at a collapse. i just think we are looking at taking some of the excitement out of the markets that has been building the last six months. alix: the ceo of morgan stanley says that is priced in. the 10 year yield's next move. aberdeen selling treasuries while pimco says to buy treasuries and play defense. and it is europe versus the u.s. euks go nowhere as the fights multiple fires. welcome to "bloomberg daybreak" on this thursday, may 30. i'm alix steel alongside barry hold -- -- barry rent alongside barry rid holtz -- barry ritholtz of bloomberg

opinion. markets, here's what's happening. we are taking a break. it's been a really rough break. s&p futures up by about seven points. the 200 day moving average, will we hold that level? that is the question of the day. euro-dollar flat as well. we had a seven year auction that it seemed like nobody wanted to buy. therefore, you were able to get an equity bid. crude a little stronger. time now for bloomberg first take. we are joined by romaine bostick miss -- of "would you "what'd you miss?" >> the magnitude is not so big. i don't think we are looking at a collapse. i think we are just looking at taking some of the excitement out of the market that has been building the last six months. alix: on the flipside, ray dalio

saying we are looking at a bigger conflict now. romaine: i think you are hearing that sentiment from a lot of people we talk to over the last three or four weeks now, which is that if you don't have to be exposed to equities right now, if you don't have to allocate or overweight to equities, you don't have to. you can gain some return without taking on that risk. barry: i'm really intrigued that the difference between the head of a publicly traded company very dependent on market cycles and a private company that has a lot of confidence in their institutional investors. i guess this says that gorman is much more focused on the month to quarter. pain of a long-standing the chinese, and he thinks in

terms of long secular cycles decades at a time. what gorman is looking at is really just the tip of the spear. dalio is discussing we are in the midst of a major conflict between two superpowers. this is a long-standing cultural and secular challenge america is going to have to deal with for many years. they are not disagreeing. it is just two different timelines. omaine: it that is a great point. you get the variant opinions about this market, but when you look at the more short-term, they don't seem to be as worried because -- i'm sorry, they do seem to be a little more worried. but people who have longer duration, you can see them positioning in a way where they don't really worry too much. barry: let's look at the bond market and what's been going on.

there's short-term concerns, inverted yield curve, weak retail sales, soft housing sales. people have been forecasting a recession next year for the past five years, and they've been wrong. starting to look like some of the uptick on a slowdown is seeming more and more evident, and that is why we seem to tenure at multi-month lows. i think we got a little too far on that. you don't have the fed support right now that the fed is going to cut. you still have a really strong economy. consumer confidence is high. you still have corporate profitability. and you already have a couple of banks out this morning or overnight saying now is the time to short the market alix: i also wonder -- short the market. alix: i also wonder how much confirmation bias plays into this. every time i read an

article about america's corporate sector has too much debt, why wouldn't they refinance at such low rates? why wouldn't you borrow practically free money? the problem we ran into pre-financial crisis is people couldn't service the debt. hopefully corporations are much healthier than that. theine: to your point about 10 year, you're seeing a lot of that discussion on the short side of the curve now. why do i need to be exposed to equities over the summer when i can bail into this and pretty much get what i need? alix: that is a good point, and that brings us to our third story of the day, and that is europe. this shows the u.s. imports of car and car parts. you can see that europe is quite exposed with the u.s.. me, we spend a lot of time with china, but by the way, europe is not going anywhere.

to whoever said we need to cover this because i kinda forgot about it. first of all, did you know that merkel is in the country today? alix: i actually did not know that. romaine: she is giving the commencement at harvard. she's not actually meeting with trump. i think it really speaks to where we stand right now with the relationship between the u.s. and europe. we know the u.s. government, the trade negotiators specifically, want merkel to be more involved in these discussions. she's made it clear she thinks this is brussels' resp onsibility. alix: you can't have it -- barry: you can't have it both ways. you can't have it america first come about by the way we need a little help from you. you are part of the global community, or you are not. alix: not only that, but you look at where we are in europe just a few days ago, who is in charge?

merkel is going to try to govern through 2021, but who is going to lead her party after that? macron is losing a lot of support in france. if trump wanted to talk to someone, who's he going to talk to? romaine: you've got a lame-duck eu. there's really no incentive for anyone to put their neck out there. barry: at the same time, the u.k. is just a hot mess. it is so fascinating watching that unspool. it really is an incredible period of time we live in. alix: i'm glad someone finally said hot mess. agreed. romaine bostick, thanks very much. you can find all of the charts we are going to use on the program at gtv on your terminal. coming up, more of our exclusive interview with morgan stanley's james gorman, who says trade

talks need to get back on track. this is bloomberg. >> do i think this is going to devolve into a full trade war? no i don't, because there is too much self-interest in keeping this thing on the rails. ♪

viviana: this is "bloomberg daybreak." first group shares are up the most in a decade. the owner of the greyhound bus line and the u.s. will put that unit and its british counterpart up for sale. ng to group is bowi shareholder pressure to break up the company. musk is pushing tesla

employees to catch up with demand for electric cars. musk has sent a second email in as many weeks to the company's workers, painting a positive picture of demand and urged employees to do what is needed to speed up deliveries. in southern california, disneyland is bracing for a record crowd. the park unveiled the widely anticipated star wars: galaxies the largestion, ever addition to the theme park that opened more than 60 years ago. for the first time, disneyland will require reservations. visitors will be able to stay four hours at galaxy's edge, and then they will. be asked to leave we spoke to the head of -- they will be asked to leave. we spoke to the head of disney's theme park unit. >> walt disney said disneyland would never be complete as long as there is imagination. i suspect that this is a new

high watermark, but it certainly is not the end. this is just the beginning. viviana: that is your bloomberg business flash. alix: thanks so much, the viada. so, are you going? barry: i am at a conference at , and their offices are a half-hour away from disneyland. we tried to get reservations for the star wars park. the second it came online, it was sold out. it is going to be a giant hit. alix: look how cool that is. who doesn't want to be there? barry: do you remember when disney spent $4 billion to buy the star wars franchise, and people screamed how they wi ldly overpaid? that may turn out to be a very cheap purchase for disney. alix: there we go. barry is not going, and i can't go either.

morgan stanley ceo james gorman says negotiations between china and the u.s. need to get back on track. he sat down in beijing for an exclusive interview. >> 40% of the world's gdp is tied up in these two countries. to have a major trade war would be very bad for both countries. everybody understands that, i think. i certainly hope that they do. ceos i talked to understand it. what we've got is there is a resetting of this relationship, which makes sense. after 30 years of incredible economic growth in china, there needs to be resetting. there are certain things that need to be addressed. do i think this is going to evolve, as a betting man, into a full trade war? no i don't, because there is too much self-interest in keeping this thing on the rails. some have said if this doesn't happen by the g20 in late j

une. i don't know about an exact time for a resolution, but certainly the negotiators need to come to the table and figure this out. we need to get the train back on the tracks. reporter: what are the global economic implications if we do get a full-blown trade war, if trump pulls the trigger on tariffs on those additional chinese goods? guest: frankly, a lot of that is priced in. what you said about where the 10 year is right now, where the s&p has been moving. unfortunately it is not in isolation. we have brexit going on in the background. we have european elections coming up. there's a lot of macro noise right now. i can't predict exactly what will happen if that $250 billion tariff number kicks in, but the bottom line is the two largest economies in the world do not

serve themselves well by engaging in a full-blown trade war. needs to be more adjustment, more transparency, particularly about technology transfer, and we need to get this thing back on the tracks. reporter: does it start with consumer sentiment in the u.s., and of course corporate earnings and profits? guest: it is interesting. the market psyche is fragile. the market itself on fundamentals is fine. unemployment is 3.5%. who thought this was possible a decade ago? we've got very muted inflation. there's plenty of liquidity in the market. the market sentiment, the issue is the market psyche. there is more downside risk than upside risk. more people think the market is heading down and we are potential he heading towards a recession, which the inverted yield curve would suggest. that is why you are seeing at any point in time, when these macro stories hit the news,

whether it is prime minister may in the u.k. announcing her resignation, the shock election results in australia, around the world you are seeing things that are all triggering market reactions, and it is more negative news than positive news which is driving it. reporter: that yield inversion firmly in focus for many investors. how concerned are you when you look at that? guest: it is concerning. it is the leading recession indicator for the last 50 years. on the other hand, i saw former chair yellen said it could mean that, or it could just mean it is time for the fed to cut rates. that surprised me, frankly. i think the fed is being decidedly neutral at the moment, which i personally feel is the prudent thing to do, to cut -- thing toof hard do. cut rates ahead of hard evidence of a recession is using your

firepower. alix: joining us now from boston is charles schwab's chief global investment strategist. so good to see you. we have james gorman saying we are pricing in a full-blown tariff war. then ray dalio says history have countries in conflict seen that things can go out of control and all parties deeply regret it. is a risky time. which do you go with? guest: well, it is a risky time. they mentioned the yield curve. the yield curve is an indicator of recession risk. war be therade catalyst? there is potential there. it is not an issue between a full-blown trade war or a happy resolution. this is somewhere in between. perhaps there will be some kind of deal, but how long will it

take at the same time that the global purchasing managers index has fallen 12 months in a row? consumer confidence is high. it is at a level consistent with periods preceding trouble in the past. it is a number printed to vulnerability in the global economic backdrop that could be the catalyst. barry: isn't this really just a binary outcome that is unknown? , orer we get a trade deal this continues to spiral out of control and gets worse and worse . either of those options are very difficult for the market to discount because they are both

so different and the results are so significantly opposite each other. is true.hink that this is a political decision. it is not an economist decision. this is being made behind closed doors in a couple of rooms on different sides of the earth, so it is very difficult to assess what is going to happen here. there may be more risk to the equity market then is currently being priced in. i've seen many surveys of professional investors who are 80% to 90% confident a deal is going to get done. i think that is reflected in the fact that stocks are only down that tweet from the president about a trade war. but we can to be to see yields fall. the bond market is looking for a much met -- is looking through a much more pessimistic lens. usually at this point in the cycle, the bond market gets it right.

alix: looking at the s&p 200 day moving average, how much more downside, if you think the bonds are getting it right? significantlylly more downside. this is maybe the end of a cycle, another bear market. stocks dropped 19.5 percent, only to rebound. it would not be surprising to see another episode like that again. that does not mean investors have to flee or panic. maybe diversification's return. it doesn't necessarily mean people have to sell, but they do need to be aware that the risks to the downside is higher than it's been in some time. barry: that is a really important point. -- we've seenft developed emerging-market slack market -- we've seen developed

overall markets lag markets. do you see the correlation return and everybody begins to move back in lockstep? jeff: i think it is a good place to consider to diversify portfolios. for one, europe and japan might be a little immune to some of the worst of the trade war for a variety of reasons. already that seems to be showing up. even more importantly, what we've seen over the last 50 years is that relative performance trend you were speaking to, the u.s. versus international, tends to reverse around yield curve inversions. we seen seven over the last 50 years, and that is exactly where we see this flip in relative performance. we are perhaps they are again, so it is an interesting indicator. can't tell you exactly why it

works, but it seems to. we may be on the cusp of a long potential period where international stocks begin to outperform. alix: you're going to be sticking with us. coming up, we discussed why trade, brexit, and iran have predictions of downturns in the second quarter. this is bloomberg. ♪

♪ barry: wall street's biggest banks are warning of a second-quarter slump in trading revenues. citigroup, j.p. morgan all indicating a downturn for their trading businesses as geopolitical uncertainty and trade sours sentiment on the street. still with us from boston is jeff klein top, charles schwab charles schwabp, chief global investment strategist. what do you think about this projection for downturn in

trading activity on wall street? jeff: it has been interesting that we've seen volatility seem to pick up. we haven't seen that reflected in greater trading activity. i think as you look at these financial institutions, largely valuations reflect some of this pessimism on the trading outlook . i think expectations are fairly low, and that might help to serve this group times get a little more difficult. sure, but do you want to buy banks with the three year curve inverted? jeff: not traditionally. that could weigh on concerns about the ability to make some money off of the cash balances. but i would point out that if this is a relatively abbreviated downturn, meaning a two or three year recession we are headed quarter a two or three

one, that is a very different environment, particularly as it relates to credit losses, which may already be reflected in their valuations. alix: thank you for being with us. it does raise the question, when his value finally going to be a thing? barry: that has been the question for quite a while. we started to see a resurgence of value in the fourth quarter. gross is in a down -- growth is in a downturn. that is the return. alix: coming up, it is the relentless rally in global bonds. what does it take to send the 10 year below 10%? more on that next. this is bloomberg. ♪

alix: this is "bloomberg daybreak." thettle bit of calm in markets, but i am skeptical if it is going to last. of 1%, up by 2/10

sitting right around the 200 day moving average. european stocks also more optimistic. european banks up three temp of 1%. a large part of that is the calm we are seeing in the bond market. only --year spread is the nine-month 10 year spread is only nine points. dollar tree out with a earnings, coming in bang in-line with adjusted earnings estimates, $1.14. that stock up a little bit premarket. they did start testing there dollar tree plus multi-price strategy. this follows dollar general, that seems to have a pretty solid quarter, with comp sales for the full year about 2.5%. we like looking at these guys because this is a pretty good

read on the lower end of the consumer, which is where we are seeing the wage gains. holding up pretty well right now. barry: it just goes to show you how bifurcated this recovery has been. there's no middle left anymore. it is the high-end and the low end. the closest thing to a middle these days is target, and they did pretty well. they are at higher middle, is that a better way to describe it? alix: that works. barry: but all of the lower economic strata retailers seem to be doing ok in a low interest rate environment. alix: what they talk about in terms of margins on the call, dollar general talked about a gross profit rate decrease, in part because of consumables, and they had higher sales of lower margin products, and that had a higher portion of overall sales. when you add that to china, you wonder what they are going to say on the call. barry: every time i look at a retailer, i am forced to say how

much of this is our current cycle and how much of this is just long-term secular trend away from consumerism, away from sport shopping, and away from the middle class going out and spending a lot of money in places like macy's? they are the ones having the hardest time adjusting to the new environment. alix: exactly. in the bond market, the yield and 10 year treasuries nearing a 10 year low. bloomberg's jon ferro spoke with -- with pimco's ceo and cio on where they see investment credit. >> we talk about credit issuance for markets. a lot of that occurs outside the united states, across asia and pockets of europe. a lot of our growth areas are focused on where we anticipate there to be the best return. in this business, you have to start sometimes multiple years

before that opportunity actually is out there and ready to be realized, so that is one of the key areas of focus. resources with a slight tilt towards credit outside the united states. jonathan: let's talk about private credit markets. is that an opportunity? that -- that is an opportunity, and it is going to become even more attractive for returns. jonathan: how scalable is it? >> it is never going to be as scalable as what pimco does on the liquid side, but it doesn't matter. we think there is opportunity because of what banks used to do that they don't do anymore. it goes from lending against real estate to buying securities and housing to being able to opportunistically do direct do various

transactions which, if constructed the right way, should get 10% to 12% of the business cycle. question ise key other people. it's been an incredibly competitive environment. is there an area where there might be a bit of froth? >> consistent with our views on corporate credit on the public side, that is where we see the froth. we look at areas like commercial real estate, residential real estate. we continue to see considerable opportunity. despite the financial crisis being 11 years past, we still see friction in markets. we still see opportunities for investors on the private side, as well as the public side. that has really been our focus for now, looking to harvest opportunities within that space. jonathan: how important is that

liquidity premium you can get out of private markets? >> it is twofold. i think it is probably a couple of percent. i am simplifying what it is about, but people get compensated for owning liquid securities, and there are people who could very easily hold this kind of paper. think about people who don't need the liquidity. think about insurance companies. clearly it is one of the most interesting risk premiums, but more importantly, it is also a way to structure transactions where you think you have an edge and you think you understand and industry better than most. we are going to find part of what we are currently doing very attractive, and some other things not so attractive. jonathan: while recognizing liquidity is one thing, the liquidity in markets is something you've talked about in

the past. do you think enough people are focused on that? you've talked about financial market vulnerabilities. the market has got bigger. participation has increased over the last several years, and yet fundamentally in terms of the structure, the market has gotten weaker. just make sense of that for people. >> people are talking about it. people are aware of the risks. returns, itk at appears people are more exposed to this then would be suggested from the rhetoric. volatility has been relatively low the last several years. you just have to take a look and feel the markets from a day-to-day trading perspective when you shift, there's going to be overshooting. we don't necessarily mean that this going to lead to another financial crisis. we do think that it is going to lead to disappointment in the form of overshooting fund

mentals. alix: that was pimco's ceo and cio, speaking to bloomberg in an exclusive interview with jonathan ferro. barry: still with us is jeff kleintop of charles schwab. we had the st. louis fed to a research piece that says as rates have gone up since 2015, there's been more financial distress in the lower half of the economic strata. what does the availability and cost of credit mean for the economy? know, it isn't always the cost of credit. it is the availability, as you point out. asen that gets pulled away things get difficult. i am concerned about the higher-yielding area of the market. i think there's some vulnerability there as we go into a downturn. but i'm also very concerned about the private credit market. it was just discussed there. i think that is a big vulnerability this time. in the last economic cycle,

people poured into this between prime and subprime. this time they've poured into liquidity premium, where we are also seeing investor protections fade away. it could be ugly. alix: good description. kleintop of charles schwab, thank you very much. , credit line ahead of its ipo. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." coming up in the next hour, jen

away cofounder and president. ♪ viviana: this is "bloomberg daybreak." i'm the vr or tonto with your bloomberg business flash -- i'm viviana or todd a -- i'm viviana hurtado with your bloomberg business flash. -- whoe partnered with uberpartnered with -- partnered with flex to provide rental vehicles. disney ceo bob iger tells reuters it would be very difficult to keep film in georgia if antiabortion legislation becomes law in a year. they filmed several recent hits there including "avengers:

"black panther." regulators will determine the exact timeline for the boeing 737 max to return to the air. as a leaderts on me of this company. it is very unfortunate that i can't change what happened. i would if i could. what i can commit to is our company is going to do everything possible to ensure safety going forward. viviana: that is the bloomberg business flash. alix: thank you so much. i love the way the boeing story, it is like, where is the pr? now? that interview happened yesterday. barry: this is just a snafu from start to finish. it was a self-inflicted wound. they had so many internal warnings about this. they were charging an upsell for

certain additional safety features, and then the response is a pr disaster in itself. it is surprising to see such an experienced company -- there is a playbook for this, and they apparently couldn't be bothered for it. alix: we are going to cover three things wall street is buzzing about this morning. that off, pimco warns collateralized loan obligations are expected to see huge losses in the next cycle downturn. a plan to take axel private, said to be in talk with strategic investment to take the publisher private. the company and talk with banks to arrange a big reddit line ahead of its planned ipo. joining us now is sonali basak. let's start with pimco and but they said about clo's. those losses are going to be borne primarily by clo equity investors.

morning ony one this. sonali: totally. some of the other big players we've seen is the financial stability board, wondering if this is going to be a systemic issue. the equity portion is the riskiest part of the structure. it is not so surprising they are saying that is going to be a problem. further down the road, there would be problems in different parts of the capital structure. barry: it seems like there is a little left over trauma and people are looking at this, not that enthusiastic about clo's, but it doesn't seem to be as huge and systemic as it was a decade ago. is absolutely the question. we are not talking about subprime mortgages. we are talking about the corporate sector.

mcqueen is talking about a100 -- leveraged loan loss talking about a $150 leverage loan loss. rating agencies are looking at it. insurance companies and banks holding a lot of the loans may not feel so great about it. if those are the people suffering losses, we may see commodification. barry: let's talk about this kkr story, taking a publisher private. that seems like it is very debt laden. and publishing, is that still a business? alix: there's is a legitimate publisher alive? is a really interesting story. i can't remember the last time i heard about it. i think "business insider" was the last publisher that was bought a. couple of years ago sonali: -- bought a couple of years ago.

year theyd last started showing some numbers, so it is an interesting time to do a deal. the idea here is kkr as a partner can do more acquisitions. if this were to go through, the future might be a lot more exciting for the deal right in front of us. barry: so if you take a whole bunch of struggling online media outlets and put them together, they no longer struggle? i guess there's economies of scale. there's an infinite number of webpages, and we watched cpm's drop over the last 10 or so years from fairly rich to practically free. sonali: that's exactly the question here. the people they are competing with our google and facebook. in 2004 they wanted to buy the "daily telegraph." what will online be in five years.

at least now if they do this with kkr, they can do it in the private i. wework is our third story. he had $6 billion in cash at the beginning of the year. what did they burn through to need this line of credit? typical fors pretty companies to get a pre-ipo revolver. jp morgan is leading it. they have a stake in the company as well, so it is not surprising. the reason this is an exciting story for the rest of wall aneet is it is really set people up for the ipo. burning another company through cash, so how do you value it, and who is going to want to invest in it? who would bet in at longer-term, especially in the real estate market? alix: there you go.

much. basak, thank you so coming up, a stunning new hotel at jfk. we will talk to the developer behind the $265 million project. this is bloomberg. ♪

alix: new york's jfk airport has a new tell, and is a stunner -- and it is a stunner. here is the hotel's developer tyler morris. >> it is the largest hotel lobby in the world. howard hughes built this building. he hired the designer, and they only spoke on the world one time. i want the greatest terminal anyone in the world has ever seen, and i don't care about price. we restored everything here.

the penny tile is detailed all over this building. there's 100,000 square feet of penny tile. the glass here is 5000 feet -- glass here is thick so you can't hear the takeoffs. runway.the other is we wanted people to have a reason to come to the airport. today you generally go to the airport as the means to an end. we won at the airport to be enjoyable. the airport is no longer a lousy place to be. it is a fun place to be. tyler morris, mcr develop and ceo, is here with bloomberg's alix schatzker. >> thank you. you are up for this project against donald trump, weren't you? >> that's right. he competed, but didn't win.

jfk, not a hotel at exactly the world's most site, a good selection? >> people want to be there, and they want to be -- and we want to give them a reason to be there. reporter: and you are confident this will generate good returns? guest: i think it is going to be a terrific investment. people are loving the building. they are loving walking free 200,000 foot squared lobby. yesterday, was there and it is an extraordinary, iconic piece of architecture. kind.is one of a it is a piece of art more than an airport terminal. reporter: what is it like being real estate developer in a country run by a real estate developer? [laughter]

guest: this was a tricky project. we had to run it through government organizations, conservation projects. it was really a labor of love to get to the finish line on this project. whether it is that he give you a hotel or any of the other projects you have underway, is it easier being a real estate developer in trump's america then it was in obama's america? reporter: i don't think donald has had much of an effect from a real estate development perspective, but -- reporter: not even on the tax side? guest: it is really a wash. elp orx plan didn't h hurt in most cases. there's more regulations, more red tape. it takes longer. construction costs have gone up across america. reporter: how does new york city rate as a development market

against some of the other cities , the big ones were the small markets in america. guest: i think it is safe to say new york city is the most expensive to build in. but it also has the most demand on the most traffic. 185,000 people fly out of kennedy everyday, and that .umber just keeps going people are traveling more and more. growth of the global travel business last year was 1.8 billion. is ther: how coordinated revenue at the hotel with the air travel industry? guest: i think it is quite coordinated. reporter: you need a good economy. guest: well, but people even travel in a bad economy. i think we need to be a community hotel for the queens and long island community, and the people that work at jfk airport. reporter: you are not marketing onlinethe rooms in the

travel agencies or global distribution systems. why? guest: we think we have a great product, and we want you to go to book it. there are plenty of alternatives out there, but we think you are going to come to us. sorensen -- if arnie sorensen could not break out of this, how can you? guest: he said we should give it a shot, so i am a little voodoo doll in certain offices right now, but we are giving it a shot, and i hope it works. i've got a few plans up my sleeve, or some good-sized plans. reporter: don't be so vague. let's see with the competition is.

thank you very -- reporter: thank you very much for joining us. mcr.is tyler morse of alix: it makes total sense for a wedding. you fly in, you don't have to travel to the middle of new york city, you fly in and year out. barry: by the way, we are talking about the architect euro andn from the 1950's 1960's. alix: coming up on this program, mike wilson will be joining us. he is still pessimistic looking at his own version of the yield curve and what it tells us about growth. this is bloomberg. ♪

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

be positive about. gorman, ceo of morgan stanley, weighing in on yield curve inversion and what it means for market anxiety. and the 10 year's next move. aberdeen saying the market is .rong, while pimco says buy dollar general delivers solid earnings on the high-end, while dollar tree is cutting its full-year forecast. it is a battle for your wallet. welcome to "bloomberg daybreak," on this thursday, may 30. z with us oft bloomberg opinion. thed is off, going to disneyland star wars attraction. just kidding, he would hate that. [laughter] barry: it looks so fun. no stone is left unturned. that looks like about as immersive and experience for a star wars fan. alix: what ride would you be

most excited about? barry: they have some of the vr stuff. it is not like the roller coaster rides. it is a very different set of experiences, which is probably why they sold out so quickly. there's now going to be a waiting list. you want to go to this, you are at september or october. alix: there we go. that's my anniversary. my husband would love to do that. [laughter] alix: that is definitely not true. in the markets, the question for traders today. sb futures are up, and just -- s&p futures are up just above the 200 day moving average. the bond market and commodities taking a break as we digest all of these headlines and the big move we've seen in yields. now let's get an update on what is making headlines outside the business world. viviana hurtado is here with first word news. viviana: the trade war between the u.s. and china is escalating. beijing is putting purchases of

american soybeans on hold. state run grain buyers haven't received any further orders to continue with the so-called goodwill buying, and don't expect that to happen because of a lack of progress in trade talks. china is the world's largest buyer of soybeans. e-minis angela merkel -- germany's chancellor angela merkel visits the u.s. to give a commencement address at harvard, a sign of germany's growing unease that she will not go to the white house. the turning point came last june, when president donald trump scuttled the agreement she built with other g7 leaders in canada. victory netanyahu's celebration was premature. the is really prime minister couldn't form a new government in the time since last month's election, so israelis will vote again on september 17. coalition members tripped up netanyahu because they could not reach a consensus on who should serve in the army. 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. alix: thank you so much. reading that yield curve inversion, you've got the 17, the three months and the 10 year going to a low yesterday. james gorman, morgan stanley ceo, sat down in an interview that is working the alarm bell. >> it is concerning. look at what the 10 years in germany did. it shows just how anxious the markets are. there's more news to be anxious about than there is to be positive about. alix: joining us now is mike wilson, morgan stanley chief u.s. equity strategist. you actually have your own yield curve you look at based on certain factors. what is it, and what has this told you? we first inverted back in march, i heard the yield curve apologists, as i like to call them, talking about how it is different this time because of monetary policy, german bones

-- negative -- german bon different.s are looked at a yield curve if you adjusted for qe and qt. is steepen the curve a lot more. the curve would be steepened dramatically more in the 2011 to 2014 period, which it did, but then qt was worth probably between 15 and 75 basis points of rate hikes. we actually inverted november december, about the time the market crept out. it stayed inverted that entire period, meaning we have actually

checked the box on this idea that we've been inverted for six months, so it is a valid signal. barry: let's talk about that. a lot of people look at the yield curve as if it is a binary event. but when an event is short and shallow, that is different than a long-duration inversion that is deeper. back out qeesting is what we have? mike: that's right. i think it explains what's been going on in the volatility markets as well. we have a chart this week that is really empowering. i like to have a thesis, but i like to test it the marketplace. there is a very good relationship between the yield curve this directly as a leading indicator of the vix by about three years. it makes perfect sense. the fed is tightening policy.

clearly it is going to lead to higher volatility in financial markets. what we noticed was a couple of years ago, volatility got away from the prediction, but if we overlay our new yield curve on that, it actually fits perfectly. by anywe still have, historical standard, very low rates. near normal rate regime. we are still closer to emergency footing then where rates have been over the past 50 years. how do you figure that into looking at what the fed is doing to the overall economy. the fed funds rate has been coming down every cycle, meaning every cycle it has required a lower fund to get the economy going and it has taken a lower fed funds rate to slow the economy. it is actually perfect. if you look at our adjusted fed funds rate, and actually fits

that channel perfectly and argues very strongly that the fed did exceed our star and fall of last year. i think that is where we are in this economic cycle. alix: if you take into account what it means for volatility, it is all rising, but nowhere near where we saw back in december, for example. where should that be based on your yield curve we do it on a moving average basis -- on the yield curve? mike: we do it on a moving average basis. we are not predicting a recession yet, but it raises the risk. the risk of a recession was higher this year than average for trade escalation, and that has really been the call. we think the u.s. economy is unique in many ways relative to the rest of the world. we think people are too complacent around u.s. economic

expansion because fiscal stimulus happened last year. it is creating really difficult comparisons and a lot of constrains and supply chains and inventories, and capex. the one i think most important for calling it a recession is labor markets. we've been adamant about labor cost to being an issue for small to mid-cap companies, and we think people are ignoring that for some reason. alix: you can see utilities sold off and semis got a bit. is that bouncing action, or what you think? mike: we've been overweight utilities since last summer. probably the most important call we've made in the last five years, was rotating into defensive suckers -- into defensive sectors. does not exactly build your confidence about economic growth. the market gets this, so that is good news.

this groups have rallied so much and we are getting to month and now. i own a lot of this stuff, and i am nervous about it too. i think we just saw some profit taking in those spaces. barry: so you are saying you are not forecasting a recession, but /three-month10 year yield curve had been inverted for six months, i think every economists would say recession for that long. why no recession? not anell, i'm economist. gone up.the risk has no doubt about it. these are very precarious when you get to this point. i want to make it here, a

recession can really only be called if unemployment goes up. everything else is noise. even if we went to 0% gdp growth this quarter, if you don't have an employment increase, who cares? it is not really a recession. that's why focusing on labor markets here is so important. they've held up, but the lag. if we see another quarter of disappointing earnings and maybe two quarters, my guess is companies are going to full that lever to cut labor costs. is are they going to go to the labor costs, and if they do, it is over and you have a recession. alix: mike wilson of morgan stanley will be staying with us. we will take a look at retail. we will break down the dollar results coming up next. this is bloomberg. ♪

alix: we are at the tail end of earnings season, and it is a mixed results. taylor riggs has the latest. taylor: i wanted to start with yesterday's sessions, setting the tone for where we are today. abercrombie & fitch and canada deuce missing sales -- canada goose missing sales for both. we think that these discount retailers would be poised to benefit if there was any pinch on the consumer. that is not the case with burlington. they cut their full-year sales ceo --e, saying the saying, the ceo, that they are managing expenses. they will improve on the bottom line.

no talk yet of tariffs with burlington, but not the case with dollar tree enter dollar general. ceo said the team has done a great job mitigating 25% tariffs, but a future tariffs are imposed, they expected to impact with their business and their customers. dollar general perhaps in a bit of a better position to wea ther the storm. barry: thank you so much. mike, let's take that retail story and go right into what you were discussing with wage increases. we've been hearing for a decade wages are lagging, not going up. the lower classes and middle classes are lacking that fuel to go out and spend on the retail side. now we are starting to see wages tick up. some have been minimum wage

increases. others have been scarcity of workers. the pushback seems that is a risk to profits. that's exactly our call. we made the call that margins were going to disappoint in 2018 with this reason being one of them. forget, the consumer overspent last year a bit. out that the comparisons are really difficult. i think the consumer is in fine shape today, but once again, the risk for the consumer today is that businesses are feeling the pinch and decide to cut back on labor. then we have a bigger slow down in the consumer activity. these numbers in april is before the trade escalation, which is really interesting to me that these retail numbers are quite soft. a lot of the concern is actually in profitability.

what we are seeing is discounting by retailers, usually a function of demand being softer. barry: when you say the corporate sector is going to cut back on labor, is it they are going to reduce their forward hiring, or are they actually going to freeze salaries? will there be layoffs? how significant a changes this, or is it really just around the margin? mike: it is around the margin so far. we have a shortage of high-quality labor in this country, so companies don't want to do a big layoff and hire people back. they are still optimistic about the neck couple of years, so they don't want to know there il they feel and they need to. -- just not ration hiring as much, doing a different kind of hiring to keep the costs down. they haven't gone down to the

third rail yet, but i think the risk of that is increasing if the second and third quarter earnings are disappointing. alix: if you wind up having low yields, why wouldn't that be a good thing for these companies struggling to maintain their margins. mike: corporate leverage is one .rea where we have access they views excess cash to buy back stock. the balance sheets aren't terrible, but they are pretty stretched. if things are slowing, typically comedies don't decide to lever up more. i don't think lower rates at this point is a good thing necessarily for the economy. this is a bat signal for the economy. iss is where our view different the last three or four months. i will just pay higher multiples, not noticing that growth is slowing. barry: let's talk about

corporate debt for a minute. i think there is a tendency to paint with too broad a brush. leverage, a lot of debt in the corporate world, but most of it is held by pretty high quality companies that, even if there is significant downturn, they have no problems servicing it. on the bottom end of the market, on the jump market, there's a lot of debt that, if there is any sort of shortfall in revenue, there's going to be problems servicing it. do we tend to look at both the same way when we should be saying these top 1000 companies can borrow with 2% all they want , it is a good use of capital, versus the companies that are thin in order to pay those? mike: it is a bifurcation of wealthy individuals, high-quality companies. they are fine. debt service is a very easy for

them. it is the lower quality companies and lower income folks who are still pretty stretched. that is the marginal dollar in the marketplace. dollar comes from the lower income folks. if someone is making a ton of money and makes an extra 4%, chances are they are going to bank it. i think it is a very similar analogy. our view is nothing like oe. oe or a corporate leverage problem, but i don't think that companies are in a position to go and borrow more because we are seeing wage costs go up. chances are they are going to cut costs and try to spend less. alix: president trump is speaking to press right now. he says that china would love to make a deal with the u.s. i feel there is a burt at the end of that sentence -- a but at

the end of that sentence. barry: part of me wonders how much china just once to wait out this president. the other thing is if china wants to make a deal, they will make a deal. the cheerleading for that audience is in the house and senate. china knows how to negotiate a trade deal. if there is a deal to be had, it would have been done already. a good point. coming up, tesla gets down once again. it's status may drop to a nice luxury carmaker. more in today's bottom line. this is bloomberg. ♪

alix: time now to look at three companies worth watching this

morning. first up for me is boeing. the ceo giving an interview to cbs. i guess this was his apology. barry: too little, too late? alix: let's hear about it. >> we clearly fell short, and the implementation of this angle a attack disagree alert was mistake. we did not implemented properly. we are confident in the fundamental safety of the airplane. alix: fundamental safety, but when? barry: how soon does that software upgrade rollout? how fast are planes up in the air? they have millions of orders that may be at risk. they really have to get this .one sooner rather than later the other company i am looking at is citigroup. goldman sachs just upgraded them from a neutral to a buy. i always find it amusing when 1 wall st bank upgrades another. consensusaying

expectations can be beaten in 2020. they are talking about double-digit returns. -- that is an aggressively optimistic call. how many times have they been bailed out? i will leave that to the sma rt money at goldman. company wehird started watching today is tesla. for more, brooke sutherland joins us now. blow after blow, and now a barclays price target downgrade. persistentre is this on building up infrastructure. the exponential growth story, analysts are wondering after first quarter delivery numbers, is that really going to be the case? or does it become already

saturated in the market? i also find it interesting there's another email from musk tryingto boast with -- to bolster sentiment within his employees. are they just managing to the numbers come the short-term goals, to try to keep this alive? barry: they have way too much debt. the solarcity acquisition added billion billion to $3 annually. the paradigm shift took place. the question is, does tesla stick around to read any of the fruits of what they planted. they have not shown the ability to execute especially well. brooke: i think exit houston is really the issue. there was the tent outside of the factory to be production

targets. it is not sustainable. can you turn out quality vehicles as a legitimate car company and not go off on these side ventures? barry: it is so different then in software and technology, where you can just release a mediocre version. we will upgrade it from the one to the two to the version three. it will be great. you can't do that for cars. and clearly also not was phones. [laughter] brooke: there were those safety about the questions -- there were those questions about the safety of the tesla cars as well. alix: brooke sutherland, thank you very much. coming up, the latest readings on the economy from trade to jobless claims. this is bloomberg. ♪

alix: this is "bloomberg daybreak." i am alix steel. 30 seconds away from the latest read on economic data. futures up .3%.

in the other asset classes, i want to point out what is happening with the lira. turkey is considering deploying russian missiles on the mediterranean. you are seeing the lira take a big leap. dollar-lira down 2%. 10-year gilts in italy down .hree basis points economic data hitting the tape. this is the second read of first-quarter gdp. it looks better than expectations. 3.1% growth for the first quarter. personal consumption coming in stronger at 1.3%. the other data we want to pay attention to is the goods trade balance coming in in line with estimates at -$72.1 billion. retail inventories were up .5%. that will be something to watch going forward as we see

stockpiling ahead of trade wars. is there consumer demand on the back end? then what happens to growth? >> that is fascinating. comingu look at this holiday season it is amazing to think the trade war is already impacting inventory. alix: then what you do with your discounting and the margin? stanleyus is stephen and still at this is mike wilson, morgan stanley chief equity u.s. strategist. jumping. is that trade or a demand? we have seen massive swings around the trade cycle. we are stockpiling in advance of the possibility of production in the supply chain. it has caused a lot of volatility in gdp. i'm not sure that means

anything. >> gdp volatility, we saw a big uptick post tax cut. impact? no more stephen: that is the consensus view. i think the key to answering the question is what happens with business investment. business investment is what benefited from the tax cuts. we saw a big pop last year. and iwed again this year think that is a function of caution around the trade situation. if we can get the trade situation resolved, then hopefully we will get back to normal. at that point we would see business investment strengthen. >> can you separate the impact of the trade war and tariffs on the slowdown from other cyclical factors? how can we put those in the context? to quantifygh

because it is not so much the primary effects of the trade situation we want to worry about. people are calculating what is the gdp impact of tariffs go up? thee numbers are small but bigger issue is does it affect confidence? does it affect business investment? those are the things that can make it a significant player. alix: i want to highlight some of the details in the trade data. exportshly decline in and 2.4% increase in imports. is this going to be a multinational small caps situation? >> the supply chain disruption has been going on for a while and it is not all tariff related. i think i have a different view. the stimulus is unique for the united states. it created excess in the economy that the fed cannot fix. some of the inventory was a function of double ordering. if i cannot get parts i double order so that when i get my fill

i cancel the orders. iffs exacerbated that. this is part of our these is. there is excess inventory, excess, which now has to revert, and labor, labor is the wildcard. >> we have soft housing sales, subtree tell, none of that is tariff related -- soft retail. none of that is tariff related. is that temporary or is this the beginning of something? is does it question slip into a recession or not. 3.2% is not sustainable. i think we could go below 2%.

we will do .6% this quarter. >> just muddle through the rest of the year. >> than the question is does it tip? trade does not help that. focusing on trade too much as an excuse is dangerous. this is not just about trade. there are constraints in the real economy that are hurting corporate and corporate will react. a cut back on capex, purging inventory, will they go to labor. alix: stephen, give me the other side. stephen: i cannot disagree more. consumption was weak in the first quarter. we got the march numbers, which are huge, which sets us up for a good second quarter. consumer spending bouncing back. topline gdp will be lower than it was in q1 because of the inventory situation. i think gdp will be closer to 3%

than 2% this year. alix: what are you guys reading that is different? are you looking at the same data. >> it sounds like a difference on the outlook for the consumer. the consumer is solid, the labor market is solid, wage growth is good. unless we get a big shock that causes a big hit the confidence i think the consumer will anchor things. we think this is a micro driven slowdown, it is corporate. from a macro standpoint, it is hard to see. if you pay attention what is going on the corporate world, that is the risk. corporations will change their behavior if they continue to miss numbers. that is the thesis of our call. people jumped on board with our call in the fourth quarter and then dismissed it. we think the risk is present right now. if that happens, i can assure

you, corporations will do something. they will not do nothing. >> you are looking at the corporate sector, you're looking at the consumer sector, it is like the six blind men describing the elephant. can the corporate side slowdown while the consumer continues to spend? the countryside is littered with the bodies of economists who forecast the exhaustion of the american consumer. it has not yet happened other than briefly during the financial crisis. >> i am not an equity guy so i cannot speak to the earning situation, but last year was kind of a once in a generation event with corporate tax reform. i would not be surprised to see earnings softer going forward because you are getting back to something closer the normal. from our standpoint it is a function of what the impacts of this trade dispute are. if the u.s. and china come to then the of agreement,

underlying fundamentals for the us economy are still in good stead -- good shape. alix: stephen stanley and mike wilson, thank you so much. >> we will expect more volatility and lower returns from corporate credit markets according to pimco cio dan iversen. inathan ferro spoke to him an exclusive interview with the pimco cio and ceo. acrosse is froth different areas of the market but the area of most concern for us is the credit market, specifically related to corporate credit risk. that area where we have had a decade of low yields and an area where we are getting more concerned about fundamentals. >> it is been a great time for weak issuers to issue paper in europe and the u.s.. it is great for them. we thinkgs get worse,

we would have opportunity to buy them chief. jonathan: you think things will get worse? >> on the high-yield credit. of course. jonathan: what was interesting about spending the day with you is how bearish you sound around corporate credit. story,ly, that is the but much more so relative to your competition. i speak to bond investors on a daily basis. bearish they how firm seems to be on corporate credit. >> when we look at the world today, we see near-term uncertainty that could be resolved to some degree. a tremendous amount of liquidity, accommodative central banks. within the private sector, spreads to go tighter in the short term. this is the single area of the financial markets prone to overshooting to the downside when people's views towards economic growth change.

as fixed income managers, the most important task we need to focus on is avoiding capital impairment or the type of downside volatility that is likely to take place when people begin to fear credit risk. jonathan: you mention some of the excesses we've experienced. some members of the team think things could get more excessive in the coming years. there was a comparison used between now and the mid to thousands. a historical parallel you are thinking about in the coming years? >> i think we do. what you want to have is a framework where you think of value at you say given a scenario, what are the things you want to buy and you make sure we do what we say we are going to do. in what isake pride offered?

in times of markets when equities go down 50%, we need to perform. we are the building block in people's portfolio where they are counting us to perform. the last thing they need is for us to be overweight in lazy credit. jonathan: within the secular outlook, number five is the one that stuck out to me. financial market vulnerabilities. the idea the market no longer absorbs the news, it makes the news. talk to me about that. how concerned are you about the financial market vulnerability? >> we are quite concerned. this dynamic may take some time for this dynamic to rear its head. we are concerned about the market being able to facilitate the risk transfer when investor mindsets change. we saw a preview of that in the fourth quarter. as an active manager, you need to be prepared for market

overshooting, and if you are prepared, you can profit. jonathan: the key word is active. i imagine the argument for active is stronger over last 12 months than it once was. manny: active for fixed income. we have a different view than most. it is as simple as this. there are structural reasons in there are behavioral reasons why some agent the market have not economic reasons to buy papers. think of the central bank, think of insurance companies who have solvency issues. we think we can deliver consistency return of other benchmarks in a much easier way that equity managers can. when i hear about active versus passive, i say do not talk to us. job is somehow easier than

equity managers and we knowledge this. there's a lot we can do. the company always has 200 bonds outstanding. some traded in dollars, some in euros. there are so many things we can value and deliver better alpha. alix: that was pimco ceo manny roman and cio dan ives and speaking with -- dan iversen speaking with jonathan ferro. investment bank job cuts to cut costs. not necessarily a surprise. they will begin as soon as mid-june. barry: we were literally just speaking about this -- when does the corporate sector begin to say our profits are falling, let's cut labor lose. here is the first example. alix: is this banks trimming the

fat or something different? the summer travel season is here and one luxury retailer is ready to take you away. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." coming up later on bloomberg markets, an exclusive interview with ken bentsen. alix: time for follow the lead, a deep dive into stories making headlines and moving markets with the insights from industry veterans and insiders. today we will look at the travel industry and the consumer. barry: joining us is jen rubio,

away cofounder and president. good morning. i am fascinated by a lot of the new luggage that has come out. some of the tsa security built into it, and the ability to use it as a charger for your electronics. tell us a little bit about what you guys do. jen: away is a travel grant that makes exactly that. we've been selling suitcases and sold over a million of them. suitcases did have a feature that allows you to charge your phone on our carry-on sizes. that is a feature we are continuing to keep a close eye on and evolve. barry: what about the lithium-ion battery issues that are not allowed in to check luggage anymore? jen: that was an interesting time for us. that started happening late 2017, early 2018 when the airlines put the lithium-ion ban and were targeting our luggage because that was the rise of our popularity. i think it was a make or break

moment for us. we created a retrofit program. the batteries we have are easily removable and it has created a great deal of customer loyalty. alix: your bags do not come cheap. the large size are $300. what are you noticing in terms of demand. what price point is popular? how consistent do you feel demand can be. jen: our price point is the sweet spot. ar consumers used to high-quality back they are getting the same bad for a much more affordable price. they are getting away better back then they would at the price point they are used to playing at. because of our director consumer model, we compare our backs to similar products two or three times the price. barry: that means you are looking at high end manufacturers. some of their bags or $1500. jen: exactly. a lot of the same components and

materials and the same factories we have used in the packed have produced those bags. we are not wholesaling or licensing. you can only by our backs online and in our stores. alix: where do you build your luggage? jen: all over asia. alix: what is the impact the trade war has had on your supply chain? jen: it is something we are keeping a close eye on. our direct to consumer model gives us a lot of flexibility. what we are experts in is not the trade war, but the quality of our products. that is our priority. we have put a lot of resources into building a nimble and flexible supply chain so we can respond accordingly. because of that, we now manufacturer in half a dozen countries over asia. barry: we are looking at automobiles and farm products, luggage and the components do not seem to be an issue yet. are you thinking you can escape even if this escalates? jen: they have been part of some

of the recent tariff announcements. it is important for a strap a long-term view and maintain the quality of our product and the promise to our customers. alix: if you do wind up seeing other companies have to re-diversified their own supply chain, does that make it more competitive in markets you are already in? jen: we have noticed people are coming to is not just for the product, but for the brand and the experience we are breaking. as you look toward our growth of the next few years, luggage will become a smaller and smaller part of everything we are offering. everything we offer, apparel, wellness, where our expansion into retail stores, we are keeping an eye on what is the best experience we can give our customer. alix: great to catch up with you. jen rubio, away cofounder. want to recap some of president trump headlines that of been crossing. one has to do with china.

he says china would love to make a deal with the u.s.. he talks about the border and robert mueller. the big headline is that china will love to make a deal with the u.s.. barry: it is one of those old jokes. never bring a knife to a gunfight. if they want to make a deal, they will make a deal. i do not know who his audience is, but it certainly is not the chinese. they know how to negotiate a trade deal. i am more intrigued by whatever else he is saying about domestic politics. we are entering the crazy season now, both on the democratic side and now there is rumors about people challenging trump on his right. we will see how that plays out. out thathould point s&p futures are around the highs of the session. it remains to be seen if it is sustainable. what i am watching over the next 24 hours has to do with beijing and rare earth. it could use its dominance of rhetoric to hit back -- of rare

earth to hit back against washington. is ceo of jh out capital group, the only u.s. producer of rare earth minerals. do you feel the u.s. to make up any supply gap china might leave us? jim: absolutely. we closed on the site in 2017. we are doing a ramp up in two stages. in the last two years we have highlighted -- we have hired 200 americans. right now we ship 100% of our product to china for processing because there is no refining capacity elsewhere in the world outside of china. by next year we be making fully separated rare earth products and would be a self-sufficient producer next year. barry: the challenge is these

products, for the primary use cases, need to be turned into metals and ultimately magnets. the supply chain is complex throughout asia. it is a deeper story than whether we can produce. alix: i want to point out what we're watching. this is president trump outside the white house moments ago. talkedk about china, he about turkey, about robert mueller, about impeachment. we'll be looking for more headlines as they cross. james: no rare earths yet. barry: let's talk about rare earths. mission-critical for technology and defense products and jet aircraft. how soon can you ramp-up production where we are not dependent on china for 80%? some crazy number of rare earths? james: china dominates the industry. by next year we will be

producing separated rareths and be able to sell outside of china. there is a supply chain throughout asia. ishink the important thing that whether or not trump and xi smile and hub tomorrow or this lasts a long time, there is a single point of failure in the supply chain for advanced materials, for materials the power the technology of tomorrow. electric vehicles, wind turbines, robotics, drones, high-speed trains, all these things require our product. you will see a shift in the supply chain for the world to recognize you do not want a single point of failure. alix: the concern is the quality of the resources may be different and the cost profile may be higher. that makes it less competitive. james: we have the single best ore body in the world. mountain pass, california is considered the saudi arabia.

alix: the majority of the reserves are in china. james: the reserves in china are much lower constant take -- concentration. despite the fact that their less stringent environmental standards elsewhere in the world , with the fact that we've a much higher environmental standard in california and a 25% tariff on our product going into china currently, we are still profitable today. we believe we can compete as a global low-cost producer relative to anybody. alix: great to see you. i appreciate it. ceo.apital we want to update you on the headlines that crossed as president trump was leaving the white house. the first is that china should be open to make a deal. china would love to make a deal with the u.s.. they are also saying domestically that robert mueller was conflicted and was the wrong

pick for the pro-and he does not he doesor the probe and not see how congress can impeach him. barry: robert mueller is a lifelong republican, i do not see how he is conflicted. if congress finds the political will they can impeach him. what they are saying is they will not impeach him. no market reaction. alix: markets are up because we had a killer gdp revision. that doesn't for bloomberg daybreak. coming up on the open, priya misra will be joining us. this is bloomberg. ♪

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

jonathan: coming up, stocks bouncing back. tensions linger. --asury yields betting treasury yields to 2019 year lows. vice-chairman claret or -- clarida. bank of america joining citigroup and jpmorgan flagging pain. teachers are positive on the s&p 500. -- futures are positive on the s&p 500. the lows for the year on the 10 year treasury yield, 2.25. that is where we begin. is the bond market flashing a warning sign >>? indicators of fears of recession are closer than people would expect. >> we are probably the riskiest credit market. >> the panic is in the bond market. >>