make a deal. we are not ready to make a deal, and we are taking in tens of billions of dollars of tariffs. alix: president trump sticks with tough talk on china. and let the horse trading begin. who will lead the eu and ecb starts today. chrysler renault? to create the third-largest automaker now up to politicians. david: welcome to "bloomberg daybreak."as we come to the air, there is news out of germany. the name of a potential successor to angela merkel has been displaced. alix: fair weather friends.

merkel meeting/wanted to stay in power through 2021. how much power can she wield, and how much longer can she stay in since her party did not do a good job in the elections? david: i think this is part of the continued ripples of those eu parliamentary elections. the question is what do you do? how do you rebound off of that to come back? angela merkel is shuffling around the deck chairs, i think it is fair to say. and doesn't go over to the conservative wing of her party? that is what she staved off. alix: all right. looking at the markets here, this story is bond yields,. . it is a safe haven trade -- bond yields, full stop.

trade in thehaven bonds. trend, notng its own swept up in any kind of safe haven bid, up by about 1%. david: now let's turn to the morning brief. today, eu leaders are in brussels continuing deliberations over who will take control of the council, the commission, and the european central bank. tomorrow, the ecb releases its semiannual financial stability review. on thursday we get the second rate of u.s. gdp's and china pmi's, and costco and dollar tree will release earnings for the last quarter. on friday, the feds preferred inflation gauge, as well as personal spending numbers for april. now it is time for bloomberg first take. abramovitzed by lisa

and marty schenker. first off, this is what president trump had to say. pres. trump: i think they probably wish they made the deal that they had on the table before they tried to renegotiated. they would like to make a deal. we are not ready to make a deal, and we are taking in tens of billions of dollars of tariffs, and that number could go up very substantially every easily. -- very substantially, very easily. david: the markets didn't react all that much. marty: i think president trump's rhetoric is beginning to weigh on markets sentiment. alix: the equity market took the hit last week, and now it is yields. i think there is a

difference between trade deal and no trade deal. the idea that there is no easy solution is setting in, and people realize there's going to be ongoing pain with businesses as a result of the uncertainty. even if they do get some sort of deal, it won't be comprehensive. i think that is weighing on global growth. it is certainly weighing on the multinational companies and their stocks. we've definitely seen rotations within the equity markets away from the companies that will be most affected. you are seeing markets start to price this in. i think bond yields are the best way of looking at this. david: are the equity markets in particular looking for that supposed meeting at the end of june between presidency and president trump asked between president xi and president trump -- between president xi and president trump? marty: i think expectations are

way out of whack with the way things are going to be. they are going to tell their staffs to get it done, but i think it just as easily could break down. alix: also, who is listening to who? they could go away with totally different interpretations of the meeting. lisa: this is really important. we just moved away from a discussion of the easy ways to make this resolution. is this a trade war? is this a tech war? what issues are on the table? it is not even clear what is going to be resolved. we have moved beyond some easy trade deal at this point. alix: let's look at what is going on in europe. you had parliamentary elections over the weekend. it is a hodgepodge. i want to focus on the bt people btp bundd -- the yield widening. italy is being

specifically affected by reports that the european union is considering finding -- about $4ng fining it -- for for can sit exceeding their debt limit. there is a hardening of stance in the european union towards italy. on the flipside, it was just reduced growth prospects. david: if that does indeed happen, it takes a while. feeling pretty well? marty: he is saying come get me. what this speaks to his the discord politically within the eu. it has always been the biggest challenge. it has not been so much the economic union. it has been the political union. now with angela merkel influx, the leader of europe, it becomes

even more difficult to figure out a solution. alix: and france, too. marine le pen's party did well. nigel farage in the u.k. who saw that coming? centers europe still wins. marty: that's right. it is true the populist movement was sort of held in check. it is interesting how the news have a different approach. david: in the meantime, dealmaking is afoot in europe. we have yet chrysler offering to buy and merge with renault -- we have fiat chrysler offering to buy and merge with renault. if it did, it would become the third largest auto producer overnight. it is fascinating. this is more of a response to pressure on these auto companies. lisa: the amount of money to have to spend with was back to electronic acacia, as well as a

-- with respect to electronification, as well as , it wasomation interesting to see that both shares of the companies surged. it is interesting. you normally see one benefit from the other. what is interesting as we go forward, these companies coming together are going to have negotiating power with their suppliers. they are going to reduce costs and boost some of their prices. it is really about positioning and a market that is getting increasingly tight. alix: what is interesting, talking about politics, it is going to have to be cross-border m&a. salvini loves the steel. i don't know -- loves this deal. i don't know if france feels the same way. marty: good luck with that. in many cases, the economic sense does not translate into political consensus.

look at deutsche bank. when you think about cross-border acquisitions, that is a nonstarter. the. same is true with the auto industry. it may turn out that this is just wishful thinking that this deal could actually take place. alix: was it 10% that france owns of renault? no, have team percent. -- no, 15%. lisa: and it would go down to 7.5%. about thatll talk and much more over the next couple of hours. thank you so much. a reminder, you can find all the charts we used and more. terminal on your and browse the features. coming up, more on the rush to global bonds with fidelity's head of global macro. 10 year yields at the lowest since october 2017. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." global payments agreed to by total system services in a deal valued at five point -- at $25.5 billion. the transaction will be announced today. shareholders of global payments will own the combined majority of the total company. fiat chrysler proposed a combination with renault that would be structured as a 50-50 ownership. aheadrmakers are moving without the other members of renault at nissan and mitsubishi. thousands of so-called

mom-and-pop businesses will lose -- that is your bloomberg business last. alix: president trump digs in his heels with china. and today, is the bond market really feeling the effects? to the yields dropping lowest level since october 2017. timmer us now is jurrien , head of global macro at fidelity. this is almost near the record we saw back in 2017. what do we do? jurrien: that is a good question. ultimately this comes down to the price for uncertainty. in the stock market we are seeing falling pe. pe is still relatively high in the u.s. at 16.3 times forward earnings. be atst of the world may the most.

the world is pricing uncertainty -- the rest of the world maybe 14 at the most. the world is present uncertainty. -- the world is pricing uncertainty. we are seeing it in the bond market and bond proxies. deratingeing a general of equities across the world. alix: you raise -- david: you valuing inuestion of the bond market. total cash yield is much more modest. talk us through that. bearish argument is we have all of this uncertainty, and valuations are high, and that is a toxic combination. valuations in the u.s. are much higher than in the rest of the world. trading atdex is

about a 13 multiple, and the u.s. is at 16 plus. the u.s. is a nneka phenomenon in its stock market that almost no one else in the world has -- is a unique phenomenon in its stock market that almost no one else in the world has. add the yield, it is not a direct yield, but the cash yield of buybacks, which last year totaled $800 billion, you get to 5.2%. when you compare the market valuation on a total yield basis versus the pe basis, you get kodaly different results -- you get totally different results. on the cash yield basis, it is only at the 28th percentile, which means it is almost as cheap as it tends to get. that is something the rest of the world doesn't have, so that is the bullish counterargument.

alix: if you marry the two points, if you have companies that have less cash potentially because markets are getting squeezed or because there is global uncertainty, what happens to the valuation? jurrien: that is the big question. it is a matter of distinguishing , a economic impacts of trade trade escalation with china, versus the stock market impact. you could argue that economic impacts are limited because it is only on $500 billion of imports, and that is in a $20 trillion plus economy. 500,f you look at the s&p which is very much levered towards globalization prewitt high profit margins -- globalization through its high profit margins, maybe this becomes a profit margin story come up which then becomes a

free cash flow story, which then becomes a by backstory. backstory --by becomes a buyback story. david: are you seeing any indications of this in earnings reports? not so much looking backwards, but as people come out and talk about earnings going forward, are they worried about margins in the way you describe? jurrien: i haven't seen it so much directly, but if you look at q1, q1 did outperform very much lowered expectations. that was generally driven more by sales growth, but there was some margin erosion. , which the margin story is basically at all-time highs for a number of reasons, but one of them certainly is globalization. it really becomes an issue of how much domestic sales growth from a relatively strong economy to mystically -- economy domestically gets offset, and

what companies doing the face of that. that kind of comes back to these tariffs. if tariffs are a tax, it is a question of who has to pay for the tax. is it the company through lower profit margins, or can they pass them on to consumers? , taxess a consumer tax are obviously a headwind, but in an environment where consumers have low debt, very low unemployment, and rising wages, maybe that is a tax that consumers are able to pay, but those are all open questions we don't really have the answers to yet. timmer ofrien fidelity will be staying with us. up, more on fiat chrysler and renault's plan. this is bloomberg. ♪

david: fiat chrysler has proposed a merger with renault, which would create the third-largest auto company in the world. for more, we welcome bloomberg's -- bureauau trees chief. what is the likelihood that this deal will actually get done? reporter: the likelihood is very high because as we report today in our story about the thisround of the deal, project was developed directly by the fiat chairman and renault chairman, so fiat and renault essentially have worked together to come to this proposal, which is now with the renault board. they will lookg at it.

aance's government, which is 15% stake in renault, expressed a positive view. with nissan and mitsubishi, it could potentially become the world's biggest carmaker. david: clearly the shareholders like the proposal. the two stocks are up today on the news. esther salvini originally was skipped -- mr. salvini originally was skeptical. he's come around. ?hy is that tommaso: it is a good idea for shareholders. clearly, one big company instead of two smaller ones would be digitally created more profit if

the execution would be right. the italian politicians initially said we want to play our role because the french government is assured renault, but mr. salvini says this is good news for italy and good news for europe because it would create a global champion. david: fascinating. very big deal, potentially. all: also, how much is this matching tesla? david: and more broadly, tesla was the first one in there, but there is going to have to be that big conversion for all auto companies, whether it is general motors or to oda -- or toyota or anyone else. alix: for more on what this means for the auto industry or more broadly, jurrien timmer of fidelity is still with us. do you like this broadly? jurrien: if it means more

shareholder value, i think it is a step in the right direction. u.s. is leaps ahead in terms of the shareholder value orientation. japan and europe have lagged behind that. that is not a good thing or bad thing for society in general, but for the markets' potential to rerate, i think that is a step in the right direction. david: one of the big questions we talked about a lot is european economic growth. is part of the solution consolidation? we talked about auto company mergers like this, bank consolidations. is that part of the way toward better economic growth in europe? jurrien: possibly. growth has been very sluggish. the banks play a large role in that. they never really clean house the way that did in the u.s. u.s., things get out of hand quicker, but also get

cleaned up quicker. in europe, that happens less so. in europe, there's also much less of a fiscal response in which the u.s. has been more forthcoming, and in japan as well. i think it has a number of different reasons. you also have these existential threats with italy, brexit, investors want to get confidence through a lower pe. alix: is it not from a position of strength, but defense? you have so much regulation in europe that you don't have the in the u.s. like carbon emissions. europe is much force her ahead -- much further ahead and that then the u.s., kind of forcing these. you do needien: strength and skill to overcome whatever the headwinds are. alix: all right. jurrien timmer will be sticking with us.

this is what happens when companies get desperate. david: the diesel scandal and the omissions thing have clearly hurt german manufacturing. it has certainly held back european growth. -- theg is a problem, brexit thing is a problem, too. alix: we also saw household loans picking up. confidence is a little better. green shoots, maybe? we've been hearing that for like a year. coming up, deutsche bank is considering options for part of a wider overall. this is bloomberg. ♪

alix: this is "bloomberg daybreak." good morning. risk off. we have a shortened holiday trading week. s&p futures down by 2/10 of 1%.

the real under performer in europe is italy, down by about 2% for italian banks. a lot of things going on there, but one of them is a fine that could be slapped on italy for over going its budget deficit. you look at global bond yields and can't help but wonder if something is the matter. and there you have the reason. -50 basis points. ok, he was right. what is seriously wrong if that is happening? david: something is seriously something. you don't run into bonds unless you are scared of something. we will debate that. david: let's find out what is going on outside the business world. for that, we turn to viviana hurtado. she's here with the first word news. viviana: chancellor angela

merkel concluded that her successor plans have fallen apart. successor, she admits may not be up to the job. the worstshe oversaw ever result for her party and a national election. austria's chancellor is the first to be thrown out of office since world war ii. he has started a campaign to get back into power. to the u.k. now, nigel farage was the big winner in european parliament reelections. his brexit party wants to take the country out of the european union without negotiating a deal. the vote rattled the u.k.'s major parties. corbyn haser jeremy now promised a referendum on any brexit deal.

conservatives say the election shows voters just want to leave the eu. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is bloomberg. david: thanks so much. we've talked about the european parliamentary elections. they were complicated. it was not easy. sometimes the populists come to power, sometimes not. alix: if you dig between the lines, this is sort of the layout of how fragmented everything is. germany did not do well. david: we seen the angela merkel shakeup already because they did so badly. alix: in france, marine le pen's party really came in first place. david: macron still has a majority in parliament. let's turn to italy specifically. bond yields have been trending

down, with one major exception being italian bonds. the commission is considering beginning the process to sanction italy for exceeding european fiscal deficit restrictions. still with us is jurrien timmer of fidelity. mr. salvini and his party did quite well in the elections. they are going to keep spending money. jurrien: yes. it is interesting. careful -- the eu has to be careful what they wish for. do you put a fine on them for maybe spending more money when everyone in the world is going in that direction? i think would've the bigger trends we are seeing is as central banks lose the ability , reallylate economies

it becomes a question of does the fiscal side take over. in the u.s. we are definitely seeing that. in japan we have seen that. now the topic has entered the fray. in europe, they can't really go there because there is no fiscal central authority, so what do you do? this is sort of the overall pressure point, currency versus fiscal versus central banks. italy and other countries that want to spend more overtime will probably get their way even though they get to navigate the eu rules because that is where the rest of the world is already going. alix: fair. they have salvini saying he wants 100 seats, infrastructure, qe. it seems like he came out with a mandate in some senses from the european elections.

how do you play that? jurrien: something in the middle will happen. they will go to the negotiating table. there's obviously political grandstanding. we saw that with greece a few years ago. probably somewhere in the middle is where we come out. in brussels, they need to be careful they don't stoke the fire of anti-euro sentiment. --italy, they all fiercely they obviously want to create gainstomentum a this mandate you described. countries will probably follow the rules, but not to the mandate you've described. david: we now have the president of the commission, the council, and of the ecb all up for changes now. jurrien: we are living in a developed world of aging demographics, low interest rates and falling interest rates,

slower growth, and central banks that at least, except for the u.s., are pretty much maxed out. it does make a fiscal response the obvious choice, whether that is a good thing or a bad thing. thate is the only constant isn't really participating because the way it is structured. ultimately there will be some but iton even in europe, will be slower and more difficult, and that is one of the reasons why it continues to trade at a discount. alix: we will turn now to deutsche bank come up with plans to unveil restructuring in the next two months that could include a capital increase. "the journal" also reporting that their chief could get booted in the shakeup. financialoomberg's

reporter. reporter: last week there was the general meeting of the company. they faced a very angry shareholders who had been frustrated over the years with the very low share price. it hit another record low just today. the ceo is under great pressure -- to present a new plan for the bank. those have been insufficient in the past. david: there was a confidence vote that came up short. how much this that influence decisions at this point? reporter: it is certainly a factor influencing his thinking. the leadership of deutsche bank knows that the confidence is extremely important. proxy forry important

the confidence in the management team. the head of the investment bank and the chief regulatory officer came away with the worst vote. 61% backingeceived them formally, but in the corporate governance system of germany, that is still a very low vote. if nine people want to see some change, it is going to influence his thinking. david: thank you so much. still with us is mr. jurrien timmer of fidelity. we talked a little bit about this earlier, but let me be bore specific. we had bob diamond, former head of barclays, on last week. he said the real answer is not a consolidation as much as it is concentration. coming up,at mergers but getting specific on what they are focusing on. is that what we are seeing come of that they will back off the investment bank? i think there are a

number of things going on, but the lack of volatility certainly has played a role in terms of trading.tability of there is just less to do. these all play a role. so that is probably a step in the right direction, although on the others of the coin, it reduces the depth in the market potentially if there are fewer players in the market. ultimately, banks like economic growth. they like a positively sloped yield curve, may raising rates. in the u.s. we started to get that, and now we are going back and the other direction. in europe we don't have any of these things, and on top of that a lot of excessive leverage in the system. the banksally see how of europe are going to be an attractive area. i would much rather focus on the companies that generate a lot of

dividend yields high payout ratios in an environment of mostly negative yield in europe. companies that can generate cash flow to the investors in the stable growth areas. i would rather stick to that. alix: i am going to play the devils advocate again. there were some reports that there will be capital buffers that could be adopted in germany by regulators. longer-term, are those green shoots signs? jurrien: they are potentially green shoots, but generally banks are in early cycle play. in the u.s., we are very much in late cycle. europe is even farther ahead. you could argue europe is not quite in a recession, but if you are in a late cycle environment, generally the banks are not the place to be. the banks are on the other side

of the break, but there is a and a place, and it doesn't seem like it is. david: where is the place to be, if there is, and europe right now? jurrien: the stable growers, whether it is pharmaceuticals or other companies that return a high dividend yields, especially relative to very low bond yields. that to me in the current economic climate in europe is probably the best place to be. taylor: great to have you -- david: great to have you with us today. ceong up, a defiant huawei says there is no need to can negotiate with president trump. more from our exclusive interview next. this is bloomberg. >> i will ignore trump. then who can he negotiate?

if he calls me, i may not answer. ♪

viviana: this is "bloomberg daybreak." half-hour,n the next columbia sportswear ceo. ♪ alix: this is --viviana: this is ."teslaerg daybreak is getting ready to reveal how much it will charge for its made in china model three. the electric car maker inviting people to guess. there are speculations it will cost between $43,000 and

$51,000, lower than the current imported version. tesla is counting on shanghai factories to boost the company's competitiveness in china. the iconic magazine "sports illustrated" is being sold to authentic brands for $110 million. they plan to big-money licensing out the magazine name. the current owner paradis will continue publishing the print version, and for at least two years writing the website. and it is the old to make gift for a sports fan in your life, but it won't come cheaply. golfer jack nicholas is going to sell his gold rolex watch. in 2017, a rolex owned by actor for newman went home almost $18 million. that is your bloomberg business flash. it is not as precious as the paul newman one, but it is quite a special one.

whenever he raised the trophy, he had that gold rolex on. he had it since 1966, when rolex gave it to them. he had never had a watch before. gary player said, take that one. alix: so you would rather have paul newman's? david: no, i am just saying don't be disappointed if it goes for a little less. today when they wear stuff, they are getting paid. they never got paid then. he just loves that rolex. alix: we turn now to wall street eat to cover three things -- wall street beat to cover three things wall street is talking about this morning. yes --ibaba e alibaba eyes a giant shares sale. huawei's way -- and

founder says he won't negotiate with president trump. david: joining us now is sonali basak. around you have to turn profitability, but also invest in compliance. it is the biggest problem since 2012, when they were hit by an insider trading scandal that led to the departure of a ceo. they've already taken some pay cuts in response to this, and started issuing internal reviews, so it is pretty proactive. david: and they leaked information to their clients, basically. it doesn't include a particular stock, but it does include information about the markets, something that could compromise the integrity of the markets. i am really interested in

alibaba. they are looking at perhaps another ipo, a $20 billion share sale in china. sonali: this definitely seems to be responding to the u.s./china trade tensions. banks has not been named yet. while this is a u.s./china story, it would involve every major international bank. david: and we do read against the distribute in china. but they had rules about dual class equities so that they could do it. sonali: that is exactly right. but this is something blue bring intelligence analysts -- something bloomberg intelligence analysts said was more of a homecoming.

david: staying in china, while huawei is very, much in the crosshairs in the trade war with the u.s. this is what their founder had to say. the u.s. has never bought products from us. even if the u.s. wanted to buy our products in the future, i may not sell to them. there's no need for negotiation. i will ignore trump. then, with whom will he negotiate? --he calls, i my not answer i may not answer. his tweets are self-contradictory. david: you talk about two parties talking past one another .

it doesn't sound like there is room for agreement here. doesn'tannie said trump even have my phone number, like trump can't find it. [laughter] david: the president is whether you have -- whether he has president trump's phone number. [laughter] likened the company to an airplane with a hole in it. they will fix the hole, but the airplane will still fly. alix: our bloomberg anchor is trying not to crack up. [laughter] out: i think what was left is the fact that, especially in they will not be able to alter the software because this dispute. it is definitely impacting europe. google and huawei have already had a lot of tensions. huawei says way --

they will just develop their own android, but that is easier said than done. that is a legitimate thing he could send behind. and something interesting he did say, that he would defend apple if they tried to place a similar ban on them. david: you can see more of our exclusive interview with at 9:00 ceo this friday p.m. eastern time here in new york. this is bloomberg. coming up, can states hold drugmakers accountable for the oldfield crisis -- for the opioid crisis? more on i'm watching next. alix: and go ahead and check out tv on your terminal.

scroll through and check it out. this is bloomberg. ♪

david: this is what i'm watching today, the aftermath of the opioid crisis in the states and municipalities saying they were hurt by this. oklahoma is one of the states using $10 billion -- suing for $10 billion against the manufacturers. they are about to go to trial. the two other defendants have settled now. johnson & johnson is the sole remaining defendant. they don't make opioids anymore. they went out of this business, but they did make it. you do not want to be the last defendant in a case like that alix: -- in a case like that.

oklahoma says i can take a run on you and maybe get the full $10 billion. alix: what is the legal case? david: that the new the issue was damaging a did not disclose it was a real threat. alix: and for oklahoma, is it that they had to pay for all of these people? costs yes, health care through supporting people and things like that. is clear that these manufacturers are under a lot of stress. mckinsey -- right, look at that. oklahoma debts are going down. mckinsey has said we won't do business with purdue anymore. j.p. morgan has said we won't do business with purdue anymore. as this -- it is almost like a boycott. alix: which is very interesting related to, say, gun makers.

because you have a lot more esg , you'recut holders getting a lot more investors in toks saying we are not going invest in you now. david: a really tough trial coming up. alix: definitely watching that throughout the day. coming up, be investment management chief investment strategist will be joining us. a risk off day where things are really happening on the bond market here and overseas. yield blue here by about three basis points. this is bloomberg. ♪

♪ pres. trump: they would like to make a deal.

we are not ready to make a deal, and we are taking intends and billions -- tens of billions of dollars of tariffs. alix: president trump continues to talk tough on china. huawei says they are only attacking it because they are successful. we speak about 10 year on its 10 year lows. and fiat chrysler makes a bid for renault to create the world's third-largest carmaker. david: welcome to "bloomberg daybreak" on this tuesday. we have a big drama playing out in germany right now for angela merkel's party. alix: cdu did not do well. merkel basically throws her undericked successor akk the bus, and says she can no longer succeed her.

david: apparently akk made the first move. alix: do people listen to her? and how does she lead? what is her mandate now? david: she it is particularly difficult because she is a lame duck. she is stepping down as party leader. and there is a much more conservative alternative to akk. alix: all of that playing o backdropope, still the for the markets. to me it is a risk off move. dollar-yen now flat, coming back from lower levels. the 10 year yield down by two basis points, so a little bit of combing on the -- a little bit of calming on the margins versus what we saw a few hours ago. how far will the safe haven

trade actually play out today? david: this morning it was all safe haven. it is time now for the morning brief. today, eu leaders are meeting in brussels to continue deliberations over who will take over president of the council, the commission, and the european central bank. also, today the u.s. starts two days of debt auctions. tomorrow, the ecb releases its semiannual stability review. thursday we get china pmi's. costco and dollar tree will also release earnings. and friday, the fed releases their preferred inflation gauge and personal and income spending members -- spending numbers. president trump traveled to japan to make progress on a trade deal with prime minister shinzo abe, but took the occasion to say he was in no big

rush to do a similar deal with china. pres. trump: as far as china is concerned, they wanted to make a deal. i think they probably wished they made the deal that they had on the table before they tried to renegotiated. they would like to make a deal. we are not ready to make a deal, and we are taking intends of billions of dollars in tariffs, and that could go up substantially very easily. david: we welcome now tobias harris, taddeo's senior vice president for japan. let's start with china. what did you make out of what the president said? is this just more of the same? could we look to anything more coming out of the g20 meeting as president xi meets with president trump? point, domestic politics in both countries reigned supreme. circumstances in neither country seems to be pushing the leaders

towards an agreement. i think you are in a position where president xi can't look weak and can't look like he's backing down. the deeper you get into the 2020 election cycle in the united states, the same dynamics are at play with president trump. i think right now, both look like they are digging in for a long war of attrition. david: if we don't break the cycle, is the most likely outcome stasis? that is to say, where we are right now? or is it more likely that the president will imposes tariffs -- will impose those tariffs on the other imports? guest: at this point, you can't rule out another round of tariffs. this administration showed they are not afraid of imposing tariffs. the president believes the united states is collecting revenue from tariffs. i don't think you can just rule that out right off the bat. i think that is certainly on the table.

the legal processes in motion for drawing up with that could look like. alix: what struck me over the last week is that china has had a lot of rhetoric, but i've yet concrete action against the u.s. part of it is they don't import as much from the united states. i think that the measures might be less visible or not be as visible right away. you are slowing down inspections, keeping things from coming into the country. i think china would like to find a way out of this, so they can afford maybe to play it slowly in hopes of finding some way to resolve the impacts. a you are digging in for longer-term fight, you don't need to put everything out there at once. you can put measures in place gradually. this might still be a slow that might beight

escalating, but you still might see more escalation out of a longer period of time. david: it struck me that there seems to be two different tales coming out. the president kept saying we are going to get a deal, it is going to be great. from the japanese side, we heard we are not close to a deal. which is it? tobias: probably closer to the japanese side. right now you have a negotiator just focused on figuring out the scope of what talks are looking like. you and i have talked about this before, the right now they are focused on what it agreement would look like. we have not heard from the trump administration yet what they are in terms ofive concessions for japan. david: at the same time, how important is it to the president that he sort of cools some other trade conflicts while he pursues china?

you saw he backed off the european tariffs extending, and seems to be backing off other places. tobias: i think there is only so much bandwidth to go through discussions like this. that's exactly why you had agreements in september of last year to start negotiations with japan, and once china talks started, that was shelved until april. you just don't have the capacity for running these talks. david: i might find it encouraging if that bandwidth was being used for active negotiations with china. tobias: there is nothing scheduled as far as another round of ministerial talks, no high-profile lower-level talks going on. right now i think a dance of

rhetoric, posturing, maneuvering to try to signal positions, it doesn't look like they are getting back to the table. david: tobias, great to have you with us. that is tobias harris of t eneo. jp morgan had a note that said we see a better outlook for equities at the margin, with earnings revisions trending better and expectations for the rest of 2019 quite achievable. nevertheless, the level of had run risk -- of headline risk leaves us in no large rush to run into an equities position. guest: this is a really .nteresting statement the thing about the trade war is on an economic basis, it doesn't really hit the economy of the u.s. that much. we are a $21 trillion economy.

even if we put 25% tariffs on the whole $520 billion we trade with china, you're just making a very small dent in that $21 trillion. that is not really the issue. the issue is what do cfos do about confidence, capital expenditures, investment? ultimately, that is how this blows back to the stock market. if you get slower growth because of slower investment, that is where we could go with this. david:david: we do see capital investment trailing off, don't wait? -- don't we? guest: yes we do, and it is related to the trade issues. the u.s. has been fine as we've raised tariffs and have really not dented economic growth. the issue is this rolls down quarter after quarter, and if you are projecting forward where you're going to invest, you are probably going to slow down. there is some uncertainty, and you are ultimately hitting

numbers with this. i think buying the dip here has worked over the last 10 years. i am not sure it works right now. i think you have to see some concrete progress to get a sense of where the u.s. is going on this. alix: don't buy those dips. coming up, how low could the 10 year treasury yield go? you have a flight to the safety of bonds. bank of america's latest call, coming up next. this is bloomberg. ♪

alix: the you best 10 year yield is at the lowest level since october 2017. bank of america saying the yield could fall as low as 2.5%.

the chief technical strategists for fists markets -- for fixed markets writes, "inflation targeting has proved very difficult, and a myriad of risks remain. momentum in this market is in the favor of the bulls." the chief strategist who made the call joins us now. walk us through the potential to get to 2.5%. guest: the bond market is in a bull market, essentially avenging the calls for the dead bond last year. what we are seeing happen now is simply a retracement to the to 2.25%.m from 1.3% . we are at the middle of this entire range. the question becomes how much lower can yields really go. when you use technical analysis, you look at the major turning points in the prior trend, the all-time low to the recent peak in yields. if we did a

retracement, that would show where we are. but that is a huge level in all technical charts. that level is 2.05%. alix: how does that leave us for the two-year? that is for the 10 year. two-year is going lower. view, that full downside measures about 1.78%. the two years should continue to and move below 2% probably this year. to illustrate that we could look at the chart of bonds versus copper, if you like, it ties in what is happening with those asset classes. in this particular chart, we look at the bloomberg dollar index versus commodities index on the bottom, and on the top as bond prices versus commodity prices. -- excuse me, bond prices versus

copper prices. just last week in the latest rally, the ratio of bonds versus copper rallied to a new almost three year high. bond prices are outperforming copper prices. that is a trend, folks. this isn't just a 52-week high. walk us through both of those points. first of all, if we hit 2.05% on the 10 year, what economic backdrop does that signify? that means the modeled picture we get today about u.s. growth is going to be clearer on the downside. the other thing to bond market is telling the fed is that the fed is too tight. feels a little bit like last autumn, where the market was ahead of the fed and saying you are too tight for what is going on, and it is time to

move. it will paint not a great picture for the u.s.. having said that when yields are so low, there is nothing else. so it is on some level positive for equities, but it is not a great picture moving forward david: -- great picture moving forward. david: if your analysis is correct, that would mean the fed has to cut. would be, that the case, i would think. alix: how much of an indicator is copper still looking forward in terms of a leading indicator? how do you look at that versus it's reaction function to the dollar, for example.

-- for example? i think copper prices are a little closer because the market tends to gravitate towards copper initially at those early signs of growth. we don't see that. look at the australian dollar, bolo 70. -- below 70. alicia, to follow-up up on that, it was all commodities that got hit last week. how do you look at it? alicia: the data was terrible last week. it painted this picture that we are going in the wrong direction, so the expectations for many of us was that we were going to have this weak spot in the first quarter and would destress them. it turns out that the first quarter was pretty strong and we are probably going to hit a soft

patch over the summer. all of the gdp estimates are now hovering between the 1.7% to 2% range for the second quarter. the bulk of earnings growth comes in the fourth quarter this year. you're basically flat for the first quarter, down 2% for the second quarter. you need that last part of the year to really kick in. we are probably going to have a weak earnings year anyway. it is just where that is happening is different than where people were expecting. david: so you are almost giving up on the second half. alicia: i am not giving up. i think the american economy is extraordinary. actually kind of noisy, so you have this incredible labor market at the same time you had these terrible manufacturing numbers last week and the lowest jobless claims in over 50 years. david: and a strong consumer with little the household balance sheets.

alicia: yes, the household balance sheets have healed, so it is an unclear picture. the market is hovering because it is unclear. our sense of it is that you've feeling on trade, you can't get this multiple up until things are looking good. the data is messy, but not formally bad. alix: paul come around this up for us. did we had the 2.05%. what is the bounce back after that? paul: first, you never know if it is going to bounce back from 2.05%. realistically, we could be 25 basis points from where we are. to go back to the concept of did the bondable really die -- the bond bull really die, that would mean that the first correction

technically and that long-term new trend of the bond bear could actually be about 1.75 percent, which is an even deeper fibonacci retracement level. that would be bold. the bank of america merrill lynch fund survey suggested only 4% of fund managers think u.s. .0 year yield will move below david: there you have it. thanks so much for being with us. alicia levine of bny mellon be sticking with us. coming up, fiat and renault are setting a plan to merge. more on today's bottom line. this is bloomberg. ♪

david: time now to look at three companies worth watching this morning.

i'm watching chrysler fiat and renault. fiat chrysler has offered to merge with renault, and it has been favorably received in not only by shareholders, but also by the countries involved. italy and france both have a big say and it. it would form the third-largest car company in the world for you get to nissan. these are the deals it would have wanted to do, and neither one of them is there. alix: not a bad thing. amazon.ching a scoop from bloomberg talking about the fact that you're going to be purging the small suppliers. under $10 million sales supplying amazon in bulk, they will not be buying from them to reduce their overhead. really hurting mom-and-pops. it doesn't affect us as we know, but it is going to affect

mom-and-pops. david: the third company we are watching his global payments. brooks haviland -- brooke sutherland joins us now. brooke: a big deal after a number of big deals in the global payments system. is merging with total after that purchase of worldpay. this is really the continuation of a trend in this hunt for scale in global payments. global and total are talking about the benefits for innovation, pricing power, holding onto market share in a time when you are seeing a lot of disruption in the payment space from the likes of then mow square, and some banks getting into this at well. david: what kind of market share what they have? brooke: they issue credit cards for banks and help manage that portfolio, so when you are monitoring for fraud, that is

what you are registering too. it is interesting to see this combination because it is rather .ntested what the benefits are they are also looking for $100 million in revenue from this. they think they can earn that much more combined, and i am not sure about that >> -- i'm not sure about that. does that give you benefits when you had that vertical integration? alix: where would they expand? how would they get that money? brooke: they talked about potentially going into international markets, that maybe they see growth there. some analysts that they would want to get there anyway. they have a point of service type offering they may be looking to expand.

these and there is talk of scale, is it more on the defensive side? david: do they compete with the likes of paypal? brooke: i think this is more about trying to intermediate that competition and keep them in their place and hold onto their market share, but i think it is also the banks. you see more of the banks getting into payments. you see what goldman is trying to do with marcus. it is coming from all different directions here. alix: thank you so much for joining us. coming up, president trump is after huawei because of its success, according to the company's founder and ceo. this is bloomberg. ♪ is bloomberg. ♪

alix: this is "bloomberg daybreak." i am alix steel. a couple of hours ago it was a risk obsession, then we start to see a buy the dips.

s&p futures flipping neutral. still losses in italian banks. that is a european story. if you're have a potential fine of $4 billion coming down on italy, that would hurt. still off the lows of the session. it was a bit into bonds, a bid into the yen. that is coming off. dollar-yen is flat. the aussie dollar outperforming in the g10 space. .0 year yield holding flat it was much worse this morning. bad.into safety not as david: i think it is early to call it risk on. alix: not risk on. tech is caught in the middle of the trade war in the market is punishing the sector. just this morning citigroup lowered its price for apple. taylor riggs has more on trade and tech. taylor: you're exactly right.

i wanted to set us up and see how we got here. it has been quite a month. companies they get most of their sales from the domestic market outperforming companies that get a lot of their sales with the international market. trade in terms are starting to affect some of these stock prices. one stock getting hit, that is the chipmakers. the stocks index going for its worst month since 2008. -- frommpanies get china. it is china's tech sector that is getting hit harder than the u.s. tech sector. we are taking a look at china's tech minus the u.s. tech in 12 of the last 60 days. it is china's tech sector that has been underperforming, sometimes by as much as 4%. for now it seems that the u.s.

tech sector has been weathering the storm better. as we know, that can change. david: thank you so much. isnese telecom giant huawei in the center of the u.s. china trade dispute and our colleague talked exclusively with the founder and ceo of one way it was adamant in his denial of u.s. charges against his company. the u.s. has never bought products from us. unit u.s. wants to buy products in the future, i may not sell to them. there is no need for negotiation. i will ignore trump. then who will he negotiate? i see his tweets and i think they are laughable because they are contradictory. >> the critics would say you got to where you are through intellectual property theft and government support. what is your response to that?

the u.s. has not developed that technology. from where should i steal it? it is more likely they steal our technology. now we are leading the u.s.. trumpet taxes because we are now -- trump attacks us because we are now more advanced. >> there have been calls by some in china for beijing to retaliate against apple. is that an action china should be looking at taking? >> that will not happen. if that happens, i will be the first to protest. apple is the world's leading company. if there was no apple, there would be no mobile internet. if there is no apple to help show us the world, we would not see the beauty of this world. apple is my teacher. as a student, why should i

oppose my teacher? >> you have bragging rights. earlier this year you overtook apple as the number two smartphone seller. you do have that goal of becoming the number one smartphone maker in the world. does that goal have to be shelved? >> we can become bigger or smaller. we are not a public company. we are not pursuing growth or profit. it is good enough for us to keep alive. that was part of bloomberg's exclusive interview with the huawei founder and ceo. you can catch more of that interview in a bloomberg television special friday 9:00 in new york. with us is alicia levine of bny mellon investment management. when you are listening to that, what were your thoughts alicia:? it is interesting. part of the reason why way has leaped ahead is that it is used

u.s. components. i am not surprised the china tech is doing worse than the u.s. tech. all of china tech is dependent on our technology. there was an interesting wall street journal article this weekend talking about how huawei has the building blocks to leapfrog ahead and it is another example of the advantages of backwardness. you learn from other companies mistakes. you have a clear path of where you need to go without having to do all the investment and make the mistakes. i think huawei is a perfect example. david: the article started out with a story of the people in chicago -- he was taking photos of his competitors. it turns out he did not know you're not supposed to do that. is it too late to stop huawei? if we pull back entirely, to

they keep going? alicia: i think you wind up with two spheres of influence. the trade war has morphed with the tech war. everywhere,ches particular in smaller countries and poor countries. here in the u.s., the rural areas are using huawei technology because it is 30% cheaper. this is a clear strategy supported by the government. that is china's model. it nurses industry until they have critical mass to function on their own. we should not be supplies the chinese government helps nurture walkway -- nurture huawei. that is their business model. it creates an unfair advantage. alix: does that mean there is a china put an emerging market tech versus here in the u.s. where the faang stocks have erased the outperformance they have seen? to end upu are going

with different spheres of influence. huawei cannot catch up so quickly so it has been stockpiling u.s. components. these are strategic, smart companies. if your business is dependent on qualcomm, you will stockpile chips. stockpilet cannot software with the administration actions. making huaweid up unable to access the u.s. banking system, they can stop them completely. you can have a full and club plug of thing -- a pull and kind of thing. david: is that good or bad for u.s. tech? the supply chains are so integrated. alicia: i do not think it is great for any side. it is too late. they should have been noticed earlier.

it was clear the u.s. government knew earlier because motorola was firing and cisco was firing all of these lawsuits years ago and it never raised the flag in a way it has right now. with the kind of reset huawei had, it is difficult to disentangle it. it is not great for the u.s. chip sector. alix: we had jamie dimon speaking at a conference in new york, and he said the trade issues are a bigger risk to the economy. he sees 1% growth within the corner. how do you price for something like that? alicia: in the markets? the tech sector is interesting because there is the server-side , there is the communication side, and the hardware side. the companies involved in services or in clouds are fine. you're going to run into trouble in the hardware side and you cannot ignore it. i'm amazed that the market has

held up this well. in a funny way, i feel like the market hit the snooze button on this waiting to see what will happen. , itou look at the technical looks like the first stop on the s&p to be 2775. it would not be that painful. if you get a 5% to 10% downdraft, everyone says that is fine, we will be ok, but it never stops there. your next reevaluation point is 2775 and then you have to see where this is going. it is clear earnings will get hit on the component side of much on the communication side or the service side or the cloud side. you have to unpack it. david: alicia levine of bny mellon, thanks so much for being with us. let's get an update on what is happening outside the business world with viviana hurtado.

viviana: chancellor angela merkel concluded her succession plans have fallen apart. bloomberg learned the heir apparent may not be up to the taking over as leader of the christian democratic union in december, she has seen her popularity slide. on sunday she oversaw the cb use worst ever results in a international election -- in a national election. the estranged coalition partners joined the opposition in a vote to dismiss. cursed has started a campaign -- kerst has started a campaign to get back in power. china has seized a bank and that is locking -- rocking investors. regulators assumed control of the bank, citing serious credit risk. 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. to me the question becomes how bad is it out there for the smaller banks and does china have a cohesive strategy to deal with it? ared: the smaller banks linked to smaller enterprises and that is an issue in china. small and medium enterprises are what is suffering in china. -- have been the smaller, midsize companies. how bad is it? david: a very small bank, but on the bloomberg just shot up because of that story. alix: the question is there needs to be consolidation -- how do you get that in the military or? -- in the middle of a trade war? david: we get a view from tim .oyle, columbia sportswear ceo

that is next in follow the lead. this is bloomberg. ♪

viviana: this is bloomberg daybreak. coming up later on balance of power, republican governor asa hutchinson of arkansas. this is "bloomberg daybreak. members of the board at renault are setting up a proposal to world'she words -- the third-largest lawmaker. don't be structured as a 50-50 ownership. renal shareholders would get an implied premium -- renault

shareholders would get an implied premium. their moving ahead without nissan and mitsubishi. to revealetting ready how much it will charge for its made in china model 3. there is speculation the car will cost between $43,000 and $51,000. it shanghainting on factories to boost the company's competitiveness in china. sports illustrated is being sold authentic brands. authentic brands plans to make money licensing out the magazine's name. owner will continue publishing the print version of sports illustrated for two years and running its website. that is your business flash. david: it is time for all of the lead, a deep dive into stories making headlines and moving markets with key insights from industry veterans and insiders. today we are looking at what is going on inside the retail industry -- the retail industry

is caught in the crosshairs of president trump's tariffs. joining us is columbia sportswear's president and ceo. ofumbia sportswear is one the biggest outdoor an active lifestyle and apparel companies in the united states. welcome back. great to have you here. we have that letter come outside by people like the head of nike and adidas saying this is a problem for us as retailers. is it a big problem for columbia at this point? tim: we signed on to that letter. we believe these tariffs and trade wars are bad for americans consumers and that for consumers everywhere. we believe this kind of difficulty in global business is very significant and a head wind against all of us. we are spending lots of time in the company managing our sourcing operations when we should be managing our sales operations. this is a disruptive event for

us. david: do you see in the near future an effect on your margins? tim: we have a broad sourcing operation. we sourced in 19 countries and china represents only the high teens percent of our total importation into the u.s.. it is disruptive, it is causing problems. we are spending times on this topic when we should be spending time selling our products globally and taking advantage of the technologies we have invented in portland and the brands we have established in portland. and weif this continues have seen in the united states and china, if it gets worse, how realistic is it for you to the percentage from china, and where would you go to? tim: we sourced almost

exclusively from southeast asia. this is all terror -- this is all tariff related. our products are among the most commoditiesffed since the 1930's. our company is adept at moving production around to take advantage of tariffs. much of what we imported to europe is sourced in bangladesh because there are no tariffs in that area. it is an advantage of about 50% for the company when we are sourcing products into europe. these tariffs exist between every country we worked in. you establish the relationship of a factory, you have intellectual property and established processes for doing business which you cannot replicate in two seconds moving to some other factory. these are important relationships we want to keep and we have to focus on building these and hopefully our business

will be around a lot longer than the trump administration. alix: you might feel comfortable with your sourcing, but of some companies have to move to other companies in southeast asia, are you concerned that will increase your cost in those areas? tim: absolutely. we are finding competitive pressures in those markets. this will continue. the big issue is the uncertainty we face in terms of trying to grow our business. we are spending too much time worrying about mr. trump trade war as opposed to selling our products. alix: are you passing up along those price increases, are your customers able to withstand that and will you be able to do that for the next year? tim: we will pass on the prices if we have to. these are taxes on commodities american consumers will be purchasing. yes these taxes will be passed on. david: what about your

experience with the consumer in the united states? we hear the consumer is in good shape. employment is high, there is real wage growth. our people coming and buying? i am surprised how strong the consumer market has been. we sell products in the central part of the united states and our business -- our home is in portland, oregon which is one of the largest exporters of soybeans in the united states. obviously as that business goes down to the business in china we will expect consumers in some markets to be more damaged than others. alix: you raise an excellent point. that brings me to what your visibility is like for the next 12 to 18 months. tim: who knows what is going on in washington. this is why we have such a strong balance sheet in our company, to be able to withstand issues like this which can come

up from time to time. we would prefer to spend our time and focus our energies on selling our products globally as opposed to worrying about a certain market. but does that mean there's any capital allocation or investment you're holding back on making because you do not have a disability? -- you do not have that visibility? tim: we measure our capital investments raised on what we expect the business to be in the future. we have put distribution projects on hold, move them around the world to take advantage of where we know business -- to have more certainty than we have in the near term in the u.s. david: let me ask the flip side. young employees around the world. in terms of employees in the united states, are you starting to see wage pressure because it is a robust employment situation? tim: there is significant wage

pressure. this is the home of the footwear business in the united states. this is a competitive market. change ine largest employment -- in payroll rates happening in southeast asia, india, vietnam, and those markets. they are very inflationary. alix: so great to catch up with you. tim boyle, columbia sportswear ceo. , heavy rain and flooding drenched fields across the u.s.. more on what i'm watching, next. this is bloomberg. ♪

alix: here is what i am watching. corn, wheat, and rain. this is a map from the weather shows theat

possibility and the likelihood of rain on tuesday night. it is the red areas you need to be paying attention to, particularly in kansas. farmers are currently trying to plant their corn, so corn prices are spiking. most farmers will be forced to plant more soybeans, and soybeans are already under pressure because they cannot export them to china. then you have subsidies from the u.s. government that would help soybean armors, which means supply we do not need. david: cannot happen a worse time. alix: they're also working with the bad drought. you cannot win in either direction. david: there will be fallout with farm equipment and things like that. alix: there was an article over the weekend about how tough it will be for john deere and caterpillar. starting to get some aid from the government. that was for soybeans.

it back toging traded president trump, you wonder when the patients will run out. farmers have been patient. alix: we had this debate over the dinner table over the weekend. me against five other people. when the patients would run out. so far it has not. they do not like the tariff with china to begin with. that does it for bloomberg daybreak: americas. coming up on the open, i'm joined by mark connors, credit suisse global head of risk advisory as we seem to be in a slight buy the dips scenario. dollar-yen trends flat. this is bloomberg. ♪

alix: from new york city for our viewers worldwide, i'm alix steel. jonathan ferro is off today. the countdown to the open starts right now.

♪ coming up, president trump sticks with tough talk on china. investors piling into bonds with yields in the u.s. hitting multiyear lows. the fight for who will lead the european union kicks off. fiat chrysler renault? fiat makes a bid for the french car company. now is up to the politicians. in the markets, we were looking at a risk off day, now we are paring those losses. as an p futures flat on the day. euro-dollar also flat. now is about the aussie dollar. you're still seeing solid buying in the bond market. yields down three basis points. same in germany, multi-year low. crude talking that trend. we start with our top story and that is