china calls u.s. a troublemaker. shiftconomists start to their baseline to a full on trade war. patient, patient, patient. the fed reaffirms its patient stance. deutsche bank promises far-reaching changes. the ceo promises a tough cut back and promises to accelerate transformation. markets unimpressed. david: welcome to "bloomberg daybreak." best buy earnings are coming out even as we are talking. it looks like earnings-per-share beat quite a bit. alix: comp sales were a beat. they are raising their guidance for the second quarter and full year earnings, and their margins are better. , and thet surprising premarket they are up 4%. alix: totally different for

tesla. that stock down over 4%. saying this is going to be hurt by the trade war. the macro starting to feed threw two what that means for tesla. david: as we know, they need to cash because they need to get profitable, which they are not. apparently the whisper number is going down, too. alix: rough. all of that setting backdrop for today's risk off field in the market. s&p futures down by almost one full percentage point. it is a safe haven bid. you've got the yen, the swissie, and the dollar all down. money coming into the bond market. this is the lowest level we have seen in months. the bund yield in europe over 11

basis points on the negative side. crude getting completely whacked on the safe haven move. david: u.s. weekly jobless claim numbers are going to come out at about 8:30 this morning eastern time. 10:00, the u.s. census bureau announces new home sales for the month of april. throughout the day, federal aviation officials will go over the safety review of the boeing 737 max 8 aircraft, and specifically what will be necessary before that grounded aircraft can fly again. we are joined by gina martin adams and marty schenker. were looking for peace between the united states and china, it is not coming out of china right now. they responded to the president. and editorial overnight says the is behavinges

like a bull in a china shop. said it will make the united states a laughingstock. a direct shot at the president, i believe. marty: it is true that the rhetoric is getting more strident on the chinese side. on the u.s. side, they haven't said very much of anything the last few days. i do not know what this is the prelude to come up but it may be moving towards pain in the markets that could force the sides to try to reopen discussions. alix: we heard the rhetoric. economists are rereading some of their cases here. goldman sachs saying it has become a close call, saying that potentially a full-blown trade war is becoming more and more of a possibility. gina: i think it is obviously not making anyone happy. there were probably some lingering hopes that with this

june 1 deadline looming, maybe there would be an agreement. regardingon marks that are not going to be greeted kindly by stocks. we are in something of an air pocket now, so we will be more sensitive to these types of headlines. earnings season is basically over. you just have a few extra companies yet to report, but more than 95% through the s&p 500. there's no bulky economic data set to be released, so it is going to be all politics all the time, and that is not a comfortable spot for the markets to be in. david: we've gone from no drama obama to all drama, all the time with trump. alix: is that a thing? david: that's what we used to say. nice and calm. but now it is different, all building up to this g20 meeting. the markets are all hoping for 29.thing june 28, june

ofty: it seems like the end june is a very pivotal time. i think the danger is over expecting what is going to come out of that. i do think that mnuchin's comments about the meeting were really off the top of his head. didn't represent any real .nowledge of that decision a lot could happen in the next six weeks that would change that. david: i sure agree with you. we are building up all these expectations. we will see what happens. in the meantime, we had fed minutes out yesterday. alix: patience, patience. david: no surprise, they basically said they think they can stick with exactly where they are going. there is some speculation on whether inflation was transient or not, but the bond market didn't really react. it is interesting.

thinking maybe this is a little hawkish because they didn't talk about a cut. gina: a lot of this is timing. in a lot of ways, the fed minutes are irrelevant now. we sort of moved on to other things. the bond market is increasingly concerned, just like the equity market, about the outlook for the economy and with respects to the recent eruption of trade turmoil once again, which really wasn't part of the language in the fed meeting. this didn't erupt again until may. the fed meeting was the last day of april. some of this is just the relevance of these minutes is questionable. i think the fed very strongly did stick to their concept of , andnce being important the notion of an insurance cut is going to be something we talk about for a while, and he fed will probably have to cut back. alix: it fell like it was not

only inflation, but inflation expectations would need to stay lower for longer for the fed to actually cut. you wonder when the trade war is factored in if that kind of feedthrough. marty: i do get the sense that the fed is also searching for some visibility on the trade front before they move one way or the other. david: i think it is important that president trump's infamous tweet came after this. it is not clear what these minutes would have said if that had happened before. alix: some analysts thought the bar was lower for a rate cut, and perhaps it was a bit higher than we thought. let's go to the third story, which is deutsche bank. , "weassured, the ceo says are prepared to make some tough cutbacks." he's taking it really seriously. come on. how has it not been serious for a while? what happened?

gina: i think it is more of the same out of the european banking system. not to paintugh with a very simplistic brush, but there is very limited growth . there is no spread. there is bloated labor force reflecting economic conditions decades ago. there's also little take out for excess capacity in the form of the regulatory burden. it is reflected in the stock prices. this group has continued to underperform year after year. deutsche's stock is down on a a marketasis on that has been holding relatively afloat. there's just not a lot of great things to say. they need to rationalize spending is the first line of defense to create some sort of bottom. david: somebody needs to do something about deutsche bank

beyond preparing to do something. we had pmi's this morning. german manufacturing has been struggling. now services is coming down. sentiment is supporting germany. marty: there's an increasing number of people who think fiscal issues have to be at the forefront. deutsche bank to me is like the financial equivalent of brexit. how many times have we been there, and still no resolution? the political considerations of trying to deal with deutsche bank are substantial. david: if you read his remarks, he actually embraces the political. the first big chunk of his speech is how important deutsche bank is to germany. like i am going to write myself in this flag. alix: mom, dad, can you help me out? schenker,a and marty

thank you for being with us. now let's get headlines outside the business world. viviana hurtado is here with first word news. viviana: china making its position clear, and has no intention of making concessions to the u.s. to restart trade talks. the ministry of commerce saying the u.s. unilaterally escalated tensions. if it wants to resume talks, he needs to correct what it did. china blames the u.s. for escalating the trade war by raising tariffs. the u.s. blames china for backing out on parts of the deal that were already settled. indian prime minister narendra modi surged to a lead in the country's six week long election , set to win more than the 272 seats in parliament needed to form a government. that is seen as an endorsement s nationalism and populist economic policies. u.k. prime minister theresa may hanging onto her job by a

thread. high-profile cabinet minister andrea leadsome quit. she said she doesn't believe the government's approach to brexit will honor the results of the 2016 referendum. a growing revolt looks likely to force may from power. 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 to vr art auto. this -- i'm viviana hurtado. alix: "the daily telegraph was quote saying may -- "the daily telegraph" saying may have to go, calling it a national emergency. ouch. david: we used to call it the daily tory-graph.

are we actually reintroducing the risk of a hard brexit? that is the danger. we thought that was sort of gone. now you start to worry maybe it comes back again. alix: it seems like the market is agreeing. deutsche bank and the u.k. that's what marty made the connection to? david: and that is not a good thing. alix: not so much. coming up, more on trade and the fed and what it all means for market. we are talking to ubs asset management head of multi-asset strategy. this is bloomberg. ♪

viviana: this is "bloomberg daybreak."

the new york -- stock exchange is reportedly making a bid for more biotech ipos. biotechs have traditionally listed on the nasdaq, in part because of its cheaper fees. apple is developing a voice activated device that can recognize human emotion. documentshas seen that describe it as a health and wellness device that can determine the user's emotional state from the sound of his or her voice. shares of tesla are falling again. morgan stanley says tesla has gone from a growth story to one that is about restructuring. tesla will probably miss this year's delivery target range, he says, because of the trade war between the u.s. and china. that is your bloomberg business flash. alix: thank you so much. the trump administration debating whether to blacklist more chinese tech companies.

beijing pressing on with denouncing u.s. actions. u.s. is behaving like "able in the -- like "a bull in a china shop." has the market re-rated for a base case of a trade war? guest: we are getting closer to it. i think people are still looking at this june 28 meeting at the g20, and there is this hope that there is going to be some thawing then, but increasingly it is looking like things have to get worse before they get better. the chances of tariffs on all chinese goods and an increasing of this tech war is getting priced into markets. david: give us an over under. how far does it go if it continues for the indefinite future? evan: the issue here is there is damage being done to the global

economy whatever happens. the uncertainty is going to affect business confidence, business sentiment. we saw that in the pmi's overnight. even if we get a sudden trade deal, it is unlikely the tariffs are going to be all removed. , thengoing uncertainty president trump may look at europe and auto tariffs. the chances for us returning to the all-time highs in markets quickly is low. alix: they said implementation of further tariffs could become their base case. "while we still think an agreement is more likely than not, and has become a close call." let's say it tips the other direction. what sectors are protected that is not just going to be the 10 year yield? evan: obviously the defenses will be the places to be. utilities have done very well over the last year or so, but there's more room for them to perform if we head in this

direction. escalation of the trade war and tariffs on all chinese goods, the fed, which doesn't what to cut, may -- which doesn't want to cut, may be forced to. david: so we got minutes from the fed yesterday on that very subject. people were may be or expecting more of an indication they are inclined to cut. they didn't get that. we are patient where we are, just where we need to be. do you think that withstands possible further problems with trade, or is that because we hadn't had the problems we have now? evan: that's right, the fed minutes are still because they came before trump's tweets. the fed really doesn't want to do anything. they want to but if we get escalation and you start to see it in the economic data, they may be forced to. why are we still

seeing rate cuts priced into the market? that can't just be anticipating trade when the fed couldn't, and some cases, be more clear. evan: we have to think about it as probability distribution. the if you think base case fed is not going to cut, there is still a reasonable chance they will be forced to, and forced to cut more than 25 basis points. 50, 75 basis points, for example. that is what you are seeing priced into the market. 2019,the cut outlook for you are basically looking at 100 basis points for a hike -- for a cut, excuse me. if that is the case, how do you invest for something like that? evan: it is very tricky. it is very tricky to trade tweets and headlines. you don't want to bring all of your risk down into bonds, and

then the next day have a headline that talks are back and managing is headed to china. what we do is we put it on hedges. onere short on the korean -- on the korean won come along on the japanese yen. david: talk about time horizon. you mentioned the end of june for something maybe good happening. , the st.. bullard louis fed president, saying if this doesn't get resulted six months, the fed will have to pay attention. does that sound right to you? evan: i think it is more data dependent than time-dependent. if you see any deterioration at all in the labor market, the fed is not going to be hesitant to cut rates. david: did you have it. evan brown of ubs asset management is going to be staying with us. coming up, deutsche bank's ceo christian sewing signals changes

for the investment bank. more on that next. this is bloomberg. ♪

david: what you bank stock -- deutsche bank stock hitting historic lows against the backdrop of further weakness. ceo christian sewing told shareholders no one was more disappointed than he was, and you them, "i can assure changes are coming." joining us now is bloomberg's annmarie hordern, who is outside annual meeting. still with us is evan brown of ubs asset management. it sounds like the meeting has

almost upbeat tone to it. nnmarie: they do have an upbeat tone. very different then what the shareholders were saying. shareholders are angry and frustrated. one of them was saying that it is cheaper to buy a share of deutsche bank in germany then it is to buy a pack of cigarettes. the main thing coming up next will be the vote of confidence in the supervisory board. the big shareholders actually want to see the chair go before his term is up in 2020 two. even ecb officials and regulators say the bank would be better off without the chair, something you don't see everyday. they have announced more cost cuts today, but the stock is still trading at a record low. announcing those didn't move the needle. david: it doesn't seem comprehensive. it only seems piecemeal.

we heard that they are prepared to make tough cutbacks. why haven't they done it already? annmarie: that is a very good question. how much do you decimate something before what is left of it? ofre they are seeing a bit revenue growth, they have nine straight quarters of revenue contraction, so they need to cost cut and still try to boost revenue. at the investment bank, they have wanted to rival wall street , and there's been a lot of calls to overhaul that. now they are starting to take that a little more seriously in terms of where they are going to go. the one thing he did omit was equities trading. that is likely a unit that is going to get a lot of cost cuts. the investment banking is huge for them in terms of how much capital it uses, but in terms of the three biggest divisions, it doesn't make any money. alix: evan, are there other european banks you may want to

be buying is deutsche bank drags down the whole group, or do you stay away? evan: it has been a difficult macro environment for european banks. i think a lot of the bad news is in the price, and actually, the low yield environment has been holding back european banks. as we look out, we get a new ecb president. it is going to be hard to be even more dovish than draghi, so there is going to be upward pressure on yield. the macro environment in general on the domestic economy is in decent shape, so hopefully better times ahead. alix: maybe. thank you so much. this is bloomberg. ♪

alix: this is "bloomberg daybreak." a risk obsession developing today. s&p futures down by about 23 points. dow jones futures still off by

about triple digits. european stocks lower, european banks as well. the headlines keep coming, and they don't get any better. deutsche bank wants to do something positive come about -- something positive come about what they do exactly still unknown. is moving lower despite the fact that it looks like narendra modi is going to follow through with more of a win than previously expected. spreadee months 10 year is a little flatter, but off the flatness of the session. crude really getting hit hard here. watch the 200 day moving average. what kind of followthrough buying could we see is this risk off hold filters through the market? david: ecb minutes from their last meeting are not that bullish.

they raise concerns over weaker inflation expectations from april. they debated whether the bank loan program should be a monetary policy tool. basically, they are not as confident as they were, either about inflation or second-half growth pickup. alix: uncomfortably low. i don't know if that feels really good when you are talking about inflation. i should point out that 10 year bund yields are still -10 basis points, so we are still pricing in a quite -- pricing in quite a lot of risk. david: we welcome now someone who knows europe and international economics like few others. bob kimmitt served as u.s. abbasid or germany. -- u.s.s. to germany ambassador to germany. thank you for being with us. in addition to what we talked about with the ecb minutes, we

also had pmi numbers coming out that were disappointing with respect to germany, and particular. services seem to be getting weaker. we have deutsche bank really struggling. what is going on with european growth, and particularly germany, which is the driver? if you take a look at the recent imf prediction, global growth is down, so we have to look at this as a global story because with europe and germany especially being so dependent on exports, i think we have to look at softness elsewhere. inside europe, there are a number of factors. there are some long-term factors like bad demographics over time, some internal struggles they have between the nationstates making it difficult to start up new companies, but i think part of this is europe's contribution

to a slowing global growth story. time, theree same are growing calls from some quarters that the needs to be more fiscal stimulus, particularly with regards to germany. is that in the cards, do you think? the ecb has pretty much done what it can do, hasn't it? robert: i think the ecb, if you listen to what they've said, believes that the monetary contribution to european economics has run a significant part of its course. in germany, as you well know, going back to their historical concerns coming out of the weimar period, they tend to be fiscal disciplinarians. a lot of people think they should loosen up a bit. i would say it is important to statistics in019

a surprisingd growth rate of 1.7% annually, with a real pickup in household demand and construction, so i don't know that this is a trend that is going to play out during the course of the year. the predictions are still for growth of only about 0.5%, but at least we are starting to see some pickup in that household demand. i personally wouldn't look for a lot of fiscal stimulus in the near-term. alix: the question then becomes an external factor, which is china. we spoke to bob diamond about his views on germany. here's what he had to say. >> if you think about the potential for a trade war, it is really going to hit those countries that rely on manufacturing and exports. it is countries like germany that i think will be impacted more than the u.s. is thereassador, upside surprise if we do get some kind of trade resolution? is germany off to the races?

robert: certainly germany is very dependent on global trade. i think they're slow down is part of a global slowdown story, and also a global trade story at this particular point. they are heavily invested in china. by the way, china also heavily invested in germany and europe. so i think a trade deal between the u.s. and china would have that ancillary effective helping germany and europe. we are beginning trade negotiation ourselves with europe. this is the most active trade environment have ever seen. theu.s. has concluded u.s./mexico/canada agreement. there are talks going on with japan. from my perspective, a country like germany would have interest in successful resolution of all of those, including the u.s.-european negotiations.

david: one thing markets and companies right now are trying to get a sense of is how long this will go on, how bad it will get. i think people were spitting it to get resolved as early as last week or so, and now it has taken a different direction. it seems like a lot of people are putting a lot of hopes that they will get together and resolve this thing. robert: i don't know that we will see an agreement at the g20 summit in osaka in a month, but i think we are to the point in this negotiation that the negotiators have done their job, and now the political leaders need to do their job. i think only presidents trump and xi can give that instruction to bring the deal to closure. i think the negotiators are close enough to do it. so i don't like that in osaka, k it is an opportunity for the two

leaders, factoring in domestic politics in both countries, to make a decision on what instructions to give their negotiators. i think it is on the table for them to say to the negotiators, let's cut the deal. but let's be clear, we are in a decades long competition with china, not just on trade, but political, military, and other issues. we thrive on competition. let's all play by the rules and continue to compete. i think this trade deal would be an important next step, but we are looking at decades of competition between our two countries and our two systems. david: as we all try to manage this relationship, how much more complicated is that once we've inserted national security issues in the telecommunications area with huawei? sition isd states' po this is not trade it all, it is national security.

robert: i think it adds a bit of complexity, but i've served at the state department, defense department, treasury department, and the white house. for me, national security is the summation of our foreign policy plus defense policy plus economic policy, all resting on a strong intelligence base. therefore, economics and finance have always been part of the national security equation. with a relationship like china, in which each of those factors play a role, i don't think you can single out huawei or anything like that to say it is an outlier. know, it is an integral part of that competition we discussed. and by the way, one thing is to be noted, and for your viewers especially. there is a lot of talk about the trade dispute, the u.s. and china on huawei. i am at this point more concerned about the rise of investment protectionism that i am trade protectionism, not just

in the u.s., but in europe, the u.k., japan, singapore, and australia. new investment regulations have been promulgated in the past year, making it more difficult to acquire in those countries. it is aimed at china, but it is going to affect investors more broadly. for the chinese to say this is simply the u.s. trying to hold them down belies the fact that there is a global concern about china not playing by the rules, using foreign direct investment to try to get at advanced technology, intellectual property. so i think we need to look at this not just from a bilateral, but global basis. david: that is a really powerful point, and something we don't hear enough about. i hope you can come back to talk about exactly that subject. really great to have you with us. that is ambassador bob commit joining us today from washington -- bob kimmitt joining us from

washington. now viviana hurtado is here with first word news. saysna: a u.s. official deployment to the middle east would be for defensive purposes. the u.s. already sent an aircraft carrier groups and bombers to the region because of tensions with iran. he was known as the american taliban after being captured in afghanistan in 2001. is beingwalker lind released from a federal prison in indiana. he is getting out a few years early because of good behavior. narendra modi says india wins once again. the prime minister surging to a majority in the general election , establishing a commanding lead in vote counting. the results are seen as an endorsement of his hindu-nationalist policies.

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: thank you so much. one of the things i found amusing, mr. modi really surprising me. it happened early in the evening before concession speeches were given. cnn in india had to fill out time. to put together a cgi image of mr. modi flying into the studio on an airplane to try to occupy people while they were waiting for the speeches. that is creativity in television journalism. alix: i would rather see that than a magic wall, which is what we see during a lot of our elections. [laughter] alix: i like the graphic. what is interesting to me is this is a surprise, but also the pro-incumbency vote also a surprise. this reminds me of australia. we were not expecting the incumbency to win, and they did.

it is a different world than about a year and a half ago. david: and a much larger turnout of women than there were last time, interestingly. coming up, carlos ghosn arrives in court. the former nissan chairman and ceo faces charges as he arrives for his pretrial hearings. more on that next. this is bloomberg. ♪

♪ viviana: this is "bloomberg daybreak." coming up in the next hour, beth ford, land o lakes ceo. ♪ alix: we turn now to wall street

beat to cover three things wall street is buzzing about this morning. first up, harvard's pay practice coming under fire. overseeutives that endowment are overpaid. and carlos ghosn arrives in court for pretrial hearings. and the we world of agm. and virtualirmish meetings part for the course when you attend a general meeting. david: if you were german, you would speak proper sausage. they take it very seriously. joining us now is should ali basak. -- is sonali this is not the first time they've complained. sonali: it is not.

job atve a very hard harvard when you have people like ray dalio. how much are you supposed to pay people investing in other funds? it is hard to keep people around if you are not paying them enough. david: but they are making $15 million, the top executives. as i understand, the complaint is that now they are making a lot less money for the fund and still getting paid the same amount, so why isn't that reflecting the composition? sonali: it is an issue for them and really all limited partners. pay is capped, so how do you draw people into turn the strategy around? his job supposed to be reconstructing the entire portfolio, so maybe you will not see those with else in the first year. alix: i liked that the goal maybe is to change bonuses to performance. isn't that insane? [laughter] alix: can you imagine?

david: at harvard. alix: we don't do performance. [laughter] alix: let's go to the second-story here. carlos ghosn at the pretrial hearings today at the tokyo district court 17th court division. i wonder if we will see his face this time. sonali: this might be a little less drama. these are the most important parts of a trial that is going to begin next year. someone who has known as the cost killer, really turning around these companies based on a lot of drama, we might see a little less of it now. that is the way these courts are working. david: the interesting thing to me as we are used to. mason, that sort of thing. i think this is -- used to perry mason, that sort of thing. i think this is going to be very different. sonali: i don't think we are

alix: i think the bar is super low. ghosn was only sentenced in april. are world of agm. david: i love it. alix: i was thinking about it a couple of days ago. what are the weird things that happen at shareholder annual meetings? apparently there is a weird what about self such -- about sausage. david: justin germany. they take their sausage very seriously. at an annualoman another manmad at for eating too much sausage.

they had to call the police. last year at morgan stanley's annual meeting, somebody got up and thanked james gorman for being the lebron james of wall street. that is as much excitement as we got last year. alix: wasn't one guy naked at daimler if you use ago? david: well, you can't get in. [laughter] thanks so much for being with us. coming up, qualcomm following the most in more than two years on the antitrust ruling against the company. more on that next. this is bloomberg. ♪

david: qualcomm struggling after banning sale to chinese company huawei, and then news on an antitrust ruling. with us is the former head of on competition. what did the judge find qualcomm did wrong? is it different from what other people do? guest: yes, or so the judge found. she found that qualcomm has monopoly power with chips on 3g and 4g mobile telephone services . she found out that they -- she found out, and

they wouldined, that refuse to license their competitors. secondly, they entered into exclusive agreements with handset makers, and that foreclosed the market from competitors. thirdly, through a convoluted process, qualcomm forced handset manufacturers license qualcomm intellectual property even if there chips weren't going to be used. david: even if you buy someone else's chip, you still have to you still have to pay qualcomm. i've never heard about such a thing. does this apply to 5g? could it encourage or discourage 5g? the prohibitions put on qualcomm, the affirmative obligation, apply to the 5g

chips in addition to the third and fourth. she said that is what is needed to purge the monopoly that has occurred until now. david: does that mean it is more likely that we will have more competition and innovation potentially in 5g? kevin: absolutely. of course, what qualcomm is going to say is it is going to tie their hands. they will argue the other side of it. david: qualcomm came out right away and said we are going to appeal it and get it reversed. you and i have discussed this before. it is an unusual case. bringing theftc case, and the justice department saying we disagree. what is going to happen next in this case? kevin: just a month ago, the department of justice filed a statement saying you should train the tiger, not tame the tiger, telling the judge to pull

back. the ftc went full throttle and opposed justice in the filing. i would expect qualcomm to pull out every weapon it has, maybe trying to settle the case with the fcc. you have an entirely different commission now. they can go that route. they can appeal. they may try to enlist the aid of the justice department is the go forward in the appeal. it would be unprecedented to have two agencies of the federal government fighting with each other going forward. david: this is in the ninth circuit, but it could go to the supreme court. what does the supreme court do when they have the justice department on one side and the ftc on the other? kevin: what they always do, make up their own mind. i think they might very well take this case. david: how difficult will this

make it for qualcomm to license chips while this is enforced? kevin: it is going to be easy for them. they are just going to have to do it under different terms than they have in the past. david: with a federal judge looking over their shoulder. kevin: exactly. david: very good to have you with us. that is kevin arquit. lands --ing up, our coming up, allianz's investment properly manager will be joining us. we have a russian to the bond market in germany and the u.s., -- a rush into the bond market in germany and the u.s., as well. this is bloomberg. ♪

♪ the japan-ification of

europe. we speak about political risk and the future of u.k. prime minister theresa may. continues to go from bad to worse. we begin land o lakes president beth ford. fed ministry -- the , with no its patience need for a rate cut. david: welcome to "bloomberg daybreak." they are counting the votes over in india. big win for prime minister modi. he really beat the other party deadly. he was a reform candidate when he came in. now the theory as he will be able to push the reforms he wanted to do to the economy. alix: over the last few days it

looked like he was going to win in the first place. goldman sachs now saying they are neutral on the rupee, but overweight on indian stocks. there could be some more optimism to be had, especially if something can get done. now you've really got to deliver if this is your second term. david: that's what he did when he was head of the state over there. they did a lot of progrowth, economic reforms. go's annual general meeting -- deutsche bank's annual general meeting is over in frankfurt. i must say, this is the opposite of harry truman's "the buck stocks here -- "the buck stops here." it is on your shoulders. alix: they want him out as chairman. i don't know, whose fault is it? if it is not you, who is it?

david: when you are in charge of an organization, either rightly or wrongly, you are responsible. it is your responsibility. that's what i believe. alix: he can say he's going to cut all they want, but there has to be something delivered that actually deals with growth. david: as i said, the beginning of his statement was all "we are german. germany needs us." it wasn't about great investment. alix: germany needs us. it is not all our fault. those are really great points. economists say a full-blown trade war may become the base case scenario, leading investors two -- leading investors to weigh what that could mean. >> there is a more pessimistic outlook on the tree discussions. the markets haven't sold off. >> my view is if you sell a

rally, you take a view on whether this thing is going to happen or not. this is binary. >> on the equity side, another 5% to 10% would be easy if a deal didn't happen. >> i would argue we get another 5% to 6% down. we should then get some sort of agreement, and then growth starts to come back, and certainly the equity markets will come back. >> we are going to be in a period of sustained competition going forward, so that has to --ft investors' vol investors' volatility discussions. mckinneyh us is burns of allianz global investors. what do you make of it? in january of 2018, the s&p was at about 2850.

nearly a year and a half later, the s&p is at 2850 despite the fact that earnings have grown in the interim. you have seen multiple contractions. that is one great example of the massive costs of a trade war. aree costs that investors starting to digest, i think that you are starting to hear a lot of strategists suggest there is an increasing risk that this does become the baseline. ,ariffs are very easy to impose whereas a lot of folks in the market think that maybe this is ,ust trump's way of bargaining but they are very difficult to roll back. you have vested interests that will push to keep them in place. david: what does the baseline look like? where is it drawn? we had bloomberg economics doing studies that if this continues, we are going to have 4/10 of a point of gdp taken out of the

united states, and something worse in china. what does that due to to the market if that is true? burns: that certainly has an impact. that is the impact to gdp. if using about the broader american public and the cost borne by the american people if they do go ahead and impose tariffs on the rest of chinese imports, some estimates suggests you could have as much as $2000 a year of additional costs imposed on the average american family. if you take an american family and post your base expenses, that is a pretty big dent in discretionary income. that could also result in increases in inflation. really, tariffs by definition raise prices. the biggest long-term cost is probably the cost with respect to profit margins. really driven has

stocks for the last 10 to 20 years has been expansion of profit margins because of the globalization of supply chains. trade wars, for all intents and purposes, are starting to act in a reversal to reverse those supply chains. if that happens and you squeeze margins, that is going to be a really long term cut to u.s. stock market profit ability. alix: fair. you are making the really good case to go buy treasuries. you have the inversion on the three month and the 10 year. the 10 year is at the lowest level so far this year. based on that, what stocks do you buy? well, we don't necessarily suggest you flee stocks. one big difference between today and the end of last year is there was also last year and the fourth quarter a concern that the fed was going to make a large policy mistake.

the fed has stated in their minutes that they are going to be more patient, but within equities i think you look for companies that, maybe, look for stability of earnings, companies that have clean balance sheets to weather the storm. on focus at our firm is dividend paying equities. companies that are paying and growing dividends are a great way to hide out a little bit because those are the types of stocks that tend to be less voluntary -- less volatile than the broader market. stock prices go up and down, but dividends are always positive. david: did you just say we should avoid tech? burns: no, i didn't say to avoid tech. i think that is a whole other issue. in the case of a trade war, i would note that the technology sector is probably the one that is most exposed to trade with

china, and i think that is one of the reasons why you've seen the tech sector -- it did great last year and first quarter, but it has been the worst this month as the trade war has ramped up. despite that pullback, the tech mostr is probably come on valuation metrics, a little more expensive than its historical average or the broader market. you don't have valuation on your side. at the same time, there's still a lot of opportunities thin technology among companies that are paying and raising dividends. maybe some old-line tech like oracle and cisco. alix: we are going to continue and aonversation deeper dive into tech as we go. markets are seeing a risk off permeate. european banks getting dragged

down. deutsche bank at a low. the safe haven totally in place. euro-swissie dropping lower. money going into the dollar, the swissie, and the yen, and into the long end of the treasury curve. you are seeing a big move into bonds and treasuries. crude almost breaking through the 200 a moving average. that is never good. david: is that u.s. inventories? alix: it is going to be sentiment and u.s. inventories, and chinese inventories as well. coming up, president trump considering blacklisting more chinese companies. is the trade war becoming a tech war? how deep can it go? more on that next. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." the new york stock exchange is reportedly making a bid for more biotech ipos. the exchange is cutting fees for companies with little to no revenue. biotechs have traditionally listed on nasdaq, in part because of cheaper fees. shares of tesla are falling again. morgan stanley says tesla has gone from a growth story to one that is about restructuring. they write, "tesla will probably miss this year's delivery target range" because of the trade war between the u.s. and china. amazon developing a voice activated wearable device that can recognize human emotions. bloomberg has seen internal documents and drawings that describe it as a health and wellness product worn on the wrist. the amazon device has

microphones and software that can determine the user's emotional state from the sound of his or her voice. that is your bloomberg business flash. alix: that is amazing. i keep thinking like, "echo, what am i feeling right now?" [laughter] david: it is going to have cameras and all sorts of things. talk about invasion of privacy. not just what you buy, but how you feel? -- alix: i feel sad, i've got to buy chocolates. david: salty foods or something. alix: i want to keep my feelings to the couch. [laughter] david: so to speak. let's turn to tech now. tech has loomed large in president trump's trade dispute since the beginning.

china is not backing down. "the people's daily" published that making america make theain" will just u.s. "a laughingstock." still with us is burns mckinney of allianz global investors. dan, i'll start with you. chips are the lowest they've been since the financial crisis. the large of the trade war? when will it end? reporter: we got all of this enthusiasm into the group, and then we had first quarter numbers come in and the

conference calls, and there really wasn't much to substantiate all of the enthusiasm. then we get this next wave of bad news in terms of tariffs and everything else. now the sector is starting to go back down again. i would take the perspective that i think the recovery in terms of the performance of the sox is way ahead of itself compared to the fundamentals, and the current chart you are showing is just kind of calibrating back into where we are in terms of earnings and sales growth. we don't have really strong indication that things are going to turn around. david: so maybe there is overreaction to the upside. what about qualcomm in particular? they got hit with not only trade implications, but that antitrust ruling. are they getting over punished by that? is the market over to the downside? dan: i think it is just kind of a sense of exhaustion from the portfolio manager and a research analyst.

if you thing about everything that's happened with them, they had this big lawsuit with apple, they finally got it settled, and everyone now started saying they are a 5g play, so this is going to be great going forward. then all of a sudden we get this decision out of the ninth court that goes to some sort of black cloud over the company. it is just so many unknowns with qualcomm. you were saying with your previous guest, their licensing model generates about 60% of their operating profits. it is a huge component for them. if that gets knocked out, it is going to be very hard for them to continue to grow. were talkingyou about some old-school tech like oracle. if you look at the faang stocks, what do you do with them? they really outraised the performance they saw. would you be selling these names, bottom picking these

names? it is challenging for me to say in general because i manage a portfolio that focuses on dividend paying stocks and value equities. the faang stocks are ones that really don't check off a lot of those boxes. in general, one of the things you do have to be wary of is that those are names that are certainly benefiting from momentum, especially given that the market is more and more dominated by etf's. basically, when a stock goes up, they have to buy more of it. that momentum play can drive those continuously upward. at the same time, if that reverses, it can really have a snowball effect to the downside. dan, among these faang stocks, you have in your notes the forward price earnings ratio. it is really quite striking because it goes from a low of

to 101 withp netflix. at 25.at 68, facebook which ones of those are fully priced? dan: the growth goes along with the multiples. if you look at amazon and aws, you've got a high multiple. netflix is over 100 times forward earnings. then you've got companies like facebook and apple that are kind of hitting a bit of a bump in the road with tariffs in the privacy issue. those multiples are much lower. then you've got microsoft at about 37 times. with the faang group, it is fun to look at all of the diversity within the sector. i think as an investor, obviously you want to look at companies that are growing. netflix and amazon are still growing at a good pace. so is microsoft.

facebook and apple, you are probably look at -- probably looking at flat to negative growth. alix: would you want something where amazon can tell you what your feelings are? dan: that would be great, and then they could send more stuff to my house, so that would really work well. [laughter] it.: go for david: dan morgan and burns mckinney, thank you. coming up, tesla tumbles again. the stock falling in premarket is analyst gene munster notes sales risk. more on that in today's bottom line. now it's time to go to break. ♪

david: it is time now to look at three companies worth watching this morning. first of all, i'm watching corelogic. corelogic is the organization that collects data and sends it to the u.s. government. turns out the justice department investigation, really examining a charge that they are getting together and inspiring to make sure you can't negotiate your commission when you go to sell a house. that is something people have been complaining out for a long time. we will see. it could have profound effects through the real estate industry. alix: and it could get done? david: it depends on what they find. alix: i see. munster talked about the ramifications of tesla in the region. >> the reason why the

stock has dropped is the china piece is now more in question. i think there is risk that teslas are tariffed going into china, and there could be consumer backlash against the china brand. alix: on the flipside, you have china.tery issue in david: tesla is not doing well. alix: but he still believes in tesla. this is just a china trade specific story. david: in the meantime, we are looking at boeing. for more on that, brooke sutherland joins us. we have the acting faa administrator coming out, saying there is not a big rush to get these 737 max 8's back in the air. brooke: the airlines are talking about late august, and now it is looking like that timeline is maybe overoptimistic. to me, i always thought that was

a little ambitious because if you think about the faa, they are really under a harsh spotlight here and don't want to rush this. they want to make sure they find everything and look at this as thoroughly as possible, but also come out with a cord into response with other regulators. the faa was put in a really awkward position as the last global regulator to ground the max. you had china first, europe preceding the faa. i think they want to have more of a coordinated effort that reestablishes their authority. that is complicated because these other countries have their own agendas. david: they are meeting in fort worth today with representatives from 31 other different countries. i thought they were going to say this is the plane to get back in .he air, but men know -- but no they are just laying out the approach. brooke: there have been key differences that have emerged about simulator trading.

the faa has not actually said specifically what they are thinking about simulator training, but there have been comments made by pilots that that wouldn't be necessary, so that could be a key sticking point for getting everybody on board. alix: if it is delayed, i wonder what the trickle down is. the ryanair ceo was saying, what, the fall? david: he was saying june or july, very optimistic. alix: and also thought they would approve it a month after the faa. brooke: i think you start to see a lot of these airlines asking for compensation. we've already seen airlines in china asking for compensation for that. haven't heard those comments from the u.s. airlines yet. but if this stretches beyond august into the fall, and we still don't have these planes in the air, i think you could see american, southwest saying you have to give us something here. david: it does cut capacity.

alix: they are like forcing it on the airlines. do it yourself or take the planes out. brooke sutherland, thank you for joining us. coming up next, is europe going to be the next japan? we will have more on euro growth chiefnges with citi global analyst. the wti falls below $60 a barrel for the first time since march. part of that is inventory in the u.s., but also the risk off and trade fears encompassing but we are seeing in all of the markets on a big bid into bonds. this is bloomberg. ♪

♪ alix: this is bloomberg daybreak, i am alix steel. it is a real risk-offer version day developing. economistsand

potentially re-rating the idea that a trade war becomes a base case rather than an outlier scenario. bank stocks are getting get hard in europe, down 1%. deutsche bank on a record low. commodity markets, you can see here, the dollar breaking breakingcrude oil below $60 a barrel for the first time since march, below the 200 day moving average. a big move coming into the bond markets. , on a three year yield, bridging the 2. level8 -- 2.8 level. david: it will be interesting to see how they position themselves going into the holiday weekend. alix: good point, we might not see that much movement tomorrow. david: we will not be here tomorrow, i hear. alix: likely. david: for headlines on the business world, return to viviana hurtado here with the

first word news. >> this company is making his intention clear -- the ministry of commerce in china says the u.s. unilaterally escalated tensions. if it wants to talk. , it needs to correct what it did. china blames the u.s. for escalating the trade war by imposing tariffs. the u.s. blames jennifer backing out of parts of the deal which already settled. in india, the prime minister surged through a majority on his own in the countries six-week long election. he is set to win more than 272-seats in parliament needed to form a government. modi's an endorsement of hardline nationalism. the ceo of this company says far-reaching changes are needed including significant cut to the investment bank. the comments coming in preparation for remarks on

today's shareholder meeting. whereghlighted places cuts are unlikely. the equities business was not included in the list. global news, 24 hours a day, on air and at tic-toc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. hurtado.ana this is bloomberg. deutsche bank having their annual shareholder meeting, stock down to historic lows on the word of use that revenues may be softening. and we just heard that there will be going through tough cuts. and in the meantime, the chairman saying that he was at fault but not for all of the troubles. we go to annmarie hordern in frankfurt for the meeting. event, but the big thing is the vote of no-confidence. where are we on that? annmarie: we are waiting for it to happen. , ishe building beside me

rather shareholders are. after the ceo spoke, shareholders voiced their concerns and they are very frustrated. when of them even saying how they are so disappointed with the share price that it is cheaper to buy a pack of cigarettes -- that it is cheaper to buy deutsche bank shares than it is to buy a pack of cigarettes. group this week showing how shareholders including the qatari royal family are very frustrated and want to chairman best want to the chairman to step down before his term is over. even ecb officials are saying that the bank would be better off without him. he has been at the helm for seven years and the share price is down 70%. many people say it is time for him to move on. a lot of this comes down to the investment bank. he has had this dream for deutsche bank to be this global bank, a challenger to wall street, and that is where many people, analysts and

shareholders are saying that the investment bank needs an overhaul. something that he really wanted to keep intact for the bank. alix: bloomberg's annmarie hordern, thank you very much. i was thinking, which would i rather have that cigarettes were deutsche bank? one might kill you. want deutsche bank. alix: the euro-dollar is trading around the low range, after pmi's did not really go anywhere. joining us is city managing director and chief global fordham.tina what will be at stake during parliamentary elections, given the backdrop of lower growth and the trade war? tina: well, we are the headline will be after that he you parliamentary elections, it has pretty much are ready been written, that will be that the vote share of populist parties

in europe will have gone up relative to the last parliamentary elections. that is the reason why most of the questions i am getting from investors right now are whether the rising populism will somehow undermine the functioning or even break up europe. but there are more steaks than that. alix: but that is a lot of stakes too. what are you telling investors, and what is worse than that? tina: what is worse than of morelists getting votes, it would be progress toward undermining the cohesion of the union over all. what is more at stake is the functioning of e.u. institutions, and how this new matter, whats will this will mean for other key posts in the commission. then you a you commission will on october 31,

and also the replacement of mario draghi at the ecb. david: you talk about the populistsisks from coming to power, but what about the lost opportunity costs of doing some of the reforms, led perhaps by mario draghi himself, saying that we need to do more to address economic it in particularly fiscal concerns. are we losing that opportunity? toa: that would be more due what central banks can do in terms of monetary policy and the extent to which national governments are going to be able to do more. the real thing is fragmentation across european politics, which i would emphasize a lot more than populism, which is becoming a term that doesn't really mean very much. certainly for the u.k., which quotes today. brexit was supposed to happen,

and we will see the two main parties, coming in close to last. that is its ordinary. david: but when you talk about monetary policy, it seems as if the ecb has done pretty much what they can do. now there is a need for fiscal reform or fiscal stimulus, things like labor reform. that is something that for some of you that he you parliament could have a positive effect with either through their leaders or through things done at the parliamentary level? tina: not disputing that at all, but it is still national parliaments best national governments that really are responsible for those decisions. political analyst like me are looking at any lessons if any we can draw from higher turnouts perhaps in parliamentary elections, what kind of protest-voting is going on, what it might mean for national elections, and whether there is a hope for a bit more political capital for

government. i do think there are some positive effects coming out of other aspects of european union trends that matter quite a bit. one is what i call the brexit effect, the fact like brexit looks like such a mess, that other protest parties are not talking about another in-out referendum like we had in the u.k.. that means less pressure from breakups, one example that i think is useful to highlight. david: all of this is taking place at the backdrop of a trade war but totally got blown out in the last few days. alix: we spoke to ambassador robert can it earlier in the show and he talked about the fact that it is no longer just a trade war, but it is really a protectionist global story. here is what he had to say. >> i am more concerned about the rise of investment protectionism than i am trade protectionism, just in the u.s. but in

europe, germany, u.k., canada, japan, singapore and australia, new investment regulations have been promulgated making it difficult to acquire in those countries. it is aimed at china, but it will affect global investors more broadly. alix: tina, what do you think about that in your base case? tina: the way that i look at it comes from study of different starting points. that is that 20th century style state to state conflicts and military conflicts are much less likely to happen in the current environment. but countries will not stop wanting to project power and they are now doing so through the trade channels are merrily, including with security defense policy -- trade channels, primarily and through security policy. and there is competition from rising economic populism. it wins votes. you consider that the u.s.-china

tensions, that is one of the few areas of bipartisan agreement in the u.s. at the moment, both democrats and republicans support being tough on china5 tina, thank you so much for being here with us today that is tina fordham from citigroup coming to us from london coming up, land o'lakes president and ceo joins us next. this is bloomberg. ♪

>> this is bloomberg daybreak. i am viviana hurtado. democratic representative eric swalwell of california is coming up. ♪

alix: time now for follow the lead, a deep dive into stories making headlines. today we will look at agriculture and farming through the lens of land o'lakes. joining us from chicago is beth ford, land o'lakes president and ceo. reportedly today we will get something from the government providing some kind of assistance to farmers, as much as $15 billion to offset losses in the trade war. what are you hearing from farmers about what they need? beth: what we need are the trade deals to be finished. periods been a 3-5-year of low commodity prices for farmers. our dairy business and butter business are our leading brands but we are also a foot production business and we are former-owned right to store shelves. we have a number of corn growers and other growers as well as our dairy business.

we are hearing that there will be some market facilitation payments, and it will be helpful, but more than anything, the farmers want the trade for finished. alix: we heard of a lot of compensation for soybean farmers if the trade war last. without the enough? -- would that be enough? what thedepends on composition will be. as you can imagine, then been growers, on the dairy side, their first payments, they received about $250 million in total. it was not enough to offset the market fall when the trade deals were not completed. their debut producers, especially, have been under dynamics.g industry we are seeing two the reformers a day out of business in wisconsin, a heritage dairy state. it is a very tough operating environment. david: one problem is the plight of the farmers. there was a tough situation before the trade dispute came

along, another is that the government intervening in that marketplace, and giving certain subsidies to others. what is the risk that it would destroy the marketplace? would you plant soybeans rather than corn because of soybeans, faster? beth: let's write. rights pressuring them now is the weather. the weather has not been helpful. in some core form states like indiana, ohio, we are seeing that decisions are being driven not just by trade. it is really being driven right now by the weather pattern. it is too wet for the farmers to get into the field. 43% or so planted right now, normally we are at 88% or more. it is taking decisions of their ability for them to make. we have a number of elements right now and the primary one is

weather. alix: right, and that makes it worse for the farmers. if you end up seeing the trade impacts continue for a year or longer, some economists are cases.ng their base where does it hurt? is it more consolidation or margins? what is the end result? all. yes, yes, yes to what we are seeing is consolidation happen in the sector. you are seeing them as i say, animals move, acres shift. you can on the hold on for so long in a lokomotiva person environment. i am so impressed best in a low commodity price environment -- i in a low commodity price environment. a lot of farmers have been andng money for a few years there are now working towards income diversification, looking at different ways they can be entrepreneurs. i think of them as the original entrepreneur, they figured it hot, too cold, too dry,

trade issues. where what you are seeing is up and down the sector in the firm lev inel the farming business, we hear about. david: the shift from family-owned firms to corporations. will this accelerate that process? beth: we are seeing an acceleration. . but i want to be clear, 96% of farms are still family-owned. what happens is an individual does not have somebody to pass their form onto, and it is next to the neighbor, so they say they will sell the farm. so the farmer's neighbors acquires the farm. but i think there is a narrative that it is going to big corporate forms, and yes, there is an increased scale, but to be clear, 96% of farms are still

family-owned. the narrative is not directly on point. alix: out wondering what this means for land o'lakes. oneing at 50 in foods -- company was already struggling with this. assets, to buy certain like this company, for example, or do sit back and wait it out? beth: land o'lakes is not in the drinking milk business, we are in butter, cheese. we have vermont, creamery, different sector. but that all plays in together. we have supply agreement for drinking milk businesses. we seel it play out, investments across the country, we see animal numbers and animals shifting in different parts of the country. for our direct business, it is all about innovation. we are focused on innovation in the portfolio, new product

entrances into the marketplace, partnering differently with retailers because they are going through their own solid asian, grocery retailers. there are a variety of ways we're thinking about this in the arm level. alix: there is swine flu in china, and also warms affecting this wine -- and also worms. what are you hearing? beth: we are hearing the same thing. we see a significant portion of that industry coming out -- i had heard 25%, so you're right, there are some industry fundamentals. we talk a lot about trade. trade is a significant issue, but there are so many other factors. i brought up earlier the weather

swine flu is another issue impacting producers an impact in the sector. david: before we let you go, i want to ask, when you came in last summer, it was reported that you were the first openly gay woman to be ceo. what difference does that make, the land o'lakes, and to you, in directing with other corporations? beth: it doesn't really. again, i was chosen for the role because the board believed i was best suited to drive the strategic performance that they were focused on, and that we were aligned to. this business is a member-owned business, and they were clear that i was aligned with their families and their members. and of course, i hold them in high regard. it was not one of the criteria. at the same time, it certainly did not hold me back from being named in that is a shannon -- named in that position. it was not look we discussed.

it was not part of the criteria. it was whether i could drive performance. alix: bath, it was really great to get your perspective. thank you so much for your time. beth ford, ceo of land o'lakes. we will have much more on the new round of eight performers today on commodities and at 1:00 p.m. eastern time. coming up, tesla heading for a seventh day of losses. more on what i am watching with my next guest, who will be watching us next. that is coming up. this is bloomberg. ♪ bloomberg. ♪

♪ tesla is looking at a seventh consecutive day of losses, we have production, demand and trade concerns piling up. joining us on the phone is regimented or gail, he has an

underperform rating on tesla -- joining us on the phone is rajvindra gill. intorade war will bite deliveries. what is your base case? rajvindra: i think that is one issue that compounds already a list of significant problems for tesla. we were on the show last year when the shares were around $350, and we predicted the stock would fall below $200. now, we're thinking the floor could be lower. this company has never made an annual profit since going public, and the math doesn't add up, it has never really added up. we think the stock is like walking a tightrope about 100 feet in the air. it would be one thing if it was trading at half its market cap, but it is trading at $34 billion, nearly 80 times 2020 earnings. and the valuation is twice that of netflix, amazon, google, all considered a.i. technology

plays. compared to auto comps, these comes are trading 10-12 times. so the math has never added up, the valuation has always been astronomical. the problems in terms of deliveries, gross margins, lack of profitability, they are now certain to come into clearview. we think the stock has a lot further down to go. david: this has really become an amazing, global brand, and has changed the auto industry. will it go down in history as just that or can it be a truly successful company? would it make sense for them to bring in someone who is a seasoned executive, may be a manufacturing executive, the way perhaps google bought in eric schmidt at one point? rajvindra: there is no doubt? rajvindra: that the company created the first advantage in vs, it was innovative when it

moved into the suv market before anyone else. that has some technology advantages with respect to up.ery management and neural however, even despite that, years, it last 6-7 still has never made a profit on an annual basis, regardless of the brand or the price point. if you look at the technology itself, with respect to its autopilot -- alix: we do have to leave it there, but thank you for that take, rajvindra gill, thank you for joining us. that is next for bloomberg daybreak. coming up, gene munster joins us. this is bloomberg. ♪ ♪

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jonathan: global equity markets heading south, trade tensions showing little signs of easing. the federal reserve going. latest fast, the meetings signaling patience for a lot longer. and test lab with a seventh straight day of losses. analysts struggling to forecast 2019 demand. features are pointing down. we are down 25 points on the s&p 500. yield. the u.s. 10 year let us begin with a big issue, showing no signs of stepping in. >> they are going to remain patient. >> patient. >> patient is the word they used. >> as they wait for the economic effect of trade tensions to show up. >> expectations to rate cuts. >>. >> much more significantly than a month ago because of trade and technology