotiating tactics. david: you've studied china very carefully and this regime very carefully. they've studied president trump to understand him as well. what do they think might affect the president the most and get him to come to the table? richard: like everybody in the u.s. and the rest of the world, they are trying to work that out, and haven't yet. i think trump has rattled china more than anybody else has managed to do, particularly a year or so ago. i think they've studied since then. what we've seen in china is a little bit of a rally around the flag moment. this will cause damage for china if these tariffs go ahead. it will cause a lot of damage particularly to the private companies along the coast and the like. it is the responsibility of the general secretary to manage the u.s. relationship, the most

important bilateral relationship that china has. xi has a lot of critics that are keeping their heads down these days. but if the economy is really affected by this, this will be a and thatbeat xi with, could cause him some problems. he's not in trouble of losing his job or anything like that, and that brings us back to your question. the big pressure point on trump is the electoral cycle, whether this plays well or place poorly for him. that is pretty hard to judge at the moment. david: thank you very much for joining us. that is richard mcgregor of the lahouaiej institute -- the lowy institute. alix: national economic council director larry kudlow tried to play down impact on the u.s. economy. mr. kudlow: if you go the whole $200 billion increase in 10% to 20%, plusercent -- to the gdpd $300 billion,

would be a modest number. in terms of job losses, we are way below that number. laidleroining us now is be and victoria fernandez. is the market appropriately pricing a trade war? ben: probably not. if tariffs stay at these levels, it probably takes a couple of percentage points off of u.s. earnings growth. if we go all the way, that is probably 5% to 6%. i think this probably tells us more about how far the markets rallied more than anything else. we had unrelenting good news for months here. we thought we were going to get some thing that didn't fall into place. this is trade. we know what the parameters are here. alix: you see s&p futures taking another leg lower, off by over 1.5%.

there is rhetoric out there that says equities have not fallen far enough to push president into making a deal. do you agree? if you do, what would? run for: we had a bull quite a while. we did have a pullback last week with the concerns coming out with the trade issues. i wouldn't be surprised to see a little bit further of a downturn , just increased volatility going on in the market place. we don't have a set number of what that would be for the of should to make a change, but we know they are already pushing to have the rates, even when we had strong gdp numbers mean out and strong consumer numbers. it probably wouldn't be too much for them to raise their voices with a downfall in the market, but we wouldn't is bait more volatility from here. alix: we do have some headlines here. there is no sourcing yet, so we want to be careful on taking it too seriously, but china is said

to raise tariffs on some u.s. goods from june 1. fall toseeing markets the lows of the session, dollar-yen falling to a session low on those headlines. david: ok. it is not unexpected. we do expect china to retaliate. at the same time, as we look at the possible effects on u.s. companies and the economy, is the greater nature -- the greater danger not tariffs, but other things they could do? ben: the u.s. is a pretty closed stock market and economy. something like 6% to 8% of u.s. corporate revenues come from china. these are some of the lowest numbers in the world. real relative losers are elsewhere in the world. europe, north asian supply chains. i think the direct impact is fairly low. i think the real impact is sentiment.

markets have rallied one direction for four months here. the expectations are halved. you had nearly $20 billion of outflows from develop markets funds last week. you have some of that sensitivity. so i think the earnings macro sensitivities here are sort of manageable, but markets have come a very long way. ben and victoria will be sticking with us. this new headline, china sent to raise tariffs on some u.s. goods from june 1. we do not have the correct sourcing from that, yet markets are still moving on that headline. stocks caught in the crosshairs. next.l discuss this is bloomberg. ♪

could be the next victim of the trade war, with cell phones and laptops at risk of getting slapped with the next round of tariffs. joining us is techonomy's contribute in editor -- contributing editor. apparently we will have an announcement as soon as today for the rest of that $325 billion worth of goods. what will that do? guest: with all of these trade wars going on, there are no winners. the u.s. consumer will suffer, as well as the chinese economy and consumers. at the end of the day, when you look at this trade war, you have to understand where china is coming from relative to the advantages and leverages we have. ultimately, china will have to

cave on this because if they don't come up with a risk is a permanent market share loss of their supply chain, which can move because the u.s. is a more adaptable country. they can move to other countries like in southeast asia and latin america. it will never go back to china. they cannot risk this. david: david: that is eventually -- david: that is eventually. in the meantime, what will be the damage to the tech sector? james: the tech sector will suffer across the board. i think it is going to be felt. the real goal is to pick the companies that are not the direct losers from the trade escalation. when you see that, it is the companies it will -- companies that will continue to lower-cost for consumers and continue to

show capital efficiencies, companies like amazon, basically the faangs except apple. devaluations are really high. i think a correction, which can happen if this keeps going, can open up a lot of opportunities because a lot of devaluations have gone a little too lofty. david: you are pretty confident the chinese government will have to give in and the end. they also have a lot of flexibility in the way the government works to keep their economy going and redirect some of the supply chains. we are not as nimble. james: sure. this is going to be a period of cyclical pain for everybody, but really it is about how to identify the companies that will be beneficiaries. there are no winners right now because the talks are going to

escalate. te be as loud as his bark? i'm not sure about that. victoriah us still are fernandez of cross mark global investment and ben laidler with just bc -- with hsbc. if we lose in this tech war, what happens? portfolios,th our we've actually been making a little bit of a shift. we were looking more at how you type names than some of the growth tech names that have had such a strong run so far. maybe you start to make a bit of a shift. that is not to say you don't hold tech names. we saw tim cook talk about the hit they would get from china. that got brought back a little bit when numbers were better-than-expected, but i think you will continue to see a hit there. maybe look at other names within

the tech sector. palo alto, cybersecurity types of names. maybe find another way in the tech sector then just some of the headline names that make it hit. alix: ben, what do you think? ben: tech will definitely get hit. ,ardware is the most exposed but they are also pretty cheap sectors. they have significantly higher profitability. i think they will get through this. they also sell a bunch of things that china doesn't have. some of these things aren't completely interchangeable, so i think tech spoelstra. -- tech pulls through. isx: but if we have wobbles, there a danger for the broader s&p to be dragged down? if they were responsible for the way up, on the way down, what happens? ben: tech is the best performer you to date despite having lower earnings.

we will see whether that continues, whether that survives the trade war or not. to thegoing back original comment, i think tech has a lot of flexibility that other sectors don't have. the net cash balance sheets, very high r.o.e.'s, the ability to buy back stocks in a week earnings environment. i think there's more flexibility here than you have for a lot of other sectors. david: that is a great point about the balance sheets. kmak, thank you so much. the tory fernandez and ben laidler -- victoria fernandez and ben laidler will be staying with us. alix: a couple of things happening right now. first off, the headlines that china is looking to raise tariffs on about $60 billion worth of goods. we are having more specifics come in. one is that china may reduce

some boeing orders. boeing getting hit on premarket. also saying they are going to stop buying u.s. agricultural products. i have some issues with that, whether they could technically do that. those are the two headlines causing some ruckus in the markets. s&p futures on the lows this session, dollar-yen on the low as well. we are going to continue those headlines as they cross here. we will have more on that in today's bottom line. this is bloomberg. ♪

alix: let's get you updated on the breaking headlines. china's ministry of finance say on u.s.l impose tariffs goods starting june 1. they will lower orders for boeing and stop buying u.s.

agricultural goods. are you surprised about the boeing comment? reporter: i'm a little surprised in that it is a very aggressive stance from china, but that is really what we saw from the u.s. with the increase of tariffs. if you remember, in the negotiations, there had been talk of acing to for can increase in aircraft orders from -- talk of a significant increase in aircraft orders from boeing. down the road, there is clearly a limit to the amount of boeing aircraft's they are going to buy, so that was an interesting bargaining chip in the first place. david: how long is the lag before this will take effect? reporter: i think the question is do they cancel existing orders, which would be a very significant hit to boeing,

particularly with the 737 max, which is already facing cancellations from indonesia. there are questions about other emerging markets that might be looking to cancel orders as well. if you did see a sick get move to curtail orders, that could toral -- a significant move curtail orders, that could spiral. especially some of these carriers that perhaps didn't necessarily have the cash flow to afford some of these orders in the first place. the risk is that it creates a waterfall effect. alix: victoria fernandez come across mark global investment chief market strategist -- fernandez, cross market global investment chief strategist, is still with us. victoria: there were questions about the production numbers, but we wanted to wait to see what would happen with actual orders. effect?re be a domino

are there canceling existing orders? how is that going to flow through? that is definitely something we will have to look at and see if it is a holding that we will continue. right now we hold it because of the dividend, but we have to be concerned when we hear that orders are going to be cut. alix: brooke sutherland, thank you so much. pictorial fernandez will be sticking with us. -- victoria fernandez will be sticking with us. times"bal -- "the global editor-in-chief tweeting that china will not by as much agricultural product. we will discuss what it means for the consumer and the s&p. this is bloomberg. ♪

alix: this is "bloomberg daybreak." i am alix steel. ariba headlines. the ministry of finance -- here are the headlines.

the ministry of finance saying they will raise tariffs, the global times editors thing china may start purchasing -- may stop purchasing u.s. financial -- u.s. agricultural products. traders not waiting for that. europe taking another light lower, particularly the dax. in other asset classes, it is a flood to say paving continuing. dollar-yen down .6%. vix slightly elevated. , it feels like equities continue to take it on the chin when it comes to trade. other asset classes taking it in stride. david: a bumpy morning. let's figure out what is going outside the business world. we turn to viviana hurtado with first word news. viviana: china striking back. the minister of finance concerns

says beijing will boost tariffs on some u.s. goods. the move coming as no surprise after the u.s. raise tariffs on chinese products last friday. china vowed to retaliate. -- warnedtrump word china retaliating would only make matters worse and tweeted china had a great deal almost completed and backed out. mike pompeo making a surprise visit to brussels where iran is being discussed. eu foreign officials are looking for ways to salvage the nuclear deal. 60 days toven europe throw them in economic lifeline. iran is threatening to back out of some of the provisions if urope does not -- the u.s. china trade dispute is getting the claim. traders fearing the largest may refrainrter from buying more u.s. beings.

african swine fever is cutting demand in asia. 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. hurtado.na this is bloomberg. lisa: joining us is sterling smith, bloomberg's global agricultural application specialist. china would stop buying u.s. agricultural products? sterling: it is completely possible. soybeany cut the imports down to 6 million pounds last year, that sounds like a lot, it is if you dump it in your front yard but it is not that much. beings not need the because of problems they've been having with their hogs. they are reaching out to other countries like argentina. china has a command economy. you do not import soybeans if you are an importer. it is possible they can import

no agricultural products. david: what does that do in china? can they find new sources or does the price of crude go up? sterling: the price of crude goes up. the chinese government is sitting on plenty of cash. it is a command economy. if you were used to getting three porkchops a week, maybe you only get one. you can ramp up chicken production fairly rapidly. this is due toof falling demand because of the hog issue? you do not need the soybean to feed them. how much of that is convenient? sterling: there is a lot of demand loss. the trade war pushed is below eight dollars on soybeans. without the trade war they would be trading $.40 higher. this is conveniently allowing prices to drop. david: it sounds like china has a fair amount of options. what does this do to the american farmer? sterling: the american farmer

will have to look to uncle sam. we'll need to change the way we farm in this country. we'll need to find organic solutions and cut down on the acreage of these crops. the way you make more money is to plant more acres and make more bushels. you will be looking at a year where we could see very large crops and serious demand issues. lisa: we heard on friday that president trump wants to help them, and give them to countries suffering humanitarian needs. if they buy from the farmer, that is fine. the soybeans are only good to be processed into animals. feed are get them to starting children in the same stories for the corn. starving countries want rice and wheat. they do not want our animal feed. something you could do is encourage biodiesel, that would encourage demand domestically

but it would not be enough to offset the beans we sent to china every year. alix: if china winds up diversifying with air buying their beans, is that solution permanent? sterling: yes. we saw this 1979 with the russian wheat crisis. we went after russia. after that we do not sell any week to russia. the government's first job is to and chinaod security will diversify this because they do not want against -- they do not want to get caught in this situation again. alix: sterling, you're the best. thank you so much for joining us. david: turning from commodities to the consumer, victoria and ben are still with us. victoria, we'll start with you. already, we are seeing all sorts of developments with respect to this trade dispute. what does this indicate to you?

is it making you reevaluate exactly what the possible effect could be from farmers to bowing -- to boeing? victoria: in the long term i think we do come to a deal with china, whether that will be in june or after that. in the short term, we have a lot of volatility, whether it is the boeing story or the act story -- or the agriculture story. -- china went straight after trump space in the farmland. they have to find a way to make their point and they are doing that. this goes back to our conversation. it is just more uncertainty in the market which is not good for investors and they will pull back and have that safe haven trade. i think we have to look at a longer-term investment thesis and not look at so much of what is moving the headlines but what is going to do well longer-term. david: does it change the

longer-term investment these is at this point? ben: i don't think so. i don't think we should be surprised china is responding. the question is whether their escalating. .he answer is probably no a trade deal is probably on the table. it is in the interest of both party. i think we were set up for something to go along -- for something to go wrong. i would like to see earnings begin to move up. that is the fundamental support for the market. we are beginning to see that on first-quarter earnings season. david: if it drives up the cost of goods sold, that is bad for margins. ben: i do not think the margin impact will be particularly significant. we do not important enough from china. the tariffs are not big enough. margin expectations are being brought down a lot. u.s. earnings expectations -- we

talked a lot about growth but growth expectations have not come down. we have taken a big couch out of margin expectations. i think that gives is quite a lot of flexibility. i think earnings begin to drift back up. agree?ictoria, do you ?s there pricing power i think earnings will do better as we get toward the end of the year. everyone thought we would see an earnings recession in the first quarter. we are now looking at a 8% gain in the first quarter. some of that negative sentiment has been pushed on to the second and the third quarter. we are looking flat to negative for the second quarter, flat for the third quarter. seeing a comeback in expectations for the fourth quarter.

we do see earnings doing better in the second half of the year. that will be good for companies and margins. i do not think it will be a huge push on margins. a lot of that comes down to comparable products people can use, what is the price on some of this? people can find other products if they need to. i'm not sure those products get pushed onto the consumer. still doing better. david: what about the sentiment which could be critically important? we have the china trade situation. we have usmca pending, and we have not turned toward europe yet. that is next up? i will be curious to see what we're hearing out of the earnings we have got. retail earnings this week, cisco as well. you have alibaba, tencent reporting this week.

the sentiment is going to be key going forward. i think the consumer in the u.s. , a strong foundation for us to go forward. they are holding their own. the balance sheets are going well. savings are still good. we have room to run and astiment will be uncertain we have these trade talks go back and forth. david: as you look forward to the rest of the year, how concerned your about sentiment turning the wrong way? ben: i think sentiment has been negative. this is been obtained trade. markets rally 15% or 16% and strong outflows from equity funds. big overweight for defensive sectors. volatility has come down and that is what made us nervous, and then you are having a repricing. the strength of the consumer is your insurance policy so this does not get any worse.

anyone who wants a job in the u.s. has a job in the u.s. real wages have been picking up. i think the consumer is something to applaud. david: how much does that make you focus on retail sales numbers? ben: quite a lot. manufacturing and industrial production has been weak, the strength of the consumer is the bulwark to anything going more wrong than it has already gone. victoria fernandez, thank you so much for being with us. ben will be staying with us. coming up, a look at the trade fallout. that is next in today's follow the lead and this is bloomberg. ♪

viviana: this is "bloomberg daybreak." coming up later on "bloomberg markets," independent senator angus king of maine. this is "bloomberg daybreak." london commissioning an independent culture crackdown following a bloomberg report of sexual misconduct. the bloomberg businessweek report finding an atmosphere of persistent harassment in the world's oldest insurance market. lloyds has already threatened to give potential lifetime bans for inappropriate behavior. according to the financial 60% oforacle is firing its research and develop and staff in china. that is roughly 900 workers.

telling thers financial times the job cuts are due to the u.s.-china trade war. softbank's vision fun investing in version term green cell. at $3.5s green cell billion. since 2015, green cell has delivered annual growth of more than 100%. .avid: time for follow the lead a deep dive into the stories making headlines in moving markets with insights from industry veterans and insiders. today we continue the trade conversation. the u.s.-china dispute is at the top of investor concerns as they assessed how far they should price in a full-blown chain more -- trade war. let's welcome shamaila khan. i'm going to start off with a report just today. em's wereows into

$1.7 billion. our investors voting with their feet? shamaila: the prospects for trade negotiations have changed over the last week with the probability of a more protracted than expected trade negotiation has gone up. that is a negative for risk assets. alix: where is the biggest mispriced emerging markets? shamaila: to the extent the negotiation continues longer , e.m. was always honorable. you can see that as a price reaction today. alix: and that is broad-based? shamaila: it is and the higher boehner names -- the higher beta names are more vulnerable. alix: you like e.m.? ben: yes. you see massive outflows in dm. e.m. equities have perform that well. the dollar point is well taken.

the growth in dm is widening in e.m. favor. david: how much of your based ont to em is your believe the china trade dispute will go away in the foreseeable future. if you knew it going away, would you change your view? has thehink china policy flexibility to stabilize growth. that is what we have seen over the last six to nine months. in the country's more exposed to the supply chain -- david: perhaps southeast asia more broadly. the supply chain lasts for an indefinite. of time -- for an indefinite period time, what does that do to supply chains in global markets? shamaila: it will impact growth. side, we do income not expect that to be a big

impact for them. on the equity side is a different story altogether. -- thatee that trying china has the ability to manage this. they have control over their monetary policy and fiscal policy which the u.s. doesn't. that does give them more leverage. alix: is a part of that lever going to be what you can do with the u.n.? the -- with the yuan? that will prevent them from being able to stimulate? shamaila: the fiscal policy is a different matter and they have already been doing that and we expect that to show up in chinese growth numbers later in the year. there are number things they can do to mitigate the impact. our base case is still there will be a negotiated outcome. it is normal in a negotiation process cap these kind of pickups, especially at the last minute when both parties are trying to negotiate a better deal. alix: if you are looking at chinese equities, would you want to do chinese equities that are

more consumer focused versus copper focused or stealing manufacturing focused? is been interesting about the chinese policy response to date is how focused it has been on the private sector rather than the as a we -- rather than the soe. the fact that stimulus has been so private sector focused, i would be focused on those private sector names. chinese equities are some of the most a mystic in the world. -- some of the most domestic in the world. david: is there different between countries export dependent as opposed to countries that have much more been developed market within their boundaries? shamaila: from an asset price perspective, investors rarely differentiate between those countries, even if the closed economies are more vulnerable from a debt perspective. they tend to get impacted as much as the open economy.

that is true over a longer time. in the short-term asset price reaction, you'll see the higher-yielding countries getting more impacted if this continues for some time. alix: that also raises the question, are there any em countries that are immune? that would get taken down with this but are not exposed? shamaila: we have been very selective in emerging markets to the extent there are opportunities that emerge because of repricing of assets and overpricing of risk, we will be buyers. countries that are strong from an external perspective, those are the names we would expect to be holding in much better. david: there are things going on in the world besides u.s. china trade. we have an election in south africa, and election in india. how to those elections affect your investment? shamaila: the election in south

africa came in close to market expectations. what we need to see is president ramaphosa addressing some of the long-standing issues in south africa. appoint a more credible cabinet, address issues with utility company and address investors concerns on things like land reform and natural is it -- nationalization. alix: shamaila khan and ben laidler, thank you both. i am watching the market. u.s. equity futures deeply in the red as more headlines come out from china. what to expect with the u.s. china trade war in retaliation. we will break that down, next. this is bloomberg. ♪

alix: here is what i'm watching. equity futures declining. nasdaq futures up 2.5%.

china says it will raise tariffs on u.s. goods on june 1. joining us is michael antonelli. what you do today? michael: you have to look for what the market does over the first hour. the first hour is the panic news reaction. it will be the most volatility. then we will settle in your range. wen we look at the chart, look at 2800 as being the target. that is the top of the range from last fall. in this very short-term, markets trade on better or worse and things got worse. alix: do you feel like the worst is accurate -- is accurately no, i think the market will be trying to do that. let's think about this in a positive light. now we can test the theory that there is debt buyers out there. we will see if the market can absorb bad news. other wise, maybe the sand it was built on was not that strong. david: it goes to the question,

what is the truth? were the markets paying too much attention to what the treasury was saying as opposed to what the chinese were saying? michael: the market needs to find its footing in an escalation of trade war. we will find out this week what that level looks like. if the market can absorb that and move itself to a new level without doing much technical damage, that is what the upside would look like. it can absorb bad news and not fall apart. alix: what you make of the fact that most of the action is still centered in u.s. equities? the more volatility is centered in the equity market. michael: i think that is a function of the 17% bounce off of the end of last year. the tape was extended. people have been saying what is the bond market saying, why are gilts so weak? up 17% -- why are yields so weak?

david: are you suggesting they've done is a favor? the market was overextended anyway? michael: i think we will find out. if we can absorb the bad news and not do too much damage, that is a good reset on the bar. the upside would be a reset and we go back to the slow growth earnings we have going. michael antonelli, thank you for joining us. that wraps it up for us. openg up on bloomberg, the , chief u.s. equity strategist on this risk off day with s&p futures down 1.5%, moving treasuries and the yen. 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: trade uncertainty heading markets. china retaliating. tensions building in the persian gulf as saudi arabia sends its oil tech -- says oil tankers have been attacked. uber falling much further away from its ipo price. 30 minutes until the start of trading, good morning. after the biggest weekly loss of 2019, we may add some way to that at the open. down 57 on the s&p, negative almost 2%. euro-dollar 1.1258 and treasuries, yields lower five basis points. 2.42 is your yield. let's begin with our big issue. no quick fix for u.s.-china trade issues. >> is a long game. >> long game. >> disrupting entire economies

takes time. >>