president trump is ready to block list -- block list huawei. it has the power to -- who is telling the truth? bond yields or u.s. economy. bunds will rise. oil's big on ability. tensions threaten to erupt into bigger conflicts. 2020 candidates ask president trump to back down. >> i am david westin. trade is very much in the spotlight. we are waiting for walmart. myt part about what a fight -- what effect might shares have. alix: that is going to cut into margins irrespective of global supply chains and tariffs. david: with -- we will see how they do.

-- -10 basis points. david: they cannot stay there. alix: crude, the geopolitical risk up by about 1%. david: we're waiting for walmart. let's turn to number first take. ponczek.ined by sarah >> it changes everything. david: moving beyond that really important issue, let's turn to

what the united states government did last night with respect to telecommuting kitchen's coming in from china. it took very important actions. on the one hand it said is it a national emergency. that means the department of commerce is going to have to approve all purchases from adversarial companies. alix: walmart is art. the rate in line with estimates. of one in at a beat dollar. the revenue 11 new -- the revenue a little light. david: i understand that sales are up but merely on the value of the transactions. it is light on the revenue, really good on the earnings-per-share. alix: the company is going to have to raise some prices from tariffs. yes, if we have more tariffs, that would be some kind of strain on inflation. demandhow elastic is from consumer? if they do raise prices, what is that going to do to prices

overall? we will see if they can withstand some of that increased cost structure. alix: how sticky will it be? 10% tariffs, yeah, you can pass that on. 25%, you cannot pass that on. the smaller companies over in china. 2.398% of the 10 year and maybe that is legit. david: it all winds up back to china. let's come back to what the united states government did last night. there were two things going on, the president declared a national emergency. the congress has to approve any purchases from adversarial companies. going the other way, congress has put while way on a blacklist. sarah, how critical is this?

talking about the trade tariff issue. this might be more important. >> this shows how serious the trump administration is about really cracking down on china. the fact of the matter is you look at markets, futures are higher this morning. chinese markets are higher. it is just unbelievable for me how resilient the market has really been because you think of an event like this as well and it will hurt the likes of quality but how about key west suppliers. if you look at fo expects. still higher right now if you look in early trading. you see the likes of qualcomm getting ahead a little bit. nothing bit. worried.little warm this is just banning while way -- huawei. you have all of these u.s. based

suppliers who now have either to find suppliers or people finding the prospect of a delay in the rollout of 5g because you cannot wrote -- switch over to ericsson are samsung. there is a potential for some ripple effect that could have a potential impact on gdp. it is going to take some time. alix: you were talking to some folks. this is a more material folk -- more material issue. david: a goes to the heart of -- it goes to the heart of president xi's initiative. we have to assume that he will react strong. >> look at the relationship between the u.s. and china. clearly not going the right way people -- right way. tariffs were not moving in the right direction.

now we are hearing it from this angle that comes back to the heart of the matter that this is something that is not going to probably be completely resolved in the next month. this is an issue that is going to be going on at sticking with us for a long time. people might as well get used to it. alix: it is deal or no deal and waiting forever. in the meantime, you had that buying in the bond market. goldman sachs asset management was talking about how yields have to go higher. >> we see the teen year at 2.4. that looks too low. in the short-term, while you have these tensions and uncertainty, you can see yields going lower. two your reference point at the end of the year, closer to 2.7-ish is where we will expect u.s. 10 year. >> look, he is a lot smarter than i am. portfolio managers have reallocated the percentage of their portfolios they are going

to hold in tech income. whether you want to call that a flight to quality or whatever. it is not just going to flip back over. you have these managers having to be in something safe. the most logical thing to get into is it u.s. treasuries and some of the european debt even if you're getting negative yield. right now this is the safest place for a lot of people to be until we get some sort of resolution on trade or at least some sign that global growth is on an upward trajectory. you are going to continue to get yields going higher. david: equity, investors tend not to be. >> that seems to be the narrative. you look in the bond market and the two-year yesterday falling to the lowest level of the beginning of 2018. -- ite were experience seems like the stock market is just ever resilient but the fact

of the matter is you look at what he said. we could see the 10 year going back to 2.7%. last year we were trading about the .2% and people were calling for the .5% yields. you think about this new error -- this new era. 2.7 looks pretty high. david: iran, we have seen a lot of things happening in kluth of u.s. ordering their personnel out of embassies. the democratic candidates for saying to-- joe biden stay in the agreement. , harris says we cannot afford to pay game -- play games. how nervous are the markets about this because the markets do not seem to be reacting that much even if we're sending aircraft carriers. sarah: equity markets do not seem concerned. oil prices are rising.

rising for the third straight day. they are being impacted. commerce saying you cannot deny the fact that clearly oil traders are taking this into account and thinking about supply and now that does affect price. >> if this escalates you see a drop in global demand. you also have other analysts who are factoring in what has gone .n in iran, issues and opec there's a lot of demand side issues at play in what is going on now doesn't help. >> in terms of the individual markets, you have the time spreads quite tight. as the overall oil flat prices not sing the same kind of raleigh, that is a whole different story. feels like the sentiment is not bullish oil yet. , it isot only bullish not a market they really want to see the sequence itself.

this seems to be a lot of -- i guess that is normal. different people taking decisions on the outlook but until you get that synchronicity within the market, then this is what you have. we are probably going to be back to 70 on the bgi -- on wti. much.thank you very david, let's recap walmart. you had earnings coming in at it than estimated jet revenue coming in every verse it now we are up 2%. the company offering some warning on tariffs saying they will have to raise some prices if tariffs go through. david: it is interesting, it is up a little bit. we had roughly been. we head north rooms saying we said- there the call and -- when they have warned about tariffs.

alix: e-commerce sales really solid. sequentially that was lower. that is still solid growth. david: such a high rate. they are losing money in e-commerce sales. it is a negative margin but they want to grow it. alix: much more on walmart. looking at trade, treasuries and the timing of a defensive allocation. t. rowe price, head of global assets. this is bloomberg. ♪

>> this is bloomberg daybreak. your bloomberg business flash. today's share of thomas cook are plunging. negotiating a $385 million rescue loan but it will only get the money if it makes press in selling its airline debt and growing losses have help desk have hurt thomas cook. it is forecasting another tough summer. nestle is in talks of one of the biggest private equity deals. it is negotiating to sell his skincare business for more than $10 billion. the potential buyer is a group headed by e qe buyers. a bullishut with sales and profit forecast for the current period. it is a sign it is still spending on its computer network, this despite concern over global growth. cisco said via -- asia declined.

that is your bloomberg business flash. david? david: united states took action that could sign in the growth of chinese -- the chinese government condemned the move saying -- welcome now from hong kong, in the current. thank you for being with us. he heard the chinese response. it talk about trade. something much more fundamental at least on the u.s. side. andreas: and in fact, china had pushed back against that very point. they said they do not accept this being framed on the ground of national security. then expect -- accept the idea of expert controls.

they will resolutely defend their companies and they object countries object to unilaterally abusing their law to apply sections. there's not much of a middle ground. the go speak to how deep rate comes between both countries. how much tougher china's rhetoric is becoming. >> there is a matter of principle and that is the language. is there a real matter of strategic interest of china because they have been so committed to developing their technology? and specifically 5g. this would go to the heart of that. >> yeah, for sure. they are national champion. they are very out of huawei. on the opposing side, they got their own interest to promote the technology.

as you say, they want to create this high-tech world-class economy is a part of the industrial strategy. a lot of analysts say these risks are worth doing, that would set back china's ambitions. this was well beyond the merchandise goods, will be on tariffs. this measure goes to the core of china's industrial and economic strategy. david: think you for being with us. haze.ning us is sebastian the reaction over the last 14 hours pretty clear. you want to buy safety. we take a look at the 10 year and what we have been. you can see what happened overnight you can see what happened when president trump talked about the auto tariffs. are we looking at 10 years that makes sense? >> this is one of those situations where bond investors

are more pessimistic and equity investors are showing a much more muted reaction to the recent escalation and trade war. senset the moment makes and that the context and a flight to safety. at some point you have to reconcile those two views. the equity markets have had a negative reaction, but you know, still have to buy the dip affect that you have seen. at the moment we are not panicking either. we're sitting comfortably close to neutral between stocks and bonds. >> our bonds reflecting the us economy? things at home and sex -- at goldman sachs, something closer to .7 is it somewhere we can expect the u.s. ten-year 50 u.s. economies pretty firm. with side of the pendulum is correct. yield is hereower to stay.

10-year has been range bound. it will go back up but the straps extrapolating a little bit the equity markets have performed well you today essentially on the fed. as opposed to real pmi earnings data. we're getting positive earnings surprises what from very low expectations. there is a flight to safety effect. yields outside of the u.s. are also remarkably low. that puts lower pressures on the yield. we could stay there for a while. the consensus is close to 80% probability we will see a fed cut. there are quite a few arguments to be made for lower yields for

quite a while. david: this is a question i will put on a different chart. the s&p going up and the spread on the tenure which has been going down. these two things are so in contradiction to each other. whether sprint indicating a positive recession. they are sitting on their hands. >> the yield curve in the spread, whether you look at this one or the two to 10, it has a good historical track record in signaling a recession. time lag between that signal and subsequent recession is all over the place. it can be relatively quick. can take another three years. it is always dangerous to say this time is different. you don't want to say that too often. you have unusual distortions. -- 20 trillion

of sovereign debt a set of u.s. that yield negative or 0%. you have these effects that made distort the signal this time around. >> sebastian page of t. rowe price will be staying with us. coming up, walmart erasing early gains after losing on first-quarter revenue. senior retail analysts will be joining us next. this is bloomberg. ♪

david: walmart shares have been reversing their -- they had their best first-quarter in nine years. the first time revenue was light. joining us now is chuck. he has a hold rating on walmart with a $99 per circuit.

thank you for joining us. >> i think the numbers are pretty much in line. the total in-store sales are up which what just which is what we were expecting traffic increased. digital sales up. on the big tencent or more --dline, the geordie of that the majority of that looks like it is from a lower tax rate. the true surprise when people comb through the details will be the company's u.s. margin is much better than expected which is very favorable. the counter of that, the inventory levels were higher than expected. we will see a modest positive reaction to the numbers. alix: you mentioned be more to. how do you then factor in any kind of trade war into the margin story? worried now we are not much about the trade issue for walmart or most of the names.

clearly, we go to hire 25% as the year aggressors. that is something that will be a factor. clearly, it could be a factor later in the year. the gross margin performance was better from lower transportation costs. most important a better e-commerce margin is something we have been waiting to see. david: as i look at same-store sales, they were up. it appears to be up more because of the volume of the total value of the transaction rather than number of transactions. those that relate to margins? >> that is right. that could be a little bit of inflation in the basket. think the 3.4% is a healthy number. maybe it missed a little bit of the whisper on the two-year comp , up 5.5%. the sales trends stay throughout

the quarter improved which we expected to happen here. the timing of easter, given the weather, have to quarter was better. no real surprise. quarter. margin in the alix: waiting for the call. it is going to be about asking the unknown. they don't know. that is going to be the question for the call. david: on top of increased investment for same-day delivery. alix: coming up, tensions mounting in the middle east? oil mounting higher for the third day. what is real and what is fiction. we will break that down. this is bloomberg. ♪

at comcast, we didn't build the nation's largest gig-speed network just to make businesses run faster. we built it to help them go beyond. because beyond risk... welcome to the neighborhood, guys. there is reward. ♪ ♪ beyond work and life... who else could he be? there is the moment. beyond technology... there is human ingenuity.

♪ ♪ every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. take your business beyond. alix: this is "bloomberg daybreak: americas."

some upside here. automobiles lower. delay in terrace. tariffs. some say you have a bottom for the euro, some don't agree. the bond markets also want a break. the 10 year spread flatter. german yields down 10 basis points. >> first, we find out about first word news. it the hardest and a crackdown on collusion among foreign exchange traders. the

the eu finding banks. -- finding will engage with the u.s.. keepecutive order would the maker from the u.s. market. restrictionsays could the u.s. behind. warns it would be a disaster to go to war with iran, saying he wants to make it clear to president trump he cannot go to war without congressional authorization. joe biden says he is concerned the u.s. would instigate a military confrontation.

global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. democraticsurprised candidates are talking about the possible deal for with iran. mitt romney saying i am not against it, but there is no appetite for it. the marker of success will be iranian oil production, sanctions have been better than obama's nuclear agreement, if your goal is just oil production in iran. >> is the ultimate goal regime change? alix: or something else? all that in the conversation of what is real, what is not.

oil is higher for a third straight day, but markets don't seem convinced. i guess joins us now. t. rowe price is still with us. what would you have two say this is the real deal here? worderyone is using the sabotage. i think the risk is very high. a lot can go wrong with that word sabotage. it takes a long pipeline. you're talking about hundreds of thousands of errol stuck in the line. that is coming on the heels of the russian pipeline contamination.

these sabotage acts are taking oil out of the markets and draining inventory, so they are a bullish indication. is the risk of policy mistake a real confrontation? the risk of aake policy confrontation or a completelynversation off the table. acts thathese small less thingsn deescalate. we saw the escalation language from the foreign members to of the uae, but the saudi statements were strong, unclear, we statements from the u.s.,

are not looking for confrontation, so a little de-escalation this morning, but if the iranians will take the position or other groups take the position that they will do these acts of sabotage, they can be pretty destructive and that is on top of the fact that news reports are that venezuela production has been cut in half from a low level. you have iranian oil coming out of the markets, so i think the markets will tighten significantly. had theore broadly, we incident and russia. overcoming a risk psychological barrier? he used to be the streets of hormuz nobody messed with. more accepted that

we use oil supplies is geopolitics. >> we are seeing very high geopolitical sort of use of oil in many different ways, sanctions come small sabotage -- sanctions, small sabotage, different trading patterns. there is this sense that if prices go above 70 you have analysts saying that could years,over the next two the amount of oil out of the u.s., so there are lots of geopolitical factors, but the market under cells this idea of because it is not something you can bomb a country over. it seems immaterial, but it can be quite disruptive to market operations. alix: --

david: sebastian, give us a sense more broadly, what is going on in the middle east and iran right now. is there something markets are investors need to be taking into account? >> investors need to take it into account. geopolitical tensions don't matter to markets until they really do, so the description of those risks applies here. in the short run, you see hits to supply, like the drone attack , the straits of hormuz, iran tensions, venezuela, all those can spur cyclical rallies, but we take a longer-term view and expected trend lower over the next five years due to increase productivity and the productivity of u.s. shale in particular.

our time horizon is it that longer, recognize forces creating cyclical rallies, but we have an underweight position in portfolios. that is reflected in the curve. if you look at where russia and saudi arabia are producing, it is below where they are able to produce. fact thatmake of the producers are making up for any lost oil we see in the same respect? aregain, analysts overstating how much spare capacity we have in the markets in the various countries, russia or opec. the market is also not recognizing the supply elasticity in the united states. when you look at problems in opec countries, you have risk in

lookia, venezuela does not like it will be resolved. their oil industry is basically destroyed. now you are having problems around the middle east. putting extras security on its offshore fields that it shares with iran. of national oil companies having difficulties. we have all seen problems in a lot of there are national oil companies that will have trouble maintaining production in a next 12 months thewo years, so i think markets are overly optimistic about how we will go forward, looksagree, the long-term very promising with alternative energy coming in. there is a lot of technology that come sin to stifle demand.

fear, have a recession one thing holding the market back is the belief that china's economy is about to crater. again, i think that is further than may be the market is assuming to have this collapse in demand. david: sebastian, pick up on that. , somebout the demand side of the trade disputes, including china, the effect on global growth and demand side. can stimulate,a and perhaps they are in center of eyes to stimulate more with the recent escalation in trade tensions. ,f you take a longer-term view you have forces like the electric vehicles that would work against higher oil prices.

comes are in the low so there is a long-term secular trend downward. a lot of it goes back to productivity. increased capital some pointine and at you get a decreasing rate of productivity that decreases. add the demand side and change the time horizon, the prices here are about right. let's talk about the geopolitical risk premium and oil. what should be trading at? i think we can see five dollars to $10 more. acts continue to see these of sabotage, it might be like a flash flood, then all of a

sudden everybody will get freaked out at the same moment. ininery runs tend to be high it is the next six weeks that are the pivotal point on the price. thank you very much. more on the tensions in iran and what you do in a capital market if you are and need to raise cash. david: we will get all the answers. cartelsp, the currency come the eu fines five banks. citibank it's the biggest fine. it is up in the market. more on that next. this is bloomberg. ♪

>> this is "bloomberg daybreak: americas." you're taking a live look at the hewlett packard greenroom. , your bloomberg business flash. elon musk will launch his own satellite. the company will take the first step towards creating a space-based consolation. it is a bet elon musk is making along with jeff bezos.

after vowing changes being accused of an extreme reference for hiring these upholders. fighting another part of the case, accused of underpaying female and minority workers. this week, the maker of twinkies hostess brand outpacing all but index,bers of the food sellining why it chose to 8 million shares. that is your business flash outlook. children still take their bag lunches. the twinkie was the best thing in there.

fun all day,make meathen you have beyond and everyone is trying to get into this category. something here does not make sense. or is oneoth exist, destined to not? twinkies?ow about no, they don't know about twinkies. three things wall street is buzzing about. five banks find for currency collusion, all paying fines. amazon, anbig bet on investment of nearly $860 million, and gender pay cap gets worse in the u.k.

u.k. banks will face hearings after data reveals the gender pay gap is getting worse. david: they are digging in even deeper. joining us now is our guest. let's start with the settlement. not a big surprise. we knew there were charges pending. >> that's right. this is a continuation of what we have seen before. 12 banks find more than $11 billion for fx rigging. this was the announcement that the commission would not tolerate collusive behavior. >> don't do that. david: why? alix: is it over for these guys? >> it is probably not over

because we see continuous fines and uncovering of new activities. the regulators are looking very closely at banks. i don't think it is over. of behavior from the past that needs to be uncovered and brought to light. it is better than the alternative. you remember arthur anderson? david: berkshire hathaway? we knew they bought amazon. warren buffett said he did not make the investment. one of his guys made the investment. j.p.actually bought more morgan. >> yes, warren buffett likes

banks. he doesn't like wells fargo, but in general likes banks. he, j.p. morgan, and amazon are working on that health care venture. alix: the question is always apple. it is a product, but then you look at the overhang from the supreme court or issues with other big tech, that becomes dicier. the more dicey thing is kraft heinz. have the supreme court decision monday saying it is possible to sue these big tech companies. that could apply to amazon is well. alix: good point. let's get to the stories that will shock viewers, the gender pay gap in the u.k.

apparently in some banks it is worse. compared 2018 to 2019, areas where the gender pay gap was worsening, hsbc, ubs, .arclays, credit suisse that is not good pr for them. >> no, it is not. david: they now require banks to report. last year was really bad. you would think the ceo would say i want those numbers to be better. the fact that they are worse, i don't know how that happens. alix: it is difficult to nudge people in these higher-paying positions. one organization is pushing them to publish their median gender pay gap. those proposals have not succeeded, but it is looking at whether they are getting into

the higher paying positions. alix: they have a harder time climbing the corporate ladder. you can't see them more if they are not in the positions. it is a whole different cultural issue. it is a little bit different. david: you would think they would care about it and make it better. alix: it takes a while for corporate culture. david: you are very patient today. alix: i am, right? david: it is great. many thanks for being here. alix: coming up, you will be talking. at six months to agree to a deal to limit car imports into the u.s. i know that is what you are watching. david: this is bloomberg. ♪

david: here is what i am

watching. we heard late yesterday it appears president trump will postpone the deadline on automobile tariffs. he's saying we will give you six months to negotiate quotas with us. alix: it helped the dax, but companies are still down today. what is the reason? part of wonder whether it was the fact it is postponed. it creates uncertainty over the next six months. raises a broader question. usehis the tactic we will in europe, for the usmca, the gap? is this the new paradigm?

simply because they can't fight this many battles at the same time, this is postponing it themse they can't battle at the same time is china. alix: that is interesting. they still have to pass u.s. mc? david: they do. , housing data in half an hour. we look at the strong u.s. consumer. what about housing? this is bloomberg. ♪

at comcast, we didn't build the nation's largest gig-speed network just to make businesses run faster. we built it to help them go beyond. because beyond risk... welcome to the neighborhood, guys. there is reward. ♪ ♪ beyond work and life... who else could he be? there is the moment. beyond technology... there is human ingenuity. ♪ ♪ every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. take your business beyond. ♪ alix: president trump plans to

in the disrupti to 5g. willan sachs says yields rise, markets might not believe it. walmart posted best first quarter in nine years. tariffs good way -- could weigh on prices. david: we have tiger woods, rory mcilroy. they are all coming. alix: golf. david: championships out on long island. it will be colder. normally they play in august. some golfers may have cold-weather gear. alix: no kidding?

not so great weather. david: still pretty chilly. alix: it means traffic will be bad in new york. rebound,rkets, a futures up 0.3%. i don't have a good theme. yesterday was about the bond rally. u.s. yields up. it is still participating in europe, but euro-dollar is flat. here will the next crisis be? david: the u.s. is claiming that actions it is taking have nothing to do with the overall trade dispute. the chinese government is having none of it. our resident trade expert is in washington. we are saying this is a separate

issue, but this is essential to the chinese. >> that's right. it is getting increasingly difficult to separate these two things. the administration has been saying its assault on huawei and efforts to convince allies not beene huawei equipment has separate from the deal negotiations it is pursuing with china, but this really highlights how those trade negotiations are taking place in the context of a bigger innovation war, technology war developing. the trump administration is signaling it is willing to use all of its tools. this is about limiting access to american technology and taking aim at huawei's supply chain. david: we were talking about the underlying trade dispute and whether it can get result in the

near future. does this decision make that more difficult, or they maximum towards a deal? thinks byinistration raising pressure, basically it is threatening to impose tariffs on all imports on this pressure that it can draw china into a deal. a lot of china experts in washington are starting to say that looks like a really risky gambit and may backfire on the trump administration. alix: when it comes to tariffs, it there is a tit-for-tat, but this? >> absolutely. china has the ability to harass foreign companies that are doing business on the ground in china.

one of the first things i thought of when i saw this was are they going to find a way to limit iphone exports out of china. that would clearly hit american consumers. will they shut other american plants on the ground in china. there is a lot of china can do here. david: thank you so much for joining us today. trade was just one risk factor prompting a flight into the bond market yesterday. here is the 10 year yield trip in the last 24 hours. is the extent of this move justified? our guests weighed in on yield low. 2.4 looks too >> it is signaling risk aversion. >> it feels like the market is

reactive to risks. >> why do you have these tensions, uncertainty? you can see yields grind lower. >> the yield is so flat you can also be in cash. >> tech, industrials, u.s. equities, risk, right, takes it beating. that is the one that what this portion of a rise -- disproportionately rise if we get a trade war. >> how much risk off are you getting? alix: joining us from boston is our guest, and from st. louis. is happening in the bond market accurately reflecting the u.s. economy? >> know, the u.s. economy is fairly strong. continue,growth to

2.5%, right around trend. we have a strong labor market. we are seeing wage growth. we are still seeing a strong consumer. rates, i don't think it would be in response to weakening u.s. fundamentals. it is the risks we are seeing globally. this is a change in terms of how the fed traditionally reacts to the world. the internals look pretty good. it is the extra miles the world is concerned about. david: i will put up a chart that shows what u.s. these are doing -- equities are doing. this would normally indicate two different things. to reallyed has to

keep rates where they are talk about cutting them, because the markets react so badly to what is going on, isn't that strong fundamentally? >> i would agree. you are seeing markets reacting to the soft data, the sentiment from the uncertainty lurking from these trade tensions. showcase that most investors have become much more bearish, their stance and view of the market six months from today is 40% bearish, a 16% increase in one week. the spread between the earnings yields on the s&p 500 and the 10 year treasuries, supported i the strong economic backdrop, we see a disconnect the twin the

valuation in the equities supported by the flows out of equities into fixed income and the uncertainty not supported by the data, earnings included. alix: we had a lot of selling of u.s. equities in march, a lot of foreign holdings coming in, a record high. do you want to be selling equities, buying bonds, or be contrarian? >> i will tell you to be in equities. good forhave in a long-term investors. 77% of the time markets go up. 2018 was an anomaly. even the selloff in the marketplace of the past weekend a half -- week and a half, we are still at all time highs.

i think you have to go back to fundamentals. there will be winners and losers .rom decisions of tariffs tariffs are attacks, therefore pricing power, cash flow, and growth now matters more than ever, because you have to go with companies that have growth structurally or fundamentally. david: we talk about soft sentiment data. is there some point at which it comes hard? can we actually talk ourselves into it? it is also the ceos, consumers. is real.certainty these risks are not imagine. i don't think the soft data becomes hard data for no reason. that affects real decision-making.

that is the road, the risk we are looking at. we are still seeing positive fundamentals. remainskey is the u.s. the world's reserve currency for the foreseeable future, but china is the linchpin to world growth. this is a marriage whether the u.s. and china like it or not. it made the an unhappy marriage, but both are key to world global growth. that is why the trade deal is so important, not just for the two countries, but europe and the rest of em. both of you are sticking with us. coming up, walmart posting the best quarter in nine years, but prices could go up because of a trade dispute. you're looking at the bloomberg's summit in london. the santander chairman is speaking. we will speak to facebook,

joining bloomberg television later tonight. go to live on your terminal if you want to see the full event. this is bloomberg. ♪

>> this is "bloomberg daybreak." was hit the hardest and a crackdown on collusion among foreign exchange traders, the eu finding five banks. pay $336 million. other banks find include

barclays, rbs, and mitsubishi u.s. j. nestlé in talks for one the biggest private equity deals of the year to sell its skincare business for $10 billion. a potential group is headed by the i would be investment authority as part of the consortium. , ares of, cooker plunging $385 million rescue loan, getting the money if it makes progress if it sells its airline. , cook is forecasting another tough summer. alix: thank you. wal walmart earnings was not all sunshine and roses. >> taking a look at walmart.

a strong first-quarter report from walmart, eps beating i $.11, margins in line with analysts. same-store sales in the u.s. met estimates. you can see were looking at the 19th consecutive quarter of same-store sales growth driven by higher than average ticket prices. this, online did well, up 37%, higher than forecasts. walmart is locked in a battle with amazon. both companies saying they plan to bring down delivery times. if you are a retailer, you are focused on walmart.

grocery accounts for 50% of revenue. most of that is in the u.s. it is the world's largest retailer and can offset some costs. the company said it is committed low, but theices cfo said increased tariffs means increasing prices. david: thank you. still with us are our guests. low, but the cfowhat can we learn about the consumer and retail overall? this chart shows retail sales growth back to 2009. it is an upward trend. the thing that strikes me is the variation is greater, to the downside and the upside. we just had a downside surprise. what are we learning about the consumer right now? >> we know the economy is

service-driven, so those retail sales pictures are incomplete. i wanted to note that. it has been quite erratic. what we are seeing is the consumer is still in control of the growth of the economy, the overall pace of retail sales going up, based on a strong and healthy consumer, above average savings rates, household debt coming down, tight labor markets , not the wage growth we would like to see, but still pretty strong, but you are seeing a moderation in that growth. overall, the picture of the consumer leads into the reality that we will see positive growth this year, but slower than last year. stocks? you like retail

the consumer discretionary space because of its diversity. like media, online retail. we got some positive data yesterday, retail sales for april were disappointing, but year over year sales were up 3% and homebuilder confidence was positive, so i confer, the consumer appears to be an strong shape, supported by a low unemployment rate, low mortgage rates, which loads well for another subset of the consumer space, the homebuilders and repair market. thed: is that despite tariffs? >> it gives me pause across the board. you have to be very selected and diversified in terms of what you are playing for. there are pockets of

opportunities, the homebuilders, is repair market, and what the multiple some of those stocks are trading at? many are below market multiple. wouldlk about walmart, i say the overall sales growth continues to be anemic to down. participating in that online shift and digital shift of retail space, as well as others. you have to be very selective. when you walk it forward, can the consumer handle a 25% tariff increase? >> that is the key question. at this stage, we are in the late innings and will see slower earnings growth in gdp growth. the last thing we need is higher

prices. the savior of this growth expansion is low inflation, low pick up in consumer prices. when tariffs become an issue, that may spike inflation and get the fed off the sidelines. cautious, but are we think the consumer really tribes the cycle forward and that low inflation keeps the cycle on pace and equities with addedus outperform, but volatility and bumps along the road. david: please stay with us. coming up, nestlé in talks to sell its skincare business for $10 billion. more on that next. this is bloomberg. ♪

david: time now for the bottom line. electrictesla and

vehicles overall. a nasty case of overheating and some teslas catching fire. down in the premarket a bit. this is shanghai. this tesla caught fire. tesla is saying there is nothing outg come but -- wrong, but of an abundance of caution we have some software fixes. part of the issue is the lithium ion gets hot, so you have to have a coolant that rotates so it doesn't explode. that definitely is an issue. don't take them on a plane, but you can drive in them. bell,arnings after the the biggest read through with capex.

it is taking into account potential tariffs, and they signssee someone's -- they will have more spending. that reads will through their profit forecast. may be negotiating to sell its skincare business to a private equity firm. it is a good price for this business. it is previously thought to be a growth business for nestlé. ,hey made some deals to expand including buying brands from l'oreal, but they asked the question why nestlé is in the skincare business when it is beverages?ood and he has been pushing the company to make changes and it looks like nestlé is divesting the business. ,avid: we see nestlé trading up

is that because it was dilutive? >> this was a growing business, , but not ausiness great fit with nestlé. now you have a lot of money coming in. nestlé has accelerated its share buyback program. the thinking is they can use this cash to buy back more shares or do an acquisition that would complement their existing businesses. they bought the rights to market starbucks company coffee for $7 billion. perhaps they will do something in pet care. i hope they don't come up because those deals have not been slamdunk spirit -- slamdunk's. alix: there were a lot of hitters, kkr, colgate-palmolive. i wonder if that is specific to

the asset. >> private equity firms were interested in different pieces. that you cane probably market some the pieces of this or take it public and the will be interest into specialist are's -- in the investors. alix: coming up, the health of the housing market, permit data on deck. what the numbers could say about the economy after numbers were iffy in april. this is bloomberg. ♪

alix: this is "bloomberg daybreak." i am alix steel. some markets it is a risk on day , other markets risk aversion during s&p futures still high up .3%.

european autos weaker and continuing to grind lower during in the currency market, the risk on currencies are outperforming but you are still seeing a move into the bond markets in europe. here in the u.s., a little bit of selling on the margin but still very low yield on some spreads. housing data out just now. month by month coming in 5.7%. march was revised upwards by 1.7% fromt, up to -.3%. permits coming in higher than expected. up .6%. david: to reiterate, it is strange because the housing starts by numbers are above, but by percentages is below and that is because last month got revised down. alix: permits the strongest in

three months. perhaps brighter outlook for that sector. and we have those lower mortgage rates. barton andus, yana nila richardson. is this sustainable? nila: i hope so because they are not that great. if you look at the 50 year average, it is 1.5 million housing start. even in the last year, a moderate year we were still producing more homes than we are right now. i'm not impressed by this number. it will be a slow crawl for housing and continues to be. it is not a cyclical issue. it is structural and has to do with building costs, labor shortages, even immigration policy. these are big headlines to builders. david: you know this so well.

it is not 50 years. it is 10 years. on the top line is the housing prices, which are coming down, and the white line is building permits. which are just wondering around and not going much up or down. the three-year mortgage -- the 30 year mortgage has gone down some which should stimulate the house buying. rates are great for the consumer which should keep consumer demand robust. years ago we were thinking rates would go above 5%. that is good for the consumer. what is wrong with the housing market is this mismatch between supply at the high end, and where demand is, which is at affordable starter homes. the missing question within all of those charts is affordability. prices outran wages.

wages have been slow and moderate even though we have a tight labor market and consumers have not been it will be up with high house prices. that is why you see these lines telling different stories. alix: fair. from where you sit the homeowner index is -- are you a buyer of that or do you need to be a seller? has done a lott of work and i think most of that is multiple expansion. being selected within the consumer space, particularly as a relates to homebuilders and repair and remodel is extremely important. if you look at the healthiness of the consumer, you can also extended to other areas of the market outside of the consumer discretionary and consumer staples and think about areas like health care that have done the opposite. they trailed the market, they are down considerably relative to the market, over 13%. more importantly, the elasticity

of demand as relates downstairs service and biofarma goods is steadier matter what the tariff picture looks like. david: within the realm of homebuilding, do you differentiate between homes as opposed to single-family? if you put up numbers that show renting versus buying, the renting seems to be coming up. does that create an homes as opo opportunity? yana: we cannot comment on specific names but you noted one way we are investing is through the second derivative. if you have the housing and the permits pick up, should pick up post that, that is the spent in the big-box retailers and the repair and remodel market. once you are in the house, doing all of the upkeep. we are playing it through the second derivative and not homebuilders. david: i will come to you with the same question.

we have the chart showing something you know well. there is been an increase in buying after the great financial crisis. it seems to be closing back down. close to where we were the great financial crisis. nela: right. the one way if you want to get exposure to real estate, a good rates,do that is through which has been outperforming, and part of that is because apartment rates have done so well. the lower homeownership rates have increased the number of renters and we have seen an increase in household formation. millennials are starting to move out of their parents basements and into apartments and that is good news for the rental industry. that is the way we are recommending our investors get exposure to real estate, through rates. we also caution the risk in rates are balanced because we do not know what the long-term

picture is for interest rates. this is a highly interest rate sensitive sector. alix: we are seeing risk on take a leg up. equities around the highs of the session and bond yields pushing higher as you sell. nela, wrap this all together for me and what does this mean for the fed? nela: the basis is that the housing market is not telling the fed much. usually housing was an indicator of an economy that was going into a recession or out of a recession. the headwinds we are seeing are on the supply side, not the demand side. it is not telling the fed much but we know the housing market has been a detractor to gdp growth. the fed cannot count on housing to stimulate growth. it is about the consumer and the consumer spending on goods and services, not necessarily the housing market picture.

it also means inflation stays low because we are seeing moderation in house prices, and house prices have been what has kept inflation up over the cycle. the fact that these prices are moderate means that even the biggest driver in this very low inflation environment is starting to moderate. that means the fed can stay on the sidelines for longer. alix: that is a great point. yana, part of what we saw yesterday was a moving yields. the two-year yield low the fed funds rate by the widest spread and's 2008. you factor in a housing market that will allow the fed to stay on hold longer than that. how much risk you take on in that kind of environment? eye of theis in the ball holder. we can talk about various -- in the eye of the beholder. we can talk about areas like utilities and consumer staples.

argue those are extremely expensive because of the lack of volatility. there is no growth. if one is questioning the trajectory of growth this year and next year, and that is leg down, then what are you paying for? i would argue sectors like information technology and health care, troop growth at a reasonable price propositions here on out because they have the valuation support in the long-term tailwinds with them that are not going to be a quarterly event but more of a multitier extension. i would also argue that we question where we are in the cycle and maybe we are longer in the tooth, but maybe we are midcycle. since the beginning of the economic recovery, the recovery has been subpar. gdp growth has been about 2.2% and most economic recoveries are

at twice that level. perhaps we have more work to do. david: how much of that extension of the cycle may be because of the fed? will they extended by cutting rates. the bond market is saying it is more than a 125 basis point cut. is that likely or is the bond market getting ahead of itself? nela: i think the bond market is getting ahead of itself. we do not think a fed cut is likely. for the fed to cut rates, we would have to see a pickup in the unemployment rate. right now it is at 50 year lows. we would have to see a real weakening in economic fundamentals. we are not seeing that. first quarter growth was above 3%. unexpectedly strong. what the market may be wishing for, they do not want the knock on effects of what would drive that, which is a real deterioration in economic fundamentals. they'll be a critical end to the bull market.

david: yana barton and nila richardson. thank you both for being with us. now we turn to viviana hurtado with first word news. says it willing gauge with the u.s. over concerns on product security. president trump signing in order that would restrict the telecom company from the american market. worries the company could use equipment for spying. there are worries that could put the company behind when it comes to developing five g networks. president trump will give the eu and japan six months to agree on a limit of car sales in the u.s.. in return he will ignore -- he the administration determining the importance of cars into the u.s. are a threat to national security, arguing they hurt domestic automakers and their ability to invest in new technology.

of congress are demanding the trump administration tell them about u.s. plans to respond attention with iran. bloomberg learning today leaders from both parties will be briefed. next week there will be a larger briefing for all house members. chuck schumer saying there is an alarming lack of clarity about the strategy in iran. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. david: coming up, what have tariffs done for the steel industry? we talk with the former newport chairman and ceo and former trump trade advisory. that is next in follow the lead. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." you are taking a live look at the hewlett-packard enterprise greenroom. hour, up in the next democratic senator chris van hollen of maryland. this is "bloomberg daybreak." spacex has made a business of launching satellites for others. tonight he will launch his own. the company will take the first step create a space installation that beings broadband around the world. it is a bet elon musk is making along with jeff bezos. after trumpes accuses it of a preference for hiring fees a -- hiring -- oracle isa

still fighting another part of the u.s. labor department case. representing under female and minority employees. -- the meeting takes place on may 23. that is the same day the faa will host 50 foreign counterparts in texas. they will talk about plans to review a software update and new pilot training for the plane. that is your bloomberg business flash. david? david: time for follow the lead. a deep dive into stories making headlines in moving markets with insight from industry veterans and insiders. today we are taking a look at the u.s. steel industry and what tariffs have done for into the business. we welcome michael mckee, bloomberg international economics and policy correspondent.

michael: the president put the caps on in march of last year. now we have enough data to show why the economy are bad for the -- why economists think tariffs are bad for the economy. 2016, we have that slump in the overall investment economy. steel jobs lost. the president put the caps on in march and there were some jobs created although it is rolling over now. the alliance for american manufacturing says about 12,000 jobs. the folks at the peterson institute calculated the hit to the economy and figured out a cost $900,000 per job to create those jobs, taxpayers paying 900,000 per job together. one reason, we raised prices. not only did the price of imported steel go up, but he gives u.s. producers the opportunity to raise prices and they did by a lot. that is the white line. still users have to pay those

prices. this is the price of nuts, bolts, and washers, the basic components of all manufacturing, they have soared. the companies get passed on to the companies absorbing the profit margins. even though the president has tweeted this has been great for the steel companies, it is not great for the people who own the steel companies. shareholders have seen still companies lose since the tariffs went on. you can see the steel index in and u.s. steel, prices have gone nowhere but down. alix: joining us on the phone is dan dimicco, nucor chairman emeritus and former ceo and also advisor to president trump. due to the steel companies themselves -- higher prices incentivize more production which means lower prices and lower equity prices.

have steel companies learned their lesson? dan: there's so much wrong with what you just said and what might just said. just said. mike i do not know where to begin. at the end of the day, i've always been a form -- a firm believer that eventually performance dictates where the stock price will be. the stock price will respond in time to strong performance or weak performance. what is happening in the marketplace today is not something we focus on because we know that any company's performance continues to improve, the stock price will eventually reflect that. steel prices today and for many months have gone down below where they were before the tariffs. all that talk about steel prices being up and killing the steel consumer is fake news.

i use that term strongly. steel prices have come down below predetermined levels. the only reason they went up is because of the hedge buying and the fear mongering. they settled back down. the only thing the tariffs have done, from a national security standpoint it was critical these things be put in place. stoppedy have done is the illegal dumping and predatory pricing of our trading partners. prices today, while below where they were prior to the tariffs in effect, are still way above the prices that kept the industry from earning its cost of capital. what the president has done, is continue to work about jobs. i heard mike cost about 12,000 jobs and the baloney about what it costs for jobs. the steel industry is very

capital intensive. it takes time for those jobs to show up. there is been tens of billions of dollars invested by steel companies in the united states. nucor, u.s.es, steel, and even companies overseas. those jobs will show up in the next six to 24 months and there will be many more than 12,000. the multiplier effect in communities where steel industries are present like 71.r are the order of that is how many jobs will be created. the information that has been shared with you is erroneous and all-news. david: so dan, putting aside the fake news -- dan: all-news. -- old news. david: you think the dumping laws were not adequate. do you think we should go

industry by industry, because they're dumping cases in most industries. do you think we should have a quota-based system with tariffs? dan: in all industries are just steel? david: wise the steel industry different? dan: the first line of defense , ande use of anti-dumping the industry is using it and so are other industries like the appliance industry. have the massive ,vercapacity created by china it affects the ability of this country to be able to have sustainable steel industry, which is critical for national defense and national security and that is why the president took the action he did, the extraordinary action of the tariffs. they are working and that would

be my response to that. whether or not -- they should fully utilize thethey are anti-g laws if they are being in an industry that is subject to dumping. unfortunately it takes years to get those things through the two orand they incurred three years of severe harm. the president can no longer allow that to take place with steel and aluminum. alix: dan dimicco, nucor, thank you. we'll be talking much more about trade and commodities caught in the crosshairs coming up on "commodities edge" at 1:00 eastern time. oil plummeting for the third straight day. tensions in the middle east rising. more on what i am watching. this is bloomberg. ♪

alix: what i am watching his oil . saudi arabia accusing iran of

ordering the drone attacks on the aramco oil station. much risk premium is in oil and how much should be in oil? mark: you have seen a lot priced in after the move lower and now we will continue to crime higher. i would say there is another two dollars to go, specifically in brent. when you're thinking of the floating market and where the risk is, the easiest way to see that is through the financial instrument of rent. -- of brent. alix: what is interesting to me is the time spread versus the flat price. the time spread is more extensive. the flat price has had a little bit of rally but not much. mark: people are not sure what to think about going forward in terms of where are these sanctions going to be?

are there going to be sanctions that can be lifted from the u.s.? what is the chinese trade war going to do to product flows, and realistically, we are coming into the summer months and driving season and we have a low refinery utilization rate and you have products continuing to dry up. there is a misunderstanding in the market as to where things will shake out as we head into the end of june. alix: thanks very much. that wraps it up for bloomberg daybreak. coming up on the open with jonathan ferro, danny dwyer. this is bloomberg. ♪

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

jonathan: coming up, treasury yields bouncing off 2019 lows. the market still primed for a rate cut. president trump lending to delay auto tariffs on the eu and japan. the focus remaining on china as the white house ratchets up the pressure, moving to curb huawei access to u.s. markets. futures positive eight points on the s&p 500. up .33%. we have bounced away from the lows. 2.40 on the u.s. 10 year. higher on the 2-year note. up three basis points on the tenure maturity. let's begin with markets pricing a rate cut and a soft landing. >> the possibility of rate cut. >> the odds of a rate cut. >> much later than the year. >> the federal reserve is near a rate cut than a rate hike. >> not any signs. >>